<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-Q
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended JULY 3, 1998
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OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from___________to_____________
Commission file number 33-64140
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DAL-TILE INTERNATIONAL INC.
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(Exact name of registrant as specified in its charter)
Delaware 13-3548809
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) identification no.)
7834 Hawn Freeway, Dallas, Texas 75217
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(Address of principal executive office)
(Zip Code)
(214) 398-1411
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(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
YES X NO
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As of August 7, 1998, the registrant had outstanding 53,545,101 shares of voting
common stock, par value $0.01 per share.
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DAL-TILE INTERNATIONAL INC.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PART I - FINANCIAL INFORMATION PAGE
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<S> <C>
Item 1 - Financial Statements (Unaudited) 3
Notes to Consolidated Condensed Financial Statements
(Unaudited) 8
Item 2 - Management's Discussion and Analysis of
Financial Condition and Results of Operations 11
PART II - OTHER INFORMATION
Item 4 - Submission of Matters to a Vote of Security Holders 15
Item 5 - Other Information 16
Item 6 - Exhibits and Reports on Form 8-K 16
</TABLE>
Page 2
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DAL-TILE INTERNATIONAL INC.
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(In Thousands Except Per Share Amounts)
(Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
------------------------ ------------------------
JULY 3, JULY 4, JULY 3, JULY 4,
1998 1997 1998 1997
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<S> <C> <C> <C> <C>
Net sales $190,907 $173,742 $376,738 $341,151
Cost of goods sold 100,680 100,133 199,183 184,350
--------- ---------- --------- -----------
Gross profit 90,227 73,609 177,555 156,801
Expenses:
Transportation 14,211 14,902 28,744 26,391
Selling, general and administrative 56,770 69,197 114,203 122,189
Amortization of intangibles 1,401 1,401 2,802 2,802
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Total expenses 72,382 85,500 145,749 151,382
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Operating income (loss) 17,845 (11,891) 31,806 5,419
Interest expense 11,649 9,280 23,253 17,359
Interest income 30 67 56 206
Other income (expense) 396 (132) 5 548
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Income (loss) before income taxes 6,622 (21,236) 8,614 (11,186)
Income tax provision 1,175 (7,433) 2,339 (3,915)
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Net income (loss) $ 5,447 $(13,803) $ 6,275 $ (7,271)
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BASIC EARNINGS PER SHARE
Net income (loss) per common share $ 0.10 $ (0.26) $ 0.12 $ (0.14)
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Average shares 53,435 53,435 53,435 53,435
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DILUTED EARNINGS PER SHARE
Net income (loss) per common share $ 0.10 $ (0.26) $ 0.12 $ (0.14)
--------- ---------- --------- -----------
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Average shares 54,500 53,435 54,325 53,435
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</TABLE>
The accompanying notes are an integral part of the consolidated condensed
financial statements.
Page 3
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DAL-TILE INTERNATIONAL INC.
CONSOLIDATED CONDENSED BALANCE SHEETS
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
JULY 3, JANUARY 2,
1998 1998
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<S> <C> <C>
ASSETS
Current Assets:
Cash $ 737 $ 7,488
Trade accounts receivable 111,670 96,296
Inventories 128,457 130,747
Prepaid expenses 3,431 3,120
Other current assets 17,596 18,438
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Total current assets 261,891 256,089
Property, plant, and equipment, at cost 290,887 299,232
Less accumulated depreciation 80,608 71,547
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210,279 227,685
Goodwill, net of amortization 150,178 152,560
Finance costs, net of amortization 5,998 6,599
Tradename and other assets 29,155 29,136
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Total assets $657,501 $672,069
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</TABLE>
The accompanying notes are an integral part of the consolidated condensed
financial statements.
Page 4
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DAL-TILE INTERNATIONAL INC.
CONSOLIDATED CONDENSED BALANCE SHEETS (CONTINUED)
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
JULY 3, JANUARY 2,
1998 1998
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<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Trade accounts payable $23,453 $18,231
Accrued expenses 61,089 55,043
Accrued interest payable 593 2,287
Current portion of long-term debt 39,598 19,261
Income taxes payable 334 801
Deferred income taxes 1,414 863
Other current liabilities 4,672 4,715
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Total current liabilities 131,153 101,201
Long-term debt 492,546 537,830
Other long-term liabilities 28,443 27,230
Deferred income taxes 1,684 1,888
Stockholders' Equity:
Common stock, $.01 par value:
Authorized shares - 200,000,000; issued and
outstanding shares - 53,435,101 534 534
Additional paid-in capital 435,242 436,100
Accumulated deficit (364,611) (370,886)
Accumulated other comprehensive loss (67,490) (61,828)
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Total stockholders' equity 3,675 3,920
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Total liabilities and stockholders' equity $657,501 $672,069
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</TABLE>
The accompanying notes are an integral part of the consolidated condensed
financial statements.
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DAL-TILE INTERNATIONAL INC.
CONSOLIDATED CONDENSED STATEMENT OF STOCKHOLDERS' EQUITY
JULY 3, 1998
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
ACCUMULATED
OTHER
COMMON PAID-IN ACCUMULATED COMPREHENSIVE
STOCK CAPITAL DEFICIT LOSS TOTAL
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<S> <C> <C> <C> <C> <C>
Balance at January 2, 1998 $ 534 $436,100 $(370,886) $(61,828) $ 3,920
Common stock registration fees - (858) - - (858)
Comprehensive income (loss)
Net Income - - 6,275 - 6,275
Foreign currency translation adjustments - - - (5,662) (5,662)
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Total Comprehensive income (loss) 613
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Balance at July 3, 1998 $ 534 $435,242 $(364,611) $(67,490) $ 3,675
-------- --------- ------------ -------------- ----------
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</TABLE>
The accompanying notes are an integral part of the consolidated condensed
financial statements.
Page 6
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DAL-TILE INTERNATIONAL INC.
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
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JULY 3, JULY 4,
1998 1997
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<S> <C> <C>
OPERATING ACTIVITIES
Net income (loss) $ 6,275 $ (7,271)
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and amortization 14,234 10,292
Asset write-down 1,700 -
Provision for losses on accounts receivable 3,207 10,264
Deferred income tax provision 1,017 (6,398)
Foreign currency transaction (gain) (1,319) (280)
Changes in operating assets and liabilities:
Trade accounts receivable (19,068) (18,010)
Inventories 1,142 (36,857)
Other assets (245) (6,111)
Trade accounts payable and accrued expenses 10,980 6,151
Accrued interest payable (1,616) (767)
Other liabilities 1,093 (2,274)
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Net cash provided by (used in) operating activities 17,400 (51,261)
INVESTING ACTIVITIES
Proceeds from sale of (expenditures for) property,
plant, and equipment, net 1,196 (28,671)
FINANCING ACTIVITIES
Borrowings under long-term debt 60,008 196,060
Repayments of long-term debt (84,955) (131,589)
Fees and expenses associated with debt refinancing (241) (2,824)
Fees and expenses associated with common stock
registration (94) -
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Net cash provided by (used in) financing activities (25,282) 61,647
Effect of exchange rate changes on cash (65) (20)
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Net decrease in cash (6,751) (18,305)
Cash at beginning of period 7,488 9,999
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Cash at end of period $ 737 $ (8,306)
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</TABLE>
The accompanying notes are an integral part of the consolidated condensed
financial statements.
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DAL-TILE INTERNATIONAL INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(IN THOUSANDS)
(UNAUDITED)
1. BASIS OF PRESENTATION
The operating results of Dal-Tile International Inc. and its consolidated
subsidiaries (the "Company") for the three and six months ended July 3,
1998 reflect the results of operations of Dal-Tile International Inc. and
its consolidated subsidiaries. Due to the Company's 52/53 week accounting
cycle, the second quarter of 1998 ended on July 3, 1998.
The accompanying unaudited consolidated condensed financial statements have
been prepared in accordance with generally accepted accounting principles
for interim financial information and Article 10 of Regulation S-X.
Accordingly, they do not include all of the information and footnotes
required by generally accepted accounting principles for complete financial
statements. In the opinion of management, all adjustments, consisting of
normal recurring adjustments considered necessary for a fair presentation
of the financial position, results of operations, and cash flow have been
included. The results of operations for the six months ended July 3, 1998
are not necessarily indicative of the results that may be expected for the
year ending January 1, 1999. For further information, refer to the
consolidated financial statements and footnotes thereto included in the
January 2, 1998 annual report on Form 10-K of the Company.
Certain prior year amounts have been reclassified to conform to the 1998
presentation.
2. EARNINGS PER SHARE
Earnings per share are presented on both the basic and diluted methods.
Basic earnings per share are based on the average number of shares
outstanding during each period presented. Diluted earnings per share are
based on the average number of shares outstanding including any dilutive
effects of options, warrants and convertible securities.
3. COMPREHENSIVE INCOME
As of January 3, 1998, the Company adopted Financial Accounting Standards
Board Statement No. 130, "Reporting Comprehensive Income" ("SFAS 130").
SFAS 130 establishes new rules for the reporting and display of
comprehensive income and its components; however, the adoption of SFAS 130
had no impact on the Company's net income or shareholders' equity. SFAS 130
requires foreign currency translation adjustments, which prior to adoption
were reported separately in shareholders' equity, to be included in other
comprehensive income. Prior year financial statements have been
reclassified to the requirements of SFAS 130.
