<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended: August 31, 1996
----------------
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: 0-2572
STEEL CITY PRODUCTS, INC.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 55-0437067
------------------------ -------------------
(State of Incorporation) (I.R.S. Employer
Identification No.)
1001 SANTERRE DRIVE, GRAND PRAIRIE, TEXAS
75050
-----------------------------------------
(Address of principal executive offices)
(Zip Code)
(972) 660-4499
----------------------------------------------------
(Registrant's telephone number, including area code)
---------------------------------------------------------------------------
(Former name, former address, and former fiscal year, if changed since last
report)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
--- ---
At October 1, 1996, 3,238,061 shares of the Registrant's Common Stock,
$0.01 par value per share, were issued and outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
None
<PAGE> 2
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
INDEX TO FINANCIAL STATEMENTS
STEEL CITY PRODUCTS, INC.
Balance Sheets at August 31, 1996 (unaudited)
and February 29, 1996 . . . . . . . . . . . . . . . . . . . . . . . . . 3
Statements of Operations for the three month periods ended
August 31, 1996 and August 31, 1995 (unaudited) . . . . . . . . . . . . 4
Statements of Operations for the six month periods ended
August 31, 1996 and August 31, 1995 (unaudited) . . . . . . . . . . . . 5
Statement of Stockholders' Equity for the six months
ended August 31, 1996 (unaudited) . . . . . . . . . . . . . . . . . . . 6
Statements of Cash Flows for the six month periods ended
August 31, 1996 and August 31, 1995 (unaudited) . . . . . . . . . . . . 7
Notes to financial statements (unaudited) . . . . . . . . . . . . . . . . 8
- 2 -
<PAGE> 3
STEEL CITY PRODUCTS, INC.
BALANCE SHEETS
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
ASSETS AUGUST 31, FEBRUARY 29,
1996 1996
---------- -----------
(Unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents................................................. $ 7 $ 3
Trade accounts receivable, less allowance of $337 and $419, respectively.. 2,964 2,512
Advances to Oakhurst Company, Inc......................................... 4,755 2,051
Notes receivable - Oakhurst Company, Inc.................................. 262 249
Inventories............................................................... 3,977 4,493
Deferred tax asset........................................................ 75 75
Other..................................................................... 157 287
-------- ----------
Total current assets............................................ 12,197 9,670
-------- ----------
Property and equipment, at cost............................................. 1,998 1,998
Less accumulated depreciation............................................. (851) (752)
-------- ----------
1,147 1,246
-------- ----------
Deferred tax asset, less valuation allowance of $48,300..................... 2,018 2,018
Notes receivable - Oakhurst Company, Inc., long-term portion................ 1,148 1,282
Other assets................................................................ 431 315
-------- ----------
3,597 3,615
-------- ----------
$ 16,941 $ 14,531
======== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable.......................................................... $ 3,431 $ 3,650
Accrued compensation...................................................... 256 272
Current maturities of long-term obligations............................... 280 260
Net obligation of discontinued business segment-current portion........... 526 465
Due to affiliate.......................................................... 198 97
Other..................................................................... 61 175
-------- ----------
Total current liabilities....................................... 4,752 4,919
-------- ----------
Long-term obligations:
Net obligation of discontinued business segment........................... 349 678
Long-term debt............................................................ 4,330 1,428
Other long-term obligations............................................... 96 110
-------- ----------
4,775 2,216
-------- ----------
Commitments and contingencies...............................................
Stockholders' equity:
Preferred stock, par value $0.01 per share; authorized
5,000,000 shares, issued 1,938,526 shares;
liquidation preference $10,135......................................... 19 19
Common stock, par value $0.01 per share; authorized
5,000,000 shares; issued 3,238,061 shares.............................. 32 32
Additional paid-in capital................................................ 43,824 43,824
Deficit (Reorganized on August 26, 1989).................................. (36,460) (36,478)
Treasury stock, at cost, 207 common shares................................ (1) (1)
-------- ----------
Total stockholders' equity...................................... 7,414 7,396
-------- ----------
$ 16,941 $ 14,531
======== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
-3-
<PAGE> 4
STEEL CITY PRODUCTS, INC.
