Securities and Exchange Commission
Washington, DC 20549
FORM 10-Q
Quarterly Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For The Quarterly Period Ended: February 28, 1995
Commission File Number: 0-10653
UNITED STATIONERS INC.
(Exact name of Registrant as specified in its charter)
DELAWARE 36-3141189
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2200 East Golf Road, Des Plaines, Illinois 60016-1267
(Address of principal executive offices) (Zip Code)
(708) 699-5000
(Registrant's telephone number including area code)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
(1) Yes X No
(2) Yes X No
As of March 30, 1995, United Stationers Inc. had 5,857,923 shares of
common stock, $.10 par value, outstanding.
INDEX
PAGE
NUMBER
PART I - FINANCIAL INFORMATION
Condensed Consolidated Balance Sheets as of
February 28, 1995 and August 31, 1994. 3
Condensed Consolidated Statements of Income
for the Three Months Ended February 28, 1995
and February 28, 1994 and the Six Months Ended
February 28, 1995 and February 28, 1994. 4
Condensed Consolidated Statements of Cash Flows
for the Six Months Ended February 28, 1995 and
February 28, 1994. 6
Notes to Condensed Consolidated Financial Statements. 7
Management's Discussion and Analysis of
Financial Condition and Results of Operations. 8
PART II - OTHER INFORMATION 11
SIGNATURES 15
INDEX TO EXHIBITS 16
-2-
UNITED STATIONERS INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands of dollars)
ASSETS
(Unaudited) (Audited)
February 28, August 31,
1995 1994
CURRENT ASSETS
Cash and cash equivalents $ 9,712 $ 6,920
Accounts receivable, net 189,993 187,565
Inventories 303,821 225,794
Prepaid expenses 18,907 15,512
Total Current Assets $522,433 $435,791
PROPERTY, PLANT AND EQUIPMENT, at cost $248,430 $243,928
Less-Accumulated depreciation and amortization (123,010) (114,364)
Net Property, Plant and Equipment $125,420 $129,564
GOODWILL, NET $ 41,811 $ 42,369
OTHER ASSETS, NET $ 10,571 $ 10,826
TOTAL ASSETS $700,235 $618,550
LIABILITIES AND STOCKHOLDERS' INVESTMENT
CURRENT LIABILITIES
Short-term debt and current maturities
of long-term obligations $ 37,514 $ 6,338
Accounts payable 151,679 121,793
Accrued liabilities 70,515 67,833
Total Current Liabilities $259,708 $195,964
DEFERRED INCOME TAXES $ 17,433 $ 17,427
LONG-TERM OBLIGATIONS $166,553 $159,149
STOCKHOLDERS' INVESTMENT $256,541 $246,010
TOTAL LIABILITIES AND STOCKHOLDERS' INVESTMENT $700,235 $618,550
The accompanying notes to condensed consolidated financial
statements are an integral part of these balance sheets.
-3-
UNITED STATIONERS INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In thousands of dollars, except share data)
(Unaudited)
FOR THE THREE MONTHS ENDED
February 28, February 28,
1995 1994
NET SALES $431,640 $369,988
COST OF SALES 341,011 287,428
Gross profit on sales $ 90,629 $ 82,560
WAREHOUSING, MARKETING AND
ADMINISTRATIVE EXPENSES 75,191 73,338
Income from operations $ 15,438 $ 9,222
OTHER EXPENSE, net 3,171 2,738
Income before income taxes $ 12,267 $ 6,484
INCOME TAXES 4,905 2,640
NET INCOME $ 7,362 $ 3,844
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING 18,595,600 18,587,082
NET INCOME PER COMMON SHARE $ .40 $ .21
CASH DIVIDENDS PAID PER COMMON SHARE $ .10 $ .10
The accompanying notes to condensed consolidated financial
statements are an integral part of these statements.
-4-
UNITED STATIONERS INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In thousands of dollars, except share data)
(Unaudited)
FOR THE SIX MONTHS ENDED
February 28, February 28,
1995 1994
NET SALES $833,838 $740,585
COST OF SALES 658,252 573,251
Gross profit on sales $175,586 $167,334
WAREHOUSING, MARKETING AND
ADMINISTRATIVE EXPENSES 145,469 145,739
Income from operations $ 30,117 $ 21,595
OTHER EXPENSE, net 6,164 4,898
Income before income taxes $ 23,953 $ 16,697
INCOME TAXES 9,648 6,929
NET INCOME $ 14,305 $ 9,768
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING $18,593,123 18,584,999
NET INCOME PER COMMON SHARE $ .77 $ .53
CASH DIVIDENDS PAID PER COMMON SHARE $ .20 $ .20
The accompanying notes to condensed consolidated financial
statements are an integral part of these statements.
