<PAGE>
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended JUNE 30, 1998
-------------
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ___________ to ____________
Commission File Number 0-23832
-------
PSS WORLD MEDICAL, INC.
-----------------------
(Exact name of registrant as specified in its charter)
Florida 59-3500595
------- ----------
(State or other jurisdiction (IRS employer
of incorporation) identification number)
4345 Southpoint Blvd.
Jacksonville, Florida 32216
--------------------- -----
(Address of principal executive offices) (Zip code)
Registrant's telephone number (904) 332-3000
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 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.
[X] Yes [ ] No
As of August 11, 1998 a total of 70,211,090 shares of common stock,
par value $.01 per share, of the registrant were outstanding.
<PAGE>
PSS WORLD MEDICAL, INC. AND SUBSIDIARIES
JUNE 30, 1998
INDEX
PAGE NUMBER
---------------
PART I FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheets -
June 30, 1998 and April 3, 1998 3
Condensed Consolidated Statements of Operations -
Three Months Ended June 30, 1998 and 1997 4
Condensed Consolidated Statements of Cash Flows -
Three Months Ended June 30, 1998 and 1997 5
Notes to Condensed Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 10
PART II OTHER INFORMATION
Item 1. Legal Proceedings 16
Item 2. Changes in Securities and Use of Proceeds 17
Item 5. Other Information 17
Item 6. Exhibits and Reports on Form 8-K 18
SIGNATURES 20
2
<PAGE>
PART I FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
PSS WORLD MEDICAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
JUNE 30, APRIL 3,
1998 1998
------------------- -------------------
(UNAUDITED) *
ASSETS
<S> <C> <C>
Current Assets:
Cash and cash equivalents $ 97,323 $ 82,491
Marketable securities 26,850 81,550
Accounts receivable, net 228,014 210,042
Inventories 121,515 122,502
Prepaid expenses and other 54,865 45,699
------------------- -------------------
Total current assets 528,567 542,284
Property and equipment, net 26,613 24,871
Other Assets:
Intangibles, net 95,739 90.134
Other 19,301 19,493
------------------- -------------------
Total assets $670,220 $676,782
=================== ===================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 86,494 $105,642
Accrued expenses 59,249 42,657
Current maturities of long-term debt and capital lease
obligations 2,803 2,794
Other 9,495 7,058
------------------- -------------------
Total current liabilities 158,041 158,151
Long-term debt and capital lease obligations, net of current
portion 128,317 128,113
Other 2,706 2,621
------------------- -------------------
Total liabilities 289,064 288,885
------------------- -------------------
Shareholders' Equity:
Preferred stock, $.01 par value; 1,000,000 shares authorized,
no shares issued and outstanding
Common stock, $.01 par value; 150,000,000 shares authorized,
70,102,599 and 69,563,937 shares issued and outstanding at
June 30, 1998 and April 3, 1998, respectively 701 696
Additional paid-in capital 343,756 341,679
Retained earnings 36,699 45,522
------------------- -------------------
Total shareholders' equity 381,156 387,897
------------------- -------------------
Total liabilities and shareholders' equity $670,220 $676,782
=================== ===================
</TABLE>
* Condensed from audited financial statements.
The accompanying notes are an integral part of these condensed consolidated
statements.
3
<PAGE>
PSS WORLD MEDICAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
THREE MONTHS ENDED
---------------------------------------------
JUNE 30, JUNE 30,
1998 1997
-------------------- ------------------
Net sales $342,538 $288,182
Cost of goods sold 247,854 211,398
-------------------- ------------------
Gross profit 94,684 76,784
General and administrative expenses 48,304 40,930
Selling expenses 26,500 22,420
Merger and other nonrecurring costs
and expenses 300 1,385
-------------------- ------------------
Income from operations 19,580 12,049
-------------------- ------------------
Other income (expense):
Interest expense (3,037) (276)
Interest and investment income 1,745 831
Other income 744 394
-------------------- ------------------
(548) 949
-------------------- ------------------
Income before provision for income
taxes 19,032 12,998
Provision for income taxes 7,737 5,077
--------------------- ------------------
Net income $ 11,295 $ 7,921
===================== ==================
Earnings per share:
Basic $ 0.16 $ 0.12
===================== ==================
Diluted $ 0.16 $ 0.12
===================== ==================
Weighted average shares outstanding:
Basic 69,858,000 67,285,000
===================== ==================
Diluted 70,727,000 68,059,000
===================== ==================
The accompanying notes are an integral part of these condensed consolidated
statements.
4
<PAGE>
PSS WORLD MEDICAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
-----------------------
JUNE 30, June 30,
1998 1997
----------- ----------
<S> <C> <C>
Cash Flows From Operating Activities:
Net income $ 11,295 $ 7,921
Adjustments to reconcile net income to net cash provided by
(used in) operating activities:
Depreciation and amortization 3,573 2,610
Provision for doubtful accounts 317 808
Merger and other nonrecurring costs and expenses 300 62
Deferred compensation 222 --
Changes in operating assets and liabilities, net of effects
from business acquisitions:
Accounts receivable, net (16,167) (1,023)
Inventories 7,368 2,893
Prepaid expenses and other current assets 1,110 3,042
Other assets (2,219) (1,140)
Accounts payable, accrued expenses and other liabilities (25,888) (3,291)
----------- ----------
Net cash (used in) provided by operating activities (20,089) 11,882
----------- ----------
Cash Flows From Investing Activities:
Purchases of marketable securities (29,332) (35,501)
Proceeds from sales and maturities of marketable securities 77,531 75,166
Capital expenditures (2,905) (3,709)
Purchases of businesses, net of cash acquired (7,212) (1,983)
Payments on noncompete agreements (886) (1,083)
----------- ----------
Net cash provided by investing activities 37,196 32,890
----------- ----------
Cash Flows From Financing Activities:
Proceeds from borrowings 205 --
Repayments of borrowings (2,109) (27,761)
Repayments on revolving line of credit -- (5,000)
Principal payments under capital lease obligations (107) --
Proceeds from issuance of common stock 86 174
----------- ----------
Net cash used in financing activities (1,925) (32,587)
----------- ----------
Foreign currency translation adjustment -- 247
----------- ----------
Net increase in cash and cash equivalents 15,182 12,432
Cash and cash equivalents, beginning of period 82,141 39,099
----------- ----------
Cash and cash equivalents, end of period $ 97,323 $ 51,531
=========== ==========
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
statements.
