<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended December 31, 1999
-----------------
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 0-10068
-------
ICO, INC.
-------------------------------------------
(Exact name of registrant as specified in its charter)
Texas 76-0566682
- -------------------------------------- -----------------------------------
(State of incorporation) (IRS Employer Identification Number)
11490 Westheimer, Suite 1000, Houston, Texas 77077
- -------------------------------------------- ------------
(Address of principal executive offices) (Zip Code)
(281) 721-4200
--------------------
(Telephone Number)
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
--- ---
Common stock, without par value 22,406,506 shares
outstanding as of February 14, 2000
<PAGE>
ICO, INC.
INDEX TO QUARTERLY REPORT ON FORM 10-Q
<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION PAGE
<S> <C> <C>
Item 1. Financial Statements
Consolidated Balance Sheets as of December 31, 1999 and
September 30, 1999.......................................................... 3
Consolidated Statements of Operations for the Three Months
Ended December 31, 1999 and 1998............................................ 4
Consolidated Statements of Comprehensive Income for the
Three Months ended December 31, 1999 and 1998............................... 5
Consolidated Statements of Cash Flows for the Three Months
Ended December 31, 1999 and 1998............................................ 6
Notes to Consolidated Financial Statements.................................. 7
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations................................................... 10
Item 3. Quantitative and Qualitative Disclosures About Market Risks................. 16
PART II. OTHER INFORMATION
Item 1. Legal Proceedings........................................................... 17
Item 2. Changes in Securities (no response required)................................ -
Item 3. Defaults upon Senior Securities (no response required)...................... -
Item 4. Submission of Matters to a Vote of Security Holders (no response required).. -
Item 5. Other Information (no response required).................................... -
Item 6. Exhibits and Reports on Form 8-K............................................ 19
</TABLE>
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<PAGE>
ICO, INC.
CONSOLIDATED BALANCE SHEET
(Unaudited and in thousands, except share data)
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
1999 1999
------------ ------------
<S> <C> C>
ASSETS
Current assets:
Cash and equivalents $ 31,958 $ 37,439
Trade receivables (less allowance for doubtful accounts of $1,943
and $1,884, respectively) 55,355 53,421
Inventories 27,972 26,592
Deferred tax asset 3,395 3,062
Prepaid expenses and other 3,873 3,524
-------- --------
Total current assets 122,553 124,038
-------- --------
Property, plant and equipment, at cost 188,708 188,346
Less - accumulated depreciation and amortization (76,596) (73,760)
-------- --------
112,112 114,586
-------- --------
Other assets:
Goodwill 53,987 54,859
Debt offering costs 3,527 3,643
Other 2,681 2,709
-------- --------
Total Assets $294,860 $299,835
======== ========
LIABILITIES, STOCKHOLDERS' EQUITY AND
ACCUMULATED OTHER COMPREHENSIVE LOSS
Current liabilities:
Short-term borrowings and current portion of long-term debt $ 10,410 $ 10,009
Accounts payable 26,470 22,860
Accrued interest 1,094 4,185
Accrued salaries and wages 2,123 3,818
Income taxes payable 1,405 574
Other accrued expenses 11,017 12,390
-------- --------
Total current liabilities 52,519 53,836
Deferred income taxes 1,492 1,726
Long-term liabilities 1,550 1,671
Long-term debt, net of current portion 138,628 139,652
-------- --------
Total liabilities 194,189 196,885
-------- --------
Commitments and contingencies -- --
Stockholders' equity:
Preferred stock, without par value - 500,000 shares authorized;
322,500 shares issued and outstanding with a liquidation
preference of $32,250 13 13
Junior participating preferred stock, without par value -
50,000 shares authorized; 0 shares issued and outstanding -- --
Common stock, without par value - 50,000,000 shares authorized;
22,406,506 shares issued and outstanding 39,696 39,693
Additional paid-in capital 105,333 105,333
Accumulated other comprehensive loss (6,443) (4,684)
Accumulated deficit (37,928) (37,405)
-------- --------
Total Stockholders' equity 100,671 102,950
-------- --------
$294,860 $299,835
======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
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<PAGE>
ICO, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
(Unaudited and in thousands, except share data)
<TABLE>
<CAPTION>
THREE MONTHS
ENDED DECEMBER 31,
----------------------
1999 1998
------- --------
<S> <C> <C>
Revenues:
Petrochemical processing sales and services $52,044 $44,242
Oilfield sales and services 21,977 18,549
------- -------
Total net revenues 74,021 62,791
------- -------
Cost and expenses:
Cost of sales and services 56,159 47,993
Selling, general and administrative 10,338 10,472
Depreciation 3,453 3,537
Amortization of intangibles 646 708
------- -------
70,596 62,710
------- -------
Operating income 3,425 81
------- -------
Other income (expense):
Interest income 427 649
Interest expense (3,482) (3,471)
------- -------
(3,055) (2,822)
------- -------
Income (loss) before taxes 370 (2,741)
Provision (benefit) for income taxes 349 (327)
------- -------
Net income (loss) $ 21 $(2,414)
------- -------
Preferred Dividends 544 544
------- -------
Net loss applicable to common stock $ (523) $(2,958)
======= =======
Basic loss per share (see Note 3) $ (.02) $ (.13)
======= =======
Diluted loss per share (see Note 3) $ (.02) $ (.13)
======= =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
-4-
<PAGE>
ICO, INC.
