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 SEPTEMBER 30, 2000
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 September 30, 2000, there were 1,000 shares of Glenoit Corporation common
stock outstanding.
DOCUMENTS INCORPORATED BY REFERENCE: NONE
1
<PAGE>
PART 1 - FINANCIAL INFORMATION
Item 1. Financial Statements
GLENOIT CORPORATION AND SUBSIDIARIES
(a wholly-owned subsidiary of Glenoit Universal, Ltd.)
(Debtor-in-Possession)
Consolidated Balance Sheets
<TABLE>
<CAPTION>
January 1, September 30,
2000 2000
------------- -------------
ASSETS (Unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 2,015,080 $ 264,024
Receivables:
Trade accounts receivable, net of allowance of $5,470,000 and
$7,789,000 as of January 1, 2000 and September 30, 2000,
respectively 27,639,925 35,238,027
Other receivables 2,396,339 7,276,997
Inventories 50,974,925 59,140,979
Current deferred tax assets 3,406,960 4,706,960
Prepaid expenses and other current assets 1,012,441 3,046,372
------------ -------------
Total current assets 87,445,670 109,673,359
Property, plant and equipment, net 67,701,677 60,520,108
Other assets:
Notes receivable from related party 246,810 231,802
Intangible assets, net of accumulated amortization of $3,185,000
and $4,940,000 as of January 1, 2000 and September 30, 2000,
respectively 50,933,860 49,162,989
Deferred loan costs and other, net of accumulated amortization of
$2,836,000 and $3,126,000 as of January 1, 2000 and
September 30, 2000, respectively 9,293,032 5,059,363
Other assets 1,324,424 1,026,523
------------ -------------
Total assets $216,945,473 $225,674,144
============ =============
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
2
<PAGE>
GLENOIT CORPORATION AND SUBSIDIARIES
(a wholly-owned subsidiary of Glenoit Universal, Ltd.)
(Debtor-in-Possession)
Consolidated Balance Sheets
<TABLE>
<CAPTION>
January 1, September 30,
2000 2000
--------------- ----------------
LIABILITIES AND STOCKHOLDER'S DEFICIT (Unaudited)
<S> <C> <C>
Current liabilities not subject to compromise:
Accounts payable $ 10,061,519 $ 13,506,840
Accrued expenses 13,907,287 14,028,364
Current maturities of long-term debt 237,681,953 151,022,158
Due to Holdings 2,462,933 1,848,019
--------------- --------------
Total current liabilities not subject to compromise 264,113,692 180,405,381
Deferred income taxes 5,840,012 5,838,990
Other long-term liabilities 6,125,933 2,066,864
--------------- --------------
Total liabilities not subject to compromise (Note 10) 276,079,637 188,311,235
--------------- --------------
Liabilities subject to compromise - 100,799,291
Commitments and contingencies
Stockholder's deficit:
Common stock, $.01 par value, 1,000 shares authorized,
issued and outstanding as of January 1, 2000 and
September 30, 2000 10 10
Additional paid-in capital 1,461,713 1,461,713
Accumulated deficit (60,255,036) (64,183,690)
Accumulated other comprehensive loss (340,851) (714,415)
--------------- --------------
Total stockholder's deficit (59,134,164) (63,436,382)
--------------- --------------
Total liabilities and stockholder's deficit $ 216,945,473 $ 225,674,144
=============== ==============
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
3
<PAGE>
GLENOIT CORPORATION AND SUBSIDIARIES
(a wholly-owned subsidiary of Glenoit Universal, Ltd.)
(Debtor-in-Possession)
Consolidated Statements of Income (Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
---------------------------------- ---------------------------------------
October 2, September 30, October 2, September 30,
1999 2000 1999 2000
------------ --------------- ---------------- ----------------
<S> <C> <C> <C> <C>
Net sales $ 85,978,312 $ 98,979,029 $ 222,134,884 $ 260,274,456
Cost of sales 60,081,107 71,143,977 156,998,280 192,687,500
------------ --------------- ---------------- ----------------
Gross profit 25,897,205 27,835,052 65,136,604 67,586,956
------------ --------------- ---------------- ----------------
Operating expenses:
Selling 6,494,976 7,020,659 17,944,465 18,516,441
Administrative 7,992,445 9,555,288 26,325,896 28,583,358
Research and development 1,083,690 1,071,773 3,123,115 3,382,829
Restructuring and reorganization charges - 607,000 13,100,000 1,999,000
------------ --------------- ---------------- ----------------
Total operating expenses 15,571,111 18,254,720 60,493,476 52,481,628
------------ --------------- ---------------- ----------------
Income from operations 10,326,094 9,580,332 4,643,128 15,105,328
------------ --------------- ---------------- ----------------
Other income (expense):
Interest expense (6,637,999) (5,736,543) (18,030,471) (19,448,542)
Amortization of deferred financing costs (468,414) (850,393) (1,155,952) (1,851,179)
Other (24,566) (6,164) 180,786 669,644
------------ --------------- ---------------- ----------------
Total other expense (7,130,979) (6,593,100) (19,005,637) (20,630,077)
------------ --------------- ---------------- ----------------
Income (loss) before income taxes 3,195,115 2,987,232 (14,362,509) (5,524,749)
Income tax expense (benefit) 1,389,788 733,838 (5,099,898) (1,596,095)
------------ --------------- ---------------- ----------------
Net income (loss) $ 1,805,327 $ 2,253,394 $ (9,262,611) $ (3,928,654)
============ =============== ================ ================
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
4
<PAGE>
GLENOIT CORPORATION AND SUBSIDIARIES
(a wholly-owned subsidiary of Glenoit Universal, Ltd.)
Consolidated Statement of Stockholder's Deficit (Unaudited)
(Debtor-in-Possession)
for the nine months ended September 30, 2000
<TABLE>
<CAPTION>
Accumulated
Shares of Additional Other
Common Common Paid-in Accumulated Comprehensive
Stock Stock Capital Deficit Loss Total
---------- ------- ----------- ------------ ---------------- ----------
<S> <C> <C> <C> <C> <C> <C>
Balance as of
January 1, 2000 1,000 $ 10 $ 1,461,713 $ (60,255,036) $ (340,851) $ (59,134,164)
Net loss (3,928,654) (3,928,654)
Accumulated Other
Comprehensive
Income (Loss) (373,564) (373,564)
---------- --------- ------------ ------------- ---------- ----------------
Balance as of
September 30, 2000 1,000 $ 10 $ 1,461,713 $ (64,183,690) $ (714,415) $ (63,436,382)
========== ========= ============ ============= =========== ================
</TABLE>
Consolidated Statement of Comprehensive Loss (Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
-----------------------------------
October 2, September 30,
1999 2000
------------------ ---------------
<S> <C> <C>
Net loss $ (9,262,611) $ (3,928,654)
Other comprehensive income (loss), net of tax:
Currency translation adjustment 231,020 (227,874)
------------------ ----------------
Comprehensive loss $ (9,031,591) $ (4,156,528)
================== ================
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
5
<PAGE>
GLENOIT CORPORATION AND SUBSIDIARIES
(a wholly-owned subsidiary of Glenoit Universal, Ltd.)
