<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 28, 1996
COMMISSION FILE NUMBER 1-13430
CONVERSE INC.
(Exact name of registrant as specified in its charter)
DELAWARE 04-1419731
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
ONE FORDHAM ROAD 01864
NORTH READING, MASSACHUSETTS (Zip Code)
(Address of principal executive offices)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (508) 664-1100
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 Act of
1934 during the preceding 12 months (or for such shorter period that 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 issuer's
classes of common stock, as of the latest practical date.
AS OF SEPTEMBER 28, 1996, 16,772,156 SHARES OF COMMON STOCK WERE OUTSTANDING.
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
PART I: FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial
Statements
A. Condensed Consolidated Balance Sheets 1
B. Condensed Consolidated Statements of
Operations 2
C. Condensed Consolidated Statements of
Cash Flows 3
D. Notes to Condensed Consolidated
Financial Statements 4
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of
Operations 9
PART II: OTHER INFORMATION
Item 1. Legal Proceedings 14
Item 2. Changes in Securities 14
Item 3. Defaults Upon Senior Securities 14
Item 4. Submission of Matters to a Vote of
Security Holders 15
Item 5. Other Information 15
Item 6. Exhibits and Reports on Form 8-K 15
SIGNATURE 15
</TABLE>
ii
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PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CONVERSE INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
DECEMBER 30, SEPTEMBER 28,
1995 1996
------------ -------------
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents.......... $ 2,738 $ 4,051
Restricted cash................ 443 903
Receivables, less allowances of
$2,237 and $1,720 respectively.... 61,688 81,274
Inventories (Note 3)............... 81,903 82,899
Refundable income taxes............ 11,377 --
Prepaid expenses and other current
assets............................ 21,059 25,245
-------- --------
Total current assets............ 179,208 194,372
-------- --------
Asset held for sale (Note 7)............ 3,066 --
Net property, plant and equipment....... 15,521 17,095
Other assets............................ 26,712 23,634
-------- --------
$224,507 $235,101
======== ========
Liabilities and Stockholders' Equity
(Deficiency)
Current liabilities:
Short-term debt (Note 4)........... 13,906 20,173
Current maturities of long-term
debt........................... 6,324 6,392
Accounts payable................... 34,208 42,674
Accrued expenses................... 33,295 28,324
Income taxes payable............... 1,795 2,771
-------- --------
Total current liabilities....... 89,528 100,334
Long-term debt, less current maturities
(Note 4)............................... 112,824 123,708
Current assets in excess of 34,454 32,896
reorganization value...................
Deferred postretirement benefits other
than pensions.......................... 10,386 10,269
Stockholders' equity (deficiency):
Common stock, $1.00 stated value,
50,000,000 shares authorized,
shares issued and outstanding;
1995 - 16,692,156;
1996 - 16,772,156................. 16,692 16,772
Preferred stock, no par value,
authorized 10,000,000 shares,
none issued and outstanding....... -- --
Additional paid in capital......... 3,528 3,755
Retained earnings (deficit)........ (41,830) (51,843)
Foreign currency translation
adjustment........................ (1,075) (790)
-------- --------
Total stockholders' equity
(deficiency)................... (22,685) (32,106)
-------- --------
$224,507 $235,101
======== ========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
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CONVERSE INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
------------------------------------------------- ------------------
SEPT. 30, 1995 SEPT. 28, 1996 SEPT. 30, 1995 SEPT. 28, 1996
--------------- --------------- --------------- ------------------
<S> <C> <C> <C> <C>
Net sales............................... $110,121 $113,318 $330,641 $279,776
Cost of sales........................... 80,783 83,388 225,820 205,342
-------- -------- -------- --------
Gross profit............................ 29,338 29,930 104,821 74,434
Selling, general and administrative
expenses............................... 36,026 33,153 110,586 88,588
Royalty income.......................... 4,489 6,301 12,240 17,546
Restructuring expense (credit) (Note 7). 0 0 1,000 (2,209)
-------- -------- -------- --------
Earnings (loss) from operations......... (2,199) 3,078 5,475 5,601
Loss on investment in unconsolidated
subsidiary (Note 5).................... 0 0 41,599 515
Interest expense........................ 3,525 4,827 9,518 12,921
Other (income) expense, net............. 962 229 (555) 1,726
-------- -------- -------- --------
Earnings (loss) before income tax....... (6,686) (1,978) (45,087) (9,561)
Income tax expense (benefit)............ (103) 1,033 (14,660) 452
-------- -------- -------- --------
Net earnings (loss)..................... $( 6,583) $ (3,011) $(30,427) $(10,013)
======== ======== ======== ========
Net earnings (loss) per share........... $(0.39) $(0.18) $(1.82) $(0.60)
======== ======== ======== ========
Weighted average number of common
shares (Note 2)........................ 16,692 16,707 16,692 16,697
======== ======== ======== ========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
2
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CONVERSE INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
-----------------
SEPTEMBER 30, 1995 SEPTEMBER 28, 1996
------------------ ------------------
<S> <C> <C>
Cash flows from operating activities:
Net earnings (loss)................. $(30,427) $(10,013)
Adjustments to reconcile net earnings
(loss) to net cash provided by
(required for) operating activities:
Loss on investment in
unconsolidated subsidiary....... 41,599 515
Provision for (reversal of)
restructuring actions........... 1,000 (2,209)
Depreciation of property, plant
and equipment................... 2,346 2,431
Amortization of intangible assets 263 342
Amortization of current assets
in excess of reorganization
value........................... (1,558) (1,558)
Deferred income taxes............ (6,710) (3,198)
Changes in assets and liabilities:
Receivables...................... (16,715) (19,586)
Inventories...................... (1,521) (996)
Refundable income taxes.......... (12,934) 11,377
Prepaid expenses and other current
assets.............................. (3,381) (1,310)
Accounts payable and accrued expenses (8,866) 2,974
Income taxes payable............. 794 976
Other long-term assets and
liabilities..................... 1,067 2,765
-------- --------
Net cash required for operating
activities............................. (35,043) (17,490)
-------- --------
Cash flows from investing activities:
Advances to unconsolidated
subsidiary....................... (10,822) --
Exercise of stock options......... -- 307
Proceeds from disposal of assets.. -- 5,101
Additions to property, plant and
equipment......................... (5,172) (3,823)
-------- --------
Net cash (used) provided by investing
activities............................. (15,994) 1,585
-------- --------
Cash flows from financing activities:
Net proceeds from debt.............. 50,212 17,218
-------- --------
Net cash provided by financing
activities............................. 50,212 17,218
Net (decrease) increase in cash and
cash equivalents....................... (825) 1,313
Cash and cash equivalents at beginning
of period.............................. 4,992 2,738
-------- --------
Cash and cash equivalents at end of
period................................. $ 4,167 $ 4,051
======== ========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
3
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CONVERSE INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of presentation:
In the opinion of management, the accompanying unaudited condensed
consolidated financial statements contain all adjustments, consisting of normal
recurring accruals, considered necessary for a fair presentation. This interim
financial information and notes hereto should be read in conjunction with the
Company's annual report on Form 10-K for the year ended December 30, 1995. The
Company's consolidated results of operations for the three months ended
September 28, 1996 are not necessarily indicative of the results to be expected
for any other interim period or the entire fiscal year.