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
(Unaudited and in thousands, except share data)
<TABLE>
<CAPTION>
Three Months
Ended December 31,
-------------------------
1999 1998
------- -------
<S> <C> <C>
Net Income (loss) $ 21 $(2,414)
Other comprehensive income (loss):
Foreign currency translation adjustment (1,759) 418
------- -------
Comprehensive loss $(1,738) $(1,996)
======= =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
-5-
<PAGE>
ICO, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited and in thousands, except share data)
<TABLE>
<CAPTION>
Three Months
Ended December 31,
---------------------------
1999 1998
--------- --------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 21 $(2,414)
Adjustments to reconcile net income to net cash
provided by (used for) operating activities:
Depreciation and amortization 4,099 4,245
Changes in assets and liabilities, net of the effects of
business acquisitions:
Receivables (2,928) 6,818
Inventories (2,156) 2,276
Prepaid expenses and other assets (391) (98)
Income taxes payable 828 572
Deferred taxes (261) (883)
Accounts payable 4,143 (1,747)
Accrued interest (3,091) (3,120)
Accrued expenses (3,003) (2,658)
------- -------
Total adjustments (2,760) 5,405
------- -------
Net cash provided by (used for) operating activities (2,739) 2,991
------- -------
Cash flows used for investing activities:
Capital expenditures (2,676) (5,393)
Dispositions of property, plant and equipment 79 79
------- -------
Net cash used for investing activities (2,597) (5,314)
------- -------
Cash flows provided by (used for) financing activities:
Payment of dividend on preferred stock (544) (544)
Payment of dividend on common stock -- (1,216)
Additional debt 1,202 --
Debt repayments (630) (2,713)
------- -------
Net cash provided by (used for) financing activities 28 (4,473)
------- -------
Effect of currency exchange rates on cash (173) (5)
------- -------
Net decrease in cash and equivalents (5,481) (6,796)
Cash and equivalents at beginning of period 37,439 51,135
------- -------
Cash and equivalents at end of period $31,958 $44,339
======= =======
Supplemental disclosures of cash flow information:
Cash received (paid) during the period for:
Interest received $ 427 $ 649
Interest paid (6,543) (6,582)
Income taxes paid (175) (13)
</TABLE>
The accompanying notes are an integral part of these financial statements.
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<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 1. BASIS OF FINANCIAL STATEMENTS
The accompanying unaudited consolidated financial statements have been
prepared in accordance with Rule 10-01 of Regulation S-X, "Interim Financial
Statements," and accordingly do not include all information and footnotes
required under generally accepted accounting principles for complete financial
statements. The financial statements have been prepared in conformity with the
accounting principles and practices as disclosed in the Annual Report on Form
10-K for the year ended September 30, 1999 for ICO, Inc. (the "Company"). In
the opinion of management, these interim financial statements contain all
adjustments (consisting only of normal recurring adjustments) necessary for a
fair presentation of the Company's financial position as of December 31, 1999,
the results of operations for the three months ended December 31, 1999 and 1998
and the changes in its cash position for the three months ended December 31,
1999 and 1998. Results of operations for the three month period ended December
31, 1999 are not necessarily indicative of the results that may be expected for
the year ending September 30, 2000. For additional information, refer to the
consolidated financial statements and footnotes included in the Company's Annual
Report on Form 10-K for the year ended September 30, 1999.
NOTE 2. RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
During June 1998, the Financial Accounting Standards Board issued SFAS No.
133, "Accounting for Derivative Instruments and Hedging Activities", which
requires that companies recognize all derivative instruments as either assets or
liabilities on the balance sheet and measure those instruments at fair value.
Due to the Company's limited use of derivative instruments, the impact of
adopting SFAS No. 133 is not expected to be material to the Company's financial
statements. The Company was required to adopt SFAS No. 133 in its financial
statements for the fiscal year ending September 30, 2000. However, SFAS No.
137, "Accounting for Derivative Instruments and Hedging Activities-Deferral of
the Effective Date of FASB Statement No. 133," deferred the implementation of
SFAS 133 until the fiscal year ending September 30, 2001.
During April 1998, the American Institute of Certified Public Accountants
issued Statement of Position (SOP) 98-5, "Reporting on the Costs of Start-Up
Activities", which requires that companies expense as incurred costs of start-up
activities and organization costs. The Company is required to adopt SOP 98-5 in
its financial statements for the fiscal year ending September 30, 2000. The
adoption of this SOP is not expected to be material to the Company's financial
statements.
Certain reclassifications have been made to prior year amounts in order to
conform to current year classifications.
-7-
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 3. EARNINGS PER SHARE AND STOCKHOLDERS' EQUITY
Earnings per share is based on earnings applicable to common shareholders
and is calculated using the weighted average number of common shares outstanding
and in accordance with SFAS 128, "Earnings per Share". During the three months
ended December 31, 1999 and December 31, 1998, the potentially dilutive effects
of the Company's exchangeable preferred stock (would have an anti-dilutive
effect) and common stock options, with exercise prices exceeding fair market
value of the underlying common shares, have been excluded from diluted earnings
per share.
<TABLE>
<CAPTION>
Three Months Ended December 31,
------------------------------------------------------------------
1999 1998
----------------------------- ------------------------------
(In thousands, except share data)
Income Shares Amount Income Shares Amount
-------- ---------- ------- ------- ---------- ------
<S> <C> <C> <C> <C> <C> <C>
Net Income $ 21 $(2,414)
Less: Preferred stock dividends 544 544
----- -------
BASIC EPS (523) 22,406,506 $(.02) (2,958) 22,108,153 $(.13)
===== =====
EFFECT OF DILUTIVE SECURITIES
Options -- 22,449 -- --
Warrants -- -- -- --
----- ---------- ------- ----------
DILUTED EPS $(523) 22,428,955 $(.02) $(2,958) 22,108,153 $(.13)
===== ========== ===== ======= ========== =====
</TABLE>
NOTE 4. INVENTORIES
Inventories consisted of the following:
<TABLE>
<CAPTION>
December 31, 1999 September 30, 1999
----------------- --------------------
(In thousands)
<S> <C> <C>
Finished Goods $10,301 $10,947
Raw Materials 13,061 11,353
Work in Progress 1,385 933
Supplies 3,225 3,359
------- -------
$27,972 $26,592
======= =======
</TABLE>
-8-
<PAGE>
NOTE 5. SEGMENT AND FOREIGN OPERATIONS INFORMATION
The Company's two reportable business segments are Petrochemical Processing
Services and Oilfield Services.
The Petrochemical Processing segment provides size reduction, compounding,
concentrates manufacturing, distribution and related services. The primary
customers of the Petrochemical Processing segment include large producers of
petrochemicals, end users such as rotational molders, and polymer distributors.
