<PAGE> 1
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, 1996
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 0-17743
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COMPTRONIX CORPORATION
- -------------------------------------------------------------------------------
(Exact Name of Registrant as Specified in Its Charter)
Delaware 63-0860282
- -------------------------------- ------------------------------------
(State or Other Jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or Organization)
Three Maryland Farms, Suite 140
Nashville, Tennessee 37027
- ---------------------------------------- -------------------
(Address of Principal Executive Offices) (Zip Code)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (615) 377-3330
--------------
N/A
- -------------------------------------------------------------------------------
(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. Yes X No
--- ---
APPLICABLE ONLY TO ISSUERS INVOLVED IN
BANKRUPTCY PROCEEDINGS DURING THE
PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Sections 12, 13, 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court. Yes No
--- ---
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practical date. 13,163,410 as of August 13,
1996
<PAGE> 2
PART I. FINANCIAL INFORMATION
ITEM I. CONDENSED FINANCIAL STATEMENTS
COMPTRONIX CORPORATION -- SEE NOTE 3
CONDENSED BALANCE SHEETS
ASSETS
(in thousands)
<TABLE>
<CAPTION>
June 30, December 31,
1996 1995
------------ ------------
(unaudited)
<S> <C> <C>
Current Assets:
Cash and cash equivalents $ 183 $ 225
Accounts receivable, net 8,948 13,042
Inventories 13,339 18,165
Other current assets 1,844 822
------- -------
Total Current Assets 24,314 32,254
Property, Plant and Equipment
(Less accumulated depreciation and
amortization of $26,789 at June 30, 1996 and
$26,344 at December 31, 1995)
14,011 14,312
Other Assets 1,082 1,145
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Total Assets $39,407 $47,711
======= =======
</TABLE>
See notes to financial statements.
2
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COMPTRONIX CORPORATION -- SEE NOTE 3
CONDENSED BALANCE SHEETS
LIABILITIES AND STOCKHOLDERS' EQUITY
(in thousands)
<TABLE>
<CAPTION>
June 30, December 31,
1996 1995
----------- ---------
(unaudited)
<S> <C> <C>
Current Liabilities:
Current maturities of long-term debt $ 15,300 $ 1,559
Accounts payable 9,456 8,158
Accrued payroll and related expenses 740 876
Other payables and accruals 2,154 3,270
-------- -------
Total current liabilities 27,650 13,863
Convertible Subordinated Debentures 29,230 29,230
Long-term debt, excluding current maturities - 17,098
Stockholders' Deficit:
Redeemable convertible preferred stock Series
A-6%, no par value per share; authorized
5,000,000 shares; issued and outstanding,
1,986,468 shares plus $871 dividend
accretion at June 30, 1996 and 1,899,319
shares plus $286 dividend accretion at
December 31, 1995 19,865 19,279
Common stock, par value $.01 per share;
authorized 50,000,000 shares; issued
13,298,410 shares at June 30, 1996 and
13,298,410 at December 31, 1995
133 133
Additional paid-in capital 29,779 29,749
Accumulated deficit (67,250) (61,641)
-------- -------
Total Stockholders' Deficit (17,473) (12,480)
Total Liabilities and Stockholders' -------- -------
Deficit $ 39,407 $47,711
======== =======
</TABLE>
See notes to financial statements.
3
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COMPTRONIX CORPORATION -- SEE NOTE 3
CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Quarters Ended
--------------------------------
June 30, July 2,
1996 1995
----------- ---------
(in thousands except per share)
<S> <C> <C>
Sales $17,768 $22,737
Cost of sales 18,777 21,475
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Gross profit (loss) (1,009) 1,262
Marketing, general and administrative expense 1,544 1,798
Interest expense -- net 952 938
Other expense 19 125
------- -------
2,515 2,861
------- -------
Net loss (3,524) (1,599)
Accrued dividend in kind on preferred stock
295 277
------- -------
Net loss applicable to common stock $(3,819) $(1,876)
======= =======
Net loss per common share $ (0.29) $ (0.14)
======= =======
Weighted average common shares 13,298 13,263
======= =======
</TABLE>
See notes to financial statements.
4
<PAGE> 5
COMPTRONIX CORPORATION -- SEE NOTE 3
CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended
------------------------------
June 30, July 2,
1996 1995
--------------- ------------
(in thousands except per share)
<S> <C> <C>
Sales $41,265 $50,240
Cost of sales 41,062 46,750
------- -------
Gross profit 203 3,490
Marketing, general and administrative expense 3,007 3,153
Interest expense -- net 1,967 1,931
Other expense (income) 251 (69)
------- -------
5,225 5,015
------- -------
Net loss (5,022) (1,525)
Accrued dividend in kind on preferred stock 586 512
------- -------
Net loss applicable to common stock $(5,608) $(2,037)
======= =======
Net loss per common share $ (0.42) $ (0.16)
======= =======
Weighted average common shares 13,298 12,975
======= =======
</TABLE>
See notes to financial statements.
5
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COMPTRONIX CORPORATION -- SEE NOTE 3
CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended
----------------------------------
June 30, July 2,
1996 1995
------------ ----------
(in thousands except per share)
<S> <C> <C>
Cash flows from operating activities:
Net loss $(5,022) $(1,525)
Adjustments to reconcile net loss to net cash
provided by operating activities:
Estimated loss on sale of excess capacity - -
Depreciation and amortization 2,044 2,702
Allowance for doubtful accounts 99 (618)
Decrease in accounts receivable -- trade 3,996 2,450
Decrease in inventories 4,826 850
(Increase) decrease in prepaid exp. and other
assets (1,023) 334
Increase (decrease) in accounts payable 1,301 (1,682)
Increase in accrued payroll and related expenses
(106) 62
Increase (decrease) in other payables and
accruals (1,116) 816
------- -------
Net cash provided by operating activities 4,999 3,389
------- -------
Cash flows from investing activities:
Capital expenditures, net (1,684) (813)
------- -------
Net cash used in investing activities (1,684) (813)
------- -------
Cash flows from financing activities:
Payment of settlement and restructuring costs - -
Net payments on revolving line of credit (2,355) (1,561)
Principal payments on other long term debt (1,002) (1,412)
Proceeds from issuance of common stock - -
------- -------
Net cash used in financing activities (3,357) (2,973)
------- -------
Net decrease in cash (42) (397)
Cash, beginning of period 225 397
Cash, end of period ------- -------
$ 183 $ 0
======= =======
</TABLE>
See notes to financial statements.
