SECURITIES & EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
---------
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1999
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OF 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM TO
COMMISSION FILE NO. 1-106
LYNCH CORPORATION
-----------------
(Exact name of Registrant as specified in its charter)
INDIANA 38-1799862
------- ----------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
401 THEODORE FREMD AVENUE, RYE, NEW YORK 10580
- ---------------------------------------- -----
(Address of principal executive offices) (Zip Code)
(914) 921-7601
--------------
Registrant's telephone number, including area code
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
YES X NO
Indicate the number of shares outstanding of each of the Registrant's classes of
Common Stock, as of the latest practical date.
CLASS OUTSTANDING AT OCTOBER 31, 1999
----- ---------------------------------------
Common Stock, no par value 1,412,383
<PAGE>
INDEX
LYNCH CORPORATION AND SUBSIDIARIES
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Condensed Consolidated Balance Sheet:
- September 30, 1999
- December 31, 1998
Condensed Consolidated Statements of Operations:
- Three and nine months ended September 30, 1999 and 1998
Condensed Consolidated Statements of Cash Flows:
- Nine months ended September 30, 1999 and 1998
Notes to Condensed Consolidated Financial Statements:
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Item 3. Quantitative and Qualitative Disclosure About Market Risk
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
SIGNATURES
<PAGE>
Part 1 - FINANCIAL INFORMATION -
Item 1 - Financial Statements
<TABLE>
LYNCH CORPORATION AND SUBSIDIARIES
----------------------------------
CONDENSED CONSOLIDATED BALANCE SHEET
------------------------------------
(In thousands)
<CAPTION>
September 30 December 31
1999 1998
(Unaudited) (A)
ASSETS ---- ----
CURRENT ASSETS:
<S> <C> <C>
Cash and cash equivalents .............................................. $ 78,653 $ 1,132
Receivables, less allowances of $319 and $395 .......................... 24,825 25,320
Inventories ............................................................ 31,959 28,396
Deferred income tax benefits ........................................... 9,280 9,315
Other current assets ................................................... 760 1,787
Net current assets of subsidiaries to be distributed to shareholders ... 0 58,047
Net current assets of discontinued operations .......................... 0 38,625
--------- ---------
TOTAL CURRENT ASSETS .................................................. 145,477 162,622
PROPERTY, PLANT AND EQUIPMENT:
Land ................................................................... 672 672
Buildings and improvements ............................................. 11,007 12,585
Machinery and equipment ................................................ 53,821 51,306
--------- ---------
65,500 64,563
Accumulated depreciation ............................................... (20,873) (17,534)
--------- ---------
44,627 47,029
EXCESS OF COST OVER FAIR VALUE OF NET ASSETS ACQUIRED,NET ................. 22,289 21,075
OTHER ASSETS .............................................................. 10,261 7,328
NET NON - CURRENT ASSETS OF SUBSIDIARIES TO BE
DISTRIBUTED TO SHAREHOLDERS ............................................ 0 170,295
NET NON - CURRENT ASSETS OF DISCONTINUED OPERATIONS ....................... 0 71,651
--------- ---------
TOTAL ASSETS ......................................................... $ 222,654 $ 480,000
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Notes payable to banks ................................................. $ 20,624 $ 59,686
Trade accounts payable ................................................. 17,587 18,178
Accrued interest payable ............................................... 5,623 2,575
Accrued liabilities .................................................... 16,714 3,580
Customer advances ...................................................... 3,174 2,406
Current maturities of long - term debt ................................. 1,383 2,027
Net current liabilites of subsidiaries to be distributed to shareholders 0 37,240
Net current liabilites of discontinued operations ...................... 0 18,162
--------- ---------
TOTAL CURRENT LIABILITIES ............................................ 65,105 143,854
LONG-TERM DEBT ............................................................ 122,333 126,976
DEFERRED INCOME TAXES ..................................................... 8,476 9,316
OTHER LONG TERM LIABILITIES ............................................... 1,525 2,182
MINORITY INTERESTS ........................................................ 11,899 3,999
NET NON - CURRENT LIABILITIES OF SUBSIDIARIES TO BE
DISTRIBUTED TO SHAREHOLDERS ............................................... 0 147,600
NET NON - CURRENT LIABILITIES OF DISCONTINUED OPERATIONS ................. 0 6,280
SHAREHOLDERS' EQUITY
COMMON STOCK,NO PAR VALUE-10,000,000 SHARES
AUTHORIZED; 1,471,191 shares issued (at stated value) ................... 5,139 5,139
ADDITIONAL PAID - IN CAPITAL ............................................ 8,302 8,554
RETAINED EARNINGS ....................................................... 1,078 26,771
ACCUMULATED OTHER COMPREHENSIVE INCOME .................................. 0 59
TREASURY STOCK OF 58,808 and 52,943 SHARES,AT COST ...................... (1,203) (730)
--------- ---------
TOTAL SHAREHOLDERS' EQUITY .............................................. 13,316 39,793
--------- ---------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY ............................. $ 222,654 $ 480,000
========= =========
<FN>
(A) The Balance Sheet at December 31,1998 has been derived from the Audited
Financial Statements at that date,but does not include all of the information
and footnotes required by generally accepted accounting principles for complete
financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
LYNCH CORPORATION AND SUBSIDIARIES
----------------------------------
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
----------------------------------------------
(UNAUDITED)
(In thousands, except share amounts)
<CAPTION>
Three Months Nine Months
Ended September 30 Ended September 30
1999 1998 1999 1998
---- ---- ---- ----
SALES AND REVENUES
<S> <C> <C> <C> <C>
Manufacturing ............................................. $ 51,070 $ 49,824 $ 144,844 $ 138,390
Costs and expenses:
Manufacturing ............................................. 45,380 43,485 128,165 119,588
Selling and administrative ................................ 4,677 4,676 15,277 14,399
----------- ----------- ----------- -----------
OPERATING PROFIT .............................................. 1,013 1,663 1,402 4,403
Other income (expense):
Investment Income ......................................... 559 3 572 170
Interest expense .......................................... (3,267) (2,104) (7,796) (5,933)
Gain on sale of stock by subsidiary ....................... -- 2,127 -- 2,069
----------- ----------- ----------- -----------
