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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (D) OF THE
SECURITIES AND EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1998
COMMISSION FILE NUMBER: 0-23159
VARI-LITE INTERNATIONAL, INC.
(Exact name of registrant as specified in its charter)
Delaware 75-2239444
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
201 Regal Row, Dallas, Texas 75247
(Address of principal executive offices) (Zip Code)
Registrant's telephone number including area code: (214) 630-1963
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes [X] No [ ]
Indicate the number of shares outstanding of each of the Issuer's
classes of common stock, as of the latest practicable date: As of May 1,
1998, there were 7,800,003 shares of Common Stock outstanding.
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VARI-LITE INTERNATIONAL, INC.
INDEX TO QUARTERLY REPORT ON FORM 10-Q
FOR THE QUARTER ENDED MARCH 31, 1998
<TABLE>
PART I. - FINANCIAL INFORMATION Page
<S> <C>
Item 1. Financial Statements
Consolidated Balance Sheets as of
September 30, 1997 and March 31, 1998.......................... 3
Consolidated Statements of Income (Loss) for
the three months ended March 31, 1997 and 1998................. 4
Consolidated Statements of Income (Loss) for
the six months ended March 31, 1997 and 1998................... 5
Consolidated Statement of Stockholders' Equity for
the six months ended March 31, 1998............................ 6
Consolidated Statements of Cash Flows for
the six months ended March 31, 1997 and 1998................... 7
Notes to Consolidated Financial Statements..................... 8
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations............................ 11
Item 3. Quantitative and Qualitative Disclosures About Market Risk.. 15
PART II. - OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders........ 16
Item 6. Exhibits and Reports on Form 8-K............................ 16
SIGNATURES.......................................................... 17
</TABLE>
2
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VARI-LITE INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
(IN THOUSANDS EXCEPT SHARE DATA)
<TABLE>
SEPTEMBER 30, MARCH 31,
ASSETS 1997 1998
---- ----
<S> <C> <C>
CURRENT ASSETS:
Cash.......................................... $ 1,862 $ 3,592
Receivables, less allowance for doubtful
accounts of $450 and $555................... 14,445 14,307
Inventory..................................... 4,050 6,749
Prepaid expense and other current assets...... 2,536 1,994
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TOTAL CURRENT ASSETS........................ 22,893 26,642
EQUIPMENT AND OTHER PROPERTY:
Lighting and sound equipment.................. 102,487 114,179
Machinery and tools........................... 2,929 4,526
Furniture and fixtures........................ 3,945 4,163
Office and computer equipment................. 9,189 10,207
Work in progress and raw materials inventory.. 5,343 4,660
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123,893 137,735
Less accumulated depreciation and
amortization............................... 55,248 64,568
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68,645 73,167
OTHER ASSETS..................................... 5,166 6,393
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TOTAL ASSETS................................ $96,704 $106,202
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LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued expenses......... $12,086 $ 9,403
Unearned revenue.............................. 2,992 1,707
Income taxes payable.......................... 820 17
Current portion of long-term obligations...... 7,824 3,204
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TOTAL CURRENT LIABILITIES................... 23,722 14,331
LONG-TERM OBLIGATIONS............................ 38,418 35,571
DEFERRED INCOME TAXES............................ 7,023 7,121
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TOTAL LIABILITIES........................... 69,163 57,023
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Preferred Stock, $0.10 par value (10,000,000
shares authorized; no shares outstanding).... 0 0
Common Stock, $0.10 par value (40,000,000
shares authorized; 5,800,003 and 7,800,003
shares outstanding).......................... 585 785
Treasury Stock................................ (186) (186)
Additional paid-in capital.................... 3,344 24,451
Stockholder notes receivable.................. (176) (87)
Stock purchase warrants....................... 600 600
Cumulative foreign currency translation
adjustment................................... 361 503
Retained earnings............................. 23,013 23,113
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TOTAL STOCKHOLDERS' EQUITY.................. 27,541 49,179
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TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY.. $96,704 $106,202
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</TABLE>
See accompanying notes to the consolidated financial statements.
3
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VARI-LITE INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME (LOSS)
FOR THE THREE MONTHS ENDED MARCH 31, 1997 AND 1998
(UNAUDITED)
(IN THOUSANDS EXCEPT SHARE DATA)
<TABLE>
1997 1998
---- ----
<S> <C> <C>
Rental revenues...................................... $19,549 $15,965
Product sales and services revenues.................. 2,835 3,262
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TOTAL REVENUES.................................... 22,384 19,227
Rental cost.......................................... 8,290 7,468
Product sales and services cost...................... 1,987 2,356
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TOTAL COST OF SALES............................... 10,277 9,824
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GROSS PROFIT...................................... 12,107 9,403
Selling, general and administrative expense.......... 8,234 7,641
Research and development expense..................... 1,609 1,890
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TOTAL OPERATING EXPENSES.......................... 9,843 9,531
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OPERATING INCOME (LOSS).............................. 2,264 (128)
Interest expense (net)............................... 893 568
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INCOME (LOSS) BEFORE INCOME TAXES.................... 1,371 (696)
Income taxes (benefit)............................... 552 (275)
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NET INCOME (LOSS).................................... $ 819 $ (421)
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WEIGHTED AVERAGE SHARES OUTSTANDING.................. 5,789,221 7,800,003
--------- ---------
--------- ---------
WEIGHTED AVERAGE DILUTED SHARES OUTSTANDING.......... 5,808,694 7,800,003
--------- ---------
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PER SHARE INFORMATION
Net income:
BASIC............................................. $0.14 $(0.05)
----- ------
----- ------
DILUTED........................................... $0.14 $(0.05)
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Dividends declared................................... $0.0525 $0.0000
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</TABLE>
See accompanying notes to the consolidated financial statements.
