<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[x] Quarterly report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended February 28, 1998 or
-----------------
[ ] Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from ___________ to ____________
Commission file number: 2-45166
-------
A. Schulman, Inc. and its Consolidated Subsidiaries
- --------------------------------------------------------------------------------
(Exact Name of Registrant as Specified in its Charter)
Delaware 34-0514850
- -------------------------------- ----------------------------------------
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
3550 West Market Street, Akron, Ohio 44333
- --------------------------------------------------------------------------------
(Address of Principal Executive Offices) (Zip Code)
(330) 666-3751
-------------------------------------------------------------------------------
(Registrant's Telephone Number, including Area Code)
- --------------------------------------------------------------------------------
(Former Name, Former Address and Former Fiscal Year, if Changed Since Last
Report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
----- -----
Number of common shares outstanding
as of March 31, 1998 - 35,673,818
<PAGE> 2
A. SCHULMAN, INC.
STATEMENT OF CONSOLIDATED INCOME (Notes 1 and 2)
<TABLE>
<CAPTION>
For the three months ended For the six months ended
-------------------------- ------------------------
February 28, February 28, February 28, February 28
1998 1997 1998 1997
---- ---- ---- ----
Unaudited Unaudited
--------- ---------
<S> <C> <C> <C> <C>
Net sales $239,840,000 $241,125,000 $504,048,000 $498,932,000
Interest and other income 673,000 1,371,000 1,603,000 2,905,000
------------ ------------ ------------ ------------
240,513,000 242,496,000 505,651,000 501,837,000
------------ ------------ ------------ ------------
Costs and expenses:
Cost of goods sold 198,962,000 204,227,000 419,351,000 419,791,000
Selling, general and
administrative expenses 22,642,000 19,890,000 45,699,000 42,337,000
Interest expense 382,000 961,000 683,000 1,737,000
Foreign currency transaction
(gains) losses (449,000) (194,000) (356,000) 169,000
Minority interest 367,000 185,000 551,000 426,000
------------ ------------ ------------ ------------
221,904,000 225,069,000 465,928,000 464,460,000
------------ ------------ ------------ ------------
Income before taxes and cumulative
effect of accounting change 18,609,000 17,427,000 39,723,000 37,377,000
Provision for income taxes (Note 7) 7,624,000 7,680,000 16,204,000 15,647,000
------------ ------------ ------------ ------------
Income before cumulative effect
of accounting change 10,985,000 9,747,000 23,519,000 21,730,000
Cumulative effect of accounting
change (Note 6) - - (2,007,000) -
------------ ------------ ------------ ------------
Net income 10,985,000 9,747,000 21,512,000 21,730,000
Less: Preferred stock dividends (13,000) (13,000) (27,000) (27,000)
------------ ------------ ------------ ------------
Net income applicable to
common stock $ 10,972,000 $ 9,734,000 $ 21,485,000 $ 21,703,000
============ ============ ============ ============
Weighted average number of shares outstanding (Note 8):
Basic 35,764,943 37,654,464 35,897,235 37,723,214
Diluted 35,834,581 37,664,125 35,948,676 37,729,559
Basic earnings per share (Note 8):
Income before cumulative effect
of accounting change $ .31 $ .26 $ .66 $ .58
Cumulative effect of accounting
change - - (.06) -
------------ ------------ ------------ ------------
Net income $ .31 $ .26 $ .60 $ .58
============ ============ ============ ============
Diluted earnings per share (Note 8):
