<PAGE> 1
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended DECEMBER 31, 1998
-----------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission File Number 0-14044
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DEFIANCE, INC.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 34-1526359
-------------------------------- -----------------------------
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
1111 Chester Ave., Suite 750, Cleveland, Ohio 44114-3516
- -------------------------------------------------- ----------------------------
(Address of principal executive offices) (Zip Code)
(Registrant's telephone number, including area code) (216) 861-6300
-------------------------
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
----------- -----------
The number of Common Shares outstanding at February 12, 1999 was 6,003,749.
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PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
DEFIANCE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET
(All amounts in thousands)
ASSETS
------
<TABLE>
<CAPTION>
12/31/98 6/30/98
------------- -------------
<S> <C> <C>
CURRENT ASSETS:
Cash $297 $2,916
Accounts receivable 19,078 16,679
Inventories -- Note B 3,762 3,801
Deferred income taxes 601 590
Prepaid expenses and other current assets -- Note C 3,044 3,311
------------- -------------
Total current assets 26,782 27,297
PROPERTY, PLANT AND EQUIPMENT -- net 33,913 34,722
COST IN EXCESS OF NET ASSETS OF ACQUIRED COMPANIES 4,493 4,619
OTHER ASSETS 1,386 1,304
============= =============
Total assets $66,574 $67,942
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES:
Current maturities of long-term obligations $2,923 $3,353
Accounts payable 5,379 4,967
Accrued payroll and employee benefits 2,771 3,707
Accrued expenses -- Note D 2,570 2,648
------------- -------------
Total current liabilities 13,643 14,675
LONG-TERM OBLIGATIONS -- Note E 10,392 9,955
DEFERRED INCOME TAXES 3,234 3,209
CONTINGENCIES -- Note F
STOCKHOLDERS' EQUITY:
Common shares 351 351
Additional paid-in capital 24,077 24,141
Common shares in treasury, at cost -- Note G (6,912) (5,770)
Retained earnings 21,789 21,381
------------- -------------
Total stockholders' equity 39,305 40,103
============= =============
Total liabilities and stockholders' equity $66,574 $67,942
============= =============
</TABLE>
See notes to condensed consolidated financial statements.
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<PAGE> 3
DEFIANCE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF INCOME
(All amounts in thousands, except per share amounts)
<TABLE>
<CAPTION>
Three months ended Six months ended
12/31/98 12/31/97 12/31/98 12/31/97
------------- -------------- ------------- -------------
<S> <C> <C> <C> <C>
Net sales $24,152 $21,772 $46,132 $42,373
Cost of goods sold 19,202 17,680 37,624 34,657
------------- -------------- ------------- -------------
Gross profit 4,950 4,092 8,508 7,716
Selling and administrative expenses 3,446 2,355 6,428 5,243
Other charges --Note J 210 210
------------- -------------- ------------- -------------
Operating earnings 1,294 1,737 1,870 2,473
Interest expense -- net 253 323 485 646
------------- -------------- ------------- -------------
Earnings before income tax provision 1,041 1,414 1,385 1,827
Income tax provision 368 498 491 649
------------- -------------- ------------- -------------
Net earnings $673 $916 $894 $1,178
============= ============== ============= =============
Common shares issued and outstanding:
Beginning of period 6,003,749 6,409,896 6,161,449 6,416,896
Shares issued during period 4,000 7,000
Shares purchased for treasury (350,000) (157,700) (360,000)
------------- -------------- ------------- -------------
End of period 6,003,749 6,063,896 6,003,749 6,063,896
============= ============== ============= =============
Average outstanding common shares:
Used for basic net earnings per common share 6,003,749 6,095,744 6,065,201 6,256,766
Effect of dilutive securities -- stock options 6,701 48,013 10,565 37,386
------------- -------------- ------------- -------------
Used for diluted net earnings per
common share 6,010,450 6,143,757 6,075,766 6,294,152
============= ============== ============= =============
Basic and diluted net earnings per share -- Note H $0.11 $0.15 $0.15 $0.19
============= ============== ============= =============
</TABLE>
See notes to condensed consolidated financial statements.
