Management's Discussion and Analysis of Financial Condition and Results of Operations

Inflation
Inflation has not had a significant impact on the Company's United States operations over the past three years, nor is it expected to have a significant impact in the foreseeable future.

The Mexican economy, however, has been experiencing inflation rates substantially in excess of those in the United States. During the first quarter of fiscal year 1997, the Company changed its method of reporting foreign currency translation adjustments for its Mexican operations to the method prescribed for highly inflationary economies. Under that method, foreign currency translation adjustments are reflected in results of operations instead of in shareholders' equity. This change did not have a material effect on the Company's results of operations for fiscal year 1997 or 1998.

As of January 1, 1999, the Mexican economy is no longer considered highly inflationary according to the SEC staff. The functional currency which will be used by the Company's Mexican operations is the Mexican peso. This change is not expected to have a material effect on the Company's operations, consolidated financial condition or results of operations.