The Oilfield Service business segment provides oilfield tubular and sucker
rod inspection, reconditioning and coating services and also sells equipment to
customers. This segment's customers includes leading integrated oil companies,
large independent oil and gas exploration and production companies, drilling
contractors, steel producers and processors and oilfield supply companies.
Summarized financial information of the company's reportable segments for
the three months ended December 31, 1999 and 1998 is shown in the following
table.
<TABLE>
<CAPTION>
Petrochemical Other
THREE MONTHS ENDED Processing Oilfield Reconciling
DECEMBER 31, 1999 Services Services Items* Total
------------- ---------- ------------- -------
<S> <C> <C> <C> <C>
Revenues $ 52,044 $21,977 $ -- $ 74,021
Operating Income (Loss) 4,298 1,949 (2,822) 3,425
THREE MONTHS ENDED
DECEMBER 31, 1998
Revenues 44,242 18,549 -- 62,791
Operating Income (Loss) 2,015 928 (2,862) 81
Petrochemical Other
Processing Oilfield Reconciling
Services Services Items* Total
------------- ---------- ------------- -------
AS OF DECEMBER 31, 1999
Total Assets $180,165 $75,550 $39,145 $294,860
</TABLE>
- ------
* Consists primarily of corporate overhead expenses and unallocated corporate
assets. Corporate assets include cash, deferred tax assets, unamortized bond
offering expenses, corporate furniture and equipment, and certain patents and
licenses.
A reconciliation of total segment operating income to consolidated income
before taxes and extraordinary items is as follows:
<TABLE>
<CAPTION>
Three Months
Ended December 31,
------------------------
1999 1998
-------- --------
<S> <C> <C>
Total operating income for reportable segments $ 3,425 $ 81
Interest income 427 649
Interest expense (3,482) (3,471)
------- -------
Consolidated income (loss) before income taxes $ 370 $(2,741)
======= =======
</TABLE>
-9-
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The statements contained in all parts of this document, including, but not
limited to, timing of new services or facilities, ability to compete, effect of
enhanced distribution capability, future capital expenditures, effects of
compliance with laws, effects of the Euro adoption, matters relating to
operating facilities, effect and cost of litigation and remediation, future
liquidity, future capital expenditures, future acquisitions, future market
conditions, reductions in expenses, derivative transactions, effects of the Year
2000 issue, marketing plans, demand for the Company's products and services,
future growth plans, financial results and any other statements which are not
historical facts are forward-looking statements within the meaning of section
27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act
of 1934 that involve substantial risks and uncertainties. When words such as
"anticipate", "believe", "estimate", "intend", "expect", "plan" and similar
expressions are used, they are intended to identify the statements as forward-
looking. Actual results, performance or achievements can differ materially from
results suggested by these forward-looking statements due to a number of
factors, including those described below and elsewhere in this document and
those described in the Company's other filings with the SEC. Actual results,
performance or achievements can differ materially from results suggested by
these forward-looking statements due to a number of factors, including those
described in the Company's fiscal 1999 Form 10-K dated December 17, 1999.
INTRODUCTION
The Company's revenue is classified into two operating segments:
petrochemical processing and oilfield services. Petrochemical processing
revenues are derived from (1) distributing plastic powders, (2) grinding
petrochemicals into powders (size reduction), providing ancillary services and
selling grinding equipment manufactured by the Company, and (3) compounding
sales and services, which include the manufacture and sale of concentrates. The
Company's distribution operations typically utilize the Company's size reduction
and compounding facilities to process petrochemical products prior to sale.
Oilfield services revenues include revenues derived from (1) exploration sales
and services (new tubular goods inspection), (2) production sales and services
(reclamation, reconditioning and inspection of used tubular goods and sucker
rods), (3) corrosion control services (coating of tubular goods and sucker
rods), and (4) other sales and services (oilfield engine sales and services in
Canada). Service revenues in both of the Company's business segments are
recognized as the services are performed or, in the case of product sales,
revenues are generally recognized upon shipment to third parties.
Cost of sales and services for the petrochemical processing and oilfield
services segments is primarily comprised of compensation and benefits to non-
administrative employees, occupancy costs, repair and maintenance, electricity
and equipment costs and supplies, and, in the case of concentrate manufacturing
operations and the Company's distribution business, purchased raw materials.
Selling, general and administrative expenses consist primarily of compensation
and related benefits to the sales and marketing, executive management,
management information system support, accounting, legal, human resources and
other administrative employees of the Company, other sales and marketing
expenses, communications costs, systems costs, insurance costs and legal and
accounting professional fees.
The gross margin percentages for the distribution and concentrate
manufacturing businesses generally are significantly lower than those generated
by the Company's size reduction services. Several of the Company's
petrochemical processing subsidiaries, including the Company's concentrate
manufacturing and distribution operations, typically buy raw materials, improve
the material and then sell the finished product. In contrast, many of the
Company's size reduction operations, particularly the U.S. locations, typically
involve processing customer-owned material (referred to as toll processing). As
a result of these factors, the expansion of the Company's distribution and
concentrate manufacturing businesses within the petrochemical processing segment
has had the effect of reducing overall petrochemical processing margins as a
percentage of revenue.
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<PAGE>
The demand for the Company's oilfield products and services depends upon oil
and natural gas prices and the level of oil and natural gas production and
exploration activity. In addition to changes in commodity prices, exploration
and production activities are affected by worldwide economic conditions, supply
and demand for oil and natural gas, seasonal trends and the political stability
of oil-producing countries. The oil and gas industry has been highly volatile
over the past several years, due primarily to the volatility of oil and natural
gas prices. During fiscal 1996 and 1997, the oil and gas service industry
generally experienced increased demand and improved product and service pricing
as a result of improved commodity prices and greater levels of oil and gas
exploration and production activity, due largely to a strong world economy. In
fiscal 1998, however, oil prices declined significantly versus fiscal 1997
levels. While gas prices also declined during this period, they declined to a
lesser extent. These trends were attributed to, among other factors, an excess
worldwide oil supply, lower domestic energy demand resulting from an
unseasonably warm winter and a decline in demand due to the economic downturn in
Southeast Asia. As oil and, to a lesser extent, natural gas prices declined
during this period, demand for oilfield products and services, including those
provided by the Company, softened.
