<PAGE>
<PAGE>
SECURITIES AND EXCHANGE
COMMISSION
Washington, D.C. 20549
FORM 10-K/A
ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1995
Commission file number: 1-3462
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, New York 10018
(Address of principal executive offices (Zip Code)
Registrant's telephone number, including area code: (212)556-4700
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
Common Stock, par value $0.01 per share New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: Not applicable
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 by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. Yes__ No X.
As of March 1, 1996, 7,400,282 shares of Registrant's Common Stock were
outstanding, and the aggregate market value of the voting stock held by
non-affiliates of Registrant was approximately $7,701,000. This figure was
calculated on the basis of the closing price of a share of common stock of
Registrant on the New York Stock Exchange on March 1, 1996. As used herein,
non-affiliates means all stockholders of Registrant other than executive
officers, directors and 5% shareholders.
The information required by Part IV of Form 10-K is incorporated by
reference to the proxy materials of the Registrant distributed to
stockholders in connection with its annual meeting scheduled for May 9, 1996.
1
<PAGE>
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
INDEX TO FINANCIAL STATEMENTS AND SCHEDULES
Report of Independent Public Accountants - December 31, 1995.................3
Consolidated Balance Sheets- December 31, 1995 and 1994......................4
Consolidated Statements of Operations -
Company - for the Years Ended December 31, 1995 and 1994 and
the Three Months December 31, 1993
Predecessor - for the Nine Months September 30, 1993...................6
Consolidated Statements of Cash Flows -
Company - for the Years Ended December 31, 1995 and 1994 and
the Three Months December 31, 1993
Predecessor - for the Nine Months September 30, 1993...................7
Consolidated Statements of Stockholders' Equity
for the year ended December 31, 1995 and
for the period October 1, 1993 to December 31, 1994....................8
Notes to Consolidated Financial Statements
for the Year Ended December 31, 1995...................................9
2
<PAGE>
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Stockholders and Board of Directors
of Belding Heminway Company, Inc.
We have audited the accompanying consolidated balance sheets of Belding
Heminway Company, Inc. (a Delaware corporation) and subsidiaries as of December
31, 1995 and 1994, and the related consolidated statements of operations, cash
flows and stockholders' equity for the years ended December 31, 1995 and 1994
and the period October 1, 1993 to December 31, 1993 (post-acquisition basis). We
have also audited the accompanying consolidated statements of operations and
cash flows for the nine month period ended September 30, 1993 (pre-acquisition
basis). These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Belding Heminway Company,
Inc. and subsidiaries as of December 31, 1995 and 1994, and the results of their
operations, cash flows and stockholders' equity for the years ended December 31,
1995 and 1994 and the periods October 1, 1993 to December 31, 1993,
(post-acquisition basis) and January 1, 1993 to September 30, 1993
(pre-acquisition basis) in conformity with generally accepted accounting
principles.
Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The 1995, 1994 and 1993 schedules listed
in the index of financial statements and schedules are presented for purposes of
complying with the Securities and Exchange Commission's rules and are not part
of the basic financial statements. These 1995, 1994 and 1993 schedules have been
subjected to the auditing procedures applied in the audits of the basic
financial statements and, in our opinion, fairly state in all material respects
the financial data required to be set forth therein in relation to the basic
financial statements taken as a whole.
ARTHUR ANDERSEN LLP
New York, New York
February 23, 1996 (Except for the amendment to the Credit Agreement (Notes 4
and 9) as to which the date is March 15, 1996)
3
<PAGE>
<PAGE>
BELDING HEMINWAY COMPANY, INC.
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 31, 1995 DECEMBER 31, 1994
----------------- -----------------
ASSETS
Current Assets:
<S> <C> <C>
Cash and cash equivalents $ 629 $ 1,015
Accounts receivable trade (net of allowance
of $2,127 and $2,376 respectively) 11,314 10,815
Inventories 18,360 15,733
Federal income taxes receivable 787 525
Current deferred tax asset 313 2,180
Other current assets 953 1,250
-------- --------
32,356 31,518
-------- --------
Property, plant and equipment, at cost:
Land 2,283 1,986
Building and improvements 13,312 16,477
Machinery and equipment 17,418 14,370
-------- --------
33,013 32,833
Less: Accumulated depreciation and amortization (3,538) (1,763)
--------- ----------
29,475 31,070
--------- ----------
Goodwill (net of amortization of
$2,947 and $1,467 respectively) 20,450 33,481
Deferred tax assets 9,515 469
Net assets of discontinued operations --- 29,049
Other assets 2,328 2,865
-------- --------
Total Assets $ 94,124 $128,452
======== ========
</TABLE>
See Notes to Consolidated Financial Statements
4
<PAGE>
<PAGE>
BELDING HEMINWAY COMPANY, INC.
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 31, 1995 DECEMBER 31, 1994
----------------- -----------------
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 5,593 $ 4,127
Current maturities of long-term debt 4,029 4,123
Federal income taxes payable -- 773
Other current liabilities 12,948 12,140
-------- --------
22,570 21,163
-------- --------
Long-Term Debt 44,666 40,365
Other Liabilities 19,386 19,865
-------- --------
Total Liabilities 86,622 81,393
-------- --------
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 1,374 92
-------- --------
22,179 20,897
-------- --------
Common Stock, par value $0.01 per share
20,000,000 shares authorized;
Shares issued and outstanding:
December 31, 1995: 7,409,282 74 74
December 31, 1994: 7,429,032
Paid in Capital 19,859 19,863
Retained Earnings (34,610) 6,225
-------- --------
Total Common Stockholders' Equity (14,677) 26,162
-------- --------
Total Liabilities and Stockholders' Equity $ 94,124 $128,452
======== ========
</TABLE>
See Notes to Consolidated Financial Statements
5
<PAGE>
<PAGE>
BELDING HEMINWAY COMPANY, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
COMPANY PREDECESSOR
----------------------------------- --------------
YEARS ENDED THREE MONTHS NINE MONTHS
DECEMBER 31, DECEMBER 31, SEPTEMBER 30,
1995 1994 1993 1993
------------------- ------------- -------------
<S> <C> <C> <C> <C>
Net sales $ 88,654 $ 76,767 $ 17,978 $ 57,766
Cost of sales 65,905 54,043 11,767 39,241
-------- -------- -------- --------
22,749 22,724 6,211 18,525
Selling, general & administrative expenses 15,940 15,846 3,881 21,910
Other (income) expense -- net (324) (507) (78) 2,402
Impairment charge 25,000 -- -- --
Restructuring charge -- -- -- 18,548
-------- -------- -------- --------
Income (loss) from continuing operations
before interest and income taxes (17,867) 7,385 2,408 (24,335)
Interest expense 4,000 3,245 864 2,136
-------- -------- -------- --------
Income (loss) from continuing operations
before income taxes (21,867) 4,140 1,544 (26,471)
Provision (benefit) for income taxes (314) 2,113 605 (7,917)
-------- -------- -------- --------
Income (loss) from continuing operations (21,553) 2,027 939 (18,554)
Less dividends on preferred stock 1,282 2,342 607 --
Gain on preferred stock redemption -- 4,099 -- --
-------- -------- -------- --------
Income (loss) applicable to common
stock from continuing operations (22,835) 3,784 332 (18,554)
-------- -------- -------- --------
Income (loss) from discontinued operations,
net of income tax provision (17) 1,497 611 1,130
Loss on disposal of discontinued operations,
net of income tax benefit (17,983) -- -- --
-------- -------- -------- --------
Income (loss) applicable to common stock $(40,835) $ 5,281 $ 943 $(17,424)
======== ======== ======== ========
Earnings per common share:
Continuing operations $ (3.08) $ .72 $ .07 $ (9.45)
Discontinued operations (2.43) .28 .12 .58
-------- -------- -------- --------
Total $ (5.51) $ 1.00 $ .19 $ (8.87)
======== ======== ======== ========
Dividend declared per common share None None None $ .32
======== ======== ======== ========
Weighted average common shares
outstanding (in thousands) 7,414 5,265 5,000 1,964
======== ======== ======== ========
</TABLE>
See Notes to Consolidated Financial Statements.
