<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended July 30, 1995
-------------
( ) 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: 1-9474
FORSTMANN & COMPANY, INC.
(Debtor-in-Possession)
(Exact name of registrant as specified in its charter)
GEORGIA 58-1651326
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1155 Avenue of the Americas
New York, New York 10036
(Address of principal executive offices)
(212) 642-6900
(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. X Yes No
--- ---
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
There were 5,618,799 shares of voting common stock, $.001 par value,
outstanding as of September 26, 1995.
1
<PAGE>
PART I -- FINANCIAL INFORMATION
Item 1. Financial Statements
FORSTMANN & COMPANY, INC.
(Debtor-in-Possession)
CONDENSED STATEMENTS OF OPERATIONS
FOR THE THIRTEEN WEEKS ENDED JULY 30, 1995 AND JULY 31, 1994, AND
THE THIRTY-NINE WEEKS ENDED JULY 30, 1995
AND JULY 31, 1994
(unaudited)
<TABLE>
<CAPTION>
Thirteen Weeks Ended Thirty-Nine Weeks Ended
------------------------- ---------------------------
July 30, July 31, July 30, July 31,
1995 1994 1995 1994
----------- ----------- ------------ ------------
<S> <C> <C> <C> <C>
Net sales $68,608,000 $69,092,000 $181,534,000 $183,052,000
Cost of goods sold 59,525,000 54,919,000 153,974,000 141,544,000
----------- ----------- ------------ ------------
Gross profit 9,083,000 14,173,000 27,560,000 41,508,000
Selling, general and
administrative expenses 6,614,000 5,212,000 17,284,000 16,157,000
Provision for uncollectible
accounts 1,177,000 187,000 1,698,000 1,606,000
----------- ----------- ------------ ------------
Operating income 1,292,000 8,774,000 8,578,000 23,745,000
Interest expense, net 5,698,000 4,726,000 15,255,000 12,841,000
----------- ----------- ------------ ------------
Income (loss) before income
taxes (4,406,000) 4,048,000 (6,677,000) 10,904,000
Income tax provision
(benefit) (1,740,000) 1,599,000 (2,637,000) 4,307,000
----------- ----------- ------------ ------------
Net income (loss) (2,666,000) 2,449,000 (4,040,000) 6,597,000
Preferred stock in-kind
dividends and accretion
to redemption value 64,000 58,000 191,000 173,000
----------- ----------- ------------ ------------
Income (loss) applicable
to common shareholders $(2,730,000) $ 2,391,000 $ (4,231,000) $ 6,424,000
=========== =========== ============ ============
Per share and share
information:
Income (loss) per common
share $(.49) $.43 $(.75) $1.15
=========== =========== ============ ============
Weighted average common
shares outstanding 5,618,799 5,588,766 5,618,799 5,587,479
=========== =========== ============ ============
</TABLE>
See notes to financial statements.
2
<PAGE>
FORSTMANN & COMPANY, INC.
(Debtor-in-Possession)
CONDENSED BALANCE SHEETS
JULY 30, 1995 AND OCTOBER 30, 1994
(unaudited)
<TABLE>
<CAPTION>
July 30, October 30,
1995 1994
------------- -------------
<S> <C> <C>
ASSETS
Current Assets:
Cash $ 46,000 $ 49,000
Accounts receivable, net of allowance of
$2,682,000 and $2,100,000, respectively 70,794,000 57,089,000
Current income taxes receivable 1,586,000 1,500,000
Inventories 77,813,000 76,881,000
Current deferred tax assets 6,062,000 4,339,000
Other current assets 1,319,000 943,000
------------ ------------
Total current assets 157,620,000 140,801,000
Property, plant and equipment, net 80,181,000 79,479,000
Other assets 10,336,000 8,976,000
------------ ------------
Total $248,137,000 $229,256,000
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term debt $ 7,632,000 $ 2,714,000
Long-term debt in default classified as
current 160,262,000 -
Accounts payable 22,395,000 13,153,000
Accrued liabilities 13,516,000 12,272,000
------------ ------------
Total current liabilities 203,805,000 28,139,000
Long-term debt 2,890,000 155,597,000
Deferred tax liabilities 6,316,000 6,316,000
Accrued additional pension liability in
excess of accumulated benefit obligation 943,000 943,000
Redeemable preferred stock 2,616,000 2,425,000
Shareholders' Equity:
Common stock 5,619 5,619
Additional paid-in capital 26,564,381 26,602,381
Excess of additional pension liability
over unrecognized prior service cost,
net (526,000) (526,000)
Retained earnings since November 2, 1992 5,523,000 9,754,000
------------ ------------
Total shareholders' equity 31,567,000 35,836,000
------------ ------------
Total $248,137,000 $229,256,000
============ ============
</TABLE>
See notes to financial statements.
3
<PAGE>
FORSTMANN & COMPANY, INC.
(Debtor-in-Possession)
CONDENSED STATEMENTS OF CASH FLOWS
FOR THE THIRTY-NINE WEEKS ENDED JULY 30, 1995
AND JULY 31, 1994
(unaudited)
<TABLE>
<CAPTION>
July 30, July 31,
1995 1994
------------- -------------
<S> <C> <C>
Net income (loss) $ (4,040,000) $ 6,597,000
------------ ------------
Adjustments to reconcile net income (loss)
to net cash used by operating activities:
Depreciation and amortization 10,388,000 10,346,000
Income tax provision (benefit) (2,637,000) 4,307,000
Income tax refunds (payments), net 829,000 (571,000)
Provision for uncollectible accounts 1,698,000 1,606,000
Loss (gain) from disposal and impairment of
machinery and equipment 56,000 (66,000)
Other non-cash items (368,000) -
Changes in current assets and current
liabilities:
Accounts receivable (15,393,000) (35,133,000)
Inventories (2,636,000) (3,035,000)
Other current assets (380,000) (446,000)
Accounts payable 9,242,000 (7,525,000)
Accrued liabilities (109,000) (2,590,000)
Accrued interest payable 2,188,000 2,248,000
Investment in notes receivable, net (10,000) 430,000
Deferred financing costs (572,000) (765,000)
------------ ------------
Total adjustments 2,296,000 (31,194,000)
------------ ------------
Net cash used by operating activities (1,744,000) (24,597,000)
------------ ------------
Cash flows used in investing activities:
Capital expenditures, net of sales and use
tax refund (9,401,000) (10,177,000)
Investment in other assets, principally
computer information systems (1,170,000) (1,724,000)
Net proceeds from disposal of machinery and
equipment 110,000 128,000
------------ ------------
Net cash used by investing activities (10,461,000) (11,773,000)
------------ ------------
Cash flows from financing activities:
Net borrowings under the Revolving Line of
Credit 7,686,000 25,927,000
Proceeds from the Term Loan 7,500,000 -
Repayment of the Term Loan (2,500,000) -
Proceeds from issuance of Senior Secured Notes - 10,000,000
Borrowings under the CIT Equipment Facility
and other financing arrangements 3,092,000 3,099,000
Repayment of the CIT Equipment Facility and
other financing arrangements (2,707,000) (2,681,000)
Incentive stock options exercised - 25,000
Cash paid in connection with Dissenters'
Proceeding (869,000) -
------------ ------------
Net cash provided by financing activities 12,202,000 36,370,000
------------ ------------
Net decrease in cash (3,000) -
Cash at beginning of period 49,000 53,000
------------ ------------
Cash at end of period $ 46,000 $ 53,000
============ ============
</TABLE>
See notes to financial statements.
