<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ____________ to ____________
Commission file number: 0-20679
MECHANICAL DYNAMICS, INC.
(Exact name of registrant as specified in its charter)
MICHIGAN 38-2163045
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
2301 COMMONWEALTH BLVD.
ANN ARBOR, MICHIGAN
48105
(Address of principal executive
offices, including zip code)
(313) 994-3800
(Registrant's telephone number, including area code)
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.
[X] Yes [ ] No
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.
NO PAR VALUE 5,743,222
(Class of common stock) (Outstanding as of August 7, 1996)
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MECHANICAL DYNAMICS, INC.
INDEX
Page No.
PART I. - FINANCIAL INFORMATION
ITEM 1. - FINANCIAL STATEMENTS
Condensed Consolidated Balance Sheets as of June
30, 1996 and December 31, 1995 3
Condensed Consolidated Statements of Income for the
Three and Six Months Ended June 30, 1996 and 1995 4
Condensed Consolidated Statements of Cash Flows for
the Six Months Ended June 30, 1996 and 1995 5
Notes to Condensed Consolidated Financial Statements 6
ITEM 2. - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS 7
PART II. - OTHER INFORMATION
ITEM 6. - EXHIBITS AND REPORTS ON FORM 8-K 11
SIGNATURES 12
INDEX TO EXHIBITS 13
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PART I. - FINANCIAL INFORMATION
ITEM 1. - FINANCIAL STATEMENTS
MECHANICAL DYNAMICS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
<TABLE>
<CAPTION>
June 30, December 31,
1996 1995
==============================================================================================
(unaudited)
<S> <C> <C>
Assets:
Current assets:
Cash and cash equivalents $20,785 $1,141
Accounts receivable 4,551 4,423
Prepaid and deferred expenses 961 936
- ----------------------------------------------------------------------------------------------
Total current assets 26,297 6,500
Net property and equipment 1,279 1,268
Total other assets 1,528 1,570
- ----------------------------------------------------------------------------------------------
Total assets $29,104 $9,338
==============================================================================================
Liabilities And Shareholders' Equity:
Current liabilities:
Borrowings under lines of credit $33 $82
Accounts payable 601 620
Accrued expenses 3,272 2,777
Deferred revenue 4,212 3,666
- ----------------------------------------------------------------------------------------------
Total current liabilities 8,118 7,145
- ----------------------------------------------------------------------------------------------
Redeemable common stock 333 859
Shareholders' equity:
Convertible preferred stock 0 265
Common stock 19,213 9
Common stock warrants 0 449
Additional paid-in capital 0 114
Retained earnings 1,407 475
Subscriptions receivable 0 (10)
Cumulative translation adjustment 33 32
- ----------------------------------------------------------------------------------------------
Total shareholders' equity 20,653 1,334
- ----------------------------------------------------------------------------------------------
Total liabilities and shareholders' equity $29,104 $9,338
==============================================================================================
</TABLE>
See accompanying notes to condensed consolidated financial statements.
3
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MECHANICAL DYNAMICS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share data)
(unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
1996 1995 1996 1995
=======================================================================================================================
<S> <C> <C> <C> <C>
Revenue:
Software licenses $3,678 $3,326 $7,519 $6,014
Services 2,563 1,962 4,770 3,919
- -----------------------------------------------------------------------------------------------------------------------
Total revenue 6,241 5,288 12,289 9,933
- -----------------------------------------------------------------------------------------------------------------------
Cost of revenue:
Software licenses 158 190 358 409
Services 1,332 1,324 2,693 2,486
- -----------------------------------------------------------------------------------------------------------------------
Total cost of revenue 1,490 1,514 3,051 2,895
- -----------------------------------------------------------------------------------------------------------------------
Gross profit 4,751 3,774 9,238 7,038
- -----------------------------------------------------------------------------------------------------------------------
Operating expenses:
Sales and marketing 2,453 1,911 4,797 3,749
Research and development 869 750 1,755 1,425
General and administrative 685 664 1,369 1,221
- -----------------------------------------------------------------------------------------------------------------------
Total operating expenses 4,007 3,325 7,921 6,395
- -----------------------------------------------------------------------------------------------------------------------
Operating income 744 449 1,317 643
Other income, net 75 13 76 16
- -----------------------------------------------------------------------------------------------------------------------
Income before income taxes 819 462 1,393 659
Provision for income taxes 258 82 461 116
- -----------------------------------------------------------------------------------------------------------------------
Net income $561 $380 $932 $543
=======================================================================================================================
Calculation Of Net Income Per Share:
Net income $561 $380 $932 $543
Accretion of warrants 0 59 0 110
- -----------------------------------------------------------------------------------------------------------------------
Net income available to common shareholders $561 $321 $932 $433
=======================================================================================================================
Net income per common share $0.12 $0.08 $0.22 $0.11
=======================================================================================================================
Common and common equivalent shares 4,729 3,839 4,295 3,830
=======================================================================================================================
</TABLE>
See accompanying notes to condensed consolidated financial statements.
4
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MECHANICAL DYNAMICS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
<TABLE>
<CAPTION>
Six Months
Ended June 30,
- ---------------------------------------------------------------------------------------------------------------------------------
1996 1995
- ---------------------------------------------------------------------------------------------------------------------------------
(unaudited)
<S> <C> <C>
Cash flows from operating activities:
Net income $932 $543
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 262 299
Provision (credit) for deferred income taxes (35) (48)
(Gain) loss on disposal of assets, net 4 15
Changes in assets and liabilities:
Accounts receivable (91) (1,150)
Prepaid and deferred expenses (20) 194
Other assets 34 (5)
Accounts payable (51) (209)
Accrued expenses 489 599
Deferred revenue 530 651
- ---------------------------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 2,054 889
- ---------------------------------------------------------------------------------------------------------------------------------
Cash flows from investing activities:
Proceeds from the sale of property and equipment 0 37
Purchases of property and equipment (230) (414)
- ---------------------------------------------------------------------------------------------------------------------------------
Net cash used in investing activities (230) (377)
- ---------------------------------------------------------------------------------------------------------------------------------
Cash flows from financing activities:
Net borrowings (payments) under line of credit agreements (49) (698)
Proceeds from the issuance of common stock 17,850 10
Proceeds from collections on subscriptions receivable 10 17
Payments of long-term debt 0 (398)
- ---------------------------------------------------------------------------------------------------------------------------------
Net cash provided by (used in) financing activities 17,811 (1,069)
- ---------------------------------------------------------------------------------------------------------------------------------
Effect of exchange rate changes on cash 9 (16)
- ---------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in cash and cash equivalents 19,644 (573)
Cash and cash equivalents at beginning of period 1,141 817
- ---------------------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of period $20,785 $244
=================================================================================================================================
Supplemental disclosures of cash flow information:
Cash paid during the year for:
Interest $17 $42
Income taxes $234 $206
=================================================================================================================================
</TABLE>
See accompanying notes to condensed consolidated financial statements.