6
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COMPTRONIX CORPORATION -- SEE NOTE 3
NOTES TO CONDENSED FINANCIAL STATEMENTS
(Unaudited)
June 30, 1996
NOTE 1 -- BASIS OF PRESENTATION
The accompanying unaudited condensed financial statements have been prepared in
accordance with instructions to Form 10- Q and do not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements. The statements (and all other information in
this report) have not been audited by independent accountants, but in the
opinion of the Company, contain all adjustments necessary for a fair
presentation of the results for the period. The results of operations for the
six month period ended June 30, 1996 are not necessarily indicative of the
results of operations for the year ending December 31, 1996.
NOTE 2 -- SECURED DEBT
In November 1993, the Company obtained a new credit facility with CIT
Group/Business Credit, Inc. ("CIT"). The new credit facility, as amended,
consists of a $34.0 million revolving line of credit secured by accounts
receivable and inventory maturing in 1998 and a $6.0 million five-year term loan
secured by equipment. The borrowings under the revolving line of credit are
limited to 85% of the Company's eligible accounts receivable and 50% of the
Company's eligible inventory (a total availability of $11.2 million at June 30,
1996 and $15.2 million at December 31, 1995 and total borrowings of $11.7
million and $14.1 million, respectively). The credit facility has various
financial covenants which limit the Company's ability to incur additional
indebtedness, purchase and dispose of equipment and declare or pay cash
dividends. The Company also is required to maintain certain financial
covenants. As of June 30, 1996, the Company failed to meet the EBITDA covenant
in its credit agreement with CIT. Because the Company did not receive a waiver
therefor, it has presented its CIT and bank borrowings as current indebtedness.
NOTE 3 -- CHAPTER 11 PROCEEDING
Because of the Company's second quarter performance, the Company did not meet
the required EBITDA covenant for the six months ended June 30, 1996 in its
credit facility with CIT. In addition, because of the reduced level of sales,
the Company's borrowings exceeded the availability computed in accordance with
the formula described above. After discussions, the Company and CIT were
unable to reach an agreement on terms for continued lending and a waiver of
covenants in the credit agreement for the Company's second quarter performance.
Therefore, on August 8, 1996, the Company filed a Voluntary Petition for
Reorganization Under Chapter 11 of the U.S. Bankruptcy Code in the U.S.
Bankruptcy Court (the "Chapter 11 Proceeding").
In general, commencement of the Chapter 11 Proceeding constituted an event of
default under the Company's lending agreements. However, under Chapter 11,
actions to collect claims against the Company in existence prior to the filing
of the petition for relief under the federal bankruptcy laws are stayed while
the Company continues business operations as debtor-in- possession. Additional
claims may arise subsequent
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<PAGE> 8
to the filing date resulting from rejection of executory contracts, including
leases, and from the determination by the court (or agreed to by parties in
interest) of allowed claims for contingencies and other disputed amounts.
Actions relative to claims secured against the Company's assets ("secured
claims") also are stayed by the bankruptcy filing, although the holders of such
claims have the right to move the court for relief from stay. Secured claims
are secured primarily by liens on the Company's accounts receivable, inventory
and property, plant and equipment. Substantially all unsecured liabilities of
the Company as of the petition date are subject to compromise under a plan of
reorganization which has not yet been completed; when completed, the plan of
reorganization must be voted upon by all impaired classes of creditors and
equity security holders and approved by the Bankruptcy Court. In the Chapter
11 Proceeding, claims of unsecured creditors are entitled to be paid in full
prior to the equity holders of the Company receiving any value under a plan of
reorganization. Because of the levels of the Company's unsecured claims and
indebtedness, there exists a significant likelihood that holders of unsecured
debt and claims will receive substantially less than the full amount of their
claims and equity holders may not, therefore, be entitled to any value in a
plan of reorganization.
To finance the Company's operations during the initial phase of the Chapter 11
Proceeding, the Company and CIT have entered into an agreed order pursuant to
which the Company will be permitted to use its cash from operations to fund its
business at least through August 30, 1996, which may be extended through
agreement of the parties or order of the Bankruptcy Court. The Company is also
soliciting proposals for debtor-in-possession financing from CIT and other
potential lenders. There can be no assurance that the Company will be
successful in obtaining debtor-in-possession financing; nevertheless, the
Company has developed a business plan for operating using its cash from
operations to the extent permitted in the Chapter 11 Proceeding.
8
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Item 2. Management's Discussion and Analysis of Results of Operations and
Financial Condition
GENERAL
Comptronix Corporation (the "Company") provides manufacturing services to
original equipment manufacturers in the electronics industry, including
producers of computers, computer peripherals, industrial instruments,
communications equipment, medical devices and test equipment. The Company
operates facilities in Guntersville, Alabama, and in Empalme, Sonora, Mexico.
On August 8, 1996, the Company filed a petition for reorganization under
Chapter 11 of the U.S. Bankruptcy Code in the U.S. Bankruptcy Court for the
Middle District of Tennessee, Case Number 396-06840 (the "Chapter 11
Proceeding"). The Company is managing its business as debtor-in-possession.
See " -- Certain Currently Identifiable Factors Anticipated to Affect Remaining
1996 Results," " -- Liquidity and Capital Resources" and Note 3 of Notes to the
Unaudited Condensed Financial Statements.
The Company has incurred operating losses during the last seven years.
Operating results are generally affected by a number of factors, including the
relative mix of high volume/lower margin business and lower volume/higher
margin business, price competition, raw material costs, labor efficiencies, the
degree of automation that can be used in the assembly process and the
efficiencies achieved by the Company in managing inventories and fixed assets.
The Company's future success will depend, in part, on its ability to develop a
restructuring plan under the Chapter 11 Proceeding, to maintain its current, or
establish new, lending relationships, to meet its ongoing obligations to its
suppliers and to continue to provide quality, on-time products and services to
its customers.
The financial information and the discussion below should be read in
conjunction with the unaudited financial statements and notes thereto included
in this Form 10-Q. This discussion will also address certain factors which are
anticipated to effect the Company's 1996 results and financial condition.
