<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 27, 1997
Commission File Number 1-13430
Converse Inc.
(Exact name of registrant as specified in its charter)
Delaware 43-1419731
(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 27, 1997, 17,317,956 shares of common stock were
outstanding.
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
PART I: FINANCIAL INFORMATION
Item 1. Financial Statements
A. Condensed Consolidated Balance Sheet 1
B. Condensed Consolidated Statement of Operations 2
C. Condensed Consolidated Statement of Cash Flows 3
D. Notes to Condensed Consolidated Financial Statements 4
Item 2. Management's Discussion and Analysis of 8
Financial Condition and Results of Operations
PART II: OTHER INFORMATION
Item 1. Legal Proceedings 15
Item 2. Changes in Securities 15
Item 3. Defaults Upon Senior Securities 16
Item 4 Submission of Matters to a Vote of Security Holders 16
Item 5. Other Information 16
Item 6. Exhibits and Reports on Form 8-K 16
SIGNATURE 16
</TABLE>
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
CONVERSE INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET
((Dollars in thousands, except per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
Dec. 28,1996 Sept. 27, 1997
------------ --------------
<S> <C> <C>
Assets
- ------
Current assets:
Cash and cash equivalents ................................................ $ 5,908 $ 7,178
Restricted cash .......................................................... 1,354 ---
Receivables, less allowances of $1,994 and $3,352, respectively........... 61,546 93,778
Inventories (Note 3) ..................................................... 86,799 90,117
Refundable income taxes .................................................. 582 582
Prepaid expense and other current assets.................................. 20,383 15,359
-------- --------
Total current assets................................................ 176,572 207,014
Net property, plant and equipment.............................................. 17,849 18,971
Other assets................................................................... 28,182 31,778
-------- --------
$222,603 $257,763
======== ========
Liabilities and Stockholders' Equity (Deficiency)
- -------------------------------------------------
Current liabilities:
Short-term debt (Note 4).................................................. $ 13,421 $ 12,817
Current maturities of long-term debt (Note 4)............................. 117,765 86,737
Accounts payable.......................................................... 49,503 46,682
Accrued expenses.......................................................... 25,124 17,182
Income taxes payable...................................................... 3,407 2,999
-------- --------
Total current liabilities.......................................... 209,220 166,417
Long-term debt (Note 4) ....................................................... 9,644 80,000
Current assets in excess of reorganization value............................... 32,376 30,818
Deferred postretirement benefits other than pensions........................... 10,231 10,143
Stockholders' equity (deficiency):
Common stock, $1.00 stated value, 50,000,000 shares
authorized, 17,213,157 and 17,317,956 shares issued and outstanding at
December 28, 1996 and September 27, 1997, respectively.................. 17,213 17,318
Preferred stock, no par value, 10,000,000 shares authorized
none issued and outstanding............................................. --- ---
Additional paid-in capital................................................ 5,392 2,281
Retained earnings (deficit) .............................................. (60,265) (47,406)
Foreign currency translation adjustment................................... (1,208) (1,808)
-------- --------
Total stockholders' equity (deficiency) ........................... (38,868) (29,615)
-------- --------
$222,603 $257,763
======== ========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
1
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CONVERSE INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(Dollars in thousands, except per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
------------------------------ ------------------------------
Sept. 28, 1996 Sept. 27, 1997 Sept. 28, 1996 Sept. 27, 1997
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
Net sales........................................... $113,318 $121,903 $279,776 $361,196
Cost of sales....................................... 83,388 89,799 205,342 256,047
-------- -------- -------- --------
Gross profit........................................ 29,930 32,104 74,434 105,149
Selling, general and administrative expenses........ 33,153 32,581 88,588 99,834
Royalty income...................................... 6,301 5,502 17,546 16,889
Restructuring expense (credit) (Note 5)............. --- --- (2,209) (563)
-------- -------- -------- --------
Earnings from operations............................ 3,078 5,025 5,601 22,767
Loss (credit) on investment in unconsolidated
subsidiary (Note 7).............................. --- --- 515 (13,051)
Interest expense, net (Note 4)...................... 4,827 4,438 12,921 10,992
Other expense, net.................................. 229 303 1,726 2,597
-------- -------- -------- --------
Earnings (loss) from continuing operations
before income tax ................................. (1,978) 284 (9,561) 22,229
Income tax expense ................................. 1,033 109 452 8,558
-------- -------- -------- --------
Net earnings (loss) from continuing operations...... (3,011) 175 (10,013) 13,671
Extraordinary loss net of tax of $508
- write-off of deferred financing fees (Note 4).... --- --- --- 812
-------- -------- -------- --------
Net earnings (loss) ................................ $( 3,011) $ 175 $(10,013) $ 12,859
======== ======== ======== ========
Net earnings (loss) per share:
Continuing operations............................ $ (0.18) $ 0.01 $ (0.60) $ 0.77
Extraordinary loss (Note 4)...................... --- --- --- (0.05)
-------- -------- -------- --------
Net earnings..................................... $ (0.18) $ 0.01 $ (0.60) $ 0.72
======== ======== ======== ========
Weighted average number of common shares (Note 2)... 16,707 17,744 16,697 17,836
======== ======== ======== ========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
2
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CONVERSE INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(Dollars in thousands)
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
---------------------------------------
Sept. 28, 1996 Sept. 27, 1997
-------------- --------------
<S> <C> <C>
Cash flows from operating activities:
Net earnings (loss) ...................................................... $(10,013) $ 12,859
Adjustments to reconcile net earnings (loss) to net cash required for
operating activities:
Loss (credit) on investment in unconsolidated subsidiary............... 515 (20,633)
Credit for restructuring actions ...................................... (2,209) (563)
Extraordinary loss from write-off of deferred financing fees........... --- 1,320
Depreciation of property, plant and equipment.......................... 2,431 2,643
Amortization of intangible assets...................................... 342 351
Amortization of current assets in excess of reorganization value....... (1,558) (1,558)
Deferred taxes......................................................... (3,198) 5,987
Changes in assets and liabilities:
Receivables............................................................ (19,586) (32,232)
Inventories............................................................ (996) (3,318)
Refundable income taxes ............................................... 11,377 ---
Prepaid expenses and other current assets.............................. (1,310) 802
Accounts payable and accrued expenses.................................. 2,974 (2,739)
Income taxes payable................................................... 976 (408)
Other long-term assets and liabilities................................. 2,765 (2,766)
-------- --------
Net cash required for operating activities.......................... (17,490) (40,255)
-------- --------
Cash flows from investing activities:
Proceeds from disposal of assets.......................................... 5,101 ---
Additions to property, plant and equipment................................ (3,823) (3,765)
-------- --------
Net cash provided (used) by investing activities.................... 1,278 ( 3,765)
-------- --------
Cash flows from financing activities:
Net proceeds from exercise of stock options............................... 307 522
Net proceeds from (payment of) short-term debt............................ 6,267 (604)
Net proceeds from (repayment of) old credit facility...................... 10,951 (117,765)
Net borrowings under new credit facility.................................. --- 86,737
Net proceeds from bond issue.............................................. --- 76,400
-------- --------
Net cash provided by financing activities........................... 17,525 45,290
Net increase/(decrease) in cash and cash equivalents........................... 1,313 1,270
Cash and cash equivalents at beginning of period............................... 2,738 5,908
-------- --------
Cash and cash equivalents at end of period..................................... $ 4,051 $ 7,178
======== ========
</TABLE>
3
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CONVERSE INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands)
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 thereto should be read in conjunction with the
Company's annual report on Form 10-K for the year ended December 28, 1996. The
Company's consolidated results of operations for the three and nine month
periods ended September 27, 1997 are not necessarily indicative of the results
to be expected for any other interim period or the entire fiscal year.
Derivatives:
The Company enters into foreign exchange contracts in order to reduce the
impact of foreign currency fluctuations on certain transactions designated in
foreign currencies. These contracts are marked to market and the resulting
unrealized gain or loss is included in net income. For financial reporting
purposes, realized and unrealized gains or losses on these contracts are
recognized as other income or expense.
2. Net Earnings (Loss) per Common Share
Net earnings (loss) per common share is computed based on the weighted
average number of common shares and common equivalent shares, if dilutive,
assumed outstanding for the applicable period.
Net earnings for nine months ended September 27, 1997 include a gain of
approximately $8,000, net of income taxes, pertaining to the settlement of
outstanding litigation and claims relating to Apex One, Inc. ("Apex"). See Note
7. Net earnings per share from continuing operations of $0.77 for the nine
months ended September 27, 1997 include $0.45 relating to the settlement of
these claims.
