<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the Quarterly Period Ended September 30, 1998
or
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
Commission File Number: 333-46235
PRODUCTION RESOURCE GROUP, L.L.C.
(Exact Name of Registrant as Specified in its Charter)
Delaware 14-1786937
-------- ----------
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
539 Temple Hill Road, New Windsor, New York 12553
------------------------------------------- -----
(Address of Principal Executive Office) (Zip Code)
(914) 567-5700
(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 90 days. Yes [X] No [ ]
1
<PAGE>
PRODUCTION RESOURCE GROUP, L.L.C.
Table Of Contents
<TABLE>
<S> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited):
Combined Balance Sheets as of September 30, 1998
and December 31, 1997.............................................. 3
Combined Statements of Operations and Members' Equity
for the nine and three months ended September 30,
1998 and 1997...................................................... 4
Combined Statements of Cash Flows for the nine months
ended September 30, 1998 and 1997.................................. 5
Notes to Combined Financial Statements............................. 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations................................ 16
Item 3. Quantitative and Qualitative Disclosures About Market Risk.......... 22
PART II. OTHER INFORMATION
Item 1. Legal Proceedings................................................. 22
Item 2. Changes in Securities and Use of Proceeds......................... 22
Item 3. Defaults upon Senior Securities................................... 22
Item 4. Submission of Matters to a Vote of Security Holders............... 22
Item 5. Other Information................................................. 22
Item 6. Exhibits and Reports on Form 8-K.................................. 22
Signatures ........................................................................ 23
</TABLE>
2
<PAGE>
PRODUCTION RESOURCE GROUP, L.L.C.
Combined Balance Sheets
($ in thousands)
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1998 1997
--------------- ---------------
(UNAUDITED)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 11,342 $ 27,164
Accounts receivable, net of allowance of $2,044 at September
30, 1998 and $2,572 at December 31, 1997 34,631 23,783
Deferred production expenses 2,526 --
Inventories 9,495 4,425
Other current assets 5,734 1,286
-------- --------
Total current assets 63,728 56,658
Property and equipment - net 78,282 49,236
Goodwill - net of accumulated amortization of $1,473 at September
30, 1998 and $540 at December 31, 1997 32,556 15,341
Other assets 9,539 7,017
-------- --------
Total assets $184,105 $128,252
======== ========
LIABILITIES AND MEMBERS' EQUITY
Current liabilities:
Current portion of long-term debt $ 830 $ 822
Accounts payable 14,871 15,809
Payroll and sales taxes payable 1,560 918
Deferred revenue 9,956 2,119
Income taxes payable 963 --
Other current liabilities (including accrued bond interest of $3,078
at September 30, 1998 and $225 at December 31, 1997) 6,916 1,758
-------- --------
Total current liabilities 35,096 21,426
Long-term debt:
Senior subordinated notes 100,000 100,000
Credit facilities 42,838 --
Other long-term debt 3,476 3,743
Minority interest 434 --
Members' equity 2,261 3,083
-------- --------
$184,105 $128,252
======== ========
</TABLE>
See accompanying notes.
Note: The combined balance sheet at December 31, 1997 has been derived from
the audited financial statements at that date.
3
<PAGE>
PRODUCTION RESOURCE GROUP, L.L.C.
Combined Statements of Operations and Members' Equity (Unaudited)
($ In thousands)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
1998 1997 1998 1997
-------------------- -------- --------
<S> <C> <C> <C> <C>
Revenues $ 56,260 $ 18,953 $111,625 $ 50,656
Direct production expenses:
Direct production costs 36,469 11,015 69,017 31,599
Depreciation expense 2,940 1,359 7,701 4,061
-------- -------- -------- --------
39,409 12,374 76,718 35,660
-------- -------- -------- --------
Gross profit 16,851 6,579 34,907 14,996
Selling, general and administrative expenses 10,310 4,378 23,773 10,392
Other depreciation and amortization 1,006 672 3,253 1,373
Non-recurring compensation expense -- 2,000 -- 2,000
-------- -------- -------- --------
Operating profit (loss) 5,535 (471) 7,881 1,231
Interest expense 3,952 1,129 10,185 2,322
Interest (income) (73) (30) (506) (76)
-------- -------- -------- --------
Income (loss) from continuing operations before income taxes 1,656 (1,570) (1,798) (1,015)
and minority interest
Provision for income taxes 546 76 739 298
-------- -------- -------- --------
Income (loss) from continuing operations 1,110 (1,646) (2,537) (1,313)
Discontinued operations:
Loss from operations of discontinued
Themed Attraction Permanent Installation Business -- (1,140) -- (377)
-------- -------- -------- --------
Income (loss) before minority interest and extraordinary item 1,110 (2,786) (2,537) (1,690)
Extraordinary item -- 614 -- 614
Minority interest 19 -- 30 --
-------- -------- -------- --------
Net income (loss) 1,091 (3,400) (2,567) (2,304)
Members' equity--beginning of period 364 12,415 3,083 14,398
Preferred units issued in connection with the acquisitions of
Pro-Mix, Inc. and Signal Perfection Ltd. 806 -- 1,745 --
Less distributions -- (465) -- (3,544)
-------- -------- -------- --------
Members' equity--end of period $ 2,261 $ 8,550 $ 2,261 $ 8,550
======== ======== ======== ========
See accompanying notes.
</TABLE>
4
<PAGE>
PRODUCTION RESOURCE GROUP, L.L.C.
Combined Statements of Cash Flows (Unaudited)
($ In thousands)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
1998 1997
------- -------
<S> <C> <C>
OPERATING ACTIVITIES
Net loss $ (2,567) $(2,304)
Adjustments to reconcile net loss to net cash used in
operating activities:
Extraordinary item -- 614
Depreciation 9,044 4,924
Gain on sale of property and equipment (2,092) (84)
Amortization of goodwill and other 1,381 442
Amortization of debt related costs 528 68
Minority interest 30 --
Provision for doubtful accounts 596 634
Changes in operating assets and liabilities:
Accounts receivable 1,610 (382)
Deferred production expenses (2,526) --
Inventories (2,506) (223)
Other current assets (2,782) (976)
Accounts payable (12,114) 247
Payroll and sales taxes payable (698) (158)
Deferred revenue 6,152 (3,592)
Income taxes payable 311 --
Other current liabilities 4,395 320
------- -------
Net cash used in operating activities (1,238) (470)
</TABLE>
5
<PAGE>
PRODUCTION RESOURCE GROUP, L.L.C.
