<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 June 30, 1996
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 0-11053
C-TEC CORPORATION
(Exact name of registrant as specified in its charter)
Pennsylvania 23-2093008
(State of other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
105 Carnegie Center
Princeton, New Jersey 08540-6215
(Address of principal executive offices)
(Zip Code)
(609) 734-3700
Registrant's telephone number, including area code)
(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 requirement for the past 90 days.
YES X NO
Indicate the number of shares outstanding of each of the issuer's classes
of common stock ($1.00 par value), as of July 31, 1996.
Common Stock 19,567,512
Class B Common Stock 7,890,655
<PAGE>
C-TEC CORPORATION
INDEX
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Statements of
Operations-Quarters and Six Months
Ended June 30, 1996 and 1995
Condensed Consolidated Balance Sheets-
June 30, 1996 and December 31, 1995
Condensed Consolidated Statements of
Cash Flows-Six Months Ended June 30,
1996 and 1995
Notes to Condensed Consolidated Financial
Statements
Item 2. Management's Discussion and Analysis of
Results of Operations and Financial
Condition
PART II. Other Information
Exhibits and Reports on Form 8-K
SIGNATURE
<PAGE>
PART 1. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
C-TEC CORPORATION AND SUBSIDIARIES
Condensed Consolidated Statements of Operations
(Dollars in Thousands Except Per Share Amounts)
(Unaudited)
<TABLE>
<CAPTION>
Quarter Ended Six Months Ended
June 30 June 30
1996 1995 1996 1995
<S> <C> <C> <C> <C>
SALES $90,941 $79,210 $179,917 $152,373
COSTS & EXPENSES, EXCLUDING DEPRECIATION
AND AMORTIZATION 55,921 50,765 111,670 98,073
DEPRECIATION AND AMORTIZATION 23,602 15,516 46,936 29,344
------- ------- -------- --------
OPERATING INCOME 11,418 12,929 21,311 24,956
INTEREST & DIVIDEND INCOME 3,658 3,664 7,399 8,503
INTEREST EXPENSE (6,318) (6,495) (12,755) (12,842)
GAIN ON SALE OF INVESTMENT IN
NORTHEAST NETWORKS, INC. - 2,890 - 2,890
OTHER INCOME, NET 1,789 287 2,120 544
------- ------- -------- --------
INCOME FROM CONTINUING OPERATIONS
BEFORE INCOME TAXES 10,547 13,275 18,075 24,051
PROVISION FOR INCOME TAXES 4,794 3,929 8,345 6,866
------- ------- -------- --------
INCOME FROM CONTINUING OPERATIONS
BEFORE MINORITY INTEREST AND
EQUITY IN UNCONSOLIDATED ENTITIES 5,753 9,346 9,730 17,185
MINORITY INTEREST IN (INCOME) LOSS OF
CONSOLIDATED ENTITIES 236 (37) 520 (72)
EQUITY IN INCOME (LOSS) OF
UNCONSOLIDATED ENTITIES (955) 473 (1,624) (2,129)
------- ------- -------- --------
INCOME FROM CONTINUING
OPERATIONS BEFORE EXTRAORDINARY
CHARGE 5,034 9,782 8,626 14,984
INCOME FROM DISCONTINUED
OPERATIONS, NET OF INCOME TAX
PROVISION OF $7 IN 1996
AND $(103) IN 1995 (9) 113 18 128
------- ------- -------- --------
INCOME BEFORE EXTRAORDINARY
CHARGE 5,025 9,895 8,644 15,112
EXTRAORDINARY CHARGE - DISCONTINUATION
OF THE APPLICATION OF SFAS 71 - - (1,928) -
------- ------- -------- --------
NET INCOME 5,025 9,895 6,716 15,112
PREFERRED DIVIDEND 650 - 650 -
------- ------- -------- --------
NET INCOME AVAILABLE FOR COMMON
SHAREHOLDERS $4,375 $9,895 $6,066 $15,112
======= ======= ======== ========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Quarter Ended Six Months Ended
June 30 June 30
1996 1995 1996 1995
<S> <C> <C> <C> <C>
Primary Earnings (loss) per average
common share
Income from continuing operations before
extraordinary charge $0.18 $0.36 $0.31 $0.55
========== ========== ========== ==========
Extraordinary charge-discontinuation of
the application of SFAS 71 $ -- $ -- $ (0.07) $ --
========== ========== ========== ==========
Net income available to Common
Shareholders $0.16 $0.36 $0.22 $0.55
========== ========== ========== ==========
Average common shares and common stock
equivalents outstanding 27,742,347 27,445,167 27,795,112 27,445,167
Fully diluted Earnings (loss) per average
common share
Income from continuing operations before
extraordinary change $0.17 $0.36 $0.30 $0.55
========== ========== ========== ==========
Extraordinary change discontinuation of the
application of SFAS 71 $ -- $ -- $ (0.07) $ --
========== ========== ========== ==========
Net income available to common
shareholders $0.15 $0.36 $0.21 $0.55
========== ========== ========== ==========
Average common shares and common stock
equivalents outstanding 29,199,490 27,445,167 29,252,255 27,445,167
</TABLE>
See accompanying notes to Condensed Consolidated Financial Statements.
