SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
Quarterly Report under Section 13 or 15 (d)
of the Securities Exchange Act of 1934
For the quarterly period ended: September 30, 1999
------------------
Commission File Number: 0-19589
-------
ARGUSS HOLDINGS, INC.
----------------------------------------------------------
(Exact name of Registrant as specified in its Charter)
Delaware 02-0413153
- ------------------------------- -------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation of organization) Identification Number)
One Church Street, Suite 302, Rockville, Maryland 20850
- ------------------------------------------------- -----------------
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code: 301-315-0027
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:
----- -----
As of November 9, 1999, there were 12,668,513 shares of Common Stock, $ .01 par
value per share, outstanding.
<PAGE>
ARGUSS HOLDINGS, INC.
INDEX
Part I - Financial Information: Page
----
Item 1 - Financial Statements
Consolidated Balance Sheets (Unaudited)-
September 30, 1999 and December 31, 1998 3
Consolidated Statements of Operations (Unaudited)-
Three Months and Nine Months Ended September 30, 1999
and September 30, 1998 4
Consolidated Statements of Cash Flows (Unaudited)-
Nine Months Ended September 30, 1999 and September
30, 1998 5
Notes to Consolidated Financial Statements
(Unaudited) 7
Item 2 - Management's Discussion and Analysis of Financial
Condition and Results of Operations 13
Item 3 - Quantitative and Qualitative Disclosures about Market Risk 18
Part II - Other Information 19
Items 1 through 6
Signatures
Exhibits
2
<PAGE>
ARGUSS HOLDINGS, INC.
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
Sept. 30, 1999 Dec. 31, 1998
-------------- -------------
Assets
Current assets:
Cash $ 3,678,000 $ 1,819,000
Restricted cash from customer advances 2,906,000 978,000
Accounts receivable trade, net of allowance
for doubtful accounts of $311,000 and
$265,000 in 1999 and 1998, respectively 37,496,000 35,263,000
Costs and earnings in excess of billings 16,201,000 2,339,000
Inventories 4,149,000 5,657,000
Other current assets 1,825,000 1,399,000
Deferred tax assets 1,844,000 1,844,000
------------ ------------
Total current assets 68,099,000 50,047,000
Property, plant and equipment, net 36,945,000 31,147,000
Goodwill, net 95,486,000 71,728,000
------------ ------------
$200,530,000 $152,922,000
============ ============
Liabilities and Stockholders' Equity
Current liabilities:
Current portion of long-term debt $ 7,315,000 $ 11,429,000
Short-term borrowings 27,070,000 8,038,000
Accounts payable 17,032,000 13,798,000
Billings in excess of costs and earnings -- 748,000
Customer advances 2,391,000 1,380,000
Accrued expenses and other liabilities 13,429,000 7,098,000
Due to former shareholders of acquired companies 11,745,000 18,696,000
------------ ------------
Total current liabilities 78,982,000 61,187,000
------------ ------------
Long-term debt, excluding current portion 21,202,000 23,187,000
Deferred income taxes 3,510,000 3,675,000
------------ ------------
Total liabilities 103,694,000 88,049,000
------------ ------------
Stockholders' equity:
Common stock $.01 par value 119,000 109,000
Additional paid-in capital 77,346,000 61,327,000
Common stock issuable to former USI shareholders 10,909,000 --
Retained earnings 8,462,000 3,437,000
------------ ------------
Total stockholders' equity 96,836,000 64,873,000
------------ ------------
$200,530,000 $152,922,000
============ ============
The accompanying notes are an integral part of these financial statements.
3
<PAGE>
ARGUSS HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
Sept. 30, 1999 Sept. 30, 1998 Sept. 30, 1999 Sept. 30, 1998
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
Net sales $ 53,351,000 $ 45,908,000 $ 142,965,000 $ 104,741,000
Cost of sales, excluding depreciation 39,642,000 34,543,000 107,456,000 78,578,000
------------ ------------ ------------- -------------
Gross profit, excluding depreciation 13,709,000 11,365,000 35,509,000 26,163,000
Selling, general and administrative expenses 3,904,000 3,889,000 11,990,000 11,247,000
Depreciation 2,195,000 1,668,000 6,218,000 4,463,000
Goodwill amortization 1,208,000 687,000 3,212,000 1,992,000
Engineering and development 322,000 362,000 1,006,000 905,000
------------ ------------ ------------- -------------
Operating income 6,080,000 4,759,000 13,083,000 7,556,000
------------ ------------ ------------- -------------
Other income (expense):
Interest income and other 186,000 136,000 380,000 312,000
Interest expense (1,113,000) (827,000) (3,168,000) (2,275,000)
------------ ------------ ------------- -------------
Income before taxes and reversal of
accrued loss on disposition of
discontinued operation 5,153,000 4,068,000 10,295,000 5,593,000
Income tax expense (2,483,000) (1,902,000) (5,267,000) (3,034,000)
------------ ------------ ------------- -------------
Income before reversal of
accrued loss on disposition of
discontinued operation 2,670,000 2,166,000 5,028,000 2,559,000
------------ ------------ ------------- -------------
Reversal of accrued loss on disposition
of discontinued operation,
net of tax expense 182,000 -- -- --
------------ ------------ ------------- -------------
Net income $ 2,852,000 $ 2,166,000 $ 5,028,000 $ 2,559,000
============ ============ ============= =============
Earnings per common share:
- basic $ .24 $ .20 $ .43 $ .24
===== ===== ===== =====
- diluted $ .22 $ .18 $ .39 $ .23
===== ===== ===== =====
Weighted average shares outstanding:
- basic 11,889,000 10,697,000 11,798,000 10,493,000
============ ============ ============= =============
- diluted 13,169,000 12,068,000 12,935,000 11,359,000
============ ============ ============= =============
</TABLE>
The accompanying notes are an integral part of these financial statements.
