<PAGE> 1
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM 10-Q
(MARK ONE)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JULY 31, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM TO
METALLURG, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C>
DELAWARE 13-1661467
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) INDENTIFICATION NO.)
</TABLE>
6 EAST 43RD STREET
NEW YORK, NEW YORK 10017
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
(ZIP CODE)
(212) 835-0200
(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 [ ]
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Sections 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court.
Yes [X] No [ ]
The number of shares of common stock, $0.01 par value, issued and
outstanding as of September 10, 1999 was 5,000,000.
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<PAGE> 2
METALLURG, INC. AND CONSOLIDATED SUBSIDIARIES
INDEX
<TABLE>
<CAPTION>
PAGE NO.
--------
<S> <C> <C>
Part I. FINANCIAL INFORMATION
Item 1 -- Financial Statements (Unaudited)
Condensed Statements of Consolidated Operations for the
Quarter and the Two Quarters Ended July 31, 1999 and
1998................................................... 2
Condensed Consolidated Balance Sheets at July 31, 1999 and
January 31, 1999....................................... 3
Condensed Statements of Consolidated Cash Flows for the
Two Quarters Ended July 31, 1999 and 1998.............. 4
Notes to Condensed Consolidated Financial Statements...... 5
Item 2 -- Management's Discussion and Analysis of Financial
Condition and Results of Operations....................... 11
Part II. OTHER INFORMATION
Item 6.(a) EXHIBITS........................................ 19
Item 6.(b) REPORT ON FORM 8-K.............................. 19
Signature Page.............................................. 20
</TABLE>
1
<PAGE> 3
PART I
FINANCIAL INFORMATION
METALLURG, INC. AND CONSOLIDATED SUBSIDIARIES
ITEM 1 -- FINANCIAL STATEMENTS
CONDENSED STATEMENTS OF CONSOLIDATED OPERATIONS (UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
QUARTER ENDED TWO QUARTERS ENDED
JULY 31, JULY 31,
-------------------- --------------------
1999 1998 1999 1998
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Sales........................................... $115,897 $169,754 $233,576 $337,429
Commission income............................... 155 259 289 414
-------- -------- -------- --------
Total revenue................................. 116,052 170,013 233,865 337,843
-------- -------- -------- --------
Operating costs and expenses:
Cost of sales................................. 100,765 142,671 208,804 281,679
Selling, general and administrative
expenses................................... 14,066 15,147 28,474 29,908
Environmental expense recovery................ (5,501) -- (5,501) --
Restructuring charges......................... 4,386 -- 4,386 --
Merger costs.................................. -- 4,416 -- 4,416
-------- -------- -------- --------
Total operating costs and expenses......... 113,716 162,234 236,163 316,003
-------- -------- -------- --------
Operating income (loss).................... 2,336 7,779 (2,298) 21,840
Other income (expense):
Other (expense) income, net................... (27) (333) 5 545
Interest expense, net......................... (2,894) (2,544) (5,860) (4,616)
-------- -------- -------- --------
(Loss) income before income tax provision....... (585) 4,902 (8,153) 17,769
Income tax provision............................ 1,769 3,404 2,745 9,481
-------- -------- -------- --------
Net (loss) income............................... (2,354) 1,498 (10,898) 8,288
Other comprehensive loss:
Foreign currency translation adjustment....... (737) (1,152) (2,421) (1,076)
-------- -------- -------- --------
Comprehensive (loss) income................... $ (3,091) $ 346 $(13,319) $ 7,212
======== ======== ======== ========
</TABLE>
See notes to condensed unaudited consolidated financial statements.
2
<PAGE> 4
METALLURG, INC. AND CONSOLIDATED SUBSIDIARIES
ITEM 1 -- FINANCIAL STATEMENTS
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
JULY 31, JANUARY 31,
1999 1999
----------- -----------
(UNAUDITED)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................................. $ 44,557 $ 37,293
Accounts and notes receivable, net........................ 64,333 63,680
Inventories............................................... 99,177 120,658
Other assets.............................................. 17,739 16,759
-------- --------
Total current assets.............................. 225,806 238,390
Property, plant and equipment, net.......................... 47,782 49,018
Other assets................................................ 22,045 23,709
-------- --------
Total............................................. $295,633 $311,117
======== ========
LIABILITIES
Current liabilities:
Short-term debt and current portion of long-term debt..... $ 4,071 $ 4,945
Trade payables............................................ 38,984 37,460
Accrued expenses.......................................... 31,208 25,801
Other current liabilities................................. 3,124 3,955
-------- --------
Total current liabilities......................... 77,387 72,161
-------- --------
Long-term debt.............................................. 107,358 109,185
Accrued pension liabilities................................. 36,760 41,062
Environmental liabilities, net.............................. 33,372 35,463
Other liabilities........................................... 5,909 5,556
-------- --------
Total long-term liabilities....................... 183,399 191,266
-------- --------
Total liabilities................................. 260,786 263,427
-------- --------
SHAREHOLDERS' EQUITY
Common stock................................................ 50 50
Additional paid-in capital.................................. 45,733 45,257
Accumulated other comprehensive loss........................ (2,809) (388)
Retained (deficit) earnings................................. (8,127) 2,771
-------- --------
Total shareholders' equity........................ 34,847 47,690
-------- --------
Total............................................. $295,633 $311,117
======== ========
</TABLE>
See notes to condensed unaudited consolidated financial statements.
