-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, BWTwcugz31xqGiS/xcIoU+WBv9SOqpnf75eDnANYZBcdiHc7cBSpgKLwgMk1ZfU3 8oZGJSBAjCss1eig8ybdzA== 0000950117-96-001501.txt : 19961125 0000950117-96-001501.hdr.sgml : 19961125 ACCESSION NUMBER: 0000950117-96-001501 CONFORMED SUBMISSION TYPE: 10-Q/A PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19960930 FILED AS OF DATE: 19961122 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: BELDING HEMINWAY CO INC /DE/ CENTRAL INDEX KEY: 0000011027 STANDARD INDUSTRIAL CLASSIFICATION: TEXTILE MILL PRODUCTS [2200] IRS NUMBER: 131574754 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q/A SEC ACT: 1934 Act SEC FILE NUMBER: 001-03462 FILM NUMBER: 96670743 BUSINESS ADDRESS: STREET 1: 1430 BROADWAY CITY: NEW YORK STATE: NY ZIP: 10018 BUSINESS PHONE: 2125564700 10-Q/A 1 BELDING HEMINWAY COMPANY INC. 10-Q/A ================================================================================ UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q/A (X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1996 COMMISSION FILE NO. 0-23082
OR ( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM ______ TO ______ ----------------------- BELDING HEMINWAY COMPANY, INC. (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) DELAWARE 13-1574754 (STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.) 1430 BROADWAY NEW YORK, NY 10018 (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE) REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE (212) 556-4700 FORMER NAME, FORMER ADDRESS AND FORMER FISCAL YEAR, IF CHANGED SINCE LAST REPORT: N/A 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. [X] YES [ ] NO INDICATE THE NUMBER OF SHARES OUTSTANDING OF EACH OF THE ISSUER'S CLASSES OF COMMON STOCK, AS OF THE LATEST PRACTICABLE DATE. AS OF NOVEMBER 11, 1996, 7,388,282 SHARES OF COMMON STOCK WERE OUTSTANDING. ================================================================================ PAGE 1 OF 18 BELDING HEMINWAY COMPANY, INC. 1430 BROADWAY NEW YORK, NY 10018 TABLE OF CONTENTS
PAGE NO. Part I -- Financial Information Item 1. Financial Statements Consolidated Balance Sheets as of September 30, 1996 and December 31, 1995 3 Consolidated Statements of Operations for the Three and Nine months Ended September 30, 1996 and 1995 4 Consolidated Statements of Cash Flows for the Nine months Ended September 30, 1996 and 1995 5 Notes to Unaudited Consolidated Financial Statements September 30, 1996 6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 8 Part II -- Other Information Item 1. Legal Proceedings N/A Item 2. Changes in Securities N/A Item 3. Defaults upon Senior Securities 14 Item 4. Submission of Matters to a Vote of Security Holders 14 Item 5. Other Information 14 Item 6. Exhibits and Reports on Form 8-K 14 Signatures 15
PAGE 2 OF 18 PART I - FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS BELDING HEMINWAY COMPANY, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (DOLLARS IN THOUSANDS)
ASSETS SEPTEMBER 30, 1996 DECEMBER 31, 1995 (UNAUDITED) (NOTE) ----------- ------ Current Assets: Cash and cash equivalents $ 448 $ 629 Accounts receivable trade, net 11,927 11,314 Inventories 18,081 18,360 Federal income taxes receivable 100 787 Current deferred tax asset 1,483 313 Other current assets 632 953 ------- ------- Total current assets 32,671 32,356 ------- ------- Property, plant and equipment, at cost 32,809 33,013 Less: Accumulated depreciation and amortization (4,913) (3,538) ------- ------- Net property, plant and equipment 27,896 29,475 ------- ------- Goodwill, net 20,322 20,450 Deferred tax asset -- 9,515 Other assets 1,723 2,328 ------- ------- Total Assets $82,612 $94,124 ======= ======== LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities: Accounts payable $5,208 $5,593 Current maturities of long-term debt 37,786 4,029 Other current liabilities 9,625 12,948 ------- ------- 52,619 22,570 ------- ------- Long-term debt 227 44,666 Other liabilities 18,698 19,386 ------- ------- Total Liabilities 71,544 86,622 ------- ------- Redeemable Preferred Stock, par value $0.01 per share 20,805,060 shares authorized; Shares issued and outstanding: Series A - None Series B - 20,805,060 20,805 20,805 Accumulated dividends on preferred stock 2,388 1,374 ------- ------- 23,193 22,179 ------- ------- Common Stock, par value $0.01 per share 20,000,000 shares authorized; Shares issued and outstanding: September 30, 1996: 7,388,282 74 December 31, 1995: 7,409,282 74 Paid in Capital 19,858 19,859 Retained Earnings (32,057) (34,610) ------- ------- Total Common Stockholders' Equity (12,125) (14,677) ------- ------- Total Liabilities and Stockholders' Equity $82,612 $94,124 ======= =======
