SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-KSB
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1996
-----------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
------------ ------------
Commission file number 1-4184
------
MATEC Corporation
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 06-0737363
- ------------------------------- ----------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification number)
75 South St., Hopkinton, Massachusetts 01748
- -------------------------------------- ----------
(Address of principal executive office) (Zip Code)
Registrant's telephone number, including area code: (508) 435-9039
--------------
Securities registered pursuant to Section 12 (b) of the Act:
Title of each class: Name of each exchange on which registered:
-------------------- ------------------------------------------
Common Stock $.05 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 (or for such shorter period
that the Registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days:
Yes X No
------ -------
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K (Sec.229.405 of this chapter) is not contained
herein, and will not be contained, to the best of registrant's knowledge,
in definitive proxy or information statements incorporated by reference in
Part III of this Form 10-KSB or any amendment to this Form 10-KSB. [ ]
-1-
<PAGE>
Aggregate market value of voting stock held by non-affiliates: $5,055,562
(computed by reference to the last sales price of such common stock on
March 24, 1997 as reported in the American Stock Exchange consolidated
trading index).
Number of shares of common stock outstanding at March 24, 1997: 2,735,216
Documents incorporated by reference:
Annual Report to Stockholders for the year ended December 31, 1996:
Parts I, II and IV
Proxy Statement for the 1997 annual meeting of stockholders: Part III
-2-
<PAGE>
PART I
Item 1. Business
- -----------------
General
- -------
MATEC Corporation ("MATEC" or "Registrant") is incorporated under the
laws of Delaware. As used herein the term "Company" refers to MATEC and
its subsidiaries.
Industry Segments
- -----------------
The Company's business operates in three segments: Electronics,
Steel Cable, and Instruments, and is conducted primarily through its four
principal wholly owned operating subsidiaries.
The Company has two real estate complexes, located in Delaware and
Massachusetts, which are operated by its wholly owned subsidiaries, RSC
Realty Corporation and MEKontrol, Inc., respectively.
During the fourth quarter of 1996, the Company decided to phase out of
its AcoustoSizer (TM) product line in the Instruments segment and to close
its Electronics segments manufacturing operation in Pennsylvania and
relocate the operation to its Massachusetts facility. For further
information, see Note 2 of the Notes to Consolidated Financial Statements
in the 1996 Annual Report to Stockholders, which Note is incorporated by
reference.
Financial information about industry segments is set forth in
Note 12 of the Notes to Consolidated Financial Statements in the 1996
Annual Report to Stockholders, which Note is incorporated herein by
reference.
Principal Products and Services
- -------------------------------
Electronics
-----------
Valpey-Fisher Corporation ("Valpey") is involved in the design,
production, import, and sale of quartz crystals and oscillators. In
addition, Valpey manufactures and provides a wide variety of piezoelectric
products and related services.
The quartz crystals and oscillators are used in commercial, industrial,
military, and aerospace products which rely on electronic rather than
mechanical control of their function. To assure precise timing and
control, the electronic circuitry used in these products incorporates
quartz crystals and oscillators as integral components. Except for more
costly atomic standards, quartz crystals and oscillators continue to be one
of the most stable references for accurately controlling electronic
frequencies and time.
-3-
<PAGE>
Valpey's products and capabilities include:
- high-volume, low-cost crystals and oscillators for consumer
and commercial applications,
- high-reliability, precision crystals and oscillators used
in sophisticated industrial, military and aerospace
applications.
- ultra-high frequency crystals used in crystal filters and
oscillators for OEM telecommunications and microwave
applications.
Applications for Valpey's products include computers, computer
peripheral equipment such as modems and high resolution graphics terminals,
microprocessor-based instrumentation, communications equipment, and defense
and aerospace electronics. A significant portion of the high-volume,
low-cost product sales is derived from imported products. Crystal and
oscillator sales accounted for 36%, 40%, and 30% of the Company's sales for
the years ended December 31, 1996, 1995 and 1994, respectively.
Piezoelectric products manufactured by Valpey include ultrasonic
transducer crystals and assemblies, surface acoustic wave (SAW) substrates,
and precision quartz crystals. In addition, Valpey provides a variety of
related services to the electronic and optical markets of the research,
commercial, industrial, medical, and aerospace industries.
Products are sold by its direct sales personnel, independent
manufacturers' representatives and distributors.
Cultured quartz, which is available from a number of domestic and
foreign suppliers, is the principal raw material.
Valpey imports products from various Far East (including China, Japan,
South Korea, and Taiwan) suppliers for resale to its customers.
Historically, Valpey has not experienced significant quality or delivery
problems with these suppliers. In order to eliminate the effects of
currency fluctuations, Valpey purchases the product in U.S. dollars.
However, Valpey is subject to the inherent risks involved in international
trade such as political instability and restrictive trade policies.
Steel Cable
- -----------
Bergen Cable Technologies, Inc. ("Bergen") is involved in the design
and manufacture of custom mechanical control assemblies. In addition,
Bergen manufactures or purchases and sells a wide range of small diameter
cables made primarily of stainless or galvanized steel. Current cable
capabilities range from a .0045" diameter miniature cable to a 0.187" wire
rope. Bergen's sales accounted for 41%, 34% and 42% of the Company's sales
for the years ended December 31, 1996, 1995 and 1994, respectively.
A substantial portion of Bergen's cable assembly business is
custom-designed to meet customers' specifications and requirements.
Bergen's major markets include the OEM automotive, aerospace, medical and
marine.
-4-
<PAGE>
Bergen also produces the Safety Cable (TM) System, a fastener retention
system, used in securing fasteners during the manufacture or repair of
aircraft components. This System, developed by Bergen and the GE Aircraft
Group, consists of Bergen's stainless steel cable, stainless steel
ferrules, and an exclusive, patented crimping and cutting tool.
Bergen's principal raw materials, which include carbon steel, stainless
steel and improved plow steel are available from both domestic and foreign
suppliers.
Products are sold by its direct sales personnel and through independent
manufacturers' representatives.
Sales to the automotive market amounted to approximately 54%, 46%, and
41% of Bergen's sales during the years ended December 31, 1996, 1995 and
1994, respectively.
Instruments
-----------
The Company's Instruments segment includes Matec Applied Sciences, Inc.
("MASI") and Matec Instruments, Inc.("MI"). These subsidiaries develop and
manufacture computer-controlled ultrasonic test equipment to perform
real-time measurements and analysis. The Instruments segment accounted for
19%, 21%, and 24% of the Company's sales for the years ended December 31,
1996, 1994 and 1994, respectively.
The instruments are sold in the USA mainly through each subsidiary's
sales personnel, while foreign sales are performed through independent
manufacturers' representatives. Export sales accounted for 31%, 49%, and
53% of this segment's sales for the years ended December 31, 1996, 1995 and
1994, respectively.
Export sales are primarily shipped to customers located in Europe, the
Pacific Rim and Canada. Product is sold in U.S. dollars and may be shipped
on open account (based on credit history and rating), through a letter of
credit, or by payment of cash in advance.
The principal raw materials used are electronic components. Generally,
most of the components are available from a number of sources. However, a
few electronic components are purchased from single suppliers. The Company
believes, however, that if necessary, alternate sources of supply for these
items could be developed and delays in obtaining alternate sources would
not have a material adverse effect on its business.
-5-
<PAGE>
Matec Applied Sciences, Inc. ("MASI")
-------------------------------------
MASI produces and sells instruments that evaluate the stability of
colloidal dispersions (small particles in suspension) for fundamental and
applied research in both laboratory and industrial applications.
Currently, MASI sells two instruments: the ESA-8000 ("ESA") and the CHDF
2000 Particle Sizer ("CHDF").
The ESA system measures the surface electrical charge, particle
mobility, pH, conductivity, and temperature of colloidal suspensions in
both aqueous and non-aqueous dispersions. The computer-controlled
instrument provides on-line, real time measurements and on-screen
plotting. The major markets for this system include industries involved in
the research and processing of pigments, minerals and ores, ceramics and
petrochemicals.
During the second quarter of 1996, MASI introduced and began shipping
its CHDF, an upgraded and newer version of the original CHDF 1100 Particle
Sizer that was introduced in 1989. The CHDF performs high-resolution
measurements of particle size distributions in the size range of 0.015 -
1.1 microns. The instrument operates using Windows software and may be
used with an external autosampler The primary markets for this instrument
are the latex, ceramics, pharmaceutical and pigment industries.
During the fourth quarter of 1996, the Company decided to phase out its
third instrument, the AcoustoSizer(TM). MASI began commercial shipments of
the AcoustoSizer(TM) in the fourth quarter of 1993. For further
information, see Note 2 to the Notes to Consolidated Financial Statements
in the 1996 Annual Report to Stockholders, which Note is incorporated by
reference. The AcoustoSizer(TM) was developed by MASI in a joint effort
with Colloidal Dynamics Pty. Ltd. and the University of Sydney, both in
Australia.
Matec Instruments, Inc. ("MI")
------------------------------
MI designs, manufactures and sells:
- high power ultrasonic instrumentation and systems for the
non-destructive evaluation (NDE) and non-destructive testing (NDT)
of materials.
- Doppler blood flow, and heart, vascular and cell function
instruments, under the Crystal Biotech trade name, used mainly in
cardiovascular medical research.
- ultrasonic transducers and probes that allow these systems to
measure flow in blood vessels as small as 0.3 mm in diameter and
heart functions in all venues.
