<PAGE>
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 Fiscal Year Ended Commission File Number
December 31, 1997 0-4671
ISOMET CORPORATION
------------------
State of Incorporation IRS Employer Identification
New Jersey No. 22-1591074
Address of Principal Executive Offices
5263 Port Royal Road
Springfield, Virginia 22151
Company's Telephone Number: (703) 321-8301
Securities Registered Pursuant to Section 12(b) of the Act:
None
Securities Registered Pursuant to Section 12(g) of the Act:
Common Stock Par Value $1.00
1,909,090 Shares Were Outstanding on January 31, 1998
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 preceeding 12 months (or for such shorter period the Company was required to
file such report(s)), and (2) has been subject to such filing requirements for
the past ninety (90) days. Yes X No
----- -----
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of regulation SB is not contained herein and will not be contained, to the best
of registrant 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. (X)
On January 31, 1998 the approximate aggregate market value of the voting stock
held by non-affiliates of the Company was $6,019,000.
<PAGE>
DOCUMENTS INCORPORATED HEREIN BY REFERENCE
------------------------------------------
Portions of the Company's Annual Report to Stockholders for fiscal year
1997 are incorporated by reference into Part II of this Form 10-KSB and portions
of the Company's definitive proxy statement for the annual meeting of
stockholders to be held on May 28, 1998, are incorporated by reference into Part
III of this Form 10-KSB.
-2-
<PAGE>
PART I
ITEM 1 DESCRIPTION OF BUSINESS
(a) General Development of Business
-------------------------------
Isomet Corporation (hereinafter referred to as "Isomet" or "Company") was
incorporated in 1956. The Company is a manufacturer of laser control devices,
systems and equipment for color image reproduction applications.
(b) Financial Information About Industry Segments
---------------------------------------------
See Note 10 (Segment Information) of the Notes to the Consolidated
Financial Statements.
(c) Narrative Description of Business/Business Done and Intended
------------------------------------------------------------
to be Done
----------
(1) Principal Products and Services
(a) Principal Products
Isomet's acousto-optic line is comprised of laser control devices and
systems for applications that make use of lasers to process or communicate
information through various forms of recorded images. Acousto-optics is the
interaction between light and sound within a crystalline material that can be
used to manipulate laser light for practical purposes. Acousto-optic technology
is an essential element of image processing systems such as laser printers,
laser film recorders phototypesetters and laser-based inspection systems.
Isomet's graphic arts systems product line consists of high resolution
digital color scanners, laser film recorders, laser plotters and specialized
interface software and electronics packages.
Isomet has one operating overseas subsidiary. Isomet UK, Ltd., in Wales
UK, markets and services graphic arts equipment and laser control devices in
Europe. Through it's subsidiary and a network of sales representatives, the
Company conducts business in most industrially developed countries.
-3-
<PAGE>
The following table shows for each of the last three fiscal years the
approximate amount of total revenue attributable to the Company's commercial
product lines and Government contracts:
<TABLE>
<CAPTION>
Revenue - Sales 1997 1996 1995
- --------------------------------- ---------- ---------- ----------
<S> <C> <C> <C>
Acousto-Optic Laser Components
and Graphic Arts Equipment $8,622,544 $5,754,818 $4,725,386
Government Agencies 10,075 42,970 63,575
---------- ---------- ----------
Total: $8,632,619 $5,797,788 $4,788,961
</TABLE>
(b) Method of Distribution
----------------------
The Company distributes its products domestically through its own salesmen
and value-added resellers and to foreign customers primarily through independent
agents or through its foreign subsidiary.
(2) New Products
------------
Product enhancement effort during 1997 was directed primarily to hardware
and software upgrades for existing products and new acousto-optic device
designs.
(3) Source and Availability of Raw Materials
----------------------------------------
Precious metals and various chemicals are raw materials essential to
various phases of the Company's business. Precious metals and chemicals are
readily available and are obtained from domestic commercial suppliers, such as
Johnson Matthey and AAA Molybdenum.
(4) Patents, Trademarks, Licenses, Franchises and Concessions
---------------------------------------------------------
For its acousto-optic component product line, the Company holds several
patents; none of which materially affect its present business. The Company
protects many of its crystal growing processes and acousto-optic device
manufacturing processes as trade secrets; they are important to the Company's
competitive market position.
In 1989, the Company entered into a license agreement with Patlex
Corporation covering the use of certain lasers in its systems and sub-systems
product line. The Company's obligation under this agreement terminated in 1996
due to the expiration of applicable patents.
-4-
<PAGE>
(5) Seasonal Operations
-------------------
The Company's business is not seasonal.
(6) Practices Re Certain Working Capital Items
------------------------------------------
None
(7) Customers
---------
In 1997, of $8,632,619 in total sales, one customer accounted for
$3,083,799 or approximately 36% and another customer accounted for $1,415,206 or
16%. In 1996, of $5,797,788 in total sales, one customer accounted for $878,400
or approximately 15%.
(8) Backlog
-------
Backlog of orders believed to be firm was $3,451,000 as of December 31,
1997 and $4,549,000 as of December 31, 1996. It is expected that all of the
backlog orders will be filled during fiscal years 1998 and 1999.
(9) Description of Material Business Subject to Renegotiation or
------------------------------------------------------------
Termination
- -----------
The Company has no material business subject to renegotiation or
termination.