(2,708) 26 (7,224) (3,694)
----------- ----------- ----------- -----------
LOSS FROM CONTINUING OPERATIONS BEFORE INCOME
TAXES, MINORITY INTERESTS, DISCONTINUED OPERATIONS
AND EXTRAORDINARY ITEM ........................................ (1,695) 1,689 (5,822) 709
Benefit (provision)for income taxes ........................... 700 (706) 2,337 (311)
Minority interests ............................................ 378 87 1,393 224
----------- ----------- ----------- -----------
LOSS FROM CONTINUING OPERATIONS BEFORE
DISCONTINUED OPERATIONS AND EXTRAORDINARY ITEM ................ (617) 1,070 (2,092) 622
DISCONTINUED OPERATIONS:
Income (loss) from operations of Lynch Interactive
Corporation distributed to shareholders (less income
tax (provision) benefit of ($803), ($1,033), $3,068
and ($2,689) and minority interests of $147, $315,
$578, and $688 ............................................... 1,024 1,433 (7,493) 3,387
Loss from discontinued operations of industrial tape
segment of Spinnaker Industries (less applicable income
tax provision of $315, $308,and $733 and minority interests
of $403, $558, and $1,013) ................................... 0 (354) (572) (972)
Gain on sale of Spinnaker's Industrial tape operations (less
income tax provision of $9,495 and minority interest of $7,013) 7,431 0 7,431 0
EXTRAORDINARY ITEM
Income on early extinguishment of debt (less income tax
provision of $73 and minority interest of $60 ................ 54 0 54 0
----------- ----------- ----------- -----------
NET INCOME (LOSS) ............................................. $ 7,892 $ 2,149 ($ 2,672) $ 3,037
=========== =========== =========== ===========
Weighted average shares outstanding ......................... 1,412,000 1,418,000 1,415,000 1,418,000
=========== =========== =========== ===========
Basic and diluted earnings per share:
Loss from continuing operations before discontinued operations ($0.44) $0.75 ($1.48) ($0.44)
Income (loss) from Lynch Interactive ......................... 0.73 1.01 (5.31) 2.39
Income (loss) from discontinued operations ................... 5.26 (0.25) 4.85 (0.69)
Extraordinary item ........................................... 0.04 0.00 0.04 0.00
----------- ----------- ----------- -----------
NET INCOME (LOSS) ............................................. $ 5.59 $ 1.52 ($ 1.89) $ 2.14
=========== =========== =========== ===========
</TABLE>
<PAGE>
<TABLE>
Lynch Corporation
-----------------
Consendensed Consolidated Statement of Cash Flows
-------------------------------------------------
Unaudited
In Thousands
<CAPTION>
Nine Months Ended
September 30,
1999 1998
---- ----
OPERATING ACTIVITIES
<S> <C> <C>
Net Income (Loss) ................................................... (2,672) 3,037
Adjustments to reconcile net income(loss) to cash
provided by operating activities:
Income (loss) from operations of Lynch Interactive Corporation .. 7,493 (3,387)
Loss from operations of industrial tape segment ................. 572 972
Gain on sale of industrial tape segment ......................... (7,431) --
Extraodinary item ............................................... (54) --
Depreciation and amortization ................................... 4,226 4,036
Amortization of deferred financing costs ........................ 630 906
Gain on sale of stock by subsidiary corporation ................. -- (2,082)
Deferred Taxes .................................................. (805) 869
Minority interests .............................................. (1,393) (224)
Gain on sale of fixed assets .................................... (854) --
Changes in operating assets:
Receivables ................................................... 495 1,037
Inventories ................................................... (3,563) 2,366
Accounts payable and accruals ................................. 3,091 (5,933)
Other ......................................................... 418 (2,964)
-------- --------
Cash provided by (used in) operating activities
of continuing operations ................................... 153 (1,367)
INVESTING ACTIVITIES
Capital Expenditures ................................................ (2,828) (5,132)
Investment in Spinnaker Coating - Maine ............................. -- (46,907)
Proceeds from sale of industrial tape segment ....................... 104,450 --
Proceeds from sale of fixed assets .................................. 2,442 --
Other ............................................................... (737) 954
-------- --------
Cash provided by (used in) investing activities of
continuing operations ....................................... 103,327 (51,085)
FINANCING ACTIVITIES
Change in notes payable ............................................. (39,026) 28,801
Repayments of long-term debt ........................................ (5,100) 11,735
Deferred financing costs ............................................ (468) (741)
Other ............................................................... (1,662) 639
-------- --------
Cash provided by (used in) financing activities of
continuing operations ....................................... (46,256) 40,434
-------- --------
Cash provided by (used in) activities of continuing operations 57,224 (12,018)
Cash provided by Lynch Interactive Corporation ...................... 15,987 8,562
Cash provided by (used in) industrial tape segment .................. 4,310 (1,909)
-------- --------
Increase(decrease) in cash and cash equivalents ................. 77,521 (5,365)
Cash and cash equivalents at beginning of perion .................... 1,132 6,497
======== ========
Cash and cash equivalents at end of period ...................... 78,653 1,132
======== ========
</TABLE>
<PAGE>
A. SUBSIDIARIES OF THE REGISTRANT
- -- ------------------------------
As of September 30, 1999, after the effect of the distribution of Lynch
Interactive Corporation and the sale of the Industrial Tape Business of
Spinnaker Industries, Inc. (see Notes C and D), the Subsidiaries of the
Registrant are as follows:
<TABLE>
<CAPTION>
SUBSIDIARY OWNED BY LYNCH
- ---------- --------------
<S> <C>
Lynch Display Technologies, Inc. 100.0%
Lynch Systems, Inc. 92.0%
Lynch International Holding Corporation 92.0%
Lynch-AMAV LLC 69.0%
M-tron Industries, Inc. 100.0%
M-tron Industries, Ltd. 100.0%
Spinnaker Industries, Inc. 47.6%(O)/60.4%(V)
Entoleter, Inc. 47.6%(O)/60.4%(V)
Spinnaker Coating, Inc. 47.6%(O)/60.4%(V)
Spinnaker Coating-Maine, Inc. 47.6%(O)/60.4%(V)
<FN>
Notes: (V)=Percentage voting control; (O)=Percentage of equity ownership
</FN>
</TABLE>
<PAGE>
B. BASIS OF PRESENTATION
- -- ---------------------
The accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of the management, all adjustments
(consisting of normal recurring accruals) considered necessary for a fair
presentation have been included. Operating results for the nine month period
ended September 30, 1999 are not necessarily indicative of the results that may
be expected for the year ended December 31, 1999. For further information, refer
to the consolidated financial statements and footnotes thereto included in the
Registrant's Annual Report on Form 10-K for the year ended December 31, 1998.
