ITEM 1. BUSINESS
GENERAL
Meade Instruments Corp. is a multinational consumer optics company that designs, manufactures, imports and distributes telescopes, telescope accessories, binoculars and other optical products. Meade's dedication to product innovation has led to the successful introduction of a wide range of products, resulting in what the Company believes to be the broadest and most complete line of telescopes and telescope accessories available. The Company offers more than 50 different telescope models with several different optical configurations, as well as more than 250 accessory products. The Company's telescopes range in aperture from 2 to 16 inches and in retail price from less than $100 to more than $15,000. The Company also offers a complete line of binoculars from small aperture theater glasses to full-size waterproof models at retail price points from approximately $10 to more than $300.
Since its founding in 1972, Meade has strived to develop a reputation for providing the amateur astronomer with technically sophisticated products at competitive prices. Combining its manufacturing expertise with its dedication to innovation, quality and value, Meade has developed and produced some of the industry's most technologically advanced consumer telescopes at affordable prices. Although professional and institutional applications of Meade's telescopes are not Meade's primary market, the Company's Schmidt-Cassegrain telescopes are used by many universities, scientific laboratories and aerospace companies throughout the world. The Company has capitalized on its brand name recognition among serious amateur astronomers and its ability to bring advanced technology to lower price points to market successfully its less-expensive telescopes to beginning and intermediate amateur astronomers. Meade has become a major supplier of telescopes to such retailers as Discovery Channel Stores (formerly The Nature Company), Aldi (Germany), Wal-Mart, Costco and Sam's Club.
Meade was sold by its founder and current Chief Executive Officer to an investor in 1986 and was then reacquired by the Company's senior management in 1991. After the reacquisition, management emphasized a business plan that concentrated on new product development, securing a reliable supplier of less-expensive telescopes, effective targeted marketing and customer service. To those ends the Company committed nearly $2.1 million to research and development during fiscal 2001 and has, over the last five fiscal years, committed nearly $5.9 million in the aggregate to research and development. These research and development expenditures were centered on the development of technologically advanced less-expensive telescopes as well as product improvement and industrial applications of the Company's existing technologies.
Meade manufactures nearly the complete line of its advanced astronomical telescopes in Irvine, California, including the production of all of the advanced optical systems, which are critical components of telescopes. Many of the Company's less-expensive telescopes are manufactured under proprietary designs by manufacturers principally located in Taiwan and mainland China. The Company also sources component parts for small to midrange telescopes and related accessories from several suppliers in mainland China, Taiwan and Japan that are assembled into finished product in the Company's wholly-owned Mexican assembly plant (See Item 2.
ITEM 2. PROPERTIES
The Company leases a 161,000 square foot manufacturing, distribution and corporate facility and a 42,000 square foot warehouse both of which are located in Irvine, California. The leases expire in 2007 and 2003, respectively. The Company also leases a 50,000 square foot assembly plant in Tijuana, Mexico. The Tijuana lease expires in 2004 with three, five year options. The Company owns a 30,000 square foot office and distribution facility located in Borken, Germany. The Company also leases a 13,500 square foot office, repair and distribution facility in Graefelfing, Germany which expires in August 2002. The Company's management believes that all facilities occupied by the Company are adequate for present requirements; and that the Company's current equipment is in good condition and suitable for the operations involved.
ITEM 3.
ITEM 3. LEGAL PROCEEDINGS
Meade Instruments Corporation v. Reddwarf Starware, LLC, aka Reddwarf Instruments, LLC ("Reddwarf"), Civil No. SACV 98-240 GLT, United States District Court for the Central District of California, and Appeal No. 99-1517, United States Court of Appeals for the Federal Circuit. Action for declaratory relief initiated by a complaint filed March 16, 1998, by the Company for declaratory judgment of non-infringement of Reddwarf's U.S. Patent No. 4,764,881, for declaratory judgment that Reddwarf's patent is invalid, void, and unenforceable, for an injunction and damages under federal antitrust statutes, and for an injunction and other relief under California unfair competition statutes. Reddwarf has filed a counterclaim, alleging infringement by the Company's LX200 series telescope system (and unspecified other products) of Reddwarf's U.S. Patent No. 4,764,881. The counterclaim further alleges that the infringement is willful and seeks an unspecified amount of damages, an injunction, and other relief against the Company.
On June 29, 1999, the Court granted the Company's Motion for Summary Judgment of Non-Infringement. On August 10, 1999, the Court granted in part and denied in part the Company's Motion for Attorney's Fees under 35 U.S.C. Section 285 and, in an order of October 14, 1999, the Court determined that the amount of attorneys' fees to be awarded to the Company from Reddwarf is $33,681.50.
On July 27, 1999, Reddwarf filed a Notice of Appeal to United States Court of Appeals for the Federal Circuit. On June 23, 2000, the Court of Appeals granted the Company's motion to dismiss Reddwarf's appeal. On February 27, 2001, the Court of Appeals denied Reddwarf's petition for panel rehearing and, on March 12, 2001, the Court of Appeals denied Reddwarf's petition for en banc rehearing. Reddwarf's time to file a petition for a writ of certiorari, seeking review by the United States Supreme Court, extends until June 11, 2001. Due to the uncertainties of litigation, the Company is unable to provide an evaluation of the likelihood of an unfavorable outcome should the Supreme Court grant certiorari or in the event of other additional proceedings in this matter, or an estimate of the amount of the potential loss in the event of an unfavorable outcome.
The Company is also involved from time to time in litigation incidental to its business. Management believes that the outcome of current litigation will not have a material adverse effect on the Company.
Prior to the reacquisition of the Company by certain members of its senior management, Meade agreed to be bound by the provisions of an order ("Order") of the United States Federal Trade Commission ("FTC") prohibiting the Company from making certain acquisitions. The Order provides that before Meade may acquire any stock, equity interest or assets, other than purchases of manufactured product in the ordinary course of business, of any company engaged in the manufacture or sale of Schmidt-Cassegrain telescopes with apertures of 8 to 11 inches in the United States, Meade must provide the FTC with prior notice of such event. The Order is effective until August 19, 2001.
ITEM 4.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of the Company's stockholders during the fourth quarter of the fiscal year covered by this report.
PART II
ITEM 5.
