<PAGE> 1
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION
13 OR 15 (D) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR 13-WEEK PERIOD ENDED APRIL 3, 1999 COMMISSION FILE NO. 0-26228
MARTIN INDUSTRIES, INC.
-----------------------
(Exact name of registrant as specified in its charter)
DELAWARE 63-0133054
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
301 EAST TENNESSEE STREET
FLORENCE, ALABAMA 35630
(Address of Principal Executive Offices) (Zip Code)
(256) 767-0330
(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 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
--- ---
Indicate the number of shares outstanding of each of the Issuer's Classes of
Common Stock, as of the Latest Practicable Date.
8,487,823 shares of Common Stock, $.01
par value, as of May 17, 1999
<PAGE> 2
MARTIN INDUSTRIES, INC.
INDEX
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements:
Unaudited Condensed Consolidated Balance Sheets as of
April 3, 1999 and December 31, 1998 2
Unaudited Condensed Consolidated Statements of
Operations and Comprehensive Income for the 13-Week
Periods Ended April 3, 1999 and March 28, 1998 4
Unaudited Condensed Consolidated Statements of Cash
Flows for the 13-Week Periods Ended April 3, 1999 and
March 28, 1998 5
Notes to Condensed Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 11
Item 3. Quantitative and Qualitative Disclosure About
Market Risk 18
PART II. OTHER INFORMATION
Item 2. Changes in Securities and Use of Proceeds 19
Item 6. Exhibits and Reports on Form 8-K 19
</TABLE>
1
<PAGE> 3
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
MARTIN INDUSTRIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
ASSETS
<TABLE>
<CAPTION>
April 3, December 31,
1999 1998
----------- -----------
<S> <C> <C>
Current assets:
Cash and short-term investments $ 5,919,000 $ 9,818,000
Accounts and notes receivable, less
allowance for doubtful accounts of
$662,000 and $627,000, respectively 17,256,000 10,712,000
Inventories 17,775,000 20,323,000
Refundable income taxes 1,591,000 1,712,000
Deferred tax benefits 3,827,000 3,924,000
Prepaid expenses and other assets 1,181,000 1,277,000
----------- -----------
Total current assets 47,549,000 47,766,000
----------- -----------
Property, plant and equipment, net 11,081,000 10,004,000
Deferred tax benefits 584,000 622,000
Intangibles, net of accumulated amortization 1,801,000 1,773,000
Other noncurrent assets 2,979,000 2,214,000
----------- -----------
16,445,000 14,613,000
----------- -----------
Total assets $63,994,000 $62,379,000
=========== ===========
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
balance sheets.
2
<PAGE> 4
MARTIN INDUSTRIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
April 3, December 31,
1999 1998
------------ ------------
<S> <C> <C>
LIABILITIES
Current liabilities:
Notes payable $ 162,000 $ 159,000
Current portion of long-term debt 1,733,000 1,741,000
Accounts payable 4,674,000 3,139,000
Accrued liabilities:
Payroll and employee benefits 2,698,000 2,348,000
Product liability 1,054,000 961,000
Warranty 1,058,000 1,126,000
Workers' compensation 731,000 709,000
Other 1,072,000 985,000
------------ ------------
Total current liabilities 13,182,000 11,168,000
------------ ------------
Long-term debt 6,012,000 6,864,000
Deferred compensation 2,253,000 2,304,000
------------ ------------
8,265,000 9,168,000
------------ ------------
Total liabilities 21,447,000 20,336,000
------------ ------------
STOCKHOLDERS' EQUITY
Preferred stock $.01 par value, 1,000,000
shares authorized; no shares issued
and outstanding 0 0
Common stock, $.01 par value, 20,000,000 shares
authorized; 9,752,993 shares issued at April 3,
1999 and 9,752,053 at December 31, 1998 98,000 98,000
Paid-in capital 27,314,000 27,397,000
Retained earnings 24,243,000 24,229,000
Foreign currency translation adjustment (820,000) (996,000)
------------ ------------
50,835,000 50,728,000
Less:
Treasury stock at cost (1,265,170 shares at April 3,
1999 and 1,325,170 at December 31, 1998) 3,909,000 4,008,000
Unearned compensation - ESOP 4,379,000 4,677,000
------------ ------------
Total stockholders' equity 42,547,000 42,043,000
------------ ------------
Total liabilities and stockholders' equity $ 63,994,000 $ 62,379,000
============ ============
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
balance sheets.
3
<PAGE> 5
MARTIN INDUSTRIES, INC.
CONDENSED CONSOLIDATED STATEMENTS
OF OPERATIONS AND COMPREHENSIVE INCOME
(Unaudited)
<TABLE>
<CAPTION>
13-WEEK
PERIOD ENDED
--------------------------------
APRIL 3, MARCH 28,
1999 1998
------------ -------------
<S> <C> <C>
NET SALES $ 23,033,000 $ 18,908,000
Cost of sales 19,247,000 15,231,000
------------ ------------
GROSS PROFIT 3,786,000 3,677,000
------------ ------------
Operating expenses:
Selling 2,560,000 2,514,000
General and administrative 1,853,000 1,487,000
Non-cash ESOP compensation expense 180,000 402,000
------------ ------------
4,593,000 4,403,000
------------ ------------
OPERATING LOSS (807,000) (726,000)
Interest expense 198,000 240,000
Interest and other income (1,279,000) (217,000)
------------ ------------
INCOME (LOSS) BEFORE INCOME TAXES 274,000 (749,000)
Provision (credit) for income taxes 110,000 (281,000)
------------ ------------
NET INCOME (LOSS) $ 164,000 $ (468,000)
============ ============
Other comprehensive income, net of tax:
Foreign currency translation adjustment 176,000 74,000
------------ ------------
Comprehensive income (loss) $ 340,000 $ (394,000)
============ ============
BASIC PER SHARE DATA:
Net income (loss) $ 0.02 $ (0.07)
============ ============
Weighted average number of common and common
equivalent shares outstanding 7,160,459 6,991,295
============ ============
DILUTED PER SHARE DATA:
Net income (loss) $ 0.02 $ (0.07)
============ ============
Weighted average number of common and common
equivalent shares outstanding 7,197,392 6,991,295
============ ============
DIVIDENDS DECLARED PER SHARE $ 0.021 $ 0.040
============ ============
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
statements.