For the six months ended July 3, 1998 and July 4, 1997, total comprehensive
income (loss) amounted to $613 and ($7,839), respectively.
Page 8
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DAL-TILE INTERNATIONAL INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(IN THOUSANDS)
(UNAUDITED)
4. INVENTORIES
Inventories were as follows:
<TABLE>
<CAPTION>
JULY 3, JANUARY 2,
1998 1998
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<S> <C> <C>
Raw Materials $ 8,870 $ 9,891
Work-in-process 4,150 3,960
Finished goods 115,437 116,896
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$ 128,457 $ 130,747
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</TABLE>
5. ASSET WRITE-DOWN
As a result of refinement of the Company's manufacturing strategy, the
Company has decided to pursue the sale of its Mt. Gilead, North Carolina
glazed floor tile facility. A $1,700 provision, which was included in
selling, general and administrative expenses, was recorded in the second
quarter of 1998 to reduce the carrying value of the facility to its
estimated net realizable value.
6. LONG-TERM DEBT
Long-term debt consists of the following:
<TABLE>
<CAPTION>
JULY 3, JANUARY 2,
1998 1998
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<S> <C> <C>
Term Loan A $ 217,500 $ 217,500
Term Loan B 124,500 125,000
Revolving Credit Loan 168,000 190,000
Other 22,144 24,591
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532,144 557,091
Less current portion 39,598 19,261
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$ 492,546 $ 537,830
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</TABLE>
Page 9
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DAL-TILE INTERNATIONAL INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(IN THOUSANDS)
(UNAUDITED)
7. INCOME TAXES
The income tax provision for the three and six months ended July 3, 1998
reflects effective tax rates of approximately 18% and 27%, respectively.
For the three and six months ended July 4, 1997, the rate was approximately
35%. The effective tax rate for the three and six months ended July 3,
1998 reflects expected Mexico tax liabilities and U.S. state and possession
income tax based on estimated taxable income in those jurisdictions.
8. COMMITMENTS AND CONTINGENCIES
The Company is subject to federal, state, local and foreign laws and
regulations relating to the environment and to work places. Laws that
affect or could affect the Company's United States operations include,
among others, the Clean Air Act, the Clean Water Act, the Resource
Conservation and Recovery Act and the Occupational Safety and Health Act.
The Company believes it is currently in substantial compliance with such
laws and the regulations promulgated thereunder.
The Company is involved in various proceedings relating to environmental
matters. The Company, in the past, has disposed or arranged for the
disposal of substances which are now characterized as hazardous and
currently is engaged in the cleanup of hazardous substances at certain
sites. It is the Company's policy to accrue liabilities for remedial
investigations and cleanup activities when it is probable that such
liabilities have been incurred and when they can be reasonably estimated.
The Company has provided reserves which management believes are adequate to
cover probable and estimable liabilities of the Company with respect to
such investigations and cleanup activities, taking into account currently
available information and the Company's contractual rights of
indemnification. However, estimates of future response costs are
necessarily imprecise due to, among other things, the possible
identification of presently unknown sites, the scope of contamination of
such sites, the allocation of costs among other potentially responsible
parties with respect to any such sites and the ability of such parties to
satisfy their share of liability. Accordingly, there can be no assurance
that the Company will not become involved in future litigation or other
proceedings or, if the Company were found to be responsible or liable in
any litigation or proceeding, that such costs would not be material to the
Company.
The Company is also a defendant in various lawsuits arising from normal
business activities. In the opinion of management, the ultimate liability
likely to result from the contingencies described above is not expected to
have a material adverse effect on the Company's consolidated financial
condition, results of operations or liquidity.
Page 10
<PAGE>
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
During the second quarter of 1998, the Company continued to see positive results
from the strategic plan implemented in July 1997. Sales increased $5.1 million
over the first quarter of 1998 and cash flow has increased due to higher
profitability and improved management of accounts receivable and inventories.
The Company will continue to focus on customer service enhancements during the
remainder of 1998 while furthering efforts to reduce transportation costs and
operating costs.
The following is a discussion of the results of operations for the three and six
months ended July 3, 1998 compared with the three and six months ended July 4,
1997 for Dal-Tile International Inc. and its consolidated subsidiaries (the
"Company"). Due to the Company's 52/53 week accounting cycle, the second quarter
of 1998 ended on July 3, 1998.
NET SALES
Net sales for the second quarter of 1998 increased $17.2 million, or 9.9%, to
$190.9 million from $173.7 million in the second quarter of 1997. Net sales
for the six months ended July 3, 1998 increased $35.5 million, or 10.4%, to
$376.7 million from $341.2 million for the same period in 1997. The increase
in net sales was due principally to improved customer service in all
distribution channels resulting from better product availability and the
realignment of the sales organization. This realignment has focused more
experienced sales personnel on customer satisfaction.
GROSS PROFIT
Gross profit for the second quarter of 1998 increased $16.6 million, or 22.6%,
to $90.2 million from $73.6 million in the second quarter of 1997. Gross profit
for the six months ended July 3, 1998 increased $20.8 million, or 13.3%, to
$177.6 million from $156.8 million for the same period in 1997. Gross margin
increased in the second quarter of 1998 to 47.3% from 42.4% in the second
quarter of 1997. Gross margin increased for the six months ended July 3, 1998
to 47.1% from 46.0% for the comparable period in 1997. The increases were due
to higher sales and lower obsolescence or slow moving reserve requirements.
These increases were partially offset by an unfavorable shift in product mix and
higher per unit manufacturing costs related to reduced production levels during
the first quarter of 1998.
EXPENSES
Expenses in the second quarter of 1998 decreased $13.1 million, or 15.3%, to
$72.4 million from $85.5 million in the second quarter of 1997. For the six
months ended July 3, 1998, expenses decreased $5.7 million, or 3.8%, to $145.7
million from $151.4 million for the same period in 1997. Expenses as a percent
of sales in the second quarter of 1998 decreased to 37.9% from 49.2% in 1997.
For the six months ended July 3, 1998, expenses as a percent of sales decreased
to 38.7% from 44.4% in 1997. The decreases were due in part to higher sales,
reductions in staffing, lower professional fees and the overall reduction in
operating expenses associated with cost reduction initiatives implemented in
July 1997. These decreases were offset by high transportation costs and a $1.7
million write-down of assets at the Company's Mt. Gilead manufacturing facility.
The Company is currently pursuing the sale of this facility. Additionally,
expenses for the three and six months ended July 4, 1997 were negatively
affected by charges of $16.3 million, of which $7.6 million was recorded to
increase the reserve for doubtful accounts. The balance of the charges consisted
of $2.5 million in respect of terminated employees and $6.2 million in respect
of other charges, primarily related to liabilities incurred for lease
terminations, executive search fees and other items.
Page 11
<PAGE>
OPERATING INCOME (LOSS)
Operating income in the second quarter of 1998 increased $29.7 million to $17.8
million from a loss of ($11.9) million in the second quarter of 1997. The
Company had operating income of $31.8 million for the six months ended July 3,
1998 as compared to $5.4 million for the same period in 1997. Operating income
increased due to higher sales, decreased operating expenses, as well as
decreases in provisions for doubtful accounts and slow moving or obsolete
inventories.
INTEREST EXPENSE (NET)
Interest expense (net) in the second quarter of 1998 increased $2.4 million, or
26.1%, to $11.6 million from $9.2 million in the second quarter of 1997. For the
six months ended July 3, 1998, interest expense (net) increased $6.0 million, or
34.9%, to $23.2 million from $17.2 million for the same period in 1997. These
increases were due to increased borrowing requirements through the end of 1997
and higher fees and interest rates in connection with second and third quarter
1997 amendments to the Company's credit facility.
INCOME TAXES
The income tax provision for the three and six months ended July 3, 1998
reflects effective tax rates of approximately 18% and 27%, respectively. For
the three and six months ended July 4, 1997, the rate was approximately 35%.
The effective tax rate for the three and six months ended July 3, 1998 reflects
expected Mexico tax liabilities and U.S. state and possession income tax based
on estimated taxable income in those jurisdictions. No U.S. federal income tax
expense has been recorded for 1998 due to an offset by a valuation allowance
against U.S. federal deferred tax assets recorded during 1997. The valuation
allowance will continue to be reassessed in future reporting periods.
The effective rates for the three and six months ended July 4, 1997, were based
on the estimated annual income of 1997. Subsequent to the first quarter of
1997, the Company incurred significant U.S. losses which eliminated the U.S.
federal and state income tax liability for that period and generated substantial
net operating loss carryforwards. A valuation allowance was established in 1997
to offset any benefit from the net operating losses and to reflect management's
estimation as to the future utilization of the deferred tax assets. The
resulting provision for 1997 was due to taxes incurred on earnings in Mexico.
NET INCOME (LOSS)
Net income in the second quarter of 1998 increased to $5.4 million from a loss
of ($13.8) million in the second quarter of 1997 and increased to income of $6.3
million for the six months ended July 3, 1998 from a loss of ($7.3) million for
the same period in 1997. Net income increased due to higher sales and lower
operating expenses offset by higher interest expense.
