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 Quarter Ended March 31, 1999
----------------------------
Commission file number 1-892
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THE B.F.GOODRICH COMPANY
--------------------------------------
NEW YORK 34-0252680
- -------------------------------- --------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
4020 KINROSS LAKES PARKWAY, RICHFIELD, OHIO 44286-9368
- --------------------------------------------- -------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code 330-659-7600
----------------
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports) and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
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As of March 31, 1999, there were 74,445,557 shares of common stock outstanding.
There is only one class of common stock.
<PAGE>
ART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements
THE B.F.GOODRICH COMPANY
CONDENSED CONSOLIDATED STATEMENT OF INCOME (UNAUDITED)
(Dollars in millions, except per share amounts)
Three Months Ended
March 31,
--------------------------------
1999 1998
------------- --------------
Sales $ 1,035.6 $ 937.7
Operating Costs and Expenses:
Cost of sales 740.0 683.5
Selling and administrative expenses 164.5 143.5
Consolidation costs 26.2 -
------------- --------------
930.7 827.0
------------- --------------
Operating income 104.9 110.7
Interest expense (21.2) (15.8)
Interest income 0.5 2.9
Other expense - net (1.9) (5.5)
------------- --------------
Income from continuing operations before
income taxes and Trust distributions 82.3 92.3
Income tax expense (30.4) (35.5)
Distributions on Trust preferred securities (2.6) (2.6)
------------- --------------
Income from continuing operations 49.3 54.2
Income (loss) from discontinued operations - (1.6)
------------- --------------
Net Income $ 49.3 $ 52.6
============= ==============
Earnings (loss) per share:
Basic
Continuing operations $ 0.66 $ 0.74
Discontinued operations - (0.02)
------------- --------------
Net income $ 0.66 $ 0.72
============= ==============
Diluted
Continuing operations $ 0.66 $ 0.72
Discontinued operations - (0.02)
------------- --------------
Net income $ 0.66 $ 0.70
============= ==============
Dividends declared per common share $ 0.275 $ 0.275
See notes to condensed consolidated financial statements.
<PAGE>
THE B.F.GOODRICH COMPANY
CONDENSED CONSOLIDATED BALANCE SHEET (UNAUDITED)
(Dollars in millions)
<TABLE>
<CAPTION>
March 31, December 31,
1999 1998
------------- -------------
<S> <C> <C>
ASSETS
Current Assets
Cash and cash equivalents $ 33.4 $ 31.7
Accounts and notes receivable,
less allowances for doubtful
receivables (March 31, 1999:
$23.7; December 31, 1998: $22.6) 667.7 629.0
Inventories 782.3 772.5
Deferred income taxes 151.4 142.1
Prepaid expenses and other assets 40.9 39.2
---------- -----------
Total Current Assets 1,675.7 1,614.5
---------- -----------
Property, plant and equipment - net 1,251.9 1,255.9
Deferred Income Taxes 21.1 39.7
Prepaid Pension 143.4 148.0
Goodwill 790.1 771.0
Identifiable Intangible Asset 123.9 112.4
Other Assets 257.1 251.1
---------- -----------
$4,263.2 $4,192.6
========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Short-term bank debt $ 188.7 $ 144.1
Accounts payable 353.1 364.4
Accrued expenses 431.0 420.1
Income taxes payable 71.7 59.4
Current maturities of long-term debt
and capital lease obligations 2.1 2.8
---------- -----------
Total Current Liabilities 1,046.6 990.8
---------- -----------
Long-term Debt and Capital Lease Obligations 991.9 995.2
Pension Obligations 43.4 43.6
Postretirement Benefits Other Than Pensions 335.8 338.1
Other Non-current Liabilities 101.7 101.7
Mandatorily Redeemable Preferred
Securities of Trust 123.7 123.6
Shareholders' Equity
Common stock - $5 par value
Authorized 200,000,000 shares;
issued 76,312,961 shares at March 31,
1999, and 76,213,081 shares at
December 31, 1998 381.6 381.1
Additional capital 545.6 543.7
Income retained in the business 765.6 736.8
Accumulated other comprehensive income (6.4) 3.6
Common stock held in treasury, at cost
(1,867,404 shares at March 31, 1999,
and 1,846,894 shares
at December 31, 1998) (66.3) (65.6)
----------- -----------
Total Shareholders' Equity 1,620.1 1,599.6
----------- -----------
$4,263.2 $4,192.6
=========== ===========
</TABLE>
See notes to condensed consolidated financial statements.
Page 3
<PAGE>
THE B.F.GOODRICH COMPANY
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED)
(Dollars in millions)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
-----------------------------
1999 1998
------------- ------------
<S> <C> <C>
OPERATING ACTIVITIES
Net $ 49.3 $ 52.6
Income
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation and amortization 45.3 35.9
Deferred income taxes 4.2 5.1
Gain on sale of investment (3.2) -
Change in assets and liabilities,
net of effects of acquisitions and
dispositions of businesses:
Receivables (43.7) (26.5)
Inventories (14.1) (19.1)
Other current assets (1.8) 3.6
Accounts payable (11.8) 5.9
Accrued expenses 4.4 (25.1)
Income taxes payable 13.9 2.2
Other non-current assets
and liabilities 3.2 (1.2)
----------- -----------
Net cash provided by operating activities 45.7 33.4
INVESTING ACTIVITIES
Purchases of property (43.0) (33.6)
Proceeds from sale of property 0.3 3.1
Proceeds from sale of investment 3.5 -
Payments made in connection with acquisitions,
net of cash acquired (26.1) (366.1)
----------- -----------
Net cash used by investing activities (65.3) (396.6)
FINANCING ACTIVITIES
Net increase in short-term debt 47.1 315.3
Proceeds from issuance of long-term debt - 130.0
Repayment of long-term debt and
capital lease obligations (4.0) (2.2)
Termination of receivable sales program - (40.0)
Proceeds from issuance of capital stock 1.7 4.5
Purchases of treasury stock - (12.4)
Dividends (20.5) (14.9)
Distributions on Trust preferred securities (2.6) (2.6)
----------- -----------
Net cash provided by financing activities 21.7 377.7
EFFECT OF EXCHANGE RATE CHANGES ON
CASH AND CASH EQUIVALENTS (0.4) (1.0)
----------- -----------
INCREASE IN CASH AND CASH EQUIVALENTS 1.7 13.5
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 31.7 47.0
----------- -----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 33.4 $ 60.5
=========== ===========
Supplemental Cash Flow Information:
Income taxes paid $ 13.2 $ 6.7
=========== ===========
Interest paid, net of amounts capitalized $ 17.5 $ 13.3
=========== ===========
</TABLE>
See notes to condensed consolidated financial statements.
