<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[ X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1998
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD _____________TO ____________.
COMMISSION FILE NUMBER 001-13797
HAWK CORPORATION
(Exact name of Registrant as specified in its charter)
DELAWARE 34-1608156
-------- ----------
(State of incorporation) (I.R.S. Employer Identification No.)
200 Public Square, Suite 30-5000, Cleveland, Ohio 44114
-------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(216) 861-3553
--------------
Registrant's telephone number, including area code)
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (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[ ].
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date. As of the date of this report,
the Registrant had the following number of shares of common stock outstanding:
Class A Common Stock, $0.01 par value: 9,187,750
Class B Common Stock, $0.01 par value: None (0)
1
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<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited) 3
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 20
Item 3. Quantitative and Qualitative Disclosures about Market Risk 24
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 24
Item 6. Exhibits and Reports on Form 8-K 24
SIGNATURES 25
</TABLE>
2
<PAGE> 3
PART I. FINANCIAL INFORMATION
ITEM I. FINANCIAL STATEMENTS (UNAUDITED)
HAWK CORPORATION
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1998 1997
(UNAUDITED) (NOTE)
----------- ------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 13,437 $ 4,388
Marketable securities 4,000
Accounts receivable, less allowance of $405, and $321, respectively 27,475 25,746
Inventories 24,276 22,083
Deferred income taxes 2,917 2,833
Other current assets 1,464 1,375
-------- --------
Total current assets 73,569 56,425
Property, plant and equipment:
Land 1,229 1,218
Buildings and improvements 13,621 10,877
Machinery and equipment 69,555 57,104
Furniture and fixtures 2,632 2,326
Construction in progress 2,974 1,914
-------- --------
90,011 73,439
Less accumulated depreciation 26,782 20,959
-------- --------
Total property, plant and equipment 63,229 52,480
Other assets:
Intangible assets 61,117 56,539
Net assets held for sale 3,604 3,604
Shareholder notes 1,010 1,675
Other 2,290 2,363
-------- --------
Total other assets 68,021 64,181
-------- --------
Total assets $204,819 $173,086
======== ========
</TABLE>
3
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HAWK CORPORATION
CONSOLIDATED BALANCE SHEETS - (CONTINUED)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1998 1997
(UNAUDITED) (NOTE)
----------- ------
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable $ 11,934 $ 10,369
Short term borrowings 1,189 1,744
Accrued compensation 8,401 8,069
Other accrued expenses 6,514 5,494
Current portion of long-term debt 6,713 1,955
--------- ---------
Total current liabilities 34,751 27,631
Long-term liabilities:
Long-term debt 97,876 130,193
Deferred income taxes 6,490 6,322
Other 2,005 1,811
--------- ---------
Total long-term liabilities 106,371 138,326
Detachable stock warrants, subject to put option 9,300
Shareholders' equity (deficit):
Preferred stock 1
Series D preferred stock, $.01 par value;
an aggregate liquidation value of $1,530,
plus any accrued and unpaid dividends with
9.8% cumulative dividend (1,530 shares
authorized, issued and outstanding) 1
Class A common stock, $.01 par value; 75,000,000
shares authorized, 9,187,750 issued and outstanding 92 14
Class B common stock, $.01 par value, 10,000,000
shares authorized, none issued or outstanding
Additional paid-in capital 54,658 1,964
Retained earnings (deficit) 9,607 (3,120)
Accumulated other comprehensive loss (661) (1,030)
--------- ---------
Total shareholders' equity (deficit) 63,697 (2,171)
Total liabilities and shareholders' equity (deficit) $ 204,819 $ 173,086
========= =========
</TABLE>
Note: The balance sheet at December 31, 1997 has been derived from the audited
financial statements at that date but does not include all of the information
and footnotes required by generally accepted accounting principles for complete
financial statements. See notes to consolidated financial statements.
4
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HAWK CORPORATION
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
NINE MONTHS ENDED THREE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30,
1998 1997 1998 1997
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Net sales $ 140,120 $ 116,362 $ 43,401 $ 39,381
Cost of sales 94,985 82,940 29,607 28,895
--------- --------- --------- ---------
Gross profit 45,135 33,422 13,794 10,486
Selling, technical and
administrative expenses 17,213 14,241 5,632 4,794
Amortization of intangibles 2,648 2,575 880 949
Plant consolidation
expense 50 50
--------- --------- --------- ---------
Total expenses 19,861 16,866 6,512 5,793
Income from operations 25,274 16,556 7,282 4,693
Interest expense 9,531 11,307 2,406 3,758
Interest income (741) (668) (250) (168)
Other expense, net 19 122 2 82
--------- --------- --------- ---------
Income before income taxes
and extraordinary items 16,465 5,795 5,124 1,021
Income taxes 7,003 2,534 2,176 545
--------- --------- --------- ---------
Income before extraordinary items 9,462 3,261 2,948 476
Extraordinary charge 3,079
--------- --------- --------- ---------
Net income $ 6,383 $ 3,261 $ 2,948 $ 476
========= ========= ========= =========
Earnings per share:
Basic:
Earnings before
extraordinary items $ 1.32 $ .65 $ .32 $ .08
Extraordinary items (.44)
--------- --------- --------- ---------
Basic earnings per share $ .88 $ .65 $ .32 $ .08
========= ========= ========= =========
Diluted:
Earnings before
extraordinary items $ 1.23 $ .53 $ .32 $ .07
Extraordinary items (.41)
--------- --------- --------- ---------
Diluted earnings per share $ .82 $ .53 $ .32 $ .07
========= ========= ========= =========
</TABLE>
See notes to consolidated financial statements.
