SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarter Ended December 31, 1996
Commission File Number 0-8401
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
------------------- ------------------------------------------
None None
|
Securities registered pursuant to Section 12(g) of the Act:
CACI International Inc Common Stock, $0.10 par value
(Title of each class)
CACI INTERNATIONAL INC AND SUBSIDIARIES
PART I: FINANCIAL INFORMATION
Item 1. Financial Statements
Unaudited Consolidated Balance Sheets as of December 31, 1996 and June 30, 1996
Unaudited Consolidated Statements of Operations for the Three Months Ended December 31, 1996 and 1995
Unaudited Consolidated Statements of Operations for the Six Months Ended December 31, 1996 and 1995
Unaudited Consolidated Statements of Cash Flows for the Six Months Ended December 31, 1996 and 1995
Notes to Unaudited Consolidated Financial Statements
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
PART II: OTHER INFORMATION
Item 1. Legal Proceedings
Item 5. Forward Looking Statements
SIGNATURES
INDEX TO EXHIBITS
PART 1: FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CACI INTERNATIONAL INC AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands) ASSETS
------
December 31, 1996 June 30, 1996
----------------- -------------
CURRENT ASSETS (Unaudited)
Cash and equivalents $ 2,577 $ 1,778
Accounts receivable:
Billed 60,460 59,330
Unbilled 12,760 7,770
------- -------
Total accounts receivable 73,220 67,100
------- -------
Income taxes receivable 1,466 1,627
Deferred income taxes 147 133
Prepaid expenses and other 3,692 3,593
------- -------
TOTAL CURRENT ASSETS 81,102 74,231
------- -------
PROPERTY AND EQUIPMENT, NET
Equipment and furniture 26,566 24,007
Leasehold improvements 2,326 2,186
------- -------
Property and equipment, at cost 28,892 26,193
Accumulated depreciation & amortization (18,968) (17,138)
------- -------
TOTAL PROPERTY AND EQUIPMENT, NET 9,924 9,055
------- -------
ACCOUNTS RECEIVABLE, LONG TERM 7,082 7,289
GOODWILL, NET 13,997 10,548
OTHER ASSETS 1,728 1,813
DEFERRED INCOME TAXES 651 372
------- -------
TOTAL ASSETS $114,484 $103,308
|
CACI INTERNATIONAL INC AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
December 31, 1996 June 30, 1996
----------------- -------------
CURRENT LIABILITIES (Unaudited)
Note payable $ 0 $ 9,987
Accounts payable and accrued expenses 16,374 19,196
Accrued compensation and benefits 11,736 13,406
Deferred rent expense 665 724
Deferred income taxes 3,225 2,243
------- -------
TOTAL CURRENT LIABILITIES 32,000 45,556
------- -------
NOTES PAYABLE 15,900 0
DEFERRED RENT EXPENSES 2,064 2,274
DEFERRED INCOME TAXES 155 140
SHAREHOLDERS' EQUITY
Common stock -
$.10 par value, 40,000,000 shares authorized,
13,982,000 and 13,755,000 shares issued 1,398 1,376
Capital in excess of par 8,287 6,239
Retained earnings 68,172 62,628
Cumulative currency translation adjustments 170 (1,243)
Treasury stock, at cost (3,526,000 shares ) (13,662) (13,662)
------- -------
TOTAL SHAREHOLDERS' EQUITY 64,365 55,338
------- -------
TOTAL LIABILITIES & SHAREHOLDERS' EQUITY $114,484 $103,308
======= =======
|
See notes to consolidated financial statements (unaudited).
