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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q/A
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
<TABLE>
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FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1996 COMMISSION FILE NO. 0-23082
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OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM ______ TO ______
-----------------------
BELDING HEMINWAY COMPANY, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 13-1574754
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
1430 BROADWAY
NEW YORK, NY 10018
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE (212) 556-4700
FORMER NAME, FORMER ADDRESS AND FORMER FISCAL YEAR, IF CHANGED SINCE
LAST REPORT: N/A
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.
[X] YES [ ] NO
INDICATE THE NUMBER OF SHARES OUTSTANDING OF EACH OF THE ISSUER'S CLASSES OF
COMMON STOCK, AS OF THE LATEST PRACTICABLE DATE.
AS OF NOVEMBER 11, 1996, 7,388,282 SHARES OF COMMON STOCK WERE OUTSTANDING.
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PAGE 1 OF 18
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BELDING HEMINWAY COMPANY, INC.
1430 BROADWAY
NEW YORK, NY 10018
TABLE OF CONTENTS
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PAGE NO.
<S> <C>
Part I -- Financial Information
Item 1. Financial Statements
Consolidated Balance Sheets
as of September 30, 1996 and December 31, 1995 3
Consolidated Statements of Operations
for the Three and Nine months Ended September 30, 1996 and 1995 4
Consolidated Statements of Cash Flows
for the Nine months Ended September 30, 1996 and 1995 5
Notes to Unaudited Consolidated Financial Statements
September 30, 1996 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 8
Part II -- Other Information
Item 1. Legal Proceedings N/A
Item 2. Changes in Securities N/A
Item 3. Defaults upon Senior Securities 14
Item 4. Submission of Matters to a Vote of Security Holders 14
Item 5. Other Information 14
Item 6. Exhibits and Reports on Form 8-K 14
Signatures 15
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PAGE 2 OF 18
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PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
BELDING HEMINWAY COMPANY, INC.
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
ASSETS SEPTEMBER 30, 1996 DECEMBER 31, 1995
(UNAUDITED) (NOTE)
----------- ------
<S> <C> <C>
Current Assets:
Cash and cash equivalents $ 448 $ 629
Accounts receivable trade, net 11,927 11,314
Inventories 18,081 18,360
Federal income taxes receivable 100 787
Current deferred tax asset 1,483 313
Other current assets 632 953
------- -------
Total current assets 32,671 32,356
------- -------
Property, plant and equipment, at cost 32,809 33,013
Less: Accumulated depreciation and
amortization (4,913) (3,538)
------- -------
Net property, plant and equipment 27,896 29,475
------- -------
Goodwill, net 20,322 20,450
Deferred tax asset -- 9,515
Other assets 1,723 2,328
------- -------
Total Assets $82,612 $94,124
======= ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable $5,208 $5,593
Current maturities of long-term debt 37,786 4,029
Other current liabilities 9,625 12,948
------- -------
52,619 22,570
------- -------
Long-term debt 227 44,666
Other liabilities 18,698 19,386
------- -------
Total Liabilities 71,544 86,622
------- -------
Redeemable Preferred Stock, par value
$0.01 per share 20,805,060 shares
authorized; Shares issued and outstanding:
Series A - None
Series B - 20,805,060 20,805 20,805
Accumulated dividends on preferred stock 2,388 1,374
------- -------
23,193 22,179
------- -------
Common Stock, par value $0.01 per share
20,000,000 shares authorized;
Shares issued and outstanding:
September 30, 1996: 7,388,282 74
December 31, 1995: 7,409,282 74
Paid in Capital 19,858 19,859
Retained Earnings (32,057) (34,610)
------- -------
Total Common Stockholders' Equity (12,125) (14,677)
------- -------
Total Liabilities and Stockholders' Equity $82,612 $94,124
======= =======
</TABLE>
See Notes to Unaudited Consolidated Financial Statements.
PAGE 3 OF 18
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BELDING HEMINWAY COMPANY, INC.
AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS NINE MONTHS
ENDED SEPTEMBER 30, ENDED SEPTEMBER 30,
1996 1995 1996 1995
------------------ ------------------
<S> <C> <C> <C> <C>
Net sales $ 22,915 $ 20,612 $ 67,158 $ 65,769
Cost of sales 15,919 15,212 48,063 47,487
-------- -------- -------- --------
Gross profit 6,996 5,400 19,095 18,282
Selling, general & administrative expenses 3,528 3,441 10,508
11,654
Other (income) expense -- net (118) (69) (384) (222)
-------- -------- -------- --------
Income from continuing operations before
interest and income taxes 3,586 2,028 8,971 6,850
Interest expense 1,083 1,016 3,395 2,961
-------- -------- -------- --------
Income from continuing operations before
income taxes 2,503 1,012 5,576 3,889
Provision for income taxes 1,032 535 2,367 2,023
-------- -------- -------- --------
Income from continuing operations 1,471 477 3,209 1,866
Less dividends on preferred stock 345 326 1,014 952
-------- -------- -------- --------
Income applicable to common stock
from continuing operations 1,126 151 2,195 914
Income (loss) from discontinued operations,
net of income tax provision 313 (49) 358 377
-------- -------- -------- --------
Income applicable to common stock $ 1,439 $ 102 $ 2,553 $ 1,291
======== ======== ======== ========
Earnings per common share:
Continuing operations $ 0.15 $ 0.02 $ 0.30 $ 0.12
Discontinued operations 0.04 (.01) 0.05 0.05
--------- -------- -------- --------
Total $ 0.19 $ 0.01 $ 0.35 $ 0.17
======== ======== ======== ========
Weighted average common shares
outstanding (in thousands) 7,392 7,413 7,397 7,416
======== ======== ======== ========
Total depreciation and amortization 898 1,021 2,344 2,644
======== ======== ======== ========
</TABLE>
See Notes to Unaudited Consolidated Financial Statements.
PAGE 4 OF 18
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BELDING HEMINWAY COMPANY, INC.
AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30,
1996 1995
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Income from continuing operations $ 3,209 $ 1,866
Reconciliation of net income from continuing
operations to net cash provided by operations:
Depreciation and amortization 2,344 2,644
Deferred tax provision 1,993 1,105
Gain on asset sale (131) --
Changes in operating assets and liabilities:
Accounts receivable (613) (419)
Inventories (752) (3,972)
Federal income taxes receivable 565 --
Other current assets 443 259
Accounts payable (385) 1,842
Other current liabilities (1,894) (2,709)
Other liabilities (637) --
Other operating assets and liabilities 164 131
Cash flow from discontinued operations (44) 2,207
-------- --------
4,262 2,954
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of discontinued operations 8,190 2,623
Capital expenditures (970) (2,915)
Investments in other assets (389) (199)
Proceeds from asset sales 534 --
Acquisition of Culver noncash net assets -- (2,800)
Adjustments related to acquisitions (42) (123)
-------- --------
7,323 (3,414)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from revolving credit facility and capitalized
lease obligations 31,787 29,801
Repayment of long term debt and capital lease obligations (42,469) (27,295)
Payment of long term liabilities (1,084) (2,427)
-------- --------
(11,766) 79
-------- --------
Decrease in cash and cash equivalents (181) (381)
Cash and cash equivalents beginning of period 629 1,015
-------- --------
Cash and cash equivalents end of period $ 448 $ 634
======== ========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest $ 3,393 $ 2,007
======== ========
Income taxes $ 103 $ 798
======== ========
See Notes to Unaudited Consolidated Financial Statements
PAGE 5 OF 18
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BELDING HEMINWAY COMPANY, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1996
NOTE 1: BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Rule 10-01 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring accruals) considered necessary for fair presentation have
been included. Certain reclassifications have been made to prior year amounts in
order to present them on a basis consistent with the current year. Operating
results for the nine-month period ended September 30, 1996 are not necessarily
indicative of the results that may be expected for the year ending December 31,
1996. For further information, refer to the consolidated financial statements
and footnotes included in the Company's annual report on Form 10-K for the year
ended December 31, 1995.
NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Operation: The Company and its subsidiaries manufacture and market
industrial and consumer threads and distribute a line of home sewing and craft
products, principally buttons. The Company has divested the Home Furnishings
division (See Note 5).
Consolidation: The accompanying consolidated financial statements include the
accounts of the Company and all subsidiaries after elimination of intercompany
items and transactions.
Depreciation and Amortization: Depreciation and amortization are computed
principally by the straight-line method for each class of depreciable and
amortizable asset based on their estimated useful lives. Buildings and
improvements, machinery and equipment, and furniture, fixtures and leasehold
improvements are generally depreciated over periods of 20-35, 5-25 and 5-10
years, respectively.
Revenue Recognition: Revenue is recognized upon shipment of merchandise.
Cash Equivalents: The Company considers all highly liquid investments with a
maturity of six months or less when purchased to be cash equivalents.
Use of Estimates: The preparation of financial statements in conformity with
generally accepted accounting principles requires the Company to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
NOTE 3: EARNINGS PER SHARE
Earnings per common share for the Company have been computed on the basis of
weighted average common shares outstanding after providing for quarterly
preferred dividend requirements.
PAGE 6 of 18
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BELDING HEMINWAY COMPANY, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1996
NOTE 4: INVENTORIES:
The components of inventories, net of reserves, are as follows (dollars in
thousands):
</TABLE>
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<CAPTION>
SEPTEMBER 30, 1996 DECEMBER 31, 1995
------------------ -----------------
<S> <C> <C>
Raw materials and greige goods $ 5,264 $ 3,189
Manufacturing supplies 1,202 1,346
Work in Progress 5,231 6,033
Finished goods 6,384 7,792
------- -------
$18,081 $18,360
======= =======
</TABLE>
NOTE 5: DISCONTINUED OPERATIONS
On July 31, 1996 the Company completed the sale of its Home Furnishings
division. Proceeds received on the sale, adjusted for closing costs and changes
in net asset value of the division subsequent to the contract date were used to
repay the Company's revolving bank loan. Such net proceeds approximated the
amount that had been borrowed under the revolving loan in support of the Home
Furnishings division's inventories and receivables. The repayment of bank debt
was sufficient in amount to avoid bank fees that would have been payable had the
Company not completed the sale within the time frame prescribed by the Company's
Credit Agreement dated October 29, 1993, as amended ("Credit Agreement") or in
an amount sufficient to repay amounts borrowed against the division's
inventories and receivables.
The results of the Home Furnishings division for the period January 1, 1996
through July 31, 1996 and all prior periods have been presented as results of
discontinued operations.
PAGE 7 OF 18
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PART I - FINANCIAL INFORMATION
ITEM 2. MANAGEMENT DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULT OF OPERATIONS
RESULTS OF OPERATIONS
THIRD QUARTER
SALES
Sales during the third quarter of 1996 totaled $22.9 million as compared to
$20.6 million during the third quarter of 1995 for an increase of $2.3 million.
Sales in the consumer product segment totaled $12.9 million during the third
quarter of 1996, compared with $10.5 million during the third quarter of 1995
for an increase of $2.4 million or 22.3%. The increase in quarterly sales was
the result of improved sales in the Button division and incremental sales
contributed by Culver Textile Company ("Culver") which was acquired on August
31, 1995.
Sales in the industrial product segment totaled $10.0 million during the third
quarter of 1996 as compared to $10.1 million during the third quarter of 1995.
GROSS MARGIN
Gross margin increased $1.6 million during the third quarter of 1996 to $7.0
million as compared to $5.4 million during the third quarter of 1995. The gross
margin percentage was 30.5% during the third quarter of 1996, compared with
26.2% during the third quarter of 1995.