3
<PAGE> 5
METALLURG, INC. AND CONSOLIDATED SUBSIDIARIES
ITEM 1 -- FINANCIAL STATEMENTS
CONDENSED STATEMENTS OF CONSOLIDATED CASH FLOWS (UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
TWO QUARTERS ENDED
JULY 31,
--------------------
1999 1998
-------- --------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income.................................................. $(10,898) $ 8,288
Adjustments to reconcile net income to net cash provided by
operating activities:
Executive stock awards.................................... -- 750
Depreciation and amortization............................. 3,990 4,282
Loss (gain) on sale of assets............................. 3 (592)
Deferred income taxes..................................... 1,100 2,279
Provision for doubtful accounts........................... 141 606
Provision for restructuring costs......................... 4,386 --
Other, net................................................ 3,773 2,397
-------- --------
Total............................................. 2,495 18,010
Change in operating assets and liabilities:
Increase in trade receivables............................. (7,805) (12,596)
Decrease (increase) in inventories........................ 16,680 (5,774)
(Increase) decrease in other current assets............... (2,229) 1,586
Increase in trade payables and accrued expenses........... 13,316 16,542
Payments for environmental remediation.................... (1,817) (1,006)
Other assets and liabilities, net......................... (7,389) (8,270)
-------- --------
Net cash provided by operating activities............ 13,251 8,492
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property, plant and equipment................ (5,089) (6,998)
Proceeds from asset sales................................. 35 1,286
Other, net................................................ 63 (2,254)
-------- --------
Net cash used in investing activities................ (4,991) (7,966)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Capital contribution from Safeguard International......... -- 3,541
Net short-term borrowings (repayments).................... 117 (1,851)
Repayment of long-term debt............................... (524) (548)
-------- --------
Net cash (used in) provided by financing
activities.......................................... (407) 1,142
-------- --------
Effects of exchange rate changes on cash and cash
equivalents............................................... (589) (248)
-------- --------
Net increase in cash and cash equivalents................... 7,264 1,420
Cash and cash equivalents -- beginning of period............ 37,293 43,003
-------- --------
Cash and cash equivalents -- end of period.................. $ 44,557 $ 44,423
======== ========
</TABLE>
See notes to condensed unaudited consolidated financial statements.
4
<PAGE> 6
METALLURG, INC. AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONDENSED UNAUDITED CONSOLIDATED
FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
The accompanying condensed unaudited consolidated financial statements
include the accounts of Metallurg, Inc. ("Metallurg") and its majority-owned
subsidiaries (collectively, the "Company"). These financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information pursuant to Accounting Principles Board Opinion No. 28.
Accordingly, they do not include all of the information and footnotes required
by generally accepted accounting principles for complete financial statements.
The condensed consolidated balance sheet as of January 31, 1999 was derived from
audited financial statements. In the opinion of management, all adjustments
(consisting of normal recurring adjustments) considered necessary for a fair
presentation have been included. Operating results for the interim periods
presented are not necessarily indicative of the results to be expected for a
full year.
The Company is a wholly owned subsidiary of Metallurg Holdings, Inc.
("Metallurg Holdings") since the acquisition date of July 13, 1998. The
financial statements do not reflect the pushdown of purchase accounting
adjustments recorded by Metallurg Holdings.
For further information, see the financial statements and footnotes thereto
included in the Company's audited consolidated financial statements for the year
ended January 31, 1999.
The Company reports the results of its operating subsidiaries on a
one-month lag. Accordingly, the two quarters ended July 31, 1999 and 1998
include worldwide operating results for the six months ended June 30, 1999 and
1998 and operating results of Metallurg, Inc., the parent holding company, for
the six months ended July 31, 1999 and 1998. Balance sheet data at July 31, 1999
reflect the financial position of Metallurg, Inc. at July 31, 1999 and of its
operating subsidiaries at June 30, 1999. Balance sheet data at January 31, 1999
reflect the financial position of Metallurg, Inc. at January 31, 1999 and of its
operating subsidiaries at December 31, 1998.
2. INVENTORIES
Inventories, net of reserves, consist of the following (in thousands):
<TABLE>
<CAPTION>
JULY 31, JANUARY 31,
1999 1999
-------- -----------
<S> <C> <C>
Raw materials............................................... $19,247 $ 29,096
Work in process............................................. 2,652 3,249
Finished goods.............................................. 72,648 83,116
Other....................................................... 4,630 5,197
------- --------
Total............................................. $99,177 $120,658
======= ========
</TABLE>
3. COMMITMENTS AND CONTINGENCIES
The Company continues defending various claims and legal actions arising in
the normal course of business, including those relating to environmental
matters. Management believes, based on the advice of counsel, that the outcome
of such litigation will not have a material adverse effect on the Company's
consolidated financial position, results of operations or liquidity. There can
be no assurance, however, that existing or future litigation will not result in
an adverse judgment against the Company which could have a material adverse
effect on the Company's future results of operations or cash flows.
5
<PAGE> 7
METALLURG, INC. AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONDENSED UNAUDITED CONSOLIDATED
FINANCIAL STATEMENTS -- (CONTINUED)
4. EARNINGS PER COMMON SHARE
Earnings per share is not presented since the Company is a wholly owned
subsidiary of Metallurg Holdings.
5. RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards ("SFAS") No. 133, "Accounting for Derivative
Instruments and Hedging Activities". SFAS No. 133 establishes accounting and
reporting standards for derivative instruments, including certain derivative
instruments embedded in other contracts, and for hedging activities. It requires
that an entity recognize all derivatives as either assets or liabilities in the
statement of financial position and measure those instruments at fair value.
SFAS No. 133 is effective for all fiscal quarters of fiscal years beginning
after June 15, 2000. The Company is currently evaluating the impact SFAS No. 133
will have on its financial statements.
6. SUPPLEMENTAL GUARANTOR INFORMATION
In November 1997, the Company issued $100 million principal amount of its
11% Senior Notes due 2007. Under the terms of the Senior Notes, Shieldalloy
Metallurgical Corporation ("Shieldalloy"), Metallurg Holdings Corporation,
Metallurg Services, Inc., Metallurg International Resources, Inc. ("MIR, Inc.")
and MIR (China), Inc. (collectively, the "Guarantors"), wholly owned
subsidiaries of the Company, have fully and unconditionally guaranteed on a
joint and several basis the Company's obligations to pay principal, premium and
interest relative to the Senior Notes. During the second quarter of 1999, the
Company established MIR, Inc. as a wholly owned subsidiary and a guarantor of
the Senior Notes. Certain commercial activities previously carried out by
Metallurg, Inc. are now being carried out by MIR, Inc. Management has determined
that separate, full financial statements of the Guarantors would not be material
to potential investors and, accordingly, such financial statements are not
provided. Supplemental financial information of the Guarantors is presented
below.
