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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1998
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
COMMISSION FILE NUMBER 0-19737
NOEL GROUP, INC.
(Exact name of registrant as specified in its charter)
Delaware 13-2649262
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
667 Madison Avenue, New York, New York 10021-8029
(Address of principal executive offices) (Zip Code)
(212) 371-1400
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months, (or for such shorter period that the
registrant was required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
----- -----
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class Outstanding at August 12, 1998
Common Stock - $.10 Par Value 20,567,757
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NOEL GROUP, INC.
INDEX
<TABLE>
<S> <C>
Page No.
PART I - FINANCIAL INFORMATION
Item 1. Statements of Net Assets in Liquidation (Liquidation Basis)
June 30, 1998 and December 31, 1997 3
Statement of Changes in Net Assets in Liquidation (Liquidation Basis)
For the Three and Six Months Ended June 30, 1998 4
Consolidated Statement of Operations (Going-Concern Basis)
For the Three Months Ended March 31, 1997 5
Condensed Consolidated Statement of Cash Flows (Going-Concern Basis)
For the Three Months Ended March 31, 1997 6
Notes to Financial Statements 7
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations 14
PART II - OTHER INFORMATION
Item 1. Legal Proceedings 16
Item 3. Defaults upon Senior Securities 16
Item 4. Submission of Matter to a Vote of Security Holders 16
Item 5. Other Information 16
Item 6. Exhibits and Reports on Form 8-K 17
</TABLE>
2
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PART I - FINANCIAL INFORMATION
ITEM 1. - FINANCIAL STATEMENTS
NOEL GROUP, INC.
STATEMENTS OF NET ASSETS IN LIQUIDATION (Liquidation Basis)
(Dollars in thousands, except per share amounts)
<TABLE>
<CAPTION>
June 30, December 31,
1998 1997
-------- ------------
(Unaudited)
<S> <C> <C>
ASSETS
Cash and cash equivalents ............................... $ 4,563 $ 3,493
Short-term investments................................... 14,778 9,697
------- --------
Total cash and short-term investments ................... 19,341 13,190
Investments (Note 2) .................................... 42,844 58,183
Income taxes (Note 3) ................................... 1,348 5,134
Other assets (Note 2) ................................... 3,712 12,405
------- -------
Total assets ............................................ 67,245 88,912
------- -------
LIABILITIES
Accounts payable ........................................ 6 281
Accrued expenses (Note 4) ............................... 3,801 5,070
------- -------
Total liabilities ....................................... 3,807 5,351
------- -------
Net assets in liquidation ............................... $63,438 $83,561
======= =======
Number of common shares outstanding ..................... 20,567,757 20,567,757
========== ==========
Net assets in liquidation per outstanding share ......... $3.08 $4.06
===== =====
</TABLE>
The accompanying notes are an integral part of these financial statements.
3
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NOEL GROUP, INC.
STATEMENT OF CHANGES IN NET ASSETS IN LIQUIDATION (Liquidation Basis)
For the Three and Six Months Ended June 30, 1998
(Unaudited, dollars in thousands)
<TABLE>
<S> <C>
Net assets in liquidation at January 1 .............................................. $83,561
Changes in estimated liquidation values of assets and liabilities (Note 5) .......... 1,413
Liquidating distribution (Note 6) ................................................... (14,397)
-------
Net assets in liquidation at March 31 ............................................. 70,577
Changes in estimated liquidation values of assets and liabilities (Note 5) .......... 2,116
Liquidating distribution (Note 6) ................................................... (9,255)
-------
Net assets in liquidation at June 30 ................................................ $63,438
=======
</TABLE>
The accompanying notes are an integral part of this financial statement.
