<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1994
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 1-8158
VARCO INTERNATIONAL, INC.
(Exact name of registrant as specified in its charter)
California 95-0472620
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
743 North Eckhoff Street, Orange, CA 92668
(Address of principal executive offices)
(Zip code)
(714) 978-1900
(Registrant's telephone number, including area code)
Not Applicable
(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 (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
-- -- ----
33,365,075
(Number of shares of Common Stock outstanding at October 31, 1994)
<PAGE>
PART I-FINANCIAL INFORMATION
Item 1. Financial statements.
Pursuant to General Instruction D to Form 10-Q, the Condensed Consolidated
Statements of Cash Flows, Condensed Consolidated Balance Sheets and Condensed
Consolidated Statements of Income of Varco International, Inc., (the "Company")
and its subsidiaries included in the registrant's Third Quarter Report to
Shareholders for the three months ended September 30, 1994, filed as Exhibit 19
hereto are incorporated herein by reference. Such financial statements should be
read in light of the following:
Adjustments. The financial statements contained in Exhibit 19 hereto
include all adjustments which in the opinion of management are of a normal
recurring nature, considered necessary to present fairly the results of
operations for the interim periods presented.
Net Income Per Share. Net income per share is based upon an average of
33,527,248 and 33,412,160 shares outstanding for the nine months ended September
30, 1994, and 1993 respectively, and upon an average of 33,545,611 and
33,483,897 shares outstanding for the three months ended September 30, 1994 and
1993 respectively.
Inventories. The Company estimates the components of inventory at September
30, 1994 and December 31, 1993, to be as follows:
<TABLE>
<CAPTION>
September 30, 1994 December 31, 1993
------------------ -----------------
<S> <C> <C>
Raw Materials $ 6,081,000 $ 5,615,000
Work in Process 15,277,000 11,806,000
Finished Goods 36,594,000 34,031,000
----------- -----------
$57,952,000 $51,452,000
=========== ===========
</TABLE>
Fixed Assets. Fixed assets are stated net of accumulated depreciation of
$50,965,000 at September 30, 1994, and $45,768,000 at December 31, 1993.
2
<PAGE>
Common Stock and Additional Paid-In-Capital. On September 30,1994, the
Company Common Stock account was $23,733,000, and Additional Paid-In-Capital
accounts were $102,175,000.
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
Pursuant to General Instruction D to Form 10-Q, Management' Discussion and
Analysis of Financial Condition and Results of Operations contained in the
registrant's Third Quarter Report to Shareholders for the three months ended
September 30, 1994, filed as Exhibit 19 hereto, is incorporated herein by
reference.
PART II-OTHER INFORMATION
Item 2. Changes in Securities
On July 17, 1992, the Company sold $50,000,000 aggregate principal amount
of its 8.95% Senior Notes Due June 30,1999 (the "Senior Notes") to a group of
ten institutional investors pursuant to a Note Agreement dated as of July 1,
1992 (the "Note Agreement"). The principal of the Senior Notes is payable in
five equal annual installments commencing on June 30, 1995.
The Note Agreement prohibits any "Restricted Payment" subsequent to July
17, 1992 unless after giving effect thereto, (i) the aggregate amount of all
Restricted Payments subsequent to such date would not exceed $5,000,000 plus the
cumulative sum of 50% of the Company's consolidated net income (or minus 100% in
the case of a deficit) subsequent to March 31, 1992 and (ii) the Company could
incur at least $1.00 of additional indebtedness under the Note Agreement
covenant limiting indebtedness. The term "Restricted Payment" includes (a) any
dividend (other than dividends payable in shares of capital stock) or other
distributions on any shares of capital stock of the Company; (b) any purchase,
redemption or other acquisition of any shares of the capital stock of the
Company or any rights or options to purchase or acquire such shares; and (c) any
"Restricted Investment", which is generally defined as any investment other than
an investment in a subsidiary of the Company or an investment in certain
designated government or rated securities. The redemption of the Company's
outstanding $2.00 Cumulative Convertible Preferred Stock, Series A and the
redemption of the 8 1/2% Convertible Subordinated Debentures Due 1996 guaranteed
by the Company were exempted from the foregoing restrictions. In addition, the
3
<PAGE>
Company may purchase, redeem or otherwise acquire shares of its capital stock or
make Restricted Investments from the net cash proceeds of the substantially
current sales of shares of capital stock or from the sale of securities
convertible into such shares upon conversion.
On February 25, 1993 the Company entered into an unsecured revolving credit
agreement with Citicorp USA, Inc. and Citibank, N.A. (the "Credit Agreement")
which currently provides for advances and letters of credit of up to $10,000,000
each, subject to reduction in certain events. Under the terms of the Credit
Agreement the amount available for the payment of dividends on, and repurchases
of, Common Stock is limited to 25% of the Company's consolidated net income
arising after January 1, 1992, computed on a cumulative basis. In addition,
pursuant to an amendment to the Credit Agreement entered into in May 1994, the
Company may repurchase at any time prior to December 31, 1995 not in excess of
one million shares of its Common Stock for an aggregate cost not exceeding $6
million. The Company may also purchase or otherwise acquire shares of Common
Stock from the proceeds of the substantially concurrent sale of shares of Common
Stock.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
10 The Varco International Inc. 1994 Directors' Stock Option Plan
11 Statement re computation of per share earnings for the three months
and nine months ended September 30, 1994 and 1993.
19 Varco International, Inc. Third Quarter Report to Shareholders. Three
Months Ended September 30, 1994.
27 Financial Data Schedule
(b) Reports on Form 8-K.
No reports on Form 8-K were filed during the quarter for which this
report is filed.
4
<PAGE>
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.
VARCO INTERNATIONAL, INC.
Date: November 10, 1994 By: /s/ RICHARD A. KERTSON
---------------------------
Vice President-Finance
and Chief Financial Officer
Date: November 10, 1994 By: /s/ DONALD L. STICHLER
---------------------------
Controller-Treasurer
and Secretary
5
<PAGE>
EXHIBIT INDEX
10 The Varco International Inc. 1994 Directors' Stock Option Plan
11 Statement re computation of per share earnings for the three months and nine
months ended September 30, 1994 and 1993.
