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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 December 31, 1997
-----------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
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Commission file number 1-4184
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MATEC Corporation
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(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:
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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
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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-K or any amendment to this Form 10-K. [X]
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Aggregate market value of voting stock held by non-affiliates: $5,715,468
(computed by reference to the last sales price of such common stock on
March 23, 1998 as reported in the American Stock Exchange consolidated
trading index).
Number of shares of common stock outstanding at March 23, 1998: 2,733,631
Documents incorporated by reference:
Annual Report to Stockholders for the year ended December 31, 1997:
Parts I, II and IV
Proxy Statement for the 1998 annual meeting of stockholders: Part III
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PART I
Item 1. Business
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General
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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
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The Company's business operates in two segments: Electronics and
Instruments, and is conducted primarily through its three principal
wholly owned operating subsidiaries.
In May 1997, the Company sold its AcoustoSizer(TM) product line in
the Instruments segment. For further information, see Note 3 of the
Notes to Consolidated Financial Statements in the 1997 Annual Report to
Stockholders, which Note is incorporated by reference.
During 1997 the Company had two real estate complexes, located in
Delaware and Massachusetts, which were operated by its wholly owned
subsidiaries, RSC Realty Corporation and MEKontrol, Inc.,
respectively. In February 1998, the Company sold its real estate
complex located in Delaware. For further information, see Note 16 of
the Notes to Consolidated Financial Statements in the 1997 Annual
Report to Stockholders, which Note is incorporated by reference.
During the third quarter of 1997, the Company adopted a plan to
sell its Bergen Cable Technologies, Inc. ("BCT") subsidiary. The
Company signed a letter of intent in December 1997 to sell assets and
certain liabilities for approximately $7.5 million in cash and a $1.25
million note receivable. The transaction is subject to the negotiation
and execution of a definitive purchase agreement, the approval of the
Company's Board of Directors, and the buyers obtaining certain
financing. The Company expects to realize a gain on the disposition of
BCT. The operating results of BCT have been reported as discontinued
operations, and previously reported financial statements have been
restated to reflect this disposition. For further information, see
Note 2 of the Notes to Consolidated Financial Statements in the 1997
Annual Report to Stockholders, which Note is incorporated by reference.
Financial information about industry segments is set forth in
Note 13 of the Notes to Consolidated Financial Statements in the 1997
Annual Report to Stockholders, which Note is incorporated by reference.
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Principal Products and Services
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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.
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 69%, 61%, and 61% of the
Company's sales for the years ended December 31, 1997, 1996 and 1995,
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.
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Instruments
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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 24%, 33%, and 32% of the Company's sales for the
years ended December 31, 1997, 1996 and 1995, respectively.
The instruments are sold in the USA mainly through each
subsidiary's sales personnel, while foreign sales are performed through
independent manufacturers' representatives. Crystal Biotech (TN)
products are sold worldwide exclusively through one distributor.
Export sales accounted for 48%, 31%, and 49% of this segment's sales
for the years ended December 31, 1997, 1996 and 1995, 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.
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.
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In May 1997, the Company sold its third instrument product line,
the AcoustoSizer(TM). For further information, see Note 3 to the Notes
to Consolidated Financial Statements in the 1997 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.
During the last four 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 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 immersion testing systems are 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's(TN) main products include the CBI-8000 and
ultrasonic probes. The CBI-8000, an upgradable and modular instrument
introduced in 1994, 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. Primary markets for these products include government
and university laboratories, research hospitals and the pharmaceutical
industry.
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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 CHDF-2000 product. Under the CHDF
agreement, MASI is granted the sole and exclusive worldwide right to
manufacture and sell products utilizing certain technology.
Seasonal Nature of the Business
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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
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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 32% of the
Electronics segment sales in 1997 were made to its five largest
customers. Approximately 24% of the Instruments segment sales were
made to its five largest customers.
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Backlog Data
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The Company's backlog of firm orders at December 31, 1997 and 1996
are as follows (in thousands):
Segment 1997 1996
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Electronics ..................... $3,935 $2,744
Instruments ..................... 643 187
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$4,578 $2,931
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The increase in the Electronics segment is mainly attributable to
the increased demand and improved market conditions in the
telecommunications market. The 1997 backlog in the Instruments segment
includes orders for 3 custom designed systems for the NDE/NDT market
compared to no orders in 1996. 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, 1997 backlog
within 1998.
Government Contracts
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The Company'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
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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 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.
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.
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Research and Development
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Expenditures for Company-sponsored research and development
activities amounted to approximately $124,000, $705,000 and $525,000 in
1997, 1996 and 1995, respectively. Such amounts represent 0.7%, 3.9%
and 2.8%, respectively, of sales for such periods.
The decrease in 1997 expenses is attributable to reduced expenses
in the Instruments segment due to the phasing out of the
AcoustoSizer(TM) in the fourth quarter of 1996 and the completion of
the new CHDF instrument model in 1996. The increase in expenses from
1996 to 1995 is mainly due to higher expenses in the Instruments
segment relating to the new model of the CHDF instrument.
Environmental Regulations
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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
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No employees at the various locations of the Company are
represented by a collective bargaining unit. At December 31, 1997, the
Company's continuing operations have 102 full-time and 5 part-time
employees. The Company considers its relations with its employees to
be satisfactory.
Foreign and Domestic Operations and Export Sales
- ------------------------------------------------
The Company's continuing operations have no foreign operations.
Financial information about export sales is set forth in Note 12 of the
Notes to Consolidated Financial Statements in the 1997 Annual Report to
Stockholders, which Note is incorporated by reference.
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Item 2. Properties
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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
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Northboro, Massachusetts (1) 35,000 Real Estate Operation
Instruments
Hopkinton, Massachusetts 32,400 Electronics, Corporate
Headquarters
(1) Matec Instruments occupies approximately 11,000 square feet,
approximately 10,000 square feet is leased and the remaining
space is available for rent.
In February 1998, the Company sold its facility located in
Wilmington, Delaware. See Note 16 of the Notes to Consolidated
Financial Statements in the 1997 Annual Report to Stockholders.
The Company believes its facilities 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.
Item 3. Legal Proceedings
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The Company is involved in litigation in the ordinary course of
business. The Company believes based on advice of legal counsel 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.
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Executive Officers of the Registrant
- ------------------------------------
The names, ages and offices of the executive officers of the
Registrant are as follows:
Name Age Office
---- --- ------
Ted Valpey, Jr. 65 President and Chief Executive Officer
Michael J. Kroll 49 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. Valpey has been President and Chief Executive Officer of the
Registrant since April 28, 1997. He has been Chairman of the
Corporation since prior to 1993.
Mr. Kroll has been Vice President and Treasurer of the Registrant
since prior to 1993.
PART II
Item 5. Market for the Registrant's Common Stock and Related
- ------- ----------------------------------------------------
Stockholder Matters
-------------------
The information set forth on the inside front cover of the 1997
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 3 of the 1997 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 3 through 5 of the 1997 Annual
Report to Stockholders under the caption "Management's Discussion and
Analysis" is incorporated by reference.
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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 6 through the inside back cover of
the 1997 Annual Report to Stockholders is incorporated by reference.
Item 9. Disagreements on Accounting and Financial Disclosure
- ------- ----------------------------------------------------
None.
PART III
The information called for by Part III is hereby incorporated by
reference from the information set forth and under the headings "Common
Stock Ownership of Certain Beneficial Owners and Management", "Election
of Directors", and "Executive Compensation" in Registrant's definitive
proxy statement for the 1998 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-K. In addition,
information on Registrant's executive officers has been included in
Part I above under the caption "Executive Officers of the Registrant".
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PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on
- -------- -------------------------------------------------------
Form 8-K
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(a) 1. The following Consolidated Financial Statements are
incorporated by reference from the indicated pages of the
1997 Annual Report to Stockholders:
Page Number(s) in
Annual Report
Consolidated Balance Sheets,
December 31, 1997 and 1996 .................... 6
Consolidated Statements of Operations
for the Years Ended December 31, 1997,
1996 and 1995 ................................. 7
Consolidated Statements of Cash Flows
for the Years Ended December 31, 1997,
1996 and 1995 ................................. 8
Consolidated Statements of Stockholders' Equity
for the Years Ended December 31, 1997,
1996 and 1995 ................................. 9
Notes to Consolidated Financial Statements ..... 9-16
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
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Independent Auditors' Report ...................... 16
Schedule II - Valuation Reserves .................. 17
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.
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(a) 3. The exhibits filed in this report or incorporated by
reference, listed on the Exhibit Index on page 18, are as
follows:
Exhibit No. Description
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3. (a) Certificate of Incorporation
3. (c) By-Laws
4. (a) Common Stock Purchase Warrant
10. (a) * 1992 Stock Option Plan
10. (b) * Separation Agreement and General Release
10. (c) * Option Cancellation Agreement
11. Calculation of Earnings Per Share
13. 1997 Annual Report to Stockholders
21. Subsidiaries of the Registrant
23. Independent Auditors' Consent
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, 1997.
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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 27, 1998 By:/s/ Ted Valpey, Jr.
------------------
Ted Valpey, Jr.
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/ Ted Valpey, Jr. President, Chief Executive March 27, 1998
- ------------------------ Officer, Chairman of the Board
Ted Valpey, Jr. and Director
/s/ Michael J. Kroll Vice President and Treasurer
- ------------------------ (Principal Financial Officer March 27, 1998
Michael J. Kroll and Principal Accounting
Officer)
/s/ Eli Fleisher Director March 27, 1998
- ------------------------
Eli Fleisher
Director March , 1998
- ------------------------
Robert B. Gill
/s/ Lawrence Holsborg Director March 27, 1998
- ------------------------
Lawrence Holsborg
/s/ John J. McArdle III Director March 27, 1998
- ------------------------
John J. McArdle III
/s/ Robert W. Muir, Jr. Director March 27, 1998
- ------------------------
Robert W. Muir, Jr.
/s/ Joseph W. Tiberio Director March 27, 1998
- ------------------------
Joseph W. Tiberio
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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, 1997 and 1996, and for each of the
three years in the period ended December 31, 1997, and have issued our
report thereon dated February 23, 1998; such consolidated financial
statements and report are included in the MATEC 1997 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 23, 1998
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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, 1997 $ 85,000 $ (10,089) $ (15,089)(A) $ 90,000
========= ========= ========= =========
December 31, 1996 $ 129,000 $ 14,705 $ 58,705 (A) $ 85,000
========= ========= ========= =========
December 31, 1995 $ 134,000 $ (1,737) $ (3,263)(A) $ 129,000
========= ========= ========= =========
Inventory Reserve:
Year Ended:
December 31, 1997 $ 980,000 $ 189,072 $ 49,072(B) $1,120,000
========== ========= ========= ==========
December 31, 1996 $ 586,000 $ 543,941 $ 149,941(B) $ 980,000
========== ========= ========= ==========
December 31, 1995 $ 632,000 $ 144,436 $ 190,436(B) $ 586,000
========== ========= ========= ==========
(A) Write-off of uncollectible accounts, net of recoveries.
