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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File
For Quarter Ended June 30, 1997 Number 0-9209
------------------- ------
RIVERSIDE GROUP, INC.
(Exact name of registrant as specified in its charter)
Florida 59-1144172
- ------------------------------------------ ------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization Identification No.)
7800 Belfort Parkway, Jacksonville, Florida 32256
- ------------------------------------------- -----
(Address of principal executive Offices) (Zip Code)
Registrant's telephone number, including area code number
904-281-2200
------------
Indicate by a 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, and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
----- -----
On August 5, 1997, there were 5,287,123 shares of the Registrant's common stock
outstanding.
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RIVERSIDE GROUP, INC.
INDEX
<TABLE>
<CAPTION>
Page
PART I. FINANCIAL INFORMATION Number
------
<S> <C> <C> <C>
Item 1. Financial Statements
Condensed Consolidated Balance Sheets
June 30, 1997 (Unaudited)
and December 31, 1996 3
Condensed Consolidated Statements of Operations
For the three months and six months ended
June 30, 1997 and 1996 (Unaudited) 4
Condensed Consolidated Statement
of Common Stockholders' Equity
For the six months ended
June 30, 1997 (Unaudited) 5
Condensed Consolidated Statements of
Cash Flows
For the six months ended
June 30, 1997 and 1996 (Unaudited) 6
Notes to Condensed Consolidated
Financial Statements (Unaudited) 7
Item 2. Management's Discussion and Analysis 12
of Financial Condition and Results of
Operations
PART II.
Item 6. Exhibits and Reports on Form 8-K 24
</TABLE>
2
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RIVERSIDE GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(in thousands, except share data)
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1997 1996
----------- ------------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 352 $ 3,100
Accounts receivable, less allowance for doubtful
accounts of $3,384 in 1997 and $4,318 in 1996 96,160 71,743
Inventory 129,571 100,672
Construction and permanent loans 8,568 4,169
Deferred tax asset 12,338 10,331
Prepaid expenses 2,045 1,023
--------- ---------
Total current assets 249,034 191,038
Investment in real estate 15,786 16,854
Investment in Circle Investors, Inc. 5,345 5,345
Property, plant and equipment, net 45,425 50,245
Trademark (net of accumulated amortaization of
$10,163 in 1997 and $10,052 in 1996) 6,837 6,948
Deferred tax asset 18,831 18,831
Excess of cost over fair value of assets acquired 16,132 16,463
Other assets (net of accumulated amortization of
$7,794 in 1997 and $6,983 in 1996) 7,284 8,106
--------- ---------
Total assets $ 364,674 $ 313,830
========= =========
LIABILITIES & STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current maturities of long-term debt $ 10,307 $ 4,861
Accounts payable 68,036 41,318
Income tax payable 25 25
Accrued liabilities 26,155 28,000
--------- ---------
Total current liabilities 104,523 74,204
Long-term debt, less current maturities 213,645 186,142
Mortgage debt, related party 16,699 17,416
Other long-term liabilities 3,104 2,985
--------- ---------
Total liabilities 337,971 280,747
Minority interest 10,478 12,308
Commitments and contigencies (Note 2)
COMMON STOCKHOLDERS EQUITY:
Common stock, $.10 par value; 20,000,000 shares authorized; 529 530
5,287,123 issued and outstanding in 1997 and 5,296,123
issued and outstanding in 1996
Additional paid in capital 16,711 16,728
Retained earnings (deficit) (1,015) 3,517
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Total common stockholders' equity 16,225 20,775
--------- ---------
Total liabilities and common stockholders' equity $ 364,674 $ 313,830
========= =========
</TABLE>
The accompanying notes are an integral part of the Condensed Consolidated
Financial Statements.
3
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RIVERSIDE GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
(in thousands except per share amounts)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
-------------------------- --------------------------
JUNE 30, JUNE 30, JUNE 30, JUNE 30,
1997 1996 1997 1996
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
REVENUES:
Sales and service revenues $ 237,335 $ -- $ 396,654 $ --
Insurance premiums and annuity considerations -- 1,258 -- 3,224
Net investment income (loss) (46) 3,036 (53) 6,193
Net realized investment gains 633 743 672 1,217
Other operating income 1,993 (84) 3,126 196
----------- ----------- ----------- -----------
239,915 4,953 400,399 10,830
----------- ----------- ----------- -----------
COSTS AND EXPENSES:
Cost of sales 183,028 -- 305,400 --
Provision (reduction) for doubtful accounts (463) -- 583 --
Depreciation, goodwill and trademark amortization 1,418 -- 2,725 --
Income on reorganization of life insurance
subsidiaries -- (431) -- (431)
Selling, general and administrative expenses 47,796 1,400 86,373 2,352
Interest expense 6,214 767 12,231 1,556
Policyholder benefits -- 2,227 -- 5,805
Policy acquisition expenses -- 969 -- 2,026
----------- ----------- ----------- -----------
237,993 4,932 407,312 11,308
----------- ----------- ----------- -----------
EARNINGS (LOSS)BEFORE INCOME TAXES, EQUITY IN
RELATED PARTIES AND MINORITY INTEREST 1,922 21 (6,913) (478)
Current income tax expense (benefit) (1,454) -- 1,286 --
Equity in (earnings)losses of Wickes Inc. -- 580 -- (1,715)
Equity in losses of related parties (213) -- (766) --
Minority interest (648) -- 1,861 --
----------- ----------- ----------- -----------
NET INCOME (LOSS) $ (393) $ 601 $ (4,532) $ (2,193)
=========== =========== =========== ===========
EARNINGS (LOSS) PER SHARE:
Income (Loss) per common share $ (0.07) $ 0.11 $ (0.85) $ (0.41)
=========== =========== =========== ===========
Weighted average number of common stock
used in computing earnings per share 5,307,833 5,311,123 5,308,111 5,311,123
</TABLE>
The accompanying notes are an integral part of the Condensed Consolidated
Financial Statements.
