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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 26, 1998
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission File Number 0-24884
CANNONDALE CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 06-0871823
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
16 TROWBRIDGE DRIVE, BETHEL, CONNECTICUT 06801
(Address of principal executive offices) (ZIP CODE)
(203) 749-7000
(Registrant's telephone number, including area code)
- --------------------------------------------------------------------------------
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), (2) has been subject to such
filing requirements for the past 90 days. Yes X No .
--- ---
The number of shares outstanding of the issuer's Common Stock, $.01 par value
per share, as of November 6, 1998 was 7,448,679.
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CANNONDALE CORPORATION
INDEX
Page
Part I Financial Information
Item 1. Financial Statements
Condensed Consolidated Balance Sheets as of September 26,
1998, June 27, 1998 and September 27, 1997 1
Condensed Consolidated Statements of Earnings for the three
months ended September 26, 1998 and September 27, 1997 2
Condensed Consolidated Statements of Cash Flows for the three
months ended September 26, 1998 and September 27, 1997 3
Notes to Condensed Consolidated Financial Statements 4
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations 7
Part II Other Information
Item 6. Exhibits and Reports on Form 8-K 10
Signature 11
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PART I
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CANNONDALE CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
SEPTEMBER 26, 1998 JUNE 27, 1998 SEPTEMBER 27, 1997
--------- --------- ---------
(UNAUDITED) (UNAUDITED)
ASSETS
Current assets:
Cash ................................................ $ 2,407 $ 3,031 $ 4,716
Trade accounts receivable, less allowances of
$8,747, $8,479 and $7,324 ........................ 57,075 61,746 54,360
Inventory ........................................... 46,404 39,420 38,469
Deferred income taxes ............................... 3,312 2,172 2,942
Prepaid expenses and other current assets ........... 5,519 4,449 3,885
--------- --------- ---------
Total current assets .................................... 114,717 110,818 104,372
Property, plant and equipment, net ...................... 36,868 35,769 25,529
Notes receivable and advances to related parties ........ 12,665 2,688 380
Other assets ............................................ 3,071 3,002 2,087
--------- --------- ---------
Total assets ............................................ $ 167,321 $ 152,277 $ 132,368
========= ========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable .................................... $ 16,759 $ 16,747 $ 15,502
Revolving credit advances ........................... 2,022 2,141 1,052
Income taxes payable ................................ 2,382 1,732 3,546
Warranty and other accrued expenses ................. 6,022 5,820 5,624
Payroll and other employee related benefits ......... 1,591 2,142 1,257
Payable to related party ............................ -- 2,800 --
Current installments of long-term debt .............. 560 461 538
--------- --------- ---------
Total current liabilities ............................... 29,336 31,843 27,519
Long-term debt, less current installments ............... 63,261 40,352 22,474
Deferred income taxes ................................... 1,561 1,569 328
Other noncurrent liabilities ............................ 275 275 275
--------- --------- ---------
Total liabilities ....................................... 94,433 74,039 50,596
--------- --------- ---------
Stockholders' equity:
Common stock, $.01 par value:
Authorized shares - 40,000,000
Issued shares - 8,741,579, 8,737,088 and
8,701,851 ...................................... 87 87 87
Additional paid-in capital .......................... 57,355 57,303 57,055
Retained earnings ................................... 36,117 35,405 26,723
Less shares in treasury at cost - 1,292,900,
656,400 and 25,000 ............................... (20,162) (12,417) (570)
Accumulated other comprehensive income .............. (509) (2,140) (1,523)
--------- --------- ---------
Total stockholders' equity .............................. 72,888 78,238 81,772
--------- --------- ---------
Total liabilities and stockholders' equity .............. $ 167,321 $ 152,277 $ 132,368
========= ========= =========
See accompanying notes
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CANNONDALE CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(IN THOUSANDS, EXCEPT FOR PER SHARE DATA)
THREE MONTHS THREE MONTHS
ENDED ENDED
SEPTEMBER 26, 1998 SEPTEMBER 27, 1997
------------------ ------------------
(UNAUDITED) (UNAUDITED)
Net sales .............................. $ 42,218 $ 34,309
Cost of sales .......................... 27,614 22,952
-------- --------
Gross profit ........................... 14,604 11,357
-------- --------
Expenses:
Selling, general and administrative 10,674 9,105
Research and development .......... 2,153 1,119
-------- --------
12,827 10,224
-------- --------
Operating income ....................... 1,777 1,133
-------- --------
Other income (expense):
Interest expense .................. (839) (179)
Other income ...................... 136 148
-------- --------
(703) (31)
-------- --------
Income before income taxes ............. 1,074 1,102
Income tax expense ..................... (362) (432)
-------- --------
Net income ............................. $ 712 $ 670
======== ========
Basic earnings per share ............... $ .09 $ .08
======== ========
Diluted earnings per share ............. $ .09 $ .07
======== ========
See accompanying notes
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CANNONDALE CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
THREE MONTHS ENDED THREE MONTHS ENDED
SEPTEMBER 26, 1998 SEPTEMBER 27, 1997
------------------ ------------------
