<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K/A
(Amendment No. 1)
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
November 12, 1998 (September 15, 1998)
-------------------------------------------------------------
Date of report (Date of earliest event reported)
Hexcel Corporation
-----------------------------------------------------------------
(Exact Name of Registrant as Specified in Charter)
Delaware 1-8472 94-1109521
- ----------------- ------------------------- ----------------------
(State of (Commission File No.) (IRS Employer
Incorporation) Identification No.)
Two Stamford Plaza
281 Tresser Boulevard
Stamford, Connecticut 06901-3238
- --------------------------------------------------------------------------------
(Address of Principal Executive Offices and Zip Code)
(203) 969-0666
--------------------------------------------------------------------
(Registrant's telephone number, including area code)
N/A
- --------------------------------------------------------------------------------
(Former Name or Former Address, if Changed Since Last Report)
<PAGE>
Paragraph (a) of Item 7 of the Registrant's Current Report on Form 8-K filed
with the Securities and Exchange Commission on September 24, 1998 is hereby
amended to read in it's entirety as set forth below.
Item 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
(a) FINANCIAL STATEMENTS OF CLARK-SCHWEBEL HOLDINGS, INC.
On September 15, 1998, the Company acquired certain assets
and operating liabilities from Clark-Schwebel, Inc. and its
subsidiaries ("C-S"). The following audited historical
financial statements of C-S are provided in Annex A hereto:
Report of Independent Public Accountants
Independent Auditors' Report
Consolidated Balance Sheets as of December 28, 1996
and January 3, 1998
Consolidated Statements of Income for the years ended
January 3, 1998, December 28, 1996 and December 30,
1995
Consolidated Statements of Cash Flows for the years
ended January 3, 1998, December 28, 1996 and December
30, 1995
Notes to Consolidated Financial Statements
The following unaudited historical financial statements of C-S
are provided in Annex B hereto:
Consolidated Balance Sheets as of January 3, 1998 and
July 4, 1998
Consolidated Statements of Income for the Three and Six
months ended July 4, 1998 and June 28, 1997
Consolidated Statements of Stockholders' Equity and
Comprehensive Income as of January 3, 1998 and July 4,
1998
Consolidated Statements of Cash Flows for the Six
Months ended July 4, 1998 and June 28, 1997
Notes to Condensed and Consolidated Financial
Statements
2
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
HEXCEL CORPORATION
(Registrant)
November 11, 1998 /s/ Wayne C. Pensky
(Date)
------------------------------
Wayne C. Pensky,
Corporate Controller and
Chief Accounting Officer
3
<PAGE>
ANNEX A
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors of
Clark-Schwebel Holdings, Inc.:
We have audited the accompanying consolidated balance sheets of Clark-Schwebel
Holdings, Inc. (a Delaware corporation) and subsidiaries as of December 8, 1996,
and January 3, 1998, and the related consolidated statements of income and cash
flows for each of the two periods in the year ending December 28, 1996, and the
fiscal year ending January 3, 1998. 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 disclosure 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 Clark-Schwebel Holdings, Inc.
and subsidiaries as of December 28, 1996, and January 3, 1998, and the results
of their operations and their cash flows for each of the two periods in the year
ended December 28, 1996, and the fiscal year ending January 3, 1998, in
conformity with generally accepted accounting principles.
Arthur Andersen LLP
Columbia, South Carolina
February 12, 1998 (except with respect to the matter discussed in Note 17 as
to which the date is September 15, 1998)
4
<PAGE>
INDEPENDENT AUDITORS' REPORT
We have audited the accompanying statements of income and cash flows of Fort
Mill A Inc. (the "Predecessor") (a wholly owned subsidiary of Springs
Industries, Inc.) for the fiscal year ended December 30, 1995. These financial
statements are the responsibility of the Predecessor's management, our
responsibility is to express an opinion on the financial statements based on our
audit.
We conducted our audit 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 audit provides a reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the results of operations and cash flows of Fort Mill A Inc. for the
fiscal year ended December 30, 1995 in conformity with generally accepted
accounting principles.
DELOITTE & TOUCHE LLP
Charlotte, North Carolina
February 9, 1996
(February 24, 1996 as to Note 2)
5
<PAGE>
CLARK-SCHWEBEL HOLDINGS, INC.
CONSOLIDATED BALANCE SHEETS
DECEMBER 28, 1996 AND JANUARY 3, 1998
(DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
DECEMBER 28, JANUARY 3,
1996 1998
---- ----
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents ........................................ $ 4,064 $ 147
Accounts receivable, net ......................................... 25,794 28,527
Inventories, net ................................................. 33,625 34,897
Other ............................................................ 592 235
---------- ----------
Total current assets ........................................ 64,075 63,806
---------- ----------
PROPERTY, PLANT AND EQUIPMENT ............................................ 67,936 72,133
Accumulated depreciation ............................................. (5,841) (12,540)
---------- ----------
Property, plant and equipment, net............................... 62,095 59,593
---------- ----------
EQUITY INVESTMENTS ....................................................... 63,426 65,411
GOODWILL ................................................................. 44,333 43,205
OTHER ASSETS ............................................................. 6,808 5,702
---------- ----------
TOTAL ASSETS ............................................................. $ 240,737 $ 237,717
---------- ----------
---------- ----------
LIABILITIES AND EQUITY
CURRENT LIABILITIES:
Accounts payable ................................................. $ 21,448 $ 19,806
Accrued liabilities .............................................. 15,330 16,706
Deferred tax liabilities -- current .............................. 2,056 2,370
Current maturities of long-term debt ............................ 51 0
---------- ----------
Total current liabilities .................................... 38,885 38,882
LONG-TERM DEBT ........................................................... 123,440 155,994
DEFERRED TAX LIABILITIES ................................................. 21,458 20,575
LONG-TERM BENEFIT PLANS AND OTHER ........................................ 7,121 4,139
COMMITMENTS AND CONTINGENCIES ............................................
---------- ----------
TOTAL LIABILITIES ........................................................ 190,904 219,590
---------- ----------
EQUITY:
Preferred stock (par value per share - $.01) - 12.5%
participating, 10,000 shares authorized, 1,000 and 0 shares
issued and outstanding, respectively ............................ 35,000 0
Common stock (par value per share - $.01) - 100,000
shares authorized, 9,000 shares issued and outstanding,
less management loans of $822 and $0, respectively .............. 9,178 9,000
Retained earnings ............................................... 7,005 13,664
Cumulative translation adjustment ............................... (1,350) (4,537)
---------- ----------
Total equity ................................................ 49,833 18,127
---------- ----------
TOTAL LIABILITIES AND EQUITY ............................................. $ 240,737 $ 237,717
---------- ----------
---------- ----------
</TABLE>
See notes to consolidated financial statements.
6
<PAGE>
CLARK-SCHWEBEL HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF INCOME
YEARS ENDED DECEMBER 30, 1995, DECEMBER 28, 1996 AND JANUARY 3, 1998
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 29,
1995 - APRIL 18 - 1996 -
APRIL 17, DECEMBER 28, JANUARY 3,
1995 1996 1996 1998
---------- --------- ---------- ----------
(PREDECESSOR BASIS) (SUCCESSOR BASIS)
<S> <C> <C> <C> <C>
Net sales ..................................... $ 231,306 $ 68,911 $ 152,003 $ 240,204
Cost of goods sold ............................ 191,978 54,958 118,605 184,901
---------- --------- ---------- ----------
Gross profit .................................. 39,328 13,953 33,398 55,303
Selling, general and adminstrative
expenses .................................. 17,750 4,812 10,418 15,987
---------- --------- ---------- ----------
Operating income .......................... 21,578 9,141 22,980 39,316
Other income (expense):
Interest expense .......................... (401) (148) (10,061) (15,176)
Other, net ................................ 12 (5) 50 35
---------- --------- ---------- ----------
Income before income taxes ................... 21,189 8,988 12,969 24,175
Provision for income tax ................... (8,444) (3,595) (5,460) (9,657)
Income from equity investees, net ........... 2,553 1,174 2,633 3,997
---------- --------- ---------- ----------
Income from continuing operations ............. 15,298 6,567 10,142 18,515
Discontinued operations:
Income from discontinued operations, net .. 111 0 0 0
---------- --------- ---------- ----------
Net income .................................... $ 15,409 $ 6,567 10,142 18,515
---------- ---------
---------- ---------
Accrued dividends on preferred stock .......... (3,137) (2,856)
---------- ----------
Net income applicable to common shares .... $ 7,005 $ 15,659
---------- ---------
---------- ---------
</TABLE>
See notes to consolidated financial statements.