-6-
<PAGE>
During the last three years, MI's main focus has been selling custom
designed systems used to inspect for and detect flaws in materials. These
systems may be integrated with a customer's manufacturing or quality
control process. MI believes that its future growth will come from sales
of these custom systems that combine ultrasonic technology with custom
software, hardware and mechanical design. MI's also continues to sell a
line of standard instrumentation to the NDE/NDT market.
Instrumentation products for the NDE/NDT markets include the IMT-8000
and various custom Immersion Tank Imaging Test Systems, a family of
ultrasonic PC plug-in board instruments and several older, manually and
computer controlled toneburst instruments. Markets for these instruments
include government and academic research laboratories, as well as R&D and
quality assurance departments in industry.
The IMT-8000 system is a bench-top immersion testing system capable of
providing high-definition, full-color C-Scan representations of flaws deep
within materials and structures. The plug-in boards, when installed in
certain computers, provide the user certain material testing features.
These systems facilitate the detection of defects and anomalies in metals,
ceramics, composites and other types of materials. Industrial applications
for the system include the evaluation of bond quality, material integrity
and delamination detection.
Crystal Biotech(TN) products include the CBI-8000, the Myotrac System,
and the DataFlow(TN). The CBI-8000, an upgradable and modular instrument
introduced in 1994, replaces the older VF-1 model and measures blood flow
and myocardial dimensions in laboratory instrumented animals. Modules
offered by MI enhance the capabilities of the CBI-8000 to provide the user
simultaneous measurements of blood flow, organ dimensions, and tissue
thickness and volumetric flow. The Myotrac System, introduced in late
1994, measures cellular function and dimension. MI's DataFlow(TN) system
is a data acquisition tool that enables the user to record, analyze and
display data collected from the VF-1 or any other instrument. Primary
markets for these products include government and university laboratories,
research hospitals and the pharmaceutical industry.
Patents and Licenses
- --------------------
The Company owns various patents and has additional patent applications
pending. While some of these patents are deemed to have value, the
business of the Company, in the opinion of management, is not substantially
dependent upon such patents, but is primarily based on know-how and market
acceptance.
In the Instruments segment, MASI is a licensee of certain patented
technology relating to its AcoustoSizer(TM) and CHDF-2000 products. Under
the AcoustoSizer(TM) agreement, MASI is granted a world-wide sole and
exclusive license to manufacture and market instruments for scientific and
laboratory use. Under the CHDF agreement, MASI is granted the sole and
exclusive worldwide right to manufacture and sell products utilizing
certain technology.
-7-
<PAGE>
Seasonal Nature of the Business
- -------------------------------
In recent years, the Company has experienced some softness in third
quarter sales offset by a rise in fourth quarter sales in the Instruments
segment. The Company attributes this third quarter decline to vacations
taken during the summer months in the research community (industry,
government and university).
Working Capital
- ---------------
There are no unusual working capital requirements relating to the
Company's ongoing operations.
Customers
- ---------
During the last three years, no customer accounted for 10% of the
Company's consolidated sales.
A majority of the sales in the Electronics segment are to the computer
and telecommunications markets. Approximately 30% of the Electronics
segment sales in 1996 were made to its five largest customers. Sales to
the aerospace and automotive markets accounted for approximately 65% of the
1996 revenue in the Steel Cable segment. Approximately 40% of the Steel
Cable's segment sales in 1996 were made to its five largest customers.
Backlog Data
- ------------
The Company's backlog of firm orders at December 31, 1996 and 1995 are
as follows (in thousands):
Segment 1996 1995
------------- ---- ----
Electronics ..................... $2,744 $4,737
Steel Cable ..................... 3,143 2,689
Instruments ..................... 187 373
------ ------
$6,074 $7,799
====== ======
The decrease in the Electronics segment is attributable to the lower
backlog level in the import product line, partially offset by a slightly
higher backlog level in the remaining product lines. The increase in the
Steel Cable segment is mainly due to an increase in the automotive market
backlog. The decrease in the Instruments segment is due to a lower level
of custom designed systems for the NDE/NDT market. In the Instruments
segment, management believes that backlog data is not as meaningful, since
customer's orders for instruments are normally shipped upon receipt of
order.
The Company expects to ship all of the December 31, 1996 backlog within
1997.
-8-
<PAGE>
Government Contracts
- --------------------
Bergen's government contract-related business is in the form of firm
fixed-price contracts. These contracts are subject to the standard
government contract clause which permits the Government to terminate such
contracts at its convenience. In the event of such termination there are
provisions to enable the Company to recover its costs plus a fee. The
Company does not at this time anticipate the termination of any of its
major government contracts.
Competition
- -----------
In most of the markets in which the Company operates there are numerous
competitors. A number of the competitors are larger and have greater
resources than the Company. Larger competitors include Teleflex Industries
in the Steel Cable segment and M-tron Industries, Inc. in the Electronics
segment. In addition, in the Electronics segment, foreign competitors,
particularly from the Far East, continue to dominate the U.S. markets.
However, based on the reasons below, the Company believes it can maintain a
competitive position in its businesses.
In the Electronics segment, the Company believes its quality, strong
design and application engineering, responsive customer service and a
willingness to provide specialty small quantity orders will continue to
enable the Company to remain competitive in its markets.
Management believes that in the Steel Cable segment, Bergen has a
strong competitive edge in the cable assembly market based on its
reputation for design capability, service, quality, and customer
responsiveness.
In the Instruments segment, the Company believes its strong design
work, application engineering and quality will enable it to remain
competitive in the markets in which it competes.
Research and Development
- ------------------------
Expenditures for Company-sponsored research and development activities
amounted to approximately $705,000, $536,000 and $962,000 in 1996, 1995 and
1994, respectively. Such amounts represent 2.3%, 1.8% and 4.0%,
respectively, of sales for such periods.
The increase in expenses in 1996 is mainly due to higher expenses in
the Instruments segment relating to the new model of the CHDF instrument.
The reduction in expenses from 1994 to 1995 is attributable to lower
expenses in the Electronics and Instruments segments as new product and
process development projects were completed in late 1994.
-9-
<PAGE>
Environmental Regulations
- -------------------------
To the knowledge of the Company compliance with Federal, state and
local provisions which have been enacted or adopted regulating the
discharge of materials into the environment or otherwise relating to the
protection of the environment, has not had, nor will have a material effect
upon capital expenditures, earnings or competitive position.
Employees
- ---------
No employees at the various locations of the Company are represented by
a collective bargaining unit. At December 31, 1996, the Company has 314
full-time and 14 part-time employees. The Company considers its relations
with its employees to be satisfactory.
Foreign and Domestic Operations and Export Sales
- ------------------------------------------------
Financial information about foreign and domestic operations and export
sales is set forth in Note 12 of the Notes to Consolidated Financial
Statements in the 1996 Annual Report to Stockholders, which Note is
incorporated herein by reference.
-10-
<PAGE>
Item 2. Properties
- ------- ----------
The Company has the following facilities, each of which contains office
and manufacturing space and all of which are owned (except as noted).
Approximate
Location Square Feet Primary Use
-------- ----------- -----------
Wilmington, Delaware (1) 215,000 Real Estate Operation
Lodi, New Jersey 50,560 Steel Cable
Northboro, Massachusetts (2) 35,000 Real Estate Operation
Instruments
Hopkinton, Massachusetts 32,400 Electronics, Corporate
Headquarters
Juarez, Mexico (3) 20,000 Steel Cable
(1) At December 31, 1996 this facility is subject to one Industrial
Revenue Bond with a total balance due of $200,000. See Note 9 of
the Notes to Consolidated Financial Statements in the 1996 Annual
Report to Stockholders. Approximately 124,000 square feet is
leased and the remaining space is available for rent.
(2) Matec Instruments occupies approximately 11,000 square feet,
approximately 10,000 square feet is leased and the remaining
space is available for rent.
(3) Facilities under lease expiring in December 1997.
The Company believes its facilities (owned or leased) are suitable for
their current uses and are in good repair. The Company believes that its
facilities are adequate to satisfy its production capacity needs for the
immediate future.
-11-
<PAGE>
Item 3. Legal Proceedings
- ------- -----------------
The Company is involved in litigation in the ordinary course of
business. The Company believes that the outcome of these actions
should not have a material adverse effect on the financial condition
of the Company.
Item 4. Submission of Matters to a Vote of Security Holders
- ------- ---------------------------------------------------
No matters were submitted to a vote of the Registrant's security
holders during the last quarter of the fiscal year covered by this
report.
Executive Officers of the Registrant
- ------------------------------------
The names, ages and offices of the executive officers of the
Registrant are as follows:
Name Age Office
---- --- ------
Robert B. Gill 55 President and Chief Executive Officer
Michael J. Kroll 48 Vice President and Treasurer
The term of office for each officer of the Registrant is until
the first meeting of the Board of Directors following the Annual
Meeting of Stockholders and until a successor is chosen and
qualified.
Mr. Gill has been President and Chief Executive Officer of the
Registrant since December 21, 1992. He was President of Laser Diode,
Inc., a manufacturer of communication equipment, from prior to 1992
to December 1992.
Mr. Kroll has been Vice President and Treasurer of the Registrant
since prior to 1992.
-12-
<PAGE>
PART II
Item 5. Market for the Registrant's Common Stock and Related
- ------- ----------------------------------------------------
Stockholder Matters
-------------------
The information set forth on Page 1 of the 1996 Annual Report to
Stockholders under the caption "Common Stock Information" is
incorporated by reference.
Item 6. Selected Financial Data
- ------- -----------------------
The information set forth on page 4 of the 1996 Annual Report to
Stockholders under the caption "Five Year Financial Summary" is
incorporated by reference.