Page 4
<PAGE>
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Note A: BASIS OF INTERIM FINANCIAL STATEMENT PREPARATION - The accompanying
unaudited condensed consolidated financial statements of The BFGoodrich Company
("BFGoodrich" or the "Company") have been prepared in accordance with the
instructions to Form 10-Q and do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring accruals) considered necessary for a fair presentation have
been included. Operating results for the three months ended March 31, 1999, are
not necessarily indicative of the results that may be achieved for the year
ending December 31, 1999. For further information, refer to the consolidated
financial statements and footnotes included in the Company's Annual Report on
Form 10-K for the year ended December 31, 1998.
The Company adopted the provisions of SOP 98-5 - Reporting on the Costs of
Start-up Activities during the first quarter of 1999. Adoption of the SOP did
not have an impact on the Company's earnings or financial position.
Note B: PENDING MERGER- On November 22, 1998, the Company and Coltec Industries
Inc ("Coltec"), a Pennsylvania company, entered into an Agreement and Plan of
Merger ("Merger Agreement"). Under the terms of the Merger Agreement, upon
consummation of the Merger, each share of Coltec common stock issued and
outstanding immediately prior to the effective time of the Merger shall be
converted into the right to receive 0.56 of a share of BFGoodrich common stock.
The Merger will be accounted for as a pooling of interests, and as such, future
consolidated financial statements will include Coltec's financial data as if
Coltec had always been a part of BFGoodrich.
The Company has received all regulatory approvals necessary to complete the
merger and the shareholders of each company have overwhelmingly approved the
merger. Allied Signal Inc. and Crane Co. have filed lawsuits in the U.S.
District Court in South Bend, Indiana seeking to block the merger and were
granted a temporary restraining order and preliminary injunction to prevent the
merger from occurring prior to the court's review of the lawsuits. The
preliminary injunction is scheduled to expire on July 16, 1999. The Company and
Coltec filed an appeal with the U.S. Court of Appeals for the Seventh Circuit
challenging the preliminary injunction order. The court will hear the appeal
during the week of June 7, 1999.
The unaudited pro forma combined financial data is presented for informational
purposes only. They are not necessarily indicative of the results of operations
or of the financial position which would have occurred had the Merger been
completed during the periods or as of the date for which the pro forma data are
presented. They are also not necessarily indicative of the Company's future
results of operations or financial position. In particular, the Company expects
to realize significant operating cost savings as a result of the Merger. No
adjustment has been included in the pro forma combined financial data for these
anticipated operating cost savings nor for the one-time merger and consolidation
costs expected to be incurred upon consummation of the Merger.
- 5 -
<PAGE>
Pro forma per share amounts for the combined company are based on the exchange
ratio of 0.56 of a share of BFGoodrich common stock for each share of Coltec
common stock.
Unaudited Selected Pro Forma Combined Financial Data
----------------------------------------------------
<TABLE>
<CAPTION>
Three Months Ended March 31,
(Dollars in millions, except per share amounts)
-----------------------------------------------
1999 1998
------ ------
<S> <C> <C>
Pro Forma Combined Statement of Income
Data:
Sales $1,411.8 $1,312.1
Income from continuing operations 76.7 79.4
Income from continuing operations
per diluted common share 0.69 0.71
Weighted average number of common shares
and assumed conversions (on a
fully diluted basis) (millions) 113.3 112.6
March 31,
1999
---------
<S> <C>
Pro Forma Combined Balance Sheet Data:
Total assets $5,416.8
Total shareholders' equity 1,343.4
Book value per common share 12.25
</TABLE>
Note C: CONSOLIDATION COSTS - Consolidation costs of $26.2 million were recorded
during the first quarter of 1999. These costs relate to employee termination
payments resulting from realignment of the Performance Materials Segment
headquarters (approximately 140 positions) and the Company's Advanced Technology
Group (approximately 15 positions) as well as from reductions at certain
Performance Materials operating locations (approximately 40 positions). Most of
the severance payments are expected to occur during the second quarter. The
Company expects to realize annualized savings of approximately $15.0 million
from these actions, of which approximately $7.0 million is expected to be
realized during the second half of this year.
Note D: ACQUISITIONS - In March 1999 the Company's Performance Materials segment
acquired a textile coatings business. The preliminary purchase price of $19.6
million includes approximately $11 million of goodwill. The purchase price
allocations have been based on preliminary estimates. Goodwill is being
amortized using the straight-line method over 20 years.
Also, in March 1999, the Company's Aerospace segment acquired a developer of
micro-electromechanical systems, which integrate electrical and mechanical
components to form "smart" sensing and control devices.
- 6 -
<PAGE>
The preliminary purchase price of $12.0 million includes approximately $9
million of goodwill. The purchase agreement provides for additional
consideration to be paid over the next six years based on a percentage of net
sales (5 percent). The additional consideration for the first five years,
however, is guaranteed not to be less than $3.5 million. As the $3.5 million
of additional consideration is not contingent on future events, it has been
included in the $12.0 million purchase price noted above. All additional
contingent amounts payable under the purchase agreement will be recorded as
additional purchase price when earned and amortized over the remaining life
of the goodwill. Goodwill is being amortized using the straight-line method
over 15 years.
In March 1998, the Company acquired Freedom Chemical Company ("Freedom
Chemical"), a global manufacturer of specialty and fine chemicals that are sold
to a variety of customers who use them to enhance the performance of their
finished products, for approximately $378 million in cash.
Note E: DISCONTINUED OPERATIONS - During the 1998 first quarter, the Company
recognized a $1.6 million after-tax charge related to a business previously
divested and reported as a discontinued operation.
