<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
------------------------
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JULY 3, 1999 COMMISSION FILE NUMBER: 333-57209
------------------------
OUTSOURCING SERVICES GROUP, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 33-0597491
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
650 FIFTH AVENUE, 14TH FLOOR 10022
NEW YORK, NY (Zip Code)
(Address of principal executive offices)
Registrant's telephone number, including area code: (212) 957-6368
Securities registered pursuant to Section 12(b) of the Act: NONE
Securities registered pursuant to Section 12(g) of the Act: NONE
------------------------
Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes /X/ No/__/
Number of shares of common stock, $.001 par value, outstanding as of the
close of business on July 3, 1999: 3,441,983 shares.
<PAGE>
OUTSOURCING SERVICES GROUP, INC.
INDEX TO FORM 10-Q
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
PART I. Financial Information
ITEM 1. Financial Statements
Condensed Consolidated Balance Sheets as of July 3, 1999
(unaudited) and December 31, 1998 3
Condensed Consolidated Statements of Operations for the
Three and Six Month Periods Ended July 3, 1999 and June 27, 1998
(unaudited) 4
Condensed Consolidated Statements of Cash Flows for the
Six Month Periods Ended July 3, 1999 and June 27, 1998
(unaudited) 5
Notes to Condensed Consolidated Financial Statements (unaudited) 7
ITEM 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations. 14
PART II. Other Information 18
Item 1. Legal Proceedings
Item 2. Changes in Securities
Item 3. Defaults Upon Senior Securities
Item 4. Submission of Matters to a Vote of Security Holders
Item 5. Other Information
Item 6. Exhibits and Reports on Form 8-K
SIGNATURES
EXHIBITS
</TABLE>
2
<PAGE>
OUTSOURCING SERVICES GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
AS OF JULY 3, 1999 AND DECEMBER 31, 1998
(IN THOUSANDS, EXCEPT FOR SHARE DATA)
<TABLE>
<CAPTION>
DECEMBER 31, JULY 3,
1998 1999
------------ ---------
(Unaudited)
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $ 8,747 $ 1,746
Short term investments 253 260
Accounts receivable, net 32,244 46,150
Other receivables 870 2,876
Inventories, net (Note 3) 27,443 33,776
Prepaid expenses and other current assets 556 1,873
Deferred income taxes, net 3,931 3,931
--------- ---------
Total current assets 74,044 90,612
PROPERTY AND EQUIPMENT, net 31,743 32,171
GOODWILL, net 71,554 78,558
DEFERRED FINANCING COSTS, net 7,714 7,064
ENVIRONMENTAL INSURANCE RECEIVABLE 7,750 7,750
DUE FROM CCL 3,376 3,376
OTHER ASSETS 1,500 1,398
--------- ---------
Total assets $ 197,681 $ 220,929
--------- ---------
--------- ---------
LIABILITIES, REDEEMABLE PREFERRED STOCK, AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Trade accounts payable $ 27,429 $ 33,826
Accrued expenses 16,930 17,403
Deferred Taxes -- 448
Other current liabilities 930 4,403
--------- ---------
Total current liabilities 45,289 56,080
DEFERRED INCOME TAXES, net 1,275 1,275
ENVIRONMENTAL CONTINGENCIES AND
OTHER LIABILITIES (Note 4) 15,990 27,171
LONG TERM DEBT 105,000 105,000
--------- ---------
Total liabilities 167,554 189,526
REDEEMABLE SERIES A PREFERRED STOCK, $.001 par value;
3,750 shares authorized, issued and outstanding 375 375
REDEEMABLE SERIES B PREFERRED STOCK, $.001 par value;
26,250 shares authorized, issued and outstanding 4,094 4,199
COMMITMENTS AND CONTINGENCIES (Note 5)
STOCKHOLDERS' EQUITY:
Common stock, $.001 par value; 6,000,000 shares
authorized; 3,441,983 shares issued and outstanding as of
July 3, 1999 and 3,455,174 as of December 31, 1998 3 3
Common stock warrants 663 663
Additional paid-in capital 32,272 32,140
Notes receivable from stockholders (772) (764)
Accumulated deficit (6,584) (5,948)
Accumulated other comprehensive income 76 735
--------- ---------
Total stockholders' equity 25,658 26,829
--------- ---------
Total Liabilities, Redeemable
Preferred Stock and Stockholders' Equity $ 197,681 $ 220,929
--------- ---------
--------- ---------
</TABLE>
See notes to condensed consolidated financial statements
3
<PAGE>
OUTSOURCING SERVICES GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTH AND SIX MONTH PERIODS ENDED
JULY 3, 1999 AND JUNE 27, 1998
(IN THOUSANDS, EXCEPT FOR SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 27, JULY 3, JUNE 27, JULY 3,
1998 1999 1998 1999
----------- ----------- ----------- -----------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
NET REVENUES $ 61,094 $ 68,974 $ 114,969 $ 132,697
COST OF GOODS SOLD 51,514 58,454 97,388 112,784
----------- ----------- ----------- -----------
GROSS PROFIT 9,580 10,520 17,581 19,913
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES 5,444 5,855 10,417 11,869
----------- ----------- ----------- -----------
INCOME FROM OPERATIONS 4,136 4,665 7,164 8,044
INTEREST EXPENSE, net 3,265 3,284 6,092 6,672
OTHER INCOME, net -- (418) -- (418)
----------- ----------- ----------- -----------
INCOME BEFORE INCOME TAX PROVISION
AND EXTRAORDINARY ITEM 871 1,799 1,079 1,790
PROVISION FOR INCOME TAXES 248 787 881 1,033
----------- ----------- ----------- -----------
INCOME (LOSS) BEFORE EXTRAORDINARY ITEM 623 1,012 191 757
EXTRAORDINARY ITEM, LOSS FROM EARLY
EXTINGUISHMENT OF DEBT. net of income tax benefit of $1,429 -- -- (2,577) --
----------- ----------- ----------- -----------
NET INCOME (LOSS) $ 623 $ 1,012 $ (2,386) 757
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
ACCRETION OF PREFERRED STOCK (62) (62) (124) (124)
PREFERRED STOCK DIVIDENDS (9) (9) (19) (19)
----------- ----------- ----------- -----------
NET INCOME (LOSS) ATTRIBUTABLE COMMON STOCKHOLDER $ 552 $ 941 $ (2,529) 614
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
OTHER COMPREHENSIVE INCOME (LOSS):
Foreign currency translation adjustment (372) (17) (464) 659
----------- ----------- ----------- -----------
COMPREHNSIVE INCOME (LOSS) $ 180 $ 924 $ (2,993) 1,273
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
EARNINGS PER SHARE:
INCOME BEFORE EXTRAORDINARY ITEM $ 0.19 $ 0.29 $ 0.06 $ 0.22
(LOSS) FROM EXTRORDINARY ITEM -- -- (0.79) --
----------- ----------- ----------- -----------
NET INCOME (LOSS) PER SHARE - Basic $ 0.19 $ 0.29 $ (0.73) $ 0.22
- Diluted 0.18 0.28 -- 0.21
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
NET INCOME (LOSS) ATTRIBUTABLE TO COMMON STOCKHOLDERS
Basic $ 0.16 $ 0.27 $ (0.77) $ 0.18
Diluted 0.16 0.26 (0.74) 0.17
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
WEIGHTED AVERAGE NUMBER OF COMMON SHARES:
Basic 3,360,174 3,441,983 3,267,152 3,447,737
Diluted 3,506,174 3,580,483 3,398,041 3,586,237
</TABLE>
See notes to condensed consolidated financial statements.