6
<PAGE> 8
METALLURG, INC. AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONDENSED UNAUDITED CONSOLIDATED
FINANCIAL STATEMENTS -- (CONTINUED)
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS (UNAUDITED)
FOR THE QUARTER ENDED JULY 31, 1999
(IN THOUSANDS)
<TABLE>
<CAPTION>
METALLURG, INC. COMBINED COMBINED
("PARENT GUARANTOR NON-GUARANTOR
COMPANY") SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
--------------- ------------ ------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Sales.............................. $39,604 $94,728 $(18,435) $115,897
Commission income.................. 19 202 (66) 155
------- ------- -------- --------
Total revenue.................... 39,623 94,930 (18,501) 116,052
------- ------- -------- --------
Operating costs and expenses:
Cost of sales.................... $ 1 36,090 83,835 (19,161) 100,765
Selling, general and
administrative expenses....... 1,345 2,614 10,107 -- 14,066
Environmental expense recovery... -- (5,501) -- -- (5,501)
Restructuring charges............ -- -- 4,386 -- 4,386
------- ------- ------- -------- --------
Total operating costs and
expenses...................... 1,346 33,203 98,328 (19,161) 113,716
------- ------- ------- -------- --------
Operating (loss) income............ (1,346) 6,420 (3,398) 660 2,336
Other income (expense):
Other income (expense), net...... 2 (16) (13) -- (27)
Interest (expense) income, net... (2,794) 345 (445) -- (2,894)
Equity in earnings (losses) of
subsidiaries.................. 141 (3,371) -- 3,230 --
------- ------- ------- -------- --------
(Loss) income before income tax
provision........................ (3,997) 3,378 (3,856) 3,890 (585)
Income tax (benefit) provision..... (1,643) 2,305 1,107 -- 1,769
------- ------- ------- -------- --------
Net (loss) income.................. (2,354) 1,073 (4,963) 3,890 (2,354)
Other comprehensive (loss) income:
Foreign currency translation
adjustment.................... (737) 1,123 (743) (380) (737)
------- ------- ------- -------- --------
Comprehensive (loss) income........ $(3,091) $ 2,196 $(5,706) $ 3,510 $ (3,091)
======= ======= ======= ======== ========
</TABLE>
7
<PAGE> 9
METALLURG, INC. AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONDENSED UNAUDITED CONSOLIDATED
FINANCIAL STATEMENTS -- (CONTINUED)
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS (UNAUDITED)
FOR THE TWO QUARTERS ENDED JULY 31, 1999
(IN THOUSANDS)
<TABLE>
<CAPTION>
METALLURG, INC. COMBINED COMBINED
("PARENT GUARANTOR NON-GUARANTOR
COMPANY") SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
--------------- ------------ ------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Sales.............................. $ 7,297 $72,345 $191,381 $(37,447) $233,576
Commission income.................. -- 21 379 (111) 289
-------- ------- -------- -------- --------
Total revenue.................... 7,297 72,366 191,760 (37,558) 233,865
-------- ------- -------- -------- --------
Operating costs and expenses:
Cost of sales.................... 6,573 71,334 168,955 (38,058) 208,804
Selling, general and
administrative expenses....... 3,271 4,805 20,398 -- 28,474
Environmental expense recovery... -- (5,501) -- -- (5,501)
Restructuring charges............ -- -- 4,386 -- 4,386
-------- ------- -------- -------- --------
Total operating costs and
expenses...................... 9,844 70,638 193,739 (38,058) 236,163
-------- ------- -------- -------- --------
Operating (loss) income............ (2,547) 1,728 (1,979) 500 (2,298)
Other income (expense):
Other income (expense), net...... 2 (9) 12 -- 5
Interest (expense) income, net... (5,725) 771 (906) -- (5,860)
Equity in losses of
subsidiaries.................. (2,845) (4,046) -- 6,891 --
-------- ------- -------- -------- --------
Loss before income tax provision... (11,115) (1,556) (2,873) 7,391 (8,153)
Income tax (benefit) provision..... (217) 682 2,280 -- 2,745
-------- ------- -------- -------- --------
Net loss........................... (10,898) (2,238) (5,153) 7,391 (10,898)
Other comprehensive loss:
Foreign currency translation
adjustment.................... (2,421) (76) (2,419) 2,495 (2,421)
-------- ------- -------- -------- --------
Comprehensive loss................. $(13,319) $(2,314) $ (7,572) $ 9,886 $(13,319)
======== ======= ======== ======== ========
</TABLE>
8
<PAGE> 10
METALLURG, INC. AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONDENSED UNAUDITED CONSOLIDATED
FINANCIAL STATEMENTS -- (CONTINUED)
CONDENSED CONSOLIDATING BALANCE SHEET AT JULY 31, 1999 (UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
METALLURG, INC. COMBINED COMBINED
("PARENT GUARANTOR NON-GUARANTOR
COMPANY") SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
--------------- ------------ ------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents........ $ 36,677 $ 562 $ 13,129 $ (5,811) $ 44,557
Accounts, notes and loans
receivable, net............... 19,853 48,146 55,530 (59,196) 64,333
Inventories...................... -- 35,162 66,633 (2,618) 99,177
Other assets..................... 10,187 1,020 9,998 (3,466) 17,739
-------- -------- -------- --------- --------
Total current assets..... 66,717 84,890 145,290 (71,091) 225,806
Investments -- intergroup.......... 101,795 51,527 -- (153,322) --
Property, plant and equipment,
net.............................. 1,025 8,440 38,317 -- 47,782
Other assets....................... 9,260 20,379 13,830 (21,424) 22,045
-------- -------- -------- --------- --------
Total.................... $178,797 $165,236 $197,437 $(245,837) $295,633
======== ======== ======== ========= ========
LIABILITIES
Current liabilities:
Short-term debt and current
portion of long-term debt..... $ 9,882 $ (5,811) $ 4,071