3. Inventories
Inventories are summarized as follows:
<TABLE>
<CAPTION>
December 28, 1996 Sept. 27, 1997
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<S> <C> <C>
Retail merchandise............................... $ 6,298 $ 5,276
Finished products................................ 73,887 75,207
Work in process ................................. 3,320 5,654
Raw materials.................................... 3,294 3,980
------- -------
$86,799 $90,117
======= =======
</TABLE>
4
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4. Debt
In May 1997, the Company issued $80,000 of 7% Convertible Subordinated
Notes due June 1, 2004 (the "Convertible Notes"). The Convertible Notes are
subordinated to all existing and future Senior Indebtedness (as defined
therein). The Convertible Notes are convertible at any time prior to maturity,
unless previously redeemed, into common stock of the Company, at the option of
the holder, at a conversion price of $21.83 per share, subject to adjustment in
certain events. In addition, the Convertible Notes may be redeemed, in whole or
in part, at the option of the Company, at any time on or after June 5, 2000 at
redemption prices set forth therein plus accrued interest to the date of
redemption. Interest is payable semi-annually on June 1 and December 1,
commencing on December 1, 1997. Proceeds from the Convertible Notes were used to
repay indebtedness under the Company's then existing credit agreement (the "Old
Credit Facility").
Simultaneously with the issuance of the Convertible Notes in May 1997, the
Company entered into a new $150,000 secured credit agreement (the "Credit
Facility") with BT Commercial Corporation ("BTCC") for revolving loans, letters
of credit, foreign exchange contracts and banker acceptances and repaid the Old
Credit Facility. In connection with the repayment of the Old Credit Facility,
the Company wrote off deferred financing fees of $1,320 in the second quarter.
This write-off is presented as an extraordinary item on the statement of
operations. In July 1997 BTCC, as agent, syndicated the Credit Facility to a
group of participating lenders (the "Banks"). The amount of credit available to
the Company at any time is limited by a borrowing base formula, as defined in
the Credit Facility, consisting primarily of U.S. and Canadian accounts
receivable and inventory. The aggregate of letters of credit, foreign exchange
contracts and banker acceptances may not exceed $80,000 at any time; revolving
loans are limited only by the Credit Facility's maximum availability less any
amounts outstanding for letters of credit, foreign exchange contracts or banker
acceptances.
The Credit Facility is for a five-year term and, accordingly, has an
expiration date of May 21, 2002. However, the total revolving loans and banker
acceptances outstanding under the Credit Facility of $86,737 are classified as
current due to the Company's lockbox arrangement (whereby payments by the
Company's customers are deposited in a lockbox controlled by the Banks) and
certain clauses contained in the Credit Facility regarding mandatory repayment
that involve subjective judgments by the Banks. This classification is required
by Emerging Issues Task Force 95-22, "Balance Sheet Classification of Borrowings
Outstanding under a Revolving Credit Agreement that Includes both a Subjective
Acceleration Clause and a Lockbox Arrangement".
As of September 27, 1997 the Company's borrowing base was $115,453.
Utilization under the Credit Facility amounted to $94,553 consisting of
revolving loans of $56,580, banker acceptances of $30,157 and outstanding
letters of credit of $7,816. Accordingly, $20,900 of the maximum available
borrowing base remained unutilized as of September 27, 1997.
5
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Revolving loans under the Credit Facility bear interest either at the Prime
Lending Rate (as defined therein) plus one percent (1.00%) per annum or at the
Adjusted LIBOR Rate (as defined therein) plus a margin of two and one-half
percent (2.50%) per annum. The foregoing LIBOR margin is subject to reduction
based upon the Company achieving certain interest coverage ratios specified in
the Credit Facility. At September 27, 1997 revolving loans outstanding under the
Credit Facility bore interest of 8.29% based upon the weighted average of the
Prime Lending Rate and Adjusted LIBOR Rate, as defined. Obligations outstanding
under the Credit Facility are secured by first priority liens on substantially
all of the Company's U.S. and Canadian assets. The Credit Facility contains
customary affirmative and negative covenants, including one financial covenant
with respect to an interest coverage ratio with which the Company was in
compliance for the quarter ended September 27, 1997.
Subsidiaries of the Company maintain asset-based financing arrangements in
certain European countries with various lenders. In general, these financing
arrangements allow for borrowings based upon eligible accounts receivable and
inventory at varying advance rates and varying interest rates. As of September
27, 1997, total short-term borrowings outstanding under these financing
arrangements totaled $12,817. These obligations are secured by first priority
liens on the respective foreign assets being financed. In addition, Converse
Inc. provided guarantees with respect to the outstanding borrowings for certain
of the financing arrangements.
5. Restructuring
As more fully described in Note 4 to the Consolidated Financial Statements
for the year ended December 28, 1996 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 27, 1997:
<TABLE>
<CAPTION>
Dec. 28, 1996 Charges/ Changes in Sept. 27, 1997
Balance Write-offs Estimates Balance
------------- ---------- --------- --------------
<S> <C> <C> <C> <C>
Contract termination costs........... $1,502 $1,072 --- $ 430
Employee severance and
related costs.................... 2,456 1,683 --- 773
Lease termination costs.............. 564 --- (564) ---
------ ------ ----- ------
$4,522 $2,755 $(564) $1,203
====== ====== ===== ======
</TABLE>
During the first quarter of 1997, the Company re-opened the manufacturing
facility located in Mission, Texas for cutting and limited production due to an
unexpected increase in demand for athletic original products. Accordingly, the
remaining lease termination restructuring reserve was reversed. The remaining
liabilities represent fixed amounts to be paid out over the next year.
6
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6. Commitments and Contingencies
Converse is or may become a defendant in a number of pending or threatened
legal proceedings in the ordinary course of its business. Converse believes that
the ultimate outcome of any such proceedings will not have a material adverse
effect on its financial position or results of operations.
7. Apex Litigation and Claims Resolution
As more fully described in Note 16 to the Consolidated Financial Statements
for the year ended December 28, 1996 included within the Company's annual report
on Form 10-K, during the first quarter of 1997, the Company settled
substantially all claims with the former owners of Apex, as well as
substantially all claims with former Apex creditors and the Apex bankruptcy
estate. As a result of these settlements, the Company recorded a net pretax gain
of $13,051 during the first quarter of 1997. During the second quarter of 1997,
the Company received a cash payment of $753 in settlement of its claim with the
one remaining former owner of Apex. This former owner of Apex continues to hold
subordinated notes issued by the Company in the amount of $774. This amount is
included within accrued expenses in the accompanying September 27, 1997
consolidated balance sheet. As of September 27, 1997, there are no remaining
material claims against the Company relating to its 1995 acquisition of Apex.
As more fully described in Note 3 to the Consolidated Financial Statements
for the year ended December 28, 1996 included within the Company's annual report
on Form 10-K, on December 28, 1996, an accrual of $5,424, which represented the
Company's estimates of its liabilities relating to Apex, remained on the
Company's financial statements. During the first quarter of 1997, this remaining
accrual was reversed in conjunction with the Apex litigation settlements.
8. Recently Issued Accounting Standards
During 1997, the Financial Accounting Standards Board issued Statement No.
128, "Earnings per Share" (FAS 128). FAS 128 requires the Company to disclose a
basic and diluted earnings per share calculation. Basic earnings per share
excludes common stock equivalents from the EPS calculation, while diluted EPS is
calculated consistent with the Company's primary earnings per share calculation.
The Company will adopt the provisions of FAS 128 within the 1997 year-end
consolidated financial statements. Basic and diluted earnings per share, as
computed under FAS 128, would have been $0.01 and $0.01 per share, respectively,
for the three months ended September 27, 1997, and $0.75 and $0.72,
respectively, for the nine months ended September 27, 1997.
In June 1997, the FASB issued Statement No. 130, "Reporting Comprehensive
Income" (FAS 130) and Statement No. 131, "Disclosures about Segments of an
Enterprise and Related Information" (FAS 131). FAS 130 establishes standards for
reporting and display of comprehensive income and its components in the
consolidated financial statements. FAS 131 establishes standards for reporting
information on operating segments in interim and annual financial statements.
Both are effective for the Company for the year ending January 2, 1999 and the
Company is reviewing the impact on its Consolidated Financial Statements.
7
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ITEM 2:
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Comparison of three months ended September 28, 1996 to September 27, 1997
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 ("Third Quarter 1996") and for the three months ended
September 27, 1997 ("Third Quarter 1997").
<TABLE>
<CAPTION>
Three Months Ended
---------------------------------------------------------------------
Sept. 28, 1996 % Sept. 27, 1997 %
-------------- - -------------- -
<S> <C> <C> <C> <C>
Net sales ................................. $113,318 100.0 $121,903 100.0
Gross profit............................... 29,930 26.4 32,104 26.3
Selling, general and administrative
expenses ................................ 33,153 29.3 32,581 26.7
Royalty income............................. 6,301 5.6 5,502 4.5
Earnings from operations .................. 3,078 2.7 5,025 4.1
Interest expense, net ..................... 4,827 4.3 4,438 3.6
Net earnings (loss)........................ $ (3,011) (2.7) $ 175 0.1
Net earnings (loss) per share.............. $ (0.18) $ 0.01
</TABLE>
Net Sales
Net sales for Third Quarter 1997 increased to $121.9 million from $113.3
million for the prior year quarter, a 7.6% improvement. The growth in net sales
was attributable to a 56.9% increase in the athletic originals (formerly
athleisure) category compared to Third Quarter 1996 but was partially offset by
declines of 2.5%, 18.3% and 16.7% in the basketball, children's and cross
training categories compared to the prior year quarter. The strong U.S. dollar
continues to adversely affect reported international results. On a constant
dollar basis, net sales would have increased 10.6% in the Third Quarter 1997
compared to the Third Quarter 1996.