See Notes to Unaudited Consolidated Financial Statements. PAGE 3 OF 18 BELDING HEMINWAY COMPANY, INC. AND SUBSIDIARIES UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
THREE MONTHS NINE MONTHS ENDED SEPTEMBER 30, ENDED SEPTEMBER 30, 1996 1995 1996 1995 ------------------ ------------------ Net sales $ 22,915 $ 20,612 $ 67,158 $ 65,769 Cost of sales 15,919 15,212 48,063 47,487 -------- -------- -------- -------- Gross profit 6,996 5,400 19,095 18,282 Selling, general & administrative expenses 3,528 3,441 10,508 11,654 Other (income) expense -- net (118) (69) (384) (222) -------- -------- -------- -------- Income from continuing operations before interest and income taxes 3,586 2,028 8,971 6,850 Interest expense 1,083 1,016 3,395 2,961 -------- -------- -------- -------- Income from continuing operations before income taxes 2,503 1,012 5,576 3,889 Provision for income taxes 1,032 535 2,367 2,023 -------- -------- -------- -------- Income from continuing operations 1,471 477 3,209 1,866 Less dividends on preferred stock 345 326 1,014 952 -------- -------- -------- -------- Income applicable to common stock from continuing operations 1,126 151 2,195 914 Income (loss) from discontinued operations, net of income tax provision 313 (49) 358 377 -------- -------- -------- -------- Income applicable to common stock $ 1,439 $ 102 $ 2,553 $ 1,291 ======== ======== ======== ======== Earnings per common share: Continuing operations $ 0.15 $ 0.02 $ 0.30 $ 0.12 Discontinued operations 0.04 (.01) 0.05 0.05 --------- -------- -------- -------- Total $ 0.19 $ 0.01 $ 0.35 $ 0.17 ======== ======== ======== ======== Weighted average common shares outstanding (in thousands) 7,392 7,413 7,397 7,416 ======== ======== ======== ======== Total depreciation and amortization 898 1,021 2,344 2,644 ======== ======== ======== ========
See Notes to Unaudited Consolidated Financial Statements. PAGE 4 OF 18 BELDING HEMINWAY COMPANY, INC. AND SUBSIDIARIES UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS (DOLLARS IN THOUSANDS)
NINE MONTHS ENDED SEPTEMBER 30, 1996 1995 ---- ---- CASH FLOWS FROM OPERATING ACTIVITIES: Income from continuing operations $ 3,209 $ 1,866 Reconciliation of net income from continuing operations to net cash provided by operations: Depreciation and amortization 2,344 2,644 Deferred tax provision 1,993 1,105 Gain on asset sale (131) -- Changes in operating assets and liabilities: Accounts receivable (613) (419) Inventories (752) (3,972) Federal income taxes receivable 565 -- Other current assets 443 259 Accounts payable (385) 1,842 Other current liabilities (1,894) (2,709) Other liabilities (637) -- Other operating assets and liabilities 164 131 Cash flow from discontinued operations (44) 2,207 -------- -------- 4,262 2,954 -------- -------- CASH FLOWS FROM INVESTING ACTIVITIES: Proceeds from sale of discontinued operations 8,190 2,623 Capital expenditures (970) (2,915) Investments in other assets (389) (199) Proceeds from asset sales 534 -- Acquisition of Culver noncash net assets -- (2,800) Adjustments related to acquisitions (42) (123) -------- -------- 7,323 (3,414) -------- -------- CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from revolving credit facility and capitalized lease obligations 31,787 29,801 Repayment of long term debt and capital lease obligations (42,469) (27,295) Payment of long term liabilities (1,084) (2,427) -------- -------- (11,766) 79 -------- -------- Decrease in cash and cash equivalents (181) (381) Cash and cash equivalents beginning of period 629 1,015 -------- -------- Cash and cash equivalents end of period $ 448 $ 634 ======== ======== SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Cash paid during the period for: Interest $ 3,393 $ 2,007 ======== ======== Income taxes $ 103 $ 798 ======== ======== See Notes to Unaudited Consolidated Financial Statements PAGE 5 OF 18 BELDING HEMINWAY