UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q/A
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
- --- SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended January 2, 1999
---------------
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
- --- SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
---------------------- -----------------------
Commission File Number 0-20080
-------
GALEY & LORD, INC.
--------------------------------------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 56-1593207
------------------------------- --------------------
(State or other jurisdiction of (IRS Employer
incorporation or organization) (Identification No.)
980 Avenue of the Americas
New York, New York 10018
- ---------------------------------------- --------------------
(Address of principal executive offices) Zip Code
212/465-3000
------------------------------------------------------
Registrant's telephone number, including area code
Not Applicable
- -------------------------------------------------------------------------
Former name, former address and former fiscal year, if changed since last
report.
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter periods that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No .
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practical date.
Common Stock, $.01 Par Value - 11,850,187 shares as of February 5, 1999.
Exhibit Index at page 26
1
<PAGE>
INDEX
GALEY & LORD, INC.
Page
----
PART I. FINANCIAL INFORMATION
- ------------------------------
Item 1. Financial Statements (Unaudited)
Consolidated Balance Sheets -- 3
January 2, 1999, December 27, 1997
and October 3, 1998
Consolidated Statements of Income -- 4
Three months ended January 2, 1999
and December 27, 1997
Consolidated Statements of Cash Flows -- 5
Three months ended January 2, 1999
and December 27, 1997
Notes to Consolidated Financial Statements -- 6-12
January 2, 1999
Item 2. Management's Discussion and Analysis of 13-22
Financial Condition and Results of
Operations
Item 3. Quantitative and Qualitative Disclosures About 23
Market Risk
PART II. OTHER INFORMATION
- ---------------------------
Item 1. Legal Proceedings 24
Item 2. Changes in Securities 24
Item 3. Defaults upon Senior Securities 24
Item 4. Submission of Matters to a Vote of Security 24
Holders
Item 5. Other Information 24
Item 6. Exhibits and Reports on Form 8-K 24
SIGNATURES 25
- ----------
EXHIBIT INDEX 26
- -------------
2
<PAGE>
PART I. FINANCIAL INFORMATION
- -----------------------------
ITEM 1. FINANCIAL STATEMENTS
GALEY & LORD, INC.
CONSOLIDATED BALANCE SHEETS
(Dollar amounts in thousands)
<TABLE>
<CAPTION>
JANUARY 2, DECEMBER 27, OCTOBER 3,
1999 1997 1998
ASSETS (Unaudited) (Unaudited) *
- ------ ------------ --------- -------------
<S> <C> <C> <C>
Current assets:
Cash and cash equivalents $ 15,716 $ 6,198 $ 19,946
Trade accounts receivable 181,145 86,570 183,192
Sundry notes and accounts receivable 10,752 473 12,166
Inventories 185,501 95,934 185,497
Income taxes receivable 3,590 2,516 4,348
Deferred income taxes 11,174 175 11,370
Prepaid expenses and other current assets 5,024 2,798 4,339
----------- -------- ------------
Total current assets 412,902 194,664 420,858
Property, plant and equipment, at cost 519,044 204,939 515,899
Less accumulated depreciation and
amortization (108,817) (71,160) (98,334)
----------- -------- ------------
410,227 133,779 417,565
Investments in and advances to associated
companies 24,653 - 26,327
Notes receivable - 141,000 -
Deferred charges, net 15,849 6,661 15,148
Other non-current assets 3,349 - 3,100
Intangibles, net 154,190 37,567 155,295
----------- -------- ------------
$ 1,021,170 $513,671 $1,038,293
=========== ======== ============
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
Current liabilities:
Current portion of long-term debt $ 3,849 $ 1,431 $ 4,051
Trade accounts payable 58,645 21,440 66,098
Accrued salaries and employee benefits 21,755 6,895 28,085
Accrued liabilities 46,918 1,629 39,504
Income taxes payable 497 - 1,748
----------- -------- ------------
Total current liabilities 131,664 31,395 139,486
Long-term debt 671,929 360,004 682,926
Other long-term liabilities 26,490 - 26,647
Deferred income taxes 61,811 18,486 61,357
Stockholders' equity:
Common stock 122 121 122
Contributed capital in excess of par
value 39,019 35,980 38,987
Retained earnings 85,231 69,932 81,861
Treasury stock, at cost (2,247) (2,247) (2,247)
Accumulated other comprehensive income 7,151 - 9,154
----------- -------- ------------
Total stockholders' equity 128,148 103,786 127,877
----------- -------- ------------
$ 1,021,170 $513,671 $1,038,293
=========== ======== ============
</TABLE>
*Condensed from audited financial statements.
See accompanying notes to consolidated financial statements.
3
<PAGE>
GALEY & LORD, INC.
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
(Amounts in thousands except per share data)
<TABLE>
<CAPTION>
Three Months Ended
-----------------------------
January 2, December 27,
1999 1997
---------- ---------
<S> <C> <C>
Net sales $ 246,035 $ 127,147
Cost of sales 218,113 117,351
---------- ---------
Gross profit 27,922 9,796
Selling, general and administrative expenses 7,899 3,387
Amortization of goodwill 1,132 421
---------- ---------
Operating income 18,891 5,988
Interest expense 14,956 3,500
Income from associated companies (1,315) -
Bridge financing interest expense - 379
Loss on foreign currency hedges - 2,745
---------- --------
Income (loss) before income taxes and extraordinary loss 5,250 (636)
Income tax expense (benefit):
Current 2,090 (851)
Deferred (210) 325
---------- ---------
Income (loss) before extraordinary loss 3,370 (110)
Extraordinary loss from debt refinancing,
net of taxes of $332 - (524)
----------- ----------
Net income (loss) $ 3,370 $ (634)
=========== ==========
Net income per common share:
Basic:
Average common shares outstanding 11,841 11,664
Income (loss) per share before extraordinary loss $ .28 $ (.01)
Extraordinary loss from debt refinancing - (.04)
----------- ---------
Net income (loss) per common share - Basic $ .28 $ (.05)
=========== =========
Diluted:
Average common shares outstanding 11,968 12,036
Income(loss) per share before extraordinary loss $ .28 $ (.01)
Extraordinary loss from debt refinancing - (.04)
----------- ---------
Net income (loss) per common share - Diluted $ .28 $ (.05)
=========== =========
</TABLE>
See accompanying notes to consolidated financial statements.