7
<PAGE>
CLARK-SCHWEBEL HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 30, 1995, DECEMBER 28, 1996 AND JANUARY 3, 1998
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 29,
1995 - APRIL 18 - 1996 -
APRIL 17, DECEMBER 28, JANUARY 3,
1995 1996 1996 1998
-------------- ---------------- ----------------- -------------
(PREDECESSOR BASIS) (SUCCESSOR BASIS)
<S> <C> <C> <C> <C>
OPERATING ACTIVITIES:
Net income .................................... $ 15,409 $ 6,567 $ 10,142 $ 18,515
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization of goodwill
and unearned revenue ..................... 11,128 3,526 6,683 9,385
Amortization of deferred financing cost .. 0 0 601 1,106
Deferred tax provision ................... 176 1,404 (1,128) (1,369)
Income from equity investments, net ... (2,553) (1,174) (2,633) (3,997)
Income from discontinued operations,
net ...................................... (111) 0 0 0
Loss on sale of equipment ................ 0 0 0 42
Changes in assets and liabilities,
net of the effects of the purchase
of the company:
Accounts receivable ................... (8,244) 1,832 3,811 (2,733)
Inventories ........................... (2,931) (2,883) 3,323 (1,272)
Prepaid expenses and other ............ 1,465 (187) 1,399 890
Accounts payable ...................... 3,181 (697) 14,011 (1,642)
Accrued liabilities ................... 367 (289) 5,076 2,377
Other ................................. 124 (131) (455) 342
----------- ----------- ----------- -----------
Net cash provided by operating
activities ........................... 18,011 7,968 40,830 21,644
----------- ----------- ----------- -----------
INVESTING ACTIVITIES:
Purchases of equipment and other assets ....... (8,429) (1,603) (2,035) (11,019)
Proceeds from sale of assets .................. 42 0 0 1,511
Payment for purchase of company ............... 0 0 (192,895) 0
----------- ----------- ----------- -----------
Net cash used in investing
activities ........................... (8,387) (1,603) (194,930) (9,508)
----------- ----------- ----------- -----------
FINANCING ACTIVITIES:
Investment by Springs ......................... (8,982) (10,955) 0 0
Transfer of assets retained by Springs ........ 0 4,461 0 0
Proceeds from issuance of stock ............... 0 0 45,000 0
Payment of acquisition fees, net .............. 0 0 (10,128) 0
Loans to management investors ................. 0 0 (822) 0
Proceeds from long-term borrowings ............ 0 0 160,000 45,994
Principal payments under long-term debt and
capital lease obligations ..................... (87) (29) (36,616) (13,491)
Redemption of preferred stock, net ............ 0 0 0 (50,172)
Dividends received from ASCO .................. 0 0 304 1,616
----------- ----------- ----------- -----------
Net cash provided by (used in)
financing activities ................. (9,069) (6,523) 157,738 (16,053)
----------- ----------- ----------- -----------
NET CHANGE IN CASH ................................ 555 (158) 3,638 (3,917)
CASH, BEGINNING OF PERIOD/YEAR .................... 29 584 426 4,064
----------- ----------- ----------- -----------
CASH, END OF PERIOD/YEAR .......................... $ 584 $ 426 $ 4,064 $ 147
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
CASH PAID FOR INTEREST ............................ $ 401 $ 120 $ 7,081 $ 12,263
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
CASH PAID FOR TAXES ............................... $ 0 $ 0 $ 7,546 $ 10,488
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
</TABLE>
See notes to consolidated financial statements.
8
<PAGE>
CLARK-SCHWEBEL HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
1. BASIS OF PRESENTATION
The accompanying consolidated financial statements include the assets,
liabilities and results of operations of Clark-Schwebel Holdings, Inc. the
successor company ("Company"), following the change in ownership (See Note 2),
for the following periods: as of and for the period ended January 3, 1998, and
as of December 28, 1996 and for the period from April 18, 1996 to December 28,
1996. The Company's primary asset is the capital stock of Clark-Schwebel, Inc.
its operating company. The statements also include the assets, liabilities, and
results of operations as of and for the period ended December 30, 1995, and for
the period from December 31, 1995 to April 17, 1996 of Fort Mill A Inc., the
predecessor company ("Predecessor Company"), prior to the change in ownership.
The statements of the Predecessor Company include certain liabilities and
expenses that historically were accounted for only at the Springs Industries,
Inc. ("Springs") - parent company level. The financial statements of the
Predecessor Company and Successor Company are not comparable in certain respects
due to differences between the costs bases of certain assets and liabilities and
the impact of interest expense on the Successor Company (see Note 2).
SUMMARIZED FINANCIAL INFORMATION---The following table provides summarized
financial information for Clark-Schwebel, Inc., the operating company, on a
stand alone basis. Clark-Schwebel, Inc. is a wholly owned subsidiary of
Clark-Schwebel Holdings, Inc. and its separate financial statements are not
included or filed separately because management has determined that they would
not be material to investors. The 1996 balance sheet information is as of
December 28, 1996 and the 1996 income statement information is for the period
from April 18, 1996 through December 28, 1996. The 1997 balance sheet
information is as of January 3, 1998 and the 1997 income statement information
is for the period from December 29, 1996 to January 3, 1998.
<TABLE>
<CAPTION>
1996 1997
----------- -----------
<S> <C> <C>
Current assets ........................... $ 64,038 $ 63,806
Noncurrent assets ........................ 176,662 173,911
-------------- --------------
Total assets ............................. $240,700 $237,717
-------------- --------------
-------------- --------------
Current liabilities ...................... $ 38,885 $ 36,706
Noncurrent liabilities ................... 148,878 135,097
Equity ................................... 52,937 65,914
-------------- --------------
Total liabilities and equity ............. $240,700 $237,717
-------------- --------------
-------------- --------------
Net sales ................................ $152,003 $240,204
Gross profit ............................. 33,398 55,303
Income from continuing operations ........ 10,135 19,816
Net income ............................... $ 10,135 $ 19,816
-------------- --------------
-------------- --------------
Dividends to Clark-Schwebel Holdings, Inc. $ 0 $ 5,000
-------------- --------------
-------------- --------------
</TABLE>
All assets of Clark-Schwebel, Inc. represent restricted net assets with the
exception of the foreign equity investments and distributions received from the
foreign equity investments. Except in limited circumstances, Clark-Schwebel,
Inc. is prohibited from transferring restricted net assets to Clark-Schwebel
Holdings, Inc. in the form of cash dividends, loans, or advances without the
consent of a third party lender. The amount of unrestricted net assets at
January 3, 1998 is $62,257, which represents the book value of the foreign
equity investments ($61,254) and distributions received in the form of cash from
the foreign equity investments ($1,003).
OPERATIONS---The Company consists primarily of the operations, assets, and
liabilities of manufacturing facilities located in Anderson, SC, Statesville,
NC, Cleveland, GA, and Washington, GA, which produce woven
9
<PAGE>
fiber glass and aramid fabrics. The Company's products are used in electronic
circuit boards, coated and laminated composites, aircraft construction and
protective apparel such as anti-ballistic vests and helmets.
2. PURCHASE TRANSACTION
On February 24, 1996, the Company, Springs and affiliates of Vestar Equity
Partners, L.P. (Vestar), entered into an Agreement and Plan of Merger
(Agreement) whereby affiliates of Vestar would acquire the Company. Pursuant to
the Agreement, on April 17, 1996 (Closing Date), Vestar/CS Holding Company, LLC
(Vestar/CS) purchased all of the issued and outstanding capital stock of Fort
Mill A Inc. from Springs for approximately $192,895. The sources of cash for
this purchase included $110,000 of senior notes, an equity contribution of
$45,000 and bank debt. On the day following the Closing Date, Vestar/CS had an
82% common equity interest and management investors had an 18% common equity
interest in the Company.
Under the Agreement, Springs agreed to (i) assume responsibility for
repayment of the Industrial Revenue Bonds payable in 2010 and related accrued
interest, (ii) pay $959 in certain accrued employee benefits, (iii) provide
indemnification for certain environmental, tax and other matters (including the
environmental matter described in Note 14 for which $175 was accrued at December
30, 1995), (iv) retain the accounts receivable from one customer (which totaled
$2,782 as of December 30, 1995) and related $1,400 reserve, and (v) retain the
$99 accrued obligation related to the Company's Long-Term Disability Plan. At
the Closing Date, all payable and receivable accounts between the Company and
Springs were canceled.
The acquisition was accounted for as a purchase business combination. The
adjustment to net assets represents the step-up to fair value of the net assets
acquired as follows:
<TABLE>
<S> <C>
Purchase price .................................................. $ 192,895
Nonfinancing portion of fees and expenses ....................... 2,780
-----------
Total purchase price ............................................ 195,675
Less fair value of net assets acquired .......................... (150,547)
-----------
Excess of purchase price over fair value of net assets acquired.. $ 45,128
-----------
-----------
</TABLE>
The fair values of Clark-Schwebel, Inc.'s assets and liabilities at the
date of acquisition are presented below:
<TABLE>
<S> <C>
Current assets ............................................... $ 68,410
Property, plant and equipment ................................. 66,391
Equity investments ............................................ 62,314
Current liabilities ........................................... (20,282)
Other liabilities ............................................. (26,286)
-----------
Net assets acquired ........................................... $ 150,547
-----------
-----------
</TABLE>
Following the acquisition, the purchase cost (including the fees and
expenses related thereto) was allocated to the tangible and intangible assets
and liabilities of the Company based upon their respective fair values. This
resulted in a step-up in the basis of inventory of $5,274 and property, plant
and equipment of $15,000. The excess of the purchase price over the fair value
of net assets acquired of $45,128 was recorded as goodwill, and is being
amortized on a straight-line basis over a period of 40 years.
