<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
__________________
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarter ended September 30, 1997 Commission File Number 0-13617
LIFELINE SYSTEMS, INC.
(Exact name of registrant as specified in its charter)
MASSACHUSETTS 04-2537528
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
640 MEMORIAL DRIVE
CAMBRIDGE, MASSACHUSETTS 02139
(Address of principal executive offices) (Zip Code)
(617) 679-1000
(Registrant's telephone number, including area code)
__________________
Securities registered pursuant to Section 12(b) of the Act: NONE
Securities registered pursuant to Section 12(g) of the Act:
Common stock $0.02 par value
----------------------------
(Title of Class)
Indicate by check mark whether the registrant (i) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (ii) has been subject to such filing
requirements for the past 90 days.
Yes X No ________
-------
Number of shares outstanding of this issuer's class of common stock as of
October 31, 1997: 5,782,129
<PAGE>
LIFELINE SYSTEMS, INC.
INDEX
<TABLE>
<CAPTION>
PAGE
<S> <C>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Consolidated Balance Sheets - September 30, 1997
and December 31, 1996 3
Consolidated Statements of Income - Three and nine months
ended September 30, 1997 and 1996 4
Consolidated Statements of Cash Flows - Nine months
ended September 30, 1997 and 1996 5
Notes to Consolidated Financial Statements 6
ITEM 2.
Management's Discussion and Analysis of Results of
Operations and Financial Condition 7-11
PART II. OTHER INFORMATION
ITEM 6.
Exhibits and Reports on Form 8-K 12
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
LIFELINE SYSTEMS, INC.
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
September 30, December 31,
1997 1996
---- ----
ASSETS
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 952 $ 3,030
Short-term investments 10,065 10,318
Accounts receivable, net 6,570 6,062
Inventories 1,847 1,450
Net investment in sales-type leases 1,672 1,278
Other current assets 1,926 1,675
Deferred income taxes 990 1,046
-------------- ---------------
Total current assets 24,022 24,859
Property and equipment, net 13,010 7,127
Goodwill, net 2,152 2,568
Net investment in sales-type leases 3,936 3,160
Other assets 652 195
-------------- ---------------
Total assets $43,772 $37,909
============== ===============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 1,001 $ 1,063
Accrued expenses 3,283 2,520
Accrued payroll and payroll taxes 1,764 1,743
Accrued income taxes 1,415 854
Deferred revenues 743 812
Product warranty 461 639
Other current liabilities 374 47
-------------- ---------------
Total current liabilities 9,041 7,678
Deferred income taxes 2,331 1,690
Deferred compensation 1,196 896
Other non-current liabilities 462 25
Commitments:
Stockholders' equity:
Common stock, $.02 par value, 10,000,000 shares
authorized, 6,350,357 shares issued at
September 30, 1997 and 6,217,192 shares issued
at December 31, 1996 127 124
Additional paid-in capital 16,120 15,618
Retained earnings 18,621 15,151
-------------- ---------------
34,868 30,893
Less: treasury stock at cost, 592,548 shares
at September 30, 1997 and 532,348 shares at
December 31, 1996 (4,028) (2,923)
Notes receivable - officers (100) (350)
Cumulative translation adjustment 2 -
-------------- ---------------
Total stockholders' equity 30,742 27,620
-------------- ---------------
Total liabilities and stockholders' equity $43,772 $37,909
============== ===============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
-3-
<PAGE>
LIFELINE SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF INCOME
(In thousands except for per share data)
<TABLE>
<CAPTION>
Three months ended Nine months ended
September 30, September 30,
--------------------------------- ---------------------------------
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenues
Services $ 8,252 $ 6,350 $23,372 $17,576
Net product sales 5,648 6,073 17,758 18,519
Finance and rental income 285 332 854 859
-------------- -------------- -------------- --------------
Total revenues 14,185 12,755 41,984 36,954
-------------- -------------- -------------- --------------
Costs and expenses
Cost of services 3,790 2,710 10,828 7,656
Cost of sales 1,461 1,954 4,822 6,164
Selling, general, and administrative 6,486 5,895 19,740 17,360
Research and development 433 440 1,321 1,394
-------------- -------------- -------------- --------------
Total costs and expenses 12,170 10,999 36,711 32,574
-------------- -------------- -------------- --------------
Income from operations 2,015 1,756 5,273 4,380
Other income, net 114 171 459 520
-------------- -------------- -------------- --------------
Income before income taxes 2,129 1,927 5,732 4,900
Provision for income taxes 840 791 2,262 2,009
-------------- -------------- -------------- --------------
Net income $ 1,289 $ 1,136 $ 3,470 $ 2,891
