<PAGE> 1
================================================================================
UNITED STATES
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 MARCH 31, 1998 COMMISSION FILE NO. 0-23082
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM TO
CARLYLE INDUSTRIES, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 13-1574754
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
ONE PALMER TERRACE
CARLSTADT, NJ 07072
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE (201) 935-6220
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.
[X] YES [ ] NO
INDICATE THE NUMBER OF SHARES OUTSTANDING OF EACH OF THE ISSUER'S CLASSES OF
COMMON STOCK, AS OF THE LATEST PRACTICABLE DATE.
AS OF MAY 1, 1998, 7,382,782 SHARES OF COMMON STOCK WERE OUTSTANDING.
================================================================================
Page 1 of 13
<PAGE> 2
CARLYLE INDUSTRIES, INC.
ONE PALMER TERRACE
CARLSTADT, NJ 07072
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE NO.
--------
<S> <C>
Part I -- Financial Information
Item 1. Financial Statements
Consolidated Balance Sheets
as of March 31, 1998 and December 31, 1997.............................. 3
Consolidated Statements of Operations
for the Three Months Ended March 31, 1998 and 1997...................... 4
Consolidated Statements of Cash Flows
for the Three Months Ended March 31, 1998 and 1997...................... 5
Notes to Unaudited Consolidated Financial Statements - March 31, 1998... 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations........................... 9
Part II -- Other Information
Item 1. Legal Proceedings....................................................... Not Applicable
Item 2. Changes in Securities................................................... Not Applicable
Item 3. Defaults upon Senior Securities......................................... 11
Item 4. Submission of Matters to a Vote of Security Holders..................... 11
Item 5. Other Information....................................................... Not Applicable
Item 6. Exhibits and Reports on Form 8-K........................................ 11
Signatures.............................................................. 12
</TABLE>
Page 2 of 13
<PAGE> 3
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CARLYLE INDUSTRIES, INC.
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
MARCH 31, 1998
(UNAUDITED) DECEMBER 31, 1997
-------------- -----------------
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $ 5,497 $ 12,475
Accounts receivable trade, net 2,783 3,040
Inventories, net 2,403 2,541
Current deferred tax asset 2,292 2,740
Other current assets 137 118
------------ ------------
Total current assets 13,112 20,914
------------ ------------
Property, plant and equipment, at cost 2,523 2,509
Less: Accumulated depreciation and amortization (778) (739)
------------ ------------
Net property, plant and equipment 1,745 1,770
------------ ------------
Goodwill, net 2,128 2,152
Other assets 486 226
------------ ------------
Total Assets $ 17,471 $ 25,062
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 647 $ 731
Current maturities of long-term debt 51 51
Federal income taxes payable 117 6,514
Other current liabilities 1,089 2,972
------------ ------------
1,904 10,268
------------ ------------
Long-Term debt 66 78
Other Liabilities 8,831 9,033
------------ ------------
Total Liabilities 10,801 19,379
Redeemable Preferred Stock, par value $0.01 per share
21,305,055 shares authorized;
Shares issued and outstanding at March 31, 1998
and December 31, 1997: 20,805,060 20,805 20,805
Accumulated dividends on preferred stock 4,554 4,184
------------ ------------
25,359 24,989
Common Stock, par value $0.01 per share
20,000,000 shares authorized;
Shares issued and outstanding at March 31, 1998
and December 31, 1997: 7,382,782 74 74
Paid in Capital 19,858 19,858
Retained Earnings (38,621) (39,238)
------------ ------------
Total Common Stockholders' Equity (18,689) (19,306)
------------ ------------
Total Liabilities and Stockholders' Equity $ 17,471 $ 25,062
============ ============
</TABLE>
See Notes to Unaudited Consolidated Financial Statements.
Page 3 of 13
<PAGE> 4
CARLYLE INDUSTRIES, INC.
AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
1998 1997
-------- --------
<S> <C> <C>
Net Sales $ 5,057 $ 5,005
Cost of Sales 2,500 2,352
-------- --------
2,557 2,653
Selling, general & administrative expenses 1,098 1,287
Other income -- net -- (6)
-------- --------
Income from continuing operations before
interest and income taxes 1,459 1,372
Interest expense (income) (97) 33
-------- --------
Income from continuing operations before taxes 1,556 1,339
Provision for income taxes 569 488
-------- --------
Income from continuing operations 987 851
Less dividends on preferred stock 370 348
-------- --------
Income from continuing operations
applicable to common stock 617 503
Loss from discontinued operations, net of
income tax provision -- (316)
Loss on disposal of discontinued operations, net of
income tax provision -- (9,801)
-------- --------
-- (10,117)
-------- --------
Net income (loss) applicable to common stock $ 617 $ (9,614)
======== ========
Basic earnings (loss) per common share:
Continuing operations $ .08 $ .07
Discontinued operations -- (1.37)
-------- --------
Total $ .08 $ (1.30)
======== ========
Diluted earnings (loss) per common share:
Continuing operations $ .08 $ .07
Discontinued operations -- (1.37)
-------- --------
Total $ .08 $ (1.30)
======== ========
Weighted average common shares
outstanding (in thousands) 7,383 7,388
======== ========
</TABLE>
See Notes to Unaudited Consolidated Financial Statements.
Page 4 of 13
<PAGE> 5
CARLYLE INDUSTRIES, INC.
AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
1998 1997
-------- --------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Income from continuing operations $ 987 $ 851
Reconciliation of net income from continuing
operations to net cash provided (used) by operations:
Depreciation and amortization 159 117
Deferred tax provision 448 447
Changes in operating assets and liabilities:
Accounts receivable, trade 257 510
Inventories 138 (439)
Other current assets (19) 231
Other assets (356) --
Accounts payable (84) 98
Federal and state income taxes payable (7,117) (35)
Other current liabilities (1,163) (298)
Other liabilities (202) (192)
Cash flow from discontinued operations -- (4,813)
-------- --------
(6,952) (3,523)
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of discontinued operation -- 51,924
Capital expenditures (14) (65)
-------- --------
(14) 51,859
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from revolving credit facility and capitalized
lease obligations -- 20,279
Repayment of long term debt and capital lease
obligations (12) (57,234)
-------- --------
(12) (36,955)
-------- --------
(Decrease) increase in cash and cash equivalents (6,978) 11,381
Cash and cash equivalents beginning of period 12,475 131
-------- --------
Cash and cash equivalents end of period $ 5,497 $ 11,512
======== ========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest $ -- $ 783
======== ========
Income taxes $ 7,237 $ 35
======== ========
</TABLE>
See Notes to Unaudited Consolidated Financial Statements
Page 5 of 13
<PAGE> 6
CARLYLE INDUSTRIES, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1998
NOTE 1: BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Rule 10-01 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 fair presentation have
been included. Certain reclassifications have been made to prior year amounts in
order to present them on a basis consistent with the current year. Operating
results for the three-month period ended March 31, 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 consolidated financial statements
and footnotes included in the Company's annual report on Form 10-K for the year
ended December 31, 1997.
NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Operation: The Company and its subsidiary distributes a line of home
sewing and craft products, principally buttons.
Consolidation: The accompanying consolidated financial statements include the
accounts of the Company and all subsidiaries after elimination of intercompany
items and transactions.
Depreciation and Amortization: Depreciation and amortization are computed
principally by the straight-line method for each class of depreciable and
amortizable asset based on their estimated useful lives. Buildings and
improvements, machinery and equipment, and furniture, fixtures and leasehold
improvements are generally depreciated over periods of 20-35, 5-25 and 5-10
years, respectively.
Revenue Recognition: Revenue is recognized upon shipment of merchandise.
Cash Equivalents: The Company considers all highly liquid investments with a
maturity of three months or less when purchased to be cash equivalents.
Use of Estimates: The preparation of financial statements in conformity with
generally accepted accounting principles requires the Company 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 amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
NOTE 3: EARNINGS PER SHARE
Earnings per common share for the Company have been computed on the basis of
weighted average common shares outstanding after providing for quarterly
preferred dividend requirements.
Page 6 of 13
<PAGE> 7
NOTE 4: INVENTORIES:
The components of inventories, net of reserves, are as follows (dollars in
thousands):
<TABLE>
<CAPTION>
MARCH 31, 1998 DECEMBER 31, 1997
-------------- -----------------
<S> <C> <C>
Raw materials $1,967 $1,976
Work in Progress 10 10
Finished goods 426 555
------ ------
$2,403 $2,541
====== ======
</TABLE>
NOTE 5: DISCONTINUED OPERATIONS
On March 26, 1997, the Company sold the assets and specified liabilities of the
Company's Thread division to an affiliate of Hicking Pentecost PLC ("HP"). The
aggregate cash consideration was $54.9 million, of which $3.0 million was placed
in escrow subject to certain post-closing adjustments, plus the assumption of
approximately $6.8 million of long term liabilities. The proceeds from the $3.0
million held in escrow, if any, will be recognized as income from discontinued
operations, net of related income taxes when, and if, the funds become
receivable by the Company.
