SECURITIES AND EXCHANGE COMMISSION
Washington, DC 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 September 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 1-3410
AMERICAN BANKNOTE CORPORATION
(Exact name of Registrant as specified in its charter)
A Delaware I.R.S. Employer
Corporation No. 13-0460520
410 Park Avenue, New York, New York 10022-4407
Telephone - Area Code 212-593-5700-9100
200 Park Avenue, New York, New York 10166-4999
(Former Address, if Changed From 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 for the
past 90 days. Yes X No
At November 9, 1998 - 20,524,442 shares of common stock were outstanding.
<PAGE>
AMERICAN BANKNOTE CORPORATION
FORM 10-Q
I N D E X
PAGE
NO.
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Unaudited Condensed Consolidated Balance Sheets
September 30, 1998 and December 31, 1997. . . . . . . 3
Unaudited Condensed Consolidated Statements of Income
For the Nine and Three Months Ended September 30, 1998
and 1997. . . . . . . . . . . . . . . . . . . . . . . 4
Unaudited Condensed Consolidated Statements of Cash Flows
For the Nine Months Ended September 30, 1998 and 1997 5
Unaudited Condensed Consolidated Statement of Stockholders'
Equity For the Nine Months Ended September 30, 1998 . 6
Notes to Unaudited Condensed Consolidated
Financial Statements. . . . . . . . . . . . . . . . . 7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations . . . . 14
Item 3. Quantitative and Qualitative Disclosures
about Market Risks. . . . . . . . . . . . . . . . . . 24
PART II - OTHER INFORMATION
Item 1. Legal Proceedings. . . . . . . . . . . . . . . . . 24
Item 2. Changes in Securities and Use of Proceeds. . . . . 24
Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . 25
<PAGE>
PART I - Financial Information
ITEM 1. Financial Statements
AMERICAN BANKNOTE CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except share data)
September December
30, 1998 31, 1997
ASSETS (Unaudited)
Current assets
Cash and cash equivalents . . . . . . . . . . . . . $106,592 $ 17,323
Accounts receivable, net of allowance for
doubtful accounts of $1,630 and $986. . . . . . . 45,476 57,422
Costs in excess of billings, of $14,001 and
$2,848, on uncompleted contracts. . . . . . . . . 1,069 5,442
Inventories . . . . . . . . . . . . . . . . . . . . 31,192 41,686
Deferred income taxes . . . . . . . . . . . . . . . 6,399 3,046
Prepaid expenses and other. . . . . . . . . . . . . 14,188 11,371
Total current assets . . . . . . . . . . . . . 204,916 136,290
Property, plant and equipment, at cost,
net of accumulated depreciation and
amortization of $119,798 and $113,939 . . . . . . . 226,946 258,724
Other assets . . . . . . . . . . . . . . . . . . . . 25,447 25,918
Excess of cost of investment in subsidiaries
over net assets acquired, net of accumulated
amortization of $9,039 and $8,863 . . . . . . . . . 66,119 82,604
$523,428 $503,536
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Revolving credit facilities . . . . . . . . . . . . $ 3,494 $ 7,523
Current portion of long-term debt . . . . . . . . . 82,572 17,886
Accounts payable and accrued expenses . . . . . . . 59,670 54,761
Total current liabilities . . . . . . . . . . . 145,736 80,170
Long-term debt . . . . . . . . . . . . . . . . . . . 223,149 293,215
Other liabilities . . . . . . . . . . . . . . . . . . 25,784 21,466
Deferred income taxes . . . . . . . . . . . . . . . . 56,686 32,808
Minority interest . . . . . . . . . . . . . . . . . . 18,607 20,836
469,962 448,495
Commitments and Contingencies
Stockholders' equity
Preferred Stock, authorized 2,500,000 shares,
no shares issued or outstanding . . . . . . . . . - -
Zero Coupon Convertible Subordinated Debentures . . 7,325 8,326
Preferred Stock, Series B, par value $.01 per share,
authorized 2,500,000 shares, issued and outstanding
1,704,845 shares in 1998. . . . . . . . . . . . . 17 -
Common Stock, par value $.01 per share,
authorized 50,000,000 shares; issued
22,370,787 shares and 21,134,769 shares . . . . . 224 211
Capital surplus . . . . . . . . . . . . . . . . . . 79,162 74,713
Retained-earnings (deficit) . . . . . . . . . . . . (21,171) (23,282)
Unearned compensation . . . . . . . . . . . . . . . (1,335)
Treasury stock, at cost (1,985,845 shares
and 281,000 shares) . . . . . . . . . . . . . . . (1,253) (1,253)
Cumulative currency translation adjustment . . . . (9,503) (3,674)
Total stockholders' equity . . . . . . . . . . 53,466 55,041
$523,428 $503,536
See Notes to Condensed Consolidated Financial Statements.
<PAGE>
AMERICAN BANKNOTE CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME - UNAUDITED
(Amounts in thousands, except per share data)
Nine Months Ended Three Months Ended
September 30 September 30
1998 1997 1998 1997
Sales . . . . . . . . . . . . . . . $239,804 $248,416 $75,798 $88,152
Costs and expenses:
Cost of goods sold. . . . . . . . 182,477 166,263 62,044 58,435
Selling and administrative. . . . 44,624 34,881 18,004 11,962
Severance and asset impairments . 20,791 20,791
Depreciation and amortization . . 18,045 17,799 6,228 6,346
265,937 218,943 107,067 76,743
(26,133) 29,473 (31,269) 11,409
Other (expense) income:
Interest expense. . . . . . . . . (27,316) (24,353) (9,766) (8,451)
Gain on sale of subsidiary. . . . 79,518 79,518
Other, net. . . . . . . . . . . . 463 2,397 263 845
52,665 (21,956) 70,015 (7,606)
Income before taxes on income
and minority interest . . . . . 26,532 7,517 38,746 3,803
Taxes on income . . . . . . . . . . 19,303 371 23,131 807
Income before minority interest . 7,229 7,146 15,615 2,996
Minority interest . . . . . . . . . 760 2,458 450 564
Income before cumulative effect
of change in accounting principle 6,469 4,688 15,165 2,432
Cumulative effect of change in
accounting principle. . . . . . (2,290) - - -
Net income. . . . . . . . . . . . $ 4,179 $ 4,688 $15,165 $ 2,432
Net income per share - Basic:
Before cumulative effect of change
in accounting principle $ .29 $ .23 $ .70 $ .12
Cumulative effect of change in
accounting principle . . . . (.11) - - -
$ .18 $ .23 $ .70 $ .12
Net income per share - Diluted:
Before cumulative effect of change
in accounting principle $ .23 $ .22 $ .55 $ .11
Cumulative effect of change in
accounting principle . . . . (.08) - - -
$ .15 $ .22 $ .55 $ .11
See Notes to Condensed Consolidated Financial Statements.
<PAGE>
AMERICAN BANKNOTE CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - UNAUDITED
(Dollars in thousands)
Nine Months Ended
September 30
1998 1997
Operating Activities:
Net cash from operations, after adjustments to
reconcile income (loss) to net cash
provided by operating activities. . . . . . . $(5,241) $ 21,829
Changes in operating assets and liabilities,
net of effects from acquisitions:
Marketable securities. . . . . . . . . . . . . . - 2,077
Accounts receivables. . . . . . . . . . . . . . . 8,826 (3,075)
Inventories . . . . . . . . . . . . . . . . . . . (8,276) (7,021)
Prepaid and other assets. . . . . . . . . . . . . (421) (5,757)
Accounts payable and accrued expenses . . . . . . (4,199) (5,198)
Other . . . . . . . . . . . . . . . . . . . . . . 2,712 (975)
Net cash provided by (used in)
operating activities . . . . . . . . . . . . . . (6,599) 1,880
Investing Activities:
Net Proceeds from sale of subsidiary. . . . . . . . 105,637
Acquisitions of subsidiaries. . . . . . . . . . . . (1,169) (5,546)
Capital expenditures. . . . . . . . . . . . . . . . (4,338) (7,491)
Net cash provided by (used in) investing activities . 100,130 (13,037)
Financing Activities:
Long-term borrowings (net of related
expenses in 1998 of $1,503) . . . . . . . . . . . 54,223 6,280
Zero Coupon Convertible Subordinated Debenture. . . 4,700
Payment of long-term debt . . . . . . . . . . . . . (59,224) (8,813)
Revolving credit facilities, net. . . . . . . . . . 1,686 88
Dividend to minority shareholder. . . . . . . . . . (1,295) (2,587)
Proceeds from exercise of options and warrants. . . 100 626
Other . . . . . . . . . . . . . . . . . . . . . . . 53 -
Net cash provided by (used in)
financing activities . . . . . . . . . . . . . . . (4,457) 294
Effect of foreign currency exchange rate
changes on cash and cash equivalents. . . . . . . . 195 218
Increase (decrease) in cash and cash equivalents . . 89,269 (10,645)
Cash and cash equivalents beginning of period . . . . 17,323 14,256
Cash and cash equivalents end of period . . . . . . . $106,592 $ 3,611
Supplemental cash payments:
Taxes . . . . . . . . . . . . . . . . . . . . . . . $ 6,400 $ 3,400
Interest . . . . . . . . . . . . . . . . . . . . . $18,100 $20,400
See Notes to Condensed Consolidated Financial Statements.
<PAGE>
AMERICAN BANKNOTE CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY - UNAUDITED
NINE MONTHS ENDED SEPTEMBER 30, 1998
(Amounts in thousands)
<TABLE>
<CAPTION>
Zero Coupon Cumulative
Convertible Series B Retained Currency
Subordinated Preferred Common Capital Earnings Unearned Treasury Transl. Total
Debentures Stock Stock Surplus (Deficit) Comp. Stock Adjust. Equity
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance-
January 1, 1998 $8,326 $211 $74,713 $(23,282) $(1,253) $(3,674) $55,041
Exchange of Series B
Preferred Stock for
Common Stock $ 17 (17)
Issuances in
connection with:
Options exercised 1 99 100
Compensation
plans 6 2,306 $(1,335) 977
Acquisitions 2 651 653
Zero coupon convertible
subordinated debentures:
Accreted interest 413 (413)
Conversion (1,414) 4 1,410
Foreign
currency
translation
adjustments (1,655) (5,829) (7,484)
Net income 4,179 4,179
Balance-
September 30, 1998 $7,325 $ 17 $224 $79,162 $(21,171) $(1,335) $(1,253) $(9,503) $53,466
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
<PAGE>
AMERICAN BANKNOTE CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED
Note A - Basis of Presentation
The accompanying unaudited condensed consolidated financial statements do not
contain all disclosures required by generally accepted accounting principles.
Reference should be made to the Company's Annual Report on Form 10-K for the
year ended December 31, 1997. The accompanying unaudited condensed consolidated
financial statements reflect all adjustments (consisting of normal recurring
adjustments) which are, in the opinion of management, necessary for a fair
statement of the results of the interim periods presented and are not
necessarily indicative of the results which may be expected for a full year.
Note B - Cumulative Effect of Accounting Change
The AICPA Accounting Standards Executive Committee issued in April 1998,
Statement of Position ("SOP") 98-5, "Reporting on the Costs of Start-Up
Activities." SOP 98-5 provides guidance on the financial reporting of start-up
costs and organization costs and requires the cost of start-up activities and
organization costs to be expensed as incurred. The Company adopted this
pronouncement in the third quarter of 1998 effective as of the beginning of the
year. The cumulative effect of this change in accounting principle resulted in a
charge to net income of $2.3 million net of applicable tax benefit. In addition,
previously reported cost of goods sold for the first six months of 1998 was
retroactively adjusted to eliminate the net amortization of startup costs of
approximately $0.9 million which decreased previously reported net loss by
approximately $0.6 million.
