<PAGE> 1
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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(X) Quarterly report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the quarterly period ended September 28, 1997 or
( ) Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
---------------------------
Commission file number 1-14378
ACME METALS INCORPORATED
(Exact name of registrant as specified in its charter)
Delaware 36-3802419
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
13500 South Perry Avenue, Riverdale, Illinois 60827-1182
(Address of principal executive offices) (Zip Code)
(708) 849-2500
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months, and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
---- ----
Number of shares of Common Stock outstanding as of October 29, 1997:
11,627,946.
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<PAGE> 2
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
ACME METALS INCORPORATED
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands except per share data)
<TABLE>
<CAPTION>
For the Three Months Ended For the Nine Months Ended
---------------------------- ----------------------------
September 28, September 29, September 28, September 29,
1997 1996 1997 1996
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
NET SALES $ 115,250 $ 125,174 $ 364,051 $ 378,307
COSTS AND EXPENSES:
Cost of products sold 105,653 105,733 337,980 323,869
Depreciation expense 9,311 3,096 29,257 9,391
------------- ------------- ------------- -------------
Gross margin 286 16,345 (3,186) 45,047
Training and Pre-Start-up-New Facility - 3,280 - 6,431
Selling and administrative expense 9,433 9,187 29,766 26,511
------------- ------------- ------------- -------------
Operating income (loss) (9,147) 3,878 (32,952) 12,105
NON-OPERATING INCOME (EXPENSE):
Interest expense (10,482) (289) (30,377) (1,226)
Interest income 19 1,022 479 4,887
Other-net (187) 155 (311) 43
------------- ------------- ------------- -------------
Income (loss) before income taxes (19,797) 4,766 (63,161) 15,809
Income tax (benefit) provision (9,257) 1,907 (24,001) 6,324
------------- ------------- ------------- -------------
Net income (loss) $ (10,540) $ 2,859 $ (39,160) $ 9,485
============= ============= ============= =============
PER COMMON SHARE:
Net income (loss) $ (0.91) $ 0.25 $ (3.37) $ 0.82
============= ============= ============= =============
</TABLE>
The accompanying notes are an integral part of this financial statement.
2
<PAGE> 3
ACME METALS INCORPORATED
CONSOLIDATED BALANCE SHEETS
(in thousands)
<TABLE>
<CAPTION>
(Unaudited)
September 28, December 29,
1997 1996
------------- ------------
ASSETS
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 6,715 $ 33,224
Short-term investments - 11,817
Receivables, less allowances of $1,487 in 1997 and $1,320 in 1996 59,044 52,502
Income tax receivable 16,320 -
Inventories 69,156 68,884
Deferred income taxes 11,559 14,957
Other current assets 1,549 1,453
--------- ---------
Total current assets 164,343 182,837
--------- ---------
INVESTMENTS AND OTHER ASSETS:
Investments in associated companies 17,235 17,862
Other assets 17,566 19,028
Deferred income taxes 38,137 25,297
--------- ---------
Total investments and other assets 72,938 62,187
--------- ---------
PROPERTY, PLANT AND EQUIPMENT:
Property, plant and equipment, at cost 860,694 841,034
Construction in progress 14,825 6,319
Accumulated depreciation (315,109) (286,628)
--------- ---------
Total property, plant and equipment 560,410 560,725
--------- ---------
$ 797,691 $ 805,749
========= =========
<CAPTION>
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 57,420 $ 73,796
Accrued expenses 37,171 39,966
Income taxes payable - 2,178
--------- ---------
Total current liabilities 94,591 115,940
--------- ---------
LONG-TERM LIABILITIES:
Long-term debt 354,388 310,085
Other long-term liabilities 19,157 13,026
Postretirement benefits other than pensions 97,193 93,247
Retirement benefit plans 10,497 12,750
--------- ---------
Total long-term liabilities 481,235 429,108
--------- ---------
Commitments and contingencies (see note titled Commitments and Contingencies)
SHAREHOLDERS' EQUITY:
Preferred stock, $1 par value, 2,000,000 shares authorized, no shares issued
Common stock, $1 par value, 20,000,000 shares authorized, 11,629,546
and 11,610,723 shares issued in 1997 and 1996, respectively 11,630 11,611
Additional paid-in capital 165,647 165,342
Retained earnings 59,472 98,632
Minimum pension liability adjustment (14,884) (14,884)
--------- ---------
Total shareholders' equity 221,865 260,701
--------- ---------
$ 797,691 $ 805,749
========= =========
</TABLE>
The accompanying notes are an integral part of this financial statement.
3
<PAGE> 4
ACME METALS INCORPORATED
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
<TABLE>
<CAPTION>
For The Nine Months Ended
----------------------------
September 28, September 29,
1997 1996
------------- -------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ (39,160) $ 9,485
ADJUSTMENTS TO RECONCILE NET INCOME (LOSS) TO
NET CASH (USED FOR) PROVIDED BY OPERATING ACTIVITIES:
Depreciation 29,751 9,973
Accretion of Senior Discount Notes 8,803 9,830
CHANGE IN CURRENT ASSETS AND LIABILITIES:
Receivables (6,542) (2,948)
Inventories (272) 114
Accounts payable (14,489) (5,496)
Other current accounts (1,672) (4,545)
Pension contribution (3,691) -
Income tax receivable (16,320) -
Other, net 917 10,156
------------- -------------
Net cash (used for) provided by operating activities (42,675) 26,569
------------- -------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of investments (331) (24,669)
Sales and/or maturities of investments 12,148 144,991
Investment in joint venture - (1,750)
Capital expenditures New Facility (19,771) (155,725)
Capital expenditures other (11,704) (19,007)
------------- -------------
Net cash used for investing activities (19,658) (56,160)
------------- -------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings under revolving credit agreement 73,500 -
Repayments of revolving credit agreement (38,000) -
Issuance of bonds, net of discount - 19,873
Debt issue costs - (396)
Other 324 312
------------- -------------
Net cash provided by financing activities 35,824 19,789
------------- -------------
Net decrease in cash and cash equivalents (26,509) (9,802)
Cash and cash equivalents at beginning of period 33,224 53,043
------------- -------------
Cash and cash equivalents at end of period $ 6,715 $ 43,241
============= =============
</TABLE>
The accompanying notes are an integral part of this financial statement.
