UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the period ended March 28, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OF 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ______ to ______
Commission file number 1-11427
NEW ENGLAND BUSINESS SERVICE, INC.
----------------------------------
(Exact name of the registrant as specified in its charter)
Delaware 04-2942374
-------- ----------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
500 Main Street
Groton, Massachusetts, 01471
----------------------------
(Address of principal executive offices)
(Zip Code)
(978) 448-6111
--------------
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Sections 13 and 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
--- ---
The number of common shares of the Registrant outstanding on May 5, 1998
was 13,845,797.
<PAGE>
PART I - FINANCIAL INFORMATION
- ------------------------------
Item 1. Financial Statements
- ----------------------------
<TABLE>
NEW ENGLAND BUSINESS SERVICE, INC.
CONDENSED CONSOLIDATED BALANCE SHEET
(In Thousands)
<CAPTION>
(unaudited)
Mar. 28, June 28,
1998 1997
-------- --------
<S> <C> <C>
ASSETS
Current Assets
Cash and cash equivalents $ 3,354 $ 7,365
Short term investments 1,561 469
Accounts receivable - net 43,451 34,147
Inventories 18,548 11,569
Direct mail advertising and prepaid expenses 11,606 6,976
Deferred income tax benefit 9,581 7,900
-------- --------
Total current assets 88,101 68,426
Property and equipment - net 46,725 32,419
Property held for sale 631 631
Goodwill - net 67,784 31,795
Other Assets - net 31,938 7,925
-------- --------
TOTAL ASSETS $235,179 $141,196
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable $ 14,310 $ 13,872
Accrued expenses 25,725 19,455
-------- --------
Total current liabilities 40,035 33,327
Revolving Line of Credit 98,000 27,000
Deferred Income Taxes 226 288
STOCKHOLDERS' EQUITY
Common stock 14,750 14,616
Additional paid-in capital 30,543 26,537
Cumulative foreign currency translation adj. (1,547) (1,762)
Retained earnings 68,626 58,024
-------- --------
Total 112,372 97,415
Less: Treasury stock (15,454) (16,834)
-------- --------
Stockholders' Equity 96,918 80,581
-------- --------
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY $235,179 $141,196
======== ========
</TABLE>
See Notes to Unaudited Consolidated Financial Statements
<PAGE>
<TABLE>
NEW ENGLAND BUSINESS SERVICE, INC.
CONSOLIDATED STATEMENTS OF INCOME
(unaudited)
<CAPTION>
Three Months Ended Nine Months Ended
Mar. 28, Mar. 29, Mar. 28, Mar. 29,
1998 1997 1998 1997
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
NET SALES $ 98,002 $ 64,127 $255,268 $188,032
OPERATING EXPENSES:
Cost of sales 37,438 22,686 96,906 65,293
Selling and advertising 33,186 20,982 85,782 65,413
General and administrative 14,999 11,658 39,637 34,686
Exit costs - (500) - 4,543
-------- -------- -------- --------
Total operating expenses 85,623 54,826 222,325 169,935
INCOME FROM OPERATIONS 12,379 9,301 32,943 18,097
OTHER INCOME/(EXPENSE):
Interest income 73 58 180 301
Interest expense (1,725) - (2,679) -
Gain on pension settlement - 644 556 2,187
-------- -------- -------- --------
INCOME BEFORE TAXES 10,727 10,003 31,000 20,585
PROVISION FOR INCOME TAXES 4,345 3,999 12,174 8,203
-------- -------- -------- --------
NET INCOME $ 6,382 $ 6,004 $ 18,826 $ 12,382
======== ======== ======== ========
PER SHARE AMOUNTS:
Basic Earnings Per Share $ .46 $ .46 $ 1.37 $ .93
======== ======== ======== ========
Diluted Earnings Per Share $ .45 $ .45 $ 1.35 $ .92
======== ======== ======== ========
Dividends $ .20 $ .20 $ .60 $ .60
======== ======== ======== ========
BASIC WEIGHTED AVERAGE SHARES OUTSTANDING 13,781 13,101 13,712 13,345
Plus incremental shares from assumed
conversion of stock options 300 205 269 124
-------- -------- -------- --------
DILUTED WEIGHTED AVERAGE SHARES OUTSTANDING 14,081 13,306 13,981 13,469
======== ======== ======== ========
</TABLE>
See Notes to Unaudited Consolidated Financial Statements
<PAGE>
<TABLE>
NEW ENGLAND BUSINESS SERVICE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)
(unaudited)
<CAPTION>
Nine Months Ended
Mar. 28, Mar. 29,
1998 1997
--------- ---------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 18,826 $ 12,382
Adjustments to reconcile net income to cash:
Depreciation and amortization 12,022 7,336
Deferred income taxes (13) 51
Gain on pension settlement 556 (2,187)
Other non-cash items 1,456 3,144
Changes in assets and liabilities:
Accounts receivable (1,491) 624
Inventories and prepaid expenses (3,016) 407
Accounts payable (3,944) 1,974
Accrued expenses 1,501 1,435
--------- ---------
Net cash provided by operating activities 25,897 25,166
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property and equipment (10,144) (6,086)
Purchase of investments (1,561) (3,800)
Proceeds from sale of investments 462 13,815
Acquisition of businesses (82,706) (4,300)
Other assets (386) -
--------- ---------
Net cash used in investing activities (94,335) (371)
CASH FLOWS FROM FINANCING ACTIVITIES:
Payment of debt (19,650) (10,338)
Proceeds from credit line 89,900 9,450
Proceeds from issuing common stock 2,433 1,712
Purchase of treasury stock - (16,120)
Dividends paid (8,224) (7,982)
--------- ---------
Net cash provided by (used in) financing
activities 64,459 (23,278)
EFFECT OF EXCHANGE RATE ON CASH (32) 49
--------- ---------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (4,011) 1,566
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 7,365 6,508
--------- ---------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 3,354 $ 8,074
========= =========
</TABLE>
See Notes to Unaudited Consolidated Financial Statements
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Basis of Presentation
- ------------------------
The consolidated financial statements contained in this report are unaudited
but reflect all adjustments, consisting only of normal recurring
adjustments, which are, in the opinion of management, necessary for a fair
statement of the results of the interim periods reflected. Certain
information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting
principles have been omitted pursuant to applicable rules and regulations of
the Securities and Exchange Commission. The results of operations for the
interim period reported herein are not necessarily indicative of results to
be expected for the full year.
