<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------
FORM 10-Q
FOR THE FISCAL QUARTER ENDED JUNE 30, 2000
OF
GOSS HOLDINGS, INC.
a Delaware Corporation
IRS Employer Identification No. 36-4326281
SEC File Number 333-08421
700 OAKMONT LANE
WESTMONT, ILLINOIS 60559-5546
(630) 850-5600
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.
The registrant has filed all documents and reports required to be filed by
Section 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the
distribution of securities under a plan confirmed by a court.
The registrant had 10,000,000 shares of Common Stock outstanding at August 9,
2000.
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GOSS HOLDINGS, INC.
INDEX
<TABLE>
<CAPTION>
PART I - FINANCIAL INFORMATION: PAGE NO.
------------------------------- --------
<S> <C>
Item 1 - Financial Statements
Consolidated Balance Sheets - June 30, 2000 and
December 31, 1999 2
Consolidated Statements of Operations - For the three month
and six month periods ended June 30, 2000 and 1999 3
Consolidated Statements of Cash Flows - Six months ended
June 30, 2000 and 1999 4
Notes to Consolidated Financial Statements 5
Item 2 - Management's Discussion and Analysis of Financial
Condition and Results of Operations 10
PART II - OTHER INFORMATION:
Item 1 - Legal Proceedings 14
Item 6 - Exhibits and Reports on Form 8-K 14
SIGNATURES 15
</TABLE>
1
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PART I FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
GOSS HOLDINGS, INC.
CONSOLIDATED BALANCE SHEETS
(IN MILLIONS)
(UNAUDITED)
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
2000 1999
---- ----
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 26.5 $ 29.9
Accounts receivable, net 131.7 133.9
Inventories, net 163.2 151.7
Other current assets 14.4 8.3
-------- --------
Total current assets 335.8 323.8
Property and equipment, net 129.8 140.7
Goodwill, net 252.4 261.7
Assets held for sale 23.5 24.6
Other assets 27.2 33.4
-------- --------
Total assets $ 768.7 $ 784.2
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 113.9 $ 164.2
Short-term debt 56.9 23.4
Current portion of long-term debt 7.1 5.3
Advance payments from customers 162.8 134.2
Other current liabilities 181.7 199.8
-------- --------
Total current liabilities 522.4 526.9
Long-term debt, less current portion 302.4 302.0
Other liabilities 35.9 36.2
-------- --------
Total liabilities 860.7 865.1
Minority interest 8.2 8.5
Common stock - $.01 par value, 15,000,000 shares
authorized; 10,000,000 shares outstanding 0.1 0.1
Additional paid in capital 77.2 76.8
Retained earnings (173.2) (164.1)
Cumulative translation adjustment (4.3) (2.2)
-------- --------
Total shareholders' equity (100.2) (89.4)
-------- --------
Total liabilities and shareholders' equity $ 768.7 $ 784.2
======== ========
</TABLE>
The accompanying Notes to Consolidated Financial Statements are an integral part
of these statements.
2
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GOSS HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN MILLIONS)
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS FOR THE SIX MONTHS
ENDED JUNE 30, ENDED JUNE 30,
2000 1999 2000 1999
------ ------ ------ ------
<S> <C> <C> <C> <C>
Net sales $163.0 $160.6 $272.3 $309.9
Cost of sales 132.6 162.5 226.5 294.6
------ ------ ------ ------
Gross profit (loss) 30.4 (1.9) 45.8 15.3
Operating expenses 22.1 27.7 41.5 48.6
Legal settlement 0.0 (4.0) (20.0) (5.0)
Goodwill amortization 1.8 2.1 3.7 4.1
------ ------ ------ ------
Operating profit (loss) 6.5 (27.7) 20.6 (32.4)
Other (expense) (2.6) (0.5) (2.4) (0.8)
Interest expense (11.0) (11.8) (21.3) (23.8)
------ ------ ------ ------
Loss before income taxes (7.1) (40.0) (3.1) (57.0)
Provision (benefit) for income taxes 4.0 (0.7) 5.9 (1.2)
------ ------ ------ ------
Net loss $(11.1) $(39.3) $(9.0) $(55.8)
====== ====== ====== ======
</TABLE>
The accompanying Notes to Consolidated Financial Statements are an integral part
of these statements.
