SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
-------------------------------------------
FORM 10-K
(mark one)
[ X ] Annual Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the fiscal year ended January 3, 1998
[ ] Transition Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Commission file number 1-13085
METRIKA SYSTEMS CORPORATION
(Exact name of Registrant as specified in its charter)
Delaware 33-0733537
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
5788 Pacific Center Boulevard
San Diego, CA 92121
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (617) 622-1000
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
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Common Stock, $.01 par value American Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
None
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months, and (2) has been subject to
the filing requirements for at least the past 90 days. Yes [ X ] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of the Registrant's knowledge, in definitive proxy
or information statements incorporated by reference into Part III of this
Form 10-K or any amendment to this Form 10-K. [ ]
The aggregate market value of the voting stock held by nonaffiliates of
the Registrant as of January 30, 1998, was approximately $44,382,000.
As of January 30, 1998, the Registrant had 8,267,828 shares of Common
Stock outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant's Annual Report to Shareholders for the year
ended January 3, 1998, are incorporated by reference into Parts I and II.
Portions of the Registrant's definitive Proxy Statement for the Annual
Meeting of Shareholders to be held on June 1, 1998, are incorporated by
reference into Part III.
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PART I
Item 1. Business
(a) General Development of Business.
Metrika Systems Corporation (the Company or the Registrant) develops,
manufactures, and markets on-line process optimization systems that
employ proprietary ultra-high-speed advanced scientific measurement
technologies for applications in raw-materials analysis and finished-
materials quality control. The Company manufactures process optimization
systems that provide real-time, nondestructive analysis of the
composition of raw materials in basic-materials production processes,
including coal, cement, and minerals. The Company also manufactures
advanced systems which are used to measure and control parameters such as
material thickness, coating thickness, and coating weight in web-type
materials, such as metal strip, rubber, and plastic foils. Customers use
these systems to improve product quality and consistency, lower material
costs, reduce energy consumption, and minimize waste.
The Company's systems make real-time, on-line, non-invasive,
nondestructive, precise measurements of materials using advanced
scientific measurement techniques, including gamma spectroscopy, beta
particle detection, laser spectroscopy, X-ray fluorescence, and
ultrasound. The Company's systems incorporate proprietary intelligent
sensors that have been developed for specific production processes along
with ultra-high-speed signal-processing electronics. These systems can be
combined with the Company's proprietary real-time software to form
integrated process optimization systems designed to fit the customer's
specific application.
On December 31, 1996, the Company acquired substantially all of the
assets, subject to certain liabilities, of the Autometrics division of
Svedala Industries, Inc. (Autometrics), for $1,347,000 in cash.
Autometrics designs, manufactures, and markets on-line analysis
instruments for the minerals processing industry.
The Company was incorporated as a Delaware corporation in November
1996. In connection with the Company's incorporation, Thermo Instrument
Systems Inc., transferred to the Company the assets, liabilities, and
business of its Gamma-Metrics subsidiary and Radiometrie division in
exchange for 5,000,000 shares of the Company's common stock. In December
1996, the Company sold 967,828 shares of its common stock in a private
placement at $15.00 per share for net proceeds of $13,528,000. In June
1997, the Company sold 2,300,000 shares of its common stock in an initial
public offering at $15.50 per share for net proceeds of approximately
$32.5 million. As of January 3, 1998, Thermo Instrument owned 5,000,000
shares of the Company's common stock, representing 60% of such stock
outstanding. Thermo Instrument develops, manufactures, markets, and
services instruments and software used for identification and
quantification of complex molecular compounds and elements in gases,
liquids, and solids. Uses include pharmaceutical drug research and
clinical diagnostics, monitoring and measuring environmental pollutants,
industrial inspection, and test and control for quality assurance and
productivity improvement. In addition, Thermo Instrument develops,
manufactures, markets, and services equipment for the measurement,
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preparation, storage, and automation of sample materials and photonics
and vacuum components for original equipment manufacturers. Thermo
Instrument is an 82% owned subsidiary of Thermo Electron Corporation.
Thermo Electron provides analytical and monitoring instruments;
biomedical products including heart-assist devices, respiratory-care
equipment, and mammography systems; paper-recycling and papermaking
equipment; alternative-energy systems; industrial process equipment; and
other specialized products. Thermo Electron also provides industrial
outsourcing, particularly in environmental-liability management,
laboratory analysis, and metallurgical services, and conducts
advanced-technology, research and development.
Forward-Looking Statements
Forward-looking statements, within the meaning of Section 21E of the
Securities Exchange Act of 1934, are made throughout this Annual Report
on Form 10-K. For this purpose, any statements contained herein that are
not statements of historical fact may be deemed to be forward-looking
statements. Without limiting the foregoing, the words "believes,"
"anticipates," "plans," "expects," "seeks," "estimates," and similar
expressions are intended to identify forward-looking statements. There
are a number of important factors that could cause the results of the
Company to differ materially from those indicated by such forward-looking
statements, including those detailed under the caption "Forward-looking
Statements" in the Registrant's 1997* Annual Report to Shareholders,
which statements are incorporated herein by reference.
(b) Information About Industry Segments
The Company is engaged in one business segment.
(c) Description of Business
(i) Principal Products and Services
On-line Raw Materials Analysis Business
The Company manufactures on-line process optimization systems which
non-invasively measure and analyze the physical and chemical properties
of a stream of bulk solid materials in real time. The systems are
primarily used to analyze the composition of raw materials used in
certain basic industries, such as coal, cement, and minerals. The
analysis technique used in the Company's process optimization systems
involves neutron interrogation. Under neutron interrogation, each
element, when activated by neutrons, emits gamma rays of unique
characteristics which allow identification and quantification of the
elements present. Neutron interrogation allows the entire stream of the
material to be analyzed and eliminates the need for sampling. In
addition, it provides accurate analysis of the materials, especially
those that are non-homogeneous, and can be used to analyze a broad range
* References to 1997, 1996, and 1995, herein are for the fiscal years
ended January 3, 1998, December 28, 1996, and December 30, 1995,
respectively.
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of substances. The systems contain proprietary sensors that detect gamma
rays emitted from the material being analyzed, which is activated by the
neutron source within the analyzer. This yields a composite gamma ray
spectrum of the material. Through on-line high-speed spectroscopy, this
spectrum is then decomposed into its constituent parts by using
microprocessors and sophisticated real-time analytical software. The
analyzer can then translate this data into the elemental composition of
the raw materials and can also use the information to infer certain
quality-control parameters specific to the process.
The Company currently markets the following family of products based
on its neutron-interrogation technology:
On-line Coal Analyzer. The Company's on-line coal analyzer can
examine entire streams of coal at a rate of up to four hundred tons per
hour, determine the sulfur and ash concentration of the coal on a
continuous basis, and can also simultaneously compute the calorific value
of the coal, among other quality parameters. Customers can use the data
to blend or sort the coal depending on its quality. The Company has
developed proprietary high-speed software that can be incorporated into
the system to enable the customer to automatically adjust and control the
coal blending and sorting process on-line.
Coal analyzers are currently used by coal mines and coal-burning
utilities. Coal mines can use the coal analyzer to improve profitability
by blending coals of different quality to meet specific contract
requirements or environmental regulatory standards, by sorting out
low-sulfur coal which can be sold for a premium or by controlling the
specific gravity of separation in a coal-cleaning plant to ensure that
quality specifications are met without over-cleaning. In addition to
ensuring more consistent quality, on-line coal analysis improves recovery
or yield from the mine, thus extending the life of a mine by reducing the
risk of premature exhaustion of low-sulfur reserves that are required to
balance high-sulfur reserves. Coal-burning utilities use the coal
analyzers to reduce costs while satisfying environmental emissions
regulations.
CrossBelt Analyzer. The Company's CrossBelt Analyzer (CBA) is used
primarily by the cement industry to analyze the composition of cement raw
materials. The CBA is essentially a horizontal tunnel that is easily
assembled around a customer's conveyor belt. The CBA analyzes materials
traveling on a conveyor belt at speeds of up to 600 feet per minute and
with material flow rates in excess of 1,000 tons per hour. The system
generates data which provides the elemental composition of the entire
stream of materials, and can use the information to infer certain
quality-control parameters such as lime-saturation factor and silica
ratio. The CBA can incorporate high-speed proprietary software which
allows the customer to automatically control production processes. The
CBA is incorporated on-line into their production process, which enables
them to control the mix of raw materials at the beginning of the
production line or to automatically control the blending of additives
with crushed limestone and clay further down the production line. Both
approaches enable the producer to achieve more uniform cement quality.
The CBA controls the production process by using the analytical data it
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compiles to automatically adjust the composition of the additive mix to
achieve target quality levels. This approach helps reduce variations in
the materials fed into the cement kiln yielding several benefits: lower
energy consumption, greater throughput, and extended refractory life.
Mineral Slurry Analyzers. The Company recently developed an on-line
analyzer using neutron interrogation for use in the mineral extraction
industry for analyzing mineral slurry, a mixture of fine insoluble
materials and water. The Company is currently introducing this new
product and has successfully installed two mineral slurry analyzers --
one for phosphate processing in the production of fertilizers and one for
iron ore processing. Virtually all mined minerals, including iron,
copper, nickel, and bauxite, must be separated and purified through a
process called beneficiation whereby the mined minerals are milled and
mixed with water to form a mineral slurry. The mineral of interest is
then concentrated through a variety of separation stages using reagents.
The Company's neutron-based mineral slurry analyzer, which analyzes the
entire elemental composition of the slurry, can greatly improve the
efficiency of the beneficiation process by using the collected data to
automatically adjust various process parameters, including the amount of
reagents used in the process. The Company believes its neutron-based
mineral slurry analyzer is suitable for controlling the beneficiation
process for a wide variety of minerals.
Autometrics, acquired December 31, 1996, is a manufacturer of two
mineral slurry analysis product lines: on-line X-ray slurry analyzers and
on-line particle-size analyzers. The X-ray slurry analyzers are used in
the mineral extraction industry, primarily for copper, iron, and gold
extraction, to measure the percentage of elements present in mineral
slurries. It can also be designed to automatically control and adjust the
amount of reagents used in the mineral beneficiation process. The X-ray
slurry analyzer provides customers who do not require a comprehensive
analysis system a cost-effective alternative to the Company's
neutron-based mineral slurry analyzer. The on-line particle-size
analyzers are real-time measuring instruments. The on-line particle-size
analyzers use ultrasound together with proprietary models to determine
the particle-size distribution and percent solids in mineral slurries.
Software Products. The Company complements its application-specific
sensor technology with process optimization software. These systems use
adaptive and predictive controls to maximize material utilization, as
well as to blend raw materials to meet certain requirements in a
cost-effective manner. The process to extract, beneficiate, and utilize
raw materials is difficult to control due to variances in chemistry,
size, and shape of the materials, and time delays in the transport of
materials from different points within the handling system. The Company's
proprietary process control software can accomplish these optimization
tasks by performing model-based estimation and by adaptively controlling
source materials.
FastLab. The Company offers its FastLab analyzer for rapid analysis
of samples off-line, with minimal sample preparation. The FastLab can be
used for numerous applications such as spot-check analysis of raw
materials, core hole analysis, fuel analysis, and chemical additives
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analysis. This product is suitable for the same markets that use on-line
elemental analysis.
Process Safety Instrumentation. The Company is a supplier of process
safety instrumentation in the nuclear power industry. The Company's
instrumentation is designed to improve the safety and efficiency of
nuclear power plants. In addition, the Company offers automated test
equipment and some safety-related computer software for nuclear power
plants and other facilities where radioactive materials are used.
Revenues from the Company's on-line raw-materials analysis business
were $28,051,000, $22,875,000, and $19,492,000 in 1997, 1996, and 1995,
respectively.
On-line Finished-materials Quality-control Business
The Company develops, manufactures, and markets gauges and process
optimization systems for industrial manufacturing lines for continuous
production of certain web-type materials. Web-type materials are flat
sheet materials like paper, metal strip, plastic foil, rubber, and glass.
Typical high-volume products made from web-type materials include all
types of vehicle body and other parts, metals used for refrigerators and
similar products, beverage/food cans, cladding for buildings, and rubber
tires. The Company's instruments measure the total thickness, basis
weight, and coating thickness of web-type materials such as plastic
foils, hot and cold metal strip, rubber, glass, and non-woven fabrics.
The measuring technology incorporated in the Company's products is based
on partial absorption, reflection, or change in ionizing or infra-red
radiation, as well as white light and laser beams, by the materials to be
measured. The Company's systems can measure a single point on the
material to be measured, several points, or generate a "profile" of the
web. Measured values are acquired without contact and without interfering
with the production process, have high measurement accuracy, and are
extremely reliable despite hostile environments. The Company offers its
measuring gauges with or without its process optimization systems. The
customer's production process can be regulated automatically by the
Company's process optimization system.
The Company's products incorporate a variety of measurement gauges
such as X-ray thickness gauges, isotope thickness gauges, X-ray
fluorescence coating gauges, or beta-backscatter gauges, depending on the
application. The thickness gauges manufactured by the Company basically
function by measuring partial absorption of energy by the material to be
measured. The change in the intensity of the energy emitted is detected
by application-specific sensors, then processed by high-speed
microprocessors, before emerging as the measured value. These instruments
can incorporate the Company's high-speed proprietary software to form a
fully integrated process optimization system for continuous manufacturing
processes and improved product quality.
The Company's products save on raw materials and energy, maximizing
productivity and product quality. The total thickness of web-type
material, or the coating on it, is measured accurately at the point of
manufacture by the Company's products and compared with an input target
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value. Adjustments can be made early in the process, because the
Company's products can accurately measure materials closer to the origin
of the strip, thus reducing material waste.
Revenues from the Company's on-line finished-materials quality-
control business were $28,663,000, $29,172,000, and $26,540,000 in 1997,
1996, and 1995, respectively.
(ii) and (xi) New Products; Research and Development
The Company maintains active programs for the development and
introduction of new products and improvements to existing products. The
Company also seeks to develop new applications for its existing products
and technology. In particular, the Company is actively seeking new
applications for its non-invasive, nondestructive analysis technologies.
The Company is also in the process of developing other applications for
its CBA.
With respect to its on-line finished-materials quality-control
business, the Company is focused on two areas of commercial importance in
the metals industry: the measurement of metal coatings and the
cross-profile-thickness measurement of hot steel strip, cold strip, and
plate. In both areas of measurement, parameters, particularly accuracy
and resolution, are being tightened in response to end-user needs. In
addition, the Company is involved in numerous other development projects
including, among others, development of an X-ray-based tomographic
thickness profile system. The object of this system is to take a snapshot
of thickness variations across the sheet at a high-transverse resolution.
This system is in the early stages of development. The Company is also
developing a compact fixed-energy X-ray source for thin films in the
plastic, rubber, glass, and other industries which the Company
anticipates introducing to the market in 1998.
Research and development expenses for the Company were $3,815,000,
$3,024,000, and $2,580,000 in 1997, 1996, and 1995, respectively.
