UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED NOVEMBER 30, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the Transition Period from ______ to ______
COMMISSION FILE NO. 33-95318
PORTOLA PACKAGING, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 94-1582719
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
890 FAULSTICH COURT
SAN JOSE, CALIFORNIA 95112
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES, INCLUDING ZIP CODE)
(408) 453-8840
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports) and (2) has been subject to
such filing requirements for the past 90 days. YES X NO.
--- ---
11,942,733 shares of Registrant's $.001 par value Common Stock, consisting of
2,134,992 shares of nonvoting Class A Common Stock and 9,807,741 shares in the
aggregate of voting Class B Common Stock, Series 1 and 2 combined, were
outstanding at December 11, 1998.
<PAGE>
PORTOLA PACKAGING, INC. AND SUBSIDIARIES
INDEX
Part I - Financial Information
- -------------------------------
Item 1. Financial Statements
Condensed Consolidated Balance Sheets as of
November 30, 1998 and August 31, 1998
Condensed Consolidated Statements of Operations for
the Three Months Ended November 30, 1998 and 1997
Condensed Consolidated Statements of Cash Flows for
the Three Months Ended November 30, 1998 and 1997
Notes to Condensed Consolidated Financial Statements
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations
Part II - Other Information
- ----------------------------
Item 6. Exhibits and Reports on Form 8-K
Signatures
Exhibit Index
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
PORTOLA PACKAGING, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except per share data)
<TABLE>
<CAPTION>
November 30, August 31,
1998 1998
------------ ----------
<S> <C> <C>
(UNAUDITED)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents....................... $5,675 $3,570
Investments..................................... -- --
Accounts receivable, net........................ 19,074 22,887
Inventories..................................... 11,032 11,260
Other current assets............................ 2,821 1,356
Deferred income taxes........................... 2,516 2,516
------------ ----------
Total current assets........................ 41,118 41,589
Property, plant and equipment, net.............. 85,602 85,874
Goodwill, net................................... 11,880 12,086
Patents, net.................................... 1,761 1,814
Covenants not to compete, net................... 425 607
Debt financing costs, net....................... 2,868 2,982
Other assets.................................... 4,820 3,908
------------ ----------
Total assets.................................... $148,474 $148,860
============ ==========
LIABILITIES, REDEEMABLE WARRANTS, COMMON STOCK
AND OTHER SHAREHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES:
Current portion of long-term debt............... $3,819 $2,772
Accounts payable................................ 6,673 8,138
Accrued liabilities............................. 10,876 10,793
Accrued interest................................ 2,154 5,224
------------ ----------
Total current liabilities..................... 23,522 26,927
Long-term debt, less current portion............ 130,556 127,936
Other long term obligations..................... 749 777
Deferred income taxes........................... 6,592 6,666
------------ ----------
Total liabilities........................... 161,419 162,306
Commitments and contingencies (Note 4)
Redeemable warrants to purchase Class A
Common Stock.................................. 8,551 7,959
------------ ----------
Common stock and other shareholders' equity (deficit):
Class A convertible common stock of $.001
par value:
Authorized: 5,203 shares; Issued and
outstanding 2,135 shares in both periods.... 2 2
Class B, Series 1, common stock of $.001
par value:
Authorized: 17,715 shares; Issued and
outstanding 8,636 shares in both periods.... 8 8
Class B, Series 2, convertible common stock
of $.001 par value:
Authorized: 2,571 shares; Issued and
outstanding 1,171 shares in both periods.... 1 1
Additional paid-in capital...................... 7,797 7,797
Notes receivable from shareholders.............. (463) (463)
Cumulative foreign currency translation
adjustments................................... (902) (1,039)
Accumulated deficit............................. (27,939) (27,711)
------------ ----------
Total common stock and other
shareholders' deficit................... (21,496) (21,405)
------------ ----------
Total liabilities, redeemable
warrants, common stock and other
shareholders' deficit................... $148,474 $148,860
============ ==========
</TABLE>
The accompanying notes are an integral part of the
condensed consolidated financial statements.