5
<PAGE>
PSS WORLD MEDICAL, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1 - BASIS OF PRESENTATION
The condensed consolidated financial statements of PSS World Medical, Inc.
("PSS" or the "Company") reflect, in the opinion of management, all adjustments
necessary to present fairly the financial position and results of operations for
the periods indicated and give retroactive effect to the mergers with S&W X-Ray,
Inc. ("S&W") and Gulf South Medical Supply, Inc. ("Gulf South"). These
transactions were accounted for under the pooling-of-interests method of
accounting, and accordingly, the accompanying condensed consolidated financial
statements have been retroactively restated as if PSS, S&W, and Gulf South had
operated as one entity since inception.
Due to the differing fiscal year ends of Gulf South and PSS prior to April
3, 1998, the three months ended March 31, 1997 of Gulf South were consolidated
with the three months ended June 30, 1997 of the Company. Due to a change in
Gulf South's fiscal year end to conform with that of the Company, the quarter
ended June 30, 1998 reflects the operating results of PSS World Medical, Inc.
and all subsidiaries, including Gulf South, for the three months ended June 30,
1998. As a result, the results of operations for Gulf South for the period from
January 1, 1998 to April 3, 1998 are not reflected in any of the periods
presented. During this period, Gulf South recorded a net loss of $20.9 million,
which includes merger and other nonrecurring costs and expenses of $26.9
million, and a change in cash of approximately $(0.4) million.
The accompanying condensed consolidated financial statements should be read
in conjunction with the financial statements and related notes in the Company's
1998 Annual Report on Form 10-K. Certain information and footnote
disclosures normally included in financial statements prepared in accordance
with generally accepted accounting principles have been omitted pursuant to the
Securities and Exchange Commission rules and regulations.
Financial statements for the Company's subsidiary outside the United States
are translated into U.S. dollars at quarter-end exchange rates for assets and
liabilities and weighted average exchange rates for income and expenses. The
resulting translation adjustments are recorded as a separate component of
shareholders' equity.
The results of operations for the interim periods covered by this report
may not necessarily be indicative of operating results for the full fiscal year.
Certain items have been reclassified to conform to the current year
presentation.
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards ("SFAS") No. 133, Accounting for Derivative
Instruments and Hedging Activities, which establishes accounting and reporting
standards for derivative instruments and hedging activities. The statement is
effective for fiscal years beginning after June 15, 1999. The financial impact
of the adoption of this statement has not been determined. However, the effect
of the adoption of the statement is not expected to be material.
NOTE 2 - BUSINESS ACQUISITIONS
Immaterial Pooling
During the three months ended June 30, 1998, the Company merged with an
imaging supply and equipment distributor, with aggregate annual revenues of
approximately $18.0 million, in a merger accounted for under the pooling-of-
interests method. The Company issued approximately 349,000 shares of PSS common
stock in connection with this pooling. Due to the immaterial effect of this
acquisition on prior periods, the Company's historical financial statements have
not been restated. Accordingly, the results of operations have been reflected
in the condensed consolidated financial statements prospectively from the
acquisition date and retained earnings of approximately $0.8 million of the
acquired company have been recorded as an adjustment to the retained earnings of
the Company.
6
<PAGE>
PSS WORLD MEDICAL, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-(CONTINUED)
(Unaudited)
Purchase Acquisitions
During the three months ended June 30, 1998, the Company acquired certain
assets, including accounts receivable, inventories, and equipment, of three
physician medical supply and equipment distributors, two imaging supply and
equipment distributors, and a long-term care distributor accounted for under the
purchase method of accounting. These companies had aggregate annual revenues of
approximately $42.0 million. The aggregate consideration consisted of $7.2
million cash. The excess of the purchase price paid over the estimated fair
value of the net assets acquired of approximately $2.8 million, in aggregate,
has been recorded as goodwill and will be amortized on a straight-line basis
over 15 to 30 years. The operations of the acquired companies have been included
in the Company's results of operations subsequent to the dates of acquisition.
Supplemental pro forma information is not presented as the impact on the
Company's results of operations would not be material.
NOTE 3 - MERGER AND OTHER NONRECURRING COSTS AND EXPENSES
During the three months ended June 30, 1998, the Company recorded merger and
other nonrecurring costs and expenses of approximately $0.3 million in
connection with the acquisition of an imaging supply and equipment distributor
accounted for under the pooling-of-interests method.
