FORM 10Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1999
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OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _______ to _______
Commission File Number 1-6549
American Science and Engineering, Inc.
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(Exact name of Registrant as specified in its charter)
Massachusetts 04-2240991
- ------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
829 Middlesex Turnpike
Billerica, Massachusetts 01821
- ---------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
(978) 262-8700
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(Registrant's telephone number, including area code)
________________________________________________________________________________
(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, and (2) has been subject to such filing requirements
for the past 90 days.
Yes X No
----- -----
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date
Outstanding at
Class of Common Stock Sept. 30, 1999
--------------------- --------------
$.66 2/3 par value 4,914,753
Page 1 of 12 Pages
The Exhibit Index is Located at Page 12
AMERICAN SCIENCE AND ENGINEERING, INC.
PART I - FINANCIAL INFORMATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Dollars and shares in Thousands, except per share amounts
For The Three Months Ended For The Six Months Ended
---------------------------- -------------------------
Sept. 30, Sept. 30, Sept. 30, Sept. 30,
1999 1998 1999 1998
-------- -------- -------- --------
NET SALES AND CONTRACT REVENUE $ 15,459 $ 14,361 $ 29,775 $ 26,053
-------- -------- -------- --------
COSTS AND EXPENSES:
Cost of sales and contracts 10,925 9,612 20,796 16,851
Selling, general and administrative expenses 2,673 2,369 5,373 4,500
Research and development 1,204 1,458 2,603 2,866
-------- -------- -------- --------
Total costs and expenses 14,802 13,439 28,772 24,217
-------- -------- -------- --------
OPERATING INCOME 657 922 1,003 1,836
-------- -------- -------- --------
OTHER INCOME (EXPENSE):
Interest, net (24) 21 (26) 31
Other, net (4) (20) (39) (68)
-------- -------- -------- --------
Total other income (expense) (28) 1 (65) (37)
-------- -------- -------- --------
INCOME BEFORE PROVISION
FOR INCOME TAXES 629 923 938 1,799
PROVISION FOR INCOME TAXES 239 369 356 719
-------- -------- -------- --------
NET INCOME $ 390 $ 554 $ 582 $ 1,080
======== ======== ======== ========
INCOME PER SHARE - BASIC $ .08 $ .12 $ .12 $ .23
======== ======== ======== ========
- DILUTED $ .08 $ .11 $ .12 $ .21
======== ======== ======== ========
DIVIDENDS PAID PER SHARE NONE NONE NONE NONE
WEIGHTED AVERAGE SHARES - BASIC 4,915 4,802 4,903 4,775
======== ======== ======== ========
- DILUTED 4,998 5,083 5,008 5,097
======== ======== ======== ========
The accompanying notes are an integral part of these condensed consolidated
financial statements.
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AMERICAN SCIENCE AND ENGINEERING, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
Dollars in thousands
Sept. 30, 1999 Mar. 31, 1999
-------------- ------------
(Unaudited)
ASSETS CURRENT ASSETS:
Cash and cash equivalents $ 1,133 $ 366
Accounts receivable, net of allowances
of $408 at September 30,
and $259 at March 31, 1999 11,031 7,958
Unbilled costs and fees, net of
allowances of $447 at September 30, and
March 31, 1999 6,170 2,374
Inventories 10,501 11,083
Deferred income taxes 1,370 1,370
Prepaid expenses and other current assets 1,794 1,224
------- -------
TOTAL CURRENT ASSETS 31,999 24,375
------- -------
NONCURRENT ASSETS:
Non-current deferred income taxes 254 254
Deposits 17 17
Other assets 115 115
Patents and other intangibles, net of accumulated
amortization of $110 at Sept. 30, 1999 and $55
at March 31, 1999 355 401
Property and equipment, net of
Accumulated depreciation of
$10,370 at Sept. 30,1999 and
$9,677 at March 31,1999 4,958 5,042
------- -------
$37,698 $30,204
======= =======
The accompanying notes are an integral part of these condensed consolidated
financial statements.