Note F: INVENTORIES - Inventories included in the accompanying condensed
consolidated balance sheet consist of:
<TABLE>
<CAPTION>
(Dollars in millions)
---------------------------------
March 31, December 31,
1999 1998
--------- ------------
<S> <C> <C>
FIFO or average cost
(which approximates
current costs):
Finished products $238.0 $236.0
In process 407.0 416.9
Raw materials and supplies 202.6 189.8
------- -------
847.6 842.7
Less:
Reserve to reduce certain
inventories to LIFO (52.8) (54.1)
Progress payments and advances (12.5) (16.1)
------- -------
Total $782.3 $772.5
======= =======
</TABLE>
In-process inventories include significant deferred costs related to production,
pre-production and excess-over-average costs for long-term contracts. The
Company has pre-production inventory of $84.8 million related to design and
development costs on the 717-200 program through March 31, 1999. In addition,
the Company has excess-over-average inventory of $40.5 million related to costs
associated with the production of the flight test inventory and the first
production units. The Company anticipates spending approximately $2 million more
for design and development through August 1999, the aircraft's scheduled Federal
Aviation Administration ("FAA") certification date. If the contract is cancelled
prior to FAA certification, the Company expects substantial recovery of these
costs. If the aircraft is certified and actively marketed, the recovery of these
costs will depend upon the number of aircraft delivered.
- 7 -
<PAGE>
In 1993, the Company revised its contract with Pratt & Whitney on the PW4000 for
the A300/310 and MD-11 programs. The revised contract provides that if Pratt &
Whitney accepts delivery of less than 500 units between 1993 through 2003, an
"equitable adjustment" will be made. Recent market projections on the PW4000
contract indicate that less than 500 units will be delivered. As a result, the
Company and Pratt & Whitney reached an agreement for an equitable adjustment in
April 1999 that will be recorded in the second quarter.
NOTE G: BUSINESS SEGMENT INFORMATION - The Company's operations are classified
into two reportable business segments: BFGoodrich Aerospace ("Aerospace") and
BFGoodrich Performance Materials ("Performance Materials"). The Company's two
reportable business segments are managed separately based on fundamental
differences in their operations.
Segment operating income is total segment revenue reduced by operating expenses
identifiable with that business segment. Corporate includes general corporate
administrative costs and Advanced Technology Group research expenses.
Consolidation costs are discussed in Note C of these unaudited condensed
consolidated financial statements.
The Company evaluates performance primarily based on operating income. The
accounting policies of the reportable segments are the same as those described
in the summary of significant accounting policies. There are no intersegment
sales.
<TABLE>
<CAPTION>
(Dollars in millions)
Three months ended March 31,
1999 1998
------- -------
<S> <C> <C>
Sales
Aerospace $ 735.6 $ 685.3
Performance Materials 300.0 252.4
-------- --------
Total Sales $1,035.6 $ 937.7
======== ========
Operating Income
Aerospace $ 112.2 $ 87.9
Performance Materials 33.2 36.6
-------- --------
$ 145.4 $ 124.5
Corporate General and Administrative Expenses (14.3) (13.8)
Consolidation Costs (26.2) -
-------- --------
Total Operating Income $ 104.9 $ 110.7
======== ========
Assets
Aerospace $2,435.7 $2,446.1
Performance Materials 1,423.2 1,246.3
Corporate 404.3 253.7
-------- --------
Total Assets $4,263.2 $3,946.1
======== ========
</TABLE>
- 8 -
<PAGE>
NOTE H: EARNINGS PER SHARE - The computation of basic and diluted earnings per
share for income from continuing operations is as follows for the three months
ended March 31:
<TABLE>
<CAPTION>
(In millions, except per share amounts) 1999 1998
------------ ------------
<S> <C> <C>
Numerator:
Income from continuing operations
for basic and diluted earnings per share
- income available to common stockholders $49.3 $54.2
==== ====
Denominator:
Denominator for basic earnings per
share - weighted-average shares 74.4 72.8
---- ----
Effect of dilutive securities:
Stock options and warrants .4 .9
Convertible Notes - 1.3
---- ----
Dilutive potential common shares .4 2.2
---- ----
Denominator for diluted earnings
per share - adjusted weighted-average
shares and assumed conversions 74.8 75.0
==== ====
Per share income from continuing operations:
Basic $ .66 $.74
==== ====
Diluted $ .66 $.72
==== ====
</TABLE>
NOTE I: COMPREHENSIVE INCOME
Total comprehensive income consists of the following for the three months ended
March 31 (dollars in millions):
<TABLE>
<CAPTION>
1999 1998
------ ------
<S> <C> <C>
Net Income $49.3 $52.6
---- ----
Other Comprehensive Income:
Unrealized
translation (10.0) (2.5)
---- ----
adjustments during period
Other Comprehensive Income (10.0) (2.5)
---- ----
Total Comprehensive Income $39.3 $50.1
==== ====
</TABLE>
- 9 -
<PAGE>
Accumulated other comprehensive income consists of the following (dollars in
millions):
<TABLE>
<CAPTION>
March 31, December 31,
1999 1998
---------- ------------
<S> <C> <C>
Cumulative unrealized translation adjustments $(5.8) $4.2
Minimum pension liability adjustment (.6) (.6)
----- ----
$(6.4) $3.6
===== ====
</TABLE>
Note J: CONTINGENCIES - There are pending or threatened against BFGoodrich or
its subsidiaries various claims, lawsuits and administrative proceedings, all
arising from the ordinary course of business with respect to commercial, product
liability and environmental matters, which seek remedies or damages. BFGoodrich
believes that any liability that may finally be determined with respect to
commercial and product liability claims, should not have a material effect on
the Company's consolidated financial position or results of operations. The
Company is also involved in legal proceedings as a plaintiff involving contract,
patent protection, environmental and other matters. Gain contingencies, if any,
are recognized when they are realized.
The Company and its subsidiaries are generators of both hazardous wastes and
non-hazardous wastes, the treatment, storage, transportation and disposal of
which are subject to various laws and governmental regulations. Although past
operations were in substantial compliance with the then-applicable regulations,
the Company has been designated as a potentially responsible party ("PRP") by
the U.S. Environmental Protection Agency ("EPA") in connection with
approximately 45 sites. The Company believes it may have continuing liability
with respect to not more than 19 of these federal sites.