4
<PAGE> 5
ACME METALS INCORPORATED
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
BASIS OF PRESENTATION:
The accompanying financial statements for the periods ended September 28, 1997
and September 29, 1996 are unaudited. The statements should be read in
conjunction with the audited financial statements included in the Company's
1996 Annual Report on Form 10-K. In the opinion of management, all
adjustments, consisting only of normal recurring adjustments, necessary for a
fair statement of such financial statements have been included. The financial
statements have been subjected to a limited review by Price Waterhouse LLP, the
Company's independent accountants, whose report appears on page 11 of this
filing. Such report is not a "report" or "part of the Registration Statement"
within the meaning of Sections 7 and 11 of the Securities Act of 1933 and the
liability provisions of Section 11 of such Act do not apply.
The Company's fiscal year ends on December 28, 1997 and will contain 52 weeks.
Third quarter results for 1997 and 1996 cover 13-week periods.
SEGMENT INFORMATION:
The Company presents its operations in two segments, Steel Making and Steel
Fabricating.
Steel Making operations include the manufacture of sheet, strip and
semifinished steel in low-, mid-, and high-carbon, alloy and special grades.
Principal markets include agricultural, automotive, industrial equipment,
industrial fasteners, welded steel tubing, processor and tool manufacturing
industries.
The Steel Fabricating Segment processes and distributes steel strapping,
strapping tools and industrial packaging (Acme Packaging Corporation), welded
steel tube (Alpha Tube Corporation) and auto and light truck jacks (Universal
Tool & Stamping Company, Inc.). The Steel Fabricating Segment sells to a
number of markets.
All sales between segments are recorded at contractual prices determined on an
annual basis and reviewed periodically to reflect current market conditions.
Income from operations consists of total sales less operating expenses.
Operating expenses include an allocation of expenses incurred at the Corporate
Office that are considered by the Company to be operating expenses of the
Segments rather than general corporate expenses. Income from operations does
not include other non-operating income or expense, interest income or expense,
income taxes, or extraordinary items.
The products and services of the Steel Making and Steel Fabricating Segments
are distributed through their own respective sales organizations which have
sales offices at various locations in the United States. Export sales are
insignificant for the periods presented.
5
<PAGE> 6
ACME METALS INCORPORATED
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(continued)
<TABLE>
<CAPTION>
For The For The
Three Months Ended Nine Months Ended
---------------------------------- -------------------------------
Sept. 28, Sept. 29, Sept. 28, Sept. 29,
1997 1996 1997 1996
----------- ----------- ----------- -----------
(in thousands, except for shipment and production statistics)
<S> <C> <C> <C> <C>
Net Sales:
Steel Making:
Sales to unaffiliated customers $ 44,495 $ 56,121 $ 148,825 $ 169,712
Intersegment sales 23,620 26,153 73,405 85,548
----------- ----------- ----------- -----------
68,115 82,274 222,230 255,260
Steel Fabricating:
Sales to unaffiliated customers 70,755 69,053 215,226 208,595
Intersegment sales 221 491 798 1,190
----------- ----------- ----------- -----------
70,976 69,544 216,024 209,785
Eliminations (23,841) (26,644) (74,203) (86,738)
----------- ----------- ----------- -----------
Total $ 115,250 $ 125,174 $ 364,051 $ 378,307
=========== =========== =========== ===========
Income (loss) from Operations:
Steel Making $ (16,451) $ (1,469) $ (53,047) $ (3,545)
Steel Fabricating 7,304 5,347 20,095 15,650
----------- ----------- ----------- -----------
Total $ (9,147) $ 3,878 $ (32,952) $ 12,105
=========== =========== =========== ===========
Depreciation:
Steel Making $ 8,529 $ 2,275 $ 26,824 $ 6,918
Steel Fabricating 990 881 2,916 2,813
Corporate 3 79 11 242
----------- ----------- ----------- -----------
Total $ 9,522 $ 3,235 $ 29,751 $ 9,973
=========== =========== =========== ===========
Capital Expenditures:
Steel Making $ 4,364 $ 41,081 $ 23,144 $ 154,506
Steel Fabricating 2,553 2,079 6,388 4,411
Corporate 4 14 57 24
----------- ----------- ----------- -----------
Total $ 6,921 $ 43,174 $ 29,589 $ 158,941
=========== =========== =========== ===========
Operating Data (in tons)
Steel Production (hot band) 184,096 165,974 543,387 488,515
Steel Shipments (flat roll) 141,980 146,192 464,050 459,309
</TABLE>
PER SHARE DATA:
Per share amounts for 1997 and 1996 are based on the weighted average number of
common and dilutive common equivalent shares outstanding during the three month
and nine month periods, respectively (11,629,281 in 1997 and 11,631,654 in 1996
and 11,628,556 in 1997 and 11,617,902 in 1996).
6
<PAGE> 7
ACME METALS INCORPORATED
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(continued)
INVENTORIES:
Inventories are summarized as follows:
Sept. 28, December 29,
1997 1996
--------- -----------
Raw materials $ 10,260 15,642
Semi-finished and finished products 53,835 46,493
Supplies 5,061 6,749
--------- -----------
$ 69,156 $ 68,884
========= ===========
PROPERTY, PLANT AND EQUIPMENT:
The Company has capitalized expenditures related to the construction of a
continuous thin slab caster and hot strip mill (the "New Facility") totaling
$450.5 million at September 28, 1997. Total cash payments for the New Facility
in the first nine months of 1997 were $19.8 million. Accrued payments to the
general contractor at September 28, 1997 and December 29, 1996 include accounts
payable of $10.1 million and $12.0 million, respectively. Due to the non-cash
nature of such payables at each date they have been excluded from the
Statements of Cash Flows. The remainder of capital expenditures classified as
construction in progress at September 29, 1997 was for an upgrade of the
Company's management information systems and to a lesser extent the replacement
and rehabilitation of various production facilities.
