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 FOR THE QUARTER ENDED JULY 3, 1999
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
- ------ EXCHANGE ACT OF 1934
Commission file numbers 333-42411 and 333-42411-01
--------------------------------------------------
GLENOIT CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 13-3862561
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
GLENOIT ASSET CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 51-0343206
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
111 West 40th Street
New York, New York 10018
Telephone: (212) 391-3915
(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 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 [ ] No [X]
None of the voting securities of Glenoit Corporation or Glenoit Asset
Corporation is held by non-affiliates.
As of July 3, 1999, there were 1,000 shares of Glenoit Corporation common stock
outstanding.
DOCUMENTS INCORPORATED BY REFERENCE: NONE
<PAGE>
PART 1 - FINANCIAL INFORMATION
Item 1. Financial Statements
<TABLE>
<CAPTION>
GLENOIT CORPORATION AND SUBSIDIARIES
(a wholly-owned subsidiary of Glenoit Universal, Ltd.)
Consolidated Balance Sheets
January 2, July 3,
1999 1999
--------------- ----------------
ASSETS (Unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 339,700 $ 935,456
Receivables:
Trade accounts receivable, net of allowance of $2,360,000 and 29,666,112 48,107,774
$3,470,000 as of January 2, 1999 and July 3, 1999,
respectively
Other receivables 364,996 2,592,586
Inventories 19,734,042 55,320,113
Due from Holdings - 313,237
Prepaid expenses and other current assets 3,797,479 3,330,186
--------------- ----------------
Total current assets 53,902,329 110,599,352
Property, plant and equipment, net 49,108,311 70,684,937
Other assets:
Notes receivable from related party 266,821 256,816
Intangible assets, net of accumulated amortization of $1,735,000 35,715,233 51,033,686
and $2,146,000 as of January 2, 1999 and July 3, 1999,
respectively
Deferred loan costs and other, net of accumulated amortization of 5,195,653 9,543,162
$1,181,000 and $1,869,000 as of January 2, 1999 and July 3,
1999, respectively
Other assets 510,716 1,325,342
--------------- ----------------
Total assets $ 144,699,063 $ 243,443,295
=============== ================
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
2
<PAGE>
<TABLE>
<CAPTION>
GLENOIT CORPORATION AND SUBSIDIARIES
(a wholly-owned subsidiary of Glenoit Universal, Ltd.)
Consolidated Balance Sheets
January 2, July 3,
1999 1999
--------------- ---------------
LIABILITIES AND STOCKHOLDER'S DEFICIT (Unaudited)
<S> <C> <C>
Current liabilities:
Accounts payable $ 2,888,602 $ 13,209,449
Accrued expenses 21,820,034 17,201,908
Current maturities of long-term debt - 161,583,168
Due to Holdings 1,752,143 -
--------------- ---------------
Total current liabilities 26,460,779 191,994,525
Long-term debt less current maturities 160,707,499 95,000,000
Deferred income taxes 3,382,058 6,583,682
Other long-term liabilities 504,196 6,906,128
--------------- ---------------
Total liabilities 191,054,532 300,484,335
--------------- ---------------
Commitments and contingencies
Stockholder's deficit:
Common stock, $.01 par value, 1,000 shares authorized, issued
and outstanding as of January 2, 1999 and July 3, 1999 10 10
Additional paid-in capital 1,461,713 1,461,713
Accumulated deficit ( 46,966,633 ) ( 58,034,571)
Accumulated other comprehensive loss ( 850,559 ) ( 468,192)
--------------- ---------------
Total stockholder's deficit ( 46,355,469 ) ( 57,041,040)
--------------- ---------------
Total liabilities and stockholder's deficit $ 144,699,063 $ 243,443,295
=============== ===============
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
3
<PAGE>
<TABLE>
<CAPTION>
GLENOIT CORPORATION AND SUBSIDIARIES
(a wholly-owned subsidiary of Glenoit Universal, Ltd.)
Consolidated Statements of Income (Unaudited)
Three Months Ended Six Months Ended
----------------------------------- --------------------------------------
July 4, July 3, July 4, July 3,
1998 1999 1998 1999
--------------- -------------- --------------- ----------------
<S> <C> <C> <C> <C>
Net sales $ 49,160,174 $ 81,274,254 $ 87,940,092 $ 136,156,572
Cost of sales 31,916,312 56,459,636 59,153,275 96,917,173
--------------- -------------- --------------- ----------------
Gross profit 17,243,862 24,814,618 28,786,817 39,239,399
--------------- -------------- --------------- ----------------
Operating expenses:
Selling 3,843,598 6,564,125 7,263,648 11,449,489
Administrative 2,555,336 9,601,995 4,940,401 18,333,451
Research and development 494,104 1,399,110 922,081 2,039,425
Restructuring charge - - - 13,100,000
--------------- -------------- --------------- ----------------
Total operating expenses 6,893,038 17,565,230 13,126,130 44,922,365
--------------- -------------- --------------- ----------------
Income (loss) from operations 10,350,824 7,249,388 15,660,687 ( 5,682,966)
--------------- -------------- --------------- ----------------
Other income (expense):
Interest expense ( 3,312,564) ( 6,269,859) ( 6,315,913) ( 11,392,472)
Amortization of deferred financing costs ( 159,977) ( 395,719) ( 318,723) ( 687,538)
Other ( 20,369) 158,711 ( 3,706) 205,352
--------------- -------------- --------------- ----------------
Total other expense ( 3,492,910) ( 6,506,867) ( 6,638,342) ( 11,874,658)
--------------- -------------- --------------- ----------------
Income (loss) before income taxes 6,857,914 742,521 9,022,345 ( 17,557,624)
Income tax expense (benefit) 2,544,427 289,012 3,323,053 ( 6,489,686)
--------------- -------------- --------------- ----------------
Net income (loss) $ 4,313,487 $ 453,509 $ 5,699,292 $ ( 11,067,938)
================= ================= =============== ================
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
4
<PAGE>
<TABLE>
<CAPTION>
GLENOIT CORPORATION AND SUBSIDIARIES
(A WHOLLY-OWNED SUBSIDIARY OF GLENOIT UNIVERSAL, LTD.)
CONSOLIDATED STATEMENT OF STOCKHOLDER'S DEFICIT (UNAUDITED)
FOR THE SIX MONTHS ENDED JULY 3, 1999
Accumulated
Shares of Additional Other
Common Common Paid-in Accumulated Comprehensive
Stock Stock Capital Deficit Loss Total
---------- ---------- ------------ ------------------ ---------------- ----------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance as of
January 2, 1999 1,000 $ 10 $ 1,461,713 $ ( 46,966,633) $ ( 850,559) $ ( 46,355,469)
Net loss ( 11,067,938) ( 11,067,938)
Accumulated Other
Comprehensive
Income 382,367 382,367
---------- ---------- ------------ ------------------ ---------------- ----------------
Balance as of
July 3, 1999 1,000 $ 10 $ 1,461,713 $ ( 58,034,571) $ ( 468,192) $ ( 57,041,040)
========== ========== ============ ================== ================ ================
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (LOSS) (UNAUDITED)
Six Months Ended
----------------------------------------
July 4, July 3,
1998 1999
------------------ ----------------
Net income (loss) $ 5,699,292 $ ( 11,067,938)
Other comprehensive income (loss), net of tax:
Currency translation adjustment ( 288,751) 237,068
------------------ ----------------
Comprehensive income (loss) $ 5,410,541 $ ( 10,830,870)
================== ================
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
5
<PAGE>
<TABLE>
<CAPTION>
GLENOIT CORPORATION AND SUBSIDIARIES
(A WHOLLY-OWNED SUBSIDIARY OF GLENOIT UNIVERSAL, LTD.)
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
Six Months Ended
--------------------------------------
July 4, July 3,
1998 1999
--------------- ----------------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 5,699,292 ( 11,067,938)
Adjustments to reconcile net income (loss) to net cash
used in operating activities:
Depreciation and amortization 2,752,047 6,026,655
Restructuring charge - 13,100,000
Stock compensation 100,000 -
Loss (gain) on sale of property and equipment 16,305 ( 50,439)
Effect of foreign currency exchange rate ( 288,751) 382,367
Changes in operating assets and liabilities:
Trade and other receivables ( 22,940,129) ( 16,438,383)
Inventories ( 4,127,741) ( 17,547,663)
Prepaid expenses and other assets ( 658,135) ( 849,692)
Due to Holdings 2,302,845 ( 2,065,380)
Accounts payable 3,489,859 5,227,694
Accrued expenses and other liabilities 2,294,223 ( 3,478,525)
--------------- ----------------
Net cash used in operating activities ( 11,360,185) ( 26,761,304)
--------------- ----------------
Cash flows from investing activities:
Purchases of acquired businesses, net of cash acquired - ( 59,548,691)
Purchases of and additions to property, plant and equipment ( 10,920,042) ( 4,371,728)
Proceeds from sale of property and equipment and refunds of
deposits 41,392 436,856
--------------- ----------------
Net cash used in investing activities ( 10,878,650) ( 63,483,563)
--------------- ----------------
Cash flows from financing activities:
Payments on capital lease obligations ( 339,417) -
Proceeds from line of credit and issuance of debt, net 22,000,000 95,875,669
Advances on notes receivable - related parties ( 89,300) -
Payments for financing costs ( 5,035,046)
--------------- ----------------
Net cash provided by financing activities 21,571,283 90,840,623
--------------- ----------------
Net increase (decrease) in cash and cash equivalents ( 667,552) 595,756
Cash and cash equivalents at beginning of period 1,072,280 339,700
--------------- ----------------
Cash and cash equivalents at end of period $ 404,728 $ 935,456
=============== ================
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
6
<PAGE>
GLENOIT CORPORATION AND SUBSIDIARIES
(A WHOLLY-OWNED SUBSIDIARY OF GLENOIT UNIVERSAL, LTD.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
1. SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements
of Glenoit Corporation and subsidiaries (collectively the "Company")
have been prepared in accordance with generally accepted accounting
principles for interim financial information. 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 only normal
recurring adjustments) considered necessary for a fair presentation
have been included. Operating results for the six-month period ended
July 3, 1999 are not necessarily indicative of the results that may be
expected for the fiscal year ending January 1, 2000. The unaudited
financial statements should be read in conjunction with the audited
financial statements and footnotes thereto for the fiscal year ended
January 2, 1999.
CONSOLIDATION
Prior to September 1997, the accompanying financial statements included
the accounts of Glenoit Corporation and its wholly-owned subsidiaries
Glenoit Mills, Inc. ("Mills"), Tarboro Properties, Inc. ("Tarboro"),
and Glenoit Asset Corporation, Inc. ("Glenoit Asset Corporation"). In
September 1997, Glenoit Corporation merged with Mills and Tarboro. In
addition, Glenoit Corporation's newly formed wholly-owned subsidiary,
Glenoit Corporation of Canada ("Glenoit Canada") acquired the assets of
Collins & Aikman Canada Inc. On October 2, 1998, the Company acquired
all the capital stock of American Pacific Enterprises, Inc. On February
12, 1999, the Company acquired all the outstanding shares of capital
stock of Ex-Cell Home Fashions, Inc. (See Note 7). Accordingly, at July
3, 1999, the accompanying financial statements include the accounts of
Glenoit Corporation and its wholly-owned subsidiaries Glenoit Canada,
American Pacific Enterprises, Inc., Glenoit Asset Corporation and
Ex-Cell Home Fashions, Inc. The Company is a wholly-owned subsidiary of
Glenoit Universal, Ltd. ("Holdings").
7
<PAGE>
GLENOIT CORPORATION AND SUBSIDIARIES
(A WHOLLY-OWNED SUBSIDIARY OF GLENOIT UNIVERSAL, LTD.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
1. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
ADOPTION OF NEW ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards No. 133, Accounting for
Derivative Instruments and Hedging Activities ("SFAS No. 133"). SFAS
No. 133 establishes standards related to the recording and reporting of
derivative instruments. The FASB recently delayed the required
implementation of SFAS No. 133 until fiscal year 2001. The Company
recently entered into an interest rate hedge agreement but has yet to
determine any future impact of SFAS No. 133.
2. RELATED PARTY TRANSACTIONS
In March 1998, the Company loaned an officer $100,000 and created an
unsecured note receivable. During June 1998, Holdings sold three
officers of the Company a total of 857.46 shares of Holdings' Class A
common stock for approximately $158,000. Holdings loaned the officers
an amount equal to the sales price and created full recourse notes
receivable secured by the issued shares. In connection with the stock
issuance, the Company recorded non-cash compensation expense of
$100,000.
In July 1998, Holdings settled a dispute regarding additional purchase
price owed to a shareholder associated with the recapitalization in
December 1995 discussed in Note 2 to the Consolidated Financial
Statements as of January 2, 1999. Accordingly, Holdings paid
approximately $1.9 million to the shareholder during July 1998. These
funds were paid to Holdings by the Company as a dividend.