5
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HAWK CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
1998 1997
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net income $ 6,383 $ 3,261
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 8,314 7,166
Accretion of discount on debt 238 487
Deferred income taxes 2,343
Extraordinary charge, net of income taxes 3,079
Changes in operating assets and liabilities, net:
Accounts receivable 132 (5,319)
Inventories (940) (865)
Other assets 89 (925)
Accounts payable 542 2,800
Other liabilities 1,969 1,248
-------- --------
Net cash provided by operating activities 19,806 10,196
Cash flows from investing activities:
Purchase of marketable securities (4,130)
Business acquisitions (9,100) (26,088)
Purchases of property, plant and equipment (11,127) (4,798)
Payments received on shareholder notes 665 163
-------- --------
Net cash used in investing activities (23,692) (30,723)
Cash flows from financing activities
Payments on short term debt (636)
Proceeds from borrowings on long-term debt 35,000
Payments on long-term debt (69,544) (783)
Net proceeds from issuance of common stock 52,772
Deferred financing costs (850) (565)
Payments of preferred stock dividend (219) (240)
Prepayment premium on early retirement of debt (3,588)
Other (30)
-------- --------
Net cash provided by (used in) financing activities 12,935 (1,618)
-------- --------
Net increase (decrease) in cash and cash equivalents 9,049 (22,145)
Cash and cash equivalents at the beginning of the period 4,388 25,774
-------- --------
Cash and cash equivalents at the end of the period $ 13,437 $ 3,629
======== ========
</TABLE>
See notes to consolidated financial statements.
6
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HAWK CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
SEPTEMBER 30, 1998
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
NOTE 1 - BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements have been prepared
in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring accruals) considered necessary for a fair presentation have
been included. Operating results for the period ended September 30, 1998 are not
necessarily indicative of the results that may be expected for the year ended
December 31, 1998. For further information, refer to the condensed consolidated
financial statements and footnotes thereto included in the Form S-1
(Registration No. 333-40535) for Hawk Corporation (the "Company") for the year
ended December 31, 1997.
The Company designs, engineers, manufactures and markets specialized components,
principally made from powder metals, for aerospace, industrial and other
specialty applications.
The consolidated financial statements include the accounts of the Company and
its wholly-owned subsidiaries and also include, effective August 1, 1997 and
June 1, 1998, the accounts of Sinterloy Corporation ("Sinterloy") and Clearfield
Powdered Metals, Inc. ("Clearfield"), respectively. All significant
inter-company accounts and transactions have been eliminated in the accompanying
financial statements.
NOTE 2 - RECENTLY ISSUED ACCOUNTING PRONOUCEMENTS
In June 1997, the Financial Accounting Standards Board issued SFAS No. 131,
Disclosures About Segments of an Enterprise and Related Information. This
statement establishes standards for reporting financial and descriptive
information about operating segments. Under SFAS No. 131, information pertaining
to the Company's operating segments will be reported on the basis that is used
internally for evaluating segment performance and making resource allocation
determinations. Management is currently studying the potential effects of
adoption of this statement, which is required for the fiscal year ended 1998.
NOTE 3 - COMPREHENSIVE INCOME
In June 1997, the Financial Accounting Standards Board issued SFAS No. 130,
Reporting Comprehensive Income, which requires that an enterprise classify items
of other comprehensive income, as defined therein, by their nature in the
financial statement and display the accumulated balance of other comprehensive
income separately from retained earnings and additional paid-in capital in the
equity section of the balance sheet. The Company adopted SFAS No. 130 in the
first quarter of 1998. The principal difference between net income as
historically reported in the consolidated statements of income and comprehensive
income is foreign currency translation recorded in shareholders' equity.
Comprehensive income is as follows:
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<TABLE>
<CAPTION>
NINE MONTHS ENDED THREE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net income $ 6,383 $ 3,261 $ 2,948 $ 476
Minimum pension liability 337 337
Marketable securities (75) (75)
Foreign currency translation 444 (1,296) 582 (511)
------- ------- ------- -------
Comprehensive income $ 6,752 $ 2,302 $ 3,455 $ 302
======= ======= ======= =======
</TABLE>
NOTE 4 - INVENTORIES
Inventories are stated at the lower of cost or market. Cost is determined by the
first-in, first-out (FIFO) method. The major components of inventories are as
follows:
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1998 1997
---- ----
<S> <C> <C>
Raw materials and work-in-process $ 21,002 $ 18,690
Finished products 4,938 4,722
Inventory reserves (1,664) (1,329)
-------- --------
$ 24,276 $ 22,083
======== ========
</TABLE>
NOTE 5 - LONG-TERM DEBT
In May 1998, the Company retired all of its outstanding Senior Subordinated
Notes. In June 1998, the Company redeemed $35,000 of its then outstanding
$100,000, 10.25% Senior Notes due December 1, 2003. As a result of these
transactions, the Company incurred an extraordinary charge of $3,079, net of
income taxes, resulting from the premium paid in connection with the purchase of
the 10.25% Senior Notes and the write off of debt issuance costs associated with
the retirement of debt. In May 1998, the Company entered into a $35,000 Term
Loan Facility, with $1,250 maturing quarterly, beginning September 30, 1998 with
the remaining principal of $12,500 due on March 31, 2003. Additionally, in May
1998, the Company executed a $50,000 Revolving Credit Facility that matures
March 31, 2003. The Senior Notes, Term Loan and Revolving Credit Facility are
fully and unconditionally guaranteed on a joint and several basis by each of the
direct or indirect wholly-owned domestic subsidiaries of the Company ("Guarantor
Subsidiaries"). (See Note 10).