COMPANY, INC. NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS SEPTEMBER 30, 1996 NOTE 1: 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 Rule 10-01 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 fair presentation have been included. Certain reclassifications have been made to prior year amounts in order to present them on a basis consistent with the current year. Operating results for the nine-month period ended September 30, 1996 are not necessarily indicative of the results that may be expected for the year ending December 31, 1996. For further information, refer to the consolidated financial statements and footnotes included in the Company's annual report on Form 10-K for the year ended December 31, 1995. NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Nature of Operation: The Company and its subsidiaries manufacture and market industrial and consumer threads and distribute a line of home sewing and craft products, principally buttons. The Company has divested the Home Furnishings division (See Note 5). Consolidation: The accompanying consolidated financial statements include the accounts of the Company and all subsidiaries after elimination of intercompany items and transactions. Depreciation and Amortization: Depreciation and amortization are computed principally by the straight-line method for each class of depreciable and amortizable asset based on their estimated useful lives. Buildings and improvements, machinery and equipment, and furniture, fixtures and leasehold improvements are generally depreciated over periods of 20-35, 5-25 and 5-10 years, respectively. Revenue Recognition: Revenue is recognized upon shipment of merchandise. Cash Equivalents: The Company considers all highly liquid investments with a maturity of six months or less when purchased to be cash equivalents. Use of Estimates: The preparation of financial statements in conformity with generally accepted accounting principles requires the Company to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. NOTE 3: EARNINGS PER SHARE Earnings per common share for the Company have been computed on the basis of weighted average common shares outstanding after providing for quarterly preferred dividend requirements. PAGE 6 of 18 BELDING HEMINWAY COMPANY, INC. NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS SEPTEMBER 30, 1996 NOTE 4: INVENTORIES: The components of inventories, net of reserves, are as follows (dollars in thousands):
SEPTEMBER 30, 1996 DECEMBER 31, 1995 ------------------ ----------------- Raw materials and greige goods $ 5,264 $ 3,189 Manufacturing supplies 1,202 1,346 Work in Progress 5,231 6,033 Finished goods 6,384 7,792 ------- ------- $18,081 $18,360 ======= =======
NOTE 5: DISCONTINUED OPERATIONS On July 31, 1996 the Company completed the sale of its Home Furnishings division. Proceeds received on the sale, adjusted for closing costs and changes in net asset value of the division subsequent to the contract date were used to repay the Company's revolving bank loan. Such net proceeds approximated the amount that had been borrowed under the revolving loan in support of the Home Furnishings division's inventories and receivables. The repayment of bank debt was sufficient in amount to avoid bank fees that would have been payable had the Company not completed the sale within the time frame prescribed by the Company's Credit Agreement dated October 29, 1993, as amended ("Credit Agreement") or in an amount sufficient to repay amounts borrowed against the division's inventories and receivables. The results of the Home Furnishings division for the period January 1, 1996 through July 31, 1996 and all prior periods have been presented as results of discontinued operations. PAGE 7 OF 18 PART I - FINANCIAL INFORMATION ITEM 2. MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULT OF OPERATIONS RESULTS OF OPERATIONS THIRD QUARTER SALES Sales during the third quarter of 1996 totaled $22.9 million as compared to $20.6 million during the third quarter of 1995 for an increase of $2.3 million. Sales in the consumer product segment totaled $12.9 million during the third quarter of 1996, compared with $10.5 million during the third quarter of 1995 for an increase of $2.4 million or 22.3%. The increase in quarterly sales was the result of improved