<PAGE> 1
FORM 10-Q
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 SEPTEMBER 30, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission File Number 1-13071
HANOVER COMPRESSOR COMPANY
(Exact name of registrant as specified in its charter)
Delaware 75-2344249
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
12001 North Houston Rosslyn
Houston, Texas 77086
(Address of principal executive offices)
(281) 447-8787
(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
As of November 9, 1998 there were 28,534,460 shares of the Company's common
stock, $0.001 par value, outstanding.
<PAGE> 2
HANOVER COMPRESSOR COMPANY
CONSOLIDATED BALANCE SHEET
(IN THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
September 30,
1998 December 31,
ASSETS (unaudited) 1997
------------ ------------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 7,662 $ 4,561
Accounts receivable, net 60,835 41,041
Inventory 55,987 32,860
Costs and estimated earnings in excess of billings
on uncompleted contracts 13,600 6,658
Prepaid taxes 6,850 6,919
Other current assets 15,882 2,750
------------ ------------
Total current assets 160,816 94,789
------------ ------------
Property, plant and equipment:
Compression equipment 362,590 438,351
Land and buildings 14,553 10,544
Transportation and shop equipment 19,957 14,589
Other 9,800 6,824
------------ ------------
406,900 470,308
Accumulated depreciation (72,455) (76,238)
------------ ------------
Net property, plant and equipment 334,445 394,070
------------ ------------
Intangible and other assets 27,825 17,593
------------ ------------
$ 523,086 $ 506,452
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term debt $ 1,682 $ 2,222
Accounts payable, trade 21,310 16,219
Accrued liabilities 20,326 9,088
Advance billings 7,987 6,752
Billings on uncompleted contracts in excess of
costs and estimated earnings 2,523 2,481
------------ ------------
Total current liabilities 53,828 36,762
Long-term debt 87,426 158,838
Deferred revenue 41,151 899
Deferred income taxes 33,346 21,682
------------ ------------
Total liabilities 215,751 218,181
------------ ------------
Commitments and contingencies
Stockholders' equity:
Common stock, $.001 par value; 100 million shares authorized;
28,534,460 (unaudited) and 28,367,169 shares issued,
respectively 29 28
Additional paid-in capital 268,353 268,588
Notes receivable - employee stockholders (10,673) (10,748)
Retained earnings 51,892 30,621
Treasury stock - 135,447 common shares, at cost (2,266) (218)
------------ ------------
Total stockholders' equity 307,335 288,271
------------ ------------
$ 523,086 $ 506,452
============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 3
HANOVER COMPRESSOR COMPANY
CONSOLIDATED STATEMENT OF INCOME
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
Three months Nine months
ended September 30, ended September 30,
------------------------- -------------------------
1998 1997 1998 1997
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Revenues:
Rentals and maintenance $ 46,211 $ 28,101 $ 123,992 $ 78,677
Compressor fabrication 12,601 14,046 44,576 35,519
Production equipment fabrication 11,945 9,311 30,052 26,672
Other 1,039 9 3,558 721
---------- ---------- ---------- ----------
71,796 51,467 202,178 141,589
---------- ---------- ---------- ----------
Expenses:
Rentals and maintenance 18,298 10,749 49,382 30,410
Compressor fabrication 10,910 10,877 37,888 29,374
Production equipment fabrication 7,747 6,636 19,693 18,862
Selling, general and administrative 7,081 5,051 19,866 14,458
Depreciation and amortization 9,486 7,497 28,588 20,802
Leasing expense 2,776 0 2,776 0
Interest expense 2,347 2,167 9,228 7,837
---------- ---------- ---------- ----------
58,645 42,977 167,421 121,743
---------- ---------- ---------- ----------
Income before income taxes 13,151 8,490 34,757 19,846
Provision for income taxes 5,103 3,353 13,486 7,839
---------- ---------- ---------- ----------
Net income $ 8,048 $ 5,137 $ 21,271 $ 12,007
========== ========== ========== ==========
Weighted average common
equivalent shares outstanding:
Basic 28,531 28,336 28,504 24,719
---------- ---------- ---------- ----------
Diluted 30,152 30,157 30,133 26,386
---------- ---------- ---------- ----------
Earnings per common share:
Basic $ 0.28 $ 0.18 $ 0.75 $ 0.49
---------- ---------- ---------- ----------
Diluted $ 0.27 $ 0.17 $ 0.71 $ 0.46
---------- ---------- ---------- ----------
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 4
HANOVER COMPRESSOR COMPANY
CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
(IN THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
Nine Months
ended September 30,
------------------------------
1998 1997
------------ ------------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 21,271 $ 12,007
Adjustments:
Depreciation and amortization 28,588 20,802
Amortization of debt issuance and debt discount 557 765
Gain on sale of assets (1,928) (294)
Deferred income taxes 6,391 1,939
Changes in assets and liabilities, net of effects of
business combinations:
Accounts receivable (19,454) (12,486)
Inventory (22,654) (14,413)
Costs and estimated earnings in excess of billings
on uncompleted contracts (6,900) 6,563
Accounts payable and other liabilities 15,966 11,980
Advance billings 1,235 1,598
Other (14,647) (4,457)
------------ ------------
Net cash provided by operating activities 8,425 24,004
Cash flows from investing activities:
Cash used for business acquisitions (17,137) --
Capital expenditures (119,405) (115,487)
Proceeds from sale of fixed assets 206,998 1,239
------------ ------------
Net cash provided by (used in) investing activities 70,456 (114,248)
Cash flows from financing activities:
Net borrowings on revolving credit facility 128,547 87,000
Repayments of shareholder notes 75 --
Equity issuance costs (162) --
Issuance of common stock -- 93,860
Debt issuance costs (1,384) (1,412)
Repayment of long-term debt (200,819) (86,425)
Purchase of treasury stock (2,048) --
Other 11 1,185
------------ ------------
Net cash provided by (used in) financing activities (75,780) 94,208
------------ ------------
Net increase in cash and cash equivalents 3,101 3,964
Cash and cash equivalents at beginning of period 4,561 7,322
------------ ------------
Cash and cash equivalents at end of period $ 7,662 $ 11,286
============ ============
Supplemental disclosure of cash flow information:
Interest paid $ 8,368 $ 6,491
Income taxes paid $ 1,398 $ 5,362
Supplemental disclosure of noncash transactions:
Notes receivable issued for purchases of property,
plant and equipment $ 1,500
Acquisitions of businesses:
Common stock issued in exchange for notes receivable $ 5,163
Property, plant and equipment acquired $ 17,156
Other noncash assets acquired $ 5,613
Liabilities assumed $ 359
Deferred taxes $ 5,273
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 5
HANOVER COMPRESSOR COMPANY
Notes to Consolidated Financial Statements
1. BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements of Hanover
Compressor Company (the "Company") included herein have been prepared in
accordance with generally accepted accounting principles for interim financial
information and in conjunction with the rules and regulations of the Securities
and Exchange Commission. Accordingly, they do not include all of the information
and footnotes required by generally accepted accounting principles for complete
financial statements. The Company believes, however, the disclosures are
adequate to make the information presented not misleading. It is the opinion of
management that the information furnished includes all adjustments, consisting
only of normal recurring adjustments, which are necessary to present fairly the
financial position, results of operations, and cash flows of the Company for the
periods indicated. It is suggested the financial statement information included
herein be read in conjunction with the consolidated financial statements and
notes thereto included in the Company's Annual Report on Form 10-K for the year
ended December 31, 1997. These interim results are not necessarily indicative of
results for a full year.