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Company's initial public offering was completed on April 14, 1997 (the "Offering"), and from that date to the present, the Company's common stock has been listed on the Nasdaq National Market under the symbol "MEAD". The high and low sales prices on a per share basis for the Company's common stock during each quarterly period for the fiscal years ended February 28, 2001 and February 29, 2000 were:
The reported closing sales price of the Company's common stock on the Nasdaq National Market on May 15, 2001 was $4.90. As of May 15, 2001, there were 161 holders of record of the Company's common stock.
Other than dividends paid to the Company's ESOP in August 1996, the Company has not paid any cash dividends on its common stock and does not anticipate declaring or paying any cash dividends on its common stock in the foreseeable future. Although the Company intends to make future contributions to the ESOP upon Board approval, no cash dividends (other than dividends paid to all holders of common stock) will be paid to the ESOP with respect to future periods.
ITEM 6.
ITEM 6. SELECTED FINANCIAL DATA
SELECTED CONSOLIDATED FINANCIAL INFORMATION
The following data have been derived from the Company's audited consolidated financial statements, including the consolidated balance sheets at February 28 (29), 2001 and 2000 and the consolidated statements of income for the three years ended February 28, 2001 and the notes thereto appearing elsewhere herein.
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(1) Represents accretion reflecting original issue discount and accrued dividends on the redeemable preferred stock. In January 1997 the Company entered into a binding agreement to redeem its redeemable preferred stock earlier than the original mandatory redemption date. The accretion was accelerated in the fiscal year ended February 28, 1997 to reflect the new redemption date (April 14, 1997) and the Company recorded an additional $3.4 million in accelerated accretion on the redeemable preferred stock pursuant to the redemption agreement (resulting in an aggregate $4.3 million accretion for fiscal 1997). The Company recorded a final accretion adjustment of approximately $374,000 during the first quarter of fiscal 1998 related to the redemption of the redeemable preferred stock.
ITEM 7.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis of the Company's financial condition and results of operations is qualified in its entirety by, and should be read in conjunction with, the more detailed information and consolidated financial statements, including the notes thereto, appearing elsewhere in this Report.
RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated, certain items from the Company's statements of income as a percentage of net sales for the periods indicated.
FISCAL 2001 COMPARED TO FISCAL 2000
Net sales decreased from $126.8 million in fiscal 2000 to $123.0 million in fiscal 2001, a decrease of 3.0%. During fiscal 2001, lower unit sales of less-expensive telescopes manufactured in Asia, lower telescope accessory sales, the negative effect of seasonal promotional markdowns and product promotions, and decreased sales from the Company's European subsidiary more than offset increases in sales of both the Company's advanced telescopes manufactured domestically and less-expensive and mid-range products assembled in the Company's Mexican facility.
Gross profit decreased from $51.0 million (40.2% of net sales) in fiscal 2000 to $40.2 million (32.7% of net sales) in fiscal 2001, a decrease of 21.2%. The decrease in gross profit was principally due to the decrease in net sales from the prior year and a decrease in the gross margin percentage. The decrease in the gross margin percentage was principally due to the effect of charges to gross profit of approximately $3 million and approximately $6.1 million, taken in the third and fourth quarter, respectively. These charges related to the aforementioned seasonal product markdowns and promotions as well as to provisions for excess inventories resulting from the lower sales volume. Gross profit was also negatively affected by lower average gross margins on products sold at the Company's European subsidiary.
Selling expenses increased from $15.5 million (12.2% of net sales) in fiscal 2000 to $21.8 million (17.7% of net sales) in fiscal 2001, an increase of 40.8%. This increase principally reflects higher advertising and marketing expenses that increased by more than $4 million over the prior year. Those expenses were part of an aggressive print media and point-of-sale advertising campaign aimed at the general consumer throughout the year but concentrated during the Christmas holiday buying period. Also contributing to the increase over the prior year was higher bad debt expenses brought on by certain customer bankruptcies and other general selling expense increases.
General and administrative expenses decreased from $10.4 million (8.2% of net sales) in fiscal 2000 to $8.4 million (6.9% of net sales) in fiscal 2001, a decrease of 18.5%. This decrease was principally due to decreases in compensation expenses during the year. Also contributing to the decrease were lower professional and consulting fees and other sundry expense reductions.
ESOP contribution expense increased from $1.9 million (1.4% of net sales) in fiscal 2000 to $3.0 million (2.4% of net sales) in fiscal 2001, an increase of 61.0%. The increase in this non-cash charge was due to increases in the average market price of the Company's stock allocated to the Employee Stock Ownership Plan during fiscal 2001. The non-cash ESOP contribution expense may fluctuate as the market value of the Company's common stock changes.
Research and development expenses increased from $1.4 million (1.1% of net sales) in fiscal 2000 to $2.1 million (1.7% of net sales) in fiscal 2001, an increase of 51.5%. This increase was due to increased engineering personnel costs, outside consulting costs and parts and supplies costs related to telescope and other consumer related products, the development of industrial optical products for TeraBeam Corporation and the development of certain CCD imaging products for commercial and industrial applications.
Interest expense increased from $977,000 for the fiscal year 2000 to $2.0 million for fiscal 2001, an increase of 108.4%. This increase was due to interest expense on the $5.0 million Term Loan, higher average borrowings on the Company's bank lines of credit and higher average market interest rates compared to the prior period.
The provision for income taxes increased to 55.3% of income before income taxes for fiscal year 2001 compared to 43.1% in the prior year. The increase in the tax rate was principally due to the impact of non-deductible permanent differences between the Company's tax books and its financial statements. The most significant of these differences was the ESOP charge.
FISCAL 2000 COMPARED TO FISCAL 1999
Net sales increased from $76.3 million in fiscal 1999 to $126.8 million in fiscal 2000, an increase of 66.2%. This increase was primarily due to increases in unit sales of less-expensive telescopes including those manufactured domestically and those manufactured in Taiwan and continuing strong sales of telescope accessories. Approximately $13.0 million of the increase in net sales was attributable to the Bresser acquisition.
Gross profit increased from $32.1 million (42.0% of net sales) in fiscal 1999 to $51.0 million (40.2% of net sales) in fiscal 2000, an increase of 59.1%. While gross margin for the Company's core business experienced little change from the previous year, overall gross margin declined due to the acquisition of Bresser. As a distributor only of optical products, Bresser is subject to gross margins that are typically lower than the margins the Company, as a manufacturer and distributor, has experienced in the past.
