This paper document is being filed pursuent to Rule 902(g) of Regulation S-T


                   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 March 31,June 30, 1997


                      Commission file number 0-26596


                    Computational Systems, Incorporated
         ------------------------------------------------------
         (Exact Name of Registrant as Specified in its Charter)


           Tennessee                                    62-1198047
- ----------------------------------------------------------------          ------------------------------------
 (State or Other Jurisdiction              of            (I.R.S. Employer Identification No.)
of Incorporation or Organization)

         835 Innovation Drive
         Knoxville, Tennessee                                  37932
- ---------------------------------------                  ---------------------------
(Address of Principal Executive Office)                      (Zip Code)


Registrant'sRegistrants Telephone Number, Including Area Code:    (423) 675-2110




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.   Yes   X    No

Common Stock outstanding - 5,003,8455,023,023 shares at March 31,June 30, 1997







Page 1 of   14   pages.
Exhibit Index on page   13   .



                     PART 1 - FINANCIAL INFORMATION


Item 1.  Financial Statements.
- -----------------------------------------------------------------------------
Consolidated Condensed Balance Sheets



Consolidated Condensed Statements of Operations



Consolidated Condensed Statements of Cash Flows



Notes to Consolidated Condensed Financial Statements



              COMPUTATIONAL SYSTEMS, INCORPORATED  AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS


                                                      
MARCH 31, DECEMBER 31, 1997 1996 (Unaudited) (Audited) ----------- ----------- ASSETS Current assets: Cash and cash equivalents $ 692,174 $ 4,576,801 Trade accounts receivable, less allowance for doubtful accounts 16,062,089 15,656,516 Inventories 3,144,321 3,190,964 Prepaid expenses and other current assets 903,485 906,733 ----------- ----------- Total current assets 20,802,069 24,331,014 ----------- ----------- Property, plant and equipment: Land 729,204 729,204 Building and improvements 7,812,000 6,714,979 Equipment and furniture 12,008,329 10,625,614 Construction-in-Progress ------- 1,293,587 ----------- ----------- 20,549,533 19,363,384 Less accumulated depreciation (6,479,637) (5,879,464) ----------- ----------- Property, plant and equipment, net 14,069,896 13,483,920 ----------- ----------- Other assets Other assets 826,226 552,777 Goodwill 6,194,663 6,292,490 Other intangible assets 664,288 612,646 ----------- ----------- Total assets $42,557,142 $45,272,847 =========== =========== LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable $ 2,193,819 $ 2,598,425 Accrued liabilities 3,975,925 7,222,579 Income taxes payable (31,938) 1,026,110 Deferred maintenance contract revenue 2,329,947 2,070,411 Line of credit 519,000 ------- ----------- ----------- Total current liabilities 8,986,753 12,917,525 Deferred maintenance contract revenue 612,661 668,862 ----------- ----------- Total liabilities 9,599,414 13,586,387 ----------- ----------- Shareholders' equity: Common stock,no par value, 50,000,000 shares authorized, 18,508,561 18,034,208 5,003,845 and 4,991,618 shares issued and outstanding in 1997 and 1996, respectively Additional paid-in capital 951,230 865,805 Retained earnings 13,497,937 12,786,447 ----------- ----------- Total shareholders' equity 32,957,728 31,686,460 ----------- ----------- Total liabilities and shareholders' equity $42,557,142 $45,272,847 =========== ===========
JUNE 30, DECEMBER 31, 1997 1996 ---------- ---------- (Unaudited) (Audited) ASSETS Current assets: Cash and cash equivalents $ 816,516 $ 4,576,801 Trade accounts receivable, less allowance for doubtful acccounts 15,399,795 15,656,516 Inventories 3,504,918 3,190,964 Prepaid expenses and other current assets 935,326 906,733 ---------- ---------- Total current assets 20,656,555 24,331,014 ---------- ---------- Property, plant and equipment: Land 729,204 729,204 Building and improvements 7,829,143 6,714,979 Equipment and furniture 13,071,978 10,625,614 Construction-in-Progress ------- 1,293,587 ---------- ---------- 21,630,325 19,363,384 Less accumulated depreciation (7,061,724) (5,879,464) ---------- ---------- Property, plant and equipment, net 14,568,601 13,483,920 ---------- ---------- Other assets Capitalized R&D and other assets 1,187,226 552,777 Goodwill 6,109,847 6,292,490 Other intangible assets 646,480 612,646 ---------- ---------- Total assets $43,168,709 $45,272,847 ========== ========== LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable $ 1,522,471 $ 2,598,425 Accrued liabilities 4,219,207 7,222,579 Income taxes payable (415,536) 1,026,110 Deferred maintenance contract revenue 2,337,362 2,070,411 Line of credit 1,438,000 ------- ---------- ---------- Total current liabilities 9,101,504 12,917,525 Deferred maintenance contract revenue 694,090 668,862 ---------- ---------- Total liabilities 9,795,594 13,586,387 ---------- ---------- Shareholders' equity: Common stock,no par value, 50,000,000 shares authorized, 5,023,023 and 4,991,618 shares issued and outstanding in 1997 and 1996, respectively 18,639,006 18,034,208 Additional paid-in capital 951,230 865,805 Retained earnings 13,782,879 12,786,447 ---------- ---------- Total shareholders' equity 33,373,115 31,686,460 ---------- ---------- Total liabilities and shareholders' equity $43,168,709 $45,272,847 ========== ========== The accompanying notes are an integral part of these consolidated financial statements.
COMPUTATIONAL SYSTEMS, INCORPORATED AND SUBSIDIARIES CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS (Unaudited)
Three Months Ended March 31, March 31,Six Months Ended June 30, June 30, June 30, June 30, 1997 1996 1997 1996 ----------- ----------- ----------- ----------- Revenues, net: Product $ 8,721,280 $ 7,932,848$9,035,800 $8,354,790 $17,757,080 $16,287,638 Services 5,753,268 2,798,4455,411,240 2,854,602 11,164,508 5,653,047 ----------- ----------- 14,474,548 10,731,293----------- ----------- 14,447,040 11,209,392 28,921,588 21,940,685 Cost of revenues: Product 2,178,165 2,316,0552,254,134 2,014,666 4,432,299 4,330,721 Services 4,018,907 2,180,2554,188,659 2,299,255 8,207,566 4,479,510 ----------- ----------- 6,197,072 4,496,310----------- ----------- 6,442,793 4,313,921 12,639,865 8,810,231 Gross margin 8,277,476 6,234,9838,004,247 6,895,471 16,281,723 13,130,454 ----------- ----------- ----------- ----------- Costs and expenses: Selling, general and administrative 5,634,274 4,355,0005,888,239 4,224,642 11,522,513 8,579,642 Research & development 1,611,124 1,206,1961,640,549 1,325,457 3,251,673 2,531,653 ----------- ----------- 7,245,398 5,561,196----------- ----------- 7,528,788 5,550,099 14,774,186 11,111,295 ----------- ----------- ----------- ----------- Income from operations 1,032,078 673,787475,459 1,345,372 1,507,537 2,019,159 ----------- ----------- ----------- ----------- Other