- - -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
---------
|X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1998
OR
|_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ________________ to _____________
Commission File Number: 333-8043
Four M Corporation
------------------
(Exact name of registrant as specified in its charter)
Maryland 52-0822639
-------- ----------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
115 Stevens Avenue
Valhalla, New York 10595
------------------ -----
(Address of principal executive offices) (Zip Code)
(914) 749-3200
--------------
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 |X| No |_|
As of November 1, 1998, the registrant had 6,815,867 shares of Common
Stock outstanding.
<PAGE>
FOUR M CORPORATION
QUARTERLY REPORT ON FORM 10-Q
TABLE OF CONTENTS
Part I - Financial Information
Item 1. Financial Statements (Unaudited): Page
Consolidated Balance Sheets as of September 30, 1998 and
December 31, 1997 (audited) 1
Consolidated Statements of Operations for the three and
nine months ended September 30, 1998 and 1997 2
Consolidated Statements of Cash Flows for the nine months
ended September 30, 1998 and 1997 3
Notes to Consolidated Financial Statements 4
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 9
Part II - Other Information
Item 1. Legal Proceedings 14
Item 6. Exhibits and Reports on Form 8-K 14
Signatures 16
<PAGE>
Part I. Financial Information
Item 1. Financial Statements (Unaudited)
FOUR M CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except per share data)
<TABLE>
<CAPTION>
- - -----------------------------------------------------------------------------------------------------
September 30, 1998 December 31, 1997
(unaudited) (audited)
- - -----------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 5,572 $ 2,025
Restricted cash (Note 9) 679 116
Accounts receivable, less allowance for doubtful
accounts of $2,513 and $2,727 56,326 55,209
Inventories (Note 6) 30,499 36,963
Income taxes recoverable -- 6,900
Notes, advances and other receivables 1,508 2,638
Deferred income taxes (Note 10) -- 16,654
- - -----------------------------------------------------------------------------------------------------
Total current assets 94,584 120,505
Property, plant and equipment, net of accumulated depreciation 167,419 181,549
Other assets 16,065 16,399
Goodwill and other intangibles, net of accumulated amortization 4,060 4,321
Deferred income taxes (Note 10) 9,304 --
- - -----------------------------------------------------------------------------------------------------
$ 291,432 $322,774
========= ========
- - -----------------------------------------------------------------------------------------------------
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities:
Accounts payable $ 39,440 $ 48,237
Accrued liabilities (Note 7) 21,223 15,769
Current maturities of long-term debt and subordinated debt 3,539 3,303
Credit Facility (Note 11) 33,287 --
- - -----------------------------------------------------------------------------------------------------
Total current liabilities 97,489 67,309
Long-term debt, less current maturities 192,809 235,354
Subordinated debt, less current maturities 2,015 1,969
Deferred income taxes 9,304 9,404
Minority interest 1,401 1,508
Other liabilities 411 565
- - -----------------------------------------------------------------------------------------------------
Total liabilities 303,429 316,109
- - -----------------------------------------------------------------------------------------------------
Stockholder's equity:
Common stock, par value $.125: Authorized shares -
10,000,000; shares issued 7,229,770, and
outstanding 6,815,867 904 904
Additional paid-in capital 717 717
Retained earnings (12,656) 6,006
- - -----------------------------------------------------------------------------------------------------
(11,035) 7,627
Less treasury stock, at cost (413,903 shares) 962 962
- - -----------------------------------------------------------------------------------------------------
Total stockholder's equity (11,997) 6,665
- - -----------------------------------------------------------------------------------------------------
$ 291,432 $322,774
========= ========
</TABLE>
The accompanying footnotes are an integral part of these financial statements.
1
<PAGE>
FOUR M CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
(In thousands)
<TABLE>
<CAPTION>
- - --------------------------------------------------------------------------------------------------------------
Three months ended September 30, Nine months ended September 30,
------------------------------------------------------------------
1998 1997 1998 1997
- - --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net sales $ 121,335 $ 113,992 $ 367,394 $ 348,017
Cost of goods sold 108,913 103,569 323,975 300,201
- - --------------------------------------------------------------------------------------------------------------
Gross profit 12,422 10,423 43,419 47,816
- - --------------------------------------------------------------------------------------------------------------
Selling, general and administrative expenses 7,479 13,376 28,786 36,934
Other expenses due to plant closing -- 2,800 -- 2,800
- - --------------------------------------------------------------------------------------------------------------
Income (loss) from operations 4,943 (5,753) 14,633 8,082
Other income (expense):
Interest expense (6,799) (6,653) (20,370) (19,277)
Loss on joint venture contract (1,803) (6,000) (5,003) (6,000)
Other income (expense) (313) -- (780) 85
- - --------------------------------------------------------------------------------------------------------------
Loss before provision for (3,972) (18,406) (11,520) (17,110)
income taxes and minority interest
Provision (benefit) for income taxes (Note10) -- (7,681) 7,250 (7,145)
- - --------------------------------------------------------------------------------------------------------------
Loss before minority interest (3,972) (10,725) (18,770) (9,965)
Minority interest 145 94 107 (9)
- - --------------------------------------------------------------------------------------------------------------
Net loss $ (3,827) $ (10,631) $ (18,663) $ (9,974)
========= ========= ========= =========
- - --------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying footnotes are an integral part of these financial statements.