2. Accounting Policies
- ----------------------
The consolidated financial statements included herein should be read in
conjunction with the financial statements and notes thereto, and the
Independent Auditors' Report in the Company's Annual Report on Form 10-K
for the fiscal year ended June 28, 1997.
Reference is made to the accounting policies of the Company described in
the notes to the consolidated financial statements in the Company's Annual
Report on Form 10-K for the fiscal year ended June 28, 1997. The Company
has consistently followed those policies in preparing this report.
3. Acquisitions
- ----------------
On December 23, 1997, the Company acquired all of the outstanding common
stock of Rapidforms, Inc. ("Rapidforms") for consideration of approximately
$82,362,000 in cash. The Company also incurred fees of approximately $344,000
associated with the acquisition. Rapidforms and its subsidiaries collectively
sell business forms, stationery, merchandising products and office supplies
primarily by direct mail to small businesses throughout the United States.
The acquisition was accounted for under the purchase method of accounting.
Accordingly, Rapidform's results of operations are included in the
accompanying financial statements from the date of acquisition. The purchase
price including acquisition costs was allocated to the net assets acquired
based on the fair value of such assets and liabilities. The excess cost over
fair value of the net tangible assets acquired was $63,793,000 of which
$24,900,000 was allocated to Rapidform's customer lists and the balance of
$38,893,000 to goodwill. The goodwill is being amortized on a straight line
basis over a period of 40 years while customer lists and other intangibles
arising from this transaction are being amortized over their respective useful
lives. These allocations and useful lives are still subject to final
valuations.
As part of the purchase accounting for the Rapidforms acquisition and included
in the allocation of the acquisition cost, a liability of $4,000,000 was
recorded to cover the anticipated costs related to a plan to close redundant
Rapidforms' manufacturing and warehouse facilities and to reduce manufacturing
personnel. Approximately $3,700,000 of the liability is allocated for
employee termination benefits and approximately $300,000 for termination of
certain contractual obligations.
<PAGE>
The following table of unaudited pro forma financial information reflects
the consolidated results of operations of the Company for the nine months
ended March 28, 1998 and March 29, 1997 as though the Rapidforms acquisition
had occurred on the first day of the respective fiscal year. This pro-forma
information for the nine months ended March 29, 1997 also includes the results
of Standard Forms Limited and Chiswick as if these acquisitions had been
consummated on June 30, 1996. The pro forma operating results are presented
for comparative purposes only and do not purport to present the Company's
actual operating results had the acquisition been consummated on June 30,
1996, or results which may occur in the future.
<TABLE>
<CAPTION>
(unaudited)
Nine Months Ended
Mar. 28, Mar. 29,
1998 1997
---------- ----------
<S> <C> <C>
Net Sales $ 298,628 $ 294,305
Net income 19,335 12,470
Earnings per common share
Basic earnings per share $ 1.41 $ 0.93
Diluted earnings per share 1.38 0.92
</TABLE>
4. Inventories
- --------------
Inventories are carried at the lower of first-in, first-out cost or market.
Inventories at March 28, 1998 and June 28, 1997 consisted of:
<TABLE>
<CAPTION>
(unaudited)
Mar. 28, June 28,
1998 1997
----------- -----------
<S> <C> <C>
Raw paper $ 1,464,000 $ 586,000
Business forms, related office products
and shipping, warehouse and packaging
supplies 17,084,000 10,983,000
---------- -----------
Total $18,548,000 $11,569,000
=========== ===========
</TABLE>
<PAGE>
5. Pension Plan
- ---------------
During the second quarter of fiscal year 1997, the Company amended its
defined benefit pension plan which provided benefits to the majority of its
domestic employees. The amendment froze plan participation at December 31,
1996 and eliminated further benefit accruals after June 28,1997. The Company
recorded a plan curtailment gain of $1,543,000 in the second quarter of fiscal
1997. Subsequently during fiscal year 1997, the actuarial estimate of the
plan curtailment was revised, resulting in a total gain of $2,187,000 for the
year. The Company settled the plan obligations during the first quarter of
fiscal year 1998 and recorded a plan settlement gain of $556,000 during the
period.
6. Debt Obligation
- ------------------
Effective December 18, 1997, the Company amended the terms of its five year,
committed, unsecured revolving line of credit agreement with two major
commercial banks, principally to increase the line of credit from $60,000,000
to $135,000,000. During the third quarter of fiscal 1998, the number of
participating commercial banks in the line of credit was expanded from two to
ten. Under this credit agreement, the Company has the option to borrow at
the Eurodollar rate plus a spread or the agent bank's base lending rate
prevailing from time to time. The effective Eurodollar based interest rate at
March 28, 1998 was 6.2%. Principal amounts are not required to be paid on
advances under this facility until maturity on December 18, 2002.
Accordingly, amounts outstanding under the revolver have been classified as
long term in nature. The credit agreement contains various restrictive
covenants which, among other things, require the Company to maintain certain
minimum levels of consolidated net worth and specific consolidated debt and
fixed charge ratios. At March 28, 1998, $98,000,000 was outstanding under
this line. Deferred debt issue costs are amortized over the term of the
agreement.
7. Earnings Per Share
- ---------------------
As of December 27, 1997 the Company adopted SFAS No. 128, entitled "Earnings
Per Share". Such adoption caused the primary and fully-diluted earnings per
share figures to be restated for all periods presented.
