FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(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, 1997
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: 000-23249
PRIORITY HEALTHCARE CORPORATION
(Exact name of registrant as specified in its charter)
Indiana 35-1927379
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
285 West Central Parkway, Suite 1704
Altamonte Springs, FL 32714
(Address of principal executive offices)
(Zip Code)
(407) 869-7001
(Registrant's telephone number,
including area code)
No Change
(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 _________
As of December 3, the number of shares outstanding of each of the issuer's
classes of common stock were as follows:
Class A common stock - 10,214,286
Class B common stock - 2,300,922
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
PRIORITY HEALTHCARE CORPORATION
CONSOLIDATED STATEMENTS OF EARNINGS
(000's omitted except share data)
(unaudited)
<TABLE>
Nine-month Three-month period
period ended ended
1997 1996 1997 1996
<S> <C> <C> <C> <C>
Net sales $ 169,300 $ 108,704 $ 60,703 $ 43,356
Cost of products sold 152,280 96,625 54,831 38,678
Gross profit 17,020 12,079 5,872 4,678
Selling,general and administrative 7,623 6,113 2,663 2,104
Depreciation and amortization 988 755 332 255
Earnings from operations 8,409 5,211 2,877 2,319
Interest expense, net (primarily related
party) 832 296 334 126
Earnings before income taxes 7,577 4,915 2,543 2,193
Provision for income taxes 3,031 1,966 1,018 877
Net earnings $ 4,546 $ 2,949 $ 1,525 $ 1,316
Pro forma earnings per share $ 0.41 $ 0.25 $ 0.14 $ 0.12
Pro forma average shares outstanding 11,180,138 10,668,297 11,317,648 10,821,085
</TABLE>
(See accompanying notes to consolidated
financial statements)
PRIORITY HEALTHCARE CORPORATION
CONSOLIDATED BALANCE SHEETS
(000's omitted except share data)
(unaudited)
September December
30, 31,
1997 1996
ASSETS
Current assets:
Cash $ 213 $ 1,656
Accounts receivable, less allowance for
doubtful accounts of $887 for 1997
and $815 for 1996 42,224 29,541
Finished goods inventory 17,629 16,132
Deferred income taxes 480 451
Other current assets 520 152
61,066 47,932
Fixed assets, at cost 2,612 2,138
Less: accumulated depreciation (1,271) (804)
1,341 1,334
Intangibles, net 7,556 7,954
TOTAL ASSETS $ 69,963 $ 57,220
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Payable to parent $ 15,101 $ 9,290
Accounts payable 18,416 16,449
Other current liabilities 2,020 1,401
35,537 27,140
Long-term obligations 310 560
Deferred income taxes 170 120
Subordinated note payable to parent 6,000
Shareholders equity:
Preferred stock, no par value, 5,000,000
shares authorized, none issued and outstanding
Common stock
Class A, $.01 par value, 15,000,000
shares authorized, 10,214,286
issued and outstanding 102 102
Class B, $.01 par value, 40,000,000
shares authorized, none issued and outstanding
Additional paid in capital 22,598 22,598
Retained earnings 5,246 6,700
Total shareholders equity 27,946 29,400
Commitments and contingencies
TOTAL LIABILITIES AND SHAREHOLDERS
EQUITY $ 69,963 $ 57,220
(See accompanying notes to consolidated
financial statements)
PRIORITY HEALTHCARE CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(000's omitted except share data)
(unaudited)
Nine-month
period ended
September 30,
1997 1996
Cash flow from operating activities:
Net income $ 4,546 $ 2,949
Adjustments to reconcile net income
to net cash provided (used) by
operating activities:
Depreciation and amortization 988 755
Deferred income taxes 21 (122)
Change in assets and liabilities,
net of acquisition:
Accounts receivable (12,005) (8,193)
Finished goods inventory (1,101) 533
Accounts payable 1,228 1,141
Other current assets and liabilities 126 76
Net cash used by operating activities (6,197) (2,861)
Cash flow from investing activities:
Purchase of fixed assets and other assests (474) (277)
Acquisition of business (333)
Net cash used by investing activities (807) (277)
Cash flow from financing activities:
Payments on long-term obligations (250) 7
Net increase in payable to parent 5,811 2,756
Net cast provided by financing activities 5,561 2,763
Net increase (decrease) in cash (1,443) (375)
Cash at beginning of period 1,656 1,359
Cash at end of period $ 213 $ 984
(See accompanying notes to consolidated
financial statements)
PRIORITY HEALTHCARE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. The accompanying consolidated financial statements have been prepared by
the Company without audit. Certain information and footnote disclosures,
including significant accounting policies, normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted. The Company believes that the financial
statements for the three and nine-month periods ended September 30, 1997 and
1996 include all necessary adjustments for fair presentation. Results for any
interim period may not be indicative of the results of the entire year.