4
<PAGE> 6
MARTIN INDUSTRIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
13-WEEK
PERIOD ENDED
------------------------------
APRIL 3, MARCH 28,
1999 1998
----------- ------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 164,000 $ (468,000)
Adjustments to reconcile net income (loss) to net cash
used in operating activities:
Depreciation and amortization 370,000 397,000
Gain on sale of assets (66,000) 0
Gain on sale of division (1,165,000) 0
Provision for doubtful accounts and notes receivable 35,000 8,000
Non-cash ESOP compensation expense 180,000 402,000
Other changes in operating assets and liabilities (1,697,000) (5,201,000)
----------- ------------
Net cash used in operating activities (2,179,000) (4,862,000)
----------- ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (1,470,000) (175,000)
Proceeds from sale of assets 177,000 0
Proceeds from sale of division 500,000 0
----------- ------------
Net cash used in investing activities (793,000) (175,000)
----------- ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net short-term borrowings (repayments) (2,000) 3,989,000
Net repayments of long-term debt (858,000) (857,000)
Exercise of stock options 48,000 80,000
Cash dividends paid (113,000) (214,000)
----------- ------------
Net cash provided by (used in) financing activities (925,000) 2,998,000
----------- ------------
NET DECREASE IN CASH AND SHORT-TERM
INVESTMENTS (3,897,000) (2,039,000)
EFFECT OF EXCHANGE RATE CHANGES ON CASH (2,000) (3,000)
CASH AND SHORT-TERM INVESTMENTS AT THE
BEGINNING OF THE PERIOD 9,818,000 15,157,000
----------- ------------
CASH AND SHORT-TERM INVESTMENTS AT THE
END OF THE PERIOD $ 5,919,000 $ 13,115,000
=========== ============
Cash paid during the period for:
Interest, net $ 175,000 $ 208,000
Income taxes, net $ 0 $ 0
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
statements.
5
<PAGE> 7
MARTIN INDUSTRIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. BASIS OF PRESENTATION
Unaudited Interim Condensed Consolidated Financial Statements
The accompanying unaudited interim condensed consolidated financial
statements of Martin Industries, Inc. and subsidiary (the "Company") have been
prepared in accordance with generally accepted accounting principles for interim
financial information and are presented in accordance with the requirements of
Form 10-Q and Article 10 of Regulation S-X. The financial statements should be
read in conjunction with the audited financial statements and notes thereto for
the year ended December 31, 1998 included on Form 10-K, as filed with the
Securities and Exchange Commission on March 31, 1999.
In the opinion of management, the unaudited interim condensed
consolidated financial statements included herein reflect all adjustments
necessary to present fairly the information set forth therein. The Company's
business is seasonal and cyclical with the potential for significant
fluctuations in quarterly earnings; therefore, the consolidated results of
operations for the periods presented are not necessarily indicative of results
for the full year.
Principles of Consolidation and Fiscal Periods
The unaudited interim condensed consolidated financial statements
include the accounts and transactions of the Company and its wholly owned
Canadian subsidiary, 1166081 Ontario Inc. All significant intercompany accounts
and transactions have been eliminated in consolidation.
The Company's fiscal quarters end on the Saturday nearest each calendar
quarter-end. The Company utilizes a December 31 fiscal year-end.
New Accounting Standards and Statements
In June 1998, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 133, Accounting for
Derivative Instruments and Hedging Activities, which establishes accounting and
reporting standards for derivative instruments, including certain derivative
instruments embedded in other contracts, and for hedging activities. This
statement is effective for fiscal years beginning after June 15, 1999. This
statement is not expected to have a material effect on the Company's financial
statements.
In March 1998, the American Institute of Certified Public Accountants
("AICPA") issued Statement of Position ("SOP") 98-1, Accounting for the Costs of
Computer Software Developed or Obtained for Internal Use. The SOP requires
capitalization of certain costs of internal-use software. The Company adopted
this statement on January 1, 1999 with no significant impact on the consolidated
financial statements.
6
<PAGE> 8
The AICPA has issued SOP 98-5, Reporting on the Costs of Start-up
Activities. This statement provides guidance on the financial reporting of
start-up costs and organization costs, and requires these costs to be expensed
as incurred. The new rules were adopted on January 1, 1999 with no significant
impact on the consolidated financial statements.
Prior Year Reclassification
Certain prior year amounts have been reclassified to conform with the
current year's presentation.
2. INVENTORIES
The Company's inventories are primarily valued at last-in, first-out
("LIFO") cost, which is not in excess of market. Inventory costs include
material, labor and overhead. The Company evaluates raw materials, purchase
parts, work-in-process and finished goods to ensure that inventory is valued at
the estimated net realizable value. Inherent in the estimates of net realizable
value are management's estimates related to the Company's future customer
demand, product mix and salvage value. At December 31, 1998, the Company
recorded a reserve for excess and obsolete inventory of $1,716,000. At April 3,
1999, the reserve for excess and obsolete inventory was $1,300,000. An analysis
of inventories at April 3, 1999 and December 31, 1998 follows:
<TABLE>
<CAPTION>
April 3, December 31,
1999 1998
----------- ------------
(Unaudited)
<S> <C> <C>
Inventories valued at first-in, first-out ("FIFO") cost:
Raw materials and purchased parts $10,906,000 $10,644,000
Work-in-process 4,299,000 4,797,000
----------- -----------
Finished goods 8,020,000 10,347,000
23,225,000 25,788,000
Less excess of FIFO over LIFO cost 5,450,000 5,465,000
----------- -----------
$17,775,000 $20,323,000
=========== ===========
</TABLE>
3. EARNINGS PER SHARE
Basic earnings per share ("EPS") 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 EPS reflects the potential
dilution that could occur if securities or other contracts to issue common stock
were exercised or converted into common stock or resulted in the issuance of
common stock that then shared in the earnings of the Company. Diluted EPS has
been computed based on the weighted average number of shares outstanding,
including the effect of outstanding stock options, if dilutive, in each
respective year.
