<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549-1004
FORM 10-Q
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2000
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM TO
COMMISSION FILE NUMBER 333-52657
INDESCO INTERNATIONAL, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 13-3987915
(State of Incorporation) (I.R.S. Employer Identification No.)
950 THIRD AVENUE
NEW YORK, NEW YORK 10022
(Address of Principal Executive Offices) (Zip Code)
(212) 593-2009
(Registrant's Telephone Number, Including Area Code)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes x No
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date (August 1, 2000)
Common Stock: 200 Shares, Par Value $0.01
<PAGE> 2
INDESCO INTERNATIONAL, INC.
FORM 10-Q
QUARTER ENDED JUNE 30, 2000
INDEX
<TABLE>
<CAPTION>
PAGE
<S> <C>
PART I. FINANCIAL INFORMATION
ITEM 1. Condensed Consolidated Balance Sheets of Indesco International,
Inc. and Subsidiaries at June 30, 2000 (Unaudited) and December 31, 1999..................... 2
Condensed Consolidated Statements of Operations of Indesco
International, Inc. and Subsidiaries for the Three and Six Months Ended
June 30, 2000 and 1999 (Unaudited)........................................................... 3
Condensed Consolidated Statements of Cash Flows of Indesco
International, Inc. and Subsidiaries for the Six Months Ended
June 30, 2000 and 1999 (Unaudited)........................................................... 4
Notes to Condensed Consolidated Financial Statements (Unaudited)............................. 5
ITEM 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations.................................................................... 17
PART II. OTHER INFORMATION
ITEM 5. Other Information............................................................................ 20
ITEM 6. Exhibits and Reports on Form 8-K............................................................. 20
SIGNATURE ............................................................................................. 21
</TABLE>
1
<PAGE> 3
INDESCO INTERNATIONAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
JUNE 30, 2000 AND DECEMBER 31, 1999
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
JUNE 30, 2000 DECEMBER 31,
(UNAUDITED) 1999
<S> <C> <C>
ASSETS
Current Assets:
Cash and Cash Equivalents $ 533 $ 377
Accounts Receivable, Net 11,223 14,275
Inventories 11,862 12,623
Prepaid Expenses and Other Assets 1,321 407
--------- ---------
Total Current Assets 24,939 27,682
Property, Plant and Equipment, Net 61,190 65,253
Excess of Cost Over Fair Value of Net Assets Acquired, Net 57,863 59,470
Patents and Other Intangibles, Net 7,243 7,557
Deferred Financing Costs 5,111 5,463
Other Assets 392 421
--------- ---------
TOTAL ASSETS $ 156,738 $ 165,846
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current Liabilities:
Current Portion of Long-Term Debt and Capital Lease Obligations $ 818 $ 871
Credit Facilities 1,512 1,827
Accounts and Drafts Payable 4,913 8,951
Income Taxes Payable 352
Accrued Expenses 6,722 6,933
--------- ---------
Total Current Liabilities 14,317 18,582
Long-Term Debt and Capital Lease Obligations 166,276 167,832
Deferred Income Taxes 506 535
--------- ---------
Total Liabilities 181,099 186,949
Stockholders' Equity (Deficit):
Common-Stock, Authorized 3,000 Shares of $.01 Par Value;
200 Shares Issued and Outstanding -- --
Additional Paid-in Capital 5,062 5,062
Accumulated Deficit (29,407) (26,166)
Accumulated Other Comprehensive Income (Loss) (16) 1
--------- ---------
Total Stockholders' Equity (Deficit) (24,361) (21,103)
--------- ---------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) $ 156,738 $ 165,846
========= =========
</TABLE>
See notes to condensed consolidated financial statements.
2
<PAGE> 4
INDESCO INTERNATIONAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2000 AND 1999
(UNAUDITED)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30, JUNE 30, JUNE 30,
2000 1999 2000 1999
<S> <C> <C> <C> <C>
Net Sales $ 24,564 $ 25,303 $ 51,127 $ 52,987
Cost of Sales 19,368 18,294 39,479 39,077
-------- -------- -------- --------
Gross Profit 5,196 7,009 11,648 13,910
Operating Expenses:
Selling, General and Administrative 1,808 3,230 4,410 6,192
Research and Development 130 642 321 1,196
Amortization of Intangibles 693 689 1,384 1,373
-------- -------- -------- --------
Total Operating Expenses 2,631 4,561 6,115 8,761
-------- -------- -------- --------
Income From Operations 2,565 2,448 5,533 5,149
Other (Income) Expense:
Interest 4,296 4,132 8,439 8,279
Other (75) 136 (97) 33
-------- -------- -------- --------
Total Other Expense, Net 4,221 4,268 8,342 8,311
-------- -------- -------- --------
Income (Loss) Before
Provision for Income Taxes (1,656) (1,820) (2,809) (3,163)
Provision for Income Taxes 233 37 432 87
-------- -------- -------- --------
NET LOSS $ (1,889) $ (1,857) $ (3,241) $ (3,250)
======== ======== ======== ========
</TABLE>
See notes to condensed consolidated financial statements.
3
<PAGE> 5
INDESCO INTERNATIONAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 2000 AND 1999
(UNAUDITED)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
2000 1999
---- ----
<S> <C> <C>
Cash Flows From Operating Activities:
Net Income (Loss) $(3,241) $(3,250)
Adjustments to Reconcile Net Loss to Net Cash
Provided by Operating Activities:
Depreciation 4,425 3,502
Amortization 1,384 1,373
Loss on Disposal of Property, Plant and Equipment 3 55
Changes in Operating Assets and Liabilities:
Accounts Receivable 2,232 1,227
Inventories 578 1,240
Prepaid Expenses and Other Assets 820 86
Accounts and Drafts Payable (3,929) 53
Income Taxes Payable 309 79
Accrued Expenses (36) (449)
------- -------
Total Adjustments 5,786 7,166
------- -------
Net Cash Provided by Operating Activities 2,545 3,916
------- -------
Cash Flows From Investing Activities:
Expenditures for Property, Plant and Equipment (835) (6,572)
Proceeds From Disposal of Property, Plant and Equipment -- --
Other (11) (60)
------- -------
Net Cash Used by Investing Activities (846) (6,632)
------- -------
Cash Flows From Financing Activities:
Repayment of Long-Term Debt (449) (325)
Net Borrowings (Reductions) Under Revolving Credit Agreements (1,079) 5,266
------- -------
Net Cash Provided (Used) by Financing Activities (1,528) 4,941
------- -------
Effect of Exchange Rate Changes on Cash (15) (46)
------- -------
Net Increase in Cash and Cash Equivalents 156 2,179
Cash and Cash Equivalents at Beginning of Year 377 1,569
------- -------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 533 $ 3,748
Supplemental Disclosures of Cash Flow Information: ======= ========
Cash Paid During the Period for:
Interest $ 8,087 $ 7,279
------- -------
Income Taxes $ 117 $ 7
------- -------
</TABLE>
Non-Cash Investing and Financing Information:
During the six month period ended June 30, 1999, the Company entered
into capital leases for machinery and equipment aggregating $105.