-5-
UNITED STATIONERS INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands of dollars)
(Unaudited)
FOR THE SIX MONTHS ENDED
February 28, February 28,
1995 1994
Cash Flows from Operating Activities
Net Income $ 14,305 $ 9,768
Adjustments to reconcile net income to
net cash used in operating activities:
Loss on sale of fixed assets 147 0
Depreciation and amortization 10,770 10,408
Increase in deferred income taxes 6 1,299
Increase/(decrease) in accounts payable 29,885 (34,010)
Increase/(decrease) in accrued liabilities 2,142 (13,495)
(Increase)/decrease in accounts receivable (2,427) 10,639
Increase in inventories (78,027) (34,687)
Increase in prepaid expenses (3,394) (806)
Increase in other assets (1,280) (1,032)
Total Adjustments $(42,178) $(61,684)
Net Cash Used in Operating Activities $(27,873) $(51,916)
Cash Flows from Investing Activities
Acquisition of property, plant and equipment $ (4,838) $ (4,007)
Disposition of property, plant and equipment 26 695
Net Cash Used in Investing Activities $ (4,812) $ (3,312)
Cash Flows from Financing Activities
Increase in short-term debt $ 1,176 $ 0
Payments on long-term obligations (5,100) (414)
Additions to long-term obligations 43,166 60,329
Issuance of common shares 186 24
Payment of dividends (3,834) (3,773)
(Acquisition)/disposition of treasury stock (117) 115
Net Cash Provided by Financing Activities $ 35,477 $ 56,281
Net increase in cash and cash
equivalents $ 2,792 $ 1,053
Cash and cash equivalents at the beginning
of the period 6,920 7,889
Cash and Cash Equivalents at the End
of the Period $ 9,712 $ 8,942
_______________________________________________________________________
Income taxes paid $ 7,188 $ 5,975
Interest paid $ 5,965 $ 5,074
The accompanying notes to condensed consolidated financial
statements are an integral part of these statements.
-6-
UNITED STATIONERS INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(1) Basis of Presentation
The accompanying condensed consolidated financial statements are unaudited,
except for the Balance Sheet as of August 31, 1994, which is condensed from the
audited Balance Sheet at that date. These statements have been prepared in
accordance with the rules and regulations of the Securities and Exchange
Commission. These statements should be read in conjunction with the Company's
audited consolidated financial statements for the year ended August 31, 1994,
and the notes therein included in its report on Form 10-K for the same period.
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. In the
opinion of the Company's management, the condensed consolidated financial
statements for the unaudited interim periods presented include all adjustments
necessary to fairly present the results of such interim periods and the
financial position as of the end of said periods. These adjustments were of a
normal recurring nature and did not have a material impact on the financial
statements presented. Certain interim expense and inventory estimates are
recognized throughout the fiscal year relating to shrinkage, inflation and
product mix. Any appropriate adjustments to reflect actual experience is
ordinarily recognized in the fourth quarter.
(2) Review
Arthur Andersen LLP, independent public accountants, have performed a review of
the condensed consolidated financial statements referred to above. Since they
did not perform an audit, they express no opinion on these statements. Refer
to the Report of Independent Public Accountants included in this filing.
-7-
UNITED STATIONERS INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
FISCAL 1995 COMPARED TO FISCAL 1994
Six Month Results
Net sales were $833.8 million for the first half of Fiscal 1995, a 12.6%
increase from net sales of $740.6 million in the comparable period a year ago.
Gross profit as a percent of net sales was 21.1% in the first half of Fiscal
1995 and 22.6% in the first half of Fiscal 1994. This lower margin rate
reflects a shift in product mix and is consistent with the margin rate achieved
in the latter half of Fiscal 1994. The higher rebates and allowances that
affected gross profit in the second half of Fiscal 1994 had become relatively
stable during the first six months of 1995.
Operating expenses as a percent of net sales declined to 17.5% for the first
half of Fiscal 1995 compared to 19.7% during the first half of Fiscal 1994.
This decline is a result of savings in people-related and freight-out expenses.