19 Varco International, Inc. Third Quarter Report to Shareholders, Three Months
Ended September 30, 1994.
27 Financial Data Schedule.
6
<PAGE>
EXHIBIT 10
VARCO INTERNATIONAL, INC.
1994 DIRECTORS' STOCK OPTION PLAN
1. PURPOSE
The purpose of this 1994 Directors' Stock Option Plan (the "Plan") of Varco
International, Inc. (the "Company") is to advance the interests of the Company
and its shareholders by enabling the Company to attract and retain highly
qualified directors who are not also employees of the Company or any of its
subsidiaries and by encouraging increased ownership of shares of the Common
Stock of the Company (the "Common Stock") by such directors.
2. ADMINISTRATION
The Plan shall be administered by a committee (the "Committee") appointed by the
Board of Directors of the Company (the "Board"), which shall consist of not less
than three directors of the Company. The Board may designate its Compensation
Committee, if any, as the Committee. The Committee is authorized to interpret
the Plan and may from time to time adopt such rules and regulations, not
inconsistent with the provisions of the Plan, as it may deem advisable.
Notwithstanding the foregoing, the Plan is intended to meet the requirements of
Rule 16b-3 promulgated under the Securities Exchange Act of 1934, as amended
(the "1934 Act") and, more specifically, to meet the criteria for a plan
providing for "formula awards" set forth in Rule 16b-3(c)(2)(ii) or any
successor rule or regulation, and, accordingly, the Committee shall have no
discretion with respect to the eligibility or selection of directors to be
granted options ("Options") under the Plan, the timing of the grant of any
Option, the number of Shares subject any Option or the exercise price thereof,
or any other matter or determination which would cause the Plan not to meet such
criteria. Decisions of the Committee shall be final and binding upon all
parties having an interest in the Plan.
3. PARTICIPATION
All directors of the Company who are not employees of the Company or any
subsidiary of the Company ("Eligible Directors") shall be eligible to
participate in the Plan. As used herein, "subsidiary" shall mean any
corporation at least 50% of the outstanding voting stock of which is owned,
directly or indirectly through one or more intermediaries, by the Company.
4. COMMON STOCK SUBJECT TO THE PLAN
Subject to adjustment as provided in Section 7 of the Plan, the maximum number
of shares of Common Stock which may be issued upon the exercise of Options shall
be 650,000. Such shares shall be authorized but unissued shares. If any
<PAGE>
Option shall expire or terminate for any reason without having been exercised in
full, the unpurchased shares which were subject thereto shall again become
available for issuance under the Plan.
5. GRANTS OF OPTIONS
(a) Initial Grants. There shall be granted to each Eligible Director
(i) on the date of his or her initial election as a member of the Board in the
case of each Eligible Director who was not a member of the Board of Directors on
the date the Plan was approved by the Board (the "Board Approval Date"), (ii) on
the Board Approval Date in the case of each Eligible Director who is a member of
the Board on the Board Approval Date, and (iii) on the date a person becomes an
Eligible Director by virtue of the termination of his or her employment by the
Company or any subsidiary of the Company in the case of each Eligible Director
who was not an Eligible Director on the date of his or her initial election as a
member of the Board or on the Board Approval Date, an Option to purchase 5,000
shares of Common Stock.
(b) Annual Grants. There shall be granted to each Eligible Director
annually on the second Thursday of August in each year, commencing with the year
1995 and to an including the year 2003, an Option to purchase 5,000 shares of
Common Stock ("Annual Grant Option").
(c) Election. Any Eligible Director may elect not to receive an
Annual Grant Option, but only by written notice delivered to the Committee not
less than six months prior to the date of grant of such Option.
(d) Adjustments. The number of shares subject to any outstanding
Option and the number of shares subject to any Option to be granted under this
Section 5 shall be subject to adjustment from time to time as provided in
Section 7 of the Plan.
(e) No Limitation on Removal. No Option granted under this Section 5
shall be construed as limiting any right which either the shareholders of the
Company or the Board may have to remove at any time, with or without cause, any
Eligible Director from the Board.
6. TERMS AND CONDITIONS OF OPTIONS
Each Option shall be evidenced by a written instrument in
substantially the form of Exhibit 1 attached hereto or in such other form as may
be approved by the Committee and shall be subject to the following terms and
conditions:
2
<PAGE>
(a) Term. The term of each Option shall be ten years from its date of
grant, subject to earlier termination in accordance with Section 7(b) of the
Plan or as follows:
(i) If any Eligible Director shall cease to be an Eligible Director
for any reason other than his or her death or disability (within the
meaning of Section 422(c)(6) of the Internal Revenue Code of 1986, as
amended (the "Code")) while holding an Option which has not expired and has
not been fully exercised, such holder may exercise such Option to the
extent that it was exercisable at the time he or she ceased to be an
Eligible Director at any time within three months after the date on which
such holder ceased to be an Eligible Director, but in no event later than
ten years from the date such Option was granted. Such Option shall
terminate upon the expiration of such period unless the holder dies prior
to such expiration, in which event he or she shall be deemed to have died
on the date he or she ceased to be an Eligible Director, and such Option be
exercisable and terminate in accordance with the provisions of paragraph
(ii) below.
(ii) If any Eligible Director shall cease to be an Eligible Director
by reason of his or her death or disability (within the meaning of Section
422(c)(6) of the Code), while holding an Option which has not expired and
has not been fully exercised, such holder (or his or her guardian or legal
representative) may exercise such Option to the extent that it was
exercisable at the time he or she ceased to be an Eligible Director by
reason of such death or disability at any time within twelve months after
the date on which such person ceased to be an Eligible Director, but in no
even later than ten years from the date such Option was granted. Such
Option shall terminate upon the expiration of such period.
