<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED DECEMBER 31, 1998
-----------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FROM TO
Commission File Number 0-5888
WAXMAN INDUSTRIES, INC.
-----------------------
(Exact Name of Registrant as Specified in its Charter)
DELAWARE 34-0899894
-------- ----------
(State of Incorporation) (I.R.S. Employer Identification Number)
24460 AURORA ROAD
BEDFORD HEIGHTS, OHIO 44146
--------------------- -----
(Address of Principal Executive Offices) (Zip Code)
(440) 439-1830
--------------
(Registrant's Telephone Number Including Area Code)
NOT APPLICABLE
--------------
(Former name, former address and former fiscal year, if changed since
last report)
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 ninety (90) days.
Yes X No
--- ---
9,913,301 shares of Common Stock, $.01 par value, and 2,143,996 shares of Class
B Common Stock, $.01 par value, were outstanding as of February 3, 1999.
1
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WAXMAN INDUSTRIES, INC. AND SUBSIDIARIES
----------------------------------------
INDEX TO FORM 10-Q
------------------
PAGE
----
PART 1. FINANCIAL INFORMATION
- -------------------------------
Item 1. Financial Statements (Unaudited)
<TABLE>
<CAPTION>
<S> <C>
Condensed Consolidated Statements of Operations -
For the Six and Three Months Ended December 31, 1998 and 1997........ 3
Condensed Consolidated Balance Sheets -
December 31, 1998 and June 30, 1998.................................. 4 -5
Condensed Consolidated Statements of Cash Flows -
For the Six Months Ended December 31, 1998 and 1997.................. 6
Notes to Condensed Consolidated Financial Statements................. 7- 11
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.......................... 12-17
PART II. OTHER INFORMATION
- --------------------------
Item 5. Other Information............................................ 18
Item 6. Exhibits and Reports on Form 8-K............................. 18
</TABLE>
SIGNATURES
- ----------
EXHIBIT INDEX
- -------------
2
<PAGE> 3
PART 1. FINANCIAL INFORMATION
---------------------
ITEM 1. FINANCIAL STATEMENTS
WAXMAN INDUSTRIES, INC. AND SUBSIDIARIES
----------------------------------------
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
------------------------------------------------
(UNAUDITED)
FOR THE SIX MONTHS AND THREE MONTHS ENDED DECEMBER 31, 1998 AND 1997
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
Six Months Ended Three Months Ended
December 31, December 31,
------------ ------------
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net sales $ 57,427 $ 54,965 $ 29,198 $ 26,808
Cost of sales 39,678 36,100 20,537 17,444
-------- -------- -------- --------
Gross profit 17,749 18,865 8,661 9,364
Selling, general and administrative expenses 16,690 14,855 8,443 7,492
Restructuring and non-recurring charges 1,350 133 -- --
-------- -------- -------- --------
Operating (loss) income (291) 3,877 218 1,872
Equity earnings of Barnett 3,331 3,168 1,804 1,704
Interest expense, net 8,732 7,751 4,422 3,899
-------- -------- -------- --------
Loss before income taxes and extraordinary loss (5,692) (706) (2,400) (323)
Provision for income taxes 240 556 54 312
-------- -------- -------- --------
Loss before extraordinary loss (5,932) (1,262) (2,454) (635)
Extraordinary loss -- 192 -- --
-------- -------- -------- --------
Net loss $ (5,932) $ (1,454) $ (2,454) $ (635)
======== ======== ======== ========
Loss per share (basic and diluted):
Loss before extraordinary loss $ (0.49) $ (0.10) $ (0.20) $ (0.05)
Extraordinary loss -- (0.02) -- --
-------- -------- -------- --------
Net loss $ (0.49) $ (0.12) $ (0.20) $ (0.05)
======== ======== ======== ========
Weighted average shares outstanding 12,057 12,009 12,057 12,013
======== ======== ======== ========
Comprehensive income:
Net loss before comprehensive income (loss) $ (5,932) $ (1,454) $ (2,454) $ (635)
Foreign currency translation adjustment 418 (615) 392 (529)
-------- -------- -------- --------
Comprehensive loss $ (5,514) $ (2,069) $ (2,062) $ (1,164)
======== ======== ======== ========
</TABLE>
The accompanying Notes to Condensed
Consolidated Financial Statements are
an integral part of these statements.
3
<PAGE> 4
WAXMAN INDUSTRIES, INC. AND SUBSIDIARIES
----------------------------------------
CONDENSED CONSOLIDATED BALANCE SHEETS
-------------------------------------
DECEMBER 31, 1998 AND JUNE 30, 1998
(IN THOUSANDS)
ASSETS
<TABLE>
<CAPTION>
December 31, June 30,
1998 1998
(Unaudited) (Audited)
----------- ---------
CURRENT ASSETS:
<S> <C> <C>
Cash $ 333 $ 72
Trade receivables, net 14,348 15,503
Other receivables 3,032 3,152
Inventories 19,621 26,162
Prepaid expenses 3,856 3,060
Net assets held for sale 9,907 --
----------- ----------
Total current assets 51,097 47,949
----------- ----------
INVESTMENT IN BARNETT 32,972 29,641
----------- ----------
PROPERTY AND EQUIPMENT:
Land 580 1,379
Buildings 4,417 7,397
Equipment 11,469 13,541
----------- ----------
16,466 22,317
Less accumulated depreciation and amortization ( 6,415) ( 9,346)
----------- ----------
Property and equipment, net 10,051 12,971
----------- ----------
COST OF BUSINESSES IN EXCESS OF NET ASSETS ACQUIRED, NET 8,054 8,189
UNAMORTIZED DEBT ISSUANCE COSTS, NET 3,142 3,524
OTHER ASSETS 4,950 3,469
----------- ----------
$ 110,266 $ 105,743
=========== ==========
</TABLE>
The accompanying Notes to Condensed
Consolidated Financial Statements
are an integral part of these
statements.
