<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q/A No. 2
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD YEAR ENDED
JUNE 30, 2000 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 333-64669
GLOBE HOLDINGS, INC.
(Exact name of registrant as specified in its charter)
Massachusetts 04-2017769
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
456 Bedford Street, Fall River, Massachusetts 02720
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 508/674-3585
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
--- ---
As of June 30, 2000, the Registrant had 2,179,150 shares of
Common Stock outstanding.
<PAGE>
TABLE OF CONTENTS
PART I FINANCIAL INFORMATION PAGE
Item 1. Financial Statements
Condensed Consolidated Balance Sheets - June 30, 2000 (Unaudited)
and December 31, 1999.....................................................1
Condensed Consolidated Statements of Income (Unaudited) -
Three Months Ended June 30, 2000 and 1999; Six Months Ended June 30,
2000 and 1999.............................................................2
Condensed Consolidated Statements of Cash Flows (Unaudited) -
Six Months Ended June 30, 2000 and June 30, 1999..........................3
Notes to Condensed Consolidated Financial Statements (Unaudited) -
June 30, 2000.............................................................4
Item 2. Management's Discussion and Analysis of Financial Conditions and
Results of Operations..................................................7
Item 3. Quantitative and Qualitative Disclosure about Market Risk..............9
PART II OTHER INFORMATION
Item 1. Legal Proceedings......................................................9
Item 2. Changes in Securities and Use of Proceeds.............................10
Item 3. Defaults Upon Senior Securities.......................................10
Item 4. Submission of Matters to a Vote of Security Holders...................10
Item 5. Other Information.....................................................10
Item 6. Exhibits and Reports on Form 8-K......................................10
<PAGE>
PART I
------
GLOBE HOLDINGS, INC.
Condensed Consolidated Balance Sheets
(Dollars in thousands)
<TABLE>
<CAPTION>
(Unaudited) (Note A)
June 30 December 31
2000 1999
--------- ----------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 4,320 $ 3,564
Available-for-sale securities 1,990 --
Accounts receivable, net 28,383 37,136
Inventories 14,655 17,791
Prepaid taxes and other assets 3,114 2,554
--------- ---------
Total current assets 52,462 61,045
Property, plant and equipment 170,689 168,610
Less accumulated depreciation and amortization (87,749) (83,836)
--------- ---------
Net property, plant and equipment 82,940 84,774
Other assets 9,173 10,526
--------- ---------
Total assets $ 144,575 $ 156,345
========= =========
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Accounts payable $ 4,340 $ 6,278
Accrued interest 6,322 8,029
Other current liabilities 7,161 6,859
Note payable 25,900 20,000
Long-term debt obligations due within one year 112,225 115,000
Senior Subordinated Notes 150,000 150,000
Senior Discount Notes 31,894 29,738
--------- ---------
Total current liabilities 337,842 335,904
Other long-term liabilities 6,158 6,674
Stockholders' deficit:
Common stock, Class A, voting, $.01 par value;
5,000,000 shares authorized 22 22
Paid in capital 44,017 44,017
Retained earnings (244,102) (230,272)
Accumulated other comprehensive income 638 --
--------- ---------
Total stockholders' deficit (199,425) (186,233)
--------- ---------
Total liabilities and stockholders' deficit $ 144,575 $ 156,345
========= =========
</TABLE>
See notes to condensed consolidated financial statements.
<PAGE>
GLOBE HOLDINGS, INC.
Condensed Consolidated Statements of Income
(Dollars in thousands)
<TABLE>
<CAPTION>
Three months ended Six months ended
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
June 30 June 30 June 30 June 30
2000 1999 2000 1999
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Net Sales $ 31,794 $ 44,374 $ 73,274 $ 87,958
Cost of sales 23,615 29,996 52,414 59,925
--------- --------- --------- ---------
Gross Margin 8,179 14,378 20,860 28,033
Selling, general and administrative expenses 8,928 5,565 15,237 11,735
Research and development expenses 1,092 1,180 1,801 2,335
Restructuring costs 336 -- 2,542 --
--------- --------- --------- ---------
Operating income (loss) (2,177) 7,633 1,280 13,963
Interest, net 8,717 7,996 17,281 15,833
Gain on available-for-sale securities (1,353) -- (1,353) --
Miscellaneous 368 (167) 182 (217)
--------- --------- --------- ---------
Loss before income taxes (9,909) (196) (14,830) (1,653)
Expense (benefit) for income taxes 1,000 (82) (1,000) (589)
--------- --------- --------- ---------
Net income (loss) $ (10,909) $ (114) $ (13,830) $ (1,064)
========= ========= ========= =========
</TABLE>
See notes to condensed consolidated financial statements.
