<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-KSB
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year ended June 30, 1997
Commission file number 0-1388
WATERS INSTRUMENTS, INC.
(d/b/a Waters Corporation)
State of Incorporation: Minnesota
IRS Employer Identification No. 41-0832194
2411 Seventh Street, NW.
Rochester, Minnesota 55901
(507)288-7777
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $.10 Par Value Per Share
Check whether the issuer (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, and (2) has been
subject to such filing requirements for the past 90 days.
Yes X No
Check if there is no disclosure of delinquent filers in
response to Item 405 of Regulation S-B contained in this
form, and no disclosure will be contained, to the best of
Company's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this
Form 10-KSB or any amendment to this Form 10-KSB.
The net sales for the Company for the Fiscal Year Ended June
30, 1997 were $14,466,000.
The aggregate market value of the voting stock held
by non-affiliates of the Company on August 29,
1997 was $4,934,340.
The number of shares outstanding of the Company's Common
Stock on August 29, 1997 was 1,462,271.
DOCUMENTS INCORPORATED BY REFERENCE
Pursuant to General Instructions E3), the responses to items
9, 10, 11 and 12 of Part III of this report are incorporated
herein by reference to certain information contained in the
Company's definitive proxy statement for its 1997 Annual
Meeting of Shareholders to be filed with the Securities
and Exchange Commission on or before September 23, 1997.
Transitional Small Business Disclosure Format (Check One)
Yes No X
<PAGE>
PART I ITEM 1. BUSINESS
(a) Business Development
Waters Instruments, Inc., a Minnesota corporation since
1960, (d/b/a Waters Corporation) is a customer-driven,
electronics manufacturer and world-wide marketer of network
interconnect, contract manufacturing, consumer farm, and
medical products. During Fiscal Year 1997, sales were
conducted through four principal business units of the
Company: Farm Products {d/b/a American FarmWorks (AFW)};
Medical Systems {d/b/a Waters Medical Systems (WMS)};
Electrical Products {d/b/a Waters Technical Systems (WTS)
and formerly known as Midwest WireTech}; and Network
Connectivity Products {d/b/a Waters Network Systems
(WNS)}.
(b) Business of Issuer
(1) American FarmWorks
American FarmWorks has been engaged primarily in the
manufacture and sale of electric fence controllers
for livestock, predator, and pet containment. The
Company considers itself the largest of the four major
suppliers of such controllers in the United States.
Fence controllers convert both AC and DC power into low-
current, high-voltage impulses on a wire fence
producing a stinging but safe shock.
Sales by American FarmWorks are made primarily through
major farm equipment and hardware distributors,
suppliers and retailers. During Fiscal Year 1997,
sales to American FarmWorks' three largest
customers accounted for
approximately 30.9% of American FarmWorks' total sales or
20.2% of the Company's total sales.
American FarmWorks sells through independent
representatives. Sales by American FarmWorks in Fiscal
Year 1997 were 65% of the Company's total sales compared
to 64% in Fiscal Year 1996.
There were no significant sales from American FarmWorks
made to governmental agencies; likewise, there were no
contracts subject to renegotiation. Raw materials
used in the
production of fence controllers are generally available
from a number of suppliers. Patents are not significant
to the manufacture of electric fence controllers;
however, the
Company has filed for a digital control module patent
that it
believes is unique to the industry. Trademarks
associated with the business are believed to be of
value. The Company's trademarks include: American
FarmWorks, Blitzer, BullDozer, Captivator, Cobra,
Dyna-Charge, Electro-Line, HOL-DEM, Hot Spark,
International, Jewel, Solar Blitz, Solar Bull, Sting
Ray, Super Charger, and ThunderBolt. The Company has
also recently filed intents to use the names: Hornet,
YellowJacket, and Wasp.
<PAGE>
The business of American FarmWorks is seasonal. Greater
customer demand occurs in the spring and summer
months. Backlog is not significant in this unit's
operations since orders are generally filled relatively
soon after receipt.
(2) Waters Medical Systems
Waters Medical Systems includes sales of cardiovascular
and organ preservation products. This business unit is
engaged in the manufacture and sale of electro-medical
instruments for hospital and laboratory use. The Company
is one of many medical equipment manufacturers, and its
position in the total medical instrument field is minor,
however, it is the dominant supplier in it's specific
product niches. Sales by Waters Medical Systems in
Fiscal Year 1997 represented approximately 11.6% of the
Company's total sales compared to 14.5% in Fiscal Year
1996.
Sales of Waters Medical Systems' products are made to
a large number of customers in the health care field
primarily through the use of independent
representatives.
No significant sales are made to the United States
Government and no contracts are subject to renegotiation.
No unusually large working capital amounts are required
by this business unit, but accounts receivable can
approach two months of sales due to the slow
reimbursement practices of third-party insurers and
administrators.
Waters Medical Systems experiences no significant
order backlog and is generally able to fill orders
reasonably soon after receipt. Raw materials necessary
in the manufacture of this business unit's products
are generally available from a number of suppliers.
The Company holds several patents relating to its
current and new medical product lines. The
significance of the patents on new products to the
Medical Systems business unit cannot presently be
determined. Waters Medical Systems experiences no
seasonal variation in its business.
The Company announced that it has received approval from
the Food and Drug Administration (the "FDA") to market
its new RM3 Renal Preservation monitor. The RM3 was
developed by Waters to preserve kidneys for transplant.
The RM3 System is a two-part kidney preservation system
which includes a monitor for regulating and
monitoring the pulsatile perfusion of one or two
kidneys and a sterile, single-use, disposable cassette
that circulates a preservation solution continuously
through the kidneys. The RM3 was the subject of a news
release made by the Company on July 31, 1997.
<PAGE>
The products of Waters Medical Systems are subject
to governmental regulation by the FDA under the Federal
Food and Drug and Cosmetic Act (the "FDCA"). The FDA
classifies medical devices into three categories that
determine the degree of regulatory control to which the
manufacturer of the device is subject. In general, Class I devices
involve compliance with labeling and recordkeeping
requirements and are subject to other general controls.
Class II devices are subject to performance standards in
addition to general controls. Class III
devices require premarket approval to
assure product safety and effectiveness.