<PAGE>
C-TEC CORPORATION AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(Dollars in Thousands)
(Unaudited)
<TABLE>
<CAPTION>
June 30 December 31
1996 1995
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and temporary cash investments $124,820 $49,397
Short-term investments 53,683 120,487
Other current assets 62,858 59,383
Deferred income taxes 8,914 9,275
-------- --------
Total current assets 250,275 238,542
-------- --------
PROPERTY, PLANT AND EQUIPMENT
Telephone Plant 426,741 419,219
Cable Plant 316,478 306,658
Other Property, Plant and Equipment 16,467 22,387
-------- --------
Total Property, Plant and Equipment 759,686 748,264
Accumulated Depreciation 349,278 324,855
-------- --------
Net Property, Plant and Equipment 410,408 423,409
-------- --------
INVESTMENTS 87,629 88,020
-------- --------
ASSETS OF BUSINESS TRANSFERRED 27,305 -
-------- --------
INTANGIBLE ASSETS, NET 148,495 164,682
-------- --------
DEFERRED CHARGES AND OTHER ASSETS 24,449 37,374
-------- --------
TOTAL ASSETS $948,561 $952,027
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Current maturities of long-term debt $29,385 $36,260
Advance billings & customer deposits 12,130 10,049
Accrued taxes 5,124 1,616
Accrued interest 5,811 5,937
Accrued contract settlements 6,680 6,629
Liabilities of business transferred 8,651 -
Other current liabilities 54,116 65,220
-------- --------
Total current liabilities $121,897 $125,711
======== ========
</TABLE>
<PAGE>
C-TEC CORPORATION AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(Dollars in Thousands)
(Unaudited)
<TABLE>
<CAPTION>
June 30 December 31
1996 1995
<S> <C> <C>
LONG-TERM DEBT $257,666 $263,046
---------- ----------
DEFERRED INCOME TAXES AND INVESTMENT
TAX CREDITS 97,900 102,906
---------- ----------
OTHER DEFERRED CREDITS 40,007 34,989
---------- ----------
MINORITY INTEREST 15,238 15,847
---------- ----------
REDEEMABLE PREFERRED STOCK 40,043 39,493
---------- ----------
COMMON SHAREHOLDERS' EQUITY:
Common Stock 31,534 31,534
Additional Paid-in Capital 358,782 358,655
Retained Earnings 128,640 123,124
Treasury Stock at cost, 4,077,446 shares
at June 30, 1996 and 377,842 December 31, 1995 (140,548) (5,288)
Common Stock of Parent Held by Subsidiary - (135,384)
Cumulative translation adjustments (2,598) (2,606)
---------- ----------
Total Common Shareholders' Equity 375,810 370,035
---------- ----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $948,561 $952,027
========== ==========
</TABLE>
See accompanying notes to Condensed Consolidated Financial Statements.
<PAGE>
Condensed Consolidated Statements of Cash Flows
(Dollars in Thousands)
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended
June 30
1996 1995
<S> <C> <C>
NET CASH PROVIDED BY OPERATING ACTIVITIES $44,378 $31,898
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to Property, Plant & Equipment (27,481) (32,252)
Loan to Affiliate - (2,287)
Purchase of loan receivable (13,088) -
Purchases of short-term investments (47,578) -
Sales and maturities of short-term investments 114,242 18,905
Acquisitions - (131,021)
Proceeds from the sale of equity
interest in Northeast Networks, Inc. - 5,007
Net proceeds from businesses transferred 16,188 -
Other 1,900 (610)
----------- -----------
Net Cash Provided by (Used in) investing Activities 44,183 (142,258)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Issuance of Long-Term Debt - 8,000
Redemption of Long-Term Debt (12,255) (11,505)
Net short-term borrowings - 1,978
Minority interest (519) -
Preferred dividend (650) -
Proceeds from issuance of stock 262 -
Other 24 (326)
----------- -----------
Net Cash Used in Financing Activities (13,138) (1,853)
----------- -----------
Net Increase (Decrease) in Cash and
Temporary Cash Investments 75,423 (112,213)
Cash and Temporary Cash Investments at
Beginning of Year 49,397 178,195
----------- -----------
Cash and Temporary Cash Investments at
June 30, $124,820 $65,982
=========== ===========
Supplemental Disclosures of Cash Flow Information
Cash paid during the periods for:
Interest (net of amounts capitalized) $12,882 $12,829
=========== ===========
Income taxes $6,828 $20,842
=========== ===========
</TABLE>
See accompanying notes to Condensed Consolidated Financial Statements
<PAGE>
COMPUTATION OF PER SHARE EARNINGS
(THOUSANDS OF DOLLARS EXCEPT PER SHARE AMOUNTS) Exhibit (11)
<TABLE>
<CAPTION>
Quarter June 30 Six Months June 30
Ended 1996 1995 Ended 1996 1995
<S> <C> <C> <C> <C>
Primary:
Average Shares Outstanding........................... 27,450,739 27,445,167 27,448,953 27,445,167
Dilutive shares resulting from stock options
based on the treasury stock method using the
average market price............................... 291,608 --- 346,159 ---
Dilutive shares resulting from redeemable
preferred stock.................................... --- --- --- ---
----------- ----------- ----------- -----------
27,742,347 27,445,167 27,795,112 27,445,167
----------- ----------- ----------- -----------
Net Income Available to Common Shareholders $4,375 $9,895 $6,066 $15,112
----------- ----------- ----------- -----------
Per Share Amount:
Net Income per Average Common Share.................. $ 0.16 $ 0.36 $ 0.22 $ 0.55
----------- ----------- ----------- -----------
Fully Diluted:
Average Shares Outstanding........................... 27,450,739 27,445,167 27,448,953 27,445,167
Dilutive Shares resulting from stock options
based on the treasury stock method using
the greater of the year-end market price or
average market prices.............................. 291,608 --- 346,159 ---
Dilutive Shares resulting from redeemable
preferred stock-treated as if converted to
common stock on the date of issuance............... 1,457,143 --- 1,457,143 ---
----------- ----------- ----------- -----------
29,199,490 27,445,167 29,252,255 27,445,167
----------- ----------- ----------- -----------
Net Income Available to Common Shareholders $4,375 $9,895 $6,066 $15,112
----------- ----------- ----------- -----------
Per Share Amount:
Net Income per Average Common Share................ $ 0.15 $ 0.36 $ 0.21 $ 0.55
----------- ----------- ----------- -----------
</TABLE>
<PAGE>
C-TEC CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Thousands of Dollars, except per share amounts)
1. The Condensed Consolidated Financial Statements included herein have been
prepared by the Company, without audit, pursuant to the rules and regulations of
the Securities and Exchange Commission. Certain information and footnote
disclosures normally included in financial statements prepared in accordance
with generally accepted accounting principles have been condensed or omitted
pursuant to such rules and regulations. However, in the opinion of the
Management of the Company, the Condensed Consolidated Financial Statements
include all adjustments, consisting only of normal recurring adjustments,
necessary to present fairly the financial information. The Condensed
Consolidated Financial Statements should be read in conjunction with the
financial statements and notes thereto included in the Company's Form 10-K for
the fiscal year ended December 31, 1995.