2. NET EARNINGS (LOSS) PER COMMON SHARE
Net earnings (loss) per common share is computed based on the weighted
average number of common shares outstanding for the applicable period.
3. INVENTORIES
Inventories are summarized as follows:
<TABLE>
<CAPTION>
DECEMBER 30, SEPTEMBER 28,
1995 1996
------- -------
<S> <C> <C>
Retail merchandise............. $ 5,766 $ 7,085
Finished products.............. 67,835 68,017
Work in process................ 4,226 3,956
Raw materials.................. 4,076 3,841
------- -------
$81,903 $82,899
======= =======
</TABLE>
4
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4. DEBT
As more fully described in Note 9 to the consolidated financial statements
for the year ended December 30, 1995 included within the Company's annual
report on Form 10-K, the Company maintains a $175,000 secured credit facility
(comprising an "A Facility" for $135,000 and a "B Facility" for $40,000 (which
amount has been permanently reduced to $31,966 at September 28, 1996)) (the
"Credit Facility") with a group of participating lenders (the "Banks"). The
amount of credit available to the Company under the A Facility at any time is
determined by reference to the Company's borrowing base set forth in the
Credit Facility, consisting primarily of domestic accounts receivable and
inventory. In addition, in conjunction with certain amendments to the Credit
Facility in November 1995 and February 1996, the Company has the ability to
borrow an additional $25,000 under the A Facility as a result of Apollo
Investment Fund, L.P. ("Apollo"), which, together with its affiliates, is the
beneficial owner of approximately 67.3% of the Company's outstanding common
stock, having caused a standby letter of credit (the "Collateral Letter of
Credit") to be provided to the Banks in the amount of $25,000. This additional
$25,000 of availability to the Company under the A Facility will expire on
March 1, 1997.
As of September 28, 1996, the maximum available borrowing base under the A
Facility, inclusive of borrowings made available as a result of the Collateral
Letter of Credit, was approximately $105,311. Utilization under the A
Facility as of September 28, 1996, inclusive of amounts supported by the
Collateral Letter of Credit, consisted of revolving loans of $71,858, bankers
acceptances of $16,632 and outstanding letters of credit of $6,739. As a
result, $10,082 of the maximum available borrowing base remained unutilized as
of September 28, 1996. As of September 28, 1996, the B Facility had loans
outstanding of $31,966, and, pursuant to the terms of the Credit Facility, the
Company may not increase its borrowings under the B Facility. At September
28, 1996, $6,392 of the outstanding Credit Facility debt has been classified
as short-term in accordance with the repayment terms of the Credit Facility.
At September 28, 1996, revolving loans outstanding under the A Facility and
loans outstanding under the B Facility bore interest at 8.18% and 10.48%,
respectively, based upon (i) the weighted average of the prime and Adjusted
LIBOR rates and (ii) the Adjusted LIBOR rate as defined in the Credit
Facility, respectively. Obligations outstanding under the Credit Facility are
secured by a first priority lien on substantially all of the Company's U. S.
assets. In addition, the Credit Facility contains certain financial and other
covenants. The Company was in compliance with all such covenants at September
28, 1996.
5
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Subsidiaries of the Company maintain asset based financing arrangements in
certain European countries with various lenders. In general, these financing
arrangements allow the subsidiaries to borrow against varying percentages of
eligible customer receivable balances based on pre-established credit lines,
along with varying percentages of inventory, as defined, at varying interest
rates. As of September 28, 1996, total short-term borrowings outstanding
under these financing arrangements totaled $20,173. The obligations are
secured by a first priority lien on the respective European assets being
financed. In addition, Converse Inc. has provided guarantees of these
borrowings outstanding in certain of the European countries.
In conjunction with the Company's acquisition of 100% of the outstanding
common stock of Apex One Inc. ("Apex") (see Note 5), Converse issued
promissory notes in the face amount of $11,000, discounted at a rate of 12%
to $9,644. The notes bear interest at the rate of 8% per annum for the first
three years and increase to 10% and 12% in 1998 and 1999, respectively.
5. LOSS ON INVESTMENT IN UNCONSOLIDATED SUBSIDIARY
As more fully described in Note 3 to the consolidated financial statements
for the year ended December 30, 1995 included within the Company's annual
report on Form 10-K, on August 11, 1995 the Company ceased funding the
operations of its unconsolidated subsidiary, Apex. At December 30, 1995, an
accrual of $10,225 remained, which represented the Company's estimates of its
liabilities relating to Apex. At September 28, 1996, the total accrual
remaining was $8,072, with the $2,153 decrease primarily relating to payments
of contractual obligations and professional fees made during the first nine
months of 1996.