<PAGE>
PORTOLA PACKAGING, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
<TABLE>
<CAPTION>
Three Months Ended
November 30,
---------------------
1998 1997
---------- ----------
(unaudited)
<S> <C> <C>
Sales........................... $44,759 $41,976
Cost of sales................... 33,264 32,887
---------- ----------
Gross profit.................... 11,495 9,089
---------- ----------
Selling, general and
administrative................ 6,174 5,464
Research and development........ 788 868
Amortization of intangibles..... 585 834
---------- ----------
7,547 7,166
---------- ----------
Income from operations.......... 3,948 1,923
---------- ----------
Other (income) expense:
Interest income............... (80) (130)
Interest expense.............. 3,522 3,315
Amortization of debt
financing costs............. 120 127
Other income, net............. (179) (1,044)
---------- ----------
3,383 2,268
---------- ----------
Income (loss) before income
taxes....................... 565 (345)
Income tax provision (benefit).. 201 (207)
---------- ----------
Net income (loss)............... $364 ($138)
========== ==========
Number of shares used in
computing basic per share
amounts....................... 11,792 11,770
========== ==========
Basic earnings per share...... $0.03 ($0.01)
Number of shares used in
computing diluted per share
amounts....................... 14,415 11,770
========== ==========
Diluted earnings per share.... $0.03 ($0.01)
</TABLE>
The accompanying notes are an integral part of the
condensed consolidated financial statements.
<PAGE>
PORTOLA PACKAGING, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
<TABLE>
<CAPTION>
Three Months Ended
November 30,
---------------------
1998 1997
---------- ----------
(unaudited)
<S> <C> <C>
Cash flows from operating activities:
Net income (loss)...................................... $364 ($138)
Adjustments to reconcile net income (loss) to net
cash provided by (used in) operating activities:
Depreciation and amortization........................ 4,049 3,964
Deferred income taxes................................ (74) --
Gain on property and equipment dispositions.......... (1) (985)
Provision for doubtful accounts...................... 62 121
Provision for excess and obsolete inventories........ 93 (100)
Changes in working capital:
Accounts receivable.................................. 3,661 2,342
Inventories.......................................... 160 (68)
Other current assets................................. (1,410) (568)
Accounts payable..................................... (1,699) (3,560)
Accrued liabilities.................................. 369 1,069
Accrued interest..................................... (3,070) (2,893)
---------- ----------
Net cash provided by (used in) operating activities.. 2,504 (816)
---------- ----------
Cash flows from investing activities:
Additions to property, plant and equipment............. (2,988) (3,758)
Proceeds from sale of property, plant and equipment.... 2 1,305
(Increase) decrease in other assets.................... (974) 243
---------- ----------
Net cash used in investing activities................ (3,960) (2,210)
---------- ----------
Cash flows from financing activities:
Borrowings under long-term debt arrangements, net...... 3,577 1,267
Increase in notes receivable from stockholders......... -- (10)
Payment on covenants not to compete agreement.......... -- (171)
Repurchase of common stock............................. -- (132)
---------- ----------
Net cash provided by financing activities............ 3,577 954
---------- ----------
Effect of exchange rate on cash.......................... (16) (34)
---------- ----------
Increase (decrease) in cash and cash equivalents..... 2,105 (2,106)
Cash and cash equivalents at beginning of period......... 3,570 3,471
---------- ----------
Cash and cash equivalents at end of period............... $5,675 $1,365
========== ==========
</TABLE>
The accompanying notes are an integral part of the
condensed consolidated financial statements.
<PAGE>
Portola Packaging, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(Unaudited)
1. Basis of Presentation:
The unaudited condensed consolidated financial statements included
herein have been prepared by Portola Packaging, Inc. and its
subsidiaries (the "Company") without audit and in the opinion of
management include all adjustments (consisting only of normal recurring
adjustments) considered necessary for a fair presentation. The
accompanying condensed consolidated financial statements should be read
in conjunction with the audited consolidated financial statements
contained in the Company's Form 10-K previously filed with the
Securities and Exchange Commission. The August 31, 1998 condensed
consolidated balance sheet data was derived from audited consolidated
financial statements, but does not include all disclosures required by
generally accepted accounting principles. Interim results are subject
to seasonal variations and the results of operations for the three
months ended November 30, 1998 are not necessarily indicative of the
results to be expected for the full fiscal year ending August 31, 1999.
Certain prior period balances have been reclassified to conform with
current period financial statement presentation. These
reclassifications had no effect on net loss for the three months ended
November 30, 1997.