Selling expenses increased from $12.3 million (16.0% of net sales) in fiscal 1999 to $15.5 million (12.2% of net sales) in fiscal 2000, an increase of 26.1%. This dollar increase principally reflects higher freight costs, higher commissions and other selling costs to support higher sales volumes in fiscal 2000 as compared to fiscal 1999.
General and administrative expenses increased from $7.3 million (9.6% of net sales) in fiscal 1999 to $10.4 million (8.2% of net sales) in fiscal 2000, an increase of 41.4%. This dollar increase was generally due to increases in personnel and benefit related costs.
ESOP contribution expense increased from $1.2 million (1.6% of net sales) in fiscal 1999 to $1.9 million (1.4% of net sales) in fiscal 2000, an increase of 55.1%. The increase in this non-cash charge was due to increases in the average market price of the Company's stock allocated to the Employee Stock Ownership Plan during fiscal 2000. The non-cash ESOP contribution expense may fluctuate as the market value of the Company's common stock changes.
Research and development expenses increased from $978,000 (1.3% of net sales) in fiscal 1999 to $1.4 million (1.1% of net sales) in fiscal 2000, an increase of 39.2%. This dollar increase was due to higher personnel related costs and higher outside consulting costs during fiscal 2000 as compared to the prior fiscal year.
Interest expense increased from $473,000 for the fiscal year ended February 28, 1999 to $977,000 for fiscal 2000, an increase of 106.6%. This increase was principally due to interest expense on the $5.0 million Term Loan and interest expense on short-term bank borrowings in Germany for the period.
SEASONALITY AND QUARTERLY RESULTS OF OPERATIONS
The Company has experienced, and expects to continue to experience, substantial fluctuations in its sales, gross margins and profitability from quarter to quarter. Factors that influence these fluctuations include the volume and timing of orders received, changes in the mix of products sold, market acceptance of the Company's products, competitive pricing pressures, the Company's ability to meet increasing demand and delivery schedules, the timing and extent of research and development expenses, the timing and extent of product development costs and the timing and extent of advertising expenditures. In addition, a substantial portion of the Company's net sales and operating income typically occurs in the third quarter of the Company's fiscal year primarily due to disproportionately higher customer demand for less-expensive telescopes during the holiday season. The Company continues to experience significant sales to mass merchandisers. Mass merchandisers, along with specialty retailers, purchase a considerable amount of their inventories to satisfy such seasonal customer demand. These purchasing patterns have caused the Company to increase its level of inventory during its second and third quarters in response to such demand or anticipated demand. As a result, the Company's working capital requirements have correspondingly increased at such times.
The following tables (in thousands of dollars) present unaudited financial results for each of the eight quarters in the period ended February 28, 2001. The Company believes that all necessary adjustments have been included to present fairly the quarterly information when read in conjunction with the consolidated financial statements and notes included elsewhere in this Report. The operating results for any quarter are not necessarily indicative of the results for any subsequent quarter.
Quarterly results can be affected by a number of factors including the timing of orders, production delays or inefficiencies, and raw materials availability. See "Business -- Operations -- Materials and Supplies."
LIQUIDITY AND CAPITAL RESOURCES
The Company funded its operations with internally generated cash flow and short-term borrowings from banks. Internally generated cash flow from net income adjusted for non-cash charges was more than offset by increases in accounts receivable, inventories and prepaid income taxes. A substantial portion of the Company's net sales typically occur in the third quarter primarily due to disproportionately higher customer demand for less-expensive telescopes during the Christmas holiday season. The increase in inventories was due to significantly lower than expected unit and dollar sales for the third quarter of the Company's fiscal year 2001. The increase in accounts receivable was principally due to the timing of sales and cash collections during the fourth quarter of fiscal 2001 compared to the prior year. With an August tax year end and the unexpected decline in third and fourth quarter sales and profits coupled with a higher than expected tax deduction from the exercise of stock options, the Company's estimated tax payments generated significant prepaid taxes at February 28, 2001. Net working capital totaled approximately $38.9 million at February 28, 2001, up from $36.6 million at February 29, 2000. Working capital requirements fluctuate during the year due to the seasonal nature of the business. These requirements are typically financed through a combination of internally generated cash flow from operating activities and short-term bank borrowings.
On September 1, 1999 the Company acquired 100% of the stock and equity interests in Bresser for $5.0 million in cash and 201,830 shares of the Company's common stock valued at approximately $2.0 million. Bresser is a German distributor of binoculars, telescopes, microscopes and other consumer optical products. To fund the cash portion of the purchase price the Company borrowed $5.0 million under the Term Loan on August 31, 1999. Bresser has provided the Company greater international distribution opportunities for its products. Further, Bresser's significant presence in the binocular and low-priced telescope market has strengthened the Company's penetration into these markets. Further to that end, in January 2000, the Company purchased what was formerly its German distributor for approximately $1.1 million cash.
On August 31, 1999 the Company entered into a loan agreement (the "Loan Agreement") with a bank, replacing its then existing credit facilities. The Loan Agreement provided the Company with an aggregate $40.0 million credit facility consisting of a five year $35.0 million revolving credit line (the "Revolving Loan") and a five year $5.0 million term loan (the "Term Loan"). The Term Loan was subject to quarterly amortization payments of $250,000 beginning September 30, 2000. In connection with the acquisition of Bresser, the Company borrowed $5.0 million under the Term Loan on August 31, 1999. The Term Loan was also subject to mandatory prepayments upon the happening of certain events. Amounts outstanding under the Revolving Loan and Term Loan bore interest, at the Company's option, at a base rate or eurodollar rate plus an applicable margin. The Company's obligations under the Loan Agreement are guaranteed by each of the Company's domestic subsidiaries and are secured by substantially all of the assets of the Company and its domestic subsidiaries. The Loan Agreement contained certain financial covenants and customary affirmative and negative covenants and events of default. As of February 28, 2001, the Company was in breach of the financial covenants set forth in the Loan Agreement. The Company has received a Waiver Agreement (the "Waiver") from the bank covering the breach as of February 28, 2001. The Waiver modifies the covenants through August 31, 2001, at which time the Company would again be required to be in compliance with the original covenants. The Waiver also reduced the amount of borrowings under the revolving credit line to $22,500,000. The Company is currently negotiating to renew its loan agreement with the bank. The Company anticipates the new loan agreement to be in the form of a $42,000,000 revolving credit facility and a $3,000,000 term loan. Availability under the new loan agreement would be subject to a borrowing base with standard advance rates against eligible accounts receivable and inventories and would be collateralized by substantially all of the assets of the Company and its domestic subsidiaries. Management believes the Company will be able to enter into the new loan agreement in order to meet its working capital needs for the foreseeable future. However, there can be no assurance that the Company will be successful in entering into a new loan agreement with its current lender. Should the Company be unable to do so, it would be required to seek alternative sources of capital in order to repay its current borrowings with the bank. There can be no assurance that such alternative sources of capital will be available on reasonable terms, if at all. Failure to obtain such alternative sources of capital would have a material adverse effect on the Company's financial condition and its ability to achieve its business plan and objectives.