Additional agreements include Transition Agreements for specified periods
in which Springs would be compensated for certain services provided to the
Company, and a Management Agreement that specifies services to be provided to
the Company by Vestar.
10
<PAGE>
In accordance with agreements related to the change of ownership
transaction, certain assets totaling $4,461 were transferred to Springs in the
first quarter of 1996. This balance has been separately disclosed on the face of
the accompanying 1996 statements of cash flows.
3. PREFERRED STOCK REDEMPTION AND ISSUANCE OF SENIOR DEBENTURES
On July 14, 1997, the Company amended the terms of its outstanding
participating preferred stock (the "Preferred Stock") by amending and
restating its certificate of incorporation (the "Certificate") to allow the
Company to redeem such Preferred Stock. On August 14, 1997 the Company issued
$46.0 million in 12.5% Senior Debentures due 2007 (the "Senior Debentures")
and paid $5 million in cash in exchange for and redemption of the Preferred
Stock. The $51.0 million redemption price was established as follows:
<TABLE>
<S> <C>
Book value of Preferred Stock ................................. $35.0
Accrued Preferred Stock dividends ............................. 6.0
Common equity component of Preferred Stock .................... 10.0
-----
Total ................................................. $51.0
-----
-----
</TABLE>
Vestar/CS-Holding paid $1.0 million for the common equity component of
the Preferred Stock at the time of the Acquisition. The common equity
component was purchased for $10.0 million on the redemption date.
Vestar/CS-Holding sold the Preferred Stock on July 14, 1997 and
simultaneously purchased 10% of the outstanding Common Stock of the Company
from the management investors on a pro rata basis. Upon the consummation of
that transaction, all of the Company's outstanding loans to management were
repaid in full.
The overall net impact of the Preferred Stock redemption and issuance of
Senior Debentures was a reduction of equity by $44.2 million, an increase in
debt by $46.0 million, a reduction of "long-term benefit plans and other"
liabilities by $6.0 million, and a decrease in cash by $4.2 million.
4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Following is a summary of the significant accounting policies used in the
preparation of the financial statements of the Company.
BASIS OF CONSOLIDATION - The consolidated financial statements include the
accounts of the Company and its subsidiaries. All material intercompany amounts
and transactions have been eliminated.
FISCAL YEAR - The Company's operations are based on a fifty-two or
fifty-three week fiscal year ending on the Saturday closest to December 31. The
fiscal years ended December 30, 1995, December 28, 1996 and January 3, 1998 are
referred to herein as 1995, 1996 and 1997, respectively. The 1995 and 1996
fiscal years each consisted of 52 weeks, while the 1997 fiscal year consisted of
53 weeks. Due to the purchase transaction on April 17, 1996, the 52 week fiscal
year in 1996 is comprised of the operations of the Predecessor Company and the
Successor Company.
USE OF ESTIMATES - The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosures of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. These estimates include the allowance for doubtful
accounts receivable and the liabilities for certain long-term benefit plans.
Actual results could differ from such estimates.
11
<PAGE>
REVENUE RECOGNITION - Revenue from product sales is recognized at the time
ownership of the goods transfers to the customer and the earnings process is
complete. This generally occurs when the goods are shipped.
CASH AND CASH EQUIVALENTS - Cash and cash equivalents include cash on hand
and in the bank as well as short term investments held for the purpose of
general liquidity. Such investments normally mature within three months from the
date of acquisition.
ACCOUNTS RECEIVABLE - The Company establishes an allowance for doubtful
accounts based upon factors including the credit risk of specific customers,
historical trends and other information. The Company performs ongoing credit
evaluations of its customers' financial condition and generally requires no
collateral. The reserve for doubtful accounts was $853 at December 28, 1996 and
$1,100 at January 3, 1998. The provision for uncollectible amounts was $1,842,
($84), $160 and $189 for fiscal 1995, 1996 (Predecessor), 1996 (Successor) and
1997 (Successor), respectively. Net write-offs (recoveries) were $349, ($6),
($38) and ($58), respectively, for the same periods.
INVENTORIES - Inventories are valued at the lower of cost or market. Cost
is determined using the last-in, first-out (LIFO) method for substantially all
inventories.
PROPERTY, PLANT, AND EQUIPMENT - Property, plant, and equipment is recorded
at cost and depreciation is computed on a straight-line basis over the estimated
useful lives of the related assets. Estimated useful lives are as follows:
<TABLE>
<S> <C>
Land improvements ................................. 10 to 20 years
Buildings and improvements ........................ 20 to 40 years
Machinery and equipment ........................... 3 to 11 years
</TABLE>
EQUITY INVESTMENTS -The company owns equity interests in CS-Interglas AG
(headquartered in Germany), Asahi-Schwebel Co., Ltd. (headquartered in Japan)
and Clark Schwebel Tech-Fab Company (located in Anderson, SC), which are
accounted for using the equity method of accounting.
FOREIGN CURRENCY - The foreign equity investments are translated at
year-end exchange rates. Equity income and losses are translated at the average
rate during the year. Cumulative translation adjustments are reflected as a
separate component of stockholders' equity.
POSTRETIREMENT BENEFITS - Postretirement benefits are accounted for
pursuant to Statement of Financial Accounting Standards ("SFAS") No. 106,
EMPLOYERS ACCOUNTING FOR POSTRETIREMENT BENEFITS OTHER THAN PENSIONS. SFAS No.
106 requires that the projected future cost of providing postretirement
benefits, such as health care and life insurance, be recognized as an expense as
employees render service rather than when claims are incurred.
INCOME TAXES - Income taxes are accounted for pursuant to SFAS 109,
ACCOUNTING FOR INCOME TAXES. Under SFAS No. 109, deferred income tax assets and
liabilities represent the future income tax effect of temporary differences
between the book and tax bases of assets and liabilities assuming they will be
realized and settled at the amounts reported in the financial statements. The
provision for income taxes included in the accompanying financial statements is
computed in a manner consistent with SFAS No. 109.
CERTAIN COMPENSATION PLANS - Certain key employees of the Company were
granted stock options and certain types of deferred compensation related to
Springs common stock under Springs' executive plans. Compensation expense
allocated from Springs for these grants for 1995, 1996 (Predecessor), 1996
Successor) and 1997 (Successor) was approximately $145, $418, $0 and $0,
respectively.
NEW ACCOUNTING STANDARD - During 1997, the FASB issued SFAS No. 130,
"Comprehensive Income", that is not effective until 1998. SFAS No. 130 applies
to the Company and will be adopted in the first quarter of 1998. Comprehensive
income is defined as essentially all changes in shareholders' equity exclusive
of transactions with owners, such as translation adjustments on investments in
foreign subsidiaries. Comprehensive income includes net income (loss) plus
changes in certain assets and liabilities that are reported directly in
12
<PAGE>
equity, referred to as "Other Comprehensive Income." The adoption of SFAS No.
130 is not expected to have a material impact on the consolidated financial
statements of the Company.
5. LONG-TERM DEBT
Long-term debt consisted of the following:
<TABLE>
<CAPTION>
1996 1997
--------- ---------
<S> <C> <C>
Senior Notes, payable in 2006, interest at 10.5% ......... $ 110,000 $ 110,000
Senior Debentures, payable in 2007, interest at 12.5% .... 0 45,994
Term Loan payable in quarterly installments; paid
in July 1997 ......................................... 13,440 0
Revolving Credit Agreement, due 2002, interest at variable
rates ................................................ 0 0
Capitalized lease obligation payable in equal monthly
Installments of $7, through June 1997 ................ 51 0
--------- ---------
Total .................................................... 123,491 155,994
Less current maturities .................................. (51) 0
--------- ---------
Long-term debt ........................................... $ 123,440 $ 155,994
--------- ---------
--------- ---------
</TABLE>
The Senior Notes accrue interest at a fixed rate of 10.5% per annum, with
interest payable semiannually in arrears on April 15 and October 15. The Senior
Notes are not redeemable at the option of the Company prior to April 15, 2001,
except in the event of a public equity offering of the Company, at which time a
portion of the Senior Notes would be redeemable. Management estimates that the
fair value of the Senior Notes is $120,450 at January 3, 1998, based on the
estimated market trading price for the Senior Notes as of January 3, 1998.
The Senior Debentures accrue interest at a fixed rate of 12.5% per annum
with interest payable semiannually in arrears on January 15 and July 15 to the
extent permitted by the Credit Agreement and the indenture governing the Senior
Notes. If the Company is unable to pay interest in cash due to the prohibitions
contained in the Credit Agreement or such indenture, interest on the Senior
Debentures would be payable in additional Senior Debentures. Under the terms of
the indenture, Clark-Schwebel, Inc., the operating company, must maintain a
minimum fixed charge coverage ratio in order to pay dividends. At January 3,
1998, the indenture allowed the operating company to pay $8,700 in dividends to
the Company. The Senior Debentures will not be redeemable at the Company's
option prior to July 15, 2002, except in the event of a public equity offering
of the Company, or a change of control or subsidiary change of control after
January 15, 1998. Management estimates that the fair value of the Senior
Debentures is $49,214 at January 3, 1998, based on the estimated market trading
price for the Senior Debentures as of January 3, 1998.
