ITEK CORPORATION AND SUBSIDIARIES 1968 AND 1967 FINANCIAL HIGHLIGHTS

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP72-00310R000200150001-9
• Release Decision: RIFPUB
• Original Classification: K
• Document Page Count: 33
• Document Creation Date: December 16, 2016
• Document Release Date: September 8, 2004
• Sequence Number: 1
• Content Type: CHART

le k Annual Pepnri for
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The cover photograph shows a beam of white light passing
through a group of glass prisms manufactured by the Pennsyl-
vania Optical Division of Itek. The light rays of the beam are
parallel until they are separated into variqus colors of the
spectrum by the refracting or "bending" action of the prisms.
The full-color cover was printed from developmental Itek RSTM
lithographic plates at Farnsworth Press, Boston, Mass.
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 Itek Corporation and Subsidiaries
1968 and 1967 FinappM9 ltr Release 2004/09/23 : CIA-RDP72-0031 OR000200150001-9
Operations:
Sales
$126,260,000
$129,197,000
Income -
From continuing operations
1,592,000
5,203,000
592,000
4,723,000
569,000
4,723,000
Earnings per Share of Common Stock -
From continuing operations
.70
2.43
.26
2.21
.25
2.21
Financial Position:
Working Capital
$ 22,469,000
$ 23,362,000
Plant & Equipment, net
21,394,000
18,142,000
69,161,000
64,708,000
10,625,000
9,029,000
Long-Term Debt
965,000
778,000
Stockholders' Investment
42,513,000
40,517,000
Common Shares Outstanding at Year End
2,274,549
2,244,993
Book Value per Share of Common Stock
18.69
18.05
83,495,000
49,290,000
6,099
5,749
Net Sales
In millions of dollars
Net Income
In millions of dollars
1968
1967
1966
1965
1964
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1964
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Sales for 1968 were $126 million, and net income, after
nonrecurring and extraordinary charges, was $569,000 or
25 cents per share. Net income from continuing oper-
ations was $1.6 million or 70 cents per share, but operating
losses of two discontinued divisions, and extraordinary
items (explained in the notes to the financial statements)
reduced this by 45 cents per share. The 1967 figures,
restated to reflect the acquisition of Scionics Corporation
in 1968, were sales of $129 million and profits of $4.7
million or $2.21 per share.
The lower operating profits from continuing operations
were primarily in our two major government-oriented
divisions, Optical Systems and Applied Technology. There
were three principal reasons for these lower profits:
first, profits were affected by the costs of entering several
new areas of business which make use of the photo-
optical and electronic technologies in which we have
pioneered; second, the Viet Nam War caused a shift of
government priorities which resulted in delays in funding
for important Itek programs; and third, we experienced
expensive overruns on a few contracts, some of which,
however, have future promise for important profits.
Altogether, these problems in our government divisions
reduced by $1.45 per share the profits we had expected
in 1968.
We have identified the principal problem areas in our gov-
ernment divisions, and corrective action has been taken.
In another area of government operations, the Wayne-
George Division, producer of precision optical encoding
and measurement devices, increased its sales and
improved its profit margins.
Our government divisions entered 1969 with a backlog of
$83.5 million, compared with $49.3 million a year earlier.
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In our commercial operations, the Business Products
Division continued its uninterrupted pattern of growth.
During the last five years, we have established a major
position in the central duplication market. As a result, our
business product sales have tripled since 1963, and
operating profit has increased by a much larger factor.
Several new products were introduced to broaden
and strengthen this area of our business during 1968.
To open up foreign markets for present and future
business products, Itek Business Products /International
was established in 1968 with offices in Dusseldorf,
Germany. Initial direct marketing will be in West Germany
and the Scandinavian countries, with later expansion
into France, Italy, the Benelux countries, and Japan. We
estimate that the potential for direct sales of our com-
mercial products abroad could allow the division's sales
and profits to increase substantially.
Our other commercial division, Pennsylvania Optical,
added the new SunspreeTM "fashion" sunglass line to its
optical products. The division also makes reading
glasses, lenses for safety eyewear, and some of the smaller
optical elements used in systems produced by the Optical
Systems Division. Operating income last year fell below
the 1967 level, largely because of wage increases and
production capacity problems. The production problems
have now been resolved, and we expect the division
to contribute its highest profits to date in 1969.
Operations of Doban Labs, Inc. and the Rolor Division
were discontinued to eliminate a drain on company
finances and to free money and management time for
higher priority programs.
