FORM 10-KSB
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
- --- EXCHANGE ACT OF 1934 (FEE REQUIRED)
For the fiscal year ended December 31, 1999
-----------------
OR
___ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
For the transition period from ___________ to _____________
Commission File No. 2-92801NY
Steiner Optics International, Inc.
(Exact Name of Registrant as specified in its Charter)
Delaware 13-3239648
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
Dr. Hans Frisch Strasse 9, D-95448 Bayreuth, Germany
(Address of principal executive offices, zip code)
011 49 921 787960
(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: None
Check whether the issuer:
(1) filed all reports to be filed by Section 13 or 15(d) of the Securities
Exchange Act over the preceding 12 months (or for such shorter period that
the registrant was required to file such reports: Yes ( ) No (X)
(2) has been subject to such filing requirements for the past 90 days:
Yes (X) No ( )
Check if there is no disclosure of delinquent filers in response to item 405
of Regulation S-B contained in this form, and no disclosure will be contained,
to the best of registrant's knowledge, if definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this From 10-KSB. ( )
State issuer's revenues for its most recent fiscal year: $11,777,844.
State the aggregate market value of the voting stock held by non-affiliates
computed by reference to the price at which the stock was sold, or the average
bid and asked prices of such stock as of a specified day within the past sixty
(60) days:
There has been no market for issuer's shares within the past sixty (60) days.
The aggregate market value of the voting stock held by non-affiliates
computed by reference to the last known quote for such stock (as reported by
the National Quotation Bureau Incorporated on February 29, 2000) is
$1,452,759.84.
State the number of shares outstanding of each of the Issuer's classes of
common equity as of December 31, 1999:
Common Stock, par value $.00001 per share 149,275,984
(Class of Common Stock) (Number of Shares)
Transitional Small Business Disclosure Format: Yes ( ) No (X)
Documents Incorporated by Reference: none.
STEINER OPTICS INTERNATIONAL, INC., AND SUBSIDIARIES
PART I
ITEM 1. DESCRIPTION OF BUSINESS
General
Steiner Optics International, Inc., was incorporated in Delaware in 1984
(the "Parent Corporation"). The Parent Corporation does not conduct any
significant business operations on its own; it functions primarily as a
holding company for Steiner Optik GmbH, a German limited liability company
and a wholly-owned subsidiary of the Parent Corporation (the "Company"). The
Parent Corporation uses its strategic position in New York City to keep an eye
on the U.S. markets, to conduct market research for the Company and to advise
the Company of new developments in the U.S. markets. Steiner-Optik (SEA) Pte.
Ltd., Singapore, the only subsidiary of the Company, has had no operations
since 1991; it was liquidated on December 29, 1999.
The Company designs, manufactures and markets high quality binoculars
(sold with warranties ranging from 10 to 30 years) and related products for
the marine, hunting, bird-watching and outdoor markets, as well as for military
use. In addition, the Company produces and sells optical components such as
prism and lense systems for use in industrial and consumer goods. The Company
has targeted the hunting market as a major area of future growth. In 1999 the
Company introduced several new products, the Wildlife Series and the Safari
Series, to the Great Outdoors market.
In the first quarter of 2000 the Company streamlined its product
structure, discontinued several products, introduced several new products,
replaced the traditional printing of the Company's logo, "Steiner" with a more
pronounced plate, "Steiner" and added another plate with the name of a product.
Both plates are permanently affixed to the binocular's main body. This
restructuring of the Company's product lines has resulted in fewer, more
pronounced lines of products; it is expected to reduce confusion among the
product lines (and price levels) and to improve distribution by focusing more
- - and more direct - advertising on fewer market segments. See Products.
Products
Most of the Company's binoculars are designed to be lightweight, rugged
and corrosion-resistant; their bodies are made from reinforced fiberglass and
covered, for additional protection, with a ribbed soft rubber. In addition,
most of the Company's binoculars are designed to be waterproof, tested to
withstand pressure at five meters underwater, and filled with nitrogen to
prevent fogging in various weather conditions.
The Company's premier binocular product is the "Admiral Gold" designed
for the boating market and equipped with the newly-developed proprietary 3D-
Vision Coating to enhance the transmission of light and a large, illuminated
HD-stabilized compass that takes bearings accurate to a single degree. The
stray light reduction system further enhances the transmission of light and
offers a remarkably sharp view. The Admiral Gold works well in all light and
atmospheric conditions; it works exceptionally well at night.
The Company also manufactures other products designed for the marine
(or boating) market, e.g., the "Commander III," a professional binocular for
offshore use that provides clear and brilliant pictures in the toughest light
conditions and is produced with (and without) a specially-designed HD-
stabilized compass (the largest in the market) with the fastest setting time and
instant bearings in rough or choppy conditions; the "Electronic Commander II"
equipped with electronic fluxgate sensor and a compass; and the new "Navigator
II," an extremely lightweight marine binocular with a very attractive price and
yet remarkable performance. The latest version of the "Navigator II" is
produced in three (3) configurations: the "Navigator II 7x50" with - and
without - the HD-stabilized compass and the "Navigator II 8x30."
All marine binoculars are dressed in distinctive blue rubber , dark blue
for the "Navigator" series and light blue for all other marine products, all
binoculars in the "Navigator" series sport purple-blue lens coating.
The Company manufactures several hunting binoculars. The "Hunting 7x50"
is designed as a night binocular. The "Hunting 9x40" is a lightweight binocular
well-suited for observation of game from great distances. The "Hunting 8x56"
is a lightweight and light-sensitive binocular most popular in Central Europe.
(Distinguished by improved visibility at dusk and dawn, this binocular can also
be used at night.) The Company also manufactures the "Hunting 8x30," a light
weight binocular particularly well suited for observation in low light
conditions. In March 2000 the Company introduced "Hunting 10x50" equipped with
a large diameter objective, high performing optics and smaller excess lens that
produce clear and sharp pictures in the dusk. Ideal for an expert hunter, this
binocular offers 10 times magnification and brings far away objects close up.
The "Predator" series - 8x22, 8x30, 8x42, 10x42, 9x40 and 12x40 - is a
recent (1998) addition to the line of hunting binoculars offered by the
Company. All binoculars in the "Predator" series feature Steiner's renown green
"Penetrator" lens coating to block out colors of haze and foliage, to increase
the transmission of brown and red colors and to facilitate thereby the
detection of game by adding contrast to a woodland setting; this "game-sensing"
feature helps the viewer to spot hidden game in the foliage.
The first "Predator" model - the "Predator 8x30" - was introduced in the
U.S. in 1998 and sold well. (The Company plans to introduce that binocular to
the other markets.) A smaller-size, compact binocular, the "Predator 8x30"
offers both power and brightness. The "Predator 8x22" - introduced a year later
- - is still smaller, compact, light-weight and moderately-priced binocular; yet
it delivers the brightness expected of larger binoculars.
The "Predator 8x22," "Predator 8x42" and "Predator 10x42" are roof-prism,
center-focus models equipped with Steiner's best "CAT" optics to insure maximum
optical performance for spotting wildlife in woodlands and brush under near
impossible light and weather conditions. Both models provide extended eye
relief for eyeglass wearers.
The "Predator 8x30," "Predator 9x40" and "Predator 12x40" use the
poroprism and the Steiner autofocus. The "Predator 9x40" is a light, yet
extremely robust model, equipped with the ergonomic eye-fitting cups to
suppress shaking. The "Predator 12x40" is designed for big-game hunters who
approach game from great distances; it performs reliably under diverse
conditions ranging from heavy foliage and low light to more open areas with haze
or fog.
All binoculars in the "Predator" series are waterproof and shockproof;
all offer more power and wider objectives without compromising their
portability; all offer 10 to 30 year warranty.
On January 17, 2000, the Company unveiled its latest addition to its
hunting binoculars. The new "Nighthunter" series feature binoculars designed
to help hunters literally see in the dark. Equipped with internal elements
maximizing sight in near-dark conditions and distinguished by high light-
transmission percentages, these binoculars pierce the thick gloom and provide
the user with brilliant color and brightness. This series features the HD lens
coating that captures and transmits the reflections of all ambient light
sources, including the moon, stars, surroundings and game animals. The Company
has applied for several patents in connection with that series. See Patents.
The Company will offer five (5) models in the "Nighthunter" series -
"Nighthunter 8x30", "Nighthunter 7x50", "Nighthunter 10x50", "Nighthunter 8x56"
and "Nighthunter 12x56." These models will be offered in the U.S. in 2000, and
thereafter (in 2001) introduced to the other markets.
The "Nighthunter 8x30" is the most versatile and compact binocular in
that series; it combines light weight, considerable power and superb
brightness. The "Nighthunter 7x50" is distinguished by the most stable and
steady performance in the most adverse light and weather conditions. The
"Nighthunter 10x50" is a midsize binocular that offers 10 times magnification
needed for the observation of game in the open country, as well as the highest
brightness at all levels of available light. The "Nighthunter 8x56" combines a
considerable power with an outstanding low-light performance, enabling a
hunter to find winter deer and other game in the pre-dawn darkness and dusk.
The "Nighthunter 12x56" is the most powerful binocular in this series. While
sufficiently hefty - to provide a stable image at 12 times magnification - it
is still lighter than other comparable binoculars on the market.
All binoculars in "Nighthunter" series are waterproof and shockproof
and equipped with the Steiner-auto-focus that obviates the need for constant
refocusing and offers a sharp view over distances from 20 meters to infinity.