See notes to consolidated financial statements.
4
<PAGE> 6
INDESCO INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(DOLLARS IN THOUSANDS)
(1) ORGANIZATION AND BASIS OF PRESENTATION
Indesco International, Inc. (the "Company"), is a wholly owned subsidiary
of Indesco Holdings Co., formerly Afa Holdings Co. ("Parent"). The Company
manufactures and sells finger activated liquid dispensing devices ("trigger
sprayers") primarily in the United States and the Netherlands. The Parent was
formed in July 1997 to acquire, through a wholly owned subsidiary, the assets
and liabilities of AFA Products, Inc. ("AFA"), located in Forest City, North
Carolina. Concurrent with this transaction, the stockholder of the Parent and an
affiliate of another stockholder of the Parent acquired the outstanding capital
stock of AFA Polytek B.V. ("Polytek") based in The Netherlands. In addition,
effective February 1, 1998, the Company acquired certain assets and liabilities
of Continental Sprayers International ("CSI"), a division of Contico
International, Inc. for approximately $94 million. Concurrent with the CSI
acquisition, Polytek became a wholly owned subsidiary of the Company.
The accompanying unaudited condensed consolidated balance sheet of the
Company as of June 30, 2000 includes the accounts of the Company and its
subsidiaries (AFA, Polytek and CSI).
The accompanying unaudited condensed consolidated statements of operations
of the Company for the six months ended June 30, 2000 and 1999 include the
results of operations of the Company and its subsidiaries (AFA, Polytek and
CSI).
The unaudited condensed consolidated balance sheet as of June 30, 2000 and
the unaudited condensed consolidated statements of operations and cash flows for
the six months ended June 30, 2000 and 1999, in the opinion of management, have
been prepared on the same basis as the Company's related annual audited
financial statements and include all significant adjustments, consisting only of
normal recurring adjustments, necessary for the fair presentation of the results
of the interim periods. The data disclosed in the notes to the condensed
consolidated financial statements for these periods are also unaudited. Certain
information and footnote disclosure normally included in the Company's annual
financial statements have been condensed or omitted. The unaudited condensed
consolidated financial statements and notes thereto should be read in
conjunction with the related annual audited financial statements and notes
thereto. Results for the six months ended June 30, 2000 are not necessarily
indicative of the results that may be expected for the entire year.
(2) SIGNIFICANT ACCOUNTING POLICIES
The condensed consolidated financial statements have been prepared using
the accounting policies disclosed in the related annual audited financial
statements.
Foreign Currency Translation
Assets and liabilities of Polytek are translated at exchange rates in
effect at the balance sheets dates ($.4320 and $.4567 per guilder at June 30,
2000 and December 31, 1999, respectively). Items of revenue and expense are
translated at average exchange rates during the period ($.4304 and $.4902 per
guilder for the six-month periods ended June 30, 2000 and 1999, respectively).
Translation adjustments resulting from translating the Polytek financial
statements into dollars are reported in the equity section of the accompanying
balance sheet under the caption "Accumulated Other Comprehensive Income (loss)."
5
<PAGE> 7
INDESCO INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(DOLLARS IN THOUSANDS)
(3) INVENTORIES
The components of inventories as of June 30, 2000 and December 31, 1999 are
summarized as follows:
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
2000 1999
---- ----
<S> <C> <C>
Raw Material $ 2,489 $ 3,252
Work-in-Process 4,949 5,267
Finished Goods 4,424 4,104
------- -------
$11,862 $12,623
======= =======
</TABLE>
(4) PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment, summarized by major classification and
estimated useful lives for depreciation purposes, is as follows:
<TABLE>
<CAPTION>
USEFUL JUNE 30, DECEMBER 31,
LIVES (YEARS) 2000 1999
------------- ---- ----
<S> <C> <C> <C>
Land $ 2,493 $ 2,538
Buildings 30-40 14,041 14,241
Machinery and Equipment 5-7 53,089 53,453
Furniture and Fixtures 5-7 3,513 3,431
Vehicles 5 19 23
Construction in Progress 7,881 7,174
------ ------
81,036 80,860
------ ------
Less: Accumulated Depreciation and Amortization (19,846) (15,607)
-------- --------
Property, Plant and Equipment, Net $ 61,190 $ 65,253
=========== ==========
</TABLE>
Construction in progress primarily consists of additions and improvements
to buildings, molds and machinery. Property, plant and equipment includes
approximately $1,533 for assets recorded under capital leases.
6
<PAGE> 8
INDESCO INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(DOLLARS IN THOUSANDS)
(5) DEBT
Debt consists of the following:
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
2000 1999
---- ----
<S> <C> <C>
Working Capital line of credit, Dutch Guilder
("NLG") denominated bearing interest at 4.75 percent (a) $ 1,512 $ 1,827
======== ========
LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS
Revolving credit facility, dollar denominated bearing
interest at 9.16 percent (b) $ 17,166 $ 18,245
Senior subordinated notes, dollar denominated bearing interest
at 9.75 percent (c) 145,000 145,000
ABN/AMRO loan, NLG denominated, bearing interest at 6.10
percent (d) 2,662 3,009
Senior mortgage note, NLG denominated,
payable in quarterly principal installments
(NLG 175,000 or US $75,600 per annum),
bearing interest at 5.50 percent (e) 870 959
Capital lease obligations, NLG denominated,
bearing interest at rates ranging from 7.10 percent
to 7.75 percent 1,396 1,490
-------- --------
167,094 168,703
Less: Current Portion 818 871
-------- --------
TOTAL LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS $166,276 $167,832
======== ========
</TABLE>
Working Capital Borrowings
(a) Netherlands
Borrowings under the NLG denominated line of credit have a maximum limit of
NLG 11,000 ($4,752 and $5,024 at June 30, 2000 and December 31, 1999,
respectively). Interest payments on the NLG denominated line of credit are due
quarterly, or with respect to interest due on short-term loans borrowed under
the line of credit, at the end of the short-term loan period. Borrowings under
the NLG line of credit are collateralized by a lien on certain real property of
Polytek. This line of credit contains certain covenants, the most significant of
which relates to minimum net worth requirements.