Item 7. Management's Discussion and Analysis of Financial
- ------- -------------------------------------------------
Condition and Results of Operations
-----------------------------------
The information set forth on pages 4 through 6 of the 1996 Annual
Report to Stockholders under the caption "Management's Discussion and
Analysis" is incorporated by reference.
Item 8. Financial Statements and Supplementary Data
- ------- -------------------------------------------
The information contained in the Consolidated Financial
Statements, Notes to Consolidated Financial Statements and the
Independent Auditors' Report appearing on pages 7 through the inside
back cover of the 1996 Annual Report to Stockholders is incorporated
by reference.
Item 9. Disagreements on Accounting and Financial Disclosure
- ------- ----------------------------------------------------
None.
-13-
<PAGE>
PART III
The information called for by Part III is hereby incorporated by
reference from the information set forth and under the headings
"Voting Securities", "Security Ownership of Management", "Election of
Directors", and "Executive Compensation" in Registrant's definitive
proxy statement for the 1997 Annual Meeting of Stockholders, which
meeting involves the election of directors, such definitive proxy
statement to be filed with the Securities and Exchange Commission
pursuant to Regulation 14A within 120 days after the end of the
fiscal year covered by this Annual Report on Form 10-KSB. In
addition, information on Registrant's executive officers has been
included in Part I above under the caption "Executive Officers of the
Registrant".
-14-
<PAGE>
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on
- -------- -------------------------------------------------------
Form 8-K
--------
(a) 1. The following Consolidated Financial Statements are
incorporated by reference from the indicated pages of the
1996 Annual Report to Stockholders:
Page Number(s) in
Annual Report
Consolidated Balance Sheets,
December 31, 1996 and 1995 .................... 7
Consolidated Statements of Operations
for the Years Ended December 31, 1996,
1995 and 1994 ................................. 8
Consolidated Statements of Cash Flows
for the Years Ended December 31, 1996,
1995 and 1994 ................................. 9
Consolidated Statements of Stockholders' Equity
for the Years Ended December 31, 1996,
1995 and 1994 ................................. 10
Notes to Consolidated Financial Statements ..... 10-16
Independent Auditors' Report ................... Inside back
cover
(a) 2. The following schedule to the Consolidated Financial
Statements and the Independent Auditors' Report on Schedule
are filed as part of this report.
Page Number
-----------
Independent Auditors' Report ...................... 18
Schedule II - Valuation Reserves .................. 19
All other schedules are omitted because they are not applicable,
not required or because the required information is included in
the Consolidated Financial Statements or notes thereto.
-15-
<PAGE>
(a) 3. The exhibits filed in this report or incorporated by
reference, listed on the Exhibit Index on page 20, are as
follows:
Exhibit No. Description
----------- ---------------------------------------------
3. (a) Certificate of Incorporation
3. (c) By-Laws
4. (a) Common Stock Purchase Warrant
10. (a) * 1992 Stock Option Plan
11. Calculation of Earnings Per Share
13. 1996 Annual Report to Stockholders
21. Subsidiaries of the Registrant
23. Consent of Independent Auditors
27. Financial Data Schedule
* Management contract or compensatory plan or arrangement
required to be filed as an Exhibit pursuant to Item 14(c) of this
report.
(b) Reports on Form 8-K
The Registrant did not file any reports on Form 8-K during the
last quarter of its year ended December 31, 1996.
-16-
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15 (d) of the
Securities Exchange Act of 1934, Registrant has duly caused this
report to be signed on its behalf by the undersigned, thereunto
duly authorized.
MATEC Corporation
Date: March 26, 1997 By: /s/ Robert B. Gill
-------------------
Robert B. Gill
President and 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 and on the
dates indicated.
Signature Title Date
--------- ----- ----
/s/ Robert B. Gill President, Chief Executive March 26, 1997
- ------------------------ Officer, and Director
Robert B. Gill
/s/ Michael J. Kroll Vice President and Treasurer
- ------------------------ (Principal Financial Officer March 26, 1997
Michael J. Kroll and Principal Accounting
Officer)
/s/ Eli Fleisher Director March 26, 1997
- ------------------------
Eli Fleisher
/s/ Lawrence Holsborg Director March 26, 1997
- ------------------------
Lawrence Holsborg
/s/ John J. McArdle III Director March 26, 1997
- ------------------------
John J. McArdle III
/s/ Robert W. Muir, Jr. Director March 26, 1997
- ------------------------
Robert W. Muir, Jr.
/s/ Joseph W. Tiberio Director March 26, 1997
- ------------------------
Joseph W. Tiberio
Director March , 1997
- ------------------------
Robert W. Valpey
/s/ Ted Valpey, Jr. Chairman of the Board and March 26, 1997
- ------------------------ Director
Ted Valpey, Jr.
-17-
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders
MATEC Corporation
Hopkinton, Massachusetts
We have audited the consolidated financial statements of MATEC Corporation
and subsidiaries as of December 31, 1996 and 1995, and for each of the
three years in the period ended December 31, 1996, and have issued our
report thereon dated February 28, 1997 (March 4, 1997, as to Note 15);
such consolidated financial statements and report are included in the
MATEC 1996 Annual Report to Stockholders and are incorporated herein by
reference. Our audits also included the financial statement schedule of
MATEC Corporation and subsidiaries, listed in Item 14. This financial
statement schedule is the responsibility of the Company's management. Our
responsibility is to express an opinion based on our audits. In our
opinion, such financial statement schedule, when considered in relation to
the basic consolidated financial statements taken as a whole, presents
fairly in all material respects the information set forth therein.
Deloitte & Touche LLP
Boston, Massachusetts
February 28, 1997 (March 4, 1997, as to Note 15)
-18-
<PAGE>
MATEC Corporation and Subsidiaries
----------------------------------
Schedule II - Valuation and Qualifying Accounts
-----------------------------------------------
Additions
Balance at Charged to Balance
Beginning Costs and at End
Description of Period Expenses Deductions of Period
----------- ---------- ---------- ---------- ----------
Allowance for
Doubtful Accounts:
Year Ended
December 31, 1996 $ 194,000 $ 83,974 $ 132,974 $ 145,000
========= ========= ========= =========
December 31, 1995 $ 199,000 $ 23,652 $ 28,652 $ 194,000
========= ========= ========= =========
December 31, 1994 $ 194,000 $ 59,881 $ 54,851 $ 199,000
========= ========= ========= =========
Inventory Reserve:
Year Ended:
December 31, 1996 $ 930,000 $ 738,314 $ 298,314 $1,370,000
========== ========= ========= ==========
December 31, 1995 $ 853,000 $ 388,040 $ 311,040 $ 930,000
========== ========= ========= ==========
December 31, 1994 $1,121,000 $ 264,863 $ 532,863 $ 853,000
========== ========= ========= ==========
-19-
<PAGE>
EXHIBIT INDEX
-------------
Exhibit No. (inapplicable items are omitted)
- -----------
3. (a) Certificate of Incorporation (incorporated by reference to
Exhibit 3. (a) to Registrant's Annual Report on Form 10-K
for the year ended December 31, 1992).
3. (c) By-Laws (incorporated by reference to Exhibit 3. (c) to
Registrant's Form 10-QSB for the quarterly period ended
September 29, 1996).
4. Each instrument which defines the rights of holders of
long-term debt of Registrant and its subsidiaries under
which the amount authorized does not exceed 10% of total
assets of Registrant and subsidiaries on a consolidated
basis has not been filed as an exhibit to this Annual
Report on Form 10-KSB. Registrant hereby undertakes and
agrees to furnish a copy of each instrument to the
Securities and Exchange Commission upon request.
4. (a) Common Stock Purchase Warrant dated April 12, 1995 between
the Registrant and Massachusetts Capital Resource Company
(incorporated by reference to Exhibit 4.(a) on Form 10-Q
for the quarterly period ended July 2, 1995.
10. (a) 1992 Stock Option Plan (incorporated by reference to
Exhibit 10. (c) to Registrant's Annual Report on Form 10-K
for the year ended December 31, 1992).
11. Calculation of Earnings Per Share. Filed herewith.
13. 1996 Annual Report to Stockholders. Filed herewith.
21. Subsidiaries of the Registrant. Filed herewith.
23. Consent of Independent Auditors. Filed herewith.
27. Financial Data Schedule. Filed for electronic purposes
only.
-20-
<PAGE>
<PAGE>
MATEC Corporation and Subsidiaries Exhibit 11
Calculation of Earnings Per Share
(amounts in thousands, except per share data)
Years Ended December 31,
1996 1995 1994
------- ------- -------
Net earnings (loss) ........................... $ (76) $ 303 $ (114)
======= ======= =======
CALCULATION OF PRIMARY EARNINGS (LOSS) PER SHARE:
Weighted average common shares outstanding .... 2,767 2,765 2,765
Increase from assumed exercise of stock options
and investment of proceeds in treasury stock,
based upon average market prices (A) ......... - 30 -
Increase from assumed exercise of warrants and
investment of proceeds in treasury stock,
based upon average market prices (A)(B) ...... - - -
----- ----- -----
Average common stock and common equivalent
shares outstanding ........................... 2,767 2,795 2,765
===== ===== =====
Net earnings (loss) per common and common
equivalent share (C) ......................... $(.03) $ .11 $(.04)
===== ===== =====
CALCULATION OF FULLY DILUTED EARNINGS (LOSS) PER SHARE:
Weighted average common shares outstanding .... 2,767 2,765 2,765
Increase from assumed exercise of stock options
and investment of proceeds in treasury stock,
based upon the higher of average or
quarter-end market prices .................... 41 33 28
Increase from assumed exercise of warrants and
investment of proceeds in treasury stock,
based upon the higher of average or
quarter-end market prices (B) ................ 4 - -
----- ----- -----
Average common stock and common equivalent
shares outstanding ........................... 2,812 2,798 2,793
===== ===== =====
Net earnings (loss) per common and common
equivalent share assuming full dilution (C) .. $(.03) $ .11 $(.04)
===== ===== =====
(A) In loss periods, dilutive common equivalent shares are excluded as the
effect would be anti-dilutive.