During 1995 the Company decided to cease operations and funding of Apex.
During the nine months ended September 28, 1996 the Company incurred an
additional $0.5 million in charges resulting primarily from credits issued to
settle claims of discrepancies on shipments of inventory. The Company
initially recorded a loss on its investment in Apex during the nine months
ended September 30, 1995 of $41.6 million.
6
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6. RESTRUCTURING
As more fully described in Note 4 to the consolidated financial
statements for the year ended December 30, 1995 included within the Company's
annual report on Form 10-K, during 1995 the Company recorded restructuring
charges relating primarily to initiatives aimed at reducing future operating
costs. The following table presents the restructuring reserves remaining at
September 28, 1996:
<TABLE>
<CAPTION>
DECEMBER 30, 1995 INCREASE/ SEPTEMBER 28, 1996
----------------- CHARGES/ (DECREASE) ------------------
BALANCE WRITE-OFFS RESERVES BALANCE
------- ---------- ----------- -------
<S> <C> <C> <C> <C>
Contract termination costs........ $5,735 $2,639 $(1,000) $2,096
Employee severance and related
costs............................ 1,687 745 1,000 1,942
Lease termination costs........... 1,453 745 0 708
------ ------ ------- ------
$8,875 $4,129 $ 0 $4,746
====== ====== ======= ======
</TABLE>
During the nine months ended September 28, 1996, $4,129 of charges were
made to the restructuring reserve primarily relating to contract termination
costs. In addition, certain contracts were terminated on terms more advantageous
than originally anticipated, resulting in a reversal of $1,000 of restructuring
accruals. Further, while implementing its Fourth Quarter, 1995 restructuring
plans, the Company executed additional severance actions resulting in a $1,000
restructuring charge. The remaining liabilities are expected to be paid or
settled during 1996.
7. ASSET HELD FOR SALE
The Company recorded restructuring charges during 1995 which included a
charge for the writedown of certain assets which the Company plans to dispose
of. One such asset, a distribution center located in Chester, S.C., was sold
in May, 1996. The sale of this asset resulted in proceeds in excess of the
Company's estimates, and as a result a gain of $2,200 was recorded as an
offset to restructuring expense in the Second Quarter, 1996.
8. COMMITMENTS AND CONTINGENCIES
As a result of the Company's decision to cease funding of Apex and Apex's
subsequent filing of a voluntary petition for Chapter 11 bankruptcy
protection, various lawsuits have been filed by Apex creditors since the Third
Quarter of 1995 alleging that the Company is liable for the debts of Apex.
Claims to date in connection with these lawsuits total approximately $6,500.
The Company believes that it has valid defenses to the claims made and intends
to contest them vigorously.
On June 28, 1996 a proposed plan of orderly liquidation (the "Plan") was
filed in the Apex Chapter 11 bankruptcy proceeding. The Plan includes a
proposed settlement between the Company and the Apex One, Inc. Official
Committee of Unsecured Creditors (the "Proposed Settlement"). The Proposed
Settlement, which is subject to
7
<PAGE>
approval of the unsecured creditors of Apex and the Bankruptcy Court,
contemplates a $4,000 payment by Converse to the Apex estate and the
relinquishment of the Company's claims against the Apex estate. In return,
Converse would be granted a release of all claims held by the Apex estate and
individual creditors of Apex. In addition, pursuant to the Proposed Settlement
the Court would grant an injunction against any Apex Creditors from commencing
or continuing any lawsuit against the Company or its agents relating in any
way to Apex.
As a result of significant operational and financial difficulties
discovered subsequent to the acquisition of Apex, the Company investigated
potential breaches of representations and warranties by Apex and its former
owners. In conjunction with this investigation, in November 1995 and May 1996
the Company paid into escrow, as opposed to paying the former owners directly,
the first two semi-annual interest payments aggregating $903 pertaining to the
subordinated notes issued in conjunction with the Apex purchase price. As a
result of this action, certain of the former owners filed a lawsuit against
the Company seeking a declaratory judgment that they are entitled to payment
of this interest and the related notes. The Company believes it has valid
defenses against this lawsuit. In March 1996, the Company filed counter claims
against the former owners based upon the results of the investigation.
On May 17, 1996, the Company filed suit against several of the sellers of
Apex seeking damages for federal securities law violations and other claims in
connection with the acquisition of Apex. On the same day certain sellers of
Apex filed suit against the Company and several of its officers, directors and
stockholders seeking damages for federal securities law violations and certain
other claims. The Company believes that it has valid defenses to the claims
made and intends to contest them vigorously.
The Company believes the ultimate outcome of the above proceedings will
not have a material adverse effect on its financial position or results of
operations.
9. STOCK OPTION AMENDMENT
At its 1996 Annual Meeting of Stockholders the Company's stockholders
approved certain amendments to the Converse Inc. 1994 Stock Option Plan (the
"1994 Plan"). The amendments: (i) increased the maximum number of shares
with respect to which stock options may be granted to any individual during
any calendar year from 150,000 to 500,000; (ii) increased the maximum number
of shares with respect to which stock options may be granted to any individual
during the term of the 1994 Plan from 300,000 to 750,000; (iii) increased from
1,600,000 to 2,300,000 the number of shares of the Company's common stock
authorized for issuance under the 1994 Plan; and (iv) authorized the granting
of stock options and issuance of shares to consultants of the Company.
8
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
COMPARISON OF THREE MONTHS ENDED SEPTEMBER 28, 1996 TO SEPTEMBER 30, 1995
The following table sets forth certain items relating to the Company's
operating results as a percentage of net sales for the three months ended
September 28, 1996 (the "Third Quarter 1996") and the three months ended
September 30, 1995 (the "Third Quarter 1995").
<TABLE>
<CAPTION>
Three Months Ended
--------------------------------------------------------
SEPTEMBER 30, 1995 % SEPTEMBER 28, 1996 %
------------------- ------ ------------------- ------
<S> <C> <C> <C> <C>
Net sales............................... $110.1 100.0 $113.3 100.0
Gross profit............................ 29.3 26.6 29.9 26.4
Selling, general and administrative 36.0 32.7 33.2 29.3
expenses...............................
