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, 1998 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 10, 1998, there were 5,287,123 shares of the Registrant's common stock
outstanding.
<page 2>
RIVERSIDE GROUP, INC.
<TABLE>
<CAPTION>
INDEX
Page
PART I. FINANCIAL INFORMATION Number
<S> ______
Item 1. Financial Statements <C>
Condensed Consolidated Balance Sheets
June 30, 1998 (Unaudited)
And December 31, 1997 3
Condensed Consolidated Statements
of Operations
Three and Six months ended
June 30, 1998 and 1997 (Unaudited) 4
Condensed Consolidated Statement
of Common Stockholders' Equity
Six months ended
June 30, 1998 (Unaudited) 5
Condensed Consolidated Statements of
Cash Flows
Six months ended
June 30, 1998 and 1997 (Unaudited) 6
Notes to Condensed Consolidated
Financial Statements (Unaudited) 7
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of
Operations 11
PART II.
Item 2. Changes in Securities 25
Item 5. Other Information 25
Item 6. Exhibits and Reports on Form 8-K 25
</TABLE>
<page 3>
Riverside Group, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(unaudited)
(in thousands, except per share data)
<TABLE>
<CAPTION>
June 30, December 31,
1998 1997
______ ___________
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 813 $ 3,154
Notes receivable 1,419 3,534
Accounts receivable, less allowance for doubtful
accounts of $4,370 in 1998 and $4,206 in 1997 98,376 81,968
Inventory 117,030 102,706
Deferred tax asset, net 11,156 8,955
Prepaid expenses 1,885 1,250
_________ ________
Total current assets 230,679 201,567
Investment in real estate 10,948 14,329
Property, plant and equipment, net 44,910 46,792
Trademark (net of accumulated amortization of 6,635 6,745
$10,385 in 1998 and $10,274 in 1997)
Deferred tax asset, net 20,361 20,361
Rental equipment (net of accumulated depreciation
of $371 in 1998 and $176 in 1997) 2,015 2,030
Excess of cost over fair value of assets acquired 15,366 15,684
Other assets (net of accumulated amortization of
$9,488 in 1998 and $8,718 in 1997) 4,949 6,397
_________ ________
Total assets $ 335,863 $313,905
========= ========
LIABILITIES & STOCKHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term debt $ 78 $ 702
Accounts payable 59,025 41,629
Income tax payable 25 25
Accrued liabilities 19,249 23,111
_________ _________
Total current liabilities 78,377 65,467
Long-term debt, less current maturities 222,270 202,686
Mortgage debt 12,750 16,038
Liabilities of discontinued operations 13 34
Other long-term liabilities 3,188 3,084
_________ _________
Total liabilities 316,598 287,309
Minority interest 10,017 11,976
Commitments and contingencies (Note 2)
Common stockholders' equity:
Common stock, $.10 par value; 20,000,000 shares
authorized; issued and outstanding, 5,287,123 529 529
in 1998 and 5,296,123 in 1997
Additional paid in capital 16,783 16,783
Retained earnings (deficit) (8,064) (2,692)
__________ _________
Total common stockholders' equity 9,248 14,620
Total liabilities and common stockholders' --------- ---------
equity $ 335,863 $ 313,905
========= =========
The accompanying notes are an integral part of the Condensed Consolidated Financial Statements.
</TABLE>
<page 4>
Riverside Group, Inc. and Subsidiaries
Condensed Consolidated Statement 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,
1998 1997 1998 1997
____ ____ ____ ____
<S> <C> <C> <C> <C>
Revenues:
Sales and service revenues $ 237,308 $ 237,335 $ 406,169 $ 396,654
Net investment income (loss) (36) (46) (51) (53)
Net realized investment gains -- 633 437 687
Other operating income 1,727 1,635 4,178 2,480
_________ _________ _________ _________
238,999 239,557 410,733 399,768
_________ _________ _________ _________
Costs and expenses:
Cost of sales 181,182 183,028 309,063 305,400
Provision for doubtful accounts (131) (463) 1,202 583
Depreciation, goodwill and
trademark amortization 1,451 1,403 2,871 2,710
Restructuring and unusual items -- -- 5,431 --
Selling, general and
administrative expenses 47,055 47,357 88,836 85,505
Interest expense 6,093 6,039 12,260 11,945
_________ _________ _________ _________
235,650 237,364 419,663 406,143
_________ _________ _________ _________
Earnings(loss) before income taxes,
equity in related parties, and
minority interest 3,349 2,193 (8,930) (6,375)
Income tax expense (benefit) 2,249 1,454 (1,630) (1,286)
Equity in losses of related parties -- 213 -- 766
Minority interest, net of income taxes 1,374 648 (1,928) (1,861)
__________ __________ __________ __________
Loss before discontinued operations (274) (122) (5,372) (3,994)
Discontinued operations:
Loss from operations of discontinued
mortgage lending operations, net of
income taxes -- (271) -- (538)
__________ ___________ __________ __________
Net loss $ (274) $ (393) $ (5,372) $ (4,532)
========== ========== ========== ==========
Basic and diluted earnings (loss)
per common share:
Earnings (loss) from continuing
operations $ (0.05) $ (0.02) $ (1.03) $ (0.75)
Net earnings (loss) from discontinued
operations -- (0.05) -- (0.10)
__________ __________ __________ __________
Loss per share $ (0.05) $ (0.07) $ (1.03) $ (0.85)
========== ========= =========== =========
Weighted average number of common stock
used in computing earnings per share 5,227,571 5,307,833 5,227,571 5,308,111
The accompanying notes are an integral part of the Condensed Consolidated Financial Statements.
