<PAGE> 1
================================================================================
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------
FORM 10-Q/A
AMENDMENT NO. 1
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1999
[ ] 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: 000-21407
LASON, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 38-3214743
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) identification number)
1305 STEPHENSON HIGHWAY
TROY, MICHIGAN 48083
(Address of principal executive offices including zip code)
TELEPHONE: (248) 597-5800
(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 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 August 12, 1999, 18,774,190 shares of Common Stock, $.01 par value
were outstanding.
<PAGE> 2
This Quarterly Report on Form 10-Q/A amends and restates, in its
entirety, the Quarterly Report on Form 10-Q for the quarter ended June
30, 1999, which was filed with the Securities and Exchange Commission
on August 16, 1999. This Quarterly Report on Form 10-Q/A has been
restated to present the merger with M-R Group plc. ("M-R"), which was
completed June 30, 1999, using the purchase method of accounting. The
merger with M-R was accounted for using the pooling of interests method
of accounting in the original filing on Form 10-Q. All other
information in this Quarterly Report on Form 10-Q/A is presented as of
the original filing date of August 16, 1999, unless otherwise
indicated.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE NO.
--------
<S> <C> <C>
Part I. Financial Information
Item 1. Financial Statements
Condensed Consolidated Balance Sheets as of June 30,
1999 (Unaudited) and December 31, 1998 3
Condensed Consolidated Statements of Income
(Unaudited), Three Months and Six Months Ended June 30,
1999 and 1998 4
Condensed Consolidated Statements of Cash Flows
(Unaudited), Six Months Ended June 30, 1999 and 1998 5
Notes to Condensed Consolidated Financial Statements
(Unaudited) 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 10
Item 3. Quantitative and Qualitative Disclosures about
Market Risk 14
Part II. Other Information
Item 2. Changes in Securities and Use of Proceeds 15
Item 4. Submission of Matters to a Vote of Security
Holders 15
Item 6. Exhibits and Reports on Form 8-K 15
Signatures 18
</TABLE>
2
<PAGE> 3
LASON, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT FOR SHARES)
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1999 1998
--------- ------------
(Unaudited)
<S> <C> <C>
ASSETS
Cash and cash equivalents........................... $ 8,276 $ 1,315
Accounts receivable (net)........................... 132,604 86,073
Supplies............................................ 13,309 10,144
Deferred income taxes............................... 1,822 --
Prepaid expenses and other.......................... 28,889 16,028
--------- ---------
Total current assets........................... 184,900 113,560
Property and equipment (net)........................ 94,154 61,665
Intangible assets (net)............................. 480,178 252,400
Employee loans receivable........................... 3,177 1,698
Other............................................... 5,668 2,362
--------- ---------
Total assets................................... $ 768,077 $ 431,685
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Accrued expenses.................................... $ 41,910 $ 13,466
Accounts payable.................................... 28,260 17,332
Notes payable....................................... 316 18,906
Customer deposits................................... 6,825 6,015
Deferred income taxes............................... 1,055 918
Other............................................... 9,807 9,763
--------- ---------
Total current liabilities...................... 88,173 66,400
Revolving credit line borrowings.................... 194,000 59,000
Deferred income taxes............................... 3,195 2,101
Convertible debentures.............................. 3,034 1,169
Other............................................... 39,307 18,077
--------- ---------
Total liabilities.............................. 327,709 146,747
--------- ---------
STOCKHOLDERS' EQUITY
Common stock, $.01 par value; 100,000,000 and
20,000,000 shares authorized, 18,740,522 and
15,378,375 shares issued and outstanding, 895,216
and 686,865 shares held in escrow................. 178 146
Preferred stock, $.01 par value; 5,000,000 shares
authorized, none issued and outstanding........... -- --
Additional paid-in capital.......................... 407,627 252,479
Retained earnings................................... 38,121 32,313
Treasury stock (at cost)............................ (5,541) --
Accumulated other comprehensive income (loss)....... (17) --
--------- ---------
Total stockholders' equity..................... 440,368 284,938
--------- ---------
Total liabilities and stockholders' equity..... $ 768,077 $ 431,685
========= =========
</TABLE>
The accompanying Notes are an integral part of the condensed
consolidated financial statements.
3
<PAGE> 4
LASON, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
--------------------------- ----------------------------
1999 1998 1999 1998
------------- ------------ ------------- -------------
<S> <C> <C> <C> <C>
Revenues, net of postage.............. $ 119,393 $62,636 $ 225,555 $ 109,202
Cost of revenues...................... 76,628 40,514 144,906 70,325
--------- ------- --------- ---------
Gross profit..................... 42,765 22,122 80,649 38,877
Selling, general and administrative 28,508 12,758 50,359 22,536
expenses............................
Compensatory stock option expense..... 71 69 143 138
Amortization of intangibles........... 3,238 1,317 5,797 2,283
Merger-related charges................ 7,755 -- 7,755 --
--------- ------- --------- ---------
Income from operations........... 3,193 7,978 16,595 13,920
Net interest expense.................. 2,714 1,530 4,845 2,176
--------- ------- --------- ---------
Income before income taxes....... 479 6,448 11,750 11,744
Provision for income taxes............ 1,459 2,608 5,942 4,438
--------- ------- --------- ---------
Net income (loss)................ $ (980) $ 3,840 $ 5,808 $ 7,306
========= ======= ========= =========
Basic income (loss) per share......... $ (0.07) $ 0.33 $ 0.39 $ 0.63
========= ======= ========= =========
Diluted income (loss) per share....... $ (0.07) $ 0.31 $ 0.37 $ 0.59
========= ======= ========= =========
</TABLE>
The accompanying Notes are an integral part of the condensed
consolidated financial statements.