(Debtor-in-Possession)
Consolidated Statements of Cash Flows (Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
--------------------------------------
October 2, September 30,
1999 2000
--------------- ---------------
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (9,262,611) $ (3,928,654)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization 9,019,764 10,216,587
Restructuring Charge 13,100,000 (1,210,000)
Gain on sale of property and equipment (50,439) (496,961)
Effect of foreign currency exchange rate 363,812 (373,564)
Changes in operating assets and liabilities:
Trade and other receivables (18,890,554) (12,630,760)
Inventories (19,139,861) (8,166,054)
Prepaid expenses and other assets (807,403) (3,721,022)
Due to Holdings (2,365,888) 85,086
Accounts payable 4,533,231 3,445,321
Accrued expenses and other liabilities (970,492) 8,367,700
------------ ---------------
Net cash used in operating activities (24,470,441) (8,412,321)
------------ ---------------
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 (6,448,271) (2,114,046)
Proceeds from sale of property and equipment and refunds of
deposits 639,706 785,106
------------ ---------------
Net cash used in investing activities (65,357,256) (1,328,940)
------------ ---------------
Cash flows from financing activities:
Proceeds from line of credit and issuance of debt, net 95,617,501 10,000,000
Repayments of long-term debt (1,659,795)
Payments for financing costs (5,368,755) (350,000)
------------ ---------------
Net cash provided by financing activities 90,248,746 7,990,205
------------ ---------------
Net increase (decrease) in cash and cash equivalents 421,049 (1,751,056)
Cash and cash equivalents at beginning of period 339,700 2,015,080
------------ ---------------
Cash and cash equivalents at end of period $ 760,749 $ 264,024
============ ===============
</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.)
(Debtor-in-Possession)
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 nine-month period ended
September 30, 2000 are not necessarily indicative of the results that
may be expected for the fiscal year ending December 30, 2000. The
unaudited financial statements should be read in conjunction with the
audited financial statements and footnotes thereto for the fiscal year
ended January 1, 2000. On August 8, 2000, Glenoit Universal, Ltd., the
Company and six of its operating subsidiaries filed for protection
under Chapter 11 of the U. S. Bankruptcy Code in the United States
Bankruptcy Court for the District of Delaware. (See Note 4 and Note
10). This matter raises substantial doubt about the Company's ability
to continue as a going concern. The consolidated financial statements
reflect the Company's position as a debtor-in-possession but do not
include any adjustments that might result from the outcome of this
uncertainty. Accordingly, the consolidated financial statements of the
Company have been prepared in accordance with the American Institute of
Certified Public Accountants Statement of Position 90-7, "Financial
Reporting by Entities in Reorganization Under the Bankruptcy Code"
("SOP 90-7"). The Plan of Reorganization and other actions during the
Chapter 11 case could change materially the amounts currently recorded
in the consolidated financial statements.
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
September 30, 2000, the accompanying financial statements include the
accounts of Glenoit Corporation and its wholly-owned subsidiaries
Glenoit Canada, American Pacific
7
<PAGE>
GLENOIT CORPORATION AND SUBSIDIARIES
(Debtor-in-Possession)
(a wholly-owned subsidiary of Glenoit Universal, Ltd.)
Notes to Consolidated Financial Statements (Unaudited)
1. SIGNIFICANT ACCOUNTING POLICIES (Continued)
Enterprises, Inc., Glenoit Asset Corporation and Ex-Cell Home Fashions,
Inc. The Company is a wholly-owned subsidiary of Glenoit Universal,
Ltd. ("Holdings").
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") which
was later amended by SFAS No. 138. SFAS No. 133, as amended,
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 has
an interest rate hedge agreement but does not believe that the future
impact of SFAS No. 133 will be material to its financial position or
results of operations.
2. RELATED PARTY TRANSACTIONS
In January 1999, the Company loaned an officer $150,000 and created an
unsecured note receivable which was repaid in February 1999.
3. INVENTORIES
Inventories are summarized as follows:
January 1, 2000 September 30, 2000
----------------- -------------------
(Unaudited)
Raw materials $9,269,434 $8,603,112
Work-in-process 4,985,545 4,980,084
Finished goods 36,719,946 45,557,783
----------------- -------------------
Total inventories $50,974,925 $59,140,979
================= ===================
8
<PAGE>
GLENOIT CORPORATION AND SUBSIDIARIES
(Debtor-in-Possession)
(a wholly-owned subsidiary of Glenoit Universal, Ltd.)
Notes to Consolidated Financial Statements (Unaudited)
4. LONG-TERM DEBT
As of January 1, 2000 and September 30, 2000, long-term debt consisted
of the following:
January 1, September 30,
2000 2000
----- ----
(unaudited)
Senior credit facility............. $142,681,953 $151,022,158
11% Senior subordinated notes ..... 95,000,000 95,000,000
------------ ------------
Total debt.................... 237,681,953 246,022,158
Subject to compromise.............. - 95,000,000
Less current portion .............. 237,681,953 151,022,158
------------ ------------
$ 0 $ 0
============ ============
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. 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 was
designated as an Acquisition Commitment and $45 million as a Working
Capital Commitment, which was 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
(Debtor-in-Possession)
(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 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, bore 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 began 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 was limited to
the amount of the unused 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 a result of certain defaults under the Facility, the Company was
prohibited by its lenders from paying $5.25 million of interest due to
holders of the Senior Subordinated Notes. Accordingly, as of April 15,
2000, the Company was in default and remains in default under the terms
of the Senior Subordinated Notes. The Company continued working with
its lenders and received various waivers and amendments through August
8, 2000 to enable the Company to operate without the lenders demanding
payment on the Facility.
On August 8, 2000, the Company announced that it had terminated a
tender offer and related solicitation of consents to certain proposed
amendments for the Senior Subordinated Notes. Also, it was announced
that Glenoit Universal, Ltd., the Company and six operating
subsidiaries filed for protection under Chapter 11 of the U. S.