4
<PAGE>
ARGUSS HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Nine Months Ended
Sept. 30, 1999 Sept. 30, 1998
-------------- --------------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 5,028,000 $ 2,559,000
Adjustments to reconcile net income to net
cash provided by (used in) operating
activities:
Depreciation 6,218,000 4,470,000
Goodwill amortization 3,212,000 1,992,000
Non cash stock compensation -- 1,847,000
Changes in assets and liabilities:
Accounts receivable (994,000) (18,387,000)
Costs and earnings in excess of billings (13,630,000) (7,934,000)
Inventories 1,508,000 (122,000)
Other current assets (367,000) 996,000
Accounts payable 2,886,000 7,763,000
Billings in excess of costs and earnings (748,000) --
Accrued expenses and other liabilities 6,166,000 5,318,000
------------ ------------
Net cash flows provided by (used in)
operating activities 9,279,000 (1,498,000)
------------ ------------
Cash flows from investing activities:
Additions to property, plant and equipment (11,224,000) (10,619,000)
Additional payment to former Schenck
shareholders (7,604,000) --
Purchase of telecom construction companies, net (2,517,000) (17,441,000)
------------ ------------
Net cash used in investing activities (21,345,000) (28,060,000)
------------ ------------
Cash flows from financing activities:
Proceeds from lines of credit 19,709,000 33,015,000
Net repayments of lines of credit (6,887,000) (4,000,000)
Issuance of common stock 1,103,000 921,000
------------ ------------
Net cash provided by financing activities 13,925,000 29,936,000
------------ ------------
Net increase in cash 1,859,000 378,000
------------ ------------
Cash at beginning of period 1,819,000 1,215,000
------------ ------------
Cash at end of period $ 3,678,000 $ 1,593,000
============ ============
</TABLE>
5
<PAGE>
ARGUSS HOLDINGS, INC.
CONSOLIDATED
STATEMENTS OF CASH FLOWS (CONTINUED)
Nine Months Ended
Sept. 30, 1999 Sept. 30, 1998
-------------- --------------
Supplemental disclosures of cash paid for:
Interest $ 2,774,000 $ 2,275,000
Corporate income taxes 1,687,000 923,000
Supplemental disclosure of
investing and financing activities:
Fair value of assets acquired:
Accounts receivable $ 1,154,000 $ 9,513,000
Other current assets 52,000 491,000
Property and equipment 792,000 7,546,000
----------- ------------
Total non cash assets 1,998,000 17,550,000
Liabilities (350,000) (6,437,000)
Long-term debt (111,000) (2,455,000)
----------- ------------
Net non cash assets acquired 1,537,000 8,658,000
Cash acquired -- 1,725,000
----------- ------------
Fair value of net assets acquired 1,537,000 10,383,000
Excess of costs over fair value
of net assets acquired 3,017,000 31,332,000
----------- ------------
Purchase price $ 4,554,000 $ 41,715,000
=========== ============
Common stock issued $ 2,037,000 $ 24,274,000
Cash paid 2,517,000 19,166,000
Cash acquired -- (1,725,000)
----------- ------------
Purchase price $ 4,554,000 $ 41,715,000
=========== ============
NOTE: During the nine months ended September 30, 1999, former Schenck
shareholders received an additional $7.6 million in cash and 777,000 shares of
the Company's common stock in full satisfaction of their additional payments. In
November 1999, former Underground Specialties shareholders will receive an
additional $11.7 million in cash and 758,000 shares of the Company's stock in
full satisfaction of their additional payments.
The accompanying notes are an integral part of these consolidated financial
statements.
6
<PAGE>
ARGUSS HOLDINGS, INC.
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
(UNAUDITED)
A) ORGANIZATION
Prior to May 1997, Arguss Holdings, Inc. (the "Company") operated as a
single entity under the name Conceptronic, Inc. On May 9, 1997, the shareholders
of the Company approved a plan providing for the internal restructuring of the
Company whereby the Company became a holding company and its operating assets
were held by wholly owned operating subsidiaries. Accordingly, on May 9, 1997,
the Company transferred substantially all of its Conceptronic, Inc. operating
assets to a newly formed, wholly owned subsidiary of the Company, and the
Company changed its name to "Arguss Holdings, Inc." The subsidiary then adopted
the name "Conceptronic, Inc." ("Conceptronic"). The Company's other wholly owned
operating subsidiary is Arguss Communications Group, Inc., formerly White
Mountain Cable Construction Corp.
The Company conducts its operations through its wholly owned subsidiaries,
Arguss Communications Group and Conceptronic. Arguss Communications Group is
engaged in the construction, reconstruction, maintenance, repair and expansion
of telecommunications systems, cable television and data systems, including
providing aerial and underground construction and splicing of both fiber optic
and coaxial cable to major telecommunications customers. Arguss Communications
Group operates through its divisions - White Mountain, Can-Am, TCS, Schenck, and
Underground Specialties. Conceptronic manufactures and sells highly advanced,
computer-controlled equipment used in the SMT circuit assembly industry.
During the quarter ended September 30, 1999, plans to sell Conceptronic
were terminated. The Company's decision not to sell the division was based, in
part, on improved order flow, completion of a new oven design, and the hiring of
a new President. Consequently, Conceptronic was reinstated as a continuing
operation. Because the Company believes there has been no impairment on the
carrying value of the net assets of Conceptronic, the estimated loss on the
disposal of discontinued operations was reversed. The reversal of the accrued
loss on the disposal of discontinued operations during the three months ended
September 30, 1999 was $182,000, or $.01 per share. Segment information for
Conceptronic is presented in Note G.
B) BASIS FOR PRESENTATION
As permitted by the rules of the Securities and Exchange Commission (the
"Commission") applicable to quarterly reports on Form 10-Q, these notes are
condensed and do not contain all disclosures required by generally accepted
accounting principles. Reference should be made to the financial statements and
related notes included in the Company's Annual Report on Form 10-K for the year
ended December 31, 1998, filed with the Commission on March 16, 1999.
In the opinion of the Company, the accompanying unaudited financial
statements contain all adjustments considered necessary to present fairly the
financial position of the Company as of September 30, 1999 and the results of
operations and cash flows for the periods presented. The Company prepares its
interim financial information using the same accounting principles as it does
for its annual financial statements.
The Company's telecom construction operations are expected to have
seasonally weaker results in the first and fourth quarters of the year, and may
produce stronger results in the second and third quarters. This seasonality is
primarily due to the effect of winter weather on outside plant activities in the
northern areas served by Arguss Communications Group, as well as reduced
daylight hours and customer budgetary constraints. Certain customers tend to
complete budgeted capital expenditures before the end of the year, and postpone
additional expenditures until the subsequent fiscal period.
Certain amounts in the 1998 financial statements have been reclassified for
comparability with the 1999 presentation.