EARNINGS PER COMMON SHARE
The Company adopted Statement of Financial Accounting Standard No. 128
(FAS 128), "Earnings Per Share," beginning with the Company's fourth quarter of
1997. All prior period earnings per share data have been restated to conform to
the provisions of this statement. Basic earnings per common share is computed
using the weighted average number of shares outstanding for the period. Diluted
earnings per common share is computed using the weighted average number of
shares outstanding adjusted for the incremental shares attributed to outstanding
options and warrants to purchase common stock. Included in diluted shares are
common stock equivalents relating to options of 1,228,000 and 1,097,000 and
warrants of 401,000 and 569,000 for the nine months ended September 30, 1998 and
1997, respectively.
OTHER COMPREHENSIVE INCOME
The Company adopted Statement of Financial Standard No. 130 (FAS 130),
"Reporting Comprehensive Income," in the first quarter of 1998. For the three
and nine months ended September 30, 1998 and 1997, there were no significant
differences between net income and comprehensive income.
2. INVENTORIES
Inventory consisted of the following amounts (in thousands):
<TABLE>
<CAPTION>
September 30, December 31,
1998 1997
--------------- ---------------
(unaudited)
<S> <C> <C>
Parts and supplies $ 38,395 $ 20,141
Work in progress 11,655 8,766
Finished goods 5,937 3,953
--------------- ---------------
$ 55,987 $ 32,860
=============== ===============
</TABLE>
<PAGE> 6
3. SALES AND LEASE BACK OF EQUIPMENT
In July 1998, the Company completed a $200 million sale and 5 year
lease transaction of certain compression equipment. The transaction was
structured as a sale and lease back of the equipment and is being accounted for
as an operating lease. Under the agreement, the equipment was sold and leased
back by the Company for a 5 year period and will continue to be deployed by the
Company under its normal operating procedures. Additionally, the Company has the
option to repurchase the equipment at any time. The lease provides for a
substantial residual value guarantee (approximately $167 million) by the
Company, which is due upon termination of the lease and which may be satisfied
by a cash payment or the exercise of a purchase option by the Company. The
equipment sold had a net book value of approximately $159 million and therefore
the sale of the equipment resulted in a gain of approximately $41 million, which
is being deferred until the end of the lease. If the Company does not exercise
its purchase options under this agreement, the deferred gain will be recognized
to the extent it exceeds any payments required to be made by the Company under
the residual value guarantee and other requirements of the agreement.
The lease agreement calls for quarterly payments. The following table
provides future minimum lease payments (in thousands) under the aforementioned
lease exclusive of any guarantee payments:
<TABLE>
<S> <C>
1998 $ 3,620
1999 14,480
2000 14,480
2001 14,480
2002 14,480
2003 10,860
</TABLE>
4. COMMITMENTS AND CONTINGENCIES
In the ordinary course of business the Company is involved in various
pending or threatened legal actions. While management is unable to predict the
ultimate outcome of these actions, it believes that any ultimate liability
arising from these actions will not have a material adverse effect on the
Company's consolidated financial position, results of operations or cash flows.
5. SUBSEQUENT EVENT
On October 22, 1998, the Company acquired the capital stock of Eureka
Energy Systems, Inc. for approximately $16.8 million in cash. The transaction
will be accounted for as a purchase.
<PAGE> 7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
Certain matters discussed in this document are "forward-looking statements"
intended to qualify for the safe harbors from liability established by the
Private Securities Litigation Reform Act of 1995. These forward-looking
statements can generally be identified as such because the context of the
statement will include words such as the Company "believes", "anticipates",
"expects", "estimates" or words of similar import. Similarly, statements that
describe the Company's future plans, objectives or goals are also
forward-looking statements. Such forward-looking statements are subject to
certain risks and uncertainties which could cause actual results to differ
materially from those anticipated as of the date of this report. The risks and
uncertainties include (1) the loss of market share through competition, (2) the
introduction of competing technologies by other companies, (3) a prolonged
substantial reduction in natural gas prices which would cause a decline in the
demand for the Company's compression and oil and gas production equipment, (4)
new governmental safety, health and environmental regulations which could
require significant capital expenditures by the Company and (5) changes in
economic or political conditions in the countries in which the Company operates.
The forward-looking statements included herein are only made as of the date of
this report and the Company undertakes no obligation to publicly update such
forward-looking statements to reflect subsequent events or circumstances.