(b) Exercise Price. The purchase price for each share of Common Stock
subject to an Option shall be equal to 100% of the Fair Market Value (as
hereinafter defined) of the Common Stock on the date such Option is granted. As
used in the Plan, "Fair Market Value" on any date shall be equal to the mean of
the high and low sales prices of a share of Common Stock on such date (or if
such date is not a trading day or there are no sales reported on such date, on
the next preceding trading day for which sales are reported), based on the
composite or consolidated transactions for New York Stock Exchange issues
reported by The Wall Street Journal (or if The Wall Street Journal is not then
being published, by The New York Times or such other source as shall be
determined by the Committee.) In the event that the Common Stock ceases to be
listed on the New York Stock Exchange, the method of determining Fair Market
Value shall be
3
<PAGE>
determined by the Committee. The exercise price of outstanding Options shall be
subject to adjustment from time to time in accordance with Section 7 of the
Plan.
(c) Exercisability. Each Option shall become exercisable with respect to
50% of the shares subject thereto on the first anniversary of the date of grant
of such Option and with respect to the remaining 50% on the second anniversary
of such date of grant, provided that the holder is an Eligible Director on the
applicable anniversary date. Notwithstanding the foregoing, in the event that
(i) any person or entity, including a "group" as contemplated by Section
13(d)(3) of the 1934 Act, acquires or gains ownership or control (including,
without limitation, power to vote) of more than 50% of the outstanding Common
Stock or (ii) as a result of or in connection with a contested election of
directors, the persons who were directors of the Company before such election
shall cease to constitute a majority of the Board of Directors of the Company,
then immediately upon the occurrence of any such event (a "Change in Control")
each outstanding Option shall become exercisable with respect to all shares
subject thereto. Options shall also become exercisable pursuant to the
provisions of Section 7(b) of the Plan.
(d) Exercise and Payment. An Option may be exercised only by written
notice to the Company at its principal executive office by the person entitled
to exercise such Option, stating the number of shares of Common Stock with
respect to which such Option is being exercised and accompanied by payment of
the full purchase price for the shares with respect to which it is exercised.
The minimum number of shares of Common Stock with respect to which an Option may
be exercised at any one time shall be 500, unless the number of shares with
respect to which the Option is being exercised is the total number of shares
available for purchase under the Option. The purchase price may be paid in
cash, in shares of Common Stock owned by the Holder, or partly in cash and
partly in shares of Common Stock. The value of shares of Common Stock delivered
in payment of the purchase price shall be their Fair Market Value, as of the
date of exercise. Upon receipt of such notice and payment and payment of any
amount on account of withholding taxes as provided in paragraph (e) below, the
Company shall promptly issue and deliver to the holder (or other person entitled
to exercise the Option) a certificate or certificates for the number of shares
of Common Stock as to which the exercise is made. No holder of an Option shall
have any rights as an owner of Common Stock until the date of issuance to him or
her of such certificate or certificates.
(e) Withholding Taxes. It shall be a condition to the obligation of the
Company to issue shares of Common Stock upon the exercise of an Option, that the
holder pay to the Company the amount requested by the Company for the purpose of
satisfying any liability to withhold federal, state, local or foreign income or
other taxes.
4
<PAGE>
(f) Transferability. No Option shall be transferable by the holder thereof
otherwise than by will or the laws of descent and distribution and any such
Option shall be exercisable during the holder's lifetime only by him or her, or
in the event of disability, by his or her guardian or legal representative.
(g) Nonstatutory Options. Each Option shall be a nonstatutory option not
intended to qualify as an incentive stock option under Section 422 of the Code.
(g) Compliance with Law. The exercise of each Option shall be on the
condition that the purchase of shares of Common Stock thereunder shall be for
investment purposes, and not with a view to resale or distribution unless such
shares are registered under the Securities Act of 1933, as amended, or if in the
opinion of counsel for the Company such registration is not required under such
Act, or any other applicable law, rule or regulation.
7. ADJUSTMENTS
(a) In the event of any change in the outstanding Common Stock by reason of
stock dividends, split-ups, consolidations, recapitalizations, reorganizations
or like events (as determined by the Committee), an appropriate and
proportionate adjustment shall be made by the Committee in the number of shares
available for issuance under the Plan, in the number of shares of Common Stock
to be subject to Options to be granted under Section 5 of the Plan, and in the
number of shares subject to, and the exercise price of shares of Common Stock
subject to Options outstanding under the Plan with respect to any unpurchased
shares. Any such adjustment to an outstanding Option shall be made without a
change in the total exercise price applicable to such unpurchased shares but
with a corresponding adjustment in the per share exercise price. No fractional
shares of Common Stock shall be issued under the Plan on account of any
adjustment under this Section 7(a).
(b) Notwithstanding anything in paragraph (a) above to the contrary, in the
event of any merger, consolidation or other reorganization of the Company in
which the Company is not the surviving or continuing corporation (as determined
by the Committee) or in the event of the liquidation or dissolution of the
Company, all Options shall terminate on the effective date of the merger,
consolidation, reorganization, liquidation or dissolution unless, in the case of
a merger, consolidation or reorganization, the agreement with respect thereto
provides otherwise. Notwithstanding any other provision of the Plan to the
contrary, all outstanding Options shall be exercisable with respect to all
shares subject thereto for a period of 30 days prior to the effective date of
any such merger, consolidation, reorganization, liquidation or dissolution
unless, in the case of a merger, consolidation or reorganization, such Options
are assumed by the continuing or surviving corporation.
5
<PAGE>
8. AMENDMENT
The Plan may be amended at any time and from time to time by the Board,
provided, however, that shareholder approval shall be required for any amendment
materially increasing the benefits accruing to participants under the Plan,
materially increasing the number of shares of Common Stock which may be issued
under the Plan (except as permitted by Section 7 of the Plan) or materially
modifying the requirements as to eligibility for participation in the Plan and
provided, further, that the Plan may not be amended more than once every six
months other than to comply with changes in the Code, the Employee Retirement
Income Security Act of 1974, as amended, or the rules thereunder. No amendment
to the Plan shall impair the rights of a holder of an Option granted prior to
its adoption without such holder's consent.
