UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-K

 

(Mark One)

 

ý	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the fiscal year ended December 31, 2001

 

or

 

o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [No Fee Required]

 

For the transition period from                       to

 

Commission File Number:  0-26524

 

MACKIE DESIGNS INC.

(Exact name of registrant as specified in its charter)

 

 

 

 

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   ý    No   o  

 

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of 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.  o

 

As of March 1, 2002, the aggregate market value of the Registrant’s Common Stock held by nonaffiliates of the Registrant was $11,117,647 based on the closing sales price of the Registrant’s Common Stock on the Nasdaq National Market.  On that date, there were 12,427,356 shares of Common Stock outstanding.

 

Portions of the definitive Proxy Statement for the Annual Meeting of Shareholders have been incorporated by reference into Part III of the Annual Report on Form 10-K.

 

 

MACKIE DESIGNS INC.

 

FORM 10-K

For the Year Ended December 31, 2001

 

 

INDEX
Part I
	Item 1.	Business
	Item 2.	Properties
	Item 3.	Legal Proceedings
	Item 4.	Submission of Matters to a Vote of Securities Holders
Part II
	Item 5.	Market for Registrant’s Common Equity and Related Shareholder Matters
	Item 6.	Selected Financial Data
	Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations
	Item 8.	Consolidated Financial Statements and Supplementary Data
	Item 9.	Changes in and Disagreements With Accountants on Accounting and Financial Disclosure
Part III
	Item 10.	Directors and Executive Officers of the Registrant
	Item 11.	Executive Compensation
	Item 12.	Security Ownership of Certain Beneficial Owners and Management
	Item 13.	Certain Relationships and Related Transactions
Part IV
	Item 14.	Exhibits, Financial Statement Schedules and Reports on Form 8-K
Signatures

 

 

PART I

 

Item 1.  Business

 

Certain statements set forth in or incorporated by reference into this report on Form 10-K contain “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements are based on currently available operating, financial and competitive information and are subject to various risks and uncertainties. Such forward-looking statements include among others, those statements including the words “expect,” “anticipate,” “intend,” “believe” and similar expressions. Our actual results could differ materially from those discussed in this report. Factors that could cause or contribute to such differences include but are not limited to the risks discussed in the “Risk Factors” section. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof.

 

Introduction

 

Mackie Designs Inc., a Washington corporation formed in 1988, is a leading developer and manufacturer of high-quality professional audio equipment.

 

Our primary products are analog and digital mixers, mixer-related products, recorders, amplifiers, loudspeakers and loudspeaker components. These products are used in a wide variety of sound applications including home and commercial recording studios, live performances, and public address systems.

 

Our products are distributed in the U.S. through a network of independent representatives to over 1,500 retail dealers of professional audio equipment as well as over 500 installed sound contractors.  Internationally, products are offered through subsidiaries in Italy, France, Germany, the United Kingdom and China and through local distributors in 70 other countries where we do not have direct operations.

 

Our businesses are organized by the end-user markets they serve as well as by product lines manufactured. The company serves the following three broadly defined markets: Live Sound/Sound Reinforcement, Recording, and Contractor/Fixed Installation.

 

We have made strategic investments to gain entry to and to enhance our position in these markets.  These investments included the purchase of Mackie Designs (Italy) S.p.A., formerly known as Radio Cine Forniture S.p.A., in June 1998 and Eastern Acoustic Works, Inc. in April 2000. Mackie Italy is an Italian corporation with principal offices in Reggio Emilia, Italy, and manufacturing facilities located in northern Italy. Its principal activity is the manufacture of loudspeakers and speaker components. Under the EAW brand name, we design and manufacture loudspeaker systems, including integrated signal processing targeted at the mid to high-end of the installed and touring sound markets.

 

In April 2001, we acquired Mackie Engineering Services (Belgium) BVBA, formerly known as Sydec, in a move to accelerate our penetration of the digital recording and digital audio workstation subsets of the recording market.  Mackie Engineering Services is principally a research and development facility with a focus on digital recording. Digital broadcast workstations marketed under the “Soundscape” name are also developed at the Belgium facility.

 

Our products are manufactured in our Woodinville, Washington, Whitinsville, Massachusetts, and Reggio Emilia, Italy facilities. During 2001, we established a relationship with a third party contract manufacturer in China, Amoisonic Electronics. We are transitioning the manufacture of certain of our product families to their facilities.

