SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 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 April 2, 1995
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Commission file number 1-7349
BALL CORPORATION
State of Indiana 35-0160610
345 South High Street, P.O. Box 2407
Muncie, IN 47307-0407
317/747-6100
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 [ ]
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
Class Outstanding at April 30, 1995
------------------- -----------------------------
Common Stock,
without par value 30,150,874 shares
<PAGE>
Ball Corporation and Subsidiaries
QUARTERLY REPORT ON FORM 10-Q
For the period ended April 2, 1995
INDEX
Page Number
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PART I. FINANCIAL INFORMATION:
Item 1. Financial Statements
Unaudited Condensed Consolidated Statement of Income
for the three month periods ended April 2, 1995
and April 3, 1994 3
Unaudited Condensed Consolidated Balance Sheet at
April 2, 1995, and December 31, 1994 4
Unaudited Condensed Consolidated Statement of Cash
Flows for the three month periods ended April 2,
1995, and April 3, 1994 5
Notes to Unaudited Condensed Consolidated Financial
Statements 6 - 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 8 - 10
PART II. OTHER INFORMATION 11
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
<TABLE>
Ball Corporation and Subsidiaries
UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF INCOME
(Millions of dollars except per share amounts)
<CAPTION>
Three months ended
------------------
April 2, April 3,
1995 1994
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<S> <C> <C>
Net sales $605.6 $587.1
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Costs and expenses
Cost of sales 535.5 531.1
General and administrative expenses 23.9 21.4
Selling and product development expenses 7.4 6.2
Net gain on dispositions of businesses (3.8) --
Interest expense 9.6 10.4
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572.6 569.1
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Income before taxes on income, minority interests and equity in
earnings of affiliates 33.0 18.0
Provision for taxes on income (12.2) (6.5)
Minority interests (1.4) (1.3)
Equity in earnings of affiliates 0.2 0.3
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Net income 19.6 10.5
Preferred dividends, net of tax benefit (0.8) (0.8)
------- -------
Earnings attributable to common shareholders $ 18.8 $ 9.7
======= =======
Earnings per share of common stock $ 0.63 $ 0.33
======= =======
Fully diluted earnings per share $ 0.59 $ 0.31
======= =======
Cash dividends declared per common share $ 0.15 $ 0.15
======= =======
</TABLE>
See accompanying notes to unaudited condensed consolidated financial statements.
<PAGE>
<TABLE>
Ball Corporation and Subsidiaries
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEET
(Millions of dollars)
<CAPTION>
April 2, December 31,
1995 1994
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<S> <C> <C>
ASSETS
Current assets
Cash and temporary investments $ 8.1 $ 10.4
Accounts receivable, net 236.2 204.5
Inventories
Raw materials and supplies 108.4 132.3
Work in process and finished goods 389.3 281.7
Deferred income tax benefits and prepaid expenses 61.2 69.2
--------- ---------
Total current assets 803.2 698.1
--------- ---------
Property, plant and equipment, at cost 1,508.2 1,486.0
Accumulated depreciation (718.5) (706.1)
--------- ---------
789.7 779.9
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Goodwill and other intangibles, net 93.2 93.8
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Other assets 200.3 188.0
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$1,886.4 $1,759.8
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Short-term debt and current portion of long-term debt $ 196.1 $ 116.7
Accounts payable 240.6 209.2
Salaries, wages and accrued employee benefits 94.8 110.5
Other current liabilities 79.4 63.3
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Total current liabilities 610.9 499.7
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Noncurrent liabilities
Long-term debt 371.9 377.0
Deferred income taxes 54.2 56.6
Employee benefit obligations, restructuring and other 193.4 193.7
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Total noncurrent liabilities 619.5 627.3
--------- ---------
Contingencies
Minority interests 28.0 16.1
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Shareholders' equity
Series B ESOP Convertible Preferred Stock 66.4 67.2
Unearned compensation - ESOP (55.4) (55.3)
--------- ---------
Preferred shareholder's equity 11.0 11.9
--------- ---------
Common stock (issued 31,426,105 shares - 1995;
31,034,338 shares - 1994) 272.0 261.3
Retained earnings 390.4 378.6
Treasury stock, at cost (1,480,178 shares - 1995;
1,166,878 shares - 1994) (45.4) (35.1)
--------- ---------
Common shareholders' equity 617.0 604.8
--------- ---------
$1,886.4 $1,759.8
========= =========
</TABLE>
See accompanying notes to unaudited condensed consolidated financial statements.
