-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, PqILEW+xcatWBu5Urtc86Z2bBgxI/7sMswcHQg+DI1FzJzpWIDOtfWStcPtsA36Z EG6JwZCfOMPazGWu2bQl7A== /in/edgar/work/20000814/0000912057-00-037302/0000912057-00-037302.txt : 20000921 0000912057-00-037302.hdr.sgml : 20000921 ACCESSION NUMBER: 0000912057-00-037302 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 20000630 FILED AS OF DATE: 20000814 FILER: COMPANY DATA: COMPANY CONFORMED NAME: BURKE INDUSTRIES INC /CA/ CENTRAL INDEX KEY: 0001046777 STANDARD INDUSTRIAL CLASSIFICATION: [2821 ] IRS NUMBER: 943081144 STATE OF INCORPORATION: CA FISCAL YEAR END: 0102 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 333-36675 FILM NUMBER: 699065 BUSINESS ADDRESS: STREET 1: 2250 SOUTH TENTH STREET CITY: SAN JOSE STATE: CA ZIP: 95112 BUSINESS PHONE: 4082973500 MAIL ADDRESS: STREET 1: 2250 SOUTH TENTH STREET CITY: SAN JOSE STATE: CA ZIP: 95112 10-Q 1 a10-q.txt 10-Q ============================================================================== UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (MARK ONE) |X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED For the quarterly period ended June 30, 2000 OR |_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to ---- ---- COMMISSION FILE NUMBER 1-333-36675 -------------------- BURKE INDUSTRIES, INC. (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) CALIFORNIA 94-3081144 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 13767 FREEWAY DRIVE SANTA FE SPRINGS, CALIFORNIA 90670 (Address of Principal Executive Offices) (Zip Code) REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (800) 221-0923 -------------------- 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, as amended, during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No . --- --- As of August 14, 2000, the number of shares outstanding of the Registrant's Common Stock was 3,894,500. =============================================================================== BURKE INDUSTRIES, INC. QUARTERLY REPORT ON FORM 10-Q INDEX
PART I FINANCIAL INFORMATION PAGE NUMBER Item 1 Financial Statements Condensed Consolidated Statements of Operations for the three months and six months ended June 30, 2000 and July 2, 1999 (unaudited) 3 Condensed Consolidated Balance Sheets as of June 30, 2000 (unaudited) and December 31, 1999 4 Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2000 and July 2, 1999 (unaudited) 5 Notes to Condensed Consolidated Financial Statements (unaudited) 6-7 Item 2 Management's Discussion and Analysis of Financial Condition and Results of Operations 8-11 Item 3 Quantitative and Qualitative Disclosures About Market Risk 12 PART II OTHER INFORMATION Item 6 Exhibits and Reports on Form 8-K 12 Signature 13
PART I FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS BURKE INDUSTRIES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (DOLLARS IN THOUSANDS)
For the Three Month Period Ended For the Six Month Period Ended June 30, 2000 July 2, 1999 June 30, 2000 July 2, 1999 ------------------ ------------------- ----------------- ---------------- (Unaudited) Net sales........................... $ 27,197 $ 28,427 $ 54,851 $ 57,061 Costs and expenses:................. Cost of sales................. 18,996 20,245 38,855 40,675 Selling, general and administrative................. 5,187 4,181 10,322 8,698 Amortization of goodwill....... 505 505 1,009 1,009 ------------------ ------------------- ----------------- ---------------- Income from operations.............. 2,509 3,496 4,665 6,679 Interest expense, net............... 4,017 3,798 7,938 7,536 ------------------ ------------------- ----------------- ---------------- (Loss) before income tax benefit.... (1,508) (302) (3,273) (857) Income tax benefit.................. ---- (121) ---- (342) ------------------ ------------------- ----------------- ---------------- Net loss............................ $ (1,508) $ (181) $ (3,273) $ (515) ================== =================== ================= ================
The accompanying Notes to Condensed Consolidated Financial Statements are an integral part of these statements. 3 BURKE INDUSTRIES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS
December 31, June 30, 1999 2000 (Derived from audited (Unaudited) financial statements) ----------------------- ----------------------- ASSETS (In Thousands) Current Assets: Cash and cash equivalents........................................... $ 154 $ 348 Trade accounts receivable, less allowance of $854 in 2000 and $658 in 1999...................................................... 15,133 13,627 Inventories......................................................... 15,813 15,585 Prepaid expenses and other current assets........................... 1,427 1,510 Deferred income tax assets.......................................... 503 503 ----------------------- ----------------------- Total current assets.............................................. 33,030 31,573 Property, Plant and Equipment: Land and improvements............................................... 2,107 2,107 Buildings and improvements.......................................... 11,210 11,210 Equipment........................................................... 19,543 19,543 Leasehold improvements.............................................. 1,040 1,040 Assets under capital leases......................................... 1,589 1,589 ----------------------- ----------------------- 35,489 35,489 Accumulated depreciation and amortization........................... 15,678 14,464 ----------------------- ----------------------- 19,811 21,025 Construction in process............................................. 841 419 ----------------------- ----------------------- Net property, plant and equipment................................. 20,652 21,444 Other Assets: Prepaid pension cost................................................... 442 442 Goodwill, net.......................................................... 26,709 27,718 Deferred financing costs, net.......................................... 5,307 5,718 Other assets........................................................... 135 139 ----------------------- ----------------------- Total other assets................................................ 