Doban Labs, Inc. was acquired as a result of the merger
of Applied Technology, Inc. into Itek. Its ScoRite auto-
matic bowling scoring system encountered unexpected
reliability problems which delayed introduction to the
market. Although we substantially improved the reliabil-
ity during the year, the product is outside of our fields of
business and we concluded that we should offer Doban
for sale rather than continue to develop ScoRite ourselves.
Rolor was acquired to provide manufacturing and market-
ing for Itek photographic processing developments. Its
1968 operating losses resulted mainly from the refusal of
a major customer to accept delivery of processing
machines which were contracted for. To avoid any further
operating losses, we discontinued Rolor as a separate
division and moved its Graphic Arts TransfloTM processor
line to Itek Business Products, which has suitable manu-
facturing and marketing capabilities.
Looking at 1969, operating profits are currently forecast
to be higher than our previous record year, 1967. However,
increased taxes and expenditures for new programs are
expected to restrict overall earnings to approximately
the 1967 level.
The Optical Systems and Applied Technology divisions
strengthened their positions for 1969 by broadening
their markets during 1968.
Optical Systems has entered important new areas of bus-
iness. These include: tactical reconnaissance cameras,
submarine periscopes, night-vision and night-fire-control
systems, and photographic processing chemistry for spe-
cial applications. In all of these areas, the chances of
obtaining significant contracts are high.
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Optical bar reconnaissance camera / Optical Systems Division
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By the beginning of 1969, the Applied Technology Division
had entered several new markets, and broadened its
customer base beyond radar homing and warning systems
for the Air Force.
Contracts for a new family of airborne and ground play-
back recording systems exceed $3 million. Mission recon-
struction and data analysis systems of this type promise
a significant market potential for several years to come.
The division's Microwave Lab continues to exploit its
unique position in ultra-stable signal sources and solid
state amplifiers by offering several new products designed
to compete, in a limited portion of the total market, with
klystron and traveling wave tube devices.
The present backlog for radar homing and warning sys-
tems extends through 1970 and well-identified future pro-
curements offer significant production rates through
1971. In addition, the government has approved plans
to pursue sales of all our countermeasures equipment
to the NATO countries, which will extend the life of these
products from three to five years.
In commercial operations, Itek Business Products is in the
process of expanding into several new market areas.
The division has established a full line of microfilm prod-
ucts for the engineering documentation market, including
proprietary aperture and copy cards, and now has a
major marketing force devoted exclusively to this product
line. This market is currently larger than $130 million a
year, and we expect to expand our share rapidly from its
present limited level. In 1968, microfilm product sales
through our own marketing organization were 50 percent
greater than in 1967, and in 1969 we expect these sales
to be substantially ahead of 1968.
IA-RDP72-0031 0R000200150001-9
Products using the Itek RSTM process promise to broaden
our proprietary product base, and to improve associated
profit margins. At the end of 1967, we introduced an
Itek RS paper for use in our 18.24 Reader-Printer for micro-
film enlargements, or "blowbacks." This paper has now
been on the market a year and has been well-accepted,
although there are some problems which we expect to
solve this year. Its price to the user is less than that of the
conventional silver halide paper which it replaces, its
quality is higher, and its processing speed is double. Even
at the initially low start-up volumes, gross margins for
this product last year were at a level normally associated
with successful proprietary products.
We have also made progress in Itek RS film products.
These high quality, high resolution, continuous-tone films
can be produced on conventional, full-scale production
equipment, and the film is expected to compete with
silver halide and diazo films for duplication purposes by
providing higher quality, at much faster processing speeds.
We expect the Itek RS process to have application in
duplicate aerial film, as well as the microfilm, microfiche,
and other duplicate film markets now largely served by
silver halide and diazo materials. We were recently
awarded a $380,000 contract to design and develop proto-
type production equipment for a specialized application
of high-volume printing and processing of Itek RS dupli-
cating film. We believe its resolution and processing
capabilities are ideally suited for such applications and
are superior to existing films.
Altogether, the duplicate film market for which we now
see Itek RS applications is probably in the order of $100
million a year. We are just starting in this area, however,
and it will take time to achieve a significant penetration
of this market.