3
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GOSS HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN MILLIONS)
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE SIX MONTHS
ENDED JUNE 30,
--------------
2000 1999
------- -------
<S> <C> <C>
OPERATING ACTIVITIES:
Net loss $(9.0) $(55.8)
Depreciation 10.8 10.9
Amortization of goodwill 3.7 4.1
Non-cash interest on subordinated notes 8.0 0.0
Changes in assets and liabilities:
Accounts receivable 2.3 (1.2)
Inventory (11.4) 64.1
Accounts payable (50.3) (20.8)
Customer advances 28.6 (38.2)
Other current liabilities (17.6) (19.5)
Other assets 4.6 3.2
Other liabilities (0.6) (11.8)
------- -------
Net cash used for operating activities (30.9) (65.0)
------- -------
INVESTING ACTIVITIES:
Capital expenditures (2.0) (4.6)
------- -------
Net cash used for investing activities (2.0) (4.6)
------- -------
FINANCING ACTIVITIES:
Net borrowings under revolving credit facilities 33.4 8.8
Capital contribution 0.0 22.4
Repayment of mortgage notes and other obligations (3.9) (1.9)
------- -------
Net cash provided by financing activities 29.5 29.3
Net decrease in cash (3.4) (40.3)
Cash at the beginning of the period 29.9 57.2
------- -------
Cash at the end of the period $26.5 $16.9
======= =======
</TABLE>
The accompanying Notes to Consolidated Financial Statements are an integral part
of these statements
4
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GOSS HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
In the opinion of Goss Holdings, Inc. ("Goss" or the "Company"), the unaudited
financial statements contain all adjustments, solely of a recurring nature,
necessary to present fairly the financial position, results of operations, and
cash flows for the periods presented. These statements should be read in
conjunction with Goss's Form 10-K for the year ended December 31, 1999. The
results of operations for the six months ended June 30, 2000 are not necessarily
indicative of the results that may be expected for the year ending December 31,
2000.
Certain reclassifications have been made to the 1999 financial statements to
conform to the classifications used in 2000.
2. INVENTORIES
Net inventories are summarized as follows (in millions):
<TABLE>
<CAPTION>
June 30, December 31,
2000 1999
------- -----------
<S> <C> <C>
Materials $73.7 $64.7
Work in process 52.7 57.9
Finished goods 12.1 4.7
Parts 24.7 24.4
------- -----------
Total inventories, net $163.2 $151.7
======= ===========
</TABLE>
3. WORKFORCE REDUCTION CHARGES
The Company recorded charges of $7.1 million and $14.7 million in the fiscal
quarters ended December 31, 1998 and 1999, respectively, for workforce
reductions. The financial statements at June 30, 2000 contain accrued
liabilities of $4.5 million for the remaining severance costs to be paid
pursuant to these reductions. Approximately $13.2 million in severance costs
relating to these reductions were paid in the six months ended June 30, 2000.
5
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GOSS HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
4. DEBT
The debt obligations of Goss are as follows (in millions):
<TABLE>
<CAPTION>
June 30, December 31,
2000 1999
-------- ------------
<S> <C> <C>
Revolving credit facilities $56.9 $23.4
Term loan 148.8 150.0
Mortgage loans 47.6 51.2
Senior subordinated notes 110.9 103.0
Other debt obligations 2.2 3.1
-------- ------------
Total debt 366.4 330.7
Less current portion 64.0 28.7
-------- ------------
Long-term debt $302.4 $302.0
======== ============
</TABLE>
On November 19, 1999, Goss Graphic Systems, Inc., a wholly-owned subsidiary of
Goss Holdings, Inc., and its lenders entered into the Second Amended and
Restated Multicurrency Credit Agreement (the "Bank Facility"). The Bank Facility
provides for total borrowings of $250 million, including a term loan in the
amount of $150 million, revolving borrowings of up to $100 million, and up to
$75 million in letters of credit. The Bank Facility matures on September 30,
2003 and provides for scheduled repayments of the term loan and scheduled
reductions in the revolving credit commitments starting in 2002. As of June 30,
2000 the term loan was fully utilized and borrowings and letters of credit under
the $100 million revolving loan portion of the Bank Facility, excluding $2.2
million of revolving credit relating to Goss's joint venture in China, totaled
$85.0 million.
