================================================================================
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-----------------------------------
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1999 COMMISSION FILE NO. 1-3462
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from to
-----------------------------------
CARLYLE INDUSTRIES, 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.)
One Palmer Terrace
Carlstadt, NJ 07072
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code (201) 935-6220
Former name, former address and former fiscal year, if changed since last
report:
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 October 28, 1999, 13,934,858 Shares of Common Stock Were Outstanding.
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Page 1 of 14
<PAGE>
CARLYLE INDUSTRIES, INC.
ONE PALMER TERRACE
CARLSTADT, NJ 07072
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE NO.
--------
<S> <C> <C>
PART I -- FINANCIAL INFORMATION
ITEM 1. Financial Statements
Consolidated Balance Sheets
as of September 30, 1999 and December 31, 1998.......................3
Consolidated Statements of Operations
for the Three and Nine Months Ended
September 30, 1999 and 1998.......................................4
Consolidated Statements of Cash Flows
for the Three and Nine Months Ended
September 30, 1999 and 1998.......................................5
Notes to Unaudited Consolidated Financial
Statements - September 30, 1999...................................6
ITEM 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations .......................9
PART II -- OTHER INFORMATION
ITEM 1. Legal Proceedings.......................................Not Applicable
ITEM 2. Changes in Securities...................................Not Applicable
ITEM 3. Defaults upon Senior Securities.....................................13
ITEM 4. Submission of Matters to a Vote of Security Holders.................13
ITEM 5. Other Information.......................................Not Applicable
ITEM 6. Exhibits and Reports on Form 8-K....................................13
Signatures..........................................................14
</TABLE>
Page 2 of 14
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CARLYLE INDUSTRIES, INC.
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
ASSETS SEPTEMBER 30, 1999
Current Assets: (UNAUDITED) DECEMBER 31, 1998
------------------ -----------------
<S> <C> <C>
Cash and cash equivalents $ 170 $ 55
Accounts receivable trade, net 5,610 4,701
Inventories, net 3,615 4,592
Current deferred tax asset 2,287 2,646
Other current assets 519 219
------------ ------------
Total current assets 12,201 12,213
------------ ------------
Property, plant and equipment, at cost 2,878 2,751
Less: Accumulated depreciation and amortization (1,059) (922)
------------ ------------
Net property, plant and equipment 1,819 1,829
------------ ------------
Goodwill, net 3,124 2,955
Other assets 678 827
------------ ------------
Total Assets $ 17,822 $ 17,824
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 1,512 $ 1,296
Current maturities of long-term debt 36 56
Federal income taxes payable -- 390
Other current liabilities 1,324 1,283
------------ ------------
2,872 3,025
------------ ------------
Long-term debt 8,875 10,421
Other liabilities 7,754 8,034
------------ ------------
Total Liabilities 19,501 21,480
------------ ------------
Redeemable Preferred Stock, par value $0.01 per share
11,187,451 shares authorized:
Shares issued and outstanding
September 30, 1999: 4,555,007
December 31, 1998: 10,687,456 4,555 10,687
Accumulated dividends on preferred stock 41 2,942
------------ ------------
4,596 13,629
Common Stock, par value $0.01 per share 20,000,000
shares authorized:
Shares issued and outstanding
September 30, 1999: 13,934,858
December 31, 1998: 7,382,782 139 74
Paid in Capital 26,345 19,858
Retained Earnings (32,759) (37,217)
------------ ------------
Total Common Stockholders' Equity (6,275) (17,285)
------------ ------------
Total Liabilities and Stockholders' Equity $ 17,822 $ 17,824
============ ============
</TABLE>
SEE NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS.
Page 3 of 14
<PAGE>
CARLYLE INDUSTRIES, INC.
AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS NINE MONTHS
----------------- -----------------
1999 1998 1999 1998
------- ------- ------- -------
<S> <C> <C> <C> <C>
Net sales $ 8,065 $ 8,111 $21,590 $17,003
Cost of sales 4,849 4,890 11,735 9,272
------- ------- ------- -------
3,216 3,221 9,855 7,731
Selling, general & administrative expenses 2,153 1,648 6,124 3,789
------- ------- ------- -------
Income before interest and income taxes 1,063 1,573 3,731 3,942
Interest expense 201 231 607 93
------- ------- ------- -------
Income before provision for income taxes 862 1,342 3,124 3,849
Provision for income taxes 320 492 1,147 1,412
------- ------- ------- -------
Income before preferred dividends 542 850 1,977 2,437
Less dividends on preferred stock 127 201 530 933
------- ------- ------- -------
Income applicable to common stockholders
before gain on preferred redemption 415 649 1,447 1,504
Gain on preferred stock redemption 3,011 -- 3,011 --
------- ------- ------- -------
Net income applicable to common stockholders $ 3,426 $ 649 $ 4,458 $ 1,504
======= ======= ======= =======
Basic and diluted earnings per common share:
Operations $ 0.04 $ 0.09 $ 0.17 $ 0.20
Gain on preferred stock redemption 0.28 -- 0.35 --
------- ------- ------- -------
Total $ 0.32 $ 0.09 $ 0.52 $ 0.20
======= ======= ======= =======
Weighted average common shares
outstanding (in thousands) 10,801 7,383 8,535 7,383
======= ======= ======= =======
</TABLE>
SEE NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS.
Page 4 of 14
<PAGE>
<TABLE>
<CAPTION>
CARLYLE INDUSTRIES, INC.
AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
NINE MONTHS ENDED SEPTEMBER 30,
1999 1998
-------- --------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Income from continuing operations $ 1,977 $ 2,437
Reconciliation of net income from continuing
operations to net cash provided (used) by operations:
Depreciation and amortization 320 444
Deferred tax provision 359 472
Changes in operating assets and liabilities:
Accounts receivable, trade (909) (1,045)
Inventories 977 837
Other assets (635) (859)
Income taxes payable (266) (6,224)
Accounts payable 216 (287)
Other current liabilities 88 (1,705)
Other liabilities (100) (648)
Cash flow from discontinued operations (163) --
-------- --------
1,864 (6,578)
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Investment in net assets of acquired business -- (3,593)
Capital expenditures (127) (36)
Investment in other assets (48) --
-------- --------
(175) (3,629)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from revolving credit facility 2,825 17,519
Repayment of long term debt and capital lease obligations (4,399) (6,906)
Preferred stock payment (9,563) (12,500)
Gain on preferred stock redemption 3,011 --
Common stock issuance 6,552 --
-------- --------
(1,574) (1,887)
-------- --------
Increase (decrease) in cash and cash equivalents 115 (12,094)
Cash and cash equivalents beginning of period 55 12,475
-------- --------
Cash and cash equivalents end of period $ 170 $ 381
======== ========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest $ 572 $ 100
======== ========
Income taxes $ 1,290 $ 7,910
======== ========
</TABLE>
SEE NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
Page 5 of 14
<PAGE>
CARLYLE INDUSTRIES, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1999
NOTE 1: BASIS OF PRESENTATION
Carlyle Industries, Inc. ("The Company") and its subsidiaries distribute a line
of buttons, trimmings, craft and gift products. 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, 1999 are not necessarily indicative of the
results that may be expected for the year ending December 31, 1999. 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, 1998.
NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
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 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 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 14
<PAGE>
NOTE 4: INVENTORIES:
The components of inventories, net of reserves, are as follows (dollars in
thousands):
SEPTEMBER 30, 1999 DECEMBER 31, 1998
------------------ -----------------
Raw materials $ 2,018 $ 1,790
Work in progress 10 10
Finished goods 1,587 2,792
-------- --------
$ 3,615 $ 4,592
======== ========
NOTE 5: RECAPITALIZATION AND REDUCTION OF OUTSTANDING PREFERRED STOCK
On July 30th the Company announced that its Board had adopted a voluntary Plan
of Recapitalization (the "Plan") to provide for the issuance of shares of common
stock in exchange for accrued and unpaid preferred stock dividends and the
exchange of additional shares of common stock for preferred stock. Pursuant to
the Plan, the Company issued 2,744,372 shares of common stock in exchange for
$3,430,467 accrued dividends through August 13, 1999 on its Series B preferred
stock. The dividend exchange valued the common stock at $1.25 per share. The
offer was made to holders of record as of July 16, 1999. At that date there were
twelve holders of preferred stock holding a total of 10,687,456 shares.
