<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
---------
Quarterly Report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the Quarterly Period Ended September 30, 1999
Commission File No. 333-27665
CONTINENTAL GLOBAL GROUP, INC.
------------------------------
(Exact Name of Registrant as Specified in its Charter)
Delaware 31-1506889
-------- ----------
(State or other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
CO-REGISTRANTS AND SUBSIDIARY GUARANTORS
Continental Conveyor & Equipment Company Delaware 34-1603197
Goodman Conveyor Company Delaware 34-1603196
<TABLE>
<S> <C> <C>
Continental Conveyor &
Continental Global Group, Inc. Equipment Company Goodman Conveyor Company
438 Industrial Drive 438 Industrial Drive Route 178 South
Winfield, Alabama 35594 Winfield, Alabama 35594 Belton, South Carolina 29627
(205) 487-6492 (205) 487-6492 (864) 338-7793
</TABLE>
(Address, including zip code, and telephone number, including
area code, of registrant's principal executive offices)
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 twelve 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 [ ]
Indicate the number of shares outstanding of each of the issuer's classes of
common stock as of the latest practical date.
As of October 31, 1999, there were 100 shares of the registrant's common stock
outstanding.
<PAGE> 2
INDEX
CONTINENTAL GLOBAL GROUP, INC.
Page
Part I Financial Information Number
Item 1 Financial Statements (Unaudited) 1
Condensed Consolidated Balance Sheets
September 30, 1999 and December 31, 1998 2
Condensed Consolidated Statements of Income
Three Months and Nine Months ended
September 30, 1999 and 1998 3
Condensed Consolidated Statements of Cash Flows
Nine Months ended September 30, 1999 and 1998 4
Notes to Condensed Consolidated Financial
Statements 5-13
Item 2 Management's Discussion and Analysis of
Financial Condition and Results of Operations 14-18
Item 3 Quantitative and Qualitative Disclosures
about Market Risk 19
Part II Other Information
Item 6 Exhibits and Reports on Form 8-K 20
Signatures 21
<PAGE> 3
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS (UNAUDITED)
1
<PAGE> 4
Continental Global Group, Inc.
Condensed Consolidated Balance Sheets
<TABLE>
<CAPTION>
September 30 December 31
1999 1998
--------------------------------------
(Unaudited) (Audited)
<S> <C> <C>
ASSETS:
Current assets:
Cash and cash equivalents $ 23,681,816 $ 26,350,700
Accounts receivable, net 33,888,070 44,423,640
Inventories 27,501,067 32,249,917
Other current assets 2,700,880 2,273,333
--------------------------------------
Total current assets 87,771,833 105,297,590
Property, plant and equipment 27,389,871 23,815,213
Less accumulated depreciation 9,987,557 8,048,953
--------------------------------------
17,402,314 15,766,260
Goodwill, net 19,739,068 19,669,858
Deferred financing costs 3,899,267 4,289,194
Other assets 762,822 734,389
--------------------------------------
$ 129,575,304 $ 145,757,291
======================================
LIABILITIES AND STOCKHOLDER'S EQUITY (DEFICIT):
Current liabilities:
Notes payable $ 9,611,862 $ 2,661,508
Trade accounts payable 20,962,520 40,522,707
Accrued compensation and employee benefits 5,176,837 5,342,206
Accrued interest on senior notes 6,600,000 3,300,000
Other accrued liabilities 4,958,268 8,115,497
Current maturities of long-term obligations 3,202,508 1,095,106
--------------------------------------
Total current liabilities 50,511,995 61,037,024
Senior notes 120,000,000 120,000,000
Other long-term obligations, less current maturities 2,929,772 2,226,461
Stockholder's equity (deficit):
Common stock, no par value, authorized 1,500 shares,
issued and outstanding 100 shares at stated value
of $5 per share 500 500
Paid-in capital 1,993,188 1,993,188
Accumulated deficit (43,138,267) (36,203,815)
Accumulated other comprehensive loss (2,721,884) (3,296,067)
--------------------------------------
(43,866,463) (37,506,194)
--------------------------------------
$ 129,575,304 $ 145,757,291
======================================
See notes to condensed consolidated financial statements.
</TABLE>
2
<PAGE> 5
Continental Global Group, Inc.
Condensed Consolidated Statements of Income
<TABLE>
<CAPTION>
Three months ended Nine months ended
September 30 September 30
1999 1998 1999 1998
--------------------------------- ---------------------------------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Net sales $ 46,710,752 $ 56,150,528 $ 162,245,125 $ 173,802,025
Cost of products sold 39,338,980 46,662,822 138,365,542 143,563,426
--------------------------------- ---------------------------------
Gross profit 7,371,772 9,487,706 23,879,583 30,238,599
Operating expenses:
Selling and engineering 3,478,933 4,173,852 11,488,357 12,481,090
General and administrative 2,218,236 2,088,160 7,009,354 6,308,761
Management fee 100,733 299,186 335,749 869,538
Amortization expense 155,581 168,491 464,289 508,883
Restructuring charges 375,908 298,752 820,896 594,188
--------------------------------- ---------------------------------
Total operating expenses 6,329,391 7,028,441 20,118,645 20,762,460
--------------------------------- ---------------------------------
Operating income 1,042,381 2,459,265 3,760,938 9,476,139
Other expenses:
Interest expense 3,941,012 3,707,252 11,286,718 10,963,724
Interest income (225,833) (370,876) (670,649) (1,320,426)
Miscellaneous, net (164,823) 57,023 (55,789) 152,038
--------------------------------- ---------------------------------
Total other expenses 3,550,356 3,393,399 10,560,280 9,795,336
--------------------------------- ---------------------------------
Loss before foreign income taxes (2,507,975) (934,134) (6,799,342) (319,197)
Foreign income tax benefit - (316,212) - (721,073)
--------------------------------- ---------------------------------
Net income (loss) $ (2,507,975) $ (617,922) $ (6,799,342) $ 401,876
================================= =================================
</TABLE>
See notes to condensed consolidated financial statements.
3
<PAGE> 6
Continental Global Group, Inc.