(10) Competitive Conditions and Competitive Position
-----------------------------------------------
To its knowledge, the Company competes principally against two U.S.
companies and three foreign companies, two of which are substantially larger
than the Company in the manufacture and commercial sales of acousto-optic laser
components and sub-systems. No single company dominates the market in the
Company's product line. The Company competes with these companies on the basis
of price and product performance. The Company is well known and has an
established position in the market for these products.
For the graphic arts pre-press equipment, the Company competes principally
against four foreign companies and two domestic companies, four of which are
substantially larger than the Company. No single company dominates the market
for sales of this equipment. The Company has an established position in the
market for these products.
-5-
<PAGE>
(11) Research and Development
------------------------
The following amounts were expended for Company sponsored research and
development for the fiscal years indicated:
1997 $ -0-
1996 $ 37,736
1995 $ 60,846
(12) Compliance with Environmental Regulations
-----------------------------------------
The Company's business is not materially affected by federal, state or
local laws regulating the discharge of materials into the environment or
otherwise relating to the protection of the environment.
(13) Employees
---------
On December 31, 1997 the Company employed fifty (50) full-time employees,
of whom five (5) were employed by the Company's foreign subsidiary.
(d) Financial Information About Foreign and Domestic Operations and
---------------------------------------------------------------
Export Sales
------------
See Note 10 (Segment Information) of the Notes to the Consolidated
Financial Statements.
ITEM II PROPERTIES
The Company leases 19,724 square feet at 5263 Port Royal Road, Springfield,
Virginia for corporate offices, manufacturing facilities and engineering
laboratories at an annual rental of $186,672, plus adjustments for increases or
decreases in real estates taxes and in the cost-of-living index. This lease
expires on August 31, 1998 and provides for two successive three year renewal
periods at the same terms and conditions as the present lease. Management
believes that the facilities are adequate for it's present level of business.
In the United Kingdom, the Company leases 3,113 square feet for acousto-
optic products and scanner marketing and service activities. The annual rental
amount is $18,450. The lease expires in April, 2000 and is renewable.
-6-
<PAGE>
ITEM III LEGAL PROCEEDINGS
There are no material legal proceedings pending against the Company.
ITEM IV SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted to a vote of the security holders in the
fourth quarter.
PART II
ITEM V MARKET FOR THE COMPANY'S COMMON STOCK AND RELATED
SECURITY HOLDER MATTERS
Common stock market prices, dividends and related security holder matters
set forth in the Company's 1997 Annual Report to stockholders are hereby
incorporated by reference.
ITEM VI SELECTED FINANCIAL DATA
Selected Financial Data set forth by the Company's 1997 Annual Report to
stockholders is hereby incorporated by reference.
ITEM VII MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Management's Discussion and Analysis of Financial Condition and Results of
Operations set forth in the Company's 1997 Annual Report to stockholders is
hereby incorporated by reference.
ITEM VIII FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
See pages F-1 through F-22 of this Annual Report on Form 10-KSB.
ITEM IX DISAGREEMENT IN ACCOUNTING AND FINANCIAL DISCLOSURE
The Company has not had any disagreements on accounting or financial
disclosure with it's accountants required to be reported hereunder.
-7-
<PAGE>
PART III
ITEM X DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY
The information called for by this Item is incorporated by reference from
the Company's definitive proxy statement for the 1998 Annual Meeting of
stockholders.
ITEM XI MANAGEMENT/RENUMERATION
The information called for by this Item is incorporated by reference from
the Company's definitive proxy statement for the 1998 Annual Meeting of
stockholders.
ITEM X11 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
The information called for by this Item is incorporated by reference from
the Company's definitive proxy statement for the 1998 Annual Meeting of
stockholders.
ITEM XIII CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information called for by this Item is incorporated by reference from
the Company's definitive proxy statement for the 1998 Annual Meeting of
stockholders.
PART IV
ITEM XIV EXHIBITS, FINANCIAL STATEMENTS, SCHEDULES AND REPORTS
ON FORM 8-K
(1) Financial Statements
--------------------
A Table of Contents to the Financial Statements appears on page F-1.
(2) Exhibits
--------
The exhibits, if any, filed with this report are listed on the Index
to Exhibits on page E-1.
(3) Reports on Form 8-K
-------------------
No reports on Form 8-K were filed during the fourth quarter of the
year ended December 31, 1997.
-8-
<PAGE>
SIGNATURES
Pursuant to the requirement of The Securities and Exchange Act of 1934, the
Registrant has duly caused this Annual Report to be signed on it's behalf by the
undersigned thereunto duly authorized.
_________________________
ISOMET CORPORATION
(Registrant)
Date: March 27, 1998 By: /S/ Jerry W. Rayburn
------------------- ----------------------
Jerry W. Rayburn
Executive Vice President, Finance
and Treasurer and Director
Pursuant to the requirements of the Securities and Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant and in the capacities indicated on this 27th day of March 1998.
<TABLE>
<CAPTION>
/S/ Henry Zenzie /S/ Leon Bademian /S/ Lee R. Marks
- ------------------- ------------------ -----------------
<S> <C> <C>
Henry Zenzie Leon Bademian Lee R. Marks
Director Director Director
</TABLE>
-9-
<PAGE>
INDEX TO EXHIBITS
*3.1 Certificate of Incorporation of Registrant filed May 9, 1956.
*3.2 Certificate of Amendment of Certificate of Incorporation of Registrant
filed April 8, 1959.
*3.3 Certificate of Amendment of Certificate of Incorporation of Registrant
filed February 8, 1961.
*3.4 Certificate of Amendment of Certificate of Incorporation of Registrant
filed June 15, 1966.