2. The IV-1, Inc. ("IV-1") and IV-One Services, Inc. ("IV-One Services")
subsidiaries of the Company have been named as defendants in a second amended
counterclaim filed by Amgen, Inc. ("Amgen") on May 14, 1996, in the Circuit
Court of the Eighteenth Judicial District of Seminole County, Florida. Amgen
has asserted that these entities tortiously interfered with a license agreement
(the "License Agreement") between Amgen and Ortho Pharmaceutical Corporation
("Ortho"). Pursuant to this agreement, Amgen licensed Ortho to sell EPO for use
in the treatment of non-dialysis patients, while Amgen reserved the exclusive
right to sell EPO for use in the treatment of dialysis patients. Amgen has
asserted that, prior to the purchase of IV-1 and IV-One Services by the Company,
these entities induced Ortho to sell EPO to them for resale in the dialysis
market in contravention of the License Agreement. Amgen has also alleged that
IV-1 and IV-One Services were involved in a civil conspiracy to circumvent the
terms of the License Agreement to allow the resale of EPO to the dialysis
market. Furthermore, Amgen has asserted unfair competition claims against IV-1,
including that IV-1 manufactured and distributed unapproved prefilled syringes
of EPO and another product manufactured by Amgen in container systems unapproved
by Amgen. Amgen did not specify a time frame for the acts complained of in the
civil conspiracy and unfair competition allegations. In each count, Amgen has
demanded an unspecified amount of compensatory damages, including costs and
interest.
The Company believes that the former owners of IV-1, IV-One Services and Charise
Charles are contractually obligated to provide legal defense and to indemnify
the Company for losses and liabilities with respect to this litigation, to the
extent that the alleged acts occurred prior to the purchase of such entities by
the Company. To date, the former owners have provided the legal defense for IV-
1 and IV-One Services in the litigation. Indemnification from the former owners
of IV-1 and IV-One Services is limited to no more than $1.5 million and
indemnification from the former owners of Charise Charles is limited to no more
than $2.0 million. As of September 30, 1997, approximately $89,000 of claims
for indemnification had been submitted to the former owners. The Company does
not expect the Amgen litigation to be material to the Company's results of
operations, financial condition or cash flows; however, no assurance can be
given that this litigation will not have a material adverse effect on the
Company,
3. On November 14, 1995, an investigator for the FDA, accompanied by an
inspector from the State of Florida Board of Pharmacy, inspected the Company's
pharmacy in Altamonte Springs, Florida. At the end of the inspection, the FDA
investigator issued an FDA Form-483, which is the form used by FDA investigators
to identify any observed or suspected noncompliance with the laws administered
by the agency. The FDA Form-483 identified the facility as a
pharmacy/repackager and listed three observations related to certain
requirements that the FDA typically imposes on manufacturers of sterile
products. The Company advised the FDA in December 1995 that the Company
believes it is not, within the statutory or regulatory meaning of these terms, a
repackager or a manufacturer. A second inspection of the same facility occurred
on June 26, 1997, in which the FDA investigator was again accompanied by Florida
pharmacy authorities. The FDA investigator issued a substantially identical FDA
Form-483 at the end of that inspection. The Florida State Board of Pharmacy did
not issue any deficiencies regarding the operations of the Altamonte Springs
pharmacy in either of these inspections.