The Bank Facility contains certain financial covenants which must be satisfied
at the end of each quarter, are cumulative from the period starting on January
1, 2000, and at December 31, 2000 become rolling twelve month covenants. At June
30, 2000, Goss was in compliance with these covenants.
5. CONTINGENCIES
LEGAL CONTINGENCIES
In the normal course of its business, the Company is subject to various claims
and lawsuits. Typically, these matters consist of product liability claims
brought by the individuals who operate the equipment that the Company sold,
disputes with customers over the performance and completion of installation of
equipment, and workers' compensation claims by the Company's own employees.
6
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GOSS HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
It is not presently possible to determine the outcome of the claims and lawsuits
against the Company. However, the Company maintains as an accrued liability a
reserve that is its present estimate of the total cost to resolve all of these
matters. Management does not believe that the ultimate disposition of any of
these matters will have a material adverse effect on the Company's financial
position or liquidity, although it is possible that the resolution of these
matters could be material to the results of operations in a given period.
On March 7, 2000, Goss filed a federal lawsuit under the Antidumping Act of 1916
against MAN Roland Druckmaschinen AG, Koenig & Bauer AG, Mitsubishi Heavy
Industries, Ltd., Tokyo Kikai Seisakusho, Ltd. and their United States
subsidiaries. The lawsuit claims unspecified damages as a result of the
importation of large newspaper presses into the United States by the defendants
and the sale of these presses at prices substantially below those prevailing in
foreign markets. While Goss believes it is entitled to receive significant
damages in this action, there can be no assurance that it will be successful.
In June of 2000, the U.S. Court of Appeals for the Federal Circuit upheld the
determination by the Court of International Trade that the International
Trade Commission properly found that the U.S. printing press industry was
injured by unfairly-traded imports from Germany and Japan. The ruling was in
response to an appeal filed by the affected German and Japanese producers to
the earlier Court of International Trade ruling. The only appeal alternative
remaining to the German and Japanese producers is with the U.S. Supreme Court.
ENVIRONMENTAL CONTINGENCIES
The Company has received either notices of potential liability or third-party
claims under the Federal Comprehensive Environmental Response, Compensation, and
Liability Act at four off-site disposal facilities or so-called "Superfund
Sites". The Company's share of the responsibility for these Superfund Sites
generally is minor, and, although current law imposes joint and several
liability on any party deemed to be responsible at a Superfund Site, management
believes that the ultimate resolution of these matters will not be material to
the Company.
The Company's Reading, Pennsylvania, facility has been operating a groundwater
remediation system under a 1981 Consent Order with the Commonwealth of
Pennsylvania as a result of its and its predecessor's historical waste disposal
practices. The Company has completed remediation at the site pursuant to a
remediation proposal approved by the Commonwealth and has submitted a monitoring
proposal to the Commonwealth for approval.
Rockwell has agreed to indemnify the Company for expenses attendant to existing
environmental matters to the extent of one-half of those expenses in excess of
$1.0 million. The Company maintains as an accrued liability a reserve that is
its present estimate of the total cost to resolve all of these matters.
Management does not believe that the ultimate disposition of any of these
matters will have a material adverse effect on the Company's financial position
or liquidity, although it is possible that the resolution of these matters could
be material to the results of operations in a given period.