4
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RIVERSIDE GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF COMMON STOCKHOLDERS' EQUITY
(unaudited)
(in thousands)
<TABLE>
<CAPTION>
TOTAL
ADDITIONAL RETAINED COMMON
COMMON PAID-IN EARNINGS STOCKHOLDERS'
STOCK CAPITAL (DEFICIT) EQUITY
-------- -------- --------- -------------
<S> <C> <C> <C> <C>
Balance, December 31, 1996 $ 530 $ 16,728 $ 3,517 $ 20,775
Net loss, six months ended June 30, 1997 (4,532) (4,532)
Purchase and retirement of 9,000 shares of
common stock, at cost (1) (17) (18)
-------- -------- --------- --------
Balance, June 30, 1997 $ 529 $ 16,711 $ (1,015) $ 16,225
======== ======== ========= ========
</TABLE>
The accompanying notes are an integral part of the Condensed
Consolidated Financial Statements.
5
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RIVERSIDE GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
---------------------
JUNE 30, JUNE 30,
1997 1996
--------- ---------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (4,532) $ (2,193)
Adjustments to reconcile net loss to net cash provided by (used in)
operating activities:
Net change in deferred acquisition costs -- 49
Gain on Life Insurance Reorganization (430)
Depreciation expense 2,201 505
Amortization expense 1,253 --
Net change in deferred acquisition costs -- 49
Provision for doubtful accounts 583 --
Gain on sale of fixed assets (546) --
Net realized investment gains on investments (672) (1,217)
Provision for deferred income taxes (2,007) --
Equity in losses of unconsolidated subsidiaries 766 2,295
Minority interest (1,861) --
Interest on policyholder's funds -- 3,469
Change in other assets and liabilities:
Increase in accounts receivable (24,966) --
Increase in inventory (28,899) --
Increase in other assets (1,774) (998)
Accrued investment income -- 197
Increase in accounts payable and accrued liabilities 24,314 --
Reserve for unpaid claims, policy benefits and
recoverable on paid losses from reinsurers and others -- (504)
Net liabilities of other liabilities and current income taxes (1) (358)
-------- --------
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES (36,141) 864
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of investments:
Property, plant and equipment (2,693) --
Fixed maturities available for sale -- (30,383)
Equity securities -- (233)
Investment real estate (320) --
Mortgage, construction and policy loans (17,995) (3,587)
Short-term investments -- (75,783)
Sale, maturity, and principal reductions of investments:
Property, plant and equipment 6,442 --
Fixed maturities available for sale -- 25,707
Equity securities -- --
Investment real estate 2,062 --
Mortgage, construction and policy loans 13,735 3,239
Short-term investments -- 87,981
-------- --------
NET CASH PROVIDED BY INVESTING ACTIVITIES 1,231 6,941
CASH FLOWS FROM FINANCING ACTIVITIES
Net borrowings under revolving line of credit 27,668 --
Repayment of debt (10,484) (2,401)
Increase in borrowings 14,965 --
Purchase and retirement of treasury shares (18) --
Net proceeds from issuance of common stock 31
Deposits of policyholders' funds -- 82
Withdrawal of policyholders' funds -- (4,867)
-------- --------
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES 32,162 (7,186)
NET INCREASE(DECREASE) IN CASH AND EQUIVALENTS (2,748) 619
Cash and equivalents at beginning of period 3,100 258
-------- --------
Cash and equivalents at end of period $ 352 $ 877
======== ========
</TABLE>
Cash paid during the period for interest was $11,546,000 and $1,458,000
for the six months ended June 30, 1997 and 1996, respectively. Cash
paid during the period for income taxes was $832,000 and $0 for the six
months ended June 30, 1997 and 1996, respectively.
The accompanying notes are an integral part of the Condensed Consolidated
Financial Statements.
6
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RIVERSIDE GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Financial Statement Presentation
The condensed consolidated financial statements present the financial
position, results of operations, and cash flows of Riverside Group, Inc. and
its wholly-owned and majority-owned subsidiaries (the "Company").
The condensed consolidated balance sheets as of June 30, 1997, the
condensed consolidated statements of operations for the six months ended June
30, 1997 and 1996, the condensed consolidated statement of common stockholders'
equity for the six months ended June 30, 1997 and the condensed consolidated
statements of cash flows for the six months ended June 30, 1997 and 1996, have
been prepared by the Company without audit. In the opinion of management, all
adjustments (which include only normal recurring adjustments) necessary to
present fairly the financial position, results of operations and cash flows at
June 30, 1997, and for all periods presented have been made. The results of
operations for the six months period ended June 30, 1997 are not necessarily
indicative, if annualized, of those to be expected for the full year.
Certain information and footnote disclosures normally included in
consolidated financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted. It is suggested
that these condensed consolidated financial statements be read in conjunction
with the consolidated financial statements and notes thereto included in the
Company's Annual Report on Form 10-K for the year ended December 31, 1996 filed
with the Securities and Exchange Commission.
Earnings Per Share
Earnings per share are based on the weighted average number of shares
of common stock outstanding during each period (5,308,111 shares in 1997 and
5,311,123 shares in 1996). The Company purchased and retired 9,000 shares of
its common stock during the first six months of 1997.
2. COMMITMENTS AND CONTINGENCIES
On June 30, 1997, Wickes Inc. ("Wickes") completed the sale leaseback
of its 72,000 square foot corporate headquarters in Vernon Hills, Illinois. The
sale price was approximately $7.3 million (which was utilized to reduce debt),
and a gain of approximately $600,000 will be amortized over the life of the
lease. Wickes will be master leasing the entire building for a 20 year term, at
market rates and has subleased over 20,000 square feet. This transaction is
expected to have a favorable impact on
7
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Wickes' future net earnings with the increase in rent expense (selling, general
and administrative expenses) more than offset by reduced interest expense.
At June 30, 1997, Wickes had accrued approximately $1.0 million for
remediation of certain environmental and product liability matters,
principally underground storage tank removal.