Before either a Class I or Class II device may be
marketed, Section 510(k) of the FDCA requires that the
manufacturer submit to the FDA, at least 90 days before
marketing begins, a premarket notification of its intent
to market the device. If the FDA
accepts the sufficiency of the premarket
notification, the device may then be marketed. While this
FDA decision may be reached within the 90-day period,
it often takes a longer period of time and marketing
may be delayed.
At present, all of the products of Waters Medical
Systems are Class II devices and appropriate marketing
approvals have been received from the FDA. However,
failure to obtain, or delays in obtaining, the required
approvals for any new versions of the present product
offerings or future new products could adversely affect
Waters Medical Systems, as could any product recall.
All manufacturers of medical devices are subject to
general controls of FDA, which presently include
regulations on annual registration, device listing,
good manufacturing practices, labeling, and the
misbranding and adulteration provisions of the FDCA.
The FDCA also provides for the unscheduled inspection
of facilities. Waters Medical
Systems believes that it is in compliance with all
applicable FDA regulations and practices, and that
continued compliance will not result in significant
additional expenditures.
<PAGE>
(3) Waters Technical Systems/Waters Network Systems
The Company, in Fiscal Year 1997, made investments in
sales and marketing, engineering, and manufacturing to
provide long-term sales growth in this business unit.
Sales for Fiscal Year 1997 for this business unit were
$3,346,000. This represents a 10.2% increase over the
Fiscal Year 1996 net sales of $3,037,000.
As of June 30, 1997, the Waters Technical
Systems/Waters Network Systems business units' backlog
of orders was $604,000. This backlog is scheduled to be
filled within 12 months. This compares to an order
backlog of $469,000 at June 30, 1996.
Waters Technical Systems, (formerly known as Midwest
WireTech) performs contract manufacturing including
product assemblies, and cable harness assemblies sold
directly on a specific order basis mainly to
computer, medical, communication, and office
equipment manufacturers. The
industry in which the business unit operates is marked by
a large number of relatively small suppliers
operating
predominantly on a regional basis. The Company
believes Waters Technical Systems competes effectively
within it's regional area.
In Fiscal Year 1997, Waters Technical Systems served
a relatively small number of customers, with ten
customers representing about 89.6% of the business unit's
sales.
This business unit is often required to order
significant inventories of raw materials to provide
lead time for meeting customer delivery
requirements. Raw materials necessary to this unit's
business are generally available from a number of
suppliers. Patents and proprietary rights are of no
significance to its business.
Waters Network Systems, a business unit created late
in Fiscal Year 1995, manufactures and markets a wide
range of connectivity products for Token-Ring and
Ethernet local area networks (LANs). The products
provide the ability to network computers throughout
school districts or business offices. While the
industry for network products is very large and covers
a wide range of applications, the business unit focused
initially on the K-12 educational segment to provide
solutions that were not being met by other
manufacturers.
In response to the needs of the educational segment,
Waters Network Systems offers consulting and training
services. Numerous school districts require support on
network design and installation as well as training
support staff on courseware and productivity tools
software. These services give Waters Network Systems a
differential advantage that distinguishes the Company in
the educational market.
<PAGE>
The LAN products are sold primarily through dealerships
who resell the products as well as provide network
cabling installations. Less than 30% of the customers
are school districts or local Boards of Education
purchasing the products directly from the Company.
The sales cycle frequently takes up to a year to
transition from having the products specified to the
actual installation. As a startup business unit, Waters
Network Systems is heavily focusing its efforts on
having its products specified with an increasing
number of districts.
From Fiscal Year 1995, when the Company introduced
Waters Network Systems, through Fiscal Year 1997, the
number of customers increased 13 fold. Many of the
dealerships currently have been awarded the bids for
specific school districts, with the installation to
occur early in Fiscal Year 1998. With the educational
market, installations are seasonal with sales peaking
during the summer months when school is out of session.
The demand for network products exists in virtually all
new schools being built as well as the larger market for
retrofitting most existing schools.
During Fiscal Year 1997, Waters Network Systems continued
to expand its product line to include intelligent and
switched hubs for both copper and fiber LANs used to
manage networks or increase the capacity of current
networks. The Company believes the introduction of the
new products will position the business unit to provide
complete network connectivity solutions in the
educational as well as commercial market segments.
<PAGE>
(4) Information as to Company's Business as a Whole
During Fiscal Years 1997 and 1996, the Company
expended $500,000 for research and development
activities, respectively.
The Company had a total of 135 employees as of June
30, 1997, of which 104 were regular full-time employees.
This
compares to a total of 144 employees as of June 30, 1996,
of which 106 were regular full-time employees.
(c) Financial Information About Foreign and Domestic
Operations and Export Sales.
The Company maintains no office or facilities outside of
the United States and sells the majority of its products
in the United States. Export sales were $331,000 in
Fiscal Year 1997, compared to $412,000 in Fiscal Year
1996. Most sales for foreign exports have been made
through unrelated foreign dealers in major European,
Asian, and South American markets and by a number of
export dealers in outlying countries. The Company has
no significant activities outside of the United States.
<PAGE>
PART 1 ITEM 2 PROPERTIES
The Company owns a 66,000 square-foot, steel and cement
block building located on 10.9 acres in Valley High Industrial
Park, Rochester, Minnesota. The building houses the
corporate headquarters and production facilities for all of
the business units. Fourteen thousand square feet are
devoted to office and engineering space and the remaining
area is used for manufacturing and warehousing,
approximately 16% by Waters Medical Systems,
24% by Waters Technical Systems, 53% by
American FarmWorks, and 7% by Waters Network Systems.
The Company currently leases 2,500 square feet of office space
in a Plymouth, Minnesota office complex for use as sales
and development offices.
The Company believes that insurance coverage on its properties
is adequate.
<PAGE>
PART 1 ITEM 3 LEGAL PROCEEDINGS
During Fiscal Year 1997, the Company did not have and
currently does not have any other legal proceedings pending
which are material to its business or financial position.
