FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended December 26, 1998
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 No. 0-22416
KENTUCKY ELECTRIC STEEL, INC.
(Exact name of Registrant as specified in its charter)
Delaware 61-1244541
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification
Number)
P. O. Box 3500, Ashland, Kentucky 41105-3500
(Address of principal executive office, Zip Code)
(606) 929-1222
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
The number of shares outstanding of each of the issuer's classes of common
stock, as of February 8, 1999, is as follows:
4,057,731 shares of voting common stock, par value $.01 per share.
<PAGE>
KENTUCKY ELECTRIC STEEL, INC. AND SUBSIDIARY
TABLE OF CONTENTS
Page
PART I. FINANCIAL INFORMATION
Item 1 - Financial Statements
Condensed Consolidated Balance Sheets ............. 3
Condensed Consolidated Statements of Operations ... 4
Condensed Consolidated Statements of Cash Flows ... 5
Notes to Condensed Consolidated Financial
Statements ..................................... 6-8
Item 2 - Management's Discussion and Analysis of Financial
Condition and Results of Operations ............. 9-12
Item 3 - Qualitative and Quantitative Disclosures about
Market Risk ..................................... 12
PART II. OTHER INFORMATION
Item 6 - Exhibits and Reports on Form 8-K .................. 13
SIGNATURES ....................................... 14
<PAGE>
<TABLE>
KENTUCKY ELECTRIC STEEL, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in Thousands)
(Unaudited)
Dec. 26, Sept. 26,
ASSETS 1998 1998
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 134 $ 150
Accounts receivable, less allowance for doubtful
accounts and claims of $440 at December 26, 1998
and $460 at September 26, 1998 12,004 12,037
Inventories 20,281 20,363
Operating supplies and other current assets 5,391 5,206
Deferred tax assets 692 648
------- -------
Total current assets 38,502 38,404
------- -------
PROPERTY, PLANT AND EQUIPMENT
Land and buildings 4,532 4,532
Machinery and equipment 42,006 42,004
Construction in progress 3,875 3,031
Less - accumulated depreciation (15,632) (14,772)
------- -------
Net property, plant and equipment 34,781 34,795
------- -------
DEFERRED TAX ASSETS 6,100 5,990
------- -------
OTHER ASSETS 1,119 1,062
------- -------
Total assets $ 80,502 $ 80,251
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Advances on line of credit $ 13,227 $ 11,397
Accounts payable 7,594 7,056
Capital expenditures payable 671 857
Accrued liabilities 2,907 3,834
Environmental liabilities 982 982
Current portion of long-term debt 125 125
------- -------
Total current liabilities 25,506 24,251
------- -------
LONG-TERM DEBT 20,000 20,000
------- -------
OTHER LIABILITIES 880 808
------- -------
Total liabilities 46,386 45,059
------- -------
SHAREHOLDERS' EQUITY
Preferred stock, $.01 par value, 1,000,000
shares authorized, no shares issued - -
Common stock, $.01 par value, 15,000,000
shares authorized, 4,990,312 and 4,985,937
share issued, respectively 50 50
Additional paid-in capital 15,686 15,671
Less treasury stock - 930,781 and 526,996
shares at cost, respectively (4,267) (3,254)
Deferred compensation (63) (73)
Retained earnings 22,710 22,798
------- -------
Total shareholders' equity 34,116 35,192
------- -------
Total liabilities and shareholders' equity $ 80,502 $ 80,251
<FN>
See notes to condensed consolidated financial statement
</TABLE>
<TABLE>
KENTUCKY ELECTRIC STEEL, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in Thousands, Except Per Share Data)
(Unaudited)
Three Months Ended
Dec. 26, Dec. 27,
1998 1997
<S> <C> <C>
NET SALES $ 25,624 $ 26,020
COST OF GOODS SOLD 23,549 23,680
------- -------
Gross profit 2,075 2,340
SELLING AND ADMINISTRATIVE EXPENSES 1,689 1,688
------- -------
Operating income 386 652
INTEREST INCOME AND OTHER 25 10
INTEREST EXPENSE (553) (595)
------- -------
Income (loss) before income taxes (142) 67
PROVISION (CREDIT) FOR INCOME TAXES (54) 26
------- -------
Net income (loss) $ (88) $ 41
NET INCOME (LOSS) PER COMMON SHARE -