The Company warrants the products in this series for 30 years.
All hunting binoculars are dressed in green rubber; the color of all
binoculars in the "Predator" and "Nighthunter" series is dark "forest-green;"
the color of all other hunting binoculars is light "military" green.
The Company also offers the "Rocky" series of binoculars for serious
bird watchers. The "Rocky 10x28" is a high power binocular with a large
diameter objective; the "Rocky 8x24," is the smallest and lightest of the
"Rocky" models; the "Rocky 12x28" offers 12 times magnification. These
binoculars use bright "CAT" optics designed to spot birds or wildlife in
difficult light conditions. All "Rocky" binoculars are warranted for 10 years.
The Company continues to offer several other compact binoculars. The latest
additions to this line of binoculars are the "Rocky S 8x42" and "Rocky S
10x42." Both are designed to spot birds or wildlife in difficult light
conditions; both use the exclusive "Penetrator" high-contrast optics, both can
be folded for convenience.
For sale in the sports and leisure markets, the Company offers the
"Safari" series comprised of "Safari 8x22," "Safari 8x30," "Safari 9x40" and
"Safari 12x40." The "Safari 8x30" is a compact, moderately priced binocular,
with the new Steiner AP-Autolux "glare blocker" coating that filters out
unwanted reflections and allows the usable white light to reach the eyes.
Lightweight and water-resistant, the new "Safari 8x30" is ideal for travel
and leisure use in all light conditions. This binocular also uses AP-Autolux
coating and provides virtually distortion-free images. "Safari 9x40" combines
high magnification, large diameter objective and light weight that makes this
binocular perfect for hiking in the mountains and for the observation of
animals. "Safari 12x40" is the long-distance large size binocular that produces
excellent light conditions with a 40 mm diameter objective. With its 12 times
(turbo) magnification and special optics, it produces sharp pictures rich in
contrast. It is perfect for conscientious observation of nature. "Safari 8x22"
is a compact binocular in that series that fits into a coat pocket or a glove
compartment. All binoculars in the "Safari" series are dark brown.
The "Wildlife" series is the Company's latest, revolutionary addition
to its spectrum of binoculars; it is also the Company's entry into the Great
Outdoors market. Reinhold Messner, the renowned solo climber of Mount Everest,
helps the Company to promote this series. The products in this series --
"Wildlife 8x30," "Wildlife 8x56" and "Wildlife 7x50" -- are extremely robust
yet unexpectedly lightweight. All of them utilize high contrast optics to
deliver clear, brilliant pictures, at any time of the day, anywhere one may
wander, i.e., in the mountains, in the forest, in the desert or at the coast.
All products in the "Wildlife" series are filled with nitrogen to prevent
fogging. "Wildlife 8x56" is particularly good at night; it provides clear and
bright pictures in low light conditions. All binoculars of this series are
equipped with the Steiner-auto-focus that obviates the need for constant
refocusing and offers a sharp view over distances from 20 meters to infinity.
The Company provides a 30-year limited warranty for the products in this
series.
The Company continues to offer other, specialized lines of products
for customers with particular needs and requirements, as well as in particular
areas of the world. Among other such products, the Company continues to
produce, to special orders, "Commander II 15x80", a long distance leader with
an integrated HD-stabilized compass and a range-finding reticle; and the
"Commander III 7x50", with AC-optics specifically designed for extreme low
light conditions. In the "Rallye" series, the Company continues to offer the
"Rallye 20x80," an economically priced leisure binocular ideally suited for
astronomical observation; and "Rallye 10x50," designed to provide maximum
brightness while supplying more than adequate power. All Rallye models are
equipped with fully-coated precision optics encased in the durable Makrolon
housing.
Finally, the Company manufactures binoculars for military applications,
custom-made to meet rigid specifications and equipped with enhancements not
found on civilian products, as well as produces optical components for a wide
variety of civil and military applications, systems and measuring devices.
Late in 1999 the Company conducted intensive market research to
strengthen its world-wide distribution network and to direct all products and
marketing activities towards the target groups. The Company has introduced
several new products during the first quarter of the year 2000, eliminated
several others and thereby redefined and clarified the structure of its product
lines. Not all of the Company's products are offered in all markets at all
times. See Marketing.
Research and Development
The Company's research and development ("R&D") department, historically
in the forefront of the Company's activities, has introduced many innovations
to the market, e.g., use of plastic for the housing, red coating for filtering
ultraviolet and infra-red radiation, integrated compass, etc. In 1999 11
engineers and technicians of the Company were engaged in the R&D activities
at any given time; they focused on the development of new products, as well
as on improving the Company's manufacturing and quality control practices. In
1999 the Company spent roughly $142,189 on the R&D (as compared with $148,778
in 1998). The Company's R&D expenditures in 1999 (in Deutsche Marks) remained
almost unchanged (by comparison with 1998). The decrease - apparent in the U.S.
Dollars - is due primarily to the fluctuation of the exchange rate.
Marketing, Distribution and Customers
In Germany the Company's products are sold to specialty and department
stores by the Company's in-house sales force and by independent sales
representatives, as well as through catalogues and wholesalers. Foreign sales
are made mainly through local independent distributors; some of the
distributors hold exclusive rights to distribute the Company's products within
their respective territories. In the past few years the Company substantially
extended its international distribution network, concentrating on the eleven
(11) members of the European Community that use the Euro as their currency in
general, and on the United Kingdom and France in particular. Finally, the
Company has completely overhauled its system of distribution in Germany. In
the past the Company relied exclusively on the network of independent sales
representatives there for all of the Company's products. In 1999 the Company
changed its marketing strategy. Since then the Company has been selling its
products to retailers of the marine and hunting products only through the
Company's distributors, but continued to sell directly to photo dealers and
opticians through its independent sales representatives.
Pioneer & Co., Inc., of Moorestown, N.J. ("Pioneer"), has been the
exclusive distributor of the Company's products in the U.S. since April 1982.
In 1998 Pioneer accounted for 33% of the Company's total sales. The dramatic
increases in sales in 1997-1998 were due to a large order, placed by a foreign
manufacturer of other products, for "Hunting 8x30" binoculars. In 1999 Pioneer
still accounted for roughly 33% of the Company's total sales but without the
benefit of a special order. Supra. In January 2000 the existing contract with
Pioneer has been extended indefinitely. The Company and Pioneer are working
on a marketing plan for the next decade. The U.S. market for consumer goods is
particularly important to the Company not only because of the volume of sales
to the U.S. based customers but also because the U.S. is a trendsetter.
The Company markets its products worldwide. Total sales in each
geographic area differ from year to year. During both 1998 and 1999, North
America accounted for the largest percentage of the total sales, i.e., 37.3%
and 36.1%, respectively. In 1998 and 1999, Germany accounted for 31.1% and
31.7%, respectively; the remainder of Europe accounted for 18.1% and 24.4%,
respectively; and sales to the remaining areas accounted for 13.4% and 7.9%,
respectively.
Military sales usually account for 8-12% of the Company's annual sales,
but large orders could increase that percentage dramatically. Despite widely-
publicized reduction in the armed services, the Company's revenues from
military sales have not decreased primarily because the military now tends to
buy less equipment of better quality.
The Company's marketing department, among other things, monitors the
performance of, and renders assistance to, the Company's distributors and sales
representatives. The marketing department runs seminars, prepares manuals for
the sales force, creates and coordinates advertising and promotions, point-of-
sale displays, press releases, product reports and exhibitions at specialty
trade and consumer shows. It also places printed advertisements in trade
journals and special interest magazines.
Advertising and marketing costs decreased insignificantly from
approximately $584,000 in 1998 to approximately $582,000 in 1999. In Deutsche
Marks, those costs slightly increased. Over the past couple of years the
Company developed new catalogs, new marketing tools and new advertising
displays, as well as hired a new marketing director in mid-1999. Finally, the
Company substantially expanded its presence at annual international
exhibitions. For example, only in Germany the Company now regularly
participates in the Great Outdoor exhibition (held in Friedrichshafen), and in
8-9 other important annual exhibitions of products for the marine, hunting,
photographic and other markets.
Manufacturing Operation
Most of the Company's products are manufactured at its facilities in
Bayreuth, Germany. The Company uses mostly modern equipment for the production
(grinding, polishing, etc.) of the optical components of its product lines and
continues to invest in machinery. In 1999 alone the Company invested roughly
$190,000 into new machinery. The Company manufactures most of its products out
of raw materials such as glass, metals and plastic. The Company continues to
outsource some of components to counterparties in the Far East.
Raw glass is manufactured by others to the Company's specifications
and, hence, is of limited utility to someone other than the Company. The lead-
time for delivery of semi-finished glass is roughly 5-6 months. Semi-finished
glass is manufactured by the Company; it represents roughly 50% of the
Company's inventory. Hence, the Company must always keep sufficient quantity of
raw and semi-finished glass on hand to allow for flexibility in the
manufacturing process.
Finished goods represented approximately 28% of the Company's inventory
in 1999 (as compared to roughly 31% in 1998). A special order from a military
customer, produced in 1998 for delivery early in 1999, accounted for dramatic
increase in finished goods in 1998. There was no comparable order in 1999.
Most of the Company's products are manufactured to meet the (rather
uncertain) demand. Accordingly, the Company keeps - in line with the industry's
tradition - rather large inventories of finished and semi-finished goods to
meet the anticipated demand for its products. Late in 1999, however, the
Company introduced a new production planning and controlling system. This
system is expected to reduce the levels of inventory in the future.