 

“MACKIE,” the running man figure, “RCF,” “Artesuono,” “EAW” and all of the names of our U.S.–produced products are registered trademarks or common law trademarks.  To the extent trademarks are unregistered, we are unaware of any conflicts with trademarks owned by third parties.  This document also contains names and marks of other companies.

 

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Markets

 

Our products are well represented in most professional audio markets, which include live performance, broadcast and recording and fixed installation.  The live performance market includes music instrument support and systems used by touring performers.  The broadcast and recording market includes all facets of recording, from home and project studios to professional studios and broadcast facilities.  The fixed installation market includes sporting venues, houses of worship and users of business music systems.

 

Products

 

We design, manufacture and market products in most professional audio markets.  Loudspeakers under the EAW brand name are recognized as some of the best quality loudspeakers available for both large fixed installation projects and touring sound systems.  Loudspeakers under the Mackie brand name are leaders in the sound reinforcement market being used both for live and fixed installation markets.  The company also has RCF and Mackie Industrial loudspeakers, which are marketed to the fixed installation market.

 

Mixing products under the Mackie brand name are leaders in most professional audio markets.  We have numerous recording mixers in both analogue and digital formats, additionally mixes are marketed to both the live and fixed installation markets.

 

Hard disk recorders are marketed to both the recording and live markets.  These products are used for the digital recording of live events and the recording and editing of audio in numerous formats.

 

Distribution and Sales

 

In the U.S., we use a network of independent representatives to sell to over 1,500 retail dealers and 500 installed sound contractors, some of which have several outlets.  Our products are sold in musical instrument stores, pro audio outlets and several mail order outlets.  Sales to our top 10 U.S. dealers represented approximately 37%, 32%, and 37% of net sales made to U.S. customers in 2001, 2000 and 1999, respectively.  Guitar Center accounted for approximately 17%, 13%, and 13% of U.S. net sales in 2001, 2000 and 1999, respectively.  No other dealer accounted for more than 10% of sales made to U.S. customers in this period.

 

Internationally, products are offered through subsidiaries in the United Kingdom, Germany, France, Italy and China and through local distributors in countries where we do not have direct operations.  Our top 10 international dealers and distributors represented approximately 22%, 18%, and 16% of international net sales in 2001, 2000 and 1999, respectively.  No single international distributor accounted for more than 10% of international net sales in this period.  Sales to customers outside of the U.S. accounted for approximately 49%, 44%, and 49%, of total net sales in 2001, 2000, and 1999, respectively.

 

Marketing

 

Our marketing strategy is designed to strengthen our brands and to educate end-users about our products.  All advertising, brochures, video, multimedia and trade show materials are created by our in-house marketing and design department.  Additionally, our websites are developed and maintained in-house to provide timely, accurate and compelling product and support information.  Materials are provided by the marketing department to representatives, distributors and dealers worldwide, as part of the overall sales strategy.  Owner’s manuals and sales literature are currently produced in several different languages.  These materials are provided as a complement to direct advertising and customer support follow-up programs.  To further enhance customer awareness and understanding of our products, we advertise in leading trade publications, provide ongoing technical training and education for representatives and distributors, and participate in the primary industry trade shows for our markets.  We have won several national advertising awards as a result of this commitment to detail and excellence.

 

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Customer Support

 

Customer support programs are designed to enhance brand loyalty by building customer understanding of product use and capabilities.  The customer service and support operation also provides us with a means of understanding customer requirements for future product enhancements.  This understanding comes through direct customer contact, as well as through close analysis of responses to various product registration surveys.

 

Product support specialists are located in Woodinville, Washington and Whitinsville, Massachusetts to provide direct technical service and support.  Technical support through a toll-free number is provided during scheduled business hours, and via the website after business hours. Service and repairs on products sold in the U.S. are performed at our Woodinville and Whitinsville sites, and for certain specialized products, at approximately 100 authorized warranty service centers located throughout the U.S.  Internationally, our subsidiaries as well as our independent distributors are utilized to provide product support. These subsidiaries and distributors are responsible for warranty repairs for products sold into their markets and for the costs of carrying inventory required to meet customer needs.

 

Research and Development

 

Our research and development strategy is to develop affordable, high-quality products and related accessories for targeted markets.  On December 31, 2001, there were 103 individuals involved in research and development activities.  Research and development operations are located at the three manufacturing facilities located in Woodinville, Whitinsville and Reggio Emilia, Italy.  Additionally, there are research and development groups located in Belgium, Canada and the Czech Republic.  Research and development expenses were approximately $11.9 million in 2001, $9.4 million in 2000, and $7.1 million in 1999.