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<PAGE> 4
DEFIANCE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(All amounts in thousands)
<TABLE>
<CAPTION>
Six months ended
12/31/98 12/31/97
------------- -------------
<S> <C> <C>
OPERATING ACTIVITIES:
Net earnings $894 $1,178
Items not affecting cash:
Depreciation and amortization 3,317 3,722
Deferred income taxes (24) (70)
Current items:
Other current items (3,075) 2,533
------------- -------------
Cash provided by operating activities 1,112 7,363
------------- -------------
INVESTING ACTIVITIES:
Capital expenditures (2,001) (1,098)
Payments received on notes receivable from sale of business 113 275
Other -- net (223) 163
------------- -------------
Cash used for investing activities (2,111) (660)
------------- -------------
FINANCING ACTIVITIES:
Payments of long-term obligations (1,849) (3,597)
Additions to long-term obligations 1,856
Issuance of common shares from exercise of stock options 92
Repurchase of common shares (1,141) (2,618)
Dividends paid (486) (499)
------------- -------------
Cash used for financing activities (1,620) (6,622)
------------- -------------
CASH:
Increase (decrease) (2,619) 81
Beginning of period 2,916 188
============= =============
End of period $297 $269
============= =============
</TABLE>
See notes to condensed consolidated financial statements.
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<PAGE> 5
DEFIANCE, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SIX MONTHS ENDED DECEMBER 31, 1998
(All amounts in thousands, except share amounts)
A - CONSOLIDATED FINANCIAL STATEMENTS
These unaudited interim financial statements reflect all adjustments (consisting
solely of normal recurring adjustments) that, in the opinion of management, are
necessary for a fair statement of results of the interim periods presented. This
report includes information condensed from, and should be read in conjunction
with, the Company's annual report on Form 10-K for the year ended June 30, 1998.
<TABLE>
<CAPTION>
B - INVENTORIES
12/31/98 6/30/98
-------------- -------------
<S> <C> <C>
Raw materials $1,287 $1,628
Work in process 1,142 1,164
Finished goods 1,333 1,009
-------------- -------------
$3,762 $3,801
============== =============
C - PREPAID EXPENSES AND OTHER CURRENT ASSETS
12/31/98 6/30/98
-------------- -------------
Pension $773 $795
Factory and production supplies 760 761
Insurance 254 243
Preoperating costs 381
Other 1,257 1,131
-------------- -------------
$3,044 $3,311
============== =============
D - ACCRUED EXPENSES
12/31/98 6/30/98
-------------- -------------
Taxes $469 $944
Insurance 338 499
Rent 202 255
Interest 221 186
Other 1,340 764
-------------- -------------
$2,570 $2,648
============== =============
</TABLE>
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<PAGE> 6
E - LONG TERM OBLIGATIONS
The Company has a $6,000 unsecured revolving line of credit with its primary
lender, which expires October 2000. At December 31, 1998, the Company had $4,145
available for borrowing under this facility. Effective August 19, 1998,
borrowings under this facility carry interest at the prime rate less 125 basis
points. Also effective August 19, 1998, the Company's variable rate terms loans
carry interest at the Euro dollar rate plus 90 basis points. This represents a
25 basis point reduction from the rate spreads previously in effect.
F - CONTINGENCIES
The Company is involved in various litigation arising in the normal course of
business. It is not possible to determine the ultimate liability, if any, in
these matters. In the opinion of management, such litigation is not expected to
have a material effect on the consolidated financial position or results of
operations.
G - COMMON SHARES IN TREASURY
The Company adopted a stock repurchase plan in January 1996. During the six
months ended December 31, 1998 the Company repurchased 157,700 shares in open
market transactions for $1,141. As of December 31, 1998, the Company had
repurchased 1,021,800 shares for $6,912. A total of 1,500,000 shares have been
authorized for repurchase under this plan.
H - NET EARNINGS PER COMMON SHARE
All earnings per share amounts for all periods have been presented and where
necessary, restated to conform to the requirements of Statement of Financial
Accounting Standards (SFAS) Statement Number 128, "Earnings per Share."
