SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 6-K
REPORT OF FOREIGN ISSUER
Pursuant to Rule 13a-16 or 15d-16 of
the Securities Exchange Act of 1934
RESULTS FOR THE QUARTER ENDED
JUNE 30, 2000
CONSOLTEX INC.
(Translation of Registrant's Name into English)
8555, route Transcanadienne, Saint-Laurent, Quebec, H4S 1Z6, Canada
(Address of Principal Executive Offices)
(Indicate by check mark whether the registrant files or will file annual
reports under cover of Form 20-F of Form 40-F.)
Form 20-F ___x____ Form 40-F ________
(Indicate by check mark whether the registrant by furnishing the information
contained in this Form is also hereby furnishing the information to the
Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of
1934.)
Yes _____ No ___x___
(If "Yes" is marked, indicate below the file number assigned to the
registrant in connection with Rule 12g3-2(b): 82-___)
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<PAGE>
CONSOLTEX INC.
(FORMERLY CONSOLTEX GROUP INC.)
THE QUALITY IS WOVEN RIGHT IN
RESULTS FOR THE QUARTER ENDED
JUNE 30, 2000
FOR FINANCIAL INQUIRIES OR INFORMATION CONTACT:
PAUL J. BAMATTER
VP FINANCE AND CHIEF FINANCIAL OFFICER
TEL: 212-596-0480
FAX: 212-596-0483
2
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August 14, 2000 - Consoltex Inc. (formerly named Consoltex Group Inc.)
announces its results for the second quarter ended June 30, 2000. The
Company reported a loss of $3.6 million for the quarter ended June 30,
2000 compared to net earnings of $2.5 million for the same quarter in
1999. Starting in the first quarter of 2000, the Company is reporting
its results in US dollars and has prepared its financial statements under
U.S. generally accepted accounting principles ("GAAP"). Previously, the
Company reported in Canadian dollars and prepared its financial
statements under Canadian GAAP. All prior period amounts have been
restated to reflect these changes which were made to more accurately
reflect the currency in which the Company operates, as well as to be more
useful to the users of these financial statements.
Consolidated sales increased from $85.4 million in the second quarter in
1999 to $102.6 million in the current quarter. Approximately 90% of the
overall sales volume arose as a result of the additional sales from the
Atlas and Marino acquisitions completed July 1 and October 1, 1999
respectively and approximately 10% through internal growth in the Textile
Operations.
Consolidated gross profits increased from $19.8 million, or 23.2% of
sales, in the quarter ended June 30, 1999 to $21.7 million, or 21.1% of
sales, in the current quarter. The primary reason for the reduction in
gross margin percentage relates to the rapid increase in the price on
polypropylene resin, the Company's primary raw material in the
Polypropylene Operations.
EBITDA for the quarter ended June 30, 2000 was $11.4 million, or 12.4%
higher than the comparable quarter in 1999. The increase in EBITDA
results from the Atlas and Marino acquisitions, offset, in part, by the
squeeze on margins resulting from rapidly rising polypropylene resin
costs.
Increased depreciation and amortization expense related primarily to the
additional goodwill amortization and depreciation expense related to the
acquisitions completed during 1999. Interest expense during the quarter,
at $5.9 million, was 35.4% higher than the comparable period in 1999
reflecting the cost of the additional debt related to the Marino and
Atlas acquisitions, as well as higher interest rates on the Company's
floating rate debt. Earnings during the quarter include a $1.7 million
foreign exchange loss versus a gain of $2.3 million in the second quarter
of 1999. During the quarter, the Company sold a building in Mexico for
$850,000 and recorded a loss on the sale of $426,000, which is recorded
in Other income (expense).
3
<PAGE>
TEXTILE OPERATIONS
Sales in the Textile Operations for the quarter ended June 30, 2000
totaling $58.4 million represents an increase of 3% compared to the like
quarter in the prior year. The Textile Operations sales growth came from
the continued strong growth in curtaining fabrics where our product
range, customer service and quality act as significant barriers to new
competitors, and from our U.S. based converting/importing business which
has and is continuing to develop new sources for fabrics manufactured at
more favorable costs. This growth was partially offset by weaker sales
in the polyester and nylon-based fashion and outerwear apparel fabrics
which continue to suffer from increased import competition of fabrics and
garments entering the North American market from countries with lower
cost labor.
