-----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, HbN8wSts+rBVw0C3rmdrNAv9XJbCmib2YZjnr7apF/HinBqYslnXBk8ZAd0Dw7pL 7m5YXajPrK3KgaQKSMPcRw== 0000950131-96-005262.txt : 19961028 0000950131-96-005262.hdr.sgml : 19961028 ACCESSION NUMBER: 0000950131-96-005262 CONFORMED SUBMISSION TYPE: 8-K/A PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19960814 ITEM INFORMATION: Financial statements and exhibits FILED AS OF DATE: 19961025 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: POLYMER GROUP INC CENTRAL INDEX KEY: 0000927417 STANDARD INDUSTRIAL CLASSIFICATION: BROADWOVEN FABRIC MILS, MAN MADE FIBER & SILK [2221] IRS NUMBER: 571003983 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K/A SEC ACT: 1934 Act SEC FILE NUMBER: 001-14330 FILM NUMBER: 96648106 BUSINESS ADDRESS: STREET 1: 4838 JENKINS AVE CITY: NORTH CHARLESTON STATE: SC ZIP: 29405 BUSINESS PHONE: 8037445174 MAIL ADDRESS: STREET 1: 4838 JENKINS AVENUE CITY: NORTH CHARLESTON STATE: SC ZIP: 29405 8-K/A 1 FORM 8-K/A SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 8-K/A AMENDMENT NO. 1 CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Date of Report: August 14, 1996 (Date of earliest event reported) Polymer Group, Inc. (Exact name of registrant as specified in its charter) Delaware 1-14330 57-1003983 (State of (Commission (IRS Employer Incorporation) File Number) Identification No.) 4838 Jenkins Avenue North Charleston, South Carolina (Address of principal executive offices) 29405 (Zip Code) (803) 566-7293 (Registrant's telephone number, including area code) ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS --------------------------------- (a) Financial Statements of Business Acquired The financial statements required by Item 7(a) relative to the acquisition of the business of FNA Polymer Corp. described in Item 2 of Form 8-K of Polymer Group, Inc. dated August 14, 1996 are attached hereto as an exhibit and incorporated herein by this reference. (b) Pro Forma Unaudited Financial Information The pro forma unaudited financial information required by Item 7(b) relative to the FNA Acquisition described in Item 2 of Form 8-K of Polymer Group, Inc. dated August 14, 1996 is attached hereto as an exhibit and incorporated herein by this reference. (c) Exhibits Exhibits required to be filed with this current report on Form 8-K/A Amendment No. 1 are included in the following exhibit index. 2 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has caused this report to be signed on its behalf by the undersigned thereunto duly authorized. POLYMER GROUP, INC. (Registrant) October 24, 1996 /s/ Jerry Zucker (Date) ------------------------------ Jerry Zucker Chairman, President, Chief Executive Officer and Director (Principal Executive Officer) October 24, 1996 (Date) /s/ James G. Boyd ------------------------------ James G. Boyd Executive Vice President, Treasurer and Director (Principal Financial Officer and Principal Accounting Officer) 3 EXHIBIT INDEX EXHIBIT NUMBER DESCRIPTION - ------- ----------- 1 Financial Statements required by Item 7(a). 2 Pro forma unaudited financial information required by Item 7(b). 23 Consent of Coopers & Lybrand L.L.P. 4 EX-1 2 FINANCIAL STATEMENTS EXHIBIT 1 FINANCIAL STATEMENTS REQUIRED BY ITEM 7(a) 5 REPORT OF INDEPENDENT ACCOUNTANTS --------------------------------- To the Board of Directors of Petropar N.A., Corp.: We have audited the accompanying consolidated balance sheet of Petropar N.A., Corp. and Subsidiary (a wholly-owned subsidiary of Petropar, S.A.) as of December 31, 1995, and the related consolidated statements of operations, shareholder's equity (deficit) and cash flows for the year then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Petropar N.A., Corp. and Subsidiary as of December 31, 1995, and the consolidated results of its operations and its cash flows for the year then ended, in conformity with generally accepted accounting principles. /s/ Coopers & Lybrand L.L.P. Charlotte, North Carolina January 12, 1996, except as to information presented in Note 10, for which the date is February 5, 1996, and information presented in Note 11, for which the date is April 17, 1996. 6 PETROPAR N.A., CORP. AND SUBSIDIARY (a wholly-owned subsidiary of Petropar, S.A.) CONSOLIDATED BALANCE SHEET December 31, 1995 ------ ASSETS Current assets: Accounts receivable: Trade (net of allowance of $121,000) $ 4,059,200 Related party 2,308 Interest and other 7,524 Inventories 769,298 Other current assets 44,018 ----------- Total current assets 4,882,348 Property, plant and equipment, net 20,857,788 Other assets 16,488 ----------- $25,756,624 =========== LIABILITIES AND SHAREHOLDER'S EQUITY (DEFICIT) Current liabilities: Current portion of long-term debt $ 1,606,593 Cash overdraft 605,237 Accounts payable: Trade 1,860,189 Construction 17,128 Related parties 2,317,198 Accrued interest 207,430 Other accrued expenses 295,404 ----------- Total current liabilities 6,909,179 Long-term debt 23,661,520 ----------- 30,570,699 ----------- Shareholder's equity (deficit): Common stock, $1 par value; authorized 1,000 shares; 100 shares issued and outstanding 100 Paid-in capital 900 Accumulated deficit (4,815,075) ----------- (4,814,075) ----------- $25,756,624 =========== The accompanying notes are an integral part of the consolidated financial statements. 7 CONSOLIDATED STATEMENT OF OPERATIONS for the year ended December 31, 1995 ------ Net sales $25,942,292 Cost of sales 21,659,244 ----------- Gross profit 4,283,048 Selling, general and administrative expenses 3,624,351 ----------- Income from operations 658,697 Other income (expense): Interest income 1,018,946 Interest expense (3,577,618) Other expenses (422,017) ----------- Net loss $(2,321,992) =========== The accompanying notes are an integral part of the consolidated financial statements. 8 CONSOLIDATED STATEMENT OF SHAREHOLDER'S EQUITY (DEFICIT) for the year ended December 31, 1995 ----------
Common Stock Shareholder's ------------------- Paid-in Accumulated Equity Shares Amount Capital Deficit (Deficit) ------ ------ ------- ----------- ------------- Balances, December 31, 1994 100 $100 $900 $(2,493,083) $(2,492,083) Net loss (2,321,992) (2,321,992) --- ---- ---- ----------- ----------- Balances, December 31, 1995 100 $100 $900 $(4,815,075) $(4,814,075) === ==== ==== =========== =========== The accompanying notes are an integral part of the consolidated financial statements.