Gross margin in the consumer product segment totaled $4.6 million or 35.7%
during the third quarter of 1996 as compared to $3.7 million or 35.0% during the
third quarter of 1995. The margin improvement in the consumer product segment
was the result of improved sales in the Button division and incremental sales
resulting from the Culver acquisition.
Gross margin in the industrial product segment increased $.7 million to $2.4
million in the third quarter of 1996 as compared to $1.7 million during the
third quarter of 1995. The gross margin percent during the third quarter of 1996
was 24.0 percent as compared to 17.0 percent in the corresponding quarter of
1995. The improvement over 1995 margins is attributable to cost and headcount
reductions implemented beginning in September 1995.
SELLING, GENERAL AND ADMINISTRATIVE
Selling, general and administrative expenses totaled $3.5 million during the
third quarter of 1996 as compared with $3.4 million during the same period in
1995.
Selling, general and administrative expenses in the consumer product segment in
the third quarter of 1996 totaled $1.3 million as compared to $1.1 million in
the third quarter of 1995. The increase in selling, general and administrative
costs in the consumer product segment was the result of additional expenses
attributable to the Button division.
PAGE 8 OF 18
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Selling, general and administrative expenses in the industrial product segment
totaled $2.2 million during the third quarter of 1996 as compared to $2.3
million in the third quarter of 1995. The 1995 third quarter amount of $2.2
million included the reversal of $.7 million of expense accruals, including
bonus and other fees. The decline in selling, general and administrative
expenses in the industrial product segment was the result of reduced spending by
the industrial Thread division totaling $.4 million resulting principally from
headcount reductions and lower goodwill amortization of $.1 million and lower
corporate spending in the amount of $.4 million. The Thread division headcount
reductions were made in the second half of 1995 and $17.4 million of goodwill
was written off in the fourth quarter of 1995 in connection with the Thread
division asset impairment.
INTEREST EXPENSE
Interest expense during the third quarter of 1996 totaled $1.1 million as
compared to $1.0 million during the third quarter of 1995. The weighted average
interest rate during the third quarter of 1996 was 9.95% as compared to 8.24% in
1995. The increase in rate is mostly attributable to the removal of the LIBOR
interest rate option from the Company's credit facility effective in March 1996.
Weighted average debt during the third quarter of 1996 was $41.6 million as
compared to $46.5 million in the third quarter of 1995.
INCOME TAXES
The provision for income taxes during the third quarter of 1996 totaled $1.0
million as compared to $.5 million during the same period last year. The
combined effective income tax rate in 1996 was 41.2% as compared to 52.9% in
1995. The combined effective income tax rates are higher than combined statutory
rates because of nondeductible goodwill. The 1996 combined effective income tax
rate was lower than in 1995 because of the reduction in goodwill amortization
resulting from the Thread division asset impairment recorded in the fourth
quarter of 1995.
PREFERRED DIVIDENDS
Preferred dividends during the third quarter of 1996 totaled $.3 million as
compared to $.3 million during the same period in 1995. Preferred dividends are
accrued and compound at a rate of 6%. Preferred dividend payments are subject to
the approval of the Company's bank lenders. Such approval has not been granted
and no dividend payments have been made by the Company.
YEAR-TO-DATE
SALES
Sales during the nine month period ended September 30, 1996 totaled $67.2
million as compared to $65.8 million during the same period of 1995 for an
increase of $1.4 million.
Sales in the consumer product segment totaled $36.0 million during the first
nine months of 1996 as compared to $29.7 million in the first nine months of
1995 for an increase of $6.3 million. The increase in consumer segment sales was
mostly the result of incremental sales contributed by Culver.
Sales in the industrial product segment totaled $31.2 million in 1996 as
compared to $36.1 million during the first nine months of 1995 for a decrease of
$4.9 million. All of this year to year reduction occurred during the first two
quarters of 1996.
PAGE 9 OF 18
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GROSS MARGIN
Gross margin during the first nine months of 1996 totaled $19.1 million as
compared to $18.3 million during the same period in 1995 for an increase of $.8
million. The gross margin percent during the first nine months of 1996 was 28.4%
as compared to 27.8% during the nine months ended September 30, 1995.
