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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): April 25, 1997
Noel Group, Inc.
(Exact name of registrant as specified in its charter)
Delaware 0-19737 13-2649262
(State or other (Commission (IRS Employer
jurisdiction of File Number) Identification No.)
incorporation)
667 Madison Avenue, New York, New York 10021
(Address of principal executive offices) (zip code)
Registrant's Telephone Number, including Area Code: (212) 371-1400
N/A
(Former name or former address, if changed since last report)
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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
On April 25, 1997, Noel Group, Inc. ("Noel") distributed (the
"HealthPlan Distribution") approximately 3,754,675 shares of common stock, par
value $.01 per share ("HealthPlan Common Stock"), of HealthPlan Services
Corporation ("HealthPlan Services") at the rate of 0.1838631 shares of
HealthPlan Common Stock for each share of Common Stock, par value $.10 per share
("Noel Common Stock"), of Noel issued and outstanding on the April 18, 1997
record date. The HealthPlan Distribution was made pursuant to the Plan of
Liquidation and Dissolution adopted by the Board of Directors on May 21, 1996
and approved by the shareholders at a Special Meeting of Shareholders held on
March 19, 1997. In addition, in connection with the HealthPlan Distribution,
Noel withheld approximately 521,171 shares of HealthPlan Common Stock for
possible transfer to Noel's warrant and/or option holders upon exercise of their
respective warrants and options. The 3,754,675 shares constituting the
HealthPlan Distribution and the additional 521,171 shares of HealthPlan Common
Stock withheld by Noel were registered on a Registration Statement on Form S-3
filed by HealthPlan Services on March 31, 1997, and declared effective by the
Securities and Exchange Commission on April 17, 1997. The HealthPlan Common
Stock had a value of $14.375 per share on the Distribution Date. As previously
reported on a Form 8-K filed with the Commission, Noel sold to Automatic Data
Processing, Inc. 1,320,000 shares of HealthPlan Common Stock on February 7,
1997, at a price of $20 per share or $26.4 million in the aggregate. The
proceeds of such sale are expected to be used in part to pay the taxes payable
as a result of the HealthPlan Distribution.
HealthPlan Services is a provider of marketing, administrative
and risk management services and solutions for health and other benefit
programs.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(a) Financial statements of business acquired. Not
applicable.
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(b) Pro forma financial information.
NOEL GROUP, INC.
UNAUDITED PRO FORMA STATEMENT OF NET ASSETS IN LIQUIDATION
MARCH 31, 1997
(Dollars in thousands except per share amounts)
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<CAPTION>
Pro Forma Pro Forma
March 31, Adjustments March 31,
1997 (Note 5) 1997
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<S> <C> <C> <C>
Assets
Cash and cash equivalents $22,150 $22,150
Short-term investments 11,739 11,739
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Total cash and short-term investments 33,889 33,889
Investments (Note 2) 141,708 $(53,973) 87,735
Other assets 2,021 2,021
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177,618 (53,973) 123,645
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Liabilities
Accounts payable 169 169
Accrued expenses 9,457 9,457
Income taxes 9,639 9,639
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19,265 19,265
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Net assets in liquidation before options and warrants $158,353 $(53,973) $104,380
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Number of common shares outstanding 20,421,039 20,421,039
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Net assets in liquidation per outstanding share $7.75 $5.11
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Dilution for options and warrants (Note 6):
Net assets in liquidation after options and warrants $172,915 (62,690) $110,225
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Number of common shares outstanding 23,230,588 23,230,588
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Net assets in liquidation per outstanding share $7.44 $4.74
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The accompanying notes are an integral part of this financial statement.
