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 June 30, 1998
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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 Number 1-10211
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ESSEX INTERNATIONAL INC.
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(Exact name of registrant as specified in its charter)
DELAWARE 13-3496934
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1601 WALL STREET, FORT WAYNE, INDIANA 46802
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (219) 461-4000
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None
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(Former name, former address and former fiscal year,
if changed since last report)
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:<PAGE>
Number of Shares
Outstanding
Common Stock As of June 30, 1998
------------- -------------------
$.01 Par Value 29,528,425
2<PAGE>
ESSEX INTERNATIONAL INC.
FORM 10-Q INDEX
FOR THE QUARTER ENDED JUNE 30, 1998
Page No.
Part I. Financial Information
Item 1. Financial Statements
Consolidated Balance Sheets . . . . . . . . . . . . . 3
Consolidated Statements of Income . . . . . . . . . . 5
Consolidated Statements of Cash Flows . . . . . . . . 6
Notes to Consolidated Financial Statements . . . . . . 8
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations . . . 13
Part II. Other Information
Item 4. Submission of Matters to a Vote of
Security Holders . . . . . . . . . . . . . . . . . . . 20
Item 5. Other Information . . . . . . . . . . . . . . . . . . 20
Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . 20
Signature . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
2<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
ESSEX INTERNATIONAL INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
June 30,
1998 December 31,
Dollars In Thousands, Except Per Share Data (Unaudited) 1997
--------------------------------------------------------------------------------------
ASSETS
<S> <C> <C>
Current assets:
Cash and cash equivalents . . . . . . . . . . . . . . $ 5,107 $ 2,843
Accounts receivable (net of allowance of
$4,944 and $5,583) . . . . . . . . . . . . . . . . . 185,930 191,737
Inventories . . . . . . . . . . . . . . . . . . . . . 266,267 233,020
Other current assets . . . . . . . . . . . . . . . . . 12,692 15,152
-------- --------
Total current assets . . . . . . . . . . . . . 469,996 442,752
Property, plant and equipment, (net of accumulated
depreciation of $150,062 and $136,365) . . . . . . . 295,610 287,832
Excess of cost over net assets acquired (net of
accumulated amortization of $23,731 and $21,610) . . 121,102 123,222
Other intangible assets and deferred costs (net of
accumulated amortization of $697 and $4,103) . . . . 1,961 5,478
Other assets . . . . . . . . . . . . . . . . . . . . . 4,872 4,468
-------- --------
$893,541 $863,752
======== ========
See Notes to Consolidated Financial Statements
3<PAGE>
ESSEX INTERNATIONAL INC.
CONSOLIDATED BALANCE SHEETS - Continued
June 30,
1998 December 31,
Dollars In Thousands, Except Per Share Data (Unaudited) 1997
--------------------------------------------------------------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable to banks . . . . . . . . . . . . . . . . $153,458 $ 34,752
Current portion of long-term debt . . . . . . . . . . 2,500 2,500
Accounts payable . . . . . . . . . . . . . . . . . . . 67,530 63,845
Accrued liabilities . . . . . . . . . . . . . . . . . 50,683 66,425
Deferred income taxes . . . . . . . . . . . . . . . . 17,325 15,796
Total current liabilities . . . . . . . . . . . 291,496 183,318
Long-term debt . . . . . . . . . . . . . . . . . . . . 208,635 316,250
Deferred income taxes . . . . . . . . . . . . . . . . 52,603 54,438
Other long-term liabilities . . . . . . . . . . . . . 19,198 15,650
Stockholders' equity:
Common stock, par value $.01 per share;
authorized 150,000,000 shares: 30,214,025 and
29,644,482 shares issued at June 30, 1998
and December 31, 1997, respectively . . . . . . . . . 302 296
Additional paid in capital . . . . . . . . . . . . . . 197,950 188,084
Retained earnings . . . . . . . . . . . . . . . . . . 137,592 105,716
-------- --------
335,844 294,096
Less common stock in treasury, at cost: 685,600
shares at June 30, 1998 14,235 -
-------- --------
Total stockholders' equity . . . . . . . . . . 321,609 294,096
-------- --------
$893,541 $863,752
======== ========
</TABLE>
See Notes to Consolidated Financial Statements
4<PAGE>
ESSEX INTERNATIONAL INC.