4
<PAGE>
OUTSOURCING SERVICES GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTH PERIODS ENDED JUNE 27, 1998 AND JULY 3, 1999
(IN THOUSANDS)
<TABLE>
<CAPTION>
JUNE 27, JULY 3,
1998 1999
-------- --------
(Unaudited)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ (2,386) $ 757
Adjustments to reconcile net income
(loss) to net cash provided by
operating activities:
Depreciation and amortization 4,086 4,001
Amortization of deferred financing costs 281 650
Provision for doubtful accounts -- 150
Extraordinary item - loss from early
extinguishment of debt 3,630 --
Deferred income taxes -- --
Change in operating assets and liabilities,
net of effect of acquisition of Kolmar
Group (1998) and the Acupac acquisition
(June, 1999)
Trade accounts receivable (4,396) (11,816)
Other receivable 369 (1,970)
Inventories (4,678) (3,993)
Prepaid expenses and other current assets -- (879)
Other assets 508 (279)
Accounts payable 1,672 6,199
Accrued expenses and other liabilities 4,779 375
-------- --------
Net cash provided by (used in) operating
activities 3,865 (6,805)
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (929) (1,510)
Sale of property, plant and equipment 41 127
Other (1,180)
Acquisition of Kolmar Group, net of cash
acquired (1998) and acquisitions of Acupac,
and Bradcan, net of cash (1999) (77,580) (10,450)
-------- --------
Net cash used in investing activities (79,648) (11,833)
</TABLE>
See notes to condensed consolidated financial statements.
5
<PAGE>
OUTSOURCING SERVICES GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
FOR THE SIX MONTH PERIODS ENDED JUNE 27, 1998 AND JULY 3, 1999
(IN THOUSANDS)
<TABLE>
<CAPTION>
JUNE 27, JULY 3,
1998 1999
---------- ---------
(Unaudited)
<S> <C> <C>
CASH FLOWS FROM FINANCING ACTIVIIES:
Deferred financing acquisition $ (11,482) $ --
Net (repayments) borrowing on revolving loans (11,488) 11,238
Repayments of long term debt (17,125) --
Borrowing on senior subordinated notes 105,000 --
Borrowing on senior bridge loan 70,000 --
Repayment of senior bridge loan (70,000) --
Dividends on preferred stock (19) (19)
Repayment of senior subordinated debt (6,000) --
Proceeds from issuance of common stock 20,930 --
Repurchase of Management stock -- (124)
--------- ---------
Net cash provided by financing activities 79,816 11,095
--------- ---------
EFFECT OF EXCHANGE RATE CHANGES ON CASH (240) 542
--------- ---------
NET INCREASE (DECREASE) IN CASH 3,793 (7,001)
CASH, beginning of period 338 8,747
--------- ---------
CASH, end of period $ 4,131 $ 1,746
--------- ---------
--------- ---------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION
Cash paid during the quarter for:
Interest $ 4,372 $ 6,221
Income taxes $ 328 $ 748
SUPPLEMENTAL SCHEDULE OF NONCASH
TRANSACTIONS
Accretion attributable to preferred stock $ 124 $ 124
--------- ---------
--------- ---------
The Company acquired all the capital stock of
Kolmar Group (1998) and Acupac Packaging (1999)
and some of the assets of the Bradcan Corporation
(1999) In conjunction with the acquisitions,
liabilities were assumed as follows:
Fair value of assets acquired $ 63,358 $ 5,310
Intangible assets acquired 51,277 8,506
Cash paid for capital stock (77,951) (9,733)
Cash paid for assets (717)
------- ------
Liabilities assumed $ 36,684 $ 3,366
--------- ---------
--------- ---------
</TABLE>
See notes to condensed consolidated financial statements.
6
<PAGE>
OUTSOURCING SERVICES GROUP, INC.
NOTES TO CONSONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTH PERIODS ENDED JULY 3, 1999 AND JUNE 27, 1998
(UNAUDITED)
1. BASIS OF PRESENTATION
The interim condensed consolidated financial statements included herein
have been prepared by Outsourcing Services Group, Inc. ("OSG" or the "Company")
without audit, pursuant to the rules and regulations of the Securities and
Exchange Commission (the "SEC"). Certain information and footnote disclosures,
normally included in financial statements prepared in accordance with generally
accepted accounting principles, have been condensed or omitted pursuant to such
SEC rules and regulations; nevertheless, the management of the Company believes
that the disclosures herein are adequate to make the information presented not
misleading.