CACI INTERNATIONAL INC AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(Dollars in thousands) Three Months Ended December 31,
-------------------------------
1996 1995
---- ----
REVENUE $ 68,821 $ 59,332
------- -------
COSTS AND EXPENSES:
Direct costs 36,758 31,211
Indirect costs and selling expenses 25,448 22,726
Depreciation and amortization 1,556 1,391
------- -------
Total Operating Expenses 63,762 55,328
------- -------
Operating Income 5,059 4,004
Interest expense 277 129
------- -------
INCOME BEFORE INCOME TAXES 4,782 3,875
INCOME TAXES 1,936 1,528
------- -------
NET INCOME $ 2,846 $ 2,347
======= =======
EARNINGS PER COMMON AND
COMMON EQUIVALENT SHARE $ 0.26 $ 0.22
======= =======
AVERAGE NUMBER OF SHARES AND
EQUIVALENT SHARES OUTSTANDING 10,978 10,675
======= =======
Dividends paid per share NONE NONE
|
See notes to consolidated financial statements (unaudited).
CACI INTERNATIONAL INC AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(Dollars in thousands) Six Months Ended December 31,
-----------------------------
1996 1995
---- ----
REVENUE $ 131,555 $ 116,942
------- -------
COSTS AND EXPENSES:
Direct costs 69,546 62,680
Indirect costs and selling expenses 49,264 43,963
Depreciation and amortization 2,968 2,633
------- -------
Total Operating Expenses 121,778 109,276
------- -------
Operating Income 9,777 7,666
Interest expense 461 170
------- -------
INCOME BEFORE INCOME TAXES 9,316 7,496
INCOME TAXES 3,772 2,925
------- -------
NET INCOME $ 5,544 $ 4,571
======= =======
EARNINGS PER COMMON AND
COMMON EQUIVALENT SHARE $ 0.51 $ 0.43
======= =======
AVERAGE NUMBER OF SHARES AND
EQUIVALENT SHARES OUTSTANDING 10,934 10,684
======= =======
Dividends paid per share NONE NONE
======= =======
|
See notes to consolidated financial statements (unaudited).
CACI INTERNATIONAL INC AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(Dollars in thousands)
Six Months Ended December 31,
-----------------------------
1996 1995
---- ----
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 5,544 $ 4,571
Reconciliation of net income to net cash
provided by operating activities
Depreciation and amortization 2,968 2,632
Provision for deferred income taxes 703 437
Loss on sale of property and equipment 0 62
Changes in operating assets & liabilities
Accounts receivable (3,829) (2,273)
Prepaid expenses and other assets 26 (135)
Accounts payable and accrued expenses (2,393) 895
Accrued compensation & vacation (1,779) (3,562)
Deferred rent expense (268) (227)
Income taxes receivable 144 (1,899)
------- ------
Net cash provided by operating activities 1,116 501
------- -------
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisitions of property and equipment (2,711) (2,046)
Purchase of businesses (5,645) (12,440)
Proceeds from sale of property & equipment 0 27
Other (59) (534)
------- -------
Net cash used in investing activities (8,415) (14,993)
------- -------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds under line-of-credit 58,372 51,656
Payments under line-of-credit (52,459) (38,558)
Proceeds from stock options 2,070 408
------- -------
Net cash provided by financing activities 7,983 13,506
Effect of exchanges rates on cash & equivalents 117 (9)
------- -------
Net increase (decrease) in cash & equivalents 801 (995)
Cash and equivalents, beginning of period 1,776 1,996
------- -------
Cash and equivalents, end of period $ 2,577 $ 1,001
======= =======
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION
Cash paid during the period for
Income taxes, net of refunds $ 1,659 $ 3,863
======= =======
Interest $ 362 $ 170
======= =======
|
See notes to consolidated financial statements (unaudited).
CACI INTERNATIONAL INC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
A. BASIS OF PRESENTATION The accompanying unaudited consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and note disclosures normally included in the annual financial statements, prepared in accordance with generally accepted accounting principles, have been condensed or omitted pursuant to those rules and regulations, although the Company believes that the disclosures made are adequate to make the information presented not misleading.
