<PAGE> 1
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 quarterly period ended: JUNE 30, 1997
Commission File Number: 0-16937
SUMMIT TECHNOLOGY, INC.
(Exact name of registrant as specified in its charter)
Massachusetts 04-2897945
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
21 Hickory Drive Waltham, MA 02154
---------------------------------------------------
(Address of principal executive offices) (Zip Code)
617-890 1234
------------
(Registrant's telephone number, including area code)
N/A
(Former name, former address and former fiscal year, if changed
since last report.)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
[X] Yes [ ] No
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes of
stock, as of the latest practicable date.
On June 30, 1997, 31,250,141 shares of common stock, par value $.01 per share
were outstanding.
<PAGE> 2
PART I: FINANCIAL INFORMATION
ITEM 1: FINANCIAL STATEMENTS
SUMMIT TECHNOLOGY, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1997 1996
(UNAUDITED)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 34,476 $ 44,013
Short-term investments 33,892 19,393
Accounts receivable, net 9,187 8,553
Inventories, net 17,016 15,848
Prepaid expenses and other current assets 1,530 2,121
Due from related party 1,605 1,726
Restricted cash 1,353 1,502
Notes receivable from officers 185 101
-------- --------
Total current assets 99,244 93,257
-------- --------
Long-term investments 5,292 8,718
Property and equipment, net 9,161 9,381
Patents, net 5,029 6,747
Other assets, net 496 529
Net assets held for discontinued operations 13,595 15,028
-------- --------
Total assets $132,817 $133,660
-------- --------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 3,582 $ 3,771
Accrued expenses 5,058 5,974
Current maturities of long-term debt 5,101 5,246
Deferred revenue 2,588 3,634
Due to related party 3,971 1,547
-------- --------
Total current liabilities 20,300 20,172
Long-term debt, less current maturities 8,997 11,472
Deferred taxes 69 69
Stockholders' equity:
Common stock, $.01 par value. Authorized
60,000,000 shares; Issued 31,256,380 shares
in 1997 and 31,024,709 in 1996 313 311
Additional paid-in capital 171,306 170,983
Accumulated deficit (68,008) (69,187)
-------- --------
103,611 102,107
Treasury stock, at cost, 6,125 shares in 1997 and 1996 (160) (160)
-------- --------
Total stockholders' equity 103,451 101,947
-------- --------
Total liabilities and stockholders' equity $132,817 $133,660
-------- --------
</TABLE>
See accompanying notes to consolidated financial statements.
2
<PAGE> 3
PART I: FINANCIAL INFORMATION
ITEM 1: FINANCIAL STATEMENTS (CONTINUED)
SUMMIT TECHNOLOGY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS; UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS SIX MONTHS
ENDED JUNE 30, ENDED JUNE 30,
1997 1996 1997 1996
------- -------- -------- --------
<S> <C> <C> <C> <C>
Net revenues $23,643 $ 17,389 $ 44,342 $ 42,547
Cost of revenues 14,401 14,077 28,213 31,173
------- -------- -------- --------
Gross profit 9,242 3,312 16,129 11,374
Operating expenses:
Selling, general and administrative 3,702 7,060 8,669 14,317
Research and development expenses 1,513 1,889 3,236 3,273
Legal expenses 2,249 1,624 4,249 2,320
------- -------- -------- --------
Total operating expenses 7,464 10,573 16,154 19,910
------- -------- -------- --------
Operating income (loss)
from continuing operations 1,778 (7,261) (25) (8,536)
Other Income 811 1,534 1,305 2,842
------- -------- -------- --------
Income (loss) from continuing operations
before provision for income taxes 2,589 (5,727) 1,280 5,694
Provision (benefit) for income taxes 17 (119) 108 (2)
------- -------- -------- --------
Net income (loss) from continuing
operations $ 2,572 $ (5,608) $ 1,172 $ (5,692)
Loss from discontinued operations -- (6,375) -- (9,843)
------- -------- -------- --------
Net income (loss) 2,572 (11,983) 1,172 (15,535)
======= ======== ======== ========
Net income (loss) per share
from continuing operations .08 (.18) .04 (.18)
Net loss per share
from discontinued operations -- (.21) -- (.32)
------- -------- -------- --------
Net income (loss) per share $ .08 $ (.39) $ .04 $ (.50)
======= ======== ======== ========
Weighted average number of common
shares and common share
equivalents outstanding 31,283 30,962 31,243 30,953
======= ======== ======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
3
<PAGE> 4
PART I: FINANCIAL INFORMATION
ITEM 1: FINANCIAL STATEMENTS (CONTINUED)
SUMMIT TECHNOLOGY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS; UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
JUNE 30,
1997 1996
<S> <C> <C>
Cash flows used by operating activities:
Net income (loss) $ 1,172 $ 15,535
Adjustments to reconcile net income (loss) to net cash
used by operating activities:
Depreciation and amortization 2,086 1,373
Changes in operating assets and liabilities:
Accounts receivable, net (635) 6,847
Inventories, net (1,168) (4,331)
Prepaid expenses and other current assets 590 (966)
Accounts payable (190) (2,634)
Accrued expenses (915) (518)
Deferred revenue (1,046) (1,703)
Related party, net 2,546 385
Discontinued operations 1,433 1,111
-------- --------
Net cash provided (used) by operating activities 3,873 (15,971)
-------- --------
Cash flows from investing activities:
Increase in short-term investments (14,499) (14,336)
Decrease (increase) in long-term investments 3,426 (11,925)
Additions to property and equipment, net (1,434) (3,481)
Decrease in restricted cash 149 56
Other 1,242 (400)
Net cash invested in discontinued operations -- (3,917)
-------- --------
Net cash used by investing activities (11,116) (34,003)
-------- --------
Cash flows from financing activities:
Net proceeds (repayments) of long-term debt (2,619) 14,424
Proceeds from exercise of stock options 325 457
Cash used by discontinued operations -- (993)
-------- --------
Net cash provided (used) by financing activities (2,294) 13,888
Decrease in cash and cash equivalents (9,537) (36,086)
Cash and cash equivalents at beginning of period 44,013 74,304
-------- --------
Cash and cash equivalents at end of period $ 34,476 $ 38,218
-------- --------
Supplemental cash flow information:
Interest paid $ 782 $ 771
-------- --------
Income taxes paid $ 35 $ 10
-------- --------
</TABLE>
See accompanying notes to consolidated financial statements.