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
------------------- --------------------
Dollars In Thousands, Except Per Share Data 1998 1997 1998 1997
-----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net sales . . . . . . . . . . . . . . . . . . . $369,601 $453,331 $755,019 $864,109
Cost of goods sold . . . . . . . . . . . . . . 298,632 365,621 602,535 696,528
-------- -------- -------- --------
Gross profit . . . . . . . . . . . . . . . . . 70,969 87,710 152,484 167,581
Selling and administrative expenses . . . . . . 35,403 38,450 73,322 75,411
Other income, net . . . . . . . . . . . . . . . (508) (14) (756) (74)
-------- -------- -------- --------
Income from operations . . . . . . . . . . . . 36,074 49,274 79,918 92,244
Interest expense . . . . . . . . . . . . . . . 6,602 10,147 13,964 21,274
-------- -------- -------- --------
Income before income taxes and
extraordinary charge . . . . . . . . . . . . 29,472 39,127 65,954 70,970
Provision for income taxes . . . . . . . . . . 11,791 15,700 26,591 28,300
-------- -------- -------- --------
Income before extraordinary charge . . . . . . 17,681 23,427 39,363 42,670
Extraordinary charge-debt retirement,
net of income tax benefit . . . . . . . . . . 7,487 - 7,487 -
-------- -------- -------- -------
Net income . . . . . . . . . . . . . . . . . . $ 10,194 $ 23,427 $ 31,876 $ 42,670
======== ======== ======== ========
Earnings per common share:
Income before extraordinary charge . . . . . $ .59 $.84 $1.31 $1.64
Extraordinary charge . . . . . . . . . . . . (.25) - (.25) -
Net income . . . . . . . . . . . . . . . . . ----- ----- ----- -----
$ .34 $ .84 $1.06 $1.64
===== ===== ===== =====
5<PAGE>
Three Months Ended Six Months Ended
June 30, June 30,
------------------- --------------------
Dollars In Thousands, Except Per Share Data 1998 1997 1998 1997
-----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net sales . . . . . . . . . . . . . . . . . . . $369,601 $453,331 $755,019 $864,109
Cost of goods sold . . . . . . . . . . . . . . 298,632 365,621 602,535 696,528
-------- -------- -------- --------
Earnings per common share --
assuming dilution:
Income before extraordinary charge . . . . . $ .57 $ .79 $1.27 $1.50
Extraordinary charge . . . . . . . . . . . . (.24) - (.24) -
Net income . . . . . . . . . . . . . . . . . ----- ----- ----- -----
$ .33 $ .79 $1.03 $1.50
===== ===== ===== =====
</TABLE>
See Notes to Consolidated Financial Statements
6<PAGE>
ESSEX INTERNATIONAL INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
------------------------
Dollars In Thousands 1998 1997
-------------------------------------------------------------------------------
OPERATING ACTIVITIES
<S> <C> <C>
Net income . . . . . . . . . . . . . . . . . . . . . $ 31,876 $ 42,670
Adjustments to reconcile net income to cash
provided by operating activities:
Depreciation and amortization . . . . . . . . . . . 17,392 16,699
Non cash interest expense . . . . . . . . . . . . . 489 1,211
Non cash pension expense . . . . . . . . . . . . . 1,931 1,899
Loss on repurchase of debt . . . . . . . . . . . . 12,478 -
Provision for losses on accounts receivable . . . . (301) 846
Benefit for deferred income taxes . . . . . . . . . (305) (6,214)
Loss on disposal of property, plant
and equipment . . . . . . . . . . . . . . . . . . 749 454
Changes in operating assets and liabilities:
(Increase) decrease in accounts receivable . . . . 6,108 (40,586)
Increase in inventories . . . . . . . . . . . . . (24,343) (16,492)
Decrease in accounts payable and
accrued liabilities . . . . . . . . . . . . . . . (8,731) (1,366)
Net decrease in other assets and
liabilities . . . . . . . . . . . . . . . . . . . (3,754) 1,319
--------- ---------
NET CASH PROVIDED BY OPERATING ACTIVITIES . . . . 41,097 440
-------- --------
INVESTING ACTIVITIES
Additions to property, plant and equipment . . . . . (15,964) (14,156)
Proceeds from disposal of property, plant
and equipment . . . . . . . . . . . . . . . . . . . 21 3,198
Acquisitions . . . . . . . . . . . . . . . . . . . . (13,421) -
Other investments . . . . . . . . . . . . . . . . . (26) (900)
-------- --------
NET CASH USED FOR INVESTING ACTIVITIES . . . . . . (29,390) (11,858)
-------- --------
See Notes to Consolidated Financial Statements
7<PAGE>
ESSEX INTERNATIONAL INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS - Continued
(Unaudited)
Six Months Ended
June 30,
------------------------
Dollars In Thousands 1998 1997
-------------------------------------------------------------------------------
FINANCING ACTIVITIES
Proceeds from long-term debt . . . . . . . . . . . . 164,635 291,400
Repayment of long-term debt . . . . . . . . . . . . (272,250) (319,316)
Proceeds from notes payable to banks . . . . . . . . 545,028 309,634
Repayment of notes payable to banks . . . . . . . . (426,322) (311,940)
Common stock repurchase . . . . . . . . . . . . . . 14,235 (500)
Proceeds from issuance of common stock . . . . . . . - 46,022
Debt issuance costs . . . . . . . . . . . . . . . . (1,526) -
Proceeds from exercise of stock options . . . . . . 2,727 186
Senior Notes redemption premium . . . . . . . . . . (7,500) -
-------- --------
NET CASH PROVIDED BY (USED FOR)
FINANCING ACTIVITIES . . . . . . . . . . . . . . (9,443) 15,486
-------- --------
NET INCREASE IN CASH AND CASH EQUIVALENTS . . . . . . 2,264 4,068
Cash and cash equivalents at beginning of period . . 2,843 4,429
-------- --------
Cash and cash equivalents at end of period . . . . . $ 5,107 $ 8,497
======== ========
</TABLE>
See Notes to Consolidated Financial Statements
8<PAGE>
ESSEX INTERNATIONAL INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Dollars In Thousands, Except Per Share Data
-------------------------------------------
NOTE 1 ORGANIZATION
Unless the context otherwise indicates, the term "Company" refers to
Essex International Inc. ("Essex International") and its consolidated
subsidiaries, including its wholly owned subsidiary, Essex Group, Inc.
("Essex"). The principal asset of Essex International is all of the
outstanding common stock of Essex.
NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The unaudited interim consolidated financial statements contain all
adjustments, consisting of normal recurring adjustments, which are, in the
opinion of the management of the Company necessary to present fairly the
consolidated financial position of the Company as of June 30, 1998, and
the consolidated results of operations and cash flows of the Company for
the three and six-month periods ended June 30, 1998 and 1997,
respectively. Results of operations for the periods presented are not
necessarily indicative of the results for the full fiscal year. These
financial statements should be read in conjunction with the audited
consolidated financial statements and notes thereto included in the
Company's Annual Report on Form 10-K filed with the Securities and
Exchange Commission for the year ended December 31, 1997.
Recently Issued Accounting Standards
In 1997, the Financial Accounting Standards Board issued Statement
No. 130, "Reporting Comprehensive Income" ("FAS 130"), and Statement No.
131, "Disclosures about Segments of an Enterprise and Related Information"
("FAS 131"), which are required to be adopted on December 31, 1998. It is
management's belief that the disclosure provisions of FAS 130 are not
material to its consolidated financial statements. With respect to FAS
131, the Company will be required to report certain information about its
operating segments in annual and interim financial statements issued to
stockholders. FAS 131 also requires the reporting of certain information
about products and services, geographic areas in which the Company
operates and major customers. The Company has not yet completed its
analysis to determine the manner in which operating segment disclosures
will be made in the Company's annual and interim financial statements.