4
<PAGE>
GALEY & LORD, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(Amounts in thousands)
<TABLE>
<CAPTION>
Three Months Ended
-------------------------
January 2, December 27,
1999 1997
----------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 3,370 $ (634)
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities:
Depreciation of property, plant and equipment 10,643 3,698
Amortization of intangible assets 1,132 421
Amortization of deferred charges 588 52
Deferred income taxes (210) 325
Non-cash compensation 20 97
(Gain)/loss on disposals of property, plant
and equipment (187) 20
Undistributed income from associated companies (1,315) -
Extraordinary loss from debt refinancing - 524
Changes in assets and liabilities (net of acquisition):
(Increase)/decrease in accounts receivable - net 1,588 (5,937)
(Increase)/decrease in sundry notes & accounts receivable 1,351 (267)
(Increase)/decrease in inventories 386 (3,417)
(Increase)/decrease in prepaid expenses and other
current assets (712) 1,096
(Increase)/decrease in other non current assets (280) -
(Decrease)/increase in accounts payable - trade (7,433) (2,048)
(Decrease)/increase in accrued liabilities 998 (4,508)
(Decrease)/increase in income taxes payable (472) (1,104)
(Decrease)/increase in other long-term liabilities (311) -
-------- --------
Net cash provided by (used in) operating activities 9,156 (11,682)
Cash flows from investing activities:
Property, plant and equipment expenditures (7,440) (8,086)
Proceeds from sale of property, plant and equipment 3,453 34
Issuance of notes receivable - (141,000)
Dividends received from associated companies 2,972 -
Other (97) (107)
------- -------
Net cash provided by (used in) investing activities (1,112) (149,159)
Cash flows from financing activities:
Increase/(decrease) in revolving line of credit (3,500) 16,400
Principal payments on long-term debt (10,436) (189,509)
Issuance of long-term debt 2,830 344,508
Increase in common stock 12 6
Payment of bank fees and loan costs (1,252) (6,643)
------- ------
Net cash provided by (used in) financing activities (12,346) 164,762
Effect of exchange rate changes on cash and cash equivalents 72 -
------- --------
Net increase/(decrease) in cash and cash equivalents (4,230) 3,921
Cash and cash equivalents at beginning of period 19,946 2,277
------- --------
Cash and cash equivalents at end of period $15,716 $ 6,198
======= ========
</TABLE>
See accompanying notes to consolidated financial statements.
5
<PAGE>
GALEY & LORD, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JANUARY 2, 1999
(UNAUDITED)
NOTE A - BASIS OF PRESENTATION
The consolidated financial statements include the accounts of Galey & Lord, Inc.
(the "Company") and its wholly-owned subsidiaries. Investments in affiliates in
which the Company owns 20 to 50 percent of the voting stock are accounted for
using the equity method. Intercompany items have been eliminated in
consolidation.
The accompanying unaudited consolidated financial statements reflect all
adjustments which are, in the opinion of management, necessary to present fairly
the financial position as of January 2, 1999 and the results of operations and
cash flows for the periods ended January 2, 1999 and December 27, 1997. Such
adjustments consisted only of normal recurring items. Interim results are not
necessarily indicative of results for a full year. These financial statements
should be read in conjunction with the financial statements and footnotes
included in the Company's Annual Report on Form 10-K for the fiscal year ended
October 3, 1998.
NOTE B - RESTATEMENT
As announced in the Company's annual earnings release on November 8, 1999, the
Company has restated its December quarter 1998 operating results to correct the
Company's computation of its LIFO inventory reserves. The restatement increased
inventory by $1,758 and increased the Company's net income by $1,128 or $.09 per
common share.
In addition to the restatement above, the Company has reclassified $1,700 from
selling, general and administrative expenses to cost of sales to reflect the
classification of certain expenses within the acquired businesses on a basis
consistent with the Parent Company's accounting practices. The reclassification
did not impact operating or net income.
NOTE C - BUSINESS ACQUISITIONS
On January 29, 1998, the Company entered into a Master Separation Agreement with
Polymer Group, Inc. ("Polymer"), DT Acquisition, Inc. ("DTA"), a subsidiary of
Polymer, Dominion Textile, Inc. ("Dominion") and certain other parties, pursuant
to which the Company acquired (the "Acquisition") the apparel fabrics business
(the "Acquired Business") of Dominion from DTA for a cash purchase price of
$466.9 million including certain costs related to the Acquisition. The Acquired
Business primarily consists of subsidiaries and joint venture interests, which
comprise the Swift Denim Group ("Swift Denim"), Klopman International S.p.A.
("Klopman") and Swift Europe. Swift Denim is the second largest supplier of
denim in the world, Klopman is one of the largest suppliers of uniform fabrics
in Europe and Swift Europe is a major international supplier of denim to Europe,
North Africa and Asia. The total purchase price of the Acquisition was funded
with borrowings under the Company's credit facilities. The Company used the net
proceeds from the private placement on February 24, 1998 of $300.0 million
aggregate principal amount of 9 1/8% Senior Subordinated Notes Due 2008 to repay
portions of such credit facilities. In connection with the Acquisition, which
has been accounted for as a purchase transaction, the Company acquired assets
with a fair value of approximately $539.2 million and assumed liabilities of
approximately $193.4 million. The Company has made a preliminary allocation of
the purchase price and has recorded goodwill of approximately $121.1 million for
the excess purchase price (including assumed liabilities) over the fair market
value of
6
<PAGE>
GALEY & LORD, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JANUARY 2, 1999
(UNAUDITED)
NOTE C - BUSINESS ACQUISITIONS (CONTINUED)
the assets acquired. Goodwill is being amortized over a 40-year period. The
results of operations of the Acquired Business have been included in the
consolidated financial statements from the date of the Acquisition.