On July 14, 1997, the Company prepaid all of its outstanding indebtedness
under the Term Loan and amended the Credit Agreement to provide, among other
things, that the Company may, subject to certain conditions, pay up to $5,000 in
cash and issue Senior Debentures in a redemption of the Preferred Stock, and
make semi-annual interest payments in cash on the Senior Debentures. The
Revolving Credit Facility under the Credit Agreement was also amended to
increase the aggregate amount of commitments thereunder to $65,000.
The Company pays a quarterly commitment fee equal to 0.25% on the unused
portion of the Revolving Credit Facility which was $65,000 at January 3, 1998.
The Revolving Credit Facility, the Senior Notes, and the Senior Debentures
contain certain restrictive covenants which provide limitations on the Company
with respect to restricted payments, indebtedness, liens, investments,
dividends, distributions, transactions with affiliates, debt repayments, capital
expenditures, mergers, and consolidations. The bank facility covenants also
require maintenance of certain financial ratios. At January 3, 1998, the Company
was in compliance with such covenants. With the exception of the Senior
Debentures, which are obligations of Clark-Schwebel Holdings, Inc., all other
debt is incurred at the Clark-Schwebel, Inc., operating company level.
Substantially all of the assets of Clark-Schwebel, Inc., the operating company,
are subject to liens in favor of the Revolving Credit Facility lenders.
13
<PAGE>
No principal payments are required on any long-term debt in the next five
years due to the payment of the term loan in July 1997.
6. INVENTORIES
Inventories consisted of the following:
<TABLE>
<CAPTION>
1996 1997
-------- --------
<S> <C> <C>
Finished goods .......................................... $ 10,256 $ 12,301
Raw material and supplies ............................... 9,254 8,854
In process .............................................. 15,215 15,317
-------- --------
Total at standard cost (which approximates average cost) 34,725 36,472
Less LIFO reserve ....................................... (1,100) (1,575)
-------- --------
Inventories, net ........................................ $ 33,625 $ 34,897
-------- --------
-------- --------
</TABLE>
7. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consisted of the following:
<TABLE>
<CAPTION>
1996 1997
-------- --------
<S> <C> <C>
Land .................................................... $ 1,875 $ 1,875
Buildings and improvements .............................. 19,381 20,714
Machinery and equipment ................................. 43,113 47,061
Construction in progress ................................ 3,567 2,483
-------- --------
Total ................................................... 67,936 72,133
Less accumulated depreciation ........................... (5,841) (12,540)
-------- --------
Property, plant and equipment, net ...................... $ 62,095 $ 59,593
-------- --------
-------- --------
</TABLE>
8. OTHER CURRENT LIABILITIES
Accrued liabilities consisted of the following:
<TABLE>
<CAPTION>
1996 1997
-------- --------
<S> <C> <C>
Accrued retirement and incentive ........................ $ 3,841 $ 4,711
Employee benefit accruals ............................... 3,017 2,935
Accrued payroll ......................................... 2,759 2,235
Accrued interest ........................................ 2,477 4,576
Other accrued liabilities ............................... 2,235 2,249
Unearned revenue ........................................ 1,001 0
-------- --------
Total accrued liabilities ............................... $ 15,330 $ 16,706
-------- --------
-------- --------
</TABLE>
14
<PAGE>
9. STOCKHOLDERS' EQUITY
Changes in stockholders' equity on a successor basis for the periods of
April 18, 1996 through December 28, 1996, and December 29, 1996 through January
3, 1998, respectively, consisted of the following (in thousands, except share
amounts):
<TABLE>
<CAPTION>
Preferred Stock Common Stock Cumulative
--------------- ------------ Retained Translation
Shares Amount Shares Amount Earnings Adjustment
------ ------ ------ ------ -------- -----------
<S> <C> <C> <C> <C> <C> <C>
Preferred stock issued on April 17,1996.. 1,000 $ 35,000
Common stock issued on April 17,1996 .... 9,000 $ 10,000
Management loans (see Note 16) .......... (822)
Net income .............................. $ 10,142
Accrued preferred stock dividend ........ (3,137)
Cumulative translation adjustment ....... ($1,350)
------- --------- ------ -------- -------- --------
Balance at December 28, 1996 ............ 1,000 $ 35,000 9,000 $ 9,178 $ 7,005 ($1,350)
------- --------- ------ -------- -------- --------
------- --------- ------ -------- -------- --------
Repayment of management loans
(See Notes 3 and 16) ................ 822
Net income .............................. 18,515
Accrued preferred stock dividend ........ (2,856)
Redemption of preferred stock
(see Note 3) ........................ (1,000) (35,000) (1,000) (9,000)
Cummulative translation adjustment ...... (3,187)
------- --------- ------ -------- -------- --------
Balance at January 3, 1998 .............. 0 $ 0 9,000 $ 9,000 $ 13,664 ($4,537)
------- --------- ------ -------- -------- --------
------- --------- ------ -------- -------- --------
</TABLE>
10. EMPLOYEE BENEFIT PLANS
EMPLOYEES PROFIT SHARING/RETIREMENT PLANS
Substantially all associates of the Company are covered by defined
contribution plans. In 1995 and 1996 (Predecessor Company) the plan was provided
by Springs. The 1996 Successor Company plan operates substantially the same as
the Springs plan. The Company makes contributions to a defined contribution
Profit Sharing Plan annually based upon the profitability of the Company. The
contribution is allocated to participant accounts based upon participant
compensation. The amount of the Company contribution is subject to approval by
the Board of Directors.
In addition, associates are allowed to contribute a percentage of their
compensation to a defined contribution plan and the Company will match a portion
of their contribution. This plan, available to substantially all associates,
contains a matched savings provision that permits pre-tax employee
contributions. Participants can contribute from 1% to 12% of their compensation
and receive a 50% matching employer contribution on up to 4% of the
participant's contribution.
Defined contribution plan expense for 1995, 1996 (Predecessor), and 1996
(Successor) and 1997 (Successor) was $1,810, $964, $1,655 and $3,116,
respectively.
POSTRETIREMENT BENEFITS OTHER THAN PENSIONS
The Company participates in a defined benefit postretirement medical plan
which covers substantially all salaried and nonsalaried employees. In 1995 and
1996 (Predecessor Company) the plan was provided by Springs. The benefit cost
and benefit obligation for these periods was allocated by Springs to the
Predecessor Company. The 1996 Successor Company and 1997 plan operated
identically to the Springs plan, but was a separate plan on a stand alone
company basis. The plan provides medical coverage to age 65 for employees who
retire at age 62 or later, have at least 25 years of service and participated in
the plan prior to retirement. The
15
<PAGE>
plan is funded on a "pay-as-you-go" basis and is contributory, with retiree
contributions adjusted periodically. Postretirement benefit cost consisted of
the following components:
<TABLE>
<CAPTION>
1995 1996 1996 1997
----- ---- ----- -----
(PREDECESSOR) (SUCCESSOR)
<S> <C> <C> <C> <C>
Service cost ........ $138 $ 41 $ 71 $127
Interest cost ....... 278 83 229 283
----- ---- ----- -----
$416 $124 $300 $410
----- ---- ----- -----
----- ---- ----- -----
</TABLE>
Management believes that the 1995 and 1996 (Predecessor) allocated amounts
are reasonable and approximate the amounts that would have resulted from a SFAS
106 calculation of postretirement benefit cost on a separate company basis. The
1996 Successor and 1997 amounts were determined on a stand alone company basis.
The Company has assumed responsibility for the accrued benefits
attributable to employees of the Company. Pursuant to the Agreement, the Company
established employee benefit plans which are substantially similar to Springs'
employee benefit plans.
The following table sets forth the status of the Company's obligation under
SFAS No. 106 at the end of 1996 and 1997:
<TABLE>
<CAPTION>
1996 1997
-------- --------
<S> <C> <C>
Accumulated postretirement benefit obligation ("APBO")
Retirees ................................................ $ 1,473 $ 1,416
Fully eligible active plan participants ................. 393 261
Other active participants ............................... 2,145 2,583
-------- --------
Accumulated postretirement benefit obligation ........... $ 4,011 $ 4,260
Unrecognized gain/(loss) ................................ (27) (121)
-------- --------
Total recorded obligation ............................... $ 3,984 $ 4,139
-------- --------
-------- --------
</TABLE>
The 1996 and 1997 balance sheets include a liability of $3,984 and $4,139,
respectively, which is classified in "Long-Term Benefit Plans and Other."
For measurement purposes, a 10.8% annual rate of increase in the per capita
cost of covered health care benefits was assumed. This 10.8% rate is assumed to
decrease gradually to 6.3% in the year 2006 and remain at that level thereafter.
If the health care cost trend rate was increased by one percent, the APBO would
increase by 12.6% and postretirement benefit cost would increase by
approximately 14.6%. The discount rate used in determining the APBO at January
3, 1998 was 7.25%.
11. INCOME TAXES
The following tables present the components of the provision for income
taxes, a reconciliation of the statutory U.S. income tax rate to the effective
income tax rate, and the principal items of deferred income tax assets and
liabilities at the end of 1995, 1996 (Predecessor), 1996 (Successor), and 1997
(Successor).