The Company initiates corrective and/or preventive environmental projects of its
own to ensure safe and lawful activities at its current operations. The Company
believes that compliance with current governmental regulations will not have a
material adverse effect on its capital expenditures, earnings or competitive
position. The Company's environmental engineers and consultants review and
monitor past and existing operating sites. This process includes investigation
of national Priority List sites, where the Company is considered a PRP, review
of remediation methods and negotiations with other PRPs and governmental
agencies.
At March 31, 1999, the Company has recorded in Accrued expenses and in Other
Non-current Liabilities a total of $56.7 million to cover future environmental
expenditures, principally for remediation of the aforementioned sites and other
environmental matters.
The Company believes that it has adequately reserved for all of the above sites
based on currently available information. Management believes that it is
reasonably possible that additional costs may be incurred beyond the amounts
accrued as a result of new information. However, the amounts, if any, cannot be
estimated and management believes that they would not be material to the
Company's financial condition but could be material to the Company's results of
operations in a given period.
- 10 -
<PAGE>
Note K: SUBSEQUENT EVENTS - On May 5, 1999, the Company issued $200 million
in Notes due 2009 with a coupon interest rate of 6.60 percent. Net proceeds will
be used to repay short-term indebtedness and for general corporate purposes. The
Company also entered into an interest rate swap agreement that effectively
converts the interest rate on the Notes to LIBOR plus 58 basis points.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
POSITION AND RESULTS OF OPERATIONS
-------------------------------------------------
COMPARISON OF THE FIRST QUARTER OF 1999 TO THE FIRST QUARTER OF 1998
Sales during the quarter ended March 31, 1999, increased by $97.9 million, or 10
percent, over sales during the same period last year. Sales increased by 7.3
percent for Aerospace and 18.9 percent for Performance Materials as compared to
the 1998 first quarter. The reasons for these increases are discussed by segment
below.
Cost of sales as a percent of sales decreased from 72.9 percent in 1998 to 71.5
percent in 1999. The decrease is a result of the Company's efforts to improve
productivity and to lower manufacturing and material costs, slightly offset by
higher costs related to acquisitions.
Selling and administrative costs as a percent of sales increased from 15.3
percent in 1998 to 15.9 percent in 1999. This is due primarily to lower sales
volume in the core businesses of the Performance Materials Segment in
combination with a slight increase in spending. Acquisitions did not contribute
to the increase in selling and administrative costs as a percent of sales
between periods.
Consolidation costs of $26.2 million were recorded during the first quarter of
1999. These costs relate to employee termination payments resulting from
realignment of the Performance Materials Segment headquarters (approximately 140
positions) and the Company's Advanced Technology Group (approximately 15
positions) as well as from reductions at certain Performance Materials operating
locations (approximately 40 positions). Most of the severance payments are
expected to occur during the second quarter. The Company expects to realize
annualized savings of approximately $15.0 million from these actions, of which
approximately $7.0 million is expected to be realized during the second half of
this year.
Excluding consolidation costs, operating income increased $20.4 million, or 18.4
percent, from $110.7 million in 1998 to $131.1 million in 1999. Operating income
increased by $24.3 million in the Aerospace Segment and decreased slightly in
the Performance Materials Segment ($3.4 million). Operating income by segment is
discussed in greater detail below.
Interest expense-net increased $7.8 million, or 60.5 percent, from $12.9 million
in 1998 to $20.7 million in 1999. Most of this increase is due to increased
indebtedness that resulted from the purchase of Freedom Chemical late in March
1998.
Other expense-net decreased $3.6 million from $5.5 million in the first quarter
of 1998 to $1.9 million in the first quarter of 1999. The decrease is
attributable to the gain on the sale of the Company's remaining interest in DTM
during the first quarter of 1999.
- 11 -
<PAGE>
The Company's effective tax rate decreased from 38.5 percent to 37.0 percent,
quarter to quarter. The reduced effective tax rate between quarters is primarily
due to expected additional benefits from the Company's state and local tax
planning during 1999.
The Company recognized a $1.6 million after-tax charge during the first quarter
of 1998 related to a business previously divested and reported as a discontinued
operation.
The Company and Pratt & Whitney reached agreement on an equitable adjustment
regarding the PW4000 contract during April, 1999. The agreement will result in
$60.0 million of additional sales for the Company's Aerostructures Group during
the second quarter.
Business Segment Performance
- ----------------------------
Segment Analysis
----------------
<TABLE>
<CAPTION>
Three Months Ended March 31 (dollars in millions) 1999 1998
-------------------------------------------------------------------------------
Sales:
<S> <C> <C>
Aerospace $ 735.6 $685.3
Performance Materials 300.0 252.4
-------------------------------------------------------------------------------
Total $1,035.6 $937.7
===============================================================================
Operating Income:
Aerospace $ 112.2 $ 87.9
Performance Materials 33.2* 36.6
-------------------------------------------------------------------------------
Total Reportable Segments 145.4 124.5
Consolidation Costs (26.2) -
Corporate (14.3)** (13.8)
-------------------------------------------------------------------------------
Total $ 104.9 $110.7
================================================================================
<FN>
* Amount excludes $20.6 million of consolidation costs reported during the
quarter.
** Excludes $5.6 million of consolidation costs reported during the quarter.
</FN>
</TABLE>
The Company's operations are classified into two reportable business segments:
BFGoodrich Aerospace ("Aerospace") and BFGoodrich Performance Materials
("Performance Materials"). Aerospace consists of four business groups:
Aerostructures; Landing Systems; Sensors and Integrated Systems; and
Maintenance, Repair and Overhaul ("MRO"). They serve commercial, military,
regional, business and general aviation markets.
- 12 -
<PAGE>
Performance Materials consists of three business groups: Textile and Industrial
Coatings; Polymer Additives and Specialty Plastics; and Consumer Specialties.
These groups provide materials for a wide range of end use market applications
including textiles, coatings, food & beverage, personal care, pharmaceuticals,
graphic arts, industrial piping, plumbing and transportation.