However, the disclosure of additional operating information may result
upon the adoption of FAS 131.
9<PAGE>
ESSEX INTERNATIONAL INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Dollars In Thousands, Except Per Share Data
-------------------------------------------
NOTE 3 INVENTORIES
Inventories consist of the following:
<TABLE>
<CAPTION>
June 30, December 31,
1998 1997
------------- -------------
<S> <C> <C>
Finished goods . . . . . . . . . . . . $186,565 $162,570
Raw materials and work in process . . 55,706 54,146
-------- --------
242,271 216,716
LIFO reserve . . . . . . . . . . . . . 23,996 16,304
-------- --------
$266,267 $233,020
======== ========
</TABLE>
The Company values a major portion of its inventories at the lower of
cost or market based on a last-in, first-out ("LIFO") method. Principal
elements of cost included in the Company's inventories are copper, other
purchased materials, direct labor and manufacturing overhead. Inventories
valued using the LIFO method amounted to $248,031 and $222,957 at June 30,
1998 and December 31, 1997, respectively.
An actual valuation of inventory under the LIFO method can be made only
at the end of each year based on the inventory levels and costs at that
time. Accordingly, interim LIFO calculations must necessarily be based on
management's estimates of expected year-end inventory levels and costs.
Because these are subject to many forces beyond management's control,
interim results are subject to the final year-end LIFO inventory
valuation.
NOTE 4 LONG-TERM DEBT
Long-term debt consists of the following:
<TABLE>
<CAPTION>
June 30, December 31,
1998 1997
------------- -------------
<S> <C> <C>
Revolving loan . . . . . . . . . . . . . $193,635 $100,000
Lease obligation . . . . . . . . . . . . 17,500 18,750
10<PAGE>
10% Senior Notes . . . . . . . . . . . . - 200,000
-------- --------
211,135 318,750
Less current portion . . . . . . 2,500 2,500
-------- --------
$208,635 $316,250
======== ========
</TABLE>
On May 1, 1998, the Company redeemed its outstanding 10% Senior Notes
due 2003 (the "Notes") (the "Redemption"). The Notes were redeemed at
103.75% of the principal amount then outstanding plus accrued and unpaid
interest to the redemption date. The aggregate principal, premium and
11<PAGE>
ESSEX INTERNATIONAL INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Dollars In Thousands, Except Per Share Data
-------------------------------------------
accrued interest paid upon the Redemption totaled $217,500 and was
financed by the Company through a combination of borrowings under the
Company's revolving credit facility, which was amended and restated in
connection with the Redemption, and a new accounts receivable
securitization program. During the second quarter 1998, the Company
recorded extraordinary charges totaling $7,487 ($12,478 before applicable
tax benefit), or $.24 per share on a diluted basis, representing the
redemption premium and the write-offs of unamortized deferred debt costs
associated with the Notes and the Company's prior revolving credit
facility.
The amended and restated revolving credit agreement was entered into
among Essex, Essex International, the Lenders named therein, and The Chase
Manhattan Bank, as administrative agent (the "Revolving Credit
Agreement"). The Revolving Credit Agreement, which terminates October 31,
2001, provides for up to $370,000 in revolving loans reduced by borrowings
under the Company's Canadian credit facility and unsecured lines of credit
in excess of $100,000. The Revolving Credit Agreement also provides a
$25,000 letter of credit subfacility. Outstanding borrowings bear
floating rates of interest, at the Company's option, at bank prime plus
0.50% or a reserve adjusted Eurodollar rate ("LIBOR") plus 1.50%. The
spreads over the prime and LIBOR rates can be reduced to 0% and .375%,
respectively, if a specified leverage ratio is achieved. The average
commitment fees during the revolving loan period are between 0.125% to
0.375% of the average daily unused portion of the available credit based
upon a specific leverage ratio. Indebtedness under the Revolving Credit
Agreement is guaranteed by Essex International and all of Essex'
subsidiaries, and is secured by a pledge of the capital stock of Essex and
its subsidiaries and by a first lien on substantially all assets of the
Company and its subsidiaries except for those assets secured under the
accounts receivable securitization program. The Company's ability to
borrow under the Revolving Credit Agreement is restricted by the financial
covenants contained therein.
The accounts receivable securitization program, dated April 28, 1998,
was entered into among Essex, certain of Essex' subsidiaries, Essex
Funding Inc. ("Essex Funding") and Three Rivers Funding Corporation
("TRFCO") (the "Receivable Securitization Program"). The Receivable
Securitization Program provides for the sale of certain trade receivables
of Essex and certain of its subsidiaries, up to $150,000, to a wholly
owned, limited purpose subsidiary of Essex, Essex Funding. Essex Funding
finances its purchases of receivables through secured borrowings from
TRFCO. TRFCO generally obtains its financing through proceeds received
upon the issuance of commercial paper.
Under the Receivable Securitization Program, Essex Funding has
granted a security interest in all its trade accounts receivable to TRFCO.
Essex Funding's outstanding borrowings generally bear interest at TRFCO's
commercial paper rate (approximately 6.0% per annum, including certain
fees and expenses, at June 30, 1998). The Receivable Securitization
12<PAGE>
Program expires April 28, 1999, although it may be extended for successive
one-year periods subject to agreement between Essex Funding and TRFCO.
Essex Funding's outstanding borrowings are denoted as notes payable to
banks in the Consolidated Balance Sheets.
Through June 30, 1998, the Company fully complied with all of the
financial ratios and covenants under the agreements governing its
outstanding indebtedness.