LIQUIDITY AND CAPITAL RESOURCES
Cash flow from operations and funds available under the Company's bank credit
agreement (the "Second Amended Credit Facility") continue to provide the Company
with liquidity and capital resources for working capital requirements, capital
expenditures and debt service. Cash provided by operating activities for the
six months ended July 3, 1998 was $17.4 million compared to cash usage of $51.3
million for the same period in 1997. Cash provided during the six months ended
July 3, 1998 resulted from increased profitability, improved management of
accounts receivable and inventory reductions achieved through better alignment
of production requirements with sales opportunities.
Page 12
<PAGE>
Cash provided by investing activities for the six months ended July 3, 1998 was
$1.2 million, inclusive of $8.1 million in net cash proceeds from the sale of
the Company's Lansdale, PA manufacturing facility. During the remainder of
1998, the Company plans to expend approximately $18 million for capital
expenditures, including routine capital improvements, remaining costs to
complete the Dallas, TX plant expansion and costs to expand the Monterrey,
Mexico manufacturing facility.
Cash used in financing activities was $25.3 million for the first half of 1998,
which reflects repayments of $22.0 million on the revolver portion of the Second
Amended Credit Facility and payments of various other debt and fees. Total
availability as of July 3, 1998 under the Second Amended Credit Facility was
$68.0 million. The Company believes cash flow from operating activities,
together with borrowings available under the Second Amended Credit Facility (or
replacement thereof), will be sufficient to fund future working capital needs,
capital expenditures and debt service requirements.
Given increasingly stringent financial covenants and debt service requirements
under the Second Amended Credit Agreement, the Company expects that it will be
required to seek to refinance its indebtedness or amend the terms thereof in
1999 or possibly sooner. The Company's ability to amend or refinance its
obligations with respect to its indebtedness and to raise capital through
alternative means such as selling assets or raising equity capital, as well as
its ability to comply with its obligations under any new or amended debt
facilities, depends on its financial and operating performance, which, in turn,
is subject to prevailing economic conditions and to financial, business and
other factors beyond its control. If additional funds are raised through the
issuance of equity securities, the percentage ownership of the Company's
stockholders at that time would be diluted. Further, such equity securities may
have rights, preferences or privileges senior to those of the Company's common
stock. There can be no assurance that future borrowing facilities will be
available for the repayment or refinancing of the Company's indebtedness or that
the Company's existing lenders will agree to any requested modification of the
terms of its indebtedness or that the Company's operating results will be
sufficient for compliance with its obligations under any new or amended debt
facilities. The Company expects that debt incurred as part of a refinancing
would involve higher borrowing costs.
The peso devaluation and economic uncertainties in Mexico are not expected to
have a significant impact on the Company's liquidity. Since the Company has no
peso-based borrowings, high interest rates in Mexico are not expected to
directly affect the Company's liquidity. Any future devaluation of the peso
against the U.S. dollar may adversely affect the Company's results of operations
or financial condition.
The Company is involved in various proceedings relating to environmental matters
and is currently engaged in environmental investigation and remediation programs
at certain sites. The Company has provided reserves for remedial investigation
and cleanup activities that the Company has determined to be both probable and
reasonably estimable. The Company is entitled to indemnification with respect
to certain expenditures incurred in connection with such environmental matters
and does not expect that the ultimate liability with respect to such
investigation and remediation activities will have a material adverse effect on
the Company's liquidity and financial condition.
The United States is a party to the General Agreement on Tariffs and Trade
("GATT"). Under GATT, the United States currently imposes import duties on
glazed ceramic tile from non-North American countries at 15%, to be reduced
ratably to 8 1/2% by 2004. Accordingly, GATT may stimulate competition from
non-North American manufacturers who now export, or who may seek to export,
ceramic tile to the United States. The Company cannot predict with certainty
the effect that GATT may have on the Company's operations.
In 1993, Mexico, the United States and Canada approved the North American Free
Trade Agreement ("NAFTA"). NAFTA has, among other things, removed and will
continue to remove, over a
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transition period, most normal customs duties imposed on goods traded among
the three countries. In addition, NAFTA will remove or limit many investment
restrictions, liberalize trade in services, provide a specialized means for
settlement of, and remedies for, trade disputes arising thereunder, and will
result in new laws and regulations to further these goals. Although NAFTA
lowers the tariffs imposed on the Company's ceramic tile manufactured in
Mexico and sold in the United States, it also may stimulate competition in
the United States and Canada from manufacturers located in Mexico. The United
States currently imposes import duties on glazed ceramic tile from Mexico of
approximately 13%, although these duties on imports from Mexico are being
phased out ratably under NAFTA by 2008. It is uncertain what ultimate effect
NAFTA will have on the Company's results of operations.
EFFECTS OF INFLATION
The Company believes it has generally been able to increase productivity to
offset increases in costs resulting from inflation in the U.S. and Mexico.
Inflation has not had a material impact on the Company's results of operations
during the six months ended July 3, 1998 and July 4, 1997. However, any future
increases in the inflation rate, and any increases in interest rates which
affect financing costs, may negatively affect the Company's results of
operations.
IMPACT OF YEAR 2000
Some of the Company's computer programs were written using two digits rather
than four to define the applicable year. As a result, those computer programs
have time-sensitive software that recognize a date using "00" as the year 1900
rather than the year 2000. This could cause a system failure or miscalculations
causing disruptions of operations, including, among other things, a temporary
inability to process transactions, send invoices or engage in similar normal
business activities.
The Company is continuing its efforts to modify and replace certain portions of
its software and hardware so that its computer systems will function properly
with respect to dates in the year 2000 and thereafter. The total project cost
is estimated at approximately $6.0 million and will be expensed as incurred. To
date, the Company has incurred expenses totaling approximately $1.3 million and
has completed the Year 2000 assessment, development of a modification plan and a
portion of the activities called for in the plan.
The project is estimated to be completed no later than April 2, 1999, which is
prior to any anticipated impact on the Company's operating systems. The Company
believes that, with modifications to existing software and conversions to new
software, the Year 2000 issue will not pose significant operational problems for
its computer systems. However, if such modifications and conversions are not
made, or are not completed timely, the Year 2000 issue could have a material
adverse impact on operations.
The cost of the project and the date by which the Company believes it will
complete the Year 2000 modifications are based on management's best estimates,
which were derived utilizing numerous assumptions of future events, including
the continued availability of certain resources and other factors. However,
there can be no guarantee that these estimates will be achieved and actual
results could differ materially from those anticipated. Specific factors that
might cause such material differences include, but are not limited to, the
availability and cost of personnel trained in this area, the ability to locate
and correct all relevant computer codes, non-performance of key software and
hardware vendors and similar uncertainties.
In addition, material disruptions to the operations of the Company's major
customers and suppliers as a result of Year 2000 issues could also have a
material adverse impact on the Company's operations and financial condition.
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PART II. OTHER INFORMATION
Item 4. At the annual meeting of the Company held on April 30, 1998, the
shareholders of the Company approved the following proposals:
To elect seven directors to serve the ensuing year and until
respective successors shall have been duly elected and
qualified.
<TABLE>
<CAPTION>
DIRECTORS FOR AGAINST
---------- --- -------
<S> <C> <C>
Jacques R. Sardas 52,687,441 79,820
Charles J. Pilliod, Jr. 52,686,141 81,120
Douglas D. Danforth 52,742,441 24,820
Norman E. Wells, Jr. 52,688,441 78,820
Vincent A. Mai 52,687,941 79,320
Henry F. Skelsey 52,687,541 79,720
John M. Goldsmith 52,688,241 79,020
</TABLE>
To amend the Company's 1996 Amended and Restated Stock Option Plan to,
among other things, increase the number of shares reserved for
issuance pursuant thereto.
<TABLE>
<CAPTION>
FOR AGAINST ABSTAIN BROKER NON-VOTES
--- ------- ------- -----------------
<S> <C> <C> <C>
31,524,614 1,617,814 18,376,294 1,248,539
</TABLE>
To approve the material terms of the Company's Annual Incentive Plan.
<TABLE>
<CAPTION>
FOR AGAINST ABSTAIN
--- ------- -------
<S> <C> <C>
34,166,347 222,570 18,378,344
</TABLE>
To approve the stock units under stock appreciation rights agreements
granted to Messrs. Jacques R. Sardas, W. Christopher Wellborn, David
F. Finnigan, Dan L. Cooke and Marc S. Powell.
<TABLE>
<CAPTION>
FOR AGAINST ABSTAIN
--- ------- -------
<S> <C> <C>
32,739,444 1,647,369 18,380,448
</TABLE>
To ratify the appointment of Ernst & Young LLP as the Company's
independent auditors for the fiscal year ending January 1, 1999.
<TABLE>
<CAPTION>
FOR AGAINST ABSTAIN
--- ------- -------
<S> <C> <C>
52,744,435 11,850 10,976
</TABLE>
Page 15
<PAGE>
Item 5. OTHER INFORMATION
Cautionary Statement for purposes of "Safe Harbor Provisions" of the
Private Securities Litigation Reform Act of 1995.
