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SECURITIES AND EXCHANGE COMMISSION
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WASHINGTON, D.C. 20549
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FORM 10-Q
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[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 29, 1997
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OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
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Commission File #0-16148
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Multi-Color Corporation
(Exact name of Registrant as specified in its charter)
OHIO
(State or other jurisdiction of 31-1125853
incorporation or organization) (IRS Employer
Identification No.)
205 W. Fourth Street, Suite 1140, Cincinnati, Ohio 45202
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(Address of principal executive offices)
Registrant's telephone number - 513/381-1480
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Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
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Indicate the number of shares outstanding of each of the Registrant's classes of
common stock, as of the latest practicable date.
Common shares, no par value - 2,277,679 (as of August 01, 1997)
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<TABLE>
<CAPTION>
PART 1. FINANCIAL INFORMATION
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Item 1. Financial Statements
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MULTI-COLOR CORPORATION
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Statements of Operations
(Prepared Without Audit)
(Thousands except per share amounts)
Thirteen Weeks Ended
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June 29, 1997 June 30, 1996
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<S> <C> <C>
NET SALES $ 11,484 $ 11,567
COST OF GOODS SOLD 9,664 9,821
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Gross Profit 1,820 1,746
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES 1,398 1,330
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Operating Income $ 422 $ 416
OTHER EXPENSE (INCOME) (2) (6)
INTEREST EXPENSE 267 299
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Income Before Taxes $ 157 $ 123
PROVISION (CREDIT) FOR TAXES -0- -0-
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NET INCOME $ 157 $ 123
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NET EARNINGS PER SHARE COMMON SHARE
Primary $ 0.04 $ 0.03
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Fully Diluted NA NA
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AVERAGE NUMBER OF COMMON SHARES OUTSTANDING
Primary 2,213 2,215
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Fully Diluted NA NA
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PREFERRED STOCK DIVIDENDS $ 70 $ 51
NA - diluted effect less than 3% ======== ========
</TABLE>
The accompanying notes are an integral part of this financial information.
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<TABLE>
<CAPTION>
Item 1. Financial Statements (Continued)
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MULTI-COLOR CORPORATION
Balance Sheets
(Thousands)
ASSETS
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June 29, 1997 March 30, 1997
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(Derived from
(Prepared Audited Financial
Without Audit) Statements)
<S> <C> <C>
CURRENT ASSETS
Cash and Cash Equivalents $ 96 $ 81
Accounts Receivable 3,811 3,249
Notes Receivable 121 118
Inventories
Raw Materials 2,331 1,649
Work in Progress 755 641
Finished Goods 1,540 2,802
Deferred Tax Benefit 241 241
Prepaid Expenses and Supplies 58 92
Refundable Income Taxes 46 46
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Total Current Assets $ 8,999 $ 8,919
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RESTRICTED CASH (IRB PROCEEDS) $ 561 --
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SINKING FUND DEPOSITS $ 371 $ 74
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PROPERTY, PLANT, AND EQUIPMENT $ 34,695 $ 33,466
ACCUMULATED DEPRECIATION (14,186) (14,382)
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$ 20,509 $ 19,084
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PROPERTY, PLANT, AND EQUIPMENT HELD FOR SALE $ 1,221 $ 440
ACCUMULATED DEPRECIATION (941) (296)
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$ 280 $ 144
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DEFERRED CHARGES, net $ 74 $ 3
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NOTE RECEIVABLE $ 134 $ 163
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NOTES RECEIVABLE FROM OFFICERS/SHAREHOLDERS $ 100 $ 100
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TOTAL ASSETS $ 31,028 $ 28,487
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LIABILITIES AND SHAREHOLDERS' INVESTMENT
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CURRENT LIABILITIES:
Short-Term Debt $ 1,461 $ 2,294
Current portion of long-term debt 1,003 1,003
Current Portion of Capital Lease Obligation 112 114
Accounts Payable 4,572 3,632
Accrued Expenses 575 1,215
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Total Current Liabilities $ 7,723 $ 8,258
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LONG-TERM DEBT, excluding current portion $ 12,600 $ 9,600
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CAPITAL LEASE OBLIGATION $ 278 $ 302
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DEFERRED TAXES $ 241 $ 241
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DEFERRED COMPENSATION $ 720 $ 692
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PENSION LIABILITY $ 1 $ 1
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Total Liabilities $ 21,563 $ 19,094
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MINORITY INTEREST $ 471 $ 486
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SHAREHOLDERS' INVESTMENT
Preferred Stock Series B, no par value $ 530 $ 530
Preferred Stock Series A, no par value 2,418 2,418
Common Stock, no par value 218 218
Paid-in Capital 9,175 9,175
Accumulated Deficit (3,256) (3,343)
Treasury Stock (45) (45)
Excess of Additional Pension Liability Over
Unrecognized Prior Service Cost (46) (46)
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Total Shareholders' Investment $ 8,994 $ 8,907
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TOTAL LIABILITIES AND SHAREHOLDERS' INVESTMENT $ 31,028 $ 28,487
======== ========
</TABLE>
The accompanying notes are an integral part of these financial information.