Income from operations as a percent of net sales increased to 3.6% in the first
half of Fiscal 1995 from 2.9% in the first half of Fiscal 1994.
Income before income taxes as a percent of net sales was 2.9% in the first half
of Fiscal 1995 compared with 2.3% in the first half of Fiscal 1994. Net income
was $14.3 million in the first half of Fiscal 1995, up 46.4% from the $9.8
million in the first half of Fiscal 1994. Net income per share was $.77 in the
first half of Fiscal 1995, compared with $.53 for the first half of Fiscal
1994.
-8-
UNITED STATIONERS INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS (CONTINUED)
Second Quarter Results
Net sales were $431.6 million for the second quarter of Fiscal 1995, a 16.7%
increase from net sales of $370.0 million in the comparable quarter a year ago.
This increase reflects growth in every geographic region as well as the success
of the Company's niche marketing initiatives.
Gross profit as a percent of net sales decreased to 21.0% in the second quarter
of Fiscal 1995 from 22.3% in the second quarter of Fiscal 1994. This lower
margin rate reflects a shift in product mix and is consistent with the margin
rate achieved in the latter half of Fiscal 1994.
Operating expense as a percent of net sales declined to 17.4% in the second
quarter of Fiscal 1995 from 19.8% in the second quarter of Fiscal 1994. This
resulted from the savings in both people-related and freight-out expenses.
Income from operations as a percent of net sales increased to 3.6% in the
second quarter of Fiscal 1995 from 2.5% in the second quarter of Fiscal 1994.
Income before income taxes as a percent of net sales was 2.8% in the second
quarter of Fiscal 1995 compared with the prior year's quarter of 1.8%. Net
income was $7.4 million in the second quarter of Fiscal 1995, up 91.5% from the
$3.8 million in the year-ago quarter. Net income per share was $.40 in the
second quarter of Fiscal 1995, compared with $.21 for the second quarter of
Fiscal 1994.
-9-
UNITED STATIONERS INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(CONTINUED)
Liquidity and Capital Resources
A change occurred in the Company's liquidity and capital resources as a result
of the March 30, 1995 merger between United Stationers Inc. and Associated
Holdings, Inc.; see Item 5 (Subsequent Events) for further details.
During the first six months of Fiscal 1995, funds to support the Company's
working capital and capital expenditure requirements were generated from
borrowings under the Company's Reducing Revolving Credit and Term Loan
Agreement (the "Credit Agreement") and operating activities.
As of February 28, 1995 the Company had $136.0 million of borrowings
outstanding under the Credit Agreement. The Credit Agreement, as amended,
consists of a $130.0 million revolving credit facility ("Revolver") and a $30.0
million term loan ("Term Loan").
The Revolver provides for revolving credit loans up to the amount of the
commitment until August 31, 1997, at the Company's option. The initial $130.0
commitment decreases quarterly to $83.6 million as of August 31, 1997 based on
quarterly decreases which began in May 1994 as specified in the Credit
Agreement, Under the terms of the Credit Agreement, the Company is required
to pay a facility fee of 3/16 of 1% of the total available Revolver. The Term
Loan matures on September 30, 1995 (or earlier upon certain subsequent
offerings by the Company of debt or equity). Interest on both loans is payable
at varying rates provided for in the Credit Agreement.
The Credit Agreement contains certain financial covenants covering the Company
and its subsidiaries on a consolidated basis, including, without limitation,
covenants relating to the consolidated current ratio, tangible net worth,
capitalization, fixed charge coverage, capital expenditures and payment of
dividends by the Company.
On February 28, 1995 the Company entered into a loan agreement which provides
for an additional line-of-credit of $30.0 million. Under the terms of the loan
agreement, the Company is required to pay a facility fee of 3/16 of 1% of the
total face amount of the line-of-credit. The termination date for the line-of-
credit is April 30, 1995. Interest is payable at varying rates provided for in
the agreement. As of February 28, 1995, the Company has no outstanding balance
under this agreement.
During the first six months of Fiscal 1995, capital expenditures totaled
approximately $4.8 million.