Condensed Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
Nine months ended September 30
1999 1998
---------------------------------------
(Unaudited)
<S> <C> <C>
Operating activities:
Net income (loss) $ (6,799,342) $ 401,876
Adjustments to reconcile net income (loss) to net cash used
in operating activities:
Provision for depreciation and amortization 2,618,288 2,500,224
Amortization of deferred financing costs 389,927 389,928
Gain on disposal of assets (149,036) (68,072)
Changes in operating assets and liabilities (3,820,884) (1,751,406)
---------------------------------------
Net cash provided by (used in) operating activities (7,761,047) 1,472,550
---------------------------------------
Investing activities:
Purchases of property, plant, and equipment (3,677,215) (2,364,113)
Proceeds from sale of property, plant, and equipment 369,007 124,462
Purchase of Huwood - (3,689,729)
---------------------------------------
Net cash used in investing activities (3,308,208) (5,929,380)
---------------------------------------
Financing activities:
Net increase in borrowings on notes payable 6,974,313 5,550,288
Proceeds from long-term obligations 5,321,346 345,085
Principal payments on long-term obligations (2,707,433) (910,747)
Distributions for income taxes (1,426,193) (1,442,765)
---------------------------------------
Net cash provided by financing activities 8,162,033 3,541,861
Effect of exchange rate changes on cash 238,338 (423,519)
---------------------------------------
Decrease in cash and cash equivalents (2,668,884) (1,338,488)
Cash and cash equivalents at beginning of period 26,350,700 30,882,733
---------------------------------------
Cash and cash equivalents at end of period $ 23,681,816 $ 29,544,245
=======================================
</TABLE>
See notes to condensed consolidated financial statements.
4
<PAGE> 7
Continental Global Group, Inc.
Notes to Condensed Consolidated Financial Statements (Unaudited)
September 30, 1999
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 three and nine month periods ended
September 30, 1999 are not necessarily indicative of the results that may be
expected for the year ending December 31, 1999. For further information, refer
to the consolidated financial statements and footnotes of Continental Global
Group, Inc. and subsidiaries for the year ended December 31, 1998, included in
the Form 10-K filed by the Company on March 31, 1999.
B. USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the amounts reported in the financial statements and accompanying notes.
Actual results could differ from those estimates.
C. INVENTORIES
Inventories, which consist of raw materials, manufactured and purchased parts,
and work in process, are stated at the lower of cost or market. Since inventory
records are maintained on a job order basis, it is not practical to segregate
inventories into their major classes. The cost for approximately 65% and 58% of
inventories at September 30, 1999 and December 31, 1998, respectively, is
determined using the last-in, first-out (LIFO) method with the remainder
determined using the first-in, first-out (FIFO) method. Had the FIFO method of
inventory (which approximates replacement cost) been used to cost all
inventories, inventories would have increased by approximately $2,101,000 and
$2,103,000 at September 30, 1999 and December 31, 1998, respectively.
D. FINANCING ARRANGEMENTS
During the second quarter of 1999, the Company's United States operations
purchased a manufacturing facility previously leased in Colorado for $1,600,000.
The purchase was financed through a term note bearing an interest rate of
7.445%.
In July 1999, the Company's Australian subsidiary renegotiated its revolving
credit facility. The new agreement provides for a term loan of approximately
$4.5 million (Australian dollars). These proceeds were used to pay the
outstanding balance of the BCE seller notes for approximately $3.0 million
(Australian dollars) and the balance for working capital.
5
<PAGE> 8
Continental Global Group, Inc.
Notes to Condensed Consolidated Financial Statements (Unaudited)
September 30, 1999
E. RESTRUCTURING CHARGES
The Company incurred restructuring charges of approximately $821,000 in the
first nine months of 1999 related to plans executed in 1998 to close a
manufacturing facility in Australia and merge its operations with other existing
facilities and to consolidate its facilities in the United Kingdom following the
acquisition of Huwood International (Huwood). The charges consist primarily of
severance and relocation costs. To date, the Company has incurred and paid total
restructuring charges of approximately $1,948,000 related to these plans. In
addition to the severance and relocation costs expensed to date, the Company
anticipates that an additional cost associated with the restructuring of
approximately $460,000 will be incurred in the remainder of 1999. These costs
will be expensed as incurred.
F. COMPREHENSIVE LOSS
The components of comprehensive loss for the three and nine month periods ended
September 30, 1999 and 1998 are as follows:
<TABLE>
<CAPTION>
Three months ended Nine months ended
September 30 September 30
1999 1998 1999 1998
------------------------------ ------------------------------
<S> <C> <C> <C> <C>
Net income (loss) $ (2,507,975) $ (617,922) $ (6,799,342) $ 401,876
Other comprehensive income:
Foreign currency translation
adjustment (144,852) (384,116) 574,183 (1,067,817)
------------------------------ ------------------------------
Comprehensive loss $ (2,652,827) $ (1,002,038) $ (6,225,159) $ (665,941)
============================== ==============================
</TABLE>
G. INCOME TAXES
The Company and its domestic subsidiaries have elected Subchapter S Corporation
Status for United States income tax purposes. Accordingly, the Company's United
States operations are not subject to income taxes as separate entities. The
Company's United States income is included in the income tax returns of the
stockholder. Under the terms of the Tax Payment Agreement with the stockholder,
the Company makes distributions to the stockholder for payment of income taxes.
The Company has subsidiaries located in Australia, the United Kingdom, and South
Africa, which are subject to income taxes in their respective countries.
6
<PAGE> 9
Continental Global Group, Inc.
Notes to Condensed Consolidated Financial Statements (Unaudited)
September 30, 1999
H. SEGMENT INFORMATION
While the Company primarily manages its operations on a geographical basis, the
Company operates in two principal business segments: conveyor equipment and
mobile home products. The conveyor equipment business markets its products in
four main business areas. The mining equipment business area includes the
design, manufacture and testing (and, outside the United States, installation,
monitoring and maintenance) of complete belt conveyor systems and components for
mining application primarily in the coal industry. The conveyor components
business area manufactures and sells components for conveyor systems primarily
for resale through distributor networks. The engineered systems business area
uses specialized project management and engineering skills to combine mining
equipment products, purchased equipment, steel fabrication and other outside
services for sale as complete conveyor equipment systems that meet specific
customer requirements. The bulk conveyor equipment business area designs and
manufactures a complete range of conveyor equipment sold to transport bulk
materials, such as cement, lime, food products and industrial waste.
The Company's mobile home products business manufactures and/or refurbishes axle
components sold directly to mobile home manufacturers. As part of this segment
the Company also sells mounted tires and rims to the mobile home industry.
Included in the other category is primarily the manufacture and sale of air
filtration equipment for use in enclosed environments, principally in the
textile industry. The manufacturing requirements for these products are
generally compatible with conveyor equipment production and thus maximize
utilization of the Company's manufacturing facilities for its primary products.