The following unaudited pro forma results of operations assumes that the
Acquisition of the Apparel Business of Dominion had occurred at the beginning of
fiscal 1998. These pro forma results give effect to certain adjustments,
including depreciation of property, plant and equipment, amortization of the
cost of the Acquisition in excess of net assets acquired and interest expense
resulting from the acquisition and related financing. The pro forma results have
been prepared for comparative purposes only and do not purport to indicate the
results of operations that would actually have occurred had the combination been
in effect on the dates indicated or which may occur in the future.
Three Months Ended
December 27, 1997
-------------------
(in thousands except per share data)
Net sales $ 261,343
Loss before extraordinary item $ (2,581)
Loss before extraordinary item
per share - diluted $ (.21)
Net loss $ (3,105)
Net per share - diluted $ (.21)
NOTE D - INVENTORIES
The components of inventory at January 2, 1999, December 27, 1997 and October 3,
1998 consisted of the following (in thousands):
January 2, December 27, October 3,
1999 1997 1998
---------- ------------ -----------
Raw materials $ 11,974 $ 1,729 $ 13,029
Stock in process 29,456 18,582 34,554
Produced goods 146,114 77,157 142,015
Dyes, chemicals and supplies 13,055 5,819 13,011
-------- ------- ---------
200,599 103,287 202,609
Less LIFO and other reserves (15,098) (7,353) (17,112)
-------- ------- ---------
$185,501 $95,934 $ 185,497
======== ======= =========
7
<PAGE>
GALEY & LORD, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JANUARY 2, 1999
(UNAUDITED)
NOTE E - LONG-TERM DEBT
On December 23, 1998, the Company amended its Senior Credit Facility with its
current bank group lead by First Union National Bank, as agent and lender. Under
the Senior Credit Facility, as amended, the revolving line of credit borrowings
bear interest at a per annum rate, at the Company's option, of either (i) (a)
the greater of the prime rate or the federal funds rate plus .50% plus (b) a
margin of 0%, .25%, .50%, .75%, 1.00% or 1.25%, based on the Company achieving
certain leverage ratios (as defined in the Senior Credit Facility) or (ii) LIBOR
plus a margin of 1.25%, 1.50%, 1.75%, 2.00%, 2.25% or 2.50%, based on the
Company achieving certain leverage ratios. Term Loan B and Term Loan C bear
interest at a per annum rate, at the Company's option, of (A) with respect to
Term Loan B either (i)(a) the greater of the prime rate of federal funds rate
plus .50%, plus (b) a margin of 1.00%, 1.25%, 1.50% or 1.75%, based on the
Company achieving certain leverage ratios or (ii) LIBOR plus a margin of 2.25%,
2.50%, 2.75% or 3.00%, based on the Company achieving certain leverage ratios or
(B) with respect to Term Loan C, either (i)(a) greater of the prime rate or
federal funds rate plus .50%, plus (b) a margin of 1.25%, 1.50%, 1.75% or 2.00%,
based on the Company achieving certain leverage ratios, or (ii) LIBOR plus a
margin of 2.50%, 2.75%, 3.00% or 3.25%, based on the Company's achieving certain
leverage ratios.
NOTE F - NET INCOME PER COMMON SHARE
The following table sets forth the computation of basic and diluted earnings per
share (in thousands):
Quarters Ended
---------------------------
January 2, December 27,
1999 1997
----------- ------------
Numerator:
Income (loss) before extraordinary item $ 3,370 $ (110)
Extraordinary loss - (524)
---------- -----------
Net income (loss) $ 3,370 $ (634)
========== ==========
Denominator:
Denominator for basic earnings per share -
weighted average shares 11,841 11,664
Effect of dilutive securities:
Stock options 127 372
---------- ---------
Diluted potential common shares
denominator for diluted earnings per
share - adjusted weighted average shares
and assumed exercises 11,968 12,036
========== =========
8
<PAGE>
GALEY & LORD, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JANUARY 2, 1999
(UNAUDITED)
NOTE F - NET INCOME PER COMMON SHARE (CONTINUED)
Incremental shares for diluted earnings per share represent the dilutive effect
of options outstanding during the quarter. Options to purchase 246,849 shares
and 2,000 shares of common stock were outstanding during the periods ended
January 2, 1999 and December 27, 1997, respectively, but were not included in
the computation of diluted earnings per share because the options' exercise
price was greater than the average market price of the common shares. Options to
purchase 15,000 shares and 338,000 shares of common stock were outstanding
during the periods ended January 2, 1999 and December 27, 1997, respectively,
but were not included in the computation of diluted earnings per share pursuant
to the contingent share provisions of Financial Accountant Standards Board
Statement No. 128, "Earnings Per Share". Vesting of these options is contingent
upon the market price of common shares reaching certain target prices, which
were greater than the average market price of the common shares.
NOTE G - STOCKHOLDERS' EQUITY
In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards ("FAS") No. 130, "Reporting Comprehensive
Income." FAS 130 requires that the Company report comprehensive income and its
components in a full set of general-purpose financial statements. Comprehensive
income represents the change in stockholder's equity during the period from
non-owner sources. Currently, changes from non-owner sources consist of net
income and foreign currency translation adjustments. The Company adopted FAS 130
on October 4, 1998. Total comprehensive income (loss) for the quarters ended
January 2, 1999 and December 27, 1997 was $1.4 million and $(0.6) million,
respectively.