BASIC AND DILUTED $ (.02) $ .01
WEIGHTED AVERAGE SHARES OUTSTANDING -
BASIC 4,147,178 4,626,383
WEIGHTED AVERAGE SHARES OUTSTANDING -
DILUTED 4,147,178 4,643,073
<FN>
See notes to condensed consolidated financial statements
</TABLE>
<TABLE>
KENTUCKY ELECTRIC STEEL, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in Thousands)
(Unaudited)
Three Months Ended
Dec. 26, Dec. 27,
1998 1997
<S> <C> <C>
Cash Flows From Operating Activities:
Net income (loss) $ (88) $ 41
Adjustments to reconcile net income
(loss) to net cash flows from
operating activities:
Depreciation and amortization 885 917
Change in deferred taxes (110) (13)
Change in current assets and current
liabilities:
Accounts receivable 33 (1,601)
Inventories 82 (2,948)
Operating supplies and other
current assets (185) (868)
Deferred tax assets (44) 39
Accounts payable 538 2,137
Accrued liabilities (927) (1,277)
------- -------
Net cash flows from operating
activities 184 (3,573)
------- -------
Cash Flows From Investing Activities:
Capital expenditures (846) (786)
Change in capital expenditures payable (186) 274
------- -------
Net cash flows from investing
activities (1,032) (512)
------- -------
Cash Flows From Financing Activities:
Net advances on line of credit 1,830 4,095
Purchases of treasury stock (1,013) (25)
Issuance of common stock 15 14
------- -------
Net cash flows from financing
activities 832 4,084
------- -------
Net increase (decrease) in cash and
cash equivalents (16) (1)
Cash and Cash Equivalents at Beginning of Period 150 127
------- -------
Cash and Cash Equivalents at End of Period $ 134 $ 126
Interest Paid $ 937 $ 957
Income Taxes Paid $ 100 $ -
<FN>
See notes to condensed consolidated financial statement
</TABLE>
KENTUCKY ELECTRIC STEEL, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(1) Basis of Presentation
The accompanying unaudited condensed consolidated financial
statements represent Kentucky Electric Steel, Inc. and its wholly-
owned subsidiary, KESI Finance Company (collectively the Company).
All significant intercompany accounts and transactions have been
eliminated. These statements have been prepared in accordance with
generally accepted accounting principles for interim financial
information and the instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting
principles for complete financial statements. In the opinion of
management, all adjustments (consisting of normal recurring
adjustments) considered necessary for a fair presentation have been
included. Operating results for the three month period ended
December 26, 1998, are not necessarily indicative of the results that
may be expected for the year ending September 25, 1999. For further
information, refer to the financial statements and footnotes thereto
included in the Company's annual report on Form 10-K for the year
ended September 26, 1998.
(2) Accounting Policies
Fiscal Year End
The Company's fiscal year ends on the last Saturday of
September.
Property, Plant, Equipment and Depreciation
Property, plant and equipment is recorded at cost, less
accumulated depreciation. For financial reporting purposes,
depreciation is provided on the straight-line method over the
estimated useful lives of the assets, generally 3 to 12 years for
machinery and equipment and 15 to 30 years for buildings and
improvements. Depreciation for income tax purposes is computed using
accelerated methods. Expenditures for maintenance and repairs are
charged to expense as incurred. Expenditures for equipment renewals
which extend the useful life of any asset are capitalized.
Comprehensive Income
In June 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 130 (SFAS No. 130),
"Reporting Comprehensive Income", which established standards for
reporting and display of comprehensive income and its components
(revenues, expenses, gains and losses) in a full set of general-
purpose financial statements. The Company adopted SFAS No. 130 in
the quarter ended December 26, 1998. For the periods disclosed,
comprehensive income is equal to net income reported.