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AMERICAN SCIENCE AND ENGINEERING, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(CONTINUED)
Dollars in thousands
Sept. 30, 1999 Mar. 31, 1999
-------------- ------------
(Unaudited)
LIABILITIES & CURRENT LIABILITIES:
STOCKHOLDERS' Line of Credit $ 8,000 $ 1,000
INVESTMENT Current maturities of obligations
under capital leases 20 20
Accounts payable 4,982 4,456
Accrued salaries and benefits 1,004 868
Accrued warranty costs 403 374
Accrued income taxes 381 350
Deferred revenue 486 756
Customer deposits 685 1,281
Other current liabilities 818 1,224
---------- -----------
TOTAL CURRENT LIABILITIES 16,779 10,329
---------- -----------
NONCURRENT LIABILITIES:
Obligations under capital leases, net
of current maturities 6 20
Deferred revenue 261 67
Deferred compensation 148 149
Deferred rent 323 292
---------- -----------
TOTAL NONCURRENT LIABILITIES 738 528
---------- -----------
STOCKHOLDERS' INVESTMENT:
Common stock, $.66-2/3 par value
Authorized - 20,000,000 shares
Issued 4,914,753 shares at Sept. 30, 1999
and 4,877,767 shares at Mar. 31, 1999 3,276 3,252
Capital in excess of par value 17,622 17,394
Accumulated deficit (77) (659)
---------- -----------
20,821 19,987
Note receivable-Officer (640) (640)
---------- -----------
TOTAL STOCKHOLDERS' INVESTMENT 20,181 19,347
---------- -----------
$ 37,698 $ 30,204
========== ===========
The accompanying notes are an integral part of these condensed consolidated
financial statements.
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AMERICAN SCIENCE AND ENGINEERING, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Dollars in thousands For the Six Months Ended
--------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES: Sept. 30, 1999 Sept. 30, 1998
-------------- --------------
Net income $ 582 $ 1,080
Adjustments to reconcile net income to net cash provided by
(used for) operating activities:
Depreciation and amortization 748 390
Provisions for contract, inventory, accounts receivable and
warranty reserves 377 650
Changes in assets and liabilities:
Accounts receivable (3,223) (609)
Unbilled costs and fees (3,796) (1,191)
Inventories 582 (1,625)
Prepaid expenses, other assets, and deposits (570) 169
Accounts payable 526 1,075
Accrued income taxes 31 --
Customer deposits (596) 6,609
Deferred revenue (270) --
Accrued expenses and other current liabilities (467) (1,037)
Noncurrent liabilities 224 43
------- -------
Total adjustments (6,434) 4,474
------- -------
Net cash provided by operating activities (5,852) 5,554
------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (610) (1,378)
Acquisition of business -- (1,100)
Purchase of patents and intangibles 9 (40)
------- -------
Cash used for investing activities (619) (2,518)
------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings under line of credit 7,000 --
Proceeds from exercise of stock options 252 611
Principal payments of capital lease obligations (14) (13)
------- -------
Cash provided by financing activities 7,238 598
------- -------
NET INCREASE IN CASH AND CASH EQUIVALENTS 767 3,634
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 366 2,290
------- -------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 1,133 $ 5,924
======= =======
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Interest paid $ 86 $ 25
Income taxes paid $ 800 $ 369
NON-CASH TRANSACTIONS
Issuance of stock in lieu of fees $ -- $ 16
Capital lease obligation for equipment $ -- $ 24
The accompanying notes are an integral part of these condensed consolidated
financial statements.
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AMERICAN SCIENCE AND ENGINEERING, INC.