4
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VARI-LITE INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME (LOSS)
FOR THE SIX MONTHS ENDED MARCH 31, 1997 AND 1998
(UNAUDITED)
(IN THOUSANDS EXCEPT SHARE DATA)
<TABLE>
1997 1998
---- ----
<S> <C> <C>
Rental revenues...................................... $38,037 $35,135
Product sales and services revenues.................. 6,673 6,611
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TOTAL REVENUES.................................... 44,710 41,746
Rental cost.......................................... 15,083 15,035
Product sales and services cost...................... 4,673 4,670
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TOTAL COST OF SALES............................... 19,756 19,705
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GROSS PROFIT...................................... 24,954 22,041
Selling, general and administrative expense.......... 17,203 15,898
Research and development expense..................... 3,063 3,463
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TOTAL OPERATING EXPENSES.......................... 20,266 19,361
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OPERATING INCOME..................................... 4,688 2,680
Interest expense (net)............................... 1,766 1,297
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INCOME BEFORE INCOME TAXES AND EXTRAORDINARY LOSS.... 2,922 1,383
Income taxes......................................... 1,177 546
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INCOME BEFORE EXTRAORDINARY LOSS..................... 1,745 837
Extraordinary loss................................... 0 737
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NET INCOME........................................... $ 1,745 $ 100
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-------- -------
WEIGHTED AVERAGE SHARES OUTSTANDING..................5,806,132 7,624,179
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WEIGHTED AVERAGE DILUTED SHARES OUTSTANDING..........5,826,605 7,638,372
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PER SHARE INFORMATION
- ---------------------
----- -----
----- -----
----- -----
----- -----
Income before extraordinary loss:
BASIC............................................ $0.30 $0.11
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----- -----
DILUTED.......................................... $0.30 $0.11
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----- -----
Net income:
BASIC............................................ $0.30 $0.01
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----- -----
DILUTED.......................................... $0.30 $0.01
----- -----
----- -----
Dividends declared................................... $0.1050 $0.0000
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</TABLE>
See accompanying notes to the consolidated financial statements.
5
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VARI-LITE INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE SIX MONTHS ENDED MARCH 31, 1998
(UNAUDITED)
(IN THOUSANDS EXCEPT SHARE DATA)
<TABLE>
CUMULATIVE
FOREIGN
PREFERRED STOCK COMMON STOCK TREASURY STOCK ADDITIONAL STOCKHOLDER STOCK CURRENCY
--------------- -------------- --------------- PAID-IN NOTES PURCHASE TRANSLATION RETAINED
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT CAPITAL RECEIVABLE WARRANTS ADJUSTMENT EARNINGS TOTAL
------ ------ ------ ------ ------ ------ ------- ---------- -------- ----------- -------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE, OCTOBER 1,
1997................. - $ - 5,845,167 $585 (45,164) $(186) $3,344 $(176) $600 $361 $23,013 $27,541
Payments on stockholder
notes receivable...... 89 89
Initial public
offering.............. 2,000,000 200 21,107 21,307
Net effect of
translation adjustment 142 142
Net income............ 100 100
------ ------ --------- ---- ------- ----- ------- ----- ---- ---- ------- -------
BALANCE, MARCH 31,
1998.................. - $ - 7,845,167 $785 (45,164) $(186) $24,451 $ (87) $600 $503 $23,113 $49,179
------ ------ --------- ---- ------- ----- ------- ----- ---- ---- ------- -------
------ ------ --------- ---- ------- ----- ------- ----- ---- ---- ------- -------
</TABLE>
See accompanying notes to the consolidated financial statements.
6
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VARI-LITE INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED MARCH 31, 1997 AND 1998
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
1997 1998
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net income.................................... $1,745 $ 100
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization............... 5,517 6,449
Amortization of note discount and deferred
loan fees.................................. 183 59
Provision for doubtful accounts............. 58 90
Extraordinary loss from early extinguishment
of debt.................................... 0 737
Deferred income taxes....................... 132 580
(Gain) on sale of equipment and other
property................................... (34) (34)
Cost of rental equipment rented under sales-
type leases................................ 1,095 263
Provisions for ESOP and ESEP contributions.. 125 125
Net change in assets and liabilities:
Accounts receivable..................... (147) 1,477
Prepaid expenses........................ (2,459) 958
Inventory............................... (751) (2,648)
Other assets............................ (278) (1,156)
Accounts payable, accrued liabilities
and income taxes payable............... 4,159 (5,011)
Unearned revenue........................ 490 (1,379)
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Net cash provided by operating
activities............................. 9,835 610
Cash flows from investing activities:
Capital expenditures, including rental
equipment................................... (12,823) (9,490)
Acquisition of Belgium companies, net of cash
acquired.................................... 0 (1,697)
Proceeds from sale of equipment.............. 117 67
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Net cash used in investing activities..... (12,706) (11,120)
Cash flows from financing activities:
Proceeds from issuance of debt............... 8,406 54,283
Principal payments on debt................... (4,582) (62,637)
Proceeds from issuance of distributor
advances.................................... 237 514
Principal payments on distributor advances... (769) (1,242)
Proceeds from payments on stockholder notes
receivable.................................. 157 89
Proceeds from public offering of common
stock....................................... 0 21,307
Purchase of treasury......................... (158) 0
Dividends paid............................... (484) 0
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Net cash provided by financing
activities............................ 2,807 12,314
Effect on cash from foreign currency
translation adjustment......................... (707) (74)
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Net increase (decrease) during the period....... (771) 1,730
Cash, beginning of period....................... 2,633 1,862
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Cash, end of period............................. $1,862 $3,592
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SUPPLEMENTAL CASH FLOW INFORMATION
Cash paid for interest expense............... $1,700 $1,321
Cash paid for income taxes................... $ 541 $ 539
</TABLE>
See accompanying notes to the consolidated financial statements.
