<PAGE> 1
FORM 10-Q
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-----------------
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1999
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 1-7210
REPUBLIC GROUP INCORPORATED
------------------------------------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 75-1155922
-------- ----------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
811 East 30th Avenue, Hutchinson, Kansas 67502-4341
- ------------------------------------------ ----------
(Address of principal executive offices) (Zip code)
Post Office Box 1307, Hutchinson, Kansas 67504-1307
- ------------------------------------------ ----------
(Mailing Address) (Zip code)
316-727-2700
------------
(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 (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 .
----- ---
On May 10, 1999, there were 11,777,776 shares of the registrant's Common Stock,
$1.00 par value outstanding.
<PAGE> 2
REPUBLIC GROUP INCORPORATED
FORM 10-Q
Quarterly Report
For The Three Months and Nine Months Ended March 31, 1999
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Reference is made to pages 2 through 10 containing certain consolidated
financial statements of Registrant in accordance with Part I of Form 10-Q.
The consolidated financial statements include the accounts of Republic
Group Incorporated and its wholly owned subsidiaries (collectively referred to
as the "Company").
<PAGE> 3
REPUBLIC GROUP INCORPORATED
CONSOLIDATED STATEMENTS OF INCOME
Quarters Ended March 31, 1999 and 1998 (Unaudited)
<TABLE>
<CAPTION>
1999 1998
-------------- ------------
<S> <C> <C>
Gross sales ...................................... $ 35,576,000 $ 37,018,000
Less freight and discounts ....................... 4,686,000 5,105,000
-------------- ------------
Net sales ........................................ 30,890,000 31,913,000
Costs and expenses:
Cost of sales ............................... 21,749,000 20,917,000
Selling and administrative expenses ......... 4,907,000 4,187,000
-------------- ------------
26,656,000 25,104,000
-------------- ------------
Operating profit ................................. 4,234,000 6,809,000
Other income (expense), net ...................... (372,000) 23,000
-------------- ------------
Income before income taxes ....................... 3,862,000 6,832,000
Provision for income taxes ....................... 1,468,000 2,596,000
-------------- ------------
NET INCOME ....................................... $ 2,394,000 $ 4,236,000
============ ============
Basic earnings per share ......................... $ 0.20 $ 0.36
============ ============
Basic weighted average shares outstanding ........ 11,775,000 11,715,000
============ ============
Diluted earnings per share ....................... $ 0.20 $ 0.36
============ ============
Diluted weighted average shares outstanding ...... 11,860,000 11,820,000
============ ============
</TABLE>
See accompanying notes.
2
<PAGE> 4
REPUBLIC GROUP INCORPORATED
CONSOLIDATED STATEMENTS OF INCOME
Nine Months Ended March 31, 1999 and 1998 (Unaudited)
<TABLE>
<CAPTION>
1999 1998
------------- -------------
<S> <C> <C>
Gross sales ...................................... $ 110,494,000 $ 111,450,000
Less freight and discounts ....................... 14,174,000 15,219,000
------------- -------------
Net sales ........................................ 96,320,000 96,231,000
Costs and expenses:
Cost of sales ............................... 65,327,000 64,354,000
Selling and administrative expenses ......... 14,050,000 11,829,000
------------- -------------
79,377,000 76,183,000
------------- -------------
Operating profit ................................. 16,943,000 20,048,000
Other income (expense), net ...................... (1,687,000) 158,000
------------- -------------
Income before income taxes ....................... 15,256,000 20,206,000
Provision for income taxes ....................... 5,799,000 7,677,000
------------- -------------
NET INCOME ....................................... $ 9,457,000 $ 12,529,000
------------- -------------
Basic earnings per share ......................... $ 0.80 $ 1.07
------------- -------------
Basic weighted average shares outstanding ........ 11,764,000 11,699,000
------------- -------------
Diluted earnings per share ....................... $ 0.80 $ 1.06
------------- -------------
Diluted weighted average shares outstanding ...... 11,842,000 11,801,000
------------- -------------
</TABLE>
See accompanying notes.
3
<PAGE> 5
REPUBLIC GROUP INCORPORATED
CONSOLIDATED BALANCE SHEETS
March 31, 1999 and June 30, 1998
<TABLE>
<CAPTION>
March 31, 1999 June 30, 1998
-------------- -------------
(Unaudited)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents ......................... $ 22,833,000 $ 1,124,000
Accounts receivable, net .......................... 14,917,000 14,611,000
Income tax refunds receivable ..................... 1,835,000 652,000
Inventories:
Finished goods .................................. 3,474,000 2,621,000
Raw materials and supplies ...................... 7,373,000 5,829,000
------------- -------------
10,847,000 8,450,000
Prepaid expenses and other ........................ 522,000 851,000
Deferred income taxes ............................. 379,000 597,000
------------- -------------
TOTAL CURRENT ASSETS ............................ 51,333,000 26,285,000
Property, plant and equipment, at cost ............... 229,949,000 151,503,000
Less accumulated depreciation, depletion
and amortization ................................ 59,609,000 53,683,000
------------- -------------
170,340,000 97,820,000
Unamortized debt issue costs ......................... 4,940,000 291,000
Other assets ......................................... 1,207,000 1,079,000
------------- -------------
TOTAL ASSETS ......................................... $ 227,820,000 $ 125,475,000
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable .................................. $ 8,871,000 $ 10,632,000
Accrued payroll and employee benefits ............. 3,605,000 2,919,000
Accrued interest payable .......................... 1,991,000 --
Other current liabilities ......................... 1,561,000 1,710,000
------------- -------------
TOTAL CURRENT LIABILITIES ....................... 16,028,000 15,261,000
Long-term debt due after one year .................... 100,000,000 5,950,000
Deferred income taxes ................................ 12,316,000 11,475,000
Other long-term liabilities .......................... 606,000 610,000
STOCKHOLDERS' EQUITY:
Common stock, $1 par value ........................ 11,777,000 11,749,000
Additional paid-in capital ........................ 28,353,000 28,096,000
Retained earnings ................................. 58,782,000 52,544,000
Less: Treasury stock, at cost, 2,000 shares at
March 31, 1999 and 10,000 shares at June 30, 1998 (42,000) (210,000)
------------- -------------
TOTAL STOCKHOLDERS' EQUITY ...................... 98,870,000 92,179,000
------------- -------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY ........... $ 227,820,000 $ 125,475,000
============= =============
</TABLE>
See accompanying notes.
