FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Quarterly Report Under Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the Quarterly Period Ended March 31, 1995
-----------------------------
Commission File Number #0-10786
-------------------------------------
Insituform Technologies Inc.
- ------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 13-3032158
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1770 Kirby Parkway, Suite 300, Memphis, Tennessee 38138
- ------------------------------------------------------------
(Address of Principal Executive Offices)
(901) 759-7473
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(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 (I) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing requirements
for the past 90 days.
Yes X No
--- ---
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
Class Outstanding at March 31, 1995
- --------------------- ----------------------------------
Class A, Common Stock, 14,351,755 Shares
$.01 par value
<PAGE>
INDEX
Part I Financial Information:
Item 1. Financial Statements:
Consolidated Balance Sheets
Consolidated Statements of Income
Consolidated Statements of Cash Flows
Notes to Consolidated Financial
Statements
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of
Operations
Part II Other Information and Signatures:
Item 1. Legal Proceedings
Item 6. Exhibits and Reports on Form 8-K
Signatures
Index to Exhibits
<PAGE>
<PAGE>
<TABLE>
PART I. - FINANCIAL INFORMATION
-------------------------------
ITEM 1. - FINANCIAL STATEMENTS
------------------------------
INSITUFORM TECHNOLOGIES, INC.
CONSOLIDATED BALANCE SHEETS
<CAPTION>
March 31, 1995 December 31, 1994
---------------- -----------------
(Unaudited)
(In Thousands)
<S> <C> <C>
ASSETS
CURRENT
Cash and cash equivalents,
restricted $3,360 and $3,836 $ 11,447 $ 16,635
Investments in securities 1,107 1,107
Receivables (Note 4) 35,419 35,243
Costs and estimated earnings in
excess of billings 8,913 6,422
Inventories (Note 5) 7,863 7,029
Deferred income tax 2,054 2,807
Prepaid expenses and miscellaneous 2,853 2,496
-------- --------
TOTAL CURRENT ASSETS 69,656 71,739
-------- --------
PROPERTY AND EQUIPMENT, less
accumulated depreciation and
amortization (Note 6) 31,039 29,809
-------- --------
OTHER ASSETS
Investments in licensees and
associated companies (Note 2) 1,805 2,033
Patents and patent applications,
less accumulated amortization
of $1,974 and $1,909 5,698 5,606
Cost in excess of net assets of
businesses acquired of
$4,460 and $3,838 (Notes 2 and 3) 50,879 49,995
Deferred income tax 1,652 1,417
Miscellaneous 2,058 1,895
TOTAL OTHER ASSETS 62,092 60,946
-------- --------
$162,787 $162,494
======== ========
</TABLE>
See accompanying summary of accounting policies and notes to
consolidated financial statements.
<PAGE>
<TABLE>
INSITUFORM TECHNOLOGIES, INC.
CONSOLIDATED BALANCE SHEETS
<CAPTION>
March 31, 1995 December 31, 1994
-------------- -----------------
(Unaudited)
(In Thousands)
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS'
EQUITY
CURRENT LIABILITIES
Notes payable to banks $912 $277
Accounts payable and accruals 20,461 22,760
Income taxes payable (Note 9) 2,810 3,801
Deferred income taxes 526 524
Current maturities of long-term
debt (Note 10) 10,459 11,572
------- -------
TOTAL CURRENT LIABILITIES 35,168 38,934
Long-term debt, less current
maturities (Note 10) 47,925 47,347
Deferred income taxes 987 937
------- -------
TOTAL LIABILITIES 84,080 87,218
------- -------
Commitments and contingencies
(Notes 10, 11 and 12)
Minority interests 2,410 1,352
------- -------
STOCKHOLDERS' EQUITY
Preferred stock, undesignated,
$.10 par - shares authorized
1,800,000; none outstanding 0 0
Common stock, $.01 par - shares
authorized 25,000,000; shares
outstanding 14,351,755 and
14,346,005 144 143
Additional paid-in capital 44,974 44,937
Retained earnings (Note 10) 35,219 33,300
------- -------
80,337 78,380
Cumulative foreign currency
translation adjustments (854) (1,270)
Unrealized holding gains on in-
vestments available-for-sale
(Note 2) 438 438
Notes receivable from affiliates
(Note 7) (3,624) (3,624)
------- --------
TOTAL STOCKHOLDERS' EQUITY 76,297 73,924
-------- ---------
$162,787 $162,494
======== ========
</TABLE>
See accompanying summary of accounting policies and notes to
consolidated financial statements.
<PAGE>
<TABLE>
INSITUFORM TECHNOLOGIES, INC.
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
<CAPTION>
(in thousands,
except per share
amounts)
For the Three Months
Ended March 31,
1995 1994
---- ----
<S> <C> <C>
REVENUES:
Net sales $6,994 $7,876
Royalties and license fees 2,639 2,332
Construction contracts 30,199 20,273
------ ------
TOTAL REVENUES 39,832 30,481
------ ------
OPERATING COSTS AND EXPENSES:
Cost of sales 4,641 4,956
Royalty expense (Note 12) 85 43
Cost of construction contracts 20,758 14,233
Selling, administrative and general 8,860 7,198
Strategic marketing and product development 1,529 1,414
------ ------
TOTAL OPERATING COSTS AND EXPENSES 35,873 27,844
------ ------
OPERATING INCOME 3,959 2,637
OTHER INCOME (EXPENSE) (914) (356)
------ ------
INCOME BEFORE TAXES ON INCOME 3,045 2,281
TAXES ON INCOME (NOTE 9) 1,180 850
------ ------
INCOME BEFORE MINORITY INTERESTS AND
EQUITY IN EARNINGS 1,865 1,431
MINORITY INTERESTS (127) (109)
EQUITY IN EARNINGS OF AFFILIATED COMPANIES 181 149
------ ------
NET INCOME 1,919 1,471
====== ======
EARNINGS PER SHARE OF COMMON STOCK
AND COMMON STOCK EQUIVALENTS (NOTE 2):
NET INCOME $0.13 $0.10
====== ======
WEIGHTED AVERAGE COMMON AND COMMON
EQUIVALENT SHARES 14,389 14,394
====== ======
</TABLE>
See accompanying summary of accounting policies and notes to
consolidated financial statements.<PAGE>
<PAGE>
<TABLE>
INSITUFORM TECHNOLOGIES, INC.