 

Competition

 

The professional audio industry is fragmented and highly competitive.  There are many manufacturers, large and small, domestic and international, which offer audio products that vary widely in price and quality and are distributed through a variety of channels.  We compete primarily on the basis of product quality and reliability, price, ease of use, brand name recognition and reputation, ability to meet customers’ changing requirements and customer service and support.  We compete with a number of professional audio manufacturers, several of whom have significantly greater development, sales, and financial resources.  Our major competitors in the mixer category are subsidiaries of Harman International Industries, Inc., Yamaha Corporation, TOA Corporation, Philips Electronics Corporation, Peavey Electronics Corporation, Teac America, Inc. (Tascam) and  SoundTracs PLC.  Competitors in the power amplifier category include Peavey Electronics Corporation (including Crest Audio, Inc.), Crown Audio Inc. (a Harman subsidiary), and QSC Audio Products, Inc.  Competing studio monitor loudspeaker manufacturers include Genelec, Inc., Event Electronics LLC, Renkus-Heinz, Alesis Corporation and JBL (a Harman subsidiary).  Competing stage loudspeaker system manufacturers include JBL, Peavey Electronics Corporation and Electro-Voice.  Competitors in the component speaker market include JBL, Eminence Speaker Corporation, Acustica Beyma S.A. and B&C Speakers S.p.A.  Competitors in the commercial sound products category include JBL, Bose Corporation and TOA Corporation.  Competing installed sound loudspeaker system manufacturers include JBL, Tannoy, Electro-Voice, Community Professional Loudspeakers and Renkus-Heinz.  Competitors in the touring sound loudspeaker system category include JBL, L-Acoustics, Meyer Sound Laboratories and Nexo.  Competitors in the hard disk recorder/editor market include Alesis, Alai, HHB, Tascam, RADAR, AMS Audiofile and Fairlight.

 

Proprietary Technology

 

We have a strong interest in protecting the intellectual property assets that reflect original research, creative development, and product development.  As such, we have sought protection through patents, copyrights, trademarks, and trade secrets and have applied and filed for various design and utility patents, both domestically and internationally.  We have actively used certain trademarks, and have applied for and registered specific trademarks in the U.S. and in foreign countries.  While the registration of trademarks provide us with certain legal

 

5

 

rights, there can be no assurance that any such registration will successfully prevent others from infringing upon these trademarks.

 

Along with extensive trademark and patent registration and filings, we have claimed copyright protection for works of original authorship, including product brochures, literature, advertisement, and web pages.  In certain cases, we have filed and will continue to file for copyright registration in the U.S.  While copyrights provide certain legal rights of enforceability, there can be no assurance as to the ability to successfully prevent others from infringing upon these copyrights.

 

We have never conducted a comprehensive patent search relating to the technology used in our products.  We believe that our products do not infringe upon the proprietary rights of others.  There can be no assurance, however, that others will not assert infringement claims against us in the future or that claims will not be successful.

 

While Mackie pursues patent, trademark and copyright protection for products and various marks, we also rely on trade secrets, know-how and continuing technology advancement, manufacturing capabilities, affordable, high-quality products, brand name recognition, new product introduction and direct marketing efforts to develop and maintain our competitive position.  Our policy is to have each employee enter into an agreement that contains provisions prohibiting the disclosure of confidential information to anyone outside the Company and to recognize the Company’s ownership of intellectual property developed by employees.  Consulting contracts generally provide for the protection of intellectual property and the requirement of confidentiality.  There can be no assurance, however, that these confidentiality agreements will be honored or that we can effectively protect our rights to unpatented trade secrets.  Moreover, there can be no assurance that others will not independently develop substantially equivalent proprietary information and techniques or otherwise gain access to our trade secrets.  We have traditionally not sought patent protection for Mackie Italy products and have not pursued trademark or copyright protection except for the name “RCF.”

 

Manufacturing

 

Our products are manufactured in facilities in Woodinville, Whitinsville, and Reggio Emilia.  These facilities are focused on the core manufacturing technologies of electronics, loudspeakers and loudspeaker systems, and transducers, respectively. In addition, the facilities work together as part of the supply chain to provide integrated products to the market.  Many products share components, which allows for integrated manufacturing of several distinct products and in certain cases significant purchase volume discounts.