4
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NOEL GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS (Going-Concern Basis)
For the Three Months Ended March 31, 1997
(Dollars in thousands, except per share amounts)
<TABLE>
<S> <C>
SALES........................................................................... $38,473
-------
COST AND EXPENSE ITEMS:
Cost of sales................................................................... 20,711
Selling, general, administrative and other expenses............................ 17,220
Loss on disposal of Carlyle Industries, Inc.'s thread division.................. 4,364
Depreciation and amortization................................................... 862
-------
43,157
-------
Operating loss ................................................................. (4,684)
-------
OTHER INCOME (EXPENSE):
Gain on sale of HealthPlan Services Corporation ............................... 15,098
Other income ................................................................... 237
Loss from equity investments.................................................... (354)
Interest expense................................................................ (1,670)
Minority interest............................................................... 501
-------
13,812
-------
Income from continuing operations before income taxes........................... 9,128
Provision for income taxes ..................................................... (10,437)
-------
Net loss................................................................... $(1,309)
=======
BASIC EARNINGS PER SHARE FROM:
Net loss .................................................................. $(0.06)
======
Weighted average shares outstanding ............................................ 20,402,891
==========
</TABLE>
The accompanying notes are an integral part of this financial statement.
5
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NOEL GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (Going-Concern Basis)
For the Three Months Ended March 31, 1997
(Dollars in thousands)
<TABLE>
<S> <C>
Net Cash Used for Operating Activities....................................... $(5,949)
-------
Cash Flows From Investing Activities:
Purchases of short-term investments, net .................................... (2,752)
Sales of investments ........................................................ 26,400
Sales of investments ........................................................ 51,924
Purchases of property, plant and equipment .................................. (787)
Other, net .................................................................. (148)
-------
Net cash provided from investing activities.................................. 74,637
-------
Cash Flows Used for Financing Activities:
Borrowings from revolving credit line and long-term debt..................... 41,121
Repayments of revolving credit line and long-term debt....................... (76,698)
Issuance of common stock, net................................................ 910
Change in other long-term liabilities........................................ 90
Other, net................................................................... (19)
-------
Net cash used for financing activities....................................... (34,596)
-------
Effect of exchange rates on cash............................................. (38)
-------
Net increase in cash and cash equivalents ................................... $34,054
=======
Supplemental Disclosure of Cash Flow Information:
Interest paid ............................................................... $1,993
======
Taxes paid .................................................................. $43
===
</TABLE>
The accompanying notes are an integral part of this financial statement.
6
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NOEL GROUP, INC.
NOTES TO FINANCIAL STATEMENTS
This Report on Form 10-Q contains, in addition to historical information,
certain forward-looking statements, including those regarding valuation of
assets and liabilities. Such statements, including, as more fully set forth
below, those relating to management's estimates of the net value of the
Company's assets in liquidation, involve certain risks and uncertainties,
including, without limitation, those risks and uncertainties discussed below.
Should one or more of these risks or uncertainties materialize, actual outcomes
may vary materially from those indicated.
LIQUIDATION BASIS STATEMENTS
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 is
being 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 of the approval of the Plan by the shareholders, Noel
adopted the liquidation basis of accounting as of April 1, 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 distribution
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 or other disposition 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 and the actual timing of
distributions.
The valuations presented in the accompanying Statements of Net Assets in
Liquidation represent management's 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, which assumptions management believes to be reasonable,
based on present facts and circumstances. 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 Noel Common Stock has generally traded or is
expected to trade in the future.
7
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2. INVESTMENTS AND OTHER ASSETS
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 per share by the number of common 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
estimated liquidation basis amounts shown may materially differ from the actual
amounts which may be received in the future.
Noel's holding of the common shares of Career Blazers Inc. ("Career
Blazers", formerly Staffing Resources, Inc.) is unregistered.