13<PAGE>
ESSEX INTERNATIONAL INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Dollars In Thousands, Except Per Share Data
-------------------------------------------
NOTE 5 CONTINGENT LIABILITIES
There are various claims and pending legal proceedings against Essex
including environmental matters and other matters arising out of the
ordinary course of its business. Pursuant to the 1988 acquisition of Essex
by Essex International from United Technologies Corporation ("UTC"), UTC
agreed to indemnify Essex against all losses (as defined) resulting from
or in connection with damage or pollution to the environment and arising
from events, operations, or activities of Essex prior to February 29, 1988
or from conditions or circumstances existing at February 29, 1988. Except
for certain matters relating to permit compliance, Essex is fully
indemnified with respect to conditions, events or circumstances known to
UTC prior to February 29, 1988. The sites covered by this indemnity are
handled directly by UTC and all payments required to be made are paid
directly by UTC. The amounts related to this environmental contingency are
not material to the Company's consolidated financial statements. UTC also
provided a second environmental indemnity which deals with losses related
to environmental events, conditions or circumstances existing at or prior
to February 29, 1988, which only became known in the five-year period
commencing February 29, 1988. As to any such losses, Essex is responsible
for the first $4,000 incurred. Management and its legal counsel
periodically review the probable outcome of pending proceedings and the
costs reasonably expected to be incurred. Essex accrues for these costs
when it is probable that a liability has been incurred and the amount of
the loss can be reasonably estimated. After consultation with counsel, in
the opinion of management, the ultimate cost to Essex, exceeding amounts
provided, will not materially affect its consolidated financial position,
cash flows or results of operations. There can be no assurance, however,
that future developments will not alter this conclusion.
Since approximately 1990, Essex has been named as a defendant in a
number of product liability lawsuits brought by electricians and other
skilled tradesmen claiming injury from exposure to asbestos found in
electrical wire products produced a number of years ago. At June 30,
1998, the number of cases filed against Essex was 64 involving
approximately 246 claims. Essex' strategy is to defend these cases
vigorously. Essex believes that its liability, if any, in these matters
and the related defense costs will not have a material adverse effect
either individually or in the aggregate upon its business or financial
condition, cash flows or results of operations. There can be no assurance,
however, that future developments will not alter this conclusion.
14<PAGE>
ESSEX INTERNATIONAL INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Dollars In Thousands, Except Per Share Data
-------------------------------------------
NOTE 6 EARNINGS PER SHARE
The following table sets forth the computation of basic and diluted
earnings per share:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
1998 1997 1998 1997
------ ------ ------ ------
<S> <C> <C> <C> <C>
Numerator:
Income before extraordinary
charge . . . . . . . . . . . $ 17,681 $ 23,427 $ 39,363 $ 42,670
Extraordinary charge-debt
retirement, net of income 7,487 - 7,487 -
tax benefit . . . . . . . . ---------- ---------- ---------- ----------
Net income applicable to $ 10,194 $ 23,427 $ 31,876 $ 42,670
common stock . . . . . . .
Denominator:
Denominator for basic
earnings per share--
weighted-average shares . . 30,149,743 27,882,243 30,036,093 25,990,128
Effect of dilutive
securities:
Stock options . . . . . . . 801,822 1,144,750 900,403 1,194,159
Warrants . . . . . . . . . - 729,131 - 1,304,982
Dilutive potential ---------- ---------- ---------- ----------
common shares . . . . . . 801,822 1,873,881 900,403 2,499,151
Denominator for diluted ---------- ---------- ---------- ----------
earnings per share--adjusted
weighted-average shares . . 30,951,565 29,756,124 30,936,496 28,489,279
========== ========== ========== ==========
Earnings per common share:
Income before extraordinary
charge . . . . . . . . . . $ .59 $ .84 $1.31 $1.64
Extraordinary charge . . . . (.25) - (.25) -
----- ----- ----- -----
Net income . . . . . . . . . $ .34 $ .84 $1.06 $1.64
Earnings per common share-
assuming dilution:
Income before extraordinary
charge . . . . . . . . . . $ .57 $ .79 $1.27 $1.50
Extraordinary charge . . . . (.24) - (.24) -
Net income . . . . . . . . . ----- ----- ----- -----
15<PAGE>
Industrial wire . . . . . . . $ .33 $ .79 $1.03 $1.50
===== ===== ===== =====
</TABLE>
NOTE 7 COMMON STOCK REPURCHASE
The Company announced on June 15, 1998 that its Board of Directors
had approved the repurchase of up to an aggregate of 3,000,000 shares of
its common stock. The share repurchases would be made from time to time
in the open market at prevailing prices or in negotiated transactions off
the market. At June 30, 1998, the Company had repurchased 685,600 shares
at a cost of $14,235.
16<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Introduction
Unless the context otherwise indicates, the term "Company" refers to
Essex International Inc. ("Essex International") and its consolidated
subsidiaries, including its wholly owned subsidiary, Essex Group, Inc.
("Essex"). The principal asset of Essex International is all of the
outstanding common stock of Essex.
In October 1992, the Company was acquired by Bessemer Holdings, L.P.
("BHLP") (an affiliate and successor in interest to Bessemer Capital
Partners, L.P.), certain present and former employees of the Company and
other investors. In May 1997, the Company completed its initial public
offering of common stock (the "Offering") and began trading on the New
York Stock Exchange (SXC).
The Company, founded in 1930, is a leading North American developer,
manufacturer and distributor of electrical wire and cable and insulation
products serving over 11,000 customers worldwide in a wide range of
industrial markets. Among the Company's products are building wire for
commercial and residential construction applications; magnet wire and
insulation materials for electromechanical devices such as motors,
transformers and electrical controls; copper communication wire and cable
for voice and data transmissions both inside and outside the home or
office; industrial wire for applications in construction, appliances,
recreational vehicles and industrial facilities; and automotive wire and
specialty wiring assemblies for automobiles and trucks. The Company has
approximately 5,100 employees and 28 domestic manufacturing facilities.