Gross profit margins decreased from 23.6% in quarter two 1999 to 22.1% in
quarter two, 2000, primarily as a result of a lack of production volume
at certain of the Canadian manufacturing facilities.
EBITDA in the Textile Operations for the quarter ended June 30, 2000
increased by only 1.9% compared to the prior year as gross margins in the
Canadian vertical operations suffered due to strong import competition
and a lack of production volume at certain of the Canadian manufacturing
facilities. This decrease was offset, in part, by improved margins at
our U.S. based converting/importing business.
Selling and administration costs, as a percentage of sales, decreased
from 11.8% in quarter two 1999 to 10.4% in quarter two 2000, reflecting
some of the benefits of last year's restructuring activities.
POLYPROPYLENE OPERATIONS
Sales in the Polypropylene Operations increased by 53.8% compared to the
prior year due entirely to the increased sales recorded from the Atlas
and Marino acquisitions. Sales from our Mexican operations, excluding
the effect of acquisitions, grew by 17.3% in quarter two 2000 compared to
the same quarter in 1999 due principally to better pricing in small bags,
and strong sales in FIBC fabrics and bags. Sales from our U.S. based
weaving operations in Summerville, South Carolina were 11% lower this
quarter compared to the like quarter in the prior year, as a greater
portion of its sales are now recorded as intercompany sales to Atlas and
Marino and, as such, are eliminated on consolidation.
Gross profit margins slipped from 22.3% in quarter two 1999 to 19.8% in
the current quarter principally due to rapidly increasing polypropylene
resin prices, which increased significantly over the past year. The
Polypropylene Operations average purchase price during quarter two 2000
is 55% greater than in quarter two 1999. As the Polypropylene
Operations' purchases approximately 25 million pounds of resin quarterly
this has had, and will continue to have, a significant negative effect on
profitability.
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<PAGE>
Selling and administration costs increased as a percentage of sales from
7.2% in quarter two 1999 to 7.8% in the current quarter due to the nature
of the Marino and Atlas acquisitions, which sell and market their
flexible intermediate bulk container bags direct to end users and, as
such, have higher selling and administration costs.
EBITDA for the current quarter increased by 22.2% from $4.3 million
during quarter two 1999 to $5.3 million during the current quarter. The
Atlas and Marino acquisitions were responsible for the increase in
EBITDA. This increase was more than offset by the squeeze in margins
from the quick rise in resin costs.
SIX MONTHS RESULTS
Consolidated sales for the six month period ended June 30, 2000 of $202.5
million were 25.5% greater than the comparable period in 1999. Excluding
the effect of acquisitions, consolidated sales for the six month period
ended June 30, 2000 were 7.2% greater than in the comparable period in
1999.
Consolidated gross profits increased from $38.1 million, or 23.6% of
sales, for the six months ended June 30, 1999 to $43.2 million, or 21.4%
of sales, for the current six month period. This deterioration was
primarily due to the 45% increase in resin costs in the comparable six
month period.
EBITDA for the six month period ended June 30, 2000 was $21.3 million, or
7% greater than the comparable period in the prior year. The EBITDA
contributed by the two acquisitions was more than offset by the negative
effect of the increase in resin costs.
Increase depreciation and amortization expenses for the six month period
ended June 30, 2000 as well as increased financing costs are directly
related to the acquisitions completed in the second half of 1999.
The Company also recorded a $2.1 million foreign exchange loss in the six
month period as compared to a foreign exchange gain of $3.3 million for
the comparable period in 1999. The primary reason for the foreign
exchange loss is due to the strength of the U.S. dollar versus the
Mexican Peso and Canadian dollar and the fact that the Company's Mexican
and Canadian operations are financed principally with U.S. dollar
denominated debt.
Outlook
The outlook for the next few quarters is mixed. In our Textile
Operations, we believe that the strong growth in our home furnishings'
curtaining fabrics will offset the current weakness in fashion and
outerwear apparel fabrics. We do expect a temporary slow down in our
Home Furnishings curtaining business in quarter three as some of our
customers are reducing their levels of inventory in stock. Our
converting/importing business has increased its importing expertise and
has enhanced its distribution and product development capabilities.
These improvements should increase sales and margins. This growth,
however, is tempered by the continued weak demand in North America for
commodity apparel fabrics as much of this garment business have moved
overseas.