4
<PAGE> 6
REPUBLIC GROUP INCORPORATED
CONSOLIDATED STATEMENTS OF CASH FLOWS
Nine Months Ended March 31, 1999 and 1998 (Unaudited)
<TABLE>
<CAPTION>
1999 1998
------------- -------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income .......................................... $ 9,457,000 $ 12,529,000
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation, depletion and amortization ........ 6,906,000 5,593,000
Non-cash compensation expense ................... 3,000 --
Deferred income taxes ........................... 1,059,000 541,000
Loss on sale of assets .......................... 124,000 20,000
Changes in current assets and liabilities:
Accounts receivable ........................ (1,306,000) 1,589,000
Income tax refunds receivable .............. (1,183,000) (86,000)
Inventories ................................ (2,397,000) (1,201,000)
Prepaid expenses ........................... 329,000 266,000
Accounts payable and accrued liabilities ... (1,224,000) (341,000)
Income taxes payable ....................... -- 2,281,000
Accrued interest payable ................... 1,991,000 --
Other assets and liabilities .................... (132,000) 5,000
------------- -------------
NET CASH PROVIDED BY OPERATING ACTIVITIES ........... 13,627,000 21,196,000
------------- -------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property, plant and equipment .......... (79,187,000) (14,090,000)
Proceeds from sale of property, plant and equipment.. 93,000 44,000
Proceeds from life insurance policy ................. 1,000,000 --
Purchases of investments ............................ -- (7,615,000)
Proceeds from sale of investments ................... -- 6,970,000
------------- -------------
NET CASH USED BY INVESTING ACTIVITIES ............... (78,094,000) (14,691,000)
------------- -------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Dividends paid ...................................... (3,176,000) (3,159,000)
Net payments under lines of credit .................. (5,950,000) --
Proceeds from issuance of senior subordinated notes.. 100,000,000 --
Payments for debt issue costs ....................... (5,105,000) --
Issuance of common treasury stock ................... 122,000 85,000
Proceeds from exercised stock options ............... 285,000 95,000
------------- -------------
NET CASH PROVIDED (USED) BY FINANCING ACTIVITIES .... 86,176,000 (2,979,000)
------------- -------------
NET INCREASE IN CASH AND CASH EQUIVALENTS ................ 21,709,000 3,526,000
Cash and cash equivalents at beginning of year ........... 1,124,000 1,436,000
------------- -------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD ............... $ 22,833,000 $ 4,962,000
============= =============
</TABLE>
See accompanying notes.
5
<PAGE> 7
REPUBLIC GROUP INCORPORATED
Notes to Consolidated Financial Statements
March 31, 1999 and 1998 (Unaudited)
(1) In the opinion of management of the Company, the accompanying unaudited
consolidated financial statements reflect all adjustments, of a normal
recurring nature, to fairly present the Company's financial position as of
March 31, 1999, and the results of operations and cash flows for the
periods ended March 31, 1999 and 1998. The operating results for the
interim periods are not necessarily indicative of the results to be
expected for a full year. It is suggested that these consolidated financial
statements be read in conjunction with the consolidated financial
statements and the notes included in the Company's Annual Report on Form
10-K as of June 30, 1998.
(2) Basic earnings per share are computed by dividing net income by the
weighted average number of common shares outstanding during the period.
Diluted earnings per share are computed by dividing net income by the sum
of the weighted average number of shares and the number of equivalent
shares assumed outstanding under the Company's stock-based compensation
plans. Diluted earnings per share are computed as follows:
<TABLE>
<CAPTION>
For the Three Months Ended
- ------------------------------------------------------------------------------------------------------------------
March 31, 1999 March 31, 1998
- ------------------------------------------------------------------------------------------------------------------
(in thousands) Per-Share (in thousands) Per-Share
Net Income Shares Amount Net Income Shares Amount
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Basic earnings
per share $2,394 11,775 $.20 $ 4,236 11,715 $ .36
Effects of
dilutive
securities-options -- 85 -- -- 105 --
------ ------ ---- ------- ------ -----
Diluted earnings
per share $2,394 11,860 $.20 $ 4,236 11,820 $ .36
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
For the Nine Months Ended
- ------------------------------------------------------------------------------------------------------------------
March 31, 1999 March 31, 1998
- ------------------------------------------------------------------------------------------------------------------
(in thousands) Per-Share (in thousands) Per-Share
Net Income Shares Amount Net Income Shares Amount
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Basic earnings
per share $9,457 11,764 $.80 $12,529 11,699 $1.07
Effects of
dilutive
securities-options -- 78 -- -- 102 (.01)
------ ------ ---- ------- ------ -----
Diluted earnings
per share $9,457 11,842 $.80 $12,529 11,801 $1.06
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
Options to purchase 153,225 shares of common stock at prices ranging from
$18.00 to $20.76 were outstanding for the three months and nine months
ended March 31, 1999. Options to purchase 10,541 shares of common stock at
the price of $20.76 were outstanding for the three months and nine months
ended March 31, 1998. These shares were not included in the calculation of
diluted earnings per share due to the options exercise price being greater
than the average market price of the common shares for the above periods.
