SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[X] Annual report pursuant to section 13 or 15(d) of the Securities
Exchange Act of 1934 for the fiscal year ended September 30, 1996 or
[ ] Transition report pursuant to section 13 or 15(d) of the Securities
Exchange Act of 1934 for the transition period from __________________
to __________________ .
Commission file number 0-2387
RESEARCH INCORPORATED
(Exact name of the Company as specified in its charter)
Minnesota 41-0908058
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
P.O. Box 24064, Minneapolis, Minnesota 55424
(Address of principal executive office) (Zip Code)
(The Company's telephone number, including area code) (612)941-3300
Title of each class
-------------------
Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock with a par value of $.50 per share
Name of each exchange on which registered
-----------------------------------------
NASDAQ Symbol RESR
Indicate by check mark whether the Company (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 Company was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes __X__ No____
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K (Paragraph 229.405 of this chapter) is not contained herein,
and will not be contained, to the best of the Company's knowledge, in definitive
proxy or information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K. ___
The aggregate market value of the common shares held by nonaffiliates was
approximately $ 3.5 million based upon the closing sale price of the Company's
common stock as of December 9, 1996.
As of December 11, 1996; 1,161,943 common shares were outstanding.
Documents incorporated by reference:
1) Portions of the Proxy Statement dated December 12, 1996, for the Annual
Meeting of Shareholders to be held on January 16, 1997, are incorporated by
reference into Part III.
RESEARCH, INCORPORATED
PART I
Item 1. Business
(a) General Development of the Business
Research, Incorporated (the "Company") was organized as a Minnesota
corporation in October 1966, and prior to that date, operated as
the R-I Controls Division of a predecessor company which was formed
in 1952. The Company is engaged in the design, manufacturing and
sale of control systems and heating devices that solve a broad
range of customer problems. Applications for the Company's products
include control of glass furnaces, assembly of surface mount
printed circuit boards and specialized heating systems for tube
shrinking materials testing, ink drying and curing/finishing.
The global market for the Company's products includes the United
States, Canada, Europe, the Far East, Australia and South America.
Sales are made through independent sales representatives and
distributors. The Company currently operates as one business
segment through four operating divisions: Drying, Thermal
Solutions, Control Systems and Assembly Automation. Company
operations are located in Eden Prairie, Minnesota, a suburb of
Minneapolis, with a subsidiary, Research Incorporation Limited,
operating as a manufacturing site and European sales office in
Humberside, England.
During the past year, the Company has continued to operate in
substantially the same mode of operations. The Company is engaged
in the manufacture of controls systems and heating equipment. On
November 8, 1995 the Company established a FSC (Foreign Sales
Corporation) to obtain export incentives related to Research
Incorporated's increasing international sales activities.
Also refer to Note 10 and Note 8 of Item 14, Notes to Consolidated
Financial Statements, included elsewhere in this report.
(b) Financial Information About Industry Segments
The Company operates in a single industry segment, industrial
electronic instruments and systems. Financial information
concerning its operations has been presented in the financial
statements referred to under Item 8.
(c) Narrative Description of the Business
(1) (i) Products and Markets - The Company is currently engaged in
the design, manufacture, and marketing of two product classes;
process control systems and heating devices.
Process control instruments are used primarily for the
automated programming and control of industrial heating
processes and laboratory testing. Applications are found in
several basic industries such as aerospace, metals, glass,
electronics, and automotive. Complete systems are supplied
in accordance with customer requirements. The systems
include PC based supervisory software, microprocessor based
controllers and power controllers.
Heating devices are applied to a variety of process
applications, such as soldering, brazing, drying, curing,
stress relieving, surface mount technologies, and thermal
testing. Individual heating devices and complete systems
are supplied to the basic industries and applications noted
above.
The markets for the Company's product lines are located
throughout the United States and Canada, as well as
internationally -- Europe, the Far East, Australia, and
South America. Field sales are conducted primarily through
independent sales representatives and distributors who are
located throughout the market areas served.
The breakdown of sales by the two product classes is as
follows: (Amounts expressed in thousands)
Year Ended Process Control Heating
September 30 Instruments Devices Total
-----------------------------------------------------------------------------
Year Amount Percent Amount Percent Amount Percent
-----------------------------------------------------------------------------
1996 $5,779 29.4% $13,882 70.6% $19,661 100.0%
1995 5,342 25.5 15,581 74.5 20,923 100.0
1994 4,707 25.9 13,456 74.1 18,163 100.0
(ii) Product Investment - Ongoing research and development with
respect to new related products and improvements to
existing products are carried on to maintain
state-of-the-art capabilities and to meet customer
requirements. The Company does not believe that any new
product or products are being developed or acquired which
would require a material amount of the assets of the
Company or which otherwise are material.
(iii) Sources and Availability of Raw Materials - Raw materials
essential to the business of the Company are generally
readily available from a number of sources.
(iv) Patents and Trademarks - The Company has a number of
patents and is a party to certain license agreements which,
while deemed important, are not deemed material to the
business of the Company in the aggregate.
(v) Seasonality - The business of the Company is not seasonal.
(vi) Working Capital Requirements - The practices of the
Company relating to working capital items are not
considered unusual.
(vii) Customers - The Company had sales to one customer which
amounted to 11% of net sales during fiscal 1996.
(viii) Backlog - The dollar amount of the Company's backlog of
orders from operations believed to be firm at September 30,
1996, was $2,356,000; at September 30, 1995, it was
$4,150,000. It is anticipated that $1,771,000 of the September
30, 1996 backlog will be shipped in the subsequent 12-month
period. Backlog has no unusual significance to the business of
the Company.
(ix) Government Contracts - Government contracts which may be
subject to renegotiation of profits or termination do not
constitute a material portion of the Company's business.
(x) Competition - The Company's business is highly competitive,
particularly in the areas of price, service and product
performance. Competition involves hundreds of companies --
ranging from companies which are much smaller than the Company
to large companies in the electronics, printing and glass
manufacturing industries.