============== ============== ============== ==============
Net income per common share:
Primary $0.21 $0.18 $0.56 $0.47
======= ======= ======= =======
Fully diluted $0.21 $0.18 $0.55 $0.46
======= ======= ======= =======
Weighted average common and
common equivalent shares outstanding:
Primary 6,250 6,191 6,252 6,192
======= ======= ======= =======
Fully diluted 6,250 6,275 6,259 6,300
======= ======= ======= =======
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
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<PAGE>
LIFELINE SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
<TABLE>
<CAPTION>
Nine months ended
September 30,
--------------------------------
1997 1996
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net income $ 3,470 $ 2,891
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization 2,853 2,279
Deferred compensation 300 276
Deferred income tax provision 697 -
Changes in operating assets and liabilities:
Accounts receivable (511) 614
Inventories (397) (554)
Net investment in sales-type leases (1,170) (785)
Other assets (708) (296)
Other current and noncurrent liabilities 1,243 1,808
Accrued income taxes 561 421
------------- -------------
Net cash provided by operating activities 6,338 6,654
------------- -------------
Cash flows from investing activities:
Sales and maturities of investments 8,682 1,500
Purchases of investments (8,429) (3,124)
Additions to property and equipment (8,345) (3,204)
Payment for business acquisition - (1,027)
------------- -------------
Net cash used in investing activities (8,092) (5,855)
------------- -------------
Cash flows from financing activities:
Proceeds from issuance of common stock 505 215
Purchase of treasury stock (1,107) (1,337)
Issuance of treasury stock 2 98
Repayment of note receivable, officer 250 -
------------- -------------
Net cash used in financing activities (350) (1,024)
------------- -------------
Effect of foreign exchange on cash 26 -
Net decrease in cash and cash equivalents (2,078) (225)
Cash and cash equivalents at beginning of period 3,030 3,490
------------- -------------
Cash and cash equivalents at end of period $ 952 $ 3,265
============= =============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
-5-
<PAGE>
LIFELINE SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. The information furnished has been prepared from the accounts without
audit. In the opinion of the Company, the accompanying consolidated
financial statements contain all adjustments necessary, consisting only of
those of a normal recurring nature, to present fairly its consolidated
financial position as of September 30, 1997, the consolidated results of
its operations for the three and nine months ended September 30, 1997 and
1996, and its cash flows for the nine months ended September 30, 1997 and
1996.
While the Company believes that the disclosures presented are adequate to
make the information not misleading, these statements should be read in
conjunction with the consolidated financial statements and the related
notes included in the Company's Annual Report on Form 10-K, as filed with
the Securities and Exchange Commission on March 31, 1997, for the year
ended December 31, 1996.
Certain prior year balances have been reclassified to conform to the
current year presentation.
The results of operations for the three and nine month periods ended
September 30, 1997 are not necessarily indicative of the results expected
for the full year.
2. Details of certain balance sheet captions are as follows (in thousands):
<TABLE>
<CAPTION>
September December 31,
1997 1996
---------- -----------
<S> <C> <C>
Inventories:
Purchased parts and subassemblies $978 $797
Work-in-process 490 392
Finished goods 379 261
---------- -----------
$ 1,847 $ 1,450
========== ===========
Property and equipment:
Equipment $10,292 $ 9,099
Equipment leased to others 6,971 5,218
Capital in progress 5,928 687
Equipment under capital leases 1,035 1,035
Leasehold improvements 751 692
Furniture and fixtures 635 574
---------- ----------
25,612 17,305
Less accumulated depreciation and
amortization (12,602) (10,178)
---------- ----------
$13,010 $ 7,127
========== ==========
</TABLE>
3. In February, 1997, the Financial Accounting Standards Board issued
Statement No. 128 ("SFAS 128"), "Earnings per Share," which is effective
for fiscal years ending after December 15, 1997, including interim periods.
SFAS 128 requires the presentation of basic and diluted earnings per share
(EPS). Basic EPS, which replaces primary EPS, excludes dilution and is
computed by dividing income available to common stockholders by the
weighted-average number of common
-6-
<PAGE>
shares outstanding for the period. Diluted EPS reflects the potential
dilution that could occur if securities or other contracts to issue common
stock were exercised or converted into common stock or resulted in the
issuance of common stock that then shared in the earnings of the entity.