Third Quarter 1997 net sales in the United States increased 14.8% to $72.2
million from $62.9 million in Third Quarter 1996. Third Quarter 1997
international net sales declined 1.4% from $50.4 million to $49.7 million
compared to the prior year quarter. Pacific region net sales increased 58.4%,
while the Europe, Middle East and Africa ("EMEA") region, Latin and South
America ("Americas") region and Canada recorded net sales declines of 26.6%,
18.0% and 33.7% respectively as compared to Third Quarter 1996. On a constant
dollar basis, international net sales would have increased 5.4% over the prior
year quarter.
8
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Although net sales increased in Third Quarter 1997 as compared to Third
Quarter 1996, there is currently a sluggish environment for athletic footwear,
particularly basketball footwear. The Company anticipates that sales will
continue to be affected by this market for the remainder of 1997 and the first
half of 1998. Based on current trends and order backlog levels, the Company
expects fourth quarter net sales will be in the range of $80-$90 million.
Gross Profit
Gross profit increased to $32.1 million for Third Quarter 1997 from $29.9
million for Third Quarter 1996, a 7.4% improvement. Higher net sales volumes
accounted for the gross profit improvements over the prior year quarter. Gross
profit margin was 26.3% of net sales for Third Quarter 1997 compared to 26.4%
for Third Quarter 1996. Third Quarter 1997 gross profit was adversely impacted
by $2.3 million of foreign currency losses resulting from the strengthening of
the U.S. dollar during this period. These losses were offset by domestic
manufacturing gains of $2.7 million due to increased athletic originals
production levels compared to the prior year quarter. Because of a sluggish
retail environment that presently exists for athletic footwear, the Company
anticipates that gross profit margin in the fourth quarter of 1997 will be below
Third Quarter 1997 levels.
Selling, General and Administrative Expenses
Selling, general and administrative expenses decreased 1.8% to $32.6
million for Third Quarter 1997 compared to $33.2 million for Third Quarter 1996.
As a percentage of net sales, selling, general and administrative expenses
decreased to 26.7% for Third Quarter 1997 from 29.3% for the prior year period.
The decrease of $0.6 million in expenses was primarily attributable to decreased
spending in the European operation.
Royalty Income
Royalty income decreased 12.7% to $5.5 million in Third Quarter 1997 from
$6.3 million in Third Quarter 1996. International royalty income, which
currently represents approximately 80% of the Company's total royalty income,
declined 22.6% in Third Quarter 1997, primarily as a result of a 36.6% decline
in the Pacific region as compared to Third Quarter 1996. The decrease is
primarily attributable to the streamlining of the distribution of the Company's
licensed products in the Pacific region. This decline was partially off-set by
increases in the Americas and EMEA regions of 390.7% and 64.3% respectively.
United States royalty income for Third Quarter 1997 increased 81.5% to $1.1
million compared to the prior year third quarter. The Company expects that the
trend of reduced royalty income from the Pacific region will continue in the
fourth quarter of 1997 and estimates that Company-wide royalty income will be
approximately $5.0 million compared to approximately $10.0 million in the fourth
quarter of 1996.
9
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Earnings from Operations
The Company recorded earnings from operations of $5.0 million for Third
Quarter 1997 as compared to $3.1 million for Third Quarter 1996, a 61.3%
increase. As a percentage of net sales, Third Quarter 1997 earnings from
operations were 4.1% as compared to 2.7% for the prior year quarter. The
improvement in earnings from operations is attributable to higher net sales,
improved gross profit and lower selling, general and administrative expenses,
partially offset by reduced royalty income.
Interest Expense
Interest expense for Third Quarter 1997 decreased 8.3% to $4.4 million from
$4.8 million for Third Quarter 1996. The decrease is primarily driven by a
reduction in bank fees, elimination of the interest expense on substantially all
of the subordinated notes issued in connection with the acquisition of Apex One,
Inc. ("Apex") and reduced interest expense resulting from the issuance of $80
million of 7% Convertible Subordinated Notes due 2004 (the "Convertible Notes")
on May 21, 1997 to replace other higher-interest indebtedness.
Net Earnings (Loss)
Primarily for the reasons set forth above, the Company recorded earnings of
$0.2 million in Third Quarter 1997 compared to a loss of $3.0 million in Third
Quarter 1996.
Net Earnings (Loss) Per Share
The Company recorded a $0.01 net earnings per share for Third Quarter 1997
compared to an $0.18 loss per share for Third Quarter 1996.
10
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Comparison of nine months ended September 28, 1996 to September 27, 1997
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 ("Nine Months 1996") and for the nine months ended September
27, 1997 ("Nine Months 1997").
<TABLE>
<CAPTION>
Nine Months Ended
---------------------------------------------------------------------
Sept. 28, 1996 % Sept. 27, 1997 %
-------------- - -------------- -
<S> <C> <C> <C> <C>
Net sales ................................. $279,776 100.0 $361,196 100.0
Gross profit............................... 74,434 26.6 105,149 29.1
Selling, general and administrative
expenses ................................ 88,588 31.7 99,834 27.6
Royalty income............................. 17,546 6.3 16,889 4.7
Earnings from operations .................. 5,601 2.0 22,767 6.3
Loss (credit) on investment in
unconsolidated subsidiary ............... 515 0.2 (13,051) ( 3.6)
Interest expense, net ..................... 12,921 4.6 10,992 3.0
Net earnings (loss) from
continuing operations.................... $(10,013) (3.6) 13,671 3.8
Net earnings (loss) per share from
continuing operations ................... $ (0.60) $ 0.77
Extraordinary loss, net of tax ............ --- --- (812) (0.2)
Net earnings (loss) ....................... $(10,013) (3.6) 12,859 3.6
Net earnings (loss) per share.............. $ (0.60) $ 0.72
</TABLE>
Net Sales
Net sales for Nine Months 1997 increased from $279.8 million to $361.2
million, a 29.1% improvement. This growth of $81.4 million in net sales was
attributable to increases of 52.7%, 32.7%, 10.2% and 4.0% in the categories of
basketball, athletic originals, children's and cross training respectively
compared to the prior year period.
Net sales in the United States for Nine Months 1997 increased 49.2% to
$229.7 million from $154.0 million for Nine Months 1996. International net sales
increased 4.5% from $125.8 million to $131.5 million over the same prior year
period. Pacific region net sales increased 80.5% to $53.7 million for Nine
Months 1997, while sales in EMEA, Americas and Canada declined 20.5%, 18.1% and
10.4% respectively, compared to the prior year period.
11
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Gross Profit
Gross profit increased 41.3% to $105.1 million for Nine Months 1997 from
$74.4 million for Nine Months 1996. This increase was primarily driven by higher
net sales volumes and improved manufacturing efficiencies. The Company's gross
profit margin percentage improved to 29.1% compared to 26.6% for Nine Months
1996. Although gross profit increased during Nine Months 1997, it was negatively
impacted by $4.1 million of foreign currency losses due to the strengthening of
the U.S. dollar during this period.
Selling, General and Administrative Expenses
Selling, general and administrative expenses increased 12.6% to $99.8
million for Nine Months 1997 from $88.6 million for Nine Months 1996. As a
percentage of total revenue, selling, general and administrative expenses
decreased to 27.6% for Nine Months 1997 from 31.7% for Nine Months 1996. The
increase in selling, general and administrative expenses of $11.2 million was
attributable to: (i) an increase of 17.4% in United States selling expenses to
support the 49.2% increase in net sales, (ii) a 15.1% increase in United States
marketing expenses, (iii) a 32.3% increase in product development and (iv) an
11.8% increase in international marketing expenses.
Royalty Income
Royalty income decreased 3.4% to $16.9 million for Nine Months 1997
compared to $17.5 million for Nine Months 1996. International royalty income,
which represents approximately 80% of the Company's total royalty income
decreased 12.6%, primarily as a result of a decline of 26.8% in the Pacific
region compared to Nine Months 1996. The decrease is primarily attributable to
the streamlining of the distribution of the Company's licensed products in the
Pacific region. The decrease in the Pacific region royalty income was partially
offset by increases of 279.1% in the Americas and 51.7% in the EMEA region
compared to Nine Months 1996. Domestic royalty income increased 72.2% to $3.1
million for Nine Months 1997 compared to $1.8 million for Nine Months 1996.
Earnings from Operations
The Company recorded earnings from operations of $22.8 million for Nine
Months 1997 as compared to $5.6 million for Nine Months 1996. As a percentage of
net sales, earnings from operations were 6.3% for Nine Months 1997 as compared
to 2.0% from the prior year period. The improvement in earnings from operations
is attributable to higher net sales, improved gross profit margins, and lower
selling, general and administrative expenses as a percentage of net sales
partially offset by a decline in royalty income as a percentage of net sales and
reduced restructuring credits compared to the prior year period.
12
<PAGE>
Loss (Credit) on Investment in Unconsolidated Subsidiary
For Nine Months 1997, the Company recorded a pretax gain totaling $13.1
million relating to the settlement of certain obligations related to Apex. See
Note 7 to the Consolidated Financial Statements of the Company included herein.
