<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
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FOR THE QUARTERLY PERIOD ENDED COMMISSION FILE NUMBER
JANUARY 1, 2000 0-27826
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PARTY CITY CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 22--3033692
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
400 COMMONS WAY 07866
ROCKAWAY, NEW JERSEY (Zip Code)
(Address of Principal Executive Offices)
973-983-0888
(Registrant's telephone number, including area code)
-----------------
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 / / No: /X/
Indicate the number of shares outstanding of each of the issuer's classes of
common stock as of the latest practicable date:
As of February 10, 2000, there were outstanding 12,722,205 shares of
Common Stock, $.01 par value.
<PAGE> 2
PARTY CITY CORPORATION
INDEX
<TABLE>
<CAPTION>
Part I. Financial Information Page No.
--------
<S> <C>
Item 1. Consolidated Financial Statements
Consolidated Balance Sheets - January 1, 2000 (Unaudited) and July 3, 1999 3
Consolidated Statements of Operations (Unaudited) - For the Quarters and Six 4
Months Ended January 1, 2000 and December 31, 1998
Consolidated Statements of Cash Flows (Unaudited) - For the Six Months Ended 5
January 1, 2000 and December 31, 1998
Notes to Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial Condition and Results of 12
Operations
Part II. Other Information
Item 2. Changes in Securities 17
Item 3. Defaults Under Senior Securities 17
Item 4. Submission of Matters to a Vote of Security Holders 17
Item 6. Exhibits and Reports on Form 8-K 18
Exhibit Index
</TABLE>
<PAGE> 3
PART 1. FINANCIAL INFORMATION
Item 1. Financial Statements
PARTY CITY CORPORATION AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
JANUARY 1, 2000 JULY 3, 1999*
--------------- -------------
(UNAUDITED)
ASSETS
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 11,145 $ 11,470
Merchandise inventory 42,281 47,016
Refundable income taxes 1,919 6,848
Advance merchandise payments 812 9,439
Other current assets 23,364 13,328
-------- --------
Total current assets 79,521 88,101
Property and equipment, net 45,188 50,557
Goodwill, net 15,455 18,483
Other assets 1,308 906
-------- --------
Total assets $141,472 $158,047
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts and notes payable - trade $ 32,589 $ 45,114
Accrued expenses 13,761 10,145
Credit Agreement 8,144 58,550
Other current liabilities 3,398 986
-------- --------
Total current liabilities 57,892 114,795
Deferred rent 7,020 6,527
Senior Notes 28,181 --
Other long-term liabilities 711 791
Commitments and contingencies
Stockholders' equity:
Common stock, 12,722,205 and 12,455,538 shares
outstanding, respectively 127 125
Additional paid-in capital 36,777 34,024
Retained earnings 10,764 1,785
-------- --------
Total stockholders' equity 47,668 35,934
-------- --------
Total liabilities and stockholders' equity $141,472 $158,047
======== ========
</TABLE>
* Derived from audited consolidated financial statements.
See accompanying notes to consolidated financial statements.
<PAGE> 4
PARTY CITY CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA) (UNAUDITED)
<TABLE>
<CAPTION>
QUARTER ENDED SIX MONTHS ENDED
--------------------------- ----------------------------
JANUARY 1, DECEMBER 31, JANUARY 1, DECEMBER 31,
2000 1998 2000 1998
---------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
Revenues:
Net sales $ 130,769 $ 134,199 $ 198,582 $ 190,205
Royalty fees 5,277 4,459 7,593 6,467
Franchise fees -- 35 322 395
--------- --------- --------- ---------
Total revenues 136,046 138,693 206,497 197,067
Expenses:
Cost of goods sold and occupancy costs 79,733 90,920 130,450 130,433
Company-owned stores operating and selling expense 25,651 33,274 45,674 50,308
Franchise expense 1,151 1,251 2,274 2,311
General and administrative expense 6,440 6,672 14,853 9,867
--------- --------- --------- ---------
Total expenses 112,975 132,117 193,251 192,919
--------- --------- --------- ---------
Earnings before interest and income taxes 23,071 6,576 13,246 4,148
Interest expense 2,070 615 4,504 1,763
--------- --------- --------- ---------
Earnings before income taxes 21,001 5,961 8,742 2,385
Provision for income taxes (benefit) (237) 2,607 (237) 1,192
--------- --------- --------- ---------
Net income $ 21,238 $ 3,354 $ 8,979 $ 1,193
========= ========= ========= =========
Basic earnings per share $ 1.69 $ 0.27 $ 0.72 $ 0.10
========= ========= ========= =========
Weighted average shares outstanding - basic 12,543 12,456 12,499 12,462
========= ========= ========= =========
Diluted earnings per share $ 1.69 $ 0.27 $ 0.72 $ 0.10
========= ========= ========= =========
Weighted average shares outstanding - diluted 12,543 12,456 12,499 12,462
========= ========= ========= =========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 5
PARTY CITY CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS) (UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
---------------------------
JANUARY 1, DECEMBER 31,
2000 1998
---------- ------------
<S> <C> <C>
Cash flow from operating activities:
Net income $ 8,979 $ 1,193
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization 5,329 3,867
Non-cash interest 701 --
Deferred rent 493 1,573
Provision for doubtful accounts 477 --
Loss on sale of stores to franchisees 1,042 --
Deferred tax asset (915) 1,367
Changes in assets and liabilities:
Merchandise inventory 203 (5,278)
Refundable income taxes 4,929 (1,875)
Advance merchandise payments 8,627 --
Other current assets (10,008) (3,632)
Other assets (385) 47
Accounts and notes payable (12,525) 15,490
Accrued expenses 3,617 5,719
Other current liabilities 1,312 328
Other long-term liabilities (81) (86)
-------- --------
Net cash provided by operating activities 11,795 18,713
Cash flow from investment activities
Purchases of property and equipment (1,789) (20,006)
Proceeds from sales of stores to franchisees 9,877 --
Stores acquired from franchisees -- (5,970)
Disposals of property and equipment 81 15
-------- --------
Net cash provided by (used in) investing activities 8,169 (25,961)
Cash flow provided by financing activities
Proceeds from issuance of stock in exchange for services 800 --
Proceeds from issuance of Senior Notes and warrants 30,000 --
Senior Note issuance costs (673) --
Tax effect of non-qualified stock options (10) 1,023
Net proceeds from (payments on) Credit Agreement (50,406) 7,520
Proceeds from exercise of stock options -- 174
-------- --------
Net cash provided from (used in) financing activities (20,289) 8,717
-------- --------
Net increase (decrease) in cash and cash equivalents (325) 1,469
Cash and cash equivalents, beginning of period 11,470 5,089
-------- --------
Cash and cash equivalents, end of period $ 11,145 $ 6,558
======== ========
Supplemental disclosure of cash flow information:
Income taxes paid 250 226
Interest paid 2,443 1,933
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 6
PARTY CITY CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
The consolidated financial statements presented in this Form 10-Q, except
for the July 3, 1999 consolidated balance sheet, are unaudited. In the opinion
of management, the accompanying consolidated financial statements contain all
adjustments (consisting only of normal recurring accruals) necessary to present
fairly the financial position of the Company as of January 1, 2000 and the
results of operations for the interim periods presented and cash flows for six
months ended January 1, 2000 and December 31, 1998. Because of the seasonality
of the party goods industry, operating results of the Company on a quarterly
basis may not be indicative of operating results for the full year.