 

During 2001, we established a relationship with Amoisonic Electronics, a third party contract manufacturer in China. Certain product families are being transitioned to Amoisonic’s facilities to reduce costs and create additional manufacturing capacity at our owned facilities.

 

We rely almost exclusively on one vendor for our potentiometers and certain of our integrated circuits but are in contact with other manufacturers of these items regularly. These items are critical components in certain products. Interruption in, or cessation of, the supply of these components from these suppliers could adversely affect production capability, as the qualification process for another manufacturer, from sample submission to production quality and quantity delivery, could take several months. We attempt to maintain a three month supply of potentiometers and a one month supply of the specific integrated circuits on hand at any given time to reduce the effect of any disruption.

 

Backlog

 

Typically, orders are shipped within two weeks after receipt; backlog is not generally tracked. In the case of new product introductions or periods where product demand exceeds production capacity, products are allocated to customers on a monthly basis until demand is met.

 

Employees

 

At December 31, 2001, we had 1,386 full-time equivalent employees, including 169 in marketing, sales and customer support, 103 in research and development, 1,021 in manufacturing and manufacturing support, which includes manufacturing engineering, and 93 in administration and finance.  Approximately 120 of the manufacturing employees in Italy are represented by a labor union.  We consider our relations with all employees, union and non-union, to be good.

 

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RISK FACTORS

 

This report contains forward-looking statements. There are many factors that could cause actual results to differ materially from those projected by the forward-looking statements made in this report. Factors that might cause such a difference include, but are not limited to, the risk factors described below. We do not undertake any obligation to publicly release the result of any revisions to the forward-looking statements contained in this report that may be made to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events.

 

Liquidity. Under the terms of our U.S. credit agreement, we must maintain certain financial ratios and tangible net worth.  The agreement also provides, among other matters, restrictions on additional financing, dividends, mergers, acquisitions, and an annual capital expenditure limit. At December 31, 2001, we were out of compliance with one of our financial covenants. We were also out of compliance earlier during 2001 but negotiated a restructuring of the covenants and received a waiver from the lender. This restructuring resulted in slightly higher interest rates in addition to certain loan amendment fees. In April 2002 we received a waiver for the December 31, 2001 non-compliance and negotiated a new credit agreement, including a restructuring of the covenants. Under the new credit agreement, the renewal date for the line of credit is April 2003, the renewal date for the term loan is September 2003.

 

Both the line of credit and the term loan are secured by all U.S. based assets including, but not limited to, accounts receivable, inventory, fixed assets, intangibles and patents. As a result of restructuring the line of credit and term loan, we have reclassified amounts related to the term loan previously shown as long-term debt callable under covenant provisions in interim condensed consolidated financial statements.

 

The term loan may become callable under covenant provisions if we do not meet our new covenants. Although there can be no assurance, we believe that we will be able to meet our financial covenants in 2002 under the revised credit agreement.

 

We have taken various actions to improve results of operations and ensure our ongoing ability to cover scheduled debt servicing payments, including headcount reductions and other cost containment measures. During the third and fourth quarters of 2001, these measures included layoffs, salary reductions, office closures and reduction of capital expenditures. We will continue to focus on increased management controls over expenditures and attempt to reduce costs of sales by improving our methods of product sourcing. Finally, we are evaluating a variety of alternative financing sources, including possible divestiture of certain operating assets.

 

Development, Introduction and Shipment of New Products.  We are currently developing new analog and digital mixers, recording devices, amplifiers, loudspeakers and loudspeaker components.  Significant resource, technological, supplier, manufacturing or other problems may delay the development, introduction or manufacture of these products. In the past, when sales have been affected by delays in developing and releasing new products, some customers waited for new products, while others purchased products from our competitors.  Delays in the completion and shipment of new products, or failure of customers to accept new products, may affect future results.

 

Variability in Quarterly Operating Results.  Our operating results tend to vary from quarter to quarter.  Revenue in each quarter is substantially dependent on orders received within that quarter.  Conversely, our

 

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expenditures are based on investment plans and estimates of future revenues.  We may, therefore, be unable to quickly reduce spending if revenues decline in a given quarter.  As a result, operating results for that quarter will suffer.  Results of operations for any one quarter are not necessarily indicative of results for any future period.

