Form 10-K - Securities And Exchange Commission Page 18
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46contracts, as well as research for feasibility and technology updates.
Capitalized software development costs for 2000 were $555,000 compared to
$581,000 in 1999. Amortization of software costs, which was charged to cost of
sales, was $596,000 and $651,000 for 2000 and 1999, respectively.
Interest expense was down $386,000, 34.3% from 1999 reflecting lower
borrowings. Letter of credit and other expenses decreased $79,000 principally
due to decreased bank charges.
The Company's provision for taxes, rate-wise, remained unchanged from
the prior year and approximated the statutory rate.
Fiscal 1999 Versus Fiscal 1998
The Company had a net income of $2,170,000 or $.29 per share (diluted),
versus a net income of $1,794,000, or $.23 per share (diluted) in 1998.
Operating income was $4,759,000, an increase of $551,000, or 13.1% over 1998.
These increases were primarily the result of higher gross margins reflecting
increased sales of ATS products.
Total sales decreased slightly $59,000, .2% from 1998 as decreases
domestically and to the U.S. Government were only partially offset by an
increase internationally and the addition of sales from the Company's Polish
subsidiary purchased in April, 1998. Domestic sales decreased $3,640,000, 41.1%,
and represented 17.9% of the Company's total sales, down from 30.2% in the prior
year. The decrease domestically primarily reflected reduced industrial
sterilizer sales coupled with decreased sales of the Company's entertainment
products. Sales to the U.S. Government decreased $1,779,000, 60.6% and
represented 4.0% of the Company's total sales, down from 10.0% for the prior
year. The decrease in U.S. Government sales primarily reflected the completion
in the prior year of a large chamber project. International sales, including
sales of the Company's Polish subsidiary, increased $5,360,000, 30.6% and
represented 78.1% of the Company's total sales. The increase internationally
primarily resulted from additional progress on two large centrifuge projects
including a Centrifuge project for the United Kingdom Ministry of Defense (UK
MOD). Sales in 1999 to the UK MOD were approximately $7.0 million or 24.0% of
the Company's total sales. Open orders for the UK MOD constituted $11.1 million
of the Company's sales backlog at February 26, 1999.
On a segment basis, sales of the Company's Aircrew Training Systems
(ATS) products, which create and monitor the physiological effects of motion
(including spatial disorientation and centrifugal forces) on humans and
equipment for medical, training, research and entertainment markets were
$24,465,000 an increase of $2,410,000, or 10.9% over 1998. Sales of these
products accounted for 83.7% of the Company's sales compared to 75% in 1998.
Sales in the Company's other segment, the Industrial Group, which designs and
produces chambers that create environments that are used for sterilization,
research and medical applications, decreased $2,469,000 or 34.2%, and accounted
for 16.3% of the Company's total sales compared to 25% in 1998. Although the
primary reduction was in sterilizer sales, decreases were evidenced across all
product lines for this Group.
Gross profit increased $2,374,000 or 25.5%. As a percentage of sales,
gross profit was 39.9% up from 31.8% in 1998. These increases were attributable
to a product mix shift to higher margin ATS products.
Operating profit increased $551,000, or 13.1% compared to 1998. On a
segment basis, ATS has an operating profit of $5,697,000, an increase of
$1,466,000 while the Industrial Group had an operating loss of $89,000 compared
to an operating profit of $691,000 in 1998. These segment operating profits were
offset, in part, by unallocated corporate expenses of $849,000, an increase of
$135,000 over 1998.
3
Management's Discussion and Analysis of
Financial Condition and Results of Operations - Continued
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