9 CONSOLIDATED STATEMENT OF CASH FLOWS for the year ended December 31, 1995 ----------
Cash flows from operating activities: Net loss $ (2,321,992) Adjustments to reconcile net loss to net cash provided by operating activities: Depreciation 2,336,406 Amortization 147,738 Provision for bad debts 91,125 Changes in operating assets and liabilities: Receivables (1,099,477) Inventories 580,059 Other current assets (36,845) Accounts payable and accrued expenses 1,298,858 Other liabilities (131,250) ------------ Net cash provided by operating activities 864,622 ------------ Cash flows used in investing activities, additions to property and equipment (1,618,097) ------------ Cash flows from financing activities: Cash overdraft 605,237 Proceeds from short-term borrowings 2,035,165 Payments of short-term borrowings (10,975,000) Proceeds from long-term debt 8,500,000 Payments of long-term debt (3,500,000) Proceeds from loans to affiliated company 3,825,000 ------------ Net cash provided by financing activities 490,402 ------------ Net decrease in cash and cash equivalents (263,073) Cash and cash equivalents: Beginning of year 263,073 ------------ End of year $ -0- ============ The accompanying notes are an integral part of the consolidated financial statements.
10 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS _____ 1. Basis of Presentation: --------------------- Petropar N.A., Corp. (the "Company") was incorporated on August 11, 1994, as a wholly owned subsidiary of Petropar S.A., a Brazilian corporation. The common stock of Fitesa N.A., Corp., a subsidiary of Petropar S.A., was transferred to the Company in exchange for one hundred (100) shares of common stock. The accompanying consolidated financial statements include the financial position, results of operations and cash flows of Petropar N.A. Corp. and its wholly owned subsidiary, Fitesa N.A. Corp., after the elimination of all intercompany balances and transactions. 2. Summary of Significant Accounting Policies: ------------------------------------------ INVENTORIES - Inventories are stated at the lower of cost or market. Standard costing is used which approximates the first-in, first-out (FIFO) method. PROPERTY, PLANT AND EQUIPMENT - Property, plant and equipment is carried at cost. Depreciation is computed using the straight-line method over the estimated useful lives of the assets. Additions are charged to the property accounts while replacements, maintenance and repairs which do not improve or extend the life of the respective assets are expensed as incurred. When property and equipment are disposed, the difference between net book value and cash proceeds is included in the statement of operations. OTHER ASSETS - Other assets include expenses incurred in connection with the formation of the Company which are amortized on a straight-line basis over five years. CONCENTRATION OF CREDIT RISK AND FINANCIAL INSTRUMENTS - Financial instruments which potentially subject the Company to concentrations of credit risk consist principally of temporary cash investments and trade receivables. The Company places its temporary cash investments with high credit quality financial institutions. The Company markets its products primarily to customers in the manufacturing sector. The Company closely monitors the creditworthiness of its customers and generally requires no collateral from its customers. Sales to six major customers accounted for approximately 64% of sales in 1995. Approximately 64% of trade accounts receivable represented five major customers at December 31, 1995. CASH EQUIVALENTS - The Company classifies all highly liquid debt instruments purchased with original maturities of three months or less as cash equivalents. 11 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued _____ 2. Summary of Significant Accounting Policies, continued: ------------------------------------------ CASH FLOWS - Cash flows from operations include interest paid of $3,899,001 in 1995. ESTIMATES - The preparation of financial statements in conformity with generally accepted accounting principles requires management 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. 3. Inventories: ----------- The major classes of inventories at December 31, 1995 are as follows:
Finished goods $471,014 Work-in-process 28,899 Raw materials 269,385 -------- $769,298 ========
4. Property, Plant and Equipment: -----------------------------
Property, plant and equipment is comprised of the following at December 31, 1995: Land and improvements $ 226,737 Building 3,361,444 Machinery and equipment 21,712,028 Furniture and computer equipment 692,447 Construction in process 243,766 ----------- 26,236,422 Less accumulated depreciation 5,378,634 ----------- $20,857,788 ===========
12 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued _____ 5. Financing Arrangements: ---------------------- Long-term debt consists of the following at December 31, 1995:
Note payable to a bank, due October 1, 1997 plus interest at the Eurodollar rate plus 1.125% $ 9,052,000* Note payable to Petropar S.A., due August 31, 1999 plus interest quarterly at the ninety day LIBOR rate plus 3-1/4% (9.125% at December 31, 1995) 2,949,000 Line of credit available up to $4,000,000, due on October 1, 2000, plus interest monthly at a floating rate 535,165** Note payable with quarterly payments of $267,857 beginning January 1, 1996, remaining principal due October 1, 2000, interest payable monthly at a floating rate (8.8% at December 31, 1995) 7,500,000** Note payable, due October 1, 2000, interest payable monthly at a floating rate (8.05% at December 31, 1995) 1,000,000** Note payable to Fitesa Overseas, Ltd., due February 1, 2001, interest payable quarterly at LIBOR plus 3-1/4%, (9.125% at December 31, 1995) 4,231,948 ----------- 25,268,113 Less current portion of long-term debt 1,606,593 ----------- Long-term debt $23,661,520 ===========
