<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] Quarterly Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1998
or
[ ] Transition Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the transition period from _____ to _____
COMMISSION FILE NO. 1-13394
CHASE INDUSTRIES INC.
(Exact name of Registrant as specified in its charter)
DELAWARE 51-0328047
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
14212 COUNTY ROAD M-50, MONTPELIER, OHIO 43543
(Address of principal executive offices, including Zip Code)
Registrant's telephone number, including area code: (419) 485-3193
Not Applicable
(Former name, former address and former fiscal year, if changed
since last report)
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
YES [X] NO [ ]
<TABLE>
<S> <C>
NUMBER OF SHARES OF COMMON STOCK OUTSTANDING AS OF APRIL 30, 1998 . . . . . . . . . . . . . . . 6,046,416
NUMBER OF SHARES OF NONVOTING COMMON STOCK OUTSTANDING AS OF APRIL 30, 1998 . . . . . . . . . . . 4,100,079*
</TABLE>
- ----------
* The Registrant's Nonvoting Common Stock is convertible, on a share-for-share
basis, into Common Stock.
================================================================================
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CHASE INDUSTRIES INC.
TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION
<TABLE>
<CAPTION>
Item 1. Financial Statements Page
- ------- -------------------- ----
<S> <C>
Consolidated Balance Sheet as of March 31, 1998
and December 31, 1997 . . . . . . . . . . . . . . . . . . . . . . 3
Consolidated Statement of Income for the three months ended
March 31, 1998 and 1997 . . . . . . . . . . . . . . . . . . . . . . . . . 4
Consolidated Statement of Cash Flows for the three months ended
March 31, 1998 and 1997 . . . . . . . . . . . . . . . . . . . . . . . . . 5
Notes to Consolidated Financial Statements. . . . . . . . . . . . . . . . . . . . 6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations. . . . . . . . . . . . . . . . . . . . . . . . . 13
PART II. OTHER INFORMATION
Item 1. Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . . . . . . . . . . . . . . . 20
Signature. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
</TABLE>
2
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CHASE INDUSTRIES INC.
CONSOLIDATED BALANCE SHEET
(UNAUDITED; IN THOUSANDS, EXCEPT SHARE INFORMATION)
<TABLE>
<CAPTION>
March 31, December 31,
1998 1997
---- ----
ASSETS
Current assets:
<S> <C> <C>
Cash and cash equivalents $ 3,806 $ 924
Receivables, net of allowance for doubtful accounts and
claims of $1,304 and $1,286 in 1998 and 1997, respectively 47,498 42,368
Inventories 59,640 63,688
Prepaid expenses 1,102 922
Deferred income taxes 2,550 2,509
-------- --------
Total current assets 114,596 110,411
Property, plant and equipment, net 93,532 94,162
Other assets 4,426 4,928
-------- --------
Total assets $212,554 $209,501
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 30,804 $ 37,244
Accrued compensation and benefits 5,913 6,651
Accrued income taxes 3,615 --
Other accrued liabilities 6,823 6,425
Current portion of long-term debt 147 141
-------- --------
Total current liabilities 47,302 50,461
Long-term debt 46,408 48,068
Deferred income taxes 12,684 12,259
-------- --------
Total liabilities 106,394 110,788
-------- --------
Commitments and contingencies -- --
-------- --------
Stockholders' equity:
Common stock, $.01 par value, 25,000,000 shares authorized;
6,038,266 and 6,002,046 shares issued and outstanding
in 1998 and 1997, respectively 60 60
Nonvoting common stock, $.01 par value, 5,000,000 shares
authorized; 4,100,079 shares issued and outstanding
in 1998 and 1997 41 41
Additional paid-in capital 31,065 30,597
Retained earnings 74,994 68,015
-------- --------
Total stockholders' equity 106,160 98,713
-------- --------
Total liabilities and stockholders' equity $212,554 $209,501
======== ========
</TABLE>
The accompanying notes are an integral part of the
consolidated financial statements.
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CHASE INDUSTRIES INC.
CONSOLIDATED STATEMENT OF INCOME
(UNAUDITED; IN THOUSANDS, EXCEPT SHARE INFORMATION)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
1998 1997
-------- --------
<S> <C> <C>
Net sales $125,118 $126,074
Cost of goods sold (exclusive of depreciation
and amortization shown separately below) 106,641 107,922
-------- --------
Gross profit 18,477 18,152
Selling, general and administrative expenses 3,609 3,861
Depreciation and amortization 2,630 2,438
-------- --------
Operating income 12,238 11,853
Interest expense, net 981 1,282
Income before income taxes 11,257 10,571
Provision for income taxes 4,278 4,017
-------- --------
Net income $ 6,979 $ 6,554
======== ========
Earnings per share:
Basic $ .69 $ .65
======== ========
Diluted $ .67 $ .64
======== ========
</TABLE>
The accompanying notes are an integral part of the
consolidated financial statements.
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CHASE INDUSTRIES INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED; IN THOUSANDS)
<TABLE>
<CAPTION>
Three Months Ended March 31,
1998 1997
-------- --------
Operating activities:
<S> <C> <C>
Net income $ 6,979 $ 6,554
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 2,630 2,438
Deferred income tax expense 384 222
Changes in assets and liabilities:
(Increase) in receivables (5,130) (13,446)
Decrease in inventories 4,048 113
(Decrease) increase in accounts payable (6,440) 2,650
Increase in accrued liabilities 3,275 1,917
Other, net 164 536
-------- --------
Net cash provided by operating activities 5,910 984
Investing activities:
Expenditures for property, plant and equipment (3,842) (1,310)
-------- --------
Net cash (used in) investing activities (3,842) (1,310)
-------- --------
Financing activities:
Revolving credit facility (repayments) borrowings, net (1,578) 8,843
Equipment financing 2,000 --
Principal payments on long-term debt (76) (15,071)
Issuance of common stock - options exercised 468 343
-------- --------
Net cash provided by (used in) financing activities 814 (5,885)
-------- --------
Net (decrease) in cash and cash equivalents 2,882 (6,211)
Cash and cash equivalents, beginning of period 924 9,763
Cash and cash equivalents, end of period $ 3,806 $ 3,552
======== ========
Supplemental disclosures:
Interest and bank fees paid $ 640 $ 935
======== ========
Income taxes paid $ 119 $ 1,555
======== ========
</TABLE>
The accompanying notes are an integral part of the
consolidated financial statements.
