UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
-------------------------------
FORM 10-Q
(Mark One)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD
ENDED APRIL 30, 1998
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission File Number -- 0-20490
-------------------------------
THE CARBIDE/GRAPHITE GROUP, INC.
(Exact Name of Registrant as Specified in Charter)
Delaware 25-1575609
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Code)
One Gateway Center, 19th Floor
Pittsburgh, PA 15222
(412) 562-3700
(Address, including zip code, and
telephone number, including area code,
of principle executive offices)
- --------------------------------------------------------------------------------
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
As of the close of business on June 12, 1998, there were 8,734,042 shares of the
Registrant's $0.01 par value common stock outstanding.
<PAGE>
THE CARBIDE/GRAPHITE GROUP, INC.
INDEX TO FORM 10-Q
ITEM DESCRIPTION PAGE
- ------------ ---------------------------------------------------- ---------
PART I
1 Index to Financial Statements ....................... 2
2 Management's Discussion and Analysis of Financial
Condition and Results of Operations ............ 12
PART II
1 Legal Proceedings ................................... 18
2 Changes in Securities ............................... 19
3 Defaults Upon Senior Securities ..................... *
4 Submission of Matters to a Vote of Security Holders . *
5 Other Information ................................... *
6 Index to Exhibits and Reports on Form 8-K ........... 19
Signatures .......................................... 20
------------------
* Item not applicable to the Registrant for this filing on Form 10-Q.
1
<PAGE>
PART I
Item 1
INDEX TO UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
PAGE
----------
Condensed Consolidated Balance Sheets
as of April 30, 1998 and July 31, 1997 ......................... 3
Unaudited Consolidated Statements of Operations
for the Quarters and Nine Months Ended April 30, 1998 and 1997 . 4
Unaudited Consolidated Statement of Stockholders' Equity
for the Nine Months Ended April 30, 1998 ....................... 5
Unaudited Consolidated Statements of Cash Flows
for the Quarters and Nine Months Ended April 30, 1998 and 1997 . 6
Footnotes to Unaudited Condensed Consolidated Financial Statements .. 7
2
<PAGE>
THE CARBIDE/GRAPHITE GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
as of April 30, 1998 and July 31, 1997
(in thousands, except share information)
<TABLE>
<CAPTION>
April 30, July 31,
1998 1997 *
--------------- ----------------
(Unaudited)
ASSETS
<S> <C> <C>
Current assets:
Cash and cash equivalents ................................................ - $7,935
Short-term investments .................................................. - 15,912
Accounts receivable -- trade, net of allowance for doubtful
accounts: $2,030 at April 30 and $2,029 at July 31 .................. $47,424 49,088
Inventories (Note 2) ..................................................... 61,711 59,445
Income taxes receivable .................................................. 3,645 -
Other current assets ..................................................... 10,956 10,956
--------------- ----------------
Total current assets ................................................. 123,736 143,336
Property, plant and equipment, net ........................................... 133,646 87,653
Deferred income taxes ........................................................ 3,217 -
Other assets ................................................................. 4,612 4,871
--------------- ----------------
Total assets ....................................................... $265,211 $235,860
=============== ================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Trade accounts payable ................................................... $15,678 $21,036
Overdrafts ............................................................... 5,427 -
Interest ................................................................. 196 3,835
Antitrust claims reserve (Note 5) ........................................ 37,209 -
Other current liabilities ................................................ 17,059 17,640
--------------- ----------------
Total current liabilities ............................................ 75,569 42,511
Long-term debt (Note 4) ...................................................... 97,782 80,035
Deferred income taxes ........................................................ - 7,161
Other liabilities ............................................................ 10,730 9,944
--------------- ----------------
Total liabilities .................................................. 184,081 139,651
--------------- ----------------
Stockholders' equity:
Common stock, $0.01 par value; 18,000,000 shares authorized; shares
issued: 9,871,042 at April 30 and 9,752,272 at July 31; shares
outstanding: 8,734,042 at April 30 and 8,632,272 at July 31 .......... 99 97
Additional paid-in capital ............................................... 35,958 34,163
Retained earnings ....................................................... 50,448 66,683
Other stockholders' equity items ........................................ (5,375) (4,734)
--------------- ----------------
Total stockholders' equity ....................................... 81,130 96,209
--------------- ----------------
Total stockholders' equity ...................................... $265,211 $235,860
=============== ================
</TABLE>
* Condensed from audited fiscal 1997 balance sheet.
The accompanying notes are an integral part of the Unaudited
Condensed Consolidated Financial Statements.
3
<PAGE>
THE CARBIDE/GRAPHITE GROUP, INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
for the quarters and nine months ended April 30, 1998 and 1997
(in thousands, except share and per share data)
<TABLE>
<CAPTION>
Quarter Ended April 30, Nine Months Ended April 30,
------------------------------ ---------------------------------
1998 1997 1998 1997
------------- ------------- ---------------- --------------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Net sales ........................................ $72,771 $74,923 $220,979 $217,720
Operating costs and expenses:
Cost of goods sold ........................... 62,045 60,644 181,674 178,371
Selling, general and administrative .......... 3,696 3,417 11,325 10,845
Other compensation (Note 6) .................. 150 318 657 1,232
Early retirement/severance charges (Note 6) - 1,100 - 1,100
Other expenses (Note 5) ...................... 38,000 - 38,000 -
------------- ------------- ---------------- --------------
Operating income (loss) .................. (31,120) 9,444 (10,677) 26,172
Other costs and expenses:
Interest expense (Note 4) .................... 1,155 1,902 3,780 6,099
------------- ------------- ---------------- --------------
Income (loss) before income taxes and
extraordinary loss ..................... (32,275) 7,542 (14,457) 20,073
Provision for (benefit from)
taxes on income (Note 3) ....................... (10,966) 2,794 (4,639) 7,181
------------- ------------- ---------------- --------------
Income (loss) before extraordinary loss .. (21,309) 4,748 (9,818) 12,892
Extraordinary loss on early extinguishment of
debt, net of $3,769 tax benefit ................ - - (6,417) -
------------- ------------- ---------------- --------------
Net income (loss) .................... ($21,309) $4,748 ($16,235) $12,892
============= ============= ================ ==============
Earnings per share information (Note 1):
Weighted average common shares
outstanding .................................... 8,722,695 8,606,439 8,694,580 8,478,605
------------- ------------- ---------------- --------------
Weighted average common and common
equivalent shares outstanding .................. - 8,824,924 - 8,806,969
------------- ------------- ---------------- --------------
Income (loss) before extraordinary loss:
Basic ....................................... ($2.44) $0.55 ($1.13) $1.52
Diluted ..................................... ($2.44) $0.54 ($1.13) $1.46
Extraordinary loss on early extinguishment of debt:
Basic ....................................... - - (0.74) -
Diluted ..................................... - - (0.74) -
------------- ------------- ---------------- --------------
Net income (loss):
Basic ....................................... ($2.44) $0.55 ($1.87) $1.52
============= ============= ================ ==============
Diluted ..................................... ($2.44) $0.54 ($1.87) $1.46
============= ============= ================ ==============
</TABLE>
The accompanying notes are an integral part of the Unaudited
Condensed Consolidated Financial Statements.
4
<PAGE>
THE CARBIDE/GRAPHITE GROUP, INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
for the nine months ended April 30, 1998
(in thousands, except share amounts)
<TABLE>
<CAPTION>
Common Stock Additional
--------------------------- Paid-In Retained Other Stockholders'
Shares Amount Capital Earnings Equity Items
------------- ----------- ------------- ------------ ---------------------
<S> <C> <C> <C> <C> <C>
Balance at July 31, 1997 *...... 9,752,272 $97 $34,163 $66,683 $(4,734)
Net loss ....................... - - - (16,235) -
Exercise of stock options ...... 118,770 2 1,795 - (59)
Purchase of treasury stock ..... - - - - (582)
------------- ----------- ------------- ------------ ---------------------
Balance at April 30,
1998 (Unaudited) ............. 9,871,042 $99 $35,958 $50,448 ($5,375)
============= =========== ============= ============ =====================
</TABLE>
- ------------------
* Condensed from audited fiscal year 1997 statement of stockholders' equity.
The accompanying notes are an integral part of the Unaudited
Condensed Consolidated Financial Statements.
5
<PAGE>
THE CARBIDE/GRAPHITE GROUP, INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
for the quarters and nine months ended April 30, 1998 and 1997
(in thousands)
<TABLE>
<CAPTION>
Quarter Ended April 30, Nine Months Ended April 30,
---------------------------- ---------------------------------
1998 1997 1998 1997
------------- ------------ --------------- ---------------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Net income (loss) ........................................ ($21,309) $4,748 ($16,235) $12,892
Adjustments for noncash transactions:
Depreciation and amortization .......................... 3,356 2,712 9,733 7,831
Amortization of debt issuance costs .................... 54 85 153 257
Amortization of intangible assets ...................... 91 79 270 240
Deferred revenue ....................................... (33) (34) (101) (101)
Stock option compensation .............................. - 7 - 47
Adjustments to deferred taxes .......................... (10,399) 80 (10,378) (530)
Provision for loss - accounts receivable ............... - 30 - 90
Extraordinary loss on early extinguishment of debt ...... - - 10,186 -
Increase (decrease) in cash from changes in:
Accounts receivable .................................... 3,303 1,690 1,664 (4,068)
Inventories ............................................ 3,175 (4,250) (2,266) (1,078)
Income taxes ........................................... (4,490) (1,017) (4,255) 552
Other current assets ................................... 311 (803) 897 1,016
Accounts payable and accrued expenses .................. 33,557 2,649 28,241 (743)
Net change in other non-current
assets and liabilities ............................... 234 133 164 447
------------- ------------ --------------- ---------------
Net cash provided by operations .................... 7,850 6,109 18,073 16,852
------------- ------------ --------------- ---------------
Investing activities:
Capital expenditures ................................... (20,710) (8,336) (55,959) (19,310)
Proceeds from (purchase of) short-term investments ...... - - 15,750 (5,409)
------------- ------------ --------------- ---------------
Net cash used for investing activities ............. (20,710) (8,336) (40,209) (24,719)
------------- ------------ --------------- ---------------
Financing activities:
Repurchase of Senior Notes, including
premium of $8,077 .................................... - - (88,030) -
Proceeds from revolving credit facility ................ 41,700 - 153,750 -
Repayment on revolving credit facility ................. (26,950) - (56,050) -
Other .................................................. (1,890) 119 4,531 354
------------- ------------ --------------- ---------------
Net cash provided by financing activities .......... 12,860 119 14,201 354
------------- ------------ --------------- ---------------
Net change in cash and cash equivalents .................. - (2,108) (7,935) (7,513)
Cash and cash equivalents, beginning of period ........... - 11,181 7,935 16,586
------------- ------------ --------------- ---------------
Cash and cash equivalents, end of period ................. - $9,073 - $9,073
============= ============ =============== ===============
</TABLE>
The accompanying notes are an integral part of the Unaudited
Condensed Consolidated Financial Statements.
6
<PAGE>
THE CARBIDE/GRAPHITE GROUP, INC. AND SUBSIDIARIES
FOOTNOTES TO UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
The Carbide/Graphite Group, Inc. and Subsidiaries herein are referenced as
the "Company." The Company's current fiscal year ends July 31, 1998.
1. Summary of Significant Accounting Policies:
Interim Accounting
The Company's Annual Report to Stockholders and Form 10-K for the fiscal
year ended July 31, 1997 include additional information about the Company, its
operations and its consolidated financial statements and contains a summary of
significant accounting policies followed by the Company in preparation of its
consolidated financial statements and should be read in conjunction with this
quarterly report on Form 10-Q. Unless otherwise noted below, these policies were
also followed in preparing the Unaudited Condensed Consolidated Financial
Statements included herein. The 1997 year-end consolidated balance sheet data
contained herein was derived from audited financial statements, but does not
include all disclosures required by generally accepted accounting principles.
