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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-Q
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
--- THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1997
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OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
--- OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
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Commission file number 000-22298
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Scientific Games Holdings Corp.
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(Exact name of registrant as specified in its charter)
Delaware 58-1943521
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(State or other jurisdiction of (IRS identification no.)
employer)
1500 Bluegrass Lakes Parkway, Alpharetta, Georgia 30201
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(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code (770) 664-3700
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Former name, former address and former fiscal year, if changed since
last report.
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Indicate by check X whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
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APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
Indicate by check X whether the registrant has filed all documents and
reports required to be filed by Section 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court.
Yes No
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APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date: 11,870,712 shares of
Common Stock, $.001 par value per share, as of July 29, 1997.
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PART I - FINANCIAL INFORMATION
<TABLE>
<CAPTION>
Page No.
--------
<S> <C> <C>
Item 1. Consolidated Condensed Financial Statements
Consolidated Condensed Balance Sheets
June 30, 1997 and December 31, 1996..................4
Consolidated Condensed Statements of Operations
Three-month period ended June 30, 1997
and June 30, 1996
Six-month period ended June 30, 1997
and June 30, 1996....................................5
Consolidated Condensed Statements of Cash Flows
Six-month period ended June 30, 1997
and June 30, 1996....................................6
Notes to Consolidated Condensed Financial Statements..........7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.................10
PART II - OTHER INFORMATION
Item 1. Legal Proceedings............................................16
Item 2. Changes in Securities........................................16
Item 6. Exhibits and Reports on Form 8-K.............................16
</TABLE>
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PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
SCIENTIFIC GAMES HOLDINGS CORP.
CONSOLIDATED CONDENSED BALANCE SHEETS
(In thousands except share data)
<TABLE>
<CAPTION>
June 30, December 31,
1997 1996
--------- -----------
ASSETS (unaudited) (1)
<S> <C> <C>
Current assets:
Cash and cash equivalents .................................. $ 6,395 $ 6,252
Trade receivable ........................................... 29,036 27,045
Inventories ................................................ 11,467 11,290
Prepaid expenses and other current assets .................. 2,759 1,547
Deferred income tax benefit ................................ 2,854 1,254
--------- ---------
Total current assets ......................................... 52,511 47,388
Property and equipment, at cost:
Land ....................................................... 2,521 2,521
Buildings .................................................. 11,662 11,719
Production and other equipment ............................. 77,013 69,806
Construction-in-Progress ................................... 6,012 994
--------- ---------
97,208 85,040
Less accumulated depreciation and amortization ............. 40,281 33,029
--------- ---------
56,927 52,011
Goodwill ..................................................... 33,654 23,921
Other assets ................................................. 7,263 4,209
--------- ---------
$ 150,355 $ 127,529
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable ........................................... $ 8,285 $ 8,280
Accrued liabilities ........................................ 21,185 14,319
Income taxes payable ....................................... 5,222 2,854
--------- ---------
Total current liabilities .................................... 34,691 25,453
Credit facility .............................................. 17,588 3,984
Other long-term liabilities .................................. 809 745
Deferred income taxes payable ................................ 4,374 3,558
Stockholders' equity:
Common stock par value $.001 per share:
shares authorized: 25,750,000;
issued and outstanding shares: 12,143,909 at June 30, 1997
and 12,158,362 at December 31, 1996 ...................... 12 12
Additional paid-in capital.................................. 57,171 56,486
Retained earnings .......................................... 34,985 36,671
--------- ---------
92,168 93,169
Less notes receivable from officers for the sale
of common stock .......................................... (71) (71)
Cumulative foreign currency translation adjustment ......... 796 691
--------- ---------
Total stockholders' equity ................................... 92,893 93,789
--------- ---------
$ 150,355 $ 127,529
========= =========
</TABLE>
(1) Derived from audited financial statements
See accompanying notes.
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SCIENTIFIC GAMES HOLDINGS CORP.
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(In Thousands except per share data)
(Unaudited)
<TABLE>
<CAPTION>
Three-month period Six-month period
ended June 30, ended June 30,
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenues .......................... $ 50,511 $37,562 $ 96,123 $64,153
Cost of revenues excluding
depreciation and amortization ... 30,983 21,790 59,632 39,949
------ ------ ------ ------
19,528 15,772 36,491 24,204
S, G & A expenses excluding
depreciation and amortization .... 6,539 4,580 11,848 8,559
------ ------ ------ ------
12,989 11,192 24,643 15,645
Depreciation and amortization ..... 3,117 2,215 5,707 4,370
------ ------ ------ ------
9,872 8,977 18,936 11,275
In-process R&D write-off .......... 10,102 0 10,102 0
Pull-tab product line write-off ... 4,000 0 4,000 0
------ ------ ------ ------
(4,230) 8,977 4,834 11,275
Interest income ................... 141 326 214 580
Gain/(Loss) on foreign currency ... (23) 412 128 396
Interest expense .................. 221 14 272 31
------ ------ ------ ------
Earnings (loss) before income taxes (4,333) 9,701 4,904 12,220
Income tax expense (benefit) ...... 2,320 3,892 6,070 4,900
------ ------ ------ ------
Net earnings (loss) ............... $ (6,653) $ 5,809 $ (1,166) $ 7,320
====== ====== ====== ======
Earnings (loss) per common share .. $ (0.53) $ 0.42 $ (0.09) $ 0.53
====== ====== ====== ======
Weighted average number of
common and common equivalent
shares outstanding .............. 12,563 13,725 12,580 13,734
====== ====== ====== ======
</TABLE>
See accompanying notes.
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SCIENTIFIC GAMES HOLDINGS CORP.