4
<PAGE>
FORSTMANN & COMPANY, INC.
(Debtor-in-Possession)
CONDENSED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
FOR THE THIRTY-NINE WEEKS ENDED JULY 30, 1995
(unaudited)
<TABLE>
<CAPTION>
Pension
Additional Liability Total
Common Paid-In Over Prior Retained Shareholders'
Stock Capital Service Cost Earnings Equity
----- ------- ------------ -------- ------
<S> <C> <C> <C> <C> <C>
Balance, October 30, 1994 $5,619 $26,602,381 $(526,000) $ 9,754,000 $35,836,000
Quasi-reorganization
adjustment - (38,000) - - (38,000)
Loss applicable to
common shareholders - - - (4,231,000) (4,231,000)
------ ----------- --------- ----------- -----------
Balance, July 30, 1995 $5,619 $26,564,381 $(526,000) $ 5,523,000 $31,567,000
====== =========== ========= =========== ===========
</TABLE>
See notes to financial statements.
5
<PAGE>
FORSTMANN & COMPANY, INC.
(Debtor-in-Possession)
NOTES TO FINANCIAL STATEMENTS
JULY 30, 1995
(unaudited)
1. Forstmann & Company, Inc. (the "Company") is a leading designer, marketer
and manufacturer of innovative, high quality fabrics which are used
primarily in the production of brand-name and private label apparel for men
and women. The Company also produces specialty fabrics for use in billiard
and gaming tables, sports caps and career uniforms.
The condensed financial statements presented herein are unaudited and have
been prepared by the Company pursuant to the rules and regulations of the
Securities and Exchange Commission. In the opinion of management, all
adjustments (consisting of normal recurring adjustments) necessary for a
fair presentation of such information have been made. These financial
statements should be read in conjunction with the financial statements and
related notes contained in the Company's Annual Report on Form 10-K for the
fiscal year ended October 30, 1994 (the "1994 Form 10-K"), to which
reference is made. Certain information normally included in financial
statements and related notes prepared in accordance with generally accepted
accounting principles has been condensed or omitted. Because of the
seasonal nature of the Company's business, the results for the interim
periods presented are not indicative of the results for a full fiscal year.
2. As a result of the continued decline in the Company's results of operations
through the fiscal 1995 third quarter, the Company -- as more fully
described in Note 6 -- was in default as of July 30, 1995 under
substantially all of its long-term financing agreements. The decline in the
Company's results of operations is principally due to rising wool costs and
interest expense, sluggishness of retail apparel sales, and a significant
decline in women's outerwear fabric sales which were partially offset by
the sale of fabrics yielding lower profit margins. The Company was unable
to obtain satisfactory amendments to its long-term financing agreements to
resolve the defaults thereunder as of July 30, 1995 or obtain adequate
financing to replace its existing long-term financing agreements. As a
result of the foregoing, on September 22, 1995, the Company filed a
petition for protection under Chapter 11 of the United States Bankruptcy
Code with the Bankruptcy Court for the Southern District of New York. The
Company has secured a debtor-in-possession (DIP) financing commitment from
General Electric Capital Corporation (GECC). Subject to Bankruptcy Court
approval, the DIP facility will provide up to $85 million under a borrowing
base formula, less pre-petition advances and outstanding letters of credit
under the Company's existing GECC Facility (as hereafter defined in Item 2
of this Report on Form 10-Q). Under Chapter 11, certain claims against the
Company in existence prior to the filing are stayed while the Company
continues business operations as Debtor-in-Possession. As of September 22,
1995, the Company estimates that the amount of liabilities subject to
compromise approximates $83.0 million which primarily includes the
Subordinated Notes, including interest thereon and unsecured trade accounts
payable. Additional claims (liabilities subject to compromise) may arise
subsequent to the filing date resulting from the rejection of executory
contracts, including leases, and from the determination by the court (or
agreed to by parties in interest) of allowed claims for contingencies and
other disputed amounts. Claims secured by the Company's assets are also
stayed, although the holders of such claims have the right to move the
court for relief from the stay. The Company has received approval from the
Bankruptcy Court to pay or honor certain of its prepetition liabilities,
including employee wages.
The Company purchases the majority of its raw wool needs from Australia
under extended credit terms. The suppliers' receivables generated from the
sale of such Australian wool to the Company are generally insured by one of
two trade receivable insurance companies. The Company was notified by one
of the trade receivable insurance companies that it has suspended its
support of future raw wool shipments to the Company. The Company does not
have access to adequate alternative sources of raw wool if the existing
wool
6
<PAGE>
suppliers that insure their trade receivables are unwilling to continue to
supply raw wool to the Company under acceptable credit terms.
These factors raise substantial doubt about the Company's ability to
continue as a going concern. The financial statements, as of July 30, 1995,
do not include any adjustments that might be necessary if the Company is
unable to continue as a going concern.