2. Computation of Earnings (Loss) Per Common Share:
Effective for the quarter ended February 28, 1998, the Company
adopted Financial Accounting Standards Board No. 128 "Earnings Per
Share" (EPS) and accordingly has restated EPS for prior periods from
previously reported EPS. Basic EPS is computed as net income (loss)
divided by the weighted average number of common shares outstanding for
the period. Diluted EPS reflects the potential dilution that could
occur from common shares issuable through stock options, warrants and
other convertible securities. Common equivalent shares are excluded
from the November 30, 1997 computation of net loss per share as their
effect is antidilutive.
Portola Packaging, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (continued)
(Unaudited)
3. Inventories:
Inventory balances as of November 30, 1998 and August 31, 1998 were
as follows (in thousands):
November 30, August 31,
1998 1998
----------- -----------
(unaudited)
Raw materials.................... $5,567 $5,429
Work in process.................. 1,190 1,606
Finished goods................... 4,275 4,225
----------- -----------
$11,032 $11,260
=========== ===========
4. Commitments and Contingencies:
As of November 30, 1998 and August 31, 1998, the Company maintained
$3.0 million in a United States Bank to collateralize a bank loan by a
Mexican bank to the Company's 50% joint venture in Mexico (Portola
Packaging Mexico or PPI Mexico). The Company's joint venture partner
(Partner) has guaranteed to repay 50% of the loan balance ($1.5 million)
to the Company in the event PPI Mexico is unable to repay the loan. The
Partner has collateralized this guarantee by pledging 25% of its stock
interest in PPI Mexico. The loan matured on November 6, 1998 and was
not repaid by PPI Mexico. Currently, the Company and the Partner are
discussing various alternatives regarding the loan and their investment
in PPI Mexico, including the possibility of converting the loan to an
additional equity interest in PPI Mexico. Accordingly, the $3.0 million
is included in other non-current assets in the condensed consolidated
balance sheets.
The Company is currently engaged in patent infringement litigation
with three separate parties who are seeking to have the court declare
certain patents owned by the Company invalid. Two of these parties have
also included allegations of anti-trust violations in their complaints.
The Company believes its patents are valid, and is contesting these
allegations vigorously. However, there can be no assurance that the
Company will be successful in its defense of these matters. In
addition, the Company is also a party to a number of other lawsuits and
claims arising out of the normal course of business.
While there can be no assurances, management does not believe the
final disposition of these matters will have a material adverse effect
on the financial position, results of operations or cash flows of the
Company.
Portola Packaging, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (continued)
(Unaudited)
5. Recent Accounting Pronouncements:
In June 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards (SFAS) No. 130, "Reporting
Comprehensive Income" and SFAS No. 131 "Disclosure About Segments of an
Enterprise and Related Information". SFAS No. 130 establishes standards
for reporting and display of comprehensive income and its components in
a full set of general purpose financial statements. SFAS No. 131
changes current practice under SFAS No. 14 by establishing a new
framework on which to base segment reporting. The Company will
implement SFAS No. 130 and 131, which require the reporting and display
of certain information related to comprehensive income and segment
reporting, as required for the fiscal year ending 1999.
In February 1998, the Financial Accounting Standards Board issued
SFAS No. 132, "Employer's Disclosure About Pension and Other Benefits".
SFAS No. 132 revises employers' disclosures about pension and other
postretirement benefit plans. It does not change the measurement or
recognition related to the Company's benefit plans. It is effective for
the Company in fiscal year 1999.
In June 1998, the Financial Accounting Standards Board issued SFAS
No. 133, "Accounting for Derivative Instruments and Hedging Activities".
SFAS No. 133 establishes accounting and reporting standards for
derivative instruments and hedging activities and requires the
recognition of all derivatives in the balance sheet at their fair market
values. It is effective for the Company in fiscal year 2000.
The Company is currently studying the implications of these
statements and except as noted above, has not yet determined the impact
of adopting such statements on the Company's financial statements.