Results of Operations
Three Months Ended June 30, 1998
Net sales for the second quarter 1998 were $369.6 million or 18% below
the second quarter 1997 net sales of $453.3 million. On a copper price
adjusted basis, net sales for the second quarter 1998 declined
approximately 7% from the second quarter 1997. During the second quarter
1998, the average price per pound of copper, the Company's principal raw
material, on the New York Commodity Exchange, Inc. (COMEX) was $.78 versus
$1.14 for the comparable period in 1997, a decline of 32%. Copper costs
are generally passed through to customers through product pricing. The
decline in second quarter copper-adjusted sale was primarily attributable
to the Company's building wire product line which experienced reduced
selling prices and an approximate 8% decline in sales volume from the
second quarter 1997. Building wire sales volume declined due to the
Company's reduced market participation during the second quarter 1998 in
an effort to improve the Company's margins. The Company believes that
building wire prices came under strong competitive pressures as certain
other major producers chose to drop prices and sell heavily to improve
market share and/or reduce inventory levels.
Cost of goods sold for the second quarter 1998 was 18% below the
comparable period last year due primarily to lower copper prices and
reduced building wire sales volume. The Company's cost of goods sold as a
percentage of net sales were 80.8% and 80.7% in the second quarter 1998
and 1997, respectively. On a copper adjusted basis, gross margins
17<PAGE>
declined to 19.2% for the second quarter 1998 from 22.1% for the second
quarter 1997. The decline in gross margin was due primarily to reduced
spread between selling prices of building wire and the Company's cost of
copper.
Selling and administrative expenses for the second quarter 1998 declined
nearly 8% from the comparable period last year due primarily to reduced
selling expenses attributable to lower sales volume, partially offset by
increased wages and benefits resulting from a higher number of employees.
Selling and administrative expenses as a percentage of net copper-adjusted
sales were 9.6% for the second quarter 1998 compared with approximately
9.7% for the same period last year.
Interest expense for the second quarter 1998 was $6.6 million compared
with $10.1 million in the same period last year, a 35% reduction. Lower
interest costs were attributable to a $101.3 million reduction in average
debt outstanding for the second quarter 1998 versus the second quarter
1997 and a significant decline in the Company's average cost of borrowed
funds. The reduction in average debt outstanding was attributable to
strong free cash flows after investing activities and the proceeds
received under the Offering ($46.2 million). The average cost of borrowed
funds declined as a result of May 1, 1998 redemption and refinancing of
the Company's 10% Senior Notes due 2003 (the "Notes") (the "Redemption").
Income tax expense for the second quarter 1998 was 40.0% of pretax
income compared with 40.1% for the second quarter 1997.
The Company recorded net income of $10.2 million in the second quarter
1998 compared to net income of $23.4 million in the second quarter 1997.
The second quarter 1998 results include extraordinary charges of $7.5
million ($12.5 million before applicable tax benefit), with respect to the
Redemption. These charges represent the redemption premium of the Notes
and the write-offs of unamortized deferred debt costs associated with the
Notes and the prior revolving credit facility that was replaced in
connection with the Redemption.
Six Months Ended June 30, 1998
Net sales for the first six months ended June 30, 1998 were $755.0
million compared with $864.1 million in the same period last year. On a
copper-adjusted basis, net sales for the first half of 1998 were 1% below
the first half of 1997. The average COMEX price of copper for the first
half of 1998 was $.78 per pound versus $1.13 per pound in the first half
of 1997. Net copper-adjusted sales for the first half of 1998 were below
those of the first half of 1997 due primarily to second quarter 1998
building wire pricing pressure which resulted in reduced selling prices
and sales volumes. The Company believes that building wire prices came
under the second quarter competitive price pressure as certain other major
wire producers chose to reduce prices and sell heavily to improve market
share and/or reduce inventory levels. Copper-adjusted sales of the
Company's magnet wire, communication wire and cables, industrial wire and
automotive wire were all ahead of the first half of 1997, reflecting
continued long-term growth trends in the Company's primary served markets.
With regard to the underlying drivers of the building wire market,
residential, non-residential and renovation construction activity has
exhibited further expansion reflecting a combination of low interest
rates, high employment levels and continued growth within the domestic
18<PAGE>
economy. The domestic magnet wire market continued to demonstrate long-
term growth trends fueled by increasing demand for electrical convenience
items in homes, offices and vehicles and greater use of energy efficient
electric motors which require significantly more magnet wire. Outside
plant (OSP) copper cable demand, both domestically and internationally,
remained strong while the market for high-bandwidth datacom wire
experienced double digit growth rates. The Company believes OSP copper
cable demand has continued to strengthen due, in part, to the large
installed base and low cost of copper cable, ease of installation and
recent enhancements in copper electronics which have improved its
transmission capacities. High-bandwidth datacom wire demand has been
driven by the recent proliferation of personal computers, internet usage,
and the development of local and wide area networks.
Cost of goods sold for the first half of 1998 was 13% below the
comparable period last year due primarily to lower copper prices. The
Company's cost of goods sold, as a percentage of net sales were 79.8% and
80.6% in the first half of 1998 and 1997, respectively. On a copper
adjusted basis, however, gross margins declined to 20.2% for the first
half of 1998 from 22.0% for the first half of 1997. The decline in gross
margin was due primarily to building wire pricing pressure during the
second quarter 1998.
Selling and administrative expenses for the first half of 1998 declined
3% from the comparable period last year due primarily to reduced selling
expenses attributable to lower building wire sales volume and lower
general expenses, partially offset by increased wages and benefits
resulting from a higher number of employees. Selling and administrative
expenses as a percentage of net copper-adjusted sales were 9.7% for the
first half of 1998 compared with approximately 9.9% for the same period
last year.
Interest expense for the first six months of 1998 was $14.0 million
compared with $21.3 million in the same period last year. Lower interest
expense was attributable to a $117.6 million reduction in average debt
outstanding for the first half of 1998 versus the first half of 1997 and a
decline in the Company's average cost of borrowed funds. The reduction in
average debt outstanding was attributable to strong free cash flows after
investing activities and the proceeds received under the Offering ($46.2
million). The average cost of borrowed funds declined as a result of the
Redemption.
Income tax expense for the first half of 1998 was 40.3% of pretax income
compared with 39.9% for the first half of 1997.