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CHASE INDUSTRIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. SIGNIFICANT ACCOUNTING POLICIES:
PRINCIPLES OF CONSOLIDATION AND INTERIM FINANCIAL INFORMATION
The consolidated balance sheet as of March 31, 1998, and December 31,
1997, the consolidated statement of income for the three months ended March 31,
1998 and 1997, and the consolidated statement of cash flows for the three months
ended March 31, 1998 and 1997, include the accounts of Chase Industries Inc.
(the "Company"), a Delaware corporation, and its wholly-owned subsidiaries,
Chase Brass & Copper Company, Inc. ("CBCC"), a Delaware corporation, Leavitt
Tube Company, Inc. ("Leavitt"), a Delaware corporation, and Holco Corporation
("Holco"), an Illinois corporation and wholly-owned subsidiary of Leavitt.
The accompanying financial statements have been prepared in accordance
with instructions to Form 10-Q and do not include all the information and
footnote disclosures required by generally accepted accounting principles. The
financial information for March 31, 1998 and 1997, included herein is unaudited
and, in the opinion of management, reflects all adjustments necessary,
consisting only of normal recurring adjustments, for a fair presentation of such
financial information.
The results of operations for the three months ended March 31, 1998,
are not necessarily indicative of the results of operations that may be expected
for the year ended December 31, 1998. This quarterly report on Form 10-Q should
be read in conjunction with the annual financial statements included in the
Company's Annual Report on Form 10-K dated March 20, 1998.
On August 30, 1996, the Company acquired, through Leavitt, the assets
and operations of the steel tube division of UNR Industries, Inc., including all
the outstanding stock of Holco (the "Leavitt Acquisition"). Upon consummation of
the Leavitt Acquisition, Leavitt continued operations in the manufacture and
sale of structural and mechanical steel tubing. The net purchase price was
approximately $91.7 million after post-closing adjustments, of which $62 million
was financed with the Bank Credit Facility (as hereinafter defined) and the
remainder with cash. The Leavitt Acquisition was accounted for as a purchase.
On August 24, 1990, the Company acquired, through CBCC, the assets and
operations of a Delaware corporation formerly named Chase Brass & Copper
Company, Incorporated ("Old Chase"), pursuant to the Asset Purchase Agreement
("CBCC Purchase Agreement") dated May 10, 1990, by and between the Company,
CBCC, Old Chase, BP Exploration (Alaska) Inc. ("BPE") and The Standard Oil
Company (the "CBCC Acquisition"). BPE and The Standard Oil Company (collectively
referred to as "BP") own all of the stock of Old Chase. The CBCC Acquisition was
accounted for as a purchase.
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CHASE INDUSTRIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENT
In June 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 131, "Disclosures about Segments of an
Enterprise and Related Information," which is effective for years beginning
after December 15, 1997. The Company is assessing the impact on its financial
statements disclosures.
2. INVENTORIES:
Inventories are stated at the lower of cost-or-market, with cost
determined on the last-in, first-out (LIFO) basis. Inventories have been written
down to lower of cost-or-market and such amounts are considered cost for
subsequent periods. If the first-in, first-out (FIFO) method for determining
cost had been used, inventories would have been approximately $1.6 million lower
and $3.0 million higher at March 31, 1998, and December 31, 1997, respectively.
Inventories consisted of the following (in thousands):
<TABLE>
<CAPTION>
March 31, December 31,
1998 1997
-------- ------------
<S> <C> <C>
Raw materials $ 17,180 $ 22,891
Work in process 20,037 12,631
Finished goods 24,050 29,369
-------- --------
61,267 64,891
Tolling metal due customers (1,627) (1,203)
-------- --------
$ 59,640 $ 63,688
======== ========
</TABLE>
3. COMMON STOCK AND EARNINGS PER SHARE:
The Company's Board of Directors has declared a three-for-two stock
split for shareholders of record as of June 6, 1998. The stock split is subject
to shareholder approval of an increase in the Company's authorized shares at the
Company's annual meeting of shareholders to be held May 26, 1998. If shareholder
approval is obtained, the Company's issued shares will increase from
approximately 10 million to approximately 15 million shares. Fractional shares
resulting from the stock split will be paid in cash, without interest, in an
amount equal to one-third the closing sale price per share of the common stock
as reported on the New York Stock Exchange on June 6, 1998. The mail date for
new stock certificates and the payment date for fractional shares will be June
26, 1998. If the shareholders do not approve the increase in authorized shares
at the annual meeting, the stock split will not occur.
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CHASE INDUSTRIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
The following is a reconciliation of the denominator used in the
computation of basic and diluted earnings per share. Average shares are as
follows:
<TABLE>
<CAPTION>
Three Months Ended March 31,
-----------------------------------------------------
1998 1997
------------------------ ------------------------
EPS Shares EPS Shares
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Basic 10,114,891 $ .69 10,076,758 $ .65
Stock options 248,701 (.02) 196,839 (.01)
---------- ---------- ---------- ----------
Diluted 10,363,592 $ .67 10,273,597 $ .64
========== ========== ========== ==========
</TABLE>
All shares of Common Stock and Nonvoting Common Stock are identical,
except that holders of Nonvoting Common Stock have no voting rights. Shares of
Nonvoting Common Stock may be converted, at the option of the holder, into
Common Stock on a share-for-share basis, except to the extent that the holder of
Nonvoting Common Stock is restricted from obtaining certain ownership levels in
the Company pursuant to the Small Business Investment Act of 1958 and the Bank
Holding Company Act of 1956.