Earnings (loss) from operations......... (2.2) (2.0) 3.1 2.7
Net earnings (loss)..................... (6.6) (6.0) (3.0) (2.6)
</TABLE>
NET SALES
Net sales for the Third Quarter 1996 increased 2.9% to $113.3 million
from $110.1 million for the Third Quarter 1995. The $3.2 million improvement
in net sales resulted from a 28.4% increase in the Company's children's
category sales and a 14.3% increase in the Company's basketball category,
partially offset by an 17.5% decrease in the Company's athleisure sales and a
9.2% decrease in cross training sales. Unit sales of footwear increased 6.8%
over this period. Net sales in the United States increased to $62.9 million
from $57.3 million, an improvement of $5.6 million, or 9.8%. International
sales decreased to $50.4 million from $52.8 million, a $2.4 million, or 4.5%,
reduction. Based on geographic location, net sales in the Pacific region
increased 51.3% over the prior year period, net sales in Latin America
decreased 57.0%, net sales in Europe, Middle East and Africa decreased 5.3%
and net sales in Canada declined 34.9%. Net sales globally were negatively
impacted in 1996 by increased competition in the athleisure market.
GROSS PROFIT
Gross profit for the Third Quarter 1996 increased 2.0% to $29.9 million
from $29.3 million for the Third Quarter 1995. The Company's gross profit as
a percentage of net sales decreased to 26.4% for the Third Quarter 1996 as
compared to 26.6% for the prior year. Volume increases and decreases in
product costs accounted for the gross profit increase, partially offset by
price reductions. Gross profit percentage was affected by: (i) poor retail
sell-through of athleisure product, making price reductions necessary,
9
<PAGE>
and (ii) unfavorable changes in inventory valuation; partially offset by
reductions in global distribution expenses and improved inventory purchasing
variances.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative expenses for the Third Quarter 1996
decreased 7.8% to $33.2 million from $36.0 million for the Third Quarter 1995.
As a percentage of net sales, such expenses decreased to 29.3% for the Third
Quarter 1996 from 32.7% for the prior year period. The $2.8 million decrease
in selling, general and administrative expenses was a direct result of the
Company's initiative announced during 1995 to reduce operating costs. This
expense reduction consisted of decreases in sports marketing expenditures,
North American selling expenses, research and development costs, and
international operating expenses and an overall reduction in administrative
overhead partially offset by an increase in expenses related to the Company's
retail outlet stores to support additional stores and United States
advertising costs.
ROYALTY INCOME
Royalty income for the Third Quarter 1996 increased 40.0% to $6.3 million
from $4.5 million for the Third Quarter 1995. As a percentage of net sales
royalty income increased to 5.6% for the Third Quarter from 4.1% for the Third
Quarter 1995. The $1.8 million increase was primarily attributable to a $1.4
million improvement in royalty income in the Pacific region mainly
attributable to increased sales of licensed apparel in Japan.
EARNINGS (LOSS) FROM OPERATIONS
The Company recorded income from operations for the Third Quarter 1996 of
$3.1 million, compared to a loss from operations of $2.2 million for the Third
Quarter 1995 primarily as a result of the factors described above.
INTEREST EXPENSE
Interest expense for the Third Quarter 1996 increased 37.1% to $4.8
million from $3.5 million for the Third Quarter 1995. This increase is due to
(i) increased borrowings which reflect additional working capital
requirements; (ii) increased financing fees related to the Credit Facility;
and (iii) higher average interest rates on borrowings under the B Facility.
NET EARNINGS (LOSS)
The Company recorded a net loss for the Third Quarter 1996 of $3.0
million compared to a net loss of $6.6 million for the Third Quarter 1995
primarily as a result of the factors discussed above.
10
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COMPARISON OF NINE MONTHS ENDED SEPTEMBER 28, 1996 TO SEPTEMBER 30, 1995
The following table sets forth certain items relating to the Company's
operating results as a percentage of net sales for the nine months ended
September 28, 1996 and the nine months ended September 30, 1995.
<TABLE>
<CAPTION>
Nine months Ended
--------------------------------------------------------
SEPTEMBER 30, 1995 % SEPTEMBER 28, 1996 %
------------------- ------ ------------------- ------
<S> <C> <C> <C> <C>
Net sales............................... $330.6 100.0 $279.8 100.0
Gross profit............................ 104.8 31.7 74.4 26.6
Selling, general and administrative 110.6 33.5 88.6 31.7
expenses...............................
Earnings from operations............... 5.5 1.7 5.6 2.0
Net earnings (loss)..................... (30.4) (9.2) (10.0) (3.6)
</TABLE>
NET SALES
Net sales for the nine months ended September 28, 1996 decreased 15.4% to
$279.8 million from $330.6 million for the nine months ended September 30,
1995. The $50.8 million reduction in net sales was attributable to a 28.9%
decrease in the Company's athleisure category, a 14.5% reduction in its
basketball category and a 24.4% decrease in its cross training sales, as well
as the impact of the Company's decision to reduce its product offerings during
1996. These decreases were partially offset by an increase of 19.0% in the
Company's children's category. Volume decreases accounted for the majority of
the total net sales reduction over the prior year period as unit sales of
footwear decreased 11.6% over this period. Net sales in the United States
decreased to $154.0 million from $176.7 million, a reduction of $22.7 million
or 12.8%. International sales decreased to $125.8 million from $153.9
million, a $28.1 million or 18.3% reduction. Based on geographic location,
net sales in Europe, Middle East and Africa decreased 13.8% from the prior
year period, Canada sales decreased 49.8% and sales in Latin America decreased
51.2%. Net sales globally were negatively impacted by increased competition
in the athleisure market as well as lessened consumer acceptance of the
Company's spring 1996 basketball product line.
