<PAGE>
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarter Ended September 30, 1999
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number 1-11160
GLOBAL INDUSTRIAL TECHNOLOGIES, INC.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 75-2617871
- ------------------------------- --------------
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
2121 San Jacinto Street
Suite 2500
Dallas, Texas 75201
- ------------------------------- -----
(Address of principal executive (Zip Code)
offices)
(Registrant's telephone number, including area code) (214) 953-4500
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, and (2) has been subject to such filing requirements
for the past 90 days. Yes X . No .
--- ---
At November 12, 1999, 22,436,575 shares of Common Stock, par value $.25, of the
Registrant were outstanding.
Page 1 of 24
Exhibit Index Appears on Page 23
<PAGE>
INDEX
Page
Number
------
Part I. Financial Information
Item 1 Management's Representation 3
Consolidated Condensed Statements of Operations for 4
the three and the nine months ended September 30, 1999
and September 30, 1998
Consolidated Condensed Balance Sheets as of 5
September 30, 1999 and December 31, 1998
Consolidated Condensed Statements of Cash Flows for the nine 7
months ended September 30, 1999 and September 30, 1998
Notes to Consolidated Condensed Financial Statements 8
Item 2 Management's Discussion and Analysis 14
Item 3 Quantitative and Qualitative Disclosures about Market Risk 22
Part II. Other Information
Item 6 Exhibit and Reports on Form 8-K. 23
Signature 24
2
<PAGE>
PART I
FINANCIAL INFORMATION
MANAGEMENT'S REPRESENTATION
The consolidated condensed financial statements included herein have been
prepared by the Company pursuant to the rules and regulations of the Securities
and Exchange Commission. Certain information and footnote disclosures normally
included in financial statements prepared in accordance with generally accepted
accounting principles have been condensed. The Company believes that the
disclosures are adequate to make the information presented not misleading.
These consolidated condensed financial statements should be read in conjunction
with the financial statements and the notes to consolidated financial statements
included in the Annual Report, on Form 10-K for the fiscal year ended December
31, 1998.
In the opinion of the Company, all adjustments have been included that were
necessary to present fairly the financial position of Global Industrial
Technologies, Inc. and subsidiaries as of September 30, 1999; the results of
operations for the three and the nine months ended September 30, 1999 and
September 30, 1998; and cash flows for the nine months ended September 30, 1999
and September 30, 1998, respectively.
3
<PAGE>
GLOBAL INDUSTRIAL TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(In millions except per share data)
<TABLE>
<CAPTION>
Three months ended Nine months ended
Sept. 30, Sept. 30, Sept. 30, Sept. 30,
1999 1998 1999 1998
------- ------- ------- -------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Revenues
Net sales and operating revenues $ 135.4 $ 142.4 $ 408.4 $ 361.5
Other 0.5 0.5 1.2 1.5
------ ----- ------ ------
Total Revenues 135.9 142.9 409.6 363.0
------ ----- ------ ------
Costs and Expenses
Cost of sales 104.1 119.2 308.4 286.2
Selling, engineering, administrative and
general expenses 25.4 31.5 78.4 75.2
Interest expense 4.9 5.0 12.8 7.9
Restructuring charges 0.0 31.0 (1.4) 31.7
Impairment of long-lived assets 23.3 23.3
Other - net (7.0) 0.5 (7.4) 3.8
------ ----- ------ ------
Total Costs and Expenses 127.4 210.0 390.8 428.1
------ ----- ------ ------
Earnings (loss) from continuing operations
before income taxes 8.5 (67.6) 18.8 (65.1)
Income tax benefit (expense) (1.7) 25.4 (3.8) 25.0
------ ----- ------ ------
Earnings (loss) from continuing operations 6.8 (42.2) 15.0 (40.1)
Discontinued operations:
Gain (loss) on sale of discontinued operations less
applicable income taxes of $9.2, $8.7 and $49.4 (9.2) (11.9) 76.9
Earnings (loss) from discontinued operations less
applicable income taxes of $2.2, $.2 and $.5 (3.1) 0.3 (1.1)
------ ----- ------ ------
Earnings (loss) before extraordinary item 6.8 (54.5) 3.4 35.7
Extraordinary item less applicable income
taxes of $.1 (0.4) (0.4)
------ ----- ------ ------
Net earnings (loss) $ 6.4 (54.5) $ 3.0 $ 35.7
====== ===== ====== ======
Basic earnings (loss) per common share:
Continuing operations $ 0.30 (1.91) $ 0.67 $ (1.82)
====== ===== ======= ======
Discontinued operations $ 0.00 (0.56) $ (0.52) $ 3.44
====== ===== ======= ======
Extraordinary item $ (0.02) 0.00 $ (0.02) $ 0.00
====== ===== ======= ======
Net earnings (loss) $ 0.28 (2.47) $ 0.13 $ 1.62
====== ===== ======= ======
Diluted earnings (loss) per common share:
Continuing operations $ 0.30 (1.91) $ 0.65 $ (1.82)
====== ===== ======= ======
Discontinued operations $ 0.00 (0.56) $ (0.50) $ 3.44
====== ===== ======= ======
Extraordinary item $ (0.02) 0.00 $ (0.02) $ 0.00
====== ===== ======= ======
Net earnings (loss) $ 0.28 (2.47) $ 0.13 $ 1.62
====== ===== ======= ======
</TABLE>
See accompanying Notes to Consolidated Financial Statements
4
<PAGE>
GLOBAL INDUSTRIAL TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(in millions)
<TABLE>
<CAPTION>
September 30, 1999 December 31, 1998
ASSETS (Unaudited)
- ------ ------------------ ------------------
<S> <C> <C>
Current Assets
Cash and cash equivalents $ 7.6 $ 8.4
Notes and accounts receivable
Public 111.5 115.4
Unconsolidated affiliates -- 6.7
------------------ ------------------
111.5 122.1
Less allowance for doubtful accounts 4.2 6.5
------------------ ------------------
107.3 115.6
Inventories
Finished products and work in process 69.0 71.5
Raw materials and supplies 55.1 63.6
------------------ ------------------
124.1 135.1
Assets held for sale, net -- 174.0
Deferred income taxes 57.1 92.7
Asbestos insurance recoveries receivable 176.3 155.5
Prepaid expenses 6.0 9.9
------------------ ------------------
Total Current Assets 478.4 691.2
Investments in Unconsolidated Affiliates 1.9 3.1
Noncurrent Deferred Income Taxes 86.0 56.2
Goodwill - net 22.1 24.0
Noncurrent asbestos insurance receivable 170.6 145.2
Other Assets 90.6 84.5
Property, Plant and Equipment - at cost
Land, land improvements and mineral deposits 30.6 42.5
Buildings 90.1 93.2
Machinery and equipment 303.8 300.9
------------------ ------------------
424.5 436.6
Less accumulated depreciation, depletion and amortization 173.9 174.8
------------------ ------------------
Total properties - net 250.6 261.8
------------------ ------------------
Total Assets $ 1,100.2 $ 1,266.0
================== ==================
</TABLE>
See accompanying Notes to Consolidated Condensed Financial Statements.