Combined Statements of Cash Flows (Unaudited)
($ In thousands)
<TABLE>
<S> <C> <C>
INVESTING ACTIVITIES
Acquisition of net assets of Design Dynamics, Inc., net of cash
acquired $ - $ (3,980)
Acquisition of net assets of Bash Theatrical Lighting and affiliates,
net of cash acquired - (20,000)
Acquisition of net assets of Production Arts, net of cash acquired (13,604) -
Acquisition of net assets of Promix, Inc., net of cash acquired (6,328) -
Acquisition of of Light & Sound Design Holdings Ltd., net of cash
acquired (14,525) -
Acquisition of net assets of CBE Events and Exhibits, net of cash
acquired (2,378) -
Acquisition of Signal Perfection, Ltd., net of cash acquired (6,595) -
Purchases of property and equipment (14,837) (8,664)
Proceeds from sale of rental equipment 3,242 527
Additions to software development costs (473) -
Other assets (798) (2,262)
------------------ ------------------
Net cash used in investing activities (56,296) (34,379)
------------------ ------------------
FINANCING ACTIVITIES
Proceeds from long-term debt 42,838 75,320
Additions to deferred financing costs (122) (1,866)
Additions to bond offering costs (266) -
Repayments of long-term debt (738) (32,885)
Distributions to members - (3,544)
------------------ ------------------
Net cash provided by financing activities 41,712 37,025
------------------ ------------------
Net (decrease) increase in cash and cash equivalents (15,822) 2,176
Cash and cash equivalents--beginning of period 27,164 3,010
------------------ ------------------
Cash and cash equivalents--end of period $ 11,342 $ 5,186
================== ==================
See accompanying notes.
</TABLE>
6
<PAGE>
PRODUCTION RESOURCE GROUP, L.L.C.
Notes to Combined Financial Statements (Unaudited)
1. General
Presentation
The accompanying unaudited combined financial statements of Production Resource
Group, L.L.C. (the "Company") have been prepared in accordance with generally
accepted accounting principles for interim financial information and with the
instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do
not include all of the information and footnotes required by generally accepted
accounting principles for complete financial statements. In the opinion of
management, all adjustments (consisting of normal recurring accruals) considered
necessary for a fair presentation have been included. Operating results for the
three and nine month periods ended September 30, 1998 are not necessarily
indicative of the results that may be expected for the year ending December 31,
1998. For further information, refer to the combined financial statements and
footnotes thereto included in the Production Resource Group, L.L.C. Registration
Statement on Form S-4 dated May 28, 1998 for the year ended December 31, 1997.
Business
The Company is an integrator, fabricator and supplier of a broad range of
products and services for the live entertainment (theatre, concert touring
and special events), corporate events (trade and industrial shows) and
themed entertainment (gaming, theme parks and themed retail) markets. The
Company operates through four segments: lighting systems and products,
scenery automation and fabrication, event services and audio. The Company's
themed attraction permanent installation ("Themed Attraction") segment was
discontinued during 1998 and, accordingly, the consolidated statements of
operations and members' equity for the three and nine months ended September
30, 1997 have been restated to reflect the Themed Attraction segment as a
discontinued operation.
The lighting systems and products segment provides automated lighting
systems and related products for sale and rental. The scenery automation and
fabrication segment fabricates scenery for sale and provides computerized
motion and show control equipment for rental. The Company's event services
segment provides a variety of services for corporate clients, including
unique exhibit fabrication and production management for trade shows and
events. The audio segment provides audio products for sale and rental.
2. Accounting Policies
Principles of Combination
The combined financial statements of the Company include the accounts of all the
entities under common control of the members of the Company. All intercompany
balances and transactions have been eliminated.
7
<PAGE>
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amount of revenue and expenses during the
reporting period. The principal area of estimation relates to determining
total project costs. Actual results could differ from those estimates.
Income Taxes
The Company is not subject to federal, state and local income taxes except
for certain unincorporated business income taxes. Income taxes payable by
the individual members of the Company based on their respective shares of
the Company's income, have not been reflected in the accompanying
combined financial statements.
Signal Perfection Ltd., ("SPL") a Maryland corporation, which the Company
acquired in August 1998, is operating as a wholly-owned subsidiary (see
Note 3) and is subject to certain state and federal taxes. Light & Sound
Design Holdings Limited, a UK company ("Holdings"), in which the Company
acquired a 95% interest on June 19, 1998 (see Note 3), is subject to UK
corporation tax. Corporation tax payable for SPL and Holdings is provided on
taxable income at the current rate. Deferred income taxes for SPL and
Holdings are computed using the liability method pursuant to which deferred
tax assets and liabilities are determined based on differences between
financial reporting and tax bases of assets and liabilities and are measured
using enacted tax rates and laws that will be in effect when the differences
are expected to reverse.
3. Acquisitions
On January 2, 1998, the Company acquired substantially all of the assets and
assumed certain liabilities of Pro-Mix, Inc., ("Pro-Mix"), a provider of
sound equipment and acoustical and sound design consulting services
primarily to the live theatre market. The purchase price was approximately
$7,800,000 plus a $1,500,000 contingent payment (based upon a multiple of
earnings). The purchase price also includes $939,000, representing the
approximate fair value of 79,179 of the Company's Preferred Units (with a
liquidation preference of $1,500,000) issued in connection with the Pro-Mix
acquisition. The Company recorded goodwill of approximately $638,000 related to
the acquisition.