9
<PAGE>
GALEY & LORD, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JANUARY 2, 1999
(UNAUDITED)
NOTE G - STOCKHOLDERS' EQUITY (CONTINUED)
Activity in Stockholders' Equity is as follows (dollar amounts in thousands):
<TABLE>
<CAPTION>
Accumulated
Current Year Other
Comprehensive Common Contributed Retained Treasury Comprehensive
Income Stock Capital Earnings Stock Income Total
------ ----- ------- -------- ----- ------ -----
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at
October 3, 1998 $122 $38,987 $81,861 $(2,247) $9,154 $127,877
Issuance of 12,000
shares of Common
Stock upon exercise
of options - 11 - - - 11
Compensation earned
related to stock
options - 21 - - - 21
Comprehensive income:
Net income for
January 2, 1999 $3,370 - - 3,370 - - 3,370
Foreign currency
translation
adjustment (2,003) - - - - (2,003) (2,003)
------ ---- ------- ------- ------ ------ --------
Total comprehensive
income $1,367
======
Balance at
January 2, 1999 $122 $39,019 $85,231 $(2,247) $7,151 $129,276
==== ======= ======= ======= ====== ========
</TABLE>
10
<PAGE>
GALEY & LORD, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JANUARY 2, 1999
(UNAUDITED)
NOTE H - SUPPLEMENTAL CONDENSED CONSOLIDATING FINANCIAL INFORMATION
The following summarizes condensed consolidating financial information for the
Company, segregating Galey and Lord, Inc. (the "Parent") and guarantor
subsidiaries from non-guarantor subsidiaries. The guarantor subsidiaries are
wholly-owned subsidiaries of the Company and guarantees are full, unconditional
and joint and several. Separate financial statements of each of the guarantor
subsidiaries are not presented because management believes that these financial
statements would not be material to investors.
<TABLE>
<CAPTION>
January 2, 1999
------------------------------------------------------------------
(in thousands)
Non-
Guarantor Guarantor
Parent Subsidiaries Subsidiaries Eliminations Consolidated
------ ------------ ------------ ------------ ------------
Financial Position
- ------------------
<S> <C> <C> <C> <C> <C>
Current assets:
Trade accounts
receivable $ - $ 129,325 $ 51,820 $ - $ 181,145
Inventories - 144,983 41,479 (961) 185,501
Other current
assets 4,547 67,407 23,922 (49,620) 46,256
--------- --------- --------- ---------- -----------
Total current
assets 4,547 341,715 117,221 (50,581) 412,902
Property, plant and
equipment, net - 295,704 114,523 - 410,227
Intangibles - 154,190 - - 154,190
Other assets 832,198 1,964 55,033 (845,344) 43,851
--------- --------- --------- --------- -----------
$836,745 $ 793,573 $ 286,777 $(895,925) $ 1,021,170
======== ======== ========= ========= ===========
Current liabilities:
Trade accounts
payable $ 601 $ 33,114 $ 24,930 $ - $ 58,645
Accrued
liabilities 19,393 19,321 19,316 1,183 59,213
Other current
liabilities 27,095 25,713 29,351 (68,353) 13,806
--------- --------- --------- --------- -----------
Total current
liabilities 47,089 78,148 73,597 (67,170) 131,664
Long-term debt 652,563 598,413 11,603 (590,650) 671,929
Other non-current
liabilities 7,817 65,233 17,937 (2,686) 88,301
Stockholders' equity 129,276 51,779 183,640 (235,419) 129,276
--------- --------- --------- --------- -----------
$836,745 $ 793,573 $ 286,777 $(895,925) $ 1,021,170
======== ========= ========= ========= ===========
</TABLE>
11
<PAGE>
GALEY & LORD, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JANUARY 2, 1999
(UNAUDITED)
NOTE H - SUPPLEMENTAL CONDENSED CONSOLIDATING FINANCIAL INFORMATION (CONTINUED)
<TABLE>
<CAPTION>
Three Months Ended January 2, 1999
-----------------------------------------------------------------
(in thousands)
Non
Guarantor Guarantor
Parent Subsidiaries Subsidiaries Eliminations Consolidated
------- ------------ ------------ ------------ ------------
Results of Operations
- ---------------------
<S> <C> <C> <C> <C> <C>
Sales $ - $191,460 $ 64,709 $(10,134) $246,035
Gross profit - 20,088 7,809 25 27,922
Operating income 133 13,506 5,227 25 18,891
Interest expense,
income taxes and
other, net (1,267) 14,496 2,798 (506) 15,521
Net income $1,400 $ (990) $ 2,429 $ 531 $ 3,370
Three Months Ended January 2, 1999
------------------------------------------------------------------
(in thousands)
Non-
Guarantor Guarantor
Parent Subsidiaries Subsidiaries Eliminations Consolidated
------- ------------ ------------ ------------ ------------
Cash Flows
- ----------
Cash provided by
(used in) operating
activities $11,255 $ 5,390 $ (9,081) 1,592 $ 9,156
Cash provided by
(used in) investing
activities (11) (6,487) 6,990 (1,604) (1,112)
Cash provided by
(used in) financing
activities (11,267) 1,252 (2,343) 12 (12,346)
Effect of exchange
rate change on cash
and equivalents - - 72 - 72
-------- ---------- ---------- --------- ----------
Net change in cash
and cash equivalents (23) 155 (4,362) - (4,230)
Cash and cash
equivalents at
beginning of period 114 8,326 11,506 - 19,946
-------- ---------- ---------- --------- ----------
Cash and cash
equivalents at end
of period $ 91 $ 8,481 $ 7,144 $ - $ 15,716
======== ========== ========== ========= ==========
</TABLE>
12
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
FORWARD LOOKING STATEMENTS
This Form 10-Q contains statements which constitute forward-looking statements
within the meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended. Those statements
include statements regarding the intent, belief or current expectations of the
Company and its management team. Prospective investors are cautioned that any
such forward-looking statements are not guarantees of future performance and
involve risks and uncertainties, and that actual results may differ materially
from those projected in the forward-looking statements. Such risks and
uncertainties include, among other things, competitive and economic factors in
the textile, apparel and home furnishings markets, raw materials and other
costs, weather-related delays, general economic conditions and other risks and
uncertainties that may be detailed herein or in the Company's Annual Report on
Form 10-K for the fiscal year ended October 3, 1998.