6
<PAGE> 8
(3) Other Commitments and Contingent Liabilities: In connection with the
Company's preparation for a warehouse addition to its paperboard mill
located in Commerce City, Colorado, a suburb of Denver, the Company
discovered and has been investigating the presence of subsurface petroleum
hydrocarbons. The Company retained an environmental consultant who
concluded that fuel oil, jet fuel and gasoline additives had migrated in
the subsurface of the Company's property from an adjacent property. The
Company has conducted its own investigations, and the adjacent property
owner has conducted its own investigations. Additionally, the Company and
the adjacent owner have jointly sponsored investigations. Discussions
between the parties continue. The Company has completed the construction of
the warehouse addition under approval of the Colorado Department of Health.
At this time, the Company has not ascertained the future liability, if any,
of the above matter.
(4) Reclassification: Certain prior year balances have been reclassified to
conform with current year presentation.
(5) Subsequent Event: On April 20, 1999, the Board of Directors of the Company
declared a quarterly cash dividend of $0.09 per share of common stock to be
paid on June 15, 1999 to stockholders of record on May 28, 1999. Dividend
payments will total approximately $1,060,000.
(6) Income Taxes: The provisions for income taxes are based on estimated annual
effective tax rates, which differ from the federal statutory rates
principally due to state income taxes and certain non-deductible expenses.
(7) Long Term Debt: On July 15, 1998, the Company received proceeds from the
issuance of $100,000,000 of 9.5% Senior Subordinated Notes (the "Notes")
with a maturity date of July 15, 2008. The proceeds from the sale of the
Notes, along with a new bank credit facility of up to $85,000,000 entered
into with a bank syndicate on July 15, 1998, will be used primarily to
finance the construction of a new recycled paperboard mill in Lawton,
Oklahoma and for general and corporate purposes including working capital.
On July 15, 1998, the Company used a portion of the proceeds from the sale
of the Notes to repay the outstanding principal balance of a then existing
revolving credit facility dated as of June 30, 1995 (as amended) with
NationsBank, N.A., along with accrued interest. Upon repayment, the Company
ended the NationsBank, N.A. revolving credit facility. Outstanding balances
under that facility bore interest at a rate equal to LIBOR plus an agreed
margin (ranging from 50 to 150 basis points) or the bank lender's prime
rate less 0.75%.
Interest payment dates on the Notes are January 15 and July 15, and
commenced on January 15, 1999. Each interest payment will be $4,750,000.
The Notes are redeemable at the option of the Company, in whole or in part,
at any time on or after July 15, 2003, at a redemption price of 104.75%
which reduces to 100% on or after July 15, 2005. In addition, prior to July
15, 2001, the Company may redeem up to 35% of the principal amount of the
Notes with the net cash proceeds received by the Company from one or more
Public Equity Offerings, at a redemption price of 109.50%. The Notes
include financial and other covenants of the kind generally included in
such indebtedness.
The $85,000,000 new credit facility will be used as a revolving line of
credit until the conversion date. The conversion date is defined as the
earlier of July 15, 2000 or start-up of the Lawton mill. At that time the
facility will convert into a term loan with a principal amount of up to
$50,000,000 and a revolving credit facility with a $35,000,000 maximum
principal amount. After the conversion, the principal of the term loan will
amortize over four years with 10% due
7
<PAGE> 9
during the first year, 20% during the second year, 30% during the third
year and 40% during the fourth year. The revolving credit facility will
mature in four years. Availability under the new credit facility is not
subject to a borrowing base but is subject to, among other things, a
condition that the lenders receive certain assurances that the
construction of the Lawton mill is progressing on a satisfactory schedule
and within agreed-upon cost parameters. The borrowings under the new
credit facility are guaranteed by each of the Company's material
subsidiaries and are secured by a mortgage on the Lawton mill, a pledge of
stock of the Company's subsidiaries and security interests in
substantially all other personal property of the Company and its
subsidiaries. At such time, if any, as outstanding loans under the new
credit facility exceed $50,000,000, the lenders may require that other
real property and improvements of the Company and its subsidiaries be
mortgaged as security for the new credit facility. Outstanding principal
amounts on the new credit facility bear interest at a variable rate equal
to, at the election of the Company, (i) the LIBOR, plus an agreed margin
(ranging from 75 to 175 points), which is to be established annually based
upon the Company's leverage ratio or (ii) the higher of (a) NationsBank,
N.A. corporate prime rate and (b) the sum of 1/2 of 1% plus the federal
funds rate, plus, in each case, an agreed margin (ranging from 0 to 75
points). Interest payments under the new credit facility will be payable
quarterly. Under the new credit facility, the Company is required to
adhere to a number of financial and other covenants, including covenants
relating to excess cash flow, debt to EBITDA ratio, interest coverage
ratio, minimum EBITDA, and limitations on capital expenditures and
dividends. The Company may pay cash dividends and/or redeem its stock in
aggregate amounts of not more than (a) $5,300,000 in each fiscal year
ending on or before the conversion date, (b) $5,500,000 in each of the
first and second fiscal years ending after the conversion date, (c)
$6,000,000 in each of the third and fourth fiscal years ending after the
conversion date, and (d) without limitation thereafter. The new credit
facility does not restrict the transfer of funds to the parent by the
subsidiaries. There were no borrowings outstanding under the new credit
facility as of March 31, 1999.
(8) Effective January 1, 1998, the Company adopted SFAS No. 131, "Disclosures
about Segments of an Enterprise and Related Information." The following is
the Company's segment information for the quarters and nine months ended
March 31, 1999 and 1998.