4
<PAGE> 5
WAXMAN INDUSTRIES, INC. AND SUBSIDIARIES
----------------------------------------
CONDENSED CONSOLIDATED BALANCE SHEETS
-------------------------------------
DECEMBER 31, 1998 AND JUNE 30, 1998
(IN THOUSANDS, EXCEPT PER SHARE DATA)
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
December 31, June 30,
1998 1998
(Unaudited) (Audited)
CURRENT LIABILITIES: ---------- ---------
<S> <C> <C>
Current portion of long-term debt $ 22,260 $ 15,864
Accounts payable 9,112 8,473
Accrued liabilities 4,129 6,500
Accrued income taxes payable 260 250
Accrued interest 1,337 1,339
--------- ---------
Total current liabilities 37,098 32,426
--------- ---------
OTHER LONG-TERM DEBT, NET OF CURRENT PORTION 791 838
SENIOR SECURED DEFERRED COUPON NOTES, NET 86,780 81,368
SENIOR NOTES 35,855 35,855
STOCKHOLDERS' EQUITY:
Preferred stock, $.01 par value per share:
Authorized and unissued 2,000 shares -- --
Common Stock, $.01 par value per share:
Authorized 22,000 shares; Issued 9,912 at December 31, 1998
and 9,908 at June 30, 1998 98 98
Class B common stock, $.01 par value per share:
Authorized 6,000 shares; Issued 2,145 at December 31, 1998
and 2,148 at June 30, 1998 21 21
Paid-in capital 21,731 21,731
Retained deficit (71,363) (65,431)
--------- ---------
(49,513) (43,581)
Cumulative currency translation adjustment (745) (1,163)
--------- ---------
Total stockholders' equity (deficit) (50,258) (44,744)
--------- ---------
$ 110,266 $ 105,743
========= =========
</TABLE>
The accompanying Notes to Condensed
Consolidated Financial Statements are
an integral part of these statements.
5
<PAGE> 6
WAXMAN INDUSTRIES, INC. AND SUBSIDIARIES
----------------------------------------
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
-----------------------------------------------
(UNAUDITED)
FOR THE SIX MONTHS ENDED DECEMBER 31, 1998 AND 1997
(IN THOUSANDS)
<TABLE>
<CAPTION>
1998 1997
---- ----
CASH FLOWS FROM OPERATING ACTIVITIES:
- ------------------------------------
<S> <C> <C>
Net loss $ (5,932) $ (1,454)
Adjustments to reconcile net loss to
net cash used in operating activities:
Extraordinary loss - write-off of deferred financing costs -- 192
Non-cash interest 5,412 4,793
Other non-cash charges 42 --
Equity earnings of Barnett (3,331) (3,168)
Depreciation and amortization 1,407 1,535
Changes in assets and liabilities:
Trade receivables, net (1,323) (2,324)
Inventories 887 (1,539)
Other assets (3,002) 241
Accounts payable 2,229 2,192
Accrued liabilities (1,646) (1,784)
Accrued interest (2) (478)
Accrued taxes 10 668
Other, net 418 (615)
-------- --------
Net Cash Used in Operating Activities (4,831) (1,741)
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
- -------------------------------------
Net proceeds from sale of business -- 3,203
Capital expenditures, net (1,257) (1,071)
-------- --------
Net Cash (Used in) Provided by Investing Activities (1,257) 2,132
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
- -------------------------------------
Borrowings under credit agreements 47,985 56,091
Payments under credit agreements (41,589) (53,157)
Retirement of Senior Notes -- (12,000)
Repayments of long-term debt (47) (19)
-------- --------
Net Cash Provided by
(Used in) Financing Activities 6,349 (9,085)
-------- --------
NET INCREASE(DECREASE) IN CASH 261 (8,694)
BALANCE, BEGINNING OF PERIOD 72 9,637
-------- --------
BALANCE, END OF PERIOD $ 333 $ 943
======== ========
</TABLE>
The accompanying Notes to Condensed
Consolidated Financial Statements are
an integral part of these statements.
6
<PAGE> 7
WAXMAN INDUSTRIES, INC. AND SUBSIDIARIES
----------------------------------------
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
----------------------------------------------------
(UNAUDITED)
DECEMBER 31, 1998
NOTE 1 - BASIS OF PRESENTATION
---------------------
The condensed consolidated financial statements include the
accounts of Waxman Industries, Inc. ("Waxman") and its wholly-owned subsidiaries
(collectively, the "Company"). As of December 31, 1998, the Company owned 44.3%
of the common stock of Barnett Inc. (the "Barnett Common Stock") and accounts
for Barnett Inc. ("Barnett") under the equity method of accounting. The
condensed consolidated statements of operations for the six months and three
months ended December 31, 1998 and 1997, the condensed consolidated balance
sheet as of December 31, 1998 and the condensed consolidated statements of cash
flows for the six months ended December 31, 1998 and 1997 have been prepared by
the Company without audit, while the condensed consolidated balance sheet as of
June 30, 1998 was derived from audited financial statements. In the opinion of
management, these financial statements include all adjustments, all of which are
normal and recurring in nature, necessary to present fairly the financial
position, results of operations and cash flows of the Company as of December 31,
1998 and for all periods presented. Certain information and footnote disclosures
normally included in financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted. The Company
believes that the disclosures included herein are adequate and provide a fair
presentation of interim period results. Interim financial statements are not
necessarily indicative of financial position or operating results for an entire
year. It is suggested that these condensed interim financial statements be read
in conjunction with the audited financial statements and the notes thereto
included in the Company's Annual Report on Form 10-K for the fiscal year ended
June 30, 1998, filed with the Securities and Exchange Commission.
The Company's Senior Subordinated Notes mature on June 1, 1999 and the
Company's credit facility with BankAmerica Business Credit (the "Credit
Agreement") will expire on July 15, 1999. In addition, cash interest on the
Senior Secured Deferred Coupon Notes becomes payable in semi-annual installments
beginning on December 1, 1999. Management continues to develop and implement
plans to enable the Company to continue to meet all of its obligations as they
become due. As part of that process, on January 7, 1999, the Company completed
the sale of certain assets and liabilities of an indirect wholly-owned
operation, U.S. Lock, for approximately $33.0 million (the "U.S. Lock Sale").