Capital expenditures, including financed purchases of equipment, aggregated $2.4 million, $2.7 million and $2.1 million for the fiscal years ended February 28(29), 2001, 2000 and 1999, respectively. Included in purchases of equipment for fiscal 1999 is approximately $1.3 million for equipment sold and leased back under operating leases. The Company had no material capital expenditure commitments as of February 28, 2001.
Contributions to the Company's Employee Stock Ownership Plan ("ESOP") are accounted for as a contribution expense on the Company's income statement and are accrued quarterly based upon the expected annual contribution amount. As quarterly contributions are accrued, the corresponding number of shares are added to the Weighted Average Common Shares Outstanding and Unearned ESOP Shares on the Company's Balance Sheet are reduced. The ESOP uses the contributions to repay amounts due on the ESOP Loan. The ESOP contribution expense is a net non-cash charge which is added back to net income to arrive at cash flows provided by operating activities. As the Company makes these non-cash contributions to the ESOP to fund the repayment of the ESOP Loan, the Company will realize cash tax savings equal to the product of the tax basis of the contributions, multiplied by the applicable statutory tax rates in effect at the time.
Based on the Company's expectations regarding the new loan agreement as set forth above, the Company believes that internally generated cash flow and borrowing ability will be sufficient to meet its operating, working capital and capital expenditure requirements for the foreseeable future. In the event that the Company requires more capital than is presently anticipated, the Company's cash balances may be consumed and additional sources of liquidity, such as debt or equity financings, may be required to meet its capital needs. There can be no assurance that additional capital beyond the amounts the Company currently requires will be available on reasonable terms, if at all.
INFLATION
The Company does not believe that inflation has had a material effect on the results of operations during the past three years. There can be no assurance that the Company's business will not be affected by inflation in the future.
NEW ACCOUNTING PRONOUNCEMENTS
In June 1998 the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 133; Accounting for Derivative Instruments and Hedging Activities ("SFAS 133"). SFAS 133 is required to be adopted in fiscal years beginning after June 15, 2000 and establishes accounting and reporting standards for derivative instruments and for hedging activities. The Company does not anticipate that the adoption of SFAS 133 will have a material impact on its financial position or results of operations.
FORWARD-LOOKING INFORMATION
The preceding "Management's Discussion and Analysis of Financial Condition and Results of Operations" section contains various "forward looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities and Exchange Act of 1934, as amended, which represent the Company's reasonable judgment concerning the future and are subject to risks and uncertainties that could cause the Company's actual operating results and financial position to differ materially, including the following: the Company's ability to expand the markets for telescopes, binoculars and other optical products as a result of its increased advertising and marketing efforts; the Company's ability to continue to develop and bring to market new and innovative products; the Company's ability to integrate and develop its wholly-owned manufacturing facility in Mexico in combination with its existing manufacturing capabilities; the Company expanding its distribution network; the Company's ability to integrate and further develop the business of Bresser in combination with the Company's existing business; the Company experiencing fluctuations in its sales, gross margins and profitability from quarter to quarter consistent with prior periods; the extent to which the Company will be able to execute a new loan agreement; the extent to which the Company will be able to leverage its design and manufacturing expertise in the areas of free-space optics and CCD imaging; and the Company's expectation that it will have sufficient funds to meet any working capital requirements during the foreseeable future with internally generated cash flow and borrowing ability.
In addition to other information in this report, the Company cautions that certain factors, including, without limitation, the following, should be considered carefully in evaluating the Company and its business and that such factors may cause the Company's actual operating results to differ materially from those set forth in the forward looking statements described above or to otherwise be adversely affected: any significant decline in general economic conditions or uncertainties affecting consumer spending; any general decline in demand for the Company's products; any inability to continue to design and manufacture products that will achieve and maintain commercial success; any failure of the Company to penetrate the binocular market and achieve meaningful sales; any significant interruption of the Company's manufacturing abilities in its domestic or Mexican facilities or in any of its suppliers located in the far east; greater than anticipated competition; any loss of, or the failure to replace, any significant portion of the sales made to any significant customer of the Company; the inherent risks associated with international sales, including variations in local economies, fluctuating exchange rates (including conversion to Euros), increased difficulty of inventory management, greater difficulty in accounts receivable collections, costs and risks associated with localizing products for foreign countries, changes in tariffs and other trade barriers, adverse foreign tax consequences, cultural differences affecting product demand and customer service and burdens of complying with a variety of foreign laws; the inherent risks associated with products manufactured or assembled outside of the United States, including, among other things, imposition of quotas or trade sanctions, fluctuating exchange rates, shipment delays or political instability and increasing ESOP charges in the event the market price of the Company's stock increases.
ITEM 7A.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company is exposed to certain levels of market risks, including changes in foreign currency exchange rates and interest rates. Market risk is the potential loss arising from adverse changes in market rates and prices, such as foreign currency exchange and interest rates.
The Company conducts business in a number of foreign currencies, principally in Europe. These currencies have been relatively stable against the U.S. dollar for the past several years. As a result, foreign currency fluctuations have not had a material impact historically on Meade's revenues or results of operations. There can be no assurance that European currencies will remain stable relative to the U.S. dollar or that future fluctuations in the value of foreign currencies will not have a material adverse effect on the Company's business, operating results, revenues and financial condition. The Company has and will continue to consider the adoption of a foreign currency hedging program.