</TABLE>
<page 5>
Riverside Group, Inc. and Subsidiaries
Condensed Consolidated Statement of Common Stockholders' Equity
(unaudited)
(in thousands)
<TABLE>
<CAPTION>
Additional Total Common
Common Paid-In Retained Stockholders'
Stock Capital Earnings Equity
______ __________ ________ ____________
<S> <C> <C> <C>
Balance, December 31, 1997 $ 529 $ 16,783 $ (2,692) $ 14,620
Net loss, six months ended
June 30, 1998 (5,372) (5,372)
_____ ________ _________ ________
Balance, June 30, 1998 $ 529 $ 16,783 $ (8,064) $ 9,248
===== ======== ========= ========
The accompanying notes are an integral part of the Condensed Consolidated Financial Statements
</TABLE>
<Page 6>
Riverside Group, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(in thousands)
(unaudited)
<TABLE>
<CAPTION>
Six Months Ended June 30,
_________________________
1998 1997
____ ____
<S> <C> <C>
Cash Flow from Operating Activities
Net loss $ (5,372) $ (4,532)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation expense 2,372 2,201
Amortization expense 1,332 1,253
Provision for doubtful accounts 1,202 583
Gain on sale of fixed assets (1,501) (546)
Net realized investment gains on investments (437) (687)
Benefit for deferred income taxes (2,201) (2,007)
Equity in losses of unconsolidated subsidiaries -- 766
Minority interest (1,928) (1,861)
Change in other assets and liabilities:
Increase in accounts receivable (18,443) (24,966)
Decrease in notes receivable 2,182 --
Increase in inventory (14,324) (28,899)
(Increase) decrease in other assets 509 (1,774)
Increase in accounts payable and accrued
liabilities 13,449 24,314
Net liabilities of discontinued operations,
other liabilities and current income taxes 160 373
__________ __________
Net Cash Used in Operating Activities (23,000) (35,782)
Investing Activities
Purchase of investments:
Property, plant and equipment (2,276) (2,693)
Investment real estate -- (320)
Sale of investments:
Property, plant and equipment 3,549 6,442
Investment real estate 3,808 2,062
__________ __________
Net Cash Provided by Investing Activities 5,081 5,491
Cash Flows from Financing Activities
Net borrowings under the revolving line of
credit 19,463 27,668
Repayment of debt (3,985) (2,161)
Increase in borrowings 100 2,023
Purchase and retirement of treasury shares -- (18)
Net proceeds from issuance of common stock -- 31
__________ __________
Net Cash Provided by Financing Activities 15,578 27,543
Net Decrease in Cash and Equivalents (2,341) (2,748)
Cash at beginning of year 3,154 3,100
__________ __________
Cash and equivalents at end of period $ 813 $ 352
========== =========
The accompanying notes are an integral part of the Condensed Consolidated Financial Statements
</TABLE>
<Page 7>
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, 1998, the condensed
consolidated statements of operations for the six months ended June 30, 1998 and
1997, the condensed consolidated statement of common stockholders' equity for
the six months ended June 30, 1998 and the condensed consolidated statements of
cash flows for the six months ended June 30, 1998 and 1997, 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, 1998,
and for all periods presented have been made. The results for the six month
period ended June 30, 1998 is not necessarily indicative of the results to be
expected for the full year or for any interim period.
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, 1997 filed
with the Securities and Exchange Commission.
Reclassifications
_________________
Reclassifications have been made to the second quarter condensed consolidated
balance sheet and condensed consolidated statement of cash flows to more
appropriately reflect purchase rebates receivable as a reduction of accounts
payable rather than as accounts receivable. The amount previously recorded as
accounts receivable in the second quarter of 1997 was $2.1 million.
Earnings Per Share
__________________
Basic and diluted earnings per common share is calculated in accordance with
Statement of Financial Accounting Standards No. 128, "Earnings Per Share".
Earnings per share are based on the weighted average number of shares of common
stock outstanding during each period (5,227,571 shares in 1998 and 5,308,111
shares in 1997). Since the Company had a net loss, the options had an anti-
dilutive effect, and therefore, are excluded from the calculation of diluted
earnings per share.
<Page 8>
2. COMMITMENTS AND CONTINGENCIES
_____________________________
At June 30, 1998, Wickes Inc. ("Wickes") had accrued $500,000 (included in
accrued liabilities at June 30, 1998) for remediation of certain environmental
and product liability matters, principally underground storage tank removal.
Many of the sales and distribution facilities presently and formerly operated by
Wickes contained underground petroleum storage tanks. 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 $1.9 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 80 actions, each of which
seeks unspecified damages, brought since 1993 in various Michigan state courts
against manufacturers and building material retailers by individuals who claim
to have suffered injuries from products containing asbestos. All of the
plaintiffs in these actions are 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.
<Page 9>
3. LONG TERM AND MORTGAGE DEBT
___________________________
Consolidated long-term and mortgage debt is comprised of the following at
June 30, 1998 (in thousands):
THE PARENT GROUP
Long-Term Debt
______________
Subordinated Notes $ 9,722
Other 88
Less: current maturities (50)
________
Total Company long-term debt less current maturities $ 9,760
________
Mortgage Debt
_____________
Mortgage debt, non-recourse $ 12,750
Less: current maturities -
________
The Parent Group long-term mortgage debt, less
current maturities $ 12,750
________
WICKES
Revolving line of credit $112,505
Senior subordinated notes 100,000
Other 33
Less: current maturities (28)
________
Total Wickes' long-term debt less current maturities $212,510
________
Total long-term and mortgage debt _________
less current maturities $235,020
========
THE PARENT GROUP
________________
On April 20, 1998, Riverside amended certain terms of its mortgage debt.