 

Other factors which may cause quarterly results to fluctuate include:

 

•        increased competition in niche markets

•        timing of new product announcements

•        product releases and pricing changes by us or our competitors

•        market acceptance or delays in the introduction of new products

•        production constraints

•        the timing of significant orders

•        customers’ budgets

•        foreign currency exchange rates

 

Due to all of the foregoing factors, it is possible that in some future quarters our operating results will be below the expectations of analysts and investors.

 

Rapid Technological Change.  Product technology evolves rapidly, making timely product innovation essential to success in the marketplace. The introduction of products with improved technologies or features may render our existing products obsolete and unmarketable. If we cannot develop products in a timely manner in response to industry changes, or if our products do not perform well, our business and financial condition will be adversely affected.  Also, new products may contain defects or errors which give rise to product liability claims or cause the products to fail to gain market acceptance.

 

Economic and Market Conditions.  Our business is affected by domestic and global economic and political conditions and by the health of the professional audio market in the world. Our operations may in the future reflect substantial fluctuations from period to period as a consequence of such general economic and market conditions including the uncertain economic and political environment arising from the terrorist acts of September 11^th and subsequent terrorist activities. These factors could have a material adverse effect on our business and financial condition.

 

Competition.  We expect competition to increase from both established and emerging companies. If we fail to compete successfully against current and future sources of competition, our profitability and financial performance may be adversely affected.

 

Dependence on Suppliers.  Certain parts used in our products are currently available from either a single supplier or from a limited number of suppliers. If we cannot develop alternative sources of these components, or if we experience deterioration in our relationship with these suppliers, there may be delays or reductions in product introductions or shipments, which may materially adversely affect our operating results.

 

Because we rely on a small number of suppliers for certain parts, we are subject to possible price increases by these suppliers.  Also, we may be unable to accurately forecast our production schedule. If we underestimate our production schedule, suppliers may be unable to meet our demand for components. This delay in the supply of key components may materially adversely affect our business.

 

During 2001, we entered into a contract manufacturing arrangement with a third party manufacturer in China whereby we expect substantial volumes of product to be manufactured on our behalf. The transition from in-house manufacturing to third-party manufacturing creates additional risks including increased transportation cost and delivery times which could impair our ability to meet our customer demands.

 

8

 

International Operations.  We have significant net sales to customers outside the United States and believe that international sales will continue to represent a significant portion of our revenue. International sales may fluctuate due to various factors, including:

 

•        unexpected changes in regulatory requirements

•        tariffs and taxes

•        increases in freight costs, or damage or loss in shipment

•        difficulties in staffing and managing foreign operations

•        longer average payment cycles and difficulty in collecting accounts receivable

•        fluctuations in foreign currency exchange rates

•        product safety and other certification requirements

•        political and economic instability

 

The European Community and European Free Trade Association have established certain electronic emission and product safety requirements (“CE”).  All of our new products meet these requirements. Failure to obtain either a CE certification or a waiver for any product may prevent us from marketing that product in Europe.

 

We operate subsidiaries in Italy, the United Kingdom, Germany, France, the Netherlands and China. Our business and financial condition is, therefore, sensitive to currency exchange rates or any other restrictions imposed on these currencies.

 

Protection of Intellectual Property.  We have a strong interest in protecting the intellectual property assets that reflect original research, creative development, and product development. As such, we have sought protection through patents, copyrights, trademarks, and trade secrets.  Along with extensive trademark and patent registration and filings, we have claimed copyright protection for works of original authorship, including product brochures, literature, advertisement, and web pages. While certain legal rights of enforceability are available to us, there can be no assurance as to the ability to successfully prevent others from infringing upon our intellectual property.

 

We have never conducted a comprehensive patent search relating to the technology used in our products, however; we believe that our products do not infringe upon the proprietary rights of others. There can be no assurance, however, that others will not assert infringement claims against us in the future or that claims will not be successful.

 

While we pursue patent, trademark and copyright protection for products and various marks, we also rely on the use of confidentiality agreements with our employees and consultants to protect our trade secrets, proprietary information and other intellectual property. There can be no assurance, however, that these confidentiality agreements will be honored or will be effective in protecting our trade secrets, proprietary information and other intellectual property. Moreover, there can be no assurance that others will not independently develop substantially equivalent proprietary information and techniques or otherwise gain access to our trade secrets.

 

Acquisitions and Business Combinations.  We have in the past acquired businesses, and we may do so in the future. We may pursue additional acquisitions of complementary technologies or product lines. Further acquisitions may include risks of entering markets where we have no or limited prior experience, the potential loss of key employees of the acquired company, and impairment of relationships with existing employees, customers and business partners.  Further acquisitions may also impact our financial position. For example, we may use significant cash or incur additional debt, which would weaken our financial position. We cannot guarantee that future acquisitions will improve our business or operating results.