Accounts and loans payable....... $ 21,949 $ 30,857 55,384 (69,206) 38,984
Accrued expenses................. 3,275 9,178 18,755 -- 31,208
Other current liabilities........ -- 3,518 3,072 (3,466) 3,124
-------- -------- -------- --------- --------
Total current
liabilities............ 25,224 43,553 87,093 (78,483) 77,387
-------- -------- -------- --------- --------
Long-term liabilities:
Long-term debt................... 100,000 -- 7,358 -- 107,358
Accrued pension liabilities...... 155 1,774 34,831 -- 36,760
Environmental liabilities, net... -- 31,180 2,192 -- 33,372
Other liabilities................ 18,571 -- 8,752 (21,414) 5,909
-------- -------- -------- --------- --------
Total long-term
liabilities............ 118,726 32,954 53,133 (21,414) 183,399
-------- -------- -------- --------- --------
Total liabilities........ 143,950 76,507 140,226 (99,897) 260,786
-------- -------- -------- --------- --------
SHAREHOLDERS' EQUITY:
Common stock outstanding......... 50 1,227 52,191 (53,418) 50
Additional paid-in capital....... 45,733 94,460 1,014 (95,474) 45,733
Accumulated other comprehensive
(loss) income................. (2,809) (1,847) 18,926 (17,079) (2,809)
Retained deficit................. (8,127) (5,111) (14,920) 20,031 (8,127)
-------- -------- -------- --------- --------
Shareholders' equity..... 34,847 88,729 57,211 (145,940) 34,847
-------- -------- -------- --------- --------
Total.................... $178,797 $165,236 $197,437 $(245,837) $295,633
======== ======== ======== ========= ========
</TABLE>
9
<PAGE> 11
METALLURG, INC. AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONDENSED UNAUDITED CONSOLIDATED
FINANCIAL STATEMENTS -- (CONTINUED)
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS (UNAUDITED)
FOR THE TWO QUARTERS ENDED JULY 31, 1999
(IN THOUSANDS)
<TABLE>
<CAPTION>
METALLURG, INC. COMBINED COMBINED
("PARENT GUARANTOR NON-GUARANTOR
COMPANY") SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
--------------- ------------ ------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
NET CASH FLOWS FROM OPERATING
ACTIVITIES....................... $ (6,942) $18,748 $ 2,696 $(1,251) $13,251
-------- ------- ------- ------- -------
CASH FLOWS FROM INVESTING
ACTIVITIES:
Additions to property, plant and
equipment..................... (167) (1,359) (3,563) -- (5,089)
Proceeds from asset sales........ -- 16 19 -- 35
Other, net....................... (299) (2,761) 3,123 -- 63
-------- ------- ------- ------- -------
Net cash used in investing
activities....................... (466) (4,104) (421) -- (4,991)
-------- ------- ------- ------- -------
CASH FLOWS FROM FINANCING
ACTIVITIES:
Intergroup borrowings
(repayments).................. 16,632 (15,177) (2,706) 1,251 --
Net short-term borrowings........ -- -- (150) 267 117
Repayment of long-term debt...... -- -- (524) -- (524)
Dividends received (paid)........ 1,840 -- (1,840) -- --
-------- ------- ------- ------- -------
Net cash provided by (used in)
financing activities............. 18,472 (15,177) (5,220) 1,518 (407)
-------- ------- ------- ------- -------
Effects of exchange rate changes on
cash and cash equivalents........ -- -- (589) -- (589)
-------- ------- ------- ------- -------
Net increase (decrease) in cash and
cash equivalents................. 11,064 (533) (3,534) 267 7,264
Cash and cash
equivalents -- beginning of
period........................... 25,613 1,095 16,663 (6,078) 37,293
-------- ------- ------- ------- -------
Cash and cash equivalents -- end of
period........................... $ 36,677 $ 562 $13,129 $(5,811) $44,557
======== ======= ======= ======= =======
</TABLE>
10
<PAGE> 12
METALLURG, INC. AND CONSOLIDATED SUBSIDIARIES
ITEM 2 -- MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FORWARD-LOOKING STATEMENTS
Certain matters discussed under the caption "Management's Discussion and
Analysis of Financial Condition and Results of Operations" in this Form 10-Q may
constitute forward-looking statements for purposes of Section 21E of the
Securities Exchange Act of 1934, as amended, and as such may involve known and
unknown risks, uncertainties and other factors which may cause the actual
results, performance and achievements of the Company to be materially different
from future results, performance or achievements expressed or implied by such
forward-looking statements. Factors which may cause the Company's results to be
materially different include the cyclical nature of the Company's business, the
Company's dependence on foreign customers (particularly customers in Europe),
the economic strength of the Company's markets generally and particularly the
strength of the demand for iron, steel, aluminum and superalloys and titanium
alloy industries in those markets, the accuracy of the Company's estimates of
the costs of environmental remediation and the extension or expiration of
existing anti-dumping duties.
OVERVIEW
The Company is a leading international producer and seller of high quality
metal alloys and specialty metals used by manufacturers of steel, aluminum,
superalloys, titanium, chemicals and other metal consuming industries. The
industries that the Company supplies are cyclical. Throughout 1997 and into
1998, market conditions for most of the Company's products were favorable.
However, sales prices and demand for several of the Company's major products
declined during the second half of 1998 and into 1999. The Company believes that
the price declines were the result of economic turmoil seen in Asia, Latin
America and Russia in 1997 and 1998. In the steel industry, this led to lower
production almost everywhere except in the U.S. during the first half of 1998.