PART 1 ITEM 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY
HOLDERS
No matters were submitted to a vote of the Company's
shareholders during the fourth quarter of the Company's 1997
Fiscal Year. <PAGE>
PART 1 EXECUTIVE OFFICERS OF THE COMPANY
(a) Identification
The names and ages of executive officers of the Company,
their
positions and offices presently held, and the period of
service as such are as follows:
<TABLE>
<S> <C> <C> <C>
_______________________________________________________________
NAME AGE POSITION YEAR IN WHICH
FIRST BECAME
AN OFFICER
Jerry W. Grabowski 45 President, Chief Executive
Officer, and Director 1993
Gregory J. Anshus 40 Chief Financial Officer
and Treasurer 1996
</TABLE>
The following information is presented as to the
business experience of each Executive Officer during the past
five years:
Mr. Grabowski was elected President, Chief Executive Officer,
and a member of the Company's Board of Directors on August 1,
1993. He was additionally elected Chief Financial Officer and
Treasurer in January 1995 and served until his successor,
Gregory J. Anshus, was elected on October 22, 1996. From 1988
until joining the Company, Mr. Grabowski was employed as
General Manager of Onan Power/Electronics Division.
Mr. Anshus was elected Chief Financial Officer and Treasurer
on October 22, 1996. Since joining the Company in October 1991,
he served in various accounting positions in the Company.
From October 1994 until his election, Mr. Anshus served as
Controller of the Company. Until joining the Company, Mr.
Anshus served as Controller of B&F Companies.
<PAGE>
PART II ITEM 5. MARKET FOR THE REGISTRANT'S COMPANY'S
COMMON STOCK AND RELATED STOCKHOLDER MATTERS
The Company's common stock is traded on the NASDAQ
National Market System under the symbol WTRS. Below are the
high and low bid prices for each quarter of Fiscal Years 1997
and 1996 as reported on the NASDAQ/NMS. These quotations
represent prices between dealers, do not include retail
markups, markdowns, or commissions, and may not represent
actual transactions.
<TABLE>
<S> <C> <C>
1997 High Low
First 9/30/96 5 3-3/4
Quarter
Second 12/31/96 5-1/8 3-3/4
Quarter
Third 3/31/97 5-7/8 4-1/4
Quarter
Fourth 6/30/97 5-1/2 4
Quarter
1996
First 9/30/95 6-3/4 2-1/8
Quarter
Second 12/31/95 5-1/8 3-5/8
Quarter
Third 3/31/96 6-5/8 4-1/4
Quarter
Fourth 6/30/96 5-1/2 4
Quarter
</TABLE>
As of August 29, 1997 the Company had approximately
725 shareholders of record.
Dividend Summary
The Board of Directors of the Company declared a dividend at
a regularly scheduled meeting held on October 17, 1996.
The dividend was based on Fiscal Year 1996 operating results.
The Company paid the dividend in December 1996 at the rate of
4cents per share, or an aggregate amount of $58,000. The Company
also paid a dividend in December 1995 of $.04 per share for
an aggregate amount of $58,000.
The Board of Directors will review its dividend policy and
make an appropriate decision at its regularly scheduled
meeting to be held on October 23, 1997.
The Company has paid its shareholders annual dividends for
20 years, with the first dividend paid in 1975.
<PAGE>
PART II ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATION
LIQUIDITY AND CAPITAL RESOURCES
The Company's cash balance on June 30, 1997 was
$1,632,000, resulting in an increase of $668,000 from its
June 30, 1996 balance of $964,000. The Company's working
capital position at June 30, 1997 was $4,193,000, an
increase of 13% from the $3,723,000 amount at June 30,
1996. The improvement in the working capital position
resulted primarily from the focus on materials management
and just-in-time (JIT) disciplines.
In December 1996, the Company renewed the bank's $1,000,000
line of credit commitment and extended it to December 15,
1997. The
bank's line of credit charges interest at the bank's base
(prime) rate. The prime rate was 8.5% at June 30, 1997. The
Company did not borrow against the line of credit during Fiscal
Year 1997 and believes that its existing funds, cash generated
from operations, and short-term borrowing under the Company's
line of credit will be adequate to
meet the Company's foreseeable
operating
activities and outlays for capital expenditures.
Capital expenditures were $525,000 during Fiscal Year 1997,
an increase of $203,000 from Fiscal Year 1996. Improvements to
the manufacturing facility and purchases of manufacturing
equipment comprised the bulk of capital expenditures in Fiscal
Year 1997. The Company
anticipates continued improvements in its
manufacturing processes, lower unit costs, and improved
gross margins as a result of these capital expenditures.
During Fiscal Year 1997, the Company received $188,000
in proceeds, on a note receivable, from the previous year's
sale of unoccupied land adjacent to its manufacturing
facilities. Increases of long-term debt, primarily a
lease of Company equipment of $35,000, was the other
major financed cash transaction in Fiscal Year 1997.
RESULTS OF OPERATIONS
Fiscal Year 1997 Compared with Fiscal Year 1996
Net sales for Fiscal Year 1997 were $14,466,000, an increase
of 3.7% from net sales of $13,952,000 experienced in Fiscal
Year 1996.
Net sales in Waters Medical Systems declined 16.8% in Fiscal
Year 1997 compared to Fiscal Year 1996. The decrease in
sales is principally due to softening in demand for the
existing mature medical products in this business unit. The
Company announced that it has received FDA 510(k) approval
to market its new RM3 Renal Preservation monitor. The RM3
is a computer enhanced version of the MOX Renal
Transplant System. The Company anticipates sales of the RM3
to begin during the first quarter of Fiscal Year 1998. The
Company believes introduction of the RM3 will bolster its
medical products sales. The RM3 was the subject of a news
release made by the Company on July 31, 1997.
Net sales in Waters Technical Systems/Waters Network
Systems increased 10.2% in Fiscal Year 1997 compared to Fiscal
Year 1996. The Company continues to invest to provide long-term
sales growth in the Waters Technical Systems and /Waters
Network Systems business units.
Net sales in American FarmWorks in Fiscal Year 1997 increased
6% compared to Fiscal Year 1996. The Company anticipates
revenue levels in Fiscal Year 1998 to be comparable to Fiscal
Year 1997 for this business unit.
Additional comparative information about industry segments can
be found in Note 9 to the Financial Statements under Part II
Item 7 in this Form 10-KSB.
