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 September 30, 1998
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from.................to...................
Commission file number 1-8191
PORTA SYSTEMS CORP.
(Exact name of registrant as specified in its charter)
Delaware 11-2203988
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
575 Underhill Boulevard, Syosset, New York
(Address of principal executive offices)
11791
(Zip Code)
516-364-9300
(Company'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 of 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that
the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
Yes ___X___ No ______
Indicate the number of shares outstanding of each of the issuer's classes
of common stock as of the latest practicable date: 9,298,713 shares as of
November 6, 1998
Page 1 of 13 pages
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1- Financial Statements
PORTA SYSTEMS CORP. AND SUBSIDIARIES
Consolidated Balance Sheets
(Dollars in thousands)
September 30, December 31,
1998 1997
------------- ------------
Assets (Unaudited)
Current assets:
Cash and cash equivalents $ 2,699 $ 5,091
Accounts receivable, net 18,623 14,891
Inventories 8,154 8,159
Prepaid expenses 1,888 1,266
-------- --------
Total current assets 31,364 29,407
-------- --------
Property, plant and equipment, net 4,344 4,667
Deferred computer software, net 197 543
Goodwill, net 11,712 12, 059
Other assets 3,688 4,324
-------- --------
Total assets $ 51,305 $ 51,000
======== ========
Liabilities and Stockholders' Equity
Current liabilities:
Convertible subordinated debentures $ 362 $ 1,758
Current portion of senior debt 1,300 1,900
Accounts payable 5,642 5,796
Accrued expenses 6,801 8,656
Accrued interest payable 315 398
Accrued commissions 2,236 2,444
Income taxes payable 780 853
Accrued deferred compensation 1,198 1,228
Short-term loans 27 120
-------- --------
Total current liabilities 18,661 23,153
-------- --------
Senior debt net of current maturities 12,213 16,062
12% subordinated notes 5,554 --
Zero coupon senior subordinate convertible notes -- 2,796
Income taxes payable 794 649
Other long-term liabilities 516 487
Minority interest 1,171 1,040
-------- --------
Total long-term liabilities 20,248 21,034
-------- --------
Stockholders' equity:
Preferred stock, no par value; authorized
1,000,000 shares, none issued -- --
Common stock, par value $.01;
authorized 20,000,000 shares, issued
9,298,713 and 8,644,304 shares at
September 30, 1998 and December 31,
1997, respectively 93 86
Additional paid-in capital 74,970 70,926
Accumulated other comprehensive loss:
Foreign currency translation
adjustment (3,823) (4,027)
Accumulated deficit (56,471) (57,799)
-------- --------
14,769 9,186
Treasury stock, at cost (2,066) (2,066)
Receivable for employee stock purchases (307) (307)
-------- --------
Total stockholders' equity 12,396 6,813
-------- --------
Total liabilities and
stockholders' equity $ 51,305 $ 51,000
======== ========
See accompanying notes to unaudited consolidated financial statements.
Page 2 of 13 pages
<PAGE>
PORTA SYSTEMS CORP. AND SUBSIDIARIES
Unaudited Consolidated Statements of Operations
(In thousands, except per share data)
Nine Months Ended
September 30, September 30,
1998 1997
------------- -------------
Sales $ 45,160 $ 45,934
Cost of sales 26,047 28,043
-------- --------
Gross profit 18,913 17,891
-------- --------
Selling, general and administrative expenses 10,089 9,542
Research and development expenses 4,807 3,756
-------- --------
Total expenses 14,896 13,298
-------- --------
Operating income 4,017 4,593
Interest expense (2,663) (2,729)
Interest income 205 174
Other income 981 244
Debt conversion expense (945) --
-------- --------
Income before income taxes, minority
interest, and extraordinary item 1,595 2,282
Income tax expense (209) (31)
Minority interest (133) (164)
-------- --------
Income before extraordinary item 1,253 2,087
Extraordinary gain 76 115
-------- --------
Net income $ 1,329 $ 2,202
======== ========
Per share data:
Basic per share amounts:
Income before extraordinary item $ 0.14 $ 0.89
Extraordinary item 0.00 0.05
-------- --------
Net income per share of common stock $ 0.14 $ 0.94
======== ========
Weighted average shares outstanding 9,247 2,338
======== ========
Diluted per share amounts:
Income before extraordinary item $ 0.13 $ 0.32
Extraordinary item 0.00 0.02
-------- --------
Net income per share of common stock $ 0.13 $ 0.34
======== ========
Weighted average shares outstanding 9,977 6,514
======== ========
See accompanying notes to unaudited consolidated financial statements.