3. INVENTORIES
Inventories are summarized as follows:
January 2, July 3,
1999 1999
----------------- -----------------
(Unaudited)
Raw Materials $2,843,387 $9,743,610
Work-in-process 1,933,812 12,976,649
Finished goods 14,956,843 32,599,854
----------------- -----------------
Total inventories $19,734,042 $55,320,113
================= =================
8
<PAGE>
GLENOIT CORPORATION AND SUBSIDIARIES
(A WHOLLY-OWNED SUBSIDIARY OF GLENOIT UNIVERSAL, LTD.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
4. LONG-TERM DEBT
As of January 2, 1999 and July 3, 1999, long-term debt consisted of the
following:
January 2, July 3,
1999 1999
---- ----
(unaudited)
Senior credit facility $65,707,499 $161,583,168
11% Senior subordinated notes 95,000,000 95,000,000
------------ ------------
Total long-term debt 160,707,499 256,583,168
Less current portion - (161,583,168)
------------ ------------
$160,707,499 $ 95,000,000
============ ============
On April 1, 1997, the Company issued $100,000,000 of senior
subordinated notes (the "Senior Subordinated Notes") in a private
placement bond offering. The Senior Subordinated Notes bear interest at
a fixed rate of 11% and mature on April 15, 2007. The Company at its
option, can prepay these notes at a price of 105.5% of the original
principal amount, beginning on April 15, 2002. The premium declines by
1.833% thereafter each year beginning on April 15 until reduced to the
original principal amount. Additionally, prior to April 15, 2000, the
Company may redeem in the aggregate up to 25% of the original aggregate
principal amount with the proceeds of one or more Public Equity
Offerings, as defined in the Indenture governing the Senior
Subordinated Notes, at a redemption price of 110% of the original
principal amount. Upon a Change of Control of the Company, as defined
in the Indenture governing the Senior Subordinated Notes, the holder of
a Senior Subordinated Note may require the Company to redeem the note
at a price of 101% of the principal amount. Interest is payable
semi-annually, and began on October 15, 1997.
During September 1998, the Company acquired $5 million of the Senior
Subordinated Notes in the open market. These notes were subsequently
retired. In connection with this transaction, the Company recorded an
extraordinary loss of approximately $117,000, net of a tax benefit,
which consisted of the write off of a pro rata share of deferred
financing costs associated with the issuance of the Senior Subordinated
Notes.
On April 1, 1997, the Company also entered into a $70 million senior
credit facility (the "Facility") with a financial institution. Of the
total commitment of $70 million under the Facility, $25 million is
designated as an Acquisition Commitment and $45 million as a Working
Capital Commitment, which is a revolving credit facility limited to the
Borrowing Base as defined in the Facility. On October 2, 1998, the
Facility was amended to increase the Acquisition Commitment to $76
million. On October 2, 1998, in connection with the acquisition of
American Pacific Enterprises, Inc., discussed in Note 7, the Company
borrowed approximately $55.7 million under the Acquisition Commitment.
9
<PAGE>
GLENOIT CORPORATION AND SUBSIDIARIES
(A WHOLLY-OWNED SUBSIDIARY OF GLENOIT UNIVERSAL, LTD.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
4. LONG TERM DEBT (CONTINUED)
As further discussed in Note 7, the Company acquired all outstanding
shares of capital stock of Ex-Cell Home Fashions, Inc. on February 12,
1999. In connection with that acquisition, the Company amended and
restated the Facility to increase the borrowing availability to $200
million. The additional availability was reduced to $175 million in
connection with the June, 1999 amendment discussed below and is
currently comprised of (i) $65.0 million as the Working Capital
Commitment, subject to the Borrowing Base as defined, (ii) $40.0
million Term A loan and (iii) $70.0 million Term B loan. The borrowings
under both the Working Capital Commitment and Term A loan, as amended,
bear interest at the Base Rate plus 2.25% or the Eurodollar Rate plus
3.50%. Advances under the Term B loan bear interest at the Base Rate
plus 3.00% or the Eurodollar Rate plus 4.25%. Beginning in July 1999,
the interest rate charged on the Term A and Working Capital Commitment
borrowings could decrease by 1.0% if certain financial ratios are met.
Principal payments on the Term A and Term B loans begin on September
30, 1999 at a total of $1.7 million per quarter and increase over the
lives of the loans. Borrowings under the Term A loan and Working
Capital Commitment are required to be fully repaid by December 31, 2003
and borrowings under the Term B loan are required to be fully repaid by
June 30, 2004. On the date of the Ex-Cell acquisition, the Term A and
Term B loans were fully drawn. The bank also extended up to a total of
$5 million in letters of credit to the Company; however, the amount is
limited to the amount of the unused Working Capital Commitment. At July
3, 1999, the Company had approximately $51.6 million outstanding under
the Working Capital Commitment, and approximately $11.7 million
available under the Working Capital Commitment.
The Facility and Senior Subordinated Notes have various covenants, as
well as cross-acceleration provisions, that require the Company to:
maintain key financial ratios, restrict corporate borrowings, limit the
Company's ability to pay dividends, limit the type and amount of
certain investments which may be undertaken by the Company, limit the
Company's disposition of assets, limit the Company's ability to enter
into operating and capital leases, and restrict the Company's ability
to issue shares of its stock.
As of June 29, 1999, the Company's senior lenders waived the Company's
requirement to maintain and meet certain financial covenants contained
in the Facility for the period ending July 3, 1999. In connection with
obtaining the waiver, the Working Capital Commitment was reduced from
$90 million to $65 million and certain financial covenants were amended
including an amendment to require monthly testing of the Company's
total leverage and senior leverage ratios. The Company was not in
compliance with these ratios for the month of July, 1999 and,
accordingly, received a waiver for such non-compliance as well as
amended the August, 1999 and September, 1999 covenants on August 20,
1999. Based on the Company's operating results and current business
environment, it is likely that the Company will not be in compliance
with existing financial covenants in future periods including the month
ending October 30, 1999. Therefore, in accordance with generally
accepted accounting principles, all amounts outstanding under the
Facility have been classified as current liabilities. The Company is
currently not permitted to borrow more than $56 million under the
Working Capital Commitment, however, management believes that the
Company has sufficient liquidity from current cash holdings and
seasonal cashflows from operations to meet forecasted cash requirements
for the remainder of 1999. The Company is seeking additional amendments
to the Facility to conform the financial ratios contained therein to
the Company's revised business plan.
10
<PAGE>
GLENOIT CORPORATION AND SUBSIDIARIES
(A WHOLLY-OWNED SUBSIDIARY OF GLENOIT UNIVERSAL, LTD.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
4. LONG-TERM DEBT (CONTINUED)
While the Company's relationship with its senior lenders has been good
and discussions are ongoing, there can be no assurance that the Company
will obtain the necessary amendments or as to the terms thereof. The
failure to obtain the necessary amendments could have a material
negative effect on the Company's liquidity as it would be forced to
seek alternative financing and to consider additional strategic
options. The Company is currently in compliance with the requirements
of the indenture governing the Senior Subordinated Notes.
During June 1999, the Company entered into an interest rate cap
agreement which caps the maximum Eurodollar rate to be paid by the
Company at 6.5% on an $82.5 million notional amount. The Company paid
approximately $820,000 to enter into this agreement.
Substantially all of the Company's assets and operations are pledged as
collateral for the Facility. Holdings and Glenoit Asset Corporation
have guaranteed the Company's obligations under the Facility. Holdings
and Glenoit Asset Corporation have no substantive assets or operations
and rely on the Company to fund their obligations.
The Senior Subordinated Notes are fully and unconditionally guaranteed,
on a joint and several basis, by Glenoit Asset Corporation, American
Pacific Enterprises, Inc. and, as of February 12, 1999, Ex-Cell Home
Fashions, Inc. (together the "Subsidiary Guarantors"). Glenoit Asset
Corporation's operations consist solely of leasing certain trademarks
and other intangibles to Glenoit Corporation. Accordingly, Glenoit
Asset Corporation's assets and operations consist primarily of
intercompany assets and operations with Glenoit Corporation. Glenoit
Canada has not guaranteed the Senior Subordinated Notes. The financial
information of the subsidiary guarantors for these periods has been
excluded because management believes that this information is not
material to investors. Prior to the acquisition discussed in Note 7,
Glenoit Canada had no operations.
The following tables present summarized balance sheet information of
Glenoit Corporation, the Subsidiary Guarantors, and Glenoit Canada as
of July 3, 1999 and the related summarized operating statement and cash
flow statement information for the period then ended. The Company
believes that separate financial statements and other
11
<PAGE>
GLENOIT CORPORATION AND SUBSIDIARIES
(A WHOLLY-OWNED SUBSIDIARY OF GLENOIT UNIVERSAL, LTD.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
4. LONG-TERM DEBT (CONTINUED)
disclosures regarding the Subsidiary Guarantors, are not material to
investors. Summarized balance sheet information, in thousands, as of
July 3, 1999 is as follows (unaudited):
<TABLE>
<CAPTION>
Glenoit Subsidiary
Corporation Guarantors Eliminations Sub-total Canada Eliminations Consolidated
<S> <C> <C> <C> <C> <C> <C> <C>
Cash and cash equivalents ........... $ (30) 518 488 447 935
Accounts and other receivables,
net ............................... 29,149 18,315 47,464 3,237 50,701
Inventories ......................... 9,690 44,389 54,079 1,241 55,320
Other current assets ................ 3,234 333 -- 3,567 76 -- 3,643
--------- --------- --------- --------- --------- --------- ---------
Total current assets ........... 42,043 63,555 0 105,598 5,001 0 110,599
Property, plant and equipment, net .. 42,914 17,782 60,696 9,989 70,685
Other assets ........................ 174,302 84,809 (183,608) 75,503 384 (13,728) 62,159
--------- --------- --------- --------- --------- --------- ---------
Total assets ................... 259,259 166,146 (183,608) 241,797 15,374 (13,728) 243,443
========= ========= ========= ========= ========= ========= =========
Accounts payable .................... 6,363 5,778 12,141 1,068 13,209
Other current liabilities ........... 164,019 13,746 -- 177,765 1,020 -- 178,785
--------- --------- --------- --------- --------- --------- ---------
Total current liabilities ...... 170,382 19,524 0 189,906 2,088 0 191,994
Long-term debt ...................... 136,490 (41,490) 95,000 4,117 (4,117) 95,000
Other long-term liabilities ......... 8,960 4,504 13,464 26 13,490
Stockholders equity (deficit) ....... (56,573) 142,118 (142,118) (56,573) 9,143 (9,611) (57,041)
--------- --------- --------- --------- --------- --------- ---------
Total liabilities and equity ... 259,259 166,146 (183,608) 241,797 15,374 (13,728) 243,443
========= ========= ========= ========= ========= ========= =========
</TABLE>
Summarized operating statements information, in thousands, for the six
months ended July 3, 1999 is as follows:
<TABLE>
<CAPTION>
Glenoit Subsidiary Glenoit
Corporation Guarantors Eliminations Sub-total Canada Eliminations Consolidated
<S> <C> <C> <C> <C> <C> <C> <C>
Net sales ................................... $ 60,150 69,795 129,945 6,211 136,156
Cost of sales ............................... 44,856 47,317 -- 92,173 4,744 -- 96,917
-------- -------- -------- -------- -------- -------- --------
Gross profit ................................ 15,294 22,478 0 37,772 1,467 0 39,239
Operating expenses .......................... 25,540 18,731 44,271 651 44,922
Royalty income (expense) .................... 3,942 (3,942) -- 0 -- -- --
-------- -------- -------- -------- -------- -------- --------
Income (loss) from operations ............... (14,188) 7,689 0 (6,499) 816 0 (5,683)
Interest expense (income) ................... 12,280 (982) 11,298 94 11,392
Other expense (income) ...................... (5,422) (55) 5,530 53 (90) 520 483
Income taxes(benefit) ....................... (9,978) 3,196 --- (6,782) 292 -- (6,490)
-------- -------- -------- -------- -------- -------- --------
Net income(loss) ....................... (11,068) 5,530 (5,530) (11,068) 520 (520) (11,068)
======== ======== ======== ======== ======== ======== ========
</TABLE>
Summarized cash flow statement information, in thousands, for the six
months ended July 3, 1999 is as follows:
<TABLE>
<CAPTION>
<S> <C>
Glenoit Subsidiary Glenoit
Corporation Guarantors Eliminations Sub-total Canada Eliminations Consolidated
Cashflows from operating
activities ....................... $(20,536) (5,273) (25,809) (952) $(26,761)
Cashflows used in investing
activities ...................... (61,699) (1,060) (62,759) (725) (63,484)
Cashflows from financing activities.. 82,166 6,672 88,838 2,002 90,840
-------- -------- ------- ------- -------- -------- --------
Net increase(decrease) in cash ...... (69) 339 0 270 325 0 595
Cash at beginning of period ......... 39 179 -- 218 122 -- 340
-------- -------- -------- -------- -------- -------- --------
Cash at end of period ............... $ (30) $ 518 0 $ 488 $ 447 0 $ 935
======= ========= ======== ======== ======== ======== ========
</TABLE>
12
<PAGE>
GLENOIT CORPORATION AND SUBSIDIARIES
(A WHOLLY-OWNED SUBSIDIARY OF GLENOIT UNIVERSAL, LTD.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
4. LONG-TERM DEBT (CONTINUED)
Summarized operating statements information, in thousands, for the six
months ended July 4, 1998 is as follows:
<TABLE>
<CAPTION>
Glenoit Consolidated
Glenoit Asset Domestic Glenoit
Corporation Corporation Eliminations Operations Canada Eliminations Consolidated
<S> <C> <C> <C> <C> <C> <C> <C>
Net sales ........................... 81,145 81,145 6,795 87,940
Cost of sales ....................... 54,025 0 0 54,025 5,128 0 59,153
------- ------- ------- ------- ------- ------- -------
Gross profit ........................ 27,120 0 0 27,120 1,667 28,787
Operating expenses .................. 12,389 5 12,394 732 13,126
Royalty income (expense) ............ (5,083) 5,083 0 0 0 0 0
------- ------- ------- ------- ------- ------- -------
Income from operations .............. 9,648 5,078 14,726 935 0 15,661
Interest expense (income) ........... 7,422 (1,099) 6,323 (7) 6,316
Other expense (income) .............. (4,272) 4,015 (257) (10) 590 323
Income taxes ........................ 799 2,162 0 2,961 362 0 3,323
------- ------- ------- ------- ------- ------- -------
Net income .......................... 5,699 4,015 (4,015) 5,699 590 (590) 5,699
======= ======= ======= ======= ======= ======= =======
</TABLE>
Summarized cash flow statement information, in thousands, for the six months
ended July 4, 1998 is as follows:
<TABLE>
<CAPTION>
Consolidated
Glenoit Glenoit Asset Domestic Glenoit
Corporation Corporation Eliminations Operations Canada Eliminations Consolidated
<S> <C> <C> <C> <C> <C> <C> <C>
Cashflows from operating activities . (17,790) 6,175 (11,615) 255 (11,360)
Cashflows used in investing
activities ...................... (8,019) (8,019) (2,860) (10,879)
Cashflows from financing activities . 24,874 (6,168) 0 18,706 2,866 0 21,572
------- ------- ------- ------- ------- ------- -------
Net increase (decrease) in cash ..... (935) 7 (928) 261 (667)
Cash at beginning of period ......... 651 76 0 727 345 0 1,072
------- ------- ------- ------- ------- ------- -------
Cash at end of period ............... (284) 83 0 (201) 606 0 405
======= ======= ======= ======= ======= ======= =======
</TABLE>
13
<PAGE>
GLENOIT CORPORATION AND SUBSIDIARIES
(A WHOLLY-OWNED SUBSIDIARY OF GLENOIT UNIVERSAL, LTD.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
5. COMMITMENTS AND CONTINGENCIES
Holdings is a holding company and as a result does not have any
substantive assets or operations that generate revenues or cash flows.