7
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VARI-LITE INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(IN THOUSANDS EXCEPT SHARE DATA)
1. Interim Financial Information
The accompanying unaudited consolidated financial statements of
Vari-Lite International, Inc. and subsidiaries (the "Company") have been
prepared by the Company in accordance with generally accepted accounting
principles for interim financial information and the instructions to Form
10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all
of the information and footnotes required by generally accepted accounting
principles for complete financial statements.
In the opinion of management, the consolidated financial statements
contain all adjustments, consisting of normal recurring adjustments,
considered necessary to present fairly the consolidated financial position,
results of operations and cash flows of the Company for the periods
indicated. The results of operations for the three-month and six-month
periods ended March 31, 1998 are not indicative of the results of operations
that may be expected for any other interim periods or for the fiscal year
ending September 30, 1998.
For further information, refer to the consolidated financial statements
and accompanying notes included in the Company's Annual Report on Form 10-K
for the year ended September 30, 1997.
2. Inventory
Inventory consists of the following:
<TABLE>
September 30, March 31,
1997 1998
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<S> <C> <C>
Raw materials................................. $3,483 $6,155
Work in progress.............................. 350 360
Finished goods................................ 217 234
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$4,050 $6,749
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</TABLE>
3. Initial Public Offering
On October 15, 1997, in conjunction with the Company's reincorporation
in Delaware and an initial public offering, the Board of Directors of the
Company created a new class of common stock and authorized 40,000,000 shares.
As a result of the reincorporation, stockholders received 3.76368 shares of
common stock for each share of the Company's Class A common stock and Class B
common stock held by the stockholders. Share amounts and the weighted-average
shares outstanding for all periods presented give retroactive effect to the
recapitalization of the common stock. In addition, the Company authorized
10,000,000 shares of preferred stock which the Company's Board of Directors
may issue for such consideration and on such terms as it deems desirable,
including voting and conversion rights that could adversely affect the
holders of common stock.
8
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VARI-LITE INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(IN THOUSANDS EXCEPT SHARE DATA)
The Company filed a Registration Statement (Commission file no.
333-33559) for the public offering of 2,300,000 shares of common stock which
became effective October 16, 1997. The Company sold 2,000,000 shares of
common stock for $12.00 per share for an aggregate amount of $24,000 and
certain stockholders of the Company sold 300,000 shares of common stock for
$12.00 per share for an aggregate amount of $3,600.
4. Long-Term Debt and Extraordinary Loss
On December 19, 1997, the Company entered into a five-year $50,000
multicurrency revolving credit facility (the "New Credit Facility") and
canceled its existing credit facility. Borrowings under the New Credit
Facility bear interest at prime or LIBOR plus a rate margin ranging from
1.00% to 2.50% based upon the Company's ratio of Adjusted Funded Debt (as
defined in the New Credit Facility) to EBITDA (as defined in the New Credit
Facility) and are secured by a pledge of 65% of the outstanding capital
stock of the Company's foreign subsidiaries. A commitment fee is charged on
the average daily unused portion of the New Credit Facility at a rate ranging
from 0.20% to 0.375% per annum based upon the ratio of Adjusted Funded Debt
to EBITDA. The New Credit Facility contains compliance covenants, including
requirements that the Company achieve certain financial ratios. In addition,
the New Credit Facility places limitations on the Company's ability to incur
additional indebtedness, make certain loans or investments, sell assets or
reacquire the Company's stock. The Company expensed deferred financing costs
of $737 (net of tax benefit of $481) relating to the early extinguishment of
the prior debt facility, which have been reflected in the consolidated
statement of income as an extraordinary loss.
5. Net Income Per Share
During 1998, the Company adopted Statement of Financial Accounting
Standards ("SFAS") No. 128, "Earnings per Share," which requires dual
presentation of basic and diluted earnings per share ("EPS") on the face of
the consolidated income statement and requires a reconciliation of the
numerators and denominators of the basic and diluted EPS calculations.
Accordingly, all EPS information for all periods presented have been restated
to present basic and diluted EPS under the provisions of SFAS No. 128. Under
this standard, basic EPS is calculated using weighted average shares
outstanding, whereas diluted EPS is calculated using weighted average shares
outstanding including common stock equivalents, including dilutive stock
options.
6. Acquisitions
In March, 1998, the Company acquired all of the outstanding stock of the
Brussels, Belgium-based lighting and sound equipment rental companies VLB,
n.v. and EML, n.v. for total consideration of approximately $3,100, including
related acquisition and financing costs. The Company paid approximately
$1,700 in cash and assumed approximately $1,400 in liabilities. The
acquisition was funded primarily through additional borrowings under the New
Credit Facility. This acquisition was accounted for using the purchase method
of accounting, and
9
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VARI-LITE INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(IN THOUSANDS EXCEPT SHARE DATA)
accordingly, only the results of operations for the acquired companies
subsequent to the acquisition are included in the consolidated financial
statements of the Company. The excess of the purchase price over the net
assets acquired of approximately $850 was recorded by the Company as goodwill.
10
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VARI-LITE INTERNATIONAL, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
RESULTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1998 COMPARED TO THREE MONTHS ENDED MARCH 31, 1997
REVENUES. Total revenues decreased 14.1%, or $3.2 million, to $19.2
million in the three-month period ended March 31, 1998, compared to $22.4
million in the three-month period ended March 31, 1997. The revenue decrease
was attributable primarily to the factors set forth below.
Rental revenues decreased 18.3%, or $3.6 million, to $16.0 million in
the three-month period ended March 31, 1998, compared to $19.6 million in the
three-month period ended March 31, 1997. This decrease was primarily due to a
lower volume of sales-type leases, a decrease in revenues in Asia due to the
economic situation in that region and a modest softness in the Company's
European operations and was partially offset by a strong performance in
North America across all key market segments. Rental revenues from sales-type
leases decreased 85.0%, or $3.0 million, to $0.6 million for the three-month
period ended March 31, 1998 compared to $3.6 million for the three-month
period ended March 31, 1997.