2
<PAGE>
FOUR M CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
(In thousands)
<TABLE>
<CAPTION>
- - ----------------------------------------------------------------------------------------
Nine months ended September 30,
-------------------------------
1998 1997
- - ----------------------------------------------------------------------------------------
<S> <C> <C>
Cash flows from operating activities:
Net loss $(18,663) $ (9,974)
Adjustments to reconcile net loss to net cash provided by
(used for) operating activities
Depreciation and amortization 12,271 11,015
Allowance for doubtful accounts (214) 1,239
Non-cash interest expense 46 52
Deferred income taxes 7,250 2,981
Loss on sale of fixed assets 780 134
Change in assets and liabilities:
Accounts, advances, notes, and other receivables (903) (1,864)
Inventories 6,464 2,022
Income taxes recoverable (payable) 6,900 (6,090)
Other assets, net of other liabilities 1,140 (2,515)
Accounts payable and accrued liabilities (3,343) (609)
- - ----------------------------------------------------------------------------------------
Net cash provided by (used for) operating activities 11,728 (3,609)
- - ----------------------------------------------------------------------------------------
Cash flows from investing activities:
Capital expenditures (11,860) (17,959)
Proceeds from sale of fixed assets 790 3,091
Sale of fixed assets of Dallas and Houston facilities 14,392 --
- - ----------------------------------------------------------------------------------------
Net cash provided by (used for) investing activities 3,322 (14,868)
- - ----------------------------------------------------------------------------------------
Cash flows from financing activities:
Net borrowings (repayments) under revolving (7,453) 15,077
credit agreements
Secured term, mortgage, equipment and 82 2,777
other borrowings
Repayment of long-term debt (3,569) (1,808)
- - ----------------------------------------------------------------------------------------
Net cash provided by (used for) financing activities (10,940) 16,046
- - ----------------------------------------------------------------------------------------
Cash, cash equivalents and restricted cash:
Increase (decrease) in cash, cash equivalents and 4,110 (2,431)
restricted cash
Cash and cash equivalents, beginning of period 2,025 2,431
Restricted cash, beginning of period 116 --
- - ----------------------------------------------------------------------------------------
Cash and cash equivalents, end of period $ 5,572 $ --
======== ========
Restricted cash, end of period $ 679 $ --
======== ========
- - ----------------------------------------------------------------------------------------
Supplemental cash flow information:
Cash paid during the period for:
Interest $ 14,499 $ 13,649
Income taxes $ 243 $ (1,047)
- - ----------------------------------------------------------------------------------------
</TABLE>
The accompanying footnotes are an integral part of these financial
statements.
3
<PAGE>
FOUR M CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)
NOTE 1 - BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and the instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements.
In the opinion of management, the accompanying unaudited consolidated
financial statements include all adjustments, consisting of normal recurring
accruals, considered necessary for a fair presentation of the results for
interim periods. Operating results for the nine months ended September 30, 1998
are not necessarily indicative of the results to be expected for the full year
ending December 31, 1998. For further information refer to the consolidated
financial statements and footnotes thereto contained in the Four M Corporation
Annual Report on Form 10-K for the fiscal year ended December 31, 1997.
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES
Business: Four M Corporation and subsidiaries ("Four M" or the "Company") are
manufacturers of corrugated packaging and semi-chemical corrugating medium. The
Company uses the trade name Box USA to conduct the bulk of its business
activities. Four M has no assets or independent business operations other than
its ownership interest in its subsidiaries.
Use of estimates: The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts in the financial statements and
accompanying notes. Actual results could differ from those estimates.
Principles of Consolidation: The consolidated financial statements include the
accounts of Four M Corporation and all of its subsidiaries. All of the common
stock of Four M is beneficially owned by its Chairman of the Board and Chief
Executive Officer, Dennis Mehiel (the "Stockholder"). Intercompany accounts and
transactions have been eliminated.
The Company has certain 50% owned investments which are accounted for under the
equity method.
Reclassifications: Certain prior period amounts have been reclassified to
conform with the current period presentation.
NOTE 3 - ACQUISITIONS AND DISPOSITIONS
St. Joe Container Company
On May 30, 1996, the Company acquired (i) substantially all of the assets
of St. Joe Container Company, which consisted primarily of 16 converting
facilities and related working capital (the "St. Joe Acquisition") and (ii) a
50% interest in Florida Coast Paper Company, L.L.C. ("Florida Coast"), a limited
liability company which owns a linerboard mill located at Port St. Joe, Florida
(the "St. Joe Mill"). Stone Container Corporation ("Stone Container", together
with the Company, the "Joint Venture Partners") acquired the remaining 50%
interest in Florida Coast (Note 5). On May 30, 1996, the Company issued the
Notes (Note 4) and warrants valued at $0.6 million and entered into a revolving
credit facility to, in part, finance such transactions.
The St. Joe Acquisition has been accounted for using the purchase method
of accounting.
4
<PAGE>
Box USA of New Jersey, Inc. ("New Jersey")
On August 5, 1996, the Company acquired 490 shares of common stock in New
Jersey from Stone Container for $5.5 million. The purchase represented 49% of
New Jersey's outstanding shares, increasing the Company's ownership interest to
50%. Since the remaining 50% interest in New Jersey is owned indirectly by the
Stockholder, the financial statements of New Jersey are included in the
Company's consolidation.
Fibre Marketing
Pursuant to a Limited Liability Company Agreement, dated as of May 24,
1996, the Company acquired a 50% interest in Fibre Marketing Company, L.L.C.
("Fibre Marketing"). The Company made an aggregate capital contribution of
$280,000 to Fibre Marketing in August 1996.
Consolidated Packaging Corporation, Debtor-In-Possession
On August 16, 1996, Box USA Group, Inc. ("Box USA"), a wholly-owned
subsidiary of the Company, discontinued operations at its Flint, Michigan
facility and disposed of substantially all the machinery and equipment utilized
in the operations of such facility for approximately $2.3 million, and finished
goods and work-in-progress inventory and certain related assets utilized at such
facility for approximately $300,000, which resulted in a gain of $480,000.
NOTE 4 - CONDENSED CONSOLIDATING FINANCIAL STATEMENTS
In connection with the St. Joe Acquisition, the Company issued and sold
$170.0 million aggregate principal amount of 12% Senior Secured Notes due 2006
(the "Notes"). The Notes are fully and unconditionally guaranteed on a joint and
several basis by Box USA Group, Inc., Four M Paper Corporation, Page Packaging
Corporation, Box USA, Inc., and Four M Manufacturing Group of Georgia, Inc.,
each a direct or indirect wholly owned subsidiary of the Company (collectively,
the "Guarantors"). Separate financial statements and other disclosures
concerning the Guarantors are not presented because management has determined
that they are not material to the holders of the Notes. The Notes are not
guaranteed by Box USA Paper Corporation, Box USA of Florida, L.P. ("Florida
L.P."), Florida Coast, New Jersey or Fibre Marketing Group, L.L.C.