<TABLE>
<CAPTION>
Three months ended Nine months ended
September 30 September 30
1999 1998 1999 1998
-----------------------------------------------------------------
(in thousands) (in thousands)
<S> <C> <C> <C> <C>
Net sales:
Conveyor equipment $ 39,299 $ 45,885 $ 136,720 $ 144,321
Mobile home products 6,864 9,355 23,786 27,228
Other 548 911 1,739 2,253
-----------------------------------------------------------------
Total net sales $ 46,711 $ 56,151 $ 162,245 $ 173,802
=================================================================
Segment operating income:
Conveyor equipment $ 1,749 $ 2,843 $ 5,595 $ 10,841
Mobile home products 24 389 137 812
Other 28 84 34 213
-----------------------------------------------------------------
Total segment operating income 1,801 3,316 5,766 11,866
Management fee 101 299 336 870
Amortization expense 156 168 464 509
Restructuring charges 376 299 821 594
Corporate expense 126 91 384 417
-----------------------------------------------------------------
Total operating income 1,042 2,459 3,761 9,476
Interest expense 3,941 3,707 11,287 10,963
Interest income (226) (371) (671) (1,320)
Miscellaneous, net (165) 57 (56) 152
-----------------------------------------------------------------
Loss before foreign income taxes $ (2,508) $ (934) $ (6,799) $ (319)
=================================================================
</TABLE>
7
<PAGE> 10
Continental Global Group, Inc.
Notes to Condensed Consolidated Financial Statements (Unaudited)
September 30, 1999
I. GUARANTOR AND NON-GUARANTOR SUBSIDIARIES
Effective September 23, 1999, the Company's domestic subsidiaries, Continental
Conveyor & Equipment Company (CCE) and Goodman Conveyor Company (GCC), and
certain of its Australian subsidiaries, all of which are wholly owned, are the
guarantors of the $120 million Series B Senior Notes. Prior to this date, CCE
and GCC were the only guarantors of the Series B Senior Notes. The guarantees
are full, unconditional, and joint and several. Separate financial statements of
these guarantor subsidiaries are not presented as management has determined that
they would not be material to investors. The Company's United Kingdom and South
African subsidiaries are not guarantors of the Series B Senior Notes. The 1999
operations and cash flows of the Company's guarantor Australian subsidiaries are
included in the "Combined Guarantor Subsidiaries" column in the following
consolidating financial statements.
Summarized consolidating balance sheets as of September 30, 1999 and December
31, 1998 for the Company, the guarantor subsidiaries, and the non-guarantor
subsidiaries are as follows (in thousands):
<TABLE>
<CAPTION>
Combined Combined
The Guarantor Non-Guarantor
Company Subsidiaries Subsidiaries Eliminations Total
-----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
September 30, 1999:
Current assets:
Cash and cash equivalents $ 22,474 $ 1,010 $ 198 $ - $ 23,682
Accounts receivable, net (15) 28,422 5,473 8 33,888
Inventories - 24,232 3,269 - 27,501
Other current assets 69 1,730 902 - 2,701
-------------------------------------------------------------------------------
Total current assets 22,528 55,394 9,842 8 87,772
Property, plant, and
equipment, net - 11,823 5,579 - 17,402
Goodwill, net - 18,819 920 - 19,739
Investment in subsidiaries 60,009 19,724 - (79,733) -
Deferred financing costs 3,899 - - - 3,899
Other assets 154 (414) 1,039 (16) 763
-------------------------------------------------------------------------------
Total assets $ 86,590 $ 105,346 $ 17,380 $ (79,741) $ 129,575
===============================================================================
Current liabilities:
Notes payable $ - $ 7,143 $ 2,469 $ - $ 9,612
Trade accounts payable 389 15,215 5,366 (7) 20,963
Accrued compensation and
employee benefits - 4,501 676 - 5,177
Accrued interest 6,600 - - - 6,600
Other accrued liabilities 171 3,874 914 (1) 4,958
Current maturities of
long-term obligations - 3,202 - - 3,202
-------------------------------------------------------------------------------
Total current liabilities 7,160 33,935 9,425 (8) 50,512
Series B Senior Notes 120,000 - - - 120,000
Other long-term obligations - 2,762 167 - 2,929
Stockholder's equity
(deficit) (40,570) 68,649 7,788 (79,733) (43,866)
-------------------------------------------------------------------------------
Total liabilities and
stockholder's equity $ 86,590 $ 105,346 $ 17,380 $ (79,741) $ 129,575
(deficit) ===============================================================================
</TABLE>
8
<PAGE> 11
Continental Global Group, Inc.
Notes to Condensed Consolidated Financial Statements (Unaudited)
September 30, 1999
I. GUARANTOR AND NON-GUARANTOR SUBSIDIARIES (CONTINUED)
<TABLE>
<CAPTION>
Combined Combined
The Guarantor Non-Guarantor
Company Subsidiaries Subsidiaries Eliminations Total
-------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
December 31, 1998:
Current assets:
Cash and cash equivalents $ 19,969 $ 684 $ 5,698 $ - $ 26,351
Accounts receivable, net 292 20,556 25,593 (2,017) 44,424
Inventories - 24,869 7,381 - 32,250
Other current assets 38 1,782 4,682 (4,229) 2,273
-------------------------------------------------------------------------------
Total current assets 20,299 47,891 43,354 (6,246) 105,298
Property, plant, and
equipment, net - 6,109 9,657 - 15,766
Goodwill, net - 11,921 7,749 - 19,670
Investment in subsidiaries 58,709 11,892 2,697 (73,298) -
Deferred financing costs 4,289 - - - 4,289
Other assets 192 12,895 476 (12,829) 734
-------------------------------------------------------------------------------
Total assets $ 83,489 $ 90,708 $ 63,933 $ (92,373) $ 145,757
===============================================================================
Current liabilities:
Notes payable $ - $ 307 $ 2,662 $ (307) $ 2,662
Trade accounts payable 409 13,079 30,971 (3,936) 40,523
Accrued compensation and
employee benefits - 4,128 1,214 - 5,342
Accrued interest 3,300 - - - 3,300
Other accrued liabilities 171 4,675 3,297 (28) 8,115
Current maturities of
long-term obligations - 147 948 - 1,095
-------------------------------------------------------------------------------
Total current liabilities 3,880 22,336 39,092 (4,271) 61,037
Series B Senior Notes 120,000 - - - 120,000
Other long-term obligations - 194 14,062 (12,030) 2,226
Stockholder's equity
(deficit) (40,391) 68,178 10,779 (76,072) (37,506)
-------------------------------------------------------------------------------
Total liabilities and
stockholder's equity $ 83,489 $ 90,708 $ 63,933 $ (92,373) $ 145,757
(deficit) ===============================================================================
</TABLE>
9
<PAGE> 12
Continental Global Group, Inc.