<PAGE>
<TABLE>
Ball Corporation and Subsidiaries
UNAUDITED CONDENSED CONSOLIDATED
STATEMENT OF CASH FLOWS
(Millions of dollars)
<CAPTION>
Three months ended
------------------
April 2, April 3,
1995 1994
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<S> <C> <C>
Cash flows from operating activities
Net income $ 19.6 $ 10.5
Reconciliation of net income to net cash used in operating activities:
Net provision (payment) for restructuring and other charges 3.4 (2.4)
Depreciation and amortization 32.0 30.5
Other, net (16.4) 5.2
Changes in working capital components (86.2) (78.7)
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Net cash used in operating activities (47.6) (34.9)
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Cash flows from financing activities
Net change in long-term debt (2.4) (7.0)
Net change in short-term debt 70.6 66.6
Common dividends (4.5) (4.4)
Net proceeds from issuance of common stock under various employee and
shareholder plans 10.3 5.0
Acquisitions of treasury stock (10.3) (1.4)
Other, net (0.3) (0.2)
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Net cash provided by financing activities 63.4 58.6
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Cash flows from investing activities
Additions to property, plant and equipment (34.6) (23.9)
Net proceeds from dispositions of businesses 14.5 --
Other, net 2.0 1.6
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Net cash used in investing activities (18.1) (22.3)
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Net (decrease) increase in cash (2.3) 1.4
Cash and temporary investments:
Beginning of period 10.4 8.2
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End of period $ 8.1 $ 9.6
======= =======
</TABLE>
See accompanying notes to unaudited condensed consolidated financial statements.
<PAGE>
Ball Corporation and Subsidiaries
April 2, 1995
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. General.
The accompanying unaudited condensed consolidated financial statements have been
prepared by the company without audit. Certain information and footnote
disclosures, including significant accounting policies, normally included in
financial statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted. However, the company believes that
the financial statements reflect all adjustments which are necessary for a fair
statement of the results for the interim period. Results of operations for the
periods shown are not necessarily indicative of results for the year,
particularly in view of some seasonality in packaging operations. It is
suggested that these unaudited condensed consolidated financial statements and
accompanying notes be read in conjunction with the consolidated financial
statements and the notes thereto included in the company's latest annual report.
2. Reclassifications.
Certain prior year amounts have been reclassified in order to conform with the
1995 presentation.
3. Ball Packaging Products Canada, Inc. (Ball Canada).
Prior to the acquisition on April 19, 1991, of the lenders' position in the term
debt and 100 percent ownership of Ball Canada, the company had owned indirectly
50 percent of Ball Canada through a joint venture holding company owned equally
with Onex Corporation (Onex). The 1988 Joint Venture Agreement had included a
provision under which Onex, beginning in late 1993, could "put" to the company
all of its equity in the holding company at a price based upon the holding
company's fair value. Onex has since claimed that its "put" option entitled it
to a minimum value founded on Onex's original investment of approximately $22.0
million. On December 9, 1993, Onex served notice on the company that Onex was
exercising its alleged right under the Joint Venture Agreement to require the
company to purchase all of the holding company shares owned or controlled by
Onex, directly or indirectly, for an amount including approximately $30.0
million in respect of the Class A-2 Preference Shares owned by Onex in the
holding company.
The company's position is that it has no obligation to purchase any shares from
Onex or to pay Onex any amount for such shares, since, among other things, the
Joint Venture Agreement, which included the "put" option, is terminated. Onex is
now pursuing its claim in arbitration before the International Chamber of
Commerce. A hearing has been set to begin on May 30, 1995. The parties are
currently engaged in discovery. The company believes that it has meritorious
defenses against Onex's claims, although, because of the uncertainties inherent
in the arbitration process, it is unable to predict the outcome of this
arbitration.
<PAGE>
4. Shareholders' Equity.
Issued and outstanding shares of the Series B ESOP Convertible Preferred Stock
(ESOP Preferred) were 1,808,371 shares at April 2, 1995, and 1,827,973 shares at
December 31, 1994.