The accompanying unaudited condensed consolidated financial statements reflect
the Spin Off of Lynch Interactive Corporation ("Interactive") from Lynch
Corporation ("Lynch") that occurred in the third quarter of 1999 (see Note D).
<PAGE>
C. DISCONTINUED OPERATIONS
- -- -----------------------
In the third quarter of 1999, the Company's 48% owned subsidiary, Spinnaker
Industries, Inc. sold its two industrial tape units, Central Products Company
and Spinnaker Electrical, which comprise its industrial tape segment to
Intertape Polymer Group, Inc. ("Intertape"). The consideration for the sale was
approximately $105 million and 300,000 five-year warrants to purchase shares of
Intertape common stock at $29.50 each. Spinnaker recognized a gain on the
transactions of $24 million before tax and the Registrant recognized a similar
gain before tax and minority interests. The agreement to sell Spinnaker
Electrical was completed on July 30, 1999 and the agreement to sell Central
Products was completed on August 10, 1999. As a result, the Company's industrial
tape segment is being reported as discontinued operations in the accompanying
condensed consolidated financial statements. Accordingly, operating results of
the industrial tape segment have been segregated from continuing operations and
reported as a separate line item on the statement of operations.
Lynch has restated its prior year financial statements to present the operating
results of the industrial tape segment as a discontinued operation. The
industrial tape segment's net sales were $10.7 million and $31.5 million for the
three-month period ended September 30, 1999 and 1998 and $69.5 million and $89.3
million for the nine month period ended September 30, 1999 and 1998,
respectively, and $121.8 million, $119.7 million and $124.1 million for the
fiscal years ended December 31, 1998, 1997, and 1996, respectively.
The assets and liabilities of the industrial tape businesses of Spinnaker
included in the accompanying condensed consolidated balance sheet at December
31, 1998 consist of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31, 1998
-----------------
<S> <C>
Accounts receivable, net ........................................ $14,815
Inventories, net ................................................ 18,167
Prepaids and other .............................................. 5,643
-------
Current assets of discontinued operations ....................... $38,625
=======
Property, plant and equipment, net .............................. $48,312
Goodwill and other assets ....................................... 23,339
-------
Non-current assets of discontinued operations ................... $71,651
=======
Accounts payable ................................................ $13,720
Accrued liabilities ............................................. 4,442
-------
Current liabilities of discontinued operations .................. $18,162
=======
Non-current liabilities of discontinued operations .............. $ 6,280
=======
</TABLE>
<PAGE>
D. SPIN OFF
- -- --------
On August 12, 1999, the Board of Directors approved a plan to distribute the
stock of Lynch Interactive Corporation on a one for one basis to the
shareholders of Lynch Corporation ("spin off"). Lynch completed the spin off of
Lynch Interactive Corporation on September 1, 1999 to stockholders of record on
August 23, 1999. Pursuant to the spin off, each Lynch shareholder received one
share of Interactive stock for each share of Lynch owned. Lynch had received a
private letter ruling from the Internal Revenue Service that the spin off would
be tax free to Lynch shareholders. Interactive is listed on the American Stock
Exchange under the symbol "LIC."
Interactive owns all of what was Lynch's multimedia and service businesses while
Lynch retains the manufacturing businesses. Interactive owns the telephone
companies, television interests and PCS interests, as well as the 55% equity
interest of The Morgan Group, Inc. In addition, Interactive owns a 13.6% equity
interest in Spinnaker Industries, Inc. Lynch owns a 47.6% equity interest in
Spinnaker (60.4% of voting interest), as well as M-tron Industries, Inc. and
Lynch Systems, Inc. As a result, the Company's multimedia and services segments
are being reported as operations distributed to shareholders in the accompanying
condensed consolidated financial statements. Accordingly, operating results of
Lynch Interactive Corporation have been segregated from continuing operations
and reported as a separate line item on the statement of operations.
Lynch has restated its prior year financial statements to present the operating
results of Lynch on a comparable basis. Interactive's net sales for the
three-month period were $52.9 million and $53.3 million and $155.8 million and
$155.1 million for the nine month period ended September 30, 1999 and 1998,
respectively, and $205.1 million, $194.1 million and $106.8 million for the
fiscal years ended December 31, 1998, 1997, and 1996 respectively.
Lynch Interactive and Lynch have entered into certain agreements governing
various ongoing relationships, including the provision of support services and a
tax allocation agreement. The tax allocation agreement provides for the
allocation of tax attributes to each company as if it had actually filed with
the respective tax authority. At the Spin Off, the employees of the corporate
office of Lynch Corp. became the employees of Lynch Interactive Corp. and Lynch
Interactive Corp. will provide corporate management service to Lynch Corp.,
which will be charged a management fee for these services.
