<PAGE>
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q/A
(Mark One)
[X] Quarterly report pursuant to Section 13 and 15 (d) of the Securities
Exchange Act of 1934
For the quarterly period ended JUNE 30, 1998
-------------
or
[_] Transition report pursuant to Section 13 or 15 (d) of the Securities
Exchange Act of 1934
For the transition period from __________ to __________
Commission file number 1-10728
-------
UNITED STATES FILTER CORPORATION
--------------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 33-0266015
------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) identification No.)
40-004 COOK STREET, PALM DESERT, CA 92211
------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (760) 340-0098
--------------
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
------- -------
The number of shares of common stock, $.01 par value, outstanding as of August
12, 1998 was 163,575,176 shares.
Total number of pages 23
--
THERE IS ONE EXHIBIT FILED WITH THIS REPORT
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
UNITED STATES FILTER CORPORATION
AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
MARCH 31, 1998 AND JUNE 30, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
March 31, 1998 June 30, 1998
--------------- -------------
(in thousands)
ASSETS
Current assets:
<S> <C> <C>
Cash and cash equivalents $ 66,917 58,847
Short-term investments 241 417
Accounts receivable, net 873,890 993,063
Costs and estimated earnings in excess
of billings on uncompleted contracts 217,935 209,386
Inventories 473,698 492,051
Prepaid expenses 16,471 33,228
Deferred taxes 151,107 186,228
Other current assets 51,377 54,572
---------- ---------
Total current assets 1,851,636 2,027,792
---------- ---------
Property, plant and equipment, net 960,019 996,608
Investment in leasehold interests, net 21,699 21,049
Costs in excess of net assets of businesses acquired, net 1,312,776 1,367,756
Other assets 319,315 275,050
---------- ---------
$4,465,445 4,688,255
========== =========
</TABLE>
SEE ACCOMPANYING NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
2
<PAGE>
UNITED STATES FILTER CORPORATION
AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
MARCH 31, 1998 AND JUNE 30, 1998 (CONTINUED)
(UNAUDITED)
<TABLE>
<CAPTION>
March 31, 1998 June 30, 1998
-------------- -------------
(in thousands)
LIABILITIES AND SHAREHOLDERS' EQUITY
<S> <C> <C>
Current liabilities:
Accounts payable $ 357,260 369,983
Accrued liabilities 535,329 593,427
Current portion of long-term debt 118,849 20,554
Billings in excess of costs and estimated
earnings on uncompleted contracts 90,073 72,006
Other current liabilities 45,702 101,545
---------- ---------
Total current liabilities 1,147,213 1,157,515
---------- ---------
Notes payable 574,806 329,810
Long-term debt, excluding current portion 404,416 74,364
Convertible subordinated debentures 554,000 554,000
Redeemable or remarketable securities - 900,000
Deferred taxes 82,910 67,390
Other liabilities 110,662 147,000
---------- ---------
Total liabilities 2,874,007 3,230,079
---------- ---------
Shareholders' equity:
Preferred stock, authorized 3,000 shares - -
Common stock, par value $.01. Authorized 300,000
shares; 155,825 and 161,811 shares issued and
outstanding at March 31, 1998 and June 30, 1998,
respectively 1,558 1,618
Additional paid-in capital 1,945,223 1,990,004
Currency translation adjustment (57,282) (64,189)
Accumulated deficit (298,061) (469,257)
---------- ---------
Total shareholders' equity 1,591,438 1,458,176
---------- ---------
Commitments and contingencies
$4,465,445 4,688,255
========== =========
</TABLE>
SEE ACCOMPANYING NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
3
<PAGE>
UNITED STATES FILTER CORPORATION
AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED JUNE 30, 1997 AND 1998
(UNAUDITED)
<TABLE>
<CAPTION>
1997 1998
------------- --------------
(in thousands, except per share data)
<S> <C> <C>
Revenues $792,936 1,119,331
Costs of sales 597,573 788,169
-------- ---------
Gross profit 195,363 331,162
-------- ---------
Selling, general and administrative expenses 154,250 223,164
Purchased in-process research and development - 3,558
Merger, restructuring, acquisition and
other related charges - 257,920
-------- ---------
154,250 484,642
-------- ---------
Operating income (loss) 41,113 (153,480)
-------- ---------
Other income (expense):
Interest expense (10,995) (25,648)
Gain on disposition of investment in affiliate 31,098 -
Interest and other income, net 1,917 4,127
-------- ---------
22,020 (21,521)
-------- ---------
Income (loss) before income taxes
and extraordinary item 63,133 (175,001)
Income tax expense (benefit) 23,416 (19,604)
-------- ---------
Income (loss) before extraordinary item 39,717 (155,397)
Extraordinary item (422) -
-------- ---------
Net income (loss) $ 39,295 (155,397)
======== =========
Net income (loss) per common share:
Basic $ 0.31 (0.98)
======== =========
Diluted $ 0.30 (0.98)
======== =========
</TABLE>
SEE ACCOMPANYING NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
4
<PAGE>
UNITED STATES FILTER CORPORATION
AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED JUNE 30, 1997 AND 1998
(UNAUDITED)
<TABLE>
<CAPTION>
1997 1998
--------- ---------
(in thousands)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 39,295 (155,397)
Adjustments to reconcile net income (loss) to net cash provided by
(used in) operating activities:
Deferred income taxes (5,265) (50,650)
Provision for doubtful accounts 2,364 6,120
Depreciation 19,464 25,696
Amortization 7,581 12,769
Merger, restructuring, acquisition and other related
cash charges - 155,396
Write-off of in-process research and development
and goodwill - 40,818
Gain on disposition of investment in affiliate (31,098) -
(Gain) loss on sale or disposal of property, plant and equipment (27) 29,937
Change in operating assets and liabilities:
Increase in accounts receivable (55,341) (75,304)
(Increase) decrease in costs and estimated earnings in excess
of billings on uncompleted contracts (15,192) 13,287
Increase in inventories (22,533) (4,727)
Increase in other assets (3,688) (16,857)
Increase in accounts payable and accrued expenses 61,356 24,166
Increase (decrease) in billings in excess of costs and