(xi) Research and Development - The Company incurred expenses of
approximately $1,735,000, $1,682,000 and $1,309,000 in fiscal
years 1996, 1995, and 1994, respectively, on Company-sponsored
research activities related to the development of new related
products and to the improvement of existing products. No
material funds were expended for customer-sponsored research
activities.
(xii) Environmental Regulations - Compliance with federal, state
and local provisions regulating the discharge of materials
into the environment or otherwise relating to the protection
of the environment is not expected to have a material effect
upon the capital expenditures, earnings or competitive
position of the Company.
(xiii) Employees - At September 30, 1996, the Company had 159
employees.
(d) Financial Information About Foreign and Domestic Operations and
Export Sales
(1) The Company has a subsidiary in the United Kingdom. The results of
its operations were not material to the Company. Export sales
involve sales to customers primarily in Europe, Canada, the Far
East, Australia, and South America. See Note 6, "Foreign Sales" of
the Notes to Consolidated Financial Statements.
(2) Not applicable.
(3) Not applicable.
Item 2. Properties
The Company's plant and office, which are owned in fee, are located on
approximately 12 acres of property at 6425 Flying Cloud Drive, Eden
Prairie, Minnesota. The facilities consist of 90,000 square feet of
completely air-conditioned space deemed suitable for light
manufacturing and office use. Management considers these facilities to
be in good condition, well-maintained, and adequate for its current
operations. On October 4, 1996, the first quarter of fiscal 1997, the
Company completed the sale of 13.1 acres of undeveloped land. The
Company's subsidiary in the U.K. is operated in a 3,500 square foot
leased facility.
Item 3. Legal Proceedings
The Company is not a party to any material pending legal proceedings.
Item 4. Submission of Matters to a Vote of Security Holders
No matters were submitted to a vote of security holders during the
fourth quarter of fiscal 1996.
Item 4A. Executive Officers
None of the executive officers of the Company has any family
relationship with any other officer, and all officers serve at the
pleasure of the Board of Directors. The following table sets forth
other information regarding the Company's executive officers:
<TABLE>
<CAPTION>
NAME AGE POSITION OFFICER SINCE
---- ---- -------- -------------
<S> <C> <C> <C>
B.E. Bailey 48 Vice President 1992
D.G. Brady 54 Vice President 1990
C.C. Johnson 52 President, CEO, CFO, and Director 1984
G.E. Magnuson 66 Secretary and Director; 1975
Of Counsel, Lindquist & Vennum
P.L.L.P.
K.M. O'Rourke 39 Vice President 1993
G.W. Sangster 67 Vice President 1976
</TABLE>
There are no arrangements or understandings between any of the officers
and any other person pursuant to which any of them was selected as an
officer.
Messrs. Johnson and Sangster have each been employed by the Company for
more than five years. Mr. Johnson became President and Chief Executive
Officer in July of 1992; previously he was Vice President of Finance
and Chief Financial Officer. Mr. Magnuson was a partner with Lindquist
& Vennum P.L.L.P until January 1995, at which time he became Of Counsel
for Lindquist & Vennum P.L.L.P. Mr. Magnuson has been a director and
secretary of the Company for more than five years. Mr. Brady became
Vice President in November 1990; previously Mr. Brady was General
Manager for the Assembly Automation Division. Mr. Bailey became Vice
President in November 1991; previously Mr. Bailey was General Manager
for the Radiant Energy Division. Ms. O'Rourke became Vice President in
November 1993; previously Ms. O'Rourke was Manager of Human Resources.
She was hired in 1985.
PART II
Item 5. Market for The Company's Common Stock and Related Stockholder Matters
(a) & (c) Market Information and Dividends
Dividends paid and price range per share of common stock is as follows:
Stock is traded on the over-the-counter market, NASDAQ symbol (RESR)
Bid Price Range
---------------
Dividends Paid 1996 1995
----------------- ------------ ------------
During Quarter Ended 1996 1995 High Low High Low
- --------------------------------------------------------------------------------
December 31 $ .055 $ .055 9-1/2 7-1/2 7 5-1/4
March 31 .070 .055 8 6-1/2 6-3/4 4-1/2
June 30 .070 .055 8 6-1/2 6-3/4 5-3/4
September 30 .070 .055 8-1/4 6 12 5-3/4
- --------------------------------------------------------------------------------
TOTAL $ .265 $ .220
========================================
(b) Holders
The number of holders of record of the Company's common stock as of
December 2, 1996, was 649 (excluding beneficial owners of shares held
in street names).
Item 6. Selected Financial Data
<TABLE>
<CAPTION>
CONSOLIDATED FINANCIAL SUMMARY
(In thousands, except per share data)
For the Years ended September 30 1996 1995 1994 1993 1992
- ------------------------------------ ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Consolidated Operations:
Net sales $19,661 $20,923 $18,163 $15,613 $11,687
Gross profit 7,955 9,019 7,947 6,989 4,609
Percent of sales 40.5% 43.1% 43.8% 44.8% 39.4%
Income before income taxes 458 952 725 620 167
Percent of sales 2.3% 4.6% 4.0% 4.0% 1.4%
Income 290 627 497 403 373
Percent of sales 1.5% 3.0% 2.7% 2.6% 3.2%
Discontinued Operation:
Income, net of tax $ -- $ -- $ -- $ -- $ 57
Percent of sales -- -- -- -- 0.5%
Total:
Net income $ 290 $ 627 $ 497 $ 403 $ 430
Percent of sales 1.5% 3.0% 2.7% 2.6% 3.7%
------- ------- ------- ------- -------
Earnings per Share:
Continuing Operations $ .24 $ .56 $ .44 $ .36 $ .33
Discontinued Operation -- -- -- -- .05
------- ------- ------- ------- -------
Total $ .24 $ .56 $ .44 $ .36 $ .38
======= ======= ======= ======= =======
Cash Dividends Paid per Share $ .265 $ .220 $ .220 $ .220 $ .220
------- ------- ------- ------- -------
Weighted Average Number of
Shares Outstanding 1,194 1,129 1,125 1,125 1,143
As of September 30 1996 1995 1994 1993 1992
------- ------- ------- ------- -------
Consolidated Financial Condition:
Net working capital $ 5,091 $ 5,195 $ 4,952 $ 4,902 $ 4,957
Current ratio 2.7 to 1 2.5 to 1 2.5 to 1 2.9 to 1 3.3 to 1
Property and Equipment, Net $ 2,100 $ 1,876 $ 1,695 $ 1,570 $ 1,339
Total Assets 10,338 10,593 10,080 9,132 8,474
Total Stockholders' Equity 7,275 7,195 6,762 6,498 6,339
Book Value per Share $ 6.27 $ 6.31 $ 6.01 $ 5.78 $ 5.64
THE ACCOMPANYING NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS ARE AN INTEGRAL
PART OF THIS CONSOLIDATED FINANCIAL SUMMARY.