10
<PAGE>
GLENOIT CORPORATION AND SUBSIDIARIES
(a wholly-owned subsidiary of Glenoit Universal, Ltd.)
(Debtor-in-Possession)
Notes to Consolidated Financial Statements (Unaudited)
4. LONG TERM DEBT (Continued)
Bankruptcy Code in the United States Bankruptcy Court for the District
of Delaware. On August 9, 2000, the Company filed its amended plan of
reorganization that was pre- approved by its banks and holders of the
Senior Subordinated Notes in a format known as a "pre-packaged"
bankruptcy. The plan of reorganization calls for the payment of 17
cents for every dollar of principal outstanding under the Senior
Subordinated Notes while vendors will be paid in the ordinary course
without interruption. However, the Company recently announced that the
possible confirmation of the plan of reorganization has been delayed to
allow the Company time to resolve outstanding issues with its equity
sponsor, secured lenders and bondholders. Holders of approximately 83%
of the principal balance of the Senior Subordinated Notes signed
lock-up letters whereby they agreed to support the current plan of
reorganization until November 15, 2000. Currently, no new plan of
reorganization has been filed with the Court. The Company is currently
reviewing strategic options including discussions with additional
investors to identify a revised plan that will allow the Company to
exit from Chapter 11. The Company's operations during the bankruptcy
proceeding will be funded by a $65 million Debtor-in-possession credit
facility ("DIP Facility"). The DIP Facility's initial term is through
December 29, 2000. The Company is negotiating with its lending group
to extend the DIP Facility. Even though discussions are on-going,
there can be no assurance that the Company will obtain this extension
if it becomes necessary. The DIP Facility's availability is based on a
"borrowing base", similar to the Facility, plus an overadvance rate of
up to $13 million less outstanding letters of credit less $47 million
of pre-petition borrowings under the Working Capital Commitment plus
cash held in a special blocked account. As of November 13, 2000, there
were no borrowings outstanding under the DIP Facility and total
availability was approximately $24.5 million.
Additionally, the Company plans to continue to pay interest on the
outstanding principal balances of the Working Capital Commitment, Term
A loan and Term B loan. Loans under the Working Capital Commitment and
Term A loan will bear interest at the Base Rate plus 2.25% or the
Eurodollar Rate plus 3.50%. Advances made under the Term B loan bear
interest at the Base Rate plus 3.00% or the Eurodollar Rate plus 4.25%.
However, the Company will not be required to make principal
amortization payments during the Chapter 11 proceedings. Loans
outstanding under the DIP Facility will bear interest at the Base Rate
plus 2.25% or the Eurodollar Rate plus 3.50%. On August 8, 2000, the
Company also announced that it successfully negotiated $169 million of
exit financing with the same bank group that is expected to be
available to the Company upon emergence from Chapter 11.
11
<PAGE>
GLENOIT CORPORATION AND SUBSIDIARIES
(a wholly-owned subsidiary of Glenoit Universal, Ltd.)
(Debtor-in-Possession)
Notes to Consolidated Financial Statements (Unaudited)
4. LONG-TERM DEBT (Continued)
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 and the foreign subsidiaries of APE and Ex-Cell, (together the
"Subsidiary Non-Guarantors") do not guarantee 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.
The following tables present summarized balance sheet information of
Glenoit Corporation, the Subsidiary Guarantors, and Subsidiary
Non-Guarantors as of September 30, 2000 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 disclosures regarding the Subsidiary Guarantors, are not material
to investors. Summarized balance sheet information, in thousands, as of
September 30, 2000 is as follows (unaudited):
12
<PAGE>
GLENOIT CORPORATION AND SUBSIDIARIES
(a wholly-owned subsidiary of Glenoit Universal, Ltd.)
(Debtor-in-Possession)
Notes to Consolidated Financial Statements (Unaudited)
4. LONG-TERM DEBT (Continued)
<TABLE>
<CAPTION>
Glenoit Subsidiary Subsidiary
Corporation Guarantors Non-Guarantors Eliminations Consolidated
<S> <C> <C> <C> <C> <C>
Cash and cash equivalents.............. $ (353) $ (248) $ 865 $ - $ 264
Accounts and other receivables, net.... 16,890 22,741 2,884 - 42,515
Inventories............................ 10,984 44,875 3,282 - 59,141
Other current assets................... 8,686 (1,047) 114 - 7,753
-------- -------- -------- ---------- ---------
Total current assets.............. 36,207 66,321 7,145 0 109,673
Property, plant and equipment, net..... 28,950 22,425 9,145 - 60,520
Other assets........................... 190,308 111,747 2,254 (248,828) 55,481
-------- -------- -------- ---------- ---------
Total assets...................... $255,465 $200,493 $18,544 $(248,828) $225,674
======== ======== ======== ========== ========
Accounts payable....................... $4,284 $7,101 $2,122 $ - $13,507
Other current liabilities.............. 139,947 35,581 (8,630) - 166,898
-------- -------- -------- ---------- ---------
Total current liabilities......... 144,231 42,682 (6,508) 0 180,405
Long-term debt......................... 72,304 - 3,149 (75,453) -
Liabilities subject to compromise...... 100,799 - - - 100,799
Other long-term liabilities............ 853 6,920 133 - 7,906
Stockholders equity (deficit).......... (62,722) 150,891 21,770 (173,375) (63,436)
-------- -------- -------- ---------- ---------
Total liabilities and equity...... $255,465 $200,493 $18,544 $(248,828) $225,674
======== ======== ======== ========== ========
</TABLE>
Summarized operating statements information, in thousands, for the nine
months ended September 30, 2000 is as follows:
<TABLE>
<CAPTION>
Glenoit Subsidiary Subsidiary
Corporation Guarantors Non-Guarantors Eliminations Consolidated
<S> <C> <C> <C> <C> <C>
Net sales........................ $96,031 $152,341 $29,135 $(17,233) $260,274
Cost of sales.................... 75,391 110,367 24,162 (17,233) 192,687
------ ------- ------ -------- -------
Gross profit..................... 20,640 41,974 4,973 0 67,587
Operating expenses............... 18,775 32,867 840 - 52,482
Royalty income (expense)......... (5,577) 5,577 - - -
------ ------- ------ -------- -------
Income (loss) from operations.... (3,712) 14,684 4,133 0 15,105
Interest expense (income)........ 21,072 (1,672) 49 - 19,449
Other expense (income)........... (11,315) (2,727) 19 15,204 1,181
Income taxes(benefit)............ (9,540) 6,563 1,381 - (1,596)
------ ------- ------ -------- -------
Net income(loss)............. $(3,929) $12,520 $2,684 $(15,204) (3,929)
======== ======= ====== ========= =======
</TABLE>
13
<PAGE>
GLENOIT CORPORATION AND SUBSIDIARIES
(a wholly-owned subsidiary of Glenoit Universal, Ltd.)