(B) Write-off of inventory.
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EXHIBIT INDEX
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Exhibit No. (inapplicable items are omitted)
- -----------
3. (a) Certificate of Incorporation. Filed herewith.
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-K. 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. Filed herewith.
10. (b) Separation Agreement and General Release dated August 26,
1997 between the Registrant and Robert B. Gill. Filed
herewith.
10. (c) Option Cancellation Agreement dated October 20, 1997
between the Registrant and Robert B. Gill. Filed herewith.
11. Calculation of Earnings Per Share. Filed herewith.
13. 1997 Annual Report to Stockholders. Filed herewith.
21. Subsidiaries of the Registrant. Filed herewith.
23. Independent Auditors' Consent. Filed herewith.
27. Financial Data Schedule. Filed for electronic purposes
only.
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EXHIBIT 3.(a)
CERTIFICATE OF INCORPORATION
OF
MATEC (DELAWARE) CORPORATION
FIRST: The name of the Corporation is MATEC (Delaware) Corporation.
SECOND: The address of the registered office of the Corporation in the
State of Delaware is Corporation Trust Center, 1209 Orange Street, in the
City of Wilmington, County of New Castle. The name of the registered agent
of the Corporation in the State of Delaware at such address is The
Corporation Trust Company.
THIRD: The purpose of the Corporation is to engage in any lawful act
or activity for which corporations may now or hereafter be organized under
the General Corporation Law of the State of Delaware.
FOURTH: (a) The total number of shares of all classes of stock which
the Corporation shall have authority to issue shall be 11,000,000, of which
10,000,000 shares shall be Common Stock, par value $.05 per share, and
1,000,000 shares shall be Preferred Stock, par value $.10 per share.
(b) The shares of Preferred Stock may be issued from time to time in
one or more series, with such designations, powers, preferences and
relative, participating, optional or other rights, if any, and such
qualifications, limitations or restrictions thereon, as permitted by law
and as the Board of Directors shall from time to time provide for and fix
by resolution or resolutions duly adopted, including, without limitation,
voting powers, if any (including multiple or fractional votes per share),
dividend rights (including dividend preferences or limited or unlimited
dividend participation), conversion rights, mandatory or optional
redemption rights or restrictions and preferences or limited or unlimited
participation in amounts to be paid on liquidation, and the Board of
Directors is hereby authorized to fix and determine the powers, privileges,
preferences and rights of any series of Preferred Stock, and to fix the
number of shares constituting any such series and to increase or decrease
the number of shares of any such series (but not below the number of shares
thereof then outstanding).
FIFTH: The Corporation shall have perpetual existence.
SIXTH: Meetings of stockholders may be held within or without the
State of Delaware as the By-Laws may provide. The books of the Corporation
may be kept (subject to any provision contained in the statutes) outside
the State of Delaware at such place or places as my be designated from time
to time by the Board of Directors or in the By-Laws of the Corporation.
Elections of directors need not be by written ballot unless the By-Laws of
the Corporation shall provide.
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SEVENTH: (a) A director of the Corporation shall not be personally
liable to the Corporation or its stockholders for monetary damages for
breach of fiduciary duty as a director, except for liability (1) for any
breach of the director's duty of loyalty to the Corporation or its
stockholders, (2) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (3) under Section
174 of the Delaware General Corporation Law; or (4) for any transaction
from which the director derived an improper personal benefit.
(b) (1) Each person who was or is made a party or is
threatened to be made a party to or is involved in any action, suit or
proceeding, whether civil, criminal, administrative or investigative
(hereinafter a proceeding), by reason of the fact that he or she, or a
person of whom he or she is the legal representative, is or was a director
or officer of the Corporation or is or was serving at the request of the
Corporation as a director, officer, employee or agent of another
corporation or of a partnership, joint venture, trust or other enterprise,
including service with respect to employee benefit plans, whether the
basis of such proceeding is alleged action or inaction in an official
capacity as a director, officer, employee or agent or in any other
capacity while serving as a director, officer, employee or agent, shall be
indemnified and held harmless by the Corporation to the fullest extent
authorized by the Delaware General Corporation law, as the same exists or
may hereafter be amended (but, in the case of any such amendment, only to
the extent that such amendment permits the Corporation to provide broader
indemnification rights than said law permitted the Corporation to provide
prior to such amendment), against all expense, liability and loss
(including attorneys fees, judgments, fines, ERISA excise taxes or
penalties and amounts paid or to be paid in settlement) reasonably
incurred or suffered by such person in connection therewith and such
indemnification shall continue as to a person who has ceased to be a
director, officer, employee or agent and shall inure to the benefit of his
or her heirs, executors and administrators; provided, however, that,
except as provided in this paragraph (b), the Corporation shall indemnify
any such person seeking indemnification in connection with a proceeding
(or part thereof) initiated by such person only if such proceeding (or
part thereof) was authorized by the Board of Directors of the
Corporation. The right to indemnification conferred in this paragraph (b)
shall be a contract right and shall include the right to be paid by the
Corporation the expenses incurred in defending any such proceeding in
advance of its final disposition; provided, however, that, if the Delaware
General Corporation Law requires, the payment of such expenses incurred by
a director or officer in his or her capacity as a director or officer of
the Corporation (and not in any other capacity in which service was or is
rendered by such person while a director or officer, including, without
limitation, service to an employee benefit plan) in advance of the final
disposition of a proceeding, shall be made only upon delivery to the
Corporation of an undertaking, by or on behalf of such director or
officer, to repay all amounts so advanced if it shall ultimately be
determined that such director or officer is not entitled to be indemnified
under this paragraph (b) or otherwise. The Corporation may, by action of
its Board of Directors, provide indemnification to employees and agents of
the Corporation with the same scope and effect as the foregoing
indemnification of directors and officers.
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(2) Any indemnification under this paragraph (b) (unless ordered by a
Court) shall be made by the Corporation upon a determination that
indemnification of the director or officer is proper in the circumstances
because he or she has met the applicable standards of conduct set forth in
the Delaware General Corporation Law which make it permissible for the
Corporation to indemnify the director or officer. Such determination
shall be made (i) by the Board of Directors by a majority vote of a quorum
consisting of Directors who were not parties to such proceeding, or (ii)
if such a quorum is not obtainable or if such a quorum of disinterested
directors so directs, by independent legal counsel in a written opinion,
or (iii) by the stockholders.
(3) The right to indemnification and the advancement of expenses
conferred in this paragraph (b) shall not be exclusive of any other right
which any person may have or hereafter acquire under any statute,
provision of the Certificate of Incorporation, by-law, agreement, vote of
stockholders or disinterested directors or otherwise.
(4) The Corporation may purchase and maintain insurance, at its
expense, to protect itself and any director, officer, employee or agent of
the Corporation or another corporation, partnership, joint venture, trust
or other enterprise against any such expense, liability or loss, whether
or not the Corporation would have the power to indemnify such person
against such expense, liability or loss under the Delaware General
Corporation Law.
EIGHTH: In furtherance and not in limitation of the powers conferred
by statute, the Board of Directors is expressly authorized to adopt,
repeal, alter, amend or rescind the By-Laws of the Corporation.
NINTH: The Corporation reserves the right to repeal, alter, amend, or
rescind any provision contained in this Certificate of Incorporation, in
the manner now or hereafter prescribed by statute, and all rights
conferred on stockholders herein are granted subject to this reservation.
TENTH: The name and mailing address of the sole incorporator is:
Joan Dacey-Seib
Jacobs Persinger & Parker
70 Pine Street
New York, New York 10270
IN WITNESS WHEREOF, the undersigned, being the sole incorporator
hereinbefore named, for the purpose of forming a corporation pursuant to
the General Corporation Law of the State of Delaware, do make this
Certificate, hereby declaring and certifying that this is my act and deed
and that the facts herein stated are true under the penalties of perjury
and accordingly have hereunto set my hand this 14th day of April, 1987.
/s/ Joan Dacey-Seib
------------------------
Joan Dacey-Seib,
Sole Incorporator
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EXHIBIT 10.(a)
MATEC CORPORATION
1992 STOCK OPTION PLAN
1. PURPOSE
The Plan is intended to expand and improve the profitability and
prosperity of MATEC Corporation for the benefit of its stockholders by
permitting the Corporation to grant to officers and other key employees
of, and consultants and advisers to, the Corporation and its Subsidiaries,
options to purchase shares of the Corporations Common Stock. These grants
are intended to provide additional incentive to such persons by offering
them a greater stake in the Corporations continued success. The Plan is
also intended as a means of reinforcing the commonality of interest
between the Corporations stockholders and such persons, and as an aid in
attracting and retaining the services of individuals of outstanding
abilities and specialized skills.
2. DEFINITIONS
For Plan purposes, except where the context otherwise indicates, the
following terms shall have the meanings which follow:
(a) Agreement shall mean a written instrument executed and delivered
on behalf of the Corporation which specifies the terms and conditions of a
Stock Option granted to a Participant.
(b) Beneficiary shall mean the person or persons who may be designated
by a Participant from time to time in writing to the Committee, to
receive, if the Participant dies, any Option exercise rights held by the
Participant.
(c) Board shall mean the Board of Directors of the Corporation.
(d) Code shall mean the Internal Revenue Code of 1986, as it maybe
amended from time to time, and the rules and regulations promulgated
thereunder.
(e) Committee shall mean a Committee of the Board composed of three or
more persons which shall be designated by the Board to administer the
Plan. Each member of the Committee, while serving as such, shall be a
member of the Board and shall be a disinterested person within the meaning
of Rule 16b-3 of the Securities Exchange Act of 1934.
(f) Common Stock shall mean the Common Stock of the Corporation having
a par value of $0.05 per share.
(g) Corporation shall mean MATEC Corporation, a Delaware corporation.
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(h) Employee shall mean any person who is employed by the Corporation
or any Subsidiary corporation.
(i) Exercise Price shall mean the per share price for which a
Participant upon exercise of a Stock Option may purchase a share of Common
Stock.
(j) Fair Market Value shall mean the value of a share of Common Stock
to be determined by, and in accordance with procedures established by, the
Committee. Such fair market value shall be deemed conclusive upon the
determination of the Committee made in good faith. The preceding
notwithstanding, so long as the Common Stock is listed on a national stock
exchange, the Fair Market Value shall mean with respect to any given day,
the mean between the highest and lowest reported sales prices of the
Common Stock on the principal national stock exchange on which the Common
Stock is listed, or if such exchange was closed on such day or if it was
open but the Common Stock was not traded on such day, then on the next
preceding day that the Common Stock was traded on such exchange, as
reported by a responsible reporting service.
(k) Incentive Stock Option shall mean a Stock Option which is intended
to meet and comply with the terms and conditions for an incentive stock
option as set forth in Section 422 of the Code, or any other form of tax
qualified stock option which may be incorporated and defined in the Code
as it may from time to time be amended.