Certain statements contained in this filing are "forward-looking
statements" within the meaning of the Private Securities Litigation
Reform Act of 1995. Such statements are subject to risks,
uncertainties and other factors which could cause actual results to
differ materially from future results expressed or implied by such
forward looking statements. Potential risks and uncertainties
include, but are not limited to, the impact of competitive pressures
and changing economic conditions on the Company's business and its
dependence on residential and commercial construction activity, the
fact that the Company is highly leveraged, currency fluctuations and
other factors relating to the Company's foreign manufacturing
operations, the impact of pending reductions in tariffs and custom
duties, and environmental laws and other regulations.
Item 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) EXHIBITS
10.1 Amended and Restated Employment Agreement dated as of
July 17, 1998 between Dal-Tile International Inc. and
Jacques R. Sardas.
10.2 Management Subscription Agreement dated as of
July 17, 1998 between Dal-Tile International Inc. and
Jacques R. Sardas.
10.3 Management Subscription Agreement dated as of
July 17, 1998 between Dal-Tile International Inc. and
W. Christopher Wellborn.
27.1 - 27.2 Financial Data Schedule
(b) REPORTS ON FORM 8-K.
No reports on Form 8-K were filed during the quarter ended July 3, 1998.
Page 16
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
DAL-TILE INTERNATIONAL INC.
(Registrant)
Date:
August 7, 1998 /s/ W. Christopher Wellborn
- -------------- -----------------------------------
Executive Vice President, Chief Financial Officer,
Treasurer and Assistant Secretary
Page 17
<PAGE>
AMENDED AND RESTATED EMPLOYMENT AGREEMENT
AMENDED AND RESTATED EMPLOYMENT AGREEMENT dated as of July 17, 1998, by
and between Dal-Tile International Inc., a Delaware corporation (the
"Company"), and Jacques Sardas (the "Executive").
The Company is engaged in the business of the manufacture,
distribution and marketing of glazed and unglazed tile. The Company desires
to employ the Executive and the Executive desires to accept such employment
on the terms and conditions of this Agreement.
The Executive has served as President and Chief Executive of the
Company since July 1, 1997 pursuant to an Employment Agreement dated as of
June 13, 1997 and amended as of October 10, 1997 (the "Original Employment
Agreement"). The Company and the Executive desire to extend the term of the
Original Employment Agreement and amend certain other of its provisions.
NOW, THEREFORE, in consideration of the mutual premises and
agreements herein contained, and other good and valuable consideration, the
receipt and adequacy of which is hereby acknowledged, the Original Employment
Agreement is hereby amended and restated as follows:
1. TERM OF EMPLOYMENT. The term of the Executive's employment
under this Agreement (the "Term") shall commence on July 1, 1997 and continue
through and expire on December 31, 2001 unless earlier terminated as herein
provided.
2. DUTIES OF EMPLOYMENT. The Executive hereby agrees for the
Term to render his exclusive services to the Company as (subject to the last
sentence of this Section 2) its President and Chief Executive Officer, and in
connection therewith, to perform such duties commensurate with his office as
he shall reasonably be directed by the Board of Directors of the Company (the
"Board") to perform. The Executive shall devote during the Term all of his
business time, energy and skill to his executive duties
<PAGE>
hereunder and perform such duties faithfully and efficiently, except for
reasonable vacations and except for periods of illness or incapacity. When
and if requested to do so by the Board, the Executive shall serve as a
director of the Company and a director and officer of any subsidiary or
affiliate of the Company provided, that the Executive shall be indemnified
for liabilities incurred by him in his capacity as a Director or an Officer
in accordance with an Indemnification Agreement in the form attached hereto
as Exhibit A and as provided in the Company's Certificate of Incorporation
and By-Laws as in effect from time to time. From and after January 1, 2001,
with the prior written consent of the Board, the Executive may resign from
his position as President and Chief Executive Officer of the Company; it
being understood that in such event (i) the Executive shall be obligated at
the request of the Board to serve as its Chairman for the remainder of the
Term, (ii) the Executive shall continue to perform services exclusively for
the Company for the remainder of the Term as the Board shall direct
consistent with his position as Chairman, (iii) the Annual Salary and Annual
Bonus shall remain the same, unless the Board and the Executive shall
reasonably agree otherwise and (iv) such resignation, and any circumstances
directly or indirectly related thereto, shall not constitute Good Reason (as
defined below).
3. COMPENSATION AND OTHER BENEFITS.
3.1 SALARY. As compensation for all services to be rendered
by the Executive during the Term, the Company shall pay to the Executive a
salary at the annual rate of $600,000 per year (which may be increased from
time to time by the Board (the "Annual Salary")), payable in accordance with
the Company's usual payroll practices for executives. The Executive shall be
eligible to receive annual salary reviews and salary increases as authorized
by the Board.
3.2 ANNUAL BONUS. In addition to his Annual Salary, the
Executive shall be eligible to be paid a bonus in respect of each fiscal year
of the Company (the "Annual Bonus") in accordance with the Company's bonus
plan (the
-2-
<PAGE>
"Plan"), which Annual Bonus shall be determined by the Section 162(m)
Committee of the Board and which bonus shall be paid not later than 120 days
after the end of such fiscal year. The amount of the bonus opportunity shall
be 100% of the amount of the Annual Salary upon attainment of the "target"
performance level.
3.3 MULTI-YEAR BONUS. The Executive shall be eligible to be
paid a bonus in respect of the full three year period commencing on January
1, 1999 and ending December 31, 2001 pursuant to a multi-year bonus plan to
be adopted by the Company as soon as reasonably practicable hereafter (the
"Multi-Year Bonus"), subject to approval of the plan by the Company's
stockholders in accordance with Section 162(m) of the Code. The amount of
the bonus opportunity shall be a maximum of $1,200,000 if the "goal"
performance levels for such three year period are attained. The Executive
shall be eligible to receive a smaller bonus if lower performance levels are
attained. Performance levels will be established by the Section 162(m)
Committee of the Board based on the strategic plan of the Company adopted by
the Board subsequent to its initial presentation on July 30, 1998.
3.4 STOCK SUBSCRIPTION. Simultaneous with the execution of
this Agreement, the Executive shall purchase from the Company 100,000 shares
of common stock of the Company ("Common Stock") at a per share price equal to
the closing price of a share of Common Stock on the New York Stock Exchange
on the date hereof on the terms and conditions set forth in the Management
Subscription Agreement attached hereto as Exhibit B.
3.5 STOCK OPTION AGREEMENT. The Company shall simultaneously
herewith, subject to approval by its shareholders of the Dal-Tile
International Inc. 1998 Amended and Restated Stock Option Plan in accordance
with Section 162(m) of the Code (the "Option Plan"), grant Executive options
(the "Options") to purchase 2,000,000 shares of Common Stock at an exercise
price per share equal to the fair market value of the Common Stock on the
date hereof on the terms and conditions set forth in the Option Plan
-3-
<PAGE>
and a Stock Option Agreement to be entered into (the "Stock Option
Agreement") in the form attached hereto as Exhibit C, provided that the
Company shall not be obligated to issue options at an exercise price lower
than the fair market value of the Common Stock on the date of grant. The
Company shall use its best efforts to obtain such shareholder approval
promptly. The Amended and Restated Nonqualified Stock Option Agreement,
dated as of October 10, 1997, between the Executive and the Company (the
"Existing Option Agreement") shall remain in full force and effect in
accordance with its terms. The options provided for in the Existing Option
Agreement shall be referred to as the "Existing Options."
3.6 PARTICIPATION IN EMPLOYEE BENEFIT PLANS. During the
Term, the Executive shall be permitted to participate in any group life,
hospitalization or disability insurance plan, health program, pension plan,
similar benefit plan or other so-called "fringe benefit programs" of the
Company as now existing or as may hereafter be revised or adopted.
4. COVENANTS AGAINST COMPETITION. In order to induce the Company
to enter into the Original Employment Agreement, the Existing Option
Agreement, the SAR Agreement (as defined below), this Agreement, the Stock
Option Agreement and the Management Subscription Agreement, the Executive
hereby agrees as follows:
4.1 ACKNOWLEDGMENTS OF EXECUTIVE. The Executive acknowledges
that (i) the Company and any affiliates or subsidiaries thereof that are
currently existing or are acquired or formed during the Restricted Period, as
hereinafter defined (collectively, the "Companies"), are and will be engaged
primarily in the business of the manufacture, distribution and marketing of
glazed and unglazed tile (the "Company Business"); (ii) his work for the
Companies will give him access to trade secrets of and confidential
information concerning the Companies, including, without limitation,
information concerning its organization, business and affairs, organization
and operations, "know-how", customer lists, details of client or consultant
contracts, pricing policies,
-4-
<PAGE>
financial information, operational methods, marketing plans or strategies,
business acquisition plans, new personnel acquisition plans, technical
processes, projects of the Companies, financing projections, budget
information and procedures, marketing plans or strategies, and research
products (collectively, the "Trade Secrets"); and (iii) the agreements and
covenants contained in this Section 4 are essential to protect the Company
Business and goodwill of the Companies.