16
<PAGE>
Components of the total income tax provision were as follows:
<TABLE>
<CAPTION>
1995 1996 1996 1997
-------- ------ ------ -------
(PREDECESSOR) (SUCCESSOR)
<S> <C> <C> <C> <C>
Current federal ............................ $ 8,622 $ 3,739 $ 6,011 $ 9,906
Current state .............................. 1,297 563 1,096 1,955
-------- ------- ------- -------
Total current .............................. 9,919 4,302 7,107 11,861
-------- ------- ------- -------
Deferred federal ........................... 129 56 (18) 543
Deferred state ............................. 47 20 (3) 107
-------- ------- ------- -------
Total deferred ............................. 176 76 (21) 650
-------- ------- ------- -------
Total provision ............................ $10,095 $ 4,378 $ 7,086 $12,511
-------- ------- ------- -------
-------- ------- ------- -------
</TABLE>
The total provision is included in the statements of income as follows:
<TABLE>
<CAPTION>
1995 1996 1996 1997
------- ------ ------- --------
(PREDECESSOR) (SUCCESSOR)
<S> <C> <C> <C> <C>
Provision on income before income taxes..... $ 8,444 $ 3,595 $ 5,460 $ 9,657
Income from equity investees................ 1,582 783 1,626 2,854
Income of discontinued operations........... 69 0 0 0
------- ------ ------- --------
Total provision ............................ $10,095 $ 4,378 $ 7,086 $12,511
------- ------ ------- --------
------- ------ ------- --------
</TABLE>
The difference between the federal statutory tax rate and the effective tax
rate on income before income taxes was as follows:
<TABLE>
<CAPTION>
1995 1996 1996 1997
------- ------ ------- --------
(PREDECESSOR) (SUCCESSOR)
<S> <C> <C> <C> <C>
Provision at federal statutory tax rate..... 35.0% 35.0% 35.0% 35.0%
State income tax, net of federal tax effect. 3.4 3.4 4.2 4.2
Amortization of acquisition price not
deductible for tax purposes .......... 0.7 0.7 2.1 1.6
Other ...................................... 0.8 0.9 (0.2) (0.5)
------- ------ ------- --------
Effective tax rate ......................... 39.9% 40.0% 41.1% 40.3%
------- ------ ------- --------
------- ------ ------- --------
</TABLE>
Temporary differences and the related balances of deferred tax assets and
liabilities were as follows:
<TABLE>
<CAPTION>
1996 1997
------- -------
<S> <C> <C>
Employee benefit accruals .................... $ 3,356 $ 2,865
Equity investments ........................... 2,376 3,519
Other items .................................. 419 1,176
------- -------
Total deferred tax assets .................... 6,151 7,561
------- -------
Property ..................................... 11,920 11,114
Equity investments ........................... 12,551 13,339
Inventories .................................. 4,362 4,786
Other items .................................. 832 1,267
------- -------
Total deferred tax liabilities................ 29,665 30,506
------- -------
Net deferred tax liabilities ................. $23,514 $22,945
------- -------
------- -------
</TABLE>
17
<PAGE>
12. EQUITY INVESTMENTS
CS-INTERGLAS AG ("INTERGLAS")---In March 1993, the Company contributed two
European subsidiaries and $8.8 million to Interglas, a company which
manufactures fiber glass, aramid and carbon fabrics, in exchange for a 24.9%
common stock interest and convertible notes with a face value of 20 million
Deutsche marks (the "Convertible Notes"). No gain or loss was recognized as a
result of this exchange. The Company's common stock investment in Interglas had
a carrying value of $14,282 and $13,107 at December 28, 1996 and January 3,1998,
respectively.
The Convertible Notes, which had a carrying value of $13,037 and $11,344 at
December 28, 1996 and January 3, 1998, respectively, are convertible into common
stock of Interglas. At the Company's option, conversion would result in the
Company owning a total of 42% of the outstanding common stock of Interglas as of
January 3, 1998. Interest on the Convertible Notes, which is included in income
from equity investees, is at 8% through December 31, 1996 and 5% thereafter.
Interest income in 1995, 1996 and 1997 was recognized on an accrual basis. If
Convertible Notes are not converted, the principal balance plus outstanding
interest becomes due on June 30, 2007.
ASAHI-SCHWEBEL CO. LTD. ("ASCO")---On October 1, 1997, the Company
purchased an additional 4.3% common equity interest in ASCO, which increased the
Company's ownership percentage from 39.0% to 43.3%. ASCO, a company which
manufactures fiber glass fabric, operates a facility in Japan and, in 1996,
acquired a majority interest in a fiber glass manufacturer located in Taiwan.
The Company's investment in ASCO had a carrying value of $32,586 and $36,803 at
December 28, 1996 and January 3, 1998, respectively. The carrying value at
January 3, 1998 exceeds 43.3% of ASCO's total equity by approximately $1.7
million, which is being amortized on a straight-line basis through 2008.
CLARK-SCHWEBEL TECH-FAB COMPANY ("TECH-FAB")---The Company owns a 50%
partnership interest in Tech-Fab, a joint venture which manufactures nonwoven
fabrics using fiber glass and other synthetic materials. The Company's
investment in Tech-Fab had a carrying value of $3,521 and $4,156 at December 28,
1996 and January 3, 1998, respectively.
COMBINED SUMMARIZED FINANCIAL INFORMATION---The following table provides
combined summarized balance sheet information for these investees as of December
28, 1996 and January 3, 1998:
<TABLE>
<CAPTION>
1996 1997
-------- --------
<S> <C> <C>
Current assets .......................................... $165,715 $178,573
Noncurrent assets ....................................... 125,597 118,694
-------- --------
Total assets ............................................ $291,312 $297,267
-------- --------
-------- --------
Current liabilities ..................................... $ 54,303 $ 64,879
Noncurrent liabilities .................................. 89,279 77,036
Minority interest ....................................... 9,715 11,712
Redeemable equity instrument ............................ 21,341 19,853
Equity .................................................. 116,675 123,787
-------- --------
Total liabilities and equity ............................ $291,312 $297,267
-------- --------
-------- --------
</TABLE>
The following table provides combined summarized income statement
information for these investees for the years ended December 30, 1995, December
28,1996, and January 3, 1998:
<TABLE>
<CAPTION>
1995 1996 1997
-------- -------- --------
<S> <C> <C> <C>
Net sales ........... $328,145 $317,918 $328,122
Operating income .... 20,761 35,163 36,739
Net income .......... 13,207 16,643 17,783
-------- -------- --------
-------- -------- --------
</TABLE>
18
<PAGE>
13. MAJOR CUSTOMERS, CERTAIN CONCENTRATIONS, AND FAIR VALUE OF FINANCIAL
INSTRUMENTS
Sales to two customers exceeded 10% of net sales during fiscal 1995, 1996,
and 1997. Sales to the two customers represented as a percentage of net sales
29.1% and 13.2% in 1995, 29.9% and 13.5% in 1996 (Predecessor), 29.1% and 14.1%
in 1996 (Successor), and 28.7% and 15.9% in 1997 (Successor), respectively.
Accounts receivable due from these two customers as a percent of total accounts
receivable was 38.0% and 19.8% at December 28, 1996 and 27.1% and 25.2% at
January 3, 1998. Although the Company's exposure to credit risk could be
affected by conditions or occurrences within these customers' industry, no
indication of such adverse circumstances existed at January 3, 1998.
The Company currently buys substantially all of its fiber glass yarn, an
important component of its products, from two suppliers and substantially all of
its aramid yarn from one supplier. There are a limited number of manufacturers
of fiber glass yarn and aramid yarn.
The Company's financial instruments include cash, short term investments,
accounts receivable, Convertible Notes, accounts payable and long-term debt.
Management estimates that the carrying value of such instruments approximates
fair value, with the exception of the Senior Notes and Senior Debentures (see
Note 5).
14. COMMITMENTS AND CONTINGENCIES
The Company leases certain machinery and equipment under noncancelable
operating leases. Rent expense attributed to such leases was $384, $177, $314,
and $563 in 1995, 1996 (Predecessor), 1996 (Successor), and 1997 (Successor),
respectively.
Future minimum payments under the non-cancelable operating leases as of
January 3, 1998 were as follows:
<TABLE>
<S> <C>
1998 .......................................................... $ 497
1999 .......................................................... 360
2000 .......................................................... 316
2001 .......................................................... 258
2002 .......................................................... 258
---------
$ 1,689
---------
---------
</TABLE>
Prior to the Closing Date of the Acquisition, the Company was involved in
administrative proceedings under environmental laws and regulations, including
proceedings under the Comprehensive Environmental Response, Compensation and
Liability Act. On the closing date, Springs assumed all liabilities related to
the costs associated with these environmental matters. There was no material
provision for environmental matters in 1995, 1996 or 1997.
The Company is subject to legal proceedings and claims which arise in the
ordinary course of business. In the opinion of management, the ultimate
disposition of these matters will not materially affect the Company's financial
position or results of operations.
15. DISCONTINUED OPERATIONS
In January 1996, the Company sold its equity investment in a company
engaged in a separate line of business for an amount which approximated book
value. The proceeds received were distributed to Springs. The equity earnings
from this investment are included in Discontinued Operations in the Company's
financial statements.