At March 31, 1998, and December 31, 1997, the Company had no preferred
stock issued or outstanding. In conjunction with the initial public offering in
November 1994, the Company authorized 1,000,000 shares of preferred stock, none
of which has been issued. The preferences and rights of such preferred stock may
be determined by the Board of Directors at any time prior to issuance.
4. COMMITMENTS AND CONTINGENCIES:
CBCC. In connection with the CBCC Acquisition, the Company and BP
entered into a remediation agreement (the "Remediation Agreement"). Under the
terms of the Remediation Agreement, BP is responsible for certain remediation
activities attributable to environmental releases which occurred prior to the
CBCC Acquisition at CBCC's manufacturing facility and the construction of a
waste water treatment plant to enable CBCC to comply with its waste water
discharge permit (the "Permit"). BP also is obligated under the CBCC Purchase
Agreement to indemnify the Company for liabilities arising out of certain
environmental conditions that existed as of the CBCC Acquisition date. BP has
performed certain activities in this regard and has acknowledged liability for
certain releases of regulated substances into the environment which occurred
prior to the CBCC Acquisition.
While CBCC's waste water treatment plant has been in operation since
May 1993, CBCC is still experiencing occasional exceedances to certain
limitations contained in the Permit, resulting in violations of the Clean Water
Act. The Ohio Environmental Protection Agency ("Ohio EPA") is kept apprised as
to the status of activities concerning the elimination of exceedances and has
not initiated any enforcement action against CBCC for prior exceedances, but has
indicated that it may do so if exceedances of the Permit limits continue. In
early 1997 CBCC identified certain conditions it believed to be contributing to
the Permit limit exceedances and undertook corrective measures that have reduced
significantly the Permit limit exceedances. Although certain Permit limit
exceedances are still being experienced on occasion, precluding CBCC's routine
compliance with the Permit, CBCC has identified certain additional conditions
that may be contributing to the exceedances and is actively working to correct
these conditions.
CBCC and/or other entities named "Chase Brass & Copper Co." (which may
include Old Chase or divisions of Old Chase) have been named by governmental
agencies and/or private parties as a potentially responsible party ("PRP") under
the Comprehensive Environmental Response, Compensation and Liability Act of 1980
("CERCLA") and/or state laws with respect to four sites, and may have been
identified as a PRP at one additional site, as described in the following
paragraphs.
In connection with one of the four sites, located in Cleveland, Ohio,
CBCC has been named as one of over 130 defendants in a CERCLA Section 107 action
which
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CHASE INDUSTRIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
seeks recovery of response costs previously spent and proposed to be spent by
the plaintiff. The plaintiff has alleged that between 1990 and 1993 it and the
other ordered parties have incurred response costs in excess of $10 million. The
Company believes that CBCC has had no contact with the site and has no knowledge
as to what, if any, share of response costs has been allocated to CBCC. BP has
been notified of this suit and has assumed the defense thereof because alleged
events giving rise to the CERCLA liability occurred prior to the CBCC
Acquisition.
With respect to a second site, located in Tifton, Georgia, CBCC has
been notified by a group of private parties of its potential identification as a
PRP. The notice alleges that CBCC may be liable for contribution with respect to
prior cleanup costs incurred by third parties at this site and may be required
to participate in funding future cleanup costs at this site. The Company
believes that CBCC has had no contact with the site and has no knowledge as to
what, if any, share of response costs would be allocated to CBCC if it is
determined that CBCC or Old Chase had any contact with this site. BP has been
notified and has assumed the defense of this matter.
With respect to the third and fourth sites, in March 1998 CBCC received
a notice from the EPA of its potential identification as a PRP at two related
sites, one in Kansas City, Kansas, and one in Kansas City, Missouri. According
to the notice, the sites were operated by waste disposal companies from 1982
until 1987, during which time over 1,500 parties sent materials containing
polychlorinated biphenyls ("PCB's") to the site. Based on information provided
with the notice, the Company believes that the brass rod division of Old Chase
may have generated waste materials that were treated and/or disposed of at these
sites. According to the notice, a group of PRP's at the sites are performing an
analysis to evaluate and compare different cleanup alternatives at these sites,
and the EPA is planning to conduct removal activities at both facilities. As
noted above, the alleged activities with respect to these sites occurred between
1982 and 1987 and, therefore, CBCC has had no contact with these sites. The
notice does not provide, and CBCC has no knowledge of, the anticipated cleanup
costs at these sites or the portion, if any, of liability for such costs that
may be allocated based on materials of Old Chase that may have been treated
and/or disposed of at theses sites. BP has been notified and has agreed to
assume the defense of this matter.
The additional site, located in Mifflin County, Pennsylvania, was
placed on the United States Environmental Protection Agency's (the "EPA")
National Priorities List in 1989. While CBCC has not received any formal
notification from the EPA or any third party, the Company believes that Old
Chase has been identified by the EPA as a PRP. To the Company's knowledge,
however, neither CBCC nor the brass rod division of Old Chase directly disposed
of hazardous wastes at this site. Nevertheless, BP has been notified by the
Company of CBCC's (or Old Chase's) apparent identification as a PRP and BP's
responsibility for any liability associated with this site as it relates to
periods prior to the date of the CBCC Acquisition. Based on information
available to the Company, it appears that if CBCC or Old Chase were determined
to be liable, liability would be allocated on the basis of 0.5828% of cleanup
costs (or approximately $376,000).
9
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CHASE INDUSTRIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
The Company believes that CBCC has no liability for the cleanup costs
related to these sites because (a) such liability is attributable to an entity
that had the same or similar name to that of CBCC, such as a division or
subsidiary of BP (other than the brass rod division of Old Chase), or (b) such
liability arose from acts that occurred prior to the CBCC Acquisition and,
therefore, BP retained such liability under the CBCC Purchase Agreement and is
contractually obligated to indemnify the Company for such liabilities. To the
extent CBCC incurs any cleanup costs with respect to these sites, it intends to
enforce its rights under the CBCC Purchase Agreement to recover such amounts
from BP.