On March 16, 1992, the FDA issued a Compliance Policy Guide (CPG 460.200), which
explains the criteria the FDA uses to distinguish between pharmacy operations
that are properly regulated under the state law and drug manufacturing regulated
by the FDA. The Company's response to the FDA in December 1995 cited this CPG
and explained the Company's contention that, according to the FDA's own
criteria, the facility is a pharmacy properly regulated under state and local
laws.
The criteria that differentiate drug manufacturing from pharmacy operations are
uncertain under the current state of the law. If the Company is correct and its
operations are limited to those engaged in by pharmacies, there should be no
material adverse effect from the FDA Form-483s because the Company believes it
is currently in compliance in all material respects with applicable state and
local laws. If the Company is deemed to be a sterile product manufacturer or a
sterile product repackager, the Company would be subject to additional
regulatory requirements. Because the FDA does not currently have clear guidance
or regulations on this subject, the FDA or other legal authorities could decide
that the Company must file for approval of a New Drug Application. Such an
event could have a material adverse effect on the Company.
Alternatively, the agency could determine that the Company is a sterile products
repackager and promulgate regulations or publish guidance respecting such
entities. In that event, the Company would likely have to comply with that
portion of the FDA requirements that covers the repackaging operations of
sterile product manufacturers. These requirements may include stability
validation, expiration dating, sterility control, sterile product environmental
monitoring, and good manufacturing practices including appropriate employee
training related to the foregoing. The Company believes that the cost of
compliance with such requirements would not be material to the Company's
operations. However, there can be no assurance that other conditions or
requirements would not be imposed that would have a material adverse effect on
the Company.
4. In October and November of 1997, the Company sold an aggregate of 2,300,00
shares of Class B Common Stock in an initial public offering (the "Offering")
for $13.485 per share after underwriting discount but before expenses of the
offering. The aggregate net proceeds of approximately $31 million are being
used to pay expenses of the Offering, estimated at $750,000, repay indebtedness
of approximately $16.7 million to the Company's parent, Bindley Western
Industries ("BWI") and for working capital and general corporate purposes,
including potential acquisitions.
5. Certain adjustments to historical net earnings are necessary to
calculate the pro forma net earnings. The net effect of the pro forma
adjustments for the nine-month periods ended September 30, 1997 and 1996 and
the three-month periods ended September 30, 1997 and 1996 were increases
(decreases) to net earnings of $77,000, (247,000), $63,000 and (66,000),
respectively and include:
a. Additional costs required to present the Company as if it had
operated as a stand alone entity. These costs include incremental legal,
audit, risk management and administrative costs.
b. The elimination of the interest expense associated with the payable to
BWI. The Company used a portion of the proceeds of the Offering to
liquidate this indebtedness.
c. Additional interest expense attributable to the $6.0
million note payable on the dividend declared March 31, 1997, as if the
note was outstanding January 1, 1996.
d. The effective tax rate derived from the income tax expense for the
Company's historical statements was applied to the pro forma
adjustments to determine the income tax expense or benefit associated
with those adjustments.
The pro forma average shares outstanding were calculated assuming that all of
the shares of the Class A Common Stock and the number of shares of Class B
Common Stock required to be issued (i) to liquidate the average interest bearing
payable to BWI and (ii) to replace the amount in capital by which the March 31,
1997 dividend declared to BWI exceeded the most recent twelve-month earnings
were outstanding as of January 1, 1996. The number of shares required to be
issued to liquidate the payable to BWI was calculated by dividing the average
balance of the interest bearing payable to BWI by the estimated net proceeds per
share of the Offering. The number of shares required to be included as a result
of the dividend was calculated by dividing the amount by which the dividend
exceeded cumulative net income for the twelve-month period ended September 30,
1997 by the estimated net proceeds per share of the Offering.
Pro forma earnings per share has been calculated by dividing pro forma net
earnings by pro forma average shares outstanding.