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(In Thousands)
(unaudited)
<TABLE>
<CAPTION>
Six-month period
ended June 30,
1997 1996
---- ----
<S> <C> <C>
Operating activities
Net earnings(loss) ................................ $ (1,166) $ 7,320
Adjustments to reconcile net earnings to net
cash provided by operating activities:
Depreciation .................................... 4,766 4,205
Amortization of intangibles ..................... 941 165
Gain on disposal of property and equipment ...... (63) 5
Stock compensation expense ...................... 654 1,065
Other ........................................... 311 0
Deferred taxes .................................. (3,560) 0
Changes in operating assets and liabilities:
Accounts receivable ................. 4,040 (2,208)
Inventories ......................... 2,338 (894)
Prepaid expenses and other assets ... 8,805 (74)
Accounts payable .................... (4,085) (857)
Accrued liabilities ................. 2,903 (1,097)
Income taxes payable ................ 2,298 2,265
-------- --------
Net cash provided by operating activities ......... 18,183 9,895
Investing activities
Proceeds from sales of property and equipment ..... 13 45
Purchases of property and equipment ............... (7,151) (1,535)
Acquisitions of businesses net of cash acquired ... (24,219) 0
-------- --------
Net cash provided (used) in investing activities .. (31,356) (1,490)
Financing activities
Payments on notes receivable ...................... 16 28
Borrowings under credit facility .................. 20,846 0
Repayment of debt ................................. (7,055) 0
Payments on capital lease obligation .............. 0 (293)
Repurchase of common stock ........................ (519) 0
Proceeds of exercise of common stock options ...... 28 0
-------- --------
Net cash provided (used) in financing activities .. 13,316 (265)
-------- --------
Increase in cash and cash equivalents ............. 143 8,140
Cash and cash equivalents at beginning of period .. 6,252 26,415
-------- --------
Cash and cash equivalents at end of period ........ $ 6,395 $ 34,555
======== ========
</TABLE>
See accompanying notes.
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SCIENTIFIC GAMES HOLDINGS CORP.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(unaudited)
1. Basis of Presentation
The accompanying unaudited consolidated condensed 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 and should be read in conjunction with the
financial statement disclosures contained in the Company's 1996 Annual
Report on Form 10-K for the year ended December 31, 1996. In the
opinion of management, all adjustments considered necessary for a fair
presentation (which were of a normal, recurring nature) have been
included. Operating results for the three and six month periods ended
June 30, 1997 are not necessarily indicative of the results that may be
expected for the year ended December 31, 1997.
2. Inventories
Inventories consist principally of lottery tickets and materials
related to their production, which are valued at the lower of cost
(first-in, first-out method) or market. Inventories consisted of the
following:
<TABLE>
<CAPTION>
June 30, December 31,
1997 1996
----------- ------------
(In Thousands)
<S> <C> <C>
Finished goods................ $ 5,847 $ 4,684
Work-in-process............... 1,812 2,468
Raw materials................. 3,808 4,138
-------- --------
$ 11,467 $ 11,290
======== ========
</TABLE>
3. Contingencies
Refer to the Company's Form 10-K for the year ended December 31,
1996 for a description of pending legal proceedings, with respect to
which there have been no material developments since such date, except
that Ecosalud filed a notice of appeal on April 16, 1997 to appeal the
judgment entered in favor of Scientific Games Inc. in the Georgia
Litigation described in such Item 3 of such Form 10-K.
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4. Acquisition
On April 15, 1997, the Company completed its stock acquisition of
Tele Control, an on-line lottery and transaction company located in
Vienna, Austria, from Autotote Corporation. The purchase price was
$26.6 million and was accounted for under the purchase method of
accounting. The purchase price was allocated to approximately $5.1
million of net assets and a one-time write-off in connection with
in-process research and development costs of $10.1 million, with the
remainder allocated to goodwill to be amortized over 15 years.
The following table summarized the Company's estimated pro forma
results of operations as if the purchase of TeleControl and Scientific
Games International Limited (SGIL) (refer to the Company's 10-K for the
year ended December 31, 1996 for a description of the SGIL acquisition)
occurred on January 1, 1996.
<TABLE>
<CAPTION>
Six-month period
ended June 30,
(In thousands, except per share amounts) 1997 1996
--------------------------------------------------------------------------
<S> <C> <C>
Revenues $98,892 $90,933
Net earnings (loss) (1,397) 7,154
Earnings (loss) per common share (0.11) 0.52
</TABLE>
The pro forma results presented above include adjustments to
reflect interest expense on borrowings for the acquisitions,
amortization of assets acquired including intangibles, certain
management expenses related to the Company's combined operations,
including lease expense for a building owned by the former owner of
SGIL which was not purchased as part of the acquisition, and the income
tax effect of such pro forma adjustments and income taxes on earnings.
The pro forma adjustments are based upon a preliminary allocation of
the purchase price.
These pro forma unaudited results of operations do not purport to
represent what the Company's actual results of operations would have
been if the acquisitions of TeleControl and SGIL had occurred on
January 1, 1996, and should not serve as a forecast of the Company's
operating results for any future periods. The pro forma adjustments are
based solely upon certain assumptions that management believes are
reasonable under the circumstances at this time. However, the full
impact of potential cost savings has not been reflected in the pro
forma results presented above, although there can be no assurances such
cost savings will be achieved.
5. Discontinued Product Line
In July 1997 the Company discontinued its Charity pull-tab ticket
product line. A one-time write-off of $4.0 million (pre-tax)was
recognized for the disposition of the assets of this product line.
6. New Accounting Pronouncement
In February 1997, the Financial Accounting Standards Board issued
Statement No. 128, Earnings per Share, which is required to be adopted
on December 31, 1997. At that time, the Company will be required to
change the method currently used to compute earnings per share and to
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restate all prior periods. Under the new requirements for calculating
primary earnings per share, the dilutive effect of stock options will
be excluded. The impact is expected to result in changes to primary
earnings per share for the second quarter ended June 30, 1997 and June
30, 1996 of $(.01) and $.03 per share, respectively. The impact of
Statement 128 on the calculation of fully diluted earnings per share
for these quarters is not expected to be material.
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SCIENTIFIC GAMES HOLDINGS CORP.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.
GENERAL
The Company's revenues are primarily generated from the sale of instant
tickets to lotteries and promotional (commercial) customers, from the provision
of cooperative services, instant ticket hardware and software system development
and services, on-line lottery hardware and software systems and from the sale of
pull-tab tickets. Instant and pull-tab ticket revenues are generally based on a
price per 1,000 tickets. Revenues from cooperative services and hardware and
software development may be based on a percentage of the lottery's sales to the
public, a contracted price, a license agreement or any applicable combination of
the foregoing. Existing on-line revenues are generated from the sale of hardware
and software to lotteries as well as support and maintenance contracts on the
on-line systems.