<PAGE>
GLOBE HOLDINGS, INC.
Condensed Consolidated Statements of Cash Flows
(Dollars in thousands)
<TABLE>
<CAPTION>
Six Months Ending
--------------------------
(Unaudited) (Unaudited)
June 30, June 30,
2000 1999
----------- -----------
<S> <C> <C>
Net cash provided (used) by operating activities $ 270 $(4,182)
Investing Activities
Capital expenditures (2,478) (4,419)
Other - 441
-------- -------
(2,478) (3,978)
Financing Activities
Net change in note payable 5,900 8,200
Principal payments on long-term debt (2,775) -
Other (161) (115)
-------- -------
2,964 8,085
-------- -------
Net increase (decrease) in cash and cash equivalents 756 (75)
Cash and cash equivalents at beginning of year 3,564 1,439
-------- -------
Cash and cash equivalents at end of year $ 4,320 $ 1,364
======== =======
</TABLE>
See notes to condensed consolidated financial statements.
<PAGE>
Globe Holdings, Inc.
Notes to Condensed Consolidated Financial Statements (Unaudited)
(Dollars in thousands)
June 30, 2000
Note A. Basis of presentation
The accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring accruals) considered necessary for a fair presentation have
been included. Operating results for the six month period ended June 30, 2000
are not necessarily indicative of the results that may be expected for the year
ended December 31, 2000.
The balance sheet at December 31, 1999 has been derived from the audited
financial statements at that date but does not include all of the information
and footnotes required by generally accepted accounting principles for complete
financial statements.
For further information, refer to the consolidated financial statements and
footnotes thereto included in the Registrant Company and Subsidiaries' annual
report on Form 10-K for the year ended December 31, 1999.
Note B. Going Concern and Forbearance Agreement
In response to lower than expected earnings in 1999, the Company and its lenders
amended certain covenant requirements under its various credit agreements.
Specifically, as of January 28, 1999, the Senior Credit Facility was amended
such that i) certain leverage ratio tests were waived and certain covenants were
amended, ii) the interest rates on both term loans and revolving loans were
increased and iii) the management fee due to CHS may only be paid if certain
leverage tests are met. Additionally, the Company received a waiver on the
capital expenditures covenant requirements from 1998. On October 20, 1999, the
Senior Credit Facility was again amended such that i) the revolving loan
permitted borrowings were limited by the Company's leverage ratio, ii) the
interest rates on both term loans and the revolving loan were increased and iii)
certain covenant ratio requirements were amended.
At December 31, 1999, the Company was in violation of the capital expenditures
covenant which has not been waived. Accordingly, the Company has been in default
of its credit agreement since December 31, 1999. The Company failed to pay a
principal loan payment due July 15, 2000 under its Senior Credit Facility.
Additionally, the Company is expecting to be in default of various covenant
requirements throughout 2000 based on the Company's current forecast and
existing covenant requirements. Accordingly, the Company's debt has been
classified as short-term.
On April 12, 2000, the Company entered into a forbearance agreement with its
senior lenders in which they agreed to not exercise their right to call the debt
until May 31, 2000. As of May 31, 2000, the forbearance agreement was amended to
extend the forbearance period to July 31, 2000. As of July 17, 2000, the
forbearance agreement was extended to September 15, 2000. As a result of this
agreement, the Company has no availability under its revolving loan under the
Credit Agreement, has been restricted from making interest payments on the
Senior Subordinated Notes, and must meet certain covenant ratios during the
forbearance period. Because of the payment default on its Senior Credit
Facility, the Company has not made an interest payment due August 1, 2000 on its
Senior Subordinated Notes. The Company is exploring various alternatives to
restructure its indebtedness. As of August 7, 2000, the Company has $4,300 of
cash on hand and has been paying suppliers and employees in the ordinary course.
In addition, management expects the Company to generate sufficient cash to pay
suppliers and employees in the ordinary course in 2000 by reducing accounts
receivable and inventory levels, as well as by enforcing strict cash management
procedures. The Company believes that the refinancing of its capital and debt
structure in 2000 and the availability of adequate liquidity throughout the year
will be necessary for the Company to continue as a going concern. However, it is
not possible to predict whether any such arrangement will be obtained or
negotiated or of the terms thereof.