19
<PAGE>
16. RELATED PARTY TRANSACTIONS
In connection with the Acquisition, certain members of management (the
"Management Investors") made equity contributions to the Company pursuant to a
Management Subscription Agreement which provided the terms under which the
Management Investors could purchase shares in the Company. The Management
Subscription Agreement set forth the share price, vesting provisions,
disposition of shares upon termination of employment, and certain other rights
of the Management Investors with respect to the shares.
The Management Investors purchased $1.8 million, or 18%, of the common
equity in the Company. Approximately $0.8 million of the purchase price was
financed by the Company through a promissory note (the "Note") which carried an
interest rate of 6.51% annually. As described in Note 3, the notes were paid in
full during 1997 in connection with the Preferred Stock Redemption.
The Management Investors have entered into a Securityholders Agreement with
the Company and Vestar/CS Holding which contains certain agreements among such
parties with respect to the capital stock and corporate governance of the
Company. The Securityholders Agreement gives Vestar/CS Holding the right to
appoint all members to the Board of Directors of the Company. Additionally, the
Securityholders
Agreement restricts the ability of Management Investors to transfer their
equity interest except upon (A) the exercise of their tag along rights, which
allows Management Investors to sell their equity interest when Vestar/CS Holding
sells its equity interest in the Company; (B) a sale of the Company; (C) the
exercise of certain put and call options under the Management Subscription
Agreement; (D) a public sale of the Company's common stock.
The Management Investors have entered into a Voting Trust Agreement with
the Company and Vestar/CS Holding which requires Management Investors to vote
all of their common stock as directed by Vestar/CS Holding for the approval of
any of the following: amendment to the Company's Certificate of `Incorporation,
merger, share exchange, combination or consolidation of the Company with any
other person, the sale, lease or exchange of all or substantially all of the
property and assets of the Company, or the reorganization, recapitalization,
liquidation, or dissolution of the Company.
Pursuant to a Management Advisory Agreement (the "Management Agreement"),
Vestar Capital Partners will receive an annual fee and reimbursement of
out-of-pocket expenses for management and financial consulting services provided
to the Company. Such services include advising the Company on the establishment
of effective banking, legal and other business relationships, and assisting
management in developing and implementing strategies for improving the
operational, marketing and financial performance of the Company. The management
advisory fees to be paid per annum will equal the greater of (i) 1.0% of the
consolidated earnings of the Company before interest, taxes, depreciation and
amortization or (ii) $350. Expenses pursuant to the Management Agreement were
approximately $485 in 1997 and $258 for the period from April 18, 1996 to
December 28, 1996 (Successor Company).
Upon consummation of the Acquisition, the Company paid to Vestar Capital
Partners an investment banking fee of approximately $1.5 million plus
out-of-pocket expenses for its services in structuring the transaction and
providing financial advice in connection therewith. Additionally, a member of
the Company's Board of Directors received a fee of approximately $600 for his
consulting services in connection with the Acquisition.
20
<PAGE>
17. SUBSEQUENT EVENTS
HEXCEL CORPORATION ACQUIRES ASSETS OF CLARK-SCHWEBEL
On September 15, 1998, Hexcel Corporation ("Hexcel") acquired certain
assets and operating liabilities of Clark-Schwebel, Inc. In the first
transaction, Vestar Capital Partners and Management Investors sold the stock of
the Clark-Schwebel Holdings, Inc. ("Holdings") to Stamford C-S Acquisition Corp.
("Stamford") for an enterprise value of approximately $488 million, less debt
and transaction expenses. Stamford then immediately sold certain assets and
operating liabilities of Clark-Schwebel, Inc. (the "Company") to Hexcel for
$453.6 million. Stamford will retain $50 million of property, plant and
equipment to be leased to Hexcel under a long-term capital lease.
CLARK-SCHWEBEL AND PARENT COMPANY LAUNCH CASH TENDER OFFERS AND CONSENT
SOLICITATIONS FOR NOTES AND DEBENTURES
As part of the sale described above, the Company and Holdings launched cash
tender offers and consent solicitations for their notes and debentures.
Pursuant to the tender offers, the Company and Holdings, respectively, have
repurchased:
1. all $110,000,000 of the 10 1/2% Senior Notes of the Company due 2006. The
purchase price offered for each $1,000 principal amount tendered is based on a
fixed spread of 50 basis points over the yield of the 6 1/4% U.S. Treasury Notes
due March 31, 2001, plus accrued unpaid interest on the notes, minus the consent
payment described below.
2. all $45,994,000 of the 12 1/2% Senior Debentures of Holdings due 2007. The
purchase price offered for each $1,000 principal amount tendered is $1,067.50
plus accrued unpaid interest on the debentures, minus the consent payment
described below.
Concurrent with the tender offers, the issuers obtained consents to eliminate or
modify substantially all of the convenants in the indentures governing the notes
and the debentures. Holders who tender their notes and debentures were required
to consent to the proposed amendments.
The Company offered to make consent payments of $25 per $1,000 principal amount
to the holders of the notes and debentures who tender their securities and
deliver their consents at or prior to 5:00 p.m. New York City time on the
consent date.
The Company and Holdings purchased the tendered notes and debentures with
borrowings under proceeds from stock sale.
21
<PAGE>
ANNEX B
CLARK-SCHWEBEL HOLDINGS, INC.
CONSOLIDATED BALANCE SHEETS
JANUARY 3, 1998 AND JULY 4, 1998
(DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
JANUARY 3, JULY 4
1998 1998
---- ----
(UNAUDITED)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents ................................ $ 147 $ 14,175
Accounts receivable, net ................................. 28,527 22,153
Inventories, net ......................................... 34,897 35,799
Other .................................................... 235 615
---------- ----------
Total current assets ................................ 63,806 72,742
---------- ----------
PROPERTY, PLANT AND EQUIPMENT ..................................... 72,133 74,565
Accumulated depreciation ..................................... (12,540) (16,623)
---------- ----------
Property, plant and equipment, net ....................... 59,593 57,942
---------- ----------
EQUITY INVESTMENTS ................................................ 65,411 65,341
GOODWILL .......................................................... 43,205 42,641
OTHER ASSETS ...................................................... 5,702 5,327
---------- ----------
TOTAL ASSETS ...................................................... $ 237,717 $ 243,993
---------- ----------
---------- ----------
LIABILITIES AND EQUITY
CURRENT LIABILITIES:
Accounts payable ......................................... $ 19,806 $22,994
Accrued liabilities ...................................... 16,706 15,261
Deferred tax liabilities -- current ...................... 2,370 2,370
---------- ----------
Total current liabilities ........................... 38,882 40,625
---------- ----------
LONG-TERM DEBT .................................................... 155,994 155,994
DEFERRED TAX LIABILITIES .......................................... 20,575 19,578
LONG-TERM BENEFIT PLANS AND OTHER ................................. 4,139 4,139
COMMITMENTS AND CONTINGENCIES .....................................
---------- ----------
TOTAL LIABILITIES ................................................. 219,590 220,336
---------- ----------
EQUITY:
Common stock (par value per share - $.01) - 100,000 shares
authorized, 9,000 shares issued and outstanding ........ 9,000 9,000
Retained earnings ........................................ 13,664 22,310
Cumulative translation adjustment ........................ (4,537) (7,653)
---------- ----------
Total equity ........................................ 18,127 23,657
---------- ----------
TOTAL LIABILITIES AND EQUITY ...................................... $ 237,717 $ 243,993
---------- ----------
---------- ----------
</TABLE>
See notes to condensed and consolidated financial statements.
22
<PAGE>
CLARK-SCHWEBEL HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED - DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS ENDING SIX MONTHS ENDING
JUNE 28, JULY 4, JUNE 28, JULY 4,
1997 1998 1997 1998
---------- ---------- --------- ----------
<S> <C> <C> <C> <C>
Net sales .......................... $ 61,061 $ 51,246 $ 123,299 $ 111,664
Cost of goods sold ................. 47,217 39,331 95,851 84,546
---------- ---------- --------- ----------
Gross profit ....................... 13,844 11,915 27,448 27,118
Selling, general and administrative
expenses ....................... 3,825 3,593 7,727 8,016
---------- ---------- --------- ----------
Operating income ............... 10,019 8,322 19,721 19,102
Other income (expense):
Interest expense ............... (3,147) (4,377) (6,427) (8,885)
Other, net ..................... (3) 0 (3) (2)
---------- ---------- --------- ----------
Income before income taxes ......... 6,869 3,945 13,291 10,215
Provision for income tax ........... (2,824) (1,540) (5,475) (4,090)
Income from equity investees, net .. 944 1,450 1,582 2,521
---------- ---------- --------- ----------
Net income ......................... 4,989 3,855 9,398 8,646
Accrued dividends on preferred stock (1,225) 0 (2,416) 0
---------- ---------- --------- ----------
Net income applicable to common
shares ......................... $ 3,764 $ 3,855 $ 6,982 $ 8,646
---------- ---------- --------- ----------
---------- ---------- --------- ----------
</TABLE>
See notes to condensed and consolidated financial statements.