7
<PAGE>
GOSS HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
6. SEGMENT REPORTING
Information on Goss's reportable operating segments is detailed below. Beginning
January 1, 2000, Goss restructured its operations to include three geographic
profit center organizations and separate global manufacturing and engineering
cost center organizations. The column labeled "Other" includes the manufacturing
and engineering organizations, corporate expenses and eliminations of
intersegment activity. 1999 segment information has been restated to conform to
the new organizational structure.
<TABLE>
<CAPTION>
AMERICAS EUROPE ASIA OTHER TOTAL
-------- ------ ----- ------ ------
<S> <C> <C> <C> <C> <C>
THREE MONTHS ENDED JUNE 30, 2000
Sales to external customers $77.5 $28.8 $56.7 $0.0 $163.0
Intersegment sales 6.0 11.8 0.2 (18.0) 0.0
Gross profit/(loss) 11.3 6.8 15.6 (3.3) 30.4
Operating profit/(loss) 4.4 3.2 11.9 (13.0) 6.5
Other (expense) (2.6) (2.6)
Interest expense (11.0) (11.0)
(Loss) before income taxes (7.1)
Total assets $196.7 $220.2 $149.6 $202.2 $768.7
THREE MONTHS ENDED JUNE 30, 1999
Sales to external customers $65.2 $64.0 $31.4 $0.0 $160.6
Intersegment sales 2.7 4.4 0.3 (7.4) 0.0
Gross profit/(loss) (7.7) 12.7 5.7 (12.6) (1.9)
Operating profit/(loss) (17.9) 8.7 3.0 (21.5) (27.7)
Other (expense) (0.5) (0.5)
Interest expense (11.8) (11.8)
(Loss) before income taxes (40.0)
Total assets $250.0 $240.5 $138.6 $258.0 $887.1
SIX MONTHS ENDED JUNE 30, 2000
Sales to external customers $135.4 $61.8 $75.1 $0.0 $272.3
Intersegment sales 9.5 13.8 1.0 (24.3) 0.0
Gross profit/(loss) 20.3 14.0 22.4 (10.9) 45.8
Operating profit/(loss) 7.9 6.7 15.5 (9.5) 20.6
Other (expense) (2.4) (2.4)
Interest expense (21.3) (21.3)
(Loss) before income taxes (3.1)
Total assets $196.7 $220.2 $149.6 $202.2 $768.7
SIX MONTHS ENDED JUNE 30, 1999
Sales to external customers $164.8 $95.6 $49.5 $0.0 $309.9
Intersegment sales 6.9 15.0 0.4 (22.3) 0.0
Gross profit/(loss) 5.8 16.4 7.9 (14.8) 15.3
Operating profit/(loss) (12.4) 8.6 2.3 (30.9) (32.4)
Other (expense) (0.8) (0.8)
Interest expense (23.8) (23.8)
(Loss) before income taxes (57.0)
Total assets $250.0 $240.5 $138.6 $258.0 $887.1
</TABLE>
8
<PAGE>
GOSS HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
7. COMPREHENSIVE INCOME
As of October 1, 1998 Goss adopted SFAS No. 130 "Reporting Comprehensive Income"
which requires companies to report all changes in equity during a period, except
those resulting from investment by owners and distribution to owners, in a
financial statement for the period in which they are recognized. Goss has chosen
to disclose comprehensive income, which encompasses net income and foreign
currency translation adjustments, in the notes to the consolidated financial
statements.
Total comprehensive income is as follows (in millions):
<TABLE>
<CAPTION>
FOR THE THREE MONTHS FOR THE SIX MONTHS
ENDED JUNE 30, ENDED JUNE 30,
----------------------- ----------------------
2000 1999 2000 1999
------- ------- ------ -------
<S> <C> <C> <C> <C>
Net loss $(11.1) $(39.3) $(9.0) $(55.8)
Other comprehensive income:
Foreign currency translation
adjustment 0.1 (1.4) (2.1) (5.3)
------- ------- ------ -------
Total comprehensive loss $(11.0) $(40.7) $(11.1) $(61.1)
======= ======= ====== =======
</TABLE>
8. NEW ACCOUNTING STANDARDS
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities" ("SFAS 133"). SFAS 133, as amended by SFAS
No. 137, is effective for fiscal years beginning after June 15, 2000. SFAS 133
will require that all derivatives be recorded on the balance sheet at their fair
value and that changes in the derivative's fair value be recognized currently in
earnings unless specific hedge accounting criteria are met. Goss has not yet
determined the impact that the adoption of SFAS 133 will have on its earnings or
statement of financial position. However, Goss anticipates that, due to its
limited use of derivative instruments and the nature of its derivative
transactions, the adoption of SFAS 133 will not have a significant effect on its
results of operations or its financial position.