CASH FLOWS:
Cash payments for interest expense were $21.0 million during the first nine
months of 1997 and $20.0 million in the first nine months of 1996; in these
periods net cash refunded for income taxes was $0.2 million and cash payments
of $6.2 million, respectively. Cash transactions in the first nine months of
1997 for the New Facility are discussed in the Property, Plant and Equipment
footnote.
COMMITMENTS AND CONTINGENCIES:
The Company's interest in an iron ore mining joint venture requires payment of
its proportionate share of all fixed operating costs, regardless of the
quantity of ore received, plus the variable operating costs of minimum ore
production for the Company's account. The Company reimburses the joint venture
for these costs through its purchase of ore.
7
<PAGE> 8
ACME METALS INCORPORATED
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(continued)
During 1994, the Company entered into a turnkey contract with Raytheon
Engineers & Constructors, Inc. ("Raytheon") to build the New Facility at its
steel making facilities located in Riverdale, Illinois. Based on the turnkey
contract without taking into account financing costs, internally generated
costs directly related to the New Facility or additional changes that may be
requested by the Company during construction, management estimates the cost of
the New Facility, including ancillary facilities, construction, general
contractor fees and certain other project costs that will be paid by the
Company will approximate $400 million.
The Company has long-term operating lease commitments, principally for building
space for its Alpha Tube subsidiary and for various computer hardware and
software. A current lease agreement relating to building space for the Alpha
Tube subsidiary contains provisions for the Company to guarantee the lessor a
recovery of a fixed percentage of its interest in the property upon termination
of the lease. In the event the Company does not maintain compliance with
financial covenants which are consistent with those of the Working Capital
Facility, the Company could be required to purchase the lessors' interest in
the property. Lease terms cover periods from 3 to 6 years.
The Company is subject to various Federal, state and local environmental
statutes and regulations which provide a comprehensive program for controlling
the release of materials into the environment and require responsible parties
to remediate certain waste disposal sites. In addition, various health and
safety statutes and regulations apply to the work-place environment.
Administrative, civil and criminal penalties may be applicable for failure to
comply with these laws. These environmental laws and regulations are subject
to periodic revision and modification. The United States Environmental
Protection Agency, for example, recently published revised National Air Quality
Standards ("NAAQS") for particulate matter ("PM(2.5)") and ozone. Amendments to
applicable state implementation plans (state air regulations) necessary to
translate these new NAAQS into specific requirements which the Company must
meet will take several years to enact. Therefore, it will be several years
before the Company will know whether, and to what extent, these new NAAQS will
impact the Company's operations. Based on the Company's experience with
comparable changes to environmental standards, it is reasonable to anticipate
the new PM(2.5) and ozone NAAQS will require the Company to expend substantial
additional funds on air pollution control programs to comply with these new
standards.
From time to time, the Company is also involved in administrative proceedings
involving the issuance, or renewal, of environmental permits relating to the
conduct of its business. The final issuance of these permits has been resolved
on terms satisfactory to the Company; and, in the future, the Company expects
such permits will similarly be resolved on satisfactory terms.
8
<PAGE> 9
ACME METALS INCORPORATED
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(continued)
Although management believes it will be required to make further substantial
expenditures for pollution abatement facilities in future years, because of the
continuous revision of these regulatory and statutory requirements (e.g. the
new NAAQS for ozone and PM(2.5), the Company is not able to reasonably estimate
the specific pollution abatement requirements or the amount or timing of such
expenditures to maintain compliance with these environmental laws. While such
expenditures in future years may be substantial, management does not presently
expect they will have a material adverse effect on the Company's future ability
to compete within its markets.
In those cases where the Company has been identified as a Potentially
Responsible Party ("PRP") or is otherwise made aware of a possible exposure to
liability for costs associated with an environmental matter, management
determines (i) whether, in fact, the Company has been properly named or is
otherwise obligated, (ii) the extent to which the Company may be responsible
for costs associated with the site in question, (iii) an assessment as to
whether another party may be responsible under various indemnification
agreements or insurance policies the Company is a party to, and (iv) an
estimate, if one can be made, of the costs associated with the clean-up efforts
or settlement costs. It is the Company's policy to make provisions for
environmental clean-up costs at the time that a reasonable estimate can be
made. At September 28, 1997 and December 29, 1996, the Company had recorded
reserves of approximately $0.8 million and $0.2 million, respectively, for
environmental clean-up matters. While it is not possible to predict the
ultimate costs of resolving environmental related issues facing the Company,
based upon information currently available, they are not expected to have a
material effect on the consolidated financial condition or results of
operations of the Company.
In connection with the Spin-Off from The Interlake Corporation ("Interlake") on
May 29, 1986, Acme Steel Company (a subsidiary of the Company) entered into
certain indemnification agreements with Interlake. Pursuant to the terms of
the indemnification agreements, Interlake undertook to defend, indemnify and
hold Acme Steel Company harmless from any claims, as defined, relating to Acme
Steel Company operations or predecessor operations occurring before May 29,
1986, the inception of Acme Steel Company. The indemnification agreements
cover certain environmental matters including certain litigation and Superfund
sites in Duluth, Minnesota and Gary, Indiana for which either Interlake or Acme
Steel Company's predecessor operations have been named as defendants or PRPs,
as applicable. To date, Interlake has met its obligations under the
indemnification agreements and has provided the defense and paid all costs
related to these environmental matters. The Company does not have sufficient
information to determine the potential liability, if any, for the matters
covered by the indemnification agreements in the event Interlake fails to meet
its obligations thereunder in the future. In the event that Interlake, for any
reason, were unable to fulfill its obligations under the indemnification
agreements, the Company could have increased future obligations which could be
significant.
9
<PAGE> 10
ACME METALS INCORPORATED
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(continued)
Also in connection with the Spin-Off from Interlake, Acme Steel Company entered
into a Tax Indemnification Agreement ("TIA") which generally provides for
Interlake to indemnify Acme Steel Company for certain tax matters. While
certain issues have been negotiated and settled between the Company, Interlake
and the Internal Revenue Service, certain significant issues for the tax years
beginning in 1982 through 1986 remain unresolved.
