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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-Q
(Mark One ) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For quarterly period ended March 31, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For transition period from _______________ to _______________
Commission File No. 0-12553
PACCAR FINANCIAL CORP.
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(Exact name of Registrant as specified in its charter)
Washington 91-6029712
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(State or other jurisdiction of (I.R.S. Employer Identiciation No.)
incorporation or organization)
777 - 106th Avenue N.E., Bellevue, Washington 98004
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (206) 462-4100
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Former name, former address and former fiscal year, if changed since last
report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter periods 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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Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date: 145,000 shares at April 30,
1997.
THE REGISTRANT IS A WHOLLY-OWNED SUBSIDIARY OF PACCAR INC AND MEETS THE
CONDITIONS SET FORTH IN GENERAL INSTRUCTIONS (I)(1)(a) AND (b) OF FORM 10-Q
AND IS, THEREFORE, FILING THIS FORM WITH THE REDUCED DISCLOSURE FORMAT.
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Item 1 FINANCIAL STATEMENTS
PACCAR Financial Corp.
STATEMENTS OF INCOME AND RETAINED EARNINGS
(Thousands of Dollars)
Three Months Ended
March 31
1997 1996
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(Unaudited)
Interest and other income $44,402 $43,783
Rentals on operating leases 2,520 3,080
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TOTAL FINANCE INCOME 46,922 46,863
Interest expense 24,608 24,675
Other borrowing expense 447 475
Depreciation expense related
to operating leases 2,006 2,474
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TOTAL FINANCE EXPENSES 27,061 27,624
FINANCE MARGIN 19,861 19,239
Insurance premiums earned 1,395 1,332
Insurance claims and underwriting expenses 1,034 950
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INSURANCE MARGIN 361 382
Selling, general &
administrative expenses 5,994 6,094
Provision for losses on receivables 1,484 375
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INCOME BEFORE INCOME TAXES 12,744 13,152
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Federal and state income taxes 4,962 5,117
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NET INCOME 7,782 8,035
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Retained earnings at beginning of period 257,941 229,015
Cash dividends paid (2,654) (2,933)
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RETAINED EARNINGS AT END OF PERIOD $263,069 $234,117
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Earnings per share and dividends per share are not reported because the
Company is a wholly-owned subsidiary of PACCAR Inc.
See notes to financial statements.
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PACCAR Financial Corp.
BALANCE SHEETS
(Thousands of Dollars)
March 31 December 31
1997 1996*
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(Unaudited)
ASSETS
Cash $10,582 $13,154
Net finance and other receivables 2,090,061 2,095,961
Allowance for losses (35,970) (36,000)
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2,054,091 2,059,961
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Equipment on operating leases, net of
allowance for depreciation of $18,056
(1996--$18,628) 30,807 35,016
Other assets 14,993 12,481
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TOTAL ASSETS $2,110,473 $2,120,612
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LIABILITIES
Accounts payable and accrued expenses $32,839 $56,092
Payable for finance receivables acquired 6,857 27,734
Commercial paper and other short term borrowings 721,946 699,616
Medium-term notes 963,000 964,000
Income taxes - current and deferred 65,536 60,117
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TOTAL LIABILITIES 1,790,178 1,807,559
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STOCKHOLDER'S EQUITY
Preferred stock, par value $100 per share
6% noncumulative and nonvoting
450,000 shares authorized,
310,000 shares issued and outstanding 31,000 31,000
Common stock, par value $100 per share
200,000 shares authorized,
145,000 shares issued and outstanding 14,500 14,500
Paid in capital 11,726 9,612
Retained earnings 263,069 257,941
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TOTAL STOCKHOLDER'S EQUITY 320,295 313,053
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TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY $2,110,473 $2,120,612
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*The December 31, 1996 Balance Sheet has been derived from audited financial
statements.
See notes to financial statements.
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PACCAR Financial Corp.