4.2 RESTRICTIONS ON COMPETITION. During the Term and for a
two-year period after the end of the Term (the "Restricted Period") unless
this Agreement is terminated in accordance with the provisions of Section
5.4, the Executive shall not, in any place where the Company Business is now
or hereafter conducted by any of the Companies while the Executive is an
employee, agent, officer, director or shareholder of the Companies, directly
or indirectly (a) engage in the Company Business for his own account; (b)
enter the employ of, or render any services to any person or entity engaged
in the Company Business; or (c) become interested in any such person or
entity in any capacity, including, without limitation, as an individual,
partner, shareholder, officer, director, principal, agent, trustee or
consultant; provided, however, that the Executive may own, directly or
indirectly, solely as an investment, securities of any entity traded on any
national securities exchange or registered pursuant to Section 12(g) of the
Securities Exchange Act of 1934 if the Executive is not a controlling person
of, or a member of a group which controls, such entity and does not, directly
or indirectly, own 3% or more of any class of securities of such entity. The
Company shall notify the Executive of any additional entities which may
hereafter become "Companies" within the meaning of this Agreement.
4.3 CONFIDENTIAL INFORMATION; PERSONAL RELATIONSHIPS. During
the Restricted Period, the Executive shall keep secret and retain in
strictest confidence, and shall not use for the benefit of himself or others,
all confidential matters and Trade Secrets of the Companies.
-5-
<PAGE>
4.4 PROPERTY OF THE COMPANIES. All memoranda, notes, lists,
records and other documents or papers, (and all copies thereof), including
such items stored in computer memories, on microfiche or by any other means,
made or compiled by or on behalf of the Executive, or made available to the
Executive relating to the Companies are and shall be the Companies' property
and shall be delivered to the Companies upon the expiration of the Term
unless requested earlier by the Companies.
4.5 EMPLOYEES OF THE COMPANIES. The Executive acknowledges
that any attempt on the part of the Executive to induce any employee of any
of the Companies to leave any of the Companies' employ, would be harmful and
damaging to the Companies. During the Restricted Period, the Executive will
not without the prior agreement of the Companies, in any way, directly or
indirectly: (i) induce or attempt to induce any employee to terminate
employment with the Companies; (ii) disrupt the Companies' relationship with
any employee; or (iii) solicit or entice any person employed by the Companies.
4.6 BUSINESS OPPORTUNITIES. The Executive acknowledges that
the Companies have been considering, and during the Term may consider, the
acquisition of various entities engaged in the Company Business and that it
would be harmful and damaging to the Companies if he were to become
interested in any such entity without the Company's prior consent. During
the Restricted Period, the Executive will not, without the Company's prior
consent, become interested in any such entity in any capacity, including,
without limitation, as an individual, partner, shareholder, officer,
director, principal, agent, trustee or consultant, if the Executive was aware
at any time during the Term that the Companies had been considering the
acquisition of such entity.
4.7 RESTRICTIVE COVENANTS. For the purposes of this
Agreement all matters discussed in Sections 4.1, 4.2, 4.3, 4.4, 4.5 and 4.6
of this Agreement shall be referred to as the "Restrictive Covenants."
-6-
<PAGE>
4.8 RIGHTS AND REMEDIES UPON BREACH. If the Executive
breaches, or threatens to commit a breach of, any of the provisions of the
Restrictive Covenants, the Company shall have the following rights and
remedies with respect to the Executive, each of which rights and remedies
shall be independent of the others and severally enforceable, and each of
which is in addition to, and not in lieu of, any other rights and remedies
available to the Company under law or in equity.
4.8.1 SPECIFIC PERFORMANCE. The right and remedy to
have the Restrictive Covenants specifically enforced, it being agreed that
any breach or threatened breach of the Restrictive Covenants would cause
irreparable injury to the Company and money damages will not provide an
adequate remedy to the Company.
4.8.2 ACCOUNTING. The right and remedy to require
the Executive to account for and pay over to the Company all compensation,
profits, monies, accruals, increments or other benefits derived or received
by him as a result of any transactions constituting a breach of the
Restrictive Covenants.
4.8.3 SEVERABILITY OF COVENANTS. The Executive
acknowledges and agrees that the Restrictive Covenants are reasonable and
valid in geographical and moral scope and in all other respects. If any
court determines that any of the Restrictive Covenants, or any part thereof,
are invalid or unenforceable, the remainder of the Restrictive Covenants
shall not thereby be affected and shall be given full effect, without regard
to the invalid portions.
4.8.4 BLUE-PENCILLING. If it is determined that any
of the Restrictive Covenants, or any part thereof, is unenforceable because
of the duration or geographic scope of such provision, the duration or scope
of such provision, as the case may be, shall be reduced so that such
provisions becomes enforceable and, in its reduced form, such provision shall
then be enforceable.
4.9 ENFORCEABILITY IN JURISDICTION. The Company and the Executive
intend to and hereby confer jurisdiction to enforce the Restrictive Covenants
upon the
-7-
<PAGE>
courts of any jurisdiction within the states or county which the Company does
business. If the courts of any one or more of such jurisdictions hold the
Restrictive Covenants unenforceable by reason of the breadth of such scope or
otherwise, it is the intention of the Company and the Executive that such
determination not bar or in any way affect the Company's right to relief
provided above in the courts of any other jurisdiction within the
geographical scope of the Restrictive Covenants, as to breaches of such
Restrictive Covenants in such other respective jurisdictions, such
Restrictive Covenants as they relate to each jurisdiction being, for this
purpose, severable into diverse and independent covenants.
5. TERMINATION.
5.1 TERMINATION UPON DEATH. If the Executive dies during the
Term, this Employment Agreement shall terminate immediately, except that the
Executive's legal representatives shall be entitled to receive any Annual
Salary to the extent such Annual Salary has accrued and remains payable up to
the date of the Executive's death (to be paid in accordance with the
Company's usual payroll practices for executives), plus a portion of the
Executive's Annual Bonus and Multi-Year Bonus, as set forth in Sections 3.2
and 3.3 computed on a pro rata basis based on the performance of the Company
from the beginning of the relevant bonus period to the date of Executive's
death (to be paid as promptly as practicable, but no later than 10 days after
the determination thereof), and any benefits to which the Executive, his
heirs or legal representatives may be entitled under and in accordance with
the terms of any employee benefits plan or program maintained by the Company.
5.2 TERMINATION UPON DISABILITY. If the Executive becomes
disabled during his employment hereunder so that he is unable substantially
to perform his services hereunder for 180 consecutive days, then the term of
this Agreement may be terminated by resolution of the Board sixty days after
the expiration of such 180 days, such termination to be effective upon
delivery of written notice to the Executive of the
-8-
<PAGE>
adoption of such resolution; provided, that the Executive shall be entitled
to receive any accrued and unpaid Annual Salary through such effective date
of termination (to be paid in accordance with the Company's usual payroll
practices for executives), plus a portion of the Executive's Annual Bonus and
Multi-Year Bonus, as set forth in Sections 3.2 and 3.3 computed on a pro rata
basis based on the performance of the Company from the beginning of the
relevant bonus period to the date of termination (to be paid as promptly as
practicable, but no later than 10 days after the determination thereof), and
any benefits to which the Executive may be entitled under and in accordance
with the terms of any employee benefits plan or program maintained by the
Company.
5.3 TERMINATION FOR CAUSE. The Company has the right, at any
time during the Term, subject to all of the provisions hereof, exercisable by
serving notice, effective in accordance with its terms, to terminate the
Executive's employment under this Agreement and discharge the Executive for
"Cause" (as defined below). If such right is exercised, the Executive shall
be entitled to receive unpaid and accrued Annual Salary prorated through the
date of such termination, any benefits vested as of the date of such
termination and any other compensation or benefits otherwise required to be
paid under applicable law. Except for such payments, the Company shall be
under no further obligation to the Executive. As used in this Section 5, the
term "Cause" shall mean (i) the conviction of or plea of guilty by the
Executive of any felony or other serious crime involving the Company, or (ii)
gross or willful misconduct by the Executive in the performance of his duties
hereunder; provided however, that no act shall be considered gross or willful
misconduct if the Executive believes he was acting in good faith or in a
manner not opposed to the interests of the Company. The Company shall be
entitled to terminate the Executive for Cause only upon approval of a
resolution adopted by the affirmative vote of not less than two-thirds of the
membership of the Board (excluding Executive). The Company agrees to provide
to the Executive prior written notice (the "Notice") of its intention to
terminate Executive's employment for Cause, such notice to
-9-
<PAGE>
state in detail the particular acts or failures to act which constitute
grounds for the termination. The Executive shall be entitled to a hearing
before the Board to contest the Board's findings, and to be accompanied by
counsel. Such hearing shall be held within 15 days of the request thereof to
the Company by the Executive, provided that such request must be made within
15 days of delivery of the Notice. If, following any such hearing, the Board
maintains its determination to terminate the Executive's employment for
Cause, the effective date of such termination shall be as specified in the
Notice.