11
<PAGE>
GROSS PROFIT
Gross profit for the nine months ended September 28, 1996 decreased 29.0%
to $74.4 million from $104.8 million for the nine months ended September 30,
1995. The Company's gross profit as a percentage of net sales decreased to
26.6% for the nine months ended September 28, 1996 as compared to 31.7% for
the prior year. Volume reductions accounted for the majority of the gross
profit decrease with the remaining decrease due to increases in other product
costs and price reductions. Gross profit percentage was affected by: (i)
poor retail sell-through of spring 1996 basketball and athleisure product,
making price reductions necessary; (ii) unfavorable inventory purchasing
variances; (iii) reduced manufacturing utilization and efficiencies; and (iv)
unfavorable changes in inventory valuation amounts, partially offset by
reductions in global distribution expenses.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative expenses for the nine months ended
September 28, 1996 decreased 19.9% to $88.6 million from $110.6 million for
the nine months ended September 30, 1995. As a percentage of net sales, such
expenses decreased to 31.7% for the nine months ended September 28, 1996 from
33.5% for the prior year period. The $22.0 million reduction in selling,
general and administrative expenses was a direct result of the Company's
initiative announced during 1995 to reduce operating costs. This expense
reduction consisted of decreases in United States advertising, sports
marketing expenditures, research and development costs, international
operating expenses, North American selling expenses and an overall reduction
in administrative overhead, partially offset by an increase in expenses
related to the Company's retail outlet stores to support the net addition of
seven stores.
ROYALTY INCOME
Royalty income for the nine months ended September 28, 1996 increased
43.4% to $17.5 million from $12.2 million for the nine months ended September
30, 1995. As a percentage of net sales, royalty income increased to 6.3% for
the nine months ended September 28, 1996 from 3.7% for the nine months ended
September 30, 1995. The $5.3 million increase was mainly attributable to a
$4.1 million improvement in royalty income in the Pacific region which was
mainly attributable to increased sales of licensed apparel in Japan.
RESTRUCTURING EXPENSE
The Company recorded restructuring charges during 1995 which included a
charge for the writedown of certain assets which the Company plans to dispose
of. One such asset, a distribution center located in Chester, S.C., was sold
in May, 1996. The sale of this asset resulted in proceeds in excess of the
12
<PAGE>
Company's estimates and as a result a gain of $2.2 million was recorded as an
offset to restructuring expense in the Second Quarter 1996. During the nine
months ended September 28, 1996, $4,129 of charges were made to the
restructuring reserve primarily relating to contract termination costs. In
addition, certain contracts were terminated on terms more advantageous than
originally anticipated, resulting in a reversal of $1,000 of restructuring
accruals. Further, while implementing its Fourth Quarter, 1995 restructuring
plans, the Company executed additional severance actions resulting in a $1,000
restructuring charge. The remaining liabilities are expected to be paid or
settled during 1996.
EARNINGS FROM OPERATIONS
Earnings from operations for the nine months ended September 28, 1996
increased 1.8% to $5.6 million from $5.5 million for the nine months ended
September 30, 1995 primarily as a result of the factors described above.
Earnings from operations as a percentage of net sales increased to 2.0% for
the nine months ended September 28, 1996 from 1.7% for the prior year period.
LOSS ON INVESTMENT IN UNCONSOLIDATED SUBSIDIARY
During 1995 the Company decided to cease operations and funding of Apex
One, Inc., an unconsolidated subsidiary. During the nine months ended
September 28, 1996 the Company incurred an additional $0.5 million in charges
resulting primarily from credits issued to settle claims of discrepancies on
shipments of inventory. The Company initially recorded a loss on its
investment in Apex during the nine months ended September 30, 1995 of $41.6
million.
INTEREST EXPENSE
Interest expense for the nine months ended September 28, 1996 increased
35.8% to $12.9 million from $9.5 million for the nine months ended September
30, 1995. This increase of $3.4 million is due to: (i) increased borrowings
which reflect additional working capital requirements; (ii) increased
financing fees related to the Credit Facility; and (iii) higher average
interest rates on borrowings under the B Facility.
NET EARNINGS (LOSS)
As a result of the factors discussed above the Company recorded a net
loss for the nine months ended September 28, 1996 of $10.0 million as compared
to a net loss of $30.4 million for the nine months ended September 30, 1995.
LIQUIDITY AND CAPITAL RESOURCES
As of September 28, 1996, the Company's balance sheet reflects working
capital (net of cash) of $90.0 million as compared to $86.9 million as of
December 30, 1995. Accounts receivable increased $19.6 million primarily
related to Third Quarter shipments. Refundable income taxes were reduced by
$11.4 million as income tax refunds due to the Company were received during
the period.
13
<PAGE>
Borrowings under the Company's credit facilities increased to $150.3
million at September 28, 1996 from $133.1 million at December 30, 1995,
reflecting the seasonal increase in accounts receivable (see Note 4 of Notes
to Condensed Consolidated Financial Statements).
For the nine months ended September 28, 1996 and September 30, 1995 net
cash required for operating activities was $17.5 million and $35.0 million
respectively. During these periods cash was used predominately to fund the
Company's accounts receivable and purchases of inventory. During both periods
cash flows from financing activities reflected cash inflows from seasonal
borrowings under the credit facilities. For the nine months ended September
28, 1996 cash flows provided from financing activities totaled $17.2 million,
a $33.0 million decrease over the prior year period.
BACKLOG
At September 28, 1996, the Company's global backlog of firm orders was
$173 million, compared to $149 million at September 30, 1995. Approximately
38% of the September 28, 1996 order backlog is expected to be shipped during
the fourth quarter of 1996 with the remaining 62% of the backlog to be shipped
during the first quarter of 1997. The amount of unfilled orders at a
particular time is affected by a number of factors, including the scheduling
of the introduction of new products and the timing of the manufacturing and
shipping of the Company's products. Accordingly, a comparison of unfilled
orders as of two different dates is not necessarily meaningful.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
There have been no material changes from the information previously
reported under Item 3 of the Company's Annual Report on Form 10-K for the
fiscal year ended December 30, 1995 and in the Company's Quarterly Report on
Form 10-Q for the fiscal quarters ended March 30, 1996 and June 29, 1996.