On March 17, 1994, Acme Steel Company received a Statutory Notice of Deficiency
("Notice") in the amount of $16.9 million in tax as a result of the Internal
Revenue Service's examination of the 1982-1984 tax years. The Company is
contesting the unresolved issues and the Notice. Should the government sustain
its position as proposed for those unresolved issues and those contained in the
Notice, substantial interest would also be due (potentially in an amount
greater than the tax claimed). The taxes claimed relate principally to
adjustments for which Acme Steel Company is indemnified by Interlake pursuant
to the TIA. The Company has adequate reserves to cover that portion for which
it believes it may be responsible per the TIA. To date, Interlake has met its
obligations under the TIA with respect to all covered matters. In the event
that Interlake, for any reason, were unable to fulfill its obligations under
the TIA, the Company could have increased future obligations which could be
significant.
The Company's subsidiaries also have various litigation matters pending which
arise out of the ordinary course of their businesses. In the opinion of
management, the ultimate resolution of these matters will not have a material
adverse effect on the financial position of the Company.
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS:
Statement of Financial Accounting Standards ("SFAS") No. 128, "Earnings per
Share," issued in February 1997, establishes a new accounting principle for the
calculation of earnings per share and will be effective for the Company's
financial statements for the year ending December 28, 1997. Earlier
application is not permitted. Upon adoption, all prior period earnings per
share data presented shall be restated to conform to this Statement. The
calculation of earnings per share under SFAS No. 128 is more consistent with
International Accounting Standards. Adoption of this standard is not expected
to have a material impact on amounts previously reported as net income (loss)
per common share.
SFAS No. 130, "Reporting Comprehensive Income," issued in June 1997, will
require the Company to disclose, in financial statement format, all non-owner
changes in equity. Such disclosures include, for example, cumulative foreign
currency translation adjustments, certain minimum pension liabilities and
unrealized gains and losses on available-for-sale securities. This Statement
is effective for fiscal years beginning after December 15, 1997 and requires
presentation of prior period financial statements for comparability purposes.
The Company expects to adopt this Statement beginning with its 1998 financial
statements.
10
<PAGE> 11
ACME METALS INCORPORATED
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(continued)
SFAS No. 131, "Disclosures about Segments of an Enterprise and Related
Information," issued in June 1997, establishes standards for reporting
information about operating segments in annual financial statements and interim
financial reports. It also establishes standards for related disclosures about
products and services, geographic areas and major customers. Operating
segments are components of an enterprise about which separate financial
information is available that is evaluated regularly by the chief operating
decision maker in deciding how to allocate resources and in assessing
performance. Generally, financial information is required to be reported on
the basis that is used internally for evaluating segment performance and
deciding how to allocate resources to segments. The Company is currently
evaluating its options for disclosure and will adopt the Statement in its
financial statements for the year ending December 27, 1998.
11
<PAGE> 12
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors
and Shareholders of
Acme Metals Incorporated
We have reviewed the accompanying consolidated balance sheet as of September
28, 1997, the consolidated statements of operations for the three and nine
month periods ended September 28, 1997 and September 29, 1996, and the
consolidated statements of cash flows for the nine month periods ended
September 28, 1997 and September 29, 1996 (the "consolidated financial
information") of Acme Metals Incorporated and its subsidiaries. This
consolidated financial information is the responsibility of the Company's
management.
We conducted our review in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures to
financial data and making inquiries of persons responsible for financial and
accounting matters. It is substantially less in scope than an audit conducted
in accordance with generally accepted auditing standards, the objective of
which is the expression of an opinion regarding the financial statements taken
as a whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to the accompanying consolidated financial information for it to be in
conformity with generally accepted accounting principles.
We previously audited, in accordance with generally accepted auditing
standards, the consolidated balance sheet as of December 29, 1996, and the
related consolidated statements of operations, of shareholders' equity, and of
cash flows for the year then ended (not presented herein), and in our report
dated January 24, 1997 we expressed an unqualified opinion on those
consolidated financial statements. In our opinion, the information set forth
in the accompanying consolidated balance sheet information as of December 29,
1996, is fairly stated in all material respects in relation to the consolidated
balance sheet from which it has been derived.
/s/ Price Waterhouse LLP
- ------------------------
Price Waterhouse LLP
Chicago, Illinois
October 21, 1997
12
<PAGE> 13
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF
OPERATIONS AND FINANCIAL CONDITION
OVERVIEW
The Company's operations are divided into two segments, the Steel Making
Segment and the Steel Fabricating Segment. The Steel Making Segment consists of
Acme Steel Company and includes all of the facilities used in the manufacturing
of and finishing of flat rolled steel. The Steel Fabricating Segment includes
the operations of Acme Packaging, Alpha Tube and Universal Tool and Stamping all
of which use flat rolled steel in their respective fabrication processes.
Steel Making Segment
In August 1994, the Company commenced construction of a new continuous thin
slab caster/hot strip mill complex at Acme Steel's Riverdale, Illinois plant.
This complex was referred to in the Company's previous filings as the
"Modernization and Expansion Project" and is herein referred to as the "New
Facility." The New Facility, which cost approximately $400 million, excluding
capitalized interest and internal costs, allows Acme Steel to build on its
strengths as a low cost producer of high quality liquid steel by significantly
increasing its overall efficiency and reducing its finished steel production
costs. In addition, the New Facility maintains Acme's flexibility to service
its niche markets. Construction of the New Facility was substantially
completed in September 1996, and the first coil was produced on October 3,
1996. The New Facility is the world's first complex to produce flat rolled
steel by combining highly efficient mini-mill casting and rolling technology
with the traditional high quality liquid steel produced via the blast
furnace/basic oxygen furnace technology. In February 1996, Acme Steel and its
joint venture partner began construction of a $30 million state-of-the-art steel
coil processing plant adjacent to the New Facility (the "NACME Facility"). The
joint venture pickles, oils, slits, and packages steel coils produced by the
New Facility.