Accordingly, Holdings relies on the Company's distribution of dividends
in order to fund its operations and meet its obligations, including its
interest and principal payments.
Holdings has obligations with a face amount of approximately $29.6
million, bearing interest at stated rates between 5% to 12.5%, to
shareholders ("Shareholder Notes") with principal due in 2004 and 2005.
These obligations are not reflected in the Company's accompanying
balance sheets or income statements. Subject to existing debt
restrictions, Shareholder Notes with a face amount of approximately
$9.7 million contain certain acceleration clauses. At the option of
Holdings, subject to the Company's existing debt restrictions, the
interest may be paid by the issuance of additional notes or in cash.
However, Holdings must pay interest in cash on certain of the
Shareholder Notes if defined levels of consolidated cash flows of
Holdings are attained. Annual interest payments during the next five
years are approximately $2.6 million per year, excluding interest on
notes that may be issued to pay interest. Assuming Holdings makes all
interest payments related to the Shareholder Notes with additional
notes, the Company's ultimate distribution of dividends in order for
Holdings to meet its existing debt obligations is expected to be
approximately $63 million beginning December 2004 through December
2005. However, the Company may be required to declare dividends in
order for Holdings to fund certain of its obligations in cash as
discussed above. Such amounts could approximate $3 million in the
aggregate and are due through December 2004, if the defined levels of
consolidated cash flow of Holdings are met.
6. INCOME TAXES
The Company and Holdings, have entered into a Tax Sharing Agreement
whereby the Company will pay Holdings its respective pro rata share of
the total consolidated tax liability or receive its respective pro rata
share of the total consolidated tax refund, as set forth in the tax
sharing agreement. Under the Tax Sharing Agreement, the Company and
Holdings are treated as separate tax groups.
14
<PAGE>
GLENOIT CORPORATION AND SUBSIDIARIES
(A WHOLLY-OWNED SUBSIDIARY OF GLENOIT UNIVERSAL, LTD.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
7. ACQUISITIONS
On October 2, 1998, the Company acquired all the capital stock of
American Pacific Enterprises, Inc. ("APE") for approximately $39.1
million, including fees and expenses, subject to post-closing
adjustments. In addition, approximately $16.6 million of indebtedness
of APE was extinguished by the Company in connection therewith. The
purchase agreement also includes additional payments to the former
owners of APE if certain earning targets for APE's operations are met
during 1998 and 1999. For fiscal 1998, approximately $12.3 million was
paid to the former owners and current employees during April 1999. Of
this amount, approximately $3.5 million was paid to current employees.
The remaining $8.8 million was recorded as additional purchase price. A
portion of any payments to be made related to 1999 earnings may be
recorded as compensation expense during 1999. Through July 3, 1999, the
Company has recorded approximately $1.7 million as compensation expense
associated with APE's forecasted 1999 results. APE is a leading
designer, importer and marketer of decorative textile home furnishings,
principally quilts and specialty decorative bedding items. The
acquisition has been accounted for as a purchase. The preliminary
purchase price allocation attributed approximately $31.8 million to net
working capital items, approximately $1.3 million to property, plant
and equipment and approximately $22.6 million to goodwill. Goodwill is
being amortized over 25 years.
On February 12, 1999, the Company acquired all the outstanding shares
of capital stock of Ex-Cell Home Fashions, Inc. ("Ex-Cell") in a single
transaction for approximately $43.4 million, including fees and
expenses, subject to post-closing adjustment. In addition,
approximately $6.9 million of indebtedness of Ex-Cell was extinguished
by the Company in connection therewith. The acquisition has been
accounted for as a purchase. The preliminary purchase price allocation
attributed approximately $14.7 million to net working capital items,
approximately $23.3 million to property, plant and equipment, $7.1
million to long term liabilities including deferred income taxes and
approximately $19.4 million to goodwill.
Goodwill is being amortized over 25 years.
The following unaudited proforma summary of consolidated results of
operations have been prepared as if the acquisitions of APE and Ex-Cell
occurred at the beginning of the periods presented. In connection with
the allocation of purchase price, the Company wrote up APE's inventory
by approximately $3.4 million. This write-up of inventory negatively
impacted gross margin during the Company's fourth quarter of 1998 as
that inventory was sold. This one-time nonrecurring adjustment of $2.0
million, net of tax, is not reflected in the proforma results presented
below. In connection with the allocation of purchase price, the Company
wrote up Ex-Cell's inventory by approximately $2.5 million. This
write-up will negatively impact gross margin during the Company's first
nine months of 1999. The impact of this write-up is not reflected in
the proforma results presented below. Certain costs associated with the
former shareholders of Ex-Cell are also excluded from the proforma
results.
15
<PAGE>
GLENOIT CORPORATION AND SUBSIDIARIES
(A WHOLLY-OWNED SUBSIDIARY OF GLENOIT UNIVERSAL, LTD.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
7. ACQUISITIONS (CONTINUED)
Six Months Ended
--------------------------------
July 4, July 3,
1998 1999
-------------- -------------
(Unaudited)
Net sales $152,800,000 $145,000,000
============ ============
Net income (loss) $5,700,000 $(10,100,000)
========== =============
These proforma results do not purport to be indicative of the results
that would have actually been obtained if APE and Ex-Cell had been
acquired as of January 4, 1998.
8. RESTRUCTURING CHARGE
On February 25, 1999, the Company's Board of Directors approved a plan
to consolidate its manufacturing operations of the Fabric Division into
its facilities located in North Carolina and Canada. In connection with
this activity, the Company discontinued operations at its leased
Tennessee facility and terminated substantially all of the associates
at that facility. The Company ceased substantially all operations in
the facility on or about May 28, 1999. During the first quarter of
fiscal 1999, the Company recorded a restructuring charge totaling $13.1
million of which $3.2 million related to the write-off of goodwill,
$1.8 million to cover the write-down of machinery and equipment to fair
market value and the remainder for the cost of operating leases and
severance and other personnel costs related to the termination of
approximately 225 associates. The components of the reserves for this
facility are as follows (in thousands):
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Original Reserve Usage Remaining Reserve
---------------- ----- -----------------
Anticipated expenditures related to $ 7,323 $ (268) $7,055
operating leases for plant and equipment
Anticipated severance benefits 850 (339) 511
------- ------- ------
$ 8,173 $ (607) $7,566
======= ======= ======
</TABLE>
16
<PAGE>
GLENOIT CORPORATION AND SUBSIDIARIES
(A WHOLLY-OWNED SUBSIDIARY OF GLENOIT UNIVERSAL, LTD.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
9. OPERATING SEGMENTS
DESCRIPTION OF SEGMENTS
Subsequent to the APE and Ex-Cell acquisitions, the Company has two
operating divisions: (1) Fabric Division ("Fabric"), manufacturer and
distributor of fabric for the apparel, automotive and home furnishing
industries and (2) Decorative Home Furnishings, which manufactures,
imports and distributes decorative textile home furnishings to all
major specialty and broadline retail distribution channels. Decorative
Home Furnishing products include specialty bedding items, shower
curtains, household rugs, decorative pillows and table linens. All
amounts shown below are in thousands.
Second Quarter Ended
------------------------------
July 4, July 3,
1998 1999
-------- --------
Net Sales
Fabric $ 37,860 $ 25,631
Decorative Home Furnishings 11,300 56,354
Interdivisional -- (711)
-------- --------
Consolidated $ 49,160 $ 81,274
======== ========
Operating income (loss)
Fabric $ 10,590 $ 4,580
Decorative Home Furnishings 1,947 4,990
Corporate/Other (2,186) (2,321)
-------- --------
Consolidated $ 10,351 $ 7,249
======== ========
Depreciation and amortization
Fabric $ 891 $ 1,060
Decorative Home Furnishings 205 1,601
Corporate/Other 366 549
-------- --------
Consolidated $ 1,462 $ 3,210
======== ========
17
<PAGE>
GLENOIT CORPORATION AND SUBSIDIARIES
(A WHOLLY-OWNED SUBSIDIARY OF GLENOIT UNIVERSAL, LTD.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
9. OPERATING SEGMENTS (CONTINUED)
Six Months Ended
--------------------------
July 4, July 3,
1998 1999
-------- --------
Net Sales
Fabric ...................... $ 66,381 $ 40,148
Decorative Home Furnishings . 21,559 96,720
Interdivisional ............. -- (711)
-------- --------
Consolidated ........... $ 87,940 $136.157
======== ========
Operating income (loss)
Fabric ...................... $ 16,612 $ (8,832)
Decorative Home Furnishings . 3,429 7,377
Corporate/Other ............. (4,380) (4,228)
-------- --------
Consolidated ........... $ 15,661 $ (5,683)
======== ========
Depreciation and amortization
Fabric ...................... $ 1,615 $ 2,227
Decorative Home Furnishings . 406 2,539
Corporate/Other ............. 731 1,261
-------- --------
Consolidated ........... $ 2,752 $ 6,027
======== ========
July 3,
1999
--------
Inventory and accounts receivable
Fabric............................... $28,431
Decorative Home Furnishings.. 74,997
--------
Consolidated................... $103,428
========
Note 4 identifies sales and assets of the Company's Canadian operation.
There were no other material sales or assets outside of the United States.
10. FACTORING RECEIVABLES
Under an agreement with a third party, Ex-Cell, subject to credit
approval, assigns and sells substantially all its accounts receivable
without recourse. In instances where credit approval has not been
received prior to shipment, the risk of collectibility is retained by
Ex-Cell. As of July 3, 1999, there were no factored receivables with
recourse.
18
<PAGE>
Item 2 Management's Discussion and Analysis of Financial Condition
and Results of Operations
OVERVIEW
On December 13,1995, Glenoit Universal, Ltd. ("Holdings") formed a wholly owned
subsidiary, Glenoit Corporation (the Company), formerly Glenoit Intermediate,
Inc. and exchanged all of the issued and outstanding stock of Glenoit Mills,
Inc. and subsidiary ("Mills") for all of the issued and outstanding shares of
common stock of Glenoit Corporation. During 1997, Mills was merged into the
Company. The Company has two operating segments: (i) a domestic manufacturer and
marketer of specialty fabrics, primarily for the apparel industry, known as
"sliver-knit" pile fabrics ("Fabric Division") and (ii) Decorative Home
Furnishings which manufactures, imports and distributes decorative textile home
furnishings. The Company's two most recent acquisitions, American Pacific
Enterprises and Ex-Cell Home Fashions, Inc., are part of the Decorative Home
Furnishings segment.
