SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported)-------------------------------
MARTIN COLOR-FI, INC.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
SOUTH CAROLINA 0-21340 57-0879569
- --------------------------------------------------------------------------------
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
306 Main Street, Edgefield, South Carolina 29824
- -------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (803) 637-7000
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Former name or former address, if changed since last report.)
<PAGE>
Item 5. Other Events.
The Company experienced extremely difficult business conditions in the second
quarter of 1998. The Fibers Division experienced a 19% decrease in volume
shipped compared to the second quarter of 1997, caused principally by severe
price competition from foreign competitors. In addition, raw materials costs
increased 10% over the previous quarter and the second quarter of 1997.
The carpet division experienced a decrease in sales revenue of 8% during the
second quarter of 1998 compared to 1997. This was caused by a significant
reduction in sales to the manufactured housing market, offset to some extent by
growth in sales to other markets. The Company had planned for reduced sales to
the manufactured housing market, but competitive pressures caused sales to
decline much more rapidly than planned.
As a result of these conditions, the Company failed to make payments due in July
under its revolving credit loan and its overdraft line of credit. In response to
the Company's failure to make these payments and to the Company's failure to
comply with certain covenants and representations in the loan documents, the
revolving credit loan and overdraft line of credit have been accelerated by the
lenders and are immediately due. The Company does not have current assets
sufficient to repay such indebtedness or to cure the defaults.
The Company has retained the services of outside professionals to assist in
assessing its alternatives and addressing its liquidity issues. The alternatives
potentially available to the Company include filing a petition in bankruptcy,
refinancing its debt, acquiring additional capital to repay its debt, selling
all or a portion of the Company's assets, or merger of the Company with another
entity. With the exception of filing a petition in bankruptcy, however,
management of the Company cannot unilaterally effect any of such matters, and is
not currently able to assess the practical availability of such options.
The Company's lenders have agreed to forbear from exercising their rights and
remedies for an indefinite period of time, and have expressed support of the
Company's efforts to evaluate and implement financial alternatives. Although
many of the problems encountered in the second quarter have continued into the
third quarter and may continue indefinitely, the Company believes it has the
near-term financial ability to continue to operate as a going concern, though
there can be no assurances to that effect. The Company's long-term prospects are
likely to be dependent on its ability to restructure its indebtedness.
<PAGE>
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 hereunto duly authorized
MARTIN COLOR-FI, INC.
s/Bret J. Harris
By:-------------------------------------------
Bret J. Harris
Chief Financial Officer
(Principal Accounting and Financial Officer)