The Company does not enter into derivatives or other financial instruments for trading, speculative purposes or to manage its interest rate risk. The Company's financial instruments consist of cash, accounts receivable, accounts payable, and long-term obligations. The Company's exposure to market risk for changes in interest rates relates primarily to short-term investments and short-term obligations. As a result, the Company does not expect fluctuations in interest rates to have a material impact on the fair value of these instruments.
ITEM 8.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Information with respect to this item is set forth in Item 14.
ITEM 9.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
PART III
ITEM 10.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information with respect to this item is incorporated by reference from the Company's definitive Proxy Statement to be filed with the Commission within 120 days after the close of the Company's fiscal year. Information regarding executive officers of the Company is set forth under the caption "Executive Officers of the Registrant" in Item 1 hereof.
ITEM 11.
ITEM 11. EXECUTIVE COMPENSATION
Information with respect to this item is incorporated by reference from the Company's definitive Proxy Statement to be filed with the Commission within 120 days after the close of the Company's fiscal year.
ITEM 12.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Information with respect to this item is incorporated by reference from the Company's definitive Proxy Statement to be filed with the Commission within 120 days after the close of the Company's fiscal year.
ITEM 13.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information with respect to this item is incorporated by reference from the Company's definitive Proxy Statement to be filed with the Commission within 120 days after the close of the Company's fiscal year.
PART IV
ITEM 14.
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULE, AND REPORTS ON FORM 8-K
(a) The following documents are filed as part of this report:
(b) Reports on Form 8-K:
None.
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders of Meade Instruments Corp.
In our opinion, the consolidated financial statements listed in the index appearing under Item 14(a)(1) on page 17 present fairly, in all material respects, the financial position of Meade Instruments Corp. and its subsidiaries at February 28, 2001 and February 29, 2000, and the results of their operations and their cash flows for each of the three years in the period ended February 28, 2001, in conformity with accounting principles generally accepted in the United States of America. In addition, in our opinion, the financial statement schedule listed in the index appearing under 14(a)(2) on page 17, presents fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements. These financial statements and financial statement schedule are the responsibility of the Company's management; our responsibility is to express an opinion on these financial statements and financial statement schedule based on our audits. We conducted our audits of these statements in accordance with auditing standards generally accepted in the United States of America, which 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, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
/s/ PRICEWATERHOUSECOOPERS LLP
PricewaterhouseCoopers LLP
Orange County, California April 18, 2001
MEADE INSTRUMENTS CORP.
CONSOLIDATED BALANCE SHEETS
ASSETS
See accompanying notes to consolidated financial statements.
MEADE INSTRUMENTS CORP.
CONSOLIDATED STATEMENTS OF INCOME
See accompanying notes to consolidated financial statements.
MEADE INSTRUMENTS CORP.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
See accompanying notes to consolidated financial statements.
MEADE INSTRUMENTS CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS
See accompanying notes to consolidated financial statements.
MEADE INSTRUMENTS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. THE COMPANY AND OPERATIONS
THE COMPANY
Meade Instruments Corp. (the "Company"), a Delaware corporation, is a multinational consumer optics company that designs, manufactures, imports and distributes telescopes, telescope accessories, binoculars and other optical products. The Company has operations in the United States, Germany and Mexico.
OPERATIONS
During fiscal 2001, the Company experienced lower than anticipated unit sales of less-expensive telescopes manufactured in Asia, lower telescope accessory sales, the negative effect of seasonal promotional markdowns and product promotions, and decreased sales from the Company's European subsidiary. This caused the Company to be in breach of the financial covenants of its loan agreement. See Note 4. The Company has received a Waiver Agreement (the "Waiver") from the bank covering the breach as of February 28, 2001. The Waiver modifies the covenants through August 31, 2001, at which time the Company would again be required to be in compliance with the original covenants. The Waiver also reduced the amount of borrowings under the revolving credit line to $22,500,000. The Company is currently negotiating to renew its loan agreement with the bank. The Company anticipates the new loan agreement to be in the form of a $42,000,000 revolving credit facility and a $3,000,000 term loan. Availability under the new loan agreement would be subject to a borrowing base with standard advance rates against eligible accounts receivable and inventories and would be collateralized by substantially all of the assets of the Company and its domestic subsidiaries. Management believes the Company will be able to enter into the new loan agreement in order to meet its working capital needs for the foreseeable future. However, there can be no assurance that the Company will be successful in entering into a new loan agreement with its current lender. Should the Company be unable to do so, it would be required to seek alternative sources of capital in order to repay its current borrowings with the bank. There can be no assurance that such alternative sources of capital will be available on reasonable terms, if at all. Failure to obtain such alternative sources of capital would have a material adverse effect on the Company's financial condition and its ability to achieve its business plan and objectives.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of consolidation
The accompanying consolidated financial statements include the accounts of the Company and all of its 100%-owned subsidiaries and reflect the elimination of all significant intercompany account balances and transactions.
Revenue recognition
Revenues are generally recorded when title transfers and the risks of ownership are passed to customers. Provisions for returns are provided for in the same period the related sales are recorded.
Foreign currency translation
The assets and liabilities of the Company's foreign operations are translated at end of period exchange rates. Revenues and expenses are translated at the average exchange rates prevailing during the period. The effects of unrealized exchange rate fluctuations on translating foreign currency assets and liabilities into U.S. dollars are accumulated in stockholders' equity as a component of other comprehensive income.
Allowance for doubtful accounts
The Company evaluates the collectibility of its accounts receivable at least quarterly, based upon various factors including the financial condition and payment history of major customers and an overall review of collections experience on other accounts and economic factors or events expected to affect the Company's future collections experience.
Inventories
Inventories are stated at the lower of cost, as determined using the first-in, first-out ("FIFO") method, or market. Costs include materials, labor and manufacturing overhead. The Company evaluates the carrying value of its inventories at least quarterly, taking into account such factors as historical and anticipated future sales compared with quantities on hand and the price the Company expects to obtain for its products in their respective markets compared with historical costs.
Property and equipment
Property and equipment are stated at cost and are depreciated using the straight-line method over the estimated useful lives of the assets. Buildings and related improvements are depreciated over seven to twenty-five years. All other property and equipment, except property held under capital lease, is depreciated over three to seven years.