The Company's operating results may vary significantly from period to
period. Revenues and capital expenditures can be difficult to forecast because
the Company's sales cycle may vary and depend upon factors such as the size and
timing of awarded contracts, changes in customer budgets, ticket inventory
position and general economic conditions. Contracts with governmental entities
operating newly authorized instant lotteries tend to generate higher levels of
ticket sales in the initial months. Operating results may be affected by the
working capital requirements associated with preparing facilities and equipment,
establishing a distribution system and printing tickets for a recently awarded
contract, and by the amount of time elapsing before the receipt and/or
recognition of revenues from the sale of instant lottery tickets and the
provision of cooperative services. Operating results may also be affected by the
utilization of overtime labor and the Company's ability to smoothly integrate
new and/or upgraded production equipment with its existing production
operations. Revenues from the sale of tickets, cooperative services, hardware
and software development may be recognized based upon ticket shipments, a
percentage of the lottery's sales to the public, a contracted price, a license
agreement or any applicable combination of the foregoing. Accordingly, quarter
to quarter fluctuations in revenues may be expected. Additionally, circumstances
encountered in international markets, including the substantial amount of time
involved in bidding on an international contract, the evaluation of such bid and
the resultant contract award or rejection may vary significantly from that
originally anticipated when the bid is prepared. All of these factors may make
it difficult to forecast revenues and expenditures related to the Company's
operations over extended periods and can result in fluctuations in the Company's
quarterly financial results.
The Company's domestic lottery contracts typically have an initial term
of from one to three years and usually provide the customer with options to
extend the contract one or more times under the same, or mutually agreeable,
terms and conditions for additional periods generally
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ranging from one to three years. The Company's international instant lottery
contracts are less likely to have firm contract periods and, historically,
international lottery ticket customers have sought competitive bids for such
contracts more frequently. The Company's customers have exercised extension
options in the Company's domestic instant lottery contracts a majority of the
time. Upon the expiration of a contract (including any extensions which may have
been exercised), lottery authorities often award new contracts through a
competitive procurement process. During any quarter, some lottery contract is
typically expiring and/or reaching an optional extension date.
During 1997, the Company has had or will have two domestic contracts
which will expire due to having no further extensions available and its
competitors have had or will have six domestic contracts which will not be
extended or will expire. New contracts for these states have been or will be
awarded through a competitive procurement process in which the Company has or
will participate. Management estimates that the Company's customers as of
January 1, 1997 with expiring contracts during 1997 represent approximately 3%
of total U.S. retail lottery sales in 1996, and that competitors' expiring
contracts represent aggregate customers' retail sales equaling approximately 26%
of the total U.S. retail sales in 1996. It should be noted that the percentage
of retail sales attributable to any particular customer contract held by the
Company or its competitors is not necessarily indicative of the impact on the
Company's operations and revenue which may occur as a result of the Company
retaining or obtaining any particular contract. Furthermore, customers of the
Company or its competitors may seek to renegotiate the terms of existing
contracts, usually in connection with extensions of such contracts.
To date in 1997, the Company has been awarded the Pennsylvania Lottery
contract, which was formerly held by a competitor of the Company. The
Pennsylvania contract will include, in addition to instant lottery tickets,
marketing and operations support, ticket warehousing, inventory control and
ticket distribution. The Company also received a five year extension by the
Georgia Lottery commencing June 1998 for its current cooperative services
contract which would have expired in June 1998. The extension was negotiated in
lieu of a re-bid of the contract. Additionally, the South Dakota State Lottery
extended the Company's instant ticket and related product services contract,
which was scheduled to expire in June 1997, through June 1998. The Washington
State Lottery has also extended its instant ticket contract, which was scheduled
to expire June 1997, through May 1998. The Company was not the successful bidder
for contracts with the Texas Lottery which were re-awarded to a competitor.
Additionally, in January 1997 the Company was awarded a 5-year contract
by the Virginia Lottery to provide software and hardware for a new automated
ticket redemption system. The contract includes installation of approximately
6,000 units of the Company's new SciScan Technology(R) keyless validation
terminals as well as the provision of software to interface with the Lottery's
existing instant ticket software system, and the provision of automated
administration and ticket validation support. The Company was also re-awarded
approximately 60% of the instant ticket business for the New Mexico Lottery.
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Management anticipates that lottery contracts awarded or re-awarded to
the Company in 1997 and the orders thereunder will have lower equivalent prices
than charged in the previous contracts. The profit margin impact associated with
the potential equivalent lower prices will be dependent upon what offset the
level of orders from new and existing customers, productions efficiencies and
other economies of scale may provide. While Scientific Games has frequently been
awarded new contracts when its prior domestic contracts and extensions have
expired, there can be no assurance, however, that any of the Company's contracts
will be extended or that it will be awarded new contracts as a result of
competitive procurement processes in the future. Nor can any assurances be given
with respect to the Company's ability to offset, in whole or in part, the
effects of any intensified price competition.
In April 1997, the Company purchased Tele Control, an on-line lottery
and transaction processing company located in Vienna, Austria, from Autotote
Corporation. The purchase price was $26.6 million and was accounted for under
the purchase method of accounting. TeleControl develops and markets specific
computer software for long-distance data transmission which is mainly used for
on-line lotteries and betting-systems as well as by banks and credit card
companies. Software developed by TeleControl is used by lotteries in Austria,
Switzerland, The Netherlands and Germany. On July 18, 1997 the Company announced
contracts with the lottery of the German state of Mechlenburg-Vorpommern, the
Dutch State Lottery and the German national horse racing betting operator. These
contracts are for supplying hardware, software and a range of support systems.
These contracts have a combined revenue value of approximately $4.4 million to
the Company. The Company has plans to re-enter into the on-line lottery business
and plans to market world-wide an on-line and related system based on the
TeleControl system.
As previously announced, on May 19, 1997 the Board of Directors
approved the purchase in the open market over twelve months of up to 15% or
approximately 1.8 million shares of the Company's common stock. The Company
currently has approximately 11.9 million outstanding shares of common stock.