In connection with the amendment, (i) the Parent Company pledged an additional
325,000 shares of Wickes common stock in substitution for the $1.4 million cash
then held by the lender as collateral and (ii) agreed to a reduced collateral
value for the shares of pledged Wickes common stock.
WICKES
______
Under its revolving line of credit, Wickes may borrow against certain
levels of accounts receivable and inventory. The unused amount available for
borrowing at June 30, 1998 was $17.1 million.
On March 20, 1998, Wickes and its lenders entered into a third amendment to
its revolving credit agreement. This amendment includes a modification to the
fixed charge ratio covenant to reflect the restructuring announced by Wickes in
February, 1998 and includes the lenders' consent to Wickes' sale of its Iowa
facilities and its internet and utilities marketing operations.
<Page 10>
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,
1998 and 1997.
Wickes' provision for income taxes for the six month period ended June 30,
1998 was a benefit of $1.6 million, compared to a benefit of $1.3 million for
the six month period ended June 30, 1997. An effective tax rate of 39.0% was
used to calculate federal income taxes for the first six months of 1998,
compared with an effective rate of 39.1% for the first six months of 1997. In
addition to the effective federal rate used, state income and franchise taxes
were calculated separately and are included in the provision reported.
The Company continues to review future earnings projections to determine
that there is sufficient support for its deferred tax assets and valuation
allowance. In spite of the losses incurred during 1995 and 1997, management
believes that it is more likely than not that the Company will receive full
benefit of its deferred tax asset and that the valuation allowance is properly
stated. This assessment constitutes Forward-Looking Information made pursuant
to the safe harbor provisions of the Private Securities Litigation Reform Act of
1995 and is inherently subject to uncertainty and dependent upon the Company's
future profitability, which in turn depends upon a number of important risk
factors, including but not limited to, the effectiveness of the Company's
operational efforts, cyclicality and seasonality of the Company's business, the
effects of the Company's substantial leverage and competition.
5. RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
_________________________________________
Reporting Comprehensive Income. Statement of Financial Accounting
Standards No. 130, "Reporting Comprehensive Income," establishes standards for
reporting and display of comprehensive income and its components in a full set
of general-purpose financial statements. The term comprehensive income is
defined as the change in the equity of a business. Comprehensive income
includes net income as well as other components (revenues, expenses, gains, and
losses) that under generally accepted accounting principles are excluded from
net income but affect equity. The statement was effective for fiscal years
beginning after December 15, 1997. Adoption of the statement has not had a
material effect on the Company's financial statements.
Disclosure About Segments. Statement of Financial Accounting Standards No.
131, "Disclosure about Segments of an Enterprise and Related Information",
changes Statement of Financial Accounting Standards No. 14 by requiring a new
framework for segment reporting and includes the disclosure of financial
information related to each segment. The statement was effective for fiscal
years beginning after December 15, 1997. Adoption of the statement has not had
a material effect on the Company's financial statements.
<Page 11>
Employers' Disclosures About Pensions and Other Postretirement Benefits.
Statement of Financial Accounting Standards No. 132, "Employers' Disclosures
About Pensions and Other Postretirement Benefits," standardizes the disclosure
requirements for pensions and other post retirement benefits, requires
additional information on changes in the benefit obligation and fair values of
plan assets and eliminates certain disclosures that are no longer useful. This
statement is effective for fiscal years beginning after December 15, 1997. The
Company believes that the adoption of this statement will not have a significant
impact on its financial statements.
6. OPERATIONAL RESTRUCTURING
_________________________
In the first quarter of 1998, Wickes announced and completed a plan for
additional restructuring activities (the "1998 Plan"). The 1998 Plan included
the closing or consolidation of eight building centers and two component
manufacturing facilities, the sale of two additional building centers, and
further reductions in headquarters staffing. Wickes recorded a restructuring
charge of $5.4 million with respect to the 1998 Plan, consisting of $3.7 million
in anticipated losses on the disposition of closed center assets and
liabilities, $2.0 million in severance and post employment benefits, and a
benefit of $300,000 for adjustments to prior years' restructuring accruals.
7. SUBSEQUENT EVENT
________________
On July 16, 1998, Wickes announced an agreement in principle to acquire
Eagle Industries Inc., an Indianapolis, Indiana component manufacturer with 1997
sales of $10.5 million. Eagle Industries manufactures and distributes roof
trusses, wall panels and other building materials to the home building industry.
The transaction is expected to be complete by the end of the third quarter.
On July 13, 1998, the Company announced that GameVerse, Inc. ("GameVerse"),
a wholly owned subsidiary of the Company, has entered into an agreement in
principle with Greenleaf Technologies Corporation, calling for the creation of a
joint venture on-line interactive entertainment network.
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, 1997.
<Page 12>
RESULTS OF OPERATIONS
General
The Company reported results of operations for the three andsix months
ended June 30, 1998 and 199, as follows (in thousands):
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
__________________ ________________
(unaudited) (unaudited)
June 30, June 30, June 30, June 30,
1998 1997 1998 1997
____ ____ ____ ____
<S> <C> <C> <C> <C>
Earnings(loss) before
income taxes, equity in related
parties, and minority interest (1)(2) $3,349 $2,193 $(8,930) $(6,375)
Net loss before discontinued operations (274) (122) (5,372) (3,994)
Discontinued operations:
Loss from operations of discontinued
mortgage lending operations, net of
income tax -- (271) -- (538)
Net loss $ (274) $ (393) $(5,372) $(4,532)
</TABLE>
(1) Includes realized investment gains of $0 and $633,000 for the three months
ended June 30, 1998 and 1997, respectively, and $437,000 and $687,000 for
the first six months ended June 30, 1998 and 1997, respectively.