7
<PAGE> 9
INDESCO INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(DOLLARS IN THOUSANDS)
Long-Term Debt
(b) U.S.
Credit Facility
General--As of September 29, 1998, the Company, AFA and CSI entered into a
credit facility (the "Credit Facility") with First Union National Bank ("First
Union") for a term of five years. As amended on March 30, 2000, the Credit
Facility provides for up to $25,000 of borrowings from time to time and includes
a subfacility for the issuance of letters of credit up to a maximum aggregate
amount at any one time outstanding not to exceed $2,000.
Collateral--Indebtedness under the Credit Facility is collateralized by a
first priority security interest in all accounts receivable, inventory,
machinery and equipment (including molds), certain U.S. real property and all of
the U.S. intellectual property of the Company and its domestic subsidiaries. In
addition, the Company has agreed to pledge the stock of its domestic
subsidiaries.
Interest--Indebtedness under the Credit Facility bears interest at a
floating rate based (at the Company's option) upon (i) LIBOR (for either one,
two, three or six months), plus an Applicable Margin ranging from 1.25 percent
to 2.50 percent or (ii) the Base Rate (the greater of the Prime Rate announced
by First Union or the Federal Funds Rate plus 0.50 percent) plus an Applicable
Margin ranging from 0.00 percent to 1.25 percent.
Borrowing Base--The availability of borrowings under the New Credit
Facility is subject to a borrowing base equal to the sum of (i) 85 percent of
eligible accounts receivable, (ii) 60 percent of eligible inventory, (iii) 100
percent of the orderly liquidation value of selected eligible machinery and
equipment, (iv) Year 2000 Fixed Asset Availability (as defined in the Credit
Agreement , as amended) and (v) the lesser of (a) $2,000 or (b) 40% of the
Original Real Estate Value ($5,440 reduced by 1/28th quarterly). First Union
has the right to set reserves, which can limit the amount of Borrowing Base
availability. Effective April 30, 2000, a monthly reserve of $1,178 has been
established against the Borrowing Base, which reserve reduces to zero after each
semi-annual payment of interest under the New Notes.
Covenants--The New Credit Facility requires the Company (on a consolidated
basis, including all domestic subsidiaries and Polytek) to meet certain
financial tests at the end of each fiscal quarter, including minimum quarterly
EBITDA levels, maximum Funded indebtedness of EBITDA levels (waived through
December 31, 2000) determined on a rolling four-quarter basis as of the last day
of each fiscal quarter, and a Fixed Charge Coverage Ratio.
The New Credit Facility also contains covenants that include, without
limitation: (I) required delivery of financial statements, other reports and
borrowing base certificates; (ii) limitations on liens; (iii) limitations on
mergers, consolidations and sales of assets; (iv) limitations on incurrence of
debt; (v) limitations on permitted capital expenditures; (vi) limitations on
restricted payments; (vii) limitations on investments and acquisitions; (viii)
limitations on transactions with affiliates; and (ix) limitations on changes in
the Company's line of business.
INDESCO INTERNATIONAL, INC. AND SUBSIDIARIES
8
<PAGE> 10
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(DOLLARS IN THOUSANDS)
(c) Senior Subordinated Notes
On April 23, 1998, the Company issued $145,000 of 9.75 percent Senior
Subordinated Notes due April 15, 2008 (the "Old Notes") which have been
exchanged for New Notes, as defined below. The net proceeds were used by the
Company to refinance U.S. indebtedness, including borrowings incurred in
connection with the acquisition in February 1998 of substantially all of the
assets of CSI, as previously mentioned in Notes (1) and (3). Interest on the Old
Notes was payable semi-annually on April 15 and October 15.
The Old Notes were redeemable at the option of the Company, in whole or in
part, on or after April 15, 2003, at certain specified redemption prices, plus
accrued and unpaid interest thereon to the redemption date. In addition, at any
time on or before April 15, 2001, the Company could redeem up to 35 percent of
the initial aggregate principal amount of the Old Notes with the net proceeds of
one or more equity offerings at a redemption price equal to 109.75 percent of
the principal amount thereof, plus accrued and unpaid interest, if any, to the
date of redemption; provided that at least 65 percent of the initial aggregate
principal amount of the Old Notes remained outstanding. The terms of the Old
Notes required the Company to make an offer to purchase all outstanding Old
Notes at 101 percent of the principal amount thereof, plus accrued and unpaid
interest to the date of purchase, upon a change of control of the Company.
The Old Notes were unsecured senior subordinated obligations of the Company
and were subordinated in right of payment to all existing and future Senior
Indebtedness of the Company, including indebtedness under its Revolving Credit
Facility. The Old Notes were ranked pari passu with all existing and future
senior subordinated indebtedness of the Company, were ranked senior to all other
existing and future Subordinated Indebtedness of the Company and were fully and
unconditionally guaranteed, jointly and severally, on an unsecured senior
subordinated basis by each of the Company's existing and future U.S.
subsidiaries (the "Subsidiary Guarantors") (see Note 13). The Old Notes were
also effectively subordinated to all existing and future Senior Indebtedness of
the Company's subsidiaries.
On August 17, 1998, the Company filed with the Securities and Exchange
Commission a registration statement on Form S-4 with respect to its 9.75% Senior
Subordinated Notes due April 15, 2008 ("New Notes") which are fully and
unconditionally guaranteed, jointly and severally, on an unsecured senior
subordinated basis, by the Subsidiary Guarantors (see Note 13). On September 16,
1998, the Company concluded its exchange offer and the New Notes were exchanged
for $145,000 aggregate principal amount of the Old Notes. The New Notes are
subordinated in right of payment to all existing and future Senior Indebtedness,
including indebtedness under the New Credit Facility and, except for certain
transfer restrictions and registration rights relating to the Old Notes, are
identical in all material respects to the Old Notes.