Gross margin in the consumer product segment during the first nine months of
1996 totaled $11.6 million as compared with $10.1 million during the first nine
months of 1995. Increased sales by the Button division and incremental sales
resulting from the Culver acquisition provided the additional margin dollars.
The gross margin percentage during the first nine months of 1996 in the consumer
product segment was 32.3% as compared to 33.9% during the same period in 1995.
The decline in gross margin percentage in the consumer product segment was due
to the lower Culver margins.
Gross margin in the industrial segment during the first nine months of 1996
totaled $7.5 million as compared to $8.2 million in 1995. The decline in margin
dollars was directly attributable to the decline in year-to-date sales volume of
this segment. The gross margin percentage during the nine months of 1996 for the
industrial segment was 24.0% as compared to 22.3% during the first nine months
of 1995.
SELLING, GENERAL AND ADMINISTRATIVE
Selling, general and administrative expenses during the first nine months of
1996 totaled $10.5 million as compared to $11.7 million during the first nine
months of 1995.
Selling, general and administrative expenses in the consumer product segment in
the first nine months of 1996 totaled $3.9 million as compared to $3.3 million
in 1995 The increase in selling, general and administrative costs in the
consumer product segment was the result of additional expenses attributable to
Culver operations.
Selling, general and administrative expenses in the industrial product segment
totaled $6.6 million during the nine months ended September 30, 1996 as compared
to $8.4 million during the first nine months of 1995. The decline in selling,
general and administrative expenses in the industrial product segment was the
result of reduced spending totaling $1.6 million, principally the result of
headcount reductions and lower goodwill amortization of $.3 million.
INTEREST EXPENSE
Interest expense during the nine month period ended September 30, 1996 totaled
$3.4 million as compared to $3.0 million during the same period in 1995. The
weighted average interest rate during the first nine months of 1996 was 9.33% as
compared to 8.66% in 1995. Weighted average debt during the nine months ended
September 30, 1996 was $46.1 million as compared to $44.8 million during the
nine months ended September 30, 1995.
INCOME TAXES
The provision for income taxes during the nine months ended September 30, 1996
was $2.4 million as compared to $2.0 million during the same period last year.
The combined effective income tax rate in 1996 totaled 42.4% as compared to
52.0% in 1995. The combined effective income tax rates are higher than combined
statutory rates because of nondeductible goodwill. The 1996 combined effective
income tax rate is lower than the 1995 rate because of the reduction in goodwill
amortization.
PAGE 10 OF 18
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PREFERRED DIVIDENDS
Preferred dividends during the first nine months of 1996 totaled $1.0 million as
compared to $1.0 million during the same period in 1995. Preferred dividends are
accrued and compound at a rate of 6%. Preferred dividend payments are subject to
the approval of the Company's bank lenders. Such approval has not been granted
and no dividend payments have been made by the Company.
IMPACT OF INFLATION
The Company's results are affected by the impact of inflation on manufacturing
and operating costs. Historically, the Company has used selling price
adjustments, cost containment programs and improved operating efficiencies to
offset the otherwise negative impact of inflation on its operations.
LIQUIDITY AND CAPITAL RESOURCES
Cash provided by operations during the nine months ended September 30, 1996
totaled $4.3 million.
Net cash provided by investing activities during the nine months ended September
30, 1996 totaled $7.3 million which included net proceeds of $8.2 million from
the sale of the Home Furnishings division and $.5 million from the sale of
an unused parcel of land, offset by $1.0 million of capital expenditures and
$.4 million of investments in other assets.
Net cash used by financing activities totaled $11.8 million. Net proceeds of
$8.2 million from the sale of the Home Furnishings division were used to repay
bank debt during the quarter. Reductions in long term liabilities of $1.1
million reflect primarily payments to the Company's pension plan and payments
of other long term liabilities.