4
<PAGE> 5
LASON, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
------------------------
1999 1998
----------- -----------
<S> <C> <C>
CASH FLOWS PROVIDED BY (USED IN) OPERATING ACTIVITIES. $ 5,767 $ (3,751)
---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Payments for acquisition of businesses, net of cash
acquired............................................ (99,324) (65,747)
Additions to fixed assets and software development
costs............................................... (14,606) (9,002)
Proceeds from sales of fixed assets................... 596 55
---------- ----------
Net cash used in investing activities............ (113,334) (74,694)
---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings on revolving line of credit................ 195,700 331,700
Repayments on revolving line of credit................ (60,700) (248,850)
Repayments of notes payable........................... (18,660) (6,218)
Repayment on capital lease liabilities and other debt. (1,590) (727)
Proceeds from exercise of employee stock options...... 435 305
Other, net............................................ (640) --
---------- ----------
Net cash provided by financing activities........ 114,545 76,210
---------- ----------
Effect of foreign exchange rate changes on cash and cash
equivalents......................................... (17) --
---------- ----------
Net increase (decrease) in cash and cash equivalents.. 6,961 (2,235)
Cash and cash equivalents at beginning of period...... 1,315 2,925
---------- ----------
Cash and cash equivalents at end of period............ $ 8,276 $ 690
========== ==========
</TABLE>
The accompanying Notes are an integral part of the condensed
consolidated financial statements.
5
<PAGE> 6
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 1. BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements of
Lason, Inc. (together with its subsidiaries, "Lason" or the "Company") have been
prepared in conformity with generally accepted accounting principles for interim
financial information and with the instructions for Form 10-Q and Rule 10-01 of
Regulation S-X. Accordingly, such interim financial statements do not include
all of the information and footnotes required by generally accepted accounting
principles for complete consolidated financial statements.
In the opinion of management, all necessary adjustments (consisting of
normal recurring adjustments) considered necessary for a fair presentation have
been included. The operating results for the six month period ended June 30,
1999 are not necessarily indicative of the results to be expected for the year
ending December 31, 1999.
For further information, refer to the consolidated financial statements and
notes thereto included in the Company's Annual Report on Form 10-K for the year
ended December 31, 1998 filed with the Securities and Exchange Commission on
March 31, 1999.
Certain reclassifications have been made to the consolidated financial
statements for 1998 to conform to the 1999 presentation.
In the unaudited condensed consolidated financial statements previously
presented and filed with the Securities and Exchange Commission in Form 10-Q on
August 16, 1999, the acquisition of MR Group plc. ("M-R") was accounted for
using the pooling of interests method of accounting. In December 1999, Lason
took certain actions which require a change to the purchase method of accounting
for the acquisition of M-R. The accompanying unaudited condensed consolidated
financial statements, which are included in Form 10-Q/A, are restated to present
the acquisition of M-R using the purchase method of accounting. All other
information is as previously filed, unless otherwise indicated. See Note 2.
NOTE 2. MERGERS AND ACQUISITIONS
On June 30, 1999, the Company completed its merger with M-R Group plc.
("M-R"), a leading document and data management company headquartered in the
United Kingdom. In connection with the merger, the Company issued 3,071,863 new
shares of its common stock in exchange for all of the outstanding common stock
of M-R, including 47,222 shares issued in connection with the settlement of
certain M-R stock options (the "Executive Options"). Pursuant to the merger
agreement, M-R shareholders received 5.376 new shares of Lason common stock for
every 100 M-R shares held for a total value of approximately $152.4 million as
of June 30, 1999.
In connection with the Executive Options, M-R previously established a trust
that purchased shares of M-R common stock in the open market. Such shares were
to be issued to employees upon exercise of their respective individual stock
options. Such shares were converted into approximately 112,000 shares of Lason
common stock as part of the aforementioned 3,071,863 shares of Lason common
stock issued. The value of such Lason common stock issued is recorded as
treasury stock in the Company's condensed consolidated financial statements.
Under terms of the merger agreement, certain M-R stock options (the "Staff
Options") were exchanged for options to receive 39,540 shares of Lason common
stock, calculated at the same exchange ratio discussed above. The Staff Options
must be exercised, in accordance with the terms of the M-R option plan, on or
before December 29, 1999 or the options expire.
In connection with the M-R merger, the Company recorded approximately $7.8
million of merger-related expenses which were charged to operations during the
second quarter of 1999, related to discontinued leases, the consolidation of
facilities, severance and other related expenses for Lason facilities which were
closed or consolidated into M-R facilities.
During the six months ended June 30, 1999, the Company completed several
additional acquisitions, the most significant of which were: Vetri Systems, Inc.
and its affiliate Vetri Software India, Ltd., Bonner & Moore Computing Company,
a division of Bonner & Moore Associates, Inc., the Texas division of Compex
Legal Services, MSI Digital Imaging Solutions, Inc., Cover-All Computer Holdings
Company and its affiliates, MSCI, Inc., Crest Information Technologies, Inc. and
Marketing Associates, Inc.
Aggregate consideration for all acquisitions completed during the first six
months of 1999 (the "1999 Acquisitions"), excluding
6
<PAGE> 7
liabilities assumed, was approximately $256.0 million, consisting of
approximately $90.4 million in cash, 3,308,237 shares of the Company's common
stock valued at approximately $163.7 million and debentures convertible into
32,532 shares of the Company's common stock valued at approximately $1.9 million
at the date of acquisition.
For the 1999 Acquisitions, 201,736 shares of the Company's common stock
valued at approximately $9.8 million on the respective transaction dates, and
approximately $1.7 million in cash are being held in escrow to indemnify the
Company if contingencies set forth in the respective purchase agreements occur
within specified time frames, ranging from 12 to 24 months from the date of
acquisition. In addition, $4.2 million of the aggregate cash consideration will
be paid only if certain contingencies are met. Finally, certain of the purchase
agreements provide for an increase to the purchase price if operating income of
the acquired business exceeds targeted levels. The maximum amount of additional
purchase price which may be recorded should such targets be achieved for the
1999 Acquisitions is approximately $101.5 million. Purchase price contingencies,
if any, will be recorded as an adjustment to the purchase price when the related
contingency is resolved.
Each of the 1999 Acquisitions was accounted for as a purchase. The results
of operations for the three and six month periods ended June 30, 1999 include
the results of operations for each of the purchase acquisitions since the date
of their respective acquisition.
The purchase price for the 1999 Acquisitions was allocated to the assets
acquired and liabilities assumed based on the estimated fair values at the date
of acquisition. The excess of the aggregate purchase price over the fair values
of assets acquired and liabilities assumed has been allocated to goodwill and is
being amortized on a straight-line basis over 30 years. The allocation of the
excess purchase price is based on preliminary estimates and assumptions, and is
subject to revision upon final determination of the fair market value of the net
assets acquired. Management does not expect the final allocations to differ
materially from the preliminary estimates.