ITEM 2. CHANGES IN SECURITIES.
Not Applicable.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
Not Applicable.
14
<PAGE>
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS.
Not Applicable
ITEM 5. OTHER INFORMATION.
Not Applicable.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits. The following exhibits are contained in this report:
10.1 Employment Agreement, dated September 12, 1996
between Converse Inc. and James Solomon.
10.2 Fourth Amendment, dated August 30, 1996 to Credit
Facility.
10.3 Second Amendment, dated September 1, 1996 to
Accommodation Letter between Converse Inc. and Apollo.
27 Financial Data Schedule
(b) Reports on Form 8-K.
Not Applicable.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Dated: November 12, 1996
Converse Inc.
By:
----------------------------------
Donald J. Camacho
Senior Vice President and
Chief Financial Officer
15
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit No. Description
- ----------- -----------
<C> <S>
10.1 Employment Agreement, dated September 12, 1996 between Converse
Inc. and James Solomon.
10.2 Fourth Amendment, dated August 30, 1996 to Credit Facility.
10.3 Second Amendment, dated September 1, 1996 to Accommodation Letter
between Converse Inc. and Apollo.
27 Financial Data Schedule
</TABLE>
<PAGE>
Exhibit 10.1
Glenn N. Rupp
Chairman and Chief Executive Officer
Converse Inc.
One Fordham Road
North Reading, MA 01864
September 12, 1996
Mr. James E. Solomon
1365 York Avenue #26A
New York, NY 10021
Dear Jim:
This letter will serve to confirm our offer concerning your employment with
Converse Inc.
1. TITLE: Senior Vice President, Marketing
------
2. REPORTING RELATIONSHIP: You will be reporting directly to me in my
-----------------------
capacity as Chairman and CEO of Converse Inc. The following departments
will report directly to you: Marketing, Marketing Communications/Services,
Licensing, and Sports Marketing.
3. COMPENSATION: Base salary of $275,000 annually, to be reviewed annually
-------------
under the Converse Inc. Salary Administration Program.
4. INCENTIVE BONUS: You will be eligible to receive a 1997 performance-
----------------
oriented bonus at a target amount of 55% under the Converse Inc. Executive
Incentive Plan. The bonus will be calculated on a qualitative and
quantitative assessment of your contribution to the Marketing Department
and Converse Inc., as well as the Company's financial and operating
performance. Bonus payments will be made in the first quarter of each
fiscal year for the prior year's performance.
5. ALLOWANCE PAYMENT: You will receive three payments in the amount of
------------------
$93,000 each on: October 1, 1996; October 1, 1997; and October 1, 1998,
respectively. All normal and customary withholdings will be applied to
these payments. These payments are not contingent upon your continuing
employment with Converse, except if you voluntarily terminate or are
terminated for cause.
<PAGE>
J. Solomon
Page Two
September 12, 1996
6. 401K: You will be eligible to join the Converse Inc. Thrift Savings Plan
-----
after one year of employment, subject to the Company's compliance with
applicable federal requirements. Employee contributes 2-16% of base
salary, up to an annual maximum of $9,500. The Company matches 25-50% of
the first 6% of base salary. Present Company contribution match - 25%.
7. STOCK OPTIONS: The Compensation and Stock Option Committee of the Converse
--------------
Inc. Board of Directors has approved today the grant of 200,000 shares of
Converse stock options to you.
These options shall be for a term of nine years from the date of issue and
shall be at a price equal to the closing price per share on the date of the
grant, which will be September 16, 1996, your first day of employment with
Converse. Twenty percent (20%) of such options shall vest and become
exercisable on each anniversary of the grant date for the first five-years.
In the event of termination after the second anniversary date of your
Converse employment, other than for cause or resignation, fifty percent
(50%) of the then unvested options shall vest. The accelerated vesting
shall apply to this 200,000 share option grant only.
8. PENSION PLAN: You will be enrolled in the Converse Inc. Retirement Plan
-------------
which is a Defined Benefit Pension Plan fully paid for by the Company. You
will also be eligible for participation in the new Converse Supplemental
Executive Retirement Plan (SERP). This plan restores those benefits that
would otherwise be restricted by the regulations governing the Converse
Defined Pension Plan.
9. INSURANCE:
----------
Life - 2X annual salary - Company paid, (maximum $300,000).
Contributory Life - Employee paid, Increments of 1, 2, or 3X annual salary
(maximum $300,000).
Employee Business Travel - Company paid, 6X annual salary (maximum
$400,000).
Voluntary Accidental Death & Dismemberment - Employee paid, (maximum
$400,000).
Short Term Disability - Company paid, full salary up to six (6) months.
Long Term Disability - Employee paid, 60% of base pay after six (6) months
of disability (maximum $10,000 monthly).
Health - Choice of Aetna Medical/Dental or one of two HMO options.
<PAGE>
J. Solomon
Page Three
September 12, 1996
10. TERMINATION AGREEMENT: In the event of the involuntary termination,
----------------------
including a permanent layoff, of your employment by Converse, other than
for cause and within the first year of your employment by Converse, you
will be provided with 24 months' base salary; during the second year,
eighteen months' base salary; thereafter, twelve months' base salary. Any
such payment shall be made as and when normally payable.
All employee benefits will cease at the time of termination. You would be
eligible to continue your medical and dental insurance under the terms of
COBRA. Converse will pay to you a single payment on your date of
termination that is comprised of the following components:
(a) The amount to cover Converse's share of the cost of your medical and
dental insurance, as in effect on the date of termination of employment,
for the severance period, plus an amount equal to twenty-eight percent
(28%) of such payment; and
(b) If you are vested in the Converse Inc. Retirement Plan at the time of
termination, you will receive the actuarial present value (as determined by
Converse in its sole discretion) of your participation in the retirement
plan for the severance period, assuming you continued to earn the same base
pay you were earning as of your termination date.
