<PAGE> 1
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
----------------------------------
FORM 10-Q
(Mark one)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED July 3, 1999 OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM
TO
--------------------- --------------------
Commission file number 1-13474
FLORSHEIM GROUP INC.
(Exact name of registrant as specified in its charter)
Delaware 36-3520923
- ------------------------------------------------ --------------------
(State or other jurisdiction of incorporation or (I.R.S. Employer
organization) Identification No.)
200 North LaSalle Street, Chicago, Illinois 60601-1014
- ------------------------------------------------ --------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (312) 458-2500
Not Applicable
- --------------------------------------------------------------------------------
(Former name, former address and former fiscal year, if changed since last
report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirement for the past 90 days. Yes [x] No [ ]
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
8,453,651 Shares as of August 10, 1999
--------------------------------------
================================================================================
<PAGE> 2
PART I FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Financial Statements for the quarter ended July 3, 1999.
Condensed Consolidated Balance Sheets:
July 3, 1999 and January 2, 1999
Condensed Consolidated Statements of Operations and Comprehensive Earnings:
Three Months Ended July 3, 1999 and July 4, 1998
Six Months Ended July 3, 1999 and July 4, 1998
Condensed Consolidated Statements of Cash Flows:
Six Months Ended July 3, 1999 and July 4, 1998
Notes to Condensed Consolidated Financial Statements
2
<PAGE> 3
FLORSHEIM GROUP INC.
CONDENSED CONSOLIDATED BALANCE SHEET
(Unaudited)
(In thousands, except share data)
<TABLE>
<CAPTION>
===============================================================================================================================
January 2, July 3,
ASSETS 1999 1999
==============================================================================================================================
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 6,931 $ 7,798
Receivables, less allowances of $1,207 at
January 2, 1999 and $1,996 at July 3, 1999 33,370 36,609
Inventories 79,855 80,324
Other current assets 10,170 10,539
- ------------------------------------------------------------------------------------------------------------------------------
Total current assets 130,326 135,270
Property, plant and equipment, net 30,981 30,325
Deferred tax assets, net 12,852 12,831
Other assets 25,407 27,094
- ------------------------------------------------------------------------------------------------------------------------------
$ 199,566 $ 205,520
- ------------------------------------------------------------------------------------------------------------------------------
LIABILITIES AND SHAREHOLDERS' EQUITY
- ------------------------------------------------------------------------------------------------------------------------------
Current liabilities:
Bank credit facility - current portion $ 18,500 $ 25,500
Accounts payable and accrued expenses 28,374 26,964
- ------------------------------------------------------------------------------------------------------------------------------
Total current liabilities 46,874 52,464
Bank credit facility 58,500 58,500
Long-term debt 18,412 18,412
Other long-term liabilities 22,433 22,366
- ------------------------------------------------------------------------------------------------------------------------------
Total liabilities 146,219 151,742
Shareholders' equity:
Common stock, 20,000,000 shares authorized, without par value,
$1.00 stated value, 8,453,651 shares issued and outstanding 8,454 8,454
Paid-in capital 50,580 50,577
Accumulated other comprehensive loss -
translation adjustment (2,335) (2,292)
Accumulated deficit (3,352) (2,961)
- ------------------------------------------------------------------------------------------------------------------------------
Total shareholders' equity 53,347 53,778
- ------------------------------------------------------------------------------------------------------------------------------
$ 199,566 $ 205,520
==============================================================================================================================
</TABLE>
See accompanying notes to condensed consolidated financial statements.
3
<PAGE> 4
FLORSHEIM GROUP INC.
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS AND COMPREHENSIVE EARNINGS
(Unaudited)
(In thousands, except per share data)
<TABLE>
<CAPTION>
===============================================================================================================================
Three months Three months
ended ended
July 4, July 3,
1998 1999
===============================================================================================================================
<S> <C> <C>
Net sales $ 61,812 $ 62,544
Cost of sales 33,162 32,797
- ------------------------------------------------------------------------------------------------------------------------------
Gross profit 28,650 29,747
Selling, general and administrative expenses 25,456 27,099
Other expense 9 1,123
- ------------------------------------------------------------------------------------------------------------------------------
Earnings from operations 3,185 1,525
Interest expense, net 2,250 2,430
- ------------------------------------------------------------------------------------------------------------------------------
Earnings (loss) before income tax expense 935 (905)
Income tax expense (benefit) 337 (318)
- ------------------------------------------------------------------------------------------------------------------------------
Net earnings (loss) $ 598 $ (587)
Other comprehensive earnings (loss)
Foreign currency translation adjustment (124) 181
- ------------------------------------------------------------------------------------------------------------------------------
Comprehensive earnings (loss) $ 474 $ (406)
- ------------------------------------------------------------------------------------------------------------------------------
Earnings (loss) per share:
Basic $ 0.07 $ (0.07)
Diluted 0.07 (0.07)
Weighted average number of shares outstanding
Basic 8,413 8,454
Diluted 8,588 8,454
==============================================================================================================================
</TABLE>
See accompanying notes to condensed consolidated financial statements.
4
<PAGE> 5
FLORSHEIM GROUP INC.