NOTE 6 - SHAREHOLDERS' EQUITY
In May 1998, the Company completed an initial public offering ("IPO") of
5,905,250 shares of common stock at an offering price to the public of $17.00
per share. In the IPO, 3,500,000 shares were sold by the Company and 2,405,250
shares were sold by certain of the Company's stockholders. The offering resulted
in an increase in shareholders' equity of $57,000.
8
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NOTE 7 - DETACHABLE STOCK WARRANTS, SUBJECT TO PUT OPTION
For financial reporting purposes at December 31, 1997, the carrying value of the
warrants, including the put option, was estimated to be $9,300 and classified as
detachable stock warrant, subject to put option on the accompanying balance
sheet. The warrant holders exercised their detachable stock warrants on May 11,
1998 for 1,023,793 shares of the Company's Common Stock, which were then sold as
part of the Company's IPO. The warrant holders' put option terminated upon the
closing of the Company's IPO.
NOTE 8 - INCREASE IN AUTHORIZED SHARES AND STOCK SPLIT
On January 12, 1998, the Company amended its Certificate of Incorporation to
increase the authorized shares of Class A and Class B Common Stock to 75,000,000
and 10,000,000, respectively. In addition, on January 12, 1998, the board of
directors declared a 3.2299-for-one split of the Company's Class A and Class B
Common Stock in the form of a stock dividend distributed to the holders of
record on January 12, 1998. Accordingly, the number of common shares and per
share data have been restated to reflect the stock split. The par value of the
additional shares of common stock issued in connection with the stock split was
credited to common stock and a like amount charged to additional paid in capital
in the first quarter of 1998.
NOTE 9 - EARNINGS PER SHARE
In February 1997, the Financial Accounting Standards Board issued SFAS No. 128,
Earnings per Share. SFAS No. 128 replaced the previously reported primary and
fully-diluted earnings per share with basic earnings per share and diluted
earnings per share. As required, the Company adopted SFAS No. 128 in the fourth
quarter of 1997. Prior amounts have been restated to comply with SFAS No. 128
and give effect to the stock split discussed in Note 8.
Basic and dilutive earnings per share is computed as follows:
9
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<TABLE>
<CAPTION>
NINE MONTHS ENDED THREE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Income available to common shareholders:
Income before extraordinary item $ 9,462 $ 3,261 $ 2,948 $ 476
Less: Preferred stock dividends (219) (240) (38) (80)
------- ------- ------- -------
Income before extraordinary item attributable
to common shareholders 9,243 3,021 2,910 396
======= ======= ======= =======
Net income 6,383 3,261 2,948 476
Less: Preferred stock dividends (219) (240) (38) (80)
------- ------- ------- -------
Net income attributable to common shareholders 6,164 3,021 2,910 396
======= ======= ======= =======
Weighted average shares:
Basic:
Basic weighted average shares 7,017 4,664 9,188 4,664
Diluted:
Basic from above 7,017 4,664 9,188 4,664
Effect of warrant conversion 492 1,024 1,024
Effect of note conversion and options 15 29
------- ------- ------- -------
Diluted weighted average shares 7,524 5,688 9,217 5,688
======= ======= ======= =======
Earnings per share:
Basic:
Earnings before extraordinary charge $ 1.32 $ .65 $ .32 $ .08
Extraordinary charge (.44)
------- ------- ------- -------
Basic earnings per share $ . 88 $ .65 $ .32 $ .08
======= ======= ======= =======
Diluted:
Earnings before extraordinary charge $ 1.23 $ .53 $ .32 $ .07
Extraordinary charge (.41)
------- ------- ------- -------
Diluted earnings per share $ .82 $ .53 $ .32 $ .07
======= ======= ======= =======
</TABLE>
10
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NOTE 10 - SUPPLEMENTAL GUARANTOR INFORMATION
As discussed in Note 5, each of the Guarantor Subsidiaries has fully and
unconditionally guaranteed, on a joint and several basis, the obligation to pay
principal, premium, if any, and interest with respect to the Senior Notes. The
Guarantor Subsidiaries are direct, wholly-owned subsidiaries of the Company.
The following supplemental unaudited consolidating condensed financial
statements present (in thousands):
1. Consolidating condensed balance sheets as of September 30,
1998 and December 31, 1997, consolidating condensed statements
of income for the three and nine-month periods ended September
30, 1998 and 1997 and consolidating condensed statements of
cash flows for the nine months ended September 30, 1998 and
1997.
2. Hawk Corporation (Parent), combined Guarantor Subsidiaries and
combined Non-Guarantor Subsidiaries (consisting of the
Company's subsidiaries in Canada and Italy) with their
investments in subsidiaries accounted for using the equity
method.
3. Elimination entries necessary to consolidate the Parent and
all of its subsidiaries.
Management does not believe that separate financial statements of the Guarantor
Subsidiaries of the Senior Notes are material to investors. Therefore, separate
financial statements and other disclosures concerning the Guarantor Subsidiaries
are not presented. The Revolving Credit Facility contains covenants that, among
other things, would prohibit the payment of any dividends to the Company by the
subsidiaries of the Company (including Guarantor Subsidiaries) in the event of a
default under the terms of the Revolving Credit Facility.