The Polypropylene Operations has many strategic initiatives in progress
as a result of its two recent strategic acquisitions. These initiatives
will come to fruition over the next year and a half. The initiatives
include upgrading and increasing the efficiency and capacity of the
extrusion and weaving processes at our main Summerville, South Carolina
plant, expanding manufacturing capacity at our Mexican bulk bag
converting plants, reducing manufacturing and selling and administration
costs at our primary Mexican extrusion and weaving plants, and achieving
the many financial, selling, administrative, manufacturing and other
synergies that are expected to result from the two recent acquisitions.
The Polypropylene margins have, and continue to be negatively affected by
the very high cost of resin, its primary raw material. We expect these
compressed margins to last for at least the next two quarters after which
we expect the margins to return to more historic levels.
Consoltex Inc. is a North American textile and packaging company.
Consoltex Inc. was formerly called Consoltex Group Inc. before it changed
its name on January 3, 2000. Its activities are divided between the
Polypropylene and Textile Operations located in the United States,
Canada, Mexico and Costa Rica. Consoltex is vertically integrated from
the production of yarn, in its Polypropylene Operations, through to
weaving, dyeing, printing, finishing and coating and production of end
products such as bulk bags and small bags. The Company also conducts its
own research and development and maintains its own sales, marketing and
distribution network throughout North America. Consoltex has 20
manufacturing plants, which together employ approximately 7,100
associates. The Company is a Canadian private company, however, it files
its financial statements with the United States Securities and Exchange
Commission as a result of its publicly traded Senior Subordinated Notes.
The information in this quarterly statement contains forward-looking
information with respect to Consoltex Inc. and its subsidiaries. These
statements involve risks and uncertainties that could cause actual
results to differ materially from those contemplated. These risks and
uncertainties include interest rates, currency fluctuations, prices of
raw materials, general economic and other risks detailed from time-to-
time in the Company's disclosure documents filed with the United States
Securities and Exchange Commission including Item 9, "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
in the Company's most recent Form 20-F. Consoltex undertakes no
obligation to update any forward-looking statement.
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CONSOLTEX INC.
(FORMERLY CONSOLTEX GROUP INC.)
CONSOLIDATED BALANCE SHEETS (1)
=========================================================================
<TABLE>
<CAPTION>
(IN THOUSANDS OF US DOLLARS) June 30, December
(UNAUDITED) 2000 31,
1999
=========================================================================
<S> <C> <C>
ASSETS
Current assets:
Cash $ $
568 2,969
Accounts receivable and prepaid expenses 60,715 50,638
Inventories 92,514 90,202
Current portion of deferred income tax assets 340 1,134
=========================================================================
154,137 144,943
Fixed assets, net 107,007 111,044
Goodwill 78,485 80,333
Other assets 3,561 4,684
Deferred income tax assets 1,551 1,520
=========================================================================
Total assets $344,741 $342,524
=================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Bank loans $49,781 $38,888
Accounts payable and accrued liabilities 41,127 36,648
Income taxes payable 3,371 2,761
Current portion of long-term debt 51,500 55,000
Current portion of other long-term liabilities 3,654 5,646
Current portion of deferred income tax liabilities 5,756 6,396
=========================================================================
155,189 145,339
Long-term debt 120,000 120,000
Other long-term liabilities 11,027 11,196
Deferred income tax liabilities 15,546 16,603
Shareholders' equity:
Share capital (18,027,551 shares) 75,213 75,213
Contributed surplus 2,087 2,087
Retained earnings (deficit) (5,382) 437
Accumulated other comprehensive income (loss) (28,939) (28,351)
=========================================================================
42,979 49,386
=========================================================================
Total liabilities and shareholders' equity $344,741 $342,524
==================
</TABLE>
(1) In the first quarter of 2000, the Company changed its reporting
currency from the Canadian dollar to the U.S. dollar and has decided to
prepare its financials statements under U.S. GAAP. The comparative
financial statements have been restated to reflect these changes. These
changes were made to more accurately reflect the currency in which the
Company operates, as well as to be more useful to the users of these
financial statements.
6
<PAGE>
CONSOLTEX INC.
(FORMERLY CONSOLTEX GROUP INC.)
