SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
Quarterly Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
for the Quarterly Period Ended June 30, 1998
Commission File Number 1-9608
NEWELL CO.
(Exact name of registrant as specified in its charter)
DELAWARE 36-3514169
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
Newell Center
29 East Stephenson Street
Freeport, Illinois 61032-0943
(Address of principal executive offices)
(Zip Code)
(815) 235-4171
(Registrant's telephone number, including area code)
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, and (2) has been
subject to such filing requirements for the past 90 days.
Yes /X/ No / /
Number of shares of Common Stock outstanding
as of July 24, 1998: 162,623,122
1<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
<TABLE>
<CAPTION>
NEWELL CO. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited, in thousands, except per share data)
Three Months Ended Six Months Ended
Ended June 30, June 30,
-------------------------------- -------------------------------
1998 1997* 1998 1997*
------------- ------------- ------------ --------------
<S> <C> <C> <C> <C>
Net sales $ 922,730 $ 819,389 $1,693,229 $1,469,339
Cost of products sold 615,359 549,278 1,154,904 1,004,177
--------- ----------- ---------- ----------
GROSS INCOME 307,371 270,111 538,325 465,162
Selling, general and
administrative expenses 133,799 122,934 271,003 238,354
Trade names and goodwill
amortization and other 9,654 7,286 30,250 13,368
--------- ---------- ---------- ---------
OPERATING INCOME 163,918 139,891 237,072 213,440
Nonoperating expenses (income):
Interest expense 11,477 15,989 23,984 29,280
Other, net 5,478 (3,620) (180,355) (5,676)
--------- ---------- ---------- ---------
Net nonoperating
expenses (income) 16,955 12,369 (156,371) 23,604
--------- ---------- ---------- ---------
INCOME BEFORE INCOME
TAXES 146,963 127,522 393,443 189,836
Income taxes 58,197 50,502 155,803 75,178
--------- ---------- ---------- ----------
NET INCOME $ 88,766 $ 77,020 $ 237,640 $ 114,658
========= ========== ========== ==========
Earnings per share:
Basic $ 0.55 $ 0.47 $ 1.46 $ 0.71
Diluted 0.54 0.47 1.42 0.70
Dividends per share $ 0.18 $ 0.16 $ 0.36 $ 0.32
Weighted average shares
outstanding:
Basic 162,497 162,164 162,440 162,108
Diluted 173,145 162,804 173,009 162,748
See notes to consolidated financial statements.
*Restated for the merger with Calphalon Corporation, which was accounted for as a pooling of interests.
</TABLE>
2<PAGE>
NEWELL CO. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited, in thousands)
<TABLE>
<CAPTION>
June 30, % of December 31, % of
1998 Total 1997* Total
----------- ----- ------------ -----
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 68,422 1.6% $ 36,107 0.9%
Accounts receivable, net 629,960 14.8% 544,375 13.6%
Inventories, net 696,440 16.4% 653,200 16.3%
Deferred income taxes 188,434 4.4% 134,732 3.4%
Prepaid expenses and other 79,371 1.9% 65,280 1.6%
---------- ----- ---------- -----
TOTAL CURRENT ASSETS 1,662,627 39.1% 1,433,694 35.7%
MARKETABLE EQUITY SECURITIES - 0.0% 307,121 7.7%
OTHER LONG-TERM INVESTMENTS 55,388 1.3% 51,020 1.3%
OTHER ASSETS 157,783 3.7% 144,502 3.6%
PROPERTY, PLANT AND
EQUIPMENT, NET 763,799 18.0% 711,325 17.7%
TRADE NAMES & GOODWILL, NET 1,611,698 37.9% 1,364,072 34.0%
---------- ------ ---------- ------
TOTAL ASSETS $4,251,295 100.0% $4,011,734 100.0%
========== ====== ========== ======
See notes to consolidated financial statements.
*Restated for the merger with Calphalon Corporation, which was accounted for as a pooling of interests.
</TABLE>
3<PAGE>
<TABLE>
<CAPTION>
NEWELL CO. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (CONT.)
(Unaudited, in thousands)
June 30, % of December 31, % of
1998 Total 1997* Total
------------ ----- ------------ -----
<S> <C> <C> <C> <C>
LIABILITIES AND
STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Notes payable $ 71,408 1.7% $ 40,366 1.0%
Accounts payable 138,330 3.3% 138,531 3.5%
Accrued compensation 81,496 1.9% 82,676 2.1%
Other accrued liabilities 562,030 13.2% 397,948 9.9%
Income taxes 45,973 1.1% 11,797 0.3%
Current portion of long-term debt 9,846 0.2% 43,548 1.1%
----------- ------ ---------- -----
TOTAL CURRENT LIABILITIES 909,083 21.4% 714,866 17.8%
LONG-TERM DEBT 770,172 18.1% 786,793 19.6%
OTHER NONCURRENT LIABILITIES 194,720 4.6% 186,382 4.6%
DEFERRED INCOME TAXES 46,063 1.1% 90,120 2.2%
MINORITY INTEREST 8,937 0.2% 8,352 0.2%
COMPANY-OBLIGATED
MANDATORILY REDEEMABLE
CONVERTIBLE PREFERRED
SECURITIES OF A
SUBSIDIARY TRUST 500,000 11.8% 500,000 12.5%
STOCKHOLDERS' EQUITY
Common stock - authorized shares,
400.0 million at $1 par value; 162,592 3.8% 162,330 4.0%
Outstanding shares:
1998 - 162.6 million
1997 - 162.3 million
Additional paid-in capital 200,263 4.7% 201,045 5.0%
Retained earnings 1,484,232 34.9% 1,305,643 32.5%
Net unrealized gain on securities
available for sale - 0.0% 78,839 2.0%
Cumulative translation adjustment (24,767) (0.6)% (22,636) (0.6)%
----------- -----------
TOTAL STOCKHOLDER'S EQUITY 1,822,320 42.9% 1,725,221 43.0%
----------- ------ ----------- ------
TOTAL LIABILITIES AND
STOCKHOLDER'S EQUITY $ 4,251,295 100.0% $ 4,011,734 100.0%
=========== ====== =========== ======
See notes to consolidated financial statements.