In the opinion of management, the accompanying unaudited consolidated financial statements reflect all necessary adjustments and reclassifications (all of which are of a normal, recurring nature) that are necessary for fair presentation for the periods presented. It is suggested that these consolidated financial statements be read in conjunction with the consolidated financial statements and the notes thereto included in the Company's latest annual report to the Securities and Exchange Commission on Form 10-K for the year ended June 30, 1996.
B. ACCOUNTS RECEIVABLE Total accounts receivable are net of allowance for doubtful accounts of $2,076,000 and $2,245,000 at December 31, 1996 and June 30, 1996, respectively. Accounts Receivable are classified as follows:
(Dollars in thousands)
Dec. 31, 1996 June 30, 1996
------------- -------------
BILLED AND BILLABLE RECEIVABLES:
Billed receivables $ 54,519 $ 53,836
Billable receivables at end of period 5,941 5,494
-------- --------
TOTAL BILLED AND BILLABLE RECEIVABLES 60,460 59,330
======== ========
UNBILLED RECEIVABLES:
Unbilled pending receipt of contractual
documents authorizing billing 12,597 7,598
Unbilled Retainages & fee withholds
expectedto be billed within
the next 12 months 163 172
-------- --------
12,760 7,770
Unbilled retainages and fee withholds
expected to be billed beyond
the next 12 months 7,082 7,289
-------- --------
TOTAL UNBILLED RECEIVABLES 19,842 15,059
-------- --------
TOTAL ACCOUNTS RECEIVABLE $ 80,302 $ 74,389
======== ========
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C. ACQUISITION AND GOODWILL On October 1, 1996, the Company purchased the majority of contracts and assets of Sunset Resources, Inc. ("SRI"). SRI is an engineering and information technology firm that has focused on logistics and engineering support services to the U.S. Air Force and are experts in electronic commerce. The purchase price of the acquisition was financed primarily through bank borrowing under the Company's existing line of credit. The purchase price was allocated to the assets and liabilities using their fair values at the date of acquisition. The excess of the purchase price over the fair value of the net assets acquired was $3.6 million. This excess has been recorded as goodwill and will be amortized on a straight line basis over 15 years. The preliminary purchase price allocation is subject to change during the year following the acquisition as additional information concerning net asset valuation is obtained. Therefore, the final allocation may differ from the preliminary allocation.
D. NOTE PAYABLE - CLASSIFICATION At the end of fiscal year 1996, the Company had a $25 million revolving credit agreement scheduled to expire on March 31, 1997. On July 26, 1996, the Company entered into a new three-year $50 million revolving credit agreement. Because the new credit facility extends the term of the agreement from a one year to a three year credit facility effective in fiscal 1997, the Company has classified its December 31, 1996, line of credit balance as a long term debt, while the June 30, 1996, line of credit balance remains classified as a short term debt.
E. EVENT SUBSEQUENT TO DECEMBER 31, 1996 On January 3, 1997, the Company acquired the business of Sales Performance Analysis Limited ("SPA") including the intellectual property rights to certain software products for $2.6 million. SPA develops and markets a unique range of specialized software products and services that enable companies to make more effective use of their field forces through the optimal configuration of sales and services territories. SPA's annual revenue prior to acquisition was $2.0 million. It is currently estimated that some $0.7 million of the purchase consideration will be allocated to goodwill, which will be amortized over 15 years with $1.7 million allocated to software, which will be amortized over 5 years.
As the acquisition took place in January 1997, it had no impact on the Company's results for the second quarter of FY97.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations - For the Three and Six Months ended December 31, 1996
and December 31, 1995.