4
<PAGE> 5
PART I: FINANCIAL INFORMATION
ITEM 1: FINANCIAL STATEMENTS (CONTINUED)
SUMMIT TECHNOLOGY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) NATURE OF BUSINESS
Summit Technology, Inc. (the "Company") develops, manufactures and markets
ophthalmic laser systems designed to correct common vision disorders such as
nearsightedness, farsightedness and astigmatism. The Company also participates
in per procedure royalties payable to Pillar Point Partners, a partnership
formed by the Company and VISX, Inc. ("VISX") to hold certain U.S. patents
covering excimer laser systems and procedures. Through its wholly-owned
subsidiary, Lens Express, Inc., the Company sells contact lenses and related
products.
The Company has sold its vision correction centers in the U.K. On July 23,
1997, the Company agreed to sell, and LCA-Vision Inc. (LCA) agreed to acquire,
all the outstanding stock of Refractive Centers International, Inc. ("RCII"), a
Company subsidiary which owns and operates the Company's Vision Center
business. RCII was previously recorded as a business segment and has been
reported as a discontinued operation (see note five).
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying consolidated financial statements have been prepared by the
Company without audit, pursuant to the rules and regulations of the Securities
and Exchange Commission. In the opinion of the Company, these consolidated
financial statements contain all adjustments (consisting of only normal,
recurring adjustments) necessary to present fairly the consolidated financial
position of Summit Technology, Inc. and subsidiaries at June 30, 1997 and the
results of operations for the three and six month periods ended June 30, 1997
and 1996 and cash flows for the six month periods ending June 30, 1997 and 1996.
The accompanying consolidated financial statements and related notes should be
read in conjunction with the Company's Annual Report on Form 10-K for the year
ended December 31, 1996. The results of operations for the three and six month
periods ended June 30, 1997 are not necessarily indicative of the results to be
expected for the full year.
Net Income (loss) Per Share
Net income (loss) per common share is based on the weighted average number of
common shares outstanding during each period after giving effect to stock
options considered to be dilutive common stock equivalents.
In February 1997, the Financial Accounting Standards Board ("FASB") issued
statement of Financial Accounting Standards No. 128 Earnings Per Share
("Statement 128"). Statement 128 replaces the presentation of primary earnings
per share ("EPS") and fully diluted EPS with basic EPS and diluted EPS,
respectively. Statement 128 is effective for both interim and annual periods
ending after December 15, 1997 and once implemented will require restatement of
all prior EPS data to conform with Statement 128. Such restatement will not be
material.
5
<PAGE> 6
PART I: FINANCIAL INFORMATION
ITEM 1: FINANCIAL STATEMENTS (CONTINUED)
SUMMIT TECHNOLOGY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(3) INVENTORIES (IN THOUSANDS)
Inventories consist of the following:
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31
1997 1996
------- -----------
<S> <C> <C>
Raw materials and subassemblies (net) $ 1,623 $ 2,243
Work in process 1,101 728
Finished goods 14,292 12,877
------- -------
$17,016 $15,848
------- -------
</TABLE>
(4) DISCONTINUED OPERATION
The Company has sold its vision correction centers in the U.K. On July 23, 1997,
the Company agreed to sell, and LCA-Vision Inc. (LCA) agreed to acquire, all the
outstanding stock of RCII, a Company subsidiary which owns and operates the
Company's Vision Center business. In exchange, LCA agreed to issue approximately
17 million shares of LCA-Vision's common stock, approximately 9 million of which
the Company intends to distribute to its shareholders as soon as practical after
the closing and registration of such shares by LCA. The remaining shares, which
represent approximately 20 percent of LCA's outstanding shares, will be held by
the Company. The Company has agreed that RCII will have a cash balance of $10
million on the closing date. This transaction is subject to several conditions,
including Hart-Scott-Rodino compliance and the closing of bank financing by LCA.
(5) CONTINGENCIES
U.S. PATENT LITIGATION AGAINST VISX
On June 18, 1997, the Company and VISX, Inc. settled all outstanding U.S. and
international patent infringement disputes between them, including the
infringement litigation in Delaware related to the Company's Azema patent and in
Canada related to VISX's L'Esperance patents. Under the settlement, VISX and the
Company have released each other and their customers from claims of past
infringement and have cross-licensed each other's foreign patents in the field
of laser ablation of corneal tissue. In addition, as part of the agreement, an
exclusive license to the relevant U.S. Azema patents will be contributed to
Pillar Point Partners. The settlement requires an exchange of payments resulting
in a net payment of $4.5 million to the Company. Excluded from the settlement is
the lawsuit brought by VISX Partner, Inc. against Summit Partner, Inc. in
Massachusetts in connection with partnership matters.
6
<PAGE> 7
PART I: FINANCIAL INFORMATION
ITEM 1: FINANCIAL STATEMENTS (CONTINUED)
SUMMIT TECHNOLOGY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
GERMAN PATENT LITIGATION
On August 3, 1995, a German court determined that the Schwind Keratom ophthalmic
excimer laser system distributed by Coherent, and the Chiron Technolas Keracor
116 ophthalmic excimer laser system distributed by Chiron Technolas, infringe
the German counterpart of the Azema Patent. The court has entered cease and
desist orders against Schwind and Chiron Technolas and has ordered them to pay
damages to the Company for past infringements. Both the Schwind and Chiron
Technolas excimer laser systems are manufactured in Germany. On September 5,
1995, the Company posted the requisite bond in Germany to enforce the injunction
issued against Chiron Technolas by the German court, as a result of which Chiron
Technolas is now prohibited from manufacturing, selling or using its Keracor 116
ophthalmic excimer laser systems in Germany, where its production facility is
located. Chiron Technolas and Schwind appealed the judgment. On October 17,
1996, Schwind agreed to dismiss its appeal and pay the Company 1.23 million
German marks (approximately $800,000) in satisfaction of the Company's judgment.