9. REGULATORY REQUIREMENTS
(a) The Company may require that any holder, as a condition of the exercise
of any Option, to represent and establish to the satisfaction of the Company
that all shares of Common Stock acquired upon the exercise of such Option will
be acquired for investment and not with a view to resale or distribution. The
Company may prevent the sale or other disposition of any shares acquired
pursuant to the exercise of an Option until it is satisfied that such sale or
other disposition would not be in contravention of applicable state or Federal
securities laws.
(b) No Option shall be exercisable in whole or in part at any time the
Board shall determine in its discretion that the listing or qualification of the
shares of Common Stock subject to such Option on any securities exchange or
under any applicable law, or the consent or approval of any governmental
regulatory body, is necessary or desirable as a condition of, or in connection
with, the exercise of such Option or the issuance of shares of Common Stock
thereunder, unless such listing, qualification, consent or approval shall have
been effected or obtained free of any conditions not acceptable to the Board.
10. TERMINATION
The Plan shall terminate upon the earlier of the adoption by the Board of a
resolution terminating the Plan or ten years from the Board Approval Date. The
termination of the Plan shall not affect the validity of any Option outstanding
under the Plan at the date of termination, but no Option shall be granted under
the Plan subsequent to its termination.
6
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11. STOCKHOLDER APPROVAL
The Plan shall become effective upon its adoption by the Board, subject to
approval by the shareholders of the Company on or before July 31, 1995, by the
affirmative vote of the holders of a majority of the shares of Common Stock of
the Company present, or represented and entitled to vote, at a meeting duly held
in accordance with the laws of the State of California. In the event such
approval is not obtained, all Options granted under the Plan shall be void and
without effect, and no additional Options shall be granted under the Plan.
7
<PAGE>
EXHIBIT 1
VARCO INTERNATIONAL, INC.
DIRECTOR STOCK OPTION
VARCO INTERNATIONAL, INC., a California corporation, hereby grants to
_______________________ (the "Holder") a stock option pursuant and subject to
the terms and conditions of the 1994 Directors' Stock Option Plan (the "Plan")
of the Company and upon the terms and conditions set forth below. Capitalized
terms used and not otherwise defined in this Option shall have the respective
meanings set forth in the Plan.
1. STOCK OPTION. The Company grants to the Holder the right and option
to purchase from the Company an aggregate of _____ shares of Common Stock of the
Company at an exercise price of $______ per share. This Option shall become
exercisable with respect to _____ shares on _________________, and with respect
to the remaining _____ shares on _________________, provided that the Holder is
an Eligible Director on the applicable date. Notwithstanding the foregoing,
this Option shall become exercisable with respect to all shares of Common Stock
subject hereto immediately upon the occurrence of a Change in Control and shall
become exercisable with respect to all such shares in certain events in
accordance with the provisions of Section 7(b) of the Plan. This Option shall
be a nonstatutory option not intended to qualify as an incentive stock option
under Section 422 of the Code.
2. TERM. The term of this Option is ten years commencing on
_________________ and ending on _________________, subject to earlier
termination in accordance with Section 7(b) of the Plan or as follows:
(a) If the Holder shall cease to be an Eligible Director for any
reason other than his or her death or disability (within the meaning of
Section 422(c)(6) of the Code), prior to the expiration of this Option, the
Holder may exercise this Option to the extent that it was exercisable at
the time he or she ceased to be an Eligible Director at any time within
three months after the date on which he or she ceased to be an Eligible
Director, but in no event later than _________________. This Option shall
terminate upon the expiration of such period unless the Holder dies prior
to such expiration, in which event he or she shall be deemed to have died
on the date he or she ceased to be an Eligible Director, and this Option be
exercisable and terminate in accordance with the provisions of paragraph
(b) below.
<PAGE>
(ii) If the Holder shall cease to be an Eligible Director by reason of
his or her death or disability (within the meaning of Section 422(c)(6) of
the Code), prior to the expiration of this Option, the Holder (or his or
her guardian or legal representative) may exercise this Option to the
extent that it was exercisable at the time he or she ceased to be an
Eligible Director by reason of such death or disability at any time within
twelve months after the date on which he or she ceased to be an Eligible
Director, but in no even later than _________________. This Option shall
terminate upon the expiration of such period.
3. EXERCISE AND PAYMENT. This Option may only be exercised by written
notice to the Company at its principal executive office by the person entitled
to exercise this Option, stating the number of shares of Common Stock with
respect to which it is being exercised (which shall be not less than 500 shares
unless this Option is being exercised with respect to the total number of shares
available for purchase hereunder) and accompanied by payment of the full
purchase price for the shares with respect to which this Option is being
exercised. The purchase price may be paid in cash, in shares of Common Stock
owned by the Holder, valued at their Fair Market Value on the date of exercise,
determined as provided in the Plan, or partly in cash and partly in shares of
Common Stock. It shall be a condition to the exercise of this Option that the
Holder pay to the Company the amount requested by the Company for the purpose of
satisfying any liability to withhold federal, state, local or foreign income or
other taxes. The Holder shall not have any rights as an owner of Common Stock
by reason of the exercise of this Option until the date of issuance to him or
her of a certificate or certificates representing the shares of Common Stock
purchased.
4. ADJUSTMENTS. The number of shares of Common Stock subject to this
Option and the exercise price is subject to adjustment as provided in Section 7
of the Plan.
5. TRANSFERABILITY. This Option may not be transferred by the Holder
otherwise than by will or the laws of descent and distribution and during the
Holder's lifetime shall be exercisable only by him or her, or in the event of
disability, by his or her guardian or legal representative.
6. COMPLIANCE WITH LAW. The exercise of this Option shall be on the
condition that the purchase of shares of Common Stock hereunder shall be for
investment purposes, and not with a view to resale or distribution unless such
shares are registered under the Securities Act of 1933, as amended, or if in the
opinion of counsel for the Company such registration is not required under such
Act, or any other applicable law, rule or regulation.
2
<PAGE>
9. REGULATORY REQUIREMENTS.
(a) The Company may require that the Holder, as a condition of any exercise
of this Option, represent and establish to the satisfaction of the Company that
all shares of Common Stock to be acquired upon such exercise will be acquired
for investment and not with a view to resale or distribution. The Company may
prevent the sale or other disposition of any shares acquired pursuant to any
exercise of this Option until it is satisfied that such sale or other
disposition would not be in contravention of applicable state or Federal
securities laws.