In the second half of 1998, Japan, Russia, Brazil and some other Asian countries
exported large volumes of steel to the U.S., causing domestic production to be
drastically curtailed in the latter months of 1998. In 1999, domestic steel
production has increased slightly each quarter although total first half
production was about 11% below the prior year. In addition, civilian airliner
production in 1998 did not reach the levels forecast by a major producer, and
the economic turmoil already mentioned caused postponements and cancellation of
orders for airliners as trans-Pacific and Asian air passenger volumes fell
sharply. Furthermore, Asian demand for corrosion resistant materials for major
capital projects also fell sharply. These factors contributed to lower sales of
products to the superalloy and titanium alloy industries, which continue to hold
excessive inventories, particularly of their aerospace related products. The
aluminum industry had sustained satisfactory levels of demand for the Company's
products throughout 1998, and this has continued in 1999.
RESULTS OF OPERATIONS
The Company operates in one significant industry segment, the manufacture
and sale of ferrous and non-ferrous metals and alloys. The Company is organized
geographically, with its core production facilities in the United States, the
United Kingdom and Germany supported by a worldwide sales network.
Summarized financial information concerning the Company's reportable
segments is shown in the following table (in thousands). Each segment records
direct expenses related to its employees and operations. The "Other" column
includes corporate related items, fresh-start adjustments and results of
subsidiaries not meeting the quantitative thresholds as prescribed by applicable
accounting rules. The Company does not
11
<PAGE> 13
allocate general corporate overhead expenses to operating segments. There have
been no material changes in segment assets from the amounts disclosed in the
last annual report.
RESULTS OF OPERATIONS -- THE QUARTER ENDED JULY 31, 1999 COMPARED TO THE QUARTER
ENDED JULY 31, 1998
<TABLE>
<CAPTION>
GESELLSCHAFT
LONDON AND FUR
SCANDINAVIAN ELEKTRO- ELEKTROWERK
METALLURGICAL METALLURGIE WEISWEILER
CO., LTD. MBH GMBH INTERSEGMENT CONSOLIDATED
FOR THE QUARTER ENDED JULY 31, SHIELDALLOY ("LSM") ("GFE") ("EWW") OTHER ELIMINATIONS TOTALS
- ------------------------------ ----------- ------------- ------------ ----------- ------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
1999
Revenues from external
customers.................... $27,706 $26,500 $16,593 $2,958 $42,295 $116,052
Intergroup revenue............. 1,039 9,628 4,370 5,114 9,955 $(30,106) --
Environmental expense
recovery..................... (5,501) -- -- -- -- -- (5,501)
Restructuring charges.......... -- -- 3,385 1,001 -- -- 4,386
Income tax provision
(benefit).................... 2,235 251 131 223 (1,071) -- 1,769
Net income (loss).............. 4,336 858 (4,834) (1,001) (2,232) 519 (2,354)
1998
Revenues from external
customers.................... $55,587 $31,010 $30,589 $4,695 $48,132 $170,013
Intergroup revenue............. 1,573 14,262 4,500 7,530 14,684 $(42,549) --
Merger costs................... -- -- -- -- 4,416 -- 4,416
Income tax provision
(benefit).................... 3,062 566 559 420 (1,203) -- 3,404
Net income..................... 4,337 1,361 772 343 2,305 (7,620) 1,498
</TABLE>
Total Revenues
Shieldalloy revenues were $28.4 million, or 50%, below the second quarter
of 1998. As a result of the continuing weakness in the U.S. steel industry,
volume and selling prices of ferrovanadium remained lower in the second quarter
of 1999, resulting in a decrease of approximately $9.2 million. The majority of
the remaining decline is attributable to lower volume and selling prices of
ferrosilicon, chrome metal and low carbon ferrochrome resulting from lower
demand from the steel and superalloy industries.
Excess superalloy and titanium alloy inventories in the aerospace supply
chain impacted negatively on both price and particularly volume of EWW's
specialty low carbon ferrochrome, LSM's chromium and GfE's vanadium aluminum and
titanium masteralloy products. Continuing weakness in the steel sector
contributed to low prices and volumes of LSM's ferrotitanium, EWW's normal grade
ferrochrome and GfE's ferrovanadium and ferroniobium. As a result, EWW's
revenues fell $4.2 million, or 34%, below the second quarter of 1998 and GfE,
with heavy dependence on the titanium industry, saw revenues fall $14.1 million,
or 40% below the second quarter of 1998. Although LSM's revenues fell by $9.1
million, or 20%, for reasons noted above, volumes for its products to the
aluminum industry remained strong.
Gross Margins
Gross margins decreased from $27.3 million in the quarter ended July 31,
1998 to $15.3 million in the quarter ended July 31, 1999, a decrease of 44.1%,
due principally to price and volume decreases in ferrovanadium, low carbon
ferrochrome, vanadium aluminum, ferrotitanium and chromium. In aluminum master
alloys and compacted products, improvements in product mix and cost reductions
more than offset a decrease in selling price.
Selling, General and Administrative Expenses
Selling, general and administrative expenses ("SG&A") decreased from $15.1
million in the quarter ended July 31, 1998 to $14.1 million in the quarter ended
July 31, 1999, a decrease of 7.1%. For the quarter ended July 31, 1998, SG&A
represented 8.9% of the Company's sales compared to 12.1% for the quarter ended
July 31, 1999, as a result of decreased revenue.
12
<PAGE> 14
Environmental Expense Recovery
In June 1999, the Company recognized income in the amount of $5.5 million
upon settlement with an insurance company relating to coverage for certain
environmental claims stemming from the 1960's and forward. These claims relate
mostly to the historical costs of remedial activities at the Company's Newfield,
New Jersey site.
Restructuring Charges
During the second quarter of 1999, the Company initiated a restructuring
program. The restructuring is intended to reduce the Company's cost structure,
to streamline management and production technical functions and focus resources
in support of higher margin products at core production units. The restructuring
plan includes the discontinuation of certain production activities, termination
of employees, a facility closing and the write-down of certain redundant plant
and equipment and related spare parts and supplies. The restructuring
predominantly affects the Company's operations in Europe.
