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 June 30, 1997
[ ] TRANSITION PERIOD PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ______________ to ___________________
Commission File Number: 1-12624
Syratech Corporation
(Exact name of registrant as specified in its charter)
Delaware 13-3354944
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization Identification No.)
175 McClellan Highway
East Boston, Massachusetts 02128-9114
(Address of principal executive office) (Zip Code)
Registrant's telephone number, including area code - 617-561-2200
Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Sections 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 _____
Number of Shares of Common Stock, Par Value $0.01 per share, outstanding at June
30, 1997-3,784,018
<PAGE>
INDEX
PART I - FINANCIAL INFORMATION PAGE NO.
Item 1. Financial Statements:
Condensed Consolidated Balance Sheets at June 30, 1997
and December 31, 1996 1
Condensed Consolidated Income Statements for the three
and six month periods ended June 30, 1997 and 1996 2
Condensed Consolidated Statements of Cash Flows for the
three and six month periods ended June 30, 1997 and 1996 3
Notes to Condensed Consolidated Financial Statements 4
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 9
PART II - OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders 15
Item 6. Exhibits and Reports on Form 8-K 15
Signature 16
<PAGE>
PART I - FINANCIAL INFORMATION
SYRATECH CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
(unaudited)
<TABLE>
<CAPTION>
June 30, December 31,
1997 1996
------------- ------------
<S> <C> <C>
ASSETS
Current assets:
Cash and equivalents ........................................................ $ 2,128 $ 3,605
Accounts receivable, net .................................................... 46,950 60,020
Inventories ................................................................. 104,439 79,355
Deferred income taxes ....................................................... 13,253 8,940
Prepaid expenses and other .................................................. 4,448 3,803
---------- ---------
Total current assets .................................................... 171,218 155,723
Property, plant and equipment, net ............................................. 70,762 63,955
Purchase price in excess of net assets acquired ................................ 6,911 7,032
Deferred financing costs ....................................................... 10,500
Other assets ................................................................... 358 544
---------- ---------
Total ................................................................... $259,749 $227,254
========== =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Revolving loan facilities ................................................... $ 21,280 $ 6,636
Accounts payable............................................................. 13,343 9,689
Accrued expenses............................................................. 9,408 11,049
Accrued compensation......................................................... 2,676 4,228
Accrued advertising.......................................................... 2,515 3,273
Income taxes payable......................................................... -- 930
---------- ---------
Total current liabilities ............................................... 49,222 35,805
Long - term debt ............................................................... 165,000
Deferred income taxes .......................................................... 18,329 17,706
Pension liability and other long - term liabilities............................. 3,509 3,495
Accrued preferred stock dividend ............................................... 450
Commitments and contingencies ..................................................
Stockholders' equity:
Preferred stock, $.01 par value, 500,000 shares authorized; (25,000
designated as cumulative redeemable preferred stock,
18,000 shares issued and outstanding, liquidation value of $18,000) 18,000
Common stock, $.01 par value, 20,000,000 shares
authorized; 3,784,018 and 8,695,449 shares issued in
1997 and 1996, respectively................................................ 38 87
Additional paid-in capital .................................................. 12,480
Retained earnings ........................................................... 4,762 157,117
Cumulative translation adjustment ........................................... 439 567
Less: Treasury stock; 218 shares, at cost ................................... (3)
---------- ---------
Total stockholders' equity .............................................. 23,239 170,248
---------- ---------
Total ................................................................... $259,749 $227,254
========== =========
</TABLE>
See notes to condensed consolidated financial statements.
1
<PAGE>
SYRATECH CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED INCOME STATEMENTS (unaudited)
(in thousands, except per share data)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
----------------------- ----------------------
1997 1996 1997 1996
<S> <C> <C> <C> <C>
Net sales ....................................... $ 41,015 $38,592 $85,054 $69,858
Cost of sales ................................... 29,664 28,414 61,078 50,632
--------- -------- -------- --------
Gross profit ............................... 11,351 10,178 23,976 19,226
Selling, general and administrative expenses .... 18,145 (1) 11,417 32,741 (1) 20,755
Other operating income .......................... 720 (2) 3,422 (2) 1,836 (2) 3,422 (2)
--------- -------- -------- --------
Income/(loss) from operations .............. (6,074) 2,183 (6,929) 1,893
Interest expense ................................ (4,304) (866) (4,311) (993)
Interest income ................................. 194 44 202 604
Other income .................................... 1,159 (3) 11,900 (3) 2,184 (3) 11,900 (3)
--------- -------- -------- --------
Income /(loss) before provision/
(benefit) for income taxes ................. (9,025) 13,261 (8,854) 13,404
Provision/(benefit) for income taxes ............ (3,384) 4,638 (3,320) 4,691
--------- -------- -------- --------
Net income/(loss) .......................... (5,641) 8,623 (5,534) 8,713
Preferred stock dividends accrued ............... 450 450
--------- -------- -------- --------
Net income /(loss) applicable to common stockholders $ (6,091) $ 8,623 $(5,984) $ 8,713
========= ======== ======== ========
Income/(loss) per common share................... $ (1.33) $ 0.98 $ (0.90) $ 0.99
======== ======== ======== ========
Weighted average common and common
equivalent shares outstanding ................ 4,595 8,793 6,649 8,786
======== ======== ======== ========
</TABLE>
(1) Includes a $3,873 charge for compensation expense relating to stock options
as a result of the Merger (see Note 3).
(2) Represents income from disposal of Farberware inventory and income from
royalties.
(3) In 1997, represents income from the sale of equipment associated with the
Farberware settlement and in 1996 represents non-recurring income related
to the one-time licensing of the Farberware name on cookware and bakeware.
See notes to condensed consolidated financial statements.