The Company believes that the U.S. Lock Sale provides the capital necessary to
address its near term liquidity requirements. The Company also believes that a
replacement facility or modification of its existing Credit Agreement will be
arranged prior to July 15, 1999. In addition, the Company intends to refinance
all or a part of the Deferred Coupon Notes at or prior to maturity and/or to
pursue a sale of assets or other capital raising transaction to satisfy such
cash requirement. However, there can be no assurance that any such refinancing
or capital raising transaction will be consummated. Accordingly, the
accompanying consolidated financial statements have been prepared assuming the
Company will continue as a going concern and, as such, adjustments, if any, that
may be required for presentation on another basis have not been considered.
NOTE 2 - BUSINESS
--------
The common stock of Waxman trades on the New York Stock Exchange under
the symbol "WAX." The Company is a supplier of specialty plumbing and other
products to the repair and remodeling market in the United States. The Company
distributes its products to a wide variety of large national and regional
retailers and other independent retailers. U.S. Lock, which was sold by the
Company effective January 1, 1999, is a distributor of security hardware to
locksmiths and security hardware installers.
The Company conducts its business primarily through its wholly-owned
subsidiaries, Waxman Consumer Products Group Inc. ("Consumer Products"), WOC
Inc. ("WOC") and TWI International, Inc. ("TWI"). Prior to January 1, 1999, WOC
was comprised of two divisions, U.S. Lock ("U.S. Lock"), a distributor of a full
line of security hardware products (see "U.S. Lock Sale" above), and Medal
Distributing, a supplier of hardware products. TWI includes the Company's
foreign sourcing operations, including manufacturing, packaging and sourcing
operations in China and Taiwan, and an operation in Mexico that threads
galvanized, black, brass, and chrome pipe nipples and imports malleable
fittings. Consumer Products, WOC and Barnett utilize the Company's and non-
7
<PAGE> 8
affiliated foreign sourcing suppliers.
The Company currently owns 7.2 million shares, or 44.3%, of Barnett, a
direct marketer and distributor of an extensive line of plumbing, electrical and
hardware products to approximately 65,000 active customers throughout the United
States. Barnett offers and promotes approximately 11,900 name brand and private
label products through its industry- recognized Barnett(R) catalogs and
telesales operations. Barnett markets its products through five distinct,
comprehensive catalogs that target professional contractors, independent
hardware stores, maintenance managers and liquid propane gas dealers. For the
three months and six months ended December 31, 1998, the Company recognized $1.8
million and $3.3 million in equity income from this investment, respectively, as
compared to $1.7 million and $3.2 million for the same periods last year.
In April 1996, the Company completed an initial public offering of the
Barnett Common Stock at $14.00 per share, reducing its interest in the former
wholly-owned subsidiary to 49.9% of the outstanding Barnett Common Stock and,
together with certain convertible non-voting preferred stock owned,
approximately a 54% economic interest (the "Barnett Initial Public Offering").
In April 1997, the Company completed a secondary offering of 1.3 million shares
of Barnett Common Stock at $17.50 per share, reducing its voting and economic
interest to 44.5% (the "Barnett Secondary Offering") and, accordingly, began to
account for its interest in Barnett under the equity method of accounting. In
July 1997, as a result of the sale to Barnett of a substantial portion of the
business of LeRan Gas Products, one of WOC's operations, the Company received
cash and an additional 24,730 shares of Barnett Common Stock. In January 1999,
the Company completed the U.S. Lock Sale to Barnett (see Note 12). The Barnett
Common Stock trades on the Nasdaq National Market under the symbol "BNTT."
NOTE 3 - INCOME TAXES
------------
The Company accounts for income taxes in accordance with the provisions
of Statement of Financial Accounting Standards No. 109, "Accounting for Income
Taxes" ("SFAS No. 109"). SFAS No. 109 requires the Company to recognize income
tax benefits for loss carryforwards, which have not previously been recorded.
The tax benefits recognized must be reduced by a valuation allowance in certain
circumstances. The benefit of the Company's net operating loss carryforwards
have been reduced 100% by a valuation allowance.
At June 30, 1998, the Company had approximately $52.7 million of
available domestic net operating loss carryforwards for income tax purposes,
which expire 2008 through 2013. The Company also had alternative minimum tax
credit carryforwards of approximately $0.9 million at June 30, 1998, which are
available to reduce future regular income taxes over an indefinite period. The
Company will continue to assess the valuation allowance and to the extent it is
determined that such allowance is no longer required, the tax benefit of the
remaining net deferred tax assets will be recognized in the future. The tax
provision for the three and six months ended December 31, 1998 represents the
provision for various state and foreign taxes.
In January 1999, the Company will utilize a portion of the net operating
loss carryforwards to offset the tax on the net gain from the U.S. Lock Sale.
NOTE 4 - BARNETT
-------
The Company owns 7,186,530 shares, or 44.3%, of the Barnett Common
Stock as of December 31, 1998, which is accounted for under the equity method of
accounting. In April 1996, the Company completed the Barnett Initial Public
Offering, receiving net proceeds of $92.6 million, after the underwriters'
discount, and recorded a $65.9 million pre-tax gain. In April 1997, the Company
completed the Barnett Secondary Offering, receiving net proceeds of $21.6
million, after the underwriters' discount and recorded a $16.7 million pre-tax
gain. In April 1997, the Company converted the remaining convertible non-voting
preferred stock of Barnett it owned to Barnett Common Stock. In July 1997, the
Company received 24,730 shares of Barnett as a result of the sale of the gas
products business of LeRan Gas Products ("LeRan") to Barnett (see Note 5). In
January 1999, the Company completed the U.S. Lock Sale to Barnett (see Note 12).
The following table presents unaudited summary financial data for
Barnett at December 31, 1998 and for the six months then ended (in thousands of
dollars):
8
<PAGE> 9
Statement of income data: Balance sheet data:
Net sales $ 110,511 Working capital $ 58,102
Operating income 12,276 Total assets 113,247
Net income 7,506 Stockholders' equity 83,689
NOTE 5 - SALE OF DIVISION
-----------------
Effective July 1, 1997, the Company sold the gas products business of
LeRan, a division of WOC, to Barnett for $3.2 million in cash and 24,730 shares
of Barnett Common Stock, with a value of $0.6 million at the time of the
transaction. In the first quarter of fiscal 1998, the Company recorded an
estimated loss on the sale of LeRan of $133,000, including certain costs
associated with disposing of assets not included in the transaction and the sale
and closing of certain warehouses. The estimated loss was adjusted in the fourth
quarter of fiscal 1998 to an actual loss of $24,000.