2. The Company owns a forty percent equity interest in Megacable, S.A. de C.V.
("Megacable"). For the six months ended June 30, 1996 and 1995, the Company
recorded its proportionate share of losses and amortization of excess cost over
equity in net assets of $1,299 and $2,297, respectively. For the quarters ended
June 30, 1996 and 1995, the Company recorded its proportionate share of losses
and amortization of excess cost over equity in net assets of $542 and $159,
respectively. Summarized information for the financial position and results of
operations of Megacable, as of and for the six months ended June 30, 1996 and
1995 is as follows:
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Assets $66,738 $67,147
Liabilities $ 9,383 $ 9,045
Shareholders' Equity $57,292 $58,102
Sales $10,882 $10,728
Costs and Expenses $ 7,422 $ 7,392
Foreign Currency Transaction Losses $ (38) $ 5,254
Net Income (Loss) $ 4,603 $ (139)
</TABLE>
3. The provision for income taxes consists of the following:
<TABLE>
<CAPTION>
June 30
1996 1995
---- ----
<S> <C> <C>
Currently payable $11,856 $4,402
Deferred (3,312) 2,745
Investment Tax Credits (199) (281)
------- -------
Total provision from continuing operations 8,345 6,866
Provisions from discontinued operations 7 (103)
------- -------
Total provision for income taxes $ 8,352 $6,763
======= =======
</TABLE>
<PAGE>
C-TEC CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Thousands of Dollars, except per share amounts)
The provision for income taxes is different than the amount computed by applying
the United States statutory federal tax rate.
The differences are as follows:
<TABLE>
<CAPTION>
June 30
1996 1995
---- ----
<S> <C> <C>
Income before provision for income taxes and
extraordinary item $16,972 $21,850
------- -------
Federal tax provision at statutory rate $ 6,465 $7,648
Increase (reduction) due to:
State income taxes, net of federal benefit 1,529 1,524
Amortization of investment tax credits (199) (281)
Rate differential applied
to reversing timing differences (188) (842)
Estimated nondeductible expenses 407 -
Non-deductible goodwill 506 71
Equity in unconsolidated entities (439) 323
Gain on disposal of investment 58 (615)
Deferred tax amortization - (972)
Other, Net 206 10
------ ------
Provision for income taxes $8,345 $6,866
====== ======
</TABLE>
4. In December 1995, the Company acquired from RCN Corporation, the Company's
controlling shareholder ("RCN"), all the issued and outstanding shares of Common
Stock of RCN Holdings, Inc. ("Holdings"). Holdings was a wholly-owned subsidiary
of RCN that owned 128,198 shares of Common Stock of the Company and 3,582,406
shares of Class B Stock of the Company. RCN is the Company's controlling
shareholder and is controlled by Kiewit Diversified Group, which is a wholly-
owned subsidiary of Peter Kiewit Sons', Inc. The consideration for the
acquisition was newly issued shares of Common Stock and Class B Stock,
respectively, equal to the number of shares of Common Stock and Class B Stock
held by Holdings. At the same time as the Company consummated this transaction,
RCN agreed, subject to certain terms and conditions, to reduce its voting
interest in the Company if such reduction is necessary to facilitate a tax-free
restructuring of the Company through a spin-off of certain businesses and a
merger of its remaining businesses with an undetermined third party.
The transaction was accounted for as a corporate reorganization and the
newly issued shares were recorded at RCN's cost. The Common and Class B Stock of
the Company acquired in the transaction was accounted for as a contra equity
amount encaptioned Parent Stock Held by Subsidiary.
In January 1996, Holdings was dissolved and the shares of Common Stock and
Class B Stock of the Company held by Holdings were returned to treasury stock.
5. In January 1996, the Company purchased from Kiewit Construction Group Inc.,
a wholly-owned subsidiary of Peter Kiewit Sons', Inc., a $13,088 note payable by
Mazon Corporativo, S.A. de C.V. at face value. The loan bears interest at 18.12%
per annum, payable on the maturity date of April 30, 1998. The loan is primarily
secured by 7,204,975 shares of Series B, Series D-1 and
<PAGE>
C-TEC CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Thousands of Dollars, except per share amounts)
Series D-2 common stock of Megacable, S.A. de C.V. and 1,053,090 shares of
Series B Class I Common Stock of Megacable, S.A. de C.V. The loan is included in
other assets in the accompanying condensed consolidated balance sheet at June
30, 1996.
6. As a result of filing an alternative regulation plan with the Pennsylvania
Public Utility Commission, the Telephone Group determined that it no longer met
the criteria for the continued application of the accounting required by
Statement of Financial Accounting Standards No. 71 - Accounting for the Effects
of Certain Types of Regulation ("SFAS 71"). In this filing, the Group requested
approval of a change from cost-based, rate-of-return regulation to incentive-
based regulation using price caps. The Group believes approval of the plan is
probable; therefore, it discontinued application of SFAS 71 and, in accordance
with Statement of Financial Accounting Standards No. 101 - Accounting for the
Discontinuation of the Application of SFAS 71, wrote off the regulatory assets
and liabilities previously recognized pursuant to SFAS 71, resulting in an
extraordinary charge of $1,928. The regulatory assets recognized temporary
differences for which deferred taxes had not been provided and an increase in
the deferred state tax liability which resulted from an increase in Pennsylvania
state income tax rates subsequent to the dates the deferred taxes were
originally recorded. Additionally, based on a settlement reached previously with
the Pennsylvania Public Utility Commission, the Telephone Group no longer
recovers in rates state deferred income taxes on certain temporary differences
between the book and tax basis related to property, plant and equipment. The
regulatory liabilities represented a reduced deferred tax liability resulting
from decreases in federal income tax rates subsequent to the dates the deferred
taxes were originally recorded and a deferred tax benefit associated with the
temporary differences resulting from accounting for investment tax credits using
the deferred method.