<TABLE>
<CAPTION>
QUARTERS (Unaudited) 1999 1998
- --------------------------------------------------------------------------------------------------------------------------
Gypsum Recycled Elim.'s Gypsum Recycled Elim.'s
Wallboard Paperboard And Other Consolidated Wallboard Paperboard And Other Consolidated
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Shipments in units:
Wallboard (MSF) 129,738 129,738 140,982 140,982
Recycled paperboard (Tons) 46,925 (9,699) 37,226 47,654 (7,371) 40,283
Recovered paper fiber (Tons) 42,751 (19,608) 23,143 34,004 (16,655) 17,349
--------- --------- -------- ----------- --------- -------- --------- --------
Gross sales (in thousands):
Gypsum wallboard $ 19,449 $ $ $ 19,449 $ 18,748 $ $ $ 18,748
Recycled paperboard 14,679 14,679 16,870 16,870
Recovered paper fiber 2,674 (1,229) 1,445 2,948 (1,549) 1,399
Intrasegment fiber sales (1,229) 1,229 -- (1,549) 1,549 --
Intersegment paperboard
sales 3,530 (3,530) -- 2,918 (2,918) --
Other 3 3 1 1
--------- --------- -------- ----------- --------- -------- --------- --------
Gross sales 19,449 19,654 (3,527) 35,576 18,748 21,187 (2,917) 37,018
Less freight and discounts 3,482 1,202 2 4,686 3,912 1,193 -- 5,105
--------- --------- -------- ----------- --------- -------- --------- --------
Net sales $ 15,967 $ 18,452 $ (3,529) $ 30,890 $ 14,836 $ 19,994 $ (2,917) $ 31,913
--------- --------- -------- ----------- --------- -------- --------- --------
Operating profit $ 4,733 $ 1,698 $ (2,197) $ 4,234 $ 6,025 $ 2,745 $ (1,961) $ 6,809
--------- --------- -------- ----------- --------- -------- --------- --------
</TABLE>
8
<PAGE> 10
<TABLE>
<CAPTION>
NINE MONTHS (Unaudited) 1999 1998
- -------------------------------------------------------------------------------------------------------------------------
Gypsum Recycled Elim.'s Gypsum Recycled Elim.'s
Wallboard Paperboard And Other Consolidated Wallboard Paperboard And Other Consolidated
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Shipments in units:
Wallboard (MSF) 401,032 401,032 429,073 429,073
Recycled paperboard (Tons) 138,859 (19,920) 118,939 140,932 (19,219) 121,713
Recovered paper fiber (Tons) 129,431 (60,811) 68,620 108,328 (49,900) 58,428
--------- --------- --------- ---------- --------- --------- --------- -----------
Gross sales (in thousands):
Gypsum wallboard $ 58,411 $ $ $ 58,411 $ 56,145 $ $ $ 56,145
Recycled paperboard 47,615 47,615 50,547 50,547
Recovered paper fiber 8,130 (3,667) 4,463 9,738 (4,985) 4,753
Intrasegment fiber sales (3,667) 3,667 -- (4,985) 4,985 --
Intersegment paperboard
sales 7,300 (7,300) -- 7,511 (7,511) --
Other 5 5 5 5
--------- --------- --------- ---------- --------- --------- --------- -----------
Gross sales 58,411 59,378 (7,295) 110,494 56,145 62,811 (7,506) 111,450
Less freight and discounts 10,670 3,503 1 14,174 11,593 3,626 -- 15,219
--------- --------- --------- ---------- --------- --------- --------- -----------
Net sales $ 47,741 $ 55,875 $ (7,296) $ 96,320 $ 44,552 $ 59,185 $ (7,506) $ 96,231
--------- --------- --------- ---------- --------- --------- --------- -----------
Operating profit $ 17,356 $ 5,705 $ (6,118) $ 16,943 $ 18,576 $ 6,744 $ (5,272) $ 20,048
Identifiable assets 65,447 128,191 34,182 227,820 36,367 63,045 13,021 112,433
Capital Expenditures 20,027 58,787 373 79,187 9,303 3,878 909 14,090
Depreciation, depletion &
amortization 1,953 3,885 1,068 6,906 1,180 3,845 568 5,593
--------- --------- --------- ---------- --------- --------- --------- -----------
</TABLE>
The Company's operations within the gypsum segment consist of the manufacture
and sale of gypsum wallboard. Operations within the paperboard segment consist
of (i) the manufacture and sale of recycled paperboard to the gypsum industry
and other paperboard converters which manufacture composite cans, cores, tubes
and other packaging products, and (ii) the collection and sale of recovered
paper fiber. The Company's gypsum wallboard operations are located in Duke,
Oklahoma. The Company's primary markets for gypsum wallboard are Texas,
Oklahoma, Colorado and Kansas with additional secondary emphasis in the
midwestern and southeastern regions of the United States. The Company operates
recycled paperboard mills in Hutchinson, Kansas, Commerce City, Colorado, and
Halltown, West Virginia and is in the process of constructing a recycled
paperboard mill in Lawton, Oklahoma. The Lawton mill is anticipated to begin
commercial production in the first quarter of calendar year 2000. The Company's
primary markets for recycled paperboard generally lie within a 600 mile radius
of each facility. The Company operates reclaimed paper fiber recycling centers
in Kansas City, Missouri, Topeka, Kansas, and Denver, Colorado. The Company's
primary markets for reclaimed paper fiber generally lie within a 600 mile radius
of each center.
Republic Group Incorporated employs approximately 860 people, approximately 605
of whom are covered by collective bargaining units with four labor unions. The
expirations of current bargaining agreements range from 1999 to 2003. The
Company believes its relations with employees are satisfactory.
Operating profit is net sales less operating expenses. Sales between segments
are made at approximately market price. Identifiable assets by industry segment
are those used in each segment at period-end. Eliminations and other include
general corporate assets, principally cash, securities, property and equipment
and expenses.
9
<PAGE> 11
(9) The following components are included in other income (expense), net:
<TABLE>
<CAPTION>
Quarters Ended Nine Months Ended
March 31 March 31
-------- --------
1999 1998 1999 1998
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Interest expense $(2,605,000) $ (1,000) $(7,477,000) $ (2,000)
Less: Capitalized portion 1,482,000 -- 3,546,000 --
----------- ----------- ----------- -----------
Net interest expense (1,123,000) (1,000) (3,931,000) (2,000)
Interest income 728,000 48,000 2,322,000 145,000
Miscellaneous income (expense) 23,000 (24,000) (78,000) 15,000
----------- ----------- ----------- -----------
Other income (expense), net $ (372,000) $ 23,000 $(1,687,000) $ 158,000
=========== =========== =========== ===========
</TABLE>
Components of interest expense include interest associated with the Notes
and bank credit facility, commitment fees based on the unused portion of the
bank credit facility and amortization of debt issue costs.