On June 19, 1998, the Company acquired all of the Cumulative Participating
Preferred Ordinary Shares and Cumulative Redeemable Preference Shares and
approximately 95% of the Ordinary Shares of Holdings, an English company,
pursuant to a Share Purchase Agreement dated June 19, 1998 among the
shareholders of Holdings and the Company. Pursuant to the Share Purchase
Agreement, in exchange for the aforementioned Holdings stock, the Company paid
approximately $14,517,000 in cash to the shareholders of Holdings.
8
<PAGE>
Holdings has two wholly-owned operating subsidiaries, Light & Sound Design
Limited, an English company, which is based in Birmingham, England with an
office in London, England and operates exclusively in Europe, and Light &
Sound Design, Inc., a California corporation, which is based in Los Angeles,
California and Nashville, Tennessee and operates in the North American market.
Light & Sound Design Limited and Light & Sound Design, Inc. each provide rentals
of lighting and other equipment for use in the concert touring and industrial
markets. Light & Sound Design Limited and Light & Sound Design, Inc. will each
continue their business and operations as subsidiaries of Holdings, which is a
subsidiary of the Company as part of the lighting systems and products group.
The Company incurred debt of $16,000,000 under it's credit facility and recorded
goodwill of approximately $6,845,000 relating to the transaction.
In connection with the acquisition, the remaining shareholders of Holdings have
granted the Company an option (which may be exercised in one or more
installments) to purchase their remaining shares in Holdings for their fair
market value at any time during the five year period commencing on the closing
date.
On June 30, 1998, the Company acquired substantially all of the assets
subject to substantially all of the operating liabilities, of Production
Arts Lighting Inc., a New York corporation, Production Arts Europe, Inc., a
Delaware corporation and Production Arts West, Inc., a California
corporation, collectively "Production Arts". Production Arts is based in
Moonachie, New Jersey with offices in New York, Los Angeles and London,
England. Production Arts provides sales and rentals of lighting and other
equipment for use in the installation, theatrical and industrial markets.
The acquired assets of Production Arts will operate as part of the Company's
lighting systems and products group. In exchange for the assets of the three
companies constituting Production Arts, the Company paid $13,700,000 in cash to
Production Arts. The Company incurred debt of $13,700,000 under it's credit
facility and recorded goodwill of approximately $4,331,000 relating to the
transaction.
On July 31, 1998, the Company acquired substantially all of the assets
subject to substantially all of the operating liabilities, of CBE Exhibits &
Events, Incorporated, a Texas corporation, ("CBE"). CBE is based in Houston,
Texas and provides support services including logistic support, booth and
exhibit construction and storage to exhibitors at trade shows and other major
events. The acquired assets of CBE will operate as part of the Company's event
services group. Pursuant to the acquisition agreement, in exchange for the
assets of CBE, the Company paid $3,000,000 in cash to CBE and agreed to make
additional payments of up to $7,000,000 subject to the satisfaction of
performance targets. The Company recorded approximately $1,102,000 in goodwill
related to the CBE acquisition.
On August 13, 1998, the Company acquired all of the shares of the outstanding
common stock of Signal Perfection, Ltd., a Maryland Corporation, ("SPL"). SPL is
based in Columbia, Maryland and Las Vegas, Nevada and provides specialized
audio, video and show control design, fabrication and installation and related
products. SPL will continue its business and operations as part of the Company's
audio group. In exchange for the aforementioned SPL stock, the Company paid
approximately $6.7 million in cash to the shareholders of SPL. The purchase
price also included $806,000, representing the approximate fair value of 52,721
of the Company's Preferred Units (with a liquidation preference of $1,230,000)
issued to the shareholders of SPL. The Company recorded approximately $4,828,000
in goodwill related to the SPL acquisition.
9
<PAGE>
The acquisitions of Pro-Mix, Holdings, Production Arts, CBE and SPL have
been accounted for under the purchase method of accounting.
The pro forma results of operations for the nine months ended September 30, 1998
and 1997, assuming consummation of the above acquisitions as of January 1, 1997
are as follows:
Nine Months Ended
September 30,
(in thousands)
1998 1997
--------- ----------
Net revenue $ 155,427 $ 127,000
Net income 2,193 1,824
4. Reportable Segments
The Company's continuing operations include four reportable groups: scenery
automation and fabrication, lighting systems and products, audio, and event
services. The Company's scenery automation and fabrication division consists
of two operating units that fabricate scenery and rent computerized
automation equipment that controls the motion of such scenery. Sales of this
division are primarily to live theatrical concerns. The Company's lighting
systems and products division has eight primary operating units that provide
lighting equipment and systems to a highly diversified client base. The
Company's event services division provides a variety of services primarily
for corporate clients, including unique exhibit fabrication and production
management for trade shows and events. In 1998, with the acquisitions of
Pro-Mix and SPL, the Company established an audio segment. Assets of the
event services segment and the audio segment increased by approximately $3.4
million and $6.6 million, respectively, with the acquisitions of CBE and SPL.