Since the Telephone Group performs an annual study to determine the
remaining economic useful lives of regulated plant and adjusts them, when
necessary, for both financial reporting and regulatory purposes, discontinuation
of the application of SFAS 71 did not impact recorded fixed asset values.
7. In April and July 1996, the Company paid two dividends of $650 each on
redeemable preferred stock issued in connection with the acquisition of Twin
County Trans Video, Inc. in 1995. The April preferred dividend is reflected in
the Condensed Consolidated Financial Statements as of and for the six months
ended June 30, 1996.
8. In November 1995, the Company announced that it had engaged Merrill Lynch
and Co. ("Merrill Lynch") to assist with evaluating strategic options for its
various business units with a view toward enhancing shareholder value. The
Company has various contingent fees which will become payable to Merrill Lynch
and various other financial advisors, based upon the form of the restructuring,
if any.
In March 1996, the Company signed a definitive agreement (the "Stock
Purchase Agreement") for the sale to RCN of the following businesses
(collectively, "Businesses Transferred Under Contractual Arrangement"); (i)
C-TEC International, Inc., a subsidiary of the Company that owns a 40%
interest in Megacable and a $13,088 note payable by Mazon Corporativo, S.A.
de C.V.; (ii) TEC-Air, Inc., which owns a corporate jet aircraft;
<PAGE>
C-TEC CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Thousands of Dollars, except per share amounts)
(iii)Commonwealth Long Distance Company, which comprises the Company's Long
Distance Group; and (iv) Residential Communications Network, Inc., a start up
joint effort with RCN which plans to provide telecommunications services to the
residential sector ("UrbanNet").
The Businesses Transferred Under Contractual Arrangement were to be sold at
two separate closings. On April 1, 1996, the closing on the sale of UrbanNet to
RCN took place. The Company received cash proceeds of $17,500, subject to
adjustment as defined in the Stock Purchase Agreement. After the first closing,
the Company continued to retain a warrant to purchase approximately 6% of the
common stock of UrbanNet. The second closing, involving the sale of the other
Businesses Transferred Under Contractual Arrangement (the "Other Transferred
Businesses"), was expected to take place in the second half of 1996.
Pursuant to the Stock Purchase Agreement, RCN agreed to certain standstill
arrangements with respect to its equity interest in the Company.
The Stock Purchase Agreement provides the Company an option, at its
election, to repurchase any or all of the Businesses Transferred Under
Contractual Arrangement on the terms set forth in the definitive agreement, if
the Company does not restructure its domestic cable television and local
telephone operations as provided in the definitive agreement by January 1, 1997,
subject to certain exceptions if the Company has taken formal steps to effect a
restructuring at that time. The prices at which the Company may repurchase the
businesses are based on purchase price allocations from the first and second
closing, as adjusted pursuant to the definitive agreement. Although a legal
transfer of ownership will occur at the time of closing the sale of these
operations to RCN, management believes that, as a result of the repurchase
option, the risks and other incidents of ownership have not been transferred to
RCN with sufficient certainty to result in a divestiture for accounting
purposes. Therefore, these operations have not been accounted for as
discontinued operations. Effective April 1, 1996, the operating results of
UrbanNet are being reported using the equity method of accounting. The Company's
share of losses for the second quarter of 1996 is approximately $1,500. The
Company has offset the cash proceeds in deferred credits in the Condensed
Consolidated Balance Sheets. In addition, the assets and liabilities of UrbanNet
are presented in the Company's Condensed Consolidated Balance Sheets under the
captions "Assets of Business Transferred" and "Liabilities of Business
Transferred."
In August 1996, in the wake of the newly issued rules of the
Telecommunications Act of 1996, the Company announced that its Board of
Directors approved a plan for C-TEC to reaquire UrbanNet, its former competitive
residential telecom unit, and acquire the assets of Liberty Cable from Peter
Kiewit Sons' Inc. ("Kiewit") and merge those operations with C-TEC Corporation.
The decision to reacquire UrbanNet coincides with C-TEC's decision to close all
discussions concerning a sale of its cable television unit and the new favorable
regulatory conditions. Furthermore, it is the Company's intent at this time not
to proceed with the second closing involving Other Transferred Businesses. The
Company will, however, continue to explore ways to increase its profitability
and value which could include a restructuring transaction of some sort. C-TEC
has agreed in principle to exercise its option to reacquire the Businesses
Transferred Under Contractual Arrangement. The repurchase price will be
approximately $54 million, as adjusted pursuant to the definitive agreement. The
exercise of this option was approved by a special committee of the Board. The
transaction is subject to regulatory approval. No assurances can be given that
any transaction will be consummated.
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
(Thousands of Dollars, except per share amounts)
The Private Securities Litigation Reform Act of 1995 provides a "safe
harbor" for forward-looking statements. Certain information included in this
Quarterly Report is forward-looking, such information relating to the
effects of future regulation and competition. Such forward-looking information
involves important risks and uncertainties that could significantly affect
expected results in the future from those expressed in any forward-looking
statements made by, or on behalf of, the Company. These risks and uncertainties
include, but are not limited to, uncertainties relating to economic conditions,
acquisitions and divestitures, government and regulatory policies, the pricing
and availability of equipment, materials, inventories and programming,
technological developments and changes in the competitive environment in which
the Company operates.
The following discussion should be read in conjunction with the attached
Condensed Consolidated Financial Statements and notes thereto, and with the
Company's audited financial statements and notes thereto for the year ended
December 31, 1995.