7
<PAGE> 9
A reconciliation of shares as the denominator of the basic EPS
computation to the diluted EPS computation is as follows:
<TABLE>
<CAPTION>
13-Week Period Ended
------------------------
April 3, March 28,
1999 1998
--------- ---------
<S> <C> <C>
Weighted average shares-basic,
excluding ESOP and stock
option effects 5,374,701 5,328,027
Weighted average effect of ESOP
shares committed to be
released 1,785,758 1,663,268
--------- ---------
Weighted average shares-basic 7,160,459 6,991,295
Dilutive effect of stock options 36,933 0
--------- ---------
Weighted average number of
common and common
equivalent shares
outstanding-diluted 7,197,392 6,991,295
========= =========
</TABLE>
Options outstanding of 517,540 and 751,103 for the 13-week periods
ended April 3, 1999 and March 28, 1998, respectively, were not included in the
table above as they were anti-dilutive.
4. COMMITMENTS AND CONTINGENCIES
Product Contingency
The Company has experienced production and design problems with certain
products manufactured by Hunter Technology Inc. ("Hunter"), a wholly-owned
subsidiary of 1166081 Ontario Inc. These product problems, in some cases, caused
the production to be suspended and, therefore, shipments were also suspended.
Corrections have been implemented and all but one of the affected products are
back in production. The Company has completed its evaluation of the potential
exposure to deal with problems related to products shipped prior to these
corrections, and it currently believes that the ultimate liability will not have
a material adverse effect on the Company.
Legal
On February 1, 1996, 1166081 Ontario Inc. acquired all of the capital
stock of Hunter for a purchase price of approximately $1,943,000 that included
$850,000 in cash, $729,000 in promissory notes payable and $364,000 paid into
escrow. The escrow fund was established at the closing to make funds available
to meet the sellers' indemnification obligations to the Company. During the
first
8
<PAGE> 10
quarter of 1997, the Company notified certain of the sellers that it was
withholding payment on the promissory notes held by them pending resolution of
certain issues with the holders of the notes arising out of the purchase
transaction. The Company also claimed the entire amount in escrow and instituted
litigation to recover these amounts and additional amounts from certain sellers
in the purchase transaction, and certain of the sellers sued to enforce
collection of their notes.
During 1998, the Company effected a settlement with all but two of the
former shareholders, and a contingent settlement with these two. Pursuant to the
settlement, the Company has received approximately $315,000 (including interest)
of funds held in escrow, an additional payment of $32,000, and cancellation of
promissory notes and accrued interest totaling approximately $364,000. The
contingent settlement will result (if the contingency is satisfied and that
portion of the settlement effectuated) in receipt by the Company of an
additional $97,000, and cancellation of notes and accrued interest totaling
approximately $205,000. No further action is contemplated as to the Company's
claims against these two former shareholders, or as to their claims asserted in
Canada against the Company, until such time as it is determined that the
condition for completion of the settlement has been satisfied, which event will
likely occur during 1999.
The Company is a party to various legal proceedings that are incidental
to its business. Certain of these cases filed against the Company and other
companies engaged in businesses similar to the Company often allege, among other
things, product liability, personal injury and breach of contract and warranty.
Such suits sometimes seek the imposition of large amounts of compensatory and
punitive damages and trials by jury. In the opinion of management, after
consultation with legal counsel responsible for these matters, the ultimate
liability, if any, with respect to the proceedings in which the Company is
currently involved is not presently expected to have a material adverse affect
on the Company. However, the potential exists for unanticipated material adverse
judgments against the Company.
5. RESTRUCTURE CHARGE
As part of the continuing effort to reduce operating costs and improve
manufacturing efficiencies, the Company made the decision to close its
Washington Park, Illinois facility. The Company initiated the closing and the
transfer of the gas grill, gas log and freestanding vent-free stove production
into the Athens, Alabama and Huntsville, Alabama locations during the second
quarter of 1998. The Company recorded a non-recurring charge of $615,000, before
tax, in connection with the closing. The non-recurring charge includes plant
closing costs of $590,000 (primarily payroll, severance and payroll taxes of
$234,000 and group insurance of $255,000) and a property, plant and equipment
valuation charge of $25,000. The estimated reserve remaining as of April 3, 1999
and December 31, 1998 totaled $174,000 and $251,000, respectively.
6. SALE OF CERTAIN ASSETS
On March 31, 1999, the Company completed the sale of all of the assets
of its Ashley solid fuel division to United States Stove Company. The Company
recorded a gain on the sale of the Ashley division of $1,165,000 which is
included in interest and other income in the Condensed Consolidated Statements
of Operations and Comprehensive Income.
9
<PAGE> 11
7. INDUSTRY SEGMENT INFORMATION
Under SFAS No. 131, Disclosures about Segments of an Enterprise and
Related Information, certain information is disclosed for the two reportable
operating segments of the Company. The reportable segments were determined using
the internal management reporting system. They are composed of the Company's
significant sales segments. The home heating segment products include vented and
vent-free gas heaters and furnaces, wood- and coal-burning free standing heaters
and fireplace inserts, pre-engineered gas- and wood-burning fireplaces and gas
logs. The leisure and other segment products include premium gas barbecue grills
and utility trailer kits. The accounting policies for each segment are the same
as those used by the Company. The Company evaluates performance based on net
sales, gross profit and segment contribution, defined as gross profit less
selling expenses. As such, the Company does not allocate general and
administrative expense, non-cash ESOP compensation expense, interest expense,
interest and other income or income taxes to the reportable operating segments.
The segment results include certain overhead allocations, primarily related to
fixed manufacturing and selling expenses. The results and identifiable net
assets for the two reportable segments of the Company are included in the
following table.