(Debtor-in-Possession)
Notes to Consolidated Financial Statements (Unaudited)
4. LONG-TERM DEBT (Continued)
Summarized cash flow statement information, in thousands, for the nine
months ended September 30, 2000 is as follows:
<TABLE>
<CAPTION>
Glenoit Subsidiary Subsidiary
Corporation Guarantors Non-Guarantors Eliminations Consolidated
<S> <C> <C> <C> <C> <C>
Cashflows from operating
activities.......................... $(12,345) $5,003 $(1,070) $ - $(8,412)
Cashflows used in investing......... (58) (1,124) (147) - (1,329)
Cashflows from financing
activities.......................... 11,981 (3,991) - - 7,990
--------- -------- ---------- ----------- ----------
Net increase(decrease) in cash...... (422) (112) (1,217) 0 (1,751)
Cash at beginning of period......... 69 (136) 2,082 - 2,015
--------- -------- ---------- ----------- ----------
Cash at end of period............... $(353) $ (248) $ 865 $ 0 $ 264
========= ======== ========== =========== ==========
</TABLE>
Summarized operating statements information, in thousands, for the nine
months ended October 2, 1999 is as follows:
<TABLE>
<CAPTION>
Glenoit Subsidiary Subsidiary
Corporation Guarantors Non-Guarantors Eliminations Consolidated
<S> <C> <C> <C> <C> <C>
Net sales........................... $91,043 $118,985 $18,107 $(6,000) $222,135
Cost of sales....................... 66,673 81,634 14,691 (6,000) 156,998
-------- ------ ------ ------- -------
Gross profit........................ 24,370 37,351 3,416 0 65,137
Operating expenses.................. 31,624 27,854 1,016 - 60,494
Royalty income (expense)............ (5,822) 5,822 - - -
------- ------ ------ ------- -------
Income (loss) from operations....... (13,076) 15,319 2,400 0 4,643
Interest expense (income)........... 19,303 (1,446) 173 - 18,030
Other expense (income).............. (10,872) (653) (56) 12,557 976
Income taxes (benefit).............. (12,244) 6,341 803 - (5,100)
-------- -------- ------- -------- --------
Net income (loss)................... $ (9,263) $11,077 $1,480 $(12,557) $(9,263)
========= ======== ======= ========= ========
</TABLE>
Summarized cash flow statement information, in thousands, for the nine months
ended October 2, 1999 is as follows:
<TABLE>
<CAPTION>
Glenoit Subsidiary Subsidiary
Corporation Guarantors Non-Guarantors Eliminations Consolidated
<S> <C> <C> <C> <C> <C>
Cashflows from operating
activities.......................... $(19,733) $(3,028) $(1,710) - $(24,471)
Cashflows used in investing
Activities...................... (63,767) (1,488) (102) - (65,357)
Cashflows from financing
activities.......................... 83,433 5,060 1,756 - 90,249
------ ----- ----- ------ -------
Net increase (decrease) in
cash................................ (67) 544 (56) 0 421
Cash at beginning of period......... 39 179 122 - 340
------ ----- ----- ------ -------
Cash at end of period............... $ (28) $ 723 $ 66 $ 0 $ 761
====== ===== ===== ====== =======
</TABLE>
14
<PAGE>
GLENOIT CORPORATION AND SUBSIDIARIES
(Debtor-in-Possession)
(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 $33.3
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
$9.8 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. In connection with the plan
of reorganization as filed with the bankruptcy court, the Shareholder
Notes would be extinguished without any compensation to the holders.
APE is a party to a copyright infringement and unfair business
practices litigation with a competitor. The competitor has filed suit
claiming damages in excess of $8 million. The suit is in the early
stages of discovery and the potential liability, if any, to the Company
cannot be determined. Management believes that the competitor's case is
without merit and intends to vigorously contest this lawsuit.
Accordingly, no provision has been made in the Company's financial
statements.
From time to time, the Company is involved in various other litigation
which arises in the ordinary course of business. After consultation
with its legal counsel, management believes the ultimate disposition of
these matters will not have a material adverse effect on the Company's
consolidated financial position or results of operations.
15
<PAGE>
GLENOIT CORPORATION AND SUBSIDIARIES
(a wholly-owned subsidiary of Glenoit Universal, Ltd.)
(Debtor-in-Possession)
Notes to Consolidated Financial Statements (Unaudited)
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.
Consistent with the year ending January 1, 2000, the Company provided a
valuation allowance for net operating losses generated in North
Carolina and New York which are not currently anticipated to be
utilized. During the first nine months of 2000, the allowance was
increased $250,000. The Company estimates its annual effective income
tax rate to be a benefit of approximately 29%.
For tax purposes, the discharge of the liabilities pursuant to a
Chapter 11 proceeding will result in income that is excluded from the
Company's taxable income. However, certain of the Company's tax
attributes, including net operating loss carryforwards and tax credits,
must be reduced by the amount of cancellation of debt income. To the
extent the amount excluded exceeds these tax attributes, the tax basis
in the Company's property must be reduced by the amount of the excluded
cancellation of debt income. It is estimated that after the
reorganization, the Company will not have any net operating loss
carryovers with any remaining gain reducing its tax basis in plant and
equipment.
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
and expensed during 1998. The remaining $8.8 million was recorded as
additional purchase price. Based on APE's projected operating results
through the first three quarters of 1999, the Company recorded
approximately $.7 million of compensation expense related to this
agreement. However, based on the full year of APE's 1999 operating
results, this charge was later reversed and no compensation expense was
recorded for the twelve months ended January 1, 2000. APE is a leading
designer, importer and marketer of decorative textile home furnishings,
principally quilts and specialty decorative bedding items. The purchase
price allocation attributed approximately $31.8 million to net working
capital items, approximately $1.3 million to
16
<PAGE>
GLENOIT CORPORATION AND SUBSIDIARIES
(a wholly-owned subsidiary of Glenoit Universal, Ltd.)