The Company is not dependent upon any single source of raw materials
and has no long-term supply agreements with anyone. In the Company's view,
there is adequate choice of suppliers for its foreseeable needs.
The Company sells most of its products in the German currency, the
Deutsche Mark, while pays most of its suppliers in their local currencies.
Purchases of supplies in foreign currencies are appropriately hedged.
Competition
The binocular industry, relatively stable over the past few years,
has recently experienced a spate of mergers and acquisitions. None of these
events is expected to affect the Company's position in the high-end segment
of the world market. The Company sells annually approximately $10 million worth
of binoculars. The size of the total market in binoculars remains relatively
obscure. (The Company is not aware of any reliable source of any statistical
information on the subject.) Among companies engaged in research, development
and manufacturing of binocular products, many have greater financial,
production, marketing and technological resources than the Company. Competition
in this industry centers on product quality, design and price, as well as
customer acceptance and support.
The Company believes that its reputation for innovation, the high
quality of its products, the durability of its binoculars and ease of focusing
them provide the Company with a competitive edge in the hunting and boating
markets.
The military market for binoculars requires special marketing and
manufacturing expertise necessary to comply with strict requirements of the
military. The Company is an approved supplier to several important military
services. It also supplies the police, customs and similar services in many
countries. The Company has been supplying the military market for many years
despite considerable competition.
Competition in the optical component industry is extremely diversified.
Competitors range from small engineering companies to large automobile and
airplane manufacturers. The Company's prospects in this market are rather
uncertain.
Patent and Trademarks
The Company currently owns a number of patents worldwide. Several of
its patent applications pertaining to certain aspects of the technology used
in its binoculars are pending. The Company may not be able to enforce, for
financial or other reasons, the existing patents, however. Besides, the
existing patents may not be adequate to protect the Company from its
competitors. The fate of the pending patent applications is uncertain. The
Company places greater reliance on its customer relationships and the quality
of its products than on its ability to protect its intellectual property. None
of the patents are critical to the Company's ability to stay in business.
The "Steiner" trademark is registered in Germany and many other
European countries, the United States and certain Asian countries. Such
registration may not provide material protection to the Company because the
Company may not be able to protect, for financial or other reasons, its
trademark against infringement. Finally, the use of Company's trademark may
infringe upon trademarks or other rights of third parties. The Steiner trade-
mark is very important to the Company; it represents the goodwill of the
Company.
The Company also holds a number of licenses to use trademarks registered
by others. These licenses are, likewise, very important to the Company.
Backlog
The Company's backlog consists of confirmed but unfilled purchase
orders for delivery in the year 2000. The backlog was approximately $2,363,216
(approximately DM 4,600,000) at December 31, 1999, as compared to approximately
$2,380,071 (approximately DM 3,989,000) at December 31, 1998). Variations in
backlog do not represent future business trends fairly because unfilled orders
fluctuate greatly with the timing of orders and the product mix.
Employees
The Company trains many of its highly skilled employees. The
management considers the relations between the Company and its employees to
be satisfactory. None of the Company's employees are represented by labor
unions. As of December 31, 1999, the Company employed 125 persons (87 in
manufacturing and 38 in other departments).
ITEM 2. DESCRIPTION OF PROPERTY
The Company owns its office and manufacturing facilities located in
Bayreuth, Germany. Two (2) buildings with 43,040 square feet are currently used
for manufacturing and warehousing; one (1) building with 12,912 square feet is
currently used for administration. All buildings are encumbered by six (6)
mortgages. The first (in priority) mortgage is in the amount of DM 2,900,000;
it is in favor of Stadtsparkasse Bayreuth. The second and third (in priority)
mortgages are in the amount of DM 500,000 and DM 2,500,000, respectively; both
are in favor of IKB, M?nic. The fourth (in priority) mortgages - there are
three (3) of them - are each in the amount of DM 1,000,000; two (2) are in
favor of Stadtsparkasse Bayreuth, and one (1) is in favor of HypoVereinsbank
Bayreuth. The fifth (in priority) mortgage in the amount of DM 700,000 was in
favor of HypoVereinsbank Bayreuth; it was paid in full in January 2000. These
mortgages secure long-term debt of the Company. See Management's Discussion.
The Company believes that its facilities are adequately insured, well
maintained, in good operating condition and sufficient for the present level of
its operations.
ITEM 3. LEGAL PROCEEDINGS
The Company is not involved in legal proceedings at the present time.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS
None.
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The common stock of the Parent Corporation is quoted from time to time
on the OTC Bulletin Board of the National Association of Securities Dealers,
Inc., and on the "Pink Sheets" of the National Quotation Bureau, Inc.
The following tables set forth the high and low bid and ask quotations
(as reported by the National Quotations Bureau, Inc.) for shares of the common
stock from January 1, 1998 through December 31, 1999. The high and low bid
quotations for the Common Stock reflect inter-dealer prices, without retail
mark-ups, mark-downs or commissions and may not necessarily represent actual
transactions.
1999 Closing Bid Closing Ask
High Low High Low
- --------------------------------------------------------------------------
Fourth Quarter unpriced unpriced unpriced unpriced
Third Quarter unpriced unpriced unpriced unpriced
Second Quarter unpriced unpriced unpriced unpriced
First Quarter none none $.01 $.01
1998 Closing Bid Closing Ask
High Low High Low
- --------------------------------------------------------------------------
Fourth Quarter none none $.01 $.01
Third Quarter none none $.01 $.01
Second Quarter none none $.01 $.01
First Quarter none none $.01 $.01
There were 1930 record holders of the common stock of the Parent
Corporation at December 31, 1999.
The ability of the Parent Corporation to pay dividends is not subject to
any restrictions. Nonetheless, the Parent Corporation has never paid cash
dividends. The management has no intention of declaring dividends in the
foreseeable future; all working capital will be devoted to the Company's
business.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The Company designs, manufactures and markets multi-purpose binoculars,
optical components and related products for sale throughout the world. The
Company is located in Germany. Most of sales are made in German currency, the
Deutsche Mark. Most purchases of components are made in the currency of the
respective supplier.
All assets and liabilities compiled in the Company's balance sheet are
translated into U.S. Dollars at the prevailing currency exchange rates on
December 31 in the fiscal year being reported. On December 31, 1998 the
currency exchange rate was DM 1.676 per U.S. Dollar. On December 31, 1999 the
currency exchange rate was DM 1,9465 per U.S. Dollar. See Note 1, Translation of
Foreign Currencies, to the Consolidated Financial Statements. All financial
data compiled in the Company's income statement is translated into U.S. Dollars
at the average currency exchange rates during the fiscal year being reported.
The average currency exchange rates for 1998 and 1999 were DM 1.7590 and DM
1,83597 per U.S. Dollar, respectively.
The Comparison Between and Among Years Ended
December 31, 1998 and December 31, 1999
In 1999 the Company's net sales remained almost unchanged, i.e., they
amounted to $11,793,252 in 1998 and to $11,777,844 in 1999. In Deutsche Marks,
the Company's net sales increased from DM 20,743,976 in 1998 to DM 21,623,768
in 1999, but the appreciation of the U.S. Dollar against the Deutsche Mark
offset the actual increase in net sales.
The Company's export sales into the U.S. account, on the average, for
roughly a third of the Company's total sales. In Deutsche Marks, the Company's
sales to the U.S. have not changed significantly; they rose from DM 7,745,000
in 1998 to DM 7,801,000 in 1999. In the U.S. Dollars, however, these sales
decreased by roughly $154,000 due to the fluctuating exchange rate. In 1999
the Company's sales to the U.S. represented 36% of total sales.
The Company's sales to military customers account, on the average, for
roughly 10% of the total sales. These sales stood at 12% in 1998 and 14% in
1999.
In 1998 the Company's sales of industrial components constituted 16% of
domestic sales. By comparison, in 1999 the Company's sales of industrial
components constituted 14% of domestic sales. In 1998 and 1999 such sales
accounted for 5% and 4.3% of the total sales, respectively.
The Company's total costs and expenses, expressed in U.S. Dollars,
increased 2.3% from 1998 to 1999.
The Company's gross profit in 1999 decreased by 13.9% (or $775,377)
from 1998 to 1999. Some of this decrease was due to the depreciation of the
Deutsche Mark against the US Dollar. Also, a special order for products with
relatively low profit margin accounted for a large portion of the Company's
sales in 1999 and further contributed to the reduction in the Company's gross
profit in 1999.
The selling, general and administrative expenses decreased 21.8% from
$4,301,832 in 1998 to $3,363,214 in 1999. This decrease is due to the
continuing cost-saving program and several large extraordinary write-offs. See
Marketing, Distribution, and Customers.
In U.S. Dollars, the Company's operating income increased $169,830
from 1998 to 1999 primarily due to the decrease of 15% in operating costs from
1998 to 1999.
Expressed in U.S. Dollars, interest income decreased 49.77% from 1998
to 1999. In 1998, the interest paid by a supplier who missed a deadline and
incurred interest charges accounted for an increase in interest income. In
1999, the interest income returned to the level of 1997. The amount of interest
earned by the Company on the loan made by it to Carl Steiner has remained
unchanged.