STATEMENTS OF OPERATIONS
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
(Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS THREE MONTHS
ENDED ENDED
AUGUST 31, AUGUST 31,
1996 1995
---------- ----------
<S> <C> <C>
Sales................................................... $ 4,941 $ 7,078
Other income............................................ 170 138
---------- ----------
5,111 7,216
---------- ----------
Cost of goods sold, including occupancy and
buying expenses....................................... 3,957 5,655
Operating, selling and administrative expenses.......... 1,019 1,218
Provision for doubtful accounts......................... 9 201
Interest expense........................................ 125 72
---------- ----------
5,110 7,146
---------- ----------
Net income before income taxes and
undistributed earnings of investment in affiliate..... 1 70
Income tax (expense) benefit............................ (8) 16
Undistributed earnings of investment in affiliate....... 54 -
---------- ----------
Net income ............................................. 47 86
Effect of Series A Preferred Stock dividends............ (253) (253)
---------- ----------
Net loss attributable to common stockholders............ $ (206) $ (167)
========== ==========
Net loss per share attributable to common
stockholders after preferred stock dividends.......... $ (0.06) $ (0.05)
========== ==========
Weighted average number of shares outstanding
used in computing per share amount.................... 3,238,061 3,238,061
========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
-4-
<PAGE> 5
STEEL CITY PRODUCTS, INC.
STATEMENTS OF OPERATIONS
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
(Unaudited)
<TABLE>
<CAPTION>
SIX MONTHS SIX MONTHS
ENDED ENDED
AUGUST 31, AUGUST 31,
1996 1995
---------- ----------
<S> <C> <C>
Sales............................................................. $ 10,037 $ 14,914
Other income...................................................... 272 219
---------- ----------
10,309 15,133
---------- ----------
Cost of goods sold, including occupancy and
buying expenses................................................. 8,119 11,919
Operating, selling and administrative expenses.................... 2,017 2,385
Provision for doubtful accounts................................... 29 257
Interest expense.................................................. 237 147
---------- ----------
10,402 14,708
---------- ----------
Net (loss) income before income taxes and
undistributed earnings of investment in affiliate............... (93) 425
Income tax expense................................................ (8) (128)
Undistributed earnings of investment in affiliate................. 119 -
---------- ----------
Net income ....................................................... 18 297
Effect of Series A Preferred Stock dividends...................... (506) (506)
---------- ----------
Net loss attributable to common stockholders...................... $ (488) $ (209)
========== ==========
Net loss per share attributable to common
stockholders after preferred stock dividends.................... $ (0.15) $ (0.06)
========== ==========
Weighted average number of shares outstanding
used in computing per share amount.............................. 3,238,061 3,238,061
========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
-5-
<PAGE> 6
STEEL CITY PRODUCTS, INC.
STATEMENT OF STOCKHOLDERS' EQUITY
SIX MONTHS ENDED AUGUST 31, 1996
(DOLLARS IN THOUSANDS)
(Unaudited)
<TABLE>
<CAPTION>
PREFERRED STOCK COMMON STOCK ADDITIONAL RETAINED TREASURY STOCK
---------------------- ---------------------- PAID-IN EARNINGS ------------------
SHARES PAR VALUE SHARES PAR VALUE CAPITAL (DEFICIT) SHARES COST
--------- ----------- --------- ----------- ---------- --------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Balances, February 29, 1996...... 1,938,526 $19 3,238,061 $32 $43,824 ($36,478) 207 ($1)
Net income for the period........ 18
--------- --- --------- --- ------- -------- --- --
Balances, August 31, 1996........ 1,938,526 $19 3,238,061 $32 $43,824 ($36,460) 207 ($1)
========= === ========= === ======= ======== === ==
</TABLE>
The accompanying notes are an integral part of these financial statements.
-6-
<PAGE> 7
STEEL CITY PRODUCTS, INC.