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Microwave signal sources / Applied Technology Division 7
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Another potentially profitable area is offset lithography,
a field in which we already have a strong position in one
market segment with our Project-a-Lith? paper plate sys-
tem. We are now beginning field tests of a family of Itek
RS metal lithographic printing plates. These high quality,
presensitized plates are expected to be capable of high
resolution halftone reproduction and, in some cases,
of long press runs. As part of our development evaluation
of this product, a number of successful press runs have
been made in a commercial plant with Itek RS plates. Our
initial field tests demonstrate that certain types of Itek
RS plates are capable of over one-half million impressions.
The total annual metal lithographic plate market today
is more than $150 million, and it has an estimated annual
growth rate of more than 10 percent. We believe the
Itek RS family of plates has quality and cost advantages
which make it potentially competitive in several seg-
ments of this large market. Depending upon the success of
field trials and the completion of product development
programs, we hope to introduce the first product within
a year. Additional plate products currently under develop-
ment in our laboratories should come into the market
in the future. As with the duplicate film market, significant
penetration will take time.
In 1968 our company-sponsored research, development,
and patent activities were approximately 7.5 percent
of sales. In 1969 we expect our research and advanced
development expenditures to increase by about 25 per-
cent. In contrast, our product development and market
introduction expenses will be up 75 percent over 1968.
While the near-term introduction of new products
will represent an increased drain on profits, we believe
that the profit potential of these products is sufficiently
great to fully justify such a course.
In earlier annual reports, I have described Itek's plans for
long-term growth. Briefly summarized, these goals are:
^ The concentration of research and development effort
in areas which show greatest promise for multiple
commercial and government products, particularly new
photographic and reproduction materials, new and
advanced optical lenses, and new information handling
systems. (1963)
^ Provision for continued growth by investing each year
increasing amounts in research, in development of new
products from research, and of new markets for those
products. (1964)
^ The building of a company in which marketing will
become as strong as technical skills, but without in any
way slowing our technical growth. We are bringing
research and marketing closer together, and are accel-
erating the transition of new technologies and proprie-
tary products from the laboratory to the marketplace.
(1965)
^ A program of "concentric growth," particularly growth
through internal expansion, into technologies and
markets which bear a logical relationship to the com-
pany's activities. (1966)
^ To become an increasingly important factor in the
information industry, accomplishing this by using our
photographic, optical, and electronic technologies to
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Paper, chemical, and ink supplies / Business Products Division 9
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build both graphic and digital information systems.
Photosensitive films and papers will provide a continu-
ing and profitable supply business as part of these
information systems. (1967)
Together, these plans make up what might be called Itek's
philosophy of business. In each of the president's letters,
I have pointed out the high costs and risks of pioneering
new technologies and bringing new products successfully
and quickly to market. In our opinion, the potential
rewards merit the costs and risks.
Although 1968 was a setback in terms of sales and par-
ticularly earnings, it was a year of progress and of promise
in terms of these long-range goals. We anticipate a
recovery in 1969 leading towards a sales level of at least
$300 million by 1973, with improving profit margins, largely
from internal growth. At the same time, we will continue
to seriously consider unusual acquisition and product
opportunities related to our areas of business that would
add further to sales and profits.
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G OVERNMENT SYSTEMS The two principal Itek divi-
sions doing business with the government are Optical
Systems, in Lexington, Mass., and Applied Technology, in
Palo Alto, California.
The Optical Systems Division grew from the Boston Uni-
versity Physical Research Laboratories, which formed the
nucleus of Itek when it was founded in 1957 - Year One
of the Space Age. The B.U. group had pioneered in pano-
ramic aerial photography and photographic space tracking.
The field of aerial photography began with wet-plate
cameras in tethered aerial balloons over a century ago,
but it did not become a major technology until the recon-
naissance demands of World War II. Since that time, the
sophistication of airborne cameras has accelerated along
with the development of higher-flying, faster-moving
vehicles to carry them.
Aerial reconnaissance is not one but several sciences:
optical systems - lenses and mirrors - capable of gathering
the maximum amount of light and the finest detail from
great distances; special films sufficiently sensitive to
record all that the optics transmit; film transport and
camera movement mechanisms to compensate for real
and apparent subject motion - a vehicle flying far overhead
or the ground rushing below; processing equipment to
bring out the maximum capabilities of the film; and photo-
analysis systems to help human photointerpreters learn
as much as possible from each picture.
The Optical Systems Division has traditionally specialized
in large photographic systems designed for strategic
reconnaissance. Some lenses and mirrors are over 6 feet
in diameter, with surfaces so smooth that a millionth-of-
an-inch variation is called a "hill" or "valley" and must be
corrected. The film transport mechanisms and other com-
ponents of such systems are correspondingly precise.