Notes to Condensed Consolidated Financial Statements (Unaudited)
September 30, 1999
I. GUARANTOR AND NON-GUARANTOR SUBSIDIARIES (CONTINUED)
Summarized consolidating income statements for the three months and nine months
ended September 30, 1999 and 1998, respectively, for the Company, the guarantor
subsidiaries, and the non-guarantor subsidiaries are as follows (in thousands):
<TABLE>
<CAPTION>
Combined Combined
The Guarantor Non-Guarantor
Company Subsidiaries Subsidiaries Eliminations Total
-----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Three months ended September 30, 1999:
Net sales $ - $ 40,638 $ 6,073 $ - $ 46,711
Cost of products sold - 33,867 5,472 - 39,339
-----------------------------------------------------------------------
Gross profit 6,771 601 - 7,372
Total operating expenses 144 4,960 1,226 - 6,330
-----------------------------------------------------------------------
Operating income (loss) (144) 1,811 (625) - 1,042
Interest expense 3,441 458 42 - 3,941
Interest income (226) - - - (226)
Miscellaneous, net - (147) (18) - (165)
-----------------------------------------------------------------------
Income (loss) before foreign income
taxes (3,359) 1,500 (649) - (2,508)
Foreign income taxes - - - - -
-----------------------------------------------------------------------
Net income (loss) $ (3,359) $ 1,500 $ (649) $ - $ (2,508)
=======================================================================
</TABLE>
<TABLE>
<CAPTION>
Combined Combined
The Guarantor Non-Guarantor
Company Subsidiaries Subsidiaries Eliminations Total
-----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Three months ended September 30, 1998:
Net sales $ - $ 40,188 $ 16,320 $ (357) $ 56,151
Cost of products sold - 32,233 14,787 (357) 46,663
-----------------------------------------------------------------------
Gross profit - 7,955 1,533 - 9,488
Total operating expenses 103 4,133 2,793 - 7,029
-----------------------------------------------------------------------
Operating income (loss) (103) 3,822 (1,260) - 2,459
Interest expense 3,444 (120) 383 - 3,707
Interest income (371) - - - (371)
Miscellaneous, net - 53 4 - 57
-----------------------------------------------------------------------
Income (loss) before foreign income
taxes (3,176) 3,889 (1,647) - (934)
Foreign income taxes - - (316) - (316)
-----------------------------------------------------------------------
Net income (loss) $ (3,176) $ 3,889 $ (1,331) $ - $ (618)
=======================================================================
</TABLE>
10
<PAGE> 13
Continental Global Group, Inc.
Notes to Condensed Consolidated Financial Statements (Unaudited)
September 30, 1999
I. GUARANTOR AND NON-GUARANTOR SUBSIDIARIES (CONTINUED)
<TABLE>
<CAPTION>
Combined Combined
The Guarantor Non-Guarantor
Company Subsidiaries Subsidiaries Eliminations Total
----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Nine months ended September 30, 1999:
Net sales $ - $ 143,562 $ 18,683 $ - $ 162,245
Cost of products sold - 121,451 16,914 - 138,365
----------------------------------------------------------------------
Gross profit - 22,111 1,769 - 23,880
Total operating expenses 422 16,073 3,624 - 20,119
----------------------------------------------------------------------
Operating income (loss) (422) 6,038 (1,855) - 3,761
Interest expense 10,328 828 131 - 11,287
Interest income (671) - - - (671)
Miscellaneous, net - (52) (4) - (56)
----------------------------------------------------------------------
Income (loss) before foreign income
taxes (10,079) 5,262 (1,982) - (6,799)
Foreign income taxes - - - - -
----------------------------------------------------------------------
Net income (loss) $ (10,079) $ 5,262 $ (1,982) $ - $ (6,799)
======================================================================
</TABLE>
<TABLE>
<CAPTION>
Combined Combined
The Guarantor Non-Guarantor
Company Subsidiaries Subsidiaries Eliminations Total
----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Nine months ended September 30, 1998:
Net sales $ - $ 127,191 $ 47,470 $ (859) $ 173,802
Cost of products sold - 102,301 42,121 (859) 143,563
----------------------------------------------------------------------
Gross profit - 24,890 5,349 - 30,239
Total operating expenses 454 12,430 7,879 - 20,763
----------------------------------------------------------------------
Operating income (loss) (454) 12,460 (2,530) - 9,476
Interest expense 10,333 (524) 1,154 - 10,963
Interest income (1,320) - - - (1,320)
Miscellaneous, net - 213 (61) - 152
----------------------------------------------------------------------
Income (loss) before foreign income
taxes (9,467) 12,771 (3,623) - (319)
Foreign income taxes - (721) - (721)
----------------------------------------------------------------------
Net income (loss) $ (9,467) $ 12,771 $ (2,902) $ - $ 402
======================================================================
</TABLE>
11
<PAGE> 14
Continental Global Group, Inc.
Notes to Condensed Consolidated Financial Statements (Unaudited)
September 30, 1999
I. GUARANTOR AND NON-GUARANTOR SUBSIDIARIES (CONTINUED)
Summarized consolidating cash flow statements for the nine months ended
September 30, 1999 and 1998, respectively, for the Company, the guarantor
subsidiaries, and the non-guarantor subsidiaries are as follows (in thousands):
<TABLE>
<CAPTION>
Combined Combined
The Guarantor Non-Guarantor
Company Subsidiaries Subsidiaries Eliminations Total
---------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Nine months ended September 30, 1999:
Net cash provided by (used in)
operating activities $ (6,095) $ 626 $(1,642) $ (650) $ (7,761)
Investing activities:
Purchases of property, plant, and
equipment - (3,457) (220) - (3,677)
Proceeds from sale of property,
plant, and equipment - 39 330 - 369
Investment in subsidiaries (1,300) 1,300 - - -
---------------------------------------------------------------------
Net cash provided by (used in)
investing activities (1,300) (2,118) 110 - (3,308)
---------------------------------------------------------------------
Financing activities:
Net increase in borrowings on notes
payable - 6,830 (163) 307 6,974
Proceeds from long-term obligations - 5,321 - - 5,321
Principal payments on long-term
obligations - (2,672) (35) - (2,707)
Distributions for income taxes - (1,426) - - (1,426)
Distributions for interest on
senior notes 9,900 (9,900) - - -
Intercompany loan activity - (2,918) 2,568 350 -
---------------------------------------------------------------------
Net cash provided by (used in)
financing activities 9,900 (4,765) 2,370 657 8,162
Effect of exchange rate changes on cash - 291 (46) (7) 238
---------------------------------------------------------------------
Increase (decrease) in cash and cash
equivalents 2,505 (5,966) 792 - (2,669)
Cash and cash equivalents at beginning
of period 19,969 6,976 (594) - 26,351
---------------------------------------------------------------------
Cash and cash equivalents at end of
period $ 22,474 $ 1,010 $ 198 $ - $ 23,682
=====================================================================
</TABLE>
12
<PAGE> 15
Continental Global Group, Inc.