Many of the building center facilities presently and formerly operated
by Wickes contained underground petroleum storage tanks. Other than tanks at
one acquired facility recently installed in compliance with modern standards,
all such tanks known to Wickes located on facilities owned or operated by
Wickes have been filled, removed, or are scheduled to be removed in accordance
with applicable environmental laws in effect at the time. As a result of
reviews made in connection with the sale or possible sale of certain
facilities, Wickes has found petroleum contamination of soil and ground water
on several of these sites and has taken, and expects to take, remedial actions
with respect thereto. In addition, it is possible that similar contamination
may exist on properties no longer owned or operated by Wickes the remediation
of which Wickes could under certain circumstances be held responsible. Since
1988, Wickes has incurred approximately $ 2.0 million of net costs with respect
to the filling or removing of underground storage tanks and related
investigatory and remedial actions.
Wickes is one of many defendants in approximately 110 actions, each of
which seeks unspecified damages, brought in 1993, in various Michigan state
courts against manufacturers and building material retailers by individuals who
claim to have suffered injuries from products containing asbestos. Each of the
plaintiffs in these actions is represented by one of two law firms. Wickes is
aggressively defending these actions and does not believe that these actions
will have a material adverse effect on the Company.
On November 3, 1995, a complaint was filed against Wickes', its directors
and the Company seeking to enjoin or to obtain damages with respect to Wickes,
agreement to issue 2,000,000 newly-issued shares of common stock to the Parent
Company for $10 million.
The Company and Wickes are involved in various other legal proceedings
which are incidental to the conduct of their businesses. The Company does not
believe that any of these proceedings will have a material adverse effect on
the Company.
The Company's assessment of the matters described in this note and other
forward-looking statements ("Forward-Looking Statements") in these notes are
made pursuant to the safe harbor provisions of the Private Securities
Litigation Reform Act of 1995 and are inherently subject to uncertainty. The
outcome of the matters in this note may differ from the Company's assessment of
these matters as a result of a number of factors including but not limited to:
matters unknown to the Company at the present time, development of losses
materially different from the Company's experience, Wickes' ability to prevail
against its insurers with respect to coverage issues to date, the financial
ability of those insurers and other persons from whom Wickes may be entitled to
indemnity, and the unpredictability of matters in litigation.
8
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3. LONG TERM AND MORTGAGE DEBT
Consolidated long-term and mortgage debt is comprised of the following at
June 30, 1997 (in thousands):
<TABLE>
<S> <C>
THE PARENT GROUP
LONG-TERM DEBT
--------------
Subordinated Notes $ 9,535
Warehouse line of credit for construction
and permanent loans 8,527
Other 1,786
Less: current maturities (10,227)
----------
Total Company long-term debt less current maturities $ 9,621
----------
MORTGAGE DEBT
-------------
Mortgage debt, non-recourse, related party $ 16,699
Less: current maturities -
----------
The Company long term mortgage debt,
less current maturities $ 16,699
----------
WICKES
------
Revolving line of credit $ 103,981
Senior subordinated notes 100,000
Other 123
Less: current maturities (80)
----------
Total Wickes' long-term debt less current maturities $ 204,024
----------
Total long-term and mortgage debt
less current maturities $ 230,344
==========
</TABLE>
THE PARENT GROUP
On May 1, 1997, the Company obtained a $1.5 million demand bank line of
credit secured by 800,000 shares of Wickes common stock and 2,330 shares of
Circle preferred stock. Borrowings under this line of credit bear interest
payable monthly at two percent above the lender's standard rate, and principal
is payable upon demand and is designed to be paid with the cash proceeds of the
pledged Circle shares in a pending transaction. Monthly principal payments of
$125,000 per month are required beginning November 1, 1997 if the principal has
not otherwise been demanded or paid. The demand bank line of credit contains
certain affirmative and negative covenants, including among others,
prohibitions on mergers and the like, on the incurrence of indebtedness to
parties other than the lender, on loans to related parties, on the payment of
dividends, on the issuance of stock, on the disposition of assets (other than
real estate assets, the Circle shares and the shares of pledged Wickes common
stock), on the acquisition of assets or the making of capital expenditures, and
on the increase
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in compensation of the Company's chief executive officer above the 1996 level.
The demand bank line of credit also requires the Company to pledge additional
shares of Wickes common stock if the value of the shares of Wickes common stock
held as collateral falls below $4 million.
On June 24, 1997, the Company modified its existing obligation to a third
party in the approximate amount of $900,000. As modified, the terms of this
obligation call for monthly payments of $101,150 commencing October 1, 1997
with the balance due July 15, 1998, with earlier payments required from
proceeds of the Circle merger in excess of $2.5 million released from pledge
under the Company's real estate indebtedness.
WICKES
A second amendment and restatement of Wickes' revolving credit agreement
was completed on April 11, 1997. Among other things, this amendment and
restatement (i) extended the life of the facility to March 2001, (ii) reduced
the interest rate premiums over the London InterBank Offered Rate ("LIBOR") and
over prime by 75 basis points, (iii) included provisions for further interest
rate premium reductions if certain performance levels are achieved, (iv)
modified certain covenants, and (v) provided for increases in the amount of
capital expenditures allowed by the agreement equal to the proceeds received
from the sale of certain excess real estate.
Under the revolving line of credit, Wickes may borrow against certain
levels of accounts receivable and inventory. The unused amount available for
borrowing, at June 28, 1997, was $25.7 million.
On June 16, 1997, Wickes entered into an interest rate swap agreement which
effectively fixed the interest rate at 8.1% (subject to reduction in certain
circumstances), for three years, on $40 million of Wickes' borrowings under its
floating rate revolving line of credit. This interest rate swap is operative
while the LIBOR borrowing rate remains below 6.7%.
4. INCOME TAXES
The percentage ownership of Wickes by the Company does not allow
consolidation for federal income tax filing purposes. Thus, each company will
continue to separately determine its income tax liabilities. The Company's
effective tax rate, excluding Wickes', was 0% for the six months ended June 30,
1997 and 1996.