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS AND COMPREHENSIVE EARNINGS
(Unaudited)
(In thousands, except per share data)
<TABLE>
<CAPTION>
===============================================================================================================================
Six months Six months
ended ended
July 4, July 3,
1998 1999
===============================================================================================================================
<S> <C> <C>
Net sales $ 120,482 $ 126,069
Cost of sales 64,048 66,199
- ------------------------------------------------------------------------------------------------------------------------------
Gross profit 56,434 59,870
Selling, general and administrative expenses 50,354 53,273
Other expense 7 1,149
- ------------------------------------------------------------------------------------------------------------------------------
Earnings from operations 6,073 5,448
Interest expense, net 4,316 4,827
- ------------------------------------------------------------------------------------------------------------------------------
Earnings before income tax expense 1,757 621
Income tax expense 633 229
- ------------------------------------------------------------------------------------------------------------------------------
Net earnings $ 1,124 $ 392
Other comprehensive earnings (loss)
Foreign currency translation adjustment (161) 43
- ------------------------------------------------------------------------------------------------------------------------------
Comprehensive earnings $ 963 $ 435
- ------------------------------------------------------------------------------------------------------------------------------
Earnings per share:
Basic $ 0.13 $ 0.05
Diluted 0.13 0.05
- ------------------------------------------------------------------------------------------------------------------------------
Weighted average number of shares outstanding
Basic 8,413 8,454
Diluted 8,479 8,513
==============================================================================================================================
</TABLE>
See accompanying notes to condensed consolidated financial statements.
5
<PAGE> 6
FLORSHEIM GROUP INC.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(Dollars in thousands)
(Unaudited)
<TABLE>
<CAPTION>
==================================================================================================================================
Six months Six months
ended ended
July 4, July 3,
1998 1999
==================================================================================================================================
<S> <C> <C>
Cash flows from operating activities:
Net earnings $ 1,124 $ 392
Adjustments to reconcile net earnings to net cash
used in operating activities:
Gain on disposal of assets (22) (380)
Depreciation and amortization 2,431 3,153
Deferred taxes 812 (35)
Noncash interest expense 216 216
Decrease (increase) in receivables (7,138) (3,239)
Decrease (increase) in inventories 9,364 (469)
Decrease (increase) in other current assets (2,092) (1,863)
Increase (decrease) in accounts payable and
accrued expenses (8,155) (1,414)
Increase (decrease) in other long-term liabilities (69) (67)
- --------------------------------------------------------------------------------------------------------------------------------
Net cash used in operating activities (3,529) (3,706)
- --------------------------------------------------------------------------------------------------------------------------------
Cash flows from investing activities:
Proceeds from the disposal of assets 757 380
Capital expenditures (4,363) (2,807)
- --------------------------------------------------------------------------------------------------------------------------------
Net cash used in investing activities (3,606) (2,427)
- --------------------------------------------------------------------------------------------------------------------------------
Cash flows from financing activities:
Borrowings under bank credit facility 4,222 7,000
- --------------------------------------------------------------------------------------------------------------------------------
Net cash provided by financing activities 4,222 7,000
- --------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in cash and cash equivalents (2,913) 867
Cash and cash equivalents at beginning of period 7,195 6,931
- --------------------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of period $ 4,282 $ 7,798
- --------------------------------------------------------------------------------------------------------------------------------
Supplemental disclosure:
Cash payments for income taxes, net $ 553 $ 347
Cash payments for interest $ 4,193 $ 4,537
================================================================================================================================
</TABLE>
See accompanying notes to condensed consolidated financial statements.
6
<PAGE> 7
FLORSHEIM GROUP INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Six months ended July 3, 1999
(Dollars in thousands)
(Unaudited)
(1) BASIS OF PRESENTATION
The accompanying unaudited condensed financial statements of the
Florsheim Group Inc. ("Florsheim" or the "Company) have been
prepared in accordance with generally accepted accounting
principles for interim financial information and with the
instructions to Form 10-Q and Article 10 of Regulation S-X.
Accordingly, they do not include all of the information and notes
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 and six month periods ended July 3,
1999 are not necessarily indicative of the results that may be
expected for the year ended January 1, 2000.
The balance sheet at January 2, 1999 has been derived from the
audited financial statements at that date, but does not include all
of the information and notes required by generally accepted
accounting principles for complete financial statements.
For further information, refer to the consolidated financial
statements and notes thereto included in the Company's annual
report on Form 10-K for the fiscal year ended January 2, 1999.
(2) OTHER EXPENSE
During the second quarter of 1999 the Company recorded a $1.1
million charge to income related to the resignation of its former
chief executive officer and for costs associated with an evaluation
of strategic alternatives by its financial advisor. The charge is
included in Other Expense.
(3) INVENTORIES
Inventories are summarized as follows:
<TABLE>
<CAPTION>
=========================================================================================================
January 2, July 3,
1999 1999
=========================================================================================================
<S> <C> <C>
Retail merchandise $ 39,375 $ 38,069
Finished Products 32,621 34,287
Work-in-process 1,172 581
Raw materials 6,687 7,387
------------------- -------------------
$ 79,855 $ 80,324
=================== ===================
</TABLE>
7
<PAGE> 8
FLORSHEIM GROUP INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Six months ended July 3, 1999
(Dollars in thousands)
(Unaudited)
(4) LONG TERM DEBT
On July 1, 1999, the Company amended its bank credit facility,
resulting in the waiver of financial covenants related to the EBITDA
to interest expense ratio and the ratio of debt to EBITDA for the
quarter ended July 3, 1999. In addition, the amendment reset the
above noted financial covenants for the period ending October 2,
1999.
(5) EARNINGS PER SHARE
The Company presents basic and diluted earnings per share. Basic
earnings per share excludes dilution and is computed by dividing
income available to common stockholders by the weighted average
number of common shares outstanding for the period. Diluted earnings
per share reflect the potential dilution that could occur if
securities or other contracts to issue common stock were exercised.
Basic and diluted earnings per share do not include securities in
instances where they would be antidilutive.