The Chiron Technolas appeal was recently decided in favor of the Company. Chiron
Technolas may appeal further to the German Supreme Court. If the Chiron
Technolas appeal is decided against the Company, the infringement verdict in
Germany will be overturned and the Company will be liable for damages which may
or may not exceed the amount of the bond. This bond is included in current
assets as restricted cash of $1.5 million at December 31, 1996.
PILLAR POINT PARTNERS PATENT LITIGATION
The Company is aware that certain U.S. ophthalmologists are performing
refractive procedures with so-called homemade excimer lasers or with gray market
Company excimer systems acquired from overseas. These homemade and gray market
systems have not received PMA approval and have been declared illegal by the
FDA. These systems have not been determined to be safe or effective by the FDA,
and are apparently unregulated. Users have not been limited either to the amount
of refractive correction they can perform, or to the scope of advertising they
can use to encourage consumers to have the procedure. As a consequence, doctors
in the United States who purchase an approved system may be put at a commercial
disadvantage. Moreover, users of unapproved systems are not licensed under the
Pillar Point Patents, and have not been paying procedure royalties. Pillar Point
continues to spend significant amounts of money in litigation with certain users
of this equipment. The proliferation of these unapproved devices may negatively
impact the Company's business, financial position and results of operations
through loss of sales to unapproved lasers, loss of patent royalty revenues from
Pillar Point Partners, and the potential damage to the industry, at this very
early stage, posed by these unapproved devices.
Pillar Point Partners has commenced patent infringement litigation against
certain ophthalmologists believed to be using homemade laser systems not
licensed under patents held by Pillar Point Partners, as well as one alleged
manufacturer of such laser systems and an individual believed to be inducing
infringement of such patents. These actions are presently pending as Pillar
Point Partners, et al. v. David Dulaney, et al. (U.S. District Court, District
of Arizona, Civil Action No. 96-2051PHXPGR); Pillar Point Partners, et al. v.
Jon G. Dishler, et al. (U.S. District Court, District of Colorado, Civil Action
No. 96-N-2351); Pillar Point Partners, et al. v. Jui-Teng Lin, et al. (U.S.
District Court, Middle District of Florida, Civil Action No. 97-54-CV-ORL-22);
and Pillar Point Partners, et al. v. William D. Appler (U.S. District Court,
District of Columbia, Civil Action No. 1:96CV02082). The defendants in the
Barnet and Dishler actions have asserted counterclaims seeking declarations that
the patents in suit are invalid and unenforceable. Those defendants have also
raised antitrust counterclaims. In addition, the Company is pursuing litigation
against certain other parties engaged in similar activities, including an
importer, a
7
<PAGE> 8
PART I: FINANCIAL INFORMATION
ITEM 1: FINANCIAL STATEMENTS (CONTINUED)
SUMMIT TECHNOLOGY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
service provider and certain other ophthalmologists, some of whom have asserted
antitrust and other counterclaims against the Company.
In October, 1996, Autonomous Technologies Corporation ("Autonomous") sued Pillar
Point Partners, the Company and VISX (and certain affiliates of the Company and
VISX) in the Federal District Court for Delaware. In this action, Autonomous
seeks, inter alia, a declaratory judgment that it does not infringe a certain
United States Patent held by Pillar Point Partners, or, alternatively, a
judgment ordering that all U.S. patents held by Pillar Point Partners, together
with their foreign counterparts, be deemed unenforceable and/or be licensed to
Autonomous.
In July, 1997, John Taboada filed a complaint in the United States District
Court for the Western District of Texas against Stephen L. Trokel, Visx, Visx
Partner, Inc., Summit Partner, Inc., and Pillar Point Partners. In the first
two counts of the complaint, Taboada seeks a declaration that he is either the
sole inventor or a joint inventor of U.S. Patent No. 5,108,388 (the " '388
Patent") which names Dr. Trokel as the inventor. The '388 Patent has been
assigned to VISX and is licensed to Pillar Point Partners. Taboada also seeks
to recover royalties paid to one or more of the defendants for licenses granted
under the '388 Patent, charges defendants with infringement of the '388 Patent,
and seeks monetary damages and injunctive relief.
VISX ROYALTY ACTION
On August 28, 1996, an affiliate of VISX, purporting to act on behalf of Pillar
Point Partners, commenced a lawsuit against the Company in the United States
District Court for the District of Massachusetts. The suit alleges that the
Company owes equipment royalties to Pillar Point Partners of not less than $4.5
million together with interest, costs and attorneys' fees. The Company denies
these allegations and intends to contest them vigorously. However, there can be
no assurance that the lawsuit will be resolved in the Company's favor or that an
adverse judgment or settlement would not have a material adverse affect on the
results of operations of the Company in the period in which it occurs.