9. SUBSEQUENT EVENTS
On July 25, 2000, the U.S. Bankruptcy Court for the District of Delaware issued
a final decree closing the Chapter 11 cases of GGS Holdings, Inc. (a predecessor
company of Goss Holdings, Inc.), Goss Graphic Systems, Inc., and Goss Realty
L.L.C.
9
<PAGE>
ITEM 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Readers are urged to consider carefully the financial statements and related
notes contained elsewhere in this report and in Goss's Form 10-K for its fiscal
year ended December 31, 1999 as they read the discussion below.
RESULTS OF OPERATIONS
Net Sales
Goss's net sales for the fiscal quarter ended June 30, 2000 increased by 1.5% or
$2.4 million to $163.0 million compared to the quarter ended June 30, 1999.
Sales in the Americas increased by $12.3 million to $77.5 million due to
increases in shipments to insert customers which resulted from a higher order
backlog entering the 2000 quarter. Sales in Europe decreased by $35.2 million to
$28.8 million due to lower shipments to large and small newspaper customers
resulting from a lower order backlog at March 31, 2000 and the timing of
shipments. Sales in Asia increased by $25.3 million to $56.7 million due to the
timing of shipments to large newspaper customers.
Net sales for the first six months of 2000 were $272.3 million, a decrease of
$37.6 million or 12.1% from the first six months of 1999. Sales decreases in the
Americas and Europe of $29.4 and $33.8 million to $135.4 and $61.8 million,
respectively, were partially offset by a sales increase in Asia of $25.6 million
to $75.1 million. In the Americas decreased sales to large newspaper, small
newspaper, insert, and commercial customers were attributable to a lower order
backlog as of December 31, 1999. The sales decrease in Europe was attributable
to lower shipments to large and small newspaper customers resulting from a lower
order backlog at December 31, 1999 as well as the timing of shipments. The
increase in Asia is the result of the timing of shipments to large newspaper
customers.
Gross Profit
Gross profit for the quarter ended June 30, 2000 increased by $32.3 million to
$30.4 million compared to the quarter ended June 30, 1999. The 1999 quarter
included significant charges totaling $14.4 million in the Americas. These
significant charges consisted of $9.8 million for inventory write-downs related
to reduced order volume and costs to address certain product and contract
performance issues and $4.6 million for anticipated cost over-runs on contracts
as a result of delayed shipments. The shipment delays were caused by Goss's
inability to access sufficient capital resources to purchase required materials
and services in the quarter. Excluding the 1999 significant charges of $14.4
million, gross profit increased by $17.9 million and the gross profit margin
increased from 7.8% to 18.7%.
10
<PAGE>
Gross profit for the six months ended June 30, 2000 increased $30.5 million to
$45.8 million compared to the six months ended June 30, 1999. Excluding the
$14.4 million of significant charges mentioned above for the 1999 quarter, gross
profit increased by $16.1 million and the gross profit margin increased from 9.6
% to 16.8%. The change in gross profit and gross profit margin, excluding these
significant charges, is explained below.
- For the quarter ended June 30, 2000, gross profit in the Americas
increased by $10.6 million to $11.3 million and the gross profit margin
increased from 1.1% to 14.6%. The increases in gross profit and gross
profit margin are due to the increased sales volume and higher margins
on shipments to large newspaper, small newspaper, insert and commercial
customers. For the six months ended June 30, 2000, gross profit
increased in the Americas by $6.1 million to $20.3 million and the
gross profit margin increased from 8.6% to 15.0%. The increases in
gross profit and gross profit margin are due to higher margins on sales
to large newspaper, small newspaper and commercial customers.
