<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1997 Commission file number 0-21835
SUN HYDRAULICS CORPORATION
- --------------------------------------------------------------------------------
(Exact Name of Registration as Specified in its Charter)
FLORIDA 59-2754337
------- -------------------
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
1500 WEST UNIVERSITY PARKWAY
SARASOTA, FLORIDA 34243
- ---------------------------------------- ----------
(Address of Principal Executive Offices) (Zip Code)
941/362-1200
-----------------
(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. Yes [X] No [ ]
The Registrant had 6,310,002 shares of common stock, par value $.001,
outstanding as of August 8, 1997.
<PAGE> 2
Sun Hydraulics Corporation
INDEX
For the second quarter ended June 30, 1997
<TABLE>
<CAPTION>
Page
----
<S> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets as of June 30, 1997 (unaudited)
and December 31, 1996 3
Consolidated Statements of Income for the
Three Months Ended June 30, 1997 and 1996 (unaudited) 4
Consolidated Statements of Income for the
Six Months Ended June 30, 1997 and 1996 (unaudited) 5
Consolidated Statement of Changes in Shareholders' Equity for the
Six Months Ended June 30, 1997 (unaudited) 6
Consolidated Statements of Cash Flows
for the Six Months Ended June 30, 1997 and 1996 (unaudited) 7
Notes to Consolidated Financial Statements 8
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 10
Forward Looking Information 13
PART II. OTHER INFORMATION 15
Item 1. Legal Proceedings
Item 2. Changes in Securities
Item 3. Defaults Upon Senior Securities
Item 4. Submission of Matters to a Vote of Security Holders
Item 5. Other Information
Item 6. Exhibits and Reports on Form 8-K
</TABLE>
2
<PAGE> 3
PART I: FINANCIAL INFORMATION
Item 1.
Sun Hydraulics Corporation
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1997 1996
(UNAUDITED)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 1,807 $ 1,038
Accounts receivable, net of allowance for
doubtful accounts of $60 and $62 5,544 3,535
Inventories 5,593 4,451
Other current assets 843 1,132
------- -------
Total current assets 13,787 10,156
Property, plant and equipment, net 38,924 37,212
Other assets 15 1,048
------- -------
Total assets $52,726 $48,416
======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 2,504 $ 3,273
Accrued expenses and other liabilities 1,923 1,961
Long-term debt due within one year 2,562 2,340
Notes payable to related parties due within one year 704 655
Dividends payable 221 508
Income taxes payable, net 1,163 461
------- -------
Total current liabilities 9,077 9,198
Long-term debt due after one year 6,844 12,314
Notes payable to related parties due after one year 1,544 1,909
Deferred income taxes 2,578 2,578
Other liabilities -- 20
------- -------
Total liabilities 20,043 26,019
------- -------
Contingencies and commitments -- --
Shareholders' equity:
Common stock 6 2,179
Capital in excess of par value 24,092 2,719
Retained earnings 8,560 17,450
Equity adjustment for foreign currency translation 25 49
------- -------
Total shareholders' equity 32,683 22,397
------- -------
Total liabilities and shareholders' equity $52,726 $48,416
======= =======
</TABLE>
The accompanying Notes to the consolidated financial statements are
an integral part of these financial statements.
3
<PAGE> 4
Sun Hydraulics Corporation
CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
JUNE 30,
(UNAUDITED)
1997 1996
---- ----
<S> <C> <C>
NET SALES $15,276 $13,831
Cost of sales 10,444 9,125
------- -------
GROSS PROFIT 4,832 4,706
Selling, engineering and
administrative expenses 2,849 2,929
------- -------
OPERATING INCOME 1,983 1,777
Interest expense 216 218
Miscellaneous expense (income) 72 (63)
------- -------
INCOME BEFORE INCOME TAXES 1,695 1,622
Income tax provision 616 202
------- -------
NET INCOME $ 1,079 $ 1,420
======= =======
PRO FORMA INCOME DATA (NOTE 3):
INCOME BEFORE INCOME TAXES $ 1,695 $ 1,622
Pro Forma Income tax provision 616 646
------- -------
PRO FORMA NET INCOME $ 1,079 $ 976
======= =======
PRO FORMA NET INCOME PER SHARE $ .17 $ .15
======= =======
PRO FORMA AVERAGE SHARES OUTSTANDING 6,517 6,509
======= =======
</TABLE>
The accompanying Notes to the consolidated financial statements are
an integral part of these financial statements.
4
<PAGE> 5
Sun Hydraulics Corporation
CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
(UNAUDITED)
1997 1996
---- ----
<S> <C> <C>
NET SALES $29,874 $27,637
Cost of sales 20,646 18,616
------- -------
GROSS PROFIT 9,228 9,021
Selling, engineering and
administrative expenses 5,566 5,594
------- -------
OPERATING INCOME 3,662 3,427
Interest expense 368 423
Miscellaneous expense (income) 14 (10)
------- -------
INCOME BEFORE INCOME TAXES 3,280 3,014
Income tax provision 1,184 491
------- -------
NET INCOME $ 2,096 $ 2,523
======= =======
PRO FORMA INCOME DATA (NOTE 3):
INCOME BEFORE INCOME TAXES $ 3,280 $ 3,014
Pro Forma Income tax provision 1,184 1,200
------- -------
PRO FORMA NET INCOME $ 2,096 $ 1,814
======= =======
PRO FORMA NET INCOME PER SHARE $ .32 $ .28
======= =======
PRO FORMA AVERAGE SHARES OUTSTANDING 6,517 6,509
======= =======
</TABLE>
The accompanying Notes to the consolidated financial statements are
an integral part of these financial statements.