*Represents note payable guaranteed by Petropar S.A. **Substantially all of the assets of the Company serve as collateral for this debt which is held by one lender under a single credit agreement. The $7.5 million and $1.0 million notes contain restrictive covenants, the most restrictive of which requires the Company to maintain a minimum adjusted tangible net deficit as defined in the agreement of $4,831,000. The terms of the $9,052,000 note, as amended September 25, 1995, allow the Company to borrow the $9,052,000 through October 1, 1997. The note is made up of individual loans with terms, at the Company's discretion, of one three, six or twelve months in duration. As the Company has the ability and intent to continuously extend the maturity of the loans through October 1, 1997, the note has been classified as long-term on the balance sheet. 13 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued ------- 6. Income Taxes: ------------ The Company accounts for its income taxes under Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes". Deferred income taxes result from temporary differences in the recognition of income and expenses for financial and income tax reporting. The principal items comprising temporary differences consist of various tax loss carryforwards. No current year tax benefit has been established due to the losses incurred by the Company. Deferred income taxes consist of the following at December 31, 1995:
Noncurrent deferred income tax liabilities, depreciation $ 1,324,000 Noncurrent income tax assets: Tax benefit of net operating loss carryforwards available to reduce future taxable income (2,114,000) Accrued royalty and guarantee fees (788,000) Accounts receivable allowance (41,000) Miscellaneous (22,000) ----------- Net deferred income tax asset (1,641,000) Valuation allowance 1,641,000 ----------- Total deferred income taxes, net $ -0- ===========
At December 31, 1995, the Company had net operating loss carryforwards of approximately $6,217,000 for tax reporting purposes. These carryforwards, which are available to offset future taxable income, begin to expire in 2006. 7. Leases: ------ Certain equipment and automobiles are leased under operating leases. The following is a schedule of future minimum lease payments under operating leases as of December 31, 1995:
Year ending December 31: 1996 $13,397 1997 11,790 1998 5,793 1999 5,486 2000 4,114 ------- Total minimum lease payments $40,580 =======
Lease expense totaled approximately $86,700 in 1995. 14 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued -------- 8. Related Party Transactions: -------------------------- The Company is dependent upon the support of Petropar S.A. for its financial requirements. Petropar S. A. has pledged it's continued financial support to the Company for 1996. During 1995, the Company sold approximately $1,966,000 of inventory to Fitesa S.A., a wholly owned subsidiary of Petropar S.A. The Company has a royalty agreement and guarantee agreement with Petropar S.A. Royalty fees are calculated at 4% of sales to outside parties. Royalty expense included in selling, general and administrative expenses totaled $957,513 during 1995. Royalty amounts due to Petropar S.A. included in related party accounts payable at December 31, 1995 totaled $1,789,621. Guarantee fees are calculated at 1.5% of the outstanding loan balance guaranteed by Petropar S.A. Guarantee fees included in other expenses totaled $255,353 during 1995. Amounts due to Petropar S.A. for guarantee fees included in related party accounts payable at December 31, 1995 totaled $527,578. During 1995, Fitesa Overseas Limited, a wholly-owned subsidiary of Petropar S.A., assumed $20,504,378 of notes and interest obligations of the Company in exchange for notes and interest due from Fitesa Overseas Limited to the Company of $16,272,430 and the issuance of a note payable to Fitesa Overseas Limited of $4,231,948. 9. Retirement Plan: --------------- The Company provides a 401(k) retirement savings plan for substantially all employees. The plan provides for matching contributions by the Company of fifty (50) percent of voluntary employee contributions limited to eight (8) percent of employee wages. Plan expense for 1995 was approximately $97,065. 10. Contingencies: ------------- During 1995, a worker fatality occurred at the Company's plant site. The Company has been notified by its legal counsel of a claim filed by the estate of the deceased employee against the Company. Based on current facts, the Company is not able to estimate the probable outcome of the litigation. Therefore, no provision has been made in the accompanying financial statements for this contingency. The Company's insurance carrier is defending the claim on behalf of the Company. 15 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued ---------- 11. Subsequent Event: ---------------- Subsequent to December 31, 1995, the $2,949,000 note due to Petropar S.A. was forgiven by Petropar S.A. and was converted to equity by the Company in the form of a capital contribution. 12. Event Subsequent to Date of Report of Independent Accountants (Unaudited): ------------------------------------------------------------------------- On August 14, 1996, PGI Polymer, Inc., ("PGI Polymer"), a Delaware Corporation and the wholly owned subsidiary of Polymer Group, Inc., completed its acquisition (the "FNA Acquisition") of the business of FNA Polymer Corp. ("FNA") (formerly known as Fitesa North America Corporation), a North Carolina corporation, pursuant to the terms of the Stock Purchase Agreement, dated as of July 15, 1996 among Petropar S.A., a corporation incorporated under the laws of the Federative Republic of Brazil (the "Parent"), Alicorno Comercio e Servicos LDA., a corporation incorporated under the laws of Madeira (the "Seller"), and PGI Polymer (the "Stock Purchase Agreement"). Pursuant to the Stock Purchase Agreement, PGI Polymer acquired all of the issued and outstanding capital stock of PNA Corp. (formerly known as Petropar North America Corp.), a North Carolina corporation, which in turn owns all of the issued and outstanding capital stock of FNA Polymer Corp. The Seller received a cash payment of $48,000,000, subject to a working capital adjustment. 16 PETROPAR N.A., CORP. AND SUBSIDIARY (a wholly-owned subsidiary of Petropar, S.A.) CONDENSED CONSOLIDATED BALANCE SHEET (UNAUDITED) June 30, 1996 (In Thousands)