STATEMENTS OF CASH FLOWS
(Thousands of Dollars)
Three Months Ended
March 31
1997 1996
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(Unaudited)
OPERATING ACTIVITIES:
Net income $7,782 $8,035
Items included in net income not
affecting cash:
Provision for losses on receivables 1,484 375
Decrease in deferred taxes payable (2,763) (3,653)
Depreciation and amortization 3,202 3,531
Decrease in payables,
income taxes and other (8,032) (6,164)
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NET CASH PROVIDED BY
OPERATING ACTIVITIES 1,673 2,124
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INVESTING ACTIVITIES:
Finance and other receivables acquired (280,560) (281,918)
Collections on finance and other receivables 238,396 227,488
Net decrease in wholesale receivables 13,753 22,259
Proceeds from disposal of equipment 3,375 4,388
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NET CASH USED IN
INVESTING ACTIVITIES (25,036) (27,783)
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FINANCING ACTIVITIES:
Net increase in commercial paper
and other short term borrowings 22,331 12,839
Proceeds from medium-term notes 105,000 125,000
Payments of medium-term notes (106,000) (110,500)
Additions to paid in capital 2,114 1,240
Payment of cash dividend (2,654) (2,933)
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NET CASH PROVIDED BY
FINANCING ACTIVITIES 20,791 25,646
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NET DECREASE IN CASH (2,572) (13)
CASH AT BEGINNING OF PERIOD 13,154 5,967
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CASH AT END OF PERIOD $10,582 $5,954
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See notes to financial statements.
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PACCAR Financial Corp.
NOTES TO FINANCIAL STATEMENTS
NOTE A--BASIS OF PRESENTATION
The accompanying unaudited financial statements 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. However, in the opinion of
management, all adjustments (consisting of normal recurring accruals)
considered necessary for a fair presentation have been included. For further
information, refer to the financial statements and footnotes included in
PACCAR Financial Corp.'s (the "Company") Annual Report on Form 10-K for the
year ended December 31, 1996.
NOTE B--TRANSACTIONS WITH PACCAR INC
The Company has a Support Agreement with PACCAR Inc which requires, among
other provisions, that PACCAR Inc provide financial assistance as necessary
to assure that the ratio of earnings to fixed charges (as defined) of the
Company will not fall below a level of 1.25 to 1 for a full fiscal year. The
ratio for the three-month period ended March 31, 1997 was 1.60 to 1 (see
Exhibit 12.2).
PACCAR Inc charges the Company for certain administrative services it
provides. These costs are charged to the Company based upon the Company's
specific use of the services and PACCAR Inc's cost. Management considers
these charges reasonable and not significantly different from the costs that
would be incurred if the Company were on a stand-alone basis. In lieu of
payment, PACCAR Inc recognizes certain of these administrative services as an
additional investment in the Company. The Company records the investment as
paid-in capital. The Company pays a dividend to PACCAR Inc for the paid-in
capital invested in the prior year. Cash dividends of $2.7 million and $2.9
million were paid to PACCAR Inc in the quarters ended March 31, 1997 and
1996, respectively.
Occasionally, the Company borrows funds from PACCAR Inc and makes
market-rate, short-term loans to PACCAR Inc. At March 31, 1997 and 1996, the
Company had no outstanding loans from or to PACCAR Inc.
NOTE C--PREFERRED STOCK
The Company's Articles of Incorporation provide that the 6% noncumulative,
nonvoting preferred stock (100% owned by PACCAR Inc) is redeemable only at
the option of the Company's Board of Directors.
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Item 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
The finance margin improved to $19.9 million from $19.2 million in 1996 due
to slightly higher (1%) average receivables and a higher margin rate on the
receivables. Although rate competition remains intense for new business, the
margin rate improved due to reduced financial leverage of the Company.
Selling, general and administrative expenses declined 2% from the 1996 level
because of ongoing cost controls. The provision for losses increased from
$.4 million in 1996 to $1.5 million in 1997 as a result of higher net credit
losses. Accounts past due over 30 days for the Company have increased to 2.4%
from 1.5% and 1.7% at March 31, 1996, and December 31, 1996, respectively.
Both the higher past dues ratios and higher credit losses in 1997 reflected a
more difficult operating environment, particularly in the used truck market.
While credit losses have increased in 1997, losses as a ratio to average
receivables outstanding remain low in comparison to historic trends. At
March 31, 1997, the allowance for losses was 1.70% of earning assets compared
to 1.70% at December 31, 1996 and 1.72% at March 31, 1996. The level of the
allowance reflects the risks inherent in the financing of commercial highway
transportation equipment.
