<PAGE>
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended September 30, 1998 Commission File Number 0-12015
HEALTHCARE SERVICES GROUP, INC.
-------------------------------------------------------
(Exact name of registrant as specified in its charter)
Pennsylvania 23-2018365
- ------------------------------- ----------------------------
(State or other jurisdiction of (IRS Employer Identification
incorporation or organization) number)
2643 Huntingdon Pike, Huntingdon Valley, Pennsylvania 19006
-----------------------------------------------------------
(Address of principal executive office) (Zip code)
Registrant's telephone number, including area code: 215-938-1661
------------
Indicate 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
past 90 days.
YES __x__ NO _____
Number of shares of common stock, issued and outstanding as of November 10, 1998
is 11,230,887
Total of 15 Pages
<PAGE>
<TABLE>
<CAPTION>
INDEX
PART I. FINANCIAL INFORMATION PAGE NO.
<S> <C> <C>
Consolidated Balance Sheets as of 2
September 30, 1998 and December 31, 1997
Consolidated Statements of Income for the Three Months Ended 3
September 30, 1998 and 1997
Consolidated Statements of Income for the
Nine Months Ended September 30, 1998 and 1997 4
Consolidated Statements of Cash Flows for the Nine Months 5
ended September 30, 1998 and 1997
Notes To Consolidated Financial Statements 6 - 8
Management's Discussion and Analysis of Financial Condition 9 - 12
and Results Of Operations
Part II. Other Information 13
Signatures 14
</TABLE>
-1-
<PAGE>
HEALTHCARE SERVICES GROUP, INC.
Consolidated Balance Sheets
<TABLE>
<CAPTION>
September 30, December 31,
1998 1997
(Unaudited) (Audited)
------------ ------------
ASSETS
CURRENT ASSETS:
<S> <C> <C>
Cash and cash equivalents $22,329,915 $17,774,219
Accounts and notes receivable, less allowance
for doubtful accounts of $4,096,000
in 1998 and $3,663,000 in 1997 41,349,879 36,560,661
Prepaid income taxes -- 366,712
Inventories and supplies 7,632,703 7,339,928
Deferred income taxes 708,939 567,119
Prepaid expenses and other 2,727,912 2,859,133
----------- -----------
Total current assets 74,749,348 65,467,772
----------- -----------
PROPERTY AND EQUIPMENT:
Laundry and linen equipment installations 9,762,036 10,993,558
Housekeeping equipment and office
furniture 8,318,117 8,731,042
Autos and trucks 51,110 157,611
----------- -----------
18,131,263 19,882,211
Less accumulated depreciation 12,459,260 14,245,071
----------- -----------
5,672,003 5,637,140
COST IN EXCESS OF FAIR VALUE OF NET
ASSETS ACQUIRED less accumulated
amortization of $1,393,378 in 1998 and
$1,312,660 in 1997 1,962,099 2,042,817
DEFERRED INCOME TAXES 2,412,890 1,067,670
OTHER NONCURRENT ASSETS 9,952,640 10,674,340
----------- -----------
$94,748,980 $84,889,739
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 2,836,474 $ 4,275,902
Accrued payroll, accrued and withheld payroll taxes 6,806,119 3,770,310
Other accrued expenses 879,400 944,501
Income taxes payable 1,300,561
Accrued insurance claims 785,337 771,142
----------- -----------
Total current liabilities 12,607,891 9,761,855
ACCRUED INSURANCE CLAIMS 2,954,365 2,900,964
COMMITMENTS AND CONTINGENCIES (Note 3)
STOCKHOLDERS' EQUITY: (Note 2)
Common stock, $.01 par value: 22,500,000
shares authorized, 11,158,182 shares issued
and outstanding in 1998 and 7,386,863 in 1997 111,582 73,869
Additional paid in capital 26,361,701 26,005,004
Retained earnings 52,713,441 46,148,047
----------- -----------
Total stockholders' equity 79,186,724 72,226,920
----------- -----------
$94,748,980 $84,889,739
=========== ===========
</TABLE>
See accompanying notes.
-2-
<PAGE>
Healthcare Services Group, Inc.