income (expense) Interest expense (10,477) (1,146)(41,345) (221) (51,822) (1,366) Interest income 48,173 117,589(9,488) 134,872 38,685 252,460 Other income (expense), net 8,242 (5,859)7,053 4,347 15,295 (1,512) ----------- ----------- 45,938 110,584----------- ----------- (43,780) 138,998 2,158 249,582 ----------- ----------- ----------- ----------- Income before taxes 1,078,016 784,371431,679 1,484,370 1,509,695 2,268,741 Provision for income taxes 366,526 282,375146,736 534,374 513,262 816,749 ----------- ----------- ----------- ----------- Income after taxes $711,490 $501,996 =========== ===========$284,943 $949,996 $996,433 $1,451,992 ----------- ----------- ----------- ----------- Earnings per share $0.14 $0.10 =========== ===========$0.06 $0.19 $0.19 $0.29 Weighted average shares and equivalents outstanding 5,266,400 5,018,945 =========== ===========5,169,688 5,068,388 5,191,375 5,047,363 ----------- ----------- ----------- -----------
The accompanying notes are an integral part of these consolidated condensed financial statementsstatements. COMPUTATIONAL SYSTEMS, INCORPORATED AND SUBSIDIARIES CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (unaudited)(Unaudited)
ThreeSix Months Ended March 31, March 31,------------------------- June 30, June 30, 1997 1996 ---------- ---------- Cash flows from operating activities: Net income $711,490 $501,996$996,433 $1,451,992 Adjustments to reconcile net income to net cash provided (used) by operating activities: Depreciation and amortization 732,395 403,6561,484,383 1,120,084 Deferred income taxes 2,000----- (176,000) Changes in operating assets and liabilities: Accounts receivable (396,535) 553,405265,759 701,078 Income taxes refundable (payable) (981,661) (72,073)(1,365,259) 66,306 Inventories 37,334 (264,864)(327,394) (374,029) Prepaids & other current assets 3,248 71,587(28,593) 32,587 Other assets 5,697 (40,703)4,410 (170,062) Accounts payable (399,763) (16,760)(1,067,802) (323,789) Accrued liabilities (428,359) (516,951)(185,077) (68,756) Deferred maintenance contract revenue 203,335 347,497292,179 477,876 ---------- ---------- Net cash (used) provided by operating activities (510,819) 790,79069,039 2,737,287 ---------- ---------- Cash flows from investing activities: Purchase of property, plant and equipment (1,184,973) (1,108,041)(2,301,956) (2,965,297) Purchase of business (2,385,250) Investment in other assets (359,050)(743,719) ------ ---------- ---------- Net cash used in investing activities (3,929,273) (1,108,041)(5,430,925) (2,965,297) ---------- ---------- Cash flows from financing activities: Net borrowings under (repayments on) line of credit 519,0001,438,000 ------ Repayments of long-term debt (4,843) (5,821)(8,152) (8,994) Proceeds from issuance of common stock 41,308 59,610171,753 279,757 ---------- ---------- Net cash provided by financing activities 555,465 53,7891,601,601 270,763 ---------- ---------- Net increase (decrease) in cash and cash equivalents (3,884,627) (263,462)(3,760,285) 42,753 Cash and cash equivalents, at beginning of period 4,576,801 8,824,332 ---------- ---------- Cash and cash equivalents, at end of period $692,174 $8,560,870 ========== ==========$816,516 $8,867,085 ---------- ----------
The accompanying notes are an integral part of these consolidated condensed financial statements. COMPUTATIONAL SYSTEMS, INCORPORATED AND SUBSIDIARIES NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS 1. INTERIM FINANCIAL STATEMENTS: Information in the accompanying financial statements and notes to the financial statements for the interim periods is unaudited. The accompanying unaudited consolidated condensed financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of regulation S-X. Accordingly, they do not include all the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the threesix months ended March 31,June 30, 1997, are not necessarily indicative of the results that may be expected for the year ended December 31, 1997. For further information, refer to the consolidated financial statements and footnotes thereto included in the Company's Form 10-K for December 31, 1996. 2. INVENTORIES: Inventories consist of the following: March 31,June 30, December 31, 1997 1996 (Unaudited) (Audited) ----------- --------------------- Raw Materials 1,428,088$1,561,539 $1,406,893 Work in-process 574,127Work-in-process 748,962 649,589 Finished goods, net 1,142,1061,194,417 1,134,482 ----------- ----------- $3,144,321---------- $3,504,918 $3,190,964 =========== ===================== 3. CASH FLOW INFORMATION: March 31, March 31,June 30, June 30, 1997 1996 -------- ------------------- ----------- (Unaudited) (Unaudited) Supplemental disclosures of cash flows: Interest paid $ 36238,638 $ 1,4731,693 Income taxes paid, net $609,000 $461,899 On January 2, 1997 CSI issued$904,000 $857,894 The Company entered into the remainingfollowing noncash transaction to purchase M&D: common stock to the former owners of Maintenance & Diagnostic L.L.C. per the purchase agreement dated October 28, 1996. The value of the stock transferred wasvalued at $433,045. 4. RESEARCH AND DEVELOPMENT: The majority of research and development costs are expensed as incurred. Other research and development costsCosts incurred in developing a product during the period that begins when the product's prototype has been established and ending when the product is available for general release are capitalized and are amortized over the economic life of the product. Such costs capitalized in the threesix months ended March 31,June 30, 1997 amounted to $281,146.