CONSOLIDATED STATEMENTS OF EARNINGS (1)
=========================================================================
<TABLE>
<CAPTION>
(IN THOUSANDS OF US DOLLARS) QUARTER SIX MONTHS
ENDED JUNE ENDED JUNE 30
30
=========================================================================
<S> <C> <C>
</TABLE>
<TABLE>
<CAPTION>
(UNAUDITED) 2000 1999 2000 1999
=========================================================================
<S> <C> <C> <C> <C>
Sales:
Textile Operations $58,416 $56,701 $115,631 $106,601
Polypropylene Operations 44,188 28,734 86,908 54,715
=========================================================================
102,604 85,435 202,539 161,316
Cost of sales 80,936 65,622 159,293 123,219
Selling and administrative expenses 10,711 9,708 22,697 18,197
Foreign exchange (gain) loss 1,650 (2,282) 2,121 (3,348)
Depreciation and amortization 4,784 3,743 9,378 7,244
=========================================================================
Earnings from operations 4,523 8,644 9,050 16,004
Other income/(expense) (426) - (426) -
Financing costs:
Interest expense 5,858 4,326 11,479 8,480
Factor expenses 523 390 892 752
Amortization of deferred financing 607 299 1,169 583
expenses
=========================================================================
6,988 5,015 13,540 9,815
Earnings (loss) before income taxes (2,891) 3,629 (4,916) 6,189
Income tax expense 691 1,135 903 1,494
=========================================================================
Net earnings (loss) $(3,582) $2,494 $(5,819) $4,695
==================================
EBITDA (2) $11,358 $10,105 $21,292 $19,900
==================================
</TABLE>
(1)In the first quarter of 2000, the Company changed its reporting
currency from the Canadian dollar to the U.S. dollar and has decided to
prepare its financials statements under U.S. GAAP. The comparative
financial statements have been restated to reflect these changes. These
changes were made to more accurately reflect the currency in which the
Company operates, as well as to be more useful to the users of these
financial statements.
(2)Earnings before interest, taxes, depreciation, amortization, foreign
exchange gain or loss, gain or loss on sale of fixed assets and American
Industrial Partners management fee ($401 for quarter ended June 30, 2000
- $743 for the six months ended June 30, 2000; nil in 1999).
7
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Consoltex Inc.
(FORMERLY CONSOLTEX GROUP INC.)
CONSOLIDATED STATEMENTS OF CASH FLOWS (1)
=========================================================================
<TABLE>
<CAPTION>
(IN THOUSANDS OF US DOLLARS) QUARTER SIX MONTHS
ENDED JUNE ENDED JUNE
30 30
<S> <C> <C>
</TABLE>
<TABLE>
<CAPTION>
(UNAUDITED) 2000 1999 2000 1999
=========================================================================
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Net earnings (loss) $(3,582) $2,494 $(5,819) $4,695
Depreciation 3,805 3,281 7,420 6,394
Amortization of goodwill and other 979 462 1,958 850
assets
Amortization of deferred financing 607 299 1,169 583
expenses
Deferred income taxes 151 717 (682) (263)
Non-monetary foreign exchange gain 696 (2,141) 1,044 (3,314)
(loss)
Loss on sale of fixed assets 426 - 426 -
=========================================================================
3,082 5,112 5,516 8,945
Changes in:
Accounts receivable and prepaid (755) (4,382) (10,399) (12,697)
expenses
Inventories 374 (2,084) (3,221) (10,379)
Accounts payable and accrued (2,923) 541 4,762 13,649
liabilities
Income taxes payable (113) (253) 691 (229)
=========================================================================
Cash used in operating activities (335) (1,066) (2,651) (711)
Cash flows used in investing
activities:
Purchase of fixed assets, net of (3,425) (3,140) (5,871) (5,729)
disposals
Proceeds on sale of fixed assets 850 - 850 -
Acquisition of Royalton - - - (3,525)
=========================================================================
Cash used before financing activities (2,910) (4,206) (7,672) (9,965)
=========================================================================
Cash flows from financing activities:
Increase in bank loans 5,829 7,632 11,257 12,597
Repayment of long-term debt (1,750) (1,750) (3,500) (3,500)
Increase (decrease) other long- (533) (17) (2,533) (35)
term liabilities
Increase (decrease) in other (301) 716 47 1,185
assets
=========================================================================
Increase (decrease) in cash 335 2,375 (2,401) 282
Cash at the beginning of the period 233 444 2,969 2,537
=========================================================================
Cash at the end of the period $568 $2,819 $568 $2,819
=========================================================================
</TABLE>
(1)IN THE FIRST QUARTER OF 2000, THE COMPANY CHANGED ITS REPORTING
CURRENCY FROM THE CANADIAN DOLLAR TO THE U.S. DOLLAR AND HAS DECIDED TO
PREPARE ITS FINANCIALS STATEMENTS UNDER U.S. GAAP. THE COMPARATIVE
FINANCIAL STATEMENTS HAVE BEEN RESTATED TO REFLECT THESE CHANGES. THESE
CHANGES WERE MADE TO MORE ACCURATELY REFLECT THE CURRENCY IN WHICH THE
COMPANY OPERATES, AS WELL AS TO BE MORE USEFUL TO THE USERS OF THESE
FINANCIAL STATEMENTS.