Results of Operations
C-TEC Corporation and subsidiaries' (the "Company") operating income before
depreciation and amortization was $35,020 for the quarter ended June 30, 1996 as
compared to $28,445 for the same period in 1995, with the increase occurring
principally in the Cable Group. Sales increased 14.8% to $90,941 for the quarter
ended June 30, 1996 from $79,210 for the quarter ended June 30, 1995, with the
increase occurring principally in the Cable Group. For the three months ended
June 30, 1996, net income available for common shareholders was $4,375, or $.16
per common share, as compared to $9,895, or $.36 per average common share, for
the same period in 1995. The decrease in net income reflects an increase in
operating income before depreciation and amortization of $6,575, offset
principally by higher depreciation and amortization of $8,086 resulting from the
acquisition of Twin County Trans Video, Inc. and the securing of a majority
voting interest in Mercom, Inc. in 1995. The results of Twin County and Mercom
have been consolidated with the Company's results since May 1995 and August
1995, respectively. Additionally, net income in 1995 reflects a gain of $2,890
on the disposition of an equity interest in Northeast Networks, Inc.
For the six months ended June 30, 1996, operating income before depreciation
and amortization was $68,247 as compared to $54,300 for the same period in 1995,
with the increase occurring principally in the Cable Group. Sales increased
18.1% to $179,917 for the six months ended June 30,1996 from $152,373 for the
six months ended June 30, 1995, with the increase occurring principally in the
Cable Group. For the six months ended June 30, 1996, net income available for
common shareholders was $6,066, or $.22 per average common share, as compared to
$15,112, or $.55 per average common share, for the same period in 1995. The
decrease in net income reflects an increase in operating income before
depreciation and amortization of $13,947, offset principally by higher
depreciation and amortization of $17,592 and an extraordinary charge of $1,928
related to the discontinuation of the application of SFAS 71 by the Telephone
Group in the first quarter of 1996. Additionally, net income in 1995 reflects a
gain of $2,890 on the disposition of an equity interest in Northeast Networks,
Inc.
<PAGE>
Management's Discussion and Analysis of Financial Condition and Results of
Operations, continued
(Thousands of Dollars, except per share amounts)
Sales and operating income before interest, depreciation, amortization and
income taxes by operating group were as follows for the quarter and six months
ended June 30, 1996 and 1995:
<TABLE>
<CAPTION>
Quarter Ended Six Months Ended
June 30 June 30
Sales 1996 1995 1996 1995
- ----- ---- ---- ---- ----
<S> <C> <C> <C> <C>
Telephone $34,747 $31,993 $ 68,704 $ 63,409
C-TEC Cable 36,070 30,388 71,098 54,800
Mercom Cable* 3,885 N/A 7,684 N/A
Other 16,239 16,829 32,431 34,164
------- ------- -------- --------
Total $90,941 $79,210 $179,917 $152,373
======= ======= ======== ========
</TABLE>
Operating income before interest,
depreciation, amortization and income taxes
- -------------------------------------------
<TABLE>
<CAPTION>
Quarter Ended Six Months Ended
June 30 June 30
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Telephone $19,585 $19,461 $ 40,570 $ 37,756
C-TEC Cable 16,924 14,522 33,537 25,388
Mercom Cable* 1,438 N/A 2,777 N/A
Other (2,927) (5,538) (8,637) (8,844)
------- ------- -------- --------
Total $35,020 $28,445 $ 68,247 $ 54,300
======= ======= ======== ========
</TABLE>
<TABLE>
<CAPTION>
Quarter Ended Six Months Ended
June 30 June 30
Depreciation/Amortization 1996 1995 1996 1995
- ------------------------- ---- ---- ---- ----
<S> <C> <C> <C> <C>
Telephone $ 6,695 $ 6,065 $ 13,222 $ 12,059
C-TEC Cable 13,833 8,910 27,400 16,233
Mercom Cable* 2,512 N/A 5,019 N/A
Other 562 541 1,295 1,052
------- ------- -------- --------
Total $23,602 $15,516 $ 46,936 $ 29,344
======= ======= ======== ========
</TABLE>
<TABLE>
<CAPTION>
June 30
1996 1995
---- ----
Selected Operating Statistics
- -----------------------------
<S> <C> <C>
Telephone Main Access Lines 233,741 222,357
C-TEC Cable Television
Subscribers 339,114 324,769
Mercom Cable Television
Subscribers* 40,876 N/A
</TABLE>
* The above tables reflect 100% of Mercom's operating results. C-TEC began fully
consolidating Mercom in August 1995. C-TEC owns 61.92% of Mercom's outstanding
shares.
<PAGE>
Management's Discussion and Analysis of Financial Condition and Results of
Operations, continued
(Thousands of Dollars, except per share amounts)
Telephone Group
---------------
Sales of the Telephone Group increased $2,754, or 8.6% to $34,747 for
the second quarter of 1996 as compared to $31,993 for the same period in 1995.
The increase is due to higher local network service revenue of approximately
$467, resulting from an increase in access lines of approximately 10,600.
Intrastate access revenue increased approximately $484 due to growth in access
minutes and a higher average rate per minute. Nonregulated revenue increased
approximately $993 primarily due to higher business sales and epix(TM) internet
access service revenue. Additionally, interstate access revenue increased
approximately $350.
Operating expenses, excluding depreciation and amortization, increased
approximately $2,600, or 21%, as compared to the same period in 1995. Payroll
expense increased $906 primarily due to headcount additions, wage increases and
higher overtime. Materials expose increased approximately $651 primarily due to
higher nonregulated sales. Other fees increased $544 related to consulting
services for a variety of regulatory and operational matters.
For the six months ended June 30, 1996, sales of the Telephone Group
increased $5,295, or 8.4% as compared to the same period in 1995 due primarily
to increases in local network service and network access revenues of $1,097 and
$1,689, respectively. Additionally, nonregulated revenue increased approximately
$1,333. Operating expenses, excluding depreciation and amortization, increased
approximately $2,500, or 9.7%, as compared to the six months ended June 30,
1995. The increase is primarily due to higher payroll expense and higher
consulting fees.
