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Exhibit T3E-19
SAN JACINTO HOLDINGS INC. AND SUBSIDIARY
CONSOLIDATED QUARTERLY FINANCIAL STATEMENTS
THREE MONTH PERIOD ENDED MARCH 31, 1999 AND 1998
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SAN JACINTO HOLDINGS INC. AND SUBSIDIARY
Consolidated Quarterly Financial Statements
For the three month period ended March 31, 1999 and 1998
TABLE OF CONTENTS
Page
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Letter to Stockholders and Bondholders 1 - 4
Financial Statements & Notes 5 - 11
The accompanying unaudited interim consolidated financial
statements were prepared on a consistent basis utilizing the
accounting policies described in the Summary of Significant
Accounting Policies included in the notes to the consolidated
financial statements in the Company's 1998 Annual Report. These
policies and the Notes to Consolidated Financial Statements should
be read in conjunction with the accompanying statements. These
interim statements have been drawn from unaudited internal data and
include all adjustments which the Company believes necessary to a
fair presentation of the statements. The interim operating results
are not necessarily indicative of the results expected for the full
year.
Management's Discussion and Analysis of Financial Condition
and Results of Operations 12 - 15
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May 14, 1999
TO ALL SHAREHOLDERS AND BONDHOLDERS:
Enclosed are the unaudited financial statements of San Jacinto
Holdings, Inc. (the "Company") and its operating subsidiary, Safeguard Business
Systems, Inc. ("Safeguard") for the fiscal period ended March 31, 1999.
Operating earnings (EBITDA) totaled $3.4 million in the first quarter of 1999
compared to $3.0 million on a comparable basis for 1998, excluding the income
generated from the payroll and data services sales for the period ended March
31, 1998. Operating earnings have improved notwithstanding that sales were 1%
lower than the first quarter of 1998. Additionally there are no sales from the
Company's Network Expansion program realized in the first quarter, although a
number of transactions closed at the end of the first quarter of 1999. For
additional information please review the Management's Discussion and Analysis
following the audited financial statements and footnotes and the 1998 Annual
Report.
OVERVIEW
During the first quarter several items were completed, or advanced,
that are important to the Company's overall strategies for 1999. The Company
completed its Year 2000 update, and now believes that it must focus on the many
vendors to whom it does business with to insure compliance with year 2000
technology. Additionally, the Company continued upon a system wide focus on
customer service in an effort to strengthen its ties to the small business
marketplace. This focus will be continued into 1999 and will remain a critical
element of Safeguard's strategic direction for the future.
Additionally, during the first quarter of 1999, Safeguard continued on
a growth strategy to expand its channel of distribution through the addition of
new distributors and new bases of business integrated into Safeguard
distributorships. The Company closed five transactions at the end of the first
quarter through integrations with existing distributorships, although no new
distributorships were created.
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RESULTS OF OPERATIONS
Net sales for the first quarter of 1999 were $41.9 million, down 1%,
from $42.3 million from the comparable period in 1998. This modest decline
reflects an 7.9% decline in One-Write sales from $16.0 million in the first
quarter of 1998, to $14.7 million for the first quarter of 1999, and a 14.6%
decline in computer form sales from $10.4 million to $8.8 million. During 1998,
Safeguard reduced prices on its computer forms products to remain competitive
with the marketplace. Additionally Safeguard announced a price increase on its
One Write products at the end of 1998, and implemented an approximate 6%
increase beginning in the first quarter of 1999. Sales of laser products
continue to grow by 27.8% from $5.9 million to $7.5 million. Additionally, sales
from sourced products were $8.4 million, up 10.5% from the $7.6 million recorded
in 1998. Envelopes were essentially flat at $2.5 million compared to the first
quarter of 1998. The Company has placed a greater emphasis with its distribution
channel on manufactured products, due to the impact that such sales have on
absorbing overhead built into the financial structure of the Company. One of the
tools utilized to emphasize manufactured products was a form of additional
compensation for growth in manufactured products. During the first quarter of
1999 an additional $2 million in sales were generated through this program.
Selling and administrative expenses have declined from the comparable
period in 1998 from $20.8 million to $20.4 million. A majority of this expense
decline has come from cost controls and improved efficiencies.