8.New Accounting Pronouncements
- -------------------------------
In June 1997, the Financial Accounting Standards Board issued SFAS No. 130,
"Reporting Comprehensive Income" and SFAS No. 131 "Disclosures about Segments
of an Enterprise and Related Information," and in February 1998, SFAS No. 132,
"Employers' Disclosure about Pensions and Other Postretirement Benefits." The
Company will adopt these statements during fiscal year 1999 and does not
expect that the adoption of these statements will have a material impact on
the consolidated financial statements.
In March 1998, the AICPA issued Statement of Position 98-1 "Accounting for
the Costs of Computer Software Developed or Obtained for Internal Use." The
company will be required to adopt this statement in fiscal year 2000 and is
currently evaluating the impact of this statement.
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition
- -------------------------------------------------------------------
and Results of Operations
- ---------------------------------
Liquidity and Capital Resources
- -------------------------------
Cash provided by operating activities for the nine months ended March 28, 1998
was $25.9 million, representing an increase of $0.7 million from the $25.2
million provided in the comparable period last year. The comparative increase
in operating cash flow was composed of a $6.4 million increase in net income
and a $5.2 million increase in the non-cash expense reflected in net income,
offset by a $10.9 million increase in investment in working capital balances.
The increase in net income was principally the result of the reduction in
expense associated with the discontinuation of the Kinko's retail initiative
and improved profitability in the Company's core business. The increase in
non-cash expense reflected in net income was principally the result of
increased amortization expense recognized during the first nine months of
fiscal 1998 related to goodwill and other intangible assets associated with
recently acquired businesses. The increased investment in working capital
balances reflected a return to more traditional working capital investment to
support revenue growth in fiscal 1998 following a focused effort during the
first nine months of fiscal 1997 to minimize working capital balances.
Working capital balances at March 28, 1998 amounted to $48.1 million,
including $4.9 million of cash and short term investments. At June 28, 1997,
working capital amounted to $35.1 million, including $7.8 million of cash and
short term investments. The $13.0 million increase in working capital
investment during the first nine months of fiscal 1998 was composed of a $7.6
million increase associated with the acquisition of Rapidforms, Inc.'s
("Rapidforms") working capital balances and a $5.4 million increase in net
operating working capital balances. The increase in net operating working
capital balances was driven principally by a reduction in accounts payable
balances and an increase in deferred mail advertising expense.
The acquisition of Rapidforms during the first nine months of fiscal year 1998
required cash outflows of approximately $82.7 million. This cash outflow was
principally financed by an increase in borrowings under the Company's $135
million dollar revolving credit facility with ten commercial banks.
Capital expenditures for the nine months ended March 28, 1998 were $10.1
million versus the $6.1 million expended during last year's comparable period.
Capital expenditures in the first nine months of fiscal 1997 and fiscal 1998
included significant expenditures related to a plan to upgrade the Company's
information systems referred to as part of the year 2000 discussion in the in
the results of operations section of this management's discussion and analysis
of financial condition and results of operations. In addition to this
increased investment in information systems, the Company completed the
construction of a $3.2 million telemarketing facility in Flagstaff, Arizona
during the second quarter of fiscal 1998. The Company anticipates that total
capital outlays will approximate $14.0 million in fiscal year 1998, an
increase of $4.4 million or 46% over the $9.6 million expended during fiscal
year 1997.*
<PAGE>
Dividends paid during the nine months ended March 28, 1998 amounted to $8.2
million, slightly higher than the $8.0 million paid in the corresponding
period of the previous year due to a small increase in the number of Company
shares outstanding. During the nine months ended March 29, 1997, the Company
repurchased 1,023,800 shares of Company stock on the open market for total
consideration of $16.8 million. The Company is authorized to repurchase an
additional 1,959,000 Company shares on the open market, but has not
repurchased any shares during fiscal 1998.
In addition to its present cash and investment balances, the Company has
consistently generated sufficient cash internally to fund its needs for
working capital, dividends and capital expenditures. However, should the
Company need additional funds, it has a five-year, committed, senior,
unsecured, revolving line of credit with ten major banks for $135.0 million.
At March 28, 1998, $98.0 million was outstanding under this line, reflecting
additional borrowing during the first nine months of fiscal year 1998 of $82.7
million to fund the acquisition of Rapidforms, offset by repayment of $12.7
million of outstanding debt during the same period. In order to effectively
fix the interest rate on a portion of the outstanding debt, the Company has
entered into interest rate swap agreements with notional principal amounts and
other terms determined with respect to the Company's forecast of future cash
flows and borrowing needs. At March 28, 1998 the notional principal amount
outstanding of such swaps was $80 million.
In order to minimize the exposure to foreign currency fluctuations with
respect to intercompany loans to foreign business units, the Company has
entered into forward exchange rate contracts in amounts corresponding to the
loan amounts. At March 28, 1998, the Company has outstanding forward rate
contracts for $1.8 million worth of Pounds Sterling and $87,000 worth of
French Francs.
The Company anticipates that its current cash on hand, cash flow from
operations and additional availability under the line of credit will be
sufficient to meet the Company's liquidity requirements for its operations and
capital expenditures through the remainder of the year.* If the Company
chooses to pursue additional acquisitions in the future, the acquisitions
would likely be funded through cash, issuance of stock, the obtaining of
additional funds through long-term borrowing or any combination thereof.*
Subsequent to the end of the fiscal quarter, the Company announced the signing
of an agreement to acquire McBee Systems, Inc. and McBee Systems of Canada,
Inc. The Company expects to fund the acquisition by issuing common shares and
borrowing additional funds.*
<PAGE>
Results of Operations
- ---------------------
Net sales increased $33.9 million or 52.8% to $98.0 million in the third
quarter of fiscal 1998 from $64.1 million in last year's third quarter. The
sales increase was composed of a $3.4 million or 5.3% effective price increase
and a $33.0 million or 51.4% increase in net sales associated with the
acquisition of Chiswick Trading, Inc. during fiscal year 1997 and Rapidforms
during fiscal year 1998. These increases were offset in part by a $2.5
million or 3.9% decline in unit volume attributable primarily to the adverse
impact of technology on the market for the Company's products. (for further
discussion see the section titled "Forward-Looking Information and Risk
Factors to Future Performance" in this management's discussion and analysis of
financial condition and results of operations.)
