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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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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 MARCH 31, 2000 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
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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 MAY 1, 2000, 13,934,858 SHARES OF COMMON STOCK WERE OUTSTANDING.
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Page 1 of 12
<PAGE>
CARLYLE INDUSTRIES, INC.
ONE PALMER TERRACE
CARLSTADT, NJ 07072
TABLE OF CONTENTS
PAGE NO.
PART I -- FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets
as of March 31, 2000 and December 31, 1999............................3
Consolidated Statements of Operations
for the Three Months Ended March 31, 2000 and 1999....................4
Consolidated Statements of Cash Flows
for the Three Months Ended March 31, 2000 and 1999....................5
Notes to Unaudited Consolidated Financial Statements -
March 31, 2000........................................................6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations.........................8
PART II -- OTHER INFORMATION
Item 1. Legal Proceedings........................................Not Applicable
Item 2. Changes in Securities....................................Not Applicable
Item 3. Defaults upon Senior Securities......................................11
Item 4. Submission of Matters to a Vote of Security Holders..................11
Item 5. Other Information........................................Not Applicable
Item 6. Exhibits and Reports on Form 8-K.....................................11
Signatures...........................................................12
Page 2 of 12
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CARLYLE INDUSTRIES, INC.
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
March 31, 2000
(Unaudited) December 31, 1999
-------------- -----------------
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $ 35 $ 433
Accounts receivable trade, net 4,499 4,301
Inventories, net 5,571 4,488
Current deferred tax asset 2,434 2,615
Other current assets 398 217
------------ ------------
Total current assets 12,937 12,054
Property, plant and equipment, at cost 3,813 3,714
Less: Accumulated depreciation and amortization (1,185) (1,116)
------------ ------------
Net property, plant and equipment 2,628 2,598
Goodwill, net 3,102 3,147
Other assets 697 713
------------ ------------
Total Assets $ 19,364 $ 18,512
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 1,439 $ 1,235
Current maturities of long-term debt 6 21
Federal income taxes payable 121 460
Other current liabilities 1,074 1,774
------------ ------------
2,640 3,490
Long-Term debt 8,800 7,200
Other Liabilities 7,393 7,506
------------ ------------
Total Liabilities 18,833 18,196
------------ ------------
Redeemable Preferred Stock, par value $0.01 per share
11,187,451 shares authorized;
Shares issued and outstanding
Series A - None
Series B - 4,555,007 at March 31, 2000
and December 31, 1999 4,555 4,555
Accumulated dividends on preferred stock 13 12
------------ ------------
4,568 4,567
------------ ------------
Common Stock, par value $0.01 per share
20,000,000 shares authorized;
Shares issued and outstanding at March 31, 2000
and December 31, 1999: 13,934,858 139 139
Paid in Capital 26,345 26,345
Retained Earnings (30,521) (30,735)
------------ ------------
Total Common Stockholders' Equity (4,037) (4,251)
------------ ------------
Total Liabilities and Stockholders' Equity $ 19,364 $ 18,512
============ ============
</TABLE>
See Notes to Unaudited Consolidated Financial Statements.
Page 3 of 12
<PAGE>
CARLYLE INDUSTRIES, INC.
AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
Three Months Ended March 31,
2000 1999
----------- -----------
Net Sales $ 6,248 $ 6,613
Cost of Sales 3,310 3,357
----------- -----------
2,938 3,256
Selling, general & administrative expenses 2,313 2,006
----------- -----------
Income before interest and income taxes 625 1,250
Interest expense 168 198
----------- -----------
Income before income taxes 457 1,052
Provision for income taxes 174 388
----------- -----------
283 664
Less dividends on preferred stock 69 197
----------- -----------
Net income applicable to common stock $ 214 $ 467
=========== ===========
Basic and diluted earnings per common share $ .02 $ .06
=========== ===========
Weighted average common shares
outstanding (in thousands) 13,935 7,383
=========== ===========
See Notes to Unaudited Consolidated Financial Statements.
Page 4 of 12
<PAGE>
CARLYLE INDUSTRIES, INC.
AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
Three Months Ended March 31,
2000 1999
----------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Income from continuing operations $ 283 $ 664
Reconciliation of net income from continuing
operations to net cash provided (used) by operations:
Depreciation and amortization 211 166
Deferred tax provision 181 407
Changes in operating assets and liabilities:
Accounts receivable, trade (198) 480
Inventories (991) 407
Other assets (260) 43
Accounts payable 205 (438)
Federal and state income taxes payable (339) (416)
Other current liabilities (700) (257)
Other liabilities (113) (138)
Cash flow from discontinued operations -- (151)
----------- -----------
(1,721) 767
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (191) (57)
Investment in other assets (2) --
----------- -----------
(193) (57)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from revolving credit facility 2,300 650
Repayment of long term debt and capital lease obligations (715) (1,318)
Dividends on preferred stock (69) --
----------- -----------
1,516 (668)
----------- -----------
Increase (decrease) in cash and cash equivalents (398) 42
Cash and cash equivalents beginning of period 433 55
----------- -----------
Cash and cash equivalents end of period $ 35 $ 97
=========== ===========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest $ 144 $ 237
=========== ===========
Income taxes $ 462 $ 391
=========== ===========
</TABLE>
See Notes to Unaudited Consolidated Financial Statements
Page 5 of 12
<PAGE>
CARLYLE INDUSTRIES, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2000
NOTE 1: BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Rule 10-01 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring accruals) considered necessary for fair presentation have
been included. Certain reclassifications have been made to prior year amounts in
order to present them on a basis consistent with the current year. Operating
results for the three-month period ended March 31, 2000 are not necessarily
indicative of the results that may be expected for the year ending December 31,
2000. 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, 1999.
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 12
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NOTE 4: INVENTORIES:
The components of inventories, net of reserves, are as follows (dollars in
thousands):
March 31, 2000 December 31, 1999
Raw materials $ 2,270 $ 2,503
Work in Progress 111 10
Finished goods 3,190 1,975
-------- --------
$ 5,571 $ 4,488
======== ========
NOTE 5: 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 fully 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.
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. In
addition, the availability of resources to make dividend payments to the holders
of Preferred Stock in the future will also depend on the Company's future cash
flow and the timing of the settlement of the liabilities recorded in the
financial statements of the Company.
The Company intends to fulfill its remaining 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.
The Company expects to stay current with respect to preferred stock dividends.
However, the Company's redemption payments, if any, 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.
Page 7 of 12
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 2. MANAGEMENT DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULT OF OPERATIONS
RESULTS OF OPERATIONS
Sales during the first quarter of 2000 totaled $6.2 million. Sales in the first
quarter of 1999 totaled $6.6 million for a decrease of $.4 million. The softness
in sales experienced during the fourth quarter of 1999 continued in the first
quarter of 2000. This softness was the result of, among other things, the
current fashion trend. Also, a change was made by one of our largest customers
in their re-order quantities in an effort to reduce store inventory levels. The
change in re-order quantities will have the temporary effect of lowering sales
volumes until the desired inventory levels are achieved. It is expected that
this negative effect will last through most of 2000.
Gross margin during the first quarter of 2000 totaled $2.9 million as compared
with $3.3 million in the first quarter of 1999. The gross margin decline was the
result of a change in mix as sales of new, lower margin product lines grew
during the quarter while higher margin lines contracted for the reasons noted
above. The gross margin percent during the first quarter of 2000 was 47.0% as
compared to 49.2% during the first quarter of 1999.
Selling, general and administrative expenses in the first quarter of 2000
totaled $2.3 million as compared to $2.0 million in the first quarter of 1999.
The increase in selling, general and administrative expenses was the result of
on-going costs associated with new product lines introduced during the second
half of 1999.
Income before interest and income taxes totaled $625 thousand during the first
quarter of 2000 as compared to $1.250 million during the comparable period last
year. The reduction was the result of a combination of lower sales volumes and
higher selling, general and administrative expenses as described above.
Net interest expense during the first quarter of 2000 totaled $168 thousand as
compared to net interest expense of $198 thousand during the first quarter of
1999. The decrease in interest expense in 2000 as compared to 1999 was the
result of a lower level of bank debt outstanding the first quarter of 2000 as
compared to the first quarter of 1999.