SIGNIFICANT EVENTS
On January 29, 1998, the Company entered into a Master Separation Agreement with
Polymer Group, Inc. ("Polymer"), DT Acquisition, Inc. ("DTA"), a subsidiary of
Polymer, Dominion Textile, Inc. ("Dominion") and certain other parties pursuant
to which the Company acquired (the "Acquisition") the apparel fabrics business
(the "Acquired Business") of Dominion from DTA for a cash purchase price of
$466.9 million including certain costs related to the Acquisition. The Acquired
Business primarily consists of subsidiaries and joint venture interests, which
comprise the Swift Denim Group, the Klopman Group and Swift Europe. Swift Denim
is the second largest supplier of denim in the world, Klopman is one of the
largest suppliers of uniform fabrics in Europe and Swift Europe is a major
international supplier of denim to Europe, North Africa and Asia. The total
purchase price of the Acquisition was funded with borrowings under the Company's
credit facilities(see Liquidity and Capital Resources below). The Company used
the net proceeds from the private placement on February 24, 1998 of $300.0
million aggregate principal amount of 9 1/8% Senior Subordinated Notes Due 2008
(the "Initial Notes")to repay portions of such credit facilities.
13
<PAGE>
RESULTS OF OPERATIONS
The Company's operations are primarily classified into two operating segments:
(1) apparel fabrics, consisting of cotton casuals, denim, corduroy and uniform
fabrics and (2) home fabrics. Results for the three month periods ended January
2, 1999 and December 27, 1997 for each segment are shown below:
Three Months Ended
------------------
1/2/99 12/27/97
------ --------
(dollar amounts in millions)
Net Sales to External Customers
- -------------------------------
Apparel fabrics $ 237.3 $ 113.7
Home fabrics 8.7 13.4
------- --------
Total net sales $ 246.0 $ 127.1
======== ========
Operating Income Per Segment
- ----------------------------
Apparel fabrics $ 18.3 $ 5.1
% of Apparel Fabrics Net Sales 7.7% 4.5%
Home fabrics $ .6 $ .9
% of Home Fabrics Net Sales 6.5% 6.5%
--------- --------
Total $ 18.9 $ 6.0
% of Total Net Sales 7.7% 4.7%
NET SALES
Net sales for the December quarter 1998 (first quarter of fiscal 1999) were
$246.0 million as compared to $127.1 million for the December quarter 1997
(first quarter of fiscal 1998). The increase in net sales of $118.9 million
primarily resulted from $121.2 million of net sales attributable to the
Acquisition and a $1.0 million increase in net sales from the apparel fabrics
segment, partially offset by a $4.7 million decrease in net sales from the home
fabrics segment.
Apparel fabrics' net sales for the December quarter 1998 were $237.3 million, a
$123.6 million increase over the December quarter 1997 net sales of $113.7
million. The increase in net sales is primarily attributable to the addition of
Swift Denim's net sales of $82.2 million and Klopman's net sales of $39.0
million for the December quarter 1998. The remaining $2.4 million of the
increase in apparel fabrics' net sales was due to higher net sales of woven
sportswear, partially offset by lower net sales of corduroy. Sales of denim are
currently lower than those in historical periods due to the softness in the
current retail environment. The Company currently expects that sales of denim
will rebound in the June quarter 1999, although there can be no assurances that
this will occur.
Home fabrics net sales for the December quarter 1998 were $8.7 million as
compared to $13.5 million for the December quarter 1997. The decline in net
sales reflects a softness in the home fashion markets in which the Company
participates.
14
<PAGE>
OPERATING INCOME
Operating income for the December quarter 1998 was $18.9 million as compared to
$6.0 million for the December quarter 1997. The increase in apparel fabrics
operating income margins primarily was a result of the Acquisition in January
1998, partially offset by decreased operating income from the Company's other
apparel fabrics business mostly due to lower net corduroy sales resulting from a
weaker corduroy market in the December quarter 1998. Swift Denim's lower net
sales has adversely impacted its absorption of fixed costs resulting in lower
operating income than in historical periods. Home fabrics operating income
remained consistent for the December quarter 1998 compared to the December
quarter 1997.
INTEREST EXPENSE
Interest expense was $15.0 million for the December quarter 1998 compared to
$3.5 million for the December quarter 1997. The increase in interest expense was
primarily due to $11.6 million of added interest expense on additional
indebtedness incurred to finance the Acquisition.
NET INCOME AND NET INCOME PER SHARE
Net income for the December quarter 1998 was $3.4 million or $.28 per common
share, compared to a net loss for the December quarter 1997 of $0.6 million or
$.05 per common share. December quarter 1997 results included nonrecurring
charges related to the Acquisition of $4.0 million pre-tax or $.20 per common
share. Excluding the nonrecurring charges, the Company reported income before
nonrecurring items for the December quarter 1997 of $1.8 million or $.15 per
common share.
ORDER BACKLOG
The Company's order backlog at January 2, 1999 was $168.7 million, a 37%
decrease from the December 27, 1997 backlog, adjusted for the Acquisition, of
$268.6 million. Many apparel manufacturers, including many of the Company's
customers, have modified their purchasing procedures and have shortened lead
times from order to delivery. The Company believes that as this trend continues
amongst its customers, order backlogs will decline and may not provide as
meaningful information in regards to the Company's future sales as in the past.
LIQUIDITY AND CAPITAL RESOURCES
On February 24, 1998, the Company closed its private offering of $300.0 million
aggregate principal amount of 9 1/8% Senior Subordinated Notes Due 2008 (the
"Initial Notes"). Net proceeds from the offering of $289.3 million (net of the
initial purchaser's discount and offering expenses) were used to repay (i)
$275.0 million principal amount of borrowings under the Bridge Financing
Facility (as defined below) incurred to partially finance the Acquisition and
(ii)
15
<PAGE>
a portion of the outstanding amount under a revolving line of credit provided
for under the Senior Credit Facility (as defined herein).
On May 21, 1998, the Company completed an exchange offer pursuant to which it
exchanged publicly registered 9 1/8% Senior Subordinated Notes Due 2008 (the
"Notes") for the Initial Notes pursuant to the terms and conditions set forth in
a prospectus dated April 22, 1998 and filed as part of a Registration Statement
on Form S-4 with the United States Securities and Exchange Commission which was
declared effective on April 22, 1998. The terms of the Notes are identical in
all material respects to those of the Initial Notes except that the Notes are
freely transferable by holders and are not subject to any covenant regarding
registration under the Securities Act of 1933, as amended. Interest on the Notes
will be paid March 1 and September 1 of each year. The first interest payment on
the Notes was made on September 1, 1998.