5.4 TERMINATION WITHOUT CAUSE OR FOR GOOD REASON. The
Company shall have the right at any time during the Term to terminate the
Executive's employment hereunder without Cause. Upon such a termination or
the termination by the Executive for Good Reason, the Company's sole
obligation hereunder, except as otherwise provided in Section 3.5, shall be
to pay to the Executive (i) an amount equal to any Annual Salary accrued and
due and payable to the Executive hereunder on the date of termination (to be
paid in accordance with the Company's usual payroll practices for
executives), (ii) thereafter all Annual Salary for the remainder of the Term,
in accordance with the Company's usual payroll practices for executives,
(iii) in a lump sum payment (to be paid as promptly as practicable, but no
later than 10 days after the determination thereof), the greater of (A) a
portion of the Executive's Annual Bonus as set forth in Section 3.2 computed
on a pro rated basis based on the performance of the Company from the
beginning of the bonus period to the date of termination and (B) an amount
equal to the amount of the Annual Bonus for the fiscal year preceding the
fiscal year in which the date of termination occurs, pro rated based on the
number of days elapsed in the year of termination, and (iv) in a lump sum
payment (to be paid as promptly as practicable, but no later than 10 days
after the determination thereof) a portion of the Executive's Multi-Year
Bonus as set forth in Section 3.3 computed on a pro rated basis based on the
performance of the Company from January 1, 1999 to the date of termination.
For purposes of this Agreement, "Good Reason" shall mean (i) a reduction
-10-
<PAGE>
in the Annual Salary or maximum bonus opportunity as specified in Section 3.2
or 3.3, (ii) a relocation of the Company's headquarters or required
relocation of the Executive more than 100 miles outside of the Dallas/Fort
Worth Metropolitan area, (iii) a material diminution in the Executive's
duties or responsibilities, (iv) an adverse change in the Executive's title,
(v) assignment to Executive of duties and responsibilities that are
inconsistent with his position in any material respect, or (vi) failure of
the Board to nominate Executive for election to the Board, or removal of the
Executive from the Board without his consent.
5.5 OTHER. Except as otherwise provided herein, upon the
expiration or other termination of this Agreement, including the resignation
of Executive, all obligations of the Company shall forthwith terminate,
except as to any stock option rights as provided in the Stock Option
Agreement, the Existing Option Agreement and the Right (as defined below) as
provided in the SAR Agreement (as defined below) and except as otherwise
required by applicable law.
6. EXPENSES.
6.1 GENERAL. During the Term, the Executive will be
reimbursed for his reasonable professional and personal expenses incurred for
the benefit of the Company in accordance with the general policy of the
Company or directives and guidelines established by management of the Company
and upon submission of documentation satisfactory to the Company. Such
expenses shall include, but shall not be limited to, travel, entertainment,
club dues and promotional expenses and transportation expenses. With respect
to any expenses which are to be reimbursed by the Company to the Executive,
the Executive shall be reimbursed upon his presenting to the Company an
itemized expense voucher.
7. OTHER PROVISIONS.
7.1 NOTICES. Any notice or other communication required or
permitted hereunder shall be in writing and shall be delivered personally,
telegraphed,
-11-
<PAGE>
telexed, sent by facsimile transmission or sent by certified, registered or
express mail, postage prepaid. Any such notice shall be deemed given when so
delivered personally, telegraphed, telexed or sent by facsimile transmission
or, if mailed, five days after the date of deposit in the United States mail,
as follows:
(i) if to the Company, to:
Dal-Tile International Inc.
7834 Hawn Freeway
Dallas, TX 75217
Attention: Mark Solls, Esq.
with a copy to:
Frederick Fogel, Esq.
Fried, Frank, Harris, Shriver & Jacobson
One New York Plaza
New York, NY 10004
(ii) if to the Executive, to:
Jacques Sardas
6031 Orchid Lane
Dallas, TX 75230
with a copy to:
Ira C. Kaplan, Esq.
Benesch, Friedlander, Coplan & Aronoff, LLP
2300 BP America Building
200 Public Square
Cleveland, Ohio 44114
Any party may change its address for notice hereunder by notice to
the other parties hereto.
7.2 ENTIRE AGREEMENT. This Agreement, the Management
Subscription Agreement, the SAR Agreement, the Existing Option Agreement and
the Option Agreement contain the entire agreement between the parties with
respect to the
-12-
<PAGE>
subject matter hereof and supersede all prior agreements, written or oral,
with respect thereto, including, without limitation, the Original Employment
Agreement.
7.3 WAIVERS AND AGREEMENTS. This Agreement may be amended,
modified, superseded, cancelled, renewed or extended, and the terms and
conditions hereof may be waived, only by a written instrument signed by the
parties or, in the case of a waiver, by the party waiving compliance. No
delay on the part of any party in exercising any right, power or privilege
hereunder shall operate as a waiver thereof, nor shall any waiver on the part
of any party of any right, power or privilege hereunder, nor any single or
partial exercise of any right, power or privilege hereunder preclude any
other or further exercise thereof or the exercise of any other right, power
or privilege hereunder.
7.4 GOVERNING LAW. This Agreement shall be governed and
construed in accordance with the laws of the State of Delaware applicable to
agreements made and to be performed entirely within such State.
7.5 ASSIGNMENT. Executive may not delegate the performance
of any of his duties hereunder. Neither party hereto may assign any rights
hereunder without the written consent of the other party hereto. Subject to
the foregoing, this Agreement shall be binding upon and shall inure to the
benefit of the parties hereto and their respective successors and assigns.
7.6 COUNTERPARTS. This Agreement may be executed in two
counterparts, each of which shall be deemed an original but both of which
together shall constitute one and the same instrument.
7.7 HEADINGS. The headings in this Agreement are for
reference purposes only and shall not in any way affect the meaning or
interpretation of this Agreement.
8. ARBITRATION. In the event of a dispute between the Company
and the Executive over the terms of this Agreement which is not settled by
the parties, then the
-13-
<PAGE>
Company and the Executive agree to settle any and all such disputed issues by
arbitration in accordance with the then-existing rules of the American
Arbitration Association. The Company and the Executive shall jointly appoint
one person to act as the arbitrator. In the event the Company and the
Executive cannot agree to an arbitrator within 30 days, the arbitrator shall
be chosen by the President of the American Arbitration Association. The
decision of the arbitrator shall be binding upon the parties and there shall
be no appeal therefrom other than for bias, fraud or misconduct. The costs
of the arbitration, including the fees and expenses of the arbitrator, shall
be borne fifty percent by the Company, on the one hand, and fifty percent by
the Executive, on the other, but each party shall pay its own attorneys'
fees; provided, however, that if the arbitrator shall rule for the Executive,
the Company shall pay or reimburse the Executive's reasonable attorneys' fees
and the Executive's share of the arbitration costs incurred in connection
with such arbitration. Notwithstanding the foregoing, it is specifically
understood that Executive shall remain free to assert and enforce in any
court of competent jurisdiction such rights, if any, as Executive may have
under federal law, including without limitation, rights arising under Title
VII of the Civil Rights Act of 1964, as amended, the Age Discrimination and
Employment Act of 1967, as amended, and/or the Americans With Disabilities
Act of 1990.
9. STOCK OPTIONS; REGISTRATION.
(a) The Company agrees, upon the occurrence of a Filing Event (as
defined below), as promptly as practicable but not later than 45 days after
such occurrence, to (i) file with the Securities and Exchange Commission (the
"SEC"), at the Company's cost and expense, a Registration Statement on Form
S-8 (or similar form) with respect to the shares of Common Stock issuable
upon exercise of the Options, the Existing Options and the Right (as defined
in the Stock Appreciation Rights Agreement, dated as of October 10, 1997,
between the Company and Executive (the "SAR Agreement")), (ii) maintain the
effectiveness of such Registration Statement (subject to
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<PAGE>
the other provisions of this Section 9) until all of the Options, the
Existing Options and the Right shall have been exercised in full or shall
have expired, whichever shall first occur, and (iii) provide to Executive
copies of the Registration Statement and all amendments, if any, thereto.
The Company further agrees to cause any Registration Statement on Form S-8
filed by the Company on behalf of its other employees to cover the Options,
the Existing Options and the Right held by the Executive.
(b) (i) If the Company proposes to effect an underwritten
secondary registration on behalf of DTI Investors LLC or its members, the
Company will provide prompt notice to the Executive thereof and will permit
the Executive to include in such registration shares of Common Stock owned by
him (including shares acquired pursuant to the exercise of options by him)
with respect to which the Company has received written request for inclusion
therein within 20 days after the receipt of the Company's notice. Common
Stock requested by the Executive to be included in such registration will be
included pro rata on the basis of the number of shares of Common Stock held
by the Executive and the other participants in such registration, subject to
reduction, if necessary, if the managing underwriter for the offering advises
the Company that such reduction is advisable in order to avoid an adverse
effect on the proposed offering.
(ii) Subject to receipt of requisite third party consents, at
any time during the period commencing January 31, 2002 and ending December
31, 2003, Executive shall have the right to make one request for registration
on Form S-3 of shares of Common Stock owned by him (including shares acquired
pursuant to the exercise of options by him), provided that such request shall
not be effective unless the Common Stock subject thereto has an estimated
market value of at least $15,000,000. The Company will not be obligated to
effect any such registration within six months after the effective date of
any previously filed registration statement of the Company, and the Company
shall have the right to postpone any requested registration for up to six
months if it determines in good faith that such registration could reasonably
be expected to have
-15-
<PAGE>
an adverse effect on any proposal or plan by the Company or its subsidiaries
to engage in any acquisition, merger, disposition or other material corporate
transaction. Executive shall have the right to select the managing
underwriters to administer the registered public offering requested pursuant
hereto, who shall be of national prominence and reasonably acceptable to the
Company. Upon any request pursuant hereto, the Company will use all
reasonable efforts to effect the registration and the sale of the Common
Stock subject thereto as promptly as practicable. Executive acknowledges
that any registration requested pursuant hereto will be subject to any "piggy
back" registration rights in effect at the time of the Executive's request,
provided, however, that the Executive shall have the right to make one or
more additional requests for registration (on the same terms and conditions
provided for in this subparagraph (ii), except that the $15 million minimum
referred to above shall be $10 million) if shares of Common Stock owned by
him were excluded from registration as a result of "piggy back" registration
rights of others exercised by others. No such "piggy back" registration
rights shall have priority over those granted to the Executive pursuant to
this subparagraph (ii).