MEADE INSTRUMENTS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Properties held under capital leases are recorded at the present value of the noncancellable lease payments over the term of the lease and are amortized over the shorter of the lease term or the estimated useful lives of the assets.
Goodwill and intangibles
The difference between the purchase price and the fair value of net assets acquired (goodwill) at the date of acquisition is included in the accompanying consolidated balance sheets in other assets. Goodwill and intangible assets are amortized over the estimated period to be benefited which ranges from seven to fifteen years. Goodwill and intangible assets are reviewed whenever events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable. The Company reviews the recoverability by comparing the estimated future cash flows on an undiscounted basis to the net book value of the assets. In the event that projected undiscounted cash flows are less than the net book value of the assets, the carrying value of the assets are written down to their fair value, less costs to sell. Fair value is generally based on a discounted cash flow analysis. Assets that are to be disposed of are measured at the lower of cost or fair value, less costs to sell.
Income taxes
The Company uses the liability method of accounting for income taxes. Under this method deferred tax assets and liabilities are determined based on differences between financial reporting and tax bases of assets and liabilities and are measured using the enacted tax rates that will be in effect when the differences are expected to reverse. The Company files its tax return for the year ending August 31, rather than for the financial reporting period ending the last day of February.
Advertising
The Company expenses the production costs of advertising as incurred. For the years ended February 28(29), 2001, 2000 and 1999, the Company incurred advertising expenses of approximately $10,800,000, $6,400,000 and $6,300,000, respectively.
Research and development
Expenditures for research and development costs are charged to expense as incurred.
Net income per share
Basic earnings per share amounts exclude the dilutive effect of potential common shares. Basic earnings per share is based upon the weighted-average number of common shares outstanding. Diluted earnings per share is based upon the weighted-average number of common shares and dilutive potential common shares outstanding. Potential common shares are outstanding stock options under the Company's stock incentive plan which are included under the treasury stock method.
The following is a reconciliation of the denominators of the basic and diluted earnings per share computations for the fiscal years ended February 28 (29), 2001, 2000 and 1999.
On May 5, 2000, the Company declared a two-for-one stock split of the Company's common stock, to be effected in the form of a stock dividend. The dividend was paid on June 19, 2000 to stockholders of record on May 22, 2000. All share and per share amounts in the accompanying consolidated financial statements and notes thereto have been adjusted to reflect the stock split.
MEADE INSTRUMENTS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Comprehensive income
Comprehensive income is defined as a change in the equity of a business enterprise during a period from transactions and other events and circumstances from non-owner sources. In the accompanying financial statements, the only component of comprehensive income other than net income is currency translation adjustments.
Concentration of credit risk
Financial instruments which potentially subject the Company to concentration of credit risk are principally accounts receivable. The Company maintains an allowance for doubtful accounts at a level deemed appropriate by management based on historical and other factors that affect collectibility. One of the Company's significant customers filed for voluntary reorganization during fiscal year 1999. Another of the Company's significant customers and several smaller customers filed for bankruptcy during fiscal 2001. Based upon the Company's assessment of the recoverability of the receivables from these customers and in the opinion of management, the Company has established adequate provisions related to these receivables.
Fair value of financial instruments
The carrying amounts of cash, accounts receivable, prepaid expenses and other current assets, accounts payable, accrued liabilities, and short-term loans approximate fair value due to the short maturity of these instruments.
Use of estimates in the preparation of financial statements
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the respective reporting periods. Actual results could differ from those estimates.
Stock-based compensation
The Company has adopted the disclosure only provisions of Statement of Financial Accounting Standards ("SFAS") No. 123 for stock options issued to employees. Compensation cost for stock-based compensation issued to employees has been measured using the intrinsic value method provided by Accounting Principles Board No. 25.
Accounting pronouncements
In December 1999, the Securities and Exchange Commission (the "SEC") released Staff Accounting Bulletin ("SAB") No. 101, which provides guidance on the recognition, presentation and disclosure of revenue in financial statements filed with the SEC. The Company adopted SAB 101 in the fourth quarter of 2001 and its adoption has not had a material effect on the Company's results of operations or financial position.
In June 1998 the Financial Accounting Standards Board issued SFAS No. 133; Accounting for Derivative Instruments and Hedging Activities. SFAS 133 is required to be adopted in fiscal years beginning after June 15, 2000 and establishes accounting and reporting standards for derivative instruments and for hedging activities. Management does not expect the adoption of SFAS 133 to have a material impact on the Company's financial position or results of operations.
Reclassifications
Certain reclassifications have been made to conform prior year information to the fiscal 2001 presentation.
MEADE INSTRUMENTS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
3. ACQUISITIONS
On September 1, 1999 the Company acquired 100% of the stock and equity interests in Bresser Optik GmbH & Co. KG, and Bresser Optik Geschaftsfuhrung und Verwaltungs GmbH (collectively "Bresser"), for $5,000,000 in cash and 201,830 shares of the Company's common stock valued at $2,044,000. Bresser is a German distributor of binoculars, telescopes, microscopes and other consumer optical products. To fund the cash portion of the purchase price the Company borrowed $5,000,000 under the Term Loan on August 31, 1999. The acquisition of Bresser was accounted for using the purchase method of accounting. The purchase price allocation was based upon appraisals, evaluations and other studies of fair value of the assets acquired. The excess of the purchase price over the fair value of net assets acquired is included in other assets at February 29, 2000 and is being amortized on a straight-line basis over the period to be benefited which is estimated to be fifteen years.
The following table presents unaudited consolidated pro forma financial information for the two years ended February 29, 2000, as though the acquisition occurred on March 1, 1998.
The unaudited pro forma financial information is presented for information purposes only and is not necessarily indicative of the operating results that would have occurred had the acquisitions taken place on March 1, 1998. In addition, the pro forma results are not intended to be a projection of the future results and do not reflect any synergies that might be achieved from the combined operations.
A summary of the purchase price allocation of the acquisition is as follows:
In January 2000 the Company's German subsidiary acquired certain assets of Astrocom GmbH, formerly the Company's German distributor. For consideration of approximately $1,100,000 cash the Company acquired certain property and equipment, inventory and customer accounts. The acquisition is not material to the results of operations or the financial position of the Company.