In the opinion of management, the condensed consolidated financial
statements included herein reflect adjustments consisting only of normal
recurring adjustments necessary to present fairly the consolidated financial
position of the Company as of July 3, 1999, and June 27, 1998 the results of
its operations for the six month period ended July 3, 1999, and its cash
flows for the six month periods ended July 3, 1999 and June 27, 1998. The
three and six month results of operations for the interim periods are not
necessarily indicative of the results of operations for the full year.
2. NEW ACCOUNTING PRONOUNCEMENTS
In 1998, the Financial Accounting Standards Board (FASB) issued SFAS No.
133, Accounting for Derivatives and Hedging Activities. The FASB amended this
pronouncement in June 1999 to defer the effective date until the Company's
fiscal year 2001. Management is currently evaluating the impact of the
adoption of SFAS No. 133 on the financial consolidated statements.
3. INVENTORIES
Inventories consisted of the following at December 31, 1998 and July 3, 1999:
<TABLE>
<CAPTION>
(IN THOUSANDS)
------------------------
DECEMBER 31, JULY 3,
1998 1999
-------- --------
<S> <C> <C>
Raw materials ....................................... $ 22,700 $ 26,575
Work-in-process ..................................... 4,235 5,261
Finished goods ...................................... 4,045 6,289
-------- --------
30,980 38,125
Less reserve for excess and obsolete inventories .... (3,537) (4,349)
-------- --------
$ 27,443 $ 33,776
-------- --------
-------- --------
</TABLE>
4. COMMITMENTS AND CONTINGENCIES
LEASES--The Company leases warehouse and office space under operating
leases. Each lease is subject to an upward annual rental adjustment based upon
the percentage change in the Consumer Price Index. The Company is responsible
for insurance and property taxes on the facilities. The Company also has
equipment under operating leases having terms from 3 to 10 years.
ENVIRONMENTAL REGULATION AND COMPLIANCE--The Company's operations and
properties are subject to environmental laws. Violations of environmental laws
can result in civil or criminal penalties or in cease-and-desist or other orders
against the Company. In addition, the Company may be required to spend material
amounts to comply with environmental laws, and may be liable with respect to
contamination of sites currently or formerly owned or operated by the Company or
with respect to the off-site disposal of
7
<PAGE>
OUTSOURCING SERVICES GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE SIX MONTH PERIODS ENDED JULY 3, 1999 AND JUNE 27, 1998
(UNAUDITED)
hazardous substances. Based upon the Company's experience to date, as well as
certain indemnification agreements obtained in connection with the Piedmont,
Aerosol Services Holding Corporation ("ASHC") and Kolmar acquisitions and
certain insurance coverages, the Company believes that the future cost of
compliance with existing environmental laws and its liability for identified
environmental claims will not have a material adverse effect on the Company's
business, results of operations, or financial condition. There can be no
assurance, however, that the Company's obligations in this regard will not have
such an effect or that the existing indemnities and insurance will be sufficient
to fund such liabilities. Furthermore, future events, such as new information,
or changes in environmental laws (or in their interpretation or enforcement by
courts or governmental agencies) may give rise to additional costs or claims
that could have a material adverse effect on the Company's business, results of
operations, or financial condition or cash flows.
ASHC's operations are located within the boundaries of the Puente Valley
Operable Unit (OU) of the San Gabriel Valley Superfund Site. Prior to the
Company's purchase of ASHC, the EPA identified ASHC as one of more than 500
potentially responsible parties (PRPs) for the contamination of Puente Valley
OU. Subsequently, ASHC and 43 other PRPs entered into a consent agreement to
fund certain investigatory work, which work was completed in 1997. The EPA has
not determined the remedial work that will be required at the site; however, the
EPA has issued estimates for the remedial alternatives it is considering which
range from approximately $28 million to $51 million. In connection with the
Company's purchase of ASHC, the sellers (who currently own the property on which
ASHC operates) agreed to indemnify the Company with respect to the Puente Valley
OU proceeding and certain other environmental matters. Certain of the Company's
leases with the sellers also provide for off sets to the Company's rental
obligations in the event that the Company incurs liability for such an
indemnified matter. Based on this indemnity, the lease off set rights, recent
EPA cost estimates of the proposed cleanup alternatives, and certain preliminary
estimates of ASHC's share of liability, the Company believes, although there can
be no assurance, that ASHC's liability at this site will not be material. In
addition, prior to the Company's acquisition of ASHC, the Los Angeles Regional
Water Quality Control Board (RWQCB) requested that ASHC conduct certain soil and
groundwater investigation and remediation on its property. ASHC has conducted
the requested investigations and the RWQCB has approved ASHC's remediation plan.
Although there can be no assurance, the Company does not believe that the costs
of remediation will be material. This remediation is also the subject of the
above-referenced indemnity.
In October, 1995 a definitive order and claim was asserted and issued by
the U.S. Environmental Protection Agency against the Company as potentially
responsible for the remediation of a super fund site near Port Jervis, New
York for the actual clean-up. The proceedings remain administrative only, and
are not pending as litigation in any U.S. District Court. The Company
reserved for any potential liability that may arise out of this claim and
recorded insurance receivables relating to this claim which it believes are
probable of recovery. At July 3, 1999, the Company had accruals in the amount
of $14,000,000 to cover various potential environmental liabilities. The
Company has a reserve of $8,000,000 for investigation and remediation costs
at a site in New York where Kolmar has been identified by the EPA as a PRP.
Remediation has begun, and the Company believes that the established accruals
would be sufficient to fund Kolmar's liability for this site. At July 3,
1999, the Company had a long-term receivable totaling $7,750,000 for
insurance recoveries or indemnification for this site which are probable of
collection.