Interest Expense
Interest expense for Nine Months 1997 decreased 14.7% to $11.0 million from
$12.9 million for Nine Months 1996. The decrease is primarily attributable to
the reversal of $1.4 million of interest payments made into escrow relating to
the subordinated notes issued to the former owners of Apex, issuance of the
Convertible Notes replacing other higher-interest indebtedness, and a reduction
in other related financing fees. See Liquidity and Capital Resources below and
Note 4 to the Consolidated Financial Statements of the Company included herein.
Net Earnings (Loss) from Continuing Operations
Due to the business factors described above, the Company recorded net
earnings from continuing operations of $13.7 million for Nine Months 1997
compared to a net loss from continuing operations of $10.0 million for Nine
Months 1996. Net earnings from continuing operations for Nine Months 1997
include a gain of approximately $8.0 million, net of income taxes, pertaining to
the settlement of outstanding litigation and claims relating to Apex and the
Apex bankruptcy plan confirmation. See Note 7 to the Consolidated Financial
Statements of the Company included herein.
Net Earnings (Loss) Per Share from Continuing Operations
The Company recorded net earnings per share from continuing operations of
$0.77 for Nine Months 1997 compared to a $0.60 loss per share for Nine Months
1996. Earnings per share from continuing operations for Nine Months 1997 include
$0.45 relating to the settlements of virtually all outstanding claims resulting
from the Company's purchase of Apex.
Extraordinary Loss, Net of Tax
The Company entered into a new $150 million secured credit facility (the
"Credit Facility") on May 21, 1997 that replaced its former credit agreement
(the "Old Credit Facility"). In connection with repayment of the Old Credit
Facility, the Company wrote off deferred financing fees of $1,320 relating to
the Old Credit Facility, which resulted in an extraordinary loss net of taxes of
$812.
Net Earnings (Loss)
Due to the business factors described above, the Company recorded net
earnings of $12.9 million for Nine Months 1997 compared to a net loss of $10.0
million for Nine Months 1996. Net earnings for Nine Months 1997 include a gain
of approximately $8.0 million, net of income taxes, pertaining to the settlement
of outstanding litigation and claims relating to Apex and the Apex bankruptcy
plan confirmation. See Note 7 to the Consolidated Financial Statements of the
Company included herein.
13
<PAGE>
Net Earnings (Loss) Per Share
The Company recorded a net earnings per share of $0.72 for Nine Months 1997
compared to a $0.60 loss per share for Nine Months 1996. Earnings per share for
Nine Months 1997 include $0.45 relating to the settlements of virtually all
outstanding claims resulting from the Company's purchase of Apex.
Liquidity and Capital Resources
As of September 27, 1997, the Company's working capital (net of cash)
position increased to $33.4 million from a deficit of $38.6 million at December
28, 1996. Accounts receivable increased $32.2 million as a result of
significantly higher shipments during Nine Months 1997 versus the prior year.
Inventories increased only $3.3 million from year end levels despite the
increased business activity. Working capital requirements were funded by cash
provided by financing activities of $45.3 million for Nine Months 1997.
In May 1997 the Company issued $80 million of Convertible Notes and entered
into the new Credit Facility. Net proceeds from the Convertible Notes of $76.4
were used to repay indebtedness under the Company's Old Credit Facility. Total
borrowings under the Credit Facility and asset based financing arrangements
decreased to $99.6 million at September 27, 1997 from $131.2 million at December
28, 1996. See Note 4 to Consolidated Financial Statements of the Company
included herein.
For Nine Months 1997 and Nine Months 1996 net cash required for operating
activities was $40.3 million and $17.5 million, respectively. During these
periods cash was used predominantly to fund the Company's working capital
requirements. Net cash used by investing activities was $3.8 million for Nine
Months 1997 due to additions to property, plant and equipment. Net cash provided
by investing activities was $1.3 million for Nine Months 1996 due to the sale of
a non-operating distribution facility in South Carolina net of additions to
property, plant and equipment. Net cash provided by financing activities was
$45.3 million and $17.5 million for Nine Months 1997 and Nine Months 1996,
respectively. Cash provided by financing activities for the period was generated
primarily by the net proceeds of $76.4 million from the issuance of the
Convertible Notes and $86.7 million of net borrowings under the Credit Facility
offset by the repayment of $117.7 under the Old Credit Facility.
Year 2000 Software Changes
The Company recognizes the need and urgency of ensuring that it is not
adversely impacted by a software failure arising from the so-called Year 2000
problem. A Company-wide task force has been established to review the situation
and implement potential solutions. Major areas of potential business impact have
been identified, and initial conversion efforts are underway. The Company
presently anticipates having all internal systems completed by in-house staff
prior to 1999. The Company is also in communication with suppliers, customers
and others with which it does business to coordinate conversion efforts. The
total cost of compliance is still being determined.
14
<PAGE>
Backlog
Converse's global order backlog (futures) increased to $177.3 million at
September 27, 1997 from $173.5 million at September 28, 1996, a 2.2% increase.
The athletic originals category order backlog improved 63.1% while the
basketball, children's and cross training categories recorded declines of 25.3%,
19.8% and 20.8% respectively. The United States order backlog remained
relatively flat while international was up 5.0% from the prior year period. On a
constant dollar basis, Converse's global order backlog was up 4.8% and
international backlog was up 12.1%.
Forward-looking statements
Information contained in this Report contains "forward-looking statements"
which can be identified by the use of forward-looking terminology such as
"believes," "expects," "may," "will," "should" or "anticipates" or the negatives
thereof or other variations thereon or comparable terminology. These statements
include information concerning anticipated sales and earnings for the fourth
quarter of 1997 and the first half of 1998 and concerning royalty income for the
fourth quarter of 1997. No assurance can be given that future results covered by
any forward-looking statements will be achieved. The risk factors contained in
the Company's annual report on Form 10-K for the year ended December 28, 1996
constitute cautionary statements identifying important factors with respect to
such forward-looking statements, including certain risks and uncertainties, that
could cause actual results to vary materially from the future results covered in
such forward-looking statements. Other factors, such as the financial strength
of the Company, the competitive pricing environment of the footwear and apparel
industries, consumer demand for athletic footwear, marketing acceptance of the
Company's products, the strength of the U.S. dollar, the success of planned
advertising, marketing and promotional campaigns and a failure to implement
adequate solutions to the Year 2000 problem or high costs of implementation,
could also cause actual results to vary materially from the future results
covered in such forward-looking statements. The Company undertakes no obligation
to publicly release any revisions to these forward-looking statements to reflect
any future events or occurrences.
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 28, 1996.
Item 2. Changes In Securities
Not Applicable
15
<PAGE>
Item 3. Defaults Upon Senior Securities.
Not Applicable
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 Converse Inc. 1994 Stock Option Plan, as Amended and
Restated as of July 30, 1997.
10.2 Converse Inc. 1995 Non-Employee Director Stock Option Plan,
as Amended and Restated as of July 30, 1997.
11 Statement Regarding Computation of Per Share Earnings.
27 Financial Data Schedule
(b) Reports on Form 8-K.
No reports on Form 8-K were filed during the quarter ended
September 27, 1997.
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 10, 1997 Converse Inc.
By: /s/ Donald J. Camacho
-------------------------
Donald J. Camacho
Senior Vice President and
Chief Financial Officer
16
<PAGE>
EXHIBIT INDEX
Exhibit No. Description
- ----------- -----------
10.1 Converse Inc. 1994 Stock Option Plan, as Amended and
Restated as of July 30, 1997.
10.2 Converse Inc. 1995 Non-Employee Director Stock Option Plan,
as Amended and Restated as of July 30, 1997.
11.1 Statement Regarding Computation of Per Share Earnings
27 Financial Data Schedule
<PAGE>
Exhibit 10.1
CONVERSE INC.
1994 STOCK OPTION PLAN
(As Amended and Restated as of July 30, 1997)
1. Objectives of the Plan.
The Converse Inc. 1994 Stock Option Plan (the "Plan") of Converse
Inc. (the "Corporation") is intended to encourage and provide opportunities for
ownership of the Corporation's Common Stock by such key employees (including
officers) of the Corporation and any subsidiaries of the Corporation, and
persons providing bona fide consulting or advisory services to the Corporation
and any subsidiaries (other than in connection with the offer or sale of
securities of the Corporation in a capital raising transaction) ("consultants")
as the Board of Directors of the Corporation (the "Board") or a committee
thereof constituted for this purpose may from time to time determine. The Plan
is also intended to provide incentives for such employees and consultants to put
forth maximum efforts for the successful operation of the Corporation and its
subsidiaries. By extending to such key employees and consultants the opportunity
to acquire proprietary interests in the Corporation and to participate in its
success, the Plan may be expected to benefit the Corporation and its
shareholders by making it possible for the Corporation and its subsidiaries to
attract and retain the best available talent and by providing such key employees
and consultants with added incentives to increase the value of the Corporation's
stock.
2. Stock Subject to the Plan.
There are reserved for issue under the Plan 2,300,000 shares of the
Common Stock, without nominal or par value, of the Corporation (the "Shares").