STATEMENTS OF CASH FLOWS
(Dollar amounts in thousands)
(Unaudited)
<TABLE>
<CAPTION>
SIX MONTHS SIX MONTHS
ENDED ENDED
AUGUST 31, AUGUST 31,
1996 1995
------------ -----------
<S> <C> <C>
Cash flows from operating activities:
Net income................................................. $ 18 $ 297
Adjustments to reconcile net income
to net cash provided by (used in) operating activities:
Depreciation and amortization......................... 140 96
Loss on retirement of asset........................... - 10
Deferred tax expense.................................. - 151
Undistributed earnings of investment in affiliate..... (119) -
Other changes in operating assets and liabilities:
Accounts receivable................................... (452) 691
Inventories........................................... 516 792
Accounts payable...................................... (219) (1,137)
Other................................................. 189 (178)
------- -------
Net cash provided by (used in) operating activities of:
Continuing operations...................................... 73 722
Discontinued operations.................................... (268) (274)
------- -------
Net cash (used in) provided by operating activities........... (195) 448
------- -------
Cash flows from investing activities:
Advances to Oakhurst Company, Inc.......................... (2,704) (492)
Collection of note receivable, Oakhurst Company, Inc....... 121 337
Additions to property and equipment........................ - (27)
Other...................................................... - 2
------- -------
Net cash used in investing activities......................... (2,583) (180)
------- -------
Cash flows from financing activities:
Net borrowings under revolving credit agreement............ 3,193 -
Proceeds from long-term borrowings......................... 1,500 -
Principal payments on long-term obligations................ (1,785) (293)
Deferred loan costs........................................ (126) -
------- -------
Net cash provided by (used in) financing activities........... 2,782 (293)
------- -------
Net increase (decrease) in cash and cash equivalents.......... 4 (25)
Cash and cash equivalents at beginning of period.............. 3 29
------- -------
Cash and cash equivalents at end of period.................... $ 7 $ 4
======= =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
-7-
<PAGE> 8
STEEL CITY PRODUCTS, INC.
SIX MONTHS ENDED AUGUST 31, 1996
NOTES TO FINANCIAL STATEMENTS
1. INTERIM FINANCIAL STATEMENTS
In the opinion of management, the accompanying unaudited financial
statements contain all adjustments necessary to present fairly the financial
position, results of operations and cash flows for the interim periods
presented. All adjustments made are of a normal recurring nature.
While the Company believes that the disclosures presented herein are
adequate to make the information not misleading, it is suggested that these
unaudited financial statements be read in conjunction with the audited
financial statements for the fiscal year ended February 29, 1996 ("fiscal
1996") as filed in the Company's Annual Report on Form 10-K.
2. LONG-TERM OBLIGATIONS AND LINE OF CREDIT
At February 29, 1996, Steel City Products, Inc. ("SCPI") had a term
loan (the "Term Loan") with an outstanding balance of approximately $1.7
million, which was secured by a mortgage on SCPI's real estate, guaranteed by
its parent, Oakhurst Company, Inc. ("Oakhurst") and Oakhurst's subsidiaries,
and supported by a pledge of the capital stock of Oakhurst's subsidiaries. At
that date, Oakhurst had borrowings of $3.8 million outstanding under a
revolving credit agreement.
On March 28, 1996, Oakhurst obtained replacement financing from an
institutional lender that provides for a total facility for Oakhurst and its
subsidiaries of $9.5 million, comprised of a new SCPI term loan of $1.5 million
(the "Fixed Asset Loan") and a maximum revolving credit facility of $8 million
(the "Revolver") (collectively, the "Credit Facility"). The amounts
outstanding under the Term Loan and the prior Oakhurst revolving credit
agreement were repaid with part of the proceeds of the refinancing. The Credit
Facility requires separate loans to be made directly to Oakhurst's
subsidiaries, including SCPI. The initial funding of the Revolver resulted in
a loan to SCPI of approximately $2.1 million. SCPI immediately advanced these
funds to Oakhurst to enable it to repay a portion of the amounts outstanding
under the previous revolving debt. The advance bears interest at the same rate
as the Credit Facility. In connection with the new financing, Oakhurst and its
subsidiaries incurred loan costs and fees of approximately $250,000, of which
$126,000 were attributable to SCPI.