<TABLE>
<CAPTION>
Estimated
Common Liquidation
Shares Price Per Basis Amount
Owned Share June 30, 1998
----- -------- -------------
(Dollars in thousands, except per share amounts)
<S> <C> <C> <C>
Career Blazers (a) 2,026,104 $11.000 $22,287
Carlyle Industries, Inc. ("Carlyle") preferred stock (b) 10,788
Ferronorte Participacoes, S.A. ("Ferronorte") (c) 9,453
Other holdings 316
-------
Total investments at estimated liquidation basis
amounts $42,844
=======
</TABLE>
(a) Recorded based upon Noel's review of an analysis completed by Career
Blazers and its independent advisors. This analysis determined Career
Blazers' value based upon actual and projected results in relation to
comparable companies. Compared to the quoted price on the limited trading
market for Career Blazers shares, Noel believes that, at the present time,
this analysis is a better estimate of the value in liquidation of its
Career Blazers shares at June 30, 1998, because the trading market for
Career Blazers is so limited, Career Blazers is not subject to periodic
reporting requirements under the Securities Exchange Act of 1934, as
amended, and Noel's shares of Career Blazers are not registered to trade in
this market. This valuation may not be reflective of actual amounts
obtained when and if this investment is distributed or of prices that might
be obtained in an actual future transaction. The closing over-the-counter
bid price on June 30, 1998 and July 31, 1998, was $6.50 and $4.50 per
common share of Career Blazers, respectively. Noel management is currently
assessing the most advantageous way to realize its investment in Career
Blazers and does not expect a transaction to occur until the first quarter
of 1999, at the earliest.
8
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Subsidiaries of Staffing Resources, Inc. and Career Blazers Personnel
Services, Inc. and it affiliated companies merged on December 31, 1997, to
form Career Blazers. The merged company was renamed Career Blazers
effective March 31, 1998. Career Blazers offers training, temporary and
permanent staffing services across the Northeastern, Mid-Atlantic,
Southeastern, Southwestern and Rocky Mountain regions of the United States,
as well as Canada and Puerto Rico.
(b) Recorded based on management's assessment of a variety of market factors
including, but not limited to, comparisons to transactions of publicly
traded preferred stock, and an evaluation of the projected operating
results of Carlyle. Because of the unique characteristics of the investment
in Carlyle and non-marketability of the Carlyle preferred stock, the
valuation of this investment is highly judgmental and subject to an unusual
degree of uncertainty. The eventual amount realized in an actual
transaction may be substantially less than the recorded value. Also, for
various reasons, included those stated below, there may be delays in
realizing Noel's holding of Carlyle preferred stock.
On June 22, 1998, Carlyle redeemed 9,391,929 shares of its preferred stock
which Noel held along with accrued dividends of $2,211,521 for a total
payment of $11,603,450. The redeemed shares were valued at approximately
$10,212,000 on the March 31, 1998, Statement of Net Assets in Liquidation.
Carlyle financed this redemption with newly obtained bank financing.
Following the redemption, Noel holds 9,929,908 shares of Carlyle Series B
Preferred Stock which has an annual dividend rate of 6%. As of June 30,
1998, Carlyle is in default on its obligation to Noel to redeem $6,059,000
of the liquidation preference of its preferred stock plus accumulated
unpaid dividends of approximately $2,353,000, to the extent of its legally
available funds.
Noel and Carlyle are engaged in discussions with a view of satisfying
Carlyle's remaining obligations to the holders of the preferred stock in
accordance with the terms of its charter and consistent with its resources.
Discussions have dealt with the amount and timing of payments and possible
modifications of the terms of the preferred stock. Any such modifications
would require the agreement of Carlyle and the holders of the preferred
stock. Carlyle has informed Noel that it intends to fulfill its obligations
to its preferred shareholders, as required by Carlyle's charter, to the
extent that Carlyle has cash resources in excess of those required to
operate its business. Carlyle has also informed Noel that, as Carlyle
believes that it does not currently have such excess resources, its ability
to make payments on account of the preferred stock in the future will
depend on Carlyle's future cash flow, the timing of the settlement of the
liabilities recorded on its financial statements, the outcome of its
discussions with Noel described above, the ability of Carlyle to obtain
additional financing and compliance with Carlyle's new credit facility
which presently permits only specified payment amounts including 25% of
"excess cash flow", as defined in the agreement.
The Carlyle board of directors is continuing its review of Carlyle's
strategic alternatives, including, among other things, the sale of Carlyle
through merger, sale of stock or otherwise, possible acquisitions by
Carlyle and possible refinancing. Any such transaction and/or the
discussions between the companies may result in the modification of the
terms of the preferred stock or in the acceleration of the redemption of
the preferred stock and/or the reduction in the total amounts eventually
received by Noel for its holdings of Carlyle preferred stock.