In June 1999, a charge of $4.4 million was recorded with respect to the
restructuring of the Company's German operations (GfE and EWW). Approximately
100 employees were notified of terminations as operations were curtailed in line
with current demands for the Company's products. The terminations will take
effect through the end of 2000 and a provision for severance and other employee
costs of $2.9 million was recorded. Such costs shall be substantially disbursed
in 2000. Additional costs of $1.5 million were recorded for the write-down of
redundant fixed assets and related spare parts and supplies.
During July 1999, management approved a restructuring plan relating to its
U.K. operations (LSM). Currently, LSM is soliciting voluntary terminations in
its plan to simplify its organization and reduce costs by restructuring its
businesses into fewer operating divisions and relocating administrative
functions to its Rotherham plant site from its London office, which will be
closed. The restructuring is to be completed during 2000 and provisions for its
costs, which are not determinable at this time, will be recorded during the
second half of 1999.
Operating Income
Operating income decreased from $7.8 million in the quarter ended July 31,
1998 to $2.3 million in the quarter ended July 31, 1999, due primarily to the
decrease in gross margin and the other items, discussed above. Merger costs of
$4.4 million, consisting primarily of costs to cancel compensatory stock
options, were recorded in the quarter ended July 31, 1998.
Interest Expense, Net
Interest expense, net, is as follows (in thousands):
<TABLE>
<CAPTION>
QUARTER ENDED JULY 31,
----------------------
1999 1998
--------- ---------
<S> <C> <C>
Interest income............................................. $ 995 $ 820
Interest expense............................................ (3,889) (3,364)
------- -------
Income expense, net....................................... $(2,894) $(2,544)
======= =======
</TABLE>
Interest expense increased in the quarter ended July 31, 1999 reflecting
primarily higher effective interest rates and increased external borrowing
levels of GfE during the current period.
13
<PAGE> 15
Income Tax Provision
Income tax provision, net of tax benefits, is as follows (in thousands):
<TABLE>
<CAPTION>
QUARTER ENDED JULY 31,
----------------------
1999 1998
-------- --------
<S> <C> <C>
Total current............................................... $1,249 $2,512
Total deferred.............................................. 520 892
------ ------
Income tax provision, net................................. $1,769 $3,404
====== ======
</TABLE>
The differences between the statutory Federal income tax rate and the
Company's effective rate result primarily because of: (i) the U.S. taxability of
foreign dividends; (ii) the excess of foreign tax rates over the statutory
Federal income tax rate; (iii) certain deductible temporary differences which,
in other circumstances would have generated a deferred tax benefit, have been
fully provided for in a valuation allowance; (iv) the deferred tax effects of
certain tax assets, primarily foreign net operating losses, for which the
benefit had been previously recognized approximating $0.3 million in the quarter
ended July 31, 1999; and (v) the deferred tax effects of certain deferred tax
assets for which a corresponding credit has been recorded to "Additional paid-in
capital" approximating $0.2 million in the quarter ended July 31, 1999. The
deferred tax expenses referred to in items (iv) and (v) above will not result in
cash payments in future periods.
Net Income
Net income decreased from $1.5 million for the quarter ended July 31, 1998
to a loss of $2.4 million for the quarter ended July 31, 1999 due primarily to
reduced gross margins and the other items, discussed above.
RESULTS OF OPERATIONS -- THE TWO QUARTERS ENDED JULY 31, 1999 COMPARED TO THE
TWO QUARTERS ENDED JULY 31, 1998
<TABLE>
<CAPTION>
INTERSEGMENT CONSOLIDATED
FOR THE TWO QUARTERS ENDED JULY 31, SHIELDALLOY LSM GFE EWW OTHER ELIMINATIONS TOTALS
----------------------------------- ----------- ------- ------- ------- ------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
1999
Revenues from external customers..... $ 59,418 $53,455 $36,543 $ 6,248 $78,201 $233,865
Intergroup revenue................... 2,068 18,281 8,022 10,551 21,237 $(60,159) --
Environmental expense recovery....... (5,501) -- -- -- -- -- (5,501)
Restructuring charges................ -- -- 3,385 1,001 -- -- 4,386
Income tax provision................. 566 507 272 449 951 -- 2,745
Net income (loss).................... 1,632 1,244 (5,917) (777) (10,425) 3,345 (10,898)
1998
Revenues from external customers..... $109,962 $62,041 $60,046 $ 9,993 $95,801 $337,843
Intergroup revenue................... 2,731 30,008 7,270 17,402 28,564 $(85,975) --
Merger costs......................... -- -- -- -- 4,416 -- 4,416
Income tax provision (benefit)....... 6,175 1,171 1,160 1,281 (306) -- 9,481
Net income........................... 8,746 2,688 1,648 1,134 10,355 (16,283) 8,288
</TABLE>
Total Revenues
Shieldalloy revenues were $51.2 million, or 45%, below the first two
quarters of 1998. As a result of the continuing weakness in the U.S. steel
industry, decreased volume and selling prices of ferrovanadium during the first
two quarters of 1999 resulted in a decrease of approximately $19 million. The
majority of the remaining decline is attributable to lower volume and selling
prices of ferrosilicon, chrome metal and low carbon ferrochrome resulting from
lower demand from the steel and superalloys industries.
Weakness in the aerospace industry led to a reduction in superalloy and
titanium alloy demand that impacted negatively on price, and particularly on
volumes, of the Company's specialty low carbon ferrochrome, chromium and
vanadium aluminum products. As a result of continuing poor demand in the steel
14
<PAGE> 16
and aerospace industries, LSM revenues were $20.3 million, or 22%, below the
first two quarters of 1998 due primarily to decreased volume of ferrotitanium
and chromium metal sales. GfE revenues were $22.8 million, or 34%, below 1998
due primarily to decreased selling prices and volumes of vanadium aluminum,
titanium masteralloys, ferroniobium and ferrovanadium. Revenues of EWW were
$10.6 million, or 39%, below the first two quarters of 1998 due primarily to
reduced demand for low carbon ferrochrome.