At June 30, 1998 and April 3, 1998, the accompanying consolidated balance
sheets include accrued merger and restructuring costs and expenses of $26.4
million and $31.4 million, respectively, classified as accrued expenses. A
summary of the merger and restructuring activity is as follows (in thousands):
Balance at April 3, 1998.......... $30,482
Additions....................... 300
Utilized........................ (4,355)
-------
Balance at June 30, 1998.......... $26,427
=======
NOTE 4 - COMPREHENSIVE INCOME
The Company adopted SFAS No. 130, Reporting Comprehensive Income, which defines
comprehensive income as net income plus direct adjustments to shareholders'
equity. The cumulative translation adjustment of certain foreign entities is the
only such direct adjustment recorded by the Company during the three months
ended June 30, 1998 and 1997, as detailed in the following table (amounts in
thousands):
THREE MONTHS ENDED
------------------------
JUNE 30, JUNE 30,
1998 1997
---------- ---------
Net income...................................... $11,295 $7,921
========== =========
Other comprehensive income, net of tax:
Foreign currency translation adjustment........ -- (247)
---------- --------
Other comprehensive income...................... -- (247)
---------- --------
Comprehensive income............................ $11,295 $7,674
========== ========
7
<PAGE>
PSS WORLD MEDICAL, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(CONTINUED)
(UNAUDITED)
NOTE 5 - EARNINGS PER SHARE
In accordance with Statement of Financial Accounting Standards No. 128,
Earnings Per Share, the calculation of basic net earnings per common share and
diluted earnings per common share is presented below (share amounts in
thousands, except per share data):
THREE MONTHS ENDED
----------------------------
JUNE 30, JUNE 30,
1998 1997
-------- --------
Net income.................................. $ 11,295 $ 7,921
Earnings per share:
Basic...................................... $ 0.16 $ 0.12
Diluted.................................... $ 0.16 $ 0.12
Weighted average shares outstanding:
Common shares.............................. 69,858 67,285
Assumed exercise of stock options.......... 869 774
Diluted shares outstanding................. 70,727 68,059
NOTE 6 - SHAREHOLDER RIGHTS PLAN
On April 20, 1998, the Company's Board of Directors approved a Shareholder
Protection Rights Agreement (the "Rights Plan"), which provides for one
preferred stock purchase right (a "Right") in respect of each share of the
Company's Common Stock. When exercisable, each Right would entitle the holder to
purchase from the Company 1/1000th of a share of Series A Junior Participating
Preferred Stock at an exercise price of $115, subject to certain adjustments.
The Rights are generally not exercisable until a person or group of affiliated
persons has acquired or obtained the right to acquire beneficial ownership of
15% or more of the Company's then outstanding shares of Common Stock.
The Board of Directors may terminate the Rights at any time prior to the
Rights becoming exercisable and, unless extended, the Rights will terminate by
their terms effective April 20, 2008. The Board of Directors adopted the Rights
Plan to protect the Company's stockholders from coercive or abusive takeover
tactics and to give the Board of Directors additional negotiating leverage in
dealing with prospective acquirors.
8
<PAGE>
PSS WORLD MEDICAL, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(CONTINUED)
(UNAUDITED)
In connection with the approval of the Rights Plan, the Company, on April 20,
1998, amended and restated its Articles of Incorporation to establish a series
of Preferred Stock, par value $.01 per share, designated Series A Junior
Participating Preferred Stock. The number of shares in this series is initially
set at 300,000.
NOTE 7 - COMMITMENTS AND CONTINGENCIES
Gulf South and certain of its former officers and directors were named as
defendants in two purported class action lawsuits filed on July 21, 1997 related
to disclosures made in the prospectus issued by Gulf South in connection with
its public offering of common stock during 1996. The Company believes that the
allegations contained in the complaints are without merit and intends to defend
vigorously against the claims. However, the lawsuits are in early stages, and
there can be no assurances that this litigation will ultimately be resolved on
terms that are favorable to the Company.
In May 1998, the Company and certain of its present directors and officers
were named as defendants in a purported securities class action lawsuit related
to alleged damages suffered by purchasers of the Company's common stock during
the period from December 27, 1997 to May 8, 1998. The claimant seeks an
unspecified amount of damages, including costs and expenses. The Company
believes this lawsuit is without merit and intends to defend it vigorously.
However, this lawsuit is in its early stages and there can be no assurances that
this litigation will ultimately be resolved on terms that are favorable to the
Company.
The Company is named as a defendant in a purported patent infringement claim.
In this lawsuit, the claimant alleges that the urinalysis test strips sold by
the Company under the Penny Saver(TM) label infringe certain patents. The
Company is contesting the claim of infringement and has obtained a written
agreement from the manufacturer of the product indemnifying the Company for the
costs of defense of the suit and for the underlying liability. The Company
believes that the allegations contained in the complaint are without merit and
intends to defend vigorously against the claims. However, this lawsuit is in
its early stages and there can be no assurance that this litigation will
ultimately be resolved on terms that are favorable to the Company.
Although the Company does not manufacture products, the distribution of
medical supplies and equipment entails inherent risks of product liability. The
Company has not experienced any significant product liability claims and
maintains product liability insurance coverage. In addition, the Company is
party to various legal and administrative proceedings and claims arising in the
normal course of business.
While any litigation contains an element of uncertainty, management believes
that the outcome of any proceedings or claims which are pending or known to be
threatened will not have a material adverse effect on the Company's consolidated
financial position, liquidity, or results of operations.
9
<PAGE>
ITEM 2. PSS WORLD MEDICAL, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
GENERAL
PSS World Medical, Inc. (the "Company" or "PSS") is a specialty marketer and
distributor of medical products to physicians, alternate-site imaging centers,
long-term care providers, and hospitals through 101 service centers to customers
in all 50 states and 5 European countries. Since its inception in 1983, the
Company has become a leader in all three market segments it serves with a
focused, market specific approach to customer services, a consultative sales
force, strategic acquisitions, strong arrangements with product manufacturers,
and a unique culture of performance.
The Company, through its Physician Sales & Service division, is the leading
distributor of medical supplies, equipment and pharmaceuticals to office-based
physicians in the United States. Physician Sales & Service currently operates
58 medical supply distribution service centers ("Physician Supply Business")
serving over 100,000 physician offices (representing approximately 50% of all
physician offices) in all 50 states. The Physician Supply Business' primary
market is the approximately 400,000 physicians who practice medicine in
approximately 200,000 office sites throughout the United States.
The Company, through its wholly owned subsidiary Diagnostic Imaging, Inc.
("DI"), is the leading distributor of medical diagnostic imaging supplies,
chemicals, equipment, and service to the acute care and alternate-care markets
in the United States. DI currently operates 26 imaging distribution service
centers ("Imaging Business") serving over 13,000 customer sites in 32 states.