(l) Non-Qualified Option shall mean a Stock Option which does not meet
the requirements of Section 422 of the Code or the terms of which provide
that it will not be treated as an Incentive Stock Option.
(m) Participant shall mean any person who is granted a Stock Option
under the Plan.
(n) Plan shall mean the MATEC Corporation 1992 Stock Option Plan as
set forth herein and as amended from time to time.
(o) Stock Option or Option shall mean a right to purchase a stated
number of shares of Common Stock subject to such terms and conditions as
are set forth in the Plan and an Agreement.
(p) Subsidiary corporation or Subsidiary shall mean any corporation
which is a subsidiary corporation of the Corporation as defined in Section
424(f) of the Code.
3. ADMINISTRATION
(a) The Committee shall administer the Plan and, accordingly, it shall
have full power to grant Stock Options under the Plan, to construe and
interpret the Plan, and to establish rules and regulations and perform all
other acts it believes reasonable and proper, including the authority to
delegate responsibilities to others to assist in administering the Plan.
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(b) The determination of those eligible to receive Stock Options, and
the amount, type and terms and conditions of each Stock Option shall rest
in the sole discretion of the Committee, subject to the provisions of the
Plan.
(c) The Committee may permit the voluntary surrender of all or a
portion of any Option granted under the Plan to be conditioned upon the
granting to the Participant of a new Option for the same or a different
number of shares as the Option surrendered, or may require such voluntary
surrender as a condition precedent to a grant of a new Option to such
Participant. Such new Option shall be exercisable at the price, during
the period and in accordance with any other terms or conditions specified
by the Committee at the time the new Option is granted, all determined in
accordance with the provisions of the Plan without regard to the price,
period of exercise, or any other terms or conditions of the Option
surrendered.
4. COMMON STOCK LIMITS
The total number of shares of Common Stock which may be issued on
exercise of Stock Options shall not exceed 300,000 shares, subject to
adjustment in accordance with Paragraph 9 of the Plan. Shares issued
under the Plan may be, in whole or in part, as determined by the
Committee, authorized but unissued or treasury shares of Common Stock.
If any Options granted under the Plan shall expire or terminate without
having been exercised, the shares subject to such Options shall be added
back to the number of shares of Common Stock which may be issued on
exercise of Stock Options.
5. ELIGIBILITY FOR PARTICIPATION
(a) Consistent with Plan objectives, the following persons shall be
eligible to become Participants in the Plan: officers and other key
Employees and consultants and advisers to the Corporation or any
Subsidiary corporation, provided that members of the Board who are not
Employees shall not be eligible.
(b) the foregoing subparagraph (a) notwithstanding, Incentive Stock
Options shall be granted only to officers and other key Employees, and no
Incentive Stock Options shall be granted to an Employee who owns more
than 10% of the Common Stock determined in accordance with the provisions
of Section 422(b)(6) of the Code, unless the Option meets the
requirements of Section 422(c)(5) of the Code.
(c) Options shall be granted to consultants and advisers only for
BONA FIDE services rendered other than in connection with the offer or
sale of securities.
6. STOCK OPTIONS - TERMS AND CONDITIONS
All Stock Options granted under the Plan shall be evidenced by
Agreements which shall contain such provisions as shall be required by
the Plan together with such other provisions as the Committee may
prescribe, including the following provisions:
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(a) PRICE: The Committee shall establish the Exercise Price,
provided, however, that in the case of an Incentive Stock Option the
Exercise Price shall not be less than the Fair Market Value of a share
of Common Stock on the date of the grant of the Option.
(b) PERIOD: The Committee shall establish the term of any Option
awarded under the Plan, provided, however, that no option shall be
exercisable after the expiration of 10 years from the date of the grant
of the Option.
(c) TIME OF EXERCISE: The Committee shall establish the time or
times at which any Option, or portion hereof, shall be exercisable. The
Committee, subsequent to the grant of an Option, may accelerate the date
or dates on which the Option may be exercisable.
(d) EXERCISE: An Option, or portion thereof, shall be exercised by
delivery of a written notice of exercise to the Corporation together
with payment of the full purchase price of the shares as to which the
Option is exercised (Purchase Price). Payment may be made:
(i) in United States dollars by good check, bank draft of money
order payable to the order of the Corporation, or
(ii) at the discretion of the Committee by the transfer to the
Corporation of shares of Common Stock owned by the Participant having an
aggregate Fair Market Value on the date of exercise equal to the
Purchase Price or the portion thereof being so paid, or
(iii) at the discretion of the Committee and subject to any
restrictions or conditions as it deems appropriate (including any
restrictions as may be set forth in Rule 16b-3 of the Securities
Exchange Act of 1934), by electing to have the Corporation withhold from
the shares issuable upon exercise of the Option such number of shares of
Common Stock as shall have an aggregate Fair Market Value on the date of
exercise equal to the Purchase Price or the portion thereof being so
paid, or
(iv) at the discretion of the Committee by a combination of (i) and
(ii) or (i) and (iii) above.
The Committee shall determine the procedures for the use of Common Stock
in payment of the Purchase Price and may impose such limitations and
prohibitions on such use as it deems appropriate.
(e) SPECIAL RULES FOR INCENTIVE STOCK OPTIONS: Notwithstanding any
other provisions of the Plan, with respect to Incentive Stock Options
granted under the Plan, the following provisions will apply:
(i) To the extent that the aggregate Fair Market Value (determined
at the time of grant) of the shares of Common Stock with respect to
which Incentive Stock Options (whether granted hereunder or pursuant to
any other plan of the Corporation or a Subsidiary) are first exercisable
by a Participant during any calendar year exceeds $100,000 (or such
other limit as may be in effect from time to time under the Code), such
Options shall be treated as Non-Qualified Options.
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(ii) Any Participant who disposes of shares of Common Stock acquired on
the exercise of an Incentive Stock Option by sale or exchange either (a)
within two years after the date of the grant of the Option under which
such shares were acquired or (b) within one year after the acquisition of
such shares, shall notify the Corporation in writing of such disposition
and of the amount realized upon such disposition promptly after the
disposition.
7. TERMINATION OF EMPLOYMENT
If a participant holding an Option shall cease to be employed (or in
the case of a Participant who is not an Employee, shall cease to be
engaged) by the Corporation or any Subsidiary corporation by reason of
death or any other reason other than voluntary quitting, discharge for
cause or permanent and total disability as defined in Section 22(e)(3) of
the Code (hereinafter called a Disability), as determined by the
Committee, such Participant (or, if applicable, such Participants
Beneficiary) may, but only within the three months next succeeding such
cessation of employment, exercise such Option to the extent that such
Participant would have been entitled to do so on the date of such
cessation of employment. If a Participant holding an Option voluntarily
quits or is discharged for cause, such Option shall terminate on the date
of cessation of employment.
8. DISABILITY
If a Participant holding an Option shall cease to be employed (or in
the case of a Participant who is not an Employee, shall cease to be
engaged) by the Corporation or any Subsidiary corporation by reason of a
Disability, the Option shall be exercisable by such Participant or such
Participants duly appointed guardian or other legal representative, to the
extent that such Participant would have been entitled to do so on the date
of such cessation of employment, but only within one year following such
cessation of employment due to said Disability.
9. ADJUSTMENTS
In the event of a recapitalization, stock split, stock combination,
stock dividend, exchange of shares, or a change in the corporate structure
or shares of the Corporation, or similar event, the Board of Directors
upon recommendation of the Committee shall make appropriate adjustments in
the kind or number of shares which may be issued upon exercise of Options
and in the kind or number of shares issuable upon exercise of Options
theretofore granted and in the exercise price of such Options.
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10. MERGER, CONSOLIDATION OR SALE OF ASSETS
If the Corporation shall be a party to a merger or consolidation or
shall sell substantially all its assets, each outstanding Option shall
pertain and apply to the securities and/or property which a holder of the
number of shares of Common Stock subject to the Option immediately prior
to such merger, consolidation, or sale of assets would be entitled to
receive in such merger, consolidation or sale of assets.
11. AMENDMENT AND TERMINATION OF PLAN
(a) The Board, without further approval of the stockholders, may at
any time, and from time to time, suspend or terminate the Plan in whole or
in part or amend it from time to time in such respects as the Board may
deem appropriate and in the best interests of the Corporation; provided,
however, that no such amendment shall be made, without approval of the
stockholders, which would:
(i) modify the eligibility requirements for participation in the Plan;
(ii) increase the total number of shares of Common Stock which may be
issued pursuant to Stock Options, except as is provided for in accordance
with Paragraph 9 of the Plan; or
(iii) materially increase benefits accruing to Participants.
(b) No amendment, suspension or termination of this Plan shall,
without the Participants consent, alter or impair any of the rights or
obligations under any Stock Option theretofore granted to the Participant
under the Plan.
(c) The Board may amend the Plan, subject to the limitations cited
above, in such manner as it deems necessary to permit the granting of
Stock Options meeting the requirements of future amendments to the Code.
12. GOVERNMENT AND OTHER REGULATIONS
The granting of Stock Options under the Plan and the obligation of the
Corporation to issue, or transfer and deliver shares for Stock Options
exercised under the Plan shall be subject to all applicable laws,
regulations, rules and orders which shall then be in effect.
13. MISCELLANEOUS PROVISIONS
(a) RIGHTS TO CONTINUED EMPLOYMENT: No person shall have any claim or
right to be granted a Stock Option under the Plan, and the grant of an
Option under the Plan shall not be construed as giving any Participant the
right to be retained in the employ of the Corporation or any Subsidiary
corporation (or to be otherwise retained in the case of a Participant who
is not an Employee) and the Corporation expressly reserves the right at
any time to dismiss a Participant with or without cause, free from any
liability or any claim under the Plan, except as provided herein or in an
Agreement.
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(b) WHO SHALL EXERCISE: Except as provided by the Plan, an Incentive
Stock Option shall be exercisable during the lifetime of the Participant
to whom it is granted only by such Participant, and it may be exercised
only if such Participant has been in the continuous employ of the
Corporation or any Subsidiary corporation from the date of grant of the
Option to the date of its exercise.
(c) NON-TRANSFERABILITY: No right or interest of any Participant in
the Plan shall be assignable or transferable except by will or the laws of
descent and distribution, and no right or interest of any Participant
shall be liable for, or subject to, any lien, obligation or liability of
such Participant.
(d) WITHHOLDING TAXES: The Corporation may require a payment to cover
applicable withholding for income and employment taxes in connection with
a Stock Option.
(e) RIGHTS AS SHAREHOLDER: A Participant as such shall not have any
of the rights or privileges of a holder of Common Stock until such time as
shares of Common Stock are issued or are transferred to the Participant
upon exercise of an Option.
(f) PLAN EXPENSES: Any expenses of administering this Plan shall be
borne by the Corporation.