*Restated for the merger with Calphalon Corporation, which was accounted for as pooling of interests.
</TABLE>
4<PAGE>
<TABLE>
<CAPTION>
NEWELL CO. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited, in thousands)
For the Six Months Ended
June 30,
------------------------
1998 1997*
---- ----
<S> <C> <C>
OPERATING ACTIVITIES:
Net income $ 237,640 $ 114,658
Adjustments to reconcile net income
to net cash provided by
operating activities:
Depreciation and amortization 73,862 61,884
Deferred income taxes 22,670 18,532
Net gain on sale of marketable
equity securities (115,674) -
Write-off of intangible 4,288 -
assets and other
Other 3,051 (2,504)
Changes in current accounts, excluding
the effects of acquisitions:
Accounts receivable (56,865) (57,749)
Inventories (24,630) (43,944)
Other current assets (14,689) 2,852
Accounts payable (18,107) (7,034)
Accrued liabilities and other (115,263) (58,089)
---------- ----------
NET CASH PROVIDED BY (USED IN)
OPERATING ACTIVITIES (3,717) 28,606
---------- ----------
INVESTING ACTIVITIES:
Acquisitions, net (158,615) (570,096)
Expenditures for property,
plant and equipment (45,118) (27,013)
Sale of marketable
equity securities 378,321 -
Disposals of non-current assets
and other (16,626) (7,664)
---------- ----------
NET CASH PROVIDED BY (USED IN)
INVESTING ACTIVITIES 157,962 (604,773)
---------- ----------
See notes to consolidated financial statements.
*Restated for the merger with Calphalon Corporation, which was accounted for as pooling of interests.
</TABLE>
5<PAGE>
<TABLE>
<CAPTION>
NEWELL CO. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONT.)
(Unaudited, in thousands)
For the Six Months Ended
June 30,
------------------------
1998 1997*
---- ----
<S> <C> <C>
FINANCING ACTIVITIES:
Proceeds from issuance of debt 35,559 770,441
Payments on notes payable
and long-term debt (97,762) (69,957)
Proceeds from exercised stock
options and other (1,647) 3,355
Cash dividends (57,924) (50,879)
---------- ----------
NET CASH PROVIDED BY (USED IN)
FINANCING ACTIVITIES (121,774) 602,960
---------- ---------
Exchange rate effect on cash (156) (8,428)
INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS 32,315 18,365
Cash and cash equivalents at
beginning of year 36,107 4,363
---------- ----------
CASH AND CASH EQUIVALENTS
AT END OF PERIOD $ 68,422 22,728
========== ==========
Supplemental cash flow disclosures -
Cash paid during the period for:
Income taxes $ 102,522 $ 58,064
Interest $ 32,554 $ 28,712
See notes to consolidated financial statements.
*Restated for the merger with Calphalon Corporation, which was accounted for as pooling of interests.
</TABLE>
6<PAGE>
NEWELL CO. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - GENERAL INFORMATION
The condensed financial statements included herein have been prepared
by the Company, without audit, pursuant to the rules and regulations
of the Securities and Exchange Commission, and reflect all adjustments
necessary to present a fair statement of the results for the periods
reported, subject to normal recurring year-end adjustments, none of
which is material. 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, although the Company
believes that the disclosures are adequate to make the information
presented not misleading. It is suggested that these condensed
financial statements be read in conjunction with the financial
statements and the notes thereto included in the Company's latest
Annual Report on Form 10-K.
NOTE 2 - ACQUISITIONS AND DIVESTITURES
On March 5, 1997, the Company purchased Insilco Corporation's Rolodex
business unit ("Rolodex"), a marketer of office products, including
card files, personal organizers and paper punches. Rolodex was
integrated into the Company's Newell Office Product division. On May
30, 1997, the Company acquired Cooper Industries Incorporated's Kirsch
business ("Kirsch"), a manufacturer and distributor of drapery
hardware and custom window coverings in the United States and
international markets. The Kirsch North American operations were
combined with the Newell Window Furnishings division. The Kirsch
European businesses operate as a separate division, Kirsch Window
Fashions Europe. On June 13, 1997, the Company acquired Rubbermaid
Incorporated's office products business, including the ELDON{R} brand
name (now referred to as "Eldon"). Eldon is a designer, manufacturer
and supplier of computer and plastic desk accessories, resin-based
office furniture and storage and organization products. Eldon was
integrated into the Company's Newell Office Products division. On
March 27, 1998, the Company acquired Swish Track and Pole ("Swish")
from Newmond PLC. Swish is a manufacturer and marketer of decorative
and functional window furnishings in Europe and operates as part of
Kirsch Window Fashions Europe. On June 30, 1998, the Company purchased
Panex S.A. Industria e Comercio ("Panex"), a manufacturer and marketer
of aluminum cookware products in Brazil. Panex operates as part of
the Company's Mirro division. For these and other minor acquisitions,
the Company paid $909.8 million in cash and assumed $58.3 million of
debt. The transactions were accounted for as purchases; therefore,
results of operations are included in the accompanying consolidated
financial statements since their respective dates of acquisition. The
acquisition costs were allocated on a preliminary basis to the fair
market value of the assets acquired and liabilities assumed and
7<PAGE>
resulted in trade names and goodwill of approximately $729.1 million.
The final adjustments to the purchase price allocations are not
expected to be material to the consolidated financial statements. The
unaudited consolidated results of operations for the six months ended
June 30, 1998 and 1997 on a pro forma basis, as though the Rolodex,
Kirsch, Eldon, Swish and Panex businesses had been acquired on January
1, 1997, are as follows (in millions, except per share amounts):
Six Months Ended
June 30,
----------------
1998 1997
---- ----
Net sales $ 1,760.1 $ 1,772.0
Net income 234.4 104.4
Earnings per share (basic) $ 1.44 $ 0.64
On May 7, 1998, a subsidiary of the Company merged with Calphalon
Corporation ("Calphalon"), a manufacturer and marketer of gourmet
cookware. The Company issued approximately 3.1 million shares of
common stock for all of the common stock of Calphalon. This
transaction was accounted for as a pooling of interests; therefore,
prior financial statements were restated to reflect this merger.