RESULTS OF OPERATIONS
Quarter Ended June 30, 1996 and July 2, 1995
The following table sets forth for the period indicated the percentage of sales
of certain items in the Statement of Operations.
9
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<TABLE>
<CAPTION>
Quarter Ended
-------------------
June 30, July 2,
1996 1995
------- -------
(%) (%)
<S> <C> <C>
Sales 100.0 100.0
Cost of sales 105.7 94.4
----- -----
Gross profit (loss) (5.7) 5.6
Marketing, general and administrative expense 8.7 7.9
Interest expense -- net 5.3 4.1
Other expense .1 .6
----- -----
Net income (loss) (19.8) (7.0)
</TABLE>
Sales for the second quarter of 1996 were $17.8 million, a decrease of 21.6% as
compared to second quarter 1995 sales of $22.7 million. The decrease in sales
predominantly relates to the significant reduction by several large customers
in the telecommunications industry of their production schedules for the second
quarter of 1996 citing the need to reduce their finished goods inventory
levels.
Gross loss for the second quarter of 1996 was $1.0 million as compared to a
gross profit of $1.2 million for the second quarter of 1995. The gross loss
was primarily due to the reductions in sales and production schedules by
several large customers as described above. The effect of the reduction in
sales was exacerbated because the Company was not able to reduce labor costs as
quickly as its customers reduced their production schedules and because the
Company needed to maintain its manufacturing resources to meet its customer
needs at the time they anticipated their production schedules would increase.
In addition, the Company incurred significant costs for reserves related to
excess or unallocated inventory during the 1996 period.
Marketing, general and administrative expenses decreased to $1.5 million for
the second quarter of 1996 as compared to $1.8 million for the second quarter
of 1995, but remained relatively constant compared to the first quarter of
1996, reflecting the Company's continued sales efforts. Marketing, general and
administrative expenses increased to 8.7% of sales for the second quarter of
1996 as compared to 7.9% of sales for the second quarter of 1995 reflecting the
lower sales base in the second quarter of 1996.
Interest expense was at $952,000, 5.3% of sales, for the second quarter of 1996
as compared to $938,000, 4.1% of sales, for the second quarter of 1995.
Other expense was $19,000 for the second quarter of 1996 as compared to other
expense of $125,000 for the second quarter of 1995. Other expense includes
amortization expense of deferred financing costs.
The Company's net loss was $3.5 million for the second quarter of 1996 as
compared to a net loss of $1.6 million for the second quarter of 1995. Net
loss per common share was $0.29 (based upon a weighted average of 13,298,000
shares outstanding) in the second quarter of 1996
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compared to net loss per common share $0.14 (based upon a weighted average of
13,263,000 shares outstanding) in the second quarter of 1995.
Six Months Ended June 30, 1996 and July 2, 1995
The following table sets forth for the period indicated the percentage of sales
of certain items in the Statement of Operations.
<TABLE>
<CAPTION>
Six Months Ended
----------------------------
June 30, July 2,
1996 1995
-------- -------
(%) (%)
<S> <C> <C>
Sales 100.0 100.0
Cost of sales 99.5 93.1
----- -----
Gross profit (loss) .5 6.9
Marketing, general and administrative expense 7.3 6.2
Interest expense -- net 4.8 3.8
Other expense (income) .6 (.1)
----- ----
Net income (loss) (12.2) (3.0)
</TABLE>
Sales for the first half of 1996 were $41.3 million, a decrease of 17.7% as
compared to first half 1995 sales of $50.2 million. The decrease in sales
predominantly relates to the significant reduction by several large customers
in the telecommunications industry of their production schedules for the second
quarter of 1996 citing the need to reduce their finished goods inventory
levels.
Gross profit for the first half of 1996 was $203,000, 0.5% of sales, as
compared to a gross profit of $3.5 million, 6.9% of sales, for the first half
of 1995. Gross profit declined as compared to the second half of 1995
due to the decrease in sales and production schedules by several large
customers as described above in the second quarter of 1996. The effect of the
reduction in sales was exacerbated because the Company was not able to reduce
labor costs as quickly as its customers reduced their production schedules and
because the Company needed to maintain its manufacturing resources to meet its
customer needs at the time they anticipated their production schedules would
increase. In addition, the Company incurred significant costs for reserves
related to excess or unallocated inventory during the 1996 period.
Marketing, general and administrative expenses decreased to $3.0 million for
the first half of 1996 as compared to $3.1 million for the first six months of
1995. Marketing, general and administrative expenses increased to 7.3% of
sales for the first half of 1996 as compared to 6.2% of sales for the first
half of 1995 reflecting the lower sales base in the first half of 1996.
Interest expense was at $2.0 million, 4.8% of sales, for the first half of 1996
as compared to $1.9 million, 3.8% of sales, for the first half of 1995.
Other expense was $251,000 for the first half of 1996 as compared to other
income of $69,000 for the first half of 1995. Other expense for 1996 includes
amortization expense of deferred
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financing costs. Other income for 1995 includes amortization expense of
deferred financing costs which was more than offset by the reversal of reserves
relating to previous non-cash charges reserving for bad debts that were
subsequently collected.
The Company's net loss was $5.0 million for the first half of 1996 as compared
to $1.5 million for the first half of 1995. Net loss per common share was
$0.42 (based upon a weighted average of 13,298,000 shares outstanding) in the
first half of 1996 compared to net loss per common share $0.16 (based upon a
weighted average of 12,975,000 shares outstanding) in the first half of 1995.
CERTAIN CURRENTLY IDENTIFIABLE FACTORS ANTICIPATED TO AFFECT REMAINING 1996
RESULTS
Based upon the Company's current assessment of its business, there are certain
currently identifiable factors which are likely to affect the remainder of 1996
operating results. In addition, factors which are likely to affect the
Company's liquidity and uses of funds during the remainder of 1996 are
discussed below under "Liquidity and Capital Resources."
As described above, several large customers in the telecommunications industry
reduced their production schedules for the second quarter of 1996 citing the
need to reduce their finished goods inventory levels. This reduction was even
more significant than expected and was the principal factor in the sales
decline for the second quarter of 1996. The Company had anticipated an
increase in shipments to these customers for the second half of 1996, but
shipment levels have continued at second quarter levels to date, and the
Company is unable to forecast with confidence when demand from these customers
will increase. During the next several months, the Company's focus will remain
on reducing overhead and other costs to match the Company's anticipated level
of sales while maintaining the resources necessary to continue to provide
responsive, high quality manufacturing services to its customers.