Earnings before interest, taxes and amortization ("EBITA") has
increased 38.3%, from $1.8 million in 1998 to $2.4 million in 1999, primarily
due to the reduction in expenses and cost controls. EBITDA (EBITA plus
depreciation) has increased by 14.4%, from $3.0 million in 1998 to $3.4 million
in 1999.
Amortization expense has increased slightly from $.4 to $.5 in the
comparable quarterly period in 1999. Interest expense was 8.3% lower than the
amount in 1998 due to the reduced levels of borrowing caused by the improvement
in the Company's capital position from the sale of payroll and the UK
subsidiary. Thus the loss from continuing operations declined from $2.1 million
in 1998, to $1.2 million for the quarter ended March 31, 1999. The extraordinary
gain from the sale of payroll, including the gain from discontinued operations,
totaled $7.0 million for 1998, resulting in a net gain for the first quarter of
1998 of $4.8 million, compared to a net loss of $1.2 million for the first
quarter of 1999.
NETWORK EXPANSION
During the first quarter the Company continued to focus on Network
Expansion, a program for the expansion of sales volume through either
integration of new business into existing distributorships or the addition of
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new distributors to Safeguard. As the first quarter of 1999 ended, five
integration transactions were closing and twelve more were scheduled to close
within 60 days. Safeguard continues to believe that there is a significant
amount of additional business through consolidations of the channel within North
America, and that growth in sales volume will be generated through this program.
Clearly though, the process has taken longer than initially anticipated. The
direct benefit of new sales is that additional volume will absorb fixed overhead
and excess capacity within the Safeguard infrastructure.
INTERNET INITIATIVES
Safeguard is continuing to move quickly to establish an Internet site
for its distributor channel that will provide E-commerce capabilities for the
small business customer. The Company believes that an Internet site will enhance
distributors ability to aid their existing clients through reorders and
administrative information, as well as for referrals and new business generated
by small businesses who "surf" the Internet looking for solutions and pricing
information to their business problems. The Company does not believe that
E-commerce will ever supplant the need for the individual attention that a
Safeguard distributor provides for the customer, but will certainly provide
alternatives and efficiencies to enhance the personal involvement between the
distributor and the customer. The Company anticipates that the Internet site
will be operational in the third quarter of 1999, and that full E-commerce
capabilities will be available sometime in the year 2000.
WEST COAST RELOCATION
As the Company continues to focus on reducing expenses, and with the
final move by the Data Services Group and Advantage Payroll during the first
quarter of 1999, the Company has subleased its two story facility in Tustin,
California to a publicly traded company with headquarters in Orange County,
California. The remaining employees, 26 people, were relocated to the Malt
Avenue manufacturing facility in Los Angeles, and certain functions were moved
to Fort Washington, Pennsylvania. The Company should save approximately $1
million per year in utility and rental expense from the relocations.
OPERATIONAL ADVANCEMENTS
A major accomplishment occurred during the first quarter of 1999
through the successful conversion of the Company's systems to be Year 2000
compliant. This conversion was accomplished on time, and with approximately
$100,000 of external consulting costs. Of even greater significance, however, is
that it was done without any disruption to the distributor channel or the
customer base.
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Additionally the amount of repeat customer orders being transmitted
direct to the plate, is increasing. This consolidation of the front-end process
of the business will have significant labor savings in the future and allow
Safeguard to maintain its competitiveness in the industry.
Finally, the Company is moving forward to complete a conversion of the
Company's proprietary order entry system from a DOS platform to a Windows
platform in the later part of 1999. A Windows based software system will be the
only such system in the marketplace today, and will provide significant
incentives for independent forms brokers and dealers to become part of the
Safeguard organization.
CUSTOMER SERVICE INITIATIVES
The Company has established a Customer Service initiative that focuses
on improving many of the operational areas that interface with the distribution
channel and the customer base. The Company has recently begun consolidating the
contact center environments in its eastern plants to the administrative center
in Fort Washington, Pennsylvania. The purpose for this consolidation is to
improve the level of service which distributors and customers receive when they
contact Safeguard. The Company is committed to helping its independent
distributors provide quality products and exemplary service in its efforts to
improve customer retention, as well as improve its future sales levels.
The Company will continue to improve the quality, performance and
reliability of its operations through technology; achieve improved results in
sales and profitability through network expansion: identify and integrate new
products to manufacture; and maintain our commitment to our independent
distributor network where together, "We help small business succeed" in their
efforts to grow and prosper.