(iii) Raw Materials
Various components of the Company's products are supplied by
sole-source vendors. The Company has not experienced significant
difficulty in obtaining adequate supplies from these vendors, and has
identified alternate suppliers. However, there can be no assurance that
the unanticipated loss of a single vendor would not result in delays in
shipments or the introduction of new products.
(iv) Patents, Licenses, and Trademarks
The Company's policy is to protect its intellectual property rights
and to apply for patent protection when appropriate. The Company is the
owner of 12 U.S. patents, as well as corresponding foreign patents having
expiration dates ranging from 1998 through 2014. Patent protection is
believed to provide the Company with competitive advantages with respect
to certain instruments. The Company also considers that technical
know-how, trade secrets, and trademarks are important to its business.
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There can be no assurance that any patents now or hereafter owned by
the Company will afford protection against competitors. Proceedings
initiated by the Company to protect its proprietary rights could result
in substantial costs to the Company. Recently, the Company's
Gamma-Metrics subsidiary initiated a lawsuit in the Federal District
Court in San Diego, California, alleging, among other things, patent
infringement against Scantech Limited (formerly Mineral Control
Instrumentation Ltd.) and its subsidiary Mineral Control Instrumentation
Ltd. There can be no assurance that competitors of the Company, some of
whom have substantially greater resources than those of the Company, will
not initiate litigation to challenge the validity of the Company's
patents, use their resources to design comparable products that do not
infringe the Company's patents, or initiate claims that the Company's
products infringe the competitors' patents. The Company could incur
substantial costs and diversion of management resources with respect to
the defense of any such challenges or claims, which could have a material
adverse effect on the Company's business, financial condition, and
results of operations. Furthermore, parties making such challenges or
claims could secure a judgment awarding substantial damages, as well as
injunctive or other equitable relief, which could effectively block the
Company's ability to make, use, sell, distribute, or market its products
and services in the U.S. and abroad.
(v) Seasonal Influences
The Company's on-line finished-materials quality-control business
experiences a slowdown in revenues during the first quarter of each
calendar year primarily because its customers tend to place their orders
earlier in the year so that they can have the systems installed either
during the holiday season in the third quarter or between Christmas and
the New Year.
(vi) Working Capital Requirements
There are no special inventory requirements or credit terms extended
to customers that would have a material adverse effect on the Company's
working capital.
(vii) Dependency on a Single Customer
No single customer accounted for more than 10% of the Company's total
revenues in any of the past three years.
(viii) Backlog
The Company's backlog of firm orders was approximately $26,929,000
and $24,574,000 at January 3, 1998, and December 28, 1996, respectively.
The Company includes in backlog only those orders for which it has
received firm purchase orders and for which delivery has been specified
within twelve months. Certain of these orders are subject to cancellation
by the customer upon payment of a cancellation charge. Because of the
possibility of customer changes in delivery schedules, cancellation of
orders, and potential delays in product shipments, the Company's backlog
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as of any particular date may not be representative of actual sales for
any succeeding period.
(ix) Government Contracts
Not applicable.
(x) Competition
In the coal, cement, and mineral industries, the Company competes
primarily on performance and to a lesser extent on price. Competition
regarding on-line coal and cement material analyzers is limited at
present. Scantech Limited (Australia) is the Company's principal
competitor in the on-line coal and cement material analysis markets. The
Company is a recent entrant into the on-line mineral slurry analysis
market where it competes primarily with Amdel (Australia). The market for
solids and multiphase analyzers for process control generally is
fragmented, with numerous competitors. The Company believes it is a
market leader in the segment of the solids and multiphase analyzer market
for on-line bulk-materials analyzers using neutron interrogation.
Competition in the thickness-gauging business is highly fragmented
with numerous competitors competing in various end-use market segments.
As a result, competition varies according to the end-use segment. The
Company competes based upon quality, performance, and price. The
Company's largest competitors are Honeywell (U.S.), Toshiba (Japan), and
Yokogawa (Japan). Honeywell, through its divisions, Data Measurement and
Loral, offer systems to the metals industry and through its Ohmart
division is a supplier to the plastics industry. Toshiba and Yokogawa are
at present competing with the Company in Asia in the metals industry. IMS
(Germany) and IRM (Belgium/U.S.), compete with the Company worldwide in
the metals industry. There are a number of competitors such as NDC (US),
Eurotherm (U.K.), and Infrared Engineering (U.K.), which compete with the
Company in the plastics and rubber industry.
Certain of the Company's competitors have greater resources,
manufacturing and marketing capabilities, technical staff, and production
facilities than those of the Company. As a result, they may be able to
adapt more quickly to new or emerging technologies and changes in
customer requirements, or to devote greater resources to the promotion
and sale of their products than the Company. Further, competition with
respect to all of the Company's products could increase if new companies
enter the market or if existing competitors expand their product lines.
There can be no assurance that competitors of the Company will not
develop technological innovations that will render products of the
Company obsolete.
(xii) Environmental Protection Regulations
The Company believes that compliance by the Company with federal,
state, and local environmental protection regulations will not have a
material adverse effect on its capital expenditures, earnings, or
competitive position.
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(xiii) Number of Employees
As of January 3, 1998, the Company had a total of 323 employees. The
Company has had no work stoppages and considers its relations with
employees to be good.
(d) Financial Information About Exports by Domestic Operations and About
Foreign Operations
Financial information about exports by domestic operations and about
foreign operations is summarized in Note 10 to Consolidated Financial
Statements in the Registrant's 1997 Annual Report to Shareholders, and is
incorporated herein by reference.
(e) Executive Officers of the Registrant
Present Title (Year First Became
Name Age Executive Officer)
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Ernesto A. Corte 59 President and Chief Executive Officer
(1997)
Werner G. Kramer 51 Executive Vice President (1997)
John N. Hatsopoulos 63 Senior Vice President and Chief
Financial Officer (1997)
Paul F. Kelleher 55 Chief Accounting Officer (1997)
Each executive officer serves until his successor is chosen or
appointed by the Board of Directors and qualified or until earlier
resignation, death, or removal. Messrs. Hatsopoulos and Kelleher have
held comparable positions for at least five years with Thermo Instrument
or Thermo Electron. Mr. Corte has been President of the Company since its
inception in November 1996, and Chief Executive Officer since February
1998. Mr. Corte has been President of the Company's Gamma-Metrics
subsidiary since 1993. Mr. Kramer has been Executive Vice President of
the Company since its inception in November 1996 and President of the
Company's Eberline Radiometrie Instruments GmbH subsidiary and
Radiometrie's parent company, Thermo Instrument Systems GmbH, since 1993.
Messrs. Corte and Kramer are full-time employees of the Company. Messrs.
Hatsopoulos and Kelleher are full-time employees of Thermo Electron, but
devote such time to the affairs of the Company as the Company's needs
reasonably require.
Item 2. Properties
The Company leases approximately 44,900 square feet in San Diego,
California, pursuant to a lease that expires in 2003. The Company uses
this facility for manufacturing, sales, and administration for its
on-line raw-materials analysis business. The Company also leases
approximately 24,000 square feet in Gloucester, England, pursuant to a
lease expiring in 2001, and owns a facility with approximately 110,000
square feet in Erlangen, Germany, of which approximately 55,100 square
feet are utilized by the Company, with the balance being utilized by
another Thermo Instrument subsidiary. Both of these facilities are used
by the Company for manufacturing, sales, and administration for its
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on-line finished-materials quality-control business. In addition, the
Company leases office space throughout the world for its sales and
service operations. The Company believes that these facilities are
adequate for its present operations.
Item 3. Legal Proceedings
Not applicable.
Item 4. Submission of Matters to a Vote of the Security Holders
Not applicable.
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder
Matters
(a) Information concerning the market and market price for the
Registrant's common stock, $.01 par value, and related matters, is
included under the sections labeled "Common Stock Market Information" and
"Dividend Policy" in the Registrant's 1997 Annual Report to Shareholders
and is incorporated herein by reference.
(b) Use of Proceeds
The Company sold 2,300,000 shares of common stock, par value $.01 per
share, pursuant to a Registration Statement on Form S-1 (File No.
333-25243), which was declared effective by the Securities and Exchange
Commission on June 18, 1997. The managing underwriters of the offering
were Salomon Brothers, Inc., Lehman Brothers, Smith Barney Inc., and
Cazenove & Co. The aggregate gross proceeds of the offering were
$35,650,000. The Company's net proceeds from the offering were
$32,528,000. As of January 3, 1998, the Company expended $379,000 of such
net proceeds for the purchase of property, plant, and equipment,
$1,755,000 for research and development expenses, and $3,519,000 for
working capital. As of January 3, 1998, the Company had expended an
aggregate of $5,653,000 of such net proceeds. The Company invested, from
time to time, the balance of such net proceeds primarily in investment-
grade interest- or dividend-bearing instruments. As of January 3, 1998,
the remaining net proceeds of $26,875,000 were invested pursuant to a
repurchase agreement with Thermo Electron. As of January 3, 1998, the
Company had $50,289,000 of cash, cash equivalents, and available-for-sale
investments.
Item 6. Selected Financial Data
The information required under this item is included under the
sections labeled "Selected Financial Information" and "Dividend Policy"
in the Registrant's 1997 Annual Report to Shareholders and is
incorporated herein by reference.
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Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
The information required under this item is included under the
heading "Management's Discussion and Analysis of Financial Condition and
Results of Operations" in the Registrant's 1997 Annual Report to
Shareholders and is incorporated herein by reference.
Item 8. Financial Statements and Supplementary Data
The Registrant's Consolidated Financial Statements as of January 3,
1998, and Supplementary Data are included in the Registrant's 1997 Annual
Report to Shareholders and are incorporated herein by reference.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
Not applicable.
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PART III
Item 10. Directors and Executive Officers of the Registrant
The information concerning directors required under this item is
incorporated herein by reference from the material contained under the
caption "Election of Directors" in the Registrant's definitive proxy
statement to be filed with the Securities and Exchange Commission
pursuant to Regulation 14A, not later than 120 days after the close of
the fiscal year. The information concerning delinquent filers pursuant to
Item 405 of Regulation S-K is incorporated herein by reference from the
material contained under the heading "Section 16(a) Beneficial Ownership
Reporting Compliance" under the caption "Stock Ownership" in the
Registrant's definitive proxy statement to be filed with the Securities
and Exchange Commission pursuant to Regulation 14A, not later than 120
days after the close of the fiscal year.
Item 11. Executive Compensation
The information required under this item is incorporated herein by
reference from the material contained under the caption "Executive
Compensation" in the Registrant's definitive proxy statement to be filed
with the Securities and Exchange Commission pursuant to Regulation 14A,
not later than 120 days after the close of the fiscal year.
Item 12. Security Ownership of Certain Beneficial Owners and Management
The information required under this item is incorporated herein by
reference from the material contained under the caption "Stock Ownership"
in the Registrant's definitive proxy statement to be filed with the
Securities and Exchange Commission pursuant to Regulation 14A, not later
than 120 days after the close of the fiscal year.
Item 13. Certain Relationships and Related Transactions
The information required under this item is incorporated herein by
reference from the material contained under the caption "Relationship
with Affiliates" in the Registrant's definitive proxy statement to be
filed with the Securities and Exchange Commission pursuant to Regulation
14A, not later than 120 days after the close of the fiscal year.
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PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
(a,d) Financial Statements and Schedules
(1)The consolidated financial statements set forth in the list
below are filed as part of this Report.
(2)The consolidated financial statement schedule set forth in
the list below is filed as part of this Report.
(3)Exhibits filed herewith or incorporated herein by reference
are set forth in Item 14(c) below.
List of Financial Statements and Schedules Referenced in this
Item 14
Information incorporated by reference from Exhibit 13 filed
herewith:
Consolidated Statement of Income
Consolidated Balance Sheet
Consolidated Statement of Cash Flows
Consolidated Statement of Shareholders' Investment
Notes to Consolidated Financial Statements
Report of Independent Public Accountants
Financial Statement Schedules filed herewith:
Schedule II: Valuation and Qualifying Accounts
All other schedules are omitted because they are not applicable
or not required, or because the required information is shown
either in the financial statements or in the notes thereto.
(b) Reports on Form 8-K
None.
(c) Exhibits
See Exhibit Index on the page immediately preceding exhibits.
14PAGE
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
Date: March 13, 1998 METRIKA SYSTEMS CORPORATION
By:Ernesto A. Corte
-----------------------
Ernesto A. Corte
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of
the Registrant and in the capacities indicated, as of March 13, 1998.
Signature Title
--------- -----
By: Ernesto A. Corte President, Chief Executive Officer, and
---------------------------
Ernesto A. Corte Director
By: John N. Hatsopoulos Chief Financial Officer and
---------------------------
John N. Hatsopoulos Senior Vice President
By: Paul F. Kelleher Chief Accounting Officer
---------------------------
Paul F. Kelleher
By: Joseph A. Baute Director
---------------------------
Joseph A. Baute
By: Willard R. Becraft Director
---------------------------
Willard R. Becraft
By: Denis A. Helm Chairman of the Board and Director
---------------------------
Denis A. Helm
By: John T. Keiser Director
---------------------------
John T. Keiser
By: Earl R. Lewis Director
---------------------------
Earl R. Lewis
By: Arvin H. Smith Director
---------------------------
Arvin H. Smith
15PAGE
<PAGE>
Report of Independent Public Accountants
To the Shareholders and Board of Directors of Metrika Systems
Corporation:
We have audited, in accordance with generally accepted auditing
standards, the consolidated financial statements included in Metrika
Systems Corporation's Annual Report to Shareholders incorporated by
reference in this Form 10-K, and have issued our report thereon dated
February 17, 1998. Our audits were made for the purpose of forming an
opinion on those statements taken as a whole. The schedule listed in Item
14 on page 14 is the responsibility of the Company's management and is
presented for purposes of complying with the Securities and Exchange
Commission's rules and is not part of the basic consolidated financial
statements. This schedule has been subjected to the auditing procedures
applied in the audits of the basic consolidated financial statements and,
in our opinion, fairly states in all material respects the consolidated
financial data required to be set forth therein in relation to the basic
consolidated financial statements taken as a whole.
Arthur Andersen LLP
Boston, Massachusetts
February 17, 1998
16PAGE
<PAGE>
SCHEDULE II
METRIKA SYSTEMS CORPORATION
Valuation And Qualifying Accounts
(In thousands)
Balance Provision
at Charged Accounts Balance
Beginning to Accounts Written at End
Description of Year Expense Recovered Off Other(a) of Year
----------------------------------------------------------------------------
Allowance for
Doubtful Accounts
Year Ended
January 3, 1998 $ 440 $ 633 $ 209 $(713) $ 102 $ 671
Year Ended
December 28, 1996 $ 478 $ - $ - $ (36) $ (2) $ 440
Year Ended
December 30, 1995 $ 258 $ 225 $ - $ (11) $ 6 $ 478
(a) Allowance of business acquired during the year as described in Note 3 to
Consolidated Financial Statements in the Registrant's 1997 Annual Report
to Shareholders and the effect of foreign currency translation.
17PAGE
<PAGE>
EXHIBIT INDEX
Exhibit
Number Description of Exhibit
------------------------------------------------------------------------
3.1* Certificate of Incorporation of the Company, as amended.