*3.5 Certificate of Amendment of Certificate of Incorporation of Registrant
filed December 28, 1967.
*3.6 Certificate of Amendment of Certificate of Incorporation of Registrant
filed April 7, 1969.
*3.7 Certificate of Incorporation of Registrant (Restated) filed April 7, 1969.
**3.8 Certificate of Amendment to the Certificate of Incorporation of
Registrant (Restated) filed June 22, 1988.
*3.9 By-laws of Registrant.
***3.10 Subsidiaries of the Company.
27 Financial Data Schedule
* Incorporated by reference to Exhibits to the Registrant Report on
Form 10-K for the year ended December 31, 1987.
** Incorporated by reference to Exhibits to the Registrant Report on Form 10-K
for the year ended December 31, 1988.
*** Incorporated by reference to Exhibits to the Registrant Report on Form 10-K
for the year ended December 31, 1990.
-10-
<PAGE>
ISOMET CORPORATION AND SUBSIDIARIES
TABLE OF CONTENTS
<TABLE>
<CAPTION>
TITLE PAGE
----- ----
<S> <C>
INDEPENDENT AUDITOR'S REPORT............................ F-2
AUDITED FINANCIAL STATEMENTS
CONSOLIDATED BALANCE SHEETS......................... F-3 - 4
CONSOLIDATED STATEMENTS OF INCOME...................... F-5
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME........ F-6
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY........ F-7
CONSOLIDATED STATEMENTS OF CASH FLOWS.............. F-8 - 9
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS....... F-10 - 22
</TABLE>
F-1
<PAGE>
Independent Auditor's Report
----------------------------
To the Stockholders and Board of Directors
ISOMET CORPORATION
Springfield, Virginia
We have audited the accompanying Consolidated Balance Sheets of ISOMET
CORPORATION AND SUBSIDIARIES as of December 31, 1997 and 1996, and the related
Consolidated Statements of Income, Comprehensive Income, Stockholders' Equity
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 consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of ISOMET
CORPORATION AND SUBSIDIARIES as of December 31, 1997 and 1996, and the results
of their operations and their cash flows for the years then ended in conformity
with generally accepted accounting principles.
ARONSON, FETRIDGE & WEIGLE
Rockville, Maryland
March 6, 1998
F-2
<PAGE>
ISOMET CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1997 AND 1996
ASSETS
<TABLE>
<CAPTION>
1997 1996
------------ ------------
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 1,534,380 $ 200,902
Accounts and notes receivable (Note 5)
Trade 1,487,796 1,478,776
Other 36,200 38,567
Precious metals 186,283 199,126
Inventories (Notes 3 and 5) 3,381,171 3,729,694
Prepaid expenses and other 43,464 24,601
Deferred income tax asset, net (Note 7) 189,566 161,487
----------- -----------
Total current assets 6,858,860 5,833,153
----------- -----------
PROPERTY AND EQUIPMENT, AT COST (NOTES 4 AND 5) 2,541,334 2,561,271
Accumulated depreciation and amortization (2,263,966) (2,245,437)
----------- -----------
Net property and equipment 277,368 315,834
----------- -----------
OTHER ASSETS
Notes receivable - officers (Note 2) 45,000 45,000
Deposits and other 7,357 7,357
----------- -----------
Total other assets 52,357 52,357
----------- -----------
TOTAL ASSETS $ 7,188,585 $ 6,201,344
=========== ===========
</TABLE>
Refer to Notes to Consolidated Financial Statements and accompanying Independent
Auditor's Report.
F-3
<PAGE>
ISOMET CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1997 AND 1996
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
1997 1996
------------ ------------
<S> <C> <C>
CURRENT LIABILITIES
Notes payable (Note 5) $ 364,336 $ 324,450
Accounts payable 316,422 678,063
Accrued liabilities (Note 6) 218,231 273,719
Income taxes payable 686,958 5,880
Deferred revenue 10,000 456,000
----------- -----------
Total current liabilities 1,595,947 1,738,112
----------- -----------
LONG-TERM LIABILITIES
Deferred rent payable 4,378 10,947
Notes payable, net of current portion (Note 5) 633,121 864,716
----------- -----------
Total long-term liabilities 637,499 875,663
----------- -----------
Total liabilities 2,233,446 2,613,775
----------- -----------
COMMITMENTS AND CONTINGENCIES (NOTE 8)
STOCKHOLDERS' EQUITY (NOTE 9)
Common stock, par value $1 per share; 2,500,000 shares authorized,
1,909,090 and 1,905,590 shares issued and outstanding in 1997 and
1996, respectively 1,909,090 1,905,590
Capital contributed in excess of par value 4,223,003 4,221,183
Accumulated deficit (1,169,991) (2,500,659)
Accumulated other comprehensive income:
Unamortized deferred compensation from stock options (32,500) (65,266)
Foreign currency translation adjustment 25,537 26,721
----------- -----------
Total stockholders' equity 4,955,139 3,587,569
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 7,188,585 $ 6,201,344
=========== ===========
</TABLE>
Refer to Notes to Consolidated Financial Statements and accompanying Independent
Auditor's Report.