On June 25, 1998, the Company entered into a definitive agreement to
sell its school supplies and stationery business. Completion of the
sale is subject to certain conditions and approvals, and is expected
during the third quarter of 1998. Sales for this business were
approximately $90.0 million in 1997.
NOTE 3 - INVENTORIES
The components of inventories at the end of each period, net of the
LIFO reserve, were as follows (in millions):
June 30, December 31,
1998 1997
-------- -----------
Materials and supplies $ 167.6 $ 147.9
Work in process 133.3 109.9
Finished products 395.5 395.4
-------- --------
$ 696.4 $ 653.2
======== ========
NOTE 4 - MARKETABLE EQUITY SECURITIES
Marketable Equity Securities classified as available for sale are
carried at fair value with adjustments to fair value reported
separately, net of tax, as a component of stockholders' equity (and
excluded from earnings). On March 3, 1998, the Company sold all of
8<PAGE>
its marketable equity securities, which included 7,862,300 shares it
held in The Black & Decker Corporation. The Black & Decker
transaction resulted in net proceeds of approximately $378.3 million
and a net pre-tax gain, after fees and expenses, of approximately
$191.5 million. Marketable Equity Securities at December 31, 1997 are
summarized as follows (in millions):
December 31,
1997
------------
Aggregate market value $ 307.1
Aggregate cost 176.8
--------
Unrealized gain $ 130.3
========
NOTE 5 - PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment at the end of each period consisted of
the following (in millions):
June 30, December 31,
1998 1997
---------- ------------
Land $ 34.1 $ 34.1
Buildings and improvements 334.7 292.7
Machinery and equipment 910.3 840.9
-------- --------
1,279.1 1,167.7
Allowance for depreciation (515.3) (456.4)
-------- --------
$ 763.8 $ 711.3
======== ========
NOTE 6 - LONG-TERM DEBT
Long-term debt at the end of each period consisted of the following
(in millions):
June 30, December 31,
1998 1997
--------- ------------
Medium-term notes $ 263.0 $ 263.0
Commercial paper 478.0 517.0
Other long-term debt 39.0 50.3
-------- --------
780.0 830.3
Current portion (9.8) (43.5)
-------- --------
$ 770.2 $ 786.8
======== ========
9<PAGE>
Commercial paper in the amount of $478.0 million at June 30, 1998 was
classified as long-term since it is supported by the 5-year $1.3
billion revolving credit agreement.
NOTE 7 - COMPANY-OBLIGATED MANDATORILY REDEEMABLE CONVERTIBLE
PREFERRED SECURITIES OF A SUBSIDIARY TRUST OF THE COMPANY
In December 1997, a wholly owned subsidiary trust of the Company
issued 10,000,000 of its 5.25% convertible quarterly income preferred
securities (the "Convertible Preferred Securities"), with a
liquidation preference of $50 per security, to certain institutional
buyers. The Convertible Preferred Securities represent an undivided
beneficial interest in the assets of the trust. Each of the
Convertible Preferred Securities is convertible at the option of the
holder into shares of the Company's Common Stock at the rate of 0.9865
shares of Common Stock for each preferred security (equivalent to
$50.685 per share of Common Stock), subject to adjustment in certain
circumstances. Holders of the Convertible Preferred Securities are
entitled to a quarterly cash distribution at the annual rate of 5.25%
of the $50 liquidation preference commencing March 1, 1998. The
Convertible Preferred Securities are subject to a Company guarantee
and are callable by the Company initially at 103.15% of the
liquidation preference beginning in December 2001 and decreasing over
time to 100% of the liquidation preference beginning in December 2007.
The trust invested the proceeds of this issuance of the Convertible
Preferred Securities in $500 million of the Company's 5.25% Junior
Convertible Subordinated Debentures due 2027 (the "Debentures"). The
Debentures are the sole assets of the trust, mature December 1, 2027,
bear interest at the rate of 5.25%, payable quarterly, commencing
March 1, 1998, and are redeemable by the Company beginning in December
2001. The Company may defer interest payments on the Debentures for a
period not to exceed 20 consecutive quarters during which time
distribution payments on the Convertible Preferred Securities are also
deferred. Under this circumstance, the Company may not declare or pay
any cash distributions with respect to its capital stock or debt
securities that rank PARI PASSU with or junior to the Debentures. The
Company has no current intention to exercise its right to defer
payments of interest on the Debentures.
The Convertible Preferred Securities are reflected as outstanding in
the Company's consolidated financial statements as Company-Obligated
Mandatorily Redeemable Convertible Preferred Securities of a
Subsidiary Trust.
NOTE 8 - EARNINGS PER SHARE
Effective December 31, 1997, the Company adopted SFAS No. 128,
"Earnings Per Share." As a result, the Company's reported earnings
per share for 1997 were restated. The impact on previously reported
earnings per share was immaterial. The earnings per share amounts are
computed based on the weighted average monthly number of shares
10<PAGE>
outstanding during the year. "Basic" earnings per share is calculated
by dividing net income by weighted average shares outstanding.
"Diluted" earnings per share is calculated by dividing net income by
weighted average shares outstanding, including the assumption of the
exercise and/or conversion of all potentially dilutive securities ("in
the money" stock options and convertible preferred securities). A
reconciliation of the difference between basic and diluted earnings
per share for the first six months of 1998 is shown below (in
millions, except per share amounts):
<TABLE>
<CAPTION>
Basic Convertible Diluted
Earnings "In the money" Preferred Earnings
per Share stock options Securities per Share
--------------- ----------------- ---------------- ---------------
<S> <C> <C> <C> <C>
Net Income $ 237.6 $ 0.0 $ 8.0 $ 245.6
Weighted average
shares outstanding 162.4 0.7 9.9 173.0
Earnings per share $ 1.46 $ 1.42
</TABLE>
Basic earnings per share for the first six months of 1997 was $0.71.
Diluted earnings per share for the first six months of 1997 was $0.70.
NOTE 9 - COMPREHENSIVE INCOME
In the first quarter of 1998, the Company adopted SFAS No. 130,
"Reporting Comprehensive Income." The Company's Comprehensive Income
consists of net income, foreign currency translation adjustments and
unrealized gains on marketable equity securities (if any).