2
<PAGE>
SYRATECH CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)
(in thousands)
<TABLE>
<CAPTION>
Six Months Ended June 30,
-------------------------------------
1997 1996
-------------------------------------
<S> <C> <C>
Cash flows from operating activities:
Net income/(loss) ................................................ $ (5,534) $ 8,713
Adjustments to reconcile net income/(loss) to net
cash provided by operations:
Depreciation and amortization ................................. 2,791 2,160
Deferred income taxes ......................................... (3,690) 1,124
Acquisition of Farberware assets .............................. (9,500)
Net proceeds on disposal of Farberware assets ................. 13,600
Compensation related to stock options ......................... 207
Other ......................................................... 262 650
Increase (decrease) in cash, net of effect of businesses acquired:
Marketable securities ..................................... 30,561
Accounts receivable ....................................... 13,070 (13,818)
Inventories ............................................... (25,084) (44,849)
Prepaid expenses and other ................................ (645) 269
Accounts payable and accrued expenses ..................... (504) (2,910)
Income taxes payable ...................................... (930) (654)
Discontinued operations ....................................... 1,729
------------- ----------
Net cash used in operations ...................................... (20,057) (12,925)
------------- ----------
Cash flows from investing activities:
Acquisition of businesses, net of cash acquired .................. (47,440)
Insurance claim proceeds ......................................... 3,303
Purchases of property, plant and equipment, including
construction in progress ...................................... (9,059) (8,651)
Other ............................................................ 90 51
------------- ----------
Net cash used in investing activities ............................ (8,969) (52,737)
------------- ----------
Cash flows from financing activities:
Change in revolving loan facilities .............................. 14,644 (9,224)
Proceeds from borrowings ......................................... 165,000
Repayment of borrowings .......................................... (300)
Recapitalization ................................................. (152,010)
Proceeds from exercise of stock options .......................... 112
Other ............................................................ (197) 102
------------- ----------
Net cash provided by (used in) financing activities............... 27,549 (9,422)
------------- ----------
Net decrease in cash and equivalents ............................. (1,477) (75,084)
Cash and equivalents, beginning of period ........................ 3,605 78,493
------------- ----------
Cash and equivalents, end of period............................... $ 2,128 $ 3,409
============= ==========
</TABLE>
See notes to condensed consolidated financial statements.
3
<PAGE>
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
(In thousands, except share and per share data)
1. FINANCIAL INFORMATION
The accompanying unaudited interim condensed consolidated financial statements
of Syratech Corporation and Subsidiaries (the "Company") have been prepared
pursuant to the rules and regulations of the Securities and Exchange Commission.
Accordingly, certain information normally included in consolidated financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted. These interim condensed consolidated financial
statements should be read in conjunction with the consolidated financial
statements and notes included in the Company's 1996 Annual Report on Form 10-K.
In the opinion of management, the interim condensed consolidated financial
statements reflect all adjustments, which consist only of normal and recurring
adjustments, necessary for a fair presentation of the interim periods. The
results of operations for the interim periods are not necessarily indicative of
the results of operations to be expected for the full year.
2. SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Six Months Ended June 30,
1997 1996
Cash paid during the period for:
Interest $451 $ 714
==== ======
Income taxes $797 $3,950
==== ======
Supplemental schedule of non-cash financing activities:
Accrued cumulative redeemable
preferred stock dividends $450
====
3. AGREEMENT AND PLAN OF MERGER
On April 16, 1997, THL Transaction I Corp., ("THL I"), a Delaware corporation,
controlled by affiliates of Thomas H. Lee Company ("Lee Affiliates"), was merged
with and into the Company (the "Merger") pursuant to the Restated Agreement and
Plan of Merger, dated as of November 27, 1996, effective as of October 23, 1996,
as amended on February 14, 1997, between THL I and the Company.
Pursuant to the Merger, each share of the Company's Common Stock, par value
$0.01 per share ("Common Stock") issued and outstanding immediately prior to the
effective time of the Merger (the "Effective Time") (April 16, 1997) (other than
(i) shares of Common stock held by the Company or any wholly-owned subsidiary
thereof, and (ii) 35,232 shares of Common Stock that were contributed to the
Company by Leonard Florence (former principal shareholder) upon the Merger and
which were then canceled and retired) was entitled to receive at the election of
the holder thereof and as stated below, either (a) $32.00 in cash (except that
Leonard Florence received $28.00 in cash) or (b) one fully paid and
non-assessable share of the Company's Common Stock. Common Stock retained was
limited in the case of each stockholder (other than Management Stockholders) to
34.75% of such stockholder's shares of Common Stock. Also, because no more than
an aggregate of 868,250 shares of the Company Common Stock could be retained by
stockholders (other than Management Stockholders), the right to retain the
Company's Common Stock was subject to proration. In addition, each Company Stock
Option granted under the 1986 and 1993 Stock Plans outstanding immediately prior
to the Effective Time, vested and was canceled in exchange for the excess in
cash of $32.00 over the exercise price per share of the Company's Common Stock.
The aggregate amount paid to optionees was $3,685, which was charged to
compensation expense.
Upon the Merger, the Lee Affiliates acquired, directly from the Company, an
aggregate of 18,000 shares
4
<PAGE>
(100%) of the Company's 12% Cumulative Redeemable Preferred Stock and 2,374,793
shares (62.8 %) of the Company's Common Stock, in exchange for corresponding
stock interests in THL I, for which the Lee Affiliates had paid an aggregate of
$93,993 in cash. Accordingly, the Lee Affiliates acquired control of the
Company.
At the Effective Time, the Company entered into debt financing arrangements
consisting of $165,000 principal amount of 11% Senior Notes (the "Notes") and a
Senior Revolving Credit Facility of $130,000 (the "Revolving Credit Facility").
The amount invested by the Lee Affiliates in THL I, the purchase price for the
Cumulative Redeemable Preferred Stock, plus proceeds of the Notes and a portion
of the proceeds available pursuant to the Revolving Credit Facility were used to
finance the acquisition of the shares of the Company's outstanding Common Stock
that were not retained by the Company's then existing stockholders, and to
refinance the Company's outstanding indebtedness. The Revolving Credit Facility
is also intended to provide for the Company's working capital requirements at
the time of and following the Merger.