32,593 34,017 ----------------------- ----------------------- Total assets................................................ $ 86,275 $ 87,034 ======================= ======================= LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT) Current Liabilities: Revolving line of credit............................................ $ 4,728 $ -- Trade accounts payable and accrued expenses......................... 6,764 8,174 Accrued compensation and related liabilities........................ 1,405 1,743 Accrued interest.................................................... 5,615 5,528 Payable to shareholders............................................. 785 785 Capital lease obligations........................................... 514 514 Income taxes payable................................................ 222 481 ----------------------- ----------------------- Total current liabilities......................................... 20,033 17,225 Senior notes........................................................... 110,000 110,000 Floating notes......................................................... 30,000 30,000 Capital lease obligations, non-current 375 669 Other non-current liabilities.......................................... 444 444 Deferred income tax liabilities........................................ 2,388 2,388 Preferred stock, no par value; 50,000 shares authorized; 30,000 Series A Redeemable shares designated; 18,611 Series A shares issued and outstanding; 5,000 Series B Redeemable shares designated; 2,326 Series B shares issued and outstanding (aggregate liquidation and redemption preference $18,000)..................................... 21,696 20,536 Shareholders' equity (deficit): Convertible preferred stock, no par value: 3,000 Series C shares designated, issued and outstanding (liquidation preference $3,000)........................................................... 3,000 3,000 Class A common stock, no par value: Authorized shares-20,000,000 issued and outstanding shares--3,894,500 in 2000 and 1999......... 25,708 25,708 Accumulated deficit.................................................... (127,369) (122,936) ----------------------- ----------------------- Total shareholders' equity (deficit)................................ (98,661) (94,228) ----------------------- ----------------------- Total liabilities and shareholders' equity (deficit).............. $ 86,275 $ 87,034 ======================= =======================
The accompanying Notes to Condensed Consolidated Financial Statements are an integral part of these statements. 4 BURKE INDUSTRIES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (DOLLARS IN THOUSANDS)
For the Six Month Period Ended ----------------------------- June 30, July 2, 2000 1999 ------------- ------------- (Unaudited) OPERATING ACTIVITIES Net (loss) $(3,273) $ (515) Adjustments to reconcile net (loss) to net cash used in operating activities: Depreciation and amortization: Property, plant and equipment 1,214 1,039 Goodwill 1,009 1,009 Debt financing costs 411 412 Other adjustments to reconcile net (loss) to net cash used in operating activities (3,861) (2,691) ------------- ------------- Net cash used in operating activities (4,500) (746) INVESTING ACTIVITIES Purchases of property, plant and equipment (422) (1,500) ------------- ------------- Net cash used in investing activities (422) (1,500) FINANCING ACTIVITIES Issuance of preferred stock -- 244 Borrowings under revolving line of credit 9,228 -- Repayments under revolving line of credit (4,500) -- ------------- ------------- Net cash provided by financing activities 4,728 244 ------------- ------------- Decrease in cash (194) (2,002) Cash at beginning of period 348 2,981 ------------- ------------- Cash at end of period $ 154 $ 979 ============= =============
The accompanying Notes to Condensed Consolidated Financial Statements are an integral part of these statements. 5 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) 1. BASIS OF PRESENTATION The accompanying condensed consolidated financial statements of the Company have been prepared without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations. The condensed consolidated balance sheet as of December 31, 1999 was derived from audited financial statements. The accompanying condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1999. The financial information included herein reflects all adjustments (consisting of normal recurring adjustments) which are, in the opinion of management, necessary for a fair presentation of the results for the interim period. The results of operations for the three and six months ended June 30, 2000 are not necessarily indicative of the results to be expected for the full year. Certain prior year reclassifications have been made in order to conform to current year presentation. The Company uses a 52 to 53-week fiscal year ending on the Friday closest to December 31. The Company also follows a thirteen-week quarterly cycle. The six-month periods ended on June 30, 2000 and July 2, 1999. 2. INVENTORIES Inventories consist of the following at the period ended:
June 30, December 31, 2000 1999 ------------- -------------- (In thousands) Raw materials................................................... $ 5,001 $ 5,540 Work-in-process................................................. 1,982 1,861 Finished goods.................................................. 8,830 8,184 ------------- -------------- $15,813 $15,585 ============= ==============
3. SEGMENT INFORMATION The Company has two reportable business segments: BurkeMercer (organic products) and Engineered Polymers (silicone products). The BurkeMercer division produces and distributes rubber and vinyl wall base, other floor covering accessory products, flexible membranes and other organic rubber products. The Engineered Polymers division produces and distributes precision silicone seals and other products used on commercial and military aircraft as well as high performance silicone truck and bus engine hoses and other silicone rubber products. 6 BURKE INDUSTRIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