F-4
<PAGE>
ISOMET CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
1997 1996
------------ ------------
<S> <C> <C>
REVENUE
Sales $8,632,619 $5,797,788
Interest income and other 20,410 6,257
---------- ----------
Total revenue 8,653,029 5,804,045
---------- ----------
EXPENSES (NOTES 4, 8 AND 11)
Cost of sales 5,272,730 3,731,674
Selling expenses 302,192 323,153
General and administrative 965,486 942,274
Product development - 37,736
Interest expense 118,726 151,815
---------- ----------
Total expenses 6,659,134 5,186,652
---------- ----------
INCOME BEFORE INCOME TAXES AND MINORITY INTEREST 1,993,895 617,393
INCOME TAX (EXPENSE) BENEFIT (NOTE 7) (663,227) 68,135
---------- ----------
INCOME BEFORE MINORITY INTEREST 1,330,668 685,528
MINORITY INTEREST IN EARNINGS OF CONSOLIDATED SUBSIDIARY - (3,809)
----------- ----------
NET INCOME $1,330,668 $ 681,719
========== ==========
BASIC NET INCOME PER SHARE (NOTE 12)
Weighted average number shares of common stock outstanding 1,906,757 1,905,590
========== ==========
Basic net income per share $ .70 $ .36
========== ==========
DILUTED INCOME PER SHARE (NOTE 12)
Weighted average number of shares of common stock and common stock equivalents outstanding 1,971,309 1,948,529
========== ==========
Diluted net income per share $ .68 $ .35
========== ==========
</TABLE>
Refer to Notes to Consolidated Financial Statements and accompanying Independent
Auditor's Report.
F-5
<PAGE>
ISOMET CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
1997 1996
------------ ----------
<S> <C> <C>
NET INCOME $1,330,668 $681,719
---------- --------
OTHER COMPREHENSIVE INCOME
Amortization of deferred compensation from stock options 32,766 36,220
Foreign currency translation adjustment (1,184) (31,387)
---------- --------
Other comprehensive income 31,502 4,833
---------- --------
COMPREHENSIVE INCOME $1,362,170 $686,552
========== ========
</TABLE>
Refer to Notes to Consolidated Financial Statements and accompanying Independent
Auditor's Report.
F-6
<PAGE>
ISOMET CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
1997 1996
------------ ------------
<S> <C> <C>
COMMON STOCK
Shares issued and outstanding, beginning of year 1,905,590 1,905,590
Shares issued - exercise of incentive stock options 3,500 -
----------- -----------
Shares issued and outstanding, end of year 1,909,090 1,905,590
=========== ===========
Amount issued and outstanding at $1 par value, beginning of year $ 1,905,590 $ 1,905,590
Amount issued - exercise of incentive stock options 3,500 -
----------- -----------
Amount issued and outstanding at $1 par value, end of year 1,909,090 1,905,590
----------- -----------
CAPITAL CONTRIBUTED IN EXCESS OF PAR VALUE
Balance, beginning of year 4,221,183 4,221,183
Capital contributed - exercise of incentive stock options 1,820 -
----------- -----------
Balance, end of year 4,223,003 4,221,183
----------- -----------
ACCUMULATED DEFICIT
Balance, beginning of year (2,500,659) (3,182,378)
Net income 1,330,668 681,719
----------- -----------
Balance, end of year (1,169,991) (2,500,659)
----------- -----------
UNAMORTIZED DEFERRED COMPENSATION FROM STOCK OPTIONS (NOTE 9)
Balance, beginning of year (65,266) (101,486)
Amortization of deferred compensation 32,766 36,220
----------- -----------
Balance, end of year (32,500) (65,266)
----------- -----------
FOREIGN CURRENCY TRANSLATION ADJUSTMENT
Balance, beginning of year 26,721 58,108
Foreign currency translation adjustment (1,184) (31,387)
----------- -----------
Balance, end of year 25,537 26,721
----------- -----------
TOTAL STOCKHOLDERS' EQUITY $ 4,955,139 $ 3,587,569
=========== ===========
</TABLE>
Refer to Notes to Consolidated Financial Statements and accompanying Independent
Auditor's Report.
F-7
<PAGE>
ISOMET CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
1997 1996
------------ ----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $1,330,668 $ 681,719
Adjustments to reconcile net income to net cash provided by operating activities
Depreciation and amortization 92,933 124,334
Bad debt on note receivable - 30,641
Loss on disposal of property and equipment 3,123 -
Minority interest in earnings of subsidiary - (3,809)
Amortization of deferred compensation 32,766 36,220
(Increase) decrease in:
Accounts, notes and other receivables (6,653) (645,154)
Precious metals 12,843 (612)
Inventories 348,523 (480,268)
Prepaid expenses and other assets (18,863) 16,573
Deferred income tax asset (28,079) (74,015)
Increase (decrease) in
Accounts payable (361,641) 375,246
Accrued liabilities (55,488) (37,842)
Income taxes payable 681,078 5,880
Deferred revenue (446,000) 456,000
Deferred rent payable (6,569) (6,570)
---------- ---------
Net cash provided by operating activities 1,578,641 478,343
---------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property and equipment (57,590) (66,492)
---------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Repayments of debt (242,566) (265,103)
Proceeds from notes payable 50,857 -
Proceeds from exercise of incentive stock options 5,320 -
---------- ---------
Net cash used in financing activities (186,389) (265,103)
---------- ---------
Effect of exchange rate changes on cash (1,184) (31,387)
---------- ---------
NET INCREASE IN CASH AND CASH EQUIVALENTS 1,333,478 115,361
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 200,902 85,541
---------- ---------
CASH AND CASH EQUIVALENTS, END OF YEAR $1,534,380 $ 200,902
========== =========
</TABLE>
Refer to Notes to Consolidated Financial Statements and accompanying Independent
Auditor's Report.