The Company has been developing its business plan for fiscal year 1996 to
address the effects of rising wool costs, higher interest expense,
sluggishness of apparel sales at retail and continuing softness in demand
for women's outerwear fabrics as well as a recent slowdown in demand for
menswear fabrics and the shift in product mix to fabrics yielding lower
profit margins. As currently contemplated, the business plan will place
emphasis on a higher profit margin product line, emphasize niche markets,
reduce the Company's dependency on volume and seek to recover the costs of
providing customized product offerings and smaller production runs from the
Company's customers. When the business plan is finalized and approved by
the Company's Board of Directors, the Company may conclude that: increased
inventory market reserves are necessary as a result of the business plan
eliminating certain product offerings which will render certain existing
inventories obsolete; write down of certain of the Company's machinery and
equipment may be necessary as a result of the business plan eliminating
certain product offerings which will render certain machinery and equipment
as either surplus or obsolete; and certain other costs may need to be
recognized in connection with the implementation of the business plan.
Further, as a result of the Company's need to reduce future cash outflows,
the Company is evaluating its existing capital expenditure plans, including
those for its computer information systems to determine whether such
continued expenditures can be cost justified and will meet the needs of the
Company's new business strategies. Based on the outcome of such evaluation,
certain deferred software costs may be written off. The Company expects to
finalize the business plan and the evaluation of computer information
systems currently under development by October 29, 1995, the Company's
fiscal year end. Accordingly, the Company may recognize significant
expenses associated with the implementation of the business plan and the
systems evaluation during the fourth quarter of fiscal year 1995.
All likely resolutions to the Company's liquidity and debt leverage
problems will involve a conversion of certain existing indebtedness to
equity. The Company is presently unable to determine whether the likely
resolution of the liquidity and debt leverage problems will result in an
ownership change as defined in Section 382 of the Internal Revenue Code, as
amended. An ownership change would limit the Company's ability to utilize
its net operating loss and certain other carry-forward tax credits. If the
Company determines an ownership change will likely occur, the Company will
be required to increase its deferred tax asset valuation allowance by up to
$2.2 million.
3. Inventories are stated at the lower of cost, determined principally by the
LIFO method, or market and consist of:
July 30, October 30,
1995 1994
----------- -----------
Raw materials and supplies $11,051,000 $ 9,873,000
Work-in-process 53,806,000 53,730,000
Finished products 17,229,000 15,471,000
Less market reserves (4,273,000) (2,193,000)
----------- -----------
Total 77,813,000 76,881,000
Difference between LIFO
carrying value and current
replacement cost 2,408,000 2,558,000
----------- -----------
Current replacement cost $80,221,000 $79,439,000
=========== ===========
7
<PAGE>
4. Other assets consist of:
<TABLE>
<CAPTION>
July 30, October 30,
1995 1994
----------- -----------
<S> <C> <C>
Computer information systems,
net of accumulated amortization
of $3,751,000 and $2,669,000 $ 5,639,000 $5,896,000
Deferred financing costs, net of
amortization of $2,325,000 and
$1,512,000 2,720,000 2,961,000
Barter credits 1,675,000 -
Other 302,000 119,000
----------- ----------
Total $10,336,000 $8,976,000
=========== ==========
</TABLE>
During the thirty-nine week period ended July 30, 1995, the Company
exchanged inventories with a net book value of $1.8 million for barter
credits that may be used as partial consideration for future goods and
services purchased through a barter syndicate. This transaction was
recorded based upon the net book value of the inventories and did not give
rise to any profit.
5. Accrued Liabilities consist of:
<TABLE>
<CAPTION>
July 30, October 30,
1995 1994
-------------- -------------
<S> <C> <C>
Salaries, wages and related
payroll taxes $ 1,606,000 $ 1,314,000
Incentive compensation and ERA's 1,306,000 1,027,000
Vacation 1,278,000 2,022,000
Employee benefits plans 1,035,000 868,000
Interest on long-term debt 2,961,000 773,000
Medical insurance premiums 1,040,000 1,540,000
Environmental remediation 421,000 589,000
Dissenters' settlement - 831,000
Other 3,869,000 3,308,000
------------- ------------
Total $ 13,516,000 $ 12,272,000
============= ============
</TABLE>
6. Long-term debt consists of:
<TABLE>
<CAPTION>
July 30, October 30,
1995 1994
------------- ------------
<S> <C> <C>
GECC Facility $ 71,382,000 $ 58,696,000
Senior Secured Notes 27,000,000 27,000,000
Subordinated Notes 56,632,000 56,632,000
CIT Equipment Facility 7,914,000 7,082,000
Capital lease obligations 3,825,000 4,540,000
Other financing agreements 301,000 32,000
------------- ------------
Total 167,054,000 153,982,000
Debt premium - Subordinated Notes 3,730,000 4,329,000
Current portion of long-term debt (7,632,000) (2,714,000)
Long-term debt in default
classified as current (160,262,000) -
------------- ------------
Long-term debt $ 2,890,000 $155,597,000
============= ============
</TABLE>
As a result of weaker than expected operating performance (see Note 2) for
the thirteen weeks ended July 30, 1995, the Company, as of July 30, 1995,
was not in compliance with certain financial covenants contained in the
GECC Facility, the indenture to the Senior Secured Notes and the CIT
Equipment Facility (as those terms are hereinafter defined in Item 2 of
this Report on Form 10-Q) including covenants requiring the maintenance of
minimum adjusted tangible net worth, EBITDA, and certain EBITDA related
ratios. The Company's failure to comply with these covenants has resulted
in events of default under the GECC Facility, the indenture to the Senior
Secured Notes and the CIT Equipment Facility and has triggered cross-
defaults under the indenture to the Subordinated Notes. In addition, as a
result of the Company filing for protection under the U.S. Bankruptcy Code
on September 22, 1995, as described in Note 2 to the Financial Statements,
all of such indebtedness is due and payable. Accordingly, the outstanding
obligations under the GECC Facility, the CIT Equipment Facility, the Senior
Secured Notes and the Subordinated Notes are classified as current
liabilities at July 30, 1995.
8
<PAGE>
7. Share and per share information for the thirteen and thirty-nine weeks
ended July 30, 1995 and July 31, 1994 are based upon actual income (loss)
applicable to common shareholders and the weighted average shares
outstanding during the periods.