5
<PAGE>
GLOBAL INDUSTRIAL TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(in millions)
<TABLE>
<CAPTION>
September 30, 1999 December 31, 1998
LIABILITIES AND SHAREHOLDERS' EQUITY (Unaudited)
- ------------------------------------ ------------------ ------------------
<S> <C> <C>
Current Liabilities
Accounts payable $ 54.5 $ 62.8
Notes payable and current portion of long-term debt 88.7 176.7
Advances from customers on contracts 2.4 1.1
Accrued compensation and benefits 10.0 31.6
Accrued taxes other than income taxes 4.0 3.4
Insurance reserves 11.8 7.9
Income taxes currently payable 11.9 17.2
Current deferred income taxes 22.6 21.7
Asbestos related liabilites 147.9 137.6
Other accrued liabilities 18.1 74.1
------------------ ------------------
Total Current Liabilities 371.9 534.1
Long-term Debt 166.2 202.6
Postretirement benefits 80.9 81.0
Noncurrent Deferred Income Taxes 58.9 55.5
Asbestos related liabilities 179.6 145.7
Other Liabilities 5.7 12.6
Shareholders' Equity
Preferred stock
Common stock 6.8 6.8
Capital in excess of par value 379.9 381.4
Retained earnings (accumulated deficit) (16.6) (19.6)
Accumulated other nonowner changes in equity
Cumulative translation adjustment (59.5) (56.0)
Minimum pension liability adjustment (5.4) (5.4)
Treasury stock, at cost (68.2) (72.7)
------------------ ------------------
Total Shareholders' Equity 237.0 234.5
------------------ ------------------
Total Liabilites and Shareholders' Equity $ 1,100.2 $ 1,266.0
================== ==================
</TABLE>
See accompanying Notes to Consolidated Condensed Financial Statements.
6
<PAGE>
GLOBAL INDUSTRIAL TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(In millions)
<TABLE>
<CAPTION>
Nine months ended
September 30, September 30,
1999 1998
------------- -------------
(Unaudited)
<S> <C> <C>
Cash flows from operating activities
Net earnings $ 3.0 $ 35.7
Adjustments to reconcile net earnings to cash flow
Continuing operations depreciation,
depletion and amortization 20.1 16.4
Discontinued operations depreciation,
depletion and amortization 1.1 5.5
Loss (gain) on sale of discontinued operations 1.7 (126.3)
Restructuring charges and asset impairments - 59.5
Deferred income tax provision 10.2 19.2
Gain on sale of assets (3.4) -
Decrease in receivables 4.0 19.7
Decrease (increase) in inventories 6.6 (18.7)
Decrease (increase) in asbestos insurance recoveries receivable 0.2 (16.2)
Increase in discontinued operations working capital (0.9) (2.6)
Decrease in accrued compensation (14.3) (7.3)
Decrease in accounts payable and accrued liabilities (34.9) (24.1)
Increase (decrease) in current asbestos liabilities (2.2) 7.2
Decrease in income taxes payable (5.3) (18.5)
Other - net (4.5) (12.5)
------------- -------------
Net cash used by operating activities (18.6) (63.0)
------------- -------------
Cash flows from investing activities
Proceeds from sale of discontinued operations 163.8 229.5
Business acquisitions - (203.2)
Proceeds from asset sales 11.5 -
Continuing operations capital expenditures (17.9) (18.2)
Discontinued operations capital expenditures (17.0) (27.9)
------------- -------------
Net cash provided (used) by investing activities 140.4 (19.8)
------------- -------------
Cash flows from financing activities
Proceeds from borrowings - 245.3
Reduction of debt (124.3) (156.0)
Proceeds from exercise of stock options 1.5 1.8
Purchase of treasury shares - (0.3)
------------- -------------
Net cash provided (used) by financing activities (122.8) 90.8
------------- -------------
Effect of translation adjustments on cash 0.2 (0.2)
------------- -------------
Net increase (decrease) in cash and cash equivalents (0.8) 7.8
Cash and cash equivalents, beginning of period 8.4 15.9
------------- -------------
Cash and cash equivalents, end of period $ 7.6 $ 23.7
============= =============
</TABLE>
See accompanying Notes to Consolidated Condensed Financial Statements
<PAGE>
GLOBAL INDUSTRIAL TECHNOLOGIES INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
NOTE A - Introduction and Basis of Presentation
The accompanying consolidated condensed interim financial statements include the
accounts of Global Industrial Technologies, Inc. together with its subsidiaries
and unconsolidated joint ventures (collectively referred to herein as the
"Company"). The Company conducts its business in two segments: Refractory
Products and Minerals and All Other.
NOTE B - Discontinued Operations
Ameri-Forge
- -----------
On June 22, 1999, the Company sold the assets and business of Ameri-Forge
Corporation ("Ameri-Forge") for $37.5 million, subject to certain post-closing
adjustments. Ameri-Forge manufactured and sold forged steel flanges and
undercarriage components for tracked equipment. The Company had revised its
original estimate of the proceeds of the sale used in recording the loss on
disposal of Ameri-Forge reflected in the December 31, 1998 consolidated
financial statements. As a result, an additional $40 million pre-tax charge for
loss on disposal of discontinued operations was recorded in the first quarter of
1999 as a reduction in the carrying value of fixed assets. Proceeds of the sale
were used to pay down debt.
The operating results for Ameri-Forge for the prior year have been presented as
discontinued operations in the Consolidated Condensed Statement of Operations.
For the current year, operating results have been charged against the reserve
for loss on disposal. The assets and liabilities of Ameri-Forge at December 31,
1998 have been reflected as "Net Assets Held For Sale," in the accompanying
balance sheet.
APG Lime
- --------
On April 13, 1999, the Company sold the assets and business of APG Lime
Corporation ("APG Lime") for cash consideration of $126.3 million and the
assumption of $3.7 million in debt, subject to certain post-closing adjustments.