8
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CONSOLTEX INC.
(FORMERLY CONSOLTEX GROUP INC.)
CONSOLIDATED SEGMENT DISCLOSURES (1)
=========================================================================
<TABLE>
<CAPTION>
(IN THOUSANDS OF US DOLLARS) QUARTER Six months
ENDED JUNE ended June 30
30
<S> <C> <C>
</TABLE>
<TABLE>
<CAPTION>
(UNAUDITED) 2000 1999 2000 1999
=========================================================================
<S> <C> <C> <C> <C>
SALES
Textile Operations $58,416 $56,701 $115,631 $106,601
Polypropylene Operations 44,188 28,734 86,908 54,715
=========================================================================
Consolidated sales $102,604 $85,435 $202,539 $161,316
==================================
EBITDA
Textile Operations $6,848 $6,723 $13,092 $13,535
Polypropylene Operations 5,306 4,339 9,948 8,429
=========================================================================
Total for reportable segments 12,154 11,062 23,040 21,964
Corporate (796) (957) (1,748) (2,064)
=========================================================================
Consolidated EBITDA 11,358 10,105 21,292 19,900
Other income (expense) 426 - 426 -
American Industrial Partners management 401 - 743 -
fee
Foreign exchange (gain) loss 1,650 (2,282) 2,121 (3,348)
Depreciation and amortization 4,784 3,743 9,378 7,244
Financing costs 6,988 5,015 13,540 9,815
Income tax expense 691 1,135 903 1,494
=========================================================================
Net earnings (loss) $(3,528) $2,494 $(5,819) $4,695
==================================
JUNE 30, DEC. 31,
2000 1999
Segment assets:
Textile Operations $143,238 $138,518
Polypropylene Operations 195,548 201,528
=========================================================================
Total for reportable segments 338,786 340,046
Corporate 5,955 2,478
=========================================================================
Consolidated total assets $344,741 $342,524
</TABLE> =================
(1)In the first quarter of 2000, the Company changed its reporting
currency from the Canadian dollar to the U.S. dollar and has decided to
prepare its financials statements under U.S. GAAP. The comparative
financial statements have been restated to reflect these changes. These
changes were made to more accurately reflect the currency in which the
Company operates, as well as to be more useful to the users of these
financial statements.
9
<PAGE>
Consoltex Inc.
(Formerly Consoltex Group Inc.)
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (1)
========================================================================
<TABLE>
<CAPTION>
(IN THOUSANDS OF US DOLLARS) QUARTER SIX
ENDED JUNE MONTHS
30 ENDED
JUNE 30
<S> <C> <C>
</TABLE>
<TABLE>
<CAPTION>
(UNAUDITED) 2000 1999 2000 1999
<S> <C> <C> <C> <C>
========================================================================
Net earnings (loss) $(3,582) $2,494 $(5,819) $4,695
Foreign currency translation adjustments (1,205) (54) (588) 1,226
========================================================================
Consolidated comprehensive income (loss) $(4,787) $2440 $(6,407) $5,921
</TABLE> ===============================
(1) IN THE FIRST QUARTER OF 2000, THE COMPANY CHANGED ITS REPORTING
CURRENCY FROM THE CANADIAN DOLLAR TO THE U.S. DOLLAR AND HAS DECIDED TO
PREPARE ITS FINANCIALS STATEMENTS UNDER U.S. GAAP. THE COMPARATIVE
FINANCIAL STATEMENTS HAVE BEEN RESTATED TO REFLECT THESE CHANGES. THESE
CHANGES WERE MADE TO MORE ACCURATELY REFLECT THE CURRENCY IN WHICH THE
COMPANY OPERATES, AS WELL AS TO BE MORE USEFUL TO THE USERS OF THESE
FINANCIAL STATEMENTS.
10
