-----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, BcbZ2XEtSJxJeZheNGyAtYg5X3f/0jixLTjpj2QX4p4XhMfxkmraI6YvgW+nMRaA 0vy+3okQ3DDW76Hh9m6LBw== 0000950131-99-004814.txt : 19990812 0000950131-99-004814.hdr.sgml : 19990812 ACCESSION NUMBER: 0000950131-99-004814 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19990630 FILED AS OF DATE: 19990811 FILER: COMPANY DATA: COMPANY CONFORMED NAME: GLOBE MANUFACTURING CORP CENTRAL INDEX KEY: 0001071094 STANDARD INDUSTRIAL CLASSIFICATION: FABRICATED RUBBER PRODUCTS, NEC [3060] IRS NUMBER: 631101362 STATE OF INCORPORATION: AL FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 333-64675 FILM NUMBER: 99684160 BUSINESS ADDRESS: STREET 1: 456 BEDFORD STREET CITY: FALL RIVER STATE: MA ZIP: 02720 10-Q 1 FORM 10-Q 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 YEAR ENDED JUNE 30, 1999 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 333-64675 GLOBE MANUFACTURING CORP. (Exact name of registrant as specified in its charter) Alabama 63-1101362 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 456 Bedford Street, Fall River, Massachusetts 02720 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: 508/674-3585 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), and (2) has been subject to such filing requirements for the past 90 days. Yes X No --------- --------- As of June 30, 1999, the Registrant had 1,000 shares of Common Stock outstanding. TABLE OF CONTENTS
PART I FINANCIAL INFORMATION PAGE Item 1. Financial Statements Condensed Consolidated Balance Sheets - June 30, 1999 (Unaudited) and December 31, 1998................................................. 1 Condensed Consolidated Statements of Income (Unaudited) - Three Months Ended June 30, 1999 and 1998; Six Months Ended June 30, 1999 and June 30, 1998.............................................................. 2 Condensed Consolidated Statements of Cash Flows (Unaudited) - Six Months Ended June 30, 1999 and June 30, 1998.......................... 3 Notes to Condensed Consolidated Financial Statements (Unaudited) -June 30, 1999........................................................ 4 Item 2. Management's Discussion and Analysis of Financial Conditions and Results of Operations................................................. 6 Item 3. Quantitative and Qualitative Disclosure about Market Risk............. 8 PART II OTHER INFORMATION Item 1. Legal Proceedings..................................................... 8 Item 2. Changes in Securities and Use of Proceeds............................. 9 Item 3. Defaults Upon Senior Securities....................................... 9 Item 4. Submission of Matters to a Vote of Security Holders .................. 9 Item 5. Other Information..................................................... 9 Item 6. Exhibits and Reports on Form 8-K...................................... 9
PART I ------ GLOBE MANUFACTURING CORP. Condensed Consolidated Balance Sheets (Dollars in thousands)
(Unaudited) (Note A) June 30, 1999 December 31, 1998 -------------- ----------------- Assets Current assets: Cash and cash equivalents $ 1,364 $ 1,439 Accounts receivable, net 34,387 22,510 Inventories 16,591 18,380 Prepaid taxes and other assets 9,087 8,840 --------- --------- Total current assets 61,429 51,169 Property, plant and equipment 163,004 157,436 Less accumulated depreciation (79,302) (74,107) --------- --------- Net property, plant and equipment 83,702 83,329 Other assets 10,771 11,328 --------- --------- Total assets $ 155,902 $ 145,826 ========= ========= Liabilities and stockholders' equity (deficit) Current liabilities: Accounts payable $ 6,912 $ 6,012 Accrued interest expense 7,750 7,773 Other current liabilities 10,071 5,010 Note payable 19,500 11,300 --------- --------- Total current liabilities 44,233 30,095 Other long-term liabilities 7,240 5,908 Long-term debt 109,450 115,000 Senior subordinated notes 150,000 150,000 Stockholders' equity (deficit) Common stock, Class A, voting, $.01 par value 1 1 Other stockholders' equity (deficit) (155,022) (155,178) --------- --------- Total stockholders' equity (deficit) (155,021) (155,177) --------- --------- Total liabilities and stockholders' equity (deficit) $ 155,902 $ 145,826 ========= =========
See notes to condensed consolidated financial statements. -1- GLOBE MANUFACTURING CORP. Condensed Consolidated Statements of Income (Dollars in thousands)