The Notes are general unsecured obligations of the Company, subordinated in
right of payment to all existing and future senior indebtedness of the Company
and its subsidiaries and senior in right of payment to any subordinated
indebtedness of the Company. The Notes are unconditionally guaranteed, on an
unsecured senior subordinated basis, by Galey & Lord Industries, Inc., Swift
Denim Services, Inc., G&L Service Company North America, Inc., Swift Textiles,
Inc. and other future direct and indirect domestic subsidiaries of the Company.
The Notes are subject to certain covenants, including, without limitation, those
limiting the Company's and its subsidiaries' ability to incur indebtedness, pay
dividends, incur liens, transfer or sell assets, enter into transactions with
affiliates, issue or sell stock of restricted subsidiaries or merge or
consolidate the Company or its restricted subsidiaries.
On January 29, 1998, the Company entered into a new credit agreement (as
amended, the "Senior Credit Facility"), with First Union National Bank ("FUNB"),
as agent and lender, and, as of March 27, 1998, with a syndicate of lenders. The
Senior Credit Facility provides for (i) a revolving line of credit under which
the Company may borrow up to an amount (including letters of credit up to an
aggregate of $30.0 million) equal to the lesser of $225.0 million or a borrowing
base (comprised of eligible accounts receivable and eligible inventory, as
defined in the Senior Credit Facility), (ii) a term loan in the principal amount
of $155.0 million ("Term Loan B") and (iii) a term loan in the principal amount
of $110.0 million ("Term Loan C").
Under the Senior Credit Facility borrowings were used to refinance the Company's
prior senior credit facility with FUNB, to fund the Acquisition, to pay for
certain closing costs and expenses related to the Acquisition and for general
corporate and working capital purposes. Under the Senior Credit Facility, the
revolving line of credit expires on March 27, 2004 and the principal amount of
(i) Term
16
<PAGE>
Loan B is repayable in 24 quarterly payments of $387,500 until March 27, 2004
and, thereafter, four quarterly payments of $36,425,000 until Term Loan B's
maturity on April 2, 2005 and (ii) Term Loan C is repayable in 28 quarterly
payments of $275,000 until April 2, 2005 and, thereafter, four quarterly
payments of $25,575,000 until Term Loan C's maturity on April 1, 2006. Under the
Senior Credit Facility, as amended on December 22, 1998, the revolving line of
credit borrowings bear interest at a per annum rate, at the Company's option, of
either (i) (a) the greater of the prime rate or the federal funds rate plus .50%
plus (b) a margin of 0%, .25%, .50%, .75%, 1.00% or 1.25%, based on the Company
achieving certain leverage ratios (as defined in the Senior Credit Facility) or
(ii) LIBOR plus a margin of 1.25%, 1.50%, 1.75%, 2.00%, 2.25% or 2.50%, based on
the Company achieving certain leverage ratios. Term Loan B and Term Loan C bear
interest at a per annum rate, at the Company's option, of (A) with respect to
Term Loan B either (i) (a) the greater of the prime rate or federal funds rate
plus .50%, plus (b) a margin of 1.00%, 1.25%, 1.50% or 1.75%, based on the
Company achieving certain leverage ratios or (ii) LIBOR plus a margin of 2.25%,
2.50%, 2.75% or 3.00%, based on the Company achieving certain leverage ratios or
(B) with respect to Term Loan C, either (i) (a)the greater of the prime rate or
federal funds rate plus .50%, plus (b) a margin of 1.25%, 1.50%, 1.75% or 2.00%,
based on the Company achieving certain leverage ratios, or (ii) LIBOR plus a
margin of 2.50%, 2.75%, 3.00% or 3.25%, based on the Company's achieving certain
leverage ratios.
The Company's obligations under the Senior Credit Facility are secured by all of
the assets (other than real property) of the Company and each of its domestic
subsidiaries, a pledge by the Company and each of its domestic subsidiaries of
all the outstanding capital stock of its respective domestic subsidiaries and a
pledge of 65% of the outstanding voting capital stock, and 100% of the
outstanding non-voting capital stock, of certain of its respective foreign
subsidiaries. In addition, payment of all obligations under the Senior Credit
Facility is guaranteed by each of the Company's domestic subsidiaries. Under the
Senior Credit Facility, the Company is required to make mandatory prepayments of
principal annually in an amount equal to 50% of Excess Cash Flow (as defined in
the Senior Credit Facility), and also in the event of certain dispositions of
assets or debt or equity issuances (all subject to certain exceptions) in an
amount equal to 100% of the net proceeds received by the Company therefrom.
The Senior Credit Facility contains certain covenants, including, without
limitation, those limiting the Company's and its subsidiaries' ability to incur
indebtedness, incur liens, sell or acquire assets or businesses, change the
nature of its business, make certain investments or pay dividends. In addition,
the Senior Credit Facility requires the Company to meet certain financial ratio
tests and limits the amount of capital expenditures which the Company and its
17
<PAGE>
subsidiaries may make in any fiscal year. In connection with the current sales
environment for denim products, the Company and its lenders amended certain
covenants within the Company's Senior Credit Facility in December 1998. The
amendment eased the "adjusted leverage ratio" and the "adjusted fixed charge
coverage" covenants consistent with the Company's current expectations.
On December 19, 1997, the Company entered into a $470.0 million credit agreement
(the "Interim Credit Agreement") with FUNB, as agent and lender. Initial
revolving credit line borrowings under the Interim Credit Agreement were used to
refinance the existing term loan and revolving credit facility. The Interim
Credit Agreement was replaced on January 29, 1998 when the Company entered into
the Senior Credit Facility.
On December 19, 1997, the Company entered into a Senior Subordinated Credit
Agreement (the "Bridge Financing Facility") with First Union Corporation, as
agent and lender, which was amended on January 29, 1998 and provided for
borrowings of $275.0 million, of which $145.6 million was initially borrowed on
December 19, 1997 and the remainder of which was borrowed on January 29, 1998.