(3) Inventories
Inventories at December 26, 1998 and September 26, 1998 consist
of the following ($000's):
Dec. 26, Sept. 26,
1998 1998
Raw materials $ 2,889 $ 1,984
Semi-finished and finished goods 17,392 18,379
Total inventories $ 20,281 $ 20,363
(4) Long-Term Debt
The Company's bank credit facility was amended effective December
19, 1997. This amendment increased the bank credit facility from $17.5
million to $24.5 million and extended the maturity date to January 31,
2001.
(5) Earnings Per Share
Statement of Financial Accounting Standards No. 128 (SFAS No. 128)
related to earnings per share (E.P.S) requires dual presentation of
basic and diluted E.P.S. on the face of the income statement for all
entities with complex capital structures. The Company adopted SFAS No.
128 during the first quarter of fiscal 1998. The following is the
reconciliation of the numerators and denominators of the basic and
diluted earnings per share computations.
<TABLE>
For the Three For the Three
Months Ended Months Ended
December 26, 1998 December 27, 1997
Per Per
Net Share Net Share
(Loss) Shares Amount Income Shares Amount
<S> <C> <C> <C> <C> <C> <C>
Basic Earnings Per Share
Income (loss) available to
common stockholders $(88) 4,147,178 $(.02) $ 41 4,626,383 $ .01
Effect of Dilutive Securities
Options - - - 16,690
Diluted Earnings Per Share
Income (loss) available to
common stockholders
plus assumed conversions $(88) 4,147,178 $(.02) $ 41 4,643,073 $ .01
</TABLE>
The following options were not included in the computation of diluted
earnings per share because to do so would have been antidilutive for the
applicable period:
December 26, 1998 December 27, 1997
Transition stock options 91,106 147,184
Employee stock options 386,668 315,976
(6) Insurance Claim Receivable and Environmental Liabilities
The Company's melt shop operations were shut down for twelve days
during the third quarter of fiscal 1997 in order to decontaminate its
baghouse facilities after detection of a radioactive substance in the
baghouse dust, a by-product of the melting process.
The $1.0 million in environmental liabilities recorded as a current
liability on the balance sheet represents final payment due an
environmental services company for treatment and disposal of the
contaminated baghouse dust. Payment for the disposal will occur within
the next twelve months. Although it is possible that the ultimate
disposal costs may change from current estimates, the effect of the
change, if any, is not expected to be material to the financial
statements due to the Company having applicable insurance coverage.
(7) Commitments and Contingencies
The Company has various commitments for the purchase of materials,
supplies and energy arising in the ordinary course of business.
The Company is subject to various claims, lawsuits and administrative
proceedings arising in the ordinary course of business with respect to
commercial, product liability and other matters, which seek remedies or
damages. The Company believes that any liability that may ultimately be
determined will not have a material effect on its financial position or
results of operations.
The Company generates both hazardous wastes and non-hazardous wastes
which are subject to various governmental regulations. Estimated costs
to be incurred in connection with environmental matters are accrued when
the prospect of incurring costs for testing or remedial action is deemed
probable. The Company is not aware of any material asserted or
unasserted environmental claims against the Company and no accruals for
such matters have been recorded in the accompanying balance sheets
except as disclosed in Note 6. However, discovery of unknown conditions
could result in the recording of accruals in the periods in which they
become known.
KENTUCKY ELECTRIC STEEL, INC. AND SUBSIDIARY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
General. The Company manufactures special bar quality alloy and
carbon steel bar flats to precise customer specifications for sale in a
variety of niche markets. Its primary markets are manufacturers of leaf-
spring suspensions and flat bed truck trailers, cold drawn bar converters
and steel service centers.
Net Sales. Net sales decreased $.4 million (1.5%) in the first
quarter of fiscal 1999 to $25.6 million, as compared to $26.0 million for
the first quarter of fiscal 1998. The decrease in net sales is primarily
attributed to a 1.3% decrease in shipments.