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
<CAPTION>
For the Three Months
Ended March 31,
(in thousands)
1995 1994
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
NET INCOME $ 1,919 $ 1,471
ADJUSTMENTS TO RECONCILE NET INCOME TO CASH
USED BY OPERATING ACTIVITIES:
Depreciation and amortization 2,186 1,765
Provision for losses on accounts receivable 84 67
Undistributed earnings of affiliated companies (181) (149)
(Gain) loss on disposals of property and equipment (11) (55)
Minority interest 127 109
Royalties paid with redeemable preferred stock 0 41
Deferred income taxes 570 (346)
Translation adjustments 416 (220)
CHANGES IN OPERATING ASSETS AND LIABILITIES
(NET OF EFFECT OF BUSINESSES PURCHASED):
Receivables (2,530) (3,074)
Inventories (702) (642)
Prepaid expenses and miscellaneous (358) (405)
Miscellaneous other assets (327) 136
Accounts payable and accruals (2,255) 32
Income taxes payable (1,280) 718
------ ------
NET CASH PROVIDED BY CONTINUING OPERATIONS (2,342) (552)
------ ------
NET CASH USED BY DISCONTINUED OPERATIONS (43) (244)
------ ------
NET CASH PROVIDED BY OPERATIONS (2,385) (796)
------ ------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (1,993) (1,079)
Proceeds on disposal of property and equipment 143 92
Investments in licensees/affiliated companies 443 0
Patents and patent applications (169) (183)
Purchase of businesses, net of cash acquired
(Note 3) (1,431) 0
------ -------
NET CASH USED BY INVESTING ACTIVITIES (3,007) (1,170)
------ -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock 9 25
Increase in short-term borrowings 561 291
Net repayments of long-term debt (587) (1,562)
------ ------
NET CASH PROVIDED (USED) BY FINANCING ACTIVITIES 12 (1,256)
------ ------
Effect of exchange rates changes on cash 192 9
------ ------
NET DECREASE IN CASH AND CASH EQUIVALENTS FOR
THE PERIOD (5,188) (3,203)
------ ------
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 16,635 15,662
------ ------
CASH AND CASH EQUIVALENTS, END OF PERIOD $11,447 $12,459
======= =======
SUPPLEMENTAL DISCLOSURES OF CASH
FLOWS INFORMATION:
1995 1994
---- ----
CASH PAID (RECEIVED) DURING THE
THREE MONTHS ENDED MARCH 31, FOR:
Interest $1,068 $737
Income Taxes 2,233 $86
NON-CASH INVESTING AND FINANCING ACTIVITIES
Additional paid-in capital increased by a
reduction in income taxes payable for tax
benefit arising from exercise of stock options $0 $17
</TABLE>
See accompanying summary of accounting policies and notes to
consolidated financial statements.
<PAGE>
<PAGE>
INSITUFORM TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
March 31, 1995
1. In the opinion of the Company, the accompanying consolidated
financial statements contain all adjustments (consisting of only
normal recurring accruals) necessary to present fairly the
financial position as of March 31, 1995 (unaudited) and the
unaudited results of operations and cash flows for the three
months ended March 31, 1995 and 1994. The financial statements
have been prepared in accordance with the require-ments of Form
10-Q and consequently do not include all the disclosures
normally made in an Annual Report on Form 10-K. Accordingly,
the consolidated financial statements included herein should be
reviewed in conjunction with the financial statements and the
footnotes thereto included in the Company's 1994 Annual Report.
Reclassifications of prior period amounts have been made to
conform with current period presentation.
The results of operations for the three months ended March 31,
1995 and 1994 are not necessarily indicative of the results to
be expected for the full year.
2. The consolidated financial statements include the accounts of
the Company and its majority-owned subsidiaries, including a 51%
owned subsidiary, Insituform Linings Plc, a United Kingdom
company, and a 66% owned subsidiary, Insituform France S.A. All
material intercompany balances, transactions, and stockholdings
are eliminated.
The net assets of businesses purchased are recorded at their
fair value at the acquisition date and the financial statements
include their operations only from that date. Any excess of
acquisition costs over the fair value of net assets acquired is
included in the balance sheet as "Costs in excess of net assets
of businesses acquired."
The Company classifies investments in equity securities that
have readily determinable fair values and all investments in
debt securities as available-for-sale. These investments are
reported at fair value, with unrealized gains and loss excluded
from earnings and reported in a separate component of
stockholders' equity.
Corporate investments are carried at cost if ownership is less
than 20% and on the equity method if the Company's ownership
interest is 20% and greater, but not exceeding 50%. Investments
in partnerships for which the Company's ownership interest is no
greater than 50% are accounted for on the equity method.
Intercompany profits and losses are eliminated for those
investments carried on the equity method.
<PAGE>
INSITUFORM TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS (Continued)
(Unaudited)
March 31, 1995
Construction and installation revenues are recognized using the
percentage-of-completion method. Contract costs include all
direct material and labor costs and those indirect costs related
to contract performance, such as indirect labor, supplies, tools
and equipment costs. Changes in estimated total contract costs
are recognized in the period they are determined. Where a
contract loss is forecast, the full amount of the anticipated
loss is recognized in the period the loss is determined.
Earnings per share have been computed based upon the weighted
average number of common shares and common equivalent shares
outstanding during the respective periods. Common equivalent
shares include shares from the assumed exercise of common stock
options.
3. On October 21, 1994, the Company acquired all of the outstanding
common stock of Gelco Services, Inc., Gelco NuPipe, Inc.,
GelTech Constructors, Inc. and Mar-Tech Insituform Ltd. (the
"Gelco companies"), the Company's licensees of the Insituform
(registered trademark) and NuPipe (registered trademark)
processes in Oregon, Washington, Idaho, Alaska, Hawaii, Guam,
northern California and northern Nevada, portions of Montana and
British Columbia. In addition, the Company acquired related
assets of an affiliated company. The purchase price of
$18,000,000 was paid $9,000,000 in cash, together with
promissory notes aggregating $9,000,000 due on the first and
second anniversaries of the closing date. In addition, the
Company issued promissory notes aggregating $2,850,000,
representing net current liabilities (as defined) of the
acquired Gelco companies to related parties and a portion of
working capital at closing.