(UNAUDITED) (UNAUDITED)
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES ................... $ (2,562) $ 603
-------- --------
INVESTING ACTIVITIES:
Loans provided to related parties ..................................... (10,000) (153)
Proceeds from repayments of loans provided to related parties ......... 23 --
Capital expenditures .................................................. (3,688) (3,357)
Proceeds from sale of Philipsburg manufacturing facility .............. 1,389 --
-------- --------
Net cash used in investing activities ................................. (12,276) (3,510)
-------- --------
FINANCING ACTIVITIES:
Net proceeds from issuance of common stock ............................ 52 195
Proceeds from issuance of long-term debt .............................. 400 --
Payments for the purchase of treasury stock ........................... (7,745) (570)
Net proceeds from (repayments of) borrowings under short-term revolving
credit agreements ................................................. (266) 75
Net proceeds from borrowings under long-term debt and capital lease
agreements ........................................................ 22,458 2,161
-------- --------
Net cash provided by financing activities ............................. 14,899 1,861
-------- --------
Effect of exchange rate changes on cash ............................... (685) 241
-------- --------
Net decrease in cash .................................................. (624) (805)
Cash at beginning of period ........................................... 3,031 5,521
-------- --------
Cash at end of period ................................................. $ 2,407 $ 4,716
======== ========
See accompanying notes
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CANNONDALE CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements
of Cannondale Corporation (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 the information and footnotes required by
generally accepted accounting principles for complete financial statements. In
the opinion of management, all adjustments (consisting of normal recurring
accruals) considered necessary for a fair presentation have been included.
Operating results for the three-month period ended September 26, 1998 are not
necessarily indicative of the results that may be expected for the year ending
July 3, 1999. For further information, refer to the consolidated financial
statements and footnotes thereto for the fiscal year ended June 27, 1998
included in the Company's Annual Report on Form 10-K.
Earnings per Share Amounts
In 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards ("SFAS") No. 128, "Earnings Per Share." SFAS No.
128 replaced the calculation of primary and fully diluted earnings per share
with basic and diluted earnings per share. Unlike primary earnings per share,
basic earnings per share excludes any dilutive effects of options, warrants and
convertible securities. Diluted earnings per share is very similar to the
previously reported fully diluted earnings per share. All earnings per share
amounts have been presented, and where appropriate, restated to conform to the
SFAS No. 128 requirements.
Reclassifications
Certain 1998 amounts have been reclassified to conform to the current
year's presentation.
2. INVENTORY
The components of inventory are as follows (in thousands):
SEPTEMBER 26, SEPTEMBER 27,
1998 JUNE 27, 1998 1997
----------- ------------- ------------
(UNAUDITED) (UNAUDITED)
Raw materials ..................... $ 27,393 $ 20,439 $ 21,151
Work-in-process ................... 3,181 2,856 2,798
Finished goods .................... 17,178 16,931 15,740
-------- -------- --------
47,752 40,226 39,689
Less reserve for obsolete inventory (1,348) (806) (1,220)
-------- -------- --------
$ 46,404 $ 39,420 $ 38,469
======== ======== ========
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CANNONDALE CORPORATION AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(Unaudited)
3. EARNINGS PER SHARE AMOUNTS
The following table is an illustration of the reconciliation of the
numerator and denominator of basic and diluted earnings per share computations
and other related disclosures required by SFAS No. 128 (in thousands, except
earnings per share date):
THREE MONTHS THREE MONTHS
ENDED ENDED
SEPTEMBER 26, SEPTEMBER 27,
1998 1997
---- ----
(UNAUDITED) (UNAUDITED)
NUMERATOR:
Numerator for basic and diluted
earnings per share - income available to
common stockholders ........................... $ 712 $ 670
====== ======
DENOMINATOR:
Denominator for basic earnings per share -
weighted-average shares ....................... 7,682 8,685
Effect of dilutive securities:
Employee stock options ........................ 162 256
------ ------
Denominator for diluted earnings per share
- adjusted weighted-average shares and
assumed conversions ........................... 7,844 8,941
====== ======
Basic earnings per share ......................... $ .09 $ .08
====== ======
Diluted earnings per share ....................... $ .09 $ .07
====== ======
The following table sets forth the options to purchase shares of common
stock at the respective ranges of exercise prices that were not included in the
computation of diluted earnings per share because the options' exercise prices
were greater than the average market price of the common shares, and therefore,
the effect would be antidilutive:
OPTIONS RANGE OF EXERCISE PRICES
Three months ended September 27, 1998........... 1,188,888 $12.50 - $16.56
Three months ended September 28, 1997........... 86,850 $19.75 - $22.63
4. COMPREHENSIVE INCOME
As of June 28, 1998, the Company adopted SFAS No. 130, "Reporting
Comprehensive Income." Comprehensive income generally represents all changes in
stockholders' equity except those resulting from investments or contributions by
stockholders. The Company has reclassified information for the prior period to
conform with the standard. The adoption of this statement had no impact on the
Company's net income or shareholders' equity.
