<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended July 26, 1998
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission File Number 0-23027
Compass Plastics & Technologies, Inc.
-------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 95-4611994
-------- ----------
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
15730 South Figueroa Street
Gardena, CA 90248
-----------------
(Address of principal executive offices)
(Zip Code)
(213) 770-8771
--------------
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months (or such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
At September 1, 1998, the Registrant had 4,883,750 shares of common stock, par
value $.0001 per share, outstanding.
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<PAGE>
COMPASS PLASTICS & TECHNOLOGIES, INC.
FORM 10-Q
INDEX
Page
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheets as of
July 26, 1998 and October 26, 1997................................ 3
Condensed Consolidated Statements of Operations for
the Thirteen Weeks and Thirty Nine Weeks ended
July 26, 1998 and July 27, 1997................................... 5
Condensed Consolidated Statements of Cash
Flows for the Thirty Nine Weeks Ended
July 26, 1998 and July 27, 1997................................... 6
Notes to Condensed Consolidated
Financial Statements.............................................. 7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations..................... 11
PART II - OTHER INFORMATION.............................................
Item 1. Legal Proceedings....................................... 15
2. Changes in Securities................................... 15
3. Defaults upon Senior Securities......................... 15
4. Submissions of Matters to a Vote of Securities Holders.. 15
5. Other Information....................................... 15
6. Exhibits and Reports on Form 8-K........................ 15
SIGNATURES.................................................................. 16
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<PAGE>
PART I
ITEM 1. FINANCIAL STATEMENTS
COMPASS PLASTICS & TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
July 26, October 26,
1998 1997
----------- -----------
ASSETS (unaudited) (audited)
<S> <C> <C>
Current Assets:
Cash & cash equivalents $ 337,321 $ 411,930
Accounts receivable, net 6,505,320 5,750,205
Accounts receivable, other 152,226 339,139
Inventories 6,590,806 3,898,600
Other current assets, net 1,160,675 755,573
----------- -----------
Total current assets 14,746,348 11,155,447
Property, Plant and equipment, net 24,720,307 18,111,455
Other Assets
Goodwill, net 18,119,318 1,807,409
Other assets, net 1,340,749 316,578
----------- -----------
Total other assets 19,460,067 2,123,987
----------- -----------
Total Assets $58,926,722 $31,390,889
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilites:
Accounts payable and accrued expenses $ 7,571,044 $ 7,802,412
Accrued wages and related expenses 1,279,459 924,535
Current portion of capitalized lease 1,095,003 122,846
Income tax payable 0 54,597
Current portion of long-term debt 3,475,397 400,303
----------- -----------
Total current liabilities 13,420,903 9,304,693
Other Liabilities:
Long term portion of capital lease 440,878 573,089
Long term portion of long-term debt 29,793,819 6,026,435
Deferred income taxes payable 1,858,208 1,838,648
----------- -----------
Total other liabilities 32,092,905 8,438,172
Total Liabilities $45,513,808 $17,742,865
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
July 26, October 26,
1998 1997
------------ ------------
(unaudited) (audited)
<S> <C> <C>
Stockholders' Equity:
Preferred stock, par value $.0001; 5,000,000 shares
authorized; none issued and outstanding -
Common stock, par value $.0001; 20,000,000 shares
authorized, 4,883,750 issued and outstanding at
July 26, 1998 and October 26, 1997, respectively $ 488 $ 488
Additional paid-in capital 12,578,134 12,083,397
Notes receivable from sale of stock (706,448) (733,224)
Retained earnings 1,540,740 2,297,363
------------ ------------
Total Stockholder's Equity 13,412,914 13,648,024
------------ ------------
Total Liabilities and Stockholders' Equity $ 58,926,722 $ 31,390,889
============ ============
</TABLE>
See accompanying notes to the condensed consolidated financial statements
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<PAGE>
COMPASS PLASTICS & TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
13 Weeks Ended 39 Weeks Ended
July 26, July 27, July 26, July 27,
1998 1997 1998 1997
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Revenues:
Sales $ 13,558,373 $ 9,644,337 $ 37,465,377 $ 29,888,702
Cost of Goods Sold 11,810,564 7,899,182 33,016,726 24,292,431
------------ ------------ ------------ ------------
Gross Profit 1,747,809 1,745,155 4,448,651 5,596,271
------------ ------------ ------------ ------------
Selling, General and Administrative:
Selling Expenses 248,190 188,310 638,247 482,443
General Administrative 1,177,341 593,639 2,823,045 1,721,150
Amortization of Goodwill 218,858 17,280 398,765 51,835
------------ ------------ ------------ ------------
Total Selling, General and Administrative 1,644,389 799,229 3,860,057 2,255,428
------------ ------------ ------------ ------------
Operating Income (Loss) 103,420 945,926 588,594 3,340,843
Interest Expense 931,030 243,680 1,759,162 694,923
Other Expense / (Income) 0 (5,339) 0 (5,339)
------------ ------------ ------------ ------------
Income (loss) before Income Tax (827,610) 707,585 (1,170,568) 2,651,259
Provision (benefit) for income taxes (335,040) 320,230 (472,222) 1,084,000
------------ ------------ ------------ ------------
Income (loss) before extraordinary item (492,570) 387,355 (698,346) 1,567,259
Extraordinary loss from extinguishment
of indebtedness, net of tax 0 0 (58,277) 0
------------ ------------ ------------ ------------
Net income (loss) ($492,570) $387,355 ($756,623) $1,567,259
============ ============ ============ ============
Net income (loss) per comon share:
Basic:
Income (loss) before extraordinary loss ($0.10) $0.19 ($0.14) $0.78
Extraordinary loss -- -- (0.01) --
------------ ------------ ------------ ------------
Net income (loss) ($0.10) $0.19 ($0.15) $0.78
============ ============ ============ ============
Diluted:
Income (loss) before extraordinary loss ($0.10) $0.11 ($0.14) $0.44