11
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SUPPLEMENTAL CONSOLIDATING CONDENSED
BALANCE SHEET (UNAUDITED)
<TABLE>
<CAPTION>
SEPTEMBER 30, 1998
---------------------------------------------------------------------
COMBINED COMBINED
GUARANTOR NON-GUARANTOR
PARENT SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 12,088 $ 47 $ 1,302 $ 13,437
Marketable securities 4,000 4,000
Accounts receivable, net 304 20,489 6,682 27,475
Inventories, net 18,790 5,486 24,276
Deferred income taxes 2,490 427 2,917
Other current assets 66 548 850 1,464
--------- --------- --------- --------- ---------
Total current assets 18,948 39,874 14,747 73,569
Other assets:
Investment in subsidiaries 791 6,535 $ (7,326)
Inter-company advances, net 142,562 (410) 6 (142,158)
Property, plant and equipment 54,986 8,243 63,229
Intangible assets 225 60,892 61,117
Other 1,010 6,592 415 (1,113) 6,904
--------- --------- --------- --------- ---------
Total other assets 144,588 128,595 8,664 (150,597) 131,250
--------- --------- --------- --------- ---------
Total assets $ 163,536 $ 168,469 $ 23,411 $(150,597) $ 204,819
========= ========= ========= ========= =========
Liabilities and shareholders' equity
Current liabilities:
Accounts payable $ 8,839 $ 3,095 $ 11,934
Short term borrowings 1,189 1,189
Accrued compensation $ 44 7,092 1,265 8,401
Other accrued expenses 3,329 2,800 385 6,514
Current portion of long-term debt 5,000 1,070 643 6,713
--------- --------- --------- --------- ---------
Total current liabilities 8,373 19,801 6,577 34,751
Long-term liabilities:
Long-term debt 93,750 2,533 1,593 97,876
Deferred income taxes 5,888 417 185 6,490
Other 772 1,233 2,005
Inter-company advances, net 1,125 134,858 7,288 $(143,271)
--------- --------- --------- --------- ---------
Total long-term liabilities 100,763 138,580 10,299 (143,271) 106,371
--------- --------- --------- --------- ---------
Total liabilities 109,136 158,381 16,876 (143,271) 141,122
Shareholders' equity 54,400 10,088 6,535 (7,326) 63,697
--------- --------- --------- --------- ---------
Total liabilities and
shareholders' equity $ 163,536 $ 168,469 $ 23,411 $(150,597) $ 204,819
========= ========= ========= ========= =========
</TABLE>
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SUPPLEMENTAL CONSOLIDATING CONDENSED
BALANCE SHEET (UNAUDITED)
<TABLE>
<CAPTION>
DECEMBER 31, 1997
---------------------------------------------------------------------
COMBINED COMBINED
GUARANTOR NON-GUARANTOR
PARENT SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 3,103 $ 469 $ 816 $ 4,388
Accounts receivable, net 77 19,013 6,656 25,746
Inventories, net 17,455 4,628 22,083
Deferred income taxes 890 1,545 398 2,833
Other current assets 142 560 734 $ (61) 1,375
--------- --------- --------- --------- ---------
Total current assets 4,212 39,042 13,232 (61) 56,425
Other assets:
Investment in subsidiaries 790 4,971 (5,761)
Inter-company advances, net 132,490 1,300 11 (133,801)
Property, plant and equipment 46,115 6,365 52,480
Intangible assets 231 56,308 56,539
Other 1,675 7,352 445 (1,830) 7,642
--------- --------- --------- --------- ---------
Total assets $ 139,398 $ 155,088 $ 20,053 $(141,453) $ 173,086
========= ========= ========= ========= =========
Liabilities and shareholders' equity (deficit)
Current liabilities:
Accounts payable $ 7,156 $ 3,213 $ 10,369
Short term borrowings 1,744 1,744
Accrued compensation $ 64 7,189 816 8,069
Other accrued expenses (3,219) 8,582 247 $ (116) 5,494
Current portion of long-term debt 1,432 523 1,955
--------- --------- --------- --------- ---------
Total current liabilities (3,155) 24,359 6,543 (116) 27,631
Long-term liabilities:
Long-term debt 127,025 2,001 1,167 130,193
Deferred income taxes 5,665 223 434 6,322
Other 780 1,031 1,811
Inter-company advances, net 2,986 126,683 5,907 (135,576)
--------- --------- --------- --------- ---------
Total long-term liabilities 135,676 129,687 8,539 (135,576) 138,326
--------- --------- --------- --------- ---------
Total liabilities 132,521 154,046 15,082 (135,692) 165,957
Detachable stock warrants,
subject to put option 9,300 9,300
Shareholders' equity (deficit) (2,423) 1,042 4,971 (5,761) (2,171)
--------- --------- --------- --------- ---------
Total liabilities and
shareholders' equity (deficit) $ 139,398 $ 155,088 $ 20,053 $(141,453) $ 173,086
========= ========= ========= ========= =========
</TABLE>
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SUPPLEMENTAL CONSOLIDATING CONDENSED
INCOME STATEMENT (UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30, 1998
------------------------------------
COMBINED COMBINED
GUARANTOR NON-GUARANTOR
PARENT SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Net sales $ 123,494 $ 16,626 $ 140,120
Cost of sales 81,467 13,518 94,985
----------- ------------ ------------ ------------ ------------
Gross profit 42,027 3,108 45,135
Selling, technical and
administrative expenses $ 7 15,260 1,946 17,213
Amortization of intangibles 7 2,641 2,648
----------- ------------ ------------ ------------ ------------
Total expenses 14 17,901 1,946 19,861
Income (loss) from operations (14) 24,126 1,162 25,274
Interest expense 238 9,016 383 $ (106) 9,531
Interest income (847) 106 (741)
Income from equity investees 8,118 468 (8,586)
Other (income) expense, net (17) 36 19
----------- ------------ ------------ ------------ ------------
Income before extraordinary item
and income taxes 8,713 15,595 743 (8,586) 16,465
Income taxes 267 6,461 275 7,003
Income before extraordinary item 8,446 9,134 468 (8,586) 9,462
Extraordinary items 2,063 1,016 3,079
----------- ------------ ------------ ------------ ------------
Net income $ 6,383 $ 8,118 $ 468 $ (8,586) $ 6,383
=========== ============ ============ ============ ============
</TABLE>
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SUPPLEMENTAL CONSOLIDATING CONDENSED
INCOME STATEMENT (UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30, 1997
------------------------------------
COMBINED COMBINED
GUARANTOR NON-GUARANTOR
PARENT SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Net sales $ 101,113 $ 15,249 $ 116,362
Cost of sales 70,609 12,331 82,940
----------- ----------- ----------- ----------- -----------
Gross profit 30,504 2,918 33,422
Selling, technical and
administrative expenses 12,053 2,188 14,241
Amortization of intangibles $ 8 2,528 39 2,575
Plant consolidation expense 50 50
----------- ----------- ----------- ----------- -----------