The following table provides a reconciliation of the weighted
average shares outstanding used in calculating basic and diluted
earnings per share:
<TABLE>
<CAPTION>
=================================================================================
Three months ended Six months ended
July 4, July 3, July 4, July 3,
1998 1999 1998 1999
=================================================================================
<S> <C> <C> <C> <C>
Weighted average shares
outstanding - basic 8,413 8,454 8,413 8,454
Assumed exercise of stock options 175 -- 66 59
----- ----- ----- -----
Weighted average shares
outstanding - diluted 8,588 8,454 8,479 8,513
===== ===== ===== =====
</TABLE>
8
<PAGE> 9
FLORSHEIM GROUP INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Six months ended July 3, 1999
(Dollars in thousands)
(Unaudited)
(5) BUSINESS SEGMENT INFORMATION
Operating segment information is as follows:
<TABLE>
<CAPTION>
==============================================================================================================================
Three Months Ended Six Months Ended
July 4, July 3, July 4, July 3,
1998 1999 1998 1999
==============================================================================================================================
Net Sales Net Sales
------------------------------------------- -------------------------------------------
<S> <C> <C> <C> <C>
U.S. Wholesale $ 23,315 $ 25,263 $ 44,087 $ 51,870
U.S. Retail 27,737 25,971 54,036 50,983
International 10,760 11,310 22,359 23,216
------------------ ------------------ ------------------ ------------------
$ 61,812 $ 62,544 $ 120,482 $ 126,069
================== ================== ================== ==================
<CAPTION>
Earnings (Loss) from Operations Earnings (Loss) from Operations
------------------------------------------- -------------------------------------------
<S> <C> <C> <C> <C>
U.S. Wholesale $ 3,958 $ 2,044 $ 8,747 $ 5,830
U.S. Retail (1,045) (1,136) (3,641) (1,791)
International 272 617 967 1,409
------------------ ------------------ ------------------ ------------------
$ 3,185 $ 1,525 $ 6,073 $ 5,448
================== ================== ================== ==================
<CAPTION>
Total Assets
--------------------------------------------
January 2, July 3,
1999 1999
------------------ ------------------
<S> <C> <C>
U.S. Wholesale $ 105,459 $ 113,194
U.S. Retail 71,544 67,567
International 22,563 24,759
------------------ ------------------
$ 199,566 $ 205,520
================== ==================
</TABLE>
U.S. Wholesale includes certain corporate expenses and assets which are
not charged to other reportable segments.
9
<PAGE> 10
FLORSHEIM GROUP INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Six months ended July 3, 1999
(Dollars in thousands)
(Unaudited)
(6) SUPPLEMENTAL GUARANTOR FINANCIAL INFORMATION
At January 2, 1999 and July 3, 1999, Florsheim had $18,412 of
senior notes outstanding. The senior notes are guaranteed, on a
joint and several basis, by all domestic subsidiaries of Florsheim.
The following condensed consolidating information presents:
1. Condensed consolidating balance sheets as of January 2, 1999
and July 3, 1999, condensed consolidating statements of
operations for the three months ended July 4, 1998 and the
three months ended July 3, 1999, condensed consolidating
statements of operations and statements of cash flows for the
six months ended July 4, 1998 and the six months ended July 3,
1999, of (a) Florsheim, the parent, (b) the guarantor
subsidiaries, (c) the nonguarantor subsidiaries and (d)
Florsheim on a consolidated basis.
2. Florsheim, the parent, with the investments in the guarantor
and nonguarantor subsidiaries accounted for on the equity
method, and
3. Elimination entries necessary to consolidate Florsheim, the
parent, with the guarantor and nonguarantor subsidiaries.
There are no restrictions on the parent or guarantor subsidiaries
to obtain funds from the subsidiaries by dividend or loan.
10
<PAGE> 11
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
For six months ended July 3, 1999
(Continued)
(Dollars in thousands)
(Unaudited)
================================================================================
Condensed Consolidating Balance Sheet
January 2, 1999
================================================================================
<TABLE>
<CAPTION>
===============================================================================================================================
Guarantor Nonguarantor
ASSETS Parent subsidiaries subsidiaries Eliminations Consolidated
===============================================================================================================================
<S> <C> <C> <C> <C> <C>
Current assets:
Cash and cash equivalents $ 3,030 $ 1,047 $ 2,854 $ - $ 6,931
Receivables 30,280 169 5,372 (2,451) 33,370
Inventories 52,483 16,848 10,524 - 79,855
Other current assets 7,811 746 2,225 (612) 10,170
- -----------------------------------------------------------------------------------------------------------------------------
Total current assets 93,604 18,810 20,975 (3,063) 130,326
Property, plant and equipment 24,524 4,101 2,356 - 30,981
Other assets 39,550 (1,343) 52 - 38,259
Investments in subsidiaries 37,210 - - (37,210) -
- -----------------------------------------------------------------------------------------------------------------------------
Total assets $ 194,888 $ 21,568 $ 23,383 $ (40,273) $ 199,566
=============================================================================================================================
LIABILITIES AND SHAREHOLDERS' EQUITY:
Current liabilities:
Bank credit facility-current $ 18,500 $ - $ - $ - $ 18,500
Accts payable and accrd exp 23,696 1,438 5,691 (2,451) 28,374
- -----------------------------------------------------------------------------------------------------------------------------
Total current liabilities 42,196 1,438 5,691 (2,451) 46,874
Bank credit facility 58,500 - - - 58,500
Long-term debt, less 18,412 - - - 18,412
Other long-term liabilities 22,433 - 612 (612) 22,433
- -----------------------------------------------------------------------------------------------------------------------------
Total liabilities 141,541 1,438 6,303 (3,063) 146,219
Shareholders' equity 53,347 20,130 17,080 (37,210) 53,347
- -----------------------------------------------------------------------------------------------------------------------------
Total liabilities and
shareholders' equity $ 194,888 $ 21,568 $ 23,383 $ (40,273) $ 199,566
=============================================================================================================================
</TABLE>
11
<PAGE> 12
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
For six months ended July 3, 1999
(Continued)
(Dollars in thousands)
(Unaudited)
================================================================================
Condensed Consolidating Balance Sheet
July 3, 1999
================================================================================
<TABLE>
<CAPTION>