The Company sold its stake in The Black & Decker Corporation during
the first quarter of 1998 and has no other material marketable equity
security position as of June 30, 1998. Therefore, the Company's
Comprehensive Income in the first six months of 1998 includes, in
addition to net income, only foreign currency translation adjustments,
which were immaterial. The Company's Comprehensive Income in the first
six months of 1997 included unrealized gains on marketable equity
securities of $34.3 million, offset partially by currency translation
losses of $8.4 million.
The accumulated Other Comprehensive Income balances are summarized as
follows (in millions):
11<PAGE>
<TABLE>
<CAPTION>
Net Unrealized
Gain on Accumulated
Foreign Securities Other
Currency Available Comprehensive
Translation For Sale (1) Income
----------- -------------- -------------
<S> <C> <C> <C>
Balance at December 31, 1997 $ (22.6) $ 78.8 $ 56.2
Change during six months
ended June 30, 1998 (2.2) (78.8) (81.0)
-------- ------- --------
Balance at June 30, 1998 $ (24.8) $ 0.0 $ (24.8)
======== ======= ========
(1) On March 3, 1998, the Company sold its stake in The Black & Decker Corporation and realized a net pre-tax gain of
approximately $191.5 million ($115.7 million after taxes). The difference between the $78.8 million after-tax balance
at December 31, 1997 and the $115.7 million after-tax gain recorded in the first quarter of 1998 represents the
appreciation on the shares sold on March 3, 1998 from December 31, 1997 through March 3, 1998.
</TABLE>
NOTE 10 - INTERIM SEGMENT REPORTING
Effective December 31, 1998, the Company will adopt SFAS No. 131,
"Disclosure about Segments of an Enterprise and Related Information."
After reviewing the criteria for determining segments of an
enterprise, the Company believes it has three reportable segments
under the reporting requirements: Hardware and Home Furnishings,
Office Products, and Housewares. The Company believes that this
segmentation is appropriate because it organizes its product
categories into these groups when making operating decisions and
assessing performance. The Company Divisions included in each group
also sell primarily to the same retail channel: Hardware and Home
Furnishings (home centers and hardware stores), Office Products
(office superstores and contract stationers), and Housewares (discount
stores and warehouse clubs). Financial statement disclosures
regarding segments will commence with the 1998 10-K Report filing.
NOTE 11 - DISCLOSURES ABOUT PENSIONS AND OTHER POSTRETIREMENT BENEFITS
Effective December 31, 1998, the Company will adopt SFAS No. 132,
"Employers' Disclosures about Pensions and Other Postretirement
Benefits." Management believes that the adoption of this statement
will not be material to the consolidated financial statements.
NOTE 12 - RECLASSIFICATION OF TRADE NAMES AND GOODWILL AMORTIZATION
The Company is reclassifying trade names and goodwill amortization
from nonoperating expenses to operating expenses for all periods
presented.
NOTE 13 - SUBSEQUENT EVENTS
On July 13, 1998, the Company entered into a definitive agreement to
acquire the Gardinia Group, a manufacturer and supplier of window
12<PAGE>
treatments primarily marketed to retailers in Germany and other
European markets. Completion of the acquisition is subject to certain
customary conditions and approvals, and the acquisition is expected to
close during the third quarter of 1998. Sales for the Gardinia Group
were approximately $160.0 million in 1997.
On August 3, 1998, the Company entered into a definitive agreement to
sell its North American plastic storageware and serveware businesses.
Completion of the sale is subject to certain customary conditions and
approvals, and the sale is expected to close during the third quarter
of 1998. Sales for these businesses were approximately $70.0 million
in 1997.
13<PAGE>
PART I.
Item 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
RESULTS OF OPERATIONS
---------------------
The following table sets forth for the periods indicated items from
the Consolidated Statements of Income as a percentage of net sales.
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
------------------ ----------------
1998 1997* 1998 1997*
----------- ---------- ---------- -----------
<S> <C> <C> <C> <C>
Net sales 100.0% 100.0% 100.0% 100.0%
Cost of products sold 66.7% 67.0% 68.2% 68.3%
--------- --------- ---------- ---------
GROSS INCOME 33.3% 33.0% 31.8% 31.7%
Selling, general and
administrative expenses 14.5% 15.0% 16.0% 16.2%
Trade names and goodwill
amortization and other 1.0% 0.9% 1.8% 1.0%
--------- --------- ---------- ---------
OPERATING INCOME 17.8% 17.1% 14.0% 14.5%
Nonoperating expenses (income):
Interest expense 1.2% 2.0% 1.4% 2.0%
Other, net 0.7% (0.5)% (10.6)% (0.4)%
--------- --------- ---------- ----------
Net nonoperating
expenses (income) 1.9% 1.5% (9.2)% 1.6%
--------- --------- ---------- ----------
INCOME BEFORE INCOME TAXES 15.9% 15.6% 23.2% 2.9%
Income taxes 6.3% 6.2% 9.2% 5.1%
--------- --------- ---------- ----------
NET INCOME 9.6% 9.4% 14.0% 7.8%
========= ========= ========== =========
*Restated for the merger with Calpalon Corporation, which was accounted for as a pooling of interests.
</TABLE>
THREE MONTHS ENDED JUNE 30, 1998 VS. THREE MONTHS ENDED JUNE 30, 1997
Net sales for the second quarter of 1998 were $922.7 million,
representing an increase of $103.4 million or 12.6% from $819.3
million in the comparable quarter of 1997. The overall increase in net
sales was primarily attributable to contributions from Kirsch
14<PAGE>
(acquired in May 1997), Eldon (acquired in June 1997), Swish (acquired
in March 1998) and strong shipments at the Company's core* Office
Products (primarily Sanford writing instruments) and Home Furnishings
businesses (primarily Intercraft/Burnes picture frames and
Newell/Levolor window treatments). These results were offset partially
by softness in the Housewares business (primarily Mirro aluminum
cookware and bakeware) as a result of reductions in inventory at
retail. Net sales for each of the Company's product groups (and the
primary reasons for the increase or decrease) were as follows, in
millions:
1998 1997 % change
-------- -------- --------
Hardware & Home Furnishings $ 429.7 $ 339.7 26.5% (a)
Office Products 298.4 266.4 12.0% (b)
Housewares 194.6 213.2 (8.7)%(c)
-------- --------
$ 922.7 $ 819.3 12.6%
======== ========
(a) Internal growth** of 6% plus the Kirsch and Swish acquisitions.