Product sales and service revenues increased 15.0%, or $0.4 million, to
$3.2 million in the three-month period ended March 31, 1998, compared to $2.8
million in the three-month period ended March 31, 1997. This increase was
primarily due to an increase in the design and production management
services provided to the Company's customers.
RENTAL COSTS. Rental costs decreased 9.9%, or $0.8 million, to $7.5
million in the three-month period ended March 31, 1998, compared to $8.3
million in the three-month period ended March 31, 1997. Rental costs as a
percentage of rental revenues increased to 46.8% in the three-month period
ended March 31, 1998, from 42.4% in the three-month period ended March 31,
1997. The increase in rental costs as a percentage of total rental revenues
was primarily due to an increase in depreciation associated with an increase
in the Company's rental inventory.
PRODUCT SALES AND SERVICE COSTS. Product sales and service costs
increased 18.6%, or $0.4 million, to $2.4 million in the three-month period
ended March 31, 1998, compared to $2.0 million in the three-month period
ended March 31, 1997. Product sales and service costs as a percentage of
product sales and service revenue increased to 72.2% in the three-month
period ended March 31, 1998, from 70.1% in the three-month period ended March
31, 1997. The increase in product sales and service cost was primarily the
result of higher than anticipated costs to design and construct custom
stages and stage sets for customers.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSE. Selling, general and
administrative expense decreased 7.2%, or $0.6 million, to $7.6 million in
the three-month period ended March 31, 1998, compared to $8.2 million in the
three-month period ended March 31, 1997. This decrease resulted primarily
from lower payroll and related costs and other discretionary expenses. This
11
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expense as a percentage of total revenues increased to 39.7% in the
three-month period ended March 31, 1998, from 36.8% in the three-month period
ended March 31, 1997.
RESEARCH AND DEVELOPMENT EXPENSE. Research and development expense
increased 17.5%, or $0.3 million, to $1.9 million in the three-month period
ended March 31, 1998, compared to $1.6 million in the three-month period
ended March 31, 1997. This expense as a percentage of total revenues
increased to 9.8% in the three-month period ended March 31, 1998, from 7.2%
in the three-month period ended March 31, 1997. This increase was primarily
the result of an increase in the employee-related costs associated with
adding engineers for the further development of new products subsequent to
December 31, 1996.
INTEREST EXPENSE. Interest expense decreased 36.4%, or $0.3 million, to
$0.6 million in the three-month period ended March 31, 1998, compared to $0.9
million in the three-month period ended March 31, 1997. This decrease was
attributable to the negotiation of a new credit facility in December 1997
with lower interest rates to the Company.
SIX MONTHS ENDED MARCH 31, 1998 COMPARED TO SIX MONTHS ENDED MARCH 31, 1997
REVENUES. Total revenues decreased 6.6%, or $3.0 million, to $41.7
million in the six-month period ended March 31, 1998, compared to $44.7
million in the six-month period ended March 31, 1997. The revenue decrease
was attributable primarily to the factors set forth below.
Rental revenues decreased 7.6%, or $2.9 million, to $35.1 million in the
six-month period ended March 31, 1998, compared to $38.0 million in the
six-month period ended March 31, 1997. This decrease was primarily due to a
lower volume of sales-type leases, a decrease in revenues in Asia due to the
economic situation in that region and a modest softness in the Company's
European operations and was partially offset by a strong performance in
North America across all key market segments. Rental revenues from sales-type
leases decreased 74.0%, or $2.7 million, to $0.9 million for the six-month
period ended March 31, 1998 compared to $3.6 million for the six-month period
ended March 31, 1997.
Product sales and service revenues decreased 0.9%, or $0.1 million, to
$6.6 million in the six-month period ended March 31, 1998, compared to $6.7
million in the six-month period ended March 31, 1997. This decrease was
primarily due to lower sales of the Company's Irideon-Registered Trademark-
automated lighting products which decreased 31.5%, or $0.8 million, to $1.8
million in the six-month period ended March 31, 1998, compared to $2.6
million in the six-month period ended March 31, 1997. In the six-month
period ended March 31, 1997 the Company introduced two new Irideon-Registered
Trademark- products - AR5-TM- and Composer-Registered Trademark- - and
consequently shipped a large backlog. The decrease in Irideon-Registered
Trademark- product sales was primarily offset by an increase in revenues from
the design and production management services provided to the Company's
customers.
RENTAL COSTS. Rental costs in the six-month period ended March 31, 1998
were approximately the same as in the six-month period ended March 31, 1997.
Rental costs as a percentage of rental revenues increased to 42.8% in the
six-month period ended March 31, 1998, from 39.7% in the six-month period
ended March 31, 1997. The increase in rental costs as a
12
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percentage of total rental revenues was primarily due to an increase in
depreciation associated with an increase in the Company's rental inventory.
PRODUCT SALES AND SERVICE COSTS. Product sales and service costs in the
six-month period ended March 31, 1998 were approximately the same as in the
six-month period ended March 31, 1997. Product sales and service costs as a
percentage of product sales and service revenues increased to 70.6% in the
six-month period ended March 31, 1998, from 70.0% in the six-month period
ended March 31, 1997. The increase in product sales and service costs as a
percentage of the related revenues was primarily the result of higher than
anticipated costs to design and construct custom stages and stage sets for
customers.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSE. Selling, general and
administrative expense decreased 7.6%, or $1.3 million, to $15.9 million in
the six-month period ended March 31, 1998, compared to $17.2 million in the
six-month period ended March 31, 1997. This decrease resulted primarily from
lower professional services, payroll and related costs and other
discretionary expenses. This expense as a percentage of total revenues
decreased to 38.1% in the six-month period ended March 31, 1998, from 38.5%
in the six-month period ended March 31, 1997.
RESEARCH AND DEVELOPMENT EXPENSE. Research and development expense
increased 13.1%, or $0.4 million, to $3.5 million in the six-month period
ended March 31, 1998, compared to $3.1 million in the six-month period ended
March 31, 1997. This expense as a percentage of total revenues increased to
8.3% in the six-month period ended March 31, 1998, from 6.9% in the six-month
period ended March 31, 1997. This increase was primarily the result of an
increase in the employee-related costs associated with adding engineers
for the further development of new products subsequent to September 30, 1996.