</TABLE>
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations
CONSOLIDATED OPERATIONS
1996-1995 COMPARISON
Sales for fiscal 1996 were $19,661,000, a decrease of 6.0% from 1995.
The decreased sales were due to significantly lower sales in the SMT
market, counteracting sales gains achieved in other product lines.
Sales of new products introduced in the last three years accounted for
48% of sales.
The gross profit margin on sales was 40.5% compared to 43.1% in 1995.
The decrease in the gross profit margin was due to product mix and the
impact of new product introductions.
Total operating expenses were $7,867,000 in 1996 compared to $8,115,000
in 1995. On a percentage basis, these expenses represented 40.0% of
1996 sales, down from 40.1% in 1995. Selling expenses were $5,431,000
(27.6% of sales) in 1996 compared to $5,674,000 (27.1% of sales) in
1995. Selling expenses are up as a percent of sales due to the lower
volume. Expenditures for research and development increased to
$1,735,000 (8.8% of sales) in 1996 from $1,682,000 (8.0% of sales) in
1995 due to the Company's increased investment in new product
development. General and administrative expense decreased from $759,000
(3.6% of sales) in 1995 to $700,000 (3.6% of sales) in 1996.
Interest income was $25,000 in 1996 and $49,000 in 1995. Interest
income in fiscal 1996 decreased due primarily to lower investment
balances.
On September 27, 1996, the Company sold its Dimension product line for
a total sale price of $1,000,000. Total gain recognized on the sale was
$344,000 and is shown as Gain on Sale of Product Line in the
accompanying Consolidated Statement of Operations.
The effective tax rate for 1996 was 37%, compared to 34% in 1995. The
comparison of the two years is illustrated in Note 3 in the Notes to
Consolidated Financial Statements.
CONSOLIDATED OPERATIONS
1995-1994 COMPARISON
Sales for fiscal 1995 were $20,923,000, an increase of 15.2% from 1994.
The increased sales were principally due to new products and an
increase in international sales. Sales of new products introduced in
the last three years accounted for 46% of sales.
The gross profit margin on sales was 43.1% compared to 43.8% in 1994.
The decrease in the gross profit margin was due to product mix.
Total operating expenses were $8,115,000 in 1995 compared to $7,286,000
in 1994. On a percentage basis, these expenses represented 38.8% of
1995 sales, down from 40.1% in 1994. Selling expenses were $5,674,000
(27.1% of sales) in 1995 compared to $5,312,000 (29.2% of sales) in
1994. These expenses reflect an increase in product promotion offset by
expense reductions in the Controls Division during the second half of
fiscal 1995. Expenditures for research and development increased to
$1,682,000 (8.0% of sales) in 1995 from $1,309,000 (7.2% of sales) in
1994 due to the Company's increased investment in product development
and fewer customer funded engineering projects. General and
administrative expense increased from $664,000 (3.7% of sales) in 1994
to $759,000 (3.6% of sales) in 1995 due to the cost of the
implementation phase of process improvement programs.
Interest income was $49,000 in 1995 and $64,000 in 1994. Interest
income in fiscal 1995 decreased due to lower investment balances.
The effective tax rate for 1995 was 34%, compared to 31% in 1994. The
comparison of the two years is illustrated in Note 3 in the Notes to
Consolidated Financial Statements.
LIQUIDITY AND CAPITAL RESOURCES
The Company's working capital was $5,091,000 at the end of 1996 as
compared to $5,195,000 in 1995. The Company's current ratio at
September 30, 1996 and 1995 was 2.7 to 1 and 2.5 to 1, respectively.
The working capital increased due to the sale of the Dimension product
line. For further information regarding the current year items
impacting cash flows, see the Company's Consolidated Statements of Cash
Flows.
In the first quarter of fiscal year 1997, the Company sold a parcel of
undeveloped land for approximately $1,600,000 in cash. Proceeds from
this sale will be used to fund operations. For more information refer
to Note 10 in the Notes to Consolidated Financial Statements.
The Company has an unsecured bank line of credit of $3,000,000. The
Company did not borrow against the line or have any long-term debt in
1996 or 1995.
INFLATION
In the past three years, inflation has not had a significant effect on
operations.
FORWARD-LOOKING INFORMATION
The statements included in this report which are not historical or
current facts are "forward-looking statements" made pursuant to the
safe harbor provisions of the Private Securities Litigation Reform Act
of 1995. There are certain important factors that could cause results
to differ materially from those anticipated by some of the statements
made herein. Investors are cautioned that all forward-looking
statements involve risks and uncertainty. Some of the factors that
could affect results are the effectiveness of new product
introductions, the product mix of our sales and the amount of sales
generated in the SMT market.
Item 8. Financial Statements and Supplementary Data
The Company's consolidated financial statements, together with the
report of the Company's independent public accountants, Arthur Andersen
LLP, are included in Item 14.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosures
None.