Consolidated Income Statements
(Unaudited)
For the Three Months
Ended September 30,
1998 1997
----------- -----------
Revenues $54,038,751 $47,209,073
Operating costs and expenses:
Costs of services provided 46,582,281 40,078,568
Selling general and administrative 4,554,448 4,259,971
Other Income:
Interest Income 372,872 257,903
----------- -----------
Income before income taxes 3,274,894 3,128,437
Income taxes 1,002,000 1,273,000
----------- -----------
Net Income $ 2,272,894 $ 1,855,437
=========== ===========
Earnings per share of common stock: (Notes 2 and 5)
Basic earnings per common share $ 0.20 $ 0.17
=========== ===========
Diluted earnings per common share $ 0.20 $ 0.16
=========== ===========
Basic weighted average number
of common shares outstanding 11,262,386 11,055,189
=========== ===========
Diluted weighted average number
of common shares outstanding 11,648,193 11,286,944
=========== ===========
See accompanying notes
-3-
<PAGE>
Healthcare Services Group, Inc.
Consolidated Income Statements
(Unaudited)
<TABLE>
<CAPTION>
For the Nine Months
Ended September 30,
1998 1997
------------- -------------
<S> <C> <C>
Revenues $ 151,211,699 $ 134,160,823
Operating costs and expenses:
Costs of services provided 129,042,608 114,190,260
Selling general and administrative 12,795,997 11,787,684
Other Income (Expense):
Settlement of civil litigation ( Note 4) -- (1,800,000)
Interest Income 1,091,301 1,099,123
------------- -------------
Income before income taxes 10,464,395 7,482,002
Income taxes 3,899,000 3,560,000
------------- -------------
Net Income $ 6,565,395 $ 3,922,002
============= =============
Earnings per share of common stock: (Notes 2 and 5)
Basic earnings per common share $ 0.59 $ 0.34
============= =============
Diluted earnings per common share $ 0.57 $ 0.34
============= =============
Basic weighted average number
of common shares outstanding 11,203,919 11,438,280
============= =============
Diluted weighted average number
of common shares outstanding 11,554,287 11,636,508
============= =============
</TABLE>
See accompanying notes
-4-
<PAGE>
HEALTHCARE SERVICES GROUP, INC.
Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
For the Nine Months Ended
September 30,
----------------------------
1998 1997
------------ ------------
<S> <C> <C>
Cash flows from operating activities:
Net Income $ 6,565,395 $ 3,922,002
Adjustments to reconcile net income
to net cash provided by operating activities:
Depreciation and amortization 1,512,199 1,598,078
Bad debt provision 1,840,000 1,125,000
Deferred income taxes (benefits) (1,487,040) 2,972
Tax benefit of stock option transactions 309,667 51,784
Changes in operating assets and liabilities:
Accounts and notes receivable (6,628,734) (4,352,424)
Prepaid income taxes 366,712
Inventories and supplies (292,775) (18,682)
Changes to long term notes receivable 924,160 (114,509)
Accounts payable and other accrued expenses (1,504,530) (758,263)
Accrued payroll, accrued and withheld payroll
taxes 3,035,809 2,817,145
Accrued insurance claims 67,596 446,773
Income taxes payable 1,300,561 1,491,119
Prepaid expenses and other assets (71,724) (196,399)
------------ ------------
Net cash provided by operating activities 5,937,296 6,014,596
------------ ------------
Cash flows from investing activities:
Disposals of fixed assets 122,659 162,452
Additions to property and equipment (1,589,002) (1,236,009)
------------ ------------
Net cash used in investing activities (1,466,343) (1,073,557)
------------ ------------
Cash flows from financing activities:
Purchase of treasury stock (1,500,180) (9,147,680)
Proceeds from the exercise of stock options 1,584,923 880,925
------------ ------------
Net cash provided by (used in) financing activities 84,743 (8,266,755)
------------ ------------
Net increase (decrease) in cash and cash equivalents 4,555,696 (3,325,716)
Cash and cash equivalents at beginning of the year 17,774,219 22,677,290
------------ ------------
Cash and cash equivalents at end of the period $ 22,329,915 $ 19,351,574
============ ============
</TABLE>
See accompanying notes.