10
<PAGE>
<TABLE>
<CAPTION>
Nine month period ended September 30, 1998 (in thousands)
--------------------------- --------------- -------------------- ----------------- ------------------ ----------------
Lighting
Scenery Automation Systems and
Event Services and Fabrication Products Audio Total
--------------------------- --------------- -------------------- ----------------- ------------------ ----------------
<S> <C> <C> <C> <C> <C>
Revenues from external
customers $ 16,399 $ 24,044 $ 57,153 $ 14,029 $ 111,625
Intersegment revenues 112 1,145 2,526 320 4,103
Segment profit 1,501 7,291 11,770 5,296 25,858
--------------------------- --------------- -------------------- ----------------- ------------------ ----------------
</TABLE>
<TABLE>
<CAPTION>
Nine month period ended September 30, 1997 (in thousands)
--------------------------- --------------- -------------------- ----------------- ------------------ ----------------
Lighting
Scenery Automation Systems and
Event Services and Fabrication Products Audio(1) Total
--------------------------- --------------- -------------------- ----------------- ------------------ ----------------
<S> <C> <C> <C> <C> <C>
Revenues from external
customers $ 15,931 $ 20,222 $ 14,503 - $ 50,656
Intersegment revenues 424 2,642 2,319 - 5,385
Segment profit 1,380 8,045 2,654 - 12,079
--------------------------- --------------- -------------------- ----------------- ------------------ ----------------
</TABLE>
<TABLE>
<CAPTION>
Three month period ended September 30, 1998 (in thousands)
--------------------------- --------------- -------------------- ----------------- ------------------ ----------------
Scenery Lighting
Event Automation and Systems and
Services Fabrication Products Audio Total
--------------------------- --------------- -------------------- ----------------- ------------------ ----------------
<S> <C> <C> <C> <C> <C>
Revenues from external
customers $ 5,420 $ 11,902 $ 31,080 $ 7,858 $ 56,260
Intersegment revenues 39 334 963 320 1,656
Segment profit 352 3,028 5,732 2,901 12,013
--------------------------- --------------- -------------------- ----------------- ------------------ ----------------
</TABLE>
<TABLE>
<CAPTION>
Three month period ended September 30, 1997 (in thousands)
--------------------------- --------------- -------------------- ----------------- ------------------ ----------------
Scenery Lighting
Event Automation and Systems and
Services Fabrication Products Audio(1) Total
--------------------------- --------------- -------------------- ----------------- ------------------ ----------------
<S> <C> <C> <C> <C> <C>
Revenues from external
customers $8,521 $4,097 $6,339 - $18,957
Intersegment revenues 663 2,011 - - 2,674
Segment profit 1,107 1,886 1,533 - 4,526
--------------------------- --------------- -------------------- ----------------- ------------------ ----------------
</TABLE>
(1) In 1998, with the acquisitons of Pro-Mix and SPL the Company
established the audio segment.
11
<PAGE>
<TABLE>
<CAPTION>
Three month period ended Nine month period ended
September 30, September 30,
Profit (loss) (in thousands) 1998 1997 1998 1997
----------------------------------- --------------- ---------------- ------------------- ----------------
<S> <C> <C> <C> <C>
Total profit for reportable
segments $12,013 $ 4,526 $25,858 $12,079
Unallocated amounts:
Corporate selling, general and
administrative (2,533) (2,966) (7,023) (5,414)
Depreciation and amortization (3,945) (2,031) (10,954) (5,434)
Interest expense, net (3,879) (1,099) (9,679) (2,246)
--------------- ---------------- ------------------- ----------------
Total income (loss) from
continuing operations $ 1,656 $ (1,570) $ (1,798) $ (1,015)
----------------------------------- --------------- ---------------- ------------------- ----------------
</TABLE>
5. Subsidiary Financial Information
The following represents unaudited condensed combining financial statements as
of September 30, 1998 and for the nine months ended September 30, 1998 with
respect to the financial position and results of operations and cash flows of
the Company and its wholly-owned and majority-owned subsidiaries. On December
24, 1997, the Company and PRG Finance Corporation ("Finance Corp."), a Delaware
Corporation issued $100 million of 11 1/2% Senior Subordinated Notes due 2008
(the "Notes"). The Notes are fully and unconditionally guaranteed by the
Company's domestic subsidiaries other than Finance Corp. and Holdings (the
"Guarantors"). Four of the Guarantors are wholly-owned subsidiaries of the
Company and the remaining Guarantor is 99% owned by the Company (with the
remaining 1% interest owned by a member of the Company). The condensed combining
financial statements are presented in lieu of separate financial statements and
other related disclosures of Finance Corp., Holdings and the Guarantors as
management has determined that such information is not material to investors.
12
<PAGE>
Condensed Combining Balance Sheet (Unaudited)
September 30, 1998
($ in thousands)
<TABLE>
<CAPTION>
Guarantor Non-Guarantor PRG
PRG* Subsidiaries Subsidiaries Adjustments Combined
---------------- ----------------- ---------------- ------------------ -----------------
<S> <C> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 10,550 $ 461 $ 331 $ $ 11,342
Accounts receivable, net 27,058 5,188 2,385 34,631
Inventories 7,111 715 1,669 9,495
Deferred production expenses 2,526 2,526
Intercomany receivables 112 (112) -
Other current assets 2,660 747 2,327 5,734
---------------- --------------- -------------- ---------------- -------------
Total current assets 50,017 6,999 6,712 63,728
Property and equipment, net 68,441 101 9,740 78,282
Loan to subsidiary 1,982 (1,982) -
Investment in subsidiary 22,060 (22,060) -
Goodwill, net 20,951 11,605 32,556
Other assets 9,235 304 9,539
---------------- -------------- -------------- ---------------- -------------
Total assets $ 172,686 $ 7,100 $ 14,774 $ (10,455) $ 184,105
================ ============== ============== ================ =============
LIABILITIES AND MEMBERS' EQUITY
Current liabilities:
Current portion of long-term debt $ 379 $ 451 $ - $ $ 830
Accounts payable 10,116 2,115 2,640 14,871
Payroll and sales taxes payable 1,285 150 125 1,560
Deferred revenue 8,656 1,300 9,956
Income taxes payable 963 963
Other current liabilities 4,935 1,981 6,916
---------------- --------------- -------------- ---------------- -------------
Total current liabilities 25,371 3,679 6,046 35,096
Long-term debt:
Senior subordinated notes 100,000 100,000
Credit facilities 42,838 42,838
Other long-term debt 3,476 3,476
Minority interest 434 434
Members' equity 1,001 3,421 8,728 (10,889) 2,261
---------------- --------------- -------------- ---------------- -------------
$ 172,686 $ 7,100 $ 14,774 $ (10,455) $ 184,105
================ =============== ============== ================ =============
</TABLE>
13
* Exclusive of Guarantor Subsidiaries and Non-Guarantor
Subsidiaries.