estimated earnings on uncompleted contracts 3,928 (30,470)
Increase (decrease) in other liabilities (18,257) 37,377
-------- --------
Net cash provided by (used in) operating activities (17,413) 12,161
-------- --------
Cash flows from investing activities:
Payment for purchase of property, plant and equipment (30,075) (43,206)
Payment for purchase of acquisitions, including certain
merger and restructuring charges, net of cash acquired (73,816) (237,251)
Proceeds from disposal of equipment 400 2,837
Proceeds from disposition of investment in affiliate 50,897 -
Sale (purchase) of short-term investments 1,571 (176)
-------- --------
Net cash used in investing activities (51,023) (277,796)
-------- --------
</TABLE>
SEE ACCOMPANYING NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
5
<PAGE>
UNITED STATES FILTER CORPORATION
AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED JUNE 30, 1997 AND 1998 (CONTINUED)
(UNAUDITED)
<TABLE>
<CAPTION>
1997 1998
-------- ---------
(in thousands)
<S> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from issuance of remarketable or
redeemable securities - 913,637
Net proceeds from issuance of common stock 683 -
Proceeds from exercise of common stock options 465 723
Principal payments on debt (8,156) (440,765)
Net (payments) proceeds from borrowings on notes payable 10,462 (216,030)
Dividends paid (50) -
-------- --------
Net cash provided by financing activities 3,404 257,565
-------- --------
Net decrease in cash and cash equivalents (65,032) (8,070)
Cash and cash equivalents at March 31, 1997 and 1998 144,128 66,917
-------- --------
Cash and cash equivalents at June 30, 1997 and 1998 $ 79,096 58,847
======== ========
Supplemental disclosures of cash flow information:
Cash paid during the period for interest $ 12,806 28,989
======== ========
Cash paid during the period for income taxes $ 2,964 13,469
======== ========
</TABLE>
SEE ACCOMPANYING NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
6
<PAGE>
UNITED STATES FILTER CORPORATION
AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Note 1. Operations and Significant Accounting Policies
----------------------------------------------
The accompanying condensed consolidated financial statements have been prepared
by the Company pursuant to the rules and regulations of the U.S. Securities and
Exchange Commission. Certain information and footnote disclosures normally
included in financial statements prepared in accordance with U.S. generally
accepted accounting principles have been condensed or omitted pursuant to such
regulations. The condensed consolidated financial statements reflect all
adjustments and disclosures which are, in the opinion of management, necessary
for a fair presentation of the information contained therein. All such
adjustments are of a normal recurring nature. The condensed consolidated
financial statements should be read in conjunction with the consolidated
financial statements and notes thereto that are contained in the Company's
Annual Report on Form 10-K for the fiscal year ended March 31, 1998. The
results of operations for the interim periods are not necessarily indicative of
the results of the full fiscal year.
Income (Loss) per Common Share
- ------------------------------
Income (loss) per common share is computed based on the weighted average number
of shares outstanding and in accordance with Statement of Financial Accounting
Standards ("SFAS") No. 128 "Earnings Per Share". Dilutive securities consisting
of convertible preferred stock, convertible subordinated debt and common stock
options are included in the computation of income (loss) per dilutive share when
their effect is dilutive. Accordingly, "Basic EPS" and "Diluted EPS" were
calculated as follows:
<TABLE>
<CAPTION>
Three Months Ended
June 30,
-----------------------------
1997 1998
------------ --------------
(in thousands, except per share data)
<S> <C> <C>
BASIC
Net income (loss) applicable to common shares $ 39,295 (155,397)
======== ========
Weighted average common shares outstanding 126,087 158,524
======== ========
Basic income (loss) per common share $ 0.31 (0.98)
======== ========
</TABLE>
7
<PAGE>
<TABLE>
<CAPTION>
Three Months Ended
June 30,
-------------------------
1997 1998
---------- ------------
(in thousands, except per share data)
<S> <C> <C>
DILUTED
Net income (loss) applicable to common shares $ 39,295 (155,397)
Add:
Effect on net income of conversion of
convertible subordinated debentures 5,066 - *
-------- -------
Adjusted net income (loss) applicable to
common shares 44,361 (155,397)
======== ========
Weighted average shares outstanding 126,087 158,524
Add:
Assumed conversion of subordinated
debentures 18,119 - *
Exercise of options and assumed conversion
of subordinated debentures 2,266 - *
-------- --------
Adjusted weighted average shares outstanding 146,472 158,524
======== ========
Diluted income (loss) per common share $ 0.30 (0.98)
======== ========
- -----------------
</TABLE>
* The calculation of Diluted EPS does not assume conversion of subordinated
debentures or exercise of stock options for the three months ended June
30, 1998 as the effect would be antidilutive to loss per share. Under the
treasury stock method, the exercise of all outstanding options would have
increased the weighted average number of shares by 3.0 million for the
three months ended June 30, 1998.
Note 2. Inventories
-----------
Inventories at March 31, 1998 and June 30, 1998 consist of the following:
<TABLE>
<CAPTION>
March 31, 1998 June 30, 1998
-------------- -------------
(in thousands)
<S> <C> <C>
Raw materials $130,501 139,703
Work-in-progress 102,198 94,520
Finished goods 240,999 257,828
-------- -------
$473,698 492,051
======== =======
</TABLE>
8
<PAGE>
Note 3. Debt
----
Notes Payable. As of June 30, 1998, the Company had a Senior Credit Facility
which provides credit facilities to the Company of up to $750.0 million, of
which there were outstanding borrowings of $329.8 million and outstanding
letters of credit of $50.4 million. Borrowings under the Senior Credit Facility
bear interest at variable rates of up to 0.45% above certain Eurocurrency rates
or 0.15% above BankBoston's base rate. The Senior Credit Facility expires
December 2001 and is subject to customary and usual terms.