Cable Group
-----------
Sales of the Cable Group increased $9,567, or 31.5% to $39,955 for the
three month period ended June 30, 1996 as compared to $30,388 for the same
period in 1995 primarily due to higher basic service revenue of $7,877 resulting
from approximately $101,418 additional average subscribers over the same period
in 1995 and the effects of a rate increase in February 1996. Subscriber counts
increased primarily due to the acquisition of Twin County Trans Video, Inc. and
the securing of a majority voting interest in Mercom, Inc., in 1995. The results
of Twin County and Mercom have been consolidated with the Company since May 1995
and August 1995, respectively. Overall, Twin County and Mercom account for
$3,593 and $3,885, respectively, of the increase in sales over the same period
in 1995.
Operating expenses, excluding depreciation and amortization, increased
approximately $5,700 or 36.1% for the quarter ended June 30, 1996 as compared to
the same period in 1995 primarily due to higher programming expense of $2,397.
Programming expense increased primarily due to higher programming fees, channel
additions, subscriber growth, and the addition of Twin County and Mercom
subscribers.
For the six months ended June 30, 1996, the Cable Group had increased
sales of $23,982, or 43.8% as compared to the six months ended June 30, 1995
primarily due to higher basic service revenue resulting from an increase in
subscribers and the effects of rate increases in April 1995 and February 1996.
Overall, Twin County and Mercom account for $11,257 and $7,684, respectively, of
the increase in sales over the same period in 1995. Operating expenses,
excluding depreciation and amortization increased approximately $13,000, or
44.4% primarily due to higher programming expense of $5,263 and higher salaries
and benefits expense of $2,839. Programming expense increased primarily due to
higher programming fees, channel additions,
<PAGE>
Management's Discussion and Analysis of Financial Condition and Results of
Operations, continued
(Thousands of Dollars, except per share amounts)
subscriber growth, and the addition of Twin County and Mercom subscribers.
Salaries and benefits expense exceeded the 1995 level primarily due to the
acquisitions of Twin County and Mercom. The remainder of the increase is
primarily attributable to various increases in other general operating expenses
as a result of the addition of Twin County and Mercom subscribers.
Other
-----
For the quarter and six months ended June 30, 1996, other sales
decreased as compared to the same periods in 1995 primarily due to lower
revenues of $3,450 and $6,887, respectively, of the Long Distance Group from the
resale of AT&T Tariff 12 services to another long distance reseller. The Group's
arrangement for such sales terminated during the second quarter of 1995. This
decrease was partially offset by higher sales of the Communications Services
Group. Sales of the Communications Services Group for future periods are
dependent upon the procurement of contracts for projects and services.
Other costs and expenses, excluding depreciation and amortization,
decreased approximately $3,200 for the quarter ended June 30, 1996 as compared
to the same period in 1995. This decrease represents lower costs of the Long
Distance Group of $3,290 associated with the reduction in Tariff 12 revenues.
For the six month period, other costs and expenses, excluding
depreciation and amortization decreased $1,940 primarily due to lower costs of
the Long Distance Group of $6,480 associated with the reduction of Tariff 12
revenues. This decrease was partially offset by an increase in corporate
overhead of $2,860, primarily representing expenses associated with the proposed
corporate restructuring. Costs associated with UrbanNet increased $1,680.
Depreciation and Amortization
-----------------------------
Depreciation and amortization increased $8,086, or 52.1%, and $17,592
or 60.0% for the quarter and six months ended June 30, 1996, respectively,
primarily due to the acquisition of Twin County and the securing of a majority
voting interest in Mercom in later periods of 1995.
Interest and Dividend Income
----------------------------
Interest and dividend income did not change significantly for the
quarter ended June 30, 1996. For the six months ended June 30, 1996, interest
and dividend income decreased approximately $1,100, or 13.0% as compared to the
same period in 1995 due to a reduction in average invested cash, temporary cash
investments and short-term investments and a decrease in the average yield on
invested balances has decreased approximately one percent.
Income Taxes
------------
The Company's effective income tax rate was approximately 30% for the
quarter and six months ended June 30, 1995 and 49% for the quarter and six
months ended June 30, 1996. For an analysis of the change in income taxes, see
the reconciliation of the effective tax rate in Note 3.
<PAGE>
Management's Discussion and Analysis of Financial Condition and Results of
Operations, continued
(Thousands of Dollars, except per share amounts)
Other Income
------------
Other income increased for the quarterly and six month period due to
receipt of a royalty fee of approximately $1,700. The fee represents the
remaining minimum royalty fee on cellular software products sold through January
1, 1998 due to the Company in connection with its 1991 sale of the assets of its
Information Services Group and corporate data processing function.
Equity in Unconsolidated Entities
---------------------------------
The Company's share of the losses of unconsolidated entities decreased
by $1,428 for the three months ended June 30, 1996 as compared to the three
months ended June 30, 1995. The decrease is primarily due to the losses of
UrbanNet, which are recorded on the equity method since April 1, 1996 (see Note
8) of $1,499.
For the six months ended June 30, 1996, the Company's share of the
losses of unconsolidated entities decreased $505, or 23.7%. This decrease was
due in part to an improvement in the Company's share of the earnings of
Megacable of $998. Additionally, the Company recorded its share of the losses of
Mercom, Inc. and Northeast Networks, Inc. during the second quarter of 1995. The
Company acquired majority voting control of Mercom, Inc. in August, 1995 and
consolidated Mercom's financial results since that time. These items were offset
by the Company's share of the losses of UrbanNet, which is accounted for under
the equity method since April 1996 of $1,499.
Extraordinary Charge
--------------------
As a result of filing an alternative regulation plan with the
Pennsylvania Public Utility Commission, the Telephone Group determined that it
no longer met the criteria for the continued application of the accounting
required by SFAS 71. In this filing, the Group requested approval of a change
from cost-based, rate-of-return regulation to incentive-based regulation using
price caps. The Group believes approval of the plan is probable and, as a
result, discontinued application of SFAS 71 and wrote off the previously
recorded regulatory assets and liabilities. The regulatory assets recognized
temporary differences for which deferred taxes had not been provided and an
increase in the deferred state tax liability which resulted from an increase in
Pennsylvania state income tax rates subsequent to the dates the deferred taxes
were originally recorded. Additionally, based on a settlement reached previously
with the Pennsylvania Public Utility Commission, the Telephone Group no longer
recovers in rates state deferred income taxes on certain temporary differences
between the book and tax basis related to property, plant and equipment. The
regulatory liabilities represented a reduced deferred tax liability resulting
from decreases in federal income tax rates subsequent to the dates the deferred
taxes were originally recorded and a deferred tax benefit associated with the
temporary differences resulting from accounting for investment tax credits using
the deferred method.