Such Shares may be, in whole or in part, as the Board shall from time to time
determine, authorized but unissued Shares, or issued Shares which shall have
been reacquired by the Corporation. The maximum number of Shares with respect
to which options may be granted to any individual during any calendar year is
500,000 and the maximum number of Shares with respect to which options may be
granted to any individual during the term of the Plan is 750,000.
3. Administration.
Subject to the express provisions of the Plan, the Plan shall be
administered by the Executive Compensation and Stock Option Committee of the
Board (the "Committee"), and the Committee shall have plenary authority, in its
discretion, to determine the individuals to whom, and the time or times at
which, options, if any, shall be granted, the type of option to be granted
(e.g., incentive or nonqualified) and the number of Shares to be subject to an
option. Subject to the express provisions of the Plan, the Committee shall also
have plenary authority to interpret the Plan, to prescribe, amend and rescind
rules and regulations regarding it, and to take whatever
<PAGE>
action is necessary to carry out the purposes of the Plan. The Committee's
determinations on matters referred to in this Section 3 shall be conclusive.
4. The Committee.
The Committee shall consist of three or more members of the Board.
The Committee shall be appointed by the Board, which may from time to time
designate the number to serve on the Committee, appoint members of the Committee
in substitution for members previously appointed and fill vacancies, however
caused, in the Committee. No member of the Board while a member of the
Committee shall be eligible to receive an option under the Plan. The Committee
shall elect one of its members as its Chairman and shall hold its meetings at
such times and places as it may determine. A majority of the members shall
constitute a quorum. Any determination reduced to writing and signed by all the
members of the Committee shall be fully as effective as if it had been made by a
majority vote at a meeting duly called and held. The Committee may appoint a
secretary, shall keep minutes of its meetings and shall make such rules and
regulations for the conduct of its business as it shall deem advisable.
5. Eligibility.
Options may be granted only to key employees (which term as used
herein includes officers) of, and consultants to, the Corporation and of its
subsidiary corporations (the "subsidiaries") as the term "subsidiary
corporation" is defined in Section 424(f) of the Internal Revenue Code of 1986,
as amended, (the "Code"). For the purposes of the Plan the term "employee"
shall be an individual with an "employment relationship" as defined in Section
421 (Treasury Regulation Section 1.421-7(h)) of the Code. A member of the Board
or of the board of directors of a subsidiary who is not also an employee of or
consultant to the Corporation or of one of its subsidiaries shall not be
eligible to receive an option. Nothing contained in the Plan shall be construed
to limit the right of the Corporation to grant options otherwise than under the
Plan in connection with (i) the employment of any person, (ii) the acquisition,
by purchase, lease, merger, consolidation or otherwise, of the business or
assets of another corporation, firm or association, including grants to
employees thereof who become employees of the Corporation or a subsidiary, or
(iii) other proper corporate purposes.
6. Nonqualified Stock Options.
Unless it is designated an incentive stock option by the Committee,
any option granted under the Plan shall be nonqualified and shall be in such
form as the Committee may from time to time approve. Any such nonqualified
stock option shall be subject to the following terms and conditions and shall
contain such additional terms and conditions, not inconsistent with the
provisions of the Plan, as the Committee shall deem desirable:
2
<PAGE>
(a) Option Price. The option price of Shares purchasable under an
------------
option shall be determined by the Committee in accordance with procedures
established by the Committee.
(b) Option Period. The term of an option shall be fixed by the
-------------
Committee, but no option shall be exercisable after the expiration of ten years
from the date the option is granted.
(c) Exercisability. Options shall be exercisable at such time or
--------------
times as determined by the Committee at or subsequent to grant; provided,
however, that except as provided in Subsections (f), (g) and (h) of this Section
6, no option may be exercised at any time unless the holder is then a regular
employee of, or consultant to, the Corporation or a subsidiary and has
continuously remained an employee or consultant at all times since the date of
granting of the option. If any option granted under the Plan shall expire or
terminate for any reason without ever having been exercised in full, the
unissued shares subject thereto shall again be available for the purposes of the
Plan. The proceeds of the sale of Shares subject to options are to be added to
the general funds of the Corporation.
(d) Method of Exercise. Options which are exercisable may be
------------------
exercised in whole or in part at any time during the option period, by
completing and delivering to the Corporation an option exercise form provided by
the Corporation specifying the number of Shares to be purchased. Such form shall
be accompanied by payment in full of the purchase price in cash. No shares shall
be issued until full payment therefor has been made.
(e) Transferability of Options. No option shall be transferable
--------------------------
by the optionee otherwise than as set forth below or by will or by the laws of
descent and distribution, and such options shall be exercisable, during the
optionee's lifetime, only by the optionee. Notwithstanding the foregoing, if the
Committee in its sole discretion so permits, an optionee may transfer a
nonqualified stock option to the optionee's spouse, parents or lineal
descendants or to a trust for the benefit of such family members or to a
partnership in which such family members are the only partners; provided that
the option shall continue to be subject to the same terms and conditions as were
applicable thereto immediately prior to the transfer.
(f) Termination by Reason of Death. If an optionee's employment,
------------------------------
or engagement as a consultant, by the Corporation or any subsidiary terminates
by reason of death, as to those Shares with respect to which the option had
become exercisable (under the provisions of the particular option) on the date
of death, the stock option may thereafter be exercised by the legal
representative of the estate or by the legatee of the optionee under the will of
the optionee, during a period of one year (six months in the case of options
granted before July 30, 1997) from the date of such death or until the
expiration of the stated period of the option, whichever period is shorter.
3
<PAGE>
(g) Termination by Reason of Retirement or Permanent Disability.
-----------------------------------------------------------
If an optionee's employment, or engagement as a consultant, by the Corporation
or any subsidiary terminates by reason of retirement or permanent disability, as
to those Shares with respect to which the option had become exercisable (under
the provisions of the particular option) on the date of termination of
employment or such engagement, any stock option held by such optionee may
thereafter be exercised for a period of one year following such date (or until
three months following such date in the case of options granted before July 30,
1997); provided, however, that if the optionee dies within such period, any
unexercised stock options held by such optionee shall thereafter be exercisable,
to the extent it was exercisable at the time of death, for a period of one year
(six months in the case of options granted before July 30, 1997) from the date
of such death or for the stated term of the option, whichever period is shorter.
(h) Other Termination. If an optionee's employment, or
-----------------
engagement as a consultant, terminates for any reason other than death,
permanent disability, or retirement, as to those Shares with respect to which
the option had become exercisable (under the provisions of the particular
option) on the date of termination of employment or engagement as a consultant,
any option held by such optionee may thereafter be exercised during a period of
one month from the date of such termination of employment or the expiration of
the stated period of the option, whichever period is shorter; provided, however,
that if the optionee dies within such one-month period, any unexercised option
held by such optionee shall thereafter be exercisable, to the extent to which it
was exercisable at the time of death, for a period of six months from the date
of such death or for the stated period of the option, whichever period is
shorter.
(i) Option Buyout. The Committee may at any time offer to
-------------
repurchase an option, other than an option which has been held for less than six
months by an optionee who is subject to Section 16(b) of the Securities Exchange
Act of 1934, the ("1934 Act"), based on such terms and conditions as the
Committee shall establish and communicate to the optionee at the time that such
offer is made.
7. Incentive Stock Options.
Any option granted under the Plan shall, at the discretion of the
Committee, qualify as an incentive stock option as defined in Section 422(b) of
the Code and shall be in such form as the Committee may from time to time
approve. Any such incentive stock option shall be subject to the following terms
and conditions in addition to those set forth in Section 6 and shall contain
such additional terms and conditions, not inconsistent with the provisions of
the Plan, as the Committee shall deem desirable.
(a) Eligibility. Incentive stock options shall not be granted to any
-----------
individual who, at the time the option is granted, owns stock possessing more
than ten percent of the total combined voting power of all classes of stock of
the Corporation or its parent corporation (as the term "parent corporation" is
defined in Section 424(e) of the Code) or its subsidiaries (a "Ten
4
<PAGE>
Percent Shareholder") unless: 1) the option price is at least 110% of the fair
market value of the Shares subject to the option, and 2) the option states that
it is not exercisable after the expiration of five years from the date the
option is granted. Incentive stock options shall not be granted to a person who
is not a Ten Percent Shareholder unless the option price is at least 100% of the
fair market value of the Shares subject to the option on the date the option is
granted.
(b) Limitation on Exercise of Options. The maximum aggregate
---------------------------------
fair market value (determined at the time an option is granted) of the Shares
with respect to which incentive stock options are exercisable for the first time
by any optionee during any calendar year (under all plans of the Company and its
parent corporation and subsidiaries) shall not exceed $100,000. If the foregoing
$100,000 limit is exceeded with respect to an incentive stock option on account
of the acceleration of the exercise of the option pursuant to Section 8 of the
Plan, the portion of the incentive stock option in excess of the $100,000 limit
shall be treated as a nonqualified stock option. If the provisions of this
Section limit the exercisability of certain incentive stock options which would
otherwise become exercisable on account of termination of employment, the
Committee, in its sole discretion, shall determine the times at which such
incentive stock options become exercisable so that the provisions of this
Section 7(b) are not violated; provided, that in no event shall any incentive
stock option be exercisable more than ten years from the date it is granted
(five years in the case of incentive stock options granted to Ten Percent
Shareholders (described in Section 7(a)).