8. As discussed in Note 11 to the Company's annual financial statements in the
1994 Form 10-K, the Company has accrued certain estimated costs for
environmental matters. On February 24, 1995, the Company notified the
Environmental Protection Division of the Georgia Department of Natural
Resources ("GDNR") that J.P. Stevens & Co., Inc., a prior owner and
operator of the Company's Dublin facilities is a potential responsible
party pursuant to the Georgia Hazardous Site Response Act. Further, on June
29, 1995, the Company notified the GDNR of a release of a possible
hazardous substance at a site previously used by J.P. Stevens & Co., Inc.,
where various waste materials were reportedly disposed and burned. The
Company purchased the facility in 1986 and has not disposed of or burned
such waste materials at the site. As of September 26, 1995, the GDNR has
not formally responded to the Company's notification. Based upon the
foregoing, management believes that its accrual for environmental costs at
July 30, 1995, is appropriate and reasonable.
9. As discussed in Note 11 to the Company's annual financial statements in the
1994 Form 10-K, the Company was involved in legal proceedings with certain
shareholders who dissented from a 1992 merger with an affiliated company
(the "Dissenters' Proceeding"). In September 1994, the Company concluded a
settlement and a dismissal of claims with one of the dissenting
shareholders and in December 1994, the Company concluded settlement of the
remaining claims, paid such remaining dissenters $365,000 and agreed to pay
certain other costs. The action has been dismissed and no claims remain
pending in the Dissenters' Proceeding. During the first quarter of fiscal
year 1995, the Company finalized and paid all remaining costs associated
with the Dissenters' Proceeding. This increased the total estimated costs
associated with the Dissenters' Proceeding from $1,788,000 to $1,826,000,
all of which were charged to additional paid-in-capital in accordance with
the principles of quasi-reorganization accounting (see Note 14 to the
Company's annual financial statements in the 1994 Form 10-K).
10. The Company was unable to negotiate a favorable extension or renewal of its
corporate and marketing office lease which expires in October 1996 and on
January 31, 1995, the Company entered into a twenty (20) year lease with a
new landlord for such office space. Concurrent with the consummation of the
new lease, the landlord and the Company entered into a takeover agreement,
effective August 1, 1995, whereby the landlord agreed to take over the
Company's remaining obligations under its existing office lease which
expires in October 1996. Based on the current estimates of market value of
the new lease compared to the Company's remaining obligation under the old
lease, the Company has recognized a loss of $0.6 million. Additionally, the
Company incurred accelerated amortization on leasehold improvements
associated with the old lease.
Under the terms of the new lease, the Company's rental payments will
commence January 1, 1996 and future minimum rental payments, on a calendar
year basis, will be $1.6 million per year through 2015. Such minimum rental
payments will be adjusted periodically, subject to certain maximum
limitations, based on changes in the Consumer Price Index (as defined). The
Company has spent approximately $3.7 million in leasehold improvements and
related fees and expenses, of which the landlord has contributed
approximately $1.4 million.
11. On August 16, 1995, the Company's former Chairman of the Board, President
and Chief Executive Officer (the "Executive Officer") entered into a
severance agreement and resigned from the Company. The agreement entitles
the Executive Officer to a continuation of existing salary and certain
other benefits for a period of two years from the date of separation from
the Company and grants the Executive Officer title to certain of the
Company's assets in the Executive Officer's possession. In addition, under
the agreement, the Company agreed to pay certain vested but unearned equity
referenced deferred incentive awards held by the Executive Officer (the
"ERAs") which he would have been entitled to under his employment agreement
with the Company if he had been dismissed without "cause" as defined
therein. The value of ERAs were fully accrued by the Company as of March 4,
1995. In connection with such agreement, the Company expects to recognize
$0.6 million of expense during the fourth quarter of fiscal year 1995.
9
<PAGE>
Item 2.
- -------
FORSTMANN & COMPANY, INC.
(Debtor-in-Possession)
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Reference is made to Item 7 - "Management's Discussion and Analysis of
Financial Condition and Results of Operations" contained in the 1994 Form 10-K
for a discussion of the Company's financial condition as of October 30, 1994,
including a discussion of the Company's anticipated liquidity and working
capital requirements during its 1995 fiscal year.
Recent Events
- -------------
As a result of weaker than expected operating performance for the thirteen
weeks ended July 30, 1995, the Company, as of July 30, 1995, was not in
compliance with certain financial covenants contained in the GECC Facility, the
indenture to the Senior Secured Notes and the CIT Equipment Facility (as those
terms are hereinafter defined) including covenants requiring the maintenance of
minimum adjusted tangible net worth, EBITDA, and certain EBITDA related ratios.
The Company's failure to comply with these covenants has resulted in events of
default under the GECC Facility, the indenture to the Senior Secured Notes and
the CIT Equipment Facility and has triggered cross-defaults under the indenture
to the Subordinated Notes. All of such indebtedness is due and payable.
Accordingly, the outstanding obligations under the GECC Facility, the CIT
Equipment Facility, the Senior Secured Notes and the Subordinated Notes are
classified as a current liability at July 30, 1995.
As a result of the continued decline in the Company's results of operations
throughout fiscal 1995, the Company -- as more fully described in Notes 2 and 6
to the Financial Statements in this Form 10-Q -- was in default as of July 30,
1995 under substantially all of its long-term financing agreements. The decline
in the Company's results of operations is principally due to rising wool costs
and interest expense, sluggishness of retail apparel sales, and a significant
decline in women's outerwear fabric sales which were partially offset by the
sale of fabrics yielding lower profit margins. The Company was unable to obtain
satisfactory amendments to its long-term financing arrangements to resolve the
defaults thereunder as of July 30, 1995 or obtain adequate financing to replace
its existing long-term financing agreements. As a result of the foregoing, on
September 22, 1995, the Company filed for protection under Chapter 11 of the
United States Bankruptcy Code with the Bankruptcy Court for the Southern
District of New York. The Company has secured a debtor-in-possession ("DIP")
financing commitment from General Electric Capital Corporation (GECC). Subject
to Bankruptcy Court approval, the DIP facility will provide up to $85 million
under a borrowing base formula, less pre-petition advances and outstanding
letters of credit under the Company's existing GECC Facility (as hereinafter
defined). Under Chapter 11, certain claims against the Company in existence
prior to the filing are stayed while the Company continues business operations
as Debtor-in-Possession. As of September 22, 1995, the Company estimates that
the amount of liabilities subject to compromise approximates $83.0 million which
primarily includes the Subordinated Notes, including interest thereon and
unsecured trade accounts payable. Additional claims (liabilities subject to
compromise) may arise subsequent to the filing date resulting from the rejection
of executory contracts, including leases, and from the determination by the
court (or agreed to by parties in interest) of allowed claims for contingencies
and other disputed amounts. Claims secured by the Company's assets are also
stayed, although the holders of such claims have the right to move the court for
relief from the stay. The Company has received approval from the Bankruptcy
Court to pay or honor certain of its prepetition liabilities, including employee
wages.