/s/ Elvis L. Mason /s/ Michael D. Magill
---------------- -------------------
Elvis L. Mason Michael D. Magill
Chairman of the Board President & CEO
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SAN JACINTO HOLDINGS INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
($000 omitted)
(Unaudited)
March 31, December 31,
1999 1998
---- ----
ASSETS
Current assets:
Cash and cash equivalents $ 1,623 $ 639
Receivables less allowances 19,088 20,055
Inventories 6,710 6,985
Other current assets 1,306 861
--------- ---------
Total current assets 28,727 28,540
Property, machinery and equipment 11,656 12,179
Excess purchase price over net assets acquired 39,972 40,332
Other assets 1,577 1,547
--------- ---------
Total assets $ 81,932 $ 82,598
========= =========
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
Current liabilities:
Current debt obligations $ 7,099 $ 6,978
Accounts payable 15,826 15,593
Accrued expenses 10,992 8,073
--------- ---------
Total current liabilities 33,917 30,644
Long-term debt 97,255 100,703
Other liabilities 10,093 9,383
Stockholders' deficiency:
Preferred stock:
$5.00 Junior Preferred Stock, par value $.01 a share;
Authorized 1,000,000 shares, $5 cumulative
No shares issued and outstanding
Common stock, par value $.01 a share:
Authorized 2,000,000 shares,
Issued and outstanding 1,052,384 shares 11 11
Additional paid-in capital 94,143 94,143
Deficit (152,142) (150,950)
Accumulated other comprehensive loss (1,345) (1,336)
--------- ---------
Total stockholders' deficiency (59,333) (58,132)
--------- ---------
Total liabilities and stockholders' deficiency $ 81,932 $ 82,598
========= =========
See notes to consolidated financial statements
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SAN JACINTO HOLDINGS INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
($000 omitted)
(Unaudited)
Three Months Ended
March 31,
------------------
1999 1998
---- ----
Net Sales $ 41,946 $ 42,253
Cost of sales 19,505 20,126
-------- --------
Gross profit 22,441 22,127
Selling and administrative expense 20,388 20,846
Other income - distributor receivables (375) (474)
Amortization expense 507 446
Interest expense 3,113 3,394
-------- --------
Loss from continuing operations before income taxes (1,192) (2,085)
Income tax provision -- --
-------- --------
Loss from continuing operations (1,192) (2,085)
Discontinued operations:
Gain on sale of assets -- 6,438
Income from operations -- 512
-------- --------
-- 6,950
-------- --------
Net income (loss) (1,192) 4,865
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustment (9) (115)
-------- --------
Comprehensive income (loss) $ (1,201) $ 4,750
======== ========
See notes to consolidated financial statements.
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SAN JACINTO HOLDINGS INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIENCY
PERIOD FROM JANUARY 1, 1998
TO MARCH 31, 1999
($000 omitted)
(Unaudited)
Accumulated
Additional Other
Preferred Stock Common Stock Paid-In Comprehensive
Shares Amount Shares Amount Capital Deficit Loss
------ ------ ------ ------ ------- ------- ----
Balance -
January 1, 1998 -- $-- 1,052,384 $11 $94,143 $(150,780) $ (935)
Net loss (170)
Unrealized loss on
foreign currency
translation -- -- -- -- -- -- (401)
-- --- --------- --- ------- --------- -------
Balance -
December 31, 1998 -- -- 1,052,384 11 94,143 (150,950) (1,336)
Net loss (1,192)
Unrealized loss on
foreign currency
translation -- -- -- -- -- -- (9)
-- --- --------- --- ------- --------- -------
Balance -
March 31, 1999 -- $-- 1,052,384 $11 $94,143 $(152,142) $(1,345)
== === ========= === ======= ========= =======
See notes to consolidated financial statements.
