<PAGE>
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 June 30, 1997 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 0-15903
CALGON CARBON CORPORATION
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 25-0530110
------------------------------- ------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
P. O. Box 717, Pittsburgh, PA 15230-0717
-----------------------------------------
(Address of principal executive offices)
(Zip Code)
(412) 787-6700
----------------------------------------------------
(Registrant's telephone number, including area code)
- --------------------------------------------------------------------------------
(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
----- -----
Applicable only to issuers involved in bankruptcy proceedings during the
preceding five years:
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Sections 12, 13, or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court.
Yes No
------ ------
Applicable only to corporate issuers:
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 July 28, 1997
- ----------------------------- ----------------------------
Common Stock, $.01 par value 39,680,660 shares
<PAGE>
CALGON CARBON CORPORATION
SEC FORM 10-Q
QUARTER ENDED JUNE 30, 1997
The Quarterly Report on Form 10-Q contains historical information and forward-
looking statements. Statements looking forward in time are included in this
Form 10-Q pursuant to the "safe harbor" provisions of the Private Securities
Litigation Reform Act of 1995. They involve known and unknown risks and
uncertainties that may cause the Company's actual results in the future to
differ from performance suggested herein. In the context of forward-looking
information provided in this Form 10-Q and in other reports, please refer to the
discussion of risk factors detailed in, as well as the other information
contained in the Company's filings with the Securities and Exchange Commission
during the past 12 months.
I N D E X
---------
PART 1 - FINANCIAL INFORMATION
- ------ ---------------------
Item 1. Financial Statements
- ------
Page
----
Introduction to the Financial Statements................. 2
Consolidated Statement of Income and Retained Earnings... 3
Consolidated Balance Sheet............................... 4
Consolidated Statement of Cash Flows..................... 5
Selected Notes to Financial Statements................... 6
Report of Independent Accountants on Review of Unaudited
Interim Financial Information............................ 7
Item 2. Management's Discussion and Analysis of Results
- ------ -----------------------------------------------
of Operations and Financial Condition................... 8
-------------------------------------
PART II - OTHER INFORMATION
- ------- -----------------
Item 4. Submission of Matters to a Vote of Security Holders..... 11
- ------ ---------------------------------------------------
Item 6. Exhibits and Reports on Form 8-K........................ 12
- ------ --------------------------------
SIGNATURES...................................................... 13
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- 1 -
<PAGE>
PART I - FINANCIAL INFORMATION
------------------------------
Item 1. Financial Statements
- ------- --------------------
INTRODUCTION TO THE FINANCIAL STATEMENTS
----------------------------------------
The consolidated financial statements included herein have been prepared
by Calgon Carbon Corporation (the Company), without audit, pursuant to the
rules and regulations of the Securities and Exchange Commission. Certain
information and footnote disclosures normally included in financial statements
prepared in accordance with generally accepted accounting principles have been
condensed or omitted pursuant to such rules and regulations. The Company
believes that the disclosures are adequate to make the information presented
not misleading when read in conjunction with the Company's consolidated
financial statements and the notes included therein for the year ended
December 31, 1996.
The financial information presented reflects all adjustments, consisting
only of normal recurring adjustments, which are, in the opinion of management,
necessary for a fair statement of the results for the interim periods
presented. The results for interim periods are not necessarily indicative of
results to be expected for the year.
Price Waterhouse LLP has reported that they have applied limited
procedures in accordance with professional standards for a review of the
unaudited consolidated financial statements included in this filing on Form
10-Q. However, their report included on page 7 of this report on Form 10-Q
for the quarter ended June 30, 1997 states that they did not audit and they do
not express an opinion on that interim financial information. Accordingly,
the degree of reliance on their report on such information should be
restricted in light of the limited nature of the review procedures applied.
The accountants are not subject to the liability provisions of section 11 of
the Securities Act of 1933 for their report on the unaudited interim financial
information because that report is not a "report" or a "part" of the
registration statement prepared or certified by the accountants within the
meaning of sections 7 and 11 of the act.