$638,860. These costs will be amortized on a per unit sold basis. Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Comparison of Three Months Ended March 31,June 30, 1997 and March 31,June 30, 1996 Revenues, Net. Net revenues increased 34.9%28.9% in the three months ended March 31,June 30, 1997 ("the(the 1997 quarter")quarter) to $14.5$14.4 million, compared to $10.7$11.2 million during the three months ended March 31,June 30, 1996 ("the(the 1996 quarter")quarter). Revenue from the sale of products increased 9.9%8.2% to $8.7$9.0 million in the 1997 quarter from $7.9$8.4 million in the 1996 quarter. The increase in product revenues is due primarily to significant increases in the 2120 two channel vibration analysis, motor, and corrective product line, the latest version of the Company's original product line.lines offset slightly by sales decreases in other operating divisions. Service revenues increased 105.6%89.6% to $5.8$5.4 million in the 1997 quarter from $2.8$2.9 million in the 1996 quarter primarily as a result of thea fourth quarter, 1996, acquisition of Maintenance and Diagnostics LLC ("M&D"), an operator of research, service and training centers for the electric power industry, latea services company based in 1996 andPhiladelphia, Pennsylvania as well as increases in technical and customerother services driven by continuing investments in sales and marketing. Although net revenues increased significantly, the level of net revenues reached was not sufficient to support investments made to increase in product sales.revenues. Cost of Revenue. Total costs of revenues increased 37.8%49.3% to $6.2$6.4 million in the 1997 quarter from $4.5$4.3 million in the 1996 quarter. As a percentage of net revenues, total cost of revenue increased from 41.9%38.5% in the 1996 quarter to 42.8%44.6% in the 1997 quarter due to the increase in the level of services activity whichthat has a lower gross margin than product revenues. Product costs decreased 6.0%increased 11.9% to $2.2$2.3 million in the 1997 quarter from $2.0 million in the 1996 quarter primarily due to the increased level of product sales. Service costs increased 82.2% to $4.2 million in the 1997 quarter from $2.3 million in the 1996 quarter primarily due to favorable pricing that resulted from purchasing negotiations and improved efficiencies in the manufacturing process. Service costs increased 84.3% to $4.0 million in the 1997 quarter from $2.2 million in the 1996 quarter primarily due to theaforementioned acquisition of M&D as well as the increase in activity associated with the overall increase in services revenues. Selling, General and Administrative. SG&A expense increased 29.4%39.4% to $5.6$5.9 million in the 1997 quarter from $4.4$4.2 million in the 1996 quarter. The increase was due primarily to an increase in investments in market development as well as the cost of administrative support related to the corresponding increase in net revenues. Also, the company completed a staff restructuring late in the second quarter which generated additional severance costs. SG&A expense, as a percentage of net revenues, decreasedincreased to 38.9%40.8% in the 1997 quarter from 40.6%37.7% in the 1996 quarter. Research and Development. Research and development expenses increased by $404,928 or 33.6%23.8% to $1.6 million in the 1997 quarter from $1.2$1.3 million in the 1996 quarter, reflecting increases in the required level of support of a more diverse product line as well as continued expenditures for the development of new products. As a percentage of net product revenues, research and development expenses increased to 18.5%18.2% in the 1997 quarter from 15.2%15.9% in the 1996 quarter. Income from Operations. Income from operations for the 1997 quarter increased 53.2%decreased 64.7% to $1.0 million,$475,000, or 7.1%3.3% of net revenue, from $674,000,$1.3 million, or 6.3%12.0% of net revenue, in the 1996 quarter. Total operating expenses increased by $1,684,202 or 30.3% to $7.2 millionAs stated in the 1997 quarter from $5.6 millionnet revenues section above, investments were made early in the 1996 quarter. Interestyear to attain a higher level of sales throughout the Company. Due to net revenues falling short of those levels, operating income was negatively impacted when compared to the second quarter of 1996. In an effort to improve operating income, the Company has taken a number of steps including the following: total staffing was reduced by approximately 10% in an effort to reduce overall costs and, in divisions where sales were below expectations, management has taken corrective actions to bring costs in line with sales, as well as, to grow sales. Other Expense/Income. InterestOther expense increased in the 1997 quarter to $10,477 from $1,146$43,000 compared to other income of $139,000 in the 1996 quarter primarily as a resultdue to the use of available cash and draws made on the Company's bank line of credit to finance continuing growth. Interest income decreased 59.0%Income Taxes. The Company's effective tax rate for the 1997 quarter was approximately 34% compared to the 1996 quarter rate of approximately 36%. The rate has improved due to the utilization of