<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
( x ) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1998
------------------
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
---------------- -----------------
Commission File Number 0-15057
-------
P.A.M. TRANSPORTATION SERVICES, INC.
------------------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 71-0633135
-------- ----------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
Highway 412 West, Tontitown, Arkansas 72770
-------------------------------------------
(Address of principal executive offices)
(Zip Code)
(501) 361-9111
--------------
(Registrants telephone number, including area code)
N/A
---
(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 period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
--- ---
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date:
Class Outstanding at November 9, 1998
----- -------------------------------
Common Stock, $.01 Par Value 8,347,957
<PAGE> 2
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
2
<PAGE> 3
P.A.M. TRANSPORTATION SERVICES, INC.
AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
<TABLE>
<CAPTION>
September 30, December 31,
1998 1997
---- ----
(unaudited) (note)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 338 $ 6,401
Receivables:
Trade, net of allowance 19,250 16,915
Other 3,990 1,703
Equipment held for sale 170 1,529
Operating supplies and inventories 458 449
Deferred income taxes 187 61
Prepaid expenses and deposits 3,806 3,384
Income taxes refundable 20 415
--------- ---------
Total current assets 28,219 30,857
Property and equipment, at cost 131,138 103,572
Less: accumulated depreciation (44,229) (37,382)
--------- ---------
Net property and equipment 86,909 66,190
Other assets:
Excess of cost over net assets acquired 2,308 2,400
Non compete agreement 407 737
Other 752 504
--------- ---------
Total other assets 3,467 3,641
--------- ---------
Total assets $ 118,595 $ 100,688
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term debt $ 10,907 $ 15,544
Trade accounts payable 17,101 9,233
Other current liabilities 5,723 4,835
--------- ---------
Total current liabilities 33,731 29,612
Long-term debt, less current portion 32,952 28,226
Non compete agreement -- 312
Deferred income taxes 12,362 9,376
Shareholders' equity:
Common stock 83 83
Additional paid-in capital 18,768 18,592
Retained earnings 20,699 14,487
--------- ---------
Total shareholders' equity 39,550 33,162
--------- ---------
Total liabilities and shareholders' equity $ 118,595 $ 100,688
========= =========
</TABLE>
Note: The balance sheet at December 31, 1997 has been derived from the
audited financial statements at that date but does not include all of
the information and footnotes required by generally accepted accounting
principles for complete financial statements. See notes to condensed
consolidated financial statements.
3
<PAGE> 4
P.A.M. TRANSPORTATION SERVICES, INC.
AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
(thousands except per share data)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Operating revenues $ 34,131 $ 30,776 $ 105,583 $ 94,759
Operating expenses:
Salaries, wages and benefits 15,419 14,071 47,852 42,936
Operating supplies 6,361 5,714 19,714 18,152
Rent/purchased transportation 224 487 697 1,342
Depreciation and amortization 3,447 3,243 10,492 9,598
Operating taxes and licenses 2,080 1,843 6,106 5,608
Insurance and claims 1,483 1,390 4,436 4,223
Communications and utilities 410 251 1,168 699
Other 715 582 2,060 1,731
Loss (Gain) on sale of equipment (17) 0 56 0
----------- ----------- ----------- -----------
30,122 27,581 92,581 84,289
----------- ----------- ----------- -----------
Operating income 4,009 3,195 13,002 10,470
Other income (expense)
Interest expense (981) (801) (2,838) (2,560)
----------- ----------- ----------- -----------
(981) (801) (2,838) (2,560)
Income before income taxes 3,028 2,394 10,164 7,910
Income taxes --current 185 429 926 988
--deferred 990 481 3,025 2,061
----------- ----------- ----------- -----------
1,175 910 3,951 3,049
Net income $ 1,853 $ 1,484 $ 6,213 $ 4,861
=========== =========== =========== ===========
Net income per common share:
Basic $ 0.22 $ 0.18 $ 0.75 $ 0.60
=========== =========== =========== ===========
Diluted $ 0.22 $ 0.18 $ 0.74 $ 0.59
=========== =========== =========== ===========
Average common shares outstanding-Basic 8,312,674 8,223,490 8,299,568 8,166,171
=========== =========== =========== ===========
Average common shares outstanding-Diluted 8,421,163 8,362,783 8,452,355 8,228,282
=========== =========== =========== ===========
</TABLE>
See notes to condensed consolidated financial statements.