-5-
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 1 - Basis of Reporting
The accompanying financial statements are unaudited and do not include
certain information and note disclosures required by generally accepted
accounting principles for complete financial statements. However, in the opinion
of the Company, all adjustments considered necessary for a fair presentation
have been included. The balance sheet shown in this report as of December 31,
1997 has been derived from, and does not include, all the disclosures contained
in the financial statements for the year ended December 31, 1997. The financial
statements should be read in conjunction with the financial statements and notes
thereto included in the Company's Annual Report on Form 10-K for the year ended
December 31, 1997. The results of operations for the three and nine month
periods ended September 30, 1998 and 1997 are not necessarily indicative of the
results that may be expected for the full fiscal year.
Note 2 - Three-For-Two Stock Split
On August 5, 1998, the Board of Directors declared a three-for-two
stock split of the Company's Common Stock effected in the form of a 50% stock
dividend payable on August 27, 1998 to Common Stock stockholders of record on
August 17, 1998. An amount equal to the par value of the shares of Common Stock
issued was transferred from additional paid in capital to common stock in the
September 30, 1998 balance sheet and earnings per common share have been
adjusted to reflect the three-for-two stock split. The effect of this action was
to increase shares outstanding at August 27, 1998 by approximately 3,765,694 to
approximately 11,297,082.
Note 3 - Other Contingencies
The Company has a $13,000,000 bank line of credit on which it may draw
to meet short-term liquidity requirements or for other purposes, that expires on
September 30, 1999. Amounts drawn under the line are payable upon demand. At
both September 30, 1998 and December 31, 1997, there were no borrowings under
the line. However at both September 30, 1998 and December 31, 1997, the Company
had outstanding approximately $13,000,000 of irrevocable standby letters of
credit, which relate to payment obligations under the Company's insurance
program. As a result of letters of credit issued, there are no amounts available
under the line at either September 30, 1998 and December 31, 1997.
The Company is also involved in miscellaneous claims and litigation
arising in the ordinary course of business. The Company believes that these
matters, taken individually or in the aggregate, would not have a material
adverse impact on the Company's financial position or results of operations.
-6-
<PAGE>
Note 4 - Settlement of Civil Litigation
On July 24, 1997, the Company and the U.S. Attorney for the Eastern
District of Pennsylvania reached a settlement of the civil litigation commenced
by the United States Attorney on or about May 24, 1996. This litigation was a
result of and arose from (1) payments made by the Company for supplies which
were allegedly furnished to clients of the Company and the actions of the
Company after the payments were made and (2) payments made to certain clients of
the Company in connection with the purchase of laundry installations from those
clients. All claims described in the complaint were settled through the payment
in July, 1997 of $1,225,000 to the United States government. The Company and its
officers denied all allegations, and all allegations against the Company and its
officers were dismissed with prejudice. The monetary impact of this settlement
plus estimated related legal costs of $575,000, amounting to approximately
$1,800,000 was accrued at June 30, 1997 and reduced the net income for the nine
month period ended September 30, 1997, as a result of the settlement payment, by
$1,577,000 or $.14 per basic and $.13 per diluted common share (after the effect
of the August 5, 1998 three-for-two stock split). The Company has not recorded
an income tax benefit in the accompanying financial statements for the
settlement payment of $1,225,000 and therefore the effective tax rate of 47.6%
for the nine month period ended September 30, 1997 is in excess of the statutory
rate.
Note 5 - Earnings Per Common Share
In February 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 128 (SFAS No. 128) Earnings per
Share, which is effective for financial statements for periods ending after
December 15, 1997 and requires that all prior period earnings per share data be
restated. The Company's financial statements reflect this adoption. The new
standard eliminates primary and fully diluted earnings per common share and
requires presentation of basic and, if applicable, diluted earnings per common
share. Basic earnings per common share is computed by dividing income available
to common shareholders by the weighted-average common shares outstanding for the
period. Diluted earnings per common share reflects the weighted-average common
shares outstanding and dilutive potential common shares, such as stock options.
Earnings per common share reflect the three-for-two stock split described in
Note 2.
-7-
<PAGE>
Note 6 - Effect of Recently Issued Accounting Pronouncements
Reporting Comprehensive Income
In June 1997, the FASB issued SFAS No. 130, "Reporting
Comprehensive Income", which is effective for fiscal years beginning after
December 15, 1997. The Statement addresses the reporting and displaying of
comprehensive income and its components. Adoption of SFAS No. 130 relates to
disclosure within the financial statements and did not impact the Company's
financial statements.