Net sales for the nine months ended March 28, 1998 increased 35.8% to $255.3
million from $188.0 million in last year's comparable period. The sales
increase was composed of a $.2 million or .1% unit volume increase, a $8.6
million or 4.6% effective price increase, and a $62.9 million or 33.5%
increase in net sales associated with the acquisitions of Standard Forms
Limited, Chiswick Trading, Inc. and Rapidforms during fiscal years 1997 and
1998. These increases were offset in part by a $1.8 million or 1.0% decline
attributable to the discontinuation of Kinko's retail initiative and a $2.7
million or 1.4% decline attributable to higher promotional discounting.
For the third quarter of fiscal 1998, cost of sales increased to 38.2% of
sales from 35.4% of sales in last year's comparable period. This increase was
due primarily to an increase in revenue generated by lower margin products
associated with the businesses acquired by the Company during the last year.
Cost of sales as a percent of sales is anticipated to remain constant during
the remaining quarter of fiscal 1998.* On a year-to-date basis, cost of sales
increased from 34.7% of sales in fiscal 1997 to 38.0% in fiscal 1998. This
increase was caused by increased revenues generated by lower margin products
associated with the recently acquired businesses, as well as an increase in
transportation costs resulting from the UPS strike in the first quarter of
fiscal 1998.
Selling and advertising expense increased slightly to 33.9% of sales in the
third quarter of fiscal 1998 from 32.7% of sales in last year's comparable
quarter due to slight increases in selling efforts in the Company's core
businesses. On a year-to-date basis, selling and advertising expense as a
percent of sales decreased from 34.8% in fiscal 1997 to 33.6% in fiscal 1998.
The decrease for the year to date period was due to slightly lower selling and
advertising costs as a percent of sales associated with the recently acquired
businesses and maintenance of relatively flat spending levels from year to
year in the Company's core businesses. Selling and advertising expense as a
percent of sales is expected to increase slightly above the third quarter
level in the fourth quarter of fiscal year 1998.*
<PAGE>
General and administrative expense decreased to 15.3% of sales in the third
quarter of fiscal 1998 from 18.2% in last year's comparable quarter. General
and administrative expense also decreased to 15.5% of sales from 18.5% of
sales on a year to date basis. The declines were principally the result of a
lower ratio of general and administrative expense to sales associated with the
Company's newly acquired businesses. During the third quarter, the Company
continued to increase spending levels associated with its program to
reengineer its financial and operational information systems. General and
administrative expense as a percent of sales is expected to remain consistent
with the third quarter as a percent of sales throughout the remainder of the
fiscal year.*
Investment income increased from $58,000 in the third quarter of fiscal year
1997 to $73,000 in the third quarter of fiscal 1998 due to higher investable
cash balances in the Company's Canadian subsidiary. Interest expense of
$1,725,000 or 1.8% of sales has been recorded in fiscal 1998 principally due
to borrowings associated with the acquisition of Chiswick Trading, Inc. during
the fourth quarter of fiscal 1997 and the acquisition of Rapidforms during the
second quarter of fiscal 1998.
The provision for income taxes as a percentage of pre-tax income increased
to 40.5% in the third quarter of 1998 from 40.0% in the comparable quarter in
fiscal year 1997 due principally to the mix between international and domestic
effective tax rates from year to year.
During fiscal year 1996, the Company established a five year plan to upgrade
the majority of its operational information systems. The information systems
reengineering plan was developed to enhance system performance and to address
year 2000 date related issues. The plan has been and will continue to be
revised to incorporate the operational systems of newly acquired businesses.
The plan also encompasses remediation of certain software applications to
become compliant with the year 2000 where prudent, based on the timing of the
plans to replace such software. In addition, the Company is communicating
with suppliers and customers to specifically coordinate year 2000 compliance
activities. The Company's cash outlays for capital improvements and period
expense associated with the information systems reengineering project and for
year 2000 compliance are projected to total $21 million, staggered over fiscal
1997, 1998 and 1999, approximately half of which has been spent to date.* The
Company does not expect the year 2000 issue, in and of itself, to have a
material effect on its financial position and results of operations.*
In June 1997, the Financial Accounting Standards Board issued SFAS No. 130,
"Reporting Comprehensive Income" and SFAS No. 131 "Disclosures about Segments
of an Enterprise and Related Information," and in February 1998, SFAS No. 132,
"Employers' Disclosure about Pensions and Other Postretirement Benefits." The
Company will adopt these statements during fiscal year 1999 and does not
expect that the adoption of these statements will have a material impact on
the consolidated financial statements.
<PAGE>
In March 1998, the AICPA issued Statement of Position 98-1 "Accounting for
the Costs of Computer Software Developed or Obtained for Internal Use." The
company will be required to adopt this statement in fiscal year 2000 and is
currently evaluating the impact of this statement.
_________________________
* This forward-looking statement reflects the Company's current expectations.
There can be no assurance the Company's actual performance will not differ
materially from those projected in such forward-looking statements due to
important factors including those described in the section to this
Management's Discussion and Analysis of Financial Condition and Results of
Operations titled "Forward-Looking Information and Risk Factors to Future
Performance."
<PAGE>
Forward-Looking Information and Risk Factors to Future Performance
- ------------------------------------------------------------------
From time to time, the Company or its representatives have made or may make
forward-looking statements that reflect the Company's current expectations,
orally or in writing, in this Management's Discussion and Analysis of
Financial Condition and Results of Operations, elsewhere in the quarterly
report on Form 10-Q, in other reports filed under the Securities Act of 1934,
as amended, in press releases or in statements made with the approval of an
authorized executive officer. The words or phrases "is expected," "will
continue," "anticipates," "estimates," or similar expressions in any of these
communications are intended to identify "forward-looking statements" within
the meaning of Section 21E of the Securities Exchange Act of 1934 and Section
27A of the Securities Act of 1933, as enacted by the Private Securities
Litigation Reform Act of 1995.