5. Contingencies.
The Environmental Protection Agency has designated the company as a potentially
responsible party, along with numerous other companies, for the cleanup of
several hazardous waste sites. However, the company's information at this time
does not indicate that these matters will have a material, adverse effect upon
financial condition, results of operations, capital expenditures or competitive
position of the company.
6. Net Gain on Dispositions of Businesses.
The company sold its Efratom time and frequency measurement division to Datum
Inc. on March 17, 1995, for cash of $15.0 million and 1,277,778 shares of Datum
common stock with a value of $14.0 million. In conjunction with the sale of
Efratom, the company recorded an after-tax gain of $7.7 million. This gain was
partially offset by a $4.9 million after-tax charge recorded in the first
quarter of 1995 related to the wind down of the visual image generation systems
business. The April 2, 1995, Statement of Cash Flows excludes the noncash
transaction for the disposition of the Efratom division to Datum Inc.
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Consolidated net sales of $605.6 million for the first quarter of 1995 increased
3.2 percent compared to the first quarter of 1994. The increase in net sales was
due principally to increased sales in the domestic metal beverage container
business and the aerospace and communications business. In addition, sales from
FTB Packaging Ltd., the company's Chinese metal packaging business, were
consolidated for the first time in 1995. Consolidated operating earnings for the
first quarter of 1995 increased to $38.8 million from $28.4 million in the first
quarter of 1994. This increase was primarily due to improved domestic beverage
container, aerospace and communications and Canadian metal packaging results.
Consolidated interest expense for the first quarter of 1995 was $9.6 million
compared to $10.4 million for the first quarter of 1994. The decrease was
attributable to a reduction in the average level of borrowings partially offset
by the impact of higher rates on interest-sensitive borrowings.
Net income increased from $10.5 million for the first quarter of 1994 to $19.6
million for the same period in 1995, while earnings per share increased from 33
cents per share in 1994 to 63 cents per share in 1995. The improved results are
primarily due to the aforementioned factors and include an after-tax gain of
$7.7 million resulting from the sale of the company's Efratom division net of a
$4.9 million after-tax charge related to the wind down of the visual image
generation systems (VIGS) business. In conjunction with the sale of the Efratom
division, the company received cash of $15.0 million as well as 1,277,778 shares
of Datum Inc. common stock valued at $14.0 million. Excluding the effect of the
gain and VIGS charge, earnings per share for 1995 would have been 54 cents, or
64 percent higher than 1994.
Business Segments
Packaging segment net sales represented 86.8 percent of first quarter 1995
consolidated net sales and increased to $525.5 million compared to $523.4
million in the first quarter of 1994. The increase is due primarily to improved
metal beverage container sales and revenues from FTB Packaging Ltd., the
company's Chinese metal packaging business which moved from start-up to
profitable operations in late 1994. Operating earnings improved for the first
quarter of 1995 as a result of improved domestic beverage container results and
improved results in the commercial glass container business.
Within the packaging segment, sales in the metal container business increased
0.7 percent for the three-month period due to higher beverage can selling prices
and international sales from FTB Packaging Ltd. which were consolidated for the
first time in 1995. Sales in the domestic metal beverage container business
increased in 1995 despite lower unit volumes due to increased selling prices.
Operating earnings improved in the metal beverage container business reflecting
strong productivity improvement, continued cost reductions, higher prices for
the sale of aluminum process scrap and increased sales partially offset by the
increased cost of aluminum can sheet. Sales in the Canadian metal beverage
container business decreased reflecting lower unit volumes while earnings
improved compared to 1994. Earnings in the metal food container business
declined for the quarter reflecting lower sales as a result of decreased unit
volumes, lower customer demand and negative pricing pressures. The company has
entered into a new joint venture accord in the Philippines with San Miguel
Corporation and Yamamura Glass Ltd. to build a beverage can and end plant which
should commence operations in 1996. Ball will have a six percent interest in
the new company.