In the opinion of management, all adjustments which are of a normal and
recurring nature necessary for a fair statement of the results of operations of
these interim periods have been included. Net loss for the nine months ended
April 30, 1998 is not necessarily indicative of the results to be expected for
the full fiscal year. The Management Discussion and Analysis which follows these
notes contains additional information on the results of operations and financial
position of the Company. These comments should be read in conjunction with these
financial statements.
Earnings per Share
The Company adopted Statement of Financial Accounting Standards (SFAS)
#128,"Earnings per Share" (SFAS #128) during its fiscal second quarter ended
January 31, 1998. SFAS #128 requires the presentation of "basic" and "diluted"
earnings per share. Under SFAS #128, basic earnings per share is computed
utilizing only the weighted average common shares outstanding during the
relevant period. Diluted earnings per share is computed utilizing both the
weighted average shares and common stock equivalents outstanding during the
period to the extent such common stock equivalents have a dilutive effect. Prior
year amounts have been restated to conform with the requirements of SFAS #128.
The following tables provide a reconciliation of the income and share
amounts for the basic and diluted earnings per share computations for income
from continuing operations for the quarters and nine months ended April 30, 1998
and 1997 (dollar amounts in thousands):
<TABLE>
<CAPTION>
For the quarters ended April 30,
------------------------------------------------------------------------------------
1998 1997
--------------------------------------- ---------------------------------------
Per Per
Income Share Income Share
(Loss) Shares Amount (Loss) Shares Amount
----------- ------------- --------- ----------- ------------- ---------
<S> <C> <C> <C> <C> <C> <C>
Basic earnings per share....... ($21,309) 8,722,695 ($2.44) $4,748 8,606,439 $0.55
========= =========
Effect of dilutive securities:
Options for common stock..... - - - 218,485
----------- ------------- ----------- -------------
Diluted earnings per share .... ($21,309) 8,722,695 ($2.44) $4,748 8,824,924 $0.54
=========== ============= ========= =========== ============= =========
</TABLE>
7
<PAGE>
THE CARBIDE/GRAPHITE GROUP, INC. AND SUBSIDIARIES
FOOTNOTES TO UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS--Continued
<TABLE>
<CAPTION>
For the nine months ended April 30,
------------------------------------------------------------------------------------
1998 1997
--------------------------------------- ---------------------------------------
Per Per
Income Share Income Share
(Loss) Shares Amount (Loss) Shares Amount
----------- ------------- --------- ----------- ------------- ---------
<S> <C> <C> <C> <C> <C> <C>
Basic earnings per share....... ($9,818) 8,694,580 ($1.13) $12,892 8,478,605 $1.52
========= =========
Effect of dilutive securities:
Options for common stock..... - - - 328,364
----------- ------------- ----------- -------------
Diluted earnings per share .... ($9,818) 8,694,580 ($1.13) $12,892 8,806,969 $1.46
=========== ============= ========= =========== ============= =========
</TABLE>
Since the Company's results were a net loss from continuing operations for
the quarter and nine months ended April 30, 1998, common equivalent shares were
excluded from the diluted earnings per share computations for those periods as
their effect would have been anti-dilutive.
Recently Issued Accounting Pronouncements
The Financial Accounting Standards Board has recently issued SFAS #130,
"Reporting Comprehensive Income", SFAS #131,"Disclosure about Segments of an
Enterprise and Related Information" and SFAS #132, "Employers' Disclosures about
Pensions and Other Postretirement Benefits." The Company is required to adopt
these new reporting standards for its fiscal year ending July 31, 1999. The
Company is evaluating the effects on disclosure of these new reporting
standards.
2. Inventories:
Inventories consisted of the following (in thousands):
April 30, July 31,
1998 1997
----------------- ------------------
Finished goods .................... $13,007 $13,990
Work in process ................... 34,846 33,074
Raw materials ..................... 14,607 11,256
----------------- ------------------
62,460 58,320
LIFO reserve ...................... (11,997) (9,434)
----------------- ------------------
50,463 48,886
Supplies .......................... 11,248 10,559
----------------- ------------------
$61,711 $59,445
================= ==================
8
<PAGE>
THE CARBIDE/GRAPHITE GROUP, INC. AND SUBSIDIARIES
FOOTNOTES TO UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS--Continued
3. Income Taxes:
The provision for (benefit from) income taxes for the quarters and nine
months ended April 30, 1998 and 1997 are summarized by the following effective
tax rate reconciliations:
<TABLE>
<CAPTION>
Quarter Ended Nine Months Ended
April 30, April 30,
-------------------------- --------------------------
1998 1997 1998 1997
---------- ----------- ----------- ----------
<S> <C> <C> <C> <C>
Federal statutory tax rate ....................... (35.0)% 35.0% (35.0)% 35.0%
Effect of:
State taxes, net of federal benefit ......... 1.4 1.8 1.4 1.8
Foreign sales corporation benefit ........... (1.6) (2.8) (1.6) (2.8)
Prior year adjustments ...................... - 1.7 - 0.6
Other ....................................... 1.2 1.3 3.1 1.2
---------- ----------- ----------- ----------
Effective tax rate ........................ (34.0)% 37.0% (32.1)% 35.8%
========== =========== =========== ==========
</TABLE>
The income tax benefits for the quarter and nine months ended April 30,
1998 were recorded based on the Company's projected effective income tax rate
for the fiscal year ending July 31, 1998.
All federal tax returns prior to fiscal 1995 have been settled with the
Internal Revenue Service. Management does not believe that the settlement of its
open tax years will have a material adverse effect on the Company's future
operating results.
4. Long-Term Debt:
On September 26, 1997, the Company completed a tender offer for essentially
all ($79.9 million) of its 11.5% Senior Notes due 2003 (the Senior Notes) (the
Tender). The tender price paid to holders of the Senior Notes was $1,086.20 for
each $1,000 in Senior Note principal. Also, most holders received an additional
$15.00 per $1,000 in Senior Note principal in exchange for their consent to
eliminate substantially all of the restrictive covenants and certain default
provisions in the Senior Note Indenture other than the covenants to pay interest
on and principal of the Senior Notes and the default provisions related to such
covenants. Consents were received by holders of more than a majority of the
outstanding Senior Notes, resulting in the elimination of such restrictive
covenants and default provisions. After the Tender, $0.1 million in Senior Notes
were outstanding.
In connection with the Tender, the Company entered into an agreement with a
consortium of banks led by PNC Bank for a five year, $150 million revolving
credit facility with a $15 million sub-limit for standby letters of credit (the
1997 Revolving Credit Facility, as amended). The 1997 Revolving Credit Facility
replaces a $25 million revolving credit facility with PNC Bank entered into on
December 1, 1995 (the 1995 Revolving Credit Facility). Interest under the 1997
Revolving Credit Facility is based on, at the option of the Company, either PNC
Bank's prime rate or a floating LIBOR rate plus a spread (currently 0.625%)
based on a leverage calculation (specifically, the Consolidated Total
Indebtedness to EBITDA Ratio). As of April 30, 1998, the interest rate on
borrowings outstanding under the 1997 Revolving Credit Facility was 6.4%.
Repayment of funds borrowed under the new credit agreement are not required
until the expiration of the facility on September 25, 2002. The most restrictive
covenants under the 1997 Revolving Credit Facility include a minimum Interest
Coverage Ratio of 3.5 to 1.0, a maximum Consolidated Total Indebtedness to
EBITDA Ratio of 3.0 to 1.0 and a minimum Consolidated Tangible Net Worth ratio,
all as defined in the 1997 Revolving Credit Facility agreement. In April
9
<PAGE>
THE CARBIDE/GRAPHITE GROUP, INC. AND SUBSIDIARIES
FOOTNOTES TO UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS--Continued
1998, the 1997 Revolving Credit Facility was amended to incorporate a $38
million pre-tax charge ($25 million after expected tax benefits) for pending
antitrust claims (See Note 5 below). The financial covenants in the 1997
Revolving Credit Facility agreement were generally amended to exclude the
effects of this provision and reserve. The 1997 Revolving Credit Facility is
collateralized with receivables and inventory.
As a result of the Tender and revolving credit facility refinancing, the
Company recorded a $6.4 million net extraordinary loss on the early retirement
of debt during the nine months ended April 30, 1998. This extraordinary charge
represents the premium paid to Senior Note holders in connection with the Tender
and the write off of unamortized deferred financing fees associated with the
Senior Notes tendered and the 1995 Revolving Credit Facility.
5. Contingencies:
In May 1997, the Company was served with a subpoena issued by a Grand Jury
empanelled by the United States District Court for the Eastern District of
Pennsylvania. The Company was advised by attorneys for the Antitrust Division of
the United States Department of Justice (the DOJ) that the Grand Jury is
investigating price fixing by producers of graphite products in the United
States and abroad during the past five years. The Company is cooperating with
the DOJ in the investigation. The DOJ has granted the Company and certain former
and present senior executives the opportunity to participate in its Corporate
Leniency Program and the Company has entered into an agreement with the DOJ
under which the Company and such executives who cooperate will not be subject to
criminal prosecution with respect to the investigation if charges are issued by
the Grand Jury. Under the agreement, the Company has agreed to use its best
efforts to provide for restitution to its domestic customers for actual damages
if any conduct of the Company which violated the Federal Antitrust Laws in the
manufacture and sale of such graphite products caused damage to such customers.
Subsequent to the initiation of the DOJ investigation, four civil cases
were filed in the United States District Court for the Eastern District of
Pennsylvania in Philadelphia asserting claims on behalf of a class of purchasers
for violations of the Sherman Act. These cases, which have been consolidated,
name the Company, UCAR International, Inc., SGL Carbon Corporation and SGL
Carbon AG as defendants and seek treble damages. On March 30, 1998, a number of
purchasers who were previously included in the proported class of plaintiffs
covered by the consolidated case initiated a separate action in the same
District Court which asserts substantially the same claims and seeks the same
relief as the consolidated cases and names the same defendants as well as Showa
Denko Carbon, Inc. (the "Named Defendants"). Thereafter, four additional
purchasers and a related party of one purchaser who were previously included in
the proported class of plaintiffs covered by the consolidated case instituted
their own actions against the Named Defendants and, in several cases, certain
present or former related parties of UCAR International, Inc. asserting
substantially the same claims and seeking the same relief as in the consolidated
cases. Three such actions were filed in the United States District Court for the
Eastern District of Pennsylvania on April 3, 1998, April 17, 1998 and May 14,
1998, respectively. One action was filed in the United States District Court for
the Northern District of Ohio on April 17, 1998; the Company is seeking to
transfer this action to the Eastern District of Pennsylvania.
The Company has also advised the Commission of the European Communities
(the "Commission") that it wishes to invoke its Notice on the non-imposition or
reduction of fines in cartel cases (the Leniency Notice). Generally under these
Guidelines, the Commission may substantially reduce fines and other penalties if
a company cooperates with the Commission and in the judgment of the Commission
provides significant information. The Company understands that the Commission
will determine any fines at the completion of its proceedings which may not be
concluded for a year or more.
10
<PAGE>
THE CARBIDE/GRAPHITE GROUP, INC. AND SUBSIDIARIES
FOOTNOTES TO UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS--Continued
During the quarter ended April 30, 1998, the Company recorded a $38 million
pretax charge ($25 million after expected tax benefits) for potential
liabilities resulting from civil lawsuits, claims, legal costs and other
expenses associated with the antitrust matters noted above and the
investigations initiated by the antitrust enforcement authorities of the
European Union (the Antitrust Charge). The Antitrust Charge includes amounts
which may be paid in 1998 and beyond, including through settlements with
customers, fines and other costs. Based on the information available to it to
date, the Company believes that Antitrust Charge is sufficient to address the
resolution of the civil suits and other claims and costs associated with the
antitrust investigations. In addition, the Company believes that its cash flows
from operations and availability under the 1997 Revolving Credit Facility will
be sufficient to fund all of its planned liquidity needs, including the
resolution of the antitrust matters described above, through at least the
expiration of the 1997 Revolving Credit Facility in September 2002. However,
circumstances could change and the actual liabilities, costs and expenses
resulting from the antitrust matters (including the Commission antitrust
investigation) could differ materially from the current estimate which could
adversely affect the Company's ability to service its currently planned
liquidity needs.