Diluted EPS is computed similarly to fully diluted EPS under the existing
rules. SFAS 128 requires restatement of all prior-period earnings per share
data presented after the effective date. The Company will adopt SFAS 128
for the fiscal year ended December 31, 1997. Had the Company computed EPS
consistent with the provisions of SFAS 128, there would be no material
impact in the calculation of basic and diluted EPS to the earnings per
share amounts reported for the three and nine months ended September 30,
1997 and 1996.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION
This and other reports, proxy statements, and other communications to
stockholders, as well as oral statements by the Company's officers or its
agents, may contain forward-looking statements within the meaning of Section 21E
of the Securities Exchange Act of 1934, as amended, with respect to, among other
things, the Company's future revenues, operating income, or earnings per share.
Without limiting the foregoing, the words "believes," "anticipates," "plans,"
"expects," and similar expressions are intended to identify forward-looking
statements. There are a number of factors of which the Company is aware that
may cause the Company's actual results to vary materially from those forecast or
projected in any such forward-looking statement. These factors include, without
limitation, those set forth below under the caption "Certain Factors That May
Affect Future Results." The Company's failure to successfully address any of
these factors could have a material adverse effect on the Company's future
results of operations.
RESULTS OF OPERATIONS
Total revenues for the three months ended September 30, 1997 were $14.2 million,
an increase of 11% compared with total revenues of $12.8 million for the quarter
ended September 30, 1996. For the nine months ended September 30, 1997, total
revenues were $42.0 million, up 14% as compared to revenues of $37.0 million
during the same period in 1996.
For the quarter ended September 30, 1997, service revenues comprised 58% of
total revenues and grew to $8.3 million from $6.4 million for the same period in
1996, an increase of 30%. For the nine months ended September 30, 1997 service
revenues increased 33% to $23.4 million as compared to $17.6 million for the
nine months ended September 30, 1996. Service revenues comprised 56% of total
year-to-date revenues, up from 48% during the same period in 1996. This is due
to the 24% increase in the number of subscribers the Company monitored to
184,000, up from 148,000 at September 30, 1996. The Company's ability to
sustain or increase the current level of service revenue growth in the long run
depends on its ability to expand the market for its personal response services
and convert additional locally monitored programs to the services provided by
Lifeline. The Company believes that the high quality of its services and its
commitment to providing caring and rapid response to the at-risk elderly and
physically challenged will be a factor in meeting this challenge.
Product sales were $5.6 million for the three months ended September 30, 1997, a
7% decrease from $6.1 million for the three months ended September 30, 1996.
For the nine months ended September 30, 1997, product sales decreased 4% to
$17.8 million from $18.5 million during the same period in 1996. Equipment
sales have continued to decline as a result of the Company's strategy of
combining
-7-
<PAGE>
service and hardware offerings to support the transition to a service oriented
business. The Company expects continued declining product sales in future
periods as it proceeds with the strategy of packaging products and services into
a single service offering.
Finance and rental income, representing revenue earned from the Company's
portfolio of sales-type leases, decreased 14% for the third quarter of 1997 to
$285,000, from $332,000 for the third quarter of 1996. This decline was due to
an unusually high number of leases expiring in the third quarter of 1996 that
resulted in higher rental income, which is derived from the short-term rental of
equipment from expired leases until such time the equipment is returned to the
Company. The decline in rental income in 1997 is offset in part by an increase
in finance income from leases maintained in the Company's portfolio. For the
nine months ended September 30, 1997 finance and rental income remained
consistent with the nine months ended September 30, 1996 at $854,000 and
$859,000, respectively. The Company believes its customers will continue to
take advantage of its leasing program, and the retention of new leases in its
own portfolio is expected to result in finance income which is consistent with
1996 levels for the remainder of 1997.
As a percentage of service revenues, cost of services increased to 46% for the
quarter and nine months ended September 30, 1997, as compared to 43% and 44% for
the same periods in 1996, respectively. The Company's continued investment in
personnel and systems enhancements in support of its current service
infrastructure has resulted in higher cost of services in 1997. These
expenditures have enabled the Company to continue to provide a high level of
service to its increasing subscriber base. The Company also continued to make
capital expenditures on its headquarters' response center infrastructure and
systems. Total expenditures for the Company's information systems
infrastructure at its primary monitoring facility are expected to be between $9
and $10 million, the majority of which is expected to be expended during 1997.