(B) The effect of the outstanding warrants is excluded in 1995 since they do
not meet either test of paragraph 37 of APB Opinion No. 15.
(C) Dilution from stock options and warrants is less than 3%, therefore primary
earnings per share is based on the weighted average number of shares
outstanding.
<PAGE>
<PAGE>
COMMON STOCK INFORMATION
MATEC common stock is listed and traded on the American Stock Exchange
under the symbol MXC. The range of high and low prices during each
quarter for the past two years is shown below:
For the years ended December 31, 1996 1995
- ---------------------------------------------------------------------
High Low High Low
- ---------------------------------------------------------------------
4th quarter 4 5/8 2 1/2 4 5/8 3 7/8
3rd quarter 6 4 5/8 4 3/4 3 7/8
2nd quarter 6 3/8 3 15/16 4 5/8 3 7/8
1st quarter 4 1/2 3 3/4 4 1/2 4
The Company paid no dividend in 1996 or 1995. Under the Term Debt
Agreement, the Company is restricted to the amount of cash dividends
paid in any one year. See Note 9 of the Notes to Consolidated Financial
Statements.
The approximate number of stockholders of record on March 12, 1997 was
3,000. This number does not include stockholders for whom shares are
held in a "nominee" or "street" name.
(Remaining information on Page 1 not incorporated by reference.)
Page 1
<PAGE>
<PAGE>
<TABLE>
Five Year Financial Summary
<CAPTION>
Years Ended December 31, 1996 1995 1994 1993 1992
- ---------------------------------------------------------------------------------------------------
(in thousands, except per share data)
<S> <C> <C> <C> <C> <C>
Continuing operations:
Net sales $30,857 $28,837 $24,229 $19,899 $19,732
Gross profit 7,527 8,314 7,201 5,212 5,337
Earnings (loss) before income taxes and cumulative
effect of accounting change (147) 522 (156) (1,765) (1,339)
Income taxes (benefit) (71) 219 (42) (612) (431)
Earnings (loss) before cumulative effect
of accounting change (76) 303 (114) (1,153) (908)
Discontinued operations - net - - - 1,286 184
Cumulative effect of accounting change - - - 135 -
- ---------------------------------------------------------------------------------------------------
Net earnings (loss) $ (76) $ 303 $ (114) $ 268 $ (724)
===================================================================================================
Earnings (loss) per share:
Continuing operations $ (.03) $ .11 $ (.04) $ (.40) $ (.31)
Discontinued operations - - - .44 .06
Cumulative effect of accounting change - - - .05 -
- ---------------------------------------------------------------------------------------------------
Earnings (loss) $ (.03) $ .11 $ (.04) $ .09 $ (.25)
===================================================================================================
Average shares outstanding 2,767 2,765 2,765 2,884 2,896
===================================================================================================
Cash dividends per share $ - $ - $ - $ - $ .10
===================================================================================================
Total assets, end of year:
Continuing operations $22,454 $24,225 $20,448 $18,063 $15,658
Discontinued operations - - - - 2,210
- ---------------------------------------------------------------------------------------------------
$22,454 $24,225 $20,448 $18,063 $17,868
===================================================================================================
Long-term debt, end of year $ 1,984 $ 2,180 $ 428 $ 652 $ 1,102
===================================================================================================
</TABLE>
<PAGE>
<PAGE>
Management's Discussion and Analysis
Financial Condition
Cash and cash equivalents increased $53,000 from December 31, 1995.
The Company's operations generated $2,670,000 in cash during the year
while investing and financing activities used cash of $1,125,000 and
$1,492,000, respectively.
The sources of cash from operations were the net noncash items,
mainly depreciation, of $1,522,000 and $1,224,000 from the favorable
change in operating assets and liabilities, offset by the $76,000
loss. The decrease in inventory, offset in part by a reduction in
accounts payable were the primary reasons for the decrease in net
operating assets. The $2,031,000 decrease in inventory is mainly due
to the Company's efforts to reduce certain inventory levels and the
shorter lead times required for certain products. The Company
reduced its accounts payable balance by $602,000 from the prior
year's level.
The Company's primary investing activity during the year was the
purchase of $1,117,000 of capital equipment. Machinery and equipment
additions in the steel cable and electronics segments accounted for
the majority of the expenditures. These additions are mainly geared
toward adding new and upgrading existing production capabilities and
processes within each segment. Capital expenditures for 1997 are
planned to approximate $1,300,000 with additions of $700,000 and
$500,000 projected for the steel cable and electronics segments,
respectively. These additions will mainly be focused on adding
additional capacity, manufacturing cost reductions, and upgrading
existing production capabilities.
During the year, the Company reduced its lines of credit borrowings
by $1,245,000 and its long-term debt by $228,000. At December 31,
1996, the Company's unused portion of these lines of credit was
$1,660,000.
The Company believes that based on its current working capital, the
expected cash flows from operations, and its current debt
arrangements its resources are sufficient to meet the financial needs
and to fund the capital expenditures for the projected levels of
business in 1997.
Results of Operations -- Overview -- 1996 versus 1995
Net sales increased $2,020,000 (7%) in 1996 as higher sales in the
steel cable segment were partially offset by sales decreases in the
electronics and instruments segments.
The overall gross profit percentage decreased from 29% in 1995 to 24%
in 1996 mainly as a result of lower margins in both the electronics
and instruments segments.
Selling and administrative expenses decreased $916,000 (13%) from
1995 mainly due to lower selling expenses in the instruments and
steel cable segments.
<PAGE>
<PAGE>
The $169,000 (32%) increase in research and development expenses was
principally a result of higher expenses in the instruments segment.
The $655,000 in restructuring expenses relates to the expenses for
the phasing out of a product line in the instruments segment and the
closing of a manufacturing operation in the electronics segment.
Interest expense increased from $375,000 in 1995 to $416,000 in 1996
as a result of higher levels of short and long-term debt. Other
income (expense), net increased $68,000 over 1995 mainly as a result
of a $52,000 increase in dividend income and a lower operating loss
in the real estate operations. The real estate operations loss
declined $13,000 from 1995 mainly as a result of increased rental
income.
The effective income tax benefit rate in 1996 was 48% compared to an
income tax rate of 42% in 1995. Factors affecting the comparability
of rates were the dividend exclusion, nondeductible expenses, and the
effective state income tax rate due to the limited state tax benefit
of operating losses within a state.
While the Company reported a 7% increase in sales, operating profit
declined $696,000 from 1995 due to a combination of an overall
decrease in gross margins and restructuring expenses of $655,000,
partially offset by a net decrease in operating expenses.
Nonoperating expenses decreased $27,000 from 1995 due to a
combination of increased dividend income, a lower operating loss in
the real estate operations, and increased interest expense. As a
result, the Company reported a pre-tax loss of $147,000 in 1996
versus earnings of $522,000 in 1995. The after tax loss amounted to
$76,000 in 1996 compared to earnings of $303,000 in 1995.
Business Segment Results -- 1996 versus 1995
Net sales in the steel cable segment increased $2,797,000 (29%) over
1995 mainly as a result of increased sales to the automotive market.
The overall gross profit percentage increased 18% over 1995 mainly
due to the favorable effects of spreading the fixed overhead over the
higher sales level and operating efficiencies on new production
programs started in 1995, partially offset by a higher raw material
percentage caused by product mix changes. Total operating expenses
decreased 21% from 1995 primarily as a result of decreases in legal
fees, advertising and personnel expenses. As a result of the
increased sales and gross margin, coupled with lower operating
expenses, the steel cable segment reported an operating profit of
$1,087,000 compared to an operating loss of $261,000 in 1995.
Net sales in the electronics segment decreased $563,000 (4%) from
1995 primarily due to the market conditions and inventory levels of
both the OEM and contract manufacturers in the telecommunications
market. The gross profit percentage decreased 25% from 1995 as a
result of an increased provision for slow moving inventory, increased
overhead personnel costs due to additional people, and increased raw
material costs due to product mix changes. Total operating expenses
increased 22% over 1995 mainly due to the restructuring charge and
increased selling expenses. The $180,000 restructuring charge
relates to the closing and moving of the Carlisle manufacturing
<PAGE>
<PAGE>
operation to the Hopkinton facility. The selling expense increases
were due to additional personnel and increased travel and advertising
expenses. As a result of the lower sales, the decrease in gross
margin and the higher operating expenses, the electronics segment
reported an operating profit of $491,000 in 1996 compared to a profit
of $1,870,000 in 1995.
The instruments segment reported a $214,000 (3%) decrease in sales
from 1995 as lower sales to both the colloidal and medical research
markets were partially offset by a 10% increase in sales to the
NDT/NDE markets. Lower sales of the AcoustoSizer(TM) partially
offset by higher sales of both the ESA and CHDF instruments resulted
in a net sales decrease to the colloidal market. While foreign sales
decreased slightly from 1995, lower domestic sales was the main
reason for the decrease in sales to the medical research market. The
sales increase to the NDT/NDE markets was primarily due to higher
sales of the Company's custom test systems. The overall gross profit
percentage decreased 19% from 1995 as a result of the unfavorable
effect of spreading the fixed overhead costs over the lower sales
volume and lower margins realized on the sales of custom test
systems. While total operating expenses remained fairly level with
1995, a selling expense decrease of $680,000 was offset by the
$475,000 restructuring charge and a $180,000 increase in research and
development. The decrease in selling expenses were mainly due to
lower personnel, travel and advertising expenses. The restructuring
costs relate to the phasing out of the AcoustoSizer(TM) product
line. Increased personnel costs and expenses related to the
completion of the new model of the CHDF instrument were the main
reasons for the higher research and development expenses. As a
result of the lower sales level and gross profit percentage, the
instruments segment reported an operating loss of $360,000 versus an
operating profit of $298,000 in 1995.