Based on the advice of outside counsel, the Company also maintained an
accrual of $5,250,000 as of July 3, 1999 for one other site where Kolmar may
have liability for contamination caused by former operations, although it has
not yet been identified as a PRP and would have certain indemnification
rights for this site. The Company believes, based on a file review by an
independent consultant, that the accrual would be sufficient to fund all
likely remediation costs at the site.
In addition, the Company maintained an accrual at July 3, 1999, of
$750,000 for liability related to off-site waste disposal locations. Currently,
the Company is aware of one such site at which it is likely to have future
liability, and believes that the accrual is sufficient to fund such expected
liabilities.
While it is impossible at this time to determine with certainty the
ultimate outcome of the environmental matters referred to above, management
believes that adequate provisions have been made for probable losses with
respect thereto and that the ultimate outcome, after provisions therefore, will
not have a material adverse effect on the combined financial position of the
Company. It is reasonably possible that changes in estimates of recorded
obligations and related receivables may occur in the near term.
Should any losses be sustained in connection with any of such environmental
matters in excess of provisions therefore, they will be charged to income in the
future.
8
<PAGE>
OUTSOURCING SERVICES GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE SIX MONTH PERIODS ENDED JULY 3, 1999 AND JUNE 27, 1998
(UNAUDITED)
LITIGATION--There are certain other legal proceedings and claims including
product liability, pending against the Company arising out of the normal course
of business which claims for monetary damages are asserted. While it is not
feasible to predict the outcome of these legal proceedings and claims with
certainty, management is of the belief that any ultimate liabilities will not
individually or in the aggregate have a material adverse effect on the Company's
financial position or results of operations and that adequate provisions have
been made for such liabilities.
5. BUSINESS ACQUISITIONS
In April, 1999, a subsidiary of the Company (Kolmar Canada, Inc.) acquired
certain of the operating assets of Bradcan Corporation for approximately
$700,000. This acquisition was accounted for as a purchase.
On June 2, 1999, the Company acquired all of the issued and outstanding
capital stock of Acupac Packaging, Inc. ("Acupac"), for approximately $10.0
million. Acupac is primarily a provider of outsourced packaging services to the
health and beauty aids, household and consumer product markets. This
acquisition was accounted for as a purchase.
6. SUPPLEMENTAL GUARANTOR INFORMATION
The payment obligations of the Company under the Notes are guaranteed by
certain of the Company's wholly owned domestic subsidiaries ("Guarantors"). Such
guarantees are full, unconditional and joint and several. Separate financial
statements of the Guarantors are not presented because the Company's management
has determined that they would not be material to investors. The following
financial information presents the condensed combined balance sheets as of July
3, 1999 and the condensed combined statements of operations and cash flows for
the six month period ended July 3, 1999 of the Guarantors, representing Kolmar,
ASC, Piedmont and Acupac and the non-guarantors which consist of Kolmar Canada,
Kolmar de Mexico S.A. de C.V. and Kolmar (Aust.) Pty. Limited. The financial
information is intended to provide information for the Guarantor and
non-guarantor operations of the Company, based on amounts derived from the
financial statements of the Company and of the Kolmar Group, for the six month
period ended July 3, 1999.
9
<PAGE>
CONDENSED COMBINED BALANCE SHEET AT JULY 3, 1999 (UNAUDITED)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
COMBINED CONSOLIDATED
GUARANTORS NONGUARANTORS OSG ELIMINATIONS TOTAL
---------- ------------- --------- ------------ ------------
<S> <C> <C> <C> <C> <C>
ASSETS:
Current Assets:
Cash, cash equivalents and
marketable securities $ 1,529 $ 333 $ 144 $ -- $ 2,006
Accounts receivable, net 41,559 4,591 -- -- 46,150
Other receivables 1, 540 384 952 -- 2,876
Inventories 28,745 5,031 -- -- 33,776
Prepaid expenses and other current assets 5,173 425 206 -- 5,804
--------- --------- --------- --------- ---------
Total current assets 78,546 10,764 1,302 -- 90,612
Property and equipment, net 28,226 3,937 8 -- 32,171
Goodwill, net 72,293 6,265 -- -- 78,558
Investment in subsidiaries -- -- 81,299 (81,299) --
Other long-term assets 12,624 -- 6,964 -- 19,588
--------- --------- --------- --------- ---------
Total Assets $ 191,689 $ 20,966 $ 89,573 $ (81,299) $ 220,929
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
LIABILITIES:
Current Liabilities:
Accounts payable $ 30,892 $ 2,934 $ -- $ -- $ 33,826
Other current liabilities 15,311 1,912 5,031 -- 22,254
--------- --------- --------- --------- ---------
Total current liabilities 46,203 4,846 5,031 -- 56,080
Long-term debt, less current portion -- -- 105,000 -- 105,000
Other liabilities 28,660 -- (216) -- 28,446
Intercompany loan 40,418 14,831 (55,249) -- --
Redeemable preferred stock -- -- 4,574 -- 4,574
Stockholders' equity 76,406 1,289 30,433 (81,299) 26,829
--------- --------- --------- --------- ---------
Total Liabilities, Redeemable $ 191,689 $ 20,966 $ 89,573 $ (81,299) $ 220,929
Preferred Stock and Stockholders' Equity --------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
</TABLE>
10
<PAGE>
CONDENSED COMBINED STATEMENT OF OPERATIONS
FOR THE SIX MONTH PERIODS ENDED JULY 3, 1999