At September 30, 1996, the Company's principal sources of liquidity included
cash and cash equivalents of $.4 million and trade accounts receivable of $11.9
million. At September 30, 1996 the Company had $.9 million of unused
availability under its revolving credit facility (the "Revolving Facility").
At December 31, 1995, the Company was in default on certain of its loan
covenants specified in the Credit Agreement dated October 29, 1993, as amended
("Credit Agreement"). As a result, on March 15, 1996, the Credit Agreement was
amended as more fully described in the Company's Form 10-K for the year ended
December 31, 1995, and Form 10-Q for the quarterly period ended March 31, 1996.
As described in Note 5, the Company completed the sale of the Home Furnishings
division on July 31, 1996 and used the net proceeds to repay all existing
revolving facility advances against the Company's Home Furnishings division
receivables and inventories and thus avoided fees otherwise payable under the
amended Credit Agreement.
The banks participating in the Company's Credit facility have agreed in exchange
for the payment of a $250 thousand fee to postpone to March 31, 1997 the payment
of the $2.5 million in fees required by the most recent amendment to the Credit
Agreement.
In order to meet the requirements of the Term Facility and thus avoid fees
payable by the deadline, the Company expects that it will have to refinance the
Term Facility by the deadline, or sell assets. If the Company is not successful
in refinancing the Term Facility it will be obligated to demonstrate progress
toward the sale of assets and complete a sale of those assets at sufficient
levels to repay the Term Facility by the deadline, in order to avoid the payment
of fees. If the Company refinances the Term Facility, the new borrowing
arrangements may carry
PAGE 11 OF 18
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higher rates of interest and increased administrative costs. If the Company
raises funds through asset sales to discharge the Term Facility, the reduction
in interest expense resulting therefrom may not be sufficient to offset the
diminution in income that would result from such asset sales. There can be no
assurance that the Company will be able to refinance the Term Facility on
commercially acceptable terms or demonstrate sufficient progress towards asset
sale(s) by the dates fees are due and/or complete a transaction sufficient to
discharge the Term Facility by the deadline. If the Company cannot satisfy those
conditions, the Company would be obligated to pay fees under the agreement.
There is no assurance that the Company's cash flow would be sufficient to pay
those fees. If the Company is unable to pay any of the fees when due it will be
in default under the Term Facility. The Company has engaged a financial advisor
in order to assist it in the evaluation of strategic alternatives.
The Company's ability to make interest and installment principal payments on
outstanding debt also depends on generating sufficient cash flow from operations
as well as maintaining certain levels of receivables and inventory. However,
there can be no assurance the Company will have sufficient cash flow or working
capital levels will be sufficient to make such payments. If the Company is
unable to make installment principal and interest payments when due it will be
in default of the Credit Agreement.
If the Company is not successful in refinancing the Credit Facility and thereby
does not repay all of the amounts outstanding under the Credit Facility on its
final maturity date of July 1, 1997 or meet other covenant provisions it will be
in default under the Credit Facility.
Any such default or non-compliance with the Credit Facility would entitle the
lender to require immediate payment of the outstanding indebtedness and to
refuse advances and to exercise various rights against the Company, including,
without limitation, the right to foreclose its security interest in the
Company's assets and realize upon its collateral by any available judicial
procedure and/or to take possession of and sell any or all of the collateral
with or without judicial process. If such non-compliance occurred and the lender
demanded payment or refused to make further loans and the Company was unable to
obtain alternative financing, the lack of appropriate liquidity would have a
material adverse effect on the Company's results of operations and its ability
to continue as a going concern.
The Company was also in default on one covenant of certain leasing arrangements
totaling $2.2 million in debt at December 31, 1995. The leasing arrangements
have been amended on terms parallel to the amendment of the Credit Agreement.
The maturity date has been moved to July 1, 1997 and interest rate increased to
prime rate plus 1.50%. Lessor has also received a second lien on certain Company
assets. The Company is now in compliance with the provisions as amended of these
leasing arrangements during 1996. If the Company does not comply with the
provisions and is unable to obtain alternative financing, the Company would be
in default and the lender could take back the equipment under lease which would
have an adverse effect on the Company's operations.