The Company purchases the majority of its raw wool needs from Australia under
extended credit terms. The suppliers' receivables generated from the sale of
such Australian wool to the Company are generally insured by one of two trade
receivable insurance companies. The Company was notified by one of the trade
receivable insurance companies that it has suspended its support of future raw
wool shipments to the Company. The Company does not have access to adequate
alternative sources of raw wool if the existing wool suppliers that insure their
10
<PAGE>
trade receivables are unwilling to continue to supply raw wool to the Company
under acceptable credit terms.
These factors raise substantial doubt about the Company's ability to continue
as a going concern. The financial statements, as of July 30, 1995, do not
include any adjustments that might be necessary if the Company is unable to
continue as a going concern.
The Company has been developing its business plan for fiscal year 1996 to
address the effects of rising wool costs, higher interest expense, sluggishness
of apparel sales at retail and continuing softness in demand for women's
outerwear fabrics as well as a recent slowdown in demand for menswear fabrics
and the shift in product mix to fabrics yielding lower profit margins. As
currently contemplated, the business plan will place emphasis on a higher profit
margin product line, emphasize niche markets, reduce the Company's dependency on
volume and seek to recover the costs of providing customized product offerings
and smaller production runs from the Company's customers. When the business plan
is finalized and approved by the Company's Board of Directors and accepted by
its creditors, the Company may conclude that: increased inventory market
reserves are necessary as a result of the business plan eliminating certain
product offerings which would render certain existing inventories obsolete;
write down of certain of the Company's machinery and equipment may be necessary
as a result of the business plan eliminating certain product offerings which
would render certain machinery and equipment as either surplus or obsolete; and
certain other costs may need to be recognized in connection with the
implementation of the business plan. Further, as a result of the Company's need
to reduce future cash outflows, the Company is evaluating its existing capital
expenditure plans, including those for its computer information systems to
determine whether such continued expenditures can be cost justified and will
meet the needs of the Company's new business strategies. Based on the outcome
of such evaluation, certain deferred software costs may be written off. The
Company expects to finalize the business plan and the evaluation of computer
information systems currently under development by October 29, 1995, the
Company's fiscal year end. Accordingly, the Company may recognize significant
expenses associated with the implementation of the business plan and the systems
evaluation during the fourth quarter of fiscal year 1995. The financial
statements, as of July 30, 1995, do not include any adjustments that might be
necessary if the Company is unable to continue as a going concern.
The Company purchases the majority of its raw wool needs from Australia under
extended credit terms. The suppliers' receivables generated from the sale of
such Australian wool to the Company are generally insured by one of two trade
receivable insurance companies. On September 14, 1995, the Company was notified
by one of the trade receivable insurance companies that it has suspended its
support of future raw wool shipments to the Company as of September 14, 1995.
The Company does not have access to adequate alternative sources of raw wool if
the existing wool suppliers that insure their trade receivables are unwilling to
continue to supply raw wool to the Company under acceptable credit terms.
Financial Condition and Liquidity
- ---------------------------------
The Company has historically financed its investing activities and the seasonal
nature of its operations through a combination of borrowings, equipment
financing and leasing, and internally generated funds. The Company's investing
needs have arisen principally in connection with modernization and expansion of
the Company's production capacity.
Prior to the Bankruptcy filing, the Company's financing needs were funded from
the proceeds from borrowings under the Company's five-year loan agreement dated
as of October 30, 1992 as amended, with General Electric Capital Corporation
("GECC"), as agent and lender (the "GECC Facility"). The GECC Facility as of
September 1, 1995, consisted of an $85.0 million revolving line of credit (the
"Revolving Line of Credit") (which included a $7.5 million letter of credit
facility). Prior to July 1, 1995, the GECC Facility also included a $7.5
million term loan (the "Term Loan") which was repaid in full on September 1,
1995. Proceeds from the Company's ordinary operations were applied to reduce
the principal amount of borrowings outstanding under the Revolving Line of
Credit. Unused portions of the Revolving Line of Credit were borrowed and
reborrowed, subject to availability in accordance with the then applicable
commitment and borrowing base limitations. At July 30, 1995 the aggregate
amount of borrowings and letters of credit outstanding under the GECC Facility
11
<PAGE>
was approximately $76.3 million and loan availability, in excess of such
borrowings and letters of credit under the GECC Facility, was approximately
$10.8 million. The Company has secured a DIP financing commitment from GECC.
Subject to the Bankruptcy Court approval, the DIP facility will provide up to
$85 million (which includes a $10.0 million post-petition letter of credit
facility) under a borrowing base formula, less pre-petition advances and
outstanding letters of credit under the Company's existing GECC facility.
Since December 1991, the Company has been a party to a Loan and Security
Agreement (the "CIT Equipment Facility") with the CIT Group/Equipment Financing,
Inc. which provides financing for the acquisition of, and to refinance
borrowings incurred to acquire, various textile machinery and equipment. Each
loan under the CIT Equipment Facility is a five-year purchase money loan,
secured by a first (and only) perfected security interest in the equipment, and
is payable in 60 consecutive monthly installments of principal plus interest.
Certain loans under the CIT Equipment Facility are additionally secured by $1.5
million in letters of credit. On December 22, 1994, the CIT Equipment Facility
was further amended to permit up to two additional loans not to exceed an
aggregate of $5.0 million with the commitment period ending on July 31, 1995. On
December 22, 1994, the Company borrowed $2.5 million at an interest rate of
10.58%. Effective as of April 30, 1995, the CIT Equipment Facility was amended
to, among other things, terminate the commitment period in consideration for
amending certain of the financial covenant requirements under the CIT Equipment
Facility.