5
<PAGE> 6
Sun Hydraulics Corporation
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
(IN THOUSANDS)
<TABLE>
<CAPTION>
EQUITY
ADJUSTMENT
CAPITAL IN FOR FOREIGN
COMMON EXCESS OF RETAINED CURRENCY
STOCK PAR VALUE EARNINGS TRANSLATION TOTAL
<S> <C> <C> <C> <C> <C>
Balance, December 31, 1996 $ 2,179 $ 2,719 $ 17,450 $ 49 $ 22,397
Net proceeds from stock offering 6 19,246 19,252
Distributions to shareholders (10,545) (10,545)
Merger with Sun Holdings (Note 2) (2,175) 2,123 (52)
Shares retired in stock offering (4) 4 --
Net income 2,096 2,096
Dividends declared (441) (441)
Adjustment for foreign
currency translation (24) (24)
------- ------- -------- ---- --------
Balance, June 30, 1997 (unaudited) $ 6 $24,092 $ 8,560 $ 25 $ 32,683
======= ======= ======== ==== ========
</TABLE>
The accompanying Notes to the consolidated financial statements are
an integral part of these financial statements.
6
<PAGE> 7
Sun Hydraulics Corporation
Consolidated Statements of Cash Flows
(IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30,
1997 1996
(UNAUDITED) (UNAUDITED)
<S> <C> <C>
Cash flows from operating activities:
Net income $ 2,096 $ 2,523
Adjustments to reconcile net income to
net cash provided by (used in) operating activities:
Depreciation 1,852 1,723
(Increase) decrease in:
Accounts receivable (2,009) (693)
Inventories (1,142) (178)
Other current assets 289 100
Other assets 1,033 (97)
Increase (decrease) in:
Accounts payable (769) (503)
Accrued expenses and other liabilities (38) (47)
Income taxes payable, net 702 488
Other liabilities (20) 25
-------- -------
Net cash provided by operating activities 1,994 3,341
-------- -------
Cash flows from investing activities:
Capital expenditures (3,566) (7,568)
Proceeds from dispositions of equipment 2 --
-------- -------
Net cash used in investing activities (3,564) (7,568)
-------- -------
Cash flows from financing activities:
Proceeds from debt 3,722 6,403
Repayment of debt (8,970) (2,835)
Repayment of notes payable to related parties (316) (280)
Proceeds from exercise of stock options -- 8
Issuance of stock options -- 79
Net proceeds from stock offering 19,252 --
Capital paid for Sun Holdings merger (Note 2) (52) --
Distributions to shareholders (11,273) (1,310)
-------- -------
Net cash provided by financing activities 2,363 2,065
-------- -------
Effect of exchange rate changes on cash (24) (57)
-------- -------
Net increase (decrease) in cash and cash equivalents 769 (2,219)
Cash and cash equivalents, beginning of period 1,038 2,434
-------- -------
Cash and cash equivalents, end of period $ 1,807 $ 215
======== =======
Supplemental disclosure of cash flow information:
Cash paid for:
Interest (including amounts capitalized) $ 616 $ 428
Income taxes $ 482 $ 3
</TABLE>
The accompanying Notes to the consolidated financial statements are
an integral part of these financial statements.
7
<PAGE> 8
SUN HYDRAULICS CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS EXCEPT PER SHARE DATA)
1. INTERIM CONSOLIDATED FINANCIAL STATEMENTS
The accompanying unaudited interim consolidated financial statements
have been prepared pursuant to the rules and regulations of the Securities and
Exchange Commission for reporting on Form 10-Q. Accordingly, certain information
and footnotes required by generally accepted accounting principles for complete
financial statements are not included herein. The financial statements are
prepared on a consistent basis (including normal recurring adjustments) with and
should be read in conjunction with the combined financial statements and related
notes contained in the Annual Report on Form 10-K for the fiscal year ended
December 31, 1996, filed by Sun Hydraulics Corporation (the "Company") with the
Securities and Exchange Commission on March 31, 1997.
2. INITIAL PUBLIC OFFERING
The consolidated financial statements of the Company consist of the
financial position and results of operations of Sun Hydraulics Corporation ("Sun
Hydraulics") and Sun Hydraulik Holdings Limited ("Sun Holdings"). In January
1997, Sun Hydraulics effected a 9 for 1 stock split and issued 374,811 shares of
common stock and made a nominal cash payment in exchange for all of the issued
and outstanding stock of Sun Holdings. Accordingly, financial statements for
1997 are on a consolidated basis, and financial statements for 1996 are on a
combined basis.
The Company filed a Registration Statement on Form S-1 with the
Securities and Exchange Commission effective January 9, 1997, and issued
2,300,000 shares of common stock in an initial public offering ("IPO"), with an
initial offering price of $9.50. The IPO net proceeds of $19.3 million, the
exchange of shares with Sun Holdings, and the distribution of previously taxed S
Corporation retained earnings are reflected in the Statement of Changes in
Shareholders' Equity.
The $19.3 million of net proceeds from the IPO were used as follows: a
payment of $9.5 million of the S Corporation distribution was made, representing
90% of the total distribution of $10.6 million, $7.7 million was paid to
extinguish debt, and $2.1 million was retained as working capital.
The Company has 20,000,000 authorized shares of common stock, par value
$0.001, with 6,310,002 shares outstanding. The Company also has 2,000,000
authorized shares of preferred stock, par value $0.001, with no shares
outstanding.
3. PRO FORMA NET INCOME AND EARNINGS PER SHARE
Pro forma net income reflects a provision for income taxes as if Sun
Hydraulics had been a C Corporation for all periods presented.
The computation of pro forma earnings per share is based on the pro
forma weighted average number of common shares outstanding during the period
plus vested common stock equivalents, if dilutive, consisting of certain shares
subject to stock options, after giving effect to the initial public offering
(See Note 2). The assumed exercise of dilutive stock options less the number of
treasury shares assumed to be purchased from the proceeds were calculated using
the average market price for the period ended June 30, 1997.
During the first quarter of 1997, Statement on Financial Accounting
Standards NO. 128 ("SFAS 128"), "Earnings per Share", was issued. SFAS 128
will be effective for the year ending December 31, 1997 and will require a
restatement of previously reported earnings per share. Under SFAS 128, basic
and diluted earnings per share are not expected to be significantly different
from primary and fully diluted earnings per share, respectively, as calculated
by the Company.