RESULTS OF OPERATIONS
Three-month period ended June 30, 1997 compared to three-month period ended June
30, 1996.
Revenues for the three-month period ended June 30, 1997 increased $12.9
million, or 34.5% over the revenues for the three-month period ended June 30,
1996. The increase was primarily due to revenues of $6.6 million from Scientific
Games International Limited (SGIL) which was acquired in October 1996 and $7.3
million from TeleControl which was acquired in April, 1997. (Refer to the
Company's 10-K for the year ended December 31, 1996 for a description of the
SGIL acquisition and to Note 4 of the Notes to Consolidated Condensed Financial
Statements for a description of the TeleControl acquisition.)
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Gross margins decreased to 38.7% for the three-month period ended June
30, 1997 from 42.0% for the three-month period ended June 30, 1996. The decrease
was due primarily to lower margins at SGIL and lower margins resulting from new
contracts and renewals of existing contracts over the last twelve months.
Selling, general and administrative (SG&A) expenses increased $1.9
million for the three-month period of 1997 over the same period of 1996. SG&A
expenses increased as a percentage of revenues to 13.0% from 12.2%. The dollar
increase was due primarily to the additional SG&A costs of SGIL and TeleControl
and increased costs associated with higher salaries and benefits relating to
sales and marketing activities and administration.
Depreciation and amortization increased for the three-month period
ended June 30, 1997 by 41.0% or $902,000 over the comparable period of 1996 due
primarily to the amortization of intangible assets acquired as part of the
acquisition of SGIL and TeleControl, as well as depreciation of plant equipment
acquired as part of the acquisition of SGIL.
The Company recognized a one-time write-off of $10.1 million for
in-process research and development acquired in connection with the April 15,
1997 acquisition of TeleControl. Management believes this write-off is
consistent with accounting practices related to other technology-based
acquisitions. In addition, the Company discontinued its Charity pull-tab ticket
product line. A one-time write-off of $4.0 million (pre-tax) was recognized for
the anticipated losses from disposition of assets. The Company's lottery
pull-tab ticket production operations are unaffected by such write-off.
Interest income for the three-month period ended June 30, 1997
decreased $185,000 compared to the three-month period ended June 30, 1996 due to
the decrease in cash and cash equivalents. The ending balances in cash and cash
equivalents decreased by $28.3 million to $6.3 million. The decrease was due to
the acquisition of businesses and the repurchase of the Company's common stock
during the twelve months ending June 30, 1997.
Interest expense for the three-month period ended June 30, 1997
increased $207,000 from the three-month period ended June 30, 1996. The increase
was due to the increase in the balance outstanding under the Company's revolving
line of credit compared to the prior period.
Income tax expense decreased in the period ended June 30, 1997 as
compared to the same three-month period of 1996 by $1.6 million due to a
decrease in pre-tax earnings. The effective tax rate for the three month periods
ended June 30, 1997 and June 30, 1996, before the one-time write-off of
in-process research and development discussed earlier, was 39.7% and 40.1%,
respectively.
Net loss for the three-month period ended June 30, 1997 was $6.7
million compared to net earnings of $5.8 million for the period ended June 30,
1996. The decrease in net earnings was due to the write-offs discussed earlier.
Net earnings without these one-time write-offs would have been $5.8 million for
the quarter ended June 30, 1997.
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The loss per common share for the three-month period ended June 30,
1997, was 53 cents per share compared to net earnings of 42 cents per share for
the same period in 1996. The decrease in earnings per share was due to the
write-offs discussed earlier. Earnings per share without the one-time write-offs
would have been 47 cents for the quarter ended June 30, 1997. The percentage
increase in earnings per share without the one-time write-offs was higher than
the percentage increase in net earnings due to a decrease in the weighted
average number of outstanding shares and share equivalents from 13.7 million to
12.6 million.
Six-Month period ended June 30, 1997 compared to six-month period ended June 30,
1996.
Revenues for the six-month period ended June 30, 1997 increased $32.0
million, or 49.8% compared to revenues for the six-month period ended June 30,
1996. The increase was primarily due to the acquisitions of SGIL and
TeleControl, which contributed $13.3 million and $7.3 million, respectively. In
addition, revenues attributable to domestic and non-SGIL international customers
increased $7.4 million and $4.0 million, respectively.
The increase in revenue from such domestic and international customers
was primarily in the first quarter of 1997. Although the Company's operating
results can vary significantly from period to period, management believes the
decline in the Company's revenues for the first quarter of 1996 was related to
customer inventory adjustments and a transition in marketing strategy on the
part of a number of customers.
Accordingly, management believes the events of the first quarter of
1996 did not reflect a fundamental change in the Company's business in
particular, or the lottery industry in general, although it is expected that new
contracts with either new or existing customers will be subject to strong price
competition.
Gross margins increased to 38.0% for the six-month period ended June
30, 1997 from 37.7% for the six-month period ended June 30, 1996. The increase
was due primarily to the gain of gross profits related to the increase in
revenues as described above, partially offset by lower margins from SGIL.
SG&A expenses increased $3.3 million for the six-month period of 1997
over the same period of 1996. These expenses decreased as a percentage of
revenue to 12.3% from 13.3%. The dollar increase was due primarily to the
acquisition of SGIL and TeleControl. The percentage decrease was due to higher
revenues in the six-month period ended June 30, 1997 as compared to the same
period in 1996, offset by a dollar increase in SG&A expenses.
Depreciation and amortization expenses increased for the six-month
period ended June 30, 1997 by 30.6% or $1.3 million over the comparable period
of 1996. The increase was due to the amortization of intangibles associated with
the acquisition of SGIL and TeleControl, as well as depreciation of plant
equipment from SGIL.
Interest income for the six-month period ended June 30, 1997 declined
$366,000 from the six-month period ended June 30, 1996 due to a decrease in
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cash and cash equivalents. Interest expense increased $241,000 because of a
higher balance on the company's revolving line of credit. Both the decrease in
cash and increase in borrowings was due to the acquisition of businesses and the
repurchase of the Company's common stock during the twelve months ended June
30,1997. Gains on foreign currency decreased by $268,000, due mainly to activity
related to the Company's potential acquisition of Opax International during the
first six months of 1996, as well as net foreign currency gains related to
non-U.S. dollar transactions.