================================================================================================================================
Guarantor Nonguarantor
ASSETS Parent subsidiaries subsidiaries Eliminations Consolidated
================================================================================================================================
<S> <C> <C> <C> <C> <C>
Current assets:
Cash and cash equivalents $ 3,838 $ 353 $ 3,607 $ - $ 7,798
Receivables 34,191 104 6,429 (4,115) 36,609
Inventories 52,639 16,901 10,784 - 80,324
Other current assets 8,472 780 1,635 (348) 10,539
- -----------------------------------------------------------------------------------------------------------------------------
Total current assets 99,140 18,138 22,455 (4,463) 135,270
Property, plant and equipment 24,136 3,972 2,217 - 30,325
Other assets 39,064 - 861 - 39,925
Investments in subsidiaries 38,137 - - (38,137) -
- -----------------------------------------------------------------------------------------------------------------------------
Total assets $ 200,477 $ 22,110 $ 25,533 $ (42,600) $ 205,520
=============================================================================================================================
LIABILITIES AND SHAREHOLDERS' EQUITY:
Current liabilities:
Bank credit facility-current $ 25,500 $ - $ - $ - $ 25,500
Accts payable and accrd exp 21,921 1,940 7,218 (4,115) 26,964
- -----------------------------------------------------------------------------------------------------------------------------
Total current liabilities 47,421 1,940 7,218 (4,115) 52,464
Bank credit facility 58,500 - - - 58,500
Long-term debt, less 18,412 - - - 18,412
Other long-term liabilities 22,366 348 - (348) 22,366
- -----------------------------------------------------------------------------------------------------------------------------
Total liabilities 146,699 2,288 7,218 (4,463) 151,742
Shareholders' equity 53,778 19,822 18,315 (38,137) 53,778
- -----------------------------------------------------------------------------------------------------------------------------
Total liabilities and
shareholders' equity $ 200,477 $ 22,110 $ 25,533 $ (42,600) $ 205,520
=============================================================================================================================
</TABLE>
12
<PAGE> 13
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
For six months ended July 3, 1999
(Continued)
(Dollars in thousands)
(Unaudited)
================================================================================
Condensed Consolidating Statements of Operations
For three months ended July 4, 1998
================================================================================
<TABLE>
<CAPTION>
Guarantor Nonguarantor
Parent subsidiaries subsidiaries Eliminations Consolidated
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net sales $ 43,861 $ 10,726 $ 9,515 $ (2,290) $ 61,812
Cost of sales 23,934 5,974 5,544 (2,290) 33,162
- --------------------------------------------------------------------------------------------------------------------
Gross profit 19,927 4,752 3,971 - 28,650
Selling, general and
administrative expenses 16,485 5,274 3,699 - 25,456
- --------------------------------------------------------------------------------------------------------------------
Earnings from operations 3,442 (522) 272 - 3,194
Interest expense 2,250 - - - 2,250
Equity in earnings of subsidiaries,
net of tax (150) - - 150 -
Other income (expense), net (6) 1 (3) - (9)
- --------------------------------------------------------------------------------------------------------------------
Earnings(loss) before income taxes 1,036 (521) 269 (150) 935
Income tax expense (benefit) 440 (184) 80 - 337
- --------------------------------------------------------------------------------------------------------------------
Net earnings (loss) $ 596 $ (337) $ 189 $ (150) $ 598
====================================================================================================================
</TABLE>
For three months ended July 3, 1999
================================================================================
<TABLE>
<CAPTION>
Guarantor Nonguarantor
Parent subsidiaries subsidiaries Eliminations Consolidated
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net sales $ 46,553 $ 10,916 $ 10,323 $ (5,248) $ 62,544
Cost of sales 25,603 6,222 6,220 (5,248) 32,797
- --------------------------------------------------------------------------------------------------------------------
Gross profit 20,950 4,694 4,103 - 29,747
Selling, general and
administrative expenses 18,434 5,184 3,481 - 27,099
- --------------------------------------------------------------------------------------------------------------------
Earnings from operations 2,516 (490) 622 - 2,648
Interest expense 2,428 - 2 - 2,430
Equity in earnings of subsidiaries,
net of tax 192 - - (192) -
Other income (expense), net (1,148) - 25 - (1,123)
- --------------------------------------------------------------------------------------------------------------------
Earnings(loss) before income taxes (1,252) (490) 645 192 (905)
Income tax expense (benefit) (280) (175) 137 - (318)
- --------------------------------------------------------------------------------------------------------------------
Net earnings (loss) $ (972) $ (315) $ 507 $ 192 $ (587)
====================================================================================================================
</TABLE>
13
<PAGE> 14
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
For six months ended July 3, 1999
(Continued)
(Dollars in thousands)
(Unaudited)
================================================================================
Condensed Consolidating Statements of Operations
For six months ended July 4, 1998
================================================================================
<TABLE>
<CAPTION>
Guarantor Nonguarantor
Parent subsidiaries subsidiaries Eliminations Consolidated
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net sales $ 88,543 $ 21,350 $ 19,751 $ (9,162) $ 120,482
Cost of sales 49,378 11,996 11,836 (9,162) 64,048
- ---------------------------------------------------------------------------------------------------------------------
Gross profit 39,165 9,354 7,915 - 56,434
Selling, general and
administrative expenses 32,231 11,154 6,971 - 50,354
- ---------------------------------------------------------------------------------------------------------------------
Earnings from operations 6,934 (1,800) 944 - 6,080
Interest expense 4,316 - - - 4,316
Equity in earnings of subsidiaries,
net of tax (377) - - 377 -
Other income (expense), net (31) - 23 - (7)
- ---------------------------------------------------------------------------------------------------------------------
Earnings (loss) before income taxes 2,210 (1,800) 967 377 1,757
Income tax expense (benefit) 1,088 (630) 174 - 633
- ---------------------------------------------------------------------------------------------------------------------
Net earnings (loss) $ 1,122 $ (1,170) $ 793 $ 377 $ 1,124
=====================================================================================================================