The liquidation preference of the Cumulative Redeemable Preferred Stock is
$1,000 per share plus accrued but unpaid dividends. Holders of the Cumulative
Redeemable Preferred Stock are entitled, subject to the rights of creditors, in
the event of any voluntary or involuntary liquidation of the Company, to an
amount in cash equal to $1,000 for each share outstanding plus all accrued and
unpaid dividends. The rights of holders of the Cumulative Redeemable Preferred
Stock upon liquidation of the Company rank prior to those of the holders of
Common Stock.
Dividends on shares of Cumulative Redeemable Preferred Stock are cumulative from
the date of issue and are payable when and as declared from time to time by the
Board of Directors of the Company. Such dividends accrue on a daily basis
(whether or not declared) from the original date of issue at an annual rate per
share equal to 12% of the original purchase price per share, with such amount to
be compounded annually on each December 31 so that if the dividend is not paid
for any year the unpaid amount will be added to the original purchase price of
the Cumulative Redeemable Preferred stock for the purpose of calculating
succeeding years' dividends. At June 30, 1997 $450 has been accrued.
The Cumulative Redeemable Preferred Stock is redeemable at any time at the
option of the Company, in whole or in part, at $1,000 per share plus all
accumulated and unpaid dividends, if any, to the date of redemption. Subject to
the Company's existing debt agreements, the Company must redeem all outstanding
Cumulative Redeemable Preferred Stock in the event of a public offering of
equity, a change of control or certain sales of assets.
In connection with the Merger, the Company entered into a management agreement
with Thomas H. Lee Company for which the Company pays an annual management fee
in the amount of $450, ($95 expensed at June 30, 1997).
The transaction was accounted for as a recapitalization.
5
<PAGE>
The sources and uses of funds in connection with the Merger were as follows:
Sources of Funds:
11% Senior notes proceeds $165,000
Cash from exercise of employee stock options (1) 2,763
Equity contribution:
THL:
Cumulative redeemable preferred stock (1) 18,000
Common stock (1) 75,993
Retained by non-management stockholders (1) 24,224
Retained by management (1), (2) 20,872
--------
Total Sources $306,852
========
Uses of Funds:
Merger consideration (1), (3) $275,251
Repayment of existing debt 7,617
Fees and expenses (1), (4) 22,296
Increase in available cash 1,688
--------
Total Uses $306,852
========
(1) Results in a charge to stockholders' equity, net of fees capitalized of
$10,794, of $144,901.
(2) Subsequent to the Merger, the former principal shareholder sold $5,000 of
common stock to unrelated parties.
(3) Includes shares retained by management.
(4) Fees and expenses of $11,502 were incurred and charged to equity. Financing
costs of $10,794 have been deferred and will be amortized over the lives of
the new debt facilities (see Note 6).
Reconciliation of stockholders' equity:
Stockholders' equity at January 1, 1997 $170,248
Merger consideration, net (144,901)
Net loss applicable to common stockholders (5,984)
Cumulative translation adjustment (128)
Employee stock options 4,004
--------
Stockholders' equity at June 30, 1997 $23,239
========
6
<PAGE>
At the Effective Time of the Merger, the employment agreement with the Chairman
was amended which (i) changed his term of full-time employment from a rolling
five-year term to a fixed five-year term, (ii) provided for a minimum base
salary of $1,150 per annum, (iii) established $1,150 as the minimum amount upon
which the Chairman's retirement benefit (and the survivor's benefit of his
surviving spouse) will be computed and (iv) created contractual rights with
respect to certain perquisites that he is accorded informally under present
arrangements with the Company. Additionally, the employment agreement with the
Vice President of Purchasing was amended to change his term of full-time
employment from a rolling five-year term to a fixed five-year term.
4. INVENTORIES
Inventories consisted of the following:
June 30, December 31,
1997 1996
--------- ---------
Raw material $ 10,871 $ 9,020
Work-in-process 10,319 5,980
Finished goods 83,249 64,355
--------- ---------
Total $104,439 $79,355
========= =========
5. INCOME TAXES
The income tax benefit for the six month period ended June 30, 1997 has been
computed using the estimated effective tax rate for the year ended December 31,
1997. Due to the seasonality of the business, pre-tax losses are incurred in the
first half of the year. Realization of the income tax benefit is dependent upon
generating sufficient taxable income in the last half of the year. Although
realization is not assured, management believes it is more likely than not that
the income tax benefit will be realized through future taxable earnings.
6. REVOLVING LOAN FACILITIES AND LONG-TERM DEBT
The Company's $60,000 Revolving Loan Agreement was terminated on April 16, 1997,
the effective date of the Merger. In connection with the Merger, a Revolving
Credit Facility was entered into providing $130,000 of borrowings including a
$30,000 sublimit for the issuance of standby and commercial letters of credit.
Borrowings made under the Revolving Credit Facility bear interest at a rate
equal to, at the Company's option, the Eurodollar Rate plus 225 basis points or
the Prime Rate plus 50 basis points. The Revolving Credit Facility expires on
April 16, 2002. Pursuant to the terms of the Revolving Credit Facility, the
Company is required during February and March of each year to maintain excess
availability of at least $45,000. The obligations of the Company under the
Revolving Credit Facility are secured by inventory and accounts receivable of
the Company and its domestic subsidiaries and by a pledge of 100% of the
domestic subsidiaries' and at least 65% of the foreign subsidiaries' outstanding
capital stock. The Revolving Credit Facility contains customary covenants of the
Company and the subsidiary borrowers, including but not limited to, minimum
consolidated net worth on or after September 30, 1997 to be at least $1.00.
Availability under the Revolving Credit Facility, net of outstanding letters of
credit, was $34,567 at June 30, 1997.
Prior to the Merger, the Company paid the outstanding borrowings of $252 under
its Puerto Rican subsidiaries' $10,000 revolving credit facility. On May 1,
1997, the Company entered into a $1,000 facility (the "Facility"), expiring on
May 31, 1998, with the same lender. The Facility bears interest at a rate equal
to, at the Company's option, the Eurodollar Rate plus 175 basis points or the
bank's prime rate less 25 basis points. Availability under the Facility was $211
at June 30, 1997.