F-8
<PAGE>
ISOMET CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
1997 1996
--------- ---------
<S> <C> <C>
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid for interest $118,726 $151,815
======== ========
Cash paid for income taxes $ 10,228 $ -
======== ========
</TABLE>
Refer to Notes to Consolidated Financial Statements and accompanying Independent
Auditor's Report.
F-9
<PAGE>
ISOMET CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997 AND 1996
NOTE 1 - ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
(A) Organization
Isomet Corporation and its Subsidiaries (the Company) produce and sell laser
equipment, systems and laser accessory components for color image reproduction
applications. The Company also performs sponsored research and development in
the general field of laser technology.
(B) Basis of consolidation
The Company has a wholly-owned subsidiary in Barbados which has elected to be
a Foreign Sales Corporation, and has wholly-owned and majority-owned
subsidiaries in the United Kingdom. The consolidated financial statements
include the accounts of Isomet and these subsidiaries. All material
intercompany accounts and transactions have been eliminated in consolidation.
(C) Revenue recognition
The Company's revenue arising from short-term government and commercial
fixed-price contracts and orders is recorded when shipped.
(D) Inventories
Inventories of parts are stated at cost determined on a first-in, first-out
basis, which does not exceed market. Work-in-process and finished goods are
stated at the lower of standard costs (which approximate average costs) or
market.
(E) Property and equipment
Depreciation and amortization of property and equipment is recorded using the
straight-line method over estimated useful lives as follows:
<TABLE>
<CAPTION>
YEARS
-----------------------
<S> <C>
Plant equipment, including leased equipment under capital
leases 5-15
Furniture 5-10
Transportation equipment 3-5
Leasehold improvements Remaining term of lease
</TABLE>
F-10
<PAGE>
ISOMET CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997 AND 1996
NOTE 1 - ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(F) Foreign currency translation
The assets and liabilities of the Company's foreign operations are translated
at rates of exchange in effect at year end, and revenue, expenses, gains and
losses are translated at the average rates of exchange for the year. Gains and
losses resulting from translation are accumulated as a separate component of
stockholders' equity until the foreign entity is sold or liquidated.
(G) Income per share of common stock
In February 1997, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards No. 128, Earnings per Share (SFAS
------------------
No. 128). This statement establishes standards for computing and presenting
earnings per share. In accordance with this statement, basic net income per
share of common stock has been computed on the weighted average number of shares
of common stock outstanding during the period. Diluted net income per share of
common stock has been computed on the weighted average number of shares of
common stock and common stock equivalents outstanding during the year. The
diluted net income per share in 1997 and 1996 includes stock options as common
stock equivalents.
The Company adopted this statement for the year ended December 31, 1997. The
net income per share information for the year ended December 31, 1996 has been
restated for comparative purposes.
(H) Statements of cash flows
The statements of cash flows are prepared on the basis of cash on hand and in
banks which is subject to withdrawal on demand and items considered to be cash
equivalents. For purposes of the statement of cash flows, the Company considers
all highly liquid instruments purchased with a maturity of three months or less
to be cash equivalents. At times during the year the Company has amounts on
deposit with financial institutions that may exceed federally insured limits.
The Company does not believe that this results in any significant credit risk.
(I) Fair value of financial instruments
The fair market values of the financial instruments included in the
consolidated financial statements approximate their carrying value.
F-11
<PAGE>
ISOMET CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997 AND 1996
NOTE 1 - ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(J) Financial statement 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 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 those estimates.
(K) Comprehensive income
In June 1997, the FASB issued SFAS No. 130, Reporting Comprehensive Income.
------------------------------
This statement establishes standards for the reporting and display of
comprehensive income and its components in the financial statements. In
accordance with the provisions of this statement, the Company has included a
separate Consolidated Statement of Comprehensive Income in the accompanying
financial statements. Comprehensive Income for the year ended December 31,
1996, has been presented for comparative purposes.
NOTE 2 - NOTES RECEIVABLE - OFFICERS
The Company holds unsecured notes receivable from certain officers of the
Company in the amount of $45,000, bearing interest at 6%. The notes are
classified as non-current since, historically, management has not required
repayment within the next year.
NOTE 3 - INVENTORIES
Inventories are summarized as follows:
<TABLE>
<CAPTION>
1997 1996
----------- -----------
<S> <C> <C>
Parts $ 684,080 $1,174,808
Work-in-process 2,226,354 2,082,548
Finished goods 470,737 472,338
---------- ----------
Total $3,381,171 $3,729,694
========== ==========
</TABLE>
F-12
<PAGE>
ISOMET CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997 AND 1996
NOTE 4 - PROPERTY AND EQUIPMENT
The following is a summary of property and equipment
<TABLE>
<CAPTION>
1997 1996
------------------------- -------------------------
Accumulated Accumulated
Depreciation Depreciation
and and
Cost Amortization Cost Amortization
----------- ------------ ----------- ------------
<S> <C> <C> <C> <C>
Plant equipment $2,038,728 $1,827,731 $2,047,599 $1,809,288
Furniture 266,005 224,160 262,688 207,066
Transportation equipment 44,062 21,142 39,887 25,022
Leasehold improvements 192,539 190,933 193,484 189,584
Leased equipment under capital lease - - 17,613 14,477
---------- ---------- ---------- ----------
$2,541,334 $2,263,966 $2,561,271 $2,245,437
========== ========== ========== ==========
</TABLE>
Depreciation and amortization of property and equipment charged to
operations amounted to $92,933 and $124,334 in 1997 and 1996, respectively.