</TABLE>
For six months ended July 3, 1999
================================================================================
<TABLE>
<CAPTION>
Guarantor Nonguarantor
Parent subsidiaries subsidiaries Eliminations Consolidated
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net sales $ 109,970 $ 21,124 $ 21,009 $ (26,033) $ 126,069
Cost of sales 68,329 11,190 12,713 (26,033) 66,199
- ---------------------------------------------------------------------------------------------------------------------
Gross profit 41,641 9,934 8,296 - 59,870
Selling, general and
administrative expenses 35,949 10,410 6,914 - 53,273
- ---------------------------------------------------------------------------------------------------------------------
Earnings from operations 5,692 (476) 1,382 - 6,597
Interest expense 4,825 (2) 3 - 4,827
Equity in earnings of subsidiaries,
net of tax 936 - - (936) -
Other income (expense), net (1,178) - 29 - (1,149)
- ---------------------------------------------------------------------------------------------------------------------
Earnings (loss) before income taxes (1,248) (475) 1,408 936 621
Income tax expense (benefit) 232 (175) 172 - 229
- ---------------------------------------------------------------------------------------------------------------------
Net earnings (loss) $ (1,480) $ (300) $ 1,236 $ 936 $ 392
=====================================================================================================================
</TABLE>
14
<PAGE> 15
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
For six months ended July 3, 1999
(Continued)
(Dollars in thousands)
(Unaudited)
================================================================================
Condensed Consolidating Statements of Cash Flows
For six months ended July 4, 1998
================================================================================
<TABLE>
<CAPTION>
Guarantor Nonguarantor
Parent subsidiaries subsidiaries Eliminations Consolidated
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net cash provided by (used in)
operating activities $ (3,430) $ 227 $ (831) $ 505 $ (3,529)
- --------------------------------------------------------------------------------------------------------------------
Cash flows from investing activities:
Proceeds from the
disposal of assets 757 - - - 757
Additions to property,
plant and equipment (3,665) (280) (418) - (4,363)
- --------------------------------------------------------------------------------------------------------------------
Net cash provided by (used in) - -
investing activities (2,908) (280) (418) - (3,606)
- --------------------------------------------------------------------------------------------------------------------
Cash flows from financing
activities:
Net capital contribution
from (to) Parent (161) 679 (13) (505) -
Net borrowings under
revolving credit facility 4,000 - 222 - 4,222
- --------------------------------------------------------------------------------------------------------------------
Net cash provided by (used in)
financing activities 3,839 679 209 (505) 4,222
- --------------------------------------------------------------------------------------------------------------------
Net increase in cash
and cash equivalents (2,499) 626 (1,040) - (2,913)
Cash and cash equivalents
at beginning of period 4,389 374 2,432 - 7,195
- --------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents
at end of period $ 1,890 $ 1,000 $ 1,392 $ - $ 4,282
====================================================================================================================
</TABLE>
15
<PAGE> 16
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
For six months ended July 3, 1999
(Continued)
(Dollars in thousands)
(Unaudited)
================================================================================
Condensed Consolidating Statements of Cash Flows
For six months ended July 3, 1999
================================================================================
<TABLE>
<CAPTION>
Guarantor Nonguarantor
Parent subsidiaries subsidiaries Eliminations Consolidated
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net cash provided by (used in)
operating activities $ (6,004) $ (514) $ 949 $ 1,863 $ (3,706)
- -----------------------------------------------------------------------------------------------------------------------------
Cash flows from investing activities:
Proceeds from the
disposal of assets 380 - - - 380
Additions to property,
plant and equipment (2,483) (172) (152) - (2,807)
- -----------------------------------------------------------------------------------------------------------------------------
Net cash used in -
investing activities (2,103) (172) (152) - (2,427)
- -----------------------------------------------------------------------------------------------------------------------------
Cash flows from financing
activities:
Net capital contribution
from (to) Parent 1,915 (8) (44) (1,863) -
Revolving facility -
Short Term 7,000 - - - 7,000
- -----------------------------------------------------------------------------------------------------------------------------
Net cash provided by (used in)
financing activities 8,915 (8) (44) (1,863) 7,000
- -----------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in cash
and cash equivalents 808 (694) 753 - 867
Cash and cash equivalents
at beginning of period 3,030 1,047 2,854 - 6,931
- -----------------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents
at end of period $ 3,838 $ 353 $ 3,607 $ - $ 7,798
=============================================================================================================================
</TABLE>
16
<PAGE> 17
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
The following tables set forth, for the periods indicated, certain historical
operating data
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------
Three Months Ended Six Months Ended
-------------------------- ---------------------------
(Dollars in thousands) July 4, 1998 July 3, 1999 July 4, 1998 July 3, 1999
- -----------------------------------------------------------------------------------------
Amount Amount Amount Amount
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net sales:
U.S. Wholesale $ 23,315 $ 25,263 $ 44,087 $ 51,870
U.S. Retail 27,737 25,971 54,036 50,983
International (including
exports from U.S.) 10,760 11,310 22,359 23,216
-------- -------- -------- --------
Total net sales $ 61,812 $ 62,544 $120,482 $126,069
======== ======== ======== ========
Percent change in same store
sales (1) 2.4% 3.1% 2.4% 4.2%
- --------------------------------------------------------------------------------------
Number of retail stores:
U.S. specialty 179 166
U.S. outlets 90 71
International 54 52
-------- --------
Total 323 289
======== ========
</TABLE>
(1) Includes only those sales figures for U.S. specialty stores that have been
in operation for at least twelve full months. Percentage change reflects
figures for period depicted as compared to the figures from the prior year
period of comparable length.