PREPARATION OF CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The condensed consolidated financial statements included herein have been
prepared by American Science and Engineering, Inc. (the Company) pursuant to the
rules and regulations of the Securities and Exchange Commission, and the annual
condensed consolidated financial statements are subject to year end audit by
independent public accountants. Certain information and footnote disclosures
normally included in financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted pursuant to such
rules and regulations. The Company believes, however, that the disclosures are
adequate to make the information presented not misleading. It is suggested that
these condensed consolidated financial statements be read in conjunction with
the consolidated financial statements and the notes thereto included in the
Company's latest annual report on Form 10-K.
The condensed consolidated financial statements, in the opinion of management,
include all adjustments necessary to present fairly the Company's financial
position and the results of operations. These results are not necessarily to be
considered indicative of the results for the entire year.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
1. NATURE OF OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES
American Science and Engineering, Inc., is engaged in the development
and manufacture of sophisticated X-ray inspection systems for critical
detection and security screening solutions for sale primarily to U.S.
and foreign government agencies. The Company has only one reporting
segment, x-ray screening products.
The significant accounting policies followed by the Company and its
subsidiary in preparing its consolidated financial statements are set
forth in Note 1 to the consolidated financial statements included in
Form 10-K for the year ended March 31, 1999. The Company has made no
change in these policies during this quarter.
2. INVENTORIES
(Dollars in thousands) Inventories consisted of:
Sept. 30, 1999 Mar. 31, 1999
-------------- -------------
Raw materials and completed
sub-assemblies $ 4,798 $ 5,570
Work in process 5,703 5,513
--------- ---------
Total $ 10,501 $ 11,083
========= =========
3. INCOME PER COMMON AND COMMON EQUIVALENT SHARE
In March 1997, the Financial Accounting Standards Board (FASB) issued
statement of Financial Accounting Standards (SFAS) No. 128, "Earnings per
Share", which establishes standards for computing and presenting earnings
per share for entities with publicly held common stock or potential common
stock. The Company adopted SFAS 128 in fiscal 1998 and as required,
restated per share amounts for all prior periods presented to conform to
the new requirements. Basic earnings per common share is computed by
dividing net income by the weighted average number of shares of common
stock outstanding during the year. No dilution for any potentially dilutive
securities is
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included. Diluted earnings per share includes the dilutive impact of
options and warrants using the average share price of the Company's common
stock for the period.
Earnings Per Share Three Months Ended Six Months Ended
------------------ ------------------ ----------------
(in thousands except per share Sept. 30, 1999 Sept. 30, 1998 Sept. 30, 1999 Sept. 30, 1998
amounts) -------------- -------------- -------------- --------------
BASIC
Net income $ 390 $ 554 $ 582 $ 1,080
----------- ------------ ----------- -----------
Weighted average shares 4,915 4,802 4,903 4,775
----------- ------------ ----------- -----------
Basic earnings per share $ .08 $ .12 $ .12 $ .23
----------- ------------ ----------- -----------
DILUTED
Net income $ 390 $ 554 $ 582 $ 1,080
----------- ------------ ----------- -----------
Weighted average shares 4,915 4,802 4,903 4,775
----------- ------------ ----------- -----------
Effect of stock options 83 281 105 322
----------- ------------ ----------- -----------
Weighted average shares, as
adjusted 4,998 5,083 5,008 5,097
----------- ------------ ----------- -----------
Diluted earnings per share $ .08 $ .11 $ .12 $ .21
----------- ------------ ----------- -----------
4. INCOME TAXES
At March 31, 1999, the Company had approximately $67,000 of unused
investment tax and other credits which expire through 2001.
5. ACQUISITION OF BUSINESS
On August 18, 1998, the Company purchased certain assets relating to the
industrial linear accelerator business of Schonberg Research Corporation of
Santa Clara, California for $1,100,000. The components of the purchase
price consisted of the following:
Fixed assets $ 658
Raw material inventory 92
Patents and other intangible assets 350
-------
Total $ 1,100
-------
This acquisition has been accounted for under the purchase method of
accounting, and its results are included with the Company's results from
the date of acquisition.