In connection with this sale, the Company repaid all of its outstanding bank
debt using proceeds received in the transaction. No penalties were incurred by
the Company in connection with this prepayment. Income tax payments totaling
$7.3 million were made during the first quarter of 1998 related to the tax gain
on the sale of the Thread division. Nondeductible goodwill associated with the
Thread division amounting to approximately $18.0 million was charged to
discontinued operations in connection with the sale. Operating results of the
Thread division for 1997 through the date of disposition and for all prior
periods have been presented as discontinued operations. The Thread division had
revenues of $9.8 million through the date of disposition in 1997 and $66.8
million and $68.8 million during the years ended December 31, 1996 and 1995
respectively.
In connection with this transaction, the Company changed its name to Carlyle
Industries, Inc.
NOTE 6: DEFAULT ON PREFERRED STOCK
Under the terms of the Company's charter, dividends are payable upon the
Preferred Stock when, as and if declared by the Board of Directors out of
legally available funds. In addition, the Preferred Stock is required to be
redeemed by the Company in annual installments of $4.2 million beginning March
15, 1995 through March 1999, subject among other things to the extent of legally
available funds as determined by the Board of Directors and the approval of the
Company's senior lenders, if any. Prior to March 27, 1997, the Company did not
make any payments on account of the Preferred Stock (either dividend or
redemption) as the Company's lenders declined to approve such payments. However,
as of that date, the Company discharged the last of its credit facilities.
Consequently, the Company is now in default of its obligations to redeem the
Preferred Stock to the extent of its legally available funds. As of March 31,
1998, the Preferred Stock payment arrearages aggregated $21.2 million including
accrued but unpaid preferred dividends of $4.6 million. Accrued but unpaid
dividends are added to the redemption value of the Preferred Stock and the total
continues to accrue interest at a compound rate of 6% per annum.
The Company is engaged in discussions with Noel Group, Inc. ("Noel"), with a
view to satisfying its obligations to the holders of the Preferred Stock in
accordance with the terms of its charter and to the extent
Page 7 of 13
<PAGE> 8
consistent with the Company's resources. Discussions have dealt with the amount
and timing of payments and possible modifications of the Preferred Stock terms
and conditions. Any such modifications would require the agreement of the
Company and the holders of the Preferred Stock.
The Company intends to fulfill its obligation to the holders of the Preferred
Stock as required by the Company's charter to the extent the Company has cash
resources in excess of those required to operate its business. As the Company
believes that it does not currently have such excess resources, its ability to
make payments on account of the Preferred Stock in the future will depend on the
Company's future cash flow, the timing of the settlement of the liabilities
recorded in the financial statements of the Company, the outcome of the
negotiations with Noel described above, and the ability of the Company to obtain
additional financing. In addition, as the Company has agreed to notify the
Pension Benefit Guaranty Corporation ("PBGC") prior to making any redemption
payments; the Company's decision to make any such payments will depend on the
successful resolution of any issues which may arise with the PBGC relating to
the Company's unfunded liability to its defined benefit plan. In December 1997,
the Company notified the PBGC that it intends to redeem $10 million of Preferred
Stock as soon after year end as is practicable, but only to the extent of
legally available funds as determined by the Board of Directors and after
appropriate bank financing has been satisfactorily obtained. Following such
notice, the PBGC indicated that it would not take any action with respect to
such payments. The Company has engaged an investment bank to assist the Board of
Directors in determining the extent of legally available funds and is currently
exploring the possibility of securing bank financing which would enable such
payments to be made, assuming the Board of Directors determines there are
sufficient legally available funds. The Company is also exploring strategic
alternatives to such financing.
Page 8 of 13
<PAGE> 9
PART I - FINANCIAL INFORMATION
ITEM 2. MANAGEMENT DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULT OF OPERATIONS
RESULTS OF OPERATIONS
Sales during the first quarter of 1998 totaled $5.1 million. Sales in the first
quarter of 1997 totaled $5.0 million for an increase of $.1 million.
Gross margin during the first quarter of 1998 totaled $2.6 million as compared
with $2.7 million in the first quarter of 1997.