(2) Includes a restructuring charge from Wickes of $5.4 million. This charge
consisted of $3.7 million in anticipated losses on the disposition of
closed center assets and liabilities and $2.0 million in severance and post
employment benefits related to the 1998 Plan, and a benefit of $0.3 million
for adjustments to prior years restructuring accruals.
Wickes Inc.
The Company estimates that the Company's results of operations for the
second quarter of 1998 include profits of $1,313,000 attributable to Wickes,
compared to profits of $594,000 for the same period in 1997. The Company
estimates that its results of operations include losses of $2,189,000 and
$2,789,000 attributable to Wickes, for the first six months ended June 30, 1998
and 1997, respectively.
<Page 13>
The following discussion was obtained from the Wickes' second quarter 1998 10-Q.
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 sales and distribution and component manufacturing
facilities operated by Wickes, including those closed or sold during the period.
<TABLE>
Caption>
Three Months Ended Six Months Ended
__________________ ________________
June 27, June 28, June 27, June 28,
1998 1997 1998 1997
____ ____ ____ ____
<S> <C> <C>
Net Sales 100.0% 100.0% 100.0% 100.0%
Gross profit 23.6% 22.9% 23.9% 23.0%
Selling, general and
administrative expense 19.3% 19.8% 21.3% 21.4%
Depreciation, goodwill and
trademark amortization 0.5% 0.5% 0.6% 0.6%
Provision for doubtful accounts 0.0% (0.2%) 0.3% 0.1%
Restructuring and unusual items -- -- 1.3% --
Other operating income (0.6%) (0.7%) (0.9%) (0.6%)
Income from operations 4.4% 3.5% 1.3% 1.5%
</TABLE>
Net Earnings
____________
The first half of 1998 presented favorable economic conditions for the
building materials supply industry. Single family housing starts were up 9.6%
over the first half of 1997. During the first quarter of 1998, the positive
effects of the mild winter in Wickes' Midwest region, Wickes' primary region,
were partially offset by increased precipitation in the Northeast and South.
Weather conditions during the first quarter of 1997 were closer to historical
seasonal averages.
Net income for the three months ended June 27, 1998 was $2,786,000
compared with income of $1,342,000 for the three months ended June 28, 1997.
The increase in the net income for the three month period is primarily the
result of increased gross profit dollars, reductions in selling, general and
administrative ("SG&A")expense, and the elimination of equity in losses of an
affiliated company. The impact of these changes were partially offset by
increases in provision for doubtful accounts, interest expense, and reductions
in other operating income.
Net loss for the first six months of 1998 was $4,013,000 compared with a
loss of $3,848,000 for the first six months of 1997. The decrease in net income
is primarily the result of a $5.4 million charge for restructuring and unusual
items and increases in SG&A expense, provision for doubtful accounts, and
interest expense. The impact of these changes were partially offset by
increases in sales,gross profit, and other operating income and the elimination
of equity in losses of an affiliated company.
<Page 14>
Operational Restructuring
_________________________
In the first quarter of 1998, Wickes announced and completed a plan for
additional restructuring activities (the "1998 Plan"). The 1998 Plan included
the closing or consolidation of eight building centers and two component
manufacturing facilities, the sale of two additional building centers, and
further reductions in headquarters staffing. During the first quarter, Wickes
recorded a restructuring charge of $5.4 million with respect to the 1998 Plan
consisting of $3.7 million in anticipated losses on the disposition of closed
center assets and liabilities, $2.0 million in severance and post employment
benefits, and a benefit of $300,000 for adjustments to prior years'restructuring
accruals.
In March 1998, as contemplated by the 1998 Plan, Wickes sold the assets
of its two Iowa building centers to another building center chain for
approximately $3.9 million, resulting in a gain of approximately $700,000.
Three Months Ended June 27, 1998 Compared
with the Three Months Ended June 28, 1997
Net Sales
_________
Although net sales for the second quarter of 1998 were relatively
unchanged at $237.1 million compared with $237.3 million for the second quarter
of 1997, same store sales increased 7.0% compared with the same period last
year, despite deflation in lumber prices which Wickes estimates reduced sales
by approximately $9.1 million, or approximately 3.8%, compared with 1997
comparable period pricing. Same store sales to Wickes' primary customers,
building professionals, also increased 9.3% when compared with the second
quarter of 1997. Consumer same store sales decreased 10.2% for the quarter. As
of June 27, 1998, Wickes operated 101 sales and distribution facilities, 11 less
than it operated at the end of the second quarter of 1997.
Wickes believes that its investments in its target major markets and
re-merchandised conventional market sales and distribution facilities, as
well as favorable economic conditions have offset the reduction in
operating facilities and commodity lumber deflation. Same store sales
increased 27% in Wickes' nine target major markets, while same store
sales increased 19% in the 11 sales and distribution facilities which
Wickes had finished remerchandising by the end of the second quarter of
1998. Single family housing starts were approximately 10.4% higher,
nationally, in the second quarter of 1998 than in the comparable period
of 1997. In Wickes' primary geographical market, the Midwest, single
family housingwere up 4.2%.