3.2* By-Laws of the Company.
4* Specimen Common Stock Certificate.
5 Opinion of Seth H. Hoogasian, Esq.
10.1* Corporate Services Agreement dated as of November 26, 1996,
between Thermo Electron Corporation and the Company.
10.2 Thermo Electron Corporate Charter, as amended and restated
effective January 3, 1993 (filed as Exhibit 10.1 to Thermo
Electron's Annual Report on Form 10-K for the fiscal year
ended January 3, 1993 [File No. 1-8002] and incorporated
herein by reference).
10.3* Tax Allocation Agreement dated as of November 26, 1996,
between Thermo Electron and the Company.
10.4* Master Repurchase Agreement dated as of November 26, 1996,
between Thermo Electron and the Company.
10.5 Amended and Restated Master Guarantee Reimbursement and Loan
Agreement dated as of December 3, 1997, between Thermo
Electron and the Company (filed as Exhibit 10.7 to Thermo
Instrument's Annual Report on Form 10-K for fiscal year ended
January 3, 1998 [File No. 1-9786] and incorporated herein by
reference).
10.6 Amended and Restated Master Guarantee Reimbursement and Loan
Agreement dated as of December 3, 1997, between Thermo
Instrument and the Company.
10.7* Deferred Compensation Plan for Directors of the Company.
10.8* Indemnification Agreement dated as of November 26, 1996,
between Thermo Instrument and the Company.
10.9* Letter Agreement dated as of December 4, 1996, between Thermo
Instrument and the Company.
10.10* Indemnification Agreement dated as of December 4, 1996,
between Thermo Instrument and the Company.
10.11* Triple Net Lease Agreement dated January 1, 1995, between
Gamma-Metrics, as lessee and Radnor/Collins/Sorrento
Partnership, as lessor, for property located at 5788 Pacific
Center Boulevard, San Diego, California.
10.12* Form of Indemnification Agreement for Officers and Directors.
18PAGE
<PAGE>
EXHIBIT INDEX
Exhibit
Number Description of Exhibit
------------------------------------------------------------------------
10.13* Promissory Notes dated as of June 26, 1995, October 1, 1995,
December 1, 1995, and December 1, 1996, in the aggregate
principal amount of DM 3,000,000 issued by Thermo Instrument
Systems GmbH, a wholly owned subsidiary of the Company to
Nicolet Instrument GmbH, a wholly owned subsidiary of Thermo
Optek Corporation.
10.14* Equity Incentive Plan of the Company.
In addition to the stock-based compensation plans of the
Registrant, the executive officers of the Registrant may be
granted awards under stock-based compensation plans of Thermo
Electron and Thermo Instrument for services rendered to the
Registrant or such affiliated corporations. The terms of such
plans are substantially the same as those of the Registrant's
Equity Incentive Plan.
10.15* Lease Agreement dated as of October 1, 1993, between Thermo
Instrument Systems GmbH (the Company's subsidiary), as lessor,
and ESM Eberline Instruments Strahlen and Umweltmesstechnik
GmbH, as lessee.
10.16 Restated Stock Holding Assistance Plan and Form of Promissory
Note.
13 Annual Report to Shareholders for the year ended January 3,
1998 (only those portions incorporated herein by reference).
21 Subsidiaries of the Registrant.
Each exhibit above which is marked with an asterisk (*) is
incorporated herein by reference to the correspondingly
numbered exhibit to the Company's Registration Statement on
Form S-1 [File No. 333-25243].
27 Financial Data Schedule.
Exhibit 10.6
AMENDED AND RESTATED MASTER GUARANTEE REIMBURSEMENT
AND LOAN AGREEMENT
This AGREEMENT is entered into as of the 3rd day of
December, 1997 by and among Thermo Instrument Systems Inc. (the
"Parent") and those of its subsidiaries that join in this
Agreement by executing the signature page hereto (the "Majority
Owned Subsidiaries").
WITNESSETH:
WHEREAS, the Majority Owned Subsidiaries and their
wholly-owned subsidiaries wish to enter into various financial
transactions, such as convertible or nonconvertible debt, loans,
and equity offerings, and other contractual arrangements with
third parties (the "Underlying Obligations") and may provide
credit support to, on behalf of or for the benefit of, other
subsidiaries of the Parent ("Credit Support Obligations");
WHEREAS, the Majority Owned Subsidiaries and the Parent
acknowledge that the Majority Owned Subsidiaries and their
wholly-owned subsidiaries may be unable to enter into many kinds
of Underlying Obligations without a guarantee of their
performance thereunder from the Parent (a "Parent Guarantee") or
without obtaining Credit Support Obligations from other Majority
Owned Subsidiaries;
WHEREAS, the Majority Owned Subsidiaries and their
wholly-owned subsidiaries may borrow funds from the Parent, and
the Parent may loan funds or provide credit to the Majority Owned
Subsidiaries and their wholly-owned subsidiaries, on a short-term
and unsecured basis; and
WHEREAS, the Parent is willing to consider continuing to
issue Parent Guarantees and providing credit, and the Majority
Owned Subsidiaries are willing to consider continuing to provide
Credit Support Obligations and to borrow funds, on the terms and
conditions set forth below;
NOW, THEREFORE, in consideration of the foregoing and other
good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged by each party hereto, the parties
agree as follows:
1. If the Parent provides a Parent Guarantee of an Underlying
Obligation, and the beneficiary(ies) of the Parent Guarantee
enforce the Parent Guarantee, or the Parent performs under
the Parent Guarantee for any other reason, then the Majority
Owned Subsidiary that is obligated, either directly or
indirectly through a wholly-owned subsidiary, under such
Underlying Obligation shall indemnify and save harmless the
Parent from any liability, cost, expense or damage
(including reasonable attorneys' fees) suffered by the
PAGE
<PAGE>
Parent as a result of the Parent Guarantee. If a Majority
Owned Subsidiary or a wholly-owned subsidiary thereof
provides a Credit Support Obligation for any subsidiary of
the Parent, other than a subsidiary of such Majority Owned
Subsidiary, and the beneficiary(ies) of the Credit Support
Obligation enforce the Credit Support Obligation, or the
Majority Owned Subsidiary or its wholly-owned subsidiary
performs under the Credit Support Obligation for any other
reason, then the Parent shall indemnify and save harmless
the Majority Owned Subsidiary or its wholly-owned
subsidiary, as applicable, from any liability, cost, expense
or damage (including reasonable attorneys' fees) suffered by
the Majority Owned Subsidiary or its wholly-owned
subsidiary, as applicable, as a result of the Credit Support
Obligation. Without limiting the foregoing, Credit Support
Obligations include the deposit of funds by a Majority Owned
Subsidiary or a wholly-owned subsidiary thereof in a credit
arrangement with a banking facility whereby such funds are
available to the banking facility as collateral for
overdraft obligations of other Majority Owned Subsidiaries
or their subsidiaries also participating in the credit
arrangement with such banking facility.
2. For purposes of this Agreement, the term "guarantee" shall
include not only a formal guarantee of an obligation, but
also any other arrangement where the Parent is liable for
the obligations of a Majority Owned Subsidiary or its
wholly-owned subsidiaries. Such other arrangements include
(a) representations, warranties and/or covenants or other
obligations joined in by the Parent, whether on a joint or
joint and several basis, for the benefit of the Majority
Owned Subsidiary or its wholly-owned subsidiaries and (b)
responsibility of the Parent by operation of law for the
acts and omissions of the Majority Owned Subsidiary or its
wholly-owned subsidiaries, including controlling person
liability under securities and other laws.
3. Promptly after the Parent receives notice that a beneficiary
of a Parent Guarantee is seeking to enforce such Parent
Guarantee, the Parent shall notify the Majority Owned
Subsidiary(s) obligated, either directly or indirectly
through a wholly-owned subsidiary, under the relevant
Underlying Obligation. Such Majority Owned Subsidiary(s) or
wholly-owned subsidiary thereof, as applicable, shall have
the right, at its own expense, to contest the claim of such
beneficiary. If a Majority Owned Subsidiary or wholly-owned
subsidiary thereof, as applicable, is contesting the claim
of such beneficiary, the Parent will not perform under the
relevant Parent Guarantee unless and until, in the Parent's
reasonable judgment, the Parent is obligated under the terms
of such Parent Guarantee to perform. Subject to the
foregoing, any dispute between a Majority Owned Subsidiary
or wholly-owned subsidiary thereof, as applicable, and a
beneficiary of a Parent Guarantee shall not affect such
PAGE
<PAGE>
Majority Owned Subsidiary's obligation to promptly indemnify
the Parent hereunder. Promptly after a Majority Owned
Subsidiary or wholly-owned subsidiary thereof, as
applicable, receives notice that a beneficiary of a Credit
Support Obligation is seeking to enforce such Credit Support
Obligation, the Majority Owned Subsidiary shall notify the
Parent. The Parent shall have the right, at its own
expense, to contest the claim of such beneficiary. If the
Parent or the subsidiary of the Parent on whose behalf the
Credit Support Obligation is given is contesting the claim
of such beneficiary, the Majority Owned Subsidiary or
wholly-owned subsidiary thereof, as applicable, will not
perform under the relevant Credit Support Obligation unless
and until, in the Majority Owned Subsidiary's reasonable
judgment, the Majority Owned Subsidiary or wholly-owned
subsidiary thereof, as applicable, is obligated under the
terms of such Credit Support Obligation to perform. Subject
to the foregoing, any dispute between the Parent or the
subsidiary of the Parent on whose behalf the Credit Support
Obligation was given, on the one hand, and a beneficiary of
a Credit Support Obligation, on the other, shall not affect
the Parent's obligation to promptly indemnify the Majority
Owned Subsidiary or its wholly-owned subsidiary, as
applicable, hereunder.
4. Upon the request of a Majority Owned Subsidiary, the Parent
may make loans and advances to the Majority Owned Subsidiary
or its wholly-owned subsidiaries on a short-term, revolving
credit basis, from time to time in such amounts as mutually
determined by the Parent and the Majority Owned Subsidiary.
The aggregate principal amount of such loans and advances
shall be reflected on the books and records of the Majority
Owned Subsidiary (or wholly-owned subsidiary, as applicable)
and the Parent. All such loans and advances shall be on an
unsecured basis unless specifically provided otherwise in
loan documents executed at that time. The Majority Owned
Subsidiary or its wholly-owned subsidiaries, as applicable,
shall pay interest on the aggregate unpaid principal amount
of such loans from time to time outstanding at a rate
("Interest Rate") equal to the rate of the Commercial Paper
Composite Rate for 90-day maturities as reported by Merrill
Lynch Capital Markets, as an average of the last five
business days of such Majority Owned Subsidiary's latest
fiscal quarter then ended, plus twenty-five (25) basis
points. The Interest Rate shall be adjusted on the first
business day of each fiscal quarter of such Majority Owned
Subsidiary pursuant to the Interest Rate formula contained
in the preceding sentence and shall be in effect for the
entirety of such fiscal quarter. Interest shall be computed
on a 360-day basis. The aggregate principal amount
outstanding and accrued interest thereon shall be payable on
demand. The principal and accrued interest may be paid by
the Majority Owned Subsidiaries or their wholly-owned
subsidiaries, as applicable, at any time or from time to
PAGE
<PAGE>
time, in whole or in part, without premium or penalty. All
payments shall be applied first to accrued interest and then
to principal. Principal and interest shall be payable in
lawful money of the United States of America, in immediately
available funds, at the principal office of the Parent or at
such other place as the Parent may designate from time to
time in writing to the Majority Owned Subsidiary. The
unpaid principal amount of any such borrowings, and accrued
interest thereon, shall become immediately due and payable,
without demand, upon the failure of the Majority Owned
Subsidiary or its wholly-owned subsidiary, as applicable, to
pay its debts as they become due, the insolvency of the
Majority Owned Subsidiary or its wholly-owned subsidiary, as
applicable, the filing by or against the Majority Owned
Subsidiary or its wholly-owned subsidiary, as applicable, of
any petition under the U.S. Bankruptcy Code (or the filing
of any similar petition under the insolvency law of any
jurisdiction), or the making by the Majority Owned
Subsidiary or its wholly-owned subsidiary, as applicable, of
an assignment or trust mortgage for the benefit of creditors
or the appointment of a receiver, custodian or similar agent
with respect to, or the taking by any such person of
possession of, any property of the Majority Owned Subsidiary
or its wholly-owned subsidiary, as applicable. In case any
payments of principal and interest shall not be paid when
due, the Majority Owned Subsidiary or its wholly-owned
subsidiary, as applicable, further promises to pay all cost
of collection, including reasonable attorneys' fees.
5. All payments required to be made by a Majority Owned
Subsidiary or its wholly-owned subsidiaries, as applicable,
shall be made within two days after receipt of notice from
the Parent. All payments required to be made by the Parent
shall be made within two days after receipt of notice from
the Majority Owned Subsidiary.
6. This Agreement shall be governed by and construed in
accordance with the laws of the Commonwealth of
Massachusetts applicable to contracts made and performed
therein.
PAGE
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement
to be executed by their duly authorized officers as of the date
first above written.
THERMO INSTRUMENT SYSTEMS INC.
By: -----------------------------
Melissa F.Riordan
Title: Treasurer
METRIKA SYSTEMS CORPORATION
By:
-----------------------------
Ernesto A.Corte
Title: President
Exhibit 10.16
METRIKA SYSTEMS CORPORATION
RESTATED STOCK HOLDING ASSISTANCE PLAN
SECTION 1. Purpose.
The purpose of this Plan is to benefit Metrika Systems
Corporation (the "Company") and its stockholders by encouraging
Key Employees to acquire and maintain share ownership in the
Company, by increasing such employees' proprietary interest in
promoting the growth and performance of the Company and its
subsidiaries and by providing for the implementation of the Stock
Holding Policy.
SECTION 2. Definitions.
The following terms, when used in the Plan, shall have the
meanings set forth below:
Committee: The Human Resources Committee of the Board of
Directors of the Company as appointed from time to time.
Common Stock: The common stock of the Company and any
successor thereto.
Company: Metrika Systems Corporation, a Delaware
corporation.
Stock Holding Policy: The Stock Holding Policy of the
Company, as adopted by the Committee and as in effect from time
to time.
Key Employee: Any employee of the Company or any of its
subsidiaries, including any officer or member of the Board of
Directors who is also an employee, as designated by the
Committee, and who, in the judgment of the Committee, will be in
a position to contribute significantly to the attainment of the
Company's strategic goals and long-term growth and prosperity.
Loans: Loans extended to Key Employees by the Company
pursuant to this Plan.
Plan: The Metrika Systems Corporation Stock Holding
Assistance Plan, as amended from time to time.
SECTION 3. Administration.