The following table presents summarized consolidated unaudited
pro forma results of operations for the three months ended March
31, 1994 as if the acquisition of the Gelco companies had
occurred at the beginning of the year. These pro forma results
are provided for comparative purposes only and do not purport to
be indicative of the results which would have been obtained if
these acquisitions had been effected on the date indicated or
which may be obtained in the future (in thousands):
<PAGE>
<PAGE>
INSITUFORM TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS (Continued)
(Unaudited)
March 31, 1995
Total revenues $34,292
Income from continuing operations $1,624
Income from continuing operations
per common and common equivalent
share $.11
On February 16, 1995, the Company acquired 66% of the common
stock of Insituform France S.A., a newly-formed subsidiary of
its former French licensee, for FF7,400,000 (U.S.$1,431,000).
The purchase price was funded by the Company's debt facility
with Third National Bank in Nashville (see Note 10).
4. Receivables consist of the following (in thousands):
<TABLE>
March 31, 1995 December 31, 1994
<CAPTION> -------------- -----------------
<S> <C> <C>
Trade, less allowance for possible
losses of $722 and $638 $30,627 $29,002
Retainage under construction contracts 4,429 6,167
Refundable income taxes 363 74
------- -------
$35,419 $35,243
======= =======
</TABLE>
5. Inventories are valued at the lower of cost or market.
Maintenance and office supplies are not inventoried.
Inventories are summarized as follows (in thousands):
<TABLE>
March 31, 1995 December 31, 1994
<CAPTION> -------------- -----------------
<S> <C> <C>
Finished goods $ 774 $ 765
Work-in-process 707 418
Construction materials 3,509 3,153
Raw materials 2,873 2,693
------ ------
$7,863 $7,029
====== ======
</TABLE>
<PAGE>
INSITUFORM TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS (Continued)
(Unaudited)
March 31, 1995
6. Property and equipment consists of the following (in thousands):
<TABLE>
March 31, 1995 December 31, 1994
<CAPTION> -------------- -----------------
<S> <C> <C>
Land and land improvements $ 1,194 $ 1,249
Buildings 8,061 7,887
Machinery and equipment 30,809 28,544
Furniture and fixtures 4,152 3,969
Autos and trucks 2,970 3,026
Construction in progress 2,100 1,809
------- -------
49,286 46,484
Less: Accumulated depreciation (18,247) (16,675)
------- -------
$31,039 $29,809
======= =======
</TABLE>
7. On July 3, 1992, Ringwood Limited ("Ringwood"), Parkwood Limited
("Parkwood"), and Douglas Chick and Brian Chandler entered into
an agreement whereby Messrs. Chick and Chandler and Ringwood
executed a secured non-recourse promissory note in the amount of
$3,624,000 which bears interest at Citibank's prime rate plus 2-
1/2% and originally was due July 3, 1995. As security for the
note, Ringwood and Messrs. Chick and Chandler have pledged to
the Company 255,801 shares of the Company's stock beneficially
owned by them. Parkwood, Ringwood and Messrs. Chandler and
Chick are principal stockholders of the Company, and Messrs.
Chandler and Chick are directors of the Company. In April 1995,
the Board of Directors of the Company authorized extension of
the maturity date of the note to July 3, 1996.
8. On December 30, 1993, the Company adopted a plan to discon-tinue
the operations of its division engaged in the off-site
rehabilitation of downhole tubulars for the oil and gas
industry. The Company was unable to sell the business during
1994. As a result, the Company decided to liquidate the
division's assets, and during the fourth quarter of 1994
recorded a provision to write down the assets to their estimated
liquidation values and accrue the estimated costs of closing the
operation. As of March 31, 1995, all assets related to
discontinued operations had been written off and/or
<PAGE>
INSITUFORM TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS (Continued)
(Unaudited)
March 31, 1995
liquidated leaving a reserve for any remaining costs of $456,000
in accounts payable and accruals.
9. Provision for federal and state income taxes in the consolidated
statements of income are made up of the following components for
the three months ended March 31, 1995 and 1994, respectively:
<TABLE>
March 31,
1995 1994
<CAPTION> ---- ----
<S> <C> <C>
Current:
Federal $ 520 $ 514
Foreign 683 610
State 70 72
------ -----
1,273 1,106
------ -----
Deferred:
Federal $ 97 $ (45)
Foreign (190) (301)
State -- --
------ ------
(93) (346)
Total taxes on income $1,180 $ 850
====== =====
</TABLE>
The effective tax rate on income before taxes for the three
months ended March 31, 1995 and 1994 was different than the
maximum United States ("U.S.") federal statutory tax rate. The
following summary reconciles taxes at the maximum U.S. federal
statutory tax rate with the actual taxes (in thousands) and the
effective rate:
<TABLE>
1995 1994
Amount Percent Amount Percent
------ ------- ------ -------
<CAPTION>
<S> <C> <C> <C> <C>
Taxes on income at U.S. federal
statutory rate $1,033 34.0% $ 776 34.0%
Increase (decrease) in taxes
resulting from:
State income taxes, net of
federal income tax benefit 46 1.5 48 2.1
Effect of foreign income
taxed at foreign rates 225 7.4 (10) (0.4)
Tax amortization of
intangibles (187) (6.1) (121) (5.3)
Tax benefit not currently
recognizable on losses of
subsidiaries 40 1.3 68 3.0
Utilization of net operating
losses and other carryforwards(29) (1.0) (102) (4.5)
Amortization of goodwill, not
allowed for tax purposes 138 4.5 122 5.4
Other items (86) (2.8) 69 3.0
Total taxes on income $1,180 38.8% $ 850 37.3%
</TABLE>
10. The Company has outstanding borrowings of $35.1 million under its
credit agreement with Third National Bank in Nashville entered
into in July 1993, which initially provided for advances of up
to $30 million and was amended in August 1994 to provide for an
additional $12 million (as subsequently reduced) so as to
aggregate up to $42 million. Borrowings under this facility bear
interest, payable quarterly on the original $30 million (and
monthly through August 1995, and then quarterly, on the
additional facility), at the lesser of (i) the bank's prime rate
or (ii) 2.75% above a 30-day adjusted London Inter-Bank Offer
Rate ("LIBOR"), as defined in the facility (or, if the Company
maintains certain financial ratios, 2.25% above such adjusted
LIBOR rate). Quarterly principal payments of $1.1 million are
due ($1.4 million as of September 1995), with the entire
remaining principal due on December 31, 1997. The facility
obligates the Company to comply with certain financial ratios and
restrictive covenants that, among other things, limit the ability
of the Company and its subsidiaries to incur further
indebtedness, pay dividends, make loans and encumber their
properties, and requests guarantees of certain domestic
subsidiaries.