All borrowings under the Bridge Financing Facility were used to fund the
Acquisition (including fees and expenses). The Bridge Financing Facility was
repaid on February 24, 1998 when the Company closed its private offering of
$300.0 million aggregate principal amount of Initial Notes.
Pursuant to an agreement (the "Pension Funding Agreement"), dated January 29,
1998 with the Pension Benefit Guaranty Corporation ("PBGC"), the Company will
provide $5.0 million additional funding to three defined benefit pension plans
previously sponsored by Dominion, $3.0 million of which was paid at the closing
of the Acquisition and the remaining $2.0 million of which is to be paid in
installments over the succeeding two years. The Pension Funding Agreement also
gives the PBGC a priority lien of $10.0 million on certain land and building
assets of the Company to secure payment of any liability to the PBGC that might
arise if one or more of the pension plans were terminated. The Company's
obligations under the Pension Funding Agreement terminate upon the earlier to
occur of (a) the termination of the pension plans and (b) on or after January
30, 2003, either (i) the pension plans are fully funded for two consecutive
years or (ii) the Company receives an investment grade rating on its debt.
For the three months of fiscal 1999, the Company spent approximately $7.4
million for capital expenditures. The Company expects to spend approximately
$27.0 million for capital expenditures in fiscal 1999. The Company anticipates
that approximately $11.7 million will be used to increase the Company's capacity
while the remaining $15.3 million will be used to maintain existing capacity.
The Company expects to fund these expenditures through funds from operations and
borrowings under its revolving line of credit under the Senior Credit Facility.
18
<PAGE>
Working capital increased approximately $117.9 million to $281.2 million at
January 2, 1998 as compared to $163.3 million at December 27, 1997.
Approximately $98.4 million of the increase occurred as a result of the
Acquisition and related refinancings. The remaining $19.5 million of the
increase primarily reflects seasonal changes in business for the Acquired
Business since January 29, 1998.
The Company anticipates that cash requirements including working capital and
capital expenditure needs will be met through funds generated from operations
and through revolving credit borrowings under the Company's Senior Credit
Facility. In addition, from time to time, the Company uses borrowings under
secured and unsecured bank loans, through capital leases or through operating
leases for various equipment purchases.
YEAR 2000 COMPLIANCE
Until recently, computer programs were generally written using two digits rather
than four to define the applicable year. Accordingly, such programs may be
unable to distinguish properly between the Year 1900 and the Year 2000. This
could result in system failures or data corruption for the Company, its
customers or suppliers which could cause disruptions of operations, including,
among other things, a temporary inability to process transactions or engage in
business activities or to receive information, services, raw materials and
supplies, or payment from suppliers, customers or business partners or any other
companies with which the Company conducts business.
The Company, including the Acquired Business, has developed a comprehensive plan
intended to address Year 2000 issues. As part of the plan, the Company has
selected a team to identify, evaluate and implement remediation efforts aimed at
bringing the Company's information technology and non-information technology
systems into Year 2000 compliance prior to December 31, 1999. During fiscal
1998, the team completed its assessment of the Company's information technology
and non-information technology systems. Additionally, the Company has engaged an
independent consulting firm that specializes in implementing and reviewing Year
2000 programs. Such firm has evaluated significant portions of the Company's
remediation plan and has identified improvements to the Company's overall
remediation efforts.
The Company's information technology remediation efforts are substantially
complete and the Company's significant efforts in fiscal 1999 will consist of
testing the updated systems. It is anticipated
19
<PAGE>
that additional remediation efforts resulting principally from the testing
procedures will be completed by the end of the Company's 1999 fiscal year. The
Company has also prioritized and completed the significant steps of its
non-information technology systems plan. The Company's remaining remediation
efforts related to non-information technology systems are expected to be
completed during fiscal 1999. If the Company's remaining remediation efforts are
not completed on a timely basis, the Year 2000 issue could have an adverse
effect on the Company's operations.
Based upon the remediation efforts completed, the Company does not believe a
formal contingency plan will be required. Individual locations or business units
will develop informal contingency plans in the event that they do not expect to
be fully Year 2000 compliant within the current time estimates. To date, the
cost of the Company's Year 2000 assessment and remediation efforts has not been
material to the Company's results of operations or liquidity. The total
expenditures in fiscal 1999 to remediate the Company's year 2000 issues,
inclusive of its ongoing systems initiatives is not expected to exceed $2.5
million. The Company is funding the expenditures related to the Year 2000 plan
with cash flows from operations. The capitalization or expense of the foregoing
expenditures will be determined using current authoritative guidance.
The Company is also communicating with its significant suppliers, customers and
business partners to coordinate Year 2000 conversion efforts. Additionally,
during fiscal 1999 the Company will be contacting second tier suppliers to
assess their Year 2000 readiness. Currently, the Company is unaware of any
material exposures or contingencies in regards to these parties. However, the
Company cannot reasonably estimate the potential impact on its financial
position, results of operations or cash flows in the event these parties do not
become Year 2000 capable on a timely basis.
EURO CONVERSION
On January 1, 1999, eleven of the fifteen member countries of the European Union
(the "Participating Countries") established fixed conversion rates between their
existing sovereign currencies ("legacy currencies") and the Euro. Between
January 1, 1999 and December 31, 2001, the Euro will be used solely for non-cash
transactions. During this time period, the Euro will be traded on currency
exchanges and will be the basis of valuing legacy currencies. The legacy
currencies will continue to be legal tender. Beginning January 1, 2002, the
participating countries will issue new Euro-denominated bills and coins for use
in cash transactions, and no later than July 1, 2002, will withdraw all bills
and coins denominated in the legacy currencies. The legacy currencies will then
no longer be legal tender for any transactions.