The Imaging Business' primary market is the approximately 5,000 hospitals and
other alternate-site imaging companies operating approximately 50,000 office
sites throughout the United States.
Through its wholly owned subsidiary Gulf South Medical Supply, Inc. ("Gulf
South"), the Company has become a leading national distributor of medical
supplies and related products to the long-term care industry in the United
States. Gulf South currently operates 14 distribution service centers ("Long-
Term Care Business") serving over 10,000 long-term care facilities in all 50
states. The Long-Term Care Business' primary market is comprised of a large
number of independent operators, small to mid-sized local and regional chains,
and several national chains representing over 10,000 long-term care facilities.
In addition to its operations in the United States, the Company, through its
wholly owned subsidiary WorldMed International, Inc. ("WorldMed"), operates
three European service centers ("International Business") distributing medical
products to the physician office and hospital markets in Belgium, France,
Germany, Luxembourg, and the Netherlands.
INDUSTRY
According to industry estimates, the United States medical supply and
equipment segment of the health care industry represents a $34 billion market
comprised of distribution of medical products to hospitals, home health care
agencies, imaging centers, physician offices, dental offices, and long-term care
facilities. The Company's primary focus includes distribution to the physician
office, providers of imaging services, and long-term care facilities which
comprise $14 billion or approximately 40% of the overall market. The Company
currently shares approximately 9% of this $14 billion alternate-site market.
Revenues of the medical products distribution industry are estimated to be
growing as a result of a growing and aging population, increased health care
awareness, proliferation of medical technology and testing, and expanding third-
party insurance coverage. In addition, the physician market is benefiting from
the shift of procedures and diagnostic testing from hospitals to alternate
sites, particularly physician offices despite a migration of significantly lower
hospital medical product pricing into the physician office market.
10
<PAGE>
PSS WORLD MEDICAL, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
(CONTINUED)
The health care industry is subject to extensive government regulation,
licensure, and operating procedures. National health care reform has been the
subject of a number of legislative initiatives by Congress. Such reform
proposals if adopted could impact the medical products distribution industry.
Additionally, the cost of a significant portion of medical care in the United
States is funded by government and private insurance programs. In recent years,
government-imposed limits on reimbursement of hospitals, long-term care
facilities, and other health care providers have impacted spending budgets in
certain markets within the medical products industry. Recently, Congress has
passed radical changes to reimbursements for nursing homes and home care
providers. These changes also effect some distributors who directly bill the
government for these providers.
Over the past few years, the health care industry has undergone significant
consolidation. Physician provider groups, long-term care facilities, and other
alternate-site providers along with the hospitals continue to consolidate. This
consolidation sometimes shifts the medical products purchasing decision to
individuals with whom medical products distributors had no prior selling
relationship. Additionally, the consolidation creates larger customers.
Although the majority of the market serviced by the Company remains a large
number of small customers, the Long-Term Care Business depends on a limited
number of large customers for a significant portion of its net sales.
Specifically, approximately 37% of the Long-Term Care Business revenues for the
12 months ended April 3, 1998 represented sales to its top five customers.
Growth in the Long-Term Care Business as well as consolidation of the health
care industry may increase the Company's dependence on large customers.
RESULTS OF OPERATIONS
The following is management's discussion and analysis of the results of
operations for the three months ended June 30, 1998 and 1997. Due to the
differing fiscal year ends of Gulf South Medical Supply, Inc. and PSS World
Medical, Inc. prior to April 3, 1998, the three months ended March 31, 1997 of
Gulf South were consolidated with the three months ended June 30, 1997 of the
Company. Due to a change in Gulf South's fiscal year end to conform with that
of the Company, the quarter ended June 30, 1998 reflects the operating results
of PSS World Medical, Inc. and all subsidiaries, including Gulf South, for the
three months ended June 30, 1998.
THREE MONTHS ENDED JUNE 30, 1998 AND 1997
Net Sales. Net sales for the three months ended June 30, 1998 totaled $342.5
million, an increase of $54.3 million or 18.8% over net sales of $288.2 million
for the three months ended June 30, 1997. In order of contribution to the
increase, net sales increased as the result of (i) net sales from imaging
companies acquired during fiscal 1998, (ii) internal sales growth of existing
service centers, and (iii) incremental sales generated in connection with
exclusive and semiexclusive vendor relationships.
Gross Profit. Gross profit for the three months ended June 30, 1998 totaled
$94.7 million, an increase of $17.9 million or 23.3% over the three months ended
June 30, 1997 total of $76.8 million. Gross profit as a percentage of net sales
was 27.6% and 26.6% for the three months ended June 30, 1998 and 1997,
respectively. This increase in gross margin is attributable to (i) low margin
business eliminated by the Physician Supply Business during the third and fourth
quarters of fiscal 1998 and (ii) increased diagnostic imaging equipment sales
and the related preventative maintenance and emergency service provided by the
Imaging Business. Although there has been considerable gross margin pressure
from competition and a consolidating customer base, the Company has successfully
maintained its overall gross margins.
General and Administrative Expenses. General and administrative expenses for
the three months ended June 30, 1998 totaled $48.3 million, an increase of $7.4
million or 18.1% over the three months ended June 30, 1997 total of $40.9
million. As a percentage of net sales, general and administrative expenses
were 14.1% and 14.2% for the three months ended June 30, 1998 and 1997,
respectively. The decrease in general and administrative expenses as a
percentage of net sales was a result of the continued leveraging of fixed costs
of mature service center operations and the increased contribution by the
Imaging Business which operates at lower general and administrative expenses as
a percentage of sales.
11
<PAGE>
PSS WORLD MEDICAL, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
(CONTINUED)
Selling Expenses. Selling expenses for the three months ended June 30, 1998
totaled $26.5 million, an increase of $4.1 million or 18.3% over the three
months ended June 30, 1997 total of $22.4 million. As a percentage of sales,
selling expenses decreased to 7.7% for the three months ended June 30, 1998 from
7.8% for the three months ended June 30, 1997. The Company utilizes a variable
commission plan, which pays commissions based on gross profit as a percentage of
net sales.