The gross profit improved in Fiscal Year 1997 to 31.4% of
net sales from 29.5% for Fiscal Year 1996. Productivity
improvements within the entire organization, but principally
in the American FarmWorks business unit, contributed to
improvement in gross profit in Fiscal Year 1997.
Operating expenses were $3,588,000 for Fiscal Year
1997, representing an increase of $67,000 from the comparable
figure of $3,521,000 for Fiscal Year 1996. The increase
in operating expenses was primarily due to the investment in
marketing and sales in the Waters Technical Systems and
Waters Network Systems business units.
Improved working capital during Fiscal Year 1997
provided interest income of $82,000 compared to interest income
of $52,000 during Fiscal Year 1996.
Interest expense, principally lease financing on the
Company's equipment, was $4,000 during Fiscal Year 1997
compared to $18,000 in Fiscal Year 1996.
The Company also had other income of $17,000 for Fiscal Year
1997 consisting primarily of an insurance settlement
regarding a contractual obligation. Other income of $112,000
for Fiscal Year 1996 consisted primarily of the sale of
unoccupied land adjacent to its manufacturing facilities for a
gain of $124,000.
Net income for the Company for Fiscal Year 1997 was
$663,000. This compares to a net income of $548,000 for Fiscal
Year 1996. The primary reasons for the Company's continued
improvement in net income since Fiscal Year 1993 were
reductions in manufacturing costs.
Certain statements in this Management's Discussion and
Analysis are forward-looking statements that involve a number
of risks and uncertainties which may cause the Company's future
operations and results of operations to differ materially from
those anticipated in this report. Specifically, statements
relating to the sale of the RM3 Renal Preservation monitor
and expected revenue levels for the American FarmWorks
products are subject to the risks of uncertainty with
respect to product acceptance and product demand, as
well as fluctuations in the price of raw materials,
competition, and facilities utilization. These statements
are based upon current expectations; and actual reports may
differ materially from that predicted.
<PAGE>
PART II ITEM 7. FINANCIAL STATEMENTS
INDEX TO FINANCIAL STATEMENTS
(a) The following documents are filed as part of this report:
<TABLE>
<S> <C>
(1) Financial Statements:
Page Number
Management's Responsibility for Financial Reporting 11
Independent Auditor's Report 12
Balance Sheets 13
Statements of Operations and Retained Earnings 14
Statements of Cash Flows 15
Notes to Financial Statements 16 - 25
</TABLE>
<PAGE>
Management's Responsibility for Financial Reporting
August 7, 1997
To the Stockholders of Waters Instruments, Inc.
Rochester, Minnesota
The management of Waters Corporation has prepared and
is responsible for the financial statements and related
financial information contained in this report. The financial
statements were prepared in accordance with generally
accepted accounting principles, using management's best
judgment and estimates.
The
other financial data contained in this report is consistent
with that in the financial statements.
The Company maintains internal accounting control
systems designed to provide reasonable assurance that
assets
are
safeguarded from loss or unauthorized use. The
management further maintains that it is conducting its affairs
according to the highest of personal and corporate conduct.
We believe our systems for these purposes are effective and
the cost of the systems does not exceed the benefits
obtained.
The Audit Committee, composed exclusively of outside
directors, meets periodically with the Company's management
and independent auditors on financial reporting matters. The
independent public accountants have free access to the Audit
Committee and have met with the Committee, without management
present, to discuss their audit results and opinions on the
quality of financial reporting.
McGladrey & Pullen, LLP, independent auditors, are engaged
to audit Waters' financial statements and to issue a
professional opinion as to whether such statements present
fairly, in all material respects, the Waters' financial
position, results of operations and cash flows.
Gregory J. Anshus
Chief Financial Officer
<PAGE>
INDEPENDENT AUDITOR'S REPORT
To the Stockholders and
Board of Directors
Waters Instruments, Inc.
Rochester, Minnesota
We have audited the accompanying balance sheets of
Waters Instruments, Inc. (d/b/a Waters Corporation) as of June
30, 1997 and 1996, and the related statements of
operations, retained earnings, and cash flows for the
years then ended. These financial statements are the
responsibility of the Company's management. Our
responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally
accepted auditing standards. Those standards require that we
plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by
management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to
above present fairly, in all material respects, the financial
position of Waters Instruments, Inc. as of June 30, 1997 and
1996, and the results of its operations and its cash flows for
the years then ended in conformity with generally
accepted accounting principles.
McGladrey & Pullen, LLP
Rochester, Minnesota
August 7, 1997
<PAGE>
<TABLE>
<S> <C>
<C>
B a l a n c e S h e e t s
J u n e 3 0, 1 9 9 7
in Thousands 1997 1996
Current assets
Cash and equivalents (Note 2) $ 1,632 964
Trade receivables (Note 3) 1,955 2,153
Note Receivable - 188
Inventories (Note 4) 1,772 2,033
Prepaid expenses 115 33
Deferred income taxes (Note 6) 250 280
Total current assets 5,724 5,651
Property, plant and equipment (Note 5)
Land 128 128
Building 1,497 1,291
Machinery and equipment 2,040 1,797
Office furniture and equipment 1,078 1,002
4,743 4,218
Less accumulated depreciation 3,219 2,876
Net property, plant, and equipment 1,524 1,342
Other assets
Costs in excess of net assets of businesses 80 98
acquired, net of amortization
Investments 3 3
Total other assets 83 101
Total assets $ 7,331 $7,094
Current liabilities
Current maturities of long-term debt (Note 5) $ 5 $ 11
Trade payables 645 903
Accrued expenses
Salaries, wages, and other compensation 392 505
Product warranties (Note 1) 229 305
Other accrued liabilities 215 204
Total current liabilities 1,486 1,928
Long-term debt (Note 5) 34 5
Deferred income taxes (Note 6) 50 5
Stockholders' equity (Note 7)
Preferred stock, par value $25;,
Authorized:, 120,000 shares;
issued and outstanding:, none
Common stock, par value $.10 per share;,
Authorized: 5,000,000 shares;
issued and outstanding:, 146 146
1,462,271 shares (1997 and 1996)
Additional paid-in capital 1,246 1,246
Retained earnings 4,369 3,764
Total stockholders' equity 5,761 5,156
Total liabilities and equity $ 7,331 $7,094
</TABLE>
[FN]
The accompanying notes are an integral part of the financial
statements. </FN>
<PAGE>
<TABLE>
S t a t e m e n t s o f O p e r a t i o n s a n d
R e t a i n e d E a r n i n g s
<S> <C> <C>
in Thousands, except per share data 1997 1996
Net sales $ 14,466 13,952
Cost of goods sold 9,921 9,833
Gross profit 4,545 4,119
Operating expenses
Administrative 1,282 1,379
Selling 1,806 1,642
Research and development 500 500
Total operating expenses 3,588 3,521
Operating income 957 598
Other income
Interest income 82 52
Interest expense (4) (18)
Other income, net 17 112
Income before income taxes 1,052 744
Income tax provision (Note 6) 389 196
Net income 663 548
Retained earnings - beginning of year 3,764 3,274
Dividends paid - December 1996 and 1995 - 4 cents (58) (58)
Retained earnings - end of year $ 4,369 $ 3,764
Earnings per common share $ .45 $ .37
</TABLE>
[FN]
The accompanying notes are an integral part of the financial
statements.