In conjunction with the 1999 Acquisitions, liabilities assumed and other
noncash consideration were as follows (in thousands):
<TABLE>
<S> <C>
Fair value of assets acquired....................... $ 75,934
Goodwill............................................ 212,402
Cash and common stock held in escrow................ 11,536
Net cash paid in consideration for companies
acquired.......................................... (80,885)
Common stock issued in consideration for companies
acquired.......................................... (163,773)
Convertible debentures issued in consideration for
companies acquired................................ (1,865)
Treasury shares assumed 5,541
--------
Liabilities assumed................................. $ 58,890
========
</TABLE>
The following table summarizes pro forma unaudited results of operations as
if each of the 1999 Acquisitions had occurred at the beginning of the periods
presented (in thousands, except per share amounts):
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30,
1999 1998
-------------------------
<S> <C> <C>
Revenues...................... $292,334 $209,339
Income before income taxes.... 15,880 18,173
Net income ................... 8,286 11,164
Basic income per share........ $ 0.46 $ 0.76
Diluted income per share...... $ 0.43 $ 0.72
</TABLE>
In August 1999, the Company purchased all of the outstanding common stock of
Addressing Services Company, Inc., for aggregate consideration of $19.5 million
consisting of approximately $16.6 million in cash and 62,004 shares of the
Company's common stock valued at approximately $2.9 million.
NOTE 3. LONG-TERM DEBT
On June 30, 1999, the Company had a credit agreement with a bank group which
provided for revolving credit loans of up to $200 million. Borrowings are
expected to be used to finance additional acquisitions of businesses, working
capital, capital expenditures and for other corporate purposes. Borrowings under
the credit agreement are collateralized by substantially all of the Company's
assets. The Company is not required to make principal payments prior to 2003.
Interest on amounts outstanding is calculated based on interest rates determined
at the time of borrowing. Borrowings bear interest at rates ranging from LIBOR
plus an applicable margin (6.07% as of June 30, 1999) to a base percentage rate
plus an applicable margin (7.75% as of June 30, 1999), at the Company's
7
<PAGE> 8
election at the time of borrowing. The credit agreement contains restrictions on
the acquisition of stock or assets, payment of dividends, disposal of assets,
incurrence of other liabilities, and has minimum requirements for cash flow and
certain financial ratios.
During the second quarter of 1999, the Company entered into a supplemental
credit agreement (the "Bridge Loan") providing for revolving credit loans up to
$50 million. The Bridge Loan expires on August 31, 1999 and may be used to
finance acquisitions, working capital, and for other corporate purposes. No
balance was outstanding under the Bridge Loan at June 30, 1999.
Subsequent to June 30, 1999, the Company completed an amendment to the
credit agreement. The amendment, among other things, adds a term loan of $150
million and reduces the revolving portion to $150 million (with the ability, at
the Company's option, to increase the revolving portion to $250 million subject
to certain limitations). The amendment also allows for up to $50 million of the
revolving portion to be borrowed in Euro, British Pounds Sterling, Canadian
dollar and other freely traded currencies to be agreed upon with the lenders.
The amendment also secures all borrowings by guarantees of certain of the
Company's subsidiaries, as well as pledges of the capital stock of certain
subsidiaries. Quarterly principal and interest payments will be required on the
term loan, beginning in 2000 with final maturity of each loan being five years
from the closing date (2004).
NOTE 4. COMPREHENSIVE INCOME
The assets and liabilities of foreign subsidiaries are translated into
United States dollars using period end exchange rates, while the income
statements are translated using average exchange rates during the periods.
Differences arising from the translation of assets and liabilities in comparison
with the translation of the previous periods are included as a separate
component of stockholder's equity. The net accumulated foreign currency
translation adjustment is $(17,000) at June 30, 1999.
The components of other comprehensive income (loss) are as follows (in
thousands):
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
--------------------- ---------------------
1999 1998 1999 1998
---------- --------- --------- ---------
<S> <C> <C> <C> <C>
Net income (loss)................ $ (980) $ 3,840 $ 5,808 $ 7,306
Net foreign currency translation
gain (loss).................... (17) -- (17) --
---------- ------- ------- -------
Comprehensive income (loss)...... $ (997) $ 3,840 $ 5,791 $ 7,306
========== ======= ======= =======
</TABLE>
8
<PAGE> 9
NOTE 5. EARNINGS PER SHARE
The following table presents a reconciliation of the numerator (income
applicable to common shareholders) and denominator (weighted average common
shares outstanding) for the basic and diluted earnings per share calculations
for the three and six month periods ended June 30, 1999 and 1998 (in thousands,
except per share amounts):
<TABLE>
<CAPTION>
THREE MONTHS ENDED THREE MONTHS ENDED
JUNE 30, 1999 JUNE 30, 1998
--------------------------------- -------------------------------
WEIGHTED WEIGHTED
NET AVERAGE PER NET AVERAGE PER
LOSS SHARES SHARE INCOME SHARES SHARE
---------- -------- --------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
BASIC EPS.......................... $ (980) 14,749 $ (0.07) $3,840 11,654 $ 0.33
EFFECT OF DILUTIVE SECURITIES
Contingently issuable shares of
common stock..................... -- -- -- -- 409 --
Potential shares of common stock from
debentures and stock options
outstanding...................... -- -- -- -- 355 --
-------- ------ ------ ------
DILUTED EPS........................ $ (980) 14,749 $ (0.07) $3,840 12,418 $ 0.31
========= ====== ====== ======
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS ENDED SIX MONTHS ENDED
JUNE 30, 1999 JUNE 30, 1998
--------------------------------- -------------------------------
WEIGHTED WEIGHTED
NET AVERAGE PER NET AVERAGE PER
INCOME SHARES SHARE INCOME SHARES SHARE
---------- -------- --------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
BASIC EPS.......................... $ 5,808 14,727 $ 0.39 $ 7,306 11,630 $ 0.63
EFFECT OF DILUTIVE SECURITIES
Contingently issuable shares of
common stock..................... -- 802 -- -- 317 --
Potential shares of common stock from
debentures and stock options
outstanding...................... -- 377 -- -- 340 --
-------- ------ -------- ------
DILUTED EPS........................ $ 5,808 15,906 $ 0.37 $ 7,306 12,287 $ 0.59
======== ====== ======== ======
</TABLE>
The weighted average common shares and common share equivalents outstanding
used to compute the dilutive effect of common stock options outstanding was
computed using the treasury stock method prescribed by Statement of Financial
Accounting Standards ("SFAS") No. 128. During the quarter ended June 30, 1999,
the effects of contingently issuable shares and common share equivalents are not
included in the denominator for diluted earnings per share, as such effects
would be antidilutive.