Disclosures about Segments of an Enterprise and Related Information
In June 1997, the FASB issued SFAS No. 131, "Disclosures about
Segments of an Enterprise and Related Information" which is effective for fiscal
years beginning after December 15, 1997. The Statement changes the way public
companies report information about segments of their business in their annual
financial statements and requires them to report selected segment information in
their quarterly reports. Adoption of SFAS No. 131 is not expected to have a
material effect on the Company's financial statements.
Employers' Disclosure About Pensions and Postretirement Benefits
In February 1998, the FASB issued SFAS No. 132, "Employers' Disclosure
About Pensions and Other Postretirement Benefits." SFAS No. 132, effective for
the year ending December 31, 1998, requires additional disclosures and
eliminates certain existing disclosures, but does not affect recognition or
measurement of net pension or postretirement benefit cost. Restatement of
financial statement disclosures for prior periods is required. Adoption of SFAS
No. 132 is not expected to have a material effect on the Company's financial
statements.
-8-
<PAGE>
PART I.
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction
with the financial statements and notes thereto.
RESULTS OF OPERATIONS
Revenues for the third quarter of 1998 increased by 14.5% over revenues
in the corresponding 1997 quarter. Revenues for the nine months ended September
30, 1998 increased by 12.7 % over the corresponding 1997 period. The following
factors contributed to the increase in 1998 third quarter and nine months period
revenues as compared to the corresponding 1997 periods: service agreements with
new clients increased revenues by 23.6 % for the third quarter and 19.4 % for
the nine month period; providing new services to existing clients increased
revenues 3.3 % for the third quarter and 6.5% for the nine month period; and
cancellations and other minor changes decreased revenues 12.4 % for the third
quarter and 13.2 % for the nine month period.
Cost of services provided as a percentage of revenues increased to
86.2% for the third quarter of 1998 from 84.9 % in the corresponding 1997
quarter. In addition, cost of services as a percentage of revenue increased
slightly to 85.3% for the nine month period ending September 30, 1998 from 85.1%
in the same 1997 period. The primary factors affecting specific variations in
the 1998 third quarter and nine month periods' cost of services provided as a
percentage of revenue and their effects on the respective 1.3% and .2 %
increases are as follows: in the third quarter an increase of 1.0% in labor
costs and payroll related taxes, an increase of .8% in the allowance for
doubtful accounts and an increase of .6% in the cost of supplies consumed in
performing services; and offsetting these increases was a decrease of .7% in
workers' compensation, general liability and other insurance; in the nine month
period an increase of 1.1% in the cost of supplies consumed in performing
services and an increase of .4% in the allowance for doubtful accounts;
offsetting these increases was a decrease of .5% in labor costs and payroll
related taxes and a decrease of .5% in workers' compensation, general liability
and other insurance.
Selling, general and administrative expenses as a percentage of revenue
decreased in the third quarter of 1998 to 8.4% as compared to 9.0% in the
corresponding 1997 three month period. Additionally, during the nine month
period ended September 30, 1998 selling, general and administrative expenses as
-9-
<PAGE>
a percentage of revenue decreased to 8.5% as compared to 8.8% in the
corresponding 1997 period. The three and nine month decreases are primarily
attributable to the Company's ability to control certain selling, general and
administrative expenses while also comparing them to a greater revenue base.
The effective tax rate for the third quarter 1998, as well as the nine
month period ended September 30, 1998 was positively impacted by the reversal of
prior years' over accruals for income taxes.
Liquidity and Capital Resources
At September 30, 1998 the Company had working capital and cash of
$62,141,458 and $22,329,915 respectively as compared to December 31, 1997
working capital and cash of $55,705,917 and $17,774,219, respectively. The
Company's current ratio at September 30, 1998 is 5.9 to 1 compared to 6.7 to 1
at December 31, 1997.
The net cash provided by the Company's operating activities was
$5,937,296 for the nine month period ended September 30, 1998 as compared to net
cash provided of $6,014,596 in the same 1997 period. The principle sources of
cash flows from operating activities for the nine month periods ended September
30, 1998 and 1997 were net income, timing of payments for payroll, payroll
related taxes, depreciation and amortization and charges to operations for bad
debt provisions. The operating activity that used the largest amount of cash was
a $5,704,574 and $4,466,933 net increase in accounts and current and long term
notes receivable at September 30, 1998 and 1997, respectively. The increases in
these amounts resulted primarily from the growth in the Company's revenues.