Revenues for the glass business were essentially flat for the first quarter of
1995 compared to the same period in 1994 due to reduced sales to two customers
in 1995 and a decline in units shipped offset by a favorable product sales mix
in 1995. Operating earnings increased for the quarter due to higher plant
utilization and a favorable product sales mix. A price increase was announced
effective March 1, 1995 to offset cost increases for corrugated and solid fiber
paper. A price increase for wine products is to occur June 1, 1995. During the
first quarter of 1994, the company completed six furnace rebuilds which
temporarily idled a portion of the production capacity. The company completed
the rebuild of two glass furnaces during the first quarter of 1995.
The company recently announced its plan to open a plastics plant in southern
California to produce PET (polyethylene terephthalate) plastic containers. The
plastics division's headquarters are in Atlanta, Georgia where a research and
development center is currently under construction.
Sales in the aerospace and communications segment increased 25.7 percent in
1995 compared to 1994. During the first quarter of 1995, the company recorded an
additional $8.0 million pretax charge for estimated costs of winding down the
VIGS business. Excluding this $8.0 million charge, operating results improved
considerably in 1995. This improvement was primarily due to new contracts
awarded in 1994 and cost benefits associated with the company's restructuring
plan. As a result of new contract awards, the work force has been increasing. In
April 1995, the company completed the sale of its Efratom time and frequency
measurement division to Datum Inc. Earthwatch, Inc., the company's new
subsidiary formed in late 1994, merged with WorldView Imaging Corporation during
the first quarter of 1995 to serve the market for satellite-based remote sensing
of the earth. Backlog at the quarter end was approximately $293.0 million
compared to $322.0 million at December 31, 1994, and $274.0 million at the end
of the first quarter of 1994.
RESTRUCTURING AND OTHER RESERVES
In 1993, the company recorded aggregate restructuring and other reserves of
$108.7 million pretax in the third and fourth quarters. The amounts provided
included $52.5 million pretax for asset write-offs and write-downs to net
realizable values and $35.9 million for employee costs and termination benefits
and pension curtailment losses. Charges to the reserves were $19.6 million in
1993 and $30.3 million in 1994. For the three months ended April 2, 1995,
charges to the reserves were $5.6 million. These charges included costs
associated with plant closings of $3.7 million. Also included in the current
year charges are costs related to the disposal of the visual imaging product
line of $1.8 million. In 1994 and 1995, additional reserves of $4.0 million and
$8.0 million, respectively, were recorded related to the VIGS unit.
FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES
Cash used by operations increased from $34.9 million in 1994 to $47.6 million in
1995 reflecting increased working capital partially offset by higher net income
adjusted for noncash transactions, including the gain on the sale of the Efratom
division and the additional charge for VIGS. The current ratio was 1.3 at April
2, 1995, compared to 1.4 at December 31, 1994.
Total debt increased by $74.3 million to $568.0 million at April 2, 1995, from
$493.7 million at December 31, 1994, resulting in an increase in the
debt-to-total capitalization ratio to 46.4 percent at April 2, 1995, from 43.8
percent as of December 31, 1994. The increase is primarily reflected in
short-term borrowings. In September 1993, the company entered into an agreement
to sell, on a revolving basis without recourse, an undivided percentage
ownership interest in a designated pool of up to $75.0 million of packaging
trade accounts receivable. A net amount of $66.5 million of trade receivables
have been sold as of April 2, 1995. Included in general and administrative costs
in 1995 and 1994 is $1.2 million and $0.6 million, respectively, in fees related
to this agreement. As of April 2, 1995, the company had committed revolving
credit facilities of $300.0 million with various banks consisting of a $150.0
million, three-year facility and 364-day facilities which amounted to $150.0
million. Uncommitted credit facilities from various banks of approximately
$425.0 million, of which $96.0 million was outstanding, and a Canadian dollar
commercial paper facility of approximately $85.0 million, of which $30.7 million
was outstanding, also were available.
The company anticipates total 1995 capital spending of approximately $270.0
million including significant amounts for emerging businesses such as domestic
plastics (PET) and metal packaging in China. Spending in existing businesses is
concentrated within the packaging segment in part to complete the conversion of
metal beverage equipment to new industry specifications.
The Environmental Protection Agency has designated the company as a potentially
responsible party, along with numerous other companies, for the cleanup of
several hazardous waste sites. However, the company's information at this time
does not indicate that these matters will have a material, adverse effect upon
financial condition, results of operations, capital expenditures or competitive
position of the company.