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<PAGE>
CALGON CARBON CORPORATION
CONSOLIDATED STATEMENT OF INCOME AND RETAINED EARNINGS
------------------------------------------------------
(Dollars in Thousands)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
-------------------- --------------------
1997 1996 1997 1996
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Net sales...................... $ 88,803 $ 74,945 $168,695 $143,934
-------- -------- -------- --------
Cost of products sold
(excluding depreciation)...... 54,680 47,194 103,699 90,423
Depreciation and amortization.. 5,317 4,743 10,715 9,601
Selling, general and
administrative expenses....... 14,280 12,087 27,831 23,917
Research and development
expenses...................... 2,050 1,653 3,951 3,124
-------- -------- -------- --------
76,327 65,677 146,196 127,065
======== ======== ======== ========
Income from operations......... 12,476 9,268 22,499 16,869
Interest income................ 71 319 170 646
Interest expense............... (957) (154) (1,886) (328)
Other income (expense)--net.... 64 90 (410) (73)
-------- -------- -------- --------
Income before income taxes..... 11,654 9,523 20,373 17,114
Provision for income taxes..... 4,404 3,438 7,691 6,247
-------- -------- -------- --------
Net income..................... 7,250 6,085 12,682 10,867
Common stock dividends......... (3,174) (3,233) (6,348) (6,467)
Retained earnings, beginning
of period..................... 164,356 154,883 162,098 153,335
-------- -------- -------- --------
Retained earnings, end of
period........................ $168,432 $157,735 $168,432 $157,735
======== ======== ======== ========
Net income per common share.... $ .18 $ .15 $ .32 $ .27
======== ======== ======== ========
Weighted average shares
outstanding................... 39,677,495 40,418,860 39,676,085 40,418,860
========== ========== ========== ==========
</TABLE>
The accompanying notes are an integral part
of these financial statements.
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<PAGE>
CALGON CARBON CORPORATION
CONSOLIDATED BALANCE SHEET
--------------------------
(Dollars in Thousands)
<TABLE>
<CAPTION>
June 30, December 31,
1997 1996
----------- -------------
(Unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................... $ 9,850 $ 15,439
Receivables................................. 71,146 63,762
Inventories................................. 46,486 46,471
Other current assets........................ 11,941 9,247
-------- --------
Total current assets..................... 139,423 134,919
Property, plant and equipment, net............ 175,970 173,564
Intangibles................................... 73,650 72,658
Other assets.................................. 14,171 16,110
-------- --------
Total assets............................. $403,214 $397,251
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Long-term debt due within one year.......... $ 2,476 $ 4,451
Accounts payable and accrued liabilities.... 40,339 35,846
Restructuring reserve....................... 6,816 7,847
Payroll and benefits payable................ 14,295 12,903
Accrued income taxes........................ 7,284 5,202
-------- --------
Total current liabilities................ 71,210 66,249
Long-term debt................................ 68,409 65,837
Deferred income taxes......................... 37,345 40,522
Other liabilities............................. 6,467 7,748
-------- --------
Total liabilities........................ 183,431 180,356
-------- --------
Shareholders' equity:
Common shares, $.01 par value, 100,000,000
shares authorized, 41,441,960 and
41,435,960 shares issued.................. 414 414
Additional paid-in capital.................. 62,165 62,102
Retained earnings........................... 168,432 162,098
Cumulative translation adjustments.......... 8,838 12,347
-------- --------
239,849 236,961
Treasury stock, at cost, 1,761,300 shares... (20,066) (20,066)
-------- --------
Total shareholders' equity............... 219,783 216,895
-------- --------
Total liabilities and
shareholders' equity................... $403,214 $397,251
======== ========
</TABLE>
The accompanying notes are an integral part
of these financial statements.
- 4 -
<PAGE>
CALGON CARBON CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
------------------------------------
(Dollars in Thousands)
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
--------------------
1997 1996
--------- ---------
<S> <C> <C>
Cash flows from operating activities
- ------------------------------------
Net income..................................... $ 12,682 $ 10,867
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization................ 10,715 9,692
Employee benefit plan provisions............. 238 266
Changes in assets and liabilities - net of
effects from purchase of businesses and
exchange:
(Increase) decrease in receivables....... (8,789) 1,292
(Increase) decrease in inventories....... (2,508) 4,866
(Increase) in other current assets....... (2,562) (3,615)
(Decrease) in restructuring reserve...... (179) (2,055)
Increase (decrease) in accounts payable
and accruals........................... 7,728 (7,306)
Increase in long-term deferred
income taxes (net)..................... 67 5,215
Other items--net............................. (351) (1,080)
-------- --------
Net cash provided by
operating activities................... 17,041 18,142
-------- --------
Cash flows from investing activities
- ------------------------------------
Purchase of businesses....................... (500) (18,544)
Property, plant and equipment expenditures... (16,197) (5,562)
Proceeds from disposals of equipment......... 184 209
-------- --------
Net cash (used in) investing activities.... (16,513) (23,897)
-------- --------
Cash flows from financing activities
- ------------------------------------
Net proceeds from borrowings................. 727 6,005
Common stock dividends....................... (6,348) (6,467)
Other........................................ 63 -
-------- --------
Net cash (used in) financing activities... (5,558) (462)
-------- --------
Effect of exchange rate changes on cash........ (559) (362)
-------- --------
(Decrease) in cash and cash equivalents........ (5,589) (6,579)
Cash and cash equivalents, beginning
of period.................................... 15,439 40,089
-------- --------
Cash and cash equivalents, end of period....... $ 9,850 $ 33,510
======== ========
</TABLE>
The accompanying notes are an integral part
of these financial statements.