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
Forward Looking Statements.
Certain statements included in this quarterly report, which are not
historical facts, are forward looking statements. Such forward looking
statements are made pursuant to the safe harbor provisions of the
Private/Securities Litigation Reform Act of 1995. These forward looking
statements involve certain risks and uncertainties including, but not limited
to, changes in interest rates, competitive pressures, changes in customer mix,
financial stability of major customers, investment procurement opportunities and
changes in government regulations or the interpretation thereof, which could
cause actual results to differ from those in the forward looking statements.
Results of Operations.
On August 7, 1997, the Company acquired substantially all of the assets of
Grove Way Pharmacy, Inc., a specialty distributor of vaccines. The acquisition
was accounted for as a purchase and, accordingly, the results of operations are
included in the financial statements from the date of acquisition. The purchase
price and results of operations for the pre-acquisition periods were not
material to the Company.
Net sales increased to $169.3 million in the first nine-months of 1997 from
$108.7 million in the first nine-months of 1996, an increase of 56%. The
increase was generated from a 40% increase in sales of Priority Pharmacy and a
57% increase in sales of Priority Distribution. The net sales increased to
$60.7 million in the three-months ended September 30, 1997, from $43.4 million
in the three-months ended September 30, 1996, an increase of 40%. The increase
was generated from a 20% increase in sales of Priority Pharmacy and a 42%
increase in sales of Priority Distribution. The growth reflected primarily the
addition of new customers, new product introductions, additional sales to
existing customers and, to a lesser extent, inflationary price increases.
Gross margin increased to $17.0 million in the first nine-months of 1997
from $12.1 million in the first nine-months of 1996, an increase of 41%. Gross
margin as a percentage of net sales decreased in the first nine-months of 1997
to 10.1% from 11.1% in the first nine-months of 1996. Gross margins increased
to $5.9 million in the three-months ended September 30, 1997, from $4.7 million
in the three-months ended September 30, 1996, an increase of 26%. Gross margin
as a percentage of net sales decreased in the three-months ended September 30,
1997, to 9.7% from 10.8% in the three-months ended September 30, 1996. The
increase in gross margin reflected increased sales by both Priority Distribution
and Priority Pharmacy. The decrease in gross margin as a percentage of net
sales was primarily attributable to the change in sales mix resulting from the
significant increase in sales by Priority Distribution which generated lower
gross margins than those of Priority Pharmacy. Competition continues to exert
pressure on margins, particularly those of Priority Distribution.
Selling, general and administrative ("SGA") expense increased to $7.6
million in the first nine-months of 1997 from $6.1 million in the first nine-
months of 1996, a 25% increase. However, SGA expense as a percentage of net
sales decreased to 4.5% in the first nine-months of 1997 from 5.6% in the first
nine-months of 1996. SGA expense increased to $2.7 million for the three-months
ended September 30, 1997, from $2.1 million for the three-months ended September
30, 1996, a 27% increase. However, SGA expense as a percentage of net sales
decreased to 4.4% in the three-months ended September 30, 1997, from 4.9% in the
three-months ended September 30, 1996. Management continually monitors SGA
expense and remains focused on controlling these increases through improved
technology and efficient asset management. The decrease in SGA expense as a
percentage of net sales resulted from revenue growth in excess of the fixed
portion of SGA expense.
Depreciation and amortization ("D&A") increased to $988,000 in the first
nine-months of 1997 from $755,000 in the first nine-months of 1996, an increase
of 31%. D&A increased to $332,000 for the three-months ended September 30,
1997, from $255,000 for the three-months ended September 30, 1996, an increase
of 30%. The increase was primarily the result of depreciation of new equipment,
particularly in management information systems.