sales in the Button division and incremental sales contributed by Culver Textile Company ("Culver") which was acquired on August 31, 1995. Sales in the industrial product segment totaled $10.0 million during the third quarter of 1996 as compared to $10.1 million during the third quarter of 1995. GROSS MARGIN Gross margin increased $1.6 million during the third quarter of 1996 to $7.0 million as compared to $5.4 million during the third quarter of 1995. The gross margin percentage was 30.5% during the third quarter of 1996, compared with 26.2% during the third quarter of 1995. Gross margin in the consumer product segment totaled $4.6 million or 35.7% during the third quarter of 1996 as compared to $3.7 million or 35.0% during the third quarter of 1995. The margin improvement in the consumer product segment was the result of improved sales in the Button division and incremental sales resulting from the Culver acquisition. Gross margin in the industrial product segment increased $.7 million to $2.4 million in the third quarter of 1996 as compared to $1.7 million during the third quarter of 1995. The gross margin percent during the third quarter of 1996 was 24.0 percent as compared to 17.0 percent in the corresponding quarter of 1995. The improvement over 1995 margins is attributable to cost and headcount reductions implemented beginning in September 1995. SELLING, GENERAL AND ADMINISTRATIVE Selling, general and administrative expenses totaled $3.5 million during the third quarter of 1996 as compared with $3.4 million during the same period in 1995. Selling, general and administrative expenses in the consumer product segment in the third quarter of 1996 totaled $1.3 million as compared to $1.1 million in the third quarter of 1995. The increase in selling, general and administrative costs in the consumer product segment was the result of additional expenses attributable to the Button division. PAGE 8 OF 18 Selling, general and administrative expenses in the industrial product segment totaled $2.2 million during the third quarter of 1996 as compared to $2.3 million in the third quarter of 1995. The 1995 third quarter amount of $2.2 million included the reversal of $.7 million of expense accruals, including bonus and other fees. The decline in selling, general and administrative expenses in the industrial product segment was the result of reduced spending by the industrial Thread division totaling $.4 million resulting principally from headcount reductions and lower goodwill amortization of $.1 million and lower corporate spending in the amount of $.4 million. The Thread division headcount reductions were made in the second half of 1995 and $17.4 million of goodwill was written off in the fourth quarter of 1995 in connection with the Thread division asset impairment. INTEREST EXPENSE Interest expense during the third quarter of 1996 totaled $1.1 million as compared to $1.0 million during the third quarter of 1995. The weighted average interest rate during the third quarter of 1996 was 9.95% as compared to 8.24% in 1995. The increase in rate is mostly attributable to the removal of the LIBOR interest rate option from the Company's credit facility effective in March 1996. Weighted average debt during the third quarter of 1996 was $41.6 million as compared to $46.5 million in the third quarter of 1995. INCOME TAXES The provision for income taxes during the third quarter of 1996 totaled $1.0 million as compared to $.5 million during the same period last year. The combined effective income tax rate in 1996 was 41.2% as compared to 52.9% in 1995. The combined effective income tax rates are higher than combined statutory rates because of nondeductible goodwill. The 1996 combined effective income tax rate was lower than in 1995 because of the reduction in goodwill amortization resulting from the Thread division asset impairment recorded in the fourth quarter of 1995. PREFERRED DIVIDENDS Preferred dividends during the third quarter of 1996 totaled $.3 million as compared to $.3 million during the same period in 1995. Preferred dividends are accrued and compound at a rate of 6%. Preferred dividend payments are subject to the approval of the Company's bank lenders. Such approval has not been granted and no dividend payments have been made by the