(g) LEGAL CONSIDERATIONS: The Corporation shall not be required to
issue, transfer or deliver shares of Common Stock upon exercise of Options
until all applicable legal, listing or registration requirements, as
determined by legal counsel, have been satisfied, and any necessary or
appropriate written representations have been given by the Participant.
(h) OTHER PLANS: Nothing contained herein shall prevent the
Corporation from establishing other incentive and benefit plans in which
Participants in the Plan may also participate.
(i) NO WARRANTY OF TAX EFFECT: Except as may be contained in any
Agreement, no opinion shall be deemed to be expressed or warranties made
as to the effect for federal, state or local tax purposes of any grants
hereunder.
(j) CONSTRUCTION OF PLAN: The validity, construction, interpretation,
administration and effect of the Plan and of its rules and regulations,
and rights relating to the Plan, shall be determined in accordance with
the laws of the State of New York.
14. STOCKHOLDER APPROVAL - TERM OF PLAN
Upon approval by the stockholders of the Corporation, the Plan shall
become unconditionally effective as of December 4, 1992. No Option shall
be granted after December 3, 2002, provided, however, that the Plan and
all outstanding Options granted under the Plan prior to such date shall
remain in effect until the applicable Options have expired. If the
stockholders shall not approve the Plan, the Plan shall not be effective
and any and all actions taken prior thereto shall be null and void or
shall, if necessary, be deemed to have been fully rescinded.
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EXHIBIT 10.(b)
SEPARATION AGREEMENT and
GENERAL RELEASE
SEPARATION AGREEMENT and GENERAL RELEASE between MATEC CORPORATION, a
Delaware corporation (the Company) and ROBERT B. GILL (Employee).
1. As of the close of business on August 5, 1997 (the Termination
Date) Employees employment by the Company has terminated for all purposes
and Employee will no longer receive any salary, benefits or other
compensation from the Company except as set forth herein.
2. In connection with the termination of Employees employment by the
Company and in consideration of Employees release of the Company, the
Company will pay to Employee $100,000 in six equal monthly installments
commencing on the Effective Day and Time, as defined in paragraph 12
hereof, subject to withholding for tax purposes (the Special Payment
Allowance).
3. In the event that the Company consummates the sale of
substantially all of the assets of Bergen Cable Technologies, Inc.,
excluding land and buildings, and substantially all of the assets of Cable
Bergen de Mexico S.A. de C.V. to TFX Equities Inc. prior to December 31,
1997, the Company will pay a bonus to Employee (the Bonus) in an amount
determined as set forth in Exhibit 1 hereto.
4. Employee understands and agrees that the Special Payment Allowance
is made in complete satisfaction of any and all claims for wages, overtime
premiums, vacation pay, holiday pay, pay for personal days, pay for unused
sick or absence days, compensatory time, and any other payment for time
worked and leave of any kind to which Employee is or may be entitled
except as set forth herein.
5. Employee understands and agrees that the Special Payment Allowance
and Bonus, if applicable, represents a consideration to Employee over and
above anything else of value which Employee already is entitled to receive
from the Company.
6. In consideration of the Special Payment Allowance and other terms
of this Agreement, Employee (for himself, his heirs and assigns) hereby
releases and discharges the Company, and its successors, affiliates and
assigns, and their present and former officers, directors, agents and
employees, from all actions, suits, liabilities, charges, claims and
causes of action, known or unknown, fixed or contingent, that he has, or
may have, arising out of Employees employment or termination from
employment with the Company prior to the execution of this Agreement,
whether before courts, administrative agencies, or other Forums wherever
situated, including, but not limited to, all claims under Title VII of the
Civil Rights Act of 1964, as amended, the Age Discrimination in Employment
Act of 1967, as amended by the Older Workers Benefit Protection Act, the
Equal Pay Act of 1963, as amended, the New Jersey Law Against
Discrimination, as amended, and the various other federal and state civil
rights acts involving discrimination on the basis of age, race, sex,
religion, disability, national origin and marital status, and all claims
under express or implied contract theories.
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7. This Agreement does not release or waive any claims by Employee:
(a) for workers compensation to which Employee may be entitled in
respect of any job-related injury which occurred prior to the time of
termination of employment;
(b) for accrued Social Security benefits to which Employee may become
entitled under applicable law;
(c) for reimbursement of properly authorized and documented
job-related, out-of-pocket expenses actually advanced by Employee on
behalf of the Company prior to the Termination Date;
(d) for indemnification for job-related, third-party claims arising
prior to the Termination Date;
(e) with respect to Employees rights under the Consolidated Omnibus
Budget Reconciliation Act to continuation of medical and hospitalization
insurance coverage under the existing health care plan of Bergen Cable
Technologies, Inc. (Bergen), at Employees own expense after the time of
termination of employment;
(f) with respect to any rights or claims that may arise after the
date on which Employee signs this Agreement;
(g) with respect to stock options granted by the Company to Employee
which have become exercisable prior to the Termination Date, it being
understood and agreed that the Option granted to Employee by the Company
pursuant to a Stock Option Agreement dated as of December 4, 1992 shall be
exercisable for three months after the Termination Date to the extent
Employee was entitled to exercise the Option on the Termination Date, but
shall not become exercisable and is hereby terminated with respect to the
portion thereof which would have become exercisable on or after
December 4, 1997; or
(h) with respect to the matching contribution to be made by the
Company for Employees benefit under the Company's Profit Sharing 401(k)
Plan for the 1997 Plan Year in accordance with the terms of the said Plan,
if the Company elects to make matching contributions for the 1997 Plan
Year, it being understood and agreed that Employee will make no
contributions under the said Plan with respect to the Special Payment
Allowance or the Bonus, if applicable, and that the Company's matching
contribution will be limited to its applicable percentage of your salary
deferred contributions made prior to the Termination Date.
8. Notwithstanding the provisions of paragraph 4 hereof, the Company
will compensate Employee for 103 hours of accrued vacation time, subject
to withholding for tax purposes.
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9. Employee is hereby granted the option for a period of 30 days from
the Effective Day and Time to purchase from Leasing Associates the 1993
Chrysler Concorde automobile currently being used by Employee (the
Automobile) for a purchase price of $1.00. If Employee does not exercise
such option within such 30-day option period, or if Employee has not
signed and returned a copy of this Agreement in accordance with the
provisions of paragraph 10(b), or if Employee cancels this Agreement as
provided in paragraph 14, the Automobile shall be promptly returned to the
Company, together with the keys thereto.
10. (a) Employee will have a period of 21 days from the date Employee
was first given a copy of this Agreement by the Company in which to
carefully study and consider the terms of this Agreement.
(b) If at the end of 21 days from the date Employee was first
given a copy of this Agreement by the Company, Employee decides to accept
the Special Payment Allowance and Bonus, if applicable, on the terms of
this Agreement, Employee should date and sign the Employee Acceptance on
the last page of this Agreement, and return the signed copy to the Company
so that it is received by the Company no sooner than 21 days and no later
than 30 days after the day Employee was first given a copy of this
Agreement by the Company.
(c) If Employee has spoken to an attorney about this Agreement,
Employee should also have that attorney complete the Attorneys Statement
which appears at the end of this Agreement.
11. If Employee has not signed and returned a copy of this Agreement
in accordance with the provisions of paragraph 10(b), or if Employee
cancels this Agreement as provided in paragraph 14, then the Company's
offer to make the Special Payment Allowance and to pay the Bonus, if
applicable, to Employee shall be automatically withdrawn and cancelled,
and the option to purchase the Automobile shall be automatically
cancelled, and it will be as if the Company had never made that offer or
granted such option.
12. This Agreement will not become effective or enforceable until
12:01 A.M. on the eighth (8th) day after Employee has signed a copy of
this Agreement. That day and time is called the Effective Day and Time.
13. Until the Effective Day and Time, Employee has the legal right
under federal law to cancel this Agreement. The fact that Employee has
signed and returned the Execution Copy of this Agreement will not prevent
Employee from cancelling this Agreement prior to the Effective Day and
Time.
14. If Employee decides to cancel this Agreement, Employee may do so
by notifying the Company in writing at:
MATEC Corporation
75 South Street
Hopkinton, MA 01748
Attention: President
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15. If Employee has signed and returned a copy of this Agreement and
Employee does not give the Company a written cancellation notice before
the Effective Day and Time, this Agreement will become binding on
Employee.
16. Employee will promptly deliver to the Company all office equipment
of the Company in his possession, all keys to premises and offices of the
Company, all Company credit cards, and all lists, books, records, computer
discs and tapes and data of every kind, and all copies thereof, relating
to or in connection with the Company's customers and business.
17. Employee agrees to cooperate with the Company after the
Termination Date and to make himself reasonably available and to answer
questions and furnish information requested by officers, directors or
agents of the Company or Bergen relating to the business or customers of
the Company or Bergen.
18. This Agreement is the entire agreement between Employee and the
Company with respect to all matters relating to the termination of
Employees employment by the Company. The terms of this Agreement
may only be altered by a writing signed by both the Employee and the
Company.
MATEC CORPORATION
By: /s/ Ted Valpey, Jr.
---------------------------------
Chairman & CEO
Dated: 8/26/97
<PAGE>
<PAGE>
EMPLOYEES ACCEPTANCE
I hereby acknowledge that I have had the opportunity to consider the
terms of the above Separation Agreement and General Release for a period
of 21 days. I have carefully read and studied said Agreement and I fully
understand its terms and the terms of the release of claims contained
therein and the consequences to me of my acceptance of said Agreement and
giving of such release. I hereby accept and agree to the terms of said
Agreement and release, voluntarily and of my own free will.
/s/ Robert B. Gill
--------------------------------
Robert B. Gill
Dated: 9/2/97
ATTORNEYS STATEMENT
I, , an Attorney-at-Law with offices
at , declare that I am the attorney for
Robert B. Gill, the Employee named in the above Separation Agreement and
General Release, that I have explained to my client all the terms of the
said Agreement and release, and that my client has represented to me that
he fully understands all of such terms and their significance, and that my
client has signed the above Separation Agreement and General Release on my
advice.
-------------------------
Signature of Attorney
Dated:
<PAGE>
<PAGE>
Exhibit 1
Bonus based on net proceeds of sale of Bergen Cable Technologies,
Inc. and Cable Bergen de Mexico S.A. de C.V. to TFX Equities Inc., after
legal expenses and fees of investment bankers.
Net Sale Proceeds Bonus Amount
(in millions) (in thousands)
$ 7.5-8.0 $ 25
8.0-8.5 50
8.5-9.0 75
9.0-10.0 100
10.00-11.00 125
11.00-12.00 175
12.00 225
More than 12.00 225 + 5% of
excess over
$12,000,000
No bonus is payable if the net proceeds of sale are less than
$7,500,000.
<PAGE>
<PAGE>
EXHIBIT 10.(c)
OPTION CANCELLATION AGREEMENT
OPTION CANCELLATION AGREEMENT made as of the 20 day of October,
1997, by and between MATEC Corporation, a Delaware corporation (the
Company), and Robert B. Gill (the Optionholder).