Income before cumulative effect
of accounting change $ .31 $ .26 $ .66 $ .58
Cumulative effect of accounting
change - - (.06) -
------------ ------------ ------------ ------------
Net income $ .31 $ .26 $ .60 $ .58
============ ============ ============ ============
</TABLE>
- 2 -
<PAGE> 3
A. SCHULMAN, INC.
CONSOLIDATED BALANCE SHEET (Notes 1 and 2)
<TABLE>
<CAPTION>
February 28, August 31,
Assets 1998 1997
------------ ------------
Unaudited
---------
<S> <C> <C>
Current assets:
Cash and cash equivalents (Note 3) $ 67,142,000 $ 69,147,000
Short-term investments, at cost - 2,762,000
Accounts receivable, less allowance
for doubtful accounts of $6,025,000 at
February 28, 1998 and $5,304,000 at
August 31, 1997 163,134,000 150,192,000
Inventories, average cost or market,
whichever is lower 182,950,000 164,432,000
Prepaids, including tax effect of
temporary differences 15,891,000 17,181,000
------------ ------------
Total current assets 429,117,000 403,714,000
------------ ------------
Other assets:
Cash surrender value of life insurance 441,000 447,000
Deferred charges, etc., including tax effect
of temporary differences 16,956,000 19,389,000
------------ ------------
17,397,000 19,836,000
------------ ------------
Property, plant and equipment, at cost:
Land and improvements 9,206,000 9,995,000
Buildings and leasehold improvements 67,925,000 67,129,000
Machinery and equipment 192,329,000 188,777,000
Furniture and fixtures 20,559,000 20,358,000
Construction in progress 14,001,000 9,158,000
------------ ------------
304,020,000 295,417,000
Accumulated depreciation and investment grants
of $337,000 at February 28, 1998 and
$395,000 at August 31, 1997 164,827,000 156,022,000
------------ ------------
139,193,000 139,395,000
------------ ------------
$585,707,000 $562,945,000
============ ============
</TABLE>
- 3 -
<PAGE> 4
A. SCHULMAN, INC.
CONSOLIDATED BALANCE SHEET (Notes 1 and 2)
<TABLE>
<CAPTION>
February 28, August 31,
Liabilities and Stockholders' Equity 1998 1997
------------- -------------
Unaudited
---------
<S> <C> <C>
Current liabilities:
Notes payable $ 6,400,000 $ 3,000,000
Current portion of long-term debt 18,000 36,000
Accounts payable 69,204,000 63,095,000
U.S. and foreign income taxes payable 7,755,000 12,244,000
Accrued payrolls, taxes and related benefits 15,974,000 17,139,000
Other accrued liabilities 18,733,000 16,227,000
------------ ------------
Total current liabilities 118,084,000 111,741,000
------------ ------------
Long-term debt 30,000,000 12,009,000
Other long-term liabilities 33,858,000 32,309,000
Deferred income taxes 9,310,000 9,462,000
Minority interest 2,718,000 4,023,000
Stockholders' equity (Note 4):
Preferred stock, 5% cumulative, $100
par value, authorized, issued and
outstanding - 10,689 shares at February 28,
1998 and August 31, 1997 1,069,000 1,069,000
Special stock, 1,000,000 shares authorized,
none outstanding - -
Common stock, $1 par value
Authorized - 75,000,000 shares
Issued - 38,345,492 shares at February 28, 1998
and 38,342,867 shares at August 31, 1997 38,345,000 38,343,000
Other capital 44,469,000 44,412,000
Cumulative foreign currency translation
adjustment (10,238,000) (6,573,000)
Retained earnings 375,154,000 361,591,000
Treasury stock, at cost, 2,625,674 shares at
February 28, 1998 and 2,112,674 shares at
August 31, 1997 (Note 5) (56,103,000) (44,289,000)
Unearned stock grant compensation (959,000) (1,152,000)
------------ ------------
Common stockholders' equity 390,668,000 392,332,000
------------ ------------
Total stockholders' equity 391,737,000 393,401,000
------------ ------------
$585,707,000 $562,945,000
============ ============
</TABLE>
- 4 -
<PAGE> 5
A. SCHULMAN, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS (Notes 1 and 2)
<TABLE>
<CAPTION>
Six months ended
----------------
February 28, February 28,
1998 1997
---- ----
Unaudited
---------
<S> <C> <C>
Provided from (used in) operating activities:
Net income $ 21,512,000 $ 21,730,000
Items not requiring the current use of cash:
Cumulative effect of accounting change (Note 6) 2,007,000 -
Depreciation 9,380,000 9,583,000
Non-current deferred taxes (92,000) 100,000
Foreign pension and other deferred compensation 1,296,000 1,453,000
Postretirement benefit obligation 608,000 499,000
Changes in working capital:
Accounts receivable (14,110,000) (20,235,000)
Inventories (19,611,000) (24,058,000)
Prepaids 194,000 (218,000)
Accounts payable 8,905,000 22,478,000
Income taxes (3,313,000) (1,316,000)
Accrued payrolls and other accrued liabilities 1,469,000 1,878,000
Changes in other assets and other
long-term liabilities (948,000) (1,895,000)
------------ ------------
Net cash provided from
operating activities 7,297,000 9,999,000
------------ ------------
Provided from (used in) investing activities:
Expenditures for property, plant and equipment (13,759,000) (15,858,000)
Disposals of property, plant and equipment 580,000 446,000
Purchases of short-term investments (8,187,000) (11,071,000)
Proceeds from sales of short-term investments 10,993,000 38,229,000
------------ ------------
Net cash provided from (used in)
investing activities (10,373,000) 11,746,000
------------ ------------
Provided from (used in) financing activities:
Cash dividends paid (7,906,000) (7,549,000)
Increase of notes payable 3,400,000 4,600,000
Increase of long-term debt 18,000,000 25,000,000
Reduction of long-term debt (27,000) (19,000)
Increase (decrease) in minority interest (499,000) 426,000
Purchase of treasury stock (11,814,000) (5,686,000)
Exercise of stock options 59,000 -
Redemption of preferred stock - (2,000)
------------ ------------
Net cash provided from
financing activities 1,213,000 16,770,000
------------ ------------
Effect of exchange rate changes on cash (142,000) (12,838,000)
------------ ------------
Net increase (decrease) in cash and cash equivalents (2,005,000) 25,677,000
Cash and cash equivalents at beginning of period 69,147,000 113,555,000
------------ ------------
Cash and cash equivalents at end of period $ 67,142,000 $139,232,000
============ ============
</TABLE>
- 5 -
<PAGE> 6
A. SCHULMAN, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) The results of operations for the six months ended February 28, 1998 are not
necessarily indicative of the results expected for the year ended August 31,
1998.
(2) The interim financial statements furnished reflect all adjustments which
are, in the opinion of management, necessary to a fair presentation of the
results of the interim periods presented. All such adjustments are of a normal
recurring nature.
(3) All highly liquid investments purchased with a maturity of three months or
less are considered to be cash equivalents. Such investments amounted to
$51,974,000 at February 28, 1998 and $61,679,000 at August 31, 1997. Investments
with maturities between three and twelve months are considered to be short-term
investments.
(4) A summary of the stockholders' equity accounts for the six months ended
February 28, 1998 is as follows:
<TABLE>
<CAPTION>
Foreign Unearned
Currency Stock
Common Other Retained Translation Grant
Stock Capital Earnings Adjustment Compensation
----- ------- -------- ---------- ------------
<S> <C> <C> <C> <C> <C>
Balance-September 1, 1997 $38,343,000 $44,412,000 $361,591,000 $ (6,573,000) $(1,152,000)
Net income 21,512,000
Dividends paid or accrued:
Preferred (27,000)
Common, $.22 per share (7,922,000)
Foreign currency
translation adjustment (3,655,000)
Exercise of stock options 2,000 57,000
Amortization of
restricted stock 193,000
----------- ----------- ------------ ------------ -----------
Balance-February 28, 1998 $38,345,000 $44,469,000 $375,154,000 $(10,238,000) $ (959,000)
----------- ----------- ------------ ------------ -----------
</TABLE>
(5) During the six months ended February 28, 1998, the Company repurchased
513,000 shares of its common stock for $11,814,000. The Board of Directors of
the Company has authorized the repurchase of up to 877,000 additional shares.
Subject to market conditions, the Company plans to complete the program by the
end of fiscal 1998.