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AMERICAN SCIENCE AND ENGINEERING, INC.
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
In the second quarter of fiscal 2000 net sales and contract revenues grew to
$15,459,000, an 8% increase from the comparable period a year ago and an 8%
increase from the previous quarter. The company earned net profits of $390,000
in the current quarter, compared to a net profit of $554,000 in the
corresponding period a year ago and a net profit of $192,000 in the previous
quarter.
RESULTS OF OPERATIONS
Net sales and contract revenues in the second quarter increased by $1,098,000
(8%) in comparison to the corresponding year ago period and $1,143,000 (8%)
compared to the first quarter of fiscal 2000. The increase in revenues from the
previous quarter is due to increased sales of x-ray equipment.
For the second quarter, costs of sales and contracts increased to $10,925,000
from $9,612,000 in the corresponding period a year ago due primarily to
increased sales volume. Costs of sales and contracts represented 71% of revenues
versus 67% for the corresponding period last year and 69% for the first quarter
of fiscal 2000. The costs of sales percentage of revenues in the current quarter
increased from the previous quarter primarily due to sales mix. As compared to
the year ago quarter, the cost of sales percentage of revenues in the current
quarter increased due to investments made in operations infrastructure, and
introduction of new or enhanced products in response to growing domestic and
international demand.
Selling, general and administrative expenses of $2,673,000 for the second
quarter were higher by 13% compared to the corresponding year-ago period and
lower by 1% compared to the first quarter of fiscal 2000. As a percent of sales,
selling, general and administrative expenses were 17% of revenues in the current
quarter and for the corresponding year-ago period and 19% for the first quarter
of fiscal 2000. This decrease from the previous quarter is due primarily to an
increased sales base.
Company-funded research and development expenses of $1,204,000 for the second
quarter were lower by $254,000 (17%) compared to the year-ago quarter and lower
by $195,000 (14%) compared to the first quarter of fiscal 2000. This is
essentially on budget.
The Company produced a net profit of $390,000 during the second quarter. This is
a decline of $164,000 (30%) over net profit in the year-ago quarter and an
increase of $198,000 (103%) from the first quarter of fiscal 2000. The decline
in after-tax profits from the year-ago quarter is due the above mentioned
investments in operational infrastructure and new products.
-8-
AMERICAN SCIENCE AND ENGINEERING, INC.
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (Continued)
LIQUIDITY AND CAPITAL RESOURCES
Cash and cash equivalents increased by $767,000 to $1,133,000 at Sept. 30, 1999
compared to $366,000 on March 31, 1999. This increase in cash and cash
equivalents was primarily due to additional borrowings against the line of
credit partially offset by the increase in accounts receivables and unbilled
costs and fees. Working capital increased by $1,225,000 (9%) since March 31,
1999, increasing from $14,046,000 to $15,271,000 at the end of the second
quarter.
At September 30, 1999, the Company had external borrowings, with a local bank,
in the amount of $8,000,000 representing an increase of $7,000,000 during the
quarter. This was an expected increase, with funds used to support working
capital requirements of both international and domestic orders. The Company
anticipates this level of borrowing to significantly decline by the end of
fiscal 2000 (March 31, 2000). Interest is payable monthly at the bank's prime
rate of interest. The Company expects that its internally generated cash and
bank lines available to it will be adequate for its financing needs for the
short to medium term.
YEAR 2000
The Company has assessed the potential impact of the year 2000 on the Company's
internal business systems, products and operations. The Company's year 2000
initiatives include (i) testing and upgrading internal business systems and
facilities; (ii) testing and developing necessary upgrades for the Company's
current products and certain discontinued products; (iii) contacting key
suppliers, vendors, and customers to determine their year 2000 compliance
status; and (iv) developing contingency plans.