The Plan and the Stock Holding Policy shall be administered
by the Committee, which shall have authority to interpret the
Plan and the Stock Holding Policy and, subject to their
provisions, to prescribe, amend and rescind any rules and
regulations and to make all other determinations necessary or
desirable for the administration thereof. The Committee's
PAGE
<PAGE>
interpretations and decisions with regard to the Plan and the
Stock Holding Policy and such rules and regulations as may be
established thereunder shall be final and conclusive. The
Committee may correct any defect or supply any omission or
reconcile any inconsistency in the Plan or the Stock Holding
Policy, or in any Loan in the manner and to the extent the
Committee deems desirable to carry it into effect. No member of
the Committee shall be liable for any action or omission in
connection with the Plan or the Stock Holding Policy that is made
in good faith.
SECTION 4. Loans and Loan Limits.
The Committee has determined that the provision of Loans
from time to time to Key Employees in such amounts as to cause
such Key Employees to comply with the Stock Holding Policy is, in
the judgment of the Committee, reasonably expected to benefit the
Company and authorizes the Company to extend Loans from time to
time to Key Employees in such amounts as may be requested by such
Key Employees in order to comply with the Stock Holding Policy.
Such Loans may be used solely for the purpose of acquiring Common
Stock (other than upon the exercise of stock options or under
employee stock purchase plans) in open market transactions or
from the Company.
Each Loan shall be full recourse and evidenced by a
non-interest bearing promissory note substantially in the form
attached hereto as Exhibit A (the "Note") and maturing in
accordance with the provisions of Section 6 hereof, and
containing such other terms and conditions, which are not
inconsistent with the provisions of the Plan and the Stock
Holding Policy, as the Committee shall determine in its sole and
absolute discretion.
SECTION 5. Federal Income Tax Treatment of Loans.
For federal income tax purposes, interest on Loans shall be
imputed on any interest free Loan extended under the Plan. A Key
Employee shall be deemed to have paid the imputed interest to the
Company and the Company shall be deemed to have paid said imputed
interest back to the Key Employee as additional compensation.
The deemed interest payment shall be taxable to the Company as
income, and may be deductible to the Key Employee to the extent
allowable under the rules relating to investment interest. The
deemed compensation payment to the Key Employee shall be taxable
to the employee and deductible to the Company, but shall also be
subject to employment taxes such as FICA and FUTA.
SECTION 6. Maturity of Loans.
Each Loan to a Key Employee hereunder shall be due and
payable on demand by the Company. If no such demand is made,
then each Loan shall mature and the principal thereof shall
become due and payable on the fifth anniversary of the date of
PAGE
<PAGE>
the Loan, provided that the Committee may, in its sole and
absolute discretion, authorize such other maturity and repayment
schedule as the Committee may determine. Each Loan shall also
become immediately due and payable in full, without demand, upon
the occurrence of any of the events set forth in the Note;
provided that the Committee may, in its sole and absolute
discretion, authorize an extension of the time for repayment of a
Loan upon such terms and conditions as the Committee may
determine.
SECTION 7. Amendment and Termination of the Plan.
The Committee may from time to time alter or amend the Plan
or the Stock Holding Policy in any respect, or terminate the Plan
or the Stock Holding Policy at any time. No such amendment or
termination, however, shall alter or otherwise affect the terms
and conditions of any Loan then outstanding to Key Employee
without such Key Employee's written consent, except as otherwise
provided herein or in the promissory note evidencing such Loan.
SECTION 8. Miscellaneous Provisions.
(a) No employee or other person shall have any claim or
right to receive a Loan under the Plan, and no employee shall
have any right to be retained in the employ of the Company due to
his or her participation in the Plan.
(b) No Loan shall be made hereunder unless counsel for the
Company shall be satisfied that such Loan will be in compliance
with applicable federal, state and local laws.
(c) The expenses of the Plan shall be borne by the Company.
(d) The Plan shall be unfunded, and the Company shall not
be required to establish any special or separate fund or to make
any other segregation of assets to assure the making of any Loan
under the Plan.
(e) Except as otherwise provided in Section 7 hereof, by
accepting any Loan under the Plan, each Key Employee shall be
conclusively deemed to have indicated his acceptance and
ratification of, and consent to, any action taken under the Plan
or the Stock Holding Policy by the Company, the Board of
Directors of the Company or the Committee.
(f) The appropriate officers of the Company shall cause to
be filed any reports, returns or other information regarding
Loans hereunder, as may be required by any applicable statute,
rule or regulation.
SECTION 9. Effective Date.
The Plan and the Stock Holding Policy shall become effective
upon approval and adoption by the Committee.
PAGE
<PAGE>
EXHIBIT A TO STOCK HOLDING ASSISTANCE PLAN
Metrika Systems Corporation
Promissory Note
$_________
Dated:____________
For value received, ________________, an individual whose
residence is located at _______________________ (the "Employee"),
hereby promises to pay to Metrika Systems Corporation (the
"Company"), or assigns, ON DEMAND, but in any case on or before
[insert date which is the fifth anniversary of date of issuance]
(the "Maturity Date"), the principal sum of [loan amount in
words] ($_______), or such part thereof as then remains unpaid,
without interest. Principal shall be payable in lawful money of
the United States of America, in immediately available funds, at
the principal office of the Company or at such other place as the
Company may designate from time to time in writing to the
Employee.
Unless the Company has already made a demand for payment in
full of this Note, the Employee agrees to repay to the Company
from the Employee's annual cash incentive compensation (referred
to as bonus), beginning with the first such bonus payment to
occur after the date of this Note and on each of the next four
bonus payment dates occurring prior to the Maturity Date, such
amount as may be designated by the Company. Any amount remaining
unpaid under this Note shall be due and payable on the Maturity
Date.
This Note may be prepaid at any time or from time to time,
in whole or in part, without any premium or penalty. The
Employee acknowledges and agrees that the Company has advanced to
the Employee the principal amount of this Note pursuant to the
Company's Stock Holding Assistance Plan, and that all terms and
conditions of such Plan are incorporated herein by reference.
The unpaid principal amount of this Note shall be and become
immediately due and payable without notice or demand, at the
option of the Company, upon the occurrence of any of the
following events:
(a) the termination of the Employee's employment with
the Company, with or without cause, for any reason or for no
reason;
(b) the death or disability of the Employee;
PAGE
<PAGE>
(c) the failure of the Employee to pay his or her
debts as they become due, the insolvency of the Employee,
the filing by or against the Employee of any petition under
the United States Bankruptcy Code (or the filing of any
similar petition under the insolvency law of any
jurisdiction), or the making by the Employee of an
assignment or trust mortgage for the benefit of creditors or
the appointment of a receiver, custodian or similar agent
with respect to, or the taking by any such person of
possession of, any property of the Employee; or
(d) the issuance of any writ of attachment, by trustee
process or otherwise, or any restraining order or injunction
not removed, repealed or dismissed within thirty (30) days
of issuance, against or affecting the person or property of
the Employee or any liability or obligation of the Employee
to the Company.
In case any payment herein provided for shall not be paid
when due, the Employee further promises to pay all costs of
collection, including all reasonable attorneys' fees.
No delay or omission on the part of the Company in
exercising any right hereunder shall operate as a waiver of such
right or of any other right of the Company, nor shall any delay,
omission or waiver on any one occasion be deemed a bar to or
waiver of the same or any other right on any future occasion.
The Employee hereby waives presentment, demand, notice of
prepayment, protest and all other demands and notices in
connection with the delivery, acceptance, performance, default or
enforcement of this Note. The undersigned hereby assents to any
indulgence and any extension of time for payment of any
indebtedness evidenced hereby granted or permitted by the
Company.
This Note has been made pursuant to the Company's Stock
Holding Assistance Plan and shall be governed by and construed in
accordance with, such Plan and the laws of the State of Delaware
and shall have the effect of a sealed instrument.
_______________________________
Employee Name: _________________
________________________
Witness
AA980710021
Exhibit 13
METRIKA SYSTEMS CORPORATION
Consolidated Financial Statements
1997
PAGE
<PAGE>
Metrika Systems Corporation 1997 Financial Statements
Consolidated Statement of Income
(In thousands except per
share amounts) 1997 1996 1995
-----------------------------------------------------------------------
Revenues (Note 10) $56,714 $52,047 $46,032
------- ------- -------
Costs and Operating Expenses:
Cost of revenues 29,928 28,527 25,767
Selling, general, and administrative
expenses (Note 7) 14,367 13,395 11,640
Research and development expenses 3,815 3,024 2,580
------- ------- -------
48,110 44,946 39,987
------- ------- -------
Operating Income 8,604 7,101 6,045
Interest Income 2,013 101 21
Interest Expense (Note 7) (838) (796) (1,146)
------- ------- -------
Income Before Provision for Income
Taxes 9,779 6,406 4,920
Provision for Income Taxes (Note 6) 3,920 2,561 2,068
------- ------- -------
Net Income $ 5,859 $ 3,845 $ 2,852
======= ======= =======
Basic and Diluted Earnings per Share
(Note 11): $ .82 $ .76 $ .57
======= ======= =======
Weighted Average Shares (Note 11):
Basic 7,143 5,032 5,000
======= ======= =======
Diluted 7,147 5,032 5,000
======= ======= =======
The accompanying notes are an integral part of these consolidated
financial statements.
2PAGE
<PAGE>
Metrika Systems Corporation 1997 Financial Statements
Consolidated Balance Sheet
(In thousands) 1997 1996
------------------------------------------------------------------------
Assets
Current Assets:
Cash and cash equivalents $ 44,044 $ 20,229
Available-for-sale investments, at quoted market
value (amortized cost of $6,231) 6,245 -
Accounts receivable, less allowances of $671 and
$440 17,377 10,896
Unbilled contract costs and fees 2,476 1,706
Inventories 7,145 6,347
Prepaid income taxes and other current assets
(Note 6) 1,621 1,457
-------- --------
78,908 40,635
-------- --------
Property, Plant, and Equipment, at Cost, Net 10,373 12,100
-------- --------
Other Assets 727 926
-------- --------
Cost in Excess of Net Assets of Acquired
Companies (Note 3) 12,944 13,105
-------- --------
$102,952 $ 66,766
======== ========
3PAGE
<PAGE>
Metrika Systems Corporation 1997 Financial Statements
Consolidated Balance Sheet (continued)
(In thousands except share amounts) 1997 1996
------------------------------------------------------------------------
Liabilities and Shareholders' Investment
Current Liabilities:
Notes payable and current maturities of
long-term obligation (Note 8) $ 9,895 $ 11,578
Accounts payable 2,308 2,463
Accrued payroll and employee benefits 2,322 2,225
Accrued income taxes 2,445 597
Customer deposits 3,576 3,377
Accrued installation and warranty costs 2,132 1,350
Other accrued expenses 4,071 3,023
Due to parent company and affiliated
companies (Note 7) 4,184 7,317
-------- --------
30,933 31,930
-------- --------
Accrued Pension Costs (Note 4) 4,356 4,752
-------- --------
Long-term Obligation (Note 8) 3,858 5,223
-------- --------
Commitments (Note 9)
Shareholders' Investment (Notes 4 and 5):
Common stock, $.01 par value, 25,000,000 shares
authorized; 8,267,828 and 5,967,828 shares
issued and outstanding 83 60
Capital in excess of par value 58,555 26,050
Retained earnings 6,157 298
Cumulative translation adjustment (999) (1,547)
Net unrealized gain on available-for-sale
investments (Note 2) 9 -
-------- --------
63,805 24,861
-------- --------
$102,952 $ 66,766
======== ========
The accompanying notes are an integral part of these consolidated
financial statements.
4PAGE
<PAGE>
Metrika Systems Corporation 1997 Financial Statements
Consolidated Statement of Cash Flows
(In thousands) 1997 1996 1995
-----------------------------------------------------------------------
Operating Activities:
Net income $ 5,859 $ 3,845 $ 2,852
Adjustments to reconcile net income to
net cash provided by operating
activities:
Depreciation and amortization 1,630 1,792 1,866
Provision for losses on accounts
receivable 633 - 225
Deferred income tax expense 482 69 357
Other noncash items 104 (87) 597
Changes in current accounts,
excluding the effects of
acquisition:
Accounts receivable (6,987) 307 (2,031)
Inventories and unbilled contract
costs and fees (1,323) 2,708 (1,905)
Other current assets (162) 208 (555)
Accounts payable (190) 842 458
Other current liabilities 3,053 (1,878) 2,661
------- ------- -------
Net cash provided by operating activities 3,099 7,806 4,525
------- ------- -------
Investing Activities:
Acquisition, net of cash acquired
(Note 3) (1,344) - -
Purchases of available-for-sale
investments (6,091) - -
Purchases of property, plant, and
equipment (674) (671) (910)
Other 63 26 28
------- ------- -------
Net cash used in investing activities $(8,046) $ (645) $ (882)
------- ------- -------
5PAGE
<PAGE>
Metrika Systems Corporation 1997 Financial Statements
Consolidated Statement of Cash Flows (continued)
(In thousands) 1997 1996 1995
-----------------------------------------------------------------------
Financing Activities:
Net proceeds from issuance of Company
common stock (Note 5) $32,528 $13,528 $ -
Net transfers to parent company prior to
capitalization of the Company - (2,398) (6,020)
Increase (decrease) in due to parent
company and affiliated companies (1,770) 2,683 1,418
Increase (decrease) in short-term
obligations (489) (1,886) 2,855
Repayment of long-term obligation (662) (791) (694)
------- ------- -------
Net cash provided by (used in)
financing activities 29,607 11,136 (2,441)
------- ------- -------
Exchange Rate Effect on Cash (845) 630 (1,084)
------- ------- -------
Increase in Cash and Cash Equivalents 23,815 18,927 118
Cash and Cash Equivalents at Beginning of
Year 20,229 1,302 1,184
------- ------- -------
Cash and Cash Equivalents at End of Year $44,044 $20,229 $ 1,302
======= ======= =======
Cash Paid For:
Interest $ 749 $ 794 $ 1,144
Income taxes $ 2,314 $ 393 $ 55
Noncash Activities:
Fair value of assets of acquired
company $ 2,387 $ - $ -
Cash paid for acquired company (1,347) - -
------- ------- -------
Liabilities assumed of acquired
company $ 1,040 $ - $ -
======= ======= =======
The accompanying notes are an integral part of these consolidated
financial statements.
6PAGE
<PAGE>
Metrika Systems Corporation 1997 Financial Statements
Consolidated Statement of Shareholders' Investment
(In thousands) 1997 1996 1995
------------------------------------------------------------------------
Common Stock, $.01 Par Value
Balance at beginning of year $ 60 $ - $ -
Capitalization of the Company - 50 -
Net proceeds from issuance of
Company common stock (Note 5) 23 10 -
-------- -------- --------
Balance at end of year 83 60 -
-------- -------- --------
Capital in Excess of Par Value
Balance at beginning of year 26,050 - -
Capitalization of the Company - 12,532 -
Net proceeds from issuance of
Company common stock (Note 5) 32,505 13,518 -
-------- -------- --------
Balance at end of year 58,555 26,050 -
-------- -------- --------
Retained Earnings
Balance at beginning of year 298 - -
Net income 5,859 298 -
-------- -------- --------
Balance at end of year 6,157 298 -
-------- -------- --------
Cumulative Translation Adjustment
Balance at beginning of year (1,547) (2,051) (506)
Translation adjustment 548 504 (1,545)
-------- -------- --------
Balance at end of year (999) (1,547) (2,051)
-------- -------- --------
Net Unrealized Gain on
Available-for-sale Investments
Balance at beginning of year - - -
Change in net unrealized gain on
available-for-sale investments 9 - -
-------- -------- --------
Balance at end of year 9 - -
-------- -------- --------
Net Parent Company Investment
Balance at beginning of year - 11,433 14,601
Net income prior to capitalization
of the Company - 3,547 2,852
Net transfer to parent company
prior to capitalization of the
Company - (2,398) (6,020)
Capitalization of the Company - (12,582) -
-------- -------- --------
Balance at end of year - - 11,433
-------- -------- --------
Total Shareholders' Investment $ 63,805 $ 24,861 $ 9,382
======== ======== ========
The accompanying notes are an integral part of these consolidated
financial statements.