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<PAGE>
CALGON CARBON CORPORATION
SELECTED NOTES TO FINANCIAL STATEMENTS
--------------------------------------
(Dollars in Thousands)
(Unaudited)
1. Inventories:
June 30, 1997 December 31, 1996
------------- -----------------
Raw materials $13,305 $16,122
Finished goods 33,181 30,349
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$46,486 $46,471
======= =======
2. Supplemental Cash Flow Information:
Six Months Ended June 30,
-------------------------
1997 1996
------- --------
Cash paid during the period for:
Interest $ 1,669 $ 338
Income taxes, net of refunds $ 4,859 $ 2,730
------- --------
Bank debt:
Borrowings $10,354 $ 18,908
Repayments (9,627) (12,903)
------- --------
Net proceeds from borrowings $ 727 $ 6,005
======= ========
3. Common stock dividends declared during both quarters ended June 30, 1997 and
1996 were $.08 per common share.
- 6 -
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and
Shareholders of
Calgon Carbon Corporation
We have reviewed the consolidated balance sheet of Calgon Carbon Corporation
and its subsidiaries as of June 30, 1997 and the related consolidated
statements of income and retained earnings and of cash flows for the three-
month and six-month periods ended June 30, 1997 and 1996. This financial
information is the responsibility of the Company's management.
We conducted our review in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical review
procedures to financial data and making inquiries of persons responsible for
financial and accounting matters. It is substantially less in scope than an
audit in accordance with generally accepted auditing standards, the objective
of which is the expression of an opinion regarding the financial statements
taken as a whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that
should be made to the accompanying interim financial information for it to be
in conformity with generally accepted accounting principles.
We previously audited, in accordance with generally accepted auditing
standards, the consolidated balance sheet as of December 31, 1996, and the
related consolidated statements of income, shareholders' equity and cash flows
for the year then ended (not presented herein), and in our report dated
February 3, 1997, except as to Note 7, which is as of March 3, 1997, we
expressed an unqualified opinion on those consolidated financial statements.
In our opinion, the accompanying consolidated balance sheet information as of
December 31, 1996 is fairly stated in all material respects in relation to the
consolidated balance sheet from which it has been derived.
PRICE WATERHOUSE LLP
Pittsburgh, PA
August 13, 1997
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<PAGE>
Item 2. Management's Discussion and Analysis of Results of
- ------ --------------------------------------------------
Operations and Financial Condition
----------------------------------
This discussion should be read in connection with the information contained
in the Consolidated Financial Statements and Selected Notes to Financial
Statements.
Results of Operations
- ---------------------
Consolidated net sales increased by $13.9 million or 18.5% for the three
months ended June 30, 1997 and increased by $24.8 million or 17.2% for the six
months ended June 30, 1997 versus the comparable 1996 periods. Net sales to the
industrial process markets of $41.5 million and $83.8 million for the three and
six months ended June 30, 1997 increased by $7.6 million or 22.4% and $15.8
million or 23.3% compared to the three and six months ended June 30, 1996. The
increase for both periods was related to improved results for the food,
chemical-pharmaceutical and original equipment manufacturers areas. The
improvements in the food and chemical-pharmaceutical areas were associated with
the Company's Advanced Separation Technologies business, which was acquired at
the end of 1996, while the increases within the original equipment manufacturers
area resulted from improvements in the United States home water filter and
personnel protection businesses. Net sales to the environmental markets for the
three and six months ended June 30, 1997 were $38.7 million and $72.4 million
respectively, and represented increases of $6.8 million or 21.4% and $9.4
million or 14.9% over comparable 1996 periods. The increase for the three-month
period was due to strong European municipal activity in the carbon, service and
equipment areas. Additionally, the increase for the six-month period reflects
sales gains by the Advanced Oxidation group, another 1996 acquisition, partially
offset by lower initial fills in the United States municipal category. The
consumer area reported sales of $8.5 million for the quarter ended June 30, 1997
and $12.5 million for the six months then ended. These results represented
decreases from the three and six months ended June 30, 1996 of $.6 million or
6.4% and $.5 million or 3.6%, respectively. Overall, the net sales increase
was primarily related to businesses acquired during 1996 and improvements in the
European municipal category, partially offset by a foreign currency transaction
decline due to the strengthening of the U.S. dollar relative to the European
currencies for the quarter and six months of $2.2 million and $3.9 million
respectively.