(6) On November 20, 1997, the FASB Emerging Issues Task Force issued a new
ruling which requires the write-off of business process re-engineering costs.
The cumulative effect of this change to September 1, 1997 was to decrease pretax
income by $3,237,000 and net income by $2,007,000 or $.06 per share and is
accounted for as a cumulative effect of a change in accounting method. During
the six months ended February 28, 1998, pretax income was reduced $1,010,000 for
third party fees related to the Company's redesign of its business processes in
North America. In addition, $415,000 was expensed for amortization and staffing
costs related to this project. All future costs for re-engineering will be
expensed as incurred.
(7) The provision for income taxes for the three months ended February 28, 1997
includes $900,000 or $.02 per share for foreign withholding taxes on dividends
to be paid from affiliates outside the United States.
(8) Effective February 28, 1998, the Company adopted Statement of Financial
Accounting Standards No. 128, "Earnings Per Share". As provided for under this
statement, the Company discloses both basic and diluted earnings per share for
all periods presented. Basic earnings per share are computed by dividing income
available to common shareholders by the weighted-average number of common shares
outstanding for the period. Diluted earnings per share reflects the potential
dilution that could occur if common stock equivalents were exercised and then
shared in the earnings of the Company.
- 6 -
<PAGE> 7
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Material Changes in Results of Operations
- -----------------------------------------
On November 20, 1997, the FASB Emerging Issues Task Force issued a new
ruling which requires the write-off of business process re-engineering costs.
Accordingly, the Company wrote off, in fiscal 1998, $3,237,000 of such costs
which were capitalized as of August 31, 1997. This write-off, net of income
taxes, amounted to $2,007,000 or $.06 per share and is accounted for as a
cumulative effect of a change in accounting method for fiscal 1998.
A comparison of net sales by classification for both the three month
and six month periods ending February 28, 1998 and 1997 is as follows:
<TABLE>
<CAPTION>
(In Thousands)
Three Months Ended February 28, Six months ended February 28,
------------------------------- -------------------------------
Increase Increase
1998 1997 (Decrease) 1998 1997 (Decrease)
---- ---- ---------- ---- ---- ----------
<S> <C> <C> <C> <C> <C> <C>
Manufacturing $158,513 $158,425 $ 88 $331,359 $329,130 $ 2,229
Merchant 43,353 43,385 (32) 92,745 87,929 4,816
Distribution 37,974 39,315 (1,341) 79,944 81,873 (1,929)
-------- -------- -------- -------- -------- --------
$239,840 $241,125 $ (1,285) $504,048 $498,932 $ 5,116
======== ======== ======== ======== ======== ========
</TABLE>
Certain items previously reported have been reclassified to conform
with the 1998 presentation.
The translation effects from the stronger U.S. dollar decreased sales
by $14.8 million in the quarter and $34 million for the six month period.
Total tonnage increased approximately 6% for the quarter and 8% for the
six month period. Tonnage for the quarter was up approximately 11% in Europe.
Tonnage in North America was unchanged. European tonnage increased 12% during
the six month period and North American tonnage increased approximately 3%.
Gross margins on sales for the quarter were 17% compared to 15.3% for
the same quarter last year. Gross margins on sales for the six months ended
February 28, 1998 were 16.8% compared with 15.9% for the comparable six month
period last year. The increase in fiscal 1998 gross profit margins was derived
from manufacturing. A key factor in this margin improvement was increasing the
plant utilization rate from 78% in the 1997 second quarter to 86% in the current
quarter. The improvement in manufacturing operations was partially offset by
lower margins for merchant and distribution activities. A comparison of gross
profit by classification for both the three month and six month periods ending
February 28, 1998 and 1997 is as follows:
<TABLE>
<CAPTION>
(In Thousands)
Three Months Ended February 28, Six Months Ended February 28,
------------------------------- -----------------------------
Increase Increase
1998 1997 (Decrease) 1998 1997 (Decrease)
---- ---- ---------- ---- ---- ----------
<S> <C> <C> <C> <C> <C> <C>
Manufacturing $30,968 $26,398 $ 4,570 $63,431 $57,472 $ 5,959
Merchant 5,265 5,476 (211) 11,450 11,095 355
Distribution 4,645 5,024 (379) 9,816 10,574 (758)
------- ------- ------- ------- ------- -------
$40,878 $36,898 $ 3,980 $84,697 $79,141 $ 5,556
======= ======= ======= ======= ======= =======
</TABLE>
Certain items previously reported have been reclassified to conform
with the 1998
- 7 -
<PAGE> 8
presentation.