9
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In addition, Carlyle has agreed to notify the Pension Benefits Guaranty
Corporation ("PBGC") prior to making any additional dividend or redemption
payments. Carlyle's decision to make any such payments will depend on the
successful resolution of any issues which may arise with the PBGC relating
to Carlyle's unfunded liability to its benefit plan.
(c) Recorded at a 40% discount to the valuation ascribed to Noel's holding in
Ferrovia Novoeste, S.A. ("Novoeste") in the reorganization of Novoeste and
Ferronorte, S.A. Ferrovia Norte Brasil to form Ferronorte in June 1998. The
valuation was based on a third party appraisal and the discount reflects
illiquidity and the risks of operating in Brazil. Ferronorte now holds two
concessions to operate privatized railroads in Brazil. Realization of this
investment is dependent upon a sale by Noel of its interest in Ferronorte
and is subject to the risks of operating in Brazil, including foreign
currency risk. The actual amount realized for this investment could be
lower or higher than the amount recorded.
Other Assets:
The components of other assets are as follows (dollars in thousands):
<TABLE>
<CAPTION>
June 30, December 31,
1998 1997
------- ------------
<S> <C> <C>
Receivable for Lincoln Snacks Company
("Lincoln") sale $3,040 $ --
Note receivable for Curtis Industries, Inc.
("Curtis") sale -- 10,454
TDX distribution receivable -- 892
Other 672 1,059
------ -------
$3,712 $12,405
====== =======
</TABLE>
On June 8, 1998, Noel signed an agreement to sell 3,569,755 shares of
Lincoln common stock to Brynwood Partners III, L.P. Under the agreement, Noel
received $4,500,000 in cash and a 6% interest bearing note for $2,639,510. The
payment of the note and accrued interest and proceeds of $400,000 for the sale
of the remaining 200,000 Lincoln shares owned by Noel was received in July 1998.
On November 6, 1997, an agreement was signed merging Curtis with a
subsidiary of Paragon Corporate Holdings, Inc. Under the agreement, Noel
received $14,712,000 for its entire holding of Curtis, comprising $4,258,000
in cash and a two-year 7% interest bearing note for $10,454,000. This note was
repaid at face value plus accrued interest in April 1998.
3. INCOME TAXES
The income tax asset at June 30, 1998, reflects the liquidation basis of
accounting. Estimated income taxes are calculated at a 35% rate on the taxable
income and losses which would be generated if the assets were realized and
liabilities settled at the amounts shown. This estimate is subject to
significant variation if, among other things, the actual values of assets
distributed, sold or otherwise disposed of varies from current estimates. The
income tax asset is projected to be realized through the filing of the 1997,
1998 and 1999 tax returns.
10
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The components of the income tax asset are as follows (dollars in
thousands):
<TABLE>
<CAPTION>
June 30, December 31,
1998 1997
-------- ------------
<S> <C> <C>
Net unrealized capital gain $ (623) $ (222)
Net realized capital gain (141) (16,130)
Realized net operating loss carryforwards 115 3,280
Loss from the settlement of recorded
liabilities 1,426 8,442
Estimated taxes paid in 1997 and refund
carryforwards -- 9,764
Estimated tax refund due for 1997 571 --
------ --------
Net income tax asset $1,348 $ 5,134
====== ========
</TABLE>
Noel had additional net operating loss carryforwards of approximately
$8,117,000 at December 31, 1997, which expire from 2003 through 2011. Noel has
undergone "ownership changes" within the meaning of Section 382 of the Internal
Revenue Code of 1986, as amended. Consequently, future utilization of these
Federal tax loss carryforwards is significantly limited. If Noel's assets and
liabilities are realized at the values recorded at June 30, 1998, these
carryforwards will not be realizable because Noel will not generate future
taxable income.
In February 1998, Noel received $3,531,000 as a partial refund of the
over-payment of estimated taxes paid to the IRS in 1997.