Selling, general and administrative expenses in the first quarter of 1998
totaled $1.1 million as compared to $1.3 million in the first quarter of 1997.
The decrease in selling, general and administrative costs are primarily the
result of head count reductions occurring at corporate headquarters during the
last three quarters of 1997.
The provision for income taxes during the first quarter of 1998 totaled $.6
million as compared to $.5 million during the same period last year. The
combined effective income tax rate totaled 36.6% in the first quarter of 1998
and 36.4% in the first quarter of 1997. The combined effective income tax rates
are higher than combined statutory rates because of nondeductible goodwill.
Preferred dividends during the first quarter of 1998 totaled $370 thousand as
compared to $348 thousand during the same period in 1997. Preferred dividends
are accrued and compound at a rate of 6%. No dividend payments have been made by
the Company.
First quarter results may not be indicative of future quarterly results due to
future programs with major customers which may vary as to timing and amount
from quarter to quarter. In addition, consolidation within the Company's
customer base may put further pressure on the Company's revenue and operating
results in subsequent quarters. The Company is currently pursuing a number of
strategies to improve its revenue base.
LIQUIDITY AND CAPITAL RESOURCES
At March 31, 1998, the Company's principal sources of liquidity included cash
and cash equivalents of $5.5 million and trade accounts receivable of $2.8
million. In connection with the sale of the Thread division, the Company paid
approximately $7.2 million of Federal and state income taxes in March 1998.
Cash used by operations during the three months ended March 31, 1998 totaled
$7.0 million which included income tax payments totaling $7.2 million made
during the first quarter of 1998 attributable to the tax gain resulting from the
sale of the Thread division in 1997.
Under the terms of the Company's charter, dividends are payable upon the
Preferred Stock when, as and if declared by the Board of Directors out of
legally available funds. In addition, the Preferred Stock is required to be
redeemed by the Company in annual installments of $4.2 million beginning March
15, 1995
Page 9 of 13
<PAGE> 10
through March 1999, subject among other things to the extent of legally
available funds as determined by the Board of Directors and the approval of the
Company's senior lenders, if any. Prior to March 27, 1997, the Company did not
make any payments on account of the Preferred Stock (either dividend or
redemption) as the Company's lenders declined to approve such payments. However,
as of that date, the Company discharged the last of its credit facilities.
Consequently, the Company is now in default of its obligations to redeem the
Preferred Stock to the extent of its legally available funds. As of March 31,
1998, the Preferred Stock payment arrearages aggregated $21.2 million including
accrued but unpaid preferred dividends of $4.6 million. Accrued but unpaid
dividends are added to the redemption value of the Preferred Stock and the total
continues to accrue interest at a compound rate of 6% per annum.
The Company is engaged in discussions with Noel Group, Inc. ("Noel"), with a
view to satisfying its obligations to the holders of the Preferred Stock in
accordance with the terms of its charter and to the extent consistent with the
Company's resources. Discussions have dealt with the amount and timing of
payments and possible modifications of the Preferred Stock terms and conditions.
Any such modifications would require the agreement of the Company and the
holders of the Preferred Stock.
The Company intends to fulfill its obligation to the holders of the Preferred
Stock as required by the Company's charter to the extent the Company has cash
resources in excess of those required to operate its business. As the Company
believes that it does not currently have such excess resources, its ability to
make payments on account of the Preferred Stock in the future will depend on the
Company's future cash flow, the timing of the settlement of the liabilities
recorded in the financial statements of the Company, the outcome of the
negotiations with Noel described above, and the ability of the Company to obtain
additional financing. In addition, as the Company has agreed to notify the
Pension Benefit Guaranty Corporation ("PBGC") prior to making any redemption
payments; the Company's decision to make any such payments will depend on the
successful resolution of any issues which may arise with the PBGC relating to
the Company's unfunded liability to its defined benefit plan. In December 1997,
the Company notified the PBGC that it intends to redeem $10 million of Preferred
Stock as soon after year end as is practicable, but only to the extent of
legally available funds as determined by the Board of Directors and after
appropriate bank financing has been satisfactorily obtained. Following such
notice, the PBGC indicated that it would not take any action with respect to
such payments. The Company has engaged an investment bank to assist the Board of
Directors in determining the extent of legally available funds and is currently
exploring the possibility of securing bank financing which would enable such
payments to be made, assuming the Board of Directors determines there are
sufficient legally available funds. The Company is also exploring strategic
alternatives to such financing.