The Company concluded that the Chapter 11 Proceeding was the best alternative
to protect the value of the Company and its business. The Chapter 11
Proceeding will allow the Company to continue operating while it considers
strategic alternatives, including the sale of the Company, and develops a
restructuring plan.
LIQUIDITY AND CAPITAL RESOURCES
Prior to the filing of the Chapter 11 Proceeding, the Company made significant
progress in reducing debt. The Company reduced total indebtedness (other than
convertible debt) from $44.0 million at December 31, 1992 to $15.3 million at
June 30, 1996.
The Company's net cash flows provided by operating activities were $5.0 million
and $3.4 million in the first six months of 1996 and 1995, respectively.
Principally, the 1996 amount reflects lower levels of inventory as compared to
the first six months of 1995.
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The Company's net cash flows used in investing activities were $1.7 million and
$0.8 million in the first six months of 1996 and 1995, respectively. These
uses principally relate to additions of machinery and equipment.
The Company's net cash flows used in financing activities were $3.4 million for
the first six months of 1996 and principally related to payments of debt. The
net cash flows used by financing activities were $3.0 million in the first six
months of 1995 and principally related to payments of debt.
In November 1993, the Company obtained a new credit facility with CIT. The
credit facility, as amended, consists of a $34.0 million revolving line of
credit secured by accounts receivable and inventory maturing in November 1998
and $6.0 million five-year term loan secured by equipment. The borrowings under
the revolving line of credit are limited to 85% of the Company's eligible
accounts receivable and 50% of the Company's eligible inventory (a total
availability of $11.2 million at June 30, 1996 and $15.2 million at December 31,
1995 and total borrowings of $11.7 million and $14.1 million, respectively).
The credit facility has various financial covenants which limit the Company's
ability to incur additional indebtedness, purchase and dispose of equipment and
declare or pay cash dividends. The Company is also required to maintain certain
financial covenants. For the six months ended June 30, 1996, the Company was
required to maintain EBITDA (earnings before interest, taxes, depreciation and
amortization) of $2.0 million.
Because of the decline in sales discussed above, the Company did not meet the
required EBITDA covenant for the six months ended June 30, 1996. In addition,
because of the reduced level of sales, the Company's borrowings exceeded the
availability computed in accordance with the formula described above. After
discussions, the Company and CIT were unable to reach an agreement on terms for
continued lending and a waiver of covenants in the credit agreement for the
Company's second quarter performance. Therefore, on August 8, 1996, the
Company filed the Chapter 11 Proceeding.
In general, commencement of the Chapter 11 Proceeding constituted an event of
default under the Company's lending agreements. However, under Chapter 11,
actions to collect claims against the Company in existence prior to the filing
of the petition for relief under the federal bankruptcy laws are stayed while
the Company continues business operations as debtor-in- possession. Additional
claims may arise subsequent to the filing date resulting from rejection of
executory contracts, including leases, and from the determination by the court
(or agreed to by parties in interest) of allowed claims for contingencies and
other disputed amounts. Actions relative to claims secured against the
Company's assets ("secured claims") also are stayed by the bankruptcy filing,
although the holders of such claims have the right to move the court for relief
from stay. Secured claims are secured primarily by liens on the Company's
accounts receivable, inventory and property, plant and equipment.
Substantially all unsecured liabilities of the Company as of the petition date
are subject to compromise under a plan of reorganization which has not yet been
completed; when completed, the plan of reorganization must be voted upon by all
impaired classes of creditors and equity security holders and approved by the
Bankruptcy Court. In the Chapter 11 Proceeding, claims of unsecured creditors
are entitled to be paid in full prior to the equity holders of the Company
receiving any value under a plan of reorganization. Because of the levels of
the
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<PAGE> 14
Company's unsecured claims and indebtedness, there exists a significant
likelihood that holders of unsecured debt and claims will receive substantially
less than the full amount of their claims and equity holders may not, therefore,
be entitled to any value in a plan of reorganization.
To finance the Company's operations during the initial phase of the Chapter 11
Proceeding, the Company and CIT have entered into an agreed order pursuant to
which the Company will be permitted to use its cash from operations to fund its
business at least through August 30, 1996, which may be extended through
agreement of the parties or order of the Bankruptcy Court. A copy of the
Agreed Order is filed as Exhibit 10.1 hereto. The Company is also soliciting
proposals for debtor-in-possession financing from CIT and other potential
lenders. There can be no assurance that the Company will be successful in
obtaining debtor-in-possession financing; nevertheless, the Company has
developed a business plan for operating using its cash from operations to the
extent permitted in the Chapter 11 Proceeding.
In November 1993, the Company's bank lenders agreed to retain a four (4) year
term loan of $3.0 million secured by one of the Company's manufacturing
facilities in Guntersville, Alabama. At June 30, 1996 the amounts outstanding
under the term loan were $1.9 million.
EBITDA
The Company's earnings before interest, income taxes, depreciation and
amortization ("EBITDA") was a loss of $1.6 million and income of $3.1 million
for the first six months of 1996 and 1995, respectively. The Company presents
EBITDA as a supplement to the discussion of the Company's operating income and
cash flow from operations analysis because the Company believes that certain
parties find it to be a useful tool for measuring the Company's performance and
ability to service debt. EBITDA is not a substitute for GAAP operating and
cash flow data. Management, however, believes that EBITDA does supplement this
information for several reasons. First, EBITDA supplements data regarding the
Company's cash flow because EBITDA is the principal performance covenant in the
CIT Credit Agreement. In addition, the Company also has made significant
investments in capital equipment, primarily through borrowings. Therefore, the
Company is incurring a significant amount of depreciation on this equipment
reflected in its results of operations. As a result, the Company believes that
information with respect to EBITDA should be read in conjunction with the
discussion of results of operations and the discussion of liquidity and capital
resources.