The Notes due April 15, 2007, issued in connection with the Merger, require
interest payments to be made semi-annually on April 15 and October 15. The Notes
are general unsecured obligations of the Company and
7
<PAGE>
rank pari passu in right of payment with all current and future unsubordinated
indebtedness of the Company, including borrowings under the Revolving Credit
Facility. However, all borrowings under the Revolving Credit Facility are
secured by a first priority lien on the accounts receivable and inventory of the
Company and its domestic subsidiaries. Consequently, the obligations of the
Company under the Notes are effectively subordinated to its obligations under
the Revolving Credit Facility to the extent of such assets. The Notes are
redeemable, in whole or in part, at the Company's option after April 15, 2002.
The Company's ability to pay dividends is restricted by terms of the Revolving
Credit Facility and the Note Indenture.
7. RECENT ACCOUNTING PRONOUNCEMENTS
In February 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 128 "Earnings Per Share" ("Statement 128"),
which supersedes Accounting Principles Board No. 15. Statement 128 specifies the
computation, presentation, and disclosure requirements for earnings per share
("EPS") for entities with publicly held common stock or potential common stock.
The objective of Statement 128 is to simplify the computation of EPS and to make
the U. S. Standard for computing EPS more compatible with international EPS
computations. Statement 128 is effective for financial statements for both
interim and annual periods ending after December 15, 1997. The Company will be
required to adopt Statement 128 in the fourth quarter of 1997 and does not
expect the adoption to have a material impact on the Company's earnings per
common share. The pro forma basic and diluted EPS (as defined by Statement 128)
for the three and six months ended June 30, 1997 and 1996 are not materially
different from the earnings per common share amounts reported.
In June 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive Income,"
and SFAS No. 131, "Disclosures about Segments of an Enterprise and Related
Information." These statements will be effective for 1998. SFAS No. 130 provides
new standards for reporting items considered to be "comprehensive income." SFAS
No. 131 establishes standards for reporting information about operating segments
of the Company. Neither of these pronouncements would have an impact on reported
net income or on the financial position of the Company.
8
<PAGE>
SYRATECH CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Forward Looking Statements
The Private Securities Litigation Reform Act of 1995 provides a "safe harbor"
for forward-looking statements. Except for the historical information contained
in this Quarterly Report on Form 10-Q, the matters discussed are forward-looking
statements. Such forward-looking statements involve known and unknown risks,
uncertainties and other factors that may cause the actual results, performance
or achievements of the Company, or industry results, to be materially different
from any future results, performance or achievements expressed or implied by
such forward-looking statements. Such factors include, among others, general
economic and business conditions; industry capacity, industry trends; overseas
expansion; the loss of major customers; changes in demand for the Company's
products; the timing of orders received from customers; cost and availability of
raw materials; dependence on foreign sources of supply; changes in business
strategy or development plans; availability and quality of management;
availability, terms and deployment of capital; and the seasonal nature of the
business.
For additional information concerning these and other important factors that may
cause the Company's actual results to differ materially from expectations and
underlying assumptions, please refer to the reports filed by the Company with
the Securities and Exchange Commission.
Agreement and Plan of Merger
On April 16, 1997, THL Transaction I Corp., ("THL I"), a Delaware corporation,
controlled by affiliates of Thomas H. Lee Company ("Lee Affiliates"), was merged
with and into the Company (the "Merger") pursuant to the Restated Agreement and
Plan of Merger, dated as of November 27, 1996, effective as of October 23, 1996,
as amended on February 14, 1997, between THL I and the Company.
Pursuant to the Merger, each share of the Company's Common Stock, par value
$0.01 per share ("Common Stock") issued and outstanding immediately prior to the
effective time of the Merger (the "Effective Time") (April 16, 1997) (other than
(i) shares of Common stock held by the Company or any wholly-owned subsidiary
thereof, and (ii) 35,232 shares of Common Stock that were contributed to the
Company by Leonard Florence (former principal shareholder) upon the Merger and
which were then canceled and retired) was entitled to receive at the election of
the holder thereof and as stated below, either (a) $32.00 in cash (except that
Leonard Florence received $28.00 in cash) or (b) one fully paid and
non-assessable share of the Company's Common Stock. Common Stock retained was
limited in the case of each stockholder (other than Management Stockholders) to
34.75% of such stockholder's shares of Common Stock. Also, because no more than
an aggregate of 868,250 shares of the Company Common Stock could be retained by
stockholders (other than Management Stockholders), the right to retain the
Company's Common Stock was subject to proration. In addition, each Company Stock
Option granted under the 1986 and 1993 Stock Plans outstanding immediately prior
to the Effective Time vested and was canceled in exchange for the excess in cash
of $32.00 over the exercise price per share of the Company's Common Stock. The
aggregate amount paid to optionees was $3.7 million, which was charged to
compensation expense.
Upon the Merger, the Lee Affiliates acquired, directly from the Company, an
aggregate of 18,000 shares (100%) of the Company's 12% Cumulative Redeemable
Preferred Stock and 2,374,793 shares (62.8%) of the Company's Common Stock, in
exchange for corresponding stock interests in THL I, for which the Lee
Affiliates had paid an aggregate of $94.0 million in cash. Accordingly, the Lee
Affiliates acquired control of the Company.
At the Effective Time, the Company entered into debt financing arrangements
consisting of $165.0 million principal amount of 11% Senior Notes (the "Notes")
and a Senior Revolving Credit Facility of $130.0 million
9
<PAGE>
(the "Revolving Credit Facility"). The amount invested by the Lee Affiliates in
THL I, the purchase price for the Cumulative Redeemable Preferred Stock, plus
proceeds of the Notes and a portion of the proceeds available pursuant to the
Revolving Credit Facility were used to finance the acquisition of the shares of
the Company's outstanding Common Stock that were not retained by the Company's
then existing stockholders, and to refinance the Company's outstanding
indebtedness. The Revolving Credit Facility is also intended to provide for the
Company's working capital requirements at the time of and following the Merger.
See sources and uses of funds in Note 3 of the Condensed Consolidated Financial
Statements.