Expressed in U.S. Dollars, interest expense decreased 9.8% from 1998
to 1999. This decrease was due to the repayment of some loans. See Liquidity
and Sources of Capital. The decreasing interest and discount rates along with
the depreciating - against the U.S. Dollar - Deutsche Mark, combined to lower
the Company's interest expense.
A deferred United States income tax benefit of $266,105 was recognized
in 1998 due to a reduction in the valuation allowance relating to the deferred
tax asset. Such reduction was based on an assessment that it is more likely
than not that the tax benefit of the loss carryforward for U.S. income taxes
would be realized during the carryforward period. Firstly, the Company has
been profitable since 1996, and secondly, the future taxable income is
virtually enough to provide realization during the carryforward period. This
resulted in a net income tax benefit in 1998. The deferred U.S. income tax
benefit was decreased by $21,256 in 1999 due to the utilization of U.S. taxable
income.
In June 1997 the Financial Accounting Standards Board issued
Statement of Financial Accounting Standard No. 131, "Disclosures about Segments
of an Enterprise and Related Information" ("SFAS No. 131"). SFAS No. 131
establishes annual and interim reporting standards for various operating
segments of a company and related disclosures about its products, services,
geographic areas and major consumers. The Company adopted SFAS No. 131 in 1998.
This development likewise had no effect on the Company's consolidated
financial statements.
The information technology utilized by the Company is new and free
of Year 2000 defects; the production technology is not. The Company has
replaced certain computers with Year 2000 defects. The Year 2000 problems did
not have any material effect on the Company's own computer systems due to
successful preparations. The Company spent approximately DM 200,000
(approximately $108,000 at the current exchange rate) on the issues presented
by the Year 2000.
Liquidity and Sources of Capital
The Company uses cash primarily for working capital, to support the
inventory and to pay debt service for capital expenditures. This need for cash
is currently met by internally generated funds and unsecured bank lines of
credit. The Company anticipates that these sources will be sufficient for the
planned ongoing research and development and for the Company's operations.
All of the Company's unsecured bank lines of credit are short-term
and call, by their terms, for the repayment of principal at the end of each
year. Consequently, the Company's obligations to repay such lines of credit
are treated as current liabilities on the Company's balance sheet and the
Company's working capital appears to be negative. Nonetheless, the Company is
reasonably sure, on the basis of decades of experience, that its bank lines of
credit will be timely renewed in due course even though the Company's banks
have no legal obligation to do so. This type of unsecured short term lending
is customary in Germany at the present time and, consequently, is not a source
of additional concern to the Company.
The Company's factoring agent as of January 1, 1999 is FMN Finance
House (Fortis Group) ("FMN"). The agreement between the Company and FMN
provides for the sale without recourse of receivables from the Company's major
customers in Germany, as well as other German and international customers. All
such fees and expenses were charged to selling, general and administrative
expenses and interest expense, respectively, on the Company's consolidated
income statements. Amounts received from such sales in each such year have been
reported on the respective statements of cash flows as operative activities.
At December 31, 1998, the Company had accrued expenses and other
current liabilities of $1,173,729. These liabilities represent, in part,
$195,424 in general taxes, $166,647 in warranty and credit notes and $352,594
in salaries and wages. At December 31, 1999, the Company had accrued expenses
and other current liabilities of $933,235. These liabilities represent, in
part, $189,344 received in downpayments, $160,831 in general taxes, $143,488
in warranty and credit notes and $271,918 in salaries and wages. (The Company
seldom pays for overtime; rather, the Company provides additional vacation
time to its employees and accrues the corresponding amount on its books.)
In 1999 the Company reduced its long-term debt from $7,022,878
(at December 31, 1998) to $5,390,567 (at December 31, 1999) for the total of
$1,632,311. Most of this remaining debt is owed to two (2) banks. One of these
banks holds a note in the amount of DM 5,000,000 (approximately $2,568,714 at
the current exchange rate). The note bears interest at a rate of 6.98% per
annum and matures in February of 2002. The Company maintains an insurance
policy on the life of Carl Steiner, President of the Company. The cash value
of this policy stood at DM 3,338,853 on December 31, 1999. The cash value of
this policy as of February 2002 is expected to pay off the principal amount of
the note.
The other bank holds three (3) notes in the aggregate amount of DM
2,355,077.80 (approximately $1,209,903) as of December 31, 1999; those notes
bear interest at annual rates of 5.6%, 7.7% and 8%, respectively, and mature
on December 30, 2002, March 30, 2006, and March 30, 2003, respectively, if not
renegotiated.
In 1993-4 Mr. Steiner paid DM 1,000,000 to the Parent Corporation
(DM 250,000 in December 1993 and DM 750,000 in December 1994) to enable the
Parent Corporation to make a desperately needed contribution to the capital of
the Company. Mr. Steiner expected to receive, in exchange, preferred stock from
the Parent Corporation, but the Parent Corporation has been unable to issue
preferred stock because none has been authorized. The Parent Corporation has
been unable to authorize the issuance of preferred stock because up until now
the Parent Corporation did not have current audited financial statements. The
Parent Corporation owes Mr. Steiner either DM 1,000,000 or preferred stock
(to be issued six (6) years later than agreed, but with different, improved
terms), or another equivalent compensation for his investment. The Parent
Corporation will make a decision on the appropriate compensation for Mr.
Steiner once it is current with its filing obligations.
The Company used to sponsor "Basket Bayreuth e. V." (until 1997
"Steiner Bayreuth e.V."), a basketball team then playing in the German
Basketball League, as a marketing tool and to generate goodwill for the
Company. In July 1997 the Company purchased five (5) years worth of future
advertising rights from the team for DM 700,000 to continue the advertising
campaign. These rights have no current value, however, because Basket Bayreuth
e.V. went bankrupt in May 1999. In 1998, however, the Company paid the team
$99,000 to execute a special marketing campaign for the Company; the team fully
performed its obligations thereunder.
In order to pay to the team the amount due, i.e., DM 700,000, the
Company waived the repayment of (a) the outstanding balance of loans made by
the Company to team in the approximate amount of $63,000 (approximately DM
112,140) as of June 30, 1997, supra, and (b) approximately $147,000
(approximately DM 261,000) lent to the team by Carl Steiner, President of the
Company. (Mr. Steiner subsequently assigned such loan to the Company.) The
Company also paid approximately $55,000 to the team in cash and assumed two
(2) loans in the approximate amounts of $76,000 and $53,000, respectively,
made by a bank to the team.
The outstanding balances of the two (2) bank loans assumed by the
Company were approximately $32,000 and $112,000 as of December 31, 1999 and
1998, respectively. As of December 31, 1999, one of the loans was completely
repaid and the other loan had a remaining balance of approximately $32,000.
The Company expects to pay off the balance of the remaining loan by August 31,
2001.
As of December 31, 1998, the Company owed the team approximately
$75,000; the team owed the Company an amount substantially in excess of
$75,000. In May 1999 the team went bankrupt; as of December 31, 1999, the
Company did not owe anything to the team. The Company made other payments of
interest and principal on behalf of the team in 1999 and 1998 in the
approximate amounts of $69,000 and $97,000, respectively.
Finally, in the early 1990s the Company guaranteed another
obligation of the team (in the amount of DM 100,000) to a bank. The team no
longer pays its debts as they become due; it is bankrupt. Accordingly, the
Company may have to repay the team's debt currently in the amount of $44,309
(DM 80,000) to the bank, but not before the Company contests this obligation.
ITEM 7. FINANCIAL STATEMENTS
The following documents are filed as part of this report
INDEPENDENT AUDITORS' REPORT F1.
CONSOLIDATED FINANCIAL STATEMENTS
Consolidated Statements of Income and Comprehensive
Income for the Years Ended December 31, 1999 and 1998 F2.
Consolidated Balance Sheets at December 31, 1999 F3.
Consolidated Statements of Changes in Stockholders'
Equity for the Years Ended December 31, 1999 and 1998 F4.
Consolidated Statements of Cash Flows for the Years
Ended December 31, 1999 and 1998 F5.
Notes to the Consolidated Financial Statements F6.
ITEM 8. CHANGE IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not applicable.
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
The directors and executive officers of the Parent Corporation are as follows:
Name Age Position
- ----------------------------------------------------------------------------
Carl Steiner 45 President, Chief Executive Officer and
Director
Robert Eckert 40 Controller, Chief Financial Officer and
Director
The directors and executive officers of the Company are as follows:
Name Age Position
- ---------------------------------------------------------------------------
Carl Steiner 45 President, Chief Executive Officer and
Director
Robert Eckert 40 Managing Director
Carl Steiner has been President, Chief Executive Officer and Director of the
Company since January 1979 and of the Parent Corporation since January 1989.
Robert Eckert was Controller of the Company from October 1987 through January
1990, then Chief Financial Officer of the Company from January 1990 through
October 1993, and, finally, Managing Director of the Company since October
1993 to date. He has been Controller, Chief Financial Officer and Director of
the Parent Corporation since 1990.
The terms of office of all Directors and Executive Officers of the Company are
from the time of election until successors have been duly elected and
qualified. None of the Company's Directors or Executive Officers have any
family relationship with any other Director or Executive Officer.
Compliance With Section 16(a) of the Exchange Act
None of the directors, officers or 10% shareholders of the Company failed
to file on a timely basis reports required during 1997 and 1998 by Section
16(a) of the Exchange Act.