APG Lime manufactured and sold lime for industrial and construction uses. The
sale resulted in a pre-tax gain from discontinued operations of approximately
$38.2 million, which was recognized in the second quarter of 1999. Proceeds of
the sale were used to pay down debt.
The operating results of APG Lime for the period January 1, 1999 through April
13, 1999 are presented as discontinued operations. The assets and liabilities
of APG Lime at December 31, 1998 have been reflected as "Net Assets Held For
Sale," in the accompanying balance sheet.
8
<PAGE>
GLOBAL INDUSTRIAL TECHNOLOGIES INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
INTOOL
- ------
On March 12, 1998, the Company sold the assets and business of INTOOL
Incorporated ("INTOOL") for cash consideration of $229.5 million, including
certain post-closing adjustments. A gain of $76.9 million, net of tax, was
recognized. The INTOOL business manufactured and sold a product line of high-
quality pneumatic and electric tools for industrial applications, including
assembly and material removal. The operating results of INTOOL for the period
November 1, 1997 to March 12, 1998 are presented as discontinued operations in
the prior year.
In connection with the sale of INTOOL, the Company retained liabilities for
certain legal claims (net of insurance) and employee benefits. During the
second quarter of 1999 the Company adjusted its estimate for these liabilities
and recorded an additional $1.4 million pre-tax, $0.9 million net-of-tax, loss
on sale of discontinued operations for INTOOL.
NOTE C - Inventories
The determination of inventory values and cost of sales under the LIFO method
for interim financial results are based on management's estimates of expected
year-end inventory levels and prices.
NOTE D - Restructuring Charges
During the year ended December 31, 1998, the Company recognized a charge to
reorganize and restructure its current organization. The restructuring
consisted primarily of four parts:
Concurrent with the acquisition of A.P. Green Industries, Inc. ("Green")
effective July 1, 1998, management initiated plans to consolidate and integrate
the operations of both companies through workforce reductions and the closure of
duplicative facilities.
Management finalized plans to consolidate the manufacturing and administrative
functions of Corrosion Technologies International, Inc. ("CTI") with those of
Harbison-Walker Refractories Companies ("Harbison-Walker"). The move was made
in an effort to reduce costs and improve productivity and asset utilization by
eliminating duplicative functions and taking advantage of existing facilities'
excess capacity.
In addition, during the third quarter of 1998, the Company decided to terminate
a 50% joint venture and close Harbison-Walkers' Eufala, Alabama facility, which
housed a portion of its operations. During the nine months ended September 30,
1999, the Company recognized a $1.4 million gain on the sale of various assets
which were previously written-off in the restructuring charge taken in the three
months ended September 30, 1998. At that time the estimated costs to hold the
assets were expected to exceed the eventual sales proceeds. The charge taken in
1998 related to these assets was $1.9 million.
The remaining charges represent severance benefits related to the approximate
18% staff level reduction at the Company's corporate headquarters, located in
Dallas, Texas.
9
<PAGE>
GLOBAL INDUSTRIAL TECHNOLOGIES INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
The following table summarizes the activity occurring within the related current
liability accounts during the nine months ended September 30, 1999; amounts are
in millions:
<TABLE>
<CAPTION>
Balance at Balance at
Segment Type December 31, Provisions Payments September 30,
---- ----------- ---------- -------- -------------
1998 1999
---- ----
<S> <C> <C> <C> <C> <C>
Refractory Employee severance $ 2.7 $ (.6) $ (1.2) $ .9
Products Other employee fringes
(excluding pension
curtailment) 1.4 (1.0) (.1) .3
Contract terminations .8 (.6) (.1) .1
Other facility shut-down
Costs 2.1 --- (.7) 1.4
Site restoration costs 2.4 2.2 (4.4) .2
--- --- --- ---
Total Refractory Products 9.4 0 (6.5) 2.9
All Other Employee severance 1.1 --- (.4) .7
Contract terminations
and other .6 --- (.6) ---
--- --- --- ---
Total All Other 1.7 --- (1.0) .7
Corporate Employee severance 1.1 --- (1.1) ---
--- --- --- ---
Total Company $ 12.2 $ .0 $ (8.6) $ 3.6
==== === === ===
</TABLE>
Management has substantially completed the restructuring plan with the majority
of the remaining cash expenditures to occur during the first half of 2000. A
provision was made in the second quarter to increase site restoration costs by
$2.2 million based on management's latest estimate of remaining costs. The
provision was offset in total by decreases to employee severance, other employee
fringes, and contract termination reserves as shown above. The decreases are
due to lower than expected actual costs associated with those liabilities.
Given the nature of the costs reflected herein, increases or decreases may still
be necessary throughout the remaining tenure of the Company's restructuring
plans. Any such changes will be reflected in the statement of operations as
incurred.
10
<PAGE>
GLOBAL INDUSTRIAL TECHNOLOGIES INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
NOTE E - Notes Payable and Long Term Debt
At December 31, 1998 the Company amended certain provisions of the senior
revolving credit facility entered into on August 31, 1998 ("Credit Facility")
and various senior notes from separate private placement offerings ("Private
Placements") to allow for the planned disposition of the Ameri-Forge division.
The primary effect of the amendment on the Credit Facility was to (i) lower the
required minimum consolidated net worth limit from $280 million to approximately
$215 million, through July 31, 1999, to be increased to $325 million on August
1, 1999, and continue at such level thereafter and (ii) reduce the facility from
$215 million to $140 million effective upon consummation of the APG Lime sale.
The Private Placement agreements were amended to provide for (i) a reduction in
the required minimum consolidated tangible net worth limit, as defined, from
$280 million to approximately $209 million, which increases to $325 million on
July 31, 2000 and (ii) an increase in the maximum amount of debt to
capitalization, from 55% to 64% excluding ATA from Refmex, decreasing to 45%
over the next 12 months. In addition, the Private Placement agreements required
the Company to replace its existing Credit Facility as described in the
paragraphs below.
On May 3, 1999, the Company elected to exercise the optional prepayment of its
obligations under Solid Waste Disposal Revenue Bonds issued by the Industrial
Development Board of the City of Eufaula, Alabama. The called bonds were issued
in November 1996, carried a principal amount of $5.7 million at an interest rate
of 5.85%, and were scheduled to mature in November 2006. A penalty of $171,000
was paid for early termination of the bonds.