Remarketable or Redeemable Securities Issuance. On May 15, 1998, the Company
issued $500.0 million 6.375% Remarketable or Redeemable Securities due 2011
(remarketing date May 15, 2001) and $400.0 million 6.50% Remarketable or
Redeemable Securities due 2013 (remarketing date May 15, 2003) (collectively,
the "ROARS"). The net proceeds from the sale of the ROARS, including a premium
payment to the Company by Nationsbanc Montgomery Securities LLC, were $913.6
million. The net proceeds were used to repay indebtedness under the Senior
Credit Facility, indebtedness assumed in the acquisition of Memtec, and a
portion of the indebtedness assumed in the acquisition of Culligan Water
Technologies, Inc. ("Culligan").
Note 4. Acquisition
-----------
On June 15, 1998, a wholly owned subsidiary of the Company and Culligan
consummated a merger and acquisition in a tax-free reorganization pursuant to a
definitive Agreement and Plan of Merger (the "Merger Agreement") by and among
the Company, Palm Water Acquisition Corp. ("Merger Sub"), a wholly owned
subsidiary of the Company, and Culligan. Pursuant to the Merger Agreement,
Merger Sub has been merged with and into Culligan (the "Merger"). The Company
issued 48.6 million shares of the Company's common stock for all of the
outstanding common stock of Culligan (1.875 shares of the Company's common stock
for each outstanding share and each outstanding option or other right to acquire
a share of Culligan common stock, par value $.01). In addition, the Company
assumed approximately $491.7 million of third party institutional debt.
Culligan is a leading manufacturer and distributor of water purification and
treatment products and services for household, consumer and commercial
applications. Products and services offered by Culligan range from those
designed to solve residential water problems, such as filters for tap water and
household softeners, to equipment and services, such as ultrafiltration and
microfiltration products. Culligan also offers desalination systems and
portable deionization services ("PDS"), designed for commercial and industrial
applications. In addition, Culligan sells and licenses its dealers to sell
under the Culligan trademark five-gallon bottled water.
The Merger has been accounted for as a pooling of interests and, accordingly,
the condensed consolidated financial statements and notes thereto for all
periods presented have been restated to include the accounts of Culligan.
Reconciliation of results of operations of the combined entities for the three
months ended June 30, 1997 are as follows:
<TABLE>
<CAPTION>
Three Months
Ended
June 30, 1997
--------------
(in thousands)
<S> <C>
Revenues:
Company (as previously reported) $693,533
Culligan 99,403
--------
Combined $792,936
========
Net income:
Company (as previously reported) $ 12,703
Culligan 26,592
--------
Combined $ 39,295
========
</TABLE>
9
<PAGE>
<TABLE>
<CAPTION>
Three Months
Ended
June 30, 1997
-------------
<S> <C>
Income per common share:
Basic:
As previously reported $0.15
=====
As restated $0.31
=====
Diluted:
As previously reported $0.15
=====
As restated $0.30
=====
</TABLE>
Concurrent with the merger with Culligan, the Company designed and implemented a
restructuring plan to streamline its manufacturing and production base, redesign
its distribution network, improve efficiency and enhance its competitiveness.
The restructuring plan resulted in a pre-tax charge of $257.9 million. Included
in the charge is approximately $49.2 million of merger-related expenses incurred
to consummate the Culligan transaction, including investment banking fees,
printing fees, stock transfer fees, legal fees, accounting fees, governmental
filing fees and certain other transaction costs. Integration and other
acquisition costs of approximately $40.6 million were incurred during the
quarter to combine the operations of Culligan and the Company, and consist of
travel, training, payroll and benefit plan conversions, legal and consulting
fees and other one-time charges related to the transaction. The plan identifies
certain manufacturing facilities, distribution sites, sales and administrative
offices, retail outlets and certain related assets that became redundant upon
consummation of the Culligan transaction. As a result, and in accordance with
SFAS 121, an impairment loss was recognized and idle assets were written down to
the lower of their carrying cost or net realizable value. These assets will not
be depreciated while they are held for disposal. Assets with remaining service
lives were written down to the extent that carrying amounts exceeded future
discounted cash flows and estimated proceeds from disposal. Had the Company not
recognized the impairment losses, the resulting depreciation expense for the
two-week period ended June 30, 1998 would not have been material to reported
results. These assets have a carrying value of approximately $62.3 million as of
June 30, 1998 and are expected to be disposed of during the Company's current
fiscal year.
The restructuring plan also resulted in the reduction of the combined workforce
by 950 employees consisting of 123 management personnel, 295 administrative
personnel, 444 manufacturing personnel and 88 sales personnel. In addition, the
plan impaired certain carrying amounts of goodwill and other intangible assets
in accordance with SFAS 121, which requires that long-lived assets be reviewed
for impairment whenever events or changes in circumstances indicate that the
carrying amount of the assets may not be recoverable. In determining the amount
of impairment of these assets, the Company valued the assets based on the
present value of estimated expected future cash flows using discount rates
commensurate with the risks involved. The components of the merger,
restructuring, acquisition and other related charges are as follows:
<TABLE>
<CAPTION>
(in thousands)
<S> <C>
Merger, integration and other acquisitions costs $ 89,773
Write-off of duplicative assets and lease terminations 79,982
Severance, relocation and related costs 50,649
Write-off of goodwill and other intangible assets 37,516
--------
Total merger, restructuring, acquisition and other related charges $257,920
========
Cash charges $155,396
Non-cash charges 102,524
--------
$257,920
========
</TABLE>
Approximately $86.2 million of merger and restructuring related charges are
included in accrued liabilities at June 30, 1998. Additional costs to complete
the restructuring plan are not expected to be material.
Prior to the Company's acquisition of Culligan, Culligan acquired Protean plc,
including Protean's Analytical and Thermal Division ("A&T"). In connection with
the acquisition of A&T, the Company recorded a charge of $3.6 million for
purchased in-process research and development projects that had not reached
technological feasibility and that had no alternative future use.
After an income tax benefit of $50.5 million, the charges detailed above
totaling $261.5 million reduced earnings by $211.0 million.