Extraordinary loss -- -- (0.01) --
------------ ------------ ------------ ------------
Net income (loss) ($0.10) $0.11 ($0.15) $0.44
============ ============ ============ ============
</TABLE>
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<PAGE>
COMPASS PLASTICS & TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
39 Weeks Ended
July 26, 1998 July 27, 1997
------------ ------------
<S> <C> <C>
Operating Activities:
Net Income (loss) ($756,623) $1,567,259
Adjustments to reconcile net loss to
cash used in operating activities:
Depreciation and amortization 2,150,515 945,360
Deferred income taxes 23,511 209,520
Change in operating assets and liabilities,
net of effects from purchase of MOS:
Accounts receivable, net 1,516,278 976,854
Accounts receivable, other 194,527 (253,218)
Inventories 300,035 (1,200,470)
Prepaid expenses (269,341) (93,188)
Other assets (865,728) (670,056)
Accounts payable and accrued expenses (1,981,003) 247,566
Accrued wages and payroll taxes payable (509,800) 453,511
Income taxes (954,163) 103,752
------------ ------------
Net cash provided by (used in) operating activities ($1,151,792) $2,286,890
------------ ------------
Investing Activities:
Purchase of equipment and improvements ($4,832,718) ($973,550)
Collection on notes receivable, other 26,776 (50,000)
Acquisition of M.O.S., net of cash acquired (17,598,419) --
------------ ------------
Net cash used in investing activities ($22,404,361) ($ 1,023,550)
------------ ------------
Financing Activities:
Proceeds from long-term debt $27,134,293 $1,467,837
Proceeds from line of credit 14,300,000 --
Repayment of long-term debt (4,141,440) (25,914)
Repayment of line of credit (13,483,327) (2,450,000)
Repayment of capitalized lease obligations (327,982) (764,060)
------------ ------------
Net cash provided by financing activities $23,481,544 ($1,772,137)
------------ ------------
Net increase (decrease) in cash and cash equivalents (74,609) (508,797)
Cash and cash equivalents at beginning of period 411,930 729,729
------------ ------------
Cash and cash equivalents at end of period $337,321 $220,932
============ ============
</TABLE>
See accompanying notes to the condensed consolidated financial statements
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<PAGE>
Compass Plastics & Technologies, Inc.
Notes to Condensed Financial Statements
1. Basis of Presentation
Compass Plastics & Technologies, Inc., together with its wholly owned
subsidiaries, AB Plastics Corporation, based in Gardena, California, AB Plastics
de Mexico, S.A . de C.V., based in Tijuana, Mexico, and M.O.S. Plastics, Inc.,
based in San Jose, California, is referred to as the "Company".
The accompanying consolidated financial statements are unaudited, except for the
October 26,1997 balance sheet, and have been prepared pursuant to the rules and
regulations of the Securities and Exchange Commission. Certain information and
footnote disclosures normally required in financial statements prepared in
accordance with generally accepted accounting principles have been condensed or
omitted pursuant to such rules and regulations, although the Company believes
that the disclosures are adequate for a fair presentation.
These condensed consolidated financial statements reflect all adjustments which,
in the opinion of management, are necessary to fairly present the results of
operations for the interim periods. All of the adjustments which have been made
are of a normal and recurring nature. The results of interim reporting are not
necessarily an indication of the results to be expected for the full year.
For information concerning the Company's significant accounting policies,
reference is made to the Company's filing with the Securities and Exchange
Commission on Form 10-K for the fiscal year ended October 26, 1997.
2. Inventories
As of As of
July 26, 1998 October 26, 1997
------------- ----------------
Raw Materials $3,426,442 $2,127,034
Finished Goods and WIP 3,164,364 1,771,566
---------- ----------
Total $6,590,806 $3,898,600
========== ==========
3. Net Earnings (Loss) per Share
During the 39 weeks ended July 26, 1998, the Company adopted the provision of
statement of accounting standards No. 128 earnings per share ("SFAS 128"). SFAS
128 eliminates the presentation of primary and fully diluted earnings per share
("EPS") and requires presentation of basic and diluted EPS. Basic EPS is
computed by dividing income (loss) available to common stockholders by the
weighted average number of common shares outstanding for the period. Diluted EPS
is based on the weighted average of common stock and common stock equivalents
outstanding at the end of the period. Common stock equivalents have been
excluded for the weighted average shares for the 13 weeks and 39 weeks ended
July 26, 1998 as inclusion is anti-dilutive. All prior period EPS data has been
restated to conform to the new pronouncement. The impact of adopting SFAS 128
was not material. The following table sets forth the computation of basic and
diluted earnings per share.
-7-
<PAGE>
<TABLE>
<CAPTION>
13 weeks ended 13 weeks ended 39 weeks ended 39 weeks ended
July 26, 1998 July 27, 1997 July 26, 1998 July 27, 1997
(Consolidated) (Consolidated) (Consolidated) (Consolidated)
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
Numerator
Net Earnings for Basic EPS ($492,570) $387,355 ($756,623) $1,567,259
Net Earnings for Diluted EPS ($492,570) $387,355 ($756,623) $1,567,259
Denominator
Shares for Basic EPS
Avg. Shares Outstanding 4,883,750 2,000,000 4,883,750 2,000,000
Stock Options N/A (1) 1,600,000 N/A (2) 1,600,000
Shares for Diluted EPS 4,883,750 3,600,000 4,883,750 3,600,000
Basic EPS ($0.10) $0.19 ($0.15) $0.78
Diluted EPS ($0.10) $0.11 ($0.15) $0.44
</TABLE>
(1) Stock options and warrants to purchase 1,685,222 shares of common stock at
prices ranging from $1.00 to $12.40 per share are excluded from the diluted
earnings per share calculations because they are anti-dilutive. The
dilutive effect, using the treasury stock method, would have been 302,928
shares.
(2) Stock options and warrants to purchase 1,685,222 shares of common stock at
prices ranging from $1.00 to $12.40 per share are excluded from the diluted
earnings per share calculations because they are anti-dilutive. The
dilutive effect, using the treasury stock method, would have been 351,981
shares.