Preliminary studies conducted immediately prior to the CBCC Acquisition
indicated that the site upon which CBCC's manufacturing facility is located has
been contaminated with certain volatile organic compounds, including
trichlorethylene, as well as total petroleum hydrocarbons and certain metals
from historical operating practices. BP conducted initial site investigation
activities in an effort to determine the extent of contamination and appropriate
cleanup methods. After reviewing the results of that investigation, CBCC
determined that additional sampling was necessary to more fully delineate the
extent and magnitude of contamination and to identify appropriate cleanup
standards. In October 1997, CBCC initiated additional sampling that it believes
is necessary to establish appropriate cleanup standards and to identify
available remedial methods and potential regulatory constraints related to
specific remedial methodologies. The results of the initial sampling conducted
by BP, the additional sampling conducted by CBCC, and input from the Ohio EPA
will be used to develop a comprehensive remediation plan for the site. The
investigation is being conducted on a voluntary basis with the concurrence of
the Ohio EPA.
Because the site investigatory activities related to CBCC's facility
are not yet complete, the Company presently is unable to estimate with any
degree of certainty the extent of contamination or the amount of site cleanup
costs associated therewith, although such costs may be material. Therefore, to
the extent CBCC is required to fund cleanup costs related to the remediation of
contamination at its manufacturing facility as a result of BP's refusal to
implement remediation activities acceptable to CBCC, such costs could have a
material adverse effect on the Company's financial condition and results of
operations pending the recovery of such amounts from BP. However, because BP has
acknowledged its contractual obligation to fund certain investigatory and
cleanup activities related to site contamination attributable to Old Chase's
operations, the probability that CBCC would be required to make material
expenditures related to site cleanup appears to be remote. Accordingly, no
reserves have been established regarding the aforementioned matters.
Additionally, the Company expects no material impact on its financial position,
results of operations or liquidity as a result of the existence of any other
environmental conditions related to CBCC.
To the extent CBCC incurs cleanup costs with respect to CBCC's site, it
intends to enforce its rights under the CBCC Purchase Agreement and/or
Remediation Agreement to recover such amounts from BP. In the event the Company
is entitled to
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CHASE INDUSTRIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
recovery from BP pursuant to the Remediation Agreement, the CBCC Purchase
Agreement, or otherwise, but is unable to collect such amounts from BP, the
Company may elect to offset the amounts of such recoveries against amounts
payable under the $20 million promissory note issued to BP as part of the CBCC
Acquisition (the "BP Note") to the extent it legally is entitled to do so.
On January 7, 1998, a lawsuit entitled Ken-Chas Reserve Company and BP
Exploration (Alaska) Inc. and The Standard Oil Company v. Chase Industries Inc.
and Chase Brass & Copper Company, Inc. was filed in the Court of Common Pleas in
Cuyahoga County, Ohio (the "Petition"). In the Petition, Plaintiffs seek
declaratory judgement regarding the calculation of interest payable under the BP
Note, and the recovery of interest amounts previously becoming due and payable
under the BP Note which the Company offset against the receivable from BP.
Plaintiffs also have asserted that, as a result of the Company's failure to pay
interest previously due and payable under the BP Note, the Company is in default
under the BP Note and seek recovery of the $20 million principal amount of the
BP Note. The Company disputes the allegations set forth in the Petition and
believes that, even if plaintiffs were to prevail in their positions as set
forth the Petition, the Company believes that it would be able to pay amounts
due, including the principal amount of the BP Note, utilizing cash on hand,
offsets of amounts owing from Old Chase and BP, and, if necessary, borrowings
obtained under the Company's existing bank credit facility. Therefore, the
Company continues to classify the BP Note as long-term.
Leavitt. Prior to the closing of the Leavitt Acquisition, five
underground storage tanks ("USTs") were removed from Leavitt's facility in
Hammond, Indiana. Prior to removal, one or more of the USTs released petroleum
and other chemical constituents into the environment. Some contamination of
groundwater and soil at the Hammond facility remains in place. Prior to the
Leavitt Acquisition, Old Leavitt had conducted sampling and had requested the
Indiana Department of Environmental Management ("IDEM") to close the UST removal
project. The IDEM has not yet issued a "closure" letter and, in February 1997,
notified Leavitt that additional groundwater sampling will be required prior to
the IDEM considering closure. Additional groundwater sampling was conducted in
fourth quarter 1997, and the test results were submitted to the IDEM for review.
Based on these test results, which indicated the presence in the groundwater of
certain contaminants in excess of currently permissible levels in Indiana, the
IDEM has not agreed to issue a "closure" letter.
Pending further direction from the IDEM, the Company currently is
unable to determine what, if any, remedial activities may be required at the
Hammond facility. Although the cleanup costs associated with the environmental
conditions at the Hammond facility could be material, based on the results of
the 1997 sampling the probability that Leavitt would be required to make
material expenditures relating to site cleanup at the Hammond facility appears
to be remote. Therefore, the Company has not made any specific accrual for costs
related to investigation or cleanup at the Hammond facility. To the extent the
Company or Leavitt incurs a liability with respect to site cleanup at the
Hammond facility, UNR Industries, Inc., is obligated under the
11
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CHASE INDUSTRIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Leavitt Acquisition Agreement to indemnify Leavitt for 90% of losses related to
certain environmental conditions, including costs incurred with respect to
contaminants released at Leavitt's properties (including the Hammond facility)
prior to the Leavitt Acquisition, to the extent such losses exceed $400,000 in
the aggregate. In addition, to the extent the contamination at the Hammond
facility is attributed to actions of prior owners, the Company may be entitled
to recover from prior owners costs incurred by the Company at the Hammond site.
The Hammond operations were relocated to Chicago in September 1997, and no
manufacturing activities currently are conducted at the Hammond location.