-10-
UNITED STATIONERS INC. AND SUBSIDIARIES
PART II - OTHER INFORMATION
ITEM 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
At the Annual Meeting of Stockholders of United Stationers Inc.
held on January 11, 1995, the following matters were voted on:
1) Election of Directors
Each of the following members of the Board of Directors
was elected for the term listed below:
Class II Directors - term expiring in January 1998:
- E. David Coolidge III
- Jerold A. Hecktman
- Jack Twyman
2) Adoption of Amendment to 1981 Stock Incentive Award
Plan
The adoption of amendments to the 1981 Stock Incentive
Award Plan was approved. The results of the voting is as
follows:
- In favor 13,829,099
- Against 691,749
- Withheld 30,111
- Abstentions 22,696
3) Adoption of Amendment to the Management Incentive Plan
The adoption of amendments to the Management Incentive Plan
was approved. The results of the voting is as follows:
- In favor 14,079,991
- Against 416,592
- Withheld 52,575
- Abstentions 24,497
-11-
UNITED STATIONERS INC. AND SUBSIDIARIES
PART II - OTHER INFORMATION
ITEM 5 SUBSEQUENT EVENT
On March 30, 1995, pursuant to an Agreement and Plan of Merger,
dated as of February 13, 1995 (the "Merger Agreement"), between
Associated Holdings, Inc., a Delaware corporation ("Associated")
and United Stationers Inc., a Delaware corporation (the
"Company"), Associated purchased 17,201,839 shares of Common
Stock, $0.10 par value (the "Shares"), of the Company at a
purchase price of $15.50 per share, or approximately $266.6
million in the aggregate, from the Company's stockholders in
accordance with the terms of its tender offer (the "Offer") that
expired on March 22, 1995. On March 30, 1995, pursuant to the
terms of the Merger Agreement, Associated was merged with and
into the Company, with the Company surviving (the "Merger"), and
immediately thereafter, Associated Stationers, Inc., a Delaware
corporation and wholly-owned subsidiary of Associated ("ASI")
was merged with and into United Stationers Supply Co., an
Illinois corporation and wholly-owned subsidiary of the Company
("USSC"), with USSC surviving. The acquisition of the Shares by
Associated pursuant to the Offer together with the Mergers is
referred to herein as the "Acquisition".
Immediately following the Merger, the number of outstanding
Shares was 5,857,923 (or 6,973,720 on a fully-diluted basis), of
which (i) the former holders of Associated Common Stock and
warrants or options to purchase Associated Common Stock in the
aggregate owned 4,463,179 Shares constituting approximately
76.2% of the outstanding Shares and outstanding warrants or
options for 1,115,797 Shares (collectively 80.0% on a fully-
diluted basis) and (ii) pre-Merger holders of Shares (other than
Associated-Owned Shares and Treasury Shares) in the aggregate
owned 1,394,744 Shares constituting approximately 23.8% of the
outstanding Shares (or 20.0% on a fully-diluted basis).
The total amount of funds required by Associated to consummate
the Acquisition, buy out the Company stock options, refinance
certain existing indebtedness of USSC and ASI and pay related
fees and expenses was approximately $558.5 million. In order to
finance such amount, Associated, ASI, the Company and USSC
entered into (i) a credit agreement (the "New Credit
Facilities") with a group of banks and financial institutions
led by The Chase Manhattan Bank (National Association) ("Chase
Bank")
-12-
UNITED STATIONERS INC. AND SUBSIDIARIES
PART II - OTHER INFORMATION
ITEM 5 SUBSEQUENT EVENT (CONTINUED)
providing for term loan borrowings of $200.0 million and
revolving loan borrowings of up to $300.0 million and (ii) a
senior subordinated bridge loan facility with The Roebling Fund,
whose investors comprise a group of banks and financial
institutions, including Chase Bank, in the aggregate principal
amount of $130.0 million (the "Subordinated Bridge Facility").
In connection with the Acquisition, aggregate proceeds of
approximately $416.5 million under the New Credit Facilities,
together with the $130.0 million in proceeds of the bridge loan
under the Subordinated Bridge Facility made by certain lenders
to finance the purchase of a portion of the Shares in the Offer,
were used to (i) finance the purchase of Shares pursuant to the
Offer, (ii) refinance certain existing indebtedness of ASI, the
Company and USSC, (iii) terminate the Company stock options, and
(iv) pay certain of the fees, expenses and financing costs
relating to the Acquisition. In addition, simultaneously with
the consummation of the Offer, Associated obtained $12.0 million
from the sale of additional shares of Associated Common Stock to
certain existing holders of Associated Common Stock or warrants
to purchase Associated Common Stock, which was used to finance
the purchase of Shares pursuant to the Offer. The aggregate
proceeds under the New Credit Facilities consist of $125.0
million under a tranche A term loan facility, $75.0 million
under a tranche B loan facility and approximately $216.5 million
under a revolving credit facility.