available research and development tax credits, the establishment of a foreign sales corporation, and the completion of an internal analysis of the appropriate tax levels. Comparison of Six Months Ended June 30, 1997 and June 30, 1996 Revenues, Net. Net revenues increased 31.8% in the six months ended June 30, 1997 (the 1997 period) to $28.9 million, compared to $21.9 million during the six months ended June 30, 1996 (the 1996 period). Revenue from the sale of products increased 9.0% to $17.8 million in the 1997 quarter to $48,173period from $117,589$16.3 million in the 1996 period. The increase in product revenues is due primarily to significant increases in the vibration analysis, motor, and corrective product lines offset by sales decreases in certain other operating divisions. Service revenues increased 97.5% to $11.2 million in the 1997 period from $5.7 million in the 1996 period primarily as a result of a fourth quarter, 1996, acquisition of a services company based in Philadelphia, Pennsylvania as well as increases in other services driven by continuing investments in sales and marketing. Although net revenues increased significantly, the level of net revenues reached was not sufficient to support investments made to increase revenues. Specific measures are being taken to address the aforementioned challenges as stated in the applicable sections covering the three months ended June 30, 1997. Cost of Revenue. Total costs of revenues increased 43.5% to $12.6 million in the 1997 period from $8.8 million in the 1996 period. As a percentage of net revenues, total cost of revenue increased from 40.2% in the 1996 period to 43.7% in the 1997 period due to the increase in the level of services activity which has a lower gross margin than product revenues as well as lower than desired margins on certain services business lines. Product costs increased 2.3% to $4.4 million in the 1997 period from $4.3 million in the 1996 period due to the increased level of product sales offset by higher margins on certain product lines and a favorable sales mix towards higher margin products. Service costs increased 83.2% to $8.2 million in the 1997 period from $4.5 million in the 1996 period primarily due to the aforementioned 1996 fourth quarter acquisition and the cost associated with the overall increase in services revenues. Selling, General and Administrative. SG&A expense increased 34.3% to $11.5 million in the 1997 period from $8.6 million in the 1996 period. The increase was due primarily to an increase in investments in market development as well as the cost of administrative support related to the corresponding increase in net revenues. Also, the Company incurred severance costs in conjunction with a staff restructuring late in the second quarter. SG&A expense, as a percentage of net revenues, increased to 39.8% in the 1997 period from 39.1% in the 1996 period. Research and Development. Research and development expenses increased by 28.4% to $3.3 million in the 1997 period from $2.5 million in the 1996 period. This increase reflects changes in the required level of support of a more diverse product line as well as expenditures for the development of new products, some of which are scheduled for release during the third and fourth quarters of 1997. As a percentage of net product revenues, research and development expenses increased to 18.3% in the 1997 period from 15.5% in the 1996 period. Income from Operations. Income from operations for the 1997 period decreased 25.3% to $1.5 million, or 5.2% of net revenue, from $2.0 million, or 9.2% of net revenue, in the 1996 period. Operating income decreased due to the aforementioned problems noted in the discussion on the three months ended June 30, 1997. Other Expense/Income. Other income in the 1997 period was $2,000 versus other income of $249,000 in the 1996 period due to the use of available cash levels being available for investment.balances and draws made on the Company's line of credit to finance continuing growth. Income Taxes. The Company's effective tax rate for the 1997 quarter was approximately 34% versus the 1996 quarter rate of approximately 36%. The rate has improved due to the utilization of available research and development tax credits, as well asthe establishment of a foreign sales corporation.corporation, and the completion of an internal analysis of appropriate tax levels. Liquidity and Capital Resources Since its inception, the Company has financed its operations through a combination of cash flow from operations, bank borrowings and equity capital. The Company's capital requirements have arisen primarily in connection with purchases of fixed and intangible assets, including acquisitions, and the Company makes significant expenditures each year for research and development and market development. Net cash utilizedprovided by operating activities during the first six months of 1997 was $69,000 while net cash provided by operating activities during the first six months of 1996 was $2.7 million. The decrease in the 1997 quarter was $510,819. Netnet cash provided by operating activities was $790,790caused by decreases in the 1996 quarter. The change was caused primarily bylevel of net income, refunds due from the recognition and payment of accrued expensesestimated income tax liabilities, and a decrease in accounts payable. Net cash used by investing activities