RECENT DEVELOPMENTS
On October 2, 1998, the Company acquired all the capital stock of American
Pacific Enterprises, Inc. ("APE") for approximately $39.1 million, including
fees and expenses, subject to post-closing adjustment. In addition,
approximately $16.6 million of indebtedness of APE was extinguished by the
Company in connection therewith. In addition, the Company paid the former
shareholders approximately $8.8 million and certain employees approximately $3.5
million during April 1999 in connection with the acquisition agreement. APE is a
leading designer, importer and marketer of decorative textile home furnishings,
principally quilts and decorative bedding items. The Company believes that the
acquisition of APE will expand its current product offerings to large retailers,
further penetrate the specialty retailing segment and diversify product sourcing
capabilities beyond North America to include Chinese suppliers.
On February 12, 1999, the Company acquired all the outstanding shares of capital
stock of Ex-Cell Home Fashions, Inc. ("Ex-Cell") in a single transaction for
approximately $43.4 million, subject to post-closing adjustments. In addition,
approximately $6.9 million of debt of Ex-Cell was extinguished in connection
therewith. Ex-Cell is engaged in the design, manufacture, importation and
distribution of textile home furnishings, principally shower curtains, table
linens, and decorative pillows. As a result of these acquisitions, the Company
believes it has transformed itself from a specialty textile manufacturer focused
on profitable niche segments to a diversified manufacturer and distributor of
consumer goods, with the majority of its revenues derived from the home textile
market.
On February 25, 1999, the Company's Board of Directors approved a plan to
consolidate its manufacturing operations of the Fabric Division into its
facilities located in North Carolina and Canada. In connection with this
activity, the Company discontinued all operations at its leased Tennessee
facility and terminated substantially all of the associates at that facility.
During the first quarter of fiscal 1999, the Company recorded a restructuring
charge totaling $13.1 million to cover the estimated costs associated with the
closing of that facility including the cost of operating leases, the write-off
of the related goodwill, the write-down of machinery and equipment to fair
market value and severance and other personnel costs. Substandard
19
<PAGE>
performance of the Company's Fabric Division has resulted in certain covenant
defaults under the Company's senior credit facility. See "Liquidity and Capital
Resources" below.
RESULTS OF OPERATIONS
Net sales for the quarter ended July 3, 1999, increased to $81.3 million or 65.3
% compared to $49.2 million during the comparable quarter in the prior year. The
increase in net sales occurred in the Decorative Home Furnishings segment which
increased from $11.3 million in the second quarter of 1998 to $56.4 million in
1999. The increase in net sales is substantially attributable to the
acquisitions of APE and Ex-Cell which generated combined sales of $41.8 million
during the second quarter of 1999. These increases in sales of home furnishing
items were slightly offset by a decline in sales of the Fabric Division to $25.6
million from $37.9 million. This decrease was due to continued softness in the
product category as a result of unseasonably warm weather and the continued
influx of low priced apparel products, mainly from Asia.
Net sales for the six months ended July 3, 1999 increased to $136.2 million from
$87.9 million in the first half of 1998. The increase was the result of the
sales growth of the Decorative Home Furnishing segment. APE and Ex-Cell
generated a total of $69.8 million for that period. Year-to-date sales for the
Fabric Division declined to $40.1 million from $66.4 million in the first half
of 1998.
Gross profit for the quarter ended July 3, 1999 was $24.8 million or 30.5% of
net sales compared to $17.2 million or 35.1% of net sales for the same period
last year. The increase of $7.6 million relates to an increase in sales in the
Decorative Home Furnishings segment which benefited from the inclusion of APE
and Ex-Cell's operating results which combined contributed $13.3 million of
gross profit in the second quarter of 1999. Gross margin was negatively impacted
by $1.1 million of additional cost of sales related to the sale of Ex-Cell's
inventory that had been written up at the time of acquisition in accordance with
generally accepted accounting principles. As a result of the significant decline
in sales, the Fabric Division's gross margin decreased to $7.4 million from
$13.6 million. The Fabric Division's results were negatively impacted by the
decreased volume which resulted in a low absorption of overhead costs.
Gross profit for the first half of 1999 was $39.2 million as compared to $28.8
million in 1998. The increase in gross profit was related to the Decorative Home
Furnishings segment and the acquisitions of APE and Ex-Cell. Gross margin was
negatively impacted by $1.7 million year-to-date July 3, 1999 as a result of
Ex-Cell's inventory write-up. These gains were offset by the decrease in gross
profit in the Fabric Division to $9.1 million in 1999 from $22.1 million for the
first half of 1998.
Operating expenses for the quarter ended July 3, 1999, were $17.6 million
compared to $6.9 million in the first quarter of the prior year. Operating
expenses for the six months ended July 3, 1999 totaled $44.9 million as compared
to $13.1 million for 1998. Dollar increases in 1999 relate to the operating
expenses of APE and Ex-Cell which totaled $10.4 million and $18.7 million for
the second quarter and first six months of 1999, respectively. These expenses
include $.5 million and $1.0 million respectively, of goodwill amortization
specific to APE and Ex-Cell as well as $ .6 million and $1.7 million,
respectively, of incentive compensation charges directly attributable
20
<PAGE>
to the APE acquisition agreement. Operating expenses for 1999 include a $13.1
million restructuring charge recorded in the first quarter related to the
consolidation of manufacturing facilities in the Fabric Division as discussed in
"Recent Developments".
The Company reported operating income of $7.2 million for the second quarter
ended July 3, 1999 compared to operating income of $ 10.4 million in the prior
year and an operating loss of $5.7 million for the first half of 1999 as
compared to income of $15.7 million in 1998 as a result of factors described
above.
Interest expense for the quarter ended July 3, 1999, was $6.3 million compared
to $3.3 million for the same period last year. Year-to-date interest expense in
1999 was $11.4 million compared to $6.3 million in 1998. Interest expense has
increased due to higher levels of debt as a result of the APE and Ex-Cell
acquisitions.
Net income for the quarter ended July 3, 1999, was $ .5 million compared to net
income of $4.3 million the prior year. Net loss for the six months ended July 3,
1999 was $11.1 million compared to net income of $5.7 million the prior year.
LIQUIDITY AND CAPITAL RESOURCES
The Company relies on internally generated cash flow from operations,
supplemented by borrowings under its senior credit facility and vendor financing
to meet its debt service requirements, capital expenditures and working capital
needs. The Company is highly leveraged.
On April 1, 1997, the Company issued $100 million of senior subordinated notes
(the "Notes"). Concurrently with the issuance of the Notes, the Company entered
into a $70 million senior credit facility ("the New Credit Facility") with a
syndicate of lenders led by BNP, pursuant to which the Company obtained
available credit (i) up to $45.0 million for working capital and general
corporate purposes (the "Working Capital Commitment"), subject to a Borrowing
Base, and (ii) up to $25.0 million for acquisitions (the "Acquisition
Commitment"). The Company also prepaid all outstanding indebtedness under the
Old Facility. On October 2, 1998, the new Credit Facility was amended to
increase the Acquisition Commitment to $76 million. On October 2, 1998, the
Company borrowed approximately $55.7 million under the Acquisition Commitment in
connection with the APE Acquisition. In connection with the acquisition of
Ex-Cell, the Company amended and restated the New Credit Facility to increase
its borrowing availability to $200 million. This additional availability was
reduced to $175 million in connection with the June, 1999 amendment discussed
below and is currently comprised of (i) $65 million as the Working Capital
Commitment, subject to the Borrowing Base, as defined, (ii) $40 million Term A
loan, and (iii) $70 million Term B loan. Principal payments under the Term A and
Term B loans begin on September 30, 1999 at a total of $1.7 million per quarter
and increase over the life of loans. Borrowings under the Term A loan and
Working Capital Commitment are required to be fully repaid by December 31, 2003
and borrowings under the Term B loan are required to be fully repaid by June 30,
2004. On the date of the Ex-Cell acquisition, both the Term A and Term B loans
were fully drawn. At July 3, 1999, there were borrowings of approximately $51.6
million under the Working Capital Commitment and approximately $11.7 million
available to
21
<PAGE>
borrow under the Working Capital Commitment. A more detailed description of the
senior subordinated notes and the senior credit agreement may be found in the
notes to consolidated financial statements. Ex-Cell has a factoring arrangement
whereby substantially all of its accounts receivable are assigned and sold
without recourse.
As of June 29, 1999, the Company's senior lenders waived the Company's
requirement to maintain and meet certain financial covenants contained in the
New Credit Facility for the period ending July 3, 1999. In connection with
obtaining the waiver, the Working Capital Commitment was reduced from $90
million to $65 million and certain financial covenants were amended including an
amendment to require monthly testing of the Company's total leverage and senior
leverage ratios. The Company was not in compliance with these ratios for the
month of July, 1999 and, accordingly, received a waiver for such non-compliance
as well as amended the August, 1999 and September, 1999 covenants on August 20,
1999. Based on the Company's operating results and current business environment,
it is likely that the Company will not be in compliance with existing financial
covenants in future periods including the month ending October 30, 1999.
Therefore, in accordance with generally accepted accounting principles, all
amounts outstanding under the New Credit Facility have been classified as
current liabilities. The Company is currently not permitted to borrow more than
$56 million under the Working Capital Commitment, however, management believes
that the Company has sufficient liquidity from current cash holdings and
seasonal cashflows from operations to meet forecasted cash requirements for the
remainder of 1999. The Company is seeking additional amendments to the New
Credit Facility to conform the financial ratios contained therein to the
Company's revised business plan. While the Company's relationship with its
senior lenders has been good and discussions are ongoing, there can be no
assurance that the Company will obtain the necessary amendments or as to the
terms thereof. The failure to obtain the necessary amendment could have a
material negative effect on the Company's liquidity as it would be forced to
seek alternative financing and to consider additional strategic options. The
Company is currently in compliance with the requirements of the indenture
governing the Notes.
Principal and interest payments in respect of the Notes and the New Credit
Facility represent significant liquidity requirements for the Company. In
addition, the Company will be permitted (but will not be obligated) to make
certain payments to Holdings, including payments (i) in respect of principal and
interest of the Seller Notes, (ii) to cover certain administrative and operating
expenses of Holdings and (iii) to cover certain tax liabilities allocable to the
Company, subject in each case to certain conditions as described in the Notes
and the New Credit Facility.
Assuming the Company is able to obtain the modifications to the New Credit
Facility discussed above, the Company believes that cash generated from
operations, together with vendor financing and amounts available under the New
Credit Facility, will be adequate to meet its debt service requirements, capital
expenditures and working capital needs for the foreseeable future, although no
assurance can be given in this regard. The Company's future operating
performance and ability to service or refinance the Notes and to extend or
refinance its other indebtedness will be subject to future economic conditions
and to financial, business and other factors beyond the Company's control.
Holdings is a holding company and as a result does not have any substantive
assets or operations that generate revenues or cashflows. Accordingly, Holdings
relies on the Company's distribution of dividends to meet its obligations,
including interest and principal payments. As of July 3, 1999, Holdings has
obligations with a face amount of $29.6 million, bearing interest at stated
22
<PAGE>
rates between 5% to 12.5%, to shareholders with principal due in 2004 and 2005.
For further discussion see Note 5 of the Unaudited Consolidated Financial
Statements.
In July 1998, Holdings settled a dispute regarding additional purchase price
owed to a shareholder associated with the recapitalization in December 1995
discussed in Note 2 to the Consolidated Financial Statements as of January 3,
1998. Accordingly, Holdings paid approximately $1.9 million to the shareholder
during July 1998. These funds were paid to Holdings by the Company as a
dividend.
During June 1999, the Company entered into an interest rate cap agreement which
caps the maximum Eurodollar rate to be paid by the Company at 6.5% on an $82.5
million notional amount. The Company paid approximately $820,000 to enter into
this agreement.
During the six months ended July 3, 1999, net cash used in operating activities
was $26.8 million, which resulted from the Company increasing its working
capital to meet its seasonal requirements. Excluding the purchase of Ex-Cell,
receivables increased by $16.4 million, inventories and other assets increased
by $18.4 million. Accounts payable increased by $5.2 million related to
increased raw material purchases.
CAPITAL IMPROVEMENTS
Capital expenditures for the six months ended July 3, 1999 were $4.4 million.
These additions were primarily in the Decorative Home Furnishings division for
advanced printing equipment and the purchase of machinery for the start-up of
the Company's decorative pillow operations. Expenditures also were made for
upgrades to management information systems.
SEASONALITY
The Company's business is seasonal in nature. Generally, there is increased
retail demand for the Company's products during the fall (back-to-school) and
holiday selling seasons. Consequently, demand for the Company's products is
generally higher during the Company's second and third fiscal quarters when such
products are produced and distributed for these selling seasons.
INFLATION
The Company believes that inflation has not had a material impact on the results
of operations presented.