The Performance Materials Segment was previously reported as the Specialty
Chemicals Segment consisting of two groups: Specialty Additives and Specialty
Plastics. Last year, the Company reorganized this segment into the three groups
noted above and renamed the segment. Previously reported amounts for the segment
have been reclassified into the three groups noted above.
Also, because Performance Materials' acquisition of Freedom Chemical was
completed in late March 1998, its results were not included in the Segment's
results until the second quarter of 1998. Thus, the Performance Materials Group
discussion and analysis of fluctuations in sales and operating income excludes
the impact of the Freedom Chemical acquisition ( see "Comparable % Change"
column).
Corporate includes general corporate administrative costs and Advanced
Technology Group research expenses. Segment operating income is total segment
revenue reduced by operating expenses directly identifiable with that business
segment.
An expanded analysis of sales and operating income by business segment follows.
Aerospace
- ---------
<TABLE>
<CAPTION>
(Dollars in millions) % of Sales
----------
1999 1998 % Change 1999 1998
---- ---- -------- ---- ----
<S> <C> <C> <C> <C> <C>
Sales
Aerostructures $310.2 $302.6 2.5
Landing Systems 162.8 142.9 13.9
Sensors and Integrated Systems 152.5 140.2 8.8
MRO 110.1 99.6 10.5
------ ------
Total Sales $735.6 $685.3 7.3
====== ======
Operating Income
Aerostructures $ 50.7 $ 39.5 28.4 16.3 13.1
Landing Systems 24.1 15.9 51.6 14.8 11.1
Sensors and Integrated Systems 29.3 28.0 4.6 19.2 20.0
MRO 8.1 4.5 80.0 7.4 4.5
------ ------
Total Operating Income $112.2 $ 87.9 27.6 15.3 12.8
====== ======
</TABLE>
Segment Performance
- -------------------
Sales of BFGoodrich Aerospace increased $50.3 million, or 7.3 percent, in the
first quarter of 1999, from $685.3 million in the first quarter of 1998 to
$735.6 million in the first quarter of 1999. Approximately $42 million of the
increase related to increased volumes in each of the Segment's groups reflecting
higher demand in most markets, and approximately $8 million was from an
acquisition.
- 13 -
<PAGE>
Aerospace operating income increased $24.3 million, or 27.6 percent, from $87.9
million during the first quarter of 1998 to $112.2 million for the 1999 first
quarter. This growth principally reflects the impact of higher sales volumes and
the mix between OEM sales and aftermarket sales, which are generally more
profitable than OEM sales.
In recent months, Boeing, a significant customer, has made public announcements
concerning expected reductions in its production of new commercial aircraft,
particularly for the 747 program, commencing in the latter part of 1999. While,
generally speaking, a downturn in OEM production has a negative impact on
operating income, the Company believes that it will experience continued
growth in demand for higher-margin aftermarket aerospace products and achieve
improved operating margins from its MRO businesses, largely or completely
offsetting any adverse earnings effects from Boeing's expected production
slowdown.
Aerostructures Group Sales for the first quarter of 1999 increased $7.6 million,
or 2.5 percent, from $302.6 million in the first quarter of 1998 to $310.2
million in the first quarter of 1999. Commercial aftermarket sales increased
$32.2 million over the first quarter of the prior year, while sales to
commercial original-equipment manufacturers ("OEMs") experienced a slowdown
(decreased by $24.7 million). The MD-90, PW4000 (MD-11 & A300/A310 aircraft) and
GE-90 (B777 aircraft) programs experienced a slowdown in production sales.
Partially offsetting the decreases were higher volumes from the CFM56-5 (A319,
A320 & A321 aircraft), CF6-80C2 (B747 & 767 aircraft) and B737-700 commercial
programs.
Operating income for the Aerostructures Group in the first quarter of 1999 was
$50.7 million compared with $39.5 million for the first quarter of 1998, an
$11.2 million, or 28.4 percent increase. The increase, as well as the increase
in operating income margins between quarters, is primarily due to increased
aftermarket sales.
Landing Systems Group Sales increased $19.9 million, or 13.9 percent, from
$142.9 million in the 1998 first quarter to $162.8 million in the first quarter
of 1999. The increase is attributable to higher volume ($11.8 million) and an
acquisition that was made during the fourth quarter of 1998 ($8.1 million). The
volume growth principally came from higher aftermarket demand for landing gear
components and commercial wheels and brakes products on the B737, B747 and B777
programs.
Landing Systems Group operating income increased $8.2 million, or 51.6 percent,
from $15.9 million in the 1998 first quarter to $24.1 million in the first
quarter of 1999. This improvement largely reflects increased demand for landing
gear and aftermarket demand for wheels and brakes products ($4.5 million) and
the benefit of an acquisition ($0.9 million). A favorable sales mix related to
wheels and brakes products also contributed to the Group's higher operating
income.
Sensors and Integrated Systems Group Sales increased $12.3 million, or 8.8
percent, from $140.2 million in the first quarter of 1998 to $152.5 million in
the 1999 first quarter. This increase reflects higher volumes of sensors and
avionics products and integrated fuel systems.
The Sensors and Integrated Systems Group's first quarter of 1999 operating
income of $29.3 million increased $1.3 million, or 4.6 percent, from $28.0
million in the first quarter of 1998. This increase reflects the impact of
higher sales volumes ($5.1 million), especially for higher-margin aftermarket
avionics and sensors products, partially offset by higher spending ($3.9
million) - particularly research and development costs.
- 14 -
<PAGE>
MRO Group Sales increased $10.5 million, or 10.5 percent, from $99.6 million in
the first quarter of 1998 to $110.1 million in the first quarter of 1999. This
increase reflects higher demand for airframe and component maintenance services.
Operating income in the first quarter of this year increased $3.6 million, or
80.0 percent, from $4.5 million in 1998 to $8.1 million in 1999. The significant
increase in operating income over the comparable period last year was a direct
result of the higher demand for airframe and component maintenance services
noted above, as well as a reduction in costs resulting from increased
productivity and manufacturing efficiencies.