Effective October 1, 1993, the Company revalued its assets and liabilities to
reflect the price paid to purchase 100% of the Predecessor's issued and
outstanding common stock. Accordingly, the Predecessor's Consolidated Statement
of Operations is not comparable to the Company's Consolidated Statement of
Operations.
6
<PAGE>
<PAGE>
BELDING HEMINWAY COMPANY, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
COMPANY PREDECESSOR
------------------------------------- ------------
YEARS ENDED THREE MONTHS NINE MONTHS
DECEMBER 31, DECEMBER 31, SEPTEMBER 30,
1995 1994 1993 1993
---------------------- ----------- ----------
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Income (loss) from continuing operations $(21,553) $ 2,027 $ 939 $(18,554)
Reconciliation of net income (loss) from continuing operations
to net cash provided (used) by operations:
Depreciation and amortization 3,278 2,251 936 1,295
Noncash impairment charge 25,000 -- -- --
Noncash restructuring charge -- -- -- 15,549
Deferred tax provision (benefit) (674) 825 770 (6,949)
Changes in operating assets and liabilities:
Accounts receivable trade 294 (630) (170) 2,265
Inventory (564) 169 504 260
Other current assets 157 678 (22) (4,220)
Other assets 137 (662) (6) (185)
Accounts payable 94 (1,969) 496 (666)
Federal income taxes payable (773) -- -- (571)
Other current liabilities (3,070) (1,482) (1,333) 1,390
Cash flow from discontinued operations 6,018 3,677 1,012 7,021
-------- -------- -------- --------
8,344 4,884 3,126 (3,365)
-------- -------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisitions of operating companies noncash net assets (3,050) (8,390) (64,542) --
Adjustments related to acquisitions (57) (4,470) (6,560) --
Proceeds from asset sales -- 18,747 3,098 9,620
Capital expenditures (3,820) (3,617) (764) (844)
Investments in other assets (123) (2,524) -- 318
-------- -------- -------- --------
(7,050) (254) (68,768) 9,094
-------- -------- -------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of preferred stock -- -- 40,500 --
Acquisition related increase in long-term debt -- -- 47,000 --
Acquisition related repayments of long-term debt -- -- (19,500) --
Proceeds from revolving credit facility and
capitalized lease obligations 40,551 21,906 -- 21,386
Repayments of short-term borrowings -- -- -- (23,843)
Repayment of long-term debt and capital lease obligations (39,219) (27,031) (1,223) (3,409)
Acquisition related payments (290) (145) -- --
Changes in other long-term liabilities (2,722) (432) (1,921) --
Other, net -- -- -- (112)
-------- -------- -------- --------
(1,680) (5,702) 64,856 (5,978)
-------- -------- -------- --------
Decrease in cash and cash equivalents (386) (1,072) (786) (249)
Cash and cash equivalents beginning of period 1,015 2,087 2,873 3,122
-------- -------- -------- --------
Cash and cash equivalents end of period $ 629 $ 1,015 $ 2,087 $ 2,873
======== ======== ======== ========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest $ 4,349 $ 2,762 $ 818 $ 2,427
======== ======== ======== ========
Income taxes $ 1,146 $ 935 $ 68 $ 826
======== ======== ======== ========
</TABLE>
See Notes to Consolidated Financial Statements
7
<PAGE>
<PAGE>
BELDING HEMINWAY COMPANY INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
PREFERRED STOCK
-------------------------------------------
Series A Series B
-------------------------------------------
Accum.
Shares Amount Shares Amount Dividend
------ ------ ------- ------ --------
<S> <C> <C> <C> <C>
OCTOBER 1, 1993 - - - - -
Issuance of stock 5 $500 40,000,000 $40,000
Dividends accrued on
preferred stock $1,085
Net income
----- ---- ---------- ------- ------
DECEMBER 31, 1993 5 $500 40,000,000 $40,000 $1,085
----- ---- ---------- ------- ------
Series B Common
Shares Issued
Series B Common
Shares Returned
Dividends accrued
on preferred stock 2,342
Dividends paid on
12/4/94 (3,335)
Conversion of
Series B Preferred (19,694,940) (19,695)
Gain on preferred
conversion
Conversion of Series A
Pfd. to B Pfd. (5) (500) 500,000 500
Reclassification
of Series Common
Net income
Legal fees related to
recapitalization
----- ---- ---------- ------- ------
DECEMBER 31, 1994 - - 20,805,060 $20,805 92
----- ---- ---------- ------- ------
Net loss
Dividends accrued
on preferred stock 1,282
Common stock returned
----- ---- ---------- ------- ------
DECEMBER 31, 1995 - - 20,805,060 $20,805 $1,374
===== ==== ========== ======= ======
<CAPTION>
COMMON STOCK
----------------------------------------------
Paid In Retained
Series A Series B Common Capital Earnings
------------------------------------------------------------------------
Shares Amount Shares Amount Shares Amount
------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
OCTOBER 1, 1993 - - - - - - - -
Issuance of stock 3,542,404 $708 1,457,596 $292
Dividends accrued on
preferred stock $ (606)
Net income 1,550
--------- ---- --------- --- --------- ----- ------ --------
DECEMBER 31, 1993 3,542,404 $708 1,457,596 292 - - 944
--------- ---- --------- --- --------- ----- ------ --------
Series B Common
Shares Issued 128,000 26
Series B Common
Shares Returned (2,000)
Dividends accrued
on preferred stock (2,342)
Dividends paid on
12/4/94 333,543 3 $2,738
Conversion of
Series B Preferred 1,969,489 20 16,170
Gain on preferred
conversion 4,099
Conversion of Series A
Pfd. to B Pfd.
Reclassification
of Series Common (3,542,404) (708) (1,583,596) (318) 5,126,000 51 975
Net income 3,524
Legal fees related to
recapitalization (20)
--------- ---- --------- --- --------- ----- ------ --------
DECEMBER 31, 1994 - - - - 7,429,032 $74 $19,863 $ $6,225
--------- ---- --------- --- --------- ----- ------ --------
Net loss (39,553)
Dividends accrued
on preferred stock (1,282)
Common stock returned (19,750) (4)
--------- ---- --------- --- --------- ----- ------- --------
DECEMBER 31, 1995 - - - - 7,409,282 $ 74 $19,859 $(34,610)
========= ==== ========= === ========= ===== ======= ========
</TABLE>
See Notes to Consolidated Financial Statements
8
<PAGE>
<PAGE>
Belding Heminway Company, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
1. BASIS OF PRESENTATION AND 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 was organized under the laws of
the State of Delaware in 1947.
Consolidation: The accompanying consolidated financial statements include
the accounts of the Company and all subsidiaries after elimination of
intercompany items and transactions. (C)
Revenue Recognition: Revenue is recognized upon shipment of merchandise.
Sales returns: The Company estimates an allowance for sales returns based
on historical sales and sales returns and records a related allowance, if
significant.