BurkeMercer Engineered Polymers Total ------------ ---------------------- ----------- (Amounts in Thousands) THREE MONTH PERIOD ENDED JUNE 30, 2000 Revenues from external customers............ $16,060 $11,137 $27,197 Segment profit.............................. 3,007 1,122 4,129 THREE MONTH PERIOD ENDED JULY 2, 1999 Revenues from external customers............ $16,165 $12,262 $28,427 Segment profit.............................. 3,051 1,206 4,257 SIX MONTH PERIOD ENDED JUNE 30, 2000 Revenues from external customers............ $31,328 $23,523 $54,851 Segment profit.............................. 5,286 2,426 7,712 SIX MONTH PERIOD ENDED JULY 2, 1999 Revenues from external customers............ $31,158 $25,903 $57,061 Segment profit.............................. 5,585 2,837 8,422
FOR THE THREE MONTH PERIOD FOR THE SIX MONTH PERIOD ENDED ENDED JUNE 30, 2000 JULY 2, 1999 JUNE 30, 2000 JULY 2, 1999 ------------- ------------ ------------- ------------ PROFIT Total profit for reportable segments $4,129 $4,257 $7,712 $8,422 Unallocated items: Corporate general and administrative expenses 1,115 256 2,038 734 Amortization of goodwill related to the Mercer acquisition 505 505 1,009 1,009 Interest expense, net 4,017 3,798 7,938 7,536 ------------- ------------ ------------- ------------ (Loss) before income taxes ($1,508) ($302) ($3,273) ($857) ============= ============ ============= ============
7 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. The following discussion should be read in conjunction with the Company's Unaudited Condensed Consolidated Financial Statements and Notes thereto included elsewhere in this Quarterly Report on Form 10-Q. This Report contains certain forward-looking statements and information relating to the Company that are based on the beliefs of management as well as assumptions made by and information currently available to management. The words "anticipates," "believes," "estimates," "expects," "plans," "intends," and similar expressions, as they relate to the Company or its management, are intended to identify forward-looking statements. Such statements reflect the current views of the Company, with respect to future events and are subject to certain risks, uncertainties and assumptions, that could cause actual results to differ materially from those expressed in any forward-looking statement, including, without limitation: competition from other manufacturers in the Company's aerospace, flooring or commercial product lines, loss of key employees, general economic conditions and adverse factors impacting the aerospace industry such as changes in government procurement policies. Should one or more of these risks or uncertainties materialize, or should the underlying assumptions prove incorrect, actual results may vary materially from those described herein as anticipated, believed, estimated or expected. The Company does not intend to update these forward-looking statements. RESULTS OF OPERATIONS The Company operates within one industry segment, elastomer products, and is organized into two business segments: BurkeMercer and Engineered Polymers. The Company's products are organized into three product groups: Aerospace and Defense Products, which produces precision silicone seals and other products used on commercial and military aircraft; Flooring Products, which produces and distributes rubber and vinyl cove base and other floor covering accessory products; and Commercial Products, which produces various intermediate and finished silicone and organic rubber products. The following table sets forth certain income statement information for the Company for the three month period ended June 30, 2000 compared to the three month period ended July 2, 1999:
Fiscal Second Quarter ===================================================================== Percentage Percentage 2000 of Net Sales 1999 of Net Sales ===================================================================== (dollars in thousands) Net sales: Aerospace and Defense Products......... $6,565 24.1% $7,812 27.5% Flooring Products....................... 11,936 43.9% 12,188 42.9% Commercial Products..................... 8,696 32.0% 8,427 29.6% ------------------------------ ------------------------------- Net sales.................................... 27,197 100.0% 28,427 100.0% Cost of sales................................ 18,996 69.9% 20,245 71.2% ------------------------------ ------------------------------- Gross profit................................. 8,201 30.1% 8,182 28.8% Selling, general and administrative expenses.................... 5,187 19.1% 4,181 14.7% Amortization of goodwill..................... 505 1.8% 505 1.8% ------------------------------ ------------------------------- Income from operations....................... 2,509 9.2% 3,496 12.3% Interest expense............................. 4,017 14.7% 3,798 13.4% ------------------------------ ------------------------------- Loss before income tax benefit (1,508) -5.5% (302) -1.1% Income tax provision (benefit) --- --- (121) -0.4% ------------------------------ ------------------------------- Net loss.................................... ($1,508) -5.5% ($181) -0.7% ============================== ===============================
8
Fiscal Six Months ===================================================================== Percentage Percentage 2000 of Net Sales 1999 of Net Sales ===================================================================== (dollars in thousands) Net sales: Aerospace and Defense Products......... $14,195 25.9% $16,926 29.7% Flooring Products....................... 23,430 42.7% 23,145 40.6% Commercial Products..................... 17,226 31.4% 16,990 29.7% ------------------------------ ------------------------------- Net sales.................................... 54,851 100.0% 57,061 100.0% Cost of sales................................ 38,855 70.8% 40,675 71.3% ------------------------------ ------------------------------- Gross profit................................. 15,996 29.2% 16,386 28.7% Selling, general and administrative expenses.................... 10,322 18.8% 8,698 15.2% Amortization of goodwill..................... 1,009 1.8% 1,009 1.8% ------------------------------ ------------------------------- Income from operations....................... 4,665 8.6% 6,679 11.7% Interest expense............................. 7,938 14.5% 7,536 13.2% ------------------------------ ------------------------------- Loss before income tax benefit.............. (3,273) -5.9% (857) -1.5% Income tax benefit........................... -- -- (342) -0.6% ------------------------------ ------------------------------- Net loss.................................... ($3,273) -5.9% ($515) -0.9% ============================== ===============================