8
<PAGE> 9
4. INVENTORIES (IN THOUSANDS)
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1997 1996
(UNAUDITED)
<S> <C> <C>
Raw materials $ 95 $ 147
Work in process 3,850 2,758
Finished goods 1,648 1,546
------ ------
$5,593 $4,451
====== ======
</TABLE>
5. LONG-TERM DEBT (IN THOUSANDS)
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1997 1996
(UNAUDITED)
<S> <C> <C>
Lines of credit agreements, interest payable
at lender's prime rate (8.25% at June 30,
1997 and December 31, 1996) $ 2,156 $ 1,512
Secured equipment loan, interest only payable
monthly at 8.25% at December 31, 1996 -- 2,874
8.25% mortgage note payable secured by real
property due in monthly principal and
interest installments of $20 -- 2,355
Notes payable secured by equipment, payable
in monthly principal and interest
installments with interest rates varying
from 4.90% to 5.60% with maturity dates
from March 1996 to June 1998 10 46
Construction lines of credit at 8.25% and
6.47% converted to mortgage notes in April 1997
payable at 8.25% and 6.47% with maturities
of 15 years and 12 years, respectively 7,240 7,867
-------- --------
9,406 14,654
Less amounts due within one year (2,562) (2,340)
-------- --------
$ 6,844 $ 12,314
======== ========
</TABLE>
In February 1997, the Company negotiated a one year, unsecured
revolving credit facility. The agreement provides for a maximum availability of
$10.0 million, payable on demand at the lender's prime rate of interest. At June
30, 1997, $2.1 million was outstanding under this credit facility.
9
<PAGE> 10
Item 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
The Company is a leading designer and manufacturer of high-performance,
screw-in hydraulic cartridge valves and manifolds which control force, speed and
motion as integral components in fluid power systems. The Company sells its
products globally through independent distributors.
The production capacity expansion for the United States manufacturing
operations which began in March 1997 was completed during the quarter. Manifold
production has been relocated to the Company's new Sarasota, Florida, facility.
The original Sarasota plant has been reconfigured to take advantage of the
increased floor capacity for the production of cartridge valves and to establish
cellular production for high volume products. Management believes that the
Company now has the production capability to increase net sales levels during
the second half of the year.
Net sales were $15.3 million for the quarter ended June 30, 1997, a
6.5% increase over the first quarter of 1997. Demand during the quarter
continued at approximately the same level as the prior quarter, exceeding $18.0
million. The increase in backlog necessitated increased delivery lead times.
Management believes that recent production rates will be reflected in
increased sales for the remainder of the year; however, the incremental
costs of maximizing shipments to customers will continue to have a negative
impact on gross profit as a percentage of sales.
Net income for the quarter ended June 30, 1997, did not increase
proportionately to sales and remained at the first quarter level of
approximately $1.0 million. The disruption and costs associated with the
production expansion and reconfiguration were exacerbated by the increased
costs of expediting and rescheduling. In addition, the implementation of
manufacturing systems in the new manifold plant and the hiring and training of
new personnel adversely affected the rate of production increase at both U.S.
facilities.
COMPARISON OF THREE MONTHS ENDED JUNE 30, 1997 AND 1996
Net sales increased 10.4%, or $1.4 million, to $15.3 million in the
three month period ended June 30, 1997, compared to $13.8 million in the three
month period ended June 30, 1996. Domestic net sales increased 2.3%, or $0.3
million to $9.7 million. Domestic shipments were restricted by reduced manifold
production in the United States due to the move to the new plant. International
net sales increased 28.0%, or $1.2 million to $5.6 million, reflecting a
significant increase in production at the manufacturing plant in Coventry,
England. European net sales increased $0.9 million or 31.6% to $3.7 million.
Canada, Mexico and South American net sales increased $0.1 million to $0.8
million with Japan and Pacific Rim sales increasing $0.2 million to
$1.1 million.
10
<PAGE> 11
Gross Profit increased 2.7% or $0.1 million to $4.8 million in the
three month period ended June 30, 1997, compared to $4.7 million in the three
month period ended June 30, 1996. This increase primarily was related to the
increase in net sales. Gross profit as a percentage of net sales decreased to
31.6% in the three month period ended June 30, 1997, from 34.0% for the three
month period ended June 30, 1996. The decrease in the percentage of gross profit
to net sales was due to increased manufacturing overhead costs related to the
new facilities in the United States and Germany and production inefficiencies
and start-up costs in the new manifold plant in the United States.
Selling, engineering and administrative expenses decreased 2.7% or $0.1
million to $2.8 million in the three month period ended June 30, 1997, compared
to $2.9 million in the three month period ended June 30, 1996. However, due to
the timing of discretionary spending for marketing and other costs, such
expenses for the three months ended June 30, 1996, were unusually high.
Selling, engineering and administrative expenses as a percentage of sales
decreased to 18.7% in the three month period ended June 30, 1997, compared to
21.2% in the three month period ended June 30, 1996.
Interest expense was $0.2 million for the three month period ended June
30, 1997, approximately the same expense as the period ended June 30, 1996.
Miscellaneous expense for the period ended June 30, 1997 was primarily due to
exchange losses in Germany.
The provision for income taxes in the three month period ended June 30,
1997, was 36.3% of pretax income compared to 39.8% of pro forma pretax income
in the three month period ended June 30, 1996. The decrease in the effective tax
rate was due to the change in the source of pretax income among the Company's
three operations in the United States, the United Kingdom and Germany.
Net income for the three month period ended June 30, 1997, increased
to $1.1 million, or 10.6% over the three month period ended June 30, 1996,
primarily as a result of the foregoing factors.