(Debtor-in-Possession)
Notes to Consolidated Financial Statements (Unaudited)
7. ACQUISITIONS (Continued)
property, plant and equipment and approximately $31.4 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 $44.1 million, including fees and
expenses, subject to post-closing adjustments. In addition,
approximately $6.8 million of indebtedness of Ex-Cell was extinguished
by the Company in connection therewith. Ex-Cell is engaged in the
design, manufacture, importation, and distribution of textile home
furnishings consisting principally of shower curtains, table linens and
decorative pillows. The acquisition has been accounted for as a
purchase, and, accordingly, the operating results of the acquired
business have been included in the results of operations since the
acquisition date. The purchase price allocation attributed
approximately $15.1 million to net working capital items, approximately
$22.8 million to property, plant and equipment, $7.1 million to long
term liabilities including deferred income taxes and approximately
$20.1 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 acquisition of Ex-Cell occurred
at the beginning of the period presented. In connection with the
allocation of purchase price, the Company wrote up Ex-Cell's inventory
by approximately $2.2 million. This write-up negatively impacted gross
margin during the Company's first nine months of 1999 as that inventory
was sold. 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.
Nine Months Ended
October 2,
1999
----
(Unaudited)
Net sales $230,900,000
============
Net loss (8,100,000)
============
These proforma results do not purport to be indicative of the results
that would have actually been obtained if Ex-Cell had been acquired as
of January 3, 1999 or results of future periods.
17
<PAGE>
GLENOIT CORPORATION AND SUBSIDIARIES
(a wholly-owned subsidiary of Glenoit Universal, Ltd.)
(Debtor-in-Possession)
Notes to Consolidated Financial Statements (Unaudited)
8. RESTRUCTURING AND REORGANIZATION CHARGES
On February 25, 1999, the Company's Board of Directors approved a plan
to close one of the manufacturing operations of the Fabric Division. 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 the goodwill, $1.8 million to cover the write-down of machinery and
equipment to fair market value and the remainder for the costs of
operating leases, severance and other personnel costs related to the
termination of approximately 225 associates. Management reviewed its
original write-down of fixed assets and compared the actual results of
asset sales to original appraised values as well as reviewed any
remaining asset values. In connection with this review as of January 1,
2000, management determined that the write down of machinery and
equipment should be increased to $3.4 million. Management also reviewed
the anticipated requirements for operating leases and determined this
amount should decrease by $1.6 million as a result of certain leased
equipment being transferred to its other manufacturing facilities and
placed in service.
In accordance with certain guidelines within the United States
Bankruptcy Court for the District of Delaware, the Company was able to
reject certain leases associated with excess properties that do not
benefit their operations. On September 19, 2000, the Company filed a
motion to reject the leases related to the Tennessee operations as well
as its decorative pillow operations in Miami, Florida. On October 19,
2000, these motions were approved by the Court.
As discussed above, the Company had already decided to abandon the
Tennessee operation and recorded a restructuring charge to cover, among
other things, the present value of its lease obligations and future
carrying costs. As a result of the approved motion, upon confirmation
of the Company's plan of reorganization, the Company will pay the
landlord approximately $600,000 as a termination fee. The Company will
stop paying monthly rent when the Company has removed any remaining
machinery or equipment which is estimated to be November 30, 2000.
Therefore, during the third quarter of 2000, the Company has reversed
approximately $2.9 million of excess reserves that were originally
provided to cover restructuring costs through August 2007.
The Company also rejected its lease related to its decorative pillow
operations in Miami, Florida. On September 21, 2000, the Company
notified substantially all employees at the facility that they would be
terminated as of November 20, 2000. The Company will operate this
facility through November and transfer all equipment to its operations
in Goldsboro, North Carolina. Accordingly, the Company has accrued for
any related severance and the estimated lease termination fee of
approximately $300,000. The
18
<PAGE>
GLENOIT CORPORATION AND SUBSIDIARIES
(a wholly-owned subsidiary of Glenoit Universal, Ltd.)
(Debtor-in-Possession)
Notes to Consolidated Financial Statements (Unaudited)
8. RESTRUCTURING AND REORGANIZATION CHARGES (Continued)
Company also wrote off approximately $600,000 of capitalized leasehold
improvements that were being depreciated over the original lease term.
The components of the Company's restructuring charges are as follows
(in thousands):
<TABLE>
<CAPTION>
Original Usage Adjustment Additional Remaining
Reserve Reserve
<S> <C> <C> <C> <C> <C>
Anticipated expenditures related to
operating leases for plant and equipment $7,323 $(1,787) $(1,586) (2,610) $1,340
Anticipated severance benefits 850 (850) 0 800 800
-------- -------- -------- -------- --------
$8,173 $(2,637) $(1,586) (1,810) $2,140
====== ======== ======== ======= ======
</TABLE>
It is anticipated that these lease rejection fees will be paid in full
after the plan of reorganization becomes effective. Also, included in
the reorganization charges are expenses accrued to third party
financial and legal advisors totaling $1.8 million and $3.2 million for
the three months and nine months ended September 30, 2000,
respectively.
9. OPERATING SEGMENTS
Description of Segments
The Company has two operating segments: (i) Decorative Home Furnishings
which designs, manufacturers, imports and distributes decorative
textile home furnishings and (ii) a domestic manufacturer and marketer
of specialty fabrics, primarily for the apparel industry, known as
"sliver knit" pile fabrics ("Fabric Division").
Measurement of Segment Profit
The Company evaluates performance and allocates resources based on
operating income of each division. The accounting policies of the
reportable segments are the same as described in Note 1 and exclude any
costs associated with the Company's corporate administrative and
finance functions.
Factors Management used to identify the Reportable Segments
The Company's reportable segments are business units that offer
different products and each are managed separately. The following
tables present operating results and other financial information
utilized by management in analyzing each operating division. All
amounts are in thousands.
19
<PAGE>
GLENOIT CORPORATION AND SUBSIDIARIES
(a wholly-owned subsidiary of Glenoit Universal, Ltd.)