PART III
Items 10., Pursuant to General Instruction G (3), the information required by
11., 12., Item 10 - Directors and Executive Officers of the Company,
and 13. Item 11 - Executive Compensation,
Item 12 - Security Ownership of Certain Beneficial Owners and
Management, and
Item 13 - Certain Relationships and Related Transactions, except
that portion of Item 10 relating to executive officers of the
Company, which is set forth in Item 4A of this report, is hereby
incorporated by reference from the Company's definitive Proxy
Statement, to be filed with the Commission with respect to the
Annual Meeting of Shareholders to be held on January 16, 1997.
<TABLE>
<CAPTION>
PART IV
Item 14. Exhibits, Financial Statements, Schedules, and Reports on Form 8-K
<S> <C>
(a) (1) Financial Statements: Page #
The following consolidated financial statements of Research, ------
Incorporated and the Report of the Independent Public
Accountants thereon, are filed as part of this Form 10-K.
(i) Report of Independent Public Accountants 13
(ii) Consolidated Balance Sheets as of September 30, 1996 and
1995 14
(iii) Consolidated Statements of Operations and Consolidated
Statements of Stockholders' Equity for the years ended
September 30, 1996, 1995, and 1994 15, 16
(iv) Consolidated Statements of Cash Flows for the years ended
September 30, 1996, 1995, and 1994 17
(v) Notes to Consolidated Financial Statements 18-22
(2) Financial Statement Schedule
The following financial statement schedule is filed with this
report:
(i) Schedule II -Valuation and qualifying accounts 23
All schedules except those listed above are omitted because they
are not applicable or not required, or because the required
information is included in the financial statements or note
thereto.
(3) Exhibits Page #
------
(3.1) Articles of Incorporation - Incorporated by reference to
Exhibit (3.1) of the Company's Form 10-K for the period
ended September 30,1994
(3.2) Bylaws - Incorporated by reference to Exhibit (3.2) of the
Company's Form 10-K for the period ended September 30,1994
(4.1) Line of Credit Agreement between Norwest Bank Minnesota
N.A. and the Company dated October 28, 1996 24, 25
(10.1) 1981 Employee Incentive Stock Option Plan - Incorporated
by reference to registration statement on Form S-8, file
No. 2-75497 (filed May 27, 1988)
(10.2) 1991 Stock Plan - Incorporated by reference to
registration statement on Form S-8, file No. 33-75256
(filed February 14, 1994)
(10.4) Amendment to Employment Agreement between the Company and
Claude C. Johnson, made as of April 22, 1988 -
Incorporated by reference to Exhibit (10.4) of the
Company's Form 10-K for the period ended September 30,1994
(10.5) Amendment to Employment Agreement between the Company and
Gordon W. Sangster, made as of April 22, 1988 -
Incorporated by reference to Exhibit (10.5) of the
company's Form 10-K for the period ended September 30,1994
(21.1) Subsidiaries of the Company 26
(23.1) Consent of Arthur Andersen LLP 27
(27.0) Financial Data Schedule 28
(b) Reports on Form 8-K:
No reports on form 8-K were filed in the quarter ended September 30,
1996.
</TABLE>
SIGNATURES
Pursuant to the requirements of Section 13 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.
RESEARCH, INCORPORATED
By /s/ Claude C. Johnson
-----------------------------------------
Claude C. Johnson *, President, CEO, CFO,
and Director
Date: December 11, 1996
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the Company and in
the capacities and on the dates indicated:
Signature Title Date
/s/ J. R. Anderson Director December 11, 1996
- ------------------------------
James R. Anderson
/s/ K. G. Anderson Director December 11, 1996
- ------------------------------
Kenneth G. Anderson
/s/ E. L. Lundstrom Director December 11, 1996
- ------------------------------
Edward L. Lundstrom
/s/ G. E. Magnuson Director December 11, 1996
- ------------------------------
Gerald E. Magnuson
/s/ C. G. Schiefelbein Director December 11, 1996
- ------------------------------
Charles G. Schiefelbein
* Principal executive officer and financial officer
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Stockholders and the Board of Directors of Research, Incorporated:
We have audited the accompanying consolidated balance sheets of RESEARCH,
INCORPORATED (a Minnesota corporation) and Subsidiary as of September 30, 1996
and 1995, and the related consolidated statements of operations, stockholders'
equity and cash flows for each of the three years in the period ended September
30, 1996. These consolidated 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 Research, Incorporated and
Subsidiary as of September 30, 1996 and 1995, and the results of their
operations and their cash flows for each of the three years in the period ended
September 30, 1996 in conformity with generally accepted accounting principles.
Our audit was made for the purpose of forming an opinion on the basic financial
statements taken as a whole. The schedule listed as a part of Item 14 in this
Form 10-K is presented for purposes of complying with the Securities and
Exchange Commissions rules and is not part of the basic financial statements.
This schedule has been subjected to the auditing procedures applied in the audit
of the basic financial statements and, in our opinion, fairly state in all
material respects the financial data required to be set forth therein in
relation to the basic financial statements taken as a whole.
/s/ Arthur Andersen LLP
-----------------------
ARTHUR ANDERSEN LLP
Minneapolis, Minnesota,
October 25, 1996
<TABLE>
<CAPTION>
CONSOLIDATED BALANCE SHEETS
As of September 30
------------------------------
ASSETS 1996 1995
- ------------------------------------------------- ------------ ------------
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 1,841,147 $ 1,307,564
Accounts receivable, net of reserves of $150,000 2,366,814 4,147,907
Inventories 3,474,488 2,722,446
Prepayments, primarily deferred income taxes 471,310 415,109
------------ ------------
Total current assets 8,153,759 8,593,026
------------ ------------
PROPERTY AND EQUIPMENT, at cost:
Land and land improvements 212,852 212,852
Building 2,073,024 1,972,234
Machinery and equipment 3,863,381 3,841,923
Less accumulated depreciation (4,048,814) (4,151,031)
------------ ------------
Net property and equipment 2,100,443 1,875,978
------------ ------------
OTHER ASSETS 84,214 124,068
------------ ------------
Total assets $ 10,338,416 $ 10,593,072
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
- -------------------------------------------------
CURRENT LIABILITIES:
Accounts payable $ 1,277,805 $ 1,417,719
Accrued liabilities:
Salaries and benefits 314,040 505,436
Profit sharing contribution 160,000 268,000
Warranty reserve 250,000 150,000
Real estate taxes 125,000 215,000
Other 463,650 215,073
Federal and state income taxes 472,467 627,055
------------ ------------
Total current liabilities 3,062,962 3,398,283
------------ ------------
STOCKHOLDERS' EQUITY:
Common stock, $.50 par value, 5,000,000 shares authorized,
1,161,243 and 1,139,618 shares issued and outstanding
at September 30, 1996 and 1995, respectively 580,622 569,809
Additional paid-in capital 275,470 197,315
Foreign currency translation 17,816 8,953
Retained earnings 6,401,546 6,418,712
------------ ------------
Total stockholders' equity 7,275,454 7,194,789
------------ ------------
Total liabilities and stockholders' equity $ 10,338,416 $ 10,593,072
============ ============
THE ACCOMPANYING NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS ARE AN INTEGRAL
PART OF THESE CONSOLIDATED BALANCE SHEETS.