<TABLE>
<CAPTION>
Segment Information
-----------------------
13-Week Period Ended
-----------------------
April 3, March 28,
1999 1998
-------- --------
(In Thousands)
<S> <C> <C>
Net sales:
Home heating products $ 12,076 $ 10,738
Leisure and other products 10,957 8,170
-------- --------
$ 23,033 $ 18,908
======== ========
Gross profit:
Home heating products $ 1,548 $ 1,678
Leisure and other products 2,238 1,999
-------- --------
$ 3,786 $ 3,677
======== ========
Segment contribution (loss): (1)
Home heating products $ (54) $ 45
Leisure and other products 1,280 1,118
-------- --------
$ 1,226 $ 1,163
======== ========
April 3, Dec. 31
1999 1998
-------- --------
Identifiable net assets: (2)
Home heating products $ 24,953 $ 31,363
Leisure and other products 17,915 7,995
Other (3) 3,244 1,681
-------- --------
$ 46,112 $ 41,039
======== ========
</TABLE>
(1) Segment contribution (loss) consists of gross profit less selling
expenses.
(2) Represents property, plant and equipment, accounts receivable and
inventory (each net of respective reserves).
(3) Represents amounts attributable to the Company's corporate administration.
10
<PAGE> 12
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following discussion of the financial condition and results of
operations of the Company should be read in conjunction with the unaudited
interim condensed consolidated financial statements of the Company and notes
thereto appearing elsewhere in this Form 10-Q. All references to the first
quarter of 1999 and the first quarter of 1998 are referring to the 13-week
periods ended April 3, 1999 and March 28, 1998, respectively.
OVERVIEW
The Company manufactures products in two industry segments: home
heating products and leisure and other products such as do-it-yourself utility
trailer kits and premium gas barbecue grills. Each of the industry segments in
which the Company operates is cyclical in nature, with sales being affected by
general economic cycles, consumer confidence levels, inflation, employment and
income levels and the availability of credit generally. The Company's fireplace
business is also influenced by factors affecting the housing industry, such as
housing demand, the availability of financing and the level and stability of
interest rates. The Company's NuWay utility trailer kits and Broilmaster premium
gas barbecue grills historically have been contraseasonal to the Company's home
heating products, with higher sales during warm weather months.
On March 31, 1999, the Company completed the sale of all of the assets
of its Ashley solid fuel division to United States Stove Company. The Company
recorded a gain on the sale of the Ashley division of $1,165,000.
As part of the continuing effort to reduce operating costs and improve
manufacturing efficiencies, the Company made the decision to close its
Washington Park, Illinois facility. The Company initiated the closing and the
transfer of the gas grill, gas log and freestanding vent-free stove production
into the Athens, Alabama and Huntsville, Alabama locations during the second
quarter of 1998. The Company recorded a non-recurring charge of $615,000, before
tax, in connection with the closing. The non-recurring charge includes plant
closing costs of $590,000 (primarily payroll, severance and payroll taxes of
$234,000 and group insurance of $255,000) and a property, plant and equipment
valuation charge of $25,000. The estimated reserve remaining as of April 3, 1999
and December 31, 1998 totaled $174,000 and $251,000, respectively. See Note 5 to
Notes to Condensed Consolidated Financial Statements.
On February 1, 1996, the Company's Canadian subsidiary, 1166081 Ontario
Inc., acquired all of the capital stock of Hunter Technology Inc., ("Hunter").
The aggregate purchase price of approximately $1,943,000 included $850,000 in
cash, $729,000 in promissory notes payable and $364,000 paid into escrow. The
purpose of the escrow was to make funds available to meet the sellers'
indemnification obligations to the Company. The promissory notes, bearing
interest at a rate of 9% per annum, matured during the first quarter of 1997.
The Company withheld payment on certain of the promissory notes pending
resolution of certain issues with the holders of the notes arising out of the
purchase transaction. The Company claimed the entire amount in escrow and
instituted litigation to recover these amounts and
11
<PAGE> 13
additional amounts from certain sellers in the purchase transaction, and certain
of the sellers sued to enforce collection of their notes.
During 1998, the Company effected a settlement with all but two of the
sellers, and a contingent settlement with these two. Pursuant to the settlement,
the Company has received approximately $315,000 (including interest) of funds,
held in escrow, an additional payment of $32,000, and cancellation of notes and
accrued interest totaling approximately $364,000. Consequently, in 1998, the
Company recorded a gain on the settlement of litigation of $422,000. The
contingent settlement will result (if the contingency is satisfied and that
portion of the settlement effectuated) in receipt by the Company of an
additional $97,000, and cancellation of notes and accrued interest totaling
approximately $205,000. No further action is contemplated as to the Company's
claims against those certain sellers, or as to their claims asserted in Canada
against the Company, until such time as it is determined that the condition for
completion of the settlement has been satisfied, which event will likely occur
during 1999.
Sales of home heating products and, in particular, gas and solid fuel
heaters (other than fireplaces), historically have been seasonal in nature, with
sales being directly affected by weather conditions. In an effort to better
control its production schedule and inventory of finished products in light of
this seasonality, the Company utilizes early booking programs, which allow the
Company to project sales early in the year and plan production accordingly. In
general, the Company takes early booking orders for its heating products in the
first and second quarters and fills the majority of these orders in the second
and third quarters, with fill-in orders being shipped in the fourth quarter and
to a lesser degree in the ensuing first quarter. Unseasonably warm weather
results in higher customer inventories that in turn result in fewer fourth
quarter customer fill-in orders and lower response to the Company's early
booking programs for the following year.
Notwithstanding the early booking programs, sales are recognized by the
Company when the product is shipped. A majority of sales of gas and solid fuel
heaters under the Company's early booking programs historically have occurred in
the second and third quarters, with products being shipped throughout this
period. Orders under the Company's early booking programs have historically
represented up to 60% of customers' projected annual requirements and, because
of program terms, the shipping period often extends over several months.
Customer orders for products other than orders placed under the early booking
programs are accepted and filled by the Company as received and shipped at the
customer's request. As used in the following discussion and elsewhere in this
Form 10Q, the term "gross sales" reflects total customer invoices billed by the
Company for the applicable period, net of any customer sales credits issued. The
term "net sales" as used herein and elsewhere in this Form 10Q, reflects gross
sales less deductions for cash discounts, freight and special program credits
allowed by the Company.