- For the quarter ended June 30, 2000, gross profit in Europe decreased
by $6.0 million to $6.8 million and the gross profit margin increased
from 20.0% to 23.6%. For the six months ended June 30, 2000, gross
profit in Europe decreased $2.4 million to $14.0 million and the gross
profit margin increased from 17.2% to 22.7%. The decrease in gross
profit is due to the lower sales volume and the increase in gross
profit margin is due to higher margins on sales to large and small
newspaper customers.
- For the quarter ended June 30, 2000, gross profit in Asia increased by
$10.0 million to $15.6 million and the gross profit margin increased
from 17.9% to 27.5%. For the six months ended June 30, 2000, gross
profit in Asia increased $14.5 million to $22.4 million and the gross
profit margin increased from 16.0% to 29.8%. The increases in gross
profit and gross profit margin are due to increased sales volumes and
higher margins on sales to large and small newspaper customers.
- For the quarter ended June 30, 2000, the gross loss from global cost
centers decreased by $3.3 million to $3.3 million due to favorable cost
performance and the elimination of unrecovered fixed manufacturing
costs associated with the Reading, Pennsylvania facility, which was
closed in December of 1999. For the six months ended June 30, 2000,
the gross loss from global cost centers increased by $2.1 million to
$10.9 million due to an increase in unrecovered fixed costs resulting
from unused manufacturing capacity, partly offset by favorable cost
performance.
Operating Expenses
Operating expenses, which consist primarily of engineering, selling, general and
administrative expenses, decreased 20.2% to $22.1 million for the quarter. The
1999 period included a $3.1 million charge for bad debts and $1.3 million for
legal and consulting fees related to the
11
<PAGE>
company's capital restructuring. Excluding these significant charges, operating
expenses decreased by $1.2 million, or 5.2%. This decrease is the result of the
1999 workforce reduction and reduced spending for engineering and administrative
expenses.
Operating expenses for the six months ended June 30, 2000 decreased $7.1
million or 14.7% to $41.5 million compared to 1999. Excluding the significant
1999 charges discussed above for the quarter, operating expenses decreased by
$2.8 million, or 6.3%. This decrease is the result of the 1999 workforce
reduction and reduced spending for engineering and administrative expenses.
Interest Expense
Interest expense decreased by $0.8 million for the quarter and $2.5 million for
the six-month period due to lower debt balances in 2000, partially offset by the
effect of higher interest rates.
Income Taxes
For the quarter ended June 30, 2000, the provision for income taxes increased
from a benefit of $0.7 million in the 1999 period to a $4.0 million expense. For
the six-month period ended June 30, 2000, the provision increased from a benefit
of $1.2 million in the 1999 period to a $5.9 million expense. The increases for
the 2000 quarter and six-month periods are due to an increase in the amount of
taxable income generated in countries where Goss is in a tax liability position.
FINANCIAL CONDITION AND LIQUIDITY
For the six months ended June 30, 2000, operating activities used $30.9 million
of cash compared to the six months ended June 30, 1999 when operating activities
used $65.0 million of cash. The decrease in cash used from operations in 2000 is
due to the increase in net income for the period, partly offset by higher
payments to trade creditors. Commencing on January 26, 2000 and May 5, 2000,
Goss made payments of approximately $19.8 million and $20.1 million,
respectively, to its pre-petition trade creditors, representing the first two of
the three payments required by the Plan of Reorganization as approved by the
Bankruptcy Court for the District of Delaware. Substantially all of the
pre-petition trade payments were paid prior to their scheduled dates of February
18, 2000 and May 22, 2000. Goss intends to make the final payment due to its
pre-petition trade creditors of approximately $20.0 million by its scheduled
date of August 21, 2000. Cash used in investing activities decreased to $2.0
million in 2000 from $4.6 million in 1999 due to lower spending on capital
projects. Financing activities provided a net $29.5 million in cash in 2000.