(Debtor-in-Possession)
Notes to Consolidated Financial Statements (Unaudited)
9. OPERATING SEGMENTS (Continued)
<TABLE>
<CAPTION>
Third Quarter Ended
-------------------------------
October 2, September 30,
1999 2000
---- ----
<S> <C> <C>
Net sales
Decorative Home Furnishings $63,801 $78,252
Fabric.............................. 22,839 21,441
Intercompany........................ (662) (714)
------ -------
Consolidated................... $85,978 $98,979
======= =======
Operating income (loss)
Decorative Home Furnishings $7,340 $8,129
Fabric.............................. 5,194 5,063
Corporate/Other..................... (2,208) (3,612)
------- -------
Consolidated................... $10,326 $9,580
======= ======
Depreciation and amortization
Decorative Home Furnishings $1,704 $1,700
Fabric.............................. 986 944
Corporate/Other................... 303 972
------- -------
Consolidated................... $2,993 $3,616
====== ======
Nine Months Ended
---------------------------------------
October 2, September 30,
1999 2000
---- ----
Net sales
Decorative Home Furnishings $160,521 $208,556
Fabric............................... 62,987 54,159
Intercompany......................... (1,373) (2,441)
------ --------
Consolidated.................... $222,135 $260,274
======== ========
Operating income (loss)
Decorative Home Furnishings $14,717 $17,309
Fabric............................... (3,638) 6,997
Corporate/Other...................... (6,436) (9,201)
======= =======
Consolidated.................... $4,643 $15,105
======= =======
Depreciation and amortization
Decorative Home Furnishings $4,243 $5,112
Fabric............................... 3,213 2,892
Corporate/Other...................... 1,564 2,213
------- -------
Consolidated.................... $9,020 $10,217
======= =======
September 30,
2000
------------
Inventory and accounts receivable
Decorative Home Furnishings $87,116
Fabric............................... 7,263
---------
Consolidated................... $94,379
=========
</TABLE>
20
<PAGE>
GLENOIT CORPORATION AND SUBSIDIARIES
(a wholly-owned subsidiary of Glenoit Universal, Ltd.)
(Debtor-in-Possession)
Notes to Consolidated Financial Statements (Unaudited)
10. LIABILITIES SUBJECT TO COMPROMISE
On August 8, 2000, the Company announced that it had terminated a
tender offer and related solicitation of consents to certain proposed
amendments for its 11% Senior Subordinated Notes. The Company also
announced that it filed for protection under Chapter 11 of the U. S.
Bankruptcy Code in the United States Bankruptcy Court for the District
of Delaware. On August 9, 2000, the Company filed its amended plan of
reorganization that was pre-approved by its banks and bondholders in a
format known as a "pre-packaged" bankruptcy. The amended plan of
reorganization allows for the Company to pay its vendors in the
ordinary course of operations and on normal trade terms without
interruption. However, the Company recently announced that the possible
confirmation of the plan of reorganization has been delayed to allow
the Company time to resolve outstanding issues with its equity sponsor,
secured lenders and bondholders. Holders of approximately 83% of the
principal balance of the Senior Subordinated Notes signed lock-up
letters whereby they agreed to support the current plan of
reorganization until November 15, 2000. Currently, no new plan of
reorganization has been filed with the Court. The Company is currently
reviewing strategic options including discussions with additional
investors to identify a revised plan that will allow the Company to
exit from Chapter 11.
Under the amended plan of reorganization and based on motions approved
by the bankruptcy court, the Company was allowed to pay all outstanding
pre-petition claims in the ordinary course and without interruption
except for the principal and accrued interest associated with the
Senior Subordinated Notes. As of August 8, 2000, there was $95 million
of principal amount and $8.5 million of accrued interest not yet paid
related to the Senior Subordinated Notes. In addition, there was
approximately $2.7 million of unamortized deferred financing costs
related to the Senior Subordinated Notes. In accordance with generally
accepted accounting principles, the unamortized deferred financing
costs have been netted against the outstanding principal balance and
accrued interest as of August 8, 2000 to determine the level of
"liabilities subject to compromise". "Liabilities subject to
compromise" refers to liabilities incurred prior to the commencement of
the Chapter 11 case and represent the Company's estimate of known or
potential claims to be resolved in connection with the Chapter 11 case.
Such claims remain subject to future adjustment based on actions of the
Bankruptcy Court, treatment under the Plan of Reorganization and other
events. The original plan of reorganization calls for a payment of 17
cents for every dollar of principal outstanding under the Senior
Subordinated Notes and no payment for accrued interest. Therefore, the
Company did not record any additional interest expense on the Senior
Subordinated Notes subsequent to August 8, 2000. This amount of
interest for the period August 8, 2000 through September 30, 2000 is
estimated to be approximately $1.5 million.
21
<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) Decorative Home Furnishings
which manufactures, imports and distributes decorative textile home furnishings
and (ii) a domestic manufacturer and marketer of specialty fabrics, primarily
for the apparel industry, known as "sliver-knit" pile fabrics ("Fabric
Division"). 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 August 8, 2000, the Company announced that it had terminated a tender offer
and related solicitation of consents to certain proposed amendments for its 11%
Senior Subordinated Notes. The Company also announced that it filed for
protection under Chapter 11 of the U. S. Bankruptcy Code in the United States
Bankruptcy Court for the District of Delaware. On August 9, 2000, the Company
filed its amended plan of reorganization that was pre-approved by its banks and
bondholders in a format known as a "pre-packaged" bankruptcy. The amended plan
of reorganization allows for the Company to pay its vendors in the ordinary
course of operations and on normal trade terms without interruption. However,
the Company recently announced that the possible confirmation of the plan of
reorganization has been delayed to allow the Company time to resolve outstanding
issues with its equity sponsor, secured lenders and bondholders. Holders of
approximately 83% of the principal balance of the Senior Subordinated Notes
signed lock-up letters whereby they agreed to support the current plan of
reorganization until November 15, 2000. Currently, no new plan of reorganization
has been filed with the Court. The Company is currently reviewing strategic
options including discussions with additional investors to identify a revised
plan that will allow the Company to exit from Chapter 11.
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. 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 $44.1
million, subject to post-closing adjustments. In addition, approximately $6.8
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
22
<PAGE>
curtains, table linens, and decorative pillows. The Company believes that these
acquisitions 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. 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. These acquisitions have been
accounted for as "purchases" under APB Opinion No. 16 and, accordingly, the
financial statements reflect the results of operations from the dates of
purchase.
On February 25, 1999, the Company's Board of Directors approved a plan to close
one of the manufacturing operations of the Fabric Division. 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.
Results of Operations
Net sales for the quarter ended September 30, 2000, increased to $99.0 million
or 15.1% compared to $86.0 million during the comparable quarter in the prior
year. The increase in net sales occurred in the Decorative Home Furnishings
segment which increased from $63.8 million in the third quarter of 1999 to $78.3
million in 2000. The increase in net sales was the result of increased sales of
rugs, quilts and specialty bedding items. These increases in sales of home
furnishing items were slightly offset by a decline in sales of the Fabric
Division to $21.4 million from $22.8 million. This decrease was due to continued
softness in the product category.
Net sales for the nine months ended September 30, 2000 increased to $260.3
million from $222.1 million in the nine months of 1999. The increase was the
result of the sales growth of the Decorative Home Furnishing segment from $160.5
million to $208.5 million and to the inclusion of Ex-Cell for the full first
quarter of 2000. Year-to-date sales for the Fabric Division declined to $54.2
million from $63.0 million in the first nine months of 1999.
