<PAGE> 1
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 Exchange Act of 1934
For the Quarterly Period ended SEPTEMBER 30, 1997
Commission File Number 333-34323
HYDROCHEM INDUSTRIAL SERVICES, INC. (*)
(Exact name of registrant as specified in its charter)
DELAWARE 75-2503906
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
6210 ROTHWAY
HOUSTON, TEXAS 77040
(Address of principal executive offices) (Zip Code)
(713) 462-2130
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant
was required to file such reports), AND
(2) has been subject to such filing
requirements for the past 90 days.
Yes / / No /X/
The number of shares of Common Stock of the Registrant, par value of
$.01 per share, outstanding on November 14, 1996 was 100 shares.
- -------------------------------------------------------------------------------
* HydroChem International, Inc., a direct and wholly owned subsidiary of
HydroChem Industrial Services, Inc. is a Co-Registrant. It is incorporated
under the laws of the State of Delaware and its I.R.S. Employer Identification
Number is 75-2512100.
<PAGE> 2
HYDROCHEM INDUSTRIAL SERVICES, INC.
AND SUBSIDIARY
INDEX
<TABLE>
<S> <C>
Part I. Financial Information
Item 1. Financial Statements
Consolidated Balance Sheets as of December 31, 1996 and
September 30, 1997 (unaudited) . . . . . . . . . . . . . . . . . . . . . 3
Consolidated Statements of Operations for each of the three and nine
month periods ended September 30, 1996 and 1997 (unaudited) . . . . . . . 4
Consolidated Statement of Stockholder's Equity for the nine
month period ended September 30, 1997 (unaudited) . . . . . . . . . . . . 5
Consolidated Statements of Cash Flows for each of the nine
month periods ended September 30, 1996 and 1997 (unaudited) . . . . . . . 6
Notes to Consolidated Financial Statements (unaudited) . . . . . . . . . . . . 7
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations . . . . . . . . . . . . . . . . . . . . . . . . 10
Part II. Other Information
Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . . . . . . . . . . . . . 14
Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Exhibit Index . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
</TABLE>
2
<PAGE> 3
HYDROCHEM INDUSTRIAL SERVICES, INC.
AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
ASSETS
<TABLE>
<CAPTION>
December 31, September 30,
1996 1997
--------- --------------
(Unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents . . . . . . . . . . . . . . . $ 671 $ 28,508
Restricted cash (Note 2) . . . . . . . . . . . . . . . . - 2,312
Receivables, net . . . . . . . . . . . . . . . . . . . . 24,357 26,419
Inventories . . . . . . . . . . . . . . . . . . . . . . 3,569 3,875
Prepaid expenses and other current assets . . . . . . . 1,140 1,992
Deferred income taxes . . . . . . . . . . . . . . . . . 1,791 1,689
--------- --------
Total current assets . . . . . . . . . . . . . . . . 31,528 64,795
Property and equipment, at cost . . . . . . . . . . . . . . 54,772 61,436
Accumulated depreciation . . . . . . . . . . . . . . . . (17,360) (22,840)
--------- --------
37,412 38,596
Intangible assets, net . . . . . . . . . . . . . . . . . . . 46,582 45,023
--------- --------
Total assets . . . . . . . . . . . . . . . . . . . . $ 115,522 $148,414
========= ========
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities:
Accounts payable . . . . . . . . . . . . . . . . . . . . $ 5,704 $ 5,549
Income taxes payable . . . . . . . . . . . . . . . . . . 12 -
Accrued liabilities . . . . . . . . . . . . . . . . . . 7,971 8,620
Current portion of long-term debt (Note 3) . . . . . . . 4,625 -
--------- --------
Total current liabilities . . . . . . . . . . . . . 18,312 14,169
Long-term debt (Note 3) . . . . . . . . . . . . . . . . . . 63,700 110,000
Deferred income taxes . . . . . . . . . . . . . . . . . . . 7,740 7,569
Commitments and contingencies (Note 5)
Stockholder's Equity:
Common stock, $.01 par value:
1,000 shares authorized, 100 shares outstanding . . 1 1
Additional paid in capital . . . . . . . . . . . . . . . 19,670 16,558
Retained earnings . . . . . . . . . . . . . . . . . . . 6,099 117
--------- --------
Total stockholder's equity . . . . . . . . . . . . 25,770 16,676
--------- --------
Total liabilities and stockholder's equity . . . . . $ 115,522 $148,414
========= ========
</TABLE>
See accompanying notes.
3
<PAGE> 4
HYDROCHEM INDUSTRIAL SERVICES, INC.
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Three months ended Nine months ended
September 30, September 30,
----------------------- ---------------------
1996 1997 1996 1997
---------- --------- -------- --------
(in thousands)
<S> <C> <C> <C> <C>
Revenue . . . . . . . . . . . . . . . . . . $ 35,450 $ 40,030 $114,651 $120,744
Cost of revenue . . . . . . . . . . . . . . . 22,183 23,687 70,059 71,477
-------- -------- -------- --------
Gross profit . . . . . . . . . . . . . . 13,267 16,343 44,592 49,267
Selling, general and administrative expense . 10,518 11,128 30,702 32,289
Depreciation . . . . . . . . . . . . . . . . 1,982 2,094 5,694 5,983
-------- -------- -------- --------
Operating income . . . . . . . . . . . . 767 3,121 8,196 10,995
Other (income) expense:
Interest expense, net . . . . . . . . . 1,955 2,374 5,993 6,161
Special charge . . . . . . . . . . . . . 500 - 500 -
Other (income) expense, net . . . . . . (11) (17) (159) 6
Amortization of intangibles . . . . . . 381 376 1,143 1,155
-------- -------- -------- --------
Income (loss) before taxes and
extraordinary item . . . . . . . . . . . (2,058) 388 719 3,673
Income tax provision (benefit) (Note 4) . (1,444) 347 505 1,885
-------- -------- -------- --------
Income (loss) before extraordinary item . . . (614) 41 214 1,788
Extraordinary item - loss on early
extinguishment of debt,
net of taxes (Note 3) . . . . . . . - 2,342 - 2,342
-------- -------- -------- --------
Net income (loss) . . . . . . . . . . . . . . $ (614) $ (2,301) $ 214 $ (554)
======== ======== ======== ========
</TABLE>
See accompanying notes.