23
<PAGE>
CLARK-SCHWEBEL HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY AND COMPREHENSIVE INCOME
(DOLLARS IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
CUMULATIVE
PREFERRED STOCK COMMON STOCK RETAINED TRANSLATION COMPREHENSIVE
SHARES AMOUNT SHARES AMOUNT EARNINGS ADJUSTMENT TOTAL INCOME
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at December 28, 1996 1,000 $ 35,000 9,000 $ 9,178 $ 7,005 $ (1,350) $ 49,833 $ 8,792
Repayment of management loans 822 822
Net income 18,515 18,515 18,515
Accrued preferred stock dividend (2,856) (2,856)
Redemption of preferred stock (1,000) (35,000) (1,000) (9,000) (45,000)
Cumulative translation adjustment (3,187) (3,187) (3,187)
------ -------- ----- -------- -------- -------- -------- --------
Balance at January 3, 1998 0 $ 0 9,000 $ 9,000 $ 13,664 $ (4,537) $ 18,127 $ 24,120
------ -------- ----- -------- -------- -------- -------- --------
------ -------- ----- -------- -------- -------- -------- --------
Net income (Unaudited) 4,791 4,791 4,791
Cumulative translation adjustment (Unaudited) (2,175) (2,175) (2,175)
------ -------- ----- -------- -------- -------- -------- --------
Balance at April 4, 1998 (Unaudited) 0 $ 0 9,000 $ 9,000 $ 18,455 $ (6,712) $ 20,743 $ 26,736
------ -------- ----- -------- -------- -------- -------- --------
------ -------- ----- -------- -------- -------- -------- --------
Net Income (Unaudited) 3,855 3,855 3,855
Cumulative translation adjustment (Unaudited) (941) (941) (941)
------ -------- ----- -------- -------- -------- -------- --------
Balance at July 4, 1998 (Unaudited) 0 $ 0 9,000 $ 9,000 $ 22,310 $ (7,653) $ 23,657 $ 29,650
------ -------- ----- -------- -------- -------- -------- --------
------ -------- ----- -------- -------- -------- -------- --------
</TABLE>
See notes to condensed and consolidated financial statements.
<PAGE>
CLARK-SCHWEBEL HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED - DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS ENDING
JUNE 28, JULY 4,
1997 1998
-------- ---------
<S> <C> <C>
OPERATING ACTIVITIES:
Net income ........................................ $ 9,398 $ 8,646
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization of goodwill
and unearned revenue ......................... 4,562 4,906
Amortization of deferred financing cost ........ 417 404
Deferred tax provision ......................... (595) (676)
Income from equity investments, net ............ (1,540) (2,521)
Loss on sale of equipment ...................... 11 7
Changes in assets and liabilities, net of the
effects of the purchase of the company:
Accounts receivable ....................... (557) 6,374
Inventories ............................... (4,130) (902)
Prepaid expenses and other ................ 98 (320)
Accounts payable .......................... 7,525 3,188
Accrued liabilities ....................... (570) (1,445)
Other .......................................... (6) (1)
-------- ---------
Net cash provided by operating activities 14,613 17,660
-------- ---------
INVESTING ACTIVITIES:
Purchases of equipment ............................ (3,541) (2,723)
Proceeds from sale of equipment ................... 1,494 25
Additional investment in CS-Interglas ............. 0 (2,643)
-------- ---------
Net cash used in investing activities ... (2,047) (5,341)
-------- ---------
FINANCING ACTIVITIES:
Principal payments under long-term debt and
capital lease obligations ...................... (2,301) 0
Proceeds from repayment of loans to management
Investor ....................................... 23 0
Dividends received from ASCO ...................... 0 1,709
-------- ---------
Net cash (used in) provided by
financing activities .................... (2,278) 1,709
-------- ---------
NET CHANGE IN CASH ..................................... 10,288 14,028
CASH, BEGINNING OF PERIOD .............................. 4,064 147
-------- ---------
CASH, END OF PERIOD .................................... $ 14,352 $ 14,175
-------- ---------
-------- ---------
CASH PAID FOR INTEREST ................................. $ 6,030 $ 8,269
-------- ---------
-------- ---------
CASH PAID FOR TAXES .................................... $ 6,372 $ 4,914
-------- ---------
-------- ---------
</TABLE>
Noncash Transaction: The company accrued dividends on preferred stock of $2,416
for the period of December 29, 1996 - June 28, 1997.
See notes to condensed and consolidated financial statements.
25
<PAGE>
CLARK-SCHWEBEL HOLDINGS, INC.
NOTES TO CONDENSED AND CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
1. BASIS OF PRESENTATION
The accompanying consolidated financial statements include the assets,
liabilities and results of operations as of July 4, 1998 and for the period
from January 4, 1998 to July 4, 1998 of Clark-Schwebel Holdings, Inc. The
Company's primary asset is all of the capital stock of Clark-Schwebel, Inc.,
its operating company. The statements also include the assets and liabilities
of the Company as of January 3, 1998, and the Company's results of operations
for the period from December 29, 1996 to June 28, 1997.
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 Article 10 of Regulation S-X of the Securities and Exchange
Commission (SEC). Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. All significant intercompany balances and transactions
have been eliminated. The balance sheet at January 3, 1998 has been derived
from the audited financial statements at that date. In the opinion of
management, all adjustments (consisting of normal recurring accruals)
considered necessary for a fair presentation have been included. Results of
operations for interim periods are not necessarily indicative of results for
the entire year. For further information, refer to the Company's consolidated
financial statements and footnotes for the year ended January 3, 1998
included in the Company's Form 10-K for the year then ended.
SUMMARIZED FINANCIAL INFORMATION---The following table provides
summarized financial information for Clark-Schwebel, Inc., the operating
company, on a stand-alone basis. Clark-Schwebel, Inc. is a wholly owned
subsidiary of Clark-Schwebel Holdings, Inc. and its separate financial
statements are not included or filed separately because management has
determined that they would not be material to investors. The balance sheet
information is as of July 4, 1998 and the income statement information is for
the six months ended July 4, 1998.
<TABLE>
<CAPTION>
1998
--------
<S> <C>
Current assets ................................ $ 72,742
Noncurrent assets ............................. 171,251
--------
Total assets .................................. $243,993
--------
--------
Current liabilities ........................... $ 37,986
Noncurrent liabilities ........................ 135,189
Equity ........................................ 70,818
--------
Total liabilities and equity .................. $243,993
--------
--------
Net sales ..................................... $111,664
Gross profit .................................. 27,118
Income from continuing operations ............. 10,431
Net income .................................... $ 10,431
--------
--------
Dividends paid to Clark-Schwebel Holdings, Inc. $ 2,411
--------
--------
</TABLE>
All assets of Clark-Schwebel, Inc. represent restricted net assets with
the exception of the foreign equity investments and distributions received from
the foreign equity investments. Except in limited circumstances, Clark-Schwebel,
Inc. is prohibited from transferring restricted net assets to Clark-Schwebel
Holdings, Inc. in the form of cash dividends, loans, or advances without the
consent of the lenders under the Credit Agreement. The amount of unrestricted
net assets at July 4, 1998 was $61,295, which represents the book value of the
foreign equity investments ($61,225) and distributions received in the form of
cash from the foreign equity investments, net of restricted payments to increase
equity ownership in foreign equity investments ($70).
26
<PAGE>
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Following is a summary of the significant accounting policies used in
the preparation of the financial statements of the Company.
BASIS OF CONSOLIDATION - The consolidated financial statements include the
accounts of the Company and its operating company and wholly-owned subsidiary,
Clark-Schwebel, Inc. All material intercompany amounts and transactions have
been eliminated.
FISCAL YEAR - The Company's operations are based on a fifty-two or
fifty-three week fiscal year ending on the Saturday closest to December 31.
Accordingly, the interim periods will also be reported on the Saturday closest
to the calendar quarter end. The fiscal year ended January 2, 1999 is referred
to herein as 1998. The fiscal year ended January 3, 1998 is referred to herein
as 1997. The 1998 fiscal year consists of 52 weeks, while the 1997 fiscal year
consisted of 53 weeks.
USE OF ESTIMATES - The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosures of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. These estimates include the allowance for doubtful
accounts receivable and the liabilities for certain long-term benefit plans.
Actual results could differ from such estimates.
REVENUE RECOGNITION - Revenue from product sales is recognized at the
time ownership of the goods transfers to the customer and the earnings process
is complete. This generally occurs when the goods are shipped.
CASH AND CASH EQUIVALENTS - Cash and cash equivalents include cash on
hand and in the bank as well as short term investments held for the purpose of
general liquidity. Such investments normally mature within three months from the
date of acquisition.
ACCOUNTS RECEIVABLE - The Company establishes an allowance for doubtful
accounts based upon factors including the credit risk of specific customers,
historical trends and other information. The Company performs ongoing credit
evaluations of its customers' financial condition and generally requires no
collateral.
INVENTORIES - Inventories are valued at the lower of cost or market. Cost
is determined using the last-in, first-out (LIFO) method for substantially all
inventories.