FTC INVESTIGATION
On October 13, 1995, the Company received notice that the FTC initiated an
investigation to determine whether Pillar Point Partners, VISX the Company or
any of their predecessors, alone or in conjunction with others, is engaging or
has engaged in any unfair methods of competition, in violation of the Federal
Trade Commission Act, relating to certain arrangements concerning patents on
devices and procedures, and/or practices relating to the sale or distribution
of certain ophthalmic surgical devices. The FTC has issued subpoenas to the
Company and others (including one officer of the Company and David F. Muller,
the Company's former Chairman and Chief Executive Officer) for testimony and to
produce certain materials and information relating to the subject matter of the
investigation. The FTC investigating staff has informed the Company that it has
reason to believe that a violation of the Federal Trade Commission Act may have
occured and that it is prepared to recommend that the Commission issue an
administrative complaint under the Act. The staff has also invited the Company
to engage in negotiation regarding these matters. There can be no assurance
that, if any such staff recommendation were made, the Commission would
ultimately authorize the filing of a complaint. In forming Pillar Point
Partners, the Company has taken measures to structure the partnership in a
manner consistent with U.S. antitrust laws. The compliance of Pillar Point
Partners' patent arrangements with the Federal Trade Commission Act may depend
upon the activities of the partners, a determination of what constitutes the
relevant market for purposes of such laws, the number and relative strength of
competitors in such markets and numerous other factors, many of which are
presently unknown or are beyond the control of Pillar Point Partners. There can
be no assurance that an administrative action, if one were commenced by the
FTC, will conclude that Pillar Point Partners' patent arrangements comply with
U.S. antitrust laws. The Company is unable to predict with certainy whether or
not, or when, any proceeding may be brought by the FTC, or the scope of relief,
if any, that may ultimately be ordered in the event that any such proceeding
were determined adversely to the Company and/or Pillar Point Partners. The
Company intends to vigorously contest any action challenging the lawfulness
of Pillar Point Partners' patent arrangements.
8
<PAGE> 9
PART I: FINANCIAL INFORMATION
ITEM 1: FINANCIAL STATEMENTS (CONTINUED)
SUMMIT TECHNOLOGY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
ANTITRUST LITIGATION
In June 1996, a Texas ophthalmologist, Robert G. Burlingame, sued Pillar Point,
VISX, the Company and certain affiliates of VISX and the Company in the Federal
District Court for the Northern District of California alleging that the
defendants have violated and are violating federal and state antitrust laws. The
plaintiff seeks damages of an unspecified amount, treble damages, attorneys'
fees and a permanent injunction against future violations. On September 5, 1996,
a Nevada ophthalmologist, John R. Shepherd, through his professional
corporation, commenced a similar lawsuit against the same parties, in the same
court, alleging substantially similar claims and seeking substantially similar
relief. Pillar Point Partners has stated that it believes the California
lawsuits are without merit and is contesting the suits vigorously.
SERIANI LITIGATION
On October 26, 1992, Joseph Seriani brought suit against Lens and certain of its
former shareholders in the Florida Circuit Court. The suit alleged violations of
the Florida Civil Remedies for Criminal Practices Act - the Florida civil RICO
statute - based on events which allegedly occurred in the mid-1980s. Seriani's
claims against Lens were dismissed several times for failure to state a viable
claim, but in each instance with leave to amend and refile. On May 15, 1996, the
date of the Company's acquisition of Lens, Seriani and his wife Rhonda Seriani
filed an amended complaint which included the Company as an additional
defendant. On November 25, 1996, the Serianis' voluntarily dismissed their
action against the Company and on March 7, 1997 voluntarily dismissed their
action against the remaining defendants, in each case without prejudice. On
March 24, 1997, the Seriani's commenced a new lawsuit against Lens and others in
the United States District Court for the Southern District of Illinois, alleging
substantially similar claims. The Company believes that the Serianis' suits
against the Company and Lens are and were without merit.
VERNON LITIGATION
On or about March 23, 1994, a former Lens employee filed a charge of
discrimination against Lens with the Equal Employment Opportunity Commission,
alleging sexual discrimination and harassment by certain co-employees, and
retaliation against her by Lens when she was terminated after making the claim.
After an investigation, the EEOC's Legal Department concluded that no probable
cause existed. On or about February 1, 1996, the former employee sued Lens and
two Lens managers in the United States District Court for the Southern District
of Florida, alleging sexual harassment and other state and federal charges and
seeking unspecified compensatory and punitive damages. All defendants have
denied the allegations. Subsequently, other present or former employees have
made similar allegations, and two have indicated that they intend to file suit
and have filed administrative complaints with the Florida Commission on Human
Relations. While Lens believes the claims to be without merit, there can be no
assurance that it will prevail in this litigation. Lens cannot predict the range
of possible compensatory damages, if any, or whether punitive damages may be
assessed.
9
<PAGE> 10
PART I: FINANCIAL INFORMATION
ITEM 1: FINANCIAL STATEMENTS (CONTINUED)
SUMMIT TECHNOLOGY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SHAREHOLDER ACTIONS
Between August, 1996 and October, 1996, fourteen shareholder actions were
commenced against the Company and certain of its officers in the United States
District Court for the District of Massachusetts. The actions were consolidated,
by order of the Court entered December 2, 1996, as In re Summit Technology
Securities Litigation, Civil Action No. 96-11589-JCT (the "Exchange Act
Action"). Plaintiffs filed a First Amended and Consolidated Class Action
Complaint (the "Complaint") on January 10, 1997.