Other than cash flow from operations, Goss's primary source of liquidity is its
bank credit facility (the "Bank Facility"), which permits borrowings up to $250
million, including a term loan in the amount of $150 million, revolving
borrowings of up to $100 million, and up to $75 million in letters of credit.
The Bank Facility matures on September 30, 2003 and provides for scheduled
repayments of the term loan and scheduled reductions in the revolving credit
commitments starting in 2002. As of June 30, 2000, the term loan was fully
utilized and borrowings and letters
12
<PAGE>
of credit issued under the $100 million revolving loan portion of the facility,
excluding $2.2 million of revolving credit relating to Goss's joint venture in
China, totaled $85.0 million, an increase of $21.2 million from the end of the
prior fiscal quarter.
The Bank Facility contains certain financial covenants, including, but not
limited to, a minimum fixed charge coverage test, a minimum Earnings Before
Interest, Taxes, Depreciation and Amortization (EBITDA) test, and a maximum
capital spending test. These covenants are described more fully in Section 7.6
of the November 19, 1999 Second Amended and Restated Credit Agreement, a copy of
which was filed with the Securities and Exchange Commission as Exhibit 4.2 to
Goss's Form 10-K for the year ended December 31, 1999 and is incorporated herein
by reference.
In addition to the revolving credit facility, Goss also is party to an indenture
under which it issued $112.5 million in subordinated notes and has mortgage
loans on certain of its facilities. A copy of the indenture agreement is
included as Exhibit 4.1 to Goss's Form 10-K for the year ended December 31, 1999
and is incorporated herein by reference. The mortgage loans are included as
Exhibits 4.4 and 4.5 to Goss's Form 8-K as filed with the Securities and
Exchange Commission on February 12, 1998, and are incorporated herein by
reference. The indenture contains covenants similar to those in the revolving
credit facility and includes cross-default provisions under which an event of
default under the revolving credit facility would also be considered an event of
default under the indenture.
Goss is a highly leveraged business. As a consequence, it is dependent upon its
bank credit facility to provide essential liquidity, and borrowings under that
facility are dependent upon Goss's fulfillment of the financial covenants that
it contains. Should Goss at some future time not be able to satisfy those
financial covenants it would significantly, and negatively, affect Goss's
business by, among other things, restricting growth in sales or necessitating
Goss's obtaining a replacement credit facility. Goss's ability to obtain a
replacement facility would be dependent on the financial markets and its
financial condition at that time.
FORWARD LOOKING STATEMENTS
Certain of the statements contained in this Report are forward-looking. While
Goss believes that these statements are accurate, Goss's business is dependent
upon general economic conditions, various conditions specific to its industry,
and future trends and these factors could cause actual results to differ
materially from the forward-looking statements that have been made.
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PART II. OTHER INFORMATION
Item 1. Legal Proceedings
In June of 2000, the U.S. Court of Appeals for the Federal
Circuit upheld the determination by the Court of International
Trade that the International Trade Commission properly found
that the U.S. printing press industry was injured by
unfairly-traded imports from Germany and Japan. The ruling was
in response to an appeal filed by the affected German and
Japanese producers to the earlier Court of International Trade
ruling. The only appeal alternative remaining to the German
and Japanese producers is with the U.S. Supreme Court.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
10.1 Management Stock Incentive Plan
10.2 Form of Restricted Stock Agreement
10.3 Form of Non-Vested Unit Agreement
10.4 Form of Incentive Option Agreement
10.5 Form of Performance Option Agreement
10.6 Form of Discretionary Option Agreement
27.1 Financial Data Schedule
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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.
GOSS HOLDINGS, INC.
Date: August 14, 2000 By: /s/ JOSEPH P. GAYNOR, III
------------------------------------
Joseph P. Gaynor, III, Executive Vice President and
Chief Financial Officer (Principal Financial Officer
and Principal Accounting Officer)
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