Pursuant to the Plan, the Company also offered to the preferred stockholders an
exchange of shares of preferred stock for shares of the Company's common stock
at the rate of sixty two hundredths (.620911) of a share of common stock for
each share of preferred stock. In connection with this exchange offer 6,132,449
shares of preferred stock were exchanged for 3,807,704 shares of common stock.
NOTE 6: ARREARS ON PREFERRED STOCK
Under the terms of the Company's charter, dividends are payable upon the
Preferred Stock when, as and if declared by the Board of Directors out of
legally available funds. In addition, the Preferred Stock by its terms was
required to be redeemed by the Company in annual installments beginning March
15, 1995 through March 15, 1999, subject among other things to the approval of
the Company's senior lenders, if any and to the extent of legally available
funds as determined by the Board of Directors. Prior to March 27, 1997, the
Company did not make any payments on account of the Preferred Stock (either
dividend or redemption) as the Company's lenders declined to approve such
payments. However, as of that date, the Company discharged its credit facility.
Consequently, the Company was in arrears of its obligations to redeem the
Preferred Stock to the extent of its legally available funds.
On June 23, 1998 the Company paid $12.5 million to holders of its Series B
Preferred stock of record as of June 22, 1998. $10.1 million of this amount
represented the original redemption amount and $2.4 million represented the
increase in the required redemption payment resulting from accumulated and
unpaid dividends.
As described in Note 5, on August 13, 1999, the Company paid $3,430,467 of
accrued preferred dividends and made a Preferred Stock redemption payment of
$6,132,449, all by issuance of common stock
As of September 30, 1999, the Preferred Stock payment arrearages aggregated $4.6
million including accrued but unpaid preferred dividends of $41 thousand.
Accrued but unpaid dividends are added to the redemption value of the Preferred
Page 7 of 14
<PAGE>
Stock and the total continues to accrue dividends at a compound rate of 6% per
annum.
The Company intends to fulfill its obligation to the holders of the Preferred
Stock as required by the Company's charter to the extent that the Company has
cash resources in excess of those required to operate its business. As provided
for under the Company's credit facility, payments on preferred stock are
permitted up to the net amount received in connection with the Thread escrow
account distribution. As a result, the Company expects to stay current with
respect to preferred stock dividends. However, the Company's redemption payments
on account of the Preferred Stock in the future will depend on the Company's
future cash flow, the timing of the settlement of the liabilities recorded in
the consolidated financial statements of the Company, the ability of the Company
to obtain additional financing and compliance with the Company's Credit Facility
which presently permits only specified payment amounts including 25% of "excess
cash flow", as defined in the agreement. In addition, the Company's decision to
make any such payments will depend on the successful resolution of any issues
which may arise with the PBGC relating to the Company's unfunded liability, if
any, to its defined benefit plan.
NOTE 7: SUBSEQUENT EVENT
On October 22, 1999, the Company reached final agreement with Hicking Pentecost
PLC regarding all outstanding issues related to the sale of the Thread division
in 1997. As a result, $2.4 million of escrow proceeds were received from the
escrow agent; this receipt will be reported as income from discontinued
operations totaling $1.5 million after tax during the fourth quarter of 1999.
Page 8 of 14
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 2. MANAGEMENT DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULT OF OPERATIONS
RESULTS OF OPERATIONS
THIRD QUARTER
Sales during the third quarter of 1999 and 1998 totaled $8.1 million.
Incremental sales from acquired businesses accounted for $.9 million of total
sales in the third quarter of 1999. Offsetting those incremental sales was a
decrease due to the timing of seasonal distributions to a major customer.
Gross margin in the third quarter of 1999 and 1998 totaled $3.2 million. The
gross margin during both periods was 39.5% of sales.
Selling, general and administrative expenses totaled $ 2.2 million in the third
quarter of 1999 as compared to $1.6 million in the third quarter of 1998.
Selling, general and administrative expenses were impacted by several activities
during the quarter. First, approximately $227 thousand was incurred related to
the start-up of two new product lines. In addition, various legal and consulting
fees totaling $158 thousand were incurred related to the preferred stock
transaction as described in Note 5 and the Thread escrow issue as described in
Note 7.