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal proceedings
There were no events required to be reported under Item 1 for the quarter ending
April 2, 1995.
Item 2. Changes in securities
There were no events required to be reported under Item 2 for the quarter ending
April 2, 1995.
Item 3. Defaults upon senior securities
There were no events required to be reported under Item 3 for the quarter ending
April 2, 1995.
Item 4. Submission of matters to a vote of security holders
There were no events required to be reported under Item 4 for the quarter ending
April 2, 1995.
Item 5. Other information
There were no events required to be reported under Item 5 for the quarter ending
April 2, 1995.
Item 6. Exhibits and reports on Form 8-K
(a) Exhibits
11.1 Statement Re: Computation of Earnings per Share
27.1 Financial Data Schedule
(b) Reports on Form 8-K
A Current Report on Form 8-K, dated April 26, 1995, announcing the
election of George A. Sissel as president and chief executive officer
of Ball Corporation.
<PAGE>
SIGNATURE
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.
Ball Corporation
(Registrant)
By: /s/ R. David Hoover
-------------------------
R. David Hoover
Senior Vice President and
Chief Financial Officer
Date: May 15, 1995
-------------------------
<PAGE>
Ball Corporation and Subsidiaries
QUARTERLY REPORT ON FORM 10-Q
April 2, 1995
EXHIBIT INDEX
Description Exhibit
----------- -------
Statement Re: Computation of Earnings per Share EX-11.1
Financial Data Schedule EX-27.1
<TABLE>
Exhibit 11.1
------------
<CAPTION>
Ball Corporation and Subsidiaries
STATEMENT RE: COMPUTATION OF EARNINGS PER SHARE
(Millions of dollars except per share amounts)
April 2, April 3,
1995 1994
-------- --------
Earnings per Common Share - Assuming No Dilution
- ------------------------------------------------
<S> <C> <C>
Net income $ 19.6 $ 10.5
Preferred dividends, net of tax (0.8) (0.8)
-------- --------
Net earnings attributable to common shareholders $ 18.8 $ 9.7
======== ========
Weighted average number of common shares outstanding (000s) 29,962 29,493
======== ========
Net earnings per share of common stock $ 0.63 $ 0.33
======== ========
Earnings per Share - Assuming Full Dilution
- -------------------------------------------
Net income $ 19.6 $ 10.5
Adjustments for deemed ESOP cash contribution in lieu of
Series B ESOP Preferred dividend (0.6) (0.6)
-------- --------
Net earnings attributable to common shareholders $ 19.0 $ 9.9
======== ========
Weighted average number of common shares outstanding (000s) 29,962 29,493
Dilutive effect of stock options 302 83
Common shares issuable upon conversion of Series B ESOP
Preferred stock 2,107 2,154
-------- --------
Weighted average number shares applicable to fully diluted
earnings per share 32,371 31,730
======== ========
Fully diluted earnings per share $ 0.59 $ 0.31
======== ========
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
THE UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF INCOME FOR THE
THREE MONTHS ENDED APRIL 2, 1995 AND THE UNAUDITED CONDENSED CONSOLIDATED
BALANCE SHEET AS OF APRIL 2, 1995 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> APR-02-1995
<CASH> 8,100
<SECURITIES> 0
<RECEIVABLES> 236,200
<ALLOWANCES> 0
<INVENTORY> 497,700
<CURRENT-ASSETS> 803,200
<PP&E> 1,508,200
<DEPRECIATION> 718,500
<TOTAL-ASSETS> 1,886,400
<CURRENT-LIABILITIES> 610,900
<BONDS> 371,900
<COMMON> 226,600
0
11,000
<OTHER-SE> 390,400
<TOTAL-LIABILITY-AND-EQUITY> 1,886,400
<SALES> 605,600
<TOTAL-REVENUES> 605,600
<CGS> 535,500
<TOTAL-COSTS> 535,500
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 9,600
<INCOME-PRETAX> 33,000
<INCOME-TAX> 12,200
<INCOME-CONTINUING> 19,600
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 19,600
<EPS-PRIMARY> 0.63
<EPS-DILUTED> 0.59
</TABLE>