11. "CAUSE" means (a) willful misconduct, (b) repeated, serious and substantial
-------
infractions of Converse rules or policies, (c) willful material breach of
this Agreement, or (d) conviction for a felony involving moral turpitude.
It is understood that mere failure to achieve financial results shall not
in any respect be deemed "cause" for purposes of this Agreement.
12. RELOCATION: Enclosed is the Relocation Policy outlining the benefits for
-----------
which you are eligible. It is imperative that you contact Camille Welch
(508-664-8738) as soon as possible regarding issues relating to relocation
eligibility.
13. MISCELLANEOUS:
--------------
Vacation: Annual vacation of four weeks.
Educational Assistance Program: Company paid, tuition reimbursement
(maximum $2,000 Undergraduate, $3,000 Graduate) annually.
<PAGE>
J. Solomon
Page Four
September 12, 1996
Jim, it gives me great pleasure to confirm this offer of employment on behalf of
Converse. This position is vital to the future success of Converse. I look
forward to your joining us and becoming a key part of our management team.
Sincerely,
CONVERSE INC.
/s/ Glenn N. Rupp September 12, 1996
- ------------------ ------------------
Glenn N. Rupp, Chairman & CEO Date
/s/ James Solomon September 13, 1996
- ------------------ ------------------
Jim Solomon Date
<PAGE>
Exhibit 10.2
FOURTH AMENDMENT TO CREDIT AGREEMENT
------------------------------------
THIS FOURTH AMENDMENT to Credit Agreement (the "Amendment") is made as
of this 30th day of August, 1996, by and among Converse Inc. ("Borrower"), BT
Commercial Corporation, as Agent in such capacity, ("Agent"), BT Commercial
Corporation (in its capacity as lender, "BTCC"), The Bank of New York Commercial
Corporation ("Bank of New York"), Fleet Bank of Massachusetts, N.A. ("Fleet"),
Harris Trust and Savings Bank ("Harris"), Heller Financial, Inc. ("Heller"),
LaSalle National Bank ("LaSalle"), Nationsbank of Texas, N.A. ("Nationsbank"),
Sanwa Business Credit Corporation ("Sanwa"), Fleet Capital Corporation ("Fleet
Capital"), and First Source Financial LLP ("First Source"), (BTCC, Bank of New
York, Fleet, Harris, Heller, LaSalle, Nationsbank, Sanwa, Fleet Capital and
First Source, herein collectively referred to as "Lenders").
W I T N E S S E T H:
-------------------
WHEREAS, Borrower, Agent and Lenders are parties to that certain
Credit Agreement dated as of November 17, 1994, as amended by that certain First
Amendment to Credit Agreement dated as of May 18, 1995, that certain Second
Amendment to Credit Agreement dated as of November 13, 1995 and that certain
Third Amendment to Credit Agreement dated as of February 29, 1996 (collectively,
the "Credit Agreement"); and
WHEREAS, Borrower has requested that Agent and Lenders provide for
certain amendments to the Credit Agreement, as more fully set forth herein.
NOW, THEREFORE, in consideration of the mutual agreements herein
contained and other good and valuable consideration, the adequacy of which is
hereby acknowledged, and subject to the terms and conditions hereof, the parties
hereto agree as follows:
1 . DEFINITIONS. Unless otherwise defined herein, all capitalized terms
-----------
shall have the meaning given to them in the Credit Agreement.
2 . AMENDMENTS TO CREDIT AGREEMENT.
------------------------------
.1 The defined term "BORROWING BASE", which appears in Section 1.1 of the
Credit Agreement is hereby amended by deleting the phrase "thirty
percent (30%) of the then Eligible Retail Inventory, but in any event
not more than $2,500,000," in subclause (B)(ii)(2) and inserting the
following in lieu thereof:
"fifty percent (50%) of the then Eligible Retail Inventory, but
in any event not more than $5,000,000"
<PAGE>
and also by deleting the phrase "May, June and July of each year" in
the proviso of clause (B) and inserting the phrase "May through and
including November in 1996 and May, June and July of every year
thereafter" in lieu thereof.
.2 Section 7.7 of the Credit Agreement is hereby amended by deleting the
phrase " ".93 to 1 for the nine month period ending September 30,
1996; (E)" and relettering clause "(F)", clause "(E)".
.3 Section 7.19 of the Credit Agreement is hereby amended after the
phrase "at the end of any calendar quarter commencing March 31, 1996"
in the second and third lines by inserting the parenthetical "(other
than the calendar quarter ending September 30, 1996)" and in the table
listing Projected Net Income Amounts by deleting the reference to
calendar quarter September 30 and the corresponding figure,
"$1,101,000."
.4 Section 7.20 of the Credit Agreement is hereby amended by deleting
such Section in its entirety and inserting the following in lieu
thereof:
"7.20 MINIMUM EBITDA. Borrower shall not permit its EBITDA to
--------------
be an amount less than $1,500,000 for the three month period
ending September 30, 1996."
3 . AMENDMENT FEE. The effectiveness of the amendments herein
-------------
contained is expressly conditioned upon the payment by Borrower, on the date
hereof, to Agent for the benefit of the Lenders, of an Amendment Fee in an
amount equal to $75,000.
4 . REAFFIRMATION BY BORROWER. Borrower hereby represents and warrants
-------------------------
to Agent and Lenders that (i) the representations and warranties set forth in
Section 5 of the Credit Agreement are true and correct on and as of the date
hereof, except to the extent (a) that any such representations or warranties
relate to a specific date, or (b) of changes thereto as a result of transactions
for which Agent and Lenders have granted their consent; (ii) Borrower is on the
date hereof in compliance with all of the terms and provisions set forth in the
Credit Agreement as hereby amended; and (iii) upon execution hereof no Default
or Event of Default has occurred and is continuing or has not previously been
waived.