Selling, general and administrative expenses increased in 1998. During
1998, the Company incurred $1,425,000 of business process re-engineering costs
related to the redesign of its business processes in North America. In addition,
higher compensation levels and additional costs were incurred in 1998 to support
the increase in sales volume.
Interest expense decreased in 1998 due to lower levels of borrowing.
Foreign currency transaction gains and losses were primarily due to
changes in the value of currencies within the European Monetary System, as well
as the U.S. dollar, Canadian dollar, Mexican peso and Indonesian rupiah.
Minority interest represents a 30% equity position of Mitsubishi
Chemical MKV Company in a partnership with the Company and a 35% equity position
of P.T. Prima Polycon Indah in an Indonesian joint venture with the Company.
Other income was down because of lower interest income resulting from a
decline in European temporary investments.
The effective tax rates for the respective three month periods were 41%
in 1998 and 44.1% in 1997. For the six months ended February 28, the effective
tax rates were 40.8% in 1998 and 41.9% in 1997. The 1997 periods include a
$900,000 provision for foreign withholding taxes on dividends. The 1998 periods
include the effect of a new 15% surtax in France.
The strengthening in the value of the U.S. dollar decreased net income
by approximately $788,000 or $.02 per share for the quarter and $1,842,000 or
$.05 per share for the six month period.
Earnings in Europe for the quarter and six month period were
approximately the same as last year due to the adverse effects of translation.
Total tonnage was up 11% for the quarter on solid gains in merchant activities.
However, profit margins were 18.1% compared with 18.4% last year due to lower
margins in merchant and distribution activities.
North American profits before withholding taxes and the cumulative
effect of accounting changes were up 13% for the quarter and 33% for the six
month period. Tonnage in manufacturing was up 11% for the quarter, but declines
in merchant and distribution activities reduced the gains. Profit margins for
the quarter were 15.6% compared with 11.6% last year with gains in all
activities.
The Company currently has a good level of orders in Europe. The
European economies are showing signs of improvement and good demand is
anticipated for the balance of fiscal 1998. Manufacturing margins were up for
the first half, but it appears that competitive price pressures will make it
difficult to generate additional margin improvement. Also, the strength of the
U.S. dollar should continue to have an adverse impact on results.
North American margins in the second half of fiscal 1998 should show
year over year gains, but higher costs, including the business re-engineering
program and the start-up of a new Mexican line, will reduce the improvement. In
addition, there has been noted some softening in the Company's automotive
business, which combined with higher costs, may hamper growth of earnings.
Material Changes in Financial Condition
- ---------------------------------------
As of February 28, 1998, the current ratio was 3.6:1 and working
capital was $311 million.
During the six months ended February 28, 1998, the Company repurchased
513,000 shares of its common stock for $11,814,000. The Board of Directors of
the Company has authorized the repurchase of up to 877,000 additional shares.
Subject to market conditions, the Company plans to complete the program by the
end of fiscal 1998.
- 8 -
<PAGE> 9
The ratio of long-term liabilities to capital was 14% at February 28,
1998 and 10.1% at August 31, 1997. This ratio is calculated by dividing the sum
of long-term debt and other long-term liabilities by the sum of total
stockholders' equity, long-term debt and other long-term liabilities. This ratio
increased during the six months ended February 28, 1998 due to increases in the
outstanding debt under the revolving credit agreement of $18 million.