</FN>
<PAGE>
<TABLE>
S t a t e m e n t s o f C a s h F l o w s
<S> <C>
<C>
in Thousands 1997
1996
Cash flows from operations
Cash received from customers $ 14,652 $ 13,937
Interest received 82 52
Cash paid to suppliers and employees (13,448) (13,558)
Interest paid (4) (18)
Income taxes paid (242) (256)
Net cash provided by operations 1,040 157
Cash flows from investing
Proceeds from note receivable 188 -
Capital expenditures (490) (322)
Proceeds from sales of property and - 48
equipment
Net cash used for investing (302) (274)
Cash flows from financing
Payment of long-term debt (12) (102)
Dividends paid (58) (58)
Net cash used for financing (70) (160)
Net increase (decrease) in cash and 668 (277)
equivalents
Cash and equivalents, beginning of year 964 1,241
Cash and equivalents, end of year $ 1,632 $ 964
Reconciliation of net income to net cash from
operations:
Net income $ 663 $ 548
Depreciation and amortization 361 348
Gain on sale of property and equipment - (126)
Provision for losses on accounts receivable 12 12
Deferred income taxes 75 (45)
Changes in assets and liabilities
Accounts receivables 186 (15)
Inventories 261 (292)
Prepaid expenses (82) 24
Trade payables (258) (263)
Accrued expenses (178) (34)
Net cash from operations $ 1,040 $ 157
</TABLE>
[FN]
The accompanying notes are an integral part of the financial
statements.
</FN>
<PAGE>
N o t e s t o F i n a n c i a l S t a t e m e n t s
1. N a t u r e o f B u s i n e s s a n d
S i g n i f i c a n t A c c o u n t i n g P o l i c i e s
A. N a t u r e o f B u s i n e s s
The Company operates four principle business units: Waters
Network Systems (WNS), Waters Technical Systems (WTS,
formerly known as Midwest WireTech), American FarmWorks (AFW),
and Waters Medical Systems (WMS). The sales of products
from all four business units occur principally within
the United States. Waters Network Systems, a newly formed
business unit, addresses local area network connectivity
solutions for the K-12 educational market. Waters
Technical Systems is engaged in the subcontract manufacturing
of product assemblies and cable harness assemblies for the
communications and computer industries. American FarmWorks
manufactures and sells electric fence controllers for
animal management to retailers. Waters Medical Systems
produces medical equipment and analytical instruments for
hospital and laboratory use. The Company extends credit in
the normal course of business. The Company performs ongoing
credit evaluations of its customers' financial conditions and
generally requires no collateral.
B. I n v e n t o r i e s
Inventories are recorded at the lower of FIFO (first-in, first
out) method cost or market.
C. P r o p e r t y, P l a n t, and E q u i p m e n t
Property, plant and equipment are recorded at cost
less accumulated depreciation. Depreciation is computed
on the
straight-line method over estimated useful lives of 5 to 40
years for buildings and improvements, 3 to 10 years for
machinery, equipment, and office furniture. The present
values of capital lease obligations are classified as long-
term debt and the related assets are included in
equipment. Amortization of equipment under capital leases
is included in depreciation expense.
<PAGE>
D. I n c o m e T a x e s
Deferred taxes are provided on a liability method
whereby deferred tax assets are recognized for deductible
temporary differences and operating loss and tax credit
carryforwards and deferred tax liabilities are recognized
for taxable temporary differences. Temporary differences
are the differences between the reported amounts of assets
and liabilities and their tax bases. Deferred tax assets
are reduced by a valuation allowance when, in the opinion of
management, it is more likely than not that some portion or
all of the deferred tax assets will not be realized.
Deferred tax assets and liabilities are adjusted for the
effects of changes in tax laws and rates on the date of
enactment.
E. I n t a n g i b l e A s s e t
Cost in excess of net assets acquired is amortized on a
straightline basis over a twenty-year period beginning
in 1983. Amortization of $18,000 is recorded annually.
Accumulated amortization at June 30, 1997 and 1996 was $270,000
and $252,000, respectively.
F. R e s e a r c h a n d D e v e l o p m e n t
Research and Development costs are expensed as incurred.
<PAGE>
G. E m p l o y e e B e n e f i t s
The Company has a 401(k) deferred savings plan for all
employees (associates) who have completed six months of
service. The
Company may make matching and discretionary contributions.
The
Plan has a calendar year-end. During the fiscal years
ending June 30, 1997 and 1996, the Company expensed $24,000 in
matching contributions, respectively.
The Company offers medical insurance to its associates which
it self-insures up to $25,000 per individual and
$1,000,000 in aggregate.
H. E a r n i n g s P e r C o m m o n S h a r e
Earnings per common share amounts were computed using
the weighted average number of shares outstanding during each
year. Average shares outstanding for the years ending June 30,
1997 and 1996 were 1,462,271. Options for purchase of stock
which are common stock equivalents do not have a material
dilutive effect on per share amounts
and have not been included in the
computations.