Cost of Goods Sold. Cost of goods sold decreased $131,000 (.6%) in
the first quarter of fiscal 1999 to $23.5 million, as compared to $23.7
million for the first quarter of fiscal 1998. As a percentage of net sales,
cost of goods sold increased from 91.0% for the first quarter of fiscal 1998
to 91.9% for the first quarter of fiscal 1999. The increase in cost of goods
sold as a percentage of net sales reflects higher per ton conversion costs
due to lower productivity and higher repair and maintenance expense, offset
by lower scrap costs. Production decreased due to equipment problems
leading up to our scheduled maintenance outage in late December.
Gross Profit. As a result of the above, the first quarter of fiscal
1999 reflected a gross profit of $2.1 million as compared to a gross profit
of $2.3 million for the first quarter of fiscal 1998. As a percentage of
net sales, gross profit decreased from 9.0% for the first quarter of fiscal
1998 to 8.1% for the first quarter of fiscal 1999.
Selling and Administrative Expenses. Selling and administrative
expenses include salaries and benefits, corporate overhead, insurance, sales
commissions and other expenses incurred in the executive, sales and
marketing, shipping, personnel, and other administrative departments.
Selling and administrative expenses for the first quarter of fiscal 1999
were unchanged from the comparable period in fiscal 1998. As a percentage
of net sales, such expenses increased from 6.5% for the three months ended
December 27, 1997 to 6.6% for the three months ended December 26, 1998. The
increase, as a percentage of sales, is the result of the decrease in net
sales (as discussed above) for the quarter ended December 26, 1998.
Operating Income. For the reasons described above, operating income
decreased by $266,000 from an operating income of $652,000 in the first
quarter of fiscal 1998 to an operating income of $386,000 in the first
quarter of fiscal 1999. As a percentage of net sales, operating income
decreased from 2.5% in the first quarter of 1998 to 1.5% in the first
quarter of 1999.
Interest Expense. Interest expense decreased by $42,000 for the three
months ended December 26, 1998 from $595,000 for the first quarter of fiscal
1998 to $553,000 for the first quarter of fiscal 1999. The decrease in
interest expense is due to a decrease in the average amount outstanding and
a slight decline in the interest rate on the Company's line of credit during
the first quarter of fiscal 1999 as compared to the first quarter of fiscal
1998.
Net Income (Loss). As a result of the above, net income decreased by
$129,000 for the three months ended December 26, 1998 from net income of
$41,000 for the first quarter of fiscal 1998 to a net loss of $88,000 for
the first quarter of fiscal 1999.
Liquidity and Capital Resources.
The cash flows provided by operating activities were $.2 million for
the first quarter of fiscal 1999 as compared to cash flow used by operations
of $3.6 million for the first quarter of fiscal 1998. First quarter of
fiscal 1999 cash flows reflect the net loss of $88,000, $.9 million in
depreciation and amortization, an increase of $.5 million in accounts
payable and a $.9 million reduction in accrued liabilities. The decrease
in accrued liabilities is attributed to the payment of interest on long-term
debt, the annual deposit of profit sharing and 401K matching funds with the
trustee, and a reduction in the workers compensation accrual. First quarter
of fiscal 1998 operating cash flows reflect the increases in accounts
receivable and inventories (due primarily to the increased level of sales
and production) and the decrease in accrued liabilities, which were slightly
offset by an increase in accounts payable.
The cash flows used by investing activities were $1.0 million for the
first quarter of fiscal 1999 as compared to $.5 million for the first
quarter of fiscal 1998. The cash flows used by investing activities consist
of $.8 million in capital expenditures and a decrease in capital
expenditures payable of $.2 million for the first fiscal quarter of 1999.
The cash flows used by investing activities for the first quarter of fiscal
1998 consist of capital expenditures of $.8 million offset somewhat by an
increase in capital expenditures payable of $.3 million.
The cash flows provided from financing activities were $.8 million for
the first quarter of fiscal 1999 as compared to $4.1 million for the first
quarter of fiscal 1998. The cash flows provided from financing activities
for the first quarter of fiscal 1999 reflect net advances of $1.8 million
on the Company's line of credit which were used primarily for capital
expenditures as discussed above and $1.0 million used for the purchase of
treasury stock. The cash flows provided from financing activities for the
first quarter of fiscal 1998 reflect net advances of $4.1 million on the
Company's line of credit which were used primarily for working capital needs
and capital expenditures.