IMPACT OF YEAR 2000 COMPLIANCE
The Company has evaluated its Year 2000 risk in three separate categories,
information technology systems ("IT"), non-IT systems ("Non-IT") and third party
relationships in which the Company has a material relationship ("Third Party
Risk"). The Company has developed a plan in which the risks in each of these
categories are being addressed and reviewed by the appropriate level of
management as follows:
23
<PAGE>
Due to conversions already in progress to improve operating performance,
the Company believes that a failure of the IT system is unlikely and any
possible failure would not result in a material adverse effect. Management
expects the conversions and the review of its IT systems to be completed by
October 1999 and, accordingly, a contingency plan for IT risks has not been
developed. However, should the remaining review indicate a contingency plan is
needed, the Company will react accordingly.
Non-IT systems involve embedded technologies such as microcontrollers or
microprocessors. Examples of Non-IT systems include telephones, security systems
and computer controlled manufacturing equipment. A malfunction in one of these
areas could result in the Company not being able to manufacture and ship product
on time to its customers. The Company has substantially completed its review of
Non-IT systems and management believes the Non-IT risks are minimal. Any costs
of addressing Non-IT risks are included in normal upgrade and replacement
expenditures which were planned outside of the Company's Year 2000 review. Since
these risks are believed to be minimal, a contingency plan for Non-IT risks has
not been developed. However, should any additional review indicate a contingency
plan is needed, the Company will react accordingly.
The Company's review of its Third Party Risk includes detailed reviews of
critical relationships with suppliers and business partners, such as banking
institutions and key raw material suppliers. The Third Party Risk review is
ongoing and is expected to be completed by September 1999. The Company presently
does not expect the risk associated with or costs of addressing the Company's
Third Party Risk to be material.
The Company's greatest Year 2000 risk would manifest itself in a critical
third party's system malfunction where the Company would suffer business
interruption until the supplier or customer corrected the problem or an
alternative supply was found. At this point in the Company's review, it is not
aware of any potential situations which may cause this scenario to occur, but
will formulate a contingency plan should its review indicate it is necessary to
do so.
There can be no assurance that these conclusions will be achieved and
actual results could differ from those anticipated. Specific factors that might
cause differences include, but are not limited to, the ability of the third
parties with which the Company has material relationships to modify or convert
their systems to be Year 2000 compliant, the ability of the Company to complete
its conversions on schedule, and similar uncertainties.
FORWARD-LOOKING STATEMENTS
This Form 10-Q contains certain forward-looking statements concerning the
Company's operations, economic performance and financial condition, including in
particular, the likelihood of the Company's success in developing and expanding
its business and of maintaining financing on reasonable terms. These statements
are based upon a number of assumptions and estimates, which are inherently
subject to significant uncertainties and contingencies, many of which are beyond
the control of the Company, and reflect future business decisions which are
subject to change. Some of these assumptions inevitably will not materialize,
and unanticipated events will occur which will affect the Company's results. The
forward looking statements in this Form 10-Q are intended to be subject to the
safe harbor protection provided by Section 27A of the Securities Act of 1933 and
Section 21E of the Securities Act of 1934 (the "Safe Harbor Acts").
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company's exposure to market risk relates to changes in interest rates
and foreign currency rates. The Company entered into an interest rate cap
agreement which caps the maximum Eurodollar rate to be paid by the Company at
6.5% on an $82.5 million notional amount. The Company's borrowings under its New
Credit Facility bear interest rates based on either a floating Base Rate or the
Eurodollar Rate. As of July 3, 1999, the Company had $161.6 million outstanding
under its New Credit Facility. The Company's other borrowings consist of $95.0
million of senior subordinated debt due on April 2007 at a fixed rate of 11%. As
of July 3, 1999, the average interest rate on the borrowings under the New
Credit Facility was 9.1%. The definitive extent of the Company's interest rate
risk under the New Credit Facility is not quantifiable or predictable because of
the variability of future interest rates and borrowing requirements.
The Company is exposed to foreign currency risk by virtue of its Canadian
and Chinese operations. However, less than 10% of its annual revenues are
generated by these operations. The Company feels its exposure to significant
adjustments in the Canadian and Chinese currencies to be minimal. Additionally,
the Company's consolidated financial statements are denominated in U.S. dollars
and, accordingly, changes in the exchange rate between U.S. dollars and these
two currencies affect the operating results as well as stockholder's deficit.
These adjustments, to date, have not been material to the Company's consolidated
balance sheet.
24
<PAGE>
PART II - OTHER INFORMATION
ITEM 2: LEGAL PROCEEDINGS
There have been no material developments in legal proceedings involving the
Company or its subsidiaries since the Company's Annual Report on Form 10-K
for the year ended January 2, 1999.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
3.1 Certificate of Incorporation of Glenoit Corporation is hereby
incorporated by reference to Exhibit 3.1 to Glenoit Corporation's
Registration Statement on Form S-4 (Registration No. 333-42411)
filed on December 16, 1997.
3.2 By-Laws of Glenoit Corporation are hereby incorporated by
reference to Exhibit 3.2 to Glenoit Corporation's Registration
Statement on Form S-4 (Registration No. 333-42411) filed on
December 16, 1997.
3.3 Certificate of Incorporation of Glenoit Asset Corporation is
hereby incorporated by reference to Exhibit 3.3 of Amendment No. 1
to Glenoit Asset Corporation's Registration Statement of Form S-4
(Registration No. 333-42411-01) filed February 4, 1998.
3.4 By-Laws of Glenoit Asset Corporation are hereby incorporated by
reference to Exhibit 3.4 of Amendment No. 1 to Glenoit Asset
Corporation's Registration Statement of Form S-4 (Registration No.
333-42411-01) filed February 4, 1998.
4.1 Indenture dated as of April 1, 1997 between Glenoit Corporation,
the Subsidiary Guarantors (as defined therein) and United States
Trust Company of New York is hereby incorporated by reference to
Exhibit 4.1 to Glenoit Corporation's Registration Statement on
Form S-4 (Registration No. 333-42411) filed on December 16, 1997.
4.2 Purchase Agreement dated as of March 26, 1997 among Glenoit
Corporation, the Subsidiary Guarantors (as defined therein),
Salomon Brothers Inc. and CIBC Wood Gundy Securities Corp. is
hereby incorporated by reference to Exhibit 4.2 to Glenoit
Corporation's Registration Statement on Form S-4 (Registration No.
333-42411) filed on December 16, 1997.
4.3 Registration Agreement dated as of March 26, 1997 among Glenoit
Corporation, the Subsidiary Guarantors (as defined therein),
Salomon Brothers Inc. and CIBC Wood Gundy Securities Corp. is
hereby incorporated by reference to Exhibit 4.3 to Glenoit
Corporation's Registration Statement on Form S-4 (Registration No.
333-42411) filed on December 16, 1997.
25
<PAGE>
10.1 Second Amended and Restated Credit Agreement dated as of April 1,
1997 among Glenoit Corporation, the banks, financial institutions
and other institutional lenders listed on the signature pages
thereto as the Restatement Lenders, the Banque Nationale de Paris,
as Administrative Agent for the Lender Parties (as defined
therein) is hereby incorporated by reference to Exhibit 10.1 to
Glenoit Corporation's Registration Statement on Form S-4
(Registration No. 333-42411) filed on December 16, 1997.
10.2 Supply Agreement dated February 1, 1997 by and between the Company
and Sterling Fibers, Inc. is hereby incorporated by reference to
Exhibit 10.2 of Amendment No. 1 to Glenoit Corporation's
Registration Statement on Form S-4 (Registration No. 333-42411)
filed on February 4, 1998.
10.3 Employment Agreement dated October 28, 1997 by and among the
Company, Glenoit Universal, Inc. and Thomas J. O'Gorman is hereby
incorporated to reference to Exhibit 10.3 of Amendment No. 1 to
Glenoit Corporation's Registration Statement on Form S-4
(Registration No. 333-42411) filed on February 4, 1998.
10.4 Employment Agreement dated August 5, 1996 by and between the
Company and Lester D. Sears is hereby incorporated by reference to
Exhibit 10.4 of Amendment No. 1 to Glenoit Corporation's
Registration Statement on Form S-4 (Registration No. 333-42411)
filed on February 4, 1998.
10.5 Stockholders Agreement dated as of December 14, 1995 by and among
Glenoit Universal, Inc., Citicorp Venture Capital, John Mowbray
O'Mara, Banque Nationale de Paris, The Equitable Life Assurance
Society of the United States, the Seller, Soannes Investment
Corporation, Thomas J. O'Gorman and certain other parties thereto
to is hereby incorporated by reference to Exhibit 10.5 of
Amendment No. 1 to Glenoit Corporation's Registration Statement on
Form S-4 (Registration No. 333-42411) filed on February 4, 1998.
10.6 Second Amendment and Waiver to the Credit Agreement, dated October
2, 1998, among Glenoit Corporation, the banks, financial
institutions and other institutional lenders parties to the Credit
Agreement and Banque Nationale de Paris as Agent is hereby
incorporated by reference to Exhibit 4.1 of Glenoit Corporation's
Form 8-K filed on October 16, 1998.
10.7 Stock Purchase Agreement dated October 2, 1998 among Glenoit
Corporation, American Pacific Enterprises, Inc., Steven J. Block,
Jeffrey J. Block and Gregory D. Block is hereby incorporated by
reference to Exhibit 2.1 of Glenoit Corporation's Form 8-K filed
on October 16, 1998
10.8 Third Amendment and Waiver to the Credit Agreement, dated October
30, 1998, among Glenoit Corporation, the banks, financial
institutions and other institutional lenders parties to the Credit
Agreement and Banque Nationale de Paris as Agent is incorporated
by reference to Exhibit 10.8 of Glenoit Corporation's Form 10-K
filed on April 1, 1999.
10.9 Third Amended and Restated Credit Agreement, dated February 12,
1999, among Glenoit Corporation, the banks, financial institutions
and other institutional lenders parties to the Credit Agreement
and Banque Nationale de Paris as Agent is hereby incorporated by
reference to Exhibit 4.1 of Glenoit Corporation's Form 8-K filed
on February 26, 1999.
26
<PAGE>
10.10 Stock Purchase Agreement dated February 12, 1999, among Glenoit
Corporation, Ex-Cell Home Fashions, Inc., Arnold Angerman, Irving
Angerman, Samuel Samelson and two trusts is hereby incorporated by
reference to Exhibit 2.1 of Glenoit Corporation's Form 8-K filed
on February 26, 1999.
10.11 Amendment No. 2 to the Third Amended and Restated Credit
Agreement, dated as of June 29, 1999, among Glenoit Corporation,
the banks, financial institutions and other institutional lenders
and Banque Nationale de Paris as Agent.
10.12 Amendment No. 3 to the Third Amended and Restated Credit
Agreement, dated as of August 20, 1999, among Glenoit Corporation,
the banks, financial institutions and other institutional lenders
and Banque Nationale de Paris as Agent.
21.1 Subsidiaries of Glenoit Corporation is hereby incorporated by
reference to Exhibit 21.1 to Glenoit Corporation's Registration
Statement on Form S-4 (Registration No. 333-42411) filed on
December 16, 1997.
27.1 Financial Data Schedule.
27.2 Financial Data Schedule.
(b) Reports on Form 8-K
On February 26, 1999, the Company filed on Form 8-K information
regarding the acquisition of the capital stock of Ex-Cell Home
Fashions, Inc. which occurred on February 12, 1999. In addition, on
April 27, 1999, the Company filed an amendment to this Form 8-K to
include required financial information related to the acquisition.
27
<PAGE>
SIGNATURES
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.
Dated: August 23, 1999
GLENOIT CORPORATION
By /s/ LESTER D. SEARS
----------------------------------------------
Lester D. Sears
Executive Vice President and
Chief Financial Officer
(On behalf of the Registrant and as Principal
Financial and Accounting Officer)
SIGNATURES
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.
Dated: August 23, 1999
GLENOIT ASSET CORPORATION
By /s/ LESTER D. SEARS
----------------------------------------------
Lester D. Sears
Executive Vice President and
Chief Financial Officer
(On behalf of the Registrant and as Principal
Financial and Accounting Officer)
28
AMENDMENT NO. 2 TO THE
THIRD AMENDED AND RESTATED CREDIT AGREEMENT
Dated as of June 29, 1999
AMENDMENT NO. 2 TO THE THIRD AMENDED AND RESTATED CREDIT
AGREEMENT dated as of February 12, 1999 among Glenoit Corporation, a Delaware
corporation (the "Borrower"), the banks, financial institutions and other
institutional lenders listed on the signature pages thereof as the Restatement
Lenders (the "Lenders"), the bank listed on the signature pages thereof as the
Issuing Bank (the "Issuing Bank"), Banque Nationale de Paris, as the swing line
bank (the "Swing Line Bank") and as administrative agent (the "Agent") for the
Lender Parties and the arranger (the "Arranger"), Fleet National Bank, as
syndication agent (the "Syndication Agent"), and LaSalle Bank National
Association, as documentation agent (the "Documentation Agent"; together with
the Agent and the Syndication Agent, the "Agents") and the THIRD AMENDED AND
RESTATED SECURITY AGREEMENT dated as of February 12, 1999 from the Borrower and
the other Grantors as defined therein to the Agent.