On July 30, 1999, the Company entered into a $120 million revolving debt
facility with Chase Bank of Texas, N.A. as agent (the "New Facility"), that will
expire on June 30, 2000. The facility is secured by certain assets of the
Company, and carries a floating interest rate of LIBOR+250 basis points. Fees
associated with the execution of the New Facility totaled $1.79 million. The
initial drawdown on the facility was used to retire the existing revolving
Credit Facility. The New Facility also allows for the issuance of a maximum of
$20 million in letters of credit. As of November 10, 1999, the Company had
drawn $69.5 million under the New Facility, with an additional $16.7 million
allocated to issued letters of credit. Pursuant to the terms of the New
Facility, proceeds from the sale of certain assets of the Company in the amount
of $6.9 million were applied to reduce the principal amount of the New Facility
from $120 million to $113.1 million on September 30, 1999. Given this reduction
in the principal amount of the New Facility, the Company had an amount of $26.9
million available for further borrowing as of November 10, 1999.
In addition, on July 30, 1999, the Company amended certain portions of the
Private Placement agreements to allow for the securitization of the New
Facility, to eliminate the increase in minimum consolidated net worth originally
due to increase to $325 million on July 31, 2000 as described above, and to
recognize more restrictive covenants provided for in the New Facility. In
consideration of these amendments, the interest rates on the private placement
notes will increase by up to 75 basis points between August 1, 1999, and October
31, 1999; an additional increase of 75 basis points between November 1, 1999,
and January 31, 2000; an additional increase of 50 basis points between February
1, 2000, and April 30, 2000; and a final increase of 50 basis points after May
1, 2000, for a total of 250 basis points.
11
<PAGE>
GLOBAL INDUSTRIAL TECHNOLOGIES INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
On September 21, 1999, the Company amended certain portions of the Harbison
Walker GmbH debt facility with Westdeutsche Landesbank Girozentrale and Dresdner
Bank AG by issuing a parent guarantee for 7.0 million deutschmarks, and
reducing the principal amount of the credit facility from 23.4 million
deutschmarks to 20.7 million deutschmarks as of September 29, 1999, with a
further reduction to 19.5 million deutschmarks by December 14, 1999.
NOTE F - Interest Rate Swaps
In the second quarter of 1999, the Company terminated the two existing interest
rate swaps at a gain of $.3 million. See Note M to the Consolidated Financial
Statements contained in the Company's Annual Report on Form 10-K for the year
ended December 31, 1998.
NOTE G - Contingencies
The Company and its subsidiaries are involved in certain legal actions and
claims arising in the ordinary course of business. See Note N to Consolidated
Financial Statements contained in the Company's Annual Report on Form 10-K for
the year ended December 31, 1998.
NOTE H - Comprehensive Income
The components of comprehensive income (loss) for the Company include net income
(loss), and changes in the cumulative translation and minimum pension liability
adjustments. Total comprehensive income (loss) for the three and nine month
periods ended September 30, 1999, was $5.4 million and ($.5) million,
respectively; and for the three and nine months ended September 30, 1998,
($56.1) million and $29.7 million, respectively.
NOTE I - Earnings Per Share
Outstanding options to purchase 1.0 million shares, 1.1 million shares, 2.3
million shares and 2.3 million shares, respectively, were excluded from the
three and nine months ended September 30, 1999, and the three and the nine
months ended September 30, 1998, diluted earnings per share calculations as the
exercise prices associated with the options exceeded the average market value of
the Company's common shares. Deferred compensation units representing .1
million potential common shares were excluded from the three and nine months
ended September 30, 1999, diluted earnings per share calculations, as the effect
of inclusion in the calculation would be anti-dilutive.
12
<PAGE>
GLOBAL INDUSTRIAL TECHNOLOGIES INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
No differences in the numerator exist to calculate basic and diluted earnings
per share. A reconciliation of the common shares outstanding utilized in the
denominator of the basic and diluted earnings per share calculation is as
follows:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
Sept. 30, Sept. 30, Sept. 30, Sept. 30,
1999 1998 1999 1998
--------------------------------------------------------
<S> <C> <C> <C> <C>
Denominator for basic earnings (loss)
Per share 22.4 22.0 22.4 22.0
------------ -------------- ------------ ------------
Potential common shares:
Stock options .3 --- .4 ---
Deferred compensation units .1 --- .1 ---
---- ---- ---- ----
Total potential common shares .4 --- .5 ---
---- ---- ---- ----
Denominator for diluted earnings
(loss) per share 22.8 22.0 22.9 22.0
==== ==== ==== ====
</TABLE>
NOTE J - Information by Industry Segment
Sales and operating profit results are presented below for the three and the
nine months ended September 30, 1999, and September 30, 1998.
<TABLE>
<CAPTION>
Three Months Ended Nine Months
Sept. 30, Sept. 30, Sept. 30, Sept. 30,
INDUSTRY SEGMENT 1999 1998 1999 1998
-----------------------------------------------------
<S> <C> <C> <C> <C>
Revenues
Refractory Products and Minerals............ $127.8 $128.4 $375.6 $319.5
All Other................................... 7.6 13.5 32.8 39.4
------ ------ ------ ------
Reportable segment revenues............... 135.4 141.9 408.4 358.9
Divested operations......................... --- .5 --- 2.6
------ ------ ------ ------
Total revenues........................... $135.4 $142.4 $408.4 $361.5
====== ====== ====== ======
Operating profit (loss)
Refractory Products and Minerals............ $ 13.1 $ (3.2) $ 36.7 $ 12.7
All Other................................... 1.8 (.1) 6.2 1.7
------ ------ ------ ------
Reportable segment profit................. 14.9 (3.3) 42.9 14.4
Restructuring charges....................... --- (31.0) 1.4 (31.7)
Impairment of long lived assets............. --- (23.3) --- (23.3)
Corporate expenses.......................... (2.1) (5.3) (13.4) (14.8)
Divested operations....................... .6 .3 .7 (1.8)
Interest expense.......................... (4.9) (5.0) (12.8) (7.9)
------ ------ ------ ------
Earnings (loss) from continuing
operations $ 8.5 $(67.6) $ 18.8 $(65.1)
Before income taxes................. ====== ====== ====== ======
</TABLE>
13
<PAGE>
GLOBAL INDUSTRIAL TECHNOLOGIES INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
Item 2 - Management's Discussion and Analysis of Financial Condition and Results
of Operations
Recent Developments
- -------------------
On July 12, 1999, the Company announced that it had signed a definitive
agreement (the "Agreement") under which an indirect wholly-owned subsidiary of
---------
RHI AG, a corporation organized under the laws of Austria ("RHI"), would make a
---
cash tender offer (the "Tender Offer") to purchase all outstanding shares of
------------
common stock of the Company (the "Shares") at a cash price per Share of $13.00.