As of March 30, 1995, the date of the Merger, various contingent
obligations were incurred, primarily related to provisions under
existing employment agreements.
-13-
UNITED STATIONERS INC. AND SUBSIDIARIES
PART II - OTHER INFORMATION
ITEM 6 EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibit
Number
2 Not applicable
4 Not applicable
10 Not applicable
11 Not applicable
15 Letter regarding unaudited interim
financial information
18 Not applicable
19 Not applicable
22 Not applicable
23 Consent of Experts and Counsel
24 Not applicable
27 Not applicable
99 Not applicable
(b) A report on Form 8-K was filed on February 13, 1995,
reporting that, in Item 5, the Company had entered into the
Merger Agreement and Plan of Merger with Associated
Holdings, Inc.
-14-
UNITED STATIONERS INC. AND SUBSIDIARIES
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.
UNITED STATIONERS INC.
(Registrant)
Date: April 12, 1995 Jeffrey K. Hewson
Jeffrey K. Hewson
President and Chief Operating Officer
Ted S. Rzeszuto
Ted S. Rzeszuto
Vice President and Controller
Report on Form 10-Q for the quarter ended February 28, 1995.
-15-
UNITED STATIONERS INC. AND SUBSIDIARIES
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
UNITED STATIONERS INC.
(Registrant)
Date: April , 1995
Jeffrey K. Hewson
President and Chief Operating Officer
Ted S. Rzeszuto
Vice President and Controller
Report on Form 10-Q for the quarter ended February 28, 1995.
-15-
UNITED STATIONERS INC. AND SUBSIDIARIES
INDEX TO EXHIBITS
Sequential
Exhibit Page
Number Number
2 Not applicable
4 Not applicable
10 Not applicable
11 Not applicable
15 Letter regarding unaudited interim
financial information 17
18 Not applicable
19 Not applicable
22 Not applicable
23 Consent of Experts and Counsel 18
24 Not applicable
27 Not applicable
99 Not applicable
-16-
Exhibit 15
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Stockholders and
Board of Directors of
United Stationers Inc.:
We have reviewed the accompanying condensed consolidated balance sheet of
UNITED STATIONERS INC. (a Delaware Corporation) AND SUBSIDIARIES as of
February 28, 1995, and the related condensed consolidated statements of
income and cash flows for the three- and six-month periods ended February
28, 1995 and 1994. These financial statements are the responsibility of
the Company's management.
We conducted our review in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical
procedures to financial data and making inquiries of persons responsible
for financial and accounting matters. It is substantially less in scope
than an audit conducted in accordance with generally accepted auditing
standards, the objective of which is the expression of an opinion regarding
the financial statements taken as a whole. Accordingly, we do not express
such an opinion.
Based on our review, we are not aware of any material modifications that
should be made to the condensed consolidated financial statements referred
to above for them to be in conformity with generally accepted accounting
principles.
We have previously audited, in accordance with generally accepted auditing
standards, the consolidated balance sheet of United Stationers Inc. and
subsidiaries as of August 31, 1994 (not presented herein), and, in our
report dated October 6, 1994, we expressed an unqualified opinion on those
consolidated financial statements. In our opinion, the information set
forth in the accompanying condensed consolidated balance sheet as of August
31, 1994, is fairly stated, in all material respects, in relation to the
consolidated balance sheet from which it has been derived.
/s/ARTHUR ANDERSEN LLP
Chicago, Illinois
March 21, 1995
-17-
Exhibit 23
To United Stationers Inc.:
We are aware that United Stationers Inc.'s Form 10-Q for the quarter ended
February 28, 1995, which includes our report dated March 21, 1995, covering
the unaudited interim financial information contained therein, is
incorporated by reference into its previously filed Registration Statements
on Form S-8 (File Nos. 2-77628, 33-4729 and 33-32453) and into the
previously filed Registration Statement on Form S-3 (File No. 33-28251) of
United Stationers Inc. Pursuant to Regulation C of the Securities Act of
1933, that report is not considered a part of the Registration Statements
prepared or certified by our firm or a report prepared or certified by our
firm within the meaning of Sections 7 and 11 of the Act.
/s/ARTHUR ANDERSEN LLP
Chicago, Illinois,
April 12, 1995
-18-
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
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