As a result of the foregoing factors, net income for the first quarter of
1997 declined to $7.8 million from $8.0 million for the first quarter of 1996.
LIQUIDITY AND CAPITAL RESOURCES
During first quarter 1997, the Company funded its portfolio growth primarily
through the issuance of commercial paper, which increased $22.3 million from
December 1996. Cash decreased due principally to the timing of month-end
payments.
In order to minimize exposure to fluctuations in interest rates, the Company
seeks to borrow funds or enter into interest rate contracts with interest
rate characteristics similar to the characteristics of its receivables and
leases. Other considerations which affect the Company's funding operations
include the amount of fixed and variable rate receivables, the maturity
schedule of existing debt, the availability of desired debt maturities and
the level of interest rates.
As of March 31, 1997, the Company and PACCAR Inc together maintained unused
bank lines of credit of $445 million which are largely used to support the
Company's commercial paper borrowings.
Other information on liquidity and sources of capital as presented in the
Company's 1996 Annual Report on Form 10-K continues to be relevant.
PART II--OTHER INFORMATION
Item 6 EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits filed as part of this report are listed in the accompanying
Exhibit Index.
(b) There were no reports on Form 8-K for the quarter ended March 31, 1997.
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PACCAR Financial Corp.
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.
PACCAR Financial Corp.
(Registrant)
Date: May 9, 1997 BY: /S/T. R. Morton
-----------------------------
T. R. Morton
President
(Authorized Officer)
BY: /S/ M. T. Barkley
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M. T. Barkley
Controller
(Chief Accounting Officer)
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PACCAR Financial Corp.
EXHIBIT INDEX
3.1 Restated Articles of Incorporation of the Company, as amended
(incorporated by reference to Exhibit 3.1 to the Company's Annual Report
on Form 10-K dated March 26, 1985. Amendment incorporated by reference
to Exhibit 19.1 to the Company's Quarterly Report on Form 10-Q dated
August 13, 1985, File Number 0-12553).
3.2 By-Laws of the Company, as amended (incorporated by reference to Exhibit
3.2 to the Company's Registration Statement on Form 10 dated October 20,
1983, File Number 0-12553).
4.1 Indenture for Senior Debt Securities dated as of December 1, 1983 and
first Supplemental Indenture dated as of June 19, 1989 between the
Company and Citibank, N.A. (incorporated by reference to Exhibit 4.1 to
the Company's Annual Report on Form 10-K dated March 26, 1984, File
Number 0-12553 and Exhibit 4.2 to the Company's Registration Statement
on Form S-3 dated June 23, 1989, Registration Number 33-29434).
4.3 Forms of Medium-Term Note, Series F (incorporated by reference to
Exhibits 4.3A, 4.3B and 4.3C to the Company's Registration Statement on
Form S-3 dated May 26, 1992, Registration Number 33-48118).
Form of Letter of Representation among the Company, Citibank, N.A. and the
Depository Trust Company, Series F (incorporated by reference to Exhibit
4.4 to the Company's Registration Statement on Form S-3 dated May 26,
1992, Registration Number 33-48118).
4.4 Forms of Medium-Term Note, Series G (incorporated by reference to
Exhibits 4.3A and 4.3B to the Company's Registration Statement on Form
S-3 dated December 8, 1993, Registration Number 33-51335).
Form of Letter of Representation among the Company, Citibank, N.A. and
the Depository Trust Company, Series G (incorporated by reference to
Exhibit 4.4 to the Company's Registration Statement on Form S-3 dated
December 8, 1993, Registration Number 33-51335).
4.5 Forms of Medium-Term Note, Series H (incorporated by reference to
Exhibits 4.3A and 4.3B to the Company's Registration Statement on Form
S-3 dated March 11, 1996, Registration Number 333-01623).
Form of Letter of Representation among the Company, Citibank, N.A. and
the Depository Trust Company, Series H (incorporated by reference to
Exhibit 4.4 to the Company's Registration Statement on Form S-3 dated
March 11, 1996, Registration Number 333-01623).
10.1 Support Agreement between the Company and PACCAR Inc dated as of June
19, 1989 (incorporated by reference to Exhibit 28.1 to the Company's
Registration Statement on Form S-3 dated June 23, 1989, Registration
Number 33-29434).