(collectively, the "Non-Guarantors"). The following are unaudited condensed
consolidating financial statements regarding the Company (on a stand-alone basis
and on a consolidated basis) and the Guarantors and Non-Guarantors as of and for
the nine months ended September 30, 1998:
Condensed Consolidating Balance Sheet
(in thousands)
<TABLE>
<CAPTION>
Four M Elimination
Corporation Guarantors Non-Guarantors Entries Consolidated
----------- ---------- -------------- ------- ------------
<S> <C> <C> <C> <C> <C>
Current assets ............ $ -- $ 81,515 $13,069 $ -- $ 94,584
Investment in affiliates .. (11,997) 5,890 -- 11,797 5,690
Total assets .............. (11,997) 263,702 27,930 11,797 291,432
Current liabilities ....... -- 88,755 8,734 -- 97,489
Total liabilities ......... -- 278,482 24,947 -- 303,429
Stockholder's equity ...... (11,997) (14,780) 2,983 11,797 (11,997)
</TABLE>
5
<PAGE>
Condensed Consolidating Statement of Operations
(in thousands)
<TABLE>
<CAPTION>
Four M Elimination
Corporation Guarantors Non-Guarantors Entries Consolidated
----------- ---------- -------------- ------- ------------
<S> <C> <C> <C> <C> <C>
Net sales ................. $ -- $ 329,274 $ 38,120 $ -- $ 367,394
Gross profit .............. -- 39,477 3,942 -- 43,419
Income from operations .... -- 13,746 887 -- 14,633
Loss before income taxes .. -- (11,161) (359) -- (11,520)
Net income (loss) of
subsidiaries .............. (18,663) -- -- 18,663 --
Net income (loss) ......... (18,663) (18,411) (252) 18,663 (18,663)
</TABLE>
Condensed Consolidating Statement of Cash Flows
(in thousands)
<TABLE>
<CAPTION>
Four M Elimination
Corporation Guarantors Non-Guarantors Entries Consolidated
----------- ---------- -------------- ------- ------------
<S> <C> <C> <C> <C> <C>
Net cash provided by
operating activities .......... $ -- $ 11,384 $ 344 $ -- $ 11,728
Net cash provided by (used
for) investing activities ..... -- 3,350 (28) -- 3,322
Net cash used for financing
activities .................... -- (10,463) (477) -- (10,940)
----------------------------------------------------------------
Increase (decrease) in cash
and cash equivalents .......... -- 4,271 (161) -- 4,110
Cash and cash equivalents,
beginning of period ........... -- 1,745 396 -- 2,141
----------------------------------------------------------------
Cash and cash equivalents, end
of period ..................... -- $ 6,016 $ 235 -- $ 6,251
================================================================
</TABLE>
6
<PAGE>
NOTE 5 - INVESTMENT IN FLORIDA COAST
In conjunction with the formation of Florida Coast, the Company and Stone
Container each invested $5.0 million for a 50% interest in Florida Coast Holding
Co., L.L.C. ("Florida Coast Holding"), the holder of all of the member interests
in Florida Coast and, Stone Container made a $30.0 million capital contribution
to Florida Coast Holding. In addition, the Company and Stone Container have each
agreed to provide Florida Coast with up to $10.0 million of subordinated
financing, if needed, for general corporate purposes. As of September 30, 1998,
the Company had not advanced any loans under the Subordinated Credit Facility.
The Company's investment in Florida Coast Holding is accounted for using
the equity method of accounting. The Company did not record its 50% share of
Florida Coast's operating results for the nine month period ended September 30,
1998 of $(4.9) million since its investment had no carrying value.
Summarized unaudited income statement information of Florida Coast for the
nine months ended September 30, 1998 were as follows:
Summarized Statement of Operations (in thousands):
Nine Months
Ended
September 30, 1998
- - --------------------------------------------------------------------------------
Net sales $ 114,116
Net operating income 8,103
Interest expense 17,816
Net loss (9,713)
- - --------------------------------------------------------------------------------
Pursuant to an Output Purchase Agreement, the Company and Stone Container
have agreed to purchase one-half of the St. Joe Mill's entire linerboard
production at a price indexed to market prices but subject to a minimum purchase
price. This purchase price is intended to generate sufficient funds to cover
cash operating costs, cash interest expense and maintenance capital expenditures
of the St. Joe Mill. In accounting for the acquisition of the St. Joe Mill, the
Company determined that it would be required to pay additional amounts above
market price for linerboard and possibly incur other additional costs to fulfill
its obligations under the Output Purchase Agreement and accordingly, provided a
reserve for such purchases (Note 7).
For 1998, Stone Container and the Company have each agreed to fund 50% of
any purchase price adjustments required pursuant to the Output Purchase
Agreement up to $600,000 each month on a cumulative basis. Stone Container has
agreed to fund 100% of any excess amounts, including the Company's portion,
through the end of 1998. Fifty percent of such excess amounts are due and
payable by the Company to Stone Container no later than March 31, 1999. At
September 30, 1998, the Company had reserved $1.2 million to reflect its
outstanding obligations under the Output Purchase Agreement and $3.1 million to
reflect excess amounts funded by Stone Container, on behalf of the Company, in
connection with the Output Purchase Agreement.
NOTE 6 - INVENTORY
Inventories are valued at the lower of cost (first-in, first-out) or
market and consist of the following (in thousands):
September 30, December 31,
1998 1997
---- ----
Raw materials $22,650 $28,071
Work-in-process 1,472 1,801
Finished goods 6,377 7,091
----- -----
$30,499 $36,963
======= =======
7
<PAGE>
NOTE 7 - ACCRUED LIABILITIES
Accrued liabilities were approximately $21.2 million at September 30, 1998
and $15.8 million at December 31, 1997, respectively. These amounts include
reserves for unfavorable contracts (Note 5) and accruals for various items
including employee benefits, utilities, interest and plant repairs. Accrued
liabilities increased from June 30, 1998 to September 30, 1998 primarily due to
the interest accrual of $5.1 million on the Notes.