4. Acquisition of M.O.S. Plastics, Inc.
On February 27, 1998, Compass Plastics & Technologies, Inc. ("Compass")
completed the acquisition from Werner H. Schulz and Carolyn Schulz, co-trustees
of the Schulz Family Living Trust, of all of the outstanding shares of capital
stock of M.O.S. Plastics, Inc. ("MOS"), a San Jose, California-based
injection-molding company that specializes in producing turn-key plastics parts
and subassemblies. The purchase price for the stock was approximately $17.4
million in cash, subject to adjustment based on a percentage of any step-up in
basis of any of the tangible assets of MOS. Compass also issued to Werner H.
Schulz and Carolyn Schulz, co-trustees of the Schulz Family Living Trust,
five-year warrants to purchase 50,000 shares of the common stock of Compass at
an exercise price of $10.80 per share, and entered into a one-year employment
agreement with Mr. Schulz, followed by a one-year consulting agreement, for him
to continue in the areas of sales, engineering and tooling for MOS. Mr. Schulz
was elected to the Board of Directors of Compass on May 14, 1998. The
information set forth above is qualified in its entirety by reference to the
Stock Purchase Agreement, dated as of January 28, 1998, between Compass and
Werner H. Schulz and Carolyn Schulz, co-trustees of the Schulz Family Living
Trust, a copy of which was filed on March 6, 1998 with the Securities and
Exchange Commission as an exhibit to the Company's Current Report on Form 8-K.
The acquisition has been accounted for using the purchase method of accounting.
The excess of the purchase price over the fair values of the net assets acquired
was approximately $16.5
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<PAGE>
million and has been recorded as goodwill which is being amortized on a straight
line basis over a 20 year period.
In connection with the acquisition, Compass, its wholly-owned
subsidiary AB Plastics Corporation ("AB"), and MOS entered into a Commercial
Loan Agreement with The Sumitomo Bank of California ("Sumitomo") and
Manufacturers Bank ("Manufacturers") (collectively, the "Lenders"), pursuant to
which Compass and such subsidiaries (collectively, the "Borrowers") obtained a
$6,000,000 revolving credit commitment (with borrowings thereunder limited to
specified percentages of the Borrowers' eligible accounts receivable and
eligible inventory) maturing on January 2, 2003, and an amortizing $14,000,000
term loan with final maturity on January 2, 2003. Interest payable in respect of
such loans will vary depending on the Company's relative degree of leverage from
time to time, and such loans are secured by substantially all of the non-real
estate assets of the Borrowers. In addition to scheduled amortization payments,
the term loan is subject to mandatory prepayment under certain circumstances,
including out of any new net debt proceeds, and specified portions of future net
equity proceeds and/or excess cash flow until such time as the principal balance
of the term loan is reduced to $7,000,000. The proceeds of the term loan and
initial revolving credit borrowings were utilized to retire the outstanding
revolving credit borrowings under the Company's and AB's previous loan facility
with Sumitomo, to pay a portion of the purchase price for the shares of capital
stock of MOS, to retire certain secured indebtedness of MOS, and to pay
transaction expenses relating to the acquisition.
As a result of the Company's losses for its recent 39-week period, as of July
26, 1998, Compass was in violation of certain financial covenants under its
Commercial Loan Agreement. The Lenders have agreed to forebear on those certain
covenant defaults provided that such forbearance shall terminate as to such
covenant defaults on October 31, 1998.
Also in connection with the acquisition, Compass and AB issued a
$7,000,000 debenture to Sirrom Capital Corporation d/b/a Tandem Capital
("Sirrom") and a $2,000,000 debenture to Pinecreek Capital Partners, L.P.
("Pinecreek"), each of which debentures bears interest at 12.25% per annum
payable quarterly in arrears, and matures as to all principal on February 27,
2003. Compass' and AB's obligations under such debentures are secured by second
liens on substantially all of Compass' and AB's non-real estate assets, and such
obligations and liens are subordinated to the liens securing the obligations
under the Commercial Loan Agreement described above. The net proceeds of such
debentures were used to pay a portion of the purchase price for the shares of
capital stock of MOS.
In conjunction with the issuance of such debentures, the Company issued
to Sirrom and Pinecreek five-year warrants to purchase 420,000 shares and
120,000 shares of common stock of Compass, respectively, at an exercise price of
$6.75 per share. In addition, in the event that any portion of their respective
debentures remain outstanding on February 27, 2000 and/or each anniversary
thereof, Compass has agreed to issue, on each such date, to Sirrom an additional
warrant for 140,000 shares of common stock of Compass, and/or to Pinecreek an
additional warrant for 40,000 shares of common stock of Compass, in each case at
an exercise price equal to the greater of $7.00 per share or 75% of the average
closing bid price of Compass' common stock for the 20 trading days preceding the
required date of issuance of such additional warrant. Compass has granted to
Sirrom and Pinecreek demand and piggyback registration rights in respect of the
shares underlying such warrants, and has granted, so long as the debentures
remain outstanding, observer rights for a representative of each of Sirrom and
Pinecreek to attend all meetings of Compass' Board of Directors.
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<PAGE>
As a consequence of the acquisition, the consolidated balance sheet of the
Company at July 26, 1998 includes the balance sheet of MOS along with
preliminary purchase accounting adjustments. The results of operations of MOS
have been included in the consolidated results of operations and the
consolidated statements of cash flow of the Company since February 27, 1998, the
date of acquisition.
The following proforma financial information presents the results of operations
of the Company with MOS as though the acquisition was consummated as of October
27, 1997. Proforma adjustments have been made to give effect to the amortization
of goodwill and other intangibles, interest expense related to acquisition debt,
the related tax effects, and the effect upon basic and diluted earnings per
share of the stock options and stock warrants issued in conjunction with the
acquisitions.
13 Weeks Ended 39 Weeks Ended
July 26, 1998 July 26, 1998
------------- -------------
Sales $13,558,373 $43,157,486
Net Income ($492,570) ($1,071,403)
Net Income (loss) per Share
Basic ($0.10) ($0.22)
Diluted ($0.10) ($0.22)
Such proforma results are not necessarily indicative of what the actual
consolidated results of operations would have been if the acquisition had been
effected at the beginning of the periods presented or the results which may be
achieved in the future.