10
<PAGE> 12
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Results of Operations
Quarters Ended March 31, 1999 and 1998. Consolidated net income was
$2,394,000, or $0.20 per diluted share on net sales of $30,890,000 for the third
quarter ended March 31, 1999. This compares to consolidated net income of
$4,236,000, or $0.36 per diluted share, on net sales of $31,913,000 for the
March 1998 quarter. Consolidated operating profits for the March 1999 quarter
decreased 38% from the March 1998 quarter due to reduced operating profits in
each of the Company's operating segments.
A 21% decline in operating profits in the Company's gypsum wallboard
segment was primarily attributable to longer than expected commissioning of the
newly-configured production lines at its gypsum wallboard plant in Duke,
Oklahoma. Production constraints and inefficiencies associated with the start-up
of the lines caused shipments of gypsum wallboard to decrease 8% and per unit
operating costs to increase 39% from the March 1998 quarter. The Company's
gypsum wallboard segment was positively impacted by continued strong demand for
gypsum wallboard. Gypsum wallboard selling prices in the quarter just completed
were 13% higher than the same quarter one year ago and 3% higher than the
December 1998 quarter.
The Company's recycled paperboard segment operating profits declined 38%
from the March 1998 quarter. Continued weakness in the East Coast uncoated
recycled paperboard markets and $367,000 of expenses related to the accelerated
hiring and training of new employees at the Company's new recycled paperboard
mill presently under construction at Lawton, Oklahoma were the principal
factors. Shipments of recycled paperboard increased 3% from the December 1998
quarter, but were 2% less than in the March 1998 quarter. Paperboard net selling
prices declined 7% from the March 1998 quarter to the current quarter; however,
the decline was substantially offset by a reduction in raw material costs,
mainly reclaimed paper fiber. Shipments of reclaimed paper fiber from the
Company's paper recycling operations increased 26% from the March 1998 quarter.
The Company's selling and administrative costs as a percent of net sales
increased from 13% in the March 1998 quarter to 16% in the March 1999 quarter.
The additional expenses associated with the Lawton mill and the production
constraints and inefficiencies at the Duke plant were the largest contributing
factors. Consolidated net income was negatively impacted by a $442,000 increase
over the March 1998 quarter in interest expense, net of interest income,
associated with the Notes issued in July 1998 used to fund construction of the
Lawton mill.
Nine Months Ended March 31, 1999 and 1998. Consolidated net income for
the nine months ended March 31, 1999 was $9,457,000 or $0.80 per diluted share,
on net sales of $96,320,000. This compares to consolidated net income of
$12,529,000, or $1.06 per diluted share, on net sales of $96,231,000 for the
same period in 1998.
The slight increase in consolidated net sales was primarily attributable to
an 11% increase in gypsum wallboard selling prices. The 7% decline in gypsum
wallboard shipments and 25% increase in gypsum wallboard per unit costs were,
again, caused by the production constraints and inefficiencies related to the
start-up and longer than anticipated commissioning of the newly-configured
production lines. Shipments of recycled paperboard declined 1%; however,
shipments of reclaimed paper fiber increased 19% from the 1998 period. Average
net selling prices of recycled paperboard declined 5%, but were more than offset
by a 21% decline in raw material costs, mainly reclaimed paper fiber. When
comparing the nine month periods, the recycled paperboard segment was adversely
affected by weakness in the East Coast uncoated recycled paperboard markets.
Secondly, in the 1999 period, the recycled paperboard segment was negatively
impacted by $559,000 of expenses related to the accelerated hiring and training
of employees for the Lawton mill currently under construction.
11
<PAGE> 13
Selling and administrative costs as a percent of net sales increased from
12% in the 1998 period to 15% in the 1999 period. This increase was the result
of factors similar to those affecting the quarter. Consolidated net income for
the nine months was negatively impacted by a $1,752,000 increase over the same
period in 1998 in interest expense, net of interest income, associated with the
Notes issued in July 1998.
Expansion Projects
Duke, Oklahoma Gypsum Wallboard Plant. Both production lines have been
operational since late January of 1999, but the plant has experienced a longer
than expected start-up period and commissioning of the newly-configured
production lines. Since early March, the plant has realized a gradual
improvement in production output. The Company anticipates continued gradual
improvements in production output and efficiencies in the June quarter and on
through fiscal 2000. The expanded plant will ultimately increase annual capacity
from 570 million to 1.2 billion square feet.
Lawton, Oklahoma Recycled Paperboard Mill. Construction of the Company's
new recycled paperboard mill in Lawton, Oklahoma continues on schedule with
commercial production anticipated to begin in the first quarter of calendar year
2000. The Lawton mill will be used primarily for the production of gypsum-grade
recycled paperboard and is expected to have an annual productive capacity of
220,000 tons. The addition of the Lawton mill will essentially double the
Company's current recycled paperboard capacity. Management estimates that the
Lawton mill will cost approximately $170,000,000 including related working
capital requirements and capitalized interest.
Year 2000 Compliance
The Company uses a number of computer software programs, operating systems,
and types of equipment with embedded computer chips in its internal operations,
including applications used in the Company's financial business systems,
manufacturing processes and administrative functions. To the extent that the
programs, operating systems, and equipment contain source code or embedded
computer chips that are unable to interpret appropriately the upcoming calendar
year 2000, some level of modification or possible replacement will be necessary.
A team of employees from various areas within the Company has been appointed to
address the Year 2000 issue. The Company presently expects that all of its core
operations and essential functions will be ready for the Year 2000 transition.
The Company has received a certification from the vendor of its financial and
payroll software that such software is year 2000 compliant. However, this
software will be internally analyzed and tested for additional assurance.