NOTE 8 - MILL SHUTDOWNS AND REOPENINGS
In the latter part of 1996 and first quarter of 1997, the Company
experienced a decline in prices for corrugating medium as a result of increased
capacity in the industry and decreased demand for such products. In response to
such market conditions, the Company shut down its corrugating medium mill at Ft.
Madison, Iowa (the "Ft. Madison Mill") in March 1997 and resumed limited
production in August 1997. Full production commenced in September 1997.
In addition, the St. Joe Mill experienced a decline in prices for
linerboard as a result of increased capacity in the industry. In response to
such market conditions, Florida Coast shut down the St. Joe Mill in April 1997
and resumed limited production in early September 1997. Full production
commenced in October 1997. During the period of the St. Joe Mill shut down, the
Company remained subject to the terms of the Output Purchase Agreement (Note 5).
A portion of the Company's payments under the Output Purchase Agreement during
the shut down period ($6.0 million) has been charged to operations as part of a
loss on joint venture.
On August 16, 1998, Florida Coast shut down the St. Joe Mill due to
economic conditions in the industry. The length of the shut down has not yet
been determined. During the period of the shut down, the Company remains subject
to the terms of the Output Purchase Agreement (Note 5).
NOTE 9 - PLANT CLOSING AND DISPOSITIONS
On August 9, 1997, the Company announced its intent to close two of its
facilities and to reallocate its business at those locations to its other nearby
facilities, including a new facility that is intended to utilize state of the
art technology and is expected to expand the Company's capacity in the
Southeastern operating region. In connection therewith, the Company recorded a
provision of $1.0 million in the third quarter of 1997 to accrue the costs of
closing such facilities, which are principally related to severance and
relocation of employees. In addition, the Company established a reserve during
the third quarter of 1997 of $1.8 million, to cover costs in connection with
certain plant dispositions which have occurred in 1998.
In January 1998, the Company sold its Dallas and Houston corrugating
operations for cash of $20.4 million, subject to working capital adjustments,
which approximated net book value. Approximately $11.2 million of the proceeds
of such sale was put into a collateral account to be utilized pursuant to the
terms of the Indenture governing the Notes, and the remainder was used for
working capital purposes. As of September 30, 1998, approximately $10.5 million
of such proceeds were used for capital expenditures.
NOTE 10 - INCOME TAXES
Deferred income taxes have been adjusted by $7.3 million, in conformity
with FASB 109, due to the uncertainty of future short-term profits. As a result
of this uncertainty, the Company has reclassified $9.3 million of current
deferred income taxes to long-term.
NOTE 11 - LONG-TERM DEBT
The Company has a Credit Facility to finance the Company's working capital
needs. As of September 30, 1998, the Company has reclassified $33.3 million of
long-term debt to current. because it was not in compliance with certain of the
financial covenants contained in the Credit Facility and as a result is in
default. The lender has offered to waive such non-compliance under terms and
conditions which are not satisfactory to the Company. No assurance can be given
that the Company will be able to obtain the necessary waivers from the lender on
terms and conditions satisfactory to the Company. As of November 16, 1998, the
amount outstanding under the Credit Facility was $25.5 million.
NOTE 12 - SUBSEQUENT EVENTS
On August 7, 1998, the stockholders of the Company entered into a Stock
Purchase Agreement which provided for the sale of 100% of the outstanding shares
of common stock of the Company. On October 27, 1998, the Stock Purchase
Agreement was cancelled.
8
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
The following discussion contains forward looking statements that involve
known and unknown risks and uncertainties including, but not limited to, the
impact of competitive products, product demand and market acceptance risks,
fluctuations in operating results and other risks detailed from time to time in
the Company's filings with the Securities and Exchange Commission. These risks
could cause the Company's actual results for the current and future years to
differ materially from those expressed in any forward looking statements made
by, or on behalf of, the Company.
Recent Developments
On August 7, 1998, the stockholders of the Company entered into a Stock
Purchase Agreement which provided for the sale of 100% of the outstanding shares
of common stock of the Company. On October 27, 1998, the Stock Purchase
Agreement was cancelled.
As of September 30, 1998 the company has reclassified 33.3 million dollars
of long term debt to current because it was not in compliance with certain of
the financial covenants contained in the Credit Facility and as a result is in
default. The lender has offered to waive such non-compliance under terms and
conditions which are not satisfactory to the Company. No assurance can be given
that the Company will be able to obtain the necessary waivers from the lender on
terms and conditions satisfactory to the Company. As of November 16, 1998, the
amount outstanding under the Credit Facility was $25.5 million.