Itek optical systems must be tested under extreme envi-
ronmental conditions to ensure consistent high quality
operation in a variety of circumstances - very high or low
temperatures, for example, or varying atmospheric pres-
 sures. These tests are carried out in lick's specially
designed optical IacAi M nRelease 2004/09/23 :
During 1968, Optical Systems broadened its marketing
position by moving into new business areas and develop-
ing new applications of proven technological capabilities.
These include:
^ Tactical reconnaissance cameras. Building upon its
experience in the strategic systems field, the division is
expanding into the market of smaller, less expensive
high-production-run cameras for tactical use, such as
those used in rapid-return low-level surveillance.
^ Submarine periscopes. This field has long been domi-
nated by a few companies specializing in underwater
optics. Itek is currently working on a development con-
tract for the Navy, and hopes to compete successfully in
this field.
^ Night-vision and night-fire-control systems. This is one
of the most rapidly expanding government markets. It is
a practical application of the blending of optics and
electronics, and provides an introduction to government
customers with whom Itek has done relatively little
business. We are now manufacturing prototype night-
vision and targeting systems for the Army.
^ Photographic processing chemistry for special applica-
tions. Of particular significance is a new Itek contract to
design and produce prototype equipment for high-
volume processing and printing of Itek RS duplicating
film.
Itek acquired Applied Technology, Inc., a successful
IA-riDP tUU3 F FZtO'02DOiW ' Vuipment, for two
primary reasons: first, the Viet Nam War has made it clear
that electronic warfare is here to stay, and that systems
once considered optional aboard military aircraft are now
considered essential; second, it is apparent that the future
of information systems lies in the combined technologies
of optics and electronics.
In the reconnaissance field, Itek is now the only company
with major capabilities in both optics and electronics.
Founded in 1959, Applied Technology grew principally
through design and production of radar homing and warn-
ing systems and electronic countermeasures equipment.
Basically, these systems warn an operator when he is
being scanned by enemy radar, giving him the opportunity
to take evasive action or to "jam" the intruding signals.
Applied Technology systems are installed aboard military
aircraft, ships, and ground vehicles. Currently, systems
are being installed on F-4E "Phantom" jets at Itek's Lincoln
Aerospace Center in Nebraska.
Applied Technology is also expanding its markets to
include new products for new customers. The division's
Microwave Lab is supplying components for some of the
newest doppler radar systems. Additionally, new markets
are opening for recently developed active "jammer" com-
ponents, microwave test equipment, and a flight - line test
set which is expected to become standard equipment
throughout the armed services.
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equipment / Applied Technology Division 13
 B USINESS PRODUCTS Itek's first major venture into the
commercial b&FkdtaR@l@A4920'bl4fb9/23 : IA-RDP72-00310R000200150001-9
acquisition of Photostat Corporation, Rochester, N.Y.,
prominent in the design and manufacture of photocopying
machines and offset lithography printing equipment.
Photostat grew into the lick Business Products Division,
which has become a major U.S. manufacturer of equip-
m.ent for the microfilm, offset printing, and photocopy
markets.
With the acquisition of the microfilm business of Scionics
Corporation in 1968, Itek Business Products began
marketing complete systems for engineering documenta-
tion, the largest segment of the growing micro-records
market. The systems include:
^ Automatic cameras for reducing large original drawings
to small frames of microfilm.
^ Microfilm processors that meet stringent military
specifications for retaining maximum image quality.
^ Aperture cards, copy cards, card cutters, and viewer-
mounters.
^ Several types of reader-printers (including those using
the Itek RS process) for viewing and reproducing micro-
filmed documents.
^ Automatic platemaking equipment and offset printing
units for quantity reproduction from microfilm.
Itek Business Products also markets many of the supplies
necessary for the operation of these systems, including
chemicals and reader-printer paper.
The complete Itek microfilm system works this way:
An original full-sized engineering drawing is photographed
on a frame of 35mm microfilm- the same size film used in
most small amateur cameras. The film is processed by a
machine designed to retain on the image all of the detail
of the original. The frame of processed film is then per-
manently heat-sealed into an Itek aperture card- a
standard-sized punched or printed tab-card with a "win-
dow" for the film. Thousands of these cards, or unit
records, can be stored in a small space and quickly
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Elements of lick microfilm system / Business Products Division
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 lei rluvcd either manuallg or 8V computer selection. I iigh
IlwuliIV duplfcales, or LApprmvied~iRobrRe4da!~er21004109/23
tad auiom111ICdIV, to rdis Irill ulion to other 1OCaliOns.