State of Readiness. In order to establish priorities for assessment and
remediation of Year 2000 issues, all computerized systems have been inventoried
and classified as follows:
Level 1: These are systems that are most critical. They include items that
could have a material adverse effect through extended production
interruptions, potential revenue losses, or significant expenditures.
(e.g., utilities, manufacturing and financial functions)
Level 2: These are systems that should not have a material adverse effect
on the Company but are needed to remain competitive. (e.g., telephones and
computers)
Level 3: These are systems that are desirable and enable employees to work
more efficiently. (e.g., voice mail, pagers, and copiers)
Overall, the Company's Year 2000 compliance program is approximately 70%
complete. The Company's Year 2000 team remains on schedule and anticipates
completing the entire process by June
12
<PAGE> 14
30, 1999, although these processes will continue to be in effect up to and into
the Year 2000. To date, the Company believes that the items which it has
identified as level 1 or level 2 will be compliant by the Year 2000 with no
material impact on the Company's financial results.
In addition to its internal Year 2000 compliance program, the Company has
requested information from a majority of its customers and vendors concerning
their Year 2000 compliance. Responses have been received from many key customers
indicating that they do not presently anticipate any significant Year 2000
problems. The Company is continuing to collect and review responses from
customers and vendors, and presently expects to complete this process during the
June 1999 quarter. The Company intends to continue to communicate with its key
customers and vendors as more information becomes available in order to further
evaluate potential risks to the Company's business operations.
Costs to Address Year 2000 Issues. The Company is executing its Year 2000
program primarily with internal resources. The principal costs associated with
these internal resources are payroll and employee benefits of the members of the
Year 2000 committee and the Company's information technology ("IT") department,
third party consultants, and hardware and software upgrades. Internal costs
related to payroll, employee benefits, and third party consultants are estimated
to be less than $150,000 through March 31, 1999. Starting in fiscal year 1995,
the Company replaced substantially all of its business systems hardware and
software. The Company estimates expenditures of approximately $300,000 in fiscal
year 1999 and approximately $250,000 in fiscal year 2000 for periodic, scheduled
upgrades of hardware and software. The Company does not separately track the
internal costs attributable to the Year 2000 program. All costs of Year 2000
compliance are recorded as an expense in the period incurred.
During the March 1999 quarter, the Company began testing its computer
networks, hardware, operating systems and business software. The testing is
being done by the Company's IT department with assistance from third party
consultants, as needed, to verify readiness by these systems. The costs of the
third party consultants and upgrades, if necessary, are not expected to be
material to the results of operations or the financial condition of the Company.
Risks of Year 2000 Issues. The company does not presently anticipate any
considerable delays or exceptions to the scheduled substantial completion of its
Year 2000 program by the end of June 1999. Therefore, any adverse consequences
from Year 2000 issues would result from presently unforeseen circumstances. As a
result, the Company has not yet developed any worst case Year 2000 scenarios.
The Company intends to begin analyzing potential risks and adverse scenarios
during the June 1999 quarter.
Contingency Plans. The Company is in the process of drafting contingency
plans for potential risks that could have a material adverse effect through
extended production interruptions, potential revenue losses or significant
expenditures. These contingency plans may include the use of substitute vendors
in the event that the vendor is determined to be non-compliant. Completion of
the contingency plans is expected in the June 1999 quarter.
At this time, the Company believes that it is adequately addressing the
Year 2000 issues, although there can be no assurance that the Year 2000 issues
will not have a material adverse effect on its business, financial condition or
results of operations. In addition, disruptions in the economy generally
resulting from Year 2000 failures or the public's perception of failures could
have a material adverse effect on the Company.
13
<PAGE> 15
Environmental Matters
In connection with the Company's preparation for a warehouse addition to
its paperboard mill located in Commerce City, Colorado, a suburb of Denver, the
Company discovered and has been investigating the presence of subsurface
petroleum hydrocarbons. The Company retained an environmental consultant who
concluded that fuel oil, jet fuel and gasoline additives had migrated in the
subsurface of the Company's property from an adjacent property. The Company has
conducted its own investigations, and the adjacent property owner has conducted
its own investigations. Additionally, the Company and the adjacent owner have
jointly sponsored investigations. Discussions between the parties continue. The
Company has completed the construction of the warehouse addition under approval
of the Colorado Department of Health. At this time, the Company has not
ascertained the future liability, if any, of the above matter.
Liquidity and Capital Resources
The following is a summary of certain financial statistics related to the
liquidity of the Company at March 31, 1999, and at June 30, 1998.
<TABLE>
<CAPTION>
March 31, 1999 June 30, 1998
----------------- ----------------
<S> <C> <C>
Cash, cash equivalents and investments $ 22,833,000 $ 1,124,000
Working capital $ 35,305,000 $ 11,024,000
Ratio of current assets to current liabilities 3.2:1 1.7:1
</TABLE>
On July 15, 1998, the Company received proceeds from the sale of
$100,000,000 of 9.5% Notes (the "Notes") with a maturity date of July 15, 2008.
The proceeds from the Notes, along with a new bank credit facility of up to
$85,000,000 entered into with a bank syndicate on July 15, 1998, will be used
primarily to finance the construction of the Lawton mill and for general and
corporate purposes, including working capital. On July 15, 1998, the Company
used a portion of the proceeds from the sale of the Notes to repay the
outstanding principal balance ($5,950,000) of a then existing revolving credit
facility dated as of June 30, 1995 (as amended) with NationsBank, N.A., along
with accrued interest. Upon repayment, the Company ended the NationsBank, N.A.
revolving credit facility. Outstanding balances under that facility bore
interest at a rate equal to LIBOR plus an agreed margin (ranging from 50 to 150
basis points) or the bank lender's prime rate less 0.75%.