Allowance for doubtful accounts: The Company maintains a reserve for
doubtful accounts which includes 100% of all invoices past due 61 days or more
and other items that management deems doubtful of collection.
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.
Income taxes: Deferred income taxes are determined using the liability
method whereby the future expected consequences of temporary differences between
the tax basis of assets and liabilities and their reported amounts in the
financial statements are recognized as deferred tax assets and liabilities.
Impairment: Long term assets are reviewed for impairment following the
provisions of SFAS Number 121. Goodwill not associated with particular assets is
reviewed for impairment based on an analysis of undiscounted future cash flows
associated with the related operation.
Goodwill: Goodwill is amortized over a thirty year period.
Environmental liabilities: The Company accrues for losses associated with
environmental remediation obligations when such losses are probable and
reasonably estimable. Accruals for estimated losses from environmental
remediation obligations generally are recognized no later than completion of
the remedial feasibility study. Such accruals are adjusted as further
information develops or circumstances change. Costs of future expenditures
for environmental remediation obligations are not discounted to their present
value.
Cash Equivalents: The Company considers all highly liquid investments with
a maturity of three 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
9
<PAGE>
<PAGE>
financial statements and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates.
2. THREAD DIVISION ASSET IMPAIRMENT:
During 1995, the Thread division's results were substantially below
historical levels and the levels expected when the Company was acquired in 1993.
Based on the performance and expected future levels of operations, management
determined that the book value of certain property, plant, and equipment, which
was adjusted to reflect the 1993 acquisition, was impaired. As a result, the
Company recorded an impairment charge of $6.4 million to adjust the book value
of the equipment to its estimated December, 1995 fair value. Fair value was
based on estimated realizable value in a sale. The amounts actually realized in
the future could differ materially from the amounts assumed in determining the
impairment charge. Among other factors, the write down reflects the failure of
plant consolidations made in connection with the acquisition to achieve expected
results and the estimated effect of future cost reduction activities on the
revenues associated with those assets. A proportionate amount of goodwill
allocated to the Thread division in connection with the 1993 acquisition was
also written-off following the principals in Statement of Financial Accounting
Standard No. 121. The goodwill write off was $17.4 million and other related
charges were $1.2 million. The Company's adoption of Statement of Financial
Accounting Standard No. 121 (Accounting for the Impairment of Long-Lived Assets
and for Long-Lived Assets to be Disposed Of). was effective January 1, 1995, and
the adoption had no impact on the consolidated financial statements as of that
date.
3. DISCONTINUED OPERATIONS:
During the fourth quarter of 1995, the Company announced its decision to
divest the Home Furnishings division. Consequently, the results of operations of
the Home Furnishings division for 1995 and all prior periods have been
classified as discontinued operations. In connection with this decision, the
Company has retained an investment banker and has begun the process of
identifying prospective buyers. It is anticipated a sale could be completed by
mid year 1996.
As a result of the decision to sell the Home Furnishings division, the
Company recorded an estimated loss on disposition in the amount of $18 million
net of income tax benefit during the fourth quarter of 1995, including $7.6
million of goodwill write-off. The resulting book value of the division is a net
liability of $793 thousand and is classified as a current liability as of
December 31, 1995. The Home Furnishings division had revenues of (in thousand of
dollars) $39,324, $40,734 and $30,084 during the years ended December 31, 1993,
1994 and 1995 respectively.
The loss on discontinued operations includes the Company's best estimate in
December 1995 of the amounts expected to be realized on the sale of the Home
Furnishings division. The amounts the Company will ultimately realize could
differ materially in the near term from the amounts assumed in arriving at the
loss on disposal of the discontinued operations.
4. LIQUIDITY:
At December 31, 1995, the Company was in default on certain of its loan
covenants. On March 15, 1996, the Company amended its Credit Agreement dated
October 29, 1993, as amended ("Credit
10
<PAGE>
<PAGE>
Agreement"). As further described in Note 9, $4.029 million principal amount of
the Company's long term debt must be paid in 1996, and $44.488 million or
substantially all of the Company's long-term debt must be paid in 1997. In
addition, a schedule of fees is required to be paid beginning July 31, 1996, if
the sale of the Home Furnishings division has not been completed and progress
toward completion or completion of other asset sales has not taken place. Based
on its current 1996 budgets, progress to date on the sale of the Home
Furnishings division, and preliminary discussions regarding the sale of other
assets, the Company believes that it will remain in compliance with the
provisions of the revised Credit Agreement through December 31, 1996. However,
there can be no assurance that budgets will be achieved or that asset sales,
including the sale of the Home Furnishings division, will take place at expected
prices or take place at all. Failure of these events to occur as expected could
result in non-compliance with the terms of the revised Credit Agreement in 1996.
If such non-compliance occurred and the lender demanded payment or refused to
make further loans and the Company was unable to obtain alternate financing, the
lack of adequate liquidity would have a material adverse effect on the Company's
results of operations and its ability to continue as a going concern.
5. ACQUISITION BY NOEL GROUP, INC.:
On July 21, 1993 Noel Group, Inc. ("Noel"), through its wholly-owned
subsidiary, BH Acquisition Corporation ("BH Acquisition"), accepted for payment
1,434,712 shares of common stock, par value $1.00 per share (the "Shares"), of
the Predecessor, representing approximately 73% of all outstanding shares,
pursuant to a tender offer to the stockholders of the Predecessor at $30.25 per
share, net to the seller in cash (the "Offer"). The Offer was made pursuant to
an Agreement and Plan of Merger dated as of June 16, 1993 among the Predecessor,
Noel and BH Acquisition. In October 1993, BH Acquisition was merged with and
into the Predecessor (with the Company being the surviving corporation) pursuant
to a merger among the Predecessor, Noel, and BH Acquisition. The total purchase
price for 100% of the Shares, including the 27%, acquired following the tender
offer was approximately $64.5 million.
Effective October 1, 1993, the Company increased the carrying amounts of
its net assets to reflect the price paid for 100% of its common stock, a process
generally referred to as "push down" accounting.
6. INCENTIVE PROGRAM:
As of December 6, 1994, the Company's voting stockholders adopted the
Belding Heminway Company, Inc. 1994 Incentive Program ("the Program"). Grants
under the Program may consist of incentive stock options, non-qualified stock
options, stock appreciation rights in tandem with stock options or freestanding,
restricted stock grants, or restored options. In connection with the Program,
500,000 shares of Common Stock were available for grants at the start of the
Program. The following table summarizes stock option activity under the Program:
<TABLE>
<CAPTION>
Option
---------------------
(Dollars in thousands except per share amounts) Shares Price Aggregate
- ----------------------------------------------- ------ ----- ---------
<S> <C> <C> <C>
Outstanding at December 31, 1993 -- -- --
Granted 190,000 $10.00 $1,900
Exercised -- -- --
Cancelled -- -- --
------- ----------- ------
Outstanding at December 31, 1994 190,000 $10.00 1,900
Granted 76,000 $7.50-$3.13 402
11
<PAGE>
<PAGE>
Exercised -- -- --
Cancelled (20,000) $10.00 (200)
------- ----------- ------
Outstanding at December 31, 1995 246,000 $10.00-$3.1 $2,102
======= ====== ==== ======
</TABLE>
At December 31, 1995, 1994 and 1993 exercisable options totaled 123,400,
38,000 and none, respectively.
In 1996, the Company entered into an agreement with a consultant for a
specified amount of cash consideration and 200,000 stock options (See Note 23).