(b) This Option shall not be exercisable in whole or in part at any time
the Board shall determine in its discretion that the listing or qualification of
the shares of Common Stock subject hereto on any securities exchange or under
any applicable law, or the consent or approval of any governmental regulatory
body, is necessary or desirable as a condition of, or in connection with, the
exercise of this Option or the issuance of shares of Common Stock hereunder,
unless such listing, qualification, consent or approval shall have been effected
or obtained free of any conditions not acceptable to the Board.
10. CONFLICT. In the event of any conflict between the terms and
provisions of this Option and the terms and provisions of the Plan, the terms
and provisions of the Plan shall govern.
11. GOVERNING LAW. This Option shall be governed by and interpreted in
accordance with the laws of the State of California.
VARCO INTERNATIONAL, INC.
BY_____________________________
Title:
Dated: _________________
45684.2
3
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EXHIBIT 11
VARCO INTERNATIONAL, INC.
Statement Re Computation of Per Share Earnings
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, 1994 September 30, 1994
--------------------------------------
<S> <C> <C>
A. CALCULATION OF ADJUSTED EARNINGS
Net Income After Tax $3,008,000 $8,270,000
<CAPTION>
Total Number Average Number Stock Option Shares Used
Number of of Shares after of Shares Equivalent To Calculate
Days Weighing Outstanding Shares EPS
----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
B. CALCULATION OF AVERAGE SHARES OUTSTANDING
Common Stock Outstanding from time-to-time during:
Three Months Ended September 30, 1994 92 3,071,445,454 33,385,277 160,334 33,545,611
Nine Months Ended September 30, 1994 273 9,109,167,516 33,366,914 160,334 33,527,248
C. CALCULATION OF EARNINGS PER SHARE
Income Per Share = Net Income After Tax
------------------------
Total Shares Outstanding
Income Per Share =
Three Months Ended September 30, 1994 3,008,000 = $0.09
-------------------------
33,545,611
Nine Months Ended September 30, 1994 8,270,000 = $0.25
--------------------------
33,527,248
</TABLE>
<PAGE>
EXHIBIT 11
VARCO INTERNATIONAL, INC.
Statement Re Computation of Per Share Earnings
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, 1993 September 30, 1993
--------------------------------------
<S> <C> <C>
A. CALCULATION OF ADJUSTED EARNINGS
Net Income After Tax $1,034,000 $3,803,000
<CAPTION>
Total Number Average Number Stock Option Shares Used
Number of of Shares after of Shares Equivalent To Calculate
Days Weighing Outstanding Shares EPS
----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
B. CALCULATION OF AVERAGE SHARES OUTSTANDING
Common Stock Outstanding from time-to-time during:
Three Months Ended September 30, 1993 92 3,056,330,008 33,220,978 262,919 33,483,897
Nine Months Ended September 30, 1993 273 9,049,742,792 33,149,241 262,919 33,412,160
C. CALCULATION OF EARNINGS PER SHARE
Income Per Share = Net Income After Tax
------------------------
Total Shares Outstanding
Income Per Share =
Three Months Ended September 30, 1994 1,034,000 = $0.03
-------------------------
33,483,897
Nine Months Ended September 30, 1994 3,803,000 = $0.11
--------------------------
33,412,160
</TABLE>
<PAGE>
VARCO INTERNATIONAL, INC.
3
THIRD QUARTER REPORT 1994
<PAGE>
TO OUR SHAREHOLDERS
Several third quarter developments provide encouragement that our key strategies
are producing increasingly positive results. Earnings were up significantly
from a year ago; incoming orders remained strong; and there was evidence of a
growing acceptance of our newer products. Additionally, we recently announced
an acquisition that we believe expands our future growth opportunities.
Net Income for the quarter was $3.0 million, $.09 per share, on Revenues of
$54.2 million. In the third quarter of last year we earned $1.0 million, $.03
per share, on Revenues of $43.7 million.
For the first nine months of 1994 Net Income increased to $8.3 million,
$.25 per share, from $3.8 million, $.11 per share, in the comparable period of
last year. Revenues were $163.1 million for the nine months, 18 per cent above
the $138.2 million of a year ago. On each dollar of sales and rental revenue
above the 1993 level we were able to generate 29 cents of increased pre-tax
profits, a performance consistent with our management objectives.
Incoming orders totaled $58.6 million for the third quarter, somewhat
above the $57.4 million recorded in the prior three months, and considerably
higher than the $50.0 million received in the third quarter of 1993.
Two third quarter orders are of particular significance. Each results from
the construction of a new drilling rig, one for an offshore platform and the
other for land drilling in Europe. Each includes integrated horizontal and
vertical pipe handling systems a well as a Top Drive Drilling System. In each
case Varco was selected by its customer, the drilling contractor, to collaborate
in the design of a drilling rig employing the latest technology. It is
anticipated that these rigs will also include "TOTAL" computer based drilling
information systems supplied by our M/D Totco Division, as well as products of
other Varco divisions. Increasingly, our newer products - those designed to help
our customers drill faster and safer at less cost - are significantly impacting
our industry.
On November 10 we announced an agreement in principle for the acquisition
of Rig Technology Limited of Aberdeen, Scotland. Under the name Thule Rigtech,
the company designs and sells equipment and systems used in the handling and
processing of drilling fluids. It has gained a reputation for introducing
technically advanced products which reduce the cost of drilling. Their
strategies parallel those of Varco, and their systems offer a potential for
integration with the products of other Varco divisions. Thus, we believe this
acquisition offers a significant new avenue for future growth.
With oil prices hovering in the $17-$18 per barrel range, and natural gas
prices declining during the third quarter, oil companies are under continuing
pressure to reduce costs. In that environment, our product offerings command
significant attention.
We are please with our recent results, but recognize that we must work even
harder to achieve continued progress. The support of our shareholders,
employees, customers, suppliers and friends is much appreciated.