YEAR 2000 COMPLIANCE
The efficient operation of the Company's business is dependent in part
on its computer software programs and operating systems (collectively, "Programs
and Systems"). These Programs and Systems are used in several key areas of the
Company's business, including inventory management, pricing, sales, and
financial reporting, as well as in various administrative functions. Many of the
Company's Programs and Systems, as well as the programs and systems of third
parties doing business with the Company, are subject to the "Year 2000" issue,
which is the inability of a computer to correctly process dates after December
31, 1999. This inability could potentially cause affected computers to shut down
or perform
12
<PAGE> 14
incorrect calculations, ultimately resulting in a system failure, disruption of
operations, and the inability to engage in normal business activities. This
issue also affects products or systems which contain embedded computer chips
with date sensitive programming, such as manufacturing equipment, security
systems, telephone equipment and office equipment ("non-IT systems"). As a
result, many companies' software and computer systems need to be upgraded or
replaced in order to address the Year 2000 issue.
The Company has evaluated its Programs and Systems to identify and
address potential Year 2000 compliance problems. As a result, the Company has
purchased Year 2000 compliant versions of its packaged Programs and Systems and
has decided to modify its custom Programs and Systems. The Company has incurred
approximately $100,000 during 1997 and 1998 and expects to incur an additional
$50,000 during 1999 to modify or make selective improvements to its Programs and
Systems. The Company plans to complete the replacement and modification of its
IT Programs and Systems by the end of 1999. While some non-critical systems may
not be addressed until after December 1999, the Company believes such systems
will not disrupt its operations in a material manner. With respect to the
Company's non-IT systems, the Company has partially completed its evaluation,
but currently believes that its material non-IT systems are not date dependent.
The Company has also initiated communication with suppliers, and
intends to initiate communication with financial institutions and other third
parties with which it does business in the near future, to evaluate their Year
2000 compliance. The Company is currently reviewing responses from its suppliers
to identify and assess compliance issues, but has not yet completed that review.
The Company will continue to communicate with suppliers and will monitor the
responses during 1999.
Because of the subjective nature of and inherent uncertainty in the
Year 2000 compliance issue, the actual costs to address and resolve any
non-compliance issues may differ materially from those anticipated. In
particular, this estimate assumes that the Company will not encounter material
Year 2000 compliance issues with its non-IT systems, that it has correctly
identified and assessed the material Year 2000 compliance issues associated with
its IT Programs and Systems, and that its suppliers, customers and others with
which it does business correctly communicate with the Company and do not
experience significant Year 2000 compliance issues.
The Company could be affected if the Year 2000 issue impacts suppliers'
abilities to provide raw materials and other supplies needed in the
manufacturing process or if its customers' ability to take shipments are
affected. The Company is also dependent on third parties or government agencies
to (1) supply sufficient electrical power and other utilities, transportation
and other services to sustain the manufacturing process and other Company
operations, (2) process, pay and maintain records of certain employee benefits,
and (3) supply funds and information in a timely fashion for its distributors
and customers to purchase products. Any failure on the part of these third
parties could have a material adverse effect on the business, results of
operations and financial condition of the Company.
If the Company's efforts to resolve the Year 2000 issue are not
adequate or implemented in a timely manner, the Company could experience a
disruption in its normal business activities. Management of the Company
currently believes that the most reasonably likely worst case scenario would be
the delay in collections from third parties which could result in liquidity
issues for the Company, the delay of financial reporting due to any accounting
processes which may need to be performed manually, a delay in purchasing
supplies and shipping products, and increased costs associated with obtaining
alternative sources of supply and other business, in each case until all Year
2000 issues are
13
<PAGE> 15
resolved. However, the potential consequences of the Year 2000 issues are
inherently uncertain, and consequently, no assurance can be given that this will
be the reasonably likely worst case scenario.
The Company is in the process of developing a contingency plan for Year
2000 issues, which is scheduled to be completed during the third quarter of
1999.
The Company, in the normal course of its business, has evaluated the
need for a system-wide replacement of its Programs and Systems without regard to
the Year 2000 compliance issue. As a result of the evaluation and as part of the
Company's long-term strategic plan, the Company made the decision to purchase
fully integrated Enterprise Resource Planning ("ERP") Programs and Systems that
will replace its current Program and Systems. Such ERP Programs and Systems are
Year 2000 compliant. The Company has incurred approximately $792,000 through
April 3, 1999 and expects to incur an additional $2.2 million during 1999 and
2000 to complete the installation of the new Programs and Systems.
Many of the statements in this section constitute forward-looking
statements and are subject to a number of assumptions, risks and uncertainties
that could cause actual results to differ materially from those expressed or
contemplated by these statements. See "Safe Harbor Statement under the Private
Securities Litigation Reform Act of 1995" appearing on page 20 of this report.
RESULTS OF OPERATIONS
The following tables set forth, for the periods indicated, information
derived from the Company's financial statements expressed as a percentage of net
sales.
<TABLE>
<CAPTION>
13-Week Period Ended
----------------------
April 3, March 28,
1999 1998
-------- ---------
<S> <C> <C>
Net sales 100.0% 100.0%
Cost of sales 83.6 80.6
----- -----
Gross profit 16.4 19.4
Operating expenses:
Selling 11.1 13.3
General and administrative 8.0 7.9
Non-cash ESOP compensation expense 0.8 2.1
----- -----
19.9 23.3
----- -----
Operating loss (3.5) (3.9)
Interest expense 0.9 1.2
Interest and other income (5.6) (1.1)
----- -----
Income (loss) before income taxes 1.2 (4.0)
Provision (credit) for income taxes 0.5 (1.5)
----- -----
Net income (loss) 0.7% (2.5)%
===== =====
</TABLE>
14
<PAGE> 16
13-WEEK PERIOD ENDED APRIL 3, 1999 COMPARED TO 13-WEEK PERIOD ENDED MARCH 28,
1998
Net Sales
Net sales in the 13-week period ended April 3, 1999 increased to $23.0
million from $18.9 million in the 13-week period ended March 28, 1998, an
increase of $4.1 million, or 21.8%.
Home Heating Products. Net sales of home heating products increased to $12.1
million in the first quarter of 1999 from $10.7 million in the first quarter of
1998, an increase of $1.3 million, or 12.5%. The increase in net sales of home
heating products was primarily the result of an increase in Martin Fireplace net
sales of $1.5 million, or 23.4%, to $7.9 million. Martin Fireplace shipments
benefited from a strong housing market, expanded distribution and aggressive
sales programs.