GENERAL
The Company is a leading provider of a broad array of natural gas
compression rental, operations and maintenance services in the United States and
select international markets. The Company's operations consist of providing gas
compression services through renting, maintaining and operating natural gas
compressors and engineering, fabricating and selling gas compression and oil and
gas production equipment. As of September 30, 1998, the Company operated a fleet
of 2,663 compression rental units with an aggregate capacity of approximately
941,000 horsepower. The Company's products and services are essential to the
production, transportation, processing and storage of natural gas and are
provided primarily to energy producers and processors.
On July 22, 1998, the Company completed a $200 million, 5-year lease
transaction (the "Equipment Lease") arranged by Chase Securities Inc. The
transaction has been structured as a sale and lease back of compression
equipment to Hanover Equipment Trust 1998A, a newly-formed Delaware business
trust (the "Trust"). Under the Equipment Lease, the compression equipment was
sold to the Trust for $200 million and leased back by the Company for a 5-year
period. The compression equipment will continue to be deployed by the Company
under its normal operating procedures. Additionally, the Company has the option
to repurchase the equipment from the Trust at any time. The lease provides for a
residual value guarantee (approximately 83% of the total cost) by the Company,
which is due upon termination of the lease and which may be satisfied by a cash
payment or the exercise of a purchase option by the Company. The sale of the
equipment resulted in a gain of approximately $41 million, which is being
deferred until the end of the lease.
<PAGE> 8
Proceeds from the Equipment Lease were used to repay borrowings under the
Company's existing $200 million revolving credit facility with The Chase
Manhattan Bank, as agent (the "Bank Credit Agreement").
RESULTS OF OPERATIONS
THREE MONTHS ENDED SEPTEMBER 30, 1998 COMPARED TO THREE MONTHS ENDED SEPTEMBER
30, 1997
REVENUES
The Company's total revenues increased by $20.3 million, or 40%, to $71.8
million during the three months ended September 30, 1998 from $51.5 million
during the three months ended September 30, 1997. The increase resulted from
growth of the Company's natural gas compressor rental fleet.
Revenues from rentals and maintenance increased by $18.1 million, or 64%,
to $46.2 million during the three months ended September 30, 1998 from $28.1
million during the three months ended September 30, 1997. Domestic revenues from
rentals and maintenance increased by $11.5 million, or 51%, to $33.9 million
during the three months ended September 30, 1998 from $22.4 million during the
three months ended September 30, 1997. International revenues from rentals and
maintenance increased by $6.6 million, or 115%, to $12.3 million during the
three months ended September 30, 1998 from $5.7 million during the three months
ended September 30, 1997. The increase in both domestic and international rental
and maintenance revenues resulted primarily from expansion of the Company's
rental fleet and increased part sales. Domestic horsepower in the rental fleet
increased by 22% from approximately 646,000 horsepower at September 30, 1997 to
approximately 791,000 horsepower at September 30, 1998. In addition,
international horsepower increased by 105% from approximately 73,000 horsepower
at September 30, 1997 to approximately 150,000 horsepower at September 30, 1998.
Revenues from the fabrication and sale of compressor equipment to third
parties decreased by $1.5 million, or 10%, to $12.6 million during the three
months ended September 30, 1998 from $14.1 million during the three months ended
September 30, 1997. During the three months ended September 30, 1998, an
aggregate of approximately 49,000 horsepower of compression equipment was
fabricated, 50% of which was placed in the rental fleet and 50% of which was
sold to third party customers. During the three months ended September 30, 1997,
approximately 51,000 horsepower was fabricated, 53% of which was placed in the
Company's rental fleet and 47% of which was sold to third party customers. Gross
margin for compressor fabrication was 13% and gross profit was $1.7 million for
the three months ended September 30, 1998 as compared to 23% gross margin and
$3.2 million gross profit for the three months ended September 30, 1997. This
higher gross margin during the three months ended September 30, 1997 resulted
primarily from recognition of higher than expected gross margins on the
completion of several fabrication projects.
<PAGE> 9
Revenues from the fabrication and sale of production equipment increased by
$2.6 million, or 28%, to $11.9 million during the three months ended September
30, 1998 from $9.3 million during the three months ended September 30, 1997.
This included non-recurring international revenues from fabrication and sale of
production equipment of $2.0 million during the three months ended September 30,
1998 and there were no international revenues from fabrication and sale of
production equipment during the three months ended September 30, 1997.
EXPENSES
Rentals and maintenance operating expenses increased by $7.6 million, or
70%, to $18.3 million during the three months ended September 30, 1998 from
$10.7 million during the three months ended September 30, 1997. The increase
resulted primarily from the corresponding 64% increase in revenues from rentals
and maintenance which included increased part sales during the three months
ended September 30, 1998 over the corresponding period in 1997.
Operating expenses of compressor fabrication was unchanged during the three
months ended September 30, 1998 and the three months ended September 30, 1997.
The operating expenses attributable to production equipment fabrication
increased by $1.1 million, or 17%, to $7.7 million during the three months ended
September 30, 1998 from $6.6 million during the three months ended September 30,
1997. Gross margin for production equipment fabrication for the domestic
division was 34% and gross margin for the international division was 43% for the
three months ended September 30, 1998.
Selling, general and administrative expenses increased $2.0 million, or
40%, to $7.1 million during the three months ended September 30, 1998 from $5.0
million during the three months ended September 30, 1997. The increase in these
expenses resulted from the increased activity in the Company's rental and
maintenance and compressor fabrication business segments as described above.
Depreciation and amortization increased by $2.0 million, or 27%, to $9.5
million during the three months ended September 30, 1998 from $7.5 million
during the three months ended September 30, 1997, due to the increase in the
Company's rental fleet over prior period.
INTEREST EXPENSE
Interest expense increased by $.2 million, or 8%, to $2.3 million during the
three months ended September 30, 1998 from $2.1 million during the three months
ended September 30, 1997. As a result of the Equipment Lease, the Company
expects to incur annual operating lease expense of approximately $14 million, an
amount equivalent to the annual interest expense of the Bank Credit Agreement
that was repaid with the proceeds of the sale of the compression equipment to
the Trust.
LEASING EXPENSE
The Equipment Lease is being accounted for as an operating lease. The Company
incurred lease expense of $ 2.8 million during the three months ended September
30, 1998, an amount equivalent to the interest expense for a comparable amount
of the Bank Credit Agreement that was repaid pursuant to the Equipment Lease.