Results of Operations
Three months ended June 30, 1997 compared to three months ended June 30, 1996
Net sales increased 6.3% to $41.0 million for the three months ended June 30,
1997 from $38.6 million for the three months ended June 30, 1996. Excluding the
impact of acquisitions of businesses and product lines completed in 1996, net
sales increased 4.3%. This increase reflects increased sales volume of sterling
silver flatware and glassware items. The changes in product prices did not
materially impact net sales.
Gross profit increased 11.5% to $11.4 million for the three months ended June
30, 1997 from $10.2 million for the three months ended June 30, 1996. Gross
profit as a percentage of sales was 27.7% for the 1997 second quarter compared
to 26.4% for the comparable 1996 period. The 1.3 percentage point increase in
gross profit percentage reflected increased sterling silver flatware and Rochard
Limoges porcelain box sales and increased production efficiencies in the
Company's Puerto Rico sterling silver manufacturing facility. In addition, there
was an increase in the gross margin in the Silvestri product line compared to
the three months ended June 30, 1996 due to the 1996 liquidation of product
acquired in the initial purchase of the Silvestri line. The increase in gross
profit margin was not materially impacted by change in product pricing.
Selling, general and administrative expenses ("S, G & A expenses") increased to
44.2% as a percentage of net sales or $18.1 million for the three months ended
June 30, 1997 from 29.6% or $11.4 million for the three months ended June 30,
1996. Excluding the 1996 acquisitions, S, G & A expenses were $13.0 million or
41.0% as a percentage of net sales for the three months ended June 30, 1997
compared to 27.3% in the same period of 1996. This increase in S, G & A expenses
was due primarily to a $3.9 million charge to compensation expense relating to
stock options as a result of the Merger. Also contributing to the increase are
increased personnel and related costs for expected 1997 growth in sales volume.
In addition, fixed S, G & A expenses for the Rauch and Silvestri seasonal
businesses are incurred throughout the year, however, sales are heavily weighted
toward the third and fourth quarters of the year. In connection with the Merger,
the Company entered into a management agreement with Thomas H. Lee Company for
which the Company pays an annual management fee in the amount of $0.45 million.
For the three months ended June 30, 1997, $0.09 million has been included in S,
G & A expenses.
Loss from operations of $6.1 million for the three months ended June 30, 1997
included other operating income of $0.7 million from the disposal of Farberware
inventory and Farberware license revenue.
Interest expense of $4.3 million for the three months ended June 30, 1997
compared to $0.9 million for the three months ended June 30, 1996. This change
results from the increase in interest associated with the issuance of the 11%
Senior Notes in connection with the Merger offset by a decrease in borrowings
under the revolving loan facilities compared to the same quarter of 1996 which
were higher than normal due to the 1996 acquisitions.
Other income of $1.2 million for the three months ended June 30, 1997 relates to
the sale of certain machinery, tools and equipment in conjunction with the
February 3, 1997 Settlement reached with U. S. Industries, Inc. and Bruckner
Manufacturing Corp. The three months ended June 30, 1996 included non-recurring
pre-tax income of $11.9 million, net of costs resulting from the Farberware
license agreement.
The income tax benefit was $3.4 million for the three months ended June 30, 1997
compared to an income
10
<PAGE>
tax provision of $4.6 million for the same period of 1996. The effective income
tax rate was (37.5%) for the 1997 second quarter compared to 35.0% for the 1996
second quarter. The Company's estimated effective tax rate for 1997 is 37.5%.
This increase in the effective income tax rate in 1997 is due primarily to a
higher proportion of income earned in state tax jurisdictions with higher income
tax rates. Due to the seasonality of the business, losses were incurred in the
first half of the year. Realization of the income tax benefit is dependent upon
generating sufficient taxable income in the last half of the year. Although
realization is not assured, management believes it is more likely than not that
the income tax benefit will be realized through future taxable earnings.
Net loss applicable to common stockholders for the three months ended June 30,
1997 was ($6.1) million compared to net income applicable to common stockholders
of $8.6 million for the comparable 1996 period. Loss per common share was
($1.33) on average shares of 4,595,000 in the 1997 second quarter compared to
income per common share of $0.98 on average shares of 8,793,000 in the 1996
second quarter. The reduction in average shares reflects the Merger which
occurred on April 16, 1997.
Six Months Ended June 30, 1997 compared to the Six Months Ended June 30, 1996.
Net sales increased 21.8% to $85.1 million for the six months ended June 30,
1997 from $69.9 million for the six months ended June 30, 1996. Excluding the
impact of acquisitions of businesses and product lines completed in 1996, net
sales increased 13.8%. The primary reasons for the increase were increased sales
volume of giftware (including silverplated items and glassware) and sterling
silver flatware.
Gross profit increased 24.7% to $24.0 million for the six months ended June 30,
1997 from $19.2 million for the six months ended June 30, 1996. Gross profit as
a percentage of sales was 28.2% for the six months of 1997 compared to 27.5% for
the same period in 1996. The 0.7 percentage point increase in gross profit
percentage reflected increased sterling silver flatware and Rochard Limoges
porcelain box sales and increased production efficiencies in the Company's
Puerto Rico sterling silver manufacturing facility partially offset by
unfavorable product mix in the Company's giftware line. In addition, there was
an increase in the gross margin in the Silvestri product line compared to the
six months ended June 30, 1996 due to the 1996 liquidation of product acquired
in the initial purchase of the Silvestri line. The increase in gross profit
margin was not materially impacted by change in product pricing.
Selling, general and administrative expenses ("S, G & A expenses") increased to
38.5% as a percentage of net sales or $32.8 million for the six months ended
June 30, 1997 from 29.7% or $20.8 million for the six months ended June 30,
1996. Excluding the 1996 acquisitions, S, G & A expenses were $23.9 million or
34.6% as a percentage of net sales for the six months ended June 30, 1997
compared to 28.1% in the same period of 1996. The increase in S, G & A expenses
was due primarily to a $3.9 million charge to compensation expense relating to
stock options as a result of the Merger. Also contributing to the increase are
increased personnel and related costs for expected 1997 growth in sales volume,
and the $0.09 management fee.