C) GOODWILL
The Company's policy is to amortize goodwill over its estimated useful life
of twenty years. (See discussion on page 13 and 15 of Management's Discussion
and Analysis of Financial Condition and Results of Operations.)
7
<PAGE>
D) EARNINGS PER SHARE
Basic earnings per common share are computed by dividing net income
available to common stockholders by the weighted average number of common shares
outstanding for the period. Diluted earnings per common share reflect the
maximum dilution that would have resulted from the exercise of stock options and
warrants and contingently issuable shares. Diluted earnings per common share are
computed by dividing net income by the weighted average number of common shares
and all dilutive securities.
<TABLE>
<CAPTION>
For the Three Months Ended
Sept. 30, 1999 Sept. 30, 1998
-------------- --------------
Income Net Income Net
per Share Shares Income per Share Shares Income
--------- ------ ------ --------- ------ ------
<S> <C> <C> <C> <C> <C> <C>
Basic $ .24 11,889,000 $2,852,000 $ .20 10,697,000 $2,166,000
Effect of stock options
and warrants (.01) 522,000 -- (.01) 625,000 --
Effect of estimated
additional shares to be
issued for USI/Schenck
purchase (.01) 758,000 -- (.01) 746,000 --
------- ---------- ---------- ------- ---------- ----------
Diluted $ .22 13,169,000 $2,852,000 $ .18 12,068,000 $2,166,000
======= ========== ========== ======= ========== ==========
</TABLE>
<TABLE>
<CAPTION>
For the Nine Months Ended
Sept. 30, 1999 Sept. 30, 1998
-------------- --------------
Income Net Income Net
per Share Shares Income per Share Shares Income
--------- ------ ------ --------- ------ ------
<S> <C> <C> <C> <C> <C> <C>
Basic $ .43 11,798,000 $5,028,000 $ .24 10,493,000 $2,559,000
Effect of stock options
and warrants (.02) 498,000 -- (.01) 620,000 --
Effect of estimated
additional shares to
be issued for USI/
Schenck purchase (.02) 649,000 -- -- 246,000 --
------- ---------- ---------- ------- ---------- ----------
Diluted $ .39 12,935,000 $5,028,000 $ .23 11,359,000 $2,559,000
======= ========== ========== ======= ========== ==========
</TABLE>
E) CONTRACT ACCOUNTING
The retainage included in accounts receivable, representing amounts
withheld by contract with respect to Arguss Communications Group accounts
receivable, was $3,702,000 and $3,384,000 at September 30, 1999 and December 31,
1998, respectively. The Company expects to collect substantially all the
retainage within one year.
September 30, December 31,
1999 1998
------------- ------------
Costs incurred on uncompleted contracts $80,041,000 $ 41,703,000
Estimated earnings 15,487,000 8,242,000
----------- ------------
95,528,000 49,945,000
Less: Billings to date 79,327,000 47,606,000
----------- ------------
$16,201,000 $ 2,339,000
=========== ============
Included in accompanying balance sheets
under the following captions:
Costs and earnings in excess of billings $16,201,000 $ 3,087,000
Billings in excess of costs and earnings -- (748,000)
----------- ------------
$16,201,000 $ 2,339,000
=========== ============
8
<PAGE>
F) ACQUISITIONS
During the nine months ended September 30, 1999, the Company paid former
Schenck shareholders an additional $7.6 million in cash and 777,000 shares of
the Company's common stock in full satisfaction of their additional payments. In
1998, the Company acquired Underground Specialties. The Underground Specialties
purchase agreement contains provisions for additional payments by the Company to
former Underground Specialties shareholders to be satisfied by the Company's
common stock and cash, if certain adjusted EBITDA thresholds for the year ended
July 31, 1999 are met. Underground Specialties has exceeded the EBITDA
thresholds. The additional payment will aggregate approximately $11.7 million in
cash and 758,000 shares of the Company's common stock. Additional payments
earned under the terms of the agreements are recorded as an increase in
goodwill.
G) SEGMENT INFORMATION
The Company adopted SFAS No. 131, "Disclosures about Segments of an
Enterprise and Related Information" during the fourth quarter of 1998. SFAS No.
131 establishes standards for reporting information about operating segments in
interim financial reports issued to stockholders. It also establishes standards
for related disclosures about products and services and geographic areas.
Operating segments are defined as components of an enterprise about which
separate financial information is available that is evaluated regularly by the
chief operating decision maker, or decision making group, in deciding how to
allocate resources and assessing performance.
The Company's three reportable segments are telecom construction,
manufacturing and other. The telecom construction segment is engaged in the
construction, reconstruction of telecommunications systems, cable television and
data systems, including providing aerial and underground construction and
splicing for both fiber optic and coaxial cable to major telecommunications
customers. Because the construction of a telecom system is a fully integrated
undertaking, the Company does not capture individually each component of the
construction functions performed for revenue reporting purposes. The
manufacturing segment manufactures and sells highly advanced,
computer-controlled equipment used in the SMT circuit assembly industry. The
"Other" column includes the Company's corporate and unallocated expenses.
The Company's reportable segments are organized in separate business units
with different management, technology and services. The respective segments
account for their respective businesses using the same accounting policies used
in the consolidated financial statements. Summarized financial information
concerning the Company's reportable segments net of inter-company transactions
is shown in the following table.