Notes to Condensed Consolidated Financial Statements (Unaudited)
September 30, 1999
I. GUARANTOR AND NON-GUARANTOR SUBSIDIARIES (CONTINUED)
<TABLE>
<CAPTION>
Combined Combined
The Guarantor Non-Guarantor
Company Subsidiaries Subsidiaries Eliminations Total
---------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Nine months ended September 30, 1998:
Net cash provided by (used in)
operating activities $ (7,339) $ 10,500 $ (3,443) $ 1,755 $ 1,473
Investing activities:
Purchases of property, plant, and
equipment - (784) (1,580) - (2,364)
Proceeds from sale of property,
plant, and equipment - 21 103 - 124
Purchase of Huwood - - (3,690) - (3,690)
Investment in Subsidiaries (3,690) - 3,690 - -
---------------------------------------------------------------------
Net cash used in investing activities (3,690) (763) (1,477) - (5,930)
---------------------------------------------------------------------
Financing activities:
Net increase in borrowings on notes
payable - 1,707 5,550 (1,707) 5,550
Proceeds from long-term obligations - - 345 - 345
Principal payments on long-term
obligations - (144) (839) 73 (910)
Distributions for income taxes (178) (1,265) - - (1,443)
Distributions for interest on
senior notes 9,900 (9,900) - - -
---------------------------------------------------------------------
Net cash provided by (used in)
financing activities 9,722 (9,602) 5,056 (1,634) 3,542
Effect of exchange rate changes on cash - - (303) (121) (424)
---------------------------------------------------------------------
Increase (decrease) in cash and cash
equivalents (1,307) 135 (167) - (1,339)
Cash and cash equivalents at beginning
of period 28,073 2,322 488 - 30,883
---------------------------------------------------------------------
Cash and cash equivalents at end of
period $ 26,766 $ 2,457 $ 321 $ - $ 29,544
=====================================================================
</TABLE>
13
<PAGE> 16
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the Consolidated
Financial Statements and related notes included in the Company's Form 10-K dated
March 29, 1999.
GENERAL
The Company believes it is a leading international manufacturer and supplier of
conveyor equipment for use in the coal mining industry. The Company estimates it
has the largest share of the United States market for idlers used in above
ground conveyor equipment and a significant share of the United States
underground coal mining conveyor equipment market. In January 1997, the Company
consummated the acquisition of BCE Holdings Pty. Ltd. (BCE), a group of conveyor
and related equipment and service companies in Australia. On April 1, 1997, the
Company acquired Hewitt-Robins, a United States manufacturer of conveyor
components. On October 17, 1997, the Company completed the acquisition of the
MECO Belts Group (MECO) from Joy Technologies Inc., a subsidiary of
Harnischfeger Industries. MECO is an international conveyor equipment company
with operations in the United States, United Kingdom, South Africa, and
Australia. On August 6, 1998, the Company acquired Huwood International (Huwood)
in the United Kingdom, which now establishes the Company as the leading
manufacturer and supplier of conveyor equipment for use in coal mining in the
United Kingdom.
RESULTS OF OPERATIONS
The following table sets forth, on a comparative basis, selected income
statement data as a percentage of net sales for the three month and nine month
periods ended September 30, 1999 and 1998.
<TABLE>
<CAPTION>
Three months ended Nine months ended
September 30 September 30
----------------------------------------------
1999 1998 1999 1998
<S> <C> <C> <C> <C>
Net sales 100.0% 100.0% 100.0% 100.0%
Cost of products sold 84.2 83.1 85.3 82.6
Gross profit 15.8 16.9 14.7 17.4
SG&A expenses 12.2 11.2 11.4 10.8
Management fee 0.2 0.5 0.2 0.5
Amortization expense 0.3 0.3 0.3 0.3
Restructuring charges 0.9 0.5 0.5 0.3
Operating income 2.2 4.4 2.3 5.5
</TABLE>
THREE MONTHS ENDED SEPTEMBER 30, 1999, COMPARED TO THREE MONTHS ENDED SEPTEMBER
30, 1998:
NET SALES
Net sales for the quarter decreased by $9.4 million, or 17%, from $56.1 million
in 1998 to $46.7 million in 1999. Net sales in the conveyor equipment segment
decreased by $6.6 million. The decrease in the conveyor equipment segment
primarily resulted from a decrease in domestic conveyor equipment sales of $5.1
million and a decrease in sales at the Australian subsidiary of $3.2 million,
partially offset by increased sales in the United Kingdom and South African
subsidiaries of $1.7 million. The decrease in domestic conveyor sales is the
result of reduced capital purchases in the coal industry, that the Company
believes were significantly related to excessive
14
<PAGE> 17
coal inventory levels. The sales decrease in Australia is due to the completion
of major projects in the first quarter of 1999 that started in the second
quarter of 1998. Net sales in the Company's mobile home products segment and
other segment decreased by $2.5 million and $0.3 million, respectively. The
decrease in the mobile home products segment is attributable to regional
softness in the mobile home market.
GROSS PROFIT
Gross profit for the quarter decreased by $2.1 million, or 22%, from $9.5
million in 1998 to $7.4 million in 1999.The conveyor equipment segment accounted
for $1.6 million of this decrease. While gross profit margins as a percentage of
sales in the Company's domestic conveyor equipment operations remained
unchanged, gross profit decreased by $1.2 million due to decreased sales volume
caused by the reduced capital purchases in the coal industry. Gross profit in
the foreign conveyor equipment operations decreased by $0.4 million, primarily
in the Australian operation due to lower sales volume and competitive market
conditions. Gross profit in the Company's mobile home products segment and other
segment decreased by $0.4 million and $0.1 million, respectively.
SG&A EXPENSES
SG&A expenses for the quarter decreased by $0.6 million, or 9%, from $6.3
million in 1998 to $5.7 million in 1999. This decrease is the result of the
favorable impact of the restructuring initiatives in the foreign subsidiaries
combined with the reduction in domestic manpower in the third quarter.