Interest expense during the third quarter of 1999 totaled $201 thousand as
compared to interest expense of $231 thousand during the third quarter of 1998.
The decrease was due to decreased borrowings.
The provision for income taxes totaled $320 thousand as compared to $492
thousand during the same period last year. The combined effective tax rate
totaled 37.1% in 1999 as compared to 36.7% in 1998. The gain on preferred stock
redemption was not a taxable item. The combined effective income tax rates were
higher than combined statutory rates because of nondeductible goodwill.
Preferred dividends accrued totaled $127 thousand as compared to $201 thousand
during the same period in 1998. Preferred dividends are accrued and compound at
a rate of 6% per annum. The reduction in preferred dividends accrued as compared
to 1998 was due to conversion of the Preferred Stock to Common Stock on August
13, 1999.
YEAR TO DATE
Sales during the nine months ended September 30, 1999 totaled $21.6 million as
compared to $17.0 million during the year to date period in 1998 for an increase
of $4.6 million. Incremental sales contributed by acquired businesses totaled
$5.8 million for the first nine months of 1999. The Company estimates that
approximately $.5 million of this amount represented the filling of backlog
orders related to the acquired Streamline business. Somewhat offsetting the
favorable incremental sales was the effect of timing of seasonal distributions
and initial placements with major customers.
Page 9 of 14
<PAGE>
Gross margin during the nine months ended September 30, 1999 totaled $9.9
million or 45.6% as compared to $7.7 million or 45.5% during the comparable
period in 1998. The increase in incremental gross margin in 1999 over 1998 was
mostly the result of gross margin from acquired businesses which totaled $2.7
million in 1999.
Selling, general and administrative expense during the nine months ended
September 30, 1999 totaled $6.1 million as compared to $3.8 million for the
first nine months of 1998. Incremental selling, general and administrative
expense incurred by acquired businesses totaled $1.4 million. In addition,
approximately $348 thousand was incurred in connection with new product lines,
$186 thousand of consolidation expense was recorded in connection with the
Streamline acquisition and $158 thousand in various legal and consulting
expenses were incurred in connection with the preferred stock recap as described
in Note 5 and the Thread escrow issue, as discussed in Note 6.
Net interest expense during the nine months ended September 30, 1999 totaled $
607 thousand as compared to $ 93 thousand for the first nine months of 1998. The
increase in interest expense in 1999 as compared to 1998 was the result of bank
debt outstanding beginning June 23, 1998 in connection with the Preferred Stock
payment and subsequent acquisitions.
The provision for income taxes for the nine months ended September 30, 1999
totaled $ 1.1 million as compared to $ 1.4 million for the same period last
year. The combined effective tax rate totaled 36.7% for the nine months ended
September 30, 1999 and 1998. The gain on preferred stock redemption was not a
taxable item. The combined effective income tax rates are higher than combined
statutory rates because of nondeductible goodwill.
Preferred dividends accrued during the first nine months of 1999 totaled $530
thousand as compared to $933 thousand during the first nine months of 1998. The
reduction from 1998 was due to the partial redemption of preferred stock.
LIQUIDITY AND CAPITAL RESOURCES
At September 30, 1999, the Company's principal sources of liquidity included
cash and cash equivalents of $170 thousand and trade accounts receivable of $5.6
million
Cash provided by operations during the nine months ended September 30, 1999
totaled $1.9 million.
Under the terms of the Company's charter, dividends are payable upon the
Preferred Stock when, as and if declared by the Board of Directors out of
legally available funds. In addition, the Preferred Stock by its terms was
required to be redeemed by the Company in annual installments beginning March
15, 1995 through March 15, 1999, subject among other things to the approval of
the Company's senior lenders, if any and to the extent of legally available
funds as determined by the Board of Directors. Prior to March 27, 1997, the
Company did not make any payments on account of the Preferred Stock (either
dividend or redemption) as the Company's lenders declined to approve such
payments. However, as of that date, the Company discharged its credit facility.
Consequently, the Company was in arrears of its obligations to redeem the
Preferred Stock to the extent of its legally available funds.