7PAGE
<PAGE>
Metrika Systems Corporation 1997 Financial Statements
Notes to Consolidated Financial Statements
1. Nature of Operations and Summary of Significant Accounting Policies
Nature of Operations
Metrika Systems Corporation (the Company) develops, manufactures, and
markets on-line process optimization systems that employ proprietary
ultra high-speed advanced scientific measurement technologies for
applications in raw-materials analysis and finished-materials quality
control. The Company manufactures process optimization systems that
provide real-time, nondestructive analysis of the composition of raw
materials in basic-materials production processes, including coal,
cement, and minerals. The Company also manufactures advanced systems that
are used to measure and control parameters such as material thickness,
coating thickness, and coating weight in web-type materials, such as
metal strip, rubber, and plastic foils. Customers use these systems to
improve product quality and consistency, lower material costs, reduce
energy consumption, and minimize waste.
Relationship with Thermo Instrument Systems Inc. and Thermo Electron
Corporation
The Company operated as two divisions of Thermo Instrument Systems
Inc. until its incorporation as a Delaware corporation in November 1996.
In connection with the Company's incorporation, Thermo Instrument
transferred to the Company the assets, liabilities, and businesses of its
Gamma-Metrics subsidiary and Radiometrie division in exchange for
5,000,000 shares of the Company's common stock. As of January 3, 1998,
Thermo Instrument owned 5,000,000 shares of the Company's common stock,
representing 60% of such stock outstanding. As of January 3, 1998, Thermo
Instrument is an 82% owned subsidiary of Thermo Electron Corporation.
Principles of Consolidation
The accompanying financial statements include the accounts of the
Company and its wholly owned subsidiaries. All material intercompany
accounts and transactions have been eliminated.
Fiscal Year
The Company has adopted a fiscal year ending the Saturday nearest
December 31. References to 1997, 1996, and 1995 are for the fiscal years
ended January 3, 1998, December 28, 1996, and December 30, 1995,
respectively. Fiscal year 1997 included 53 weeks; 1996 and 1995 each
included 52 weeks.
Revenue Recognition
Generally, the Company recognizes product revenues upon shipment of
its products. The Company provides a reserve for its estimate of warranty
and installation costs at the time of shipment. Revenues and profits on
contracts, which due to their complexity extend over multiple quarterly
reporting periods, are recognized using the percentage-of-completion
method. Such contracts include all manufacturing contracts of the
Company's on-line finished-materials quality-control business, which
commonly are of 5 to 10 months duration, as well as certain contracts of
similar duration or longer at the Company's on-line raw-materials
analysis business. Revenues recorded under the percentage-of-completion
method were $20,421,000 in 1997, $18,611,000 in 1996, and $17,523,000 in
8PAGE
<PAGE>
Metrika Systems Corporation 1997 Financial Statements
Notes to Consolidated Financial Statements
1. Nature of Operations and Summary of Significant Accounting Policies
(continued)
1995. The percentage of completion is determined by relating the actual
costs incurred to date to management's estimate of total costs to be
incurred on each contract. If a loss is indicated on any contract in
process, a provision is made currently for the entire loss. Contracts
generally provide for the billing of customers upon the attainment of
certain milestones in each contract. Revenues earned on contracts in
process in excess of billings are classified as unbilled contract costs
and fees in the accompanying balance sheet. There are no significant
amounts included in the accompanying balance sheet that are not expected
to be recovered from existing contracts at current contract values, or
that are not expected to be collected within one year, including amounts
that are billed but not paid under retainage provisions.
Stock-based Compensation Plans
The Company applies Accounting Principles Board Opinion (APB) No. 25,
"Accounting for Stock Issued to Employees" and related interpretations in
accounting for its stock-based compensation plans (Note 4). Accordingly,
no accounting recognition is given to stock options granted at fair
market value until they are exercised. Upon exercise, net proceeds,
including tax benefits realized, are credited to equity.
Income Taxes
The Company, Thermo Instrument, and Thermo Electron entered into a
tax allocation agreement under which the Company and Thermo Instrument
were included in Thermo Electron's consolidated federal and certain state
income tax returns. The agreement provided that in years in which the
Company had taxable income, it would pay to Thermo Electron amounts
comparable to the taxes the Company would have paid if it had filed
separate tax returns. Subsequent to the Company's initial public offering
in June 1997, Thermo Instrument's ownership of the Company was reduced
below 80% and, as a result, the Company is required to file its own
federal income tax returns.
In accordance with Statement of Financial Accounting Standards (SFAS)
No. 109, "Accounting for Income Taxes," the Company recognizes deferred
income taxes based on the expected future tax consequences of differences
between the financial statement basis and the tax basis of assets and
liabilities, calculated using enacted tax rates in effect for the year in
which the differences are expected to be reflected in the tax return.
Earnings per Share
During the fourth quarter of 1997, the Company adopted SFAS No. 128,
"Earnings per Share" (Note 11). As a result, all previously reported
earnings per share have been restated and the Company is required to
report diluted earnings per share. Basic earnings per share have been
computed by dividing net income by the weighted average number of shares
outstanding during the year. For periods prior to the Company's November
1996 capitalization, shares issued in connection with such capitalization
have been shown as outstanding for purposes of computing earnings per
share. Diluted earnings per share have been computed assuming the
exercise of stock options, as well as their related income tax effects.
9PAGE
<PAGE>
Metrika Systems Corporation 1997 Financial Statements
Notes to Consolidated Financial Statements
1. Nature of Operations and Summary of Significant Accounting Policies
(continued)
Stock Split
In May 1997, the Company declared and effected a one-for-two reverse
stock split. All share and per share information has been restated to
reflect the stock split.
Cash and Cash Equivalents
At year-end 1997 and 1996, $40,173,000 and $15,672,000, respectively,
of the Company's cash equivalents were invested in a repurchase agreement
with Thermo Electron. Under this agreement, the Company in effect lends
excess cash to Thermo Electron, which Thermo Electron collateralizes with
investments principally consisting of corporate notes, commercial paper,
U.S. government-agency securities, money market funds, and other
marketable securities, in the amount of at least 103% of such obligation.
The Company's funds subject to the repurchase agreement are readily
convertible into cash by the Company. The repurchase agreement earns a
rate based on the 90-day Commercial Paper Composite Rate plus 25 basis
points, set at the beginning of each quarter. At year-end 1997 and 1996,
cash equivalents also included investments in interest-bearing accounts
at the Company's foreign operations, which have an original maturity of
three months or less. Cash and cash equivalents are carried at cost,
which approximates market value.
Inventories
Inventories are stated at the lower of cost (on a weighted average
basis) or market value and include materials, labor, and manufacturing
overhead. The components of inventories are as follows:
(In thousands) 1997 1996
-----------------------------------------------------------------------
Raw material and supplies $4,077 $4,207
Work in process 2,416 1,230
Finished goods 652 910
------ ------
$7,145 $6,347
====== ======
10PAGE
<PAGE>
Metrika Systems Corporation 1997 Financial Statements
Notes to Consolidated Financial Statements
1. Nature of Operations and Summary of Significant Accounting Policies
(continued)
Property, Plant, and Equipment
The costs of additions and improvements are capitalized, while
maintenance and repairs are charged to expense as incurred. The Company
provides for depreciation and amortization using the straight-line method
over the estimated useful lives of the property as follows: buildings, 40
years; machinery and equipment, 3 to 10 years; and leasehold
improvements, the shorter of the term of the lease or the life of the
asset. Property, plant, and equipment consists of the following:
(In thousands) 1997 1996
------------------------------------------------------------------------
Land $ 1,613 $ 1,861
Buildings 7,534 8,594
Machinery, equipment, and leasehold improvements 5,622 5,501
------- -------
14,769 15,956
Less: Accumulated depreciation and amortization 4,396 3,856
------- -------
$10,373 $12,100
======= =======
Other Assets
Other assets in the accompanying balance sheet consist primarily of
acquired technology and the cost of acquired patents that are being
amortized using the straight-line method over their estimated useful
lives, ranging from 5 to 20 years. Accumulated amortization was
$1,371,000 and $1,169,000 at year-end 1997 and 1996, respectively.
Cost in Excess of Net Assets of Acquired Companies
The excess of cost over the fair value of net assets of acquired
companies is amortized using the straight-line method over 40 years.
Accumulated amortization was $2,007,000 and $1,627,000 at year-end 1997
and 1996, respectively. The Company assesses the future useful life of
this asset whenever events or changes in circumstances indicate that the
current useful life has diminished. The Company considers the future
undiscounted cash flows of the acquired companies in assessing the
recoverability of this asset. If impairment has occurred, any excess of
carrying value over fair value is recorded as a loss.
Foreign Currency
All assets and liabilities of the Company's foreign subsidiaries are
translated at year-end exchange rates, and revenues and expenses are
translated at average exchange rates for the year, in accordance with
SFAS No. 52, "Foreign Currency Translation." Resulting translation
adjustments are reflected as a separate component of shareholders'
investment titled "Cumulative translation adjustment." Foreign currency
transaction gains and losses are included in the accompanying statement
of income and are not material for the three years presented.
11PAGE
<PAGE>
Metrika Systems Corporation 1997 Financial Statements
Notes to Consolidated Financial Statements
1. Nature of Operations and Summary of Significant Accounting Policies
(continued)
Fair Value of Financial Instruments
The Company's financial instruments consist primarily of cash and
cash equivalents, available-for-sale investments, accounts receivable,
notes payable and current maturities of long-term obligation, accounts
payable, due to parent company and affiliated companies, and long-term
obligation. Available-for-sale investments are carried at fair value in
the accompanying balance sheet (Note 2). The fair values were determined
based on quoted market prices. The Company's long-term obligation bears
interest at a variable market rate, therefore the carrying amount
approximates fair value (Note 8). The carrying amounts of the Company's
remaining financial instruments approximate fair value due to their
short-term nature.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities,
disclosure of contingent assets and liabilities at the date of the
financial statements, and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
2. Available-for-sale Investments
In accordance with SFAS No. 115, "Accounting for Certain Investments
in Debt and Equity Securities", the Company's debt securities are
considered available-for-sale investments in the accompanying balance
sheet and are carried at market value, with the difference between cost
and market value, net of related tax effects, recorded currently as a
component of shareholders' investment titled "Net unrealized gain on
available-for-sale investments."
The aggregate market value, cost basis, and gross unrealized gains of
available-for-sale investments by major security type are as follows:
Gross
Market Cost Unrealized
(In thousands) Value Basis Gains
------------------------------------------------------------------------
1997
Corporate bonds $6,105 $6,091 $ 14
Other 140 140 -
------ ------ ------
$6,245 $6,231 $ 14
====== ====== ======
12PAGE
<PAGE>
Metrika Systems Corporation 1997 Financial Statements
Notes to Consolidated Financial Statements
2. Available-for-sale Investments (continued)
All of the Company's available-for-sale investments in the
accompanying 1997 balance sheet had contractual maturities of one year or
less. Actual maturities may differ from contractual maturities as a
result of the Company's intent to sell these securities prior to maturity
and as a result of put and call options that enable either the Company,
the issuer, or both, to redeem these securities at an earlier date.
3. Acquisition
On December 31, 1996, the Company acquired the assets, subject to
certain liabilities, of the Autometrics division of Svedala Industries
Inc. (Autometrics) for $1,347,000 in cash. Autometrics is a manufacturer
and marketer of on-line analysis instruments for the minerals-processing
industry.
The acquisition has been accounted for using the purchase method of
accounting and its results of operations have been included in the
accompanying financial statements from its date of acquisition. The cost
of the acquisition exceeded the estimated fair value of the acquired net
assets by $400,000, which is being amortized over 40 years. Allocation of
the purchase price was based on an estimate of the fair value of the net
assets acquired.
Based on unaudited data, the following table presents selected
financial information for the Company and Autometrics on a pro forma
basis, assuming the companies had been combined since the beginning of
1996.
(In thousands except
per share amount) 1996
-----------------------------------------------------------------------
Revenues $54,746
Net income 3,170
Basic and diluted earnings per share .63
The pro forma results are not necessarily indicative of the actual
results that would have occurred had the acquisition of Autometrics been
made at the beginning of 1996.
13PAGE
<PAGE>
Metrika Systems Corporation 1997 Financial Statements
Notes to Consolidated Financial Statements
4. Employee Benefit Plans
Stock-based Compensation Plans
Stock Option Plans
------------------
In November 1996, the Company adopted a stock-based compensation plan
for its key employees, directors, and others, which permits the grant of
stock and stock-based awards as determined by the human resources
committee of the Company's Board of Directors (the Board Committee),
including restricted stock, stock options, stock bonus shares, or
performance-based shares. To date, only nonqualified stock options have
been awarded under this plan. The option recipients and the terms of
options granted under this plan are determined by the Board Committee.
Options granted prior to the Company's initial public offering became
exercisable in September 1997. Generally, options granted to date are
exercisable immediately, but are subject to certain transfer restrictions
and the right of the Company to repurchase shares issued upon exercise of
the options at the exercise price, upon certain events. The restrictions
and repurchase rights generally lapse ratably over a five- to ten-year
period, depending on the term of the option, which generally ranges from
seven to twelve years. Nonqualified stock options may be granted at any
price determined by the Board Committee, although incentive stock options
must be granted at not less than the fair market value of the Company's
stock on the date of grant. To date, all options have been granted at
fair market value. In addition to the Company's stock-based compensation
plans, certain officers and key employees may also participate in the
stock-based compensation plans of Thermo Electron and Thermo Instrument.
A summary of the Company's stock option activity is as follows:
1997
--------------------
Weighted
Number Average
of Exercise
(Shares in thousands) Shares Price
----------------------------------------------------------------------
Options outstanding, beginning of year - $ -
Granted 303 15.00
Forfeited (2) 15.00
---
Options outstanding, end of year 301 $15.00
=== ======
Options exercisable 301 $15.00
=== ======
Options available for grant 49
===
14PAGE
<PAGE>
Metrika Systems Corporation 1997 Financial Statements
Notes to Consolidated Financial Statements
4. Employee Benefit Plans (continued)
As of January 3, 1998, the options outstanding were exercisable at
prices ranging from $15.00 to $15.34 and had a weighted-average remaining
contractual life of 8.3 years.