In April 1995, the Company was named as a third-party defendant in a
Superfund action in Federal District Court in New Jersey relating to waste
disposal at a landfill located in Sayreville, New Jersey (the Sayreville
Litigation). Carbon Graphite Group, Inc. was named as successor to Airco-Speer
Company (Airco-Speer). Since this landfill was closed prior to the organization
of the Company in 1988, the Company's only possible connection with the
Sayreville Litigation would be if it were a successor to Airco-Speer, a claim
which it disputes. Furthermore, pursuant to the Asset Purchase Agreement by
which the Company acquired its operating assets from The BOC Group, plc. (BOC),
BOC agreed to provide an indemnification for certain environmental matters. BOC
has assumed and commenced the defense of the Sayreville Litigation and agreed to
indemnify the Company for losses associated therewith in accordance with the
terms of the Asset Purchase Agreement. In addition, BOC asserts that the
liability in this matter was settled by a 1992 agreement with the plaintiffs in
the present case. As a result of a motion for summary judgment, the Court has
substantially reduced the scope of claims which may be brought against the
Company. Based on the above, management does not believe that the Company will
incur a material loss with respect to the Sayreville Litigation.
The Company is also involved in various legal proceedings considered
incidental to the conduct of its business, the ultimate disposition of which, in
the opinion of the Company's management, will not have a material adverse effect
on the financial position, fiscal year operating results, cash flows or business
of the Company. Claims (other than environmental and contract claims and claims
for punitive damages) against the Company are generally covered by insurance
which includes a $250,000 per occurrence self-insured retention. As of April 30,
1998, a $0.4 million reserve has been recorded to provide for estimated exposure
on claims for which a loss is deemed probable.
6. Other Items:
Other Compensation
Other compensation for the quarter and nine months ended April 30, 1998
included $0.2 million and $0.7 million, respectively, accrued under the
Company's Incentive Bonus Plan.
Early Retirement/Severance Charge
Early retirement/severance charges for the quarter and nine months ended
April 30, 1997 represent costs associated with the retirement of two executives
of the Company.
11
<PAGE>
PART I
Item 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Results of Operations
The following table sets forth certain financial information for the
quarters and nine months ended April 30, 1998 and 1997 and should be read in
conjunction with the Unaudited Condensed Consolidated Financial Statements,
including the notes thereto, appearing elsewhere in this Quarterly Report on
Form 10-Q:
<TABLE>
<CAPTION>
Quarter Ended Nine Months Ended
April 30, April 30,
---------------------------- ---------------------------------
1998 1997 1998 1997
------------ ------------ -------------- ---------------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Net sales:
Graphite electrode products .............. $52,622 $54,543 $161,928 $157,816
Calcium carbide products ................. 20,149 20,380 59,051 59,904
------------ ------------ -------------- ---------------
Total net sales .................... $72,771 $74,923 $220,979 $217,720
============ ============ ============== ===============
Percentage of net sales:
Graphite electrode products .............. 72.3% 72.8% 73.3% 72.5%
Calcium carbide products ................. 27.7 27.2 26.7 27.5
------------ ------------ -------------- ---------------
Total net sales .................... 100.0% 100.0% 100.0% 100.0%
============ ============ ============== ===============
Gross profit as a percentage of segment net sales:
Graphite electrode products .............. 13.9% 19.7% 18.2% 19.0%
Calcium carbide products ................. 16.8 17.4 16.6 15.5
Percentage of total net sales:
Total gross profit ....................... 14.7% 19.1% 17.8% 18.1%
Selling, general and administrative ...... 5.1 4.6 5.1 5.0
Operating income (loss) .................. (42.8) 12.6 (4.8) 12.0
Income (loss) from continuing operations .. (29.3) 6.3 (4.4) 5.9
</TABLE>
------------------
Net sales for the quarter ended April 30, 1998 were $72.8 million versus
$74.9 million in the prior year comparable quarter. Graphite electrode product
sales for the quarter ended April 30, 1998 were $52.6 million versus $54.5
million in the prior year comparable quarter, while calcium carbide product
sales were $20.1 million versus $20.4 million in the prior year comparable
quarter. Net sales for the nine months ended April 30, 1998 were $221.0 million
versus $217.7 million in the prior year comparable period, a 1.5% increase. For
the nine months ended April 30, 1998, graphite electrode product sales increased
2.6% to $161.9 million, while calcium carbide product sales decreased 1.4% to
$59.1 million.
Within the graphite electrode products segment, graphite electrode net
sales for the quarter ended April 30, 1998 were $40.2 million, a 9.6% increase
over the prior year comparable quarter as a result of a 9.1% increase in
shipments. Net prices of graphite electrodes for the quarter ended April 30,
1998 were essentially unchanged versus the comparable quarter a year ago. A 2.8%
increase in domestic electrode prices was offset by a 4.8% decrease in realized
foreign electrode prices. The continued strengthening of the U.S. dollar against
foreign currencies resulted in the decrease in realized foreign prices. Domestic
and foreign electrode shipments
12
<PAGE>
as a percentage of total electrode shipments for the quarter ended April 30,
1998 were 56.8% and 43.2%, respectively, versus 54.3% and 45.7%, respectively,
for the prior year comparable quarter. Needle coke sales for the quarter ended
April 30, 1998 were $6.0 million versus $8.6 million in the prior year
comparable quarter, with the decrease resulting from a 33.7% decrease in
shipments. The decrease in needle coke shipments was due to lower production
resulting from an extended plant shutdown to install and start-up new equipment
at the Company's affiliate, Seadrift Coke, L.P. The project, which was
substantially completed in April, 1998, increased the plant's needle coke
production capacity to approximately 170,000 tons per year. The net price of
needle coke increased 6.5% during the quarter ended April 30, 1998 as compared
to a year ago. Graphite specialty product sales for the quarter ended April 30,
1998 totaled $6.3 million versus $9.3 million a year ago. The decrease was
principally the result of the expiration of a supply agreement with SGL Carbon
Corporation (SGL Corp.) under which the Company sold large graphite rods and
plates and other processing services to SGL Corp. at cost for a period of three
years (the SGL Supply Agreement). The contract expired in January 1998.
For the nine months ended April 30, 1998, graphite electrode sales were
$121.5 million, a 10.0% increase over the prior year comparable period resulting
principally from a 9.1% increase in shipments. Net selling prices for graphite
electrodes during the nine months ended April 30, 1998 were essentially
unchanged as compared to a year ago. While the average domestic net price
increased 5.8%, foreign price realizations were down 5.5% due to the relatively
stronger U.S. dollar during the current period. Domestic and foreign electrode
shipments as a percentage of total electrode shipments for the nine months ended
April 30, 1998 were 54.2% and 45.8%, respectively, versus 51.8% and 48.2%,
respectively, in the prior year comparable period. Needle coke sales for the
nine months ended April 30, 1998 were $24.3 million versus $20.7 million in the
prior year comparable period. The increase in needle coke sales was due to a
11.1% increase in needle coke shipments, despite the lower production and
shipments in the fiscal 1998 third quarter, and a 5.7% increase in needle coke
prices. Graphite specialty product sales for the nine months ended April 30,
1998 were $16.1 million versus $26.7 million in the prior year comparable
period, with the decrease resulting from the winding down of the SGL Supply
Agreement.
Within the calcium carbide product segment, pipeline acetylene sales for
the quarter ended April 30, 1998 were $7.3 million versus $7.1 million in the
prior year comparable quarter, a 3.3% increase resulting from increased
acetylene deliveries. Desulfurization sales of $5.9 million represented a 3.4%
decrease from a year ago resulting primarily from decreased shipments. Sales of
calcium carbide for fuel gas applications were $5.1 million, a 7.5% decrease
from a year ago resulting primarily from a decrease in shipments. Net sales of
calcium carbide for fuel gas applications are expected to continue at lower
levels as a result of increasing competition in this product line. Sales in all
other product categories totaled $1.8 million, essentially unchanged as compared
to a year ago. For the nine months ended April 30, 1998, pipeline acetylene
sales were $22.2 million versus $20.4 million for the comparable period a year
ago, a 9.0% increase resulting primarily from an increase in acetylene
deliveries. Desulfurization sales of $18.1 million represented a 3.7% decrease
from a year ago due to decreased shipments. Sales of calcium carbide for fuel
gas applications for the nine months ended April 30, 1998 were $15.0 million, a
6.0% decrease from a year ago resulting primarily from a decrease in shipments.
All other calcium carbide product sales for the nine months ended April 30, 1998
totaled $3.7 million, a 27.9% decrease from the comparable prior year period
resulting primarily from a decrease in shipments of electrically calcined
anthracite coal.
Gross profit as a percentage of graphite electrode product sales for the
quarter ended April 30, 1998 was 13.9% versus 19.7% in the prior year comparable
quarter. Gross profit as a percentage of graphite electrode product sales for
the nine months ended April 30, 1998 was 18.2% versus 19.0% in the prior year
comparable period. The decrease in the gross margins for both periods resulted
primarily from the disruption in production and lower sales of needle coke which
resulted from the extended plant shutdown to install and start-up new equipment
at the Company's affiliate, Seadrift Coke, L.P. The negative impact from the
extended shutdown more than offset the
13
<PAGE>
benefits of increased needle coke sales volumes during the current nine-month
period and improved needle coke prices during both the quarter and nine months
ended April 30, 1998. Also, the cost of decant oil, the primary raw material in
the production of needle coke, during the current quarter and nine months was
approximately 23% and 13% lower, respectively, as compared to a year ago, which
contributed positively to the gross margin.
Gross profit as a percentage of calcium carbide product sales for the
quarter ended April 30, 1998 was 16.8% versus 17.4% in the prior year comparable
quarter. The decrease in the gross margin resulted primarily from lower
desulfurization sales and lower sales of calcium carbide for fuel gas
applications. Gross profit as a percentage of calcium carbide product sales for
the nine months ended April 30, 1998 was 16.6% versus 15.5% in the prior year
comparable period. The increase was primarily the result of improved product
sales mix, coupled with lower operating costs during the current period.
Selling, general and administrative expenditures for the quarter ended
April 30, 1998 were $3.7 million versus $3.4 million in the comparable quarter a
year ago. Total expenses increased in the current quarter primarily as a result
of increased consulting expenditures and increased marketing expenditures in the
graphite electrode products business. Selling, general and administrative
expenditures for the nine months ended April 30, 1998 were $11.3 million versus
$10.8 million in the comparable period a year ago. The prior year amount was
unusually high as a result of a settlement of a lawsuit and the accrual of costs
associated with the search for a new chief executive officer for the Company.
Excluding these unusual items, expenditures increased $1.0 million in the
current period as a result of the items noted in the quarterly discussion above.
Other compensation for the quarter and nine months ended April 30, 1998
included $0.2 million and $0.7 million, respectively, accrued under the
Company's Incentive Bonus Plan. Other compensation for the quarter and nine
months ended April 30, 1997 included $0.3 million and $1.0 million,
respectively, in charges associated with the Company's Incentive Bonus Plan.
Early retirement/severance charges for the quarter and nine months ended
April 30, 1997 represent costs associated with the retirement of two executives
of the Company.