Page 10 of 14
<PAGE>
On June 23, 1998 the Company paid $12.5 million to holders of its Series B
Preferred stock of record as of June 22, 1998. $10.1 million of this amount
represented the original redemption amount and $2.4 million represented the
increase in the required redemption payment resulting from accumulated and
unpaid dividends.
On August 13, 1999, the Company paid $3,430,467 of accrued preferred dividends
and made a Preferred Stock redemption payment of $6,132,449 all by issuance of
stock.
As of September 30, 1999, the Preferred Stock payment arrearages aggregated $4.6
million including accrued but unpaid preferred dividends of $41 thousand.
Accrued but unpaid dividends are added to the redemption value of the Preferred
Stock and the total continues to accrue interest at a compound rate of 6% per
annum.
On July 30, 1999 the Company announced that its Board had adopted a voluntary
Plan of Recapitalization (the "Plan") to provide for the issuance of shares of
common stock in exchange for accrued and unpaid preferred stock dividends and
the exchange of additional shares of common stock for preferred stock. Pursuant
to the Plan the Board had authorized the issuance of 2,757,363 shares of common
stock in exchange for $3,446,704 accrued dividends through August 13, 1999, on
its Series B preferred stock. The dividend exchange offer valued the common
stock at $1.25 per share. The offer was made to holders of record as of July 16,
1999. At that date there were twelve holders of preferred stock holding a total
of 10,687,456 shares.
Pursuant to the Plan, the Company's Board also approved an offer to the
preferred stockholders to exchange their shares of preferred stock for shares of
the Company's common stock at the rate .620911 of a share of common stock for
each share of preferred stock. In connection with this exchange offer 6,132,449
shares of preferred stock were exchanged for 3,807,704 shares of common stock.
The Company intends to fulfill its obligation to the holders of the Preferred
Stock as required by the Company's charter to the extent that the Company has
cash resources in excess of those required to operate its business. As provided
for under the Company's credit facility, payments on preferred stock are
permitted up to the net amount received in connection with the Thread escrow
account resolution. As a result, the Company expects to stay current with
respect to granting preferred stock dividends. However, the Company's redemption
payments on account of the Preferred Stock in the future will depend on the
Company's future cash flow, the timing of the settlement of the liabilities
recorded in the consolidated financial statements of the Company, the ability of
Page 11 of 14
<PAGE>
the Company to obtain additional financing and compliance with the Company's new
Credit Facility which presently permits only specified payment amounts including
25% of "excess cash flow", as defined in the agreement. In addition, the
Company's decision to make any such payments will depend on the successful
resolution of any issues which may arise with the PBGC relating to the Company's
unfunded liability, if any, to its defined benefit plan.
In connection with the acquisition of Westwater Enterprises LLP, contingent
payments of up to $2 million may become payable upon the achievement of
specified earnings levels or in the event of a change of control of the Company,
as defined in the Westwater acquisition agreement (the "agreement"), which
definition provides, among other things, that a change in control will take
place if an entity other than Noel Group, Inc. obtains a greater than 50% voting
ownership of the Company. The transactions described above would not result in a
change in control as defined in the agreement. The contingent payment period
covers the three years ended December 31, 2000 at which time the contingent
payment period expires.
YEAR 2000 ISSUES
The Company has implemented a plan to address year 2000 issues. The Company's
plan includes the identification and testing of its information technology
components and imbedded technology. In connection with this plan a detailed list
of hardware, software and other micro-processing technology has been compiled.
The Company's plan includes an evaluation of each identified item as compliant
or not compliant and the testing of each component. Certain noncompliant systems
have been upgraded or replaced and others are scheduled to be replaced. In
addition, the Company's plan includes confirmation with its significant
customers and suppliers regarding their state of readiness with respect to year
2000 issues. The Company does not currently have complete information concerning
the year 2000 compliance status of all of its major customers and vendors. In
the event that any of the Company's significant customers or vendors do not
successfully and timely achieve year 2000 compliance, the Company's business or
operations could be adversely affected.
The Company's primary risks related to year 2000 issues are associated with the
failure of its management information systems, which include billing, production
scheduling, raw material ordering and financial reporting. In addition, the
Company may be at risk if any of its significant customers or vendors experience
risk of failures related to year 2000 issues.