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<TABLE>
<CAPTION>
Item 1. Financial Statements (Continued)
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MULTI-COLOR CORPORATION
Statements of Cash Flows
(Prepared Without Audit)
(Thousands)
Thirteen Weeks Ended
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June 29, 1997 June 30, 1996
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<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 157 $ 123
Adjustments to reconcile net income to net
cash provided by (used in) operating activities -
Depreciation and amortization 453 461
Minority interest in losses of subsidiary (16) --
Common stock issued for awards -- 32
Increase in deferred compensation 28 34
Decrease in notes receivable 26 24
Net (increase) decrease of accounts receivable,
inventories and prepaid expenses and supplies (63) 843
Net increase (decrease) in accounts payable and
accrued liabilities 302 (1,748)
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Net cash provided by (used in) operating activities $ 887 ($ 231)
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CASH FLOWS FROM INVESTING ACTIVITIES:
Capital Expenditures, net $(2,010) $( 337)
Restricted cash (IRB Proceeds) (561) --
Proceeds from sale of assets -- 46
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Net cash used in investing activities $(2,571) $( 291)
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CASH FLOWS FROM FINANCING ACTIVITIES:
Decrease of revolving loan including,
non-current portion, net $( 833) $( 481)
Cash Dividends (70) (51)
Sinking fund payments (297) (1,340)
Proceeds from issuance of preferred stock -- 2,432
Additions to long term debt, including current portion 3,000 --
Treasury Stock, net -- (45)
Repayment of Capital Lease Obligations (26) (15)
Capitalized Bank Fees (75) --
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Net cash provided by financing activities $ 1,699 $ 500
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Net increase (decrease) in cash and cash equivalents $ 15 $( 22)
CASH AND CASH EQUIVALENTS, beginning of period $ 81 $ 40
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CASH AND CASH EQUIVALENTS, end of period $ 96 $ 18
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SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Interest paid $ 267 $ 299
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Income Taxes (refunded) paid $ 2 $( 3)
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</TABLE>
The accompanying notes are an integral part of this financial statement.
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MULTI-COLOR CORPORATION
Notes to Financial Information
Item 1. Financial Statements
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The condensed financial statements included herein have been prepared by
the Company, without audit, pursuant to the rules and regulations of the
Securities and Exchange Commission. Although certain information and
footnote disclosures, normally included in financial statements prepared in
accordance with generally accepted accounting principles, have been
condensed or omitted pursuant to such rules and regulations, the Company
believes that the disclosures are adequate to make the information
presented not misleading. These condensed financial statements should be
read in conjunction with the financial statements and the notes thereto
included in the Company's latest Annual Report on Form 10-K.
The information furnished in these financial statements reflects all
estimates and adjustments which are, in the opinion of management,
necessary to present fairly the results for the interim periods reported,
and all adjustments and estimates are of a normal recurring nature.
Item 2. Management's Discussion and Analysis of Financial Condition and
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Results of Operations
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Results of Operations
Thirteen Weeks Ended June 29, 1997 Compared to the Thirteen Weeks Ended June 30,
1996
Net sales decreased $83,000, or .7%, in the first quarter as compared to
the same quarter of the previous year. The decrease in sales was due to a
31% ($997,000) decrease in conventional label business. A portion of the
$997,000 decline in conventional label business ($325,000 or approximately
32%) was the result of the Company eliminating the flexo printing
operations in the Cincinnati division during fiscal year 1997. Excluding
the flexo sales from the total net sales comparative analysis would have
resulted in a 2% increase in first quarter fiscal year 1998 total net sales
when compared to the same prior year quarter. The Company continues to take
steps to improve the profitability of its conventional label business and
may experience further sales declines as a result of these efforts.