Wickes' benefit for income taxes for the six month period ended June 28,
1997 was $1.3 million, compared to $1.5 million for the six month period ended
June 29, 1996. An effective tax rate of 39.1% was used to calculate federal
income taxes for the six month period ended June 28, 1997, compared with an
effective rate of 38.5% for the six month period of 1996. In addition to the
effective rate used, state franchise taxes were calculated separately and
are included
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in the benefit reported.
5. SUBSEQUENT EVENT
The Company is currently modifying loans made to a director of
the Company, in the amounts of $154,114 and $225,000, in 1996 and 1995,
respectively.
6. RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
Statement of Financial Accounting Standards No. 129, "Disclosures of
Information About Capital Structure," establishes standards for disclosing
information about an entity's capital structure. The new accounting principle
is effective for the Company's fiscal year ending December 31, 1997. The
Company believes that adoption will not have a material impact on its financial
statements.
In June of 1997, the Financial Accounting Standards Board issued Statement
No. 130, "Reporting Comprehensive Income" and Statement No. 131, "Disclosures
about Segments of an Enterprise and Related Information." Under the new
reporting and disclosure requirements promulgated in these statements, the
Company is required to, and will adopt the provisions beginning in fiscal 1998.
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the Condensed
Consolidated Financial Statements and Notes thereto contained elsewhere herein
and in conjunction with the Consolidated Financial Statements and Notes thereto
and Management's Discussion and analysis of Financial Condition and Results of
Operations contained in the Company's Annual report on Form 10-K for the year
ended December 31, 1996.
RESULTS OF OPERATIONS
GENERAL
The Company reported results of operations for the three months and six
months ended June 30, 1997 and 1996, as follows (in thousands):
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
------------------ ----------------
(unaudited) (unaudited)
June 30, June 30, June 30, June 30,
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Equity in earnings(losses)
of Wickes (1) $ - $ 580 $ - $ (1,715)
Earnings(losses) before
income taxes, equity
in related parties,
and minority interest (2)(3) 1,922 21 (6,913) (478)
Net earnings(loss) $ (393) $ 601 $ (4,532) $ (2,193)
</TABLE>
(1) The Company accounted for its investment in Wickes on the equity method
through June 30, 1996.
(2) Includes $674,000 of additional deferred acquisition cost amortization,
resulting from the reorganization of the Company's former life insurance
subsidiaries in 1996.
(3) Includes realized investment gains of $633,000 and $743,000 for the three
months ended June 30, 1997 and 1996, respectively, and $672,000 and
$1,217,000 for the first six months ended June 30, 1997 and 1996,
respectively.
WICKES
The Company estimates that the Company's results of operations for the
second quarter of 1997 include profits of $594,000 attributable to Wickes,
compared to the Company's equity of $580,000 for the same period in 1996. The
Company estimates that its results of operations include losses of
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$2,789,000 and $1,715,000 attributable to Wickes, for the first six months
ended June 30, 1997 and 1996, respectively.
The following discussion was obtained from the Wickes' second quarter 1997
Quarterly Report on Form 10-Q filed with the Securities and Exchange
Commission.
The following table sets forth, for the periods indicated, the percentage
relationship to net sales of certain expense and income items. This
information includes the results from all building centers and component
manufacturing facilities operated by Wickes, including those subsequently
closed or sold.
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
------------------ ----------------
(unaudited) (unaudited)
June 28, June 29, June 28, June 29,
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net sales 100.0 % 100.0 % 100.0 % 100.0 %
Gross profit 22.9 % 22.4 % 23.0 % 22.6 %
Selling, general and
administrative expense 19.8 % 18.3 % 21.4 % 20.4 %
Depreciation, goodwill and
trademark amortization 0.5 % 0.6 % 0.6 % 0.7 %
Provision for doubtful accounts (0.2)% (0.2)% 0.1 % 0.2 %
Other operating income (0.7)% (0.7)% (0.6)% (0.6)%
Income from operations 3.5 % 4.4 % 1.5 % 1.9 %
</TABLE>
Net Earnings
Net income for the three months ended June 28, 1997 was $1,342,000 compared
with $1,881,000 for the three months ended June 29, 1996. The net loss for the
six months ended June 28, 1997 was $3,848,000 compared with a loss of
$4,293,000 for the six months ended June 29, 1996. The decrease in net income
for the three-month period primarily results from an increase in selling,
general and administrative expenses ("SG&A") partially offset by increased
sales and gross profit, decreases in interest expense, equity in loss of
affiliated company and provision for income taxes. The decrease in net income
for the six month period primarily results from an increase in selling, general
and administrative expenses ("SG&A") and reduced income tax benefit partially
offset by increased sales and gross profit, and decreases in interest expense,
equity in loss of affiliated company and depreciation, goodwill and trademark
amortization.
13
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THREE MONTHS ENDED JUNE 28, 1997 COMPARED
WITH THE THREE MONTHS ENDED JUNE 29, 1996
Net Sales
Net sales for the second quarter of 1997 increased 3.7% to $237.3 million
from $228.8 million for the second quarter of 1996. Same store sales increased
3.3% compared with the same period last year. Same store sales to Wickes'
primary customers, residential and commercial builders, increased 4.4% when
compared with the second quarter of 1996. Consumer same store sales were down
4.8% for the quarter. As of June 28, 1997, Wickes operated 112 building
centers, two more than it operated at the end of the second quarter of 1996.
Wickes estimates that inflation in lumber prices accounted for approximately
$5.1 million of the sales increase for the quarter, compared with the 1996
comparable period. Wickes believes that showroom remerchandising, sales
training, and big builder initiatives also contributed to the overall and same
store sales increases.
Gross Profit
1997 second quarter gross profit increased to $54.3 million from $51.2
million for the second quarter of 1996, a 6.0% increase. Gross profit as a
percent of sales increased to 22.9% for the second quarter of 1997 from 22.4%
in 1996. The increase in gross profit as a percent of sales is primarily
attributable to improved product costs and increased lumber prices. Sales to
the professional builder, as a percent of total sales, increased to 85.5% for
the second quarter of 1997 from 84.1% for the same period in 1996. Lumber and
building materials accounted for 89.4% of the materials sold in the second
quarter of 1997, compared with 88.4% of the materials sold in the second
quarter of 1996.