(b) Internal growth of 7% plus the Eldon acquisition.
(c) Internal sales declines.
* The Company defines a core business as a continuing business owned
more than two years, including minor acquisitions.
** The Company defines internal growth as growth from its core
businesses.
Gross income as a percentage of net sales in the second quarter of
1998 was 33.3% or $307.4 million versus 33.0% or $270.1 million in the
comparable quarter of 1997. Gross margins improved in the second
quarter of 1998 as a result of improvements at several of the
Company's core businesses and cost savings related to the integration
of the 1997 acquisitions into existing divisions.
Selling, general and administrative expenses ("SG&A") in the second
quarter of 1998 were 14.5% of net sales or $133.8 million versus 15.0%
or $122.8 million in the comparable quarter of 1997. SG&A as a
percentage of net sales declined in the second quarter of 1998 as a
result of stable core business SG&A spending and cost savings achieved
as Rolodex (acquired in March 1997), Kirsch and Eldon are being
integrated.
The Company has reclassified trade names and goodwill amortization
from nonoperating expenses to operating expenses for all periods
presented. Trade names and goodwill amortization as a percentage of
net sales in the second quarter of 1998 was comparable to the second
quarter of 1997.
15<PAGE>
Operating income in the second quarter of 1998 was 17.8% of net sales
or $163.9 million versus 17.1% or $140.0 million in the comparable
quarter of 1997. The increase in operating margins was primarily due
to an increase in margins at several of the Company's core businesses.
These increases were offset partially by the 1997 and 1998
acquisitions, whose operating margins are improving as they are being
integrated, but are still operating at less than the Company's average
operating margins.
Net nonoperating expenses in the second quarter of 1998 were 1.9% of
net sales or $17.0 million versus 1.5% of net sales or $12.4 million
in the comparable quarter of 1997. The $4.6 million increase was due
primarily to $6.7 million of distributions related to the convertible
preferred securities issued by a subsidiary trust in December 1997.
For the first three months of both 1998 and 1997, the effective tax
rate was 39.6%.
Net income for the second quarter of 1998 was $88.7 million,
representing an increase of $11.6 million or 15.0% from the comparable
quarter of 1997. Basic earnings per share increased 17.0% to $0.55 in
the second quarter of 1998 versus $0.47 in the second quarter of 1997.
Diluted earnings per share increased 14.9% to $0.54 vs. $0.47 in the
second quarter of 1997. The increases in net income and earnings per
share were primarily due to cost savings related to the integration of
Rolodex, Kirsch, and Eldon and strong shipments at Sanford,
Intercraft/Burnes and Newell/Levolor. These results were offset
partially by softness at Mirro.
SIX MONTHS ENDED JUNE 30, 1998 VS. SIX MONTHS ENDED JUNE 30, 1997
Net sales for the first six months of 1998 were $1,693.2 million,
representing an increase of $223.9 million or 15.2% from $1,469.3
million in the comparable period of 1997. The overall increase in net
sales was primarily attributable to contributions from Rolodex,
Kirsch, Eldon, Swish and strong shipments at Sanford,
Intercraft/Burnes and Newell/Levolor. These results were offset
partially by softness at Mirro. Net sales for each of the Company's
product groups (and the primary reasons for the increase or decrease)
were as follows, in millions:
1998 1997 % change
------ ------- --------
Hardware & Home $ 803.3 $ 637.6 26.0% (a)
Furnishings
Office Products 501.3 416.6 20.3% (b)
Housewares 388.6 415.1 (6.4)% (c)
---------- ----------
$ 1,693.2 $ 1,469.3 15.2%
========== ==========
16<PAGE>
(a) Internal growth of 5% plus the Kirsch and Swish acquisitions.
(b) Internal growth of 8% plus the Rolodex and Eldon acquisitions.
(c) Internal sales declines.
Gross income as a percentage of net sales in the first six months of
1998 was 31.8% or $538.4 million versus 31.7% or $465.2 million in the
comparable period of 1997. Gross margins at several of the Company s
core businesses improved while the 1997 acquisitions had gross margins
which were slightly lower than the Company's average gross margins. As
these acquisitions are integrated, the Company expects their gross
margins to continue to improve.
SG&A in the first six months of 1998 were 16.0% of net sales or $271.0
million versus 16.2% or $238.3 million in the comparable period of
1997. SG&A as a percentage of net sales declined in the second quarter
of 1998 as a result of stable core business SG&A spending and cost
savings achieved as the Rolodex, Kirsch and Eldon acquisitions are
being integrated.
The Company has reclassified trade names and goodwill amortization
from nonoperating expenses to operating expenses for all periods
presented. Trade names and goodwill amortization as a percentage of
net sales in the first six months of 1998 was comparable to the first
six months of 1997, excluding one-time charges (which included
write-offs of intangible assets) of $11.4 million recorded in the
first quarter of 1998.
Operating income in the first six months of 1998 was 14.0% of net
sales or $237.1 million versus 14.5% or $213.5 million in the
comparable period of 1997. Excluding the one-time charges of $11.4
million, operating income in the first six months of 1998 was $248.5
million or 14.7% of net sales. The slight increase in operating
margins in the first six months of 1998, excluding the one-time
charges, was primarily due to an increase in margins at several of
the Company's core businesses. These increases were offset partially
by the 1997 and 1998 acquisitions, whose operating margins are
improving as they are being integrated, but are still operating at
less than the Company's average operating margins.
Net nonoperating income in the first six months of 1998 was 9.2% of
net sales or $156.3 million versus net nonoperating expenses of 1.6%
of net sales or $23.6 million in the comparable period of 1997. The
$179.9 million increase in income was due to a one-time net gain of
$191.5 million on the sale of the Company's stake in The Black &
Decker Corporation. This gain was offset partially by distributions of
$13.3 million related to the convertible preferred securities issued
by a subsidiary trust in December 1997.