------
The Tender Offer commenced Friday, July 16, 1999. The completion of the Tender
Offer is conditioned upon at least a majority of the Shares having been tendered
and not withdrawn and regulatory and other customary conditions. The completion
of the Tender Offer was also initially conditioned upon RHI's obtaining
definitive financing arrangements, but is no longer subject to this condition
(see below). The Agreement also provides that, following completion of the
Tender Offer, the indirect wholly-owned subsidiary of RHI will merge with and
into the Company. When such merger becomes effective, each Share not tendered
and accepted pursuant to the Tender Offer will be converted into the right to
receive $13.00 in cash and the Company will become a wholly-owned subsidiary of
RHI. The foregoing description is qualified in its entirety by reference to the
Agreement, which is attached as Exhibit 1 to the Company's Tender Offer
Solicitation/Recommendation Statement on Schedule 14D-9, filed with the
Securities and Exchange Commission on July 16, 1999, and is incorporated herein
by reference.
On August 30, 1999, RHI was notified by the German Federal Cartel Office that it
would not raise any objections to RHI's acquisition of Global and that the
applicable waiting period was, therefore, terminated as of such date.
Additionally, the staff of the U.S. Federal Trade Commission (the "FTC") has
---
indicated to RHI that it will not object to the consummation of the acquisition
of Global if, prior to the acquisition, RHI enters into binding agreements to
divest certain assets relating to the manufacture of certain refractory products
on terms and to one or more buyers approved by the FTC. RHI entered into a
definitive agreement to divest those assets on November 11, 1999 subject to the
satisfaction or waiver of certain conditions, including a financing condition.
The purchaser has the right to terminate the agreement at any time prior to 5:00
p.m. Eastern Standard Time on November 19, 1999 if purchaser board approval has
not been obtained and the right to terminate the agreement at any time prior to
5:00 p.m. Eastern Standard Time on November 22, 1999 based on the results of its
due diligence review. While RHI believes that the terms and conditions of the
divestiture should satisfy the FTC's requirements, there can be no assurance
that the FTC will consent to the terms of the divestiture or that RHI will be
successful in completing the divestiture or the timing or terms thereof. While
RHI is satisfied with the progress made to date on this matter, there can be no
assurance that RHI will be successful in divesting of such assets or the timing
or the terms thereof.
On October 29, 1999 RHI announced that in light of its completed public offering
of RHI shares in the Austrian and German capital markets and the credit
agreements it had executed among several banks, it was irrevocably waiving the
financing condition to its obligation to purchase the Shares pursuant to the
Tender Offer. As of November 14, 1999, 17,868,369 Shares had been tendered and
not withdrawn pursuant to the Tender Offer. This constitutes approximately 72.0%
of Global's outstanding shares as of the commencement of the Tender Offer.
The Tender Offer is currently scheduled to expire at 9:00 a.m., New York City
time, on Monday, November 22, 1999, unless extended.
14
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Results of Operations
- ---------------------
Overall Summary
The Company reported net earnings of $3.0 million, or $.13 per share compared to
net earnings of $35.7 million, or $1.62 per share for the nine months ended
September 30, 1999 and September 30, 1998, respectively. The Company also
reported net earnings of $6.4 million, or $.28 per share compared to a net loss
of $54.5 million, or $2.47 per share for the three months ended September 30,
1999 and September 30, 1998, respectively.
Continuing Operations
From continuing operations, the Company reported earnings of $15.0 million, or
$.67 per share compared to a loss of $40.1 million, or $1.82 per share for the
nine months ended September 30, 1999 and September 30, 1998, respectively. In
addition, the Company reported earnings of $6.8 million, or $.30 per share
compared to a loss of $42.2 million, or $1.91 per share for the three months
ended September 30, 1999 and September 30, 1998, respectively. The 1999 results
include contributions for the entire nine months from Green. The 1998 results
include contributions from Green for the three months following July 1, 1998.
Including Green, revenues for the nine months of $409.6 million increased $46.6
million, or 13%, from $363.0 million in 1998. Third quarter revenues of $135.9
million decreased $7.0 million, or 5%, from $142.9 million in 1998. Segment
results from continuing operations for the nine months of $42.9 million
increased $28.5 million, or 198% from $14.4 million in 1998. Third quarter
operating results for the three months of $14.9 million increased $18.2 million,
or 552%, from an operating loss of $3.3 million in 1998. Segment revenues and
operating profits are discussed individually below under the heading "Industry
Segment Analysis".
General corporate expenses for the nine months of $13.4 million decreased $1.4
million, or 9%, from $14.8 million in 1998. Corporate expense for the nine
months includes an offset of $4.6 million of pre-tax income from a third quarter
payment ($5.0 million net of $.4 million of transaction fees) from RHI pursuant
to its merger agreement with the Company. Excluding the effect of the RHI
payment, corporate expense increased $3.2 million, or 22%, from $14.8 million in
1998. The increase is primarily due to the payment of $.9 million of defense
costs associated with the WHX tender offer, foreign currency losses, and an
increase in expenses relating to asbestos claims (See Note G to the consolidated
condensed financial statements for more information on asbestos claims).
Interest expense of $12.8 million for the nine months ended September 30, 1999
increased $4.9 million, or 62%, from $7.9 million for the same period in 1998.
The increase is due to higher debt levels in 1999 from the acquisition of Green,
including cash expenditures for the integration of Green and Harbison-Walker.
Other net income of $7.4 million for the nine months ended September 30, 1999
increased $11.2 million from a net expense of $3.8 million for the same period
in 1998. The increase
15
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
primarily reflects the third quarter payment of $5.0 million from RHI mentioned
above, a recognized gain on the sale of the Jeffrey processing business, and a
gain on the disposal of the British Jeffrey Diamond (BJD) processing business.
The Company also recognized in the third quarter of 1999, an extraordinary loss
of $.4 million or $.02 per share, related to the early retirement of debt.
In the second quarter of 1999, the Company recorded a $1.4 million gain on the
sale of Refractory Product and Mineral assets which had been written off
previously as part of the restructuring charges taken in the third quarter of
1998. The gain is reported as a credit to restructuring charges.
Backlog
The Company's consolidated backlog of unshipped orders from continuing
operations was $160.1 million at September 30, 1999, compared to $140.4 million
at September 30, 1998. The net increase of $19.7 million reflects a higher
backlog from Refractory Products offset by a lower backlog from the CTI and
Processing Equipment businesses.