4
<PAGE> 5
P.A.M. TRANSPORTATION SERVICES, INC.
AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(unaudited)
(in thousands)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
1998 1997
---- ----
<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 6,213 $ 4,861
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 10,492 9,598
Non compete agreement amortization 330 330
Provision for deferred income taxes 3,025 2,061
Loss on retirement of property and equipment 56 0
Changes in operating assets and liabilities:
Accounts receivable (4,228) (4,513)
Prepaid expenses and other current assets (678) (136)
Accounts payable 7,868 2,468
Accrued expenses 887 1,386
--------- ---------
Net cash provided by operating activities 23,965 16,055
INVESTING ACTIVITIES
Purchases of property and equipment (33,564) (11,832)
Proceeds from sales of assets 3,584 145
--------- ---------
Net cash used in investing activities (29,980) (11,687)
FINANCING ACTIVITIES
Borrowings under lines of credit 125,632 108,014
Repayments under lines of credit (129,116) (112,822)
Borrowings of long-term debt 24,505 6,131
Repayments of long-term debt (21,245) (11,638)
Proceeds from exercise of stock options 176 422
--------- ---------
Net cash provided by (used in) financing activities (48) (9,893)
--------- ---------
Net decrease in cash and cash equivalents (6,063) (5,525)
Cash and cash equivalents at beginning of period $ 6,401 $ 5,940
--------- ---------
Cash and cash equivalents at end of period $ 338 $ 415
========= =========
</TABLE>
See notes to condensed consolidated financial statements.
5
<PAGE> 6
P.A.M. TRANSPORTATION SERVICES, INC.
AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
SEPTEMBER 30, 1998
NOTE A: BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In management's opinion, all adjustments (consisting of
normal recurring accruals) necessary for a fair presentation have been included.
Operating results for the nine-month period ended September 30, 1998 are not
necessarily indicative of the results that may be expected for the year ended
December 31, 1998. For further information, refer to the consolidated financial
statements and the footnotes thereto included in the Company's annual report on
Form 10-K for the year ended December 31, 1997.
NOTE B: NOTES PAYABLE AND LONG-TERM DEBT
In the first nine months of 1998, the Company's subsidiaries, P.A.M. Dedicated
Services, Inc. and Choctaw Express, Inc., entered into installment obligations
for the purchase of revenue equipment in the aggregate amount of approximately
$20.8 million and $3.7 million, respectively. These obligations are payable in
36, 48 and 60 monthly installments at interest rates ranging from 6.19% to
7.50%.
NOTE C: NEW ACCOUNTING PRONOUNCEMENT
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, "Accounting for Derivative Instruments
and Hedging Activities". The Statement establishes accounting and reporting
standards requiring that every derivative instrument be recorded in the balance
sheet as either an asset or liability at its fair value. The Company has
determined that the adoption of this statement will have no material effect on
its financial statements.
6
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PART I - FINANCIAL INFORMATION
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
7
<PAGE> 8
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
FORWARD-LOOKING INFORMATION
Certain information included in this Quarterly Report on Form 10-Q contains
"forward-looking statements" within the meaning of the Private Securities
Litigation Reform Act of 1995. Such forward-looking statements may relate to
financial results and plans for future business activities, and are thus
prospective. Such forward-looking statements are subject to risks, uncertainties
and other factors which could cause actual results to differ materially from
future results expressed or implied by such forward-looking statements.
Potential risks and uncertainties include, but are not limited to, general
economic conditions, competition and other uncertainties detailed in this report
and detailed from time to time in other filings by the Company with the
Securities and Exchange Commission.
THREE MONTHS ENDED SEPTEMBER 30, 1998 VS. THREE MONTHS ENDED SEPTEMBER 30, 1997
For the quarter ended September 30, 1998, revenues increased 10.9% to $34.1
million as compared to $30.8 million for the quarter ended September 30, 1997.
The main factor for the increase in revenues was a 14.9% increase in the average
number of tractors from 917 in the third quarter of 1997 compared to 1,054 in
third quarter of 1998.
The Company's operating ratio improved to 88.2% of revenues in the third quarter
of 1998 compared to 89.6% in the third quarter of 1997.