Interest payment dates on the Notes are January 15 and July 15, and
commenced on January 15, 1999. Each interest payment will be $4,750,000. The
Notes are redeemable at the option of the Company, in whole or in part, at any
time on or after July 15, 2003, at a redemption price of 104.75% which reduces
to 100% on or after July 15, 2005. In addition, prior to July 15, 2001, the
Company may redeem up to 35% of the principal amount of the Notes with the net
cash proceeds received by the Company from one or more Public Equity Offerings,
at a redemption price of 109.50%. The Notes include financial and other
covenants of the kind generally included in such indebtedness.
The $85,000,000 new credit facility will be used as a revolving line of
credit until the conversion date. The conversion date is defined as the earlier
of July 15, 2000 or start-up of the Lawton mill. At that time the facility will
convert into a term loan with a principal amount of up to $50,000,000 and a
revolving credit facility with a $35,000,000 maximum principal amount. After the
conversion, the principal of the term loan will amortize over four years with
10% due during the first year, 20% during the second year, 30% during the third
year and 40% during the fourth year. The revolving credit facility will mature
in four years. Availability under the new credit facility is not subject to a
borrowing base but is subject to, among other things, a condition that the
lenders receive certain assurances that the construction of the Lawton mill is
progressing on a satisfactory schedule and within agreed-upon cost parameters.
The borrowings under the new credit facility are guaranteed by each of the
Company's material subsidiaries and are secured by a mortgage on the Lawton
mill, a pledge of stock of the Company's subsidiaries and security interests in
substantially all other personal property of the Company
14
<PAGE> 16
and its subsidiaries. At such time, if any, as outstanding loans under the new
credit facility exceed $50,000,000, the lenders may require that other real
property and improvements of the Company and its subsidiaries be mortgaged as
security for the new credit facility. Outstanding principal amounts on the new
credit facility bear interest at a variable rate equal to, at the election of
the Company, (i) the LIBOR, plus an agreed margin (ranging from 75 to 175
points), which is to be established annually based upon the Company's leverage
ratio or (ii) the higher of (a) NationsBank, N.A. corporate prime rate and (b)
the sum of 1/2 of 1% plus the federal funds rate, plus, in each case, an agreed
margin (ranging from 0 to 75 points). Interest payments under the new credit
facility will be payable quarterly. Under the new credit facility, the Company
is required to adhere to a number of financial and other covenants, including
covenants relating to excess cash flow, debt to EBITDA ratio, interest coverage
ratio, minimum EBITDA, and limitations on capital expenditures and dividends.
The new credit facility does not restrict the transfer of funds to the parent by
the subsidiaries.
The Company generated $13,627,000 of net cash from operations and received
$100,000,000 from the sale of the Notes during the nine months ended March 31,
1999. The Company used this cash to fund $79,187,000 of capital expenditures and
$5,105,000 of debt issue costs, to pay $3,176,000 in dividends and repay the
$5,950,000 principal balance under the old revolving credit facility. Capital
expenditures relating to the construction of the Lawton mill and the expansion
of the Duke plant, including the purchase of related railcars were approximately
$56,500,000 and $16,350,000, respectively, during the nine month period.
Management estimates that the Lawton mill will cost, including capitalized
interest and related working capital requirements, approximately $170,000,000.
The Company estimates that capital expenditures for the June 1999 quarter will
total approximately $67,000,000, including approximately $62,000,000 on the
Lawton mill and approximately $5,000,000 principally to upgrade equipment at the
Company's other facilities including final expenditures related to the Duke
expansion. The Company estimates that it will spend approximately $43,000,000 in
fiscal year 2000 to complete and provide working capital for the Lawton mill and
approximately $10,000,000 to $12,000,000 to upgrade equipment at the Company's
facilities. The new credit facility imposes limits on the Company's ability to
make capital expenditures, but the Company believes that those limits will not
prevent it from implementing its capital expenditure program.
The Company believes that the net proceeds from the sale of the Notes and
the $85,000,000 made available under the new credit facility, together with cash
generated by operations, will be sufficient (i) to complete the construction of
the Lawton mill, (ii) to fund the other capital expenditure requirements
identified above, (iii) to fund the Company's working capital requirements
including interest payments, (iv) to pay dividends to stockholders and (v) to
fund other general and corporate requirements. The Company anticipates it will
be necessary to begin borrowing from its bank credit facility during the June
1999 quarter, primarily based on the funding projections related to the
construction of the Lawton mill.
On April 20, 1999, the Board of Directors of the Company declared a
quarterly cash dividend of $.09 per share of common stock to be paid on June 15,
1999 to stockholders of record on May 28, 1999. Dividend payments will total
approximately $1,060,000. Quarterly dividends historically have been paid in
September, December, March and June. The schedule and payment of cash dividends
is subject to the approval of the Company's Board of Directors. The new credit
facility and the Indenture impose limits on the Company's ability to pay
dividends, but the Company does not anticipate that such limits will prevent the
payment of dividends at historical levels. In most cases, the limits imposed by
the new credit facility are the most restrictive. Under those limits, the
Company may pay cash dividends and/or redeem its stock in aggregate amounts of
not more than (a) $5,300,000 in each fiscal year ending on or before the
conversion date, (b) $5,500,000 in each of the first and second fiscal years
ending after the conversion date, (c) $6,000,000 in each of the third and fourth
fiscal years ending after the conversion date and (d) without limitation
thereafter.
15
<PAGE> 17
Forward-Looking Statements
Certain matters discussed in this Quarterly Report on Form 10-Q may
constitute forward-looking statements within the meaning of the federal
securities laws. These forward-looking statements are based on current
expectations and entail various risks and uncertainties that could cause actual
results to differ materially from those contemplated by the forward-looking
statements due to a number of factors, including general economic conditions,
competition, market acceptance of selling price increases, raw material costs,
facility fuel costs, timely completion and successful operation thereafter of
the on-going capital projects at the Duke plant and the Lawton mill, Year 2000
compliance issues and other risks detailed from time to time in the Company's
filings with the Securities and Exchange Commission, including annual reports on
Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K.