NOTE 6 - SENIOR NOTE PURCHASE OFFER
--------------------------
In May 1997, the Company commenced an offer to purchase $12.0 million
principal amount of its 11 1/8% Senior Notes due September 1, 2001 (the "Senior
Notes") at par (the "Purchase Offer"). The offer expired on July 2, 1997 with
$2.5 million of the Senior Notes being purchased. On July 3, 1997, the Company
called for redemption the $9.5 million of Senior Notes that had not been
tendered in the Purchase Offer, and on August 4, 1997, the Company completed the
note redemption. The Company used a portion of the net proceeds from the Barnett
Secondary Offering to purchase the Senior Notes. The Company recorded an
extraordinary charge of $0.2 million in the quarter ended September 30, 1997
related to the write-off of unamortized deferred financing costs associated with
the purchase and redemption of these Senior Notes.
NOTE 7 - NON-RECURRING CHARGE
--------------------
In the first quarter of fiscal 1999, Consumer Products recorded a
non-recurring charge of $1.35 million relating to the move of its Bedford
Heights, Ohio warehouse to Groveport, Ohio. The cash cost of this move has been
paid as of December 31, 1998. Included in the charge are severance benefits for
personnel and the loss on the write-off of tangible assets at the Bedford
Heights warehouse. The Company believes that the relocation to a more modern and
efficient facility, which was completed in November 1998, will allow Consumer
Products to provide more sophisticated distribution services to its customers
and help it remain competitive through significant annual savings.
NOTE 8 - SUPPLEMENTAL CASH FLOW INFORMATION
----------------------------------
Cash payments during the three months ended December 31, 1998 and 1997
included interest of $0.5 million and $0.3 million, respectively. For the six
months ended December 31, 1998 and 1997, cash interest payments were $2.9
million and $3.1 million, respectively. The Company made no federal income tax
payment in the quarter or six month periods ended December 31, 1998 or 1997.
NOTE 9 - EARNINGS PER SHARE
------------------
In February 1997, The Financial Accounting Standards Board ("FASB")
issued SFAS No. 128, "Earnings per Share" to be effective for financial
statements issued for periods ending after December 15, 1997. SFAS No. 128
requires companies to restate earnings per share data for all periods presented.
Under SFAS No. 128, primary earnings per share have been replaced by "basic
earnings per share", which represents net income divided by the weighted average
number of common shares outstanding. Diluted earnings per share continues to
utilize the weighted average number of common stock and common stock
equivalents, which include stock options and warrants. Since the Company is in a
loss position, the impact of these options and warrants is anti-dilutive;
therefore the Company has disclosed basic earnings per share as basic and
diluted for the quarters and six month periods ended December 31, 1998 and 1997.
9
<PAGE> 10
The number of common shares used to calculate basic and diluted
earnings per share are as follows (in thousands):
<TABLE>
<CAPTION>
Six months Six months Three months Three months
December 31, December 31, December 31, December 31,
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Basic 12,057 12,009 12,057 12,013
Dilutive effect of:
Stock options -- -- -- --
Warrants -- -- -- --
------ ------ ------ ------
Diluted 12,057 12,009 12,057 12,013
</TABLE>
NOTE 10 - SEGMENT INFORMATION
-------------------
The Company classifies its businesses into two business segments: (i)
distribution of plumbing, security hardware (see Note 12 with respect to the
U.S. Lock Sale) and other products, which includes the operations of Consumer
Products and WOC; and (ii) foreign sourcing operations, which includes the
Company's sourcing and packaging operations in Taiwan and China, and Western
American Manufacturing, Inc. ("WAMI"), an operation in Mexico that provides
galvanized, black, brass and chrome pipe nipples and imports malleable fittings.
These products are sold primarily to D-I-Y home centers and retailers in the
United States. Sales outside of the United States are insignificant. In
addition, nearly all of the products from the foreign sourcing operations are
sold to the Company's wholly-owned operations and Barnett. Set forth below is
certain financial data relating to the Company's business segments (in thousands
of dollars).
<TABLE>
<CAPTION>
Three and six months ended
- -------------------------- Foreign Corporate and
December 31, 1998 and 1997 Distribution Sourcing Other Elimination Total
- --------------------------- ------------ -------- ----- ----------- -----
Reported net sales:
<S> <C> <C> <C> <C> <C>
Fiscal 1999 three months $ 19,643 $ 13,402 -- $ (3,847) $ 29,198
Fiscal 1998 three months 21,165 11,198 -- (5,555) 26,808
Fiscal 1999 six months 41,397 23,319 -- (7,289) 57,427
Fiscal 1998 six months 43,070 21,966 -- (10,071) 54,965
Operating income (loss):
Fiscal 1999 three months $ 990 $ 154 $ (926) -- $ 218
Fiscal 1998 three months 1,598 1,112 (838) -- 1,872
Fiscal 1999 six months 1,036 525 (1,852) -- (291)
Fiscal 1998 six months 3,702 1,840 (1,665) -- 3,877
Identifiable assets:
December 31, 1998 $ 46,730 $ 20,740 $ 42,796 -- $ 110,266
June 30, 1998 48,489 18,042 39,212 -- 105,743
</TABLE>
10
<PAGE> 11
NOTE 11 - COMPREHENSIVE INCOME
--------------------
In June 1997, The FASB issued SFAS No. 130, "Reporting Comprehensive
Income" to be effective for financial statements issued for fiscal years
beginning after December 15, 1997. SFAS No. 130 requires companies to report
components of comprehensive income in the financial statements as prominently as
the other financial statements. Comprehensive income is defined as the change in
equity of a business during a period from transactions and other events and
circumstances that are not included in net income. Accordingly, the Company has
identified its foreign currency translation adjustments as a component of
comprehensive income on the face of the consolidated statements of operations.