Working capital at December 26, 1998 was $13.0 million as compared to
$14.2 million at September 26, 1998, and the current ratio was 1.5 to 1.0
as compared to 1.6 to 1.0.
The Company's primary ongoing cash requirements are for current
capital expenditures. The two sources for the Company's liquidity are
internally generated funds and its bank credit facility. The Company has
$13.2 million in borrowings outstanding on its line of credit as of December
26, 1998. The Company believes that the unused portion of its $24.5 million
bank credit facility and internally generated funds will be sufficient to
fund its ongoing cash needs.
Year 2000 Compliance
The following Year 2000 discussion is provided in response to the
Securities and Exchange Commission's recent interpretative statement
expressing its view that public companies should include detailed discussion
of Year 2000 issues in their MD&A.
The Company is currently assessing the issues confronting it related
to the "Year 2000 problem", which is the result of the inability of many
computer systems and electronic equipment to distinguish the Year 2000 from
the Year 1900. The Company is following an organized program to assure the
Company's information technology systems and related infrastructure will be
Year 2000 compliant. The Company has divided its Year 2000 issues into
three areas including: computer hardware and software business systems,
manufacturing process control devices and related systems, and facility
support systems. The Company's Year 2000 program include three phases: (1)
an audit and assessment phase designed to identify Year 2000 issues; (2) a
modification phase designed to correct Year 2000 issues (this phase includes
testing of individual modifications as they are installed); and (3) a
testing phase to test entire systems for Year 2000 compliance after
individual modifications have been installed and tested.
The Company has completed the audit and assessment phase for the
computer hardware and software business systems and the facility support
systems. The audit and assessment phase for the manufacturing process
control devices and related systems is substantially completed and should
be finalized by March 31, 1999.
The Company has completed the modification phase for its computer
hardware and software business systems and expects to conduct final testing
of these systems in the first calendar quarter of 1999. Modifications and
final testing of the facility support systems are expected to be completed
by March 31, 1999.
The Company currently expects to complete the modification phase for
its manufacturing process control devices and related systems during the
second calendar quarter of 1999. After all modifications have been made,
appropriate testing of the system is expected to be performed prior to July
31, 1999.
Management has estimated that the cost for correction of Year 2000
issues, including any software and hardware changes and the cost of
personnel involved in working on the project, will be approximately
$300,000. The Company estimates that 40% of the total cost has been spent
to date. The Year 2000 updates are being funded out of funds generated from
operations and account for less than 30% of the Company's information
technology budget.
The Company's Year 2000 program includes investigation of the Year 2000
readiness status of our major vendors and customers. The Company is using
letters, questionnaires and protocols to determine its vendors' and
customers' 2000 readiness. The Company has contacted all major vendors
including energy and scrap suppliers and external service providers
including banks, insurance companies and phone service providers to
determine their Year 2000 compliance status. If any such vendor indicates
that they will not be Year 2000 compliant, the Company will develop
contingency plans to address the issue, which may include identifying and
developing other vendors. The Company has also contacted significant
customers to determine their progress towards Year 2000 compliance and to
identify issues, if any, which might develop if a customer is unable to
become year 2000 compliant on a timely basis. If any issues are identified,
the Company expects to develop procedures to permit the Company to continue
to supply the customer despite Year 2000 issues.
The Company does not have a contingency plan to operate in the event
that its business systems are not Year 2000 compliant. As our work
progresses, if the results of our testing suggest that there is a
significant risk that the business systems might not be Year 2000 compliant,
a contingency plan will be developed.
Outlook
Management continues to see somewhat lower demand in the Company's
major markets and downward pricing on many of our products. However, the
Company's current backlog and shipping levels are stable to increasing.
During the scheduled major maintenance outage from December 23, 1998 through
January 3, 1999, both furnaces were overhauled and several other capital and
major maintenance projects were completed. Management is optimistic that
the benefits of these projects combined with continued stable to increasing
shipment levels will help the Company minimize the effect of lower demand
and declining prices.
Qualitative and Quantitative Disclosure About Market Risk
Management does not believe that there is any material market risk
exposure with respect to derivative or other financial instruments that
would require disclosure under this item.