<PAGE> 10
INCOME TAXES
The provision for income taxes increased by $1.8 million, or 52%, to $5.1
million during the three months ended September 30, 1998 from $3.4 million
during the three months ended September 30, 1997. The increase resulted
primarily from the corresponding increase in income before taxes. The average
effective income tax rates during the three months ended September 30, 1998 and
1997 were 39% and 40%, respectively.
NET INCOME
Net income increased $2.9 million, or 57%, to $8.0 million during the three
months ended September 30, 1998 from $5.1 million during the three months ended
September 30, 1997 for the reasons discussed above.
NINE MONTHS ENDED SEPTEMBER 30, 1998 COMPARED TO NINE MONTHS ENDED
SEPTEMBER 30, 1997
REVENUES
The Company's total revenues increased by $60.6 million, or 43%, to $202.2
million during the nine months ended September 30, 1998 from $141.6 million
during the nine months ended September 30, 1997. The increase resulted from
growth of the Company's natural gas compressor rental fleet.
Revenues from rentals and maintenance increased by $45.3 million, or 58%,
to $124.0 million during the nine months ended September 30, 1998 from $78.7
million during the nine months ended September 30, 1997. Domestic revenues from
rentals and maintenance increased by $27.9 million, or 44%, to $91.2 million
during the nine months ended September 30, 1998 from $63.3 million during the
nine months ended September 30, 1997. International revenues from rentals and
maintenance increased by $17.4 million, or 113%, to $32.8 million during the
nine months ended September 30, 1998 from $15.4 million during the nine months
ended September 30, 1997. The increase in both domestic and international rental
and maintenance revenues resulted primarily from expansion of the Company's
rental fleet.
Revenues from the fabrication and sale of compressor equipment to third
parties increased by $9.1 million, or 26%, to $44.6 million during the nine
months ended September 30, 1998 from $35.5 million during the nine months ended
September 30, 1997. During the nine months ended September 30, 1998, an
aggregate of approximately 164,000 horsepower of compression equipment was
fabricated, 47% of which was placed in the rental fleet and 53% of which was
sold to third party customers. During the nine months ended September 30, 1997,
approximately 128,000 horsepower was fabricated, 45% of which was placed in the
Company's rental fleet and 55% of which was sold to third party customers. The
increase in horsepower produced resulted from increased demand in the overall
natural gas compression market. In addition, gross margin for compressor
fabrication was 15% and gross profit was $6.7 million for the nine months ended
September 30, 1998 as compared to 17% gross margin and $6.1 million for the nine
months ended September 30, 1997. This higher gross margin during the nine months
<PAGE> 11
ended September 30, 1997 resulted primarily from recognition of higher than
expected gross margins on the completion of several fabrication projects as
previously discussed.
Revenues from the fabrication and sale of production equipment increased by
$3.4 million, or 13%, to $30.1 million during the nine months ended September
30, 1998 from $26.7 million during the nine months ended September 30, 1997.
This included non-recurring international revenues from fabrication and sale of
production equipment of $2.0 million during the nine months ended
September 30, 1998 and there were no international revenues from fabrication and
sale of production equipment during the nine months ended September 30, 1997.
EXPENSES
Rentals and maintenance operating expenses increased by $19.0 million, or
62%, to $49.4 million during the nine months ended September 30, 1998 from $30.4
million during the nine months ended September 30, 1997. The increase results
primarily from the corresponding 58% increase in revenues from rentals and
maintenance during the nine months ended September 30, 1998 over the
corresponding period in 1997.
Operating expenses of compressor fabrication increased by $8.5 million, or
29%, to $37.9 million during the nine months ended September 30, 1998 from $29.4
million during the nine months ended September 30, 1997. This expense increase
was a result of the corresponding increase in compressor fabrication revenue. In
addition, the operating expenses attributable to production equipment
fabrication increased by $0.8 million, or 4%, to $19.7 million during the nine
months ended September 30, 1998 from $18.9 million during the nine months ended
September 30, 1997. Gross margin for production equipment fabrication for the
domestic division was 34% and gross margin for the international division was
43% for the nine months ended September 30, 1998.
Selling, general and administrative expenses increased $5.4 million, or
37%, to $19.8 million during the nine months ended September 30, 1998 from $14.4
million during the nine months ended September 30, 1997. The increase in these
expenses resulted from the increased activity in the Company's rental and
maintenance and compressor fabrication business segments as described above.
Depreciation and amortization increased by $7.8 million, or 37%, to $28.6
million during the nine months ended September 30, 1998 from $20.8 million
during the nine months ended September 30, 1997, due to the increase in the
Company's rental fleet over prior period.
INTEREST EXPENSE
Interest expense increased by $1.4 million, or 18%, to $9.2 million during the
nine months ended September 30, 1998 from $7.8 million during the nine months
ended September 30, 1997. As a result of the Equipment Lease, the Company
expects to incur annual operating lease expense of approximately $14 million, an
amount equivalent to the annual interest expense of the Bank Credit Agreement
that was repaid with the proceeds of the sale of the compression equipment to
the Trust.
LEASING EXPENSE
The Equipment Lease is being accounted for as an operating lease. The Company
incurred lease expense of $ 2.8 million during the nine months ended September
30, 1998, an amount equivalent to the interest expense of the Bank Credit
Agreement that was repaid pursuant to the Equipment Lease.
<PAGE> 12
INCOME TAXES
The provision for income taxes increased by $5.6 million, or 72%, to $13.4
million during the nine months ended September 30, 1998 from $7.8 million during
the nine months ended September 30, 1997. The increase resulted primarily from
the corresponding increase in income before taxes. The effective income tax
rates during the nine months ended September 30, 1998 and 1997 were 39% and 40%,
respectively.
NET INCOME
Net income increased $9.3 million, or 77%, to $21.3 million during the nine
months ended September 30, 1998 from $12.0 million during the nine months ended
September 30, 1997 for the reasons discussed above.