These expenditures are not expected to have an impact on 1997 results of
operations as the platform is not expected to be placed in service until 1998.
However, cost of services in 1998 and in future years is expected to be impacted
by the depreciation of these investments. The Company has established goals for
productivity improvements and other cost reductions to offset the impact of
these investments; however, the Company does not expect that any such product
improvements and cost reductions will have an impact until 1999.
Cost of sales improved to 26% of product sales for the three months ended
September 30, 1997, compared with 32% for the same period a year ago. For the
nine months ended September 30, 1997, cost of sales was 27% of product sales,
compared with 33% for the nine months ended September 30, 1996. The significant
improvement is largely attributable to continued utilization of new technology
which reduced materials costs, improvements in manufacturing processes, and the
enhanced reliability of the Company's product which reduced the warranty costs
compared to 1996 levels. The Company expects to maintain cost of sales as a
percentage of product sales at approximately this level for the remainder of
1997.
Selling, general, and administrative expenses remained constant at 46% and 47%
of total revenues during the three and nine month periods ended September 30,
1997 and 1996. The $2.4 million increase in actual expenses to $19.7 million in
1997 from $17.3 million in 1996, however, was primarily due to the Company's
larger employee base. This resulted in an increase in salaries and related
fringe benefits as compared to the same period in 1996. Also, increased
spending associated with the Company's sales and marketing strategies and the
inclusion of a full year of costs associated with the July, 1996 acquisition
of CareTel, Inc. of Ontario, Canada attributed to the overall increased
spending.
-8-
<PAGE>
Research and development expenses were 3% of total revenues for the three months
ended September 30, 1997 and 1996. For the nine months ended September 30,
1997, research and development expenses were 3% of total revenues as compared to
4% for the nine month period ended September 30, 1996. Research and development
efforts are focused on ongoing product improvements and developments. The
Company expects to maintain these expenses at approximately a consistent
percentage of total revenues through 1997.
The Company's effective tax rate was 39.5% for the three and nine months ended
September 30, 1997, versus 41% for the comparable periods in 1996. The decrease
is due to tax benefits from tax-exempt securities, however the Company believes
that its tax rate will increase in future periods as a result of lower amounts
invested in such securities due to the Company's anticipated use of cash in
1997.
LIQUIDITY AND CAPITAL RESOURCES
During the nine months ended September 30, 1997, the Company's portfolio of
cash, cash equivalents, and investments decreased $2.3 million to $11.0 million
at September 30, 1997 from $13.3 million at December 31, 1996. The net
decrease resulted from continued expenditures in the Company's information
systems infrastructure. The Company anticipates it will spend between $9 and
$10 million as it develops a flexible, scaleable, and fault tolerant response
center platform at its primary monitoring facility to support its growing
subscriber base. While the new platform is anticipated to be placed in service
after 1997, the majority of the outlays will be expended during 1997,
principally pursuant to development agreements entered into with third party
vendors. As of September 30, 1997, the Company has expended $5.0 million dollars
on the new platform. Additional expenditures for other investments in property
and equipment and the purchase of $1.1 million of treasury stock also
contributed to the decrease in cash, cash equivalents and investments. These
expenditures were in part offset by the Company's profitable results of
operations and the repayment of a $250,000 note by the Company's Chief Executive
Officer in February, 1997.
In January, 1997, the Company's Board of Directors approved the repurchase of up
to 100,000 shares of the Company's common stock from time to time in the open
market for general corporate purposes. The Company has purchased 60,700 shares
directly from the Company's Chief Executive Officer through September 30, 1997
for $1.1 million as part of this program. These shares were purchased from the
Chief Executive Officer partly in connection with the repayment of the $250,000
note and associated tax expenses.
In November, 1995 the Company secured a $4.0 million line of credit effective in
January, 1996. During 1996, the term of the credit facility was extended until
December, 1997. This credit agreement contains a number of covenants, including
requirements that the Company maintain certain levels of financial performance
and capital structure, limitations on the Company's capital and other
expenditures, and restrictions on the Company's capacity to secure additional
debt financing. No amounts were outstanding as of September 30, 1997.