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CHASE INDUSTRIES INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
GENERAL
The Company, through its wholly owned subsidiaries CBCC and Leavitt, is
a leading manufacturer of free- machining and forging brass rod and structural
and mechanical steel tubing. Chase Industries Inc. is traded on the New York
Stock Exchange under the symbol CSI. Visit our home pages on the world wide web
at www.chasebrass.com and www.leavitt-tube.com.
STOCK SPLIT
The Company's Board of Directors has declared a three-for-two stock
split for shareholders of record as of June 6, 1998. The stock split is subject
to shareholder approval of an increase in the Company's authorized shares at the
Company's annual meeting of shareholders to be held May 26, 1998. If shareholder
approval is obtained, the Company's issued shares will increase from
approximately 10 million to approximately 15 million shares. Fractional shares
resulting from the stock split will be paid in cash, without interest, in an
amount equal to one-third the closing sale price per share of the common stock
as reported on the New York Stock Exchange on June 6, 1998. The mail date for
new stock certificates and the payment date for fractional shares will be June
26, 1998. If the shareholders do not approve the increase in authorized shares
at the annual meeting, the stock split will not occur.
CBCC
CBCC is an ISO 9002 certified manufacturer and supplier of
free-machining and forging brass rod in the United States and Canada. CBCC's net
sales represent gross sales of brass rod less sales discounts and freight
charges. The gross sales price of brass rod consists of a metal price charged to
customers and a fabrication price as separate components. Cost of goods sold
includes the cost of brass scrap, which is the principal raw material used in
the manufacturing process and the primary component of cost of goods sold, as
well as the costs of labor, energy and other materials and supplies used in
fabricating the brass scrap into finished rod. Therefore, CBCC's profit levels
depend primarily on the amount of finished rod shipped, fabrication prices, and
the difference between the metal price charged to customers and CBCC's cost of
brass scrap.
The principal raw material used in CBCC's manufacturing process is
brass scrap, approximately 80% of which is obtained from customers and 20% of
which is purchased from scrap dealers at prevailing free-market prices.
Free-market prices of brass scrap fluctuate based on the supply of and demand
for brass scrap and the price for copper and zinc (the major components of
brass), and generally are less than the price at which brass scrap is purchased
from customers ("Metal Buying Price").
CBCC's pricing structure consists of a metal selling price and a
fabrication price as separate components. The metal price charged to customers
("Metal Selling Price")
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CHASE INDUSTRIES INC.
is determined at the time of shipment based on the then-current Metal Buying
Price and is not directly affected by fluctuations in free-market brass scrap
prices. As a result of this pricing structure, increases and decreases in the
Metal Selling Price will affect net sales levels and gross profit as a
percentage of sales, even in the absence of an increase or decrease in shipments
or the fabrication prices charged to customers, but will have little impact on
the Company's gross profit levels. However, the quantity of free-market brass
scrap purchased by CBCC and changes in the difference between the free-market
prices paid for brass scrap and the Metal Buying Price will affect the Company's
gross profit, even in the absence of an increase or a decrease in shipments or
net sales levels.
In addition to sales made under the pricing structure described above,
some sales are made on a tolling basis. In a tolling arrangement, the customer
consigns brass scrap to CBCC and is charged a fabrication price for processing
the brass scrap into finished rod. Tolling transactions reduce the Company's net
sales by the Metal Selling Price that otherwise would be charged to the customer
in a sale of finished brass rod and cost of goods sold by the Metal Buying Price
that otherwise would be paid to the customer. To a lesser extent, tolling
transactions also affect the Company's gross profit to the extent CBCC is unable
to take advantage of the pricing differential on brass scrap purchased and sold.
To partially offset the effect of tolling transactions on the Company's gross
profit, CBCC requires tolling customers to deliver 1.04 pounds of brass scrap in
exchange for each pound of finished rod shipped.
LEAVITT
Leavitt is a leading producer of structural and mechanical electric
resistance welded steel tubing in square, rectangular and round shapes in sizes
ranging from 1/2 inch to 10 inch squares and equivalent rectangles and 3/8 inch
to 12 3/4 inches in outer diameter for round sizes. Leavitt's financial
performance may be impacted by changes in the price it pays for flat-rolled
steel, the primary cost component of Leavitt's finished product, which is based
on the market conditions in the flat-rolled steel industry. Based on the
then-current market conditions in the steel tubing industry, Leavitt may or may
not pass the economic impact of steel price changes on to its customers through
changes in the selling price.
RESULTS OF OPERATIONS
Three Months Ended March 31, 1998, Compared with Three Months Ended March 31,
1997
Net sales decreased $959,000, or 1%, to $125.1 million in 1998. This
decline was due to a 10% reduction in the brass rod Metal Selling Price. Demand
remains strong for brass rod and steel tubing, and the Company experienced
record shipments in first quarter 1998. The brass rod market was driven by
ongoing strength in the industry's largest end use market, construction and
remodeling, as record new housing starts spur sales of plumbing fittings and
fixtures. The steel tubing business continues to see growth in sales of
structural steel tubing thanks in part to an industry wide marketing campaign
emphasizing its advantages over alternative materials.
14
<PAGE> 15
CHASE INDUSTRIES INC.
As a result of the above factors, gross profit increased 325,000, or
2%, to $18.5 million in first quarter 1998 compared with 1997, despite
production interruptions from the integration of the new billet heaters and
lower contributions from reduced free-market brass scrap purchases.
Selling, general and administrative expenses decreased $252,000, or 7%,
to $3.6 million and depreciation and amortization increased $192,000, or 8%, to
$2.6 million in first quarter 1998.
As a result of the above factors, operating income increased $385,000,
or 3%, to $12.2 million in first quarter 1998 compared with 1997.
Net interest expense decreased $301,000, or 23%, to $981,000 in first
quarter 1998, primarily as a result of prepayments of Leavitt Acquisition debt.