The assets and liabilities of the Company's foreign subsidiaries are
translated into U.S. dollars using current exchange rates. Income statement
items are translated at average exchange rates prevailing during the period. The
resulting translation adjustments are recorded in the "cumulative foreign
currency translation adjustment" account in stockholders' equity. The change of
the U.S. dollar during the six months ended February 28, 1998 decreased this
account by $3,665,000.
The Company is working on the Year 2000 issue throughout its
operations. Presently, the total cost of achieving Year 2000 compliance is not
expected to be material to operations or financial position.
Cautionary Statements
- ---------------------
From time to time, in written reports and oral statements, we discuss
our expectations regarding future performance of the Company. These
"forward-looking statements" are based on currently available information. They
are also inherently uncertain, and investors must recognize that events could
turn out to be significantly different from what we had expected. Examples of
such uncertainties include, but are not limited to, the following:
* Worldwide and regional economic, business and political conditions
* Fluctuations in the value of currencies within the European Monetary
System, as well as the U.S. dollar, Canadian dollar, Mexican peso
and Indonesian rupiah
* Fluctuations in prices of plastic resins and other raw materials
* Changes in customer demand and requirements
- 9 -
<PAGE> 10
Part II - Other Information
- ---------------------------
Items 1 through 5 are not applicable or the answer to such items is
negative; therefore, the items have been omitted and no reference is required in
this report.
Item 6 - Exhibits and Reports on Form 8-K
- -----------------------------------------
<TABLE>
<CAPTION>
(a) Exhibit
Number Exhibit
-------- -------
<C> <S>
27 Financial Data Schedule*
</TABLE>
(b) No Reports on Form 8-K have been filed during the quarter for which this
report is filed.
- -----
* Filed only in electronic format pursuant to Item 601(b)(27) of Regulation
S-K.
- 10 -
<PAGE> 11
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.
<TABLE>
<S> <C>
Date April 14, 1998 A. Schulman, Inc.
---------------- -----------------------------------------
(Registrant)
/s/ R. A. Stefanko
-----------------------------------------
R. A. Stefanko, Executive Vice President-
Finance & Administration
(Signing on behalf of Registrant as a duly
authorized officer of Registrant and signing as
the Principal Financial Officer of Registrant)
</TABLE>
- 11 -
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEET AS OF FEBRUARY 28, 1998 AND AUGUST 31, 1997 AND THE
STATEMENT OF CONSOLIDATED INCOME FOR THE THREE MONTHS ENDED FEBRUARY 28, 1998
AND FEBRUARY 28, 1997 AND FOR THE SIX MONTHS ENDED FEBRUARY 28, 1998 AND
FEBRUARY 28, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000087565
<NAME> A. SCHULMAN, INC.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> AUG-31-1998
<PERIOD-START> SEP-01-1997
<PERIOD-END> FEB-28-1998
<CASH> 67,142
<SECURITIES> 0
<RECEIVABLES> 163,134
<ALLOWANCES> 6,025
<INVENTORY> 182,950
<CURRENT-ASSETS> 429,117
<PP&E> 304,020
<DEPRECIATION> 164,827
<TOTAL-ASSETS> 585,707
<CURRENT-LIABILITIES> 118,084
<BONDS> 30,000
0
1,069
<COMMON> 38,345
<OTHER-SE> 352,323
<TOTAL-LIABILITY-AND-EQUITY> 585,707
<SALES> 504,048
<TOTAL-REVENUES> 505,651
<CGS> 419,351
<TOTAL-COSTS> 465,928
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 683
<INCOME-PRETAX> 39,723
<INCOME-TAX> 16,204
<INCOME-CONTINUING> 23,519
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 2,007<F1>
<NET-INCOME> 21,512
<EPS-PRIMARY> .60
<EPS-DILUTED> .60
<FN>
<F1>On November 30, 1997, the FASB Emerging Issues Task Force issued a new ruling
which requires the write-off of business process re-engineering costs. The
cumulative effect of this change to September 1, 1997 was to decrease pretax
income by $3,237,000 and net income by $2,007,000 or $.06 per share and is
accounted for as a cumulative effect of a change in accounting method.
</FN>
</TABLE>