Results of Operations -- Overview -- 1995 versus 1994
Net sales increased $4,608,000 (19%) in 1995 to $28,837,000, mainly
as a result of the record sales level reported in the electronics
segment.
The overall gross profit percentage decreased from 30% in 1994 to 29%
in 1995 as lower margins in the steel cable and instruments segments
exceeded the improved margin in the electronics segment.
Selling and administrative expenses increased $570,000 (9%) over 1994
mainly due to higher selling expenses in the electronics and
instruments segments.
The $426,00 (44%) reduction in research and development expenses was
principally a result of lower expenses in the electronics and
instruments segments.
Other income (expense), net amounted to $374,000 of expense in 1995
compared to $82,000 of expense in 1994. Interest expense increased
$337,000 over 1994 due to the higher levels of short and long-term
debt. The real estate operations loss declined $13,000 from 1994
mainly as a result of lower overall operating expenses. Other income
includes $26,000 of dividend income in 1995.
<PAGE>
<PAGE>
The effective income tax rate in 1995 was 42% compared to a benefit
rate of 27% in 1994. The difference in rates is mainly due to the
effective state income tax rate and the limited state tax benefit of
operating losses within a state. As disclosed in the Notes to
Consolidated Financial Statements, the Company recorded a valuation
allowance to fully reserve for the potential state tax benefits of
the state net operating loss carryforwards during both years. The
change in the valuation allowance in 1995 includes the utilization of
a portion of prior year state net operating loss carryforwards.
Based on the higher sales level, the increased gross margin and the
lower percentage of operating expenses to sales, operating profit was
$896,000 in 1995 versus an operating loss of $73,000 in 1994.
Nonoperating expenses increased $291,000 over 1994 mainly as a result
of increased interest expense. As a result, the Company reported a
pre-tax profit from continuing operations of $522,000 in 1995 versus
a loss of $156,000 in 1994. The after tax earnings amounted to
$303,000 in 1995 compared to a loss of $114,000 in 1994.
Business Segment Results -- 1995 versus 1994
Sales in the electronics segment increased $4,646,000 (56%) over 1994
as all product lines reported significant increases. The sales
increases were mainly attributable to higher sales to both OEM and
contract manufacturers in the telecommunications market and to the
distributor markets. The overall gross profit percentage increased
36% over last year mainly as a result of the favorable effects of
allocating the fixed overhead expenses over the increased sales level
and manufacturing efficiencies and product yield improvements on
internally manufactured products. Total operating expenses remained
level with 1994 as lower general and administrative and research and
development expenses were offset by a 24% rise in selling expenses.
The reduction in G&A expense was due to lower personnel expenses.
The decrease in R&D expenses resulted from the completion of product
and process development projects in late 1994. Increased sales
commission, personnel, and advertising expenses were the major items
causing the higher selling expense. As a result of the significant
increase in sales and gross margin, coupled with level overall
operating expenses, the electronics segment's operating profit rose
to $1,870,000 compared to an operating loss of $63,000 in 1994.
Sales in the steel cable segment decreased $369,000 (4%) from 1994.
While sales to most major markets were comparable to last year, sales
to the fitness equipment market dropped about $750,000. The Company
continues to pursue product opportunities in the automotive market
and other markets it serves, but continues to see softness in the
fitness equipment, aerospace and government markets. The overall
gross profit percentage decreased about 20% from 1994, prior to the
favorable effects of the LIFO adjustment in 1994.
The lower margin resulted from the start-up expenses and operating
inefficiencies associated with several new programs beginning
production during the year, increased depreciation expense, and the
effect of the fixed operating costs over the lower sales volume.
Total operating expenses increased 7% over last year primarily due to
<PAGE>
<PAGE>
legal fees related to a suit against a former sales representative.
As a result of the lower sales, the reduced gross margin and the
increased operating expenses, the steel cable segment reported an
operating loss of $261,000 compared to an operating profit of
$628,000 in 1994.
The instruments segment reported a 6% increase in sales over 1994 to
a record level of $6,178,000. Higher sales to the NDT/NDE markets
partially offset by a 9% decrease in sales to both the colloidal and
medical research markets accounted for the net sales gain. The
increased sales to the NDT/NDE markets were attributable to higher
sales of the Company's custom test systems. The reduction in sales
to the colloidal market was due to lower foreign sales of the ESA
product partially offset by increased sales of the CHDF product.
Lower foreign sales was the main reason for the decrease in sales to
the medical research market. The overall gross profit percentage
decreased 7% from 1994 as a result of higher occupancy costs due to
increased space requirements, increased personnel costs caused by
additional employees and changes in the product mix of sales. Total
operating expenses increased 5% over 1994 as higher selling expenses
were partially offset by lower R&D expenses. Increased advertising,
promotional and commission expenses accounted for the higher selling
expenses. The decrease in R&D expense was mainly attributable to a
reduction in expenses associated with the development of the
AcoustoSizer(TM) partially offset by increased product development
expenses in the medical research and NDT/NDE market segments. While
sales increased slightly over 1994, lower gross margins and higher
operating expenses resulted in the instruments segment reporting
$298,000 in operating profit versus an operating profit of $404,000
in 1994.
<PAGE>
<PAGE>
Consolidated Balance Sheets
December 31, 1996 1995
- --------------------------------------------------------------------------
Assets
Current assets:
Cash and cash equivalents $ 883,795 $ 830,340
Receivables, net 5,764,123 5,672,411
Inventories 5,463,772 7,719,160
Deferred income taxes and other current assets 1,037,329 1,032,328
- --------------------------------------------------------------------------
Total current assets 13,149,019 15,254,239
- --------------------------------------------------------------------------
Property, plant and equipment, at cost:
Land and improvements 1,005,108 1,005,895
Buildings and improvements 6,198,618 6,149,253
Machinery and equipment 11,690,193 11,177,306
- --------------------------------------------------------------------------
18,893,919 18,332,454
Less accumulated depreciation 12,479,944 11,637,820
- --------------------------------------------------------------------------
6,413,975 6,694,634
Other assets:
Marketable equity securities 2,781,708 2,134,799
Miscellaneous 108,915 140,907
- --------------------------------------------------------------------------
$22,453,617 $24,224,579
==========================================================================
Liabilities and Stockholders' Equity
Current liabilities:
Notes payable $ 1,190,000 $ 2,435,000
Current portion of long-term debt 200,000 228,333
Accounts payable 2,035,044 2,636,689
Accrued liabilities 1,399,272 1,378,184
Income taxes 118,523 350,305
- --------------------------------------------------------------------------
Total current liabilities 4,942,839 7,028,511
- --------------------------------------------------------------------------
Deferred income taxes 1,651,568 1,435,568
Long-term debt 1,984,400 2,179,960
Stockholders' equity:
Preferred stock, $1.00 par value-
Authorized 1,000,000 shares; issued, none - -
Common stock, $.05 par value-Authorized
10,000,000 shares; issued 3,804,195 and
3,793,695 shares 190,210 189,685
Capital surplus 6,442,439 6,397,485
Retained earnings 10,954,963 11,030,591
Net unrealized gain on marketable
equity securities 1,570,324 1,181,415
Treasury stock at cost, 1,049,467 and
1,029,315 shares (5,283,126) (5,218,636)
- --------------------------------------------------------------------------
Total stockholders' equity 13,874,810 13,580,540
- --------------------------------------------------------------------------
$22,453,617 $24,224,579
=========================================================================
See notes to consolidated financial statements.
<PAGE>
<PAGE>
<TABLE>
Consolidated Statements of Operations
<CAPTION>
For the Years Ended December 31, 1996 1995 1994
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net sales $30,857,396 $28,837,026 $24,228,683
Cost of sales 23,330,742 20,522,548 17,028,131
- -----------------------------------------------------------------------------------------
Gross profit 7,526,654 8,314,478 7,200,552
- -----------------------------------------------------------------------------------------
Selling and administrative expenses 5,966,608 6,882,748 6,312,283
Research and development expenses 704,932 535,619 961,768
Restructuring expenses 655,000 - -
- ----------------------------------------------------------------------------------------
7,326,540 7,418,367 7,274,051
- ----------------------------------------------------------------------------------------
Operating profit (loss) 200,114 896,111 (73,499)
Other income (expense):
Interest expense (416,060) (374,832) (37,691)
Other, net 69,318 1,145 (44,669)
- -----------------------------------------------------------------------------------------
(346,742) (373,687) (82,360)
- -----------------------------------------------------------------------------------------
Earnings (loss) before income taxes (146,628) 522,424 (155,859)
Income tax (expense) benefit 71,000 (219,000) 42,000
- -----------------------------------------------------------------------------------------
Net earnings (loss) $ (75,628) $ 303,424 $ (113,859)
=========================================================================================
Earnings (loss) per share $ (.03) $ .11 $ (.04)
=========================================================================================
</TABLE>
See notes to consolidated financial statements.