10
<PAGE>
Note 5. Comprehensive Income
--------------------
In the current period, the Company adopted SFAS 130 "Reporting Comprehensive
Income", which establishes standards for disclosing comprehensive income in both
annual and interim financial statements. Accordingly, the Company's
comprehensive income was as follows:
<TABLE>
<CAPTION>
Three Months Ended
June 30,
--------------------
1997 1998
-------- ---------
<S> <C> <C>
Net income (loss) $39,295 (155,397)
Foreign currency translation adjustments (8,178) (6,907)
------- --------
Comprehensive income (loss) $31,117 (162,304)
======= ========
</TABLE>
11
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Results of Operations
- ---------------------
Revenues. Revenues for the three months ended June 30, 1998 were $1.1 billion,
an increase of $326.4 million or 41.2% from the $792.9 million for the three
months ended June 30, 1997. This increase was due primarily to acquisitions
completed by the Company subsequent to June 30, 1997. For the three months ended
June 30, 1998, revenues from capital equipment sales represented 44.6% of total
revenues. Revenues from services, operations, replacement parts and consumables
represented 22.5% of total revenues, while revenues from distribution
represented 21.4% of total revenues and revenues from consumer products
represented 11.5% of total revenues.
Gross Profit. Gross profit as a percentage of revenue ("gross margin") was
29.6% for the three months ended June 30, 1998 compared to 24.6% in the
corresponding period in the prior year. These increases in gross margin for the
three months ended June 30, 1998 were due primarily to (i) efficiencies realized
as a result of the Company's reorganization plan implemented in the third
quarter of the prior year; (ii) certain economies of scale related to the
Company's significant growth including enhanced purchasing power; (iii)
favorable product mix in the current quarter resulting from the Company's
emphasis on selling higher margin value added products and services in the
current quarter; and (iv) the incurrence of certain unreimbursed project costs
during the quarter ended June 30, 1997 recorded by Kinetics, which was acquired
as of December 31, 1997 and accounted for as a pooling of interests.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses for the three months ended June 30, 1998 were $223.2
million before purchased in-process research and development and merger,
restructuring, acquisition and other related charges described below ("certain
charges"), an increase of $68.9 million or 44.7% from the $154.3 million for the
three months ended June 30, 1997. The increase in these expenses can be
attributed primarily to the addition of sales and administrative personnel
accompanying the Company's acquisitions completed subsequent to June 30, 1997.
During the current period, selling, general and administrative expenses (before
certain charges) were 19.9% of revenues compared to 19.5% for the comparable
period in the prior year.
Merger, Restructuring, Acquisition and Other Related Charges. Concurrent with
the merger with Culligan, the Company designed and implemented a restructuring
plan to streamline its manufacturing and production base, redesign its
distribution network, improve efficiency and enhance its competitiveness. The
restructuring plan resulted in a pre-tax charge of $257.9 million. Included in
the charge is approximately $49.2 million of merger-related expenses incurred to
consummate the Culligan transaction, including investment banking fees, printing
fees, stock transfer fees, legal fees, accounting fees, governmental filing fees
and certain other transaction costs. Integration and other acquisition costs of
approximately $40.6 million were incurred during the quarter to combine the
operations of Culligan and the Company, and consist of travel, training, payroll
and benefit plan conversions, legal and consulting fees and other one-time
charges related to the transaction. The plan identifies certain manufacturing
facilities, distribution sites, sales and administrative offices, retail outlets
and certain related assets that became redundant upon consummation of the
Culligan transaction. As a result, and in accordance with SFAS 121, an
impairment loss was recognized and idle assets were written down to the lower of
their carrying cost or net realizable value. These assets will not be
depreciated while they are held for disposal. Assets with remaining service
lives were written down to the extent that carrying amounts exceeded future
discounted cash flows and estimated proceeds from disposal. Had the Company not
recognized the impairment losses, the resulting depreciation expense for the
two-week period ended June 30, 1998 would not have been material to reported
results. These assets have a carrying value of approximately $62.3 million as of
June 30, 1998 and are expected to be disposed of during the Company's current
fiscal year.
The restructuring plan also resulted in the reduction of the combined work force
by 950 employees consisting of 123 management personnel, 295 administrative
personnel, 444 manufacturing personnel and 88 sales personnel. In addition, the
plan impaired certain carrying amounts of goodwill and other intangible assets
in accordance with SFAS 121, which requires that long-lived assets be reviewed
for impairment whenever events or changes in circumstances indicate that the
carrying amount of the assets may not be recoverable. In determining the amount
of impairment of these assets, the Company valued the assets based on the
present value of estimated expected future cash flows using discount rates
commensurate with the risks involved. The components of the merger,
restructuring, acquisition and other related charges are as follows:
12
<PAGE>
<TABLE>
<CAPTION>
(in thousands)
<S> <C>
Merger, integration and other acquisitions costs $ 89,773
Write-off of duplicative assets and lease terminations 79,982
Severance, relocation and related costs 50,649
Write-off of goodwill and other intangible assets 37,516
--------
Total merger, restructuring, acquisition and other related charges $257,920
========
Cash charges $155,396
Non-cash charges 102,524
--------
$257,920
========
</TABLE>
Approximately $86.2 million of merger and restructuring related charges are
included in accrued liabilities at June 30, 1998. Additional costs to complete
the restructuring plan are not expected to be material.
Prior to the Company's acquisition of Culligan, Culligan acquired Protean plc,
including Protean's Analytical and Thermal Division ("A&T"). In connection with
the acquisition of A&T, the Company recorded a charge of $3.6 million for
purchased in-process research and development projects that had not reached
technological feasibility and that had no alternative future use.
After an income tax benefit of $50.5 million, the charges detailed above
totaling $261.5 million reduced earnings by $211.0 million.
Interest Expense. Interest expense increased to $25.6 million for the three
months ended June 30, 1998 from $11.0 million for the corresponding period in
the prior year. Interest expense for the three months ended June 30, 1998
consisted primarily of interest on the Company's (i) 6.0% Convertible
Subordinated Notes issued on September 18, 1995 due 2005, (ii) 4.5% Convertible
Subordinated Notes issued on December 11, 1996 due 2001, (iii) 6.375%
Remarketable or Redeemable Securities issued May 15, 1998 due 2011 (Remarketing
Date May 15, 2001), (iv) 6.5% Remarketable or Redeemable Securities due 2013
(Remarketing date May 15, 2003), (v) other long-term debt bearing interest at
rates ranging from 2.0% to 10.1% and (vi) borrowings under the Company's Senior
Credit Facility. At June 30, 1998, the Company had cash and short-term
investments of $59.3 million.