WITNESSETH:
WHEREAS, the Company and Optionholder have entered into a Separation
Agreement and General Release; and
WHEREAS, the Optionholder is the owner of a currently exercisable
Option granted under the Company's 1992 Stock Option Plan to purchase
120,000 shares of Common Stock of the Company pursuant to a Stock Option
Agreement dated December 4, 1992 between the Company and Optionholder
(such option being hereinafter collectively referred to as the Option);
and
WHEREAS, the Optionholder wishes to relinquish and deliver the Option
to the Company pursuant to the terms of this Agreement, and the Company is
willing to accept such relinquishment and delivery in accordance with the
terms of this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants,
representations and warranties made herein, and of the mutual benefits to
be derived hereby, the parties hereto agree as follows:
1. TERMINATION, CANCELLATION AND RELINQUISHMENT. Effective as of the
date hereof the Option shall be terminated and cancelled and become null
and void automatically, and all rights of the Optionholder in respect
thereof shall be terminated, cancelled and relinquished, except for the
right of the Optionholder to receive the payment provided for in this
Agreement.
2. PAYMENT TO THE OPTIONHOLDER. In consideration of such
termination, cancellation and relinquishment, as of the date hereof, the
Company is paying to the Optionholder, and the Optionholder acknowledges
receipt of, $60,000.
3. WITHHOLDING. The payment made by the Company to the Optionholder
under this Agreement is being made subject to any withholding as may be
required by applicable law or regulation.
4. GENERAL PROVISIONS.
4.1 WARRANTY OF AUTHORITY AND OWNERSHIP. The Optionholder represents
and warrants to the Company that the Optionholder has full authority to
relinquish and deliver the Option for surrender and cancellation pursuant
to the terms of this Agreement, and that the Optionholder has good and
sole title to the Option free and clear of all liens, charges,
encumbrances, or other obligations relating to the sale or transfer
thereof, and that the Option is not subject to any adverse claim.
<PAGE>
<PAGE>
4.2 ADDITIONAL OPTIONHOLDER WARRANTIES. The Optionholder
acknowledges that the Company has informed him that the Company continues
in active negotiations with various parties concerning the possible sale
of the Company's subsidiary Bergen Cable Technologies, Inc. (Bergen) and
that in the near future the Company may enter into an agreement with one
of such parties to sell Bergen. Furthermore, the Optionholder understands
that in the event of the sale of Bergen the Company may make a partial
distribution to its shareholders of the proceeds received for the sale of
Bergen. Optionholder acknowledges that there is no assurance that such
sale of Bergen or such partial liquidation will be effected. Optionholder
further acknowledges his responsibilities under the securities laws
concerning confidential information concerning the Company.
4.3 ENTIRE AGREEMENT. This Agreement contains, and is intended as, a
complete statement of all of the terms of the arrangements between the
parties with respect to the matters provided for, supersedes any previous
agreements and understandings between the parties with respect to those
matters, and cannot be changed or terminated orally. THE OPTIONHOLDER
ACKNOWLEDGES THAT THE COMPANY HAS NOT MADE NOR AUTHORIZED ANY PERSON TO
MAKE ON BEHALF OF THE COMPANY ANY RECOMMENDATION AS TO WHETHER THE
OPTIONHOLDER SHOULD ENTER INTO THIS AGREEMENT OR TO TAKE OR REFRAIN FROM
TAKING ANY OTHER ACTIONS WITH RESPECT TO THE OPTION.
4.4 GOVERNING LAW. This Agreement shall be governed by and construed
in accordance with the laws of the Commonwealth of Massachusetts
applicable to agreements made and to be performed in Massachusetts without
regard to the principles thereof regarding the choice of law. The
Company and the Optionholder hereby irrevocably submit to the jurisdiction
of the courts of the Commonwealth of Massachusetts and the Federal courts
of the United States of America located in the Commonwealth of
Massachusetts solely in respect of the interpretation and enforcement of
the provisions of this Agreement. The Company and the Optionholder hereby
consent to and grant any such court jurisdiction over the person of such
parties and over the subject matter of any such dispute.
IN WITNESS WHEREOF, the undersigned have entered into this Agreement
as of the date first written above.
THE COMPANY:
MATEC CORPORATION
By: /s/ Theodore S. Valpey, Jr.
-----------------------------
Title: Chairman CEO
THE OPTIONHOLDER:
/s/ Robert B. Gill
----------------------------------
Robert B. Gill
<PAGE>
MATEC Corporation and Subsidiaries Exhibit 11
Calculation of Earnings Per Share
(amounts in thousands, except per share data)
Years Ended December 31,
1997 1996(A) 1995(A)
------ ------ ------
Net earnings (loss) from continuing operations ... $ 307 $ (705) $ 475
Net earnings (loss) from discontinued operations . 181 629 (172)
------ ------ ------
Net earnings (loss) .............................. $ 488 $ (76) $ 303
====== ====== ======
Calculation of basic earnings per share:
- ----------------------------------------
Weighted average common shares outstanding ...... 2,737 2,767 2,765
===== ===== =====
Basic earnings (loss) per common share:
Continuing operations ......................... $ .11 $ (.26) $ .17
Discontinued operations ....................... .07 .23 (.06)
------ ------ ------
$ .18 $ (.03) $ .11
====== ====== ======
Calculation of diluted earnings per share:
- ------------------------------------------
Weighted average common shares outstanding ...... 2,737 2,767 2,765
Increase from assumed exercise of stock options
and investment of proceeds in treasury stock,
based upon the average market prices (B) (C) ... 22 - 30
----- ----- -----
Average common stock and common equivalent
shares used to calculate diluted earnings
(loss) per share ............................... 2,759 2,767 2,795
===== ===== =====
Diluted earnings (loss) per common share:
Continuing operations ......................... $ .11 $ (.26) $ .17
Discontinued operations ....................... .07 .23 (.06)
------ ------ ------
$ .18 $ (.03) $ .11
====== ====== ======
(A) Restated for discontinued operations.
(B) The dilutive effect of stock options and warrants was not considered
in 1996 since the Company reported a loss from continuing operations.
(C) The dilutive effect of outstanding warrants to purchase 85,000 shares
of common stock were not included in the 1997 and 1995 computations
since the exercise price was greater than the average market price of
the common shares.
- -
<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, 1997 1996
- ---------------------------------------------------------------------
High Low High Low
- ---------------------------------------------------------------------
4th quarter 4 1/4 3 15/16 4 5/8 2 1/2
3rd quarter 5 1/8 4 6 4 5/8
2nd quarter 5 3/8 3 7/8 6 3/8 3 15/16
1st quarter 4 1/8 3 3/8 4 1/2 3 3/4
The Company paid no dividend in 1997 or 1996. Under the Term Debt
Agreement, the Company is restricted to the amount of cash dividends
paid in any one year. See Note 10 of the Notes to Consolidated
Financial Statements.
The approximate number of stockholders of record on March 13, 1998 was
2,900. This number does not include stockholders for whom shares are
held in a "nominee" or "street" name.
(Remaining information on inside front cover not incorporated by
reference.)
Inside front cover
<PAGE>
<PAGE>
<TABLE>
Five Year Financial Summary
<CAPTION>
Years Ended December 31, 1997 1996 1995 1994 1993
- ---------------------------------------------------------------------------------------------------
(in thousands, except per share data)
<S> <C> <C> <C> <C> <C>
Continuing operations:
Net sales $16,975 $18,312 $19,089 $14,112 $10,810
Gross profit 4,649 4,905 6,604 4,694 3,130
Earnings (loss) before income taxes and cumulative
effect of accounting change 518 (1,149) 848 (755) (1,897)
Income (taxes) benefit (211) 444 (373) 209 665
Earnings (loss) before cumulative effect
of accounting change 307 (705) 475 (546) (1,232)
Discontinued operations - net 181 629 (172) 432 1,221
Cumulative effect of accounting change - - - - 279
- ---------------------------------------------------------------------------------------------------
Net earnings (loss) $ 488 $ (76) $ 303 $ (114) $ 268
===================================================================================================
Basic and diluted earnings (loss) per share:
Continuing operations $ .11 $ (.26) $ .17 $ (.20) $ (.43)
Discontinued operations .07 .23 (.06) .16 .42
Cumulative effect of accounting change - - - - .10
- ---------------------------------------------------------------------------------------------------
Earnings (loss) $ .18 $ (.03) $ .11 $ (.04) $ .09
===================================================================================================
Average shares outstanding 2,737 2,767 2,765 2,765 2,884
===================================================================================================
Cash dividends per share $ - $ - $ - $ - $ -
===================================================================================================
Total assets, end of year:
Continuing operations $16,835 $15,222 $17,114 $13,847 $13,011
Discontinued operations 5,662 5,520 5,268 5,042 4,243
- ---------------------------------------------------------------------------------------------------
$22,497 $20,742 $22,382 $18,889 $17,254
===================================================================================================
Long-term debt, end of year $ 1,989 $ 1,984 $ 2,180 $ 428 $ 652
===================================================================================================
</TABLE>
<PAGE>
<PAGE>
Management's Discussion and Analysis
Financial Condition
Cash and cash equivalents increased $275,000 from December 31, 1996.
The Company's continuing operations generated $1,515,000 in cash
during the year while investing and financing activities used cash of
$398,000 and $930,000, respectively. In addition, discontinued
operations provided $87,000 in cash.
The primary sources of cash from continuing operations were net
earnings of $307,000, the net noncash items, mainly depreciation, of
$637,000 and $571,000 from the favorable change in operating assets
and liabilities. A decrease in receivables and increases in income
taxes payable and accounts payable, offset in part by an increase in
inventory were the primary reasons for the decrease in net operating
assets. The decrease in receivables from the December 31, 1996 level
is mainly due to a reduction in the number of days sales outstanding
and the collection of an income tax refund. The increase in accounts
payable is mainly attributable to the timing of inventory purchases
and the increase in inventory. The inventory increase is mainly due
to the higher level in the electronics segment to support the
increase sales and backlog levels. The increase in income taxes
payable is due to the higher level of earnings and the corresponding
increase in income taxes due.
The Company's primary investing activity during the year was the
purchase of $382,000 of capital equipment mainly in the electronics
segment. These additions are mainly geared toward adding new and
upgrading existing production capabilities and processes within this
segment. Capital expenditures for 1998 are budgeted to approximate
$900,000 with the majority of the additions planned for the
electronics segment. 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 $650,000 and its long-term debt by $200,000. At December 31,
1997, the Company's unused portion of these lines of credit was
$1,850,000.
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 1998.
New Accounting Standards
In June 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards ("SFAS") No. 130,
"Reporting Comprehensive Income" and SFAS No. 131, "Disclosure about
Segments of an Enterprise and Related Information". SFAS No. 130
establishes standards for reporting and displaying comprehensive
income and is effective for the Company's 1998 financial statements.