The FASB has issued Statement No. 128, Earnings per Share,
which supersedes APB Opinion No. 15. Statement No. 128
requires the presentation of earnings per share by all
entities that have common stock or potential common stock,
such as options, warrants and convertible securities
outstanding that trade in a public market. Those entities
that have only common stock outstanding are required to
present basic earnings per-share amounts. All
other entities are required to present basic and diluted
pershare amounts. Diluted per-share amounts assume the
conversion, exercise or issuance of all potential common
stock instruments unless the effect is to reduce a loss or
increase the income per common share from continuing
operations. All entities required to present per-share
amounts must initially apply Statement No. 128 for annual
and interim periods ending after December 15, 1997. Earlier
application is not permitted.
Because the Company has potential common stock outstanding
(stock options to employees, as discussed in Note 7), the
Company will be required to present basic and diluted
earnings per share. If the Company had applied Statement
No. 128 in the accompanying financial statements, the
following per-share amounts would have been reported:
<TABLE>
<S> <C> <C>
Years Ended June 30,
Basic earnings per share: 1997 1996
Net income .45 .37
Diluted earnings per share:
Net income .44 .37
</TABLE>
The weighted-average number of shares of common stock used
to compute the basic earnings per share was increased by 29,700
and 30,211 shares for the years ended June 30, 1997 and
1996, respectively, for the assumed exercise of the
employee stock
options in computing the diluted per-share data.
<PAGE>
I. S t a t e m e n t o f C a s h F l o w s
For purposes of the statement of cash flows, highly liquid
investments purchased with maturities of three months or less
are considered to be cash equivalents.
<TABLE>
<S> <C> <C>
In thousands: 1997 1996
Supplemental schedule of non-cash
investing and financing activities:
Machinery and equipment acquired
with capital lease $ 35 -
</TABLE>
J. P r o d u c t W a r r a n t y
The Company's products are currently covered by
product warranties for one year after date of purchase. At the
time of sale, the Company recognizes an estimated warranty
cost based on prior history and expected future claims.
K. F a i r V a l u e of F i n a n c i a l
I n s t r u m e n t s
The fair value of cash and cash equivalents, accounts
receivable, and accounts payable approximate the carrying
amount because of the short maturity of those instruments.
L. F i n a n c i a l S t a t e m e n t s E s t i m a t e
s
The preparation of financial statements in conformity
with generally accepted accounting principles requires
management to make estimates and assumptions that affect
reported amounts of assets and liabilities and disclosures
of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual results
could differ from these estimates.
M. A d v e r t i s i n g C o s t s
The Company follows the policy of charging the production
costs of advertising to expense as incurred. Advertising
expenses for the years ended June 30, 1997 and 1996 were
$251,000 and $198,000, respectively.
N. L o n g - L i v e d A s s e t s a n d G o o d w i l l
The Company assesses long-lived assets for impairment under
FASB Statement No. 121, "Accounting for the Impairment of
Long-Lived Assets to be Disposed of." Under those rules,
property and equipment and goodwill associated with assets
acquired in a purchase business combination are included
in impairment evaluations when events or circumstances exist
that indicate the carrying amount of those assets may not be
recoverable.
2. C a s h a n d E q u i v a l e n t s
At June 30, 1997 and 1996, the Company had cash balances
totaling $146,000 and $101,000, respectively, at one bank
located in Minnesota. The balances are insured by the
Federal Deposit Insurance Corporation up to $100,000. In
addition, the Company maintains cash balances in a money
market mutual fund with Norwest Funds. Such funds are not
insured and totaled $1,486,000 at June 30, 1997 and $863,000
at June 30, 1996. The Company has not incurred any losses in
such accounts.
<PAGE>
3. T r a d e A c c o u n t s R e c e i v a b l e
Trade accounts receivable consist of the following:
<TABLE>
<S> <C> <C>
in Thousands 1997 1996
Trade accounts receivable $1,987 $2,193
Less allowance for doubtful
accounts 32 40
Totals $1,955 $2,153
</TABLE>
4. I n v e n t o r i e s
Inventories consist of the following:
<TABLE>
<S> <C> <C>
in Thousands 1997 1996
Raw materials $1,350 $1,518
Work-in-process 256 253
Finished goods 166 262
Totals $1,772 $2,033
</TABLE>
5. L o n g - T e r m D e b t
Long-term debt consists of the following:
<TABLE>
<S> <C> <C>
in Thousands 1997 1996
Capital lease obligations due in
varying monthly installments
through January 2000 secured by $ 39 $16
related equipment.
Less current maturities 5 11
Net long-term debt $ 34 $ 5
</TABLE>
<TABLE>
<S> <C>
Scheduled maturities, by fiscal year, of long-term debt are
as follows:
1998 $ 5
1999 $ 6
2000 $ 28
Total long-term debt $ 39
term debt
</TABLE>
<TABLE>
<S> <C> <C>
At June 30, property, plant and equipment includes the
following amounts for capital leases:
1997 1996
Property, plant and equipment
$ 49 $38
Accumulated amortization
10 16
Net assets under capital lease
$ 39 $22
</TABLE>
<TABLE>
<S> <C>
At June 30, 1997, the Company had the following
minimum
commitments for payment of rentals under capital leases:
1998 9
1999 9
2000 30
Total lease commitments $48
Less amount representing
interest 9
Present value of lease
payments, included in long-
term debt $39
</TABLE>
6. I n c o m e T a x e s
The income tax provision charged to continuing operations for the
years ended June 30, 1997 and 1996 are as follows:
<TABLE>
<S> <C> <C>
in Thousands 1997 1996
Current:
US federal $ 410 $203
State 54 33
Total Current 464 236
Deferred:
US federal (58) (39)
State (17) (1)
Total Deferred (75) (40)
Total current and deferred: $ 389 $ 196
</TABLE>
The income tax provision differs from the amount of income tax
determined by applying the US federal income tax rate to pretax
income for the continuing operations for the years ended June 30,
1997 and 1996 due to the following:
<TABLE>
<S> <C> <C>
1997 1996
Computed "expected" tax expense $ 400 $ 260
Increase (decrease) in income taxes
resulting from: 12 10
Non-deductible expenses
Change in Valuation Allowance - (85)
State taxes net of NOL carryforward 48 25
Tax credits (65) (12)
Other (6) (2)
Total $ 389 $ 196
</TABLE>
Net deferred tax assets consist of the following components as of
June 30, 1997 and 1996:
<TABLE>
<S> <C> <C>
1997 1996
Deferred tax assets
Employee benefits and severance $ 85 $ 90
Inventory and receivable allowances 61 74
Warranty and contingency reserves 104 151
Total deferred tax assets $ 250 $ 315
Deferred tax liabilities
Installment sale $ - $ 35
Property and equipment 50 5
Total deferred tax liabilities 50 40
Net deferred tax assets $ 200 $ 275
</TABLE>
The components giving rise to the net deferred tax assets
described above have been included in the Company's Balance
Sheets as of June 30, 1997 and 1996 as follows:
<TABLE>
<S> <C> <C>
Current assets $ 250 $ 280
Noncurrent liabilities (50) (5)
Net deferred tax assets $ 200 $ 275
</TABLE>
<PAGE>
7. S t o c k O p t i o n s
In 1985, the Company adopted an Incentive Stock Option Plan (the
"1985 ISO Plan") and a Non-Qualified Stock Option Plan (the "1985
NQ Plan"), both of which had a term of ten years and
terminated on March 20, 1995. As of June 30, 1995, all
options granted under the 1985 ISO Plan and the 1985 NQ
Plan had terminated except for one option for the
purchase of 5,000 shares exercisable at $2.1875 per share.