The accompanying condensed consolidated financial statements have been prepared
on a going concern basis, which contemplates the realization of assets and the
satisfaction of liabilities in the normal course of business. The financial
statements do not include any adjustments relating to the recoverability and
classification of assets or the amounts and classification of liabilities that
might be necessary should the Company be unable to continue as a going concern.
Note C. Available-For-Sale Securities
On April 5, 2000 the Company received shares from a mutual insurance company
that demutualized. Accordingly, a gain on marketable securities was recorded in
income before taxes for approximately $1,353, which represents the initial
public offering price of the shares received. The marketable securities will be
classified as available-for-sale securities, accordingly, subsequent
fluctuations in market prices, resulting in unrealized gains and losses, will be
recorded in accumulated other comprehensive income in stockholders' equity. At
June 30, 2000 the unrealized gain was approximately $638.
Note D. Inventories
The components of inventory consist of the following:
<TABLE>
<CAPTION>
June 30, December 31,
-------- ------------
2000 1999
-------- ------------
<S> <C> <C>
Raw materials $ 3,014 $ 3,282
Finished goods 12,077 14,945
------- -------
$15,091 $18,227
Less LIFO reserve (436) (436)
------- -------
$14,655 $17,791
</TABLE>
<PAGE>
Note E. Debt
Long-term debt consists of the following:
<TABLE>
<CAPTION>
June 30, December 31,
-------- ------------
2000 1999
-------- ------------
<S> <C> <C>
Term loan A, principal due in variable semi-annual
installments through 2005; variable rate interest $ 57,500 $ 60,000
Term loan B, principal due in variable semi-annual
installments through 2006; variable rate interest 54,725 55,000
Senior Subordinated Notes, due 2008; interest at 10% 150,000 150,000
Senior Discount Notes, due 2009; semiannual cash interest
payments at 14% beginning February 2004, less original issue
discount of $17,192 and $19,348 31,894 29,738
-------- --------
294,119 294,738
-------- --------
Less current maturities 294,119 294,738
-------- --------
$ -- $ --
</TABLE>
Note F. Comprehensive income (loss)
The components of comprehensive income (loss) are as follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
For the Quarter Ended June 30, For the Six Months Ended June 30,
2000 1999 2000 1999
------------ ------------ ------------ --------------
Net Loss $ (10,909) $ (114) $ (13,830) $ (1,064)
Other comprehensive income:
Unrealized gain on available-for-sale
securities 638 - 638 -
------------ ------------ ------------ --------------
Comprehensive loss $ (10,271) $ (114) $ (13,192) $ (1,064)
============ ============ ============ ==============
</TABLE>
Note G. Commitments and Contingencies
The Company is a party to an agreement with a utility company, under the
terms of which, the Company is obligated to purchase power generated from a
co-generation power plant through 2006. The Company receives a portion of the
savings generated by the plant and profits on excess supply generated. The co-
generation power plant began operations in January 1991. Currently the Company
is attempting to terminate this agreement. As a result the utility company has
filed suit, however, the suit is in the discovery stages. Accordingly no
determination regarding the outcome of this suit can be made at this time.
From time to time, the Company has been and is involved in various legal
and environmental proceedings, all of which management believes are routine in
nature and incidental to the conduct of its business. The ultimate legal and
financial liability of the Company with respect to such proceedings cannot be
estimated with certainty, but the Company believes, based on its examination of
such matters, that none of such proceedings, if determined adversely to the
Company, would have a material adverse effect on the Company's results of
operations or financial condition.
Note H. Restructuring Costs
In February, 2000 the Company entered into an agreement with North American
Rubber Thread Company to sell its Latex thread operation and on July 25, 2000
the Company completed the transaction. The selling price was $1.5 million and
the Company received $1.1 million in cash, and $0.4 million in a term note.
There is also a $1.0 million contingency payment from North American Rubber
Thread Company based on their future sales volume of Latex thread. The
contingency payment will be recognized when received in future periods and has
not been contemplated in determining the loss or gain on the sale of the Latex
thread operation. The loss from the sale is approximately $800, of which $0.4
million is attributable to a write down of Latex inventory and $0.4 million
associated with an impairment of Latex manufacturing equipment. The write down
of inventory has been recorded in cost of goods sold and the loss from the
impairment of manufacturing equipment has been recorded in miscellaneous
expense. In connection with this sale and other reorganization efforts the
Company has reduced its work force by 248 employees and has offered an early
retirement program. The early retirement program reduces the number of employees
accumulating benefits under the plan, resulting in a reduction of the projected
benefit obligation of $1,406. The Company has incurred a one time charge of
$2,200, of which includes $2,000 of severance cost and a net curtailment loss of
$200 resulting from the early retirement program. As of June 30, 2000, the
Company has paid $1,515 of severance cost.