(d) ABN/AMRO Loan
Polytek has a credit facility with the ABN-AMRO Bank, The Netherlands. This
credit facility includes a loan of up to NLG 8,500 ($3,672) requiring quarterly
payments of NLG 216 ($93) through 2007. This Note is collateralized by a lien on
certain real property of Polytek. This Note contains certain covenants, the most
significant of which relate to minimum net worth requirements.
9
<PAGE> 11
INDESCO INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(DOLLARS IN THOUSANDS)
(e) Senior Mortgage Note
In connection with the construction of a manufacturing facility, Polytek
obtained a NLG 3,500 ($1,512) mortgage from ABN-AMRO Bank, The Netherlands.
Borrowings under this Mortgage Note are collateralized by a lien on certain real
property of Polytek.
(6) INCOME TAXES
The profit (loss) before provision for income taxes consisted of:
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, JUNE 30,
2000 1999
---- ----
<S> <C> <C>
United States $(3,739) $(2,691)
Foreign 930 (472)
------- -------
Total Pre-Tax Loss $(2,809) $(3,163)
======= =======
</TABLE>
The condensed consolidated statements of operations includes income taxes
on foreign subsidiary income and minimum state taxes. The Company has recorded a
full valuation allowance related to the potential tax benefit of the net
operating loss carryforward and other deferred tax assets.
The Company paid income taxes of $80 and $7 for the six month periods ended
June 30, 2000 and 1999, respectively. The Company has U.S. net operating loss
carryforwards of approximately $22,000, expiring in years 2012 through 2019. The
net deferred tax liability of $506 relates to foreign taxes.
The Company has established valuation allowances in accordance with the
provision of FASB Statement No. 109, "Accounting for Income Taxes." The Company
will review the adequacy of the valuation allowance in the future years and
recognize only those benefits as the reassessment indicates that it is more
likely than not that the benefits will be realized.
(7) CONTINGENCIES
Litigation
There are pending claims and litigation against the Company arising in the
ordinary course of business. Management believes, on the basis of its
understanding and advice of counsel, that these actions will not result in
payment of amounts, if any, which would have a material adverse effect on the
Company's consolidated financial position, results of operations or cash flows.
(8) RELATED PARTY TRANSACTIONS
Management Fees
The Company has a management agreement with an affiliate of one of the
shareholders of the Parent that provides for annual payments of $300 and expires
on July 29, 2008, subject to renewal for successive five-year periods.
INDESCO INTERNATIONAL, INC. AND SUBSIDIARIES
10
<PAGE> 12
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(DOLLARS IN THOUSANDS)
For the six months ended June 30, 2000 and 1999, the Company incurred
approximately $150 and $150, respectively, of management fees and certain
expenses. As of June 30, 2000 and December 31, 1999, all fees and expenses had
been paid.
Transactions with Affiliates
Until October 1999, the Company purchased molds from an affiliate for
approximately $189 during 1999.. In addition, the affiliate provided certain
repairs and maintenance at a cost to the Company of approximately $217. Included
in accounts payable in the accompanying balance sheet at December 31, 1999, is
approximately $68 relating to these assets and services provided by the
affiliate. In October 1999, the Company completed a transaction in which it sold
back to the affiliate all its shares of the affiliate for a total amount of NLG
1,238 (US $562). The loss on sale of the shares was not material.
Professional Services
The law firm of Gratch Jacobs & Brozman, P.C., of which one of the Parent's
shareholders was a non-practicing principal, provides legal services on an
ongoing basis to the Company and its subsidiaries. For the six months ended June
30, 2000 and 1999, the Company incurred fees of approximately $199 and $312,
respectively, to Gratch Jacobs & Brozman, P.C.
(9) EMPLOYEE BENEFIT PLANS
The Company offers an employee savings plan (the "Plan") under Section
401(k) of the Internal Revenue Code. The Plan covers substantially all full-time
U.S. employees of the Company and its domestic subsidiaries, and the Company
matches 25 percent of each employee's contribution up to a maximum of 6 percent
of the employee's annual compensation. Polytek has various pension plans
covering substantially all employees. Polytek funds all costs through insurance
contracts which provide for retiree benefits under the terms of the plan; there
were no unfunded or overfunded benefit obligations.
(10) PLANT CLOSEDOWN COST
Pursuant to its plan approved in 1998, the Company closed its El Paso,
Texas and Juarez, Mexico manufacturing facilities in June 1999. The estimated
cost of this plan was approximately $5,344, which was reflected in operating
expenses in 1998. The estimated costs consisted of employee separation costs of
$1,100, asset impairments of $3,978, and other exit costs of $266. During 1999,
the Company sold and disposed of certain assets of its El Paso and Juarez
facilities and incurred related severance costs. The remaining reserve of
approximately $600 at June 30, 2000 and December 31, 1999 reflects the estimated
loss on the sale of the El Paso facility.
(11) SUPPLEMENTAL CONDENSED CONSOLIDATING FINANCIAL STATEMENTS
The New Notes (described in Note 6) are fully and unconditionally
guaranteed, jointly and severally, on an unsecured senior subordinated basis, by
the Subsidiary Guarantors. Polytek is a non-guarantor subsidiary.
The following condensed consolidating financial statements include the
accounts of the Company, the Subsidiary Guarantors, and the non-guarantor
subsidiaries.