(UNAUDITED)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
COMBINED CONSOLIDATED
GUARANTORS NONGUARANTORS OSG ELIMINATIONS TOTAL
---------- ------------- -------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Net revenues $123,315 $ 10,172 $ -- $ (790) $132,697
Cost of goods sold 105,100 8,474 -- (790) 112,784
-------- -------- -------- ------ --------
Gross profit 18,215 1,698 -- -- 19,913
Selling, general and administrative
expense 14,423 1,091 (3,645) -- 11,869
-------- -------- -------- ------ --------
Income from operations 3,792 607 3,645 -- 8,044
Interest expense, net 2,323 441 3,908 -- 6,672
Other income, net -- (418) -- -- (418)
-------- -------- -------- ------ --------
Income (loss) before provision for
income taxes 1,469 584 (263) -- 1,790
Provision (benefit) for income taxes 1,029 111 (107) -- 1, 033
-------- -------- -------- ------ --------
Net income (loss) $ 440 $ 473 $ (156) $ -- $ 757
-------- -------- -------- ------ --------
-------- -------- -------- ------ --------
</TABLE>
11
<PAGE>
CONDENSED COMBINED STATEMENT OF CASH FLOWS
FOR THE SIX MONTH PERIOD ENDED JULY 3, 1999
(UNAUDITED)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
CONSOLIDATED
GUARANTORS NONGUARANTORS OSG ELIMINATIONS TOTAL
---------- ------------- -------- ------------ ------------
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income, (loss) $ 440 $ 473 $ (156) $ -- $ 757
Total adjustments to reconcile net income (loss) to net
cash provided by (used in) operating activities (8,630) 618 (9,625) 10,075 (7,562)
-------- -------- -------- -------- --------
Net cash provided by (used in) operating activities (8,190) 1,091 (9,781) 10,075 (6,805)
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures (1,324) (178) (8) -- (1,510)
Acquisition of Acupac Packaging, net of cash (9,733) -- -- -- (9,733)
Acquisition of Bradcan, Corporation -- (717) -- -- (717)
Sales of property, plant or equipment, net -- 127 -- 127
-------- -------- -------- -------- --------
Net cash used in investing activities (11,057) (768) (8) -- (11,833)
CASH FLOWS FROM FINANCING ACTIVITIES
Net borrowing on revolving loans 11,238 -- -- -- 11,238
Payment of Dividends -- -- (19) -- (19)
Proceeds from cash received from
management stock -- -- -- -- --
Repurchase of management stocks -- -- (124) -- (124)
Repayment (borrowing) of debt due to affiliate 701 (701) 10,075 (10,075) --
-------- -------- -------- -------- --------
Net cash used in financing activities 11,939 (701) 9,932 (10,075) 11,095
Effect of exchange rate changes on cash 9 533 -- -- 542
-------- -------- -------- -------- --------
Net increase (decrease) in cash (7,299) 155 143 -- (7,001)
Cash, beginning of period 8,568 178 1 -- 8,747
-------- -------- -------- -------- --------
Cash, end of period $ 1,269 $ 333 $ 144 $ -- $ 1,746
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
</TABLE>
12
<PAGE>
OUTSOURCING SERVICES GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE SIX MONTH PERIODS ENDED JULY 3, 1999 AND JUNE 27, 1998
(UNAUDITED)
7. BUSINESS SEGMENT INFORMATION
The Company operates predominantly in one business segment. The company
provides contract manufacturing for consumer products manufacturers and
distributors in the health and beauty aids, color cosmetics, aerosol products
such as high-end hair spray and shaving creams and gels. With the acquisition of
the Kolmar Group, the Company has operating facilities in the U.S., Mexico and
Canada.
Net revenues, income from operations, identifiable assets and depreciation
and amortization by geographic region for the six and three month periods ended
July 3, 1999, are as follows:
<TABLE>
<CAPTION>
SIX MONTH PERIOD
--------------------------------------------------------
(DOLLARS IN THOUSANDS)
----------------------
UNITED
STATES MEXICO CANADA OTHER TOTAL
------ ------ ------ ----- -----
<S> <C> <C> <C> <C> <C>
Net revenues $122,525 $ 4,919 $ 5,253 $ -- $132,697
Income from operations 7,435 272 281 56 8,044
Identifiable assets 204,133 4,307 12,473 16 220,929
Depreciation and amortization 3,701 122 159 8 3,990
</TABLE>
<TABLE>
<CAPTION>
THREE MONTH PERIOD
--------------------------------------------------------
(DOLLARS IN THOUSANDS)
----------------------
UNITED
STATES MEXICO CANADA OTHER TOTAL
------ ------ ------ ----- -----
<S> <C> <C> <C> <C> <C>
Net revenues $ 63,429 $ 2,251 $ 3,294 $ -- $ 68,974
Income from operations 4,442 19 96 108 4,665
Identifiable assets 204,133 4,307 12,473 16 220,929
Depreciation and amortization 1,821 63 140 4 2,028
</TABLE>
Net revenues, income from operations, identifiable assets and depreciation
and amortization by geographic region for the six and three month periods ended
June 27, 1998, are as follows:
<TABLE>
<CAPTION>
SIX MONTH PERIOD
--------------------------------------------------------
(DOLLARS IN THOUSANDS)
----------------------
UNITED
STATES MEXICO CANADA OTHER TOTAL
------ ------ ------ ----- -----
<S> <C> <C> <C> <C> <C>
Net revenues $105,912 $ 3,070 $ 3,472 $ 2,515 $114,969
Income from operations 7,198 228 161 (423) 7,164
Identifiable assets 195,786 446 4,737 1,432 202,401
Depreciation and amortization 3,803 144 54 85 4,086
</TABLE>
<TABLE>
<CAPTION>
THREE MONTH PERIOD
--------------------------------------------------------
(DOLLARS IN THOUSANDS)
----------------------
UNITED
STATES MEXICO CANADA OTHER TOTAL
------ ------ ------ ----- -----
<S> <C> <C> <C> <C> <C>
Net revenues $ 56,205 $ 1,703 $ 1,805 $ 1,381 $ 61,094
Income from operations 3,993 197 140 (194) 4,136
Identifiable assets 195,786 446 4,737 1,432 202,401
Depreciation and amortization 2,018 77 26 35 2,156
</TABLE>
13
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS
OF OPERATIONS.