Additionally, operating activities' cash flows for the nine month period ended
September 30, 1998 was decreased by $1,504,530 as a result of the timing of
payments to vendors.
The Company's principle use of cash in investing activities for the
nine month periods ended September 30, 1998 and 1997 was the purchase of
housekeeping equipment and laundry equipment installations.
The Company expends considerable effort to collect the amounts due for
its services on the terms agreed upon with its clients. Many of the Company's
clients participate in programs funded by federal and state governmental
agencies which historically have encountered delays in making payments to its
program participants. Whenever possible, when a client falls behind in making
agreed-upon payments, the Company converts the unpaid accounts receivable to
interest bearing promissory notes. The promissory notes receivable provide a
means by which to further evidence the amounts owed, provide a definitive
repayment plan and therefore may enhance the ultimate collectibility of the
amounts due. In some instances the Company obtains a security interest in
certain of the debtors' assets.
The Company encounters difficulty in collecting amounts due from
certain of its clients, including those in bankruptcy, those turned over to
collection attorneys, those which have terminated service agreements and slow
payers experiencing financial difficulties. In order to provide for these
-10-
<PAGE>
collection problems and the general risk associated with the granting of credit
terms, the Company has increased its bad debt provision by approximately
$1,840,000 in the nine month period ended September 30, 1998. In making its
evaluation, in addition to analyzing and anticipating, where possible, the
specific cases described above, management considers the general collection risk
associated with trends in the long-term care industry.
The Company has a $13,000,000 bank line of credit on which it may draw
to meet short-term liquidity requirements in excess of internally generated cash
flow, that expires on September 30, 1999. Amounts drawn under the line are
payable on demand. At September 30, 1998, there were no borrowings under the
line. However, at such date, the line was fully used as a result of contingent
liabilities of the Company to the lender relating to letters of credit issued
for the Company (See Note 3 of Notes to Financial Statements). In light of its
existing working capital balances, the Company does not believe it will need to
currently increase its bank line of credit.
At September 30, 1998, the Company had $22,329,915 of cash and cash
equivalents, which it views as its principal measure of liquidity.
The level of capital expenditures by the Company is generally dependent
on the number of new clients obtained. Such capital expenditures primarily
consist of housekeeping equipment and laundry and linen equipment installations.
Although the Company has no remaining specific material commitments for capital
expenditures during calendar year 1998, it estimates that it will have incurred
capital expenditures of approximately $2,000,000 during this year in connection
with housekeeping equipment and laundry and linen equipment installations in its
clients' facilities, as well as hardware and software expenditures relating to
the implementation of a new computerized financial reporting system. The Company
believes that its cash from operations, existing balances and credit line will
be adequate for the foreseeable future to satisfy the needs of its operations
and to fund its continued growth. However, if the need arose, the Company would
seek to obtain capital from such sources as long-term debt or equity financing.
In accordance with the Company's previously announced authorizations to
purchase its outstanding common stock, the Company expended approximately
$1,500,000 to purchase 150,000 shares of its common stock in September 1998 at
an average price of $10.00 per common share and $10,900,000 during 1997 to
purchase 1,413,750 shares of its common stock at an average price of $7.73 per
common share. The Company remains authorized to purchase approximately 613,500
shares pursuant to previous Board of Directors' action (in each case after
giving effect to the 50% stock dividend described below).
The Company's Board of Directors declared a three-for-two stock split
in the form of a 50% stock dividend payable August 27, 1998, in shares of the
Company's Common Stock to the owners of its Common Stock of record at the close
of business August 17, 1998. The effect of this action was to increase shares
outstanding by approximately 3,765,694 to approximately 11,297,082. The
three-for-two stock split has been reflected in the September 30, 1998 balance
sheet and earnings per common share have been adjusted to reflect the
three-for-two stock split.
-11-
<PAGE>
Other Matters - Year 2000 Compliance
The Company is in the process of implementing new operating and
application software which it believes will be fully operational during 1998.
The Company has been notified by its software manufacturer, as well as the firm
providing installation support, that the new applications have functionality for
the year 2000. The Company does not believe it will incur any material expense,
beyond the new systems installation costs, with respect to year 2000 issues.