Based on the above factors, net income increased $425,000, or 6%, to
$7.0 million. Basic earnings per share increased to $.69 in first quarter 1998
compared with $.65 in first quarter 1997. Diluted earnings per share was $.67 in
first quarter 1998 compared with $.64 in first quarter 1997.
LIQUIDITY AND CAPITAL RESOURCES
General
At March 31, 1998, cash and cash equivalents totaled $3.8 million
compared with $924,000 at year end 1997. Total debt at March 31, 1998, was $46.6
million compared with $48.2 million at year end 1997. All Leavitt Acquisition
debt payments originally due through July 2000 had been prepaid as of March 31,
1998.
Working Capital
At March 31, 1998, working capital was $67.3 million, a $7.3 million,
or 12%, increase from $60.0 million at December 31, 1997.
At March 31, 1998, the increase in working capital predominantly
resulted from a $2.8 million increase in cash and cash equivalents, a $5.1
million, or 12%, increase in accounts receivable, and a $6.4 million, or 17%,
decrease in accounts payable, partially offset by a $4.0 million, or 6%,
decrease in inventories, and a $3.3 million increase in accrued liabilities.
The increase in accounts receivable and the decline in inventories was
due principally to an increase of $7.4 million, or 21%, in net sales in March
1998 compared with December 1997. The Company's shipments typically are lower in
December due to customer shutdowns.
The Company's current ratio was 2.42 at March 31, 1998, compared to
2.19 at December 31, 1997.
Cash Flow Provided by Operating Activities
15
<PAGE> 16
CHASE INDUSTRIES INC.
For the three months ended March 31, 1998, net cash provided by
operating activities was $5.9 million, which included net income of $7.0 million
and depreciation and amortization of $2.6 million, partially offset by an
increase in working capital, excluding cash, debt and deferred taxes, of $4.4
million.
For the three months ended March 31, 1997, net cash provided by
operating activities was $984,000, which included net income of $6.6 million and
depreciation and amortization of $2.4 million, partially offset by an increase
in working capital, excluding cash, debt and deferred income taxes, of $8.7
million.
Cash Flow Used in Investing Activities
Capital expenditures were $3.8 million for the three months ended March
31, 1998, and $1.3 million for the three months ended March 31, 1997.
Cash Flow Used in Financing Activities
Cash provided by financing activities of $814,000 for the three months
ended March 31, 1998, consisted of proceeds of $2 million received in
conjunction with the lease of billet heating equipment and $468,000 from the
issuance of common stock for stock options exercised, partially offset by net
repayments of long-term debt of $1.7 million. Financing activities during the
three months ended March 31, 1997, included net repayments of long-term debt of
$6.2 million partially offset by $343,000 from the issuance of common stock for
stock options exercised.
Capital Resources
In 1996, the Company launched a capital project referred to as "Project
400." The project includes potential expansion of CBCC's foundry, extrusion
system and finishing capability with an ultimate goal of increasing finished
brass rod shipments to approximately 400 million pounds annually, a one-third
increase over current production levels. The first phase of the project included
the installation of three new billet heaters in fourth quarter 1997 which were
fully operational by the end of first quarter 1998. It is anticipated that
capital projects will be paid for with cash flow provided by operating
activities.
Bank Credit Facility
In connection with the Leavitt Acquisition in August 1996, the Company
entered into a new credit facility (the "Bank Credit Facility") of $100 million
agented by PNC Bank, National Association. The Bank Credit Facility replaced the
Company's existing $33 million bank credit facility, and includes a $60 million
term loan ("Term Loan") and a $40 million revolving credit facility ("Revolving
Credit Facility"). The Company prepaid $30 million on the Term Loan in 1997 and
$10 million in 1996, including all amounts originally due through July 2000. The
remaining balance on the Term Loan is payable in quarterly installments in
amounts ranging from $475,000 in October 2000 to $1,525,000 due October 2002.
The total borrowing capacity under the Revolving Credit Facility is determined
monthly by a formula based on levels of inventory and
16
<PAGE> 17
CHASE INDUSTRIES INC.
accounts receivable, up to a maximum of $40 million. The Revolving Credit
Facility commitment expires August 30, 2001, and the Company can request a
one-year extension of the expiration date at any time.
Effective June 16, 1997, the Company and PNC Bank agreed to an
amendment to the Bank Credit facility which reduced the Company's LIBOR spread
and provided a Federal funds interest rate option for the Revolving Credit
Facility. Advances under the Bank Credit Facility will bear interest at
alternative variable rates based on certain percentages, as provided in the
agreement, in excess of the lending bank's prime rate, the Federal funds rate or
LIBOR, with interest payable quarterly or as of the end of each LIBOR borrowing
period, whichever is shorter.
The Bank Credit Facility contains certain covenants that, among other
things, limit the Company's ability to incur additional debt, make capital
expenditures or pay dividends. The covenants also require the Company to
maintain a minimum interest coverage ratio and level of net worth and restrict
the Company from exceeding a maximum ratio of debt to cash flow from operations.
The Bank Credit Facility also requires the Company to maintain CBCC and Leavitt
as wholly-owned subsidiaries.
As of March 31, 1998, $20 million was outstanding under the Term Loan
and $6.0 million was outstanding under the Revolving Credit Facility. Total
availability under the Revolving Credit Facility was $34.0 million.
BP Note
In connection with the CBCC Acquisition, the Company issued a
promissory note to Old Chase in the original principal amount of $20.0 million
(the "BP Note"). The BP Note was recorded at the CBCC Acquisition date at a
discount using a 10.4% effective interest rate. The BP Note initially was
scheduled to mature in August 1996, and the Company, at its option, extended the
maturity date to August 1999, with interest payable annually from August 1996
through maturity at 9.28%. The BP Note contained a contingent interest payment
based upon average Company earnings (as defined in the BP Note) for the years
ended December 31, 1990 through 1995. The contingent interest, totalling
$254,000 and due August 1996, and the annual interest of $1,856,000 due August
1997, were offset against the receivable from BP. See Note 4 of Notes to
Consolidated Financial Statements and Part II. Item 1. Legal Proceedings.
