SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1996
------------------------------------------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
---------------------- ----------------------
33-96808
(Commission File Number)
Crain Industries, Inc.
(Exact name of Registrant as specified in charter)
Delaware
(State or other jurisdiction of incorporation or organization)
43-1714086
(I.R.S. Employer Identification No.)
101 South Hanley Road
St. Louis, MO 63105
(314) 719-0100
(Address, including zip code, and telephone number, including
area code, of registrant's principal executive offices)
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:
<TABLE>
<CAPTION>
Outstanding at
Class September 30, 1996
---------------------- ------------------
<S> <C>
Crain Industries, Inc.
Common Stock 1,000 shares
</TABLE>
<PAGE>
<TABLE>
CRAIN INDUSTRIES, INC.
INDEX
<CAPTION>
Page
PART I - FINANCIAL INFORMATION ----
<S> <C>
Crain Industries, Inc. (A Delaware corporation)
Condensed Consolidated Balance Sheets as of September 30, 1996 and
December 31, 1995...................................................... 1
Condensed Consolidated Statements of Operations for the three and nine
months ended September 30, 1996 and one month ended September 30,
1995................................................................... 2
Condensed Consolidated Statements of Cash Flows for the nine months
ended September 30, 1996 and one month ended September 30, 1995........ 3
Notes to Condensed Consolidated Financial Statements..................... 4
Crain Industries, Inc. (An Arkansas corporation) (the "Predecessor")
Condensed Consolidated Statements of Operations for the two and eight
months ended August 25, 1995........................................... 6
Condensed Consolidated Statement of Cash Flows for the eight months
ended August 25, 1995.................................................. 7
Notes to Condensed Consolidated Financial Statements..................... 8
PART II - OTHER INFORMATION.............................................. 13
SIGNATURES............................................................... 14
Exhibit 27.1 Financial Data Schedule..................................... 15
</TABLE>
<PAGE>
<TABLE>
CRAIN INDUSTRIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
<CAPTION>
September 30, December 31,
1996 1995
----------------------------
(Unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents....................... $ 1,822 $ 1,983
Accounts receivable, net of allowance for
doubtful accounts of $4,042 and $4,093........ 42,167 35,987
Inventories..................................... 29,147 33,128
Prepaid expenses and other...................... 2,420 1,313
----------- -----------
Total current assets.......................... 75,556 72,411
Property, plant and equipment, net................ 45,346 41,975
Deferred financing costs, net..................... 10,778 12,046
Intangibles, net.................................. 50,097 56,341
Other assets...................................... 1,048 1,085
----------- -----------
Total assets.................................. $ 182,825 $ 183,858
=========== ===========
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities:
Current maturities of long-term obligations..... $ 123 $ 122
Accounts payable................................ 24,670 19,919
Accrued and other liabilities................... 9,455 11,827
Accrued interest................................ 1,751 5,030
Accrued payroll and personnel................... 5,211 3,739
Income taxes payable............................ 1,029 91
----------- -----------
Total current liabilities..................... 42,239 40,728
Long-term obligations, less current maturities.... 110,177 116,215
Other long-term liabilities....................... 4,953 2,633
Stockholder's equity:
Common stock, $.01 par value, 1,000 shares
authorized, 1,000 shares issued and
outstanding................................... -- --
Contributed capital............................. 24,428 24,528
Retained Earnings (Accumulated deficit)......... 1,028 (246)
----------- -----------
Total stockholder's equity.................... 25,456 24,282
----------- -----------
Total liabilities and stockholder's equity.... $ 182,825 $ 183,858
=========== ===========
<FN>
See accompanying notes to the condensed consolidated financial statements
</TABLE>
<PAGE>
<TABLE>
CRAIN INDUSTRIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands)
(Unaudited)
<CAPTION>
Three Months Nine Months One Month
Ended Ended Ended
September 30, September 30, September 30,
--------------- --------------- ---------------
1996 1996 1995
--------------- --------------- ---------------
<S> <C> <C> <C>
Net sales.................... $ 83,234 $ 226,191 $ 28,388
Operating expenses:
Cost of goods sold......... 65,883 180,111 23,203
Selling, general and
administrative........... 9,112 25,206 2,883
Depreciation and
amortization............. 2,529 6,567 492
--------------- --------------- ---------------
Operating income............. 5,710 14,307 1,810
Other expense (income):