17<PAGE>
For the first six months of both 1998 and 1997, the effective tax rate
was 39.6%.
Net income for the first six months of 1998 was $237.6 million,
representing an increase of $122.9 million or 107.1% from the
comparable period of 1997. Basic earnings per share increased 105.6%
to $1.46 in the first six months of 1998 versus $0.71 in the first six
months of 1997. Diluted earnings per share increased 102.9% to $1.42
vs. $0.70 in the first six months of 1997. Excluding the one-time net
gain on the sale of Black & Decker stock of $191.5 million ($115.7
million after taxes) and one-time charges of $11.4 million ($6.9
million after taxes), net income increased $14.1 million or 12.3% to
$128.8 million in the first six months of 1998 versus $114.7 million
in the first six months of 1997. Basic earnings per share, excluding
the nonrecurring items, increased 11.3% to $0.79 versus $0.71 in the
first six months of 1997 and diluted earnings per share increased
12.9% to $0.79 versus $0.70 in the first six months of 1997.
LIQUIDITY AND CAPITAL RESOURCES
-------------------------------
SOURCES:
The Company's primary sources of liquidity and capital resources
include cash provided from operations and use of available borrowing
facilities.
Cash used in operating activities in the first six months of 1998 was
$3.7 million, representing a decrease of $32.3 million from cash
provided by operating activities of $28.6 million for the comparable
period of 1997. The decrease was due to $75.8 million of taxes paid
in the seconod quarter of 1998 on the $191.5 million net gain on the
sale of Black & Decker common stock sold in the first quarter of 1998.
This decrease was offset partially by an increase in net income in the
first six months of 1998 (excluding nonrecurring items) of $14.1
million, an increase in depreciation and amortization of $12.0 million
and better management of inventories of $19.3 million.
On March 3, 1998, the Company received $378.3 million from the sale of
7,862,300 shares of Black & Decker common stock. The proceeds from
the sale were used to pay down commercial paper.
The Company has short-term foreign and domestic uncommitted lines of
credit with various banks which are available for short-term
financing. Borrowings under the Company's uncommitted lines of credit
are subject to the discretion of the lender. The Company's uncommitted
lines of credit do not have a material impact on the Company's
liquidity. Borrowings under the Company's uncommitted lines of credit
at June 30, 1998 totaled $71.4 million.
During 1997, the Company amended its revolving credit agreement to
increase the aggregate borrowing limit to $1.3 billion, at a floating
18<PAGE>
interest rate. The revolving credit agreement will terminate in
August 2002. At June 30, 1998, there were no borrowings under the
revolving credit agreement.
In lieu of borrowings under the Company's revolving credit agreement,
the Company may issue up to $1.3 billion of commercial paper. The
Company's revolving credit agreement provides the committed backup
liquidity required to issue commercial paper. Accordingly, commercial
paper may only be issued up to the amount available for borrowing
under the Company's revolving credit agreement. At June 30, 1998,
$478.0 million (principal amount) of commercial paper was outstanding.
The entire amount is classified as long-term debt.
The Company has a universal shelf registration statement under which
the Company may issue up to $500.0 million of debt and equity
securities, subject to market conditions. At June 30, 1998, the
Company had not issued any securities under this registration
statement. However, in July 1998, the Company issued an aggregate
$325.0 million (principal amount) of medium-term notes under this
registration statement, the proceeds of which were used to pay down
commercial paper.
At June 30, 1998, the Company had outstanding $263.0 million
(principal amount) of medium-term notes issued under a previous shelf
registration statement with maturities ranging from five to ten years
at an average annual rate of interest equal to 6.3%.
USES:
The Company's primary uses of liquidity and capital resources include
acquisitions, dividend payments and capital expenditures.
Cash used in acquiring businesses was $158.6 million and $570.1
million in the first six months of 1998 and 1997, respectively. In the
first six months of 1998, the Company acquired Swish Track and Pole,
Panex, and made another minor acquisition for cash purchase prices
totaling $160.7 million. In the first six months of 1997, the Company
acquired Rolodex, Kirsch and Eldon for cash purchase prices totaling
$595.9 million. All of these acquisitions were accounted for as
purchases and were paid for with proceeds obtained from the issuance
of commercial paper.
Capital expenditures were $45.1 million and $27.0 million in the first
six months of 1998 and 1997, respectively.
The Company has paid regular cash dividends on its common stock since
1947. On February 10, 1998, the quarterly cash dividend was increased
to $0.18 per share from the $0.16 per share that had been paid since
February 11, 1997. Prior to this date, the quarterly cash dividend
paid was $0.14 per share since February 6, 1996, which was an increase
from the $0.12 per share paid since May 11, 1995. Aggregate dividends
19<PAGE>
paid during the first six months of 1998 and 1997 were $57.9 million
and $50.9 million, respectively.
Retained earnings increased in the first six months of 1998 and 1997
by $178.6 million and $65.2 million respectively. The increase in
1998 was primarily due to a net pre-tax gain of $191.5 million ($115.7
million after taxes) on the sale of the Black & Decker common stock.
Working capital at June 30, 1998 was $753.5 million compared to $718.8
million at December 31, 1997. The current ratio at June 30, 1998 was
1.83:1 compared to 2.01:1 at December 31, 1997.
Total debt to total capitalization (total debt is net of cash and cash
equivalents, and total capitalization includes total debt, convertible
preferred securities and stockholders' equity) was .25:1 at June 30,
1998 and .27:1 at December 31, 1997.
The Company believes that cash provided from operations and available
borrowing facilities will continue to provide adequate support for the
cash needs of existing businesses; however, certain events, such as
significant acquisitions, could require additional external financing.
MARKET RISK
-----------
The Company's market risk is impacted by changes in interest rates,
foreign currency exchange rates, and certain commodity prices.
Pursuant to the Company's policies, natural hedging techniques and
derivative financial instruments may be utilized to reduce the impact
of adverse changes in market prices. The Company does not hold or
issue derivative instruments for trading purposes, and has no material
sensitivity to changes in market rates and prices on its derivative
financial instrument positions.