NOTE 6. SEGMENT AND RELATED INFORMATION
SFAS No. 131, "Disclosures about Segments of an Enterprise and Related
Information" was issued in June 1997 and is effective for financial statements
issued after December 15, 1998. The statement requires the Company to report
certain information about its operating segments.
For years prior to 1998, the Company was managed as one operating segment.
Beginning in 1998, the Company's reportable segments consist of groups of
business units that are organized geographically. Each of the Company's
geographic regions has a separate management team and infrastructure, and offers
different combinations of the Company's services. The Company evaluates the
performance of its operating segments based on income before income taxes and
net corporate interest expense. Intersegment sales and transfers are not
significant.
9
<PAGE> 10
The following table presents summarized financial information for the
Company's reportable segments for the three and six months ended June 30, 1999
and 1998 (in thousands). The "Other" balances include corporate related items,
results of insignificant operations and, as it relates to segment profit (loss),
income and expenses not allocated to reportable segments. The international
segment was previously included in "other" but is now shown separately as
certain quantitative thresholds under SFAS No. 131 have now been met. The
international segment includes the United Kingdom, Canada and Mexico. Prior
periods have been restated accordingly. Additionally, prior periods have been
restated for the reallocation of certain business units among regions during the
second quarter of 1999.
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
----------------------- -----------------------
1999 1998 1999 1998
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Revenues:
Midwest................................ $ 3,182 $ 774 $ 3,858 $ 1,506
Central................................ 37,769 24,865 69,032 47,783
Northeast.............................. 17,543 12,236 35,774 19,431
Southeast.............................. 15,382 6,972 29,345 12,876
Southwest.............................. 17,408 9,196 34,079 12,357
West................................... 24,406 8,363 44,791 14,908
International.......................... 7,356 190 12,577 273
Other.................................. (3,653) 40 (3,901) 68
-------- -------- -------- --------
Total............................... $119,393 $ 62,636 $225,555 $109,202
======== ======== ======== ========
Segment profit (loss):
Midwest................................ $ 520 $ 181 $ 632 $ 347
Central................................ 3,509 4,431 6,300 7,332
Northeast.............................. 1,650 1,978 4,482 3,527
Southeast.............................. 2,812 968 4,804 1,451
Southwest.............................. 2,691 1,988 6,589 3,118
West................................... 4,388 2,011 7,243 3,426
International.......................... 774 23 1,671 27
Other.................................. (15,865) (5,132) (19,971) (7,484)
-------- -------- -------- --------
Total............................... $ 479 $ 6,448 $ 11,750 $ 11,744
======== ======== ======== ========
Details of "Other" segment profit (loss):
Net corporate interest expense......... $ (2,536) $ (1,481) $ (4,301) $ (2,103)
Corporate expenses not allocated to
operating segments................... (13,060) (3,122) (15,123) (4,366)
Amortization of intangibles not
allocated to operating segments...... (140) (445) (404) (862)
Compensatory stock option expense...... (129) (85) (143) (154)
Other.................................. -- 1 -- 1
-------- -------- -------- --------
Total............................... $(15,865) $ (5,132) $(19,971) $ (7,484)
======== ======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1999 1998
--------- ------------
<S> <C> <C>
Total assets:
Midwest...................................... $ 13,059 $ --
Central...................................... 145,816 86,933
Northeast.................................... 117,791 107,245
Southeast.................................... 91,797 37,405
Southwest.................................... 77,441 56,143
West......................................... 96,855 84,397
International................................ 170,430 13,610
Other........................................ 54,888 45,952
--------- ---------
Total..................................... $ 768,077 $ 431,685
========= =========
Details of "Other" total assets:
Net goodwill not allocated to operating
segments................................... $ 26,909 $ 29,900
Net other intangible assets not allocated to
operating segments......................... 7,526 5,931
Other corporate assets not allocated to
operating segments......................... 20,453 10,121
--------- ---------
Total..................................... $ 54,888 $ 45,952
========= ===========
</TABLE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following discussion contains forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933, as amended, and Section
21E of the Securities Exchange Act of 1934, as amended. Those statements include
statements regarding the intent, belief or current expectations of the Company
and its management. Prospective investors are cautioned that any such
forward-looking statements are not guarantees of future performance and involve
a number of risks and uncertainties, and that actual results could differ
materially from those indicated by such forward-looking statements. Among the
important factors that could cause actual
10
<PAGE> 11
results to differ materially from those indicated by such forward-looking
statements are: (i) the assimilation of acquisitions, (ii) the management of the
Company's growth and expansion, (iii) dependence on major customers, or on key
personnel, (iv) development by competitors of new or superior products or
services, or entry into the market of new competitors, (v) fluctuations in paper
prices, (vi) integrity and reliability of the Company's data, (vii) volatility
of the Company's stock price, (viii) changes in the business services
outsourcing industry, (ix) significance of intangible assets, (x) changes
related to compensatory stock options and (xi) other risks identified from time
to time in the Company's reports and registration statements filed with the
Securities and Exchange Commission.
OVERVIEW
During the six months ended June 30, 1999, the Company completed several
acquisitions which were accounted for as purchases, the most significant of
which were: M-R Group plc. ("M-R"), Vetri Systems, Inc. and its affiliate Vetri
Software India, Ltd., Bonner & Moore Computing Company, a division of Bonner &
Moore Associates, Inc., the Texas division of Compex Legal Services, MSI Digital
Imaging Solutions, Inc., Cover-All Computer Holdings Company and its affiliates,
MSCI, Inc., Crest Information Technologies, Inc. and Marketing Associates, Inc.
In connection with the M-R merger, the Company recorded approximately $7.8
million of merger-related expenses which were charged to operations during the
second quarter of 1999, related to discontinued leases, the consolidation of
facilities, severance and other related expenses for Lason facilities which were
closed or consolidated into M-R facilities.