<TABLE>
<CAPTION>
Nine Months Ended
September 30, 1999
------------------
Telecom
Construction Manufacturing Other Total
------------ ------------- ----- -----
<S> <C> <C> <C> <C>
External sales $ 130,802,000 $ 12,163,000 -- $ 142,965,000
Cost of sales, excluding
depreciation 99,302,000 8,154,000 -- 107,456,000
------------- ------------ ------------ -------------
Gross profit, excluding
depreciation 31,500,000 4,009,000 -- 35,509,000
Operating expenses,
excluding depreciation 8,850,000 3,140,000 -- 11,990,000
Goodwill amortization 3,212,000 -- -- 3,212,000
Depreciation 6,059,000 159,000 -- 6,218,000
Engineering and development -- 1,006,000 -- 1,006,000
Interest and other income 380,000 -- -- 380,000
Interest expense (2,997,000) (163,000) (8,000) (3,168,000)
------------- ------------ ------------ -------------
Pretax income (loss) $ 10,762,000 ($ 459,000) ($ 8,000) $ 10,295,000
============= ------------ ------------ =============
Capital expenditures $ 11,095,000 $ 129,000 -- $ 11,224,000
============= ============ ============ =============
Property, plant and equipment, net $ 35,643,000 $ 1,279,000 $ 23,000 $ 36,945,000
============= ============ ============ =============
Total assets $ 185,699,000 $ 9,113,000 $ 5,718,000 $ 200,530,000
============= ============ ============ =============
Total liabilities $ 98,225,000 $ 6,046,000 $ 10,872,000 $ 115,143,000
============= ============ ============ =============
</TABLE>
9
<PAGE>
<TABLE>
<CAPTION>
Nine Months Ended
September 30, 1998
------------------
Telecom
Construction Manufacturing Other Total
------------ ------------- ----- -----
<S> <C> <C> <C> <C>
External sales $ 91,508,000 $ 13,233,000 -- $ 104,741,000
Cost of sales, excluding
depreciation 69,737,000 8,841,000 -- 78,578,000
------------- ------------ ------------ -------------
Gross profit, excluding
depreciation 21,771,000 4,392,000 -- 26,163,000
Operating expenses,
excluding depreciation 5,858,000 3,542,000 -- 9,400,000
Goodwill amortization 1,992,000 -- -- 1,992,000
Non cash stock compensation 1,806,000 -- 41,000 1,847,000
Depreciation 4,299,000 164,000 -- 4,463,000
Engineering and development -- 905,000 -- 905,000
Interest and other income 272,000 9,000 31,000 312,000
Interest expense (2,127,000) (147,000) (1,000) (2,275,000)
------------- ------------ ------------ -------------
Pretax income (loss) $ 5,961,000 ($ 357,000) ($ 11,000) $ 5,593,000
============= ============ ============ =============
Capital expenditures $ 10,943,000 $ 106,000 -- $ 11,049,000
============= ============ ============ =============
Property, plant and equipment, net $ 25,885,000 $ 1,318,000 $ 31,000 $ 27,234,000
============= ============ ============ =============
Total assets $ 127,853,000 $ 9,155,000 $ 842,000 $ 137,850,000
============= ============ ============ =============
Total liabilities $ 66,565,000 $ 4,149,000 $ 3,939,000 $ 74,653,000
============= ============ ============ =============
</TABLE>
<TABLE>
<CAPTION>
Three Months Ended
September 30, 1999
------------------
Telecom
Construction Manufacturing Other Total
------------ ------------- ----- -----
<S> <C> <C> <C> <C>
External sales $ 49,139,000 $ 4,212,000 -- $ 53,351,000
Cost of sales, excluding
depreciation 36,784,000 2,858,000 -- 39,642,000
------------- ------------ ------------ -------------
Gross profit, excluding
depreciation 12,355,000 1,354,000 1,000 13,709,000
Operating expenses,
excluding depreciation 2,833,000 1,070,000 -- 3,904,000
Goodwill amortization 1,208,000 -- -- 1,208,000
Depreciation 2,142,000 53,000 -- 2,195,000
Engineering and development -- 322,000 -- 322,000
Interest and other income 186,000 -- -- 186,000
Interest expense (1,050,000) (63,000) -- (1,113,000)
------------- ------------ ------------ -------------
Pretax income (loss) $ 5,308,000 ($ 154,000) ($ 1,000) $ 5,153,000
============= ------------ ============ =============
Capital expenditures $ 2,804,000 $ 18,000 -- $ 2,822,000
============= ============ ============ =============
Property, plant and equipment, net $ 35,643,000 $ 1,279,000 $ 23,000 $ 36,945,000
============= ============ ============ =============
Total assets $ 185,699,000 $ 9,113,000 $ 5,718,000 $ 200,530,000
============= ============ ============ =============
Total liabilities $ 98,225,000 $ 6,046,000 $ 10,872,000 $ 115,143,000
============= ============ ============ =============
</TABLE>
10
<PAGE>
<TABLE>
<CAPTION>
Three Months Ended
September 30, 1998
------------------
Telecom
Construction Manufacturing Other Total
------------ ------------- ----- -----
<S> <C> <C> <C> <C>
External sales $ 42,452,000 $ 3,456,000 -- $ 45,908,000
Cost of sales, excluding
depreciation 32,219,000 2,324,000 -- 34,543,000
------------- ------------ ------------ -------------
Gross profit, excluding
depreciation 10,233,000 1,132,000 -- 11,365,000
Operating expenses,
excluding depreciation 2,090,000 1,055,000 -- 3,145,000
Goodwill amortization 687,000 -- -- 687,000
Non cash stock compensation 742,000 -- 2,000 744,000
Depreciation 1,613,000 55,000 -- 1,668,000
Engineering and development -- 362,000 -- 362,000
Interest and other income 114,000 8,000 14,000 136,000
Interest expense (772,000) (54,000) (1,000) (827,000)
------------- ------------ ------------ -------------
Pretax income (loss) $ 4,443,000 $ (386,000) $ 11,000 $ 4,068,000
============= ============ ============ =============
Capital expenditures $ 3,523,000 $ 64,000 -- $ 3,587,000
============= ============ ============ =============
Property, plant and equipment, net $ 25,885,000 $ 1,318,000 $ 31,000 $ 27,234,000
============= ============ ============ =============
Total assets $ 127,853,000 $ 9,155,000 $ 842,000 $ 137,850,000
============= ============ ============ =============
Total liabilities $ 66,565,000 $ 4,149,000 $ 3,939,000 $ 74,653,000
============= ============ ============ =============
</TABLE>
H) BANK FINANCING
In March 1999, the Company increased its availability under credit
facilities with banks. The Company expanded the credit facility to $100 million
from approximately $50 million, and increased the number of banks participating
to six money center and regional banks. The Company pledged the capital stock of
its wholly owned subsidiaries and the majority of the Company's assets to secure
the credit facility. The Company intends to use the credit facility to provide
working capital to finance acquisitions and the purchase of capital assets and
for other corporate purposes. The credit facility has a $70 million revolving
credit feature, as well as a $30 million amortizing five-year term facility.
Amounts borrowed under the credit facility will bear interest as a relationship
to the London Interbank Offered Rate ("LIBOR"), plus 1.25% to 2.25% as
determined by the ratio of the Company's total funded debt to EBITDA. The
Company incurs commitment fees of .25% to .50% as determined by the ratio of the
Company's total funded debt to EBITDA on any unused borrowing capacity under the
credit facility.