Loss from operations of $6.9 million for the six months ended June 30, 1997
included other operating income of $1.8 million from the disposal of Farberware
inventory and Farberware license revenue.
Interest expense of $4.3 million for the six months ended June 30, 1997 compared
to $1.0 million for the six months ended June 30, 1996. This change results from
the increase in interest associated with the issuance of the 11% Senior Notes in
connection with the Merger offset by a decrease in borrowings under the
revolving loan facilities compared to the same period of 1996 were higher than
normal due to the 1996 acquisitions.
Other income of $2.2 million for the six months ended June 30, 1997 relates to
the sale of certain machinery, tools and equipment in conjunction with the
February 3, 1997 Settlement reached with U. S. Industries, Inc. and Bruckner
Manufacturing Corp. The six months ended June 30, 1996 included non-recurring
pre-tax income of $11.9 million, net of costs resulting from the Farberware
license agreement.
The income tax benefit was $3.3 million for the six months ended June 30, 1997
compared to an income tax provision of $4.7 million for the same period of 1996.
The effective income tax rate was (37.5%) for the six months ended June 30, 1997
compared to 35.0% for the six months ended June 30, 1996. The Company's
estimated effective tax rate for 1997 is 37.5%. This increase in the
11
<PAGE>
effective income tax rate in 1997 is due primarily to a higher proportion of
income earned in state tax jurisdictions with higher income tax rates. Due to
the seasonality of the business, losses were incurred in the first half of the
year. Realization of the income tax benefit is dependent upon generating
sufficient taxable income in the last half of the year. Although realization is
not assured, management believes it is more likely than not that the income tax
benefit will be realized through future taxable earnings.
Net loss applicable to common stockholders for the six months ended June 30,
1997 was ($5.5) million compared to net income applicable to common stockholders
of $8.7 million for the comparable 1996 period. Loss per common share was
($0.90) on average shares of 6,649,000 in the six months ended June 30, 1997
compared to income per common share of $0.99 on average shares of 8,786,000 in
the six months ended June 30, 1996. The reduction in average shares reflects the
Merger which occurred on April 16, 1997.
Liquidity and Capital Resources
Net cash used in operating activities for the six months ended June 30, 1997 was
$20.1 million. The primary uses of cash were the normal seasonal building of
inventory in preparation of the third and fourth quarter selling season
partially offset by the seasonal collection of accounts receivable.
The Company's working capital requirements are seasonal and tend to be highest
in the period from September through December due to the Christmas selling
season. Accounts receivable tend to decline during the first quarter as
receivables generated during the third and fourth quarters are collected and
remain lower until the next peak season beginning in September. This seasonality
has increased as a result of the 1996 acquisition of Rauch and the Silvestri and
Potpourri product lines.
Capital expenditures were approximately $9.1 million for the six months ended
June 30, 1997. These expenditures were primarily for the purchase of land for a
warehouse facility on the West Coast, improvements at the Company's East Boston
facility and the purchase of machinery, tools and dies for the Company's Rauch,
Puerto Rico and C. J. Vander manufacturing facilities.
The Company's $60.0 million Revolving Loan Agreement was terminated on April 16,
1997, the effective date of the Merger. In connection with the Merger, a
Revolving Credit Facility was entered into providing $130.0 million of
borrowings including a $30.0 million sublimit for the issuance of standby and
commercial letters of credit. Borrowings made under the Revolving Credit
Facility bear interest at a rate equal to, at the Company's option,
NationsBank's Eurodollar Rate plus 225 basis points or the Prime Rate plus 50
basis points. The Revolving Credit Facility expires on April 16, 2002. Pursuant
to the terms of the Revolving Credit Facility, the Company is required during
February and March of each year to maintain excess availability of at least
$45.0 million. The obligations of the Company under the Revolving Facility are
secured by inventory and accounts receivable of the Company and its domestic
subsidiaries and by a pledge of 100% of the domestic subsidiaries' and at least
65% of the foreign subsidiaries' outstanding capital stock. The Revolving Credit
Facility contains customary covenants of the Company and the subsidiary
borrowers, including but not limited to minimum consolidated net worth on or
after September 30, 1997 to be at least $1.00. Availability under the Revolving
Credit Facility, net of outstanding letters of credit, was $34.6 million at June
30, 1997.
Prior to the Merger, the Company paid the outstanding borrowings of $0.3 million
under its Puerto Rican subsidiaries' $10.0 million revolving credit facility. On
May 1, 1997, the Company entered into a $1.0 million facility (the "Facility"),
expiring on May 31, 1998, with the same lender. The Facility bears interest at a
rate equal to, at the Company's option, the Eurodollar Rate plus 175 basis
points or the lenders prime rate less 25 basis points. Availability under the
Facility was $0.2 million at June 30, 1997.
The Notes due April 15, 2007, issued in connection with the Merger, require
interest payments to be made semi-annually on April 15 and October 15. The Notes
are general unsecured obligations of the Company and rank pari passu in right of
payment with all current and future unsubordinated indebtedness of the Company,
including borrowings under the Revolving Credit Facility. However, all
borrowings under the Revolving Credit Facility are secured by a first priority
lien on the accounts receivable and inventory of the Company and its domestic
subsidiaries. Consequently, the obligations of the Company under the Notes are
effectively
12
<PAGE>
subordinated to its obligations under the Revolving Credit Facility to the
extent of such assets.
The Company's ability to pay dividends is restricted by terms of the Revolving
Credit Facility and the Note Indenture.
See "Agreement and Plan of Merger" in the accompanying Condensed Consolidated
Financial Statements for the sources and uses of the Merger.
The liquidation preference of the Cumulative Redeemable Preferred Stock is
$1,000 per share plus accrued but unpaid dividends. Holders of the Cumulative
Redeemable Preferred Stock are entitled, subject to the rights of creditors, in
the event of any voluntary or involuntary liquidation of the Company, to an
amount in cash equal to $1,000 for each share outstanding plus all accrued and
unpaid dividends. The rights of holders of the Cumulative Redeemable Preferred
Stock upon liquidation of the Company rank prior to those of the holders of
Common Stock.