Although management anticipates that the Company will continue to acquire
complementary businesses in the future, there can be no assurance that the
Company will be able to identify and acquire attractive acquisition candidates,
profitably manage such acquired companies or successfully integrate such
acquired companies into the Company without substantial costs, delays or other
problems. In addition, there can be no assurance that any companies acquired in
the future will be profitable at the time of acquisition or will achieve sales
and profitability justifying the Company's investment therein or that the
Company will recognize the synergies expected from such acquisitions.
RESULTS OF OPERATIONS -- THREE MONTHS ENDED JUNE 30, 1999 COMPARED WITH THREE
MONTHS ENDED JUNE 30, 1998.
Consolidated net revenues increased 91% to $119.4 million for the three
months ended June 30, 1999 from $62.6 million in the second quarter of 1998.
Approximately $45.3 million of the increase is due to acquisitions and
approximately $11.5 million is due to growth in the Company's existing business.
The majority of the internal growth is attributable to the increase in image and
data capture and data management revenues, largely the result of successful
cross-selling of the Company's core services and the Company's focus on fast
growing markets, such as e-commerce.
Gross profit increased to $42.8 million for the second quarter of 1999 from
$22.1 million for the comparable 1998 quarter primarily due to the increase in
net revenues. Gross profit as a percentage of net revenues is 36% for the three
months ended June 30, 1999 versus 35% for the comparable period of 1998.
Selling, general and administrative expenses increased $15.7 million to
$28.5 million for the three months ended June 30, 1999 from $12.8 million for
the comparable 1998 quarter. Selling, general and administrative expenses are
approximately 24% of net revenues for the current year quarter, versus 20% in
the comparable quarter of 1998. Approximately $9.4 million of the increase is
due to selling, general and administrative expenses of acquired companies. The
remaining increase is primarily due to higher compensation and other corporate
administration expenses associated with managing a larger consolidated
organization.
Amortization of intangibles increased to $3.2 million for the three months
ended June 30, 1999 from $1.3 million for the second quarter of 1998 primarily
due to an increase in goodwill related to the business acquisitions completed.
The Company reported operating income of $3.2 million for the three months
ended June 30, 1999, compared to $8.0 million in the comparable period of 1998.
The decline is due to the merger-related expenses discussed in the overview of
this Item 2. Excluding these charges, operating income increased 37% to $10.9
million for the three months ended June 30, 1999.
Net interest expense is $2.7 million for the 1999 second quarter compared to
$1.5 million in 1998. The increase is primarily due to higher average line of
credit balances resulting from borrowings used primarily to fund business
acquisitions.
The provision for income taxes as a percentage of pre-tax income increased to
305% for the quarter ended June 30, 1999, from 40% in the comparable period of
1998. This is due to lower pre tax income, primarily as a result of the
aforementioned merger-related
11
<PAGE> 12
expenses, while goodwill amortization expense not deductible for federal income
tax purposes increased due to recent acquisitions. Excluding the tax effect
associated with the merger-related expenses, the provision for income taxes as a
percentage of pre tax income would have been 53% for the 1999 second quarter.
RESULTS OF OPERATIONS -- SIX MONTHS ENDED JUNE 30, 1999 COMPARED WITH SIX MONTHS
ENDED JUNE 30, 1998.
Consolidated net revenues increased 107% to $225.6 million for the six
months ended June 30, 1999 from $109.2 million for the comparable period of
1998. Approximately $93.8 million of the increase is due to acquisitions and
approximately $22.6 million is due to growth in the Company's existing business.
The internal growth is primarily the result of increased image and data capture
and data management revenue.
Gross profit increased to $80.6 million for the six months ended June 30,
1999 from $38.9 million for the comparable 1998 period primarily due to an
increase in net revenues. Gross profit as a percentage of net revenues is 36%
for the six months ended June 30, 1999 and for the comparable period of 1998.
Selling, general and administrative expenses increased $27.9 million to
$50.4 million, or 22% of net revenues for the first six months of 1999, from
$22.5 million, or 21% of net revenues in the same period of 1998. Approximately
$17.1 million of the increase is due to selling, general and administrative
expenses of acquired companies. The remaining increase is primarily due to
increased compensation and other corporate administration expenses associated
with managing a larger consolidated organization.
Amortization of intangibles increased to $5.8 million for the six months
ended June 30, 1999 from $2.3 million for the comparable 1998 period primarily
due to an increase in goodwill related to business acquisitions completed.
Net interest expense was $4.8 million for the first six months of 1999
compared to $2.2 million in the comparable 1998 period. The increase is
primarily due to higher average borrowing balances resulting from borrowings
used mainly to fund business acquisitions.
Provision for income taxes as a percentage of pre tax income was 51% for the
six months ended June 30, 1999 compared to 38% for the 1998 comparable period,
primarily due to an increase in goodwill amortization expense that is not
deductible for federal income tax purposes.
LIQUIDITY AND CAPITAL RESOURCES
The Company has funded its operations and acquisitions through a combination
of cash flow from operations, bank borrowings and the issuance of shares of
common stock.
Cash flows provided by operating activities totaled $5.8 million for the six
months ended June 30, 1999 compared to an outflow of $3.8 million for the
comparable period of 1998. The increase in operating cash flows in 1999 is
primarily due to an increase in net income before noncash merger-related
expenses and noncash depreciation and amortization, and an increase in accrued
expenses, partially offset by higher accounts receivable and other current
assets.
Cash flows used in investing activities totaled $113.3 million and $74.7
million for the six months ended June 30, 1999 and 1998, respectively, and was
primarily used to fund the acquisition of businesses and invest in capital
equipment and software development activities. Cash used for acquisitions, net
of cash acquired, was approximately $99.3 million and $ 65.7 million for the six
months ended June 30, 1999 and 1998, respectively. Cash used to invest in
capital equipment and software development activities totaled $14.6 million for
the 1999 first half, compared to $9.0 million for the comparable period of 1998.
During the first six months of 1999 and 1998, the Company invested approximately
$4.9 million and $1.3 million, respectively, for the development and
implementation of computer software primarily to support the Company's domestic
and international information processing needs. These projects and related costs
will continue as the Company pursues its acquisition strategy.