COMPARISON OF THE THREE-MONTH PERIOD ENDED JUNE 30, 2000 VERSUS THE THREE-MONTH PERIOD ENDED JULY 2, 1999. NET SALES. Total net sales decreased 4.3%, from $28.4 million for the three-month period ended July 2, 1999 to $27.2 million for the same period in 2000. Aerospace and Defense Products sales decreased 16.0%, from $7.8 million for the three-month period ended July 2, 1999 to $6.6 million for the same period in 2000, due to a decrease in demand for commercial and military products. Flooring Products net sales decreased 2.1% from $12.2 million for the three-month period ended July 2, 1999 to $11.9 million for the same period in 2000, due to lower demand for vinyl flooring and cove base products. Commercial Products sales increased 3.2%, from $8.4 million for the three-month period ended July 2, 1999 to $8.7 million for the same period in 2000. The increase in sales as compared to the prior year was the result of stronger demand for commercial silicone specialty products. COST OF SALES. Cost of sales decreased 6.2%, from $20.2 million for the three-month period ended July 2, 1999 to $19.0 million for the same period in 2000. As a percentage of net sales, gross profit increased from 28.8% for the three-month period ended July 2, 1999 to 30.1% for the same period in 2000. The improved gross profit percentage was due to an improved sales mix resulting from a greater proportion of net sales of higher margin Flooring and Commercial Products in the three-month period. SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and administrative expenses increased 24.1%, from $4.2 million for the three-month period ended July 2, 1999 to $5.2 million for the same period in 2000. As a percentage of net sales, selling, general and administrative expenses increased from 14.7% for the three-month period ended July 2, 1999 to 19.1% for the same period in 2000. The increase in expenses was due to increased shipping and warehousing costs and one-time expenses associated with the recent management reorganization within the Company. AMORTIZATION OF GOODWILL. Amortization of goodwill was $0.5 million for the three-month period ended June 30, 2000, which was unchanged from the same period in 1999. 9 INCOME FROM OPERATIONS. As a result of the above factors, income from operations decreased 28.2%, from $3.5 million for the three-month period ended July 2, 1999 to $2.5 million for the same period in 2000. INTEREST EXPENSE. Interest expense increased from $3.8 million for the three-month period ended July 2, 1999 to $4.0 million for the same period in 2000. The increase is due to the Company's use of its Credit Facility during the quarter, and the interest expense associated with the capital lease for the Company's new computer system which was entered into in March of 1999. NET LOSS. As a result of the above factors, net loss increased from $0.2 million for the three-month period ended July 2, 1999 to a loss of $1.5 million for the same period in 2000. COMPARISON OF THE SIX-MONTH PERIOD ENDED JUNE 30, 2000 VERSUS THE SIX-MONTH PERIOD ENDED JULY 2, 1999. NET SALES. Total net sales decreased 3.9%, from $57.1 million for the six-month period ended July 2, 1999 to $54.9 million for the same period in 2000. Aerospace and Defense Products sales decreased 16.1%, from $16.9 million for the six-month period ended July 2, 1999 to $14.2 million for the same period in 2000, due to decreases in demand for commercial and military products. Flooring Products net sales increased 1.2%, from $23.1 million for the six-month period ended July 2, 1999 to $23.4 million for the same period in 2000, due to higher demand for both vinyl and rubber flooring and cove base products. Commercial Products sales increased 1.4%, from $17.0 million for the six-month period ended July 2, 1999 to $17.2 million for the same period in 2000. The increase in sales as compared to the prior year was the result of higher demand for the Company's commercial silicone specialty products. COST OF SALES. Cost of sales decreased 4.5%, from $40.7 million for the six-month period ended July 2, 1999 to $38.9 million for the same period in 2000, due primarily to the decrease in net sales. As a percentage of net sales, gross profit increased from 28.7% for the six-month period ended July 2, 1999 to 29.2% for the same period in 2000. The increase in gross profit percentage was due to an improved sales mix resulting from a higher proportion of net sales of the higher margin Flooring and Commercial Products in the six month period. The improved sales mix helped offset the impact of the year on year reduction in net sales of Aerospace and Defense products, which have a high proportion of fixed operating expenses. SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and administrative expenses increased 18.7%, from $8.7 million for the six-month period ended July 2, 1999 to $10.3 million for the same period in 2000. As a percentage of net sales, selling, general and administrative expenses increased from 15.2% for the six-month period ended July 2, 1999 to 18.8% for the same period in 2000. The increase in expenses was due to increased shipping and warehousing costs and one-time costs associated with the recent management reorganization within the Company. AMORTIZATION OF GOODWILL. Amortization of goodwill was $1.0 million for the six-month period ended June 30, 2000, which was unchanged from the same period in 1999. INCOME FROM OPERATIONS. As a result of the above factors, income from operations decreased 30.2%, from $6.7 million for the six-month period ended July 2, 1999 to $4.7 million for the same period in 2000. 