NOTE 5 - NOTES PAYABLE
Notes payable consist of:
<TABLE>
<CAPTION>
1997 1996
--------- ----------
<S> <C> <C>
NationsBank - Revolving Credit Facility, with interest
payable monthly at the Bank's prime plus 2%. The rate
in effect on December 31, 1997 was 10.5%. The loan is
due on April 1, 1998, and is payable in monthly
installments of $12,000 plus interest. The collateral
for this loan is a blanket lien on all assets. $641,604 $786,000
NationsBank - Loan with interest due at the Bank's prime
plus 2%. The rate at December 31, 1997 was 10.5%. The
loan is due on April 1, 1998, and is payable in monthly
installments of $8,000 plus interest. The collateral for
this loan is a blanket lien on all assets. 222,497 318,716
</TABLE>
F-13
<PAGE>
ISOMET CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997 AND 1996
NOTE 5 - NOTES PAYABLE (CONTINUED)
<TABLE>
<CAPTION>
1997 1996
--------- -----------
<S> <C> <C>
Lloyds Bank, United Kingdom - Overdraft line of credit with
interest payable monthly at 4% above the United Kingdom Bank
Base Rate. The rate in effect at December 31, 1997 was 11.25%.
Collateral for this loan is a blanket lien on the assets of
Isomet (UK) Limited, a majority-owned subsidiary, and has a
maximum borrowing base of 75,000 pounds sterling (approximately
$123,000 at December 31, 1997) $119,307 $ 84,450
Ford Motor Credit Corp. - Loan with interest payable monthly at
10.25%. The loan is due August 28, 2000 and is payable in monthly
installments of $520. The collateral for the loan is a truck. 14,049 -
-------- ----------
997,457 1,189,166
Less: Current portion 364,336 324,450
-------- ----------
Total $633,121 $ 864,716
======== ==========
</TABLE>
The NationsBank loan agreements contain various covenants as to certain
ratios and limits borrowings to amounts outstanding on certain receivables. All
loan covenants were met at December 31, 1997.
While the NationsBank loans are due on April 1, 1998, the bank has proposed
to extend its loans with the Company for two years at maturity at the current
monthly amortization with a reduction in the interest rate. Assuming
curtailments at the current rates and with maturity of the NationsBank notes
extended for two years, the future debt maturities are as follows:
<TABLE>
<CAPTION>
Year Ending
December 31 Amount
------------- ---------
<S> <C>
1998 $364,336
1999 245,570
2000 387,551
--------
Total $997,457
========
</TABLE>
F-14
<PAGE>
ISOMET CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997 AND 1996
NOTE 6 - ACCRUED LIABILITIES
A summary of accrued liabilities follows:
<TABLE>
<CAPTION>
1997 1996
--------- ---------
<S> <C> <C>
Salaries and payroll taxes $ 6,391 $ 95,495
Commissions 6,185 13,224
Compensated absences 152,156 117,808
Warranty service 1,642 -
Other 51,857 47,192
-------- --------
Total $218,231 $273,719
======== ========
</TABLE>
NOTE 7 - INCOME TAXES
The domestic and foreign components of income before income taxes and
minority interest are as follows:
<TABLE>
<CAPTION>
1997 1996
----------- ----------
<S> <C> <C>
Domestic $1,986,138 $665,540
Foreign 102,873 (48,147)
---------- --------
Income before income taxes and minority interest $2,089,011 $617,393
========== ========
</TABLE>
The components of income tax expense (benefit) are as follows:
<TABLE>
<CAPTION>
1997 1996
---------- ----------
<S> <C> <C>
Current
Domestic $691,306 $ 5,880
Foreign - -
-------- --------
Total 691,306 5,880
-------- --------
Deferred
Domestic (28,079) (74,015)
Foreign - -
-------- --------
Total (28,079) (74,015)
-------- --------
Income tax expense (benefit) $663,227 $(68,135)
======== ========
</TABLE>
F-15
<PAGE>
ISOMET CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997 AND 1996
NOTE 7 - INCOME TAXES (CONTINUED)
Significant items attributable to the calculation of the deferred income
tax benefit are as follows:
<TABLE>
<CAPTION>
1997 1996
---------- ----------
<S> <C> <C>
Net operating loss carryforwards $ 6,945 $ 640,663
Difference in the timing of expenses for tax and financial
reporting purposes (256,401) (286,824)
General business credits 66,615 -
</TABLE>
A reconciliation of income taxes computed at a combination of statutory
Federal and state rates and the effective income tax benefit is as follows:
<TABLE>
<CAPTION>
1997 1996
---------- ----------
<S> <C> <C>
Federal income taxes at statutory rate $677,924 $ 226,284
Increases (decreases) in taxes from:
State income taxes, net 73,820 26,355
Change in valuation allowance - (216,312)
Income tax applicable to UK subsidiary (60,789) -
Difference in expense recognition (27,728) (104,462)
-------- ---------
Tax expense (benefit) $663,227 $ (68,135)
======== =========
</TABLE>
The components of deferred tax asset at December 31, 1997 and 1996 are as
follows:
<TABLE>
<CAPTION>
1997 1996
--------- ----------
<S> <C> <C>
Deferred tax assets (liabilities)
Book/tax depreciation differences $ - $ (1,652)
Inventory capitalization adjustment 45,422 36,089
Other inventory adjustments 75,920 -
Vacation pay book/tax difference 57,758 44,720
Allowance for doubtful accounts 215 215
Capital loss carryforwards 8,589 8,589
Net operating loss carryforwards - 2,756
General business credit carryforwards - 66,615
Deferred rent 1,662 4,155
-------- --------
Total $189,566 $161,487
======== ========
</TABLE>
F-16
<PAGE>
ISOMET CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997 AND 1996
NOTE 7 - INCOME TAXES (CONTINUED)
The Company has net operating loss carryforwards for tax reporting purposes
of approximately 777,400 pounds sterling ($1,277,000) in the United Kingdom.