Total expenses 8 14,631 2,227 16,866
----------- ----------- ----------- ----------- -----------
Income (loss) from operations (8) 15,873 691 16,556
Interest expense 487 10,738 322 $ (240) 11,307
Interest income (908) 240 (668)
Income from equity investees 3,173 285 (3,458)
Other (income) expense, net 273 (151) 122
----------- ------------ ----------- ----------- -----------
Income before income taxes 3,313 5,571 369 (3,458) 5,795
Income taxes 52 2,398 84 2,534
----------- ----------- ----------- ----------- -----------
Net income $ 3,261 $ 3,173 $ 285 $ (3,458) $ 3,261
=========== ============ ============ ============ ============
</TABLE>
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SUPPLEMENTAL CONSOLIDATING CONDENSED
INCOME STATEMENT (UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SEPTEMBER 30, 1998
-------------------------------------
COMBINED COMBINED
GUARANTOR NON-GUARANTOR
PARENT SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Net sales $ 38,583 $ 4,818 $ 43,401
Cost of sales 25,705 3,902 29,607
----------- ----------- ----------- ----------- -----------
Gross profit 12,878 916 13,794
Selling, technical and
administrative expenses (33) 5,061 604 5,632
Amortization of intangibles $ 3 877 880
----------- ----------- ----------- ----------- -----------
Total expenses (30) 5,938 604 6,512
Income from operations 30 6,940 312 7,282
Interest expense 2,291 115 2,406
Interest income (250) (250)
Income from equity investees 2,841 75 $ (2,916)
Other (income) expense, net 70 (90) 22 2
----------- ------------ ----------- ----------- -----------
Income before income taxes 3,051 4,814 175 (2,916) 5,124
Income taxes 103 1,973 100 2,176
----------- ----------- ----------- ----------- -----------
Net income $ 2,948 $ 2,841 $ 75 $ (2,916) $ 2,948
=========== ============ ============ ============ ============
</TABLE>
16
<PAGE> 17
SUPPLEMENTAL CONSOLIDATING CONDENSED
INCOME STATEMENT (UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SEPTEMBER 30, 1997
-------------------------------------
COMBINED COMBINED
GUARANTOR NON-GUARANTOR
PARENT SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Net sales $ 34,610 $ 4,771 $ 39,381
Cost of sales 24,972 3,923 28,895
----------- ----------- ----------- ----------- -----------
Gross profit 9,638 848 10,486
Selling, technical and
administrative expenses 3,987 807 4,794
Amortization of intangibles $ 3 937 9 949
Plant consolidation expense 50 50
----------- ----------- ----------- ----------- -----------
Total expenses 3 4,974 816 5,793
Income (loss) from operations (3) 4,664 32 4,693
Interest expense 162 3,559 117 $ (80) 3,758
Interest income (248) 80 (168)
Income (loss) from equity investees 469 (58) (411)
Other (income) expense, net 78 63 (59) 82
----------- ----------- ----------- ----------- -----------
Income (loss) before income taxes 474 984 (26) (411) 1,021
Income taxes (credit) (2) 515 32 545
----------- ----------- ----------- ----------- -----------
Net income (loss) $ 476 $ 469 $ (58) $ (411) $ 476
=========== ============ ============ ============ ============
</TABLE>
17
<PAGE> 18
SUPPLEMENTAL CONSOLIDATING CONDENSED
CASH FLOW STATEMENT (UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30, 1998
------------------------------------
COMBINED COMBINED
GUARANTOR NON-GUARANTOR
PARENT SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Net cash provided by
operating activities $ 3,835 $ 12,852 $ 3,119 $ 19,806
Cash flows from investing activities:
Purchase of marketable securities (4,130) (4,130)
Business acquisitions (9,100) (9,100)
Purchase of property, plant and
equipment (9,645) (1,482) (11,127)
Payments received on
shareholder loans 665 665
----------- ----------- ----------- ----------- -----------
Net cash used in
investing activities (12,565) (9,645) (1,482) (23,692)
Cash flows from financing
activities:
Payments on short term borrowings (636) (636)
Proceeds from borrowings on
long-term debt 35,000 35,000
Net proceeds from issuance of
common stock 52,722 52,772
Payments on long term debt (66,250) (2,779) (515) (69,544)
Deferred financing costs (850) (850)
Payment of preferred
stock dividend (219) (219)
Payments on early retirement
of debt (3,588) (3,588)
------------ ----------- ----------- ----------- ------------
Net cash provided by
financing activities 17,715 (3,629) (1,151) 12,953
----------- ------------ ------------ ----------- -----------
Net (decrease) increase in cash and
cash equivalents 8,985 (422) 486 9,049
Cash and cash equivalents
at beginning of period 3,103 469 816 4,388
----------- ----------- ----------- ----------- -----------
Cash and cash equivalents
at end of period $ 12,088 $ 47 $ 1,302 $ 13,437
=========== ============ ============ =========== ============
</TABLE>
18
<PAGE> 19
SUPPLEMENTAL CONSOLIDATING CONDENSED
CASH FLOW STATEMENT (UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30, 1997
------------------------------------
COMBINED COMBINED
GUARANTOR NON-GUARANTOR
PARENT SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Net cash provided by
operating activities $ 6,299 $ 3,640 $ 257 $ 10,196
Cash flows from investing activities:
Business acquisitions (26,088) (26,088)
Purchase of property, plant and
equipment (4,603) (195) (4,798)
Payments received on
shareholder loans 163 163
----------- ----------- ----------- ----------- -----------
Net cash used in
investing activities (25,925) (4,603) (195) (30,723)
Cash flows from financing
activities:
(Payments) proceeds on
long-term debt (1,751) 1,591 (623) (783)
Deferred financing costs (565) (565)
Payment of preferred
stock dividend (240) (240)
Other (30) (28) 28 (30)
----------- ----------- ----------- ----------- -----------
Net cash (used in) provided by
financing activities (2,021) 998 (595) (1,618)
----------- ----------- ----------- ----------- -----------
Net (decrease) increase in cash and
cash equivalents (21,647) 35 (533) (22,145)
Cash and cash equivalents
at beginning of period 25,187 5 582 25,774
----------- ----------- ----------- ----------- -----------
Cash and cash equivalents
at end of period $ 3,540 $ 40 $ 49 $ 3,629
=========== ============ ============ =========== ============
</TABLE>
19
<PAGE> 20
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following discussion and analysis should be read in conjunction with the
Company's consolidated financial statements and notes thereto appearing
elsewhere in this report.