12
<PAGE>
<PAGE>
7. Inventories:
The components of inventories as of December 31, net of reserves are as
follows (dollars in thousands):
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Manufacturing supplies $ 1,346 $ 1,291
Raw materials and greige goods 3,189 3,872
Work in progress 6,033 5,106
Finished goods 7,792 5,464
------- -------
$18,360 $15,733
======= =======
</TABLE>
At December 31, 1995 and 1994, $12,455 and $11,718 respectively, of
inventories were valued by the last-in first-out ("LIFO") method. If the
first-in, first-out ("FIFO") method (which approximates replacement costs) of
inventory accounting had been used by the Company, inventories would not have
been materially affected.
Inventories are stated at lower of cost or market with cost determined
principally on an average cost, or LIFO basis.
8. OTHER CURRENT LIABILITIES AND OTHER LIABILITIES:
Other liabilities as of December 31 consist of the following (dollars in
thousands):
<TABLE>
<CAPTION>
CURRENT 1995 1994
- ------- ------- -------
<S> <C> <C>
Insurance $ 2,754 $ 3,383
Salaries, wages, bonuses and other compensation 2,741 1,628
Plant consolidations 1,187 1,907
Net liabilities of discontinued operations 793 --
Other 5,473 5,222
------- -------
$12,948 $12,140
======= =======
LONG TERM 1995 1994
- --------- ------- -------
Pension liability $ 6,483 $ 6,647
Environmental liabilities 4,600 4,523
Other post-retirement benefits 4,249 4,315
Other 4,054 4,380
------- -------
$19,386 $19,865
======= =======
</TABLE>
13
<PAGE>
<PAGE>
9. DEBT:
Debt obligations as of December 31 consist of (dollars in thousands):
<TABLE>
<CAPTION>
1995 1994
------- -------
<S> <C> <C>
Senior Bank Facilities
Term facility (a) .......................... $20,650 $18,339
Revolving facility (a) ..................... 25,450 26,000
Capitalized lease obligations ................ 2,508 149
Note Payable Connecticut Development Authority 87 --
------- -------
48,695 44,488
Less: Current installments .................. 4,029 4,123
------- -------
$44,666 $40,365
======= =======
</TABLE>
(a) The Senior Bank Facilities under the Credit Agreement consist of (i) a
$25.0 million amortizing senior term loan facility (the "Term Facility") and
(ii) a $29.0 million senior revolving credit facility (the "Revolving Facility")
up to $2.5 million of which is available as standby and trade letters of credit
(which letters of credit are subject to certain fees).
On December 31, 1995, the Company was in default on certain of its loan
covenants specified in the Credit Agreement. As a result, on March 15, 1996, the
Credit Agreement was amended to provide, among other changes, the following:
Defaults at December 31, 1995 were waived.
Maturity of Senior Bank Facilities was changed to July 1, 1997 from
December 31, 1999.
Loans bear interest at the rate of NationsBank prime rate plus 1.75%.
Previously the Company had the option of selecting an interest rate
equivalent to (a) 1.75% plus the higher of (1) NationsBank's prime
rate and (2) the Federal funds rate plus 1/2 of 1% or (b) a rate based
upon certain rates offered for U.S. dollar deposits in the London
interbank market plus 2.75%.
If Revolving Facility advances exist against the Company's Home
Furnishings division receivables and inventory on July 31, 1996 and
August 31, 1996, the Company will pay fees of $100,000 and $200,000,
respectively.
If the Company has not refinanced or repaid the Term Facility in full
by December 31, 1996, the Company will be obligated to demonstrate
progress towards disposition of assets in addition to the Home
Furnishings division and complete a sale of those assets by the due
date, at sufficient levels to repay the Term Facility, in order to
avoid the payment of fees as follows: September 30, 1996, $300,000;
November 15, 1996, $700,000; December 31, 1996, $1,500,000.
The requirement for the Company to maintain an interest rate cap
agreement was deleted. (See Note 10 to Consolidated Financial
Statements)
Financial covenant tests were revised.
Terms of the Revolving Facility were revised to reduce advances
available against work in process inventory effective September 30 and
December 31, 1996.
On the basis of preliminary discussions with financial institutions and
financial consultants, the Company believes that it can complete the sale of its
Home Furnishings Division on or prior to July 31, 1996 (and use the net proceeds
to repay existing credit facility advances against the Company's Home
14
<PAGE>
<PAGE>
Furnishings Division receivables and inventory) and thus avoid the fees which
would otherwise be payable under the credit facility if advances against the
Home Furnishings Division remain outstanding on that date.
There can be no assurance the Company will complete a sale of Home
Furnishings prior to July 31. If the transaction is not completed by that date,
the Company believes that the fees could be funded by cash flows from
operations. However, there can be no assurance such funds will be available. If
the Company is unable to pay those fees when due it will be in default under the
credit facility.
In addition, the Company may not generate sufficient proceeds from the sale
of Home Furnishings to repay the revolving credit facility advances existing
against the Company's Home Furnishings Division. If the Company generates
insufficient proceeds from the sale, the Banks could prevent the sale or the
Company could be in default under the credit agreement.
In order to meet the requirements of the Term Facility and thus avoid fees
payable on September 30, November 15 and December 31, the Company expects that
it will have to refinance the Term Facility by September 30, 1996. If the
Company is not successful in refinancing the Term Facility by September 30, 1996
it will be obligated to demonstrate progress toward the sale of assets in
addition to the Home Furnishings division by September 30 and complete a sale of
these assets by December 31, 1996, at sufficient levels to repay the Term
Facility by December 31, 1996, in order to avoid the payment of fees. If the
Company refinances the Term Facility, it is likely that the new borrowing
arrangements will carry 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 will 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 December 31, 1996. 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'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 Agreement and
thereby does not repay all of the amounts outstanding under the Credit Agreement
on its final maturity date of July 1, 1997 or meet other covenant provisions it
will be in default under the Credit Agreement.
Any such default or non-compliance with the Credit Agreement 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 paid a fee of $150,000 for this amendment.
15
<PAGE>
<PAGE>
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 substantially similar terms 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
second lien on certain Company assets. The Company believes it will be in
compliance with the provisions 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.
Loans outstanding as of December 31, 1995, under the Term Facility total
$20.650 million and are repayable in consecutive quarterly installments: one
installment of $.804 million, three installments of $.902 million each, two
installments of $1.263 million each, and one installment of $14.614 million.
Each bank is entitled to a commitment fee of 1/2% per annum on the unused
portion of its commitment under the Senior Bank Facilities, payable quarterly in
arrears. In addition, NationsBank is entitled to an administrative agency fee of
$100 thousand payable annually in advance for the life of the Facilities.
The Senior Bank Facilities are guaranteed, subject to certain limitations,
by all direct and indirect domestic subsidiaries of the Company. The Senior Bank
Facilities are secured by a first priority lien or security interest in
substantially all the assets of the Company. The Senior Bank Facilities contain
representations and warranties, covenants and events of default customary for
credit facilities of this nature. Such customary covenants include restrictions
on the ability to borrow more debt, acquire other companies, pay dividends, and
the use of proceeds from the sale of assets. The Company must maintain certain
current asset and debt to equity ratios. In addition, the Company must meet
certain coverage tests related to interest and cash flow.
Payments on principal of long-term debt outstanding, as of December 31,
1995, required are as follows (dollars in thousands):
1996 $ 4,029
1997 44,488
1998 72
1999 78
2000 28
-------
$48,695
=======
These payments may be adjusted based on the Company's proceeds from asset
sales and "excess cash flow" as defined in the Credit Agreement.