I - COMPREHENSIVE INCOME
As of July 1, 1998, the Company adopted SFAS Statement 130, "Reporting
Comprehensive Income." Statement 130 establishes new rules for the reporting and
display of comprehensive income and its components; however, the adoption of
this Statement had no impact on the Company's net income or stockholders'
equity. During the first two quarters of fiscal years 1999 and 1998, total
comprehensive income was the same as net income since the Company had no items
qualifying as other comprehensive income.
J - SUBSEQUENT EVENT AND OTHER CHARGES
On January 8, 1999, the Company and The General Chemical Group Inc. (NYSE: GCG)
announced that General Chemical, through DN Acquisition Corporation, an indirect
wholly-owned subsidiary of General Chemical, would make a cash tender offer for
all outstanding shares of Defiance common stock at $9.50 per share. The offer
commenced on January 13, 1999. The offer and withdrawal rights expired at 12:00
midnight, New York City time, on Thursday, February 11, 1999, at which time DN
Acquisition Corporation accepted for payment 5,651,767 shares representing 94.1
percent of the 6,003,749 outstanding shares. DN Acquisition Corporation accepted
for payment all shares properly tendered and not withdrawn in the offer. The
Company's board of directors had unanimously recommended that the stockholders
of Defiance accept the offer and tender their shares. Further information is
provided in Item 2 under the heading "Recent Developments".
As of December 31, 1998 the Company had incurred costs directly relating to this
transaction of $210. This amount is classified as "Other charges" in the
Condensed Consolidated Statement of Income.
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<PAGE> 7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RESULTS OF OPERATIONS
- ---------------------
Net Sales
- ---------
Net sales increased by $2,380,000, or 10.9 percent, for the quarter and by
$3,759,000, or 8.9 percent, for the year to date compared with last year,
primarily from higher testing and tooling development services revenues and
sales of prototype dies and parts, reflecting increased prototype, tooling and
testing activity at the Big Three and their Tier One suppliers. Sales of cam
follower rollers and axles were up slightly for the quarter and remained
slightly ahead of last year on a year to date basis, despite the General Motors
labor strike, which reduced sales in the first fiscal quarter this year by
approximately $1,100,000.
Gross Profit
- ------------
Gross profit, as a percentage of sales, increased from 18.8 percent last year to
20.5 percent this year for the quarter, and from 18.2 percent last year to 18.4
percent this year for the year to date, primarily from increased sales of work
performed in-house.
Selling and Administrative (S&A) Expenses
- -----------------------------------------
S&A expenses, as a percentage of sales, increased to 14.3 percent from 10.8
percent for the quarter and to 13.9 percent from 12.4 percent for the year to
date compared with last year, primarily from increased investments in product
engineering and development, sales and marketing to Tier One automotive
suppliers and improvements in manufacturing and quality systems.
Interest Expense -- Net
- -----------------------
Interest expense, net of interest income, was 21.7 percent lower for the quarter
and 24.9 percent lower for the year to date compared with last year due to lower
average net borrowings at slightly lower interest rates.
Income Taxes
- ------------
The effective income tax rate was 35.4 percent for the quarter and 35.5 percent
for the year to date, compared with 35.2 percent for the quarter and 35.5
percent for the year to date last year. Differences in effective rates are due
to future taxable amounts considered in the computation of income taxes for the
current year as required by Statement of Financial Accounting Standards No. 109,
"Accounting for Income Taxes."
Year 2000
- ---------
As discussed in the Company's annual report on Form 10-K for the year ended June
30, 1998, the Company has completed its assessment of Year 2000 implications and
has put an action plan in place with the necessary resources dedicated to
resolution. The Company continues to believe that with modifications to existing
software, conversions to new software, and in some cases the purchase of new
hardware, the Year 2000 issue will not pose significant operational problems or
materially affect future financial results or the financial condition of the
Company. The Company continues to make inquiries of its critical suppliers
regarding their Year 2000 readiness and follow up these inquiries to ensure, to
the best of its ability, that these suppliers will also be Year 2000 compliant.