These consolidated financial statements should be read in conjunction with
the Company's audited consolidated financial statements for the eighteen-month
period ended July 3, 1999, included in the Company's Annual Report on Form 10-K
filed with the Securities and Exchange Commission. All significant intercompany
accounts and transactions have been eliminated. The July 3, 1999 consolidated
balance sheet amounts have been derived from the Company's audited consolidated
balance sheet amounts.
Effective July 3, 1999, the Company changed its fiscal year end for
financial reporting from December 31 to the Saturday nearest to June 30. The
Company continues to use December 31 as its tax year end. The change to a 52-53
week calendar was made to facilitate comparable store sales computations. The
term "Fiscal Year" refers to the 52-53 weeks ending the Saturday nearest June
30, unless otherwise noted.
2. FINANCING ACTIVITIES
On April 24, 1998, the Company refinanced and replaced its then existing
$20 million loan facility with a $60 million secured revolving line of credit
agreement with a group of banks maturing April 24, 2001 (as amended, the "Credit
Agreement"). Advances under the Credit Agreement originally bore interest, at
the Company's option, at the agent bank's base rate (the higher of the bank's
prime rate or the federal funds rate plus 1/2% per annum) or LIBOR plus an
applicable margin. The Company did not meet certain of its financial and
reporting covenants, including those relating to timely filing of consolidated
financial statements, minimum levels of profitability, net worth, liquidity,
fixed charge coverage and others. Consequently, the Company's debt under the
Credit Agreement was subject to acceleration and is classified as a current
liability in the consolidated balance sheets at January 1, 2000 and July 3,
1999. The Credit Agreement was secured by all the assets of the Company.
Additionally, the Credit Agreement restricted the payment of dividends.
On August 16, 1999, the Company entered into the following agreements with
its existing bank lenders under the Credit Agreement (the "Banks"), a new group
of investors (the "Investors") and its trade vendors. The Banks and the Company
entered into a Standstill and Forbearance Agreement (the "Bank Forbearance
Agreement"). Under the Bank Forbearance Agreement, the Banks agreed not to
exercise rights and remedies based upon any existing defaults until June 30,
2000 unless a further event of default occurred. The interest rate on its bank
debt was increased to 2% over the bank's prime interest rate, and the Company
paid a forbearance fee of $580,000.
On August 17, 1999, the Company received $30 million in financing from the
Investors. The Investors purchased senior secured notes and warrants pursuant to
separate securities purchase agreements (the "Securities Purchase Agreements")
each dated as of August 16, 1999. Under these Securities Purchase Agreements,
the Company issued (i) $10 million of its 12.5% Secured Notes due 2003 (the "A
Notes"); (ii)$5 million of its 13.0% Secured Notes due 2003 (the "B Notes");
(iii) $5 million of its 13.0% Secured Notes due 2002 (the "C Notes"); (iv) $10
million of its 14.0% Secured Notes due 2004 (the "D Notes", and together with
the A Notes, the B Notes and the C Notes, the "Notes"); and (v) warrants (the
"Warrants") to purchase 6,880,000 shares of the Company's common stock at an
initial exercise price of $3.00 per share.
<PAGE> 7
See Note 3 to consolidated financial statements. Up to $15 million of the Notes
was secured by a first lien that was pari passu with the liens under the Credit
Agreement. The Notes are also secured by a second lien on all of the Company's
assets. The Company issued the Warrants in connection with the sale of the C
Notes and the D Notes. The Warrants may be exercised before the close of
business on August 16, 2006. The shares of Common Stock reserved for issuance
under the Warrants represent approximately 35% of the shares of Common Stock
outstanding assuming the exercise of the Warrants. The warrants were valued at
$1,965,000 based on management's estimate using certain fair value methodologies
and represent an original issue discount to the C and D notes. This discount is
being amortized using the effective interest method. The effective yield is
18.3% and 18.9% on the C Notes and D Notes, respectively. The proceeds from the
$30 million in new financing were used for the purchase of seasonal inventory,
payment of amounts due under the Credit Agreement, transaction fees and working
capital.