COMPARISON OF SIX MONTHS ENDED JUNE 30, 1997 AND 1996
Net sales increased 8.1%, or $2.2 million, to $29.9 million in the six
month period ended June 30, 1997, compared to $27.6 million in the six month
period ended June 30, 1996. Domestic net sales increased 3.1%, or $0.6 million
to $19.0 million. Net sales were restricted in the United States by production
constraints and demand was substantially higher than shipments. International
net sales increased 18.1%, or $1.7 million to $10.9 million. European net sales
increased $0.9 million or 14.0% to $7.1 million. Canada, Mexico and South
American net sales increased $0.3 million to $1.5 million with Japan and Pacific
Rim sales increasing $0.5 million to $2.3 million.
Gross Profit increased 2.3% or $0.2 million to $9.2 million in the six
month period ended June 30, 1997, compared to $9.0 million in the six month
period ended June 30, 1996. This increase is primarily related to the increase
in net sales. Gross profit as a percentage of net sales decreased to 30.9% in
the six month period ended June 30, 1997 from 32.6% for the six month period
ended June 30, 1996. The decrease in the percentage of gross profit to net sales
was due to increased manufacturing overhead costs related to the new facilities
in the United States and Germany and production inefficiencies and start-up
costs in the new manifold plant in the United States.
11
<PAGE> 12
Selling, engineering and administrative expenses were $5.6 million for
the six month period ended June 30, 1997, approximately the same expense as the
six month period ended June 30, 1996. However, due to the timing of
discretionary spending for marketing and other costs, such expenses for the
three months ended June 30, 1996, were unusually high. Selling, engineering and
administrative expenses as a percentage of sales decreased to 18.6% in the six
month period ended June 30, 1997 compared to 20.2% in the six month period ended
June 30, 1996.
Interest expense was $0.4 million for the six month period ended June
30, 1997, approximately the same expense, as the period ended June 30, 1996.
The provision for income taxes in the six month period ended June 30,
1997, was 36.1% of pretax income compared to 39.8% of pro forma pretax income
in the six month period ended June 30, 1996. The decrease in the effective tax
rate primarily was due to the change in the source of pretax income among the
Company's three operations in the United States, the United Kingdom and Germany.
Net income for the six month period ended June 30, 1997, increased to
$2.1 million, or 15.5% over the six month period ended June 30, 1996, primarily
as a result of the foregoing factors.
LIQUIDITY AND CAPITAL RESOURCES
In January 1997, the Company received $20.3 million of gross proceeds
from its initial public offering of common stock. Net proceeds after expenses
were approximately $19.3 million. In January 1997, approximately 90% or $9.5
million of the S Corporation distribution was paid and the balance of $1.0
million was paid in May 1997. Also in January 1997, the capital equipment loan
balance of $2.9 million and the mortgage balance of $2.4 million on the original
United States facility were paid in full. In March 1997, $1.0 million was paid
to reduce the mortgage on the new plant in the United States to a balance of
$5.2 million. In February and March 1997, $1.4 million was used to repay the
entire revolving line of credit in the United States.
In February 1997, the Company negotiated a $10.0 million unsecured
revolving credit facility with a term of one year and an interest rate equal to
the bank lender's prime rate. This replaced a $1.7 million revolving line of
credit, which had been secured by the Company's inventories and accounts
receivable. At June 30, 1997, $2.1 million had been drawn down under this credit
facility.
Cash generated from operations in the six month period ended June 30,
1997, was $2.0 million compared to $3.3 million in the six month period ended
June 30, 1996. The cash flow reduction reflected an increase in inventory of
$1.1 million to provide for higher volume shipments and the various production
moves and an accounts receivable increase of $2.0 million as a result of a
higher shipment level at the end of the second quarter.
Capital expenditures in the six-month period ended June 30, 1997, were
$3.6 million. This was comprised of $1.4 million related to the construction of
the new facilities in the United States and Germany and $2.2 million spent for
machinery and equipment.
The Company believes that cash generated from operations and its
borrowing availability under the $10 million revolving line of credit will be
sufficient to satisfy the Company's operating expenses and capital expenditures
for the foreseeable future.
12
<PAGE> 13
The Company declared a dividend of $.035 per share to shareholders of
record on March 31, 1997, which was paid on April 15,1997. The Company also
declared a dividend of $.035 per share to shareholders of record July 3, 1997,
which was paid on July 15, 1997.
SEASONALITY AND INFLATION
The Company experiences reduced activity during the fourth quarter of
the year, largely as a result of fewer working days due to holiday shutdowns.
The Company does not believe that inflation had a material effect on
its operations for the six months ended June 30, 1997 and June 30, 1996. There
can be no assurance, however, that the Company's business will not be affected
by inflation in the future.
FORWARD-LOOKING INFORMATION
Certain oral statements made by management from time to time and
certain statements contained herein that are not historical facts are
"forward-looking statements" within the meaning of Section 21E of the Securities
Exchange Act of 1934 and because such statements involve risks and
uncertainties, actual results may differ materially from those expressed or
implied by such forward-looking statements. Forward-looking statements,
including those in Management's Discussion and Analysis of Financial Condition
and Results of Operations are statements regarding the intent, belief or current
expectations, estimates or projections of the Company, its Directors or its
Officers about the Company and the industry in which it operates, and
assumptions made by management, and include among other items, (i) the Company's
strategies regarding growth, including its intention to develop new products;
(ii) the Company's financing plans; (iii) trends affecting the Company's
financial condition or results of operations; (iv) the Company's ability to
continue to control costs and to meet its liquidity and other financing needs;
(v) the declaration and payment of dividends; and (vi) the Company's ability to
respond to changes in customer demand domestically and internationally,
including as a result of standardization. Although the Company believes that its
expectations are based on reasonable assumptions, it can give no assurance that
the anticipated results will occur.