12.1 Statement re computation of ratio of earnings to fixed charges of the
Company pursuant to SEC reporting requirements for the three-month
periods ended March 31, 1997 and 1996.
12.2 Statement re computation of ratio of earnings to fixed charges of the
Company pursuant to the Support Agreement with PACCAR Inc for the
three-month periods ended March 31, 1997 and 1996.
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PACCAR Financial Corp.
EXHIBIT INDEX
12.3 Statement re computation of ratio of earnings to fixed charges of PACCAR
Inc and subsidiaries pursuant to SEC reporting requirements for the
three-month periods ended March 31, 1997 and 1996.
27 Financial Data Schedule for Article 5 of Regulation S-X, Item 601(c) for
the three-month period ended March 31, 1997.
Other exhibits listed in Item 601 of Regulation S-K are not applicable.
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EXHIBIT 12.1
PACCAR Financial Corp.
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
PURSUANT TO SEC REPORTING REQUIREMENTS
(Thousands of Dollars)
Three Months Ended
March 31
1997 1996
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FIXED CHARGES
Interest expense $24,608 $24,675
Portion of rentals deemed interest 59 59
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TOTAL FIXED CHARGES $24,667 $24,734
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EARNINGS
Income before taxes $12,744 $13,152
Fixed charges 24,667 24,734
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EARNINGS AS DEFINED $37,411 $37,886
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RATIO OF EARNINGS TO FIXED CHARGES 1.52X 1.53X
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The method of computing the ratio of earnings to fixed charges shown above
complies with SEC reporting requirements but differs from the method called
for in the Support Agreement between the Company and PACCAR Inc. See Exhibit
12.2.
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EXHIBIT 12.2
PACCAR Financial Corp.
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
PURSUANT TO THE SUPPORT AGREEMENT
BETWEEN THE COMPANY AND PACCAR INC
(Thousands of Dollars)
Three Months Ended
March 31
1997 1996
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FIXED CHARGES
Interest expense $24,608 $24,675
Facility and equipment rental 178 177
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TOTAL FIXED CHARGES $24,786 $24,852
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EARNINGS
Income before taxes $12,744 $13,152
Depreciation 2,080 2,522
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14,824 15,674
Fixed charges 24,786 24,852
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EARNINGS AS DEFINED $39,610 $40,526
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RATIO OF EARNINGS TO FIXED CHARGES 1.60X 1.63X
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<PAGE>
EXHIBIT 12.3
PACCAR Inc
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
PURSUANT TO SEC REPORTING REQUIREMENTS
(Thousands of Dollars)
Three Months Ended
March 31
1997 1996
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FIXED CHARGES
Interest expense
PACCAR Inc and subsidiaries (1) $ 35,318 $32,809
Portion of rentals deemed interest 1,526 1,471
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TOTAL FIXED CHARGES $ 36,844 $34,280
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EARNINGS
Income before taxes -
PACCAR Inc and subsidiaries $ 88,690 $55,891
Fixed charges 36,844 34,280
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EARNINGS AS DEFINED $ 125,534 $90,171
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RATIO OF EARNINGS TO FIXED CHARGES 3.41X 2.63X
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(1) Exclusive of interest, if any, paid to PACCAR Inc
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<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
STATEMENTS OF INCOME AND RETAINED EARNINGS FOR THE THREE MONTHS ENDED MARCH 31,
1997 AND 1996 AND FROM THE BALANCE SHEETS AT MARCH 31, 1997 AND DECEMBER 31,
1996 OF PACCAR FINANCIAL CORP. AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> MAR-31-1997
<CASH> 10,582
<SECURITIES> 0
<RECEIVABLES> 2,090,061
<ALLOWANCES> 35,970
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 48,863
<DEPRECIATION> 18,056
<TOTAL-ASSETS> 2,110,473
<CURRENT-LIABILITIES> 0
<BONDS> 963,000
0
31,000
<COMMON> 14,500
<OTHER-SE> 274,795
<TOTAL-LIABILITY-AND-EQUITY> 2,110,473
<SALES> 0
<TOTAL-REVENUES> 48,317
<CGS> 0
<TOTAL-COSTS> 28,095
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 1,484
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 12,744
<INCOME-TAX> 4,962
<INCOME-CONTINUING> 7,782
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 7,782
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