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SAN JACINTO HOLDINGS INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
($000 omitted)
(Unaudited)
Three Months Ended
March 31,
------------------
1999 1998
---- ----
Cash flows from operating activities:
Net income (loss) $(1,192) $ 4,865
Adjustments to reconcile net income (loss) to cash
provided by (used in) operating activities:
Amortization 507 446
Depreciation 1,020 1,259
Gain on sale of assets -- (6,438)
Unrealized exchange (loss) (9) (115)
(Increase) decrease in operating assets:
Receivables 967 2,314
Inventories 275 (158)
Assets held for disposition -- 500
Other assets (474) (1,323)
Increase (decrease) in operating liabilities:
Accounts payable 233 1,521
Accrued expense and other liabilities 3,629 2,407
------- -------
Net cash provided by operating activities 4,956 5,278
Cash flows from investing activities:
Purchase of software, machinery and equipment (217) (104)
Adjustment due to currency fluctuations (27) 1
------- -------
Net cash used in investing activities (244) (103)
------- -------
Cash flows from financing activities:
Repayment of long-term debt and capital lease obligations (1,854) (2,260)
Net repayment of revolving loans (1,724) (2,260)
Deferred financing costs (150) --
------- -------
Net cash used in financing activities (3,728) (4,520)
------- -------
Increase in cash and cash equivalents 984 655
Cash and cash equivalents at beginning of period 639 385
------- -------
Cash and cash equivalents at end of period $ 1,623 $ 1,040
======= =======
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SAN JACINTO HOLDINGS INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
($000 omitted)
(Unaudited)
(Continued)
Supplemental disclosure of non-cash investing and financing activities:
Capital lease obligations of $253 and $102 were entered into during the
first three months of 1999 and 1998 respectively, to acquire software,
machinery and equipment.
Supplemental disclosure of cash flow information:
Three Months
Ended
March 31,
1999 1998
Earnings before interest, taxes, depreciation $3,448 $3,014
and amortization (EBITDA)
Earnings before interest, taxes and $2,428 $1,755
amortization (EBITA)
Cash paid during the period for:
Interest $1,285 $1,507
See notes to consolidated financial statements
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SAN JACINTO HOLDINGS INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
THREE MONTH PERIOD ENDED MARCH 31, 1999 and 1998
(Unaudited)
NOTE A. UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS:
Basis of presentation - The accompanying interim financial statements
have been prepared by the Company without audit. These statements
include all adjustments which management believes necessary for a fair
presentation of the statements and have been prepared on a consistent
basis using the accounting policies described in the Summary of
Significant Accounting Policies in the notes to the consolidated
financial statements included in the Company's 1998 audited financial
statements. These policies and notes to consolidated financial
statements should be read in conjunction with the accompanying interim
financial statements. The interim operating results are not necessarily
indicative of the operating results expected for the full year. The
accompanying financial statements as of December 31, 1998 are derived
from the Company's audited financial statements as of that date.
NOTE B. DISCONTINUED OPERATIONS:
In 1997, the Company decided to divest of its payroll and data
processing operations. On March 31, 1998, effective as of April 1,
1998, the Company sold its payroll processing operations to Advantage
Business Services Holdings, Inc. Safeguard reported a gain of $6.4
million after expenses and payments to third parties. The proceeds from
the sale were used to repay a portion of the Revolving Loan and a
portion of the Term Loan, and to fund operations. The net assets of the
data processing operations were sold at approximately net book value,
effective January 1998. Consideration for this sale will be in the form
of royalty payments beginning in 1999.
The net sales from discontinued operations are $2.9 million for the
first quarter of 1998. The sales and related expenses of the operations
were excluded from the determination of the Company's loss from
continuing operations for the periods presented.