Interest expense........... 3,079 10,851 1,241
Amortization of deferred
financing costs.......... 422 1,268 149
Other, net................... (4) (24) 28
--------------- --------------- ---------------
Income before income tax
provision.................. 2,213 2,212 392
Income tax provision......... 800 938 140
--------------- --------------- ---------------
Net income.................. $ 1,413 $ 1,274 $ 252
=============== =============== ===============
<FN>
See accompanying notes to the condensed consolidated financial statements
</TABLE>
<PAGE>
<TABLE>
CRAIN INDUSTRIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
<CAPTION>
Nine Months One Month
Ended Ended
Sept 30, Sept 30,
1996 1995
------------------------
<S> <C> <C>
Cash flows provided by (used in) operating
activities:
Net income.......................................... $ 1,274 $ 252
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation.................................... 5,516 410
Amortization of intangible assets............... 1,051 82
Amortization of deferred financing costs........ 1,268 148
Change in assets and liabilities:
Accounts receivable........................... (6,180) (514)
Inventories................................... (819) 1,969
Prepaid expenses and other.................... (1,077) (1,042)
Accounts payable.............................. 4,751 (3,123)
Accrued and other liabilities, net............ (921) (1,890)
Other long term liabilities, net.............. 2,320 --
---------- ----------
Net cash from operating activities.................... 7,183 (3,708)
---------- ----------
Cash flows used in investing activities:
Acquisitions, net of cash acquired.................. -- (127,340)
Capital expenditures, net........................... (8,887) (534)
---------- ----------
Net cash used in investing activities............... (8,887) (127,874)
---------- ----------
Cash flows provided by (used in) financing
activities:
Proceeds from issuance of long-term obligations... 73,802 117,400
Repayment of long-term obligations................ (69,840) --
Change in contributed capital..................... (100) 25,028
Financing fees and other.......................... -- (7,572)
Deferred purchase price payment................... (2,319) --
---------- ----------
Net cash provided by financing activities............. 1,543 134,856
---------- ----------
Net change in cash and cash equivalents............... (161) 3,274
Cash and cash equivalents at beginning of the period.. 1,983 1
---------- ----------
Cash and cash equivalents at end of the period........ $ 1,822 $ 3,275
========== ==========
<FN>
See accompanying notes to the condensed consolidated financial statements
</TABLE>
<PAGE>
CRAIN INDUSTRIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except per share data)
(Unaudited)
1. THE COMPANY
Crain Industries, Inc. (a Delaware corporation) ("Crain" or the "Company")
was formed on May 25, 1995 to participate in the acquisition of Crain
Industries, Inc. (an Arkansas corporation) (the "Predecessor") and the
transactions related thereto (the "Acquisition"). Crain is a wholly owned
subsidiary of Crain Holdings Corp. (a Delaware corporation)("Holdings").
Prior to the Acquisition, Crain conducted no operations other than those
incident to the Acquisition.
2. BASIS OF PRESENTATION
Unaudited Interim Condensed Consolidated Financial Statements
-------------------------------------------------------------
The unaudited interim condensed consolidated financial statements reflect
all adjustments consisting only of normal recurring adjustments which are,
in the opinion of management, necessary for a fair presentation of
financial condition and results of operations. The results for the three
and nine months ended September 30, 1996, are not necessarily indicative
of the results that may be expected for a full fiscal year.
Financial Statements Presented
------------------------------
The Company was acquired on August 29, 1995 from the Predecessor. The
Condensed Consolidated Statements of Operations included herein represent
the three and nine months ended September 30, 1996 and the one month ended
September 30, 1995. The Condensed Consolidated Statements of Cash Flows
included herein represent the nine months ended September 30, 1996 and the
one month ended September 30, 1995. The one month ended September 30, 1995
information is provided to enable the users to combine the Company's
results for the current periods disclosed, with the Predecessor's results
for the two months and eight months ended August 25, 1995 to provide
comparable prior year data.
Statement of Cash Flows
-----------------------
Interest paid for the nine months ended September 30, 1996 and the one
month ended September 30, 1995, is approximately $14,304 and $4
respectively. Income taxes paid for the nine months ended September 30,
1996 and the one month ended September 30, 1995, is approximately $101
and $0 respectively.
Income Taxes
------------
The Company accounts for income taxes, in accordance with the provisions
of SFAS No. 109.