Net loss for the six-month period ended June 30, 1997 was $1.2 million
compared to net income of $7.3 million for the period ended June 30, 1996. Net
income for the six month period ended June 30, 1997, without the one-time
write-offs of in-process research and development associated with the
acquisition of TeleControl and the Charity pull-tab product line, was $11.3
million. The effective tax rate for the six-month periods ended June 30, 1997
and June 30, 1996, before the one-time write-off of in-process research and
development, was 40.3% and 40.1%, respectively.
Earnings per common share for the six-month period ended June 30, 1997,
was a loss of 9 cents per share compared to 53 cents per share for the same
period in 1996. Earnings per share for the six months ended June 30, 1997, prior
to the one-time write-offs discussed earlier, was 90 cents per share. The 69.8%
increase in earnings per share prior to the one-time write-offs was due to a
54.9% increase in net earnings. The weighted average shares decreased from 13.7
million to 12.6 million.
LIQUIDITY AND CAPITAL RESOURCES
JUNE 30, 1997 VERSUS JUNE 30, 1996
For the six-month period ended June 30, 1997, net cash provided by
operating activities increased $7.0 million, to $16.9 million from $9.9 million
for the comparable period in 1996. The increase was due primarily to a decrease
in working capital partially offset by a decline in net income. The decline in
working capital was mostly attributable to a decline in the growth in accounts
receivable and other assets partially offset by a decline in accounts payable.
Purchases of property and equipment for the six-month period ended June
30, 1997 were higher by $5.5 million as compared to the same period in 1996. The
Company purchased TeleControl in April 1997 for $26.6 million primarily through
borrowing under the Company's credit facility.
In December 1996, the Company entered into a new $80 million,
three-year revolving credit facility ("the Bank Credit Agreement") with two
one-year extension options with the consent of the lenders. The Bank Credit
Agreement offers borrowing rate options under prime rate, London Interbank
Offered Rate ("LIBOR") or Interbank Offered Rate ("IBOR"), plus or minus an
applicable margin depending on the type of borrowing and the Company's debt to
total capitalization ratio, a certain fixed charge ratio, the imposition of
liens on assets, and asset sales.
15
<PAGE> 16
In connection with the October 1, 1991 acquisition of the assets of the
Company from Bally Entertainment Corporation ("Bally"), the Company agreed to
make an earn out payment (the "Earnout") of up to $5 million on April 30, 1997
if total cumulative earnings before interest, income taxes, depreciation and
amortization ("EBITDA") from October 1, 1991 through December 31, 1996 equaled
or exceeded $95.4 million. At December 31, 1996, cumulative EBITDA from October
1, 1991 exceeded $95.4 million without any Adjustments as discussed below.
Management believes that the Company has competing claims, offsets and other
potential adjustments (collectively, "Adjustments") which could reduce the
amount ultimately determined to be owed to Bally, if any. However, the effect of
such Adjustments cannot be quantified at this time and there can be no assurance
that such Adjustments ultimately will affect the timing or amount of any Earnout
payments which may be required. The maximum amount payable to Bally has been
accrued as additional goodwill and will be amortized over 34.5 years.
The Company expects that its cash balance, cash flows from operations
and the availability of funds from its Bank Credit Agreement should permit it to
meet anticipated capital expenditures, working capital and fund future growth as
new business opportunities arise.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Refer to the Company's Form 10-K for the year ended December 31,
1996 for a description of pending legal proceedings, with respect to
which there have been no material developments since such date, except
that Ecosalud filed a notice of appeal on April 16, 1997 to appeal the
judgment entered in favor of Scientific Games Inc., in the Georgia
Litigation described in such Item 3 of such Form 10-K.
Although it is not possible to determine the outcome of these
proceedings and claims at their current stage, management believes
based upon, among other things, the advice of counsel, that the
disposition of these matters should not have a material adverse affect
on the Company's consolidated financial condition or consolidated
results of operations.
Item 2. CHANGES IN SECURITIES
None
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
16
<PAGE> 17
#3.2 Certificate of Designation of Series A Participating
Cumulative Preferred Stock, as filed with the
Delaware Secretary of State on July 31, 1997,
incorporated by reference from the Company's Form
8-A/A for its Series A Participating Cumulative
Preferred Stock filed with the Commission on August
6, 1997.
#10.47 Amended and Restated Directors Stock Option Plan
#11 Computation of Per Share Earnings
#27 Financial Data Schedule (for SEC use only)
(b) Reports on Form 8-K
On June 30, 1997 a report on Form 8-K was filed with respect
to the previously reported acquisition of TeleControl to
report the consummation of such acquisition and to file
certain financial statements and pro forma financial
information with respect thereto.
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.
SCIENTIFIC GAMES HOLDINGS CORP.
Date: August 14, 1997 By: /s/WILLIAM G. MALLOY
----------------------------
William G. Malloy
President and
Chief Executive Officer
Date: August 14, 1997 By: /s/CLIFF O. BICKELL
-----------------------------
Cliff O. Bickell
Vice President, Treasurer,
and Chief Financial Officer
17
<PAGE> 1
EXHIBIT 10.47
SCIENTIFIC GAMES HOLDINGS CORP.
AMENDED AND RESTATED
DIRECTORS' STOCK OPTION PLAN
(AS AMENDED AND RESTATED MAY 15, 1997)
1. Purpose. The Scientific Games Holdings Corp. Directors' Stock
Option Plan (hereinafter called the "Plan") is intended as an incentive and as a
means of encouraging stock ownership by public non-management members of the
Board of Directors of SCIENTIFIC GAMES HOLDINGS CORP., a Delaware corporation
(hereinafter called the "Company"), in order to increase the proprietary
interest of the non-employee directors in the Company and thereby provide them
with an increased incentive to work for the Company's success.