NOTE C. INVENTORIES:
Inventories consist of the following:
March 31, December 31,
1999 1998
---- ----
($000 omitted)
Raw Material $4,137 $4,380
Work-in-process 252 258
Finished Goods 2,321 2,347
------ ------
Total $6,710 $6,985
====== ======
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SAN JACINTO HOLDINGS INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
THREE MONTH PERIOD ENDED MARCH 31, 1999 and 1998
(Unaudited)
(continued)
NOTE D. LONG-TERM DEBT:
The Company's debt outstanding is as follows:
March 31, December 31,
1999 1998
---- ----
($000 omitted)
Revolving Loan - Collateralized $ 16,183 $ 17,377
Revolving Loan 3,470 4,000
Term Loan 8,000 8,000
Amended Exchange Loan 10,052 11,487
12% Senior Subordinated Notes 65,878 65,878
8% Senior Subordinated Notes 1 1
8% Subordinated Debentures 194 194
Capital lease obligations 576 744
--------- ---------
104,354 107,681
Less current debt obligations (7,099) (6,978)
--------- ---------
Total long-term debt $ 97,255 $ 100,703
========= =========
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SAN JACINTO HOLDINGS INC. AND SUBSIDIARY
MANAGEMENT DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
THREE MONTH PERIOD ENDED MARCH 31, 1999 AND 1998
RESULTS OF OPERATIONS
The following commentary presents management's discussion and analysis of the
Company's financial condition and results of operations. Certain of the
statements included below, including those regarding future financial
performance or results, or that are not historical facts, are or contain
"forward-looking" information as that term is defined in the Securities Act of
1933, as amended. The words "expect", "believe", "anticipate", "project",
"estimate", and similar expressions are intended to identify forward-looking
statements. The Company cautions readers that any such statements are not
guarantees of future performance or events and such statements involve risks,
uncertainties and assumptions, including but not limited to industry conditions,
general economic conditions, interest rates, competition, ability of the Company
to successfully manage its growth, and other factors discussed below and in the
Company's Annual Report for the years ended December 31, 1998 and 1997. Should
one or more of these risks or uncertainties materialize or should the underlying
assumptions prove incorrect, those actual results and outcomes may differ
materially from those indicated in the forward-looking statements. This review
should be read in conjunction with the information provided in the financial
statements, accompanying notes and in the Company's Annual Report for the years
ended December 31, 1998 and 1997.
The following table sets forth, for the periods indicated, selected financial
data as a percentage of net sales.
Three Months Ended
March 31,
1999 1998
---- ----
Net Sales 100.0% 100.0%
Cost of Sales 46.5 47.6
----- -----
Gross profit 53.5 52.4
Selling and administrative expense 48.6 49.3
Other income - distributor receivables (0.9) (1.1)
Amortization expense 1.2 1.1
Interest Expense 7.4 8.0
----- -----
Loss from continuing operations before income taxes (2.8) (4.9)
Income tax provision -- --
----- -----
Loss from continuing operations (2.8) (4.9)
Discontinued operations:
Gain on sale of assets -- 15.2
Income from operations -- 1.2
----- -----
-- 16.4
----- -----
Net income (loss) (2.8)% 11.5%
===== =====
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SAN JACINTO HOLDINGS INC. AND SUBSIDIARY
MANAGEMENT DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
THREE MONTH PERIOD ENDED MARCH 31, 1999 AND 1998
RESULTS OF OPERATIONS - Continued
San Jacinto Holdings Inc. through its wholly owned subsidiary, Safeguard
Business Systems, Inc. ("Safeguard"), provides business solutions and services
to small businesses through its independent distribution network in the United
States and Canada. Through this distribution channel, Safeguard markets pegboard
systems, continuous forms and checks, laser forms and checks, advertising
specialty goods, filing systems, envelopes, and other business products designed
for small businesses with less than 50 people on staff. Safeguard is a privately
owned company with manufacturing plants in California, Pennsylvania and Georgia.
COMPARISON OF THE THREE MONTH PERIOD ENDED MARCH 31, 1999 TO THE THREE MONTHS
PERIOD ENDED MARCH 31, 1998.
NET SALES. Net sales from continuing operations the first quarter of 1999 are
slightly ($0.3 million or 0.7%) below the same period in 1998. The sales results
reflect a 7.9% decline in manual forms sales, and a 14.6% decline in computer
forms sales, partially off-set by a 27.8% growth in laser forms and a 10.5%
growth in sales of sourced products. The sales results reflect the anticipated
shift in product mix from manual and computer forms to laser forms and sourced
products as the small business customer's transition from manual and pin-fed
computer forms to laser forms and promotional products. The decline in manual
forms sales is off-set in part by a 6.0% price increase effective January 1999.
The Company's 1999 objectives are focused on the expansion of its distributor
network through recruiting new distributors and assisting existing distributors
in purchasing customer bases from independent forms dealers interested in
selling their businesses. Substantial efforts have occurred in identifying and
contacting potential new distributors and forms dealers during the first quarter
of 1999. Negotiations are currently underway with several dealers for the
acquisition of their customer bases by existing Safeguard distributors. Five
such acquisitions have closed in 1999 to date with estimated annual revenue of
approximately $1.0 million.