The Board of Directors adopted the 1995 Stock Option Plan
(the "1995 Plan") in May 1995 and the shareholders of the
Company approved the 1995 Plan at the Company's annual meeting
in October 1995. The 1995 Plan provides for the grant of
both incentive stock options and non-qualified stock
options and reserves
150,000 shares of the Company's Common Stock for issuance
under the 1995 Plan and any previous plans of the Company,
to be granted on a one-for-one basis. The outstanding
5,000 share option under the Company's 1985 ISO Plan
therefore reduces the shares reserved for issuance under
the 1995 Plan to 145,000 shares.
Options may be granted to eligible employees and directors at
not less than 100% of fair value of the Company's common
stock. Options may be exercised over terms not to exceed 10
years. The following is a summary of transactions:.
<TABLE>
<S> <C> <C>
1997 1996
Options outstanding beginning of year: 55,000 55,000
Terminated 0 0
Granted 0 0
Options outstanding, end of year 55,000 55,000
($2.1275 - $2.1875)
Options exercisable, end of year 55,000 55,000
($2.1275 -,$2.1875)
Available for Grant, end of year 95,000 95,000
(/TABLE>
Grants under this plan are accounted for using APB Opinion No.
25 and related interpretations. Accordingly, no compensation
cost has been recognized for grants under the stock option
plan.
In October 1996, the Financial Accounting Standards Board
issued Statement of Financial Accounting Standards No. 123,
Accounting for Stock-Based Compensation, which establishes new
standards for stock-based employee compensation. The Company
had a choice under the Standard of either using SFAS 123 in
measuring expense or presenting pro forma net income (and
earnings per share). The Company has elected to adopt the
presentation of pro forma net income provision of SFAS 123.
For fiscal years ended June 30, 1997 and 1996 the Company did
not have any options under the plan that would require
recognition of compensation cost under SFAS 123.
In December 1996, the Board of Directors adopted the
Associates Stock Purchase Plan (the "ASP Plan"). The ASP Plan
is available to associates who have worked at least six
months with the Company and are regularly scheduled to work
at least 20 hours a week. The ASP Plan is carried out in 12-
month phases commencing on January 1, 1997. Company stock
bought under the ASP Plan is purchased at the lesser of
85% of the stock price at the beginning or end of the
phase. No compensation cost has been recognized under the
terms of this Plan for the year ended June 30, 1997.
<PAGE>
8. O t h e r M a t t e r s
The Company has a $1,000,000 line of credit with its
bank. Borrowings under the line are charged interest at the
prime rate and are collateralized by accounts receivable and
inventories. The prime rate was 8.5% at June 30, 1997. The
credit agreement expires December 15, 1997. The loan
agreement requires the Company to meet certain financial
ratios and covenants. There were no borrowings outstanding
under the line of credit at June 30, 1997.
The Company also has a documentary letter of credit to
support the purchase of inventories. At June 30, 1997, the
Company had letter of credit facilities of $400,000, of
which $74,000 of letter of credit commitments were
outstanding.
9. I n d u s t r y S e g m e n t s a n d S i g n i f i c a
n t C u s t o m e r s
Operating income is total revenue less operating
expenses, excluding interest and general corporate expenses.
The Company did not have any sales between industry
segments. Identifiable assets by industry segment
includes both assets directly identified with those
operations and an allocable share of jointly used assets.
General corporate assets consist primarily of cash, cash
equivalents and building costs. The following table
summarizes data by industry segment.
</TABLE>
<TABLE>
<S> <C> <C>
in Thousands 1997 1996
Net Sales
WNS $ 1,267 $ 377
WTS 2,079 2,660
AFW 9,437 8,893
WMS 1,683 2,022
$ 14,466 $13,952
Operating Income (Loss)
WNS $ (50) $(157)
WTS (156) 280
AFW 1,905 1,226
WMS 540 628
General Corporate Expenses (1,282) (1,379)
Operating Income $ 957 $ 598
Capital Expenditures
WNS $ - $ 8
WTS 12 113
AFW 166 163
WMS 36 12
$ 214 $ 296
Depreciation and Amortization
WNS $ 5 $ 4
WTS 31 18
AFW 168 121
WMS 21 43
$ 225 $ 186
Identifiable Assets
WNS $ 462 $ 708
WTS 570 618
AFW 2,686 2,809
WMS 631 680
Corporate 2,982 2,279
$ 7,331 $7,094
Significant customers (sales > 10% of net sales)
WTS
No. of customers 10 10
Sales to those customers $ 1,862 $2,284
AFW
No of customers 1 1
Sales to that customer $ 1,961 $1,530
</TABLE>
<PAGE>
PART II ITEM 8. CHANGES IN AND DISAGREEMENTS WITH
ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
NONE
PART III ITEM 9. DIRECTORS, EXECUTIVE OFFICERS,
PROMOTERS, AND CONTROL PERSONS; COMPLIANCE
WITH SECTION 16(A) OF THE EXCHANGE ACT
Other than information included in "Executive Officers of
the Company" which is set forth as part of Part I
hereof, the additional information required under this item
is incorporated by reference to the Company's definitive
Proxy Statement for its 1997 Annual Meeting of Shareholders.