On July 21, 2000 the Company established an employee retention program for
key individuals who have been deemed critical to operations of the Company. The
program calls for payments up to a maximum of $951, with the first disbursement
of $317 taking place on July 21, 2000, and the remainder contingent upon
specific events taking place.
Note I. Income Taxes
The Company's tax provision (benefit) for the period ended June 30, 2000
differs from the statutory rate, as a result of an increase in the valuation
allowance and disqualified original issue discount and state taxes.
The Company's tax provision (benefit) for the period ended June 30, 1999
differs from the statutory rate, primarily as a result of the Company's Foreign
Sales Corporation, the result of which is partially offset by disqualified
original issue discount and state taxes.
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
The Company's operating results in 1999 were not sufficient to meet certain
financial covenants under its bank credit facility. The credit agreement was
amended in January and October 1999 to reset certain covenants at levels the
Company believed it could achieve. These covenants governed the Consolidated
Leverage Ratio, the Consolidated Interest Coverage Ratio, and Minimum EBITDA. In
addition, revolving loan borrowings were conditioned on meeting a specified
Consolidated Leverage ratio. As part of these amendments, the interest rates
payable on term loan and revolving loan borrowings were increased and the
payment of the management fee due to Code, Hennessy & Simmons was conditioned on
satisfaction of certain leverage tests, which were not met in 1999. As of
December 31, 1999, the Company was not in compliance with the Capital
Expenditures covenant in its bank credit agreement, and the Company has not met
the Consolidated Interest Coverage Ratio, Consolidated Fixed Charge Coverage
Ratio, Maximum Leverage Ratio, and Minimum EBITDA covenant in the bank credit
agreement during the first six months of, and does not expect to meet such
covenants during the remainder of, 2000. The Company failed to pay a principal
loan payment due July 15, 2000 under its bank credit facility. To date, the
lenders under the bank credit agreement have not accelerated the Company's debt
under the credit agreement. The lenders have entered into a forbearance
agreement for the credit facility. The forbearance agreement expires on
September 15, 2000, and precludes the Company from borrowing on its credit
facility, requires interest on term loans and bank fees to be paid monthly,
precludes interest payments on the Senior Subordinated Notes, and requires that
certain covenant ratios be met during the forbearance period. Because of the
payment default on its bank credit facility, the Company has not made an
interest payment due August 1, 2000 on the Senior Subordinated Notes.
As long as the lenders forbear from accelerating the Company's obligations
under the bank credit facility, the Company expects that it would continue to
operate in default for the near term. Acceleration of obligations under the bank
credit facility would result in a default in the Company's $150 million 10%
Senior Subordinated Notes due 2008 and the $30.8 million 14% Senior Discount
Notes due 2009. The Company expects that it will be required to restructure its
outstanding debt and financing arrangements, in any case. There can be no
assurances the Company will be able to restructure its debt, or of the terms on
which any such restructuring may occur. The Company's senior subordinated
debentures and senior discount notes would suffer substantial impairment in a
restructuring.
In February 2000, the Company entered into an agreement with North American
Rubber Thread Company to sell its Latex thread operation and on July 25, 2000
the Company completed the transaction. The selling price was $1.5 million and
the Company received $1.1 million in cash, and $0.4 million in a term note.
There is also a $1.0 million contingency payment from North American Rubber
Thread Company based on their future sales volume of Latex thread. The
contingency payment will be recognized when received in future periods and has
not been contemplated in determining the loss or gain on the sale of the Latex
thread operation. The loss from the sale is approximately $800, of which $0.4
million is attributable to a write down of Latex inventory and $0.4 million
associated with an impairment of Latex manufacturing equipment. The write down
of inventory has been recorded in cost of goods sold and the loss from the
impairment of manufacturing equipment has been recorded in miscellaneous
expenses. In connection with the proposed sale of the Latex operation and other
reorganization efforts the Company has reduced its work force and has offered an
early retirement program to employees. The Company has incurred a one time
charge of $2.2 million in the first quarter for the work force reduction.