In the Complaint, plaintiffs claim to have been purchasers of the Company's
Common Stock at various times between May, 1995 and June, 1996. They claim
violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934
arising out of public statements made by the Company or its officers. Plaintiffs
allege that the statements made material misrepresentations of fact, or failed
to disclose material information necessary to make statements made not
misleading, concerning a variety of matters -- including, for example, alleged
sale of laser systems in contravention of FDA regulations, alleged patent
royalty payments owed by the Company, alleged defects in the manner by which the
Company obtained FDA approval for the Company's Excimer System, alleged adverse
side effects of use of the Company's laser systems, alleged size of the market
for Laser Vision Correction systems and procedures in the U.S., alleged
competitive position of the Company's Excimer System compared with excimer
systems under development or sold by competitors, and an alleged "write-off"
arising from the acquisition of Lens Express, Inc. Among the statements which
plaintiffs claim to have been misleading or to have unlawfully omitted material
information are statements contained in a number of the Company's filings with
the SEC pursuant to the reporting and other requirements of the Securities
Exchange Act of 1934 or the Securities Act of 1933. Such filings include:
The Company's Annual Report on Form 10-K for the fiscal year ended December
31, 1994
The Company's Quarterly Report on Form 10-Q for the quarterly period ended
March 31, 1995
The Company's Quarterly Report on Form 10-Q for the quarterly period ended
June 30, 1995
The Company's Quarterly Report on Form 10-Q for the quarterly period ended
September 30, 1995
The Company's Registration Statement on Form S-3 and Prospectus dated
October 23, 1995
The Company's Annual Report on Form 10-K for the fiscal year ended December
31, 1995
10
<PAGE> 11
PART I: FINANCIAL INFORMATION
ITEM 1: FINANCIAL STATEMENTS (CONTINUED)
SUMMIT TECHNOLOGY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In addition, plaintiffs claim violations of Section 20A of the Securities
Exchange Act of 1934 by certain officers of the Company due to alleged sales of
Common Stock of the Company while in the possession of material non-public
information.
Plaintiffs seek certification of the Exchange Act Action as a class action,
purportedly on behalf of all purchasers of the Company's Common Stock, other
than defendants and certain affiliated persons and entities, between March 31,
1995 and July 3, 1996. Plaintiffs seek unspecified damages, interest, costs and
expenses.
On October 1, 1996, an additional action was commenced in the United Sates
District Court for the District of Massachusetts against the Company, its
directors, certain of its officers and the four underwriters of the Company's
October, 1995 Common Stock offering. The action was coordinated with In re
Summit Technology Securities Litigation, Civil Action No. 96-11589, by order of
the Court dated December 2, 1996 and is presently pending as In re Summit
Technology Securities Litigation (the Burke Action), Civil Action No. 96-11589
(the "Burke Action"). Plaintiff filed an Amended Complaint (the "Amended
Complaint") on January 10, 1997.
In the Amended Complaint, plaintiff claims to have purchased shares of the
Company's Common Stock pursuant to the Company's Registration Statement on Form
S-3 dated October 23, 1995, and declared effective by the Securities and
Exchange Commission on or about October 24, 1995 (the "October Registration
Statement"). He claims violations of Sections 11, 12(2) and 15 of the Securities
Act of 1933 arising out of alleged material misstatements of fact in the October
Registration Statement or failures to disclose material information necessary to
make statements made in the October Registration Statement not misleading. He
claims misrepresentations or omissions concerning a variety of matters --
including, for example, alleged adverse side effects of use of the Company's
laser products, alleged sale by the Company of its products in contravention of
FDA regulations and alleged royalty payments owed by the Company. The Amended
Complaint seeks unspecified damages, interest, costs and expenses. The plaintiff
seeks certification of the Burke Action as a class action, purportedly on behalf
of all purchasers of the Company's Common Stock pursuant to the October
Registration Statement, other than defendants and certain affiliated persons and
entities.
On June 3, 1997, the Court denied without opinion the Company's motion to
dismiss the Exchange Act Action and the Burke Action.
On December 20, 1996, a shareholder of the Company filed in the United States
District Court for the District of Massachusetts a derivative action,
purportedly on behalf of the Company, against the Company as nominal defendant,
its directors and certain of its present or former officers. This action is
presently pending as West v. Muller, et al, Civil Action No. 96-12576-JLT (the
"Derivative Action"). The complaint in the Derivative Action alleges that the
defendant directors and officers caused the Company to make public statements,
in violation of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934
and
11
<PAGE> 12
PART I: FINANCIAL INFORMATION
ITEM 1: FINANCIAL STATEMENTS (CONTINUED)
SUMMIT TECHNOLOGY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
of Sections 11 and 12 of the Securities Act of 1933, which contained material
misrepresentations of fact or which failed to disclose material information
necessary to make the statements made not misleading. It alleges that this
conduct has rendered the Company liable to the plaintiffs in, and has exposed
the Company to the expense and inconvenience of defending, the Exchange Act
Action and the Burke Action and has harmed the Company's reputation, thereby
limiting its access to capital markets. The complaint further alleges that the
defendant directors and officers improperly traded in the Company's Common Stock
based upon material non-public information. The complaint seeks recovery from
the defendant directors and officers, in an unspecified amount, for the damages
allegedly caused by their alleged misconduct. By order dated July 22, 1997, the
Derivative Action was consolidated with the Exchange Act Action for all
purposes.
On May 30, 1997, an alleged purchaser of call options with respect to Summit
common stock commenced an action against the Company and certain of its present
or former officers in the United States District Court for the District of
Massachusetts. The action was filed as Myers V. Summit Technology, Inc., et
al., Civil Action No. 97-11167-JLT. Plaintiff in this action claims to have
purchased twenty (20) Summit $35 calls on February 9, 1996, which he claims
expired worthless on September 20, 1996. Plaintiff claims violations of
Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 arising out of
public statements made by the Company or its officers. Plaintiff in this action
seeks certification of the action as a class action, purportedly on behalf of
all persons or entities (other than the defendants, members of Summit's Board
of Directors, and various Summit affiliates) who purchased Summit call options
or sold Summit put options during the period beginning on March 31, 1995
through and including July 3, 1996. Plaintiff seeks unspecified damages,
interest, costs and expenses. Other than allegations relating to plaintiff
himself and the class he seeks to represent, the allegations of the complaint
are substantially similar to those made in the first amended and consolidated
class action complaint filed in the Exchange Act Action. Under provisions of a
pre-trial order previously entered in the Exchange Act Action, this action has
been consolidated with the Exchange Act Action for all purposes.