LIQUIDITY AND CAPITAL RESOURCES
The Company has historically utilized internally generated funds and equity
and debt financing to finance the growth of its compressor fleet and maintain
sufficient compression and production equipment inventory. Cash flows from
operating activities, before changes in assets and liabilities, were $54.9
million for the nine months ended September 30, 1998 as compared to $35.2
million for the nine months ended September 30, 1997. Capital expenditures for
property, plant and equipment were $119.4 million for the nine months ended
September 30, 1998 as compared to $115.5 million for the nine-month period ended
September 30, 1997. In addition, the Company utilized $17.1 million to acquire
the stock of certain businesses and the related assets and liabilities.
Inventory increased $23.1 million during the nine months ended September 30,
1998 from due to increases in compressor and production equipment fabrication
operations and compression rental operations. Bank borrowings were $128.5
million for the nine months ended September 30, 1998 as compared to $87.0
million for the nine months ended September 30, 1997.
The Company has Subordinated Notes outstanding in the aggregate principal
amount of $23.5 million, bearing interest at 7%, payable semi-annually, with
principal due on December 31, 2000. The proceeds from the Equipment Lease were
used to repay borrowings under the Bank Credit Agreement. The Company
anticipates arranging additional sources of debt and/or equity in 1999 in
addition to operating cash plans to fund its anticipated level of 1999 capital
expenditures.
IMPACT OF THE YEAR 2000
Many computer systems, software products and other equipment utilize
microprocessors in which the year is represented by only two digit entries, as
"19" is inferred to be the century. Date sensitive software may interpret a
date using "00" as the year 1900 rather than the year 2000, which could disrupt
operations due to systems failures or software miscalculations. These date
fields need to accept four digit entries to distinguish dates beginning in the
year 2000. Issues related to this situation are commonly referred to as "Year
2000 issues".
Primarily to accommodate its growth, the Company has installed or plans to
install various modifications or upgrade existing computer software and hardware
which include, among others things, an accommodation of Year 2000 issues. The
costs associated with the Year 2000 software modifications are being done in the
ordinary course of business and are not expected to be material in relation to
either future operating results, cash flows or financial conditions. The Company
expects that all Year 2000 hardware and software upgrades will be completed in
mid-1999.
The Company has reviewed its machinery and equipment operation and
believes that none of its significant machinery and equipment is dependent on
microprocessors which may be materially affected by Year 2000 issues.
The Company has not initiated formal communications with all of its
significant customers, suppliers and vendors to ensure that those parties have
appropriate plans to address Year 2000 issues where they may otherwise impact
the operations of the Company. The Company does not, however, have any
significant customers, suppliers or vendors that directly interface with the
Company's information technology systems. There is inherent uncertainty related
to Year 2000 issues due to the possibility of failures by third party customers,
suppliers and vendors which cannot be anticipated. The Company cannot guarantee
the systems of other companies on which it relies will be converted timely and
will not have a material adverse effect on the Company's operations, cash flows
or financial position. The Company has not currently evaluated contingency plans
to address any possible operation disruptions resulting from third party
failures.
<PAGE> 13
EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
10.7 1998 Stock Option Plan
27 Financial Data Schedule
All other items specified by Part II of this report are inapplicable and have
been omitted.
<PAGE> 14
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.
HANOVER COMPRESSOR COMPANY
Date: November 16, 1998
By:
/s/ Michael J. McGhan
- -------------------------------------
Michael J. McGhan
President and Chief Executive Officer
Date: November 16, 1998
By:
/s/ Curtis A. Bedrich
- -------------------------------------
Curtis A. Bedrich
Chief Financial Officer
<PAGE> 15
<TABLE>
<CAPTION>
EXHIBIT INDEX
Exhibit Number Name
- -------------- ----
<S> <C>
(10.1) Lease dated as of July 20, 1998 between the Trust and
the Company.*
(10.2) Guarantee dated as of July 22, 1998 and made by the
Company, Hanover/Smith, Inc., Hanover Maintech, Inc.
and Hanover Land Company.*
(10.3) Lessee's and Guarantor's Consent dated as of July 20,
1998 made by the Company, Hanover/Smith, Inc.,
Hanover Maintech, Inc. and Hanover Land Company.*
(10.4) Participation Agreement dated as of July 22, 1998
among the Company, the Trust, The Chase Manhattan
Bank, as agent, Societe General & Financial
Corporation, and Wilmington Trust Company.*
(10.5) Security Agreement dated as of July 22, 1998 made by
the Trust in favor of The Chase Manhattan Bank, as
agent, with the Company joining by Joinder of
Lessee.*
(10.6) Lease Supplement No. 1 dated as of July 22, 1998
between the Trust and the Company.*
(10.7) Hanover Compressor Company 1998 Stock Option Plan.
</TABLE>
* Previously filed as an exhibit to the Company's
Current Report on Form 8-K dated July 22, 1998.
<PAGE> 1
HANOVER COMPRESSOR COMPANY
1998 STOCK OPTION PLAN
1. Preamble.
Hanover Compressor Company, a Delaware corporation (the "Company"), hereby
establishes the Hanover Compressor Company 1998 Stock Option Plan (the "Plan")
as a means whereby the Company may, through awards of non-qualified stock
options:
(a) provide Company Officers, employees, Directors and consultants
with additional incentive to promote the success of the Company's and its
Subsidiaries' businesses;
(b) enable such employees to acquire proprietary interests in the
Company; and
(c) encourage such employees to remain in the employ of the Company
and its Subsidiaries.
(d) provide officers and directors of, and consultants to, the
Company and its Subsidiaries (who are not otherwise employees) with additional
incentive to promote the success of the businesses of the Company and its
Subsidiaries.
Except as specifically provided herein, the provisions of this Plan do not
apply to or affect any option, stock appreciation rights, or stock heretofore or
hereafter granted under any other stock plan of the Company or any subsidiary,
and all such options, stock appreciation right or stock continue to be governed
by and subject to the applicable provisions of the plan or agreement under which
they were granted.
2. Definitions.
2.01 "Board" or "Board of Directors" means the board of directors of the
Company.