Cash flows provided by financing activities totaled $114.5 million in 1999
compared to $76.2 million for the comparable period of 1998 and largely
consisted of borrowings on the Company's revolving line of credit primarily used
to fund the payments for acquired businesses and for working capital
requirements. Additionally, during the first quarter of 1999 and 1998 the
Company repaid promissory notes in the amounts of $18.6 million and $6.2
million, respectively, relating to business acquisitions in the fourth quarter
of 1998 and 1997, respectively.
12
<PAGE> 13
Credit Agreement Borrowings
Subsequent to June 30, 1999, the Company amended and restated its credit
agreement with its lenders. The amended credit agreement has a revolving credit
facility of $150 million, which the Company may increase to up to $250 million,
subject to certain limitations. A portion of the revolving credit facility of up
to $50 million is available to the Company for borrowings in Euro, British pound
sterling, Canadian dollars and other freely traded currencies to be agreed upon
with the lenders. The amendment to the credit agreement also added a term loan
facility of $150 million. The Company is required to begin quarterly principal
and interest payments on the term loan commencing May 31, 2000, with final
maturity on both loan portions in 2004. Borrowings under the credit agreement
will be used to finance additional acquisitions of businesses, working capital,
capital expenditures and other corporate purposes, including refinancing
existing indebtedness. Borrowings under the credit agreement are secured by
guaranties of certain of the Company's subsidiaries, as well as pledges of the
capital stock of certain subsidiaries. Interest on amounts outstanding is
calculated based on interest rates determined at the time of borrowing.
Borrowings bear interest at rates ranging from a Eurodollar rate plus a maximum
of 2.00% (6.78% at August 16, 1999), or a base rate plus a maximum of 0.50%
(8.0% at August 16, 1999), at the Company's election at the time of borrowing.
The credit agreement contains restrictions on acquisitions, dispositions of
assets and the incurrence of other liabilities and contains certain financial
ratio covenants. As of August 16, 1999, $223.2 million was borrowed under the
credit agreement.
Prior to the amendment, the credit agreement provided for revolving loans of
up to $200 million, which the Company supplemented with an additional agreement
providing for revolving credit loans of up to an additional $50 million.
Borrowings under the credit agreement were collateralized by substantially all
of the Company's assets before the recent amendment.
Future Capital Needs
The Company's liquidity and capital resources have been significantly
affected by acquisitions of businesses and, given the Company's acquisition
strategy, may be significantly affected for the foreseeable future. To date, the
Company has financed its acquisitions with borrowings under its credit
agreement, with shares of its common stock and with cash from operations.
The Company's ability to obtain cash adequate to fund its needs depends
generally on the results of its operations and the availability of financing.
Management believes that cash flow from operations, in conjunction with
borrowings from its existing and any future credit agreements and possible
issuance of shares of its common stock, will be sufficient to meet debt service
requirements, make possible future acquisitions and fund capital expenditures in
the future. However, there can be no assurance in this regard or that the terms
available for any future financing, if required, would be favorable to the
Company.
YEAR 2000
The Company uses a significant number of computer software programs and
operating systems in its internal operations. To the extent that these software
applications contain a source code that is unable to interpret appropriately the
upcoming calendar year 2000, some level of modification or even possible
replacement of such source code or program applications will be necessary. In
addition, the Company may experience significant adverse business interruptions
if significant customers and/or suppliers are not prepared for the year 2000.
The Company has a standing committee consisting of key management personnel
to address the year 2000 issue. The Company has surveyed its customers and
suppliers identifying those that are most critical to the operations of the
Company. Meetings were scheduled between such entities and Company personnel to
gain a clear understanding of their year 2000 readiness and any potential impact
on the Company. Appropriate contingencies were developed based upon these
meetings.
The Company is currently modifying its computer software programs and
operating systems to make each significant system and program "Year 2000
Compliant". Substantially all critical business systems are year 2000 compliant,
and all individual business-unit systems (including those of M-R) are expected
to be compliant by September 30, 1999. As of June 30, 1999, the Company has
incurred approximately $3.3 million in connection with its year 2000 compliance
program and anticipates that it will incur an additional estimated $850,000 to
complete the program.
Although the Company has not totally completed its year 2000 remediation, it
does not anticipate a material year 2000 business interruption due to the nature
of its operating systems, and the customers and suppliers with which it
transacts business. However, there can be no assurance that the Company will not
incur unanticipated costs or systems interruptions, which could have a material
adverse effect on the Company's business, financial condition or results of
operations. In addition, there can be no assurance that
13
<PAGE> 14
failure of the Company's critical customers or suppliers to be year 2000
compliant will not have a material adverse effect on the Company's business,
financial condition or results of operations. In addition, there can be no
assurance that businesses acquired in the future will not incur unanticipated
costs or systems interruption, which could have an adverse effect on the
Company's business, financial condition or results of operations.
INFLATION
Certain of the Company's expenses, such as wages and benefits, occupancy
costs, and equipment repair and replacement, are subject to normal inflation.
Supplies, such as paper and related products, can be subject to significant
price fluctuations. Although the Company to date has been able to substantially
offset any such cost increases through increased operating efficiencies, there
can be no assurance that the Company will be able to offset any future cost
increases through similar efficiencies or increased charges for its products and
services.
LITIGATION
The Company is, from time to time, a party to legal proceedings arising in
the normal course of its business. Management believes that none of the legal
proceedings currently outstanding will have a material adverse effect on the
Company's business, financial condition or results of operations.
ITEM 3. QUANTITIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Pursuant to the General Instructions to Item 305 of Regulation S-K, the
quantitative and qualitative disclosures called for by Item 3 of Part I of Form
10-Q and Item 305 of Regulation S-K do not require additional disclosure by the
Company at this time.
14
<PAGE> 15
PART II. OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
During the second quarter of 1999, the Company issued shares of its common
stock without registration under the Securities Act of 1933 (the "Act"). The
issuance of Securities described in the first two paragraphs below were exempt
from registration under the Act by virtue of Section 4(2) thereof as
transactions not involving a public offering. The issuance of the securities
described in the third paragraph were exempt from registration under the Act by
virtue of Section 3(a)(10) thereof.
In the second quarter of 1999, in connection with the acquisition of the
shares or assets of various companies as partial payment of the purchase price,
the Company issued 140,480 shares of its common stock valued at $5,958,058. The
shares were issued at prices ranging from $37.33 to $56.86.