GENERAL
Outsourcing Services Group, Inc. (the Company or OSG) is a leading provider
of outsourced manufacturing and packaging services to the health and beauty aid,
household, and automotive consumer product markets in North America. OSG
primarily manufactures and/or packages health and beauty aid products, such as
colored cosmetics, lipsticks, facial powders, skin care creams and lotions, hair
spray and gel, hair mousse, shampoo, and shaving cream and gel. Other products
manufactured and packaged by the Company include household and automotive
products, such as lubricants, tire sealers, cleaners, and lighter fluid. OSG
offers its customers a complete range of services, including product
development, formulation, blending, manufacturing, filling, and packaging. It
also provides ancillary services such as materials procurement, warehousing, and
distribution of finished goods.
RESULTS OF OPERATIONS
For the six and three month periods ended July 3, 1999 compared to the six and
three month periods ended June 27, 1998.
NET REVENUE. Revenues of $132.7 and $69.0 million for the six month and
three month periods ended July 3, 1999 increased by approximately $17.7 million
(15%) and $7.9 million (13%), respectively, from the prior 1998 periods. The
increases for the six and three month periods are primarily attributable to the
increase in new contracts for the color cosmetic production and services.
COST OF GOODS SOLD. Cost of goods sold of $112.8 and $ 58.5 million for the
six and three month periods ended July 3, 1999, increased by approximately $15.4
million (16%) and $6.9 million (13%), respectively, from the prior 1998 periods.
Total cost of goods sold, as a percentage of sales, increased slightly to 85%
for the six and three month periods from 84.6% and 84.7% from the prior 1998
periods. This was primarily due to the continuing shift towards increased full
service, including purchasing more raw materials for the customers at Kolmar and
the increase in new color cosmetic production contracts.
SG&A EXPENSES. Selling, general and administrative expenses ("SG&A") of
$11.9 million and $5.9 million for the six and three month periods ended July 3,
1999, increased by approximately $1.5 million (14.4%) and increased by $0.5
million (9.3%), respectively, from the prior 1998 periods. The increase for the
six month period was primarily attributable to the additional selling, marketing
and administrative infrastructure expenses. For the six and three month period
ended July 3, 1999, as a percentage of net revenues, SG&A decreased to 8.9% and
8.5%, respectively.
INTEREST EXPENSE. Interest expense of $6.7 million and $3.3 million for the
six and three month periods ended July 3, 1999, increased by approximately$0.6
million (9.5%) and $0.02 million (0.6%), respectively, from the prior 1998
periods. The increase in interest expense was primarily attributable to the
Company borrowing under the available credit facilities for the financing of the
acquisition of all of the outstanding capital stock of Acupac Packaging, Inc.
LIQUIDITY AND CAPITAL RESOURCES
As of July 3, 1999, OSG had cash and cash equivalents of $2.0 million,
working capital of $34.5 million and long-term debt of $105.0 million. The
primary sources of cash were from operating activities. Cash used by
operations was $6.8 million for the six month period ended July 3, 1999. Cash
provided by operations was $3.9 million for the six month period ended June
27, 1998. Principal uses of cash were for capital expenditures, and interest
payments. During the six month period ended July 3, 1999, the Company
borrowed $11.2 million under the working capital facilities. The borrowings
were primarily utilized for the acquisition of all the capital stock of
Acupac Packaging, Inc. and certain assets of the Bradcan Corporation.
As of January 1, 1998, OSG consummated the Kolmar Acquisition. The purchase
price for the Kolmar Acquisition was $78.0 million, subject to certain
post-closing adjustments. In conjunction with the Kolmar Acquisition, the
Company refinanced all of its existing indebtedness totaling $36.2 million. The
purchase price and refinanced indebtedness, plus expenses, were financed through
$30.0 million of borrowings under the Senior Secured Credit Facility, $70.0
million of borrowings under the Subordinated Bridge Facility and the issuance of
$20.9 million of Common Stock to existing stockholders of the Company.
The Company anticipates that its primary uses of working capital in future
periods will be to service its indebtedness and provide funds for operations and
future acquisitions. Should the Company seek to acquire additional businesses,
it will have to incur additional indebtedness and possibly raise additional
equity. The Company's ability to grow through acquisitions is dependent upon the
availability of such financing as well as the availability of acquisition
candidates and the terms on which such candidates may be acquired, which may be
adversely affected by competition for such acquisitions. The Company regularly
examines opportunities for
14
<PAGE>
strategic acquisitions or other companies or lines of business. The Company
historically has financed its acquisitions through a combination of borrowings
under bank credit facilities, seller provided financing, internally generated
cash flows and the issuance of equity and debt securities and anticipates that
it may from time to time issue additional debt and/or equity securities either
as direct consideration for such acquisitions or to raise additional funds to be
used (in whole or in part) in payment for acquired businesses or assets. There
can be no assurance as to whether or when any acquired business would contribute
positive operating results commensurate with the associated acquisition cost.
The Company believes that cash on hand, cash flow from operations and
available borrowings under the Senior Secured Credit Facility will be sufficient
to meet the Company's presently anticipated working capital and capital
expenditure needs through fiscal 1999.
The Company's capital expenditures are expected to decline slightly from
historical levels as a result of the significant historical spending on
information system upgrades and major cost-saving programs. The Company's
capital expenditures will be primarily for replacements of existing assets and
new customer requirements.
The Company regularly examines opportunities for strategic acquisitions of
other companies or lines of businesses and anticipates that it may from time to
time issue additional debt and/or equity securities either as direct
consideration for such acquisitions or to raise additional funds to be used (in
whole or in part) in payment for acquired securities or assets. The issuance of
such securities could be expected to have a dilutive impact on the Company's
shareholders, and there can be no assurance as to whether or when any acquired
business would contribute positive operating results commensurate with the
associated investment.