The Company's primary market risk is interest rate exposure, primarily
in the United States. The Company manages interest rate exposure
through its conservative debt ratio target and its mix of fixed and
floating rate debt. Interest rate exposure was reduced significantly
in 1997 from the issuance of $500 million 5.25% Company-Obligated
Mandatorily Redeemable Convertible Preferred Securities of a
Subsidiary Trust, the proceeds of which reduced commercial paper.
Interest rate swaps may be used to adjust interest rate exposures when
appropriate based on market conditions, and, for qualifying hedges,
the interest differential of swaps is included in interest expense.
The Company's foreign exchange risk management policy emphasizes
hedging anticipated intercompany and third-party commercial
transaction exposures of one year duration or less. The Company
focuses on natural hedging techniques of the following form: 1)
offsetting or netting of like foreign currency flows, 2) structuring
foreign subsidiary balance sheets with appropriate levels of debt to
reduce subsidiary net investments and subsidiary cash flows subject to
20<PAGE>
conversion risk, 3) converting excess foreign currency deposits into
U.S. dollars or the relevant functional currency and 4) avoidance of
risk by denominating contracts in the appropriate functional currency.
In addition, the Company utilizes forward contracts and purchased
options to hedge commercial and intercompany transactions. Gains and
losses related to qualifying hedges of commercial transactions are
deferred and included in the basis of the underlying transactions.
Derivatives used to hedge intercompany transactions are marked to
market with the corresponding gains or losses included in the
consolidated statements of income. Due to the diversity of its
product lines, the Company does not have material sensitivity to any
one commodity. The Company manages commodity price exposures primarily
through the duration and terms of its vendor contracts.
Based on the Company's overall interest rate, currency rate and
commodity price exposures at June 30, 1998, management of the Company
believes that a short-term change in any of these exposures will not
have a material effect on the consolidated financial statements of the
Company.
YEAR 2000 COMPUTER COMPLIANCE
-----------------------------
In order to address the "Year 2000 Problem" relating to the inability
of certain computer software programs to process 2-digit year-date
codes after December 31, 1999, the Company has conducted a
comprehensive review of its computer systems and formulated a plan to
modify or replace programs where necessary. It is anticipated that all
reprogramming efforts for major systems will be completed by December
31, 1998, allowing more than adequate time for testing. The Company
has received confirmations from its primary vendors and customers that
they have plans underway to address this issue as well. Management
believes that the total cost of implementing the Year 2000 plan will
not be significant to the Company's financial results.
FORWARD LOOKING STATEMENTS
--------------------------
Forward-looking statements in this Report are made in reliance upon
the safe harbor provisions of the Private Securities Litigation Reform
Act of 1995. Such forward-looking statements may relate to, but are
not limited to, such matters as sales, income, expenses, margins,
earnings per share, return on equity, capital expenditures, dividends,
capital structure, free cash flow, debt to capitalization ratios,
internal growth rates, the Year 2000 plan, future economic
performance, management's plans, goals and objectives for future
operations and growth or the assumptions relating to any of the
forward-looking information. The Company cautions that forward-looking
statements are not guarantees since there are inherent difficulties in
predicting future results, and that actual results could differ
materially from those expressed or implied in the forward-looking
statements. Factors that could cause actual results to differ include,
but are not limited to, those matters set forth in the Company's
Annual Report on Form 10-K, the documents incorporated by reference
therein and in Exhibit 99 thereto.
21<PAGE>
PART I.
Item 3.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The information required by this item is incorporated herein by
reference to the section entitled "Market Risk" in the Company's
Management's Discussion and Analysis of Results of Operations and
Financial Condition (Part I, Item 2).
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
As of June 30, 1998, the Company was involved in 35 matters concerning
federal and state environmental laws and regulations, including
matters in which it had been identified by the U.S. Environmental
Protection Agency and certain state environmental agencies as a
potentially responsible party ("PRP") for contaminated sites under the
Comprehensive Environmental Response, Compensation and Liability Act
("CERCLA") and equivalent state laws. In assessing its environmental
response costs, the Company has considered several factors, including,
the extent of the Company's volumetric contribution at each CERCLA
site relative to that of other PRPs: the kind of waste; where
applicable, the terms of existing cost sharing and other agreements;
the financial ability of other PRPs to share in the payment of
requisite costs; the Company's prior experience with similar sites;
environmental studies and cost estimates available to the Company; the
effects of inflation on cost estimates; and the extent to which the
Company's and other parties' status as PRPs is disputed. Based on
information available to it, the Company's estimate of environmental
response costs associated with these matters as of June 30, 1998
ranged between $19.8 million and $27.9 million. As of June 30, 1998,
the Company had a reserve equal to $24.3 million for such
environmental costs in aggregate. No insurance recovery was taken
into account in determining the Company's cost estimates or reserve,
nor do the Company's cost estimates or reserve reflect any discounting
for present value purposes. Because of the uncertainties associated
with environmental investigations and response activities, the
possibility that the Company could be identified as a PRP at sites
identified in the future that require the incurrence of environmental
response costs, and the possibility of additional sites as a result of
businesses acquired, actual costs to be incurred by the Company may
vary from the Company's estimates. Subject to difficulties in
estimating future environmental costs, the Company does not expect
that any sum it may have to pay in connection with environmental
matters in excess of amounts reserved will have a material adverse
effect on its consolidated financial statements.
22<PAGE>
Reference is made to the disclosure of several legal proceedings
relating to the importation and distribution of vinyl mini-blinds made
with plastic containing lead stabilizers in Note 15 to the
consolidated financial statements included in the Company's Annual
Report on Form 10-K for the year ended December 31, 1997. With
respect to the civil suit filed by the California Attorney General and
the Alameda County District Attorney against numerous defendants,
including a subsidiary of the Company (which was coordinated with the
case filed as a national and California private class action in 1997),
on June 22, 1998, the Court entered a Stipulated Consent Judgement
resolving the Attorney General's case as to the Company's subsidiary
and most of the defendants. The Company's contribution to the
judgement amount is not expected to be material to the Company's
consolidated financial statements. Other related litigation described
in Note 15 remains pending. Although management of the Company cannot
predict the ultimate outcome of these matters with certainty, it
believes that their ultimate resolution will not have a material
effect on the Company's consolidated financial statements.