2. Administration.
(a) The Plan shall be administered, construed and interpreted
by the Company's existing Stock Option Committee or by the Board of
Directors (the "Committee"); further provided that each Committee
member shall recuse himself or herself from all matters relating to the
administration, construction or interpretation of this Plan in
connection with any awards to such person. The terms and conditions of
each individual stock option award shall be evidenced by a stock option
certificate (hereafter a "Stock Option Certificate"), which shall be in
accordance with the provisions of the Plan.
(b) The interpretation and construction by the Committee of
any provision of the Plan, any option granted under it or any Stock
Option Certificate and any determination by the Committee, pursuant to
any provision of the Plan, any such option or any provisions of a Stock
Option Certificate, shall be final and conclusive. Business shall be
transacted by a vote of the members of the Committee, and any decision
or determination reduced to writing and signed by the members shall be
as fully effective as if it had been made by a vote at a meeting duly
called and held.
3. Eligibility. Members of the Board of Directors who are not employees
of the Company or any subsidiary of the Company (an "Eligible Director") shall
be eligible to be granted options under and pursuant to the terms of the Plan;
provided that an Eligible Director may decline to be eligible under this Plan at
any time prior to the grant to him or her of options hereunder by furnishing
written notice of such election to the Secretary of the Company.
4. Stock. The stock subject to the options and other provisions of the
Plan shall be authorized but unissued or reacquired shares of the $0.001 par
value Common Stock of the Company (the "Common Stock"). Subject to readjustment
in accordance with the provisions of Section 5(i), the total amount of the
Common Stock on which options may be granted to Directors participating under
the Plan shall not exceed in the aggregate 275,000 shares.
<PAGE> 2
In the event that any outstanding option (or portion thereof) under the
Plan for any reason expires unexercised or terminates without exercise prior to
the end of the period during which options may be granted, the shares of the
Common Stock allocable to the unexercised portion of such option again may be
subjected to an option under the Plan.
5. Terms and Conditions of Options. Stock options granted pursuant to
the Plan may be evidenced by Stock Option Certificates in such form as the
Committee from time to time shall approve; such certificates and the stock
options granted hereby or thereby, shall comply with and be subject to the
following terms and conditions:
(a) Number of Shares. Each Stock Option Certificate shall
state the total number of shares of the Common Stock to which it
pertains. Each Eligible Director shall be granted, as of the first
business day following the later of (i) his or her initial election or
appointment to the Board or (ii) qualification as an Eligible Director,
an option to purchase 6,000 shares of the Common Stock of the Company
subject to adjustment under Section 5(i) (an "Initial Grant") for so
long as shares are available under the Plan. Further, each Eligible
Director shall be granted an annual option to purchase an additional
3,000 shares of the Common Stock of the Company subject to adjustment
under Section 5(i) on such date during a year as the Committee shall
specify, or if no date shall be specified during a year, then shares
for such year shall be granted no later than such date as immediately
precedes the next annual meeting of the Company's stockholders (each
such grant, a "Supplemental Grant") for so long as shares are available
under the Plan, provided that such Eligible Director must be serving on
the Board of Directors on the date a Supplemental Grant is to be made
in order to receive said grant. No options shall be granted after
September 22, 2003.
(b) Option Price. The option price per share shall be the
Fair Market Value per share of the Common Stock on the date
the option is granted.
(c) Medium and Time of Payment. The option price shall be
payable upon the exercise of the option in an amount equal to
the number of shares then being purchased times the per share option
price. Payment at the election of the optionee, shall be (i) in cash;
(ii) by delivery to the Company of a certificate or certificates for
shares of the Common Stock duly endorsed for transfer to the Company
with signature guaranteed, if requested by the Company, by a member
firm of the New York Stock Exchange or by a national banking
association; or (iii) by a combination of (i) and (ii). In the event of
any payment by delivery of shares of the Common Stock, such shares
shall be valued on the basis of their respective Fair Market Values (as
defined in Section 5(d)). If payment is made by delivery of shares of
the Common Stock, the value of such stock shall not exceed the total
option price payment.
(d) Fair Market Value. For purposes of Sections 5(b) and (c),
Fair Market Value of the Common Stock shall be determined on the date
of grant and on the date of exercise of each stock option, as
applicable. The term "Fair Market Value" of a share of Common Stock on
any day shall mean (i) the last sale price on such day on the principal
stock exchange, or the National Association of Securities Dealers'
Automated Quotation ("NASDAQ") National Market System, as the case may
be, on which such Common Stock is then listed or admitted
-2-
<PAGE> 3
to trading, (ii) if no sale takes place on such day on such exchange or
the NASDAQ National Market System, as the case may be, the average of
the last reported closing bid and asked prices on such day as
officially quoted on such exchange or the NASDAQ National Market
System, as the case may be, (iii) if the Common Stock is not then
listed or admitted to trading on any stock exchange or the NASDAQ
National Market System, as the case may be, the average of the last
reported closing bid and asked prices on such day in the
over-the-counter market, as furnished by the NASDAQ system or the
National Quotation Bureau, Inc, (iv) if neither such corporation at the
time is engaged in the business of reporting such prices, as furnished
by any similar firm then engaged in such business, or (v) if there is
no such firm, as furnished by any member of the National Association of
Securities Dealers ("NASD") selected mutually by the Optionee and the
Corporation or, if they cannot agree upon such selection, as selected
by two such members of the NASD, one of which shall be selected by the
Optionee and one of which shall be selected by the Corporation.
(e) Terms of Options. Terms of options granted under the Plan
shall commence on the date of grant and shall expire on the tenth
anniversary of the date of grant, subject to Section 5(i). No option
may be granted under the Plan after September 22, 2003.
(f) Vesting. Each option shall vest twenty percent (20%) per
year beginning with the first year's anniversary of the date of grant
until all granted options have vested. Options shall be exercisable
immediately upon vesting; provided, however, that no option granted to
a person who is subject to Section 16 of the Exchange Act or the rules
and regulations promulgated thereunder shall be subject to exercise
prior to the expiration of six months from the date of grant, and
further provided, however, that all outstanding options shall also vest
and be exercisable on the date of the consummation of a "change in
control." For purposes of this section, a change in control will be
deemed to be deemed to have occurred if any "person" or "group" of
persons (as determined pursuant to Section 13(d) and 14(d) of the
Exchange Act and the rules and regulations promulgated thereunder),
other than the Management Stockholders, (i) becomes the beneficial
owner, directly or indirectly, of voting securities of the Company, or
securities convertible into, or exchangeable for, voting securities,
representing more than 50% of the combined voting power of the
Company's then outstanding securities or (ii) acquires the right or
power to nominate and/or control, directly or indirectly, a majority of
the members of the Board of Directors, without having first received
the prior written consent of at least two-thirds (including the
favorable vote of at least one Director who is a Management
Stockholder) of the members of the entire Board of Directors in office
prior to any such person or group of persons acquiring such right or
power. "Management Stockholders" means the persons identified as such
on Exhibit A hereto.