The net assets of Interactive included in the accompanying condensed
consolidated balance sheets as of December 31, 1998 consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31, 1998
(IN THOUSANDS) -----------------
<S> <C>
Cash, cash equivalents and marketable securities ................. $ 27,988
Accounts receivable, net ......................................... 18,853
Deferred income taxes ............................................ 4,265
Prepaids and other ............................................... 6,941
--------
Current assets of subsidiaries to be distributed to .............. $ 58,047
shareholders ========
Property, plant and equipment, net ............................... $ 91,183
Goodwill ......................................................... 47,740
Investment in and advances to PCS license
holders ........................................................ 23,360
Other Assets ..................................................... 8,012
--------
Non-current assets of subsidiaries to be distributed to .......... $170,295
shareholders ========
Notes payable .................................................... $ 2,037
Accounts payable ................................................. 4,662
Accrued liabilities .............................................. 21,902
Current portion of long term debt ................................ 8,639
--------
Current liabilities of subsidiaries to be distributed to ......... $ 37,240
shareholders ========
Long term debt ................................................... $119,024
Deferred income tax .............................................. 13,062
Other long term debt ............................................. 4,987
Minority interest ................................................ 10,527
--------
Non-current liabilities and minority interest
of subsidiaries to be distributed to shareholders .............. $147,600
========
</TABLE>
Net assets of approximately $23 million were distributed to Lynch Interactive at
the Spin Off.
<PAGE>
E. ACQUISITIONS
- -- ------------
On July 30, 1998, the Company's subsidiary, Spinnaker Industries, Inc. acquired
tesa tape, inc.'s pressure sensitive electrical tape product line and its
Carbondale, Illinois manufacturing plant (the "tesa tape Acquisition"). The
purchase price totaled $10.7 million plus transaction costs, comprised of
200,000 shares of Spinnaker common stock (subject to adjustment) valued at $3.7
million, $4.5 million in term debt, $2.0 million in cash, and a $0.5 million
subordinated note. The acquired business produces electrical tape for insulating
motors coils and transformers for customers in Europe, Canada and the U.S. See
Note C concerning sale of industrial tape businesses.
On March 18, 1998, Spinnaker Coating-Maine, Inc. acquired the pressure sensitive
adhesive-backed label stock business of S.D. Warren. The purchase price was
approximately $51.8 million, plus the assumption of certain liabilities and was
funded by issuing the seller a convertible subordinated note of $7.0 million
with the remainder funded by Spinnaker's revolving credit facility. As a result
of this transaction, the Registrant recorded approximately $21.3 million in
goodwill which is being amortized over 30 years.
All of the above acquisitions were accounted for as purchases, and accordingly,
the assets acquired and liabilities assumed were recorded at their estimated
fair market values.
The operating results of the S.D. Warren's adhesive-backed label stock business
are included in the Consolidated Statement of Operations from its acquisition
date. The following unaudited proforma information shows the results of the
Registrant's operations as though the acquisition of S.D. Warren's
adhesive-backed label stock business had been made at the beginning of 1998.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
(IN THOUSANDS, EXCEPT PER SHARE DATA) SEPTEMBER 1998
----------------
<S> <C>
Sales and Revenues ........................................... $ 150,534
Operating Profit ............................................. 5,046
Income (Loss) from Continuing Operations Before
Income Taxes and Minority Interest ......................... (1,676)
Net Income (Loss) from Continuing Operations ................. (460)
Net Income (Loss) from Continuing
Operations Per Share ....................................... $ (0.32)
</TABLE>
F. INVENTORIES
- -- -----------
Inventories are stated at the lower of cost or market value. At September 30,
1999, inventories were valued by three methods: last-in, first-out (LIFO) - 21%,
specific identification - 77%, and first-in, first-out (FIFO) - 2%. At December
31, 1998, the respective percentages were 15%, 82%, and 3%.
<PAGE>
<TABLE>
<CAPTION>
(IN THOUSANDS)
SEPTEMBER 30, DECEMBER 31,
1999 1998
---------- ----------
<S> <C> <C>
Raw material and supplies .................... $ 9,302 $ 7,711
Work in process .............................. 2,779 1,273
Finished goods ............................... 19,878 19,412
------- -------
Total Inventories .......................... $31,959 $28,396
======= =======
</TABLE>
G. INDEBTEDNESS
- -- ------------
Spinnaker Industries, Inc. maintains revolving lines of credit at its
subsidiaries which total $40 million, of which $17.9 million was outstanding and
$12.2 million was available as of September 30, 1999. These facilities were
refinanced in conjunction with the sale of Central Products and Spinnaker
Electrical.
In general, the credit facilities are secured by property, plant and equipment,
inventory, receivables and common stock of certain subsidiaries and contain
certain covenants restricting distributions to the Registrant.
<TABLE>
LONG TERM DEBT CONSISTS OF:
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1999 1998
----------- -----------
<S> <C> <C>
Spinnaker Industries, Inc. 10.75% Senior
Secured Notes due 2006 ................. $ 114,000 $ 115,000
Unsecured notes issued in connection
with acquisitions at fixed interest rates
averaging 9.6% with maturities
through 2000 ............................ -- 7,500
Other ................................... 9,716 6,503
--------- ---------
123,716 129,003
Current Maturities ...................... (1,383) (2,027)
--------- ---------
$ 122,333 $ 126,976
========= =========
</TABLE>
Proceeds from the sale of Central Products Company were used to satisfy
transaction costs and repay approximately $18.2 million of the working capital
revolver debt. The balance of the proceeds are available to invest in any
business, capital expenditure or other tangible asset in the Permitted
Businesses, as defined in the Indenture. Any proceeds not so invested within 270
days after the closing of the sale or not used to permanently reduce
indebtedness (other than subordinated debt) shall be used to repurchase the
Senior Notes on a pro rata basis as required by the Indenture.
The proceeds from the sale of Spinnaker Electrical, an unrestricted subsidiary
under the Indenture, were used to repay approximately $6.9 million of certain
term debt and working capital revolver debt collateralized by the assets of
Spinnaker Electrical. The remaining net proceeds will be used for general
purposes, which may include purchasing Senior Notes in the open market. Other
options include acquisitions, capital expenditures, and /or repurchase shares of
Spinnaker stock.
Interest expense from continuing operations is subject to certain matters
associated with the use of the net proceeds from the sales of CPC and Spinnaker
Electrical, including retirement of senior debt or "permitted investments" as
defined under the Indenture. As a result, interest expense, as presented on a
historical basis, may not necessarily be indicative of interest expense of
continuing operations for the year ended December 31, 1999.