5 . FULL FORCE AND EFFECT. Except as herein amended, the Credit
---------------------
Agreement and all other Credit Documents shall remain in full force and effect.
6 . COUNTERPARTS. This Amendment may be executed in two or more
------------
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same document.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Amendment on the
day and year specified above.
BORROWER:
CONVERSE INC.
By: /s/ Donald J. Camacho
----------------------
Name: Donald J. Camacho
-----------------
Title: Senior Vice President
---------------------
AGENT:
BT COMMERCIAL CORPORATION
By: /s/ Wayne D. Hillock
--------------------
Name: Wayne D. Hillock
----------------
Title: Senior Vice President
---------------------
LENDERS:
BT COMMERCIAL CORPORATION
By: /s/ Wayne D. Hillock
---------------------
Name: Wayne D. Hillock
----------------
Title: Senior Vice President
----------------------
THE BANK OF NEW YORK
COMMERCIAL CORPORATION
By: /s/ Anthony Viola
------------------
Name: Anthony Viola
-------------
Title: Vice President
--------------
FLEET BANK OF
MASSACHUSETTS, N.A.
By:
-----------------------
Name:
-------------------
Title:
------------------
<PAGE>
HARRIS TRUST AND SAVINGS
BANK
By: /s/ John McKelvie
-----------------
Name: John McKelvie
-------------
Title: Vice President
--------------
HELLER FINANCIAL, INC.
By: /s/ Joel Richards
-----------------
Name: Joel Richards
-------------
Title: Vice President
---------------
LASALLE NATIONAL BANK
By: /s/ Christopher G. Clifford
---------------------------
Name: Christopher G. Clifford
-----------------------
Title: Senior Vice President
---------------------
NATIONSBANK OF TEXAS, N.A.
By: /s/ J. Bart Bearden
-------------------
Name: J. Bart Bearden
---------------
Title: Vice President
--------------
SANWA BUSINESS CREDIT
CORPORATION
By:
-----------------------
Name:
-------------------
Title:
------------------
FLEET CAPITAL CORPORATION
By:
-----------------------
Name:
-------------------
Title:
------------------
<PAGE>
FIRST SOURCE FINANCIAL LLP
By: First Source Financial, Inc.,
its Manager
By:
-----------------------
Name:
-------------------
Title:
------------------
<PAGE>
Exhibit 10.3
Apollo Advisors, L.P.
Two Manhattanville Road
Purchase, New York 10577
Converse Inc.
One Fordham Road
North Reading, MA 01864
Attention: Mr. Donald Camacho
Senior Vice President and Chief Financial Officer
Re: Amended Accommodation Letter
September 1, 1996
Gentlemen:
Reference is hereby made to that certain Credit Agreement dated as of
November 17, 1994 by and among Converse Inc. (the "Company"), the financial
institutions parties thereto (collectively, the "Lenders") and BT Commercial
Corporation, as agent for the Lenders (in such capacity, the "Agent"), as
amended by the First Amendment to the Credit Agreement dated as of May 10, 1995,
by and among the Company, the Lenders and the Agent, and as further amended by
the Second Amendment dated as of November 15, 1995, Third Amendment dated as of
February 29, 1996, and Fourth Amendment as of August 30, 1996, by and among the
Company, the Lenders, and the Agent amending the Credit Agreement (the Credit
Agreement, as amended by the First, Second, Third, and Fourth Amendment, the
"Credit Agreement" and the Fourth Amendment, the "Amendment"). All terms used
but not defined in this Accommodation Letter have the meaning given to them in
the Credit Agreement.
So long as the Letter of Credit or any Letter of Credit Loan remains
outstanding, you will not, without Apollo's prior consent, cause the amount of
the availability under paragraph (D) of the definition of "Borrowing Base"
utilized from time to time to be more than the amounts set forth below in the
period below
Period Amount
-------------- ----------------
Through March 1, 1997 $25 million
This Amended and Restate Accommodation Letter shall be governed by, and
construed in accordance with, the laws of the State of New York.
<PAGE>
This Amended and Restated Accommodation Letter may be executed in any
number of counterparts, each of which shall be an original and all of which,
when taken together, shall constitute one original.
If the foregoing correctly sets forth our agreement, please indicate your
acceptance of the terms hereof by signing in the appropriate space below and
returning to us the executed duplicate of this Amended and Restated
Accommodation Letter.
Very truly yours,
APOLLO INVESTMENT FUND, L.P.
By: Apollo Advisors, L.P.
as Managing Partner
and on behalf of Apollo Investment Fund, L.P.
By: Apollo Capital Management, Inc.,
its general partner
By: /s/ Joshua J. Harris
--------------------
Its: Vice President
Agreed to and accepted as of the date
first above written:
Converse Inc.
By: /s/ Donald J. Camacho
---------------------
Its: Senior Vice President
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
COMPANY'S UNAUDITED FINANCIAL STATEMENTS CONTAINED IN ITS THIRD QUARTER FORM
10-Q AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-28-1996
<PERIOD-START> DEC-31-1995
<PERIOD-END> SEP-28-1996
<CASH> 4,954
<SECURITIES> 0
<RECEIVABLES> 82,994
<ALLOWANCES> 1,720
<INVENTORY> 82,899
<CURRENT-ASSETS> 194,372
<PP&E> 23,919
<DEPRECIATION> 6,824
<TOTAL-ASSETS> 235,101
<CURRENT-LIABILITIES> 100,334
<BONDS> 0
0
0
<COMMON> 16,772
<OTHER-SE> (48,878)
<TOTAL-LIABILITY-AND-EQUITY> 235,101
<SALES> 279,776
<TOTAL-REVENUES> 297,322
<CGS> 205,342
<TOTAL-COSTS> 293,930
<OTHER-EXPENSES> 32
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 12,921
<INCOME-PRETAX> (9,561)
<INCOME-TAX> 452
<INCOME-CONTINUING> (9,046)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (10,013)
<EPS-PRIMARY> (0.600)
<EPS-DILUTED> 0
</TABLE>