PROPERTY, PLANT, AND EQUIPMENT - Property, plant, and equipment is recorded
at cost and depreciation is computed on a straight-line basis over the estimated
useful lives of the related assets. Estimated useful lives are as follows:
<TABLE>
<S> <C>
Land improvements .............................. 10 to 20 years
Buildings and improvements ..................... 20 to 40 years
Machinery and equipment ........................ 3 to 11 years
</TABLE>
EQUITY INVESTMENTS - The company owns equity interests in CS-Interglas AG
(headquartered in Germany), Asahi-Schwebel Co., Ltd. (headquartered in Japan)
and Clark Schwebel Tech-Fab Company (located in Anderson, SC), which are
accounted for using the equity method of accounting.
FOREIGN CURRENCY - The foreign equity investments are translated at
year-end exchange rates. Equity income and losses are translated at the average
rate during the year. Cumulative translation adjustments are reflected as a
separate component of stockholders' equity.
27
<PAGE>
POSTRETIREMENT BENEFITS - Postretirement benefits are accounted for
pursuant to Statement of Financial Accounting Standards ("SFAS") No. 106,
EMPLOYERS ACCOUNTING FOR POSTRETIREMENT BENEFITS OTHER THAN PENSIONS. SFAS No.
106 requires that the projected future cost of providing postretirement
benefits, such as health care and life insurance, be recognized as an expense as
employees render service rather than when claims are incurred.
INCOME TAXES - Income taxes are accounted for pursuant to SFAS 109,
ACCOUNTING FOR INCOME TAXES. Under SFAS No. 109, deferred income tax assets and
liabilities represent the future income tax effect of temporary differences
between the book and tax bases of assets and liabilities assuming they will be
realized and settled at the amounts reported in the financial statements. The
provision for income taxes included in the accompanying financial statements is
computed in a manner consistent with SFAS No. 109.
GOODWILL - Goodwill represents the excess of the purchase price over the
fair value of the net assets acquired in the Acquisition of the Company from
Springs Industries in April 1996. Goodwill recorded from the Acquisition was
$45,128, and is being amortized on a straight-line basis over a period of 40
years.
3. LONG-TERM DEBT
Long-term debt consisted of the following:
<TABLE>
<CAPTION>
JANUARY 3, JULY 4,
1998 1998
--------- --------
<S> <C> <C>
Senior Notes, payable in 2006, interest at 10.5% ............... $110,000 $110,000
Senior Debentures, payable in 2007, interest at 12.5% .......... 45,994 45,994
Revolving Credit Agreement, due 2002, interest at variable rates 0 0
--------- --------
Total .......................................................... 155,994 155,994
Less current maturities ........................................ 0 0
--------- --------
Long-term debt ................................................. $155,994 $155,994
--------- --------
--------- --------
</TABLE>
The Senior Notes accrue interest at a fixed rate of 10.5% per annum, with
interest payable semiannually in arrears on April 15 and October 15. The Senior
Notes are not redeemable at the option of the Company prior to April 15, 2001,
except in the event of a public equity offering of the Company, at which time a
portion of the Senior Notes would be redeemable.
The Senior Debentures accrue interest at a fixed rate of 12.5% per annum
with interest payable semiannually in arrears on January 15 and July 15 to the
extent permitted by the Credit Agreement and the indenture governing the Senior
Notes. If the Company is unable to pay interest in cash due to the prohibitions
contained in the Credit Agreement or such indenture, interest on the Senior
Debentures would be payable in additional Senior Debentures. The Senior
Debentures will not be redeemable at the Company's option prior to July 15,
2002, except in the event of a public equity offering of the Company, or a
change of control or subsidiary change of control after January 15, 1998. See
Note 6.
The Company has a $65.0 million Revolving Credit Facility under the Credit
Agreement. The Company pays a quarterly commitment fee equal to 0.25% on the
unused portion of the Revolving Credit Facility, which was $65.0 million at
July 4, 1998.
The Revolving Credit Facility, the Senior Notes, and the Senior Debentures
contain certain restrictive covenants which provide limitations on the Company
with respect to restricted payments, indebtedness, liens, investments,
dividends, distributions, transactions with affiliates, debt repayments, capital
expenditures, mergers, and consolidations. The bank facility covenants also
require maintenance of certain financial ratios. At July 4, 1998, the Company
was in compliance with such covenants. With the exception of the Senior
Debentures, which are obligations of Clark-Schwebel Holdings, Inc., all other
long-term debt is owed at the Clark-Schwebel, Inc., operating company level, and
guaranteed by Clark-Schwebel Holdings, Inc.
No principal payments are required on any long-term debt in the next five
years.
28
<PAGE>
4. INVENTORIES
Inventories consisted of the following:
<TABLE>
<CAPTION>
JANUARY 3, JULY 4,
1998 1998
--------- --------
<S> <C> <C>
Finished goods ......................................... $ 12,301 $ 11,511
Raw material and supplies .............................. 8,854 10,384
In process ............................................. 15,317 15,853
--------- --------
Total at standard cost (which approximates average cost) 36,472 37,748
Less LIFO reserve ...................................... (1,575) (1,949)
--------- --------
Inventories, net ....................................... $ 34,897 $ 35,799
--------- --------
--------- --------
</TABLE>
5. CONVERSION OF CS-INTERGLAS AG ("INTERGLAS") NOTE RECEIVABLE AND OPTION TO
PURCHASE A CONTROLLING INTEREST IN INTERGLAS
On March 31, 1998, the Company notified CS-Interglas of its intent to
convert its 20 million Deutsche mark convertible notes (the "Convertible Notes")
into CS-Interglas common stock. Effective June 30, 1998, the conversion
increased the Company's ownership of the outstanding common stock of Interglas
from 24.9% to 41.9%. The conversion was approved by the German Merger Control
Authorities. Interglas manufactures fiber glass, aramid and carbon fabrics in
Europe, with plants in Germany, Belgium, England and France. CS-Interglas sales
for the fiscal year ended June 30, 1997 were $154 million.
On March 31, 1998, the Company also entered into an agreement (the
"Interglas Purchase Agreement") with the Deschler-Group, the Company's joint
venture partner in Interglas who, following the Company's Convertible Notes
conversion described above, owns 41.9% of the outstanding common stock of
Interglas. Under the Interglas Purchase Agreement, the Company purchased 1.7% of
Interglas' common stock from the Deschler-Group for 4.75 million Deutsche marks
(approximately $2.6 million) on June 30, 1998. This purchase increased the
Company's ownership in Interglas from 41.9% to 43.6%. The Company's purchase of
additional shares in CS-Interglas was approved by the German Merger Control
Authorities. Additionally, pursuant to the Interglas Purchase Agreement, the
Company obtained two options from the Deschler-Group to purchase additional
shares of Interglas held by the Deschler-Group. The first option allows the
Company to purchase an additional 6.4% of Interglas' common stock from the
Deschler-Group on or before January 10, 1999, which, if exercised, will give the
Company control of Interglas. The second option allows the Company to purchase
the remaining shares of Interglas held by the Deschler-Group at any time through
December 31, 1999.
6. SUBSEQUENT EVENTS
HEXCEL CORPORATION ACQUIRES ASSETS OF CLARK-SCHWEBEL
On September 15, 1998, Hexcel Corporation ("Hexcel") acquired certain
assets and operating liabilities of Clark-Schwebel, Inc. In the first
transaction, Vestar Capital Partners and Management Investors sold the stock of
the Clark-Schwebel Holdings, Inc. ("Holdings") to Stamford C-S Acquisition Corp.
("Stamford") for an enterprise value of approximately $488 million, less debt
and transaction expenses. Stamford then immediately sold certain assets and
operating liabilities of Clark-Schwebel, Inc. (the "Company") to Hexcel for
$453.6 million. Stamford will retain $50 million of property, plant and
equipment to be leased to Hexcel under a long-term capital lease.
CLARK-SCHWEBEL AND PARENT COMPANY LAUNCH CASH TENDER OFFERS AND CONSENT
SOLICITATIONS FOR NOTES AND DEBENTURES
As part of the sale described above, the Company and Holdings launched cash
tender offers and consent solicitations for their notes and debentures.
Pursuant to the tender offers, the Company and Holdings, respectively, have
repurchased:
1. all $110,000,000 of the 10 1/2% Senior Notes of the Company due 2006. The
purchase price offered for each $1,000 principal amount tendered is based on a
fixed spread of 50 basis points over the yield of the 6 1/4% U.S. Treasury Notes
due March 31, 2001, plus accrued unpaid interest on the notes, minus the consent
payment described below.
2. all $45,994,000 of the 12 1/2% Senior Debentures of Holdings due 2007. The
purchase price offered for each $1,000 principal amount tendered is $1,067.50
plus accrued unpaid interest on the debentures, minus the consent payment
described below.
Concurrent with the tender offers, the issuers obtained consents to eliminate or
modify substantially all of the convenants in the indentures governing the notes
and the debentures. Holders who tender their notes and debentures were required
to consent to the proposed amendments.
The Company offered to make consent payments of $25 per $1,000 principal amount
to the holders of the notes and debentures who tender their securities and
deliver their consents at or prior to 5:00 p.m. New York City time on the
consent date.
The Company and Holdings purchased the tendered notes and debentures with
borrowings under proceeds from stock sale.
29