Results of Operations
The following tables set forth certain consolidated statement of
operations data and such data as a percentage of net sales for the periods
indicated (Dollars in millions):
Three Months Ended September 30,
--------------------------------
1998 1997
---- ----
Percent of Percent of
Amount Net Sales Amount Net Sales
------ ---------- ------ ----------
Net sales ........................... $ 121.3 100.0% $ 114.0 100.0%
Cost of goods sold .................. (108.9) (89.8) (103.6) (90.9)
-------- ----- -------- -----
Gross profit ........................ 12.4 10.2 10.4 9.1
Selling, general and
administrative expenses ........... (7.5) (6.2) (13.4) (11.7)
Other expenses due to plant closings -- -- (2.8) (2.5)
-------- ----- -------- -----
Income (loss) from operations ....... 4.9 4.0 (5.8) (5.1)
Interest expense .................... (6.8) (5.6) (6.6) (5.8)
Loss on joint venture contract ...... (1.8) (1.5) (6.0) (5.3)
Other expense ....................... (0.3) (0.1) -- --
-------- ----- -------- -----
Loss before benefit for
income taxes and minority interest (4.0) (3.2) (18.4) (16.2)
Benefit for income taxes ............ -- -- 7.7 6.8
-------- ----- -------- -----
Loss before minority interest ....... $ (4.0) (3.2)% $ (10.7) (9.4)%
========================================
Nine Months Ended September 30,
-------------------------------
1998 1997
---- ----
Percent of Percent of
Amount Net Sales Amount Net Sales
------ ---------- ------ ----------
Net sales ........................... $ 367.4 100.0% $ 348.0 100.0%
Cost of goods sold .................. (324.0) (88.2) (300.2) (86.3)
-------- ----- -------- -----
Gross profit ........................ 43.4 11.8 47.8 13.7
Selling, general and
administrative expenses ........... (28.8) (7.8) (36.9) (10.6)
Other expenses due to plant closings -- -- (2.8) (0.8)
-------- ----- -------- -----
Income from operations .............. 14.6 4.0 8.1 2.3
Interest expense .................... (20.4) (5.6) (19.3) (5.5)
Loss on joint venture contract ...... (5.0) (1.4) (6.0) (1.7)
Other income (expense) .............. (0.8) (0.2) 0.1 --
-------- ----- -------- -----
Loss before benefit (provision) for
income taxes and minority interest (11.6) (3.2) (17.1) (4.9)
Benefit (provision) for income
taxes ............................. (7.2) (2.0) 7.1 2.0
-------- ----- -------- -----
Loss before minority interest ....... $ (18.8) (5.2)% $ (10.0) (2.9)%
=========================================
9
<PAGE>
Three Month Period Ended September 30, 1998 Compared to Three Month Period Ended
September 30, 1997
Consolidated net sales of $121.3 million were achieved by the Company for
the three months ended September 30, 1998, which represented an increase of
6.4%, from $114.0 million in the three months ended September 30, 1997. Net
sales for the Company's converting facilities increased $6.2 million, or 5.6%,
to $117.1 million for the three months ended September 30, 1998 from $110.9
million for the three months ended September 30, 1997. The increase in net sales
was primarily as a result of the increased average selling prices offset by the
decrease in volume resulting from the sale of the Dallas and Houston corrugating
operations. Net sales at the Ft. Madison Mill for the three months ended
September 30, 1998 were $4.2 million as compared to net sales of $3.1 million
for the three months ended September 30, 1997. This increase was primarily as a
result of the Ft. Madison Mill resuming full production in September 1997 and
the increased selling price per ton of corrugating medium in 1998.
The Company's cost of goods sold, as a percentage of net sales, remained
relatively unchanged. Cost of goods sold, as a percentage of net sales, at the
Company's converting facilities remained relatively unchanged. Cost of goods
sold, as a percentage of net sales, at the Ft. Madison Mill decreased to 89.9%
for the three months ended September 30, 1998, from 113.5% for the three months
ended September 30, 1997 primarily as a result of the Ft. Madison Mill resuming
full production in September 1997 and the increased selling price per ton of
corrugating medium in 1998.
Gross profit increased $2.0 million, or 19.2%, to $12.4 million for the
three months ended September 30, 1998 from $10.4 million for the three months
ended September 30, 1997. The Company's gross profit, as a percentage of net
sales, for the converting facilities increased to 10.2% for the three months
ended September 30, 1998 from 9.8% for the three months ended September 30,
1997. Gross profit (loss) at the Ft. Madison Mill increased to $0.4 million for
the three months ended September 30, 1998 from $(0.4) million for the three
months ended September 30, 1997 primarily as a result of the Ft. Madison Mill
resuming full production in September 1997 and the increased selling price per
ton of corrugating medium in 1998.
Selling, general and administrative expenses decreased by $5.9 million for
the three months ended September 30, 1998. As a percentage of net sales,
selling, general and administrative expenses decreased to 6.2% for the three
months ended September 30, 1998 compared to 11.7% for the three months ended
September 30, 1997.
As a result of the foregoing factors, income from operations increased
$10.7 million, or 184.5%, for the three months ended September 30, 1998, to $4.9
million from $(5.8) million for the three months ended September 30, 1997.
Interest expense increased $0.2 million, or 2.9%, to $6.8 million for the
three months ended September 30, 1998, from $6.6 million for the three months
ended September 30, 1997.
Nine Month Period Ended September 30, 1998 Compared to Nine Month Period Ended
September 30, 1997
Consolidated net sales of $367.4 million were achieved by the Company for
the nine months ended September 30, 1998, which represented an increase of 5.6%,
from $348.0 million in the nine months ended September 30, 1997. Net sales for
the Company's converting facilities increased $13.6 million, or 4.0%, to $353.5
million for the nine months ended September 30, 1998 from $339.9 million for the
nine months ended September 30, 1997. The increase in net sales was primarily as
a result of the increased average selling prices offset by the decrease in
volume resulting from the sale of the Dallas and Houston corrugating operations.
Net sales at the Ft. Madison Mill for the nine months ended September 30, 1998
were $13.9 million as compared to net sales of $8.2 million for the nine months
ended September 30, 1997. The increase was primarily as a result of the Ft.
Madison Mill resuming full production in September 1997 and the increased
selling price per ton of corrugating medium in 1998.
The Company's cost of good sold, as a percentage of net sales, increased
to 88.2% for the nine months ended September 30, 1998 from 86.3% for the nine
months ended September 30, 1997. Cost of goods sold, as a percentage of net
sales, at the Company's converting facilities increased to 88.3% for the nine
months ended September 30, 1998 from 85.5% for the nine months ended September
30, 1997. The increases were primarily as a result of the Company's absorption
of increased paper prices for both linerboard and corrugating medium. Cost of
goods sold, as a percentage of net sales, at the Ft. Madison Mill decreased to
86.3% for the nine months ended September 30, 1998 from 118.2% for the nine
months ended September 30, 1997 primarily as a result of the Ft. Madison Mill
resuming full production in September 1997 and the increased selling price per
ton of corrugating medium in 1998.