The Company's old ingot-based steel making facility was closed in July 1997.
In October 1997, the New Facility was operating at nearly 80% of its designed
capacity, and through the end of that month had produced 98% of the Company's
traditional product mix. The New Facility is expected to be operating at full
capacity by the second half of 1998. Pickling operations at the NACME Facility
began in December 1996, due to a five month delay in delivery of the slitting
equipment to the NACME Facility, and slitting operations began late in the
second quarter of 1997.
The Company's ability to produce hot rolled steel is currently outpacing steel
finishing capability. The delayed start-up of the NACME Facility and the
reliance on outside processors have been significant factors adversely
affecting shipping capabilities and the results of operations. The Company is
working with the NACME Facility and other outside processors services to
increase slitting productivity and increase shipping capability.
Commencing in the fourth quarter of 1996 and continuing through the
third quarter of 1997, the Company had a significant decline in earnings due to
among other factors on-going production cost inefficiencies resulting from New
Facility operating at less than optimal production levels, increased
depreciation and interest expense and expenses relating to the phase out of the
redundant ingot-based operations related to the New Facility and delayed
startup and related operational issues at the NACME Facility which have led to
reduced shipments and higher inventory levels. The production inefficiencies
and the resulting inventory buildup have significantly reduced the amount of
cash flow from operations. The ongoing ramp-up of the New Facility and the
NACME Facility are expected to continue to adversely affect the Company's
results of operations and cash flow through the first half of 1998.
Steel Fabricating Segment
Acme Packaging, Alpha Tube and Universal have all continued to record strong
operating results. The operating income of these companies which comprise the
Steel Fabricating Segment continues to partially offset the operating losses of
Acme Steel during the ramp-up of the New Facility and are relatively unaffected
by the transitional issues faced by the Steel Making Segment.
RESULTS OF OPERATIONS
<TABLE>
<CAPTION>
For the Years Ended For the Nine Months Ended
---------------------------------- ----------------------------
Dec. 25, Dec. 31, Dec. 29, Sept. 29, Sept. 28,
1994 1995 1996 1996 1997
-------- -------- -------- --------- ---------
<S> <C> <C> <C> <C> <C>
NET SALES 100.0% 100.0% 100.0% 100.0% 100.0%
-------- -------- -------- --------- ---------
COSTS AND EXPENSES:
Cost of products sold 82.5 81.3 86.7 85.6 92.8
Depreciation expense 2.9 2.5 3.2 2.5 8.0
-------- -------- -------- --------- ---------
Gross margin 14.6 16.2 10.1 11.9 (0.8)
Training/Pre-start-up-New Facility 0.0 0.0 2.0 1.7 -
Selling and administrative expense 6.4 6.8 7.1 7.0 8.2
Restructuring/Nonrecurring charge 1.8 0.0 0.0 0.0 0.0
-------- -------- -------- --------- ---------
Operating income (loss) 6.4 9.4 1.0 3.2 (9.0)
Interest (expense) income, net (1.2) (1.3) (0.1) 1.0 (8.2)
Other non-operating income (expense), net 0.3 0.3 0.1 0.0 (0.1)
Income tax (benefit) provision 1.9 3.0 0.5 1.7 (6.6)
-------- -------- -------- --------- ---------
Net income (loss) before extraordinary item 3.6 5.4 0.5 2.5 (10.7)
Extraordinary item, net of taxes (0.3) 0.0 0.0 0.0 0.0
-------- -------- -------- --------- ---------
Net income (loss) 3.3% 5.4% 0.5% 2.5% (10.7)%
======== ======== ======== ========= =========
</TABLE>
Third Quarter 1997 as compared to Third Quarter 1996
NET SALES. Consolidated net sales of $115.3 million in the third quarter of
1997 were $9.9 million lower than third quarter 1996 net sales. A slight
increase in the Steel Fabricating Segment's selling prices was more than offset
by an unfavorable product mix and lower sales of non-flat rolled products at
the Steel Making Segment as compared to the third quarter of 1996.
Steel Making Segment. Net sales for the Steel Making Segment were $68.1
million in the third quarter of 1997, a $14.2 million, or 17% decrease
over last year's comparable period. Sales to unaffiliated customers decreased
21% to $44.5 million while intersegment sales of $23.6 million fell
below the third quarter 1996 level by nearly 10%. Decreases in the
average selling prices, an unfavorable product mix, reduced shipments to
affiliates, and lower sales of non-flat roll products accounted for the
decreased sales in the third quarter of 1997 versus the third quarter of 1996.
Sales of non-flat roll products totaled $8.4 million, which was $6.8 million
lower than the prior year, due primarily to decreased volume.
Steel Fabricating Segment. The Steel Fabricating Segment net sales of
$71.0 million in the third quarter of 1997 were $1.4 million, or 2%, better
than the comparable period in the prior year. A slight increase in selling
prices along with sales volume gains were the principal contributors to the
improvement.
13
<PAGE> 14
GROSS MARGIN. The gross margin for the third quarter of 1997 totaled
$0.3 million profit which was $16.1 million lower than the gross profit
recorded during last year's comparable period. The lower margin was due
primarily to (i) non-recurring expense relating to the phase-out of the
redundant ingot-based operations (completed in July 1997); (ii) continuing
product cost inefficiencies resulting from the New Facility operating at
substantially less than optimal production levels; (iii) lower revenues and
higher costs associated with an unfavorable product mix; (iv) lower shipments
to affiliates; and (v) delayed start-up and related operational issues at the
NACME Facility which have led to reduced shipments and higher inventory levels.
Depreciation expense related primarily to the New Facility also reduced
operating income. The gross margin, as a percentage of sales, was 1% in the
third quarter of 1997 compared to 13% in the third quarter of 1996.
SELLING AND ADMINISTRATIVE EXPENSE. Selling and administrative expense was
$9.4 million in the third quarter of 1997, $0.2 million higher than the third
quarter of 1996. Selling and administrative expenses represented approximately
8% of net sales in 1997 versus 7% in the comparable period in 1996. The
increased expense as a percentage of sales, was principally due to reduced
sales (as discussed above) and costs related to the upgrade of the Company's
management information systems.