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PART II -- OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
On August 8, 1996, the Company filed a petition for reorganization under
Chapter 11 of the U.S. Bankruptcy Code, in the U.S. Bankruptcy Court for the
Middle District of Tennessee, Case Number 396-06840. The Company is managing
its business as debtor-in-possession. See the Current Report on Form 8-K,
dated August 9, 1996, filed with the Securities and Exchange Commission on
August 9, 1996.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
(a) As discussed above, the Company failed to meet the
covenants in its credit agreement with CIT and has been
unable to reach agreement with CIT for continued lending
and a waiver of covenants pursuant to such credit
agreement for the Company's second quarter performance;
however, the Company entered into an Agreed Order with CIT
which will allow the Company to use its cash from
operations to fund its business at least through August
30, 1996. See Exhibit 10.1 hereto. See Note 3 to Unaudited
Financial Statements. As of August 4, 1996, the
amount of indebtedness owed under the CIT credit agreement
was approximately $12.3 million.
(b) The Company did not declare or pay the regular semi-annual
dividend on the Company's Series A Convertible Preferred
Stock (the "Preferred Stock"), the scheduled payment date
for which was April 1, 1996. However, the dividend of
$0.30 per share, which may be paid in cash or in
additional shares of Preferred Stock shall accumulate.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
10.1 Stipulation and Consent Order Authorizing the
Company to Use Cash Collateral, dated August 9,
1996, by and between the Company and CIT
27. Financial Data Schedule (for SEC use only)
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the quarter ended
June 30, 1996; however, the Company filed a Current Report
on Form 8-K, dated August 9, 1996, to report the filing by
the Company of the Chapter 11 Proceeding pursuant to Item
3 of Form 8-K.
15
<PAGE> 16
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
COMPTRONIX CORPORATION
(Registrant)
Date: August 13, 1996 By: /s/ E. Townes Duncan
-------------------------------
E. Townes Duncan
Chairman of the Board
By: /s/ Joseph G. Andersen
-------------------------------
Joseph G. Andersen
Chief Financial Officer
16
<PAGE> 1
EXHIBIT 10.1
RECEIVED FOR ENTRY
11:00 a.m.
August 9 1996
By ACB
Deputy Clerk
IN THE UNITED STATES BANKRUPTCY COURT
FOR THE MIDDLE DISTRICT OF TENNESSEE
NASHVILLE DIVISION
IN RE: ) CASE NO. 396-06840
)
COMPTRONIX CORPORATION ) CHAPTER 11
Three Maryland Way, Suite 140 )
Brentwood, TN 37027 ) JUDGE LUNDIN
EIN: 63-0860282 )
)
Debtor. )
STIPULATION AND CONSENT ORDER AUTHORIZING
DEBTOR TO USE CASH COLLATERAL
Comptronix Corporation, a Delaware Corporation, the Debtor and Debtor
in Possession (the "Debtor") in this case under Title 11 of the United States
Code (the "Bankruptcy Code"), has moved the Court pursuant to Section 363(c)(2)
of the Bankruptcy Code and Rule 4001(b) of the Federal Rules of Bankruptcy
Procedure (the "Bankruptcy Rules") for an order authorizing the Debtor to use
cash collateral in the operation of its business for a limited time on the
terms provided herein. The CIT Group/Business Credit, Inc. ("CIT") claims a
security interest in and first priority lien on, inter alia, all of the
Debtor's present and future acquired
<PAGE> 2
inventory, accounts, general intangibles, equipment, documents of title and the
proceeds thereof. Upon consideration of the Debtor's motion, and the Debtor
and CIT having each consented hereto, the Court hereby finds as follows:
1.
On August 8, 1996 (the "Petition Date"), the Debtor commenced this
Chapter 11 case (the "Case") by filing a voluntary petition under the
Bankruptcy Code. The Debtor is operating its business and managing its affairs
as a Debtor in Possession pursuant to Sections 1107(a) and 1108 of the
Bankruptcy Code.
2.
The Court has jurisdiction over this matter pursuant to 28 U.S.C.
Section Section 157 and 1334. This is a core proceeding pursuant to 28 U.S.C.
Section 157(b)(2).
3.
The Debtor has immediate cash needs in order to meet payroll, to pay
other customary and necessary day to day expenses, and to prevent immediate and
irreparable harm to the estate. As of the Petition Date, the Debtor has little
cash available, and is therefore dependent on collection of its accounts and
the proceeds
2
<PAGE> 3
of the sale of its inventory to provide cash to fund ongoing operations.
4.
Since November 22, 1993, CIT has provided the Debtor a revolving line
of credit, term loan and letter of credit facility (collectively, the "CIT
Loans"), and CIT claims, to secure the CIT Loans, a fully perfected,
non-avoidable first priority security interest in, among other things, Debtor's
accounts receivable, instruments, contract rights, chattel paper, general
intangibles, inventory, equipment, fixtures, documents of title, and all
proceeds thereof (collectively, the "Pre-petition Collateral"), pursuant to the
terms and conditions of that certain Financing Agreement between CIT and the
Debtor dated November 22, 1993, as amended from time to time (the "CIT
Financing Agreement"; the CIT Financing Agreement and all other related
documents and agreements are referred to herein as the "CIT Agreements"). The
portion of the Pre-petition Collateral consisting of CIT's cash collateral
within the meaning of Section 363(a) of the Bankruptcy Code is referred to
herein as the "Cash Collateral" and includes collections of the Debtor's
accounts receivable, contract rights,
3
<PAGE> 4
chattel paper, general intangibles and proceeds of the sale of the Debtor's
inventory.
5.
Immediate use of the Cash Collateral is required to continue the
Debtor's operations and thereby maximize the prospects for a successful
reorganization pursuant to a plan or Section 363 of the Bankruptcy Code. CIT
has informed the Debtor that it will not consent to the Debtor's use of the
Cash Collateral without the entry by the Court of this Order.
6.
As protection for CIT's interest in the Pre-petition Collateral, CIT
requires that it be provided with a replacement lien as provided herein in
accordance with the provisions of Section 36 1(2) of the Bankruptcy Code.
7.
No committee of unsecured creditors has yet been appointed in this
case. A copy of this Order shall be served on the parties specified in
Paragraph (U) below pursuant to the provisions of such Paragraph.
4
<PAGE> 5
8.
Good cause has been shown for the entry of this Order, and the Court
finds the Debtor's use of the Cash Collateral, to the extent authorized herein,
is necessary to avoid immediate and irreparable harm to the Debtor's estate.
Among other things, the entry of this Order will minimize disruption of the
Debtor's business and operations as a going concern, will enhance the Debtor's
ability to formulate a successful plan of reorganization, and is in the best
interests of the Debtor, its creditors, and its estate.