The Company believes that the allegations in all of the complaints in the
actions described herein are without merit, and it intends to defend the
actions vigorously. There can be no assurance that the Company will not be
served with additional complaints of a similar nature in the future, that the
Company will ultimately prevail in the pending or any possible additional
actions, or that the actions, individually or in the aggregate, will not have a
material adverse effect on the Company.
LENS EXPRESS ACTION
Certain former shareholders of Lens Express, Inc. (the "Lens Shareholders")
commenced an action against the Company and David Muller, the Company's former
Chairman and Chief Executive Officer, in the United States District Court for
the Southern District of Florida. The action is pending as Golan, et al. V.
Summit Technology, et al., Case No. 97-6589-Ferguson. The Complaint alleges that
material misrepresentations and nondisclosures by the Company caused the Lens
Shareholders to enter into the Merger Agreement with the Company, pursuant to
which the Company acquired all of the outstanding shares of common stock of Lens
Express. These alleged misrepresentations and nondisclosures are
12
<PAGE> 13
PART I: FINANCIAL INFORMATION
ITEM 1: FINANCIAL STATEMENTS (CONTINUED)
SUMMIT TECHNOLOGY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
substantially similar to the misrepresentations and nondisclosures alleged in
the first amended and consolidated class action complaint filed on January 10,
1997 in In Re Summit Technology Securities Litigation, Civil Action No.
96-11589-JLT (the "Exchange Act Action"). In addition, the Lens Shareholders
allege that the Company breached the Merger Agreement and induced them to agree
to close on the Agreement by failing to disclose alleged material adverse
financial information about the Company, including alleged declines in the
Company's revenue and earnings. The Lens Shareholders also claim that the
Company improperly failed to provide them with an opinion letter which the Lens
Shareholders allege was necessary to make the shares of Summit stock they
received in the merger tradeable in the stock market.
The Lens Shareholders allege causes of action under Section 12 of the Securities
Act of 1933 and Sections 10(b) and 20(a) of the Securities Exchange Act of 1934.
They also allege causes of action for breach of contract, negligent
misrepresentation, fraudulent misrepresentation, and constructive trust. They
ask that the Merger Agreement be rescinded and that Lens Express be restored to
them, that a receiver be appointed to supervise the management of Lens Express
during the pendency of the litigation, and that they be awarded unspecified
compensatory and punitive damages, interest, costs and expenses.
The Company believes that the allegations in the Complaint are without merit,
and it intends to defend the action vigorously. There can be no assurance that
the Company will ultimately prevail in the action, or that the action will not
have a material adverse effect on the Company.
13
<PAGE> 14
PART I: FINANCIAL INFORMATION
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GENERAL
The Company manufactures and sells laser systems and related products to
correct vision disorders, participates in per procedure royalties from its
ownership in Pillar Point Partners and sells contact lenses and related
products. The Company also operates several centers that provide vision
correction services to the public. The results of operations for this business
have been classified as a discontinued operation for all periods presented in
the consolidated financial statements. On July 23, 1997 the Company agreed to
sell and LCA-Vision, Inc. agreed to acquire, all of the outstanding stock of
RCII, a Company subsidiary which owns and operates the Company's Vision Center
business. The Company is continuing to evaluate its operations and strategies,
which may result in the acquisition by the Company of one or more additional
businesses or the total or partial disposition of one or more of the Company's
businesses.
RESULTS OF OPERATIONS
1997 AS COMPARED WITH 1996
REVENUES
Revenues for the three months ended June 30, 1997 increased 36% to $23.6 million
from $17.4 million for the three months ended June 30, 1996. Revenues for the
six months ended June 30, 1997 increased 4% to $44.3 million from $42.3 million
for the six months ended June 30, 1996. These increases were primarily due to an
increase in royalty revenues and to a lesser extent increases in lease and
service revenues. The Company leases its lasers under several leasing programs
and recognizes the revenue over the lease terms. Sales of laser systems and
product upgrades also increased for the three month period ended June 30, 1997
as compared to the three month period ended June 30, 1996. Sales of laser
systems and product upgrades decreased, however, for the six month period ended
June 30, 1997 as compared to the six month period ended June 30, 1996. Sales of
contact lenses and related products decreased for the three and six month
periods ended June 30, 1997 as compared to the three and six month periods ended
June 30, 1996.
Due to the competitive environment and the proliferation of unapproved,
unlicensed laser systems in the U.S., system sales are likely to remain weak and
the Company may experience a decrease in unit sales and the average selling
price of its laser systems for the remainder of 1997 as compared to 1996.
Patent royalty revenues from Pillar Point Partners increased significantly in
the three and six month period ended June 30, 1997 from the three and six month
periods ended June 30, 1996. This trend may continue in 1997 although there are
many risks and contingencies that could adversely affect this trend. Some of
these are: (a) consumer and professional acceptance of laser vision correction
fails to grow; (b) licensees fail to honor their royalty payment obligations;
(c) the continued proliferation of unapproved, unlicensed laser systems in the
U.S.; and (d) the Company's rights to collect such payments and to participate
in the profits of Pillar Point Partners are adversely affected. The Company,
VISX and Pillar Point Partners are involved in several lawsuits with respect to
royalties, patent infringement and related antitrust matters and are the subject
of an FTC investigation. If any of these matters are resolved adversely to the
Company it would likely have an adverse effect on the Company's royalty
revenues.
14
<PAGE> 15
PART I: FINANCIAL INFORMATION
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONT'D.)
COST OF REVENUES
Cost of revenues as a percentage of revenues decreased to 61% for the three
months ended June 30, 1997 from 81% for the three months ended June 30, 1996.
Cost of revenues as a percentage of revenues decreased to 64% for the six months
ended June 30, 1997 from 73% for the six months ended June 30, 1996. These
decreases were primarily a result of lower cost of revenues associated with
royalties. On February 18, 1997, the Company announced that it received FDA
approval to commercially market and sell its SVS APEX PLUS excimer laser system
("Apex Plus") to treat nearsightedness. Prior to Apex Plus approval, the Company
had FDA approval to treat nearsightedness only using its Apex excimer laser
system ("Apex"). The Apex Plus has been used outside the U.S. to treat
nearsightedness, farsightedness and astigmatism. The Company does not have
approval in the U.S. to treat farsightedness and astigmatism with the Apex Plus.