The Company has obtained the commitment of Third National Bank
in Nashville to provide for additional credit available for two
years on a revolving basis, in the amount, together with the
existing facility, aggregating up to $50,000,000, the additional
amounts to be utilized for working capital and expansion of the
Company's business. The bank's commitment further provides that
principal installments on the existing facility would, after
closing on the new facility, continue at the rate of $500,000 per
quarter (subject to extension in certain circumstances), and that
all new advances, together with all indebtedness under the
current facility, would be due five years after closing on the
new facility subject to earlier installments after the first such
advance based on a five-year amortization schedule for the
existing and additional indebtedness. Under the revised
arrangements, interest on all existing and additional
<PAGE>
INSITUFORM TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS (Continued)
(Unaudited)
March 31, 1995
indebtedness would be payable quarterly at a rate selected
monthly by the Company as either the bank's prime rate, plus a
margin up to .25% in the event certain financial ratios are not
maintained, or a 30-day adjusted LIBOR rate, plus a margin
ranging from 1.75% to 2.25%, depending on maintenance of certain
financial ratios. Other covenants and guaranties contained in
the current facility would be incorporated into the revised
arrangement. All such revised arrangements remain subject to
definitive documentation between the Company and the bank.
In July 1993, in order to complete the financing for the
acquisition of Insituform Midwest, the Company also issued an
8.5% senior subordinated note, subordinated in right to the
Company's bank and other institutional financing and to deferred
consideration incurred in connection with business acquisitions.
Warrants to purchase 350,877 unregistered shares of the Company's
Common Stock were also issued to the lender. The note is
prepayable at the Company's option after July 1995, at premiums
until July 1998 ranging from 3% to 1% of the amount prepaid, and
is subject to defeasance in certain circumstances. The
subordinated note also restricts the Company's ability to pay
dividends and repurchase outstanding common stock.
The Company's subsidiaries IGL Canada Limited, Insituform
Permaline Limited, Insituform Japan KK, and IGL Canada's wholly-
owned subsidiary Neptune Coring, also maintain certain revolving
line of credit facilities. The aggregate amount outstanding
under these facilities was $912,000 at March 31, 1995.
11. As previously reported by the Company, a stockholder of the
Company has filed an action in the United States District Court
for the Western District of Tennessee against the Company and one
former and one current officer alleging various misstatements and
omissions, relating to, among other things, costs arising from
the acquisition of Insituform Group Limited in December 1992, in
public disclosures by the Company during the period from October
28, 1992 to May 12, 1993 in violation, among other things, of
Rule 10b-5.1 On April 7, 1995, the Court issued its order
certifying the action as a class action on behalf of all
- ------------------------
1 Neil Weinberg, on behalf of himself and all others similarly
situated, Plaintiffs v. Insituform Technologies, Inc., William
C. Willis, Jr. and William A. Martin, Defendants (United States
District Court for the Western District of Tennessee, Western
Division).
<PAGE>
INSITUFORM TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS (Continued)
(Unaudited)
March 31, 1995
purchasers of the Company's common stock during such time period.
Subsequent to the Company's rejection of the initial settlement
proposal tendered by plaintiffs, the Company and the plaintiffs
have more recently been engaged in substantive settlement
discussions. The Company is currently considering a proposal
containing terms which management believes may, subject to review
and authorization by the Company's board of directors and
approval by the court, constitute a reasonable basis upon which
to settle such litigation. If so authorized and approved, and
implemented, such proposal may result in an after-tax charge
against 1995 net income in the order of approximately $2 million.
No provision has been made in the financial statements with
respect to the assertion against the Company of any claims in
this litigation or any such settlement proposals.
The Company has commenced an action in Tennessee Chancery Court
(subsequently removed by defendants to federal district court)
against certain of its licensees, captioned Insituform North
America Corp. and NuPipe, Inc. v. Insituform Southeast, Inc.,
NuPipe Southeast, Inc., Enviroq Corporation and Insituform Mid-
America, Inc., seeking a declaratory judgment confirming its
action in declining to grant its consent as requested by Enviroq
Corporation (renamed IMA Merger Sub, Inc.; "Enviroq"), under the
various Insituform and NuPipe license agreements with Enviroq's
affiliates, in connection with the transactions contemplated by
the agreement dated November 2, 1994 entered into by Enviroq with
Insituform Mid-America, Inc. ("IMA"). The Company has agreed
with Enviroq and IMA that, pending attempts by the parties to
resolve their differences, through May 31, 1995 no further action
will be taken in such suit or by the Company to assert any rights
under such license agreements or under the partnership agreement
of Midsouth Partners, arising as a result of the acquisition of
Enviroq by IMA on April 18, 1995 without the Company's consent.
Prior to its acquisition by the Company, Naylor sold all of the
common stock of Naylor Industrial Services, Inc. ("NISI"), which
provided industrial cleaning services to refineries and chemical
and petrochemical manufacturing plants. As part of such sale,
Naylor agreed to indemnify the purchaser for certain pending or
threatened litigation claims that were known to Naylor as of the
date of sale. Among other matters, NISI is one of approximately
181 defendants in approximately 3,029 plaintiff cases,
collectively known as the Lone Star Steel litigation, pending in
Morris County, Texas, in which plaintiffs allege unspecified
damages against defendants, who supplied services or products to
Lone Star Steel over a period in excess of 40 years, arising from
<PAGE>
INSITUFORM TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS (Continued)
(Unaudited)
March 31, 1995
the alleged exposure of Lone Star's workers to toxic and
hazardous circumstances.