In accordance with the foregoing findings, it is hereby ORDERED as
follows:
(A) The Debtor is authorized to use Cash Collateral in
accordance with the terms and conditions of this
Order until the earlier (the "Termination Date") of (i) August 30, 1996 and
(ii) the date the Debtor's right to use Cash Collateral terminates in
accordance with paragraph (J) below.
(B) As protection for the diminution in value of the Pre-petition
Collateral during the pendency of this Order by reason of the use of the Cash
Collateral, the Debtor is hereby authorized and directed to grant to CIT, and
CIT is hereby granted, to secure
5
<PAGE> 6
"Collateral Diminution" (as hereafter defined), a valid, attached, choate,
enforceable, perfected and continuing security interest in and lien upon all
assets comprising the estate of the Debtor under Section 541 of the Bankruptcy
Code which do not constitute Pre-petition Collateral, including, without
limitation, (i) all avoidance claims against and recoveries from any person
whatsoever under Sections 544, 545, 547, 548 and 553 of the Bankruptcy Code,
whether acquired, created or arising before or after the Petition Date and (ii)
any property acquired after the Petition Date which does not constitute
proceeds of Pre-petition Collateral (collectively, the "Replacement
Collateral"), subject only to (x) valid, perfected and non-avoidable
pre-petition security interest in equipment, if any, and (y) the security
interests and liens described in paragraph (C) below. The term "Collateral
Diminution" means, with reference to property of the Debtor, the amount by
which (A) the sum at the Debtor's book value, on the Petition Date, of
inventory, plus accounts and other receivables, plus cash on hand exceeds (B)
the sum at the Debtor's book value, on the Termination Date, of inventory, plus
accounts and other receivables, plus cash on hand, on the termination date.
6
<PAGE> 7
(C) The security interests and liens in favor of CIT in the
Replacement Collateral shall be subject, but only to the extent of $50,000.00,
to the administrative claims of Bass, Berry & Sims, bankruptcy counsel for the
Debtor (or any successor bankruptcy counsel for the Debtor), for fees and
expenses allowed by this Court pursuant to Sections 330 and 331 of the
Bankruptcy Code and Bankruptcy Rule 2016 or Section 503(b) of the Bankruptcy
Code, but not including any fees or expenses related to the investigation of,
preparation for, or commencement or prosecution of, any claims or proceedings
against CIT or its claims or security interests in and liens on the
Pre-petition Collateral or the Replacement Collateral, other than the
investigation of whether CIT's security interest in the Pre-Petition Collateral
was properly perfected. The right of CIT to object to the reasonableness of
any fees or expenses of Bass, Berry & Sims hereby is reserved.
(D) The security interests and liens granted to CIT in the
Replacement Collateral pursuant to paragraph (B) hereof: (i) shall not now or
at any time hereafter be (a) subject to any lien or security interest which is
avoided and preserved for the benefit of the estate of the Debtor under Section
551 of the Bankruptcy Code; or (b) subordinated to any other lien or claim
under Section
7
<PAGE> 8
364(d) of the Bankruptcy Code or otherwise, and (ii) are deemed valid,
perfected and enforceable security interests and liens at all times from and
after the date hereof, without regard to whether such security interests and
liens are perfected under applicable non-bankruptcy law.
(E) Except as provided in paragraph (C) above, no costs or
expenses of administration incurred in the Case, in any superseding case under
Chapter 7 of the Bankruptcy Code following conversion of the Case pursuant to
Section 1112 of the Bankruptcy Code, or in any other cases related thereto will
be senior to or on a parity with the liens granted to CIT by this Order or to
the priority administrative claims to which it would be entitled under Section
507(b) of the Bankruptcy Code.
(F) CIT shall not be required to file any financing statement,
mortgage, notice of lien or similar instrument in any jurisdiction or take any
other action in order to validate and perfect the security interests and liens
created hereunder, which security interests and liens are hereby deemed valid
and properly perfected upon entry of this Order by this Court. If CIT chooses,
in its sole discretion, to file such financing statements, mortgages, notice of
lien or similar instruments or otherwise
8
<PAGE> 9
confirm perfection of such liens, all such documents shall be deemed to have
been filed or recorded at the time and on the date of entry of this Order,
whether or not so filed or recorded on such date, and the automatic stay of
Section 362 of the Bankruptcy Code hereby is deemed vacated and modified to
permit the filing of any of the foregoing.
(G) Debtor shall continue to maintain each of the depository
accounts and cash management accounts that are in existence as of the Petition
Date, or replace them with accounts subject to arrangements acceptable to CIT
(all such accounts are collectively referred to as the "Cash Collateral
Account").
(H) The Debtor shall at all times during the pendency of the Case:
(i) keep all Cash Collateral that comes into the Debtor's possession, custody,
or control, together with all proceeds, products, or profits thereof, separate
and distinct from all other property of the Debtor and of the Debtor's estate,
with all such funds to be placed in the Cash Collateral Account; (ii) strictly
account for all Cash Collateral, together with all proceeds, products, or
profits thereof that come into the Debtor's possession, custody, or control;
(iii) keep records which shall be of such character as will reasonably be
calculated to enable CIT
9
<PAGE> 10
to determine at any time the status of all Cash Collateral, together with all
proceeds, products, or profits thereof; (iv) furnish to CIT, on Tuesday of each
week, a weekly accounts and inventory confirmation statement for the week
ending on the prior Friday, (v) furnish to CIT, on August 13th, 20th and 27th,
1996, a sales certificate showing sales during the 7 day period ending on
August 9th, 16th and 23rd, respectively and (vi) permit CIT to inspect, audit,
and make copies of and extract from all records and other papers in the
possession, custody, or control of the Debtor pertaining to the Collateral in
which it has an interest, together with all proceeds, products, or profits
thereof, and pertaining to the financial condition and operations of the Debtor
and compliance with the "Budget", as that term is defined in paragraph (L)(a)
below.
(I) The Debtor shall forthwith and hereafter deposit (through the
existing lockbox arrangement or a replacement arrangement acceptable to CIT) in
the Cash Collateral Account: (i) all Cash Collateral currently in the
possession, custody, or control of the Debtor or its agents, employees, or
representatives, together with all proceeds, products, or profits thereof; and
(ii) all other Cash Collateral, together with all
10
<PAGE> 11
proceeds, product, or profits thereof, hereafter collected by or on behalf of
the Debtor. CIT specifically shall have the right to make inquiries of the
lockbox and depository banks regarding the status of the Cash Collateral
Account, and copies of the monthly account statements of the Cash Collateral
Account shall be provided to CIT by such lockbox and depository banks or by the
Debtor.