4
<PAGE> 5
HYDROCHEM INDUSTRIAL SERVICES, INC.
AND SUBSIDIARY
CONSOLIDATED STATEMENT OF STOCKHOLDER'S EQUITY
(UNAUDITED)
<TABLE>
<CAPTION>
Additional
Common Paid-in Retained
Stock Capital Earnings Total
----------- ------------- -------- ------------
(in thousands)
<S> <C> <C> <C> <C>
Balance at December 31, 1996 . . . . . . . . $ 1 $19,670 $ 6,099 $25,770
Dividend to parent (Note 3) . . . . . . - (3,112) (5,428) (8,540)
Net loss . . . . . . . . . . . . . . . . - - (554) (554)
----- ------- ------- -------
Balance at September 30, 1997 . . . . . . . . $ 1 $16,558 $ 117 $16,676
===== ======= ======= =======
</TABLE>
See accompanying notes.
5
<PAGE> 6
HYDROCHEM INDUSTRIAL SERVICES, INC.
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Nine months ended
September 30,
---------------------------
1996 1997
-------- ---------
(in thousands)
<S> <C> <C>
Operating activities:
Net income (loss) . . . . . . . . . . . . . . . . . . . . . $ 214 $ (554)
Adjustments to reconcile net income (loss)
to net cash provided by operating activities:
Depreciation . . . . . . . . . . . . . . . . . . . . . . 5,694 5,983
Amortization . . . . . . . . . . . . . . . . . . . . . . 1,143 1,155
Amortization of deferred financing costs . . . . . . . . 438 395
Write off of deferred financing costs . . . . . . . . . - 3,178
Deferred income tax expense . . . . . . . . . . . . . . (312) (72)
Loss (gain) on sale of property and equipment . . . . . (26) 26
Changes in operating assets and liabilities:
Receivables, net . . . . . . . . . . . . . . . . . . . . 3,721 (2,062)
Inventories . . . . . . . . . . . . . . . . . . . . . . (278) (306)
Prepaid expenses and other current assets . . . . . . . (506) (852)
Accounts payable . . . . . . . . . . . . . . . . . . . . 2,924 (155)
Income taxes payable . . . . . . . . . . . . . . . . . . (424) (12)
Accrued liabilities . . . . . . . . . . . . . . . . . . (1,377) 649
--------- ---------
Net cash provided by operating activities . . . . . 11,211 7,373
--------- ---------
Investing activities:
Expenditures for property and equipment . . . . . . . . . . (5,421) (7,429)
Purchase of assets, net of cash acquired . . . . . . . . . . 173 -
Proceeds from sale of property and equipment . . . . . . . . 287 238
--------- ---------
Net cash used in investing activities . . . . . . . (4,961) (7,191)
--------- ---------
Financing activities:
Proceeds from issuance of senior subordinated notes,
net of offering costs . . . . . . . . . . . . . . . . . - 106,832
Repayments of senior and subordinated debt, net . . . . . . (6,246) (68,325)
Dividend to parent . . . . . . . . . . . . . . . . . . . . . - (8,540)
--------- ---------
Net cash provided by (used in) financing
activities . . . . . . . . . . . . . . . . . . . (6,246) 29,967
--------- ---------
Net increase in cash . . . . . . . . . . . . . . . . . . . . . . 4 30,149
Cash at beginning of period . . . . . . . . . . . . . . . . . . . 1,088 671
--------- ---------
Cash at end of period . . . . . . . . . . . . . . . . . . . . . . $ 1,092 $ 30,820
========= =========
</TABLE>
See accompanying notes
6
<PAGE> 7
HYDROCHEM INDUSTRIAL SERVICES, INC.
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1997
(UNAUDITED)
1. ORGANIZATION AND BASIS OF PRESENTATION
The consolidated financial statements include the accounts of
HydroChem Industrial Services, Inc. ("HydroChem") and its wholly-owned
subsidiary, HydroChem International, Inc. ("International" and collectively
with HydroChem, the "Company"). HydroChem is a wholly-owned subsidiary of
HydroChem Holding, Inc. ("Holding").
The Company is engaged in the business of providing industrial
cleaning services to a wide range of processing industries throughout the
United States and internationally, including petrochemical plants, oil
refineries, electric utilities, pulp and paper mills, rubber plants and
aluminum plants. This type of work is typically recurring maintenance to
improve or sustain the operating efficiencies and extend the useful lives
of process equipment and facilities. Services provided include
high-pressure water cleaning, chemical cleaning, industrial vacuuming,
waste minimization, commissioning and other specialized services.
The accompanying unaudited consolidated financial statements presented
herein have been prepared in accordance with generally accepted accounting
principles for interim financial information and the rules and regulations
of the Securities and Exchange Commission. Accordingly, they do not
include all of the information and footnotes required by generally accepted
accounting principles for complete financial statements. Certain
information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted. In the opinion of management,
the accompanying unaudited interim financial statements include all
adjustments, consisting of only normal recurring accruals, necessary for a
fair presentation of the results of the interim periods. Operating
results for the three and nine month interim periods ended September 30,
1997 are not necessarily indicative of the results that may be expected for
the year ending December 31, 1997. These unaudited consolidated financial
statements should be read in conjunction with the Company's audited
consolidated financial statements included in the Company's Amendment No. 1
to Form S-4 filed with the Securities and Exchange Commission on October 3,
1997.
2. RESTRICTED CASH
At September 30, 1997, approximately $2.3 million of the Company's
cash was required to secure outstanding undrawn letters of credit which
were principally incurred in connection with the Company's property and
casualty insurance program. These letters of credit were previously
secured by the Company's revolving loan and will be secured by cash of the
Company until the New Credit Facility is in place (see Note 3).