The Company recorded net income of $31.9 million in the first half of
1998 compared to net income of $42.7 million in the first half of 1997.
The first half of 1998 results included extraordinary charges of $7.5
million ($12.5 million before applicable tax benefit), with respect to the
Redemption. These charges represented the redemption premium of the Notes
and the write-offs of unamortized deferred debt costs associated with the
Notes and the prior revolving credit facility that was replaced in
connection with the Redemption.
Liquidity, Capital Resources and Financial Condition
General
19<PAGE>
Essex International Inc. is a holding company with no operations and has
virtually no assets other than its ownership of the outstanding common
stock of Essex. All of such stock is pledged, however, to the lenders
under the Revolving Credit Agreement (as defined below). Accordingly,
Essex International's ability to meet its cash obligations is dependent on
Essex' ability to pay dividends, to loan, or otherwise advance or transfer
funds to Essex International in amounts sufficient to service Essex
International's cash obligations.
Essex International expects that it may receive certain cash payments
from Essex from time to time to the extent cash is available and to the
extent it is permitted under the terms of the Revolving Credit Agreement.
Such payments may include: (i) an amount necessary under the tax sharing
agreement between Essex and Essex International to enable Essex
International to pay Essex' taxes as if computed on an unconsolidated
basis; (ii) an annual management fee to an affiliate of BHLP of up to $1.0
million; and (iii) certain other amounts to meet ongoing expenses of Essex
International (such amounts are considered to be immaterial both
individually and in the aggregate, however, because Essex International
has no operations, other than those conducted through Essex, or
employees). To the extent Essex makes any such payments, it will do so
out of operating cash flow, borrowings under the Revolving Credit
Agreement or other sources of funds it may obtain in the future subject to
the terms of the Revolving Credit Agreement.
On May 1, 1998, the Company effected the Redemption of its Notes. The
Notes were redeemed at 103.75% of the principal amount then outstanding
plus accrued and unpaid interest to the Redemption date. The aggregate
principal, premium and accrued interest paid upon the Redemption totaled
$217.5 million and was financed by the Company through combination of
borrowings under the Revolving Credit Facility, which was amended and
restated in connection with the Redemption Securitization Program (as
defined below).
The Company's aggregate notes payable to banks and long-term debt at
June 30, 1998 was $364.6 million and its stockholders' equity was $321.6
million. The resulting ratio of debt to total capitalization improved to
53% from 55% at December 31, 1997. As of June 30, 1998, the Company was
in compliance with all covenants under the agreements governing its
outstanding indebtedness.
Credit Facilities and Lines of Credit
The Company currently has the following sources of liquidity available
to it: (i) a $370.0 million revolving credit agreement, amended and
restated effective March 27, 1998, among Essex, Essex International, the
Lenders named therein, and The Chase Manhattan Bank, as administrative
agent (the "Revolving Credit Agreement"); (ii) a $150.0 million accounts
receivable securitization program among Essex and certain of its
subsidiaries, Essex Funding Inc. ("Essex Funding") and Three Rivers
Funding Corporation ("TRFCO"), dated April 28, 1998 (the "Receivable
Securitization Program"); (iii) a $25.0 million agreement and lease, dated
as of April 12, 1995, between Essex and Mellon Leasing Corporation (the
"Sale and Leaseback Agreement"); (iv) a $15.0 million (U.S. dollar) credit
agreement between a subsidiary of the Company and the Bank of Montreal
(the "Canadian Credit Agreement"); and (v) bank lines of credit with
various lending banks which provide for unsecured borrowings for working
capital of up to $60.0 million.
20<PAGE>
The Revolving Credit Agreement, which terminates October 31, 2001,
provides for up to $370.0 million in revolving loans reduced by borrowings
under the Canadian Credit Agreement and the Company's unsecured lines of
credit in excess of $100.0 million. The Revolving Credit Agreement also
provides a $25.0 million letter of credit subfacility. Outstanding
borrowings bear floating rates of interest, at the Company's option, at
bank prime plus 0.50% or a reserve adjusted Eurodollar rate ("LIBOR") plus
1.50%. The spreads over the prime and LIBOR rates can be reduced to 0%
and .375%, respectively, if a specified leverage ratio is achieved. Based
upon the specified leverage ratio at June 30, 1998, the Company's floating
rate of interest for borrowings under the Revolving Credit Agreement is
LIBOR plus 0.375%. The commitment fees during the revolving loan period
are between 0.125% to 0.375% of the average daily unused portion of the
available credit based upon a specific leverage ratio. Indebtedness under
the Revolving Credit Agreement is guaranteed by Essex International and
all of Essex' subsidiaries, and is secured by a pledge of the capital
stock of Essex and its subsidiaries and by a first lien on substantially
all assets of the Company and its subsidiaries except for those assets
secured under the Receivable Securitization Program. The Company's
ability to borrow under the Revolving Credit Agreement is restricted by
the financial covenants contained therein. As of June 30, 1998, the
Company had $170.0 million of undrawn capacity based upon a borrowing base
of $370.0 million borrowing line of credit, reduced by outstanding
borrowings under: (i) the Revolving Credit Agreement ($193.6 million);
and (ii) the Canadian Credit Agreement ($6.4 million). The Revolving
Credit Agreement contains various covenants which include, among other
things: (a) the maintenance of certain financial ratios and compliance
with certain financial tests and limitations; (b) limitations on
investments and capital expenditures; (c) limitations on cash dividends
paid; and (d) limitations on leases and the sale of assets.
The Receivable Securitization Program provides for the sale of certain
trade receivables of Essex and certain of its subsidiaries, up to $150.0
million, to a wholly owned, limited purpose subsidiary of Essex, Essex
Funding. Essex Funding finances its purchases of receivables through
secured borrowings from TRFCO. TRFCO generally obtains its financing
through proceeds received upon the issuance of commercial paper.