PRELIMINARY STATEMENTS:
(1) The Borrower, the Lenders and the Agents have entered into
a Third Amended and Restated Credit Agreement dated as of February 12, 1999 (as
amended by Amendment No. 1 dated as of April 14, 1999, and as further amended,
supplemented or modified to date, the "Credit Agreement"). Capitalized terms not
otherwise defined in this Amendment have the same meanings as specified in the
Credit Agreement.
(2) The Borrower and the other Loan Parties propose that (a)
Ex-Cell be permitted to replace the Ex-Cell Factoring Program, (b) the Borrower
be permitted to (i) enter into a factoring arrangement on terms and conditions
acceptable to the Agent to factor Accounts Receivable arising from its fabric
division (the "Fabric Factoring Program") and (ii) sell certain equipment
located in Jacksboro, Tennessee and certain real property located in
Bentonville, Arkansas, the proceeds of such sales being used to make prepayments
of the Term Borrowings. The Borrower requests that the Required Lenders amend
the Credit Agreement to permit the foregoing.
(3) The Borrower, the other Loan Parties and the Lenders have
agreed to amend the Credit Agreement and the Third Amended and Restated Security
Agreement as hereinafter set forth.
SECTION 1. Waiver to the Credit Agreement. The Borrower hereby
requests that the Required Lenders waive, and by their signature on the
signature pages hereto, the Required Lenders hereby waive as of the date hereof
and subject to the satisfaction of the conditions precedent set forth in Section
4: (a) maintenance of the Total Leverage Ratio less than or equal to the ratio
set forth in Section 5.04(a) for the Rolling Period ending in June 1999; (b)
maintenance of the Senior Leverage Ratio less than or equal to the ratio set
forth in Section 5.04(a) for the Rolling Period ending in June 1999; and (c)
maintenance of the Interest Coverage Ratio less than or equal to the ratio set
forth in Section 5.04(c) for the Rolling Period ending in June 1999.
SECTION 2. Amendments to the Credit Agreement. The Credit
Agreement is, effective as of the date hereof and subject to the satisfaction of
the conditions precedent set forth in Section 3 below, hereby amended as
follows:
<PAGE>
(a) Section 1.01 of the Credit Agreement is hereby
amended as follows:
(i) the following defined terms are hereby added
thereto in the proper alphabetic order and read, respectively,
as follows:
"'Approved Factoring Program' means each of the
Ex-Cell Factoring Program and the Fabric Factoring Program
(collectively, the 'Approved Factoring Programs'";
"'Approved Program Agreement' means each of the Ex-Cell
Program Agreement and the Fabric Program Agreement
(collectively, the 'Approved Factoring Program Agreements'.";
"'Approved Program Purchaser' means each of the Ex-Cell
Program Purchaser, the Fabric Program Purchaser and each other
Person who meets the definition of "Eligible Assignee" and is
a purchaser or factor approved by the Agent under an Approved
Program Agreement.";
"'Approved Program Receivable' means any Receivable that is a
Fabric Program Receivable or an Ex-Cell Program Receivable.";
"'Fabric Factoring Program' means, from time to time, a
factoring arrangement on terms and conditions satisfactory to
the Agent between the Borrower, as seller, and a Person
satisfactory to the Agent and who meets the definition of
"Eligible Assignee", as the factor or purchaser (such person
being, a "Fabric Program Purchaser") of Accounts Receivable
arising in the ordinary course of business of the Borrower's
fabric division.";
"'Fabric Program Agreement' means each agreement executed by
the Borrower and a Fabric Program Purchaser governing or in
connection with the Fabric Factoring Program, as such
agreement may be amended, supplemented or modified from time
to time solely in accordance with its terms, the terms and
conditions hereof and upon the Agent's prior written
consent.";
"'Fabric Program Purchaser' has the meaning specified in the
definition of "Fabric Factoring Program".";
"'Fabric Program Receivable' means any Receivable arising in
the ordinary course of business of the Borrower's fabric
division and that is (a) owned by the Borrower immediately
prior to such receivable being purchased under the Fabric
Factoring Program or (b) owned by the Borrower and eligible to
be purchased under the Fabric Factoring Program or (c) owned
by the Borrower and subject to a Lien in favor of an Fabric
Program Purchaser.";
(ii) each of the definitions of "Ex-Cell Factoring
Program", "Ex-Cell Program Agreement", "Ex-Cell Program
Purchaser" and "Ex-Cell Program Receivable" therein is hereby
amended and restated to read, respectively, as follows:
"'Ex-Cell Factoring Program' means, from time to
time, a factoring arrangement on terms and conditions
satisfactory to the Agent between Ex-Cell, as
<PAGE>
seller, and a Person satisfactory to the Agent and who meets
the definition of "Eligible Assignee", as factor or purchaser
(such person being, an "Ex-Cell Program Purchaser").";
"'Ex-Cell Program Agreement' means each agreement executed by
Ex-Cell and an Ex-Cell Program Purchaser governing or in
connection with the Ex-Cell Factoring Program, as such
agreement may be amended, supplemented or modified from time
to time solely in accordance with its terms, the terms and
conditions hereof and upon the Agent's prior written
consent.";
"'Ex-Cell Program Purchaser' has the meaning specified in the
definition of "Ex-Cell Factoring Program".";
"'Ex-Cell Program Receivable' means any Receivable (a) owned
by Ex-Cell immediately prior to such receivable being
purchased under an Ex-Cell Factoring Program or (b) owned by
Ex-Cell and eligible to be purchased under an Ex-Cell
Factoring Program or (c) owned by Ex-Cell and subject to a
Lien in favor of an Ex-Cell Program Purchaser.";
(iii) Clause (b) of the definition of "Eligible
Inventory" is hereby amended by deleting therefrom the phrase
"Ex-Cell Program Receivable" and substituting therefor the
phrase "Approved Program Receivable";
(iv) Clause (m) of the definition of "Eligible
Receivables" is hereby amended by deleting therefrom the
phrase "Ex-Cell Program Receivables" and substituting therefor
the phrase "Approved Program Receivables";
(v) the definition of "Extraordinary Receipt" therein
is hereby amended by deleting the phrase "or (b)" from the
penultimate line thereof and substituting therefor, the
following phrase:
"(b) any tax refund for Fiscal Year 1998 or (c)";
(vi) the definition of "Funded Debt" therein is
hereby amended by deleting the phrase "any Debt arising
pursuant to the terms of the Accounts Receivable Management
Agreement" from the proviso clause of such definition and
substituting for such phrase, the phrase "any Debt arising
pursuant to the terms of any Approved Program Agreement".
(vii) the definition of "Related Documents" therein
is hereby amended by deleting the phrase "the Ex-Cell Program
Agreement" and substituting therefor the phrase "each Approved
Program Agreement".
(b) Section 2.06(b)(ii)(A) is hereby amended by deleting the
reference "Section 5.02(e)" therein and substituting therefor the
reference "Sections 5.02(e)(i) through (vi)".
(c) Section 5.02(a)(ix) is hereby amended and restated in its
entirety to read as follows:
<PAGE>
"(ix) Liens on Approved Program Receivables in favor of any
Approved Program Purchaser created under an Approved Factoring
Program.".
(d) Section 5.02(b)(iii)(G) is hereby amended and restated in
its entirety to read as follows:
"(G) Debt incurred by a Loan Party under an Approved Program
Agreement.".
(e) Section 5.02(e) is hereby amended by (i) deleting the word
"and" that follows subclause (v) thereof and (ii) deleting
subclause (vi) thereof and substituting for such subclause the
following:
"(vi) sales of Approved Program Receivables in
accordance with the terms and conditions of an
Approved Program Agreement; and
(vii) sales of the assets listed on
Schedule 5.02(e)(vii), in each case conducted on an
arm's-length basis for fair market value."
(f) Section 5.02(f)(vii) is hereby amended by deleting the
amount "$250,000" therein and substituting therefor the amount
"$500,000".
(g) Section 5.02(k)(i)(z) is hereby amended and restated in
its entirety to ready as follows:
"(z) upon the prior written consent of the Agent, the
prepayment of Debt under an Approved Program Agreement
(except, to the extent any repurchase of Accounts Receivable
is in accordance with the terms and conditions of the
applicable Approved Program Agreement, such repurchase may be
made without any further consent from the Agent), or".
(h) Section 5.02(m)(iv) is hereby amended and restated in its
entirety to read as follows:
"(iv) in favor of an Approved Program Purchaser in connection
with an Approved Factoring Program".
(i) Section 5.04(a) is hereby amended and restated in its
entirety to read:
"(a) Leverage Ratios. (i) Maintain a Total Leverage
Ratio as of the end of each Rolling Period ended during each
Fiscal Month of each Fiscal Year set forth below of not more
than the ratio set forth below for each Rolling Period ended
during each such Fiscal Month:
------------------------ ---------------
Fiscal Month Ratio
------------------------ ---------------
March 1999 5.85:1.00
------------------------ ---------------
June 1999 5.85:1.00
------------------------ ---------------
July 1999 6.25:1.00
------------------------ ---------------
<PAGE>
August 1999 6.00:1.00
------------------------ ---------------
Sep 1999 5.85:1.00
------------------------ ---------------
Dec 1999 5.85:1.00
------------------------ ---------------
March 2000 5.85:1.00
------------------------ ---------------
June 2000 5.85:1.00
------------------------ ---------------
Sep 2000 5.85:1.00
------------------------ ---------------
Dec 2000 5.85:1.00
------------------------ ---------------
March 2001 5.85:1.00
------------------------ ---------------
June 2001 5.65:1.00
------------------------ ---------------
Sep 2001 5.65:1.00
------------------------ ---------------
Dec 2001 5.35:1.00
------------------------ ---------------
March 2002 5.35:1.00
------------------------ ---------------
June 2002 5.35:1.00
------------------------ ---------------
Sep 2002 5.10:1.00
------------------------ ---------------
Dec 2002 5.10:1.00
------------------------ ---------------
March 2003 4.85:1.00
------------------------ ---------------
June 2003 4.85:1.00
------------------------ ---------------
Sep 2003 4.60:1.00
------------------------ ---------------
Dec 2003 4.60:1.00
------------------------ ---------------
March 2004 4.35:1.00
------------------------ ---------------
(ii) Maintain a Senior Leverage Ratio as of the end
of each Rolling Period ended during each Fiscal Month of each Fiscal
Year set forth below of not more than the ratio set forth below for
each Rolling Period ended during each such Fiscal Month:
------------------------ ---------------
Fiscal Month Ratio
------------------------ ---------------
March 1999 3.70:1.00
------------------------ ---------------
June 1999 3.70:1.00
------------------------ ---------------
July 1999 3.80:1.00
------------------------ ---------------
August 1999 3.70:1.00
------------------------ ---------------
Sep 1999 3.70:1.00
------------------------ ---------------
Dec 1999 3.70:1.00
------------------------ ---------------
March 2000 3.70:1.00
------------------------ ---------------
June 2000 3.70:1.00
------------------------ ---------------
Sep 2000 3.70:1.00
------------------------ ---------------
Dec 2000 3.70:1.00
------------------------ ---------------
March 2001 3.70:1.00
------------------------ ---------------
June 2001 3.50:1.00
------------------------ ---------------
Sep 2001 3.50:1.00
------------------------ ---------------
Dec 2001 3.25:1.00
------------------------ ---------------
March 2002 3.25:1.00
------------------------ ---------------
June 2002 3.25:1.00
------------------------ ---------------
Sep 2002 3.00:1.00
------------------------ ---------------
Dec 2002 3.00:1.00
------------------------ ---------------
March 2003 2.75:1.00
------------------------ ---------------
June 2003 2.75:1.00
------------------------ ---------------
Sep 2003 2.50:1.00
------------------------ ---------------
<PAGE>
Dec 2003 2.50:1.00
------------------------ ---------------
March 2004 2.25:1.00
------------------------ ---------------
(j) Schedule I is hereby amended and restated in its entirety
to read as set forth in Exhibit A hereto.
(k) Schedule 5.02(e)(vii) shall read as set forth in Exhibit B
hereto.
SECTION 3. Amendments to the Security Agreement. The Security
Agreement is, effective as of the date hereof and subject to the satisfaction of
the conditions precedent set forth in Section 3 below, hereby amended to delete
each of the addresses appearing under the signature blocks thereof and
substituting therefor the following addresses, respectively:
(a) for Glenoit Corporation, 109 W. James Street, Tarboro, NC
27886;
(b) for Glenoit Universal, Ltd., 109 W. James Street, Tarboro,
NC 27886;
(c) for Glenoit Assets Corp., 109 W. James Street, Tarboro, NC
27886;
(d) for American Pacific Enterprises, Inc., 109 W. James
Street, Tarboro, NC 27886;
(e) for Grand Avenue Corp., 109 W. James Street, Tarboro, NC
27886;
(f) for Ex-Cell Home Fashions, Inc., 109 W. James Street,
Tarboro, NC 27886;
(g) for Ex-Cell of Bentonville, Inc., 109 W. James Street,
Tarboro, NC 27886; and
(h) for Ex-Cell Linde of Carolina, Inc., 109 W. James Street,
Tarboro, NC 27886.