Walter B. Reinhold George I. Boyadjieff
Chairman President and Chief Executive Officer
November 10, 1994
2
<PAGE>
CONDENSED CONSOLIDATED
BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
(in thousands) September 30, December 31,
1994 1993
<S> <C> <C>
CURRENT ASSETS
CASH AND CASH EQUIVALENTS $ 13,694 $ 22,560
SHORT TERM INVESTMENTS 33,652 30,746
RECEIVABLES (NET) 44,658 40,239
INVENTORIES 57,952 51,452
OTHER 9,440 7,558
- - - ------------------------------------------------------------------------------
TOTAL CURRENT ASSETS 159,396 152,555
PROPERTY, PLANT AND EQUIPMENT AT COST,
LESS ACCUMULATED DEPRECIATION 51,772 49,764
COST IN EXCESS OF NET ASSETS ACQUIRED 33,825 34,766
OTHER ASSETS 11,407 10,936
- - - ------------------------------------------------------------------------------
TOTAL ASSETS $256,400 $248,021
==============================================================================
CURRENT LIABILITIES
ACCOUNTS PAYABLE $ 13,588 $ 13,818
OTHER LIABILITIES 22,730 25,496
CURRENT PORTION OF LONG-TERM DEBT 10,000
- - - ------------------------------------------------------------------------------
TOTAL CURRENT LIABILITIES 46,318 39,314
LONG-TERM DEBT 39,291 49,164
OTHER NON-CURRENT LIABILITIES 10,509 6,935
- - - ------------------------------------------------------------------------------
TOTAL LIABILITIES 96,118 95,413
SHAREHOLDERS' EQUITY
COMMON STOCK
AND ADDITIONAL PAID-IN CAPITAL $125,908 $126,302
RETAINED EARNINGS 34,374 26,306
- - - ------------------------------------------------------------------------------
TOTAL SHAREHOLDERS' EQUITY 160,282 152,608
- - - ------------------------------------------------------------------------------
TOTAL LIABILTIES AND
SHAREHOLDERS' EQUITY $256,400 $248,021
==============================================================================
</TABLE>
VARCO INTERNATIONAL, INC. AND SUBSIDIARIES
3
<PAGE>
CONDENSED CONSOLIDATED
STATEMENTS OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
(in thousands, Three Months Nine Months
except per share data) Ended September 30, Ended September 30,
1994 1993 1994 1993
<S> <C> <C> <C> <C>
REVENUES
NET SALES $47,666 $38,111 $144,354 $122,847
RENTAL INCOME 5,998 5,179 17,158 14,142
OTHER INCOME 584 402 1,569 1,174
- - - --------------------------------------------------------------------------------
54,248 43,692 163,081 138,163
- - - --------------------------------------------------------------------------------
COSTS AND EXPENSES
COST OF SALES 30,004 25,424 92,718 81,781
COST OF RENTAL INCOME 1,858 1,486 5,286 4,274
SELLING, GENERAL AND
ADMINISTRATIVE
EXPENSES 13,583 11,415 39,590 34,883
RESEARCH AND
DEVELOPMENT COSTS 2,720 2,431 8,799 7,358
INTEREST EXPENSE 1,219 1,257 3,558 3,786
- - - --------------------------------------------------------------------------------
49,384 42,013 149,951 132,082
- - - --------------------------------------------------------------------------------
INCOME BEFORE
INCOME TAXES 4,864 1,679 13,130 6,081
PROVISION FOR
INCOME TAXES 1,856 645 4,860 2,278
- - - --------------------------------------------------------------------------------
NET INCOME $ 3,008 $ 1,034 $ 8,270 $ 3,803
================================================================================
NET INCOME PER SHARE OF
COMMON STOCK $ .09 $ .03 $ .25 $ .11
================================================================================
SHARES USED TO CALCULATE
EARNINGS PER SHARE 33,546 33,484 33,527 33,412
================================================================================
</TABLE>
Note:
These statements are condensed and do not contain disclosures required by
generally accepted accounting principles. Reference should be made to the
financial statements contained in the Annual Report to Shareholders for the year
ended December 31, 1993.
VARCO INTERNATIONAL INC. AND SUBSIDIARIES
4
<PAGE>
CONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
(in thousands) Nine Months Ended September 30,
1994 1993
<S> <C> <C>
OPERATING ACTIVITIES
NET INCOME $ 8,270 $ 3,803
DEPRECIATION AND AMORTIZATION 8,126 8,044
INCREASE (DECREASE) IN OPERATING
CASH FLOWS:
RECEIVABLES (4,419) 9,928
INVENTORIES (6,500) 6,777
ACCOUNTS PAYABLE (230) (1,800)
INTEREST PAYABLE 1,123 1,113
OTHER (2,566) 5,528
- - - -------------------------------------------------------------------------------
NET CASH FROM
OPERATING ACTIVITIES 3,804 33,393
- - - -------------------------------------------------------------------------------
INVESTING ACTIVITIES
SHORT TERM INVESTMENTS (2,906) (22,421)
EQUIPMENT PURCHASES (8,457) (1,906)
PROCEEDS FROM EQUIPMENT SALES 112 653
ACQUISITION COSTS (352) (4,920)
- - - -------------------------------------------------------------------------------
NET CASH (USED IN)
INVESTING ACTIVITIES (11,603) (28,594)
- - - -------------------------------------------------------------------------------
FINANCING ACTIVITIES
REPURCHASE OF COMMON STOCK (1,067)
PRINCIPAL PAYMENTS ON DEBT (2,055)
OTHER (157)
- - - -------------------------------------------------------------------------------
NET CASH (USED IN)
FINANCING ACTIVITIES (1,067) (2,212)
- - - -------------------------------------------------------------------------------
NET CHANGE IN CASH AND
CASH EQUIVALENTS (8,866) 2,587
- - - -------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS AT
BEGINNING OF YEAR 22,560 26,921
- - - -------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS AT
END OF QUARTER $13,694 $29,508
===============================================================================
</TABLE>
VARCO INTERNATIONAL, INC. AND SUBSIDIARIES
5
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
GENERAL INDUSTRY CONDITIONS
Worldwide drilling activity, as measured by the average number of active
drilling rigs, increased in the first nine months of 1994 to an average of
approximately 1,740 from an average of approximately 1,660 during the same
period in 1993. This increase is due primarily to an increase of approximately
13% in North American drilling activity to an average of approximately 1,007
rigs. The international component of active drilling rigs declined to an average
of approximately 733 in the first nine months as compared to 771 in the first
nine months of 1993. Offshore drilling is down slightly year-to-year, as a gain
in the Gulf of Mexico was offset by declines in other areas of the world. The
average number of worldwide active drilling rigs for the years 1993, 1992, and
1991 were 1,711, 1,674, and 1,888, respectively.