(Dollars in thousands, except as percents)
Second Quarter First Six Months
----------------------------------- ----------------------------------
FY97 FY96 FY97 FY96
---------------- --------------- --------------- ---------------
Department of Defense $ 35,671 51.8% $ 31,536 53.1% $ 68,485 52.1% $ 60,946 52.1%
Federal Civilian Agencies 16,327 23.7% 14,636 24.7% 32,390 24.6% 29,533 25.3%
Commercial 14,822 21.6% 11,731 19.8% 26,601 20.2% 22,192 19.0%
State & Local Governments 2,001 2.9% 1,429 2.4% 4,079 3.1% 4,271 3.6%
------- ----- ------- ----- ------- ----- ------- -----
Total $ 68,821 100.0% $ 59,332 100.0% $131,555 100.0% $116,942 100.0%
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During the three months ("second quarter") and six months ended December 31, 1996, the Company's total revenue increased by 16%, or $9.5 million, and by 12.5%, or $14.6 million, respectively, over the same periods last year. The increases were primarily the result of the acquisitions described below and an increase in sales of commercial products and services.
On September 1, 1995, the Company acquired Automated Sciences Group, Inc. ("ASG") which contributed approximately $2.8 million to the FY 1997 first quarter revenue versus $1.2 million for the same quarter last year. On January 1, 1996, IMS Technologies, Inc. ("IMS") was acquired, and it contributed revenue of approximately $4.2 million and $8.2 million, respectively, for the quarter and six months ending December 31, 1996. On October 1, 1996, the Company acquired the majority of contracts and assets of Sunset Resources, Inc. ("SRI"), which added approximately $2.6 million in revenue in the second quarter FY 1997.
Revenue from the Department of Defense ("DoD") increased by 13%, to $35.7 million, for the quarter, and by 12%, to $68.5 million, for the first six months. This growth was the result of internal growth coupled with the second quarter acquisition of SRI and the first quarter effect of the ASG acquisition discussed above.
Federal Civilian Agencies revenue is primarily derived from Department of Justice ("DoJ") litigation support efforts. These services are dependent on the level of DoJ litigation that the Company is supporting at any period of time and have fluctuated from quarter to quarter. FY 1997 second quarter DoJ revenue decreased slightly to $11.8 million versus last year's second quarter $12.3 million. For the first six months of FY 1997, revenue from DoJ was $23.7 million compared to $25.2 million for the same period last year. Total revenue from Federal Civilian Agencies increased by 11.6%, to $16.3 million, for the quarter, and by 9.7%, to $32.4 million, for the first six months in FY 1997. The Federal Civilian Agencies revenue growth was primarily the result of the IMS acquisition discussed above.
During the three and six months ended December 31, 1996, Commercial revenue increased by 26%, or $3.1 million, and 20%, or $4.4 million, respectively,
over the same periods last year. These increases are primarily the result of increases in sales of simulation and marketing analysis software products coupled with higher commercial litigation support and systems sales. The nature of the Company's proprietary software products business is inherently less predictable than the Company's longer-term contract work with the Federal Government and may fluctuate from quarter to quarter.
The following table sets forth the amounts and the relative percentage that certain items of expense and earnings bear to revenue for the three months and six months ended December 31, 1996 and December 31, 1995, respectively.
Dollar Amount (in thousands) Percentage of Revenue
------------------------------------ ---------------------------------
Second Quarter First Six Months Second Quarter First Six Months
---------------- ------------------ --------------- ----------------
FY97 FY96 FY97 FY96 FY97 FY96 FY97 FY96
------- ------- -------- -------- ------- ------ ------ ------
Revenue $68,821 $59,332 $131,555 $116,942 100.0% 100.0% 100.0% 100.0%
Costs and expenses
Direct costs 36,758 31,211 69,546 62,680 53.4% 52.7% 52.9% 53.5%
Indirect costs 25,448 22,726 49,264 43,963 37.0% 38.3% 37.4% 37.6%
Depreciation
& amortization 1,556 1,391 2,968 2,633 2.3% 2.3% 2.3% 2.3%
------- ------- ------- ------- ------ ------ ------ ------
Total operating
expenses 63,762 55,328 121,778 109,276 92.7% 93.3% 92.6% 93.4%
Income from
operations 5,059 4,004 9,777 7,666 7.3% 6.7% 7.4% 6.6%
Interest expense 277 129 461 170 0.4% 0.2% 0.4% 0.1%
------- ------- ------- ------- ------ ------ ------ ------
Earnings before
income taxes 4,782 3,875 9,316 7,496 6.9% 6.5% 7.0% 6.5%
Income taxes 1,936 1,528 3,772 2,925 2.8% 2.5% 2.8% 2.6%
------- ------- ------- ------- ------ ------ ------ ------
Net income $ 2,846 $ 2,347 $ 5,544 $ 4,571 4.1% 4.0% 4.2% 3.9%
======= ======== ======== ======== ====== ====== ====== ======
|
Compared with the second quarter of FY 1996, operating income increased by 26%, to $5.1 million, from $4.0 million. For the first six months of FY 1997, operating income increased to $9.8 million from $7.7 million, or 27.3%. Operating income increased as a result of revenue increases, as well as from margin improvements associated with the higher proportion of software product sales which carry greater margins. Operating income in the first quarter of FY 1997 also benefitted from a $0.5 million favorable impact of a settlement of prior year indirect cost rates which had been the subject of a routine government audit.