20
<PAGE>
The Company's European operations export the majority of its sales to countries
that are Participating Countries. As the European pricing policy has
historically been based on local currencies, the Company believes that as a
result of the Euro conversion the uncertainty of the effect of exchange rate
fluctuations will be greatly reduced. In addition, the Company's principal
competitors are also located within the Participating Countries. The Company
believes that the conversion to the Euro will eliminate much of the advantage or
disadvantage coming from exchange rate fluctuation resulting from transactions
involving legacy currencies in Participating Countries. Accordingly,
competitiveness will be solely based on price, quality and service. While the
Company believes the increased competitiveness based on these factors will
provide the Company with a strategic advantage over smaller local companies, it
cannot assess the magnitude of this impact on its operations.
The Company's Euro conversion plan provides for the invoicing of products in
both local currencies and Euro beginning January 1, 1999. However, the
conversion of the Company's financial reporting and information systems will not
begin until the Company's 2000 fiscal year. The Company believes that the Euro
conversion will be completed prior to the beginning of its 2001 fiscal year and
that the costs related to the conversion will not be material to the Company's
operating results or liquidity although no assurances can be made in this
regard.
IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS
In June 1997, the FASB issued FAS 131, "Disclosures about Segments of an
Enterprise and Related Information", effective for years beginning after
December 15, 1997, the Company's fiscal year 1999. FAS 131 requires that a
public company report financial and descriptive information about its reportable
operating segments pursuant to criteria that differ from current accounting
practice. Operating segments, as defined, 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. The financial information to be reported includes segment
profit or loss, certain revenue and expense items and segment assets and
reconciliations to corresponding amounts in the general purpose financial
statements. FAS 131 also requires information about products and services,
geographic areas of operation, and major customers. The Company has not
completed its analysis of the effect of adoption on its financial statement
disclosure, however, the adoption of FAS 131 will not affect results of
operations or financial position, but may affect the disclosure of segment
information.
In June 1998, the FASB issued FAS 133, "Accounting for Derivative Instruments
and Hedging Activities," effective for years beginning
21
<PAGE>
after June 15, 1999, the Company's fiscal year 2000. FAS 133 requires that all
derivatives be recorded on the balance sheet at fair value. Derivatives that are
not hedges must be adjusted to fair value through income. If the derivative is a
hedge, depending on the nature of the hedge, changes in the fair value of
derivatives would be either offset against the change in the fair value of
assets, liabilities, or firm commitments through earnings or recognized in other
comprehensive income until the hedged item is recognized in earnings. The
ineffective portion of a derivative's change in fair value would immediately be
recognized in earnings. The Company has not yet determined what the effect of
FAS 133 will be on the earnings and financial position of the Company.
22
<PAGE>
Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Information relative to the Company's market risk sensitive instruments by major
category at October 3, 1998 is presented under Item 7a of the registrant's
Annual Report on Form 10-K for the fiscal year ended October 3, 1998.
FOREIGN CURRENCY EXPOSURES
The Company's earnings are affected by fluctuations in the value of its
subsidiaries' functional currency as compared to the currencies of its foreign
denominated sales and purchases. Foreign currency options and forward contracts
and natural offsets are used to hedge against the earnings effects of such
fluctuations. As of January 2, 1999, the result of a uniform 10% change in the
value of the U.S. dollar relative to currencies of countries in which the
Company manufactures or sells its products would not be material.
COTTON COMMODITY EXPOSURES
Purchase contracts are used to hedge against fluctuations in the price of raw
material cotton. Increases or decreases in the market price of cotton may effect
the fair value of cotton commodity purchase contracts. Due to decreases in the
spot rate and quoted futures contract prices of cotton between the Company's
fiscal year ended October 3, 1998 and January 2, 1999, a 10% decline in market
prices as of January 2, 1999 would have an additional negative impact on the
value of outstanding contracts of $10.3 million compared to the Company's fiscal
year end.
INTEREST RATE EXPOSURES
The Company enters into interest rate swap agreements to reduce the impact of
changes in interest rates on its floating rate debt. The fair values of the
agreements are not materially different from the notional values as of January
2, 1999.
DERIVATIVE FINANCIAL INSTRUMENTS
The Company uses forward exchange contracts to reduce the effect of fluctuating
foreign currencies on short-term assets and commitments. These short-term assets
and commitments principally relate to accounts receivable and trade payable
positions and fixed asset purchase obligations. Unrealized gains and losses
related to outstanding forward exchange contracts at January 2, 1999 are not
material.
23
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings (not applicable)
Item 2. Changes in Securities and Use of Proceeds (not applicable)
Item 3. Defaults Upon Senior Securities (not applicable)
Item 4. Submission of Matters to a Vote of Security Holders (not applicable)
Item 5. Other Information (not applicable)
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits - The exhibits to this Form 10-Q are listed in the
accompanying Exhibit Index
(b) Reports on Form 8-K - None.
24
<PAGE>
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.
Galey & Lord, Inc.
---------------------------
(Registrant)
/s/ Michael R. Harmon
------------------------------
Michael R. Harmon
Executive Vice President,
Chief Financial Officer
(Principal Financial and
Accounting Officer), Treasurer
and Secretary
December 8, 1999
- -----------------
Date
25
<PAGE>
EXHIBIT INDEX
Exhibit Sequential
Number Description Page No.
- ------- ----------- ----------
27 Financial Data Schedule
26
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> OCT-02-1999
<PERIOD-START> OCT-04-1998
<PERIOD-END> JAN-02-1999
<CASH> 15,716
<SECURITIES> 0
<RECEIVABLES> 181,145
<ALLOWANCES> 0
<INVENTORY> 185,501
<CURRENT-ASSETS> 412,902
<PP&E> 519,044
<DEPRECIATION> 108,817
<TOTAL-ASSETS> 1,021,170
<CURRENT-LIABILITIES> 131,664
<BONDS> 298,624
0
0
<COMMON> 122
<OTHER-SE> 39,019
<TOTAL-LIABILITY-AND-EQUITY> 1,021,170
<SALES> 246,035
<TOTAL-REVENUES> 246,035
<CGS> 218,113
<TOTAL-COSTS> 218,113
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 14,956
<INCOME-PRETAX> 5,250
<INCOME-TAX> 1,880
<INCOME-CONTINUING> 3,370
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,370
<EPS-BASIC> 0.28
<EPS-DILUTED> 0.28
</TABLE>