Company. YEAR-TO-DATE SALES Sales during the nine month period ended September 30, 1996 totaled $67.2 million as compared to $65.8 million during the same period of 1995 for an increase of $1.4 million. Sales in the consumer product segment totaled $36.0 million during the first nine months of 1996 as compared to $29.7 million in the first nine months of 1995 for an increase of $6.3 million. The increase in consumer segment sales was mostly the result of incremental sales contributed by Culver. Sales in the industrial product segment totaled $31.2 million in 1996 as compared to $36.1 million during the first nine months of 1995 for a decrease of $4.9 million. All of this year to year reduction occurred during the first two quarters of 1996. PAGE 9 OF 18 GROSS MARGIN Gross margin during the first nine months of 1996 totaled $19.1 million as compared to $18.3 million during the same period in 1995 for an increase of $.8 million. The gross margin percent during the first nine months of 1996 was 28.4% as compared to 27.8% during the nine months ended September 30, 1995. Gross margin in the consumer product segment during the first nine months of 1996 totaled $11.6 million as compared with $10.1 million during the first nine months of 1995. Increased sales by the Button division and incremental sales resulting from the Culver acquisition provided the additional margin dollars. The gross margin percentage during the first nine months of 1996 in the consumer product segment was 32.3% as compared to 33.9% during the same period in 1995. The decline in gross margin percentage in the consumer product segment was due to the lower Culver margins. Gross margin in the industrial segment during the first nine months of 1996 totaled $7.5 million as compared to $8.2 million in 1995. The decline in margin dollars was directly attributable to the decline in year-to-date sales volume of this segment. The gross margin percentage during the nine months of 1996 for the industrial segment was 24.0% as compared to 22.3% during the first nine months of 1995. SELLING, GENERAL AND ADMINISTRATIVE Selling, general and administrative expenses during the first nine months of 1996 totaled $10.5 million as compared to $11.7 million during the first nine months of 1995. Selling, general and administrative expenses in the consumer product segment in the first nine months of 1996 totaled $3.9 million as compared to $3.3 million in 1995 The increase in selling, general and administrative costs in the consumer product segment was the result of additional expenses attributable to Culver operations. Selling, general and administrative expenses in the industrial product segment totaled $6.6 million during the nine months ended September 30, 1996 as compared to $8.4 million during the first nine months of 1995. The decline in selling, general and administrative expenses in the industrial product segment was the result of reduced spending totaling $1.6 million, principally the result of headcount reductions and lower goodwill amortization of $.3 million. INTEREST EXPENSE Interest expense during the nine month period ended September 30, 1996 totaled $3.4 million as compared to $3.0 million during the same period in 1995. The weighted average interest rate during the first nine months of 1996 was 9.33% as compared to 8.66% in 1995. Weighted average debt during the nine months ended September 30, 1996 was $46.1 million as compared to $44.8 million during the nine months ended September 30, 1995. INCOME TAXES The provision for income taxes during the nine months ended September 30, 1996 was $2.4 million as compared to $2.0 million during the same period last year. The combined effective income tax rate in 1996 totaled 42.4% as compared to 52.0% in 1995. The combined effective income tax rates are higher than combined statutory rates because of nondeductible goodwill. The 1996 combined effective income tax rate is lower than the 1995 rate because of the reduction in goodwill amortization. PAGE 10 OF 18 PREFERRED DIVIDENDS Preferred dividends during the first nine months of 1996 totaled $1.0 million as compared to $1.0 million during the same period in 1995. Preferred dividends are accrued and compound at a rate of 6%. Preferred dividend payments are subject to the approval of the Company's bank