For the quarter, direct costs increased by $5.5 million, or 17.8%, largely due to increases in revenue. Direct costs include direct labor and other direct costs (i.e. non-labor direct cost) which generally are passed to the customer without significant mark-up. Direct labor, the principal driver of profit bearing revenue, increased by 11.6% in the second quarter of FY 1997 versus the same period last year. Other direct costs, which historically vary from quarter to quarter, increased by approximately $3.1 million, or 29.7%. These higher other direct costs are the principal reason for the increase in the percentage of total direct costs in the most recent quarter. For the first six months of FY 1997, direct costs increased by $6.9 million, or 11%, primarily due to the increases in direct labor with a corresponding increase in revenue.
Indirect costs include fringe benefits, indirect labor, marketing and bid & proposal costs, and other discretionary costs. Fringe benefits, representing the largest category of indirect expenses, increased proportionally to total labor costs. Total indirect costs increased by $2.7 million, or 12%, for the quarter, and, by $5.3 million, or 12%, for the first six months of the year, primarily as a result of increased revenue and related direct labor. For the second quarter, however, indirect costs as a percentage of revenue decreased from 38.3% to 37.0% due to higher other non-labor direct costs and increased software product sales, which did not significantly effect the indirect costs.
The depreciation and amortization expense increase of $0.2 million for the quarter and $0.3 million for the first six months were primarily the result the acquisitions previously discussed.
Interest expense for the three and six month periods ending December 31, 1996 was $277,000 and $461,000, respectively. Compared to the same periods last year, interest expense increased by $148,000 and $291,000, respectively. These increases are the result of increased borrowings incurred to support the acquisitions discussed above.
The effective income tax rate for the quarter and the first six months was 40.5% versus 39.0% for the same period last year. The increase in the effective tax rate is primarily the result of the increase in non-deductible amortization goodwill expense associated with the acquisitions discussed above.
LIQUIDITY AND CAPITAL RESOURCES
For the first six months of FY 1997, operations provided $1.1 million of cash compared to the $0.5 million in FY 1996. The FY 1997 increase in cash provided by operating activities is largely the result of increases in net income, partially offset by the increase in accounts receivable and decrease in accounts payable and accrued expenses and compensation.
Investing activities used cash of approximately $8.4 million during the six months ended December 31, 1996 versus $15.0 million for the same period last year. Acquisitions discussed above accounted for the majority of the investments, with most of the remaining investments allocated to the purchase of office and computer-related equipment for use in the performance of contracts and for increased efficiency in the Company's administration.
During the six months ended December 31, 1996, the Company's financing activities provided cash of approximately $8.0 million, primarily from a $5.9 million increase in borrowings under the Company's revolving line of credit and from $2.1 million in proceeds derived from exercises of stock options.
On October 1, 1996 the Company completed its acquisition of the business and most of the assets of SRI for $5.3 million. The acquisition was financed with bank borrowings under the existing line of credit.