Three months ended Six months ended ----------------------------------- ------------------------------------ (Unaudited) (Unaudited) (Unaudited) (Unaudited) June 30, 1999 June 30, 1998 June 30, 1999 June 30, 1998 ------------- ------------- ------------- ------------- Net Sales $44,374 $46,066 $87,958 $92,490 Cost and expenses: Cost of sales 29,996 29,492 59,925 59,556 Selling, general & administrative expenses 5,565 5,759 11,735 12,010 Research & development expenses 1,180 1,043 2,335 2,133 Interest, net 7,038 860 13,938 1,788 Miscellaneous (167) (16) (217) (655) ------- ------- ------- ------- 43,612 37,138 87,716 74,812 ------- ------- ------- ------- Income before income taxes 762 8,928 242 17,678 Provision for income taxes 259 3,356 86 6,638 ------- ------- ------- ------- Net income $ 503 $ 5,572 $ 156 $11,040 ======== ======= ======= =======
See notes to condensed consolidated financial statements. -2- GLOBE MANUFACTURING CORP Condensed Consolidated Statements of Cash Flows (Dollars in thousands)
Six Months Ending ------------------------------ (Unaudited) (Unaudited) June 30, 1999 June 30, 1998 ------------- ------------- Cash from (used in) operations ($4,182) $ 13,965 Investing Activities Capital expenditures (4,419) (17,128) Other 441 (4) ------- -------- (3,978) (17,132) ------- -------- Financing Activities Net change in note payable 8,200 7,525 Principal payments on long-term debt - (3,750) Other (115) (89) ------- -------- 8,085 3,686 ------- -------- Net increase (decrease) in cash and cash equivalents (75) 519 Cash and cash equivalents at beginning of year 1,439 1,947 ------- -------- Cash and cash equivalents at end of period $ 1,364 $ 2,466 ======= ========
See notes to condensed consolidated financial statements. -3- GLOBE MANUFACTURING CORP. Notes to Condensed Consolidated Financial Statements (Unaudited) (Dollars in thousands) June 30, 1999 Note A. Basis of presentation The accompanying unaudited condensed consolidated financial statements 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 of 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 six month period ended June 30, 1999 are not necessarily indicative of the results that may be expected for the year ended December 31, 1999. The balance sheet at December 31, 1998 has been derived from the audited financial statements at that date but does not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. For further information, refer to the consolidated financial statements and footnotes thereto included in the Registrant Company and Subsidiaries' annual report on Form 10-K for the year ended December 31, 1998. Note B. Inventories The components of inventory consist of the following:
June 30 December 31, -------- ------------ 1999 1998 ---- ---- Raw materials $ 3,842 $ 2,688 Finished goods 13,557 16,500 ------- ------- $17,399 $19,118 Less LIFO reserve (808) (808) ------- ------- $16,591 $18,380
-4- Note C. Debt Long-term debt consists of the following:
June 30 December 31 -------- ----------- 1999 1998 -------- ----------- Term loan A, principal due in variable semi-annual $ 60,000 $ 60,000 installments through 2005; variable rate interest 55,000 55,000 Term loan B, principal due in variable semi-annual installments through 2006; variable rate interest 150,000 150,000 Senior Subordinated Notes, due 2008; interest at 10% -------- -------- 265,000 265,000 Less current maturities 5,550 - -------- -------- $259,450 $265,000
On March 23, 1999 the Company exchanged all of its outstanding 10% Senior Subordinated Notes due 2008 for an equal amount of its Series B 10% Senior Subordinated Notes due 2008. Note D. Segment Information Globe Manufacturing Corp. (the "Company") operates in one industry segment encompassing the manufacture and sale of elastomeric fibers. These fibers, which consist of spandex fibers and latex thread, are sold to customers in the textile and apparel industries that are geographically diversified throughout the United States and in various foreign countries. The Company's manufacturing facilities are located in the United States. The following is a summary by geographic area of revenues from customers. Revenues are attributed to each geographic location based upon the location of the Company's customers.