11
<PAGE> 13
INDESCO INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SUPPLEMENTAL CONDENSED CONSOLIDATING BALANCE SHEET
<TABLE>
<CAPTION>
JUNE 30, 2000
(UNAUDITED)
(DOLLARS IN THOUSANDS)
SUBSIDIARY NON-GUARANTOR
GUARANTORS SUBSIDIARY
INDESCO
INTERNATIONAL, AFA
INC. PRODUCTS CSI POLYTEK ELIMINATIONS CONSOLIDATED
<S> <C> <C> <C> <C> <C> <C>
ASSETS:
CURRENT ASSETS:
Cash and Cash Equivalents $ 804 (442) (239) 410 -- $ 533
Accounts Receivable, Net 13,075 11,513 10,959 3,589 (27,913) 11,223
Inventories -- 6,147 3,065 2,668 (18) 11,862
Prepaid Expenses & Other 802 -- 23 496 1,321
--------- ------ ------ ----- ------- ----------
TOTAL CURRENT ASSETS 14,681 17,218 13,808 7,163 (27,931) 24,939
Property, Plant & Equipment, Net 354 20,474 31,932 8,494 (64) 61,190
Excess Purchase Price Over Fair Value
of Net Assets Acquired, Net -- 11,380 49,929 (3,446) -- 57,863
Patents & Other Intangibles, Net 15 3,751 3,477 -- -- 7,243
Deferred Financing Costs, Net 5,111 -- -- -- -- 5,111
Deferred Tax Asset -- 2,041 8,099 -- (9,856) 284
Investments in Subsidiaries 18,446 -- -- -- (18,446) --
Other 124,007 98 10 -- (124,007) 108
--------- ------ ------ ----- -------- ----------
TOTAL ASSETS 162,614 54,962 107,255 12,211 (180,304) 156,738
========= ====== ======= ====== ======== ==========
LIABILITIES & STOCKHOLDERS EQUITY:
CURRENT LIABILITIES
Current Portion of Long Term Debt and
Capital Lease Obligations $ -- -- -- 818 -- $ 818
Credit Facility -- -- -- 1,512 -- 1,512
Accounts Payable - Trade 72 2,294 1,883 2,895 (2,231) 4,913
Income Taxes Payable 3 138 -- 211 -- 352
Accrued Expenses 30,108 919 8,196 1,223 (33,724) 6,722
--------- ------ ------ ----- -------- ----------
TOTAL CURRENT LIABILITIES 30,183 3,351 10,079 6,659 (35,955) 14,317
Long Term Debt 162,166 34,224 91,014 4,110 (125,238) 166,276
Deferred Income Taxes -- 2,041 7,815 506 (9,856) 506
--------- ------ ------ ----- -------- ----------
TOTAL LIABILITIES 192,349 39,616 108,908 11,275 (171,049) 181,099
--------- ------ ------ ----- -------- ----------
STOCKHOLDERS' EQUITY:
Common Stock (2,500) 3,000 -- 242 (742) --
Additional Paid - In Capital -- 5,521 15,795 510 (16,764) 5,062
Retained Earnings (Accumulated Deficit) (27,235) 6,825 (17,448) 200 8,251 (29,407)
Accumulated Other Comprehensive Income (loss) -- -- -- (16) -- (16)
--------- ------ ------ ----- -------- ----------
TOTAL STOCKHOLDERS' EQUITY (29,735) 15,346 (1,653) 936 (9,255) (24,361)
--------- ------ ------ ----- -------- ----------
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY $ 162,614 54,962 107,255 12,211 (180,304) $ 156,738
========= ====== ======= ====== ======== ==========
</TABLE>
12
<PAGE> 14
INDESCO INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
(UNAUDITED)
FOR THE SIX MONTHS ENDED JUNE 30, 2000
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
SUBSIDIARY NON-GUARANTOR
GUARANTORS SUBSIDIARY
INDESCO
INTERNATIONAL, AFA
INC. PRODUCTS CSI POLYTEK ELIMINATIONS CONSOLIDATED
<S> <C> <C> <C> <C> <C> <C>
Net Sales $ -- 20,233 17,911 13,340 (357) $ 51,127
Cost of Sales -- 14,427 15,295 10,486 (729) 39,479
-------- -------- -------- -------- -------- --------
Gross Profit -- 5,806 2,616 2,854 372 11,648
Operating Expenses 1,527 1,606 1,771 1,211 6,115
-------- -------- -------- -------- -------- --------
Income from Operations (1,527) 4,200 845 1,643 372 5,533
Other (Income) Expense
Interest 8,277 1,843 4,772 162 (6,615) 8,439
Equity in Income of Consolidated
Subsidiaries (590) -- -- -- 590 --
Other (6,657) (679) (334) 551 7,022 (97)
-------- -------- -------- -------- -------- --------
Total Other Expense, Net 1,030 1,164 4,438 713 997 8,342
Income (Loss) Before
Provision for Income Taxes (2,557) 3,036 (3,593) 930 (625) (2,809)
Provision for Income Taxes -- 120 -- 312 -- 432
-------- -------- -------- -------- -------- --------
Net Income (Loss) $ (2,557) 2,916 (3,593) 618 (625) $ (3,241)
======== ======== ======== ======== ======== ========
</TABLE>
13
<PAGE> 15
INDESCO INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
(UNAUDITED)
FOR THE SIX MONTHS ENDED JUNE 30, 2000
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
SUBSIDIARY NON-GUARANTOR
GUARANTORS SUBSIDIARY
----------------------------------------------------
INDESCO
INTERNATIONAL, AFA
INC. PRODUCTS CSI POLYTEK ELIMINATIONS CONSOLIDATED
<S> <C> <C> <C> <C> <C> <C>
NET INCOME $(2,557) 2,916 (3,593) 618 (625) $(3,241)
Adjustments to Reconcile Net Income to
Net Cash Provided by Operating Activities:
Depreciation 26 1,723 1,982 694 4,425
Amortization of:
Intangibles -- 210 914 (65) 1,059
Patents -- 156 169 -- 325
Loss (gain) on disposal of P.P.& E . -- -- 3 -- 3
Deferred Financing Fees 352 -- -- -- 352
Equity in Income of Affiliate (590) -- -- -- 590 --
(INCREASE)/DECREASE IN OPERATING ASSETS: --
Accounts Receivable 2 914 1,786 (470) 2232
Intercompany Receivable (3,582) 212 330 -- 3,040 --
Other Accounts Receivable -- -- -- --
Inventory 134 560 (98) (18) 578
Prepaid Expenses and Other Assets (650) 38 885 195 468
INCREASE/(DECREASE) IN OPERATING LIABILITIES
Accounts Payable (121) (841) (2,478) (489) (3,929)
Accrued Expenses (92) 444 286 (678) 4 (36)
Income Taxes Payable (2) 101 -- 210 309
Intercompany Payable 3,495 (329) (137) 877 (3,906) --
------- ------ ------ ----- ------ -------
Total Adjustments (1,162) 2,762 4,300 176 (290) 5,786
------- ------ ------ ----- ------ -------