Forward-Looking Statements
The matters discussed or incorporated by reference in this Report on
Form 10-Q that are forward-looking statements (as defined in the Private
Securities Litigation Reform Act of 1995) involve risks and uncertainities.
These risks and uncertainities include, but are not limited to, the reliance
on truck and utility vehicle industry; excess industry capacity; product
demand and industry pricing; volatility of raw material costs, especially
steel scrap; intense foreign and domestic competition; management's estimate
of niche market data; the cyclical and capital intensive nature of the
industry; and cost of compliance with environmental regulations. These
risks and uncertainities could cause actual results of the Company to differ
materially from those projected or implied by such forward-looking
statements.
Without limiting the foregoing, various statements in the previous
discussion of Year 2000 are likewise forward-looking statements. These
statements include statements of the Company's expectations, statements with
regard to schedules and expected completion dates and statements regarding
expected Year 2000 compliance. These forward-looking statements are subject
to various risk factors which may materially affect the Company's efforts
to achieve Year 2000 compliance. These risk factors include the inability
of the Company to complete the plans and modifications that it has
identified, the failure of software vendors to deliver the upgrades and
repairs to which they have committed, the wide variety of information
technology systems and components, both hardware and software, that must be
evaluated and the large number of vendors and customers with which the
Company interacts. The Company's assessments of the effects of Year 2000
on the Company are based, in part, upon information received from third
parties and the Company's reasonable reliance on that information.
Therefore, the risk that inaccurate information is supplied by third parties
upon which the Company reasonably relied must be considered as a risk factor
that might affect the Company's Year 2000 efforts. The Company is
attempting to reduce the risks by utilizing an organized approach, extensive
testing, and allowance of ample contingency time to address issues
identified by tests.
<PAGE>
PART II. - OTHER INFORMATION
ITEM 6. Exhibits and Reports on Form 8-K
A) Exhibits
3.1 - Certificate of Incorporation of Kentucky Electric
Steel, Inc., filed as Exhibit 3.1 to Registrant's
Registration Statement on Form S-1 (No. 33-67410),
and incorporated by reference herein.
3.2 - By-Laws of Kentucky Electric Steel, Inc., filed as
Exhibit 3.2 to Registrant's Registration Statement
on Form S-1 (No. 33-67140), and incorporated by
reference herein.
27 - Financial Data Schedule
B) Reports on Form 8-K - None
<PAGE
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
DATED: February 8, 1999 KENTUCKY ELECTRIC STEEL, INC.
(Registrant)
William J. Jessie
William J. Jessie, Vice President,
Secretary, Treasurer, and
Principal Financial Officer
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from Kentucky
Electric Steel, Inc.'s condensed consolidated financial statements as of and
for the three month period ended December 26, 1998 included in this
Company's quarterly report on Form 10-Q and is qualified in its entirety by
reference to such condensed consolidated financial statements.
</LEGEND>
<CIK> 0000910394
<NAME> KENTUCKY ELECTRIC STEEL, INC.
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-25-1999
<PERIOD-START> SEP-27-1998
<PERIOD-END> DEC-26-1998
<EXCHANGE-RATE> 1
<CASH> 134
<SECURITIES> 0
<RECEIVABLES> 12,444
<ALLOWANCES> 440
<INVENTORY> 20,281
<CURRENT-ASSETS> 38,502
<PP&E> 50,413
<DEPRECIATION> 15,632
<TOTAL-ASSETS> 80,502
<CURRENT-LIABILITIES> 25,506
<BONDS> 20,000
<COMMON> 50
0
0
<OTHER-SE> 34,066
<TOTAL-LIABILITY-AND-EQUITY> 80,502
<SALES> 25,624
<TOTAL-REVENUES> 25,624
<CGS> 23,549
<TOTAL-COSTS> 23,549
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 553
<INCOME-PRETAX> (142)
<INCOME-TAX> (54)
<INCOME-CONTINUING> (88)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (88)
<EPS-PRIMARY> (.02)
<EPS-DILUTED> (.02)
</TABLE>