NOTE 12 - SUBSEQUENT EVENT - SALE OF U.S. LOCK
-------------------------------------
In December 1998, the Company announced it had entered into an
agreement to sell certain of the assets and liabilities of U.S. Lock, a division
of WOC, to Barnett for approximately $33.0 million in cash, less certain post
closing adjustments. The U.S. Lock Sale was completed effective January 1, 1999,
resulting in an estimated net pretax gain of $18.9 million, of which
approximately $18.4 million will be reported as a deferred gain due to the
Company's continued ownership of 44.3% of Barnett, the acquirer of U.S. Lock.
The Company will utilize a portion of its net operating loss carryforwards to
offset the tax on the net gain from the U.S. Lock Sale.
11
<PAGE> 12
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
-------------------------------------------------
CONDITION AND RESULTS OF OPERATIONS
-----------------------------------
This Quarterly Report contains certain "forward-looking statements"
within the meaning of the Private Securities Litigation Reform Act of 1995 that
are based on the beliefs of the Company and its management. When used in this
document, the words "anticipate," "believe," "continue," "estimate," "expect,"
"intend," "may," "should," and similar expressions are intended to identify
forward-looking statements. Such statements reflect the current view of the
Company with respect to future events and are subject to certain risks,
uncertainties and assumptions, including, but not limited to, the risk that the
Company may not be able to implement its deleveraging strategy and the
refinancing of its bank credit facility in the intended manner, risks associated
with currently unforeseen competitive pressures and risks affecting the
Company's industry, such as decreased consumer spending, customer concentration
issues, risks associated with the Company's inability to meet the listing
requirements of the New York Stock Exchange and the effects of general economic
conditions. In addition, the Company's business, operations and financial
condition are subject to the risks, uncertainties and assumptions which are
described in the Company's reports and statements filed from time to time with
the Securities and Exchange Commission, including this Report. Should one or
more of those risks or uncertainties materialize, or should underlying
assumptions prove incorrect, actual results may vary materially from those
described herein.
A. RESULTS OF OPERATIONS
---------------------
FOR THE THREE MONTHS ENDED DECEMBER 31, 1998 AND 1997
- -----------------------------------------------------
Net Sales
- ---------
Net sales for the fiscal 1999 second quarter ended December 31, 1998
totaled $29.2 million, as compared to $26.8 million for second quarter in fiscal
1998. U.S. Lock reported an increase in net sales of $1.3 million, or 23.5%, in
comparison to the same period last year. U.S. Lock's increase in net sales is
attributable to the continued expansion of its customer base through monthly
promotional flyers and the expansion in the number of its professional telesales
representatives. Net sales for the Asian operations increased by $3.9 million,
primarily due to an increase in sales to Barnett and to the direct import
programs managed by Consumer Products. Approximately $1.1 million of the net
sales increase for Waxman's Asian operations are the result of direct import
sales that are being managed by Consumer Products. Consumer Products reported a
net sales decrease of approximately $2.8 million, or 19.2%, primarily due to a
$1.8 million reduction in sales to Hechinger / Builders Square. The reduction in
Consumer Products' net sales is the result of a reduction in the number of
Builders Square stores and their aggressive inventory management program as our
packaged plumbing sales program with them ends. As previously disclosed by the
Company, Consumer Products was informed that the Hechinger / Builders Square
operations were consolidating their supplier relationships and Consumer Products
would retain only the bulk plumbing business of approximately $2.3 million
annually beginning in January 1999. For the quarter ended December 31, 1998,
total sales to Hechinger / Builders Square were approximately $1.1 million,
including $0.8 million of packaged plumbing products.
Gross Profit
- ------------
Gross profit margin decreased to 29.7% from 34.9% and gross profit
decreased to $8.7 million from $9.4 million for the three months ended December
31, 1998, as compared to the corresponding quarter in the prior fiscal year. The
decrease in the gross margin is primarily attributable to a higher proportion of
sales from the lower gross margin direct import sales program, however, gross
profit for the Asian operations improved due to the additional sales volume. The
gross profit reduction was primarily due to lower sales at Consumer Products.
For the three months ended December 31, 1998, the gross profit from the Mexican
pipe nipple operations was lower by $0.6 million in comparison to the same
period last year, due to the competitive pricing pressure of other overseas
suppliers.
12
<PAGE> 13
Selling, General and Administrative Expenses
- --------------------------------------------
Selling, general and administrative expenses ("SG&A expenses")
increased from $7.5 million for the quarter ended December 31, 1997 to $8.4
million for the quarter ended December 31, 1998. As a percentage of net sales,
SG&A expenses increased from 27.9% for the fiscal 1998 second quarter to 28.9%
for the fiscal 1999 second quarter. The increase in SG&A expense is primarily
attributable to foreign exchange losses of $0.3 million being reported in the
quarter ended December 31, 1998, as compared to exchange gains of $0.5 million
being reported for the same period last year. Consumer Products reported a $0.1
million reduction in costs for the three months ended December 31, 1998 as
compared to the prior year. SG&A expenses at Consumer Products increased as a
percentage of net sales due to the decrease in the sales base. U.S. Lock
reported an increase of $0.2 million in SG&A expenses but had a reduction in
SG&A expenses as a percentage of net sales from 21.4% in the second quarter of
fiscal 1998 to 20.3% in the fiscal 1999 second quarter.
Equity Earnings of Barnett
- --------------------------
The Company recorded equity earnings from its ownership interest in
Barnett of $1.8 million for the quarter ended December 31, 1998, as compared to
$1.7 million for the same quarter in fiscal 1998.
Interest Expense
- ----------------
For the quarter ended December 31, 1998, interest expense totaled $4.4
million, an increase of $0.5 million, from the $3.9 million in the comparable
quarter last year. The increase is primarily due to an increase in the accretion
of interest on the Company's 12 3/4% Senior Secured Deferred Coupon Notes
("Deferred Coupon Notes") and additional borrowings by the Company under the
Credit Agreement. Average borrowings for the current year's quarter amounted to
$141.5 million, with a weighted average interest rate of 11.8%, as compared to
$121.4 million in the same quarter last year, with a weighted average interest
rate of 12.0%.
Provision for Income Taxes
- --------------------------
The provision for income taxes amounted to $0.1 million for the second
quarter of fiscal 1999, as compared to $0.3 million for the same quarter last
year. The provision for the current quarter primarily represents various state
and foreign taxes of the Company's wholly-owned operations. The difference
between the effective and statutory tax rates is primarily due to domestic
operating losses not benefited and goodwill amortization.