(g) Method of Exercise. All options granted hereunder shall be
exercised by written notice directed to the Secretary of the Company at
its principal place of business, accompanied by payment made in
accordance with Section 5(c), in cash or personal check (which will be
accepted subject to collection), or by certificates for shares of the
Common Stock, or by a combination of cash, personal check or
certificates for shares of the Common Stock, of the option price for
the number of shares specified in the notice of exercise and by any
documents required by Section 5(k). The Company shall make delivery of
such shares
-3-
<PAGE> 4
within a reasonable period of time; provided, however, that if any law
or regulation requires the Company to take any action (including but
not limited to the filing of a registration statement under the
Securities Act of 1933 and causing such registration statement to
become effective) with respect to the shares specified in such notice
before the issuance thereof, then the date of delivery of such shares
shall be extended for the period necessary to take such action.
(h) Effect of Termination of Service as an Eligible Director.
In the event an optionee during his or her life ceases to be an
Eligible Director of the Company for any reason, any vested option or
unexercised portion thereof granted to him or her shall terminate on or
shall not be exercisable after the earlier to occur of (i) the
expiration date of the option, or (ii) ninety (90) days after
termination of service as an Eligible Director. In the event of the
death of the optionee while he or she is an Eligible Director of the
Company, any vested option or unexercised portion thereof granted to
him or her may be exercised by his or her personal representatives,
heirs or legatees at any time prior to the expiration of six (6) months
from the date of the death of the optionee, but in no event later than
the date of expiration of the option period. In the event an optionee
ceases to be an Eligible Director of the Company for any reason, any
non-vested options shall terminate as of the date such person ceases to
be an Eligible Director.
(i) Adjustments Upon Changes in Capitalization. In the event
that the outstanding shares of the Common Stock of the Company are
hereafter increased or decreased or changed into or exchanged for a
different number or kind of shares or other securities of the Company
in any such case by reason of a recapitalization, reclassification,
stock split, combination of shares or dividend payable in shares of the
Common Stock, an adjustment of like kind shall automatically be made in
the number and kind of shares available for the granting of options
under the Plan, subject to right of the Committee to make such further
adjustment as it shall deem necessary to effect the provisions of this
Section. In addition, an adjustment of like kind shall automatically be
made in the number and kind of shares as to which outstanding options,
or portions thereof then unexercised, shall be exercisable, to the end
that the optionee's proportionate interest shall be maintained as
before the occurrence of such event, subject to right of the Committee
to make such further adjustment as it shall deem necessary to effect
the provisions of this Section. Any such adjustment in outstanding
options shall be made without change in the total price applicable to
the unexercised portion of the option and with a corresponding
adjustment in the option price per share. No fractional shares shall be
issued or optioned in making the foregoing adjustments. No increase in
or exchange of outstanding shares of Common Stock for fair value
approved by the Board of Directors (whether or not in connection with a
recapitalization or reclassification) will result in any adjustment in
option price per share. All adjustments made by the Committee under
this paragraph shall be conclusive.
Subject to any required action by the stockholders, if the
Company shall be a party to any reorganization involving merger,
consolidation, acquisition of the stock or acquisition of the assets of
the Company, the Committee in its discretion may declare (a) that all
options granted hereunder are to be terminated after giving at least
ten days' notice to holders of
-4-
<PAGE> 5
outstanding options, or (b) that any option granted hereunder shall
pertain to and apply with appropriate adjustment as determined by the
Committee to the securities of the resulting corporation to which a
holder of the number of shares of Common Stock subject to the option
would have been entitled. The adoption of a plan of dissolution or
liquidation by the Board of Directors and stockholders of the Company
shall cause every option outstanding hereunder to terminate on the
fifteenth day thereafter; provided, in the event of the adoption of a
plan of dissolution or liquidation in connection with a reorganization
as provided in the preceding sentence, options outstanding hereunder
shall be governed by and shall be subject to the provisions of the
preceding sentence. If any rights or warrants to subscribe for
additional shares are given pro rata to holders of outstanding shares
of the class or classes of stock then set aside for this Plan, each
optionee under this Plan shall be entitled to the same rights or
warrants on the same basis as holders of the outstanding shares with
respect to such portion of his or her option as is exercised on or
prior to the record date for determining stockholders entitled to
receive or exercise such rights or warrants.
Any issue by the Company of stock of any class, or securities
convertible into shares of stock of any class, shall not affect, and no
adjustment by reason thereof shall be made with respect to, the number
or price of shares of Common Stock subject to any option except as
specifically provided otherwise in this Section 5(i). The grant of an
option pursuant to the Plan shall not affect in any way the right or
power of the Company to make adjustments, reclassifications,
reorganizations or changes of its capital or business structure or to
merge or to consolidate or to dissolve, liquidate or sell, or transfer
all or any part of its business or assets.
(j) Who May Exercise; Non-Transferability of Stock Options. No
option shall be assignable or transferable by the optionee except by
will or by the laws of descent and distribution or pursuant to a
qualified domestic relations order as defined in the Internal Revenue
Code or Title I of the Employee Retirement Income Security Act, or the
rules thereunder; and, during the lifetime of an optionee, the option
shall be exercisable only by the optionee.