CERTAIN TRENDS AND UNCERTAINTIES
Historically, the Company has grown its business through acquisitions and
investments in its operations. The Company intends to continue during 1999 to
make significant investments in the growth of its business and to examine
opportunities for additional growth through acquisitions and strategic
investments. The impact of these decisions on future profitability cannot be
predicted with any certainty. The Company's commitment to growth may increase
its vulnerability to unforeseen downturns in its markets and shifts in
competitive conditions. However, the Company believes that significant
opportunities exist in the markets for each of its product lines and services,
and continued investment in its marketing and sales capabilities and product
development will enhance its opportunities for long term growth and
profitability.
YEAR 2000 COMPLIANCE
GENERAL DESCRIPTION
The Year 2000 issue is the result of computer programs being written using
two digits rather than four to define the applicable year. Many of the Company's
computer programs that have time sensitive software may recognize a date using
"00" as the year 1900 rather than 2000. This could result in a system failure or
miscalculations causing disruptions of operations, including, among other
things, a temporary inability to process transactions, send invoices or engage
in similar normal business activities.
This discussion of the implications of the Year 2000 issue contains
numerous forward-looking statements based on inherently uncertain information.
The cost of the Company's project to address the Year 2000 issue and the date on
which the Company plans to complete its internal Year 2000 modifications are
based on management's best estimates of future events. The material assumptions
underlying the estimated costs are the continued availability of internal and
external resources, the cost of these resources, the time required to accomplish
the tasks, and the cost of needed equipment. The Company cannot guarantee,
however, that it will achieve these estimates, and actual results could differ.
Moreover, although management believes it will be able to make the necessary
modifications in advance, failure to modify the systems may have a material
effect on the Company.
Readiness Preparation
The Company is preparing for the century change with a comprehensive
enterprise-wide Year 2000 program. The Company has identified all of the major
systems susceptible to the Year 2000 problem and has sought external and
internal resources to renovate and test the systems. The Company is testing
purchased software, internally developed systems and systems supported by
external parties as part of the program. The Company is evaluating customers and
vendors that have significant relationships with it to determine whether they
are adequately preparing for the year 2000. In addition, the Company is
developing contingency plans to reduce the impact of some potential events that
may occur. The Company cannot guarantee, however, that the systems of vendors or
customers with whom the Company does business will be completed on a timely
basis, or that contingency plans will shield operations from failures that may
occur.
15
<PAGE>
The Company plans to complete all currently identified Year 2000 issues
prior to the year 2000, with special emphasis placed on those systems vital to
the continuance of a broad core of business activity. The Company's Year 2000
project (the "Project") is divided into three major sections--infrastructure,
applications software, and third-party suppliers and customers. The general
phases common to all sections are (i) inventorying Year 2000 items; (ii)
assigning priorities to identified items; (iii) assessing the Year 2000
compliance of items determined to be material to the Company; (iv) repairing or
replacing material items that are determined not to be Year 2000 compliant; and
(v) designing and implementing contingency and business continuation plans.
Material items are those believed by the Company to have a risk involving the
safety of individuals, or that may cause damage to property or the environment,
or affect revenues.
As of July 3, 1999, the inventory, assigning of priorities and assessing
Year 2000 compliance of material items phases of each section of the Project had
been completed. The Company is in the process of repairing and replacing
material items that are not Year 2000 compliant. The Company is also designing
and implementing contingency plans.
The infrastructure section consists of hardware and operating software
other than applications software. This section is on schedule to be completed by
the year 2000, and as of July 3, 1999, approximately 70% of the activities
related to this section had been completed. The Company's manufacturing
facilities located in Port Jervis, Mexico, and Corona are fully Year 2000
compliant.
The applications software section consists of inventory, financial and
other similar software. This section is in the process of converting
applications software that is not Year 2000 compliant and, where available from
the supplier, the replacement of such software. The Company estimates that this
category was approximately 70% completed as of July 3, 1999, and will be
completed by the Year 2000.
Approximately 70% of the Company's hardware and software critical to the
continuance of its business was Year 2000 compliant as of July 3, 1999. The
Company estimates that it will be fully Year 2000 compliant by the fourth
quarter of 1999.
The third-party suppliers and customers section involves identifying and
reviewing the Company's customers and vendors and determining their Year 2000
readiness. To date, the Company has identified approximately 615 vendors and has
made inquiries about their Year 2000 readiness plans and status. To date,
approximately 585 vendors have responded and those who have responded have
stated that they will be Year 2000 compliant by December 31, 1999. Management
does not believe that the inability of vendors, customers, and other third
parties to complete their Year 2000 remediation process in a timely manner will
have a material impact on the financial position or results of operations of the
Company. However, the effect of non-compliance by third parties is not readily
determinable.
RISKS
The principal risks associated with the Year 2000 issue can be grouped into
three categories: (i) the Company's failure to ready its operations for the next
century, (ii) disruption of the Company's operations due to operational failures
of third parties, and (iii) business interruptions among suppliers and customers
such that the Company's operations would be adversely affected. The only risk
largely under the Company's control is preparing its internal operations for the
Year 2000. The Company is heavily dependent on its computer systems. The
complexity of these systems and their interdependence make it impractical to
convert to alternative systems without interruptions if necessary modifications
are not completed on schedule. Management believes that the Company will be able
to make the necessary modifications prior to the year 2000.
Failure of the Company's third party suppliers and customers to address
their Year 2000 issues may jeopardize the Company's operations, but the
seriousness of this risk depends on the nature and duration of the failures. The
most serious impact on the Company's operations from vendors would result if
basic services such as telecommunications, electric power, and services provided
by other financial institutions and governmental agencies were disrupted. The
Company is unable to estimate the likelihood of significant disruptions among
its basic infrastructure suppliers. In view of the unknown probability of
occurrence and impact on operations, the Company considers the loss of basic
infrastructure services to be the most reasonably likely worst case Year 2000
scenario.