NET CASH PROVIDED BY OPERATING ACTIVITIES (3,719) 5,678 707 793 (915) 2,545
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions of Property Plant and Equipment (33) (468) (196) (202) 64 (835)
Disposal of Property Plant and Equipment -- -- -- -- -- --
Increase in other Assets -- -- (11) -- -- (11)
------- ------ ------ ----- ------ -------
NET CASH USED IN INVESTING ACTIVITIES (33) (468) (207) (202) 64 (846)
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase/(Decrease) in Line of Credit (1,079) -- -- -- (1,079)
Repayment of Long Term Debt/
Capital Lease Obligation -- -- -- (449) -- (449)
Advances (to)/from Parent Company 5,421 (5,703) (569) -- 851 --
------- ------ ------ ----- ------ -------
NET CASH FROM FINANCING ACTIVITIES 4,342 (5,703) (569) (449) (851) (1,528)
Effect of exchange rate change on cash -- -- -- (15) (15)
Increase (decrease) in Cash and Cash 590 (493) (69) 128 -- 156
Equivalents
Cash and Cash Equiv. at Beginning of Year 214 51 (170) 282 377
------- ------ ------ ----- ------ -------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 804 (442) (239) 410 -- $ 533
======= ====== ====== ===== ====== =======
</TABLE>
14
<PAGE> 16
INDESCO INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
(UNAUDITED)
FOR THE SIX MONTHS ENDED JUNE 30, 1999
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
SUBSIDIARY NON-GUARANTOR
GUARANTORS SUBSIDIARY
INDESCO
INTERNATIONAL AFA CSI
INC. PRODUCTS U.S. POLYTEK ELIMINATIONS CONSOLIDATED
<S> <C> <C> <C> <C> <C> <C>
Net Sales -- 18,066 22,422 12,636 (137) 52,987
Cost of Sales (102) 12,643 16,430 10,567 (461) 39,077
------- ------- ------- ------- ------- -------
Gross Profit 102 5,423 5,992 2,069 324 13,910
Operating Expenses 1,950 1,476 3,622 1,713 8,761
------- ------- ------- ------- ------- -------
Income from Operations (1,848) 3,947 2,370 356 324 5,149
Other (Income) Expense
Interest 8,023 1,985 4,572 256 (6,557) 8,279
Equity in Loss of Consolidated
Subsidiaries (6,564) (619) (249) 571 6,893 33
Other 97 -- -- -- (97) --
------- ------- ------- ------- ------- -------
Total Other Expense, Net 1,556 1,366 4,323 827 239 8,311
Income (Loss) Before Provision
for Income Taxes (3,404) 2,581 (1,953) (472) 85 (3,163)
Provision for Income Taxes 1 32 54 -- -- 87
------- ------- ------- ------- ------- -------
Net Income (Loss) (3,405) 2,549 (2,007) (472) 85 (3,250)
======= ======= ======= ======= ======= =======
</TABLE>
15
<PAGE> 17
INDESCO INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
(UNAUDITED)
FOR THE SIX MONTHS ENDED JUNE 30, 1999
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
SUBSIDIARY NON-GUARANTOR
GUARANTORS SUBSIDIARY
INDESCO
INTERNATIONAL AFA CSI
INC. PRODUCTS U.S. POLYTEK ELIMINATIONS CONSOLIDATED
<S> <C> <C> <C> <C> <C> <C>
Cash Flows From Operating
Activities:
Net Income (Loss) (3,405) 2,549 (2,007) (472) 85 (3,250)
Adjustments to Reconcile Net
Income (Loss) Provided (Used)
by Operating Activities:
Depreciation -- 1,252 1,422 828 3,502
Amortization -- 369 1,077 (73) 1,373
Loss on disposal of property
plant and equipment -- 55 -- -- 55
Equity in (Earnings) Loss of
Subsidiaries and Affiliate 97 -- -- -- (97) --
Changes in Operating Assets and
Liabilities:
Accounts Receivable (4,320) (1,562) 2,324 (209) 4,994 1,227
Inventories -- (199) 874 553 12 1,240
Prepaid Expenses and Other Assets 94 (8) (277) 277 86
Accounts and Drafts Payable 403 2,330 2,686 455 (5,821) 53
Income Taxes Payable (1) (17) 97 -- 79
Other Accrued Expenses 63 45 (1,034) (350) 827 (449)
------ ------ ------ ------ ------ ------
Net Cash Provided (Used)
by Operating Activities (7,069) 4,814 5,162 1,009 (85) 3,916
Cash Flows From Investing
Activities:
Expenditures for Property,
Plant and Equipment (165) (2,814) (3,132) (461) -- (6,572)
Proceeds from Disposal of
Property, Plant and Equipment -- -- -- -- -- --
Other -- -- (60) -- (60)
------ ------ ------ ------ ------ ------
Net Cash Used by Investing
Activities (165) (2,814) (3,192) (461) -- (6,632)
Cash Flows From Financing
Activities:
Repayment of Long-Term Debt -- -- -- (325) (325)
Net (Repayment) Borrowings
Under Revolving Credit
Agreements 5,286 -- -- (20) 5,266
Advances to/from Parent 2,258 (2,258) -- -- -- --
------ ------ ------ ------ ------ ------
Net Cash Provided (Used)
by Financing Activities 7,544 (2,258) -- (345) -- 4,941
------ ------ ------ ------ ------ ------
Effect of Exchange Rate
Change on Cash -- (46) (46)
Net Increase (Decrease)
in Cash and Cash Equivalents 310 (258) 1,970 157 -- 2,179
Cash and Cash Equivalents at
Beginning of Year 68 1,000 365 136 -- 1,569
------ ------ ------ ------ ------ ------
Cash and Cash Equivalents
at End of Period 378 742 2,335 293 -- 3,748
====== ====== ====== ====== ====== ======
</TABLE>
16
<PAGE> 18
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
RESULTS OF OPERATIONS
The accompanying unaudited condensed consolidated statements of operations
of the Company include (i) the results of operations of the Company, AFA,
Polytek and CSI for the three months ended June 30, 2000 and 1999 and (ii) the
results of operations of the Company, AFA, Polytek and CSI for the six months
ended June 30, 2000 and 1999. See Note 2 to the Company's condensed consolidated
financial statements for a description of exchange rates used in the translation
of Polytek's operating results. All dollar amounts are presented in thousands.