In-mold label sales increased 11% ($817,000) and cylinder sales increased
13% ($97,000) in the first quarter as compared to the same quarter of the
previous year confirming the Company's confidence in the long-term growth
in these markets.
Gross profit increased by $74,000 as compared to the previous year with
lower sales volumes. Additionally, the gross profit as a percentage of
sales increased from 15.1% to 15.8% on a comparative basis reflecting
management's commitment to lower the Company's cost structure and improve
profitability.
Selling, general, and administrative expenses increased $68,000 as compared
to the same prior year period. The increase was attributable to the
increased selling effort required in support of growing in-mold label
sales.
Interest expense decreased $32,000 as compared to the same prior year
period and was the result of lower borrowings against the Industrial
Revenue Bonds.
The net income for the period was $157,000 ($.04 per share) as compared to
net income of $123,000 ($.03 per share) in the same prior year period,
representing a net income increase of 27%.
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Liquidity and Capital Resources
In July 1994, the Company entered into a new Credit Agreement with PNC
Bank, Ohio, National Association, and Star Bank, National Association
extending through July 1997. This agreement was to provide available
borrowings under the revolving line of credit of up to a maximum of
$5,000,000 subject to certain borrowing base limitations, and to
provide for up to an additional $1,400,000 of long-term financing for
capital expenditures. During 1995, the Company was in violation of
certain of its financial covenants and received waivers from its
lenders with respect to these violations until April 2, 1995. In
connection with the waivers, the Credit Agreement was amended to
restrict the borrowing base, increase the interest rate and fees
applicable to the borrowings under the Credit Agreement, and restrict
the $1,400,000 term loan and lease lines. The Company remained in
violation of the cashflow coverage ratio, the leverage ratio, and the
current ratio covenants until February 23, 1996, at which time, the
Credit Agreement was restated. As the Company was in violation of
certain covenants that gave the lenders the right to accelerate the due
dates of their loans, the 1995 annual report was issued with the
otherwise long-term debt classified as short-term. This resulted in a
significant deterioration in the Company's working capital position.
During 1996, management launched a three tiered initiative designed to
overcome the Company's financial difficulties. First was a plan to
restore the Cincinnati operations to profitability as measured on an
Earnings Before Interest, Taxes, Depreciation, and Amortization
(EBITDA) basis. Second was a strategy to continue growing the in-mold
label business while improving gross margins in this area. This
strategy called for consolidating all the gravure in-mold label
manufacturing in the Scottsburg facility thereby increasing operating
efficiencies and operating leverage. The third aspect of the initiative
called for the Company to raise approximately $3,000,000 in equity to
strengthen the capital structure of the Company. The Company was
successful in its efforts as four consecutive quarters of profitability
resulted during 1996 each having EBITDA exceeding $1,000,000.
Additionally, the Company was successful in raising $500,000 in equity
prior to year-end 1996 and $2,418,000 during the first quarter of 1997,
supporting its commitment to strengthen its overall financial
structure.
Regaining profitability during 1996 coupled with significant
improvements in cashflow and debt reduction enabled the Company to
restate its loan agreement with its lenders on February 23, 1996. The
restated loan agreement provided available borrowings under the
revolving line of credit of up to $3,750,000 and a $500,000 standby
letter of credit to purchase raw materials included as a sub-limit to
the revolving credit facility. Additionally, the restated agreement
allowed for annual capital expenditures not to exceed $1,500,000.
With the infusion of equity, the Company expanded the Scottsburg
division during 1997 by adding additional capacity. Recognizing the
importance of this expansion program to the overall success of the
Company, the lenders amended the restated loan agreement on May 2, 1996
permitting the acquisitions associated with the Scottsburg expansion.
This amendment allowed total capital expenditures of $3,500,000 for
1997. Additionally, the associated covenants impacted by the increased
capital expenditures were appropriately amended and the Company remains
in compliance with the revised covenant requirements.