Performance Materials
- ---------------------
<TABLE>
<CAPTION>
(Dollars in millions) Comparable % of Sales
1999 1998 % Change % Change 1999 1998
----- ----- -------- --------- ------- -----
<S> <C> <C> <C> <C> <C> <C>
Sales
Textile and Industrial Coatings $153.7 $121.2 26.8 (9.0)
Polymer Additives and Specialty
Plastics 105.5 110.3 (4.4) (4.4)
Consumer Specialties 40.8 20.9 95.2 (1.4)
------ ------
Total Sales $300.0 $252.4 18.9 (6.3)
====== ======
Operating Income
Textile and Industrial Coatings $ 8.3 $ 15.7 (47.1) (35.0) 5.4 13.0
Polymer Additives and Specialty
Plastics 19.2 15.3 25.5 25.3 18.2 13.9
Consumer Specialties 5.7 5.6 1.8 (14.3) 14.0 26.8
------- -------
Total Operating Income $ 33.2* $ 36.6 (9.3) (6.6) 11.1 14.5
======= =======
<FN>
* Excludes $20.6 million of consolidation costs - see Note C to the unaudited
condensed consolidated financial statements.
</FN>
</TABLE>
Segment Performance
- -------------------
Sales for the Performance Materials Segment increased $47.6 million, or 18.9
percent, from $252.4 million in the first quarter of 1998 to $300.0 million in
the first quarter of 1999. Acquisitions accounted for approximately $64 million
of the increase, partially offset by reduced volumes (approximately $9 million),
particularly in the textile market, and pricing pressures across most markets
served (approximately $7 million).
Operating income decreased by $3.4 million, or 9.3 percent, from $36.6 million
during the first quarter of 1998 to $33.2 million during the first quarter of
1999. The decrease is attributable to increased competition within certain
contracting markets that has resulted in reduced volumes (approximately $3
million) and increased pressure on pricing (approximately $7 million), partially
offset by reduced raw material costs and increased productivity and
manufacturing efficiencies (approximately $7 million).
- 15 -
<PAGE>
As noted on page 13, the following Group discussion and analysis of fluctuations
in sales and operating income excludes the impact of the Freedom Chemical
acquisition (see "Comparable % Change" column).
Textile and Industrial Coatings Group Sales decreased $10.9 million, or 9.0
percent, from the prior year due to reduced volume (approximately $8.0 million)
and pricing pressures (approximately $3.0 million) The majority of the decrease
can be attributed to the Group's textile business, where both volumes and prices
continue to be less than 1998 levels. The domestic textile market continued to
contract, as customers closed plants and moved operations overseas to better
compete with intense foreign competition. In addition, continued instability in
foreign financial markets (Russia and Asia), inexpensive imports, and European
Union furniture fabric tariffs all negatively impacted revenue for the Group.
The Company's largest competitors are fighting to retain and/or gain market
share, resulting in additional downward pressure on prices, especially in the
dye industry.
Operating income for the Textile and Industrial Coatings Group decreased $5.5
million, or 35.0 percent, due almost entirely to the volume and price pressures
in the textile market described above.
Polymer Additives and Specialty Plastics Group Sales decreased $4.8 million, or
4.4 percent, from the prior year, driven primarily by price competition
(approximately $4 million) and slightly lower volume (approximately $1 million).
Downward pricing pressure was especially significant for the Group's Estane(R)
thermoplastic polyurethane (TPU) products, where a decline in demand for
recreational applications (e.g. ski boots, skate wheels) has created an
overcapacity for TPU moldings. With excess capacity, several competitors
entered other Estane(R) market segments with substantially lower prices, driving
a reduction in our prices to maintain market share. The Polymer Additives
products, particularly rubber chemicals, also suffered from pricing pressures
linked to general industry weaknesses. Volume was very strong for the Group's
TempRite(R) high heat-resistant plastics products, as a robust construction
market coupled with gains in market share resulted in a significant increase in
sales. Strength in the Group's plumbing, fire sprinkler and industrial
piping markets helped to partially offset volume declines seen in other markets
including lubricants, rubber chemicals, TPU, tolling, and monomer markets.
Despite the decline in sales, the Polymer Additives and Specialty Plastics Group
operating income increased $3.9 million, or 25.5 percent over the prior year.
The increase in operating income is directly attributable to increased demand
for TempRite(R) products, driven by the significant increase in volume, lower
raw material prices (particularly PVC) and manufacturing productivity
improvements and cost efficiencies.
Consumer Specialties Group Sales during the first quarter of 1999 were basically
level with sales during the first quarter of 1998 (1.4 percent decline). North
American sales, particularly pharmaceuticals were very strong, but were offset
by double digit declines in Asia and Eastern Europe due to weak economic
conditions and competitive pricing in many international markets.
Operating income decreased by $0.8 million, or 14.3 percent, versus the prior
year, as the volume strength seen in North America was not enough to offset the
volume and price weaknesses experienced in other parts of the world.
- 16 -
<PAGE>
YEAR 2000 COMPUTER COSTS
------------------------
General - The Year 2000 issue is the result of some computer programs being
written using two digits rather than four to define the applicable year. The
Company's computer equipment and software and devices with embedded technology
that are date-sensitive may recognize a date using "00" as the year 1900 rather
than the year 2000. This could result in a system failure or miscalculations
causing disruptions of operations, including, among other things, a temporary
inability to process transactions, send invoices, or engage in similar normal
business activities. The Company has assessed how it may be impacted by the Year
2000 issue and has formulated and commenced implementation of a comprehensive
plan to address all known aspects of the issue.
The Plan - The Company's plan encompasses its information systems, production
and facilities equipment that utilize date/time oriented software or computer
chips, products, vendors and customers and is being carried out in four phases:
1) assessment and development of a plan; 2) remediation; 3) testing; and 4)
implementation. The Company's plan includes purchasing new information systems
where circumstances warrant.
The Company's plan also includes contracting with independent experts as
considered necessary. To date, the Company has engaged independent experts to
evaluate its Year 2000 plan, including its identification, assessment,
remediation and testing efforts at certain locations.
With regard to information systems, production and facilities equipment and
products, the Company is substantially complete with the assessment and plan
development phase and is approximately 75 percent, 65 percent and 93 percent
complete, respectively with its total planned efforts including remediation,
testing and implementation. The Company expects that its remediation efforts in
these areas will be substantially completed by September 30, 1999.