The Company also entered into an Investor Rights Agreement (the "Investor
Rights Agreement") with the Investors and the previous chief executive officer
of the Company. In this agreement, the Company granted registration rights with
respect to shares of common stock. Under the Investor Rights Agreement, the
Investors agree that they will not, without the prior written consent of the
Board of Directors, (i) acquire or agree to acquire, publicly offer or make any
public proposal with respect to the possible acquisition of (a) beneficial
ownership of any securities of the Company, (b) any substantial part of the
Company's assets, or (c) any rights or options to acquire any of the foregoing
from any person; (ii) make or in any way participate in any "solicitation" of
"proxies" (as such terms are defined in the rules of the Securities Exchange Act
of 1934, as amended) to vote, or seek to advise or influence any person with
respect to the voting of any voting securities of the Company; or (iii) make any
public announcement with respect to any transaction between the Company or any
of its securities holders and the Investors, including without limitation, any
tender or exchange offer, merger or other business combination of a material
portion of the assets of the Company. These standstill provisions terminate if
the Company's consolidated earnings before interest, taxes, depreciation and
amortization and exclusive of special charges ("EBITDA"), as defined in the
Investor Rights Agreement, does not meet specified targets. The Company achieved
its target EBITDA for the calendar year 1999. Also, in connection with these
transactions, one outside director of the Company resigned and two
representatives of the Investors joined the Board of Directors.
Party City's trade vendors representing approximately $36.4 million of
trade debt also entered into an agreement with the Company. Pursuant to a Vendor
Standstill and Forbearance Agreement ("Vendor Forbearance Agreement"), these
trade vendors agreed to forbear from taking any action against Party City until
January 15, 2000. The trade vendors received promissory notes from Party City
totaling approximately $12.2 million representing one-third of their unpaid
balances as of May 1, 1999 (the "Trade Notes"). The Trade Notes bore interest at
a rate of 10% per year and were scheduled to mature on November 15, 1999.
Interest on the Trade Notes was due on January 15, 2000. As of February 10,
2000, substantially all the remaining two-thirds of the unpaid balances that
were due as of May 1, 1999, have been satisfied through individual arrangements
with such vendors. See Note 3 to consolidated financial statements.
In order to meet the cash flow requirements of the Halloween seasonal
purchase of inventory and to meet the requirements of the Bank Forbearance
Agreement, the Company identified stores for sale to existing franchisees to
generate working capital. Eighteen stores with a net book value of approximately
$9.8 million were sold to franchisees, of which seventeen stores with a net book
value of approximately $9.4 million were sold in the quarter ended October 2,
1999. In order to facilitate the sale of these stores, franchise fees were
negotiated at lower than normal rates for specific periods. The total proceeds
from the sales of these stores was approximately $9.9 million of which $9.7
million was received subsequent to July 3, 1999. The net proceeds from the sale
of stores was required under the Bank Forbearance Agreement to be used to pay
down the outstanding borrowings under the Credit Agreement.
<PAGE> 8
3. SUBSEQUENT EVENTS
On January 14, 2000, the Company replaced the Credit Agreement with a new
revolving credit facility with Congress Financial Corporation ("Congress"), as
lender. Under the terms of the Loan and Security Agreement (the "Loan
Agreement") which the Company entered into with Congress, the Company may from
time to time borrow amounts based on a percentage of its eligible inventory, up
to a maximum of $40 million at any time outstanding. Advances bear interest, at
the Company's option, (i) at the adjusted Eurodollar rate plus the applicable
margin, which will initially be 2.75% per annum (subject to possible reduction
to a margin as low as 2.25% from and after June 30, 2001, based on the Company's
pre-tax income and excess availability) or (ii) at the rate of 3/4% per annum
above the prime rate. The term of the Loan Agreement is three years, and is
secured by a lien on substantially all of the assets of the Company. At February
10, 2000, $7.5 million was outstanding under the Loan Agreement.
Party City also received $7 million in cash proceeds from the sale to
certain of its existing investors (the "Investor Group") of a new series of
senior secured notes pursuant to a First Amendment (the "First Amendment") to
the Securities Purchase Agreement dated as of August 16, 1999. Pursuant to the
First Amendment, the Company issued $7,000,000 in aggregate principal amount of
its 14.0% Secured Notes due 2002 (the "E Notes"). The E Notes are secured by a
lien on substantially all of the Company's assets. The Investor Group, together
with other existing investors and Congress, have entered into an intercreditor
agreement. In consideration for waivers and forbearances granted by the
Investors to various defaults under the terms of the Company's existing senior
secured notes, the Company also agreed to amend and restate the terms of
existing warrants (the "Existing Warrants") held by such investors to acquire
6,880,000 shares of the Company's Common Stock. The amended and restated
warrants (the "Amended Warrants") will provide for an exercise price of $1.07
per share and were issued upon surrender of the Existing Warrants, which have an
exercise price of $3.00 per share. These shares represent approximately 35% of
the shares outstanding after giving effect to the exercise of the Amended
Warrants. The Company used the proceeds from the sale of the E Notes and initial
amounts borrowed under the Loan Agreement (i) to pay off all amounts owing under
its current credit facility, (ii) to pay all amounts owing on the trade notes
issued to certain of its vendors in August 1999 and (iii) to pay the remaining
amounts owed to various seasonal trade vendors for credit extended for inventory
purchased by the Company for the 1999 Halloween, Thanksgiving and Christmas
seasons.