The Company is in discussions with several banks and financial institutions to
refinance all of its existing debt at commercially acceptable terms. However,
there can be no assurance that the Company will be able to complete a
refinancing of the Term Facility or demonstrate sufficient progress towards
asset sale(s) by the dates fees are due and or complete a transaction sufficient
to discharge the Term Facility by the deadline.
Pursuant to the terms of the Company's Series B Preferred Stock, 20% of such
shares were scheduled to be redeemed on March 15 of each year commencing in 1995
and ending in 1999. Dividends on the Series B Preferred Stock accrue at an
annual rate of 6% and are payable quarterly on March 15, June 15, September 15,
and December 15. Both the preferred stock redemptions and the quarterly dividend
payments are subject to approval of the banks participating in the Company's
credit facility. The Company was notified as of March 15,
PAGE 12 OF 18
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1995 that the banks declined approval of the dividend and redemption payments
and no such payments have been made. As a result, additional dividends will
accrue on the scheduled but unpaid dividends at a rate of 6% per annum.
PAGE 13 OF 18
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PART II - OTHER INFORMATION
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
a) None
b) REDEEMABLE SERIES B PREFERRED STOCK
Scheduled dividend payments totaling $1,316,018 in 1995, $330,907 on
March 15, 1996, $339,548 on June 15, 1996 and $345,533 on September
15, 1996 were subject to the approval of the Company's bank lenders.
Such approval was not granted by the banks and the dividend payments
were not made. As a result, the unpaid dividends accrue at a
compounded rate of 6% per annum.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS
None
ITEM 5. OTHER INFORMATION
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a) Exhibits
<TABLE>
<CAPTION>
Exhibit No. Description
----------- -----------
<C> <S>
10.23A Amendment, dated as of November 12, 1996, to Credit
Agreement dated as of October 29, 1996 (as previously
amended) between the Company and NationsBank of
North Carolina, N.A., individually and as agent for
Fleet Bank, The Bank of New York, and the Daiwa
Bank, Limited.
</TABLE>
b) Reports on Form 8-K.
During the third quarter of 1996, the Company did not file a Current
Report on Form 8-K.
PAGE 14 OF 18
<PAGE>
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
BELDING HEMINWAY COMPANY, INC.
(Registrant)
S/Karen Brenner
- ------------------------------------------
Karen Brenner, Chairman, President and Chief Executive Officer
S/Edward F. Cooke
- ------------------------------------------
Edward F. Cooke, Vice President and Chief Accounting Officer
Date: 11/21/96
PAGE 15 OF 18
<PAGE>
<PAGE>
NationsBank
101 South Tryon Street, NC1-002-31-31
Charlotte, NC 28255
[NATIONSBANK logo]
November 12, 1996
BELDING HEMINWAY COMPANY, INC.
1430 Broadway
New York, New York 10018
RE: CREDIT AGREEMENT
Gentlemen:
Reference is made to that certain Credit Agreement dated as of October 29, 1996,
by and among Belding Heminway Company, Inc. (the "Borrower"), the banks listed
on the signature pages thereto (the "Banks"), and NationsBank, N.A. as agent
(the "Agent") for the Banks, as amended from time to time (as amended, the
"Credit Agreement"), pursuant to which the Banks have made available to the
Borrower certain term loans, revolving loans and letters of credit. Capitalized
terms not otherwise defined herein shall have the meanings ascribed to them in
the Credit Agreement.