increased from $2.9 million for the previous year. Investing activities primarily include additionssix months ended June 30, 1996 to property, plant$5.4 million for the six months ended June 30, 1997. Capital expenditures during the first six months of 1997 included final payments to complete a fourth quarter 1996 services business acquisition and equipmentthe capitalization of certain types of research and cash payments made to closedevelopment costs which did not occur during the acquisition of M&D.same period in 1996. The Company maintains bank lines of credit that provide for borrowings of up to $12.0 million based on a borrowing formula and a minimum current ratio of 1.25 or better and bearingbetter. The bank lines of credit bear interest at the lender's base rate or the adjusted LIBOR rate plus the applicable LIBOR margin at the Company's discretion. The Company's total liabilities decreased to $9.6$9.8 million as of March 31,1997June 30, 1997 as compared to $13.6 million as of December 31, 1996 reflectingdue to payments on obligations incurredmade in connection with the first half of 1997 to close a fourth quarter acquisition, a decrease in the level of M&D as well asincome taxes payable due to payments made for prior year tax liabilities, and refunds due from the recognition and payment of outstandingestimated tax liabilities. Although the Company has presently has neither acquisition agreements nor arrangements, the Company may in the future make strategic acquisitions of other providers of maintenance products or services using stock, cash, debt or a combination thereof. Depending on the terms of the acquisition, the Company may need to incur additional indebtedness or issue equity securities to make any such acquisition. The Company routinely engages in transactions in foreign countries. Substantially all of the Company's transactions are denominated in U.S. currency, thereby limiting the Company's exposure to fluctuations in foreign currency exchange rates. In February 1997, the FASB issued Statement of Accounting Standards No. 128, Earnings Per Share (EPS). The Statement simplifies the standards for computing earnings per share by replacing the presentation of primary earnings per share with a presentation of basic earnings per share. Additionally, the Statement requires dual presentation of basic and diluted EPS on the face of the income statement and requires a reconciliation of the numerator and denominator of the diluted EPS calculation. The Company plans to adopt the provisions of Statement 128 in fiscal year 1997 and the impact on the Company's financial statements has not been determined. PART II - OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K (a) Exhibits: (11) Statement re: computation of per share earnings (27) Financial data schedule (b) No reports on Form 8-K were filed for the quarter ended March 31, 1996.June 30, 1997. 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. COMPUTATIONAL SYSTEMS, INCORPORATED Date: May 13,August 11, 1997 By: /s/ Ronald G. Canada -------------------------------------------------------------------------- Ronald G. Canada, Chairman and Chief Executive Officer By: /s/ Bryan J. Collier ------------------------------------ Bryan J. Collier,Tomas A. Valunas -------------------------------------- Tomas A. Valunas, Vice President of Finance and Chief Financial Officer Exhibit Index Sequential Item No. Description ---------- ---------------------------------------------------------------------------------------------- (11) Statement re: Computation of per share earnings (27) Financial data schedule EXHIBIT 11 - EARNINGS PER SHARE
THREE MONTHS ENDED MARCH 31, MARCH 31,SIX MONTHS ENDED ----------------------- ----------------------- June 30, June 30, June 30, June 30, 1997 1996 1997 1996 --------- --------- --------- --------- PRIMARY: Weighted average number of common shares outstanding 5,000,064 4,752,6115,015,466 4,798,001 5,007,429 4,781,501 Net effect of dilutive stock options based on the treasury stock method using the average market price 266,336 266,334154,222 270,387 183,946 265,862 --------- --------- --------- --------- Weighted average number of common and common equivalent shares outstanding 5,266,400 5,018,9455,169,688 5,068,388 5,191,375 5,047,363 --------- --------- --------- --------- Net income $711,490 $501,996 --------- ---------$284,943 $949,996 $996,433 $1,451,992 Primary net income per common share as reported $0.14 $0.10$0.06 $0.19 $0.19 $0.29 FULLY DILUTED: Weighted average number of common shares outstanding 5,000,064 4,752,6115,015,466 4,798,001 5,007,429 4,781,501 Net effect of dilutive stock options based on the treasury stock method using the period-end market price if higher than average price 266,336 272,174154,222 270,387 183,946 284,453 --------- --------- --------- --------- Weighted average number of common and common equivalent shares outstanding 5,266,400 5,024,7855,169,688 5,068,388 5,191,375 5,065,954 --------- --------- --------- --------- Net income $711,490 $501,996 --------- ---------$284,943 $949,996 $996,433 $1,451,992 Fully diluted net income per common share as reported $0.14 $0.10$0.06 $0.19 $0.19 $0.29
The difference between fully diluted earnings per share and primary earnings per share is immaterial. Therefore, fully diluted earnings per share have not been disclosed in the financial statements.