4. BANK DEBT
On August 31, 1999 the Company entered into a loan agreement (the "Loan Agreement") with a bank, replacing its then existing credit facilities. The Loan Agreement provided the Company with an aggregate $40,000,000 credit facility consisting of a five year $35,000,000 revolving credit facility (the "Revolving Loan") and a five year $5,000,000 term loan (the "Term Loan"). In connection with the acquisition of Bresser Optik (see Note 3), the Company borrowed $5,000,000 under the Term Loan on August 31, 1999. The Term Loan was subject to quarterly principal amortization payments of $250,000 beginning September 30, 2000. The Term Loan was also subject to
MEADE INSTRUMENTS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
mandatory prepayments upon the happening of certain events. Amounts outstanding under the Revolving Loan and Term Loan bore interest, at the Company's option, at a base rate (9.0% at February 28, 2001 or eurodollar rate plus an applicable margin. The Loan Agreement contained certain financial covenants and customary affirmative and negative covenants and events of default. As of February 28, 2001, the Company was in breach of the financial covenants set forth in the Loan Agreement. The Company has received the Waiver from the bank covering the breach as of February 28, 2001. The Waiver modifies the covenants through August 31, 2001 at which time the Company would again be required to be in compliance with the original covenants. The Waiver also reduced the amount of borrowings under the revolving credit line to $22,500,000. (See Note 1.)
At February 28, 2001 the Company guaranteed up to approximately $3,500,000 of indebtedness of its German operating subsidiary. Short-term bank borrowings at the German subsidiary, totaling $1,745,000 at February 28, 2001, bear interest at the banks' base rates (ranging from 5.7% to 8.7% at February 28, 2001).
5. COMMITMENTS AND CONTINGENCIES
In December 1996 the Company executed a lease commencing October 1, 1997 for its corporate office and manufacturing facilities. The lease term is ten years, extendable for an additional ten years (two terms of five years each) at the Company's option. Lease commitments for this lease are subject to 9% increases at the beginning of the months 31, 61 and 91. In February 2000, the Company entered into a lease for warehouse space located near the Company's corporate headquarters. The warehouse lease expires in 2003.
In August 1999, the Company entered into a lease for an assembly facility in Tijuana, Mexico. The lease term is five years with three, five year renewal options. In January 2000, the Company entered into a lease for an office, repair and distribution facility in Graefelfing, Germany. The lease expires in August 2002.
Aggregate future minimum commitments under noncancellable leases and other agreements at February 28, 2001 that have remaining terms in excess of one year are as follows:
For the fiscal years ended February 28 (29), 2001, 2000 and 1999, the Company incurred rent expense of $2,294,000, $1,521,000 and $1,207,000, respectively.
On June 3, 1998 a complaint was filed against the Company alleging infringement of a U.S. patent by the Company. On April 29, 1999, the Company filed a motion requesting summary judgment that the Company has not infringed the patent and a motion requesting summary judgment that the patent is invalid. On June 30, 1999, the court granted the motion for summary judgment of non-infringement. On July 2, 1999, the court held that the Company has not infringed the patent. On July 27, 1999 the opposing party filed a purported notice of appeal with respect to the summary judgment motion. On May 2, 2000 the Company filed a motion to dismiss the appeal. On June 23, 2000 the court granted the Company's motion and ordered a dismissal of the appeal. On July 7, 2000, the opposing party filed a petition for rehearing of the appeal. On March 12, 2001, the appellate court denied the opposing party's petition for a rehearing of the appeal. In the event of any further proceedings on the merits, the
MEADE INSTRUMENTS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Company intends to vigorously defend the judgment. The ultimate liability of the Company under this action is not presently determinable. After discussion with counsel, and in light of the summary judgment and actions of the appellate court, it is the opinion of management that such liability is not expected to have a material effect on the Company's financial position or results of operations.
The Company is involved from time to time in litigation incidental to its business. Management believes that the outcome of current litigation will not have a material adverse effect on the Company.
6. EMPLOYEE STOCK OWNERSHIP PLAN
Adoption of the ESOP was effective March 1, 1996 and covers all employees of the Company who meet certain service and eligibility requirements. A participant becomes 100% vested in his ESOP account if, while employed at the Company, the participant (i) reaches his 60th birthday, (ii) becomes disabled (as defined), (iii) dies, or (iv) achieves three years of credited service (as defined). Distributions of a participant's vested account are directed by the ESOP's Administrative Committee. The Company provides a put option to any participant who receives a distribution of Company stock, unless the stock is readily tradable on an established market.
In April 1996 the ESOP purchased 3,000,000 shares of common stock held by the existing stockholders for $11,000,000. The ESOP financed the purchase of the common stock (the "financed shares") with the proceeds of an $11,000,000 term loan (the "acquisition loan") from the Company. The financed shares are held by the Meade Instruments Corp. Employee Stock Ownership Trust (the "ESOP trust"). The ESOP pledged the financed shares to the Company as security for the acquisition loan. The financed shares were initially credited to a suspense account on the books of the ESOP and will be allocated to the accounts of individual ESOP participants, as of each plan year end, for payments made on the acquisition loan. The acquisition loan has a twenty year term and bears interest at 6% per annum. Principal and interest is due annually, subject to the Company making contributions to the ESOP to fund the principal and interest payments. The release of financed shares from collateral is based on a formula defined in the plan. The Company accounts for its ESOP in accordance with Statement of Position 93-6. Accordingly, the shares pledged as collateral are reported as unearned ESOP shares in the balance sheet. As shares are committed to be released from collateral, the Company records compensation expense, and the shares become outstanding for net income per share purposes. Any dividends on allocated shares are recorded as a reduction of retained earnings; any dividends on unallocated ESOP shares are recorded as a reduction of debt and accrued interest.
For the years ended February 28 (29), 2001, 2000 and 1999, the Company recognized ESOP contribution expense of $2,997,000, $1,861,000 and $1,200,000, respectively.
As of February 28, 2001 approximately 1,206,000 shares in the ESOP trust have been allocated to individual participants. Allocation to individual participant accounts are made in the ratio that the compensation of each participant bears to the total compensation of all such participants. There are approximately 220,000 shares committed to be released as of February 28, 2001. Shares in suspense at February 28, 2001 are 1,794,000.