Selling, General and Administrative Expense
SG&A expense increased to 19.8% of net sales in the second quarter of 1997
compared with 18.3% of net sales in the second quarter of 1996. Much of the
increase is attributable to increased training, market expansion programs, and
Wickes' decision to remerchandise facilities and invest in programs to support
sales improvement. Wickes expects to continue investing in these long-term
sales growth initiatives through the end of 1997.
Increases, as a percent of sales, in salaries and wages, travel,
professional fees, training costs, and marketing were partially offset by
reductions in health and casualty insurance costs and delivery expense.
Salaries, wages and employee benefits increased, as a percent of sales, by
0.9%. As of June 28, 1997, Wickes had 4,083 full time and part time employees,
up 5.9% from June 29, 1996.
Depreciation, Goodwill and Trademark Amortization
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Depreciation, goodwill and trademark amortization decreased to $1.2 million
for the second quarter of 1997 compared with $1.3 million for the same period
in 1996. This decrease is primarily due to the sale or disposal of excess
facilities, vehicles and equipment during 1996 and the first half of 1997.
Provision for Doubtful Accounts
Provision for doubtful accounts remained relatively the same for the second
quarters of 1997 and 1996, income of $0.5 million. Increased construction
activity in the Northeast and Midwest, during the second quarter, results in
improved collections on previously reserved accounts and lower delinquency
levels.
Other Operating Income
Other operating income for the second quarter of 1997 was $1.6 million, or
0.7% of sales. This was the same as the second quarter of 1996.
Interest Expense
In the second quarter of 1997, interest expense decreased 3.8% to $5.3
million compared with $5.5 million in the second quarter of 1996. This
reduction reflects a decrease in the effective borrowing rate on total long
term debt for the second quarter of 21 basis points from the second quarter of
1996, primarily due to a reduction in interest rate on Wickes' revolving line
of credit, effective April 11, 1997, see "Note 3. Long-Term Debt" of Notes to
Condensed Consolidated Financial Statements included elsewhere herein.
Approximately 85% of Wickes' second quarter average borrowings on its revolving
credit facility were LIBOR-based.
Equity in Loss of Affiliated Company
In the second quarter of 1997, Wickes recorded a loss of $0.2 million, under
the equity method, with respect to its investment in its affiliate engaged in
operations in Russia. In the second quarter of 1996, Wickes recorded a loss of
$0.9 million. In May of 1997, additional third party equity was invested and
Wickes' ownership decreased from 46% to 38%.
SIX MONTHS ENDED JUNE 28, 1997 COMPARED
WITH THE SIX MONTHS ENDED JUNE 29, 1996
Net Sales
Net sales for the first half of 1997 increased 4.0% to $396.7 million from
$381.3 million for the first half of 1996. Same store sales increased 3.8%
compared with the same period last year. Same store sales to Wickes' primary
customers, residential and commercial builders, increased 5.2% when compared
with the first half of 1996. Consumer same store sales were down 6.8% for the
first half.
15
<PAGE> 16
As of June 28, 1997, Wickes operated 112 building centers, two more than it
operated at the end of the first half of 1996. Wickes estimates that inflation
in lumber prices accounted for approximately $10.4 million of the sales
increase for the first half of 1997, compared with the 1996 comparable period.
Wickes believes that showroom remerchandising, sales training, and big builder
initiatives also contributed to the overall and same store sales increases.
Also, weather conditions in the Northeast during the first quarter of 1997 were
more favorable compared with the record snowfalls recorded in the first quarter
of 1996.
Gross Profit
Gross profit for the first half of 1997 increased to $91.3 million from
$86.1 million for the first half of 1996, a 5.9% increase. Gross profit as a
percent of sales increased to 23.0% for the first half of 1997 from 22.6% in
1996. The increase in gross profit as a percent of sales is primarily
attributable to improved product costs and increased lumber prices. Sales to
the professional builder, as a percent of total sales, increased to 87.2% for
the first half of 1997 from 85.3% for the same period in 1996. Lumber and
building materials accounted for 88.6% of the material sold in the first half
of 1997, compared with 87.2% of the materials sold in the first half of 1996.
Selling, General and Administrative Expense
SG&A expense increased to 21.4% of net sales in the first half of 1997
compared with 20.4% of net sales in the first half of 1996. Much of the
increase is attributable to increased training, market expansion programs, and
Wickes' decision to remerchandise facilities and invest in programs to support
sales improvement. Wickes expects to continue investing in these long-term
sales growth initiatives through the end of 1997.
Increases, as a percent of sales, salaries and wages, travel, professional
fees, training costs, and marketing were partially offset by reductions in
health and casualty insurance costs and delivery expense. Total salaries and
wages increased, as a percent of sales, by 0.7%.
Depreciation, Goodwill and Trademark Amortization
Depreciation, goodwill and trademark amortization decreased to $2.4 million
for the first half of 1997 compared with $2.8 million for the same period in
1996. This decrease is primarily due to the sale or disposal of excess
facilities, vehicles and equipment during 1996 and the first half of 1997.
Provision for Doubtful Accounts
Provision for doubtful accounts decreased to $0.6 million or 0.1% of sales
for the first half of 1997 compared with $0.9 million or 0.2% of sales for the
same period in 1996. This decrease is the result of a more selective customer
base and improved credit policies at centers acquired since 1994, and increased
efforts in collecting previously reserved accounts receivable.
16
<PAGE> 17
Other Operating Income
Other operating income for the first half of 1997 was $2.5 million, or 0.6%
of sales. This was the same as the first half of 1996.