Oil and gas prices continued to fall sharply in the first half of fiscal
1999, reaching a low of just under eleven dollars per barrel during the first
quarter of fiscal 1999. This 25-year low, in real dollar terms, resulted in
extremely depressed levels of oilfield exploration and production activity. The
Company's oilfield service revenues and income have been adversely impacted by
these factors. More recently, the price of oil has risen to above $25 per
barrel and natural gas prices have also risen. This increase, however, has not
yet resulted in a significant recovery of oil-related activity. The number of
rigs drilling for oil remains extremely depressed at nearly the lowest levels in
more than 25 years. This has resulted in only a modest recovery in demand for
oilfield services generally, including those provided by the Company,
particularly exploration-related products and services. Although the Company
is optimistic that, if oil and gas prices remain at or near their present
levels, market conditions will improve, the timing of such a recovery cannot be
predicted with certainty.
LIQUIDITY AND CAPITAL RESOURCES
The following are considered by management as key measures of liquidity
applicable to the Company:
<TABLE>
<CAPTION>
December 31, 1999 September 30, 1999
----------------- ------------------
<S> <C> <C>
Cash and cash equivalents $31,958,000 $37,439,000
Working capital 70,034,000 70,202,000
Current ratio 2.3 2.3
Debt-to-capitalization .60 to 1 .59 to 1
</TABLE>
Cash and cash equivalents decreased $5,481,000 during the three months ended
December 31, 1999 due to the factors described below. The Company's working
capital decreased only slightly during the three months ended December 31, 1999
from $70,202,000 at September 30, 1999 to $70,034,000 at December 31, 1999 as a
result of the factors described below.
For the three months ended December 31, 1999, cash provided by (used for)
operating activities decreased to uses of $(2,739,000) from cash provided by
operating activities of $2,991,000 for the three months ended December 31, 1998.
The decrease occurred despite higher net income due to the various changes in
working capital accounts (particularly changes of accounts receivable,
inventory, accounts payable, accrued interest, and accrued liabilities).
Capital expenditures totaled $2,676,000 during the three months ended
December 31, 1999, of which $1,109,000 related to the oilfield services
business, and the remaining $1,567,000 related to the petrochemical processing
business. The Company anticipates that available cash and/or existing credit
facilities will be sufficient to fund remaining fiscal 2000 capital expenditure
requirements.
-11-
<PAGE>
Cash flows used for financing activities improved to cash provided of
$28,000 during the three months ended December 31, 1999 from uses of
$(4,473,000) during the first three months of fiscal 1999. The increase was the
result of lower debt repayments, increased borrowings, and lower common stock
dividends ($0 during fiscal 2000 compared to $1,216,000 in fiscal 1999) in the
first quarter of fiscal 2000, compared to the comparable 1999 period.
As of December 31, 1999, the Company had approximately $9,271,000 of
additional borrowing capacity available under various foreign credit
arrangements. Currently, the Company does not have a domestic credit facility.
The Company anticipates that existing cash balances and the additional borrowing
capacity provided by the foreign credit facilities will be an adequate source of
liquidity for the remainder of fiscal 2000.
The terms of the Company's Senior Notes limit the amount of liens and
additional indebtedness incurred by the Company. The Company's foreign
facilities are generally secured by assets owned by subsidiaries of the Company
and also carry various financial covenants.
RESULTS OF OPERATIONS
<TABLE>
<CAPTION>
Three Months Ended December 31,
-------------------------------------------------
% of % of
NET REVENUES (000'S) 1999 Total 1998 Total
--------------------------------------------------
<S> <C> <C> <C> <C>
Distribution $22,767 44 $19,758 45
Size Reduction Services and Other Sales and Services 11,206 21 12,379 28
Compounding Sales and Services 18,071 35 12,105 27
------- --- ------- ---
Total Petrochemical Processing Revenues 52,044 100 44,242 100
------- -------
Exploration Sales and Services 6,626 30 6,519 35
Production Sales and Services 8,426 38 7,093 38
Corrosion Control Sales and Services 4,792 22 4,436 24
Other Sales and Services 2,133 10 501 3
------- --- ------- ---
Total Oilfield Sales and Services Revenues 21,977 100 18,549 100
------- -------
$74,021 $62,791
======= =======
-------------------------------------------------
Three Months Ended December 31,
-------------------------------------------------
% of % of
OPERATING PROFIT (000'S) 1999 Total 1998 Total
--------------------------------------------------
Petrochemical Processing $ 4,298 69 $ 2,015 68
Oilfield Sales and Services 1,949 31 928 32
------- --- ------- ---
Total Operations 6,247 100 2,943 100
General Corporate Expenses (2,822) (2,862)
------- -------
Total $ 3,425 $ 81
======= =======
</TABLE>
-12-
<PAGE>
Revenues.
First quarter fiscal 2000 consolidated revenues increased $11,230,000 or 18%
compared to the first quarter of fiscal 1999. The increase was due to revenue
improvements in both the Petrochemical Processing and Oilfield Service business
segments.
Petrochemical processing revenues increased $7,802,000 (18%) during the
first quarter of fiscal 2000, compared to the same quarter of last year. This
increase was the result of an increase in distribution and compounding revenues,
partially offset by a decline in size reduction and other revenues. Distribution
revenues increased $3,009,000 to $22,767,000, an increase of 15%. The increase
resulted from increased distribution volumes, particularly in Europe, and an
increase in average selling prices due to rising resin prices. Rising resin
prices also tend to motivate customers to increase their purchases of the
Company's products ahead of future price increases. Conversely, falling resin
prices tend to motivate customers to draw down their resin inventories and defer
resin and related processing service purchases. Size reduction services and
other sales and service revenues declined $1,173,000 (9%) to $11,206,000,
primarily due to lower size reduction machinery sales in the first quarter of
fiscal 2000. Compounding sales and service revenues rose to $18,071,000 during
the first quarter of fiscal 2000, an increase of $5,966,000 (49%) over first
quarter fiscal 1999 revenues. This increase is almost entirely attributable to
the Company's mid-fiscal 1999 capacity expansion of its concentrate
manufacturing facility located in LaPorte, Texas.