Note C - Severance and Asset Impairments
During the third quarter of 1998, the Company: (a) implemented a program of
certain cost saving measures in Australia (b) was notified by a long standing
customer that a contract at the Company's domestic operations will expire on
December 31, 1998 and would not be renewed and (c) received renewals of certain
multi-year contracts at anticipated lower production volumes. As a result of the
foregoing, the Company will in the near term terminate approximately 210
employees and will not renew the contracts of certain other employees all of
which will result in the payment of severance. Additionally, as a result of the
aforementioned contract and reduced volume in certain product lines, specific
owned and leased property and equipment will no longer be used and is therefore
impaired, and certain inventories, primarily raw materials and spare parts, will
no longer be utilized. Accordingly, during the third quarter of 1998, the
Company provided charges for asset impairments and severance,
<PAGE>
AMERICAN BANKNOTE CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED
Note C - Severance and Asset Impairments - Continued
which are included in the following categories in the 1998
Consolidated Statements of Income (in thousands):
Cost of goods sold $ 5,511
Selling, general and administrative expense 283
Severance and asset impairments 20,791
$26,585
These charges consisted of the following (in thousands):
Write-downs:
Inventory on hand $ 5,247
Fixed assets not in use 7,630
Fixed assets currently in use 4,403
17,280
Accruals:
Employee severance pay and fringe benefits 3,679
Present value of lease payments and related
exit costs 5,343
9,022
Other related costs incurred:
Management consultants 283
$26,585
In addition to the above, the Company incurred severance charges in the normal
course of business of $0.4 million.
The Company has determined that a substantial portion of the impaired property
and equipment does not have a net realizable value due to excess industry
capacity, the age of the equipment and the cost of dismantling and removal.
Approximately $1.1 million and $3.4 million of the above charge will require the
utilization of cash during the fourth quarter of 1998 and calendar 1999,
respectively. At September 30, 1998, accrued expenses include $6.0 million for
severance and related costs and the present value of lease payments. Other
long-term liabilities include $2.8 million primarily related to the present
value of lease payments. During the third quarter 1998, approximately $0.5
million was expended for severance payments. The Company estimates that all of
the above activities will be completed by September 30, 1999.
<PAGE>
AMERICAN BANKNOTE CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED
Note D - Gain on Sale of Subsidiary
Effective July 20, 1998, the Company completed its previously announced public
offering ("the Offering") of all of the shares of its wholly-owned subsidiary,
American Bank Note Holographics, Inc. ("ABNH"). The Company received
approximately $107 million in proceeds from the offering before taxes, legal,
accounting, printing and related expenses. The pre-tax gain on the sale was
approximately $79.5 million.
The following operations of ABNH are included in the Condensed Consolidated
Statement of Income:
Nine Months Ended
September 30
1998* 1997
Sales. . . . . . . . . . . . . . . . . . $16,803 $19,641
Costs and expenses:
Cost of goods sold . . . . . . . . . . 6,554 7,837
Selling and administrative . . . . . . 2,805 3,861
Depreciation and amortization . . . . 594 869
9,953 12,567
Operating income . . . . . . . . . . . . 6,850 7,074
Other income, net. . . . . . . . . . . . 77 109
Intercompany interest income . . . . . . 163 228
Interest expense . . . . . . . . . . . . (261) -
Income before taxes on income . . . . 6,829 7,491
Taxes on income . . . . . .. . . . . . . 2,744 3,057
Net income . . . . . . . . . . . . $ 4,085 $ 4,354
*Through July 20, 1998
The financial statements reflect both allocated and, where readily determinable,
actual expenses for services provided by the Company to ABNH to affiliates
through the Offering. Where allocations have been utilized, the Company and
affiliates and ABNH recorded transactions based upon systematic and reasonable
methods, including but not limited to, sales, asset values, and headcount all as
a percent of total.
In addition to the above, the Company and affiliates had purchases of $1.4
million and $0.2 million in the nine months ended September 30, 1998 and 1997,
respectively, from ABNH in the normal course of business. There were no sales by
the Company and affiliates to ABNH in the nine months of 1998 or 1997. Trade
accounts payable to ABNH were $1.1 million and $0.7 million at September 30,
1998 and December 31, 1997, respectively. There were no trade receivables from
ABNH at September 30, 1998 or December 31, 1997.
<PAGE>
AMERICAN BANKNOTE CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED
Note D - Gain on Sale of Subsidiary - Continued
The amounts by major category of historical transactions with ABNH follow for
the period from January 1, 1998 to July 20, 1998 (in thousands):
Due from (to) ABNH:
Balance at beginning of period (3). . . . . . . . $(22,996)
Income tax liability receivable from ABNH . . . 2,422
Tax payments received from ABNH . . . . . . . . (2,422)
Cash advances from ABNH. . . . . . . . . . . . (8,233)
Offering costs from ABNH. . . . . . . . . . . . (182)
Allocation of employee benefits (1) . . . . . . 402
Allocation of security services . . . . . . . . 100
Sales and administration expenses (2). . . . . .. 244
Intercompany interest (3) . . . . . . . . . . . (156)
Executive benefits (4). . . . . . . . . . . . . 13
Balance at July 20, 1998. . . . . . . . . . . . . $(30,808)
(1) Primarily medical, life and disability insurance premiums. (2) Includes
legal fees and allocated portion of audit fees. (3) Includes a $5.3 million
note receivable to ABNH bearing
interest at 5.75% per annum.
(4) Includes value of restricted stock of the Company.
The amounts due to ABNH have been canceled and deemed to be a dividend as of the
Offering date.
The Company and ABNH have entered into several agreements in connection with the
Offering pursuant to which certain administrative services may continue to be
performed by the Company for ABNH following the Offering, and the companies will
continue to maintain certain business ties. No services have been provided to
ABNH since the date of the Offering. The Company and ABNH have also exchanged
certain releases and indemnification agreements. Following the date of the sale,
ABNH is longer be a member of the Company's consolidated group for tax purposes.
As a result of the sale of ABNH, the Company determined that undistributed
retained earnings of ABNB could no longer be considered permanently invested.
Accordingly, during the third quarter of 1998, the Company provided $7.1 million
for this tax adjustment.
<PAGE>
AMERICAN BANKNOTE CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED
Note E - Changes in Common Stock Issued
Changes in Common Stock issued:
Balance January 1, 1998 21,135
Stock options exercised 54
Restricted stock compensation plans 595
Acquisitions 156
Conversion of zero coupon convertible
subordinated debentures 431
Balance September 30, 1998 22,371
In March 1998 and September 1998, a total of approximately 595,000 shares of
restricted stock was awarded to various employees under the Company's Long Term
Performance Plan. Restrictions on the shares lapse over three years. The
aggregate market value of the shares on the date of issuance ($2.2 million) is
being charged to operations over the period that the restrictions lapse.
Note F - Series B Preferred Stock
On July 22, 1998, the Board of Directors adopted a resolution creating a series
of 2,500,000 shares of preferred stock designated as Series B Preferred Stock.
The shares of the Series B Preferred Stock are generally non voting and
otherwise are substantially similar to the Company's Common Stock. The Series B
Preferred Stock is convertible into Common Stock on a share for share basis at
the option of the Series B Preferred Stock stockholder or the Company. In July
1998, the Company exchanged 1,704,845 shares of the Series B Preferred Stock for
an equal number of its outstanding shares of Common Stock. Such shares of Common
Stock exchanged are held by the Company as treasury stock.
Note G - Net Income Per Share
In the fourth quarter of 1997, the Company adopted Statement of Financial
Accounting Standards ("SFAS") No. 128, "Earnings Per Share." All prior period
earnings per share data have been restated to conform to the provisions of this
statement.
<PAGE>
AMERICAN BANKNOTE CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED
Note G - Net Income Per Share - Continued
Computations used in the calculation of basic and diluted income per share
follow:
<TABLE>
<CAPTION>
Nine Months Ended Three Months Ended
September 30 September 30
1998 1997 1998 1997
<S> <C> <C> <C> <C>
Basic Income Per Share
Income before cumulative effect
of change in accounting principle $ 6,469 $ 4,688 $15,165 $ 2,432
Accretion of zero coupon convertible
subordinated debentures . . . . . (413) (65) (132) (65)
Numerator for basic income per share
before cumulative effect
of change in accounting principle $ 6,056 $ 4,623 $15,033 $ 2,367
Denominator for basic income per share Weighted average of shares of:
Common Stock. . . . . . . . . . 20,851 19,950 20,316 19,910
Series B Preferred Stock. . . . 379 - 1,134 -
Denominator for basic income
per share . . . . . . . . . . 21,230 19,950 21,450 19,910
Diluted Income Per Share
Income before cumulative effect
of change in accounting principle $ 6,469 $ 4,688 $15,165 $ 2,432
Accretion of zero coupon convertible
subordinated debentures converted (23) (65) - (65)
Numerator for diluted income per
share before cumulative effect
of change in accounting principle $ 6,446 $ 4,623 $15,165 $ 2,367
Denominator for diluted income per share Weighted average of shares of:
Common Stock. . . . . . . . . . 20,851 19,950 20,316 19,910
Series B Preferred Stock. . . . 379 - 1,134 -
Weighted average shares . . . . 21,230 19,950 21,450 19,910
Effect of dilutive:
Zero coupon convertible
subordinated debentures . . . . 5,635 - 5,635
Employee stock options and
non-vested share issuances. . . 705 880 545 1,020
Denominator for diluted income per
share - weighted average shares
and assumed conversions. . . . . 27,570 20,830 27,630 20,930
</TABLE>
The 1998 denominator for computing diluted income per share excludes
approximately 2.1 million shares of Common Stock that are reserved for
the exercise of warrants to purchase approximately 1.6 million shares
of Common Stock and the exercise of approximately 0.5 million stock
options. The exercise prices of these securities are greater than the
average market price of the common shares and their inclusion would be
antidilutive to diluted income per share.
<PAGE>
AMERICAN BANKNOTE CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED
Note H - Translation of ABNB's Financial Statements
Change in Accounting
As a result of the reduced inflation rate in Brazil, effective January 1, 1998,
the method of translating the financial statements of the Company's subsidiary
in Brazil, American Bank Note Grafica e Servicos Ltda. ("ABNB"), was changed to
reflect translation gains and losses as a separate component of equity. Prior to
1998, ABNB's financial statements were translated using the method applicable to
hyperinflationary economies in which gains and losses resulting from translation
and transactions were determined using a combination of current and historical
rates and were reflected in earnings. Such charge included in the condensed
consolidated statement of operations for the nine months ended September 30,
1997 was approximately $107,000. As a result of this change in accounting
method, the Company adjusted its deferred income tax liability with a
corresponding charge of approximately $1.7 million to stockholders' equity as of
the beginning of 1998.
Note I - Acquisitions
As of March 31, 1998, the Company acquired check and card personalization
businesses in France. The acquisition purchase price of approximately $3.3
million was financed with approximately $1.6 million of non-recourse term loans
in France, $1.0 million of cash and the issuance of 155,503 shares of the
Company's Common Stock valued at approximately $0.7 million. The acquisitions
were accounted for by the purchase method of accounting. The purchase price was
allocated on a preliminary basis as follows: assets acquired $14.4 million;
liabilities assumed $11.7 million; and excess cost of investment in subsidiaries
over net assets acquired $0.6 million.
Note J - Accounting Pronouncements
Effective January 1, 1998, the Company adopted Statement of Financial Accounting
Standards ("SFAS") No. 130, "Reporting Comprehensive Income." The comprehensive
loss for the nine months ended September 30, 1998 was approximately $3.3
million, inclusive of the foreign currency translation adjustments of $7.5
million.
SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities,"
issued in June 1998, is effective for periods beginning after June 15, 1999. The
Company is currently evaluating the effect of this standard.
<PAGE>
AMERICAN BANKNOTE CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED
Note K - Inventories
September December
30, 1998 31, 1997
(in thousands)
Finished goods. . . . . . . . . . . . . $ 5,642 $ 6,454
Work in process . . . . . . . . . . . . 10,450 17,356
Raw materials and supplies. . . . . . . 16,169 17,876
$32,261 $41,686
Note L - Commitments and Contingencies
The Company is involved in various litigation, reference is made to
"Part II - Other Information, Item 1. Legal Proceedings."