10 INTEREST EXPENSE. Interest expense increased from $7.5 million for the six-month period ended July 2, 1999 to $7.9 million for the same period in 2000. The increase is due to the debt service associated with the Company's use of its Credit Facility during the quarter, and the interest expense associated with the capital lease for the Company's new computer system which was entered into in March of 1999. NET LOSS. As a result of the above factors, net loss increased from $0.5 million for the six-month period ended July 2, 1999 to a loss of $3.3 million for the same period in 2000. INCOME TAX PROVISION (BENEFIT) For the three and six month periods ended June 30, 2000, the Company did not record an income tax provision due to operating losses. LIQUIDITY AND CAPITAL RESOURCES CASH FLOW. The Company's principal uses of cash are to finance working capital, capital expenditures for property, plant and equipment, internal growth and debt service. CAPITAL REQUIREMENTS. The Company expects to spend approximately $2.0 million during 2000 on capital expenditures not directly related to acquisitions. Cash flow from operations, to the extent available, may also be used to fund a portion of any acquisition expenditures. The Company anticipates that its principal use of cash during 2000 will be working capital requirements, capital expenditures and debt service requirements. Based upon current and anticipated levels of operations, the Company believes that its cash flow from operations, together with amounts available under the Credit Facility (described below), will be adequate to meet its anticipated requirements for the foreseeable future for working capital, capital expenditures and interest payments. SOURCES OF CAPITAL. Under a Loan and Security Agreement with NationsBank, N.A., as administrative agent, and other lending institutions party thereto, the Company has a borrowing capacity of $25.0 million (the "Credit Facility"). The Credit Facility matures in August 2002. Interest on loans under the Credit Facility bear interest at rates based upon either, at the Company's options, Eurodollar Rates plus a margin of 2.5% or upon the Prime Rate. Loans under the Credit Facility are secured by security interests in substantially all of the assets of the Company and are guaranteed by any and all current or future subsidiaries of the Company, which guarantees are secured by substantially all of the assets of such subsidiaries. The Credit Facility contains customary covenants restricting the Company's ability to, among other things, incur additional indebtedness, create liens or other encumbrances, pay dividends or make other restricted payments, make investments, loans and guarantees or sell or otherwise dispose of a substantial portion of assets to, or merge or consolidate with, another entity. The Credit Facility also contains a number of financial covenants that will require the Company to meet certain ratios and tests and provide that a change of control of the Company (as defined in the Credit Facility) will constitute an event of default. 11 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK. As reported by the Company in its Annual Report on Form 10-K for the fiscal year ended December 31, 1999, the Company is exposed to market risks related to fluctuations in interest rates on its Senior and Floating-Rate Notes. The Company does not currently use interest rate swaps or other types of derivative financial instruments. Management does not believe that the future market rate risk related to the Senior Notes and Floating-Rate Notes will have a material impact on the Company's financial position, results of operations or liquidity. PART II OTHER INFORMATION ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K. (a) EXHIBITS. EXHIBIT NO. DESCRIPTION 3.1 Amended and Restated Articles of Incorporation of the Company (1) 3.2 By-laws of the Company (1) 10.1 Letter Agreement, dated June 11, 2000, modifying and amending the Lease, dated November 17, 1995, by and between Donald M. Hypes Trust dated April 25, 1983 and Burke Industries, Inc. 10.2 Amendment to Lease, made and entered into as of July 19, 2000, by and between The Stern Westwood & Santa Fe Springs Family Limited Partnership and Burke Industries, Inc. 10.3 Extension and Fifth Amendment of Lease, dated as of February 23, 2000, by and between RTC Properties, Inc. and Burke Industries, Inc. 27 Financial Data Schedule ---------------------------- (1) Incorporated by reference to the Company's Registration Statement on Form S-4, File No. 333-36675, as filed with the Securities and Exchange Commission on September 29, 1997, as amended. (b) REPORTS ON FORM 8-K The Company filed no reports on Form 8-K during the six months ended June 30, 2000. 12 SIGNATURE Pursuant to the requirements of Section 13 or 15(d) 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 in the City of Santa Fe Springs, State of California on the 14th day of August, 2000. BURKE INDUSTRIES, INC. By: /s/ STEPHEN G. GEANE ----------------------- Stephen G. Geane Chief Financial Officer 13 EX-10.1 2 ex-10_1.txt EXHIBIT 10.1 EXHIBIT 10.1 BEST BEST & KRIEGER LLP [Letterhead] June 11, 2000 VIA FACSIMILE FAX NO. (562) 926-3710 AND FIRST CLASS MAIL Greg Geane Burke Industries, Inc. 13767 Freeway Drive Santa Fe Springs, CA 90670 Re: 14910 CARMENITA ROAD NORWALK, CALIFORNIA Dear Mr. Geane: This letter is intended to be a Letter Agreement (the "Letter Agreement") which will serve to modify and amend the existing lease dated November 17, 1995 (the "Lease") between the Donald M. Hypes Trust dated April 25, 1983 (the "Landlord") and Burke Industries, Inc., a California corporation (the "Tenant") for the above-referenced real property (the "Property"). As you know the original lease term of the Lease expires at midnight on July 25, 2000. On May 26, 2000 Mr. Elliott Stein exercised the option to extend the term of the Lease for an additional five (5) year period commencing July 26, 2000 and ending July 25, 2005. In the meantime, we have discussed the desire of the Tenant to shorten the Lease term and the desire of the Landlord to resolve the Landlord's outstanding concerns. Based on these discussions, the Landlord is willing to modify the Lease subject to the following terms and conditions. All of the terms and conditions of the Lease shall continue to apply during the remaining original term of the Lease and the extended term following the expiration of the original lease term on July 25, 2000 with the following modifications: 1. The term of the Lease upon expiration of the original lease term on July 25, 2000 shall be extended to February 28, 2001. Thereafter, the Lease shall be a month-to-month tenancy which may be terminated by either party upon thirty (30) days prior written notice. 