INTEREST EXPENSE. Interest expense decreased 26.6%, or $0.5 million, to
$1.3 million in the six-month period ended March 31, 1998, compared to $1.8
million in the six-month period ended March 31, 1997. This decrease was
attributable to the reduction in indebtedness from the use of the proceeds
from the initial public offering in October 1997 to repay $21.3 million of
indebtedness and the subsequent negotiation of a new credit facility in
December 1997 with lower interest rates to the Company.
EXTRAORDINARY LOSS. A non-cash extraordinary loss of $0.7 million was
recorded in the six-month period ended March 31, 1998, net of $0.4 million of
tax benefit, relating to the early extinguishment of debt under the Company's
old credit facility.
LIQUIDITY AND CAPITAL RESOURCES
Historically, the Company has financed its operations and capital
expenditures with cash flow from operations, bank borrowings and advances
from distributors and customers. The Company's operating activities
generated cash flow of $9.8 million and $0.6 million for the six-month
periods ended March 31, 1997 and 1998, respectively. This decrease is
primarily due to a decrease in accounts payable and other accrued liabilities.
13
<PAGE>
During the fiscal year ended September 30, 1997, the Company borrowed
under a multicurrency credit agreement (the "Old Credit Agreement") to
partially finance its operations and capital expenditures. On October 21,
1997, the Company consummated the initial public offering of its common stock
and used the net proceeds thereof, approximately $21.3 million, to repay
indebtedness under the Old Credit Agreement. In December 1997, the Company
entered into a new multicurrency credit agreement, with SunTrust Bank,
Atlanta ("SunTrust"), as agent for the lenders thereunder (the "New Credit
Agreement"), which replaced the Old Credit Agreement. The New Credit
Agreement has a five-year term and provides the Company with a $50 million
revolving credit facility, which is secured by the pledge of 65% of the
capital stock of the Company's foreign subsidiaries. The commitment fee on
the unused portion of the facility and the interest charged on the
outstanding balance of the facility are determined by a pricing grid based on
the Company's ratio of Adjusted Funded Debt (as defined in the New Credit
Agreement) to EBITDA (as defined in the New Credit Agreement). The commitment
fee ranges from 0.2% to 0.375% and the interest rate ranges from 1.0% to 2.5%
above the London interbank offering rate ("LIBOR") or SunTrust's base rate.
The initial commitment fee and margin above LIBOR is fixed through June 30,
1998, at 0.25% and 1.5%, respectively. The New Credit Agreement includes
customary negative covenants such as restrictions on the Company's ability to
incur debt, make acquisitions or investments or sell assets. Also, the New
Credit Agreement includes financial covenants regarding the Company's net
worth, ratio of Adjusted Funded Debt to total capitalization, the ratio of
Adjusted Funded Debt to EBITDA and the ratio of EBITR (as defined in the New
Credit Agreement) to interest and rent expenses. As of March 31, 1998, $33.8
million was outstanding under the New Credit Agreement (based on currency
exchange rates as of that date).
The Company has hedged a portion of its currency fluctuation risk by
borrowing in British pounds sterling and Japanese yen under both the Old
Credit Agreement and the New Credit Agreement. Cash generated from the
Company's England and Japan offices is typically denominated in British
pounds sterling and Japanese yen, respectively, and is used to pay expenses
incurred in those currencies and service the foreign currency borrowings.
The Company is a party to interest rate swap agreements which fix the
Company's effective interest costs under a portion of the New Credit
Agreement.
The Company's business requires significant capital expenditures.
Capital expenditures for the six-month periods ended March 31, 1997 and 1998
were approximately $12.8 million and $9.5 million, respectively, of which
approximately $10.8 million and $9.1 million were for rental equipment
inventories. The majority of the Company's revenues are generated through the
rental of automated and conventional lighting equipment and concert sound
systems and, as such, the Company must maintain a significant amount of
rental equipment to meet customer demands.
The Company had a working capital deficit of $2.4 million at March 31,
1997 and a working capital surplus of $12.3 million at March 31, 1998. The
Company has historically maintained working capital deficits since the bulk
of its revenue-generating assets are classified as long-term assets rather
than current assets. The working capital surplus at March 31, 1998 is
primarily due to higher inventory purchased to manufacture the new product
lines, lower
14
<PAGE>
accounts payable and lower current portion of long-term debt as a result of
the New Credit Agreement.
Management believes that cash flow generated from operations and
borrowing capacity under the New Credit Agreement should be sufficient to
fund its anticipated operating needs and capital expenditures for at least
the next twelve months. However, because the Company's future operating
results will depend on a number of factors, including the demand for the
Company's products and services, the level of competition, the success of the
Company's research and development programs, the ability to achieve
competitive and technological advances and general and economic conditions
and other factors beyond the Company's control, there can be no assurance
that sufficient capital resources will be available to fund the expected
expansion of its business beyond such period.
DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS
This report includes "forward-looking statements" as that phrase is
defined in Section 27A of the Securities Act of 1933, as amended, and Section
21E of the Securities Exchange Act of 1934, as amended. When used in this
report, the terms "anticipate," "believe," "estimate," "will," "could,"
"may" and similar expressions, as they relate to management or the Company,
are intended to identify forward-looking statements. Such statements
reflect the current views of management with respect to future events and are
subject to certain risks, uncertainties and assumptions, including without
limitation the following as they relate to the Company: fluctuations in
operating results and seasonality; ability to introduce new products;
technological changes; reliance on intellectual property; capitalized
litigation costs; dependence on entertainment industry; competition;
dependence on management; foreign exchange risk; international trade risk;
dependence on key suppliers and dependence on manufacturing facility. Should
one or more of these risks or uncertainties materialize, or should underlying
assumptions prove incorrect, actual results may vary materially from those
described herein.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Not applicable.