Net Loss
- --------
The Company's net loss for the quarter ended December 31, 1998 amounted
to $2.5 million, or $0.20 per basic and diluted share, as compared to the loss
of $0.6 million, or $0.05 per basic and diluted share, in the fiscal 1998 second
quarter.
FOR THE SIX MONTHS ENDED DECEMBER 31, 1998 AND 1997
- ---------------------------------------------------
Net Sales
- ---------
Net sales for the six months ended December 31, 1998 totaled $57.4
million, an increase of $2.4 million from the $55.0 million for the comparable
period in fiscal 1998. U.S. Lock and the Company's foreign sourcing and
manufacturing operations recorded net sales increases for the six month period
in fiscal 1999, in comparison to the same period last year, of 23.3% and 36.9%,
respectively. Sales made by the foreign sourcing operations to Barnett account
for nearly all of their reported sales and have increased due to the growth of
Barnett. U.S. Lock's increase in net sales is attributable to an increase in the
number of monthly promotional flyers mailed and the expansion in the number of
its professional telesales representatives. During the same comparable periods,
Consumer Products Group's net sales decreased by approximately $3.9 million, or
13.3%, principally due to the $3.5 million decrease in sales to Hechinger /
Builders Square. Net sales to Hechinger / Builders Square have been reduced due
to the
13
<PAGE> 14
reduction in the number of Builders Square stores, their aggressive
inventory management program and the termination of our package plumbing sales
program late in the fiscal 1999 second quarter with Builders Square. In
addition, approximately $1.1 million of the increase in the Company's Asian
operations net sales are the result of direct import sales that are being
managed by Consumer Products.
Gross Profit
- ------------
The gross profit margin for the six months ended December 31, 1998
decreased to 30.9% from 34.3% for the six months ended December 31, 1997. The
reduction in the gross margin is attributable to a higher proportion of sales
from the lower gross margin direct import sales program at Consumer Products and
competitive pricing pressures and certain fixed costs at our Mexican pipe nipple
operation. Gross profit decreased to $17.7 million for the current six month
period as compared to $18.9 million for the six months ended December 31, 1997.
The decrease in gross profit is attributable to the reduction in sales volume at
Consumer Products that covers certain fixed costs and a higher gross margin in
the prior year on the initial rollout of certain product lines to customers.
U.S. Lock reported a $0.8 million improvement in gross profit during the current
year six month period. The foreign operations reported a reduction of $0.3
million in their gross profit margin, primarily due to the competitive pricing
issues associated with the Mexican pipe nipple operation.
Selling, General and Administrative Expenses
- --------------------------------------------
SG&A expenses increased from $14.9 million for the six months ended
December 31, 1997 to $16.7 million for the six month period ended December 31,
1998. As a percentage of net sales, SG&A expenses increased from 27.0% for the
six month period in fiscal 1998 to 29.1% for the six months ended December 31,
1998. The increase in expenses and the ratio was due to lower sales and higher
expenses at Consumer Products and foreign exchange losses of $0.4 million being
reported in the six month period ended December 31, 1998, as compared to $0.7
million in foreign exchange income being reported for the same period last year.
Restructuring and Non-Recurring Charges
- ---------------------------------------
In the fiscal 1999 first quarter ended September 30, 1998, Consumer
Products recorded a non-recurring charge of $1.35 million relating to the move
of its Bedford Heights, Ohio warehouse to Groveport, Ohio. Included in the
charge are severance benefits for personnel and the loss on the write-off of
tangible assets at the Bedford Heights warehouse. The Company believes that the
relocation to a more modern and efficient facility, which was completed in
November 1998, will allow Consumer Products to provide more sophisticated
distribution services to its customers and help it remain competitive through
significant annual savings.
Equity Earnings of Barnett
- --------------------------
The Company recorded equity earnings from its 44.3% ownership interest in
Barnett of $3.3 million for the six months ended December 31, 1998. For the
comparable period in fiscal 1998, the Company recorded equity earnings of $3.2
million.
Interest Expense
- ----------------
For the six months ended December 31, 1998, interest expense totaled
$8.7 million, an increase of $0.9 million from the $7.8 million in the
comparable period last year. The increase is primarily due to an increase in
borrowings under the Credit Agreement and an increase in the accretion of
interest on the Deferred Coupon Notes of $5.4 million as compared to $4.8
million for the six months ended December 31, 1998 and 1997, respectively.
Average borrowings for the six months ended December 31, 1998 amounted to $139.2
million, with a weighted average interest rate of 11.8%, as compared to $121.5
million in the same period last year, with a weighted average interest rate of
12.0%.
14
<PAGE> 15
Provision for Income Taxes
- --------------------------
The provision for income taxes amounted to $0.2 million and $0.6
million for the six months ended December 31, 1998 and 1997, respectively. The
provision for the current period primarily represents various state and foreign
taxes of the Company's wholly-owned operations. The difference between the
effective and statutory tax rates is primarily due to domestic losses not
benefited and goodwill amortization.
Extraordinary Loss
- ------------------
In the six months ended December 31, 1997, the Company incurred an
extraordinary charge of $0.2 million associated with the write-off of deferred
financing costs from the repurchase of $12.0 million of Senior Notes in July and
August 1997. (See Note 6)
Net Loss
- --------
The Company's net loss for the six months ended December 31, 1998
amounted to $5.9 million, or $0.49 per basic and diluted share, as compared to
the loss of $1.5 million, or $0.12 per basic and diluted share, in the same
period last year. Included in the fiscal 1998 results is an extraordinary charge
of $0.2 million, or $0.02 per basic and diluted share, from the write-off of
deferred financing costs as discussed above. The fiscal 1999 six month results
include a non-recurring charge of $1.35 million for the relocation of the
Consumer Products' warehouse from Bedford Hts., Ohio to Groveport, Ohio.
Year 2000
- ---------
The Company utilizes management information systems and software
technology that may be affected by Year 2000 issues throughout its businesses.