<PAGE>
<PAGE>
<TABLE>
Consolidated Statements of Cash Flows
<CAPTION>
For the Years Ended December 31, 1996 1995 1994
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash Flows from Operating Activities:
Net earnings (loss) $ (75,628) $ 303,424 $ (113,859)
Adjustments to reconcile net earnings (loss) to net cash
provided (used) by operating activities:
Depreciation and amortization 1,341,179 1,270,785 1,101,471
Changes in deferred income taxes (144,000) 132,000 (42,000)
Loss on write-off of assets under restructuring plans 320,000 - -
Other 4,440 2,960 -
Changes in assets and liabilities:
Receivables, net 32,288 (1,070,365) (1,363,072)
Inventories 2,031,151 (2,090,619) (1,915,987)
Other current assets 96,999 58,936 (163,054)
Accounts payable and accrued liabilities (580,557) (511,368) 1,874,927
Income taxes, net (355,782) 24,636 159,830
- ---------------------------------------------------------------------------------------------------------
Net cash provided (used) by operating activities 2,670,090 (1,879,611) (461,744)
- ---------------------------------------------------------------------------------------------------------
Cash Flows from Investing Activities:
Capital expenditures, net (1,116,856) (1,354,383) (1,903,830)
Purchases of marketable equity securities - - (150,000)
Collection of amount due from sale of discontinued operations - 250,000 155,000
Other, net (7,435) (26,000) (22,688)
- ---------------------------------------------------------------------------------------------------------
Net cash (used) by investing activities (1,124,291) (1,130,383) (1,921,518)
- ---------------------------------------------------------------------------------------------------------
Cash Flows from Financing Activities:
Proceeds from issuance of long-term debt and warrants - 2,000,000 -
Net borrowings (repayments) under lines of credit (1,245,000) 1,520,000 915,000
Payments on long-term debt (228,333) (223,333) (208,334)
Purchases of common stock (64,490) (788) (881)
Stock options exercised 45,479 - -
- ---------------------------------------------------------------------------------------------------------
Net cash provided (used) by financing activities (1,492,344) 3,295,879 705,785
- ---------------------------------------------------------------------------------------------------------
Net Increase (Decrease) in Cash and Cash Equivalents 53,455 285,885 (1,677,477)
Cash and Cash Equivalents at beginning of year 830,340 544,455 2,221,932
- ---------------------------------------------------------------------------------------------------------
Cash and Cash Equivalents at end of year $ 883,795 $ 830,340 $ 544,455
=========================================================================================================
Supplemental Disclosures of Cash Flow Information
Cash paid during the year for:
Interest $ 433,947 $ 403,462 $ 78,879
Income taxes $ 187,500 $ - $ 25,620
</TABLE>
<PAGE>
<PAGE>
Consolidated Statements of Cash Flows - continued
Noncash Investing and Financing Activities:
Under Statement of Financial Accounting Standards No. 115, "Accounting for
Certain Investments in Debt and Equity Securities", the Company recorded
the following increases (decreases):
1996 1995 1994
- --------------------------------------------------------------------------
Marketable Equity Securities $ 647,000 $ 582,000 $ (248,000)
Deferred Income Taxes 258,000 233,000 (100,000)
Net Unrealized Gain (Loss) on
Marketable Equity Securities 389,000 349,000 (148,000)
See notes to consolidated financial statements.
<PAGE>
<PAGE>
<TABLE>
Consolidated Statements of Stockholders' Equity
<CAPTION>
Unrealized
Gain (Loss)
on
Marketable
Common Stock Capital Retained Equity Treasury
Shares Amount Surplus Earnings Securities Stock
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balance, January 1, 1994 3,793,695 $189,685 $6,374,485 $10,841,026 $ 979,818 $(5,216,967)
Net (loss) - - - (113,859) - -
Purchases of common stock - - - - - (881)
Unrealized (loss) on marketable
equity securities - - - - (147,621) -
- ----------------------------------------------------------------------------------------------------------------
Balance, December 31, 1994 3,793,695 189,685 6,374,485 10,727,167 832,197 (5,217,848)
Net earnings - - - 303,424 - -
Purchases of common stock - - - - - (788)
Unrealized gain on marketable
equity securities - - - - 349,218 -
Issuance of detachable
common stock purchase
warrants - - 23,000 - - -
- ----------------------------------------------------------------------------------------------------------------
Balance, December 31, 1995 3,793,695 189,685 6,397,485 11,030,591 1,181,415 (5,218,636)
Net (loss) - - - (75,628) - -
Purchases of common stock - - - - - (64,490)
Unrealized gain on marketable
equity securities - - - - 388,909 -
Exercise of stock options 10,500 525 44,954 - - -
- ---------------------------------------------------------------------------------------------------------------
Balance, December 31, 1996 3,804,195 $190,210 $6,442,439 $10,954,963 $1,570,324 $(5,283,126)
===============================================================================================================
</TABLE>
See notes to consolidated financial statements.
<PAGE>
<PAGE>
Notes to Consolidated Financial Statements
(1) Summary of Significant Accounting Policies:
Principles of consolidation -- The accompanying consolidated financial
statements include the accounts of MATEC Corporation and its wholly owned
subsidiaries. Significant intercompany balances and transactions have
been eliminated in consolidation.
Use of estimates -- The preparation of the Company's financial
statements in conformity with generally accepted accounting principles
necessarily requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the balance sheet dates. Estimates
include reserves for accounts receivable and inventory, useful lives of
property, plant and equipment, accrued liabilities, and deferred income
taxes.
Fair value of financial instruments -- Statement of Financial
Accounting Standards No. 107 "Disclosures About Fair Value of Financial
Instruments" requires disclosure of the fair value of certain financial
instruments. The carrying amounts of cash, cash equivalents, accounts
payable and accrued expenses approximate fair value because of their
short-term nature. Marketable equity securities are recorded in the
financial statements at aggregate fair value. The carrying amounts of the
Company's debt instruments approximate fair value (Notes 8 and 9).
Cash equivalents -- For purposes of the statements of cash flows, the
Company considers all highly liquid investments with a maturity of three
months or less when purchased to be cash equivalents. Cash equivalents
are stated at cost plus accrued interest, which approximates market value.
Inventories -- Inventories are stated at the lower of cost or market.
Steel cable product inventory costs are determined by the last-in,
first-out method (LIFO). The remaining product inventory costs are
determined by the first-in, first-out method (FIFO).
Property, plant and equipment -- The Company uses the straight-line
method of providing for depreciation and amortization of property, plant
and equipment for financial reporting purposes and accelerated methods for
tax purposes. The estimated lives used to compute depreciation and
amortization are as follows: land improvements - 10 years, buildings and
improvements - 15 to 40 years and machinery and equipment - 3 to 10 years.
Marketable equity securities -- Marketable equity securities consist
of common stocks and are valued under Statement of Financial Accounting
Standards No. 115 ("SFAS 115") "Accounting for Certain Investments in Debt
and Equity Securities". Under SFAS 115, the Company has classified these
securities as "available for sale" and are valued at fair value, with
unrealized gains, net of taxes excluded from earnings and reported as a
separate component of stockholders' equity.
<PAGE>
<PAGE>
Notes continued
At December 31, 1996 and 1995, the fair market value (based on quoted
market prices) of these securities was $2,781,708 and $2,134,799,
respectively, and the amortized cost was $710,384. Gross unrealized gains
amounted to $2,071,324 and $1,424,415 at December 31, 1996 and 1995,
respectively, and there were no unrealized losses at either date. During
1996, the Company recorded a $388,909 increase in the "Unrealized Gain
(Loss) on Marketable Equity Securities" component of stockholders' equity
and a $349,218 increase in the same account during 1995.
Revenue recognition -- Revenue is generally recognized when product is
shipped. Revenue under long-term contracts is recorded primarily on the
percentage of completion method. Under this approach, sales and gross
margin are recognized as the work is performed, based on the ratio that
incurred costs bear to estimated total completion costs. Provisions for
anticipated losses are made in the period in which they first become
determinable.
Income taxes -- The Company accounts for income taxes under Statement
of Financial Accounting Standards No. 109 ("SFAS 109") "Accounting for
Income Taxes". This Statement requires the Company to compute deferred
income taxes based on the differences between the financial statement and
tax basis of assets and liabilities using enacted rates in effect in the
years in which the differences are expected to reverse.
Earnings (loss) per share -- Earnings (loss) per share have been
computed based on the weighted average number of shares outstanding during
the years -- 2,767,391 shares in 1996, 2,764,503 shares in 1995 and
2,764,687 shares in 1994. No effect has been given to outstanding stock
options and warrants as no material dilutive effect would result from the
exercise of these items.
Stock compensation plans -- The Company applies APB Opinion No. 25
"Accounting for Stock Issued to Employees" and related interpretations in
accounting for its stock option plans.
Recently Issued Accounting Standards -- Effective January 1, 1996, the
Company adopted Statement of Financial Accounting Standards ("SFAS") No.
121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to Be Disposed Of." This statement establishes
accounting standards for the impairment of long-lived assets, certain
identifiable intangibles, and goodwill related to those assets to be held
and used and for long-lived assets and certain identifiable intangibles
to be disposed of. Adoption of the standard had no material effect on the
Company's financial position and results of operations.
(2) Restructuring Expenses: In the fourth quarter of 1996, the Company
recorded restructuring expenses of $655,000 pursuant to the phasing out of
its AcoustoSizer(TM) product line in the Instruments segment and the
closing of its high frequency fundamental quartz crystal operation in
Carlisle, Pennsylvania and relocating it to Hopkinton, Massachusetts. The
$655,000 in expenses include the write-down of assets of $320,000,
severance costs of $191,000, warranty reserves of $70,000 and other costs
of $74,000 relating to the above product line restructurings.