On June 10, 1998, the Company reached agreement with De La Rue, plc concerning
the settlement of the three pending lawsuits with De La Rue and its affiliated
companies. Such actions have been dismissed with prejudice. Terms of the
settlement are subject to a confidentiality agreement and the amounts previously
provided are sufficient to cover the settlement.
The Company and its subsidiaries are parties to various additional lawsuits (as
both plaintiff and defendant) related to various matters in the normal course of
business, which in the opinion of management, are not anticipated to have a
material adverse impact on its consolidated financial position or results of
operations.
Note M - Subsequent Events
In October 1998, pursuant to a tender offer commenced on August 27, 1998, the
Company redeemed for cash $70 million aggregate principal amount of its
outstanding 10 3/8% Senior Notes due June 1, 2002 (the "Notes"), for 101% of the
principal amount, plus accrued interest.
In connection with the above purchase of the Notes, the Company incurred a
pre-tax extraordinary loss on their early extinguishment of approximately $1.8
million consisting of approximately $0.8 million for the 1% premium and
approximately $1.0 million of a non-cash write off of previously deferred debt
issue expense.
As of November 11, 1998, the Company received conversion requests for
approximately $2.6 million principal amount of the zero coupon convertible
debentures at an average conversion price of $1.26 per share. The Company may at
its option redeem for cash all or a portion of these securities.
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
General
Consolidated operations in 1998 include the operations of ABNH to the July 20,
1998 date of sale. The acquisition of the Sati Group's check personalization,
electronic printing and document management business, acquired in August 1997,
and the Menno plastic card business, acquired in May 1997, are reflected in the
results of operations for the entire 1998 period. In addition, on March 31,
1998, the Company acquired check and card personalization businesses in France.
The acquisitions were accounted for as purchase transactions and their
operations are included since that date.
The Company operates in both Brazil and Australia which had significant foreign
exchange rate fluctuations in 1998 and 1997. The comparison below reflects the
effect of changes in foreign exchange rates.
COMPARISON OF RESULTS OF THE NINE MONTHS ENDED SEPTEMBER 30, 1998 WITH
THE NINE MONTHS ENDED SEPTEMBER 30, 1997
The Company operates in a single industry, secured products and systems, with
three principal product lines. The following table presents these product lines
for the nine-months ended September 30 (dollars in millions):
1998 1997
$ % $ %
Transaction Cards & Systems . . . . 68.2 28.5 83.3 33.5
Printing Services
& Document Management . . . . . . 64.3 26.8 43.6 17.6
Security Printing Solutions . . . . 107.3 44.7 121.5 48.9
239.8 100.0 248.4 100.0
Sales decreased by $8.6 million or 3.5% from 1997 after giving effect to a $19.4
million reduction in sales resulting from changes in foreign exchange rates.
Transaction Cards & Systems ("TCS") sales decreased $15.1 million or 18.1% and
Security Printing Solutions ("SPS") sales decreased $14.3 million or 11.8%.
These decreases were partially offset by an increase in Printing Services and
Document Management sales of $20.7 million or 47.5%.
The decrease in TCS sales was principally due to lower volume requirements for
stored-value telephone cards in Brazil($14.8 million), decreased sales resulting
from the sale of ABNH ($2.3 million), and lower equipment sales ($2.1 million)
in Australia. These decreases were partially offset by a stronger demand in
Brazil for transaction cards and the acquisition in May 1997 of the Menno card
business ($2.2 million), increased card personalization sales resulting from the
March 1998 acquisition of CPS in France ($2.4 million) and increased transaction
processing revenues ($1.1 million) from the Company's domestic merchant services
operation.
<PAGE>
AMERICAN BANKNOTE CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED
RESULTS OF OPERATIONS - CONTINUED
The increase in PSDM sales is primarily due to the acquisition of Sati in France
($17.1 million) and the award of a new outsourcing contract in Brazil ($5.8
million).
The decrease in SPS sales ($14.3 million) is principally due to reduced customer
volumes at American Bank Note Company ("ABN"), for travelers checks, foreign and
domestic government products and other secure documents, and lower volumes for
bank documents in Australia and Brazil. These decreases were partially offset by
increased currency sales at ABN, passport sales in Australia and driver's
license systems in Brazil.
Sales by foreign subsidiaries represented 75% and 71% of the Company's
consolidated sales in 1998 and 1997, respectively.
Cost of goods sold increased $16.2 million or 9.7%, after giving effect to a
$14.4 million reduction in costs resulting from changes in foreign exchange
rates. As a percentage of sales, cost of goods sold was 76.1% in 1998 as
compared to 66.9% in 1997. This increase is primarily attributable to an
inventory write-down of $5.5 million resulting primarily from a reduction in
domestic business (see Note C - Severance and Asset Impairments), decreased
margins due to the sale of ABNH and a change in product mix primarily in Brazil
and Australia. In Brazil, lower volumes on the higher margin stored-value
telephone cards was partially offset with lower margin PSDM sales. In Australia,
higher costs associated with new customer contracts and products resulted in
lower margins. The product mix in any given period is not indicative of the
expected product mix in any future period.
Selling and administrative expenses increased $9.7 million (27.9%) from 1997
after giving effect to a $2.0 million reduction resulting from changes in
foreign exchange rates. The increase was principally due to the inclusion of the
Sati Group's operations in 1998 ($2.0 million), higher charges for restricted
stock grants, severance payments and employee incentive provisions ($3.6
million), a reversal of pre-tax liabilities no longer required in 1997 ($0.8
million), higher commissionable sales ($1.2 million), an increase in the bad
debt provision ($0.8 million), and higher consulting and professional fees ($0.7
million). As a percentage of sales, selling and administrative expenses
increased to 18.6% in 1998 from 14.0% in 1997.
The charge for severance and asset impairments of $20.8 million results from the
implementation of certain cost savings measures in Australia, the loss of a
customer contract, and reduced levels of production in certain product lines,
(as further described in Note C Severance and Asset Impairments).
<PAGE>
AMERICAN BANKNOTE CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED
RESULTS OF OPERATIONS - CONTINUED
Depreciation expense increased by $0.2 million from 1997 principally due to the
inclusion of the Sati group in 1998.
Interest expense increased $3.0 million in 1998, primarily due to higher
incremental borrowings resulting from the sale of $95 million 11 1/4% Senior
Subordinated Notes in December 1997.
Other income, net decreased by $1.9 million primarily due to decreased interest
and investment income when compared to 1997.
Effective July 20, 1998, the Company completed its public offering of all the
shares of its wholly-owned subsidiary, ABNH resulting in a pre-tax gain on the
sale of approximately $79.5 million (See Note C Gain on Sale of Subsidiary).
Taxes on income (benefit) are calculated using an estimated annual effective
income tax rate at the end of each reporting period. The rate is reviewed and
adjusted periodically to reflect changes in estimates by tax jurisdictions in
regulations, rates, deductibility of expenses, utilization of tax credits,
potential tax exposures, and state and local taxes. In addition, as a result of
the sale of ABNH, the Company determined that undistributed retained earnings of
ABNB could no longer be considered permanently invested. Accordingly, during the
third quarter of 1998, the Company provided $7.1 million for this tax
adjustment.
The cumulative effect adjustment of a change in accounting principle of $2.3
million, net of tax, is the result of the Company's adoption of SOP 98-5
"Reporting on the Costs of Start-Up Activities," in the third quarter effective
as of the beginning of the year.
COMPARISON OF RESULTS OF THE THREE MONTHS ENDED SEPTEMBER 30, 1998
WITH THE THREE MONTHS ENDED SEPTEMBER 30, 1997
The following table presents the three product lines for the three-month periods
ended September 30 (dollars in millions):
1998 1997
$ % $ %
Transaction Cards & Systems . . . . 22.3 29.4 27.9 31.6
Printing Services
& Document Management . . . . . . 22.8 30.1 17.0 19.3
Security Printing Solutions . . . . 30.7 40.5 43.3 49.1
75.8 100.0 88.2 100.0
Sales decreased by $12.4 million or 14.1% from 1997 after giving effect to a
$7.3 million reduction in sales resulting from changes in foreign exchange
rates. Transaction Cards & Systems sales decreased $5.6 million or 20.1%.
Printing Services & Document Management sales increased $5.8 million or 34.1%
and Security Printing Solutions sales decreased $12.6 million or 29.1%.
<PAGE>
AMERICAN BANKNOTE CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED
RESULTS OF OPERATIONS - CONTINUED
The decrease in TCS sales mainly resulted from the elimination of hologram sales
due to the sale of ABNH.
The increase in PSDM sales is primarily due to the acquisition of Sati in France
($4.7 million) and the award of a new outsourcing bank contract in Brazil ($1.9
million).
The decrease in SPS sales ($12.6 million) is principally due to reduced customer
volumes at ABN for travelers checks, foreign and domestic government products
and other secure documents, and lower volumes for bank documents in Australia
and Brazil. The decreases were partially offset by increased passport sales in
Australia and drivers license systems in Brazil.
Sales by foreign subsidiaries represented 87% and 69% of the Company's
consolidated sales in 1998 and 1997, respectively.
Cost of goods sold increased $3.6 million or 6.2%, after giving effect to a $5.1
million reduction in costs resulting from changes in foreign exchange rates. As
a percentage of sales, cost of goods sold was 81.9% in 1998 as compared to 66.3%
in 1997. This increase is primarily attributable to an inventory write-down of
$5.5 million resulting primarily from a reduction in domestic business (see Note
C Severance and Asset Impairments), decreased margins due to the sale of ABNH,
and a change in product mix primarily in Brazil and Australia. In Brazil, lower
volumes on the higher margin stored-value telephone cards was partially offset
with lower margin PSDM sales. In Australia, higher costs associated with new
customer contracts and products resulted in lower margins. The product mix in
any given period is not indicative of the expected product mix in any future
period.
Selling and administrative expenses increased $6.1 million (50.6%) from 1997
after giving effect to a $0.2 million reduction resulting from changes in
foreign exchange rates. The increase was principally due to the inclusion of the
Sati Group's operations in 1998 ($0.6 million), higher charges for restricted
stock grants, severance payments and employee incentive provisions ($3.2
million), higher commissionable sales ($0.8 million), an increase in the
provision for bad debts ($0.8 million) and higher consulting and professional
fees ($0.7 million). As a percentage of sales, selling and administrative
expenses increased to 23.8% in 1998 from 13.6% in 1997.
The charge for severance and asset impairments of $20.8 million results from the
implementation of certain cost savings measures in Australia, the loss of a
customer contract, reduced levels of production in certain product lines, and
impaired owned and lease property and equipment which will no longer be
utilized. (See Note C - Severance and Asset Impairments).
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS - CONTINUED
Depreciation expense was approximately the same compared to the prior year.
Interest expense increased $1.3 million in 1998, primarily due to higher
incremental borrowings resulting from the sale of $95 million 11 1/4% Senior
Subordinated Notes in December 1997.
Other income, net decreased by $0.6 million primarily due to lower interest and
investment income when compared to 1997.
Effective July 20, 1998, the Company completed its public offering of all the
shares of its wholly-owned subsidiary, ABNH resulting in a pre-tax gain on the
sale of approximately $79.5 million (See Note D Gain on Sale of Subsidiary).
Taxes on income are calculated using an estimated annual effective income tax
rate at the end of each reporting period. The rate is reviewed and adjusted
periodically to reflect changes in estimates by tax jurisdictions in
regulations, rates, deductibility of expenses, utilization of tax credits,
potential tax exposures, and state and local taxes. In addition, as a result of
the sale of ABNH, the Company determined that undistributed retained earnings of
ABNB could no longer be considered permanently invested. Accordingly, during the
third quarter of 1998, the Company provided $7.1 million for this tax
adjustment.