The Company is also reviewing the efforts of its vendors and customers to become
Year 2000 compliant. Letters and questionnaires have been sent to all critical
entities with which the Company does business to assess their Year 2000
readiness. The Company anticipates that its activities will be on-going for all
of 1999 and will include follow-up telephone interviews and on-site meetings as
considered necessary in the circumstances. The Company believes the Year 2000
Information and Readiness Disclosure Act of 1998 will facilitate the exchange of
Year 2000 information between it and its suppliers in 1999. Although this review
is continuing, the Company is not currently aware of any vendor or customer
circumstances that may have a material adverse impact on the Company. The
Company will be looking for alternative suppliers where circumstances warrant.
The Company can provide no assurance that Year 2000 compliance plans will be
successfully completed by suppliers and customers in a timely manner.
Cost - The Company's estimate of the total cost for Year 2000 compliance is
approximately $55 million, of which approximately $45 million has been incurred
through March 31, 1999. The Company capitalized approximately $31 million and
expensed approximately $14 million of the $45 million spent to date. The
Company's cost estimates include the amount specifically related to remedying
Year 2000 issues as well as costs for improved systems which are Year 2000
compliant and would have been acquired in the ordinary course but whose
acquisition has been accelerated to ensure compliance by the Year 2000.
Incremental spending has not been, and is not expected to be, material because
most Year 2000 compliance costs include items that are part of the standard
procurement and maintenance of the Company's information systems and production
and facilities equipment. Other non-Year 2000 efforts have not been materially
delayed or impacted by the Company's Year 2000 initiatives.
- 17 -
<PAGE>
Risks - The Company believes that the Year 2000 issue will not pose significant
operational problems for the Company. However, if all Year 2000 issues are not
properly identified, or assessment, remediation and testing are not effected in
a timely manner with respect to problems that are identified, there can be no
assurance that the Year 2000 issue will not have a material adverse impact on
the Company's results of operations or adversely affect the Company's
relationships with customers, vendors, or others. Additionally, there can be no
assurance that the Year 2000 issues of other entities will not have a material
adverse impact on the Company's systems or results of operations.
Contingency - The Company has developed high-level contingency plans in the
event any of its critical suppliers or service providers should incur Year 2000
failures in their systems that would cause a disruption in the Company's ability
to conduct business and for system implementations/ upgrades planned for later
this year. More detailed contingency plans are in the process of being developed
and/or finalized for each facility. Some of the areas addressed in these
contingency plans include potentially increasing the staffing of shifts at
yearend, carrying higher-levels of inventory for critical materials, components
and finished goods and using alternate suppliers for critical raw materials. The
Company's view of a "reasonably likely worse case scenario" would entail the
temporary shutdown of a production unit at one or more of the Company's major
manufacturing sites. Although the Company does not anticipate such a scenario
will occur, if it were to occur, the Company believes it would be able to
correct the problem in a timely fashion, alternatively source the production or
satisfy the customer demand from existing inventory. Possible consequences of
these actions may include increased manufacturing and general and administrative
expenses and/or lost revenue. If the Company's contingency plans are not
adequate or its suppliers or customers fail to remedy their own Year 2000
matters, the Company's results of operations and financial condition may be
materially adversely affected.
CAPITAL RESOURCES AND LIQUIDITY
- -------------------------------
Current assets less current liabilities increased $5.4 million from December 31,
1998 to March 31, 1999. The increase resulted from an increase in accounts
receivable and inventory, offset by an increase in short-term indebtedness. The
Company expects to have adequate cash flow from operations and has the credit
facilities (described in the Company's Annual Report on Form 10-K for the year
ended December 31, 1998) to satisfy its operating requirements and capital
spending programs and to finance growth opportunities as they arise.
The Company's debt-to-capitalization ratio was 40.4 percent at March 31, 1999,
compared with 39.8 percent at December 31, 1998. For purposes of this ratio, the
Trust preferred securities are treated as capital.
During the first quarter of 1999, the Company entered into a committed short-
term revolving credit facility with certain banks that provides for an
additional $300 million of domestic lines of credit. The Company's existing
$300 million 5 year committed revolving credit facility, originally due to
expire on June 30, 2000, was exended to February 18, 2004 during the quarter.
The Company also increased its committed European revolver from $75 million to
$125 million during the first quarter of 1999.
- 18 -
<PAGE>
On May 5, 1999, the company issued $200 million in Notes due 2009 with a
coupon interest rate of 6.60 percent. Net proceeds will be used to repay
short-term indebtedness and for general corporate purposes. The Company also
entered into an interest rate swap agreement that effectively converts the
interest rate on the Notes to LIBOR plus 58 basis points.
Cash Flows
Cash flow from operating activities in the first quarter of 1999 was $12.3
million more than the same period last year. EBITDA, excluding consolidation
costs, increased from $141.1 million in the first quarter of 1998 to $174.5
million in the first quarter of 1999.
TRANSITION TO THE EURO
- ----------------------
Although the Euro was successfully introduced on January 1, 1999, the legacy
currencies of those countries participating will continue to be used as legal
tender through January 1, 2002. Thereafter, the legacy currencies will be
canceled and Euro bills and coins will be used in the eleven participating
countries.
Transition to the Euro creates a number of issues for the Company. Business
issues that must be addressed include product pricing policies and ensuring the
continuity of business and financial contracts. Finance and accounting issues
include the conversion of bank accounts and other treasury and cash management
activities.
The Company continues to address these transition issues and does not expect the
transition to the Euro to have a material effect on the results of operations or
financial condition of the Company. Actions taken to date include the ability to
quote its prices; invoice when requested by the customer; and issue pay checks
to its employees on a dual currency basis. The Company has not yet set
conversion dates for its accounting systems, statutory reporting and tax books,
but will do so this year in conjunction with its efforts to be Year 2000
compliant. The financial institutions in which the Company has relationships
have transitioned to the Euro successfully as well and are issuing statements in
dual currencies.