Results of Operations
Three and Six Months Ended June 30, 2000 Compared to Three and Six Months Ended
June 30, 1999
Net sales of the Company were $31.8 million for the second quarter of
2000 and $73.3 million for the first six months of 2000, compared to $44.4
million and $88.0 million, respectively, for the corresponding periods in 1999,
representing a decrease of 28.4% and 16.7%. The decrease is primarily due to a
decrease in latex fiber sales, along with a decrease in the net selling price
for fine denier and heavy denier spandex.
Gross margin for the second quarter was $8.2 million and $20.9 million
for the first six months of 2000, compared to $14.4 million and $28.0 million,
respectively, for the corresponding periods in 1999, representing decreases of
43.1% and 25.6%. The Company's gross margin as a percentage of net sales was
25.7% for the second quarter and 28.5% for the fist six months of 2000, compared
to 32.4% and 31.9%, respectively, for the corresponding periods in 1999. The
decrease in gross margin was primarily due to a decrease in both heavy and fine
denier spandex net selling price. The overall downward trend in selling price in
the fiber industry is related to several factors. The oversupply of fabric in
the apparel industry, that was originally caused by the Asian economic crisis in
1998, which continued to exist in 2000 and resulted in price pressure from
apparel manufactures. In addition over the past several years the elastomeric
fiber industry has increased production capacity of spandex and such increase
has out paced demand.
Selling, general and administrative expenses were $8.9 million for the
second quarter of 2000, and $15.2 million for the six months of 2000, compared
to $5.6
<PAGE>
million and $11.7 million, respectively, for the corresponding periods in 1999,
representing increases of 60.4% and 29.8%. As a percentage of net sales,
selling, general and administrative expenses were 28.1% for the second quarter
of 2000, and 20.8% for the first six months of 2000, compared to 12.5% and
13.3%, respectively, for the corresponding periods in 1999. The increase in
selling, general and administrative expenses is primarily due to increases in
the reserve for doubtful accounts to reflect management's decision to curtail or
sever relationships with specific foreign distributors. Also, increases in fine
denier spandex to foreign markets has increased returns and product claims,
sales agent commissions and freight expense.
Research and development expenses were $1.1 million for the second quarter
of 2000, and $1.8 million for the first six months of 2000, compared to $1.2
million and $2.3 million, respectively, for the corresponding periods in 1999.
Research and development expenses as a percentage of net sales were 3.4% for the
second quarter of 2000, and 2.5% for the first six months of 2000, compared to
2.7% and 2.7%, respectively, for the corresponding periods in 1999. The decrease
in research and development expenses is attributed to the Company refocusing and
streamlining its research and development efforts. The Company has concentrated
on projects that have a higher probability of success and will result in new
advances in chemistry and process capability.
Net interest expense was $8.7 million for the second quarter of 2000, and
$17.3 million for the first six months of 2000, compared to $8.0 million and
$15.8 million, respectively, for the corresponding periods in 1999. The increase
in interest expense was primarily due to an increase in the level of outstanding
debt and interest rates from the comparable prior year period.
Income tax expense of $1.0 million was recognized during the second quarter
to reflect the Company's revised effective tax rate, resulting from nonrecurring
charges which have impacted the Company's estimates of taxable income for the
year.
Liquidity and Capital Resources
Cash provided by operating activities was $0.3 million for the six months
ended June 30, 2000 as compared to cash used by operating activities of $4.2
million for the comparable prior year period. The increase in cash provided by
operating activities for the six months ended June 30, 2000 was due to decreases
in inventory balances and accounts receivable. This reduction was partially
offset by decreases in accounts payable and accrued expenses, and increases in
prepaid expenses.
The average days sales outstanding for accounts receivable was approximately
104 days for the six months ended June 30, 2000 compared to 74 days for the
comparable prior year period. The increase in days outstanding is due to
extending payment terms to customers where competition has increased due to
present market conditions of supply and demand, and export sales increasing to
36.6% form 33.6% in the comparable prior period.
Inventory balances decreased $3.1 million from December 31, 1999, primarily
due to a decrease in the latex finished goods and raw material inventory. The
note payable increased $5.9 million from December 31, 1999, primarily due to an
interest payment due on the senior subordinated notes and working capital needs.
Capital expenditures were $2.5 million for the six months ended June 30, 2000
compared to $4.4 million in the comparable prior year period. Capital
expenditures for the six months ended June 30, 2000 consisted primarily of
operational expenditures.