Salaries, wages and benefits decreased from 45.7% of revenues in the third
quarter of 1997 to 45.2% of revenues in the third quarter of 1998. This decrease
was due to the replacement of higher cost fleet owners with company drivers and
discontinuation of the fuel surcharge paid to fleet owners. The decrease was
partially offset by an increase in amounts paid to company drivers due to
changes in driver pay packages early in the first quarter of 1998.
Rent and purchased transportation decreased from 1.6% of revenues in the third
quarter of 1997 to 0.7% of revenues in the third quarter of 1998. This decrease
was due to the replacement of rental trailers with company-owned trailers and a
planned decrease in intermodal operations, thus reducing purchased
transportation costs.
Communications and utilities increased from 0.8% of revenues in the third
quarter of 1997 to 1.2% of revenues in the third quarter of 1998 due to
increased usage of Qualcomm satellite tracking units.
NINE MONTHS ENDED SEPTEMBER 30, 1998 VS. NINE MONTHS ENDED SEPTEMBER 30, 1997
For the nine months ended September 30, 1998, revenues increased 11.4% to $105.6
million as compared to $94.8 million for the nine months ended September 30,
1997. The main factor for the increase in revenues was a 13.0% increase in the
average number of tractors from 917 for the first nine months of 1997 compared
to 1,036 for the first nine months of 1998.
The Company's operating ratio improved to 87.7% of revenues in the first nine
months of 1998 compared to 89.0% in the first nine months of 1997.
Operating supplies and expenses decreased from 19.2% of revenues in the first
nine months of 1997 to 18.7% of revenues in the first nine months of 1998. The
decrease represents a lower price paid for diesel fuel.
Rent and purchased transportation decreased from 1.4% of revenues in the first
nine months of 1997 to 0.7% of revenues in the first nine months of 1998. This
decrease was due to the replacement of rental
8
<PAGE> 9
trailers with company-owned trailers and a planned decrease in intermodal
operations, thus reducing purchased transportation costs.
Communications and utilities increased from 0.7% of revenues in the first nine
months of 1997 to 1.1% of revenues in the first nine months of 1998 due to
increased usage of Qualcomm units and federal surcharges related to inbound
"toll-free" calls initiated from payphones.
LIQUIDITY AND CAPITAL RESOURCES
During the first nine months of 1998, the Company generated $24.0 million in
cash from operating activities. Investing activities used $30.0 million in cash
in the first nine months of 1998. Financing activities neither generated or used
cash in the first nine months of 1998 primarily due to borrowings and repayments
of approximately the same amount.
The Company's principal subsidiary, P.A.M. Transport, Inc., has a $15.0 million
secured bank line of credit subject to borrowing limitations. The line of credit
includes a provision that allows the Company to finance equipment at a reduced
interest rate of LIBOR + 1.50% (currently 7.14%). The maximum amount of
equipment that may be financed under this equipment provision is $7.5 million
with the remaining $7.5 million representing a general "working capital" line of
credit at an interest rate of LIBOR + 1.85% (currently 7.49%). Outstanding
advances on this line of credit were approximately $3.3 million at September 30,
1998, including $1.6 million in letters of credit. The Company's borrowing base
limitation at September 30, 1998 was $11.7 million. The line of credit is
guaranteed by the Company and matures on May 31, 1999 while the equipment
portion of the line of credit matures on May 31, 2000.
In addition to cash flow from operations, the Company uses its existing line of
credit on an interim basis to finance capital expenditures and repay long-term
debt. Longer-term transactions, such as installment notes (generally three to
five year terms at fixed rates), are typically entered into for the purchase of
revenue equipment; however, the Company purchased additional revenue equipment
during the first nine months of 1998 with a cost of approximately $5.6 million
using its existing line of credit. In addition, P.A.M. Dedicated Services, Inc.
and Choctaw Express, Inc., subsidiaries of the Company, entered into installment
obligations during the first nine months of 1998 for the purchase of revenue
equipment in the amount of approximately $20.8 and $3.7 million, respectively,
payable in 36, 48 and 60 monthly installments at interest rates ranging from
6.19% to 7.50%.
In addition, during the remainder of 1998, the Company plans to replace 165
tractors and to add 10 tractors and 50 trailers which would result in additional
debt of approximately $10.3 million. Management expects that the Company's
existing working capital and its available line of credit will be sufficient to
meet the Company's current capital commitments, to repay indebtedness coming due
in fiscal 1998, and to fund its operating needs during the remainder of fiscal
1998.