5
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MECHANICAL DYNAMICS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note (1) - Basis Of Presentation
The accompanying unaudited condensed consolidated financial statements
include the accounts of Mechanical Dynamics, Inc. ("MDI" or the "Company") and
its subsidiaries, and have been prepared in accordance with generally
accepted accounting principles for interim financial information and with
Article 10 of Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements. The Company believes all adjustments,
consisting of normal recurring adjustments considered necessary for a fair
presentation, have been included. For further information, refer to the
consolidated financial statements and footnotes thereto included in the
Company's Registration Statement on Form S-1 for the year ended December 31,
1995.
Operating results for the three and six-month periods ended June 30,
1996 are not necessarily indicative of the results that may be expected
for the year ended December 31, 1996.
Note (2) - Financing Arrangements
In April 1996, the Company entered into an agreement with its principal
bank for a $2.0 million line of credit. The agreement is subject to annual
renewal, and expires on April 30, 1997. Borrowings on the line of credit bear
interest at the bank's prime rate, and are secured by accounts receivable and
certain other assets of the Company. No borrowings were outstanding under this
agreement as of June 30, 1996.
Note (3) - Redeemable Common Stock And Shareholders' Equity
Redeemable Common Stock
In July 1996, the redemption privileges associated with 20,842 shares
of redeemable common stock expired. The redemption privileges on the remaining
20,843 shares of redeemable common stock outstanding are exercisable at $8.00
per share between June 15, 1997 and July 14, 1997.
Common Stock
In May 1996, the Company completed an initial public offering of its
stock, which resulted in the issuance of 1,500,000 shares at $11.00 per share.
In June 1996, an additional 354,750 shares were sold by the Company at
$11.00 per share to cover over-allotments.
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ITEM 2. - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following information should be read in conjunction with the condensed
consolidated interim financial statements and the notes thereto included in
Item 1 of this Quarterly Report and with Management's Discussion and Analysis
of Financial Condition and Results of Operations contained in the Company's
Prospectus dated May 14, 1996 and filed with the Securities and Exchange
Commission.
OVERVIEW
MDI develops, markets and supports virtual prototyping solutions. The
Company's virtual prototyping software allows the engineer or designer to
design a complete product by simulating, both visually and mathematically, a
product in motion. The Company's principal software product, ADAMS Full
Simulation Package, is used by customers to simulate mechanical systems. The
Company's revenue has in the past been, and is expected in the future to be,
derived almost exclusively from its ADAMS Full Simulation Package and related
software products and services.
FORWARD-LOOKING INFORMATION IS SUBJECT TO RISK AND UNCERTAINTY
Except for the historical information contained in this Quarterly Report, the
matters herein contain "forward-looking" statements (as defined in the Private
Securities Litigation Reform Act of 1995) that involve risk and uncertainty.
These forward-looking statements include, but are not limited to, revenue
levels, including the level of international revenue, certain operating expense
levels, the level of other income, the Company's liquidity and capital needs,
and various business environment and trend information. Actual future results
and trends may differ materially depending on a variety of factors, including
the volume and timing of orders received during the quarter, the mix of and
changes in distribution channels through which the Company's products are sold,
the timing and acceptance of new products and product enhancements by the
Company or its competitors, changes in pricing, the level of the Company's
sales of third party products, purchasing patterns of distributors and
customers, competitive conditions in the industry, business cycles affecting
the markets in which the Company's products are sold, extraordinary events,
such as litigation or acquisitions, including related charges, and economic
conditions generally or in various geographic areas. All of the foregoing
factors are difficult to forecast. The future operating results of the Company
may fluctuate as a result of these and other risk factors detailed in the
Company's Prospectus dated May 14, 1996 and filed with the Securities and
Exchange Commission.
Due to all of the foregoing factors, the Company believes that period-to-period
comparisons of its results of operations are not necessarily meaningful and
should not be relied upon as an indication of future performance. It is likely
that, in some future quarters, the Company's operating results will be below
the expectations of stock market analysts and investors. In such an event, the
price of the Company's Common Stock would likely be materially adversely
affected.
RESULTS OF OPERATIONS
Revenue
Revenue increased 18.0% from $5.3 million in the three months ended June 30,
1995 to $6.2 million in the three months ended June 30, 1996. Revenue increased
23.7% from $9.9 million in the six month period ended June 30, 1995 to $12.3
million in the six month period ended June 30, 1996. The percentage of the
Company's revenue from international customers was 67.3% and 59.2% for the
three month periods ended June 30, 1995 and 1996, respectively. The percentage
of revenue from international customers was 62.5% and 62.2% for the six month
periods ended June 30, 1995 and 1996, respectively. The Company
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expects that international revenue will continue to be a major component of the
Company's total revenue in the future.
Software licenses revenue increased 10.6% from $3.3 million in the three months
ended June 30, 1995 to $3.7 million in the three months ended June 30, 1996.