Page 3 of 13 pages
<PAGE>
PORTA SYSTEMS CORP. AND SUBSIDIARIES
Unaudited Consolidated Statements of Operations
(In thousands, except per share data)
Three Months Ended
September 30, September 30,
1998 1997
------------- -------------
Sales $ 14,217 $ 17,060
Cost of sales 8,625 9,948
-------- --------
Gross profit 5,592 7,112
-------- --------
Selling, general and administrative expenses 3,122 3,650
Research and development expenses 1,794 1,268
-------- --------
Total expenses 4,916 4,918
-------- --------
Operating income 676 2,194
Interest expense (881) (889)
Interest income 48 82
Other income 269 42
-------- --------
Income before income taxes, minority
interest and extraordinary item 112 1,429
Income tax expense (9) (8)
Minority interest (57) (179)
-------- --------
Income before extraordinary item 46 1,242
Extraordinary gain -- 104
-------- --------
Net income $ 46 $ 1,346
======== ========
Per share data:
Basic per share amounts:
Income before extraordinary item $ 0.01 $ 0.53
Extraordinary item -- 0.05
-------- --------
Net income per share of common stock $ 0.01 $ 0.58
======== ========
Weighted average shares outstanding 9,299 2.338
Diluted per share amounts:
Income before extraordinary item $ 0.01 $ 0.19
Extraordinary item -- 0.01
-------- --------
Net income per share of common stock $ 0.01 $ 0.20
======== ========
Weighted average shares outstanding 9,734 6,700
======== ========
See accompanying notes to unaudited consolidated financial statements.
Page 4 of 13 pages
<PAGE>
PORTA SYSTEMS CORP. AND SUBSIDIARIES
Unaudited Consolidated Statements of Comprehensive Income
Nine Months Ended
September 30, September 30,
1998 1997
------------- -------------
Net income $ 1,329 $ 2,202
Other comprehensive income (loss),
net of tax:
Foreign currency translation
adjustments 204 (419)
------- -------
Comprehensive income $ 1,533 $ 1,783
======= =======
Three Months Ended
September 30, September 30,
1998 1997
------------- -------------
Net income $ 46 $ 1,346
Other comprehensive income (loss),
net of tax:
Foreign currency translation
adjustments 77 (217)
------- -------
Comprehensive income $ 123 $ 1,129
======= =======
See accompanying notes to unaudited consolidated financial statements.
Page 5 of 13 pages
<PAGE>
PORTA SYSTEMS CORP. AND SUBSIDIARIES
Unaudited Consolidated Statements of Cash Flows
(In thousands)
Nine Months Ended
September 30, September 30,
1998 1997
------------- -------------
Cash flows from operating activities:
Net income $ 1,329 $ 2,202
Adjustments to reconcile net income
to net cash provided by (used in)
operating activities:
Extraordinary gain (76) (115)
Non-cash debt conversion expense 945 --
Non-cash financing expenses 311 279
Non-cash interest charges 304 --
Depreciation and amortization 1,631 2,381
Amortization of debt discounts 189 30
Minority interest 131 (164)
Changes in assets and liabilities:
Accounts receivable (3,732) (2,354)
Inventories 5 (426)
Prepaid expenses (622) (330)
Other receivables -- 31
Other assets 215 628
Accounts payable, accrued expenses
and other liabilities (1,383) (309)
------- -------
Net cash provided by (used in)
operating activities (753) 1,853
------- -------
Cash flows from investing activities:
Proceeds from disposal of assets
held for sale, net -- 500
Capital expenditures (503) (434)
------- -------
Net cash provided by (used in)
investing activities (503) 66
------- -------
Cash flows from financing activities:
Proceeds from senior debt 6 314
Repayments of senior debt (4,455) (1,933)
Proceeds from 12% subordinated
debentures and warrants 6,000 --
Repayment of Zero coupon senior
subordinated convertible notes (2,796) --
(Repayments of) proceeds from short
term loans (93) 92
------- -------
Net cash used in financing
activities (1,338) (1,527)
------- -------
Effect of exchange rates on cash 202 70
------- -------
Increase (decrease) in cash and
cash equivalents (2,392) 462
Cash and equivalents - beginning
of the year 5,091 2,584
------- -------
Cash and equivalents - end of
the period $ 2,699 $ 3,046
======= =======
Supplemental cash flow disclosures:
Cash paid for interest expense $ 1,857 $ 2,298
======= =======
Cash paid for income taxes $ 188 $ 74
======= =======
See accompanying notes to unaudited consolidated financial statements.