Leisure and Other Products. Net sales of leisure and other products increased
$2.8 million, or 34.1%, in the first quarter of 1999 to $11.0, million as
compared to $8.2 million in the first quarter of 1998. Net sales of barbecue gas
grills increased $1.9 million, or 27.3%, in the first quarter of 1999, as
compared to the first quarter of 1998, primarily as a result of new model
introductions, strong brand recognition and continued growth in the premium gas
grill market. Sales of NuWay utility trailers increased $639,000, or 52.6%, to
$1.9 million in the first quarter of 1999. Utility trailer sales benefited from
the addition of a significant retail customer.
Gross Profit
Gross profit in the first quarter of 1999 was $3.8 million as compared
to $3.7 million in the first quarter of 1998, an increase of $109,000, or 3.0%.
Gross margin, defined as gross profit as a percentage of net sales, decreased to
16.4% in the first quarter of 1999 from 19.4% in the first quarter of 1998.
Home Heating Products. Gross profit on net sales of home heating products in the
first quarter of 1999 was $1.5 million as compared to $1.7 million in the first
quarter of 1998, a decrease of $130,000, or 7.7%. The decrease in gross profit
was primarily the result of higher fixed manufacturing cost, competitive
pressures on selling prices for gas heaters and wood-burning fireplaces and the
continued shift in mix from higher margin gas heaters to fireplace products.
Gross margin was 12.8% in the first quarter of 1999 as compared to 15.6% in the
first quarter of 1998.
Leisure and Other Products. Gross profit on net sales of leisure and other
products in the first quarter of 1999 was $2.2 million as compared to $2.0
million in the first quarter of 1998, an increase of $239,000, or 12.0%.
Manufacturing costs increased during the quarter due to quality improvement
initiatives associated with the gas grill production line and, therefore, gross
profit did not increase at the rate of the sales increase in the leisure and
other product segment. Gross margin was 20.4% in the first quarter of 1999 as
compared to 24.5% in the first quarter of 1998.
Selling Expenses
Selling expenses in the first quarter of 1999 increased to $2.6 million
from $2.5 million in the first quarter of 1998, an increase of $46,000, or 1.8%,
primarily as a result of increased commissions, offset by decreases in co-op
advertising and the reclassification of certain administrative expenses. Selling
expenses as a percent of net sales decreased to 11.1% in the first quarter of
1999 from 13.3% in the first quarter of 1998.
15
<PAGE> 17
Segment Contribution
Total segment contribution, defined as gross profit less selling
expenses, increased $63,000, or 5.4%, to $1.2 million in the first quarter of
1999. The increase was the result of the 3.0% increase in gross profit, offset
by the 1.8% increase in selling expenses.
General and Administrative Expenses
General and administrative expenses increased $366,000, or 24.6%, in
the first quarter of 1999 as compared to the first quarter of 1998. The increase
was primarily the result of the reclassification of certain expenses previously
classified as selling, increased payroll, employee and relocation benefits,
travel, supplies and training expenses in the administration, data processing
and design and development departments.
Non-cash ESOP Compensation Expense
Non-cash ESOP compensation expense was $180,000 in the first quarter of
1999 as compared to $402,000 in the first quarter of 1998, a decrease of
$222,000, or 55.2%. In the first quarter of 1999, 70,662 shares of unallocated
ESOP stock were committed to be released as compensation at an average fair
value of $2.55 per share as compared to 75,012 shares committed to be released
as compensation at an average fair value of $5.36 per share in the first quarter
of 1998.
Interest Expense
Interest expense in the first quarter of 1999 was $198,000 as compared
to $240,000 in the first quarter of 1998, a decrease of $42,000, or 17.5%. The
decrease was primarily attributable to a decrease in average outstanding debt.
Interest and Other Income
Interest and other income in the first quarter of 1999 was $1.3 million
as compared to $217,000 in the first quarter of 1998, an increase of $1.1
million. The increase was primarily the result of the $1.2 million gain on the
sale of the Ashley division recorded in the first quarter of 1999. See Note 6 to
Notes to Condensed Consolidated Financial Statements.
Provision for Income Taxes
The provision for income taxes was $110,000 in the first quarter of
1999 as compared to a credit for income taxes of $281,000 in the first quarter
of 1998. The effective tax rate was 40.1% in the first quarter of 1999 as
compared to (37.5%) in the first quarter of 1998. The effective tax rate differs
from the amount computed by applying the federal statutory rate primarily due to
the non-recognition of a tax benefit on the $51,000 pre-tax loss of Hunter
during the first quarter of 1999 as realization of any additional tax benefit is
not assured at this time.
Net Income and Net Income Per Share
The net income in the first quarter of 1999 was $164,000 as compared to
the net loss of $468,000 in the first quarter of 1998. The change was primarily
the result of the factors discussed above.
16
<PAGE> 18
The net income per share-basic was $0.02 in the first quarter of 1999
as compared to the net loss per share-basic of $0.07 in the first quarter of
1998. The change in net income per share-basic was primarily the result of the
change in net income to $164,000 from a net loss of $468,000, partially offset
by the increase in the weighted average shares outstanding. The increase in the
weighted average shares outstanding was primarily the result of stock options
exercised and ESOP shares released and committed to be released to participants.
The net income per share-diluted was $0.02 in the first quarter of 1999
as compared to the net loss per share-diluted of $0.07 in the first quarter of
1998. The dilutive effect of stock options did not have a material effect on the
net income per share on a diluted basis.
LIQUIDITY AND CAPITAL RESOURCES
The Company has historically financed its operations from internally
generated funds and seasonal borrowings under its bank line of credit. The
Company's primary capital requirements are for working capital, debt service,
capital expenditures and dividends.
The Company's operations in the 13-week period ended April 3, 1999 used
$2.2 million in cash primarily to finance increases in extended term ("dating")
receivables. The Company's initial public offering investments and proceeds from
the sales of certain assets were also utilized to provide the funds needed for
capital expenditures, long-term debt repayments and dividends for the period.