15
<PAGE>
PART II OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On February 27, 1998, the Annual Meeting of Stockholders was held
in Dallas, Texas. The stockholders were asked to elect two Class I
directors to serve until 2001. The vote was as follows:
<TABLE>
Against or Broker/
For Witheld Non Votes
--- ------- ---------
<S> <C> <C> <C>
John D. Maxson 5,676,660 6,211 0
C. Vincent Prothro 5,675,860 7,011 0
</TABLE>
Messrs. Brutsche', Smith, Clark and Rettberg will continue as
directors of the Company.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
10.33 Amendment 1, dated April 24, 1998 to the Multicurrency
Credit Agreement, dated as of December 19, 1997, among
the Company and SunTrust Bank, Atlanta, as agent for the
other banks thereunder
11.1 Computation of Earnings per Common Share for the three
months ended March 31, 1997 and 1998
11.2 Computation of Earnings per Common Share for the six
months ended March 31, 1997 and 1998
27.1 Financial Data Schedule
(b) No reports on Form 8-K were filed for the quarter ended March
31, 1998.
16
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
VARI-LITE INTERNATIONAL, INC.
Date: May 1, 1998 By: /s/ MICHAEL P. HERMAN
----------------------------------
Michael P. Herman
Vice President - Finance,
Chief Financial Officer
and Secretary
17
<PAGE>
EXECUTION COUNTERPART
AMENDMENT NO. 1 TO
CREDIT AGREEMENT
THIS AMENDMENT NO. 1 TO CREDIT AGREEMENT (this "AMENDMENT") dated as of
April 21, 1998, by and among VARI-LITE INTERNATIONAL, INC., a Delaware
corporation (the "BORROWER"), SUNTRUST BANK, ATLANTA ("SUNTRUST"), BROWN
BROTHERS HARRIMAN & CO., CHASE BANK OF TEXAS, N.A., FORMERLY KNOWN AS TEXAS
COMMERCE BANK NATIONAL ASSOCIATION, COMERICA BANK-TEXAS and THE FIRST NATIONAL
BANK OF CHICAGO (collectively, the "LENDERS"), SUNTRUST BANK, ATLANTA, as agent
and collateral agent for the Lenders (in such capacity, the "AGENT" and
"COLLATERAL AGENT"), and BROWN BROTHERS HARRIMAN & CO, AS CO-AGENT FOR THE
LENDERS (IN SUCH CAPACITY THE "CO-AGENT")
WITNESSETH:
WHEREAS, Borrower, the Lenders, the Agent and the Collateral Agent and the
Co-Agent are parties to a certain Multicurrency Credit Agreement dated as of
December 19, 1997 (as heretofore amended or modified, the "CREDIT AGREEMENT";
defined terms used herein without definition shall have the meanings ascribed to
such terms in the Credit Agreement);
WHEREAS, Borrower has requested, and the Lenders have agreed, that the
Credit Agreement be amended to make certain modifications to the covenants set
forth therein, all as more specifically set forth below;
WHEREAS, the parties wish to amend the Credit Agreement to reflect this
agreement;
NOW, THEREFORE, for and in consideration of the mutual covenants contained
herein and other valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties hereto, intending to be legally bound,
agree as follows:
SECTION 1. AMENDMENTS TO CREDIT AGREEMENT. Subject to the satisfaction of
the conditions precedent set forth in SECTION 2 hereof, and effective as of the
Effective Date (as hereinafter defined), the Credit Agreement is hereby amended
as follows:
1. Section 1.01 of the Credit Agreement is hereby amended by adding the
following new defined terms in alphabetical order, as follows:
"INTERCREDITOR AGREEMENT" shall mean that certain Intercreditor
Agreement to be entered into between the Agent and the Collateral Agent
with the holders of the indebtedness outstanding pursuant to the Note
Agreement relating to the sharing of proceeds of the
<PAGE>
Collateral and the collections under any guarantees, such agreement to be
in form and substance satisfactory to the Agent, the Collateral Agent and
each of the Lenders.
"NOTE AGREEMENT" shall mean the note purchase agreement to be entered
into by and among the Borrower and certain institutional investors
purchasing fixed rate notes of the Borrower, such agreement to be in form
and substance satisfactory to the Agent and each of the Lenders.
2. Section 6.08 of the Credit Agreement is hereby amended by deleting
subsections (a) and (c) thereof in its entirety and substituting the following
in lieu thereof:
"(a) LEVERAGE RATIO. Maintain as of the last day of each fiscal
quarter of Borrower, a maximum Leverage Ratio of no greater than sixty
percent (60%).
(c) FIXED CHARGE COVERAGE. Maintain as of the last day of each fiscal
quarter of Borrower during the Applicable Periods set forth below, a
minimum Fixed Charge Coverage Ratio of no less than the ratio set forth
such Applicable Period:
<TABLE>
Applicable Period Ratio
----------------- -----
<S> <C>
Closing Date through
December 31, 1998 1.50:1.00
January 1, 1999 through
September 30,1999 1.75:1.00
October 1, 1999 and thereafter 2.00:1.00."
</TABLE>
3. Section 7.01 of the Credit Agreement is hereby amended by deleting
the "and" at the end of subsection (j) thereof and by deleting subsection (k)
thereof in its entirety and substituting the following in lieu thereof:
"(k) Indebtedness of the Borrower outstanding pursuant to the Note
Agreement in an aggregate principal amount not to exceed $30,000,000;
PROVIDED THAT such Indebtedness is (i) not secured other than by Liens on
the Collateral which are pari passu with the Liens on the Collateral in
favor of the Collateral Agent for the benefit of the Lenders and subject to
the Intercreditor Agreement, and (ii) incurred by the Borrower prior to
December 31, 1998;
(l) Indebtedness of the Guarantors outstanding pursuant to guarantees
of the Indebtedness permitted by subsection (k) above; PROVIDED THAT, the
holders of such guarantees entitled to the proceeds thereof are parties to
the Intercreditor Agreement; and
(m) other Indebtedness not to exceed $1,000,000 at any one time
outstanding."