Gross profit for the quarter ended September 30, 2000 was $27.8 million or 28.1%
of net sales compared to $25.9 million or 30.1% of net sales for the same period
last year. The Fabric Division's results were negatively impacted by decreased
volume and manufacturing inefficiencies which resulted in a low absorption of
overhead costs decreasing gross margin to $4.4 million from $7.5 million. Gross
margin in the third quarter of 1999 was negatively impacted by $0.5 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. Gross margin in the Decorative Home Furnishings segment
increased to $23.1 million from $18.5 million.
23
<PAGE>
Gross profit for the first nine months of 2000 was $67.6 million as compared to
$65.1 million in 1999. The increase in gross profit was related to the
Decorative Home Furnishings segment. Gross margin was negatively impacted by
$2.2 million year-to-date October 2, 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 $10.3 million in 2000 from $16.5 million for the first nine months
of 1999 as a result of decreased volume and manufacturing inefficiencies.
Operating expenses, excluding restructuring and reorganization charges, for the
quarter ended September 30, 2000, were $17.6 million compared to $15.6 million
in the third quarter of the prior year. Operating expenses, excluding
restructuring and reorganization charges, for the nine months ended September
30, 2000 totaled $50.5 million as compared to $47.4 million for 1999. During the
third quarter, the Company filed motions to reject two property leases as
allowed under the bankruptcy code. One of the rejected leases related to the
shutdown Tennessee operation and this resulted in recording income of $2.9
million because the Company had previously accrued for lease payments through
August 2007. The other rejected lease related to a decorative pillow operation
in Miami, Florida. Substantially all employees in this facility will be
terminated by November 21, 2000 and any related severance was accrued. In
addition, the Company wrote-off previously capitalized leasehold improvements.
The Company has also incurred financial and legal advisory fees directly related
to the bankruptcy totaling $1.8 million and $3.2 million for the three months
and nine months ended September 30, 2000, respectively. 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". In addition to the restructuring charge,
dollar increases in 2000 relate to the operating expenses of Ex-Cell for the
first full quarter of 2000. Through the first two quarters of 1999, the Company
had recorded $1.7 million of compensation charges related to the APE purchase
agreement. During the third quarter of 1999, the Company reversed $1 million of
this expense resulting in year-to-date October 2, 1999 expense of $0.7 million.
However, based on the full year of APE's 1999 operating results, this charge was
later reversed and no compensation expense was recorded for the twelve months
ended January 1, 2000.
The Company reported operating income of $9.6 million for the third quarter
ended September 30, 2000 compared to operating income of $10.3 million in the
prior year and operating income for the nine months ended September 30, 2000 of
$15.1 compared to an operating income of $4.6 million in 1999 as a result of
factors described above.
Interest expense for the quarter ended September 30, 2000, was $5.7 million
compared to $6.6 million for the same period last year. Interest expense
decreased as a result of not recording any interest on the 11% Senior
Subordinated Notes subsequent to the August 8, 2000 bankruptcy filing.
Year-to-date interest expense in 2000 was $19.4 million compared to $18.0
million in 1999. Interest expense has increased due to higher levels of debt as
a result of the Ex-Cell acquisition and higher interest rates which was slightly
offset by the reduced interest expense associated with the 11% Senior
Subordinated Notes.
Net income for the quarter ended September 30, 2000, was $2.2 million compared
to net income of $1.8 million the prior year. Net loss for the nine months ended
September 30, 2000 was $3.9 million compared to a net loss of $9.3 million in
the prior year.
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Liquidity and Capital Resources
The Company relies on internally generated cash flow from operations,
supplemented by borrowings under its senior credit facility, DIP financing 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 Paribas, 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"). 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 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 began 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. During November 1999, the Company prepaid a total of
approximately $1 million of loans outstanding under the Term A and Term B
facilities with excess cash proceeds from the sale of fixed assets. A more
detailed description of the Notes and the senior credit agreement may be found
in the notes to consolidated financial statements.
As a result of certain defaults under the Facility, the Company was prohibited
by its lenders from paying $5.25 million of interest due to holders of the
Notes. Accordingly, as of April 15, 2000, the Company was in default and remains
in default under the terms of the Notes. The Company continued working with its
lenders and received various waivers and amendments through August 8, 2000 to
enable the Company to operate without the lenders demanding payment on the
Facility.
On August 8, 2000, the Company announced that it had terminated a tender offer
and related solicitation of consents to certain proposed amendments for the
Notes. Also, it was announced that Glenoit Universal, Ltd., the Company and six
operating subsidiaries filed for protection under Chapter 11 of the U. S.
Bankruptcy Code in the United States Bankruptcy Court for the District of
Delaware. On August 9, 2000, the Company filed its amended plan of
reorganization that was pre-approved by its banks and holders of the Notes in a
format known as a "pre-packaged" bankruptcy. The plan of reorganization calls
for the payment of 17 cents for every dollar of principal outstanding under the
Notes while vendors will be paid in the ordinary course without interruption.
However, the Company recently announced that the possible confirmation of the
plan of reorganization has been delayed to allow the Company time to resolve
outstanding issues with its equity sponsor, secured lenders and bondholders.
Holders of approximately 83% of the
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principal balance of the Notes signed lock-up letters whereby they agreed to
support the current plan of reorganization until November 15, 2000. Currently,
no new plan of reorganization has been filed with the Court. The Company is
currently reviewing strategic options including discussions with additional
investors to identify a revised plan that will allow the Company to exit from
Chapter 11. The Company's operations during the bankruptcy proceeding will be
funded by a $65 million Debtor-in-possession credit facility ("DIP Facility").
The DIP Facility's initial term is through December 29, 2000. The Company is
negotiating with its lending group to extend the DIP Facility. Even though
discussions are on-going, there can be no assurance that the Company will obtain
this extension if it becomes necessary. The DIP Facility's availability will be
based on a "borrowing base", similar to the Facility, plus an overadvance rate
of up to $13 million less outstanding letters of credit less $47 million of
pre-petition borrowings under the Working Capital Commitment plus cash held in a
special blocked account. As of November 13, 2000, there were no borrowings
outstanding under the DIP Facility and total availability was approximately
$24.5 million.