<PAGE>
<PAGE>
Notes continued
(3) Receivables, net: Receivables, net of allowances, consist of the
following:
1996 1995
- --------------------------------------------------------------------------
Accounts receivable, less allowance for doubtful
accounts of $145,000 and $194,000 $5,497,657 $5,672,411
Costs and estimated earnings in excess of billings
on uncompleted contracts 142,466 -
Refundable income taxes 124,000 -
- --------------------------------------------------------------------------
$5,764,123 $5,672,411
==========================================================================
(4) Inventories: Inventories consist of the following:
1996 1995
- --------------------------------------------------------------------------
Raw materials $2,585,732 $3,415,021
Work in process 849,481 925,168
Finished goods 2,028,559 3,378,971
- --------------------------------------------------------------------------
$5,463,772 $7,719,160
==========================================================================
Inventories of $2,575,000 in 1996 and $2,897,000 in 1995 are
determined by the LIFO method. In 1996 and 1995 the amounts of LIFO
inventories were approximately $36,000 and $23,000 less than the amount of
such inventories determined on the FIFO basis.
(5) Income Taxes: The components of the provision (benefit) for income
taxes are as follows:
1996 1995 1994
- --------------------------------------------------------------------------
Current provision:
Federal $ 63,000 $ - $ -
State 10,000 87,000 -
- --------------------------------------------------------------------------
73,000 87,000 -
- --------------------------------------------------------------------------
Deferred provision (benefit):
Federal (105,000) 133,000 (62,000)
State (39,000) (1,000) 20,000
- --------------------------------------------------------------------------
(144,000) 132,000 (42,000)
- --------------------------------------------------------------------------
Total $ (71,000) $ 219,000 $ (42,000)
==========================================================================
<PAGE>
<PAGE>
Notes continued
The tax effects of significant items comprising the Company's net
deferred tax liability as of December 31, 1996 and 1995 are as follows:
1996 1995
- --------------------------------------------------------------------------
Deferred tax liabilities:
Depreciation $ 550,200 $ 584,700
DISC commissions 535,200 535,200
Unrealized gain on marketable equity securities 501,000 243,000
- --------------------------------------------------------------------------
Total deferred tax liabilities 1,586,400 1,362,900
- --------------------------------------------------------------------------
Deferred tax assets:
Inventory reserves 545,500 485,600
State net operating loss carryforwards 318,000 311,600
Restructuring expenses 80,000 -
Allowance for doubtful accounts 58,400 70,800
Accrued expenses 101,200 100,400
Federal net operating loss carryforwards - 18,700
- --------------------------------------------------------------------------
Total deferred tax assets 1,103,100 987,100
Valuation allowance (318,000) (311,600)
- --------------------------------------------------------------------------
Deferred tax assets, net 785,100 675,500
- --------------------------------------------------------------------------
Net deferred tax liabilities $ 801,300 $ 687,400
==========================================================================
Other current assets include deferred income taxes of approximately
$850,000 and $748,000 in 1996 and 1995.
Valuation allowances have been provided at December 31, 1996 and 1995
for "state net operating loss carryforwards". The allowances have been
recorded since it is more likely than not that the Company may not be able
to generate operating income to realize the benefit of these losses, by
the expiration dates beginning in 1997.
The valuation allowance increased slightly during 1996 as a result of
additional state net operating losses in 1996.
The total income tax provision (benefit) differs from that computed by
applying the Federal income tax rate to income before income taxes. The
reasons for the difference are as follows:
1996 1995 1994
- --------------------------------------------------------------------------
Income taxes at statutory rates $ (49,854) $ 177,624 $ (52,992)
State income tax, net of Federal
tax benefit (20,000) 57,000 13,000
Benefit of state operating
loss carryforward - (25,000) -
Non-deductible expenses 16,000 17,000 15,000
Dividend exclusion (16,000) - -
Other, net (1,146) (7,624) (17,008)
- --------------------------------------------------------------------------
$ (71,000) $ 219,000 $ (42,000)
==========================================================================
<PAGE>
<PAGE>
Notes continued
(6) Profit Sharing and Savings Plan: The Company has a trusteed profit
sharing 401(k) plan that covers all qualified employees. Under the profit
sharing section of the plan, the Company may make contributions to the
plan at the discretion of the Board of Directors. Under the 401(k)
section of the plan, the Company matched 50% of employee contributions up
to 6% of compensation. Total Company contributions charged to operations
were $160,000 in 1996, $142,000 in 1995 and $115,000 in 1994.
(7) Accrued Liabilities: Accrued liabilities consists of the following
items:
1996 1995
- --------------------------------------------------------------------------
Employee compensation $ 275,991 $ 364,267
Other 1,123,281 1,013,917
- --------------------------------------------------------------------------
$1,399,272 $1,378,184
==========================================================================
(8) Notes Payable: The Company has secured demand lines of credit with
two banks amounting in total to $2,850,000. The $2,000,000 line of credit
is secured by all assets except real estate and marketable equity
securities. Advances under this line are based on percentage formulas of
specific receivable and inventory balances of certain subsidiaries. The
Company had $1,040,000 of borrowings outstanding under this line of credit
at December 31, 1996. The $850,000 line of credit is secured by
marketable equity securities. The Company had $150,000 of borrowings
outstanding under this line of credit at December 31, 1996. There are no
compensating balance requirements or significant commitment fees under
either arrangement. The weighted average interest rate on outstanding
notes payable was 9.21% at December 31, 1996 and 9.4% at December 31,
1995.
(9) Long-Term Debt:
Long-term debt consists of the following:
1996 1995
- --------------------------------------------------------------------------
11% Term Debt, $2 million face amount, due in 2000;
interest payable quarterly $1,984,400 $1,979,960
Industrial Revenue Bonds:
Principal payment of $200,000 in 1997;
interest payable semi-annually at a rate of 7.0% 200,000 380,000
Other - 48,333
- --------------------------------------------------------------------------
2,184,400 2,408,293
Less current portion 200,000 228,333
- --------------------------------------------------------------------------
$1,984,400 $2,179,960
==========================================================================
The Term Debt Note is secured by all the Company's assets, except for
real estate, marketable equity securities, and certain specific equipment
with a total book value of $208,000. The Term Debt Agreement includes
covenants covering debt to equity and interest expense ratios and
restrictions as to the total amount of debt, dividends, and capital stock
repurchases. Dividend payments in any fiscal year are limited to 30% of
the Company's net earnings of the prior fiscal year. At December 31,
1996, the Company was not in compliance with the covenant pertaining to
<PAGE>
<PAGE>
Notes continued
interest expense ratios but received a waiver of compliance from the
lender. Under the Agreement, the lender will subordinate its security
interest for up to $4 million in debt, with corresponding increases in
the interest rate from the 10% stated rate to 12% based on the
subordination amount. The lender subordinated its security interest to
the $2 million bank line of credit. As part of the Agreement, the
Company issued the lender transferable common stock warrants to purchase
85,000 shares of the Company's common stock at $4.75 per share. The
warrants were valued at $23,000 on the date of issuance. The warrants
expire on June 30, 2000.
The Industrial Revenue Bonds are secured by certain assets with
carrying values of $1,836,000.
The aggregate principal payments on long-term debt due in each of the
next five years are as follows; 1997 - $200,000; 1998 - $0; 1999 - $0;
2000 - $2,000,000; and 2001 - $0.
(10) Stock Compensation Plans: The MATEC Corporation 1992 Stock Option
Plan allows for the granting of options to officers, key employees, and
other individuals to purchase a maximum of 300,000 shares of the
Company's common stock. The option price and terms are determined by the
Company's Stock Option-Compensation Committee. The options granted may
qualify as incentive stock options ("ISO's"). Through December 31, 1996,
all options granted were ISO's. At December 31, 1996, this Plan has
83,500 options available for future grant and 294,000 common shares
reserved for issuance.
The 1982 Incentive Stock Option Plan allowed for the granting of
options to employees, including officers, to purchase a maximum of
150,000 shares of the Company's common stock at a price not less than the
fair market value of the stock at or about the time of grant. All
options under the 1982 Plan expired in 1996.
The Company applies APB Opinion No. 25 and related Interpretations in
accounting for its plans. Accordingly, no compensation expense has been
recognized for these plans. Had compensation cost for the shares granted
under the above plans been determined under the provisions of SFAS No.
123, the expense would not have a material effect on the Company's net
earnings (loss) and earnings (loss) per share in 1995 and 1996.
