-----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, BwgYuEkQR55wASKK7aOpfS3hn1owG8tb8RJC0qbo2zxuOCgS+pNq0pOqunBQ4Y1i iogsccxV2BwNNS0lDSrJGw== /in/edgar/work/0000912057-00-050912/0000912057-00-050912.txt : 20001121 0000912057-00-050912.hdr.sgml : 20001121 ACCESSION NUMBER: 0000912057-00-050912 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20000929 FILED AS OF DATE: 20001120 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: 773276 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 a2030474z10-q.txt FORM 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 September 29, 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 November 20, 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 nine months ended September 29, 2000 and October 1, 1999 3 (unaudited) Condensed Consolidated Balance Sheets as of September 29, 2000 (unaudited) and December 31, 1999 4 Condensed Consolidated Statements of Cash Flows for the nine months ended September 29, 2000 and October 1, 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 Nine Month Period Ended Sept. 29, 2000 Oct. 1, 1999 Sept. 29, 2000 Oct. 1, 1999 -------------------------------------------------------------------------------- (Unaudited) Net sales...................... $ 26,641 $ 26,833 $ 81,492 $ 83,894 Costs and expenses: Cost of sales............ 19,561 19,918 58,416 60,593 Selling, general and administrative............ 6,321 4,637 16,643 13,335 Amortization of goodwill.. 504 504 1,513 1,513 ------------------- ----------------- ----------------- ---------------- Income from operations......... 255 1,774 4,920 8,453 Interest expense, net.......... 3,674 3,600 11,612 11,136 ------------------- ----------------- ----------------- ---------------- Loss before income tax benefit........................ (3,419) (1,826) (6,692) (2,683) Income tax benefit............. (144) ---- (144) (342) ------------------- ----------------- ----------------- ---------------- Net income (loss).............. $ (3,275) $ (1,826) $ (6,548) $ (2,341) =================== ================= ================= ================
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 (DOLLARS IN THOUSANDS)
Sept. 29, 2000 Dec. 31, 1999 ---------------- --------------------- (Derived from audited (Unaudited) financial statements) ---------------- --------------------- ASSETS (In Thousands) Current Assets: Cash and cash equivalents.................................................. $ 875 $ 348 Trade accounts receivable, less allowance of $750 in 2000 and $658 in 1999. 14,027 13,627 Inventories................................................................ 16,959 15,585 Prepaid expenses and other current assets.................................. 1,780 1,510 Deferred income tax assets................................................. 503 503 ----------- ---------- Total current assets..................................................... 34,144 31,573 Property, Plant and Equipment 35,634 35,489 Accumulated depreciation and amortization.................................. 16,314 14,464 ----------- ---------- 19,320 21,025 Construction in process.................................................... 1,077 419 ----------- ---------- Net property, plant and equipment........................................ 20,397 21,444 Other Assets: Prepaid pension cost.......................................................... 442 442 Goodwill, net................................................................. 26,205 27,718 Deferred financing costs, net................................................. 5,101 5,718 Other assets.................................................................. 145 139 ----------- ---------- Total other assets....................................................... 31,893 34,017 ----------- ---------- Total assets....................................................... $ 86,434 $ 87,034 =========== ========== LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT) Current Liabilities: Revolving line of credit................................................... $8,729 $-- Trade accounts payable and accrued expenses................................ 9,335 8,174 Accrued compensation and related liabilities............................... 2,143 1,743 Accrued interest........................................................... 1,834 5,528 Payable to shareholders.................................................... 785 785 Capital lease obligations.................................................. 514 514 Income taxes payable....................................................... 214 481 ------------ --------- Total current liabilities................................................ 23,554 17,225 Senior notes.................................................................. 110,000 110,000 Floating notes................................................................ 30,000 30,000 Capital lease obligations, non-current ....................................... 244 669 Other non-current liabilities................................................. 488 444 Deferred income tax liabilities............................................... 2,388 2,388 Preferred stock, no par value; 50,000 shares authorized; 30,000 Series A Redeemable shares designated; 22,744 Series A shares issued and outstanding; 5,000 Series B Redeemable shares designated; 2,847 Series B shares issued and outstanding (aggregate liquidation and redemption preference $18,000).................................................................. 