During the quarter ended April 30, 1998, the Company recorded a $38 million
pretax charge ($25 million after expected tax benefits), classified as "other
expense" in the Unaudited Condensed Consolidated Statement of Operations for the
quarter and nine months ended April 30, 1998, for potential liabilities
resulting from civil lawsuits, claims, legal costs and other expenses associated
with pending antitrust matters. See "Item 1 - Legal Proceedings" in Part II
below. The Antitrust Charge includes amounts which may be paid in 1998 and
beyond, including through settlements with customers, fines and other costs.
Based on the information available to it to date, the Company believes that the
Antitrust Charge is sufficient to address the resolution of the civil suits and
other claims and costs associated with the antitrust investigations. In
addition, the Company believes that its cash flows from operations and
availability under the 1997 Revolving Credit Facility will be sufficient to fund
all of its planned liquidity needs, including the resolution of the antitrust
matters described above, through at least the expiration of the 1997 Revolving
Credit Facility in September 2002. However, circumstances could change and the
actual liabilities, costs and expenses resulting from the antitrust matters
(including the Commission antitrust investigation) could differ materially from
the current estimate which could adversely affect the Company's ability to
service its currently planned liquidity needs.
Net interest expense for the quarter ended April 30, 1998 was $1.2 million
and included $1.5 million of interest expense associated with the 1997 Revolving
Credit Facility and $0.1 million in bank fees, less $0.4 million in capitalized
interest. Net interest expense for the quarter ended April 30, 1997 was $1.9
million and included $2.5 million of interest expense associated with the Senior
Notes, less $0.4 million in interest income associated with the Company's cash
equivalents and short-term investments and $0.2 million of capitalized interest.
Net interest expense for the nine months ended April 30, 1998 was $3.8 million,
including $3.4 million of interest expense associated with the 1997 Revolving
Credit Facility, $1.5 million of interest expense associated with the Senior
Notes and $0.4 million in bank fees, less capitalized interest of $1.2 million
and interest income of $0.3 million. Net interest expense for the nine months
ended April 30, 1997 was $6.1 million, including $7.4 million of interest
expense associated with the Senior Notes, less $1.1 million of interest income
and $0.2 million in capitalized interest.
The income tax benefits for the quarter and nine months ended April 30,
1998 were recorded based on the Company's projected effective income tax rate
for the fiscal year ending July 31, 1998. The current year effective rate
differs from the federal statutory rate due primarily to state taxes, offset by
benefits derived from the Company's foreign sales corporation. See Note 3 to the
Unaudited Condensed Consolidated Financial Statements for more details on the
Company's effective tax rate.
14
<PAGE>
As a result of the Tender and revolving credit facility refinancing, the
Company recorded a $6.4 million net extraordinary loss on the early retirement
of debt during the nine months ended April 30, 1998. This extraordinary charge
represents the premium paid to Senior Note holders in connection with the Tender
and the write off of unamortized deferred financing fees associated with the
Senior Notes tendered and the 1995 Revolving Credit Facility.
Recently Issued Accounting Pronouncements
The Company adopted SFAS #128, "Earnings per Share", during its fiscal
second quarter ended January 31, 1998. See Note 1 to the Unaudited Condensed
Consolidated Financial Statements for a discussion of this new accounting
standard.
The Financial Accounting Standards Board has recently issued SFAS #130,
"Reporting Comprehensive Income", SFAS #131,"Disclosure about Segments of an
Enterprise and Related Information" and SFAS #132, "Employers' Disclosures about
Pensions and Other Postretirement Benefits." The Company is required to adopt
these new reporting standards for its fiscal year ending July 31, 1999. The
Company is evaluating the effects on disclosure of these new reporting
standards.
Liquidity and Capital Resources
Liquidity
The Company's liquidity needs are primarily for capital expenditures,
working capital and debt service on its revolving credit facility. The Company
has undertaken a substantial modernization program with respect to its graphite
electrode production facilities and several other major capital projects
expected to increase total capital expenditures to approximately $65 million in
fiscal 1998 and $40 million in fiscal 1999. The Company believes that its cash
flows from operations and availability under its revolving credit facility will
be sufficient to fund all of its planned liquidity needs through at least the
expiration of the 1997 Revolving Credit Facility in September 2002. However, in
the event these resources are not sufficient to fund the Company's capital
expenditures (including cash needs for the modernization program and other major
capital projects), service its indebtedness and pay any other obligation
including those that may arise from pending legal proceedings and the resolution
of current antitrust matters, the Company would be required to obtain additional
funding. There can be no assurance that sources of funds would be available in
amounts sufficient for the Company to meet its obligations or on terms favorable
to the Company.
On September 26, 1997, the Company completed the Tender (See Note 4 to the
Unaudited Condensed Consolidated Financial Statements). The tender price paid to
holders of the Senior Notes was $1,086.20 for each $1,000 in Senior Note
principal. Also, most holders received an additional $15.00 per $1,000 in Senior
Note principal in exchange for their consent to eliminate substantially all of
the restrictive covenants and certain default provisions in the Senior Note
Indenture other than the covenants to pay interest on and principal of the
Senior Notes and the default provisions related to such covenants. Consents were
received by holders of more than a majority of the outstanding Senior Notes,
resulting in the elimination of such restrictive covenants and default
provisions. After the Tender, $0.1 million in Senior Notes were outstanding.
In connection with the Tender, the Company entered into an agreement with a
consortium of banks led by PNC Bank for a five year, $150 million revolving
credit facility with a $15 million sub-limit for standby letters of credit (the
1997 Revolving Credit Facility, as amended). The 1997 Revolving Credit Facility
replaces a $25 million revolving credit facility with PNC Bank entered into on
December 1, 1995 (the 1995 Revolving Credit
15
<PAGE>
Facility). Interest under the 1997 Revolving Credit Facility is based on, at the
option of the Company, either PNC Bank's prime rate or a floating LIBOR rate
plus a spread (currently 0.625%) based on a leverage calculation (specifically,
the Consolidated Total Indebtedness to EBITDA Ratio). As of April 30, 1998, the
interest rate on borrowings outstanding under the 1997 Revolving Credit Facility
was 6.4%. Repayment of funds borrowed under the new credit agreement are not
required until the expiration of the facility on September 25, 2002. The most
restrictive covenants under the 1997 Revolving Credit Facility include a minimum
Interest Coverage Ratio of 3.5 to 1.0, a maximum Consolidated Total Indebtedness
to EBITDA Ratio of 3.0 to 1.0 and a minimum Consolidated Tangible Net Worth
ratio, all as defined in the 1997 Revolving Credit Facility agreement. In April
1998, the 1997 Revolving Credit Facility was amended to incorporate the
Antitrust Charge (See "Item 1 - Legal Proceedings" in Part II below and Note 5
to the Unaudited Condensed Consolidated Financial Statements). The financial
covenants in the 1997 Revolving Credit Facility agreement were generally amended
to exclude the effects of the Antitrust Charge. The 1997 Revolving Credit
Facility is collateralized with receivables and inventory.
In the process of developing permit applications for facility upgrades, the
Company determined that certain parameters in its air permits do not reflect
current operations. The Company is working to resolve this issue and has advised
the appropriate state environmental authorities. At this time, management cannot
determine the magnitude of the costs, if any, that may be incurred.
On March 4, 1998, the Company's Board of Directors authorized the
expenditure of up to $10 million to repurchase the Company's common stock.
Subject to price and market considerations and applicable securities laws, such
purchases may be made from time to time in open market, privately negotiated or
other transactions. No time limit was placed on the duration of the repurchase
program. The extent and timing of any repurchases will depend on market
conditions and other corporate considerations. During the quarter ended April
30, 1998, the Company repurchased 5,000 shares of its common stock under its
stock repurchase program.
Cash Flow Information
Cash flow provided by operations for the quarter ended April 30, 1998 was
$7.9 million, including $6.4 million of cash inflows from net income plus
non-cash expenses, which included $24.2 million in net non-cash expenses from
the Antitrust Charge (See "Item 1 - Legal Proceedings" in Part II below). In
addition, other working capital changes increased cash flow from operations by
$1.5 million, including a $3.3 million inflow from accounts receivable and a
$3.2 million inflow from inventory, partially offset by a $4.5 million net
outflow from income taxes. Net interest and tax payments for the quarter were
$1.4 million and $3.8 million, respectively. Cash flow provided by operations
for the nine months ended April 30, 1998 was $18.1 million. Cash inflows from
net income plus non-cash expenses of $28.2 million, including $24.2 million from
the Antitrust Charge, were partially offset by a $10.1 million net cash outflow
due to changes in other working capital items, including a $2.3 million increase
in inventories and a $4.3 million net out flow from income taxes. Net interest
and tax payments for the nine-month period were $8.3 million and $5.0 million,
respectively.
Investing activities for the quarter and nine months ended April 30, 1998
included $20.7 million and $56.0 million, respectively, in capital expenditures.
Also, investing activities during the nine months ended April 30, 1998 included
a $15.8 million net cash inflow from the sale of short-term investments. The
Company believes that most of its future investing activity cash flow
requirements will be for capital expenditures, including its modernization and
expansion programs. The Company believes that its future cash flow provided by
operations and borrowings under the 1997 Revolving Credit Facility will be
adequate to fund its currently planned investing needs.
16
<PAGE>
Cash flow provided by financing activities for the quarter ended April 30,
1998 was $12.9 million, including a $14.8 million net inflow from the 1997
Revolving Credit Facility. Cash flow provided by financing activities for the
nine months ended April 30, 1998 was $14.2 million. Major cash flow items
included an $97.7 million net cash inflow from the 1997 Revolving Credit
Facility, offset by outflows of $79.9 million for the principal amount of Senior
Notes repurchased in connection with the Tender and $8.1 million for the related
tender premium.
Other Items
Year 2000
The Company is in the process of modifying, upgrading and replacing certain
components of its computer software and operating systems to accommodate the
"Year 2000" changes required for correct recording of dates in the Year 2000 and
beyond. The Company believes that its current plan will adequately address the
"Year 2000" issue and the Company does not expect to experience significant
operational problems associated with "Year 2000" compliance once its program is
complete. The costs of system conversions and software upgrades, which are
expected to be completed by mid-1999, are not expected to be material.
Niagara Falls Labor Contract
In May, 1998, the Company and the Union representing the hourly work force
at its Niagara Falls, New York facility agreed to a five-year extension of its
labor agreement. The extended agreement, which expires in January, 2004, covers
285 hourly workers and was negotiated to terms deemed satisfactory to the
Company.
Forward-Looking Statements
This report may contain forward looking statements that are based on
current expectations, estimates and projections about the industries in which
the Company operates, management's beliefs and assumptions made by management.
Words such as "expects," "anticipates," "intends," "plans," "believes,"
"estimates" and variations of such words and similar expressions are intended to
identify such forward looking statements. These statements constitute "forward
looking statements" within the meaning of Section 27A of the Securities Act of
1933, and are subject to the safe harbor created thereby. These statements are
based on a number of assumptions that could ultimately prove inaccurate and,
therefore, there can be no assurance that such statements will prove to be
accurate. Factors which could affect actual future results include the
occurrence of unanticipated events or circumstances relating to investigations
by the Department of Justice, the antitrust enforcement authorities of the
European Union or related civil lawsuits as well as the assertion of other
claims relating to such investigations or lawsuits or the subject matter
thereof. Such factors also include the possibility that increased demand or
prices for the Company's products may not occur or continue, changing economic
and competitive conditions (including currency exchange rate fluctuations),
technological risks and other risks, costs and delays associated with the
start-up and operation of major capital projects (including the Company's
modernization program), changing governmental regulations (including
environmental rules and regulations) and other risks and uncertainties,
including those detailed in the Company's filings with the Securities and
Exchange Commission. Neither the statements contained in this report nor any
reserve or charge recorded by the Company relating to civil lawsuits or claims
shall be deemed to constitute an admission as to any liability in connection
with the subject matter thereof. The Company does not undertake to publicly
update any forward looking statement, whether as a result of new information,
future events or otherwise.