THE COMPANY'S STATE OF READINESS
The Company has tested and evaluated its critical information technology systems
for year 2000 compliance, including its significant computer systems, software
applications, and related equipment. The Company is currently in the process of
upgrading or replacing its noncompliant systems. In most cases, such upgrades or
replacements are being made in the ordinary course of business. The Company
expects that all of its information technology systems will be year 2000
compliant by the end of 1999. Any problems that are identified will be
prioritized and remediated based on their assigned priority. The Company will
continue periodic testing of its critical internal business systems in an effort
to minimize operating disruptions due to year 2000 issues. The Company believes
that all of the products that it currently manufactures and sells are year 2000
compliant.
The Company has identified and contacted suppliers, vendors, and customers that
are believed to be significant to the Company's business operations in order to
assess their year 2000 readiness. As part of this effort, the Company
distributed questionnaires relating to year 2000 compliance to its significant
suppliers, vendors, and customers. It is developing a more detailed follow-up to
ensure its most critical suppliers and vendors have adequate year 2000 plans in
place.
CONTINGENCY PLANS
The Company is developing a contingency plan that will allow its primary
business operations to continue despite possible disruptions due to year 2000
problems. These plans may include identifying and securing other suppliers,
increasing inventories, modifying production facilities and schedules, as well
as emergency power for information technology in case of general power failure,
and redundant
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data in dissimilar computer systems to be used in case of a failure of the
existing IT system. As the Company continues to evaluate the year 2000 readiness
of its business systems and facilities, products and significant suppliers,
vendors, and customers, it will modify and adjust its contingency plan as may be
required.
COSTS TO ADDRESS THE COMPANY'S YEAR 2000 ISSUES
To date, costs incurred in connection with the year 2000 issue have not been
material. The Company does not expect total year 2000 remediation costs to be
material, but there can be no assurance that the Company will not encounter
unexpected costs or delays in achieving year 2000 compliance.
RISKS OF THE COMPANY'S YEAR 2000 ISSUES
While the Company is attempting to minimize any negative consequences arising
from the year 2000 issue, there can be no assurance that the year 2000 problems
will not have a material adverse impact on the Company's business, operations,
or financial condition. While the Company expects that upgrades to its internal
business systems will be completed in a timely fashion, there can be no
assurance that the Company will not encounter unexpected costs and delays. If
any of the Company's material suppliers, vendors, or customers experience
business disruptions due to year 2000 issues, the Company might also be
materially adversely affected. There is expected to be a significant amount of
litigation relating to the year 2000 issue and there can be no assurance that
the Company will not incur material costs in defending or bringing lawsuits. Any
unexpected costs or delays arising from the year 2000 issue could have a
significant adverse impact on the Company's business, operations, and financial
condition.
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AMERICAN SCIENCE AND ENGINEERING, INC.
Part II - Other Information
ITEM 1 - LEGAL PROCEEDINGS
In September 1998, the Company filed suit against EG&G Astrophysics
Research Corp. ("EG&G") in U.S. District Court in Boston, Massachusetts
alleging that EG&G is infringing on at least two patents owned by the
Company and that EG&G has misappropriated certain trade secrets of the
Company. In February 1999, the Company filed a related action in the
same court against the U.S. Customs Service ("Customs") alleging that
Customs had either misappropriated the Company's trade secrets or
facilitated their misappropriation by EG&G and that Customs had
improperly entered into a contract with EG&G for the acquisition of a
product functionally equivalent to MobileSearch(TM). In May 1999, the
Court held a hearing on the Company's motion for a preliminary
injunction against both Customs and EG&G prohibiting the further
performance of the contested contract and preventing EG&G from
utilizing the Company's trade secrets. In August 1999, the Court issued
a ruling denying the request for the preliminary injunction. The
Company is continuing to pursue its claims against EG&G, but has filed
a motion to dismiss the suit against Customs.
In a related matter, EG&G has filed a request with the U.S. Patent and
Trademark Office for reexamination of the two patents that currently
are at issue in the patent infringement action described above. The
Company filed oppositions to the reexamination requests and believes
that its patent claims will be upheld.