In the ordinary course of business, the Company is exposed to floating
interest rate risk. In March 1999, the Company terminated interest rate swaps
entered into as a hedge against variable term loan interest rate risk. The
aggregate loss of approximately $330,000 on termination of the interest rate
swaps is being amortized over the remaining life of the related term loan which
was hedged.
11
<PAGE>
To hedge the variable term loan interest rate risk for $30 million in
notional amount, five-year, term financing facility, the Company has entered
into an interest rate swap pursuant to which it pays fixed interest rates and
receives variable interest rates on the same notional amount. During the nine
months ended September 30, 1999, the Company's payment under the interest rate
swap aggregated approximately $70,000. The Company had no receipts pursuant to
the interest rate swap.
I) RELATED-PARTY TRANSACTIONS
During the nine months ended September 30, 1999, the Company acquired
offices and equipment maintenance facilities from the former owners of Can-Am
and Schenck, who are significant shareholders in Arguss, as well as employees of
Arguss Communications Group. The aggregate purchase price was $2,608,000, and
was negotiated based on independent, third party appraisals.
12
<PAGE>
ARGUSS HOLDINGS, INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RESULTS OF OPERATIONS
Prior to May 1997, Arguss Holdings, Inc. (the "Company") operated as a
single entity under the name Conceptronic, Inc. On May 9, 1997, the shareholders
of the Company approved a plan providing for the internal restructuring of the
Company whereby the Company became a holding company and its operating assets
were held by wholly owned operating subsidiaries. Accordingly, on May 9, 1997,
the Company transferred substantially all of its Conceptronic, Inc. operating
assets to a newly formed, wholly owned subsidiary of the Company, and the
Company changed its name to "Arguss Holdings, Inc." The subsidiary then adopted
the name "Conceptronic, Inc." ("Conceptronic"). The Company's other wholly owned
operating subsidiary is Arguss Communications Group, formerly White Mountain
Cable Construction Corp. Arguss Communications Group operates through its
divisions - White Mountain, Can-Am, TCS, Schenck, and Underground Specialties.
The Company conducts its operations through its wholly owned subsidiaries,
Arguss Communications Group and Conceptronic. Arguss Communications Group is
engaged in the construction, reconstruction, maintenance, repair and expansion
of telecommunications systems, cable television and data systems, including
providing aerial and underground construction and splicing of both fiber optic
and coaxial cable to major telecommunications customers. Conceptronic
manufactures and sells highly advanced, computer-controlled equipment used in
the Surface Mount Technology circuit assembly industry.
During the quarter ended September 30, 1999, plans to sell Conceptronic
were terminated. The Company's decision not to sell the division was based, in
part, on improved order flow, completion of a new oven design, and the hiring of
a new President. Consequently, Conceptronic was reinstated as a continuing
operation. Because the Company believes there has been no impairment on the
carrying value of the net assets of Conceptronic, the estimated loss on the
disposal of discontinued operations was reversed. The reversal of the accrued
loss on the disposal of discontinued operations during the three months ended
September 30, 1999 was $182,000, or $.01 per share. Segment information for
Conceptronic is presented in Note G.
The Company uses an amortization period of twenty years with respect to the
amortization of its goodwill. Management believes that the Company's goodwill
amortization policy results in a better measure of financial performance than
the amortization period of forty years used by its competitors. Had the Company
adopted a forty year useful life for amortization of goodwill, its net income
for the three months and nine months ended September 30, 1999 would have
increased by $604,000 and $1,606,000, respectively. Diluted earnings per share
would have increased by $.05 per share and $.12 per share for the three months
and nine months ended September 30, 1999. Consequently, net income for the three
months and nine months ended September 30, 1999 would have been $3,456,000 and
$6,634,000, respectively and diluted earnings per share would have been $.26 per
share and $.51 per share for the three months and nine months ended September
30, 1999.
THREE MONTHS ENDED SEPTEMBER 30, 1999, COMPARED TO THREE MONTHS ENDED
SEPTEMBER 30, 1998
The Company had consolidated earnings before interest, taxes, depreciation
and amortization adjusted for non cash stock compensation (EBITDA) of $9,851,000
for the three months ended September 30, 1999, compared to $7,992,000 for the
same period one year ago. For the three months ended September 30, 1999, EBITDA,
as a percentage of consolidated net sales (EBITDA margin), was 18.5%, compared
to 17.4% for the comparable period in 1998. Arguss Communications Group had
EBITDA of $9,600,000 for the three months ended September 30, 1999, compared to
$8,257,000 for the same period in 1999. Arguss Communications Group achieved an
EBITDA margin of 19.5% for the three months ended September 30, 1999 and 1998.
Arguss Communications Group's strong EBITDA margin performance was combined with
continued strong revenue growth and improved gross margin results as discussed
below.
The Company had consolidated net income of $2,852,000 for the three months
ended September 30, 1999, compared to net income of $2,166,000 for the three
months ended September 30, 1998. The Company's results were favorably impacted
by the maturation of projects started during 1998 in Orlando, FL, Portland, OR
and Denver CO and the positive operating results of White Mountain.
13
<PAGE>
Consolidated net sales for the three months ended September 30, 1999 were
approximately $53,351,000, compared to approximately $45,908,000 for the three
months ended September 30, 1998, an increase of 16% due, in part, to the
acquisition of Underground Specialties. Operations owned for at least one year
had a net sales increase of $4,794,000 or 10% for the three months ended
September 30, 1999.
Consolidated gross profit margin, excluding depreciation, was 26% of sales
for the three months ended September 30, 1999, compared to 25% for the three
months ended September 30, 1998. The improvement in margins is due primarily to
Can-Am, whose Portland, OR project and other regional TCI projects achieved
greater sales volume and margins for the three months ended September 30, 1999.
The improvements in margins was offset, in part, by reduced levels of
construction activity in Alaska, customer delays in the roll-out of projects in
San Jose and the impact of lower margins on a certain long-haul project in
Oregon.