<PAGE> 9
The Company's unaudited pro forma consolidated balance sheet as of January
1, 2000, after giving effect to the January 14, 2000 refinancing transactions
described above, is as follows (in thousands):
<TABLE>
<CAPTION>
PROFORMA
JANUARY 1, PROFORMA JANUARY 1,
2000 ADJUSTMENTS 2000
---- ----------- ----
(UNAUDITED) (UNAUDITED) (UNAUDITED)
<S> <C> <C> <C>
Current assets
Cash and cash equivalents $ 11,145 $ (979) $ 10,166
Merchandise inventory 42,281 -- 42,281
Other current assets 26,095 (3,067) 23,028
-------- -------- --------
Total current assets 79,521 (4,046) 75,475
Property and equipment, net 45,188 -- 45,188
Goodwill, net 15,455 -- 15,455
Other assets 1,308 -- 1,308
-------- -------- --------
Total assets $141,472 $ (4,046) $137,426
======== ======== ========
Current liabilities
Accounts and notes payable $ 32,589 $ (9,238) $ 23,351
Accrued expenses 13,761 -- 13,761
Credit Agreement 8,144 (8,144) --
Other current liabilities 3,398 -- 3,398
-------- -------- --------
Total current liabilities 57,892 (17,382) 40,510
Long-term liabilities
Loan Agreement -- 6,336 6,336
Senior Notes 28,181 7,000 35,181
Other long-term liabilities 7,731 -- 7,731
Stockholders equity 47,668 -- 47,668
-------- -------- --------
Total liabilities and stockholders' equity $141,472 $ (4,046) $137,426
======== ======== ========
</TABLE>
4. RELATED PARTY TRANSACTION
On November 2, 1999, the Company's Non-Executive Chairman of the Board
purchased $166,667 of the Company's 13.0% Secured Notes due 2002 and $333,333 of
the Company's 14.0% Secured Notes due 2004 from an Investor for a total purchase
price of $498,184. In connection with that purchase, the Non-Executive Chairman
acquired warrants to purchase 229,333 shares of the Company's common stock at an
exercise price of $3.00. In connection with the negotiations discussed in Note 3
above, on January 14, 2000, the exercise price for the warrants was reduced to
$1.07.
5. SECURITIES LITIGATION
The Company has been named as a defendant in the following twelve class
action complaints: (1) Weber v. Party City Corp., Steven Mandell, and David
Lauber, Civ. Action No. 99-CV-1252; (2) Opus GT Partners LP v. Party City Corp.
and Steven Mandell, Civ. Action No. 99-CV-1327; (3) Klein and Shiffrin v. Party
City Corp., Steven Mandell and David Lauber, Civ. Action No. 99-CV-1325; (4)
Flynn v. Party City Corp., David Lauber and Steven Mandell, Civ. Action No.
99-CV-1328; (5) Catanzarite v. Party City Corp., Steven Mandell and David
Lauber, Civ. Action No. 99-CV-1317; (6) Tabbert v. Party City Corp. and Steven
Mandell, Civ. Action No. 99-CV-1353; (7) Maietta v. Steven Mandell and Party
City Corp., Civ. Action No. 99-CV-1386; (8) Barry v. Party City Corp., Steven
Mandell and David Lauber, Civ. Action No. 99-CV-1453; (9) Kurzweil v. Party City
Corp., Steven Mandell and David Lauber, Civ. Action No. 99-CV-1396; (10) Hormel
v. Party City Corp., Steven Mandell and David Lauber, Civ. Action No.
99-CV-1689; (11) Sacher v. Party City Corp., Steven Mandell and David Lauber,
Civ. Action No. 99-CV-2238: and (12) Gross v. Party City Corp., Steven Mandell
and David Lauber, Civ. Action No. 99-CV-2355. The
<PAGE> 10
Company's former Chief Executive Officer and former Chief Financial Officer and
Executive Vice President of Operations have also been named as defendants. The
complaints have all been filed in the United States District Court for the
District of New Jersey. The complaints were filed as class actions on behalf of
persons who purchased or acquired Party City common stock during various time
periods between February 1998 and March 19, 1999.
The complaints allege, among other things, violations of sections 10(b) and
20(a) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated
thereunder, and seek unspecified damages. The plaintiffs allege that defendants
issued a series of false and misleading statements and failed to disclose
material facts concerning, among other things, the Company's financial
condition, adequacy of internal controls and compliance with certain loan
covenants. The plaintiffs further allege that because of the issuance of a
series of false and misleading statements and/or failure to disclose material
facts, the price of Party City common stock was artificially inflated.
On September 13, 1999, the Court signed an Order appointing lead plaintiffs
and lead counsel to represent the classes alleged in the complaints. The Order
directed plaintiffs to file a consolidated and amended complaint in October
1999, which the plaintiffs did and which was served on the Company on or about
October 18, 1999.
The defendants have made a motion to dismiss the complaint and it is
anticipated that a hearing with respect to that motion will be held in March
2000.
Other
The Company was named as a defendant in a complaint filed with the Supreme
Court of the State of New York, County of New York, on January 16, 1998 (the
"Complaint"), by each of Party City of Greenbrook, Inc., Party City of Watchung,
Inc., Party City of 22, Inc., Party City of Ralph Avenue and Party City of
Jersey City, Inc., each a franchisee of the Company. Four of the plaintiffs in
the suit have existing Party City franchise stores, with the remaining plaintiff
possessing a right of first refusal to develop a Party City store in Watchung,
New Jersey.
The Complaint stated various causes of action, including unjust enrichment,
unfair competition, fraud and misrepresentation, breach of contract,
misappropriation of information and violations of the New Jersey Franchise
Practices Act and the New York State Franchise Sales Act. The crux of the
Complaint was that the Company undertook a course of conduct intentionally
designed to adversely impact the value of the Plaintiffs' franchise stores in
order to permit the Company to purchase such stores at a substantially reduced
value. The Company settled the lawsuit on June 30, 1999, at no cost to the
Company. In connection with the settlement, the Company agreed to sell the
plaintiff one store at its fair value.
On April 23, 1999, plaintiff Emil Asch, Inc. filed a Complaint in the
United States District Court for the Eastern District of New York against the
Company and co-defendants Amscan, Inc., Hallmark, Inc., and Rubie's Costume. The
Complaint alleges five violations of the Robinson-Patman Act, which pertains to
price discrimination, unfair competition, tortious interference with contractual
relations, and false and deceptive advertising.
Plaintiff seeks damages of $2 million, as well as treble and punitive
damages for certain counts. The Company has answered the Complaint, and
discovery should proceed shortly.
Although the Company's management is unable to express a view on the likely
outcome of these litigations because they are in their early stages, they could
have a material adverse effect on the Company's business and results of
operations.
In addition to the foregoing, the Company is from time to time involved in
routine litigation incidental to the conduct of its business. The Company is
aware of no other material existing or threatened litigation to which it is or
may be a party.