GROSS PROFIT. Gross profit before selling and administrative expenses, excludes
commission expense. The gross profit margin from continuing operations is as
follows:
Three Months Ended
March 31,
1999 1998
---- ----
Manual forms 62.4% 62.8%
Computer and laser forms 52.7 47.9
Sourced products 39.8 40.2
---- ----
Total 53.5% 52.4%
==== ====
This improvement in gross profit margin during the first quarter 1999 is
attributable to a significant reduction in manufacturing overhead costs. The
cost reductions are in leased and owned equipment costs related to technological
advances in the computer systems implemented in 1997. The Company realized
additional manufacturing facility cost savings in 1999 associated with the
closure of the Addison, Illinois plant.
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SAN JACINTO HOLDINGS INC. AND SUBSIDIARY
MANAGEMENT DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
THREE MONTH PERIOD ENDED MARCH 31, 1999 AND 1998
RESULTS OF OPERATIONS - Continued
SELLING AND ADMINISTRATIVE EXPENSE. Selling and administrative expenses are
$20.4 million in the first quarter of 1999 compared to $20.8 million for the
same period in 1998, representing 48.6% and 49.3% of net sales in each period.
The reduction in selling and administrative costs is attributable to strategic
reductions in costs throughout the Company and efficiencies achieved through
technological advancements in the operating system. Commissions to independent
distributors account for 70% of total selling and administrative costs in 1999
and 1998. As a percent of total sales, commission costs have remained constant
at approximately 34% of net sales.
OTHER INCOME - Distributor Receivables. Other income (cash received greater than
carrying value of distributor receivables) is $0.4 million for the first quarter
1999 and $0.5 in 1998, representing 0.9% and 1.1% of net sales in 1999 and 1998,
respectively. In conjunction with the Company's purchase price allocation for
the acquisition of Safeguard in December 1986, the value assigned to distributor
receivables associated with loans and advances previously made by Safeguard to
facilitate the purchase of account protection rights by distributors was $4.8
million, net of deferred interest income of approximately $7.8 million. This
value was based on the evaluation by an independent valuation firm of the
distributor receivables which aggregated approximately $26.0 million as of
December 31, 1986. Due to the effect of collection and distributor advance
policies instituted in 1988, the net distributor receivables balance was reduced
to zero by early 1992. Cash collection of this distributor receivable is
expected to continue in amounts approximating $1.5 million through the year
2000.
AMORTIZATION EXPENSE. Amortization expense is $0.5 million for the first
quarters of 1999 and $0.4 million in 1998. The expense consists of the
amortization of intangible assets including the excess purchase price over net
assets acquired and deferred financing costs.
INTEREST EXPENSE. Interest expense is $3.1 million for the first quarter of 1999
and $3.4 million for the same period in 1998 including $1.3 million and $1.5
million, respectively, of cash interest payments. The decrease in interest
expense in 1999 is attributable to a reduction in the Company's average
outstanding borrowings as a result of principal repayments under the Amended
Exchange Loan, and a slight (0.5%) reduction in the Company's borrowing rate
under its collateralized Revolving Loan.
INCOME TAX PROVISION. No tax liability was generated in the United States or
Canada as a result of net losses from operations.
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary sources of liquidity are cash flows generated from
operations, cash on hand, availability of long-term capital lease alternatives
and borrowing capacity under the revolving loans. The Company's cash flows from
operating activities is $5.0 million in the first three months of 1999. As of
March 31, 1999, the Company had $1.6 million in cash and cash equivalents, and
$1.5 million in availability under the revolving loans. At that date, the
Company had a working capital deficiency of $5.2 million and a ratio of current
assets to current liabilities of 0.85:1.
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SAN JACINTO HOLDINGS INC. AND SUBSIDIARY
MANAGEMENT DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
THREE MONTH PERIOD ENDED MARCH 31, 1999 AND 1998
LIQUIDITY AND CAPITAL RESOURCES - Continued
The Company's ongoing liquidity requirements arise primarily from capital
expenditures, working capital needs and debt service. The Company's capital
expenditures for the first three months of 1999 are $0.5 million in machinery
and equipment. The Company anticipates total capital expenditures in 1999 of
$2.0 million. These expenditures will be funded through additional capital lease
obligations and cash flow from operations.
The Company has met all of its debt obligations and is not in default of any of
its loan agreements. The Company continues to monitor its cash position and
believes that sufficient funding alternatives exists to meet its obligations as
they come due.
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