Oilfield service revenues increased $3,428,000 (18%) to $21,977,000 during
the first quarter of fiscal 2000, compared to the same period in fiscal 1999. Of
this increase, 71% related to the February 1999 acquisition of MilCorp in
Canada. The remaining increase was due to the strong rebound of production
service revenues, an increase of other sales and service revenues and small
Corrosion Control and Exploration revenue increases. The average U.S. rig count
during the first quarter of fiscal 2000 rose 11% to 773, compared to the year
earlier quarter. While the U.S. drilling rig count has risen substantially from
the April 1999 low of 488, the increased activity has primarily been focused on
relatively inexpensive lower risk projects. These types of projects do not
require the Company's inspection or coating services as much as the more
expensive drilling projects, such as offshore drilling in the Gulf of Mexico. As
a result, Exploration service revenues increased only $107,000 (2%) to
$6,626,000 and Corrosion Control service revenues increased only $356,000 (8%).
Production services benefitted both from the acquisition of MilCorp and
significantly higher oil and gas prices as revenues increased to $8,426,000
during the first quarter of fiscal 2000, a $1,333,000 (19%) increase from first
quarter fiscal 1999 revenues. As the revenue changes indicate, the demand for
the Company's Production services and products is generally more sensitive to a
change in oil and gas prices, while demand for the Company's Exploration
services is more affected by a change in drilling rig counts. Other sales and
service revenues, which include Canadian oilfield engine sales and trucking
revenue, primarily increased due to the acquisition of MilCorp.
COSTS AND EXPENSES
Gross margins (calculated as net revenues minus costs of sales and
services), as a percentage of revenues, increased to 24.1% during the first
quarter of fiscal 2000, compared to 23.6% during the first quarter of fiscal
1999. The increase was the result of improvements in both the petrochemical
processing and oilfield service businesses.
During the Company's first fiscal quarter 2000, petrochemical processing
gross margins rose to 22.7% from 22.1% during the first quarter of fiscal 1999.
The improvement was primarily driven by improved operating efficiencies,
increased domestic compounding volumes, reduced direct production expenses and
the beneficial effect of rising polymer prices, particularly in Southeast Asia.
Oilfield service gross margins improved to 27.6% of revenues during the
first quarter of fiscal 2000 compared to 27.2% during the same quarter of fiscal
1999. The increase was due to the acquisition of MilCorp and improved production
services gross margins offset by the effect of lower Exploration service and
Corrosion Control service gross margins. The changes in Production, Exploration
and Corrosion Control service gross margins were
-13-
<PAGE>
primarily due to changes in business volumes and, to a lesser extent, lower
average selling prices.
Selling, general and administrative expenses decreased $134,000 (1%) from
$10,472,000 (16.7% of revenues) in the first quarter of fiscal 1999 to
$10,338,000 (14.0% of revenues) in the first quarter of fiscal 2000. This
decrease was the result of cost cutting efforts, offset by the impact of the
February 1999 acquisition of MilCorp.
Depreciation and amortization declined slightly to $4,099,000 in the first
quarter of fiscal 2000 from $4,245,000 in the first quarter of fiscal 1999, a
decline of $146,000 (3%).
OPERATING INCOME
Operating income increased $3,344,000 from $81,000 for the three months
ended December 31, 1998, to $3,425,000 for the three months ended December 31,
1999. The increase was due to the changes in revenues and costs and expenses
discussed above.
INTEREST INCOME/EXPENSE
Net interest expense was $2,822,000 during the three months ended December
31, 1998. For the three months ended December 31, 1999, the Company had net
interest expense of $3,055,000. This change was primarily the result of lower
interest income due to the decrease of the Company's cash holdings.
INCOME TAXES
The Company's effective income tax rate increased to 94% during the three
months ended December 31, 1999, compared to 12% during the three months ended
December 31, 1998. The increase was the result of a change in the mixture of
pre-tax income generated by the Company's operations in various taxing
jurisdictions and an increase in non-deductible expenses, such as goodwill
amortization, as a percentage of pre-tax income.
NET INCOME
For the three months ended December 31, 1999, the Company had net income of
$21,000, compared to net loss of $(2,414,000) for the same period in fiscal
1999, due to the factors described above.
FOREIGN CURRENCY TRANSLATION
The fluctuations of the U.S. dollar against the Euro, Swedish krona, British
pound, Canadian dollar, New Zealand dollar, and the Australian dollar have
impacted the translation of revenues and income of the Company's international
operations. The table below summarizes the impact of the above currencies
during the three months ended December 31, 1999 compared to the exchange rates
used to translate the three months ended December 31, 1998.
Net revenues $(2,461,000)
Operating income (190,000)
Pre-tax income (150,000)
Net income (82,000)
-14-
<PAGE>
YEAR 2000 ISSUE
The Year 2000 problem arose because some computer programs use only the last
two digits of a year as a reference date, causing the program to improperly
recognize a year that does not begin with "19."
The Company completed its Year 2000 readiness project in the first quarter
of fiscal year 2000. The implementation of the Year 2000 readiness project did
not result in any other IT projects being deferred, except for a delay in non-
Year-2000-related upgrades of the Oilfield operation's business software
program. The Company began making these upgrades in the fourth quarter of fiscal
1999, and expects to complete making them by the third quarter of fiscal 2000.
To date, the company has not experienced any material disruptions of its
business operations that were attributable to the Year 2000 problem.
The total cost associated with required software and hardware modifications
to become Year 2000 ready has not been material to the Company's financial
position or results of operations. The total cost of the Year 2000 readiness
project was approximately $490,000. Costs related to the Year 2000 project have
been accounted for in accordance with the Company's existing policies. Other
than purchases of new hardware and software, Year 2000 project expenditures have
been expensed as incurred.
-15-
<PAGE>
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company's primary market risk exposures include short-term debt
obligations carrying variable interest rates, and forward currency contracts
intended to hedge accounts payable obligations denominated in currencies other
than a given operation's functional currency.