7
<PAGE> 8
3. LONG-TERM DEBT
Long-term debt at December 31, 1996 and September 30, 1997 consisted
of the following (in thousands):
<TABLE>
<CAPTION>
December 31, September 30,
1996 1997
------------- -------------
<S> <C> <C>
Revolving loan . . . . . . . . . . . . . . $ 5,450 $ -
Term loan A . . . . . . . . . . . . . . . 19,875 -
Term loan B . . . . . . . . . . . . . . . 25,000 -
--------- --------
Total senior debt . . . . . . . . . . . . 50,325 -
Less current portion of senior debt . . . 4,625 -
--------- --------
45,700 -
Subordinated debt . . . . . . . . . . . . 18,000 -
Senior subordinated notes . . . . . . . . - 110,000
--------- --------
Total long-term debt . . . . . . . . . . . $ 63,700 $110,000
========= ========
</TABLE>
On August 4, 1997, HydroChem issued $110,000,000 of its 10 3/8% Senior
Subordinated Notes due 2007 (the "Series A Notes") in a private offering
pursuant to Rule 144A under the Securities Act of 1933. HydroChem has
registered an identical series of notes (the "Series B Notes") with the
Securities and Exchange Commission and on November 7, 1997, completed an
exchange of the Series A Notes for the Series B Notes. The Series B Notes
mature on August 1, 2007 and bear interest at 10 3/8% per annum which is
payable semi-annually in arrears on February 1 and August 1 of each year,
commencing on February 1, 1998. The Series B Notes are redeemable at the
option of HydroChem, in whole or in part, on or after August 1, 2002 at
specified redemption prices. In addition, up to 35% of the Series B Notes
are redeemable at the option of HydroChem with the proceeds from one or more
equity offerings at a redemption price of 109.375% of the principal amount
thereof. International is a guarantor of the Series B Notes.
A portion of the net proceeds from the sale of the Series A Notes
was used to repay the Company's senior debt and subordinated debt and to
fund a dividend to Holding which Holding used to discharge accrued interest
on its indebtedness and accrued dividends on its preferred stock. As a
result of the early repayment of the Company's debt, an extraordinary loss
was recognized in the amount of $2,342,000 (net of the related tax benefit
of $1,435,000). The extraordinary loss consisted of the write-off of
associated deferred financing costs in the amount of $3,178,000 before
related tax benefit, as well as a prepayment premium and other related
fees and expenses.
On November 12, 1997, HydroChem received a commitment from a financial
institution for a new credit facility (the "New Credit Facility") which
provides for unsecured borrowings up to $25 million. The New Credit
Facility will mature three years from inception and will bear interest at
rates adjusted quarterly based upon the Company's operating performance.
The interest rates will be based on LIBOR or the prime rate, at the
discretion of HydroChem. The calculated interest rates will range from
LIBOR plus 1.25% to LIBOR plus 2.00% or the prime rate to the prime rate
plus 0.25%. In addition, a commitment fee of 0.25% will be payable
quarterly on the unborrowed portion of the New Credit Facility. The New
Credit Facility will require the Company to meet certain financial ratios
and covenants.
4. INCOME TAXES
The Company files a consolidated tax return with Holding. The
Company's effective income tax rate differs from the federal statutory
income tax rate primarily due to nondeductible permanent differences and
state income taxes.
8
<PAGE> 9
5. COMMITMENTS AND CONTINGENCIES
HydroChem is a defendant in various lawsuits arising in the normal
course of business. Substantially all of these suits are being defended by
HydroChem's insurance carriers. While the results of litigation cannot be
predicted with certainty, management believes the final outcome of such
litigation will not have a material adverse effect on the Company's
consolidated financial position.
6. SUMMARY UNAUDITED FINANCIAL INFORMATION
Summary unaudited financial information for International, included in
the consolidated financial condition and results of operations of
HydroChem, is as follows (in thousands):
<TABLE>
<CAPTION>
As of As of
December 31, September 30,
1996 1997
------------ ------------
<S> <C> <C>
Current assets . . . . . . . . . . . . . . . $ 1,976 $ 1,392
Noncurrent assets . . . . . . . . . . . . . 155 125
Current liabilities . . . . . . . . . . . . 85 49
Noncurrent liabilities . . . . . . . . . . . - -
</TABLE>
<TABLE>
<CAPTION>
Three months ended Nine months ended
September 30, September 30,
---------------------- -------------------
1996 1997 1996 1997
-------- -------- ------- --------
<S> <C> <C> <C> <C>
Revenue . . . . . . . . . . $ 1,800 $ 567 $ 3,495 $ 2,116
Gross profit . . . . . . . . 712 208 1,376 900
Net income (loss) . . . . . 200 (61) 223 (78)
</TABLE>
9
<PAGE> 10
HYDROCHEM INDUSTRIAL SERVICES, INC.
AND SUBSIDIARY
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
STATEMENT REGARDING FORWARD-LOOKING INFORMATION
This Form 10-Q contains forward-looking statements and information that are
based on management's beliefs, as well as assumptions made by, and information
currently available to, management. When used in this document, the words
"believe," "anticipate," "estimate," "project," "expect," and similar
expressions are intended to identify forward-looking statements. Although the
Company believes that the expectations reflected in such forward-looking
statements are reasonable, it can give no assurance that such expectations will
prove to have been correct. Such statements are subject to certain risks,
uncertainties and assumptions. Should one or more of these risks or
uncertainties materialize, or should underlying assumptions prove incorrect,
actual results may vary materially from those anticipated. The Company
undertakes no obligation to release publicly the result of any revisions to
these forward-looking statements that may be made to reflect events or
circumstances after the date hereof or to reflect the occurrence of
unanticipated events.
OVERVIEW
The Company is a leading provider of industrial cleaning services to a wide
range of processing industries, including petrochemical plants, oil refineries,
electric utilities, pulp and paper mills, rubber plants and aluminum plants.
This type of work is typically recurring maintenance to improve or sustain the
operating efficiencies and extend the useful lives of process equipment and
facilities. Services provided include hydroblasting, chemical cleaning,
industrial vacuuming, waste minimization, commissioning and other specialized
services. Customers are generally billed on a monthly basis.
Cost of revenue primarily consists of direct costs for employee
compensation and benefits, contract labor, travel, equipment, supplies,
chemicals, site services and insurance. Selling, general and administrative
("SG&A") expense includes employee compensation and benefits, travel,
facilities, supplies, insurance, advertising, training, professional fees and
doubtful accounts expense.