P01 1 n an aperture card is inserted in a reader-printer, the
~fwvvcr secs it crisp, 18" bV 24" image of I tie Will on it
~,i:rnnn, and can make high gnalilV lull siied copies hV
unialing a hullos.
ratter pl;itemHMi g-the ItekPlatemas(cr line tornisa
major part of Itlk's cottirncrcial hI Is II I css. WitlIt radltloIlal
ditlcutaking suslcros, an original is pliotograplicd, it ncgil-
livt: proccsscd. and a Iighl-sensilive paper or utelal plate
i~kpnt;ed to 1111 negalive.'[lie stale then has to he wiped
vvilit I heniiculs hefore going on the press. With Ific I'tate-
ut!,lt;r nail, 11w positive suite is exposed direclly to the
nrw,inal, and cinerges within seconds ItIIIV prepared logo
Iilrc(Aly on Ific press.
rds o:u 1 01 a continuing effort to upgrade products in the
olt!,et line, the large Mark Ill lick Plitieniasler unit was
ai roduced ill 1968. INS model conliuaes to improve Ific
lo01 l 01 cuslooler convenience and etluipnlent perlortu-
,nuo, and is e.vpecled to spearhead new ptacenienls its well
,ib to Iscale, it replacement demand In earlier instiillalioils.
ww, larger Positive Process I'hotoslal 11 photocopy unit
1. Vile.,; Ils;o introduced in 1968. This unit is of piirl fcular
(merest to Ilie adverlisingand puhlicalion liclds or sizing,
lilt mil, itud proofing applications. II is it unique product
for (he market served in Ihat it produces high quality posi-
I vc prints hirccilV from original copy, eliminating IIn'
CiH=y~,y,~ y1-I,ylly to i6Oabpt~~b~(]ti'i e original 10 Ilegi3
live; print hack to positive print.I'Ie 3ustness Producls
Division is the sole source oI supplies lot' this unii.
'I'ICl1I. PRODUCT'S Two oI HM 's divisions nianulac-
lure special al kinds of iiplical products for government
and connncrr,ial markets.
'I he I'enusglvania Optical Division, which hecalim pall oI
lick in iPith, is located in Readitig, i'ennsVivania.l'he
division has font; cslahlishcd product lines of salelt/
lenses, rcttdt/-lo-weir rcadingglasses, Ironies, sunglasses,
and precision optics.
In 1968, Pennsylvania Optical entered tlic "fashion" lolled
glass market with the Itek Sunsprcc line.'I'he lenses of
hose ilualilt/ glosses, in a wide spectrum of rotors front
rose to violet, me heat Icmpered, opliciillV polished glass
ihoI resists scrolc'iingand is praclicall1 unhreakahle.
Various sIVIes for men lord women arc hoing introduced
Ihroughoul thecouulrV-
l'hc market lorsale1V lenses is retnled to general inilos-
Irial activib\, and hoth have grown sllhslatittally in recent
Vcars. During I9IiII, I'emtsVlvania Optical added now styles
oI Ironies for salelV glasses, and holh sales and profits
were well ahovl; iniliol goals.
In addition, the division supplies some of the small optical
elcrncnl5 used ill sVslelns produced bV the Optical Syslcros
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t i
nnstncc lat,Ilm l glasses % I'cnnspIvtiniii Oplicai I)IVIS1all
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Test strips and chemicals for Itek
RS process / Lexington Research Laboratories
Division, and has ground and polished some of the space
A-RQ97 Q% Q9At i@4I'$1K0pIAram.
The Wayne-George Division, in Newton, Mass., was
acquired by Itek in 1967. This division produces a line of
electro-optical devices called optical encoders, which are
used in submarine navigation systems, tracking radars,
automatic machine tools, and other types of equipment.
These mechanisms measure linear or rotary motion with
very high accuracy, converting the measurements into
electrical signals that can be fed into high-speed com-
puters.
During 1968, this division introduced a new line of rotary
encoders containing integrated-circuit electronics, and
began deliveries of another type of encoder which is
believed to be the most accurate available.