Dividends on shares of Cumulative Redeemable Preferred Stock are cumulative from
the date of issue and are payable when and as declared from time to time by the
Board of Directors of the Company. Such dividends accrue on a daily basis
(whether or not declared) from the original date of issue at an annual rate per
share equal to 12% of the original purchase price per share, with such amount to
be compounded annually on each December 31 so that if the dividend is not paid
for any year the unpaid amount will be added to the original purchase price of
the Cumulative Redeemable Preferred stock for the purpose of calculating
succeeding years' dividends. At June 30, 1997 $0.5 million has been accrued.
The Cumulative Redeemable Preferred Stock is redeemable at any time at the
option of the Company, in whole or in part, at $1,000 per share plus all
accumulated and unpaid dividends, if any, to the date of redemption. Subject to
the Company's existing debt agreements, the Company must redeem all outstanding
Cumulative Redeemable Preferred Stock in the event of a public offering of
equity, a change of control or certain sales of assets.
At the Effective Time of the Merger, the employment agreement with the Chairman
was amended which (i) changed his term of full-time employment from a rolling
five-year term to a fixed five-year term, (ii) provides for a minimum base
salary of approximately $1.2 million per annum, (iii) established approximately
$1.2 million as the minimum amount upon which the Chairman's retirement benefit
(and the survivor's benefit of his surviving spouse) will be computed and (iv)
created contractual rights with respect to certain perquisites that he is
accorded informally under present arrangements with the Company. Additionally,
the employment agreement with the Vice President of Purchasing was amended to
change his term of full-time employment from a rolling five-year term to a fixed
five-year term.
The Company believes that the 1996 acquisitions of businesses and product lines
together with the growth in the Company's existing businesses will generate
sufficient income from operations to cover the increased level of interest to be
incurred as a result of the Merger and recapitalization and allow the Company to
remain profitable. As the new acquisitions are integrated with the core
business, and with each other, cost savings are expected to be realized as
redundant functions, services and facilities are eliminated. When the West Coast
warehouse and distribution facility becomes operational in 1998, it is expected
that many of these cost savings will be realized.
The Company believes that funds generated from operations and borrowings
available under the Revolving Credit Facility will be sufficient to finance the
Company's working capital requirements, provide for all known obligations of the
Company (including the obligations of the Company under the $165.0 million Notes
issued in connection with the Merger and under its operating leases) and fund
planned capital expenditures through December 31, 1998. See "Agreement and Plan
of Merger".
Accounting Pronouncements
In February 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 128 "Earnings Per Share" ("Statement 128")
which supersedes Accounting Principles Board No. 15. Statement 128 specifies the
computation, presentation, and disclosure requirements for earnings per
13
<PAGE>
share ("EPS") for entities with publicly held common stock or potential common
stock. The objective of Statement 128 is to simplify the computation of EPS and
to make the U. S. Standard for computing EPS more compatible with international
EPS computations. Statement 128 is effective for financial statements issued for
periods ending after December 15, 1997. The Company will be required to adopt
Statement 128 in the fourth quarter of 1997 and does not expect the adoption to
have a material impact on the Company's earnings per common share.
In June 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive Income,"
and SFAS No. 131, "Disclosures about Segments of an Enterprise and Related
Information." These statements will be effective for 1998. SFAS No. 130 provides
new standards for reporting items considered to be "comprehensive income." SFAS
No. 131 establishes standards for reporting information about operating segments
of the Company. Neither of these pronouncements would have an impact on reported
net income or on the financial position of the Company.
14
<PAGE>
PART II-OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
A Special Meeting of Stockholders was held on April 14, 1997, in Boston,
Massachusetts, at which the following matter was submitted to a vote of the
stockholders:
Votes cast for or against and the number of abstentions regarding the proposal
to approve and adopt the Restated Agreement and Plan of Merger, dated as of
November 27, 1996, effective as of October 23, 1996, as amended on February 14,
1997, between Syratech and THL Transaction I Corp., a Delaware Corporation ("THL
I") organized by Thomas H. Lee Company, and the transactions contemplated
thereby, including the merger of THL I with and into Syratech were as follows:
6,571,654 FOR
2,375 AGAINST
2,009 ABSTAIN
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
EX-10-1 Commitment Letter between Banco Popular de Puerto Rico and
Wallace International de PR, Inc. dated May 1, 1997.
EX-10-2 Letter Agreement between Banco Popular de Puerto Rico and Wallace
International de PR, Inc. dated May 12, 1997.
EX-11 Computation of Net Income per Common Share.
EX-27 Financial Data Schedule
(b) Reports on Form 8-K:
A report on Form 8-K, dated April 30, 1997, reporting a change in
control of the Company was filed during the three months ended June
30, 1997.
15
<PAGE>
SYRATECH CORPORATION AND SUBSIDIARIES
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Syratech Corporation
Dated: August 13, 1997
/s/ E. Merle Randolph
________________________________________
E. Merle Randolph
Vice President, Treasurer, and
Chief Financial and Accounting Officer
16
EX-10-1
BANCO POPULAR
May 1, 1997
Mr. E. Merle Randolph
Vice President
Wallace International de PR, Inc.
175 McClellan Highway
East Boston, Massachusetts 02128
Dear Mr. Randolph:
We are pleased to confirm that Banco Popular de Puerto Rico ("the Bank") has
approved an increase in the line of credit of Wallace International de PR, Inc.
("the Borrower") subject to the terms and conditions outlined below:
Amount : $1,000,000
Type : Revolving line of credit
Purpose : Funds will be used for working capital needs
of Wallace International de PR, Inc. or of
its parent company, Wallace
International Silversmiths, Inc.
Repayment : Revolving.
Interest Rate : Interest rate on the notes to be set on the
day an advance is made based on LIBOR plus
1.75%, or if the Borrower so chooses,
pricing will be based on the Bank's Prime
Rate less 25% fluctuating concurrently with
any changes in the Bank's Prime Rate from
time to time. Interest to be paid monthly in
arrears on a 360 days basis.