</TABLE>
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF OPERATIONS
For the Years Ended September 30 1996 1995 1994
- -------------------------------- ----------- ----------- -----------
<S> <C> <C> <C>
Net Sales $19,661,182 $20,922,505 $18,163,119
Cost of Sales 11,705,817 11,904,004 10,216,097
----------- ----------- -----------
Gross profit 7,955,365 9,018,501 7,947,022
----------- ----------- -----------
Expenses:
Selling 5,431,240 5,674,288 5,312,486
Research and development 1,735,204 1,681,779 1,309,146
General and administrative 700,460 759,385 663,872
----------- ----------- -----------
Total expenses 7,866,904 8,115,452 7,285,504
----------- ----------- -----------
Income From Operations 88,461 903,049 661,518
Gain on Sale of Product Line 344,400 -- --
Interest Income 24,969 49,060 63,741
----------- ----------- -----------
Income Before Income Tax Provision 457,830 952,109 725,259
Income Tax Provision 168,000 325,000 228,000
----------- ----------- -----------
Net Income $ 289,830 $ 627,109 $ 497,259
=========== =========== ===========
Net Income Per Common Share $ .24 $ .56 $ .44
=========== =========== ===========
Weighted Average Common Shares Outstanding 1,193,789 1,128,848 1,125,118
----------- ----------- -----------
THE ACCOMPANYING NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS ARE AN INTEGRAL
PART OF THESE CONSOLIDATED STATEMENTS.
</TABLE>
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Additional Foreign
Common Stock Paid-In Currency Retained
Shares Amount Capital Translation Earnings Total
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balances,
September 30, 1993 1,125,118 $ 562,559 $ 145,440 $ -- $ 5,790,449 $ 6,498,448
Foreign currency
translation -- -- -- 13,656 -- 13,656
Net income -- -- -- -- 497,259 497,259
Dividends -- -- -- -- (247,531) (247,531)
- ------------------------------------------------------------------------------------------------------------------------------------
Balances,
September 30, 1994 1,125,118 562,559 145,440 13,656 6,040,177 6,761,832
Options exercised 14,500 7,250 51,875 -- -- 59,125
Foreign currency
translation -- -- -- (4,703) -- (4,703)
Net income -- -- -- -- 627,109 627,109
Dividends -- -- -- -- (248,574) (248,574)
- ------------------------------------------------------------------------------------------------------------------------------------
Balances,
September 30, 1995 1,139,618 569,809 197,315 8,953 6,418,712 7,194,789
Options exercised 21,625 10,813 78,155 -- -- 88,968
Foreign currency
translation -- -- -- 8,863 -- 8,863
Net income -- -- -- -- 289,830 289,830
Dividends -- -- -- -- (306,996) (306,996)
- ------------------------------------------------------------------------------------------------------------------------------------
Balances,
September 30, 1996 1,161,243 $ 580,622 $ 275,470 $ 17,816 $ 6,401,546 $ 7,275,454
====================================================================================================================================
THE ACCOMPANYING NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS ARE AN INTEGRAL
PART OF THESE CONSOLIDATED STATEMENTS.
</TABLE>
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Years Ended September 30 1996 1995 1994
- --------------------------------------------------------- ----------- ----------- -----------
<S> <C> <C> <C>
Operating Activities:
Net income $ 289,830 $ 627,109 $ 497,259
Adjustments to reconcile net income to
net cash provided by (used in) operating activities:
Depreciation and amortization 463,429 433,376 386,761
Deferred income taxes -- (12,196) 57,732
Gain on sale of product line (344,400) -- --
Changes in current operating elements:
Accounts receivable, net 1,781,093 (150,491) (1,734,319)
Inventories (852,042) (125,214) (936,955)
Prepayments, primarily deferred income taxes (56,201) (104,099) (37,759)
Accounts payable and accrued liabilities (736,333) (87,208) 613,115
Federal and state income taxes (154,588) 179,643 23,154
----------- ----------- -----------
Net cash provided by (used in) operating activities 390,788 760,920 (1,131,012)
----------- ----------- -----------
Investing Activities:
Proceeds from sale of product line 1,000,000 -- --
Purchases of short-term investments -- -- (700,000)
Maturities of short-term investments -- 701,679 2,079,065
Property and equipment additions, net (650,352) (569,908) (477,379)
Purchase of net assets of business acquired -- -- (165,000)
Other 2,312 (5,326) (32,938)
----------- ----------- -----------
Net cash provided by investing activities 351,960 126,445 703,748
----------- ----------- -----------
Financing Activities:
Cash dividends paid (306,996) (248,574) (247,531)
Issuance of common stock 88,968 59,125 --
----------- ----------- -----------
Net cash used in financing activities (218,028) (189,449) (247,531)
----------- ----------- -----------
Foreign Currency Translation 8,863 (4,703) 13,656
----------- ----------- -----------
Cash and Cash Equivalents:
Net increase (decrease) in cash and cash equivalents 533,583 693,213 (661,139)
Beginning of year 1,307,564 614,351 1,275,490
----------- ----------- -----------
End of year $ 1,841,147 $ 1,307,564 $ 614,351
=========== =========== ===========
THE ACCOMPANYING NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS ARE AN INTEGRAL
PART OF THESE CONSOLIDATED STATEMENTS.