LIQUIDITY AND CAPITAL RESOURCES
Operating cash flows decreased $27.0 million for the nine months ended September
30, 1998 as compared to the same period in 1997 (before changes in operating
assets and liabilities) primarily as a result of decreased earnings when
adjusted for the gain on the sale of ABNH and the charges for severance and
asset impairment in the third quarter.
Operating assets and liabilities also affected cash flows. The net increase in
operating cash flows from such changes of $18.6 million in 1998 as compared to
1997 is primarily due to the timing of payments of prepaid expenses, accounts
receivable collections and payments of accounts payable offset by an increase in
inventories.
Investing activities for 1998 included $1.2 million for an acquisition in France
as compared to $5.5 million during 1997 in Brazil of a leading manufacturer of
personalized financial transaction cards and in France of a leading manufacturer
of electronically printed personalized documents. The acquisition in 1998 did
not have a significant effect on the Company's results of operations. The
reduction in the level of capital expenditures to $4.3 million in 1998 from $7.5
million in 1997 reflected the substantial completion of the expansion of certain
manufacturing capacity in Brazil in 1997. The $105.6 million of proceeds
reflects the $115.9 million IPO of ABNH net of underwriting discounts and
expenses related to the transaction.
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES - CONTINUED
Financing activities for the nine months ended September 30, 1998 included the
refinancing of the Leigh-Mardon ("LM") debt in Australia, increased working
capital revolver borrowings and reduced dividend payments to ABNB's minority
shareholder. The LM refinancing included a five-year $55.3 million amortizing
revolving credit facility. The revolving credit facility expires in March 2003
with semi-annual commitment step downs and is initially priced at the bank bill
rate plus 1.75%. On March 26, 1998, in connection with the refinancing,
Leigh-Mardon entered into a three-year floating-to-fixed interest rate swap with
two of the syndicate banks. The notional principal amount of the swap is equal
to 75% of the initial borrowings under the facilities or approximately $37.3
million. The notional principal amount of the swap will amortize in line with
the semi-annual commitment reductions under the five-year revolving credit
facility. Under the terms of the swap agreement, Leigh-Mardon will pay the
counterparty an average fixed rate of 5.62% and will receive an amount equal to
the 90-day bank bill rate (approximately 5.0% at September 30, 1998).
At September 30, 1998, the Company had approximately $106.6 million in cash and
cash equivalents including the net proceeds from the IPO of ABNH.
The Company's subsidiary, ABN, is party to a three-year, revolving credit
facility for general working capital purposes and letters of credit which was
amended to a $10 million commitment to reflect the sale of ABNH through an IPO
in July and which was originally scheduled to expire on October 30,1998. In
October, the current lender, Chase Manhattan Bank, extended the $10 million
revolving credit's maturity to December 31, 1998 to allow additional time to
negotiate a new multi-year committed facility.
At September 30, 1998, the Company had approximately $4.9 million of
availability under its Credit Facility before reductions for $3.5 million of
outstanding letters of credit and $1.4 million of borrowings. In addition, LM
and the Sati Group had available unused lines of credit of approximately $2.0
million and $1.0 million, respectively.
In October 1998, the Sati Group entered into a three-year floating-to-fixed rate
interest rate swap agreement with Societe Generale on 65% of the principal
amount (approximately $8.0 million) of its amortizing term loans. The swap is
priced at a fixed rate of 3.8% plus the 1.75% spread applicable to the Sati
Group's PIBOR (Paris Interbank Offer Rate) loans. This hedging agreement was
required under the terms of the Sati Group bank loan agreements.
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES - CONTINUED
The Company completed a tender offer for $70 million principal amount of the 10
3/8% Senior Notes on September 25, 1998. A total of $70 million face value of
bonds were redeemed for a total use of funds of $73.2 million including a 1%
tender premium and accrued interest. Currently $20.1 million of proceeds of the
Offering remain after deducting all fees, expenses and taxes related to the
offering of ABNH and reinvested capital expenditures to date. These proceeds can
be reinvested in the current businesses or related acquisitions for a period of
up to 180 days from the Offering's effective date, July 20, 1998 or used to
Tender for additional 10 3/8% Senior Notes.
The Company's long-term debt included $56.5 million of 10 3/8% Senior Notes
(after the above completed tender offer), $95.0 million principal amount of 11
1/4% Senior Subordinated Notes, $8.0 million of 11 5/8% Senior Notes, $46.2
million of LM revolving credit facility, $4.1 million of borrowings in Brazil,
$11.4 million of the Sati Group debt and $1.9 million of other debt.
Management believes that cash flows from operations together with cash balances
and availability of funds under the Company's and subsidiaries credit facilities
and asset sales will be sufficient to service debt and fund capital expenditures
for the foreseeable future. The Company also believes that it and its
subsidiaries possess sufficient unused debt capacity and access to debt and
equity markets to pursue additional acquisition opportunities and meet
extraordinary working capital needs as they arise.
Reference is made to the Company's Annual Report on Form 10-K for the year ended
December 31, 1997 "Liquidity and Capital Resources."
IMPACT OF INFLATION
Reference is made to the Company's Form 10-K for the year ended December 31,
1997 "Impact of Inflation."
Effective January 1, 1998, as a result of substantial decrease in inflation
rates in Brazil, the method of translating ABNB's financial statements was
changed to reflect gains and losses as a separate component of stockholders'
equity. Prior to 1998, the Company translated ABNB's financial statements as if
ABNB were operating in a hyperinflationary economy. In prior years gains and
losses resulting from translation and transactions were determined using a
combination of current and historical rates and are reflected in earnings. The
effect of the change reduced stockholders' equity by approximately $1.7 million
with a corresponding credit to deferred income taxes.
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES - CONTINUED
The Company's domestic, Australian, New Zealand and French operations are not
significantly affected by inflation. ABNB's sales represented 42% and 43% of
consolidated sales in 1998 and 1997, respectively.
YEAR 2000 ISSUE
The Year 2000 issue involves the risk that computer systems using two-digit date
fields will fail to properly recognize the Year 2000, resulting in computer
system failures for businesses, government agencies, service providers, vendors
and customers. If not corrected, these computer applications could fail or
create erroneous results. The global extent of the potential impact of the Year
2000 problem is not yet known, and if not timely corrected, could affect the
economy and the Company. The Company uses computer information systems and
manufacturing equipment, which may be affected. It also relies on suppliers and
customers who are also dependent on systems and equipment, which use date
sensitive software. The Company recognizes the importance of the Year 2000 issue
and it has been given high priority.
In 1997 the Company began to review the production equipment used in the
manufacture of its products as well as the systems related to the infrastructure
of the Company's manufacturing and office facilities. The Company is continuing
to inventory and verify Year 2000 readiness of computer controlled manufacturing
equipment and computer controls for its manufacturing and office facilities.
This effort is approximately 50 percent complete and requires validation of
equipment from the equipment manufacturer.
In 1998 the Company began evaluating and testing its internal computer
information systems. This effort involves plans for creating or purchasing
replacement systems for those computer information systems that were developed
internally as well as obtaining versions of software purchased from third
parties that are Year 2000 compliant. The Company expects to have substantially
converted or replaced computer information systems for its entire business
operations by the end of the third quarter of 1999. Also, in 1998 the Company
began to assess the Year 2000 problem remediation efforts of the Company's
suppliers, including providers of services such as utilities, and customers
where there is a significant business relationship. These efforts however
provide no assurances that the Company will not be affected by the Year 2000
problems of other organizations.
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES - CONTINUED
YEAR 2000 ISSUE - CONTINUED
The costs associated with the Company's Year 2000 remediation are being expensed
as incurred. The Company estimates that it has expended approximately $0.4
million to date and that an additional $0.8 million may be required to be
expended. The foregoing amounts are estimates and may include amounts that would
have been incurred in normal upgrading of equipment and software.
The Company's current estimates of the amount of costs and time necessary to
remediate and test its computer systems are based on the facts and circumstances
existing and known at this time. These estimates were made using assumptions of
future events including the continued availability of certain resources,
implementation success by key third parties and other factors.
If the Company is unsuccessful or if the remediation efforts of its key
suppliers or customers are unsuccessful with regard to Year 2000 remediation,
there may be a material adverse impact on the Company's results and financial
condition. The Company's contingency plan is currently limited to such
precautionary measures as an anticipated increased level of finished goods and
raw materials to minimize the potential disruption in the Company's ability to
manufacture and distribute products and also the identification of alternate
suppliers. At this time, however, the Company is unable to quantify any
potential adverse impact but will continue to monitor and evaluate the
situation.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
Certain statements in this Form 10-Q and in certain documents incorporated by
reference herein constitute "forward-looking" statements within the meaning of
the Private Securities Litigation Reform Act of 1995 (the "Reform Act"). Such
"forward-looking" statements involve known and unknown risks, uncertainties and
other factors which may cause the actual results, performance or achievements of
the Company, or industry results, to be materially different from any future
results, performance, or achievements expressed or implied by such
"forward-looking" statements. Such factors are more fully described in the
Company's Annual Report on Form 10-K for the year ended December 31, 1997 which
should be considered in connection with a review of this report.
<PAGE>
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS
As required by the Company's Australian and French subsidiary's financing
agreements, separate three-year floating-to-fixed rate swap agreements were
entered into, on approximately $43.3 million principal amount of debt. The debt
arrangements are discussed in greater detail in Liquidity and Capital Resources
in included in Item 2 hereof.
PART II OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
On June 10, 1998, the Company reached agreement with De La Rue, plc concerning
the settlement of the three pending lawsuits with De La Rue and its affiliated
companies. Such actions have been dismissed with prejudice. Terms of the
settlement are subject to a confidentiality agreement and the amounts previously
provided are sufficient to cover the settlement.
Reference is made to the Company's Annual Report on Form 10-K for the year ended
December 31, 1997.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
On July 22, 1998, the Board of Directors adopted a resolution creating a series
of 2,500,000 shares of Preferred stock designated as Series B Preferred Stock.
The shares of the Series B Preferred Stock are generally non voting and
otherwise are substantially similar to the Company's Common Stock. The Series B
Preferred Stock is convertible into Common Stock on a share for share basis at
the option of the Series B Preferred Stock stockholder or the Company. In July
1998, the Company exchanged 1,704,845 shares of a newly authorized Series B
Preferred Stock for an equal number of its outstanding shares of Common Stock.
Such shares are held by the Company as treasury stock.
<PAGE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
Exhibit
Number
3.1 Certificate of Designations of Series B Preferred Stock of
American Banknote Corporation **
4.1 Amending Agreement to the Senior Debt Facility Agreement dated August 10,
1998 between ABN Australasia Limited ("Borrower") American Banknote
Corporation and Chase Securities Australia Limited ("Agent"), for itself
and as Agent of the Participants. **
4.2 Registration Rights Agreement Entered into as of July 30,
1998, Between American Banknote Corporation and Bay Harbour
Management, L.c., for its Managed Accounts **
27 Article 5 Financial Data Schedule ** ** Filed electronically
herewith
(b) Report on Form 8-K - Form 8-K filed August 3, 1998
Items 2 and 7
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the Company
has duly caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
American Banknote Corporation
By s/ Patrick J. Gentile
------------------------
Patrick J. Gentile
Senior Vice President and
Chief Accounting Officer
Date: November 16, 1998
<PAGE>
Exhibit Index
List of Exhibits Pursuant to Item 601 of Regulation S-K:
Exhibit
3.1 Certificate of Designations of Series B Preferred Stock of
American Banknote Corporation
4.1 Amending Agreement to the Senior Debt Facility Agreement dated August 10,
1998 between ABN Australasia Limited ("Borrower") American Banknote
Corporation and Chase Securities Australia Limited ("Agent"), for itself
and as Agent of the Participants.