Employee Stock Purchase Program
-------------------------------
Substantially all of the Company's full-time U.S. employees are
eligible to participate in an employee stock purchase program sponsored
by Thermo Instrument and Thermo Electron. Under this program, shares of
Thermo Instrument's and Thermo Electron's common stock can be purchased
at the end of a 12-month period at 95% of the fair market value at the
beginning of the period, and the shares purchased are subject to a
six-month resale restriction. Prior to November 1, 1995, the applicable
shares of common stock could be purchased at 85% of the fair market value
at the beginning of the period, and the shares purchased were subject to
a one-year resale restriction. Shares are purchased through payroll
deductions of up to 10% of each participating employee's gross wages.
Pro Forma Stock-based Compensation Expense
In October 1995, the Financial Accounting Standards Board issued SFAS
No. 123, "Accounting for Stock-based Compensation," which sets forth a
fair-value based method of recognizing stock-based compensation expense.
As permitted by SFAS No. 123, the Company has elected to continue to
apply APB No. 25 to account for its stock-based compensation plans. Had
compensation cost for awards in 1997 under the Company's stock-based
compensation plans been determined based on the fair value at the grant
dates consistent with the method set forth under SFAS No. 123, the effect
on the Company's net income and earnings per share would have been as
follows:
(In thousands except per share amounts) 1997
------------------------------------------------------------------------
Net income:
As reported $5,859
Pro forma 5,712
Basic and diluted earnings per share:
As reported .82
Pro forma .80
Compensation expense for options granted is reflected over the
vesting period; therefore, future pro forma compensation expense may be
greater as additional options are granted.
15PAGE
<PAGE>
Metrika Systems Corporation 1997 Financial Statements
Notes to Consolidated Financial Statements
4. Employee Benefit Plans (continued)
The weighted average fair value per share of options granted in 1997
was $7.51. The fair value of each option grant was estimated on the grant
date using the Black-Scholes option-pricing model with the following
weighted-average assumptions:
1997
------------------------------------------------------------------------
Volatility 29%
Risk-free interest rate 6.2%
Expected life of options 8.3 years
The Black-Scholes option-pricing model was developed for use in
estimating the fair value of traded options which have no vesting
restrictions and are fully transferable. In addition, option-pricing
models require the input of highly subjective assumptions including
expected stock price volatility. Because the Company's employee stock
options have characteristics significantly different from those of traded
options, and because changes in the subjective input assumptions can
materially affect the fair value estimate, in management's opinion, the
existing models do not necessarily provide a reliable single measure of
the fair value of its employee stock options.
401(k) Savings Plan
Substantially all of the Company's full-time U.S. employees are
eligible to participate in Thermo Electron's 401(k) savings plan.
Contributions to the 401(k) savings plan are made by both the employee
and the Company. Company contributions are based upon the level of
employee contributions. The Company contributed and charged to expense
$215,000, $176,000, and $178,000 in 1997, 1996, and 1995, respectively.
Defined Benefit Pension Plan
The Company's German subsidiary has a defined benefit pension plan
covering substantially all of its full-time employees. Benefits are based
on a percentage of eligible earnings for each year of service in excess
of ten.
Net periodic pension costs included the following components:
(In thousands) 1997 1996 1995
------------------------------------------------------------------------
Service cost $120 $186 $168
Interest cost on projected benefit obligation 203 293 257
Amortization of unrecognized obligations (45) - (13)
---- ---- ----
$278 $479 $412
==== ==== ====
16PAGE
<PAGE>
Metrika Systems Corporation 1997 Financial Statements
Notes to Consolidated Financial Statements
4. Employee Benefit Plans (continued)
The funded status of the Company's defined benefit pension plan is as
follows:
(In thousands) 1997 1996
--------------------------------------------------------------
Actuarial present value of benefit
obligations:
Vested benefits $2,842 $3,093
Nonvested benefits 59 77
------ ------
Accumulated benefit obligation 2,901 3,170
Effect of projected future salary increases 395 307
------ ------
Projected benefit obligation 3,296 3,477
Plan assets at fair value - -
------ ------
Plan assets less than projected benefit
obligation 3,296 3,477
Unrecognized net gain 1,060 1,275
------ ------
Accrued pension costs $4,356 $4,752
====== ======
Actuarial assumptions used to determine the net periodic pension
costs were:
1997 1996 1995
------------------------------------------------------------------------
Discount rate 6.5% 6.5% 6.7%
Rate of increase in salary levels 2.5% 1.5% 3.6%
Defined Contribution Pension Plan
In addition, the Company's United Kingdom subsidiary participates in
a multi-employer, defined contribution pension plan covering
substantially all of its full-time employees. The Company contributed to
the plan and charged to expense $161,000, $134,000, and $119,000 in 1997,
1996, and 1995, respectively.
5. Common Stock
Sale of Common Stock
In June 1997, the Company sold 2,300,000 shares of its common stock
in an initial public offering at $15.50 per share, for net proceeds of
$32,528,000.
In December 1996, the Company sold 967,828 shares of its common stock
in a private placement at $15.00 per share, for net proceeds of
$13,528,000.
17PAGE
<PAGE>
Metrika Systems Corporation 1997 Financial Statements
Notes to Consolidated Financial Statements
5. Common Stock (continued)
Reserved Shares
At January 3, 1998, the Company had reserved 362,500 unissued shares
of its common stock for possible issuance under stock-based compensation
plans.
6. Income Taxes
The components of income before provision for income taxes are as
follows:
(In thousands) 1997 1996 1995
----------------------------------------------------------------------
Domestic $6,460 $4,583 $2,845
Foreign 3,319 1,823 2,075
------ ------ ------
$9,779 $6,406 $4,920
====== ====== ======
The components of the provision for income taxes are as follows:
(In thousands) 1997 1996 1995
----------------------------------------------------------------------
Currently payable:
Federal $2,616 $1,864 $1,209
State 134 363 226
Foreign 688 265 276
------ ------ ------
3,438 2,492 1,711
------ ------ ------
Net deferred (prepaid):
Federal (80) (273) (165)
State (17) (40) (24)
Foreign 579 382 546
------ ------ ------
482 69 357
------ ------ ------
$3,920 $2,561 $2,068
====== ====== ======
18PAGE
<PAGE>
Metrika Systems Corporation 1997 Financial Statements
Notes to Consolidated Financial Statements
6. Income Taxes (continued)
The provision for income taxes in the accompanying statement of
income differs from the provision calculated by applying the statutory
federal income tax rate of 34% to income before provision for income
taxes due to the following:
(In thousands) 1997 1996 1995
----------------------------------------------------------------------
Provision for income taxes at statutory
rate $3,325 $2,178 $1,673
Increase (decrease) resulting from:
State income taxes, net of federal tax 77 213 133
Foreign tax rate and tax law differential 139 27 117
Tax benefit of foreign sales corporation (173) (140) (113)
Amortization of cost in excess of net
assets of acquired companies 117 111 111
Other 435 172 147
------ ------ ------
$3,920 $2,561 $2,068
====== ====== ======
Prepaid income taxes in the accompanying balance sheet consist of the
following:
(In thousands) 1997 1996
------------------------------------------------------------
Prepaid income taxes:
Reserves and accruals $ 626 $ 577
Inventory basis difference 381 307
Accrued compensation 219 105
------ ------
$1,226 $ 989
====== ======
A provision has not been made for U.S. or additional foreign taxes on
$4.6 million of undistributed earnings of foreign subsidiaries that could
be subject to taxation if remitted to the U.S. because the Company
currently plans to keep these amounts permanently reinvested overseas.
7. Related-party Transactions
Corporate Services Agreement
The Company and Thermo Electron have a corporate services agreement
under which Thermo Electron's corporate staff provides certain
administrative services, including certain legal advice and services,
risk management, certain employee benefit administration, tax advice and
preparation of tax returns, centralized cash management, and certain
financial and other services, for which the Company paid Thermo Electron
annually an amount equal to 1.0% of the Company's revenues in 1997 and
1996 and 1.20% of the Company's revenues in 1995. For these services, the
Company was charged $567,000, $520,000, and $552,000 in 1997, 1996, and
19PAGE
<PAGE>
Metrika Systems Corporation 1997 Financial Statements
Notes to Consolidated Financial Statements
7. Related-party Transactions (continued)
1995, respectively. Beginning in 1998, the Company will pay an annual fee
equal to 0.8% of the Company's revenues. The annual fee is reviewed and
adjusted annually by mutual agreement of the parties. The corporate
services agreement is renewed annually but can be terminated upon 30
days' prior notice by the Company or upon the Company's withdrawal from
the Thermo Electron Corporate Charter (the Thermo Electron Corporate
Charter defines the relationships among Thermo Electron and its majority
owned subsidiaries). Management believes that the service fee charged by
Thermo Electron is reasonable and that such fees are representative of
the expenses the Company would have incurred on a stand-alone basis. For
additional items such as employee benefit plans, insurance coverage, and
other identifiable costs, Thermo Electron charges the Company based upon
costs attributable to the Company.
Repurchase Agreement
The Company invests excess cash in a repurchase agreement with Thermo
Electron as discussed in Note 1.
Due to Parent Company and Affiliated Companies
The Company borrowed funds from a wholly owned subsidiary of Thermo
Optek Corporation, a majority owned subsidiary of Thermo Instrument,
pursuant to certain promissory notes, which were repaid in February 1997.
The Company had $1,928,000 outstanding under the promissory notes at
year-end 1996. The notes bore interest at a variable rate. The weighted
average interest rate for the notes outstanding at year-end 1996 was
3.8%.
The Company had $4,184,000 and $5,389,000 of noninterest-bearing
advances from Thermo Instrument and affiliated companies at year-end 1997
and 1996, respectively, which are due on demand.
Other Related-party Services
The Company leases office and manufacturing space in Germany to a
wholly owned subsidiary of Thermo Instrument pursuant to an arrangement
whereby the Company charges the Thermo Instrument subsidiary its
allocated share of the occupancy expenses of the Company's German
facility, based on space utilized. Pursuant to this arrangement, the
Company recorded $472,000, $368,000, and $367,000 in 1997, 1996, and
1995, respectively, as a reduction in selling, general, and
administrative expenses in the accompanying statement of income.
Other Related-party Transactions
In 1997 and 1996, the Company paid commissions totaling $83,000 and
$70,000, respectively, to Thermo Sentron Inc., an affiliated company.
In 1997, the Company purchased X-ray source components for $267,000
from Kevex X-Ray Inc., a wholly owned subsidiary of ThermoSpectra
Corporation, an affiliated company.
20PAGE
<PAGE>
Metrika Systems Corporation 1997 Financial Statements
Notes to Consolidated Financial Statements
8. Short- and Long-term Obligations
Short-term Obligations
Notes payable and current maturities of long-term obligation in the
accompanying balance sheet includes $9,233,000 and $10,813,000 at
year-end 1997 and 1996, respectively, of amounts borrowed under lines of
credit. The weighted average interest rate for these borrowings at
year-end 1997 and 1996 was 4.6% and 4.1%, respectively. Unused lines of
credit aggregated $7,437,000 at January 3, 1998. As of January 3, 1998,
$1,876,000 of the total lines of credit are secured by real estate at the
Company's German subsidiary and the remainder is guaranteed by Thermo
Electron.
Long-term Obligation
In October 1994, the Company's German subsidiary borrowed 11,500,000
German deutsche marks pursuant to a promissory note, payable in monthly
installments of 99,200 German deutsche marks with a final payment in
October 2004. The balance outstanding was $4,520,000 and $5,988,000 at
year-end 1997 and 1996, respectively. The loan is secured by real estate
at the Company's German subsidiary with a net book value of $8,324,000 at
year-end 1997. The note bears interest at a variable rate, which was 4.0%
and 3.75% at year-end 1997 and 1996, respectively.
The annual repayment requirements of the long-term obligation as of
January 3, 1998, are $662,000 in each year from 1998 through 2002 and
$1,210,000 in 2003 and thereafter.
9. Commitments
The Company leases portions of its office and operating facilities
under various operating lease arrangements. The accompanying statement of
income includes expenses from operating leases of $882,000, $632,000, and
$650,000 in 1997, 1996, and 1995, respectively. Future minimum payments
due under noncancelable operating leases at January 3, 1998, are $723,000
in 1998, $675,000 in 1999, $653,000 in 2000, $577,000 in 2001, $509,000
in 2002, and $1,017,000 in 2003 and thereafter. Total future minimum
lease payments are $4,154,000.
Outstanding letters of credit, principally related to performance
bond obligations, totaled $7,482,000 at January 3, 1998.
10. Concentration of Risk And Geographical Information
Various components of the Company's products are supplied by
sole-source vendors. The Company has not experienced significant
difficulty in obtaining adequate supplies from these vendors, and has
identified alternate suppliers. However, there can be no assurance that
the unanticipated loss of a single vendor would not result in delays in
shipments or in the introduction of new products.
21PAGE
<PAGE>
Metrika Systems Corporation 1997 Financial Statements
Notes to Consolidated Financial Statements
10. Concentration of Risk and Geographical Information (continued)
The following table shows data for the Company by geographical area.
(In thousands) 1997 1996 1995
-----------------------------------------------------------------------
Revenues:
United States $ 28,051 $ 22,875 $ 19,492
Germany 16,934 18,279 18,205
United Kingdom 10,817 8,679 7,190
France 1,885 2,385 1,974
Transfers between geographical
areas (a) (973) (171) (829)
-------- -------- --------
$ 56,714 $ 52,047 $ 46,032
======== ======== ========
Income before provision for income
taxes:
United States $ 5,714 $ 5,084 $ 3,397
Germany 1,702 593 1,653
United Kingdom 1,908 1,485 1,192
France 391 467 356
Corporate and eliminations (b) (1,111) (528) (553)
-------- -------- --------
Total operating income 8,604 7,101 6,045
Interest income (expense), net 1,175 (695) (1,125)
-------- -------- --------
Income before provision for income
taxes $ 9,779 $ 6,406 $ 4,920
======== ======== ========
Identifiable assets:
United States $ 23,389 $ 19,571 $ 23,313
Germany 23,000 24,496 25,027
United Kingdom 6,978 5,176 3,748
France 1,881 1,745 1,886
Corporate (c) 47,704 15,778 -
-------- -------- --------
$102,952 $ 66,766 $ 53,974
======== ======== ========
Export revenues included in United
States revenues above (d):
Asia $ 4,673 $ 7,328 $ 3,528
Europe 7,350 1,277 2,682
Other 6,892 4,814 4,388
-------- -------- --------
$ 18,915 $ 13,419 $ 10,598
======== ======== ========
(a) Transfers among geographical areas are accounted for at prices that
are representative of transactions with unaffiliated parties.
(b) Primarily general and administrative expenses.
(c) Primarily cash, cash equivalents, and available-for-sale investments.
(d) In general, export sales are denominated in U.S. dollars.