Borrowings under the Credit Facility bear interest at the higher of
the Citibank N.A. base rate plus 1.5%, or $5,000 per month, and borrowings
under the Revolver are subject to a borrowing base that is calculated according
to defined levels of Oakhurst's subsidiaries' accounts receivable and
inventories. The Credit Facility contains financial covenants, including among
others, the maintenance of defined subsidiary and consolidated tangible net
worth levels and consolidated current ratio, and limitations on annual cash
dividends.
The Fixed Asset Loan provides for twenty-four monthly principal and
interest payments based on a five year amortization schedule, with the
remaining principal balance due on April 1, 1998. The Fixed Asset Loan permits
prepayment without penalty, and contains a provision for the release of SCPI's
building as collateral on the Credit Facility in the event of a refinancing of
the Fixed Asset Loan, subject to a right of first refusal by the current lender
to refinance the Fixed Asset Loan on the same terms as offered by a new lender.
SCPI participates in a cash concentration system together with the
other subsidiaries of Oakhurst. SCPI's available cash that is transferred to
Oakhurst is reflected as an addition to the advances to Oakhurst.
- 8 -
<PAGE> 9
3. RECENTLY ISSUED ACCOUNTING STANDARD
In October 1995, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 123, "Accounting for
Stock-Based Compensation". This statement is effective beginning in the
current fiscal year. The new standard defines a fair value method of
accounting for stock options and similar equity instruments. Pursuant to the
new standard, companies are encouraged, but not required, to adopt the fair
value method of accounting for employee stock-based transactions. Companies
are also permitted to continue to account for such transactions under
Accounting Principles Board Opinion ("APBO") No. 25, "Accounting for Stock
Issued to Employees", but would be required to disclose in a note to the
financial statements pro forma net income and earnings per share as if the
company had applied the new method of accounting.
In the first quarter of the current fiscal year, the Company elected
not to adopt the fair value method of accounting for employee stock-based
transactions and will continue to account for such transactions under the
provisions of APBO No. 25.
- 9 -
<PAGE> 10
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
OVERVIEW
Steel City Products, Inc. ("SCPI") is a special, limited purpose,
majority-owned subsidiary of Oakhurst Company, Inc. ("Oakhurst"). SCPI is
expected to concentrate on its historical line of business, while any future
growth and expansion opportunities are expected to be pursued by one or more
subsidiaries of Oakhurst. Through Oakhurst's ownership of SCPI, primarily in
the form of preferred stock, Oakhurst retains substantially all the value of
SCPI, and receives substantially all of the benefit of operations through
dividends on the preferred stock. Oakhurst's ownership of SCPI is designed to
facilitate the preservation and utilization of SCPI's and Oakhurst's net
operating tax loss carryforwards which amount to approximately $149 million.
In addition to cash derived from operations, SCPI's liquidity and
financing requirements are determined principally by the working capital needed
to support its level of business, together with the need for capital
expenditures and the cash required to repay its debt. SCPI also receives cash
payments pursuant to two notes receivable from Oakhurst, and from time to time,
repayments of advances to Oakhurst. SCPI's working capital needs fluctuate
primarily due to the amounts of inventory it carries which can change
seasonally, the size and timeliness of payment of receivables from its
customers to which from time to time SCPI grants extended payment terms for
their seasonal inventory builds, and the amount of credit extended to SCPI by
its suppliers. SCPI participates in a cash concentration system together with
all the subsidiaries of Oakhurst. Available cash that is transferred to
Oakhurst is reflected as an addition to the advances to Oakhurst.