Interest Expense
In the first half of 1997 interest expense decreased 6.8% to $10.4 million
from $11.2 million in the first half of 1996. This reduction reflects a $10.4
million decrease in average borrowings on Wickes' revolving credit facility
resulting primarily from the closing of building centers since December 1995
and the $9.8 million in net proceeds from Wickes' issuance of 2 million shares
of its common stock in June 1996. The effective borrowing rate on total long
term debt for the first half was relatively the same as the first half of 1996.
Approximately 87% of Wickes' first half average borrowings on its revolving
credit facility were LIBOR-based.
Equity in Loss of Affiliated Company
In the first half of 1997, Wickes recorded a loss of $0.8 million, under the
equity method, with respect to its investment in its affiliate engaged in
operations in Russia. In the first half of 1996 Wickes recorded a loss of $1.9
million. In May of 1997, additional third party equity was invested and
Wickes' ownership decreased from 46% to 38%.
PARENT COMPANY AND OTHER SUBSIDIARIES
The following discussion relates to the operations of the Parent Company and
its subsidiaries, other than Wickes and former life insurance subsidiaries (the
"Parent Group").
The Parent Group's non-interest operating expenses for the three months
ended June 30, 1997, decreased to $979,000 from $1,283,000 for the same period
in 1996. Included in the second quarter of 1996 results were non-recurring
transactions, such as deferred bank debt costs amortized as a result of the
Life Insurance Reorganization. Wickes Mortgage Lending, Inc's ("WML")
operating expenses for the 2nd quarter of 1997 were $758,000 compared to
$737,000 for the same period in 1996. Reimbursements received from Wickes
increased to approximately $248,000 in 1997 versus $148,000 in 1996; these
reimbursements are used to offset operating expenses.
The Parent Group's non-interest operating expenses for the first six months
of 1997 and 1996 were $1,784,000 and $1,875,000, respectively. Savings of
approximately $276,000 from the restructuring of the Wickes Financial Services
Center, Inc. program, were offset by expenses no longer being allocable to the
Life Insurance Group. Although Wickes Mortgage Lending, Inc.'s ("WML")
operating expenses increased for the first six months of 1997 by approximately
$398,000, reimbursements received from Wickes of approximately $548,000, offset
the increase.
Revenues of the Parent Group (excluding investment income) for the three
months ended June
17
<PAGE> 18
1997, increased to $359,000 from $201,000 for the same period in 1996.
Included are WML's revenues of $358,000 and $169,000 for 1997 and 1996,
respectively.
Revenues of the Parent Group (excluding investment income) for the six
months were $648,000 and $406,000 for 1997 and 1996, respectively. Included
are WML's revenues of $646,000 and $324,000 for 1997 and 1996, respectively.
Gains of sales of investment real estate for the three months ended June 30,
1997, were $633,000 compared to $198,000 for the three months ended June 30,
1996. Gains of sales of investment real estate for the first six months of
1997 and 1996 were $672,000 and $198,000, respectively.
In the second quarter of 1997, interest expense increased 24% to $955,000
from $768,000 in the second quarter of 1996. This change is primarily due to
the Parent Company's real estate mortgage and the borrowings on WML's warehouse
line of credit. In the second quarter of 1997, interest expense consisted of:
$406,000 on the Parent Company's subordinated notes and other debt; $374,000 on
the Parent Company's real estate mortgage debt; and $175,000 on WML's warehouse
line of credit. In 1996, interest expense consisted of $393,000 on the Parent
Company's subordinated notes and other debt; $99,000 on the Parent Company's
real estate mortgage debt and $276,000 on a note to a bank repaid in June 1996
in connection with the reorganization of the Company's former life insurance
subsidiaries. The Company anticipates that WML will continue to increase the
volume of originating construction loans, thereby increasing interest expense
on the warehouse line of credit. However, interest expense on the Parent
Company's real estate mortgage debt, will continue to decrease, due to the
sales of real estate, which generates prepaid principal payments.
The Parent Group's interest expense for the first six months were $1,820,000
and $1,550,000 for 1997 and 1996, respectively. This change is primarily due
to the Parent Company's real estate mortgage and the borrowings on WML's
warehouse line of credit. In the first six months of 1997, interest expense
consisted of: $790,000 on the Parent Company's subordinated notes and other
debt; $744,000 on the Parent Company's real estate mortgage debt; and $286,000
on WML's warehouse line of credit. In 1996, interest expense consisted of
$785,000 on the Parent Company's subordinated notes and other debt; $99,000 on
the Parent Company's real estate mortgage debt; and $665,000 on a note to a
bank repaid in June 1996 in connection with the reorganization of the Company's
former life insurance subsidiaries.
LIFE INSURANCE OPERATIONS
The Company's Condensed Consolidated Statements of Operations include the
operations of its former life insurance subsidiaries for the first six months
of 1996.
During the first six months of 1996, the operations (other than WML) of the
Company's life insurance subsidiaries generated income after taxes of
$1,635,000. However, based on an evaluation of the life operations profits and
the benefits to the Company of these operations, additional deferred
acquisition cost amortization was recorded reducing life insurance income to a
net of $961,000.
18
<PAGE> 19
INCOME TAXES
The Company does not consolidate with Wickes for income tax filing purposes.
Thus, each company will continue to separately determine its income tax
liability. The Company's effective tax rate, excluding Wickes', was 0% for the
six months ended June 30, 1997 and 1996. The Company's equity in losses of
Wickes has reduced the Company's GAAP basis in its investment in Wickes
creating deferred tax benefits which will be realized upon sale or subsequent
increase in GAAP basis of this investment.
Wickes' recorded an income tax benefit of $1.3 million for the first half of
1997 compared with a benefit of $1.5 million in the first half of 1996. An
effective federal income tax rate of 39.1% was used to calculate federal income
taxes for the first half of 1997, compared with an effective rate of 38.5% for
the first half of 1996. In addition to the effective federal tax rate used,
state income and franchise taxes were calculated separately and are included in
the benefit reported for both years.