The Company's strategy has typically been to finance only working capital
with variable interest rate debt and to fix interest rates for the financing of
long-term assets. Forward currency contracts are used by the Company as a method
to establish a fixed functional currency cost for raw material purchases
denominated in non-functional currency (typically the U.S. dollar).
The following table summarizes the Company's market sensitive financial
instruments. These transactions are considered non-trading activities.
<TABLE>
<CAPTION>
On-Balance Sheet
Financial Instruments December 31, 1999
- --------------------------------------- ---------------------------------------------------------------------
US$ equivalent Weighted Average
Variable interest rate long-term debt: in thousands Year-end interest rate Expected maturity
------------------ ------------------------- --------------------
<S> <C> <C> <C>
Currency denomination
- ---------------------
Dutch Guilders $1,583 4.00% less than one year
British Pounds Sterling 726 4.51% less than one year
French Francs 58 3.74% 2001
Italian Lira 4,432 3.55% less than one year
Canadian Dollar 3,762 7.48% various through 2004
</TABLE>
Anticipated transactions and related derivatives
- ------------------------------------------------
<TABLE>
<CAPTION>
Forward Exchange Agreements (000s):
<S> <C>
Receive US$/Pay NZ$:
- --------------------
Contract Amounts US$878
Average Contractual Exchange Rate (NZ$/US$) .5208
Expected Maturity Dates January 2000 through April 2000
Receive US$/Pay Australian $:
- -----------------------------
Contract Amounts US$1,597
Average Contractual Exchange Rate (A$/US$) .6489
Expected Maturity Dates January 2000 through April 2000
</TABLE>
-16-
<PAGE>
PART II OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company is a named defendant in eight cases involving eight plaintiffs,
for personal injury claims alleging exposure to silica resulting in silicosis-
related disease. (The cases, all of which are pending in Texas state courts,
were initiated on May 13, 1991; November 21, 1991; August 26, 1992; June 29,
1995; August 15, 1995; July 23, 1997; June 1, 1999; and January 4, 2000). For
the most part, the Company is generally protected under worker's compensation
law from claims under these suits except to the extent a judgment is awarded
against the Company for intentional tort. The standard of liability applicable
to all except one of the Company's pending cases is intentional tort, a stricter
standard than the gross negligence standard applicable to wrongful death cases.
The Company currently has no pending cases in which wrongful death is alleged.
Although one suit against the Company involves negligence claims that, in
theory, could circumvent the Company's immunity protections under the workers'
compensation law, even if such circumvention occurred, the Company believes that
this litigation, referred to as the Roark litigation, should not have a material
adverse effect on the financial condition, results of operations and/or cash
flow of the Company. As described in more detail below, the Roark litigation
names the Company and Baker Hughes, Inc. ("Baker Hughes"), among others, as
defendants and falls within the provisions of an agreement between the Company
and Baker Hughes that limits the Company's obligations in the litigation.
In fiscal 1993, the Company settled two other silicosis-related suits, both
of which alleged wrongful death caused by silicosis-related diseases, which
resulted in a total charge of $605,000. In 1994, the Company was dismissed
without liability from two suits alleging intentional tort against the Company
for silicosis-related disease. In 1996, the Company obtained a non-suit in two
other intentional tort cases and in early 1997 was non-suited in an additional
tort case. During the second quarter of fiscal 1998, three cases involving
alleged silicosis-related deaths were settled. The Company was fully insured for
all three cases and, as a result, did not incur any settlement costs. During the
second quarter of fiscal 1998, the Company was non-suited in one intentional
tort case, and during the fourth quarter of fiscal 1998, the Company was non-
suited in two additional tort cases. During the second quarter of fiscal 1999,
the Company was non-suited in one intentional tort case, and during the fourth
quarter of fiscal 1999, the Company was non-suited in an additional intentional
tort case. The Company and its counsel cannot at this time predict with any
reasonable certainty the outcome of any of the remaining suits or whether or in
what circumstances additional suits may be filed. Except as described below, the
Company does not believe, however, that such suits will have a material adverse
effect on its financial condition, results of operations or cash flows. The
Company has in effect in some instances general liability and employer's
liability insurance policies applicable to the referenced suits; however, the
extent and amount of coverage is limited and the Company has been advised by
certain insurance carriers of a reservation of rights with regard to policy
obligations pertaining to the suits because of various exclusions in the
policies. Except for the Roark litigation, if an adverse judgment is obtained
against the Company in any of the referenced suits which is ultimately
determined not to be covered by insurance, the amount of such judgment could
have a material adverse effect on the financial condition, results of operations
and/or cash flows of the Company.
The Company's agreement with Baker Hughes, pursuant to which Baker Hughes
Tubular Services ("BHTS") was acquired by the Company, provides that Baker
Hughes will reimburse the Company for 50% of the BHTS environmental remediation
costs in excess of $318,000 with Baker Hughes' total reimbursement obligation
being limited to $2,000,000 (current BHTS obligation is $1,650,000). BHTS is a
responsible party at two hazardous waste disposal sites that are currently
undergoing remediation pursuant to the Comprehensive Environmental Response,
Compensation, and Liability Act ("CERCLA"). Under CERCLA, persons who were
responsible for generating the hazardous waste disposed of at a site where
hazardous substances are being released into the environment are jointly and
severally liable for the costs of cleaning up environmental contamination, and
it is not uncommon for neighboring landowners and other third parties to file
claims for personal injuries and property damage allegedly caused by hazardous
substances released into the environment. The two sites where BHTS is a
responsible party are the French Limited site northeast of Houston, Texas, and
the Sheridan site near Hempstead, Texas.
-17-
<PAGE>
Remediation of the French Limited site has been completed, with only natural
attenuation of contaminants in groundwater occurring at this time. Remediation
has not yet commenced at the Sheridan site. Current plans for cleanup of this
site, as set forth in the federal Record of Decision, call for on-site
bioremediation of the soils in tanks and natural attenuation of contaminants in
the groundwater. However, treatability studies to evaluate possible new remedies
for the soils, such as in-place bioremediation, are being conducted as part of a
Remedial Technology Review Program. Based on the completed status of the
remediation at the French Limited site and BHTS's minimal contribution of wastes
at both of the sites, the Company believes that its future liability under the
agreement with Baker Hughes with respect to these two sites will not be
material.