Depreciation and amortization charges result primarily from the
capital-intensive nature of the industrial cleaning industry and the
acquisitions that HydroChem has completed. The principal components of
depreciation relate to vehicles, hydroblasting pumps and chemical pumps and
circulators. Amortization relates to goodwill, customer lists and other
intangibles related to prior acquisitions. HydroChem accounted for all of
these acquisitions under the purchase method and, because the purchase price of
acquired assets exceeded their fair value, recorded significant amounts of
goodwill and other intangibles. As a result, the Company has incurred
significant levels of amortization.
EBITDA is defined as net income plus interest expense, income tax provision
(benefit), depreciation, amortization, and other income and expense (including
a special charge in 1996) reflected in the determination of net income. EBITDA
should not be construed as a substitute for operating income, as an indicator
of liquidity or as a substitute for net cash provided by operating activities,
which are determined in accordance with generally accepted accounting
principles. EBITDA is included because management believes that certain
readers may find it to be a useful tool for analyzing operating performance,
leverage, liquidity, and a company's ability to service debt.
For supplemental information, it is suggested that "Management's Discussion
and Analysis of Financial Condition and Results of Operations" be read in
conjunction with the corresponding section included in the Company's Amendment
No. 1 to Form S-4 filed with the Securities and Exchange Commission on October
3, 1997. The Form S-4 also includes the Company's Consolidated Financial
Statements and the Notes thereto for certain prior periods, as well as other
relevant financial and operating information.
10
<PAGE> 11
RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated, information
derived from the Company's consolidated statements of operations, expressed as
a percentage of revenue. There can be no assurance that the trends in operating
results will continue in the future.
<TABLE>
<CAPTION>
Three months ended Nine months ended
September 30, September 30,
--------------------- -------------------
1996 1997 1996 1997
------ ------ ------ ------
<S> <C> <C> <C> <C>
Revenue . . . . . . . . . . . . . . 100.0% 100.0% 100.0% 100.0%
Cost of revenue . . . . . . . . . . 62.6 59.2 61.1 59.2
------ ----- ----- -----
Gross profit . . . . . . . . . . 37.4 40.8 38.9 40.8
SG&A expense . . . . . . . . . . . . 29.6 27.8 26.8 26.7
Depreciation . . . . . . . . . . . . 5.6 5.2 5.0 5.0
------ ----- ----- -----
Operating income . . . . . . . . 2.2 7.8 7.1 9.1
Other (income) expense:
Interest expense, net . . . . . 5.5 5.9 5.2 5.1
Special charge . . . . . . . . . 1.4 - 0.4 -
Other (income) expense, net . . - - (0.1) 0.0
Amortization of intangibles . . 1.1 0.9 1.0 1.0
------ ----- ----- -----
Income (loss) before taxes and
extraordinary item . . . . . . . (5.8) 1.0 0.6 3.0
Income tax provision (benefit) . . . (4.1) 0.9 0.4 1.5
------ ----- ----- -----
Income (loss) before extraordinary
item . . . . . . . . . . . . . (1.7)% 0.1% 0.2% 1.5%
====== ===== ===== =====
EBITDA . . . . . . . . . . . . . . . 7.8% 13.0% 12.1% 14.1%
</TABLE>
THREE MONTHS ENDED SEPTEMBER 30, 1997 COMPARED TO
THREE MONTHS ENDED SEPTEMBER 30, 1996
Revenue. Revenue increased $4.5 million, or 12.9%, to $40.0 million for
the three months ended September 30, 1997 from $35.5 million in the prior year
period. Hydroblasting revenue increased $5.7 million, or 36.3 %, while
chemical cleaning revenue decreased $2.5 million, or 17.4%. Industrial
vacuuming revenue increased $1.4 million, or 45.6 %, while revenue from all
other services decreased $51,000, or 1.9%. Hydroblasting revenue has
continually increased during the year and during the three months ended
September 30, 1997 due to the implementation of sole-source provider
arrangements with certain customers and a small number of large projects with
existing customers. The decrease in chemical cleaning revenue was primarily
caused by a decrease in electric utility boiler cleaning and certain other
projects. Growth in industrial vacuuming revenue resulted from increased
customer demand for services provided by additional vacuum trucks placed in
service by the Company in 1996 and 1997.
Gross profit. Cost of revenue increased $1.5 million, or 6.8%, to $23.7
million for the three months ended September 30, 1997 from $22.2 million in the
prior year period. Gross profit increased $3.0 million, or 23.2%, to $16.3
million for the three months ended September 30, 1997 from $13.3 million in the
prior year period. As a result of the revenue increases described above, which
were partially offset by increases in cost of revenue, gross profit margins for
the three month period increased to 40.8% in 1997 from 37.4% in the
corresponding period in 1996.
SG&A expense. SG&A expense increased $610,000, or 5.8%, to $11.1 million
for the three months ended September 30, 1997 from $10.5 million in the prior
year period. This increase primarily resulted from increases in employee
compensation and benefits expense as well as the settlement of certain property
and casualty insurance claims arising in prior periods at higher than
anticipated amounts. For the three month period, SG&A expense as a percent of
revenue decreased to 27.8% in 1997 from 29.6% in 1996.
EBITDA. Increased gross profit, partially offset by increased SG&A
expense, resulted in an increase in EBITDA of
11
<PAGE> 12
$2.5 million, or 89.7%, to $5.2 million for the three months ended September
30, 1997 from $2.7 million in the prior year period. As a percentage of
revenue, EBITDA was 13.0% for the three months ended September 30, 1997, which
was up from 7.8% in the prior year period.
Depreciation. Depreciation expense increased $112,000, or 5.7% and was
relatively unchanged at $2.1 million for the three months ended September 30,
1997 from $2.0 million in the prior year period.
Operating income. Increased gross profit, partially offset by increased
SG&A expense, resulted in an increase of $2.4 million, or 306.9%, in operating
income to $3.1 million for the three months ended September 30, 1997 from
$767,000 in the prior year period. As a percentage of revenue, operating
income was 7.8% for the three months ended September 30, 1997, which was up
from 2.2% in the prior year period.