There can be no assurance the Company's actual performance will not differ
materially from that projected in such forward-looking statements due to
important factors including but not limited to those described below. These
factors include increasing competition, economic cycles, technological change,
paper and postal costs, customer preferences, response rates, prospect lists,
governmental regulations, inherent risks in acquisitions, disruptions to the
Company's operating systems and reliance on vendors, all of which are
described in further detail below. The Company undertakes no obligation to
release the results of any revisions to these factors to reflect any future
events or circumstances.
Increasing Competition; Pressure on Price and Margins
The Company operates in a highly competitive marketplace, in which it
competes with a variety of mail order marketers, retailers, dealers,
distributors and local printers in the marketing of business forms, stationery
and supplies to small businesses. Over the course of the past decade, mail
order providers of business forms and stationery have experienced growth in
excess manufacturing capacity. In addition, the Company has faced increasing
competition from low-price, high-volume office supply chain stores.
Improvements in the cost and quality of printing technology have increasingly
allowed dealers, distributors and local printers to gain access to products of
complex design and functionality at competitive prices. The Company currently
anticipates that these trends will continue. No assurance can be given that
competition will not have an adverse effect on the Company's business. In
addition, if any of the Company's mail order competitors were to seek to gain
or retain market share by reducing prices or increasing promotional
discounting, the Company could be compelled to reduce its prices or match the
discounts and thereby reduce its gross margin and profitability.
<PAGE>
Economic Cycles; Variability of Performance.
The Company's standardized forms and check business accounts for a large
majority of its sales and profitability. The forms and check industry is
highly competitive and generally characterized by mature products designed
within well-established industry standards. The Company relies, in part, on
net small business formations for growth in demand for its standardized form
and check products. As a result, the Company's growth rate is closely
correlated to the strength of its target small business market. The Company's
revenue trends and operating profitability have been materially adversely
affected by recession-related contractions in the small business economy in
the past. The Company will continue to experience quarterly and annual
variations in net sales and net income as a result of changes in the levels of
small business formations and failures or from other economic events having an
impact on small businesses generally.
Technological Change; Product Obsolescence and Risks to Competitive Advantage.
The Company's standardized business forms and related products are designed
to provide small businesses with the financial and business records required
to manage a business. Steady technological improvements have provided small
businesses in several market segments with alternative means to enact and
record business transactions. PC-based, point-of-sale, electronic form and
electronic transaction systems have been designed to automate several of the
functions performed by the Company's products. The price and performance
characteristics of personal laser and ink-jet printing equipment have improved
markedly in the recent past, thereby allowing small businesses a cost-
competitive means to print low-quality versions of Company forms on plain
paper. In addition, the Internet has the potential to eliminate the Company's
advantage of scale in direct marketing by providing all competitors with equal
access to customers who purchase products over the Internet. In response, the
Company has focused resources on the acquisition, development and procurement
of new products less susceptible to technological obsolescence and has
aggressively moved to develop a comprehensive electronic catalog of products
to be utilized in retail-based kiosks, PC-based software and over the
Internet. It should be noted that the Company's small business customers have
to-date proven to be relatively slow adapters of new technology which has
minimized the adverse impact of these technological trends. However, the
Company can give no assurance that continued technological change will not
have a material adverse impact on the long-term prospects for the Company's
business.
<PAGE>
Paper Costs and Postal Rates; Risks to Margins.
The cost of paper used to produce the Company's products, catalogs and
advertising materials constitutes, directly or indirectly, approximately 20%
of consolidated revenues. In addition, the Company is reliant on the U.S.
Postal Service for delivery of most of the Company's promotional materials.
Coated paper costs for promotional materials and postal rates for third class
mail have increased significantly over the past decade. In addition, certain
segments of the paper market have demonstrated considerable price volatility
over the past five years. The Company has been able to counteract the impact
of postal and paper cost increases with cost reduction programs and selected
product price increases. Due to increased competition in the small business
forms, stationery and supplies marketplace, no assurance can be given that the
Company will be able to increase product pricing to compensate for future
paper or postal cost increases. The inability to raise prices in response to
paper or postal cost increases could reduce the Company's operating
profitability and net income.
Customer Preferences; Investment Requirements & Sales Risk.
The Company's core business is the direct marketing, manufacturing and
distribution of standardized forms and related products to small businesses.
Newly-formed small business owners are increasingly demanding custom and
color-coordinated products to create an image in addition to enabling the
management of business transactions. The relative prices charged by local
printers, contract printers and dealers for providing these custom and full-
color printed products have been declining due to technological advances in
composition systems and printing equipment. As a direct result, the cost
advantage inherent to the Company's standardized forms and related printed
products has declined. The Company is responding with focused investment in
the infrastructure required to sell, compose, print and distribute custom and
full-color products. This effort includes installation of an integrated and
flexible information system architecture and the re-engineering of many of the
Company's basic business functions. In addition, the Company expects to
continue to invest in its dealer and technology-based channels that more
readily support the interactive marketing required to sell custom and full-
color products. However, the Company can give no assurance that the rate of
decline in demand for standardized forms and related printed products will not
accelerate, that the interactive marketing investments will prove successful,
or that the information systems re-engineering effort will not result in
operating inefficiencies or unplanned expense. If any of such potential risks
materialize, the Company's future net sales and net income could be materially
adversely affected.
<PAGE>
Response Rates and Customer Retention; Sales Risk.
Customer and prospect response rates to the Company's catalogs and
promotional materials have remained relatively stable over time. Continued
stability in prospect response and customer retention is primarily dependent
on the continued relevancy of the range of the Company's products to the small
business marketplace. New product introductions, to date, have generally
offset declines in response rates and retention attributable to product
obsolescence. However, the Company can make no assurances that its new
product introductions will continue to offset the rate of obsolescence of its
standardized forms products in the future. An increase in the rate of product
obsolescence or a decline in new product introductions could negatively impact
response rates and customer retention which, in turn, would have a materially
adverse impact on the Company's long-term financial performance.