23,758 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........................................................ (132,706) (122,936) ------------ --------- Total shareholders' equity (deficit)...................................... (103,998) (94,228) ------------ --------- Total liabilities and shareholders' equity (deficit)...................... $ 86,434 $ 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 Nine Month Period Ended ---------------------------------- Sept. 29, 2000 Oct. 1, 1999 ---------------------------------- (Unaudited) OPERATING ACTIVITIES Net loss................................................................. $ (6,548) $ (2,341) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization: Property, plant and equipment...................................... 1,850 1,546 Goodwill........................................................... 1,513 1,513 Debt financing costs............................................... 617 618 Other adjustments to reconcile net loss to net cash used in operating activities............................................ (4,831) (2,281) ------------- ----------- Net cash used in operating activities.................................... (7,399) (945) INVESTING ACTIVITIES Purchases of property, plant and equipment............................... (803) (2,080) ------------- ----------- Net cash used in investing activities.................................... (803) (2,080) FINANCING ACTIVITIES Net borrowings under revolving line of credit............................ 8,729 ---- Exercise of stock options................................................ ---- 244 ------------- ----------- Net cash provided by financing activities................................ 8,729 244 ------------- ----------- Increase in cash and cash equivalents.................................... 527 (2,781) Cash and cash equivalents at beginning of period......................... 348 2,981 ------------- ----------- Cash and cash equivalents at end of period............................... $ 875 $ 200 ============= ===========
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 nine months ended September 29, 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 nine-month periods ended on September 29, 2000 and October 1, 1999. 2. INVENTORIES Inventories consist of the following at the period ended:
Sept. 29, 2000 Dec. 31, 1999 -------------------------------- (In thousands) -------------------------------- Raw materials................................................... $5,397 $5,540 Work-in-process................................................. 1,963 1,861 Finished goods.................................................. 9,599 8,184 --------------- --------------- $16,959 $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 SEPTEMBER 29, 2000 Revenues from external customers............ $16,677 $9,964 $26,641 Segment profit (loss)....................... 2,788 (515) 2,273 THREE MONTH PERIOD ENDED OCTOBER 1, 1999 Revenues from external customers............ $17,499 $9,334 $26,833 Segment profit (loss)....................... 3,407 (527) 2,880 NINE MONTH PERIOD ENDED SEPTEMBER 29, 2000 Revenues from external customers............ $48,005 $33,487 $81,492 Segment profit.............................. 8,074 1,911 9,985 NINE MONTH PERIOD ENDED OCTOBER 1, 1999 Revenues from external customers............ $48,657 $35,237 $83,894 Segment profit.............................. 8,992 2,310 11,302
FOR THE THREE MONTH PERIOD FOR THE NINE MONTH PERIOD ENDED ENDED SEPT. 29, 2000 OCT. 1, 1999 SEPT. 29, 2000 OCT. 1, 1999 -------------- ------------ -------------- ------------ PROFIT Total profit for reportable segments $2,273 $2,880 $9,985 $11,302 Unallocated items: Corporate general and administrative expenses 1,514 602 3,552 1,336 Amortization of goodwill related to the Mercer acquisition 504 504 1,513 1,513 Interest expense, net 3,674 3,600 11,612 11,136 ----------------- --------------- ----------------- ------------------ Loss before income taxes ($3,419) ($1,826) ($6,692) ($2,683) ================= =============== ================= ==================
4. BANK CREDIT FACILITY The Company's Credit Facility contains various financial covenants. At September 29, 2000, the Company was not in compliance with certain of these covenants and the Company has an outstanding balance under the Credit Facility of $8.7 million. The Company obtained a waiver from the bank for violation of the covenants and the covenants have been amended for future periods. 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 September 29, 2000 compared to the three month period ended October 1, 1999:
FISCAL THIRD QUARTER --------------------------------------------------------------------- PERCENTAGE PERCENTAGE 2000 OF NET SALES 1999 OF NET SALES --------------------------------------------------------------------- (DOLLARS IN THOUSANDS) Net sales: Aerospace and Defense Products......... $5,859 22.0% $5,223 19.5% Flooring Products...................... 12,496 46.9% 12,709 47.4% Commercial Products.................... 8,286 31.1% 8,901 33.1% ------------------------------ ------------------------------- Net sales....... ........................... 26,641 100.0% 26,833 100.0% Cost of sales... ........................... 19,561 73.4% 19,918 74.2% ------------------------------ ------------------------------- Gross profit.... ........................... 7,080 26.6% 6,915 25.8% Selling, general and administrative expenses................... 6,321 23.7% 4,637 17.3% Amortization of goodwill.................... 504 1.9% 504 1.9% ------------------------------ ------------------------------- Income from operations...................... 255 1.0% 1,774 6.6% Interest expense............................ 3,674 13.8% 3,600 13.4% ------------------------------ ------------------------------- Loss before income tax benefit.............. (3,419) -12.8% (1,826) -6.8% Income tax benefit.......................... (144) 0.5% --- 0.0% ------------------------------ ------------------------------- Net income (loss)........................... ($3,275) -12.3% ($1,826) -6.8% ============================== ===============================
8
FISCAL NINE MONTHS --------------------------------------------------------------------- PERCENTAGE PERCENTAGE 2000 OF NET SALES 1999 OF NET SALES --------------------------------------------------------------------- (DOLLARS IN THOUSANDS) Net sales: Aerospace and Defense Products......... $20,054 24.6% $22,149 26.4% Flooring Products...................... 35,956 44.1% 35,854 42.7% Commercial Products.................... 25,482 31.3% 25,891 30.9% ------------------------------ ------------------------------- Net sales....... ........................... 81,492 100.0% 83,894 100.0% Cost of sales... ........................... 58,416 71.7% 60,593 72.2% ------------------------------ ------------------------------- Gross profit.... ........................... 23,076 28.3% 23,301 27.8% Selling, general and administrative expenses................... 16,643 20.4% 13,335 15.9% Amortization of goodwill.................... 1,513 1.9% 1,513 1.8% ------------------------------ ------------------------------- Income from operations...................... 4,920 6.0% 8,453 10.1% Interest expense............................ 11,612 14.3% 11,136 13.3% ------------------------------ ------------------------------- Loss before income tax benefit.............. (6,692) -8.3% (2,683) -3.2% Income tax benefit.......................... (144) 0.2% (342) 0.4% ------------------------------ ------------------------------- Net income (loss).......................... ($6,548) -8.0% ($2,341) -2.8% ============================== ===============================
COMPARISON OF THE THREE-MONTH PERIOD ENDED SEPTEMBER 29, 2000 VERSUS THE THREE-MONTH PERIOD ENDED OCTOBER 1, 1999. NET SALES. Total net sales decreased 0.7%, from $26.8 million for the three-month period ended October 1, 1999 to $26.6 million for the same period in 2000. Aerospace and Defense Products sales increased 12.2% from $5.2 million for the three-month period ended October 1, 1999 to $5.9 million for the same period in 2000, due to an increase in demand for commercial and military products during the third quarter. Flooring Products net sales decreased 1.7% from $12.7 million for the three-month period ended October 1, 1999 to $12.5 million for the same period in 2000, due to lower demand for rubber flooring and cove base products. Commercial Products sales decreased 6.9%, from $8.9 million for the three-month period ended October 1, 1999 to $8.3 million for the same period in 2000. The decrease in sales as compared to the prior year was primarily due to lower demand for commercial rubber specialty products. COST OF SALES. Cost of sales decreased 1.8%, from $19.9 million for the three-month period ended October 1, 1999 to $19.6 million for the same period in 2000. The decrease in cost of sales was primarily due to the reduction in sales and decreased manufacturing expenses, offset by a $0.4 million warranty provision for potential product quality issues on a defense program. As a percentage of net sales, gross profit increased from 25.8% for the three-month period ended October 1, 1999 to 26.6% for the same period in 2000 due to the reduction in manufacturing expenses and improved average sales prices. SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and administrative expenses increased 36.3%, from $4.6 million for the three-month period ended October 1, 1999 to $6.3 million for the same period in 2000. As a percentage of net sales, selling, general and administrative expenses increased from 17.3% for the three-month period ended October 1, 1999 to 23.7% for the same period in 2000. The increase in expenses was due to increased shipping and warehousing costs in the Flooring 9 Products segment, expenses associated with a corporate initiative to improve the performance of the Company's information technology system, professional fees incurred for a study to identify state tax credits available to the Company, and costs related to management changes within the Company during the third quarter. AMORTIZATION OF GOODWILL. Amortization of goodwill was $0.5 million for the three-month period ended September 29, 2000, which was unchanged from the same period in 1999. INCOME FROM OPERATIONS. As a result of the above factors, income from operations decreased from $1.8 million for the three-month period ended October 1, 1999 to $0.2 million for the same period in 2000. INTEREST EXPENSE. Interest expense increased slightly from $3.6 million for the three-month period ended October 1, 1999 to $3.7 million for the same period in 2000. The increase is due to the Company's use of its Credit Facility