4.2 Registration Rights Agreement Entered into as of July 30,
1998, Between American Banknote Corporation and Bay Harbour
Management, L.c., for its Managed Accounts
27 Article 5 Financial Data Schedule
Exhibit 3.1
CERTIFICATE OF DESIGNATIONS OF SERIES B PREFERRED STOCK OF
AMERICAN BANKNOTE CORPORATION
<PAGE>
CERTIFICATE OF DESIGNATIONS
OF
SERIES B PREFERRED STOCK
OF
AMERICAN BANKNOTE CORPORATION
CERTIFICATE OF DESIGNATIONS
OF
SERIES B PREFERRED STOCK
OF
AMERICAN BANKNOTE CORPORATION
Pursuant to Section 151 of the Delaware
General Corporation Law
I, Harvey J. Kesner, General Counsel, Executive Vice President and
Secretary of American Banknote Corporation, a corporation organized and existing
under the Delaware General Corporation Law (the "Company"), in accordance with
the provisions of Section 151 of such law, DO HEREBY CERTIFY that pursuant to
the authority conferred upon the Board of Directors by the Certificate of
Incorporation of the Company, the Board of Directors on July 22, 1998 adopted
the following resolution which creates a series of 2,500,000 shares of Preferred
Stock designated as Series B Preferred Stock, as follows:
RESOLVED, that pursuant to Section 151(g) of the Delaware General
Corporation Law and the authority vested in the Board of Directors of the
Company in accordance with the provisions of ARTICLE FOURTH of the Certificate
of Incorporation of the Company, a series of Preferred Stock of the Company be,
and hereby is, created, and the powers, designations, preferences and relative,
participating, optional or other special rights of the shares of such series,
and the qualifications, limitations or restrictions thereof, be, and hereby are,
as follows:
Section 1. Designation and Amount. The shares of such series shall be
designated as "Series B Preferred Stock" (the "Series B Preferred Stock") and
the number of shares constituting such series shall be 2,500,000.
Section 2. Dividends and Distributions.
(A) In the event the Company shall, at any time after
the issuance of any share of Series B Preferred Stock, make any distribution on
the shares of Common Stock of the Company, whether by way of a dividend or a
reclassification of stock, a recapitalization, reorganization or partial
liquidation of the Company or otherwise, which is payable in cash or any debt
security, debt instrument, real or personal property or any other property, or
in shares of capital stock of the Company (other than Common Stock and any other
capital stock of the Company entitled to vote generally in the election of
directors ("Voting Stock")) or in rights or warrants to acquire any such share,
including any debt security convertible into or exchangeable for any such share,
then, and in each such event, the Company shall simultaneously make on each then
outstanding share of Series B Preferred Stock of the Company a distribution, in
like kind, equal to such distribution made on a share of Common Stock.
(B) In the event the Company shall, at any time after the issuance of
any share of Series B Preferred Stock, make any distribution on the shares of
Common Stock of the Company of rights or warrants to acquire additional shares
of Common Stock, including any debt security convertible into or exchangeable
for any such share, then, and in each such event, the Company shall
simultaneously make on each then outstanding share of Series B Preferred Stock a
distribution of rights, warrants or debt securities entitling the holder of the
Series B Preferred Stock to acquire or receive upon conversion or exchange the
same number of shares of Series B Preferred Stock upon the same terms and
conditions as the rights, warrants or debt securities distributed to the holders
of the Common Stock.
(C) In the event the Company shall, at any time after the issuance of
any share of Series B Preferred Stock, make any distribution on the shares of
Common Stock of the Company of rights or warrants to acquire additional shares
of Voting Stock, including any debt security convertible into or exchangeable
for any such share, then, and in each such event, the Company shall
simultaneously make on each then outstanding share of Series B Preferred Stock a
distribution of rights, warrants or debt securities entitling the holder of the
Series B Preferred Stock to acquire or receive upon conversion or exchange the
same number of shares of a security identical to the Voting Stock except that
such security shall not have any voting rights greater than the voting rights of
the Series B Preferred Stock (the "Non-Voting Stock") upon the same terms and
conditions as the rights, warrants or debt securities distributed to the holders
of the Common Stock.
(D) The distributions on the Series B Preferred Stock to which holders
thereof are entitled pursuant to Sections 2(A) (B) and/or (C) above are
hereinafter referred to as "Dividends".
(E) In the event the Company shall, at any time after the issuance of
any share of Series B Preferred Stock, declare or pay any dividend or make any
distribution on Common Stock payable in shares of Common Stock or Voting Stock,
or effect a subdivision or split or a combination, consolidation or reverse
split of the outstanding shares of Common Stock into a greater or lesser number
of shares of Common Stock, then in each such case a provision shall be made, as
applicable, for either (i) a dividend or distribution on the Series B Preferred
Stock payable in shares of Series B Preferred Stock or Non-Voting Stock, as the
case may be, equal to, on a per share basis, the number of shares of Common
Stock or Voting Stock paid on each share of Common Stock, or (ii) a subdivision
or split or a combination, consolidation or reverse split of the outstanding
shares of Series B Preferred Stock (each, a "Capital Adjustment"), which Capital
Adjustment shall be effected in the same proportion as the adjustment that is
made to the Common Stock.
(F) The Company shall declare each Dividend and effect each Capital
Adjustment at the same time it declares any cash or non-cash dividend or
distribution on the Common Stock in respect of which a Dividend is required to
be paid, or effects a capital adjustment in respect of the Common Stock.
Section 3. Voting Rights.
(A) Subject to the provisions of Sections 10 and 3(B), holders of
shares of Series B Preferred Stock shall not be entitled to vote upon any matter
upon which stockholders of the Company are entitled to vote, except to the
extent required by law, in which case holders of record of shares of Series B
Preferred Stock shall have only such voting rights as are required by law.
(B) In the event that distributions on the Series B Preferred Stock to
which holders thereof are entitled pursuant to Sections 2(A), (B) and/or (C)
shall not have been paid or set aside for payment for four or more quarterly
dividend periods, whether consecutive or not, the holders of record of Preferred
Stock of the Company of all series (including the Series B Preferred Stock),
other than any series in respect of which such right is expressly withheld by
the Certificate of Incorporation or the authorizing resolutions included in any
Certificate of Designations therefor, shall have the right, at the next meeting
of stockholders called for the election of directors, to elect two members to
the Board of Directors, which directors shall be in addition to the number
required by the By-laws prior to such event, to serve until the next Annual
Meeting and until their successors are elected and qualified or their earlier
resignation, removal or incapacity or until such earlier time as all unpaid
distributions upon the outstanding shares of Series B Preferred Stock shall have
been paid (or irrevocably set aside for payment) in full. The holders of shares
of Series B Preferred Stock shall continue to have the right to elect directors
as provided by the immediately preceding sentence until all unpaid distributions
upon the outstanding shares of Series B Preferred Stock shall have been paid (or
set aside for payment) in full. Such directors may be removed and replaced by
such stockholders, and vacancies in such directorships may be filled only by
such stockholders (or by the remaining director elected by such stockholders, if
there be one) in the manner permitted by law; provided, however, that any such
action by stockholders shall be taken at a meeting of stockholders and shall not
be taken by written consent thereto.
(C) Notwithstanding the foregoing, the Series B Preferred Stock is not
considered "Voting Stock" as such term is defined in the Company's Rights
Agreement (the "Rights Agreement"), dated as of March 24, 1994, between the
Company and Chemical Bank, as Rights Agent.
Section 4. Reacquired Shares. Any shares of Series B Preferred Stock
purchased or otherwise acquired by the Company in any manner whatsoever shall be
retired and cancelled promptly after the acquisition thereof. All such shares
upon their retirement and cancellation shall become authorized but unissued
shares of Preferred Stock, without designation as to series, and such shares may
be reissued as part of a new series of Preferred Stock to be created by
resolution or resolutions of the Board of Directors.
Section 5. Liquidation, Dissolution or Winding Up. Upon any voluntary
or involuntary liquidation, dissolution or winding up of the Company, no
distribution shall be made to the holders of shares of stock ranking junior upon
liquidation, dissolution or winding up to the Series B Preferred Stock unless
the holders of shares of Series B Preferred Stock shall have received for each
share of Series B Preferred Stock an amount equal to the greater of (i) $.01 and
(ii) the amount to be distributed per share to holders of Common Stock.
Section 6. Consolidation, Merger, etc. In case the Company shall enter
into any consolidation, merger, combination or other transaction in which the
shares of Common Stock are exchanged for or changed into other stock or
securities, cash and/or any other property, then in any such case each
outstanding share of Series B Preferred Stock shall at the same time be
similarly exchanged for or changed into the aggregate amount of stock,
securities, cash and/or other property (payable in like kind), as the case may
be, for which or into which each share of Common Stock is changed or exchanged.
Section 7. No Redemption. The shares of Series B Preferred Stock shall
not be redeemable at the option of the Company or any holder thereof.
Notwithstanding the foregoing sentence of this Section, the Company may acquire
shares of Series B Preferred Stock in any other manner permitted by law, the
provisions hereof and the Certificate of Incorporation of the Company.
Section 8. Ranking. Unless otherwise provided in the Certificate of
Incorporation of the Company or a Certificate of Designations relating to a
subsequent series of preferred stock of the Company, the Series B Preferred
Stock shall rank (i) junior to the Company's Series A Junior Preferred Stock and
all other series of the Company's preferred stock as to the payment of dividends
and junior to all other series of the Company's preferred stock (other than the
Company's Series A Junior Preferred Stock) as to the distribution of assets on
liquidation, dissolution or winding up, (ii) on a parity with the Company's
Series A Junior Preferred Stock as to the distribution of assets on liquidation,
dissolution or winding up and on a parity with the Common Stock as to the
payment of dividends and (iii) senior to the Common Stock as to the distribution
of assets on liquidation, dissolution or winding up.
Section 9. Mandatory Conversion.
(A) Subject to the provisions of Section 9(C) below,
all outstanding shares of Series B Preferred Stock and Non-Voting Stock shall
automatically be converted (the "Mandatory Conversion") at the option of the
Company effective as of a date determined by the Company (the "Mandatory
Conversion Date") into an equal number of shares of Common Stock and Voting
Stock, respectively, of the Company. All holders of record of shares of Series B
Preferred Stock and Non-Voting Stock will be given written notice of the
Mandatory Conversion Date and the place designated for Mandatory Conversion of
all such shares of Series B Preferred Stock and Non-Voting Stock pursuant to
this Section 9. Such notice shall be sent by first class or registered mail,
postage prepaid, to each record holder of Series B Preferred Stock and
Non-Voting Stock at such holder's address last shown on the records of the
transfer agent for the Series B Preferred Stock and Non-Voting Stock (or the
records of the Company, if it serves as its own transfer agent). Upon receipt of
such notice, each holder of shares of Series B Preferred Stock and Non-Voting
Stock shall surrender his or its certificate or certificates for all such shares
to the Company at the place designated in such notice, and shall thereafter
receive certificates for the number of shares of Common Stock or Voting Stock,
respectively, to which such holder is entitled pursuant to this Section 9. On
the Mandatory Conversion Date, all rights with respect to the Series B Preferred
Stock or Non-Voting Stock so converted, including the rights, if any, to receive
notices and vote, will terminate, except only the rights of the holders thereof,
upon surrender of their certificate or certificates therefor, to receive
certificates for the number of shares of Common Stock or Voting Stock, as the
case may be, into which such Series B Preferred Stock has been converted, and
payment of any declared or accrued but unpaid dividends thereon. If so required
by the Company, certificates surrendered for conversion shall be endorsed or
accompanied by written instrument or instruments of transfer, in form
satisfactory to the Company, duly executed by the registered holder or by his or
its attorney duly authorized in writing. As soon as practicable after the
Mandatory Conversion Date and the surrender of the certificate or certificates
for Series B Preferred Stock or Non-Voting Stock, as the case may be, the
Company shall cause to be issued and delivered to such holder, or on his or its
written order, a certificate or certificates for the number of shares of Common
Stock or Voting Stock, respectively, issuable on such conversion in accordance
with the provisions hereof.