CONTINGENCIES - ENVIRONMENTAL MATTERS
As discussed in Note 4 of Notes to Consolidated Financial Statements,
each of CBCC and Leavitt are subject to certain contingent liabilities relating
to environmental conditions at their respective facilities. Because
investigatory activities with respect to such environmental conditions have not
been completed, the Company currently is unable to estimate with any degree of
certainty the extent of contamination or the amount of cleanup costs associated
therewith. However, the cleanup costs associated with these environmental
conditions may be material and, in the event CBCC or Leavitt, as applicable,
were determined to be solely responsible or liable for site cleanup activities
(due to the inability or unwillingness of other responsible parties to perform
17
<PAGE> 18
CHASE INDUSTRIES INC.
or pay for such activities), such expenditures could have a material adverse
effect on the Company's earnings and financial condition. Notwithstanding this
potential (although uncertain) material liability, because of the contractual
obligations of third parties with respect to such environmental conditions, the
Company does not believe that it will be required to make material expenditures
with respect to these environmental conditions or that the cleanup costs or
other liabilities associated with such conditions will have a material adverse
effect on the Company's financial condition, results of operations or liquidity.
On the bases stated above, the Company has not made any related accrual of all
or any part of such costs.
CONTINGENCIES - LEGAL PROCEEDINGS
As discussed in Item 1. Legal Proceedings of Part II, the Company and
CBCC are defendants in a lawsuit regarding amounts payable under the BP Note. As
discussed therein, the Company disputes the allegations made in the lawsuit, but
believes that, even if the plaintiffs were to prevail in their positions, the
Company believes that it would be able to pay amounts due, including the
principal amount of the BP Note, utilizing cash on hand, offsets of amounts
owing from Old Chase and BP, and, if necessary, borrowings obtained under the
Company's existing Bank Credit Facility. Therefore, the Company continues to
classify the BP Note as long-term, and believes that judgement against the
Company and CBCC would not have a material adverse effect on the Company's
financial condition, results of operations or liquidity.
SAFE HARBOR
Management uses estimates and assumptions in discussing future
operations of the Company and conditions in the industries in which it operates.
Such forecasts made by the Company are forward looking and are subject to risks
and uncertainties which could cause actual results to differ materially from
historical results or those anticipated. Actual results will be affected by
general economic and industry conditions in the end-use markets for the
Company's products, as well as the impact of competitive products and pricing.
Foreign economic activity and the relationship of the U.S. dollar to other
currencies also affect import levels and exports of U.S. manufactured products
containing parts made from brass rod and steel tubing. The Company's shipments
also will be affected by its ability to maintain manufacturing operations at its
current levels without significant interruption.
18
<PAGE> 19
CHASE INDUSTRIES INC.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
On January 7, 1998, a lawsuit entitled Ken-Chas Reserve Company and BP
Exploration (Alaska) Inc. and The Standard Oil Company v. Chase Industries Inc.
and Chase Brass & Copper Company, Inc. was filed in the Court of Common Pleas in
Cuyahoga County, Ohio (the "Petition"). In the Petition, Plaintiffs seek
declaratory judgement regarding the calculation of interest payable under the BP
Note. Under the BP Note, a contingent interest payment was payable August 24,
1996, calculated pursuant to a formula based on the Company's "EBDIT" (defined
in the BP Note as earnings before depreciation, interest and taxes, as
determined in accordance with GAAP) for years 1990 through 1995. In calculating
the interest payable August 24, 1996, the Company followed the express terms of
the BP Note and, accordingly, deducted amortization from earnings for the
purposes of the interest calculation. In calculating the interest payable on
August 24, 1996, in accordance with the express terms of the BP Note, the
interest payable was $254,748, which the Company offset against the receivable
from BP. Plaintiffs allege that, notwithstanding the express terms of the BP
Note, the term "EBDIT" should be interpreted to refer to earnings before
depreciation, interest, taxes and amortization and, based on such
interpretation, allege that the contingent interest payable under the BP Note in
August 1996 should have been $5,833,811.
In addition, under the BP Note, interest is payable August 24 of each
year from and after August 24, 1996, until the BP Note matures on August 24,
1999. The interest due and payable August 24, 1997, was $1,856,000, which amount
the Company also offset against the receivable from BP. Plaintiffs also seek
money judgement against the Company for payment of the $1,856,000 in interest
that was payable as of August 24, 1997.
By letter dated March 23, 1998, Old Chase asserted that, as a result of
failing to pay the interest as described in the Petition, the Company was in
default under the BP Note and, on such basis, Old Chase gave written notice of
acceleration of the BP Note. Plaintiffs subsequently have amended the Petition
seeking an additional judgement in the principal amount of $20 million (the
original and currently outstanding principal amount of the BP Note.)
The Company disputes the allegations made by the Plaintiffs regarding
the interpretation of EBDIT, believes that the Company properly offset the
interest amounts payable in August 1996 and 1997 against the receivable from BP,
and believes this lawsuit is without merit. On the same basis, the Company
disputes that a default exists under the BP Note. In the event plaintiffs were
to prevail in their positions, the Company believes that it would be able to pay
amounts due, including the principal amount of the BP Note, utilizing cash on
hand, offsets of amounts owing from Old Chase and BP, and, if necessary,
borrowings obtained under its existing Bank Credit Facility and, therefore,
judgement against the Company and CBCC would not have a
19
<PAGE> 20
CHASE INDUSTRIES INC.CHASE INDUSTRIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
material adverse effect on the Company's financial condition, results of
operations or liquidity.
<TABLE>
<CAPTION>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a. EXHIBITS
<S> <C> <C>
3.1 -- Restated Certificate of Incorporation of Chase Brass Industries, Inc., a Delaware
corporation (incorporated by reference to Exhibit 4.1 to the Company's Registration
Statement on Form S-8 dated December 9, 1994, Registration No. 33-87278), as
amended by the Certificate of First Amendment to the Company's Restated Certificate
of Incorporation (incorporated by reference to Exhibit 3.2 to the Company's Current
Report on Form 8-K dated May 14, 1997).