10
<PAGE>
Gross profit decreased $4.4 million, or 9.2%, to $43.4 million for the
nine months ended September 30, 1998 from $47.8 million for the nine months
ended September 30, 1997. The Company's gross profit, as a percentage of net
sales, for the converting facilities decreased to 11.7% for the nine months
ended September 30, 1998 from 14.5% for the nine months ended September 30,
1997. The decline in gross profit is attributable to the sale of the Company's
Dallas and Houston corrugating operations and the resultant reduction in volume.
Gross profit at the Ft. Madison Mill increased to $1.9 million for the nine
months ended September 30, 1998 from $(1.5) million for the nine months ended
September 30, 1997 primarily as a result of the Ft. Madison Mill resuming full
production in September 1997 and the increased selling price per ton of
corrugating medium in 1998.
Selling, general and administrative expenses decreased by $8.1 million for
the nine months end September 30, 1998. As a percentage of net sales, selling,
general and administrative expenses decreased to 7.8% for the nine months ended
September 30, 1998 compared to 10.6% for the nine months ended September 30,
1997.
As a result of the foregoing factors, income from operations increased
$6.5 million, or 80.2%, for the nine months ended September 30, 1998, to $14.6
million from $8.1 million for the nine months ended September 30, 1997.
Interest expense increased $1.1 million, or 5.7%, to $20.4 million for the
nine months ended September 30, 1998, from $19.3 million for the nine months
ended September 30, 1997.
Liquidity and Capital Resources
Historically, the Company has relied on cash flows from operations and
bank borrowings to finance its working capital requirements and capital
expenditures.
Net cash provided by operating activities for the nine months ended
September 30, 1998 was $11.7 million compared to net cash used for operating
activities of $3.6 million for the nine months ended September 30, 1997. Cash
provided by operating activities for the nine months ended September 30, 1998
was driven by a recovery of income taxes of $6.9 million, a $6.5 million
decrease in inventory, and a $7.3 million decrease in deferred taxes which was
offset by net loss of $(18.7) million and a $(3.3) million decrease in accounts
payable and accrued liabilities.
Net cash provided by investing activities was $3.3 million for the nine
months ended September 30, 1998 compared to net cash used for investing
activities of $14.9 million for the nine months ended September 30, 1997. This
difference was primarily due to the sale of fixed assets from the Company's
Dallas and Houston corrugating operations.
Net cash used for financing activities was $10.9 million for the nine
months ended September 30, 1998 compared to net cash provided by financing
activities of $16.0 million for the nine months ended September 30, 1997. This
difference was primarily due to the sale of Dallas and Houston corrugating
operations.
Capital expenditures for the nine months ended September 30, 1998 were
$11.9 million as compared to $18.0 million for the nine months ended September
30, 1997. The Company plans to spend approximately $14.2 million in 1998 on
capital expenditures the majority of will be financed through an escrow account
maintained pursuant to the terms of the Indenture governing the Notes.
On May 30, 1996, the Company established a Credit Facility to finance the
Company's working capital needs. The Credit Facility will mature in 2001 and
initially provided total borrowing of up to $80.0 million on a revolving basis,
subject to borrowing base limitations, and a requirement that unused borrowing
base availability must be at least $5.0 million. Effective December 5, 1997, the
Credit Facility was modified, so as to among other things, (i) reduce, per the
Company's request, the borrowing capacity from $80.0 million to $65.0 million;
(ii) modify the base borrowing interest rate from the lender's prime rate plus
.5% to a sliding scale rate, based on performance, of the lender's prime rate
plus .5% to 1.0%; and (iii) reduce the minimum unused borrowing base
availability to $1.0 million, increasing on December 31, 1998 to $5.0 million.
On May 11, 1998, the Credit Facility was amended, and Fibre Marketing was made
an additional borrower hereunder.
The Company is not in compliance with certain of the financial covenants
contained in the Credit Facility and as a result is in default. The lender has
offered to waive such non-compliance under terms and conditions which are not
satisfactory to the Company. No assurance can be given that the Company will be
able to obtain the necessary waivers from the lender on terms and conditions
satisfactory to the Company. As of November 16, 1998, the amount outstanding
under the Credit Facility was $25.5 million. On November 1, 1998, the Company
had unused borrowing capacity of approximately $11.1 million under the Credit
Facility (Note 11).
As of September 30, 1998 the company has reclassified 33.3 million dollars
of long term debt to current because it was not in compliance with certain of
the financial covenants contained in the Credit Facility and as a result is in
default.
11
<PAGE>
Pursuant to the Subordinated Credit Facility, the Company will provide, if
needed, Florida Coast with up to $10.0 million of subordinated indebtedness on a
revolving credit basis. As of September 30, 1998, the Company had not advanced
any loans under the Subordinated Credit Facility.
In light of the impact of the Output Purchase Agreement, default under the
Credit Facility and current market conditions, among other things, there can be
no assurance that cash generated by operations together with amounts available
under the Credit Facility, will be sufficient to meet the Company's obligations
in connection with the Output Purchase Agreement, the Company's debt service
requirements and working capital needs through September 30, 1999.
Environmental Matters
The Company's operations are subject to environmental regulation by
federal, state and local authorities in the United States. The Company believes
that it is in substantial compliance with current federal, state and local
environmental regulation. Unreimbursed liabilities arising from environmental
claims, if significant, could have a material adverse effect on the Company's
results of operations and financial condition. Furthermore, actions by federal,
state and local governments concerning environmental matters could result in
laws or regulations that could increase the cost of compliance with
environmental laws and regulations.
The operations of the St. Joe Mill are subject to extensive and changing
environmental regulation by federal, state and local authorities. Significant
capital expenditures have been made in the past to comply with water, air and
solid and hazardous waste regulations at the St. Joe Mill. The St. Joe Mill
expects to make significant expenditures in the future. Capital expenditures by
the St. Joe Mill for environmental control equipment was approximately $0.2
million in Fiscal 1997 and is budgeted to be approximately $1.0 million in
Fiscal 1998. In November 1997, the EPA issued its final rules, informally known
as the "cluster rules", which are more stringent than the existing requirements
for discharge of wastewaters under the Clean Water Act and impose new
requirements on air emissions under the Clean Air Act for the pulp and paper
industry. Although the final rules are less stringent, in some respects, than as
initially proposed, the Company currently believes that the St. Joe Mill will be
required to make capital expenditures of approximately $30.0 million during the
period of 1998 through 2005 in order to meet the requirements of the new
regulations. The Joint Venture Partners may determine that, under the final
regulations, the costs associated with the production of mottled white
linerboard are prohibitive and could therefore discontinue its production. If
the Joint Venture Partners determine to discontinue the production of mottled
white linerboard, the Company estimates the capital spending that would be
required to comply with the regulations would be approximately $9.0 million.