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NOTES TO NOEL GROUP, INC. PRO FORMA FINANCIAL STATEMENTS
AS OF MARCH 31, 1997
(UNAUDITED)
1. PLAN OF COMPLETE LIQUIDATION AND DISSOLUTION:
On March 19, 1997, the shareholders of Noel Group, Inc. ("Noel")
approved a Plan of Complete Liquidation and Dissolution (the "Plan"), which was
adopted by Noel's Board of Directors on May 21, 1996. Under the Plan, Noel will
be liquidated (i) by the sale of such of its assets as are not to be distributed
in kind to its shareholders, and (ii) after paying or providing for all its
claims, obligations and expenses, by cash and in-kind distributions to its
shareholders pro rata and if required by the Plan or deemed necessary by the
Board of Directors, by distributions of its assets from time to time to one or
more liquidating trusts established for the benefit of the then shareholders, or
by a final distribution of its then remaining assets to a liquidating trust
established for the benefit of the then shareholders.
As a result, Noel has adopted the liquidation basis of accounting as of
March 31, 1997. Under the liquidation basis of accounting, assets are stated at
their estimated net realizable values and liabilities are stated at their
anticipated settlement amounts. See Note 2 for a specific discussion of the
methods used to determine estimated net realizable values of investments.
The valuation of assets and liabilities necessarily requires many
estimates and assumptions and there are substantial uncertainties in carrying
out the provisions of the Plan. The actual value of any liquidating
distributions will depend upon a variety of factors including, but not limited
to, the actual market prices of any securities distributed in-kind when they are
distributed, the actual proceeds from the sale of any of Noel's assets, the
ultimate settlement amounts of Noel's liabilities and obligations, actual costs
incurred in connection with carrying out the Plan, including administrative
costs during the liquidation period, the amount of income earned on Noel's cash
and cash equivalents and short-term investments during the liquidation period,
and the actual timing of distributions.
The valuations presented in the accompanying Pro Forma Statement of Net
Assets in Liquidation represent estimates, based on present facts and
circumstances, of the net realizable values of assets and costs associated with
carrying out the provisions of the Plan based on the assumptions set forth in
the accompanying notes. The actual values and costs are expected to differ from
the amounts shown herein and could be higher or lower than the amounts recorded.
Accordingly, it is not possible to predict the aggregate net values ultimately
distributable to shareholders and no assurance can be given that the amount to
be received in liquidation will equal or exceed the price or prices at which the
Common Stock has generally traded or is expected to trade in the future.
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2. INVESTMENTS:
Investments are recorded at their estimated net realizable value in
liquidation. For investments where a public market exists, and the entity is
subject to the periodic reporting requirements of the Securities Exchange Act of
1934, as amended, the estimated liquidation-basis amount is calculated by
multiplying the market price by the number of shares owned without adjustment
for whether the shares owned are registered for sale, any other restriction on
transfer, control premiums, or whether the market has sufficient liquidity to
support the sale of the volume of securities owned at the quoted prices.
This valuation may not be reflective of actual amounts obtained when
and if these investments are distributed or of prices that might be obtained in
actual future transactions. Because of the inherent uncertainty of the valuation
of securities both where a public market exists and where it does not exist, the
amounts shown may materially differ from actual amounts which may be received in
the future.
Noel's holding of the common shares of Carlyle Industries, Inc.
("Carlyle"), Lincoln Snacks Company ("Lincoln") and Staffing Resources, Inc.
("Staffing") are unregistered except for 421,000 shares of Lincoln which are
subject to restrictions under Rule 144.
HealthPlan Services Corporation ("HPS") and Carlyle trade on the New
York Stock Exchange under the symbols HPS and CRL, respectively. Lincoln trades
on the Nasdaq Stock Market's Small Cap Market under the symbol SNAX.
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<CAPTION>
Estimated
Liquidation-Basis
Common Price Per Amount
Shares Share March 31,1997
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(Dollars in thousands, except per share amounts)
<S> <C> <C> <C>
HPS (retained)(a) 521,171 $16.875 $ 8,795
HPS (distributed)(b) 3,754,675 14.375 53,973
Staffing(c) 2,026,104 9.100 18,438
Carlyle preferred stock(d) 22,050
Carlyle common stock(a) 2,205,814 2.109 4,653
Curtis Industries, Inc.(e) 18,456
Ferrovia Novoeste, S.A.(f) 8,000
Lincoln(a) 3,769,755 1.250 4,712
Other holdings 2,631
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Estimated liquidation-basis amount $141,708
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(a) Recorded based on the closing price of the common stock on March 31,
1997. Using the closing market prices on May 7, 1997, these investments
would have been valued as follows (dollars in thousands except per
share amounts):
Estimated
Closing Price Liquidation-Basis Amount
May 7, 1997 May 7, 1997
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HPS (retained) $16.125 $8,404
Carlyle 1.875 4,136
Lincoln 1.125 4,241
(b) Recorded based upon the market price on April 25, 1997, the date of
distribution to Noel shareholders. See Note 5.