Gross Profit
____________
1998 second quarter gross profit increased to $56.1 million from $54.3
million for the second quarter of 1997, a 3.3% increase. Gross profit as a
percentage of sales increased to 23.6% for the second quarter of 1998 from 22.9%
in 1997. The increase in gross profit as a percentage of sales is primarily
attributable to improved product costs and a reduction in costs associated with
physical inventory count adjustments. These improvements were partially offset
by the effects of lumber deflation. Sales to building professionals, as a
percentage of total sales, increased to 87.8% for the second quarter of 1998
from 85.5% for the same period in 1997. Lumber and building materials accounted
for 89.6% of sales in the second quarter of 1998, compared with 89.4% in the
second quarter of 1997.
<Page 15>
Selling, General and Administrative Expense
___________________________________________
SG&A expense decreased to 19.3% of net sales in the second quarter of
1998 compared with 19.8% of net sales in the second quarter of 1997. Much of
the reduction can be attributed to expense reductions as part of Wickes'
operational restructuring and the completion of most of Wickes' remerchandising
programs during or prior to the end of the second quarter of 1998.
Decreases as a percentage of sales in general office, travel, marketing,
professional fees, and maintenance expenses were partially offset by increases
in salaries and wages, employee relocation and real estate rent expense.
Salaries, wages and employee benefits increased as a percentage of sales by
0.2%. As of June 27, 1998, Wickes had 3,865 full time and part time employees,
a decrease of 5.3% from June 28, 1997.
Depreciation, Goodwill and Trademark Amortization
_________________________________________________
Depreciation, goodwill and trademark amortization increased to $1.3
million for the second quarter of 1998 compared with $1.2 million for the same
period in 1997. This increase is primarily due to depreciation on rental
equipment. Wickes' tool rental program was initiated during 1997 and no
depreciation on rental equipment was recorded in the second quarter of 1997.
Provision for Doubtful Accounts
_______________________________
Wickes recorded a benefit from the provision for doubtful accounts of
$0.1 million in the second quarter of 1998, compared with a benefit of $0.5
million in the second quarter of 1997. Increased construction activity in the
Northeast and Midwest, during the second quarter, results in improved
collections on previously reserved accounts and lower delinquency levels.
Collections during the second quarter of 1997 were very high.
Other Operating Income
______________________
Other operating income for the second quarter of 1998 was $1.4 million
compared with $1.6 million for the second quarter of 1997. During the second
quarter of 1998, Wickes recorded a gain of approximately $180,000 on the
difference between insured replacement cost and book value of inventory, as a
result of a fire at one of its sales and distribution facilities. In the second
quarter of 1997 Wickes recorded a gain of approximately $500,000 on the sale of
a previously closed sales and distribution facility.
<Page 16>
Interest Expense
________________
In the second quarter of 1998 interest expense increased to $5.5 million
from $5.3 million for the second quarter of 1997, resulting primarily from an
increase in average total long term debt of approximately $13.1 million,
partially offset by a decrease in the effective borrowing rate on total long
term debt of approximately 20 basis points. The decrease in the effective
borrowing rate is primarily due to a reduction in the interest rate on Wickes'
revolving line of credit, effective April 11, 1997 and a small reduction in the
LIBOR rate. Approximately 93% 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 equity in loss of
affiliated company of $200,000. Wickes' net equity in this affiliate was
reduced to zero at December 31, 1997 thus no additional equity losses for this
affiliate were recorded in 1998.
Six Months Ended June 27, 1998 Compared
with the Six Months Ended June 28, 1997
Net Sales
_________
Although net sales for the first half of 1998 increased 2.3% to $405.9
million from $396.7 million for the first half of 1997, same store sales
increased 7.9% compared with the same period last year, despite deflation in
lumber prices which Wickes estimates reduced sales by approximately $15.0
million, or approximately 3.8% compared with 1997 comparable period pricing.
Same store sales to Wickes' primary customers, building professionals, also
increased 9.2% when compared with the first half of 1997. Consumer same store
sales decreased 5.4% for the first half. As of June 27, 1998 Wickes operated
101 sales and distribution facilities, 11 less than it operated at the end of
the second quarter of 1997.
Wickes believes that its investments in its target major markets and
re-merchandised conventional market sales and distribution facilities, as well
as favorable economic and weather conditions have offset the reduction in
operating facilities and commodity lumber deflation. Same store sales
increased 28% in Wickes' nine target major markets, while same store sales
increased 23% in the 11 sales and distribution facilities Wickes finished
remerchandising by the end of the second quarter of 1998. Single family
housing starts were 9.6% higher, nationally, in the first half of 1998 than in
the comparable period of 1997. In Wickes' primary geographical market, the
Midwest, single family housing starts were up 7.7%. During the first quarter
of 1998, the positive effects of the mild winter in Wickes' Midwest region,
Wickes' primary region, were partially offset by increased precipitation in
the Northeast and South. Weather conditions during the first quarter of 1997
were closer to historical seasonal averages.
<Page 17>
Gross Profit
____________
Gross profit during the first half of 1998 increased to $97.1 million
from $91.3 million for the first half of 1997, a 6.4% increase. Gross profit as
a percentage of sales increased to 23.9% for the first half of 1998 from 23.0%
in 1997. The increase in gross profit as a percentage of sales is primarily
attributable to improved product costs, increased margins on internally
manufactured products and a reduction in costs associated with physical
inventory count adjustments. These improvements were partially offset by the
effects of lumber deflation. Sales to building professionals, as a percentage
of total sales, increased to 88.5% for the first half of 1998 from 87.2% for
the same period in 1997. Lumber and building materials accounted for 88.6% of
sales in the first half of 1998, relatively unchanged from the first half of
1997.