</TABLE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - The Company's significant
accounting policies not elsewhere set forth in the accompanying consolidated
financial statements are as follows:
PRINCIPLES OF CONSOLIDATION - The consolidated financial statements include
Research, Incorporated and its wholly owned Subsidiary. All significant
intercompany accounts and transactions have been eliminated in consolidation.
FOREIGN CURRENCY TRANSLATION - The assets and liabilities of the Company's
Subsidiary are translated into U.S. dollars using current exchange rates at the
end of the period. Statements of operations items are translated at average
exchange rates prevailing during the period.
CASH & CASH EQUIVALENTS - Cash equivalents represent money market investments
that have an original maturity of three months or less. Cash and cash
equivalents are recorded at cost, which approximates fair value.
ACCOUNTS RECEIVABLE - Accounts receivable consisted of the following components
at September 30:
1996 1995
- --------------------------------------------------------------------------------
Trade receivables, net $2,260,915 $3,449,375
Costs in excess of billings
on percentage-of-completion
contracts 105,899 698,532
- --------------------------------------------------------------------------------
Total $2,366,814 $4,147,907
================================================================================
INVENTORIES - Inventories are stated at the lower of first-in, first-out, cost
or market and include direct labor costs, materials and overhead. Inventories
consisted of the following components at September 30:
1996 1995
- --------------------------------------------------------------------------------
Manufactured subassemblies
and purchased parts $2,406,077 $2,104,382
Work in process 1,068,411 618,064
- --------------------------------------------------------------------------------
Total $3,474,488 $2,722,446
================================================================================
DEPRECIATION - Depreciation of property and equipment is computed principally
using accelerated methods for both financial and income tax reporting purposes.
Depreciation is charged to operations over the estimated useful lives of the
property and equipment as follows:
Years
- --------------------------------------------------------------------------------
Land improvements 20
Building 33
Machinery and equipment 5 to 10
- --------------------------------------------------------------------------------
REVENUE RECOGNITION - Sales and related cost of sales are recorded at the time
of shipment, except for system contracts which are recognized on a
percentage-of-completion basis. Revenues on such contracts are recognized as the
work progresses based on the estimated gross profit for each contract.
SIGNIFICANT CUSTOMER - The Company has one customer which accounted for 11% and
13% of net sales during 1996 and 1995, respectively.
WARRANTIES - The Company's products are generally under warranty against defects
in material and workmanship for a one-year period. Estimated warranty costs are
accrued in the same period as products are shipped.
INCOME TAXES - Deferred income tax assets or liabilities are recognized for the
differences between financial and income tax reporting bases of assets and
liabilities based on enacted tax rates and laws.
NET INCOME PER COMMON SHARE - Net income per common share is computed by
dividing net income by the weighted average number of common shares and common
share equivalents of outstanding employee stock options which are outstanding
during each period presented.
USE OF ESTIMATES - The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and reported amounts of revenues and expenses during the reporting
period. Ultimate results could differ from those estimates.
2
LINE OF CREDIT: For 1996, the Company had a $3,000,000 unsecured bank line of
credit which carried an interest rate equal to the bank's base (prime) rate with
no compensating balance requirements. Subsequent to September 30, 1996, the line
of credit has been renewed with similar terms. During 1996, 1995 and 1994, the
Company had no borrowings against the line of credit.
3
INCOME TAXES: The income tax provision consisted of the following:
1996 1995 1994
- ------------------------------------------------------------------------------
Current federal $201,000 $315,000 $163,000
Current state 2,000 27,000 15,000
Foreign (33,000) 3,000 (4,000)
- ------------------------------------------------------------------------------
Total 170,000 345,000 174,000
Deferred income taxes (2,000) (20,000) 54,000
- ------------------------------------------------------------------------------
Income tax provision $168,000 $325,000 $228,000
==============================================================================
A reconciliation of the statutory federal rate to the effective tax rate is as
follows:
1996 1995 1994
- ------------------------------------------------------------------------------
Statutory federal rate 34% 34% 34%
State taxes, net of federal
income tax provision - 2 1
Other, net 3 (2) (4)
- ------------------------------------------------------------------------------
Effective tax rate 37% 34% 31%
==============================================================================
Income taxes paid $356,000 $212,000 $143,000
==============================================================================
The Company has recorded the following net deferred taxes:
As of September 30 1996 1995
- --------------------------------------------------------------------
Current deferred taxes:
Gross assets $283,000 $203,000
Gross liabilities (1,000) (10,000)
- --------------------------------------------------------------------
Total current deferred taxes 282,000 193,000
- --------------------------------------------------------------------
Noncurrent deferred taxes:
Gross assets 25,000 115,000
Gross liabilities (76,000) (79,000)
- --------------------------------------------------------------------
Total noncurrent
deferred taxes (51,000) 36,000
- --------------------------------------------------------------------
Net deferred taxes $231,000 $229,000
====================================================================
The tax effect of significant temporary differences representing deferred tax
assets and liabilities is as follows:
As of September 30 1996 1995
- --------------------------------------------------------------------
Depreciation and amortization $(109,000) $(86,000)
Tax refunds -- 85,000
Inventory reserves 100,000 66,000
Accounts receivable reserves 51,000 51,000
Warranty reserves 85,000 51,000
Accruals and other, net 104,000 62,000
- --------------------------------------------------------------------
Net deferred taxes $231,000 $229,000
====================================================================
The Company did not record any valuation allowance against deferred tax assets
at September 30, 1996 or 1995.