Under the Receivable Securitization Program, Essex Funding has granted a
security interest in all its trade accounts receivable to TRFCO. Essex
Funding's outstanding borrowings generally bear interest at TRFCO's
commercial paper rate (approximately 6.0% per annum, including certain
fees and expenses, at June 30, 1998). The Receivable Securitization
Program expires April 28, 1999, although it may be extended for successive
one-year periods subject to agreement between Essex Funding and TRFCO. At
June 30, 1998, $133.2 million was outstanding under this program.
The Sale and Leaseback Agreement provided $25.0 million for the sale and
leaseback of certain of the Company's fixed assets. The lease obligation
has a seven-year term expiring in May 2002. The principal component of
the rental is paid quarterly, with the amount of each of the first 27
payments equal to 2.5% of lessor's cost of the equipment, and the balance
due at the final payment. The interest component is paid on the unpaid
principal balance and is calculated by lessor at LIBOR plus 2.5%. The
effective interest rate can be reduced by 0.125% to 1.125% if certain
specified financial conditions are achieved.
21<PAGE>
As of June 30, 1998, $6.4 million was outstanding under the Canadian
Credit Agreement and is denoted as notes payable to banks in the Company's
Consolidated Balance Sheets. Borrowings are secured by the subsidiary's
accounts receivable. Interest rates for borrowings under the Canadian
Credit Agreement are based upon Canadian market rates for banker's
acceptances with spreads similar to the Revolving Credit Agreement. The
Canadian Credit Agreement terminates on March 26, 1999, although it may be
extended for successive one-year periods upon the mutual consent of the
subsidiary and the Bank of Montreal.
The Company had $13.9 million of unsecured bank lines of credit
outstanding as of June 30, 1998 and is denoted as notes payable to banks
in the Company's Consolidated Balance Sheets. These lines of credit bear
interest at rates subject to agreement between the Company and the lending
banks.
Cash Flow and Working Capital
In general, the Company requires liquidity for working capital, capital
expenditures, debt repayments, interest and taxes. Of particular
significance to the Company are its working capital requirements which
increase whenever it experiences strong incremental demand in its business
or a significant rise in copper prices. Historically, the Company has
satisfied its liquidity requirements through a combination of funds
generated from operating activities together with funds available under
its credit facilities. Based upon historical experience and the
availability of funds under its credit facilities, the Company expects
that its usual sources of liquidity will be sufficient to enable it to
meet its cash requirements for working capital, capital expenditures, debt
repayments, interest and taxes through June 30, 1999.
Operating Activities. Net cash provided by operating activities in the
first six months of 1998 was $41.1 million, compared to $.4 million in the
same period last year. The increase in cash provided by operating
activities was primarily the result of a reduction in accounts receivable
attributable to a 31% decline in the average COMEX cost of copper for the
first six months of 1998 compared to the first six months in 1997,
partially offset by additional inventory growth and less net income during
the first six months of 1998 compared to the same period in 1997.
Investing Activities. Capital expenditures of $16.0 million in the
first half of 1998 were $1.8 million more than in the first half of 1997.
Capital expenditures in 1998 are expected to be above 1997 levels and will
be used to improve manufacturing efficiency, expand capacity and maintain
current facilities and equipment. At June 30, 1998, approximately $12.0
million was committed to outside vendors for capital expenditures. In
June 1998, the Company completed its acquisition of BICC's United Kingdom
magnet wire and related distribution operations for approximately $13.4
million in cash plus assumed accounts payable and accrued liabilities.
The acquisition was financed from proceeds under the Company's existing
credit facilities. Future cash requirements of these operations are
expected to be satisfied through the Company's traditional sources of
liquidity as previously discussed. The Revolving Credit Agreement imposes
limitations on capital expenditures, business acquisitions and
investments.
Financing Activities. On June 15, 1998 the Company announced that its
Board of Directors had approved the repurchase of up to an aggregate of
22<PAGE>
3,000,000 shares of its common stock. The share repurchases will be made
from time to time in the open market at prevailing market prices or in
negotiated transactions off the market. Share repurchases are to be
financed from proceeds under the Company's existing credit facilities.
Through June 30, 1998, the Company had repurchased 685,600 shares of its
common stock at an aggregate cost of $14.2 million. The Company also paid
during the second quarter 1998 a $7.5 million redemption premium in
conjunction with the redemption of the Notes.
Long-Term Liquidity Considerations
The terms of the Sale and Leaseback Agreement include a balloon payment
of $8.1 million in 2002. Additionally, in July 1998, the Company
announced a five-year profit growth plan consisting of a series of long-
term initiatives requiring considerable amounts of financial resources.
The plan, which concludes in the year 2003, includes $131 million of
capital expenditures for new plants and equipment, manufacturing and
distribution improvements and a major upgrade of the Company's business
information systems. The Company expects these additional capital
requirements and its traditional liquidity needs for working capital,
capital expenditures, interest and taxes, as well as its debt repayment
obligations under the Sale and Leaseback Agreement will be met through a
combination of funds available under its various credit facilities and
cash flows from operations. The Company may also consider additional
sources of funds if considered necessary and if favorable terms and
conditions can be secured.
The Company's operations involve the use, disposal and cleanup of
certain substances regulated under environmental protection laws. The
Company has accrued $0.9 million for environmental remediation and
restoration costs. The accrual is based upon management's estimate of the
Company's exposure in light of relevant available information including
the allocations and remedies set forth in applicable consent decrees,
third-party estimates of remediation costs, the estimated ability of other
potentially responsible parties to pay their proportionate share of
remediation costs, the nature of each site and the number of participating
parties. Subject to the difficulty in estimating future environmental
costs, the Company expects that any sum it may have to pay in connection
with environmental matters in excess of the amounts recorded or disclosed,
if any, will not have a material adverse effect on its financial position,
cash flow or results of operations. There can be no assurance, however,
that future developments will not alter this conclusion.