2. In the event the tenancy is terminated for any reason and Tenant holds over after such termination, then the monthly rent shall be increased to two hundred percent Law Offices of BEST BEST & KRIEGER LLP Greg Geane Burke Industries, Inc. June 11, 2000 Page 2 (200%) of the monthly rent payable by Tenant immediately preceding the termination. 3. Rent during the term commencing on July 26, 2000 and ending on February 28, 2001 shall be Eleven Thousand Nine Hundred Dollars ($11,900.00) per month payable in accordance with the terms of Section 4.1 of the Lease. The rent during the month-to-month tenancy commencing on March 1, 2001 shall be Twelve Thousand Five Hundred Dollars ($12,500.00) per month payable in accordance with the terms of Section 4.1 of the Lease. 4. Concurrent with Tenant's execution of this Letter Agreement, Tenant shall pay to Landlord the sum of Ten Thousand Dollars ($10,000.00) to be held as an additional security deposit in accordance with Section 4.8 of the Lease. Landlord acknowledges that it currently holds Eight Thousand Dollars ($8,000.00) as a security deposit prior to the payment required hereinabove. 5. Concurrent with Tenant's execution of this Letter Agreement, Tenant's option to extend the term of the Lease under Section 3.2 of the Lease for an additional five (5) year period shall be immediately terminated, canceled and revoked. 6. Concurrent with Tenant's execution of this Letter Agreement, Tenant's right of first refusal under Section 15.18 of the Lease to purchase the Property shall be immediately terminated and revoked. 7. On or before termination of the Lease as extended by this Letter Agreement, Tenant shall comply with Section 11 and 12 of the Lease and make those repairs and clean-up required thereunder at Tenant's sole cost and expense, including without limitation, the repairs listed on Exhibit "A" attached hereto and incorporated herein by this reference. 8. Tenant agrees that Tenant's Property as defined in Section 11 of the Lease does NOT include the carpeting, window coverings, air lines, power panels, electrical distribution, security, fire protection systems, lighting, fixtures, heating, ventilating, air conditioning equipment, plumbing, and fencing. Moreover, Tenant's Property does NOT include all electrical panels, distribution and buss ducting, air lines, air compressors, gas lines, track systems, crane-ways, and associated cranes. 9. Concurrent with Tenant's execution of this Letter Agreement, Tenant shall use its best efforts to deliver to Landlord a complete copy of Tenant's Material Safety Data Sheet file (the "Data Sheet File") for the period commencing on the Law Offices of BEST BEST & KRIEGER LLP Greg Geane Burke Industries, Inc. June 11, 2000 Page 3 commencement date of the Lease and ending on the execution date of this Letter Agreement. Landlord agrees that the Data Sheet File shall be used by Landlord for the sole purpose of Landlord's environmental studies and assessments of the Property. 10. At any time following the execution of this Letter Agreement and at all times during the tenancy, Tenant shall continue to permit Landlord and its agents the inspection and other rights set forth in Section 15.4 of the Lease and the right to continuously display "For Sale" signs. If the Tenant agrees with the terms of this Letter Agreement please have an authorized officer of the Tenant sign where indicated below and return the signed original to the undersigned along with the Tenant's check payable to the Landlord in the amount of Ten Thousand Dollars ($10,000.00) for the additional security deposit and the copy of the Data Sheet File, within ten (10) days from the date of this Letter Agreement. If you have any questions please do not hesitate to contact me. Very truly yours, /s/ Brian M. Lewis Brian M. Lewis of BEST BEST & KRIEGER LLP BML/dme cc: Marjorie Hypes Garrett Carter AGREED: Donald M. Hypes Trust dated April 24, 1983 By: /s/ Marjorie Hypes ------------------------------------- Marjorie Hypes, Trustee AGREED AS TO FORM AND CONTENT: Burke Industries, Inc., a California corporation Law Offices of BEST BEST & KRIEGER LLP Greg Geane Burke Industries, Inc. June 11, 2000 Page 4 By: /s/ Stephen G. Geane ----------------------------------------- Its Chief Financial Officer July 19, 2000 EXHIBIT "A" 1. Remove wood demising wall in the back side of the building. 2. Fill in existing depressed areas with sand and gravel base material 5" thick concrete slab @ 2500 PS1 with dowels. Patch existing concrete where the wall and machinery are removed from. 3. Fire Sprinklers. Labor to safe off existing to return to original condition. 4. Electrical. Safe off electrical where wood demising wall is being removed and where machinery is removed. 5. Electromechanical. All electromechanical systems shall be placed in good working order including without limitation restroom fixtures and loading doors. 6. Safe off gas and air lines. 