Historically, during the first half of its fiscal year, the Company utilizes
cash to fund operations, whereas operations provide cash during the second half
of the Company's fiscal year. Net cash used by operations was approximately
$1.7 million during the thirty-nine week period ended July 30, 1995 (the "1995
Period") as compared to net cash used by operations of approximately $24.6
million during the thirty-nine week period ended July 31, 1994 (the "1994
Period"). This improvement is primarily attributable to a decline in cash used
to finance accounts receivable due to lower sales, higher accounts payable and
accrued liabilities due to high wool payables primarily attributable to more
favorable extended wool terms, all of which was somewhat offset by weaker
operating results. Net cash used by investing activities during the 1995
Period, primarily for capital expenditures, was $10.5 million, a decrease of
$1.3 million from the 1994 Period. Operating and investing activities during
the 1995 Period were funded from $7.7 million of net borrowings under the
Revolving Line of Credit, the $5.0 million net proceeds of the Term Loan (which
were used to repay a portion of outstanding borrowings under the Revolving Line
of Credit), and $3.1 million of additional borrowings under the CIT Equipment
Facility and other financing arrangements which were somewhat offset by $2.7
million repayment of loans under the CIT Equipment Facility and other financing
arrangements, and $0.9 million paid in connection with the final settlement of
the Dissenters' Proceeding (see Note 9 to the Financial Statements contained in
this Form 10-Q).
The Company expects spending for capital expenditures, primarily machinery and
equipment, in fiscal year 1995 to be approximately equal to fiscal year 1994.
Working Capital at July 30, 1995 was a negative $46.2 million, a $158.9 million
decline from working capital at October 30, 1994 due to the reclassification of
$160.3 million of long-term debt in default to current liabilities. Current
assets increased by $16.8 million which was somewhat offset by a $15.4 million
increase in current liabilities excluding the $160.3 million reclassification of
long-term debt in default to current liabilities. The increase in current
assets is primarily due to a $13.7 million increase in accounts receivable and a
$1.0 million increase in inventories. The increase in accounts receivable is due
to the seasonal nature of the Company's sales. The increase in inventories is
primarily due to a $1.2 million increase in raw materials and supplies. Current
liabilities, other than the reclassification of debt, increased primarily due to
a $9.2 million increase in accounts payable resulting principally from higher
and more extended terms for wool payables.
The Company's business is seasonal, with the vast majority of orders for woolen
fabrics placed from December through April for manufacturers to produce apparel
for retail sale during the fall and winter months. As a result of normal
payment terms for such fabrics, the Company historically receives the major
portion of its payments thereon during July through October. This seasonal
pattern is further influenced by the industry practice of providing coating
12
<PAGE>
fabric customers with favorable billing terms (referred to as "dating"), which
permits payment sixty (60) days beyond July 1 for invoices billed in January
through June. Accounts receivable at July 30, 1995 included $21.3 million of
receivables with dating, a decrease of $8.3 million compared to July 31, 1994.
This decrease is primarily attributable to a $14.8 million decline in women's
outerwear (coating) fabric sales during the 1995 Period compared to the 1994
Period. The Company believes that the decline in sales of coating fabrics is
due to the exceptionally warm temperatures registered across the country during
the previous fall and winter seasons and increased imports from Eastern Europe
last year which have resulted in higher levels of women's coats remaining in
retail inventories during the 1995 Period. The Company expects women's
outerwear sales to be significantly lower in fiscal year 1995 than in fiscal
year 1994.
The sales backlog at September 24, 1995 was $33.8 million as compared to $42.1
million at the same time a year earlier. The decline is primarily attributable
to the reduced demand for menswear, women's coating and specialty fabrics as
well as the effects of government orders being filled, all of which were
somewhat offset by higher womenswear orders. Excluding government orders, which
traditionally yield significantly lower gross profit margins, the backlog
declined from $37.9 million to $33.8 million at September 24, 1995.
The Company purchases a significant amount of its raw wool inventory from
Australia. Since all of the Company's forward purchase commitments for raw wool
are denominated in U.S. dollars, there is no actual currency exposure on
outstanding contracts. However, future changes in the relative exchange rates
between United States and Australian dollars can materially affect the Company's
results of operations for financial reporting purposes. The cost of certain raw
wool categories sourced from Australia has risen significantly, due in part to a
drought in Australia which has resulted in a reduction in sheep herds. The
effect of the drought and the effect of fluctuating raw wool purchases by
certain Far Eastern countries, indicates that raw wool costs may continue to
increase in the near future. Based on wool costs incurred during the 1995
Period and the Company's forward purchase commitments and current wool market
trends, the Company expects wool costs to continue to be significantly higher
during the remainder of fiscal year 1995 as compared to fiscal year 1994.
The Company was unable to negotiate a favorable extension or renewal of its
corporate and marketing office lease which expires in October 1996 and on
January 31, 1995, the Company entered into a twenty (20) year lease with a new
landlord for such office space. Concurrent with the consummation of the new
lease, the landlord and the Company entered into a lease takeover agreement,
effective August 1, 1995, whereby the landlord agreed to take over the Company's
remaining obligation under its existing office lease.
Under the terms of the new lease, the Company's rental payments will commence
January 1, 1996 and future minimum rental payments, on a calendar year basis,
will be $1.6 million per year through 2015. Such minimum rental payments will
be adjusted periodically, subject to certain maximum limitations, based on
changes in the Consumer Price Index (as defined). The Company has spent
approximately $3.7 million in leasehold improvements and related fees and
expenses, of which the landlord has contributed approximately $1.4 million.