YEAR 2000
In the next two years, many companies may face a potentially serious information
systems problem because their computer software applications and operational
programs may not properly recognize calendar dates beginning in the Year 2000.
This problem could force computers to either shut down or provide incorrect data
or information causing a temporary inability to process transactions.
Accordingly, a disruption of normal business activities may occur.
The Company began the process of identifying the changes required to its
computer programs and hardware in 1997 and has completed its Year 2000
assessment consisting of an analysis of all information systems, data and voice
networks, physical plants, rolling stock electronic systems and external
suppliers and customers. The Company has determined its overall risk due to Year
2000 failures and has developed a strategy to repair or replace any system
determined to be non-compliant by June 30, 1999. The Company anticipates funding
all Year 2000 related expenditures, which are currently estimated at $50,000,
from
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<PAGE> 10
operating cash flows and as of September 30, 1998 the Company had incurred
costs of approximately $5,000 related to Year 2000 issues.
All information systems requiring replacement or remediation are under a vendor
software maintenance contract, which includes an upgrade to a Year 2000
compatible version. The software vendor has released its Year 2000 compatible
version, which has been initially installed and is being used by one of the
Company's subsidiaries in order to analyze and test Year 2000 compatability.
This version has passed all of the Company's Year 2000 tests and the Company
believes it is Year 2000 compliant. The Company's remaining subsidiaries are
expected to convert to the Year 2000 software version by June 30, 1999.
The Company has surveyed its major suppliers for their state of readiness. Major
suppliers and customers whose responses indicate they may not be Year 2000
compatible in a timely fashion are being monitored on a monthly basis. The
Company is planning another survey to cover secondary suppliers and customers.
This survey is expected to be completed by December 31, 1998. The Company has
also issued certification requests to the software companies on which its
computer programs rely seeking assurance that they will be Year 2000 compliant.
Approximately 95% of the questionnaires have been returned. Respondents have
indicated that they are currently Year 2000 compliant or will be well in advance
of the Year 2000.
The Company's contingency plans relative to the Year 2000 have not been
finalized. These plans are evolving as the testing of systems progresses and the
Company's subsidiaries continue to convert to Year 2000 compliant software.
During the testing and conversion phase (scheduled for completion by June 30,
1999), management will develop and modify a "worst case scenario" contingency
plan based on testing and conversion results.
The related costs and projected completion dates for Year 2000 compatability are
based upon management's best estimates. However, management cannot predict the
impact on the Company's business, financial condition, and results of operations
if customers and suppliers fail or delay to address Year 2000 issues.
10
<PAGE> 11
PART II. OTHER INFORMATION
Item 5. Other Information.
On October 21, 1998, the Company signed a letter of intent to acquire
certain assets of Decker Transport, Inc. ("Decker") and Van Houten Ltd
("Van Houten") of Riverdale, New Jersey. Terms of the transaction were
not disclosed. The acquisition is subject to completion of a due
diligence investigation, execution of a definitive agreement and
certain regulatory approvals. The parties anticipate closing the
purchase by the end of 1998. The Company anticipates funding the
acquisition of the Decker and Van Houten assets from existing working
capital and its available line of credit.
Item 6. Exhibits and Reports on Form 8-K.
(a) The following exhibits are filed with this report:
11.1 - Statement Re: Computation of Diluted Earnings Per Share.
27.1 - Financial Data Schedule (for SEC use only).
27.2 - Restated Financial Data Schedule (for SEC use only).
(b) Reports on Form 8-K
None.
11
<PAGE> 12
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.
P.A.M. TRANSPORTATION SERVICES, INC.
Dated: November 9, 1998 By:/s/ Robert W. Weaver
------------------------
Robert W Weaver
President and Chief Executive Officer
(principal executive officer)
Dated: November 9, 1998 By:/s/ Larry J. Goddard
------------------------
Larry J. Goddard
Vice President-Finance, Chief Financial
Officer, Secretary and Treasurer
(principal accounting and financial officer)
12
<PAGE> 1
EXHIBIT NO. 11.1
STATEMENT RE: COMPUTATION OF DILUTED EARNINGS PER SHARE
13
<PAGE> 2
EXHIBIT (11)----STATEMENT RE: COMPUTATION OF DILUTED EARNINGS PER SHARE
Diluted earnings per share computations assumes the exercise of stock purchase
warrants and options to purchase shares of common stock. The shares assumed
exercised are based on the weighted average number of warrants and options
outstanding during the period and only include those warrants and options whose
average share price during the period exceeds its related exercise price. The
net additional shares issuable are calculated based on the treasury stock method
and are added to the weighted average number of shares outstanding during the
period.