<PAGE> 11
6. STOCKHOLDERS' EQUITY
The Company entered into an agreement with a crisis management firm in
April 1999 to assist the Company in restructuring its operations as well as with
negotiations with its vendors and banks. Based on the attainment of certain
goals in the first quarter of fiscal 2000, the crisis management firm earned a
success fee, which at the option of the crisis management firm was to be paid
either in cash or a combination of cash and stock. The Company recorded a
liability for the success fee in the first quarter of fiscal 2000. In the second
quarter, the crisis management firm agreed to accept 80% of its success fee in
stock and as such the Company issued 266,667 shares of common stock in the
second quarter of fiscal 2000.
7. SEGMENT INFORMATION
The following table contains key financial information of the Company's
business segments (in thousands):
<TABLE>
<CAPTION>
QUARTER ENDED SIX MONTHS ENDED
JANUARY 1, DECEMBER 31, JANUARY 1, DECEMBER 31,
2000 1998 2000 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
RETAIL:
Net revenue $ 130,769 $ 134,199 $ 198,582 $ 190,205
Operating earnings 25,385 10,005 22,458 9,464
Identifiable assets 130,058 138,794 130,058 138,794
Depreciation/amortization 2,077 1,755 4,233 3,376
Capital expenditures 429 1,489 786 15,680
FRANCHISING:
Net revenue $ 5,277 $ 4,494 $ 7,915 $ 6,862
Operating earnings 4,126 3,243 5,641 4,551
Identifiable assets 2,400 2,564 2,400 2,564
Depreciation/amortization -- -- -- --
Capital expenditures -- -- -- --
CORPORATE/OTHER:
Net revenue $ -- $ -- $ -- $ --
Operating expenses 6,440 6,672 14,853 9,867
Identifiable assets 9,014 8,601 9,014 8,601
Depreciation/amortization 557 228 1,096 514
Capital expenditures 553 1,885 1,003 4,326
CONSOLIDATED TOTALS:
Net revenue $ 136,046 $ 138,693 $ 206,497 $ 197,067
Operating earnings 23,071 6,576 13,246 4,148
Interest expense 2,070 615 4,504 1,763
--------- --------- --------- ---------
Earnings before income taxes 21,001 5,961 8,742 2,385
Provision for income taxes (benefit) (237) 2,607 (237) 1,192
--------- --------- --------- ---------
Net income $ 21,238 $ 3,354 $ 8,979 $ 1,193
========= ========= ========= =========
Identifiable assets $ 141,472 $ 149,959 $ 141,472 $ 149,959
Depreciation/amortization 2,634 1,983 5,329 3,890
Capital expenditures 982 3,374 1,789 20,006
</TABLE>
<PAGE> 12
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
SELECTED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE AND STORE DATA)
<TABLE>
<CAPTION>
QUARTER ENDED SIX MONTHS ENDED
------------- ----------------
JANUARY 1, DECEMBER 31, JANUARY 1, DECEMBER 31,
2000 1998 2000 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Total revenue $ 136,046 $ 138,693 $ 206,497 $ 197,067
========= ========= ========= =========
Company-owned stores
Net sales $ 130,769 $ 134,199 $ 198,582 $ 190,205
Cost of goods sold and occupancy costs 79,733 90,920 130,450 130,433
--------- --------- --------- ---------
Gross profit 51,036 43,279 68,132 59,772
Store operating and selling expense 25,651 33,274 45,674 50,308
--------- --------- --------- ---------
Company-owned stores profit contribution 25,385 10,005 22,458 9,464
Franchise stores:
Royalty fees 5,277 4,459 7,593 6,467
Franchise fees -- 35 322 395
--------- --------- --------- ---------
Total franchise revenues 5,277 4,494 7,915 6,862
Total franchise expense 1,151 1,251 2,274 2,311
--------- --------- --------- ---------
Franchise profit contribution 4,126 3,243 5,641 4,551
General and administrative expense:
Special charges (a) 1,394 -- 6,262 --
Other general and administrative expenses 5,046 6,672 8,591 9,867
--------- --------- --------- ---------
6,440 6,672 14,853 9,867
--------- --------- --------- ---------
Earnings before interest and income taxes 23,071 6,576 13,246 4,148
Interest expense, net 2,070 615 4,504 1,763
--------- --------- --------- ---------
Earnings before income taxes 21,001 5,961 8,742 2,385
Provision for income taxes (benefit) (237) 2,607 (237) 1,192
--------- --------- --------- ---------
Net income $ 21,238 $ 3,354 $ 8,979 $ 1,193
========= ========= ========= =========
Basic earnings per share $ 1.69 $ 0.27 $ 0.72 $ 0.10
========= ========= ========= =========
Diluted earnings per share $ 1.69 $ 0.27 $ 0.72 $ 0.10
========= ========= ========= =========
Weighted average shares outstanding -- Basic 12,543 12,456 12,499 12,462
========= ========= ========= =========
Weighted average shares outstanding -- Diluted 12,543 12,456 12,499 12,462
========= ========= ========= =========
EBITDA (b) $ 27,100 $ 8,559 $ 24,838 $ 8,038
========= ========= ========= =========
</TABLE>
(a) Special charges relate to consulting services, accounting fees, bank
fees, legal fees and other expenses related to the Company's default on its
Credit Agreement and related financial and refinancing transactions. The Company
engaged the services of a crisis management consulting firm and various other
professionals and consultants to advise management during the complex
negotiations with the bank, vendors and potential investors.
(b) Earnings before interest, taxes, depreciation and amortization, and
exclusive of special charges, as defined above.