ITEM 10. EXECUTIVE COMPENSATION
The following table sets forth all compensation awarded to, earned by, or
paid by the Company to Messrs. Steiner & Eckert, the Company's only executive
officers, for services rendered in all capacities to the Company during the
fiscal years ended December 31, 1998 and 1999, respectively:
SUMMARY COMPENSATION TABLE
Annual Compensation
Name and Position Year Salary Bonus Other(a)
- -------------------------------------------------------------------------
Carl Steiner 1997(b) $140,244 $17,249 $16,439
(President & Chief
Executive Officer) 1998(c) $138,665 $17,055 $16,254
1999(d) $132,852 $16,340 $15,573
Robert Eckert 1997(b) $140,244 $23,713 $16,439
(Controller & Chief
Financial Officer) 1998(c) $138,665 $22,347 $16,254
1999(d) $132,852 $31,431 $15,573
(a) represents premiums paid by the Company to fund an annuity for the
benefit of Messrs. Steiner & Eckert. The Company purchased an annuity to fund
their pensions effective on their attaining the age of 65 and equal to 50% of
their then current compensation from the Company (the "Pension Amount"). The
Pension Amount will be payable for the balance of their respective lives. Upon
their death, their widows will be entitled to receive, for the balance of
their respective lives, an amount equal to 60% of the Pension Amount, and
their children will be entitled to receive an amount equal, in the aggregate,
to 40% of the Pension Amount until they reach the age of 18 or, if they
continue to be full-time students, until they reach the age of 28.
(b) Based upon an average exchange rate of DM 1.7392 per U.S. Dollar during
1997.
(c) Based upon an average exchange rate of DM 1.7590 per U.S. Dollar during
1998.
(d) Based upon an average exchange rate of DM 1.83597 per U.S. Dollar during
1999.
Employment Agreements
The Company has employment agreements with Messrs. Steiner and Eckert.
These agreements are cancelable at any time by either party. Messrs. Steiner
and Eckert get to use a company car and a pension plan. See Note 12.
Options/SAR Grants/Incentive Plans/Director Compensation
Until 1998 the executive officers did not hold any stock options, SAR or
other equity-related incentives and did not participate in any incentive
compensation plan. The members of the Board of Directors still do not receive
any compensation for their services qua members of the Board. Commencing
January 1, 1998, however, each director of the Parent Corporation received
$2,500 per month, and the Secretary of the Parent Corporation received $500
per month, by way of incentive compensation, for work done by them under the
agreement dated December 15, 1997, between the Company and the Parent
Corporation. Pursuant to that agreement, the Parent Corporation undertook to
advertise products manufactured by the Company in international markets, to
conduct market surveys, to maintain customer contacts, to procure special
orders and to draft contracts with the Company's customers.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth the number of shares of Common Stock owned
beneficially as of December 31, 1997, 1998 and 1999, by each person known to
be the beneficial owner of more than five percent of the Parent Corporation's
voting securities, by each director and by all directors and executive officers
as a group. The Parent Corporation has no outstanding securities other than
the common stock. Unless otherwise noted, each individual has sole voting and
investment power for the shares indicated below.
Shares of Common Percentage of Shares
Stock beneficially of Common Stock
Name owned beneficially owned
- ---------------------------------------------------------------------------
Carl Steiner 104,046,694(a) 69.4
c/o Steiner Optik GmbH
Dr. Hans Frisch Strasse 9
D-95488 Bayreuth Germany
Robert Eckert 0 0
c/o Steiner Optik GmbH
Dr. Hans Frisch Strasse 9
D-95488 Bayreuth Germany
All directors and
executive officers as
a group (2 persons) 104,046,694(a) 69.4
(a) Includes 500,000 shares held by Mr. Steiner's son.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Mr. Carl Steiner, the Company's President, Chief Executive Officer
and the majority shareholder, was also the President of Basket Bayreuth e.V.,
a registered basketball club in Germany until July 1997. In 1998 the Company
paid approximately $196,000 to this club; in 1999 the Company paid nothing to
the club. The Company assumed, however, several loans made to the club by
others (in 1997) and paid these loans down (in 1999); at December 31 in 1998
and 1999 the outstanding balances of these loans were $112,000 and $32,000,
respectively.
At December 31 in 1998 and 1999 Mr. Steiner owed the Company $591,000
and $594,000, respectively. The principal of this loan, bearing interest at
3.5%, is scheduled to be repaid in 10 equal annual payments, commencing 2002
and ending 2011.
The Parent Corporation still owes Mr. Steiner for and on account of
two (2) payments in the aggregate amount of DM 1,000,000 (DM 250,000 in
December 1993 and DM 750,000 in December 1994) made by Mr. Steiner to the
Parent Corporation to make desperately needed contributions to the capital of
the Company.
ITEM 13. LIST OF EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits.
3.1 Certificate of Incorporation of the Company, as amended (filed as
Exhibit 3.1 to the Company's Form 10-K for the fiscal year ended
December 31, 1991, File No. 2-92801NY).
3.2 By-Laws of the Company (filed as Exhibit 3.2 to the Company's
Form 10-K for the fiscal year ended December 31, 1991,
File No. 2-92801NY).
10.1 Translation of Agreement dated April 1, 1982, between Steiner Optik
GmbH and Pioneer & Co., Inc. (filed as Exhibit 10.1 to the Company's
Form 10-K for the fiscal year ended December 31, 1991,
File No. 2-92801NY).
10.2 Translation of Employment Agreement dated January 8, 1979, between
Steiner Optik GmbH and Carl Steiner (filed as Exhibit 10.2 to the
Company's Form 10-K for the fiscal year ended December 31, 1991,
File No. 2-92801NY).
10.3 Translation of Employment Agreement dated September 4, 1993, between
Steiner Optik GmbH and Robert Eckert (filed as Exhibit 10.3 to the
Company's Form 10-KSB for the fiscal year ended December 31, 1993,
File No. 2-92801NY).
21. Subsidiaries of the Company (filed as Exhibit 22 to the Company's
Form 10-K for the fiscal year ended December 31, 1991,
File No. 2-92801NY).
27. Financial Data Schedule
(b) Reports on Form 8-K
none.
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.
March 31, 2000
--------------
STEINER OPTICS INTERNATIONAL, INC.
By: /s/ Carl Steiner
------------------------------
Carl Steiner, President, Chief
Executive Officer
In accordance with the Exchange Act, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on
the dates indicated
/s/ Carl Steiner
_____________________________ March 31, 2000
Carl Steiner, President,
Chief Executive Officer and
Director (Principal Executive
Officer)
/s/ Robert Eckert
__________________________ March 31, 2000
Robert Eckert, Chief Financial
Officer and Director
(Principal Financial Officer)
STEINER OPTICS INTERNATIONAL, INC. AND SUBSIDIARY
Consolidated Financial Statements
For The Years Ended December 31, 1999 and 1998
And Independent Auditors' Report
STEINER OPTICS INTERNATIONAL, INC. AND SUBSIDIARY
Table of Contents
Page
INDEPENDENT AUDITORS' REPORT 3
CONSOLIDATED FINANCIAL STATEMENTS
Consolidated Statements of Income and Comprehensive Income
for the Years Ended December 31, 1999 and 1998 4
Consolidated Balance Sheets at December 31, 1999 5
Consolidated Statements of Changes in Stockholders' Equity
(Deficiency) for the Years Ended December 31, 1999 and 1998 6
Consolidated Statements of Cash Flows for the Years Ended
December 31, 1999 and 1998 7
Notes to the Consolidated Financial Statements, Years Ended
December 31, 1999 and 1998 8 - 21
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Shareholders
of Steiner Optics International, Inc.
We have audited the accompanying consolidated balance sheets of Steiner Optics
International, Inc. and Subsidiary as of December 31, 1999 and 1998 and the
related consolidated statements of income and comprehensive income, changes in
stockholders' equity (deficiency), and cash flows for the years ended December
31, 1999 and 1998. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with U.S. generally accepted auditing
standards. Those standards require that we plan and perform the audits 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 financial position of Steiner Optics
International, Inc. and Subsidiary as of December 31, 1999 and 1998 and the
results of their operations and their cash flows for the years ended December
31, 1999 and 1998, in conformity with U.S. generally accepted accounting
principles.
Nuremberg, February 25, 2000
Dr. Roedl & Partner GmbH
Wirtschaftspruefungsgesellschaft
Steuerberatungsgesellschaft
Dr. Roedl Schreyer
Wirtschaftspruefer Wirtschaftspruefer
Steiner Optics International, Inc. and Subsidiary
Consolidated Statements of Income and Comprehensive Income
for the years ended December 31, 1999 1998
- ----------------------------------------------------------------------
Sales revenue $ 11,777,844 $ 11,793,252
Cost of sales (6,970,902) (6,210,933)
---------- ---------
Gross profit 4,806,942 5,582,319
---------- ---------
Operating expenses:
Selling, general and administrative (3,363,214) (4,301,832)
Research and development (142,189) (148,778)
---------- ---------
Total operating expenses (3,505,403) (4,450,610)
---------- ---------
Income from operations 1,301,539 1,131,709
Other income and expense
Interest expense (802,565) (889,160)
Interest income 24,610 48,999
Other income 70,604 65,877
Foreign currency transaction (losses) gains (7,985) 149,180
---------- ---------
Total other expense (715,336) (625,104)
---------- ---------
Income from operations
before income taxes 586,203 506,605
Income tax provision (benefit) 286,216 (73,461)
---------- ---------
Net income $ 299,987 $ 580,066
========= =========
Other comprehensive income, net of tax:
Foreign currency translation adjustments (226) 223,000
--------- ---------
Comprehensive income $ 299,761 $ 803,066
--------- ---------
Basic earnings per share $ 0.00201 $ 0.00388
========= =========
See accompanying summary of accounting policies and notes to the consolidated
financial statements.