Important factors that could cause the actual results to differ
materially from those in the forward-looking statements include, among other
items, (i) the economic cyclicality of the capital goods industry in general and
the hydraulic valve and manifold industry in particular, which directly affect
customer orders, lead times and sales volume; (ii) conditions in the capital
markets, including the interest rate environment and the availability of
capital; (iii) changes in the competitive marketplace that could affect the
Company's revenue and/or cost bases, such as increased competition, lack of
qualified engineering, marketing, management or other personnel, and increased
labor and raw materials costs; (iv) changes in technology or customer
requirements, such as standardization of the cavity into which screw-in
cartridge valves must fit, which could render the Company's products or
technologies noncompetitive or obsolete; (v) new product introductions, product
sales mix and the geographic mix of sales nationally and internationally; and
(vi) changes relating to the Company's international sales, including changes in
regulatory requirements or tariffs, trade or currency restrictions, fluctuations
in exchange rates, and tax and collection issues. Further information relating
to factors that could cause actual results to differ from those anticipated is
included but not limited to information under the headings "Risk Factors" in the
Form S-1 Registration Statement and Prospectus for the
13
<PAGE> 14
Company's initial public offering, and "Business" in the Company's Form 10-K for
the year ended December 31, 1996. The Company disclaims any intention or
obligation to update or revise forward-looking statements, whether as a result
of new information, future events or otherwise.
14
<PAGE> 15
PART II
OTHER INFORMATION
Item 1. Legal Proceedings.
None.
Item 2. Changes in Securities.
None.
Item 3. Defaults upon Senior Securities.
None.
Item 4. Submission of Matters to a Vote of Security Holders.
The Annual Meeting of Shareholders of the Company was held on June 21,
1997. At the meeting, the following actions were taken by the shareholders:
1. Arthur B. Bodley was reelected as a Director to serve until the Annual
Meeting in 1998, and Robert E. Koski and James G. March were reelected
to serve until the Annual Meeting in 2000, and until their successors
are elected and qualified or until their earlier resignation, removal
from office or death. The votes cast for and against each were as
follows:
<TABLE>
<CAPTION>
For Withheld
--- --------
<S> <C> <C>
Arthur B. Bodley 5,817,156 7,495
Robert E. Koski 5,822,016 2,635
James G. March 5,822,016 2,635
</TABLE>
2. The appointment of Price Waterhouse, LLP, as the Company's independent
certified public accountants for the year 1997 was ratified and
approved. The voting on the proposal was as follows:
FOR 5,726,637
AGAINST 93,364
ABSTAIN 4,650
Item 5. Other Information.
None.
15
<PAGE> 16
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT DESCRIPTION
------ -------------------
<S> <C>
3.1* Amended and Restated Articles of Incorporation of the Company (previously filed as
Exhibit 3.1 in the Pre-Effective Amendment No. 4 to the Company's Registration Statement on
Form S-1 filed on December 19, 1996 (File No. 333-14183)).
3.2* Amended and Restated Bylaws of the Company (previously filed as Exhibit 3.2 in the Pre-
Effective Amendment No. 4 to the Company's Registration Statement on Form S-1 filed on
December 19, 1996 (File No. 333-14183)).
4.1* Revolving Credit Agreement, dated March 9, 1992, between Sun Hydraulics Corporation and
Northern Trust Bank of Florida/Sarasota, N.A. (previously filed as Exhibit 4.1 in the
Company's Registration Statement on Form S-1 filed on October 15, 1996 (File No. 333-
14183)).
4.2* Modification Agreement, dated March 25, 1993, amending Revolving Credit Agreement dated
March 9, 1992, between Sun Hydraulics Corporation and Northern Trust Bank of Florida, N.A.
(previously filed as Exhibit 4.2 in the Company's Registration Statement on Form S-1 filed
on October 15, 1996 (File No. 333-14183)).
</TABLE>
16
<PAGE> 17
<TABLE>
<S> <C>
4.3* Second Modification to Revolving Credit Agreement, dated May __, 1995, between Sun
Hydraulics Corporation and Northern Trust Bank of Florida, N.A. (previously filed as
Exhibit 4.3 in the Company's Registration Statement on Form S-1 filed on October 15, 1996
(File No. 333-14183)).
4.4* Revolving Line of Credit Renewal Note, dated May __, 1995, in the amount of $1,700,000.00
given by Sun Hydraulics Corporation to Northern Trust Bank of Florida, N.A. (previously
filed as Exhibit 4.4 in the Company's Registration Statement on Form S-1 filed on
October 15, 1996 (File No. 333-14183)).
4.5* Mortgage and Security Agreement, dated January 9, 1992, between Suninco, Inc., Sun
Hydraulics Corporation, and Northern Trust Bank of Florida, N.A. (previously filed as
Exhibit 4.5 in the Company's Registration Statement on Form S-1 filed on October 15, 1996
(File No. 333-14183)).
4.6* Loan Agreement, dated March 29, 1996, between Suninco, Inc., Sun Hydraulics Corporation,
and Northern Trust Bank of Florida, N.A. (previously filed as Exhibit 4.6 in the Company's
Registration Statement on Form S-1 filed on October 15, 1996 (File No. 333-14183)).
4.7* Security Agreement, dated March 29, 1996, between Suninco, Inc., Sun Hydraulics
Corporation, and Northern Trust Bank of Florida, N.A. (previously filed as Exhibit 4.7 in
the Company's Registration Statement on Form S-1 filed on October 15, 1996 (File No. 333-
14183)).
4.8* Modification and Additional Advance Agreement, dated March 29, 1996, between Suninco, Inc.
and Northern Trust Bank of Florida, N.A. (previously filed as Exhibit 4.8 in the Company's
Registration Statement on Form S-1 filed on October 15, 1996 (File No. 333-14183)).
4.9* Consolidated Note, dated March 29, 1996, in the amount of $2,475,000.00, given by Suninco,
Inc. to Northern Trust Bank of Florida, N.A. (previously filed as Exhibit 4.9 in the
Company's Registration Statement on Form S-1 filed on October 15, 1996 (File No. 333-
14183)).
4.10* Loan Agreement, dated May 20, 1996, between Sun Hydraulics Corporation and Northern Trust
Bank of Florida, N.A. (previously filed as Exhibit 4.10 in the Company's Registration
Statement on Form S-1 filed on October 15, 1996 (File No. 333-14183)).