Restructuring charges
During the year ended December 31, 1998, the Company recognized a charge to
reorganize and restructure its current organization. The restructuring
consisted primarily of four parts:
Concurrent with the acquisition of Green effective July 1, 1998, management
initiated plans to consolidate and integrate the operations of both companies
through workforce reductions and the closure of duplicative facilities.
Management finalized plans to consolidate the manufacturing and administrative
functions of Corrosion Technologies International, Inc. ("CTI") with those of
Harbison-Walker Refractories Companies ("Harbison-Walker"). The move was made
in an effort to reduce costs and improve productivity and asset utilization by
eliminating duplicative functions and taking advantage of existing facilities'
excess capacity.
In addition, during the third quarter of 1998, the Company decided to terminate
a 50% joint venture and close Harbison-Walkers' Eufala, Alabama facility, which
housed a portion of its operations. During the nine months ended September 30,
1999, the Company recognized a $1.4 million gain on the sale of various assets
which were previously written-off in the restructuring charge taken in the three
months ended September 30, 1998. At that time, the estimated costs to hold the
assets were expected to exceed the eventual sales proceeds. The charge taken in
1998 related to these assets was $1.9 million.
The remaining charges represent severance benefits related to the approximate
18% staff level reduction at the Company's corporate headquarters, located in
Dallas, Texas.
16
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following table summarizes the activity occurring within the related current
liability accounts during the nine months ended September 30, 1999; amounts are
in millions:
<TABLE>
<CAPTION>
Balance at Balance at
Segment Type December 31, Provisions Payments September 30,
---- 1998 1999
------------ ---------- -------- -------------
<S> <C> <C> <C> <C> <C>
Refract Employee severance $ 2.7 $ (.6) $ (1.2) $ .9
Products Other employee fringes
(excluding pension
curtailment) 1.4 (1.0) (.1) .3
Contract terminations .8 (.6) (.1) .1
Other facility shut-down
costs 2.1 --- (.7) 1.4
Site restoration costs 2.4 2.2 (4.4) .2
---- ---- ---- ----
Total Refractory Products 9.4 0 (6.5) 2.9
All Other Employee severance 1.1 --- (.4) .7
Contract terminations
and other .6 --- (.6) ---
---- ---- ---- ----
Total All Other 1.7 --- (1.0) .7
Corporate Employee severance 1.1 --- (1.1) ---
---- ---- ---- ----
Total Company $ 12.2 $ 0 $ (8.6) $ 3.6
==== ==== ==== ====
</TABLE>
Management has substantially completed the restructuring plan with the majority
of the remaining cash expenditures to occur during the first half of 2000. A
provision was made in the second quarter to increase site restoration costs $2.2
million based on management's latest estimate of remaining costs. The provision
was offset in total by decreases to employee severance, other employee fringes,
and contract termination reserves as shown above. The decreases are due to
lower than expected actual costs associated with those liabilities. Given the
nature of the costs reflected herein, increases or decreases may still be
necessary throughout the remaining tenure of the Company's restructuring plans.
Any such changes will be reflected in the statement of operations as incurred.
17
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Industry Segment Analysis
- -------------------------
Refractory Products and Minerals
Revenues for the nine months of $375.6 million increased $56.1 million, or 18%,
from $319.5 million in 1998. The increase is primarily due to the contribution
from Green for the first six months of 1999 ($95.0 million) offset by lower
worldwide sales ($38.9 million). Revenues from the foreign operations (Aken,
Refmex and Recsa) decreased $17.2 million from 1998 to 1999 due to decreased
demand from the cement and steel industries in Mexico and Latin America, an
economic slowdown in Chile from the depressed copper industry, and lower sales
to Russia. Refractory product sales in the United States decreased $10.8
million from the prior year primarily due to lower iron and steel production,
delayed industrial projects and Green sales which were not maintained by the
Company. Sales of mineral products declined $10.9 million in 1999 primarily
from the continued effect of prevailing exchange rates between the U.S. Dollar
and European currencies on the Company's ability to competitively price exports.
Revenues for the three months of $127.8 million decreased $.6 million, or .5%,
from $128.4 million in 1998.
Operating profit for the nine months of $36.7 million increased $24 million, or
189%, from $12.7 million in 1998. The improvement for the nine months is
primarily due to the profit contribution from the Green acquisition ($29.6
million excluding depreciation), cost reductions and margin improvements in the
Harbison-Walker business including costs associated with the termination of the
Eufala, Alabama joint venture ( $9.9 million), offset by increased depreciation
and the effect of the lower worldwide sales ($15.5 million) mentioned above.
Third quarter operating profit of $13.1 million increased $16.3 million, or
509%, from an operating loss of $3.2 million in 1998.
All Other
Revenues for the nine months of $32.8 million decreased $6.6 million, or 17%,
from $39.4 million in 1998. The decrease is due to lower sales volume in the
CTI business offset by the shipment of an electronic scrap recovery system in
the first quarter from the Shred Tech business. Revenues for the third quarter
of $7.6 million decreased $5.9 million, or 44%, from $13.5 million in 1998. The
decrease in the third quarter is due to lower sales volume in the CTI business
due to the depressed copper industry.
Operating profit for the nine months of $6.2 million increased $4.5 million from
$1.7 million in 1998. The increase is due to the profit contribution from the
aforementioned sale of an electronic scrap recovery system, a gain on the sale
of the Jeffrey processing business, margin improvements due to lower material
costs, and lower fixed costs from headcount reductions offset by the effect of
lower worldwide sales mentioned above. Operating profit for the third quarter of
$1.8 million increased $1.9 million from an operating loss of $.1 million in
1998.
18
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Discontinued Operations
The Company reported a net loss of $11.6 million from discontinued operations
for the nine months ended September 30, 1999. The reported amount includes
operating profits from APG Lime ($.3 million net of allocated interest and
taxes), a net loss on the sale of Ameri-Forge ($24.8 million), a net gain on the
sale of APG Lime ($13.8 million) and a net charge ($.9 million) for retained
liabilities associated with the INTOOL divestiture.
For the nine months ended September 30, 1998, the Company reported a net gain on
the sale of INTOOL of $76.9 million and an operating loss from INTOOL , Ameri-
Forge, and APG Lime of $1.1 million.
Liquidity, Capital Resources and Financial Condition
- ----------------------------------------------------
Cash and cash equivalents were $7.6 million at September 30, 1999, a decrease of
$.8 million from $8.4 million at December 31, 1998. Net cash used by operating
activities was $18.6 million during the nine month period ended September 30,
1999, reflecting the contribution from operating earnings (excluding the net
loss on the sales of Ameri-Forge and APG Lime) less working capital increases.