Derivative Financial Instruments
The Company, to a limited extent, uses forward fixed price contracts and
derivative financial instruments to manage foreign currency exchange and
commodity price risks. to protect the Company's anticipated cash flows
from the risk of adverse foreign currency exchange fluctuations for firm
sales and purchase commitments, the Company enters into foreign currency
forward exchange contracts. Copper, the Company's principal raw material,
experiences marked fluctuations in market prices, thereby subjecting the
Company to copper price risk with respect to copper repurchases on fixed
customer sales contracts. Forward fixed price contracts and derivative
financial instruments in the form of copper futures contracts are utilized
by the Company to reduce those risks. The Company does not hold or issue
financial instruments for investment or trading purposes. The Company is
exposed to credit risk in the event of nonperformance by counterparties
23<PAGE>
for foreign exchange forward contracts, metal forward price contracts and
metals futures contracts but the Company does not anticipate
nonperformance by any of these counterparties. The amount of such
exposure is generally the unrealized gains with respect to the underlying
contracts.
Impact of Year 2000
The Company has substantially completed the impact analysis of the year
2000 issue on the processing of date-sensitive information by the
Company's computerized information systems, including all date-sensitive
hardware and software used in the manufacture and distribution of its
products, and is pursuing due process "discovery" with respect to the
Company's vendors and customers to assure they will be year 2000 compliant
in a timely manner. The year 2000 problem is the result of computer
programs being written using two digits (rather than four) to define the
applicable year. Any of the Company's hardware or software that is date-
sensitive may recognize a date using "00" as the year 1900 rather than the
year 2000, which could result in miscalculations or system and mechanical
failures. Based on information available at this time, costs of
addressing potential problems are not currently expected to have a
material adverse impact on the Company's financial position, results of
operations or cash flows in future periods. The Company is currently
engaged in resolving all significant year 2000 issues and believes it will
be able to do so in a timely manner.
General Economic Conditions and Inflation
Although net sales are heavily influenced by the price of copper, the
Company's major raw material, the Company's operating results are
generally not affected by changes in copper prices because the Company
generally has been able to pass on its cost of copper to its customers.
The Company attempts to match its copper purchases with its production
requirements and thereby minimize copper cathode and rod inventories. The
Company cannot predict future copper prices or the effect of fluctuations
in the cost of copper on the Company's future operating results.
The Company believes that it is only affected by inflation to the extent
that the economy in general is thereby affected. Should inflationary
pressures drive costs higher, the Company believes that general industry
competitive price increases would sustain operating results, although
there can be no assurance that this will be the case. In addition, the
Company believes that its sensitivity to downturns in its primary markets
is less significant than it might otherwise be due to its diverse customer
base, broad product line and its strategy of attempting to match its
copper purchases with its needs.
Information Regarding Forward Looking Statements
This document contains various forward-looking statements and
information that are based on management's belief, as well as assumptions
made by and information currently available to management. Any statements
made that are not historical in nature, including statements preceded by
the words "intend", "expect", "would", and similar expressions are
forward-looking statements. Although the Company believes that the
expectations reflected in such forward-looking statements are reasonable,
it can give no assurance that such expectations will prove to have been
correct. Such statements are subject to certain risks, uncertainties and
24<PAGE>
assumptions. Should one or more of these risks or uncertainties
materialize, or should underlying assumptions prove incorrect, actual
results may vary materially from those expected. Among the key factors
that may have a direct bearing on the Company's operating results and
forward-looking statements included herein are fluctuations in the
economy, acquisition and consolidation activity in the Company's
businesses, the willingness of customers to accept more distant
distribution channels, demand for the Company's products, the impact of
price competition and fluctuations in the price of copper.
25<PAGE>
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
On April 29, 1998, the Company held its first Annual Meeting of
Stockholders ("Meeting"). The stockholders voted upon the following items
at the Meeting:
1. Election of Directors: Messrs. Rodney A. Cohen and Stuart S.
Janney,
III were elected to three-year terms. Mr. Cohen has served as a
director since 1996; Mr. Janney has served as a director since
1997.
The voting for each director was as follows:
Shares Voted Shares
For Withheld
------------ --------
Rodney A. Cohen 26,640,583 250,560
Stuart S. Janney, III 26,658,983 232,160
The terms of the other directors, Messrs. Steven R. Abbott, W.L.
Lyons
Brown, Jr., Edward O. Gaylord, Robert D. Lindsay and Ward W. Woods
expire after 1998.
2. The Company's 1997 Stock Option Plan for Nonemployee Directors was
approved. There were 25,645,739 shares for, 1,202,176 shares
against,
and 43,228 shares abstained for the proposal.
Item 5. Other Information
Pursuant to the Company's bylaws, stockholders who wish to bring matters
or propose nominees for director at the Company's 1999 annual meeting of
stockholders must provide specified information to the Company not later
than the close of business on the 60th day, nor earlier than the close of
business on the 90th day prior to the first anniversary of the preceding
year's annual meeting, which for 1999 will be between January 29, 1999 and
February 28, 1999 (unless such matters are included in the Company's proxy
statement pursuant to Rule 14a-8 under the Securities Exchange Act of
1934, as amended.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
None.
(b) Reports on Form 8-K:
A Current Report on Form 8-K (Items 5 and 7) was filed on
April
7, 1998 to report the call for redemption on March 31, 1998 by
Essex Group, Inc., its wholly owned subsidiary, of all of its
outstanding 10% Senior Notes due 2003.
26<PAGE>
A Current Report on Form 8-K (Items 5 and 7) was filed on July
10, 1998 to report the Board of Directors on June 15, 1998 had
approved the repurchase of up to an aggregate of 3,000,000
shares
of the Company's common stock.
27<PAGE>
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.
ESSEX INTERNATIONAL INC.
(Registrant)
August 12, 1998 /s/ David A. Owen
---------------------------------
David A. Owen
Executive Vice President,
Chief Financial Officer and
Treasurer
(Principal Financial Officer)
28<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from Form 10-Q as
of June 30, 1998 and is qualified in its entirety by reference to such financial
statements.
</LEGEND>
<CIK> 0000846919
<NAME> ESSEX INTERNATIONAL INC.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> JUN-30-1998
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<COMMON> 302
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