Given the Company's current cash, marketable securities, credit availability,
and revenue levels, funding requirements for operations and in support of future
growth are expected to be met primarily from existing liquid assets, operating
cash flow, and existing borrowing facilities. The Company expects these sources
will be sufficient to finance the requirements of its investments in its
information systems infrastructure, its internally funded lease financing
program, stock repurchases, other investments in support of its current
business, and any potential acquisitions through 1997.
-9-
<PAGE>
Additional financing alternatives are currently being evaluated and may be
pursued if deemed appropriate.
In February, 1997, the Financial Accounting Standards Board issued Statement No.
128 ("SFAS 128"), "Earnings per Share," which is effective for fiscal years
ending after December 15, 1997, including interim periods. SFAS 128 requires
the presentation of basic and diluted earnings per share (EPS). Basic EPS,
which replaces primary EPS, excludes dilution and is computed by dividing income
available to common stockholders by the weighted-average number of common shares
outstanding for the period. Diluted EPS reflects the potential dilution that
could occur if securities or other contracts to issue common stock were
exercised or converted into common stock or resulted in the issuance of common
stock that then shared in the earnings of the entity. Diluted EPS is computed
similarly to fully diluted EPS under the existing rules. SFAS 128 requires
restatement of all prior-period earnings per share data presented after the
effective date. The Company will adopt SFAS 128 for the fiscal year ended
December 31, 1997. Had the Company computed EPS consistent with the provisions
of SFAS 128, there would be no material impact in the calculation of basic and
diluted EPS to the earnings per share amounts reported for the three and nine
months ended September 30, 1997 and 1996.
In September, 1997, the Company signed a letter of intent to lease an 82,000
square foot facility in Framingham, MA for its corporate headquarters. If
renovation of the building is completed, the Company expects to relocate in
1998. The Company is currently evaluating possible alternatives for its
existing lease.
CERTAIN FACTORS THAT MAY AFFECT FUTURE RESULTS
The following important factors, among others, could cause actual results to
differ materially from those indicated by forward-looking statements made in
this Quarterly Report on Form 10-Q and presented elsewhere by management from
time to time.
The Company's results are partially dependent on its ability to develop services
and products that keep pace with continuing technological changes, evolving
industry standards, changing client preferences and new service and product
introductions by the Company's competitors. Lifeline's future success will
depend on its ability to enhance its existing services and products (including
accessories), to introduce new service and product offerings to meet and adapt
to changing customer requirements and emerging technologies on a timely basis
and to offer such products and services at competitive prices. There can be no
assurance that Lifeline will be successful in identifying, developing,
manufacturing or marketing new services and products or enhancing its existing
services and products on a timely basis or that Lifeline will be able to offer
such services and products at competitive prices. Also, there can be no
assurance that services, products or technologies developed by others will not
render Lifeline's services or products noncompetitive or obsolete.
The Company's growth is dependent on its ability to increase the number of
subscribers served by its monitoring centers. The Company's ability to continue
to increase service revenue is a key factor in its long-term growth, and there
can be no assurance that the Company will be able to do so. The Company's
failure to increase service revenue could have a material adverse effect on the
Company's results of operations.
The Company may experience risks and uncertainties associated with the
development of new information technology. These include the risks that such
development effort may not be completed
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<PAGE>
on schedule, or at all, or within budget, or that future developments in
information technology will render the Company's system non-competitive; the
risks that the Company does not realize the intended benefits from the new
system, once completed; and the uncertainty associated with the substantial
commitment of funds to the development effort, including the risk that the
Company will have available significantly less cash to finance its operations,
other capital expenditures and future growth, including acquisitions.
The Company may expand its operations through the acquisition of additional
businesses. There can be no assurance that the Company will be able to
identify, acquire or profitably manage additional businesses or successfully
integrate any acquired businesses into the Company without substantial expenses,
delays or other operational or financial problems. In addition, acquisitions
may involve a number of special risks, including diversion of management's
attention, failure to retain key acquired personnel, unanticipated events,
contingent liabilities and amortization of acquired intangible assets. There can
be no assurance that the acquired businesses, if any, will achieve anticipated
revenues or earnings.
The Company sells a significant portion of its products to healthcare providers
which establish their own Lifeline programs. These healthcare providers
typically rent, rather than sell, the Lifeline products to subscribers and
accordingly following such time as a product is no longer used by a subscriber,
it is returned to the healthcare provider and becomes available for rent to
another subscriber. As a result of this use and reuse of the Company's
products, sales of such products are dependent on growth in the number of
subscribers and on the ability of the Company to encourage its healthcare
provider customers to replace their existing inventory by continuing to enhance
its products with new features.