Consolidated selling, general and administrative expenses for the three
months ended September 30, 1999 were $3,904,000 or 7.3% of net sales, compared
to $3,889,000 or 8.5% of net sales for the three months ended September 30,
1998. Arguss Communications Group experienced reduced selling, general and
administrative expenses as a percentage of net sales because for the three
months ended September 30, 1998 the Company had $742,000 of non cash stock
compensation, compared to none in the comparable period ended September 30,
1999.
Depreciation expense increased to $2,195,000 for the three months ended
September 30, 1999, compared to $1,668,000 for the three months ended September
30, 1998 due primarily to Arguss Communications Group which made significant
equipment acquisitions during calendar year 1998, and during the nine months
ended September 30, 1999. The equipment is depreciated over sixty months.
Goodwill amortization, which is calculated using a twenty-year amortization
period, increased to $1,208,000 from $687,000 from the comparable period one
year ago due to Schenck, whose former shareholders realized an additional
payment of $18,696,000 in cash and stock in full satisfaction of their
additional payment. The additional payment earned under the terms of Schenck
purchase agreement was recorded as an increase in goodwill. The increased
goodwill is amortized over the remaining nineteen-year amortization period,
which increased goodwill amortization during the three months ended September
30, 1999 by $246,000. The Company also recorded $22,650,000 in additional
goodwill during the three months ended September 30, 1999 related to the
additional payment due former Underground Specialties shareholders. This
increased goodwill is amortized over the remaining nineteen-year amortization
period.
Interest expense for the three months ended September 30, 1999 was
$1,113,000, compared to $827,000 for the comparable period in 1998. The Arguss
Communications Group interest expense increased for the three months ended
September 30, 1999, due to the purchase of Underground Specialties which was
partially financed through bank lines of credit, due to the additional payment
of $7.6 million to former Schenck shareholders and due to increased use of
financing lines for the capital assets purchases in support of Arguss
Communications Group's revenue growth. (See discussion of expanded bank credit
facilities in LIQUIDITY AND CAPITAL RESOURCES.)
Income tax expense was $2,483,000 for the three months ended September 30,
1999, compared to $1,902,000 in income tax expense for the three months ended
September 30, 1998. The effective income tax rate was 48% and 47% for the three
months ended September 30, 1999 and 1998, respectively. Goodwill amortization,
which is nondeductible for income tax purposes, impacts the effective income tax
rate creating an unusual relationship of the expected effective tax rate to
pretax income or loss. During the three months ended September 30, 1999, the
Company utilized a 39% effective income tax rate prior to giving effect to the
impact of nondeductible goodwill amortization on pretax income, compared to a
40% estimated tax rate in the comparable period of one year ago.
NINE MONTHS ENDED SEPTEMBER 30, 1999, COMPARED TO NINE MONTHS ENDED
SEPTEMBER 30, 1998
The Company had EBITDA of $22,893,000 for the nine months ended September
30, 1999, compared to $16,170,000 for the same period in 1998. For the nine
months ended September 30, 1999 and 1998, EBITDA margin was 16.0% and 15.4%,
respectively. Arguss Communications Group increased its EBITDA to $23,103,000
for the nine months ended September 30, 1999 from $16,185,000 in the same period
one year ago. Arguss Communications Group's EBITDA margin was 17.7% for the nine
months ended September 30, 1999 and 1998, respectively. Arguss Communications
Group's strong EBITDA margin performance was combined with continued strong
revenue growth and consistent gross margin results as discussed below.
14
<PAGE>
The Company had consolidated net income of approximately $5,028,000 for the
nine months ended September 30, 1999, compared to net income of $2,559,000 for
the nine months ended September 30, 1998. The Company's results were favorably
impacted by the maturation of projects started during 1998 in Orlando, FL,
Portland, OR and Denver, CO and positive operating results achieved by
Underground Specialties, owned for the entire period in 1999, which offset the
decline in Alaska construction activity.
Consolidated net sales for the nine months ended September 30, 1999 were
approximately $142,965,000, compared to approximately $104,741,000 for the
comparable period in 1998, an increase of 36% due primarily to the acquisition
of Underground Specialties, which accounted for $29,511,000 or 21% of the net
sales for the nine months ended September 30, 1998. Operations owned for at
least one year had a net sales increase of $15,844,000 or 15% for the nine
months ended September 30, 1999.
Consolidated gross profit margin, excluding depreciation, was 25% of sales
for the nine months ended September 30, 1999 and 1998. Improved margins at
Arguss Communications Group from its long-haul operations and aforementioned
maturing projects were offset by lower levels of construction activity in
Alaska.
Consolidated selling, general and administrative expenses for the nine
months ended September 30, 1999 were $11,990,000 or 8.4% of net sales, compared
to $11,247,000 or 10.7% of net sales for the comparable period in 1998. The
Company experienced reduced selling, general and administrative expenses as a
percentage of net sales because in the nine months ended September 30, 1998,
Arguss Communications Group had $1,847,000 in non cash stock compensation,
compared to none for the nine months ended September 30, 1999. Arguss
Communications Group has maintained control of administrative costs as a
percentage of consolidated net sales as sales volumes have increased.
Depreciation expense increased to $6,218,000 for the nine months ended
September 30, 1999, compared to $4,463,000 for the nine months ended September
30, 1998 due primarily to Arguss Communications Group, which made significant
equipment acquisitions during the calendar year 1998 and during the nine months
ended September 30, 1999. The capital assets are depreciated over sixty months.
Goodwill amortization, which is calculated using a twenty-year amortization
period, increased to $3,212,000 from $1,992,000 in the comparable period one
year ago due to the acquisition of Underground Specialties, the additional
payment to Schenck, and the additional payment due to former Underground
Specialties shareholders.
Interest expense for the nine months ended September 30, 1999 was
$3,168,000, compared to $2,275,000 for the comparable period in 1998. Interest
expense increased due to the acquisition of Underground Specialties, whose
purchase was partially financed through bank financing, due to the additional
payment of $7.6 million to former Schenck shareholders, and due to equipment
financing lines for the above expanded capital assets acquisition program. (See
discussion of expanded bank credit facilities in LIQUIDITY AND CAPITAL
RESOURCES.)
Income tax expense increased to $5,267,000 for the nine months ended
September 30, 1999 from $3,034,000 in the comparable period one-year ago. The
effective income tax rate was 51% and 54% for the nine months ended September
30, 1999 and 1998, respectively. Goodwill amortization, which is non-deductible
for income tax purposes, impacts the effective income tax rate creating an
unusual relationship of the expected effective tax rate to pretax income or
loss. During the nine months ended September 30, 1999, the Company utilized a
39% effective income tax rate prior to giving effect to the impact of
nondeductible goodwill amortization on pretax income, compared to a 40%
effective tax rate in the comparable period one year ago.