(c) Staffing is recorded at the closing over-the-counter bid price of
$13.00 on March 31, 1997, discounted by 30%. The discount for Staffing
reflects the limited trading market for such shares, the fact that
Staffing is not subject to periodic reporting requirements under the
Securities Exchange Act of 1934, as amended, and the fact that Noel's
shares of Staffing are unregistered. The closing bid price on May 7,
1997, discounted by 30% was $8.75 per common share.
(d) Recorded at the liquidation preference of the preferred shares which
includes accumulated, unpaid dividends of $2,737,000 through March 31,
1997. Noel management currently estimates that the Carlyle preferred
stock will be realized at its liquidation preference in connection with
the execution of the Plan. Realization of the liquidation preference is
dependent upon the preferred stock being redeemed by the issuer which
may take more than one year from the date the Plan was approved.
In January 1997, the Pension Benefit Guarantee Corporation ("PBGC")
notified Carlyle that it was considering whether the sale of its thread
division would create an obligation under ERISA to immediately fund, in
whole or in part, Carlyle's unfunded liability to its defined benefit
plan. In February 1997, at the request of the PBGC, Carlyle agreed to
provide the PBGC with at least 30 days advance notice of any proposed
dividend, stock redemption, stockholder buyback or other distribution
to shareholders of any class of equity prior to March 31, 2002. In
consideration of such agreement, the PBGC agreed not to take action
solely with respect to the proposed sale transaction. If, after
receiving notice of a proposed dividend, stock redemption, stockholder
buyback or other distribution to Carlyle shareholders (including Noel),
the PBGC takes the position that Carlyle should fund, in whole or in
part, the unfunded liability to the defined benefit plan and if such
position is upheld, the ability of Carlyle to take any such proposed
action would be adversely affected.
(e) Recorded at the liquidation preference of the Curtis Industries, Inc.,
("Curtis") preferred shares which includes accumulated, unpaid
dividends of $4,446,000 at March 31, 1997. Noel management currently
estimates that the Curtis preferred stock will be realized at its
liquidation preference, in connection with the execution of the Plan.
However, Curtis' loan covenants currently prohibit any payments on the
preferred stock. Realization of the liquidation preference
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is dependent upon the preferred stock being redeemed by the issuer
which may take more than one year from the date the Plan was approved.
However, based on Curtis' current financial position and results of
operations, Noel management believes that the loan restrictions will be
satisfied and that the liquidation value will be realized in a
reasonable period of time following the approval of the Plan. There can
be no assurance that a lesser amount will not be realized. If it is not
possible to satisfy the loan restrictions in a reasonable period of
time following approval of the plan, it is likely that a lesser amount
will be realized.
No value has been assigned to Noel's holding of approximately 62% of
the outstanding shares of Curtis common stock. Curtis has a history of
operating losses, the common stock has a negative book value, and there
is no public market for Curtis common stock. As a result of these
factors, management is unable to reliably estimate the value, if any,
of the Curtis common stock.
(f) Recorded at cost. This investment was made in March and June of 1996.
Ferrovia Novoeste, S.A., ("Novoeste") was organized to acquire a
railroad in Brazil via a privatization transaction. In the absence of a
ready market, Noel management believes that cost is the best indicator
of the value of this investment due to the short period of time that
has elapsed since it was made. Realization of this investment is
dependent upon establishing successful operations as a private company
in Brazil or sale by Noel of its interest in Novoeste and is subject to
the risks of operations in Brazil, including foreign currency risks.