OPERATING INCOME
Operating income for the quarter decreased by $1.4 million, or 58%, from $2.4
million in 1998 to $1.0 million in 1999. The decrease is the result of the
decrease in gross profit of $2.1 million, offset by reduced SG&A expenses of
$0.6 million, a decrease in management fees of $0.2 million, and an increase in
restructuring charges of $0.1 million.
NINE MONTHS ENDED SEPTEMBER 30, 1999, COMPARED TO NINE MONTHS ENDED SEPTEMBER
30, 1998:
NET SALES
Net sales for the nine-month period decreased by $11.6 million, or 7%, from
$173.8 million in 1998 to $162.2 million in 1999. Sales in the Company's
domestic conveyor equipment segment decreased by $13.4 million, offset by an
increase in sales in the foreign conveyor equipment business of $5.8 million.
The decrease in the domestic conveyor sales is the result of reduced capital
purchases in the coal industry. The increase in the foreign conveyor equipment
segment is primarily the result of the August 1998 acquisition of Huwood. Sales
in the Company's mobile home products segment decreased by $3.5 million due to
regional softness in the mobile home market. The remaining decrease of $0.5
million occurred in the Company's other segment.
GROSS PROFIT
Gross profit for the nine-month period decreased by $6.3 million, or 21%, from
$30.2 million in 1998 to $23.9 million in 1999. Gross profit in the conveyor
equipment segment decreased by $5.4 million and gross profit in the mobile home
products segment and other segment decreased by $0.7 million and $0.2 million,
respectively. While gross profit margins as a percentage of sales in the
Company's domestic conveyor equipment operations showed a small improvement,
gross profit decreased by $1.9 million primarily due to decreased sales volume
caused by reduced capital purchases in the coal industry. Gross profit in the
foreign conveyor equipment operations declined by $3.5 million primarily due to
lower margins resulting from subcontract cost overruns on major fixed-price
Australian contracts in the first and second quarters of 1999.
15
<PAGE> 18
SG&A EXPENSES
SG&A expenses for the nine-month period decreased by $0.3 million, or 2%, from
$18.8 million in 1998 to $18.5 million in 1999. This decrease is the result of
the favorable impact of the restructuring initiatives in the foreign
subsidiaries combined with the reduction in domestic manpower in the third
quarter.
OPERATING INCOME
Operating income for the nine-month period decreased by $5.7 million, or 60%,
from $9.5 million in 1998 to $3.8 million in 1999. This decrease is the result
of the $6.3 million decrease in gross profit, offset by the $0.3 million
decrease in SG&A expenses, a $0.5 million decrease in management fees, and a
$0.2 million increase in restructuring charges. In accordance with the Company's
Management Agreement, the decrease in management fees is due to lower operating
income.
RESTRUCTURING CHARGES
The Company incurred restructuring charges of approximately $0.8 million in the
first nine months of 1999 related to plans executed in 1998 to close a
manufacturing facility in Australia and merge its operations with other existing
facilities and to consolidate its facilities in the United Kingdom following the
acquisition of Huwood. The charges consist primarily of severance and relocation
costs. To date, the Company has incurred and paid total restructuring charges of
approximately $1.9 million related to these plans. In addition to the severance
and relocation costs expensed to date, the Company anticipates that an
additional cost associated with the restructuring of approximately $0.5 million
will be incurred in the remainder of 1999. These costs will be expensed as
incurred.
BACKLOG
Backlog at September 30, 1999 was $49.1 million, an increase of $17.1 million,
or 53%, from $32.0 million at June 30, 1999. The Company's domestic backlog
increased $20.6 million primarily due to significant orders from a major
customer. This increase was offset by a reduction in the foreign backlog of $3.5
million. Management believes that approximately 65% of the backlog will be
shipped in 1999.
LIQUIDITY AND CAPITAL RESOURCES
Net cash provided by (used in) operating activities was $(7.8) million and $1.5
million for the nine months ending September 30, 1999 and 1998, respectively.
Net cash used in operating activities in 1999 is attributable to a net loss of
$6.8 million, a net increase in operating assets of $3.8 million, and a gain on
disposal of assets of $0.2 million, offset by depreciation and amortization of
$3.0 million. Net cash used in operating activities in 1998 resulted primarily
from net income of $0.4 million, increased by depreciation and amortization of
$2.9 million, offset by a net increase in operating assets of $1.8 million.
Net cash used in investing activities was $3.3 million and $5.9 million for the
nine months ending September 30, 1999 and 1998, respectively. Net cash used in
investing activities in 1999 represents net purchases of property, plant, and
equipment. These purchases include the purchase of a manufacturing facility at
the Company's operations in Colorado for $1.6 million. This facility was
previously leased. Net cash used in investing activities in 1998 represents net
purchases of property, plant, and equipment of $2.2 million and the purchase of
Huwood for $3.7 million.
Net cash provided by financing activities was $8.2 million and $3.5 million for
the nine months ending September 30, 1999 and 1998, respectively. Net cash
provided by financing activities in 1999 represents a net increase in borrowings
on notes payable of $7.0 million and proceeds from long-term obligations of $5.3
million, offset by principal payments on long-term obligations of $2.7
16
<PAGE> 19
million and distributions of $1.4 million for the payment of income taxes. The
proceeds from long-term obligations include $1.6 million which was used for the
purchase of the manufacturing facility in Colorado. Net cash provided by
financing activities in 1998 is the result of a net increase in borrowings on
notes payable of $5.5 million and proceeds from long-term obligations of $0.3
million, offset by principal payments on long-term obligations of $0.9 million
and distributions of $1.4 million for the payment of income taxes.
The Company's primary capital requirements consist of working capital, capital
expenditures and debt service. The Company expects current financial resources
and funds from operations to be adequate to meet anticipated cash requirements.
At September 30, 1999, the Company had cash and cash equivalents of $23.7
million and a credit facility line with $18.5 million available.
INTERNATIONAL OPERATIONS
The Company transacts business in a number of countries throughout the world and
has facilities in the United States, Australia, the United Kingdom, and South
Africa. As a result, the Company is subject to business risks inherent in
non-U.S. operations, including political and economic uncertainty, import and
export limitations, exchange controls and currency fluctuations. The Company
believes that the risks related to its foreign operations are mitigated by the
relative political and economic stability of the countries in which its largest
foreign operations are located. As the U.S. dollar strengthens and weakens
against foreign currencies in which the Company transacts business, its
financial results will be affected. The principal foreign currencies in which
the Company transacts business are the Australian dollar, the British pound
sterling, and the South African rand. The Company estimates that the fluctuation
of the U.S. dollar versus other currencies, primarily the Australian dollar and
the British pound, resulted in increases (decreases) to stockholder's equity of
approximately $575,000 and $(1,068,000) for the nine months ended September 30,
1999 and 1998, respectively.