Software licenses revenue increased 25.0% from $6.0 million in the six months
ended June 30, 1995 to $7.5 million in the six months ended June 30, 1996. The
increases in software licenses revenue resulted from further market penetration
of the Company's products, highlighted by sales to new customers as well as
additional sales into the Company's existing customer base. Furthermore,
customer order size increased during the quarter ended June 30, 1996, with more
customers purchasing certain of the Company's modular packages along with their
purchase of the ADAMS Full Simulation Package. Software licenses revenue
decreased by $163,000 from the three months ended March 31, 1996 to the three
months ended June 30, 1996. This decrease, primarily due to a decline in the
licensing of third party software products through the Company's European
subsidiaries, resulted from the planned termination of a licensing agreement
with a third party software company. The Company does not expect the
termination of this agreement to have a significant impact on future quarters'
revenue.
Services revenue consists of revenue from software maintenance agreements as
well as consulting, training and funded research and development. Services
revenue increased 30.6% from $2.0 million in the three months ended June 30,
1995 to $2.6 million in the three months ended June 30, 1996. Services revenue
increased 21.7% from $3.9 million in the six months ended June 30, 1995 to $4.8
million in the six months ended June 30, 1996. Revenue from software
maintenance agreements increased by 30.8% for the three month period ended June
30, 1996 versus the similar period in 1995, and by 24.8% for the six month
period ended June 30, 1996 versus the similar period in 1995. These increases
were primarily due to the growth in the Company's installed base of customers
as well as the strong level of repeat business the Company has experienced
through customers renewing their existing software maintenance agreements. The
Company expects the majority of customers currently under software maintenance
agreements to renew their agreements in the future. Revenues from consulting,
training and funded research and development services increased by 30.5% for
the three month period ended June 30, 1996 versus the similar period in 1995,
and by 19.6% for the six month period ended June 30, 1996 versus the similar
period in 1995. These increases were primarily the result of customers
continuing to integrate the Company's products and services directly into their
product design processes.
Cost of Revenue
The cost of software licenses revenue as a percentage of software licenses
revenue decreased from 5.7% to 4.3% for the three months ended June 30, 1995
and 1996, respectively. The cost of software licenses revenue as a percentage
of software licenses revenue decreased from 6.8% to 4.8% for the six months
ended June 30, 1995 and 1996, respectively. These decreases were primarily due
to a reduction in royalties paid to third parties whose software products were
licensed through the Company's European subsidiaries.
The cost of services revenue as a percentage of services revenue decreased from
67.5% to 52.0% for the three months ended June 30, 1995 and 1996, respectively.
The cost of services revenue as a percentage of services revenue decreased
from 63.4% to 56.5% for the six months ended June 30, 1995 and 1996,
respectively. These decreases were primarily due to improved margins on
consulting and software maintenance revenue and, to a lesser extent, a shift in
service revenue mix to the higher margin software maintenance revenue
component.
Operating Expenses
Sales and marketing expenses were $1.9 million and $2.5 million for the three
months ended June 30, 1995 and 1996, respectively, representing 36.1% and
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39.3% of total revenue for the respective periods. Sales and marketing expenses
were $3.7 million and $4.8 million for the six months ended June 30, 1995 and
1996, respectively, representing 37.7% and 39.0% of total revenue for the
respective periods. These increases were primarily due to an increase in
commissions paid to third party sellers, coinciding with the increase in
software licenses revenue recognized through this sales channel. In addition,
sales and marketing expenses increased due to incremental marketing and sales
expenses incurred in Japan, and in connection with the opening of new sales
offices during the last twelve months in Ohio, Texas, Germany, and Italy. The
Company expects to continue the growth of its worldwide sales and marketing
organization in the future, reflecting the Company's commitment to expand its
global market penetration.
Research and development expenses were $750,000 and $869,000 for the three
months ended June 30, 1995 and 1996, respectively, representing 14.2% and
13.9% of total revenue for the respective periods. Research and development
expenses were $1.4 million and $1.8 million for the six months ended June 30,
1995 and 1996, respectively, representing 14.3% and 14.3% of total revenue for
the respective periods. The absolute dollar increases in research and
development expenses were primarily the result of additional personnel hired to
support the development of new products as well as the enhancement of existing
products. The Company intends to continue to invest significant resources in
research and development activities during future periods.
General and administrative expenses were $664,000 and $685,000 for the three
months ended June 30, 1995 and 1996, respectively, representing 12.6% and
11.0% of total revenue for the respective periods. General and administrative
expenses were $1.2 million and $1.4 million for the six months ended June 30,
1995 and 1996, respectively, representing 12.3% and 11.1% of total revenue for
the respective periods. The absolute dollar increases in general and
administrative expenses were primarily due to incremental expenses associated
with managing the Company's growing operations worldwide.
Other Income, Net
Other income, net was $13,000 and $75,000 for the three months ended June 30,
1995 and 1996, respectively. Other income, net was $16,000 and $76,000 for the
six months ended June 30, 1995 and 1996, respectively. The increases were
primarily the result of interest earned on the proceeds from the Company's
initial public offering in May 1996, partially offset by foreign currency
transaction losses incurred during 1996.
Provision For Income Taxes
The Company's effective income tax rate was 17.6% and 33.1% for the six months
ended June 30, 1995 and 1996, respectively. The difference between the
effective and statutory federal rate in 1996 was due primarily to the benefit
of tax exempt interest income and certain tax credits carried forward from 1995.
LIQUIDITY AND CAPITAL RESOURCES
The Company has funded its operations to date primarily through internally
generated cash flow. Cash and cash equivalents increased by $19.7 million from
$1.1 million as of December 31, 1995 to $20.8 million as of June 30, 1996. The
increase was primarily the result of the $17.8 million in net proceeds raised
from the Company's initial public offering in May 1996, and, to a lesser
extent, cash flow generated from operations.
In April 1996, the Company entered into an agreement with its principal bank
for a $2.0 million line of credit. The agreement is subject to annual renewal,
and expires on April 30, 1997. Borrowings on the line of credit bear interest
at the bank's prime rate, and are secured by accounts receivable and certain
other assets of the Company. No borrowings were outstanding under this
agreement as of June 30, 1996. The Company's subsidiaries in Germany,
9
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Italy, Sweden and France also have line of credit and overdraft facilities that
provide for aggregate borrowing availability of approximately $600,000.