</TABLE>
17
<PAGE> 18
<TABLE>
<S> <C>
4.11* Security Agreement, dated May 20, 1996, between Sun Hydraulics Corporation and Northern
Trust Bank of Florida, N.A. (previously filed as Exhibit 4.11 in the Company's Registration
Statement on Form S-1 filed on October 15, 1996 (File No. 333-14183)).
4.12* Consolidated Note, dated May 20, 1996, in the amount of $3,063,157.00, given by Sun
Hydraulics Corporation to Northern Trust Bank of Florida, N.A. (previously filed as
Exhibit 4.12 in the Company's Registration Statement on Form S-1 filed on October 15, 1996
(File No. 333-14183)).
4.13* Loan Agreement, dated June 14, 1996, between Sun Hydraulics Corporation, Suninco Inc., and
Northern Trust Bank of Florida, N.A. (previously filed as Exhibit 4.13 in the Company's
Registration Statement on Form S-1 filed on October 15, 1996 (File No. 333-14183)).
4.14* Mortgage, dated June 14, 1996, between Sun Hydraulics Corporation, Suninco Inc., and
Northern Trust Bank of Florida, N.A. (previously filed as Exhibit 4.14 in the Company's
Registration Statement on Form S-1 filed on October 15, 1996 (File No. 333-14183)).
4.15* Security Agreement, dated June 14, 1996, between Sun Hydraulics Corporation and Northern
Trust Bank of Florida, N.A. (previously filed as Exhibit 4.15 in the Company's Registration
Statement on Form S-1 filed on October 15, 1996 (File No. 333-14183)).
4.16* Promissory Note, dated June 14, 1996, in the amount of $6,187,000.00, given by Sun
Hydraulics Corporation and Suninco, Inc. to Northern Trust Bank of Florida, N.A.
(previously filed as Exhibit 4.16 in the Company's Registration Statement on Form S-1 filed
on October 15, 1996 (File No. 333-14183)).
4.17* Revolving Loan Facility letter agreement, dated July 30, 1996, in the amount of L.800,000,
between Sun Hydraulics Ltd. and Lloyds Bank Plc. (previously filed as Exhibit 4.17 in the
Company's Registration Statement on Form S-1 filed on October 15, 1996 (File No. 333-
14183)).
4.18* Overdraft and Other Facilities letter agreement, dated June 7, 1996, in an amount not to
exceed L.250,000, between Sun Hydraulics Ltd. and Lloyds Bank Plc. (previously filed as
Exhibit 4.18 in the Company's Registration Statement on Form S-1 filed on October 15, 1996
(File No. 333-14183)).
</TABLE>
18
<PAGE> 19
<TABLE>
<S> <C>
4.19* Mortgage, dated April 11, 1996, between Sun Hydraulik GmbH and Dresdner Bank (previously
filed as Exhibit 4.19 in the Company's Registration Statement on Form S-1 filed on
October 15, 1996 (File No. 333-14183)).
4.20* Amendment to Recommended Offer by Sun Hydraulics Corporation to acquire the whole of the
issued share capital of Sun Hydraulik Holdings Limited, dated December 17, 1996 (previously
filed as Exhibit 2.1 in the Pre-Effective Amendment No. 4 to the Company's Registration
Statement on Form S-1 filed on December 19, 1996 (File No. 333-14183)).
4.21* Master Note, dated February 3, 1997, in the amount of $10,000,000.00, made by the Company
to evidence a line of credit granted to the Company by Northern Trust Bank of Florida, N.A.
(previously filed as Exhibit 4.21 to the Company's Annual Report on Form 10-K for the year
ended December 31, 1996).
10.1* Form of Distributor Agreement (Domestic) (previously filed as Exhibit 10.1 in the Company's
Registration Statement on Form S-1 filed on October 15, 1996 (File No. 333-14183)).
10.2* Form of Distributor Agreement (International) (previously filed as Exhibit 10.2 in the
Company's Registration Statement on Form S-1 filed on October 15, 1996 (File No. 333-
14183)).
10.3*+ Sun Hydraulics Corporation 1996 Stock Option Plan (previously filed as Exhibit 10.3 in the
Pre-Effective Amendment No. 4 to the Company's Registration Statement on Form S-1 filed on
December 19, 1996 (File No. 333-14183)).
10.4+ Amendment No. 1 to 1996 Stock Option Plan.
10.5*+ Form of Indemnification Agreement (previously filed as Exhibit 10.4 in the Pre-Effective
Amendment No. 4 to the Company's Registration Statement on Form S-1 filed on December 19,
1996 (File No. 333-14183)).
11.1 Statement regarding Computation of Earnings Per Share.
27.1 Financial Data Schedule for quarter ended June 30, 1997. (For SEC purposes only)
</TABLE>
- ---------------------------
* Previously filed.
+ Executive management contract or compensatory plan or arrangement.
19
<PAGE> 20
(b) Reports on Form 8-K
Report on Form 8-K dated June 23, 1997, announcing a $0.035 per share
dividend on its common stock payable on July 15, 1997, to shareholders
of record on July 3, 1997, and reporting comments made by management at
the Registrant's annual shareholders' meeting held on June 21, 1997.
20
<PAGE> 21
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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, in the City of
Sarasota, State of Florida on August 13, 1997.
SUN HYDRAULICS CORPORATION
By: /s/ Richard J. Dobbyn
------------------------------------
Richard J. Dobbyn
Chief Financial Officer (Principal
Financial and Accounting Officer)
21
<PAGE> 22
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT DESCRIPTION
------ -------------------
<S> <C>
3.1* Amended and Restated Articles of Incorporation of the Company (previously filed as
Exhibit 3.1 in the Pre-Effective Amendment No. 4 to the Company's Registration Statement on
Form S-1 filed on December 19, 1996 (File No. 333-14183)).
3.2* Amended and Restated Bylaws of the Company (previously filed as Exhibit 3.2 in the Pre-
Effective Amendment No. 4 to the Company's Registration Statement on Form S-1 filed on
December 19, 1996 (File No. 333-14183)).