5. Extraordinary Loss from Extinguishment of
Indebtedness
As a consequence of the new Loan Agreement with the Lenders and the repayment of
outstanding revolving credit borrowings under AB's previous loan facility,
approximately $97,000 of deferred loan fees was retired, and such amount was
recorded as an extraordinary loss from extinguishment of indebtedness during the
39 weeks ended July 26, 1998.
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<PAGE>
Item 2 - Management's Discussion and Analysis of
Financial Condition and Results of Operations
Overview
The Company is a leading manufacturer and assembler of custom injection molded
plastic components for computer, medical and consumer electronics OEM's located
in California and Mexico. The Company manufactures complex components based on
customer specifications and orders. The Company's most significant customers are
the television and computer display divisions of Sony, Matsushita's Panasonic
and Quasar television units, Samsung's computer monitor unit, Casio's electronic
keyboard unit, Hitachi's and Sanyo's television units. The Company supplies its
customer requirements from its manufacturing facilities in Gardena and San Jose,
California, and Tijuana, Mexico.
Compass' purchase of Silicon Valley-based M.O.S. Plastics, Inc. was completed on
February 27, 1998. MOS' current customers include many divisions of Hewlett
Packard, Apple Computer, Lifescan, Nellcor, Origin, and Silicon Graphics. The
addition of MOS is one major step towards achieving the Company's goals of
customer diversification and expansion of its engineering, tooling and
manufacturing capability. The Company believes that the acquisition solidifies
the Company's position as a total outsourcing partner from design to production.
The Company has been significantly affected by the economic instability of Asian
countries, which is reflected in the Company's reported losses in the recent
quarter and for the year. Some companies have taken a nationalistic view,
including one of Compass' customers so far, and are relocating some production
back home to offset unemployment and enjoy favorable export prices due to
currency devaluation. The Company believes, however, that this situation is
temporary and that the decisions to transfer production from Asia to the Baja
California, Mexico, area will be driven by (a) the NAFTA requirements for
international electronic manufacturers to have significant production facilities
in North America by 2001 and (b) the desire of leading computer companies such
as Dell and Gateway to minimize in-process and finished goods inventory. The
Company knows of ten, mostly Taiwanese, computer monitor manufacturers that have
opened or announced plans to open plants in the Baja area this year. However,
there can be no guarantee the Company will be awarded any new business from
these companies. The Company's earnings have been reduced due to the added
overhead expenses of the Company's new plant in Tijuana which was built in
anticipation of this future business.
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<PAGE>
Comparative Results of Operations
The following table sets forth, for the periods indicated, certain information
relating to the Company's operations expressed as a percentage of the Company's
net sales.
<TABLE>
<CAPTION>
13 Weeks Ended 39 Weeks Ended
July 26, July 27, July 26, July 27,
1998 1997 1998 1997
----------- ----------- ----------- ------------
<S> <C> <C> <C> <C>
Revenues:
Sales 100.0% 100.0% 100.0% 100.0%
Cost of Goods Sold 87.1% 81.9% 88.1% 81.3%
----------- ----------- ----------- ------------
Gross Profit 12.9% 18.1% 11.9% 18.7%
----------- ----------- ----------- ------------
Selling, General and Administrative:
Selling Expenses 1.8% 2.0% 1.7% 1.6%
General Administrative 8.7% 6.2% 7.5% 5.8%
Amortization of Goodwill 1.6% 0.2% 1.1% 0.2%
----------- ----------- ----------- ------------
Total Selling, General and Administrative 12.1% 8.3% 10.3% 7.5%
----------- ----------- ----------- ------------
Operating Income (Loss) 0.8% 9.8% 1.6% 11.2%
Interest Expense 6.9% 2.5% 4.7% 2.3%
Other Expense / (Income) 0.0% -0.1% 0.0% 0.0%
----------- ----------- ----------- ------------
Income (loss) before Income Tax -6.1% 7.3% -3.1% 8.9%
Provision (benefit) for income taxes -2.5% 3.3% -1.3% 3.6%
----------- ----------- ----------- ------------
Income (loss) before extraordinary item -3.6% 4.0% -1.9% 5.2%
Extraordinary loss from extinguishment
of indebtedness, net of tax 0.0% 0.0% -0.2% 0.0%
----------- ----------- ----------- ------------
Net income (loss) -3.6% 4.0% -2.0% 5.2%
=========== =========== =========== ============
</TABLE>
The Company's sales for the 13 weeks ended July 26, 1998 increased $3.9 million
or 40.6% over the comparable 1997 period, due primarily to the inclusion of the
sales of MOS from February 27, 1998, the date of acquisition. Sales from
existing businesses decreased 12.0% over the comparable 1997 period. The Company
shipped more than $3.7 million of product to several customers from its new
Tijuana plant in the 1998 period. Sales to Sony decreased 32.1% over the
comparable 1997 period, and represented 34.0% of total sales in the 1998 period,
compared to 70.3% of total sales for the comparable 1997 period.
The Company's sales for the 39 weeks ended July 26, 1998 increased $7.6 million
or 25.3%, due primarily to the inclusion of the sales of MOS from February
27,1998, the date of acquisition. Sales from existing businesses were about
equal to the comparable 1997 period.
The Company's gross profit was about equal for the 13 weeks, and declined 20.5%
for the 39 weeks, over the comparable 1997 periods, respectively. AB's revenue
decline and the start-up of its Tijuana plant, which added significant overhead
expenses, is principally responsible
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<PAGE>
for the gross profit decline. AB has cut overhead expenses at its Gardena plant
and completed construction of its new warehouse in May, eliminating off-site
warehousing costs. However, the Company's reduced gross profits, as a percentage
of sales, will continue until such time as revenue increases to offset the
additional overhead expenses of the new plant.
The Company's selling, general and administrative expenses increased 105.9% for
the 13-week period and 71.2% for the 39-week period, over the comparable 1997
periods, respectively. SG&A expenses were 12.1% of sales for the 13 weeks, and
10.3% for the 39 weeks, compared to 8.3% and 7.5% for the comparable 1997
periods, respectively. The increase is primarily due to the inclusion of MOS
from February 27, 1998, the date of acquisition, which added $712,000 in
expenses and $325,000 of goodwill amortization, administrative expenses of AB
Plastics de Mexico which started operations in November 1997, personnel
additions in sales and finance at AB added during the 1997 fiscal year, and
incremental costs associated with being a publicly-held company beginning in
September 1997.