LIQUIDITY AND CAPITAL RESOURCES
THE PARENT GROUP
The Parent Company's general liquidity requirements consist primarily of
funds for payment of debt and related interest and for operating expenses and
overhead. In addition, dependent upon the completion of the conversion into
cash of the Parent Company's shares of Circle common and preferred stock (the
"Circle Shares") discussed below and upon the Company's liquidity position from
time to time thereafter, the Company may consider implementing a program of
selling assets and paying cash dividends to the holders of its common stock
from time to time.
Operations, exclusive of Wickes (which is currently prohibited from paying
dividends by reason of restrictions in debt instruments), consist primarily of
real estate sales and the operations of WML. The Company has significantly
curtailed WML's operations and does not anticipate that WML will be a
significant contributor to liquidity in the future. Also, real estate sales
proceeds are required to be applied to real estate debt reduction and are not
available to the Parent Company for other purposes Accordingly, the Parent
Company's principal source of funds is anticipated to be sales of non-real
estate assets.
A significant source of liquidity for the Parent Company is anticipated from
the proposed merger of Circle with an unrelated third party (the "Circle
Merger") pursuant to which the Circle Shares are to be converted into an
aggregate of approximately $5.3 million in cash. Circle has informed the
Company that it hopes to complete the Circle Merger before the end of September
1997.
The Company anticipates that these proceeds of the Circle Merger would be
utilized as follows: (i) approximately $1.1 million would be utilized to repay
in full the Company's bank line of credit, (ii) approximately $1.0 million
would be unpledged and available to the Company for specified purposes
including payment of operating expenses and debt service, and (iii) the balance
would, until
19
<PAGE> 20
released, remain in pledge to secure the Company's $16.7 million real estate
indebtedness to American Founders and certain other obligations of the Company
described below.
The Company believes that the cash proceeds of the Circle Merger anticipated
to be available to it described above, together with the anticipated additional
merger proceeds that would be released from pledge under the Company's real
estate indebtedness as a result of real estate sales contemplated by existing
contracts, would be sufficient for general liquidity purposes and debt
requirements through the remainder of 1997. In order, however, to support its
operations and overhead and to service its indebtedness thereafter, the Parent
Company will need to obtain significant additional funds through other asset
sales or additional financing. The principal asset that could be sold by the
Parent Company would be its shares of Wickes common stock. Furthermore, there
can be no assurance that the Circle Merger will be completed, that anticipated
releases of any merger proceeds will occur, or that the Company's bank lender
will continue funding under the demand line of credit or will not demand
repayment of the outstanding borrowings. In any of these events, the Company
would need to obtain a significantly greater amount of funds through asset sales
or financing.
Future availability of any cash proceeds of the Circle Shares depends upon
their release from pledge. All of the Circle Shares are currently pledged to
secure indebtedness of the Company. Circle shares to be converted into $3.2
million in the Circle Merger, together with real estate and one million shares
of Wickes common stock, are pledged to secure the Company's $16.7 million of
real estate indebtedness. The balance of the Circle Shares, which would be
converted into $2.1 million in the Circle Merger, together with 800,000 shares
of Wickes common stock are pledged to secure the Company's $1.5 million demand
bank line of credit. In addition, all of the collateral for the Company's bank
line of credit are pledged on a subordinated basis, together with an additional
400,000 shares of Wickes common stock, on an unsubordinated basis, to secure the
Company's $900,000 obligation to another party. The merger proceeds of Circle
Shares that are at the time of the Circle Merger pledged to secure the Company's
real estate indebtedness would remain pledged and would not be available to the
Parent Company until released and until after the $900,000 obligation is repaid
(except that the Company will be entitled to utilize the first $2.5 million of
merger proceeds to repay the bank line of credit and for other specified
purposes as discussed above). The amount of required collateral for real estate
indebtedness is adjusted quarterly and Circle Shares or merger proceeds thereof
would be released in the event there is any excess collateral at any quarterly
valuation date, which would depend upon factors including the market value of
Wickes common stock and the timing and amount of real estate sales.
For a description of a $1.5 million demand bank line of credit obtained on
May 1, 1997, see Note 3 of Notes to Condensed Consolidated Financial Statements
included elsewhere herein.
For a description of the modification by the Company of an existing
obligation to a third party in the approximate amount of $900,000 in June 1997,
see Note 3 of Notes to Condensed Consolidated Financial Statements included
elsewhere herein .
20
<PAGE> 21
The $10,000,000 principal of the Company's 13% Subordinated Notes is due in
September 1999. The Company anticipates that to repay this indebtedness it
will need to obtain additional funds through borrowings, issuance of debt or
equity securities, asset sales, or funds provided by operations in which the
Company may become engaged in the future.
During the first six months of 1997, stockholders' equity decreased by a net
of $4,550,000. This decrease is primarily a result of Wickes' operating losses
of $2,195,000 and interest expense at the parent group of $1,820,000. During
the first three months of 1997, the Company recorded losses in Wickes of
$2,789,000. This loss was offset with earnings during the second three months
of 1997 of $594,000. Wickes' results of operations have historically been
adversely affected by seasonal weather factors during the first three months of
the year.
FORWARD-LOOKING INFORMATION CAUTIONARY STATEMENT. The discussion above of
the Company's future liquidity needs and sufficiency constitutes
Forward-Looking Information within the meaning of the Private Securities
Litigation Reform Act of 1995 and is inherently subject to uncertainty as a
result of a number of risk factors including, among other things: (I) the
continued ability of the Company to borrow, and the absence of a repayment
demand, under its demand bank line of credit, (ii) the Company's ability to
achieve the level of real estate sales required to meet scheduled real estate
debt payments, and (iii) the ability of the Company to raise funds through
sales of Circle Shares or Wickes common stock. Future real estate sales depend
upon a number of factors, including interest rates, general economic
conditions, and conditions in the commercial real estate markets in Atlanta,
Georgia, and Jacksonville, Florida. As discussed above, although the Circle
merger would convert the Circle Shares into approximately $5.3 million in cash,
there is no assurance that this transaction will be completed or how much of
the merger proceeds will be available to the Company over what time period.