During fiscal 1998, the Company began to implement plans at certain of its
operations to ensure those systems continue to meet its internal and external
requirements. During fiscal 1998, the Company's largest division, Consumer
Products, completed the modifications and testing of its information systems and
is Year 2000 compliant. Consumer Products utilizes an IBM AS400 system, along
with the latest version of Year 2000 compliant J.D. Edwards software. The
Company's corporate office is in the process of converting to this J.D. Edwards
package and should complete the conversion in the third quarter of fiscal 1999.
In August 1998, WAMI's PC-based Year 2000 software upgrade was installed and is
being tested. Based on information from software vendors, the PC-based
information systems at TWI and CWI will require the installation of minor
upgrades to be Year 2000 compliant. These modifications are expected to be
completed in fiscal 1999 and financed through working capital with minimal cost.
Until the U.S. Lock Sale, U.S. Lock contracted with Barnett for its information
system, accounting and certain other administrative functions, although it had
been developing a Year 2000 compliant system. The Company's operations have
developed questionnaires and contacted key suppliers and customers regarding
their Year 2000 compliance to determine any impact on its operations. In
general, the suppliers and customers have developed or are in the process of
developing plans to address Year 2000 issues. The Company will continue to
monitor and evaluate the progress of its suppliers and customers on this
critical matter. The Company is also reviewing its non-information technology
systems to determine the extent of any changes that may be necessary and
believes that there will be minimal changes necessary for compliance.
Based on the progress the Company has made in addressing its Year 2000
issues and the Company's plan and timeline to complete its compliance program,
the Company does not foresee significant risks associated with its Year 2000
compliance at this time. As the Company's plan is to address its significant
Year 2000 issues prior to being affected by them, it has not developed a
comprehensive contingency plan. However, if the Company identifies significant
risks related to its Year 2000 compliance or its progress deviates from the
anticipated timeline, the Company will develop contingency plans as deemed
necessary at that time.
Strategic Review of Operations
- ------------------------------
With the completion of the U.S. Lock Sale in January 1999, the Company
will be initiating a strategic review of its operations. The Company expects to
complete this review before the end of fiscal 1999.
15
<PAGE> 16
B. LIQUIDITY AND CAPITAL RESOURCES
-------------------------------
The Company's business strategy includes the reduction of its interest
expense and its leverage by the sale of selected assets and the refinancing of
its remaining indebtedness whenever possible. To that end, the Company completed
the U.S. Lock Sale for approximately $33.0 million in January 1999. The Company
believes that the U.S. Lock Sale provides the capital necessary to address its
near term liquidity requirements. Those liquidity requirements include the
maturity of the Credit Agreement on July 15, 1999 (unless such Credit Agreement
is extended or replaced) and the first semi-annual cash interest payment of
approximately $6 million under the Deferred Coupon Notes on December 1, 1999.
The Company believes that a replacement facility or modification of the Credit
Agreement will be arranged prior to July 15, 1999. In addition, the Company
intends to refinance all or a part of the Deferred Coupon Notes at or prior to
maturity and/or to pursue a sale of assets or other capital raising transaction
to satisfy such cash requirement. However, there can be no assurance that any
such refinancing or capital raising transaction will be consummated.
In June 1996, the Company entered into the Credit Agreement with
BankAmerica Business Credit, Inc. The Credit Agreement provides for, among other
things, revolving credit advances of up to $30.0 million and term loans of up to
$5.0 million (the "Term Loans"). As of December 31, 1998, the Company had $14.1
million in borrowings under the revolving credit line of the credit facility and
had approximately $0.3 million available under such facility. At December 31,
1998, there were $5.0 million of Term Loans outstanding. The Credit Agreement
expires on July 15, 1999. The Company is discussing the Credit Agreement with
its bank and other credit institutions with the view of extending the term and
increasing the availability of capital under its credit facilities.
The Credit Agreement provides for revolving credit advances of (a) up
to 85.0% of the amount of eligible accounts receivable and (b) up to the lesser
of (i) $16.0 million or (ii) 60% of the amount of eligible raw and finished
goods inventory. Revolving credit advances bear interest at a rate equal to (a)
BankAmerica's reference rate plus 1.0% or (b) LIBOR plus 2.75%. The Credit
Agreement includes a letter of credit subfacility of $2.0 million, of which $0.3
million was outstanding at December 31, 1998. The Term Loans bear interest at a
rate per annum equal to .25% over the interest rate applicable to revolving
credit advances under the Credit Agreement. Borrowings under the Credit
Agreement are secured by the accounts receivable, inventories, certain general
intangibles and unencumbered fixed assets of Consumer Products and WOC (the
"Borrowers"). In addition, the Term Loans are also secured by a pledge of
500,000 shares of Barnett Common Stock owned by the Company (constituting
approximately 3.1% of all outstanding Barnett Common Stock). The Credit
Agreement requires the Borrowers to maintain cash collateral accounts into which
all available funds are deposited and applied to service the facility on a daily
basis. The Credit Agreement prevents dividends and distributions by the
Borrowers except in certain limited instances including, so long as there is no
default or event of default and the Borrowers are in compliance with certain
financial covenants, the payment of interest on the Senior Subordinated Notes
and the Company's 12 3/4% Senior Secured Deferred Coupon Notes due 2004 (the
"Deferred Coupon Notes"), and contains customary negative, affirmative and
financial covenants and conditions. The Company was in compliance with or had
obtained a waiver for all loan covenants at December 31, 1998.
Since the consummation of the Barnett Initial Public Offering, the cash
flow generated by Barnett is no longer available to the Company. The Company
relies primarily on Consumer Products and, prior to January 1, 1999, U.S. Lock
for cash flow. Consumer Products' customers include D-I-Y warehouse home
centers, home improvement centers, mass merchandisers and hardware stores. The
sale of U.S. Lock further increases the Company's dependence on the Consumer
Products business. Consumer Products may be adversely affected by prolonged
economic downturns or significant declines in consumer spending. There can be no
assurance that any such prolonged economic downturn or significant decline in
consumer spending will not have a material adverse impact on the Consumer
Products' business and its ability to generate cash flow. Furthermore, Consumer
Products has a high proportion of its sales with a concentrated number of
customers. One of Consumer Products' largest customers, Kmart, accounted for
approximately 18.2% of net sales for Consumer Products in fiscal 1998. The
combined operations of Hechinger / Builders Square was Consumer Products'
largest customer, accounting for approximately $11.7 million, or 21.1%, of its
net sales in fiscal 1998. Net sales to the combined operations declined during
fiscal 1998, with $5.1 million being sold in the last six months of fiscal 1998.