SECTION 4. Conditions of Effectiveness. This Amendment shall
become effective as of the date first above written when, and only when (a) the
Agent shall have received counterparts of this Amendment executed by the
Borrower and the Required Lenders or, as to any of the Lenders, advice
satisfactory to the Agent that such Lender has executed this Amendment, and the
consent attached hereto executed by each of the Guarantors and each of the
Grantors and (b) the Borrower shall have reduced, in accordance with Section
2.05(a), the total Working Capital Commitments to $65,000,000. Furthermore, this
Amendment is subject to the provisions of Section 8.01 of the Credit Agreement.
SECTION 5. Representations and Warranties of the Borrower. The
Borrower represents and warrants as follows:
(a) the representations and warranties contained in each Loan
Document are correct on and as of the date hereof, after giving effect
to this Amendment, as though made on and as of the date hereof, other
than any such representations or warranties that by their terms, refer
to a specific date, in which case, as of such specific date; and
(b) no Default has occurred and is continuing under the Credit
Agreement, as amended hereby, or would result from this Amendment or
the consummation of the transactions contemplated hereby.
<PAGE>
SECTION 6. Reference to and Effect on the Loan Documents. (a)
On and after the effectiveness of this Amendment, each reference in the Credit
Agreement to "this Agreement", "hereunder", "hereof" or words of like import
referring to the Credit Agreement, and each reference in the Notes and each of
the other Loan Documents to "the Credit Agreement", "thereunder", "thereof" or
words of like import referring to the Credit Agreement, shall mean and be a
reference to the Credit Agreement, as amended by this Amendment.
(b) On and after the effectiveness of this Amendment, each
reference in the Security Agreement to "this Agreement", "hereunder",
"hereof" or words of like import referring to the Security Agreement,
and each reference in each of the other Loan Documents to "the Security
Agreement", "thereunder", "thereof" or words of like import referring
to the Security Agreement, shall mean and be a reference to the
Security Agreement, as amended by this Amendment.
(c) The Credit Agreement, the Security Agreement, the Notes
and each of the other Loan Documents, as specifically amended by this Amendment,
are and shall continue to be in full force and effect and are hereby in all
respects ratified and confirmed.
(d) The execution, delivery and effectiveness of this
Amendment shall not, except as expressly provided herein, operate as a waiver of
any right, power or remedy of any Lender or the Agent under any of the Loan
Documents, nor constitute a waiver of any provision of any of the Loan
Documents.
SECTION 7. Costs, Expenses and Taxes. The Borrower agrees to
pay on demand all costs and expenses of the Agent in connection with the
preparation, execution, delivery and administration, modification and amendment
of this Amendment, the Notes and the other instruments and documents to be
delivered hereunder (including, without limitation, the reasonable fees and
expenses of counsel for the Agent) in accordance with the terms of Section 8.04
of the Credit Agreement. In addition, the Borrower shall pay any and all stamp
and other taxes payable or determined to be payable in connection with the
execution and delivery of this Amendment and the other instruments and documents
to be delivered hereunder, and agree to save the Agent and each Lender harmless
from and against any and all liabilities with respect to or resulting from any
delay in paying or omission to pay such taxes.
SECTION 8. Execution in Counterparts. This Amendment may be
executed in any number of counterparts and by different parties hereto in
separate counterparts, each of which when so executed shall be deemed to be an
original and all of which taken together shall constitute but one and the same
agreement. Delivery of an executed counterpart of a signature page to this
Amendment by telecopier shall be effective as delivery of a manually executed
counterpart of this Amendment.
SECTION 9. Governing Law. This Amendment shall be governed by,
and construed in accordance with, the laws of the State of New York.
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment to be executed by their respective officers thereunto duly authorized,
as of the date first above written.
GLENOIT CORPORATION
By /s/ Lester D. Sears
-------------------
Title: EVP and CFO
<PAGE>
GLENOIT UNIVERSAL, LTD.
By /s/ Lester D. Sears
Name: Lester D. Sears
Title: EVP and CFO
GLENOIT ASSETS CORP.
By /s/ Lester D. Sears
Name: Lester D. Sears
Title: EVP and CFO
AMERICAN PACIFIC ENTERPRISES, INC.
By /s/ Lester D. Sears
Name: Lester D. Sears
Title: EVP and CFO
GRAND AVENUE CORP.
By /s/ Lester D. Sears
Name: Lester D. Sears
Title: EVP and CFO
EX-CELL HOME FASHIONS, INC.
By /s/ Lester D. Sears
Name: Lester D. Sears
Title: EVP and CFO
EX-CELL OF BENTONVILLE, INC.
By /s/ Lester D. Sears
Name: Lester D. Sears
Title:EVP and CFO
EX-CELL LINDE OF CAROLINA, INC.
By /s/ Lester D. Sears
Name: Lester D. Sears
Title: EVP and CFO
<PAGE>
AGENT
BANQUE NATIONALE DE PARIS,
as Agent
By /s/ Alan Mustachi
Title: Director
By /s/ John Caparella
Title: VP
LENDERS
BANQUE NATIONALE DE PARIS
By /s/ Alan Mustachi
Title: Director
By /s/ John Caparella
Title: VP
<PAGE>
BOEING CAPITAL CORPORATION
By /s/ David Nelson
Name: David Nelson
Title: Special Credits Officer
CENTURA BANK
By /s/ Lowry Perry
Name: Lowry Perry
Title: VP
COMERICA
By /s/ David W. Shirey
Name: David W. Shirey
Title: Assistant Vice President
DEUTSCHE FINANCIAL SERVICES
By /s/ Philip G. Porcher, IX
Name: Philip G. Porcher, IX
Title: Vice President
<PAGE>
FIRST SOURCE FINANCIAL LLP,
By First Source Financial, Inc. as its
Agent/Manager
By /s/ Gregory R. Cooper
Name: Gregory R. Cooper
Title: Senior Vice President
<PAGE>
FLEET BANK, N.A.
By /s/ Alfred Bonfantini
Name: Alfred Bonfantini
Title: Senior Vice President
<PAGE>
Floating Rate Porfolio
By: INVESCO Senior Secured Management,
Inc., as attorney in fact
By /s/ Anne M. McCarthy
Name: Anne M. McCarthy
Title: Authorized Signatory
<PAGE>
LASALLE BANK NATIONAL
ASSOCIATION
By /s/ Kristen J. Lindbergh
Name: Kristen J. Lindbergh
Title: Corporate Banking Officer
<PAGE>
KZH ING-1 LLC
By /s/ Virginia Conway
Name: Virginia Conway
Title:Authorized Agent
<PAGE>
KZH ING-2 LLC
By /s/ Virginia Conway
Name: Virginia Conway
Title:Authorized Agent
<PAGE>
KZH ING-3 LLC
By /s/ Virginia Conway
Name: Virginia Conway
Title:Authorized Agent
<PAGE>
METROPOLITAN LIFE INSURANCE
COMPANY
By /s/ James R. Dinger
Name: James R. Dinger
Title: Director
<PAGE>
VAN KAMPEN SENIOR FLOATING RATE FUND
By /s/ Jeffrey W. Maillet
Name: Jeffrey W. Maillet
Title: Senior Vice President and Director
VAN KAMPEN PRIME RATE INCOME TRUST
By Jeffrey W. Maillet
Name: Jeffrey W. Maillet
Title: Senior Vice President and Director
EXHIBIT 10.12
AMENDMENT NO. 3 TO THE
THIRD AMENDED AND RESTATED CREDIT AGREEMENT
Dated as of August 20, 1999
AMENDMENT NO. 3 AND WAIVER TO THE THIRD AMENDED AND RESTATED
CREDIT AGREEMENT dated as of February 12, 1999 among Glenoit Corporation, a
Delaware corporation (the "Borrower"), the banks, financial institutions and
other institutional lenders listed on the signature pages thereof as the
Restatement Lenders (the "Lenders"), the bank listed on the signature pages
thereof as the Issuing Bank (the "Issuing Bank"), Banque Nationale de Paris, as
the swing line bank (the "Swing Line Bank") and as administrative agent (the
"Agent") for the Lender Parties and the arranger (the "Arranger"), Fleet
National Bank, as syndication agent (the "Syndication Agent"), and LaSalle Bank
National Association, as documentation agent (the "Documentation Agent";
together with the Agent and the Syndication Agent, the "Agents").
PRELIMINARY STATEMENTS:
(1) The Borrower, the Lenders and the Agents have entered into
a Third Amended and Restated Credit Agreement dated as of February 12, 1999 (as
amended by Amendment No. 1 dated as of April 14, 1999, and Amendment No. 2 dated
as of June 29, 1999, and as further amended, supplemented or modified to date,
the "Credit Agreement"). Capitalized terms not otherwise defined in this
Amendment have the same meanings as specified in the Credit Agreement.
(2) The Borrower, the other Loan Parties and the Lenders have
agreed to amend the Credit Agreement and the Third Amended and Restated Security
Agreement as hereinafter set forth.
SECTION 1. Waiver to the Credit Agreement. The Borrower hereby
requests that the Required Lenders waive, and by their signature on the
signature pages hereto, the Required Lenders hereby waive as of the date hereof
and subject to the satisfaction of the conditions precedent set forth in Section
4: (a) maintenance of the Total Leverage Ratio less than or equal to the ratio
set forth in Section 5.04(a) for the Rolling Period ending in July 1999; and (b)
maintenance of the Senior Leverage Ratio less than or equal to the ratio set
forth in Section 5.04(a) for the Rolling Period ending in July 1999.
SECTION 2. Amendments to the Credit Agreement. The Credit
Agreement is, effective as of the date hereof and subject to the satisfaction of
the conditions precedent set forth in Section 3 below, hereby amended as
follows:
(a) Section 1.01 of the Credit Agreement is hereby amended by
adding the following defined terms thereto in the proper alphabetic order and
each such defined term shall read as follows:
"'AGGREGATE REVOLVER BORROWINGS' means the sum of the
aggregate principal of the Working Capital Advances and the
Swing Line Advances."
"'DISCOUNTED FABRIC RECEIVABLES AMOUNT' means the product of
(a) the amount of Fabric Program Receivables (as determined
based on the most recent Borrowing Base Certificate delivered
to the Lender Parties hereunder) and (b) 1.00 minus the lesser
of (i) 0.10 and (ii) the effective discount rate applied by
the Fabric Program Purchaser to the Fabric Program Receivables
purchased by such Fabric Program Purchaser."
<PAGE>
"'REVOLVER BORROWING LIMIT' means, (a) on any date occurring
in: (i) August 1999, the lesser of (A) the Loan Value of the
Eligible Collateral and (B) $56,000,000; and
(ii) September 1999 and October 1999, the lesser of
(A) the Loan Value of Eligible Collateral and
(B) (1) $56,000,000 or (2) IF THE Borrower
shall have entered into a Fabric Factoring
Program, the difference between $60,000,000
and the Discounted Fabric Receivables Amount;
and
(b) on any date occurring (i) thereafter and on or
prior to November 5, 1999, the lesser of (A) the
Loan Value of Eligible Collateral and (B) (1)
$51,000,000 or (2) if the Borrower shall have
entered into a Fabric Factoring Program, the
difference between $55,000,000 and the Discounted
Fabric Receivables Amount;
(ii) after November 5, 1999 and on or prior to
November 12, 1999, the lesser of (A) the Loan
Value of Eligible Collateral and (B) (1)
$46,000,000 or (2) if the Borrower shall have
entered into a Fabric Factoring Program, the
difference between $50,000,000 and the
Discounted Fabric Receivables Amount;
(iii) after November 12, 1999 and on or prior to
November 19, 1999, the lesser of (A) the Loan
Value of Eligible Collateral and (B) (1)
$41,000,000 or (2) if the Borrower shall have
entered into a Fabric Factoring Program, the
difference between $45,000,000 and the
Discounted Fabric Receivables Amount; and
(iv) after November 19, 1999, the lesser of (A) the
Loan Value of Eligible Collateral and (B) (1)
$36,000,000 or (2) if the Borrower shall have
entered into a Fabric Factoring Program, the
difference between $40,000,000 and the
Discounted Fabric Receivables Amount;
in each case, such Loan Value as determined from the most recent Borrowing Base
Certificate delivered to the Lender Parties hereunder."