ASSETS - ------ Current assets: Accounts receivable, net.................................. $ 3,377 Inventories............................................... 1,036 Other..................................................... 41 ------- Total current assets................................. 4,454 ------- Property, plant and equipment, net........................ 19,830 Other..................................................... 8 ------- Total assets......................................... $24,292 ======= LIABILITIES AND SHAREHOLDERS' EQUITY - ------------------------------------ Current liabilities: Accounts payable and accrued expenses..................... $ 5,463 Long-term debt, less current portion........................... 18,543 Shareholders' equity: Additional paid-in capital................................ 2,950 Deficit................................................... (2,664) ------- 286 ------- Total liabilities and shareholders' equity.......................................... $24,292 =======
See accompanying notes. 17 PETROPAR N.A., CORP. AND SUBSIDIARY (a wholly-owned subsidiary of Petropar, S.A.) CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS (UNAUDITED) for the six months ended June 30, 1996 (In Thousands)
Net sales............................................ $ 15,082 Cost of sales........................................ 9,895 --------- Gross profit....................................... 5,187 Selling, general and adminstrative expenses.......... 1,759 --------- Operating income................................... 3,428 Interest expense, net................................ 970 --------- Income before Income taxes......................... 2,458 Income taxes......................................... 307 --------- Net income......................................... $ 2,151 =========
See accompanying notes. 18 PETROPAR N.A., CORP. AND SUBSIDIARY (a wholly-owned subsidiary of Petropar, S.A.) CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED) for the six months ended June 30, 1996 (In Thousands)
Cash flow from operating activities....................................................... $ 3,984 Cash flow (used in) investing activities, additions to property and equipment............. (208) Cash flow (used in) financing activities, payments of debt................................ (3,776) ------- Net change in cash and cash equivalents................................................ 0 Cash and cash equivalents: Beginning of period.................................................................... 0 ------- End of period.......................................................................... $ 0 =======
See accompanying notes. 19 PETROPAR N.A. AND SUBSIDIARY (a wholly-owned subsidiary of Petropar, S.A.) Notes To Condensed Consolidated Financial Statements (UNAUDITED) 1. BASIS OF PRESENTATION: The accompanying unaudited financial statements of the Company have been prepared in accordance with generally accepted accounting principles for interim financial information. 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 of the Company, the unaudited financial statements contain all adjustments of a normal recurring nature necessary for a fair presentation. The operating results for the six months ended June 30, 1996 are not necessarily indicative of the results that may be expected for an entire year. The preparation of financial statements in accordance with generally accepted accounting principles requires management to make estimates and assumptions that may affect the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. 2. INVENTORIES: The major classes of inventories at June 30, 1996 are as follows: Finished goods.................. $ 803 Work-in-process................. 17 Raw material.................... 216 ------ $1,036 ====== 3. CONTINGENCIES: As previously discussed, during 1995, a worker fatality occurred at the Company's plant site. The Company has been notified by its legal counsel of a claim filed by the estate of the deceased against the Company. Based on facts, the Company is not able to estimate the probable outcome of the litigation. Therefore, no provision has been made in the accompanying financial statements for this contingency. The Company's insurance carrier is defending the claim on behalf of the Company. 4. OTHER MATTERS: As previously discussed, on August 14, 1996, PGI Polymer completed the FNA Acquisition pursuant to the terms of the Stock Purchase Agreement for $48.0 million, subject to a working capital adjustment. 