Interest expense for the nine months ended September 30, 1993 includes $150
thousand of interest on BH Acquisition debt. This interest expense is reflected
in the Company's historical cost financial statements because the Company was
obligated to repay the debt. In addition, interest expense for that nine month
period reflects $99 thousand on $7.3 million loaned to the Company by BH
Acquisition.
16
<PAGE>
<PAGE>
10. INTEREST RATE CAP AGREEMENT:
The Company has a two-year 6% interest rate cap agreement with NationsBank
in the notional amount of $12 million for the purpose of hedging against
increases in interest rates on its bank debt. The agreement, dated April 22,
1994 provides for a quarterly determination of the amount by which the
three-month LIBOR rates exceed 6%. If the three-month LIBOR rate exceeds 6%, a
payment will be made to the Company three months in arrears. Payments of $19
thousand were made to the Company under this agreement in 1995. The cost of the
agreement to the Company was $139 thousand which is being amortized over the
life of the agreement.
11. LEASE PAYMENTS:
The following is a schedule by year of future minimum lease payments under
capital and non-cancelable operating leases with initial or remaining terms of
one year or more at December 31, 1995 (dollars in thousands):
<TABLE>
<CAPTION>
CAPITAL OPERATING
------- ---------
<C> <C> <C>
1996 .......................................... $ 702 $ 757
1997 .......................................... 2,041 576
1998 .......................................... 63 502
1999 .......................................... 63 486
2000 .......................................... 21 40
Later Years ................................... -- --
------ ------
Total minimum lease payments .................. $2,890 $2,361
------ ======
Amount representing interest .................. 382
------
Present value of future minimum
lease payments (including current
portion of $519) ............................ $2,508
======
</TABLE>
Rental expense for premises and machinery and equipment leased by the
Company under operating leases was as follows (dollars in thousands):
<TABLE>
<CAPTION>
COMPANY PREDECESSOR
----------------------------------- --------------
YEARS ENDED THREE MONTHS NINE MONTHS
DECEMBER 31, DECEMBER 31, SEPTEMBER 30,
1995 1994 1993 1993
------------------ ---- ----
<S> <C> <C> <C> <C>
Premises ............... $532 $573 $ 86 $562
Machinery .............. $104 $151 $115 $349
</TABLE>
12. FINANCIAL INSTRUMENTS:
The Company's financial instruments are comprised of cash, cash
equivalents, accounts receivable, debt and Series B Preferred Stock and the
interest rate cap agreement. The carrying amounts of cash, cash equivalents and
accounts receivable approximate fair values due to the short-term maturity of
the instruments. It was not practicable to obtain an estimate of the fair value
of the Company's outstanding debt obligations or Series B Preferred Stock.
17
<PAGE>
<PAGE>
13. PENSION PLAN:
The Company sponsors a defined benefit plan which requires no contribution
from the employees. The plan was frozen as of December 31, 1994, and no new
employees are eligible to join this plan after that date. Prior to December 31,
1994, the Plan covered substantially all employees. The employees covered under
this plan do not receive any additional accruals for service rendered after
December 31, 1994. Plan assets consist principally of common stocks, U.S.
Government and corporate obligations.
Net periodic pension cost of the pension plan was as follows (dollars in
thousands):
<TABLE>
<CAPTION>
COMPANY PREDECESSOR
----------------------------------- -------------
YEARS ENDED THREE MONTHS NINE MONTHS
DECEMBER 31, DECEMBER 31, SEPTEMBER 30,
1995 1994 1993 1993
-------------------- ------- -------
<S> <C> <C> <C> <C>
Service cost on benefits earned
during the year ................ $ -- $ 338 $ 16 $ 164
Interest cost on projected benefit
obligations .................... 1,455 1,354 65 674
Actual return on plan assets ..... (3,558) (67) (18) (186)
Amortization, net ................ 2,271 (1,013) -- --
------- ------- ------- -------
Net periodic pension costs ..... $ 168 $ 612 $ 63 $ 652
======= ======= ======= =======
</TABLE>
The benefits under the plans are determined based on formulas which reflect
the employees' years of service and compensation during their employment period.
The projected unit credit method is used to determine pension costs. Funding
requirements for the plan are based on the unit credit method. The Company's
policy is to fund pension cost as required by ERISA.
During 1995, the Danfield pension plan was merged into the Company's plan.
The Danfield plan, which was also frozen as of December 31, 1994, was overfunded
in the amount of $611 thousand as of that date.
As of December 31, 1994, as required by the purchase method of accounting,
a liability was recorded reflecting the excess of the Company's projected
benefit obligation measured at an 8.5% discount rate over the fair value of plan
assets.
The following table sets forth information on the plan as of December 31
(dollars in thousands):
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Actuarial present value of benefit obligations
Vested ..................................... $ 19,352 $ 15,644 $ 26,293
======== ======== ========
Accumulated ................................ $ 19,407 $ 16,370 $ 26,370
======== ======== ========
Projected .................................. $ 19,407 $ 16,370 $ 27,150
Fair value of plan assets .................... 17,202 11,713 21,592
-------- -------- --------
Unfunded projected benefit obligation ........ 2,205 4,657 5,558
Unrecognized gain ............................ (583) -- --
-------- -------- --------
Accrued pension cost ......................... $ 2,788 $ 4,657 $ 5,558
======== ======== ========
</TABLE>
18
<PAGE>
<PAGE>
Assumptions used in measuring the pension obligation at December 31 were:
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Weighted average discount rate 7.5% 8.5% 7.5%
Rate of increase of compensation levels N/A 5.0% 5.0%
Expected long-term rate of return on assets 9.5% 9.5% 9.0%
</TABLE>
In addition to its liability for the Company sponsored plan, the Company
also had an additional pension liability in the amount of $3.6 million as of
December 31, 1995 in connection with a terminated multi-employer plan.
14. OTHER POST-RETIREMENT BENEFITS:
The Company provides certain health and life insurance benefits for
eligible retirees and their dependents. The Predecessor adopted, effective
January 1, 1993, SFAS No. 106 "Employers' Accounting for Postretirement Benefits
Other Than Pensions," whereby the cost of post-retirement benefits are accrued
during employees' working careers. These costs were previously recognized by
Predecessor as a charge to income in the period the benefits were paid. The plan
is not funded. The Company's policy is to pay the cost of benefits as incurred.
Certain benefits are available to full-time employees who were over age 30,
as of January 1, 1992, provided such employees work for the Company for 25 years
and reach certain ages, but not less than age 55. Employees hired after January
1, 1993 will not be eligible to receive benefits under this Plan.
In its historical financial statements, the Predecessor elected to amortize
the January 1, 1993 obligation over a 20 year period. As of October 1, 1993, as
required by the purchase method of accounting, the liability as of that date was
recorded in the Company's consolidated financial statements
The present value of the postretirement benefit accrual at December 31,
1995 and 1994 measured in accordance with the standard at a 7.5% and 8.5%
discount rate, respectively, is estimated as follows (dollars in thousands):
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Retirees .............................. $3,388 $3,279
Fully eligible active plan participants 647 557
Other active participants ............. 769 479
------ ------
Subtotal ............................ 4,804 4,315
Unrecognized net loss ................. 555 --
------ ------
$4,249 $4,315
====== ======
</TABLE>
An 8.5% discount rate was used to measure expense for the year ended
December 31, 1995. A 7.5% discount rate was used to measure expense for the year
ended December 31, 1994 and the three month period ended December 31, 1993. The
assumed discount rate was 8.5% at January 1, 1993 for purposes of determining
the Predecessor's 1993 net postretirement benefit expense and for determining
the accumulated postretirement benefit obligation at January 1, 1993.