Naylor, among approximately 210 other parties, has been served
with a third party complaint by McDermott, Inc. ("McDermott") in
a class action filed by more than 1,200 plaintiffs (on behalf of
a potential class of over 8,000 plaintiffs) against 84
defendants, including McDermott. Plaintiffs seek damages
resulting from alleged exposure to an escape of hazardous
substances from an oil reclamation facility. McDermott's third
party complaints seek, among other things, clean-up costs under
the Comprehensive Environmental Response, Compensation and
Liability Act and tort contribution and indemnity. Based on
available facts, it appears that McDermott has substantial
defenses to plaintiffs' claims, and it is probable that Naylor's
exposure is limited to a pro rata or proportionate share of
McDermott's liability, if any.
The financial statements include the estimated amounts of
liabilities that are likely to be incurred from these and various
other pending Naylor litigation and claims.
The Company is involved in certain additional litigation
incidental to the conduct of its business. In the Company's
opinion, none of these proceedings will have a material adverse
effect on the Company's financial position or results of
operations.
12. As of December 31, 1994, the former stockholders of NuPipe, Inc.
were entitled to receive 35% of the royalty income collected by
the Company in connection with the NuPipe technology acquired by
the Company in 1988. In March 1995, the Company exercised an
option, granted in October 1994, to acquire such parties'
interest in such payments in exchange for issuance of the
Company's promissory notes aggregating $1,000,000. The notes are
payable in quarterly installments over three years and bear
interest at 5.4% per annum.<PAGE>
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following is management's discussion and analysis of certain
significant factors which have affected the Company's financial
condition and results of operations during the periods included in
the accompanying consolidated financial statements.
GENERAL
The Company's revenues include product sales of materials and
equipment to licensees, construction revenues from trenchless
installation and non-trenchless contracting activities and royalty
income and initial license fees received from licensees for the use
of the Company's trenchless rehabilitation processes. Product sales
consist primarily of sales of Insitutubes (registered trademark) and
NuPipe (registered trademark) to licensees. Construction contract
revenue is generated by the Company's wholly-owned subsidiaries,
Insituform Southwest ("Southwest"), Insituform of New England, Inc.
("New England"), Insituform Gulf South, Inc. ("Gulf South"), Gelco
Services, Inc. ("Gelco"), IGL Canada Limited ("IGL Canada"),
Insituform Permaline Limited ("Permaline"), Insituform Midwest, Inc.
("Midwest"), Insituform Overseas Limited ("IOL"), NuPipe Limited, and
Insituform France S.A. ("Insituform France"). Royalties and license
fees are generated by the Company's 33 unaffiliated Insituform
licensees and sub-licensees and its 10 unaffiliated NuPipe licensees.
Product sales and royalties are primarily a function of the contracts
performed by the Company's licensees. However, changes in product
sales may vary from changes in royalties because of several factors,
including differences between the timing of Insitutube sales and
contract performance by licensees and the accrual by the Company of
minimum royalties in excess of royalties otherwise due for work
performed. Construction revenues generated by the Company's
consolidated subsidiaries are unrelated to product sales and
royalties, and include revenues from the non-trenchless operations of
IGL Canada. The Company's consolidated subsidiaries obtain supplies
of Insitutubes and related materials from the Company.
Fluctuations in the exchange rates between the United States dollar
and the currencies of other countries in which the Company operates
or has licensees may have an impact on the Company's consolidated
results during the relevant reporting period. See "Results of
Operations" below. The Company manages any such foreign currency
exposure, when appropriate, to offset such exposure in whole or in
part.
<PAGE>
Seasonal variations in the Company's results of operations may arise
from the budgetary and appropriations process of the governmental
customers of the Company and its licensees and the contraction of
pipeline rehabilitation activity in certain northern regions during
severe weather conditions. Severe cold weather affects the Company's
operations in Canada in the months of December, January, February and
March where, over the three years ended December 31, 1994, the volume
of work performed in the first calendar quarter by IGL Canada has
averaged 5.9% of the total year's work. The volume of work reported
on a consolidated basis by the Company's licensees (including
affiliated licensees) in the first calendar quarter of the year has
averaged, for the five years ended December 31, 1994, approximately
21.3% of the work they reported over the full year. See "Results of
Operations" below.
LIQUIDITY AND CAPITAL RESOURCES
At March 31, 1995, the Company had $11.4 million in cash, U.S.
Treasury bills, and short-term investments, as compared to $16.6
million at December 31, 1994. Cash and cash equivalents decreased
$5.2 million as a result of cash used by operations of $2.4 million
and capital expenditures of $2.0 million. The Company's working
capital ratio was 2.0 at March 31, 1995, representing an increase
from 1.8 at December 31, 1994.
Although income from continuing operations increased in 1995 to
$1.9 million from $1.5 million in 1994, continuing operations used
$2.3 million in cash in 1995, as compared to cash used by continuing
operations of $0.6 million in first quarter 1994. This additional
use of cash by 1995 operations is primarily attributable to
reductions in accounts payable, accrued expenses and income taxes
payable from the respective December 31, 1994 balances, partially
offset by increased depreciation and amortization and a slightly
smaller increase in receivables as compared with the first quarter of
1994. Additional federal and state income tax payments were made by
the Company in March 1995 as a result of greater 1994 United States
taxable income as compared with that generated for the 1993 tax year.
Further in first quarter 1995, the Company made its 1994 profit
sharing plan contributions and bonus payments.
Receivables, which include amounts unbilled and retainage receivables
under construction contracts, increased $2.5 million during the three
months ended March 31, 1995. Trade receivables increased $1.6
million from product sales in the United States, Japan, and to a
lesser extent in the United Kingdom. Retainage receivables decreased
by $1.7 million during the first quarter of 1995. The collection
cycle for construction receivables is generally longer than for the
Company's other operations due to provisions for retainage, often 5%
to 10% of the contract amount, as well as the slow internal review
processes often employed by the construction subsidiaries' municipal
customers. Retainage receivables are generally received within 60 to
90 days after the completion of a contract.