Union Contract Agreement
- ------------------------
On November 21, 1998, the Company's Defiance Precision Products, Inc. subsidiary
and United Auto Workers Local 638 reached agreement on a new three-year contract
which will expire in November 2001. The new agreement covers approximately 240
employees at two production facilities located in Defiance, Ohio.
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
Cash provided by operating activities for the year to date was $1,112,000, which
met working capital needs. Cash used by current items was $3,075,000, primarily
from an increase in accounts receivable due to substantially higher sales levels
at the end of the current quarter as compared with the end of the previous
fiscal year. At the end of the quarter the current ratio was 1.96 to 1 compared
with 1.86 to 1 at the end of the prior fiscal year. Working capital was
$13,139,000 at the end of the quarter compared with $12,622,000 at the end of
the prior fiscal year.
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<PAGE> 8
Interest-bearing (funded) debt increased by $7,000 for the year to date.
Scheduled payments of long-term obligations totaled $1,849,000 and borrowings on
the revolving line of credit were $1,856,000. At the end of the quarter, the
debt to total capitalization ratio (funded debt divided by the sum of funded
debt and stockholders' equity) was 25 percent, unchanged from the end of the
prior fiscal year. The Company had $4,145,000 available in additional borrowing
capacity under its revolving credit facility at December 31, 1998.
Capital expenditures for the year to date totaled $2,001,000, and at the end of
the quarter the Company had no significant outstanding commitments for capital
expenditures. Based on currently expected levels of business, the Company now
estimates it will spend approximately $4,000,000 this fiscal year relative to
asset replacements, cost reduction programs and productivity improvement
programs. Additional capital expenditures relative to new or increased sales are
currently estimated at $1,000,000. The Company has the necessary financing
capacity available, if required, to fund its outstanding commitments and expects
to fund its remaining planned capital expenditures for the fiscal year through
operating cash flow.
The Company repurchased 157,700 of its common shares in open market transactions
for $1,141,000 for the year to date, all of which occurred during the first
fiscal quarter. Quarterly cash dividends of $0.04 per share were paid to
shareholders in September and December 1998. Dividend payments totaled $486,000
for the year to date. The Company has not repurchased any additional shares or
declared any dividends since December 31, 1998. Under the terms of the Merger
Agreement (see "Recent Developments" above) the Company is prohibited from
repurchasing any additional shares or declaring any dividends.
The preceding discussions include forward-looking statements. See "FORWARD
LOOKING STATEMENTS" below.
RECENT DEVELOPMENTS
- -------------------
On January 7, 1999 the Company entered into an Agreement and Plan of Merger (the
"Merger Agreement") with New Hampshire Oak, Inc. ("Parent") and its wholly owned
subsidiary, DN Acquisition Corporation (the "Purchaser"). Parent is owned by The
General Chemical Group Inc. A copy of the Merger Agreement is filed as exhibit
10(bo) to this Report and is incorporated herein by reference.
In accordance with the Merger Agreement, the Purchaser commenced on January 13,
1999 a cash tender offer (the "Offer") to purchase all of the outstanding shares
of the Company's Common Stock, par value $0.05 per share (the "Shares"), at a
price per Share of $9.50, net to the seller in cash, without interest thereon
(the "Offer Price"), subject to the terms and conditions in the Offer to
Purchase dated January 13, 1999 (the "Offer to Purchase"). A copy of the Offer
to Purchase is filed as exhibit 10(bp) to this Report and is incorporated herein
by reference.
The Offer expired at 12:00 midnight, New York City time, on Thursday, February
11, 1999, at which time the Purchaser accepted for payment 5,651,767 shares
representing 94.1 percent of the actual outstanding Shares and 87.7 percent of
the outstanding Shares on a fully diluted basis (such basis assumes that all
Shares underlying vested and unvested stock options are issued and outstanding).
The Purchaser accepted for payment all Shares properly tendered and not
withdrawn in the Offer.