(B) Subject to the provisions of Section 9(C) below, all holders of
record of shares of Series B Preferred Stock shall have the option, upon notice
to the Company, to convert any or all of their shares of Series B Preferred
Stock, and their shares of Non-Voting Stock on a pro rata basis, into an equal
number of shares of Common Stock and Voting Stock, respectively, of the Company
("Optional Conversion") effective on the date specified in each such holder's
notice to the Company. Upon the giving of such notice, such holder of shares of
Series B Preferred Stock shall surrender his or its certificate or certificates
for all such shares to the Company and shall thereafter receive certificates for
the number of shares of Common Stock and Voting Stock, as applicable, to which
such holder is entitled pursuant to this Section 9. On the effective date of the
Optional Conversion, all rights with respect to the Series B Preferred Stock and
Non-Voting Stock so converted, including the rights, if any, to receive notices
and vote, will terminate, except only the rights of the holders thereof, upon
surrender of their certificate or certificates therefor, to receive certificates
for the number of shares of Common Stock and Voting Stock, as applicable, into
which such Series B Preferred and Non-Voting Stock has been converted, and
payment of any declared or accrued but unpaid dividends thereon. If so required
by the Company, certificates surrendered for conversion shall be endorsed or
accompanied by written instrument or instruments of transfer, in form
satisfactory to the Company, duly executed by the registered holder or by his or
its attorney duly authorized in writing. As soon as practicable after the
effective date of the Optional Conversion and the surrender of the certificate
or certificates for Series B Preferred Stock and Non-Voting Stock, as
applicable, the Company shall cause to be issued and delivered to such holder,
or on his or its written order, a certificate or certificates for the number of
shares of Common Stock and Voting Stock, as applicable, issuable on such
conversion in accordance with the provisions hereof.
(C) A Mandatory Conversion or Optional Conversion may be effected only
if, after giving effect to such conversion, the person receiving shares of
Common Stock and Voting Stock of the Company, as applicable, upon the conversion
would not be considered an "Acquiring Person" or an Affiliate or Associate of an
Acquiring Person as such terms are defined in the Company's Rights Agreement.
Section 10. Amendment. The provisions hereof shall not be amended in
any manner which would adversely affect the rights, privileges or powers of the
Series B Preferred Stock without, in addition to any other vote of stockholders
required by law, the affirmative vote of the holders of a majority of the
outstanding shares of Series B Preferred Stock, voting together as a single
class.
IN WITNESS WHEREOF, I have executed and subscribed this
Certificate of Designations and do affirm the foregoing as true under the
penalties of perjury this 29th day of July, 1998.
s/Harvey J. Kesner
-----------------------
Name: Harvey J. Kesner
Title: General Counsel,
Executive Vice
President and
Secretary
ATTEST:
s/ Naina Rasheed
- - ----------------
Exhibit 4.1
Amending Agreement to the Senior Debt Facility Agreement Dated August 10, 1998
between ABN Australasia Limited ("Borrower") American Banknote Corporation and
Chase Securities Australia Limited ("Agent"), for itself and as Agent of the
Participants.
<PAGE>
Amending Agreement to the Senior Debt Facility Agreement
Date: 1998
Parties: ABN AUSTRALASIA LIMITED (ACN 072 664 692) incorporated in
Victoria of 1144 Nepean Highway, Highett, Victoria
("Borrower")
EACH COMPANY set out in schedule 1 (each a "Guarantor" and
together the "Guarantors")
AMERICAN BANKNOTE CORPORATION a company incorporated in
Delaware and of the 49th Floor, 200B Park Avenue, New York
("ABN")
CHASE SECURITIES AUSTRALIA LIMITED (ACN 002 888 011) of
Level 35, AAP Centre, 259 George Street, Sydney, NSW
("Agent"), for itself and as Agent of the Participants
Recitals:
A. The Participants have provided at the request of the Borrower
and each Guarantor the facilities on the terms set out in the
Agreement.
B. The Agent, acting on the instructions of all Participants, has
agreed at the request of the Borrower to amend the Agreement
on the terms set out below.
Operative provisions:
1. Interpretation
1.1 In this agreement, words and phrases not defined have the
meaning given in the Agreement.
1.2 The following words have these meanings in this agreement
unless the contrary intention appears:
Agreement means the agreement entitled "Senior Debt Facility Agreement"
between, among others, the Borrower and the Guarantors dated 3 June 1996 as
amended by the agreement entitled "Senior Debt Facility Agreement Novation
and Amendment Agreement" dated 26 February 1998 between, among others, the
parties to this agreement.
Effective Date means the date on which the Agent receives (or, on the
instructions of a Majority Participants, waives in writing the receipt of)
the condition precedent documents described in clause 3.1.
Incorporation of Terms
1.3 Clauses 1.2 to 1.8 (inclusive). 36 (Governing Law and
Jurisdiction), 37 (Counterparts) and 38 (Acknowledgment by
Borrowers and Guarantors) apply as if set out in full in this
agreement with references to "this Agreement" construed as
references to this agreement.
<PAGE>
2. Amendments
Amendments to "Margin"
2.1 On and from 1 July 1998 the parties agree that, for the
purposes of calculating the interest payable under clause 9.3
of the Agreement for the period commencing 1 July 1998 and
ending on 31 March 1999 ("Review Period"), the Margin for each
Funding Period will be 2.5% per annum. For the avoidance of
doubt, it is further agreed that the Margin, in respect of any
portion of a Funding Period outside the Review Period, is the
Margin that would have otherwise been payable but for this
clause.
Amendments to financial covenants
2.2 On and from the Effective Date clauses 15.3(a), (b) and (c) of
the Agreement are amended to read as follows:
"The Borrower and each Guarantor undertake to each Indemnified Party as
follows, except to the extent that the Agent acting on the instructions of
the Majority Participants consents.
(a) It will ensure that the ratio of:
(i) EBITDA at each Quarterly Date and in respect of the
12 month period ending on that date; to
(ii) Interest Expense under this Agreement paid or
payable in cash during that period,
is, with respect to each Quarterly Date up to and including 31 December
1998, not less than 2.5:1 and for each Quarterly Day thereafter, not less
than 3:1.
(b) It will ensure that the ratio of:
(i) Total Debt at each Quarterly Date; to
(ii) EBITDA for the 12 month period immediately
preceding each Quarterly Date,
is, with respect to 30 June 1998 and 30 September 1998, not greater than
4.75:1, with respect to 31 December, not greater than 4.25:1, and for each
Quarterly Date thereafter, not greater than 4:1.
(c) It will ensure that the ratio of:
(i) EBITDA for the 12 month period immediately
preceding each Quarterly Date; to
(ii) Debt Service during that period,
is, with respect to each Quarterly Date up to and including 30 September
1998, not less than 1.75:1, with respect to 31 December 1998, not less than
1.5:1, and with respect to each Quarterly Date thereafter, not less than
1.75:1."
3.1 Clause 2.2 has effect on the date the Agent receives the
following in form and substance satisfactory to it:
(a) a certificate signed by a director or secretary of the
Borrower confirming that no alterations have been made
to the memorandum and articles of association and
certificate of registration of the Borrower and each
Guarantor since 26 February 1998; and
(b) a certified copy of an extract of the minutes of a
meeting of the board of directors of the Borrower and
each Guarantor which:
(i) evidences the resolutions authorising:
(A) the signing and delivery of and observance of
obligations under this agreement, and
(B) the appointment of an authorised agent to
execute this agreement on its behalf, and
(ii) acknowledges that this agreement will benefit it;
and
(c) this agreement signed and delivered by the Borrower and
all Guarantors.
3.2 Anything required to be certified under clause 3.1 must be
certified by the secretary or a director of the Borrower or
the relevant Guarantor as being true and complete as at a date
no earlier than 7 days before the date of this agreement.
4. Acknowledgments
4.1 The Borrower and the Guarantors acknowledge that this
agreement is a "Transaction Document" within the definition of
that term in the Agreement.
4.2 On the Effective Date, the Borrower and the Guarantors make
the representations and warranties contained in clause 14 of
the Agreement.
4.3 The Borrower and the Guarantors acknowledge that nothing in
this agreement affects or limits their existing obligations
under any Transaction Document.
<PAGE>
5. Amendment Fee
If it has not already done so, ABN must pay to the Agent, upon execution of
this agreement for the account of the Participants, an amendment fee of
0.5% calculated on the aggregate of each Participant's
Commitment. This fee shall not be refunded by the Borrower to ABN.
6.1 In addition to the undertakings contained in the Agreement,
the Borrower also undertakes:
(a) to convene a monthly meeting with the Agent and
the Participants to review the financial
undertakings as amended by clause 2 of this
agreement on a 12 month trailing basis
calculated from the most recent Quarterly Date.
For the avoidance of doubt, the financial
covenants in clause 2 of this agreement will
continue to be tested quarterly;
(b) that no further payment of funds from the Borrower to
ABN will occur without the prior written consent of the
Agent acting on the instructions of all Participants;
and
(c) a debt compliance letter will be issued by the
Borrower's auditor on the financial undertakings as
amended by clause 2 of this agreement no later than 30
days after each Quarterly Date up to and including 31
March 1999,
for the period commencing on the date of this agreement and
ending on 31 March 1999 or on the first Quarterly Date
thereafter which the Borrower complies with its financial
undertakings as amended by clause 2 of this agreement
whichever is the latter.
6.2 ABN agrees to ensure the Borrower complies with the
undertakings contained in clause 6.1.
7. Representation
ABN confirms that between the date of signing of the Agreement and the date
of signing of the Amending Agreement, the Borrower has made payments of an
aggregate amount of A$850,000 to ABN representing the Borrowers pro rata share
of the ABN group's global corporate insurance policy.
EXECUTED as an agreement
<PAGE>
Schedule 1 Guarantors
Name (ACN) Place of Incorporation Address
ABN Australasia Victoria 1144 Nepean Highway
Holdings Pty Limited Highett, Victoria 3199
(ACN 072 977 229)
American Banknote Victoria 1144 Nepean Highway
Pacific Pty Ltd Highett, Victoria 3199
(ACN 072 977 265)
American Banknote Victoria 1144 Nepean Highway
Australasia Pty Ltd Highett, Victoria 3199
(ACN 072 977 292)
Leigh-Mardon Payment Victoria 1144 Nepean Highway
Systems Pty Limited Highett, Victoria 3199
(ACN 006 412 657)
American Banknote Victoria c/- Chapman Tripp
New Zealand Limited Sheffield Young
Level 1
AMP Centre
1 Grey Street
Wellington
New Zealand
<PAGE>
SIGNED by
as attorney for ABN
AUSTRALASIA LIMITED under
power of attorney dated
in the presence of:
..................................
Signature of witness
..................................
Name of witness (block letters)
.................................. ..................................
Address of witness By executing this agreement the
attorney states that the attorney
.................................. has received no notice of revocation
Occupation of witness of the power of attorney
SIGNED by
as attorney for EACH GUARANTOR
under power of attorney dated
in the presence of:
..................................
Signature of witness
..................................
Name of witness (block letters)
.................................. ..................................
Address of witness By executing this agreement the
attorney states that the attorney
.................................. has received no notice of revocation
Occupation of witness of the power of attorney
<PAGE>
SIGNED by
as attorney for ABN BANKNOTE
CORPORATION under power
of attorney dated
in the presence of:
..................................
Signature of witness
..................................
Name of witness (block letters)
.................................. ..................................
Address of witness By executing this agreement the
attorney states that the attorney
.................................. has received no notice of revocation
Occupation of witness of the power of attorney
SIGNED by
as attorney for CHASE SECURITIES
AUSTRALIA LIMITED (for itself and
as Agent for the Participants)
under power of attorney dated
in the presence of:
..................................
Signature of witness
..................................
Name of witness (block letters)
.................................. ..................................