In August 1998, Consumer Products was informed that the Hechinger / Builders
Square operations were consolidating their supplier relationships and Consumer
Products would retain only the bulk plumbing business of approximately $2.3
million
16
<PAGE> 17
annually. For the quarter ended December 31, 1998, total sales to
Hechinger / Builders Square were approximately $1.1 million, including $0.8
million of packaged plumbing products. The packaged plumbing supply relationship
ended late in the second quarter of fiscal 1999 and, sales to Builders Square
were significantly lower during the past several quarters due to a reduction in
the number of Builders Square stores and their aggressive inventory management
program. Due to the loss of this revenue base, Consumer Products has developed
plans to reduce its cost structure to be more in line with its revenue base. The
Company expects the impact to operating income to be approximately $0.8 million
lower in fiscal 1999, in comparison to fiscal 1998. In the event Consumer
Products were to lose any additional large retail accounts as a customer or one
of its largest accounts were to significantly curtail its purchases from
Consumer Products, there would be additional material short-term adverse effects
until the Company could further modify Consumer Products' cost structure to be
more in line with its anticipated revenue base. Consumer Products would likely
incur significant charges if additional materially adverse changes in its
customer relationships were to occur.
The Company paid no Federal taxes in the first quarter of fiscal 1999.
At June 30, 1998, the Company had $52.7 million of available domestic net
operating loss carryforwards for income tax purposes, which expire 2008 through
2013, and $36.8 million of original issue discount, as of December 31, 1998,
that has been expensed on the Company's financial statements and will become
deductible for tax purposes when the Deferred Coupon Notes are paid.
The Company does not have any commitments to make substantial capital
expenditures; however, it plans to spend approximately $1.8 million in capital
expenditures in fiscal 1999. The Company utilizes management information systems
and software technology that may be affected by Year 2000 issues throughout its
businesses. During fiscal 1998, the Company began to implement plans at certain
of its operations to ensure those systems continue to meet its internal and
external requirements. During fiscal 1998, the Company's largest division,
Consumer Products, completed the modifications and testing of its information
systems and is Year 2000 compliant. Consumer Products utilizes an IBM AS400
system, along with the latest version of Year 2000 compliant J.D. Edwards
software. The Company's corporate office is in the process of converting to this
J.D. Edwards package and should complete the conversion in the fiscal 1999 third
quarter. In August 1998, WAMI's PC-based Year 2000 software upgrade was
installed and is being tested. Based on information from software vendors, the
PC-based information systems at TWI and CWI will require the installation of a
minor upgrade to be Year 2000 compliant. These modifications are expected to be
completed in fiscal 1999 and financed through working capital with minimal cost.
Fiscal 1999 capital expenditures for Consumer Products include
expenditures to improve the efficiencies of its operations, provide new data
technology and to move to a more efficient and modern facility. Also included in
the capital expenditure budget are certain expansion plans for the Company's
foreign operations.
At December 31, 1998, the Company had working capital of $14.0 million
and a current ratio of 1.4 to 1.
DISCUSSION OF CASH FLOWS
- ------------------------
Net cash used for operations was $4.8 million in the six months ended
December 31, 1998 principally due to an increase in trade receivables and other
assets and a decrease in accrued liabilities, offset by a decrease in
inventories and an increase in accounts payable. Also affecting net cash used
for operations was $3.3 million in equity earnings of Barnett. Excluding this
item, the net cash used in operations was $1.5 million. Cash flow used in
investments totaled $1.3 million, primarily attributable to capital
expenditures. Cash flow provided by financing activities, and net borrowings
under the Company's credit facilities totaled $6.3 million.
17
<PAGE> 18
PART II. OTHER INFORMATION
-----------------
ITEM 5. OTHER INFORMATION
-----------------
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
--------------------------------
a) See Exhibit 27.
b) Form 8-K
None
All other items in Part II are either inapplicable to the Company during the
quarter ended December 31, 1998 or the answer is negative or a response has been
previously reported and an additional report of the information need not be
made, pursuant to the instructions to Part II.
SIGNATURES
----------
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
WAXMAN INDUSTRIES, INC.
-----------------------
REGISTRANT
DATE: FEBRUARY 8, 1999 BY: /S/ MARK W. WESTER
MARK W. WESTER
VICE PRESIDENT-FINANCE
AND CHIEF FINANCIAL OFFICER
(PRINCIPAL FINANCIAL AND
ACCOUNTING OFFICER)
18
<PAGE> 19
EXHIBIT INDEX
-------------
PAPER (P) OR
EXHIBIT --------------
NUMBER DESCRIPTION ELECTRONIC (E)
- ------ ----------- --------------
(27) Financial Data Schedule E
(submitted to the Securities
and Exchange Commission in
Electronic Format)
19
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUN-30-1999
<PERIOD-START> JUL-1-1998
<PERIOD-END> DEC-31-1998
<CASH> 333
<SECURITIES> 0
<RECEIVABLES> 15,071
<ALLOWANCES> (723)
<INVENTORY> 19,621
<CURRENT-ASSETS> 51,097
<PP&E> 16,466
<DEPRECIATION> (6,415)
<TOTAL-ASSETS> 110,266
<CURRENT-LIABILITIES> 37,098
<BONDS> 123,426
0
0
<COMMON> 119
<OTHER-SE> (50,377)
<TOTAL-LIABILITY-AND-EQUITY> 110,266
<SALES> 57,427
<TOTAL-REVENUES> 57,427
<CGS> 39,678
<TOTAL-COSTS> 16,690
<OTHER-EXPENSES> 1,350
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 8,732
<INCOME-PRETAX> (5,692)
<INCOME-TAX> 240
<INCOME-CONTINUING> (5,932)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (5,932)
<EPS-PRIMARY> (.49)
<EPS-DILUTED> (.49)
</TABLE>