Income Taxes. The Company recorded an income tax benefit of $19.6 million for
the three months ended June 30, 1998 as compared to income tax expense of $23.4
million in the comparable period in the prior year. Before non-recurring
charges, income tax expense was $30.9 million or an effective tax rate of 35.7%
for the three months ended June 30, 1998 as compared to 37.1% for the comparable
period in the prior year.
Net Income. Income before non-recurring charges for the three months ended
June 30, 1998 was $55.6 million, an increase of $15.9 million from the $39.7
million for the three months ended June 30, 1997. After non-recurring charges,
net loss in the three months ended June 30, 1998 was $155.4 million as compared
to net income of $39.3 million in the corresponding period in the prior year.
(Net income in quarter ended June 30, 1997 included a one-time after tax gain of
$18.8 million or $0.15 per diluted share on Culligan's disposition of an
investment in an affiliate.) Net income (loss) per common share for the three
months ended June 30, 1997 and 1998 were as follows:
<TABLE>
<CAPTION>
Three Months Ended
June 30,
-------------------
1997 1998
-------- --------
<S> <C> <C>
Basic $0.31 (0.98)
===== =====
Diluted $0.30 (0.98)
===== =====
</TABLE>
13
<PAGE>
Liquidity and Capital Resources
- -------------------------------
The Company's principal sources of funds are cash and other working capital,
cash flow generated from operations and borrowings under the Company's Senior
Credit Facility. At June 30, 1998, the Company had working capital of $870.3
million including cash and short-term investments of $59.3 million. On May 15,
1998, the Company issued $500.0 million 6.375% Remarketable or Redeemable
Securities due 2011 (remarketing date May 15, 2001) and $400.0 million 6.50%
Remarketable or Redeemable Securities due 2013 (remarketing date May 15, 2003)
(collectively, the "ROARS"). The net proceeds from the sale of the ROARS,
including a premium payment to the Company by Nationsbanc Montgomery Securities
LLC, were $913.6 million. The net proceeds were used to repay indebtedness under
the Senior Credit Facility, indebtedness assumed in the acquisition of Memtec,
and a portion of the indebtedness assumed in the acquisition of Culligan. The
Company's long-term debt at June 30, 1998 consisted of (i) $140.0 million of
6.0% Convertible Subordinated Notes due 2005; (ii) $414.0 million of 4.5%
Convertible Subordinated Notes due 2001; (iii) $500.0 million of ROARS due 2011
(remarketing date May 15, 2001); (iv) $400.0 million of ROARS due 2013
(remarketing date May 15, 2003); (v) other long-term debt of $94.9 million
bearing interest at rates ranging from 2.0% to 10.1%.
As of June 30, 1998, the Company had a Senior Credit Facility which provides
credit facilities to the Company of up to $750.0 million, of which there were
outstanding borrowings of $329.8 million and outstanding letters of credit of
$50.4 million. Borrowings under the Senior Credit Facility bear interest at
variable rates of up to 0.45% above certain Eurocurrency rates or 0.15% above
BankBoston's base rate. The Senior Credit Facility expires December 2001 and is
subject to customary and usual terms.
The Company believes its current cash position, cash flow from operations, and
available borrowings under the Company's Senior Credit Facility will be adequate
to meet its anticipated cash needs from working capital, revenue growth,
scheduled debt repayment and capital investment objectives for at least the next
twelve months.
CERTAIN TRENDS AND UNCERTAINTIES
The Company and its representatives may from time to time make written or oral
forward-looking statements, including statements contained in the Company's
filings with the United States Securities and Exchange Commission and in its
reports to stockholders. In connection with the "Safe Harbor" provisions of the
Private Securities Litigation Reform Act of 1995, the Company is hereby
identifying important factors that could cause actual results to differ
materially from those contained in any forward-looking statement made by or on
behalf of the Company; any such statement is qualified by reference to the
following cautionary statements.
Acquisition Strategy. In pursuit of its strategic objective of becoming
the leading global single-source provider of water and wastewater treatment
systems and services, the Company has, since 1991, acquired more than 150 United
States based and international businesses. The Company plans to continue to
pursue acquisitions that expand the segments of the water and wastewater
treatment and water-related industries in which it participates, complement its
technologies, products or services, broaden its customer base and geographic
areas served and/or expand its global distribution network, as well as
acquisitions which provide opportunities to further and implement the Company's
one-stop-shop approach in terms of technology, distribution or service. The
Company's acquisition strategy entails the potential risks inherent in assessing
the value, strengths, weaknesses, contingent or other liabilities and potential
profitability of acquisition candidates and in integrating the operations of
acquired companies. In addition, the Company's acquisition of Memtec was
accomplished through an unsolicited tender offer, and the Company could make
other such acquisitions. The level of risk associated with such acquisitions is
generally greater because frequently they are accomplished, as was the case with
the acquisition of Memtec, without the customary representations or due
diligence typical of negotiated transactions. Although the Company generally has
been successful in pursuing acquisitions, there can be no assurance that
acquisition opportunities will continue to be available, that the
14
<PAGE>
Company will have access to the capital required to finance potential
acquisitions, that the Company will continue to acquire businesses or that any
business acquired will be integrated successfully or prove profitable.
International Transactions. The Company has made and expects it will
continue to make acquisitions and expects to obtain contracts in markets outside
the United States. In addition, a substantial portion of the business of a
wholly owned subsidiary of the Company includes non-U.S. sales. While these
activities may provide important opportunities for the Company to offer its
products and services internationally, they also entail the risks associated
with conducting business internationally, including the risk of currency
fluctuations, slower payment of invoices, the lack in some jurisdictions of
well-developed legal systems, nationalization and possible social, political and
economic instability. In particular, the Company has significant operations in
Asia which have been and may in the future be adversely affected by current
economic conditions in that region. While the full impact of this economic
instability cannot be predicted, it could have a material adverse effect on the
Company's revenues and profitability.