3. INVENTORIES
<TABLE>
<CAPTION>
The composition of inventories at September 30, 1996, is as follows:
<S> <C>
Raw materials............................................... $ 21,144
Finished goods.............................................. 8,003
-----------
Total..................................................... $ 29,147
===========
</TABLE>
<PAGE>
4. CONTINGENCIES
On December 13, 1995, the Company initiated a lawsuit in the District
Court of Dallas County, Texas styled Crain Industries, Inc., f/k/a/ Crain
Acquisition Corp. v. Dude, Inc., f/k/a/ Crain Industries, Inc., H.C.
"Dude" Crain, Jr., et al., Cause No. 95-12997, seeking money damages based
on certain allegations of misrepresentation, fraud, and breach of contract
in connection with the Acquisition. In August, 1996, the Company settled
all litigation with the sole shareholder of the Predecessor. The
settlement amounted to a $10.0 million reduction in purchase price through
the cancellation of a $10.0 million note payable owed to the sole
shareholder of the Predecessor, which resulted in a purchase price
adjustment to inventory and goodwill.
5. ASSET PURCHASE AGREEMENT
On August 30, 1996, the Company signed a definitive agreement to acquire
the assets of the Comfort Clinic Division ("Comfort Clinic") of Bio
Clinic Corporation, a subsidiary of Sunrise Medical, Inc. for an aggregate
cash consideration of $14.0 million. The purchase was consummated on
October 18, 1996, at which time the Company acquired substantially all of
the assets of Comfort Clinic, assumed certain liabilities and entered into
certain leases. Comfort Clinic is a major manufacturer and distributor of
therapeutic comfort products, primarily mattress pads and pillows.
<PAGE>
<TABLE>
CRAIN INDUSTRIES, INC.
(AN ARKANSAS CORPORATION)
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands)
(Unaudited)
<CAPTION>
Two Months Eight Months
Ended Ended
August 25, August 25,
1995 1995
------------ ------------
<S> <C> <C>
Net Sales.......................................... $ 44,594 $ 172,524
Operating expenses:
Cost of goods sold............................. 36,030 140,953
Selling, general and administrative............ 7,535 22,372
Depreciation and amortization.................. 841 3,529
------------ -------------
Operating income................................. 188 5,670
Other expense (income):
Interest expense............................. 654 2,355
Gain on insurance settlement................. -- (2,434)
Other, net................................... 166 (531)
------------ -------------
(Loss)income before income tax provision......... (632) 6,280
Income tax provision............................. -- --
------------ -------------
Net(loss)income.................................. $ (632) $ 6,280
============ =============
<FN>
See accompanying notes to the condensed consolidated financial statements
</TABLE>
<PAGE>
<TABLE>
CRAIN INDUSTRIES, INC.
(An Arkansas corporation)
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
<CAPTION>
Eight Months
Ended
August 25,
1995
------------
<S> <C>
Cash flows provided by (used in) operating
activities:
Net income...................................................... $ 6,280
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation................................................ 3,312
Amortization of intangible assets........................... 217
Change in assets and liabilities:
Accounts receivable....................................... (2,961)
Inventories............................................... (1,297)
Prepaid expenses and other................................ (472)
Accounts payable.......................................... 5,233
Accrued and other liabilities, net........................ 946
----------
Net cash from operating activities................................ 11,258
----------
Cash flows used in investing activities:
Capital expenditures, net....................................... (4,887)
----------
Net cash used in investing activities............................. (4,887)
----------
Cash flows provided by (used in) financing
activities:
Proceeds from issuance of long-term obligations............... 48,099
Repayment of long-term obligations............................ (47,630)
Dividends..................................................... (2,901)
Changes due from stockholder.................................. (1,516)
----------
Net cash used in financing activities............................. (3,948)
----------
Net change in cash and cash equivalents........................... 2,423
Cash and cash equivalents at beginning of the period.............. 1,634
----------
Cash and cash equivalents at end of the period.................... $ 4,057
==========
<FN>
See accompanying notes to the condensed consolidated financial statements
</TABLE>
<PAGE>
CRAIN INDUSTRIES, INC.
(AN ARKANSAS CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands)
(Unaudited)
1. BASIS OF PRESENTATION
Unaudited Interim Consolidated Financial Statements
---------------------------------------------------
The unaudited interim consolidated financial statements reflect all
adjustments consisting only of normal recurring adjustments which are,
in the opinion of management, necessary for a fair presentation of
financial position and results of operations. The results for the two and
eight months ended August 25, 1995, are not necessarily indicative of the
results that may be expected for a full fiscal year.