IMPACT OF YEAR 2000
As the Year 2000 approaches, the Company is aware of the issues associated with
the programming code in existing computer systems. The 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 or hardware that have
date sensitive software or embedded chips may recognize a date using "00" as the
year 1900 rather than the year 2000. This could result in a system failure or
miscalculations causing disruptions of operations, including, among other
things, a temporary inability to process transactions, send invoices, or engage
in similar normal business activities.
The Company has been addressing the Year 2000 issue since mid-1997. A
company-wide taskforce was assembled to review all systems to determine whether
each system is Year 2000 compliant. The Company has utilized both internal and
external resources to identify, correct or reprogram, and test systems for the
Year 2000 compliance. The plan to resolve the problems involved four phases:
assessment, remediation, testing and implementation. In addressing the four
phases, the Company has reviewed its computer hardware and software; reviewed
its manufacturing operations for any embedded chips or software that could
affect production; reviewed the various manufactured products to determine
potential Year 2000 problems; and surveyed third party vendors to determine Year
2000 compliance.
To date, the Company has completed the assessment and remediation phases and is
substantially complete with the testing and implementation phases. The Company
expects to complete its Year 2000 activities within a timeframe that will enable
its material information systems to function without significant disruption in
Year 2000.
17
<PAGE> 20
The costs for the Company's Year 2000 assessment, remediation, testing and
implementation is estimated to be approximately $1.1 million, of which $0.9
million has been expended through September 30, 1999.
The Company performed an evaluation of domestic and international suppliers to
identify mission critical vendors. These vendors have been contacted and have
submitted written assurances that their operations will be prepared for the
millennium change and will provide an uninterrupted supply of components and
services. As a contingency plan to ensure an uninterrupted supply of components,
the Company has multiple suppliers for all critical components. The Company
currently has no other contingency plans in place in the event it does not
complete all phases of the Year 2000 program. The Company plans to evaluate the
status of completion each month in the fourth quarter of 1999 and determine
whether such a plan is necessary.
The information above contains certain forward-looking statements, including,
without limitation, statements relating to the Company's plans, strategies,
objectives, expectations, intentions and adequate resources that are made
pursuant to the "safe harbor" provisions of the Private Securities Litigation
Reform Act of 1995. Readers are advised that forward-looking statements about
the Year 2000 should be read in conjunction with the Company's disclosure under
the heading Cautionary Statement for Safe Harbor Purposes.
CAUTIONARY STATEMENT FOR SAFE HARBOR PURPOSES
This Management's Discussion and Analysis of Financial Condition and Results of
Operations (MD&A) contains forward-looking statements within the meaning of the
federal securities laws. As a general matter, forward-looking statements are
those focused upon future plans, objectives or performance as opposed to
historical items and include statements of anticipated events or trends and
expectations and beliefs relating to matters that are not historical in nature.
Such forward looking statements include, without limitation, statements
regarding the Company's Year 2000 compliance program. Such forward looking
statements are subject to uncertainties and factors relating to the Company's
operations and business environment, all of which are difficult to predict and
many of which are beyond the control of the Company, that could cause actual
results of the Company to differ materially from those matters expressed in or
implied by such forward-looking statements.
18
<PAGE> 21
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The following table provides information about the Company's Series B Senior
Notes. The table presents principal cash flows and interest rate by expected
maturity date.
Interest Rate Sensitivity
Principal Amount by Expected Maturity
Average Interest Rate
<TABLE>
<CAPTION>
Fair
Value,
(dollars in thousands) 1999 2000 2001 2002 2003 Thereafter Total 9/30/99
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Long-Term Obligations,
including current
portion
Fixed Rate $ - $ - $ - $ - $ - $ 120,000 $ 120,000 $ 72,000
Average interest rate 11% 11% 11% 11% 11% 11%
</TABLE>
The Company's interest income and expense are most sensitive to changes in the
general level of U.S. interest rates. In this regard, changes in U.S. interest
rates affect the interest earned on the Company's cash equivalents as well as
interest paid on its debt. To mitigate the impact of fluctuations in U.S.
interest rates, the Company generally borrows on a long-term basis to maintain a
debt structure that is fixed rate in nature.
A portion of the Company's operations consists of manufacturing and sales
activities in foreign jurisdictions. The Company manufactures and sells its
products in the United States, Australia, the United Kingdom, and South Africa.
As a result, the Company's financial results could be significantly affected by
factors such as changes in foreign currency exchange rates or weak economic
conditions in the foreign markets in which the Company distributes its products.
The Company's operating results are exposed to changes in exchange rates between
the U.S. dollar and the Australian dollar, the British pound sterling, and the
South African rand.
19
<PAGE> 22
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits: Refer to the index of exhibits.
(b) No reports on Form 8-K were filed during the quarter ended
September 30, 1999.
20
<PAGE> 23
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CONTINENTAL GLOBAL GROUP, INC.
By: /s/ Jimmy L. Dickinson
------------------------
Jimmy L. Dickinson
Vice President and Chief
Financial Officer (As duly
authorized representative and
as Principal Financial and
Accounting Officer)
CONTINENTAL CONVEYOR & EQUIPMENT COMPANY
By: /s/ Jimmy L. Dickinson
----------------------
Jimmy L. Dickinson
Vice President - Finance (As duly
authorized representative and as
Principal Financial and Accounting
Officer)
GOODMAN CONVEYOR COMPANY
By: /s/ Lawrence Kukulski
---------------------
Lawrence Kukulski
Vice President - Finance and
Administration (As duly authorized
representative and as Principal
Financial and Accounting Officer)
Date: November 12, 1999
21
<PAGE> 24
Continental Global Group, Inc.
Form 10-Q
Index of Exhibits
<TABLE>
<CAPTION>
Exhibit
Number Description of Exhibit
<S> <C> <C>
3.1 Certificate of Incorporation of Continental Global Group, *
Inc., as currently in effect
3.2 By-Laws of Continental Global Group, Inc., as currently in effect *
3.3 Certificate of Incorporation of Continental Conveyor & Equipment *
Company, as currently in effect
3.4 By-Laws of Continental Conveyor & Equipment Company, as currently *
in effect
3.5 Certificate of Incorporation of Goodman Conveyor Company, as *
currently in effect
3.6 By-Laws of Goodman Conveyor Company, as currently in effect *
4.1 Indenture, dated as of April 1, 1997, among Continental Global *
Group, Inc., Continental Conveyor & Equipment Company, Goodman
Conveyor Company, and the Trustee (containing, as exhibits,
specimens of the Series A Notes and the Series B Notes)
10.1
(a) Revolving Credit Facility, dated as of September 14, 1992, as *
amended by Amendment I, II, and III, among Continental Conveyor
& Equipment Company, Goodman Conveyor Company, and Bank One,
Cleveland, NA
(b) Amendment IV, dated as of December 31, 1998, to the Revolving
Credit Facility, dated as of September 14, 1992, among
Continental Conveyor & Equipment Company, Goodman Conveyor
Company, and Bank One, Cleveland, NA. (Filed as Exhibit 10.1(b)
to the Company's Form 10-Q for the quarter ended March 31, 1999,
and is incorporated herein by reference.)