Additionally, the Company will continue to pay interest on the outstanding
principal balances of the Working Capital Commitment, Term A loan and Term B
loan. Loans under the Working Capital Commitment and Term A loan will bear
interest at the Base Rate plus 2.25% on the Eurodollar Rate plus 3.50%. Advances
made under the Term B loan bear interest at the Base Rate plus 3.00% or the
Eurodollar Rate plus 4.25%. However, the Company will not be required to make
principal amortization payments during the Chapter 11 proceedings. Loans
outstanding under the DIP Facility will bear interest at the Base Rate plus
2.25% or the Eurodollar Rate plus 3.50%. On August 8, 2000, the Company also
announced that it successfully negotiated exit financing with the same bank
group that is expected to be available to the Company upon emergence from
Chapter 11.
Ex-Cell has a factoring arrangement whereby substantially all of its accounts
receivable are assigned and sold without recourse. During November 1999, the
Company entered into a factoring agreement for its domestic Fabric Division
whereby all pre-approved accounts are assigned without recourse. The Company
does retain credit risks on customer orders that were not approved by the
factor. As of September 30, 2000, the Company retained credit risk of
approximately $3.0 million related to accounts not factored under these two
agreements.
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. In connection with the current plan of
reorganization, the Seller Notes would be extinguished without any compensation
to the holders.
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 September
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30, 2000, Holdings has obligations with a face amount of $33.3 million, bearing
interest at stated rates between 5% to 12.5%, to shareholders with principal due
in 2004 and 2005.
During September 1998, the Company acquired $5 million of the 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 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.
During the nine months ended September 30, 2000, net cash used in operating
activities was $8.4 million. Receivables increased by $12.6 million, inventories
increased by $8.2 million, accrued expenses increased $8.4 million, and accounts
payable increased $3.4 million. These increases are primarily to support the
sales growth in the Decorative Home Furnishing Segment and to meet the company's
seasonal requirements.
Capital Improvements
Capital expenditures for the nine months ended September 30, 2000 were $2.1
million. These additions were related to numerous, small projects in the two
operating segments.
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 currently not experienced any significant systems or other Year
2000 related problems. The Company substantially completed all the conversions
that were in progress to improve operating efficiencies in which Year 2000
corrections were ancillary. The Company capitalized the costs associated with
these conversions in accordance with appropriate accounting policies.
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
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of the Company's success in developing and expanding its business, maintaining
financing on reasonable terms and a successful emergence from Chapter 11. 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 Risks
The Company's exposure to market risk relates to changes in interest rates and
foreign currency rates. During 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. As of September 30, 2000, the
market value of this cap was approximately $ .7 million. The Company has not
used any other derivative financial instruments. 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 September 30, 2000, the Company had $151.0 million
outstanding under its New Credit Facility and DIP Facility with an average
interest rate of 10.4%. The Company's other borrowings consist of $95.0 million
of senior subordinated debt due on April 2007 at a fixed rate of 11%. 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. Both China and Canada have traditionally had relatively
stable currencies and therefore the Company believes its exposure to significant
adjustments 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 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.
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PART II - Other Information
ITEM 1: 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 1, 2000. See "Item 2: Changes in Securities and Use of
Proceeds" for a discussion related to the Company filing for protection under
Chapter 11 of the U. S. Bankruptcy Code.
ITEM 2: Changes in Securities and Use of Proceeds
On August 8, 2000, the Company announced that it had terminated a tender offer
and related solicitation of consents to certain proposed amendments for its 11%
Senior Subordinated Notes (the "Notes"). The Company also announced it filed for
protection under Chapter 11 of the U. S. Bankruptcy Code in the United States
Bankruptcy Court for the District of Delaware. On August 9, 2000, the Company
filed an amended plan of reorganization that was pre-approved by its banks and a
majority of holders of the Notes in a format known as a "pre-packaged"
bankruptcy. The plan calls for payment, upon confirmation, to the holders of the
Notes of 17 cents for every dollar of principal outstanding. However, the
Company recently announced that the possible confirmation of the plan of
reorganization has been delayed to allow the Company time to resolve outstanding
issues with its equity sponsor, secured lenders and bondholders. Holders of
approximately 83% of the principal balance of the Senior Subordinated Notes
signed lock-up letters whereby they agreed to support the current plan of
reorganization until November 15, 2000. Currently, no new plan of reorganization
has been filed with the Court. The Company is currently reviewing strategic
options including discussions with additional investors to identify a revised
plan that will allow the Company to exit from Chapter 11.
ITEM 3: Defaults upon Senior Securities
On April 15, 2000, the Company was prohibited by its bank group from paying
$5.25 million of interest due on the Notes and the Company was in default and
remains in default under the terms of the Notes. In addition, the Company's
filing for protection under Chapter 11 of the U. S. Bankruptcy Code was also a
default under the terms of the Notes.
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.
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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.
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.
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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.
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 is hereby incorporated by
reference to Exhibit 10.11 of Glenoit Corporation's Form 10-Q
filed on August 24, 1999.
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 is hereby incorporated by
reference to Exhibit 10.12 of Glenoit Corporation's Form 10-Q
filed on August 24, 1999.
10.13 Amendment No. 4 to the Third Amended and Restated Credit
Agreement, dated as of October 29, 1999, among Glenoit
Corporation, the banks, financial institutions and other
institutional lenders and Banque Nationale de Paris as Agent, is
hereby incorporated by reference to Exhibit 10.13 of Glenoit
Corporation's Form 10-Q filed on November 23, 1999.
10.14 Amendment No. 5 to the Third Amended and Restated Credit
Agreement, dated as of November 19, 1999, among Glenoit
Corporation, the banks, financial institutions and other
institutional lenders and Banque Nationale de Paris as Agent, is
hereby incorporated by reference to Exhibit 10.14 of Glenoit
Corporation's Form 10-Q filed on August 24, 1999.
10.15 Amendment No. 6 to the Third Amended and Restated Credit
Agreement, dated as of March 16, 2000, among Glenoit Corporation,
the banks, financial institutions, and other institutional lenders
and Banque Nationale de Paris as Agent, is hereby incorporated by
reference to Exhibit 10.15 of Glenoit Corporation's Form 10-K
filed on April 17, 2000.
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10.16 Amendment No. 7 to the Third Amended and Restated Credit Agreement
dated as of April 26, 2000, among Glenoit Corporation, the banks,
financial institutions, and other institutional lenders and Banque
Nationale de Paris as Agent is hereby incorporated by reference to
Exhibit 10.16 of Glenoit Corporation's Form 10-Q filed on May 22,
2000.
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.
(b) Reports on Form 8-K
The Company filed a Form 8-K on August 8, 2000 announcing the
bankruptcy filing. The Company also filed a Form 8-K on October 26,
2000 which disclosed the deferral of the confirmation date for the
Company's amended plan of reorganization.
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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: November 17,2000
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: November 17,2000
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)
33