The Company's interest expense increased $687,000, or 282%, for the 13 weeks,
and $1,064,000, or 153.1%, for the 39 weeks, over the comparable 1997 periods,
respectively. Approximately $755,000 of the increase was attributable to new
debt issued to purchase the stock of MOS. Additionally, interest expense
increased from the inclusion of existing MOS debt from February 27, 1998, the
addition of debt associated with the purchase of new equipment for Tijuana in
November 1997, and the purchase of the Gardena property and construction of the
warehouse addition starting in August 1997.
Liquidity and Capital Resources
The Company has historically generated sufficient cash flows from operations to
fund its general working capital needs. As of July 26, 1998, the Company had
working capital of $1.3 million compared to $1.9 million at October 26, 1997.
The decrease is attributable to the increase in the current portion of debt
incurred by the acquisition of MOS.
Net cash used by operations for the 39 weeks ended July 26, 1998 was $1.2
million, compared to $2.3 million provided by operations for the comparable 1997
period. The principle use of cash, in addition to the operating losses year to
date, was a reduction in accrued payables and compensation of $2.4 million.
Net cash used for non-acquisition investing activities for the 39 weeks ended
July 26, 1998 was $4.8 million, compared to $1.0 million for the comparable 1997
period. The 1998 amount reflects the Company's expenditures related to the
expansion of the Gardena property, and the final construction and installation
of equipment at its Tijuana plant.
The Company's financing activities included a new $3.0 million loan from General
Electric Capital Corporation to pay for equipment at its Tijuana plant. The loan
is secured by that equipment. The Company also borrowed an additional $1.3
million under its construction loan agreement to complete its warehouse
addition.
In connection with the acquisition of MOS, Borrowers entered into a new $20
million Commercial Loan Agreement with Sumitomo and Manufacturers. The credit
facilities consist of a $6 million revolving credit facility and a $14 million
term loan. At July 26, 1998, total borrowings under the loan agreement were
$16.7 million. The interest rate is variable based
-13-
<PAGE>
on the Company's leverage ratios from time to time. Interest is payable monthly,
with scheduled principal payments on the term loan to be made quarterly starting
July 1, 1998. At July 26, 1998, the Company's effective interest rate 9.44%.
Also in connection with the acquisition, Compass and AB borrowed $9 million in
subordinated debentures. The interest rate is 12.25% and interest is payable
quarterly beginning June 1, 1998. The information set forth above is qualified
in its entirety by reference to the respective loan agreements, dated as of
February 27, 1998, filed on June 12, 1998, with the Securities and Exchange
Commission as Exhibits 10.19, 10.20 and 10.21 to the Company's Quarterly Report
on Form 10-Q.
As a result of the Company's losses for the recent 39 week period, as of July
26, 1998, the Borrowers were in violation of certain financial covenants under
its Commercial Loan Agreement. The Lenders have agreed to forebear on those
certain covenant defaults provided that such forbearance shall terminate as to
such covenant defaults on October 31, 1998.
Year 2000 Compliance
The Company is continuing to analyze operations to determine and implement the
procedures necessary to ensure timely Year 2000 compliance. The Company is also
in the process of identifying and contacting key customers, vendors and
suppliers to request confirmation of timely external Year 2000 compliance. Each
of the Company's facilities utilizes and is dependent upon data processing
systems and software to conduct business. The Company has received confirmation
from vendors of the principal business software used by the Company that the
latest available release of such software is designed to be Year 2000 compliant.
The Company anticipates that the installation of Year 2000 compliant software
will occur in a timely manner. Additionally, various machines and other types of
equipment at each facility have computer controls and/or contain integrated
circuits that may be affected, and the Company is in the process of identifying
and analyzing such property to determine Year 2000 compliance.
Although the Company currently believes that becoming internally Year 2000
compliant will not have a significant impact on the financial condition or
results of future operations of the Company, the Company remains concerned that
the failure to comply by a relatively small number of large customers and/or
vendors, including banking institutions and transportation companies, may
disrupt operations at one or more of the Company's facilities.
Forward-Looking Statements
This report contains forward-looking statements within the meaning of Section
21E of the Securities Exchange Act of 1934. These forward-looking statements are
based largely on the Company's expectations and are subject to a number of risks
and uncertainties, certain of which are beyond the Company's control. Actual
results could differ materially from these forward-looking statements as a
result of, among other factors, risks related to the Company's dependence on the
computer and consumer electronics industries, its concentration of customers,
fluctuations in operating results, potential significant indebtedness and
leverage, competition, variability of customer requirements and nature of
customer commitments on orders, the integration of the Company's new Mexican
manufacturing facility and other risks described in the Company's Registration
Statement on Form S-1. In light of these risks and uncertainties, there can be
no assurance that the forward-looking information contained in this report will
in fact occur.
-14-
<PAGE>
Part II - Other Information
Item 1. Legal Proceedings
The Company is not a party to any legal proceedings other than routine
litigation incidental to its business, none of which is material.
Item 2. Changes in Securities
Not Applicable
Item 3. Defaults upon Senior Securities
As of July 26, 1998, Compass was in violation of certain financial
covenants under its Commercial Loan Agreement. At such date,
outstanding borrowings under such agreement were $16.7 million. The
Lenders have agreed to forebear on those certain covenant defaults
provided that such forbearance shall terminate as to such covenant
defaults on October 31, 1998.
Item 4. Submission of Matters to a vote of Securities Holders
None.
Item 5. Other Information
Not Applicable
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits :
10.22 First Amendment to the Commercial Loan Agreement, dated June 11,
1998 between Sumitomo Bank and Manufacturers Bank ("Lenders") and
Compass Plastics and Technologies, Inc., AB Plastics Corporation,
and M.O.S. Plastics, Inc.
27.1 Financial Data Schedule.
(b) Reports on Form 8-K
The Company filed the following reports during the quarterly period ending
July 26, 1998:
1. Current Report on Form 8-K, dated February 27, 1998, as amended,
reporting the Financial Statements of M.O.S. Plastics, Inc. and the
proforma financial information of Compass Plastics and Technologies,
Inc. and M.O.S. Plastics, Inc.