17
<PAGE>
PART II
Item 1
LEGAL PROCEEDINGS
In May 1997, the Company was served with a subpoena issued by a Grand Jury
empanelled by the United States District Court for the Eastern District of
Pennsylvania. The Company was advised by attorneys for the Antitrust Division of
the United States Department of Justice (the DOJ) that the Grand Jury is
investigating price fixing by producers of graphite products in the United
States and abroad during the past five years. The Company is cooperating with
the DOJ in the investigation. The DOJ has granted the Company and certain former
and present senior executives the opportunity to participate in its Corporate
Leniency Program and the Company has entered into an agreement with the DOJ
under which the Company and such executives who cooperate will not be subject to
criminal prosecution with respect to the investigation if charges are issued by
the Grand Jury. Under the agreement, the Company has agreed to use its best
efforts to provide for restitution to its domestic customers for actual damages
if any conduct of the Company which violated the Federal Antitrust Laws in the
manufacture and sale of such graphite products caused damage to such customers.
Subsequent to the initiation of the DOJ investigation, four civil cases
were filed in the United States District Court for the Eastern District of
Pennsylvania in Philadelphia asserting claims on behalf of a class of purchasers
for violations of the Sherman Act. These cases, which have been consolidated,
name the Company, UCAR International, Inc., SGL Carbon Corporation and SGL
Carbon AG as defendants and seek treble damages. On March 30, 1998, a number of
purchasers who were previously included in the proported class of plaintiffs
covered by the consolidated case initiated a separate action in the same
District Court which asserts substantially the same claims and seeks the same
relief as the consolidated cases and names the same defendants as well as Showa
Denko Carbon, Inc. (the "Named Defendants"). Thereafter, four additional
purchasers and a related party of one purchaser who were previously included in
the proported class of plaintiffs covered by the consolidated case instituted
their own actions against the Named Defendants and, in several cases, certain
present or former related parties of UCAR International, Inc. asserting
substantially the same claims and seeking the same relief as in the consolidated
cases. Three such actions were filed in the United States District Court for the
Eastern District of Pennsylvania on April 3, 1998, April 17, 1998 and May 14,
1998, respectively. One action was filed in the United States District Court for
the Northern District of Ohio on April 17, 1998; the Company is seeking to
transfer this action to the Eastern District of Pennsylvania.
The Company has also advised the Commission of the European Communities
(the "Commission") that it wishes to invoke its Notice on the non-imposition or
reduction of fines in cartel cases (the Leniency Notice). Generally under these
Guidelines, the Commission may substantially reduce fines and other penalties if
a company cooperates with the Commission and in the judgment of the Commission
provides significant information. The Company understands that the Commission
will determine any fines at the completion of its proceedings which may not be
concluded for a year or more.
During the quarter ended April 30, 1998, the Company recorded a $38 million
pretax charge ($25 million after expected tax benefits) for potential
liabilities resulting from civil lawsuits, claims, legal costs and other
expenses associated with the antitrust matters noted above and the
investigations initiated by the antitrust enforcement authorities of the
European Union (the Antitrust Charge). The Antitrust Charge includes amounts
which may be paid in 1998 and beyond, including through settlements with
customers, fines and other costs. Based on the information available to it to
date, the Company believes that the Antitrust Charge is sufficient to address
the resolution of the civil suits and other claims and costs associated with the
antitrust investigations. However, circumstances could change and the actual
liabilities, costs and expenses resulting from the antitrust matters (including
the Commission antitrust investigation) could differ materially from the current
estimate.
18
<PAGE>
In April 1995, the Company was named as a third-party defendant in a
Superfund action in Federal District Court in New Jersey relating to waste
disposal at a landfill located in Sayreville, New Jersey (the Sayreville
Litigation). Carbon Graphite Group, Inc. was named as successor to Airco-Speer
Company (Airco-Speer). Since this landfill was closed prior to the organization
of the Company in 1988, the Company's only possible connection with the
Sayreville Litigation would be if it were a successor to Airco-Speer, a claim
which it disputes. Furthermore, pursuant to the Asset Purchase Agreement by
which the Company acquired its operating assets from The BOC Group, plc. (BOC),
BOC agreed to provide an indemnification for certain environmental matters. BOC
has assumed and commenced the defense of the Sayreville Litigation and agreed to
indemnify the Company for losses associated therewith in accordance with the
terms of the Asset Purchase Agreement. In addition, BOC asserts that the
liability in this matter was settled by a 1992 agreement with the plaintiffs in
the present case. As a result of a motion for summary judgment, the Court has
substantially reduced the scope of claims which may be brought against the
Company. Based on the above, management does not believe that the Company will
incur a material loss with respect to the Sayreville Litigation.
The Company is also involved in various legal proceedings considered
incidental to the conduct of its business, the ultimate disposition of which, in
the opinion of the Company's management, will not have a material adverse effect
on the financial position, fiscal year operating results, cash flows or business
of the Company. Claims (other than environmental and contract claims and claims
for punitive damages) against the Company are generally covered by insurance
which includes a $250,000 per occurrence self-insured retention. As of April 30,
1998, a $0.4 million reserve has been recorded to provide for estimated exposure
on claims for which a loss is deemed probable.
Item 2
CHANGES IN SECURITIES
On April 15, 1998, the Company issued 7,000 unregistered shares of Common
Stock in connection with employee stock option exercises. The average option
exercise price paid to the Company was $20.48 per share.
Item 6
A. INDEX TO EXHIBITS
Exhibit Page
- ----------- ----
10.49 Second Amendment to Revolving Credit and Letter of
Credit Issuance Agreement and Waiver between the Company
and PNC Bank, National Association dated April 30, 1998 ... *
* Filed by EDGAR.
B. REPORTS ON FORM 8-K
During the quarter ended April 30, 1998, the Company filed a current report
on Form 8-K dated March 30, 1998 describing the estimated financial impact of an
extended shutdown of the needle coke production facility of its affiliate,
Seadrift Coke, L.P. Also, the Company filed a current report on Form 8-K dated
April 20, 1998 disclosing its intent to record the Antitrust Charge (See "Item 1
- - Legal Proceeding" above).
19
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the Registrant has duly caused this report to be signed on its behalf
by the following authorized officers on June 12, 1998.
Signature Title
- ---------------------- ----------------------------------------------------
/s/ Walter B. Fowler Chief Executive Officer (Principal Executive Officer)
- ----------------------
(Walter B. Fowler)
/s/ Stephen D. Weaver Vice President - Finance and Chief Financial Officer
- ---------------------- (Principal Financial Officer)
(Stephen D. Weaver)
/s/ Jeffrey T. Jones Controller - Corporate Finance
- ---------------------- (Principal Accounting Officer)
(Jeffrey T. Jones)
/s/ Michael F. Supon Vice President and General Manager,
- ---------------------- Electrodes and Graphite Specialty Products
(Michael F. Supon)
/s/ Ararat Hacetoglu Vice President and General Manager, Carbide Products
- ----------------------
(Ararat Hacetoglu)
/s/ Jim J. Trigg Vice President and General Manager, Seadrift Coke, L.P.
- ----------------------
(Jim J. Trigg)
20
SECOND AMENDMENT TO REVOLVING CREDIT
AND LETTER OF CREDIT ISSUANCE AGREEMENT AND WAIVER
This SECOND AMENDMENT TO REVOLVING CREDIT AND LETTER OF CREDIT ISSUANCE
AGREEMENT AND WAIVER is made as of this 30th day of April 1998 (this "Second
Amendment") and entered into by and among THE CARBIDE/GRAPHITE GROUP, INC., a
corporation organized and existing under the laws of the State of Delaware (the
"Borrower"), the financial institutions party thereto as lenders (collectively
referred to herein as the "Lenders"), PNC BANK, NATIONAL ASSOCIATION, in its
capacity as the issuer of letters of credit (in such capacity, the "L/C Issuer")
and PNC BANK, NATIONAL ASSOCIATION, in its capacity as agent for the Lenders and
the L/C Issuer (in such capacity, the "Agent") and further amends that certain
Revolving Credit and Letter of Credit Issuance Agreement dated as of September
25, 1997, as previously amended by that certain First Amendment to Revolving
Credit and Letter of Credit Issuance Agreement dated as of October 28, 1997 (the
"First Amendment") (the Revolving Credit and Letter of Credit Issuance
Agreement, as amended by the First Amendment, is hereinafter referred to as the
"Original Credit Agreement").
WITNESSETH
WHEREAS, as a result of certain investigations being conducted by the
United States Department of Justice and similar enforcement authorities of the
European Union as well as certain private claims and civil actions arising out
of the alleged pattern of activities which are the basis of the above referenced
proceedings (all of the foregoing collectively referred to herein as the
"Investigation"), the Borrower will, without admitting or denying either
culpability or liability, record a charge of Thirty Eight Million Dollars
($38,000,000) (the "Special Reserve") for its Fiscal Quarter ending April 30,
1998 for potential liabilities which may be incurred as a result of the
Investigation; and
WHEREAS, the Borrower has requested certain amendments to and waivers of
the terms of the Original Credit Agreement to accommodate the Investigation and
the Special Reserve; and
WHEREAS, the Agent, the Lenders and the L/C Issuer have agreed to make such
amendments and waivers upon the terms and conditions set forth herein.
NOW THEREFORE, in consideration of the foregoing premises, the mutual
covenants and agreements contained herein and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, and
with the intent to be legally bound hereby, the parties hereto agree as follows:
<PAGE>
ARTICLE I
AMENDMENTS TO ORIGINAL CREDIT AGREEMENT
Section 1.01 Amendments to Section 1.01 of the Original Credit Agreement.
The following defined terms and the definitions therefor are hereby added to
Section 1.01 of the Original Credit Agreement and inserted in correct
alphabetical order:
Adjusted EBITDA shall mean, for any period, the Borrower's EBITDA for such
period minus the net after tax amount of any charge against the Special Reserve
occurring during such period.
April 1998 Delivery Date shall mean the date on which the Borrower's financial
statements and Compliance Certificate for the Fiscal Quarter ending April 30,
1998 are required to be delivered to the Lenders pursuant to items (i) and (iii)
of Section 6.02.
Investigation shall mean certain investigations being conducted by the United
States Department of Justice and similar enforcement authorities of the European
Union as well as certain private claims and civil actions arising out of the
alleged pattern of activities which are the basis of the above referenced
proceedings.
Second Amendment shall mean the Second Amendment to Revolving Credit and Letter
of Credit Issuance Agreement and Waiver dated as of the Second Amendment
Effective Date.
Second Amendment Effective Date shall mean April 30, 1998.
Second Amendment Fee shall mean a fee equal to five (5) basis points of each
Lender's Revolving Credit Commitment which shall be payable by the Borrower to
each Lender who approves the Second Amendment on or before the Second Amendment
Effective Date.
Special Reserve shall mean the charge of Thirty-Eight Million Dollars
($38,000,000) (the "Special Reserve") recorded by the Borrower for its Fiscal
Quarter ending April 30, 1998 for potential liabilities which may be incurred as
a result of the Investigation.
Section 1.02 Amendment to Section 2.03 of the Original Credit Agreement.
Section 2.03 of the Original Credit Agreement is hereby amended and restated in
its entirety to read as follows:
<PAGE>
2.03. Commitment Fee. Accruing from Closing Date until the Second Amendment
Effective Date, the Borrower agrees to pay to the Agent for the account of each
Lender, as consideration for such Lender's Revolving Credit Commitment
hereunder, a commitment fee (the "Commitment Fee") equal to the Applicable
Commitment Fee per annum, as set forth in the Original Credit Agreement, (all
computed on the basis of a year of 365 or 366 days, as the case may be, and
actual days elapsed) on the average daily amount equal to such Lender's
Revolving Credit Commitment minus such Lender's Ratable Share of Total
Utilization. Accruing from the Second Amendment Effective Date until the
Expiration Date, the Borrower agrees to pay to the Agent for the account of each
Lender, as consideration for such Lender's Revolving Credit Commitment
hereunder, a Commitment Fee equal to the Applicable Commitment Fee per annum, as
set forth in the Second Amendment, (all computed on the basis of a year of 365
or 366 days, as the case may be, and actual days elapsed) on the average daily
amount equal to such Lender's Revolving Credit Commitment minus such Lender's
Ratable Share of Total Utilization. All Commitment Fees shall be payable (i)
quarterly in arrears beginning October 31, 1997 and continuing on the last
Business Day of each Fiscal Quarter occurring during the term of the Revolving
Credit Commitment thereafter, (ii) on the Expiration Date and (iii) upon
acceleration of the Notes.