GENERAL
Hawk designs, engineers, manufactures and markets specialized components,
principally made from powder metals, used in a wide variety of aerospace,
industrial and commercial applications. The Company is a leading worldwide
supplier of friction products for brakes, clutches and transmissions used in
aerospace, industrial and specialty applications. Friction products represented
61.0% of Company sales in the first nine months of 1998. Hawk is also a leading
supplier of powder metal components for industrial applications, including pump,
motor and transmission elements, gears, pistons and anti-lock brake sensor
rings. Powder metal components represented 28.7% of Company sales in the first
nine months of 1998. In addition, the Company designs and manufactures die-cast
aluminum rotors for small electric motors used in appliances, business machines
and exhaust fans. The Company focuses on manufacturing products requiring
sophisticated engineering and production techniques for applications in markets
where it has achieved a significant market share.
Since its formation in 1989, Hawk has pursued a strategic growth plan by making
complementary acquisitions and broadening its customer base. All these
acquisitions were accounted for under the purchase method of accounting, with
the purchase price allocated to the estimated fair market value of the assets
acquired and liabilities assumed. In the acquisitions, any excess of the
purchase price paid over the estimated fair value of the net assets acquired was
allocated to goodwill, which resulted in approximately $49.2 million of goodwill
reflected on the September 30, 1998 balance sheet. The annual amortization of
goodwill will result in non-cash charges to future operations of approximately
$2.1 million per year (of which the majority of such amortization is deductible
for tax purposes) based on amortization periods ranging from 15 to 40 years.
Year 2000 Compliance
- --------------------
The Company is continuing its efforts to assess and remediate issues caused by
the inability of certain of its information systems to properly process
transactions using dates beginning in the Year 2000. During 1998, the Company
completed an assessment of its information systems relative to Year 2000
deficiencies. Each of the Company's operating units is now engaged in the
remediation of its Year 2000 issues which includes upgrading or replacing older
software with new programs and systems, which will handle the Year 2000 and
beyond.
In addition, the Company has requested and gathered information about the Year
2000 compliance status of its significant suppliers and continues to monitor
their compliance. There can be no assurance that the systems of other companies
that interact with the Company will be sufficiently Year 2000 compliant so as to
avoid an adverse impact on the Company's operations, financial condition and
results of operations.
The Company has budgeted the necessary funds to address its Year 2000 related
projects. The Company believes that the incremental cost of Year 2000 compliance
efforts is not material due to its use of third-party developed software which
is now date compliant or can be made date compliant by purchasing vendor
supplied upgrades. All of the costs related to achieving Year 2000 compliance
will be funded through the Company's operating cash flows.
The Company expects that most of its remediation efforts will be in place before
mid-1999. However, there can be no assurance that the Company will be successful
in implementing its Year 2000 remediation according to the anticipated schedule.
20
<PAGE> 21
In addition, the Company may be adversely affected by the inability of other
companies whose systems interact with the Company to become Year 2000
compliant and by potential interruptions of utility, communications or
transportation systems as a result of Year 2000 issues.
Although the Company expects its internal information systems to be Year 2000
compliant as described above, the Company intends to prepare a contingency plan
that will specify what it plans to do if it or significant external companies
are not Year 2000 complaint in a timely manner. The Company expects to prepare
its contingency plan during 1999.
RECENT EVENTS
On November 12, 1998, the Board of Directors of the Company authorized the
repurchase of up to $2.0 million of its common stock. The Company expects to
purchase the shares from time to time in the open market, as market conditions
warrant. All shares repurchased will be held as treasury shares available for
reissue in connection with the Company's stock option plan and for general
corporate purposes.
THIRD QUARTER 1998 COMPARED TO THIRD QUARTER 1997
Net Sales. Net sales increased $4.0 million, or 10.2%, to $43.4 million in the
third quarter of 1998 from $39.4 million in the comparable quarter of 1997. The
sales increase was attributable to the acquisition of Clearfield in June 1998,
and to a lesser extent, Sinterloy in August 1997, and strong customer demand in
the Company's powder metal product lines. Sales in the Company's powder metal
lines increased $5.1 million, or 60.7%, to $13.5 million in the third quarter of
1998 from $8.4 million in the comparable quarter of 1997. Sales in the Company's
powder metal lines, exclusive of Clearfield and Sinterloy, increased $1.8
million, or 21.4%, to $10.2 million in the third quarter of 1998 from $8.4
million in the comparable quarter of 1997. The increase was attributable to the
strong customer demand in the truck, motor and transmission components, and lawn
and garden markets, as well as increased demand in the fluid power markets
served by the Company. Sales of friction products, affected by decreased demand
in agriculture markets decreased $0.7 million, or 2.7%, to $25.6 million in the
third quarter of 1998 from $26.3 million in the comparable quarter of 1997.