Long term cash requirements, other than for normal operating expenses, are
anticipated for the development of new software products and enhancements of
existing products, financing growth, and the possible acquisition of software
products, technologies and businesses complementary to the Company's business.
The Company believes that cash flows from operations, together with existing
cash balances, and available borrowings will be adequate to meet the Company's
cash requirements for working capital and capital expenditures for the next
twelve months and the foreseeable future.
Net cash provided by operating activities increased by $1.2 million from
$889,000 in the six months ended June 30, 1995 to $2.1 million in the six
months ended June 30, 1996. The increase was mainly due to changes in accounts
receivable and higher net income during the six month period in 1996 versus the
similar period in 1995.
Net cash used in investing activities decreased by $147,000 from $377,000
during the six months ended June 30, 1995 to $230,000 during the six months
ended June 30, 1996. The decrease was primarily due to reduced purchases of
property and equipment during 1996.
Net cash provided by financing activities increased by $18.9 million from $1.1
million of cash used in financing activities during the six months ended June
30, 1995 to $17.8 million of cash provided by financing activities during the
six months ended June 30, 1996. The increase was primarily due to the net
proceeds of $17.8 million raised in the Company's initial public offering in
May 1996. Also, to a lesser extent, the increase was due to a $1.1 million
reduction of cash used for debt payments during the six month period in 1996
versus the similar period in 1995.
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PART II. - OTHER INFORMATION
ITEM 6. - EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS
Number Exhibit
- ------ ------------------------------------------------------------------------
(4.2) Loan Agreement between KeyBank National Association ("KeyBank") and the
Company dated April 24, 1996, and Master Demand Business Loan Note by
the Company in favor of KeyBank in the amount of $2.0 million dated
April 24, 1996
(11) Statement re computation of per share earnings
(27) Financial Data Schedule
(b) REPORTS ON FROM 8-K
No reports on Form 8-K were filed by the Company during the three months ended
June 30, 1996.
11
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Dated: August 13, 1996 MECHANICAL DYNAMICS, INC.
(Registrant)
/s/ James E. Vincke
--------------------------------------------------
JAMES E. VINCKE
Vice President of Finance & Administration and
Chief Financial Officer
(a duly authorized officer and Principal Financial
Officer)
12
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INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Number Exhibit Title Page No.
- ------ -------------------------------------------------------------- --------
<S> <C> <C>
(4.2) Loan Agreement between KeyBank and the Company dated April 14
24, 1996, and Master Demand Business Loan Note by the Company
in favor of KeyBank in the amount of $2.0 million dated April
24, 1996
(11) Statement re computation of per share earnings 23
(27) Financial Data Schedule 24
</TABLE>
13
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EXHIBIT 4.2
[KeyBank Logo]
LOAN AGREEMENT
Mechanical Dynamics, Inc. (hereinafter referred to as the "Borrower") of 2301
Commonwealth, Ann Arbor, MI 48105, having applied to KeyBank National
Association, located at 100 S. Main Street, Ann Arbor, Michigan 48104
(hereinafter referred to as the "Bank") for the credit accommodations more
fully set forth below, subject to the following provisions contained herein,
and the Bank having agreed and consented to extend such credit accommodations
to the Borrower subject to following provisions contained herein:
NOW, THEREFORE, in consideration of the credit accommodations from Bank,
the mutual covenants contained herein, and other good and valuable
consideration, the Borrower hereby warrants, represents and agrees as follows:
1. LINE OF CREDIT.
a. The Bank may make advances and disbursements to the Borrower in whole
or in part and from time to time on and after the date hereof, through and
including April 30, 1997("maturity"), up to, but not exceeding, an aggregate
principal amount of Two Million and NO/100 Dollars ($2,000,000.00) outstanding
at any one time. The Line of Credit is evidenced by a Master Demand Business
Loan Note of even date herewith (the "Note"). The line of credit is payable on
demand. The terms of the Note, and all renewals, replacements, modifications
and amendments thereof, are hereby incorporated herein specifically by
reference. The Borrower may borrow, repay and reborrow under the Line of
Credit
b. This Line of Credit is in the form of an uncommitted credit facility
from the Bank to the Borrower in a principal amount not to exceed the amount
set forth above, and is in the form of loans or advances made by the Bank to
the Borrower from time to time in the sole and absolute discretion of the Bank.
This Agreement will govern the administration of the Line of Credit should any
loans or advances be made to the Borrower under this Line of Credit. The
Borrower agrees that the aggregate principal amount outstanding under the Line
of Credit is the amount reflected upon the books, records and ledgers of the
Bank. THE BORROWER AGREES THAT NO PROVISION OF THIS AGREEMENT, THE NOTE, OR
THE PROVISIONS OF ANY DOCUMENTS EXECUTED IN CONNECTION WITH THIS AGREEMENT, AND
NO COURSE OF DEALING BETWEEN THE BANK AND THE BORROWER SHALL ACT TO COMMIT THE
BANK TO MAKE ANY LOANS OR ADVANCE ANY FUNDS TO THE BORROWER.