Merger and Other Nonrecurring Costs and Expenses. During the three months
ended June 30, 1998 and 1997, the Company recorded merger and other nonrecurring
costs and expenses of approximately $0.3 million and $1.4 million, respectively.
Merger and other non recurring costs and expenses for the three months ended
June 30, 1997, include retroactively recorded tax accruals of $0.8 million
primarily related to state and local tax compliance matters. These tax
adjustments relate only to Gulf South, and due to changes in operational
procedures, will be nonrecurring subsequent to April 3, 1998.
Operating Income. Operating income for the three months ended June 30, 1998
totaled $19.6 million, an increase of $7.5 million or 62.0% over the three
months ended June 30, 1997 total of $12.1 million. Operating results for the
three months ended June 30, 1998 and 1997 include merger and other nonrecurring
costs and expenses of approximately $0.3 million and $1.4 million, respectively.
On a pro forma basis, excluding the effect of merger and other nonrecurring
costs and expenses, pro forma operating income would have increased $6.4
million, or 47.4%, to $19.9 million for the three months ended June 30, 1998
from $13.5 million for the three months ended June 30, 1997.
Interest Expense. Interest expense for three months ended June 30, 1998
increased approximately $2.7 million compared to the three months ended June 30,
1997. Interest expense increased due to the $125.0 million 8 1/2% senior
subordinated debt outstanding during the three months ended June 30, 1998.
Interest expense for the three months ended June 30, 1997 primarily results from
the debt of the pooled Imaging Business companies.
Interest and Investment Income. Interest and investment income for three
months ended June 30, 1998 increased approximately $0.9 million, or 112.5%,
compared to the three months ended June 30, 1997 due to the investment of the
net proceeds from the debt offering.
12
<PAGE>
PSS WORLD MEDICAL, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
(CONTINUED)
Other Income. Other income for the three months ended June 30, 1998 totaled
$0.7 million, an increase of $0.3 million or 75.0% over the three months ended
June 30, 1997 total of $0.4 million. Other income consists of finance charges
on customer accounts and financing performance incentives. The increase in
other income results from the growth in the Company's operations.
Provision For Income Taxes. Provision for income taxes for the three months
ended June 30, 1998 totaled $7.7 million, an increase of $2.6 million or 51.0%
over the three months ended June 30, 1997 total of $5.1 million. The income tax
provision computation is affected by the non-deductible nature of certain non-
recurring merger costs and expenses in the period in which they were incurred.
Net Income. Net income for the three months ended June 30, 1998 totaled $11.3
million, an increase of $3.4 million or 43.0% over the three months ended June
30, 1997 total of $7.9 million. As a percentage of net sales, net income
increased to 3.3% for the three months ended June 30, 1998 from 2.7% for the
three months ended June 30, 1997. On a pro forma basis, excluding the effects
of merger and other nonrecurring costs and expenses, pro forma net income would
have increased $2.9 million, or 33.0%, to $11.7 million for the three months
ended June 30, 1998 from $8.8 million for the three months ended June 30, 1997.
The following table presents net income and earnings per share for the three
months ended June 30, 1998 and 1997, as reported, and the pro-forma effect on
net income and earnings per share excluding merger and other nonrecurring costs
and expenses.
<TABLE>
<CAPTION>
PRO FORMA (A) AS REPORTED
THREE MONTHS ENDED THREE MONTHS ENDED
---------------------------------------------- ----------------------------------------------
JUNE 30, 1998 JUNE 30, 1997 JUNE 30, 1998 JUNE 30, 1997
---------------------- -------------------- --------------------- ---------------------
<S> <C> <C> <C> <C>
Net income (in millions) $11,680 $8,789 $11,295 $7,921
Diluted earnings per share $ 0.17 $ 0.13 $ 0.16 $ 0.12
</TABLE>
- --------------
(a) Excludes merger and other nonrecurring costs and expenses.
LIQUIDITY AND CAPITAL RESOURCES
As the Company's business grows, its cash and working capital requirements
will also continue to increase as a result of the need to finance acquisitions
and anticipated growth of the Company's operations. This growth will be funded
through a combination of cash flow from operations, revolving credit borrowings,
use of proceeds from the $125.0 million senior subordinate notes offering, and
any future public offerings.
Net cash used by operating activities was $(20.1) million for the three months
ended June 30, 1998 compared to net cash provided by operating activities of
$11.9 million for the three months ended June 30, 1997 due to the timing of
accounts receivable collections, payments of merger and acquisition expenses,
and the timing of fiscal year end vendor payments and employee incentive based
compensation payments.
Net cash provided by investing activities of $37.2 million and 32.9 million
for the three months ended June 30, 1998 and 1997 respectively, consisted
primarily of proceeds from sales and maturities of marketable securities offset
by capital expenditures, payment for purchases of net assets from business
acquisitions, and payments on noncompete agreements.
13
<PAGE>
PSS WORLD MEDICAL, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
(CONTINUED)
Net cash used in financing activities of $(1.9) million for the three months
ended June 30, 1998 primarily resulted from repayments of outstanding debt of
acquired companies. Net cash used in financing activities of $(32.9) million for
the three months ended June 30, 1997 primarily consisted of payoff of debt
assumed through fiscal 1997 acquisitions.
The Company had working capital of $370.5 million and $384.1 million as of
June 30, 1998 and April 3, 1998, respectively. Accounts receivable, net of
allowances, were $228.0 million and $210.0 million at June 30, 1998 and April 3,
1998, respectively. The annualized average number of days sales in accounts
receivable outstanding was approximately 57.5 for the three months ended June
30, 1998 and 54.3 days for the year ended April 3, 1998.