The Company is reviewing disclosure options and will present such
information in the first quarter of 1998 to the extent required.
<PAGE>
<PAGE>
SFAS No. 131 establishes standards for reporting annual and interim
operating segment information and is effective for the Company's 1998
annual financial statements and interim reporting beginning in 1999.
The Company is evaluating the effect that this new standard will have
on disclosures in the Company's financial statements and will reflect
the required information in the year ended December 31, 1998
financial statements as required.
Results of Operations -- Overview -- 1997 versus 1996
Net sales from continuing operations decreased $1,338,000 (7%) from
1996 as lower sales in the instruments segment were partially offset
by a sales increase in the electronics segment.
The overall gross profit percentage remained at 27% during both years
as higher margins in 1997 in the electronics segment were offset by
lower margins in the instruments segment.
Selling and administrative expenses decreased $478,000 (11%) from
1996 mainly due to lower selling expenses in the instruments segment.
The reduction in research and development expenses resulted from
decreased expenses in the instruments segment.
The $134,000 restructuring credit represents a 1997 cash recovery,
net of legal expenses, from the sale of one of the product lines in
the instruments segment. The $655,000 in restructuring expenses in
1996 relates to the expenses for the phasing out of a product line in
the instruments segment and the closing of a manufacturing opertion
in the electronics segment.
Interest expense decreased from $353,000 in 1996 to $260,000 in 1997
as a result of lower levels of short and long-term debt. Other
income (expense), net decreased $20,000 from 1996 mainly as a result
of a higher operating loss in the real estate operations due to a
decrease in rental income.
The effective income tax rate in 1997 was 41% compared to an income
tax benefit rate of 39% in 1996. The main factor affecting the
comparability of rates was 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% decrease in sales, operating profit
increased $1,593,000 from 1996 mainly due to a net decrease in
operating and restructuring expenses. Nonoperating expenses
decreased $74,000 from 1996 mainly as a result of lower interest
expense offset in part by a higher operating loss in the real estate
operations. As a result, the Company reported a pre-tax profit from
continuing operations of $518,000 in 1997 compared to a pre-tax loss
of $1,149,000 in 1996. Earnings from continuing operations amounted
to $307,000 in 1997 compared to a $705,000 loss in 1996. Earnings
from discontinued operations amounted to $181,000 in 1997 compared to
$629,000 in 1996. Overall, the Company reported net earnings of
$488,000 versus a loss of $76,000 in 1996.
<PAGE>
<PAGE>
Business Segment Results -- 1997 versus 1996
Net sales in the electronics segment increased $549,000 (4%) over
1996 as a result of increased demand and improved market conditions
of both the OEM and contract manufacturers in the telecommunications
market. The overall gross profit percentage increased 17% over 1996,
mainly as a result of a lower provision for slow moving inventory and
the closing of the Carlisle manufacturing facility in 1996. Total
operating expenses decreased $180,000 from 1996 due to the
restructuring expense incurred in 1996. Selling and administrative
expenses remained level with 1996. As a result of the increased
sales level and gross profit percentage along with the decrease in
operating expenses, the electronics segment reported an operating
profit of $1,258,000 in 1997 compared to an operating profit of
$491,000 in 1996.
The instruments segment reported a $1,886,000 (32%) decrease in sales
from 1996 as product sales to all major markets declined. Lower
sales to the colloidal, NDT/NDE, and medical research markets
accounted for about 40%, 35% and 25%, respectively, of the sales
decrease. A majority of the sales decrease to the colloidal market
was due to the segment phasing out and selling its AcoustoSizer
product line in early 1997. The decline in sales to the NDT/NDE
markets was mainly attributable to decreased sales of custom test
systems to one customer. Decreased foreign sales was the main reason
for the decrease in sales to the medical research markets. The
overall gross profit percentage decreased about 5% from 1996 mainly
as a result of custom test systems representing a larger percentage
of sales in 1997 compared to 1996. Total operating expenses
decreased $1,701,000 from 1996. Selling and administrative expenses
decreased $511,000 from 1996 as selling expense decreased $398,000
and administrative expense declined $113,000. The reductions in
selling expenses were mainly due to lower personnel, travel and
advertising expenses. Lower personnel costs was the main reason for
the decrease in administrative expenses. Research and development
expenses decreased $581,000 from 1996 as a result of lower personnel,
operating supplies, and outside consulting expenses in 1997. During
1997, the segment recorded a $134,000 restructuring recovery from the
sale of its AcoustoSizer (TM) product line. The restructuring
expense of $475,000 in 1996 related to the costs of phasing out of
this product line. As a result of the decreases in operating
expenses, the segment reported an operating profit of $524,000 in
1997 compared to an operating loss of $360,000 in 1996.
<PAGE>
<PAGE>
Results of Operations -- Overview -- 1996 versus 1995
Net sales from continuing operations decreased $776,000 (4%) from
1995 as both the electronics and instruments segments reported lower
sales.
The overall gross profit percentage decreased from 35% in 1995 to 27%
in 1996 due to lower margins in both the electronics and instruments
segments.
Selling and administrative expenses decreased $484,000 (10%) from
1995 mainly as a result of lower selling expenses in the instruments
segment.
The $180,000 (34%) increase in research and development expenses was
a result of higher expenses in the instruments segment.
The $655,000 in restructuring expenses relates to the expenses for
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 $330,000 in 1995 to $353,000 in 1996
as a result of higher levels of short-term debt. Other income
(expense), net increased $77,000 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 39% compared to an
income tax rate of 44% 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.
Operating profit decreased $2,050,000 from 1995 due to a combination
of a decrease in the total gross profit and restucturing expenses of
$655,000, partially offset by a net decrease in operating expenses.
Nonoperating expenses decreased $53,000 from 1995 due to the
combination of increased dividend income and a lower operating loss
in the real estate operations, partially offset by an increase in
interest expense. As a result, the Company reported a pre-tax loss
from continuing operations of $1,149,000 in 1996 compared to pre-tax
earnings of $848,000 in 1995. The net loss from continuing
operations amounted to $705,000 in 1996 versus earnings of $475,000
in 1996. Discontinued operations reported net earnings of $629,000
in 1996 compared to a loss of $172,000 in 1995. Overall, the Company
reported a net loss of $76,000 in 1996 versus net earnings of
$303,000 in 1995.
<PAGE>
<PAGE>
Business Segment Results -- 1996 versus 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
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 were 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.
Impact of the Year 2000 Issue
The Company has reviewed its in-house data processing systems and
computer applications to assess the impact of the Year 2000. The
estimated cost to modify the current software is not material and the
Company presently believes that the Year 2000 issue will not pose
significant operational problems. However, Year 2000 issues could
impact the Company, if the systems operated by our customers, vendors
or subcontractors are not Year 2000 compliant.
<PAGE>
<PAGE>
Consolidated Balance Sheets
December 31, 1997 1996
- --------------------------------------------------------------------------
Assets
Current assets:
Cash and cash equivalents $ 885,097 $ 610,290
Receivables, net 3,123,764 3,715,765
Inventories 3,193,388 2,888,980
Deferred income taxes and other current assets 976,371 954,973
- --------------------------------------------------------------------------
Total current assets 8,178,620 8,170,008
- --------------------------------------------------------------------------
Property, plant and equipment, at cost:
Land and improvements 1,002,232 1,002,232
Buildings and improvements 5,413,643 5,336,200
Machinery and equipment 5,727,258 5,641,797
- --------------------------------------------------------------------------
12,143,133 11,980,229
Less accumulated depreciation 8,233,727 7,788,029
- --------------------------------------------------------------------------
3,909,406 4,192,200
Other assets:
Marketable equity securities 4,657,743 2,781,708
Net assets of discontinued operations 5,661,677 5,520,104
Miscellaneous 90,102 77,890
- --------------------------------------------------------------------------
$22,497,548 $20,741,910
==========================================================================
Liabilities and Stockholders' Equity
Current liabilities:
Notes payable $ - $ 650,000
Current portion of long-term debt - 200,000
Accounts payable 1,194,394 1,080,194
Accrued liabilities 1,172,277 1,182,415
Income taxes 415,960 118,523
- --------------------------------------------------------------------------
Total current liabilities 2,782,631 3,231,132
- --------------------------------------------------------------------------
Deferred income taxes 2,317,474 1,651,568
Long-term debt 1,988,840 1,984,400
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 shares 190,210 190,210
Capital surplus 6,442,439 6,442,439
Retained earnings 11,443,318 10,954,963
Net unrealized gain on marketable
equity securities 2,695,359 1,570,324
Treasury stock at cost, 1,070,544 and
1,049,467 shares (5,362,723) (5,283,126)
- --------------------------------------------------------------------------
Total stockholders' equity 15,408,603 13,874,810
- --------------------------------------------------------------------------
$22,497,548 $20,741,910
=========================================================================
See notes to consolidated financial statements.
<PAGE>
<PAGE>
<TABLE>
Consolidated Statements of Operations
<CAPTION>
For the Years Ended December 31, 1997 1996 1995
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net sales $16,974,620 $18,312,512 $19,088,885
Cost of sales 12,325,280 13,407,624 12,484,811
- -----------------------------------------------------------------------------------------
Gross profit 4,649,340 4,904,888 6,604,074
- -----------------------------------------------------------------------------------------
Selling and administrative expenses 3,929,393 4,407,710 4,891,936
Research and development expenses 124,037 704,932 524,804
Restructuring expenses (recovery) (133,900) 655,000 -
- ----------------------------------------------------------------------------------------
3,919,530 5,767,642 5,416,740
- ----------------------------------------------------------------------------------------
Operating profit (loss) 729,810 (862,754) 1,187,334
Other income (expense):
Interest expense (259,747) (353,351) (329,832)
Other, net 47,939 67,482 (9,416)
- -----------------------------------------------------------------------------------------
(211,808) (285,869) (339,248)
- -----------------------------------------------------------------------------------------
Earnings (loss) from continuing operations
before income taxes 518,002 (1,148,623) 848,086
Income tax (expense) benefit (211,000) 444,000 (373,000)
- -----------------------------------------------------------------------------------------
Earnings (loss) from continuing operations 307,002 (704,623) 475,086
- -----------------------------------------------------------------------------------------
Earnings (loss) from discontinued operations 181,353 628,995 (171,662)
- -----------------------------------------------------------------------------------------
Net earnings (loss) $ 488,355 $ (75,628) $ 303,424
=========================================================================================
Basic and diluted earnings (loss) per share:
Continuing operations $ .11 $ (.26) $ .17
Discontinued operations .07 .23 (.06)
- -----------------------------------------------------------------------------------------
$ .18 $ (.03) $ .11
=========================================================================================
</TABLE>
See notes to consolidated financial statements.