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, sale or
other disposition of Noel's investments including legal and investment banking
fees and salaries and related expenses of officers and employees assigned to
effect the distribution, sale or other disposition of specific investments.
The components of accrued expenses are as follows (dollars in thousands):
<TABLE>
<CAPTION>
June 30, December 31,
1998 1997
-------- ------------
<S> <C> <C>
Salaries and benefits $1,705 $2,414
Rent and other expenses 991 1,147
Professional fees 605 823
Other, net 500 686
------ ------
$3,801 $5,070
====== ======
</TABLE>
11
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This projection of accrued expenses assumes that Noel will complete its
operations by March 31, 1999. The actual costs incurred could vary significantly
from the related accrued expenses due to uncertainty related to the actual
length of time required to complete the Plan, the exact method by which each of
Noel's assets will be realized and contingencies.
For the six months ended June 30, 1998, Noel's cash operating expenses
exceeded the return on its cash and cash equivalents and short-term investments
by $1,623,000.
Noel's cash operating expenses for the six months ended June 30, 1998,
were as follows (dollars in thousands):
<TABLE>
<S> <C>
Salaries and benefits $ 839
Rent and other expenses 761
Professional fees 311
------
$1,911
======
</TABLE>
5. CHANGES IN ESTIMATED LIQUIDATION VALUES OF ASSETS AND LIABILITIES
The changes in the estimated liquidation values of assets and
liabilities were as follows (dollars in thousands):
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, 1998 June 30, 1998
------------------ ----------------
<S> <C> <C>
To adjust investments to estimated
liquidation values, net $2,281 $1,603
To adjust estimated accrued
expenses (851) (887)
To adjust estimated income taxes 653 (255)
To adjust other assets 33 3,068
-------- -------
Total adjustments $2,116 $3,529
====== ======
</TABLE>
6. LIQUIDATING DISTRIBUTIONS
On April 25, 1997, Noel distributed 3,754,675 shares of common stock of
HealthPlan Services Corporation ("HPS") valued at $14.375 per HPS share for a
total value of $53,974,000 to Noel shareholders of record at the close of
business on April 18, 1997. The distribution rate was 0.1838631 of a share of
HPS common stock per share of Noel Common Stock and the value of the
distribution was $2.6430 per share of Noel Common Stock.
On October 6, 1997, Noel distributed 412,601 shares of HPS common stock
valued at $21.1565 per HPS share for a total value of $8,729,000 to Noel
shareholders of record at the close
12
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of business on September 29, 1997. The distribution rate was 0.02006 of a share
of HPS common stock per share of Noel Common Stock and the value of the
distribution was $.4244 per share of Noel Common Stock.
On December 1, 1997, Noel distributed 2,205,814 shares of Carlyle common
stock valued at $1.40 per Carlyle share for a total value of $3,088,000 to Noel
shareholders of record at the close of business on November 21, 1997. The
distribution rate was .107246 of a share of Carlyle common stock per share of
Noel Common Stock and the value of the distribution was $.1501 per share of Noel
Common Stock.
On March 27, 1998, Noel distributed $.70 per outstanding Noel share for
a total amount of $14,397,000 to shareholders of record at the close of business
on March 20, 1998.
On April 30, 1998, Noel distributed $.45 per outstanding Noel share for
a total amount of $9,255,000 to shareholders of record at the close of business
on April 22, 1998.
On July 20, 1998, Noel declared a $.92 distribution per outstanding Noel
share for a total amount of $18,922,336 to shareholders of record at the close
of business on July 31, 1998. The payable date of this distribution is August
14, 1998.
7. COMMITMENTS AND CONTINGENCIES
Certain of Noel's holdings are involved in various legal proceedings
generally incidental to their 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 Noel's financial position.
GOING-CONCERN BASIS STATEMENTS
8. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
GENERAL
Prior to the approval of the Plan, Noel conducted its principal
operations through small and medium-sized companies in which Noel held
controlling or other significant equity interests.
Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted pursuant to the rules and regulations
of the Securities and Exchange Commission. It is recommended that these
consolidated financial statements be read in conjunction with the consolidated
financial statements and the notes thereto included in Noel's 1997 annual
report.