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Disclosures Regarding Forward-Looking Statements
This report includes "forward-looking statements" within the meaning
of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Act of 1934, as amended. Certain
statements included in this Form 10-Q, including, without limitation,
statements related to the impact of the final disposition of legal
matters in the "Commitments and Contingencies" footnote to the condensed
consolidated financial statements, anticipated cash flow sources and
uses under "Liquidity and Capital Resources", the mitigation of the Year
2000 issue under "Impact of the Year 2000 Issue" and other statements
contained in the "Management's Discussion and Analysis of Financial
Condition and Results of Operations" regarding the Company's financing
alternatives, financial position, business strategy, plans and
objectives of management of the Company for future operations, and
industry conditions, are forward-looking statements. Although the
Company believes that the expectations reflected in any such
forward-looking statements are reasonable, it can give no assurance that
such expectations will prove to have been correct. Any forward-looking
statements herein are subject to certain risks and uncertainties in the
Company's business, including but not limited to, competition in its
markets, and reliance on key customers, all of which may be beyond the
control of the Company. Any one or more of these factors could cause
actual results to differ materially from those expressed in any
forward-looking statement. All subsequent written and oral
forward-looking statements attributable to the Company or any person
acting on its behalf are expressly qualified in their entirety by the
cautionary statements disclosed in this paragraph and elsewhere in this
report.
Results of Operations
Sales increased $2.8 million, or 6.7%, from $42.0 million for the
three months ended November 30, 1997 to $44.8 million for the three
months ended November 30, 1998. This increase was primarily due to
sales increases in Canada of $1.3 million and the United Kingdom of $1.1
million and to a lesser extent, increases in domestic closure sales of
$591,000. The increase in international sales was primarily due to
increased unit shipments. Equipment sales remained flat for the first
three months of fiscal year 1999 as compared to the same period in
fiscal year 1998.
Gross profit increased $2.4 million to $11.5 million or 25.7% for
the first quarter of fiscal 1999 as compared to $9.1 million, or 21.7%,
for the first quarter of fiscal 1998. A majority of the increase was
attributable to margin improvements in domestic closures of $1.1 million
and the United Kingdom of $907,000. The margin increase in domestic
closures is primarily the result of cost improvements from recent
restructuring efforts. The United Kingdom operations margin improved
due to a shift from using subcontractors and imported closures during
their start-up phase in the first quarter of fiscal year 1998, to
becoming more self-sufficient and producing closures in their own
facility for the first quarter of fiscal year 1999.
Selling, general and administrative expenses increased $710,000, or
12.9%, to $6.2 million for the three months ended November 30, 1998, as
compared to $5.5 million for the same period in fiscal year 1998, and
increased as a percentage of sales from 13.0% for the three months ended
November 30, 1997 to 13.8% for the three months ended November 30, 1998.
These increases are primarily due to an increase in personnel in the
Company's United Kingdom operations and increased expenses for bonus
costs partially offset by decreases in domestic personnel costs
resulting from recent restructuring efforts.
Research and development expense decreased $80,000, or 9.2%, to
$788,000 for the three months ended November 30, 1998, as compared to
$868,000 for the three months ended November 30, 1997, and decreased as
a percentage of sales from 2.1% in the three months ended November 30,
1997 to 1.8% in the three months ended November 30, 1998. The decrease
in research and development expense was due primarily to decreased
prototype costs.
Amortization of intangibles (consisting of amortization of patents,
goodwill and covenants not to compete) decreased $249,000, or 29.9%, to
$585,000 for the three months ended November 30, 1998, as compared to
$834,000 for the three months ended November 30, 1997. The decrease was
primarily a result of certain covenants of the Canadian operations
becoming fully amortized in June 1998.
Interest income decreased $50,000 to $80,000 for the three months
ended November 30, 1998 from $130,000 for the same period in fiscal year
1998. This decline was primarily due to fluctuations in the levels of
invested cash in fiscal 1999 as compared to fiscal 1998.
Interest expense increased $207,000 to $3.5 million for the three
months ended November 30, 1998, as compared to $3.3 million for the
three months ended November 30, 1997. This increase was primarily due
to increased borrowings under the Company's line of credit for the three
months ended November 30, 1998 as compared to the same period in fiscal
year 1998.
Amortization of debt financing costs decreased $7,000 for the three
months ended November 30, 1998 to $120,000 from $127,000 for the three
months ended November 30, 1997. Debt financing costs are primarily
attributable to the $110 million senior notes issued in October 1995 and
to a lesser extent, debt financing incurred by the Company's western
Canadian subsidiary.
Other income was $179,000 for the three months ended November 30,
1998 which was primarily due to foreign currency gains on intercompany
transactions. Other income of $1.0 million was recorded for the three
months ended November 30, 1997 primarily due to the gain on the sale of
the Portland, Oregon facility.