Inventories were $121.5 million and $122.5 million as of June 30, 1998 and
April 3, 1998, respectively. The Company had annualized inventory turnover of
8.1x and 8.3x times for the three months ended June 30, 1998 and the year ended
April 3, 1998, respectively. Inventory financing has historically been achieved
through negotiating extended payment terms from suppliers.
Earnings before interest expense, taxes, depreciation and amortization
("EBITDA") totaled approximately $25.6 million for the three months ended June
30, 1998. EBITDA margin and coverage was approximately 7.5% and 8.4x,
respectively, for the same period.
The Company has historically maintained an asset-backed, revolving credit
facility. This credit facility recently expired. The Company is currently in
the process of negotiating a new credit facility with a syndicate of banks. The
Company's wholly owned subsidiary, Gulf South, has available a $15.0 million
revolving credit facility which matures September 25, 1998. Gulf South had no
outstanding debt under its credit facility.
On October 7, 1997, the Company issued, in a private offering under Rule 144A
of the Securities Act of 1933, an aggregate principal amount of $125.0 million
of its 8 1/2% senior subordinated notes due in 2007 (the "Private Notes") with
net proceeds to the Company of $119.5 million after deduction for offering
costs. The Private Notes are unconditionally guaranteed on a senior
subordinated basis by all of the Company's domestic subsidiaries. On February
10, 1998, the Company closed its offer to exchange the Private Notes for senior
subordinated notes (the "Notes") of the Company with substantially identical
terms to the Private Notes (except that the Notes do not contain terms with
respect to transfer restrictions). Interest on the Notes accrues from the date
of original issuance and is payable semiannually on April 1 and October 1 of
each year, commencing on April 1, 1998, at a rate of 81/2% per annum.
The Company believes that the expected cash flows from operations, bank
borrowings, the net proceeds of the debt offering, and capital markets should be
adequate to meet the Company's anticipated future requirements for working
capital, capital expenditures and scheduled payments of interest on its debts
for the foreseeable future.
YEAR 2000
The Company is currently replacing a majority of its internal information
systems hardware and software with new systems ("New Systems") that are year
2000 compliant. These New Systems will be used in several key areas of the
Company's business, including inventory management, purchasing, sales, shipping,
accounts payable, accounts receivable, and financial reporting. The Company
expects to incur internal payroll costs, consulting fees, and hardware and
software costs for preparation and implementation of these New Systems. The
total expected cost of implementation is estimated to be approximately $10.0
million, with $0.8 million incurred through June 30, 1998. Although the Company
believes it will complete all phases of implementation of these New Systems by
December 1999, there can be no assurance that full implementation will occur by
the year 2000. Failure to complete certain phases of the implementation would
have a material adverse affect on the Company's systems and results of
operations.
The Company has developed a preliminary contingency plan that consists of
modifications to existing information system software and hardware for year 2000
compliance. The implementation of this plan would occur in the fourth quarter of
fiscal 1999 if the Company believes it will not be able to achieve New Systems
implementation by December 1999.
14
<PAGE>
PSS WORLD MEDICAL, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
(Continued)
Implementation of the New System entails contacting suppliers to ensure
compatibility with the Company's information systems and to discuss year 2000
compliance issues. There can be no assurance that the systems of other
companies which the Company's systems rely upon will be timely converted, or
that such failure to convert by another company would not have a material
adverse effect on the Company's systems and results of operations.
All statements contained herein that are not historical facts, including, but
not limited to, statements regarding anticipated growth in revenue, gross
margins and earnings, statements regarding the Company's current business
strategy, the Company's projected sources and uses of cash, and the Company's
plans for future development and operations, are based upon current
expectations. These statements are forward-looking in nature and involve a
number of risks and uncertainties. Actual results may differ materially. Among
the factors that could cause results to differ materially are the following:
the availability of sufficient capital to finance the Company's business plans
on terms satisfactory to the Company; competitive factors; the ability of the
Company to adequately defend or reach a settlement of outstanding litigations
and investigations involving the Company or its management; changes in labor,
equipment and capital costs; changes in regulations affecting the Company's
business; future acquisitions or strategic partnerships; general business and
economic conditions; and other factors described from time to time in the
Company's reports filed with the Securities and Exchange Commission. The
Company wishes to caution readers not to place undue reliance on any such
forward-looking statements, which statements are made pursuant to the Private
Securities Litigation Reform Act of 1995 and, as such, speak only as of the date
made.
15
<PAGE>
PART II OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company and certain of its current officers and directors are named as
defendants in a purported securities class action lawsuit entitled Jack Hirsch
v. PSS World Medical, Inc., et al., Civil Action No. 98-502-cv-5-20A. The
action, which was filed on May 28, 1998, is pending in the United States
District Court for the Middle District of Florida. The plaintiff alleges, for
himself and for a purported class of similarly situated stockholders that
allegedly purchased the Company's stock between December 27, 1997 and May 8,
1998, that the defendants engaged in violations of certain provisions of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and Rule 10b-5
promulgated thereunder. The plaintiff seeks damages, including costs and
expenses. The Company believes that the allegations contained in the complaint
are without merit and intends to defend vigorously against the claims. However,
the lawsuit is in the earliest stages, and there can be no assurance that this
litigation will be ultimately resolved on terms that are favorable to the
Company.