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CANNONDALE CORPORATION AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(Unaudited)
The Company's comprehensive income is as follows, net of tax (in thousands):
THREE MONTHS THREE MONTHS
ENDED ENDED
SEPTEMBER 26, SEPTEMBER 27,
1998 1997
---- ----
(UNAUDITED) (UNAUDITED)
Net Income ..................................... $ 712 $ 670
Foreign currency translation gain (loss),
net of tax ................................... 1,631 (144)
------- -------
Total comprehensive income ..................... $ 2,343 $ 526
======= =======
The component of accumulated other comprehensive income is as follows,
net of tax (in thousands):
September 26, June 27, September 27,
1998 1998 1997
------------- -------- -------------
UNAUDITED UNAUDITED UNAUDITED
Foreign currency translation adjustments,
net of tax ......................................... (509) (2,140) (1,523)
------ ------ ------
Accumulated other comprehensive income............... (509) (2,140) (1,523)
====== ====== ======
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Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RESULTS OF OPERATIONS
Net Sales. Net sales increased to $42.2 million in the first quarter of
fiscal 1999 from $34.3 million in the first quarter of fiscal 1998, an increase
of $7.9 million or 23.1%. The increased sales were primarily a result of strong
worldwide demand for Cannondale products during the first quarter of fiscal
1999. The increased demand can be attributed to the Company's introduction of
its high-end 1999 bicycle product line in June 1998. The introduction of new
product in fiscal 1999 was done earlier than it had been done in the prior-year
period. The earlier introduction of 1999 products may or may not result in a
sales shift from future results of operations to the current quarter.
Gross Profit. Gross profit was $14.6 million in the first quarter of
fiscal 1999, an increase of $3.2 million, or 28.6%, over the gross profit in the
first quarter of fiscal 1998 of $11.4 million. Gross profit as a percentage of
net sales increased to 34.6% for the first quarter of fiscal 1999 compared to
33.1% for the first quarter of fiscal 1998. The increase in gross profit dollars
and gross profit as a percentage of net sales is primarily attributable to a
sales mix that favored international markets and high-end products,
cost-reduction programs and the Company's continued integration of proprietary
technology through the use of its Cannondale bicycle frames, CODA components and
HeadShok suspension systems and a stronger U.S. dollar against the Japanese yen.
Operating Expenses. Operating expenses were $12.8 million for the first
quarter of fiscal 1999, an increase of approximately $2.6 million, or 25.5%,
over the $10.2 million recorded for the first quarter of fiscal 1998.
Selling, general and administrative expenses increased to $10.7 million
in the first quarter of fiscal 1999, from $9.1 million recorded during the
prior-year period. Increased selling, general and administrative expenses were
associated with increased sales and additional personnel primarily relating to
the Company's sales force and product management, and marketing personnel to
support the Company's current and planned future growth. As a percentage of
sales, selling, general and administrative expenses decreased to 25.3% for the
first three months of fiscal 1999 from 26.5% in the prior-year period due to the
sales growth experienced during the first quarter of fiscal 1999.
Research and development expenses increased to $2.2 million in the
first quarter of fiscal 1999, from $1.1 million recorded during the prior-year
period. The increase in research and development expenses reflects the Company's
commitment to improvement of its current products and the generation of new
products and manufacturing processes. The increase in spending during the first
quarter of fiscal 1999 was attributable to the product and process development
of the motocross motorcycle and the effort to improve and expand its existing
bicycle and CODA product lines. The Company plans to introduce the motocross
motorcycle to the market between June 1999 and August 1999. As a percentage of
sales, the Company increased its investment in research and development expense
to 5.1% for the first three months of fiscal 1999 compared to 3.3% for the first
three months of fiscal 1998.