Selling, General and Administrative Expense
___________________________________________
SG&A expense decreased slightly, to 21.3% of net sales in the first half
of 1998 compared with 21.4% of net sales in the first half of 1997. Increased
expenses attributable to major market expansion programs and remerchandising of
sales and distribution facilities were more than offset through reductions in
other areas, primarily the reduction of costs anticipated under Wickes'
operational restructuring plan, implemented in the first quarter of 1998.
Decreases as a percentage of sales in professional fees, marketing,
travel and general office expense were partially offset by increases in salaries
and wages, employee relocation and real estate rental expenses. Salaries, wages
and employee benefits for the first half of 1998, increased as a percentage of
sales by 0.4% when compared with the first half of 1997.
Depreciation, Goodwill and Trademark Amortization
_________________________________________________
Depreciation, goodwill and trademark amortization increased to $2.6
million for the first half of 1998 compared with $2.4 million for the same
period in 1997. This increase is primarily due to depreciation on rental
equipment. Wickes' tool rental program was initiated during 1997 and no
depreciation on rental equipment was recorded in the first half of 1997.
Provision for Doubtful Accounts
_______________________________
The provision for doubtful accounts increased to $1.2 million for the
first half of 1998 from $0.6 million in the first half of 1997. The primary
reason for the increase is the better than historical collection performance
achieved during the first half of 1997, expense of only 0.1% of total sales.
<Page 18>
Restructuring and Unusual Items
_______________________________
In February of 1998, Wickes announced the 1998 Plan which included the
closing or consolidation of eight sales and distribution facilities and two
component manufacturing facilities in February, the sale of two additional sales
and distribution facilities in March, and further reductions in headquarters
staffing. Wickes recorded a restructuring charge of $5.4 million, which
included $3.7 million in anticipated losses on the disposition of closed center
assets and liabilities, $2.0 million in severance and post employment benefits
related to the 1998 Plan, and a benefit of $300,000 for adjustments to prior
years' restructuring accruals. By the end of the second quarter the 1998 Plan
was virtually complete. No restructuring or unusual items were recorded in the
first half of 1997.
Other Operating Income
______________________
Other operating income for the first half of 1998 was $3.8 million
compared with $2.5 million for the first half of 1997. During the first half of
1998, Wickes recorded a gain of approximately $1.6 million on the sale of two
sales and distribution facilities located in Iowa, two other closed facilities,
and excess equipment. A gain of $180,000 on the difference between insured
replacement cost and book value of inventory, as a result of a fire at one of
its sales and distribution facilities was also recorded in the first half of
1998. In the first half of 1997, Wickes recorded a gain of approximately
$500,000 on the sale of a previously closed sales and distribution facility.
Interest Expense
________________
In the first half of 1998, interest expense increased to $10.9 million
from $10.4 million during the first half of 1997, resulting primarily from an
increase in average total long term debt of approximately $14.2 million,
partially offset by a decrease in the effective borrowing rate on total long
term debt of approximately 22 basis points. The decrease in the effective
borrowing rate is primarily due to a reduction in the interest rate on Wickes'
revolving line of credit, effective April 11, 1997. Approximately 93% 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 equity in loss of affiliated
company of $766,000. Wickes' net equity in this affiliate was reduced to
zero at December 31, 1997 thus no additional equity losses for this affiliate
were recorded in 1998.
Parent Company and Other Subsidiaries
The following discussion relates to the operations of the Parent Company
and its subsidiaries, other than Wickes (the "Parent Group"). In December of
1997, Riverside purchased "Wickes Plus" from Wickes Inc., and in January of
1998, Riverside purchased Cybermax, an Internet Service Provider located in
Jacksonville, Florida. These operations have established Riverside as a
marketer of Internet services including dial-up and dedicated connectivity, web
software development, web hosting, long distance, prepaid and post paid calling
cards. Riverside markets these operations under the name "Cybermax". In 1998,
Riverside also began marketing gas and electricity under the name of WIXX Energy
("WIXX"). These operations are in the start-up phase and did not generate
substantial revenues through June 30, 1998. By the end of 1998, the Company
expects these operations will begin generating significant revenues.
<Page 19>
Non-interest operating expenses for the three months ended June 30, 1998
increased to $1,317,000 from $540,000 for the same period in 1997. The primary
reason for the increase is due to the startup costs incurred by the Cybermax
operations, which accounted for approximately $849,000 of the expenses. In
addition, WIXX incurred approximately $219,000 of expenses for the three months
ending June 30, 1998.
The Parent Group's non-interest operating expenses for the first six
months of 1998 and 1997 were $2,503,000 and $871,000, respectively. The primary
reason for the increase is due to the startup costs incurred by the Cybermax
operations, which accounted for approximately $1,714,000 of the expenses.
In addition, WIXX incurred approximately $381,000 of expenses for the six months
ending June 30, 1998.
Revenues of the Parent Group (excluding investment income) for the second
quarter of 1998 and 1997 were $498,000 and $0, respectively. Included is
$167,000 in sales attributable to the Cybermax operations and $325,000 received
in settlement of a lawsuit.
The Parent Group's revenues for the first six months of 1998 were
$697,000 compared with $0 in 1997. Included is $282,000 in sales attributable
to the Cybermax operations and $415,000 received in various lawsuit
settlements.
Interest expense decreased to $605,000 from $780,000 for the three
months ending June 30, 1998 and 1997, respectively. Principal payments made
on the Parent Company's real estate debt during the last twelve months, are the
primary reason for the decrease. The interest expense will continue to decrease
as a result of real estate sales.