In conjunction with the Spin Off of Lynch Interactive, lines of credit
facilities of $20 million were transferred from the Registrant to Interactive.
<PAGE>
H. GAIN ON SALE OF SUBSIDIARY STOCK
- -- --------------------------------
On July 31, 1998, Spinnaker Industries, Inc. completed the acquisition of the
electrical tape division of tesa tape, inc. Part of the purchase price was the
issuance of 200,000 shares, subject to certain adjustments of Spinnaker's Class
A Common Stock. As a result of this issuance, the Registrant recorded a gain on
sale of subsidiary stock of $2.1 million in the third quarter of 1998, or $1.2
million ($0.87 per share) after tax.
I. EARNINGS PER SHARE
- -- ------------------
Basic earnings per common share amounts are based on the average number of
common shares outstanding during each period, excluding the dilutive effects of
options, warrants, and convertible securities.
J. SEGMENT INFORMATION
- -- -------------------
After the distribution to shareholders of the stock of Lynch Interactive
Corporation, the Company is engaged in the manufacture of adhesive backed label
stock and other manufacturing. The Company measures performance of its segments
primarily by revenues, operating profit and EBITDA before corporate allocation
(operating profit before income taxes, depreciation, amortization and allocated
corporate expenses). Identifiable assets of each segment have not changed
materially since December 31, 1998.
EBITDA (before corporate allocation) for operating segments is equal to
operating profit before interest, taxes, depreciation, amortization and
allocated corporate expenses. EBITDA is presented because it is widely accepted
financial indicator of value and ability incur and service debt. EBITDA is not a
substitute for operating income or cash flows from operating activities in
accordance with generally accepted accounting principles.
Operating profit (loss) is equal to revenues less operating expenses, excluding
interest and income taxes. Prior to the Spin Off of Lynch Interactive Lynch
allocated a portion of its general corporate expenses to its operating segments.
Subsequent to the Spin Off, Lynch Interactive is providing corporate management
services to the Registrant and charging a corporate overhead management fee.
General corporate office expenses related to finance and administrative
functions including public company compliance reporting, bank and investor
relations, taxes and other than income taxes and holding company payroll,
historically allocated and charged to the industrial tape segment were reversed
and allocated back to continuing operations. These expenses were not considered
to be directly attributed to discontinued operations. Expenses allocated back to
continuing operations totaled $0.2 million and $1.0 million in the three and
nine months periods ended September 30, 1999 and 1998.
<PAGE>
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30
1999 1998 1999 1998
---------- ----------- ---------- ----------
Revenues:
Manufacturing:
<S> <C> <C> <C> <C>
Adhesive-backed label stock ................ $ 39,535 $ 41,221 $ 116,191 $ 110,594
Other manufacturing ........................ 11,535 8,603 28,653 27,796
--------- --------- --------- ---------
Total manufacturing ........................ $ 51,070 $ 49,824 $ 144,844 $ 138,390
--------- --------- --------- ---------
EBITDA (before corporate allocation):
Manufacturing:
Adhesive-backed label stock ................ $ 1,714 $ 3,701 $ 6,553 $ 9,432
Other manufacturing ........................ 1,458 76 1,208 829
Corporate manufacturing expenses ........... (498) (621) (1,511) (1,776)
--------- --------- --------- ---------
Total manufacturing ........................ 2,674 3,156 6,250 8,485
Corporate expenses, gross .................... (230) (54) (622) (414)
--------- --------- --------- ---------
Consolidated total ........................... $ 2,444 $ 3,102 $ 5,628 $ 8,071
========= ========= ========= =========
Operating profit (loss):
Manufacturing:
Adhesive-backed label stock ................ $ 1,469 $ 2,555 $ 3,562 $ 6,616
Other manufacturing ........................ 389 (90) 343 81
Corporate manufacturing expenses ........... (690) (836) (2,116) (2,127)
--------- --------- --------- ---------
Total manufacturing ........................ 1,168 1,629 1,789 4,570
Unallocated corporate expense ................ (155) 34 (389) (167)
--------- --------- --------- ---------
Consolidated total ........................... $ 1,013 $ 1,663 $ 1,402 $ 4,403
========= ========= ========= =========
Total operating profit for reportable
segments .................................. $ 1,013 $ 1,663 $ 1,402 $ 4,403
Other profit or loss:
Investment income .......................... 559 3 572 170
Interest expense ........................... (3,267) (2,104) (7,796) (5,933)
--------- --------- --------- ---------
Income (loss) from continuing operations
before income taxes, minority interests
and discontinued operations extraordinary item $ (1,695) $ (438) $ (5,822) $ (1,360)
========= ========= ========= =========
</TABLE>
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
SALES AND REVENUES
- ------------------
The accompanying unaudited condensed consolidated financial statements reflect
the Spin Off of Lynch Interactive Corporation (Interactive) from Lynch
Corporation (Lynch) (Registrant) that occurred in the third quarter of 1999 and
also the sale by Spinnaker Industries, Inc. (Spinnaker), a consolidated
subsidiary of the Registrant, of its two industrial tape units, Central Products
Company and Spinnaker Electrical that also occurred in the third quarter of
1999. Accordingly, the operating results of both Interactive and the industrial
tape segment have been segregated from continuing operations of the Registrant
and are reported as separate line items on the financial statements as
discontinued operations. The comparative amounts for 1998 have also been
restated to reflect the above transactions. The ensuing narrative considers
these changes and only includes discussions of the Registrant as ti is currently
composed.
Revenues for the third quarter of 1999 increased by $1.2 million or 2.5%, to
$51.1 million, from the third quarter of 1998. Revenues for the nine months
ended September 30, 1999 increased by $6.5 million from the comparable 1998
period reflecting the S.D. Warren acquisition noted below.