LIQUIDITY AND CAPITAL RESOURCES
Effective August 1, 1998, the Company acquired Underground Specialties. The
Underground Specialties purchase agreement contains provisions for additional
payments by the Company to former Underground Specialties shareholders to be
satisfied by the Company's common stock and cash, if certain adjusted EBITDA
thresholds for the year ended July 31, 1999 are met. Underground Specialties has
exceeded its EBITDA thresholds at July 31, 1999. Former Underground Specialties
shareholders will receive an additional $11.7 million in cash and 758,000 shares
of the Company's stock in full satisfaction of their additional payment. The
Company accrued $11,745,000 as a liability at September 30, 1999 for the cash
portion payable. The Company has recorded $10,909,000 of common stock issuable
at September 30, 1999 to reflect the 758,000 shares which will be issued. The
cash portion will be paid in November of 1999 and funded by the revolving line
of credit. Additional payments earned under the terms of the agreements are
recorded as an increase in goodwill.
15
<PAGE>
During the nine months ended September 30, 1999, former Schenck
shareholders received an additional $7.6 million in cash and 777,000 shares of
the Company's common stock in full satisfaction of their additional payments.
The Company funded the payment using its lines of credit.
Consolidated net cash provided by operating activities for the nine months
ended September 30, 1999 was $9,279,000, compared to a use of cash of $1,498,000
for the nine months ended September 30, 1998. The increase in cash provided by
operating activities is due primarily to the increase in net income, as well as
a reduction in the rate of the growth in contract receivables when compared to
the same period one year ago. (Contract receivables include accounts receivable
and costs and earnings in excess of billings). Net cash used for investing
activities for the nine months ended September 30, 1999 was $21,345,000,
compared to $28,060,000 in the comparable period of 1998. The decrease in
investing activities is primarily due to the acquisition of Longnecker for
$1,835,000 in cash in 1999, compared with the acquisitions of Can-Am, Schenck
and Underground Specialties for $17,441,000 in cash during the nine months ended
September 30, 1998. The Company expended $7,604,000 in 1999 for the additional
payment due to former Schenck shareholders. Net cash flows provided by financing
activities was $13,925,000 for the nine months ended September 30, 1999,
compared to net cash flows provided by financing activities of $29,936,000 for
the same period in 1998. The decrease in net cash flows from financing
activities reflects the impact of the acquisition of Can-Am, Schenck and
Underground Specialties in 1998 whose cash amount exceeded the aggregate cash
expended to purchase Longnecker, and to make the additional payment to former
Schenck shareholders in 1999.
In March 1999 the Company increased its availability under credit
facilities with banks. The Company expanded the credit facility to $100 million
from approximately $50 million, and increased the number of banks participating
to six money center and regional banks. The Company pledged the capital stock of
its wholly owned subsidiaries and the majority of the Company's assets to secure
the credit facility. The Company will utilize the credit facility to provide
working capital, to finance acquisitions, to purchase equipment, and to fund
other corporate activities. The credit facility has a $70 million revolving
credit line, as well as a $30 million decreasing five-year term financing
facility. Amounts borrowed under the credit facility will bear interest as a
relationship to the London Interbank Offered Rate ("LIBOR"), plus 1.25% to 2.25%
as determined by the Company's ratio of funded debt to EBITDA. The Company
incurs commitment fees of .25% to .50% as determined by the ratio of the
Company's total funded debt to EBITDA on any unused borrowing capacity under the
credit facility.
The Company had $70 million in revolving lines of credit with commercial
banks of which $27,000,000 was drawn down as of September 30, 1999 to fund the
additional payment to former Schenck shareholders, the purchase of Longnecker,
capital equipment purchases and working capital. In the ordinary course of
business, the Company is exposed to variable interest rate risk. To hedge the
variable term loan interest rate risk for $30 million in notional amount,
five-year term, financing facility, the Company has entered into an interest
rate swap pursuant to which it pays a fixed interest rate and receives a
variable interest rate on the same notional amount. During the nine months ended
September 30, 1999, the Company's payment under interest rate swap aggregated
approximately $70,000. The Company had no receipts pursuant to the interest rate
swap. In March 1999, the Company terminated interest rate swaps entered into as
a hedge against variable-term loan interest rate risk. The aggregate loss of
approximately $330,000 on termination of the interest rate swaps is being
amortized over the remaining life of the related term loan which was hedged.
The Company continues to actively pursue acquisitions in the telecom
construction and other industries. In the event that one or more satisfactory
acquisition candidates are identified, the Company may seek to expand its
existing credit facilities or issue additional equity or subordinated debt.
The Company believes it has sufficient cash flow from operations, cash on
hand and availability under its credit line to meet its liquidity needs.
The Company's telecom construction operations are expected to have
seasonally weaker results in the first and fourth quarters of the year, and may
produce stronger results in the second and third quarters. This seasonality is
primarily due to the effect of winter weather on outside plant activities in the
northern areas served by Arguss Communications Group, as well as reduced
daylight hours and customer budgetary constraints. Certain customers tend to
complete budgeted capital expenditures before the end of the year, and are slow
to return to expected production levels in the first quarter of the subsequent
fiscal period.
16
<PAGE>
YEAR 2000 DATE CONVERSION
The Year 2000 issue relates to the inability of certain computer software
programs to properly recognize and process date-sensitive information relative
to the year 2000 and beyond. Without corrective measures, this issue could cause
computer applications to fail or to create erroneous results. Incomplete or
untimely resolution of the Year 2000 issue by the Company or by its key vendors,
customers, suppliers or by other third parties could have a materially adverse
impact on the Company's business, operations or financial condition in the
future.
During 1998, Arguss Communications Group commenced the upgrading of its
business information systems through common integrated computer and software
systems throughout Arguss Communications Group. As a by-product of the
implementation of the new integrated business reporting system, Arguss
Communications Group remediated Year 2000 compliance issues at certain of its
divisions. All Arguss Communications Group divisions are operating on the new
integrated business system as of September 30, 1999.