Interest expense. Interest expense increased $419,000, or 21.4%, to $2.4
million for the three months ended September 30, 1997 from $2.0 million in the
prior year period. Increased interest expense resulted from an increase in
debt due to the issuance in August 1997 of $110 million of HydroChem's 10 3/8%
Senior Subordinated Notes due 2007.
Special charge. In 1996, the Company incurred approximately $500,000 of
expenses related to merger negotiations between the company and a
publicly-traded company, which were terminated prior to consummating the
merger.
Amortization. Amortization expense of $376,000 for the three months ended
September 30, 1997 was relatively unchanged from $381,000 in the prior year
period.
Income (loss) before taxes and extraordinary item. For the reasons
described above, income before taxes and extraordinary item increased $2.5
million, or 118.9%, to $388,000 for the three months ended September 30, 1997
from a loss of $2.1 million in the prior year period.
Income tax provision (benefit). The effective tax rate increased to 89.4%
of income before taxes for the three months ended September 30, 1997 from 70.2%
in the prior year period. This increase principally resulted from a change in
the proportion of estimated 1997 earnings which are not deductible for income
tax purposes.
Net income (loss) before extraordinary item. For the reasons described
above, net income (loss) before extraordinary item increased $655,000, or
106.7%, to income of $41,000 for the three months ended September 30, 1997 from
a loss of $614,000 for the prior year period.
Extraordinary item. In 1997, as a result of the early repayment of the
Company's debt, an extraordinary loss was recognized in the amount of $2.3
million (net of the related tax benefit of $1.4 million). The extraordinary
loss consisted of the write-off of associated deferred financing costs in the
amount of $3.2 million before related tax benefit, as well as a prepayment
premium and other related fees and expenses.
Net loss. For the reasons described above, net loss increased $1.7
million, or 274.8%, to a loss of $2.3 million for the three months ended
September 30, 1997 from a loss of $614,000 for the prior year period.
NINE MONTHS ENDED SEPTEMBER 30, 1997 COMPARED TO
NINE MONTHS ENDED SEPTEMBER 30, 1996
Revenue. Revenue increased $6.0 million, or 5.3%, to $120.7 million for
the nine months ended September 30, 1997 from $114.7 million in the prior year
period. Hydroblasting revenue increased $9.6 million, or 18.9%, while chemical
cleaning revenue decreased $5.9 million, or 12.9%. Industrial vacuuming
revenue increased $3.6 million, or 41.1%, while revenue from all other services
decreased $1.1 million, or 12.6%, for the same period. Hydroblasting revenue
has continually increased during the year due to the implementation of
sole-source provider arrangements with certain customers and a small number of
large projects with existing customers. The decrease in chemical cleaning
revenue was primarily caused by a decrease in electric utility boiler cleaning
and certain other projects. Growth in industrial vacuuming revenue resulted
from increased customer demand for services provided by additional vacuum
trucks placed in service by the Company in 1996 and 1997. The decrease in
other services was principally the result of reduced activity with one customer
partially offset by increased activity with other customers.
12
<PAGE> 13
Gross profit. Cost of revenue increased $1.4 million, or 2.0% to $71.5
million for the nine months ended September 30, 1997 from $70.1 in the prior
year period. For the same period, gross profit increased $4.7 million, or
10.5%, to $49.3 million in 1997 from $44.6 million in the prior year. As a
result of the revenue increases described above, which were partially offset by
increases in cost of revenue, gross profit margins for the nine month period
increased from 38.9% to 40.8%.
SG&A expense. SG&A expense increased $1.6 million, or 5.2%, to $32.3
million for the nine months ended September 30, 1997 from $30.7 million in the
prior year period. This increase primarily resulted from increases in employee
compensation and benefits expense as well as the settlement of certain property
and casualty insurance claims at higher than anticipated amounts. For the nine
month period, SG&A expense as a percent of revenue decreased to 26.7% for 1997
from 26.8% for 1996.
EBITDA. Increased gross profit, partially offset by increased SG&A
expense, resulted in an increase in EBITDA of $3.1 million, or 22.2%, to $17.0
million for the nine months ended September 30, 1997 from $13.9 million in the
prior year period. As a percentage of revenue, EBITDA was 14.1% for the nine
months ended September 30, 1997, which was up from 12.1% in the prior year
period.
Depreciation. Depreciation expense increased $289,000, or 5.1%, and was
relatively unchanged at $6.0 million for the nine months ended September 30,
1997 from $5.7 million in prior year period.
Operating income. Increased gross profit, partially offset by increased
SG&A expense, resulted in an increase in operating income of $2.8 million, or
34.2% to $11.0 million for the nine months ended September 30, 1997 from $8.2
million in the prior year period. As a percentage of revenue, operating income
was 9.1% for the nine months ended September 30, 1997, which was up from 7.1%
in prior year period.
Interest expense. Interest expense increased $168,000, or 2.8%, to $6.2
million for the nine months ended September 30, 1997 from $6.0 million in the
prior year period. Increased interest expense resulted from an increase in
debt due to the issuance in August 1997 of $110 million of HydroChem's 10 3/8%
Senior Subordinated Notes due 2007, partially offset by lower revolving loan
and term loan balances prior to the extinguishment of that debt.
Special charge. In 1996, the Company incurred approximately $500,000 of
expenses related to merger negotiations between the company and a
publicly-traded company, which were terminated prior to consummating the
merger.
Amortization. Amortization expense of $1.2 million for the nine months
ended September 30, 1997 was relatively unchanged from $1.1 million in the
prior year period.
Income before taxes and extraordinary item. For the reasons described
above, income before taxes and extraordinary item increased $3.0 million, or
410.8%, to $3.7 million for the nine months ended September 30, 1997 from
$719,000 in the prior year period.
Income tax provision. The effective tax rate decreased to 51.3% of income
before taxes for the nine months ended September 30, 1997 from 70.2% in 1996.
This decrease principally resulted from higher projected income before taxes in
the year ending December 31, 1997 than was realized in the year ended December
31, 1996, and comparable amounts of expense projected for 1997 and incurred in
1996 which are not deductible for income tax purposes.