(iii) The Company shall bear all expenses in connection with
the registrations provided for herein, other than underwriting discounts and
commissions and transfer taxes, if any, and fees and expenses of the
Executive's legal and other advisers, attributable to the inclusion in any
such registration of Common Stock owned by Executive.
(c) The obligations of the Company contained in this Section 9 are
subject to (i) requirements of applicable law, (ii) restrictions that may be
imposed by the Company's underwriters, and (iii) Executive cooperating and
providing any needed consents, agreements (including any required "lock up"
or customary indemnity agreements, to the extent such arrangements are
requested of members of Company management or significant shareholders,
generally) and information. Executive agrees that he will discontinue any
exercise of the Options, the Existing Options or the Rights or
-16-
<PAGE>
sale of shares of Common Stock upon notice from the Company that an event or
development makes amendment or supplement of any Registration Statement of
the Company covering shares of Common Stock owned by the Executive (or
suspension of effectiveness thereof) necessary, and will not resume such
exercise or sale until the Company informs Executive he may do so (provided
that the Company shall not require such discontinuance for more than 90 days
in any 360-day period). Executive specifically agrees that, in connection
with a Filing Event described in clause (i) of the definition thereof, he
will not sell, transfer or otherwise dispose of any shares of Common Stock,
for a period of 180 days following such event, unless the underwriters for
the relevant public offering determine a shorter period to be appropriate.
(d) For the purpose of this Section 9, "Filing Event" shall mean
the earliest to occur of the following events: (i) the sale in a registered
public offering of at least 10% of the shares of Common Stock held at such
time by DTI Investors LLC or its members (taken as a group); and (ii) the
date of the termination of the Executive's employment (A) by the Company
without Cause or by reason of disability or by the Executive for Good Reason,
(B) as a result of the expiration of the Term of this Agreement (December 31,
2001), or (C) by reason of the Executive's death.
-17-
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of
the date first above written.
DAL-TILE INTERNATIONAL INC.
By:
-----------------------------------------
Name:
-----------------------------------------
Title:
-----------------------------------------
--------------------------------------------
Jacques Sardas
-18-
<PAGE>
EXHIBIT B
DAL-TILE INTERNATIONAL INC.
MANAGEMENT SUBSCRIPTION AGREEMENT
AGREEMENT made as of July 17, 1998 by and among Dal-Tile
International Inc., a Delaware corporation (the "Corporation") and Jacques
Sardas (the "Subscriber").
WHEREAS, the Subscriber wishes to purchase an aggregate of 100,000
shares of common stock, par value $.01 per share of the Corporation (the
"Common Stock") for $9.44 per share in cash and thereby make an investment in
the Corporation and the Corporation wishes to issue and sell the same to the
Subscriber, upon the terms and conditions hereinafter set forth;
NOW, THEREFORE, the parties agree as follows:
SECTION 1. AGREEMENT TO SELL AND PURCHASE SECURITIES. The
Corporation agrees to sell to the Subscriber, and the Subscriber subscribes
and agrees to pay for, upon the terms and condition hereinafter set forth,
100,000 shares (the "Shares") of Common Stock, at a purchase price of $9.44
per share.
SECTION 2. CLOSING. The issuance and delivery of the Shares to
the Subscriber and all other transactions contemplated hereby shall take
place at a closing (the "Closing") at the offices of the Corporation at 10:00
a.m. Dallas times, on July 24, 1998 or at such other place or such other time
or date as the Corporation and the Subscriber may agree in writing. At the
Closing the Subscriber shall pay for the Shares in immediately available
funds or by such other form of payment acceptable to the Corporation and the
Corporation will issue or cause to be issued and delivered to him
certificates for the Shares.
SECTION 3. REPRESENTATIONS AND WARRANTIES BY THE CORPORATION.
The Corporation represents and warrants to the Subscriber that:
(a) The Corporation is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware, and
has all requisite corporate power and authority for the transactions
contemplated by this Agreement.
(b) The authorized capital stock of the Corporation consists of
200,000,000 shares of Common Stock and 11,100,000 shares of preferred stock,
par value $.01 per share. As of April 3, 1998, there were 53,455,101 shares
of Common Stock outstanding and no shares of preferred stock outstanding.
(c) The Corporation has full power and authority to enter into
this Agreement, and to issue and deliver the Shares and to incur and perform
the obligations provided for herein, all of which have been duly authorized
by all necessary corporate action. The execution and performance of this
agreement does not, and the issuance of the Shares will not, violate any
provision of any applicable law or the Restated Certificate of Incorporation
or the By-Laws of the Corporation, or any agreement or instrument by which it
is bound and will not result in the creation of any encumbrance or charge
upon any of its assets. This Agreement constitutes the
<PAGE>
valid and legally binding obligation of the Corporation, enforceable in
accordance with its terms, except as the same may be limited by bankruptcy,
insolvency, reorganization, moratorium or other laws affecting the
enforcement of creditors' rights generally or by general equitable principles.
(d) The Shares when issued and delivered pursuant to this
Agreement will be validly issued, fully paid and non-assessable.
SECTION 4. REPRESENTATIONS AND WARRANTIES OF SUBSCRIBER.
The Subscriber for himself represents, warrants and agrees that:
(a) The Subscriber is acquiring the Shares to be acquired by him
hereunder for his own account, for investment and not with a view to the sale
or distribution thereof nor with any present intention of distributing or
selling the same.
(b) The Subscriber will not sell, assign, transfer, pledge or
otherwise dispose of any of the Shares acquired by him hereunder unless and
until the same are registered under the Securities Act of 1933, as amended
(the "Securities Act"), and any applicable state securities law, or an
exemption from such registration is available, and until the Corporation
shall have received a written opinion of counsel to the Subscriber,
reasonably acceptable to the Corporation, that the disposition is in
compliance with the requirements of the Securities Act and any applicable
state securities law.
(c) The Subscriber acknowledges and agrees that the Shares will
contain an appropriate legend restricting the transfer thereof.
(d) The Subscriber has the full legal right and power and all
authority and approval required to enter into, execute and deliver this
Agreement and to perform fully his obligations hereunder. This Agreement has
been duly executed and delivered and is the valid and binding obligation of
the Subscriber enforceable in accordance with its terms, except as the same
may be limited by bankruptcy, insolvency, reorganization, moratorium or other
laws affecting the enforcement of creditors' rights generally or by general
equitable principles. The execution and delivery of this Agreement by the
Subscriber and the performance by the Subscriber of this Agreement in
accordance with its terms and conditions will not (i) require the approval or
consent of any other person, including without limitation the approval or
consent of any governmental or regulatory body; or (ii) conflict with or
result in any breach or violation of any of the terms and conditions of, or
constitute (or with notice or lapse of time or both constitute) a default
under, any statute, regulation, order, judgment or decree applicable to the
Subscriber, or any instrument, contract or other agreement to which the
Subscriber is a party or by or to which the Subscriber is bound or subject.
(e) The Subscriber is an Executive Officer of the Corporation and
is familiar with its business and prospects.
SECTION 5. COUNTERPARTS. This Agreement may be executed in one
or more counterparts, each of which shall be signed by the Corporation and
the Subscriber and all of
-2-
<PAGE>
which shall be deemed to be one and the same agreement binding upon the
Corporation and the Subscriber.
SECTION 6. NOTICES. All notices hereunder shall be in writing
and shall be deemed to have been duly given if delivered in person or by
registered or certified mail, return receipt requested, to the Corporation at
its principal place of business, or to the Subscriber at the address set
forth below or such other address as the Subscriber shall have given to the
Corporation for such purpose. Notice shall be deemed to have been
effectively given when mailed by certified mail, return receipt requested, to
the proper address or delivered in person.
SECTION 7. CHANGES. The terms and provisions of this Agreement
may not be modified or amended, or any of the terms or provisions hereof
waived, except pursuant to the written consent of the Corporation and the
Subscriber.
SECTION 8. HEADINGS. The headings of the various sections of
this Agreement have been inserted for convenience of reference only and shall
not be deemed to be part of this Agreement.
SECTION 9. GOVERNING LAW. This Agreement shall be governed by
and construed in accordance with the law of the State of Delaware applicable
to agreements made and to be performed entirely within such State.
IN WITNESS WHEREOF, this Agreement has been duly executed as of the
date first above written.
DAL-TILE INTERNATIONAL INC.