OPERATING INCOME / LOSS. The operating loss for the Company in the third
quarter of 1997 was $9.1 million compared to the $3.9 million of income
recorded during the same period in 1996.
Steel Making Segment. The Steel Making Segment recorded a $16.5
million loss from operations in the third quarter of 1997, an additional loss
of $15.0 million compared to the loss recorded in the third quarter of 1996.
The significant decline in earnings in the third quarter of 1997 was primarily
the result of (i) non-recurring expense relating to the phase-out of the
redundant ingot-based operations (completed in July 1997); (ii) continuing
product cost inefficiencies resulting from the New Facility operating at
substantially less than optimal production levels; (iii) lower revenues and
higher costs associated with an unfavorable product mix; (iv) lower shipments
to affiliates; and (v) delayed start-up and related operational issues at the
NACME Facility which have led to reduced shipments and higher inventory levels.
Depreciation expense increased $6.3 million over the third quarter of 1996
primarily related to the New Facility. Affecting results in the third quarter
of 1997 was the delayed start-up of the slitting line at the NACME Facility
resulting in reduced shipments and higher inventories. In the third quarter,
shipments lagged production by 42,000 tons or 23%. Sales to external
customers were 21% lower than last year's comparable period, and sales to the
Steel Fabricating Segment were 10% lower than in the third quarter of 1996.
Approximately 63% of shipments and 60% of gross margin in the third quarter of
1997 as compared to 62% of shipments and 60% of gross margin in the prior year
was attributable to external customers while the remainder was generated by
sales to the Steel Fabricating Segment.
Steel Fabricating Segment. The Steel Fabricating Segment's operating
income of $7.3 million for the third quarter of 1997 was $2.0 million higher
than in last year's comparable period, resulting primarily from a slight
increase in selling prices and lower raw material costs.
14
<PAGE> 15
INTEREST INCOME / EXPENSE. Interest income for the third quarter of 1997 fell
below the third quarter of 1996 by $1.0 million. The decrease in interest
income is the result of reduced cash and investment balances resulting from
payments for the construction of the New Facility and increased working capital
requirements. Interest expense of $10.5 million for the third quarter of 1997
increased as compared to the same period of the prior year by $10.2 million.
During 1997, all interest costs are being charged against earnings versus 1996
when a significant amount of these costs were capitalized as part of the New
Facility. The Company ceased capitalization of interest costs relating to the
New Facility mid-way through the fourth quarter of 1996 when the facility was
placed in service.
INCOME TAXES. Income tax benefits recorded in the third quarter of 1997
totaled $9.3 million based on an effective tax rate of 47% as compared
to $1.9 million of tax expense in the third quarter of 1996, based on a 40%
effective tax rate. In the third quarter of 1997 the Company increased
its estimated annual tax rate from 34% to 38%.
NET INCOME (LOSS). The Company recorded a loss of $10.5 million, or $0.91 per
share in the third quarter of 1997 versus income of $2.9 million, or $0.25 per
share, recorded in the third quarter of 1996. Per share amounts for 1997 and
1996 are based on the weighted average number of common shares and dilutive
common equivalent shares outstanding during the three month periods (11,629,281
in 1997 and 11,631,654 in 1996).
Nine Months Ended September 28, 1997 as compared to Nine Months Ended September
29, 1996
NET SALES. Consolidated net sales of $364.1 million for the nine months ended
September 28, 1997 were $14.3 million lower than the prior year comparable
period. An unfavorable change in product mix and a decrease in non-flat roll
product shipments as compared to the first nine months of 1996 was partially
offset by increased sales volume by the Steel Fabricating Segment.
Steel Making Segment. Net sales for the Steel Making Segment were $222.2
million in the first nine months of 1997, a $33.0 million, or 13%,
decrease over last year's comparable period. Sales to unaffiliated customers
decreased 12% or $20.9 million while intersegment sales of $73.4 million
fell below the first nine months of 1996 level by 14%. Decreases in the
affiliate shipments, an unfavorable product mix, and lower sales of non-flat
roll products accounted for the decreased sales in the first nine months of
1997 versus the first nine months of 1996. Sales of non-flat roll products
totaled $23.2 million, which was $21.0 million lower than the prior year, due
primarily to decreased volume.
Steel Fabricating Segment. The Steel Fabricating Segment net sales of
$216.0 million in the first nine months of 1997 were $6.2 million, or
3%, above the comparable period in the prior year. A slight increase in
selling prices along with sales volume gains for the fabricating businesses
accounted for the improvement.
GROSS MARGIN. The gross loss for the first nine months of 1997 was
$3.2 million which was $48.2 million lower than the gross profit recorded
during last year's comparable period. The decrease in margin was due primarily
to (i) non-recurring expense relating to the phase-out of the redundant
ingot-based operations (completed in July 1997); (ii) continuing product cost
inefficiencies resulting from the New Facility operating at substantially less
than optimal production levels; (iii) lower revenues and higher costs
associated with an unfavorable product mix; (iv) lower shipments to affiliates;
and (v) delayed start-up and related operational issues at the NACME Facility
which have led to reduced shipments and higher inventory levels.
15
<PAGE> 16
Also, increased depreciation expense related primarily to the New
Facility further reduced gross margin in the first nine months of 1997. The
gross margin, as a percentage of sales, was negative 0.8% in the first nine
months of 1997 compared to 11.9% for the first nine months of 1996.
SELLING AND ADMINISTRATIVE EXPENSE. Selling and administrative expense was
$29.8 million in the first nine months of 1997, $3.3 million higher than the
first nine months of 1996. Selling and administrative expenses represented
approximately 8% of net sales in 1997 compared to 7% for the comparable period
in 1996. The increased expense was principally due to costs related to the
upgrade of the Company's management information systems.
OPERATING INCOME / LOSS. The operating loss for the Company in the first nine
months of 1997 of $33.0 million was $45.1 million lower than the $12.1 million
of income recorded during the same period in 1996.