(J) Sales of inventory for less than 85% of cost (other than (x)
inventory which, prior to the Petition Date, was marked for sale at a lower
price and (y) types of inventory which are sold below cost in the ordinary
course of business in accordance with historical practices of the Debtor in
existence prior to the Petition Date) shall require the consent of CIT. Until
the Termination Date, the Debtor shall be responsible for the collection and
receipt of all Cash Collateral and for the deposit (through the existing
lockbox arrangement or a replacement lockbox arrangement acceptable to CIT) of
all such Cash Collateral into the Cash Collateral Account in strict accordance
with the provisions hereof. The term "Event of Default" shall mean the
occurrence of any of the following:
11
<PAGE> 12
(i) the breach by the Debtor of any warranty, representation or
covenant of any of any of the following provisions of the CIT Financing
Agreement: (a) Section 6, paragraphs 3 and 4 (other than the last sentence
thereof), Section 7, paragraphs 2, 3, 4, 5, 6 (but only with respect to taxes
arising after the Petition Date), 7, 17, 18, 19 (but only with respect to E.
Townes Duncan) and 21 (but only with respect to taxes arising after the
Petition Date), Section 8, paragraphs 1, 2, 3, 7, 8, 10 and 12;
(ii) the failure of the Debtor to have sales in an aggregate amount on
a cumulative basis as of the dates set forth in the weekly sales projection set
forth in the Budget attached hereto as Exhibit "A" and by reference made a part
hereof (the "Budget") at least equal to 90% of the cumulative sales projected
for such dates;
(iii) the sale of inventory for less than 85% of cost (other than (x)
inventory which, prior to the Petition Date, was marked for sale at a lower
price and (y) types of inventory which are sold below cost in the ordinary
course of business in accordance with historical practices of the Debtor in
existence prior to the Petition Date) without the consent of CIT;
12
<PAGE> 13
(iv) if, on or before August 15, 1996, the Debtor has not obtained, to
the satisfaction of CIT, in the exercise of its reasonable discretion,
confirmation from the Debtor's customers that the purchase orders in existence
on the Petition Date will remain in effect;
(v) if, after the application of all cash on hand to outstanding
principal under the revolving line of credit portion of the CIT Loans, the
amount by which Availability (as defined in the CIT Financing Agreement) is
less than $0.0 would be more than $1,744,863.59;
(vi) the occurrence of any other breach or default under or
non-compliance with the terms of this Order; or (vii) the appointment of a
trustee in the Case or the conversion of the Case to a Chapter 7 case.
Upon the occurrence of an Event of Default, CIT may elect to terminate
the Debtor's right to use Cash Collateral by giving notice of termination,
whereupon the Debtor's right to use Cash Collateral pursuant to this Order
shall terminate on the third (3rd) Business Day following such notice, unless
the Debtor has cured such Event of Default within such 3 Business Day period.
The automatic stay and all of Debtor's rights and privileges
13
<PAGE> 14
hereunder shall remain in full force and effect pending order of this Court.
Nothing in this Order shall be construed to limit CIT's or Debtor's right to
seek modification of this Consent Order, whether or not the Debtor remains in
compliance with its terms.
(K) No funds shall be deposited in the Cash Collateral Account
other than those deposited therein in accordance with paragraphs (H) and (I)
hereof.
(L) No funds shall be disbursed from the Cash Collateral Account
except as follows:
(a) The Debtor shall be authorized to make disbursements
from funds held in the Cash Collateral Account only for the payment of the
actual expenses necessary to the operation of the Debtor's business pursuant to
the provisions hereof and the Budget. The funds deposited in the Cash
Collateral Account, and other Cash Collateral, shall not be disbursed or
otherwise used for the payment of any other expenses incurred by or on behalf
of the Debtor without prior authorization from CIT or the Court. The Debtor
shall pay to CIT, promptly after receipt thereof, 100% of the proceeds (net of
the usual and customary direct selling expenses) of the sale of any equipment
or fixtures. Such amounts
14
<PAGE> 15
may be applied by CIT to payment of the CIT Loans in such order of application
as it shall determine, and the automatic stay of Section 362 of the Bankruptcy
Code hereby is deemed vacated and modified to permit such application. Funds
in the Cash Collateral Account shall not be used for the payment of any
expenses incurred by or on behalf of any party or entity other than the Debtor
or commingled with funds used for the payment of expenses incurred by or on
behalf of any party other than the Debtor. In addition, unless otherwise
ordered by this Court, the Debtor shall not use any Cash Collateral:
(i) for payment of any pre-petition debts or
obligations of the Debtor or pre-petition claims against the Debtor, unless
specifically authorized to do so by this Court after notice and hearing
provided, however, that pre-petition insurance premiums and pre-petition wages,
expenses and benefits may be paid to employees, officers and directors of the
Debtor if authorized by the Court, without notice and a hearing;
(ii) for the payment of any debts or obligations of
the Debtor which are not directly related to the operations of, or efforts to
dispose of, the business of the Debtor;
15
<PAGE> 16
(iii) for the payment to any company, individual or
entity related to the Debtor as an insider, as defined in Section 101(31) of
the Bankruptcy Code, other than salaries, expenses and benefits payable to the
officers and directors of the Debtor in the ordinary course of business; or
(iv) for the posting of or otherwise securing the
Debtor's reimbursement obligations under the outstanding letter of credit
issued pursuant to the CIT Financing Agreement.
(b) The actual expenses necessary to the operation of and
efforts to dispose of the Debtor's business shall include only those categories
of expenses set forth in the Budget. To the extent that any expenditure will
exceed 100% of the corresponding line item in the Budget, the Debtor must seek
prior approval of CIT before such expenditure can be made. If CIT objects to
the requested payment within 3 days after receiving notice of same, the Debtor
may not make the requested expenditure without further order of the Court,
after notice and a hearing.
(M) The Debtor shall deliver to CIT such financial and other
information concerning the business and financial affairs of the Debtor as are
required by the CIT Agreements or as CIT may reasonably request from time to
time.