<PAGE>
Condensed Combining Statement of Operations (Unaudited)
Nine months ended September 30, 1998
($ in thousands)
<TABLE>
<CAPTION>
PRG* Guarantor Non Guarantor PRG
Subsidiaries Subsidiaries Adjustments Combined
--------------- -------------- ------------------ -------------- -------------
<S> <C> <C> <C> <C> <C>
Revenues $ 97,344 $ 5,119 $ 9,222 $ (60) $ 111,625
Direct production expenses 60,004 3,618 5,455 (60) 69,017
Depreciation expense 7,060 -- 641 7,701
--------------- -------------- ------------------ -------------- -------------
Gross profit 30,280 1,501 3,126 -- 34,907
Other depreciation and amortization 3,110 4 71 68 3,253
Selling, general and administrative expenses 21,155 504 2,114 23,773
--------------- -------------- ------------------ -------------- -------------
Operating profit 6,015 993 941 (68) 7,881
Interest expense 10,171 6 8 10,185
Interest (income) (498) (3) (5) (506)
--------------- -------------- ------------------ -------------- -------------
Income (loss) before income taxes and
minority interest (3,658) 990 938 (68) (1,798)
Provision for income taxes 72 311 356 739
--------------- -------------- ------------------ -------------- -------------
Income (loss) before minority interest (3,730) 679 582 (68) (2,537)
Minority interest (30) (30)
--------------- -------------- ------------------ -------------- -------------
Net income (loss) $(3,730) $679 $582 $ (98) $ (2,567)
=============== ============== ================== ============== =============
</TABLE>
* Exclusive of Guarantor Subsidiaries and
Non-Guarantor Subsidiaries
14
<PAGE>
Condensed Combining Statement of Cash Flows (Unaudited)
Nine months ended September 30, 1998
($ in thousands)
<TABLE>
<CAPTION>
PRG* Guarantor Non-Guarantor PRG
Subsidiaries Subsidiaries Combined
--------------- ------------------ -------------------- --------------------
<S> <C> <C> <C> <C>
NET CASH (USED IN) PROVIDED BY
OPERATING ACTIVITIES $ (1,843) $ 267 $ 338 $ (1,238)
INVESTING ACTIVITIES
Acquisition of net assets of Production Arts, net (13,604) (13,604)
of cash acquired
Acquisition of net assets of Promix, Inc., net of (6,328) (6,328)
cash acquired
Acquisition of Light & Sound Design Holdings Ltd., (14,525) (14,525)
net of cash acquired
Acquisition of of CBE Events & Exhibits net of cash (2,378) (2,378)
acquired
Acquisition of Signal Perfection Ltd., net of cash (6,595) (6,595)
acquired
Purchases of property and equipment (14,100) (737) (14,837)
Proceeds from sale of rental equipment 3,242 3,242
Additions to software development costs (473) (473)
Other assets (798) (798)
--------------- ------------ ------------------ ---------------
Net cash used in investing activities $ (55,559) - (737) $(56,296)
---------------- ------------ ------------------ ---------------
FINANCING ACTIVITIES
Proceeds from long-term debt 42,838 42,838
Loan from Parent (1,982) 1,982 -
Additions to deferred financing costs (122) (122)
Additions to bond offering costs (266) (266)
Repayments of long-term debt (738) (738)
--------------- ------------ ------------------ ---------------
Net cash provided by financing activities $ 39,730 $ 1,982 $41,712
--------------- ------------ ------------------ ---------------
Net (decrease) increase in cash and cash equivalents (17,672) $ 267 1,583 (15,822)
Cash and cash equivalents--beginning of period 27,112 52 27,164
--------------- ------------ ------------------ ---------------
Cash and cash equivalents--end of period $ 9,440 $ 319 $ 1,583 $ 11,342
=============== ============ ================== ===============
</TABLE>
* Exclusive of Guarantor and Non-Guarantor Subsidiaries
6. Subsequent Event
On October 23, 1998, the Company acquired all the outstanding shares of common
stock of Production Lighting Systems, Inc. (PLS), a California corporation. PLS
provides lighting equipment for rental and sale. The Company paid $6.75 million
in cash related to the acquisition. PLS will continue its business and
operations as part of the Company's lighting systems and products group.
15
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
SAFE HARBOR FOR FORWARD-LOOKING STATEMENTS
- -------------------------------------------
Certain statements made in this report may be deemed to be forward-looking
statements as defined in the Safe Harbor Provisions of the Private Securities
Litigation Reform Act of 1995. Forward-looking statements involve known and
unknown risks and uncertainties, which may cause the Company's actual results in
future periods or plans for future periods to differ materially from what is
currently anticipated. Those risks include, among others, general competitive
factors, the Company's ability to develop and implement operational and
financial systems to manage rapidly growing operations, the Company's ability
to successfully complete and integrate its acquisitions and to implement
operational improvements in its acquired businesses, the episodic nature of the
Company's business and other risks and uncertainties detailed from time to time
in the Company's filings with the Securities and Exchange Commission.
16
<PAGE>
Results of Operations
- --------------------------
Comparability of Periods
Financial results for the period ended September 30, 1998 and the period ended
September 30, 1997 are not fully comparable to prior periods due to the
acquisitions of the net assets of Design Dynamics, Inc. and Bash Theatrical
Lighting and affiliates ("Bash") in June and August 1997 respectively, and the
acquisitions of Pro-Mix, Holdings, Production Arts, CBE and SPL on January 2,
June 19, June 30, July 31 and August 13, 1998, respectively. The Company's
historical combined financial statements for the period ended September 30, 1998
and the period ended September 30, 1997 include results of operations from such
acquired operations only from the dates of their respective acquisitions.
Three Months Ended September 30, 1998 Compared to Three Months Ended
September 30, 1997
Revenues. The Company's revenues increased to $56.3 million for the
three months ended September 30, 1998 an increase of $37.3 million or 196%, from
$19.0 million for the three months ended September 30, 1997. The increase was
primarily attributable to revenue generated by operations acquired subsequent to
the third quarter of 1997 and internal growth. Revenues increased in the
lighting systems and products segment by approximately $24.7 million. This
increase was primarily related to the acquisitions of Holdings and Production
Arts in June 1998 ( approximately $14.5 million in additional revenue) and the
acquisition of Bash in August 1997 (approximately $6.5 million in additional
revenue). Revenue in the scenery automation and fabrication segment increased by
approximately $7.8 million primarily related to an increase in scenery
fabrication projects. Additionally, the Company began operations in the audio
segment in 1998, with the acquistions of Pro-Mix and SPL that provided an
additional $7.9 million in revenue for the three month period ended September
30, 1998. The above increases were offset by a decline in revenue of
approximately $3.1 million in the event services group, primarily attributable
to a decline in the number and changes in the timing of corporate events.