8. Adjustment Upon Changes in Capitalization, Etc.
The aggregate number and class of shares reserved under the Plan and
with respect to which options may be granted to any individual, the number and
class of shares subject to each option granted pursuant to the Plan and the
option price per Share payable under each such option shall be appropriately and
equitably adjusted in the event of: any reclassification or increase or decrease
in the number of the issued Shares of the Corporation by reason of a split-up or
consolidation of Shares; the payment of a stock dividend; a recapitalization; a
combination or exchange of Shares; a spin-off; or any like capital adjustment.
Subject to the next paragraph, if the Corporation shall be
reorganized or shall be merged with or into or consolidated with any other
corporation, or shall sell all or substantially all of its assets or effect a
complete liquidation, each option, if any, then outstanding under the Plan,
shall thereafter apply to such number and kind of securities, cash or other
property as would have been issuable by reason of such reorganization, merger,
consolidation, sale or liquidation to a holder of the number of Shares which
were subject to the option, if any, immediately prior to such transaction.
In the event of a proposed transaction of the type set forth in the
preceding paragraph, the Committee may determine that each option then
outstanding under the Plan, shall terminate as of a date to be fixed by the
Committee and approved by the Board upon not less
5
<PAGE>
than thirty days' written notice to the optionee; and may further determine when
and to the extent that, any option granted at least six months prior to such
event to any optionee who has been an employee or consultant for one year or
more prior to the date of such notice, shall be accelerated and such optionee
shall be entitled to exercise such option without regard to any installment
provision of the option prior to the termination date fixed in said notice;
provided, however, that in no event shall the Committee have the right to make
any determination provided for in this paragraph, if doing so would make any
transaction ineligible for pooling of interest accounting treatment under APB
No. 16 or any successor provision that but for such determination would be
eligible for such treatment.
All adjustments under this Section 8 shall be made by the Committee,
subject to the approval of the Board, which action shall be final and
conclusive.
Anything to the contrary notwithstanding, upon a Change of Control (as
hereinafter defined) and, in the case of options granted on or after April 1,
1996, subsequent termination of an optionee's employment by the Corporation or
by the optionee as a result of a material breach by the Corporation of any
employment agreement between the optionee and the Corporation, each option
granted prior to such Change of Control shall become immediately exercisable in
full. As used herein, "Change of Control" shall mean any of the following
events:
(a) The acquisition (other than (i) from the Corporation or
INTERCO INCORPORATED or (ii) by Apollo (as hereinafter defined)) by any person,
entity or "group", within the meaning of Section 13(d)(3) or 14(d)(2) of the
1934 Act, excluding, for this purpose, the Corporation or its subsidiaries, or
any employee benefit plan of the Corporation or its subsidiaries, of beneficial
ownership (within the meaning of Rule 13d-3 promulgated under the 1934 Act) of
20% or more of either the then outstanding Shares or the combined voting power
of the Corporation's then outstanding voting securities entitled to vote
generally in the election of directors if the beneficial ownership of such
person, entity or "group" exceeds the beneficial ownership of Shares and the
combined voting power of the Corporation's then outstanding securities entitled
to vote generally in the election of directors held by any person or entity that
acquired such Shares or securities having such voting power from the Corporation
and by Apollo; or
(b) Individuals who, as of the Effective Date (as defined in
Section 12), constitute the Board (as of such date, the "Incumbent Board"),
cease for any reason to constitute at least a majority of the Board; provided,
that any person becoming a director subsequent to the first anniversary of the
Effective Date whose election, or nomination for election by the Corporation's
stockholders, was approved by a vote of at least a majority of the directors
then comprising the Incumbent Board (other than an election or nomination of an
individual whose initial assumption of office is in connection with an actual or
threatened election contest relating to the election of the directors of the
Corporation, as such terms are used in Rule 14a-11 of
6
<PAGE>
Regulation 14A promulgated under the 1934 Act) shall be considered as though
such person were a member of the Incumbent Board; or
(c) Approval by the stockholders of the Corporation of a
reorganization, merger or consolidation, in each case, with respect to which
persons who were the stockholders of the Corporation immediately prior to such
reorganization, merger or consolidation do not, immediately thereafter, own,
directly or indirectly, more than 50% of the combined voting power entitled to
vote generally in the election of directors of the reorganized, merged or
consolidated company's then outstanding voting securities, or a liquidation or
dissolution of the Corporation or the sale of all or substantially all of the
assets of the Corporation, in each case, unless the transaction was approved by
a majority of the directors then comprising the Incumbent Board.
For purposes of the definition of "Change of Control", the term
"Apollo" shall mean Apollo Advisors, L.P. and Lion Advisors, L.P. and any entity
that controls, is controlled by or is under common control with Apollo Advisors,
L.P. and Lion Advisors, L.P., including accounts under common management.
9. Amendments and Termination.
The Board may amend, alter, or discontinue the Plan, but no
amendment, alteration, or discontinuation shall be made which would impair the
rights of an optionee under an option without the optionee's consent, or which
without the approval of the stockholders would, except as is provided in Section
8, increase the total number of Shares reserved for the purpose of the Plan,
change the employees or class of employees and consultants eligible to
participate in the Plan, or extend the maximum option period under Section 6(b).
The Committee may amend the terms of any option theretofore granted,
prospectively or retroactively, but no such amendment shall impair the rights of
any optionee without the consent of the optionee. The Committee may also
substitute new options for previously granted options, including substitution
for previously granted options having higher option prices.
10. General Provisions.
(a) The Committee may require each person purchasing Shares
pursuant to an option under the Plan to represent to and agree with the
Corporation in writing that the optionee is acquiring the Shares without a view
to distribution thereof. The certificates for such Shares may include any legend
which the Committee deems appropriate to reflect any restrictions on transfer.
(b) All certificates for Shares delivered under the Plan shall be
subject to such stock-transfer orders and other restrictions as the Committee
may deem advisable under the rules,
7
<PAGE>
regulations, and other requirements of the Securities and Exchange Commission,
any stock exchange upon which the Shares are then listed, and any applicable
federal or state securities law, and the Committee may cause a legend or legends
to be put on any such certificates to make appropriate reference to such
restrictions.
(c) Nothing contained in the Plan shall prevent the Board from
adopting other or additional compensation arrangements, subject to stockholder
approval if such approval is required; and such arrangements may be either
generally applicable or applicable only in specific cases.
11. Taxes.
Following exercise of an option, the optionee shall, no later than
the date as of which an amount related to the option exercise first becomes
includable in the gross income of the optionee for federal, state or local tax
purposes, pay to the Corporation, or make arrangements satisfactory to the
Corporation regarding payment of, any federal, state, or local taxes of any kind
required by law to be withheld with respect to such amount and the Corporation
and its subsidiaries shall, to the extent permitted by law, have the right to
deduct any such taxes from any payment of any kind otherwise due to the
optionee.
12. Effective Date of Plan.
The Plan became effective on October 19, 1994 the date it was adopted
by the Board and by the Company's then sole stockholder (the "Effective Date").
The Plan as amended and restated shall be effective as of April 1, 1996, the
date as of which it is adopted by the Board, subject to stockholder approval.
13. Term of Plan.
No option shall be granted pursuant to the Plan more than 10 years
after the Effective Date, but options theretofore granted may extend beyond and
be exercised after that date.
8
<PAGE>
Exhibit 10.2
CONVERSE INC.
1995 NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN
--------------------------------------------
(as amended and restated on July 30, 1997)
The purposes of the Converse Inc. 1995 Non-Employee Director Stock Option
Plan (the "Plan") are to foster and promote the long term financial success of
Converse Inc. (the "Company") by (a) attracting and retaining directors who are
not employees and are not affiliated with the Company's largest stockholders,
Lion Advisors, L.P. ("LALP") and Apollo Investment Fund, L.P. ("AIFLP") ("Non-
Employee Directors") of outstanding ability by providing for the grant of
nonqualified stock options; (b) providing Non-Employee Directors with
compensation opportunities which are competitive with other corporations; and
(c) enabling such directors to participate in such financial success of the
Company by encouraging them to become owners of the common stock of the Company.
The Company believes that the Plan will cause the participants to contribute
materially to the growth of the Company, thereby benefitting the Company's
stockholders and will align the economic interests of the participants with
those of the stockholders.
1. Administration
--------------
Administration of this Plan is intended to be self-executing in accordance
with the express terms and conditions of the Plan. However, to the extent that
determinations are required with respect to ministerial matters under the Plan,
such determinations shall be made by a committee (the "Committee") consisting of
not less than two persons appointed by the Board of Directors of the Company
from among its members who are Non-Employee Directors of the Company, all of
whom shall be "disinterested persons" as defined under Rule 16b-3 under the
Securities Exchange Act of 1934 (the "Exchange Act"). In no event shall such
determinations affect the eligibility of awards made or to be made under the
Plan as "formula awards" within the meaning of Rule 16b-3(c)(2)(ii) under the
Exchange Act, or any successor regulation. Subject to the foregoing, the
Committee's interpretations of the Plan and all determinations made by the
Committee pursuant to the powers vested in it hereunder shall be conclusive and
binding.