In May 1999, the Company issued 6,616 shares of its common stock at a price
per share of $54.52 to shareholders of a company it had previously acquired as
additional consideration for the achievement of certain target levels of
financial performance after the acquisition.
On June 30, 1999, the Company acquired all of the outstanding shares of
stock of M-R Group plc., a United Kingdom publicly-held company ("M-R"),
effected by means of a scheme of Arrangement ("Scheme of Arrangement")
negotiated at arm's length under Section 425 of the Companies Act of 1985, under
the laws of the United Kingdom. Under the Scheme of Arrangement, M-R
shareholders received 3,024,641 shares of Lason common stock. Additional shares
shall be issued upon exercise of outstanding M-R options.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On May 27, 1999, the Company held its Annual Meeting of Shareholders. There
were three matters voted on -- the election of directors, amendment of the
Company's 1998 Equity Participation Plan to increase by 500,000 to 1,400,000 the
number of reserved shares of Lason common stock for issuance under the plan, and
an amendment to Lason's Amended and Restated Certificate of Incorporation to
increase the number of authorized shares to 100,000,000 from 20,000,000. All
directors nominees were elected, and the two other matters were approved. The
following table sets forth the results of the voting on the matters voted upon.
<TABLE>
<CAPTION>
MATTER VOTED UPON: VOTES FOR VOTES WITHHELD VOTES AGAINST ABSTAIN
------------------------------------ ----------- ---------------- --------------- ---------
<S> <C> <C> <C> <C>
Nominees:
William Rauwerdink.................. 12,941,589 185,617 -- --
Robert Yanover...................... 12,942,289 184,917 -- --
Approval of amendment to 1998 Equity
Participation Plan................ 6,722,566 -- 6,384,303 20,337
Approval of amendment to Amended and
restated Certificate of
Incorporation..................... 9,305,431 -- 3,809,865 11,910
</TABLE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a. Exhibits
<TABLE>
<S> <C>
2.9 Agreement of Purchase and Sale of
Stock dated July 17, 1997 between
Lason and Image Conversion Systems,
Inc.(2)
2.10 Asset Purchase Agreement dated
November 25, 1997 between Lason and
VIP Imaging, Inc.(3)
2.11 Stock Purchase Agreement dated
February 12, 1998 with respect to the
acquisition of Racom Corporation and
its affiliates by Lason.(4)
2.12 Asset Purchase Agreement dated March
5, 1998 between Lason and API Systems,
Inc.(5)
2.13 Agreement for the Purchase and Sale of
Stock dated July 24, 1998 between
Lason and Consolidated
Reprographics.(6)
2.15 Transaction Agreement between Lason
and M-R Group plc. dated March 25,
1999.(9)
2.16 Amendment Agreement between Lason and
M-R Group plc. dated April 30, 1999.
(9)
2.17 Amendment Agreement between Lason and
M-R Group plc. dated May 13, 1999.(9)
3.1 Form of Amended and Restated
Certificate of Incorporation of
</TABLE>
15
<PAGE> 16
<TABLE>
<S> <C>
the Company.(1)
3.2 Form of Revised Amended and Restated
Bylaws.(7)
4.1 Form of Certificate representing
Common Stock of the Company.(1)
4.3 Third Amended and Restated Credit
Agreement dated as of August 16, 1999
among the Company, the Lenders named
therein, Bank One, Michigan as
administrative agent, and Comerica
Bank, as syndication agent.(10)
10.5 Registration Agreement dated January
17, 1995 by and among the Company and
the 1995 Stockholders.(1)
10.9 Offer of employment dated April 30,
1996 from Lason Systems, Inc. to Mr.
Rauwerdink.(1)
10.10 Offer of employment dated June 12,
1996 from Lason Systems, Inc. to Mr.
Jablonski.(1)
10.11 1995 Stock Option Plan of the
Company.(1)
10.17 1996 Lason Management Bonus Plan.(1)
10.18 Lason Systems, Inc. 401(k) Profit
Sharing Plan & Trust.(1)
10.19 Amendments to Lason Systems, Inc.
401(k) Profit Sharing Plan & Trust.(1)
10.20 Lease Agreement dated as of September
3, 1985 by and between Lason Systems,
Inc. and Mart Associates, as
amended.(1)
10.24 Employment Agreement of Gary L. Monroe
dated June 1, 1999.(10)
10.25 Amended and Restated Secured
Promissory Note, dated as of June 5,
1999 -- Gary L. Monroe.(10)
10.26 Amended and Restated Pledge and
Security Agreement dated June 5, 1999
-- Gary L. Monroe.(10)
10.27 Amended and Restated Secured
Promissory Note, dated as of June 5,
1999 -- William J. Rauwerdink.(10)
10.28 Amended and Restated Pledge and
Security Agreement dated June 5, 1999
-- William J. Rauwerdink.(10)
10.29 Amended and Restated Secured
Promissory Note, dated as of June 5,
1999 -- John R. Messinger.(10)
10.30 Amended and Restated Pledge and
Security Agreement dated June 5, 1999
-- John R. Messinger.(10)
10.42 1998 Equity Participation Plan of
Lason, Inc.(8)
10.43 Employment Agreement of John R.
Messinger dated April 27, 1999.(9)
27.1 Financial Data Schedule (6 months
ended 6-30-99 Restated).+
27.2 Financial Data Schedule (6 months
ended 6-30-98 -- Restated).+
27.3 Financial Data Schedule (12 months
ended 12-31-98 -- Restated).+
</TABLE>
16
<PAGE> 17
- ----------
+ Filed herewith.
(1) Incorporated herein by reference to registrant's Form S-1 filed on
October 7, 1996, Commission File No. 333-09799.
(2) Incorporated herein by reference to registrant's Form 8-K filed on
August 4, 1997, Commission File No. 0-21407.
(3) Incorporated herein by reference to registrant's Form 8-K filed on
December 10, 1997, Commission File No. 0-21407.
(4) Incorporated herein by reference to registrant's Form 8-K filed on March
17, 1998, Commission File No. 0-21407.
(5) Incorporated herein by reference to registrant's Form 8-K filed on March
20, 1998, Commission File No. 0-21407.
(6) Incorporated herein by reference to registrant's Form S-1 filed on July
30, 1998, Commission File No. 333-60143.