Reliance on Key Personnel. The operations of the Company are dependent on
the continued efforts of senior management, in particular Richard J. Heckmann,
the Company's Chairman of the Board, President and Chief Executive Officer. The
Company has entered into an employment agreement with Mr. Heckmann, and the
Company is considering employment agreements for other members of senior
management, most of whom do not currently have such agreements, although the
names of such members have yet to be determined. There can be no assurance that
the Company will enter into employment agreements with members of senior
management. Should any of the Company's senior managers be unable or choose not
to continue in their present roles, the Company's prospects could be adversely
affected.
Profitability of Fixed Price Contracts. A significant portion of the
Company's revenues are generated under fixed price contracts. To the extent that
original cost estimates are inaccurate, scheduled deliveries are delayed or
progress under a contract is otherwise impeded, revenue recognition and
profitability from a particular contract may be adversely affected. The Company
routinely records upward or downward adjustments with respect to fixed price
contracts due to changes in estimates of costs to complete such contracts. There
can be no assurance that future downward adjustments will not be material.
Cyclicality, Seasonality and Possible Earnings Fluctuations. The sale of
capital equipment within the water treatment industry is cyclical and influenced
by various economic factors including interest rates and general fluctuations of
the business cycle. A significant portion of the Company's revenues are derived
from capital equipment sales. While the Company sells capital equipment to
customers in diverse industries and in global markets, cyclicality of capital
equipment sales and instability of general economic conditions, including those
currently unfolding in Asian markets, could have a material adverse effect on
the Company's revenues and profitability.
The sale of water and wastewater distribution equipment and supplies is also
cyclical and influenced by various economic factors including interest rates,
land development and housing construction industry cycles. Sales of such
equipment and supplies are also subject to seasonal fluctuation in temperate
climates. The sale of water and wastewater distribution equipment and supplies
is a significant component of the Company's business. Cyclicality and
seasonality of water and wastewater distribution equipment and supplies sales
could have a material adverse effect on the Company's revenues and
profitability.
The Company's high-purity process piping systems have been sold principally to
companies in the semiconductor and, to a lesser extent, pharmaceutical and
biotechnology industries, and sales of those systems are critically dependent on
these industries. The success of customers and potential customers for high-
purity process piping systems is linked to economic conditions in these
respective industries, which in turn are each subject to intense competitive
pressure and are affected by overall economic conditions. The semiconductor
industry in particular has historically been, and will likely continue to be,
cyclical in nature and vulnerable to general downturns in the economy. The
semiconductor and pharmaceutical industries also represent significant markets
for the Company's water and wastewater treatment systems. Downturns in these
industries could have a material adverse effect on the Company's revenues and
profitability.
15
<PAGE>
Operating results from the sale of high-purity process piping systems also can
be expected to fluctuate significantly as a result of the limited pool of
existing and potential customers for these systems, the timing of new contracts,
possible deferrals or cancellations of existing contracts and the evolving and
unpredictable nature of the markets for high-purity process piping systems.
As a result of these and other factors, the Company's operating results may be
subject to quarterly or annual fluctuations. There can be no assurance that at
any given time the Company's operating results will meet or exceed stock market
analysts' expectations, in which event the market price of the common stock
could be adversely affected.
Potential Environmental Risks. The Company's business and products may be
significantly influenced by the constantly changing body of environmental laws
and regulations, which require that certain environmental standards be met and
impose liability for the failure to comply with such standards. The Company is
also subject to inherent risks associated with environmental conditions at
facilities owned, and the state of compliance with environmental laws, by
businesses acquired by the Company. While the Company endeavors at each of its
facilities to assure compliance with environmental laws and regulations, there
can be no assurance that the Company's operations or activities, or historical
operations by others at the Company's locations, will not result in cleanup
obligations, civil or criminal enforcement actions or private actions that could
have a material adverse effect on the Company.
In that regard, at a Connecticut ion exchange resin regeneration facility (the
"South Windsor Facility") operated by a wholly owned subsidiary of the Company
(the "South Windsor Subsidiary"), acquired by the Company in October 1995 from
Anjou International Company ("Anjou"), U.S. federal and state environmental
regulatory authorities issued certain notices of violation alleging multiple
violations of applicable wastewater pretreatment standards. The South Windsor
Subsidiary reached an agreement with the U.S. Attorney's Office and the U.S.
Environmental Protection Agency ("USEPA") to settle all agency claims and
investigations relating to this matter by entering into a plea agreement
pursuant to which the South Windsor Subsidiary would plead guilty to violating
the Clean Water Act. The settlement provides for a payment of $1.36 million,
which includes a criminal penalty of $1.0 million and annual environmental
compliance audits at the South Windsor Facility for five years among other
things. On June 10, 1998, the South Windsor Subsidiary pled guilty to a single
count information alleging violations of the federal Clean Water Act in the
United States District Court for the District of Connecticut. Sentencing in the
case has been set for September 1, 1998. The Company believes that this
settlement will conclude this matter in its entirety; however, the settlement
does not include a formal release of all liabilities in this regard. The Company
has certain rights of indemnification from Anjou which may be available with
respect to this matter pursuant to the laws of the State of New York or the
Stock Purchase Agreement dated as of August 30, 1995 among the Company, Anjou
and Polymetrics, Inc.