22PAGE
<PAGE>
Metrika Systems Corporation 1997 Financial Statements
Notes to Consolidated Financial Statements
11. Earnings per Share
Basic and diluted earnings per share were calculated as follows:
(In thousands except per share amounts) 1997 1996 1995
------------------------------------------------------------------------
Basic
Net income $5,859 $3,845 $2,852
------ ------ ------
Weighted average shares 7,143 5,032 5,000
Basic earnings per share $ .82 $ .76 $ .57
====== ====== ======
Diluted
Net income $5,859 $3,845 $2,852
------ ------ ------
Weighted average shares 7,143 5,032 5,000
Effect of stock options 4 - -
------ ----- ------
Weighted average shares, as adjusted 7,147 5,032 5,000
------ ------ ------
Diluted earnings per share $ .82 $ .76 $ .57
====== ====== ======
12. Unaudited Quarterly Information
(In thousands except per share amounts)
1997 First(a) Second Third Fourth
----------------------------------------------------------------------
Revenues $12,592 $14,133 $14,886 $15,103
Gross profit 5,556 6,504 7,268 7,458
Net income 715 1,227 1,843 2,074
Basic and diluted
earnings per share .12 .20 .22 .25
1996 First Second Third Fourth
----------------------------------------------------------------------
Revenues $11,594 $12,589 $13,584 $14,280
Gross profit 4,779 5,464 6,202 7,075
Net income 449 830 1,146 1,420
Basic and diluted
earnings per share .09 .17 .23 .28
(a) Reflects the December 31, 1996, acquisition of Autometrics.
23PAGE
<PAGE>
Metrika Systems Corporation 1997 Financial Statements
Report of Independent Public Accountants
To the Shareholders and Board of Directors of Metrika Systems
Corporation:
We have audited the accompanying consolidated balance sheet of
Metrika Systems Corporation (a Delaware corporation and 60%-owned
subsidiary of Thermo Instrument Systems Inc.) and subsidiaries as of
January 3, 1998, and December 28, 1996, and the related consolidated
statements of income, cash flows, and shareholders' investment for each
of the three years in the period ended January 3, 1998. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether the consolidated
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes assessing
the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for
our opinion.
In our opinion, the consolidated financial statements referred to
above present fairly, in all material respects, the financial position of
Metrika Systems Corporation and subsidiaries as of January 3, 1998, and
December 28, 1996, and the results of their operations and their cash
flows for each of the three years in the period ended January 3, 1998, in
conformity with generally accepted accounting principles.
Arthur Andersen LLP
Boston, Massachusetts
February 17, 1998
24PAGE
<PAGE>
Metrika Systems Corporation 1997 Financial Statements
Management's Discussion and Analysis of
Financial Condition and Results of Operations
Forward-looking statements, within the meaning of Section 21E of the
Securities Exchange Act of 1934, are made throughout this Management's
Discussion and Analysis of Financial Condition and Results of Operations.
For this purpose, any statements contained herein that are not statements
of historical fact may be deemed to be forward-looking statements.
Without limiting the foregoing, the words "believes," "anticipates,"
"plans," "expects," "seeks," "estimates," and similar expressions are
intended to identify forward-looking statements. There are a number of
important factors that could cause the results of the Company to differ
materially from those indicated by such forward-looking statements,
including those detailed immediately after this Management's Discussion
and Analysis of Financial Conditions and Results of Operations under the
heading "Forward-looking Statements."
Overview
The Company develops, manufactures, and markets on-line process
optimization systems that employ proprietary ultra high-speed advanced
scientific measurement technologies for applications in raw-materials
analysis and finished-materials quality control. The Company is a pioneer
in the development of process optimization systems that provide
real-time, nondestructive analysis of the composition of raw materials in
basic-materials production processes, including coal, cement, and
minerals. The Company also manufactures advanced systems that are used to
measure and control parameters such as material thickness, coating
thickness, and coating weight in web-type materials, such as metal strip,
rubber, and plastic foils. Customers use these systems to improve product
quality and consistency, lower material costs, reduce energy consumption,
and minimize waste.
The Company intends to supplement its internal growth with strategic
acquisitions of complementary businesses. There can be no assurance that
such businesses will be available at prices attractive to the Company. On
December 31, 1996, the Company acquired the assets, subject to certain
liabilities, of the Autometrics division of Svedala Industries Inc.
(Autometrics), a manufacturer and marketer of on-line analysis
instruments for the minerals-processing industry.
A significant portion of the Company's sales are of large systems,
the timing of which can lead to variability in the Company's quarterly
revenues and income. In addition, in 1997, approximately 51% of the
Company's revenues originated outside the U.S. and approximately 33% of
the Company's revenues were exports from the U.S. Revenues originating
outside the U.S. represent revenues of the Company's on-line finished-
materials quality-control business. The operations of the on-line
finished-materials quality-control business are located in Germany, the
United Kingdom, and France, which principally sell in their local
currencies.
Exports from the Company's U.S. operation are denominated in U.S.
dollars. The Company generally seeks to charge its customers in the same
currency as its operating costs. However, the Company's financial
performance and competitive position can be affected by currency-
exchange-rate fluctuations. Since the operations of the on-line
25PAGE
<PAGE>
Metrika Systems Corporation 1997 Financial Statements
Management's Discussion and Analysis of
Financial Condition and Results of Operations
Overview (continued)
finished-materials quality-control business are conducted in Europe,
principally Germany, the Company's operating results could be adversely
affected by capital spending and economic conditions in Europe. The
Company's strategy is to expand its on-line finished-materials
quality-control business in geographic areas outside of Europe with
particular emphasis in North America, which in turn may reduce the
Company's exposure to European market conditions.
Results of Operations
1997 Compared With 1996
Revenues increased 9% to $56,714,000 in 1997 from $52,047,000 in
1996, reflecting an increase of $5,176,000 at the on-line raw-materials
analysis business, primarily due to increased sales in international
markets and the inclusion of $1,969,000 in revenues from Autometrics,
acquired December 31, 1996. Revenues decreased at the on-line finished-
materials quality-control business principally due to the unfavorable
effects of currency translation as a result of the strengthening of the
U.S. dollar relative to foreign currencies in countries in which the
Company operates, which decreased revenues by $2,259,000. This was offset
in part by an increase in demand in the U.S., which resulted primarily
from the strengthening of the U.S. dollar relative to the German deutsche
mark.
The gross profit margin increased to 47% in 1997 from 45% in 1996.
The gross profit margin at the on-line raw materials analysis business
increased to 52% in 1997 from 51% in 1996, resulting principally from
increased volume and a change in product mix, offset in part by the
inclusion in 1997 of lower-margin revenues at Autometrics. The gross
profit margin at the on-line finished-materials quality-control business
improved to 43% in 1997 from 41% in 1996 due to higher costs incurred in
the 1996 period relating to the introduction of new products, and an
increase in higher-margin sales in 1997 resulting from sales of such new
products.
Selling, general, and administrative expenses as a percentage of
revenues decreased to 25% in 1997 from 26% in 1996. The decrease was due
to an increase in revenues, offset primarily by an increase in legal
expenses in connection with an ongoing patent infringement lawsuit
initiated by the Company's Gamma-Metrics subsidiary, relating to its
on-line raw-materials cement-analysis systems. Research and development
expenses increased to $3,815,000 in 1997 from $3,024,000 in 1996,
primarily due to an increase in product development expenses at the
on-line raw-materials analysis business.
Interest income increased to $2,013,000 in 1997 from $101,000 in
1996, primarily due to interest income earned on the invested proceeds
from the Company's December 1996 private placement and June 1997 initial
public offering.
The effective tax rate was 40% in 1997 and 1996. The effective tax
rate exceeded the statutory federal income tax rate primarily due to the
26PAGE
<PAGE>
Metrika Systems Corporation 1997 Financial Statements
Management's Discussion and Analysis of
Financial Condition and Results of Operations
1997 Compared With 1996 (continued)
impact of state income taxes, nondeductible amortization of cost in
excess of net assets of acquired companies, and foreign tax rate and tax
law differences.
The Company is currently assessing the potential impact of the year
2000 on the processing of date-sensitive information by the Company's
computerized information systems and on products sold as well as products
purchased by the Company. The Company believes that its internal
information systems and current products are either year 2000 compliant
or will be so prior to the year 2000 without incurring material costs.
There can be no assurance, however, that the Company will not experience
unexpected costs and delays in achieving year 2000 compliance for its
internal information systems and current products, which could result in
a material adverse effect on the Company's future results of operations.
The Company is presently assessing the effect that the year 2000
problem may have on its previously sold products. The Company is also
assessing whether its key suppliers are adequately addressing this issue
and the effect this might have on the Company. The Company has not
completed its analysis and is unable to conclude at this time that the
year 2000 problem as it relates to its previously sold products and
products purchased from key suppliers is not reasonably likely to have a
material adverse effect on the Company's future results of operations.
1996 Compared With 1995
Revenues increased 13% to $52,047,000 in 1996 from $46,032,000 in
1995, reflecting sales growth at both the on-line raw materials analysis
and finished-materials quality-control businesses. Revenues increased
$3,383,000 at the on-line raw-materials analysis business primarily due
to growing acceptance of its product line in international markets, and
$3,581,000 at the on-line finished-materials quality-control business
largely due to the introduction of its quality-control product line in
Asia. Revenues decreased $949,000 due to the unfavorable effect of
currency translation as a result of the strengthening of the U.S. dollar
relative to foreign currencies in countries in which the Company
operates.
The gross profit margin increased to 45% in 1996 from 44% in 1995.
The gross profit margin at the on-line raw-materials analysis business
improved to 51% in 1996 from 44% in 1995, primarily due to product
redesign and increased sales of products which have lower manufacturing
costs. The improvement was offset in part by a decrease in the gross
profit margin at the on-line finished-materials quality-control business
to 41% in 1996 from 44% in 1995, resulting principally from additional
costs associated with the continued introduction of new products in the
German operations of this business.
Selling, general, and administrative expenses as a percentage of
revenues increased to 26% in 1996 from 25% in 1995, primarily due to
increased marketing efforts in international markets resulting in an
increase in staffing and higher travel expenses at the Company's on-line
finished-materials quality-control operations in Germany. Research and
development expenses increased to $3,024,000 in 1996 from $2,580,000 in
27PAGE
<PAGE>
Metrika Systems Corporation 1997 Financial Statements
Management's Discussion and Analysis of
Financial Condition and Results of Operations
1996 Compared With 1995 (continued)
1995, principally due to an increase in product-development expenses at
the on-line finished-materials quality-control business in Germany.
Interest expense decreased to $796,000 in 1996 from $1,146,000 in
1995 due to a decrease in short-term borrowings at the on-line finished-
materials quality-control business, as well as a decline in interest
rates. Interest income increased to $101,000 in 1996 from $21,000 in
1995, primarily due to higher average invested balances at the Company's
foreign operations, as well as interest earned on the invested proceeds
from the Company's December 1996 private placement.
The effective tax rates were 40% in 1996 and 42% in 1995. These rates
exceeded the statutory federal income tax rate primarily due to the
impact of state income taxes, nondeductible amortization of costs in
excess of net assets of acquired companies, and foreign tax rate and tax
law differences. The effective tax rate decreased in 1996 primarily due
to proportionately less income before provision for income taxes from
Germany, which is taxed at a higher rate.
Liquidity and Capital Resources
Consolidated working capital was $47,975,000 at January 3, 1998,
compared with $8,705,000 at December 28, 1996. Included in working
capital are cash and available-for-sale investments of $50,289,000 at
January 3, 1998, compared with $20,229,000 at December 28, 1996. Also
included in working capital are short-term borrowings and advances from
parent company and affiliated companies of $14,079,000 at January 3,
1998, and $18,895,000 at December 28, 1996.
During 1997, $3,099,000 of cash was provided by operating activities.
The Company funded a $6,987,000 increase in accounts receivable caused
primarily by a higher volume of shipments late in the fourth quarter of
1997. The Company funded a $1,323,000 increase in inventories and
unbilled contracts and fees, primarily due to an increase in work in
process at the Company's on-line raw-material analysis business and, to a
lesser extent, a higher volume of contracts in process at the Company's
on-line finished-materials quality-control business. These uses of cash
were offset in part by a $3,053,000 increase in other current
liabilities, primarily due to an increase in accrued income taxes.
During 1997, the Company's primary investing activities, excluding
purchases of available-for-sale investments, included an acquisition and
capital expenditures. On December 31, 1996, the Company acquired the
assets, subject to certain liabilities, of Autometrics for $1,347,000 in
cash (Note 3). The Company expended $674,000 for the purchase of
property, plant, and equipment during 1997 and plans to make capital
expenditures of approximately $700,000 during 1998.
The Company's financing activities provided $29,607,000 of cash in
1997. In June 1997, the Company sold 2,300,000 shares of its common stock
in an initial public offering for net proceeds of $32,528,000. During
1997, the Company increased its foreign short-term borrowings by $489,000
and repaid $662,000 of its long-term obligation. A decrease in "Due to
parent company and affiliated companies" used $1,770,000 of cash in 1997.
28PAGE
<PAGE>
Metrika Systems Corporation 1997 Financial Statements
Management's Discussion and Analysis of
Financial Condition and Results of Operations
Liquidity and Capital Resources (continued)
Although the Company expects to have positive cash flow from its
existing operations, the Company may require significant amounts of cash
for the acquisition of complementary businesses. The Company expects that
it will finance any such acquisitions through a combination of internal
funds, additional debt or equity financing from the capital markets, or
short-term borrowings from Thermo Instrument or Thermo Electron, although
it has no agreement with these companies to ensure that funds will be
available on acceptable terms, or at all. The Company believes that its
existing resources are sufficient to meet the capital requirements of its
existing businesses for the foreseeable future.
29PAGE
<PAGE>
Metrika Systems Corporation 1997 Financial Statements
Forward-looking Statements
In connection with the "safe harbor" provisions of the Private
Securities Litigation Reform Act of 1995, the Company wishes to caution
readers that the following important factors, among others, in some cases
have affected, and in the future could affect, the Company's actual
results and could cause its actual results in 1998 and beyond to differ
materially from those expressed in any forward-looking statements made
by, or on behalf of, the Company.
Dependence on Capital Spending Policies. The Company's customers
include coal-burning utilities, coal mines, cement manufacturers, and
manufacturers of web-type materials such as steel, plastic, and rubber.
The capital spending policies of these companies can have a significant
effect on the demand for the Company's products. Such policies are based
on a wide variety of factors, including the resources available to make
such purchases, the spending priorities among various types of process
control equipment or techniques and policies regarding capital
expenditures during recessions. Any decrease in capital spending by these
customers could have a material adverse effect on the Company's business
and results of operations. Further, the Company's growth is dependent in
part on construction and upgrade of manufacturing plants in the basic-
materials industries. A recession in one or more markets could cause a
slowdown or reduction in capital spending and in new-plant construction.