2. Grants
------
Incentives under the Plan shall consist of nonqualified stock options
("Grants"). All Grants shall be subject to the terms and conditions set forth
herein and to those other terms and conditions consistent with this Plan as the
Committee deems appropriate and as are specified in writing by the Committee to
the employee (the "Grant Letter"). The Committee shall approve the form and
provisions of each Grant Letter to each Non-Employee Director; provided,
however, that Grants to Non-Employee Directors shall be made only in accordance
with the provisions of Section 5.
-1-
<PAGE>
3. Shares Subject to the Plan
--------------------------
(a) Subject to the adjustment specified below, the aggregate number of
shares of common stock of the Company ("Company Stock") that have been or may be
issued or transferred under the Plan is 45,000 shares. The shares may be
authorized but unissued shares of Company Stock or reacquired shares of Company
Stock, including shares repurchased by the Company on the open market. If and
to the extent options granted under the Plan terminate, expire, or cancel
without having been exercised, the shares subject to such option shall again be
available for purposes of the Plan.
(b) If there is any change in the number or kind of shares of Company
Stock issuable under the Plan through the declaration of stock dividends, or
through a recapitalization, stock splits, or combinations or exchanges of such
shares, or merger, reorganization or consolidation of the Company,
reclassification or change in par value or by reason of any other extraordinary
or unusual events affecting the outstanding Company Stock as a class without the
Company's receipt of consideration, the maximum number of shares of Company
Stock available for Grants, the maximum number of shares of Company Stock for
which any one individual participating in the Plan may be granted over the term
of the Plan, the number of shares of Company Stock for which automatic grants
are to be subsequently made to Non-Employee Directors under Section 5 and the
number of such shares covered by outstanding Grants, and the price per share or
the applicable market value of such Grants, shall be proportionately adjusted by
the Committee to reflect any increase or decrease in the number or kind of
issued shares of Company Stock to preclude the enlargement or dilution of rights
and benefits under such Grants; provided, however, that any fractional shares
resulting from such adjustment shall be eliminated. The adjustments determined
by the Committee shall be final, binding and conclusive.
4. Eligibility for Participation
-----------------------------
Only Non-Employee Directors shall be eligible to participate in the Plan
(hereinafter referred to individually as the "Participant" and collectively as
the "Participants").
5. Stock Option Grants to Non-Employee Directors
---------------------------------------------
(a) Number of Shares. Each director who is a Non-Employee Director (it
being understood that individuals affiliated with LALP and AIFLP are not
eligible to participate in the Plan) shall receive a grant of a nonqualified
stock option to purchase 7,500 shares of Company Stock as of the effective date
of this Plan as set forth in Section 14, subject to the approval of the
Company's stockholders. Each individual who becomes a Non-Employee Director
after the effective date of this Plan as set forth in Section 14 shall receive a
grant of a nonqualified stock option to purchase 7,500 shares of Company Stock
as of the date of his or her first election to the Board of Directors.
-2-
<PAGE>
(b) Option Price and Exercise Period. The purchase price of Company Stock
subject to such grants shall be the fair market value of a share of such stock
as of the date such Stock Option is granted. The "fair market value" of Company
Stock shall be the closing price of a share of Company Stock on the New York
Stock Exchange; provided, however, that if shares of Company Stock shall not be
listed on the New York Stock Exchange, then the fair market value will be the
closing price of a share of Company Stock on the principal stock exchange on
which such shares are listed for trading, or if no sale takes place on such day
on any such exchange, the average of the closing bid and asked prices on such
day as officially quoted on any such stock exchange or if the Company Stock is
not admitted to trading on any stock exchange the fair market price shall be the
last sale reported on the NASDAQ National Market System published in the Wall
Street Journal or, if no such sale is so reported, the average of the reported
closing bid and asked prices on such day in the over-the-counter market, as
furnished by the National Association of Security Dealers Automated System, or,
if such price at the time is not available from such system, as furnished by any
similar system then engaged in the business of reporting such prices and
selected by the Company or, if there is no such system, as furnished by any
member of the National Association of Security Dealers, selected by the Company.
Each Stock Option granted pursuant to this Section shall have an exercise period
of ten years from the date of grant.
(c) Vesting of Options. The vesting period for such Stock Options shall
commence on the date of grant and shall end on the third anniversary thereof,
with one-third of the shares of Company Stock subject to each grant becoming
exercisable on each anniversary date of the Grant, on a cumulative basis.
Notwithstanding the foregoing, all outstanding Stock Options granted pursuant to
this Section shall become immediately exercisable upon a Change of Control of
the Company (as defined herein).
(d) Manner of Exercise. A Non-Employee Director may exercise a Stock
Option by delivering a notice of exercise to the Secretary of the Company with
accompanying payment of the option price. Such notice may instruct the Company
to deliver shares of Company Stock due upon the exercise of the Stock Option to
any registered broker or dealer designated by the grantee ("Designated Broker")
in lieu of delivery to the grantee. Such instruction must designate the account
into which the shares are to be deposited.
(e) Satisfaction of Option Price. A Non-Employee Director shall pay the
option price in cash. A Non-Employee Director shall pay the option price at the
time of exercise. Shares of Company Stock shall not be issued or transferred
upon exercise of a Stock Option until the option price is fully paid.
(f) Termination of Relationship With the Company, Disability or Death.
-----------------------------------------------------------------
(1) In the event a Non-Employee Director during his lifetime ceases to
serve as a Non-Employee Director for any reason other than on account
of becoming an employee of the Company or death, any Stock Option
granted pursuant to this Section which is otherwise exercisable by the
Non-Employee
-3-
<PAGE>
Director shall terminate unless exercised within three months of the
date on which he ceases to serve as a Non-Employee Director, but in any
event no later than the date of expiration of the option exercise
period; provided, however, that in the case of a Non-Employee Director
who is disabled within the meaning of Section 105(d)(4) of the Internal
Revenue Code of 1986, as amended (the "Code"), such period shall be one
year (for six months in the case of options granted before July 30,
1997); provided further, however, if the optionee dies within such
period, any unexercised stock options held by optionee shall thereafter
be exercisable, to the extent it was exercisable on at the time of
death, for a period of one year (six months in the case of options
granted before July 30, 1997) from the date of such death or for the
stated term of the option, whichever period is shorter.
(2) In the event of the death of the Non-Employee Director while he is
serving as a Non-Employee Director or within not more than three months
of the date on which he ceases to be a Non-Employee Director, any Stock
Option granted pursuant to this Section which was otherwise exercisable
by the Non-Employee Director at the date of death may be exercised by
his personal representative at any time prior to the expiration of one
year (six months in the case of options granted before July 30, 1997)
from the date of death, but in any event no later than the date of
expiration of the option exercise period.
(g) Rule 16b-3 Restrictions. Unless a Non-Employee Director could
otherwise transfer Company Stock issued pursuant to a Stock Option granted
pursuant to this Section without incurring liability under Section 16(b) of the
Exchange Act, at least six months must elapse from the date of acquisition of
the Stock Option to the date of disposition of the Company Stock issued upon
exercise of such Stock Option. Notwithstanding any other provision of the Plan,
this Section may not be amended more than once every six months, except for
amendments necessary to conform the Plan to changes of the provisions of, or the
regulations relating to, the Code.
6. Transferability of Options
--------------------------
Only a Participant or his or her authorized legal representative may
exercise rights under a Grant. Such persons may not transfer those rights
except by will or by the laws of descent and distribution or, if permitted under
Rule 16b-3 of the Exchange Act and if permitted in any specific case by the
Committee in their sole discretion, pursuant to a qualified domestic relations
order as defined under the Code or Title I of ERISA or the regulations
thereunder. When a Participant dies, the personal representative or other
person entitled to succeed to the rights of the Participant (a "Successor
Grantee") may exercise such rights. A Successor Grantee must furnish proof
satisfactory to the Company of his or her right to receive the Grant under the
Participant's will or under the applicable laws of descent and distribution.
-4-
<PAGE>
7. Change of Control of the Company
--------------------------------
Upon a Change of Control (as hereinafter defined) each option granted
prior to such Change of Control shall become immediately exercisable in full.