19
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
COMPANY PREDECESSOR
------------------------------------ -------------
YEARS ENDED THREE MONTHS NINE MONTHS
DECEMBER 31, DECEMBER 31, SEPTEMBER 30,
1995 1994 1993 1993
------------------ ---- ----
<S> <C> <C> <C> <C>
Service Cost ........................ $ 33 $ 32 $ 14 $ 33
Interest Cost ....................... 367 352 81 243
Amortization of Transition Obligation -- -- -- 147
---- ---- ---- ----
$400 $384 $ 95 $423
==== ==== ==== ====
</TABLE>
The assumed health care cost trend rate used in measuring the accumulated
postretirement benefit obligation at December 31, 1995 was 11% for 1995,
decreasing gradually to 5.5% by the year 2005. A one-percentage point increase
in the assumed health care cost trend rate would increase the accumulated
postretirement benefit obligation as of December 31, 1995 by $72 thousand and
the sum of service costs and interest costs on an annual basis by $6 thousand.
15. STOCKHOLDERS' EQUITY:
COMMON STOCK
Each share of Common Stock is entitled to one vote per share. As of
December 31, 1995 there were 20,000,000 shares of Common Stock authorized and
7,409,282 shares outstanding. Payment of dividends on the common stock are
prohibited under the current terms of the Company's bank credit facility.
PREFERRED STOCK
Each share of Series B Preferred Stock is entitled to one vote per share.
As of December 31, 1995 there were 20,805,060 shares of Series B Preferred Stock
authorized and outstanding. The Series B Preferred Stock is entitled to a
preference on liquidation equal to $1 per share plus accrued and unpaid
dividends at the rate of $.06 per annum per share.
Twenty percent of the shares of Series B Preferred Stock amounting to
approximately $4.2 million are scheduled to be redeemed by the Company from
funds legally available therefore, on March 15th of each year commencing in 1995
and ending in 1999. Such shares may also be redeemed at any time at the
Company's option.
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, 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. Dividends in arrears as of December 31, 1995 and 1994
were $1,374,000 and $92,000 respectively. Because of its holdings of both Common
and Preferred stock, Noel has approximately 76.3% of the vote with respect to
the Company's capital stock.
20
<PAGE>
<PAGE>
16. EXCHANGE OF PREFERRED STOCK:
On November 14, 1994, the Board of Directors adopted the 1994 Voluntary
Recapitalization Plan (as subsequently amended, the "Plan") pursuant to which
the Company offered its preferred stockholders the right to exchange up to 50%
of their outstanding shares of Series B Preferred Stock (and all accrued but
unpaid dividends thereon through December 4, 1994) for shares of Common Stock of
the Company on the basis of one share of common stock for each ten dollars face
amount of Series B Preferred Stock. The Company also allowed the preferred
stockholders to exchange the accrued but unpaid dividends on their unexchanged
shares of Series B Preferred Stock and their shares of Series A Preferred Stock
for shares of Common Stock of the Company on the same basis.
Pursuant to the Plan, the preferred stockholders exchanged an aggregate sum
of 19,694,940 shares of Series B Preferred Stock (representing approximately 49%
of the then issued and outstanding shares of Series B Preferred Stock) and all
of the accrued but unpaid dividends on the Series A and Series B Preferred Stock
through December 4, 1994, for 2,303,032 shares of Common Stock. The difference
between the carrying value of preferred stock and accrued dividends exchanged,
$23.0 million, and the fair value of the common stock issued, $18.9 million, has
been recorded as a gain on redemption of preferred stock which is accounted for
as a negative preferred stock dividend in the amount of $4.1 million.
In addition, Noel, formerly the holder of all of the issued and outstanding
shares of Series A Preferred Stock of the Company, exercised its right under the
Company's charter to convert all of its Series A Preferred Stock into shares of
Series B Preferred Stock on the basis of 100,000 Series B preferred shares for
each share of Series A Preferred Stock surrendered for conversion. After giving
effect to the Plan and the Series A Conversion, there remain 20,805,060 shares
of Series B Preferred Stock issued and outstanding.
On December 13, 1994, the Company amended its Restated Certificate of
Incorporation to increase the number of authorized shares of Common Stock from
13,542,404 shares to 20,000,000 shares and to grant to all holders of capital
stock, irrespective of class or series, one vote per share on all matters on
which stockholders are entitled to vote. Formerly, only the holders of preferred
stock were entitled to vote.
17. UNSTAPLING OF COMMON STOCK:
On February 28, 1994, Noel distributed 3,542,404 shares of the Company's
Series A Common Stock to Noel shareholders at a ratio of 0.175434 shares of
Series A Common Stock for each share of common stock of Noel. During the period
from February 28, 1994 to December 14, 1994, the shares of Series A Common Stock
of the Company traded stapled to the shares of common stock of Noel, i.e., no
separate stock certificates representing shares of Series A Common Stock were
issued and the certificates representing shares of Noel's common stock were
deemed to evidence ownership of the Series A Common Stock of the Company. The
Company also sold shares of Series B Common Stock during that period of time to
certain management employees and their affiliates, which shares are represented
by separate stock certificates.
On December 15, 1994, shares of Series A Common Stock of the Company ceased
to be stapled to the shares of Noel (the "Unstapling Date"). On the Unstapling
Date, all authorized shares of Series A and Series B Common Stock of the Company
were automatically reclassified as shares of Common Stock without series to
create a single class of Common Stock. The Company has delivered stock
certificates representing shares of Common Stock of the Company, and cash in
lieu of fractional shares thereof, to the
21
<PAGE>
<PAGE>
holders of record of its Series A Common Stock as of December 5, 1994. The
certificates representing shares of Series B Common Stock are deemed to
represent the same number of shares of Common Stock of the Company. Holders of
Series B Common Stock have the right, but are not required, to exchange their
certificates for new certificates representing shares of Common Stock of the
Company.
The Company's Common Stock commenced trading independently on the
Unstapling Date on the NASDAQ Small-Cap Market and on February 15, 1995,
delisted from the NASDAQ and began trading on the New York Stock Exchange under
the symbol BHY.
18. ACQUISITION RELATED RESTRUCTURING CHARGE:
The accompanying Predecessor consolidated financial statements for the nine
months ended September 30, 1993, include a restructuring charge of $18.5
million. This restructuring was directly related to the acquisition. The
principal components of the charge were (dollars in thousands):
<TABLE>
<S> <C>
Severance $ 7,283
Write down of real estate investments 7,329
Acquisition related fees and expenses 1,841
Other write downs of assets to be disposed 1,382
Other 713
-------
$18,548
=======
</TABLE>
The write down of real estate investments represents the difference between
their estimated short term cash liquidation value and their estimated long-term
realizable value. The charges reflect new management's intention to dispose of
these investments.
The accompanying financial statements for the nine months ended September
30, 1993 also include a $4.6 million provision for environmental liabilities
which was included in selling, general and administrative expenses.
19. INCOME TAXES:
Effective January 1, 1993, the Predecessor adopted Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes". The cumulative
effect of adopting the new standard was to increase deferred income tax
liabilities by $200 thousand as of January 1, 1993, which amount is reflected in
the tax provision for the nine months ended September 30, 1993.
The income (loss) before income taxes are for the periods 1995, 1994 and
1993 are substantially all domestic in origin.