Gross profit, before depreciation, as a percentage of net sales, for the three
and six months ended June 30, 1997 were 38.4% and 38.5%, respectively, and were
37.0% and 37.2% in the comparable 1996 periods. The improvements were the
result of sales increases for higher margin products and reduced natural gas
costs, partially offset by lower margin equipment sales by the Company's
recently acquired businesses.
Depreciation and amortization for the three and six months ended June 30, 1997
increased by $.6 million and $1.1 million, respectively, due to amortization of
intangibles (primarily goodwill) associated with the Company's 1996
acquisitions.
Selling, general and administrative and research and development expenses for
the three-month period ended June 30, 1997 increased by $2.6 million versus the
comparable 1996 period and by $4.7 million for the six-month period then ended
primarily because of costs associated with the acquired businesses.
- 8 -
<PAGE>
During the quarter and six-month period ended June 30, 1997, interest income
decreased and interest expense increased versus the comparable 1996 periods, and
resulted in a net additional interest cost for the quarter of $1.1 million and
for the six-month period of $2.0 million. These changes were related to the
Company's 1996 acquisition program which reduced invested cash and increased
long-term debt by $60 million.
The effective income tax rate for the three-month and six-month periods ended
June 30, 1997 was 37.8%. This compares to 36.1% and 36.5%, respectively, for
the three and six months ended June 30, 1996. Both changes were the result of
increases in United States state income taxes.
Financial Condition
- -------------------
Working Capital and Liquidity
-----------------------------
Net cash provided by operating activities was $17.0 million for the six
months ended June 30, 1997 and decreased $1.1 million from the six-month period
ended June 30, 1996. This decrease resulted from increased working capital
invested in accounts receivable and inventory offset by increased accounts
payable and accruals.
During the quarter ended June 30, 1997, the Company obtained industrial revenue
bond financing in the amount of $3.0 million for machinery and equipment
purchases at the Pearl River facilities. These bonds will mature in April 2009.
Historically, the Company has provided sufficient cash on an annual basis for
its debt service, working capital, capital expenditures, restructuring, dividend
and treasury stock purchase requirements. Based on its present financial
position, including its cash and cash equivalents, and history of operations,
the Company anticipates that cash from operating activities combined with other
available external financial resources will provide sufficient liquidity to fund
its 1997 net cash obligations.
Restructuring of Operations
- ---------------------------
During 1997, the Company expects to continue the restructuring plan begun
in the fourth quarter of 1994. The restructuring reserve at June 30, 1997 of
$6.8 million relates principally to the estimated costs for the demolition of
the Brilon-Wald, Germany plant. The Company has been approached by potential
purchasers of the facility, however, at this time a suitable buyer has not been
identified. Evaluations of demolition, disposition, site protection and
environmental costs continue and the existing reserves are believed to be
adequate.
Capital Expenditures and Investments
- ------------------------------------
Capital expenditures for property, plant and equipment were $16.2 million
for the six months ended June 30, 1997 compared to expenditures of $5.6 million
for the same period in 1996. The major 1997 expenditures were for capacity
expansion and cost reduction projects at the Big Sandy, Kentucky plant ($9.9
million), the Pearl River, Mississippi plant ($2.5 million) and at the Feluy,
Belgium plant ($1.9 million). Capital expenditures for the year 1997 are
projected to be approximately $40 million.