PART III ITEM 10. EXECUTIVE COMPENSATION
Information required under this item is incorporated by
reference to the Company's definitive Proxy Statement for its
1997 Annual Meeting of Shareholders.
PART III ITEM 11. SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
Information required under this item is incorporated by
reference to the Company's definitive Proxy Statement for its
1997 Annual Meeting of Shareholders.
PART III ITEM 12. CERTAIN RELATIONSHIPS AND
RELATED TRANSACTIONS
Information required under this item is incorporated by
reference to the Company's definitive Proxy Statement for its
1997 Annual Meeting of Shareholders.
<PAGE>
PART IV ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
(a)Exhibits:
See Exhibit Index following the signature page of this report.
(b)Reports on Form 8-K
There were no reports on Form 8-K filed by the Company during
the fourth quarter of fiscal year 1997.
PART IV ITEM 13. Exhibits and Reports on Form 8-KSB
(a)Exhibits:
See Exhibit Index following the signature page of this report.
(b)Reports on Form 8-KSB
On May 14, 1996, the Registrant filed a Form 8-KSB describing
the agreement to settle the lawsuit Wedge-Loc Company had
previously brought against the Registrant.
<PAGE>
Signatures
Pursuant to the requirements of Section 13 or 15(d) of
the Securities Exchange Act of 1934, the Company has duly
caused this Report to be signed on its behalf by the
undersigned, thereunto duly authorized, in Rochester,
Minnesota, on September 16, 1997.
WATERS INSTRUMENTS, INC.
/s/ Jerry W. Grabowski
By Jerry W. Grabowski
President and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act
of 1934, this Report has been signed by the following
persons on behalf of the Company in the capacities and
on the dates
indicated.
<TABLE>
<S> <C> <C>
Signature Title Date
President, Chief
/s/ Jerry W. Grabowski Executive Officer,
Jerry W. Grabowski (Principal Executive
Officer) and Director
September 16, 1997
Chief Financial
/s/ Gregory J. Anshus Officer (Principal
Gregory J. Anshus Financial Officer)
September 16, 1997
/s/ William R. Franta Director
William R. Franta September 16, 1997
/s/ John A. Grimstad Director and
John A. Grimstad Secretary September 16, 1997
/s/ Charles G. Schiefelbein
Charles G. Schiefelbein Director September 16, 1997
</TABLE>
<PAGE>
CONSENT OF INDEPENDENT ACCOUNTANTS
TO THE BOARD OF DIRECTORS
WATERS INSTRUMENTS, INC.
We hereby consent to the incorporation by reference in
the Registration Statement on Form S-8 (No. 33-64937) of the
Waters Instruments, Inc. 1995 Stock Option Plan of our
report dated August 7, 1997, on the financial
statements of Waters Instruments, Inc., which report,
statements, and schedules appear, or are incorporated by
reference in the Annual Report on Form 10-KSB for the year
ended June 30, 1997.
McGladrey & Pullen, LLP
Rochester, Minnesota
September 16, 1997
<PAGE>
<TABLE>
<S> <C> <C>
Exhibit Index for Form 10-KSB (for the Fiscal Year ended June
30, 1997)
Page Number
3.1 Restated Articles of Incorporation, as amended
to date, incorporated by reference to
Exhibit 3.1 to the Company's Annual Report on
Form 10-K for the fiscal year ended January 31, 1989. *
3.2 Restated Bylaws, as amended to date, incorporated
by reference to the description of such amendment set
forth under the caption "Amendment
to Bylaws" of the Company's definitive proxy
statement for its 1988 Annual Meeting of Shareholders. *
10.1 Management Incentive Compensation Plan, incorporated
by reference to the description of such Plan set
forth under the caption "Compensation Plans"
of the Company's definitive proxy statement for its
1989 Annual Meeting of Shareholders. (1) *
10.2 1985 Incentive Stock Option Plan and Form of Stock
Option Agreement, incorporated by reference to Exhibit
10.4 to the Company's Annual Report on
Form 10-K for the fiscal year ended January 31, 1985. *
10.3 1985 Nonqualified Stock Option Plan and Form
of Stock Option Agreement, incorporated by reference
to Exhibit 10.5 to the Company's Annual Report
on Form 10-K for the fiscal year
ended January 31, 1986. *
10.4 Employment agreement dated July 28, 1993 between
the Company and Gerald W. Grabowski incorporated by
reference to Exhibit 10.10 to the Company's Annual
Report on Form 10-KSB for the fiscal year ended
June 30, 1993. (1) *
10.5 1995 Stock Option Plan incorporated by reference
to Exhibit 10.5 to the Company's Annual Report on
Form 10-KSB for the fiscal year ended
June 30, 1996. *
10.6 Settlement Agreement with Wedge-Loc providing for
the $240,000, incorporated by reference to Exhibit 10.6
to the Company's Annual Report on Form 10-KSB for
the fiscal year ended June 30, 1996. *
24.1 Power of Attorney. *
27 Financial Data Schedule (filed in electronic formal
only)
</TABLE>
[FN]
(1) Indicates a management compensatory plan.
* Incorporated by reference; SEC File No. 0-1388.
</FN>
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-END> JUN-30-1997
<CASH> 1,632
<SECURITIES> 0
<RECEIVABLES> 1,987
<ALLOWANCES> 32
<INVENTORY> 1,772
<CURRENT-ASSETS> 5,724
<PP&E> 4,243
<DEPRECIATION> 3,219
<TOTAL-ASSETS> 7,331
<CURRENT-LIABILITIES> 1,486
<BONDS> 34
<COMMON> 146
0
0
<OTHER-SE> 5,615
<TOTAL-LIABILITY-AND-EQUITY> 7,331
<SALES> 14,466
<TOTAL-REVENUES> 14,466
<CGS> 9,921
<TOTAL-COSTS> 9,921
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 12
<INTEREST-EXPENSE> 4
<INCOME-PRETAX> 1,052
<INCOME-TAX> 389
<INCOME-CONTINUING> 663
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 663
<EPS-PRIMARY> .45
<EPS-DILUTED> .44
</TABLE>