As discussed above, the Company finances temporary working capital
requirements under an unsecured bank line of credit with its principal lender.
The credit agreement provides a line of $30 million for a term expiring July 31,
1999. Interest on the line of credit is payable monthly at a variable rate
equivalent to 30-day London Interbank Offered Rate ("LIBOR") plus 1.25%, which
at May 17, 1999 was 6.1525%. As of April 3, 1999, there was no outstanding
balance on the line of credit.
FINANCIAL POSITION
Cash and short-term investments in the first quarter of 1999 decreased
$3.9 million as a result of the factors discussed above. Accounts receivable
increased $6.4 million in the first quarter of 1999. Inventory decreased $2.5
million in the first quarter of 1999. The increase in accounts receivable was
the result of a $7.0 million increase in dating receivables primarily on grill
sales. In an effort to better control its production schedule in light of the
seasonal nature of its home heating products and barbecue gas grill business,
the Company utilizes early booking programs under which customers receive
favorable dating terms for placing their orders early and permitting the Company
to ship the products at "factory convenience."
The decrease in inventories was primarily attributable to the Company's
plan to improve inventory utilization and reduce inventory levels and the sale
of the Ashley division.
During the first quarter of 1999, net property, plant and equipment
increased $1.1 million, or 10.8%. The increase was the result of $1.5 million in
capital expenditures during the quarter offset by depreciation expense of
$370,000.
17
<PAGE> 19
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
The Company is exposed to market risk from changes in foreign currency
exchange rates and interest rates as part of its normal operations. The Company
has estimated its market risk exposures using sensitivity analyses assuming a
10% change in market rates.
FOREIGN CURRENCY EXCHANGE RATE RISK
Due to its Canadian operations, the Company has assets, liabilities,
operations and cash flows in the Canadian currency. Fluctuations in foreign
currency exchange rates impact the U.S. dollar value of Canadian dollar assets,
liabilities, operations and cash flows. The Company translates the Canadian
dollar income statement to U.S. dollars using the average rate of exchange and
translates the Canadian dollar balance sheet to U.S. dollars using the closing
rate of exchange. Certain accounts (e.g., capital stock) are translated using an
historical exchange rate. Consequently, unrealized foreign currency translation
adjustments are reported as a separate component of stockholders' equity. To
illustrate the potential impact of changes in foreign currency exchange rates on
the unrealized foreign currency translation adjustment, a hypothetical 10%
change (decrease) in the average and closing exchange rates for the three-month
period ended April 3, 1999 would have increased the unrealized foreign currency
translation adjustment (a loss) by $701,000.
INTEREST RATE RISK
To manage its exposure to change in interest rates, the Company uses
both fixed and variable rate debt. At April 3, 1999, the Company had $4,177,000
of debt outstanding at a variable interest rate of 79.5% of prime plus 1.35%.
However, the Company is also a party to an interest rate swap which effectively
converts the interest rate on the debt to a fixed rate of 8.21%. The debt is
scheduled to mature in September 2002. The interest rate swap is scheduled to
expire in January 2000. Therefore, the Company would be exposed to interest rate
fluctuations on the January 2000 debt balance upon expiration of the interest
rate swap. A hypothetical increase of 10% in the prime lending rate would not
cause the Company's interest expense to increase significantly.
In addition, the Company maintains an unsecured bank line of credit of
up to a maximum of $30,000,000 which is to be utilized to finance inventories,
receivables and operations on an interim basis. Interest on the line of credit
is payable monthly at a variable rate based on the 30-day LIBOR plus 1.25%. A
hypothetical increase of 10% in the LIBOR rate would not cause the Company's
interest expense to increase significantly.
Certain statements contained in this section and the estimated amounts
generated from the sensitivity analyses referred to above include
forward-looking statements of market risk which assume that certain adverse
market conditions may occur. Actual future market conditions may differ
materially from such assumptions. Accordingly, the forward-looking statements
should not be considered projections by the Company of future events or losses.
18
<PAGE> 20
PART II. OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
On July 18, 1995, the Company closed the sale of 2,300,000 shares of
common stock at a price of $9.50 per share in connection with the initial public
offering of its stock. The proceeds of the offering, net of an underwriting
discount of $1,530,000 and expenses of $923,000, were $19,397,000. Through the
date of this Quarterly Report, the Company has used approximately $13.5 million
of the proceeds to fund capital expenditures, acquire Hunter Technology Inc.,
repay outstanding indebtedness, acquire shares of its Common Stock in accordance
with the Company's share repurchase program, and for working capital and other
general corporate purposes. During the first quarter of 1999, the Company used
approximately $3.9 million to repay outstanding indebtedness and for working
capital and other general corporate purposes. See "Condensed Consolidated
Balance Sheets," "Condensed Consolidated Statements of Cash Flows," and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources and -- Financial Position,"
appearing elsewhere in this report.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
*3(a) Form of Restated Certificate of Incorporation of
Martin Industries, Inc. which was filed as Exhibit
3(a) to the Registrant's Registration Statement on
Form S-1 filed with the Commission on July 10, 1995
(Registration No.33-90432).
*3(b) Bylaws of Martin Industries, Inc. as amended and
restated on May 16, 1997 which were filed as Exhibit
3(b) to the Registrant's Quarterly statement on Form
10-Q for the 26-week period ended June 28, 1997
(Commission File No. 0-26228).
*3(c) Amendments to the By-laws of Martin Industries, Inc.
which were filed as Exhibit 99.1 to the Company's
Form 8-K on February 24, 1999 (Commission File
No.0-26228).
*4(a) Article 4 of the Restated Certificate of
Incorporation of Martin Industries, Inc. (included in
Exhibit 3(a)).
*4(b) Rights Agreement, dated as of February 23, 1999,
between Martin Industries, Inc. and SunTrust Bank,
Atlanta, Rights Agent, which was filed as Exhibit 1
to the Company's Registration Statement on Form 8-A
(Commission File No. 0-26228).