4
STOCKHOLDERS' EQUITY: A total of 210,000 shares of common stock were reserved
for issuance to directors, officers and key employees on the exercise of options
granted pursuant to the 1991 Stock Option Plan. Information concerning the 1991
Stock Option Plan for 1996, 1995 and 1994 is as follows:
1996 1995 1994
- --------------------------------------------------------------------------------
Outstanding, beginning of year 112,500 119,500 135,000
Exercised (ranging from
$3.50 to $5.25) (21,625) (14,500) -
Granted (ranging from
$5.00 to $7.75) 28,500 23,500 8,500
Canceled or expired
(ranging from $3.50 to $7.75) (6,625) (16,000) (24,000)
- --------------------------------------------------------------------------------
Outstanding, end of year 112,750 112,500 119,500
================================================================================
Exercisable, end of year 61,000 57,250 53,125
- --------------------------------------------------------------------------------
Available for grant, end of year 77,125 99,000 113,500
- --------------------------------------------------------------------------------
The options under the above plan expire five years after the date of grant and
are exercisable at a rate of 25% per year on a cumulative basis, beginning one
year after the date of grant. At the end of fiscal 1996, the outstanding options
under the above plan had exercise prices ranging from $3.50 to $7.75.
5
PROFIT SHARING PLAN: The Company has a profit sharing retirement plan which
provides deferred compensation benefits for eligible employees. The annual
contribution to the plan is discretionary and is determined in accordance with
policies established by the Board of Directors. The Board of Directors
authorized contributions of $160,000, $268,000, and $188,000 for 1996, 1995 and
1994, respectively.
6
FOREIGN SALES: Export sales to customers in various foreign countries totaled
$6,976,000, $6,762,000 and $4,673,000 in 1996, 1995 and 1994, respectively.
7
ACQUISITION: In 1994, the Company acquired the net assets of Unifab Electronics,
a manufacturer of the Quantum product line in the United Kingdom, for $165,000.
This transaction was accounted for by the purchase method of accounting and,
accordingly, the results of operations have been included in the consolidated
financial statements from the date of acquisition. In a related event, the
Company established a subsidiary in the United Kingdom, Research Incorporation
Limited.
8
SALE OF PRODUCT LINE: On September 27, 1996, the Company sold its Dimension
product line, including associated equipment, for a total sales price of
$1,000,000. Total gain recognized on the sale was approximately $344,000 and is
shown as Gain on Sale of Product Line in the accompanying statement of
operations. An agreement was also signed with the buyer allowing the Company to
purchase the Dimension product on a discounted basis for a minimum period of
three years.
9
NEW ACCOUNTING PRONOUNCEMENT: The Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compension" (SFAS No. 123), which is effective for the Company's fiscal year
ended September 30, 1997. Statement No. 123 encourages, but does not require, a
fair value based method of accounting for employee stock options or similar
equity instruments. The Company believes the effect of the adoption of the new
standard will have no impact on the Company's consolidated results of operations
or financial position because the Company intends to continue to measure
compensation costs under Accounting Principles Board Opinion No. 25, "Accounting
for Stock Issued to Employees" and present pro forma disclosures of net income
and net income per share as if the fair value based method of accounting had
been applied.
10
SALE OF LAND: On October 4, 1996, the Company sold a parcel of undeveloped land.
The purchase price for the land totalled approximately $1,600,000 and was paid
in cash. This will result in a one-time gain of approximately 60 cents per share
in the first quarter of 1997.
11
QUARTERLY FINANCIAL DATA (UNAUDITED): Summarized quarterly financial data for
1996 and 1995 is as follows:
<TABLE>
<CAPTION>
1996 Quarterly Results
1st 2nd 3rd 4th 1996
(In thousands, except net income per share) Quarter Quarter Quarter Quarter Total
- -------------------------------------------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Consolidated Operations:
Net sales $ 4,380 $ 5,258 $ 5,793 $ 4,230 $19,661
Gross profit 1,804 2,129 2,294 1,728 7,955
Income before income taxes 47 57 201 153 458
Net Income $ 27 $ 39 $ 121 $ 103 $ 290
Earnings per Share:
Net Income per Share $ .02 $ .03 $ .10 $ .09 $ .24
Weighted average common shares outstanding 1,199 1,197 1,197 1,191 1,194
==================================================================================================================
1995 Quarterly Results
1st 2nd 3rd 4th 1995
(In thousands, except net income per share) Quarter Quarter Quarter Quarter Total
- -------------------------------------------- ------- ------- ------- ------- -------
Consolidated Operations:
Net sales $ 4,993 $ 4,584 $ 5,380 $ 5,966 $20,923
Gross profit 2,289 2,007 2,404 2,319 9,019
Income before income taxes 214 38 348 352 952
Net Income $ 132 $ 24 $ 233 $ 238 $ 627
Earnings per Share:
Net Income per Share $ .12 $ .02 $ .21 $ .21 $ .56
Weighted average common shares outstanding 1,126 1,126 1,129 1,136 1,129
==================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
RESEARCH, INCORPORATED
SCHEDULE II
VALUATION AND QUALIFYING ACCOUNTS
Balance, Balance,
Beginning End of
of Period Additions Deductions Period
--------- --------- ---------- ---------
<S> <C> <C> <C> <C>
Allowance for doubtful accounts (1):
Year ended September 30, 1994 $ 150,000 $ 172 $ (172) $ 150,000
Year ended September 30, 1995 150,000 10,305 (10,305) 150,000
Year ended September 30, 1996 150,000 5,480 (5,480) 150,000
Reserve for product warranties:
Year ended September 30, 1994 $ 150,000 $ 261,663 $(261,663) $ 150,000
Year ended September 30, 1995 150,000 401,547 (401,547) 150,000
Year ended September 30, 1996 150,000 680,452 (580,452) 250,000
Reserve for inventory obsolescence:
Year ended September 30, 1994 $ 327,000 $ 90,000 $(247,156) $ 169,844
Year ended September 30, 1995 169,844 146,737 (122,386) 194,195
Year ended September 30, 1996 194,195 216,328 (117,523) 293,000
(1) Deductions represent amounts determined to be uncollectible and charged
against the reserve net of collections on accounts previously written off.