<PAGE>
In February 1995, the Company acquired 66% of the stock of the newly-
formed Insituform France S.A. for the sum of approximately
$1.5 million, which was funded with proceeds from the Company's
existing credit facility with Third National Bank in Nashville.
The Company has outstanding borrowings of $35.1 million under its
credit agreement with Third National Bank in Nashville entered into
in July 1993, which initially provided for advances of up to
$30 million and was amended in August 1994 to provide for an
additional $12 million (as subsequently reduced) so as to aggregate
up to $42 million. Borrowings under this facility bear interest,
payable quarterly on the original $30 million (and monthly through
August 1995, and then quarterly, on the additional facility), at the
lesser of (i) the bank's prime rate or (ii) 2.75% above a 30-day
adjusted London Inter-Bank Offer Rate ("LIBOR"), as defined in the
facility (or, if the Company maintains certain financial ratios,
2.25% above such adjusted LIBOR rate). Quarterly principal payments
of $1.1 million are due ($1.4 million as of September 1995), with the
entire remaining principal due on December 31, 1997. The facility
obligates the Company to comply with certain financial ratios and
restrictive covenants that, among other things, limit the ability of
the Company and its subsidiaries to incur further indebtedness, pay
dividends, make loans and encumber their properties, and requests
guarantees of certain domestic subsidiaries.
The Company has obtained the commitment of Third National Bank in
Nashville to provide for additional credit available for two years on
a revolving basis, in the amount, together with the existing
facility, aggregating up to $50,000,000, the additional amounts to be
utilized for working capital and expansion of the Company's business.
The bank's commitment further provides that principal installments on
the existing facility would, after closing on the new facility,
continue at the rate of $500,000 per quarter (subject to extension in
certain circumstances), and that all new advances, together with all
indebtedness under the current facility, would be due five years
after closing on the new facility subject to earlier installments
after the first such advance based on a five-year amortization
schedule for the existing and additional indebtedness. Under the
revised arrangements, interest on all existing and additional
indebtedness would be payable quarterly at a rate selected monthly by
the Company as either the bank's prime rate, plus a margin up to .25%
in the event certain financial ratios are not maintained, or a 30-day
adjusted LIBOR rate, plus a margin ranging from 1.75% to 2.25%,
depending on maintenance of certain financial ratios. Other
covenants and guaranties contained in the current facility would be
incorporated into the revised arrangement. All such revised
arrangements remain subject to definitive documentation between the
Company and the bank.
<PAGE>
In October 1994, the Company acquired all of the outstanding common
stock of Gelco Services, Inc., Gelco NuPipe, Inc., GelTech
Constructors, Inc. and Mar-Tech Insituform Ltd., the Company's
licensees of the Insituform process in Oregon, Washington, Idaho,
Alaska, Hawaii, Guam, northern California and northern Nevada,
portions of Montana and British Columbia, and related assets. The
purchase price of $18 million was paid with $9 million in cash at
closing and $9 million in promissory notes due on the first and
second anniversaries of closing. In addition, the Company issued
promissory notes, aggregating approximately $2.85 million, to the
former Gelco shareholders and their affiliates, representing net
current liabilities of the acquired companies to related parties and
a portion of working capital at closing. The notes issued in the
Gelco closing are secured by the assets acquired, subject to the
rights of Third National Bank in Nashville under its loan
arrangements with the Company.
The Company's senior subordinated note in the principal amount of
$5 million acquired by Hanseatic Corporation in July 1993 requires
quarterly payments of interest at 8.5% per annum and installments of
principal in the amount of $1 million on each of the fifth through
eighth anniversary dates of closing, with the entire remaining
principal due nine years after closing. The note is subordinated to
bank and other institutional financing (including the credit facility
with Third National Bank in Nashville), and purchase money debt
incurred in connection with acquisitions of businesses. The note is
prepayable at the option of the Company after the second anniversary
of closing, at premiums until the fifth anniversary of closing
ranging from 3% to 1% of the amount prepaid, and is subject to
defeasance thereafter in the event the Company deposits cash or
government securities sufficient to service payments under the note.
Warrants with respect to 350,877 shares of Common Stock issued in
connection with such note are exercisable, at the election of the
holder, through July 25, 1998, at a price per share of Common Stock
of $14.25, and such shares are entitled to demand and incidental
registration rights.
In October 1992, Naylor sold (the "NISI Sale") all of the common
stock of Naylor Industrial Services, Inc. ("NISI"), which was engaged
primarily in the provision of industrial cleaning services to
refineries and chemical and petrochemical manufacturing plants. As
part of the NISI sale, Naylor agreed to indemnify the purchaser, with
certain exceptions and subject to specified limitations, against
certain claims that may arise out of the breach by Naylor of its
representations, warranties and covenants to the purchaser or from
actions or omissions of Naylor prior to the NISI Sale, and further to
indemnify the purchaser for certain pending or threatened litigation
claims that were known to Naylor as of the date of purchase. At the
time of the Company's acquisition of Naylor, Naylor maintained
general liability, worker's compensation, and automobile insurance
policies with an annual aggregate coverage limit of $6 million,
subject to per occurrence deductibles of up to $250,000 for worker's
compensation claims and up to $100,000 for general liability and
<PAGE>
automobile claims. Although such coverage was obtained by Naylor so
as to be generally consistent with industry practice, there can be no
assurance that any claims that arise, if successful, are or will be
wholly or partially insured, or covered by financial reserves, or
that such claims will not result in retroactive adjustments in
Naylor's insurance premiums based on the terms of its retrospective
rated policies. The Company's financial statements reflect
management's estimate of the likely amounts of such remaining
premiums. At March 31, 1995, Naylor had outstanding letters of
credit securing future premium payments which were collateralized by
cash and cash equivalents of approximately $2.8 million.