Financial Statements Presented
------------------------------
Crain Industries, Inc., (an Arkansas corporation) (the "Predecessor") was
acquired by Crain Industries, Inc., (a Delaware corporation) (the
"Company") on August 29, 1995. The unaudited Condensed Consolidated
Statements of Operations for the two and eight months ended August 25,
1995 and the unaudited Condensed Consolidated Statements of Cash Flows for
the eight months ended August 25, 1995 are presented herein to enable the
users to combine the Predecessor's results with those of the Company for
the one month ended September 30, 1995 to arrive at comparable period
data.
Statement of Cash Flows
-----------------------
Interest and taxes paid for the eight months ended August 25, 1995 were
$1,247 and $349, respectively.
Income Taxes
------------
The Predecessor elected to be taxed under the provisions of subchapter S
of the Internal Revenue Code, accordingly, taxable income of the
Predecessor was allocated to the sole shareholder of the Predecessor who
was responsible for payments of taxes thereon.
<PAGE>
PART I
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GENERAL
The following comments should be used in reviewing the discussion and analysis
of results of operations and liquidity and capital resources. Crain
Industries, Inc. (a Delaware corporation) (the "Company") was organized in
May, 1995 for the purpose of accomplishing the acquisition of certain assets
and liabilities of Crain Industries, Inc. (an Arkansas corporation) (the
"Predecessor") (the "Acquisition") and prior to the Acquisition, the Company
was not engaged in any activities other than those incidental to the
Acquisition. The Company has accounted for the Acquisition in accordance with
the purchase method of accounting.
The Company believes that the operating results of the Predecessor are not
directly comparable to the Company's operating results for post-Acquisition
periods due to, among other things, (i) purchase accounting adjustments
relating to the Acquisition, including the amortization of goodwill and
intangibles, (ii) increases in interest expense relating to the financing of
the Company and (iii) anticipated cost savings resulting from the elimination
of certain expenses related to the sole shareholder of the Predecessor.
RESULTS OF OPERATIONS
The following discussion and analysis is based on the historical unaudited
results of operations for the three months ended September 30, 1996 and the
unaudited results of operations for the three months ended September 30, 1995,
along with the historical unaudited results of operations for the nine months
ended September 30, 1996 and the unaudited results of operations for the nine
months ended September 30, 1995. Included in the three and nine months ended
September 30, 1995 is the two months and eight months ended August 25, 1995 of
the Predecessor and the one month ended September 30, 1995 of the Company.
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
1996 1995 1996 1995
-------------------- --------------------
(In Thousands)
<S> <C> <C> <C> <C>
Net sales.......................... $ 83,234 $ 72,982 $226,191 $200,912
Cost of goods sold................. 65,883 59,233 180,111 164,156
Selling, general and
administrative................... 9,112 10,418 25,206 25,255
Depreciation and amortization...... 2,529 1,333 6,567 4,021
--------- --------- --------- ---------
Operating income................... 5,710 1,998 14,307 7,480
Interest expense................... 3,079 1,895 10,851 3,596
Amortization of deferred
financing costs.................. 422 149 1,268 149
Gain on insurance settlement....... -- -- -- (2,434)
Other (income) expenses............ (4) 194 (24) (503)
--------- --------- --------- ---------
Income (loss) before income taxes.. 2,213 (240) 2,212 6,672
Provision for income taxes (1)..... 800 140 938 140
--------- --------- --------- ---------
Net income (loss).................. $ 1,413 $ (380) $ 1,274 $ 6,532
========= ========= ========= =========
EBITDA (2)......................... $ 8,239 $ 3,331 $ 20,874 $ 11,501
========= ========= ========= =========
Cash flows from operating
activities....................... $ (87) $ 9,200 $ 7,183 $ 7,550
========= ========= ========= =========
</TABLE>
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(1) The Predecessor elected to be taxed under the provision of Subchapter
S of the Internal Revenue Code. Accordingly, taxable income of the
Predecessor was allocated to the sole shareholder of the Predecessor who
was responsible for the payment of taxes thereon.