<PAGE> 13
<TABLE>
<CAPTION>
QUARTER ENDED SIX MONTHS ENDED
------------- ----------------
JANUARY 1, DECEMBER 31, JANUARY 1, DECEMBER 31,
2000 1998 2000 1998
------ ------ ------ ------
<S> <C> <C> <C> <C>
STORE DATA:
COMPANY-OWNED:
Stores open at beginning of period 199 193 215 148
Stores opened -- 14 1 54
Stores closed (1) -- (1) --
Stores acquired from franchisees -- -- -- 5
Stores sold to franchisees -- -- (17) --
------ ------ ------ ------
Stores open at end of period 198 207 198 207
FRANCHISE:
Stores open at beginning of period 207 167 178 161
Stores opened -- -- 12 11
Stores closed (1) -- (1) --
Stores acquired from corporate -- -- 17 --
Stores sold to corporate -- -- -- (5)
------ ------ ------ ------
Stores open at end of period 206 167 206 167
------ ------ ------ ------
404 374 404 374
====== ====== ====== ======
Increase in company-owned same store
sales 3.9% 11.9% 1.3% 11.3%
Increase in franchise same store sales 12.1% 7.9% 10.3% 6.0%
Average sales per Company-owned store
(in thousands) $661.8 $660.1 $985.0 $988.3
</TABLE>
<TABLE>
<CAPTION>
BALANCE SHEET DATA: January 1, December 31,
2000 1998
---- ----
<S> <C> <C>
Working capital (deficiency) $ 21,629 $ 15,396
Total assets 141,472 149,959
Bank borrowings and other debt 36,325 46,800
Capital lease obligation 880 994
Stockholders' equity 47,668 48,493
</TABLE>
QUARTER ENDED JANUARY 1, 2000 ("SECOND QUARTER") COMPARED TO QUARTER ENDED
DECEMBER 31, 1998 ("1998 QUARTER")
Retail. Net sales from Company-owned stores decreased 2.6% to $130.8
million for Second Quarter, from $134.2 million for the comparable 1998 Quarter.
The decrease in sales is the result of the decreased number of stores offset in
part by same store sales increases. Same store sales increased 3.9% in the
Second Quarter. Gross profit reflects the cost of goods sold and store occupancy
costs including rent, common area maintenance, real estate taxes, repair and
maintenance, depreciation and utilities. Gross profit for the Second Quarter
increased 17.9% to $51.0 million from $43.3 million for the comparable 1998
Quarter. The increase in gross profit in the Second Quarter was primarily due to
a charge of $7.9 million recorded in the 1998 quarter. This charge was the
result of the reconciliation of the physical inventory counts taken in January
through March of 1999. In addition, the Company increased its provision for
obsolete inventory by $2.7 million during the 1998 Quarter. Gross margin was
39.0% for the Second Quarter compared with 32.2% for the comparable 1998
Quarter.
Store operating and selling expenses decreased 22.9% to $25.7 million for
the Second Quarter from $33.3 million in the comparable 1998 Quarter. The
decrease in store operating expenses is primarily attributable to decreased
store payroll and bonuses of $2.6 million and reduced advertising of $2.6
million during the Second Quarter. Store operating and selling expenses were
19.6% and 24.8% of sales for the Second Quarter and 1998 Quarter, respectively.
Pre-opening expenses of $38,000 were incurred in the
<PAGE> 14
quarter related to one third quarter opening (no Company-owned stores were
opened in the second quarter compared to pre-opening expenses of $169,000
incurred in the 1998 Quarter in connection with the opening of 14 stores.
Company-owned stores recorded a profit contribution of $25.4 million for the
Second Quarter, compared to a contribution of $10.0 million for the 1998
Quarter.
Franchising. Franchise revenue is composed of the initial franchise fees
that are recorded as revenue when the store opens, and ongoing royalty fees,
generally 4% of the store's net sales. Royalty fees increased 18.3% to $5.3
million in the Second Quarter from $4.5 million in the comparable 1998 Quarter
due primarily to an increase in the number of stores and same-store sales
increases of 12.1%. No franchise fee income was recognized in the second
quarter, compared to $ 35,000 recognized in the comparable period in 1998.
Expenses directly related to franchise revenue decreased 9.8% to $1.2
million for the Second Quarter from $1.3 million for the comparable 1998 period.
As a percentage of franchise revenue, franchise expenses were 21.8% and 27.8%
for the Second Quarter and 1998 Quarter, respectively.
Franchise profit contribution increased 27.2% to $4.1 million for the
Second Quarter from $3.2 million for the comparable 1998 Quarter. The increase
in franchise profit contribution is due to higher revenues from the increased
number of franchise stores and same-store sales increases.
General and Administrative. General and administrative expenses decreased
3.5% to $6.4 million in the Second Quarter from $6.7 million in the comparable
1998 Quarter. This decrease includes $1.3 in special charges relating to
consulting accounting, banking and other expense resulting from the Company's
refinancing arrangements in the second Quarter. Exclusive of the $1.3 million in
special charges, general and administrative expenses were 3.8% and 4.8% of
revenue for the Second Quarter and 1998 Quarter, respectively. This decrease
primarily results from lower payroll expenses due to reduced corporate staffing
and from reduced recurring professional fees.
Interest Expense. Interest expense increased 236% to $2.1 million for the
Second Quarter from $615,000 in the comparable 1998 Quarter. The increased
expense is primarily attributable to increased interest rates, new borrowings
and increased average borrowings outstanding.
Income Taxes (Benefit). There was a tax benefit of $237,000 for the Second
Quarter as compared to the $2.6 million expense reported in the 1998 Quarter.
The tax benefit in the Second Quarter was the result primarily of reduced
valuation allowances against deferred tax assets and previous federal and state
net operating losses.
Net Income. As a result of the above factors, net income for the Second
Quarter was $21.2 million, or $1.69 per basic and diluted share, in the Second
Quarter, as compared to a net income of $3.4 million, or $0.27 per basic and
diluted share in the 1998 Quarter.
SIX MONTHS ENDED JANUARY 1, 2000 COMPARED TO SIX MONTHS ENDED DECEMBER 31, 1998
Retail. Net sales from Company-owned stores increased 4.4% to $198.6
million for the six months ended January 1, 2000, from $190.2 million for the
comparable six month period ended December 31, 1998. This increase is the result
of the maturing of stores opened in the 1998 period plus same-store sales
increases, offset by the effects of the 17 stores sold in the first quarter.