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Special Meeting in Lieu of Annual Meeting of the Company was held
on September 23, 1999. At the meeting, all seven of management's
nominees to the Board of Directors were elected to a one-year term
according to the following votes:
Votes
Nominee Votes For Withheld
------- --------- --------
Herman Feshbach 4,245,042 248,696
Roger P. Heinisch 4,257,097 236,641
Hamilton W. Helmer 4,257,143 236,595
Donald S. McCarren 4,246,129 247,609
William E. Odom 4,257,197 236,541
Carl W. Vogt 4,257,197 236,541
Ralph S. Sheridan 4,028,495 465,243
Carl W. Vogt 4,458,450 236,541
In addition, the stockholders approved the adoption of the Company's
1999 combination Stock Option Plan, by vote of 1,930,070 shares in
favor to 857,747 shares against.
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ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K
(10) Lease for premises at 33 Manning Rd.,
Billerica, MA
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the quarter.
The information required by Exhibit Item 11 (Statement re: Computation
of Income per Common and Common Equivalent Share) may be found in
Footnote No. 3 on Page 7.
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 hereunto duly authorized.
AMERICAN SCIENCE AND ENGINEERING, INC.
(Registrant)
Date: 15th November 1999 __________________________________________
Lee C. Steele
Vice President and Chief Financial Officer
SAFE HARBOR STATEMENT
THE FOREGOING 10-Q CONTAINS STATEMENTS CONCERNING THE COMPANY'S FINANCIAL
PERFORMANCE AND BUSINESS OPERATIONS WHICH MAY BE CONSIDERED "FORWARD-LOOKING"
UNDER APPLICABLE SECURITIES LAWS.
THE COMPANY WISHES TO CAUTION READERS OF THIS FORM 10-Q THAT ACTUAL RESULTS
MIGHT DIFFER MATERIALLY FROM THOSE PROJECTED IN ANY FORWARD-LOOKING STATEMENTS.
FACTORS WHICH MIGHT CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE
PROJECTED IN THE FORWARD-LOOKING STATEMENTS CONTAINED HEREIN INCLUDE THE
FOLLOWING: SIGNIFICANT REDUCTIONS OR DELAYS IN PROCUREMENTS OF THE COMPANY'S
SYSTEMS BY THE UNITED STATES GOVERNMENT; DISRUPTION IN THE SUPPLY OF ANY
SOLE-SOURCE COMPONENT INCORPORATED INTO THE COMPANY'S PRODUCTS (OF WHICH THERE
ARE SEVERAL); LITIGATION SEEKING TO RESTRICT THE USE OF INTELLECTUAL PROPERTY
USED BY THE COMPANY; POTENTIAL PRODUCT LIABILITY CLAIMS AGAINST THE COMPANY;
GLOBAL POLITICAL TRENDS AND EVENTS WHICH AFFECT PUBLIC PERCEPTION OF THE THREAT
PRESENTED BY DRUGS, EXPLOSIVES AND OTHER CONTRABAND; THE ABILITY OF GOVERNMENTS
AND PRIVATE ORGANIZATIONS TO FUND PURCHASES OF THE COMPANY'S PRODUCTS TO ADDRESS
SUCH THREATS; AND THE POTENTIAL INSUFFICIENCY OF COMPANY RESOURCES, INCLUDING
HUMAN RESOURCES, CAPITAL, PLANT AND EQUIPMENT AND MANAGEMENT SYSTEMS, TO
ACCOMMODATE ANY FUTURE GROWTH. THESE AND CERTAIN OTHER FACTORS WHICH MIGHT CAUSE
ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE PROJECTED ARE MORE FULLY SET
FORTH UNDER THE CAPTION "RISK FACTORS" IN THE COMPANY'S REGISTRATION STATEMENT
ON FORM S-3 (SEC FILE NO. 333-9151).