Because of the current higher margins associated with mottled white linerboard,
in the event the Joint Venture Partners discontinue the production of mottled
white linerboard, Florida Coast's revenues and profit margins would decrease.
Impact of Inflation
A period of rising prices will affect the Company's cost of production
and, in particular, the Company's raw material costs. Since the Company's
business is a margin business, the impact of increased costs on the Company will
depend upon the Company's ability to pass on such costs to its customers. The
Company is typically able to pass on a significant portion of its increased raw
material costs in a timely fashion. From time to time, however, there is a lag
in passing on price adjustments which creates a temporary margin contraction in
a rising price environment. Historically, the Company has been able to recover
fully from the impact of rising prices over a short period of time.
Year 2000
Many of the Company's computer systems may be unable to process dates
beyond December 31, 1999. This could result in system failures or
miscalculations which could have a material adverse effect on the Company's
business, financial condition or results of operations. The Company has
implemented a Year 2000 compliance program intended to identify the programs and
infrastructures that could be effected by Year 2000 issues and resolve the
problems that are identified on a timely basis.
The Company has completed the assessment phase, in which it has identified
potential Year 2000 issues, including those with respect to information
technology systems, technology embedded within equipment the Company uses as
well as equipment that interfaces with vendors and other third parties. The
Company has completed the upgrade for its central software application which
handles all billing, order entry, general ledger detail, all sub-ledger
activities and aging reports, as well as production reporting, cost system
estimating and inventory. All of these areas became Year 2000 compliant in
12
<PAGE>
August 1998. Add on applications used for the presentation of financial
statements and Payroll/HR reporting are currently being upgraded by both
respective vendors and are expected to be Year 2000 compliant by June 1999. Year
2000 issues with respect to manufacturing equipment at certain of the Company's
facilities, such as scheduling logic within such equipment and alarm systems,
have been identified. These items are expected to be Year 2000 compliant prior
to June 1999. The Company believes that these changes are insignificant to the
ongoing performance of the equipment or the Company's ability to meet its
commitments. Furthermore, in the event the Company is unable to meet certain key
operational dates, the Company believes its systems that are already Year 2000
compliant, as well as temporary solutions to systems that are currently in
place, and manual procedures would allow the Company to ship product to
customers and engage in other critical business functions.
The Company estimates the total cost of its Year 2000 program, including
Fiscal 1998 spending, to be immaterial and will be funded from operations.
However, there can be no assurance that the Company will identify all Year 2000
issues in its computer systems in advance of their occurrence or that it will be
able to successfully remedy all problems that are discovered. Failure by the
Company and/or its significant vendors and customers to complete Year 2000
compliance programs in a timely manner could have a material adverse effect on
the Company's business, financial condition or results of operations. In
addition, the revenue stream and financial stability of existing customers may
be adversely impacted by Year 2000 problems, which could cause fluctuations in
the Company's revenues and operating profitability.
13
<PAGE>
Part II - Other Information
Item 1. Legal Proceedings
From time to time, the Company is subject to legal proceedings and other
claims arising in the ordinary course of its business. The Company maintains
insurance coverage against claims in an amount which it believes to be adequate.
The Company believes that it is not presently a party to any litigation, the
outcome of which could reasonably be expected to have a material adverse effect
on its financial condition or results of operations.
On July 19, 1996, a civil action was filed in the Superior Court of Fulton
County, Georgia (the "Suit") by Sid Dunken, individually and on behalf of D&M
Partnership, a purported Georgia partnership, against the Company, Box USA
Group, Inc., Four M Manufacturing Group of Georgia, Inc. and Dennis Mehiel. The
complaint alleges that Dunken is entitled to an equity interest in the Company
or in the alternative, $150.0 million in compensatory damages, as well as
punitive damages and attorneys' fees. On September 23, 1996, the Company filed
an answer in response to the complaint. The Company believes the Suit is without
merit. The Company intends to defend against the Suit vigorously and believes it
has adequate defenses. Discovery is substantially completed, and the Company
expects the trial to commence in the latter part of 1998 or early part of 1999.
There can be no assurance that the outcome of the Suit will not be adverse to
the Company.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibits 2.1 through 10.6 and Exhibit 21.1, are incorporated herein by
reference to the exhibit with the corresponding number filed as part of the
Company's Registration Statement on Form S-4 filed on July 12, 1996, and all
amendments thereto (File No. 333-8043). Exhibits 10.7 and 12.1 are incorporated
by reference to the exhibit with the corresponding number filed as part of the
Company's Form 10-K for the transition period ended December 31, 1996. Exhibits
10.8 and 10.9 are incorporated by reference to the exhibit with the
corresponding number filed as part of the Company's reports on the Form 10-Q for
the periods ended March 31, 1997 and June 30, 1997, respectively. Exhibit 10.10
is incorporated by reference to the exhibit with the corresponding number filed
as part of the Company's Form 10-K for the fiscal year ended December 31, 1997.
Exhibit
Number Description of Exhibit
- - ------ ----------------------
2.1 Asset Purchase Agreement, dated as of November 1, 1995, among
Four M Corporation (the "Company"), St. Joe Forest Products
Company, St. Joe Container Company, St. Joe Paper Company and
Florida Coast Paper Company, L.L.C. ("Florida Coast").