ACQUISITIONS
On August 17, 1993 the Company acquired all of the outstanding Common Stock of
Metrox, Inc. for cash consideration of approximately $4.0 million. Metrox
designed and manufactured instrumentation used in the oil and gas industry, as
well as in general commercial and industrial applications. Metrox has been
combined with, and is reported within, the Company's Martin-Decker/TOTCO
Instrumentation Division.
On November 10, 1994 the Company announced an agreement in principle for
the acquisition of Rig Technology Limited of Aberdeen, Scotland for cash
consideration of approximately $9.5 million. Under the name Thule Rigtech, the
company designs and sells equipment and systems used in the handling and
processing of drilling fluids.
RESULTS OF OPERATIONS
Set forth below are the net orders and revenues for the Company's four operating
divisions:
<TABLE>
<CAPTION>
Three months ended Nine months ended
September 30, September 30,
1994 1993 1994 1993
<S> <C> <C> <C> <C>
NET ORDERS
VARCO DRILLING SYSTEMS $26,631 $13,130 $62,649 $34,763
VARCO BJ OIL TOOLS 9,116 9,503 31,868 27,298
MARTIN-DECKER/TOTCO
INSTRUMENTATION 13,032 12,900 38,699 33,154
SHAFFER 9,838 14,425 35,174 34,126
- - - ----------------------------------------------------------------
TOTAL $58,617 $49,958 $168,390 $129,341
================================================================
REVENUES
VARCO DRILLING SYSTEMS $17,037 $12,709 $ 54,481 $ 38,944
VARCO BJ OIL TOOLS 10,095 9,344 30,880 30,453
MARTIN-DECKER/TOTCO
INSTRUMENTATION 13,681 11,464 39,364 32,271
SHAFFER 12,851 9,773 36,787 35,321
- - - ----------------------------------------------------------------
TOTAL $53,664 $43,290 $161,512 $136,989
================================================================
</TABLE>
The increase in orders for Varco Drilling Systems is primarily due to Top Drive
Drilling Systems orders. Orders for Top Drive Drilling Systems for the third
quarter and the first nine months of 1994 were 12 and 32 units, respectively.
For the same periods of 1993 orders were 7 and 14 units, respectively. In
addition, orders increased due to third quarter racking and pipe handling
systems orders and to improved spare parts and service business. During the
third quarter of 1994 Drilling Systems received orders totaling approximately
$5.4 million for racking and pipe handling systems. No such orders were received
in the third quarter of 1993 and less than $1.0 million was received in the
first two quarters of 1993.
Drilling Systems' increase in revenues is also primarily from the shipment
of Top Drive Drilling Systems. In the third quarter and first nine months of
1994 revenue from Top Drive shipments were $9.3 million and $28.4 million,
respectively. This compares to revenue of $7.0 million and $16.3 million for the
same periods of 1993. Drilling Systems' parts and service business has also
increased during these periods, an approximate $3.4 million increase in the
first nine months of 1994 as compared to the same period in 1993 and by
approximately $1.3 million for the third quarter of 1994 over the third quarter
of 1993.
The increase in orders for Varco BJ Oil Tools during the first nine months
of 1994 as compared to the same period of 1993 is primarily due to the receipt
of a large order from Russia in the first quarter of 1994; to the receipt of
large orders from Latin America during the second quarter of 1994 and to the
improved general industry conditions as evidenced by the increased worldwide
drilling activity. Revenues for Oil Tools were flat year to year as a result of
a larger backlog of unshipped orders at the beginning of 1993 as compared to the
beginning backlog of 1994.
The increase in orders and revenues for Martin-Decker/TOTCO Instrumentation
is primarily due to new product sales, the Metrox acquisition and to increased
drilling activity. The increase in Instrumentation's revenues in the first nine
months 1994 as compared to the same period 1993 is comprised of increased
product sales of approximately $5.0 million and increased North American rental
revenue of approximately $2.1 million. The increase in product sales is due to
increased revenue from the TOTAL System products and to increased revenue from
Metrox products of $2.3 million due to their inclusion for the full nine months.
The increased rental revenue is due to increased rentals of TOTAL Systems and to
increased drilling activity. The North American average active rig count for the
first nine months of 1994 was approximately 1,007 as compared to approximately
889 for the same period last year.
The increase in drilling activity in 1994 has resulted in a small increase
in spare parts, service and repair orders and revenues for Shaffer. In addition,
Shaffer's business is subject to the periodic receipt of large orders for
blowout preventors ("BOP's"). During the third quarter of 1993 two such orders
were received; no such orders were received in the third quarter of 1994.
At September 30, 1994 the Company's backlog of unshipped orders was
approximately $39.2 million as compared to $32.3 million at December 31, 1993.
In accordance with industry practice, orders and commit-
6
<PAGE>
ments generally are cancelable by customers at any time. The Company believes
that most of the backlog will be shipped by December 31, 1994.
Gross margin (net sales and rental income less costs of sales and rental
income) as a percentage of net sales and rental income for the first nine months
of 1994 was 39.3%. This compares to a gross margin of 37.2% for the same period
in 1993. Gross margin for the third quarter 1993 improved to 40.6% from 37.8% in
the third quarter 1993. These improvements are due to increased utilization of
the Company's manufacturing facilities. The Company estimates that based upon
direct labor hours its manufacturing facilities were approximately 75% utilized
in each of the first three quarters of 1994 as compared to only 50%; 60% and 60%
utilization during the first; second and third quarters of 1993, respectively.