The Company's monitoring operations are concentrated principally in its
Cambridge, Massachusetts headquarters facility. Although the Company believes
that it has constructed safeguards to protect against system failures, the
disruption of service at its monitoring facility, whether due to telephone or
electrical failures, earthquakes, fire or other similar events or for any other
reason, could have a material adverse effect on the Company's results of
operations.
The Company's equipment sales have continued to decline as a result of the
Company's strategy of combining service and hardware offerings to support the
transition to a service oriented business. There can be no assurance that
service revenue will increase at a rate sufficient to offset the expected
decrease in equipment sales.
-11-
<PAGE>
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Reports on Form 8-K-No reports on Form 8-K were filed for the three
months ended September 30, 1997.
(b) Exhibits - The Exhibit which is filed with this Report or which is
incorporated herein by reference is set forth in the Exhibit Index which
appears on page 14 hereof.
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<PAGE>
LIFELINE SYSTEMS, INC.
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
November 6, 1997 LIFELINE SYSTEMS, INC.
- ---------------- ----------------------
Date Registrant
/s/ Ronald Feinstein
--------------------
Ronald Feinstein
Chief Executive Officer
/s/ Dennis M. Hurley
--------------------
Dennis M. Hurley
Vice President of Finance and
Administration
Principal Financial and
Accounting Officer
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<PAGE>
EXHIBIT INDEX
The following designated exhibits are, as indicated below, either filed
herewith or have heretofore been filed with the Securities and Exchange
Commission under the Securities Act of 1933 or the Securities and Exchange Act
of 1934 and are referred to and incorporated herein by reference to such
filings.
EXHIBIT NO. EXHIBIT SEC DOCUMENT REFERENCE
- ----------- ------- ----------------------
EXHIBIT 11. COMPUTATION RE EARNINGS PER SHARE
<TABLE>
<CAPTION>
September 30, September 30,
---------------------- ---------------------
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
PRIMARY:
- -------
Weighted average shares outstanding 5,759 5,689 5,741 5,736
Net effect of dilutive common stock
equivalents based on the treasury method 511 528 530 496
Effect of treasury shares purchased (20) (32) (19) (43)
Effect of treasury shares issued - 6 - 3
Total 6,250 6,191 6,252 6,192
------- ------- ------- -------
Net income $1,289 $1,136 $3,470 $2,891
======= ======= ======= =======
Net income per common share $ 0.21 $ 0.18 $ 0.56 $ 0.47
======= ======= ======= =======
FULLY DILUTED:
- -------------
Weighted average shares outstanding 5,759 5,689 5,741 5,736
Net effect of dilutive common stock
equivalents based on the treasury method 511 612 537 604
Effect of treasury shares purchased (20) (32) (19) (43)
Effect of treasury shares issued - 6 - 3
------- ------- ------- -------
Total 6,250 6,275 6,259 6,300
======= ======= ======= =======
Net income $1,289 $1,136 $3,470 $2,891
======= ======= ======= =======
Net income per common share $ 0.21 $ 0.18 $ 0.55 $ 0.46
======= ======= ======= =======
</TABLE>
EXHIBIT 27. FINANCIAL DATA SCHEDULE FILED ELECTRONICALLY.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> SEP-30-1997
<CASH> 952
<SECURITIES> 10,065
<RECEIVABLES> 6,838
<ALLOWANCES> 268
<INVENTORY> 1,847
<CURRENT-ASSETS> 24,022
<PP&E> 25,612
<DEPRECIATION> 12,602
<TOTAL-ASSETS> 43,772
<CURRENT-LIABILITIES> 9,041
<BONDS> 0
0
0
<COMMON> 127
<OTHER-SE> 34,741
<TOTAL-LIABILITY-AND-EQUITY> 43,772
<SALES> 17,758
<TOTAL-REVENUES> 41,984
<CGS> 4,822
<TOTAL-COSTS> 15,650
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 6
<INCOME-PRETAX> 5,732
<INCOME-TAX> 2,262
<INCOME-CONTINUING> 3,470
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,470
<EPS-PRIMARY> .56
<EPS-DILUTED> .55
</TABLE>