RESULTS OF OPERATIONS
- ---------------------
THE 1995 THIRTY-NINE WEEK PERIOD ("1995 PERIOD") COMPARED TO THE 1994 THIRTY-
NINE WEEK PERIOD ("1994 PERIOD")
Net sales for the 1995 Period were $181.5 million, a $1.5 million decrease from
the 1994 Period. Total yards of fabric sold increased slightly from 24.0
million in the 1994 Period to 24.2 million in the 1995 Period. Due to shifts in
product mix, primarily attributable to a decline in women's outerwear (coating)
sales which was offset by womenswear woolen and worsted and converting sales,
the average per yard selling price declined from $7.62 in the 1994 Period to
$7.50 in the 1995 Period. Sales of women's outerwear fabrics declined 36.8% in
the 1995 Period due to the unseasonably warm fall and winter weather experienced
in much of the U.S. last year and the increase in women's coats imported from
Eastern Europe last year. Higher levels of women's coats remain in retail
inventories as a result of the warmer weather and imports which has resulted in
lower demand for the Company's women's outerwear fabrics for the upcoming fall
and winter season. Compounding the effect of the decline in women's outerwear
13
<PAGE>
fabrics was a decline in sales of menswear worsted and speciality fabrics. The
decline in menswear sales reflects the continuing decline in the sale of
tailored menswear and the shift to "Friday wear". The decline in specialty
fabrics is primarily due to the effects of the prolonged major league baseball
strike which resulted in lower demand for baseball caps. Excluding government
sales ($3.7 million in the 1995 Period and $1.4 million in the 1994 Period),
which traditionally yield lower gross profit margins, net sales for the 1995
Period declined $3.9 million from the 1994 Period.
Cost of goods sold increased $12.4 million to $154.0 million during the 1995
Period. Gross profit decreased $13.9 million or 33.6% to $27.6 million in the
1995 Period, and the gross profit margin declined to 15.2% in the 1995 Period
from 22.7% in the 1994 Period. The decline in gross profit is primarily due to
the significant increase in wool costs that was not fully recovered through
higher selling prices and the shift in product mix, including the increase in
government sales, to fabrics yielding lower gross profit. During the fiscal
1995 third quarter, the Company identified approximately $2.8 million of yarn
inventory that has been classified as obsolete which were written down by $2.5
million. Due to the continuing weakness in sales, particularly women's
outerwear and most recently menswear, which resulted in the Company shutting
down its woolen manufacturing operation for one additional week beyond the
annual maintenance shutdown in August, the Company expects the gross profit
margin for the fourth quarter of fiscal 1995 to be lower than the fourth quarter
of fiscal 1994. Also, as described more thoroughly in Note 2 to the Financial
Statements, the Company expects to recognize significant inventory market
reserves during the fourth quarter of fiscal 1995.
Selling, general and administrative expenses, excluding the provision for
uncollectible accounts, increased $1.1 million to $17.3 million in the 1995
Period compared to $16.2 million in the 1994 Period. The majority of the
increase is attributable to the relocation of the Company's corporate and
marketing headquarters which is more fully discussed in Note 10 to the financial
statements. Also, professional services, employee related costs and royalties
increased, offset somewhat by a decline in incentive compensation expense.
The provision for uncollectible accounts increased from $1.6 million in the
1994 Period to $1.7 million in the 1995 Period. Such increase is primarily
attributable to an increase in the Company's allowance for uncollectible
accounts during the 1995 Period resulting from the filing by two of the
Company's menswear customers for protection under the United States Bankruptcy
Code. During the 1994 Period, the allowance for doubtful accounts included an
increased provision as a result of one of the Company's outerwear customers
filing for protection under the United States Bankruptcy Code in February 1994.
The Company establishes a specific allowance for uncollectible accounts based on
its quarterly review and assessment of the collectibility of aged balances
included in accounts receivable. Additionally, the Company establishes a
general allowance for uncollectible accounts based, in part, on historical
trends and the status of the economy and its effect on the Company's customers.
Interest expense for the 1995 Period was $15.3 million or $2.4 million higher
than the 1994 Period. This increase is primarily due to the increases in the
Federal Reserve discount rates which began during calendar year 1994. Increases
in the Federal Reserve discount rates since the beginning of fiscal year 1994
have resulted in the Company's interest rates applicable to borrowings under the
GECC Facility and Senior Secured Floating Rate Notes increasing by approximately
3.0% per annum.
The Company's effective income tax rate was 39.5% for both the 1995 Period and
the 1994 Period.
Preferred stock in-kind dividends and accretion to redemption value was
$191,000 in the 1995 Period and $173,000 in the 1994 Period, and the loss
applicable to common shareholders was $4.2 million in the 1995 Period compared
to income applicable to common shareholders of $6.4 million in the 1994 Period.
14
<PAGE>
THE THIRTEEN WEEKS ENDED JULY 30, 1995 (THE "1995 THIRD QUARTER") COMPARED TO
THE THIRTEEN WEEKS ENDED JULY 31, 1994 (THE "1994 THIRD QUARTER")
Net sales for the 1995 Third Quarter were $68.6 million, a decrease of $0.5
million from the 1994 Third Quarter. Total yards of fabric sold were 8.8 million
in the 1995 Third Quarter, approximately equal to the 1994 Third Quarter. Gross
profit decreased 35.9% in the 1995 Third Quarter to $9.1 million, and the gross
profit margin was 13.2% in the 1995 Third Quarter compared to 20.5% in the 1994
Third Quarter. Reference is made to the discussion regarding sales, sales mix,
cost of goods sold and gross profit in the previous comparison of operations for
the 1995 Period and the 1994 Period for an explanation of the foregoing
variations.
Selling, general and administration expenses, excluding the provision for
doubtful accounts, increased $1.4 million from $5.2 million in the 1994 Third
Quarter to $6.6 million in the 1995 Third Quarter. Reference is made to the
discussion regarding selling, general and administrative expenses in the
previous comparison of operations for the 1995 Period and the 1994 Period for an
explanation of the foregoing variations.
The provision for uncollectible accounts increased from $0.2 million in the
1994 Third Quarter to $1.2 million in the 1995 Third Quarter. Such increase
resulted from the filing by two of the Company's menswear customers for
protection under the United States Bankruptcy Code.
Interest expense for the 1995 Third Quarter increased 20.6% to $5.7 million
primarily due to higher interest rates which is more fully described in the
Results of Operations for the 1995 Period and higher average borrowing used to
fund operations and investing activities.
In the 1995 Third Quarter and 1994 Third Quarter, the Company recognized an
income tax (benefit) provision at an effective tax rate of 39.5% on (loss)
income before income taxes.