17
<PAGE> 18
THREE MONTHS ENDED JULY 3, 1999 COMPARED TO THE THREE MONTHS ENDED JULY 4, 1998
Net sales for the three months ended July 3, 1999 were $62.5 million, up $0.7
million, or 1.2%, as compared to the three months ended July 4, 1998. U.S.
Wholesale net sales increased $1.9 million, or 8.4%, due to increased sales to
department stores, particularly Sears Roebuck & Co. and J.C. Penney, and the
continued success of the MagneForce golf shoe line. U.S. Retail net sales
decreased $1.8 million, or 6.4%, as a result of planned store closings, however,
U.S. Specialty Stores same store sales increased of 3.1% over the comparable
1998 period.
Gross profit margin for the second quarter 1999 was 47.6% of net sales, as
compared to 46.4% of net sales for the second quarter 1998. The improvement in
the gross profit margin reflects improvement in U.S. Wholesale and U.S. Retail,
partially offset by International. Significant improvements in the company's new
product lines contributed to the U.S. Wholesale improvements. U.S. Retail
benefited from the store closings.
Selling, general and administrative expenses for the second quarter 1999 were
$27.1 million, an increase of $1.6 million, or 6.4%, from the second quarter
1998. Selling, general and administrative expenses for the second quarter 1999
were 43.3% of net sales, an increase from 41.2% of net sales for the second
quarter 1998 partially due to an additional $0.7 million provision for bad debt
reserves due to bankruptcy filings by two of the Company's customers during the
second quarter and higher depreciation expense, primarily related to the
Company's computer systems upgrades.
Other expense for the three months ended July 3, 1999 includes a $1.1 million
charge for costs associated with the review of strategic alternatives by the
Company's financial advisor as well as costs associated with the resignation of
the Company's former Chief Executive Officer.
Earnings from operations for the second quarter 1999 were $1.5 million, a
decrease of $1.7 million, or 52.1%, from the second quarter 1998. The decrease
was due to the increased selling, general and administrative expense and other
expense as noted above, partially offset by the increased gross profit.
Interest expense for the second quarter 1999 was $2.4 million as compared to the
second quarter 1998 amount of $2.3 million. This increase is due to increased
average borrowings during the second quarter 1999 as compared to the second
quarter 1998.
SIX MONTHS ENDED JULY 3, 1999 COMPARED TO SIX MONTHS ENDED JULY 4, 1998
Net sales for the six months ended July 3, 1999 were $126.1 million, up $5.6
million, or 4.6%, as compared to the six months ended July 4, 1998. U.S.
wholesale net sales increased $7.8 million, or 17.7%. The increase was across
all product lines within U.S. Wholesale. The most significant increase was in
department stores, which was led by J.C. Penney's, which became a new customer
in the second quarter of 1998. New products showed significant gains, with the
successful launch of the MagneForce golf shoe line. Dealers also posted gains in
the first half of 1999 compared to 1998. U.S. retail net sales decreased $3.1
million, or 5.6%, as a result of store closings, however, same store sales at
U.S. specialty stores improved 4.2% over the prior year.
18
<PAGE> 19
Gross profit margin for the first half of 1999 was 47.5% of net sales, as
compared to 46.8% of net sales for the first half 1998. The improvement reflects
an improvement in both U.S. Retail and to a lesser extent, U.S. Wholesale.
Improvements at U.S. Retail relate primarily to the closing of stores. U.S.
Wholesale improvement resulted from strength in dealer sales as well as the
growth of new products.
Selling, general and administrative expenses for the six months ended July 3,
1999 were $53.3 million, an increase of $2.9 million, or 5.8%, compared to the
1998 period. Selling, general and administrative expenses for 1999 were 42.3% of
net sales, an increase from 41.8% of net sales for 1998. The increase was a
result of an additional $0.7 million provision for bad debt reserves due to
bankruptcy filings by two of the Company's customers during the second quarter
and higher depreciation expense primarily related to the Company's computer
systems upgrade.
Other expense for the six months ended July 3, 1999 includes a $1.1 million
charge related to the costs related to the review of strategic alternatives by
the Company and costs associated with the resignation of the Company's former
Chief Executive Officer.
Earnings from operations for the six months ended July 3, 1999 were $5.4
million, compared to $6.1 million in the 1998 period. The decrease was due to
the increased selling, general and administrative expense and other expense as
noted above, partially offset by the increased gross profit.
Interest expense for the six months ended July 3, 1999 was $4.8 million, as
compared to $4.3 million in 1998. This increase is due to higher average
outstanding borrowings under the credit facility during 1999 as compared to the
1998 period.
LIQUIDITY AND CAPITAL RESOURCES
WORKING CAPITAL
Working capital at July 3, 1999 was $82.8 million, as compared to $83.5 million
at January 2, 1999. Borrowings under the Company's bank credit facility were
$84.0 million compared to $77.0 million at January 2, 1999. Additional
borrowings were made to finance increases in accounts receivable, a reduction in
accounts payable and accrued expenses and to fund capital expenditures.
On July 1, 1999, the Company amended its bank credit facility, which resulted in
a waiver of the financial covenants as of July 3, 1999. The amendment also
amends the financial covenants for the third quarter of 1999. The Company
currently anticipates it will complete a new credit facility during the third
quarter of 1999.
INFORMATION TECHNOLOGY UPGRADE AND YEAR 2000
GENERAL
The Company is currently working to resolve the potential impact of the Year
2000 Issue on the processing of time-sensitive information by its computerized
information systems. Year 2000 issues may arise as the result of computer
programs being written using two digits rather than four to define the
applicable year. Any of the Company's computer programs that have time-
19
<PAGE> 20
sensitive software may recognize a date using "00" as the year 1900 rather than
the year 2000. This situation could result in 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 related activities.
The Company named a task force in April 1998 to assess and develop action plans
to address and assess the potential impact of the Year 2000 Issue. The task
force is also responsible to evaluate the exposures from third party (e.g.
suppliers and customers) failures to correct their systems for Year 2000.