The increase in working capital during the period of $46.7 million is due
primarily to decreases in accounts payable and accrued liabilities. Accounts
payable decreased $7.3 million in the nine month period resulting from the
payment of increased spending levels in the fourth quarter of 1998 primarily
from the integration of Green and Harbison-Walker. Other accrued liabilities
decreased $35.6 million primarily due to payments relating to Ameri-Forge which
is reported as a discontinued operation, and restructuring costs associated with
the integration of Green and Harbison-Walker. Payments for Ameri-Forge during
the nine months included working capital increases, capital expenditures and
allocated interest expense.
The Company's current ratio at September 30, 1999 of 1.29 to 1 was higher than
.97 to 1 at December 31, 1998 (excluding assets held for sale) reflecting the
increased investment in working capital from the aforementioned items.
Net cash provided by (used in) investing activities was $140.4 million and
($19.8) million for the nine months ended September 30, 1999 and September 30,
1998, respectively. Proceeds from the sale of discontinued operations reflects
the sales of Ameri-Forge and APG Lime in 1999 and the sale of INTOOL in 1998.
Business acquisitions of $203.2 includes the purchase of Green on July 1, 1998.
Proceeds from asset sales of $11.5 million in 1999 includes the sale of the
Eufala property mentioned earlier, the sale of a joint venture interest acquired
in the Green acquisition, and the sale of the Jeffrey Processing business on
September 30, 1999. Capital expenditures from continuing operations of $17.9
million decreased $.3 million from $18.2 million in 1998. Refractory products
and minerals accounted for 89% of the capital expenditures in the nine month
period for plant reconfiguration spending relative to the Green/Harbison-Walker
integration program.
Net cash provided by (used in) financing activities was ($122.8) million and
$90.8 million for the nine months ended September 30, 1999 and September 30,
1998, respectively. In both periods, debt was reduced from proceeds generated
from the sale of discontinued operations discussed above. At September 30, 1999,
the Company had total debt of $254.9 million, resulting in a total debt
19
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
to total capitalization ratio of .52 to 1, and a total debt to shareholder's
equity of 1.07 to 1. The comparable amounts at December 31, 1998, were total
debt of $379.3 million, total debt to total capitalization of .62 to 1, and
total debt to stockholder's equity of 1.62 to 1.
At December 31, 1998 the Company amended certain provisions of the senior
revolving credit facility entered into on August 31, 1998 ("Credit Facility")
and various senior notes from separate private placement offerings ("Private
Placements") to allow for the planned disposition of the Ameri-Forge division.
The primary effect of the amendment on the Credit Facility was to (i) lower the
required minimum consolidated net worth limit from $280 million to approximately
$215 million through July 31, 1999, to be increased to $325 million on August 1,
1999, and continue at such level thereafter and (ii) reduce the facility from
$215 million, to $140 million effective upon consummation of the APG Lime sale.
The Private Placement agreements were amended to provide for (i) a reduction in
the required minimum consolidated tangible net worth limit, as defined, from
$280 million to approximately $209 million, which increases to $325 million on
July 31, 2000 and (ii) an increase in the maximum amount of debt to
capitalization, from 55% to 64% excluding ATA from Refmex, decreasing to 45%
over the next 12 months. In addition, the Private Placement agreements required
the Company to replace its existing Credit Facility as described in the
paragraphs below.
On April 13, 1999, the Company sold the assets and business of APG Lime for cash
consideration of $126.3 million and the assumption of $3.7 million in debt,
subject to certain post-closing adjustments. Cash proceeds from the sale were
used to reduce the debt of the Company. Subsequent to this sale, as discussed
above, the total principal amount available to the Company under the Credit
Facility was reduced from $215 million to $140 million.
On May 3, 1999, the Company elected to exercise the optional prepayment of its
obligations under Solid Waste Disposal Revenue Bonds issued by the Industrial
Development Board of the City of Eufaula, Alabama. The called bonds were issued
in November 1996, carried a principal amount of $5.7 million at an interest rate
of 5.85%, and were scheduled to mature in November 2006. A penalty of $171,000
was paid for early termination of the bonds.
On June 22, 1999, the Company sold the assets and business of Ameri-Forge for
cash consideration of $37.5 million, subject to certain post-closing
adjustments. Cash proceeds from the sale were also used to reduce the debt of
the Company.
On July 30, 1999, the Company entered into a $120 million revolving debt
facility with Chase Bank of Texas, N.A. as agent (the "New Facility"), that will
expire on June 30, 2000. The facility is secured by certain assets of the
Company, and carries a floating interest rate of LIBOR+250 basis points. Fees
associated with the execution of the New Facility totaled $1.79 million. The
initial drawdown on the facility was used to retire the existing revolving
Credit Facility. The New Facility also allows for the issuance of a maximum of
$20 million in letters of credit. As of November 10, 1999, the Company had
drawn $69.5 million under the New Facility, with an additional $16.7 million
allocated to issued letters of credit. Pursuant to the terms of the New
Facility, proceeds from the sale of certain assets of the Company in the amount
of $6.9 million were applied to reduce the principal amount of the New Facility
from $120 million to $113.1 million on September 30, 1999. Given this reduction
in the principal amount
20
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
of the New Facility, the Company had an amount of $26.9 million available for
further borrowing as of November 10, 1999.
In addition, on July 30, 1999, the Company amended certain portions of the
Private Placement agreements to allow for the securitization of the New
Facility, to eliminate the increase in minimum consolidated net worth originally
due to increase to $325 million on July 31, 2000 as described above, and to
recognize more restrictive covenants provided for in the New Facility. In
consideration of these amendments, the interest rates on the private placement
notes will increase by up to 75 basis points between August 1, 1999, and October
31, 1999; an additional increase of 75 basis points between November 1, 1999,
and January 31, 2000; an additional increase of 50 basis points between February
1, 2000, and April 30, 2000; and a final increase of 50 basis points after May
1, 2000, for a total of 250 basis points.
On September 21, 1999, the Company amended certain portions of the Harbison
Walker GmbH debt facility with Westdeutsche Landesbank Girozentrale and Dresdner
Bank AG by issuing a parent guarantee for 7.0 million deutschmarks, and reducing
the principal amount of the credit facility from 23.4 million deutschmarks to
20.7 million deutschmarks as of September 29, 1999, with a further reduction to
19.5 million deutschmarks by December 14, 1999.