Net income before extraordinary item. For reasons described above, net
income before extraordinary item increased $1.6 million, or 735.5%, to $1.8
million for the nine months ended September 30, 1997 from $214,000 for the
prior year period.
Extraordinary item. In 1997, as a result of the early repayment of the
Company's debt, an extraordinary loss was recognized in the amount of $2.3
million (net of the related tax benefit of $1.4 million). The extraordinary
loss consisted of the write-off of associated deferred financing costs in the
amount of $3.2 million before related tax benefit, as well as a prepayment
premium and other related fees and expenses.
13
<PAGE> 14
Net income (loss). For the reasons described above, net income (loss)
decreased $768,000, or 358.9%, to a loss of $554,000 for the nine months ended
September 30, 1997 from income of $214,000 for the prior year period.
LIQUIDITY AND CAPITAL RESOURCES
The Company has historically financed its operations through net cash
provided by operating activities, existing cash balances, available credit
facilities and capital contributions from Holding. In August 1997, HydroChem
issued $110 million of its 10 3/8% Senior Subordinated Notes due 2007 (the
"Series A Notes") in a private offering pursuant to Rule 144A under the
Securities Act of 1933. A portion of the net proceeds from the sale of the
Series A Notes was used to repay indebtedness, accrued interest and fees under
the Company's existing senior debt ($45.7 million) and subordinated debt ($18.7
million). In addition, $8.5 million was used to fund a dividend to Holding
which Holding used to discharge accrued interest on its indebtedness and
accrued dividends on its preferred stock. The remaining proceeds have been
invested in commercial paper and other interest bearing deposits with
short-term maturities. These funds are intended to be used for general
corporate purposes, including expanding the Company's industrial vacuuming and
other business lines through expenditures for property and equipment,
increasing the Company's marketing and sales efforts, and funding potential
acquisitions. The Company continually evaluates possible acquisitions, but
presently has no related commitments or agreements with any party.
On November 12, 1997, HydroChem received a commitment from a financial
institution for a new credit facility (the "New Credit Facility") which
provides for unsecured borrowings up to $25 million. The New Credit Facility
will mature three years from inception and will bear interest at rates adjusted
quarterly based upon the Company's financial performance.
For the nine months ended September 30, 1997, the Company provided net cash
of $182,000 from operating and investing activities which consisted of $7.4
million provided by operating activities and $7.2 million used in investing
activities. For the nine months ended September 30, 1996, $6.2 million of net
cash was provided by operating and investing activities which consisted of
$11.2 million provided by operating activities and $5.0 million used in
investing activities. Investing activities for both periods consisted
primarily of expenditures for property and equipment.
Management believes that cash and cash equivalents at September 30, 1997
and net cash expected to be provided by operating activities and borrowings, if
necessary, under the New Credit Facility will be sufficient to meet its cash
requirements for operations and expenditures for property and equipment for the
next twelve months and the foreseeable future thereafter. (See Note 3 of Notes
to Consolidated Financial Statements.)
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
<TABLE>
<CAPTION>
Exhibit
Number Description
------ -----------
<S> <C>
3.1 Certificate of Incorporation of HydroChem Industrial Services, Inc., as amended through
December 15, 1993. (Exhibit 3.1 to the Company's Registration Statement on Form S-4, filed
August 25, 1997, is hereby incorporated by reference.)
3.2 Certificate of Incorporation of HydroChem International, Inc., as amended through
October 4, 1994. (Exhibit 3.2 to the Company's Registration Statement on Form S-4, filed
August 25, 1997, is hereby incorporated by reference.)
3.3 By-Laws of HydroChem Industrial Services, Inc. (Exhibit 3.3 to the Company's Registration
Statement on Form S-4, filed August 25, 1997, is hereby incorporated by reference.)
</TABLE>
14
<PAGE> 15
<TABLE>
<S> <C>
3.4 By-Laws of HydroChem International, Inc. (Exhibit 3.4 to the Company's Registration
Statement on Form S-4, filed August 25, 1997, is hereby incorporated by reference.)
4.1 Purchase Agreement, dated as of July 30, 1997, by and among HydroChem Industrial Services,
Inc., HydroChem International, Inc. and Donaldson, Lufkin & Jenrette Securities
Corporation, as Initial Purchaser, relating to the 10 3/8% Series A Senior Subordinated
Notes due 2007. (Exhibit 4.1 to the Company's Registration Statement on Form S-4, filed
August 25, 1997, is hereby incorporated by reference.)
4.2 Indenture, dated as of August 1, 1997, among HydroChem Industrial Services, Inc.,
HydroChem International, Inc., as Guarantor, and Norwest Bank, Minnesota, N.A., as
Trustee. (Exhibit 4.2 to the Company's Registration Statement on Form S-4, filed August
25, 1997, is hereby incorporated by reference.)
4.3 Registration Rights Agreement dated August 4, 1997, by and among HydroChem Industrial
Services, Inc., HydroChem International, Inc. and Donaldson, Lufkin & Jenrette Securities
Corporation, as Initial Purchaser. (Exhibit 4.3 to the Company's Registration Statement
on Form S-4, filed August 25, 1997, is hereby incorporated by reference.)
10.1 HydroChem Holding, Inc. 1994 Stock Option Plan. (Exhibit 10.1 to the Company's
Registration Statement on Form S-4, filed August 25, 1997, is hereby incorporated by
reference.)
10.2 Employment Agreement dated November 1, 1992 between HydroChem Industrial Services, Inc.
and J. Pat DeBusk. (Exhibit 10.2 to the Company's Registration Statement on Form S-4,
filed August 25, 1997, is hereby incorporated by reference.)
10.3 Employment Agreement dated November 1, 1992 between HydroChem Industrial Services, Inc.
and Gary Noto. (Exhibit 10.3 to the Company's Registration Statement on Form S-4, filed
August 25, 1997, is hereby incorporated by reference.)
10.4 Employment Agreement dated November 1, 1992 between HydroChem Industrial Services, Inc.
and Craig Kaple. (Exhibit 10.4 to the Company's Registration Statement on Form S-4, filed
August 25, 1997, is hereby incorporated by reference.)