Commencing in May 1998, questionnaires were sent to the third parties identified
by various areas of the Company's operating units. The task force has reviewed
all responses to identify potential Year 2000 risks.
INTERNAL SYSTEMS
The Company completed an assessment of the impact of the Year 2000 issues on its
internal systems and determined that it has to modify or replace portions of its
computer hardware and software to enable these systems to function properly with
respect to dates in the Year 2000 and thereafter. These issues are being
addressed as part of the overall information technology upgrade described in the
following paragraph. The Company believes that the Year 2000 issue will not pose
significant operational problems for its internal computer systems.
The Company is in the process of a significant information technology upgrade,
costing approximately $13.0 million, which is being capitalized during 1997,
1998 and 1999. The Year 2000 issue is being addressed within this upgrade. The
Company is utilizing both internal and external resources to reprogram or
replace, and test equipment and software to resolve the Year 2000 Issue. The
Company has completed two of the three phases of the upgrade, which include the
financial systems and the wholesale and warehouse systems. The Company
anticipates completing the retail system which is the third phase of system
upgrade and the Year 2000 project no later than October, 1999. The Company is
currently developing a contingency plan for the retail system. Total costs for
the system upgrade to date are approximately $10.1 million.
The costs of the systems project and the date on which the Company believes it
will complete the Year 2000 modifications are based upon management's best
estimates, which were derived by utilizing numerous assumptions of future
events, including the continued availability of certain resources, third party
modification plans and other factors. However, there can be no guarantee that
these estimates will be achieved and the 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 and the impact of third party information system failures.
SUPPLIERS
The Company utilizes numerous suppliers to supply materials and components for
its various products. As noted above, the Company has surveyed all of its major
suppliers regarding their Year 2000 status. A number of suppliers have returned
completed questionnaires to the Company, some of which state that they are
either Year 2000 compliant or that they anticipate that they will be Year 2000
compliant by a date early enough to avoid any disruption. However, the Company,
is unable to verify this information, and it is possible that the advice
received from suppliers may be
20
<PAGE> 21
erroneous. Moreover, certain suppliers have not yet responded to the Company's
request for information and may not be Year 2000 compliant. The Company does not
currently anticipate that suppliers' Year 2000 issues would have a material
adverse effect on the Company.
SERVICE PROVIDERS
The Company has submitted questionnaires to, but is not currently aware of the
Year 2000 readiness of, certain outside service companies such as freight,
telecommunications and utility providers. Failure of certain of these providers
to be Year 2000 compliant could have a material adverse effect on the Company
which is not currently quantifiable, and it is possible that the Company's
operations could be seriously disrupted.
CUSTOMERS
The Company's major customers have been surveyed by the Company for Year 2000
compliance, and the Company is in the process of evaluating responses. A
customer's Year 2000 issues could cause a delay in receipt of purchase orders or
in payment. If Year 2000 issues are widespread among the Company's customers,
the Company's sales and cash flows could be materially adversely affected.
FORWARD LOOKING STATEMENTS
When used in this discussion, the words "believes" and "expects" and similar
expressions are intended to identify forward-looking statements. Such statements
are subject to certain risks and uncertainties, over which the Company has no
control, which could cause actual results to differ materially from those
projected. Readers are cautioned not to place reliance on these forward-looking
statements, which speak only as of the date hereof. The Company undertakes no
obligations to republish revised forward-looking statements to reflect events or
circumstances after the date thereof or to reflect the occurrence of
unanticipated events. Readers are also urged to carefully review and consider
the various disclosures made by the Company in this report, as well as the
Company's periodic reports with the Securities Exchange Commission.
ITEM 3. QUANTITATIVE AND QUANTITATIVE DISCLOSURE
ABOUT MARKET RISKS
There have been no material changes in the Company's market risk during the
three month period ended July 3, 1999. For additional information, refer to Item
7A in the Company's Annual Report on form 10-K for the year ended January 2,
1999.
21
<PAGE> 22
PART II OTHER INFORMATION
Item 4. Exhibits and Reports on Form 8-K
(a) The following exhibits are filed as part of this report:
Exhibit
Number Description
4.1 Fourth Amendment, dated as of July 1, 1999 to the Credit
Agreement, dated as of May 7, 1997, among the Company,
the Banks party thereto from time to time, and Bankers
Trust Company as agent.
27 Financial Data Schedule
(b) A Form 8-K was filed on June 22, 1999 with regards to the
termination of Bear Sterns and the resignation of Charles J.
Campbell.
22
<PAGE> 23
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.
FLORSHEIM GROUP INC.
(Registrant)
By /s/ Richard J. Anglin
--------------------------
Richard J. Anglin
Executive Vice-President,
Chief Financial Officer
Date: August 17, 1999
23
<PAGE> 1
EXHIBIT 4.1
FOURTH AMENDMENT AND WAIVER TO CREDIT AGREEMENT
FOURTH AMENDMENT AND WAIVER TO CREDIT AGREEMENT (this "Amendment"),
dated as of July 1, 1999, among FLORSHEIM GROUP INC., A Delaware corporation
(the "Borrower"), the lending institutions from time to time party to the Credit
Agreement referred to below (the "Banks"), and BANKERS TRUST COMPANY, as Agent
(the "Agent"). All capitalized terms used herein and not otherwise defined shall
have the respective meanings provided such terms in the Credit Agreement
referred to below.
W I T N E S S E T H:
WHEREAS, the Borrower, the Banks and the Agent are parties to a Credit
Agreement, dated as of May 9, 1997 (as amended, modified or supplemented to the
date hereof, the "Credit Agreement"); and
WHEREAS, the parties hereto wish to amend and waive certain provisions
of the Credit Agreement as herein provided, subject to and on the terms and
conditions set forth herein;
NOW, THEREFORE, it is agreed:
1. The Banks hereby waive the requirements of Section 3.03(f)
of the Credit Agreement solely with respect to the sale by the
Borrower to Gordon Builders, Inc. of 6.1 acres of land in
Jefferson City, Missouri consummated on May 12, 1999.