As more fully described in Note 11 of the Notes to the Company's
Consolidated Financial Statements included elsewhere herein, the
Company has also provided in its financial statements for the
estimated amounts of liabilities that are likely to be incurred from
pending litigation and claims involving Naylor. In addition, as
discussed in such note, the Company is a defendant in a lawsuit
alleging various misstatements and omissions relating to, among other
things, costs arising from the acquisition of Insituform Group
Limited, made in public disclosures by the Company. Subsequent to the
Company's rejection of the initial settlement proposal tendered by
plaintiffs, the Company and the plaintiffs have more recently been
engaged in substantive settlement discussions. The Company is
currently considering a proposal containing terms which management
believes may, subject to review and authorization by the Company's
board of directors and approval by the court, constitute a reasonable
basis upon which to settle such litigation. If so authorized and
approved, and implemented, such proposal may result in an after-tax
charge against 1995 net income in the order of approximately $2
million. No provision has been made in the financial statements with
respect to the assertion against the Company of any claims in this
litigation or any such settlement proposals.
The Company has declined to grant its consent, as requested by
Enviroq Corporation (renamed IMA Merger Sub, Inc., "Enviroq"), under
the various Insituform (registered trademark) process and NuPipe
(registered trademark) process license agreements with Enviroq's
affiliates in connection with the agreement pursuant to which, on
April 18, 1995, Enviroq was acquired by Insituform Mid-America, Inc.
("IMA"). See "Item 1. Legal Proceedings" of Part II of this report
for a description of the suit filed by the Company in Tennessee
Chancery Court (subsequently removed by defendants to federal
district court) seeking a declaratory judgment confirming such
action. The Company has agreed with Enviroq and IMA that, pending
attempts by the parties to resolve their differences, through May 31,
1995 no further action will be taken in such suit, or by the Company
to assert any rights under such license agreements or under the
partnership agreement of Midsouth Partners, arising as a result of
such acquisition without the Company's consent.
<PAGE>
Management believes its working capital and its existing credit
availability (including funds available upon implementation of the
anticipated additional facility with Third National Bank in
Nashville) will be adequate to meet its capital requirements for the
foreseeable future.
RESULTS OF OPERATIONS - Three Months Ended March 31, 1995 Compared to
Three Months Ended March 31, 1994
REVENUES. Revenues increased 30.7% to $39.8 million in 1995 from
$30.5 million in 1994, primarily reflecting an increase in
construction revenues, and to a lesser extent, royalties and license
fees, offset by a decrease in product sales. The significant
increase in construction revenues is due in part to the October 1994
acquisition of Gelco and the February 1995 acquisition of a 66%
interest in Insituform France. Subsequent to their respective
acquisitions, however, product sales to and royalty revenues from
these entities have been eliminated from the Company's consolidated
revenues. Fluctuations in currency exchange rates of the Japanese
yen and British pound sterling to the United States dollar favorably
impacted total revenues by approximately $0.6 million.
Construction revenues increased 49.0% to $30.2 million from
$20.3 million in the same period of the prior year, with $4.8 million
attributable to the recently acquired Gelco and $1.1 million
attributable to Insituform France. Construction revenues also
reflect increases (due primarily to favorable weather conditions in
1995) by New England of $2.7 million and by Midwest of $2.4 million,
offset by decreases experienced by Permaline and Southwest of
$0.8 million and $0.5 million, respectively. Fluctuations in the
currency exchange rates of the British pound sterling and the
Canadian dollar to the United States dollar favorably impacted
construction revenues by approximately $0.1 million.
Product sales decreased 11.2% to $7.0 million in 1995 from
$7.9 million in the prior year. Prior period sales included
$0.3 million in sales to the Company's newly acquired subsidiaries,
Gelco and Insituform France. Decreased construction activity in
Japan, due to delays in projects caused in part by the January
earthquake, resulted in decreased sales of $0.6 million. The
decrease in product sales was partially offset by improved sales to
European licensees of $0.4 million. Fluctuations in the currency
exchange rates of the Japanese yen and British pound sterling to the
United States dollar, collectively, positively impacted product sales
by approximately $0.3 million.
Royalties and license fees increased 13.2% to $2.6 million from
$2.3 million in 1994. While gross royalties (before elimination of
intercompany transactions) increased by $0.9 million due to increased
construction volume by the Company and its licensees, an additional
$0.7 million in intercompany royalties from wholly owned licensees
($0.3 million of which is due to newly acquired entities) resulted in
<PAGE>
a net increase of $0.2 million. License fee revenue of $0.1 million
was recognized in 1995.
OPERATING COSTS AND EXPENSES. Costs of construction contracts
increased 45.8% to $20.8 million from $14.2 million in the prior
year, primarily attributable to the newly acquired licensees which
added, collectively, $4.2 million to construction costs in 1995.
Increases in construction costs at New England and Midwest of
$2.2 million and $1.9 million, respectively, are reflective of the
increased volume by those subsidiaries in 1995. Construction costs
as a percentage of construction revenues improved to 68.7% in 1995
compared to 70.2% in 1994, principally due to margins achieved by
certain of the newer subsidiaries, partially offset by lower margins
in some regions of the United States, which resulted from competitive
bidding conditions.
Costs of product sales decreased 6.4% to $4.6 million in 1994 from
$5.0 million in 1994 as a result of the decrease in sales volume.
Costs of product sales as a percentage of product sales increased to
66.4% in 1995 compared to 62.9% for the same period in 1994 due
primarily to changes in the mix of products sold.
As a percentage of revenues, selling, administrative and general
expenses were 22.2% in 1995 compared to 23.6% in 1994. Selling,
general and administrative expenses increased 23.1% to $8.9 million
compared to $7.2 million in 1994, primarily due to $1.4 million in
additional costs of newly-acquired subsidiaries (including
amortization of goodwill of $0.3 million) and increased costs of New
England related to management transition and crew management to
handle increased volume.
Strategic marketing and product development increased 8.1% to
$1.5 million compared to $1.4 million in 1994, due primarily to
industrial marketing efforts in the chemical and pulp and paper
industries.
OTHER INCOME (EXPENSE). Other income (expense) decreased 156.7% to
($914,000) from ($356,000) in 1994. This decrease is attributable to
$705,000 of additional interest incurred on debt issued to fund
theacquisitions of Gelco and Insituform France coupled with the
significant increase in prime rates since early 1994. Partially
offsetting this decrease is an increase in investment income of
$144,000 resulting from improved market interest rates and
implementation of a domestic cash management program which maximizes
funds available for short term investment.