The Company maintains a $50 million unsecured revolving bank credit facility in the U.S., and a 500,000 pound sterling unsecured line of credit in London, England. These credit facilities expire on July 1999 and December 1997, respectively. At December 31, 1996, the Company had approximately $35 million available for borrowing under its revolving lines of credit.
Accordingly, the Company believes that the combination of internally generated funds, available bank credit and cash on hand will provide the required liquidity and capital resources for the foreseeable future.
PART II: OTHER INFORMATION
Item 1. Legal Proceedings
Since the filing of the Registrant's report indicated above, the parties have been engaged in discovery.
On July 17, 1996, ADOT filed a motion to dismiss the case on the grounds that the Court lacks jurisdiction of the matter because of CACI's failure to exhaust its administrative remedies. By Order dated February 10, 1997 the Court denied ADOT's motion to dismiss.
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.
Date: By: /s/
---------------------------- -------------------------------------
Dr. J.P. London
Chairman of the Board,
President, and Director
(Principal Executive Officer)
Date: By: /s/
---------------------------- ------------------------------------
James P. Allen
Executive Vice President,
Chief Financial Officer,
and Treasurer
(Principal Financial and
Accounting Officer)
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CACI INTERNATIONAL INC AND SUBSIDIARIES
INDEX TO EXHIBITS
Exhibit
Number Title
- ------ -----
11 Computation of Earnings per Common and
Common Equivalent Share
27 Financial Data Schedule
|
EXHIBIT 11
CACI INTERNATIONAL INC AND SUBSIDIARIES
COMPUTATION OF EARNINGS PER COMMON
AND COMMON EQUIVALENT SHARE
Three Months Ended 12/31, Six Months Ended 12/31,
------------------------- ----------------------
1996 1995 1996 1995
------ ------ ------ ------
Net Income $ 2,846 $ 2,347 $ 5,544 $ 4,571
Average shares
outstanding
during the period 10,405 10,102 10,352 10,094
Dilutive effect
of stock options
after application
of treasury
stock method 573 573 582 590
------ ------ ------ ------
Average number
of shares
outstanding
during
the period 10,978 10,675 10,934 10,684
====== ====== ====== ======
Earnings per
common and
common
equivalent share $ 0.26 $ 0.22 $ 0.51 $ 0.43
|
| ARTICLE 5 |
| THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FORM 10-Q FOR FY1997 QUARTER ENDED DECEMBER 31, 1996, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. |
| PERIOD TYPE | 6 MOS |
| FISCAL YEAR END | JUN 30 1997 |
| PERIOD END | DEC 31 1996 |
| CASH | 2,577,000 |
| SECURITIES | 0 |
| RECEIVABLES | 75,296,000 |
| ALLOWANCES | (2,076,000) |
| INVENTORY | 0 |
| CURRENT ASSETS | 81,102,000 |
| PP&E | 28,892,000 |
| DEPRECIATION | (18,968,000) |
| TOTAL ASSETS | 114,484,000 |
| CURRENT LIABILITIES | 32,000,000 |
| BONDS | 15,900,000 |
| PREFERRED MANDATORY | 0 |
| PREFERRED | 0 |
| COMMON | 1,398,000 |
| OTHER SE | 62,967,000 |
| TOTAL LIABILITY AND EQUITY | 114,484,000 |
| SALES | 0 |
| TOTAL REVENUES | 131,555,000 |
| CGS | 0 |
| TOTAL COSTS | 69,546,000 |
| OTHER EXPENSES | 52,109,000 |
| LOSS PROVISION | 123,000 |
| INTEREST EXPENSE | 461,000 |
| INCOME PRETAX | 9,316,000 |
| INCOME TAX | 3,772,000 |
| INCOME CONTINUING | 5,544,000 |
| DISCONTINUED | 0 |
| EXTRAORDINARY | 0 |
| CHANGES | 0 |
| NET INCOME | 5,544,000 |
| EPS PRIMARY | .51 |
| EPS DILUTED | .51 |