Pursuant to the Merger Agreement, promptly upon the purchase by the Purchaser of
at least a majority of the outstanding Shares on a fully-diluted basis pursuant
to the Offer, the Company became obligated to use its best efforts to allow the
Purchaser to designate up to the minimum number of directors (the "Purchaser
Designees") necessary in order for the result (expressed as a fraction) derived
by dividing the number of Purchaser Designees by the total number of directors
constituting the whole Board to be at least equal to the result (expressed as a
fraction) derived by dividing the number of Shares then held by the Purchaser by
the total number of Shares then outstanding; provided, however, that until the
Effective Time (as defined in the Merger Agreement) of the Merger (as defined
below), the Board of Directors will have at least two (2) directors who are
neither Purchaser Designees nor otherwise affiliated with Parent or the
Purchaser nor are employees of the Company or any of its subsidiaries. In
furtherance thereof, the Company is obligated to either increase the size of the
Board or secure the resignations of such number of incumbent directors, or both,
as is necessary to enable the appropriate number of Purchaser Designees to be
elected or appointed to the Board. On February 12, 1999, each of the then
directors of the Company, other than Richard W. Lock and James E. Heighway,
resigned from the Board and vacancies were filled by Paul M. Meister, Richard R.
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<PAGE> 9
Russell, Todd M. DuChene, Ralph M. Passino and Paul M. Montrone, all of whom are
officers of The General Chemical Group Inc. or its affiliates. Additional
information regarding the Purchaser Designees and their business experience is
included in Annex A of the Solicitation/Recommendation Statement filed by the
Company with the Securities and Exchange Commission (the "Commission") on
January 13, 1999 on a Schedule 14D-9 (the "Schedule 14D-9"). The Schedule 14D-9
reflects the recommendations of the Company's Board of Directors, contains a
summary of the proposed transactions, is filed as exhibit 10(br) to this Report
and is incorporated herein by reference. Additional information concerning the
Purchaser and the Offer is contained in the Schedule 14D-1 filed by the
Purchaser with the Commission on January 13, 1999.
Pursuant to the Merger Agreement, and subject to the satisfaction or waiver of
certain conditions, the Purchaser will be merged with and into the Company, with
the Company surviving the merger as a wholly owned subsidiary of Parent (the
"Merger"), and all Shares not tendered in the Offer (except any Shares as to
which the holder has properly exercised his or her dissenter's rights of
appraisal) will be converted into the right to receive $9.50 per Share in cash,
giving the transaction a total value of approximately $61.2 million.
In connection with the execution of the Merger Agreement, the Purchaser and
Parent entered into a Stockholders Agreement, dated as of January 7, 1999 (the
"Stockholders Agreement"), with each of Jerry A. Cooper, Thomas H. Roulston II,
Scott D. Roulston, Michael J. Meier, John D. Ong, George H. Lewis III, James E.
Heighway, Richard W. Lock, Clifford Schumacher, James L. Treece, Carl A.
Rispoli, Fred Burke, Roger Drummer, Michael Madden, Michael Pavlica, David
Piacenti, Benjamin Scherschel, Janice Schneikart and Phillip Tomczak
(collectively, the "Selling Stockholders"), pursuant to which such Selling
Stockholders agreed to tender their Shares in the Offer and granted to the
Purchaser an irrevocable option, exercisable upon the occurrence of certain
trigger events, to purchase the Shares owned beneficially and of record by the
Selling Stockholders (including Shares underlying Stock Options (such underlying
Shares, the "Option Shares")) at a price per Share equal to the Offer Price, in
cash. Pursuant to the Stockholders Agreement, the Selling Stockholders also
agreed that, among other things, until the applicable termination date set forth
in the Stockholders Agreement, such Selling Stockholders will not transfer the
Shares subject to the Stockholders Agreement and will vote such Shares in favor
of the Merger and against certain competing transactions. An aggregate of
1,046,587 Shares are subject to the Stockholders Agreement (including 348,116
Option Shares), representing approximately 16.2 percent of the Shares that, as
of January 7, 1999, were issued and outstanding on a fully-diluted basis (such
basis assumes that all Shares underlying vested and unvested stock options are
issued and outstanding). A copy of the Stockholders Agreement is filed as
exhibit 10(bq) to this Report and is incorporated herein by reference.