The Parent Group's interest expenses for the first six months of 1998
were $1,349,000 compared with $1,534,000. The primary reason for the decrease
was a result of principal payments made on the Parent Company's real estate
debt. During the first six months of 1998, the principal balance on the
mortgage debt was reduced by $3.2 million.
Real Estate Investments
The Company's real estate investments consist of $7,399,000 in Georgia
properties, $3,476,000 in Florida properties and $73,000 in other states.
Included in the Company's net realized investment gains for the first six
months of 1998 and 1997 were net realized gains on real estate investments of
$437,000 and $687,000, respectively.
<Page 20>
Discontinued Operations
Beginning in 1995, Riverside marketed construction and permanent mortgage
loans to and through the professional building customers of Wickes. In early
1997, Riverside began to reduce the extent of mortgage operations. In December
1997, Riverside completed the sale of its remaining mortgage operations to a
third party, which continues to market mortgage loans through Wickes.
The following table sets forth information concerning the results of the
Company's former mortgage lending operations.
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
__________________ ________________
June 30,1997(1) June 30, 1997(2)
_______________ ________________
<S> <C> <C>
Revenues -- --
Other income(loss) $ 358 $ 631
______ _______
Total revenues 358 631
Selling, general and
administrative expenses 454 883
Interest expense 175 286
______ ______
Total expense 629 1,169
______ _______
Net loss $(271) $ (538)
====== =======
(1) Net of reimbursements of $248,000 received during the three months ended
June 30, 1997, by the Parent Company on behalf of its mortgage lending
operations from Wickes.
(2) Net of reimbursements of $548,000 received during the first six months of
1997, by the Parent Company on behalf of its mortgage lending operations
from Wickes.
</TABLE>
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, 1998 and 1997. The Company's equity in losses
of Wickes has reduced Wickes' 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 $1.6 million for the first
half of 1998 compared with a benefit of $1.3 million in the first half of
1997. An effective tax rate of 39.0% was used to calculate federal income taxes
for the second quarter of 1998, compared with an effective rate of 39.1% for
the second quarter of 1997. In addition to the effective rate used, state
franchise taxes were calculated separately and are included in the provision
reported.
<Page 21>
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.
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 Parent Company's internet, telephony and
utilities marketing operations. The Parent Company's internet, telephony and
utilities marketing operations are in the start-up phase and are expected to be
net users of cash for several months. 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.
On April 20, 1998, Riverside amended certain terms of its real estate
debt. In connection with the amendment, (i) the Parent Company pledged an
additional 325,000 shares of Wickes common stock in substitution for the $1.4
million cash then held by the lender as collateral and (ii) agreed to a reduced
collateral value for the shares of pledged Wickes common stock.
In February of 1998, Riverside completed the acquisition of the Internet
and utilities marketing operations formerly owned by Wickes. The disposition of
these operations by Wickes was part of the determination made by Wickes to
discontinue or sell non-core operations. For these operations, Riverside paid
consideration of approximately $872,000 in the form of a three-year unsecured
promissory note. The terms of the promissory note include interest based on
the prime lending rate plus two percentage points due monthly and principal
due in thirteen equal quarterly installments, beginning May 15, 1998 and
ending May 15, 2001. In addition, Riverside agreed to pay ten percent of
future net income of these operations, subject to a maximum of $429,249 plus
interest. Wickes' Consolidated Financial Statements do not reflect the
promissory note since it is an inter-company note and, therefore, eliminated
in consolidation.
At August 4, 1998, the Parent Company had approximately $200,000 in cash
on hand. The Parent Company believes that its cash on hand will not be
sufficient to support its operations and overhead and to service its
indebtedness until such time as its Cybermax and WIXX operations have begun to
generate significant positive cash flow and that the Parent Company will need
significantly in excess of $1,000,000 of additional funds in order to support
its operations through September 1998 and to make the required September 30,
1998 interest payment due on its 13% Subordinated Notes. Therefore, the Parent
Company will need to obtain these and any other additional required funds
through asset sales or additional borrowings or other financing. The Company
presently anticipates that it will obtain these funds through market and private
sales of Wickes common stock. At August 7, 1998, approximately 2,012,180 of
the Parent Company's 4,152,415 shares of Wickes common stock are pledged to
secure various obligations of Wickes.
<Page 22>
On April 2, 1998, the Parent Company repaid the remaining $453,000
balance of a secured obligation to a third party. On February 12, 1998, the
Parent Company issued an unsecured note for $100,000 to a third party in
connection with its acquisition of Cybermax.
In the fourth quarter of 1997, J. Steven Wilson, Wickes' Chairman,
President and Chief Executive Officer advanced $160,000 to the Company. The
Company repaid this advance in June 1998. In addition, the Company advanced Mr.
Wilson $150,000 in June 1998.
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.
During the first six months of 1998, stockholders' equity decreased by a
net of $5.4 million. Losses attributable to Wickes accounted for approxi-
mately 41% of the decrease. Wickes recorded an operational restructuring charge
of $5.4 million in the first quarter. The Company's startup costs incurred for
the Cybermax and WIXX Energy operations accounted for approximately 39% of the
decrease.
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 Company's ability
to achieve the level of real estate sales required to meet scheduled real estate
debt payments, (ii) the level of positive or negative cash flow generated by the
Parent Company's internet, telephony and utilities marketing operations, (iii)
the Company's ability to borrow, which may depend upon, among other things, the
trading price of Wickes common stock and the Parent Company's internet,
telephony and utilities marketing operations and (iv) the ability of the Company
to raise funds through sales of 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. The Company's ability to sell Wickes common
stock would depend upon, among other things, the trading price of Wickes common
stock and, in light of the relatively low trading volume for Wickes common
stock, possibly Wickes' 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.