Revenues from Spinnaker Industries, Inc. continuing operations fell by $1.2
million between the two quarters due to product technology transition in
pressure sensitive label stock and changes in the ordering pattern of pressure
sensitive stamps partially offset by higher sales at Entoleter. The market's
rapid transition from EDP to thermal transfer paper stock technologies has
exceeded management's expectations and as a result caused Spinnaker to
experience lower volumes and average selling prices at Coating-Maine, as the
market balances quality and performance against lower priced solutions. Unit
sales of pressure sensitive postage paper stock continue to be impacted by the
uneven ordering pattern of the Bureau of Printing and Engraving. Unit sales of
pressure sensitive postage paper stock for the third quarter of 1999 slowed from
the earlier 1999 period and the corresponding 1998 period, however on an annual
basis is still anticipated to approximate prior year volumes. For the nine-month
period ended September 30, 1999, sales increased by $5.0 million. Spinnaker
completed the acquisition of S.D. Warren's pressure sensitive adhesive-backed
label stock business on March 18, 1998, revenues of this operation in 1998 prior
to Spinnaker's acquisition were $12.1 million. Increased volume as a result of
this acquisition offset the revenue decline as a result of the product
technology transition discussed above. Revenues at M-tron increased by $1.3
million for the three-month period due to increased demand from the
telecommunications industry and increased sales of new products. Revenues for
the nine-month period increased $2.5 million due to the same factors. Lynch
Systems' revenues for the third quarter increased by $1.2 million, but for the
nine months fell by $1.1 million reflecting lack of orders for extra-large glass
press machines which were not offset by orders for other products.
Operating profit for the third quarter 1999 declined by $0.7 million from the
operating profit in the prior year. Spinnaker's operating profit declined by
$0.8 million due to lower volume, reduction in gross margins as a result of the
lower pricing noted above as well as the effect of increased Asian imports.
These factors also affected the nine month period where operating profit fell by
$2.4 million, but were offset by gains on sale of fixed assets ($0.8 million).
M-tron's operating profit increased by $0.3 million due to increased volume and
Lynch Systems' operating loss decreased during the third quarter by $0.1 million
due to sale of lower margined products, and for the nine month period also due
to sales of lower margined products but predominantly due to a short-fall in
order activity.
OTHER INCOME (EXPENSE), NET
- ---------------------------
Interest income increased for both the three and nine month periods due to the
net proceeds after payment of certain debt instruments, approximately $75
million, which are currently invested in short term instruments.
Interest expense was $3.3 million for the quarter and increased from the prior
year due to allocations of a portion of the interest associated with the
Spinnaker 10.75% Senior Secured Notes Due 2006 to the discontinued industrial
tape segment until the time of their sale. During the nine-month period ended
September 30, 1999, interest expense also increased by increased debt level
resulting from Spinnaker's acquisition of S.D. Warren's pressure sensitive
adhesive-backed label stock business on March 17, 1998.
<PAGE>
Interest expense from continuing operations is subject to certain matters
associated with the use of the net proceeds from the sales of the industrial
tape units of Spinnaker, including retirement of senior debt or "permitted
investments" as defined under the Indenture. As a result, interest expense, as
presented on a historical basis, may not necessarily be indicative of interest
expense of continuing operations for the year ended December 31, 1999.
TAX PROVISION
- -------------
The income tax provision (benefit) includes federal, as well as state and local
taxes. The tax provision (benefit) for the nine months ended September 30, 1999
and 1998, represents effective tax rates of (40%) for both periods. The
differences from the federal statutory rate are principally due to the effect of
state income taxes and amortization of non-deductible goodwill.
MINORITY INTEREST
- -----------------
Minority interests contribution to the net income (loss) increased by $0.3
million and $1.2 million for the three and nine month periods, respectively,
from the prior year periods of 1998 due to the increased losses from continuing
operations at Spinnaker and the January 1, 1999 repurchase of M-tron minority
interest.
DISCONTINUED OPERATIONS
- -----------------------
On August 12, 1999, the Board of Directors approved a plan to distribute the
stock of Lynch Interactive Corporation on a one for one basis to the
shareholders of Lynch Corporation ("spin off"). Lynch completed the spin off of
Lynch Interactive Corporation on September 1, 1999 to stockholders of record on
August 23, 1999. Pursuant to the spin off, each Lynch shareholder received one
share of Interactive stock for each share of Lynch owned. Lynch had received a
private letter ruling from the Internal Revenue Service that the spin off would
be tax free to Lynch shareholders. Interactive has listed its stock on the
American Stock Exchange.(LIC)
Interactive owns all of what was Lynch's multimedia and service businesses while
Lynch retains the manufacturing businesses. Interactive owns the telephone
companies, television interests and PCS interests, as well as the 55% equity
interest of The Morgan Group, Inc. In addition, Interactive owns a 13.6% equity
interest in Spinnaker Industries, Inc. Lynch owns a 48% equity interest in
Spinnaker after the spin off, as well as M-tron Industries, Inc. and Lynch
Systems, Inc.
As a result, the Company's multimedia and services segments are being reported
as operations distributed to shareholders in the accompanying condensed
consolidated financial statements. Accordingly, operating results of Lynch
Interactive Corporation have been segregated from continuing operations and
reported as a separate line item on the statement of operations.
<PAGE>
Lynch has restated its prior year financial statements to present the operating
results of Lynch Interactive on a comparable basis. Interactive's net sales were
$155.8 million and $155.1 million for the nine month period ended September 30,
1999 and 1998, respectively, and $205.1 million, $194.1 million and $160.8
million for the fiscal years ended December 31, 1998, 1997, ad 1996
respectively.