These losses may be carried forward indefinitely. The Company has provided an
allowance for 100% of the tax benefit related to this loss because of the
uncertainty of realization.
NOTE 8 - COMMITMENTS AND CONTINGENCIES
The Company leases its plant and office facilities under various long-term
operating leases which expire in 1998. The leases require minimum annual rental
payments plus additional amounts based upon future increases in property taxes
and the consumer price index. The Company has two three-year renewal options
under one lease with the same terms.
Following is a schedule of future minimum rental payments required under
operating leases that have initial or remaining noncancellable lease terms in
excess of one year as of December 31, 1997:
<TABLE>
<CAPTION>
Year Ending
December 31 Amount
------------- ---------
<S> <C>
1998 $142,765
1999 2,596
--------
Total $145,361
========
</TABLE>
Total rent expense for all operating leases amounted to $211,142 and
$197,982 in 1997 and 1996, respectively.
The Company is contingently liable for severance pay under employment
agreements with certain officers. Upon involuntary termination, the agreements
provide for twelve months compensation based on the salaries in effect at that
time, but not less than the salaries in effect on the date of the agreements.
F-17
<PAGE>
ISOMET CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997 AND 1996
NOTE 9 - COMMON STOCK
During 1988, 1989 and 1990, the Company granted options to certain
employees to purchase 12,000 shares of the Company's common stock at $1.75 per
share. To the extent not previously exercised, options under the agreement
expire seven years from the date of issuance. Exercise of the options granted
is restricted, therefore, the difference between the option price and the market
price at the date the options were granted, if any, is recorded as deferred
compensation in stockholders' equity, and is amortized ratably over the seven
year life of the options. Options for 7,000 and 2,500 shares expired in 1997
and 1996, respectively. All of the options to purchase shares under the
employee grants have expired as of December 31, 1997.
During 1988, the Company granted options to certain officers and directors
to purchase 97,500 shares of the Company's common stock at $1.75 per share. To
the extent not previously exercised, the options terminate in ten years.
Options under the agreement may be exercised only upon the occurrence of certain
specified events. Since exercise of the options is contingent upon the
occurrence of a future event, the difference between the option price and the
market price at the date the options were granted was recorded as deferred
compensation in stockholders' equity, and is being amortized ratably over the
ten year life of the options.
The total amount of deferred compensation amortized to expense during 1997
and 1996 as a result of the 1990 and 1988 options, was $32,766 and $36,220,
respectively.
None of the above described options have been exercised as of December 31,
1997.
In 1992, the Company adopted a stock option plan covering up to 275,000
shares of the Company's stock, which includes all previously issued options, and
has a term of ten years. Isomet's Board of Directors shall determine the number
of shares and to whom options are to be granted. Options granted under the plan
are exercisable at an exercise price to be determined by the board and terminate
ten years from the date said options are granted. At December 31, 1997, there
are 97,500 non-qualified options and 39,500 incentive options outstanding under
the plan. In 1997, a total of 3,500 incentive options were exercised at a price
of $1.52 per share, and 500 incentive options were forfeited. At December 31,
1996, there were 104,500 non-qualified options and 43,500 incentive options
outstanding under the plan.
F-18
<PAGE>
ISOMET CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997 AND 1996
NOTE 10 - SEGMENT INFORMATION
The Company's operations are confined to one industry segment. The
Company's operations in different geographic areas were as follows:
<TABLE>
<CAPTION>
1997 1996
------------ ------------
<S> <C> <C>
Sales to unaffiliated customers
North America $ 6,149,799 $ 3,283,946
Europe 1,632,775 1,580,876
Far East 850,045 932,966
----------- -----------
Total sales 8,632,619 5,797,788
Transfers between geographic areas
United States 1,193,821 1,233,220
Europe 265,245 -
Eliminations (1,459,066) (1,233,220)
----------- -----------
Total sales $ 8,632,619 $ 5,797,788
=========== ===========
Operating profit (loss)
United States $ 1,952,482 $ 816,239
United Kingdom 160,139 (47,031)
Eliminations - -
----------- -----------
Total operating profit 2,112,621 769,208
Interest expense 118,726 151,815
----------- -----------
Income before income taxes and minority interest $ 1,993,895 $ 617,393
=========== ===========
Identifiable assets
United States $ 5,118,658 $ 5,703,161
United Kingdom 915,987 945,336
Eliminations (425,440) (693,055)
----------- -----------
Total identifiable assets 5,609,205 5,955,442
General corporate assets 1,579,380 245,902
----------- -----------
Total assets $ 7,188,585 $ 6,201,344
=========== ===========
Liabilities
United States $ 1,900,647 $ 2,370,653
United Kingdom 1,150,469 1,338,773
Eliminations (817,670) (1,095,651)
----------- -----------
Total liabilities $ 2,233,446 $ 2,613,775
=========== ===========
</TABLE>
F-19
<PAGE>
ISOMET CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997 AND 1996
NOTE 10 - SEGMENT INFORMATION (CONTINUED)
Transfers between geographic areas are accounted for on a cost plus mark-up
basis. Expenses directly identified with an area are used to determine
operating profit by geographic areas.