-15-
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
COMPASS PLASTICS & TECHNOLOGIES, INC.
(Registrant)
Date: September 7, 1998 By: /s/ Paul J. Iacono
------------------
Paul J. Iacono, Vice President -
Finance and Chief Financial Officer
(as both a duly authorized officer
of the registrant and the principal
financial officer and chief
accounting officer of the
registrant)
-16-
<PAGE>
AMENDMENT TO COMMERCIAL LOAN AGREEMENT
--------------------------------------
(AB/MOS)
This Amendment to Commercial Loan Agreement ("Amendment") is
entered into as of June 11, 1998 (but shall be deemed effective as of April 26,
1998) by and between The Sumitomo Bank of California, a California banking
corporation ("Sumitomo"), Manufacturers Bank, a California banking corporation
("Manufacturers"), AB Plastics Corporation, a California corporation ("AB
Plastics"), M.O.S. Plastics, Inc., a California corporation ("MOS Plastics"),
Compass Plastics & Technologies, Inc., a Delaware corporation ("Guarantor"), and
Sumitomo in its capacity as agent for Sumitomo and Manufacturers (the "Agent").
Manufacturers and Sumitomo are sometimes collectively referred to herein as the
"Banks." AB Plastics and MOS Plastics are sometimes referred to herein
collectively as the "Borrowers." This Amendment is entered into with reference
to the following:
RECITALS
--------
A. The Agent, the Banks, the Borrowers and the Guarantor previously
entered into that certain Commercial Loan Agreement dated as of February 27,
1998 (the "Agreement").
B. The Agent, the Banks, the Borrowers and the Guarantor desire to
amend the Agreement on the terms and conditions set forth herein.
AMENDMENT
---------
NOW, THEREFORE, in consideration of the foregoing, and for
other good and valuable consideration, the receipt and sufficiency of which is
hereby acknowledged, the Agent, the Banks, the Borrowers and the Guarantor
hereby agree as follows:
1. Defined Terms. Capitalized terms used in this Amendment and not
otherwise defined herein shall have the meanings given such terms in the
Agreement.
2. Amendments. The Agreement is hereby amended as follows:
A. 1.5 Repayment Terms of Term Loan. Section 1.5(c)(i) is hereby
amended by adding the following sentence at the end thereof:
-1-
<PAGE>
"Notwithstanding anything to the contrary
contained in this subparagraph 1.5(c)(i),
Borrowers will be required to apply only 60%
of the net proceeds (i.e., gross proceeds
less repayment of the indebtedness secured
by a deed of trust against the property and
reasonable closing costs) from the sale of
real estate owned by Borrowers to the
outstanding principal amount of the Term
Loan."
B. 1.6 Interest Rates. Subsection 1.6(c)(ix) is hereby amended and
restated in its entirety to provide as follows:
"(ix) As used herein, "Applicable Spread" means the additional
component of interest, expressed as a percentage per annum, to be
added to the Prime Rate or the Offshore Rate, as applicable, in
determining the applicable interest rate for amounts outstanding
under the Loans. The Applicable Spread shall be based on the
ratio of the Senior Funded Debt (on a consolidated basis) to
EBITDA (on a consolidated basis) in accordance with the following
Pricing Grid:
<TABLE>
<CAPTION>
================================ ========================== ==========================
Ratio of Funded Debt to EBITDA Applicable Spread for Applicable Spread for
Offshore Rate Borrowings Prime Rate Borrowings
================================ ========================== ==========================
<S> <C> <C>
Greater than or equal to 4.00 4.50% 2.25%
to 1
-------------------------------- -------------------------- --------------------------
Greater than or equal to 3.50 3.75% 1.50%
to 1 but less than 4.00 to 1
-------------------------------- -------------------------- --------------------------
Greater than or equal to 3.00 3.00% .75%
to 1 but less than 3.50 to 1
-------------------------------- -------------------------- --------------------------
Greater than or equal to 2.50 2.75% .50%
to 1 but less than 3.00 to 1
-------------------------------- -------------------------- --------------------------
Less than 2.50 to 1 2.50% .25%
-------------------------------- -------------------------- --------------------------
</TABLE>
The ratio of Senior Funded Debt to EBITDA (as those terms are
defined in Section 1.5(c) above) shall be determined by Agent
as of the last day of each fiscal month based on financial
information supplied by the Borrowers and Guarantor hereunder
(with such adjustments thereto as Agent shall reasonably
determine). EBITDA will be computed for the twelve fiscal
months ending with the measuring date. The Applicable Spread
shall be per the Pricing Grid and shall take effect (a)
immediately for new Offshore Rate Advances, and for existing
Offshore Rate Advances on the maturity of the applicable
interest period for such existing Offshore Rate Advances, and
(b) immediately for Prime Rate
-2-
<PAGE>
Advances. Concurrently with the execution of this Amendment
the applicable borrowing rates shall be Offshore Rate plus
3.75% and Prime Rate plus 1.5%."
C. 2.1 Unused Commitment Fee. Section 2.1(b) is hereby
amended by deleting the existing table and adding the following table:
======================================== ======================
Ratio of Senior Funded Debt to EBITDA Applicable UCF Spread
======================================== ======================
Greater than or equal to 4.00 to 1 1.00%
---------------------------------------- ----------------------
Greater than or equal to 3.50 to 1 but 0.75%
less than 4.00 to 1
---------------------------------------- ----------------------
Greater than or equal to 3.00 to 1 but 0.50%
less than 3.50 to 1
---------------------------------------- ----------------------
Greater than or equal to 2.50 to 1 but 0.375%
less than 3.00 to 1
---------------------------------------- ----------------------
Less than 2.50 to 1 0.25%
---------------------------------------- ----------------------
D. 6.2 Financial Information. Subsection 6.2(b) is hereby
amended and restated in its entirety to provide as follows:
"(b) Within 45 days after the period's end (including the
financial statements of the last month of the fiscal
year), consolidated and consolidating monthly financial
statements (including a balance sheet, income statement
and statement of cash flows) for Guarantor, Borrowers and
AB Plastics de Mexico S.A. de C.V. ("AB Mexico") and any
other subsidiaries. These financial statements may be
internally prepared. The statements shall be prepared on
a consolidated and consolidating basis, and shall reflect
the results for the month just ended as well as the
results from the beginning of the current fiscal year
through the month just ended, along with a comparison to
budget. Borrowers shall also provide to Agent monthly
compliance certificates (in the form of Exhibit E hereto)
within 45 days of each month end containing details as
reasonably required by the Banks including, but not
limited to, capital expenditure detail by location, item
and how financed."