Other Income (Expense). Interest expense increased to $839,000 in the
first quarter of fiscal 1999, from $250,000, adjusted for capitalized interest
costs related to the construction of the Company's new headquarters facility and
the expansion of the manufacturing facility, incurred during the prior-year
period. The increase in interest expense is primarily attributable to higher
average borrowings pursuant to the Company's share repurchase programs, capital
expenditures during fiscal 1998 and the first quarter of fiscal 1999 and
increased working capital levels related to the growth of the business. Other
income primarily consists of finance charges relating to accounts receivable.
LIQUIDITY AND CAPITAL RESOURCES
Net cash used in operating activities was $2.6 million for the first
three months of fiscal 1999, a decrease of $3.2 million compared to the $603,000
provided by operating activities for the first three
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months of fiscal 1998. The decrease in cash provided by operating activities
during the first quarter of fiscal 1999 is primarily attributable to less of an
increase in accounts payable due to the timing of payments for inventory
purchases and a decrease in other current liabilities. Due to the seasonality of
the business, higher inventory levels are typical for the first quarter of the
fiscal year in anticipation of second and third quarter shipments.
Capital expenditures were $3.7 million for the first three months of
fiscal 1999, compared to $3.4 million in the first three months of fiscal 1998.
Capital expenditures during the first quarter of fiscal 1999 principally consist
of the company's investments in a production facility for the motocross
motorcycle and the Company's clothing line in Bedford, Pennsylvania, and
computer and manufacturing equipment to support increases in production volume
to support the Company's planned and future growth. Capital expenditures in
fiscal 1998 primarily reflected the Company's investment in the Company's new
administrative headquarters and research and development facility and the
expansion of the Company's production facility.
During the first quarter of fiscal 1999, the Company completed the sale
of its Philipsburg facility to the Moshannon Valley Development Authority for
approximately $1.4 million, an amount which approximated the net book value of
the facility. The operations from the Philipsburg facility were moved to the
Bedford facility in June 1998.
During the first quarter of fiscal 1999, the Company provided Joseph
Montgomery, the President and Chief Executive Officer of the Company, with a
loan in the principal amount of $10 million for the purchase of certain real
property. The loan matures on August 1, 2003, at which time the entire principal
balance is due. The interest rate on the loan is set at the prime rate as
published in the Wall Street Journal from time to time, and the loan is secured
by a pledge to the Company of all of the shares of the Company's common stock
held by Mr. Montgomery and by a mortgage on such real property.
Under its stock repurchase programs, the Company repurchased an
aggregate of 636,500 shares of its common stock during the first quarter of
fiscal 1999, at a cost of $7.7 million.
Net cash provided by financing activities for the first three months of
fiscal 1999 was $14.9 million, an increase of approximately $13 million compared
to the $1.9 million for the first three months of fiscal 1998. The net cash
provided by financing activities in fiscal 1999 primarily reflects the net
proceeds from borrowings under the Company's multicurrency revolving credit
facility to meet its operating and capital requirements, to finance the
Company's programs to repurchase shares of its common stock and to finance the
loan to Joseph Montgomery.
During the first quarter of fiscal 1999, the Company received a waiver
from its lenders, pursuant to the provisions of its multicurrency revolving
credit agreement, pertaining to a certain covenant under the provisions of the
agreement. The Company expects it will be in compliance with the covenants under
the provisions of its multicurrency revolving credit agreement; provided,
however, there can be no assurance that the Company will be in compliance with
such agreement or that it will be able to obtain a waiver if it is not. The
Company also expects that cash flow generated by its operations and borrowings
under the revolving credit facilities will be sufficient to meet its planned
operating and capital requirements and to accommodate the Company's share
repurchase program, for the foreseeable future.
Year 2000 Compliance
The Company has assessed its exposure to the Year 2000 problem and has
established a comprehensive response to that exposure. Generally, the Company
has potential Year 2000 exposures in three areas: (i) financial and management
operating computer systems used to manage the Company's business, (ii)
manufacturing equipment used by the Company ("embedded chips") and (iii)
computer systems used by third parties, in particular customers and suppliers of
the Company.