Gross Profit. Gross profit increased $3.3 million, or 31.6%, to $13.8 million in
the third quarter of 1998 from $10.5 million in the comparable quarter of 1997.
The gross profit margin increased to 31.8% in the third quarter of 1998 from
26.6% in the comparable period of 1997. The increase is primarily attributable
to the inclusion of Clearfield in the recent quarter, product mix and
manufacturing efficiencies resulting from the Company's capital expenditure
program.
Selling Technical and Administrative ("ST&A") Expenses. ST&A expenses increased
$0.8 million, or 17.5%, to $5.6 million in the third quarter of 1998 from $4.8
million in the comparable period of 1997. The acquisition of Sinterloy and
Clearfield represented 92.2% of the total increase in ST&A during the third
quarter of 1998. As a percentage of sales, ST&A expenses increased to 13.0% of
sales in the third quarter of 1998 from 12.2% in the comparable quarter of 1997.
This increase was due primarily to increased spending in the Company's research
& development efforts, and the hiring of additional personnel required to
support the Company's growth.
Income from Operations. Income from operations increased by $2.6 million, or
55.2%, to $7.3 million in the third quarter of 1998, from $4.7 million in the
comparable quarter of 1997. Income from operations as a percent of net sales
increased to 16.8% in the third quarter of 1998 from 11.9% in the comparable
quarter of 1997, reflecting increased sales activity, product mix, manufacturing
efficiencies and gross margin improvement.
Interest Expense. Interest expense decreased $1.4 million, or 36.0%, to $2.4
million in the third quarter of 1998 from $3.8 million in the comparable quarter
of 1997. The decrease in 1998 compared to the comparable quarter of 1997 is
attributable to lower debt levels, a result of the repayment of debt from the
proceeds of the Company's IPO, as well as lower interest rates during the third
quarter of 1998 attributable to the refinancing of the Company's debt at the
time of the IPO.
Income Taxes. The provision for income taxes increased to $2.2 million in the
third quarter of 1998 from $0.6 million in the comparable quarter of 1997,
reflecting the increase in pre-tax income as well as an increase in the
Company's effective tax rate, due to the non deductibility of goodwill
21
<PAGE> 22
amortization resulting from the acquisition of Hutchinson and Clearfield.
Net Income. As a result of the factors discussed above, net income increased
$2.4 million, or 519.3%, to $2.9 million in the third quarter of 1998 from $0.5
million in the comparable period of 1997.
FIRST NINE MONTHS OF 1998 COMPARED TO FIRST NINE MONTHS OF 1997
Net Sales. Net sales increased by $23.8 million, or 20.4%, to $140.1 million
during the first nine months of 1998 from $116.4 million during the first nine
months of 1997. The net sales increase in the first nine months of 1998 was
attributable to the acquisition of Clearfield and Sinterloy, and strong customer
demand in most product lines served by the Company. Sales of friction products
increased to $85.5 million for the nine months ended September 1998 from $80.2
million in the comparable period of 1997, or 6.7%. The Company experienced
strong demand for the first nine months of 1998, led by the Company's aerospace
and truck markets, which was partially offset by a decrease in its agricultural
markets. Sales in the Company's powder metal lines increased 87.4% to $40.1
million for the first nine months of 1998 from $21.4 million in the comparable
period of 1997. Exclusive of Sinterloy and Clearfield, sales of powder metal
products increased by 23.8%. This increase was led by strong customer demand in
the truck, motor and transmission components, lawn and garden and the fluid
power markets served by the Company.
Gross Profit. Gross profit increased $11.7 million to $45.1 million during the
first nine months of 1998, a 35.1% increase over gross profit of $33.4 million
during the first nine months of 1997. The gross profit margin increased to 32.2%
during the first nine months of 1998 from 28.7% during the comparable period of
1997. The increase is primarily due to the inclusion of Sinterloy for the entire
nine months of 1998, product mix, and manufacturing efficiencies resulting from
the Company's capital expenditure program.
Selling, Technical and Administrative ("ST&A") Expenses. ST&A expenses increased
$3.0 million, or 20.9%, to $17.2 million during the first nine months of 1998.
The acquisition of Sinterloy and Clearfield represented 61.3% of the total
increase in ST&A during the first nine months of 1998. ST&A increased to 12.3%
of sales during the first nine months of 1998 from 12.2% during the comparable
period of 1997.
Income from Operations. Income from operations increased by $8.7 million, or
52.7%, to $25.3 million during the first nine months of 1998 from $16.6 million
in the comparable quarter of 1997. Income from operations as a percent of net
sales increased to 18.0% in the first nine months of 1998 from 14.2% in the
comparable nine month period of 1997, reflecting increased sales activity,
product mix, manufacturing efficiencies and margin improvement.
Interest Expense. Interest expense decreased $1.8 million, or 15.7%, to $9.5
million in the first nine months of 1998 from $11.3 million in the comparable
nine month period of 1997. The decrease is attributable to lower debt levels, a
result of the repayment of debt from the proceeds of the Company's IPO during
the second quarter of 1998 and, to a lesser extent, lower interest rates
incurred by the Company.