Preferred stock in-kind dividends and accretion to redemption value was $64,000
in the 1995 Third Quarter and $58,000 in the 1994 Third Quarter. As a result of
the foregoing, the Company realized a $2.7 million loss applicable to common
shareholders in the 1995 Third Quarter compared to $2.4 million income
applicable to common shareholders in the 1994 Third Quarter.
15
<PAGE>
PART II -- OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders.
None.
Item 6. Exhibits and Reports on Form 8-K:
(a) Exhibits
11.1 Statement re computation of per share earnings - not required since
such computation can be clearly determined from the material contained
herein.
15.1 Independent Accountants' Report, dated September 25, 1995 from
Deloitte & Touche LLP to Forstmann & Company, Inc.
23.1 Letter of Deloitte & Touche LLP.
27 Financial Data Schedule.
(b) Current Reports on Form 8-K
None.
16
<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.
FORSTMANN & COMPANY, INC.
-----------------------------
(Registrant)
/s/ Gary E. Schafer
------------------------------
Gary E. Schafer
Vice President and Corporate Controller
and Chief Accounting Officer
September 27, 1995
- ------------------
Date
17
<PAGE>
EXHIBIT INDEX
Exhibit Sequential
No. Description Page No.
- ------- ----------- ----------
11.1 Statement re computation of per share earnings -
not required since such computation can be
clearly determined from the material contained
herein.
15.1 Independent Accountants' Report, dated
September 25, 1995, from Deloitte & Touche LLP
to Forstmann & Company, Inc.
23.1 Letter of Deloitte & Touche LLP.
27 Financial Data Schedule.
18
<PAGE>
EXHIBIT 15.1
INDEPENDENT ACCOUNTANTS' REPORT
Forstmann & Company, Inc.:
We have made a review of the accompanying condensed balance sheet of Forstmann
& Company, Inc. as of July 30, 1995 and the related condensed statements of
operations for the thirteen weeks and the thirty-nine weeks ended July 30, 1995
and July 31, 1994 and the condensed statements of cash flow for the thirty-nine
weeks ended July 30, 1995 and July 31, 1994 and the condensed statement of
changes in shareholders' equity for the thirty-nine weeks ended July 30, 1995.
These financial statements are the responsibility of the Company's management.
We conducted our review in accordance with standards established by the
American Institute of Certified Public Accounts. A review of interim financial
information consists principally of applying analytical procedures to financial
data, and making inquiries of persons responsible for financial and accounting
matters. It is substantially less in scope than an audit conducted in
accordance with generally accepted auditing standards, the objective of which is
the expression of an opinion regarding the financial statements taken as a
whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to such condensed financial statements for them to be in conformity with
generally accepted accounting principles.
As discussed in Notes 2 and 6 to the financial statements, the Company was in
violation of substantially all of its debt agreements at July 30, 1995 and has
incurred a significant decline in operating results. The Company filed a
voluntary petition seeking reorganization under Chapter 11 of the United States
Bankruptcy Code on September 22, 1995. Such conditions raise substantial doubt
about the Company's ability to continue as a going concern. Management's plan
in regard to this matter is described in Note 2.
We have previously audited, in accordance with generally accepted auditing
standards, the balance sheet of Forstmann & Company, Inc. as of October 30, 1994
and the related statements of operations, shareholders' equity, and cash flows
for the fifty-two weeks then ended (not presented herein); and in our report
dated December 8, 1994 (January 23, 1995 as to paragraph 2 of Note 7), we
expressed an unqualified opinion on those financial statements. In our opinion,
the information set forth in the accompanying condensed balance sheet as of
October 30, 1994 is fairly stated in all material respects in relation to the
balance sheet from which it has been derived.
/s/ Deloitte & Touche LLP
September 25, 1995
Atlanta, Georgia
<PAGE>
EXHIBIT 23.1
September 25, 1995
Forstmann & Company, Inc.
1155 Avenue of the Americas
New York, NY 10036
We have made a review, in accordance with standards established by the American
Institute of Certified Public Accountants, of the unaudited interim financial
information of Forstmann & Company, Inc. for the periods ended July 30, 1995 and
July 31, 1994, as indicated in our report dated September 25, 1995 (which
included an explanatory paragraph concerning the Company's ability to continue
as a going concern); because we did not perform an audit, we expressed no
opinion on that information.
We are aware that our report referred to above, which was included in your
Quarterly Report on Form 10-Q for the quarter ended July 30, 1995, is
incorporated by reference in Registration Statement No. 33-57643 on Form S-8 and
Registration Statement No. 33-56367 on Form S-3.
We also are aware that the aforementioned report, pursuant to Rule 436(C) under
the Securities Act, is not considered a part of the Registration Statement
prepared or certified by an accountant or a report prepared or certified by an
accountant within the meaning of Sections 7 and 11 of that Act.
/s/Deloitte & Touche LLP
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from Forstmann
& Company Inc.'s condensed financial statements for the thirty-nine weeks ended
July 30, 1995 and is qualified in its entirety by reference to such financial
statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> OCT-29-1995
<PERIOD-START> OCT-31-1994
<PERIOD-END> JUL-30-1995
<CASH> 46
<SECURITIES> 0
<RECEIVABLES> 72,380
<ALLOWANCES> 2,682
<INVENTORY> 77,813
<CURRENT-ASSETS> 157,620
<PP&E> 80,181
<DEPRECIATION> 28,981
<TOTAL-ASSETS> 248,137
<CURRENT-LIABILITIES> 203,805
<BONDS> 2,890
<COMMON> 6
2,616
0
<OTHER-SE> 31,561
<TOTAL-LIABILITY-AND-EQUITY> 248,137
<SALES> 181,534
<TOTAL-REVENUES> 181,534
<CGS> 153,974
<TOTAL-COSTS> 153,974
<OTHER-EXPENSES> 17,284
<LOSS-PROVISION> 1,698
<INTEREST-EXPENSE> 15,255
<INCOME-PRETAX> (6,677)
<INCOME-TAX> (2,637)
<INCOME-CONTINUING> (4,040)
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<NET-INCOME> (4,040)
<EPS-PRIMARY> (0.75)
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</TABLE>