7. Exterior Patch, slurry coat and restripe parking area and yard area. EX-10.2 3 ex-10_2.txt EXHIBIT 10.2 EXHIBIT 10.2 AMENDMENT TO LEASE This Amendment to Lease ("Amendment") is made and entered into as of July 19, 2000, by and between THE STERN WESTWOOD & SANTA FE SPRINGS FAMILY LIMITED PARTNERSHIP ("Lessor"), and BURKE INDUSTRIES, INC., a California corporation ("Lessee"). A. Lessor's predecessor-in-interest, S & M Development Co., and Lessee entered into that certain Standard Industrial/Commercial Single-Tenant Lease dated March 29, 1996, pertaining to the lease to Lessee of the real property located at 13615 Excelsior Drive, Santa Fe Springs, California (the "Lease"). B. Lessor, as the current fee title owner of the Premises, has succeeded to the interest of the lessor under the Lease. C. The Term of the Lease is currently scheduled to expire on January 31, 2001. Lessor and Lessee desire to enter into this Amendment to extend the Term of the Lease for an additional five (5) years. C. Except as otherwise provided herein, all capitalized terms used in this Amendment shall have the same meanings given such terms in the Lease. AMENDMENT NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Lessor and Lessee agree as follows: 1. EXTENSION OF TERM. Prior to this Amendment, the Term of the Lease was scheduled to expire on January 31, 2001. Lessor and Lessee hereby agree that the Term shall be extended through January 31, 2006. The five (5) year extension period from February 1, 2001 through January 31, 2006 is referred to herein as the "Extension Term." 2. BASE RENT. During that portion of the Extension Term from February 1, 2001 through January 31, 2003, the Base Rent shall be $12,341.00 per month. During that portion of the Extension Term from February 1, 2003 through January 31, 2006, the Base Rent shall be $15,785.00 per month. In addition to the Base Rent described above, during the Extension Term Lessee shall pay to Lessor additional rent for occupancy of the exterior shed on the north side of the building in an amount equal to $650.00 per month for the period from February 1, 2001 through January 31, 2003, and $750.00 per month for the period from February 1, 2003 through January 31, 2006. All of the other terms and conditions of the Lease shall remain the same during the Extension Term. 3. TERMINATION OF OPTION TO EXTEND. The option to extend the Term set forth in Paragraph 57 of the Addendum to the Lease is hereby terminated. 4. BROKERS. Landlord and Tenant represent and warrant to the other that they have had no dealings with any real estate broker or agent in connection with the negotiation of this Amendment and the extension of the Term, and that they know of no real estate broker or agent who is entitled to a commission in connection therewith. Each party agrees to indemnify, defend and hold the other party harmless from and against any and all claims, demands, losses, liabilities, lawsuits, judgments, and costs and expenses (including, without limitation, reasonable attorneys' fees) with respect to any leasing commission or similar compensation alleged to be owing on account of the indemnifying party's dealings with any real estate broker or agent in connection with this Agreement. 5. NO OTHER CHANGES. Except as otherwise provided herein, the Lease shall remain unmodified and in full force and effect. 6. COUNTERPARTS. This Amendment may be executed in counterparts. Any such counterpart, when executed, shall constitute an original of this Amendment, and both of such counterparts together shall constitute one fully-executed document. IN WITNESS WHEREOF, the parties have entered into this Amendment as of the date first set forth above. THE STERN WESTWOOD & SANTA FE SPRINGS FAMILY LIMITED PARTNERSHIP BY THE JOHN AND ELEANOR STERN REVOCABLE TRUST, ITS GENERAL PARTNER By: /s/ John B. Stern ------------------------------- John B. Stern, Trustee BURKE INDUSTRIES, INC., a California corporation By: /s/ Stephen G. Geane ------------------------------- Name: Stephen G. Geane Its: Chief Financial Officer 2 EX-10.3 4 ex-10_3.txt EXHIBIT 10.3 EXHIBIT 10.3 Extension and Fifth Amendment of Lease, dated as of February 23, 2000, by and between RTC PROPERTIES, Inc, a New York corporation having an office at 79 Fifth Avenue, Suite 1800, New York, New York 10003 ("Lessor"), and BURKE INDUSTRIES, INC. (as assignee in interest of MERCER PRODUCTS CO., INC.), a California corporation having an office at Building 10, Hackensack Avenue, Port Kearny, South Kearny, New Jersey 07032 ("Lessee"). WITNESSETH: WHEREAS, Lessor, as lessor, and Lessee, as lessee, entered into a lease dated as of December 1, 1988, as amended by an Extension and First Amendment of Lease dated as of January 13, 1994, an Extension and Second Amendment of Lease dated as of January 23, 1995, a Third Amendment and Extension of Agreement of Lease dated as of March 1997 and by a Fourth Amendment of Lease dated as of April 21, 1998 (as amended, the "Lease") of certain premises including a portion of Building 10 identified as 10C (formerly identified as 10B), as more particularly described therein (the "Premises"); WHEREAS, Lessor and Lessee desire to extend the Lease for an additional term of five (5) years; WHEREAS, coincident and said extension, Lessor and Lessee desire to amend certain provisions of the Lease relating to security of Lessee's performance and obligations under the Lease and to amend certain other provisions of the Lease; NOW, THEREFORE, Lessor and Lessee do hereby amend the Lease as follows: PARAGRAPH 1. Effective immediately, Section 1.01 of the Lease is hereby amended by deleting all references to the Expiration Date "April 30, 2000" and inserting the date "April 30, 2005" in its place and stead. PARAGRAPH 2. Effective immediately, Section 2.01.A. of the Lease shall be deemed amended by deleting all references to the phrase "Expiration Date" and inserting the phrase "April 30, 2000" in its place and stead. PARAGRAPH 3. Effective May 1, 2000, the following shall be deemed inserted after Section 2.01.A. of the Lease: "Section 2.01.B. Lessee shall pay to Lessor, or such other person as Lessor may from time to time designate, at an address specified in or pursuant to Section 2.03, during the Term, fixed rent ("Fixed Rent"), over and above the other and additional payments to be made by Lessee as hereafter provided, of One Hundred Sixty Two Thousand Five Hundred ($162,500.00) Dollars per annum for the period from May 1, 2000 through the Expiration Date, payable in advance in equal monthly installments of Thirteen Thousand Five Hundred Forty One and 67/xx ($13,541.67) Dollars each on the first day of each and every month during such said period." PARAGRAPH 4. Effective May 1, 2000, the following shall be deemed inserted following Section 32.03 of the Lease: "Section 32.04. In addition to the security deposited with Lessor by Lessee under Section 32.01, additional security in the sum