As used herein, "Change of Control" shall mean any of the following events:
(a) The acquisition (other than by Apollo (as hereinafter
defined)) by any person, entity or "group," within the meaning of Section
13(d)(3) or 14(d)(2) of the Exchange Act, excluding, for this purpose, the
Company or its subsidiaries, or any employee benefit plan of the Company or its
subsidiaries, of beneficial ownership (within the meaning of Rule 13d-3
promulgated under the Exchange Act) of 20% or more of either the then
outstanding shares of Company Stock or the combined voting power of the
Company's then outstanding voting securities entitled to vote generally in the
election of directors if the beneficial ownership of such person, entity or
"group" exceeds the beneficial ownership of shares of Company Stock and the
combined voting power of the Company's then outstanding securities entitled to
vote generally in the election of directors held by any person or entity that
acquired such shares of Company Stock or securities having such voting power
from the Company and by Apollo; or
(b) Individuals who, as of the Effective Date (as defined in
Section 14), constitute the Board (as of such date, the "Incumbent Board"),
cease for any reason to constitute at least a majority of the Company's Board of
Directors; provided, that any person becoming a director subsequent to the first
anniversary of the Effective Date whose election, or nomination for election by
the Company's stockholders, was approved by a vote of at least a majority of the
directors then comprising the Incumbent Board (other than an election or
nomination of an individual whose initial assumption of office is in connection
with an actual or threatened election contest relating to the election of the
directors of the Company, as such terms are used in Rule 14a-11 of Regulation
14A promulgated under the Exchange Act) shall be considered as though such
person were a member of the Incumbent Board; or
(c) Approval by the stockholders of the Company of a
reorganization, merger or consolidation, in each case, with respect to which
persons who were the stockholders of the Company immediately prior to such
reorganization, merger or consolidation do not, immediately thereafter, own,
directly or indirectly, more than 50% of the combined voting power entitled to
vote generally in the election of directors of the reorganized, merged or
consolidated Company's then outstanding voting securities, or a liquidation or
dissolution of the Company or the sale of all or substantially all of the assets
of the Company, in each case, unless the transaction was approved by a majority
of the directors then comprising the Incumbent Board.
For purposes of the definition of "Change of Control," the term
"Apollo" shall mean Apollo Advisors, L.P. and LALP and any entity that controls,
is controlled by or is under common control with Apollo Advisors, L.P. and LALP,
including accounts under common management.
-5-
<PAGE>
8. Amendment and Termination of the Plan
-------------------------------------
(a) Amendment. The Board of Directors of the Company, by written
resolution, may amend or terminate the Plan at any time; provided, however, that
any amendment that materially increases the benefits accruing to Participants
under the Plan, increases the aggregate number (or individual limit for any
single grantee) of shares of Company Stock that may be issued or transferred
under the Plan (other than by operation of Section 3(b)), or modifies the
requirements as to eligibility for participation in the Plan, shall be subject
to approval by the stockholders of the Company, and provided, further, that the
Board of Directors shall not amend the Plan if such amendment would cause the
Plan or any Grant, or the exercise of any right under the Plan to fail to comply
with the requirements of Rule 16b-3 under the Exchange Act.
(b) Termination of Plan. The Plan shall terminate on the tenth
anniversary of its effective date unless terminated earlier by the Board of
Directors of the Company or unless extended by the Board with the approval of
the shareholders.
(c) Termination and Amendment of Outstanding Grants. A termination
or amendment of the Plan that occurs after a Grant is made shall not result in
the termination or amendment of the Grant unless the grantee consents or unless
the Committee acts under Section 15(a). The termination of the Plan shall not
impair the power and authority of the Committee with respect to an outstanding
Grant. Whether or not the Plan has terminated, an outstanding Grant may be
terminated or amended under Section 15(a) or may be amended by agreement of the
Company and the grantee consistent with the Plan.
9. Funding of the Plan
-------------------
This Plan shall be unfunded. The Company shall not be required to
establish any special or separate fund or to make any other segregation of
assets to assure the payment of any Grants under this Plan. In no event shall
interest be paid or accrued on any Grant, including unpaid installments of
Grants.
10. Rights of Participants
----------------------
Nothing in this Plan shall entitle any Participant or other person to
any claim or right to be granted an award under this Plan. Neither this Plan nor
any action taken hereunder shall be construed as giving any Participant any
rights to be retained by or in the employ of the Company.
11. Agreements with Participants
----------------------------
Each Grant made under this Plan shall be evidenced by a Grant Letter
containing such terms and conditions as the Committee shall approve; provided,
however,
-6-
<PAGE>
that Grants to Non-Employee Directors shall be made only in accordance with the
provisions of Section 5.
12. Requirements for Issuance of Shares
-----------------------------------
No Company Stock shall be issued or transferred upon payment of any
Grant hereunder unless and until all legal requirements applicable to the
issuance or transfer of such Company Stock have been complied with to the
satisfaction of the Committee. The Committee shall have the right to condition
any Stock Option made to any Participant hereunder on such Participant's
undertaking in writing to comply with such restrictions on his subsequent
disposition of such shares of Company Stock as the Committee shall deem
necessary or advisable as a result of any applicable law, regulation or official
interpretation thereof, and certificates representing such shares may be
legended to reflect any such restrictions.
13. Headings
--------
Section headings are for reference only. In the event of a conflict
between a title and the content of a Section, the content of the Section shall
control.
14. Effective Date and Designation of the Board
-------------------------------------------
Subject to the approval of the Company's stockholders, this Plan
shall be effective as of March ___, 1995 (the "Effective Date").
15. Miscellaneous
-------------
(a) Compliance with Law. The Plan, the exercise of Grants and the
obligations of the Company to issue or transfer shares of Company Stock under
Grants shall be subject to all applicable laws and to approvals by an
governmental or regulatory agency as may be required. With respect to persons
subject to Section 16 of the Exchange Act, it is the intent of the Company that
the Plan and all transactions under the Plan comply with all applicable
provisions of Rule 16b-3 or its successors under the Exchange Act. The
Committee may revoke any Grant if it is contrary to law or modify a Grant to
bring it into compliance with any valid and mandatory government regulation.
The Committee may, in its sole discretion, agree to limit its authority under
this Section.
(b) Ownership of Stock. A grantee or Successor Grantee shall have
no rights as a stockholder with respect to any shares of Company Stock covered
by a Grant until the shares are issued or transferred to the grantee or
Successor Grantee on the stock transfer records of the Company.
(c) Indemnification of Committee. In addition to such other rights
of indemnification as they may have as directors or as members of the Committee,
the members of the Committee shall be indemnified by the Company against the
reasonable expenses, including attorneys' fees actually and necessarily incurred
in connection with
-7-
<PAGE>
any appeal therein, to which they or any of them may be a party by reason of any
action taken or failure to act under or in connection with the Plan or any Grant
thereunder, and against all amounts paid by them in settlement thereof (provided
such settlement is approved by independent legal counsel selected by the
Company) or paid by them in satisfaction of a judgment in any such action, suit
or proceeding except in relation to matters as to which it shall be adjudged in
such action, suit or proceeding that such Committee member is liable for
negligence or misconduct in the performance of his duties; provided that within
60 days after institution of any such action, suit or proceeding the Committee
member shall in writing offer the Company the opportunity, at its own expense,
to handle and defend the same.
-8-
<PAGE>
Exhibit 11.1
CONVERSE INC. AND SUBSIDIARIES
STATEMENT REGARDING COMPUTATION OF PER SHARE EARNINGS
(Dollars in thousands, except per share amounts)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
--------------------------------- --------------------------------
Sept. 28, 1996 Sept. 27, 1997 Sept. 28, 1996 Sept. 27, 1997
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
Primary:
- --------
Weighted average number of shares outstanding.... 16,707 17,277 16,697 17,255
Weighted average incremental shares from assumed
conversion of common stock equivalents......... 0 467 --- 581
-------- ------- -------- -------
16,707 17,744 16,697 17,836
Income (loss) available to common stockholders... $ (3,011) $ 175 $(10,013) $12,859
Primary earnings (loss) per share................ $ (0.18) $ 0.01 $ (0.60) $ 0.72
Fully Diluted:
- --------------
Weighted average number of common
shares outstanding............................. 16,707 17,277 16,697 17,255
Weighted average incremental shares from assumed
conversion of common stock equivalents......... --- 464 --- 576
-------- ------- -------- -------
16,707 17,741 16,697 17,831
Income (loss) available to common stockholders... $ (3,011) $ 175 $(10,013) $12,859
Fully diluted earnings (loss) per share $ (0.18) $ 0.01 $ (0.60) $ 0.72
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JAN-03-1998
<PERIOD-START> DEC-29-1996
<PERIOD-END> SEP-27-1997
<CASH> 7,178
<SECURITIES> 0
<RECEIVABLES> 97,130
<ALLOWANCES> 3,352
<INVENTORY> 90,117
<CURRENT-ASSETS> 207,014
<PP&E> 29,083
<DEPRECIATION> 10,112
<TOTAL-ASSETS> 257,763
<CURRENT-LIABILITIES> 166,417
<BONDS> 80,000
0
0
<COMMON> 17,318
<OTHER-SE> (46,933)
<TOTAL-LIABILITY-AND-EQUITY> 257,763
<SALES> 361,196
<TOTAL-REVENUES> 378,085
<CGS> 256,047
<TOTAL-COSTS> 355,318
<OTHER-EXPENSES> (10,454)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 10,992
<INCOME-PRETAX> 22,229
<INCOME-TAX> 8,558
<INCOME-CONTINUING> 13,671
<DISCONTINUED> 0
<EXTRAORDINARY> 812
<CHANGES> 0
<NET-INCOME> 12,859
<EPS-PRIMARY> 0.72
<EPS-DILUTED> 0.72
</TABLE>