Prospect Lists; Sales Risk.
The Company's direct mail business has been characterized by a consistent
level of average annual sales per customer. As such, net sales growth is
dependent, in part, on an increase in customers served by the Company. Growth
in the total number of direct mail customers served by the Company depends
upon continued access to high-quality lists of newly-formed small businesses.
In the past, the Company's ability to compile proprietary prospect lists was a
distinct competitive advantage. However, the external list compilation
industry has grown more sophisticated and currently markets comprehensive
lists of newly-formed businesses to the Company and its competitors. At
present, the Company relies on the speed of its delivery of promotional
materials to prospective customers to gain advantage over competitors.
However, the Company can make no assurances that its promotional material
delivery advantage will be maintained over time. A deterioration in the
Company's delivery advantage could have a materially adverse impact on the
Company's business and financial performance.
Governmental Regulations; Sales Risk.
Future governmental legislation or regulation including, but not limited to,
the following potential regulatory actions have the potential to have a
material adverse impact on the Company's business prospects: 1) enactment of
privacy laws could constrain the Company's ability to mail promotional
materials or to telemarket to small businesses; 2) modification to U.S. Postal
Service regulations with the effect of increasing postal rates or reducing
postal delivery efficiency could have an adverse impact on the Company's
marketing efforts; and 3) institution of a "general sales tax", "value added
tax" or similar national tax could reduce demand for the Company's products.
Although the Company has no current knowledge or belief that such adverse
regulation, of a material nature, or similar governmental regulation is
pending or imminent, it can make no assurance that adverse governmental
regulation will not have a material adverse impact on the Company's business
in the future.
<PAGE>
Acquisitions; Inherent Risk.
From time to time the Company has acquired, or may acquire in the future, a
majority ownership position in a company or substantially all of the assets
related to a specific line of business. During fiscal year 1997, the Company
acquired Standard Forms Limited and the assets of Chiswick Trading, Inc.
which, in the aggregate have recently comprised approximately 14% of the
Company's consolidated revenues. On December 23, 1997, the Company completed
the acquisition of Rapidforms, Inc., which recently comprised approximately
21% of the Company's consolidated revenues. On May 4, 1998, the Company
announced the signing of an agreement to purchase McBee Systems, Inc, and
McBee Systems of Canada, Inc. which is anticipated to comprise approximately
14% of the Company's consolidated revenues on an ongoing basis. Such
acquisitions are undertaken to enhance the Company's competitive position in
the marketplace or to gain access to new markets, products, competencies or
technologies. The Company has performed in the past and will perform in the
future a business, financial and legal due diligence review in advance of an
acquisition to corroborate the assumptions critical to projected future
performance of an acquired entity and to identify the risks inherent to such
projections. However, the Company can make no assurances that its due
diligence review will identify all potential risks associated with the
purchase, integration or operation of any acquired enterprise. If any of such
potential risks materialize, the Company's future net sales and net income
could be materially adversely affected.
Operating Systems; Disasters and Disruptions.
The Company has become increasingly dependent upon its manufacturing,
administrative and computer processing infrastructure and operations to
process its high volume of small dollar value orders on an efficient, cost
competitive and profitable basis. The Company has implemented commercially
reasonable safeguards to reduce the likelihood of property loss or service
disruptions and has secured property and business interruption insurance to
minimize the adverse financial consequences arising from a select group of
risks. However, the Company can make no assurances that its infrastructure
and operations are not susceptible to loss or disruption, whether caused by
(i) intentional or unintentional acts of Company personnel or third party
service providers, or (ii) natural disasters including, but not limited to,
earthquakes, fire or severe storms. In addition, the Company can make no
assurance that its insurance coverage will adequately respond to all potential
causes of property loss or service disruption. In the event that any such
acts or disasters lead to property loss or operating system disruption for
which property and business interruption insurance coverage is unavailable or
insufficient, the Company's financial performance and long-term prospects
could be materially adversely affected.
<PAGE>
Computer Systems; Year 2000 Impact
The Company and its vendors have become increasingly reliant on computer
systems to process transactions and to provide relevant business information.
The majority of computer systems designed prior to the mid-1990s are
susceptible to a well publicized problem associated with an inability to
process date related information beyond the year 2000. Without proactive
modifications to routines and programs, many systems of the Company and its
vendors could be rendered useless as early as June of 1999. The Company has
created a comprehensive plan to address the year 2000 issue with respect to
both internal systems and to systems employed by critical vendors. However,
the Company can make no assurance that all year 2000 risks to Company and
critical vendor systems can be identified and successfully negated through
modification of existing programs or other means prior to June of 1999. In
the event that any year 2000 program deficiencies remain undetected, or in the
event that any programming modifications do not adequately address the year
2000 issues, the Company or its vendors could experience critical operating
system failures. Any such operating system failures could have a material
adverse impact on the Company's financial performance and long-term prospects.
Raw Materials and Services; Reliance on Certain Vendors
The Company has become increasingly reliant on certain individual third-
party vendors to provide raw materials and services critical to the Company's
operations in order to gain the advantage of volume-related favorable pricing
and, in some instances, favorable contract terms. Such critical vendors and
the nature of the products or services provided include, but are not limited
to, governmental postal services for the delivery of marketing materials and
in some countries, customer packages, MCI Telecommunications Corporation for
the provision of toll-free telephone services, R.R. Donnelley and Sons, Inc.
for printing and processing of marketing materials, Appleton Papers, Inc. for
carbonless paper, and United Parcel Service of America, Inc. for product
delivery services. In the past, the Company has been adversely affected by
disruption in the services provided or lack of availability of the products
produced by its critical vendors resulting from a variety of factors including
labor actions, inclement weather, disasters, systems failures and market
conditions. The Company can make no assurance that its critical vendors will
remain capable of providing the level of service or quantity of product
required to support the Company's business, nor that the Company could
immediately identify alternative sources for provision of the product or
service on a similar cost basis. Any such service disruption or product
shortage could have a material adverse impact on the Company's operating
performance and net income.