20 EX-2 3 PRO FORMA UNAUDITED FINANCIAL INFORMATION EXHIBIT 2 PRO FORMA UNAUDITED FINANCIAL INFORMATION REQUIRED BY ITEM 7(B) 21 POLYMER GROUP, INC. PRO FORMA UNAUDITED FINANCIAL INFORMATION INTRODUCTION On August 14, 1996, PGI Polymer, Inc. ("PGI Polymer"), a Delaware Corporation and the wholly owned subsidiary of Polymer Group, Inc., (the "Company") completed its acquisition (the "FNA Acquisition") of the business of FNA Polymer Corp. ("FNA") (formerly known as Fitesa North America Corporation), a North Carolina corporation, pursuant to the terms of the Stock Purchase Agreement, dated as of July 15, 1996 among Petropar S.A., a corporation incorporated under the laws of the Federative Republic of Brazil (the "Parent"), Alicorno Comercio e Servicos LDA., a corporation incorporated under the laws of Madeira (the "Seller"), and PGI Polymer (the "Stock Purchase Agreement"). Pursuant to the Stock Purchase Agreement, PGI Polymer acquired all of the issued and outstanding capital stock of PNA Corp. (formerly known as Petropar North America Corp.), a North Carolina corporation, which in turn owns all of the issued and outstanding capital stock of FNA Polymer Corp. The Seller received a cash payment of $48.0 million, subject to a working capital adjustment. The FNA Acquisition has been accounted for under the purchase method of accounting. On May 15, 1996, the Company completed an initial public offering of 11.5 million shares (the "Offerings") of its common stock at an offering price of $18.00 per share. Net proceeds to the Company after underwriting fees and other related costs were $190.8 million. Pursuant to the Recapitalization Agreement dated May 6, 1996, all of the warrants to acquire shares of Class C common stock were exercised, and the outstanding shares of Class A-1 common stock, Class A-2 common stock, Class A-3 common stock, Class B common stock and Class C common stock were converted (the "Reclassification") into a single class of common stock concurrently with the Offerings. In connection with the Offerings, the Company's Board of Directors approved an approximate 19.97 to 1 stock split. As part of the Offerings, the Company consummated the following transactions (together with the Offerings, the Reclassification and the approximate 19.97 to 1 stock split, the "Recapitalization"): (i) effectively repaid all outstanding indebtedness under the FiberTech Credit Facility and Chicopee Credit Facility (collectively, the "Facilities") and terminated the Facilities; (ii) redeemed $50.0 million principal amount of the 12 1/4% Senior Notes (the "Notes") at a premium of 112.25%; (iii) redeemed the Chicopee Preferred Stock at a price equal to $1,000 per share plus accrued but unpaid dividends; (iv) redeemed the Company Preferred Stock at a price of $1,000 per share plus accrued but unpaid dividends; and (v) entered into a new credit facility ("New Credit Facility") as more fully described below. The New Credit Facility consists of a $200.0 million term loan and a $125.0 million revolving facility. The New Credit Facility is secured by all of the assets of the 22 Company and by a guarantee by each of the Company's domestic subsidiaries, which guarantee is secured by the assets of each such subsidiary. The Company's non-domestic subsidiaries will either borrow directly under the New Credit Facility on a secured basis or borrow from the Company, with such borrowings being evidenced by a note pledged to the lenders. On March 15, 1995, the Company completed the acquisition (the "Chicopee Acquisition") of the Nonwovens Business of Johnson & Johnson Advanced Materials Company and Chicopee B.V. (collectively, "Chicopee") from Johnson & Johnson for an aggregate consideration of $290.0 million (including $15.0 million of fees and expenses) in a transaction accounted for by the purchase method of accounting. The following pro forma consolidated statement of operations for the year ended December 30, 1995 is based on historical financial statements of the Company, FNA and Chicopee adjusted to give effect to the Offerings, the FNA Acquisition, the Chicopee Acquisition and the financing thereof as if such events had occurred on January 1, 1995. The pro forma consolidated statements of operations for the six months ended June 29, 1996 is based on historical financial statements of the Company (including Chicopee) and FNA adjusted to give effect to the Offerings, the FNA Acquisition and the financing thereof as if such events had occurred on December 31, 1995. The pro forma balance sheet has been prepared on the assumption that the FNA Acquisition and the respective financing had occurred on June 29, 1996. The total purchase price of the FNA Acquisition has been allocated to tangible and intangible assets and liabilities based upon management's preliminary estimates of their fair value. The allocation of the purchase price for the FNA Acquisition is subject to revision when additional information concerning assets and liabilities is obtained. The accompanying unaudited pro forma information does not purport to represent what the Company's results of operations would actually have been had the FNA Acquisition, the Chicopee Acquisition and the Offerings actually occurred at the beginning of the respective periods, or project the Company's results of operations for any future periods. 23 POLYMER GROUP, INC. PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET JUNE 29, 1996
Pro Forma Company Historical Historical Pro Forma Including Company FNA Adjustments FNA ---------- ---------- ----------- --------- (dollar amounts in thousands) ASSETS - ------ Current assets: Cash and equivalents............................... $ 19,343 $ - $ - $ 19,343 Marketable securities.............................. 11,746 - - 11,746 Accounts receivable, net........................... 63,527 3,377 - 66,904 Inventories........................................ 51,383 1,036 - 52,419 Other.............................................. 13,557 41 - 13,598 -------- ------- ------- -------- Total current assets............................. 159,556 4,454 - 164,010 -------- ------- ------- -------- Property, plant and equipment, net.................. 371,037 19,830 11,036 (d) 401,903 Intangibles, loan acquisition and organization costs, net.......................... 80,486 - 21,266 (e) 101,752 Other............................................... 