4.1* Revolving Credit Agreement, dated March 9, 1992, between Sun Hydraulics Corporation and
Northern Trust Bank of Florida/Sarasota, N.A. (previously filed as Exhibit 4.1 in the
Company's Registration Statement on Form S-1 filed on October 15, 1996 (File No. 333-
14183)).
4.2* Modification Agreement, dated March 25, 1993, amending Revolving Credit Agreement dated
March 9, 1992, between Sun Hydraulics Corporation and Northern Trust Bank of Florida, N.A.
(previously filed as Exhibit 4.2 in the Company's Registration Statement on Form S-1 filed
on October 15, 1996 (File No. 333-14183)).
</TABLE>
<PAGE> 23
<TABLE>
<S> <C>
4.3* Second Modification to Revolving Credit Agreement, dated May __, 1995, between Sun
Hydraulics Corporation and Northern Trust Bank of Florida, N.A. (previously filed as
Exhibit 4.3 in the Company's Registration Statement on Form S-1 filed on October 15, 1996
(File No. 333-14183)).
4.4* Revolving Line of Credit Renewal Note, dated May __, 1995, in the amount of $1,700,000.00
given by Sun Hydraulics Corporation to Northern Trust Bank of Florida, N.A. (previously
filed as Exhibit 4.4 in the Company's Registration Statement on Form S-1 filed on
October 15, 1996 (File No. 333-14183)).
4.5* Mortgage and Security Agreement, dated January 9, 1992, between Suninco, Inc., Sun
Hydraulics Corporation, and Northern Trust Bank of Florida, N.A. (previously filed as
Exhibit 4.5 in the Company's Registration Statement on Form S-1 filed on October 15, 1996
(File No. 333-14183)).
4.6* Loan Agreement, dated March 29, 1996, between Suninco, Inc., Sun Hydraulics Corporation,
and Northern Trust Bank of Florida, N.A. (previously filed as Exhibit 4.6 in the Company's
Registration Statement on Form S-1 filed on October 15, 1996 (File No. 333-14183)).
4.7* Security Agreement, dated March 29, 1996, between Suninco, Inc., Sun Hydraulics
Corporation, and Northern Trust Bank of Florida, N.A. (previously filed as Exhibit 4.7 in
the Company's Registration Statement on Form S-1 filed on October 15, 1996 (File No. 333-
14183)).
4.8* Modification and Additional Advance Agreement, dated March 29, 1996, between Suninco, Inc.
and Northern Trust Bank of Florida, N.A. (previously filed as Exhibit 4.8 in the Company's
Registration Statement on Form S-1 filed on October 15, 1996 (File No. 333-14183)).
4.9* Consolidated Note, dated March 29, 1996, in the amount of $2,475,000.00, given by Suninco,
Inc. to Northern Trust Bank of Florida, N.A. (previously filed as Exhibit 4.9 in the
Company's Registration Statement on Form S-1 filed on October 15, 1996 (File No. 333-
14183)).
4.10* Loan Agreement, dated May 20, 1996, between Sun Hydraulics Corporation and Northern Trust
Bank of Florida, N.A. (previously filed as Exhibit 4.10 in the Company's Registration
Statement on Form S-1 filed on October 15, 1996 (File No. 333-14183)).
</TABLE>
<PAGE> 24
<TABLE>
<S> <C>
4.11* Security Agreement, dated May 20, 1996, between Sun Hydraulics Corporation and Northern
Trust Bank of Florida, N.A. (previously filed as Exhibit 4.11 in the Company's Registration
Statement on Form S-1 filed on October 15, 1996 (File No. 333-14183)).
4.12* Consolidated Note, dated May 20, 1996, in the amount of $3,063,157.00, given by Sun
Hydraulics Corporation to Northern Trust Bank of Florida, N.A. (previously filed as
Exhibit 4.12 in the Company's Registration Statement on Form S-1 filed on October 15, 1996
(File No. 333-14183)).
4.13* Loan Agreement, dated June 14, 1996, between Sun Hydraulics Corporation, Suninco Inc., and
Northern Trust Bank of Florida, N.A. (previously filed as Exhibit 4.13 in the Company's
Registration Statement on Form S-1 filed on October 15, 1996 (File No. 333-14183)).
4.14* Mortgage, dated June 14, 1996, between Sun Hydraulics Corporation, Suninco Inc., and
Northern Trust Bank of Florida, N.A. (previously filed as Exhibit 4.14 in the Company's
Registration Statement on Form S-1 filed on October 15, 1996 (File No. 333-14183)).
4.15* Security Agreement, dated June 14, 1996, between Sun Hydraulics Corporation and Northern
Trust Bank of Florida, N.A. (previously filed as Exhibit 4.15 in the Company's Registration
Statement on Form S-1 filed on October 15, 1996 (File No. 333-14183)).
4.16* Promissory Note, dated June 14, 1996, in the amount of $6,187,000.00, given by Sun
Hydraulics Corporation and Suninco, Inc. to Northern Trust Bank of Florida, N.A.
(previously filed as Exhibit 4.16 in the Company's Registration Statement on Form S-1 filed
on October 15, 1996 (File No. 333-14183)).
4.17* Revolving Loan Facility letter agreement, dated July 30, 1996, in the amount of L.800,000,
between Sun Hydraulics Ltd. and Lloyds Bank Plc. (previously filed as Exhibit 4.17 in the
Company's Registration Statement on Form S-1 filed on October 15, 1996 (File No. 333-
14183)).
4.18* Overdraft and Other Facilities letter agreement, dated June 7, 1996, in an amount not to
exceed L.250,000, between Sun Hydraulics Ltd. and Lloyds Bank Plc. (previously filed as
Exhibit 4.18 in the Company's Registration Statement on Form S-1 filed on October 15, 1996
(File No. 333-14183)).