Since the Telephone Group performs an annual study to determine the
remaining economic useful lives of regulated plant and adjusts them, when
necessary, for both financial reporting and regulatory purposes, discontinuation
of the application of SFAS 71 did not impact recorded fixed asset values.
<PAGE>
Management's Discussion and Analysis of Financial Condition and Results of
Operations, continued
(Thousands of Dollars, except per share amounts)
Financial Condition
-------------------
The Company shifted a portion of its investment portfolio from short-
term investments to cash equivalents in response to market conditions during the
first quarter of 1996.
Deferred charges and other assets decreased as a result of the
discontinuation of the application of SFAS 71 as discussed further in Note 6 and
"Extraordinary Charge" and, in accordance with Statement of Financial Accounting
Standards No. 101 -Accounting for the Discontinuation of the Application of SFAS
71, the related elimination from the financial statements all assets and
liabilities previously recognized pursuant to SFAS 71.
Partially offsetting the decrease in deferred charges was an increase
of $14,115, which represents a loan purchased from Kiewit Construction Group,
Inc. at face value of 13,088 plus accrued interest thereon. The loan is
receivable from Mazon Corporativo, S.A. de C.V.
Deferred credits increased primarily due to the receipt of $17,500
proceeds from the sale of UrbanNet to RCN, as discussed in Note 8. Offsetting
this increase is a decrease as a result of the discontinuation of the
application of SFAS 71 as discussed further in Note 6 and "Extraordinary Charge"
and in accordance with Statement of Financial Accounting Standards No. 101 -
Accounting for the Discontinuation of the Application of SFAS 71, the related
elimination from the financial statements all assets and liabilities previously
recognized pursuant to SFAS 71.
Other current liabilities decreased primarily as a result of the
timing of payments of certain payables.
<PAGE>
Management's Discussion and Analysis of Financial Condition and Results of
Operations, continued
(Thousands of Dollars, except per share amounts)
Liquidity and Capital Resources
- -------------------------------
<TABLE>
<CAPTION>
June 30 December 31
1996 1995
<S> <C> <C>
Cash and Temporary Cash Investments and
Short-term investments $178,503 $169,884
Working Capital $128,378 $112,831
Long-Term Debt (including current maturities) $287,051 $299,306
Six Months Ended June 30,
1996 1995
Net cash provided by operating activities $44,378 $31,898
Operating income before depreciation
and amortization $68,247 $54,300
Investing Activities:
Additions to property, plant and equipment $27,481 $32,252
Acquisitions of businesses - $131,021
------- --------
Total $27,481 $163,273
======= ========
</TABLE>
The increases in cash, temporary cash investments, short-term
investments and working capital at June 30, 1996 over December 31, 1995 are
primarily attributable to the excess of net cash provided by operating
activities of $44,378 over capital expenditures of $27,481 and repayments of
long-term debt of $12,255. The Company's working capital ratio was 2.1 to 1 at
June 30, 1996 and 1.9 to 1 December 31, 1995.
Net cash provided by operating activities represented 161.5% and 98.9%
of additions to property, plant and equipment for the six months ended June 30,
1996 and 1995, respectively. The Company anticipates cash provided by operating
activities will exceed additions to property, plant and equipment for 1996.
The Cable Group has a mandatory principal repayment of $18,750 on its
Senior Secured Notes due on September 1, 1996. At this time, the Company
anticipates that it will fund this repayment from its available cash balances.
In November 1995, the Company announced that it had engaged Merrill
Lynch to assist with evaluating strategic options for its various business units
with a view toward enhancing shareholder value. The Company has various
contingent fees which will become payable to Merrill Lynch and various other
financial advisors, based upon the form of the restructuring, if any.
<PAGE>
Management's Discussion and Analysis of Financial Condition and Results of
Operations, continued
(Thousands of Dollars, except per share amounts)
In March 1996, the Company signed a definitive agreement (the "Stock
Purchase Agreement") for the sale to RCN of the following businesses
(collectively, "Businesses Transferred Under Contractual Arrangement"): (i) C-
TEC International, Inc., a subsidiary of the Company that owns a 40% interest in
Megacable and a $13,088 note payable by Mazon Corporativo, S.A. de C.V.; (ii)
TEC-Air, Inc., which owns a corporate jet aircraft; (iii) Commonwealth Long
Distance Company, which comprises the Company's Long Distance Group; and (iv)
Residential Communications Network, Inc., a start up joint effort with RCN which
plans to provide telecommunications services to the residential sector
("UrbanNet").
The Businesses Transferred Under Contractual Arrangement were to be
sold at two separate closings. On April 1, 1996, the closing on the sale of
UrbanNet to RCN took place. The Company received cash proceeds of $17,500,
subject to adjustment as defined in the Stock Purchase Agreement. After the
first closing, the Company continued to retain a warrant to purchase
approximately 6% of the common stock of UrbanNet. The second closing, involving
the sale of the other Businesses Transferred Under Contractual Arrangement (the
"other Transferred Businesses"), was expected to take place in the second half
of 1996.
Pursuant to the Stock Purchase Agreement, RCN agreed to certain
standstill arrangements with respect to its equity interest in the Company.