Broken
Funding Rate : Upon at least 30 days prior written notice,
Wallace PR may prepay the note, in whole or
in part, with accrued interest without a
prepayment penalty on repricing date, it
shall reimburse for any applicable funding
losses the Bank may incur as a consequence
of redeploying such funds. Each partial
prepayment shall be made in an aggregate:
amount not less than $50,000 and shall be
applied on the unpaid installments in the
inverse order of maturities.
<PAGE>
Mr. E. Merle Randolph
May 1, 1997
Page 2
Maturity : May 31, 1998
Tenor : Short term notes up to 90 days
Security/Collateral:
1. Unlimited and Continuous Guaranties from Wallace International
Silversmiths, Inc., Towle Manufacturing Company and Syratech Corp.
2. Wallace de PR will not encumber its silver inventory located at the
Wallace International de PR, Inc. facilities in San German, Puerto
Rico. (Negative pledge of assets).
Other Terms and Conditions:
1. Apply the proceeds of the loan for the specific purposes as herein
agreed to by the Borrower and the Bank and make punctual payments.
2. Preserve Corporate existence and going concern status.
3. Submit annual audited financial statements of Borrower and Guarantors
within one hundred and twenty (120) days after close of fiscal year
end.
4. Comply with all applicable statutes, laws and regulations.
5. Any legal expenses incurred in connection with the drafting, execution
and registration of legal documents shall be paid by the Borrower.
<PAGE>
Mr. E. Merle Randolph
May 1, 1997
Page 3
All other terms and conditions specified on the Line of Credit Agreement dated
October 15, 1996 shall remain in full force and effect.
Kindly note that we will be at your disposal to clarify any questions pertaining
to the foregoing transaction at your convenience.
Cordially,
Janice A. Vazquez
Credit Officer
Corporate Banking Division
Terms and Conditions Agreed and Accepted:
Wallace International de PR, Inc.
________________________________
Authorized Signature
c. Ana E. Rivera, Esq.
EX-10-2
BANCO POPULAR
May 12, 1997
Mr. E. Merle Randolph
Vice President
Wallace International de PR, Inc.
175 McClellan Highway
East Boston, Massachusetts 02128
Dear Mr. Randolph:
Pursuant to your letter dated May 19, 1997, we have effected the following
amendment to our Amended and Restated Line of Credit Agreement dated October 15,
1996.
Page 23
Section 8(e)
From : "secure, issue, assure or incur in any indebtedness for borrowed money
on behalf of or to guaranty the obligations of any other Person;
except that Borrower may advance funds as loans to its parent company
Wallace International Silversmiths, Inc., and its ultimate parent
Syratech Corporation in a sum not to exceed TEN MILLION DOLLARS
($10,000,000) in the aggregate;"
To : "secure, issue, assure or incur in any indebtedness for borrowed money
on behalf of or to guaranty the obligations of any other Person, other
than the guarantee's of the 11% Senior Notes or the Loan and Security
Agreement each dated April 16, 1997 executed in connection with the
Thomas H. Lee Company transaction.
<PAGE>
Wallace International de PR, Inc.
Page - 2 -
Page 24
Section 8(k)
From : "permit their stockholders to pledge, assign or encumber
their stock;"
To : "permit their stockholders to pledge, assign or encumber
their stock except in accordance with the terms of the
Loan and Security Agreement dated April 16, 1997
executed in connection with the Thomas H. Lee Company
transaction."
All other terms and conditions depicted in our Amended and Restated Line of
Credit Agreement and commitment Letter remain unchanged.
As per your request, we also enclose copy of our commitment letter executed on
May 1, 1997.
Cordially,
Janice A. Vazquez
Credit Officer
Corporate Banking Division
c. Ana E. Rivera, Esq.
SYRATECH CORPORATION AND SUBSIDIARIES
COMPUTATION OF NET INCOME PER COMMON SHARE (unaudited)
(in thousands, except per share data)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
--------------------- --------------------
1997 1996 1997 1996
<S> <C> <C> <C> <C>
WEIGHTED AVERAGE COMMON AND COMMON
EQUIVALENT SHARES OUTSTANDING:
Common stock .............................................. 4,595 8,677 6,649 8,677
Common equivalent shares resulting from stock options
(treasury stock method) ................................ 116 109
-------- ------- -------- --------
Subtotal ........................................ 4,595 8,793 6,649 8,786
======== ======= ======== ========
Net income/(loss) applicable to common stockholders ... $(6,091) $8,623 $(5,984) $8,713
======== ======= ======== =======
Net income/(loss) per common share ....................... $ (1.33) $ 0.98 $ (0.90) $ 0.99
======== ======= ======== =======
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS LEGEND CONTAINS SUMMARY INFORMATION EXTRACTED FROM THE SYRATECH
CORPORATION CONSOLIDATED BALANCE SHEET AND THE CONDENSED CONSOLIDATED STATEMENT
OF INCOME AS FILED AS PART OF THE QUARTERLY REPORT ON FORM 10-Q AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH QUARTERLY REPORT ON FORM 10-Q
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> APR-1-1997
<PERIOD-END> JUN-30-1997
<CASH> 2,128
<SECURITIES> 0
<RECEIVABLES> 53,307
<ALLOWANCES> 6,357
<INVENTORY> 104,439
<CURRENT-ASSETS> 171,218
<PP&E> 105,695
<DEPRECIATION> 34,933
<TOTAL-ASSETS> 259,749
<CURRENT-LIABILITIES> 49,222
<BONDS> 0
0
18,000
<COMMON> 38
<OTHER-SE> 5,201
<TOTAL-LIABILITY-AND-EQUITY> 259,749
<SALES> 41,015
<TOTAL-REVENUES> 41,015
<CGS> 29,664
<TOTAL-COSTS> 29,664
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 4,304
<INCOME-PRETAX> (9,025)
<INCOME-TAX> (3,384)
<INCOME-CONTINUING> (5,641)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (6,091)
<EPS-PRIMARY> (1.33)
<EPS-DILUTED> (1.33)
</TABLE>