In addition to the foregoing, the Company's activities as owner and operator
of certain hazardous waste treatment and recovery facilities are subject to
stringent laws and regulations and compliance reviews. Failure of these
facilities to comply with those regulations could result in substantial fines
and the suspension or revocation of the facility's hazardous waste permit. The
Company serves as contract operator of various municipal and industrial
wastewater collection and treatment facilities, which were developed and are
owned by governmental or private entities. The Company also operates other
facilities, including service deionization centers and manufacturing facilities,
that discharge wastewater in connection with routine operations. Under certain
service contracts and applicable environmental laws, the Company as operator of
such facilities may incur certain liabilities in the event those facilities
experience malfunctions or discharge wastewater which does not meet applicable
permit limits and regulatory requirements. In some cases, the potential for such
liabilities depends upon design or operational conditions over which the Company
has limited, if any, control. In other matters, the Company has been notified by
the USEPA that it is a potentially responsible party under the Comprehensive
Environmental Response, Compensation, and Liability Act of 1980 ("CERCLA") at
certain sites to which the Company or its predecessors allegedly sent waste in
the past. It is possible that the Company could receive other such notices under
CERCLA or analogous state laws in the future. Based on sites which are currently
known to the Company that may require remediation, the Company does not believe
that its
16
<PAGE>
liability, if any, relating to such sites will be material. However, there can
be no assurance that such matters will not be material. In addition, to some
extent, the liabilities and risks imposed by environmental laws on the Company's
customers may adversely impact demand for certain of the Company's products or
services or impose greater liabilities and risks on the Company, which could
also have an adverse effect on the Company's competitive and financial position.
In 1995, Culligan purchased an equity interest in Anvil Holdings, Inc. As a
result of this transaction, Culligan assumed certain environmental liabilities
associated with soil and groundwater contamination at Anvil Knitwear's Asheville
Dyeing and Finishing Plant (the "Plant") in Swannanoa, North Carolina. Since
1990, Culligan has delineated and monitored the contamination pursuant to an
Administrative Consent Order entered into with the North Carolina Department of
Environment, Health and Natural Resources related to the closure of an
underground storage tank at the site. Groundwater testing at the Plant and at
two adjoining properties has shown levels of a cleaning solvent believed to be
from the Plant that are above action levels under state guidelines. The Company
has begun remediation of the contamination. The Company currently estimates that
the costs of future site remediation will range from up to $1.0 million to $1.8
million and that it has sufficient reserves for the site cleanup. The Company
anticipates that the potential costs of further monitoring and corrective
measures to address the groundwater problem under applicable laws will not have
a material adverse effect on the financial position or the results of operations
of the Company. However, because the full extent of the required cleanup has not
been determined, there can be no assurance that this matter will not have a
material adverse effect on the Company's financial position or results of
operations.
Certain of the Company's facilities contain or in the past contained
underground storage tanks which may have caused soil or groundwater
contamination. At one site formerly owned by Culligan, the Company is
investigating, and has taken certain actions to correct, contamination that may
have resulted from a former underground storage tank. Based on the amount of
contamination believed to have been present when the tank was removed, and the
probability that some of the contamination may have originated from nearby
properties, the Company believes, although there can be no assurance, that this
matter will not have a material adverse effect on the Company's financial
position or results of operations.
Competition. All of the markets in which the Company competes are highly
competitive, and most are fragmented, with numerous regional and local
participants. There are competitors of the Company in certain markets that are
divisions or subsidiaries of companies that have significantly greater resources
than the Company. Competitive pressures, including those described above, and
other factors could cause the Company to lose market share or could result in
significant price erosion, either of which could have a material adverse effect
upon the Company's financial position, results of operations and cash flows.
Potential Risks Related to Water Rights and Water Transfers. The Company
recently acquired more than 47,000 acres of agricultural land (the
"Properties"), situated in the Southwestern United States, the substantial
majority of which are in Imperial County, California (the "IID Properties")
located within the Imperial Irrigation District (the "IID"). Substantially all
of the Properties are currently leased to third party agricultural tenants,
including prior owners of the Properties. The Company acquired the Properties
with appurtenant water rights, and is actively seeking to acquire additional
properties with water rights, primarily in the Southwestern and Western United
States. The Company may seek in the future to transfer water attributable to
water rights appurtenant to the Properties, particularly the IID Properties (the
"IID Water"). However, since the IID holds title to all of the water rights
within the IID in trust for the landowners, the IID would control the timing and
terms of any transfers of IID Water by the Company. The circumstances under
which transfers of water can be made and the profitability of any transfers are
subject to significant uncertainties, including hydrologic risks of variable
water supplies, risks presented by allocations of water under existing and
prospective priorities, and risks of adverse changes to or interpretations of
U.S. federal, state and local laws, regulations and policies. Transfers of IID
Water attributable to water rights appurtenant to the IID Properties (the "IID
Water Rights") are subject to additional uncertainties. Allocations of Colorado
River water, which is the source of all water deliveries to the IID Properties,
are subject to limitations under complex international treaties, interstate
compacts, U.S. federal and state laws and regulations, and contractual
arrangements and, in times of drought, water deliveries could be curtailed by
the U.S. government. Further,
17
<PAGE>
any transfers of IID Water would require the approval of the U.S. Secretary of
the Interior. Even if a transfer were approved, other California water districts
and users could assert claims adverse to the IID Water Rights, including but not
limited to claims that the IID has failed to satisfy U.S. federal law and
California constitutional requirements that IID Water must be put to reasonable
and beneficial use. A finding that the IID's water use is unreasonable or
nonbeneficial could adversely impact title to the IID Water Rights and the
ability to transfer IID Water. Water transferred by the IID to metropolitan
areas of Southern California, such as San Diego, currently would be transported
through aqueducts owned or controlled by the Metropolitan Water District, a
quasi-governmental agency (the "MWD"). The transportation cost for any
transfer of IID Water and the volume of water which the MWD can be required to
transport at any time are subject to California laws of uncertain application,
some aspects of which are currently in litigation. The uncertainties associated
with water rights could have a material adverse effect on the Company's future
profitability.
Technological and Regulatory Risks. Portions of the water and wastewater
treatment business are characterized by changing technology, competitively
imposed process standards and regulatory requirements, each of which influences
the demand for the Company's products and services. Changes in regulatory or
industrial requirements may render certain of the Company's treatment products
and processes obsolete. Acceptance of new products may also be affected by the
adoption of new government regulations requiring stricter standards. The
Company's ability to anticipate changes in technological and regulatory
standards and to develop successfully and introduce new and enhanced products on
a timely basis will be a significant factor in the Company's ability to grow and
to remain competitive. There can be no assurance that the Company will be able
to achieve the technological advances that may be necessary for it to remain
competitive or that certain of its products will not become obsolete. In
addition, the Company is subject to the risks generally associated with new
product introductions and applications, including lack of market acceptance,
delays in development or failure of products to operate properly. The market
growth potential of acquired in-process research and development is subject to
certain risks, including costs to develop and commercialize such products, the
cost and feasibility of production of products utilizing the applicable
technologies, introduction of competing technologies and market acceptance of
the products and technologies involved.