During the first six months of 1998 net cash used in operating activities
was $21.1 million, $12.1 million less than the $33.2 million used in the first
six months of 1997. The first six months 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 inventory levels during the first quarter to meet
anticipated sales increases, and in the second quarter increases in accounts
receivable occur as a result of the increased sales activity.
<Page 23>
Wickes' accounts receivable balance at the end of the second quarter of
1998 increased $3.3 million when compared to the end of the second quarter of
1997, an increase of 3.4%. Approximately $2.9 million of this increase is
attributable to increased credit sales during June 1998, compared with June
1997.
Inventory at the end of the second quarter of 1998 was $12.5 million, or
9.7%, lower than at the end of the second quarter of 1997. Approximately $13.0
million in inventory reduction is attributable to the closing, consolidation, or
sale of 10 sales and distribution facilities and two manufacturing facilities
during the first quarter of 1998. Increases in same store inventory in building
materials and hardlines are nearly offset by deflation in commodity lumber
inventory of approximately $3.8 million. Accounts payable at the end of the
second quarter of 1998 decreased approximately $8.9 million, or 13.1% from the
second quarter of 1997. This change is primarily attributable to special buys
on commodity building materials, (roofing, drywall, insulation) which included
extended accounts payable terms, which occurred during the second quarter of
1997, increasing accounts payable at the end of that quarter. These special
buys occurred during the first quarter of 1998.
Wickes' capital expenditures consist primarily of the construction of
storage facilities, the remodeling and reformatting of sales and distribution
facilities and component manufacturing facilities, and the purchase of vehicles,
equipment and management information systems for both existing and new
operations. In the first six months of 1998 Wickes spent $2.0 million on capital
expenditures as compared to $2.7 million for the same period in 1997. Wickes
expects to spend approximately $4.0 million for all of 1998. Under Wickes' bank
revolving credit agreement, as amended, capital expenditures during 1998 are
limited to $6.0 million plus the proceeds from the sale of certain excess real
estate plus the portion of 1997's capital expenditures that were not spent.
Wickes expects to fund capital expenditures through borrowings and its
internally generated cash flow.
During the first three months of 1998, Wickes closed, consolidated, or
sold ten sales and distribution facilities and two component manufacturing
facilities. At August 1, 1998 Wickes operated 101 sales and distribution
facilities and 10 component manufacturing facilities compared with 112 sales and
distribution facilities and 12 component manufacturing facilities at August 1,
1997. The following table reconciles the number of sales and distribution
facilities and component manufacturing facilities operated by Wickes, through
August 1, 1998:
<TABLE>
<CAPTION>
Sales and Distribution Component Manufacturing
Facilities Facilities
__________ __________
<S> <C> <C>
As of December 27, 1997 111 11
Expansion - 1
Sold (2) -
Closings (7) (2)
Consolidation (1) -
___ ____
As of August 1, 1998 101 10
=== ===
</TABLE>
<Page 24>
On July 16, 1998, Wickes announced an agreement in principle to acquire
Eagle Industries Inc., an Indianapolis, Indiana component manufacturer with 1997
sales of $10.5 million. Eagle Industries manufactures and distributes roof
trusses, wall panels and other building materials to the home building industry.
The transaction is expected to be complete by the end of the third quarter.
Wickes maintained excess availability under its revolving line of credit
throughout the first six months of 1998. At the end of the second quarter total
borrowings under the revolving line of credit were $8.5 million higher than at
the end of the second quarter of 1997. 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 27, 1998, $112.5 million was outstanding under Wickes'
revolving line of credit, and the unused availability was approximately $17.2
million. Wickes' assessment of its future funds availability constitutes
Forward-Looking Information made pursuant to the Private Securities Litigation
Reform Act of 1995 and is inherently subject to uncertainty resulting from,
among other things, the factors discussed under "Results of Operations -
Provision for Income Tax Benefit".
On March 20, 1998, Wickes and its lenders entered into a third amendment
to Wickes' revolving credit agreement. This amendment includes a modification
to the fixed charge ratio covenant to reflect the restructuring announced by
Wickes in February 1998 and includes the lenders' consent to Wickes' sale of its
Iowa facilities and its internet and utilities marketing operations.
<Page 25>
PART II
OTHER INFORMATION
Item 2. Changes in Securities
Item 5. 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
<Page 26>
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
Senior Vice President and
Chief Financial Officer
Date: August 14, 1998
<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-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> JUN-30-1998
<EXCHANGE-RATE> 1
<CASH> 813
<SECURITIES> 0
<RECEIVABLES> 102,746
<ALLOWANCES> 4,370
<INVENTORY> 117,030
<CURRENT-ASSETS> 230,679
<PP&E> 832,528
<DEPRECIATION> 437,742
<TOTAL-ASSETS> 335,863
<CURRENT-LIABILITIES> 78,377
<BONDS> 109,722
0
0
<COMMON> 529
<OTHER-SE> 8,719
<TOTAL-LIABILITY-AND-EQUITY> 335,863
<SALES> 406,169
<TOTAL-REVENUES> 410,733
<CGS> 309,063
<TOTAL-COSTS> 309,063
<OTHER-EXPENSES> 97,138
<LOSS-PROVISION> 1,202
<INTEREST-EXPENSE> 12,260
<INCOME-PRETAX> (7,002)
<INCOME-TAX> (1,630)
<INCOME-CONTINUING> (5,372)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (5,372)
<EPS-PRIMARY> (1.03)
<EPS-DILUTED> (1.03)
</TABLE>