2
<PAGE>
4. Section 7.02 of the Credit Agreement is hereby further amended by
deleting subsection (k) thereof in its entirety and substituting the following
in lieu thereof:
"(k) (x) Liens in favor of the Collateral Agent securing the
Obligations hereunder and (y) Liens on the Collateral securing the
Indebtedness outstanding pursuant to the Note Agreement; provided, that the
holder of such Liens securing the Indebtedness outstanding pursuant to the
Note Agreement has entered into the Intercreditor Agreement;"
5. Sections 7.09 and 7.10 of the Credit Agreement are each hereby further
amended by adding the following phrase at the end of such section: "or
restrictions arising pursuant to the Note Agreement".
6. The Credit Agreement is hereby amended by the addition of the
following Section 7.13:
"Section 7.13. ACTIONS UNDER NOTE PURCHASE AGREEMENT. Without the
prior written consent of the Agent and the Required Lenders, modify, amend
or supplement the Note Purchase Agreement to (i) increase the principal
amount of the indebtedness thereunder, (ii) increase the interest rate
thereunder, (iii) modify any requirement of prepayment or repayment
thereunder which would shorten the final maturity or average life of the
indebtedness outstanding thereunder or make the requirement of prepayment
more onerous, or (iv) make any more onerous any other provision thereof."
SECTION 2. CONDITIONS OF EFFECTIVENESS. This Amendment shall become
effective as of the date first above written (the "EFFECTIVE DATE") on the first
day when all of the foregoing shall have occurred:
1. This Amendment shall have been executed and delivered by Borrower and
the Lenders to the Agent; and
2. The Borrower shall have paid to the Agent, for the benefit of the
Lenders, an amendment fee equal to 7.5 basis points multiplied by the Master
Syndicated Loan Commitment of each Lender.
SECTION 3. REPRESENTATIONS AND WARRANTIES OF BORROWER. Borrower, without
limiting the representations and warranties provided in the Credit Agreement,
represents and warrants to the Lenders and the Agents as follows:
1. The execution, delivery and performance by Borrower of this Amendment
are within Borrower's corporate powers, have been duly authorized by all
necessary corporate action (including any necessary shareholder action) and do
not and will not (a) violate any provision of any law, rule or regulation, any
judgment, order or ruling of any court or governmental agency, the articles of
incorporation or by-laws of Borrower or any indenture, agreement or other
instrument to
3
<PAGE>
which Borrower is a party or by which Borrower or any of its properties is
bound or (b)be in conflict with, result in a breach of, or constitute with
notice or lapse of time or both a default under any such indenture, agreement
or other instrument.
2. This Amendment constitutes the legal, valid and binding obligation of
Borrower, enforceable against Borrower in accordance with its terms.
3. No Default or Event of Default has occurred and is continuing as of
the Effective Date.
SECTION 4. SURVIVAL. Each of the foregoing representations and warranties
and each of the representations and warranties made in the Credit Agreement
shall be made at and as of the Effective Date. Each of the foregoing
representations and warranties shall constitute a representation and warranty of
Borrower under the Credit Agreement, and it shall be an Event of Default if any
such representation and warranty shall prove to have been incorrect or false in
any material respect at the time when made. Each of the representations and
warranties made under the Credit Agreement (including those made herein) shall
survive and not be waived by the execution and delivery of this Amendment or any
investigation by the Lenders or the Agent or the Collateral Agent.
SECTION 5. NO WAIVER. ETC. Borrower hereby agrees that nothing herein shall
constitute a waiver by the Lenders of any Default or Event of Default, whether
known or unknown, which may exist under the Credit Agreement. Borrower hereby
further agrees that no action, inaction or agreement by the Lenders, including
without limitation, any indulgence, waiver, consent or agreement altering the
provisions of the Credit Agreement which may have occurred with respect to the
non-payment of any obligation during the terms of the Credit Agreement or any
portion thereof, or any other matter relating to the Credit Agreement, shall
require or imply any future indulgence, waiver, or agreement by the Lenders. In
addition, Borrower acknowledges and agrees that it has no knowledge of any
defenses, counterclaims, offsets or objections in its favor against any Lender
with regard to any of the obligations due under the terms of the Credit
Agreement as of the date of this Amendment.
SECTION 6. AFFIRMATION OF COVENANTS. Borrower hereby affirms and restates
as of the date hereof all covenants set forth in the Credit Agreement, as
amended hereby, and such covenants are incorporated by reference herein as if
set forth herein directly.
SECTION 7. RATIFICATION OF CREDIT AGREEMENT. Except as expressly amended
herein, all terms, covenants and conditions of the Credit Agreement and the
other Loan Documents shall remain in full force and effect, and the parties
hereto do expressly ratify and confirm the Credit Agreement as amended herein.
All future references to the Credit Agreement shall be deemed to refer to the
Credit Agreement as amended hereby.
4
<PAGE>
SECTION 8. BINDING NATURE. This Amendment shall be binding upon and inure
to the benefit of the parties hereto, their respective heirs, successors,
successors-in-titles, and assigns.
SECTION 9. COSTS. EXPENSES AND TAXES. Borrower agrees to pay on demand all
reasonable costs and expenses of the Agent and the Collateral Agent in
connection with the preparation, execution and delivery of this Amendment and
the other instruments and documents to be delivered hereunder, including,
without limitation, the reasonable fees and out-of-pocket expenses of counsel
for the Agent and the Collateral Agent with respect thereto and with respect to
advising the Agent and the Collateral Agent as to its rights and
responsibilities hereunder and thereunder. In addition, Borrower shall pay any
and all stamp and other taxes payable or determined to be payable in connection
with the execution and delivery of this Amendment and the other instruments and
documents to be delivered hereunder, and agrees to save the Agent, the
Collateral Agent, the Co-Agent and each Lender harmless from and against any and
all liabilities with respect to or resulting from any delay in paying or
omission to pay such taxes.