lenders. Such approval has not been granted and no dividend payments have been made by the Company. IMPACT OF INFLATION The Company's results are affected by the impact of inflation on manufacturing and operating costs. Historically, the Company has used selling price adjustments, cost containment programs and improved operating efficiencies to offset the otherwise negative impact of inflation on its operations. LIQUIDITY AND CAPITAL RESOURCES Cash provided by operations during the nine months ended September 30, 1996 totaled $4.3 million. Net cash provided by investing activities during the nine months ended September 30, 1996 totaled $7.3 million which included net proceeds of $8.2 million from the sale of the Home Furnishings division and $.5 million from the sale of an unused parcel of land, offset by $1.0 million of capital expenditures and $.4 million of investments in other assets. Net cash used by financing activities totaled $11.8 million. Net proceeds of $8.2 million from the sale of the Home Furnishings division were used to repay bank debt during the quarter. Reductions in long term liabilities of $1.1 million reflect primarily payments to the Company's pension plan and payments of other long term liabilities. At September 30, 1996, the Company's principal sources of liquidity included cash and cash equivalents of $.4 million and trade accounts receivable of $11.9 million. At September 30, 1996 the Company had $.9 million of unused availability under its revolving credit facility (the "Revolving Facility"). At December 31, 1995, the Company was in default on certain of its loan covenants specified in the Credit Agreement dated October 29, 1993, as amended ("Credit Agreement"). As a result, on March 15, 1996, the Credit Agreement was amended as more fully described in the Company's Form 10-K for the year ended December 31, 1995, and Form 10-Q for the quarterly period ended March 31, 1996. As described in Note 5, the Company completed the sale of the Home Furnishings division on July 31, 1996 and used the net proceeds to repay all existing revolving facility advances against the Company's Home Furnishings division receivables and inventories and thus avoided fees otherwise payable under the amended Credit Agreement. The banks participating in the Company's Credit facility have agreed in exchange for the payment of a $250 thousand fee to postpone to March 31, 1997 the payment of the $2.5 million in fees required by the most recent amendment to the Credit Agreement. In order to meet the requirements of the Term Facility and thus avoid fees payable by the deadline, the Company expects that it will have to refinance the Term Facility by the deadline, or sell assets. If the Company is not successful in refinancing the Term Facility it will be obligated to demonstrate progress toward the sale of assets and complete a sale of those assets at sufficient levels to repay the Term Facility by the deadline, in order to avoid the payment of fees. If the Company refinances the Term Facility, the new borrowing arrangements may carry PAGE 11 OF 18 higher rates of interest and increased administrative costs. If the Company raises funds through asset sales to discharge the Term Facility, the reduction in interest expense resulting therefrom may not be sufficient to offset the diminution in income that would result from such asset sales. There can be no assurance that the Company will be able to refinance the Term Facility on commercially acceptable terms or demonstrate sufficient progress towards asset sale(s) by the dates fees are due and/or complete a transaction sufficient to discharge the Term Facility by the deadline. If the Company cannot satisfy those conditions, the Company would be obligated to pay fees under the agreement. There is no assurance that the Company's cash flow would be sufficient to pay those fees. If the Company is unable to pay any of the fees when due it will be in default under the Term Facility. The Company has engaged a financial advisor in order to assist it in the evaluation of strategic alternatives. The Company's ability to make interest and installment principal payments on outstanding debt also depends on generating sufficient cash flow from operations as well as maintaining certain levels of receivables and