The effect of this higher utilization has been to increase the percentage of
manufacturing expenses allocated to inventory and decrease expenses charged
directly to cost of sales, thereby contributing to an increase in gross margins.
The Company believes that new product development is a significant factor
for the future of the Company. During the first nine months of 1994 the Company
spent $8.8 million or 5.4% of revenues on new product development. This compares
to $7.4 million or 5.3% of revenues during the same period in 1993.
As a percent of revenues, selling, general and administrative expenses were
down slightly year-to-year. For the first nine months of 1994 this percent was
24.3% and it was 25.0% for the third quarter of 1994. As a percent of revenues,
selling, general and administrative expenses were 25.2% and 26.1% for the first
nine months and third quarter of 1993, respectively.
Overall Company employment at September 30, 1994 was 1,390 (including 203
temporary employees) which compares to 1,217 (including 160 temporary employees)
a year ago. Most of the increase is in manufacturing and sales.
In the first quarter of 1994 the Company adopted Financial Accounting
Standards Board Statement No. 115 "Accounting for Certain Investments in Debt
and Equity Securities." The effect of this adoption did not have a material
impact on the financial statements of the Company.
LIQUIDITY AND CAPITAL RESOURCES
At September 30, 1994 the Company had cash and cash equivalents and short term
investments of $47.3 million as compared to $53.3 million at December 31, 1993.
This decline was primarily due to increases in accounts receivable and
inventory.
In July 1992 the Company sold $50.0 million aggregate principal amount of
its 8.95% Senior Notes Due June 30, 1999 (the "Senior Notes") to a group of
ten institutional investors pursuant to a Note Agreement dated as of July 1,
1992 (the "Note Agreement"). The principal of the Senior Notes is payable in
five equal annual installments commencing on June 30, 1995. The Notes include a
yield maintenance prepayment penalty if any principal is repaid prior to the
installment due date. Had the entire outstanding principal amount been prepaid
at September 30, 1994 the prepayment penalty would have been approximately $2.1
million.
On February 25, 1993 the Company entered into an unsecured revolving credit
agreement with Citicorp USA, Inc. and Citibank, N.A. (the "Credit Agreement").
The Credit Agreement currently provides for advances and letters of credit of up
to $10 million each, subject to reduction in certain events. At September 30,
1994 there were no advances outstanding and $3.5 million in letters of credit
outstanding under this facility.
Both the Note Agreement and the Credit Agreement restrict the payment of
dividends (other than dividends payable solely in shares of Common Stock) on,
and repurchases of, Common Stock. Under the terms of the Credit Agreement, which
is generally the more restrictive of these, the amount available for the payment
of dividends on, and repurchases of, Common Stock is limited to 25% of the
Company's consolidated net income arising after January 1, 1992, computed on a
cumulative basis. In addition, pursuant to an amendment to the Credit Agreement
entered into in May 1994, the Company may repurchase at any time prior to
December 31, 1995 not in excess of one million shares of its Common Stock for an
aggregate cost not exceeding $6 million. The Company may also purchase or
otherwise acquire shares of Common Stock from the proceeds of the substantially
concurrent sale of shares of Common Stock.
On May 26, 1994 the Company announced that its Board of Directors
authorized the repurchase of up to one million shares of the Company's Common
Stock for an aggregate purchase price not exceeding $6 million. Subsequent to
that date the Company has repurchased on the open market 168,200 shares of its
Common Stock at an average price of approximately $6.30 per share.
At September 30, 1994 the Company's working capital was $113.1 million as
compared to $113.2 million at December 31, 1993 and its current ratio was 3.4 to
1.0 as compared to 3.9 to 1.0 at December 31, 1993. Long-term debt as a percent
of total capitalization was 20% at September 30, 1994 as compared to 24% at
December 31, 1993. The decrease in the foregoing ratio and percentage is due to
the reclassification from long-term to current of the principal payment on the
Senior Notes due June 30, 1995.
At September 30, 1994 the Company had net deferred tax assets of
approximately $48.1 million. The Company believes that current levels of pre-tax
income are sufficient to realize the deferred tax assets in the future.
The Company's capital expenditures during the first nine months of 1994
were $8.5 million as compared to $4.0 million of all of 1993. The Company's
current plans for capital expenditures in 1994 are approximately $9.7 million.
The Company believes its September 30, 1994 cash and cash equivalents and short
term investments will be sufficient for the acquisition of Rig Technology
Limited and to meet its capital expenditures and operating cash needs for 1994
and 1995.
INVESTOR CONTACT
Richard A. Kertson
Vice President-Finance
Varco International, Inc.
743 North Eckhoff Street
Orange, California 92668
Tel (714) 978-1900
Fax (714) 937-5029 [LOGO]
7
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF THE REGISTRANT INCLUDED IN ITS THIRD QUARTER REPORT TO
SHAREHOLDERS FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1994 AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<MULTIPLIER> 1
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> SEP-30-1994
<CASH> $13,694,000
<SECURITIES> $33,652,000
<RECEIVABLES> $46,380,000
<ALLOWANCES> ($1,722,000)
<INVENTORY> $57,952,000
<CURRENT-ASSETS> $159,396,000
<PP&E> $102,737,000
<DEPRECIATION> ($50,965,000)
<TOTAL-ASSETS> $256,400,000
<CURRENT-LIABILITIES> $46,318,000
<BONDS> $39,291,000
<COMMON> $125,908,000
0
0
<OTHER-SE> $34,374,000
<TOTAL-LIABILITY-AND-EQUITY> $256,400,000
<SALES> $161,512,000
<TOTAL-REVENUES> $163,081,000
<CGS> $98,004,000
<TOTAL-COSTS> $137,594,000
<OTHER-EXPENSES> $8,799,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> $3,558,000
<INCOME-PRETAX> $13,130,000
<INCOME-TAX> $4,860,000
<INCOME-CONTINUING> $8,270,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> $8,270,000
<EPS-PRIMARY> $0.25
<EPS-DILUTED> $0.25
</TABLE>