4,334 8 - 4,342 -------- ------- ------- -------- Total assets..................................... $615,413 $24,292 $32,302 $672,007 ======== ======= ======= ======== LIABILITIES AND SHAREHOLDERS' EQUITY - ------------------------------------ Current liabilities: Accounts payable and accrued expenses.............. $ 71,232 $ 5,463 $(3,005)(b) $ 73,690 Current portion of long-term debt.................. 9,121 - - 9,121 -------- ------- ------- -------- 80,353 5,463 (3,005) 82,811 -------- ------- ------- -------- Long-term debt, less current portion................ 313,752 18,543 29,457 (a) 361,752 Deferred income taxes............................... 24,572 - 6,136 (d) 30,708 Other............................................... 10,129 - - 10,129 Shareholders' equity: Common stock....................................... 320 - - 320 Additional paid-in capital......................... 243,662 2,950 (2,950)(c) 243,662 Deficit............................................ (67,490) (2,664) 2,664 (c) (67,490) Cumulative translation adjustment.................. 10,246 - - 10,246 Unrealized holding (loss) on marketable equity securities................................. (131) - - (131) -------- ------- ------- -------- 186,607 286 (286) 186,607 -------- ------- ------- -------- Total liabilities and shareholders' equity......................................... $615,413 $24,292 $32,302 $672,007 ======== ======= ======= ========
See explanation of pro forma adjustments on page 25. 24 POLYMER GROUP, INC. EXPLANATION OF PRO FORMA ADJUSTMENTS JUNE 29, 1996 (DOLLAR AMOUNTS IN THOUSANDS) (a) Represents net increase of indebtedness resulting from the reduction of historical debt of FNA which was liquidated prior to consummation of the acquisition and an increase in borrowings under the New Credit Facility to finance the transaction: Reduction of historical indebtedness........................ $(18,543) Borrowings under New Credit Facility........................ 48,000 -------- Net increase in indebtedness............................... $ 29,457 ======== (b) Represents reduction of FNA's historical provisions for royalty and guarantee accruals. Prior to the acquisition, FNA maintained agreements with its former parent for royalty fees which were based on sales to third parties and guarantee fees based on indebtedness guaranteed by its former parent. Such agreements were not part of the transaction; therefore, this pro forma adjustment gives effect to these historical provisions.................................................. $ (3,005) ======== (c) Represents elimination of historical equity of FNA: Additional paid-in capital.................................. $ (2,950) ======== Deficit..................................................... $ 2,664 ======== (d) Represents allocation of purchase price to estimated fair value of property, plant and equipment and establishment of provision for deferred income taxes: Property, plant and equipment............................... $ 11,036 ======== Provision for deferred income taxes......................... $ 6,136 ======== (e) Represents intangible assets created as a result of the transaction................................................. $ 21,266 ======== 25 POLYMER GROUP, INC. PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS SIX MONTHS ENDED JUNE 29, 1996
Pro Forma Pro Forma Company Company Historical Pro Forma Prior to Historical Pro Forma Including Company Adjustments FNA FNA Adjustments FNA ---------- ----------- --------- ---------- ----------- --------- (dollar and share amounts in thousands) Net sales............................................. $251,308 $ - $251,308 $15,082 $ - $266,390 Cost of goods sold.................................... 189,648 - 189,648 9,895 (312)(e) 199,231 --------- ------- -------- ------- ------- -------- Gross profit.......................................... 61,660 - 61,660 5,187 312 67,159 Selling, general and administrative expenses.......... 34,591 - 34,591 1,759 (329)(e),(g) 36,021 ---------- ------- -------- ------- ------- -------- Operating Income................................. 27,069 - 27,069 3,428 641 31,138 Interest and other expense............................ 19,605 (4,812)(a) 14,793 970 831 (f),(g) 16,594 Foreign currency transaction (gains) losses, net...... 3,573 56 (b) 3,629 - - 3,629 Income taxes.......................................... 1,776 1,856 (c) 3,632 307 646 (h) 4,585 ---------- -------- -------- ------- ------- -------- Income before extraordinary item................. $ 2,115 $ 2,900 $ 5,015 $ 2,151 $ (836) $ 6,330 ======== ======= ======= ======== Redeemable preferred stock dividends and accretion................................... (3,020) 3,020 (d) ---------- -------- Income (loss) before extraordinary item applicable to common stock...................... $ (905) $ 5,920 ========== ======== Income (loss) before extraordinary item per common share................................ $ (0.04) - $ 0.16 $ 0.20 ========== ======== ======== Average common shares outstanding................ 23,375 - 32,000 32,000 ========== ======== ========