The Company recorded a provision for income taxes of $201,000 for
the three months ended November 30, 1998 based on its pre-tax income
using an effective tax rate of 36%. The actual effective tax rate for
the entire fiscal year could vary substantially depending on actual
results achieved. The Company recorded a benefit from income taxes of
$207,000 for the three month period ending November 30, 1997.
Liquidity and Capital Resources
The Company has relied primarily upon cash from operations,
borrowings from financial institutions and sales of common stock to
finance its operations, repay long-term indebtedness and fund capital
expenditures and acquisitions. At November 30, 1998, the Company had
cash and cash equivalents of $5.7 million, an increase of $2.1 million
from August 31, 1998.
Cash provided by operations totaled $2.5 million for the three
months ended November 30, 1998, a $3.3 million increase from the
$816,000 used by operations for the three months ended November 30,
1997. Accounts receivable provided funds of $3.7 million for the first
three months of fiscal year 1999 as compared to providing funds of $2.3
million for the same period in fiscal year 1998. Accounts payable used
funds of $1.7 million in the first three months of fiscal 1999 compared
to using funds of $3.6 million in the first three months of fiscal year
1998, and accrued expenses provided funds of $369,000 in the first
quarter of fiscal 1999 as compared to providing funds of $1.1 million in
the same period of fiscal year 1998. Accrued interest expense used
funds of $3.1 million in the first quarter of fiscal 1999 compared to
using funds of $2.9 million in the same period of fiscal year 1998.
Cash used in investing activities was $4.0 million for the three
months ended November 30, 1998, as compared to using $2.2 million for
the three months ended November 30, 1997. In both periods the use of
cash consisted primarily of additions to property, plant and equipment
and for the first quarter of fiscal 1999 included an $825,000 investment
in the Company's Chinese joint venture. Cash provided by investing
activities included $1.3 million in proceeds realized from the sale of
the Portland, Oregon facility in the fiscal quarter ended November, 30,
1997.
Cash provided by financing activities was $3.6 million for the first
quarter of fiscal year 1999 compared to providing $954,000 for the first
quarter of fiscal year 1998. The increase was principally due to
increased borrowings under the Company's line of credit.
At November 30, 1998, the Company had $5.7 million in cash and cash
equivalents as well as borrowing capacity under the revolving credit
line (of which $16.7 million was available for draw as of November 30,
1998). While there can be no assurances, management believes that these
resources, together with anticipated cash flow from operations, will be
adequate to fund the Company's operations, debt service requirements and
capital expenditures into fiscal year 1999.
Recent Accounting Pronouncements
In June 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards (SFAS) No. 130, "Reporting
Comprehensive Income" and SFAS No. 131 "Disclosure About Segments of an
Enterprise and Related Information". SFAS No. 130 establishes standards
for reporting and display of comprehensive income and its components in
a full set of general purpose financial statements. SFAS No. 131
changes current practice under SFAS No. 14 by establishing a new
framework on which to base segment reporting. The Company will
implement SFAS No. 130 and 131, which require the reporting and display
of certain information related to comprehensive income and segment
reporting, as required for the fiscal year ending 1999.
In February 1998, the Financial Accounting Standards Board issued
SFAS No. 132, "Employer's Disclosure About Pension and Other Benefits".
SFAS No. 132 revises employers' disclosures about pension and other
postretirement benefit plans. It does not change the measurement or
recognition related to the Company's benefit plans. It is effective for
the Company in fiscal year 1999.
In June 1998, the Financial Accounting Standards Board issued SFAS
No. 133, "Accounting for Derivative Instruments and Hedging Activities".
SFAS No. 133 establishes accounting and reporting standards for
derivative instruments and hedging activities and requires the
recognition of all derivatives in the balance sheet at their fair market
values. It is effective for the Company in fiscal year 2000.
The Company is currently studying the implications of these
statements and except as noted above, has not yet determined the impact
of adopting such statements on the Company's financial statements.
Impact of the Year 2000 Issue
The Year 2000 issue is the result of computer programs being written
using two digits, rather than four, to define the applicable year.
Software programs and hardware that have date-sensitive software or
embedded chips may recognize a date using "00" as the year 1900 rather
than the year 2000. This could result in a major system failure or
miscalculations causing disruptions of operations, including a temporary
inability to engage in normal business activities.