SECOND QUARTER ENDED JUNE 30, 2000
The unaudited condensed consolidated operating results, expressed as a
percentage of sales, of the Company for the quarters ended June 30, 2000 and
1999 are presented below.
<TABLE>
<CAPTION>
THREE MONTHS
ENDED JUNE 30,
2000 1999
(unaudited) (unaudited)
<S> <C> <C>
Net Sales 100.0% 100.0%
Cost of Sales 78.9 72.3
----- -----
Gross Profit 21.1 27.7
Operating expenses:
Selling, General and Administrative Expenses 7.4 12.8
Research and Development Expenses 0.5 2.5
Amortization of Intangibles 2.8 2.7
----- -----
Total Operating Expenses 10.7 18.0
----- -----
Income from Operations 10.4% 9.7%
===== =====
</TABLE>
Net sales for the quarter ended June 30, 2000 were $24,564, a decrease of
$739, or 3%, as compared to net sales of $25,303 in the Second Quarter 1999. In
the Second Quarter of 1999, sales were slightly higher due to a customer new
product launch.
Cost of sales for the Second Quarter 2000 was $19,368, or 78.9% of sales,
as compared to $18,294, or 72.3% of sales, for the Second Quarter 1999. Higher
cost of sales as a percentage of sales in the Second Quarter of 2000 was due to
increased polypropylene costs and higher depreciation charges.
Operating expenses for the Second Quarter of 2000 were $2,631, or 10.7% of
sales, as compared to $4,561, or 18.0% of sales, for the Second Quarter 1999.
The $1,930 decrease is due to lower legal expenses resulting from the settlement
of a legal claim and lower overhead costs.
Interest expense for the Second Quarter of 2000 was $4,296 as compared to
$4,132 for the Second Quarter of 1999, an increase of $164. This increase is due
to higher borrowing rates as a result of the March 30, 2000 amendment to the
First Union Revolving Credit agreement (see note 5).
No U. S. tax liability has been incurred for the Second Quarter 2000.
Provisions for taxes that have been recorded in the Second Quarter 2000 relate
to state and foreign taxes. The Company has recorded a full valuation allowance
in connection with its consolidated net operating loss in the U.S.
17
<PAGE> 19
SIX MONTHS ENDED JUNE 30, 2000
The unaudited condensed consolidated operating results, expressed as a
percentage of sales, of the Company for the six months ended June 30, 2000 and
1999 are presented below.
<TABLE>
<CAPTION>
SIX MONTHS
ENDED JUNE 30,
2000 1999
(unaudited) (unaudited)
<S> <C> <C>
Net Sales 100.0% 100.0%
Cost of Sales 77.2 73.8
----- -----
Gross Profit 22.8 26.2
Operating expenses:
Selling, General and Administrative Expenses 8.6 11.7
Research and Development Expenses 0.6 2.2
Amortization of Intangibles 2.7 2.6
----- -----
Total Operating Expenses 12.0 16.5
----- -----
Income from Operations 10.8% 9.7%
===== =====
</TABLE>
Net sales for the six months ended June 30, 2000 were $51,127, a decrease
of $1,860, or 3.5%, as compared to net sales of $52,987 in the same period in
1999. In the first half of 1999, sales were slightly higher due to customer new
product launches. In addition, the six months ended June 30, 2000 include the
consolidation and rationalization of former El Paso product lines.
Cost of sales for the six months ended June 30, 2000 was $39,479, or 77.2%
of sales, as compared to $39,077, or 73.8% of sales, for the six months ended
June 30, 1999. Higher cost of sales as a percentage of sales in the six months
ended June 30, 2000 was due to higher Polypropylene and depreciation costs.
Operating expenses for the six months ended June 30, 2000 were $6,115, or
12.0% of sales, as compared to $8,761, or 16.5% of sales, for the six months
ended June 30, 1999. The $2,646 decrease is due to lower legal expenses
resulting from the settlement of a legal claim and lower overhead costs.
Interest expense for the six months ended June 30, 2000 was $8,439 as
compared to $8,279 for the six months ended June 30, 1999, an increase of $160.
This increase is due to higher borrowing rates as a result of the March 30, 2000
amendment to the Fist Union Revolving Credit agreement (see note 5).
No U.S. tax liability has been incurred for the six months ended June 30,
2000. Provisions for taxes that have been recorded during the first six months
relate to state and foreign taxes. The Company has recorded a full valuation
allowance in connection with its consolidated net operating loss in the U.S.
LIQUIDITY AND CAPITAL RESOURCES
For the six months ended June 30, 2000, the Company's operating activities
generated net cash of $2,545 (the combination of the $3,241 net loss, $5,812 of
non-cash items added back, and a $26 net decrease in working capital). In that
period, the Company had capital expenditures of $835 which was principally
related to the purchase of molds and assembly equipment in connection with new
product initiatives For the six months ended June 30, 2000, the Company has
reduced its net borrowings under bank credit agreements and capital lease
arrangements by $1,528.
18
<PAGE> 20
At June 30, 2000, the Company had available excess borrowing capacity of
approximately $7,834 and $3,823 (NLG 8,850), respectively, under its credit
facilities with First Union and ABN-AMRO Bank. (See Note 5 to the Company's
condensed consolidated financial statements for description of existing
indebtedness.)
The Company uses EBITDA (defined as income before interest, income taxes,
depreciation, amortization, one-time charges and extraordinary items) to measure
its operating performance and ability to incur and service its debt. EBITDA
should not be considered as an alternative to, or more meaningful than, net
income or cash flow statement data prepared in accordance with GAAP, or as a
measure of profitability or liquidity. EBITDA does not include commitments by
the Company for capital expenditures and payment of debt and, therefore, should
not be deemed to represent funds available to the Company. EBITDA for the Second
Quarter 2000 was $5,528 as compared to $4,734 for the Second Quarter 1999.
EBITDA for the six months ended June 30, 2000 was $11,439 as compared to $9,991
for the six months ended June 30, 1999. The $1,448 increase in EBITDA for the
six months ended June 30, 2000 is the result of lower legal and other operating
expenses during the period.