23<PAGE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
11. Computation of Earnings per Share of Common Stock
12. Statement of Computation of Ratio of Earnings to Fixed
Charges
27. Financial Data Schedule
(b) Reports on Form 8-K:
Registrant filed a Report on Form 8-K dated May 7, 1998 reporting the
acquisition by Registrant of Calphalon Corporation.
Registrant filed a Report on Form 8-K dated July 9, 1998 reporting
that the Registrant entered into a Terms Agreement in connection with
a public offering of a series of Medium-Term Notes under Registrant's
Shelf Registration Statement on Form S-3 (Registration No. 33-64225).
24<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.
NEWELL CO.
Registrant
Date: August 12, 1998 /s/ William T. Alldredge
-----------------------------
William T. Alldredge
Vice President - Finance
Date: August 12, 1998 /s/ Brett E. Gries
-----------------------------
Brett E. Gries
Vice President - Accounting & Tax
25
EXHIBIT 11
----------
<TABLE>
<CAPTION>
NEWELL CO. AND SUBSIDIARIES
COMPUTATION OF EARNINGS
PER SHARE OF COMMON STOCK
(In thousands, except per share data)
For the Year Ended
December 31,
Year-to-date ---------------------------
June 30,
1998 1997* 1996*
------------ ----- -----
<S> <C> <C> <C>
Basic Earnings per Share:
Net income $ 237,640 $ 293,147 $ 262,713
Weighted average shares outstanding 162,440 162,173 161,858
Basic Earnings per Share $ 1.46 $ 1.81 $ 1.62
Diluted Earnings per Share:
Net income $ 237,640 $ 293,147 $ 262,713
Minority interest in income of subsidiary 8,036 923 -
trust, net of tax ---------- ---------- ----------
Net income, assuming conversion of all
applicable securities $ 245,676 $ 294,070 $ 262,713
Weighted average shares outstanding: 162,440 162,173 161,858
Incremental common shares applicable to
common stock options based on the
market price during the period 703 622 423
Average common shares issuable
assuming conversion of the
Company-Obligated Mandatorily
Redeemable Convertible Preferred
Securities of a Subsidiary Trust 9,865 513 -
---------- ---------- ----------
Weighted average shares outstanding
assuming full dilution 173,008 163,308 162,281
Diluted Earnings per Share, assuming
conversion of all applicable securities $ 1.42 $ 1.80 $ 1.62
* Restated for the merger with Calphalon Corporation, which was accounted for as a pooling of interests.
26
</TABLE>
EXHIBIT 12
----------
<TABLE>
<CAPTION>
NEWELL CO. AND SUBSIDIARIES
STATEMENT OF COMPUTATION OF
RATIO EARNINGS TO FIXED CHARGES
(In thousands, except ratio data)
For the Year Ended
December 31,
Year-to-date -----------------------------------
June 30,
1998 1997* 1996*
------------ ---------- ----------
<S> <C> <C> <C>
Earnings available to fixed charges:
Income before income taxes $ 213,318 (1) $ 485,334 $ 434,378
Fixed charges -
Interest expense 23,984 76,413 58,541
Portion of rent determined
to be interest (2) 8,868 16,963 15,185
Minority interest in
income of subsidiary trust 13,304 1,528 -
Eliminate equity in earnings (4,458) (5,831) (6,364)
---------- ---------- ---------
$ 255,026 $ 575,407 $ 501,740
========== ========= =========
Fixed charges:
Interest expense $ 23,984 $ 76,413 $ 58,541
Portion of rent determined
to be interest (2) 8,868 16,963 15,185
Minority interest in
income of subsidiary trust 13,304 1,528 -
--------- --------- ---------
$ 46,156 $ 94,904 $ 73,726
========= ========= =========
Ratio of earnings to fixed charges 5.53 6.05 6.81
========= ========= =========
* Restated for the merger with Calphalon Corporation, which was accounted for as a pooling of interests.
(1) Excludes one-time net pre-tax gain of $191,513 from the sale of Black & Decker stock, offset partially by
$11,398 of one-time pre-tax charges.
(2) A standard ratio of 33% was applied to gross rent expense to approximate the interest portion of short-term and
long-term leases.
27
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND> This schedule contains summary financial
information extracted from the Newell
Co. and Subsidiaries Consolidated
Balance Sheets and Statements of Income
and is qualified in its entirety by
reference to such financial statements.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> JUN-30-1998
<CASH> 62,283
<SECURITIES> 6,139
<RECEIVABLES> 629,960
<ALLOWANCES> (20,912) <F1>
<INVENTORY> 696,440
<CURRENT-ASSETS> 1,662,627
<PP&E> 1,279,143 <F2>
<DEPRECIATION> (515,344) <F2>
<TOTAL-ASSETS> 4,251,295
<CURRENT-LIABILITIES> 909,083
<BONDS> 770,172
500,000
0
<COMMON> 162,592
<OTHER-SE> 1,659,728
<TOTAL-LIABILITY-AND-EQUITY> 4,251,295
<SALES> 1,693,229
<TOTAL-REVENUES> 538,325
<CGS> 1,154,904
<TOTAL-COSTS> 1,456,157
<OTHER-EXPENSES> (156,371)
<LOSS-PROVISION> 2,456 <F1>
<INTEREST-EXPENSE> 23,984
<INCOME-PRETAX> 393,443
<INCOME-TAX> 155,803
<INCOME-CONTINUING> 237,640
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 237,640
<EPS-PRIMARY> 1.46
<EPS-DILUTED> 1.42
<FN>
<F1> Allowances for doubtful accounts are reported as contra accounts
to accounts receivable. The corporate reserve for bad debts is a
28<PAGE>
percentage of trade receivables based on the bad debts experienced
in one or more past years, general economic conditions, the age of
the receivables and other factors that indicate the element of
uncollectibility in the receivables outstanding at the end of the
period.
<F2> See note 5 to consolidated financial statements.
29<PAGE>
</TABLE>