Gross Profit. The Company's gross profit increased to $16.9 million
for the three months ended September 30, 1998, an increase of $10.3 million, or
156%, from $6.6 million for the three months ended September 30, 1997. The
increase in gross profit was primarily due to the increase in revenues described
above. Gross profit margin declined to 30.0% for the three months ended
September 30, 1998 from 34.7% for the three months ended September 30, 1997. The
decrease was primarily attributable to a change in revenue mix to product and
systems sales which typically carry a lower gross margin than rental revenue.
The increase in the lighting and audio sale revenue is primarily attributable to
the acquisitions of SPL and Production Arts, as both these operations have high
levels of equipment sales.
Selling, general and administrative. As a percentage of revenue,
selling, general and administrative costs decreased to 18.3% for three months
ended September 30, 1998 as compared to 23.1% for the three months ended
September 30, 1997. The percentage decrease is a result of two primary factors.
First, as a result of recent acquisitions, the Company now has greater revenue
to cover its increased corporate selling, general and administrative expenses.
Secondly, these recent acquisitiions, which provide lower gross profit margins,
also incur less selling, general and adminstrative expenses as a percentage of
revenue. Selling, general and administrative expenses increased 134% or $5.9
million to $10.3 million for the three months ended September 30, 1998 compared
to $4.4 million for the three months ended September 30, 1997. The increase was
primarily attributable to incremental selling, general and administrative
expenses associated with the acquisitions of Pro-Mix, Production Arts, Holdings,
CBE and SPL (approximately $3.3 million). The remainder of the increase was
primarily attributable to the increase in personnel costs related to the hiring
of additional senior executives, and other
17
<PAGE>
professionals to manage the Company's information technology infrastructure and
new marketing initiatives.
Non-recurring compensation expense. Non-recurring compensation
expense represents employment incentives paid to the two shareholders of
Bash in connection with the signing of employment contracts with the
Company, which totaled $2.0 million for the three months ended September 30,
1997. The Company had no such expense for the three months ended September
30, 1998.
Operating Profit. Operating profit from continuing operations was
$5.5 million for the three months ended September 30, 1998, an increase of
$6.0 million from $(0.5) million for the three months ended September 30,
1997. Operating profit (loss), as a percentage of revenues, was 9.8% for the
three months ended September 30, 1998 compared to (2.5)% for the three months
ended September 30, 1997. The increase was primarily due to the increased gross
margin, a decline in selling, general and administrative costs as a percentage
of revenue and the lack of non-recurring compensation expense in the three
months ended September 30, 1998.
Interest Expense. Interest expense increased to $3.9 million for
the three months ended September 30, 1998 from $1.1 million for the three
months ended September 30, 1997. The increase was attributable to the
interest expense associated with the Senior Subordinated Notes issued in
December 1997 and interest expense associated with the borrowings under the
Company's Credit Facility.
Income taxes. Taxes reflect an allocation based on the full year
anticipated effective tax rate for the subsidiaries that are subject to income
tax. The provision for taxes as a percentage of income before taxes for such
subsidiaries was approximately 41% for the nine months ended September 30, 1998.
Discontinued Operations. The Company had a loss from discontinued
operations of $1.1 million for the three months ended September 30, 1997.
The Company believes that it has provided for any additional estimated
losses related to open themed attraction projects.
Net income (loss). The Company had net income of $1.1 million for
the three months ended September 30, 1998 compared to a net loss of $3.4
million for the three months ended September 30, 1997. The net income was
primarily due to the aforementioned increase in gross profit and the decline
in selling, general and administrative expenses as a percentage of revenues.
Additionally, the Company had no non-recurring compensation expenses during
the three month period ended September 30, 1998.
18
<PAGE>
Nine months Ended September 30, 1998 Compared to Nine months Ended September
30, 1997
Revenues. The Company's revenues increased to $111.6 million for
the nine months ended September 30, 1998 an increase of $60.9 million or
120%, from $50.7 million for the nine months ended September 30, 1997. The
increase was primarily attributable to revenue generated by operations
acquired subsequent to the third quarter of 1997. Revenues increased in the
lighting systems and products segment by $42.7 million primarly resulting
from the acquisitions of Production Arts, Holdings and Bash (approximately
$38.9 million of additional revenue). Revenue in the scenery automation and
fabrication segment has increased $3.8 million primarily due to increased
scenery fabrication projects. Finally, the Company began operations in the
audio segment in 1998 with the acquistions of Pro-Mix and SPL that provided an
additional $14.0 million in revenue for the nine months ended September 30,
1998.
Gross Profit. The Company's gross profit increased to $34.9 million
for the nine months ended September 30, 1998, an increase of $19.9 million,
or 133%, from $15.0 million for the nine months ended September 30, 1997.
The increase in gross profit was primarily due to the increase in revenues
described above. Gross profit margin improved to 31.3% for the nine months
ended September 30, 1998 from 29.6% for the nine months ended September 30,
1997. The improvement was primarily attributable to higher margins
associated with increased rental revenue as a percentage of total revenue.
The change in the revenue mix is primarily the result of the revenues added
by the lighting acquisitions and Pro-Mix.
Selling, general and administrative. As a percentage of revenue,
selling, general and administrative costs increased to 21.3% for the nine months
ended September 30, 1998 as compared to 20.5% for the nine months ended
September 30, 1997. Selling, general and administrative expenses increased to
$23.8 million for the nine months ended September 30, 1998, an increase of $13.4
million, or 129%, from $10.4 million for the nine months ended September 30,
1997. The increase was primarily attributable to incremental selling, general
and administrative expenses associated with the acquisitions of Pro-Mix,
Holdings, Production Arts, CBE and SPL (aproximately $9.8 million). The
remainder of the increase is attributed to increased personnel costs related to
the hiring of additional senior executives, and other professionals to manage
the Company's information technology, human resources, finance and sales and
marketing departments.