By:
--------------------------------------
SUBSCRIBER
-----------------------------------------
Address:
6031 Orchid Lane
Dallas, TX 75230
-3-
<PAGE>
EXHIBIT B
DAL-TILE INTERNATIONAL INC.
MANAGEMENT SUBSCRIPTION AGREEMENT
AGREEMENT made as of July 17, 1998 by and among Dal-Tile
International Inc., a Delaware corporation (the "Corporation") and W.
Christopher Wellborn (the "Subscriber").
WHEREAS, the Subscriber wishes to purchase an aggregate of 100,000
shares of common stock, par value $.01 per share of the Corporation (the
"Common Stock") for $9.44 per share in cash and thereby make an investment
in the Corporation and the Corporation wishes to issue and sell the same to
the Subscriber, upon the terms and conditions hereinafter set forth;
NOW, THEREFORE, the parties agree as follows:
SECTION 1. AGREEMENT TO SELL AND PURCHASE SECURITIES. The
Corporation agrees to sell to the Subscriber, and the Subscriber subscribes
and agrees to pay for, upon the terms and condition hereinafter set forth,
10,000 shares (the "Shares") of Common Stock, at a purchase price of $9.44
per share.
SECTION 2. CLOSING. The issuance and delivery of the Shares to
the Subscriber and all other transactions contemplated hereby shall take
place at a closing (the "Closing") at the offices of the Corporation at 10:00
a.m. Dallas times, on July 24, 1998 or at such other place or such other time
or date as the Corporation and the Subscriber may agree in writing. At the
Closing the Subscriber shall pay for the Shares in immediately available
funds or by such other form of payment acceptable to the Corporation and the
Corporation will issue or cause to be issued and delivered to him
certificates for the Shares.
SECTION 3. REPRESENTATIONS AND WARRANTIES BY THE CORPORATION.
The Corporation represents and warrants to the Subscriber that:
(a) The Corporation is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware, and
has all requisite corporate power and authority for the transactions
contemplated by this Agreement.
(b) The authorized capital stock of the Corporation consists of
200,000,000 shares of Common Stock and 11,100,000 shares of preferred stock,
par value $.01 per share. As of April 3, 1998, there were 53,455,101 shares
of Common Stock outstanding and no shares of preferred stock outstanding.
(c) The Corporation has full power and authority to enter into
this Agreement, and to issue and deliver the Shares and to incur and perform
the obligations provided for herein, all of which have been duly authorized
by all necessary corporate action. The execution and performance of this
agreement does not, and the issuance of the Shares will not, violate any
provision of any applicable law or the Restated Certificate of Incorporation
or the By-Laws of the Corporation, or any agreement or instrument by which it
is bound and will not result in the creation of any encumbrance or charge
upon any of its assets. This Agreement constitutes the valid and legally
binding obligation of the Corporation, enforceable in accordance with its
terms, except as the same may be limited by bankruptcy, insolvency,
reorganization, moratorium or other laws affecting the enforcement of
creditors' rights generally or by general equitable principles.
(d) The Shares when issued and delivered pursuant to this
Agreement will be validly issued, fully paid and non-assessable.
SECTION 4. REPRESENTATIONS AND WARRANTIES OF SUBSCRIBER.
The Subscriber for himself represents, warrants and agrees that:
<PAGE>
(a) The Subscriber is acquiring the Shares to be acquired by him
hereunder for his own account, for investment and not with a view to the sale
or distribution thereof nor with any present intention of distributing or
selling the same.
(b) The Subscriber will not sell, assign, transfer, pledge or
otherwise dispose of any of the Shares acquired by him hereunder unless and
until the same are registered under the Securities Act of 1933, as amended
(the "Securities Act"), and any applicable state securities law, or an
exemption from such registration is available, and until the Corporation
shall have received a written opinion of counsel to the Subscriber,
reasonably acceptable to the Corporation, that the disposition is in
compliance with the requirements of the Securities Act and any applicable
state securities law.
(c) The Subscriber acknowledges and agrees that the Shares will
contain an appropriate legend restricting the transfer thereof.
(d) The Subscriber has the full legal right and power and all
authority and approval required to enter into, execute and deliver this
Agreement and to perform fully his obligations hereunder. This Agreement has
been duly executed and delivered and is the valid and binding obligation of
the Subscriber enforceable in accordance with its terms, except as the same
may be limited by bankruptcy, insolvency, reorganization, moratorium or other
laws affecting the enforcement of creditors' rights generally or by general
equitable principles. The execution and delivery of this Agreement by the
Subscriber and the performance by the Subscriber of this Agreement in
accordance with its terms and conditions will not (i) require the approval or
consent of any other person, including without limitation the approval or
consent of any governmental or regulatory body; or (ii) conflict with or
result in any breach or violation of any of the terms and conditions of, or
constitute (or with notice or lapse of time or both constitute) a default
under, any statute, regulation, order, judgment or decree applicable to the
Subscriber, or any instrument, contract or other agreement to which the
Subscriber is a party or by or to which the Subscriber is bound or subject.
(e) The Subscriber is an Executive Officer of the Corporation and
is familiar with its business and prospects.
SECTION 5. COUNTERPARTS. This Agreement may be executed in one
or more counterparts, each of which shall be signed by the Corporation and
the Subscriber and all of which shall be deemed to be one and the same
agreement binding upon the Corporation and the Subscriber.
SECTION 6. NOTICES. All notices hereunder shall be in writing
and shall be deemed to have been duly given if delivered in person or by
registered or certified mail, return receipt requested, to the Corporation at
its principal place of business, or to the Subscriber at the address set
forth below or such other address as the Subscriber shall have given to the
Corporation for such purpose. Notice shall be deemed to have been
effectively given when mailed by certified mail, return receipt requested, to
the proper address or delivered in person.
SECTION 7. CHANGES. The terms and provisions of this Agreement
may not be modified or amended, or any of the terms or provisions hereof
waived, except pursuant to the written consent of the Corporation and the
Subscriber.
SECTION 8. HEADINGS. The headings of the various sections of
this Agreement have been inserted for convenience of reference only and shall
not be deemed to be part of this Agreement.
-2-
<PAGE>
SECTION 9. GOVERNING LAW. This Agreement shall be governed by
and construed in accordance with the law of the State of Delaware applicable
to agreements made and to be performed entirely within such State.
IN WITNESS WHEREOF, this Agreement has been duly executed as of the
date first above written.
DAL-TILE INTERNATIONAL INC.
By:
-------------------------------------
SUBSCRIBER
-----------------------------------------
Address:
908 Suffolk Court
Southlake, TX 76092
-3-
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 6-MOS
<FISCAL-YEAR-END> JAN-01-1999 JAN-01-1999
<PERIOD-START> APR-04-1998 JAN-03-1998
<PERIOD-END> JUL-03-1998 JUL-03-1998
<CASH> 737 737
<SECURITIES> 0 0
<RECEIVABLES> 111,670 111,670
<ALLOWANCES> 9,874 9,874
<INVENTORY> 128,457 128,457
<CURRENT-ASSETS> 261,891 261,891
<PP&E> 290,887 290,887
<DEPRECIATION> 80,608 80,608
<TOTAL-ASSETS> 657,501 657,501
<CURRENT-LIABILITIES> 131,153 131,153
<BONDS> 492,546 492,546
0 0
0 0
<COMMON> 534 534
<OTHER-SE> 3,141 3,141
<TOTAL-LIABILITY-AND-EQUITY> 657,501 657,501
<SALES> 190,907 376,738
<TOTAL-REVENUES> 190,907 376,738
<CGS> 100,680 199,183
<TOTAL-COSTS> 173,062 344,932
<OTHER-EXPENSES> (396) (5)
<LOSS-PROVISION> 1,608 3,207
<INTEREST-EXPENSE> 11,649 23,253
<INCOME-PRETAX> 6,622 8,614
<INCOME-TAX> 1,175 2,339
<INCOME-CONTINUING> 5,447 6,275
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 5,447 6,275
<EPS-PRIMARY> 0.10 0.12
<EPS-DILUTED> 0.10 0.12
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<RESTATED>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JAN-02-1998
<PERIOD-START> APR-05-1997
<PERIOD-END> JUL-04-1997
<CASH> (8,306)
<SECURITIES> 0
<RECEIVABLES> 131,299
<ALLOWANCES> 14,848
<INVENTORY> 179,328
<CURRENT-ASSETS> 329,445
<PP&E> 287,998
<DEPRECIATION> 62,356
<TOTAL-ASSETS> 752,431
<CURRENT-LIABILITIES> 93,935
<BONDS> 523,553
0
0
<COMMON> 534
<OTHER-SE> 107,196
<TOTAL-LIABILITY-AND-EQUITY> 752,431
<SALES> 173,742
<TOTAL-REVENUES> 173,742
<CGS> 100,133
<TOTAL-COSTS> 185,633
<OTHER-EXPENSES> 132
<LOSS-PROVISION> 8,978
<INTEREST-EXPENSE> 9,280
<INCOME-PRETAX> (21,236)
<INCOME-TAX> (7,433)
<INCOME-CONTINUING> (13,803)
<DISCONTINUED> 0
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<CHANGES> 0
<NET-INCOME> (13,803)
<EPS-PRIMARY> (0.26)
<EPS-DILUTED> (0.26)
</TABLE>