 

Dependence on Key Personnel.  Our future success will depend in a large part on the continued service of many of our technical, marketing, sales and management personnel and on our ability to attract, train, motivate and retain highly qualified employees. Our employees may voluntarily terminate their employment at any time.

 

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Competition for highly qualified employees is intense, and the process of locating technical, marketing, sales and management personnel with the combination of skills and attributes required to execute our strategy is often lengthy. We believe that we will need to hire additional technical personnel in order to enhance our existing products and to develop new products. If we are unable to hire additional technical personnel, the development of new products and enhancements could likely be delayed. The loss of the services of key personnel or the inability to attract new personnel could have a material adverse effect upon our results of operations.

 

Information Systems. During 2001 we replaced our localized information systems with a worldwide Enterprise Resource Planning system common to all of our owned manufacturing locations. While this investment is expected to provide a significant improvement in all aspects of our information system in the longer term, it presents additional risk to the organization in the near term. This risk is created because of the learning curve required of the entire organization and of its suppliers and because of the complexity of the software.

 

Adoption of the Euro.  On January 1, 1999, certain member states of the European Economic Community fixed their respective currencies to a new currency, commonly known as the Euro. Beginning January 1, 2002, all transactions must be recorded in Euros. We have very recently upgraded our financial and other software systems so that they are capable of processing Euro transactions, and so that the financial statements of our European subsidiaries are recorded in Euros. To date, we have not experienced any problems with the conversion to the Euro-based accounting system and do not expect this transition or the use of the Euro for transactions to materially affect our business. If we encounter unexpected difficulties, our business could be harmed.

 

Item 2.  Properties

 

We lease facilities in Woodinville, Washington totaling approximately 170,000 square feet to house our corporate headquarters as well as certain manufacturing, administrative, sales and marketing, research and development and customer support operations.  Mackie leases one of its Woodinville facilities from Mackie Holdings, LLC, an entity owned by three significant shareholders and directors, on terms we believe are at least as favorable as might have been obtained from unaffiliated parties. The remaining Woodinville facilities are leased from third parties. Additionally, we own facilities totaling 132,000 square feet in Reggio Emilia, Italy used for manufacturing and administrative purposes. Our manufacturing facility in Italy sits on approximately 7 acres of land. We also lease a series of connected buildings, in a manufacturing complex, totaling 245,000 square feet in Whitinsville, Massachusetts. We lease additional facilities throughout Europe for our regional sales offices.

 

Item 3.  Legal Proceedings

 

We have subrogated claims asserted against us from insurance companies who paid claims made by EAW’s landlord and other tenants in the building who were affected by a fire started by a loaned employee in a portion of the building occupied by EAW in 1996.  The range of potential loss ranges from $2.1 million to $2.9 million.  We expect the Massachusetts Superior Court to set a date in the latter half of 2002 for a jury trial.  We believe that these losses are not attributable to us under Massachusetts’s law and are vigorously defending the litigation.  The claims of the other tenants have been covered by EAW’s insurance carrier.  The ultimate resolution of this matter is not known at this time.  No provision has been made in our consolidated financial statements related to these claims.

 

We are also involved in various legal proceedings and claims that arise in the ordinary course of business.  We currently believe that these matters will not have a material adverse impact on our financial position, liquidity or results of operations.

 

Item 4.  Submission of Matters to a Vote of Securities Holders

 

None.

 

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PART II

 

Item 5.  Market for Common Stock and Related Shareholder Matters

 

Our common stock is traded on the Nasdaq National Market under the symbol “MKIE.”  As of March 18, 2002, there were approximately 94 shareholders of record. The following table shows the high and low sales prices for our common stock for the periods indicated, as reported by the Nasdaq National Market. These prices do not include retail markups, markdowns or commissions.

 

		Common Stock
		HIGH			LOW
Year Ended December 31, 2001:
First Quarter		$	7.00		$	5.00
Second Quarter		$	5.88		$	5.00
Third Quarter		$	5.63		$	4.50
Fourth Quarter		$	5.10		$	3.30
Year Ended December 31, 2000:
First Quarter		$	7.31		$	5.00
Second Quarter		$	7.06		$	5.50
Third Quarter		$	8.50		$	6.50