inventory. However, there can be no assurance the Company will have sufficient cash flow or working capital levels will be sufficient to make such payments. If the Company is unable to make installment principal and interest payments when due it will be in default of the Credit Agreement. If the Company is not successful in refinancing the Credit Facility and thereby does not repay all of the amounts outstanding under the Credit Facility on its final maturity date of July 1, 1997 or meet other covenant provisions it will be in default under the Credit Facility. Any such default or non-compliance with the Credit Facility would entitle the lender to require immediate payment of the outstanding indebtedness and to refuse advances and to exercise various rights against the Company, including, without limitation, the right to foreclose its security interest in the Company's assets and realize upon its collateral by any available judicial procedure and/or to take possession of and sell any or all of the collateral with or without judicial process. If such non-compliance occurred and the lender demanded payment or refused to make further loans and the Company was unable to obtain alternative financing, the lack of appropriate liquidity would have a material adverse effect on the Company's results of operations and its ability to continue as a going concern. The Company was also in default on one covenant of certain leasing arrangements totaling $2.2 million in debt at December 31, 1995. The leasing arrangements have been amended on terms parallel to the amendment of the Credit Agreement. The maturity date has been moved to July 1, 1997 and interest rate increased to prime rate plus 1.50%. Lessor has also received a second lien on certain Company assets. The Company is now in compliance with the provisions as amended of these leasing arrangements during 1996. If the Company does not comply with the provisions and is unable to obtain alternative financing, the Company would be in default and the lender could take back the equipment under lease which would have an adverse effect on the Company's operations. The Company is in discussions with several banks and financial institutions to refinance all of its existing debt at commercially acceptable terms. However, there can be no assurance that the Company will be able to complete a refinancing of the Term Facility or demonstrate sufficient progress towards asset sale(s) by the dates fees are due and or complete a transaction sufficient to discharge the Term Facility by the deadline. Pursuant to the terms of the Company's Series B Preferred Stock, 20% of such shares were scheduled to be redeemed on March 15 of each year commencing in 1995 and ending in 1999. Dividends on the Series B Preferred Stock accrue at an annual rate of 6% and are payable quarterly on March 15, June 15, September 15, and December 15. Both the preferred stock redemptions and the quarterly dividend payments are subject to approval of the banks participating in the Company's credit facility. The Company was notified as of March 15, PAGE 12 OF 18 1995 that the banks declined approval of the dividend and redemption payments and no such payments have been made. As a result, additional dividends will accrue on the scheduled but unpaid dividends at a rate of 6% per annum. PAGE 13 OF 18 PART II - OTHER INFORMATION ITEM 3. DEFAULTS UPON SENIOR SECURITIES a) None b) REDEEMABLE SERIES B PREFERRED STOCK Scheduled dividend payments totaling $1,316,018 in 1995, $330,907 on March 15, 1996, $339,548 on June 15, 1996 and $345,533 on September 15, 1996 were subject to the approval of the Company's bank lenders. Such approval was not granted by the banks and the dividend payments were not made. As a result, the unpaid dividends accrue at a compounded rate of 6% per annum. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS None ITEM 5. OTHER INFORMATION None ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K a) Exhibits
Exhibit No. Description ----------- ----------- 10.23A Amendment, dated as of November 12, 1996, to Credit Agreement dated as of October 29, 1996 (as previously amended) between the Company and NationsBank of North Carolina, N.A., individually and as agent for Fleet Bank, The Bank of New York, and the Daiwa Bank, Limited.