The Company had $7.6 million in cash and cash equivalents on hand at September
30, 1999, and committed and discretionary unused lines of credit aggregating an
additional $40.9 million (including foreign lines of credit). Management
believes that internally-generated funds, and borrowings under existing credit
facilities will be adequate to meet working capital and capital expenditure
requirements, while maintaining an appropriate debt to total capitalization
ratio.
Year 2000 Issue
- ---------------
The Company has completed its Y2K information systems implementation and
modification for all wholly owned operations. A significant portion of the
Company's direct risk in the information system area is mitigated by the
implementation of the new accounting, finance and operating (Enterprise Resource
Planning) systems. Although not purchased specifically for the purpose of
avoiding such risks, these systems are, nevertheless, fully "Year 2000"
compliant. Global has performed its own Y2K tests on this ERP software and found
no significant issues.
Testing of telecommunications hardware and software has identified some voice
mail software that requires upgrading. Upgrades are complete at most sites.
Global has upgraded its human resource applications, database management
software, desktop and network operating systems to achieve Y2K compliance levels
as described by the respective vendors. It has requested and received Y2K
compliance reports from all major outside providers of information systems and
support.
With respect to embedded technology other than information systems, the Company
has assessed its risk of major malfunctions to be relatively low at its
continuing operations. Harbison Walker and AP Green plants have conducted tests
of their production equipment. Only one machine exhibited a problem and
corrective measures are being made.
21
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Management believes that potential malfunctions occurring within its information
systems environment can be mitigated with manual processing of transactions.
Global has surveyed key vendors and customers for their Y2K readiness. However,
the risk of disruptions to operations caused by non-Year 2000 compliant systems
of customers, suppliers and unrelated third parties remains. Likewise, the
Company does not have contingency plans in place to evoke, should such an event,
or series of events occur. The possibility does therefore exist that any such
disruptions could have an adverse effect on the Company.
The Company expenses all Year 2000 costs as incurred. The ultimate total cost
to the Company of achieving Year 2000 compliant systems is currently estimated
to be less than $500,000, to be expended primarily in the 1999 timeframe. The
Company has increased its overall information systems budget to accommodate the
aforementioned Year 2000 compliance projects, but has not delayed other critical
information systems work due to these efforts. Incremental costs incurred
strictly due to Year 2000 compliance issues are not expected to have a material
impact on the Company's results of operations, financial condition or liquidity.
Item 3 - Quantitative and Qualitative Disclosures about Market Risk.
The Company has terminated the two interest rate swap contracts which were in
place at December 31, 1998. However, the Company may enter into future
contracts to offset the impact of floating interest rates. Other than the
interest rate swaps, information about market risks for the nine months ended
September 30, 1999, does not differ materially from that discussed under Item 7A
of the Company's Annual Report on Form 10-K for the year ended December 31,
1998.
Forward-Looking Statements
- --------------------------
STATEMENTS THE COMPANY MAY PUBLISH THAT ARE NOT STRICTLY HISTORICAL ARE
"FORWARD-LOOKING" STATEMENTS UNDER THE SAFE HARBOR PROVISIONS OF THE PRIVATE
SECURITIES LITIGATION REFORM ACT OF 1995. ALTHOUGH THE COMPANY BELIEVES THE
EXPECTATIONS REFLECTED IN SUCH FORWARD-LOOKING STATEMENTS ARE BASED ON
REASONABLE ASSUMPTIONS, IT CAN GIVE NO ASSURANCE THAT ITS EXPECTATIONS WILL BE
REALIZED. FORWARD-LOOKING STATEMENTS INVOLVE KNOWN AND UNKNOWN RISKS WHICH MAY
CAUSE THE COMPANY'S ACTUAL RESULTS AND CORPORATE DEVELOPMENTS TO DIFFER
MATERIALLY FROM THOSE EXPECTED. FACTORS THAT COULD CAUSE RESULTS AND
DEVELOPMENTS TO DIFFER MATERIALLY FROM THE COMPANY'S EXPECTATIONS INCLUDE,
WITHOUT LIMITATION, CHANGES IN MANUFACTURING AND SHIPMENT SCHEDULES, DELAYS IN
COMPLETING PLANT CONSTRUCTION AND ACQUISITIONS, CURRENCY EXCHANGE RATES, NEW
PRODUCT AND TECHNOLOGY DEVELOPMENTS, COMPETITION WITHIN EACH BUSINESS SEGMENT,
CYCLICALITY OF THE MARKETS FOR THE PRODUCTS OF A MAJOR SEGMENT, LITIGATION,
SIGNIFICANT COST VARIANCES, THE EFFECTS OF ACQUISITIONS AND DIVESTITURES,
DISRUPTIONS TO OPERATIONS CAUSED BY NON-YEAR 2000 COMPLIANT SYSTEMS OF UNRELATED
THIRD PARTIES, AND OTHER RISKS DESCRIBED FROM TIME TO TIME IN THE COMPANY'S SEC
REPORTS INCLUDING QUARTERLY REPORTS ON FORM 10-Q, ANNUAL REPORTS ON FORM 10-K
AND REPORTS ON FORM 8-K.
22
<PAGE>
PART II
OTHER INFORMATION
Item 6: Exhibits and reports on Form 8-K.
No exhibits or reports on Form 8-K were filed during the quarter for
which this report is filed.
23
<PAGE>
SIGNATURE
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.
GLOBAL INDUSTRIAL TECHNOLOGIES, INC.
By: /s/Donna A. Reeves
-----------------------------------
Donna A. Reeves
Vice President - Controller
(Authorized Officer and Chief
Accounting Officer)
Dated: November 15, 1999
24
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<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> SEP-30-1999
<CASH> 8
<SECURITIES> 0
<RECEIVABLES> 112
<ALLOWANCES> 4
<INVENTORY> 124
<CURRENT-ASSETS> 478
<PP&E> 425
<DEPRECIATION> 174
<TOTAL-ASSETS> 1,100
<CURRENT-LIABILITIES> 372
<BONDS> 0
0
0
<COMMON> 7
<OTHER-SE> 230
<TOTAL-LIABILITY-AND-EQUITY> 1,100
<SALES> 408
<TOTAL-REVENUES> 409
<CGS> 308
<TOTAL-COSTS> 391
<OTHER-EXPENSES> (7)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 13
<INCOME-PRETAX> (1)
<INCOME-TAX> (4)
<INCOME-CONTINUING> 19
<DISCONTINUED> (20)
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<CHANGES> 0
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<EPS-BASIC> .13
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</TABLE>