22
<PAGE>
<PAGE>
The components of the income tax provision or benefit are (dollars in
thousands):
<TABLE>
<CAPTION>
CONTINUING OPERATIONS COMPANY PREDECESSOR
- --------------------- ---------------------------------- -------------
YEARS ENDED THREE MONTHS NINE MONTHS
DECEMBER 31, DECEMBER 31, SEPTEMBER 30,
1995 1994 1993 1993
-------------------- ------- -------
<S> <C> <C> <C> <C>
Cumulative effect of adopting SFAS No. 109 $ -- $ -- $ -- $ 200
Current provision (benefit) 360 1,288 (165) (1,168)
Deferred provision (benefit) (674) 825 770 (6,949)
------- ------- ------- -------
$ (314) $ 2,113 $ 605 $(7,917)
======= ======= ======= =======
</TABLE>
<TABLE>
<CAPTION>
DISCONTINUED OPERATIONS COMPANY PREDECESSOR
- ----------------------- ----------------------------------- -------------
YEARS ENDED THREE MONTHS NINE MONTHS
DECEMBER 31, DECEMBER 31, SEPTEMBER 30,
1995 1994 1993 1993
-------------------- ------- -------
<S> <C> <C> <C> <C>
Current provision $ 2 $ 260 $ 228 $ 307
Deferred provision (benefit) (6,642) 836 201 424
------- ------- ------- -------
$(6,640) $ 1,096 $ 429 $ 731
======= ======= ======= =======
</TABLE>
The Company's tax provision or benefit differed from that which would have
been provided at a 34% rate as follows (dollars in thousands):
<TABLE>
<CAPTION>
CONTINUING OPERATIONS COMPANY PREDECESSOR
- --------------------- ---------------------------------- -------------
YEARS ENDED THREE MONTHS NINE MONTHS
DECEMBER 31, DECEMBER 31, SEPTEMBER 30,
1995 1994 1993 1993
-------------------- ------- -------
<S> <C> <C> <C> <C>
Federal provision at 34% $(7,435) $ 1,416 $ 503 $(9,196)
State and local provision, net 242 317 (16) 386
Non-deductible restructuring charges -- -- -- 668
Cumulative effect of SFAS No. 109 -- -- -- 200
Amortization/write-off of goodwill 6,847 333 84 --
Other, net 32 47 34 25
------- ------- ------- -------
$ (314) $ 2,113 $ 605 $(7,917)
======= ======= ======= =======
</TABLE>
<TABLE>
<CAPTION>
DISCONTINUED OPERATIONS COMPANY PREDECESSOR
- ----------------------- ---------------------------------- -------------
YEARS ENDED THREE MONTHS NINE MONTHS
DECEMBER 31, DECEMBER 31, SEPTEMBER 30,
1995 1994 1993 1993
-------------------- ------- -------
<S> <C> <C> <C> <C>
Federal provision at 34% $(8,378) $ 873 $ 401 $ 482
Foreign loss (income) 30 9 (47) 151
State and local provision, net (755) 147 57 98
Amortization of goodwill 2,463 67 18 --
------- ------- ------- -------
$(6,640) $ 1,096 $ 429 $ 731
======= ======= ======= =======
</TABLE>
The income tax benefit applicable to discontinued operations as of December
31, 1995 (in thousand of dollars) consisted of $6,603 from loss on disposal and
$37 from loss from operations.
At December 31, 1995 and 1994, the components of the net deferred tax asset
are (dollars in thousands):
23
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Loss on discontinued operations $ 6,658 $ --
Book value of fixed assets over tax basis (6,893) (8,966)
Pension liability 2,533 2,659
Other post-retirement benefit liability 1,839 1,787
Environmental liabilities 2,192 2,164
Operating loss carryforwards 1,271 789
Estimated value of assets held for sales over tax basis -- 112
Other, net 2,228 4,104
------- -------
$ 9,828 $ 2,649
======= =======
</TABLE>
The Company was a member of the Noel Group, Inc.'s consolidated tax group
for the period of October 30, 1993 through June 30, 1994. For the nine months
ended September 30, 1993 and for all periods subsequent to June 30, 1994, the
Company filed its own consolidated tax return.
Net operating losses (NOL) of $2.6 million and $500 thousand were generated
for the periods of July 1, 1994 through December 31, 1994 and for the calendar
year 1995, respectively. The $2.6 million NOL is available to offset future
taxable income while the $500 thousand can offset both prior and future taxable
income.
The Federal income tax receivable of $787 thousand consists of $112
thousand which represents a carryback of losses and $675 thousand representing
payments to the Internal Revenue Service for future liabilities.
Based on the Company's business plan for the future, management is of the
opinion that it is more likely than not that the deferred tax asset at December
31, 1995 will be realized.
20. EARNINGS PER COMMON SHARE:
Earnings per common share for the Company have been presented as earnings
from continuing operations, earnings from discontinued operations, and earnings
resulting from the exchange of Preferred Stock (See Note 16). Earnings per share
from continuing operations have been calculated as net income from continuing
operations after preferred dividend requirements divided by weighted average
common shares outstanding during the period. Earnings per common share from
discontinued operations have been calculated as income (loss) from discontinued
operations plus net loss on disposition of discontinued operations divided by
the weighted average number of common shares outstanding. Earnings per common
share from the gain on preferred redemption have been calculated as the gain on
preferred redemption divided by the weighted average number of common shares
outstanding during the period.
21. INDUSTRY SEGMENT DATA:
The Company operates in two principal segments, Industrial Products and
Consumer Products. Industrial involves the production and marketing of
industrial threads and yarns used in industrial applications. Consumer is
involved in the distribution of buttons, notions, braids and yarns to major
retail chains and outlets and specialty threads marketed primarily to the
wholesale bedding and embroidery market and dental floss. Consumer thread
operations, other than dental floss, are conducted principally through
operations acquired in 1994 and 1995 (Danfield and Culver, respectively). The
1994 and 1993 segment data has been restated to conform to the 1995 segment
classifications.
24
<PAGE>
<PAGE>
Button sales are made predominantly to retailers, general merchandisers and
specialty hobby and craft stores. Thread sales are made to manufacturers and
jobbers. Almost all of the Company's Button and Thread customers are located in
the United States. The Company grants credit and performs periodic credit
evaluations of its customers' financial conditions. (Dollars in thousands).
<TABLE>
<CAPTION>
COMPANY PREDECESSOR
-------------------------------------- -------------
YEARS ENDED THREE MONTHS NINE MONTHS
DECEMBER 31, DECEMBER 31, SEPTEMBER 30,
1995 1994 1993 1993
---------------------- -------- --------
<S> <C> <C> <C> <C>
SALES:
Industrial $ 45,081 $ 46,600 $ 11,893 $ 35,136
Consumer Products 43,573 30,167 6,085 22,630
-------- -------- -------- --------
Net Sales $ 88,654 $ 76,767 $ 17,978 $ 57,766
======== ======== ======== ========
DEPRECIATION AND AMORTIZATION:
Industrial $ 2,302 $ 1,837 $ 890 $ 765
Consumer Products 849 290 40 177
Corporate 127 124 6 353
-------- -------- -------- --------
Total depreciation and amortization $ 3,278 $ 2,251 $ 936 $ 1,295
======== ======== ======== ========
OPERATING PROFIT:
Industrial $(24,011) $ 5,296 $ 1,619 $ 5,234
Consumer Products 9,126 7,122 1,937 779
General corporate expenses, net (2,982) (5,033) (1,148) (30,348)
Interest expense (4,000) (3,245) (864) (2,136)
-------- -------- -------- --------
Income before Federal income taxes $(21,867) $ 4,140 $ 1,544 $(26,471)
======== ======== ======== ========
CAPITAL EXPENDITURES:
Industrial $ 3,254 $ 2,364 $ 629 $ 538
Consumer Products 527 465 135 49
Corporate 39 788 -- 257
-------- -------- -------- --------
$ 3,820 $ 3,617 $ 764 $ 844
======== ======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1995 1994
------------ ------------
<S> <C> <C>
IDENTIFIABLE ASSETS:
Industrial ............ $ 45,358 $ 61,337
Consumer Products ..... 36,059 30,994
Corporate ............. 12,707 7,072
Discontinued Operations -- 29,049
-------- --------
Total Assets .......... $ 94,124 $128,452
======== ========
</TABLE>
22. COMMITMENT AND CONTINGENCIES:
Although there can be no assurances, based on information currently
available, the Company does not believe that the outcome of all known or
threatened litigation and other claims will have a material adverse effect on
the Company's financial condition, liquidity or operating results.