<TABLE>
<CAPTION>
DILUTED EARNINGS PER SHARE FOR THE PERIOD ENDED SEPTEMBER 30, 1998 Three Months Nine Months
- ------------------------------------------------------------------ ------------ -----------
<S> <C> <C>
Actual net income (A) $ 1,853,141 $ 6,212,687
=========== ===========
Assumed exercise of stock options and warrants 310,333 323,439
Application of assumed proceeds ($1,581,041 and $1,624,777)
toward repurchase of outstanding common stock at an average
market price of $7.833 and $9.521, respectively. (201,844) (170,652)
----------- -----------
Net additional shares issuable 108,489 152,787
=========== ===========
Adjustment of shares outstanding:
Weighted average common shares outstanding 8,312,674 8,299,568
Net additional shares issuable 108,489 152,787
----------- -----------
Adjusted shares outstanding (B) 8,421,163 8,452,355
=========== ===========
Net income per common share (A) divided by (B) $ 0.22 $ 0.74
=========== ===========
</TABLE>
<TABLE>
<CAPTION>
DILUTED EARNINGS PER SHARE FOR THE PERIOD ENDED SEPTEMBER 30, 1997 Three Months Nine Months
- ------------------------------------------------------------------ ------------ -----------
<S> <C> <C>
Actual net income (A) $ 1,483,918 $ 4,860,852
=========== ===========
Assumed exercise of stock options and warrants 355,550 355,550
Application of assumed proceeds ($1,966,637 and $2,134,478)
toward repurchase of outstanding common stock at an average
market price of $9.094 and $7.274, respectively. (216,257) (293,439)
----------- -----------
Net additional shares issuable 139,293 62,111
=========== ===========
Adjustment of shares outstanding:
Weighted average common shares outstanding 8,223,490 8,166,171
Net additional shares issuable 139,293 62,111
----------- -----------
Adjusted shares outstanding (B) 8,362,783 8,228,282
=========== ===========
Net income per common share (A) divided by (B) $ 0.18 $ 0.59
=========== ===========
</TABLE>
14
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> SEP-30-1998
<CASH> 338
<SECURITIES> 0
<RECEIVABLES> 23,819
<ALLOWANCES> 579
<INVENTORY> 458
<CURRENT-ASSETS> 28,219
<PP&E> 131,138
<DEPRECIATION> 44,229
<TOTAL-ASSETS> 118,595
<CURRENT-LIABILITIES> 33,731
<BONDS> 32,952
0
0
<COMMON> 83
<OTHER-SE> 39,467
<TOTAL-LIABILITY-AND-EQUITY> 118,595
<SALES> 0
<TOTAL-REVENUES> 105,583
<CGS> 0
<TOTAL-COSTS> 92,581
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,838
<INCOME-PRETAX> 10,164
<INCOME-TAX> 3,951
<INCOME-CONTINUING> 6,213
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 6,213
<EPS-PRIMARY> .75
<EPS-DILUTED> .74
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<RESTATED>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> SEP-30-1997
<CASH> 415
<SECURITIES> 0
<RECEIVABLES> 22,129
<ALLOWANCES> 513
<INVENTORY> 483
<CURRENT-ASSETS> 26,571
<PP&E> 102,794
<DEPRECIATION> 37,922
<TOTAL-ASSETS> 95,907
<CURRENT-LIABILITIES> 30,248
<BONDS> 24,894
0
0
<COMMON> 83
<OTHER-SE> 31,512
<TOTAL-LIABILITY-AND-EQUITY> 95,907
<SALES> 0
<TOTAL-REVENUES> 94,759
<CGS> 0
<TOTAL-COSTS> 84,289
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,560
<INCOME-PRETAX> 7,910
<INCOME-TAX> 3,049
<INCOME-CONTINUING> 4,861
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,861
<EPS-PRIMARY> .60
<EPS-DILUTED> .59
</TABLE>