R ESEARCH AND DEVELOPMENT Along with building
engineering capabilities, production capacity, and
effective marketing organizations, a technologically
oriented company must continue to invest in its future
through research and development. Itek's two primary
research laboratories, the Optics Laboratory and the
Lexington Research Laboratories, pursue programs
leading towards new products and processes. Each
Itek division also carries on extensive development and
engineering efforts in its specific areas of interest.
One example of a successful chain of events leading from
the laboratory to the marketplace is the application of the
proprietary Itek RS process to a variety of products and
supplies.
The Itek RS process is a family of new photosensitive ma-
terials which can be applied to practically any surface to
produce high quality photographic images. Paper of almost
any grade can be coated with Itek RS materials in the day-
light on standard high speed paper-coating mills. This new
development has many important characteristics in its
various embodiments. These include high processing
speeds for continuous printing, high resolution, the
capability of over-printing or adding on, low cost, and
 archival quality. Although present Itek RS printing papers
use silver to form the pk-i , ft0 12004109/23
made on the development of products using non-precious
metals for the visible image.
Itek RS paper is being used in one model of the 18.24
Microfilm Reader-Printer, which has been on the market
since 1967.
During 1968 Itek worked with the Agfa-Gevaert group
in Belgium with the objective of manufacturing Itek RS
duplicating film, and we are currently considering
expanding the venture. Very recently Itek and Agfa-
Gevaert found that the Itek RS process makes it possible
to combine some of the critical steps in film manufac-
ture. If this proves feasible in full production, the cost of
manufacturing our film should be distinctly less than for
silver halide films, and cost-competitive with at least the
higher grades of diazo film, over which the Itek RS process
has very substantial quality advantages.
A new development in our laboratories is a family of Itek
RS metal lithographic plates. These high quality, pre-
sensitized offset printing plates are expected to be capable
of high resolution half-tone reproduction and, in some
cases, of long press runs.
Efforts to increase photographic speeds of our films are
continuing and good results have been achieved in the
laboratory. Although the films cannot be considered to
have amateur camera speed, Itek's laboratories have dem-
onstrated a 100-fold increase in speed over that which was
Forty-tour-inch-diameteA p(M d n@g1Jelease 2004/09/23
polishing tool / Optical Systems Division
obtainable two years ago, and progress continues.
CI" t eT e~ Rl~ cQAQo~Wc1_Aa in which Itek is
working is the market for copier-duplicators, lying between
the convenience, or office, copier and central duplication
equipment.
In optics, we have automated the testing of optical surfaces
and are using this as a production tool. Computer handling
of this information has led to automation of surface
polishing and testing, and our success in this field indicates
that automation of the entire optical manufacturing
process is likely to be achieved.
Other advances which can in the future develop from our
optics technology include optical memories using laser
holography for very high speed, high-density storage of
information, and major improvements in testing optical
lenses and mirrors by use of hologram interferometry and
computers.
Itek scientists and engineers are currently working on
research programs relating to proprietary dry photo-
graphic systems other than Itek RS for applications in such
areas as: graphic arts proofing, and microfilm recording
and blowback systems; metallic and non-metallic print-
ing plates, other than the Itek RS plates previously men-
tioned; new kinds of display and information storage
systems; and application of automatic control techniques
to general machine tools in which the computer directly
provides on-line control of the entire manufacturing
process.
Itek, Itek RS, Itek Platemaster, Project-a-Lith, Photostat, Transflo
and Sunspree are trademarks of Itek Corporation.
 Itek Corporation and Subsidiaries
FinancialStatements8ed For Release 2004/09/23 : CIA-RDP72-0031OR000200150001-9
1967
(Note 1)
Consolidated
Statements of Income
Net Sales and Revenues from Contracts (Notes 2 and 4)
For the Years Ended
December 31, 1968 and 1967
Costs and Expenses (Notes 2, 4, 6 and 7) :
Cost of sales
96,535,401
94,854,437
Selling expenses
11,255,507
9,645,437
General and administrative expenses
15,125,354
14,555,253
Total costs and expenses
122,916,262
119,055,127
Operating Income
Other Income (Expense) (Note 2) :
Interest expense
(570,617)
(478,281)
Miscellaneous, net
113,686
223,297
Income from Continuing Operations Before Federal Income Taxes
2,887,231
9,887,353
Provision for Federal income taxes (Notes 2 and 5)
1,295,000
4,684,000
Income from Continuing Operations
Loss from operations discontinued in 1968, less applicable Federal
income tax credits of $1,160,000 in 1968 and $65,000 in 1967 (Note 2)
Income before Extraordinary Items
591,967
4,723,254
Extraordinary Items, net (Note 3)
(23,017)
-
Earnings Per Share of Common Stock
(based on average shares outstanding during each year) :
From continuing operations
$.70
$2.43
Before extraordinary items
.26
Extraordinary items, net
(.01)
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Consolidated
Statements of Retained
Earnings
For the Years Ended
December 31, 1968 and 1967
Consolidated
Statements of Common
Stock
For the Years Ended
December 31, 1968 and 1967
Balance at Beginning of Year (including $1,177,952 deficit in 1967
arising from 1968 merger accounted for on a pooling-of-interests basis)
Add: Net income
Less: Dividends paid by pooled companies prior to.