Steiner Optics International, Inc. and Subsidiary
Consolidated Balance Sheet
at December 31, 1999
- ---------------------------------------------------------
Assets
Current assets:
Cash $ 172,037
Accounts receivable trade, net of
allowance for doubtful accounts of
$13,000 1,323,240
Other accounts receivable 47,416
Inventories 4,812,182
Prepaid expenses and other current assets 94,448
Deferred tax assets 379,990
---------
Total current assets 6,829,313
---------
Noncurrent assets:
Property, plant and equipment, net 4,069,693
Intangible assets, net 60,034
Assets related to pension plan obligation 467,620
Cash value of life insurance 1,715,311
Due from related parties 593,719
---------
Total noncurrent assets 6,906,377
----------
Total assets $13,735,690
==========
Liabilities and stockholders' equity
Current liabilities:
Short-term debt $ 3,450,632
Current portion of long-term debt 468,796
Current portion of capital lease obligations 180,418
Accounts payable, trade 1,031,628
Due to related parties 629,064
Income taxes payable 284,759
Accrued expenses and other liabilities 933,235
---------
Total current liabilities 6,978,532
Noncurrent liabilities: ---------
Long-term debt, less current portion 5,390,567
Long-term capital lease obligations 532,998
Accrued pension liability, net 590,146
Deferred tax liabilities 211,588
----------
Total noncurrent liabilities 6,725,299
----------
Total liabilities 13,703,831
----------
Commitments and contingencies
Stockholders' equity:
Common stock $0.00001 par value;
authorized and issued 150,000,000 shares;
outstanding: 149,275,984 shares 1,500
Additional paid-in capital 3,481,842
Accumulated deficit (3,875,349)
Accumulated other comprehensive income 427,199
Common stock in treasury, at cost;
724,016 shares (3,333)
---------
Total stockholders' equity 31,859
---------
Total liabilities and stockholders' equity $13,735,690
==========
See accompanying summary of accounting policies and notes to the consolidated
financial statements.
Steiner Optics International, Inc. and Subsidiary
Consolidated Statements of Changes in Stockholders' Equity (Deficiency)
Years ended December 31, 1999 and 1998
<TABLE>
Accumulated
Additional Other
Common Paid-in Accumulated Comprehensive Treasury
Stock Capital Deficit Income Stock Total
---------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balances at December
31, 1997 $ 1,500 $3,481,842 $(4,755,402) $ 204,425 $ (3,333) $(1,070,968)
Net income 580,066 580,066
Translation adjustment 223,000 223,000
--------------------------------------------------------------------------
Balances at December
31, 1998 1,500 3,481,842 (4,175,336) 427,425 (3,333) (267,902)
Net income 299,987 299,987
Translation adjustment (226) (226)
--------------------------------------------------------------------------
Balances at December
31, 1999 $1,500 $3,481,842 $(3,875,349) $ 427,199 $ (3,333) $ 31,859
==========================================================================
</TABLE>
Changes in stockholders' equity based on the number of shares:
---------- Common Stock-------------- Treasury
Authorized Issued Outstanding Stock
---------------------------------------------------------
Balances at December
31, 1998 150,000,000 150,000,000 149,333,500 666,500
Acquisition of
treasury stock (57,516) (57,516)
----------- ----------- ----------- -------
Balances at December
31, 1999 150,000,000 150,000,000 149,275,984 724,016
=========== =========== =========== =======
See accompanying summary of accounting policies and notes to the consolidated
financial statements.
Steiner Optics International, Inc. and Subsidiary
Consolidated Statements of Cash Flows
for the years ended December 31, 1999 1998
- --------------------------------------------------------------------------
Cash flows from operating activities:
Net income $ 299,987 $ 580,066
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 486,299 442,821
Deferred income taxes 111,195 (345,259)
(Gains) losses on the disposal of equipment (3,052) 8,566
Bad debts 24,075 64,314
Changes in operating assets and liabilities:
Trade receivables (20,946) 733,540
Due from related parties (90,299) (27,466)
Other accounts receivable 153,125 47,933
Inventories 345,947 (691,535)
Prepaid expenses and other current assets 42,296 (125,128)
Assets related to pension plan obligation (55,021) (52,170)
Cash value of life insurance (236,167) (350,798)
Accounts payable 84,035 (129,934)
Due to related parties 24,362 (23,841)
Income taxes payable 3,302 37,127
Accrued and other current liabilities (82,043) 301,170
Accrued pension liability 50,613 59,490
-------- --------
Total adjustments 837,721 (51,170)
-------- --------
Net cash provided by operating activities 1,137,708 528,896
Cash flows from investing activities:
Additions to intangible assets (26,584) (16,647)
Additions to property, plant and equipment (112,450) (126,220)
Proceeds from sales of equipment 3,052 -
-------- --------
Net cash used in investing activities (135,982) (142,867)
--------- --------
Cash flows from financing activities:
Principal repayments of capital lease
obligations (356,324) (223,626)
Repayments of short-term debt, net 156,115 (533,766)
Proceeds from issuance of long-term debt - 1,188,195
Principal repayments on long-term debt (608,849) (1,293,749)
--------- ----------
Net cash used by financing activities (809,058) (862,946)
--------- ----------
Effect of exchange rates on cash (74,637) 266,836
Net increase (decrease) in cash 118,031 (210,081)
Cash, beginning of year 54,006 264,087
--------- ----------
Cash, end of year $ 172,037 $ 54,006
========= =========
Supplemental schedule of noncash investing and financing activities and of
cash flows:
1999 1998
---------- ----------
Capital lease obligations incurred $ 120,649 $1,088,070
Cash paid during the year:
Interest $ 735,000 $ 958,000
Income taxes $ 170,000 $ 294,000
See accompanying summary of accounting policies and notes to the consolidated
financial statements.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1999 AND 1998
(1) Description of business and summary of significant accounting policies
DESCRIPTION OF BUSINESS
The Company's primary business is the design, manufacture and marketing of
Optical-based products, primarily multi-purpose binoculars for sale throughout
the world.
The Company's manufacturing facility and related operations are located in
Bayreuth, Germany.
ACCOUNTING PRINCIPLES
The financial statements have been prepared on a basis consistent with U.S.
generally accepted accounting principles.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of Steiner Optics
International, Inc. and its wholly-owned subsidiary in Germany (Steiner-Optik
GmbH). All significant intercompany accounts and transactions have been
eliminated in consolidation.
USE OF ESTIMATES IN PREPARATION OF FINANCIAL STATEMENTS
The preparation of financial statements in conformity with U.S. 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 dates of the financial
statements and the reported amounts of revenues and expenses during the
reporting periods. Actual results could differ from those estimates.
REVENUE RECOGNITION
Revenues are generally recognized when products are shipped to customers.
FOREIGN CURRENCY TRANSLATION
The financial statements of the Company's German subsidiary, where the German
Deutschmark (DM) is considered the functional currency, are translated into
U.S. dollars using the exchange rate in effect at the end of the fiscal year
for assets and liabilities and the weighted average exchange rate prevailing
during the year for results of operations. The related unrealized gains or
losses resulting from translation are reflected as a component of accumulated
other comprehensive income in stockholders' equity. Foreign currency
transaction gains and losses are included in the consolidated statements of
income as incurred.
HEDGING TRANSACTIONS
From time to time, the Company has entered into hedging transactions to reduce
its exposure to adverse fluctuations in foreign exchange rates from its ongoing
business operations. The forward exchange contracts fixed amounts the Company
was required to pay in 1999 and 1998 in foreign currency. These transactions,
which were hedges of exposed liabilities, were accounted for using the accrual
method. When terminated, the exchange rate gains in the amount of approximately
$38,000 and $27,000 were accrued to 1999 and 1998 net income, respectively.
ASSET AND LIABILITY INSTRUMENTS
The fair value of cash and temporary cash investments, short and long-term
receivables, accounts payable, and short and long-term debt was determined to
be not materially different from the carrying amount.
CASH AND CASH EQUIVALENTS
The Company's cash and cash equivalents consist of cash on hand and bank
balances.
RECEIVABLES
The Company has an agreement with a factoring agent to sell its trade
receivables. The receivables are sold without recourse, and accordingly, no
bad debt reserve related to the net receivables sold is maintained. Expenses
related to the factoring activity have been charged to selling, general and
administrative expenses as incurred.
ALLOWANCE FOR DOUBTFUL ACCOUNTS
The allowance for doubtful accounts is maintained to absorb losses inherent in
nonfactored trade receivables based on management's judgment. Factors
considered in determining the level of the allowance include: trends in
receivable volume, quality and composition; historical loss experience; specific
known risks; and current, as well as anticipated specific and general economic
factors that may affect certain customers.
INVENTORIES
Raw materials are stated at the lower of purchase cost or market; work in
process and finished goods are stated at the lower of cost (which approximates
first-in, first-out) or market.
LONG-LIVED ASSETS
Long-lived assets are reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amounts may not be recoverable.
Recoverability of assets to be held and used is determined by the Company by
a comparison of the carrying amount of the assets to future undiscounted net
cash flows expected to be generated by the assets. Impairment, if any, is
measured by the amount by which the carrying amount of the assets exceed the
fair value of the assets. Assets to be disposed of are reported at the lower
of the carrying amount or fair value less costs to sell.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are stated at cost less accumulated depreciation.