NEW ACCOUNTING STANDARDS
- ------------------------
In June 1998, the Financial Accounting Standards Board issues Statement No. 133,
Accounting for Derivative Instruments and Hedging Activities, which is required
to be adopted in years beginning after June 15, 1999. The Statement permits
early adoptions as of the beginning of any fiscal quarter after its issuance.
The Statement will require the Company to recognize all derivatives on the
balance sheet at fair value. Derivatives that are not hedges must be adjusted to
fair value through income. If the derivative is a hedge, depending on the nature
of the hedge, changes in the fair value of the derivative will either be offset
against the change in fair value of the hedged assets, liabilities, or firm
commitments through earnings or recognized in other comprehensive income until
the hedged item is recognized in earnings. The ineffective portion of a
derivative's portion of a derivative's change in fair value will be immediately
recognized in earnings.
- 19 -
<PAGE>
The Company has not yet determined what the effect of Statement No. 133 will be
on its earnings and financial position and has not yet determined the timing or
method of adoption. However, the Statement could increase volatility in earnings
and comprehensive income.
FORWARD-LOOKING INFORMATION IS SUBJECT TO RISK AND
UNCERTAINTY
---------------------------------------------------
We believe this document includes certain forward-looking statements, as defined
in the Private Securities Litigation Reform Act of 1995, that involve risk and
uncertainty.
With respect to Aerospace, the worldwide civil aviation market could be
adversely affected if customers cancel or delay current orders or
original-equipment manufacturers reduce the rate they build or expect to build
products for such customers. Such cancellations, delays or reductions may occur
if there is a substantial change in the health of the airline industry or in the
general economy, or if a customer were to experience financial or operational
difficulties. There have been weak new aircraft orders and actual cancellation
of orders from Asian carriers due to the Asian financial crisis. There are
financial difficulties in Russia and Latin America as well. If these
developments should continue or accelerate, it could have an adverse effect upon
the Company. If the decline in future new aircraft build rates is greater than
anticipated, there could be a material adverse impact on the Company. Even if
orders remain strong, original-equipment manufacturers could reduce the rate at
which they build aircraft due to inability to obtain adequate parts from
suppliers and/or because of productivity problems relating to a recent rapid
build-up of the labor force to increase the build rate of new aircraft. Boeing
announced a temporary cessation of production in the fall of 1997 for these
reasons. A change in levels of defense spending could curtail or enhance
prospects in the Company's military business. If the trend towards increased
outsourcing or reduced number of suppliers in the airline industry changes, it
could affect the Company's business. If the Boeing 717 program is not as
successful as anticipated, it could adversely affect the Company's business. If
the Company is unable to continue to acquire and develop new systems and
improvements, it could affect future growth rates. In the immediate past there
has been a higher-than-normal historical turnover rate of technicians in the MRO
business due to hiring by Boeing and the airlines, although recently the
turnover rate has been returning closer to historical levels. If this trend were
again to reverse, it could have an adverse effect on the Company. If the Company
does not experience continued growth in demand for its higher-margin aftermarket
aerospace products or is unable to continue to achieve improved operating
margins in its MRO business, it could have an adverse effect on operating
results. Such events could be exacerbated if there is a substantial change in
the health of the airline industry, or in the general economy, or if a customer
were to experience major financial difficulties. Various industry estimates of
future growth of revenue passenger miles, new original equipment deliveries and
estimates of future deliveries of regional, business, general aviation and
military orders may prove optimistic, which could have an adverse affect on
operations.
With respect to Performance Materials, if the expected growth in volume does not
materialize, results could be adversely impacted. Expected sales increases in
the Far East and Latin America could be adversely impacted by recent turmoil in
financial markets in those regions. If demand does not increase during the
second half of 1999 as anticipated or cost reduction benefits do not
materialize, the results of the Performance Materials Segment could be adversely
affected. If cost benefits from continued integration of recent acquisitions and
realignment activities do not occur as expected, results could be adversely
impacted. Revenue growth in various businesses may not materialize as expected.
- 20 -
<PAGE>
With respect to the entire Company, if outside vendors are unable to make their
computer systems Year 2000 compliant in time, or if the magnitude of the Year
2000 issue is greater than presently anticipated, it could have a material
adverse impact on the Company. If there are unexpected developments with respect
to environmental matters involving the Company, it could have an adverse effect
upon the Company.
PART II - OTHER INFORMATION
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibit 27 - Financial Data Schedule - March 31, 1999
(b) Reports on Form 8-K -
Filed on February 19, 1999 relating to the restructuring of the
Performance Materials business
Filed on February 25, 1999 relating to the Company's 1998
audited Financial Statements
- 21 -
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
May 11, 1999 The B.F.Goodrich Company
- ------------ ------------------------
/S/LAURENCE A. CHAPMAN
-----------------------
Laurence A. Chapman
Senior Vice President and
Chief Financial Officer
/S/ROBERT D. KONEY, JR.
------------------------
Robert D. Koney, Jr.
Vice President & Controller
(Chief Accounting Officer)
- 22 -
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Condensed Consolidated Balance Sheet and the Condensed Consolidated
Statement of Income of this Form 10-Q and is qualified in its entirety by
reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> MAR-31-1999
<CASH> 33,400
<SECURITIES> 0
<RECEIVABLES> 691,400
<ALLOWANCES> 23,700
<INVENTORY> 782,300
<CURRENT-ASSETS> 1,675,700
<PP&E> 2,319,800
<DEPRECIATION> 1,067,900
<TOTAL-ASSETS> 4,263,200
<CURRENT-LIABILITIES> 1,046,600
<BONDS> 991,900
123,700
0
<COMMON> 381,600
<OTHER-SE> 1,238,500
<TOTAL-LIABILITY-AND-EQUITY> 4,263,200
<SALES> 1,035,600
<TOTAL-REVENUES> 1,035,600
<CGS> 740,000
<TOTAL-COSTS> 740,000
<OTHER-EXPENSES> 26,200
<LOSS-PROVISION> 1,000
<INTEREST-EXPENSE> 21,200
<INCOME-PRETAX> 82,300
<INCOME-TAX> 30,400
<INCOME-CONTINUING> 49,300
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 49,300
<EPS-PRIMARY> .66
<EPS-DILUTED> .66
</TABLE>