As a result of ongoing assessments, the Company has determined it
will be required to modify or replace portions of hardware and software
so that those systems properly utilize dates beyond December 31, 1999.
The Company believes that with these modifications and replacements, the
Year 2000 issue will be mitigated. However, if such modifications are
not completed in a timely manner the effects of the Year 2000 issue
could have a material impact on the operations and financial condition
of the Company.
The Company will use internal resources to resolve its Year 2000
issues. Costs incurred to date by the Company have not been material.
Of the estimated remaining project costs, approximately $350,000 is
attributable to the purchase of new software and equipment, which will
be capitalized and $50,000 relates to repair of hardware and software,
which will be expensed as incurred.
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) The following exhibits are filed herewith or incorporated by
reference herein.
EXHIBIT
NUMBER EXHIBIT TITLE
- ------ -------------
10.41 Summary description of the Company Bonus Plan
and Company Profit Sharing Plan.
27.01 Financial Data Schedule.
(b) The Company did not file any reports on Form 8-K during the three
(3) month period ended November 30, 1998.
<PAGE>
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.
PORTOLA PACKAGING, INC.
(Registrant)
Date: January 4, 1999 /s/ James A. Taylor
--------------------
James A. Taylor
Vice-President and
Chief Financial Officer
(Principal Financial Officer
and Duly Authorized Officer)
<PAGE>
EXHIBIT INDEX
EXHIBIT
NUMBER EXHIBIT TITLE
- ------ -------------
10.41 Summary description of the Company Bonus Plan and Company
Profit Sharing Plan.
27.01 Financial Data Schedule.
<PAGE>
Exhibit 10.41
Summary description of the Company Bonus Plan and Company Profit Sharing
Plan:
The Company has adopted a bonus incentive plan effective for
fiscal year 1999. Certain management and technical employees are
eligible for bonuses under the plan. Bonuses under this plan will be
based on two principal factors, namely, the Company's financial
performance relative to plan, measured by Adjusted EBITDA, and the
extent to which the Company has reached customer satisfaction goals as
measured by a quarterly customer survey. Eligible employees will
receive target bonuses to the extent these goals are reached. Such
bonuses will increase up to double the originally proposed amount to the
extent that financial performance exceeds plan by up to 15% and customer
survey results exceed original targets. If and to the extent that
financial performance falls short of plan or customer satisfaction
ratings fail to meet target levels established during the first quarter
of 1999, bonuses will be less than originally proposed or will not be
awarded.
The Company has also revised its profit sharing plan to provide
that eligible employees will receive profit sharing awards of up to five
percent of compensation based on the same Company financial performance
and customer satisfaction goals outlined above. Such awards will
increase up to double the original amount to the extent that financial
performance exceeds plan by up to 15% and customer survey results exceed
the original targets. If and to the extent that financial performance
falls short of plan or customer satisfaction ratings fail to meet target
levels established during the first quarter of 1999, awards will be less
than originally proposed or will be nil.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND> THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM THE ACCOMPANYING FINANCIAL STATEMENTS AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> AUG-31-1999
<PERIOD-START> SEP-01-1998
<PERIOD-END> NOV-30-1998
<CASH> 5,675
<SECURITIES> 0
<RECEIVABLES> 19,074 <F1>
<ALLOWANCES> 0
<INVENTORY> 11,032
<CURRENT-ASSETS> 41,118
<PP&E> 85,602 <F2>
<DEPRECIATION> 0
<TOTAL-ASSETS> 148,474
<CURRENT-LIABILITIES> 23,522
<BONDS> 0
0
0
<COMMON> 11
<OTHER-SE> (21,507)
<TOTAL-LIABILITY-AND-EQUITY> 148,474
<SALES> 44,759
<TOTAL-REVENUES> 44,759
<CGS> 33,264
<TOTAL-COSTS> 33,264
<OTHER-EXPENSES> 7,547
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,522
<INCOME-PRETAX> 565
<INCOME-TAX> 201
<INCOME-CONTINUING> 364
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 364
<EPS-PRIMARY> $0.03
<EPS-DILUTED> $0.03
<FN>
<F1> Shown net of allowance
<F2> Shown net of depreciation
</FN>
</TABLE>