Page 6 of 13 pages
<PAGE>
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
Note 1: Management's Responsibility For Interim Financial Statements Including
All Adjustments Necessary For Fair Presentation
Management acknowledges its responsibility for the preparation of the
accompanying interim consolidated financial statements which reflect all
adjustments, consisting of normal recurring adjustments, considered necessary in
its opinion for a fair statement of its consolidated financial position and the
results of its operations for the interim periods presented. These consolidated
financial statements should be read in conjunction with the summary of
significant accounting policies and notes to consolidated financial statements
included in the Company's annual report to stockholders for the year ended
December 31, 1997. Results for the first nine months of 1998 are not necessarily
indicative of results for the year.
Note 2: Inventories
Inventories are valued at lower of cost or market. Inventory costs at
September 30, 1998 have been computed using a standard cost system. The
composition of inventories at the end of the respective periods is as follows:
September 30, 1998 December 31,1997
------------------ ----------------
(in thousands)
Parts and components $4,802 $5,349
Work-in-process 1,177 1,079
Finished goods 2,175 1,731
------ ------
$8,154 $8,159
====== ======
Note 3: 6% Convertible Subordinated Debentures and
Zero Coupon Senior Subordinated Notes
As of September 30, 1998, the Company had outstanding $362,000 of its 6%
Convertible Subordinated Debentures due July 1, 2002 ("the Debentures"), net of
unamortized original issue discount of $23,000 which is amortized to principal
over the term of the debt using the effective interest rate method. The face
amount of the outstanding Debentures was $385,000 at September 30, 1998.
Interest on the Debentures is payable on July 1 of each year. The interest
accrued as of September 30, 1998 amounted to $6,000.
Page 7 of 13 pages
<PAGE>
Note 4: Senior Debt
On September 30, 1998, the Company's debt to its senior lender was
$13,513,000. During the nine and three months ended September 30, 1998, the
Company repaid principal of $4,455,000 and $572,000, respectively. Based on
anticipated principal payments, $1,300,000 has been classified as a current
liability at September 30, 1998.
Effective August 1, 1998, the Company amended its agreement with its
senior lender whereby the loan amortization shall first be applied to the
non-interest bearing notes payable until the notes are paid in full and then to
the term loan, and to extend the expiration of the agreement to January 2, 2000.
Financial debt covenants include an interest coverage ratio measured
quarterly, limitations on the incurrence of indebtedness, limitations on capital
expenditures, and prohibitions on declarations of any cash or stock dividends or
the repurchase of the Company's stock. As of September 30,1998, the Company was
in compliance with the above covenants.
Note 5: 12% Subordinated Notes
In January 1998, the Company raised $6,000,000 from the private placement
of 60 units at $100,000 per unit. Each unit consisted of (a) the Company's 12 %
Subordinated Note due January 3, 2000 (a "12% Note"), in the principal amount of
$100,000, and (b) a Series B Common Stock Purchase Warrant (a "Series B
Warrant") to purchase 10,000 shares of Common Stock at $3.00 per share through
December 31, 2002. In the event that any 12% Note is outstanding one year from
the date on which such 12% Note is issued (the "Anniversary Date of the Note"),
the Company shall issue to the holder of such 12% Note on the Anniversary Date
of the Note a Series C Warrant to purchase 25 shares of Common Stock for each
$1,000 principal amount of 12% Notes outstanding on the Anniversary Date of the
Note. The Series C Warrant will have an exercise price equal to the average
closing prices of the Common Stock on each of the five trading days preceding
the Anniversary Date of the Note with respect to which the Series C Warrant is
being issued and will expire on December 31, 2003. The proceeds from the sale of
the Units was used principally to pay the remaining principal amount of Zero
Coupon Notes which had not been converted of $2,796,000 (note 3) and to reduce
the Company's senior debt by approximately $2,950,000 (note 4). The balance of
such proceeds was added to working capital. The Series B and Series C Warrants
were valued at $630,000 and were recorded as part of additional paid in capital.