Income Taxes. The provision for income taxes increased to $7.0 million in the
first nine months of 1998 from $2.5 million in the comparable period of 1997,
reflecting the increase in pre-tax income. The Company's effective tax rate
during the first nine months of 1998 was 42.5% compared to 43.7% in the
comparable nine month period of 1997.
Income before Extraordinary Items. As a result of the items discussed above,
income before extraordinary items increased $6.2 million, or 190.2%, to $9.5
million for the nine months ended September 30, 1998 from $3.3 million in the
comparable period of 1997.
22
<PAGE> 23
Net Income. Net income increased $3.1 million to $6.4 million, or 95.7%, in the
first nine months of 1998 from $3.3 million in the comparable period of 1997.
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary source of funds for conducting its business activities and
servicing its indebtedness has been cash generated from operations. In addition,
the Company has available $50.0 million under the terms of its revolving credit
facility entered into in May 1998 which may be used for general corporate
purposes or to finance future acquisitions. Net cash from operating activities
was $19.8 million for the nine month period ended September 30, 1998 as compared
to net cash from operating activities of $10.2 million in the comparable period
of 1997. The increase in net income and non-cash charges in addition to an
improved working capital position at September 30, 1998 accounted for the
increased operating cash flow.
Net cash used in investing activities was $23.7 million and $30.7 million for
the nine month periods ended September 30, 1998 and 1997, respectively. The cash
used in investing activities during the nine month period ended September 1998,
consisted of the acquisition of Clearfield, purchase of short term marketable
securities and $11.1 million for the purchases of property, plant and equipment.
In the comparable period of 1997, cash used in investing activities consisted of
the acquisition of Hutchinson and Sinterloy and $4.8 million for the purchases
of property, plant and equipment.
Net cash provided by financing activities was $12.9 million for the nine month
period ended September 30, 1998 received primarily from the proceeds of the
Company's IPO and proceeds from a $35.0 million term loan. These proceeds were
used to retire $69.5 million of outstanding debt. In the comparable nine month
period of 1997, net cash used in financing activities of $1.6 was primarily used
for the payment of debt and dividends.
The primary uses of capital by the Company are (1) to pay interest on, and to
repay principal of, indebtedness, (2) for capital expenditures for maintenance,
replacement and acquisitions of equipment, expansion of capacity, productivity
improvements and product development, and (3) making additional strategic
acquisitions of complementary businesses.
As of September 30, 1998, the Company was in compliance with the terms of its
indebtedness.
The Company believes that cash flow from operating activities, and additional
funds available under the Company's revolving credit facility, will be
sufficient to meet its currently anticipated operating and capital expenditure
requirements and service its indebtedness for the next 12 months.
FORWARD LOOKING STATEMENTS
Statements that are not historical facts, including statements about the
Company's confidence in its prospects and strategies and its expectations about
expansion into new markets and growth in existing markets, are forward-looking
statements that involve risks and uncertainties. These risks and uncertainties
include, but are not limited to (1) the ability of the Company to continue to
meet the terms of the Company's credit documents which contain a number of
significant financial covenants and other restrictions; (2) the Company's
reliance on significant customers; (3) changes in market conditions in the
end-markets served by the Company; (4) supplies and prices of raw materials used
by the Company; (5) the effect of product mix on margins; (6) whether the
Company's aerospace friction products will be able to continue to meet stringent
Federal Aviation Administration criteria and testing requirements; (7) whether
the Company will be able to successfully integrate Clearfield into its
operations; and (8) the Company's continued expansion into international
markets, with all the risks inherent in doing business internationally,
including unexpected changes in regulatory requirements, export restrictions,
23
<PAGE> 24
unexpected changes in regulatory requirements, export restrictions, currency
controls, tariffs and other trade barriers, potential instability, fluctuation
in currency exchange rates and potential adverse tax consequences. Any investor
or potential investor in the Company must consider these risks and others that
are detailed in other filings by the Company with the Securities and Exchange
Commission.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Not applicable.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company is involved in various lawsuits arising in the ordinary course of
business. In the Company's opinion, the outcome of these matters is not
anticipated to have a material adverse effect on the Company's financial
condition, liquidity or results of operations.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
27.1 Financial Data Schedule
(b) Reports on Form 8-K:
None
24
<PAGE> 25
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Date: November 13, 1998 HAWK CORPORATION
By: /s/ RONALD E. WEINBERG
-----------------------
Ronald E. Weinberg,
Chairman of the Executive Committee and Treasurer
By: /s/ THOMAS A. GILBRIDE
-----------------------
Thomas A. Gilbride,
Vice President- Finance (Chief Accounting
Officer)
25
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> SEP-30-1998
<CASH> 13,437
<SECURITIES> 4,000
<RECEIVABLES> 27,880
<ALLOWANCES> 405
<INVENTORY> 24,276
<CURRENT-ASSETS> 73,569
<PP&E> 90,011
<DEPRECIATION> 26,782
<TOTAL-ASSETS> 204,819
<CURRENT-LIABILITIES> 34,751
<BONDS> 97,876
0
1
<COMMON> 92
<OTHER-SE> 63,604
<TOTAL-LIABILITY-AND-EQUITY> 204,819
<SALES> 140,120
<TOTAL-REVENUES> 140,120
<CGS> 94,985
<TOTAL-COSTS> 19,861
<OTHER-EXPENSES> 19
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 9,531
<INCOME-PRETAX> 16,465
<INCOME-TAX> 7,003
<INCOME-CONTINUING> 9,462
<DISCONTINUED> 0
<EXTRAORDINARY> 3,079
<CHANGES> 0
<NET-INCOME> 6,383
<EPS-PRIMARY> .88
<EPS-DILUTED> .82
</TABLE>