2. WARRANTIES. The following warranties shall survive and continue after
execution and delivery of this Agreement:
a. The business operations of the Borrower are organized as a Corporation,
and the Borrower is duly organized, validly existing an in good standing under
the laws of the State of Michigan.
b. There are no material pending or, to the best of Borrower's knowledge,
threatened actions or proceedings before any court or administrative agency,
Federal or State, except as disclosed in a letter delivered by the Borrower to
the Bank at or prior to the execution of this Agreement.
c. The Borrower has filed all tax returns required to be filed and paid
all taxes due pursuant to such returns or to any assessment received. The
Internal Revenue Service and any State or local government has not asserted any
liability for taxes in excess of those already paid by the Borrower, and its
property is free of any tax liens, except, however, for those taxes which the
State of Michigan may be claiming are due and owing from
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the Borrower from previous tax years under the single business tax related to
royalties of from the sale of software by the Borrower. The Borrower
represents to the Bank that the amount of these taxes will not adversely effect
in any material way the financial condition of the Borrower.
d. The execution and performance of this Agreement, the Note, and the
Related Loan Documents, if any, are within the Borrower's powers, have been
duly authorized by appropriate corporate or partnership action, are not in
contravention of the terms of Borrower's articles of incorporation, by-laws,
regulations, close corporation agreement, partnership agreement or certificate,
or capital stock or any amendment thereof (such documents herein called
"Organization Documents"), and are not in contravention of any law or of any
other agreement to which Borrower is a party or by which it is bound.
e. All financial statements, statements as to ownership, and other
statements heretofore or hereafter given to the Bank in connection with this
Agreement, are or will be accurate and complete in all material respects,
subject to any limitation stated therein, and the Borrower is the owner of all
property in which the Borrower has given or is giving a security interest to
the Bank, free from all claims, liens, encumbrances and other security
interests. The Borrower will defend, at its sole expense, all such property
against all claims and demands of all persons, firms and corporations other
than the Bank at any time claiming the same or any interest therein.
Borrower's balance sheet and financial statements furnished to Bank in
connection with this Agreement fairly and accurately present Borrower's
financial condition and business operation at said date, and since said date
there has been no material adverse change in its condition or operation.
3. AFFIRMATIVE COVENANTS. The Borrower agrees that it will:
a. Repay the Line of Credit with interest thereon in accordance with the
terms and conditions set forth in the Note.
b. At the request of the Bank, the Borrower will supply the Bank with a
copy of its Organization Documents.
c. Continue operating in its present business form, and maintain all
rights, privileges, franchises and licenses necessary or desirable in the
normal conduct of its business activities.
d. Use the proceeds of the Line of Credit only for the following
purpose(s): to finance Borrower's accounts receivable and working capital
needs.
e. Furnish in form and substance acceptable to the Bank within 120 days
after the close of each fiscal year of the Borrower, a complete financial
statement, including a balance sheet, a profit and loss statement, and
reconciliation of surplus statement for such year for the Borrower, prepared by
an accounting firm acceptable to the Bank and prepared on an audited basis;
furnish to the Bank within 45 days after the close of each quarter an unaudited
balance sheet and profit and loss statement for such period, certified by the
Borrower as to its correctness, within 10 days of the end of each month, an
accounts receivable aging and other information as may be requested by the
Bank; and such other data, financial or otherwise, as the Bank may request; and
at all reasonable times permit a representative of the Bank to inspect the
Borrower's business properties and make extracts from the Borrower's books and
records. Additionally, Borrower will cause to be provided to the Bank within
30 days of the end of each calendar year a full and complete accounts
receivable aging for any corporation, business or other entity which is a
subsidiary of the Borrower (whether wholly or partially owned by the Borrower)
or which is affiliated with the Borrower through common ownership, management
or control.
f. Pay all taxes, assessments and governmental charges upon the Borrower
or against its properties prior to the date on which penalties are
15
<PAGE> 3
attached thereto, unless and to the extent only that the same shall be
contested in good faith and by appropriate proceedings by the Borrower.
g. As security for the Line of Credit and all other obligations and
indebtedness of any Borrower to the Bank, deliver to the Bank the following
collateral or duly executed security agreements, instruments of guarantee or
subordination agreements satisfactory to the Bank: A first position security
interest in accounts receivable, contract rights and general intangibles
evidenced by a Security Agreement of even date herewith (herein collectively
called the "Related Loan Documents"). The Borrower will execute any documents
deemed necessary by the Bank, now or hereafter to create or perfect the Bank's
interest in the collateral set forth above, and in any other collateral pledged
by the Borrower to the Bank hereunder.
h. Maintain adequate fire (including so-called extended coverage), public
liability and other insurance as the Bank may require, in such form and written
by such companies satisfactory to the Bank, and will upon request of the Bank
deliver to it the policies concerned. If required by the Bank, said policies
shall name the Bank as having a mortgagee interest in real property, or as loss
payee on personal property.
i. Comply with all requirements of the Employee Retirement Income Security
Act of 1974 ("ERISA"), as amended, and the provisions of all pension,
profit-sharing, or other employee benefit plans now or hereafter established or
maintained by the Borrower.
j. Pay or reimburse the Bank for all reasonable out-of-pocket expenses of
every nature including, but not limited to attorney's fees, which Bank incurs
in connection with this Agreement, the Note, and the Related Loan Documents, if
any, or in collection of the Line of Credit.
k. Pledge as security for the repayment of this debt any and all other
collateral pledged by the Borrower to the Bank for any other debt or obligation
that Borrower may have with the Bank. Furthermore, the Borrower hereby pledges
the collateral specifically set out in this Agreement as collateral for the
repayment of any other debt that Borrower may have with the Bank.
l. Comply with all Federal and State laws, ordinances or regulations
governing the handling, storage, transportation, disposal or any other use of
hazardous or dangerous materials or substances, or laws, ordinances or
regulations relating any way to the protection of the environment from any
materials or substances deemed hazardous or dangerous under said laws,
ordinances or regulations.