Same store sales increased 1.3% in the 1999 period. Gross profit reflects the
cost of goods sold and store occupancy costs including rent, common area
maintenance, real estate taxes, repair and maintenance, depreciation and
utilities. Gross profit for the 1999 period increased 14.0% to $68.1 million
from $59.8 million for the comparable 1998 period. The increase in gross profit
in the 1999 period was primarily due to a charge of $7.9 million recorded in the
1998 period. This charge was the result of the reconciliation of the physical
inventory counts taken in January through March of 1999. In addition, the
Company increased its provision for obsolete inventory by $2.7 million during
the 1998 period. Gross margin was 34.3% for the 1999 period compared with 31.4%
for the comparable 1998 period.
<PAGE> 15
Store operating and selling expenses decreased 9.2% to $45.7 million for
the 1999 period from $50.3 million in the comparable 1998 period. The decrease
in store operating expenses is attributable primarily to reduced advertising
expense of $1.8 million, reduced supplies expense of $804,000 and reduced other
operating expenses of $2.1 million. Store operating and selling expenses were
23.0% and 26.4% of sales for the 1999 period and 1998 period, respectively.
Pre-opening expenses in the 1999 period were $86,000 for the one Company-owned
store opened in the period plus one store planned to be opened in the third
quarter compared to pre-opening expenses of $604,000 for 54 stores opened in the
1998 period. Company-owned stores recorded a profit contribution of $22.5
million for the 1999 period, compared to a contribution of $9.5 million for the
1998 period. The increased contribution was primarily the result of reduced cost
of sales and lower operating expenses, including the decrease in pre-opening
expenses, and the increased profitability of mature stores.
Franchising. Franchise revenue is composed of the initial franchise fees
that are recorded as revenue when the store opens, and ongoing royalty fees,
generally 4% of the store's net sales. Franchise fees, recognized on 12 store
openings were $322,000 for the 1999 period compared to $395,000 for the
comparable 1998 period, which represents 11 store openings. Royalty fees
increased 17.4% to $7.6 million in the 1999 period from $6.5 million in the
comparable 1998 period due primarily to an increase in the number of franchise
stores and same-store sales increases of 10.3%.
Expenses directly related to franchise revenue decreased 1.6% to $2.3
million for the 1999 period from $2.3 million for the comparable 1998 quarter.
As a percentage of franchise revenue, franchise expenses were 28.7% and 33.7%
for the 1999 period and 1998 period, respectively. Franchise expenses declined
primarily as a result of reduced system development costs and administrative
expenses incurred.
Franchise profit contribution increased 23.9% to $5.6 million for the 1999
period from $4.6 million for the comparable 1998 period. The increase in
franchise profit contribution is due to higher revenues from the increased
number of franchise stores and same-store sales increases.
General and Administrative. General and administrative expenses increased
50.1% to $14.9 million in the 1999 period from $9.9 million in the comparable
1998 period. This increase is primarily attributable to $6.3 million in special
charges relating to consulting accounting, banking and other expense resulting
from the Company's refinancing arrangements. During the 1999 period there was a
decrease in corporate expenses primarily attributable to decreased travel,
professional fees and other costs. Exclusive of the $6.3 million in special
charges discussed above, general and administrative expenses were 4.3% and 5.0%
of revenue for the 1999 period and 1998 period, respectively.
Interest Expense. Interest expense increased 155.5% to $4.5 million for the
1999 period from $1.7 million in the comparable 1998 period. The increased
expense is primarily attributable to increased interest rates, new borrowings
and average borrowings outstanding.
Income Taxes (Benefit). There was a tax benefit of $237,000 for the 1999
period as compared to the $1.2 million expense reported in the 1998 period. The
tax benefit in 1999 was primarily due to reduced valuation allowances against
deferred tax assets and the use of previous federal and state net operating
losses.
Net Income. As a result of the above factors, net income for the 1999
period was $9.0 million, or $0.72 per basic and diluted share, in the 1999
period, as compared to a net income of $1.2 million, or $0.10 per basic and
diluted share in the 1998 period.
LIQUIDITY AND CAPITAL RESOURCES
For the six month period ended January 1, 2000, cash provided by operating
activities was $11.8 million, compared to $18.7 million for the comparable 1998
Period. The decrease in cash provided by operating activities was primarily
attributable to increases in other current assets and other assets of $10.4
million, decreases in 1999 in accounts payable of $12.5 million, compared to an
increase in accounts
<PAGE> 16
payable of $15.5 million in the 1998 period, offset in part by a reduction of
refundable income taxes of $4.9 million and increased net income of $7.8
million.
Cash provided by investing activities for the 1999 period was $8.2 million
compared to $25.9 million used in investing in the comparable 1998 period. The
change in cash used in investing activities was primarily attributable to
declines in new store additions and acquisitions. During the 1999 period, one
new store was opened compared to 54 stores opened in the 1998 period. No stores
were acquired in the 1999 period, compared to five stores acquired in the 1998
period.
Cash used in financing activities was $20.3 million for the 1999 period
compared to cash provided by financing activities of $8.7 million in the
comparable 1998 period. This change is primarily attributable to the repayment
of borrowings of $50.4 million under the Credit Agreement and net proceeds of
$29.3 million from the issuance of Senior Notes.
On January 14, 2000, the Company replaced the Credit Agreement with a new
revolving credit facility with Congress Financial Corporation ("Congress"), as
lender. Under the terms of the Loan and Security Agreement (the "Loan
Agreement") which the Company entered into with Congress, the Company may from
time to time borrow amounts based on a percentage of its eligible inventory, up
to a maximum of $40 million at any time outstanding. Advances bear interest, at
the Company's option, (i) at the adjusted Eurodollar rate plus the applicable
margin, which will initially be 2.75% per annum (subject to possible reduction
to a margin as low as 2.25% from and after June 30, 2001, based on the
Company's pre-tax income and excess availability) or (ii) at the rate of 3/4%
per annum above the prime rate. The term of the Loan Agreement is three years,
and the credit facility is secured by a lien on substantially all of the assets
of the Company. On February 10, 2000, $7.5 million was outstanding under the
Loan Agreement.