Gross Margins
Gross margins decreased from $56.2 million in the two quarters ended July
31, 1998 to $25.1 million in the two quarters ended July 31, 1999, a decrease of
55.4%, due principally to price and volume decreases in ferrovanadium,
ferrotitanium and chromium. In addition, Shieldalloy recognized a lower of cost
or market adjustment of $3.6 million relating to ferrovanadium in the first
quarter of 1999. In aluminum master alloys and compacted products, improvements
in product mix and cost reductions more than offset a decrease in selling price.
Gross margins of low carbon ferrochrome declined in 1999, resulting from lower
selling prices and less favorable product mix.
Selling, General and Administrative Expenses
SG&A decreased from $29.9 million in the two quarters ended July 31, 1998
to $28.5 million in the two quarters ended July 31, 1999, a decrease of 4.8%.
For the two quarters ended July 31, 1998, SG&A represented 8.9% of the Company's
sales compared to 12.2% for the two quarters ended July 31, 1999, as a result of
decreased revenue.
Environmental Expense Recovery
In June 1999, the Company recognized income in the amount of $5.5 million
upon settlement, with an insurance company, concerning certain environmental
matters, as discussed above.
Restructuring Charges
In June 1999, the Company recorded $4.4 million of restructuring charges
related to its German subsidiaries, as discussed above.
Operating Income
Operating income decreased from $21.8 million in the two quarters ended
July 31, 1998 to a loss of $2.3 million in the two quarters ended July 31, 1999,
due primarily to the decrease in gross margin and the other items, discussed
above.
Interest Expense, Net
Interest expense, net, is as follows (in thousands):
<TABLE>
<CAPTION>
TWO QUARTERS ENDED
JULY 31,
------------------
1999 1998
------- -------
<S> <C> <C>
Interest income............................................. $ 1,487 $ 1,648
Interest expense............................................ (7,347) (6,264)
------- -------
Income expense, net....................................... $(5,860) $(4,616)
======= =======
</TABLE>
Interest expense increased $1.2 million in the two quarters ended July 31,
1999 reflecting primarily higher effective interest rates and increased external
borrowing levels of GfE during the current period.
15
<PAGE> 17
Income Tax Provision
Income tax provision, net of tax benefits, is as follows (in thousands):
<TABLE>
<CAPTION>
TWO QUARTERS ENDED
JULY 31,
------------------
1999 1998
------- -------
<S> <C> <C>
Total current............................................... $1,645 $7,202
Total deferred.............................................. 1,100 2,279
------ ------
Income tax provision, net................................. $2,745 $9,481
====== ======
</TABLE>
The differences between the statutory Federal income tax rate and the
Company's effective rate result primarily because of: (i) the U.S. taxability of
foreign dividends; (ii) the excess of foreign tax rates over the statutory
Federal income tax rate; (iii) certain deductible temporary differences which,
in other circumstances would have generated a deferred tax benefit, have been
fully provided for in a valuation allowance; (iv) the deferred tax effects of
certain tax assets, primarily foreign net operating losses, for which the
benefit had been previously recognized approximating $0.5 million in the two
quarters ended July 31, 1999; and (v) the deferred tax effects of certain
deferred tax assets for which a corresponding credit has been recorded to
"Additional paid-in capital" approximating $0.5 million in the two quarters
ended July 31, 1999. The deferred tax expenses referred to in items (iv) and (v)
above will not result in cash payments in future periods.
Net Income
Net income decreased from $8.3 million for the two quarters ended July 31,
1998 to a loss of $10.9 million for the two quarters ended July 31, 1999. The
decrease in 1999 results primarily from reduced gross margins and the other
items, discussed above.
LIQUIDITY AND FINANCIAL RESOURCES
General
The Company's sources of liquidity include cash from operations and amounts
available under credit facilities. In addition, the Company has $44.6 million of
cash and cash equivalents at July 31, 1999. The Company believes that these
sources are sufficient to fund the current and anticipated future requirements
of working capital, capital expenditures, pension benefits, potential
acquisitions and environmental expenditures through at least January 31, 2001.
At July 31, 1999, the Company had working capital of $148.4 million, as
compared to $166.2 million at January 31, 1999. For the first two quarters of
1999, the Company generated $13.3 million in cash from operations, including
substantial reductions in inventories resulting from reduced levels of business
and increased operational focus on working capital reductions. Capital
expenditures approximated $5.1 million in the first two quarters of 1999.
Credit Facilities and Other Financing Arrangements
The Company has a credit facility with certain financial institutions led
by BankBoston, N.A. as agent (the "Revolving Credit Facility") which provides
Metallurg, Shieldalloy and certain of their subsidiaries with up to $50.0
million of financing resources at a rate per annum equal to (i) the Alternate
Base Rate plus 1.0% per annum (the Alternate Base Rate is the greater of the
Base Rate or the Federal Funds Effective Rate plus 0.5%) or (ii) the reserve
adjusted Eurodollar rate plus 2.5% for interest periods of one, two or three
months. The Revolving Credit Facility permits borrowings of up to $50.0 million
for working capital requirements and general corporate purposes, up to $30.0
million of which may be used for letters of credit in the U.S. At July 31, 1999,
there were no outstanding loans and $24.2 million of letters of credit
outstanding in the U.S. under the Revolving Credit Facility. On October 20,
1997, BankBoston, N.A., through its Frankfurt office, made available up to DM
20.5 million (approximately $10.8 million) of financing to certain of its German
subsidiaries (the "German Subfacility"), which is guaranteed by Metallurg and
the other U.S. borrowers
16
<PAGE> 18
under the Revolving Credit Facility. At July 31, 1999, immaterial amounts were
outstanding in Germany under the German Subfacility.