(b) Section 2.06(b)(iii) is hereby amended and restated
in its entirety to read as follows:
"(iii) The Borrower shall, on each Business Day, prepay an aggregate principal
amount of Working Capital Advances comprising part of the same Borrowings, the
Swing Line Advances and the Letter of Credit Advances equal to an amount
(without duplication of amounts payable under both clauses (A) and (B) below) by
which (A) (1) the sum of the aggregate principal amount of (x) the Working
Capital Advances, (y) the Swing Line Advances and (z) the Letter of Credit
Advances then outstanding plus the aggregate Available Amounts of all Letters of
Credit then outstanding exceeds (2) the lesser of the Working Capital Facility
and the Loan Value of Eligible Collateral on such Business Day (as determined
based on the most recent Borrowing Base Certificate delivered to the Lender
Parties hereunder) and (B) (1) the outstanding Aggregate Revolver Borrowings
exceed (2) the Revolver Borrowings Limit on such Business Day, provided, that on
each Business Day occurring on or after August 24, 1999 and on or prior to
October 22, 1999, for the purposes of making the calculation in this clause (B),
the outstanding Aggregate
<PAGE>
Revolver Borrowings shall be reduced by the amount of interest accrued and paid
pursuant to Section2.07 in full in cash on or after August 24, 1999 and on or
prior to October 22, 1999."
(c) Section 3.02 is hereby amended by (i) deleting the
word "and" immediately preceding clause (b) thereof
and (i) deleting the punctuation"." at the end
thereof and substituting therefor the phrase:
", and (c) the amount of the Aggregate Revolver Borrowings,
before and after giving effect to each Working Capital
Advance, Swing Line Advance and Letter of Credit Advance
requested in any Notice of Borrowing and Notice of Issuance,
as the case may be, shall be less than or equal to the
applicable Revolver Borrowings Limit."
(d) Section 5.02(f) is hereby amended by (i) deleting
the word "and" at the end of clause (vi) thereof,
(ii) inserting the phrase "clauses (i) through (vi)
of" immediately after the phrase "Investments not
otherwise permitted under" in clause (vii) thereof,
and (iii) deleting the punctuation "." from the end
of clause (vii) thereof and replacing it with the
phrase:
", and (viii) Investments in Cash Equivalents in an aggregate
amount not to exceed $2,000,000 at anytime."
(e) Section 5.04(a)(i) is hereby amended by: (i)
deleting the ratio "6.00:1.00" set forth in respect
of Fiscal Month August 1999 and substituting
therefor the ratio "6.60:1.00"; (ii) deleting the
ration "5.85:1.00" set forth in respect of Fiscal
Month September 1999 and substituting therefor the
ratio "6.75:1.00"; (iii) inserting immediately
after the Fiscal Month September 1999 the
following:
---------------------------- --------------------
Fiscal Month Ratio
---------------------------- --------------------
October 1999 5.85:1.00
---------------------------- --------------------
November 1999 5.85:1.00
---------------------------- --------------------
(f) Section 5.04(a)(ii) is hereby amended by: (i)
deleting the ratio "3.70:1.00" set forth in
respect of Fiscal Month August 1999 and
substituting therefor the ratio "4.05:1.00"; (ii)
deleting the ratio "3.70:1.00: set forth in
respect of Fiscal Month 1999 and substituting
therefor the ratio "4.15:1.00"; (iii) inserting
immediately after the Fiscal Month September 1999
the following:
---------------------------- -------------------
Fiscal Month Ratio
---------------------------- -------------------
---------------------------- -------------------
October 1999 3.70:1.00
---------------------------- -------------------
---------------------------- -------------------
November 1999 3.70:1.00
---------------------------- -------------------
(g) Section 5.04(c) is hereby amended by deleting the
ratio "1.65:1.00" set forth in respect of Fiscal
Month September 1999 and substituting therefor the
ratio "1.4:1.00".
SECTION 3. Conditions of Effectiveness. This Amendment shall
become effective as of the date first above written when, and only when the
Agent shall have received:
<PAGE>
(a) counterparts of this Amendment executed by the Borrower
and the Required Lenders or, as to any of the Lenders, advice satisfactory to
the Agent that such Lender has executed this Amendment, and the consent attached
hereto executed by each of the Guarantors and each of the Grantors;
(b) for the benefit of each Lender, an amendment fee for the
account of each Lender in an amount equal to 0.25% of such Lender's aggregate
Commitments; and
(c) for the benefit of the Working Capital Lenders, $1,500,000
as a prepayment under Section 2.06(a).
Furthermore, this Amendment is subject to the provisions of Section 8.01 of the
Credit Agreement.
SECTION 4. Representations and Warranties of the Borrower. The
Borrower represents and warrants as follows:
(a) the representations and warranties contained in each
Loan Document are correct on and as of the date hereof,
after giving effect to this Amendment, as though made on
and as of the date hereof, other than any such
representations or warranties that by their terms, refer
to a specific date, in which case, as of such specific
date: and
(b) no Default has occurred and is continuing under the
Credit Agreement, as amended hereby, or would result
from this Amendment or the consummation of the
transactions contemplated hereby.
SECTION 5. Reference to and Effect on the Loan Documents. On
and after the effectiveness of this Amendment, each reference in the Credit
Agreement to "this Agreement", "hereunder", "hereof" or words of like import
referring to the Credit Agreement, and each reference in the Notes and each of
the Other Loan Documents to "the Credit Agreement", "thereunder", "thereof" or
words of like import referring to the Credit Agreement, shall mean and be a
reference to the Credit Agreement, as amended by this Amendment.
(b) the Credit Agreement, the Notes and each of the other
Loan Documents, as specifically amended by this
Amendment, are and shall continue to be in full force
and effect and are hereby in all respects ratified and
confirmed.
(c) The execution, delivery and effectiveness of this
Amendment shall not, except as expressly provided
herein, operate as a waiver of any right, power or
remedy of any Lender or the Agent under any of the Loan
Documents, not constitute a waiver of any provision of
any of the Loan Documents.
SECTION 6. Costs, Expenses and Taxes. The Borrower agrees to
pay on demand all costs and expenses of the Agent in connection with the
preparation, execution, delivery and administration, modification and amendment
of this Amendment, the Notes and the other instruments and documents to be
delivered hereunder (including, without limitation, the reasonable fees and
expenses of counsel for the Agent) in accordance with the terms of Section 8.04
of the Credit Agreement. In addition, the Borrower shall pay any and all stamp
and other taxes payable or determined to be payable in connection with the
execution and delivery of the Amendment and the other instruments and documents
to be delivered hereunder, and agree to save the Agent and each Lender harmless
from and against any and all liabilities with respect to or resulting from any
delay in paying or omission to pay such taxes.
<PAGE>
SECTION 7. Execution in Counterparts. This Amendment may be
executed in any number of counterparts and by different parties hereto in
separate counterparts, each of which when so executed shall be deemed to be an
original and all of which taken together shall constitute but one and the same
agreement. Delivery of an executed counterpart of a signature page to this
Amendment by telecopier shall be effective as delivery of a manually executed
counterpart of this Amendment.
SECTION 8. Governing Law. This Amendment shall be governed by,
and construed in accordance with, the laws of the State of New York.
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment to be executed by their respective officers thereunto duly authorized,
as of the date first above written.
GLENOIT CORPORATION
By /s/ Lester D. Sears
-----------------------------------------
Title: EVP and CFO
GLENOIT UNIVERSAL, LTD.
By /s/ Lester D. Sears
-----------------------------------------
Name: Lester D. Sears
Title: EVP and CFO
GLENOIT ASSETS CORP.
By /s/ Lester D. Sears
-----------------------------------------
Name: Lester D. Sears
Title: EVP and CFO
AMERICAN PACIFIC ENTERPRISES, INC.
By /s/ Lester D. Sears
-----------------------------------------
Name: Lester D. Sears
Title: EVP and CFO
GRAND AVENUE CORP.
By /s/ Lester D. Sears
-----------------------------------------
Name: Lester D. Sears
Title: EVP and CFO
<PAGE>
EX-CELL HOME FASHIONS, INC.
By /s/ Lester D. Sears
-----------------------------------------
Name: Lester D. Sears
Title: EVP and CFO
EX-CELL OF BENTONVILLE, INC.
By /s/ Lester D. Sears
-----------------------------------------
Name: Lester D. Sears
Title:EVP and CFO
EX-CELL LINDE OF CAROLINA, INC.
By /s/ Lester D. Sears
-----------------------------------------
Name: Lester D. Sears
Title: EVP and CFO
<PAGE>
AGENT
BANQUE NATIONALE DE PARIS,
as Agent
By /s/ Alan Mustachi
-----------------------------------------
Title: Director
By /s/ John Caparella
-----------------------------------------
Title: VP
LENDERS
BANQUE NATIONALE DE PARIS
By /s/ Alan Mustachi
-----------------------------------------
Title: Director
By /s/ John Caparella
-----------------------------------------
Title: VP
<PAGE>
BOEING CAPITAL CORPORATION
By /s/ David Nelson
-----------------------------------------
Name: David Nelson
Title: Special Credits Officer
CENTURA BANK
By /s/ Lowry Perry
-----------------------------------------
Name: Lowry Perry
Title: VP
COMERICA
By /s/ David W. Shirey
-----------------------------------------
Name: David W. Shirey
Title: Assistant Vice President
DEUTSCHE FINANCIAL SERVICES
By /s/ Philip G. Porcher, IX
-----------------------------------------
Name: Philip G. Porcher, IX
Title: Vice President
<PAGE>
FIRST SOURCE FINANCIAL LLP,
By First Source Financial, Inc. as its
Agent/Manager
By /s/ Gregory R. Cooper
-----------------------------------------
Name: Gregory R. Cooper
Title: Senior Vice President
<PAGE>
FLEET BANK, N.A.
By /s/ Alfred Bonfantini
-----------------------------------------
Name: Alfred Bonfantini
Title: Senior Vice President
<PAGE>
Floating Rate Porfolio
By: INVESCO Senior Secured Management,
Inc., as attorney in fact
By /s/ Anne M. McCarthy
-----------------------------------------
Name: Anne M. McCarthy
Title: Authorized Signatory
<PAGE>
LASALLE BANK NATIONAL
ASSOCIATION
By /s/ Kristen J. Lindbergh
-----------------------------------------
Name: Kristen J. Lindbergh
Title: Corporate Banking Officer
<PAGE>
KZH ING-1 LLC
By /s/ Virginia Conway
-----------------------------------------
Name: Virginia Conway
Title:Authorized Agent
<PAGE>
KZH ING-2 LLC
By /s/ Virginia Conway
-----------------------------------------
Name: Virginia Conway
Title:Authorized Agent
<PAGE>
KZH ING-3 LLC
By /s/ Virginia Conway
-----------------------------------------
Name: Virginia Conway
Title:Authorized Agent
<PAGE>
METROPOLITAN LIFE INSURANCE
COMPANY
By /s/ James R. Dinger
-----------------------------------------
Name: James R. Dinger
Title: Director
<PAGE>
VAN KAMPEN SENIOR FLOATING RATE FUND
By /s/ Jeffrey W. Maillet
-----------------------------------------
Name: Jeffrey W. Maillet
Title: Senior Vice President and Director
VAN KAMPEN PRIME RATE INCOME TRUST
By Jeffrey W. Maillet
-----------------------------------------
Name: Jeffrey W. Maillet
Title: Senior Vice President and Director
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Company's consolidated balance sheet and consolidated statement of operations
for the quarter ending July 3, 1999, and such is qualified in its entirety by
reference to such financial statements.
</LEGEND>
<CIK> 0001047368
<NAME> GLENOIT CORPORATION
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JAN-01-2000
<PERIOD-START> JAN-03-1999
<PERIOD-END> JUL-03-1999
<CASH> 935
<SECURITIES> 0
<RECEIVABLES> 54,170
<ALLOWANCES> (3,470)
<INVENTORY> 55,320
<CURRENT-ASSETS> 110,599
<PP&E> 115,586
<DEPRECIATION> (44,901)
<TOTAL-ASSETS> 243,443
<CURRENT-LIABILITIES> 30,412
<BONDS> 256,583
0
0
<COMMON> 0
<OTHER-SE> (57,041)
<TOTAL-LIABILITY-AND-EQUITY> 243,443
<SALES> 136,157
<TOTAL-REVENUES> 136,157
<CGS> 96,917
<TOTAL-COSTS> 11,449
<OTHER-EXPENSES> 32,917
<LOSS-PROVISION> 351
<INTEREST-EXPENSE> 12,080
<INCOME-PRETAX> (17,557)
<INCOME-TAX> (6,489)
<INCOME-CONTINUING> (11,068)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (11,068)
<EPS-BASIC> (11.07)
<EPS-DILUTED> (11.07)
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Company's consolidated balance sheet and consolidated statement of operations
for the quarter ending July 3, 1999, and such is qualified in its entirety by
reference to such financial statements.
</LEGEND>
<CIK> 0001051260
<NAME> GLENOIT ASSET CORPORATION
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JAN-01-2000
<PERIOD-START> JAN-03-1999
<PERIOD-END> JUL-03-1999
<CASH> 30
<SECURITIES> 0
<RECEIVABLES> 45,002
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 45,032
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 45,032
<CURRENT-LIABILITIES> 7,268
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 37,764
<TOTAL-LIABILITY-AND-EQUITY> 45,032
<SALES> 0
<TOTAL-REVENUES> 3,942
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 5
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (1,415)
<INCOME-PRETAX> 5,352
<INCOME-TAX> 1,872
<INCOME-CONTINUING> 3,480
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,480
<EPS-BASIC> 3.48
<EPS-DILUTED> 3.48
</TABLE>