YEAR 2000 ISSUES
Management is currently in the process of working with its software vendors to
obtain year 2000 compliant systems. Based on information currently available,
management does not anticipate that the Company will incur significant operating
expenses or be required to invest heavily in computer system improvements to be
year 2000 compliant, however, the Company is still analyzing its systems and
requirements. To the extent the Company's systems are not fully year 2000
compliant, there can be no assurance that potential systems interruptions or the
cost necessary to update software would not have a material adverse effect on
the Company's business, financial condition, results of operations and business
prospects. The Company does not currently have complete information concerning
the year 2000 compliance status of its suppliers and customers. In the event
that any of the Company's significant suppliers or customers do not successfully
and timely achieve year 2000 compliance, the Company's business or operations
could be adversely affected.
Page 10 of 13
<PAGE> 11
IMPACT OF INFLATION
The Company's results are affected by the impact of inflation on operating
costs. Historically, the Company has used selling price adjustments, cost
containment programs and improved operating efficiencies to offset the otherwise
negative impact of inflation on its operations.
NEW YORK STOCK EXCHANGE LISTING
As of December 31, 1997, the Company failed to meet certain of the New York
Stock Exchange (the "Exchange") continued listing requirements. The Exchange and
the Company have had discussions concerning the Company's circumstances and the
Company will presently be submitting to the Exchange its plans to bring itself
into compliance. Although the Exchange has not informed the Company that it will
be delisted, there can be no assurance that it will not be delisted.
This Quarterly Report on Form 10-Q (the "Quarterly Report") contains statements
which constitute forward-looking statements within the meaning of Section 21E of
the Securities Exchange Act of 1934, as amended (the "Exchange Act"). Those
statements appear in a number of places in this Quarterly Report and include
statements regarding the intent, belief or current expectations of the Company,
its Directors or its Officers with respect to, among other things: (i) the
Company's financing plans; (ii) trends affecting the Company's financial
condition or results of operations; (iii) the Company's growth strategy and
operating strategy; (iv) customer concentration and the increasing consolidation
of the Company's customer base and (v) the declaration and payment of dividends.
Shareholders are cautioned that any such forward-looking statements are not
guarantees of future performance and involve risk and uncertainties, and that
actual results may differ materially from those projected in the forward-looking
statements as a result of various factors.
PART II - OTHER INFORMATION
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
a) None
b) REDEEMABLE SERIES B PREFERRED STOCK
Scheduled dividend payments totaling $1,316,018 in 1995,
$1,361,230 in 1996, $1,440,957 in 1997 and $368,728 in 1998
remain unpaid and continue to accrue at a compounded rate of
6% per annum. Additionally, the Company has not given effect
to certain previously scheduled redemption payments. See
Note 6 to the unaudited consolidated financial statements
for a detailed discussion of the Preferred Stock.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a) EXHIBITS
Page 11 of 13
<PAGE> 12
EXHIBIT SEQUENTIALLY
NUMBER EXHIBIT NUMBERED PAGE
------ ------- -------------
(b) REPORTS ON FORM 8-K.
During the first quarter of 1998, the Company did not file a
Current Report on Form 8-K.
Page 12 of 13
<PAGE> 13
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.
CARLYLE INDUSTRIES, INC.
(Registrant)
/S/ Karen Brenner
- --------------------------------------------------------------
Karen Brenner, Chairman, President and Chief Executive Officer
/S/ Edward F. Cooke
- --------------------------------------------------------------
Edward F. Cooke, Vice President and Chief Financial Officer
Date: May 7, 1998
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> MAR-31-1998
<CASH> 5,497
<SECURITIES> 0
<RECEIVABLES> 2,783
<ALLOWANCES> 0
<INVENTORY> 2,403
<CURRENT-ASSETS> 13,112
<PP&E> 2,523
<DEPRECIATION> 778
<TOTAL-ASSETS> 17,471
<CURRENT-LIABILITIES> 1,905
<BONDS> 0
0
25,358
<COMMON> (18,689)
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 17,471
<SALES> 5,057
<TOTAL-REVENUES> 5,057
<CGS> 2,500
<TOTAL-COSTS> 2,500
<OTHER-EXPENSES> 1,459
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (97)
<INCOME-PRETAX> 1,556
<INCOME-TAX> (569)
<INCOME-CONTINUING> 987
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 617
<EPS-PRIMARY> 0.08
<EPS-DILUTED> 0.08
</TABLE>