SECTION 10. GOVERNING LAW. This Amendment shall be governed by, and
construed in accordance with, the laws of the State of Georgia.
SECTION 11. ENTIRE UNDERSTANDING. This Amendment sets forth the entire
understanding of the parties with respect to the mailers set forth herein, and
shall supersede any prior negotiations or agreements, whether written or oral,
with respect thereto.
SECTION 12. COUNTERPARTS. This Amendment may be executed in any number of
counterparts and by different parties hereto in separate counterparts and may be
delivered by telecopier. Each counterpart so executed and delivered shall be
deemed an original and all of which taken together shall constitute but one and
the same instrument.
[Signatures Set Forth on Next Page]
5
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Amendment through
their authorized officers as of the date first above written.
VARI-LITE INTERNATIONAL, INC.
By: /s/ Mike Herman
-------------------------------
Name: MIKE HERMAN
Title: V.P. FINANCE, CFO
[CORPORATE SEAL]
SUNTRUST BANK, ATLANTA,
INDIVIDUALLY AND AS AGENT AND
COLLATERAL AGENT
By: /s/ John A. Fields, Jr.
-------------------------------
Name: John A. Fields, Jr.
Title: Vice President
By: /s/ F. McClellan Deaver, III
-------------------------------
Name: F. McClellan Deaver, III
Title: Group Vice President
BROWN BROTHERS HARRIMAN & CO.,
INDIVIDUALLY AND AS CO-AGENT
By: /s/ Richard J. Ragoza
-------------------------------
Name: Richard J. Ragoza
Title: Senior Credit Officer
6
<PAGE>
CHASE BANK OF TEXAS, N.A.
By: /s/ Bruce R. Bradford
-------------------------------
Name: Bruce R. Bradford
Title: Vice President
COMERICA BANK-TEXAS
By: /s/ David Terry
-------------------------------
Name: DAVID TERRY
Title: VICE PRESIDENT
THE FIRST NATIONAL BANK OF CHICAGO
By: /s/ Robert McMillan
-------------------------------
Name: ROBERT MCMILLAN
Title: Corporate Banking Officer
7
<PAGE>
EXHIBIT 11.1
VARI-LITE INTERNATIONAL, INC.
COMPUTATION OF INCOME (LOSS) PER COMMON SHARE
FOR THE THREE MONTHS ENDED MARCH 31, 1997 AND 1998
(In thousands except share data)
<TABLE>
1997 1998
---- ----
<S> <C> <C>
Net income (loss)...................................... $819 ($421)
Weighted average shares outstanding.................... 5,789,221 7,800,003
Dilutive effect of stock warrants after application of
treasury stock method.................................. 19,473 0
Shares used in calculating diluted income (loss)
per share............................................. 5,808,694 7,800,003
Basic net income per share............................. $0.14 ($0.05)
Diluted net income per share........................... $0.14 ($0.05)
</TABLE>
18
<PAGE>
EXHIBIT 11.2
VARI-LITE INTERNATIONAL, INC.
COMPUTATION OF INCOME PER COMMON SHARE
FOR THE SIX MONTHS ENDED MARCH 31, 1997 AND 1998
(In thousands except share data)
<TABLE>
1997 1998
---- ----
<S> <C> <C>
Income before extraordinary loss........................ $1,745 $837
Net income.............................................. $1,745 $100
Weighted average shares outstanding..................... 5,806,132 7,624,179
Dilutive effect of stock warrants after application of
treasury stock method.................................. 19,473 14,193
Shares used in calculating diluted income per share..... 5,825,605 7,638,372
Basic income per share before extraordinary loss........ $0.30 $0.11
Diluted income per share before extraordinary loss...... $0.30 $0.11
Basic net income per share.............................. $0.30 $0.01
Diluted net income per share............................ $0.30 $0.01
</TABLE>
19
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
UNAUDITED CONSOLIDATED BALANCE SHEETS AS OF MARCH 31, 1998 AND THE CONSOLIDATED
STATEMENTS OF INCOME FOR THE THREE-MONTH AND SIX-MONTH PERIODS ENDED MARCH 31,
1998 OF VARI-LITE INTERNATIONAL, INC. AS SET FORTH IN THIS FORM 10-Q AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 6-MOS
<FISCAL-YEAR-END> SEP-30-1998 SEP-30-1998
<PERIOD-START> JAN-01-1998 OCT-01-1997
<PERIOD-END> MAR-31-1998 MAR-31-1998
<CASH> 3,592 3,592
<SECURITIES> 0 0
<RECEIVABLES> 14,862 14,862
<ALLOWANCES> (555) (555)
<INVENTORY> 6,749 6,749
<CURRENT-ASSETS> 26,642 26,642
<PP&E> 137,735 137,735
<DEPRECIATION> 64,568 64,568
<TOTAL-ASSETS> 106,202 106,202
<CURRENT-LIABILITIES> 14,331 14,331
<BONDS> 0 0
785 785
0 0
<COMMON> 0 0
<OTHER-SE> 48,394 48,394
<TOTAL-LIABILITY-AND-EQUITY> 106,202 106,202
<SALES> 3,262 6,611
<TOTAL-REVENUES> 19,227 35,135
<CGS> 2,356 4,670
<TOTAL-COSTS> 9,824 19,705
<OTHER-EXPENSES> 9,531 19,361
<LOSS-PROVISION> 59 90
<INTEREST-EXPENSE> 568 1,297
<INCOME-PRETAX> (696) 1,383
<INCOME-TAX> (275) 546
<INCOME-CONTINUING> 0 0
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 737
<CHANGES> 0 0
<NET-INCOME> (421) 100
<EPS-PRIMARY> (0.05) 0.01
<EPS-DILUTED> (0.05) 0.01
</TABLE>