16
<PAGE> 17
(N) CIT shall have no obligation to make any payment, and shall
have no liability for payment or nonpayment, of any expenses or other
obligations of the Debtor, including, without limitation, payroll or other
taxes or payment of any professionals for the Debtor or any other person or
party in interest.
(O) Except as expressly stated herein, this Order is without
prejudice to any rights of CIT or the Debtor under the CIT Agreements, under
the Bankruptcy Code and the Bankruptcy Rules, or under other applicable law and
shall not preclude the entry of other orders by this Court as may be
appropriate and necessary to protect the interest of CIT, the Debtor, or other
creditors and parties in interest in the Case. Specifically, this Order in no
way constitutes a waiver (i) by CIT of its right to seek relief from the
automatic stay, dismissal of the case, or adequate protection for the Debtor's
use of the Pre-petition Collateral, or to exercise its other remedies under the
CIT Agreements, the Bankruptcy Code and the Bankruptcy Rules, and other
applicable law, and in no way constitutes the consent of CIT to the continued
use of Cash Collateral beyond August 30, 1996, either upon the same terms set
forth in this Order or upon different terms, or (ii) by the Debtor of its right
to seek a prospective modification of this Order. This Order does not
constitute a waiver of or
17
<PAGE> 18
prejudice the right of any committee appointed pursuant to Section 1103 of the
Bankruptcy Code (a "Committee") or the Debtor to (x) contest the validity,
priority, or perfection of the security interests and liens of CIT in the Pre-
petition Collateral pursuant to the CIT Agreements (but not in the Replacement
Collateral pursuant hereto), or (y) to commence and prosecute any claims,
actions or causes of action against CIT.
(P) If any or all of the provisions of this Order are hereafter
modified, vacated, or stayed, such modification, vacation, or stay shall not
affect the validity of the Debtor's use of Cash Collateral under the provisions
hereof prior to the effective date of such modification, vacation, or stay and
shall not affect the validity and enforceability of any security interests,
liens, security titles, or priorities authorized or created hereby as adequate
protection for such use of Cash Collateral. Notwithstanding any such
modification, vacation, or stay, the Debtor's use of Cash Collateral prior to
the effective date of such modification, vacation, or stay shall be governed in
all respects by the original provisions of this Order, and CIT shall be
entitled to all of the rights, remedies, privileges, and benefits granted
herein as adequate protection for such use of Cash Collateral.
18
<PAGE> 19
(Q) The entry of this Order shall not constitute a waiver of any
Pre-petition default or of any right or remedy of CIT under applicable
non-bankruptcy law.
(R) The Debtor may not sell Pre-petition Collateral other than in the
ordinary course of business without CIT's prior written consent or order of
this Court after notice and a hearing.
(S) Except to the extent inconsistent with the terms of this
Order, the provisions of the CIT Agreements shall remain in full force and
effect, and CIT shall be entitled to all rights and privileges thereunder.
(T) All notices required to be given in this Order shall be written
notices and sent by facsimile transmission as follows: (i) if to the Debtor, to
the Debtor c/o E. Townes Duncan at 615-377-3993 and to the attorneys for the
Debtor listed on the last page of this Order at 615-742-6293, and (ii) if to
CIT, to CIT c/o Jerrold K. Brown at 770-551-7899 and to the attorneys for CIT
listed on the last page of this Order at 404-581-8330. All notices under this
Order shall be effective upon receipt.
(U) The expenses described in the Budget are necessary to avoid
immediate and irreparable harm to the estate pending a final hearing. This
Order is interim only, and shall terminate on the Termination Date, on which
date the Debtor's right to use Cash
19
<PAGE> 20
Collateral also shall terminate. Due to the extreme emergency nature of this
situation, the Court is entering this Order immediately, without notice, but
only for the limited purpose of permitting the payment of expenses provided in
the Budget. Upon entry of this Order, the Debtor shall serve a copy of this
Order upon the United States Trustee, the Debtor's 20 largest unsecured
creditors, and all other parties in interest as required by the Bankruptcy
Rules. Any objections shall be made in writing and filed and served by August
23, 1996 on counsel for the Debtor, Bass, Berry & Sims, 2700 First American
Center, Nashville, 37238; Attention: John H. Bailey, III, Esq. with a copy to
counsel for CIT, Jones, Day, Reavis & Pogue, 3500 One Peachtree Center, 303
Peachtree Street, N.E., Atlanta, Georgia 30308; Attention: Christopher L.
Carson, Esq., and if any such objections are timely filed, a hearing thereon
shall be held on August 27, 1996 at 9:00 a.m.
SO ORDERED, this 9th day of August, 1996.
/s/ Keith M. Lundin
--------------------
Judge, United States Bankruptcy
Court for the Middle District of
Tennessee, Nashville Division
20
<PAGE> 21
This Order is consented and agreed to by the Debtor and CIT this 8th
day of August, 1996.
/s/ Christopher L. Carson
- ----------------------------------------
by JHB III per telephone, August 8, p.m.
Christopher L. Carson
Georgia Bar No. 112900
Jones, Day, Reavis & Pogue
3500 One Peachtree Center
303 Peachtree Street, N.E.
Atlanta, Georgia 30308-3242
404-581-8035
Attorneys for CIT
/s/ John H. Bailey, III
- ----------------------------------------
John H. Bailey, III
Bass, Berry & Sims
2700 First American Center
Nashville, Tennessee 37238
615-742-6203
Attorneys for the Debtor
21
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 183
<SECURITIES> 0
<RECEIVABLES> 9,211
<ALLOWANCES> 263
<INVENTORY> 13,339
<CURRENT-ASSETS> 24,314
<PP&E> 40,800
<DEPRECIATION> 26,789
<TOTAL-ASSETS> 39,407
<CURRENT-LIABILITIES> 27,650
<BONDS> 29,230
0
19,865
<COMMON> 133
<OTHER-SE> (37,471)
<TOTAL-LIABILITY-AND-EQUITY> 39,407
<SALES> 41,265
<TOTAL-REVENUES> 41,265
<CGS> 41,062
<TOTAL-COSTS> 44,069
<OTHER-EXPENSES> 251
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,967
<INCOME-PRETAX> (5,022)
<INCOME-TAX> 0
<INCOME-CONTINUING> (5,022)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (5,608)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