(k) Optionee's Agreement. If, in the opinion of counsel for
the Company, such action is necessary or desirable, no option shall be
granted to any optionee unless at such time such optionee truly
represents and warrants that the stock will be acquired for investment
only and not for purposes of resale or distribution and makes such
further representation and warranties as are deemed necessary or
desirable by counsel to the Company with regard to holding and resale
of the stock. If at the time of the exercise of any option, in the
opinion of counsel for the Company, it is necessary or desirable, in
order to comply with any applicable laws or regulations relating to the
sale of securities, that the optionee shall truly represent and warrant
that he or she is purchasing the shares that are subject to the option
for investment and not with any present intention to resell or
distribute the same or make other and further representations and
warranties with regard to the holding and resale of the shares, the
optionee, upon the request of the Committee, will execute and deliver
to the Company an agreement or affidavit to such effect. All
certificates issued pursuant to the exercise of any option shall be
-5-
<PAGE> 6
marked with a restrictive legend, if such marking, in the option of
counsel to the Company, is necessary or desirable.
(l) Rights as a Stockholder. An optionee shall have no rights
as a stockholder with respect to shares covered by his or her option
until the date of the issuance of the shares to him or her and only
after such shares are fully paid. Unless specified in Section 5(i)
hereof, no adjustment will be made for dividends or other rights for
which the record date is prior to the date of such issuance.
(m) Miscellaneous Provisions. The Stock Option
Certificates authorized under the Plan shall contain such other
provisions, including, without limitation, restriction upon the
exercise of the option as the Committee shall deem advisable.
6. Effective Date and Termination of Plan.
(a) The Plan shall become effective upon adoption of the Plan
by the Board of Directors of the Company; provided, however, such
effectiveness shall be subject to the approval of the Plan by the
holders of a majority of the voting power of the outstanding shares of
the Company's Voting Stock, voting together, within twelve months of
adoption by the Board of Directors if, in the opinion of counsel to the
Company, such approval is required by Section 16 of the Exchange Act or
by any other federal or state law, securities law or rule or regulation
promulgated thereunder.
(b) The Plan, with respect to the granting of options, shall
terminate at midnight on September 22, 2003, but the Board of Directors
may terminate the Plan at any prior to said time and date. Such
termination of the Plan by the Board of Directors shall not alter or
impair any of the rights or obligations under any option theretofore
granted under the Plan unless the affected optionee shall so consent.
7. Application of Funds. The proceeds received by the Company
from the sale of capital stock pursuant to options will be used for general
corporate purposes.
8. No Obligation to Exercise Option. The granting of an option
shall impose no obligation upon the optionee to exercise such an option.
9. Amendment. The Board of Directors by majority vote, at any
time and from time to time, may amend the Plan in such respects as it shall deem
advisable, to conform to any change in the law or in any other respect, except
that no amendment shall be made to the Plan which shall:
(a) Increase the aggregate number of shares of Common Stock of
the Company which may be subject to options granted under the Plan
(except by operation of the adjustment provisions of the Plan or with
the approval of the stockholders of the Company having a majority of
the voting power of the outstanding voting stock of the Company);
-6-
<PAGE> 7
(b) Extend the term of the Plan beyond September 22,
2003, or extend the maximum term of options granted thereunder; or
(c) Affect any unexercised option granted under the Plan,
without the consent of the optionee affected;
provided, however, no amendment to the Plan shall require approval of
the majority of the voting power of the outstanding voting stock of the
Company unless, in the opinion of counsel to the Company, such approval
is required by Section 16(b) or any other section of the Exchange Act,
by any other federal or state law or any regulations or rules
promulgated thereunder, and further provided that no amendment to the
Plan shall be made more than once every six months, other than to
comport with changes in the Internal Revenue Code, the Employee
Retirement Income Security Act or the rules thereunder.
-7-
<PAGE> 8
EXHIBIT A TO FIRST AMENDED AND RESTATED
1993 DIRECTORS' STOCK OPTION PLAN
MANAGEMENT STOCKHOLDERS
William G. Malloy
William F. Behm
Thomas F. Little
C. Gray Bethea, Jr.
David A. Bausch
James R. Culver
John J. Kriz
Terry D. Mangold
Cliff O. Bickell
-8-
<PAGE> 1
SCIENTIFIC GAMES HOLDINGS CORP. EXHIBIT 11
COMPUTATION OF PER SHARE EARNINGS
(In Thousands except per share data)
<TABLE>
<CAPTION>
Three-month period Six-month period
ended June 30, ended June 30,
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net earnings(loss)........................... $ (6,653) $ 5,809 $(1,166) $ 7,320
ADD: R&D and Pull-tab product line write-
offs, net of tax........................... 12,502 0 12,502 0
-------- ------- ------- -------
Net earnings excluding write-offs............ 5,849 5,809 11,336 7,320
======== ======= ======= =======
Weighted average Common stock outstanding.... 12,142 13,066 12,152 13,066
Effect of common stock equivalents (stock
options), at average market price.......... 421 659 428 668
-------- ------- ------- -------
Total................................. 12,563 13,725 12,580 13,734
======== ======= ======= =======
Net earnings (loss)per common share.......... ($ 0.53) $ 0.42 ($ 0.09) $ 0.53
======== ======= ======= =======
Pro forma net earnings per common share,
excluding write-offs....................... $ 0.47 $ 0.42 $ 0.90 $ 0.53
======== ======= ======= =======
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLAR
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<EXCHANGE-RATE> 1
<CASH> 6,395
<SECURITIES> 0
<RECEIVABLES> 29,036
<ALLOWANCES> 128
<INVENTORY> 11,467
<CURRENT-ASSETS> 52,511
<PP&E> 97,208
<DEPRECIATION> 40,281
<TOTAL-ASSETS> 150,355
<CURRENT-LIABILITIES> 34,691
<BONDS> 0
0
0
<COMMON> 12
<OTHER-SE> 92,881
<TOTAL-LIABILITY-AND-EQUITY> 150,355
<SALES> 96,123
<TOTAL-REVENUES> 96,123
<CGS> 59,632
<TOTAL-COSTS> 59,632
<OTHER-EXPENSES> 17,555
<LOSS-PROVISION> 37
<INTEREST-EXPENSE> 272
<INCOME-PRETAX> 4,904
<INCOME-TAX> 6,070
<INCOME-CONTINUING> (1,166)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,166)
<EPS-PRIMARY> (0.09)
<EPS-DILUTED> (0.09)
</TABLE>