Additionally, the Company utilizes an independent service bureau for the
processing of payroll and payroll tax related operations. Many of the Company's
clients participate in programs funded by federal and state governmental
agencies which may be affected by year 2000 issue. The Company has been notified
by its payroll processing company that all of its systems will be fully
compliant with year 2000 requirements. Any failure by the Company, its outside
processing company, its clients or the federal and state governmental agencies
to effectively monitor or implement the above referenced operational, financial,
management and technical support systems with reference to year 2000 compliance
could have a material adverse effect on the Company's business and consolidated
results of operations.
Effects of Inflation
All of the Company's service agreements allow it to pass through to its
clients increases in the cost of labor resulting from new wage agreements. The
Company believes that it will be able to recover increases in costs attributable
to inflation by continuing to pass through cost increases to its clients.
Cautionary Statements Regarding Forward Looking Statements
Certain matters discussed may include forward-looking statements that
are subject to risks and uncertainties that could cause actual results or
objectives to differ materially from those projected. Such risks and
uncertainties include, but are not limited to, risks arising from the Company
providing its services exclusively to the healthcare industry and credit and
collection risks associated with this industry. Additionally, the Company's
operating results would be adversely effected if unexpected increases in the
costs of labor, materials, supplies and equipment used in performing its
services could not be passed on to clients.
In addition, the Company believes that in order to improve its
financial performance it must continue to obtain service agreements with new
clients, as well as providing new services to existing clients, achieve modest
price increases on current service agreements with existing clients and maintain
internal cost reduction strategies at the various operational levels of the
Company. Furthermore, the Company believes that its ability to sustain the
internal development of managerial personnel is an important factor impacting
future operating results and successfully executing projected growth strategies.
-12-
<PAGE>
PART II. Other Information
Item 1. Legal Proceedings. Not Applicable
Item 2. Changes in Securities. Not Applicable
Item 3. Defaults under Senior Securities. Not Applicable
Item 4. Submission of Matters to a Vote of Security Not Applicable
Holders
Item 5. Other Information.
a) The Company's Board of Directors declared a three-for-two
stock split in the form of a 50% stock dividend payable
August 27, 1998, in shares of the Company's Common Stock to
the owners of its Common Stock of record at the close of
business August 17, 1998. The effect of this action was to
increase shares outstanding by approximately 3,765,694 to
approximately 11,297,082 shares.
Item 6. Exhibits and Reports on Form 8-K.
a) Exhibits -
27 - Financial data schedule
b) Reports on Form 8-K - None
-13-
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant had duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
HEALTHCARE SERVICES GROUP, INC.
November 12, 1998 /s/ Daniel P. McCartney
- --------------------- ---------------------------------------------
Date DANIEL P. McCARTNEY, Chief
Executive Officer
November 12, 1998 /s/ Thomas A. Cook
- --------------------- ----------------------------------------------
Date THOMAS A. COOK, President and
Chief Operating Officer
November 12, 1998 /s/ James L. DiStefano
- --------------------- ---------------------------------------------
Date JAMES L. DiSTEFANO, Chief Financial
Officer and Treasurer
November 12, 1998 /s/ Richard W. Hudson
- --------------------- ---------------------------------------------
Date RICHARD W. HUDSON, Vice
President-Finance, Secretary and Chief
Accounting Officer
-14-
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> SEP-30-1998
<CASH> 22,329,915
<SECURITIES> 0
<RECEIVABLES> 45,445,879
<ALLOWANCES> 4,096,000
<INVENTORY> 7,632,703
<CURRENT-ASSETS> 74,749,348
<PP&E> 18,131,263
<DEPRECIATION> 12,459,260
<TOTAL-ASSETS> 94,748,980
<CURRENT-LIABILITIES> 12,607,891
<BONDS> 0
111,582
0
<COMMON> 0
<OTHER-SE> 79,075,142
<TOTAL-LIABILITY-AND-EQUITY> 94,748,980
<SALES> 0
<TOTAL-REVENUES> 151,211,699
<CGS> 129,042,608
<TOTAL-COSTS> 141,838,605
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 10,464,395
<INCOME-TAX> 3,899,000
<INCOME-CONTINUING> 6,565,395
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 6,565,395
<EPS-PRIMARY> .59
<EPS-DILUTED> .57
</TABLE>