At a meeting held on January 7, 1999, the Board of Directors of the Company
unanimously approved the Offer and the Merger, determining that each of the
Offer and the Merger (including the offer price of $9.50 per share in cash) is
advisable and is fair to and in the best interests of stockholders of the
Company. In arriving at its recommendation, the Board of Directors gave careful
consideration to a number of factors, including the opinion of McDonald
Investments Inc., relating to the fairness, from a financial point of view, of
the consideration to be received by the Company's stockholders in the Offer and
the Merger.
The preceding discussions include forward-looking statements. See "FORWARD
LOOKING STATEMENTS" below.
FORWARD-LOOKING STATEMENTS
- --------------------------
The preceding discussions include forward-looking statements based on
management's current expectations, which are subject to a number of risks and
uncertainties that could materially affect demand for the Company's products and
services, thereby affecting future results of operations, financial condition or
cash flows. Demand for the Company's products and services is affected by
consumer demand in the domestic automotive and heavy-duty truck industries and
the resulting levels of production, as well as competition from other suppliers
to these industries. Demand is also affected by the level of new model
development at OEMs and the resulting need for prototyping, tooling and testing
services. Demand is also sensitive to general economic conditions, such as
growth, inflation, interest rates and unemployment levels.
-9-
<PAGE> 10
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Company's Annual Meeting of Shareholders was held October 23,
1998.
The following individuals were elected as directors, each to serve
for a term of three years:
Jerry A. Cooper
Votes for 5,283,251. Votes withheld 14,495.
Richard W. Lock
Votes for 5,279,251. Votes withheld 18,495.
The shareholders also approved the Company's 1998 Stock Option Plan
as follows: Votes for 2,601,729. Votes against 1,110,870. Abstentions
1,345.
No other proposals were presented at the Company's Annual Meeting.
ITEM 5. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
10(bo). Agreement and Plan of Merger (incorporated by reference to
Exhibit 2 of Schedule 14D-9 filed by the Company on January
13, 1999).
10(bp). Offer to Purchase (incorporated by reference to Exhibit 1 of
Schedule 14D-9 filed by the Company on January 13, 1999).
10(bq). Stockholders Agreement (incorporated by reference to Exhibit
17 of Schedule 14D-9 filed by the Company on January 13,
1999).
10(br). Schedule 14D-9 filed by the Company on January 13, 1999
(incorporated by reference).
27. Financial Data Schedule.
(b) No reports on Form 8-K were filed during the current quarter.
-10-
<PAGE> 11
SIGNATURES
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.
Date: February 12, 1999
---------------------
DEFIANCE, INC.
By: /s/ Jerry A. Cooper
-----------------------------------------------------
President and Chief Executive Officer
/s/ Michael J. Meier
-----------------------------------------------------
Vice President - Finance and Chief Financial Officer
/s/ James L. Treece
-----------------------------------------------------
Chief Accounting Officer
-11-
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUN-30-1999
<PERIOD-START> JUL-01-1998
<PERIOD-END> DEC-31-1998
<CASH> 297
<SECURITIES> 0
<RECEIVABLES> 19,078
<ALLOWANCES> 152
<INVENTORY> 3,762
<CURRENT-ASSETS> 16,782
<PP&E> 70,619
<DEPRECIATION> 36,706
<TOTAL-ASSETS> 66,574
<CURRENT-LIABILITIES> 13,643
<BONDS> 13,315
0
0
<COMMON> 351
<OTHER-SE> 38,954
<TOTAL-LIABILITY-AND-EQUITY> 66,574
<SALES> 46,132
<TOTAL-REVENUES> 46,132
<CGS> 37,624
<TOTAL-COSTS> 37,624
<OTHER-EXPENSES> 6,638
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 485
<INCOME-PRETAX> 1,385
<INCOME-TAX> 491
<INCOME-CONTINUING> 894
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 894
<EPS-PRIMARY> .15
<EPS-DILUTED> .15
</TABLE>