merger or acquisition
1968
1967
(Note 1)
$16,141,863
$11,506,806
568,950
4,723,254
-
(88,197)
Consolidated Statements
of Capital in Excess
of Stated Value
For the Years Ended
December 31, 1968 and 1967
Balance at Beginning of Year (including $17,387 in 1967 arising from
1968 merger accounted for on a pooling-of-interests basis)
Add: Exercise of employee stock options
Sale of common stock to employees under the
Company's stock purchase plan
Sale of equivalent common stock by pooled companies
prior to merger or acquisition
Conversion of debentures into common stock
18,425
10,302
829
-
34,568
6,613
3,954
143,952
Balance at End of Year
Balance at Beginning of Year (including $410,501 in 1967 arising
from 1968 merger accounted for on a pooling-of-interests basis)
$22,130,616
$13,367,432
Add: Exercise of employee stock options
Sale of common stock to employees under the
Company's stock purchase plan
Sale of equivalent common stock by pooled companies
prior to merger or acquisition and other capital transactions
Conversion of debentures into common stock less
unamortized debenture issuance expense applicable thereto
374,769
938,633
162,311
-
619,134
773,125
77,688
7,637,506
Less: Expenses incurred in connection with mergers and
acquisitions accounted for on a pooling-of-interests basis
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23
 Itek Corporation and Subsidiaries
Financial StatementA M%cl For Release 2004/09/23 : CIA-RDP72-0031 OR000200150001-9
1967
(Note 1)
Consolidated Balance
Sheets
December 31, 1968 and 1967
Current Assets:
Cash
$ 3,131,808
$ 1,826,447
Marketable securities, at cost, which approximates market value
144,365
1,323,310
Accounts receivable, less reserves of $188,000 in 1968
and $180,000 in 1967
Unbilled contract costs and fees
Inventories, at lower of cost (first-in, first-out) or
market (Note 4)
17,073,474
Refundable and prepaid Federal income taxes (Note 5)
2,276,879
Prepaid expenses
Total current assets
Investment in and Advances to Unconsolidated
Companies (Note 1)
303,862
Equipment on rent to Customers, at cost, less accumulated
depreciation of $639,721 in 1968 and $596,997 in 1967 (Note 6)
989,701
Plant and Equipment, at cost (Note 6) :
Land, buildings and leasehold improvements
13,964,054
11,383,550
Machinery and equipment
19,892,027
16,888,571
Accumulated depreciation and amortization
(13,451,520)
(11,192,391)
Net plant and equipment
20,404,561
17,079,730
319,790
684,248
$ 69,161,339
$ 64,707,526
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Liabilities and Stockholders' Investment
1968
1967
(Note 1)
Current Liabilities:
Notes payable, primarily to banks
$10,624,895
$ 9,028,797
Accounts payable
7,625,901
6,905,469
Accrued expenses
6,423,670
5,186,453
Federal income taxes
-
1,398,848
Stockholders' Investment (Notes 1 and 9) :
Preferred stock, par value $5 per share,
authorized 500,000 shares, none issued
Common stock without par value, stated at $1 per share,
authorized 3,000,000 shares, outstanding 2,274,549
shares at December 31, 1968 and 2,244,993 shares
at December 31, 1967
2,274,549 2,244,993
23,527,470 22,130,616
16,710,813 16,141,863
The accompanying notes are an integral part of these financial statements.