Accordingly, the Company recorded the net 12% Note at a value of $5,370,000. In
connection with the private placement of these units, the Company issued to its
investment banking firm 120,000 shares of common stock.
Note 6: Receivable for Employee Stock Purchases
During the quarter ended June 30, 1998, the Board of Directors approved
the exchange of certain notes receivable issued by current and former employees
of the Company for the common stock of the Company which is held as collateral
for these notes. The notes were issued as payment for the shares pursuant to the
1984 compensation plan. It is anticipated that this transaction will close
during the quarter ended December 31, 1998. The exchange of the shares of the
Company's common stock as full payment of the employee notes will have only an
effect on the Company's balance sheet as a reclassification of equity.
Page 8 of 13 pages
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
The Company's consolidated statements of operations for the periods
indicated below, shown as a percentage of sales, are as follows:
Nine Months Ended Three Months Ended
September 30, September 30,
------------- -------------
1998 1997 1998 1997
---- ---- ---- ----
Sales 100% 100% 100% 100%
Cost of sales 58% 61% 61% 58%
Gross profit 42% 39% 39% 42%
Selling, general and
administrative expenses 22% 21% 22% 21%
Research and development expenses 11% 8% 12% 8%
Operating income 9% 10% 5% 13%
Interest expense - net (5%) (6%) (6%) (5%)
Other income 2% 1% 1% 0%
Debt conversion expense (2%) 0% 0% 0%
Minority interest 0% 0% 0% (1%)
Income taxes (1%) 0% 0% 0%
Extraordinary item 0% 0% 0% 1%
Net income 3% 5% 0% 8%
The Company's sales by product line for the periods ended September 30,
1998 and 1997 are as follows:
Nine Months Ended
September 30,
-------------
1998 1997
---- ----
(Dollars in thousands)
Line connection/protection
equipment ("Line connection") $ 17,503 39% $ 18,204 40%
Operations Support Systems ("OSS") 21,263 47% 21,093 46%
Signal processing 6,246 14% 6,203 13%
Other 148 0% 434 1%
------------- -------------
$ 45,160 100% $ 45,934 100%
============= =============
Three Months Ended
September 30,
-------------
1998 1997
---- ----
(Dollars in thousands)
Line connection $ 6,906 49% $ 4,857 29%
OSS 5,519 39% 9,790 57%
Signal Processing 1,726 12% 2,261 13%
Other 66 0% 152 1%
------------- -------------
$ 14,217 100% $ 17,060 100%
============= =============
Page 9 of 13 pages
<PAGE>
Results of Operations
The Company's sales for the nine months ended September 30, 1998 compared
to the nine months ended September 30, 1997 decreased $774,000 (2%) from
$45,934,000 in 1997 to $45,160,000 in 1998. Sales for the quarter ended
September 30, 1998 of $14,217,000 decreased by $2,843,000 (17%) compared to
$17,060,000 for the quarter ended September 30, 1997. The decreased sales for
the three months are due primarily to a 44% decline in revenue from the OSS
division that was somewhat offset by increased sales from the line connection
business.
The line connection sales for the nine months ended September 30, 1998
compared to September 30, 1997 decreased from $18,204,000 to $17,503,000 or
$701,000 (4%). Line connection sales for the three months ended September 30,
increased by $2,049,000 (42%) from $4,857,000 in 1997 to $6,906,000 in 1998. The
decrease for the nine-month period reflects changes in the product mix and
reduced unit purchases from the Company's largest customer, British
Telecommunications plc ("BT"). During 1997, the Company amended an agreement to
supply certain line connection equipment to BT, which included certain new
products. The amended agreement resulted in a lower selling price for existing
products and prices that resulted in a reduced gross margin for new products.
Sales to BT during the nine months of 1997 were made pursuant to the old
agreement, while the amended agreement applied to sales in the 1998 periods. In
addition, the number of units purchased by BT declined in the nine months ended
September 30, 1998 from the comparable periods of 1997. Orders for line
connection equipment from BT remain at the reduced rate. The decline in sales to
BT for the three months ended September 30, 1998 was significantly offset by
increased sales of line connection equipment in the United States and Mexico.