(c) Letter of Amendment, dated as of July 26, 1999, to the Revolving
Credit Facility, dated as of September 14, 1992, among
Continental Conveyor & Equipment Company, Goodman Conveyor
Company, and Bank One, Cleveland, NA. (Filed as Exhibit 10.1(c)
to the Company's Form 10-Q for the quarter ended June 30, 1999,
and is incorporated herein by reference.)
(d) Letter of Amendment, dated as of November 4, 1999, to the
Revolving Credit Facility, dated as of September 14, 1992, among
Continental Conveyor & Equipment Company, Goodman Conveyor
Company, and Bank One, Cleveland, NA.
10.2 Share Sale Agreement dated as of November 8, 1996, as amended by *
First and Second Supplementary Deeds, among Continental Pty.
Ltd. and various Australian sellers, relating to the BCE
acquisition
10.3 Asset Purchase Agreement, dated as of March 3, 1997, among *
Continental Conveyor & Equipment Company, Process Technology
Holdings, Inc., and W.S. Tyler Incorporated, relating to the
Hewitt-Robins acquisition
10.4 Management Agreement, dated as of April 1, 1997, between *
Continental Global Group, Inc. and Nesco, Inc.
10.5 Tax Payment Agreement, dated as of April 1, 1997, among *
Continental Global Group, Inc., Continental Conveyor &
Equipment Company, Goodman Conveyor Company, and NES Group, Inc.
10.6 World Wide Purchase and Sale Agreement dated as of October 17,
1997, by and among Continental Conveyor International Inc., Joy
Technologies, Inc., and certain affiliates of Joy Technologies
Inc. (The "Purchase Agreement"). (All exhibits to the Purchase
Agreement have been omitted, and Registrant will furnish
supplementally to the Commission, upon request, a copy of any
omitted exhibit.) (Filed as Exhibit 2.0 to Form 8-K filed
November 3, 1997, and is incorporated herein by reference.)
27 Financial Data Schedule (filed electronically only)
</TABLE>
* Incorporated by reference from Form S-4 Registration Number 333-27665 filed
under the Securities Act of 1933.
<PAGE> 1
Exhibit 10.1(d)
November 4, 1999
To: Mr. C. E. Bryant, Jr.
President
Continental Conveyor and Equipment Company
Winfield, Alabama
and
Mr. Richard M. Sickinger
President
Goodman Conveyor Company
Belton, South Carolina
Re: Credit Facility and Security Agreement, dated as of August 27, 1993 (the
"Loan Agreement"), originally by and among Continental Conveyor & Equipment
Co. L.P., Goodman Conveyor Co. L.P. (collectively the "Original Borrowers")
and Bank One, NA, successor by merger to Bank One, Cleveland, NA (the
"Bank"), the Obligations of the Original Borrowers under said Loan
Agreement having been assumed by Continental Conveyor & Equipment Company
("Continental") and Goodman Conveyor Company (collectively with
Continental, the "Borrowers") pursuant to a certain Assumption and
Modification Agreement dated March 7, 1997 by and among the Borrowers and
the Bank, as amended from time to time thereafter (the "Loan Agreement").
Gentlemen:
The Bank hereby agrees and restates to amend Section 8.1(T) of the Loan
Agreement, effective September 30, 1999, to read in its entirety as follows:
"(T) Measured as of the end of each calendar quarter beginning
with the quarter ended September 30, 1999, the Borrowers' (as defined
below) combined operating income (which shall be before deduction for
any Management Fees) for the immediately preceding four quarters shall
be an amount equal to or greater than the sum of $14,000,000, based
upon the Borrowers' fiscal quarter-end financial statements prepared in
accordance with GAAP."
Furthermore, notwithstanding the prohibition against Distributions in
Section 8.2(H) of the Loan Agreement, the Bank hereby agrees that the Borrowers
are permitted to make advances or loans up to a maximum of $5,000,000 in the
aggregate to any one or more foreign-based subsidiaries of Continental during
the period beginning October 1, 1999 and ending on March 28, 2000.
<PAGE> 2
Continental Conveyor & Equipment Company and
Goodman Conveyor Company
November 4, 1999
Page 2 of 2
Except as herein specifically amended, directly or by reference, all of
the terms and conditions set forth in the Loan Agreement are confirmed and
ratified and shall remain in full force and effect.
Very truly yours,
BANK ONE, NA
By
------------------------------------
John R. Straka
Vice President
Confirmed and Agreed:
CONTINENTAL CONVEYOR &
EQUIPMENT COMPANY
By
------------------------------------
C. E. Bryant, Jr.
President
GOODMAN CONVEYOR COMPANY
By
------------------------------------
Richard M. Sickinger
President
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
financial statements listed on pages 2 and 3 of this Form 10-Q and is qualified
in its entirety by reference to such financial statements.
</LEGEND>
<CIK> 0001039785
<NAME> CONTINENTAL GLOBAL GROUP, INC.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> SEP-30-1999
<CASH> 23,682
<SECURITIES> 0
<RECEIVABLES> 33,888
<ALLOWANCES> 0
<INVENTORY> 27,501
<CURRENT-ASSETS> 87,772
<PP&E> 27,390
<DEPRECIATION> 9,988
<TOTAL-ASSETS> 129,575
<CURRENT-LIABILITIES> 50,512
<BONDS> 120,00
0
0
<COMMON> 1
<OTHER-SE> (43,867)
<TOTAL-LIABILITY-AND-EQUITY> 129,575
<SALES> 162,245
<TOTAL-REVENUES> 162,245
<CGS> 138,365
<TOTAL-COSTS> 138,365
<OTHER-EXPENSES> 336
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 11,287
<INCOME-PRETAX> (6,799)
<INCOME-TAX> 0
<INCOME-CONTINUING> (6,799)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (6,799)
<EPS-BASIC> 0
<EPS-DILUTED> 0
</TABLE>