On and after the Second Amendment Effective Date, the term "Applicable
Commitment Fee" shall mean the rate per annum set forth in the chart below which
corresponds to the range of ratios in which the ratio of the Borrower's
Consolidated Total Indebtedness to Adjusted EBITDA, as at the end of the
preceding fiscal quarter, falls:
- ------------------------------------------------------ -------------------------
Consolidated Total Indebtedness Applicable Commitment
to Adjusted EBITDA ratio Fee
- ------------------------------------------------------ -------------------------
Less than or equal to 1.5 to 1.0 .15%
- ------------------------------------------------------ -------------------------
Greater than 1.5 to 1.0 but less than or equal to .175%
2.0 to 1.0
- ------------------------------------------------------ -------------------------
Greater than 2.0 to 1.0 but less than or equal to .20%
2.5 to 1.0
- ------------------------------------------------------ -------------------------
Greater than 2.5 to 1.0 but less than or equal to .225%
3.0 to 1.0
- ------------------------------------------------------ -------------------------
Greater than 3.0 to 1.0 .25%
- ------------------------------------------------------ -------------------------
All such adjustments shall be determined as of the date the Borrower's quarterly
financial statements and Compliance Certificate are required to be delivered to
the Lenders pursuant to items (i) and (iii) of Section 6.02. The foregoing
notwithstanding the Applicable Commitment Fee from the Closing Date to and
including the April 1998 Delivery Date shall be .175%.
<PAGE>
Section 1.03 Amendment to Section 2.08(b)(ii) of the Original Credit
Agreement. Section 2.08(b)(ii) of the Original Credit Agreement is hereby
amended and restated in its entirety to read as follows:
(ii) Euro-Rate Option. Interest under this Interest Rate Option shall accrue,
for each Euro-Rate Portion of the Revolving Credit Loans outstanding, for any
Euro-Rate Interest Period selected, at a rate per annum equal to the sum of (A)
the Euro-Rate plus (B) the Applicable Euro-Rate Margin as determined below. The
rate of interest established pursuant to the proceeding sentence of this Section
2.08(b)(ii) for each Euro-Rate Portion shall be adjusted from time to time in
accordance with the provisions of Section 2.08(c).
For purposes of this Agreement, the term "Applicable Euro-Rate Margin" shall
mean the rate per annum set forth in the chart below which corresponds to the
range of ratios in which the ratio of the Borrower's Consolidated Total
Indebtedness to Adjusted EBITDA as at the end of the preceding fiscal quarter
falls:
- ---------------------------------------------- --------------------------------
Consolidated Total Indebtedness Applicable Euro-Rate Margin
to Adjusted EBITDA ratio
- ---------------------------------------------- --------------------------------
Less than or equal to 1.5 to 1.0 1/2%
- ---------------------------------------------- --------------------------------
Greater than 1.5 to 1.0 but less than 5/8%
or equal to 2.0 to 1.0
- ---------------------------------------------- --------------------------------
Greater than 2.0 to 1.0 but less than 3/4%
or equal to 2.5 to 1.0
- ---------------------------------------------- --------------------------------
Greater than 2.5 to 1.0 but less than 7/8%
or equal to 3.0 to 1.0
- ---------------------------------------------- --------------------------------
Greater than 3.0 to 1.0 1%
- ---------------------------------------------- --------------------------------
All adjustments shall be determined as of the date on which the Borrower's
quarterly financial statements and Compliance Certificate are required to be
delivered pursuant to items (i) and (iii) of Section 6.02. The foregoing
notwithstanding the Applicable Euro-Rate Margin from the Second Amendment
Effective Date to and including the April 1998 Delivery Date shall be
five-eighths of one percent (5/8%).
<PAGE>
Prior to the Second Amendment Effective Date, the Applicable Euro Rate Margin
shall be determined under the Original Credit Agreement.
Section 1.04 Amendment to Section 2.17 (b) of the Original Credit
Agreement. Section 2.17 (b) of the Original Credit Agreement is hereby amended
and restated in its entirety to read as follows:
(b) The Borrower shall pay (i) to the L/C Issuer for its own account a fronting
fee equal to 1/8 of 1% per annum (the "L/C Fronting Fee") on the aggregate daily
(computed at the opening of business and on the basis of a year of 365 or 366
days, as the case may be, and actual days elapsed) Stated Amount of the
outstanding Letters of Credit for the period in question, and (ii) to the Agent
for the ratable account of the Lenders a fee (the "Letter of Credit Fee") equal
to the Applicable Letter of Credit Fee per annum, as determined below, on the
aggregate daily (computed at the opening of business and on the basis of a year
of 365 or 366 days, as the case may be, and actual days elapsed) Stated Amount
of the outstanding Letters of Credit for the period in question. The Letter of
Credit Fee and the L/C Fronting Fee shall be payable (i) quarterly in arrears on
the last Business Day of each Fiscal Quarter occurring during the term of this
Agreement thereafter, (ii) on the Expiration Date or (iii) upon acceleration of
the Notes. Any issuance of an amendment to extend the stated expiration date of
a Letter of Credit or an amendment to increase the Stated Amount of a Letter of
Credit shall be treated as an issuance of a new Letter of Credit for purposes of
calculation of Letter of Credit Fee and the L/C Fronting Fee due and payable
hereunder. The Borrower shall also pay to the L/C Issuer the L/C Issuer's
customary documentation fees payable with respect to the Letters of Credit as
the L/C Issuer may generally charge from time to time. After the occurrence of
an Event of Default (which continues after the expiration of any cure period
applicable thereto) and during the continuation thereof, the rate at which the
Letter of Credit Fee is calculated shall be increased by two hundred (200) basis
points (2%) above the pre-default rate; the increase to be payable monthly
during the continuation of the Event of Default.
For purposes of this Agreement on and after the Second Amendment Effective Date,
the term "Applicable Letter of Credit Fee" shall mean the rate per annum set
forth in the chart below which corresponds to the range of ratios in which the
ratio of the Borrower's Consolidated Total Indebtedness to Adjusted EBITDA as at
the end of the preceding fiscal quarter falls:
<PAGE>
- ------------------------------------------------- -----------------------------
Consolidated Total Indebtedness Applicable Letter of
to Adjusted EBITDA ratio Credit Fee
- ------------------------------------------------- -----------------------------
Less than or equal to 1.5 to 1.0 1/2%
- ------------------------------------------------- -----------------------------
Greater than 1.5 to 1.0 but less 5/8%
than or equal to 2.0 to 1.0
- ------------------------------------------------- -----------------------------
Greater than 2.0 to 1.0 but less 3/4%
than or equal to 2.5 to 1.0
- ------------------------------------------------- -----------------------------
Greater than 2.5 to 1.0 but less 7/8%
than or equal to 3.0 to 1.0
- ------------------------------------------------- -----------------------------
Greater than 3.0 to 1.0 1%
- ------------------------------------------------- -----------------------------
All adjustments shall be determined as of the date the Borrower's quarterly
financial statements and Compliance Certificate are required to be delivered
pursuant to items (i) and (iii) of Section 6.02. The foregoing notwithstanding,
the Applicable Letter of Credit Fee from the Closing Date to and including the
April 1998 Delivery Date shall be 5/8%.
Section 1.05 Amendment to Section 4.07 of the Original Credit Agreement.
Section 4.07 of the Original Credit Agreement is hereby amended and restated in
its entirety to read as follows:
4.07. Litigation. Except for the Investigation and the matters set forth on
Schedule 4.07, there are no actions, suits, proceedings or investigations
pending or, to the knowledge of the Borrower, threatened against the
Borrower, or any Subsidiary of the Borrower, at law or equity before any
Official Body which individually or in the aggregate, if adversely
determined would be likely to result in any Material Adverse Change.
Neither Borrower nor any Subsidiary of the Borrower is in violation of any
order, writ, injunction or decree of any Official Body which could be
expected to result in any Material Adverse Change.
Section 1.06 Amendment to Section 4.14 of the Original Credit Agreement.
Section 4.14 of the Original Credit Agreement is hereby amended and restated in
its entirety to read as follows:
4.14. Compliance with Laws4.14. Compliance with Laws. Except for matters
arising from or relating to the Investigation (as to which the Borrower
does not admit that it has failed to comply with any Laws), the Borrower
and its Subsidiaries are in compliance in all material respects with all
applicable Laws (other than Environmental Laws) in all jurisdictions in
which the Borrower and its Subsidiaries are presently or will be doing
business except where the failure to do so would not, individually or in
the aggregate, constitute a Material Adverse Change.
<PAGE>
Section 1.07 Amendment to Section 4.23 of the Original Credit Agreement.
Section 4.23 of the Original Credit Agreement is hereby amended and restated in
its entirety to read as follows:
4.23. Burdensome Restrictions. No contract, lease, agreement or other
instrument to which Borrower or any of its Subsidiaries is a party or is
bound and, except for matters arising from or relating to the
Investigation, no provision of applicable law or governmental regulation
would reasonably be expected to have a Material Adverse Change.
Section 1.08 Amendment to Section 4.26 of the Original Credit Agreement.
Section 4.26 of the Original Credit Agreement is hereby amended and restated in
its entirety to read as follows:
4.26. No Material Adverse Change4.26. No Material Adverse Change. Except
for matters arising from or relating to the Investigation (provided that
the Borrower's aggregate total liability determined on a consolidated basis
for such conduct is less than or equal to the amount of the Special
Reserve), no event has occurred since July 31, 1997 and is continuing which
has had or would reasonably be expected to have a Material Adverse Change.
Section 1.09 Amendment to Section 6.11 of the Original Credit Agreement.
Section 6.11 of the Original Credit Agreement is hereby amended and restated in
its entirety to read as follows:
6.11. Compliance with Laws. The Borrower and its Subsidiaries shall comply
with all applicable Laws (other than Environmental Laws) in all respects,
provided that neither the Borrower nor any Subsidiary shall be deemed to be
in violation of this Section 6.11 for any of the following: (i) matters
arising from or relating to the Investigation; provided that the Borrower's
aggregate total liability determined on a consolidated basis for such
conduct is less than or equal to the amount of the Special Reserve, or (ii)
any other failure to comply with any Law so long as such non-compliance
does not result in fines, penalties, other similar liabilities or
injunctive relief which in the aggregate would constitute a Material
Adverse Change.
<PAGE>
Section 1.10 Amendment to Section 7.12 of the Original Credit Agreement.
Section 7.12 of the Original Credit Agreement is hereby amended and restated in
its entirety to read as follows:
7.12. Minimum Consolidated Tangible Net Worth. On and after April 30, 1998,
the Borrower shall not permit its Consolidated Tangible Net Worth to be
less than an amount equal to the sum of (i) 85% of the Consolidated
Tangible Net Worth as of April 30, 1998, plus (ii) 50% of the positive net
income for each Fiscal Quarter ending after April 30, 1998 of the Borrower
and its Subsidiaries determined on a consolidated basis in accordance with
GAAP consistently applied, plus (iii) all increases to equity from the
issuance by the Borrower after April 30, 1998 of additional equity
securities or other equity capital investments.
Section 1.11 Amendment to Section 7.13 of the Original Credit Agreement.