E. 6.3 Quick Ratio. Section 6.3 is hereby modified by
substituting the word "month" for the word "quarter" contained therein.
-3-
<PAGE>
F. 6.4 Tangible Net Worth. Section 6.4 is hereby amended
and restated in its entirety to provide as follows:
"6.4 Tangible Net Worth. To maintain on a consolidated
basis as of the end of each fiscal month Tangible Net
Worth equal to at least the sum of the following:
(a) $3,200,000;
(b) 80% of the cumulative net income after income
taxes determined on a monthly basis (with no deduction
for losses determined on a monthly basis) earned after
April 26, 1998;
(c) the net proceeds from any equity securities
issued after the date of this Agreement; and
(d) any increase in stockholders' equity resulting
from the conversion of debt securities to equity
securities after the date of this Agreement.
'Tangible Net Worth' means the gross book value of
Guarantor's and Borrowers' assets (excluding goodwill,
patents, trademarks, trade names, organization expense,
treasury stock, officer/employee and stockholder
receivables, unamortized debt discount and expense,
deferred research and development costs, deferred
marketing expenses, and other like intangibles), plus
debt subordinated to Banks in a manner acceptable to
Banks, less total liabilities, including, without
limitation, accrued and deferred income taxes, and any
reserves against assets."
G. 6.5 Maximum Senior Funded Debt to EBITDA. Section 6.5 is
hereby amended and restated in its entirety to provide as follows:
"6.5 Maximum Senior Funded Debt to EBITDA. To maintain on
a consolidated basis a ratio of Senior Funded Debt to
EBITDA (as those terms are defined in Section 1.5 above)
of not to exceed (a) 4.00 to 1 at all times prior to the
fiscal year ending about October 26, 1998; (b) 3.75 to 1
effective with the fiscal year ending about October 26,
1998 through one day prior to fiscal quarter ending about
April 26, 1999, (c) 3.50 to 1 effective with the fiscal
quarter ending about April 26, 1999 through one day
-4-
<PAGE>
prior to fiscal year ending about October 26, 1999, and
(d) 3.00 to 1 effective with the fiscal year ending about
October 26, 1999 and thereafter. For purposes of this
covenant, EBITDA will be computed for the twelve months
ending on the measuring date, and this covenant shall be
tested as of the last day of each fiscal month. Senior
Funded Debt will be determined as the amount thereof as
of the date of measurement. The trailing twelve month
EBITDA for AB Plastics for the fiscal month ending
January 25, 1998, and for MOS Plastics for the fiscal
month ending January 31, 1998, is as computed on Schedule
6.5. This EBITDA shall be used for computing the covenant
at closing."
H. 6.6 Fixed Charge Coverage Ratio. The definitions of
"Cash Flow" and "Fixed Charges" set forth in Section 6.6 are hereby amended to
provide as follows:
" 'Cash Flow' means the sum of trailing twelve month
EBITDA for the Guarantor and its subsidiaries (on a
consolidated basis) (plus MOS Plastics prior to
acquisition).
'Fixed Charges' means, as of the date of determination,
the sum of (a) the annualized (from the beginning of
Guarantor's fiscal year through the date of measurement,
on a consolidated basis for Guarantor and its
subsidiaries) sum of gross interest expense (payable in
cash for the period), plus taxes payable for such period,
plus cash dividends/distributions, plus (b) current
portion of long term debt under all Indebtedness
including, but not limited to, payments due under any
seller notes or 'earn-out' agreements entered into in
connection with the acquisition of MOS Plastics or any
other arrangements."
I. 6.7 Profitability. Section 6.7 is hereby amended by
deleting the period at the end thereof and adding the following:
", effective with the fiscal quarter ending about July
26, 1998."
J. 6.10 Leases. Section 6.10 is hereby amended by
changing the words "two million dollars ($2,000,000)" appearing therein to "two
million five hundred dollars ($2,500,000)."
K. 6.24 Additional Negative Covenants. Subsection
6.24(j) is hereby amended by changing the dollar figure "$6,500,000" set forth
therein to "$5,500,000."
-5-
<PAGE>
L. 6.30 Appraisals. A new Section 6.30 is hereby added to
the Agreement which shall provide as follows:
"6.30 Appraisals. Borrowers shall allow Agent's
appraisers from time to time to inspect and appraise all
of Borrowers' machinery and equipment (the first such
appraisal to take place by July 10, 1998), and Borrowers
shall, upon request of Agent, pay all reasonable
appraisal fees and costs incurred in connection
therewith."
M. Notice of Defaults. A new Section 6.31 is hereby added
to the Agreement which shall provide as follows:
"6.31 Notice of Defaults. Borrowers shall, within five
(5) days of becoming aware thereof, notify Agent in
writing of any Event of Default, and of any event that
with the giving of notice and/or the passage of time
could become an Event of Default. Without limiting the
foregoing, Borrowers shall also promptly notify the Agent
if they anticipate that any financial covenant contained
herein shall not be met as of the next date of
determination applicable to any such covenant (which
Borrowers are aware of prior to the time Agent or Banks
are so aware because the Borrowers have the financial
information prior to the time they are obligated to remit
it to the Agent or Banks, or for any other reason
whatsoever)."
N. Exhibit E. The existing Exhibit E to the Agreement is
hereby deleted and a new Exhibit E in the form of Exhibit "E" attached hereto
is substituted in its place.