The consolidated financial statements include the accounts of Noel and
its subsidiaries, Carlyle, Curtis, and Lincoln, (collectively the "Company"),
after the elimination of significant intercompany transactions.
13
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ITEM 2. - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
This Quarterly Report on Form 10-Q contains, in addition to historical
information, certain forward-looking statements regarding future financial
condition and results of operations. Such statements involve certain risks and
uncertainties, including, without limitation, those risks and uncertainties
discussed below and in the footnotes to the liquidation basis financial
statements. Should one or more of these risks or uncertainties materialize,
actual outcomes may vary materially from those indicated.
LIQUIDITY AND CAPITAL RESOURCES:
On June 30, 1998, Noel had cash and cash equivalents and short-term
investments of $19.3 million. The future cash needs of Noel will be dependent on
the implementation of the Plan. It is management's intention that Noel's
liquidity will be available to fund Noel's working capital requirements and to
meet its other obligations through the remainder of the liquidation period.
Pursuant to the Plan, subject to the payment or the provision for payment of the
Company's obligations, the cash proceeds of any asset sales together with other
available cash will be distributed from time to time pro rata to the holders of
the Common Stock on record dates selected by the Board of Directors with respect
to each such distribution. Noel believes that its cash and cash equivalents and
short-term investments are sufficient to fund its working capital requirements
through the completion of the Plan.
In February 1998, Noel received a $3.5 million refund of estimated taxes
paid during 1997. On March 27, 1998, Noel paid a liquidating distribution of
$.70 per outstanding share of Common Stock to shareholders of record at the
close of business on the March 20, 1998 record date, for a total of $14.4
million.
On April 1, 1998, Noel was repaid $10.5 million, the face amount of a
note from Paragon Corporate Holdings, Inc. Noel had received this note as
partial payment for the sale of its interest in Curtis in November 1997.
On April 30, 1998, Noel paid a liquidating distribution of $.45 per
outstanding share of Common Stock to shareholders of record at the close of
business on the April 22, 1998 record date, for a total of $9.3 million.
On June 6, 1998, Noel received $4.5 million as partial payment for the
sale of its holding in Lincoln.
On June 23 1998, Noel received $11.6 million from the redemption of
9,391,929 shares of Carlyle preferred stock and $2.2 million of accrued
dividends.
On July 20, 1998, Noel declared a liquidating distribution of $.92 per
outstanding share of Common Stock to shareholders of record at the close of
business on the July 31, 1998 record date. The total distribution of $18.9
million is payable on August 14, 1998.
Sources of potential liquidity include the sale or refinancing of
current holdings, dividends and preferred stock redemptions from current
holdings. Noel does not currently receive, nor expect to receive in the
immediate future, cash dividends from any of its holdings.
14
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STATEMENTS OF NET ASSETS IN LIQUIDATION:
Cash and cash equivalents and short-term investments increased by
$6.2 million. In addition to funding operating expenses, Noel paid cash
liquidating distributions totaling $23.7 million. During the six months ended
June 30, 1998, Noel received $11.6 million from the redemption of Carlyle
preferred stock, $10.5 million as repayment of the note from the sale of Curtis,
$4.5 million from the sale of Lincoln, a $3.5 million refund of estimated taxes
paid in 1997, and a payment from TDX Corporation of $.9 million
distribution receivable.
Investments decreased $15.3 million primarily because of the sale of
Lincoln for cash and a note totalling $7.5 million, and the redemption of
Carlyle preferred stock for $11.6 million. During 1998, the liquidation value
of Lincoln increased by $2.1 million and the valuation of Ferronorte increased
by $1.5 million.
The income tax asset decreased by $3.8 million primarily as a result of
Noel's receipt of a $3.5 million refund of estimated taxes paid in 1997, and
the decreased tax liability of $.3 million related to an increase in accrued
liabilities and the recognition of the dividend received deduction for accrued
dividends on Carlyle preferred stock.