Steel Making Segment. The Steel Making Segment recorded additional loss a
$53.0 million loss from operations in the first nine months of 1997, an
additional loss of $49.5 million compared to the loss recorded in the first nine
months of 1996.
The significant decline in earnings in the first nine months of 1997 was the
result of (i) non-recurring expense relating to the phase-out of the redundant
ingot-based operations (completed in July 1997); (ii) continuing product cost
inefficiencies resulting from the New Facility operating at substantially less
than optimal production levels; (iii) lower revenues and higher costs
associated with an unfavorable product mix; (iv) lower shipments to affiliates;
and (v) delayed start-up and related operational issues at the NACME Facility
which have led to reduced shipments and higher inventory levels. Depreciation
expense increased $19.9 million over the first nine months of 1996
primarily related to the New Facility. Sales to external customers were 12%
lower than last year's comparable period, and sales to the Steel Fabricating
Segment were 14% lower than in the first nine months of 1996. Approximately
65% of shipments and 55% of gross margin in 1997 was attributable to external
customers while the remainder was generated by sales to the Steel Fabricating
Segment, as compared to 62% of shipments and 69% of gross margin in the prior
year.
Steel Fabricating Segment. The Steel Fabricating Segment's operating
income of $20.1 million for the first nine months of 1997 was $4.4 million
higher than in last year's comparable period, due primarily to a slight
increase in selling prices and lower raw material costs.
INTEREST INCOME / EXPENSE. Interest income for the first nine months of 1997
totaled $0.5 million, falling below the first nine months of 1996 by $4.4
million. The decrease in interest income is the result of reduced cash and
investment balances resulting from payments for the construction of the New
Facility and increased operating requirements. Interest expense of $30.4
million for the first nine months of 1997 was 29.2 million higher compared to
the same period of the prior year. During 1997, all interest costs are being
charged against earnings versus 1996 when a significant amount of these costs
were capitalized as part of the New Facility.
16
<PAGE> 17
In the first nine months of 1996, interest costs of $26.6 million were
capitalized as part of the New Facility. The Company ceased capitalization of
interest costs relating to the New Facility mid-way through the fourth quarter
of 1996 when the facility was placed in service.
INCOME TAXES. Income tax benefits recorded in the first nine months of 1997
totaled $24.0 million based on an effective tax rate of 38% as compared
to $6.3 million of tax expense in the first nine months of 1996, based on a
40% effective tax rate.
NET INCOME (LOSS). The Company recorded a loss of $39.2 million, or $3.37 per
share in the first nine months of 1997 versus income of $9.5 million, or $0.82
per share, recorded in the first nine months of 1996. Per share amounts for
1997 and 1996 are based on the weighted average number of common shares and
dilutive common equivalent shares outstanding during the nine month periods
(11,628,556 in 1997 and 11,617,902 in 1996).
LIQUIDITY AND CAPITAL RESOURCES
The Company's current liquidity requirements include working capital needs,
cash interest payments and capital investments. The Company intends to finance
its current operating and investing activities with cash from operations and
borrowings against an $80 million Working Capital Facility. Consistent with
this strategy the Company has borrowed against its Working Capital Facility
during the nine month period ending September 28, 1997 and will continue to
borrow and repay amounts from time to time as conditions warrant. At the end
of the third quarter, the Company had $35.5 million in outstanding borrowings
against and had $34.5 million availability for borrowing under, its Working
Capital Facility.
Operating activities used $42.7 million of cash in the first nine months of
1997 due to a combination of operating losses, cash interest payments, with
the remainder resulting from changes in working capital and non-current
accounts. Investing activities decreased cash $19.7 million as the sale of
short-term investments (net of purchases) of $11.8 million was more than offset
by $31.5 million of cash payments for capital expenditures.
Capital expenditures totaled $29.6 million through the third quarter of 1997.
Total capital expenditures for the New Facility were $17.9 million for current
amounts paid and owing the general contractor, and to a lesser extent other
costs related directly to the New Facility. The remaining $11.7 million of
capital expenditures were for the upgrade of the Company's management
information systems and the replacement and rehabilitation of various
production facilities. During 1997 and 1998 the Company projects capital
expenditures of $51.5 million and 33.0 million, respectively.
17
<PAGE> 18
At September 28, 1997, the Company's long-term indebtedness was $354.4 million.
Long-term debt increased $44.3 million in the first nine months of 1997 due to
the accretion of the Senior Secured Discount Notes of $8.8 million and
additional borrowings of $35.5 million against the Working Capital Facility.
At the end of the third quarter, the Company's cash and cash equivalents
balance was $6.7 million, down $26.5 million from the December 29, 1996
balance.
Working capital of $69.8 million at the end of the third quarter of 1997 was
$2.9 million higher than the year-end 1996. The Company currently has a
Working Capital Facility which provides each operating subsidiary borrowing
availability with an overall limitation of $80 million. Under the Working
Capital Facility $34.5 million (net of outstanding borrowings) was available at
September 28, 1997. On September 27, 1997, the Credit Agreement (governing
borrowings against the Working Capital Facility) was amended. The amendment
included modifications of various restrictive and maintenance covenants
including permitting intercompany working capital loans within subsidiary
companies. The recent amendment also extended the Working Capital Facility
agreement to August 2000. At September 28, 1997, the Company's ratio of debt
to capitalization was .61 to 1.
The Company reported consolidated net sales of $365.1 million and consolidated
net loss of $39.2 million for the fiscal nine months ended September 28, 1997.
The consolidated financial performance of the Company in 1997, and in
particular of Acme Steel has been and continues to be adversely affected by the
imbalance between production and shipping capabilities and the cost
inefficiencies of operating the New Facility at less than optimal production
levels. In addition the delayed start-up of the NACME Facility which has led to
delayed shipments and higher than planned inventories and has adversely
affected incoming customer orders. (See discussion in "Overview"). The
production inefficiencies and resulting inventory buildups have significantly
reduced the amount of cash flow from operations.