During December 1996, an agreement was signed by the Company and Baker
Hughes to settle the litigation of a dispute concerning the assumption of
certain liabilities in connection with the acquisition of BHTS in 1992. The
agreement stipulates that with regard to future occupational health claims, the
parties shall share costs equally with the Company's obligations being limited
to $500,000 for each claim and a maximum contingent liability of $5,000,000
($4,500,000 net of current accruals) in the aggregate, for all claims. This
agreement governs the Company's liability with respect to the Roark litigation,
which involves occupational health claims arising out of Roark's employment at
BHTS. Based on the limitation on the Company's obligations provided for in the
agreement, the Company does not believe the Roark litigation will have a
material adverse effect on the financial condition, results of operations and/or
cash flow of the Company.
On November 21, 1997, in an action initiated by the Company in October 1994,
a Texas state court jury awarded the Company approximately $13,000,000 in the
trial of its case against John Wood Group PLC relating to the 1994 contract for
the purchase of the operating assets of NDT Systems, Inc. and certain related
entities. The court subsequently entered a judgment for $15,750,000 in the
Company's favor, which includes pre-judgment interest on the jury award. The
Company is also entitled to post-judgment interest. The Wood Group is currently
appealing the judgment and has posted a bond for the entire amount of the
judgment. This award has not been reflected in the Company's balance sheet or
operating results. The Company was represented on a contingency fee basis, and
its attorneys will receive a portion of the amount awarded to the Company.
ICO Tubular Services, Inc., a now-defunct subsidiary of the Company, has
been named as a Respondent in an arbitration claim made on August 7, 1998, by
Oil Country Tubular Limited ("OCTL"), a company based in India. OCTL alleges
that its claim, which it has brought in the Court of Arbitration of the
International Chamber of Commerce; arises in connection with a Foreign
Collaboration Agreement entered into between it and Baker Hughes Tubular
Services, Inc., a corporation whose name was changed to ICO Tubular Services,
Inc. after acquisition by the Company in 1992. OCTL claims, among other items,
that it did not receive technical assistance, spare parts, and certain raw
materials necessary for its oilfield tubular services plant in India. OCTL seeks
damages in excess of $96,000,000 calculated in part based on lost profit
projections over a number of years, from ICO Tubular Services, Inc. and its co-
respondent, Baker Hughes Incorporated ("BHI"). The Company had only peripheral
knowledge of the dispute between OCTL and BHI prior to the filing of OCTL's
claim. The arbitration proceeding is at an early stage, with answers to OCTL's
claim having been filed in November 1998. A hearing on the Company's objection
to the arbitration tribunal's jurisdiction over the Company (and the objection
to jurisdiction made by BHI) was held in London on October 5-7, 1999. The
arbitration tribunal has not yet ruled on this issue. Regardless of the
liability facts, about which the Company has no knowledge at this point, the
Company believes the damage claim is exaggerated. While the outcome of this
arbitration matter cannot be predicted, the Company plans to contest the claims
vigorously.
The Company is also named as a defendant in certain lawsuits arising in the
ordinary course of business. While the outcome of these lawsuits cannot be
predicted with certainty, ICO does not expect these matters to have a material
adverse effect on its financial condition, cash flows or results of operations.
-18-
<PAGE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits - Reference is hereby made to the exhibit index which appears on
page 20.
(b) There were no reports on Form 8-K during the Company's fiscal first
quarter.
-19-
<PAGE>
The following instruments and documents are included as Exhibits to this Form
10-Q. Exhibits incorporated by reference are so indicated by parenthetical
information.
<TABLE>
<CAPTION>
EXHIBIT NO. EXHIBIT
- ---------------- -----------------------------------------------------------------------------------------------------------
<C> <S>
2.1 -- Share Purchase Agreement between Rotec Chemicals Ltd. and the Registrant (filed as Exhibit 99.2
to Form 8-K dated May 12, 1997)
2.2 -- Plan of Merger of ICO Merger Sub, Inc. with and into ICO, Inc. (filed as Exhibit 2.4 to Form 10-Q
dated August 13, 1998)
3.1 -- Articles of Incorporation of the Company dated March 20, 1998. (filed as Exhibit 3.1 to Form
10-Q dated August 13, 1998)
3.2 -- Statement of Resolution of $6.75 Convertible Exchangeable Preferred Stock dated March 30, 1998 (filed
as Exhibit 3.2 to Form 10-K dated December 23, 1998)
3.3 -- Certificate of Designation of Junior Participating Preferred Stock of ICO Holdings, Inc. dated
March 30, 1998 (filed as Exhibit 3.3 to Form 10-K dated December 23, 1998)
3.4 -- Amended and Restated By-Laws of the Company dated May 12, 1999 (filed as Exhibit 3.4 to Form 10-Q
dated May 14, 1999).