STATEMENT OF CHANGES IN NET ASSETS IN LIQUIDATION:
Three Months Ended June 30, 1998
The increase in estimated liquidation values of assets and liabilities
of $2.1 million primarily relates to the increase of $1.4 million in the
liquidation value of Carlyle preferred stock redeemed in June and the write-up
of Ferronorte by $1.5 million.
Three Months Ended March 31, 1998
The increase in estimated liquidation values of assets and liabilities
of $1.4 million primarily relates to the increase in the liquidation value of
Lincoln of $2.1 million offset by the related increase in the tax liability of
$.7 million.
YEAR 2000 ISSUES
The Company does not expect to be in existence after 1999 and
therefore has not fully assessed its Year 2000 issues. In the event that Noel
operates beyond 1999, management does not believe that the consequences of its
Year 2000 issues would have a material effect on the Company's financial
condition.
15
<PAGE>
<PAGE>
PART II - OTHER INFORMATION
Item 1. - Legal Proceedings
There are no pending material legal proceedings to which Noel or its
subsidiaries is a party or to which any of their property is subject, other than
ordinary routine litigation incidental to their respective businesses, other
than as disclosed in Noel's Form 10-K for the year ended December 31, 1997.
Item 3. - Defaults upon Senior Securities
a) None
b) Noel is the holder of 9,929,908 shares (approximately 93%) of Series B
Preferred Stock of Carlyle. Carlyle is in default of its mandatory
redemption obligations to the holders of such Preferred Stock to the
extent of its legally available funds. As of June 30, 1998, the accrued
but unpaid dividends amounted to approximately $1,554,000.
Item 4. - Submission of Matters to a Vote of Security Holders
The Annual Meeting of Shareholders (the "Meeting") was held on May 19,
1998. Meeting the shareholders voted upon the election of ten directors, with
all ten nominees being elected. The election of directors was the only matter
voted upon at the Meeting, with the votes being cast as set for the below. No
other director's term of office continued after the Meeting. There were no
abstentions and broker non-votes.
<TABLE>
<CAPTION>
Name Number of Votes For Number of Votes Withheld
<S> <C> <C>
Joseph S. DiMartino 18,985,159 25,142
Herbert M. Friedman 18,985,259 25,042
James K. Murray, Jr. 18,985,571 24,730
Samuel F. Pryor, III 18,985,571 24,730
Stanley R. Rawn, Jr. 18,985,571 24,730
James A. Stern 18,985,959 24,342
</TABLE>
Item 5. - Other Information
Any shareholder proposal submitted with respect to Noel's 1999 Annual
Meeting of shareholders, which proposal is submitted outside the requirements of
Rule 14a-8 under the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), will be considered untimely for purposes of Rule 14a-4 and 14a-5
promulgated pursuant to the Exchange Act if notice thereof is not received by
Noel prior to March 8, 1999.
16
<PAGE>
<PAGE>
Item 6. - Exhibits and Reports on Form 8-K
a) Exhibits
<TABLE>
<CAPTION>
Item No. Item Title Exhibit No.
- -------- ---------- -----------
<S> <C> <C>
(2) Plan of Complete Liquidation and Dissolution of Noel Group, Inc. (a)
(3) Articles of Incorporation and By-Laws.
(A) Certificate of Incorporation, as amended. (b)
(B) By-Laws, as amended and restated. (c)
(4) Instruments defining the rights of security holders, including indentures.
(A) Excerpts from Certificate of Incorporation, as amended. (b)
(B) Excerpts from By-Laws, as amended and restated. (c)
(10) (A) Stock Purchase Agreement dated June 8, 1998, by and between
Brynwood Partners III, L.P. and Noel Group, Inc. (d)
(B) Letter Agreement dated June 8, 1998, by and between Brynwood
Partners I and Noel Group, Inc. (d)
(C) Promissory Note and Pledge Agreement dated June 8, 1998.
(11) Statement re: computation of per share earnings is not required because
the relevant computations can be clearly determined from the material
contained in the financial statements included herein.
(15) None.
(18) None.
(19) None.
(22) None.
(23) None.
(24) None.
(27) Financial Data Schedule.
(99) None.