A Lynch Interactive subsidiary has loans to and a 49.9% limited partnership
interest in Fortunet Communications, L.P. ("Fortunet"). Fortunet's only assets
consist of three 15Mhz personal communications licenses covering an area with a
population of 785,000 that were acquired in the C-Block auction held by the
Federal Communications Commission ("FCC"). In that auction, Fortunet acquired
30Mhz licenses in these markets, but on June 9, 1998, under FCC restructuring
options, it returned 15Mhz of the original 30Mhz acquired. On April 15, 1999,
the FCC completed the reauction of all the C-Block licenses that were returned
to it since the original C-Block auction, including the three 15Mhz licenses
that Fortunet returned. In that reauction, the successful bidders paid a total
of $2.7 million for the three licenses as compared to the $18,7 million carrying
amount of Lynch's investment in Fortunet. Accordingly, during the quarter ended
March 31, 1999, Lynch recorded a write down of $15.4 million in its investment
in Fortunet to reflect the amount bid for similar licenses in the reauction,
plus an additional $0.7 million of capitalized expenses and interest, to leave a
carrying value of $3.4 million. This write down offset by operating profits
caused the loss for the nine months ended September 30, 1999.
In the third quarter of 1999, Spinnaker sold its two industrial tape units,
Central Products Company and Spinnaker Electrical, which comprise its industrial
tape segment. Accordingly, operating results of the industrial tape segment have
been segregated from continuing operations and reported separately in the
statement of operations. In addition, the Company has restated its prior
financial statements to present the operating results of the industrial tape
segment as a discontinued operation.
Lynch has restated its prior year financial statements to present the operating
results of the industrial tape segment as a discontinued operation. The
industrial tape segment's net sales were $10.7 million and $31.5 million for the
three-month period ended September 30, 1999 and 1998 and $69.5 million and $89.3
million for the nine month period ended September 30, 1999 and 1998,
respectively, and $121.8 million, $119.7 million and $124.1 million for the
fiscal years ended December 31, 1998, 1997, and 1996, respectively.
NET INCOME/LOSS
- ---------------
Net loss for the nine months ended September 30, 1999 was $(2.7) million, or
$(1.89) per share, as compared to a net income of $3.0 million, or $2.14 per
share in the nine month period ended September 30, 1998.
Net income for the three months ended September 30, 1999 was $7.9 million, or
$5.59 per share, higher than net income of $2.1 million, or $1.52 per share, for
the same period of 1998 due primarily to Spinnaker's gain on sale of its
industrial tape units.
BACKLOG/NEW ORDERS
- ------------------
Total backlog of manufactured products from continuing operations at September
30, 1999 was $30.7 million, which represents an increase of $20.9 million from
the backlog of $9.8 million at December 31, 1998. All operating units
contributed significant increases to the backlog at September 30, 1999. Included
in the backlog for both periods is a $2.4 million cancellation provision, which
the customer paid, on an earlier glass press order at Lynch Systems which was
subsequently canceled. The customer can use this amount for future orders and if
not utilized, reverts to Lynch Systems. Included in the backlog at September 30,
1999 is a $14 million order for large glass press machines at Lynch Systems. In
connection with this order, Lynch Systems has to obtain a substantial credit
facility to protect advances by the customer and for working capital.
<PAGE>
FINANCIAL CONDITION
LIQUIDITY/CAPITAL RESOURCES
- ---------------------------
As of September 30, 1999, the Company had current assets of $145.4 million and
current liabilities of $65.1 million. Working capital was therefore $80.3
million as compared to $18.4 million at December 31, 1998. The increase is
primarily due to the sale ofthe industrial tape units. Proceeds from the sale of
Spinnaker Industrial Tape Business were used to satisfy transaction costs and
repay approximately $18.2 million of the working capital revolver debt. The
balance of proceeds from the Central Products Company, approximately $60
million, are available to invest in any business, capital expenditure or other
tangible asset in the Permitted Businesses, as defined in the Indenture. Any
proceeds not so invested within 270 days after the closing of the Industrial
Tape Sale or not used to permanently reduce indebtedness (other than
subordinated debt) shall be used to repurchase the Senior Notes on a pro rata
basis as required by the Indenture.
Net proceeds from the sale of Spinnaker Electrical, an unrestricted subsidiary,
were used to repay approximately $6.9 million of term debt and revolving debt.
The balance is available for general purposes, which may include purchasing the
Senior Notes in the open market. Other options include acquisitions, capital
expenditures to support remaining subsidiaries, and/or repurchase of Spinnaker
common stock.
First nine months capital expenditures were $2.8 million in 1999 and $5.1
million in 1998.
At September 30, 1999, total debt was $144.3 million, which was $44.4 million
less than the $188.7 million at the end of 1998 primarily due to principal
repayments. Debt at September 30, 1999 included $123.7 million of fixed interest
rate debt, at an average cash interest rate of 10.7% and $20.6 million of
variable interest rate debt at an average interest rate of 8%. Additionally, the
Company had unused lines of credit facilities of which the Spinnaker Credit
Facility is a major portion. The Spinnaker Credit Facility is available to fund
acquisitions and support periodic fluctuations in working capital. Credit
availability under the Spinnaker Credit Facility is subject to certain
variables, such as inventory and receivables eligible to be included in the
borrowing base. The Company is charged an unused credit fee every month of
0.375% per annum. Outstanding borrowings bear interest at variable rates related
to the prime interest rate or LIBOR. At September 30, 1999, the combined
effective interest rate was 8%. In conjunction with the industrial tape sale,
the Spinnaker Credit Facility was refinanced and the aggregate facility was
decreased from $60 million to $40 million. The Refinanced Credit Facility will
expire December 31, 2001. As of September 30, 1999, aggregate availability under
the Refinanced Credit Facility was approximately $30.1 million, of which
approximately $17.9 million was outstanding.
<PAGE>
In conjunction with the Spin Off of Lynch Interactive, lines of credit
facilities of $20 million were transferred from the Registrant to Interactive.
The Company has a significant need for resources to fund the operations of the
holding company and fund future growth. Lynch is currently considering various
alternative long and short-term financing arrangements. One such alternative
could be to sell a portion or all of certain investments in operating entities
either directly or through an exchangeable debt instrument. Additional debt
and/or equity financing vehicles at corporate and/or subsidiaries are also being
considered. While management expects to obtain adequate financing resources to
enable the company to meet its obligations, there is no assurance that such can
be readily obtained or at reasonable costs.