16
<PAGE> 18
Item 3. Quantitative and Qualitative Disclosures About Market Risks
The Company is exposed to market risk from changes in interest rates which
may adversely affect its financial position, results of operations and cash
flows. In seeking to minimize the risks from interest rate fluctuations, the
Company manages exposures through its regular operating and financing
activities. The Company does not use financial instruments for trading or other
speculative purposes and is not a party to any derivative financial instruments.
In general, the Company does not engage in hedging of commodities or other
contracts that would cause material exposure to market risk relating to
commodity prices or foreign currency exchange rates.
The Company is exposed to interest rate risk primarily through its
borrowing activities. As of March 31, 1999, the Company had outstanding,
$100,000,000 of Senior Subordinated Notes carrying a 9.5% fixed interest rate.
This fixed rate obligation does not expose the Company to risk of earnings or
cash flow loss due to the changes in market interest rates; however the fair
value of the Notes is sensitive to changes in interest rates. A hypothetical 100
basis point change in interest rates would result in a corresponding change of
approximately $4,500,000 in the fair value of the Notes assuming a July 15, 2003
full redemption.
As of March 31, 1999, the Company had no borrowings outstanding under its
bank credit facility under which any outstanding balance would bear interest at
variable rates. The Company anticipates that it will incur borrowings under its
variable rate bank credit facility during the June 1999 quarter. With respect to
any borrowings under the bank credit facility, interest rate changes generally
would not affect the fair value thereof, but would impact future earnings and
cash flows. See Item 2 - Management's Discussion and Analysis of Financial
Condition and Results of Operations - Liquidity and Capital Resources for
additional discussion of the terms of the Notes and the bank credit facility.
17
<PAGE> 19
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
There are no material pending legal proceedings involving the
Company or any of its subsidiaries, other than ordinary routine
litigation incidental to the Company's business.
Item 2. Changes in Securities
Not applicable.
Item 3. Defaults Upon Senior Securities
Not applicable.
Item 4. Submission of Matters to a Vote of Security Holders
Not applicable.
Item 5. Other Information
Not applicable.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
27 Article 5 of Regulation S-X-Financial Data Schedule.
(b) Reports on Form 8-K.
None
18
<PAGE> 20
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.
REPUBLIC GROUP INCORPORATED
May 12, 1999 /s/ Doyle R. Ramsey
------------------------------------
Doyle R. Ramsey
Executive Vice President and
Chief Financial Officer
May 12, 1999 /s/ Michael W. Dirks
------------------------------------
Michael W. Dirks
Vice President - Finance and
Chief Accounting Officer
19
<PAGE> 21
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit Number Description
- -------------- -----------
<S> <C>
27.399 Financial Data Schedule for the third quarter of 1999
(for SEC use only)
27.398 Financial Data Schedule for the third quarter of 1998
(for SEC use only)
27.397 Financial Data Schedule for the third quarter of 1997
(for SEC use only)
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-30-1999
<PERIOD-END> MAR-31-1999
<CASH> 22,833,000
<SECURITIES> 0
<RECEIVABLES> 15,619,000
<ALLOWANCES> 702,000
<INVENTORY> 10,847,000
<CURRENT-ASSETS> 51,333,000
<PP&E> 229,949,000
<DEPRECIATION> 59,609,000
<TOTAL-ASSETS> 227,820,000
<CURRENT-LIABILITIES> 16,028,000
<BONDS> 0
0
0
<COMMON> 11,777,000
<OTHER-SE> 87,093,000
<TOTAL-LIABILITY-AND-EQUITY> 227,820,000
<SALES> 110,494,000
<TOTAL-REVENUES> 110,494,000
<CGS> 65,327,000
<TOTAL-COSTS> 65,327,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,931,000
<INCOME-PRETAX> 15,256,000
<INCOME-TAX> 5,799,000
<INCOME-CONTINUING> 9,457,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 9,457,000
<EPS-PRIMARY> 0.80
<EPS-DILUTED> 0.80
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<RESTATED>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-END> MAR-31-1998
<CASH> 4,962,000
<SECURITIES> 1,295,000
<RECEIVABLES> 13,061,000
<ALLOWANCES> 757,000
<INVENTORY> 8,542,000
<CURRENT-ASSETS> 28,653,000
<PP&E> 135,127,000
<DEPRECIATION> 52,220,000
<TOTAL-ASSETS> 112,433,000
<CURRENT-LIABILITIES> 14,051,000
<BONDS> 0
0
0
<COMMON> 11,748,000
<OTHER-SE> 75,646,000
<TOTAL-LIABILITY-AND-EQUITY> 112,433,000
<SALES> 111,450,000
<TOTAL-REVENUES> 111,450,000
<CGS> 64,354,000
<TOTAL-COSTS> 64,354,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,000
<INCOME-PRETAX> 20,206,000
<INCOME-TAX> 7,677,000
<INCOME-CONTINUING> 12,529,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 12,529,000
<EPS-PRIMARY> 1.07
<EPS-DILUTED> 1.06
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<RESTATED>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-END> MAR-31-1997
<CASH> 3,576,000
<SECURITIES> 21,875,000
<RECEIVABLES> 13,737,000
<ALLOWANCES> 770,000
<INVENTORY> 7,557,000
<CURRENT-ASSETS> 47,530,000
<PP&E> 115,851,000
<DEPRECIATION> 45,155,000
<TOTAL-ASSETS> 119,046,000
<CURRENT-LIABILITIES> 14,492,000
<BONDS> 0
0
0
<COMMON> 11,713,000
<OTHER-SE> 62,856,000
<TOTAL-LIABILITY-AND-EQUITY> 119,046,000
<SALES> 105,913,000
<TOTAL-REVENUES> 105,913,000
<CGS> 56,500,000
<TOTAL-COSTS> 56,500,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,175,000
<INCOME-PRETAX> 23,016,000
<INCOME-TAX> 8,392,000
<INCOME-CONTINUING> 14,624,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 14,624,000
<EPS-PRIMARY> 1.25
<EPS-DILUTED> 1.24
</TABLE>