On July 22, 1996, the February 23, 1996 restated loan agreement was
amended to improve the borrowing base calculation, reduce the annual
agency fees, and improve the reporting requirements of the Borrowing
Base Certificate to a monthly versus weekly requirement. Additionally,
the Company started a new entity with Think Laboratory Co. Inc. of
Kashiwa, Japan, through a corporation owned 80% by the Company and
entitled Laser Graphic Systems,
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<PAGE> 7
Incorporated, during the second quarter to develop the market for
engraving services in the United States. Although the banks previously
had verbally consented to the creation of this subsidiary, the loan
agreement required written consent. Therefore, the third amendment and
waiver to the February 23, 1996 restated loan agreement was signed on
October 31, 1996, whereby the lenders consented to the new company. The
third amendment also increased the annual lease lines by $200,000
allowing the Company an annual exposure of $600,000 for rental payments
under all lease agreements on real and personal property in support of
the Company's Scottsburg plant expansion plans.
On January 9, 1997, the Company and its lenders, PNC Bank, Ohio,
National Association, and Star Bank, National Association, entered into
a new Credit Agreement extending its revolving line of credit through
July 31,1998. The new loan agreement also provides for a $2,000,000
non-revolving credit facility expiring August 25, 1997. Borrowings
under the revolving line of credit are limited to $4,500,000 and a
$500,000 standby letter of credit to purchase raw materials is included
as a sub-limit to the revolving credit facility. The agreement also
allows the Company to make capital expenditures of $3,200,000 during
fiscal year 1997, $2,600,000 during fiscal year 1998, and $1,800,000
during fiscal year 1999 in support of its capital expansion program.
Unexpended amounts during one fiscal year can be accumulated and
carried over to the next fiscal year. Additionally, the new agreement
allows the Company an annual exposure of $600,000 for rental payments
under all lease agreements on real and personal property. The new
agreement also reduces the fee structure of the Company's loan
portfolio and establishes reduced interest rates if certain performance
targets are accomplished. The Company is in compliance with all
covenants included in the agreements. No borrowing beyond the existing
credit facilities is anticipated.
PNC Bank, Ohio, National Association, and Star Bank, National
Association, also entered into a new loan agreement on January 9, 1997
with Laser Graphic Systems, Incorporated providing a revolving line of
credit of $500,000 until August 1, 1997 at which time, it will be
converted to an evenly amortized term note due June 30, 2002.
Through the first quarter ended June 29, 1997, net cash provided by
operating activities was $887,000 as compared to $231,000 of net cash
used in operating activities through the first quarter ended June 30,
1996. Net cash provided by operating activities was impacted by an
increase in supplier accounts payable.
At June 29, 1997, the Company's net working capital and current ratio
were $1,276,000 and 1.17 to 1, respectively, as compared to net working
capital of $661,000 and current ratio of 1.08 to 1 at March 30, 1996.
The improvement in working capital was primarily attributable to lower
borrowings under the Company's revolving loan.
At June 29, 1997, the Company was in compliance with its loan covenants
and current in its principal and interest payments on all debt. As of
July 25, 1997, approximately $1,100,000 was available under the
revolving line of credit.
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Part II. Other Information
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Item 6. Exhibits and Reports on Form 8-K
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(a) List of Exhibits
Description
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Exhibit Number
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27 Financial Data Schedule
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<PAGE> 9
Signatures
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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.
Multi-Color Corporation
(Registrant)
Date: August 06, 1997 By: /s/ William R. Cochran
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William R. Cochran
Vice President, Chief Financial Officer
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<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-29-1998
<PERIOD-END> JUN-29-1997
<CASH> 96,000
<SECURITIES> 0
<RECEIVABLES> 3,932,000
<ALLOWANCES> 0
<INVENTORY> 4,606,000
<CURRENT-ASSETS> 8,999,000
<PP&E> 35,916,000
<DEPRECIATION> 15,127,000
<TOTAL-ASSETS> 31,028,000
<CURRENT-LIABILITIES> 7,723,000
<BONDS> 12,600,000
<COMMON> 9,393,000
0
2,948,000
<OTHER-SE> (3,347,000)
<TOTAL-LIABILITY-AND-EQUITY> 31,028,000
<SALES> 11,484,000
<TOTAL-REVENUES> 11,484,000
<CGS> 9,664,000
<TOTAL-COSTS> 11,062,000
<OTHER-EXPENSES> (2,000)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 267,000
<INCOME-PRETAX> 157,000
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 157,000
<EPS-PRIMARY> 0.04
<EPS-DILUTED> 0
</TABLE>