during the quarter. INCOME TAX PROVISION (BENEFIT). The Company has filed for a tax refund of $144,000 from the state of California as a result of the Company's San Jose production facility being located within an enterprise zone. In addition to the refunds currently available to the Company, the Company has additional tax credit carry-forwards totaling $1.0 million, which may be available to offset future tax obligations. NET LOSS. As a result of the above factors, net loss increased from $1.8 million for the three-month period ended October 1, 1999 to a loss of $3.3 million for the same period in 2000. COMPARISON OF THE NINE-MONTH PERIOD ENDED SEPTEMBER 29, 2000 VERSUS THE NINE-MONTH PERIOD ENDED OCTOBER 1, 1999. NET SALES. Total net sales decreased 2.9%, from $83.9 million for the nine-month period ended October 1, 1999 to $81.5 million for the same period in 2000. Aerospace and Defense Products sales decreased 9.5%, from $22.1 million for the nine-month period ended October 1, 1999 to $20.0 million for the same period in 2000. Demand for commercial and military products during the first six months of the year was lower than the same period in the prior year. However, the backlog of Aerospace and Defense Products has increased 8.8% during the year to $14.7 million at September 29, 2000 compared to $13.5 million at December 31, 1999. Flooring Products net sales increased 0.3%, from $35.9 million for the nine-month period ended October 1, 1999 to $36.0 million for the same period in 2000, due to marginally higher demand for vinyl flooring and cove base products. Commercial Products sales decreased 1.6%, from $25.9 million for the nine-month period ended October 1, 1999 to $25.5 million for the same period in 2000. The decrease in sales as compared to the prior year was primarily due to lower demand for the Company's commercial rubber specialty products, offset somewhat by slightly higher demand for its commercial silicone products. COST OF SALES. Cost of sales decreased 3.6%, from $60.6 million for the nine-month period ended October 1, 1999 to $58.4 million for the same period in 2000, due primarily to the decrease in net sales and reductions in manufacturing expenses. As a percentage of net sales, gross profit increased from 27.8% for the nine-month period ended October 1, 1999 to 28.3% for the same period in 2000 due to an improved sales mix, improved average sales prices and decreased manufacturing expenses in the nine month period. 10 SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and administrative expenses increased 24.8%, from $13.3 million for the nine-month period ended October 1, 1999 to $16.6 million for the same period in 2000. As a percentage of net sales, selling, general and administrative expenses increased from 15.9% for the nine-month period ended October 1, 1999 to 20.4% for the same period in 2000. The increase in expenses was due to increased shipping and warehousing costs in the Flooring Products segment, costs associated with several management changes within the Company this year, and a corporate initiative to improve the performance of the Company's information technology system. AMORTIZATION OF GOODWILL. Amortization of goodwill was $1.5 million for the nine-month period ended September 29, 2000, which was unchanged from the same period in 1999. INCOME FROM OPERATIONS. As a result of the above factors, income from operations decreased 41.8%, from $8.5 million for the nine-month period ended October 1, 1999 to $4.9 million for the same period in 2000. INTEREST EXPENSE. Interest expense increased from $11.1 million for the nine-month period ended October 1, 1999 to $11.6 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 year, and the interest expense associated with the capital lease for the Company's new computer system, which was entered into in March of 1999. INCOME TAX BENEFIT. The Company has filed for a tax refund of $144,000 from the state of California as a result of the Company's San Jose production facility being located within an enterprise zone. In addition to the refunds currently available to the Company, the Company has additional tax credit carry-forwards totaling $1.0 million, which may be available to offset future tax obligations. NET LOSS. As a result of the above factors, net loss increased from $2.3 million for the nine-month period ended October 1, 1999 to a loss of $6.5 million for the same period in 2000. 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 $1.6 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 $20.0 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 3.0% or upon the Prime Rate plus a margin of 0.5%. 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 11 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. 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) 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 nine months ended September 29, 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 20th day of November, 2000. BURKE INDUSTRIES, INC. By: /s/ STEPHEN G. GEANE -------------------- Stephen G. Geane Chief Financial Officer 13 EX-27 2 a2030474zex-27.txt EXHIBIT 27
5 1,000 9-MOS DEC-29-2000 JAN-01-2000 SEP-29-2000 875 0 14,777 750 16,959 34,144 35,634 16,314 86,434 23,554 140,000 23,758 3,000 25,708 (132,706) 86,434 81,492 81,492 58,416 0 18,156 0 11,612 (6,692) (144) 4,920 0 0 0 (6,548) 0 0
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