3. Events of Default. The failure of the Borrowers (or either of them)
to perform or observe any of the additional terms and conditions set forth in
this Amendment (which failure is not cured within the grace period applicable
under Section 8.1(b) of the Agreement, if any) shall constitute an Event of
Default under the Agreement, and shall permit the Agent and the Banks to
exercise all of their rights and remedies set forth in the Agreement, other loan
documents and which they may otherwise have under law. Furthermore, the failure
of the Borrowers (or either of them) to raise an additional $2,000,000 in equity
or subordinated debt (which is subordinated to the indebtedness owing to the
Banks pursuant to documentation and terms satisfactory to the Banks in their
sole discretion) by no later than October 31, 1998 shall constitute an
additional Event of Default under the Agreement, and shall permit the Agent and
the Banks to exercise all of their rights and remedies set forth in the
Agreement, other loan documents, and which they may otherwise have under law.
-6-
<PAGE>
4. Amendment Fee. Concurrently with execution hereof, Borrowers shall
pay to Agent, for the ratable benefit of the Banks, an amendment fee in the
amount of $10,000.
5. Reaffirmation of Guaranty and Security Documents. Guarantor and
Borrowers hereby reaffirm and agree to perform and observe all of their
respective obligations and agreements under the continuing guaranty, security
agreements, pledge agreements, and any other loan documents and security
documents executed in connection with the Agreement, or otherwise pertaining to
the transactions described therein, in light of the foregoing amendments and
modifications.
6. Loan Documents in Full Force and Effect. Except as specifically
amended or modified by this Amendment, the Agreement and any and all other loan
documents executed in connection therewith or pertaining thereto shall remain
unmodified and in full force and effect.
7. Payment of Costs and Fees. Borrowers agree to pay, promptly upon
demand by Agent, all costs and expenses incurred by the Agent and the Banks in
connection with the preparation and negotiation of this Amendment, and which may
otherwise have been incurred by the Agent and the Banks in connection with the
Agreement, including without limitation reasonable attorneys' fees and costs
incurred by the Agent and Banks.
-7-
<PAGE>
This Amendment is executed as of the date stated at the top of
the first page.
"Borrowers"
AB PLASTICS CORPORATION, a California corporation
By: \s\ Michael A. Gibbs
-------------------------------------
Michael A. Gibbs, CEO
---------------------
[Printed Name and Title]
By: \s\ Paul J. Iacono
-------------------------------------
Paul J. Iacono, CFO
-------------------
[Printed Name and Title]
M.O.S. PLASTICS, INC., a California corporation
By: \s\ Michael A. Gibbs
-------------------------------------
Michael A. Gibbs, CEO
---------------------
[Printed Name and Title]
By: \s\ Paul J. Iacono
-------------------------------------
Paul J. Iacono, CFO
---------------------
[Printed Name and Title
Address where notices to Borrowers are to be sent:
15730 South Figueroa Street
Gardena, California 90248
Attn: Paul J. Iacono
Telecopier: (310) 523-9859
Telephone: (213) 770-8771
-8-
<PAGE>
"Guarantor"
COMPASS PLASTICS & TECHNOLOGIES, INC.,
a Delaware corporation
By: \s\ Michael A. Gibbs
-------------------------------------
Michael A. Gibbs, CEO
---------------------
[Printed Name and Title]
By: \s\ Paul J. Iacono
-------------------------------------
Paul J. Iacono, CFO
-------------------
[Printed Name and Title]
Address where notices to Guarantor are to be sent:
15730 South Figueroa Street
Gardena, California 90248
Attn: Paul J. Iacono
Telecopier: (310) 523-9859
Telephone: (213) 770-8771
-9-
<PAGE>
"Banks"
THE SUMITOMO BANK OF CALIFORNIA, a California
banking corporation, in its individual capacity
By: \s\ Sajeda Simjee
-------------------------------------
Sajeda Simjee, Vice President
Address where notices to Sumitomo are to be sent:
The Sumitomo Bank of California
20100 Magnolia Street
Huntington Beach, California 92646
Attn: Manager
Telecopier: (714) 968-4959
Telephone: (714) 965-5560
MANUFACTURERS BANK, a California banking
corporation
By: \s\ Gregory J. Hall
-------------------------------------
Gregory J. Hall, V.P.
---------------------
[Printed Name and Title]
Address where notices to Manufacturers are to be
sent:
Manufacturers Bank
515 South Figueroa Street
Los Angeles, California 90071
Attn: Greg Hall
Telecopier: (213) 489-6291
Telephone: (213) 489-6252
-10-
<PAGE>
"Agent"
THE SUMITOMO BANK OF CALIFORNIA, a California
banking corporation, as Agent for itself and
Manufacturers Bank
By: \s\ Sajeda Simjee
-------------------------------------
Sajeda Simjee, Vice President
Address where notices to Agent are to be sent:
The Sumitomo Bank of California
20100 Magnolia Street
Huntington Beach, California 92646
Attn.: Manager
Telecopier: (714) 968-4959
Telephone: (714) 965-5560
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 9-MOS
<FISCAL-YEAR-END> OCT-25-1998 OCT-25-1998
<PERIOD-END> JUL-26-1998 JUL-26-1998
<CASH> 337 337
<SECURITIES> 0 0
<RECEIVABLES> 6,517 6,517
<ALLOWANCES> 12 12
<INVENTORY> 6,591 6,591
<CURRENT-ASSETS> 14,746 14,746
<PP&E> 27,057 27,056
<DEPRECIATION> 2,337 2,337
<TOTAL-ASSETS> 58,927 58,927
<CURRENT-LIABILITIES> 13,421 13,421
<BONDS> 0 0
0 0
0 0
<COMMON> 0 0
<OTHER-SE> 13,413 13,413
<TOTAL-LIABILITY-AND-EQUITY> 58,927 58,927
<SALES> 13,558 37,465
<TOTAL-REVENUES> 13,558 37,465
<CGS> 11,811 33,017
<TOTAL-COSTS> 13,455 36,877
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 931 1,759
<INCOME-PRETAX> (828) (1,171)
<INCOME-TAX> (335) (472)
<INCOME-CONTINUING> (493) (698)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 58
<CHANGES> 0 0
<NET-INCOME> (493) (757)
<EPS-PRIMARY> (0.10) (0.15)
<EPS-DILUTED> (0.10) (0.15)
</TABLE>