The provision for income taxes during the first quarter of 2000 totaled $174
thousand as compared to $388 thousand during the same period last year. The
combined effective income tax rate totaled 38% in the first quarter of 2000 and
36.9% in the first quarter of 1999. The combined effective income tax rates are
higher than combined statutory rates because of nondeductible goodwill.
Preferred dividends during the first quarter of 2000 totaled $69 thousand as
compared to $197 thousand during the same period in 1999. The reduction from
1999 was due to the partial redemption of preferred stock in August 1999.
First quarter results may not be indicative of future quarterly results due to
programs with major customers which may vary as to timing and amount from
quarter to quarter. In addition, consolidation within the
Page 8 of 12
<PAGE>
Company's customer base may put further pressure on the Company's revenue and
operating results in subsequent quarters.
LIQUIDITY AND CAPITAL RESOURCES
At March 31, 2000, the Company's principal sources of liquidity included cash
and cash equivalents of $35 thousand and trade accounts receivable of $4.5
million. In addition, the Company had $2.2 million available under its revolving
credit facility as of March 31, 2000. Cash used by operations during the quarter
ended March 31, 2000 totaled $1.7 million which included $1.1 million of cash
used to fund inventory requirements related to new product lines.
The Company's revolving credit facility contains certain financial covenants
with which the failure to comply may lead to an event of default. If, as the
Company expects, factors which negatively impacted sales during the first
quarter of 2000 continue through the balance of the year, with the result that
sales and income from operations continue to be negatively effected, it may be
necessary to renegotiate the financial covenants in order to avoid an event of
default. Although there can be no assurance that it will be successful, the
Company believes that it will be able to complete satisfactory arrangements with
the provider of the credit facility so as to avoid any event of default.
On June 30, 1998, the assets and business of Westwater Enterprises LP were
acquired by Westwater Industries, Inc. ("Westwater"), a newly formed
wholly-owned subsidiary of the Company. Contingent payments related to this
acquisition of up to $2 million may become payable upon the achievement of
specified cumulative earnings levels through December 31, 2000, or in the event
of an acquisition of more than 50% voting control of the Company during the
contingent payment period. Based on current earnings levels, the Company does
not anticipate making the contingent payment.
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 fully 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.
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. In
addition, the availability of resources to make dividend payments to the holders
of Preferred Stock in the future will also depend on the Company's future cash
flow and the timing of the settlement of the liabilities recorded in the
financial statements of the Company.
The Company intends to fulfill its remaining 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.
The Company expects to stay current with respect to preferred stock dividends.
However, the Company's redemption payments, if any, 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
Page 9 of 12
<PAGE>
which may arise with the PBGC relating to the Company's unfunded liability, if
any, to its defined benefit plan.
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.
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.
Page 10 of 12
<PAGE>
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
None
b) REPORTS ON FORM 8-K.
During the first quarter of 2000, the Company did not file a
Current Report on Form 8-K.
Page 11 of 12
<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: May 12, 2000
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
</LEGEND>
<CIK> 0000011027
<NAME> Carlyle Industries, Inc.
<MULTIPLIER> 1,000
<CURRENCY> USD
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<EXCHANGE-RATE> 1
<CASH> 35
<SECURITIES> 0
<RECEIVABLES> 4,499
<ALLOWANCES> 0
<INVENTORY> 5,571
<CURRENT-ASSETS> 12,937
<PP&E> 3,813
<DEPRECIATION> 1,185
<TOTAL-ASSETS> 19,364
<CURRENT-LIABILITIES> 2,640
<BONDS> 0
0
4,568
<COMMON> (4,037)
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 19,364
<SALES> 6,248
<TOTAL-REVENUES> 6,248
<CGS> 3,311
<TOTAL-COSTS> 3,311
<OTHER-EXPENSES> 2,313
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 168
<INCOME-PRETAX> 457
<INCOME-TAX> (174)
<INCOME-CONTINUING> 283
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 214
<EPS-BASIC> 0.02
<EPS-DILUTED> 0.02
</TABLE>