June 30 June 30, ------- -------- 1999 1998 ------- -------- United States.............. $58,286 $62,680 Europe..................... 17,088 17,493 Asia....................... 5,840 3,289 Central and South America.. 1,893 1,988 Other...................... 4,851 7,040 ------- ------- Total Sales................ $87,958 $92,490 ======= =======
-5- Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations In 1998, the Company's sole shareholder, Globe Holdings, Inc. ("Globe Holdings") entered into a recapitalization transaction obtaining additional debt and equity whereby Code, Hennessy & Simmons III, L.P. obtained a majority interest in Globe Holdings and certain continuing shareholders retained a minority interest. Assets and liabilities of the Company were carried at historical cost bases and distributions to certain Company shareholders were recorded as a distribution from retained earnings. The recapitalization transaction was financed with $50 million of equity and $295 million of debt. As a result of the transaction, the aggregate indebtedness for borrowed money and interest expense increased and shareholders' equity decreased. Results of Operations Net sales of the Company were $44.4 million for the second quarter of 1999 and $88.0 million for the first six months of 1999, representing decreases of 3.7% and 4.9%, respectively, from the corresponding periods of 1998. The decrease is attributable to decreases in sales volumes of latex fiber and heavy denier spandex from the corresponding periods of 1998. Gross margin for the second quarter was $14.4 million and $28.0 million for the first six months of 1999, representing decreases of 13.3% and 14.9%, respectively, from the corresponding periods of 1998. The Company's gross margin as a percentage of net sales was 32.4% for the second quarter and 31.9% for the first six months of 1999, compared to 36.0% and 35.6%, respectively, for the corresponding periods in 1998. The decrease in gross margin was primarily due to foreign pricing pressure on fine denier spandex and a decrease in latex fiber sales volume. Selling, general and administrative expenses were $5.6 million for the second quarter of 1999, and $11.7 million for the first six months of 1999, representing decreases of 3.4% and 2.3%, respectively, from the corresponding periods of 1998. As a percentage of net sales, selling, general and administrative expenses were 12.5% for the second quarter and 13.3% for the first six months of 1999, compared to 12.5% and 13.0%, respectively, for the corresponding periods in 1998. Research and development expenses were $1.2 million for the second quarter of 1999, and $2.3 million for the first six months of 1999 compared to $1.0 million and $2.1 million, respectively, for the corresponding periods in 1998. Research and development expenses for the Company as a percentage of net sales were 2.7% for the second quarter and for the first six months of 1999, an increase from 2.3% for the corresponding periods in 1998. The slight increase is attributed to the continuing development of a new heavy denier spandex fiber. Net interest expense was $7.0 million for the second quarter and $13.9 million for the first six months of 1999, compared to $.9 million and $1.8 million, respectively, for the corresponding periods in 1998. The increase in interest expense was directly attributable to the recapitalization of the Company. -6- Liquidity and Capital Resources Cash used by operating activities was $4.2 million for the six months ended June 20, 1999 as compared to cash provided by operating activities of $14.0 million for the comparable prior year period. The reduction in cash provided by operating activities for the six months ended June 30, 1999 was due to increases in interest expense, accounts receivable, prepaid expenses, prepaid taxes, and a decrease in accrued expenses. This reduction was partially offset by a decrease in inventory balances, and increases in accounts payable, accretion on discounted notes, and depreciation and amortization. The average days sales outstanding for accounts receivable was approximately 71 days for the six months ended June 30, 1999 compared to 63 days for the comparable prior year period. The increase in days sales outstanding is due to increases in export sales which have longer terms than domestic sales. Export sales represented 34.5% and 27.5% of total sales for the six months ended June 30, 1999 and 1998, respectively. Inventory balances decreased $1.8 million from December 31, 1998, primarily due to an average increase of 16.4% in quarterly net sales for the first and second quarters of 1999, compared to the fourth quarter of 1998. The note payable increased $8.2 million primarily due to interest payments due on the senior subordinated notes and working capital needs. Capital expenditures, including capital leases, were $4.9 million for the six months ended June 30, 1999 compared to $17.1 million the comparable prior year period. Capital expenditures for the six months ended June 30, 1998 consisted primarily of expenditures for the expansion of the Tuscaloosa facility. As part of the recapitalization transaction, the Company entered into a Senior Credit Facility consisting of a $115.0 million term loan facility, which was fully drawn upon the consummation of the transaction and a $50.0 million revolving loan facility. The revolving loan facility is available for general corporate and working capital purposes. Impact of the Year 2000 Issue The year 2000 issue is the result of computer programs being written using two digits rather than four to define the applicable year. Any of the Company's computer programs that have date-sensitive software may recognize a date using "00" as the year 1900 rather than the year 2000. If the Company, its significant customers or suppliers fail to make necessary modifications and conversions on a timely basis, the year 2000 issue could have a material adverse effect on Company operations. However, the impact cannot be quantified at this time. The Company believes that its competitors face similar risks. The Company has established a corporate-wide project team to identify non- compliant software and complete the corrections required for the year 2000 issue. The Company has completed its repairs for major manufacturing