10.5 Employment Agreement dated December 15, 1993 by and among HydroChem Holding, Inc.,
HydroChem Industrial Services, Inc. and B. Tom Carter, Jr., as amended through December 9,
1996. (Exhibit 10.5 to the Company's Registration Statement on Form S-4, filed August 25,
1997, is hereby incorporated by reference.)
10.6 Employment Offer Letter dated June 3, 1996 from HydroChem Industrial Services, Inc. to
Selby F. Little, III. (Exhibit 10.6 to the Company's Registration Statement on Form S-4,
filed August 25, 1997, is hereby incorporated by reference.)
10.7 Letter Agreement regarding severance compensation dated October 31, 1997 between HydroChem
Industrial Services, Inc. and Pelham H. A. Smith
10.8 Lease Agreement dated December 4, 1979 between HydroChem Industrial Services, Inc. and
Gracey Corporation, as amended through May 29, 1996. (Exhibit 10.7 to the Company's
Registration Statement on Form S-4, filed August 25, 1997, is hereby incorporated by
reference.)
10.9 Form of Indemnification Agreement to be entered into with directors and officers.
(Exhibit 10.8 to the Company's Amendment No. 1 to the Registration Statement on Form S-4,
filed October 3, 1997, is hereby incorporated by reference.)
27.1 Financial Data Schedule
</TABLE>
(b) Reports on Form 8-K
None
15
<PAGE> 16
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.
HYDROCHEM INDUSTRIAL SERVICES, INC.
Date: November 14, 1997 By: /s/ SELBY F. LITTLE, III
----------------- ------------------------------------
Selby F. Little, III,
Executive Vice President and
Chief Financial Officer
HYDROCHEM INTERNATIONAL, INC.
Date: November 14, 1997 By: /s/ SELBY F. LITTLE, III
----------------- -------------------------------------
Selby F. Little, III,
Executive Vice President and
Chief Financial Officer
16
<PAGE> 17
EXHIBIT INDEX
10.7 Letter Agreement regarding severance compensation dated October 31,
1997 between HydroChem Industrial Services, Inc. and Pelham H. A. Smith
27 Financial Data Schedule
<PAGE> 1
October 31, 1997
Mr. Pelham H. A. Smith
3883 Turtle Creek Blvd.
Apt. 1512
Dallas, TX 75219
Dear Pelham:
As we have discussed, there may be uncertainties that will affect HydroChem
Industrial Services, Inc. (the "Company") and you due to various matters that
the Company may consider from time to time. As we have further discussed,
the Company needs you to perform the duties of your employment without being
distracted by these possible uncertainties. Accordingly, as an inducement for
you to continue your employment in this situation, the Company is pleased to
offer you the following severance compensation provisions in the event your
employment should be terminated by the Company at any time without cause:
1. If the Company terminates your employment at any time without
cause, then it will pay you severance compensation equal to twelve (12) months
of your then current base compensation. Payment of this severance compensation
would be conditional upon your signing the Company's standard form settlement
agreement and general release.
2. For the purposes of this letter, "cause" shall mean (i) any act
involving moral turpitude, (ii) any act of fraud or willful misconduct, (iii) a
conviction for any felony, or (iv) any recurring and material failure or
refusal to perform the duties of your employment which is not corrected within
fifteen (15) days after receipt of written notice thereof. Cause shall not
mean the failure to achieve any goal, objective or specific result. For the
purposes of this paragraph, a termination without cause shall also be deemed
to have occurred if, subsequent to a Change in Control ( as defined in Exhibit
A to this letter), you resign your employment within ninety days after the
occurrence of any of the following events:
(a) You are required by the Company to relocate your primary
residence from the Dallas, Texas metropolitan area.
(b) You are required by the Company to commute to an office
located outside the Houston, Texas metropolitan area.
(c) The Company reduces your base compensation or makes a
material change in your title or the duties and responsibilities of your
employment.
<PAGE> 2
Mr. Pelham H. A. Smith
October 31, 1997
Page Two
3. As further consideration for any payment you may receive under
section 1 above, and also in consideration of the confidential information that
you have been and will be developing for or receiving from the Company, you
agree to be bound by the restrictions contained in Exhibit B to this letter .
If the foregoing is acceptable to you, please sign this letter below and return
to me. A duplicate original is enclosed for your records.
Sincerely,
HydroChem Industrial Services, Inc.
By: /s/ B. TOM CARTER, JR.
-----------------------------------
B. Tom Carter, Jr., Chairman and
Chief Executive Officer
AGREED AND ACCEPTED:
/s/ PELHAM H. A. SMITH
- -----------------------
Pelham H. A. Smith
November 3, 1997
<PAGE> 3
EXHIBIT A
TO
LETTER AGREEMENT
A Change in Control shall be deemed to have occurred if (i) any person other
than the current stockholders of HydroChem Holding, Inc. ("Holding") or the
Company becomes the beneficial owner of securities of Holding or the Company
representing fifty percent or more of the combined voting power of the then
outstanding securities of either Holding or the Company, (ii) a merger or
consolidation involving Holding or the Company in which neither of them is the
surviving entity, or (iii) either Holding or the Company sells substantially
all of its assets to a person other than an associate or affiliate of either
of them. For the purposes of this Exhibit A, the term "person" or "persons"
shall mean individuals, groups, corporations, partnerships, or other entities.
<PAGE> 4
EXHIBIT B
TO
LETTER AGREEMENT
For the purposes of this Exhibit B to Letter Agreement, the term "Employer "
shall mean HydroChem Industrial Services, Inc. and any parents, subsidiaries or
affiliates thereof including HydroChem Holding, Inc. and HydroChem
International, Inc. The term "Employee" shall mean Pelham H. A. Smith.