25
<PAGE>
<PAGE>
23. RELATED PARTY TRANSACTION:
A director of the Company who is also a managing director of the Company's
majority stockholder was engaged by the Company as a financial consultant in
February 1996 at an annual rate of $100,000. The agreement also provided for
200,000 stock options exercisable over a twelve-month period at fair market
value as of the date of grant.
24. QUARTERLY RESULTS OF OPERATIONS: (UNAUDITED)
<TABLE>
<CAPTION>
QUARTER ENDED DECEMBER 31, SEPTEMBER 30, JUNE 30, MARCH 31,
1995 1995 1995 1995
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Net sales $ 22,885 $ 20,612 $ 21,844 $ 23,313
Cost of sales 18,418 15,212 15,970 16,305
-------- -------- -------- --------
Gross margin $ 4,467 $ 5,400 $ 5,874 $ 7,008
======== ======== ======== ========
Income (loss) from continuing operations $(23,749) $ 151 $ 166 $ 597
Income (loss) from discontinued operations (18,377) (49) 128 298
-------- -------- -------- --------
Income (loss) applicable to common stock $(42,126) $ 102 $ 294 $ 895
======== ======== ======== ========
Income (loss) per common share:
Continuing operations $ (3.21) $ .02 $ .02 $ .08
Discontinued operations (2.48) (.01) .02 .04
-------- -------- -------- --------
Total $ (5.69) $ .01 $ .04 $ .12
======== ======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
QUARTER ENDED DECEMBER 31, SEPTEMBER 30, JUNE 30, MARCH 31,
1994 1994 1994 1994
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Net sales $ 21,287 $ 20,356 $ 17,622 $ 17,502
Cost of sales 16,704 14,337 11,337 11,665
-------- -------- -------- --------
Gross margin $ 4,583 $ 6,019 $ 6,285 $ 5,837
======== ======== ======== ========
Income (loss) from continuing operations $ (581) $ (17) $ 297 $ (14)
Income (loss) from discontinued operations 730 315 288 164
Gain on preferred stock redemption 4,099 -- -- --
-------- -------- -------- --------
Income applicable to common stock $ 4,248 $ 298 $ 585 $ 150
======== ======== ======== ========
Income (loss) per common share:
Operating income $ (.10) $ -- $ .06 $ --
Gain on preferred stock redemption .71 -- -- --
-------- -------- --------- --------
.61 -- .06 --
Discontinued operations .12 .06 .05 .03
-------- -------- -------- --------
Total $ .73 $ .06 $ .11 $ .03
======== ======== ======== ========
</TABLE>
SEASONALITY
-----------
Although there is no pronounced seasonality in demand for
the Company's products, typically the second quarter is the
Company's best in terms of profitability. In the third quarter,
plants are closed for the first week of July for normal
maintenance. All but one plant generally close for a week between
Christmas and the New Year during the fourth quarter. Results can
also be adversely affected by regional weather, as they were in
1994 at Thread's Northeast facilities.
26
<PAGE>
<PAGE>
1995
----
Results for the fourth quarter of 1995 were negatively
impacted by the $6.4 million impairment charge, the $17.4 million
goodwill write off, the $1.2 million of other related charges and
the $18.4 million loss from discontinued operations. In addition,
during each quarter of 1995, the Thread division experienced
higher than historical levels of manufacturing inefficiencies due
to higher raw material costs, the effects of the consolidation
and relocation of facilities that occurred in 1994 and
implementation issues related to the new management information
system. Results of operations for 1995 also include the effects
of the acquisition of Culver Textile Company, Inc. as of August
31, 1995.
1994
----
Results for each of the quarters in 1994 were affected by
unusual or nonrecurring events. Poor winter weather reduced
production and shipments at the Company's Connecticut facilities
which reduced first quarter results.
The button division had completed the closing of its
Carlstadt and Kansas City facilities by the end of the first
quarter, thereby reducing costs in the second, third and fourth
quarters.
Danfield was acquired on June 30, 1994 and contributed sales
of $4.5 million in each of THE third and fourth quarters.
Danfield contributed $.2 million and $.8 million to income before
interest and taxes in the third and fourth quarters,
respectively.
A number of changes in the Thread division adversely
affected results in the third AND fourth quarters. The division
experienced delays in production and ability to ship to customers
due to implementation of a new management information system;
transfer of production from its Putnam, Connecticut facility (now
closed) to other Company facilities; closing of the Atlanta
warehouse; and the relocation of the customer service department
from Atlanta to Hendersonville. The division experienced higher
raw material and freight costs as well as greater manufacturing
inefficiencies during this period. These expenses were
particularly pronounced in the fourth quarter.
Earnings per share for the year 1994 does not equal the sum
of the 1994 quarterly earnings per share because of the preferred
stock conversion on December 15, 1994 and the resultant effect on
fourth quarter weighted average common shares outstanding.
25. OTHER:
The Company has approximately 1,192 employees, of whom approximately 31 are
sales and marketing personnel and the balance are employed in its mills and
offices. Approximately 142 employees are covered by three collective bargaining
agreements with labor unions two of which expire within the next twelve months.
The Company believes relations with its employees are satisfactory.
27
<PAGE>
<PAGE>
26. PREDECESSOR CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY:
<TABLE>
<CAPTION>
COMMON STOCK MINIMUM PARENT TREASURY STOCK
ISSUED CAPITAL RETAINED PENSION COMPANY --------------
SHARES AMOUNT SURPLUS EARNINGS IABILITY DEBT SHARES COST
------ ------ ------- -------- ------- ---- ----- ----
<S> <C> <C> <C> <C> <C> <C>
Balances as of December 31, 1992 3,605,113 $ 3,605 $ 14,470 $ 57,153 -- -- 1,683,531 $ 28,040
Net loss for the period
ended September 30, 1993 (17,424)
Acquisition of Treasury Stock (52)
Issuance of stock in connection
with employer compensation plan 3 1,629 96
Issuance of stock in
connection with stock option plan (11) (52,550) (868)
Recording of parent company debt $(6,461)
Recording of minimum pension
liability as required by FASB #87 $(3,953)
Cash dividend $.32 per share (928)
--------- --------- --------- --------- ------- ------- --------- --------
Balances September 30, 1993 3,605,113 $ 3,605 $ 14,462 $ 38,801 $(3,953) $(6,461) 1,632,610 $ 27,216
=== ==== ========= ========= ========= ========= ======= ======= ========= ========
</TABLE>
28
<PAGE>
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
BELDING HEMINWAY COMPANY, INC.
By: /s/ Edward F. Cooke
___________________________________
Edward F. Cooke, Vice President
and Chief Accounting Officer
Date: February 25, 1997
29