In addition, certain foreign subsidiaries of Metallurg have credit facility
arrangements with local banking institutions to provide funds for working
capital and general corporate purposes. These local credit facilities contain
restrictions that vary from company to company. At July 31, 1999, there were
$2.9 million of outstanding loans under these local credit facilities.
CAPITAL EXPENDITURES
The Company invested $5.1 million in capital expenditures during the first
two quarters of 1999. Capital expenditures are expected to total approximately
$18.0 million in 1999. Although the Company has projected these items in 1999,
the Company has not committed purchases to vendors for all of these projects, as
some remain contingent on local management approval and other conditions. The
Company believes that these projects will be funded through internally generated
cash, borrowings under the Revolving Credit Facility and local credit lines.
ENVIRONMENTAL REMEDIATION COSTS
AICPA Statement of Position 96-1, "Environmental Remediation Liabilities",
states that losses associated with environmental remediation obligations are
accrued when such losses are deemed probable and reasonably estimable. Such
accruals generally are recognized no later than the completion of the remedial
feasibility study and are adjusted as further information develops or
circumstances change. Costs of future expenditures for environmental remediation
obligations are generally not discounted to their present value. During the
first two quarters of 1999, the Company expended $1.8 million for environmental
remediation.
In 1997, Shieldalloy entered into settlement agreements with various
environmental regulatory authorities with regard to all of the significant
environmental remediation liabilities of which it is aware. Pursuant to these
agreements, Shieldalloy has agreed to perform environmental remediation, which
as of July 31, 1999, had an estimated cost of completion of $36.2 million. Of
this amount, approximately $0.9 million is expected to be expended in the second
half of 1999, $6.5 million in 2000 and $7.4 million in 2001. In addition, the
Company estimates it will make expenditures of $3.8 million with respect to
environmental remediation at its foreign facilities. Of this amount,
approximately $0.2 million is expected to be expended in the second half of
1999, $0.9 million in 2000 and $0.8 million in 2001.
YEAR 2000 READINESS
Metallurg has completed an internal review of its and its subsidiaries'
information technology systems in connection with its assessment of Year 2000
readiness and has almost completed the replacement or modifications of the
management and accounting systems at its subsidiaries to upgrade them generally
and to make them Year 2000 ready. Metallurg expects to spend between $1.0
million and $2.0 million on these systems changes, much of which has already
been spent. Metallurg expects that the information technology systems for all of
its subsidiaries will be Year 2000 ready early in the fourth quarter of 1999.
Those systems that are not being replaced are being, or have been, modified by
Company personnel to assure that they are Year 2000 ready. Accordingly, no
additional cost has been recognized for such internal upgrades. Metallurg has
substantially completed its assessment of whether any of its non-information
technology will need to be modified to become Year 2000 ready.
Metallurg has not received written assurances from its significant
suppliers and customers to determine the state of their readiness with regard to
Year 2000. The Company believes that they will be prepared for Year 2000 based
on its normal interactions with its customers and suppliers and because of the
wide attention that the issue has received. Metallurg has not yet seen the need
for contingency plans for the Year 2000 issue, but this need will continue to be
monitored as it obtains more information about the state of readiness of its
suppliers and customers.
17
<PAGE> 19
Metallurg presently believes that the Year 2000 issue will not pose
significant operational problems for its business systems as it believes that
all needed modifications and conversions will be timely made. If any of
Metallurg's suppliers or customers do not, or if Metallurg itself does not,
successfully deal with the Year 2000 issue, the Company could experience delays
in receiving or shipping products and in receiving payments. The severity of
these possible problems would depend on the nature of the problem and how
quickly it could be corrected or an alternative implemented, which is unknown at
this time.
The anticipated costs for Metallurg to become Year 2000 ready and the
anticipated timing to complete the Year 2000 modifications are based on
management's best estimates, which were derived utilizing numerous assumptions
of future events, including timely performance by third parties who will provide
Metallurg with the software for its new systems. However, there can be no
guarantee that these estimates will be achieved and actual results could differ
materially from those anticipated. Specific factors that might cause such
material differences include, but are not limited to, the ability to locate and
correct all relevant computer codes, the ability to successfully integrate new
business systems with existing operations and similar uncertainties. Some risks
of the Year 2000 issue are beyond the control of Metallurg and its suppliers and
customers. In particular, Metallurg cannot predict the effect that the Year 2000
issue will have on the general economy.
18
<PAGE> 20
PART II
OTHER INFORMATION
ITEM 6.(a) EXHIBITS
27. Financial Data Schedule
6.(b) REPORT ON FORM 8-K
None
19
<PAGE> 21
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on September 10, 1999 on its
behalf by the undersigned thereunto duly authorized.
METALLURG, INC.
/s/ BARRY C. NUSS
--------------------------------------
Barry C. Nuss
Chief Financial Officer
(Principal Financial Officer and
Principal Accounting Officer)
20
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JAN-31-2000
<PERIOD-START> MAY-01-1999
<PERIOD-END> JUL-31-1999
<CASH> 44,557
<SECURITIES> 0
<RECEIVABLES> 66,244
<ALLOWANCES> (1,911)
<INVENTORY> 99,177
<CURRENT-ASSETS> 225,806
<PP&E> 63,118
<DEPRECIATION> (15,336)
<TOTAL-ASSETS> 295,633
<CURRENT-LIABILITIES> 77,387
<BONDS> 107,358
0
0
<COMMON> 50
<OTHER-SE> 34,797
<TOTAL-LIABILITY-AND-EQUITY> 295,633
<SALES> 115,897
<TOTAL-REVENUES> 116,052
<CGS> 100,765
<TOTAL-COSTS> 113,716
<OTHER-EXPENSES> 27
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,889
<INCOME-PRETAX> (585)
<INCOME-TAX> 1,769
<INCOME-CONTINUING> (2,354)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,354)
<EPS-BASIC> 0
<EPS-DILUTED> 0
</TABLE>