At all times during the course of Employer's employment of the Employee, and
thereafter, Employee agrees as provided below:
(a) Employee understands that Employer's business interests require a
confidential relationship between Employer and its employees and Employer and
its customers, the protection and confidential treatment of its employees and
customers, of its inventions, trade secrets, know-how, programs and other
knowledge of its business (hereinafter collectively termed "Information")
whether or not conceived or learned by its employees in the course of their
employment. Accordingly, Employee shall keep confidential and treat
confidentially all Information, whether patented, or not, and shall not use or
aid others in using Information in competition with Employer, this obligation
to exist both during and after termination of Employee's employment by Employer
and for so long as any Information remains legally protectable as to persons
receiving it in a confidential relationship.
(b) Employee will disclose to Employer every significant item of
Information relating to Employer's interests and will disclose in writing every
invention while under the employ of Employer and which reasonably relates to
the business of Employer.
(c) Upon Employer's request, either during or after termination of
Employee's employment, but without expense to him, Employee will execute any
and all patent applications, assignments, and other legal instruments that
Employer shall deem necessary for the protection of the Information; he will
render aid and assistance in all proceedings pertaining to such property, and
will, in general, cooperate with all lawful efforts by Employer to protect the
Information.
(d) Upon termination of employment, or prior thereto as Employer may
request, Employee will surrender to Employer all papers, documents, writings,
illustrations, models and other property produced thereby or coming into his
possession by or through his employment with Employer and Employee agrees that
all such materials are at all times Employer's property.
(e) During the period of Employee's employment, and for an additional
period of one year (two years if the Employee voluntarily terminates his
Employment with Employer) immediately following the term of Employment (the
"Restriction Period"), and in consideration of the Employee's employment, the
Information to be disclosed by Employer to Employee, and Employee's right to
severance compensation in certain circumstances under the letter agreement to
<PAGE> 5
which this Exhibit B is attached, Employee shall not directly or indirectly,
(i) induce any employee of Employer to terminate his employment with Employer,
(ii) hire any such employee, (iii) call upon or solicit, with the intent to
divert or take away any clients, customers, or accounts, or (iv) in his own
behalf or as a partner, officer, director, employee, agent, consultant or
stockholder (other than as a holder of less than 1% of the outstanding capital
stock of any corporation with a class of equity securities registered under
Section 12(b) or 12(g) of the Securities Exchange Act of 1934, as amended)
engage in, invest in, or render services to any person or entity engaged in the
businesses in which Employer or any of its subsidiaries or affiliates are
engaged. The parties intend that the covenants contained in this Section (e)
shall be deemed to be a series of separate covenants, one for each foreign
country and each county or parish in each state of the United States and,
expect for geographic coverage, each such separate covenant shall be identical
in terms to the covenant contained in this Section (e). Notwithstanding the
foregoing, the Restrictions shall only apply to the areas of Employer's
business for which Employee renders services hereunder or receives Information
and in the geographical areas where Employee has responsibilities. If any
judicial or administrative body shall refuse to enforce all of the separate
covenants contained in this Section (e) because the time limit is too long, it
is expressly understood and agreed between the parties hereto that for the
purposes of such proceeding such time limitation shall be deemed reduced to the
extent necessary to permit enforcement of such covenants. If any judicial or
administrative body shall refuse to enforce all of the separate covenants
contained in this Section (e) because they are more extensive (whether as to
geographic area, scope of business or otherwise) than necessary to protect the
business and goodwill of Employer or any of its subsidiaries or affiliates it
is expressly understood and agreed between the parties hereto that for purposes
of such proceeding the geographic area, scope of business or other aspect
shall be deemed reduced to the extent necessary to permit enforcement of such
covenants.
(f) Employee acknowledges that, in view of the nature of the business in
which the Employer is engaged, the restrictions contained in this Exhibit B,
(the "Restrictions") are reasonable and necessary in order to protect the
legitimate interests of the Employer, and that any violation thereof would
result in irreparable injuries to the Employer, and Employee therefore further
acknowledges that, in the event Employee violates, or threatens to violate any
of such Restrictions, the Employer shall be entitled to obtain from any court
of competent jurisdiction, without the posting of any bond or other security,
preliminary and permanent injunctive relief as well as damages and an equitable
accounting of all earnings, profits, and other benefits arising from such
violation, which rights shall be cumulative and in addition to any other rights
or remedies in law or equity to which the Employer may be entitled. The
legitimate interests of the Employer include, but are not limited to, the
identity of customers, the special needs and requirements of customers, pricing
strategies, cost factors and bidding strategies.
(g) If any Restriction under this Exhibit B, or any part thereof, shall be
determined in any judicial or administrative proceeding to be invalid, illegal
or unenforceable, the remainder of the Restrictions shall not thereby be
affected and shall be given full effect, without regard to the invalid, illegal
or unenforceable provisions. If the period of time or the area specified in
the Restrictions shall be determined in any judicial or administrative
proceeding to be unreasonable, then the court or administrative body shall have
the power to reduce the period of time or the area covered and, in its reduced
form, such provisions shall then be enforceable and shall be enforced.
<PAGE> 6
(h) If Employee violates any of the Restrictions, the applicable
restrictive period shall be tolled from the time of the commencement of any
such violation until such time as such violation shall be cured by Employee to
the reasonable satisfaction of the Employer.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS AS OF AND FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> SEP-30-1997
<CASH> 30,820
<SECURITIES> 0
<RECEIVABLES> 26,419
<ALLOWANCES> 0
<INVENTORY> 3,875
<CURRENT-ASSETS> 64,795
<PP&E> 61,436
<DEPRECIATION> 22,840
<TOTAL-ASSETS> 148,414
<CURRENT-LIABILITIES> 14,169
<BONDS> 0
0
0
<COMMON> 1
<OTHER-SE> 16,675
<TOTAL-LIABILITY-AND-EQUITY> 148,414
<SALES> 120,744
<TOTAL-REVENUES> 120,744
<CGS> 71,477
<TOTAL-COSTS> 71,477
<OTHER-EXPENSES> 39,433
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 6,161
<INCOME-PRETAX> 3,673
<INCOME-TAX> 1,885
<INCOME-CONTINUING> 1,788
<DISCONTINUED> 0
<EXTRAORDINARY> 2,342
<CHANGES> 0
<NET-INCOME> (554)
<EPS-PRIMARY> .00
<EPS-DILUTED> .00
</TABLE>