YEAR 2000
The Company has initiated a comprehensive review of its computer systems to
identify the systems that could be affected by the "Year 2000" issue and is
developing and conducting an implementation plan to resolve the issue. The Year
2000 problem is the result of computer programs being written using two digits
(rather than four) to define the applicable year. Any of the Company's programs
or programs utilized by vendors to the Company that have time-sensitive software
may recognize a date using "00" as the year 1900 rather than the year 2000. This
could result in a major system failure or miscalculation. The Company's Year
2000 review is being performed primarily by internal staff, and in certain
operations is supplemented by outside consultants. The principal Information
Technology (IT) systems for the Company's manufacturing companies are sales
order entry, shop floor control, inventory control and accounting. The Year 2000
may also impact various non-IT systems, including among other things security
systems, HVAC, elevator systems, and communications systems. In addition, each
of the Company's businesses may be impacted by the Year 2000 readiness of third
party vendors/suppliers.
The assessment phase for the Company's manufacturing businesses is approximately
99% complete. Based upon its identification and assessment efforts to date, the
Company has determined that certain of its computer and software used in
manufacturing and accounting systems require replacement or modification. Such
replacements and modifications are ongoing and estimated to be 90% complete and
are expected to be 100% complete in 1999. The total cost of Year 2000
remediation for the manufacturing businesses is estimated to be approximately
$0.2 million, of which approximately $0.1 million has been spent to date. A
comprehensive contingency plan has not been completed at this time but is
expected to be completed in the fourth quarter of 1999.
The estimated costs and projected dates of completion for the Company's Year
2000 program are based on management's estimates and were developed using
numerous assumptions of future events, some of which are beyond the Company's
control. The Company presently believes that with modifications to existing
software and converting to new software, the Year 2000 issue will not pose
significant operational problems for the Company as a whole. However, if such
modifications and conversions are not completed timely or are ineffective, or if
key third parties, suppliers or customers experience Year 2000 problems, the
Year 2000 issue may materially and adversely impact the Company's financial
condition, results of operations and cash flows.
<PAGE>
MARKET RISK
The Company is exposed to market risk relating to changes in the general level
of U.S. interest rates. Changes in interest rates affect the amounts of interest
earned on the Company's cash equivalents and short-term investments
(approximately $78.6 million at September 30, 1999). The Company generally
finances the debt portion of the acquisition of long-term assets with fixed
rate, long-term debt. The Company generally maintains the majority of its debt
as fixed rate in nature either by borrowing on a fixed long-term basis or, on a
limited basis, entering into interest rate swap agreements. The Company does not
use derivative financial instruments for trading or speculative purposes.
Management does not foresee any significant changes in the strategies used to
manage interest rate risk in the near future, although the strategies may be
reevaluated as market conditions dictate.
At September 30, 1999, approximately $20.6 million, or 14% of the Company's
long-term debt and notes payable bears interest at variable rates. Accordingly,
the Company's earnings and cash flows are affected by changes in interest rates.
Assuming the current level of borrowings for variable rate debt and assuming a
one percentage point change in the 1999 average interest rate under these
borrowings, it is estimated that the Company's third quarter 1999 interest
expense would have changed by less than $0.1 million. In the event of an adverse
change in interest rates, management would likely take actions to further
mitigate its exposure. However, due to the uncertainty of the actions that would
be taken and their possible effects, the analysis assumes no such actions.
Further, the analysis does not consider the effects of the change in the level
of overall economic activity that could exist in such an environment.
------------------------
Included in this Management Discussion and Analysis of Financial Condition and
Results of Operations are certain forward looking financial and other
information, including without limitation matters relating to Spinnaker, Year
2000 matters and Market Risk. It should be recognized that such information are
projections, estimates or forecasts based on various assumptions, including
without limitation, meeting its assumptions regarding expected operating
performance and other matters specifically set forth, as well as the expected
performance of the economy as it impacts the Registrant's businesses, government
and regulatory actions and approvals, and tax consequences, and the risk factors
and cautionary statements set forth in reports filed by Registrant and Spinnaker
with the Securities and Exchange Commission. As a result, such information is
subject to uncertainties, risks and inaccuracies, which could be material.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
See "Market Risk" under Item 2 above.
PART II OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
27 - Financial Data Schedule
(b) Reports on Form 8-K
Reports on form 8-K were dated (i) July 16, 1999 (relating
to the acquisition of Central Scott Telephone Company), (ii)
July 30, 1999 (relating to the sale by Spinnaker of its tape
operations), (iii) September 1, 1999 (relating to the Spin
Off of Lynch Interactive Corporation) and (iv) October 6,
1999 (relating to Lynch Systems' settlement of a lawsuit and
receipt of an order for large glass press machines.
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
LYNCH CORPORATION
(Registrant)
BY: S/ROBERT E. DOLAN
Robert E. Dolan
Chief Financial Officer
November 15, 1999
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary information extracted from the Company's
Financial Statements as of September 30,1999 and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<CIK> 0000061004
<NAME> Lynch Corporation
<MULTIPLIER> 1000
<CURRENCY> U.S. Dollar
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> SEP-30-1999
<EXCHANGE-RATE> 1
<CASH> 78,653
<SECURITIES> 0
<RECEIVABLES> 24,825
<ALLOWANCES> 319
<INVENTORY> 31,959
<CURRENT-ASSETS> 145,477
<PP&E> 65,500
<DEPRECIATION> 20,873
<TOTAL-ASSETS> 222,654
<CURRENT-LIABILITIES> 65,105
<BONDS> 122,333
0
0
<COMMON> 5,139
<OTHER-SE> 8,177
<TOTAL-LIABILITY-AND-EQUITY> 222,654
<SALES> 144,844
<TOTAL-REVENUES> 144,844
<CGS> 128,165
<TOTAL-COSTS> 143,442
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 7,796
<INCOME-PRETAX> (5,822)
<INCOME-TAX> 2,337
<INCOME-CONTINUING> (2,092)
<DISCONTINUED> (634)
<EXTRAORDINARY> 54
<CHANGES> 0
<NET-INCOME> (2,672)
<EPS-BASIC> (1.89)
<EPS-DILUTED> (1.89)
</TABLE>