Address of witness By executing this agreement the
attorney states that the attorney
.................................. has received no notice of revocation
Occupation of witness of the power of attorney
Dated 1998
Amending Agreement
to the Senior Debt
Facility Agreement
ABN AUSTRALASIA LIMITED
("Borrower")
EACH COMPANY SET OUT IN
SCHEDULE 1
(each a "Guarantor")
AMERICAN BANKNOTE CORPORATION, INC
("ABN")
CHASE SECURITIES AUSTRALIA LIMITED
for itself and as Agent for the PARTICIPANTS
("Agent")
Mallesons Stephen Jaques
Solicitors
Governor Phillip Tower
1 Farrer Place
Sydney NSW 2000
Telephone (61 2) 9296 2000
Fax (61 2) 9296 3999
DX 113 Sydney
Ref: MWB:PJD
<PAGE>
Contents Amending Agreement to the Senior Debt Facility Agreement
1 Interpretation 1
Incorporation of Terms 1
2 Amendments 2
Amendments to "Margin" 2
Amendments to financial covenants 2
3 Conditions Precedent 3
4 Acknowledgments 3
5 Amendment fee 3
6 Undertakings 4
7 Representation 4
Exhibit 4.2
Registration Rights Agreement Entered into as of July 30, 1998, Between
American Banknote Corporation and Bay Harbour Management, L.c., for its
Managed Accounts
<PAGE>
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT ("Agreement") is entered into as of
July 30, 1998, between American Banknote Corporation, a Delaware corporation
(the "Company"), with an address of 200 Park Avenue, New York, New York
10166-4999 and Bay Harbour Management, L.C., for its managed accounts ("Bay
Harbour"), having its principal office at 885 Third Avenue, 34th Floor,
New York, New York 10022.
WHEREAS, pursuant to that certain Exchange Letter Agreement, dated as
of July 30, 1998 (the "Exchange Agreement"), by and between Bay Harbour and the
Company, Bay Harbour has agreed to exchange 1,704,845 shares of common stock,
par value $.01 per share ("Common Stock") of the Company for 1,704,845 shares of
Series B preferred stock, par value $.01 per share ("Series B Preferred Stock")
of the Company; on the terms described therein; and
WHEREAS, the shares of the Series B Preferred Stock to be delivered to
Bay Harbour pursuant to the Exchange Agreement are convertable into shares of
Common Stock; and
WHEREAS, the parties desire to set forth the terms and conditions of
the parties covenants and agreements in respect of the registration of the
shares of Common Stock to be delivered by the Company upon a conversion of
shares of Series B Preferred Stock into shares of Common Stock (the "Conversion
Shares") with the United States Securities and Exchange Commission and
applicable state securities agencies and listing of the Conversion Shares on the
New York Stock Exchange (the "NYSE");
NOW, THEREFORE, in consideration of the mutual promises,
representations, warranties, covenants and conditions set forth in the Exchange
Agreement and this Agreement, Company and Bay Harbour agree as follows:
1. CERTAIN DEFINITIONS
"Commission" shall mean the United States Securities and Exchange
Commission.
"Conversion Date" shall mean (i) if Bay Harbour owns no shares of
Common Stock (other than the Conversion Shares), the first date upon which any
shares of Series B Preferred Stock are converted into shares of Common Stock
(whether by the Company or Bay Harbour), or (ii) if Bay Harbour owns shares of
Common Stock in addition to any Conversion Shares, the first date upon which Bay
Harbour owns no shares of Common Stock other than any Conversion Shares;
provided that, in each case, if less than an aggregate of 100,000 shares of
Series B Preferred Stock have been converted to Conversion Shares, the
Conversion Date shall be the first date upon which at least 100,000 shares of
Series B Preferred Stock, in aggregate, have been converted to Conversion
Shares.
"Person" shall mean an individual, partnership, corporation, limited
liability company, trust or unincorporated organization, or government or agency
or political subdivision thereof.
"Registrable Securities" shall mean (a) all Conversion Shares issued,
or to be issued, upon the conversion of shares of the Series B Preferred Stock
into shares of Common Stock and (b) any stock of the Company issued as a
dividend or other distribution with respect to, or in exchange for or in
replacement of, the shares of Stock referred to in clause (a).
"Restricted Securities" shall mean the Registrable Securities until
(i) such Registrable Securities have been effectively registered under the
Securities Act and disposed of by Bay Harbour; or (ii) such Registrable
Securities have been distributed to the public pursuant to Rule 144 (or similar
provision) or the provisions of Rule 144(k) are applicable to such shares.
"Securities Act" or "1933 Act" shall mean the Securities Act of 1933,
as amended.
2. SECURITIES SUBJECT TO THIS AGREEMENT
The Securities entitled to the benefits of this Agreement are the
Registrable Securities but, with respect to any particular Registrable Security,
only so long as such security continues to be a Restricted Security.
3. SHELF REGISTRATION
Within ninety (90) days of the Conversion Date, the Company shall file
a "shelf" registration statement pursuant to Rule 415 under the Securities Act
(the "Shelf Registration") with respect to the Registrable Securities. With the
prior written consent of Bay Harbour, the Shelf Registration may include other
securities of the Company which are held by other stockholders and, solely to
the extent that the Company may register such securities on Form S-3, shares
registered on behalf of the Company.
4. REGISTRATION PROCEDURES.
If and whenever Company is required to effect the registration of any
Registrable Securities, Company will as expeditiously as possible:
(a) prepare and file, within 90 days of the Conversion Date, with the
Commission the requisite registration statement to effect such registration and
thereafter use its best efforts to cause such registration statement to become
effective, as soon as practicable after the filing thereof;
(b) prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in connection
therewith as may be necessary to keep such registration statement effective for
as long as Registrable Securities shall remain outstanding, and to comply with
the provisions of the 1933 Act with respect to the disposition of all securities
covered by such registration statement until such time as all Registrable
Securities have been disposed of in accordance with the intended methods of
disposition by Bay Harbour set forth in such registration statement;
(c) furnish to Bay Harbour such number of conformed copies of such
registration statement and of each such amendment and supplement thereto (in
each case including all exhibits), such number of copies of the prospectus
contained in such registration statement (including each preliminary prospectus
and any summary prospectus) and any other prospectus filed under Rule 424 under
the 1933 Act, in conformity with the requirements of the 1933 Act, and such
other documents (including without limitation documents incorporated or deemed
to be incorporated by reference prior to the effectiveness of such registration)
as Bay Harbour may reasonably request;
(d) use its best efforts to register or qualify all Registrable
Securities and other securities covered by such registration statement under
such other securities or blue sky laws of such United States jurisdictions as
each holder thereof shall reasonably request, to keep such registration or
qualification in effect for so long as such registration statement remains in
effect, and to take any other action which may be reasonably necessary or
advisable to enable such holder to consummate the disposition in such
jurisdictions of the securities owned by such holder, except that Company shall
not for any such purpose be required to qualify generally to do business as a
foreign corporation in any jurisdiction wherein it would not but for the
requirements of this subdivision (d) be obligated to be so qualified, to subject
itself to taxation in any such jurisdiction or to consent to general service of
process in any such jurisdiction;
(e) use its best efforts to cause all Registrable Securities covered
by such registration statement to be registered with or approved by such other
U.S. governmental agencies or authorities as may be necessary to enable Bay
Harbour to consummate the disposition of such Registrable Securities;
(f) notify Bay Harbour, at any time when a prospectus relating thereto
is required to be delivered under the 1933 Act, (1) upon discovery that, or upon
the happening of any event as a result of which, the prospectus included in such
registration statement, as then in effect, includes an untrue statement of a
material fact or omits to state any material fact required to be stated therein
or necessary to make the statements therein not misleading in the light of the
circumstances under which they were made, (2) of the issuance by the Commission
of any stop order suspending the effectiveness of such registration statement or
the initiation of proceedings for that purpose, (3) of any request by the
Commission for (i) amendments to such registration statement or any document
incorporated or deemed to be incorporated by reference in any such registration
statement, (ii) supplemements to the prospectus forming a part of such
registration statement or (iii) additional information, and (4) of the receipt
by the Company of any notification with respect to the suspensions of the
qualification or exemption from qualification of any of the Registrable
Securities for sale in any jurisdiction or the initiation of any proceeding for
such purpose, and at the request of Bay Harbour, when prepared, furnish to Bay
Harbour a reasonable number of copies of a supplement to or an amendment of such
prospectus as may be necessary so that, as thereafter delivered to the
purchasers of such securities, such prospectus shall not include an untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein not misleading in the
light of the circumstances under which they were made and, upon the happening of
such an event prior to the effectiveness of any registration statement the
Company may delay or suspend any registration until the event shall have
terminated, provided, however, that nothing contained herein shall require the
Company to prepare or update such prospectus (or proceed with such registration)
if in doing so it would be required to disclose any non-public confidential
information or which disclosure would jeopardize in a manner materially adverse
to the interests of the Company or its affiliates any ongoing negotiations or
discussions of the Company or its affiliates relating to any material corporate
event or transaction of any such party;
(g) otherwise use its best efforts to comply with all applicable rules
and regulations of the Commission, and make available to its security holders,
as soon as reasonably practicable, an earnings statement covering the period of
at least twelve months, but not more than eighteen months, beginning with the
first full calendar month after the effective date of such registration
statement, which earnings statement shall satisfy the provisions of Section
11(a) of the 1933 Act, and will furnish to each holder of Registrable Securities
at least five business days prior to the filing thereof a copy of each
registration statement and prospectus used in connection therewith, and any
amendment or supplement to such registration statement or prospectus and shall
not file any thereof which any such holder shall have reasonably objected on the
grounds that such registration statement, prospectus, amendment or supplement
does not comply in all material respects with the requirements of the 1933 Act
or the rules or regulations thereunder;
(h) provide and cause to be maintained a transfer agent and registrar
for all Registrable Securities covered by such registration statement from and
after a date not later than the effective date of such registration statement;
(i) use its best efforts to list all Registrable Securities covered by
such registration statement on the NYSE, or if the stock is not listed on the
NYSE, such other national securities exchange, trading system or market on which
similar securities issued by Company are then listed, or traded and which
represents the primary trading market for such securities and shall take any
other action necessary or advisable to facilitate the disposition of such
Registrable Securities;
(j) the Company may require Bay Harbour to furnish Company such
information regarding the distribution of such securities and, to the extent
relevant thereto regarding Bay Harbour, as Company may from time to time
reasonably request in writing; and
(k) Bay Harbour agrees by acquisition of its Registrable Securities
that upon receipt of any notice from Company of the happening of any event of
the kind described in subparagraph (f) of this Paragraph 4, it will forthwith
discontinue its disposition of Registrable Securities pursuant to the
registration statement relating to such Registrable Securities until its receipt
of the copies of the supplemented or amended prospectus contemplated by
subdivision (f) of this Paragraph 4 (when prepared) and, if so directed by
Company, will deliver to Company (at Companys expense) all copies, other than
permanent file copies, then in Bay Harbour's possession of the prospectus
relating to such Registrable Securities current at the time of receipt of such
notice.