b) Reports on Form 8-K. During the third quarter of 1996, the Company did not file a Current Report on Form 8-K. PAGE 14 OF 18 SIGNATURES 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. BELDING HEMINWAY COMPANY, INC. (Registrant) S/Karen Brenner - ------------------------------------------ Karen Brenner, Chairman, President and Chief Executive Officer S/Edward F. Cooke - ------------------------------------------ Edward F. Cooke, Vice President and Chief Accounting Officer Date: 11/21/96 PAGE 15 OF 18 EX-10 2 EXHIBIT 10.23A NationsBank 101 South Tryon Street, NC1-002-31-31 Charlotte, NC 28255 [NATIONSBANK logo] November 12, 1996 BELDING HEMINWAY COMPANY, INC. 1430 Broadway New York, New York 10018 RE: CREDIT AGREEMENT Gentlemen: Reference is made to that certain Credit Agreement dated as of October 29, 1996, by and among Belding Heminway Company, Inc. (the "Borrower"), the banks listed on the signature pages thereto (the "Banks"), and NationsBank, N.A. as agent (the "Agent") for the Banks, as amended from time to time (as amended, the "Credit Agreement"), pursuant to which the Banks have made available to the Borrower certain term loans, revolving loans and letters of credit. Capitalized terms not otherwise defined herein shall have the meanings ascribed to them in the Credit Agreement. Section 2.15(e) of the Credit Agreement establishes the requirement for the Borrower to pay to the Banks certain continuation fees (the "Term Loan Continuation Fees") in the event that Term Loans remain outstanding as of particular measurement dates. By this letter agreement, the Borrower, the Banks and the Agent hereby agree to modify section 2.15(e) to read in its entirety as follows: (e) Term Loan Continuation Fees. In the event that either (1) the Term Loans remain outstanding on March 31, 1997 or (2) an Event of Default occurs under section 6.01 hereof, then the Borrower shall pay to the Banks, in a lump sum, a fee in the amount of $2,500,000.00 (the "Continuation Fees"). Such fees shall be allocated among the Banks pro rata according to their respective Commitment Percentages. Such fees shall be due and payable on the fifth Business Day following the earlier of March 31, 1997 or the date of the occurrence of such Event of Default. Notwithstanding the foregoing, in the event that no Term Loans remain outstanding on March 31, 1997 or any time thereafter, and no Event of Default has occurred, the Borrower shall have not obligation to pay such Continuation Fees to the Banks or any part thereof. In consideration of the Banks' and the Agent's agreeing to amend section 2.15(e) of the Credit Agreement, the Borrower shall pay to the Agent, for the ratable benefit of the Banks according to their Commitment Percentages, an amendment fee of $250,000.00. The amendment of section 2.15(e) shall be effective as of the date that the Borrower pays such amendment fee to the Agent for the benefit of the Banks. The Borrower acknowledges that the amendment of section 2.15(e) as set forth herein provides it valuable and immediate consideration and to the extent that either of the conditions precedent to the payment of the Continuation Fees occurs, such Continuation Fees shall have been fully earned by the Banks. PAGE 16 OF 18 BELDING HEMINWAY COMPANY, INC. November 12, 1996 Page 2 This letter agreement has been executed by each of the Agent, the Banks, the Borrower and the parties to the various Subsidiaries Guarantees, each acknowledging their consent and agreement to the terms of this letter agreement. Sincerely, NATIONSBANK, N.A. individually as a Bank and as the Agent By: S/ James T. Gilland _____________________________________ Title: Senior V.P. __________________________________ FLEET BANK By: S/ Alex Sade _____________________________________ Title: Senior V.P. __________________________________ THE BANK OF NEW YORK By: S/ Ronald Reedy _____________________________________ Title: V. P. __________________________________ THE DAIWA BANK, LIMITED By: S/ Jun Okuda _____________________________________ Title: Attorney-In-Fact __________________________________ BELDING HEMINWAY COMPANY, INC. By: S/ Edward F. Cooke _____________________________________ Title: V.P. __________________________________ [Signatures Continued] PAGE 17 OF 18 BELDING HEMINWAY COMPANY, INC. November 12, 1996 Page 3 BLUMENTHAL/LANSING COMPANY BELDING REAL ESTATE CORPORATION CORTICELLI REAL ESTATE CORP. THE HEMINWAY & BARTLETT MANUFACTURING CO. DANFIELD THREADS, INC. BRIDGE REALTY CO. By: S/ Edward F. Cooke _____________________________________ Title: V.P. __________________________________ PAGE 18 OF 18 EX-27 3 ART. 5 FDS FOR 3RD QUARTER 10-Q
5 1,000 9-MOS DEC-31-1996 SEP-30-1996 448 0 11,927 0 18,081 32,671 32,809 4,913 82,612 52,619 0 0 23,193 (12,125) 0 82,612 67,158 67,158 48,063 48,063 10,124 0 (3,395) 5,576 (2,367) 3,209 358 0 0 2,553 0.35 0.35
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