Non-recurring compensation expense. Non-recurring compensation
expense represents employment incentives paid to the two shareholders of
Bash in connection with the signing of employment contracts with the
Company, which totaled $2.0 million for the nine months ended September 30,
1997. The Company had no such expense for the nine months ended September
30, 1998.
Operating Profit. Operating profit increased to $7.9 million for
the nine months ended September 30, 1998, an increase of $6.7 million, or 558%,
from $1.2 million for the nine months ended September 30, 1997. Operating
profit, as a percentage of revenues, improved to 7.1% for the nine months ended
September 30, 1998 from 2.4% for the nine months ended September 30, 1997,
primarily attributable to the increase in gross profit described above,
complemented by the lack of non-recurring compensation charges offset by the
increased selling, general and administrative expenses, for the nine
months ended September 30, 1998.
19
<PAGE>
Interest Expense. Interest expense increased to $10.2 million for
the nine months ended September 30, 1998 from $2.3 million for the nine
months ended September 30, 1997. The increase was attributable to the
interest expense associated with the Senior Subordinated Notes issued in
December 1997 and interest expense associated with the borrowings under the
Company's Credit Facility to fund the acquisitions.
Income taxes. Taxes reflect an allocation based on the full year
anticipated effective tax rate for the subsidiaries that are subject to income
tax. The provision for taxes as a percentage of income before taxes for such
subsidiaries was 41% for the nine months ended September 30, 1998.
Discontinued Operations. The Company had a loss from discontinued
operations of $0.4 million for the nine months ended September 30, 1997. The
Company believes that it has provided for any additional estimated losses
related to open themed attraction projects.
Net income (loss). The Company had a net loss of $2.5 million for
the nine months ended September 30, 1998 compared to a net loss of $2.3
million for the nine months ended September 30, 1997. The net loss for the
nine months ended September 30, 1998 was primarily due to the aforementioned
increased interest expense.
Liquidity and Capital Resources
During the nine months ended September 30, 1998, the Company's investing
activities were financed primarily from bank borrowings under the existing
$100 million, five-year, senior secured, reducing revolving credit facility
(the "Credit Facility") and excess proceeds related to the December 1997
issuance of 11 1/2% Senior Subordinated Notes due 2008 (the "Offering"). The
Company and its subsidiaries are restricted from making distributions under the
terms of the Indenture for the Offering and the Credit Facility. The borrowings
under the Credit Facility and the excess cash related to the Offering were used
to acquire Pro-Mix, Production Arts and Holdings ($43.4 million) and to pay for
approximately $14.8 million in property and equipment additions.
Property and equipment additions were primarily related to the purchase of
approximately $9.2 million in lighting, audio and motion control rental
equipment, $3.6 million related to the construction of a new facility in Las
Vegas, $0.8 million in leasehold, building improvements and furniture and
fixtures, and an additional $1.2 million related to computer hardware and
the implementation of an Oracle information system.
20
<PAGE>
The following table sets forth certain information from the Company's
Combined Statements of Cash Flows for the nine months ended September 30,
1998 and 1997:
Nine months Ended
September 30,
(in thousands)
1998 1997
------------------ --------------------
Net cash provided by (used in):
Operating activities $ (1,238) $ (470)
Investing activities (56,296) (34,379)
Financing activities 41,712 37,025
The Company believes that cash flow from operations and availability under
the Credit Facility will be sufficient to meet operating needs and capital
spending requirements and to fund its acquisition strategies for the
forseeable future.
Effect of Inflation
The impact of inflation on the Company's operations has not been significant
in recent years. There can be no assurance, however, that a high rate of
inflation in the future will not have an adverse effect on the Company's
results of operations and financial condition.
Year 2000
The Year 2000 Issue is the result of computer programs being written using two
digits rather than four to define the applicable year. Any of the Company's
computer programs or hardware or equipment purchased from vendors, which have
date-sensitive software or embedded chips may recognize a date using "00" as the
year 1900 rather than the year 2000. This could result in a system failure or
miscalculations causing disruptions of operations, including, among other
things, a temporary inability to operate computerized machinery or equipment,
process transactions, send invoices, or engage in similar normal business
activities.
Based on recent assessments, the Company determined that it will be required to
modify or replace certain portions of its software and certain hardware so that
those systems will properly utilize dates beyond December 31, 1999. The Company
presently believes that with modifications or replacements of existing software
and certain hardware, the Company's exposure to the Year 2000 Issue can be
mitigated so as to avoid materially adverse consequences. However, if such
modifications and replacements are not made, or are not completed timely, there
is no assurance that the Year 2000 Issue will not have a material adverse
impact on the operations of the Company.
Management's Plan
The Company's plan to address the Year 2000 Issue involves the following four
steps: assessment, remediation, testing and implementation. To date, the Company
has completed its assessment of all systems that could be significantly affected
by the Year 2000 problem for all divisions and subsidiaries of the Company
included in the Company's 1997 audited financial statements and expects to
complete its assessment of companies and divisions acquired during 1998 by the
end of 1998. As the Company has not completed its assessment of the Year 2000
issues for its 1998 acquisitions, the balance of this Year 2000 discussion
relates solely to the divisions and subsidiaries of the Company which were
included in the Company's 1997 audited financial statements. The completed
assessment concluded that several of the Company's legacy financial applications
(principally general ledger) needed to be replaced. In addition, the Company has
identified a list of hardware and software used throughout the Company requiring
replacement. Finally, the Company has queried its 100 most critical vendors and
customers that do not share information systems with the Company (external
agents) regarding their Year 2000 compliance. To date, the Company has received
a 10% response rate and is not yet aware of any external agent with a Year 2000
issue that could reasonably be expected to materially impact the Company's
results of operations, liquidity or capital resources. The Company anticipates
completing its assessment of external agents during the second quarter of 1999.