Gulf South Medical Supply, Inc. ("Gulf South"), a wholly owned subsidiary of
the Company, and certain of its current and former officers and directors, among
others, are named as defendants in two purported securities class action
lawsuits entitled Ernest Klein v. Gulf South Medical Supply, Inc., et al., Civil
Action No. 3:97cv526WS, and Ann Krupnick v. Gulf South Medical Supply, Inc., et
al., Civil Action No. 3:97cv525BN. Both actions, which were filed on July 21,
1997, are pending in the United States District Court for the Southern District
of Mississippi. The plaintiff in the Klein action alleges, for himself and for
a purported class of similarly situated stockholders that allegedly purchased
stock in Gulf South's June 1996 public offering of three million shares of its
common stock (the "June 1996 Offering"), that the defendants engaged in
violations of certain provisions of the Securities Act of 1933, as amended, and
Mississippi state law. The plaintiff in the Krupnick action alleges for herself
and for a purported class of similarly situated stockholders who purchased Gulf
South Common Stock between May 2, 1996 and July 22, 1996, that the defendants
engaged in certain violations of the Exchange Act, Rule 10b-5 promulgated
thereunder and Mississippi state law. Both lawsuits relate to disclosures made
in the prospectus issued by Gulf South in connection with its June 1996
Offering. Plaintiffs seek damages, including costs and expenses. The Company
believes that the allegations contained in these complaints are also without
merit and intends to defend vigorously against the claims. However, these
lawsuits are in their earliest stages, and there can be no assurance that this
litigation will ultimately be resolved on terms that are favorable to the
Company.
The Company is named as a defendant in a purported patent infringement claim
filed by Bayer Corp. ("Bayer") in the United States District Court for the
Middle District of Florida 98-235 Civ. J-21A. In this lawsuit, Bayer alleges
that the urinalysis test strips sold by the Company under the Penny Saver(TM)
label infringe four Bayer patents. The Company is contesting the claim of
infringement. In addition, the Company has obtained a written agreement from
the manufacturer of the product, YeongDong Pharmaceuticals of Seoul, Korea,
indemnifying the Company for the costs of defense of the suit and for the
underlying liability. To date, YeongDong has fulfilled its obligation to
reimburse the Company for the fees and costs incurred in defending this case.
The Company further has indemnity rights against the U.S. distributor of the
YeongDong product, BioSys Laboratories ("BioSys"), pursuant to its vendor
agreement with BioSys. The Company believes that the allegations contained in
the complaint are without merit and intends to defend vigorously against the
claims. However, this lawsuit is in its earliest stages and there can be no
assurance that this litigation will ultimately be resolved on terms that are
favorable to the Company.
Although the Company does not manufacture products, the distribution of
medical supplies and equipment entails inherent risks of product liability. The
Company has not experienced any significant product liability claims and
maintains product liability insurance coverage. In addition, the Company is a
party to various legal and administrative legal proceedings and claims arising
in the normal course of business. While any litigation contains an element of
uncertainty, management believes that, other than as discussed above, the
outcome of any proceedings or claims which are pending or known to be threatened
will not have a material adverse effect on the Company's consolidated financial
position, liquidity, or results of operations.
16
<PAGE>
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
(a) See Note 6 to Financial Statements concerning adoption of Shareholder
Protection Rights Agreement.
On March 26, 1998, the Company filed an amendment to the Amended and
Restated Articles of Incorporation increasing the authorized shares of
Common Stock of the Company from 60,000,000 to 150,000,000 shares and
changed the name of the Company from Physician Sales & Service, Inc. to
PSS World Medical, Inc.
(b) See Note 6 to Financial Statements concerning adoption of Shareholder
Protection Rights Agreement.
(c) On May 28, 1998, the Company issued an aggregate of 349,000 shares of
common stock, $.01 par value per share (the "Common Stock"), including
34,900 shares which are being held in escrow pending the resolution of
potential indemnifiable claims, to the former shareholders of Medical
Imaging Services, Inc. ("MIS") in exchange for substantially all of the
assets and contractual rights used in or related to the operation of the
business of MIS. The issuance of securities was made in reliance on the
exemption from registration provided under Section 4(2) of the
Securities Act of 1933, as amended, as a transaction by an issuer not
involving a public offering. All of the securities were acquired by the
recipients for investment and with no view toward public resale of
distribution without registration. The recipients qualified as
accredited investors, the offers and sales were made without any public
solicitation, and the stock certificates bear restrictive legends.
(d) Not applicable.
ITEM 5. OTHER INFORMATION
Shareholder Proposals
The proxy statement solicited by management with respect to the 1999
Annual Meeting of Shareholders will confer discretionary authority to
vote on any proposals of shareholders of the Company intended to be
presented for consideration at such Annual Meeting that are submitted to
the Company after June 17, 1999.
17
<PAGE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
EXHIBIT
NUMBER DESCRIPTION
- -------- ----------------------------------------------------------------
3.1 Amended and Restated Articles of Incorporation dated March 15, 1994,
as amended.(13)
3.2 Amended and Restated Bylaws dated March 15, 1994.(1)
4.1 Form of Indenture, dated as of October 7, 1997, by and among the
Company, the Subsidiary Guarantors named therein, and SunTrust Bank,
Central Florida, National Association, as Trustee.(2)
4.2 Registration Rights Agreement, dated as of October 7, 1997, by and
among the Company, the Subsidiary Guarantors named therein, BT Alex.
Brown Incorporated, Salamon Brothers Inc. and NationsBanc Montgomery
Securities, Inc.(2)
4.3 Form of 8 1/2% Senior Subordinated Note due 2007, including Form of
Guarantee (Private Notes).(2)
4.4 Form of 8 1/2% Senior Subordinated Note due 2007, including Form of
Guarantee (Exchange Notes).(2)
4.5 Shareholder Protection Rights Agreement, dated as of April 20, 1998,
between PSS World Medical, Inc. and Continental Stock Transfer &
Trust Company, as Rights Agent.(12)
10.1 Registration Rights Agreement between the Company and Tullis-
Dickerson Capital Focus, LP, dated as of March 16, 1994.(3)
10.2 Employment Agreement for Patrick C. Kelly. (14)
10.3 Incentive Stock Option Plan dated May 14, 1986.(3)
10.4 Shareholders Agreement dated March 26, 1986, between the Company, the
Charthouse Co., Underwood, Santioni and Dunaway.(3)
10.5 Shareholders Agreement dated April 10, 1986, between the Company and
Clyde Young.(3)
10.6 Shareholders Agreement between the Company and John D. Barrow.(3)
10.7 Amended and Restated Directors Stock Plan.(8)
10.8 Amended and Restated 1994 Long-Term Incentive Plan.(8)
10.9 Amended and Restated 1994 Long-Term Stock Plan.(8)
10.10 1994 Employee Stock Purchase Plan.(4)
10.11 1994 Amended Incentive Stock Option Plan.(3)
10.12 Amended and Restated Loan and Security Agreement between the Company
and NationsBank of Georgia, N.A. dated December 21, 1994.(5)
10.13 Distributorship Agreement between Abbott Laboratories and Physician
Sales & Service, Inc. (Portions omitted as confidential--Separately
filed with Commission).(6)
18
<PAGE>
10.14 Stock Purchase Agreement between Abbott Laboratories and Physician
Sales & Service, Inc.(6)
10.15 Amendment to Employee Stock Ownership Plan.(8)
10.15a Amendment and Restatement of the Physician Sales and Service, Inc.