There can be no assurance that the Company's existing or any future trademarks
or patents will be enforceable or will provide substantial protection from
competition or be of commercial benefit to the Company. In addition, the laws of
certain non-United States countries may not protect proprietary rights to the
same extent as do the laws of the United States. Successful challenges to
certain of the Company's patents or trademarks could materially adversely affect
its competitive and financial position.
Municipal Water and Wastewater Business. A significant percentage of the
Company's revenues is derived from municipal customers. While municipalities
represent an important part of the water and wastewater treatment industry,
contractor selection processes and funding for projects in the municipal sector
entail certain additional risks not typically encountered with industrial
customers. Competition for selection of a municipal contractor typically occurs
through a formal bidding process which can require the commitment of resources
and greater lead times than industrial projects. In addition, this segment is
dependent upon the availability of funding at the local level, which may be the
subject of increasing pressure as local governments are expected to bear a
greater share of the cost of public services.
Year 2000 Risks. The Year 2000 issue concerns the potential exposures
related to the automated generation of business and financial misinformation
resulting from the application of computer programs which have been written
using two digits, rather than four, to define the applicable year of business
transactions. Most of the Company's operating systems with Year 2000 issues have
been modified to address those issues; accordingly, management does not
anticipate any significant costs, problems or uncertainties associated with
becoming Year 2000 compliant. The Company is currently developing a plan
intended to assure that its other internal operating systems with Year 2000
issues are modified on a timely basis. Suppliers, customers and creditors of the
Company also face similar Year 2000 issues. A failure to successfully address
the Year 2000 issue could have a material adverse effect on the Company's
business or results of operations.
18
<PAGE>
Impact of Recently Issued Accounting Standards. In June 1997, FASB issued a
new statement titled "Disclosures about Segments of an Enterprise and Related
Information". The new statement is effective for fiscal years beginning after
December 15, 1997. The Company is currently determining required disclosure
under this new standard and will include the disclosures in its next annual
report.
In June 1998, FASB issued a new statement titled "Accounting for Derivative
Instruments and Hedging Activities". The new statement is effective for fiscal
years beginning after June 15, 1999. The Company does not believe that the
adoption of this standard will have a material impact on its consolidated
financial position or results of operations.
19
<PAGE>
PART II OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS
N/A
Item 2. CHANGES IN SECURITIES
N/A
Item 3. DEFAULTS UPON SENIOR SECURITIES
N/A
Item 4. SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS
N/A
Item 5. OTHER INFORMATION
N/A
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
Exhibits
The following exhibits are filed herewith or incorporated herein by reference:
27.0 Financial Data Schedule
The Company filed six Current Reports on Forms 8-K and 8-K/A during the quarter
ended June 30, 1998, as follows:
(1) May 12, 1998, reporting certain financial information relating to Protean
plc, a United Kingdom corporation ("Protean"), and The Water Filtration
Business ("Ametek") formerly a wholly owned subsidiary of Ametek, Inc.,
which the Company acquired in its acquisition of Culligan Water
Technologies, Inc.
(2) June 2, 1998, announcement of the Company's issuance of $900 million of
unsecured remarketable or redeemable securities to qualified institutional
buyers.
(3) June 23, 1998, announcement of the completion of the Company's acquisition
of Culligan Water Technologies, Inc.
(4) May 12, 1998, amendment to 8-K dated January 16, 1998, restating certain of
the Company's financial information as a result of the Company's
acquisition of The Kinetics Group, Inc.
(5) May 14, 1998, amendment to 8-K dated January 16, 1998, restating the
Company's historical financial information as a result of the Company's
acquisition of The Kinetics Group, Inc. and disclosing the Company's
possible issuance of $750 to $900 million of unsecured redeemable or
remarketable securities to qualified institutional buyers.
20
<PAGE>
(6) May 14, 1998, amendment to 8-K dated February 9, 1998, disclosing the
Company's possible issuance of $750 to $900 million of unsecured redeemable
or remarketable securities to qualified institutional buyers.
21
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
UNITED STATES FILTER CORPORATION
By: /s/ Kevin L. Spence
Dated: November 8, 1998 --------------------------------------------------
Kevin L. Spence
Executive Vice President, Chief Financial Officer
(Principal Financial Officer and
Duly Authorized Officer)
22
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit Sequential
Number Description Page Number
- ------- ----------- -----------
<S> <C>
27.0 Financial Data Schedule
</TABLE>
23
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THE CONSOLIDATED BALANCE SHEET AND STATEMENT OF OPERATIONS OF UNITED STATES
FILTER CORPORATION AND SUBSIDIARIES.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-31-1999
<PERIOD-START> APR-01-1998
<PERIOD-END> JUN-30-1998
<CASH> 58,847
<SECURITIES> 417
<RECEIVABLES> 1,039,825
<ALLOWANCES> (46,762)
<INVENTORY> 492,051
<CURRENT-ASSETS> 2,027,797
<PP&E> 1,289,537
<DEPRECIATION> (292,929)
<TOTAL-ASSETS> 4,688,255
<CURRENT-LIABILITIES> 1,157,515
<BONDS> 1,548,918
0
0
<COMMON> 1,618
<OTHER-SE> 1,456,558
<TOTAL-LIABILITY-AND-EQUITY> 4,688,255
<SALES> 1,119,331
<TOTAL-REVENUES> 1,119,331
<CGS> 788,169
<TOTAL-COSTS> 788,169
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 6,120
<INTEREST-EXPENSE> 25,648
<INCOME-PRETAX> (175,001)
<INCOME-TAX> (19,604)
<INCOME-CONTINUING> (155,397)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (155,397)
<EPS-PRIMARY> (0.98)
<EPS-DILUTED> (0.98)
</TABLE>