The fair value of the common stock upon purchase from the existing stockholders in April 1996 was determined to be $3.67 per share. Under the terms of the ESOP, the fair value of the common stock at any plan year end is to be determined by an independent appraiser so long as the stock is not readily tradable on an established market. The fair value of the shares held by the ESOP at February 28, 2001 was $6.25 per share, the market price as determined by the Nasdaq National Market. At February 28, 2001 there was no repurchase obligation.
MEADE INSTRUMENTS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
7. INCOME TAXES
Pretax income from continuing operations for each of the three years ended February 28 (29), 2001, 2000 and 1999 consists of the following:
Significant components of the provision for income taxes are as follows:
The provision for income taxes differed from the amount computed by applying the U.S. federal statutory rate to income before income taxes due to the effects of the following:
The significant components of the net deferred tax asset were as follows:
8. BUSINESS SEGMENTS, GEOGRAPHIC DATA AND MAJOR CUSTOMERS
The Company is a multinational consumer optics company that designs, manufactures, imports and distributes telescopes, telescope accessories, binoculars and other optical products. The Company is organized and operates as one segment in two principal geographic locations - North America and Europe. The following tables present
MEADE INSTRUMENTS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
information about product sales and geographic data for the fiscal years ended February 28 (29), 2001, 2000 and 1999.
The Company generated 13% of its revenue from one customer during the year ended February 28, 2001. No single customer accounted for 10% or more of the Company's revenue for the year ended February 29, 2000. The Company generated 14% of its revenue from one customer during the year ended February 28, 1999.
9. STOCK INCENTIVE PLAN
In February 1997, the Company's Board of Directors adopted the 1997 Stock Incentive Plan (the "Plan"). The Plan provides for the grant of incentive and non-qualified stock options, restricted stock, stock appreciation rights ("SARs"), and performance share awards to certain key employees (including officers, whether or not directors) of the Company or its subsidiaries. The Company has received director and stockholder approval to grant options and other awards with respect to 4,000,000 shares of common stock under the Plan. Awards under the Plan generally vest after six months and become exercisable over a four-year period, or as determined by the Compensation Committee of the Board of Directors. Stock options generally remain exercisable for a period of ten years from the date of grant. The Board of Directors has also granted non-qualified stock options to purchase common stock to each of the Company's non-employee directors. The non-employee directors are granted 5,000 options each when elected and 5,000 each upon their re-election to the Board of Directors at the Company's Annual Meeting each year. The directors' options vest in equal annual amounts over three years. Option activity during fiscal years 2001 and 2000 was as follows:
MEADE INSTRUMENTS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
The exercise price of options granted to employees was equal to the market price at the grant date. Options granted to employees generally become exercisable 25% after one year and ratably over the following 36 months or as otherwise determined by the Board of Directors. At February 28, 2001, outstanding options for common stock held by Company employees totaled 3,423,000 of which 2,806,000 were vested. The option prices range from $3.50 to $27.75 per share and are exercisable over periods ending no later than 2011.
The Company has adopted the disclosure only provisions of SFAS No. 123. Accordingly, no compensation cost has been recognized for the fixed stock option plans. Had compensation cost for the Company's stock-based compensation plans been determined based on the fair value at the grant dates for awards under those plans, consistent with the method prescribed by SFAS No. 123, the Company's net income available to common stockholders and earnings per share would have been reduced to the pro forma amounts indicated below.
The pro forma disclosures are not representative of the effects on net income available to common stockholders and earnings per share in future years.
The fair value of the Company's stock options used to compute pro forma net income and earnings per share disclosures is the estimated present value at grant date using the Black-Scholes option-pricing model with the following assumptions:
10. COMPOSITION OF CERTAIN BALANCE SHEET ACCOUNTS
The composition of inventories is as follows:
MEADE INSTRUMENTS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
The composition of other assets is as follows:
The composition of property and equipment is as follows:
The gross value of assets under capital leases included above are $1,724,000 and $1,700,000 at February 28, 2001, and February 29, 2000, respectively. For the fiscal years ended February 28(29), 2001, 2000 and 1999, the Company incurred depreciation expense of $1,551,000, $1,156,000 and $755,000, respectively.
The composition of accrued liabilities is as follows:
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Dated: May 30, 2001 MEADE INSTRUMENTS CORP.
By: /s/ JOHN C. DIEBEL ---------------------------- John C. Diebel Chairman of the Board and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
II - VALUATION AND QUALIFYING ACCOUNTS
- ---------- (1) Write-off of delinquent accounts
EXHIBIT INDEX
- ----------
+ Previously filed with the Securities and Exchange Commission as set forth in the following table:
(a) Incorporated by reference to the Company's Registration Statement on Form S-1 (Registration No. 333-21123), as filed with the Securities and Exchange Commission on February 4, 1997.
(b) Incorporated by reference to the Company's Amendment No. 1 to Registration Statement on Form S-1 (Registration No. 333-21123), as filed with the Securities and Exchange Commission on February 27, 1997.
(c) Incorporated by reference to the Company's Amendment No. 2 to Registration Statement on Form S-1 (Registration No. 333-21123), as filed with the Securities and Exchange Commission on March 13, 1997.
(d) Incorporated by reference to the Company's Amendment No. 3 to Registration Statement on Form S-1 (Registration No. 333-21123), as filed with the Securities and Exchange Commission on March 25, 1997.
(e) Incorporated by reference to the Company's Annual Report on Form 10-K for the Fiscal Year Ended February 28, 1998, as filed with the Securities and Exchange Commission on May 29, 1998.
(f) Incorporated by reference to the Company's Registration Statement on Form S-8 relating to the Company's Employee Stock Ownership Plan, as filed with the Securities and Exchange Commission on April 16, 1999.
(g) Incorporated by reference to the Company's 1999 Proxy Statement on Schedule 14A, as filed with the Securities and Exchange Commission on June 8, 1999.
(h) Incorporated by reference to the Company's Current Report on Form 8-K, as filed with the Securities and Exchange Commission on September 15, 1999.
(i) Incorporated by reference to the Company's Quarterly Report on Form 10-Q for the Quarterly Period Ended November 30, 1999, as filed with the Securities and Exchange Commission on January 14, 2000.
(j) Incorporated by reference to the Company's Annual Report on Form 10-K for the Fiscal Year Ended February 29, 2000, as filed with the Securities and Exchange Commission on May 30, 2000.