See explanation of pro forma adjustments on pages 27 and 28. 26 POLYMER GROUP, INC. EXPLANATION OF PRO FORMA ADJUSTMENTS SIX MONTHS ENDED JUNE 29, 1996 (DOLLAR AMOUNTS IN THOUSANDS) PRO FORMA ADJUSTMENTS RELATED TO THE RECAPITALIZATION (a) In connection with the Offerings, the Company consummated the following transactions: (i) effectively repaid outstanding indebtedness under the 1994 Credit Facility (by rolling it into the New Credit Facility); (ii) effectively repaid outstanding indebtedness under the 1995 Credit Facility (by rolling it into the New Credit Facility); (iii) redeemed $50.0 million in aggregate principal amount of Notes at 112.25% of the principal amount thereof plus accrued interest; and (iv) entered into a New Credit Facility consisting of a $200.0 million term loan and a $125.0 million revolving credit facility. Therefore, the following pro forma adjustments give effect to the transactions described above: Decrease in interest expense as a result of the effective repayment of the 1994 Credit Facility........................ $(2,269) Decrease in interest expense as a result of the effective repayment of the 1995 Credit Facility........................ (7,115) Decrease in interest expense as a result of the redemption of $50.0 million in aggregate principal amount of Notes...... (2,265) Increase in interest expense as a result of entering into New Credit Facility.......................................... 6,837 ------- Net decrease in interest expense as a result of the Offerings.............................................. $(4,812) ======= (b) In connection with the acquisition of its Mexican subsidiary in 1994, Polymer Group incurred approximately $56.0 million of long-term debt which was allocated to the subsidiary in the form of United States dollar intercompany indebtedness. Since the functional currency of this entity is the nuevo peso, United States dollar indebtedness is re-measured into the functional currency. The re-measurement process created foreign currency transaction gains of approximately $3.1 million for the six months ended June 29, 1996. Concurrently with the Offerings, the Company restructured this indebtedness by converting such debt into equity thus reducing foreign currency gains and losses in accordance with Statement of Financial Standards No. 52 ("SFAS 52"). Additionally, the New Credit Facility allows for the Company's Canadian and Dutch subsidiaries to borrow a portion of their working capital requirements in local currencies rather than borrowing such funds in United States dollars. The functional currency for these subsidiaries is their local currency; thus these entities are also required to re-measure United States dollar indebtedness into the functional currency. For the six months ended June 29, 1996, the Company incurred foreign currency transaction losses of $4.9 million related to United States dollar indebtedness at its Canadian and Dutch subsidiary. Since the New Credit Facility allows for foreign subsidiaries to borrow a portion of their working capital funding requirements in local (functional) currencies, a portion of the Company's net foreign currency transaction gains and losses related to this indebtedness is reduced in accordance with SFAS 52; therefore, the following pro forma adjustments give effect to the restructuring of the Mexican intercompany indebtedness and to the provisions under the New Credit Facility which allows foreign subsidiaries to borrow working capital funding requirements in their respective local currency: Reduction of foreign currency transaction gains as a result of the restructuring of United States dollar indebtedness at the Company's Mexican subsidiary............................... $(3,132) Reduction of foreign currency transaction losses giving effect to the provisions under the New Credit Facility which allows for Canadian and Dutch subsidiaries to borrow a portion of their working capital funding requirements in the local (functional) currencies........................................ 3,188 -------- Net increase in foreign currency transaction losses.......... $ 56 ======== 27
(c) Estimated tax effect of pro forma adjustments relating to (a) and (b) .............. $1,856 ====== (d) Represents elimination of redeemable preferred stock and discount accretion - as a result of the Offerings ........................................................ $3,020 ====== PRO FORMA ADJUSTMENTS RELATED TO THE FNA ACQUISITION (e) Represents estimated net increase (decrease) in depreciation and amortization resulting from the application of purchase accounting and amortization of loan acquisition costs related to the FNA Acquisition: Estimated decrease in depreciation expense on assignment of purchase price to fair value of property, plant and equipment....................................... $ (312) ===== Estimated increase in amortization expense on assignment of purchase price to intangible assets and loan acquisition cost.......... $ 290 ===== (f) Represents net increase in interest expense as a result of indebtedness incurred pursuant to the FNA Acquisition....................................................................... $ 900 ===== (g) Prior to the acquisition, FNA had royalty and guarantee agreements with its former parent. These contractual obligations were not part of the FNA Acquisition; therefore, the following pro forma adjustments give effect to the elimination of royalty and guarantee expense: Reduction of royalty expense as a result of the FNA Acquisition.................. $ (619) ===== Reduction of guarantee expense as a result of the FNA Acquisition.............. $ (69) ===== (h) Estimated tax effect of pro forma adjustments relating to (e), (f) and (g) ................. $ 646 =====
28 POLYMER GROUP, INC. PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS YEAR ENDED DECEMBER 30, 1995