4. NEGATIVE COVENANTS. Without the prior written consent of the Bank, the
Borrower will not at any time:
a. Create or assume any obligation for money borrowed from any person,
corporation or other entity other than the Bank or an affiliate of the Bank.
b. Endorse, guarantee or become surety for the obligations of any person,
corporation or other entity except that the Borrower may endorse checks or
other instruments for deposit or collection in the ordinary course of business.
c. Mortgage, pledge or otherwise encumber any of Borrower's property, real
or personal, owned or hereafter acquired, or permit any lien or security
interest to exist thereon except liens: (a) for taxes and assessments not
delinquent or being contested in good faith, (b) of mechanics or materialmen
with respect to obligations not overdue or being contested in good faith, (c)
resulting from deposits to secure payments of worker's compensation or other
social security obligations or to secure the performance of bids or contracts
in the ordinary course of business, (d) in favor of the Bank or an affiliate
16
<PAGE> 4
of the Bank, or (e) if the Borrower is an individual, existing on the
Borrower's residential property on the date of this Agreement.
d. Make any loans or advances to any person, corporation or other entity,
except for advances for travel expenses made to employees in the normal and
ordinary course of business, up to an aggregate annual amount of $100,000.00.
e. Invest $250,000.00 in cash or more in any one 12 month period in
securities other than direct obligations of the United States Government, or
agency thereof, commercial bank paper, tax exempt municipal investments,
bankers acceptances, deposit accounts, certificates of deposit issued by the
Bank or any affiliate of the Bank, except as may be otherwise allowed in
writing by the Bank.
f. Sell or assign any account receivable, with or without recourse; sell,
transfer or assign any other assets, or if the Borrower is an individual any of
its business assets, except in the ordinary course of business.
g. Enter into any merger or consolidation with any person, firm or
corporation; or alter or amend the Borrower's capital structure or business
form if the transaction is greater than $150,000.00 in value and/or Mechanical
Dynamics Inc. is not the surviving entity.
5. EVENTS OF ACCELERATION. The following events shall be "Events of
Acceleration" hereunder:
a. Failure by the Borrower to pay any principal, or interest on the Note
when and as same shall become due and payable, whether at maturity, by
acceleration, demand (if applicable) or otherwise; or
b. Failure by the Borrower to pay any of its debt (other than that
evidenced by the Note) when and as same shall become due and payable; or
c. Any representation or warranty made or any financial statement or other
information furnished by the Borrower or any officer, representative or agent
of it in connection with the execution and delivery of this Agreement, the Note
or any Related Loan Document, or if any certificate furnished pursuant thereto
shall prove to be false or erroneous in any material respect when made; or
d. The Borrower fails to perform any term, provision or agreement
contained herein, in the Note (other than for the payment of principal or
interest), or in any Related Loan Document or other instrument of security for
the Note to be performed by it and such failure shall continue unremedied for
thirty (30) days thereafter; or
e. The Borrower or any endorser, or Guarantor with respect to the Note,
shall become involved in financial difficulties as evidenced by: (a) an
assignment for the benefit of any creditor; or commencement of any similar
debtor relief proceeding, whether judicial or otherwise; (b) consent to an
application for the appointment of a trustee, interim trustee, custodian or
receiver for all or a major portion of its property; (c) the commencement of
any action or proceeding under any other federal or state bankruptcy,
insolvency, composition, debtor relief, reorganization or other similar law, or
have such a proceeding commenced against the Borrower or any of them; (d) entry
of a final judgment for the payment of money against the Borrower or any of
them in excess of $25,000.00 and the same shall not be discharged or satisfied
within thirty (30) days of its entry, or an appeal or proceeding for review
shall not be taken within said time and a stay of execution pending such appeal
shall not be obtained; (e) dissolution or suspension of the corporate charter
or of the partnership, insolvency or failure or suspension of the usual
business of the Borrower or any of them; or (f) the issuance of any attachment,
garnishment, execution, federal tax levy, or other process or seizure against
any of their property; or
17
<PAGE> 5
f. The failure to pledge or hypothecate additional security when and as
reasonably demanded by the Bank; or
g. The Bank shall deem itself insecure, in good faith, believing that the
prospect of payment of the Note or any other indebtedness owed to the Bank, or
performance under this Agreement or any instrument providing security for the
Note, is materially impaired, or the financial condition of the Borrower in the
sole discretion of the Bank has become materially impaired;
If any of the forgoing Events of Acceleration occur, then whether or not
the Bank has made demand, the amounts outstanding under the Line of Credit and
Note shall become immediately due and payable in full, including all
outstanding principal, interest and late fees, without notice at the Bank's
option. None of the forgoing Events of Acceleration shall in any way limit or
impair the Bank's ability to make demand for payment under the terms of any
Master Demand Promissory Note executed in connection herewith.
6. RIGHTS, REMEDIES AND WAIVERS. If the Line of Credit and the amounts
outstanding under the Note are not paid when due, whether by demand (if
applicable), acceleration or otherwise, the Bank shall have, and may exercise,
any of the rights and remedies provided in this Agreement or granted secured
parties under the Uniform Commercial Code, statutory or common law, and the
Bank may pursue all rights and remedies granted under the Loan Documents,
including without limitation direct action on any Guaranty. Presentment,
demand, protest or notice of any kind are all hereby expressly waived by the
Borrower. All of the above rights and remedies are deemed to be cumulative and
not exclusive and may be exercised at any time by the Bank whether individually
or simultaneously without regard to issues of priority or marshaling of assets.
7. MISCELLANEOUS.
a. Paragraph headings are for reference only and shall otherwise be
disregarded. If any term, covenant or condition in this Agreement is
determined to be invalid or unenforceable by a Court of competent jurisdiction,
the remaining terms, covenants and conditions shall remain in full force and
effect. This Agreement shall be governed by and construed under the laws of
the state of Michigan.
b. No waiver or amendment of any part of this Agreement shall be effective
unless in writing. No delay in exercising any right shall operate as a waiver
thereof. A waiver on any one occasion shall not be a waiver of any right or
remedy on any future occasion. This Agreement will terminate when all
obligations and indebtedness of the Borrower to the Bank have been paid in full
and the Bank shall not be obligated under any other agreement to advance any
additional funds to the Borrower.
c. So long as any debt evidenced by this Agreement may be outstanding, the
terms, covenants and conditions of this Agreement shall remain in full force
and effect.