Impact of the Year 2000 Issue
The Year 2000 issue is the result of computer programs being written using two
digits rather than four to define the applicable year. Computer equipment and
software and devices with embedded technology that are time-sensitive may
recognize a date using "00" as the year 1900 rather than the year 2000. This
could result in a system failure or miscalculations causing disruptions of
operations, including, among other things, a temporary inability to process
transactions, send invoices, or engage in similar normal business activities.
During the last several years, the Company has spent approximately $0.3
million to address issues related to the Y2K problem. All of these costs were
expensed as incurred and were funded by cash flow from operations. In 1999, the
Company installed a new computerized information system which was Y2K compliant
and did not require any significant additional costs attributable to the Y2K
issue. As of December 31, 1999, the Company had completed all aspects of its Y2K
readiness program and, through June 30, 2000, the Company has not experienced
any significant problems related to the Y2K issue.
<PAGE>
Forward-Looking Information
This Quarterly Report on Form 10-Q contains certain forward-looking statements,
including, without limitation, statements concerning the Company's future
financial position, business strategy, budgets, projected costs and plans and
objectives of management for future operations. These forward-looking statements
are made pursuant to the safe harbor provisions of the Private Securities
Litigation Reform Act of 1995 (which do not apply to initial public offerings).
Forward- looking statements generally can be identified by the use of
forward-looking terminology such as "may," "will," "expect," "intend,"
"estimate," "anticipate," "believe," "should," "plans," or "continue" or the
negative thereof or variations thereon or similar terminology. Although the
Company believes that the expectations reflected in such forward-looking
statements are reasonable, it can give no assurance that such expectations will
prove to have been correct. These forward-looking statements are subject to a
number of risks and uncertainties, including, without limitation, those related
to the Company's substantial leverage and debt service requirements, the
Company's dependence on significant customers and on certain suppliers, the
effects of competition on the Company, the risks related to environmental,
health and safety laws and regulations, the Company's exposure to foreign sales
risk and the cyclicality of the textile industry, risks related to the year 2000
issue, and the other factors discussed in the Company's filings with the
Securities and Exchange Commission. Actual results could differ materially from
these forward-looking statements.
Item 3. Quantitative and Qualitative Disclosure about Market Risk
The Company's market risk disclosure set forth in the Company's Annual
Report on Form 10K have not changed significantly through the six months ended
June 30, 2000.
Part II Other Information
Item 1. Legal Proceedings
In April 1997 two domestic purchasers of extruded latex thread filed a complaint
against a number of foreign manufacturers and distributors of such thread,
including an Indonesian limited liability company in which Globe Holdings then
owned a 40% interest (the "Joint Venture"). The complaint alleged an
international conspiracy to restrain trade in, and fix prices of, the thread in
the U.S. The Company was not named as a defendant in the case. The Joint Venture
alleged in its motion to dismiss that not all parties to the conspiracy had been
joined. There can be no assurance that the Company will not be named in the
future. The Company is entitled to indemnification from, among other items, any
liabilities arising out of any criminal or civil antitrust claims or
investigations resulting from the above-described proceedings to the extent
related to the Company's activities prior to the July 31, 1998 merger. This
indemnity expires on December 31, 2001.
The U.S. Department of Commerce has imposed anti-dumping duties on Indonesian
extruded latex producers. Additional duties have been levied on extruded latex
thread imported from Indonesia as of March 1999. During 1999, the Company
purchased approximately $1.7 million of latex thread from the Joint Venture for
resale in the North American market.
<PAGE>
Item 2. Changes in Securities
None.
Item 3. Defaults Upon Senior Securities
See Note B to the Financial Statements included herein for a discussion of
defaults under the Company's bank credit facility and senior subordinated
notes and of the forbearance agreement related to the bank credit facility.
Item 4. Submission of Matters to a Vote of Security Holders
None.
Item 5. Other Information
In July 2000, the employment of Horst Hesshaus, Vice President, Operations,
terminated.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
10.1 Forbearance Agreement dated as of July 17, 2000.
27.1 Financial Data Schedule
(b) Reports on Form 8-K
On June 7, 2000 the Company filed a Form 8-K disclosing the extension of the
Forbearance Agreement.
On June 9, 2000 the Company filed a Form 8-K/A in order to file as an
exhibit the Fourth Amendment and Forbearance Agreement dated as of May 31,
2000.
<PAGE>
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
GLOBE HOLDINGS INC.
Date: November 13, 2000 By: /s/ KEVIN T. CARDULLO
----------------------------------------------
Kevin T. Cardullo
Vice President, Finance and
Information Technology
and duly authorized signatory on
behalf of the Registrant