**27 Financial Data Schedule (for SEC use only).
19
<PAGE> 21
(b) Reports on Form 8-K
The Company filed a report on Form 8-K with the Commission on
February 24, 1999 in which the Company reported under Item 5
with respect to the adoption of its Stockholder Rights Plan
and the declaration of a dividend distribution of one
Preferred Share Purchase Right on each outstanding share of
Common Stock. The Company also reported under Item 5 that the
board of directors of the Company had adopted amendments to
the Company's By-laws providing that a majority of the members
of the board are to be independent directors immediately
following the Company's annual meeting of stockholders to be
held in 1999.
- -----------------------------------
*Incorporated by reference
**Filed with electronic filing only
"Safe Harbor" Statement Under the Private Securities Litigation Reform Act of
1995:
With the exception of historical factual information, the matters and
statements discussed, made or incorporated by reference in this Quarterly Report
on Form 10-Q, including those regarding the anticipated restructuring charges
resulting from the closing of the Washington Park facility, the Company's
expectations regarding the possible exposure as a result of the Hunter
Technology Inc.'s design and production problems, the Company's expectations and
estimates regarding foreign currency exchange rate and interest rate risk, and
the Company's plans and expectations regarding its Year 2000 issues, constitute
forward-looking statements and are discussed, made or incorporated by reference,
as the case may be, pursuant to the safe harbor provisions of the Private
Securities Litigation Reform Act of 1995. Wherever possible, the Company has
identified these "forward-looking" statements (as defined in Section 21E of the
Securities Exchange Act of 1934) by words such as "anticipates," "may,"
"believes," "estimates," "projects," "expects," "intends," and words of similar
import. In addition, the Company and its representatives may from time to time
make other oral or written statements that are also forward-looking statements.
Such forward-looking statements involve certain assumptions, risks and
uncertainties that could cause actual results to differ materially from those
included in or contemplated by the statements. In particular, there can be no
assurance that the Company will not incur costs related to products of Hunter
Technology Inc. or restructuring charges associated with the closing of the
Washington Park facility in excess of those currently expected. These
assumptions, risks and uncertainties include, but are not limited to, those
associated with general economic cycles; the cyclical nature of the industries
in which the Company operates and the factors related thereto, including
consumer confidence levels, inflation, employment and income levels, the
availability of credit, and factors affecting the housing industry; the
potential in the Company's business to experience significant fluctuations in
quarterly earnings, the Company's business strategy, including its strategy of
pursuing acquisitions and new product development; potential losses from product
liability and personal injury lawsuits; the effects of seasonality and weather
conditions on the Company's home heating product sales and other sales;
fluctuations in quarterly earnings due to ESOP accounting; the effect of
existing and new governmental and environmental regulations applicable to the
Company; the dependence of the Company on key personnel; the highly competitive
nature of each of the industries in which the Company operates; the volatility
of the stock price at which outstanding shares of the Company may trade from
time to time; the ability of the Company and third parties with which it does
business to identify and correct, with respect to the Year 2000 issue, all
relevant computer codes and embedded chips, unanticipated delays or
20
<PAGE> 22
difficulties in the implementation of the Company's Year 2000 project plans and
the ability of the third parties to redress their respective computer systems as
they relate to the Year 2000 issue; and the other risks and uncertainties
discussed or indicated in all documents filed by the Company with the
Commission. The Company expressly disclaims any obligation to update publicly
any forward-looking statements, whether as a result of new information, future
events or otherwise.
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.
MARTIN INDUSTRIES, INC.
Date: May 17, 1999 By /s/ Roderick V. Schlosser
--------------------------------------
Roderick V. Schlosser
Vice President and Chief Financial Officer
and Secretary
(Executed on behalf of Registrant and
as Principal Financial Officer)
21
<PAGE> 23
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit
Number Description of Exhibits Page No.
------ ----------------------- --------
<S> <C> <C>
*3(a) Form of Restated Certificate of Incorporation of Martin
Industries, Inc. which was filed as Exhibit 3(a) to the
Registrant's Registration Statement on Form S-1 filed with
the Commission on July 10, 1995 (Registration No. 33-90432).
*3(b) By-laws of Martin Industries, Inc. as amended and restated on
May 16, 1997 which were filed as Exhibit 3(b) to the
Registrant's Quarterly Statement on Form 10-Q for the 26-week
period ended June 28, 1997 (Commission File No. 0-26228).
*3(c) Amendments to the By-laws of Martin Industries, Inc. which
were filed as Exhibit 99.1 to the Company's Form 8-K on
February 24, 1999 (Commission File No. 0-26228).
*4(a) Article 4 of the Restated Certificate of Incorporation of
Martin Industries, Inc. (included in Exhibit 3(a)).
*4(b) Rights Agreement, dated as of February 23, 1999, between
Martin Industries, Inc. and SunTrust Bank, Atlanta, Rights
Agent, which was filed as Exhibit 1 to the Company's
Registration Statement on Form 8-A (Commission File No.
0-26228).
**27 Financial Data Schedule (for SEC use only).
</TABLE>
- --------------------------
*Incorporated by reference
**Filed with electronic filing only
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE COMPANY'S
FORM 10-Q FOR THE FISCAL QUARTER ENDED APRIL 3, 1999 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH CONSOLIDATED FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> APR-03-1999
<CASH> 5,919
<SECURITIES> 0
<RECEIVABLES> 17,918
<ALLOWANCES> 662
<INVENTORY> 17,775
<CURRENT-ASSETS> 47,549
<PP&E> 24,316
<DEPRECIATION> 13,235
<TOTAL-ASSETS> 63,994
<CURRENT-LIABILITIES> 13,182
<BONDS> 6,012
0
0
<COMMON> 98
<OTHER-SE> 42,449
<TOTAL-LIABILITY-AND-EQUITY> 63,994
<SALES> 23,033
<TOTAL-REVENUES> 23,033
<CGS> 19,247
<TOTAL-COSTS> 19,247
<OTHER-EXPENSES> 4,558
<LOSS-PROVISION> 35
<INTEREST-EXPENSE> (1,081)
<INCOME-PRETAX> 274
<INCOME-TAX> 110
<INCOME-CONTINUING> 164
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 164
<EPS-PRIMARY> 0.02
<EPS-DILUTED> 0.02
</TABLE>