18
<PAGE> 6
THE UNDERSIGNED WAIVES ANY RIGHT TO HAVE A JURY PARTICIPATE IN RESOLVING ANY
DISPUTE, WHETHER SOUNDING IN CONTRACT, TORT OR OTHERWISE, BETWEEN THE BANK AND
THE UNDERSIGNED ARISING OUT OF, IN CONNECTION WITH, RELATED TO, OR INCIDENTAL
TO THIS AGREEMENT OR ANY RELATIONSHIP ESTABLISHED BETWEEN THEM IN CONNECTION
WITH THIS AGREEMENT OR WITH ANY OTHER INSTRUMENT, DOCUMENT OR AGREEMENT
EXECUTED OR DELIVERED IN CONNECTION HEREWITH .
IN WITNESS WHEREOF and intending to be legally bound hereby, the Borrower
and Bank have executed and delivered this Loan Agreement this 24th day of
April, 1996.
Mechanical Dynamics, Inc., KeyBank National Association:
A Michigan corporation:
BY:/s/ James E. Vincke BY: /s/ Lorri A. Hoxie
----------------------------- -------------------------------
James E. Vincke Lorri A. Hoxie
ITS: Vice President and CFO ITS: Assistant Vice President
19
<PAGE> 7
[KeyBank Logo]
MASTER DEMAND BUSINESS LOAN NOTE
LOANS UP TO: $2,000,000.00 NOTE NUMBER:_________________________
1. PROMISE TO PAY. ON DEMAND AFTER TIME, FOR VALUE RECEIVED, on this
24th day of April 1996, the undersigned (hereinafter referred to as the
"undersigned"), jointly and severally (if more than one), promise to pay to
KeyBank National Association, located at 100 S. Main Street, Ann Arbor,
Michigan 48104, or its assigns (hereinafter referred to as the "Bank"), or
order the principal sum of Two Million and No/100 Dollars ($2,000,000.00) to
the extent such sum has been advanced to the undersigned by the Bank and
remains due and unpaid, as indicated on the books and records of the Bank, plus
interest upon the outstanding principal amount, calculated upon the actual
number of days elapsed over a year assumed to have 360 days, at the floating
rate of the Bank's Prime Rate, when and as announced by the Bank from time to
time, until maturity (the "Note Rate"). The Bank's Prime Rate may not be the
lowest rate charged by the Bank to any of its customers. In no event will the
Note Rate exceed the maximum rate of interest allowed by law. Interest will be
computed on the unpaid principal balance from the date of each advance under
this Note.
2. PAYABLE ON DEMAND. The undersigned will pay this sum, or any or all
amounts outstanding hereunder, ON DEMAND. Until such demand is made by the
Bank, the undersigned will pay consecutive monthly installments of interest
only commencing on June 1, 1996, and then on the first day of each month
thereafter.
3. UNCOMMITTED CREDIT FACILITY. The Bank has authorized an uncommitted
credit facility to the undersigned in a principal amount not to exceed the face
amount of this Note. The credit facility is in the form of loans made by the
Bank to the undersigned from time to time in the sole and absolute discretion
of the Bank, and this Note evidences the undersigned's obligation to repay
those loans. The undersigned agrees that the aggregate principal amount
outstanding under this Note is the amount reflected upon the books, records and
ledgers of the Bank. The undersigned agrees that no provision of this Note, or
the provisions of any documents executed in connection with this Note, and no
course of dealing between the Bank and the undersigned shall act to commit the
Bank to make any loans or advance any funds to the undersigned.
4. APPLICATION OF PAYMENTS; CALCULATION OF INTEREST. Each payment will be
applied first to accrued interest, then to costs and then to loan principal.
Upon default, payments received may be applied by the Bank to the amounts
outstanding hereunder in any manner and in the sole discretion of the Bank.
Interest shall be calculated upon the actual numbers of days elapsed over a
year assumed to have 360 days.
5. DEFAULT RATE. The Bank reserves the right to increase the interest
rate after default, whether by acceleration or otherwise, to a rate of three
percent (3%) per annum over the Note Rate, but in no event greater than the
maximum rate allowed by law.
6. LATE FEES. The Bank may charge a fee to cover additional
administrative costs incurred for any payment received by Bank ten (10)
business days or more after the due date of said late payment, and said fee
will be equal to two percent (2%) of the payment required hereunder or $200.00,
whichever is greater. No payments will be accepted without payment
20
<PAGE> 8
of this fee. In addition, Bank may charge a fee to cover administrative costs
incurred in origination and/or renewal of this Note, which shall be payable
upon execution of the Note.
7. LOAN AGREEMENT. This Note is executed in connection with a Loan
Agreement of even date herewith.
8. SECURITY. To secure the repayment of this Note and any or all
other liabilities of the undersigned to the Bank howsoever arising or
evidenced, whether direct or indirect, absolute or contingent, due or to become
due, now existing or hereafter arising, several or joint, including any
renewals, extensions, modifications, etc., the undersigned hereby pledges to
the Bank and grants to the Bank a continuing security interest in the following
described property, whether real or personal, and in all additions,
substitutions, and proceeds thereof: a). All balances of deposit accounts of
the undersigned now or at any time hereafter with the Bank; b). All
securities and other property of the undersigned now or hereafter in the
possession or custody of the Bank, together with substitutions, increments and
proceeds; c). Any other property declared or acknowledged to constitute
security for the indebtedness of the undersigned to the Bank, together with
substitutions, increments and proceeds thereof; d). A first position security
interest in accounts receivable, contract rights and general intangibles
evidenced by a Security Agreement of even date herewith. The Bank shall
have the right at any time to apply its own indebtedness or liability to the
undersigned or to any endorser or other party liable hereon in whole or partial
payment of this Note, either before or after its maturity, or in whole or
partial payment of any other liability due or to become due from the
undersigned to the Bank.