During the three and six month periods ended 1997, the Company upgraded several
Apex systems to Apex Plus systems at prices approximating the cost of the
upgrade. The Company expects this upgrade program to continue through at least
the remainder of 1997.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative expenses for the three months ended June 30,
1997 decreased 48% to $3.7 million from $7.1 million for the three months ended
June 30, 1996. Selling, general and administrative expenses for the six months
ended June 30, 1997 decreased 39% to $8.7 million from $14.3 million for the six
months ended June 30, 1996. This decrease was primarily a result of a decrease
in commission expense on sales of laser systems and lower selling expenses
related to selling contact lenses and related products. In addition, the Company
recorded a one-time reduction in operating expenses of $1.7 million in the
second quarter of 1997 resulting from the settlement of patent litigation.
RESEARCH AND DEVELOPMENT EXPENSES
Research and development expenses for the three months ended June 30, 1997
decreased 20% to $1.5 million from $1.9 million for the three months ended June
30, 1996.Research and development expenses for the six months ended June 30,
1997 decreased 1% to $3.2 million from $3.3 million for the six months ended
June 30, 1996. This decrease was primarily related to decreased spending on
research and development project spending.
LEGAL EXPENSES
Legal expenses for the three months ended June 30, 1997 increased 38% to $2.2
million from $1.6 million for the three months ended June 30, 1996. Legal
expenses for the six months ended June 30, 1997 increased 83% to $4.2 million
from $2.3 million for the six months ended June 30, 1996. This increase is
primarily related to the patent litigation initiated by the Company and/or
Pillar Point Partners to defend its intellectual property, to the defense of
antitrust and similar claims asserted against Pillar Point Partners and in
defense of shareholder litigation initiated against the Company in 1996. The
Company expects to continue to incur substantial legal expenses for at least
the remainder of 1997.
NET (INCOME) LOSS
Net income from continuing operations for the three months ended June 30, 1997
was $2.6 million as compared to a loss from continuing operations of $5.6
million for the three months ended June 30, 1996. Net income from continuing
operations for the six months ended June 30, 1997 was $1.2 million as compared
to a net loss from continuing operations of $5.7 million for the six months
ended June 30, 1996.
15
<PAGE> 16
PART I: FINANCIAL INFORMATION
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONT'D.)
Net loss from discontinued operations for the three and six month periods ended
June 30, 1996 was $6.4 million and $9.8 million, respectively.
INCOME TAXES
Due to the uncertainties noted above, the Company has continued to provide a
100% valuation allowance against its net deferred tax asset of approximately
$19.7 million.
LIQUIDITY AND CAPITAL RESOURCES
The Company's liquidity requirements have been met through external debt and
equity financing. As of June 30, 1997, the Company's cash, cash equivalent
balances and short-term investments increased $5.0 million to $68.4 million from
$63.4 million as of December 31, 1996. Cash provided by operations of $3.9
million resulted primarily from net income after depreciation and amortization
of $3.3 million, a decrease in net assets held for discontinued operations of
$1.4 million, a decrease in prepaid expenses and other current assets of $.6
million and an increase in net amounts due to related party of $2.5 million.
These increases to cash and cash equivalents were offset in part by an increase
in inventories of $1.2 million, an increase in accounts receivable of $.5
million, a decrease in deferred revenue of $1.1 million and a decrease in
accounts payable and accrued expenses of $1.1 million.
Cash used by investing activities of $11.1 million resulted primarily from a net
increase in short and long term investments of $11.1 million, additions to
property and equipment of $1.4 million and a decrease in patents due to
settlement of litigation of $1.3 million.
Cash used by financing activities of $2.3 million resulted from net repayments
of long-term debt obligations of $2.6 million. This cash provided by financing
activities was offset in part by proceeds from the exercise of stock options of
$.3 million.
In March of 1996, the Company obtained a $20.0 million unsecured revolving
credit facility. The facility expires in March 1999 and allows the Company to
borrow at LIBOR plus 75 basis points or Prime Rate. At June 30, 1997, the
Company had no borrowings under this facility. Also in March 1996, the Company's
wholly-owned subsidiary, RCII, obtained a $20.0 million unsecured term loan. The
term loan is guaranteed by the Company. At June 30, 1997 $13.8 million of
borrowings were outstanding under this facility. This obligation is included in
the Company's consolidated balance sheet as of June 30, 1997. In July, 1997, the
Company and RCII entered into a Loan Modification Agreement with their lenders
pursuant to which, inter alia, RCII was released from liability and the Company
became the principal obligor under the term loan.
16
<PAGE> 17
PART II: OTHER INFORMATION
ITEM 1: LEGAL PROCEEDINGS
SUMMIT TECHNOLOGY, INC. AND SUBSIDIARIES
ITEM 1. LEGAL PROCEEDINGS -- See note(5) to financial statements, above.
17
<PAGE> 18
PART II: OTHER INFORMATION
ITEM 4: MATTERS SUBMITTED TO SHAREHOLDERS
SUMMIT TECHNOLOGY, INC. AND SUBSIDIARIES
ITEM 4. MATTERS SUBMITTED TO SHAREHOLDERS
The following matters were submitted to a vote of the shareholders at the
Company's annual meeting held on June 25, 1997:
Proposal 1. Richard F. Miller was reelected to the Board of Directors
for a three year term.
Proposal 2. The shareholders approved adoption of the Company's 1997
Stock Option Plan, with 1,500,000 shares of common
stock reserved for issuance thereunder.
Proposal 3. The shareholders approved an amendment to the Company's
Articles of Organization and Bylaws increasing the
number of directors from five to seven.