OSS revenue is accounted for on a percentage of completion method.
Historically, revenue recognition, as it relates to the OSS business, is subject
to fluctuations on a quarter to quarter basis because the timing of revenue
recognition is dependent on securing milestones associated with large, long-term
contracts. Such attainment of milestones do not have a correlation with fiscal
quarters. OSS revenue for the nine months ended September 30, 1998 was
$21,263,000 compared to the nine months ended September 30, 1997 of $21,093,000,
an increase of $170,000 (1%). For the three months ended September 30, 1998, OSS
revenue was $5,519,000 compared to revenue for the three months ended September
30, 1997 of $9,790,000, a decrease of $4,271,000 (44%). The decrease in revenue
for the three months reflects the timing of the attainment of certain milestones
on long-term contracts as well as a slowdown in securing significant new
contracts during the period. For the nine-month period revenue remained at a
constant level.
Signal processing sales for the nine months ended September 30, 1998 were
$6,246,000 compared to the nine months ended September 30, 1997 of $6,203,000,
an increase of $43,000 (1%). Signal processing sales for the three months ended
September 30, 1998 were $1,726,000, compared to the three months ended September
30, 1997 of $2,261,000, a decrease of $535,000 (24%). The decrease in sales for
the three-month period ended September 30, 1998 reflects delays by certain
military customers in the placing of orders. Furthermore, during the three
months ended September 30, 1997 non-recurring revenue was recognized for certain
engineering services.
Page 10 of 13 pages
<PAGE>
Results of Operations (continued)
Cost of sales for the nine months ended September 30, 1998, as a
percentage of sales was 58% compared to the nine months ended September 30, 1997
of 61%. For the quarter ended September 30, 1998, cost of sales as a percentage
of sales was 61% compared to the same period of 1997 of 58%. The improvement in
gross margin for the nine-month period is attributed to product mix and overall
greater absorption of overhead at the Company's manufacturing facility in
Mexico. For the three-month period, the decline in gross margin reflects the
reduced level of revenue from the OSS business and therefore, the inability to
absorb the fixed operating costs and expenses of this business unit.
Selling, general and administrative expenses increased by $547,000 (6%)
from $9,542,000 to $10,089,000 for the nine months ended September 30, 1998
compared to the nine months ended September 30, 1997. This increase reflects the
Company's efforts to increase its sales and marketing effectiveness in order to
secure future business. For the quarters ended September 30, 1998 and 1997
selling, general and administration expenses decreased by $528,000 (14%) from
$3,650,000 to $3,122,000, respectively. This decrease resulted primarily from
lower commissions associated with the decreased revenues for the OSS business
for the quarter.
Research and development expenses increased by $1,051,000 (28%) and by
$526,000 (41%) for the nine and three months ended September 30, 1998 from the
comparable periods in 1997, respectively. The increased expense for both periods
results from the Company's efforts to develop new products, primarily related to
the OSS business.
As a result of the above, for the nine months ended September 30, 1998
compared to the comparable nine months of 1997, the Company had operating income
of $4,017,000 in 1998 versus $4,593,000 in 1997. The Company had operating
income of $676,000 for the quarter ended September 30, 1998 as compared to
$2,194,000 for the quarter ended September 30, 1997.
Other income for the nine months ended September 30, 1998 includes
$400,000 from the settlement of litigation, $167,000 of additional funds
received from the settlement of the sale of the Israeli business, and $234,000
in conjunction with the settlement of various old outstanding liabilities. The
three months ended September 30, 1998 includes the $234,000 from the
above-mentioned settlement of liabilities.
During the nine months ended September 30, 1998, the Company recorded debt
conversion expense of $945,000 as a result of the conversion of Zero Coupon
Notes and 6% Convertible Subordinated Debentures to common stock.
During the nine months ended September 30, 1998 and 1997, respectively,
the Company recorded a $76,000 and $115,000 gain from the early extingushment of
its 6% Convertible Subordinated Debt as a result of the exchange of the 6% Debt
for Zero Coupon Notes and common stock.
Income tax expense increased for the nine months ended September 30, 1998
compared to 1997 by $178,000 from $31,000 to $209,000 due to the limitation on
the use of the Company's NOL carryforwards. The limitation was created by the
change in ownership in 1997 due to the exchange of debt for equity.