9. REMEDIES AFTER DEMAND. Upon demand having been made by the Bank, and
unless the Bank shall otherwise elect, the full amount of the indebtedness
evidenced hereby shall be accelerated and the amounts outstanding under this
Note shall become immediately due and payable, without notice or demand. After
demand is made hereunder the Bank shall have all the rights and remedies
provided by law, whether common, statutory or otherwise, including without
limitation all the remedies granted to the Bank under the Uniform Commercial
Code, the right to offset any deposit accounts held by the Bank, the right to
repossess and dispose of any collateral pledged for this or any other note or
loan agreement between the Bank and the undersigned, the right to foreclose any
mortgage given by the undersigned by advertisement as provided by Michigan law,
etc. The undersigned shall be liable for any deficiency remaining after
disposition of any property in which the bank has a security interest to secure
payment of the indebtedness evidenced hereby, and the computation of such
deficiency or of the amount required to redeem such property shall include
actual attorney's fees, legal expenses and any other costs incurred.
10. WAIVER. The undersigned or endorser hereof and any other party liable
for the indebtedness evidenced hereby severally waives demand, presentment,
notice of dishonor and protest of this Note and consents to any extension or
postponement of time of its payment without limit as to the number or period
thereof, to any substitution, exchange or release of all or any part of the
collateral securing this Note, to the addition of any party hereto, and to the
release or discharge of or suspension of any rights and remedies against any
person who may be liable hereon for the payment of the indebtedness evidenced
hereby.
12. DELAY IN EXERCISING RIGHTS. No delay on the part of the Bank in the
exercise of any right or remedy shall operate as a waiver thereof, no single or
partial exercise by the Bank of any right or remedy shall preclude any other
future exercise thereof or the indulgence by the Bank of any default shall be
effective unless in writing and signed by the Bank, nor shall a waiver on one
occasion be construed as a bar to, or waiver of, any such right on any future
occasion.
21
<PAGE> 9
13. FINANCIAL INFORMATION. Unless otherwise agreed under the terms of the
Loan Agreement, the undersigned will provide to the Bank, at least annually
upon the anniversary of this Note, or more frequently if requested by the Bank,
any and all financial information regarding the undersigned in form and
substance acceptable to the Bank, including without limitation personal
financial statements if the undersigned is an individual, or if the undersigned
is a business all financial statements, including without limitation all profit
and loss statements, statements of cash flow, balance sheets, etc.
14. MISCELLANEOUS. The undersigned, if more than one, shall be jointly
and severally liable hereunder and the term "undersigned" shall mean any one or
more of them, their successors and assigns. Any reference to KeyBank National
Association or Bank herein shall be deemed to include any subsequent holder of
this Note. Section numbers and headings in this Note are for reference and
convenience only, and shall not be given any substantive meaning. This Note
shall be governed by and construed in accordance with the law of the State of
Michigan.
THE UNDERSIGNED WAIVES ANY RIGHT TO HAVE A JURY PARTICIPATE IN RESOLVING ANY
DISPUTE, WHETHER SOUNDING IN CONTRACT, TORT OR OTHERWISE, BETWEEN THE BANK AND
THE UNDERSIGNED ARISING OUT OF, IN CONNECTION WITH, RELATED TO, OR INCIDENTAL
TO THIS NOTE OR ANY RELATIONSHIP ESTABLISHED BETWEEN THEM IN CONNECTION WITH
THIS NOTE OR WITH ANY OTHER INSTRUMENT, DOCUMENT OR AGREEMENT EXECUTED OR
DELIVERED IN CONNECTION WITH THIS NOTE.
UNDERSIGNED:
Mechanical Dynamics, Inc., a Michigan Corporation
By: /s/ James E. Vincke
-------------------------------------
James E. Vincke
Its: Vice President and Chief Financial Officer
Address:
2301 Commonwealth
Ann Arbor, MI 48105
Tax ID/SS# No.: 38-2163045
22
<PAGE> 1
EXHIBIT 11
MECHANICAL DYNAMICS, INC. AND SUBSIDIARIES
COMPUTATION OF EARNINGS PER SHARE
(in thousands, except per share data)
(unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
1996 1995 1996 1995
============================================================================================================
<S> <C> <C> <C> <C>
PRIMARY EARNINGS PER SHARE:
Net income $561 $380 $932 $543
Accretion of warrants 0 59 0 110
- ------------------------------------------------------------------------------------------------------------
Net income available to common shareholders $561 $321 $932 $433
- ------------------------------------------------------------------------------------------------------------
Weighted average common shares outstanding 4,643 3,254 4,226 3,256
Shares issued below fair market value 0 47 0 47
Converted preferred shares 0 485 0 485
Effect of stock options and warrants 86 53 69 42
- ------------------------------------------------------------------------------------------------------------
Adjusted shares outstanding 4,729 3,839 4,295 3,830
- ------------------------------------------------------------------------------------------------------------
Net income per common share $0.12 $0.08 $0.22 $0.11
============================================================================================================
FULLY DILUTED EARNINGS PER SHARE:
Net income available to common shareholders $561 $321 $932 $433
- ------------------------------------------------------------------------------------------------------------
Weighted average common shares outstanding 4,643 3,254 4,226 3,256
Shares issued below fair market value 0 47 0 47
Converted preferred shares 0 485 0 485
Effect of stock options and warrants 104 57 104 57
- ------------------------------------------------------------------------------------------------------------
Adjusted shares outstanding 4,747 3,843 4,330 3,845
- ------------------------------------------------------------------------------------------------------------
Net income per common share $0.12 $0.08 $0.22 $0.11
============================================================================================================
</TABLE>
23
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0001011451
<NAME> MECHANICAL DYNAMICS, INC.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> JUN-30-1996
<CASH> 20,785
<SECURITIES> 0
<RECEIVABLES> 4,551
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 26,297
<PP&E> 1,279
<DEPRECIATION> 1,482
<TOTAL-ASSETS> 29,104
<CURRENT-LIABILITIES> 8,118
<BONDS> 0
333
0
<COMMON> 19,213
<OTHER-SE> 1,440
<TOTAL-LIABILITY-AND-EQUITY> 29,104
<SALES> 0
<TOTAL-REVENUES> 12,289
<CGS> 0
<TOTAL-COSTS> 10,972
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 1,393
<INCOME-TAX> 461
<INCOME-CONTINUING> 932
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 932
<EPS-PRIMARY> 0.22
<EPS-DILUTED> 0.22
</TABLE>