2.02 "Cause" means (i) the commission by such Participant of an act of
fraud, embezzlement or willful breach of a fiduciary duty to the Company
(including the unauthorized disclosure of confidential or proprietary material
information of the Company), (ii) a conviction of such Participant (or a plea of
nolo contendere in lieu thereof) for a felony or a crime involving fraud,
dishonesty or moral turpitude, (iii) willful failure of a Participant to follow
the written directions of the chief executive officer of the Company or the
Board in the case of executive officers of the Company; (iv) willful misconduct
as an employee of the Company, (v) the willful failure of such Participant to
render services to the Company in accordance with his employment or consulting
arrangement, which failure amounts to a material neglect of his duties to the
Company or (vi) substantial dependence, as determined by the Board, on alcohol
or any drug, immediate precursor or other substance listed in Schedule I-V of
the Federal Comprehensive Drug Abuse Prevention and Control Act of 1970, as
amended, as determined in the sole discretion of the Committee.
<PAGE> 2
2.03 "Change in Control" means the occurrence of any one of the following
events:
(a) any (A) consolidation or merger of the Company in which the
Company is not the continuing or surviving corporation or which
contemplates that all or substantially all of the business and/ or assets
of the Company shall be controlled by another corporation or (B) a
recapitalization (including an exchange of Company equity securities by
the holders thereof), in either case, in which any "Person" (as such term
is used in Sections 13(d) and (14(d)(2) of the Exchange Act), other than
the Controlling Shareholders, becomes the beneficial owner (within the
meaning of Rule 13d-3 promulgated under the Exchange Act) of securities of
the Company representing more than 50% of the combined voting power of the
Company's then outstanding securities ordinarily having the right to vote
in the election of directors;
(b) any sale, lease, exchange or transfer (in one transaction or
series of related transactions) of all or substantially all of the assets
of the Company and its Subsidiaries or Affiliates;
(c) approval by the shareholders of the Company of any plan or
proposal for the liquidation or dissolution of the Company, unless such
plan or proposal is abandoned within 60 days following such approval; or
(d) any "Person" (as such term is used in Sections 13(d) and 14(d)(2)
of the Exchange Act), other than the Controlling Shareholders, shall become
the beneficial owner of securities of the Company representing more than
50% of the combined voting power of the Company's then outstanding
securities ordinarily having the right to vote in the election of
directors.
2.04 "Code" means the Internal Revenue Code of 1986, as it exists now and
as it may be amended from time to time.
2.05 "Committee" means the Compensation Committee of the Board or any
other committee comprised of two or more outside Directors appointed by the
Board to administer the Plan, as the case may be. Each member of the Committee
shall (a) be a member of the Board of Directors who has not at any time within
one year prior thereto, or at any time during such member's term of service on
the Committee, received any stock options, stock appreciation rights or
allocations of any equity securities under the Plan or any other plan maintained
by the Company or any of its affiliates, except as permitted pursuant to the
provisions of Rule 16b-3(c)(2)(i) of the Exchange Act or any successor rule
thereof; and (b) be an outside Director as determined under Treasury Regulation
26 CFR ss.1.162-27(e)(3) or any successor regulation thereto. Once appointed,
the Committee shall continue to serve until otherwise directed by the Board of
Directors.
2.06 "Common Stock" means the common stock of the Company, $.001 par
value.
2.07 "Company" means Hanover Compressor Company, a Delaware corporation,
and any successor thereto.
-2-
<PAGE> 3
2.08 "Controlling Shareholders" means GKH Investments, L.P., GKH Partners,
L.P., and the partners therein.
2.09 "Director" means a member of the Board.
2.10 "Disability" means being entitled to disability benefits under the
terms of the Company's long term disability plan.
2.11 "Exchange Act" means the Securities Exchange Act of 1934, as it
exists now or from time to time may hereafter be amended.
2.12 "Fair Market Value" means for the relevant day:
(a) If shares of Common Stock are listed or admitted to unlisted
trading privileges on any national or regional securities exchange, the
last reported sale price, regular way, on the composite tape of that
exchange on the day Fair Market Value is to be determined;
(b) If the Common Stock is not listed or admitted to unlisted trading
privileges as provided in paragraph (a), and if sales prices for shares of
Common Stock are reported by the National Association of Securities
Dealers, Inc. Automated Quotations, Inc. National Market System ("NASDAQ
System"), then the last sale price for Common Stock reported as of the
close of business on the day Fair Market Value is to be determined, or if
no such sale takes place on that day, the average of the high bid and low
asked prices so reported; if Common Stock is not traded on that day, the
next preceding day on which such stock was traded; or
(c) If trading of the Common Stock is not reported by the NASDAQ
System or on a stock exchange, Fair Market Value will be determined by the
Committee in its discretion based upon the best available data.
2.13 "Officer" means a corporate or equivalent officer of the Company or
any Subsidiary or Affiliate of the Company.
2.14 "Option" means the right of a Participant to purchase a specified
number of shares of Common Stock, subject to the terms and conditions of the
Plan.
2.15 "Option Date" means the date upon which an Option is awarded to a
Participant under the Plan.
2.16 "Option Price" means the price per share at which an Option may be
exercised.
2.17 "Participant" means an individual to whom an Option has been granted
under the Plan.
2.18 "Plan" means the Hanover Compressor Company 1998 Stock Option Plan,
as set forth herein and as from time to time amended.
-3-
<PAGE> 4
2.19 "Securities Act" means the Securities Act of 1933, as it exists now
or from time to time may hereinafter be amended.
2.20 "Subsidiary" means any corporation or other entity of which the
majority voting power or equity interest is owned directly or indirectly by the
Company.
2.21 "Termination of Employment" means,
(a) with respect to an employee when the employee's employment
relationship with the Company and all of its Subsidiaries is
terminated, regardless of any severance arrangements. A transfer from
the Company to a Subsidiary or affiliate, or vice versa is not a
termination of employment for purposes of this Plan;
(b) with respect to a consultant when the consultant's consulting
relationship with the Company is terminated either due to the
termination of any consulting agreement, or otherwise, regardless of
the fact that no employment relationship exists;
(c) with respect to an Officer or Director when such individual is no
longer serving as an Officer or Director of the Company, as a
consultant to or employee of the Company and any of its Subsidiaries.