systems in all locations. The Company also completed its repair of its major financial systems. The Company's current target is to resolve compliance issues in its distribution systems and other ancillary systems by July 31, 1999. The Company also has made inquiry of its major customers and suppliers to assess their compliance. There can be no assurance that there will not be a material adverse effect on the Company if third party governmental or business entities do not convert or replace their systems in a timely manner and in a way that is compatible with the Company's systems. Costs related to the year 2000 issue are funded through operating cash flows. Through June 30, 1999, the Company expended approximately $300,000 in systems development and remediation efforts, including the cost of new software and modifying the applicable code of existing software. The Company -7- estimates remaining costs to be immaterial. The Company presently believes that the total cost of achieving year 2000 compliant systems will not be material to the Company's financial condition, liquidity or results of operations. Time and cost estimates are based on currently available information. Developments that could affect estimates include, but are not limited to, the availability and cost of trained personnel, the ability to locate and correct all relevant computer code and systems and remediation success of the Company's customers and suppliers. Forward-Looking Information This Quarterly Report on Form 10-Q contains certain forward-looking statements, including, without limitation, statements concerning the Company's future financial position, business strategy, budgets, projected costs and plans and objectives of management for future operations. These forward-looking statements are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 (which do not apply to initial public offerings). Forward- looking statements generally can be identified by the use of forward-looking terminology such as "may," "will," "expect," "intend," "estimate," "anticipate," "believe," "should," "plans," or "continue" or the negative thereof or variations thereon or similar terminology. Although the Company believes that the expectations reflected in such forward-looking statements are reasonable, it can give no assurance that such expectations will prove to have been correct. These forward-looking statements are subject to a number of risks and uncertainties, including, without limitation, those related to the Company's substantial leverage and debt service requirements, the Company's dependence on significant customers and on certain suppliers, the effects of competition on the Company, the risks related to environmental, health and safety laws and regulations, the Company's exposure to foreign sales risk and the cyclicality of the textile industry, risks related to the year 2000 issue, and the other factors discussed in the Company's filings with the Securities and Exchange Commission. Actual results could differ materially from these forward-looking statements. Item 3. Quantitative and Qualitative Disclosures about Market Risk. The Company's market risk disclosure set forth in the Company's Annual Report on Form 10-K has not changed significantly through the six months ended June 30, 1999. Part II Other Information Item 1. Legal Proceedings In April 1997 two domestic purchasers of extruded latex thread filed a complaint against a number of foreign manufacturers and distributors of such thread, including an Indonesian limited liability company in which Globe Holdings then owned a 40% interest (the "Joint Venture"). The complaint alleged an international conspiracy to restrain trade in, and fix prices of, the thread in the U.S. The Company was not named as a defendant in the case. The Joint Venture alleged in its motion to dismiss that not all parties to the conspiracy had been joined. There can be no assurance that the Company will not be named in the future. The Company is entitled to indemnification from, among other items, any liabilities arising out of any criminal or civil antitrust claims or investigations resulting from the above-described proceedings to the -8- extent related to the Company's activities prior to the recapitalization transaction in 1998. This indemnity expires on December 31, 2001. The U.S. Department of Commerce has imposed anti-dumping duties on Indonesian extruded latex producers. Additional duties of 28.29% have been levied on extruded latex thread imported from Indonesia from May 1999 going forward. From time to time, the Company has been and is involved in various legal proceedings, all of which management believes are routine in nature and generally incidental to the conduct of its business. The ultimate legal and financial liability of the Company with respect to such proceedings cannot be estimated with certainty, but the Company believes, based on its examination of such matters, that none of such proceedings, if determined adversely to the Company, would have a material adverse effect on the Company's results of operations, financial condition and its ability to meet its obligations under the Company's existing debt. Item 2. Changes in Securities None. Item 3. Defaults Upon Senior Securities None. Item 4. Submission of Matters to a Vote of Security Holders None. Item 5. Other Information None. Item 6. Exhibits and Reports on Form 8-K (a) Exhibits 27.1 Financial Data Schedule (b) Reports on Form 8-K None. -9- SIGNATURES In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. GLOBE MANUFACTURING CORP. Date: August 11, 1999 By: /s/ LAWRENCE R. WALSH ---------------------------------------------- Lawrence R. Walsh Vice President, Finance and Administration and duly authorized signatory on behalf of the Registrant EX-27 2 FINANCIAL DATA SCHEDULE
5 This schedule contains summary financial information extracted from the financial statements of Globe Manufacturing Corp. for the six months ended June 30, 1999 and is qualified in its entirety by reference to such financial statements. 1,000 6-MOS DEC-31-1999 JAN-01-1999 JUN-30-1999 1,364 0 36,854 2,466 16,591 61,429 163,004 79,302 155,902 44,233 265,066 0 0 1 (155,021) 155,902 87,958 87,958 59,925 73,995 (217) 0 13,938 242 86 0 0 0 0 156 0 0
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