CONTINGENCY PLANS
The Company has contingency plans for certain critical applications and is
working on such plans for others. The contingency plans will address disruptions
in the Company's computer systems, obtaining alternative suppliers, dealing with
inventory disruptions, and addressing customer problem issues. However, there
can be no assurance that such plans will have the necessary remedial effect.
16
<PAGE>
COSTS
In the six month period ended July 3, 1999, the Company's total
expenditures on Year 2000 compliance was $6,500. Plans are in place to bring all
of the Company's systems into compliance by December 31, 1999, with a total cost
estimated to be in the range of $200,000-$300,000. Management believes that the
costs of the Year 2000 project will not have a material effect on its results of
operations, financial condition or cash flows. The Company is funding the costs
of the Year 2000 project with normal operating cash and is staffing it with
external resources as well as internal staff redeployed from less time-sensitive
assignments. Estimated total costs could change further as analysis continues.
FORWARD LOOKING STATEMENTS
Certain statements and information contained or incorporated by reference
in this report contains "forward-looking statements" within the meaning of
Section 27A of the Securities Act, which represent the Company's expectations or
beliefs, including but not limited to, statements concerning industry
performance, the Company's operations, performance, financial condition, growth
and acquisition strategies, margins and growth in sales of the Company's
products and services. For this purpose, any statements contained in this Form
10-Q and the Company's Form 10-K, that are not statements of historical fact may
be deemed to be forward-looking statements. Such statements can be identified by
the use of forward-looking terminology such as "believes," "expects," "intends,"
"may," "will," "should," or "anticipates," or the negative therefore, other
variations thereon or comparable terminology, or by discussions of strategy. No
assurances can be given that the future results covered by the forward-looking
statements will be achieved. These statements by their nature involve
substantial risks and uncertainties, certain of which are beyond the Company's
control.
Such forward-looking statements involve known and unknown risks,
uncertainties and other factors which may cause the actual results, performance
or achievements of the Company or industry results to be materially different
from any future results, performance or achievements expressed or implied by
such forward-looking statements. Such factors include, among others, the
following: general and economic business conditions, both domestic and foreign;
industry and market capacity; fashion industry changes; the impact of the Year
2000 issue, the estimated costs associated with becoming Year 2000 compliant and
the estimated target date for substantial completion of remediation; wage rates;
existing government regulations and changes in, or failure to comply with,
government regulations; liabilities and other claims asserted against the
Company; competition; the loss of any significant customers; change in operating
strategy or development plans; the ability to attract or retain qualified
personnel; the significant indebted-ness of the Company; the availability and
terms of capital to fund the expansion of the Company's business; and other
factors referenced in this Form 10-Q and the Company's Form 10-K, copies of
which may be obtained from the Company without cost.
17
<PAGE>
PART II
OTHER INFORMATION
Item 1. Legal Proceedings
See Part I, Item 1, Notes to Condensed Consolidated Financial
Statements, Note 4, "Commitments and Contingencies".
Item 2. Changes in Securities
None.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Submission of Matters to a Vote of Security Holders
None.
Item 5. Other Information
None.
Item 6. Exhibits and Reports on Form 8-K
(a) EXHIBIT INDEX
<TABLE>
<CAPTION>
Item
Number Exhibit Page
------ ------- ----
<S> <C> <C>
11. Statement of computation of basic
and diluted net income per share
27. Financial data schedule Filed electronically
</TABLE>
(b) REPORTS ON FORM 8-K
None.
18
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
OUTSOURCING SERVICES GROUP, INC.
Dated: August 16, 1999 /S/ CHRISTOPHER DENNEY
-----------------------
Christopher Denney
Chief Executive Officer, President
and Director (Principal Executive Officer)
Dated: August 16, 1999 /S/ PERRY MORGAN
-----------------------
Perry Morgan
Chief Financial Officer, Vice President
and Secretary
(Principal Financial and
Accounting Officer)
19
<PAGE>
Exhibit 11.
OUTSOURCING SERVICES GROUP, INC.
STATEMENT OF COMPUTATION OF BASIC AND DILUTED
NET INCOME (LOSS) PER SHARE
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTH PERIODS ENDED SIX MONTH PERIODS ENDED
--------------------------- ---------------------------
JUNE 27, JULY 3, JUNE 28, JULY 3,
1998 1999 1998 1999
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Basic income (loss) per share:
Net income (loss) $ 552 $ 941 $ (2,529) $ 614
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Weighted average number of outstanding common shares 3,360,174 3,441,983 3,267,152 3,447,737
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Basic income (loss) per share $ 0.16 $ 0.27 $ (0.77) $ 0.18
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Diluted loss per share:
Net income (loss) $ 552 $ 941 $ (2,529) $ 614
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Weighted average number of outstanding common shares
assuming full dilution 3,505,174 3,580,483 3,398,041 3,586,237
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Diluted income (loss) per share $ 0.16 $ 0.26 $ -- $ 0.17
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
</TABLE>
20
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> JUL-03-1999
<CASH> 2,006
<SECURITIES> 0
<RECEIVABLES> 48,464
<ALLOWANCES> (2,314)
<INVENTORY> 33,776
<CURRENT-ASSETS> 90,612
<PP&E> 57,563
<DEPRECIATION> (25,392)
<TOTAL-ASSETS> 220,929
<CURRENT-LIABILITIES> 56,080
<BONDS> 0
0
4,574
<COMMON> 32,143
<OTHER-SE> (5,314)
<TOTAL-LIABILITY-AND-EQUITY> 220,929
<SALES> 132,697
<TOTAL-REVENUES> 132,697
<CGS> 112,784
<TOTAL-COSTS> 11,869
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 6,672
<INCOME-PRETAX> 1,790
<INCOME-TAX> 1,033
<INCOME-CONTINUING> 757
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 757
<EPS-BASIC> 0.22
<EPS-DILUTED> 0.21
</TABLE>