(2) Earnings before interest, taxes, depreciation and amortization
("EBITDA") is not a defined term under Generally Accepted Accounting
Principles ("GAAP") and is not an alternative to operating income or cash
flow from operations as determined under GAAP. The Company believes that
EBITDA provides additional information for determining its ability to
meet future debt requirements; and EBITDA is also one of the financial
measures in the covenants under the Company's debt instruments.
THREE MONTHS ENDED SEPTEMBER 30, 1996 COMPARED TO THE THREE MONTHS ENDED
SEPTEMBER 30, 1995
Net sales for the three-month period ended September 30, 1996 were $83.2
million, up 14.0% over the $73.0 million of sales for the comparable period of
1995. This sales growth is primarily the result of an increase in carpet pad
prices necessitated by an increase in raw material prices for scrap foam,
which is a major component of carpet cushion, as well as the strong market
penetration of the Company's carpet pad products, combined with strong sales
in the Company's consumer products.
Cost of goods sold for the third quarter of 1996 increased $6.7 million, to
$65.9 million, over the comparable period of 1995. As a percentage of sales,
cost of goods sold for the three-month period ended September 30, 1996,
improved to 79.2% from 81.1% for the comparable period of 1995. The increase
in cost of goods sold over the prior year is due to an increase in sales
volume. The decrease in cost of goods sold as a percentage of sales was due
to the cost reduction activities put in place by new management and a shift
in product mix, along with the benefit of utilizing internally produced scrap
in the production of carpet cushion, during the period of scrap price
increases.
Selling, general and administrative expenses for the third quarter of 1996
were $9.1 million, down $1.3 million from the comparable period of 1995.
Expressed as a percentage of sales, selling, general and administrative
expenses decreased to 10.9% for the three months ended September 30, 1996 from
14.3% for the three months ended September 30, 1995. The decrease in selling,
general and administrative expenses as a percentage of sales was attributable
to various cost reduction activities implemented by new management, higher
absorption due to the increased sales volume and the elimination of
administrative charges incurred by the Predecessor associated with the sale of
the Company.
<PAGE>
Interest expense increased to $3.1 million for the three months ended
September 30, 1996 from $1.9 million for the three months ended September 30,
1995. The $1.9 million represents $.7 million for the Predecessor's two
months ended August 25, 1995 and $1.2 million for the Company's one month
ended September 30, 1995. The increase in interest expense is the result of
the higher debt levels associated with the acquisition.
NINE MONTHS ENDED SEPTEMBER 30, 1996 COMPARED TO THE NINE MONTHS ENDED
SEPTEMBER 30, 1995
Net sales for the nine-month period ended September 30, 1996 were $226.2
million or a 12.6% increase over the $200.9 million of sales for the
comparable period in 1995. This sales growth is primarily the result of a
price increase necessitated by an increase in higher raw material prices, as
well as the strong market penetration of the Company's carpet pad and consumer
products.
Cost of goods sold for the nine-month period ended September 30, 1996
increased $16.0 million, to $180.1 million, over the comparable period of
1995. As a percentage of sales, cost of goods sold for the nine-month period
ended September 30, 1996 improved to 79.6% from 81.7% for the comparable
period of 1995. The increase in cost of goods sold over the prior year is due
to an increase in sales volume and raw material costs. The decrease in cost
of goods sold as a percentage of sales was due to the cost reduction
activities put in place by new management and a shift in product mix, as well
as the benefit of utilizing internally produced scrap for use in the
production of carpet cushion, during the period of raw material price
increases.
Selling, general and administrative expenses for the nine-month period ended
September 30, 1996 were $25.2 million, down $0.1 million from the comparable
period of 1995. Expressed as a percentage of sales, selling, general and
administrative expenses decreased to 11.1% for the nine month period ended
September 30, 1996, from 12.6% for the nine-months ended September 30, 1995.
The decrease in selling, general and administrative expenses as a percentage
of sales was attributable to the higher absorption of fixed costs due to the
increased sales volume and various cost reduction activities implemented by
new management, along with increased administrative charges incurred by the
Predecessor associated with the sale of the Company.
Interest expense increased to $10.9 million for the nine months ended
September 30, 1996 from $3.6 million for the nine month period ended September
30, 1995. The $3.6 million represents $2.4 million for the Predecessor's eight
months ended August 25, 1995 and $1.2 million for the Company's one month
ended September 30, 1995. The increase in interest expense is the result of
the higher debt levels associated with the Acquisition.