The Company's ability to sell Wickes common stock will depend upon, among other
things, the public trading price of Wickes common stock and, in light of the
relatively low public trading volume for Wickes common stock, possibly the
Company's ability to find a buyer or buyers for Wickes Common Stock in a
private transaction or otherwise.
WICKES
Wickes' principal sources of working capital and liquidity are earnings and
borrowings under its revolving credit facility. Wickes' primary need for
capital resources is to finance inventory and accounts receivable.
The first half of the year historically generates negative cash flows from
operating activities. With the peak building season historically occurring in
the second and third quarters, Wickes normally experiences increases in its
accounts receivable and inventory levels during the first quarter to meet the
anticipated increase in sales. In the first half of 1997 net cash used in
operating activities amounted to $33.2 million.
Wickes' accounts receivable balance at the end of the second quarter of 1997
increased $8.1 million when compared to the second quarter of 1996, an increase
of 9.2%. Approximately $7.4
21
<PAGE> 22
million of this increase is attributable to increased credit sales during June
of 1997, when compared with June of 1996.
Inventory at the end of the first half of 1997 was $18.9 million, or 17.1%
higher than at the end of the first half of 1996. This increase is largely
attributable to inflation in lumber products, special buys on commodity
building materials to support new programs, and the start-up of five new
building centers. Most of the special buys on commodity building materials
included extended accounts payable terms and Wickes' has also negotiated
extended terms on many of its regular purchases. These efforts are the primary
reason for the 27.1% increase in accounts payable.
For information concerning the sale leaseback of Wickes' 72,000 square foot
corporate headquarters in Vernon Hills, Illinois, completed June 30, 1997, see
"Note 2. Commitments and Contingencies" of Notes to Condensed Consolidated
Financial Statements included elsewhere herein.
Wickes' capital expenditures consist primarily of the construction of
storage facilities, the remodeling and reformation of building centers and
component manufacturing facilities, and the purchase of vehicles, equipment and
management information systems. In the first half of 1997, Wickes' spent $2.7
million on capital expenditures. Wickes expects to spend approximately $6.0
million to $8.0 million for all of 1997. Under Wickes' bank revolving credit
agreement, as amended, capital expenditures during 1997 are limited to $6
million plus the proceeds from the sale of certain excess real estate plus the
portion of 1996's capital expenditures that were not spent. Wickes expects to
fund capital expenditures through borrowings and its internally generated cash
flow.
In January, Wickes began distribution operations in start-up building center
facilities in Aurora, Illinois and Colorado Springs, Colorado. In April,
Wickes also began building centers operations in Denton, North Carolina and a
second facility in Pensacola, Florida. In June, Wickes opened a door and wall
panel manufacturing facility in Denver, Colorado. A new building center will
be opened in early August, also in Denver, Colorado. The Pensacola facility
is located in a previously closed facility which is owned by Wickes. The
remaining six facilities are leased. The following table reconciles the number
of building centers and component manufacturing facilities operated by Wickes
through June 28, 1997:
<TABLE>
<CAPTION>
Component
Building Manufacturing
Centers Facilities
------- ----------
<S> <C> <C>
As of December 28, 1996 108 12
Expansion 4 1
Consolidation - (1)
--- --
As of June 28, 1997 112 12
</TABLE>
Wickes maintained excess availability under its revolving line of credit,
throughout the first half
22
<PAGE> 23
of 1997. At the end of the first half of 1997, total borrowings under the
revolving line of credit were $4.7 million higher than at the end of the first
half of 1996. Under the current terms of Wickes' bank revolving credit
agreement, Wickes believes that it will continue to have sufficient funds
available for its anticipated operations and capital expenditures. At June 28,
1997, $104.0 million was outstanding under Wickes' revolving line of credit,
and the unused availability was approximately $25.7 million. Wickes'
assessment of its future funds availability constitutes Forward-Looking
Information and is inherently subject to uncertainty resulting from, among
other things, the factors discussed under "Results of Operations-Provision
for Income Taxes".
For a description of the April 11, 1997 amendment to Wickes' revolving line
of credit agreement, that, among other things, reduces Wickes' effective
interest rate, provides for additional reductions should certain goals be
achieved, extends the length of the agreement, and modifies or eliminates
certain covenants, see "Note 3. Long-Term Debt" of Notes to Condensed
Consolidated Financial Statements included elsewhere herein.
23
<PAGE> 24
PART II
OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
27.1 Financial Data Schedule (SEC Use Only)
(b) Reports on Form 8-K
None
24
<PAGE> 25
SIGNATURES
Pursuant to the requirements of Section 13 or 15 (d) 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.
RIVERSIDE GROUP, INC.
By /s/ J. Steven Wilson
-------------------------
J. Steven Wilson
Chairman of the Board,
President and
Chief Executive Officer
By /s/ Catherine J. Gray
-------------------------
Catherine J. Gray
Vice President and Chief Financial Officer
Date: August 14, 1997
25
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
RIVERSIDE GROUP, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEET AND
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH FINANCIAL STATEMENTS
</LEGEND>
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<EXCHANGE-RATE> 1
<CASH> 352
<SECURITIES> 0
<RECEIVABLES> 99,544
<ALLOWANCES> 3,384
<INVENTORY> 129,571
<CURRENT-ASSETS> 249,034
<PP&E> 76,425
<DEPRECIATION> 30,997
<TOTAL-ASSETS> 364,674
<CURRENT-LIABILITIES> 104,523
<BONDS> 109,535
0
0
<COMMON> 529
<OTHER-SE> 15,696
<TOTAL-LIABILITY-AND-EQUITY> 16,225
<SALES> 396,654
<TOTAL-REVENUES> 400,399
<CGS> 305,400
<TOTAL-COSTS> 305,400
<OTHER-EXPENSES> 86,373
<LOSS-PROVISION> 583
<INTEREST-EXPENSE> 12,231
<INCOME-PRETAX> 5,818
<INCOME-TAX> (1,286)
<INCOME-CONTINUING> (4,532)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (4,532)
<EPS-PRIMARY> (.85)
<EPS-DILUTED> (.85)
</TABLE>