<PAGE>
<PAGE>
<TABLE>
Consolidated Statements of Cash Flows
<CAPTION>
For the Years Ended December 31, 1997 1996 1995
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash Flows from Operating Activities:
Net earnings (loss) from continuing operations $ 307,002 $ (704,623) $ 475,086
Adjustments to reconcile net earnings (loss) to net cash
provided (used) by operating activities:
Depreciation and amortization 668,928 698,691 743,727
Changes in deferred income taxes (36,000) (155,000) 202,000
Loss on write-off of assets under restructuring plans - 320,000 -
Other 4,440 4,440 2,960
Changes in assets and liabilities:
Receivables, net 592,001 365,518 (1,122,801)
Inventories (304,408) 1,708,580 (1,944,838)
Other current assets (118,176) 31,488 (31,803)
Accounts payable and accrued liabilities 104,062 (693,860) (10,690)
Income taxes, net 297,437 (355,782) 24,636
- ---------------------------------------------------------------------------------------------------------
Net cash provided (used) by operating activities 1,515,286 1,219,452 (1,661,723)
- ---------------------------------------------------------------------------------------------------------
Cash Flows from Investing Activities:
Capital expenditures, net (382,238) (441,679) (430,888)
Collection of amount due from sale of discontinued operations - - 250,000
Other, net (16,108) (3,329) (3,372)
- ---------------------------------------------------------------------------------------------------------
Net cash (used) by investing activities (398,346) (445,008) (184,260)
- ---------------------------------------------------------------------------------------------------------
Cash Flows from Financing Activities:
Proceeds from issuance of long-term debt and warrants - - 2,000,000
Net borrowings (repayments) under lines of credit (650,000) (1,000,000) 735,000
Payments on long-term debt (200,000) (228,333) (223,333)
Purchases of common stock (79,597) (64,490) (788)
Stock options exercised - 45,479 -
- ---------------------------------------------------------------------------------------------------------
Net cash provided (used) by financing activities (929,597) (1,247,344) 2,510,879
- ---------------------------------------------------------------------------------------------------------
Cash Provided (Used) by Discontinued Operations 87,464 387,754 (468,022)
- -------------------------------------------------------------------------------------------------------
Net Increase (Decrease) in Cash and Cash Equivalents 274,807 (85,146) 196,874
Cash and Cash Equivalents at beginning of year 610,290 695,436 498,562
- ---------------------------------------------------------------------------------------------------------
Cash and Cash Equivalents at end of year $ 885,097 $ 610,290 $ 695,436
=========================================================================================================
Supplemental Disclosures of Cash Flow Information
Cash paid during the year by continuing operations for:
Interest $ 279,829 $ 371,241 $ 358,462
Income taxes $ 51,500 $ 104,500 $ -
</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:
1997 1996 1995
- --------------------------------------------------------------------------
Marketable Equity Securities $1,876,000 $ 647,000 $ 582,000
Deferred Income Taxes 751,000 258,000 233,000
Net Unrealized Gain on
Marketable Equity Securities 1,125,000 389,000 349,000
See notes to consolidated financial statements.
<PAGE>
<PAGE>
<TABLE>
Consolidated Statements of Stockholders' Equity
<CAPTION>
Unrealized
Gain on
Marketable
Common Stock Capital Retained Equity Treasury
Shares Amount Surplus Earnings Securities Stock
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balance, January 1, 1995 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)
Net earnings - - - 488,355 - -
Purchases of common stock - - - - - (79,597)
Unrealized gain on marketable
equity securities - - - - 1,125,035 -
- ----------------------------------------------------------------------------------------------------------------
Balance December 31, 1997 3,804,195 $190,210 $6,442,439 $11,443,318 $2,695,359 $(5,362,723)
================================================================================================================
</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 ("SFAS") 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 9 and 10).
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
and 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 SFAS No. 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, 1997 and 1996, the fair market value (based on quoted
market prices) of these securities was $4,657,743 and $2,781,708,
respectively, and the amortized cost was $710,384. Gross unrealized gains
amounted to $3,917,359 and $2,071,324 at December 31, 1997 and 1996,
respectively, and there were no unrealized losses at either date. During
1997, the Company recorded a $1,125,035 increase in the "Unrealized Gain
on Marketable Equity Securities" component of stockholders' equity and a
$388,909 increase in the same account during 1996.
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 SFAS No.
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 -- In the fourth quarter of 1997, the
Company adopted SFAS No. 128 "Earnings per Share", as required and
restated the previously reported earnings per share in conformity with
SFAS 128. This new standard specifies the computation, presentation and
disclosure requirements for earnings per share.
The weighted average number of shares outstanding was 2,737,198 shares
in 1997, 2,767,191 shares in 1996 and 2,764,503 shares in 1995. In 1997
and 1995, the dilutive effect of outstanding stock options was not
material. The dilutive effect of the outstanding warrants to purchase
85,000 shares were not included in the computation of diluted earnings per
share in 1997 and 1995 since the exercise price was greater than the
average market price of the common shares. In 1996, the dilutive effect
of stock options and warrants was not considered since the Company
reported a loss from continuing operations.
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.
<PAGE>
<PAGE>
Notes continued
(2) Discontinued Operations: In the third quarter of 1997, the Company
adopted a plan to sell its Bergen Cable Technologies, Inc. ("BCT")
subsidiary. The Company signed a letter of intent in December 1997 to
sell assets and certain liabilities for approximately $7.5 million in cash
and a $1.25 million note receivable. The transaction is subject to the
negotiation and execution of a definitive purchase agreement, the approval
of the Company's Board of Directors, and the buyers obtaining certain
financing. The Company expects to realize a gain on the disposition of
BCT.
The operating results of BCT have been reported as discontinued
operations, and previously reported financial statements have been
restated to reflect this classification. The operating results of BCT are
presented in the Consolidated Statements of Operations under the caption
"Earnings (loss) from discontinued operations" and include:
1997 1996 1995
-------- -------- --------
(in thousands)
Net sales $ 14,715 $ 12,545 $ 9,748
Earnings (loss) before income taxes 303 1,002 (326)
Income (taxes) benefit (122) (373) 154
Net earnings (loss) 181 629 (172)
Net assets of BCT include the following:
12/31/97 12/31/96
-------- --------
(in thousands)
Current assets $ 5,008 $ 4,979
Property, plant and equipment, net 2,407 2,253
Current liabilities 1,753 1,712
------- -------
Net assets of discontinued operations $ 5,662 $ 5,520
======= =======
All of the assets of BCT, except real estate, are pledged as
collateral for BCT's $1 million line of credit, the Company's $1 million
line of credit and the Company's Term Debt Note ($2 million face amount)
due in 2000. At December 31, 1997, BCT had $690,000 of borrowings
outstanding under its line of credit.
(3) Restructuring Expenses (Recovery): In May 1997, the Company sold its
AcoustoSizer product line and certain related assets for $130,000 in cash
and a $200,000 note to Colloidal Dynamics Pty. Ltd. ("CD"). In addition,
the Company granted CD an option for $20,000 to purchase the CD common
stock owned by the Company for $200,000. In 1997, the Company recorded a
restructuring recovery of $133,900 representing the cash it received from
CD less legal 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
(4) Receivables, net: Receivables, net of allowances, consist of the
following:
1997 1996
- --------------------------------------------------------------------------
Accounts receivable, less allowance for doubtful
accounts of $90,000 and $85,000 $3,123,764 $3,449,299
Costs and estimated earnings in excess of billings
on uncompleted contracts - 142,466
Refundable income taxes - 124,000
- --------------------------------------------------------------------------
$3,123,764 $3,715,765
==========================================================================
(5) Inventories: Inventories consist of the following:
1997 1996
- --------------------------------------------------------------------------
Raw materials $1,073,990 $1,052,627
Work in process 1,097,291 571,304
Finished goods 1,022,107 1,265,049
- --------------------------------------------------------------------------
$3,193,388 $2,888,980
==========================================================================
(6) Income Taxes: The components of the provision (benefit) for income
taxes are as follows:
1997 1996 1995
- --------------------------------------------------------------------------
Current provision (benefit):
Federal $ 164,000 $(278,000) $ 84,000
State 83,000 (11,000) 87,000
- --------------------------------------------------------------------------
247,000 (289,000) 171,000
- --------------------------------------------------------------------------
Deferred provision (benefit):
Federal (24,000) (113,000) 185,000
State (12,000) (42,000) 17,000
- --------------------------------------------------------------------------
(36,000) (155,000) 202,000
- --------------------------------------------------------------------------
Total $ 211,000 $(444,000) $ 373,000
==========================================================================
<PAGE>
<PAGE>
Notes continued
The tax effects of significant items comprising the Company's net
deferred tax liability as of December 31, 1997 and 1996 are as follows:
1997 1996
- --------------------------------------------------------------------------
Deferred tax liabilities:
Depreciation $ 486,100 $ 550,200
DISC commissions 535,200 535,200
Unrealized gain on marketable equity securities 1,252,000 501,000
- --------------------------------------------------------------------------
Total deferred tax liabilities 2,273,300 1,586,400
- --------------------------------------------------------------------------
Deferred tax assets:
Inventory reserves 516,300 545,500
State net operating loss carryforwards 274,000 318,000
Restructuring expenses 25,400 80,000
Allowance for doubtful accounts 56,200 58,400
Accrued expenses 110,900 101,200
- --------------------------------------------------------------------------
Total deferred tax assets 982,800 1,103,100
Valuation allowance (274,000) (318,000)
- --------------------------------------------------------------------------
Deferred tax assets, net 708,800 785,100
- --------------------------------------------------------------------------
Net deferred tax liabilities $1,564,500 $ 801,300
==========================================================================
Other current assets include deferred income taxes of approximately
$753,000 in 1997 and $850,000 in 1996.
Valuation allowances have been provided at December 31, 1997 and 1996
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 1998. The valuation allowance decreased
slightly during 1997 as a result of the use of state net operating loss
carryforwards in 1997.
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:
1997 1996 1995
- --------------------------------------------------------------------------
Income taxes at statutory rates $ 176,121 $(390,532) $ 288,336
State income tax, net of Federal
tax benefit 47,000 (35,000) 69,000
Non-deductible expenses 15,000 17,000 18,000
Dividend exclusion (21,000) (18,000) -
Other, net (6,121) (17,468) (2,336)
- --------------------------------------------------------------------------
$ 211,000 $(444,000) $ 373,000
==========================================================================
<PAGE>
<PAGE>
Notes continued
(7) 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 $91,000 in 1997, $105,000 in 1996 and $94,000 in 1995.
(8) Accrued Liabilities: Accrued liabilities consists of the following
items:
1997 1996
- --------------------------------------------------------------------------
Employee compensation $ 276,614 $ 224,124
Restructuring expenses 62,959 211,577
Other 832,704 746,714
- --------------------------------------------------------------------------
$1,172,277 $1,182,415
=========================================================================
(9) Notes Payable: The Company has secured demand lines of credit with
two banks amounting in total to $1,850,000. The $1,000,000 line of credit
is secured by all assets of the Company including those of the
discontinued operation, except for real estate and marketable equity
securities. Advances under this line are based on percentage formulas of
specific receivable and inventory balances of a certain subsidiary. The
$850,000 line of credit is secured by marketable equity securities. The
Company had no borrowings outstanding under either line of credit at
December 31, 1997. There are no compensating balance requirements or
significant commitment fees under either arrangement. The weighted
average interest rate on outstanding notes payable was 9.2% at December
31, 1996.