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
Interest payments on the Company's senior subordinated notes (the "Notes") and
under the Company's revolving credit agreement (the "Revolving Facility"),
represent significant obligations of the Company. The Notes require
semiannual interest payments of approximately $6.8 million, on each February
15 and August 15. Borrowings under the Revolving Facility bear interest at
floating rates and require interest payments on varying dates. All amounts
under the Revolving Facility outstanding will mature in 2000.
In addition to its debt service obligations, the Company's remaining liquidity
demands are for capital expenditures and for working capital needs. For the
nine months ended September 30, 1996, the Company spent approximately $8.9
million on capital projects, compared to $5.4 million on capital projects for
the comparable period of 1995. The Company expects to spend approximately
$6.0 million to $10.0 million annually on capital projects, of which
approximately $3.0 million will be used for maintaining facilities and
equipment.
Net cash provided by operating activities was $7.2 million for the nine months
ended September 30, 1996, which compares to $7.6 million provided by operating
activities for the comparable period of 1995. The fluctuation is due to the
increase in accounts receivable, partially offset by the increased levels of
payables during 1996, both of which are attributable to increased volumes and
timing of collections and payments. Cash used in investing activities was
$8.9 million for the nine months ended September 30, 1996 compared to $132.2
million of cash used in investing activities for the nine months ended
September 30, 1995. The $132.2 million of cash expended during the nine
months ended September 30, 1995 consists primarily of cash paid in association
with the acquisition along with routine capital expenditures. Cash provided by
financing activities for the nine months ended September 30, 1996 in the amount
of $1.5 million represents a draw down on the Revolving Facility.
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
On December 13, 1995, the Company initiated a lawsuit in the District
Court of Dallas County, Texas styled Crain Industries, Inc., f/k/a/ Crain
Acquisition Corp. v. Dude, Inc., f/k/a/ Crain Industries, Inc., H.C.
"Dude" Crain, Jr., et al., Cause No. 95-12997, seeking money damages based
on certain allegations of misrepresentation, fraud, and breach of contract
in connection with the Acquisition. In August, 1996, the Company settled
all litigation with the Predecessor owner of Crain. The settlement
amounted to a $10.0 million reduction in purchase price through the
cancellation of a $10.0 million note payable owed to the Predecessor
owner, which resulted in a purchase price adjustment to goodwill and
inventory.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
2.1 Asset Purchase Agreement dated as of August 29, 1996, by and
among Bio Clinic Corporation, Sunrise Medical Inc., and Crain
Industries, Inc., previously filed as an exhibit to the Form 8-K
of Crain Industries, Inc., dated November 1, 1996 and incorporated
by reference herein.
27.1 Financial data schedule of Crain Industries, Inc.
(b) Reports on Form 8-K
A Form 8-K was filed November 1, 1996 for a notification of the
acquisition by Crain Industries, Inc., of the assets of the
Comfort Clinic Division of Bio Clinic Corporation, which is a
subsidiary of Sunrise Medical, Inc.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
CRAIN INDUSTRIES, INC.
Dated: November 12, 1996 By: /s/ JAMES N. MILLS
___________________________________
Name : James N. Mills
Title: Chairman of the Board and
Chief Executive Officer
By: /s/ JAMES G. POWERS
___________________________________
Name : James G. Powers
Title: Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This Schedule contains summary financial information extracted from the
financial statements contained in the body of the accompanying Form 10-Q and
is qualified in its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<CAPTION>
<S> <C>
<CIK> 0001000458
<NAME> CRAIN INDUSTRIES, INC.
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-30-1996
<CASH> 1,822
<SECURITIES> 0
<RECEIVABLES> 46,209
<ALLOWANCES> 4,042
<INVENTORY> 29,147
<CURRENT-ASSETS> 75,556
<PP&E> 52,632
<DEPRECIATION> 7,286
<TOTAL-ASSETS> 182,825
<CURRENT-LIABILITIES> 42,239
<BONDS> 110,177
0
0
<COMMON> 0
<OTHER-SE> 25,456
<TOTAL-LIABILITY-AND-EQUITY> 182,825
<SALES> 226,191
<TOTAL-REVENUES> 226,191
<CGS> 180,111
<TOTAL-COSTS> 186,678
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 575
<INTEREST-EXPENSE> 12,119
<INCOME-PRETAX> 2,212
<INCOME-TAX> 938
<INCOME-CONTINUING> 1,274
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,274
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