2.22 Rules of Construction.
(a) Governing Law. The construction and operation of this Plan are
governed by the laws of the State of Delaware.
(b) Undefined Terms. Unless the context requires another meaning, any
term not specifically defined in this Plan has the meaning given to it by
the Code.
(c) Headings. All headings in this Plan are for reference only and
are not to be utilized in construing the Plan.
(d) Gender. Unless clearly appropriate, all nouns of whatever gender
refer indifferently to persons of any gender.
(e) Singular and Plural. Unless clearly inappropriate, singular terms
refer also to the plural and vice versa.
(f) Severability. If any provision of this Plan is determined to be
illegal or invalid for any reason, the remaining provisions shall continue
in full force and effect and shall be construed and enforced as if the
illegal or invalid provision did not exist, unless the continuance of the
Plan in such circumstances is not consistent with its purposes.
-4-
<PAGE> 5
3. Stock Subject to the Plan.
Except as otherwise provided in Section 10, the aggregate number of shares
of Common Stock that may be issued under Options under this Plan may not exceed
260,000 shares of Common Stock. Reserved shares may be either authorized but
unissued shares or treasury shares, in the Board's discretion. If any grants
hereunder shall terminate or expire such shares shall be eligible to be granted
as new Options under this Plan. Except as otherwise provided in Section 12, the
aggregate number of shares of Common Stock that may be issued under Options to
any one individual Participant may not exceed 60,000 shares.
4. Administration.
The Plan shall be administered by the Committee. In addition to any other
powers set forth in this Plan, the Committee has the exclusive authority:
(a) to construe and interpret the Plan, and to remedy any ambiguities
or inconsistencies therein;
(b) to establish, amend and rescind appropriate rules and regulations
relating to the Plan;
(c) subject to the express provisions of the Plan, to determine the
individuals who will receive grants of Options, the times when they will
receive them, the number of shares to be subject to each award and the
Option Price, payment terms, payment method, and expiration date
applicable to each award;
(d) to contest on behalf of the Company or Participants, at the
expense of the Company, any ruling or decision on any matter relating to
the Plan or to any grants of Options;
(e) generally, to administer the Plan, and to take all such steps and
make all such determinations in connection with the Plan and the grants of
Options as it may deem necessary or advisable;
(f) to determine the form in which tax withholding under Section 13
of this Plan will be made; and
(g) to amend the Plan or any Option granted hereunder as may be
necessary in order for any business combination involving the Company to
qualify for pooling-of-interest treatment under APB No. 16.
5. Eligible Participants
All employees, Officers, and Directors of the Company and its
Subsidiaries, and those consultants (who are not otherwise employees of the
Company or any of its Subsidiaries) are
-5-
<PAGE> 6
eligible to participate in the Plan. Subject to the provisions of the Plan, the
Committee shall determine from time to time those individuals who shall be
designated as Participants and the number, if any, of Options to be granted to
each such Participant;
6. Terms and Conditions of Options.
All Options granted under this Plan shall be nonstatutory options, which
are not intended to be classified as "incentive stock options" under Section 422
of the Code. The Committee may, in its discretion, grant Options to any
Participant under the Plan. Each Option shall be evidenced by an agreement
between the Company and the Participant. Each Option agreement, in such form as
is approved by the Committee, shall be subject to the following express terms
and conditions and to such other terms and conditions, not inconsistent with the
Plan as the Committee may deem appropriate:
(a) Option Period. Each Option will expire as of the earliest of:
(i) ten years from the Grant Date;
(ii) the date on which it is forfeited under the provisions of
Section 8;
(iii) the date three months after the Participant's Termination
of Employment for any reason other than death or Disability; or
(iv) the date twelve months after the Participant's death or
Disability.
(b) Option Price. At the time when the Option is granted, the
Committee will fix the Option Price. The Option Price may be greater than,
less than, or equal to Fair Market Value on the Option Date, as determined
in the sole discretion of the Committee.
(c) Other Option Provisions. The form of Option authorized by the
Plan may contain such other provisions as the Committee may from time to
time determine.
-6-
<PAGE> 7
7. Manner of Exercise of Options.
To exercise an Option in whole or in part, a Participant (or, after his
death, his executor or administrator) must give written notice to the Committee,
stating the number of shares to which he intends to exercise the Option. The
Company will issue the shares with respect to which the Option is exercised upon
payment in full of the Option Price. The Option Price may be paid (i) in cash,
(ii) in shares of Common Stock having an aggregate Fair Market Value, as
determined on the date of delivery, equal to the Option Price, (iii) if
permitted by the Committee, by cash or certified or cashier's check for the par
value of the Plan Shares plus a promissory note for the balance of the purchase
price, which note shall provide for full personal liability of the maker and
shall contain such other terms and provisions as the Committee may determine,
including without limitation the right to repay the note partially or wholly
with Common Stock, or (iv) by delivery of irrevocable instructions to a broker
to promptly deliver to the Company the amount of sale or loan proceeds necessary
to pay for all Common Stock acquired through such exercise and any tax
withholding obligations resulting from such exercise. The Option Price may be
paid in shares of Common Stock which were received by the Participant upon the
exercise of one or more Options.
8. Vesting.
A Participant may not exercise an Option until it has become vested. The
portion of an Option award that is vested depends upon the period that has
elapsed since the Option Date. Unless the Committee establishes a different
vesting schedule at the time when an Option is granted, all Options granted
under this Plan shall vest according to the following schedule:
<TABLE>
<CAPTION>
Period Elapsed Vested Percentage
-------------- -----------------
<S> <C>
First Anniversary of Option Date 10%
Second Anniversary of Option Date 30%
Third Anniversary of Option Date 60%
Fourth Anniversary of Option Date 100%
</TABLE>
Except as provided below, upon a Termination of Employment, a Participant
forfeits any Options that are not yet vested. Unless the Committee in its sole
discretion specifically waives the application of this sentence, then
notwithstanding the vesting schedule contained herein or in the Participant's
agreement, if the Participant's Termination of Employment is terminated for
Cause all Options granted to the Participant will be immediately cancelled and
forfeited by the Participant upon delivery to him of notice of such termination
for Cause.