Depreciation is provided over the estimated useful lives of the assets.
Method Estimated Useful Life
--------------------------------------
Buildings Straight line 10 - 30 years
Machinery and equipment Straight line 8 - 10 years
Furniture and fixtures Straight line 5 - 10 years
Repair and maintenance costs are expensed, while additions and improvements are
capitalized. The cost and related accumulated depreciation of assets sold or
retired are eliminated from the accounts and any gains or losses are reflected
in earnings.
INTANGIBLE ASSETS
Purchased software and patent are stated at cost less accumulated amortization.
Method Estimated Useful Life
--------------------------------------
Licenses Straight line 1 - 5 years
Purchased software Straight line 4 - 7 years
Patent Straight line 18 years
ADVERTISING AND MARKETING COSTS
Advertising and marketing costs are expensed as incurred and totaled
approximately $582,000 and $584,000 in 1999 and 1998, respectively.
INCOME TAXES
Deferred income tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases. Under this method, net deferred tax assets and liabilities are measured
using enacted tax rates expected to apply to taxable income in the years in
which those temporary differences are expected to be recovered or settled,
thereby giving current recognition to changes in tax rates and laws.
RESEARCH AND DEVELOPMENT
Research and development costs are charged to expense as incurred.
PENSION PLAN
The compensation cost of an employee's pension benefit is recognized on the
net periodic pension cost method over the employee's approximate service period.
BASIC EARNINGS PER SHARE
Basic earnings per share is determined by dividing net income by the weighted
number of common shares outstanding (149,275,984 shares). The Company has a
simple capital structure with no dilutive securities.
ACCOUNTING PRONOUNCEMENTS
In December 1999, the Securities and Exchange Commission released Staff
Accounting Bulletin (SAB) No. 101, "Revenue Recognition in Financial State-
ments", to provide guidance on the recognition, presentation and disclosure of
revenues in financial statements. The Company believes its revenue recognition
practices are in conformity with the guidelines prescribed in SAB No. 101.
RECLASSIFICATIONS
Certain prior year amounts have been reclassified from amounts previously
reported to conform with the 1999 presentation.
(2) Inventories
Inventories consisted of the following at December 31, 1999:
1999
-----------
Raw materials $1,379,618
Work in process 2,068,736
Finished goods 1,363,828
---------
$4,812,182
=========
(3) Property, plant and equipment
Property, plant and equipment and depreciation consisted of the following at
December 31, 1999:
1999
------------
Buildings $ 5,389,539
Machinery and equipment 3,448,949
Furniture and fixtures 2,644,750
Land 37,129
----------
Total cost 11,520,367
Less accumulated depreciation (7,450,674)
----------
Total property, plant and equipment, net $ 4,069,693
==========
Depreciation expense ($403,788 in 1998) $ 443,578
The Company's land and buildings are partially financed by a loan
collateralized by a life insurance policy on the President of the Company.
See Note (7).
(4) Intangible assets
Intangible assets and amortization consisted of the following at December 31,
1999:
1999
-------------
Purchased software $ 242,159
Patent 45,250
Licenses 11,450
Less accumulated amortization (238,825)
---------
Total intangible assets, net $ 60,034
=========
Amortization expense ($39,033 in 1998) $ 42,721
(5) Short-term debt
The following is a summary of the Company's short-term debt:
1999
------------
Revolving credit agreements $ 1,684,540
Bank notes 1,766,092
---------
Total short-term debt $ 3,450,632
==========
Average balance outstanding $ 3,289,792
Maximum amount borrowed at
any month-end $ 3,683,941
Maximum interest rate charged 8.50%
Minimum interest rate charged 1.95%
Weighted average interest rates:
during the year 5.62%
at year-end 5.66%
The weighted average interest rate during the year is the average of the
weighted average at year-end and at year-end of the previous year.
The Company has revolving credit agreements with a number of banks that have
no stated expiration dates. Maximum lines of credit under these agreements were
approximately $1,790,000 on December 31, 1999. The lines of credit are
uncollateralized and are considered due on demand. The bank notes represent
short-term borrowings which mature in 2000 and are collateralized by the
Company's land and buildings.
(6) Accrued expenses and other liabilities
Accrued expenses and other liabilities consisted of the following at December
31, 1999:
1999
------------
Salaries and wages $ 271,918
Down payments received 189,344
Social security and wage withholding
taxes 160,831
Warranty obligations and credit notes 143,488
Other accrued liabilities 131,128
Checks in transit 36,526
--------
$ 933,235
========
(7) Long-term debt
The following is a summary of the Company's long-term debt:
1999
------------
Three notes payable (a) $ 2,568,714
Note payable (b) 1,027,485
Note payable (c) 513,743
Note payable (d) 415,897
Note payable (e) 411,268
Note payable (f) 382,738
Note payable (g) 234,193
Two notes payable (h) 227,588
Note payable (i) 46,237
Note payable (j) 31,500
----------
5,859,363
Less current portion (468,796)
---------
Long-term debt $5,390,567
=========
(a) Three notes payable to a savings and loan, collateralized by land and
buildings with book value of approximately $3,000,000; interest is payable
monthly at an annual rate of 6.98 %; principal is due February, 2002.
(b) Note payable to a savings and loan, collateralized by land and buildings
with book value of approximately $3,000,000; subordinate to the notes payable
(a), (d), (e) and (f), bearing interest at the annual rate of 4.5 % and payable
quarterly; principal is repaid in semiannual installments of approximately
$103,000 beginning in March 2000 until maturity in September 2005.
(c) Note payable to a bank, collateralized by land and buildings with book
value of approximately $3,000,000; subordinate to the notes payable (a), (b),
(d), (e) and (f), bearing interest at an annual rate of 5.95 %, payable
quarterly. The principal is due June 2001.
(d) Note payable to a bank, collateralized by land and buildings with book
value of approximately $3,000,000 subordinate to note (a), bearing interest at
an annual rate of 8 %. The note is repaid in quarterly installments including
both principal and interest of approximately $14,000. If renegotiated
periodically, the note matures in December, 2010; if not renegotiated it falls
due in March 2003.
(e) Note payable to a bank, collateralized by land and buildings with book
value of approximately $3,000,000 subordinate to note (a), bearing interest at
an annual rate of 7.7 %. The note is repaid in quarterly installments including
both principal and interest of approximately $14,000. If renegotiated
periodically, the note matures in December, 2010; if not renegotiated it falls
due in March 2006.
(f) Note payable to a bank, collateralized by land and buildings with book
value of approximately $3,000,000 subordinate to note (a), bearing interest at a
n annual rate of 5.6 %, payable quarterly. The principal is repaid in
semiannual installments of approximately $19,000. If renegotiated periodically,
the note matures in December, 2010; if not renegotiated it falls due in
December 2002.
(g) Uncollateralized note payable to a bank bearing interest at an annual rate
of 5.35 %, payable quarterly. The principal is repaid in semiannual
installments of approximately $77,000 until maturity in January 2001.
(h) Two notes payable to an insurance company, bearing interest at annual rates
of 8 %. Interest is due semiannually. The principal of the loans is due when
two life insurance policies held by the Company mature in the year 2019.
(i) Uncollateralized note payable to a bank bearing interest of 4.75 %, due
quarterly. The principal will be repaid in semiannual installments of
approximately $3,300 beginning in September 2001, until maturity in March 2008.
(j) Uncollateralized note payable to a bank bearing interest of 5.6 %. The note
is repaid in monthly installments including both principal and interest of
approximately $1,800 until maturity in July 2001.
The fair value of the Company's long-term debt, based upon the discounting of
future cash flows using the Company's borrowing rate for loans of comparable
maturity, approximates the carrying value of such debt at December 31, 1999.
Future minimum payments under these obligations are as follows:
Year ended December 31,
2000 $ 468,796
2001 906,726
2002 2,878,171
2003 314,232
2004 319,392
and thereafter 972,046
---------
Total minimum payments $5,859,363
=========
(8) Income taxes
The income tax provision (benefit) consists of the following:
1999 1998
------------ ------------
Current German income taxes $ 175,021 $ 265,522
Current United States income taxes 0 6,276
Deferred German income taxes 89,939 (79,154)
Deferred United States income taxes 21,256 (266,105)
------- --------
Provision (benefit) for income taxes $ 286,216 $ (73,461)
======= ========
The combined statutory income tax rate, currently about 53%, includes
corporate income taxes at a rate of 40% for undistributed earnings, trade
taxes at a rate of 18.5% and the solidarity surcharge of 5.5% on corporate
income tax. The combined rate is lower than the sum of the three rates because
trade tax is deductible. When earnings are distributed, the corporate income
tax imposed on such earnings is reduced to 30%. Deferred tax assets and
liabilities are calculated at a combined German statutory rate of approximately
53% in 1999 and 1998 with the exception of the net operating loss carryforwards
for U.S. income taxes only, which are calculated using a 35% tax rate.