of $18,625.00 shall be deposited with Lessor (and maintained throughout the Term) by Lessee for the faithful performance and observance by Lessee of the terms, covenants and conditions of this Lease including the payment of any Fixed Rent and Additional Rent. Said additional security shall be in the form of cash or a clean, irrevocable bank letter of credit reasonably acceptable to Lessor in all respects and providing that Lessor may draw upon it at any time and from time to time in its sole discretion when Lessee is in default in observing or performing its obligations under this Lease. Said letter of credit, by its terms, shall be automatically extended for periods of one year from the present or any future expiration date thereof, it being the intention of Lessor and Lessee that at all times during the Term and the period of sixty (60) days thereafter Lessor shall be in possession of a letter of credit representing said additional security in the amount of $18,625.00, acceptable, as aforesaid, or the sum of $18,625.00. If Lessee performs all of Lessee's obligations hereunder the Lease, said additional security deposit, or so much thereof as has not theretofore been applied by Lessor, shall be returned to Lessee at the expiration of the Term hereof, and after Lessee has vacated the Premises. Section 32.05. Any cash security deposit provided by Lessee to Lessor under Section 32.04 shall be deposited by Lessor with a banking institution in an interest-bearing savings account or certificate of deposit or similar instrument within a reasonable time after receipt of such deposit by Lessor. Upon demand of Lessee (made no more frequently than once in each calendar year), Lessor shall pay to Lessee the interest then held in such savings account or accrued with respect to such certificate of deposit or other instrument (to the extent payable by the particular financial institution) as the case may be, provided that Lessor shall not be obligated to make any such payment if the additional security, provided by Lessee under Section 32.04, held by it hereunder would thereby be reduced below the sum of $18,625.00. Lessor shall have no duty to obtain any particular rate of interest and no liability for any loss in connection with the deposit." PARAGRAPH 5. Promptly upon execution and delivery of this Extension and Fifth Amendment of Lease by Lessor and Lessee, Lessor shall proceed diligently (subject to Unavoidable Delays) and in a good and workmanlike manner to complete the item of work set forth in that certain work letter between Lessor and Lessee dated as of even date herewith. PARAGRAPH 6. There shall be no further privilege of extension of this Lease beyond this extension of the Terms. PARAGRAPH 7. Unless otherwise expressly provided herein, initially capitalized terms used herein shall have the same meaning that they have in the Lease. PARAGRAPH 8. Except as modified herein, the provisions of the Lease shall continue in full force and effect. IN WITNESS WHEREOF, Lessor and Lessee have duly executed this Extension and Fifth Amendment of Lease as of the day and year first above written. 2 RTC PROPERTIES, INC. By: /s/ John L. Neu ---------------------------- ATTEST: BURKE INDUSTRIES, INC. By: /s/ Elliot Stein By: /s/ Stephen G. Geane ---------------- -------------------- 3 As of February 23, 2000 RTC Properties, Inc. 79 Fifth Avenue Suite 1800 New York, NY 10003 Re: WORK LETTER: BUILDING 10, UNIT 10C Gentlemen: Reference is made to the Agreement of Lease dated as of December 1, 1998, as amended by an Extension and First Amendment of Lease dated as of January 13, 1994; an Extension and Second Amendment of Lease dated as of January 25, 1995; a Third Amendment and Extension of Agreement of Lease, dated as of March 1997; a Fourth Amendment of Lease dated as of April 21, 1998, and by an Extension and Fifth Amendment of Lease dated as of even date herewith (as amended, the "Lease"), between RTC Properties, Inc., as lessor ("Lessor"), and Burke Industries, Inc., as lessee ("Lessee"), covering premises described therein (the "Premises"). (Terms used herein which are defined in the Lease shall have the meanings respectively attributed in the Lease, unless otherwise provided herein.) This letter will confirm Lessor's agreement to perform the following item of work (the "Work") at the Premises: ITEM NO. 1. INSTALL NEW FLOORING IN ENTRANCEWAY OF PREMISES. Lessor shall supply labor for the Work at its sole cost and expense. All materials for the Work shall be supplied by Lessor at Lessee's sole cost and expense and shall be billed by Lessor to Lessee as Additional Rent. Lessor shall proceed diligently to substantially complete the Work subject to Unavoidable Delays; however, the time of completion of the Work shall not affect Lessee's obligations under the Lease. All Work shall be performed to building standard or equal quality, in a good workmanlike manner. Lessor's obligation to perform the Work shall be a single, non-recurring duty; upon performance of an item of Work, Lessor shall no longer have any duty to perform the same or any similar item of Work, nor shall Lessor have any duty to perform repair or maintenance with respect thereto. The inclusion of any particular item herein is not intended to modify the respective repair obligations of the parties set forth in the Lease. For the purposes of Article Ninth of the Lease, the Work shall be deemed to be work performed pursuant to the Lease. The provisions of Section 25.02 of the Lease shall be applicable to the Work. Lessee shall use and occupy the Premises in such manner as shall not cause interference with the performance of any Work. Kindly indicate your agreement to the foregoing by signing a copy hereof and return it to us. Very truly yours, BURKE INDUSTRIES, INC. By: /s/ Stephen G. Geane -------------------- Agreed: RTC. PROPERTIES By: /s/ John L. Neu --------------------------- 5 EX-27 5 ex-27.txt EXHIBIT 27
5 1,000 6-MOS DEC-29-2000 JAN-01-2000 JUN-30-2000 154 0 15,987 854 15,813 33,030 36,330 15,678 86,275 20,033 140,000 21,696 3,000 25,708 (127,369) 86,275 54,851 54,851 38,855 38,855 11,193 138 7,938 (3,273) 0 4,665 0 0 0 (3,273) 0 0
-----END PRIVACY-ENHANCED MESSAGE-----