Section 7.13 of the Original Credit Agreement is hereby amended and restated in
its entirety to read as follows:
7.13. Interest Coverage. The Borrower shall not permit its ratio, measured
on a rolling four Fiscal Quarter basis, of EBITDA to Cash Interest Expense
as of the end of each Fiscal Quarter to be less than 3.5 to 1.0; provided,
however, that for purposes of this Section 7.13, the Special Reserve may be
included in calculating the Borrower's EBITDA by treating it as an
extraordinary or unusual loss pursuant to item (a)(v) of the definition of
EBITDA contained in Section 1.01 hereof.
Section 1.12 Amendment to Section 7.14 of the Original Credit Agreement.
Section 7.14 of the Original Credit Agreement is hereby amended and restated in
its entirety to read as follows:
7.14. Leverage Ratio. The Borrower shall not permit its Consolidated Total
Indebtedness to EBITDA Ratio to exceed 3.0 to 1.0; provided, however, that
for purposes of this Section 7.14, the Special Reserve may be included in
calculating the Borrower's EBITDA by treating it as an extraordinary or
unusual loss pursuant to item (a)(v) of the definition of EBITDA contained
in Section 1.01 hereof.
<PAGE>
ARTICLE II
WAIVER
Section 2.01 Waiver of Compliance. To the extent such waiver is required to
prevent a Default or Event of Default under the Original Credit Agreement solely
by reason of matters arising from or relating to the Investigation or the
Special Reserve, but only to such extent, the Agent, the Lenders, and the L/C
Issuer hereby waive compliance as of the Second Amendment Effective Date with
the following sections of the Original Credit Agreement:
(i) Section 4.07 for Fiscal Quarters ending on and prior to April 30, 1998,
(ii) Section 4.14 for Fiscal Quarters ending on and prior to April 30, 1998,
(iii) Section 4.23 for Fiscal Quarters ending on and prior to April 30, 1998,
(iv) Section 4.26 for Fiscal Quarters ending on and prior to April 30, 1998,
(v) Section 5.01(a) for Fiscal Quarters ending on and prior to April 30, 1998,
(vi) Section 5.01(f) for Fiscal Quarters ending on and prior to April 30, 1998,
(vii) Section 5.02(a) for Fiscal Quarters ending on and prior to April 30, 1998,
(viii) Section 6.11 for Fiscal Quarters ending on and prior to April 30, 1998,
(ix) Section 7.12 for Fiscal Quarters ending on and prior to April 30, 1998,
(x) Section 7.13 for Fiscal Quarters ending on and prior to April 30, 1998,
(xi) Section 7.14 for Fiscal Quarters ending on and prior to April 30, 1998.
Section 2.02 No Other Amendments or Waivers. The amendments and waivers set
forth in Article I and Article II hereof, respectively, do not either implicitly
or explicitly alter, waive or amend, except as expressly provided in this Second
Amendment, the provisions of the Original Credit Agreement. The amendments and
waivers set forth in Article I and Article II hereof, respectively, do not
waive, now or in the future, compliance with any other covenant, term or
condition to be performed or complied with nor do they impair any rights or
remedies of the Agent, the Lenders, and the L/C Issuer under the Original Credit
Agreement with respect to any such violation. Except as expressly set forth in
this Second Amendment, nothing in this Second Amendment shall be deemed or
construed to be a waiver or release of, or a limitation upon, the exercise by
the Agent, the Lenders, and the L/C Issuer of any of their respective rights and
remedies under the Original Credit Agreement and the other Loan Documents,
whether arising as a consequence of any Events of Default which may now exist or
otherwise, and all such rights and remedies are hereby expressly reserved.
<PAGE>
ARTICLE III
BORROWER'S SUPPLEMENTAL REPRESENTATIONS
Section 3.01. Incorporation by Reference. As an inducement to the Agent,
the Lenders, and the L/C Issuer to enter into this Second Amendment, the
Borrower hereby repeats herein for the benefit of the Agent, the Lenders, and
the L/C Issuer the representations and warranties made by the Borrower in
Article IV of the Original Credit Agreement, as amended hereby, except that for
purposes hereof such representations and warranties shall be deemed to extend to
and cover this Second Amendment.
ARTICLE IV
CONDITIONS PRECEDENT
Section 4.01 Conditions Precedent. Each of the following shall be a
condition precedent to the effectiveness of this Second Amendment:
(i) The Agent shall have received, on or before the Second Amendment
Effective Date, the following items, each, unless otherwise indicated, dated on
or before the Second Amendment Effective Date and in form and substance
satisfactory to the Agent and its special counsel, Tucker Arensberg, P.C.:
(A) A duly executed counterpart original of this Second Amendment;
(B) A certificate from the Secretary of the Borrower certifying that the
Articles of Incorporation and Bylaws of the Borrower previously delivered
to the Agent are true, complete, and correct.
(C) Payment of the Second Amendment Fee to the Agent for the benefit of the
Lenders;
(D) Such other instruments, documents and opinions of counsel as the Agent
shall reasonably require, all of which shall be satisfactory in form and
content to the Agent and its special counsel, Tucker Arensberg, P.C.
(ii) The following statements shall be true and correct on the Second
Amendment Effective Date and the Agent shall have received a certificate signed
by an Authorized Officer of the Borrower, dated the Second Amendment Effective
Date, stating that:
<PAGE>
(A) the representations and warranties made pursuant to Section 3.01
of this Second Amendment and in the other Loan Documents, as amended
hereby, are true and correct on and as of the Second Amendment
Effective Date as though made on and as of such date;
(B) no petition by or against the Borrower has at any time been filed
under the United States Bankruptcy Code or under any similar act;
(C) Taking into account the amendments and waivers set forth in this
Second Amendment, no Event of Default or event which with the
giving of notice, the passage of time or both would become an
Event of Default has occurred and is continuing, or would result
from the execution of or performance under this Second Amendment;
(D) Taking into account the amendments and waivers set forth in this
Second Amendment, no Material Adverse Change has occurred which
has not been disclosed to the Agent; and
(E) Taking into account the amendments and waivers set forth in this
Second Amendment, the Borrower has in all material respects
performed all agreements, covenants and conditions required to be
performed on or prior to the date hereof under the Original
Credit Agreement and the other Loan Documents.
ARTICLE V
GENERAL PROVISIONS
Section 5.01 Ratification of Terms. Except as expressly amended by this
Second Amendment, the Original Credit Agreement and each and every
representation, warranty, covenant, term and condition contained therein is
specifically ratified and confirmed. The Borrower hereby confirms that any
collateral for the Lender Obligations, including but not limited to
encumbrances, Liens, security interests, mortgages and pledges granted by the
Borrower or third parties, shall continue unimpaired and in full force and
effect. The Borrower expressly ratifies and confirms the waiver of jury trial
provision contained in the Original Credit Agreement and the other Loan
Documents.
Section 5.02 References. All notices, communications, agreements,
certificates, documents or other instruments executed and delivered after the
execution and delivery of this Second Amendment in connection with the Original
Credit Agreement, any of the other Loan Documents or the transactions
contemplated thereby may refer to the Original Credit Agreement without making
specific reference to this Second Amendment, but nevertheless all such
references shall include this Second Amendment unless the context requires
otherwise. From and after the Amendment Effective Date, all references in the
Original Credit Agreement and each of the other Loan Documents to the
"Agreement" shall be deemed to be references to the Original Credit Agreement as
amended hereby.
<PAGE>
Section 5.03 Incorporation Into Original Credit Agreement. This Second
Amendment is deemed incorporated into the Original Credit Agreement. To the
extent that any term or provision of this Second Amendment is or may be deemed
expressly inconsistent with any term or provision of the Original Credit
Agreement, the terms and provisions hereof shall control.
Section 5.04 Counterparts. This Second Amendment may be executed in
different counterparts, each of which when executed by the Borrower and the
Agent, the Lenders, and the L/C Issuer shall be regarded as an original, and all
such counterparts shall constitute one Second Amendment.
Section 5.05 Capitalized Terms. Except for proper nouns and as otherwise
defined herein, capitalized terms used herein as defined terms shall have the
same meanings herein as are ascribed to them in the Original Credit Agreement,
as amended hereby.
Section 5.06 Taxes. The Borrower shall pay any and all stamp and other
taxes and fees payable or determined to be payable in connection with the
execution, delivery, filing and recording of this Second Amendment and such
other documents and instruments as are delivered in connection herewith and
agrees to save the Agent, the Lenders, and the L/C Issuer harmless from and
against any and all liabilities with respect to or resulting from any delay in
paying or omission to pay such taxes and fees.
Section 5.07 Costs and Expenses. The Borrower will pay all costs and
expenses of the Agent (including, without limitation, the reasonable fees and
the disbursements of the Agent's special counsel, Tucker Arensberg, P.C.) in
connection with the preparation, execution and delivery of this Second Amendment
and the other documents, instruments and certificates delivered in connection
herewith.
Section 5.08 GOVERNING LAW. THIS SECOND AMENDMENT AND THE RIGHTS AND
OBLIGATIONS HEREUNDER SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE
LAWS OF THE COMMONWEALTH OF PENNSYLVANIA WITHOUT REGARD TO THE PROVISIONS
THEREOF REGARDING CONFLICTS OF LAW.
Section 5.09 Headings. The headings of the sections in this Second
Amendment are for purposes of reference only and shall not be deemed to be a
part hereof.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
IN WITNESS WHEREOF, the parties hereto, with the intent to be legally bound
hereby, have caused this Second Amendment to Revolving Credit and Letter of
Credit Issuance Agreement and Waiver to be duly executed by their respective
proper and duly authorized officers as a document under seal, as of the day and
year first above written.
Attest: Borrower:
THE CARBIDE/GRAPHITE GROUP, INC.,
a Delaware corporation
/s/ Walter E. Damian By: /s/ Stephen D. Weaver (SEAL)
Name: Walter E. Damian Name: Stephen D. Weaver
Title: VP-Human Resources Title: Chief Financial Officer
Agent and L/C Issuer:
PNC BANK, NATIONAL ASSOCIATION
By /s/ Mark W. Rutherford (SEAL)
Name: Mark W. Rutherford
Title: Vice President
Lenders:
Revolving Credit PNC BANK, NATIONAL ASSOCIATION
Commitment: $26,000,000.00
Ratable Share: 17.33% By /s/ Mark W. Rutherford (SEAL)
Name: Mark W. Rutherford
Title: Vice President
[SIGNATURES CONTINUED ON FOLLOWING PAGE]
<PAGE>
Revolving Credit NATIONAL CITY BANK OF
Commitment: $18,000,000.00 PENNSYLVANIA
Ratable Share: 12% By /s/ William S. Harris (SEAL)
Name: William S. Harris
Title: Vice President
Revolving Credit THE FIRST NATIONAL BANK OF CHICAGO
Commitment: $13,000,000.00
Ratable Share: 8.66% By /s/ Kenneth Kramer (SEAL)
Name: Kenneth Kramer
Title: Vice President
Revolving Credit CORESTATES BANK, N.A.
Commitment: $18,000,000.00
Ratable Share: 12% By /s/ Donna Jemhart (SEAL)
Name: Donna Jemhart
Title: Vice President
Revolving Credit KEYBANK, NATIONAL ASSOCIATION
Commitment: $13,000,000.00
Ratable Share: 8.66% By /s/ Lawrence A. Mack (SEAL)
Name: Lawrence A. Mack
Title: Vice President
Revolving Credit STANDARD CHARTERED BANK
Commitment: $13,000,000.00
Ratable Share: 8.66% By /s/ Kristina McDavid (SEAL)
Name: Kristina McDavid
Title: Vice President
[SIGNATURES CONTINUED ON FOLLOWING PAGE]
<PAGE>
Revolving Credit MELLON BANK, N.A.