<PAGE>
Other Risks; Variability of Performance.
The Company has experienced in the past and will experience in the future
quarterly and annual variations in net sales and net income as a result of
many factors, including, but not limited to, the timing of catalog mailings,
catalog response rates, product mix, the timing and levels of selling, general
and administrative expenses, cost reduction programs, timing of holidays and
inclement weather. The Company's planned operating expenses are based on
sales forecasts. If net sales performance falls below expectations in any
given quarter or year, the Company's operating results could be materially
adversely affected.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
- ------------------------------------------------------------------
Not applicable
<PAGE>
PART II - OTHER INFORMATION
- ---------------------------
Item 1. LEGAL PROCEEDINGS
- --------------------------
To the Company's knowledge, no material legal proceedings are pending on
the date hereof to which the Company is a party or to which any property of
the Company is subject.
Item 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
- --------------------------------------------------
Not applicable
Item 3. DEFAULTS UPON SENIOR SECURITIES
- ----------------------------------------
Not applicable.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
- ------------------------------------------------------------
Not applicable.
Item 5. OTHER INFORMATION
- --------------------------
Not applicable.
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
- -----------------------------------------
a. Exhibits
Exhibit No. Description
---------- -----------
(11) Statement re: computation of per share earnings.
(27) Financial Data Schedules
b. Reports on Form 8-K.
Not applicable
<PAGE>
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 hereunto duly authorized.
NEW ENGLAND BUSINESS SERVICE, INC.
----------------------------------
(Registrant)
May 11, 1998 /s/John F. Fairbanks
- ----------------- --------------------
Date John F. Fairbanks
Vice-President-Chief
Financial Officer
(Principal Financial and
Accounting Officer)
<PAGE>
<TABLE>
Exhibit 11
----------
New England Business Service, Inc.
Statement Re Computation of Per Share Earnings
(In Thousands Except Per Share Data)
(unaudited)
<CAPTION>
Three Months Ended Nine Months Ended
Mar. 28, Mar. 29, Mar. 28, Mar. 29,
1998 1997 1998 1997
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Net Income (a) $6,382 $6,004 $18,826 $12,382
BASIC WEIGHTED AVERAGE SHARES OUTSTANDING (b) 13,781 13,101 13,712 13,345
Plus incremental shares from assumed
conversion of stock options 300 205 269 124
-------- -------- -------- --------
DILUTED WEIGHTED AVERAGE SHARES OUTSTANDING(c) 14,081 13,306 13,981 13,469
======== ======== ======== ========
PER SHARE AMOUNTS:
Basic Earnings Per Share (a)/(b) $ .46 $ .46 $ 1.37 $ .93
======== ======== ======== ========
Diluted Earnings Per Share (a)/(c) $ .45 $ .45 $ 1.35 $ .92
======== ======== ======== ========
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEET OF NEW ENGLAND BUSINESS SERVICE, INC. AND ITS
SUBSIDIARIES AS OF MARCH 28, 1998 AMD THE RELATED STATEMENTS OF CONSOLIDATED
INCOME AND CASH FLOWS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-27-1998
<PERIOD-START> JUN-29-1997
<PERIOD-END> MAR-28-1998
<CASH> 3,354
<SECURITIES> 1,561
<RECEIVABLES> 46,793
<ALLOWANCES> (3,342)
<INVENTORY> 18,548
<CURRENT-ASSETS> 88,101
<PP&E> 125,412
<DEPRECIATION> 78,687
<TOTAL-ASSETS> 235,179
<CURRENT-LIABILITIES> 40,035
<BONDS> 0
0
0
<COMMON> 14,750
<OTHER-SE> 82,168
<TOTAL-LIABILITY-AND-EQUITY> 235,179
<SALES> 255,268
<TOTAL-REVENUES> 255,268
<CGS> 96,906
<TOTAL-COSTS> 96,906
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 2,226
<INTEREST-EXPENSE> 2,679
<INCOME-PRETAX> 31,000
<INCOME-TAX> 12,174
<INCOME-CONTINUING> 18,826
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 18,826
<EPS-PRIMARY> 1.37
<EPS-DILUTED> 1.35
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<RESTATED>
<MULTIPLIER> 1,000
<S> <C> <C> <C>
<PERIOD-TYPE> YEAR YEAR YEAR
<FISCAL-YEAR-END> JUN-28-1997 JUN-29-1996 JUN-30-1995
<PERIOD-START> JUN-30-1996 JUL-01-1995 JUN-25-1994
<PERIOD-END> JUN-28-1997 JUN-29-1996 JUN-30-1995