From time to time the information provided by the Company or
statements made by its employees may contain so- called "forward looking"
information that involves risks and uncertainties. In particular, statements
contained in this Item 7 - "Management's Discussion and Analysis of Financial
Condition and Results of Operations," which are not historical facts
(including, but not limited to statements concerning anticipated sales, profit
levels, customers and cash flows) are forward looking statements. The
Company's actual future results may differ significantly from those stated in
any forward looking statements. Factors that may cause such differences
include, but are not limited to the factors discussed above as well as the
accuracy of the Company's internal estimates of revenue and operating expense
levels. Each of these factors and others are discussed from time to time in
the Company's Securities and Exchange Commission filings.
MATERIAL CHANGES IN FINANCIAL CONDITION
At August 31, 1996, SCPI's debt primarily consisted of a term loan of
approximately $1.4 million secured by a mortgage on SCPI's real estate, and
notes payable with outstanding principal balances aggregating approximately
$820,000 that were issued in connection with the settlement of certain
contingent liabilities related to SCPI's former retail division. SCPI also has
revolving debt of approximately $3.2 million (see below) which was borrowed
primarily to repay prior revolving debt of Oakhurst, and which is largely
offset by advances receivable from Oakhurst that bear interest at the same rate
as the revolving debt.
Oakhurst and its subsidiaries, including SCPI, have available
financing under a revolving credit facility (the "Revolver") from an
institutional lender up to a maximum of $8 million, subject to defined levels
of the subsidiaries' accounts receivable and inventories. Management believes
that the Revolver will provide adequate funding for SCPI's foreseeable working
capital requirements.
- 10 -
<PAGE> 11
As of August 31, 1996, there had been no other material changes in the
Company's financial condition from February 29, 1996, discussed in Item 7 of
the Company's Annual Report on Form 10-K for fiscal 1996.
MATERIAL CHANGES IN RESULTS OF OPERATIONS
In the current year, management expects sales to be lower than in
fiscal 1996. As part of a strategic evaluation of the business, SCPI has
reduced expenses so as to mitigate negative cash flow from operations while new
customers and product lines are sought. In the first half of the current year,
cash flow from continuing operations was positive, despite the lower sales
levels, but not in amounts sufficient to satisfy all of SCPI's scheduled
principal reductions. There can be no assurance that SCPI can obtain enough
new customers or sufficient levels of new business to return sales and profits
to historical levels.
Operations include the results of SCPI's operating division, Steel
City Products, a distributor of automotive parts and accessories based in
Pittsburgh, Pennsylvania. During the three months ended August 31, 1996, Steel
City Products began to ship pet supplies to certain customers.
THREE MONTHS ENDED AUGUST 31, 1996 COMPARED WITH THREE MONTHS ENDED AUGUST 31,
1995
Compared to the second quarter of the prior year, sales decreased by
approximately $2.1 million as a result of the loss of two of SCPI's largest
customers during the prior year. One customer was lost in October 1995 due to
its bankruptcy, while the other changed its source of supply in January 1996.
These two customers accounted for a decrease in sales in the current year
second quarter of approximately $2.6 million. Sales to existing customers
increased by approximately $150,000 compared with the prior year second
quarter, and there were sales aggregating $285,000 to new customers during the
current year second quarter.
In the second quarter of the current year, SCPI experienced the first
sales of a new product line, after its introduction of non-food pet merchandise
in the first quarter. These sales, principally to existing customers, totaled
approximately $20,000.
Other income increased by $32,000 over the second quarter of the prior
year, due to higher interest income of about $58,000 on advances to Oakhurst.
However, this gain is offset by higher interest expense. Revenues relating to
an annual summer auto show were lower by $30,000 compared with the prior year
second quarter, primarily due to a smaller show in the current year.
Gross profits decreased by $439,000 in the second quarter compared
with the second quarter of the prior year, in relation to the loss of sales to
two major customers previously discussed. The net effect on profits in the
current year second quarter relating to the loss of such customers was
$345,000. The remainder of the profit decline is attributable to a lower gross
margin earned with existing customer business, which resulted primarily from
changes in existing customer product mixes, and because of competition. Gross
profits derived from new customers only partially offset the effect of the lower
gross margin.