3.2 -- By-Laws of the Company (incorporated by reference to Exhibit 3.2 to the Company's
Registration Statement on Form S-1 as filed with the Securities and Exchange
Commission on November 3, 1994, Registration No. 33-83178).
4.1 -- Specimen Common Stock Certificate (incorporated by reference to Exhibit 4.1 to the
Company's Registration Statement on Form S-1 as filed with the Securities and
Exchange Commission on November 3, 1994, Registration No. 33-83178).
4.2 -- Exchange Agreement dated November 4, 1994, between the Company and Citicorp Venture
Capital Ltd. ("CVC") (incorporated by reference to Exhibit 4.4 to the Company's
Registration Statement on Form S-8 dated December 9, 1994, Registration No.
33-87278).
4.3 -- Voting Agreement dated November 4, 1994, between the Company, CVC and Martin V.
Alonzo ("Mr. Alonzo") (incorporated by reference to Exhibit 4.5 to the Company's
Registration Statement on Form S-8 dated December 9, 1994, Registration No.
33-87278).
10.1 -- Lease Supplement No. 2 dated as of February 2, 1998, between ABN Amro Bank N.V., as
Lessor, and CBCC, as Lessee, supplementing the Master Lease dated as of December
23, 1997, between ABN Amro Bank N.V., as
</TABLE>
20
<PAGE> 21
CHASE INDUSTRIES INC.
<TABLE>
<S> <C>
Lessor, and CBCC, as Lessee, regarding the lease of equipment at CBCC's Montpelier,
Ohio, facility, filed as Exhibit 10.19 to the Company's Annual Report on Form 10-K
for the year ended December 31, 1997 (incorporated by reference to Exhibit 10.21 to
the Company's Annual Report on Form 10-K for the year ended December 31, 1997).
+27 -- Financial Data Schedules (EDGAR filing only).
</TABLE>
- ----------
+ Filed herewith
(b) REPORTS ON FORM 8-K
No Current Report on Form 8-K was filed by the Company during
the first quarter of 1998.
21
<PAGE> 22
CHASE INDUSTRIES INC.
S I G N A T U R E
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 hereto duly authorized.
CHASE INDUSTRIES INC.
Date: April 30, 1998 By: /s/ MICHAEL T. SEGRAVES
-----------------------------
Michael T. Segraves
Vice President
Chief Financial Officer
(duly authorized officer and
Principal Financial Officer)
22
<PAGE> 23
CHASE INDUSTRIES INC.
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit Sequentially
No. Description of Exhibits Numbered Page
- ------- ----------------------- -------------
<S> <C> <C> <C>
3.1 -- Restated Certificate of Incorporation of Chase Brass Industries, Inc., a Delaware
corporation (incorporated by reference to Exhibit 4.1 to the Company's Registration
Statement on Form S-8 dated December 9, 1994, Registration No. 33-87278), as amended
by the Certificate of First Amendment to the Company's Restated Certificate of
Incorporation (incorporated by reference to Exhibit 3.2 to the Company's Current
Report on Form 8-K dated May 14, 1997).
3.2 -- By-Laws of the Company (incorporated by reference to Exhibit 3.2 to the Company's
Registration Statement on Form S-1 as filed with the Securities and Exchange
Commission on November 3, 1994, Registration No. 33-83178).
4.1 -- Specimen Common Stock Certificate (incorporated by reference to Exhibit 4.1 to the
Company's Registration Statement on Form S-1 as filed with the Securities and
Exchange Commission on November 3, 1994, Registration No. 33-83178).
4.2 -- Exchange Agreement dated November 4, 1994, between the Company and Citicorp Venture
Capital Ltd. ("CVC") (incorporated by reference to Exhibit 4.4 to the Company's
Registration Statement on Form S-8 dated December 9, 1994, Registration No.
33-87278).
4.3 -- Voting Agreement dated November 4, 1994, between the Company, CVC and Martin V.
Alonzo ("Mr. Alonzo") (incorporated by reference to Exhibit 4.5 to the Company's
Registration Statement on Form S-8 dated December 9, 1994, Registration No.
33-87278).
10.1 -- Lease Supplement No. 2 dated as of February 2, 1998, between ABN Amro Bank N.V., as
Lessor, and CBCC, as Lessee, supplementing the Master Lease dated as of December
23, 1997, between ABN Amro Bank N.V., as Lessor, and CBCC, as Lessee, regarding the
lease of equipment at CBCC's Montpelier, Ohio, facility, filed as Exhibit 10.19 to
the Company's Annual Report on Form 10-K for the year ended December 31, 1997
(incorporated by reference to Exhibit 10.21 to the Company's Annual Report on Form
10-K for the year ended December 31, 1997).
+27 -- Financial Data Schedules (EDGAR filing only).
</TABLE>
- ----------
+ Filed herewith
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000928950
<NAME> CHASE INDUSTRIES, INC.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<CASH> 3,806
<SECURITIES> 0
<RECEIVABLES> 47,498
<ALLOWANCES> 1,304
<INVENTORY> 59,640
<CURRENT-ASSETS> 114,596
<PP&E> 93,532
<DEPRECIATION> 0
<TOTAL-ASSETS> 212,554
<CURRENT-LIABILITIES> 47,302
<BONDS> 0
0
0
<COMMON> 101
<OTHER-SE> 106,059
<TOTAL-LIABILITY-AND-EQUITY> 212,554
<SALES> 125,118
<TOTAL-REVENUES> 125,118
<CGS> 106,641
<TOTAL-COSTS> 106,641
<OTHER-EXPENSES> 6,239
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 981
<INCOME-PRETAX> 11,257
<INCOME-TAX> 4,278
<INCOME-CONTINUING> 6,979
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 6,979
<EPS-PRIMARY> .69
<EPS-DILUTED> .67
</TABLE>