</TABLE>
<PAGE> 25
<TABLE>
<S> <C>
4.19* Mortgage, dated April 11, 1996, between Sun Hydraulik GmbH and Dresdner Bank (previously
filed as Exhibit 4.19 in the Company's Registration Statement on Form S-1 filed on
October 15, 1996 (File No. 333-14183)).
4.20* Amendment to Recommended Offer by Sun Hydraulics Corporation to acquire the whole of the
issued share capital of Sun Hydraulik Holdings Limited, dated December 17, 1996 (previously
filed as Exhibit 2.1 in the Pre-Effective Amendment No. 4 to the Company's Registration
Statement on Form S-1 filed on December 19, 1996 (File No. 333-14183)).
4.21* Master Note, dated February 3, 1997, in the amount of $10,000,000.00, made by the Company
to evidence a line of credit granted to the Company by Northern Trust Bank of Florida, N.A.
(previously filed as Exhibit 4.21 to the Company's Annual Report on Form 10-K for the year
ended December 31, 1996).
10.1* Form of Distributor Agreement (Domestic) (previously filed as Exhibit 10.1 in the Company's
Registration Statement on Form S-1 filed on October 15, 1996 (File No. 333-14183)).
10.2* Form of Distributor Agreement (International) (previously filed as Exhibit 10.2 in the
Company's Registration Statement on Form S-1 filed on October 15, 1996 (File No. 333-
14183)).
10.3*+ Sun Hydraulics Corporation 1996 Stock Option Plan (previously filed as Exhibit 10.3 in the
Pre-Effective Amendment No. 4 to the Company's Registration Statement on Form S-1 filed on
December 19, 1996 (File No. 333-14183)).
10.4+ Amendment No. 1 to 1996 Stock Option Plan.
10.5*+ Form of Indemnification Agreement (previously filed as Exhibit 10.4 in the Pre-Effective
Amendment No. 4 to the Company's Registration Statement on Form S-1 filed on December 19,
1996 (File No. 333-14183)).
11.1 Statement regarding Computation of Earnings Per Share.
27.1 Financial Data Schedule for quarter ended June 30, 1997. (For SEC purposes only)
</TABLE>
- ---------------------------
* Previously filed.
+ Executive management contract or compensatory plan or arrangement.
<PAGE> 1
EXHIBIT 10.4
SUN HYDRAULICS CORPORATION
AMENDMENT NO. 1 TO
1996 STOCK OPTION PLAN
WHEREAS, SUN HYDRAULICS CORPORATION, a Florida corporation (the
"Company"), sponsors the Sun Hydraulics Corporation 1996 Stock Option Plan (the
"Plan"); and
WHEREAS, Section 19 of the Plan provides that the Plan may be amended
by the Board of Directors (the "Board") of the Company; and
WHEREAS, the Board has determined that it is in the best interest of
the Company and its stockholders to amend the Plan, effective as of February
24, 1997, in the manner contemplated below;
NOW, THEREFORE, the Plan is hereby amended as follows:
1. Section 15 of the Plan is amended by deleting the phrase "three
(3) months" in the first paragraph of Section 15 regarding death of an
optionee and replacing it with the following:
"twelve (12) months"
2. This Amendment shall be effective as of February 24, 1997. Except
as otherwise amended hereby, the Plan shall remain in full force and effect.
IN WITNESS WHEREOF, the undersigned, being the duly elected and
authorized Secretary of the Company, hereby certifies that this Amendment No. 1
to 1996 Stock Option Plan was legally and validly approved by the Board of
Directors of the Company on February 24, 1997.
SUN HYDRAULICS CORPORATION
By: /s/ Gregory C. Yadley
----------------------------------
Gregory C. Yadley, Secretary
<PAGE> 1
Statement regarding Computation of Per Share Earnings EXHIBIT 11.1
(in thousands, except per share data)
<TABLE>
<CAPTION>
Six months ended June 30
1997 1996
------ ------
<S> <C> <C>
PRIMARY
Net income (Note 3) $2,096 $1,814
====== ======
Weighted average shares outstanding 6,517 6,509
Primary EPS $ .32 $ .28
====== ======
FULLY DILUTED
Net income (Note 3) $2,096 $1,814
====== ======
Weighted average shares outstanding 6,523 6,488
Fully diluted EPS $ .32 $ .28
====== ======
</TABLE>
The treasury stock method was used in the calculation of the average shares
outstanding for EPS. The denominator includes the shares outstanding during the
year plus the number of shares from assumed exercise of all vested outstanding
stock options less the number of treasury shares that would be repurchased from
the proceeds of such exercise. For primary EPS, the average stock price for the
year is used; in the calculation for fully diluted EPS, the quarter end stock
price is used. For the periods presented, the number of shares issued in the
initial public offering are also included in the denominator as though the
shares had been outstanding since the beginning of each year, in accordance with
Regulation S-X, Article 11.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEETS AND CONSOLIDATED STATEMENTS OF THE REGISTRANT AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 1,807
<SECURITIES> 0
<RECEIVABLES> 5,544<F1>
<ALLOWANCES> 0
<INVENTORY> 5,593
<CURRENT-ASSETS> 843
<PP&E> 38,924<F2>
<DEPRECIATION> 0
<TOTAL-ASSETS> 52,726
<CURRENT-LIABILITIES> 9,077
<BONDS> 0
0
0
<COMMON> 6
<OTHER-SE> 32,677
<TOTAL-LIABILITY-AND-EQUITY> 52,726
<SALES> 29,874
<TOTAL-REVENUES> 29,874
<CGS> 20,646
<TOTAL-COSTS> 20,646
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 368
<INCOME-PRETAX> 3,280
<INCOME-TAX> 1,184
<INCOME-CONTINUING> 2,096
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,096
<EPS-PRIMARY> .32
<EPS-DILUTED> .32
<FN>
<F1>NET OF ALLOWANCE FOR DOUBTFUL AMOUNTS OF $60.
<F2>NET OF ACCUMULATED DEPRECIATION OF $15,873.
</FN>
</TABLE>