The Company anticipates that the foregoing matters will be satisfactorily
addressed and remedied in a timely manner. However, there can be no assurance
that the Company will be able to satisfactorily address all of these matters in
the near term. The failure to correct the imbalance between production and
shipping capabilities reduce cost inefficiencies of operating the New Facility,
as well as improving steel finishing capability could result in the Company
incurring net operating losses of a similar magnitude during the fourth quarter
of 1997 and the first half of 1998 which may force the Company to consider
financial alternatives to enable it to meet all of its obligations and
continue to adequately fund its operations.
The Company is currently exploring available alternatives to take
advantage of current interest rates and to improve its flexibility for future
opportunities to further modernize its facilities.
OUTLOOK
The Company expects to continue to improve performances of the New
Facility and refine operating practices to process all its products. The
Company expects to continue to recognize losses in the fourth quarter of 1997.
Acme Steel's operations will continue to be adversely impacted by production
cost inefficiencies relating to the ongoing ramp-up of the New Facility and the
NACME Facility for the remainder of 1997 and into 1998. The Company expects to
increase shipments, improve customer delivery performance and achieve the
projected cost benefits. The Company also expects to continue to improve the
product mix to better serve its niche product customers while increasing profit
margins. Beyond this transition period, the Company remains confident that it
will achieve the projected benefits of the New Facility.
When the New Facility reaches full production levels it is expected to
reduce cash manufacturing costs by approximately $70 per ton excluding the
additional depreciation associated with the project which are approximately $24
per ton. Additionally, it will increase shipping capability and broaden the
range of products while improving the quality of all commercial steel products
providing the Company access to a larger portion of the marketplace. The Steel
Fabricating Segment will also derive production and market benefits from the
higher quality products supplied by the Steel Making Segment.
For the remainder of 1997, the Steel Fabricating Segment earnings are
expected to remain relatively steady. The Tube subsidiary expects the
relocation and consolidation of its tube mills to progress toward full
completion in early 1998. The consolidation project will improve material
handling capabilty resulting in increased capacity of large diameter tubing and
lower operating costs.
18
<PAGE> 19
FORWARD LOOKING STATEMENTS. Actual events might materially differ from those
projected in the above forward looking statements. The timely and successful
ramp-up of the New Facility and successful installation of new computer systems
are important assumptions in the Company's projection of a fully operational
facility and the related earnings benefits. If there are substantial
unexpected production interruptions or other start-up difficulties; if the new
facility fails to achieve certain production levels; if quality levels or
performance objectives represented and guaranteed by the equipment suppliers
and turnkey general contractor (although mitigated by liquidated damages of up
to 20 % of the contract which was reduced from 30 % as the general contractor
has fulfilled some of the construction and completion obligations, as well as
certain performance obligations) are not achieved, the competitive and
financial position of the Company could be materially adversely affected. In
addition to uncertainties with respect to the New Facility, forward looking
statements regarding all of the Company's businesses, but particularly the
Steel Making Segment, are based on various economic assumptions. These
assumptions include projections regarding: selling prices for the Company's
products; costs for labor, energy, raw material, supplies, pensions and active
and retiree medical care; volume or units of product sales; competitive
developments in the marketplace by domestic and foreign competitors and the
competitive impact of the facilities which are expected to compete with the
Company's products; general economic developments in the United States
affecting the business of the Company's customers, including the strength of
the U.S. dollar against other currencies and similar events which may affect
the costs, price or volume of products sold by the Company.
There can be no assurances the results of these factors will conform with the
Company's assumptions and projections. If one or more of these factors fails
to meet the Company's projections, the adverse impact on the Company's business
and financial results could be significant. Similarly, in the event the
Company's assumptions and projections are too conservative, the Company's
performance may exceed these forecasts.
19
<PAGE> 20
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS
(a) Exhibit 15 - Letter regarding unaudited interim financial information
Exhibit 27 - Financial data schedule
20
<PAGE> 21
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.
ACME METALS INCORPORATED
Date: November 12, 1997 By: /s/ Jerry F. Williams
------------- -------------------------------------
Jerry F. Williams
Vice President - Finance and
Administration and Chief Financial
Officer
(Principal Financial Officer)
By: /s/ Gregory J. Pritz
-------------------------------------
Gregory J. Pritz
Controller
(Principal Accounting Officer)
21
<PAGE> 1
Exhibit 15
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, DC 20549
Dear Sirs:
We are aware that Acme Metals Incorporated has included our report dated
October 21, 1997 (issued pursuant to the provisions of Statement on Auditing
Standards No. 71) in the Prospectuses constituting part of its Registration
Statements on Form S-8 (Nos. 33-17235, 33-19437 and 33-30841) and in its
Registration Statements on Form S-8 (Nos. 33-38747 and 33-59627). We are also
aware of our responsibilities under the Securities Act of 1933.
Very truly yours,
/s/ Price Waterhouse LLP
- ------------------------
PRICE WATERHOUSE LLP
Chicago, Illinois
November 10, 1997
22
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<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-28-1997
<PERIOD-START> DEC-29-1996
<PERIOD-END> SEP-28-1997
<CASH> 6,715
<SECURITIES> 0
<RECEIVABLES> 60,531
<ALLOWANCES> (1,487)
<INVENTORY> 69,156
<CURRENT-ASSETS> 164,343
<PP&E> 875,519
<DEPRECIATION> (315,109)
<TOTAL-ASSETS> 797,691
<CURRENT-LIABILITIES> 94,591
<BONDS> 354,388
0
0
<COMMON> 11,630
<OTHER-SE> 210,235
<TOTAL-LIABILITY-AND-EQUITY> 797,691
<SALES> 364,051
<TOTAL-REVENUES> 364,051
<CGS> 367,237
<TOTAL-COSTS> 397,003
<OTHER-EXPENSES> 311
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (30,377)
<INCOME-PRETAX> (63,161)
<INCOME-TAX> (24,001)
<INCOME-CONTINUING> (89,160)
<DISCONTINUED> 0
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<NET-INCOME> (39,160)
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</TABLE>