<CASH> 7,365 6,508 11,604
<SECURITIES> 469 10,868 11,360
<RECEIVABLES> 37,498 33,979 32,636
<ALLOWANCES> (3,351) (3,343) (3,304)
<INVENTORY> 11,569 8,675 9,880
<CURRENT-ASSETS> 68,426 71,334 77,509
<PP&E> 105,340 102,278 106,686
<DEPRECIATION> 72,921 71,266 70,651
<TOTAL-ASSETS> 141,196 103,542 124,546
<CURRENT-LIABILITIES> 33,327 27,273 32,169
<BONDS> 0 0 0
0 0 0
0 0 0
<COMMON> 14,616 14,005 15,770
<OTHER-SE> 65,965 61,911 75,753
<TOTAL-LIABILITY-AND-EQUITY> 141,196 103,542 124,546
<SALES> 263,424 254,954 263,724
<TOTAL-REVENUES> 263,424 254,954 263,724
<CGS> 94,048 95,598 94,502
<TOTAL-COSTS> 94,048 139,936 142,035
<OTHER-EXPENSES> 0 (815) (929)
<LOSS-PROVISION> 2,612 3,033 3,177
<INTEREST-EXPENSE> 484 0 0
<INCOME-PRETAX> 31,380 21,055 28,492
<INCOME-TAX> 12,731 8,306 11,818
<INCOME-CONTINUING> 18,649 11,929 16,298
<DISCONTINUED> 0 0 0
<EXTRAORDINARY> 0 0 0
<CHANGES> 0 0 0
<NET-INCOME> 18,649 11,929 16,298
<EPS-PRIMARY> 1.39 0.81 1.07
<EPS-DILUTED> 1.38 0.81 1.07
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<RESTATED>
<MULTIPLIER> 1,000
<S> <C> <C> <C>
<PERIOD-TYPE> 3-MOS 6-MOS 9-MOS
<FISCAL-YEAR-END> JUN-28-1997 JUN-28-1997 JUN-28-1997
<PERIOD-START> JUN-30-1996 JUN-30-1996 JUN-30-1996
<PERIOD-END> SEP-28-1996 DEC-28-1996 MAR-29-1997
<CASH> 5,696 5,302 8,074
<SECURITIES> 3,675 1,603 852
<RECEIVABLES> 34,197 36,602 29,243
<ALLOWANCES> 3,474 3,834 0
<INVENTORY> 8,743 8,863 8,734
<CURRENT-ASSETS> 65,399 63,031 62,687
<PP&E> 102,381 102,805 103,127
<DEPRECIATION> 72,298 71,586 72,399
<TOTAL-ASSETS> 96,012 95,526 100,473
<CURRENT-LIABILITIES> 32,341 32,967 34,090
<BONDS> 0 0 0
0 0 0
0 0 0
<COMMON> 14,010 14,077 14,102
<OTHER-SE> 49,316 48,080 51,890
<TOTAL-LIABILITY-AND-EQUITY> 96,012 95,526 100,473
<SALES> 60,702 123,905 188,032
<TOTAL-REVENUES> 60,702 123,905 188,032
<CGS> 21,961 42,607 65,293
<TOTAL-COSTS> 37,766 72,502 104,642
<OTHER-EXPENSES> 0 (1,786) (2,488)
<LOSS-PROVISION> 674 1,455 0
<INTEREST-EXPENSE> 0 11 0
<INCOME-PRETAX> 1,147 10,582 20,585
<INCOME-TAX> 469 4,204 8,203
<INCOME-CONTINUING> 678 6,378 12,382
<DISCONTINUED> 0 0 0
<EXTRAORDINARY> 0 0 0
<CHANGES> 0 0 0
<NET-INCOME> 678 6,378 12,382
<EPS-PRIMARY> 0.05 0.47 0.93
<EPS-DILUTED> 0.05 0.47 0.92
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<RESTATED>
<MULTIPLIER> 1,000
<S> <C> <C> <C>
<PERIOD-TYPE> 3-MOS 6-MOS 9-MOS
<FISCAL-YEAR-END> JUN-29-1996 JUN-29-1996 JUN-29-1996
<PERIOD-START> JUL-01-1995 JUL-01-1995 JUL-01-1995
<PERIOD-END> SEP-30-1995 DEC-31-1995 MAR-30-1996
<CASH> 6,253 10,790 17,528
<SECURITIES> 19,598 16,091 17,170
<RECEIVABLES> 34,440 36,424 35,626
<ALLOWANCES> 3,389 3,504 (3,420)
<INVENTORY> 10,480 10,872 9,250
<CURRENT-ASSETS> 83,846 86,613 92,335
<PP&E> 110,579 103,265 99,837
<DEPRECIATION> 74,756 72,281 (70,488)
<TOTAL-ASSETS> 124,878 126,510 123,071
<CURRENT-LIABILITIES> 34,337 35,048 30,137
<BONDS> 0 0 0
0 0 0
0 0 0
<COMMON> 15,788 15,796 15,834
<OTHER-SE> 74,289 75,192 76,873
<TOTAL-LIABILITY-AND-EQUITY> 124,878 126,510 123,071
<SALES> 63,788 130,946 194,046
<TOTAL-REVENUES> 63,788 130,946 194,046
<CGS> 23,384 47,386 72,375
<TOTAL-COSTS> 38,184 75,622 108,762
<OTHER-EXPENSES> 1,242 460 (490)
<LOSS-PROVISION> 693 1,415 2,142
<INTEREST-EXPENSE> 0 0 0
<INCOME-PRETAX> 2,521 8,480 14,219
<INCOME-TAX> 978 3,025 5,238
<INCOME-CONTINUING> 541 4,453 8,161
<DISCONTINUED> 0 0 0
<EXTRAORDINARY> 0 0 0
<CHANGES> 0 0 0
<NET-INCOME> 541 4,453 8,161
<EPS-PRIMARY> 0.04 0.30 0.55
<EPS-DILUTED> 0.04 0.30 0.55
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<RESTATED>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-27-1998
<PERIOD-START> JUN-29-1997
<PERIOD-END> SEP-27-1997
<CASH> 5,494
<SECURITIES> 469
<RECEIVABLES> 40,232
<ALLOWANCES> (3,235)
<INVENTORY> 12,000
<CURRENT-ASSETS> 71,560
<PP&E> 107,471
<DEPRECIATION> 75,120
<TOTAL-ASSETS> 143,039
<CURRENT-LIABILITIES> 33,955
<BONDS> 0
0
0
<COMMON> 14,663
<OTHER-SE> 70,403
<TOTAL-LIABILITY-AND-EQUITY> 143,039
<SALES> 75,615
<TOTAL-REVENUES> 75,615
<CGS> 28,982
<TOTAL-COSTS> 28,982
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 684
<INTEREST-EXPENSE> 477
<INCOME-PRETAX> 9,732
<INCOME-TAX> 3,771
<INCOME-CONTINUING> 5,961
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,961
<EPS-PRIMARY> .44
<EPS-DILUTED> .43
</TABLE>