3.1 Certificate of Incorporation of the Company.
3.2 Certificate of Incorporation of Box USA Group, Inc.
3.3 Certificate of Incorporation of Four M Paper Corporation.
3.4 Certificate of Incorporation of Page Packaging Corporation.
3.5 Certificate of Incorporation of Box USA, Inc.
3.6 Certificate of Incorporation of Four M Manufacturing Group of
Georgia, Inc.
3.7 By-laws of the Company.
3.8 By-laws of Box USA Group, Inc.
3.9 By-laws of Four M Paper Corporation.
3.10 By-laws of Page Packaging Corporation.
3.11 By-laws of Box USA, Inc.
3.12 By-laws of Four M Manufacturing Group of Georgia, Inc.
4.1 Indenture, dated as of May 30, 1996, between the Company and
Norwest Bank Minnesota, National Association (the "Trustee").
4.2 Form of 12% Series A and Series B Senior Secured Notes, dated as
of May 30,1996 (incorporated by reference to Exhibit 4.1).
4.3 Registration Rights Agreement, dated as of May 30, 1996, among
the Company, the Guarantors and Bear, Stearns & Co. Inc. (the
"Initial Purchaser").
14
<PAGE>
4.4 Security Agreement, dated as of May 30, 1996, between the
Company and the Trustee.
4.5 Subsidiary Security Agreement, dated as of May 30, 1996, among
the Guarantors and the Trustee.
4.6 Contribution Agreement, dated as of May 30, 1996, among the
Company, the Guarantors and the Trustee.
4.7 Drop Down Notes, dated as of May 30, 1996, executed by each of
the Guarantors..
4.8 Drop Down Notes Security Agreement, dated as of May 30, 1996,
among the Guarantors and the Company.
4.9 Guaranty, dated as of May 30, 1996, among the Guarantors and the
Trustee.
4.10 Form of Company Pledge Agreement, dated as of May 30, 1996,
between the Company and the Trustee.
4.11 Form of Subsidiary Pledge Agreement, dated as of May 30, 1996,
among the Guarantors and the Trustee.
4.12 Warrant Agreement, dated as of May 30, 1996, between the Company
and the Initial Purchaser.
10.1 Output Purchase Agreement, dated as of May 30, 1996, among the
Company, Florida Coast and Stone Container Corporation
("Stone").
10.2 Financing and Security Agreement, dated as of May 30, 1996,
among the Company, the Guarantors, NationsBank, N.A.
("NationsBank"), the financial institutions named therein
(together with NationsBank, the "Lenders"), and NationsBank, as
agent (NationsBank, in such capacity, the "Agent").
10.3 Subordinated Credit Agreement, dated as of May 30, 1996, among
the Company, Florida Coast and Stone.
10.4 Environmental Indemnity Agreement, dated as of May 30, 1996,
between the Company and Florida Coast.
10.5 Stock Appreciation Unit Plan of the Company, dated as of August
1, 1992, and Amendment No. 1 thereto, dated as of August 1,
1995.
10.6 Subordination, Nondisturbance and Attornment Agreement, dated as
of May 30, 1996, between Norwest Bank Minnesota, National
Association and Box USA Group, Inc.
10.7 First Amendment to Financing and Security Agreement and
Additional Borrower Joinder Supplement, dated as of February 28,
1997, among the Company, the Guarantors, the Lenders, the Agent
and Box USA of Florida, L.P.
10.8 Second Amendment to Financing and Security Agreement, dated as
of March 27, 1997.
10.9 Third Amendment to Financing and Security Agreement, dated as of
July 31, 1997.
10.10 Fourth Amendment to Financing and Security Agreement, dated as
of December 5, 1998.
12.1 Statement regarding computation of ratios.
21.1 Subsidiaries of the registrant.
27.1* Financial Data Schedule.
* Filed herewith
(b) Reports on Form 8-K
None
15
<PAGE>
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.
FOUR M CORPORATION
By: /s/ Chris Mehiel
-----------------------------------------
Chris Mehiel
Executive Vice President and Chief
Financial Officer
(Principal Accounting Officer)
Date: November 16, 1998
FOUR M PAPER CORPORATION
By: /s/ Chris Mehiel
-----------------------------------------
Chris Mehiel
Executive Vice President and Chief
Financial Officer
(Principal Accounting Officer)
Date: November 16, 1998
BOX USA GROUP, INC.
By: /s/ Chris Mehiel
-----------------------------------------
Chris Mehiel
Executive Vice President and Chief
Financial Officer
(Principal Accounting Officer)
Date: November 16, 1998
PAGE PACKAGING CORPORATION
By: /s/ Chris Mehiel
-----------------------------------------
Chris Mehiel
Executive Vice President and Chief
Financial Officer
(Principal Accounting Officer)
Date: November 16, 1998
16
<PAGE>
BOX USA, INC.
By: /s/ Chris Mehiel
-----------------------------------------
Chris Mehiel
Executive Vice President and Chief
Financial Officer
(Principal Accounting Officer)
Date: November 16, 1998
FOUR M MANUFACTURING GROUP OF GEORGIA, INC.
By: /s/ Chris Mehiel
-----------------------------------------
Chris Mehiel
Executive Vice President and Chief
Financial Officer
(Principal Accounting Officer)
Date: November 16, 1998
17
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> SEP-30-1998
<CASH> 6,251
<SECURITIES> 0
<RECEIVABLES> 58,839
<ALLOWANCES> 2,513
<INVENTORY> 30,499
<CURRENT-ASSETS> 94,584
<PP&E> 218,111
<DEPRECIATION> 50,692
<TOTAL-ASSETS> 291,432
<CURRENT-LIABILITIES> 97,489
<BONDS> 0
0
0
<COMMON> 904
<OTHER-SE> (12,901)
<TOTAL-LIABILITY-AND-EQUITY> 291,432
<SALES> 367,394
<TOTAL-REVENUES> 367,394
<CGS> 323,975
<TOTAL-COSTS> 352,761
<OTHER-EXPENSES> (5,783)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (20,370)
<INCOME-PRETAX> (11,520)
<INCOME-TAX> (7,250)
<INCOME-CONTINUING> (18,770)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (18,663)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