In conjunction with its review of its Year 2000 compliance issues, the
Company has conducted an inventory of its information technology ("IT") and
manufacturing and telecom construction systems ("non-IT"), as well as its
telecommunications systems. Arguss Communications Group has addressed its Year
2000 compliance issue for IT, non-IT and telecommunications systems. The total
cost with respect to systems and other modifications to Company IT, non-IT and
telecommunications systems did not exceed $300,000, more than one-half of which
was expended in 1998. The Company expended less than $100,000 on Year 2000
remediation during the nine months ended September 30, 1999.
The Company has also identified and prioritized critical suppliers and
customers and communicated with them about their plans and progress in
addressing the Year 2000 problem. Detailed evaluations of the most critical
third parties have been completed. Contingency plans were developed in the first
quarter of 1999 in response to the detailed evaluations.
The Company has completed all phases of its Year 2000 Project. The Company
currently believes that the Year 2000 issue should not pose significant
operational problems to the Company. There can be no assurance, however, that
the systems of other parties upon which the Company's business relies,
including, but not limited to, the Company's key vendors, customers, suppliers
and other third parties will be converted on a timely basis. If the systems and
applications of key third parties are materially impacted by the Year 2000
issue, the Company could lose certain of its abilities to efficiently engage in
normal business activities which could have a material adverse effect on the
Company's business, financial condition or results of operations. Although some
business disruption in the Company's business may possibly occur as a result of
Year 2000 failures by third parties, the Company does not believe that such
disruption would have a materially adverse effect on its operations. Contingency
plans were developed in the first quarter of 1999 in response to the Company's
evaluation of Year 2000 business exposures. The Company believes that, with the
implementation of new business systems and contingency planning with respect to
key vendors and customers, as well as the expansion of its bank credit
facilities, the possibility of significant business interruptions of normal
operations should be reduced.
The Company believes that the most reasonably likely worst case scenario
which could occur with respect to Year 2000 is a delay in receiving payments on
accounts receivable from customers. In March 1999, the Company expanded its
available liquidity through expanded bank financing facilities. The Company
believes that such expanded financing should mitigate the cash flow impact of
delays in collections of amounts due from customers.
In addition to its internal systems and external supplier and customer
relationships, the Company has exposure to Year 2000 compliance issues with
respect to potential acquisitions. The Company includes Year 2000 compliance in
its evaluation of acquisition candidates, as well as in its due diligence in
progress. At September 30, 1999, the Company had one acquisition in progress.
Upon preliminary review, the Company does not expect significant Year 2000
compliance problems with respect to this acquisition.
FORWARD LOOKING STATEMENTS
Statements made in the quarterly report that are not historical or current
facts are "forward-looking statements" made pursuant to the safe harbor
provisions of the Private Securities Litigation Reform Act of 1995. Investors
are cautioned that actual results may differ substantially from such
forward-looking statements. Forward looking statements may be subject to certain
risks and uncertainties, including - but not limited to - continued acceptance
of the Company's products and services in the marketplace, uncertainties
surrounding new acquisitions, floating rate debt, risks of the construction
industry, including weather and an inability to plan and schedule activity
levels, doing business overseas and risks inherent in concentration of business
in certain customers. All of these risks are detailed from time to time in the
Company's filings with the Securities and Exchange Commission. Accordingly, the
actual results of the Company could differ materially from such forward-looking
statements.
17
<PAGE>
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
In the ordinary course of business, the Company is exposed to interest rate
risk. To reduce variable term loan interest rate risk, the Company has entered
into an interest rate swap in the same notional amount as its related term loan
debt with the same interest rate relationship base to LIBOR as that of the
Company's floating rate debt, and for the same term as the variable rate debt.
At September 30, 1999, the Company's variable rate term loan of $26,500,000 in
notional amount and maturing in more than 180 days was hedged through an
interest rate swap pursuant to which Arguss pays a weighted fixed interest rate
of 5.78%. The Company continues to be exposed to variable-term loan interest for
the bank's applicable margins ranging from 1.25% to 2.25% as determined by the
ratio of the Company's total funded debt to EBITDA.
Interest rate swaps are entered into as a hedge of underlying debt
instruments to effectively change the characteristics of the interest rate
without actually changing the debt instrument. For fixed rate debt, interest
rate changes affect the fair value, but do not impact earnings or cash flow.
Conversely, for floating rate debt, interest rate changes generally do not
affect the fair market value, but do impact future earnings and cash flow. A one
percentage point decrease in interest rates would decrease the fair value of
interest rate swaps by approximately $270,000. The earnings and cash flow impact
for the next year resulting from a one percentage point increase interest rates
would be neutral because of the cash flow received from the swaps. All of the
principal of the variable rate debt subject to the interest rate swap would be
repaid over the next five years thereby diminishing the impact of market
valuations on hedges.
18
<PAGE>
ARGUSS HOLDINGS, INC.
PART II
Other Information
Items 1, 2, 3, 4, 5 and 6: Not Applicable.
(a) 27 Financial Data Schedule
(b) Reports on Form 8-K
None.
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.
Arguss Holdings, Inc.
November 9, 1999 By: /s/ Rainer H. Bosselmann
-----------------------------------
Rainer H. Bosselmann
Chief Executive Officer
November 9, 1999 By: /s/ Arthur F. Trudel
-----------------------------------
Arthur F. Trudel
Principal Financial Officer and
Principal Accounting Officer
19
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM SECURITIES
AND EXCHANGE COMMISSION FORM 10-Q FOR THE QUARTER ENDED SEPTEMBER 30, 1999, AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> SEP-30-1999
<CASH> $3,678,000
<SECURITIES> 0
<RECEIVABLES> 37,496,000
<ALLOWANCES> 0
<INVENTORY> 4,149,000
<CURRENT-ASSETS> 68,099,000
<PP&E> 36,945,000
<DEPRECIATION> 0
<TOTAL-ASSETS> 200,530,000
<CURRENT-LIABILITIES> 78,982,000
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<COMMON> 77,346,000
<OTHER-SE> 8,462,000
<TOTAL-LIABILITY-AND-EQUITY> 200,530,000
<SALES> 53,351,000
<TOTAL-REVENUES> 53,351,000
<CGS> 39,642,000
<TOTAL-COSTS> 39,642,000
<OTHER-EXPENSES> 3,904,000
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<INTEREST-EXPENSE> 1,113,000
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