However, the Company has no means of ensuring that external agents will be Year
2000 ready. The only enterprise system that interfaces directly outside the
Company is its outsourced payroll system (ADP). This system has been certified
as fully year 2000 compliant.
The Company is approximately 50% complete in its remediation phase. The key
aspect of this phase is replacing the legacy financial applications that are not
Year 2000 compliant. In order to have Year 2000 compliant systems and to improve
access to business information through common, integrated computing systems
across the Company, a fully compliant Enterprise Resource Planner ("ERP")
(principally financial applications) was purchased from the Oracle Corporation
in 1997. The Company has implemented the ERP in approximately half of the
operating divisions and plans to have it implemented in the remaining divisions
by mid 1999. The Company would have implemented the ERP without regard to Year
2000 issues although the Year 2000 issues have accelerated the Company's
implementation of its ERP.
21
<PAGE>
The testing phase and implementation phase of the Company's plan runs
concurrently with the implementation of the ERP and is similarly 50% complete.
The implementation phase also includes the investigation and replacement of
non-compliant operational and administrative software applications (e.g. e-mail
clients and word processors) and the hardware upgrade or replacement of
non-compliant or questionable compliant hardware and software.
Costs
The Company will utilize primarily internal resources to program, replace, test
and implement changes for the Year 2000 project. The total cost of the project
is anticipated to approximate $3 million including the cost of acquiring
hardware and software required for the ERP system. Of this amount, approximately
$2.5 million has been spent to date. The amount primarily represents the
purchase and rollout of the Company's ERP. The remainder will primarily entail
software and hardware upgrades and further rollout of the ERP. The Company does
not track the portion of these costs attributable to Year 2000 compliance and
does not allocate internal costs (primarily personnel costs of ITS personnel) to
Year 2000 compliance. This estimate does not include the Company's potential
share of Year 2000 costs that may be incurred by companies in which the Company
has a minority interest.
Risks
Although no assurance can be given, Management of the Company believes it has an
effective program in place to resolve the Year 2000 issue in a timely manner.
The majority of the business is centralized or in the process of becoming
centralized. Most centralized corporate functions are fully compliant. In the
event that the Company does not complete any additional phases, the Company
would be required to fully centralize all business functions until that time
that full compliance could be reached. The realistic worst case scenario is that
the Company fails to centralize its key functions in tandem with a failure to
complete the Year 2000 Project. The amount of potential liability, lost revenue
and failed business processes resulting from the failure of the Company's Year
2000 compliance program cannot be reasonably estimated at this time. The
failure to correct a material Year 2000 problem could result in an interruption
in, or a failure of, certain normal business activities or operations. Such
failures could materially and adversely affect the Company's results of
operations, liquidity and financial condition. Due to the general uncertainty
inherent in the Year 2000 problem, resulting in part from the uncertainty of the
Year 2000 readiness of third-party suppliers and customers, the Company is
unable to determine at this time whether the consequences of Year 2000 failures
will have a material impact on the Company's results of operations, liquidity or
financial condition. The Year 2000 Project is expected to significantly reduce
the Company's level of uncertainty about the Year 2000 problem and, in
particular, about the Year 2000 compliance and readiness of its material
external agents. The Company believes that, with the implementation of new
business systems and completion of the Year 2000 Project as scheduled, the
possibility of significant interruptions of normal operations should be reduced.
Contingency Plans
The Company has contingency plans for certain critical applications. These
contingency plans involve primarily manual work-arounds. The Company plans to
evaluate the status of completion more thoroughly in March 1999 and determine
the extent of further contingency planning, and formalize that planning
already arranged.
22
<PAGE>
ITEM 3.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable.
PART II
Other Information
Items 1,2,3,4, and 5 are not applicable.
Item 6.
EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
27.1 Financial Data Schedule*
- ------------------------
*filed herewith
(b) Reports on Form 8-K.
The Company filed a current report on Form 8-K on July 6, 1998 reporting in Item
2, "Acquisition or Disposition of Assets," its acquisitions of Light & Sound
Design Holdings Limited ("Holdings") and Production Arts Lighting Inc.
("Production Arts"). On September 2, 1998 and September 14, 1998, the Company
filed amendments thereto on Form 8-K/A, providing in Item 7 financial statements
and pro forma financial information with respect to the acquisitions of Holdings
and Production Arts, respectively. The Company filed a current report on Form
8-K, dated on August 12, 1998 reporting in Item 2, "Acquisition or Disposition
of Assets," its acquisition of CBE Events and Exhibits. In addition, the Company
filed a current report on Form 8-K, on August 27, 1998 reporting in Item 2,
"Acquisition or Disposition of Assets," its acquisition of Signal Perfection,
Ltd.
23
<PAGE>
PRODUCTION RESOURCE GROUP, L.L.C.
FORM 10-Q
SEPTEMBER 30, 1998
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.
PRODUCTION RESOURCE GROUP, L.L.C.
November 13, 1998 By /s/ Bradley G. Miller
- ----------------- ---------------------
Date Bradley G. Miller
Chief Operating and Financial Officer
(Principal Financial Officer)
24
<PAGE>
Exhibit Index
27.1 Financial Data Schedule
25
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> SEP-30-1998
<CASH> 11,342
<SECURITIES> 0
<RECEIVABLES> 36,675
<ALLOWANCES> 2,044
<INVENTORY> 9,495
<CURRENT-ASSETS> 63,728
<PP&E> 103,444
<DEPRECIATION> 25,162
<TOTAL-ASSETS> 184,105
<CURRENT-LIABILITIES> 35,096
<BONDS> 100,000
0
0
<COMMON> 0
<OTHER-SE> 2,261
<TOTAL-LIABILITY-AND-EQUITY> 184,105
<SALES> 111,625
<TOTAL-REVENUES> 111,625
<CGS> 76,718
<TOTAL-COSTS> 103,744
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 10,185
<INCOME-PRETAX> (1,798)
<INCOME-TAX> 739
<INCOME-CONTINUING> (2,537)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,567)
<EPS-PRIMARY> 0.000
<EPS-DILUTED> 0.000
</TABLE>