The Stock Purchase Agreement provides the Company an option, at its
election, to repurchase any or all of the Businesses Transferred Under
Contractual Arrangement on the terms set forth in the definitive agreement, if
the Company does not restructure its domestic cable television and local
telephone operations as provided in the definitive agreement by January 1, 1997,
subject to certain exceptions if the Company has taken formal steps to effect a
restructuring at that time. The prices at which the Company may repurchase the
businesses are based on purchase price allocations from the first and second
closing, as adjusted pursuant to the definitive agreement. Although a legal
transfer of ownership will occur at the time of closing the sale of these
operations to RCN, management believes that, as a result of the repurchase
option, the risks and other incidents of ownership have not been transferred to
RCN with sufficient certainty to result in a divestiture for accounting
purposes. Therefore, these operations have not been accounted for as
discontinued operations. Effective April 1, 1996, the operating results of
UrbanNet are being reported using the equity method of accounting. The company's
share of losses for the second quarter of 1996 is approximately $1,500. The
Company has offset the cash proceeds in deferred credits in the Condensed
Consolidated Balance Sheets. In addition, the assets and liabilities of UrbanNet
are presented in the Company's Condensed Consolidated Balance Sheets under the
captions "Assets of Business Transferred" and "Liabilities of Business
Transferred."
In August 1996, in the wake of the newly issued rules of the
Telecommunications Act, the Company announced that its Board of Directors
approved a plan for C-TEC to reacquire UrbanNet, its former competitive
residential telecom unit, and acquire the assets of Liberty Cable from Peter
Kiewit Sons' Inc. ("Kiewit") and merge those operations with C-TEC Corporation.
The decision to reacquire UrbanNet coincides with C-TEC's decision to close all
discussions concerning a sale of its cable television unit and the new favorable
regulatory conditions. Furthermore, it is the Company's intent at this time not
to proceed with the second closing involving Other Transferred Businesses. The
Company will, however, continue to explore ways to increase its profitability
and value which could include a restructuring transaction of some sort.
<PAGE>
Management's Discussion and Analysis of Financial Condition and Results of
Operations, continued
(Thousands of Dollars, except per share amounts)
C-TEC has agreed in principle to exercise its option to reacquire the
Business Transferred Under Contractual Agreement. The repurchase price will be
approximately $54 million, as adjusted and pursuant to the definitive agreement.
The exercise of this option was approved by a special committee of the Board.
The transaction is subject to regulatory approval. No assurances can be given
that any transaction will be consummated.
REGULATORY ISSUES
- -----------------
No assurances can be given at this time that the following regulatory
matters will not have a material adverse effect on the Company's business and
results of operations in the future. Also, no assurance can be given as to what
other future actions Congress, the FCC or other regulatory authorities may take
or the effects thereof on the Company.
TELECOMMUNICATIONS ACT OF 1996
- ------------------------------
In early February, Congress passed and the President signed the
Telecommunications Act of 1996 (the "1996 Act"). The 1996 Act is intended to
stimulate growth and competition in virtually every component of the
communications industry. The 1996 Act established a framework for deregulation
and calls for state regulators and the FCC to work out the specific
implementation process.
Companies will be permitted to combine historically separate lines of
businesses into one, and provide that combined service in markets of their own
choice. In addition, there will be relief from the earnings restrictions and
price controls that have governed the local telephone business for many years
and were imposed on the cable industry in 1992 by the Cable Television Consumer
Protection and Competition Act of 1992 (the "1992 Act").
The rate regulation provisions of the 1992 Act have not had a
materially adverse effect on the Company's financial condition and results of
operations. With the passage of the 1996 Act, all cable systems rates are
deregulated as effective competition enters the franchise area, or by March 31,
1999, whichever comes sooner. The Company anticipates that certain provisions of
the 1992 Act that do not relate to rate regulation, such as the provisions
relating to retransmission consent and customer service standards, will reduce
the future operating margins of the Company.
The 1996 Act will also create growth opportunities through
acquisitions and mergers as smaller, under capitalized businesses seek
assistance from those who are better positioned to compete in a new deregulated
environment in the communications industry. On August 1, 1996, the FCC took
action to remove statutory barriers to local telephone services competition. The
FCC order implements the intent of Congress when it passed the 1996 Act. The
FCC's action reflects the experience of states that have already endeavored to
promote local competition by developing a flexible policy framework leaving
individual states appropriate discretion to accomodate any unique regional or
local market characteristics. The validation of a national policy for local
competition creates opportunity for non-franchised local telephone providers to
compete for the multi-billion dollar market place heretofore confined to
traditional local telephone companies. As a result, this new action will open
new markets for the Company and open the Company's local telephone markets to
other competitors.
<PAGE>
Part II - Other Information
Item 6. Exhibits and Reports on Form 8-K
(a.) Exhibits
(11) Computation of Per Share Earnings
(27) Financial Data Schedule
(b.) Reports on Form 8-K
No reports on Form 8-K were filed during the second quarter of
1996.
<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.
C-TEC CORPORATION
DATE: August 13, 1996 /s/ Bruce C. Godfrey
------------------------
Bruce C. Godfrey
Executive Vice President and
Chief Financial Officer
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FINANCIAL
STATEMENTS AS OF AND FOR THE SIX MONTHS ENDED JUNE 30,1996 AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 124,820
<SECURITIES> 53,683
<RECEIVABLES> 51,433
<ALLOWANCES> 1,771
<INVENTORY> 4,903
<CURRENT-ASSETS> 250,275
<PP&E> 759,686
<DEPRECIATION> 349,278
<TOTAL-ASSETS> 948,561
<CURRENT-LIABILITIES> 121,897
<BONDS> 257,666
40,043
0
<COMMON> 31,534
<OTHER-SE> 344,276
<TOTAL-LIABILITY-AND-EQUITY> 948,561
<SALES> 0
<TOTAL-REVENUES> 179,917
<CGS> 0
<TOTAL-COSTS> 115,017
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 1,709
<INTEREST-EXPENSE> 12,755
<INCOME-PRETAX> 18,075
<INCOME-TAX> 8,345
<INCOME-CONTINUING> 8,626
<DISCONTINUED> 18
<EXTRAORDINARY> (1,928)
<CHANGES> 0
<NET-INCOME> 6,066
<EPS-PRIMARY> .22
<EPS-DILUTED> .21
</TABLE>