In 1997, of $8,632,619 in total sales, one customer accounted for
$3,083,799, or approximately 36% and another customer accounted for $1,415,206
or 16%. In 1996, of $5,797,788 in total sales, one customer accounted for
$878,400, or approximately 15%.
The Company does not normally require its customers to provide collateral
for outstanding balances. During 1997, the Company acquired insurance for
accounts receivable collection on its ten largest domestic customers.
The Company's products are sold principally in North America, Europe and
the far east. Accounts and notes receivable from sales in these areas of the
world at December 31, 1997 and 1996, were as follows:
<TABLE>
<CAPTION>
1997 1996
----------- -----------
<S> <C> <C>
North America $1,132,623 $ 969,594
Europe 327,225 422,312
Far East 27,948 86,870
---------- ----------
Total $1,487,796 $1,478,776
========== ==========
</TABLE>
The accounts receivable in North America were due from 42 different
unrelated customers, of which two customers accounted for $829,919. The amount
due from these customers is expected to be collected in the normal course of
business.
The accounts receivable in Europe were due from 18 different unrelated
customers, of which three customers accounted for $283,818. All such debts are
expected to be collected in the normal course of business.
NOTE 11 - RETIREMENT PLANS
One subsidiary maintains a defined contribution retirement plan which is
available to all employees of the subsidiary. The plan is funded through the
purchase of a group annuity insurance policy. Employer contributions are
discretionary. Employees may contribute to the plan in an amount that does not
exceed 15% of the employee's annual compensation and vest 100% in their own
contributions. Vesting in the employer contributions does not occur until the
participant's normal retirement date, as defined. The plan is cancelable upon
thirty days notice. Pension expense was $7,682 and $6,656 for the years ended
December 31, 1997 and 1996, respectively.
F-20
<PAGE>
ISOMET CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997 AND 1996
NOTE 11 - RETIREMENT PLANS (CONTINUED)
The parent company maintains a contributory plan pursuant to Section 401(k)
of the Internal Revenue Code. The Plan is available to all employees of the
parent company who have completed one year of service. Participants may elect
to make 401(k) contributions to the Plan in an amount not to exceed the lesser
of 15% of annual compensation or the maximum amount specified by law. The
Company matches employee contributions in an amount not to exceed 2% of annual
compensation. The Company may make additional contributions at it discretion.
All contributions are held by a trustee and invested at the participant's
direction under the options available. Participants are vested 100% in their
contributions. Vesting in employer contributions is 20% per year with 100%
vesting after five years. Pension expense related to this plan totaled $30,339
and $34,651 for the years ended December 31, 1997 and 1996, respectively.
NOTE 12 - NET INCOME PER SHARE
The following is a reconciliation of the numerators and denominators of the
basic and diluted net income per share computations for 1997 and 1996:
<TABLE>
<CAPTION>
1997
--------------------------------------
Income Shares Per Share
(Numerator) (Denominator) Amount
------------ ------------- ---------
<S> <C> <C> <C>
Net income $1,330,668
----------
Basic net income per share
Income available to stockholders 1,330,668 1,906,757 $ .70
=========
Effect of dilutive securities
Stock options - 64,552
---------- ---------
Diluted net income per share $1,330,668 1,971,309 $ .68
========== ========= =========
</TABLE>
<TABLE>
<CAPTION>
1996
-------------------------------------
Income Shares Per Share
(Numerator) (Denominator) Amount
----------- ------------- ---------
<S> <C> <C> <C>
Net income $681,719
--------
Basic net income per share
Income available to stockholders 681,719 1,905,590 $ .36
=========
Effect of dilutive securities
Stock options - 42,939
-------- ---------
Diluted net income per share $681,719 1,948,529 $ .35
======== ========= =========
</TABLE>
F-21
<PAGE>
ISOMET CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997 AND 1996
NOTE 13 - PRONOUNCEMENTS ISSUED BUT NOT YET ADOPTED
The FASB issued SFAS No. 131, Disclosures About Segments of an Enterprise
-------------------------------------------
and Related Information in June 1997. This statement requires public companies
- -----------------------
to report financial and descriptive information about its reportable operating
segments in annual financial statements and in interim financial reports issued
to shareholders. The statement will be effective for 1998. Management is
evaluating this standard and whether or not it will be required to revise its
current methods of reporting segment information.
F-22
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FORM 10-K AN
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 1,534
<SECURITIES> 0
<RECEIVABLES> 1,488
<ALLOWANCES> 0
<INVENTORY> 3,381
<CURRENT-ASSETS> 6,859
<PP&E> 2,541
<DEPRECIATION> 2,264
<TOTAL-ASSETS> 7,189
<CURRENT-LIABILITIES> 1,596
<BONDS> 0
0
0
<COMMON> 1,909
<OTHER-SE> 3,046
<TOTAL-LIABILITY-AND-EQUITY> 7,189
<SALES> 8,633
<TOTAL-REVENUES> 8,653
<CGS> 5,273
<TOTAL-COSTS> 6,659
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 119
<INCOME-PRETAX> 1,994
<INCOME-TAX> 663
<INCOME-CONTINUING> 1,331
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,331
<EPS-PRIMARY> .70
<EPS-DILUTED> .68
</TABLE>