Commitment: $13,000,000.00
Ratable Share: 8.66% By /s/ Roger N. Stanier (SEAL)
Name: Roger N. Stanier
Title: Vice President
Revolving Credit NATIONSBANK, N.A.
Commitment: $18,000,000.00
Ratable Share: 12% By /s/ Philip Durawd (SEAL)
Name: Philip Durawd
Title: Vice President
Revolving Credit THE CHASE MANHATTAN BANK
Commitment: $18,000,000.00
Ratable Share: 12% By /s/ John Malone (SEAL)
Name: John Malone
Title: Vice President
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE FINANCIAL
STATEMENTS IN THE COMPANY'S QUARTERLY REPORT ON FORM 10-Q FOR THE QUARTERLY
PERIOD ENDED APRIL 30, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS. </LEGEND>
<S> <C>
<PERIOD-TYPE> 9-Mos
<FISCAL-YEAR-END> Jul-31-1998
<PERIOD-START> Aug-01-1997
<PERIOD-END> Apr-30-1998
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 49,454
<ALLOWANCES> (2,030)
<INVENTORY> 61,711
<CURRENT-ASSETS> 123,736
<PP&E> 324,564
<DEPRECIATION> (190,918)
<TOTAL-ASSETS> 265,211
<CURRENT-LIABILITIES> 75,569
<BONDS> 97,782
0
0
<COMMON> 99
<OTHER-SE> 81,031
<TOTAL-LIABILITY-AND-EQUITY> 265,211
<SALES> 220,979
<TOTAL-REVENUES> 220,979
<CGS> 181,674
<TOTAL-COSTS> 192,999
<OTHER-EXPENSES> 38,657
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,780
<INCOME-PRETAX> (14,457)
<INCOME-TAX> (4,639)
<INCOME-CONTINUING> (9,818)
<DISCONTINUED> 0
<EXTRAORDINARY> (6,417)
<CHANGES> 0
<NET-INCOME> (16,235)
<EPS-PRIMARY> (1.87)
<EPS-DILUTED> (1.87)
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE FINANCIAL
STATEMENTS IN THE COMPANY'S QUARTERLY REPORT ON FORM 10-Q FOR THE QUARTERLY
PERIOD ENDED APRIL 30, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS. </LEGEND>
<S> <C>
<PERIOD-TYPE> 9-Mos
<FISCAL-YEAR-END> Jul-31-1996
<PERIOD-START> Aug-01-1995
<PERIOD-END> Apr-30-1996
<CASH> 28,682
<SECURITIES> 0
<RECEIVABLES> 45,644
<ALLOWANCES> (2,765)
<INVENTORY> 52,606
<CURRENT-ASSETS> 136,739
<PP&E> 234,859
<DEPRECIATION> (171,738)
<TOTAL-ASSETS> 205,820
<CURRENT-LIABILITIES> 33,753
<BONDS> 84,284
0
0
<COMMON> 92
<OTHER-SE> 69,338
<TOTAL-LIABILITY-AND-EQUITY> 205,820
<SALES> 193,486
<TOTAL-REVENUES> 193,486
<CGS> 159,930
<TOTAL-COSTS> 169,198
<OTHER-EXPENSES> 2,110
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 6,989
<INCOME-PRETAX> 15,189
<INCOME-TAX> 4,857
<INCOME-CONTINUING> 10,332
<DISCONTINUED> 0
<EXTRAORDINARY> (2,000)
<CHANGES> 0
<NET-INCOME> 8,332
<EPS-PRIMARY> 1.14
<EPS-DILUTED> 0.98
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE FINANCIAL
STATEMENTS IN THE COMPANY'S QUARTERLY REPORT ON FORM 10-K FOR THE ANNUAL
PERIOD ENDED JULY 31, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS. </LEGEND>
<S> <C>
<PERIOD-TYPE> 12-Mos
<FISCAL-YEAR-END> Jul-31-1996
<PERIOD-START> Aug-01-1995
<PERIOD-END> Jul-31-1996
<CASH> 16,586
<SECURITIES> 0
<RECEIVABLES> 47,288
<ALLOWANCES> (1,896)
<INVENTORY> 54,779
<CURRENT-ASSETS> 140,934
<PP&E> 239,059
<DEPRECIATION> (173,882)
<TOTAL-ASSETS> 212,870
<CURRENT-LIABILITIES> 36,109
<BONDS> 81,763
0
0
<COMMON> 94
<OTHER-SE> 74,714
<TOTAL-LIABILITY-AND-EQUITY> 212,870
<SALES> 259,394
<TOTAL-REVENUES> 259,394
<CGS> 214,396
<TOTAL-COSTS> 227,113
<OTHER-EXPENSES> 2,353
<LOSS-PROVISION> 120
<INTEREST-EXPENSE> 9,073
<INCOME-PRETAX> 20,735
<INCOME-TAX> 6,416
<INCOME-CONTINUING> 14,319
<DISCONTINUED> 0
<EXTRAORDINARY> (2,177)
<CHANGES> 0
<NET-INCOME> 12,142
<EPS-PRIMARY> 1.61
<EPS-DILUTED> 1.42
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE FINANCIAL
STATEMENTS IN THE COMPANY'S QUARTERLY REPORT ON FORM 10-Q FOR THE QUARTERLY
PERIOD ENDED OCTOBER 31, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS. </LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-Mos
<FISCAL-YEAR-END> Jul-31-1997
<PERIOD-START> Aug-01-1996
<PERIOD-END> Oct-31-1996
<CASH> 2,650
<SECURITIES> 15,235
<RECEIVABLES> 52,952
<ALLOWANCES> (1,926)
<INVENTORY> 55,715
<CURRENT-ASSETS> 137,913
<PP&E> 244,131
<DEPRECIATION> (176,353)
<TOTAL-ASSETS> 212,340
<CURRENT-LIABILITIES> 31,123
<BONDS> 81,763
0
0
<COMMON> 95
<OTHER-SE> 79,181
<TOTAL-LIABILITY-AND-EQUITY> 212,340
<SALES> 67,716
<TOTAL-REVENUES> 67,716
<CGS> 55,900
<TOTAL-COSTS> 59,921
<OTHER-EXPENSES> 267
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,105
<INCOME-PRETAX> 5,423
<INCOME-TAX> 1,900
<INCOME-CONTINUING> 3,523
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,523
<EPS-PRIMARY> 0.42
<EPS-DILUTED> 0.40
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE FINANCIAL
STATEMENTS IN THE COMPANY'S QUARTERLY REPORT ON FORM 10-Q FOR THE QUARTERLY
PERIOD ENDED JANUARY 31, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS. </LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-Mos
<FISCAL-YEAR-END> Jul-31-1997
<PERIOD-START> Aug-01-1996
<PERIOD-END> Jan-31-1997
<CASH> 11,181
<SECURITIES> 15,543
<RECEIVABLES> 53,060
<ALLOWANCES> (1,970)
<INVENTORY> 51,607
<CURRENT-ASSETS> 142,271
<PP&E> 249,094
<DEPRECIATION> (178,418)
<TOTAL-ASSETS> 219,493
<CURRENT-LIABILITIES> 32,042
<BONDS> 81,763
0
0
<COMMON> 97
<OTHER-SE> 85,056
<TOTAL-LIABILITY-AND-EQUITY> 219,493
<SALES> 142,797
<TOTAL-REVENUES> 142,797
<CGS> 117,727
<TOTAL-COSTS> 125,155
<OTHER-EXPENSES> 914
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 4,197
<INCOME-PRETAX> 12,531
<INCOME-TAX> 4,387
<INCOME-CONTINUING> 8,144
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 8,144
<EPS-PRIMARY> 0.97
<EPS-DILUTED> 0.93
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE FINANCIAL
STATEMENTS IN THE COMPANY'S QUARTERLY REPORT ON FORM 10-Q FOR THE QUARTERLY
PERIOD ENDED APRIL 30, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS. </LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-Mos
<FISCAL-YEAR-END> Jul-31-1997
<PERIOD-START> Aug-01-1996
<PERIOD-END> Apr-30-1997
<CASH> 9,073
<SECURITIES> 15,687
<RECEIVABLES> 51,370
<ALLOWANCES> (2,000)
<INVENTORY> 55,687
<CURRENT-ASSETS> 145,147
<PP&E> 257,040
<DEPRECIATION> (180,791)
<TOTAL-ASSETS> 227,835
<CURRENT-LIABILITIES> 34,691
<BONDS> 81,763
0
0
<COMMON> 97
<OTHER-SE> 90,564
<TOTAL-LIABILITY-AND-EQUITY> 227,835
<SALES> 217,720
<TOTAL-REVENUES> 217,720
<CGS> 178,371
<TOTAL-COSTS> 189,216
<OTHER-EXPENSES> 2,332
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 6,099
<INCOME-PRETAX> 20,073
<INCOME-TAX> 7,181
<INCOME-CONTINUING> 12,892
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 12,892
<EPS-PRIMARY> 1.52
<EPS-DILUTED> 1.46
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE FINANCIAL
STATEMENTS IN THE COMPANY'S QUARTERLY REPORT ON FORM 10-K FOR THE ANNUAL
PERIOD ENDED JULY 31, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS. </LEGEND>
<S> <C>
<PERIOD-TYPE> 12-Mos
<FISCAL-YEAR-END> Jul-31-1997
<PERIOD-START> Aug-01-1996
<PERIOD-END> Jul-31-1997
<CASH> 7,935
<SECURITIES> 0
<RECEIVABLES> 51,117
<ALLOWANCES> (2,029)
<INVENTORY> 59,445
<CURRENT-ASSETS> 143,336
<PP&E> 271,493
<DEPRECIATION> (183,840)
<TOTAL-ASSETS> 235,860
<CURRENT-LIABILITIES> 42,511
<BONDS> 80,035
0
0
<COMMON> 97
<OTHER-SE> 96,112
<TOTAL-LIABILITY-AND-EQUITY> 235,860
<SALES> 289,586
<TOTAL-REVENUES> 289,586
<CGS> 235,401
<TOTAL-COSTS> 249,721
<OTHER-EXPENSES> 2,691
<LOSS-PROVISION> 120
<INTEREST-EXPENSE> 7,894
<INCOME-PRETAX> 29,160
<INCOME-TAX> 10,732
<INCOME-CONTINUING> 18,428
<DISCONTINUED> 0
<EXTRAORDINARY> (126)
<CHANGES> 0
<NET-INCOME> 18,302
<EPS-PRIMARY> 2.15
<EPS-DILUTED> 2.09
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE FINANCIAL
STATEMENTS IN THE COMPANY'S QUARTERLY REPORT ON FORM 10-Q FOR THE QUARTERLY
PERIOD ENDED OCTOBER 31, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS. </LEGEND>
<S> <C>
<PERIOD-TYPE> 3-Mos
<FISCAL-YEAR-END> Jul-31-1997
<PERIOD-START> Aug-01-1997
<PERIOD-END> Oct-31-1997
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 50,779
<ALLOWANCES> (2,030)
<INVENTORY> 61,858
<CURRENT-ASSETS> 123,369
<PP&E> 286,951
<DEPRECIATION> (186,079)
<TOTAL-ASSETS> 228,846
<CURRENT-LIABILITIES> 37,011
<BONDS> 77,982
0
0
<COMMON> 98
<OTHER-SE> 96,089
<TOTAL-LIABILITY-AND-EQUITY> 228,846
<SALES> 73,394
<TOTAL-REVENUES> 73,394
<CGS> 59,336
<TOTAL-COSTS> 62,855
<OTHER-EXPENSES> 228
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,473
<INCOME-PRETAX> 8,838
<INCOME-TAX> 3,185
<INCOME-CONTINUING> 5,653
<DISCONTINUED> 0
<EXTRAORDINARY> (6,417)
<CHANGES> 0
<NET-INCOME> (764)
<EPS-PRIMARY> (0.09)
<EPS-DILUTED> (0.09)
</TABLE>