<PAGE>
<PAGE>
Notes continued
A summary of the status of the Company's two fixed stock option plans
as of December 31, 1996, 1995, and 1994, and changes during the years
ended on those dates is presented below:
<TABLE>
<CAPTION>
1996 1995 1994
- -------------------------------------------------------------------------------------------------------
Number Weighted-avg. Number Weighted-avg. Number Weighted-avg.
of shares exercise price of shares exercise price of shares exercise price
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Outstanding, January 1, 253,250 $3.83 241,750 $3.81 189,500 $3.76
Granted - - 12,500 4.38 55,250 4.05
Exercised (10,500) 4.33 - - - -
Expired (21,000) 5.08 - - - -
Forfeited (11,250) 4.38 (1,000) 5.25 (3,000) 4.94
- ------------------------------------------------------------------------------------------------------
Outstanding, December 31, 210,500 $3.66 253,250 $3.83 241,750 $3.81
=======================================================================================================
Exercisable, December 31, 139,800 131,450 81,575
=======================================================================================================
</TABLE>
The following table summarizes information about fixed stock options
outstanding at December 31, 1996:
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
- ---------------------------------------------------------------- ----------------------------
Weighted Average
-----------------------------
Range of Number Remaining Number Weighted-
Exercise Outstanding Contractual Exercise Exercisable Avg. Exercise
Prices at 12/31/96 Life Price at 12/31/96 Price
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$3.50 150,000 5.9 years $ 3.50 120,000 $ 3.50
$3.63-3.88 27,500 7.2 3.73 9,100 3.65
$4.25-4.38 33,000 8.3 4.30 10,700 4.28
- ------------------------------------------------------------------------------------------------
210,500 139,800
================================================================================================
</TABLE>
<PAGE>
<PAGE>
Notes continued
(11) Other Income (Expense), net: Other, net consists of the following items:
1996 1995 1994
- --------------------------------------------------------------------------
Interest income $ 26,853 $ 21,006 $ 25,872
Real estate operations (41,427) (54,698) (67,652)
Dividends 77,629 25,876 -
Other items, net 6,263 8,961 (2,889)
- --------------------------------------------------------------------------
$ 69,318 $ 1,145 $ (44,669)
==========================================================================
Interest expense in 1996, 1995 and 1994 of $20,300, $32,725, and $44,608,
respectively, is included in real estate operations.
(12) Business Segments: The Company operates in three industry segments:
Steel Cable, Electronics, and Instruments. In addition, the Company
operates two real estate subsidiaries. Operating profit (loss) represents
net sales less all identifiable operating expenses. General corporate
expenses, income taxes, and other income or expense are excluded from
segment operations.
<PAGE>
<PAGE>
Notes continued
1996 1995 1994
- -----------------------------------------------------------------------------
(in thousands)
Net Sales:
Steel Cable $ 12,545 $ 9,748 $ 10,117
Electronics 12,348 12,911 8,265
Instruments 5,964 6,178 5,847
- -----------------------------------------------------------------------------
Total $ 30,857 $ 28,837 $ 24,229
=============================================================================
Operating Profit (Loss):
Steel Cable $ 1,087 $ (261) $ 628
Electronics 491 1,870 (63)
Instruments (360) 298 404
- -----------------------------------------------------------------------------
Total 1,218 1,907 969
General Corporate Expenses (1,018) (1,011) (1,043)
Real Estate Operations, Net (42) (55) (68)
Other Income (Expense), Net (305) (319) (14)
- -----------------------------------------------------------------------------
Earnings (loss) before income taxes $ (147) $ 522 $ (156)
=============================================================================
Identifiable Assets:
Steel Cable $ 7,232 $ 7,111 $ 6,601
Electronics 6,049 8,109 5,398
Instruments 2,999 3,511 3,058
Corporate 4,102 3,258 2,968
Real Estate Operations 2,072 2,236 2,423
- -----------------------------------------------------------------------------
$ 22,454 $ 24,225 $ 20,448
=============================================================================
Capital Expenditures:
Steel Cable $ 676 $ 923 $ 1,021
Electronics 354 209 667
Instruments 80 179 180
Corporate - - 2
Real Estate Operations 16 43 41
- -----------------------------------------------------------------------------
$ 1,126 $ 1,354 $ 1,911
=============================================================================
Depreciation and Amortization:
Steel Cable $ 643 $ 527 $ 385
Electronics 324 330 298
Instruments 154 190 195
Corporate 2 3 5
Real Estate Operations 218 221 218
- -----------------------------------------------------------------------------
$ 1,341 $ 1,271 $ 1,101
=============================================================================
Corporate assets consist mainly of cash and cash equivalents and
marketable equity securities.
<PAGE>
<PAGE>
Notes continued
Summarized financial information covering the Company's domestic and
foreign (Mexico) operations is outlined below:
1996 1995 1994
- -----------------------------------------------------------------------------
(in thousands)
Net Sales:
Domestic $25,855 $24,634 $19,739
Foreign 5,002 4,203 4,490
- -----------------------------------------------------------------------------
$30,857 $28,837 $24,229
=============================================================================
Operating Profit (Loss):
Domestic $ 1,284 $ 2,358 $ 1,301
Foreign (66) (451) (332)
- -----------------------------------------------------------------------------
$ 1,218 $ 1,907 $ 969
=============================================================================
Identifiable Assets:
Domestic $19,890 $22,044 $18,448
Foreign 2,564 2,181 2,000
- -----------------------------------------------------------------------------
$24,454 $24,225 $20,448
=============================================================================
Export sales amounted to approximately $5,703,000, $5,248,000 and
$4,704,000 in 1996, 1995 and 1994, respectively.
(13) Quarterly Financial Data (unaudited): Selected unaudited quarterly
financial data for 1996 and 1995 is set forth below:
First Second Third Fourth
- ------------------------------------------------------------------------
1996 (in thousands, except per share data)
Net sales $8,652 $8,114 $6,625 $7,466
Gross profit 2,389 2,142 1,416 1,580
Earnings (loss) before income taxes 364 272 76 (859)
- ------------------------------------------------------------------------
Net earnings (loss) $ 218 $ 176 $ 48 $ (518)
========================================================================
Net earnings (loss) per share $ .08 $ .06 $ .02 $ (.19)
========================================================================
1995
Net sales $6,319 $7,026 $7,118 $8,374
Gross profit 1,818 2,129 1,958 2,410
Earnings before income taxes 8 47 76 391
- ------------------------------------------------------------------------
Net earnings $ 5 $ 28 $ 49 $ 221
========================================================================
Net earnings per share $ .00 $ .01 $ .02 $ .08
========================================================================
In the 1996 fourth quarter, restructuring expenses reduced earnings before
income taxes by $655,000 and net earnings by $409,000 or $.15 per share (See
Note 2).
(14) Contingencies: The Company is involved in litigation in the ordinary
course of business. The Company believes that the outcome of these actions
should not have a material adverse effect on the financial condition of the
Company.
<PAGE>
<PAGE>
Notes continued
(15) Subsequent Event: In March 1997, the Company signed a letter of
intent with Colloidal Dynamics Pty. Ltd. ("CD") to sell its AcoustoSizer
(TM) product line and certain related assets for $130,000 in cash and a
$200,000 note. The letter also grants CD an option for $20,000 to
purchase the common stock of CD owned by the Company for $200,000. The
transaction is subject to the negotiation and execution of a definitive
purchase agreement and approval of each company's Board of Directors and
CD's shareholders. It is anticipated that the majority of the proceeds
received by the Company will result in a gain.
<PAGE>
<PAGE>
Independent Auditors' Report
To the Stockholders and Board of Directors of MATEC Corporation:
We have audited the accompanying consolidated balance sheets of MATEC
Corporation and subsidiaries as of December 31, 1996 and 1995, and the
related consolidated statements of operations, stockholders' equity and
cash flows for each of the three years in the period ended December 31,
1996. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these
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 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 present fairly,
in all material respects, the financial position of MATEC Corporation and
subsidiaries as of December 31, 1996 and 1995, and the results of their
operations and their cash flows for each of the three years in the period
ended December 31, 1996 in conformity with generally accepted accounting
principles.
Deloitte & Touche LLP
Boston, Massachusetts
February 28, 1997
(March 4, 1997, as to Note 15)
(Remaining information on inside back cover is not incorporated by
reference.)
inside back cover
<PAGE>
<PAGE>
Subsidiaries of the Registrant Exhibit 21
------------------------------ ----------
The following is a list of the Registrant's subsidiaries (all
of which are 100% owned):
State or Other Jurisdiction
Of Incorporation
---------------------------
Bergen Cable Technologies, Inc. New Jersey
Cable Bergen de Mexico, S.A. de C.V. Mexico
Matec Applied Sciences, Inc. Delaware
MATEC EFO Corp. Massachusetts
Matec Fiberoptics, Inc. Massachusetts
Matec Instruments, Inc. Delaware
Matec International, Inc. Massachusetts
Matec Microelectronics, Inc. Massachusetts
MEKontrol, Inc. Massachusetts
RSC Realty Corporation Delaware
Valpey-Fisher Corporation Massachusetts
<PAGE>
Exhibit 23
INDEPENDENT AUDITORS' CONSENT
The Board of Directors
MATEC Corporation:
We consent to the incorporation by reference in this Registration
Statement No. 33-77554 of MATEC Corporation on Form S-8, as
amended, of our reports dated February 28, 1997 (March 4, 1997 as
to Note 15), appearing in the Annual Report on Form 10-KSB of MATEC
Corporation for the year ended December 31, 1996.
Deloitte & Touche LLP
Boston, Massachusetts
March 27, 1997
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 883,795
<SECURITIES> 0
<RECEIVABLES> 5,642,657
<ALLOWANCES> 145,000
<INVENTORY> 5,463,772
<CURRENT-ASSETS> 13,149,019
<PP&E> 18,893,919
<DEPRECIATION> 12,479,944
<TOTAL-ASSETS> 22,453,617
<CURRENT-LIABILITIES> 4,942,839
<BONDS> 1,984,400
0
0
<COMMON> 190,210
<OTHER-SE> 13,684,600
<TOTAL-LIABILITY-AND-EQUITY> 22,453,617
<SALES> 30,857,396
<TOTAL-REVENUES> 30,857,396
<CGS> 23,330,742
<TOTAL-COSTS> 23,330,742
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 83,974
<INTEREST-EXPENSE> 416,060
<INCOME-PRETAX> (146,628)
<INCOME-TAX> (71,000)
<INCOME-CONTINUING> (75,628)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (75,628)
<EPS-PRIMARY> (.03)
<EPS-DILUTED> (.03)
</TABLE>