4.1 -- Indenture dated as of June 9, 1997 between the Company, as issuer, and Fleet National Bank, as
trustee, relating to Senior Notes due 2007 (filed as Exhibit 4.1 to Form S-4 dated June 17, 1997)
4.2 -- First Supplemental Indenture and Amendment dated April 1,1998 between the Company, as issuer, and
State Street and Trust Company (formerly Fleet National Bank), as trustee, relating to Senior Notes
due 2007 (filed as Exhibit 4.2 to Form 10-Q dated May 15, 1998)
4.3 -- Second Supplemental Indenture and Amendment dated April 1, 1998 between ICO P&O, Inc., a wholly
owned subsidiary of the Registrant, and State Street and Trust Company (formerly Fleet National Bank),
as trustee, relating to Senior Notes due 2007 (filed as Exhibit 4.3 to Form 10-Q dated May 15, 1998)
4.4 -- Warrant Agreement -- Series A, dated as of September 1, 1992, between the Registrant and Society
National Bank (filed as Exhibit 4 of the Registrant's Annual Report on Form 10-K for 1992)
4.5 -- Stock Registration Rights Agreement dated April 30, 1996 by and between the Company, a subsidiary
of the Company and the Wedco Shareholders Group, as defined (filed as Exhibit 4.4 to Form S-4 dated
May 15, 1996)
4.6 -- Shareholders' Rights Agreement dated November 20, 1997 by and between the Company and Harris
Trust and Savings Bank, as rights agent (filed as Exhibit 1 to Form 8-A dated December 22, 1997)
4.7 -- Shareholder Rights Agreement dated April 1, 1998 by and between the Registrant and Harris Trust
and Savings Bank, as rights agent (filed as Exhibit 4.7 to Form 10-Q for the quarter ended March 31,
1998)
10.1 -- ICO, Inc. 1985 Stock Option Plan, as amended (filed as Exhibit B to the Registrant's Definitive
Proxy Statement dated April 27, 1987 for the Annual Meeting of Shareholders)
10.2 -- Second Amended and Restated 1993 Stock Option Plan for Non-Employee Directors of ICO, Inc. (filed
as Exhibit A to the Registrant's Definitive Proxy Statement dated January 26, 1999 for the Annual
Meeting of Shareholders)
10.3 -- 1994 Stock Option Plan of ICO, Inc. (filed as Exhibit A to Registrant's Definitive Proxy
Statement dated June 24, 1994 for the Annual Meeting of Shareholders)
</TABLE>
-20-
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO. EXHIBIT
- ---------------- -----------------------------------------------------------------------------------------------------------
<C> <S>
10.4 -- ICO, Inc. 1995 Stock Option Plan (filed as Exhibit A to Registrant's Definitive Proxy Statement
dated August 10, 1995 for the Annual Meeting of Shareholders)
10.5 -- ICO, Inc. 1996 Stock Option Plan (filed as Exhibit A to Registrant's Definitive Proxy Statement
dated August 29, 1996 for the Annual Meeting of Shareholders)
10.6 -- ICO, Inc. 1998 Stock Option Plan (filed as Exhibit A to Registrant's Definitive Proxy Statement
dated January 23, 1998 for the Annual Meeting of Shareholders)
10.7 -- Willoughby International Stockholders Agreement dated April 30, 1996 (filed as Exhibit 10.9 to
Form S-4 dated May 15, 1996)
10.8 -- Consulting Agreement -- William E. Willoughby (filed as Exhibit 10.13 to Form S-4 dated May 15,
1996)
10.9 -- Salary Continuation Agreement -- William E. Willoughby (filed as Exhibit 10.14 to Form S-4 dated
May 15, 1996)
10.10 -- Addendum to Salary Continuation Agreement -- William E. Willoughby (filed as Exhibit 10.15 to
form S-4 dated May 15, 1996)
10.11 -- Non-Competition Covenant William E. Willoughby (filed as Exhibit 10.11 to Form S-4 dated May 15,
1996)
10.12 -- Stockholders Agreement respecting voting of shares of certain former Wedco common
shareholders (filed as Exhibit 10.21 to Form S-4 dated May 15, 1996)
10.13 -- Stockholders Agreement respecting voting of shares of certain ICO common shareholders
(filed as Exhibit 10.22 to Form S-4 dated May 15, 1996)
10.14 -- Employment Agreement dated April 1, 1995 by and between the Registrant and Asher O. Pacholder and
amendments thereto (filed as Exhibit 10.16 to Form 10-K dated December 29, 1997)
10.15 -- Employment Agreement dated April 1, 1995 by and between the Registrant and Sylvia A. Pacholder
and amendments thereto (filed as Exhibit 10.17 to Form 10-K dated December 29, 1997).
10.16 -- Employment Agreement dated September 4, 1998 by and between the Registrant and Jon C. Biro (Filed
as Exhibit 10.20 to Form 10-K dated December 23, 1998)
10.17 -- Employment Agreement dated September 4, 1998 by and between the Registrant and Isaac H. Joseph
(Filed as Exhibit 10.21 to Form 10-K dated December 23, 1998)
10.18 -- Employment Agreement dated September 4, 1998 by and between the Registrant and Robin E. Pacholder
(Filed as Exhibit 10.18 to Form 10-K dated December 17, 1999)
10.19 -- Employment Agreement dated August 5, 1999 by and between the Registrant and David M. Gerst (Filed
as Exhibit 10.19 to Form 10-K dated December 17, 1999)
21 -- Subsidiaries of the Company (Filed as Exhibit 21 to Form 10-K dated December 17, 1999)
27** -- Financial Data Schedule
- ----------------
** Filed herewith
</TABLE>
-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.
ICO, Inc.
-------------------------------------
(Registrant)
/s/ Asher O. Pacholder
-------------------------------------
February 11, 2000 Asher O. Pacholder
Chairman and Chief Financial Officer
(Principal Financial Officer)
/s/ Jon C. Biro
-------------------------------------
Jon C. Biro
Senior Vice President and Treasurer
(Principal Accounting Officer)
-22-
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
quarterly filing on Form 10-Q for the period ended December 31, 1999 and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-2000
<PERIOD-START> OCT-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 31,958,000
<SECURITIES> 0
<RECEIVABLES> 57,298,000
<ALLOWANCES> (1,943,000)
<INVENTORY> 27,972,000
<CURRENT-ASSETS> 122,553,000
<PP&E> 112,112,000
<DEPRECIATION> (76,596,000)
<TOTAL-ASSETS> 294,860,000
<CURRENT-LIABILITIES> 52,519,000
<BONDS> 0
0
13,000
<COMMON> 39,696,000
<OTHER-SE> 60,962,000
<TOTAL-LIABILITY-AND-EQUITY> 294,860,000
<SALES> 74,021,000
<TOTAL-REVENUES> 74,021,000
<CGS> 56,159,000
<TOTAL-COSTS> 70,596,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (3,055,000)
<INCOME-PRETAX> 370,000
<INCOME-TAX> 349,000
<INCOME-CONTINUING> 21,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 21,000
<EPS-BASIC> (.02)
<EPS-DILUTED> (.02)
</TABLE>