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 Itek Corporation andSubsidiaries
Financial Statementpprlwed For Release 2004/09/23 : CIA-RDP72-0031OR000200150001-9
1968
1967
(Note 1)
Consolidated Statements
of Source and
Funds Were Received From:
$ 568
950
723
254
$4
Application of Funds
For the Years Ended
Net income
Depreciation and amortization charges
,
3,202,786
,
,
2,862,827
December 31, 1968 and 1967
Funds provided by operations
Exercise of employee stock options
3,771,736
393,194
7,586,081
653,702
Sale of common stock to employees under the
Company's stock purchase plan
948,935
779,738
Sale of equivalent common stock by pooled companies prior
to merger or acquisition and other capital transactions
163,140
81,642
Increase in long-term debt
186,554
-
Other
481,458
216,967
Total Funds Received
Funds Were Used For:
Plant and equipment additions, net
6,455,504
5,471,349
Expenses incurred in connection with mergers and acquisitions
78,859
344,269
Net investment in and-advances to unconsolidated companies
303,862
-
Reduction of long-term debt
1,614,840
Dividends paid by pooled companies prior to merger or acquisition
88,197
432
161
Other
Total Funds Used
6,838,225
,
7,680,087
Increase (Decrease) in Working Capital
$ (893,208)
$1,638,043
The accompanying notes are an integral part of these financial statements.
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Notes to
Financial Statements
For the Years Ended
December 31, 1968 and 1967
(1) Principles of Consolidation
The accompanying consolidated financial state-
ments include the accounts of Itek Corporation
and all its majority owned domestic and
Canadian subsidiaries. Itek's investments in
other companies are recorded in the accom-
panying consolidated balance sheets at cost
less Itek's equity in their 1968 losses amounting
to $47,000. All material intercompany balances
and transactions have been eliminated in
consolidation.
The Scionics Corporation (Scionics) was
merged into Itek Corporation on September 20,
1968. The Company issued 18,300 shares of its
common stock in exchange for all the outstand-
ing common stock of Scionics. The merger was
accounted for as a pooling-of-interests and
accordingly the 1967 consolidated financial
statements for Itek Corporation have been
restated to include the 1967 sales and net loss of
Scionics of $231,165 and $575,815 respectively.
(2) Discontinued Operations
During 1968, the Company decided to dis-
continue and close down the operations of a
division and a subsidiary. The operating losses
of the division and subsidiary for the year 1967
and for the periods in 1968 prior to the decision
to discontinue and close down, less applicable
Federal income tax credits, have been sepa-
rately set forth in the accompanying consoli-
dated statements of income. Accordingly, net
sales of $1,286,939 in 1968 and $2,352,995 in
1967 and related costs and expenses, Federal
income tax credits, etc. have been excluded
from the applicable captions in the accompany-
ing consolidated statements of income.
The costs and expenses related to the close-
down of these two operations, less applicable
Federal income tax credits, have been included
as extraordinary items in the accompanying
consolidated statements of income. See Note 3.
(3) Extraordinary Items
The extraordinary items for 1968 in the accom-
panying consolidated statements of income are
as follows:
Gain from termination of an
agreement with a customer of
The Scionics Corporation, less
Income
(Expense)
applicable Federal income taxes of
$402,000 ....................... $ 358,972
Federal income tax reduction to
The Scionics Corporation resulting
from the carryforward of its prior
years losses .................... 283,000
Close-down of the operations of a
division and subsidiary (Note 2) -
? Expenses and losses related to the
close down, less applicable Federal
income tax credits of $1,383,000 . . (1,235,989)
? Additional Federal income tax
credit resulting from the differ-
ence between the book and tax
basis of the investment in the
subsidiary ..................... 571,000
Extraordinary items, net ........ $ (23,017)
(4) Inventories and Methods of
Recording Profits on Contracts
Inventories at December 31, 1968 and 1967
were as follows:
1968
1967
Finished goods ......
$ 6,696,912
$ 5,319,394
Contract and other
work in process less
progress payments of
$5,911,000 in 1968 and
$3,125,000 in 1967..
5,744,258
6,267,710
Raw materials ... ...
4,632,304
4,101,349
Total inventories ....
$17,073,474
$15,688,453
The Company follows the practice of recording
profits on cost reimbursement type contracts as
a percentage of costs incurred and on fixed price
contracts as a percentage of the sales value of
shipments made. On certain fixed price con-
tracts on which the sales prices (approximately
$5,200,000 at year end) have not been estab-
lished at the time of delivery, profits are
recorded as a percentage of the estimated final
sales value of shipments made. The percentages
used in recording profits represent the best
estimate of the anticipated profit percentages to
be realized on the completed contracts. If a loss
is indicated on any contract in process, pro-
vision is made for the entire estimated loss at
that time.
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purposes. 1nve5t1te1u