(7) Incorporated herein by reference to registrant's Form 10-Q filed on May
15, 1998, Commission File No. 0-21407.
(8) Incorporated herein by reference to registrant's 1998 proxy statement,
Appendix A, filed on April 28, 1998, Commission File No. 0-21407.
(9) Incorporated herein by reference to Registrant's Form 10-Q filed on May
17, 1999 Commission File No. 0-21407.
(10) Incorporated herein by reference to Registrant's Form 10-Q filed on
August 16, 1999, Commission File No. 0-21407.
b. Reports on Form 8-K
The Company filed a report on Form 8-K on April 6, 1999 disclosing in Item 5
thereof the agreement between the Company and M-R Group plc. regarding the terms
of a proposed merger.
The Company filed a report on Form 8-K on May 21, 1999 disclosing in Item 5
the revised terms of the proposed merger with M-R Group plc.
The Company filed a report on Form 8-K on July 15, 1999 disclosing in Item 2
completion of its merger with M-R Group plc. on June 30, 1999.
17
<PAGE> 18
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.
LASON, Inc
- --------------------------------------------------------------------------------
(Registrant)
/s/ WILLIAM J. RAUWERDINK
- --------------------------------------------------------------------------------
Executive Vice President and
Chief Financial Officer
March 30, 2000
18
<PAGE> 19
EXHIBIT INDEX
-------------
Exhibit No. Description
- ----------- -----------
Ex-27.1 Financial Data Schedule 6/30/99 - Restated
Ex-27.2 Financial Data Schedule 6/30/98 - Restated
Ex-27.3 Financial Data Schedule 12/31/98 - Restated
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
SIX MONTHS ENDED JUNE 30, 1999 HAVE BEEN RESTATED TO REFLECT THE MERGER WITH M-R
GROUP PLC ACCOUNTED FOR UNDER THE PURCHASE METHOD OF ACCOUNTING. THE FINANCIAL
DATA SCHEDULES PREVIOUSLY FILED WITH THE FORM 10-Q ON AUGUST 16, 1999 ACCOUNTED
FOR SUCH MERGER UNDER THE POOLING OF INTERESTS METHOD OF ACCOUNTING.
</LEGEND>
<RESTATED>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> JUN-30-1999
<CASH> 8,276
<SECURITIES> 0
<RECEIVABLES> 132,604
<ALLOWANCES> 0
<INVENTORY> 13,309
<CURRENT-ASSETS> 184,900
<PP&E> 109,756
<DEPRECIATION> 15,602
<TOTAL-ASSETS> 768,077
<CURRENT-LIABILITIES> 88,173
<BONDS> 0
0
0
<COMMON> 178
<OTHER-SE> 440,190
<TOTAL-LIABILITY-AND-EQUITY> 768,077
<SALES> 225,555
<TOTAL-REVENUES> 225,555
<CGS> 144,906
<TOTAL-COSTS> 144,906
<OTHER-EXPENSES> 64,054
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 4,845
<INCOME-PRETAX> 11,750
<INCOME-TAX> 5,942
<INCOME-CONTINUING> 5,808
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,808
<EPS-BASIC> 0.39
<EPS-DILUTED> 0.37
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
FINANCIAL DATA SCHEDULE FOR THE SIX MONTH ENDED JUNE 30, 1998 WAS FILED WITH
FORM 10-Q ON AUGUST 16, 1999, REFLECTING THE MERGER WITH M-R-GROUP PLC UNDER THE
POOLING-OF-INTERESTS METHOD OF ACCOUNTING. THIS FINANCIAL DATA SCHEDULE FILED
HEREIN RESTATES THE SIX MONTHS ENDED JUNE 30, 1998 TO REFLECT SUCH MERGER UNDER
THE PURCHASE METHOD OF ACCOUNTING.
</LEGEND>
<RESTATED>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> JUN-30-1998
<CASH> 690
<SECURITIES> 0
<RECEIVABLES> 65,026
<ALLOWANCES> 0
<INVENTORY> 6,467
<CURRENT-ASSETS> 85,894
<PP&E> 43,827
<DEPRECIATION> 6,638
<TOTAL-ASSETS> 279,304
<CURRENT-LIABILITIES> 30,716
<BONDS> 0
0
0
<COMMON> 117
<OTHER-SE> 141,486
<TOTAL-LIABILITY-AND-EQUITY> 279,304
<SALES> 109,202
<TOTAL-REVENUES> 109,202
<CGS> 70,325
<TOTAL-COSTS> 70,325
<OTHER-EXPENSES> 24,957
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,176
<INCOME-PRETAX> 11,744
<INCOME-TAX> 4,438
<INCOME-CONTINUING> 7,306
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 7,306
<EPS-BASIC> 0.63
<EPS-DILUTED> 0.59
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS FINANCIAL DATA SCHEDULE FILED HEREIN REFLECTS THE MERGER WITH M-R GROUP PLC
UNDER THE PURCHASE METHOD OF ACCOUNTING. THE FINANCIAL DATA SCHEDULE FILED FOR
THE YEAR ENDED DECEMBER 31, 1999 WITH THE FORM 10-Q FILED ON AUGUST 16, 1999
REFLECTED SUCH MERGER UNDER THE POOLING OF INTERESTS METHOD OF ACCOUNTING.
</LEGEND>
<RESTATED>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> DEC-31-1998
<CASH> 1,315
<SECURITIES> 0
<RECEIVABLES> 86,073
<ALLOWANCES> 0
<INVENTORY> 10,144
<CURRENT-ASSETS> 113,560
<PP&E> 71,430
<DEPRECIATION> 9,765
<TOTAL-ASSETS> 431,685
<CURRENT-LIABILITIES> 66,400
<BONDS> 0
0
0
<COMMON> 146
<OTHER-SE> 284,792
<TOTAL-LIABILITY-AND-EQUITY> 431,685
<SALES> 279,756
<TOTAL-REVENUES> 279,756
<CGS> 181,149
<TOTAL-COSTS> 181,149
<OTHER-EXPENSES> 63,541
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 4,929
<INCOME-PRETAX> 30,137
<INCOME-TAX> 11,902
<INCOME-CONTINUING> 18,235
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 18,235
<EPS-BASIC> 1.44
<EPS-DILUTED> 1.35
</TABLE>