</TABLE>
- -------------------------
17
<PAGE>
<PAGE>
(a) This exhibit was filed as an exhibit to Noel's Proxy Statement
for the Special Meeting of Shareholders held on March 19, 1997,
which exhibit is incorporated herein by reference.
(b) These exhibits were filed as exhibits to Noel's Registration
Statement on Form S-1, Registration No. 33-44178, effective
January 29, 1992, and are incorporated herein by reference.
(c) These exhibits were filed as exhibits to Noel's Annual Report on
Form 10-K for the fiscal year ended December 31, 1994, and are
incorporated herein by reference.
(d) These exhibits were filed as exhibits to a Current Report on Form
8-K filed with the Securities and Exchange Commission by Noel
Group, Inc. on June 22, 1998, which exhibits are incorporated
herein by reference.
b) Reports on Form 8-K
The following reports on Form 8-K were filed by the registrant during
the quarter for which this report is filed:
(i) A Report on Form 8-K was filed by the registrant on April 8,
1998, reporting the liquidating distribution of $0.70 per share
of registrant's outstanding common stock payable to stockholders
or record as of March 20,1998, which distribution was paid on or
about March 27, 1998.
(ii) A Report on Form 8-K was filed by the registrant on May 15, 1998,
reporting the liquidating distribution of $0.45 per share of
registrant's outstanding common stock payable to stockholders of
record as of April 22, 1998, which distributions was paid on or
about April 30,1998.
(iii) A Report on Form 8-K was filed by the registrant on June 22,
1998, reporting among other things, the sale by the registrant of
3,569,755 shares of the common stock of Lincoln Snacks Company at
a price of $2.00 per share.
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Signature
NOEL GROUP, INC.
Date: August 14, 1998
By: /s/ Todd K. West
------------------------------------
Todd K. West
Vice President - Finance and
Secretary (As both a duly authorized
officer of Registrant and as chief
financial officer of Registrant).
18
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C> <C>
<PERIOD-TYPE> 6-MOS 12-MOS
<FISCAL-YEAR-END> DEC-31-1998 DEC-31-1998
<PERIOD-START> JAN-01-1998 JAN-01-1997
<PERIOD-END> JUN-30-1998 DEC-31-1997
<CASH> 0<F1> 0<F1>
<SECURITIES> 0<F1> 0<F1>
<RECEIVABLES> 0<F1> 0<F1>
<ALLOWANCES> 0<F1> 0<F1>
<INVENTORY> 0<F1> 0<F1>
<CURRENT-ASSETS> 0<F1> 0<F1>
<PP&E> 0<F1> 0<F1>
<DEPRECIATION> 0<F1> 0<F1>
<TOTAL-ASSETS> 0<F1> 0<F1>
<CURRENT-LIABILITIES> 0<F1> 0<F1>
<BONDS> 0<F1> 0<F1>
<COMMON> 0<F1> 0<F1>
0<F1> 0<F1>
0<F1> 0<F1>
<OTHER-SE> 0<F1> 0<F1>
<TOTAL-LIABILITY-AND-EQUITY> 0<F1> 0<F1>
<SALES> 0<F2> 0
<TOTAL-REVENUES> 0<F2> 0
<CGS> 0<F2> 0
<TOTAL-COSTS> 0<F2> 0
<OTHER-EXPENSES> 0<F2> 0
<LOSS-PROVISION> 0<F2> 0
<INTEREST-EXPENSE> 0<F2> 0
<INCOME-PRETAX> 0<F2> 0
<INCOME-TAX> 0<F2> 0
<INCOME-CONTINUING> 0<F2> 0
<DISCONTINUED> 0<F2> 0
<EXTRAORDINARY> 0<F2> 0
<CHANGES> 0<F2> 0
<NET-INCOME> 0<F2> 0
<EPS-PRIMARY> 0<F2> 0
<EPS-DILUTED> 0<F2> 0
<FN>
<F1> See June 30, 1998 Statement of Net Assets in Liquidation
<F2> See June 30, 1998 Statement of Changes in Net Assets in Liquidation
</FN>
</TABLE>