The actual amount realized for this investment could be lower or higher
than the amount recorded.
3. INCOME TAXES:
All income tax accounts have been restated at March 31, 1997, to
reflect the liquidation basis of accounting. The estimated tax liability
reflects income taxes at a 35% rate which would become payable if the assets
were realized and liabilities settled at the amounts shown. The estimate
is subject to significant variation if, among other things, the actual values
of assets distributed or sold varies from current estimates. The components
of the income tax liability at March 31, 1997, are as follows (dollars in
thousands):
Net unrealized gain $10,784
Net realized capital gain 4,503
Net operating loss carryforwards (3,284)
Net operating loss projected (2,364)
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Total income tax liability $ 9,639
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4. ACCRUED EXPENSES:
Accrued expenses include estimates of costs to be incurred in carrying
out the Plan and provisions for known liabilities. These costs include a
provision for costs to be incurred in connection with the distribution and sale
of Noel's investments including legal and investment banking fees and salaries
and related expenses of officers and employees assigned to effect the sale or
distribution of specific investments.
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The actual costs incurred could vary significantly from the related
accrued expenses due to uncertainty related to the length of time required to
complete the Plan, the exact method by which each of Noel's assets will be
realized and contingencies. Projected operating costs through the completion of
Noel's final liquidation are included in accrued expenses net of estimated
interest income of $750,000 on Noel's cash and cash equivalents and short-term
investments. However, reductions in interest rates, the timing of future
distributions and other factors may reduce the amount of interest and investment
income such that an additional accrual for operating expenses may be required in
the future.
5. LIQUIDATING DISTRIBUTION
Pursuant to the Plan, on April 25, 1997, Noel distributed 3,754,675
shares of HPS common stock valued at $14.375 per share for a total value of
$53,973,000 to shareholders of record on April 18, 1997. The distribution rate
was 0.1838631 share of HPS common stock per share of Noel Common Stock.
6. OPTIONS AND WARRANTS
At March 31, 1997, there were 2,840,107 options and warrants
outstanding for the purchase of Noel Common Stock.
The calculation of the fully diluted net assets in liquidation assumes
that the options and warrants, which are currently in the money, are exercised
in accordance with their terms on March 31, 1997. Upon exercise, Noel would
receive $12,569,000 in cash for the net exercise proceeds, issue 2,809,549
shares of Noel Common Stock and generate a $1,993,000 income tax benefit related
to the compensation expense. The Compensation Committee of the Board of
Directors is currently evaluating a number of alternatives for settling the
outstanding options and warrants. The dilutive impact of the alternatives under
consideration on the net asset value per share of Noel Common Stock would be
equal to, or less than the dilution shown.
On the date of Noel's distribution of its HPS common stock to Noel
shareholders, Noel retained 521,171 shares of HPS common stock, the pro rata
number of HPS common shares which would have been distributed had the
outstanding options and warrants to purchase Noel Common Stock been exercised
prior to the date of the distribution. The shares of HPS common stock were
retained for possible transfer to certain option and/or warrant holders in
connection with the exercise or settlement of the outstanding options and
warrants. The pro forma adjustment to the total net assets in liquidation
includes an additional reduction of $8,717,000 which is the value of the HPS
shares to be issued to option and warrant holders upon the exercise of the
options and warrants.
7. COMMITMENTS AND CONTINGENCIES
The Company is involved in various legal proceedings generally
incidental to its businesses. While the result of any litigation contains an
element of uncertainty, management believes that the outcome of any known,
pending or threatened legal proceeding or claim, or all of them combined, will
not have a material adverse effect on the Company's consolidated financial
position.
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(c) Exhibits
2.1 Plan of Complete Liquidation and Distribution
(incorporated by reference to Exhibit A to the Noel
Proxy Statement for the Special Meeting of
Shareholders on March 19, 1997).
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.
NOEL GROUP, INC.
(Registrant)
Dated: May 12, 1997 By:/s/ Todd K. West
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Todd K. West
Vice President-Finance,
Chief Financial Officer,
Secretary and Treasurer
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