The following table summarizes the election results:
<TABLE>
<CAPTION>
FOR AGAINST ABSTAIN
--- ------- -------
<S> <C> <C> <C>
PROPOSAL 1 23,744,613 1,915,239
PROPOSAL 2 20,910,978 4,359,519 389,355
PROPOSAL 3 22,537,404 2,243,395 241,829
</TABLE>
ITEM 5. OTHER INFORMATION
The current United Parcel Service strike may have an adverse effect on the
business of Lens, which is substantially reliant on the availability of air
courier services.
18
<PAGE> 19
PART II: OTHER INFORMATION
ITEM 6: EXHIBITS AND REPORTS ON FORM 8-K
SUMMIT TECHNOLOGY, INC. AND SUBSIDIARIES
EXHIBITS AND REPORTS ON FORM 8-K
a.) Exhibits
11 Statement Re: Computation of per share earnings
b.) Reports of Form 8-K
On June 25, 1997 the Company filed a form 8-K related to
(i) its settlement of certain patent litigation with
Visx, (ii) an additional securities lawsuit filed
against the Company by an alleged purchaser of call
options with respect to Company stock and (iii) a
lawsuit initiated against the Company by the former
shareholders of Lens.
CAUTIONARY STATEMENTS AND RISK FACTORS AFFECTING FUTURE OPERATING RESULTS
This report contains information about the Company's future business prospects
including, without limitation, statements about the size of the potential
markets for laser vision correction and the Company's excimer system, the
potential for royalty revenues and the success of the Company's Lens Express
subsidiary. Some of these statements may be considered "forward looking". The
following cautionary statements identify important factors that may cause actual
results to differ materially from those reflected in, or implied by, any such
forward looking statements.
The Company's profitability and growth depend upon broad acceptance of laser
vision correction in the U.S., and there can be no assurance that laser vision
correction will be broadly accepted as an alternative to existing methods of
treating refractive vision disorders or that, if broad acceptance occurs, the
Company will benefit. Acceptance of laser vision correction may be affected
adversely by its cost, concerns relating to its safety and efficacy, the lack of
third party reimbursement, general resistance to surgery, the effectiveness of
alternative methods of correcting refractive vision disorders, the lack of
long-term follow-up data, the possibility of unknown side effects, and the cost
of the Excimer System. Laser system sales may be negatively impacted by
competition, the proliferation of unapproved devices, patent disputes, changing
technologies and delays in regulatory approvals. Participation in per-procedure
Royalties may also be negatively impacted by challenges to Pillar Point
Partners, the Company's patents and/or the FTC's investigation regarding Pillar
Point Partners, VISX and the Company. Sales of contact lenses and related
products by the Company's Lens Express subsidiary may be adversely affected by
lack of consistent sources of supply, inability to obtain suitable advertising,
burdensome laws and regulations and competition. The Company's financial
position and results of operations are likely to be negatively impacted if the
Company is unsuccessful in any of these areas.
For additional information and risks associated with the Company's
business, please review the Company's Annual Report on Form 10-K for the year
ended December 31, 1996, a copy of which is available from the Company without
charge.
19
<PAGE> 20
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
SUMMIT TECHNOLOGY, INC.
Date: August 14, 1997 By: /s/ Robert J. Palmisano
--------------- ---------------------------
Robert J. Palmisano
Chief Executive Officer
Date: August 14, 1997 By: /s/ Rajiv Bhatt
--------------- -------------------
Rajiv Bhatt
Executive Vice President and Chief
Financial Officer
20
<PAGE> 1
Exhibit 11
SUMMIT TECHNOLOGY, INC.
STATEMENT RE: COMPUTATION OF PER SHARE EARNINGS
<TABLE>
<CAPTION>
THREE MONTHS SIX MONTHS
ENDED JUNE 30, ENDED JUNE 30,
(IN THOUSANDS, EXCEPT PER SHARE AMOUNT 1997 1996 1997 1996
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net income (loss) $ 2,572 $(11,983) $ 1,172 $(15,535)
Primary income (loss) per share:
Weighted average common shares outstanding 31,158 30,962 31,090 30,953
Weighted average stock options outstanding 125 -- 153 --
------- -------- ------- --------
Total weighted average common shares outstanding 31,283 30,962 31,243 30,953
------- -------- ------- --------
Income (loss) per share $ .08 $ (.39) $ .04 $ (.50)
------- -------- ------- --------
Fully diluted income (loss) per share:
Weighted average common shares outstanding 31,158 30,962 31,090 30,953
Weighted average stock options outstanding 132 -- 153 --
------- -------- ------- --------
Total weighted average common shares outstanding 31,290 30,962 31,243 30,953
------- -------- ------- --------
Income (loss) per share $ .08 $ (.39) $ .04 $ (.50)
------- -------- ------- --------
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE JUNE 30,
1997 FORM 10-Q AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<EXCHANGE-RATE> 1
<CASH> 34,476
<SECURITIES> 33,892
<RECEIVABLES> 9,779
<ALLOWANCES> 592
<INVENTORY> 17,016
<CURRENT-ASSETS> 99,244
<PP&E> 21,561
<DEPRECIATION> 12,400
<TOTAL-ASSETS> 132,817
<CURRENT-LIABILITIES> 20,300
<BONDS> 0
0
0
<COMMON> 313
<OTHER-SE> 103,138
<TOTAL-LIABILITY-AND-EQUITY> 132,817
<SALES> 44,342
<TOTAL-REVENUES> 44,342
<CGS> 28,213
<TOTAL-COSTS> 28,213
<OTHER-EXPENSES> 16,154
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 647
<INCOME-PRETAX> 1,280
<INCOME-TAX> 108
<INCOME-CONTINUING> 1,172
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,172
<EPS-PRIMARY> .04
<EPS-DILUTED> .04
</TABLE>