</TABLE>
Exhibit 4.1
October 28, 1996
Mr. Claude Johnson, President
Research, Incorporated
6425 Flying Cloud Drive
Eden Prairie, MN 55344
Dear Claude:
We are pleased to inform you that Norwest Bank Minnesota, National Association
(the "Bank") has approved an unsecured, revolving, Conditional Line of Credit
(the "Line") for Research, Incorporated (the "Borrower") in an amount not to
exceed $3,000,000.00, inclusive of all outstanding letters of credit. You may
prepay and re-borrow under the Line as long as no borrowing causes that dollar
limit to be exceeded.
The Line, and any future advance(s) thereunder, is subject to the terms and
conditions outlined below:
-Credit Advances. Advances under the Line will be at the Bank's sole
discretion, and nothing herein should be interpreted as an obligation to
make any one or more loans.
-The Note. Your obligation to repay all loans made by us under the Line will
be evidenced by a single promissory note ("the Note") due upon the earlier
of demand or 11/30/97, the maturity date. Prior to any advance under the
Line, the Bank must have received the executed Note from Borrower.
-Interest Rate. The Note will bear interest (computed on the basis of actual
days elapsed and a 360-day year) on the principal balance outstanding.
Interest will accrue from the date of the initial advance until the Note is
paid in full at a floating rate equal to the Bank's Base Rate. The rate of
interest shall be adjusted with each change in the Base Rate.
-Compensating Balances. The Borrower is not required to maintain a
compensating balance.
-Adverse Conditions. The Line may be terminated at any time by the Bank by
written notice to the Borrower, and shall terminate automatically, without
notice, if materially adverse conditions develop at any time, whether before
or after acceptance of this letter. If the Line is terminated, each and
every note evidencing loans, if any, made under the Line will be immediately
due and payable.
-Default. The Note contains events of default and remedies available to the
Bank, all of which are incorporated herein by reference. Additionally, the
breach of any covenant, term or agreement contained in this letter
agreement, shall also constitute an event of default hereunder and under the
Note. Upon the occurrence of any one or more events of default, the Bank may
(i) terminate the Line, (ii) accelerate the indebtedness evidenced by the
Note, and (iii) exercise any other rights or remedies available to it at
law, in equity or by agreement.
The following outlines the mutual understanding and agreements between the Bank
and the Borrower:
1. So long as the Line is in effect or any indebtedness remains outstanding
under the Note, the Borrower will:
- Maintain all depository accounts at the Bank.
- Maintain a tangible net worth of not less than $6,500,000 at each
quarter-end and at the Borrower's fiscal year-end.
- Maintain a debt-to-tangible net worth ratio not greater than 1.0:1.0 at
each quarter-end and at the Borrower's fiscal year end.
- Achieve positive net earnings annually.
- Maintain a current ratio of not less than 1.5:1.0 at each quarter-end and
at the Borrower's fiscal year-end.
2. So long as the Line is in effect or any indebtedness remains outstanding
under the Note, and without the written consent of the Bank, the Borrower
will not:
- Consolidate with, or merge into, any other corporation, or permit any
other corporation to merge into it; nor will it convey, lease, or sell all
or a material portion of its assets or business, except in the ordinary
course of business; nor will it lease, purchase, or acquire all or a
material portion of the assets or business of any other corporation or
entity.
3. So long as the Line is in effect or any indebtedness remains outstanding
under the Note, the Borrower will provide financial information to the Bank
as described below:
- Annual audited financial statement and 10K report within 90 days of the
Borrower's fiscal year end;
- Quarterly 10Q reports within 45 days of each quarter's end;
- Projected balance sheet, income statement, and statement of cash flow
for the upcoming fiscal year within 90 days of the most recent year end;
- Periodic updates of business conditions; and
- Any other information that the Bank may reasonably request.
If the foregoing is agreeable to you, please sign the attached copy of this
letter and return it to me at your earliest convenience. If you have any
questions regarding the letter, please call me at 830-8933. I greatly appreciate
your business, and thank you for banking with Norwest.
Sincerely,
/s/ Douglas L. Van Metre
- -------------------------
Douglas L. Van Metre
Vice President
Accepted this ____31______ day of _____October_____, 1996.
Research, Incorporated
By: /s/ Claude C. Johnson
--------------------------
Its: Claude C. Johnson
President/CEO/CFO
Exhibit 21.1
SUBSIDIARY OF THE COMPANY
Research Incorporation Limited is incorporated in the United Kingdom as a
Private Limited Company. Research International Inc. is incorporated in
Barbados, West Indies as a Foreign Sales Corporation.
Exhibit 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation of our
report incorporated by reference in this Form 10-K, into the Company's
previously filed Registration Statement File No. 33-21699, File No. 33-45386,
and File No. 33-75256.
/s/ Arthur Andersen LLP
------------------------
ARTHUR ANDERSEN LLP
Minneapolis, Minnesota,
December 11, 1996
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
COMPANY'S CONSOLIDATED FINANCIAL STATEMENTS INCLUDED IN THE 10-K FOR THE YEAR
ENDED SEPTEMBER 30, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
CONSOLIDATED FINANCIAL STATEMENTS
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-END> SEP-30-1996
<CASH> 1,841
<SECURITIES> 0
<RECEIVABLES> 2,517
<ALLOWANCES> 150
<INVENTORY> 3,474
<CURRENT-ASSETS> 8,154
<PP&E> 6,149
<DEPRECIATION> 4,049
<TOTAL-ASSETS> 10,338
<CURRENT-LIABILITIES> 3,063
<BONDS> 0
0
0
<COMMON> 581
<OTHER-SE> 6,695
<TOTAL-LIABILITY-AND-EQUITY> 10,338
<SALES> 19,661
<TOTAL-REVENUES> 19,661
<CGS> 11,706
<TOTAL-COSTS> 11,706
<OTHER-EXPENSES> 7,867
<LOSS-PROVISION> 5
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 458
<INCOME-TAX> 168
<INCOME-CONTINUING> 290
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 290
<EPS-PRIMARY> .24
<EPS-DILUTED> .24
</TABLE>