The Company has performed an examination of its hardware and software
applications to determine whether the systems it uses to operate its business
are prepared to accommodate the Year 2000. Upon identifying the applications
that require modification to accommodate Year 2000 dating, the Company initiated
a program to modify the software using internal and third-party service
providers. The Company is currently in the modification stage of its Year 2000
remediation program, and anticipates that
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it will be in the testing and final implementation stages during the latter
part of the second fiscal quarter and into the third fiscal quarter of 1999. In
order to mitigate the possibility that the Company may not be successful in
modifying its current hardware and software applications, which it anticipates
to be able to determine by the end of calendar 1998, it is actively evaluating
Enterprise Resource Planning systems on the market to replace its current
systems. In concert with the Company's assessment of its hardware and software
applications, the Company's examination of its Year 2000 exposure also includes
the following: (1) the Company is in the process of contacting its hardware and
software vendors to determine their Year 2000 readiness; (2) the Company has
contacted its major third-party suppliers to determine their status with Year
2000 compliance and is currently evaluating their responses; and (3) the Company
is in the process of examining factory equipment with microprocessors to
determine if Year 2000 dating affects them operationally. The Company estimates
the cost of its remediation effort to be approximately $100,000. At September
26, 1998, the Company had already spent approximately $62,000 in this effort.
The Company has increased its overall information technologies budget to
accommodate Year 2000 issues and has not delayed other information technology
projects critical to the Company's business as a result of the increase. Based
on its current examination of the Year 2000 problem, its progress with
modifications to its internal systems, the results of the Company's survey of
vendors and its examination of factory equipment, the Company does not
anticipate that the Year 2000 problem will have a material adverse impact on its
operations.
If the Company is unsuccessful in completing its remediation of
non-compliant operating systems, correcting embedded chips or if customers or
suppliers cannot rectify Year 2000 issues applicable to them, the Company is
likely to incur substantial additional costs to develop alternative methods of
managing its business and replacing non-compliant equipment. The Company may
also experience delays in payments by customers or to suppliers and delays in
providing its products to customers. The Year 2000 problem is pervasive and
complex and there can be no assurance that the Company has been or will be able
to identify all of the Year 2000 issues that may affect the Company or that any
remedial efforts it takes will adequately address any potential Year 2000
problems.
The Euro
On January 1, 1999, certain member countries of the European Union will
adopt the Euro as their common legal currency. Between January 1, 1999 and
January 1, 2002, transactions may be conducted in either the Euro or the
participating countries' national currency. However, by July 1, 2002, the
participating countries will withdraw their national currency as legal tender
and complete the conversion to the Euro. The Company conducts business in Europe
and does not expect the conversion to the Euro to have an adverse effect on its
competitive position or consolidated financial position. The Company is in the
process of making the necessary system modifications and, in addition, is
evaluating Enterprise Resource Planning systems on the market to replace its
current systems that will allow the Company to conduct business in both the Euro
as well as the participating countries' national currency. The Company has
determined that failure to implement systems that are able to process both Euro
and participating countries' national currency may cause disruptions to
operations including, among other things, a temporary inability to process
transactions, send invoices or engage in normal business activities.
Certain Factors Which May Affect the Company's Future Performance
This Quarterly Report on Form 10-Q contains certain forward looking
statements within the meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of 1934, as amended,
which represent the Company's expectations or beliefs concerning future events,
including, but not limited to, the following: statements regarding the Company's
capital and current operational investments to finance the future growth of the
Company; statements regarding the Company's expected cash needs and sources of
cash to fund its planned operating and capital requirements; and statements
regarding the impact of the Year 2000 issue and the Euro conversion on
computerized information systems. Such statements are based upon the facts
presently known to the Company and assumptions as to important future events,
many of which are beyond the control of the Company. Reference is made to the
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" contained in the Company's annual report on Form 10-K for the fiscal
year ended June 27, 1998, for a description of certain additional risk factors
which may affect the Company's future results.
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PART II OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
27.1 Restated Financial Data Schedule for the Three Months Ended
September 27, 1997.
27.2 Financial Data Schedule for the Three Months Ended
September 26, 1998.
(b) Reports on Form 8-K
On August 12, 1998, the Registrant filed a report on Form 8-K,
under Item 5, relating to its additional Stock Repurchase Program
pursuant to which program the Registrant may repurchase up to
1,000,000 shares of its common stock.
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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.
CANNONDALE CORPORATION
Date: November 10, 1998 /s/ William A. Luca
----------------------------
William A. Luca
Vice President, Treasurer
and Chief Financial Officer
(Principal Financial Officer
and authorized signatory)
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INDEX TO EXHIBITS
EXHIBIT
NUMBER DESCRIPTION
27.1 Restated Financial Data Schedule for the Three Months Ended September
27, 1997.
27.2 Financial Data Schedule for the Three Months Ended September 26, 1998.