Based on information currently available, management does not anticipate that
the Company will incur significant operating expenses or be required to invest
heavily in computer system improvements to be year 2000 compliant. The cost
associated with the Company's year 2000 compliance is estimated to be less than
$50,000. To the extent the Company's systems are not fully year 2000 compliant,
there can be no assurance that potential systems interruptions or the cost
necessary to update software would not have a material adverse effect on the
Company's business, financial condition, results of operations and business
prospects.
Page 12 of 14
<PAGE>
IMPACT OF INFLATION
The Company's results are affected by the impact of inflation on 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.
THIS QUARTERLY REPORT ON FORM 10-Q (THE "QUARTERLY REPORT") CONTAINS STATEMENTS
WHICH CONSTITUTE FORWARD-LOOKING STATEMENTS WITHIN THE MEANING OF SECTION 21E OF
THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED (THE "EXCHANGE ACT"). THOSE
STATEMENTS APPEAR IN A NUMBER OF PLACES IN THIS QUARTERLY REPORT AND INCLUDE
STATEMENTS REGARDING THE INTENT, BELIEF OR CURRENT EXPECTATIONS OF THE COMPANY,
ITS DIRECTORS OR ITS OFFICERS WITH RESPECT TO, AMONG OTHER THINGS: (I) THE
COMPANY'S FINANCING PLANS; (II) TRENDS AFFECTING THE COMPANY'S FINANCIAL
CONDITION OR RESULTS OF OPERATIONS; (III) THE COMPANY'S GROWTH STRATEGY AND
OPERATING STRATEGY; (IV) CUSTOMER CONCENTRATION AND THE INCREASING CONSOLIDATION
OF THE COMPANY'S CUSTOMER BASE (V) THE DECLARATION AND PAYMENT OF DIVIDENDS;
(VI) IMPACT OF YEAR 2000 ISSUES. SHAREHOLDERS ARE CAUTIONED THAT ANY SUCH
FORWARD-LOOKING STATEMENTS ARE NOT GUARANTEES OF FUTURE PERFORMANCE AND INVOLVE
RISK AND UNCERTAINTIES, AND THAT ACTUAL RESULTS MAY DIFFER MATERIALLY FROM THOSE
PROJECTED IN THE FORWARD-LOOKING STATEMENTS AS A RESULT OF VARIOUS FACTORS.
PART II - OTHER INFORMATION
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
(A) NONE
(B) REDEEMABLE SERIES B PREFERRED STOCK
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(A) EXHIBITS
EXHIBIT SEQUENTIALLY
NUMBER EXHIBIT NUMBERED PAGE
------ ------- -------------
(B) REPORTS ON FORM 8-K.
During the third quarter of 1999, the Company did not file
a Current Report on Form 8-K.
Page 13 of 14
<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.
CARLYLE INDUSTRIES, INC.
(Registrant)
/s/ ROBERT A. LEVINSON
- -------------------------------------------------------------------
Robert A. Levinson, Chairman, President and Chief Executive Officer
/s/ EDWARD F. COOKE
- -------------------------------------------------------------------
Edward F. Cooke, Vice President, Secretary and Chief Financial Officer
Date: November 9, 1999
Page 14 of 14
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000011027
<NAME> Carlyle Industries, Inc.
<MULTIPLIER> 1,000
<CURRENCY> USD
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JUL-01-1999
<PERIOD-END> SEP-30-1999
<EXCHANGE-RATE> 1
<CASH> 170
<SECURITIES> 0
<RECEIVABLES> 5,610
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<CURRENT-ASSETS> 12,201
<PP&E> 2,878
<DEPRECIATION> 1,059
<TOTAL-ASSETS> 17,822
<CURRENT-LIABILITIES> 2,872
<BONDS> 0
0
4,596
<COMMON> (6,275)
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 17,822
<SALES> 21,590
<TOTAL-REVENUES> 21,590
<CGS> 11,735
<TOTAL-COSTS> 11,735
<OTHER-EXPENSES> 6,124
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 607
<INCOME-PRETAX> 6,135
<INCOME-TAX> (1,147)
<INCOME-CONTINUING> 4,988
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,458
<EPS-BASIC> 0.17
<EPS-DILUTED> 0.17
</TABLE>