9. Change of Control.
Notwithstanding the provisions of Section 8 or anything contained in a
Participant's agreement to the contrary, upon a Change in Control all Options
shall be subject to the following:
-7-
<PAGE> 8
(a) The Company shall have the right to acquire from Participants
their vested Options by payment of the difference between the price per
share of Common Stock established in the Change of Control and the Option
Price; and
(b) All unvested Options shall either (i) convert into options to
purchase securities of the acquirer in the Change of Control on the same
terms and conditions as apply to the Options under the Plan, (ii) convert
into such consideration as the Participant would have received had the
Options been fully vested, or (iii) be treated as otherwise determined by
the Committee.
10. Adjustments to Reflect Changes in Capital Structure.
If there is any change in the corporate structure or shares of the
Company, the Committee may, in its discretion, make any adjustments necessary to
prevent accretion, or to protect against dilution, in the number and kind of
shares authorized by the Plan and, with respect to outstanding Options, in the
number and kind of shares covered thereby and in the applicable Option Price.
For the purpose of this Section 10, a change in the corporate structure or
shares of the Company includes, without limitation, any change resulting from a
recapitalization, stock split, stock dividend, consolidation, rights offering,
spin-off, reorganization, or liquidation and any transaction in which shares of
Common Stock are changed into or exchanged for a different number or kind of
shares of stock or other securities of the Company or another entity.
11. Non-Transferability of Options.
The Options granted under the Plan are not transferable, voluntarily or
involuntarily, other than by will or the laws of descent and distribution, or to
the extent permissible under Section 422 of the Code pursuant to a qualified
domestic relations order as defined in Section 414(p) of the Code. During a
Participant's lifetime his Options may be exercised only by him.
12. Rights as Stockholder.
No Common Stock may be delivered upon the exercise of any Option until
full payment has been made and all income tax withholding requirements thereon
have been satisfied. A Participant has no rights whatsoever as a stockholder
with respect to any shares covered by an Option until the date of the issuance
of a stock certificate for the shares.
13. Withholding Tax.
The Company shall have the right to withhold in cash or shares of Common
Stock with respect to any payments made to Participants under the Plan any taxes
required by law to be withheld because of such payments.
-8-
<PAGE> 9
14. Non-Competition and Confidential Information.
Each Participant receiving Options shall be subject to the restriction
that, during the term of his Option Agreement and for a period of two years
thereafter, he or she (i) will not compete with any business of the Company or
its Subsidiaries and (ii) will not disclose to persons outside the Company
confidential information concerning the Company or its Subsidiaries without the
Company's express written consent.
15. No Right To Employment.
Participation in the Plan will not give any Participant a right to be
retained as an employee of the Company or any Subsidiary, or any right or claim
to any benefit under the Plan, unless the right or claim has specifically
accrued under the Plan.
16. Amendment of the Plan.
The Committee may from time to time amend or revise the terms of this Plan
in whole or in part and may, without limitation, adopt any amendment deemed
necessary; provided, however, that, except as provided in Section 4(g), no
change in any Options previously granted to a Participant may be made that would
impair the rights of the Participant without the Participant's consent.
17. Conditions Upon Issuance of Shares.
An Option shall not be exercisable and a share of Common Stock shall not
be issued pursuant to the exercise of an Option until such time as the Plan has
been approved by the Board of Directors and unless the exercise of such Option
and the issuance and delivery of such share pursuant thereto shall comply with
all relevant provisions of law, including, without limitation, the Securities
Act, the Exchange Act, the rules and regulations promulgated thereunder, and the
requirements of any stock exchange upon which the shares of Common Stock may
then be listed, and shall be further subject to the approval of counsel for the
Company with respect to such compliance. As a condition to the exercise of an
Option, the Company may require the person exercising such Option to represent
and warrant at the time of any such exercise that the Common Stock is being
purchased only for investment and without any present intention to sell or
distribute such shares if, in the opinion of counsel for the Company, such a
representation is required by any of the aforementioned relevant provisions of
law.
18. Effective Date and Termination of Plan.
18.1 Effective Date. This Plan is effective as of the date of its
adoption by the Board of Directors. Prior to the Board of Director's approval,
the Committee may, in its discretion, grant options under the Plan as if the
Plan were effective, provided the exercise of the options so granted shall be
expressly subject to the approval of the Plan by the Board of Directors.
-9-
<PAGE> 10
18.2 Termination of the Plan. The Board may terminate the Plan at any
time with respect to any shares that are not then subject to Options.
Termination of the Plan will not affect the rights and obligations of any
Participant with respect to Options granted before termination.
* * * * *
I hereby certify that the foregoing Plan was adopted by the Board of
Directors of Hanover Compressor Company on ______________, 1998.
Executed as of _________________, 1998
- ------------------------------------
Michael A. O'Conner
Chairman - Director
-10-
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS FINANCIAL DATA SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM THE HANOVER COMPRESSOR COMPANY FINANCIAL STATEMENTS AS OF AND FOR THE THREE
MONTHS ENDED SEPTEMBER 30, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> SEP-30-1998
<CASH> 7,662
<SECURITIES> 0
<RECEIVABLES> 61,105
<ALLOWANCES> 270
<INVENTORY> 55,987
<CURRENT-ASSETS> 160,816
<PP&E> 406,900
<DEPRECIATION> 72,455
<TOTAL-ASSETS> 523,086
<CURRENT-LIABILITIES> 53,828
<BONDS> 0
0
0
<COMMON> 268,382
<OTHER-SE> 38,953
<TOTAL-LIABILITY-AND-EQUITY> 523,086
<SALES> 24,546
<TOTAL-REVENUES> 71,796
<CGS> 18,657
<TOTAL-COSTS> 56,298
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,347
<INCOME-PRETAX> 13,151
<INCOME-TAX> 5,103
<INCOME-CONTINUING> 8,048
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 8,048
<EPS-PRIMARY> 0.28
<EPS-DILUTED> 0.27
</TABLE>