5. INDEMNIFICATION NOW, THEREFORE, in consideration of the mutual promises,
representations, warranties, covenants and conditions set forth in the Purchase
Agreement and this Agreement, Seller and Buyer agree as follows:1.CERTAIN
DEFINITIONSTerms not otherwise defined herein shall have the meanings ascribed
thereto in the Purchase Agreement. Commission shall mean the United States
Securities and Exchange Commission. Person shall mean an individual,
partnership, corporation, trust or unincorporated organization, o
(a) Indemnification by the Company. In the event of any registration
of any securities of the Company under the Securities Act, the Company will, and
hereby does, indemnify and hold harmless in the case of any registration
statement filed pursuant to Paragraph 3, Bay Harbour, its directors and
officers, each other Person who participates as an underwriter in the offering
or sale of such securities and each other Person, if any, who controls Bay
Harbour or any such underwriter within the meaning of the Securities Act,
against any losses, claims, damages or liabilities, joint or several, to which
Bay Harbour or any such director or officer or underwriter or controlling person
may become subject under the Securities Act or otherwise, insofar as such
losses, claims, damages or liabilities (or actions or proceedings, whether
commenced or threatened, in respect thereof) arise out of or are based upon any
untrue statement or alleged untrue statement of any material fact contained (on
the effective date thereof) in any registration statement under which such
securities were registered under the Securities Act, any preliminary prospectus,
prospectus subject to completion final prospectus or summary prospectus
contained therein, or any amendment or supplement thereto, or any document
incorporated by reference therein, or arise out of or are based upon the
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading, and
the Company will reimburse Bay Harbour, and each such director, officer,
underwriter and controlling person for any legal or any other expenses
reasonably incurred by them in connection with investigating or defending any
such loss, claim, liability, action or proceeding; provided that the Company
shall not be liable in any such case to the extent that any such loss, claim,
damage, liability (or action or proceeding in respect thereof) or expense arises
out of or is based upon an untrue statement or alleged untrue statement or
omission or alleged omission made in such registration statement, any such
preliminary prospectus, final prospectus, summary prospectus, amendment or
supplement in reliance upon and in conformity with information furnished to the
Company by Bay Harbour in writing, specifically stating that it is for use in
the preparation thereof and, provided further, that the Company shall not be
liable to any Person who participates as an underwriter in the offering or sale
of Registrable Securities or any other Person, if any, who controls such
underwriter within the meaning of the Securities Act, in any such case to the
extent that any such loss, claim, damage, liability (or action or proceeding in
respect thereof) or expense arises out of such Person's failure to send or give
a copy of the final prospectus, as the same may be then supplemented or amended,
to the Person asserting an untrue statement or alleged untrue statement or
omission or alleged omission at or prior to the written confirmation of the sale
of Registrable Securities to such Person if such statement or omission was
corrected in such final prospectus. Such indemnity shall remain in full force
and effect regardless of any investigation made by or on behalf of Bay Harbour
or any such director, officer, underwriter or controlling person and shall
survive the transfer of such securities by Bay Harbour.
(b) Indemnification by Bay Harbour. (i) Each holder of Registrable
Securities, severally and not jointly, which Registrable Securities are included
in a registration pursuant to the provisions of this Agreement, will indemnify
and hold harmless the Company, each person, if any, who controls the Company
within the meaning of the Securities Act, each officer of the Company who signs
the registration statement including such Registrable Securities, each director
of the Company and each of their successors from and against, and will reimburse
the Company and such officer or director with respect to, any and all claims,
actions, demands, losses, damages, liabilities, costs or expenses to which the
Company or such officer or director may become subject under the Securities Act
or otherwise, insofar as such claims, actions, demands, losses, damages,
liabilities, costs or expenses arise out of or are based upon any untrue
statement of any material fact contained in such registration statement, any
prospectus contained therein or any amendment or supplement thereto, or arise
out of or are based upon the omission to state therein a material fact required
to be stated therein or necessary to make the statements therein, in light of
the circumstances in which they are made, not misleading; provided that such
holder will be liable in any such case to the extent, but only to the extent,
that any such claim, action, demand, loss, damage, liability, cost or expense
arises out of or is based upon an untrue statement or omission made in reliance
upon and in strict conformity with written information furnished by such holder
specifically for use in the preparation thereof. The liability of each holder
under this Section shall be limited to the proportion of any such claim, action,
demand, loss, damage, liability, cost or expense which is equal to the
proportion that the public offering price of the Registrable Securities sold by
such holder under such registration statement bears to the total offering price
of all securities sold thereunder, but not, in any event, to exceed the proceeds
received by such holder from the sale of Registrable Securities covered by such
Registration Statement.
(c) Each party entitled to indemnification under this Paragraph 5 (the
"Indemnified Party") shall give notice to the party required to provide
indemnification (the "Indemnifying Party") promptly after such Indemnified Party
has actual knowledge of any claim as to which indemnity may be sought, and shall
permit the Indemnifying party to assume the defense of any such claim or any
litigation resulting therefrom; provided that counsel for the Indemnifying
party, who shall conduct the defense of such claim or any litigation resulting
therefrom, shall be approved by the Indemnified Party (whose approval shall not
unreasonably be withheld) and the Indemnified Party may participate in such
defense at such partys expense (unless the Indemnified Party) shall have
reasonably concluded that there may be a conflict of interest between the
Indemnifying Party and the Indemnified Party in such action, in which case the
fees and expenses of one such counsel for all Indemnified Parties shall be at
the expense of the Indemnifying Party), and provided further that the failure of
any Indemnified Party to give notice as provided herein shall not relieve the
Indemnifying Party of its obligations under this Paragraph 5 unless the
Indemnifying Party is materially prejudiced thereby. No Indemnifying Party, in
the defense of any such claim or litigation shall, except with the consent of
each Indemnified Party (which consent shall not be unreasonably withheld or
delayed), consent to entry of any judgement or enter into any settlement which
does not include as an unconditional term thereof the giving by the claimant or
plaintiff to such Indemnified Party of a release from all liability in respect
to such claim or litigation.
(d) If the indemnification provided for in this Paragraph 5 is held by
a court of competent jurisdiction to be unavailable to an Indemnified Party with
respect to any loss, liability, claim, damage or expense referred to herein,
then the Indemnifying Party, in lieu of indemnifying such Indemnified Party
hereunder, shall contribute to the amount paid or payable by such Indemnified
Party as a result of such loss, liability, claim, damage or expense in such
proportion as is appropriate to reflect the relative fault of the Indemnifying
Party on the one hand and of the Indemnified Party on the other in connection
with the statements or omissions which resulted in such loss, liability, claim,
damage or expense, as well as any other relevant equitable considerations. The
relative fault of the Indemnifying Party and of the Indemnified party shall be
determined by reference to, among other things, whether the untrue (or alleged
untrue) statement of a material fact or the omission (or alleged omission) to
state a material fact relates to information supplied by the Indemnifying Party
or by the Indemnified Party and the parties relative intent, knowledge, access
to information and opportunity to correct or prevent such statement or omission.
6. MISCELLANEOUS
(a) Expenses. All expenses incurred by the Company in complying with
this Agreement, including, without limitation, all registration and filing fees
(including all expenses incident to filing with the NYSE or the National
Association of Securities Dealers, Inc.), printing expenses, fees and
disbursements of counsel for the Company, the expense of any special audits
incident to or required by any such registration, and the expense (including
counsel fees) of complying with securities or Blue Sky laws shall be paid by the
Company; provided in no event shall the Company be liable for any fees payable
to counsel or accountants retained by Bay Harbour or for underwriting fees,
discounts or selling commissions attributable to Bay Harbours Conversion Shares.
(b) Stop Transfer Instructions. The Company may issue such "stop
transfer" instructions to its transfer agent with respect to all or any of the
Conversion Shares as it deems necessary if at any time Company reasonably
believes such action is required to prevent any violation of the provisions of
the Securities Act.
(c) Legend on Stock Certificates. If, in accordance with the
Securities Act and in the opinion of counsel to the Company, a legend
restricting transfer must be placed on the certificates evidencing the
Conversion Shares, the Company shall not be required to issue a certificate
evidencing the Conversion Shares which does not contain such legend unless (i)
the shares represented by any such certificate are sold pursuant to a
Registration Statement (including a current Prospectus) which has become and is
effective under the Securities Act, (ii) the staff of the Commission shall have
issued a "no action" letter, reasonably satisfactory to counsel for the Company,
to the effect that such securities may be freely sold publicly without
registration under the Securities Act or (iii) counsel reasonably acceptable to
the Company shall have rendered its opinion, which opinion shall be reasonably
acceptable to the Company, that, such securities may be freely sold publicly
without registration under the Securities Act.
(d) Filing Pursuant to Securities Laws. The Company covenants that it
will, so long as any Registrable Securities remain outstanding, file all reports
required to be filed by it under the Securities Act or the Securities Exchange
Act of 1934, as amended, and the rules and regulations promulgated by Commission
thereunder, or, if it is not required to file such reports, it will, upon the
request of Bay Harbour, make publicly available such information as will enable
Bay Harbour to sell such Registrable Securities without registration within the
limitations of the exemptions provided by (i) Rule 144 promulgated under the
Securities Act, as such rule may be amended from time to time, or (ii) any
similar rule or regulation hereafter promulgated by the Securities and Exchange
Commission.
(e) Termination. The registration rights of Bay Harbour as set
forth herein shall terminate upon the final disposition of all Conversion Shares
or if, in the written opinion of independent counsel to the Company, all of the
Registrable Securities then owned by Bay Harbour could be sold in any 90 day
period pursuant to Rule 144.
(f) Successors and Assigns. This Agreement shall inure to the
benefit of and be binding on the successors and permitted assigns of the
parties. This Agreement shall not be assignable by either party except with the
prior written of the other party, except that the registration rights set forth
herein thereof may be assigned, in whole or in part, to any transferee of
Registrable Securities, provided such transferee agrees to be bound by all
obligations and limitations of this Agreement.
(g) Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York, applicable to
contracts made and to be performed entirely with in such State.
(h) Section Headings. The headings of the sections and
subsections of this Agreement are inserted for convenience only and shall not be
deemed to constitute a part thereof.
(i) Notices.
(i) All communications under this Agreement shall be in
writing and shall be delivered by facsimile or by hand or mailed by overnight
courier or by registered or certified mail, postage prepaid:
(A) if to the Company, to the address set forth in
the preamble hereto to the attention of General Counsel or at such other
address as it may have furnished in writing to the Investors; and
(B) if to Bay Harbour, to the address set forth in
the preamble hereto to the attention of Douglas Teitelbaum, or at such other
address as may have been furnished the company in writing.
(ii) Any notice so addressed shall be deemed to be given: if
delivered by hand on the date of such delivery; if mailed by courier, on the
first business day following the date of such mailing, on the third business day
after the date of such mailing.
(j) Entire Agreement: Amendment and Waiver. This Agreement
constitutes the entire understanding of the parties hereto and supersedes all
prior understanding among such parties. This Agreement may be amended, and the
observance of any term of this Agreement may be waived, with (and only with) the
written consent of the Company and the holders of a majority of the then
outstanding Registrable Securities.
(k) Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original and all of which
together shall be considered one and the same agreement.
(l) No Inconsistent Agreements. The Company will not hereafter enter
into any agreement with respect to its securities which is inconsistent with the
rights granted to the holders of Registrable Securities in this Agreement.
(m) Remedies. Each holder of Registrable Securities, in addition
to being entitled to exercise all rights granted by law, including recovery of
damages, will be entitled to specific performance of its rights under this
Agreement. The Company agrees that monetary damages would not be adequate
compensation for any loss incurred by reason of a breach by it of the provisions
of this Agreement and hereby agrees to waive the defense in any action for
specific performance that a remedy at law would be adequate.
(n) Severability. In the event that any one or more of the
provisions contained herein, or the application thereof in any circumstances, is
held invalid, illegal or unenforceable in any respect for any reasons, the
validity, legality and enforceability of any such provision in every other
respect and of the remaining provisions contained herein shall not be in any way
impaired and privileges of each holder of Registrable Securities (including Bay
Harbour) shall be enforceable to the fullest extent permitted by law.
IN WITNESS WHEREOF, the undersigned have executed this Agreement as
of the date first set forth above.
AMERICAN BANKNOTE CORPORATION
By: s/ Harvey J. Kesner
-----------------------
Name: Harvey J. Kesner
Title: Executive Vice President
BAY HARBOUR MANAGEMENT, L.C.
for its managed accounts
By:
Name:
Title:
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<LEGEND>
This schedule contains summary financial information extracted
from the financial statements contained in the body of the
accompanying Form 10-Q and is qualified in its entirety by
reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> SEP-30-1998
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