(10) Long-Term Debt:
Long-term debt consists of the following:
1997 1996
- --------------------------------------------------------------------------
11% Term Debt, $2 million face amount, due in 2000;
interest payable quarterly $1,988,840 $1,984,400
Industrial Revenue Bonds:
Principal payment of $200,000 in 1997;
interest payable semi-annually at a rate of 7.0% - 200,000
- --------------------------------------------------------------------------
1,988,840 2,184,400
Less current portion - 200,000
- --------------------------------------------------------------------------
$1,988,840 $1,984,400
==========================================================================
The Term Debt Note is secured by all the Company's assets including
those of the discontinued operation, except for real estate, marketable
equity securities, and certain specific equipment with a total book value
of $162,000. 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.
<PAGE>
<PAGE>
Notes continued
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 $1 million
bank line of credit plus the $1 million bank line of credit maintained by
the discontinued operation. 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.
(11) Stockholders' Equity: The Company has 2,733,651 and 2,754,728
shares of its $.05 par value Common Stock outstanding at December 31,
1997 and 1996, respectively. At December 31, 1997, the Company has
acquired 1,070,544 shares of treasury stock at a cost of $5,362,723.
These acquired shares are being held as treasury shares and may be used
for general corporate purposes. Under prior authorizations from the
Board of Directors, the Company is authorized to purchase up to an
additional 46,500 shares of stock through the open market or negotiated
transactions. The Term Debt Agreement limits the amount of treasury
stock repurchases in one year to $200,000.
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, 1997, all options granted were ISO's.
At December 31, 1997, this Plan has 225,000 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.
Pro forma net earnings and earnings per share information, as
required by SFAS No. 123, "Accounting for Stock-Based Compensation", has
been determined as if the Company had accounted for its employee stock
options under the fair value method described by SFAS No. 123. The fair
value of these options was estimated at the grant date using a
Black-Scholes option pricing model with the following weighted-average
assumptions for both 1997 and 1995: dividend yield of 0% and an expected
option life of 7 years. The expected stock price volatility of the
Company's common stock was 40% in 1997 and 32% in 1995 and the weighted
average risk-free interest rates were 6.3% in 1997 and 5.9% in 1995. The
estimated weighted-average fair value per option at the date of grant for
options granted in 1997 and 1995 was $2.25 and $2.06, respectively.
There were no options granted in 1996. For purposes of the pro forma
disclosures, the estimated fair value of the options is amortized to
expense over the five-year vesting period of the options. The pro forma
effects of recognizing compensation expense under SFAS No. 123 would have
<PAGE>
<PAGE>
Notes continued
decreased Earnings (loss) from continuing operations by $10,000, $5,000
and $1,000 in 1997, 1996, and 1995, respectively. There would have
been no changes to the earnings per share amounts during these periods.
The pro forma effects to net earnings reflects options granted since 1995.
Therefore, the full impact of calculating compensation expense under SFAS
No. 123 is not reflected above, since the compensation cost is reflected
over the options' vesting period of five years and options granted prior to
1995 are not considered.
A summary of the status of the Company's two fixed stock option plans
as of December 31, 1997, 1996, and 1995, and changes during the years
ended on those dates is presented below:
<TABLE>
<CAPTION>
1997 1996 1995
- -------------------------------------------------------------------------------------------------------
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, 210,500 $3.66 253,250 $3.83 241,750 $3.81
Granted 30,000 4.22 - - 12,500 4.38
Exercised - - (10,500) 4.33 - -
Expired - - (21,000) 5.08 - -
Forfeited (172,000) 3.54 (11,250) 4.38 (1,000) 5.25
- ------------------------------------------------------------------------------------------------------
Outstanding, December 31, 68,500 $4.18 210,500 $3.66 253,250 $3.83
=======================================================================================================
Exercisable, December 31, 22,300 $4.09 139,800 $3.57 131,450 $3.87
=======================================================================================================
</TABLE>
The following table summarizes information about fixed stock options
outstanding at December 31, 1997:
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
- ---------------------------------------------------------------- ----------------------------
Weighted Average
-----------------------------
Range of Number Remaining Number Weighted-
Exercise Outstanding Contractual Exercise Exercisable Avg. Exercise
Prices at 12/31/97 Life Price at 12/31/97 Price
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$3.63-4.00 21,500 8.4 years $3.85 6,800 $3.63
$4.13-5.00 47,000 8.1 4.33 15,500 4.29
- ------------------------------------------------------------------------------------------------
68,500 $4.18 22,300 $4.09
================================================================================================
</TABLE>
<PAGE>
<PAGE>
Notes continued
(12) Other Income (Expense), net: Other, net consists of the following
items:
1997 1996 1995
- --------------------------------------------------------------------------
Interest income $ 23,292 $ 25,603 $ 20,786
Real estate operations (60,513) (41,427) (54,698)
Dividends 87,980 77,269 25,876
Other items, net (2,820) 6,037 (1,380)
- --------------------------------------------------------------------------
$ 47,939 $ 67,482 $ (9,416)
==========================================================================
Interest expense in 1997, 1996 and 1995 of $7,000, $20,300, and $32,725,
respectively, is included in real estate operations.
<PAGE>
PAGE>
Notes continued
(13) Business Segments: The Company operates in two industry segments:
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.
1997 1996 1995
- -----------------------------------------------------------------------------
(in thousands)
Net Sales:
Electronics $ 12,897 $ 12,348 $ 12,911
Instruments 4,078 5,964 6,178
- -----------------------------------------------------------------------------
Total $ 16,975 $ 18,312 $ 19,089
=============================================================================
Operating Profit (Loss):
Electronics $ 1,258 $ 491 $ 1,870
Instruments 524 (360) 298
- -----------------------------------------------------------------------------
Total 1,782 131 2,168
General Corporate Expenses (1,052) (994) (981)
Real Estate Operations, Net (61) (42) (55)
Other Income (Expense), Net (151) (244) (284)
- -----------------------------------------------------------------------------
Earnings (loss) before income taxes $ 518 $ (1,149) $ 848
=============================================================================
Identifiable Assets:
Electronics $ 6,729 $ 6,049 $ 8,109
Instruments 2,558 2,999 3,511
Corporate 5,683 4,102 3,258
Real Estate Operations 1,866 2,072 2,236
Discontinued Operations 5,662 5,520 5,268
- -----------------------------------------------------------------------------
$ 22,498 $ 20,742 $ 22,382
=============================================================================
Capital Expenditures:
Electronics $ 345 $ 354 $ 209
Instruments 77 80 179
Corporate 7 - -
Real Estate Operations - 16 43
- -----------------------------------------------------------------------------
$ 429 $ 450 $ 431
=============================================================================
Depreciation and Amortization:
Electronics $ 333 $ 324 $ 330
Instruments 138 154 190
Corporate 1 2 3
Real Estate Operations 197 218 221
- -----------------------------------------------------------------------------
$ 669 $ 698 $ 744
=============================================================================
Corporate assets consist mainly of cash and cash equivalents and
marketable equity securities.
Export sales amounted to approximately $5,080,000, $3,538,000 and
$4,200,000 in 1997, 1996 and 1995, respectively.
<PAGE>
<PAGE>
Notes continued
(14) Quarterly Financial Data (unaudited): Selected unaudited quarterly
financial data for 1997 and 1996 is set forth below:
First Second Third Fourth
- -----------------------------------------------------------------------
1997 (in thousands, except per share data)
Net sales from continuing operations $3,756 $3,912 $4,548 $4,759
Gross profit 954 1,019 1,324 1,352
Earnings (loss) before income taxes (144) 52 203 407
Net earnings (loss) from:
Continuing operations (86) 32 122 239
Discontinued operations 67 10 64 40
- -----------------------------------------------------------------------
Net earnings (loss) $ (19) $ 42 $ 186 $ 279
=======================================================================
Basic and diluted earnings (loss)
per share:
Continuing operations $ (.03) $ .01 $ .05 $ .09
Discontinued operations .02 .01 .02 .01
- -----------------------------------------------------------------------
$ (.01) $ .02 $ .07 $ .10
=======================================================================
1996
Net sales from continuing operations $5,722 $4,890 $3,499 $4,202
Gross profit 1,747 1,438 788 932
Earnings (loss) before income taxes 98 (15) (125) (1,107)
Net earnings (loss) from:
Continuing operations 59 (7) (78) (679)
Discontinued operations 159 183 126 161
- ------------------------------------------------------------------------
Net earnings (loss) $ 218 $ 176 $ 48 $ (518)
========================================================================
Basic and diluted earnings (loss)
per share:
Continuing operations $ .02 $ - $ (.03) $ (.25)
Discontinued operations .06 .06 .05 .06
- ------------------------------------------------------------------------
$ .08 $ .06 $ .02 $ (.19)
========================================================================
Earnings per share calculations for each of the quarters are based
on the weighted average numbers of shares outstanding for each period
and the sum of the quarters may not necessarily be equal to the full
year earnings per share amount.
In the 1997 second quarter, the restructuring recovery increased
earnings before income taxes by $90,000 and net earnings from
continuing operations by $55,000 or $.02 per share. (See Note 3).
In the 1996 fourth quarter, restructuring expenses reduced earnings
before income taxes by $655,000 and net earnings from continuing
operations by $409,000 or $.15 per share (See Note 3).
<PAGE>
<PAGE>
Notes continued
(15) Contingencies: The Company is involved in litigation in the ordinary
course of business. The Company believes based on advice of legal counsel that
the outcome of these actions should not have a material adverse effect on the
financial condition or results of operations of the Company.
(16) Subsequent event: In February 1998, the Company sold its real estate
complex located in Wilmington, Delaware for $2,005,000 in cash. None of the
Company's operations were located at this facility. The Company will report
an after-tax gain on this sale of approximately $215,000 or $.08 per share in
the first quarter of 1998.
<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, 1997 and 1996, and the
related consolidated statements of operations, stockholders' equity and
cash flows for each of the three years in the period ended December 31,
1997. 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, 1997 and 1996, and the results of their
operations and their cash flows for each of the three years in the period
ended December 31, 1997 in conformity with generally accepted accounting
principles.
Deloitte & Touche LLP
Boston, Massachusetts
February 23, 1998
(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 Registration
Statement No. 33-77554 of MATEC Corporation on Form S-8, as
amended, of our reports dated February 23, 1998 appearing in this
Annual Report on Form 10-K of MATEC Corporation for the year ended
December 31, 1997.
Deloitte & Touche LLP
Boston, Massachusetts
March 27, 1998
<PAGE>
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