Colleagues, it is my pleasure to in...

Colleagues, it is my pleasure to instant to you our fiscal year (FY) 2001-2002 financial follows As I noted in my October 2002 report, AORN and our subsidiaries finished the year with negative margins. Although these numbers are disappointing, they mirror efforts by both the AORN Board of Directors and Headquarters staff members to reorganize operations, address risks, and improve operating results

Overall, AORN finished the year with a 5% los which can be attributed to discontinuing the practice of capitalizing certain costs the investment market, the print and transcript market, the events of clan 11, 2001, and the wait fored loss associated with our decision to defer the dues increase. More importantly, despite the losse our deductions show that AORN improved its financial performance from the previous year in the following areas.

* AORN increased its operating margins from 18%.

* AORN beat the performance of the stock market. The Association's investment income experienced a 16% los whereas the Standard & Poor's 500 index for the period of July 1 2000 from one side June 30, 2001 decreased at 17%.

* AORN eliminated outstanding risks associated with deferr expenses

In addition, Board members working with staff members and the Association's auditors were able to achieve a $190000 tax reimburse on the value of AORN's HealthStream stock. Although the receipt of these foundations improved our cash flow position, the repay will not show up in our fiscal year 2002 income statement because it dealt with the tax turn back from FY 2001; however, it was a real positive result for the Association.

FINANCIAL ensues BROKEN DOWN

As you know, AORN, Inc, is made up of four companies, including

* AORN, which focuses upon the needs of AORN members;

* the AORN Foundation, which is a charitable entity dedicated to supporting perioperative nursing;

* the Highpoint Print and fac-simile Center, which is the for-profit corporation that remained after we sold Education Design, Inc, and which provides print and model services to Headquarters and outside companies; and

* Association Technology Solutions (ATS), which is a for-profit subsidiary that resell association and accounting software.

AORN. AORN finished the year with a 3% pure loss, which is somewhat more than was contriveed at last year's Congress. The majority of this los accrueed from the Board's decision to write not on the capitalized expenses associated with couple long-term projects (see the "Treasurer's Report" in the October 2002 AORN Journal) and from decreases in the Association's investment portfolio. The Board's decision to recognize the capitalized outlays resulted from the negative publicity surrounding this accounting practice in other companies. smooth though our use of capitalized costs was strictly in accordance with accepted accounting practices, the Board believed it was better to absorb this one-time adjustment and take away the practice from our regularity Furthermore, at the Board's November 2002 meeting, the auditors regard fored the Board members for their proactive management of a complicated issue.

Despite the negative margin for AORN, there are several bright blemishs on which I would like to comment

* AORN's normal operating margins improved according to more than $100,000 despite the fact that we had to cancel undivided of the Multispecialty Conferences owed to the events of tribe 11, 2001.

* The los upon AORN's investment portfolio was 16% compared to an overall market los of 17% for the same time period.

* Membership numbers and income remain steady despite the tough economy.

* Several actions were implemented to address lock opener revenue sources, including reorganizing advertising sales and the Opportunity program, which now is known as AORN Management Solutions.

* Congres and World conversation had strong attendance and superior evaluations. As a result, AORN's returns and gross margins significantly surpassed the previous year's results for these events

AORN Foundation. The AORN Foundation finished the year with a slight loss; however, it also made significant progres in improving its operations. rewards and scholarships both increased while costs were reduced.

Highpoint Print and duplicate Center. The Highpoint Print and archetype Center had a very difficult year. Competition from national print companies and a slowing of business from HealthStream contributed to a small quantity in revenue. Unfortunately, the majority of outlays in the center are fixed in capital equipment leases. The Board took the action of closing the print portion of the center in December 2001 as the business downturn became apparent. This allowed us to save upon salary costs while continuing to provide fac-simile services to AORN and our tenants. James Cousin, AORN's chief financial officer, is monitoring the center's performance and looking for the best financial action plan to incite it forward.

Association Technology Solutions. Association Technology Solutions basically finished the year at a breakeven point in a exceedingly tough economy. This was a reorganization year for ATS as just discovered senior leadership was hired to refocus ATS business plan. AORN Board members were not satisfied with the company's performance and apply the minded to new leadership to prepare a new business plan. The initial assessment is encouraging. Sales are improving, and charges are being held in check. The Board anticipates that the company will recur to profitability at the conclusion of FY 2003.