Employee Stock Ownership and Savings Plan.(8)
10.15b First Amendment to the Physician Sales and Service, Inc. Employee
Stock Ownership and Savings Plan.(8)
10.16 Third Amended and Restated Agreement and Plan of Merger By and Among
Taylor Medical, Inc. and Physician Sales & Service, Inc. (including
exhibits thereto).(7)
10.17 Agreement and Plan of Merger by and Among Physician Sales & Service,
Inc., PSS Merger Corp. and Treadway Enterprises, Inc.(9)
10.18 Amended and Restated Agreement and Plan of Merger, dated as of
August 22, 1997, among the Company, Diagnostic Imaging, Inc., PSS
Merger Corp. and S&W X-ray, Inc.(10)
10.19 Agreement and Plan of Merger dated December 14, 1997 by and among
the Company, PSS Merger Corp. and Gulf South Medical Supply, Inc.(11)
27 Financial Data Schedule (for SEC use only)
(1) Incorporated by Reference to the Company's Registration Statement on Form
S-3, Registration No. 33-97524.
(2) Incorporated by Reference to the Company's Registration Statement on Form
S-4, Registration No. 333-39679.
(3) Incorporated by Reference from the Company's Registration Statement on Form
S-1, Registration No. 33-76580.
(4) Incorporated by Reference to the Company's Registration Statement on Form
S-8, Registration No. 33-80657.
(5) Incorporated by Reference to the Company's Quarterly Report on Form 10-Q
for the quarterly period ended December 31, 1994.
(6) Incorporated by Reference to the Company's Annual Report on Form 10-K for
the fiscal year ended March 30, 1995.
(7) Incorporated by Reference to the Company's Annual Report on Form 10-K for
the fiscal year ended March 29, 1996.
(8) Incorporated by Reference to the Company's Quarterly Report on Form 10-Q
for the quarterly period ended June 30, 1996.
(9) Incorporated by Reference to the Company's Current Report on Form 8-K,
filed January 3, 1997.
(10) Incorporated by Reference from Annex A to the Company's Registration
Statement on Form S-4, Registration No. 333-33453.
(11) Incorporated by Reference from Annex A to the Company's Registration
Statement on Form S-4, Registration No. 333-44323.
(12) Incorporated by Reference to the Company's Current Report on Form 8-K,
filed April 22, 1998.
(13) Incorporated by Reference to the Company's Current Report on Form 8-K,
filed April 8, 1998.
(14) Incorporated by Reference to the Company's Annual Report on Form 10-K
for the fiscal year ended April 3, 1998.
(b) Reports on Form 8-K
The following current reports on Form 8-K were filed during the quarter ended
June 30, 1998:
<TABLE>
<CAPTION>
Entities for Which
Date of Report Item(s) Reported Financial Statements Filed
- -------------- ---------------- --------------------------
<S> <C>
April 8, 1998 Consummation of PSS World Medical, Inc./Gulf South PSS World Medical, Inc. and
Medical Supply, Inc. merger and an amendment to the Gulf South Medical Supply,
Company's Amended and Restated Articles of Inc.
Incorporation (i) increasing the number of
authorized shares of Common Stock of the Company
from 60,000,000 to 150,000,000 and (ii) changing the
name of the Company from Physician Sales & Service,
Inc. to PSS World Medical, Inc.
April 22, 1998 Dividend declared pursuant to Shareholder Protection None
Rights Agreement, dated as of April 20, 1998.
</TABLE>
19
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized on August 14, 1998.
PSS World Medical, Inc.
/s/ David A. Smith
-----------------------------
David A. Smith
Executive Vice President and
Chief Financial Officer
20
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
COMPANY'S QUARTERLY REPORT ON FORM 10-Q 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> APR-02-1999
<PERIOD-START> APR-04-1998
<PERIOD-END> JUN-30-1998
<CASH> 97,323
<SECURITIES> 26,850
<RECEIVABLES> 241,853
<ALLOWANCES> 13,839
<INVENTORY> 121,515
<CURRENT-ASSETS> 528,567
<PP&E> 44,287
<DEPRECIATION> 17,674
<TOTAL-ASSETS> 670,220
<CURRENT-LIABILITIES> 158,041
<BONDS> 125,317
0
0
<COMMON> 701
<OTHER-SE> 380,455
<TOTAL-LIABILITY-AND-EQUITY> 670,220
<SALES> 342,538
<TOTAL-REVENUES> 342,538
<CGS> 247,854
<TOTAL-COSTS> 247,854
<OTHER-EXPENSES> 74,787
<LOSS-PROVISION> 317
<INTEREST-EXPENSE> 3,037
<INCOME-PRETAX> 19,032
<INCOME-TAX> 7,737
<INCOME-CONTINUING> 11,295
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 11,295
<EPS-PRIMARY> 0.16
<EPS-DILUTED> 0.16
</TABLE>