Section 2.15(e) of the Credit Agreement establishes the requirement for the
Borrower to pay to the Banks certain continuation fees (the "Term Loan
Continuation Fees") in the event that Term Loans remain outstanding as of
particular measurement dates. By this letter agreement, the Borrower, the Banks
and the Agent hereby agree to modify section 2.15(e) to read in its entirety as
follows:
(e) Term Loan Continuation Fees. In the event that either (1) the
Term Loans remain outstanding on March 31, 1997 or (2) an Event of
Default occurs under section 6.01 hereof, then the Borrower shall pay to
the Banks, in a lump sum, a fee in the amount of $2,500,000.00 (the
"Continuation Fees"). Such fees shall be allocated among the Banks pro
rata according to their respective Commitment Percentages. Such fees
shall be due and payable on the fifth Business Day following the earlier
of March 31, 1997 or the date of the occurrence of such Event of
Default. Notwithstanding the foregoing, in the event that no Term Loans
remain outstanding on March 31, 1997 or any time thereafter, and no
Event of Default has occurred, the Borrower shall have not obligation to
pay such Continuation Fees to the Banks or any part thereof.
In consideration of the Banks' and the Agent's agreeing to amend section 2.15(e)
of the Credit Agreement, the Borrower shall pay to the Agent, for the ratable
benefit of the Banks according to their Commitment Percentages, an amendment fee
of $250,000.00. The amendment of section 2.15(e) shall be effective as of the
date that the Borrower pays such amendment fee to the Agent for the benefit of
the Banks. The Borrower acknowledges that the amendment of section 2.15(e) as
set forth herein provides it valuable and immediate consideration and to the
extent that either of the conditions precedent to the payment of the
Continuation Fees occurs, such Continuation Fees shall have been fully earned by
the Banks.
PAGE 16 OF 18
<PAGE>
<PAGE>
BELDING HEMINWAY COMPANY, INC.
November 12, 1996
Page 2
This letter agreement has been executed by each of the Agent, the Banks, the
Borrower and the parties to the various Subsidiaries Guarantees, each
acknowledging their consent and agreement to the terms of this letter agreement.
Sincerely,
NATIONSBANK, N.A. individually as
a Bank and as the Agent
By: S/ James T. Gilland
_____________________________________
Title: Senior V.P.
__________________________________
FLEET BANK
By: S/ Alex Sade
_____________________________________
Title: Senior V.P.
__________________________________
THE BANK OF NEW YORK
By: S/ Ronald Reedy
_____________________________________
Title: V. P.
__________________________________
THE DAIWA BANK, LIMITED
By: S/ Jun Okuda
_____________________________________
Title: Attorney-In-Fact
__________________________________
BELDING HEMINWAY COMPANY, INC.
By: S/ Edward F. Cooke
_____________________________________
Title: V.P.
__________________________________
[Signatures Continued]
PAGE 17 OF 18
<PAGE>
<PAGE>
BELDING HEMINWAY COMPANY, INC.
November 12, 1996
Page 3
BLUMENTHAL/LANSING COMPANY
BELDING REAL ESTATE CORPORATION
CORTICELLI REAL ESTATE CORP.
THE HEMINWAY & BARTLETT
MANUFACTURING CO.
DANFIELD THREADS, INC.
BRIDGE REALTY CO.
By: S/ Edward F. Cooke
_____________________________________
Title: V.P.
__________________________________
PAGE 18 OF 18
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-30-1996
<CASH> 448
<SECURITIES> 0
<RECEIVABLES> 11,927
<ALLOWANCES> 0
<INVENTORY> 18,081
<CURRENT-ASSETS> 32,671
<PP&E> 32,809
<DEPRECIATION> 4,913
<TOTAL-ASSETS> 82,612
<CURRENT-LIABILITIES> 52,619
<BONDS> 0
0
23,193
<COMMON> (12,125)
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 82,612
<SALES> 67,158
<TOTAL-REVENUES> 67,158
<CGS> 48,063
<TOTAL-COSTS> 48,063
<OTHER-EXPENSES> 10,124
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (3,395)
<INCOME-PRETAX> 5,576
<INCOME-TAX> (2,367)
<INCOME-CONTINUING> 3,209
<DISCONTINUED> 358
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,553
<EPS-PRIMARY> 0.35
<EPS-DILUTED> 0.35
</TABLE>