Interest expense increased to $832,000 in the first nine-months of 1997
from $296,000 in the first nine-months of 1996; and increased to $334,000 for
the three-months ended September 30, 1997, from $126,000 for the three-months
ended September 30, 1996. This expense is primarily related to financing
provided to the Company by BWI. The first nine-months of 1997 and the three-
months ended September 30, 1997, include $218,000 and $109,000 of interest due
on the subordinated note issued to BWI on March 31, 1997. The interest expense
on the intercompany borrowings was calculated by applying the BWI's average
incremental borrowing rate to the average outstanding borrowings. During the
first nine-months of 1997 and 1996, the average outstanding balances were $12.4
million and $ 5.7 million, respectively, and the average incremental borrowing
rate was 6.4% and 6.4%, respectively. During the three-months ended September
30, 1997 and 1996, the average outstanding balances were $ 14.2 million and $
7.7 million, respectively, and the average incremental borrowing rate was 6.4%
and 6.2%, respectively.
The Company participates in the consolidated federal and state income tax
returns filed by BWI. BWI charges federal and state income tax expense to the
Company as if the Company filed its own separate federal and state income tax
returns. The provision for income taxes represented 40% of earnings before
taxes for both the first nine-months of 1997 and 1996, and the three-months
ended September 30, 1997 and 1996.
Liquidity - Capital Resources.
Net cash used by operating activities. The Company's operations required $6.2
million in cash for the nine-months ended September 30, 1997. Accounts
receivable increased $12.0 million, primarily to support the increase in sales
and the extension of credit terms to meet competitive conditions. Inventory
increased $1.1 million due to incremental purchases necessary to serve the
increased customer base and to maximize purchasing opportunities. The $1.2
million increase in accounts payable partially reduced the cash requirements for
accounts receivable and inventory; this increase is attributable to the timing
of payments and the increase in inventory. The Company anticipates that its
operations will continue to require cash to fund its growth. Depreciation and
amortization totaled $988,000.
Net cash used by investing activities. Capital expenditures during
the first nine months of 1997 totaled $474,000. The Company expects that
capital expenditures during the last three months of 1997 will be
approximately $211,000 and during 1998 will be approximately $550,000. The
company anticipates that these expenditures will relate primarily to the
opening of the Grove City, Ohio distribution center and to the purchase of
computer
hardware and software and telecommunications equipment.
Effective August 7, 1997, the Company acquired substantially all of the
operating assets and assumed most of the liabilities of Groveway Pharmacy, Inc.,
a specialty distributor of vaccines and injectables located in Castro Valley,
CA. The acquisition was not considered material and the amount expended
approximated the fair value of the net assets acquired.
Net cash provided by financing activities. The Company's payable to BWI
increased by $5.8 million, primarily to fund the cash used by operating
activities.
The Company's principal capital requirements have been to fund working
capital needs to support internal growth, for acquisitions and for capital
expenditures. The Company's principal working capital needs are for inventory
and accounts receivable. Management controls inventory levels in order to
minimize carrying costs and maximize purchasing opportunities. The Company
sells inventory to its customers on various payment terms. This requires
significant working capital to finance inventory purchases and entails accounts
receivable exposure in the event any of its major customers encounter financial
difficulties. Although the Company monitors closely the creditworthiness of its
major customers, there can be no assurance that the Company will not incur some
collection loss on major customer accounts receivable in the future.
Historically, the Company has financed its operations through capital
contributions and advances from BWI. These advances were repaid with a portion
of the proceeds of the Company's Offering. In connection with the Offering, BWI
has made available to the Company a $30.0 million line of credit, which the
Company may utilize until December 31, 1998. Outstanding principal amounts
under the line will bear interest, payable quarterly, at a rate equal to the
rate then paid by BWI under its primary line of credit agreement.
Management believes that the net proceeds from the Offering, together with
cash from operations and borrowings from BWI, will be sufficient to meet the
Company's working capital needs for at least two years.
PART II - OTHER INFORMATION
Item 2. Changes in Securities and Use of Proceeds.