TAXES ON INCOME. Taxes on income increased 38.8% to $1.2 million
from $0.9 million as a result of an $0.8 million increase in income
before taxes on income and an increase in the effective tax rate to
38.7% from 37.2% during the first quarter of 1994. The additional
amortization of goodwill associated with the Gelco acquisition, which
<PAGE>
is not deductible for tax purposes, contributed to the increase in
the first quarter tax rate.
NET INCOME. Total revenues increased by $9.4 million or 30.7% over
the prior year, which was coupled with an increase in gross profit of
$3.1 million or 27.6%, which was partially offset by increased
operating costs of $1.8 million, or 20.6%. These factors contributed
to an increase in operating income of $1.3 million, or 50.2%. An
increase in other expense of $0.6 million, coupled with an increase
in taxes on income of $0.3 million, resulted in an increase in income
before minority interests and equity in earnings of $0.4 million, or
30.4%. As a result of the foregoing, net income for the first
quarter of 1995 was $1.9 million, an increase of $0.4 million, or
30.5%, from net income of $1.5 million in the first quarter of 1994.<PAGE>
<PAGE>
PART II - OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS
As previously reported by the Company, a stockholder of the Company
has filed an action in the United States District Court for the
Western District of Tennessee against the Company and one former and
one current officer alleging various misstatements and omissions,
relating to, among other things, costs arising from the acquisition
of Insituform Group Limited in December 1992, in public disclosures
by the Company during the period from October 28, 1992 to May 12,
1993 in violation, among other things, of Rule 10b-5.1 On April 7,
1995, the Court issued its order certifying the action as a class
action on behalf of all purchasers of the Company's common stock
during such time period. Subsequent to the Company's rejection of the
initial settlement proposal tendered by plaintiffs, the Company and
the plaintiffs have more recently been engaged in substantive
settlement discussions. The Company is currently considering a
proposal containing terms which management believes may, subject to
review and authorization by the Company's board of directors and
approval by the court, constitute a reasonable basis upon which to
settle such litigation. If so authorized and approved, and
implemented, such proposal may result in an after-tax charge against
1995 net income in the order of approximately $2 million.
The Company has commenced an action in Tennessee Chancery Court
(which was subsequently removed by defendants to the United States
District Court for the Western District of Tennessee, Western
Division) against certain of its licensees, captioned Insituform
North America Corp. and NuPipe, Inc. v. Insituform Southeast, Inc.,
NuPipe Southeast, Inc., Enviroq Corporation and Insituform Mid-
America, seeking a declaratory judgment confirming its action in
declining to grant its consent as requested by Enviroq, under the
various Insituform (registered trademark) and NuPipe (registered
trademark) license agreements with Enviroq's affiliates, in
connection with the transactions contemplated by the agreement dated
November 2, 1994 entered into by Enviroq with IMA. The Company has
agreed with Enviroq and IMA that, pending attempts by the parties to
resolve their differences, through May 31, 1995 no further action
will be taken in such suit, or by the Company to assert any rights
under such license agreements or under the partnership agreement of
Midsouth Partners, arising as and result of the acquisition of
Enviroq by IMA on April 18, 1995 without the Company's consent.
- -------------------
1 Neil Weinberg, on behalf of himself and all others similarly
situated, Plaintiffs v. Insituform Technologies, Inc., William
C. Willis, Jr. and William A. Martin, Defendants (United States
District Court for the Western District of Tennessee, Western
Division).
<PAGE>
Item 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) The exhibits required to be filed as part of this Quarterly
Report on Form 10-Q are listed on the attached Index to Exhibits.
(b) During the quarter ended March 31, 1995, the Company did
not file any Current Report on Form 8-K. The Company filed a Current
Report on Form 8-K dated April 4, 1995 addressing, under "Item 5.
Other Events." thereunder, the Company's decision not to grant its
consent to Enviroq under the various Insituform (registered
trademark) and NuPipe (registered trademark) license agreements with
Enviroq's affiliates, in connection with the proposed acquisition of
Enviroq by IMA, and the Company's standstill agreement with IMA and
Enviroq through April 30, 1995. The Company filed a Current Report
on Form 8-K dated April 18, 1995 describing, under "Item 5. Other
Events." thereunder, the extension of the standstill agreement to
postpone through April 30, 1995 the assertion by the Company of any
termination rights under the various license agreements with
Enviroq's affiliates, arising as a result of the consummation of the
acquisition of Enviroq by IMA without the consent of the Company.
The Company filed a Current Report on Form 8-K dated April 28, 1995
addressing, under "Item 5. Other Events." the extension of the
standstill arrangements through May 31, 1995. No financial
statements were included with any such report.<PAGE>
<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.
INSITUFORM TECHNOLOGIES, INC.
May 15, 1995 s/William A. Martin
------------------------------------
William A. Martin
Senior Vice President and
Principal Financial and Accounting
Officer
<PAGE>
<PAGE>
INDEX TO EXHIBITS
27 - Financial Data Schedule, which is
submitted electronically to the
Securities and Exchange Commission
for information only and not
filed
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> MAR-31-1995
<CASH> 11,447
<SECURITIES> 1,107
<RECEIVABLES> 44,332
<ALLOWANCES> 722
<INVENTORY> 7,863
<CURRENT-ASSETS> 69,656
<PP&E> 31,039
<DEPRECIATION> 18,247
<TOTAL-ASSETS> 162,787
<CURRENT-LIABILITIES> 35,168
<BONDS> 0
<COMMON> 144
0
0
<OTHER-SE> 76,153
<TOTAL-LIABILITY-AND-EQUITY> 162,787
<SALES> 6,994
<TOTAL-REVENUES> 39,832
<CGS> 4,641
<TOTAL-COSTS> 25,484
<OTHER-EXPENSES> 10,096
<LOSS-PROVISION> 489
<INTEREST-EXPENSE> 1,207
<INCOME-PRETAX> 3,045
<INCOME-TAX> 1,180
<INCOME-CONTINUING> 1,919
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,919
<EPS-PRIMARY> 0.130
<EPS-DILUTED> 0.130
</TABLE>