Operating, selling and administrative expenses decreased by $199,000
when compared to the second quarter of the prior year. After excluding royalty
expense, which is more than offset by the undistributed earnings of investment
in affiliate, the expense decrease was approximately $250,000, and resulted
principally from management's efforts to reduce SCPI's expenses and work force
in reaction to the lower levels of sales.
- 11 -
<PAGE> 12
There was a decrease of $192,000 in the provision for doubtful
accounts in the current year second quarter compared with the same period in
the prior year, when the Company recorded a provision for the expected
bankruptcy of a large customer.
SIX MONTHS ENDED AUGUST 31, 1996 COMPARED WITH SIX MONTHS ENDED AUGUST 31, 1995
When compared to the prior year, sales decreased by approximately $4.9
million as a result of the loss of the two large customers during the prior
year, as previously discussed. These two customers accounted for a decrease in
sales in the current year of approximately $6.1 million. This reduction was
only partially offset by the addition of new customers during the latter part
of the prior year and in the current year. Sales to new customers in the
current year were approximately $1.4 million.
Other income increased by $53,000 over the prior year, due to higher
interest income on advances to Oakhurst. However, this gain is offset by
higher interest expense.
Gross profits decreased by approximately $1.1 million in the first
half of the current year compared with the same period of the prior year, in
relation to the loss of sales to two major customers previously discussed.
Profits derived from new customers were entirely offset by reduced profits
earned on existing customer business, due to lower gross margins. The lower
gross margins resulted primarily from changes in existing customer product
mixes. Buying and occupancy costs decreased by approximately $40,000, but
increased by almost 1% as a percentage of sales.
Operating, selling and administrative expenses decreased by $368,000
when compared to the prior year. After excluding royalty expense, which is more
than offset by the undistributed earnings of investment in affiliate, the
expense decrease was approximately $468,000, and resulted principally from
management's efforts to reduce SCPI's expenses and work force in reaction to
the lower levels of sales.
There was a decrease of $228,000 in the provision for doubtful
accounts compared with the prior year, when the Company recorded provisions for
the bankruptcies of several customers, including one of its largest customers
in the second quarter.
- 12 -
<PAGE> 13
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company is not involved in any material legal proceedings.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders during the
quarter for which this report is filed.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
27. Financial Data Schedule (EDGAR transmission only)
(b) No reports on Form 8-K were filed during the quarter for which
this report is filed.
- 13 -
<PAGE> 14
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.
STEEL CITY PRODUCTS, INC.
Date:October 11, 1996 By: /s/ Bernard H. Frank
----------------------------
Bernard H. Frank
Chief Executive Officer
Date:October 11, 1996 By: /s/ Mark Auerbach
----------------------------
Mark Auerbach
Chief Financial Officer
- 14 -
<PAGE> 15
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit Number Description
- -------------- -----------
<S> <C>
27 Financial Data Schedule
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> FEB-28-1997
<PERIOD-START> MAR-01-1996
<PERIOD-END> AUG-31-1996
<CASH> 7
<SECURITIES> 0
<RECEIVABLES> 3,301
<ALLOWANCES> 337
<INVENTORY> 4,755
<CURRENT-ASSETS> 12,197
<PP&E> 1,998
<DEPRECIATION> 851
<TOTAL-ASSETS> 16,941
<CURRENT-LIABILITIES> 4,752
<BONDS> 4,775
0
19
<COMMON> 32
<OTHER-SE> 7,363
<TOTAL-LIABILITY-AND-EQUITY> 16,941
<SALES> 10,037
<TOTAL-REVENUES> 10,309
<CGS> 8,119
<TOTAL-COSTS> 8,119
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 29
<INTEREST-EXPENSE> 237
<INCOME-PRETAX> (93)
<INCOME-TAX> 8
<INCOME-CONTINUING> 18
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (488)
<EPS-PRIMARY> (0.15)
<EPS-DILUTED> (0.15)
</TABLE>