(d) Use of Proceeds
The Company's Registration Statement on Form S-1 (File No. 333-34463) was
declared effective on October 23, 1997. On October 24, 1997, the Company
commenced the Offering of its Class B Common Stock, par value $.01 per share
("Class B Common Stock"). The managing underwriters for the Offering were
Raymond James and Associates, Inc. and Wheat, First Securities, Inc. The
Company registered 2,300,000 shares of Class B Common Stock, for an aggregate
price to the public of the amount registered of $33,350,000. All of the
2,300,000 shares of Class B Common Stock registered were offered and sold by the
Company. On October 29, 1997, the Company closed on 2,000,000 of such shares of
Class B Common Stock, and the aggregate offering price to the public of such
amount was $29,000,000. The underwriters subsequently exercised in full their
over-allotment option to purchase the remaining registered and unsold shares of
Class B Common Stock, and on November 25, 1997, the Company sold the remaining
300,000 shares of Class B Common Stock with an aggregate offering price to the
public of $4,350,000. Therefore, the Offering was completed following the sale
of all 2,300,000 shares of Class B Common Stock registered, at an aggregate
offering price to the public of $33,350,000.
Through December 5, 1997, the aggregate amount of expenses incurred for the
Company's account in connection with the issuance and distribution of its Class
B Common Stock was approximately $3,084,500, including $2,334,500 in
underwriting discounts and commissions and $750,000 in other estimated offering
expenses. Included in the other offering expenses is approximately $140,000
that was paid to BWI for services provided by BWI to facilitate the marketing
and sale of the Offering. None of the other expenses were direct or indirect
payments to affiliates.
The net offering proceeds to the Company, after deducting the estimated
total expenses, were approximately $30,265,500. As of December 5, 1997,
approximately $16.7 million of the net offering proceeds have been used to
repay indebtedness to BWI,approximately $7.3 million of the proceeds have
been advanced to BWI and approximately $750,000 of the proceeds have been
paid for expenses of the Offering. The balance of the net offering proceeds
has been invested in interest bearing investment grade securities.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit 11 Computation of Pro forma Earnings Per Share (filed herewith)
Exhibit 27 Financial Data Schedule (filed herewith)
(b) Reports on Form 8-K
None.
SIGNATURE
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.
December 5, 1997 PRIORITY HEALTHCARE CORPORATION
BY /s/ Donald J. Perfetto
Donald J. Perfetto
Vice President and Chief Financial
Officer
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> SEP-30-1997
<CASH> 213
<SECURITIES> 0
<RECEIVABLES> 42,224
<ALLOWANCES> 887
<INVENTORY> 17,629
<CURRENT-ASSETS> 61,066
<PP&E> 2,612
<DEPRECIATION> 1,271
<TOTAL-ASSETS> 69,963
<CURRENT-LIABILITIES> 35,537
<BONDS> 6,310
0
0
<COMMON> 102
<OTHER-SE> 27,844
<TOTAL-LIABILITY-AND-EQUITY> 69,963
<SALES> 169,300
<TOTAL-REVENUES> 169,300
<CGS> 152,280
<TOTAL-COSTS> 161,723
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 116
<INTEREST-EXPENSE> 832
<INCOME-PRETAX> 7,577
<INCOME-TAX> 3,031
<INCOME-CONTINUING> 4,546
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,546
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
PRIORITY HEALTHCARE CORPORATION
EXHIBIT 11 - COMPUTATION OF PROFORMA
EARNINGS PER SHARE
(000's omitted except per share data)
<TABLE>
Nine-month period ended Three-month period ended
September 30, September 30,
<S> <C> <C> <C> <C>
1997 1996 1997 1996
Pro forma net Earnings $ 4,623 $ 2,703 $ 1,589 $ 1,250
SHARES
Weighted average number of Class A
Common Shares outstanding 10,214,286 10,214,286 10,214,286 10,214,286
Assumed number of Class B Common
Shares issued to repay payable
to parent 947,288 435,447 1,084,798 588,235
Assumed number of Class B Common
Shares issued to fund dividend
in excess of earnings (1) 18,564 18,564 18,564 18,564
Adjusted weighted average number of
Common Shares outstanding 11,180,138 10,668,297 11,317,648 10,821,085
Pro forma earnings per share $ 0.41 $ 0.25 $ 0.14 $ 0.12
</TABLE>