As previously reported, the Company further amended its New Credit Facility
with First Union National Bank, effective March 30, 2000. The March 2000
amendment, among other things, (i) reduces the Revolving Credit Commitment to
the lesser of the Borrowing Base or $25 million, (ii) effects certain changes to
the Borrowing Base, (iii) waives compliance with the Funded Indebtedness to
EBITDA ratio through the quarter ending December 31, 2000, (iv) grants First
Union a security interest in certain U.S. real property and in all of the U.S.
intellectual property of the Company and its domestic subsidiaries, (v) pledges
the stock of the Company's domestic subsidiaries, (vi) reduces the Capital
Expenditure limit (as defined in the New Credit Facility), (vii) increases by
0.25% the Applicable Margin on Eurodollar loans (currently 2.50%) and on Base
Rate loans (currently 1.25%) and (viii) establishes, effective April 30, 2000, a
monthly reserve of $1,178 against the Borrowing Base, which reserve reduces to
zero after each semi-annual payment of interest under the New Notes. In
addition, the amendment sets new financial covenants, including minimum
quarterly EBITDA levels for the year 2000 and thereafter, and maximum Funded
Indebtedness to EBITDA levels (determined on a rolling four-quarter basis as of
the last day of each fiscal quarter) commencing with the fiscal quarter ending
on March 31, 2001.
Management believes that net cash generated by operations, together with
amounts available under the credit facilities with First Union and ABN-AMRO
Bank, will be adequate to fund the payment of interest and principal on the
Company's outstanding indebtedness as well as its capital expenditure plans and
working capital requirements.
Management believes that inflation did not have a significant impact on
operations.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENT
The information provided in this Quarterly Report on Form 10-Q contains
certain forward-looking statements within the meaning of Section 27A of the
Securities Act and Section 21E of the Exchange Act. Such forward-looking
statements are based on the beliefs of management, as well as assumptions made
by and information currently available to the Company's management.
When used in this document, the words "anticipate", "believe", "estimate"
and "expect" identify forward-looking statements. Such statements reflect the
current views of the Company with respect to future events and are subject to
certain risks, uncertainties and assumptions that could cause actual results to
differ materially from those reflected in the forward-looking statement. Should
one or more of these risks or uncertainties materialize, or should underlying
assumptions prove incorrect, actual results may vary materially from those
described herein as anticipated, believed, estimated or expected. The Company
does not intend to update these forward-looking statements.
----------------------------------
19
<PAGE> 21
PART II. OTHER INFORMATION
ITEM 5. Other Information
The Company has appointed William L. Maloney Chief Financial Officer,
Corporate Controller. During the past five years, Mr. Maloney served in senior
management positions at Envirosource, including Senior Vice President
Operations; Vice President, Chief Financial Officer; and Vice President Chief
Information Officer. Mr. Maloney is a Certified Public Accountant.
ITEM 6. Exhibits and Reports on Form 8-K.
(a) Exhibits: The exhibits listed on the accompanying Exhibit Index
are filed as part of this Form 10-Q:
(b) Reports on Form 8-K: None
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
<S> <C>
3.1 (a) -- Certificate of Incorporation of Indesco International, Inc.,
as amended.*
(b) -- Certificate of Incorporation of Continental Sprayers
International, Inc., as amended.*
(c) -- Certificate of Incorporation of AFA Products, Inc., as
amended.*
3.2 (a) -- By-laws of Indesco International, Inc.*
(b) -- By-laws of Continental Sprayers International, Inc.*
(c) -- By-laws of AFA Products, Inc.*
4.1 -- Indenture, dated as of April 23, 1998, between Indesco
International, Inc., AFA Products, Inc. and Continental
Sprayers International, Inc., as subsidiary guarantors, and
Norwest Bank Minnesota, National Association, as trustee.*
4.2 -- Form of Notes.*
4.3 -- Form of Subsidiary Guarantees.*
4.4 -- Registration Rights Agreement, dated as of April 23, 1998,
between Indesco International, Inc., AFA Products, Inc. and
Continental Sprayers International, Inc., as subsidiary
guarantors, and NationsBanc Montgomery Securities LLC.*
10.1 -- Loan and Security Agreement, dated September 29, 1998, by
and among Indesco International, Inc., AFA Products, Inc.,
Continental Sprayers International, Inc. and First Union
National Bank.**
10.2 -- Amendment to Loan and Security Agreement and Waiver, dated
March 24, 1999, by and among Indesco International, Inc.,
AFA Products, Inc., Continental Sprayers International, Inc.
and First Union National Bank.***
10.3 -- Amendment to Loan and Security Agreement and Waiver, dated
March 30, 2000, by and among Indesco International, Inc.,
AFA Products, Inc., Continental Sprayers International, Inc.
and First Union National Bank.****
10.4 -- Management Agreement, dated as of February 4, 1998, between
Indesco International, Inc. and Gadraz, Inc.*
10.5 -- Employment Agreement, dated as of February 4, 1998, between
Indesco International, Inc. and Ariel Gratch.*
10.6 -- Tax Sharing Agreement, dated as of August 1, 1997, among
Indesco International, Inc., Continental Sprayers
International, Inc. and AFA Products, Inc.*
10.7 -- Supply Agreement, dated as of April 23, 1998, between Spring
& Wire Designs LLC and Indesco International, Inc.*
21 -- Subsidiaries of Indesco International, Inc.*
27 -- Financial Data Schedule.
</TABLE>
* Previously filed as an exhibit to the Company's Registration
Statement on Form S-4 (File No. 333-52657) and incorporated
herein by reference.
** Previously filed as an exhibit to the Company's Form 10-Q for the
quarterly period ended July 5, 1998 and incorporated herein by
reference.
*** Previously filed as an exhibit to the Company's Annual Report on
Form 10-K for the year ended December 31, 1998 and incorporated
herein by reference.
**** Previously filed as an exhibit to the Company's Annual Report on
Form 10-K for the year ended December 31, 1999 and incorporated
herein by reference.
20
<PAGE> 22
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Indesco International, Inc.
By: /s/ WILLIAM L. MALONEY
William L. Maloney
Title: Chief Financial Officer,
Corporate Controller
Date: August 17, 2000
21