The 1997 purchase of businesses amount of $.5 million was an increase to the
purchase price for Advanced Separation Technologies Incorporated due
- 9 -
<PAGE>
to a higher level of "Adjusted Closing Net Current Assets" than stated
in the purchase agreement. The 1996 purchase of businesses amount of $18.5
million was related to the acquisitions of the perox-pure/TM/ operations of
Vulcan Peroxidation Systems, Inc. and Solarchem Enterprises Inc. of Markham,
Ontario. For additional information associated with these acquisitions, please
refer to the Company's consolidated financial statements and notes included
therein (specifically Number 2) for the year ended December 31, 1996.
New Accounting Pronouncements
- -----------------------------
In February 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards (SFAS) No. 128, "Earnings per Share." SFAS No.
128 establishes new standards for computing and presenting earnings per share.
The Company is required to adopt the provisions of SFAS No. 128 for its
consolidated financial statements for the year ended December 31, 1997 and
subsequent interim periods. Upon adoption, the standard also requires the
restatement of all prior period earnings per share information presented. The
adoption of SFAS No. 128 is not expected to have a material effect on the
Company's earnings per share computations or disclosures.
- 10 -
<PAGE>
PART II - OTHER INFORMATION
---------------------------
Item 4. Submission of Matters to a Vote of Security Holders
- ------- ---------------------------------------------------
The annual meeting of stockholders was held April 22, 1997. In connection with
the meeting, proxies were solicited pursuant to the Securities Exchange Act.
The following are the voting results on proposals considered and voted upon at
the meeting, all of which were described in the proxy statement.
1. The nominee for director listed in the proxy statement was elected.
Votes For Votes Withheld
--------- --------------
Colin Bailey 33,318,434 846,822
The following directors continued in office after the meeting:
Class of 1998
- -------------
Robert W. Cruickshank
Arthur L. Goeschel
Thomas A. McConomy
Class of 1999
- -------------
Nick H. Prater
Seth E. Schofield
Harry H. Weil
Robert L. Yohe
<TABLE>
<CAPTION>
Votes Votes Votes
For Against Abstained
--------- ---------- ---------
<S> <C> <C> <C>
2. The proposal to declassify
the Board of Directors
and require their election
annually was defeated. 9,690,832 18,628,924 833,328
3. The proposal to require
a minimum of fifty
percent (50%) of
compensation paid to
non-employee directors
to be in the form of
Company stock that cannot
be sold for three years
was defeated. 1,718,012 26,287,119 1,147,953
4. The proposal to engage
the services of a
nationally recognized
investment banker to
explore all alternatives
to enhance the value of
the Company was defeated. 1,731,406 26,497,250 924,428
</TABLE>
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<PAGE>
Item 6. Exhibits and Reports on Form 8-K
- ------- --------------------------------
(a) Exhibits
15 Letter from Price Waterhouse LLP regarding unaudited
interim financial information.
(b) Reports on Form 8-K
There were no reports on Form 8-K filed for the quarter
ended June 30, 1997:
- 12 -
<PAGE>
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.
CALGON CARBON CORPORATION
-------------------------
(REGISTRANT)
Date: August 13, 1997 By /s/R. Scott Keefer
-----------------------------
R. Scott Keefer
Sr. Vice President-Finance,
Chief Financial Officer
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<PAGE>
Exhibit No. 15
August 13, 1997
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
Dear Ladies and Gentlemen:
We are aware that Calgon Carbon Corporation has included our report dated August
13, 1997 (issued pursuant to the provisions of Statement on Auditing Standards
No. 71) in the Prospectuses constituting part of its Registration Statements on
Forms S-8 (No. 33-34019 and No. 333-01019). We are also aware of our
responsibilities under the Securities Act of 1933.
Yours very truly,
Price Waterhouse LLP
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 9,850
<SECURITIES> 0
<RECEIVABLES> 71,146
<ALLOWANCES> 0
<INVENTORY> 46,486
<CURRENT-ASSETS> 139,423
<PP&E> 317,875
<DEPRECIATION> 141,905
<TOTAL-ASSETS> 403,214
<CURRENT-LIABILITIES> 71,210
<BONDS> 0
0
0
<COMMON> 42,513
<OTHER-SE> 177,270
<TOTAL-LIABILITY-AND-EQUITY> 403,214
<SALES> 168,695
<TOTAL-REVENUES> 168,695
<CGS> 103,699
<TOTAL-COSTS> 146,196
<OTHER-EXPENSES> 410
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,886
<INCOME-PRETAX> 20,373
<INCOME-TAX> 7,691
<INCOME-CONTINUING> 12,682
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 12,682
<EPS-PRIMARY> .32
<EPS-DILUTED> .32
</TABLE>