Uncertainty of Market Acceptance of New Products. Certain of the
Company's products represent alternatives to traditional instruments and
methods. As a result, such products may be slow to achieve, or may not
achieve, market acceptance, as customers may seek further validation of
the efficiency and efficacy of the Company's technology. This is
particularly true where the purchase of the product requires a
significant capital commitment. Further, because on-line process control
systems are incorporated into a customer's production line, a decision to
invest in these systems involves significant operating risks if the
system fails or shuts down. The Company intends to expand its product
base by adapting its proprietary technologies for new applications in
broader industry segments including the pharmaceutical, agrochemical, and
industrial chemical industries. The Company believes that, to a
significant extent, its growth prospects depend on the continuing
acceptance by a broader group of customers and by broader industry
segments of its new products and technologies. There can be no assurance
that the Company will be successful in adapting its proprietary
technologies for new applications, in obtaining these acceptances or, if
obtained, that such acceptances will be sustained. The failure of the
Company to obtain and sustain such acceptances could have a material
adverse effect on the Company's business and results of operations.
Technological Change and New Products. The market for on-line process
optimization systems is characterized by changing technology, evolving
industry standards, and new-product introductions. The Company's future
success will depend in part upon its ability to enhance its existing
products and to develop and introduce new products and technologies to
meet changing customer requirements and to successfully serve broader
industry segments. The Company is currently devoting significant
30PAGE
<PAGE>
Metrika Systems Corporation 1997 Financial Statements
Forward-looking Statements
resources toward the enhancement of its existing products and the
development of new products and technologies. There can be no assurance
that the Company will successfully complete the enhancement and
development of these products in a timely fashion or that the Company's
current or future products will satisfy the needs of the on-line process
optimization systems markets. Any failure to complete the enhancement and
development of these products or the failure of the Company's current or
future products to satisfy market needs could have a material adverse
effect on the Company's business and results of operations.
Risks Associated with Acquisition Strategy. The Company's strategy
includes the acquisition of businesses and technologies that complement
or augment the Company's existing product lines. Promising acquisitions
are difficult to identify and complete for a number of reasons, including
competition among prospective buyers, the need for regulatory approvals,
including antitrust approvals, and the high valuations of businesses
resulting from historically high stock prices in many countries. There
can be no assurance that the Company will be able to complete future
acquisitions or that the Company will be able to successfully integrate
any acquired business. In order to finance such acquisitions, it may be
necessary for the Company to raise additional funds through public or
private financings. Any equity or debt financing, if available at all,
may be on terms which are not favorable to the Company and, in the case
of equity financing, may result in dilution to the Company's
stockholders.
International Operations and International Sales. In 1997, 1996, and
1995, sales originating outside the U.S. accounted for 51%, 56%, and 58%,
respectively, of the Company's total revenues. In addition, in 1997,
1996, and 1995, U.S. export sales accounted for 33%, 26%, and 23%,
respectively, of the Company's total revenues. The Company anticipates
that sales outside the U.S. and U.S. export sales will continue to
account for a significant percentage of the Company's total revenues. The
Company intends to continue to expand its presence in international
markets. International revenues are subject to a number of risks,
including the following: agreements may be difficult to enforce and
receivables difficult to collect through a foreign country's legal
system; foreign customers may have longer payment cycles; foreign
countries may impose additional withholding taxes or otherwise tax the
Company's foreign income, impose tariffs, or adopt other restrictions on
foreign trade; U.S. export licenses may be difficult to obtain; the
protection of intellectual property in foreign countries may be more
difficult to enforce; and fluctuations in exchange rates may affect
product demand and may adversely affect the profitability in U.S. dollars
of products and services provided by the Company in foreign markets where
payment for the Company's products and services is made in the local
currency. In 1997, effects of currency translation, due to a stronger
U.S. dollar, decreased revenues by $2.3 million. Further, a significant
portion of the Company's business is conducted in foreign countries,
particularly Germany. Foreign operations are also subject to certain
risks such as general economic conditions in the countries in which the
Company operates, unexpected changes in regulatory requirements,
31PAGE
<PAGE>
Metrika Systems Corporation 1997 Financial Statements
Forward-looking Statements
compliance with a variety of foreign laws and regulations, and overlap of
different tax structures. Tax rates in certain foreign countries exceed
that of the U.S. and foreign earnings may be subject to withholding
requirements or the imposition of tariffs, exchange controls, or other
restrictions. There can be no assurance that any of these factors will
not have a material adverse effect on the Company's business and results
of operations.
Competition. The Company encounters intense competition in the sale
of its on-line finished-materials quality-control products. The Company
believes that the principal competitive factors affecting the market for
on-line process optimization systems include quality and reliability,
accuracy, price, customer service and support, ease of use, distribution
channels, technical features, and compatibility with customers'
manufacturing processes. Certain of the Company's competitors have
greater resources, manufacturing and marketing capabilities, technical
staff, and production facilities than those of the Company. As a result,
they may be able to adapt more quickly to new or emerging technologies
and changes in customer requirements, or to devote greater resources to
the promotion and sale of their products than can the Company. Further,
competition with respect to all of the Company's products could increase
if new companies enter the market or if existing competitors expand their
product lines. There can be no assurance that competitors of the Company
will not develop technological innovations that will render products of
the Company obsolete.
Proprietary Rights. Proprietary rights relating to the Company's
products will be protected from unauthorized use by third parties only to
the extent that they are covered by valid and enforceable patents or are
maintained in confidence as trade secrets. There can be no assurance that
any patents now or hereafter owned by the Company will afford protection
against competitors. Proceedings initiated by the Company to protect its
proprietary rights could result in substantial costs to the Company.
Recently, the Company's Gamma-Metrics subsidiary initiated a lawsuit in
the Federal District Court in San Diego, California, alleging among other
things, patent infringement against Scantech Limited and its subsidiary,
Mineral Control Instrumentation Ltd. There can be no assurance that
competitors of the Company, some of whom have substantially greater
resources than those of the Company, will not initiate litigation to
challenge the validity of the Company's patents, or that they will not
use their resources to design comparable products that do not infringe
upon the Company's patents. The Company could incur substantial costs and
diversion of management resources with respect to the defense of any such
claims, which could have a material adverse effect on the Company's
business, financial condition, and results of operations. Furthermore,
parties making such claims could secure a judgment awarding substantial
damages, as well as injunctive or other equitable relief, which could
effectively block the Company's ability to make, use, sell, distribute,
or market its products and services in the U.S. and abroad. There may
also be pending or issued patents held by parties not affiliated with the
Company that relate to the Company's products or technologies. In the
event that a claim relating to proprietary technology or information is
32PAGE
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Metrika Systems Corporation 1997 Financial Statements
Forward-looking Statements
asserted against the Company, the Company may need to acquire licenses
to, or contest the validity of, any such competitor's proprietary
technology. It is likely that significant funds would be required to
contest the validity of any such competitor's proprietary technology.
There can be no assurance that any license required under any such
competitor's proprietary technology would be made available on acceptable
terms or that the Company would prevail in any such contest. There can be
no assurance that the steps taken by the Company to protect its
proprietary rights will be adequate to prevent misappropriation of its
technology or independent development by others of similar technology. In
addition, the laws of some jurisdictions do not protect the Company's
proprietary rights to the same extent as the laws of the U.S. There can
be no assurance that these protections will be adequate.
Dependence on Sole-source Suppliers. Various components of the
Company's products are supplied by sole-source vendors. The Company has
not experienced significant difficulty in obtaining adequate supplies
from these vendors, and has identified alternate suppliers. However,
there can be no assurance that the unanticipated loss of a single vendor
would not result in delays in shipment or in the introduction of new
products. Any such delays could have a material adverse effect on the
Company's business or results of operations.
Government Regulations and Approvals. The market for certain of the
Company's products, both in the U.S. and abroad, is subject to, or
influenced by, various domestic and foreign clean air and consumer
protection laws. The Company designs, develops, and markets its products,
in part, to meet customer needs created by existing and anticipated
regulations, and any changes in these regulations may adversely affect
consumer demand for the Company's products.
Potential Fluctuations in Quarterly Performance. Many of the
Company's products are large systems that may require significant capital
expenditures. Consequently, the timing of sales of these systems could
affect the Company's quarterly earnings. Further, the Company's quarterly
operating results may also vary significantly depending on a number of
other factors, including the size, timing, and shipment of individual
orders, changes in pricing by the Company or its competitors, discount
levels, seasonality of revenue, foreign currency exchange rates, the mix
of products sold, the timing of the announcement, introduction and
delivery of new product enhancements by the Company and its competitors,
and general economic conditions. Generally, the Company recognizes
product revenues upon shipment of its products. Revenues on substantially
all contracts are recognized using the percentage-of-completion method.
Typically, the Company experiences higher revenues in the second half of
each year due to seasonality experienced by its on-line finished-
materials quality-control business, primarily because customers tend to
place their orders earlier in the year so that they can have the systems
installed either during the holiday season in the third quarter or
between Christmas and the New Year. Because certain operating expenses of
the Company are based on anticipated capacity levels and a high
percentage of the Company's expenses are fixed for the short term, a
33PAGE
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Metrika Systems Corporation 1997 Financial Statements
Forward-looking Statements
small variation in the timing of recognition of revenue can cause
significant variations in operating results from quarter to quarter.
There can be no assurance that any of these factors will not have a
material adverse effect on the Company's business or results of
operations.
Potential Impact of Year 2000 on Processing of Date-Sensitive
Information. The Company is currently assessing the potential impact of
the year 2000 on the processing of date-sensitive information by the
Company's computerized information systems and on products sold as well
as products purchased by the Company. The Company believes that its
internal information systems and current products are either year 2000
compliant or will be so prior to the year 2000 without incurring material
costs. There can be no assurance, however, that the Company will not
experience unexpected costs and delays in achieving year 2000 compliance
for its internal information systems and current products, which could
result in a material adverse effect on the Company's future results of
operations.
The Company is presently assessing the effect that the year 2000
problem may have on its previously sold products. The Company is also
assessing whether its key suppliers are adequately addressing this issue
and the effect this might have on the Company. The Company has not
completed its analysis and is unable to conclude at this time that the
year 2000 problem as it relates to its previously sold products and
products purchased from key suppliers is not reasonably likely to have a
material adverse effect on the Company's future results of operations.
34PAGE
<PAGE>
Metrika Systems Corporation 1997 Financial Statements
Selected Financial Information
(In thousands except
per share amounts) 1997(a) 1996(b) 1995 1994 1993
----------------------------------------------------------------------
Statement of Income
Data:
Revenues $ 56,714 $ 52,047 $ 46,032 $ 38,612 $ 19,809
Income before
provision for
income taxes 9,779 6,406 4,920 3,256 1,233
Net income 5,859 3,845 2,852 1,767 591
Basic and diluted
earnings per share .82 .76 .57 .35 .12
Balance Sheet Data:
Working capital $ 47,975 $ 8,705 $ (8,070) $ (4,665) $ (7,084)
Total assets 102,952 66,766 53,974 49,261 46,184
Long-term
obligation 3,858 5,223 6,470 6,780 -
Shareholders'
investment 63,805 24,861 9,382 14,095 19,113
_______________
(a)Reflects the December 31, 1996, acquisition of Autometrics, and the
June 1997 initial public offering of Company common stock.
(b)Reflects the December 1996 private placement of Company common stock.
35PAGE
<PAGE>
Metrika Systems Corporation 1997 Financial Statements
Common Stock Market Information
The Company's common stock is traded on the American Stock Exchange
under the symbol MKA. The following table sets forth the high and low
sale prices of the Company's common stock since June 20, 1997, the date
the Company's common stock began trading on that exchange, as reported in
the consolidated transaction reporting system.
1997
-------------------
Quarter High Low
-----------------------------------------------------------------------
Second $15 5/8 $15 1/2
Third 16 13 7/8
Fourth 18 1/2 14
As of January 30, 1998, the Company had 114 holders of record of its
common stock. This does not include holdings in street or nominee names.
The closing market price on the American Stock Exchange for the Company's
common stock on January 30, 1998, was $13 11/16 per share.
Shareholder Services
Shareholders of Metrika Systems Corporation who desire information
about the Company are invited to contact John N. Hatsopoulos, Chief
Financial Officer, Metrika Systems Corporation, 81 Wyman Street, P.O. Box
9046, Waltham, Massachusetts 02254-9046, (781) 622-1111. A mailing list
is maintained to enable shareholders whose stock is held in street name,
and other interested individuals, to receive quarterly reports, annual
reports, and press releases as quickly as possible. Distribution of
printed quarterly reports is limited to the second quarter only. All
material will be available from Thermo Electron's Internet site
(http://www.thermo.com/subsid/mka1.html).
Stock Transfer Agent
American Stock Transfer & Trust Company is the stock transfer agent
and maintains shareholder activity records. The agent will respond to
questions on issuance of stock certificates, change of ownership, lost
stock certificates, and change of address. For these and similar matters,
please direct inquiries to:
American Stock Transfer & Trust Company
Shareholder Services Department
40 Wall Street, 46th Floor
New York, New York 10005
(718) 921-8200
Dividend Policy
The Company has never paid cash dividends and does not expect to pay
cash dividends in the foreseeable future because its policy has been to
use earnings to finance expansion and growth. Payment of dividends will
rest within the discretion of the Board of Directors and will depend
upon, among other factors, the Company's earnings, capital requirements,
and financial condition.
36PAGE
<PAGE>
Metrika Systems Corporation 1997 Financial Statements
Form 10-K Report
A copy of the Annual Report on Form 10-K for the fiscal year ended
January 3, 1998, as filed with the Securities and Exchange Commission,
may be obtained at no charge by writing to John N. Hatsopoulos, Chief
Financial Officer, Metrika Systems Corporation, 81 Wyman Street, P.O. Box
9046, Waltham, Massachusetts 02254-9046.
Annual Meeting
The annual meeting of shareholders will be held on Monday, June 1,
1998, at 10:45 a.m. at the Hyatt Regency Hotel, Scottsdale, Arizona.
37PAGE
<PAGE>
Exhibit 21
METRIKA SYSTEMS CORPORATION
Subsidiaries of the Registrant
At February 20, 1998, Metrika Systems Corporation owned the following
companies:
Registrant's
State or Jurisdiction % of
Name of Incorporation Ownership
------------------------------------------------------------------------
Eberline Radiometrie S.A. France 100
Thermo Instruments Systems Ltd. UK 100
Eberline Radiometrie GmbH Germany 100
Gamma-Metrics California 100
Gamma-Metrics International F.S.C. Inc. Guam 100
Radiometric U.S.A., Inc. California 100
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM METRIKA
SYSTEMS CORPORATION'S ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED JANUARY 3,
1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JAN-03-1998
<PERIOD-END> JAN-03-1998
<CASH> 44,044
<SECURITIES> 6,245
<RECEIVABLES> 18,048
<ALLOWANCES> 671
<INVENTORY> 7,145
<CURRENT-ASSETS> 78,908
<PP&E> 14,769
<DEPRECIATION> 4,396
<TOTAL-ASSETS> 102,952
<CURRENT-LIABILITIES> 30,933
<BONDS> 3,858
0
0
<COMMON> 83
<OTHER-SE> 63,722
<TOTAL-LIABILITY-AND-EQUITY> 102,952
<SALES> 56,714
<TOTAL-REVENUES> 56,714
<CGS> 29,928
<TOTAL-COSTS> 29,928
<OTHER-EXPENSES> 3,815
<LOSS-PROVISION> 633
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<INCOME-PRETAX> 9,779
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