Page 11 of 13 pages
<PAGE>
Results of Operations (continued)
As the result of the foregoing the Company generated net income after
extraordinary items of $1,329,000, $0.14 per share (basic) and $0.13 per share
(diluted) for the nine months ended September 30, 1998 compared with net income
after extraordinary items of $2,202,000, $0.94 per share (basic) and $0.34 per
share (diluted), for the nine months ended September 30, 1997. Net income for
the three months ended September 30, 1998 was $46,000, $0.01 per share (basic
and diluted), compared with net income for the three months ended September 30,
1997 of $1,346,000, $0.58 per share (basic) and $0.20 per share (diluted).
Liquidity and Capital Resources
At September 30, 1998 the Company had cash and cash equivalents of
$2,699,000 compared with $5,091,000 at December 31, 1997. The Company's working
capital at September 30, 1998 was $12,703,000, compared to working capital of
$6,254,000 at December 31, 1997. The improved working capital reflects (i)
increased accounts receivable (ii) reduced balance of the 6% Debentures and
(iii) lower balances of accounts payable, accrued expenses and accrued
commissions.
As of September 30, 1998, the Company's loan and security agreement with
its senior secured lender, which expires January 2, 2000, provides the Company,
under its revolving line of credit and its letter of credit facility, with
combined availability totaling $9,000,000. In addition as of September 30, 1998,
the Company has $10,676,000 outstanding under a term loan agreement and
$2,837,000 outstanding in notes payable. Prior to the expiration of its
agreement with its senior lender, the Company will require either an extension
of such agreement or secure a comparable agreement with another lender. No
assurance can be give as to the ability of the Company to obtain such an
extension or alternative financing.
Year 2000 Issue
Many existing computer programs use only two digits to identify a year in
a date field. These programs were designed and developed without considering the
impact of the upcoming change in the century. If not corrected, many computer
applications could fail or create erroneous results by or at the year 2000. This
is referred to the as the "Year 2000 Issue." Management has initiated a Company
wide program to prepare the Company's computer systems and applications for year
2000 compliance including potential obligations to update its customers' systems
to the extent required under their contracts. The Company expects to incur
internal staff costs as well as other expenses necessary to prepare its systems
for the year 2000. The Company expects to both replace some systems and upgrade
others. Maintenance or modification costs will be expensed as incurred. The
total cost of this effort is still being evaluated, but is not expected to be
material to the Company.
Forward Looking Statements
Statements contained in this Form 10-Q include forward-looking statements
that are subject to risks and uncertainties. Actual results could differ
materially from those currently anticipated due to a number of factors,
including those identified in this Form 10-Q, the Company's Annual Report on
From 10-K for the year ended December 31, 1997 and in other documents filed by
the Company with the Securities and Exchange Commission.
Page 12 of 13 pages
<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.
PORTA SYSTEMS CORP.
Dated November 10, 1998 By /s/William V. Carney
---------------------------
William V. Carney
Chairman of the Board
Dated November 10, 1998 By /s/Edward B. Kornfeld
---------------------------
Edward B. Kornfeld
Vice President and Chief
Financial Officer
Page 13 of 13 pages
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> SEP-30-1998
<CASH> 2,699
<SECURITIES> 0
<RECEIVABLES> 18,623
<ALLOWANCES> 0
<INVENTORY> 8,154
<CURRENT-ASSETS> 31,364
<PP&E> 4,344
<DEPRECIATION> 0
<TOTAL-ASSETS> 51,305
<CURRENT-LIABILITIES> 18,661
<BONDS> 0
0
0
<COMMON> 93
<OTHER-SE> 12,303
<TOTAL-LIABILITY-AND-EQUITY> 51,305
<SALES> 45,160
<TOTAL-REVENUES> 45,160
<CGS> 26,047
<TOTAL-COSTS> 14,896
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,663
<INCOME-PRETAX> 1,595
<INCOME-TAX> 209
<INCOME-CONTINUING> 1,253
<DISCONTINUED> 0
<EXTRAORDINARY> 76
<CHANGES> 0
<NET-INCOME> 1,329
<EPS-PRIMARY> 0.14
<EPS-DILUTED> 0.13
</TABLE>