2. The Banks hereby waive the requirements of Sections
9.08, 9.09 and 9.10 of the Credit Agreement solely with respect to
the amount or ratio appearing in the table of each such Section
opposite the date "June 30, 1999".
3. Section 9.08 of the Credit Agreement is hereby
amended by deleting the amount "$20,500,000" appearing opposite
the date September 30, 1999 in the table therein and by inserting
in lieu thereof the amount "$17,000,000".
4. Section 9.09 of the Credit Agreement is hereby
amended by deleting the ratio "3.75:1.00" appearing opposite the
date September 30, 1999 in the table therein and inserting in lieu
thereof the ratio "6.00:1.00".
5. Section 9.10 of the Credit Agreement is hereby
amended by deleting the ratio"2.45:1.00" appearing opposite the
date September 30,
<PAGE> 2
1999 in the table therein and by inserting in lieu thereof the
ratio "1.90:1.00".
6. In order to induce the undersigned Banks to enter
into this Amendment, the Borrower hereby represents and warrants
that (i) the representations and warranties contained in the
Credit Agreement are true and correct in all material respects on
and as of the Fourth Amendment Effective Date (as defined in
Section 10 of this Amendment) (it being understood and agreed that
any representation or warranty which by its terms is made as of a
specified date shall be required to be true and correct in all
material respects only as of such specified date) and (ii) there
exists no Default or Event of Default on the Fourth Amendment
Effective Date, in each case after giving effect to this
Amendment.
7. This Amendment is limited as specified and shall not
constitute a modification, acceptance or waiver of any other
provision of the Credit Agreement or any other Credit Document.
8. This Amendment may be executed in any number of
counterparts and by the different parties hereto on separate
counterparts, each of which counterparts when executed and
delivered shall be an original, but all of which shall together
constitute one and the same instrument. A complete set of
counterparts shall be lodged with the Borrower and the Agent at
the Notice Office.
9. THIS AMENDMENT AND THE RIGHTS AND OBLIGATIONS OF THE
PARTIES HEREUNDER SHALL BE CONSTRUED IN ACCORDANCE WITH AND
GOVERNED BY THE LAW OF THE STATE OF NEW YORK.
10. This Amendment shall become effective on the date
(the "Fourth Amendment Effective Date") when the Borrower and the
Required Banks (i) shall have signed a counterpart hereof (whether
the same or different counterparts) and (ii) shall have delivered
(including by way of facsimile transmission) the same to the Agent
at the Notice Office.
11. From and after the Fourth Amendment Effective Date,
all references in the Credit Agreement and each of the Credit
Documents to the Credit Agreement shall be deemed to be references
to the Credit Agreement as amended hereby.
* * *
<PAGE> 3
IN WITNESS WHEREOF, each of the parties hereto has caused a
counterpart of this Amendment to by duly executed and delivered as of the date
first above written.
FLORSHEIM GROUP INC.
By: Richard J. Anglin
---------------------------------
Name: Richard J. Anglin
Title: Executive Vice President
Chief Financial Officer
<PAGE> 4
IN WITNESS WHEREOF, each of the parties hereto has caused a
counterpart of this Amendment to be duly executed and delivered as of the date
first above written.
FLORSHEIM GROUP INC.
By:
---------------------------------
Name:
Title:
BANKERS TRUST COMPANY
Individually, and as Agent
By: James Reilly
---------------------------------
Name: James Reilly
Title: Vice President
BANK OF AMERICA NATIONAL
TRUST AND SAVINGS ASSOCIATION
By:
---------------------------------
Name:
Title:
CREDIT AGRICOLE INDOSUEZ
By:
---------------------------------
Name:
Title:
By:
---------------------------------
Name:
Title:
<PAGE> 5
CREDIT LYONNAIS NEW YORK BRANCH
By: Attila Koc
---------------------------------
Name: Attila Koc
Title: Senior Vice President
HARRIS TRUST AND SAVINGS BANK
By: Scott F. Geik
---------------------------------
Name: Scott F. Geik
Title: Vice President
HELLER FINANCIAL, INC.
By: Robert M. Regg
---------------------------------
Name: Robert M. Regg
Title: Assistant Vice President
LASALLE NATIONAL BANK
By:
---------------------------------
Name:
Title:
THE SUMITOMO BANK, LIMITED
By:
---------------------------------
Name:
Title:
By:
---------------------------------
Name:
Title:
TRANSAMERICA BUSINESS CREDIT CORPORATION
By: Perry Vavoules
---------------------------------
Name: Perry Vavoules
Title: Senior Vice President
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JAN-01-2000
<PERIOD-START> APR-04-1999
<PERIOD-END> JUL-03-1999
<CASH> 6,007
<SECURITIES> 1,791
<RECEIVABLES> 36,609
<ALLOWANCES> 1,996
<INVENTORY> 80,324
<CURRENT-ASSETS> 135,270
<PP&E> 56,682
<DEPRECIATION> 26,357
<TOTAL-ASSETS> 205,520
<CURRENT-LIABILITIES> 52,464
<BONDS> 76,912
0
0
<COMMON> 8,454
<OTHER-SE> 45,324
<TOTAL-LIABILITY-AND-EQUITY> 205,520
<SALES> 62,544
<TOTAL-REVENUES> 62,544
<CGS> 32,797
<TOTAL-COSTS> 27,099
<OTHER-EXPENSES> 1,123
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,430
<INCOME-PRETAX> (905)
<INCOME-TAX> (318)
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (587)
<EPS-BASIC> (0.07)
<EPS-DILUTED> (0.07)
</TABLE>