A reconciliation of income taxes computed at the combined German statutory rate
is as follows:
1999 1998
----------- -----------
Expected income tax at the combined rate
applicable for retained earnings $ 318,754 $ 284,520
Increase (decrease) in corporate income
tax due to:
Changes in the valuation allowance on
the United States net operating loss 0 (266,105)
Utilization of U.S. taxable income 21,256 0
Taxation on foreign operations (78,345) (175,913)
Difference in trade tax base 33,399 33,364
Tax expenses related to prior years (13,228) 27,427
Adjustments of deferred tax assets and
liabilities for changes in enacted
tax rates 0 7,370
Nondeductible expenses 4,380 3,944
Other 0 11,932
-------- --------
Provision (benefit) for income taxes $ 286,216 $ (73,461)
======== ========
The tax effects of temporary differences that give rise to significant portions
of the deferred tax assets and deferred tax liabilities at December 31, 1999
are presented below.
1999
--------
Current deferred assets (due to
difference in valuation):
Inventories $ 271,734
Accounts receivable 108,256
--------
Current deferred tax asset $ 379,990
--------
Non-current deferred tax assets
(liabilities):
Net operating loss carryforwards
(U.S. income taxes only) $ 489,698
Pension, due to differences in
valuation 148,441
Plant and equipment, due to
differences in deprecation (604,878)
--------
Total non-current deferred tax assets 33,261
Less valuation allowance - U.S. net
operating loss carryforwards (244,849)
--------
Net non-current deferred tax liability (211,588)
--------
Net deferred tax asset $ 168,402
--------
Net decrease in the total valuation
allowance $ 21,255
At December 31, 1999, the Company had net operating loss carryforwards for U.S.
federal income tax purposes of approximately $1.4 million which are available
to offset future U.S. Federal taxable income, if any, and expire between 2006
and 2011. Such losses may only be offset against income earned in the United
States. In 1998 the Company reduced its valuation allowance for U.S. net
operating loss carryforwards from 100% to 50% because it had significant U.S.
Federal taxable income in both 1997 and 1998.
(9) Pension benefits
The Company's wholly-owned German subsidiary has a defined benefit pension
obligation for the President and the Chief Financial Officer of the Company.
The benefits are based on 50% of their last annual salary prior to retirement.
In Germany there are no legal requirements to fund the pension obligation by
transferring cash to an outside funding agency. However, the Company has assets
related to pension plan obligations to provide for the funding of the plan and
the related obligation. The assets consist of life insurance policies with cash
surrender values.
The following table sets forth the amounts presented in the Company's balance
sheets at December 31, 1999 for the accrued pension liability, the components
of pension cost and the assumptions used in accounting for the pension plan:
1999
---------
CHANGE IN BENEFIT OBLIGATION
Benefit obligation at beginning of year $ 746,636
Service cost 21,259
Interest cost 23,973
Amortization of initial benefit obligation 5,380
Exchange gain (111,707)
-------
Benefit obligation at end of year $ 685,541
-------
CHANGE IN PLAN ASSETS
Fair value of plan assets at beginning
of year $ 482,820
Actual return on plan assets 22,874
Employer contribution 32,146
Exchange loss (70,220)
-------
Fair value of plan assets at end of year $ 467,620
-------
DEVELOPMENT OF THE NET AMOUNT RECOGNIZED:
Funded status $(217,921)
Unrecognized initial benefit obligation 95,395
--------
Net amount recognized $(122,526)
========
WEIGHTED-AVERAGE ASSUMPTIONS
Discount rate 7%
Rate of compensation increase 5%
COMPONENTS OF NET PERIODIC BENEFIT
Service cost ($25,320 in 1998) $ 21,259
Interest cost ($28,552 in 1998) 23,973
Amortization of initial benefit
obligation ($5,616 in 1998) 5,380
Exchange gain ($37,372 loss in 1998) (111,707)
-------
Net benefit recognized
($96,850 cost in 1998) $ (61,095)
=======
The pension obligations have been calculated by an actuary.
(10) Commitments and contingencies
Operating leases
The Company has operating lease commitments for machinery, office equipment,
and motor vehicles. Lease terms are generally five years and many contain
renewal options. There are no escalation clauses. Minimum annual rentals
payable under these leases with remaining noncancelable terms of more than
one year are as follows:
Year ended December 31,
2000 $ 395,068
2001 366,298
2002 282,045
2003 251,220
2004 and thereafter 62,677
---------
Total minimum annual rentals payable $1,357,308
=========
Total rental expense charged to operations was approximately $230,000 and
$215,000 in 1999 and 1998, respectively.
Capital leases
The following is an analysis of property held under capital leases included
with owned property on the balance sheets at December 31:
1999
----------
Machinery and equipment $1,689,263
Less accumulated depreciation (780,154)
---------
Total machinery and equipment, net $ 909,109
=========
The depreciation of assets recorded under capital leases is included in the
depreciation of property, plant and equipment.
The capital leases consist of noncancelable equipment leases expiring through
December 2003, payable in monthly installments including imputed interest at
various rates ranging from 5.6% to 14.8%. The fair value of the company's
capital leases, based upon the discounting of future cash flows using the
Company's borrowing rate, approximates the carrying value of such leases.
The following is a schedule by years of future minimum lease payments under
capital leases:
Year ended December 31,
2000 $ 218,546
2001 216,210
2002 189,762
2003 172,379
--------
Total minimum lease payments 796,897
Less: amount representing
executionary costs and interest (83,481)
--------
Present value of minimum lease
payments $ 713,416
========
Environmental remediation liabilities
The Company's German subsidiary was requested by the City of Bayreuth in 1992
to have a qualified environmental consultant investigate the groundwater under
the Company's land for possible contamination with certain chloromethanes. The
initial samples revealed contamination of the groundwater and soil with
substantial levels of chloromethanes as well as mineral oil and lead. The
environmental remediation issue was fully resolved in 1998 at a cost of
approximately $143,000.
Litigation
Steiner Optics International, Inc. and its subsidiary, from time to time, are
parties to various other legal proceedings arising from their operations. The
Company believes that the outcome of these proceedings, individually and in the
aggregate, will have no material effect on the financial position or results of
operations of the Company and its subsidiary.
(11) Related party transactions
The Company purchased advertising from a professional basketball team supported
by the Company's President in the amount of $99,000 for the year ended 1998.
The Company also has assumed two loans granted to the team. The outstanding
balances were approximately $32,000 at December 31, 1999. The Company paid
interest and repaid the principal on these loans on behalf of the team which
amounted to approximately $69,000 and 97,000 in 1999 and 1998, respectively.
During 1999 the team entered into bankruptcy proceedings and has since been
dissolved. The Company may be liable for an additional amount of up to $40,000
for guarantees provided on behalf of the debtor.
Due from related parties in the accompanying consolidated balance sheets listed
as a non-current asset represents amounts due from the Company's President. The
Company's President owed the Company approximately $594,000 at December 31,
1999. The principal is scheduled to be repaid in 10 equal annual installments
beginning in 2002 with interest at 3.5%.
Due to related parties in the accompanying consolidated balance sheets in the
amount of $629,064 represents amounts due to the Company's President. The
amounts do not bear interest and do not have any scheduled repayment terms.
(12) Significant customers
There are two customers with whom the Company has derived over 10% of annual
revenues. The revenues derived from one of the customers - the Company's United
States distributor - are of a recurring nature and amounted to approximately
$3,909,000 and $3,971,000 in 1999 and 1998, respectively. The revenues derived
from the other customer are of a non-recurring nature and amounted to
approximately $1,370,000 in 1998.
(13) Segment and geographic information
In June, 1997, the Financial Accounting Standards Board issued SFAS No. 131,
"Disclosures about Segments of an Enterprise and Related Information". This
statement, which the Company adopted in 1998, requires that companies disclose
information on their operational segments in accordance with their internal
reporting structures.
The Company only has one reportable segment, consisting of optical-based
products, primarily binocular sales.
Revenues by geographic region were as follows (unaudited):
(in thousands of dollars) 1999 1998
---------- ----------
USA $ 4,249 $ 4,403
Germany 3,730 3,673
Remainder of Europe 2,869 2,139
Other 930 1,578
------ ------
$11,778 $11,793
====== ======
Revenues from the Company's country of domicile (USA) and all foreign countries
were as follows (unaudited):
(in thousands of dollars) 1999 1998
-------- --------
USA $ 4,249 $ 4,403
Germany 7,529 7,390
------ ------
$11,778 $11,793
====== ======
THESE NOTES ARE AN INTEGRAL PART OF THE ACCOMPANYING CONSOLIDATED FINANCIAL
STATEMENTS.
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> DEC-31-1999
<CASH> 172,037
<SECURITIES> 0
<RECEIVABLES> 1,336,240
<ALLOWANCES> 13,000
<INVENTORY> 4,812,182
<CURRENT-ASSETS> 6,829,313
<PP&E> 11,520,367
<DEPRECIATION> 7,450,674
<TOTAL-ASSETS> 13,735,690
<CURRENT-LIABILITIES> 6,978,532
<BONDS> 532,998
0
0
<COMMON> 1,500
<OTHER-SE> 30,359
<TOTAL-LIABILITY-AND-EQUITY> 13,735,690
<SALES> 11,777,844
<TOTAL-REVENUES> 11,777,844
<CGS> 6,970,902
<TOTAL-COSTS> 3,505,403
<OTHER-EXPENSES> 810,550
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 802,565
<INCOME-PRETAX> 586,203
<INCOME-TAX> 286,216
<INCOME-CONTINUING> 299,987
<DISCONTINUED> 0
<EXTRAORDINARY> (226)
<CHANGES> 0
<NET-INCOME> 299,761
<EPS-BASIC> .002
<EPS-DILUTED> .002
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