Party City also received $7 million of cash proceeds from the sale to
certain of its existing investors (the "Investor Group") of a new series of
senior secured notes pursuant to a First Amendment (the "First Amendment") to
the Securities Purchase Agreement dated as of August 16, 1999. Pursuant to the
First Amendment, the Company issued $7,000,000 in aggregate principal amount of
its 14.0% Secured Notes due 2002 (the "E Notes"). The E Notes are secured by a
lien on substantially all of the Company's assets.
The Company used the proceeds from the sale of the E Notes and initial
amounts borrowed under the Loan Agreement (i) to pay off all amounts owing under
its current credit facility, (ii) to pay all amounts owing on the trade notes
issued to certain of its vendors in August 1999 and (iii) to pay the remaining
amounts owed to various seasonal trade vendors for credit extended for inventory
purchased by the Company for the 1999 Halloween, Thanksgiving and Christmas
seasons. As of February 10, 2000, substantially all the remaining unpaid
balances that were due as of May 1, 1999, have been satisfied through individual
arrangements with the Company's vendors.
IMPACT OF YEAR 2000 ON THE COMPANY'S COMPUTER OPERATIONS
The Company prepared for the impact of the arrival of the Year 2000 on its
business. The "Year 2000 Problem" is a term used to describe the problems
created by systems that are unable to accurately interpret dates after December
31, 1999. The Year 2000 Problem created potential risks for the Company,
including the inability to recognize and properly treat dates occurring on or
after January 1, 2000, which may have resulted in computer system failures or
miscalculations of critical financial or operations information.
As of the date of this filing, February 14, 2000, the Company has not
incurred any significant business disruptions as a result of year 2000 issues.
However, while no such occurrence has developed as of the date of this filing,
year 2000 issues that may arise related to material Third Parties may not become
apparent immediately and therefore, there is no assurance that the Company will
not be affected by Third Party noncompliance in the future. The Company will
continue to monitor the issue vigilantly and work to remediate any issues that
may arise.
<PAGE> 17
FORWARD-LOOKING STATEMENTS
This Form 10-Q (including the information incorporated herein by reference)
contains forward-looking statements within the meaning of The Private Securities
Litigation Reform Act of 1995. The statements are made a number of times
throughout the document and may be identified by forward-looking terminology as
"estimate," "project," "expect," "believe," "may," "will," "intend" or similar
statements or variations of such terms. Such forward-looking statements involve
certain risks and uncertainties, and include among others, the following: levels
of sales, store traffic, acceptance of product offerings, competitive pressures
from other party supplies retailers, availability of qualified personnel,
availability of suitable future store locations, schedules of store expansion
plans and year 2000 readiness issues relating to the Company's internal systems
and those of third parties, the ability of the Company to refinance its existing
debt on terms acceptable to it and other factors. As a result of the foregoing
risks and uncertainties, actual results and performance may differ materially
from that projected or suggested herein. Additional information concerning
certain risks and uncertainties that could cause actual results to differ
materially from that projected or suggested may be identified from time to time
in the Company's Securities and Exchange Commission filings and the Company's
public announcements.
PART II OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES
None.
ITEM 3. DEFAULTS UNDER SENIOR SECURITIES
See Note 2 to the Notes to the Consolidated Financial Statements.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Company's 1999 Annual Meeting of Shareholders was held on Monday,
November 15, 1999 for the following purposes:
1. To elect five directors to the Company's Board of Directors who
shall serve until the 2000 Annual Meeting of Shareholders, or
until their successors are elected and qualified. ("Proposal 1")
2. To adopt the Company's Stock Option Plan ("Proposal 2").
The voting as to each Proposal was as follows:
Proposal 1
<TABLE>
<CAPTION>
Name For Withheld
---- --- --------
<S> <C> <C>
Jack Futterman 11,594,632 108,320
Ralph Dillon 11,573,022 129,930
Raymond C. Hemmig 11,590,002 112,950
Howard Levkowitz 11,589,572 113,380
Duayne Weinger 11,588,275 114,677
</TABLE>
<PAGE> 18
Proposal 2
<TABLE>
<CAPTION>
For Against Abstain
--- ------- -------
<S> <C> <C>
10,235,042 1,456,437 11,473
</TABLE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) The exhibits required to be filed as part of this report on Form
10-Q are listed in the attached Exhibit Index.
(b) The Company filed the following Current Report on Form 8-K during
the quarter for which this report has been filed.
Form 8-K, dated November 24, 1999 (Item 5).
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.
PARTY CITY CORPORATION
By /s/ James Shea
-----------------
(James Shea)
Chief Executive Officer
By /s/ Thomas E. Larson
-----------------------
(Thomas E. Larson)
Chief Financial Officer
By /s/ Linda M. Siluk
---------------------
(Linda M. Siluk)
Chief Accounting Officer
Date: February 14, 2000
<PAGE> 19
EXHIBIT INDEX
Exhibit No. Descritpion
27 Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUL-01-2000
<PERIOD-START> JUL-04-1999
<PERIOD-END> JAN-01-2000
<CASH> 11,145
<SECURITIES> 0
<RECEIVABLES> 7,812
<ALLOWANCES> 847
<INVENTORY> 42,281
<CURRENT-ASSETS> 79,521
<PP&E> 45,188
<DEPRECIATION> 17,514
<TOTAL-ASSETS> 141,472
<CURRENT-LIABILITIES> 57,892
<BONDS> 0
0
0
<COMMON> 127
<OTHER-SE> 47,541
<TOTAL-LIABILITY-AND-EQUITY> 141,472
<SALES> 198,582
<TOTAL-REVENUES> 206,497
<CGS> 130,450
<TOTAL-COSTS> 178,398
<OTHER-EXPENSES> 14,853
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (4,504)
<INCOME-PRETAX> 8,742
<INCOME-TAX> (237)
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 8,979
<EPS-BASIC> .72
<EPS-DILUTED> .72
</TABLE>