CHICOPEE PERIOD FROM JANUARY 2, PRO FORMA 1995 THROUGH COMPANY HISTORICAL MARCH 15, PRO FORMA PRIOR TO HISTORICAL COMPANY 1995 ADJUSTMENTS FNA FNA ------------ ------------ ------------ ----------- ----------- (dollars and share amounts in thousands) Net sales......................................... $437,638 $53,111 $ 2,909 (a) $493,658 $25,942 Cost of goods sold................................ 333,606 42,736 3,144 (c) 379,486 21,659 ------------ ------------ ------------ ----------- ----------- Gross profit...................................... 104,032 10,375 (235) 114,172 4,283 Selling, general and administrative expenses...... 61,744 6,887 (786) (a),(c) 67,845 3,624 ------------ ------------ ------------ ----------- ----------- Operating Income............................... 42,288 3,488 551 46,327 659 Interest and other expense........................ 37,868 - (12,529) (b) 25,339 2,981 Foreign currency transaction (gains) losses, net.. 22,811 1,348 (22,937) (d) 1,222 - Income taxes..................................... 5,216 445 2,740 (e) 8,401 - ------------ ------------ ------------ ----------- ----------- Income (loss) before extraordinary item....... $(23,607) $ 1,695 $33,277 $ 11,365 $(2,322) =========== =========== Redeemable preferred stock dividends and accretion............................... (4,839) - 4,839 (f) ------------ ------------ ------------ Income (loss) before extraordinary item applicable to common stock.................. $(28,446) $ 1,695 $38,116 ============ ============ ============ Income (loss) before extraordinary item per common share............................ $ (1.39) $ 0.36 ============ =========== Average common shares outstanding............. 20,500 32,000 ============ ===========
PRO FORMA COMPANY PRO FORMA INCLUDING ADJUSTMENTS FNA ----------- --------- Net sales......................................... $ - $519,600 Cost of goods sold................................ (491) (g) 400,654 ---------- --------- Gross profit...................................... 491 118,946 Selling, general and administrative expenses...... (377) (g),(i) 71,092 ---------- --------- Operating Income............................... 868 47,854 Interest and other expense........................ (233) (h),(i) 28,087 Foreign currency transaction losses, net.......... - 1,222 Income taxes (benefit)............................ (513) (j) 7,888 ---------- --------- Income before extraordinary item............... $1,614 $ 10,657 ========== ========= Redeemable preferred stock dividends and accretion............................... Income before extraordinary item applicable to common stock.................. Income before extraordinary item per common share................................ $ 0.33 ========= Average common shares outstanding............. 32,000 =========
See explanation of pro forma adjustments on pages 30 and 31. 29 POLYMER GROUP INC. EXPLANATION OF PRO FORMA ADJUSTMENTS YEAR ENDED DECEMBER 30, 1995 (DOLLAR AMOUNTS IN THOUSANDS) PRO FORMA ADJUSTMENTS RELATED TO THE CHICOPEE ACQUISITION AND RECAPITALIZATION (a) In 1993 the North American operation of Chicopee changed its method of pricing among Johnson & Johnson affiliates (the "Affiliates") to a "cost- plus" system whereby the unit selling price charged to Affiliates was manufacturing cost plus a mark-up to cover other operating costs and expenses. This policy existed at the time of the Chicopee Acquisition. Concurrently with the Chicopee Acquisition, the Company entered into a long-term supply agreement pursuant to which it supplies nonwoven fabric requirements to Johnson & Johnson. The products sold by Chicopee to Johnson & Johnson, subsequent to the Chicopee Acquisition, are at market prices; therefore, the pro forma adjustment as presented below gives effect to the change in pricing structure between Chicopee and Johnson & Johnson as a result of the Chicopee Acquisition. In addition, the following pro forma adjustment gives effect to a reduction in the historical general and administrative costs of Chicopee as a result of the Chicopee Acquisition. Such reductions represent the elimination of corporate, allocated and personnel costs charged by Johnson & Johnson which were not assumed by the Company as part of the Chicopee Acquisition: Increase in net sales as result of a change in pricing structure between Chicopee and Johnson & Johnson ................. $ 2,909 ===== Reduction in historical general and administrative expenses of Chicopee attributable to the elimination of corporate, allocated and personnel costs charged by Johnson & Johnson which were not assumed by the Company as part of the Chicopee Acquisition .................................... $ (2,242) ====== (b) In connection with the Offerings, the Company consummated the following transactions: (i) effectively repaid outstanding indebtedness under the 1994 Credit Facility (by rolling it into the New Credit Facility); (ii) effectively repaid outstanding indebtedness under the 1995 Credit Facility (by rolling it into the New Credit Facility); (iii) redeemed $50.0 million in aggregate principal amount of Notes at 112.25% of the principal amount thereof plus accrued interest; and (iv) entered into a New Credit Facility consisting of a $200.0 million term loan and a $125.0 million revolving credit facility. Therefore, the following pro forma adjustments give effect to the transactions described above: Decrease in interest expense as a result of the effective repayment of the 1994 Credit Facility ................... $ (6,488) Decrease in interest expense as a result of the effective repayment of the 1995 Credit Facility ................... $(16,903) Decrease in interest expense as a result of the redemption of $50.0 million in aggregate principal amount of Notes .. $ (6,313) Increase in interest expense as a result of entering into New Credit Facility ..................................... $ 17,175 ------ Net decrease in interest expense as a result of the Offerings ...................................... $(12,529) ====== (c) Represents estimated net increase in depreciation and amortization resulting from the application of purchase accounting and amortization of loan acquisition costs related to the Chicopee Acquisition: Estimated increase in depreciation expense on assignment of purchase price to fair value of property, plant and equipment ............................................... $ 3,144 ===== Estimated increase in amortization expense on assignment of purchase price to intangible assets and loan acquisition cost .................................................... $ 1,456 ===== 30 (d) In connection with the acquisition of its Mexican subsidiary in 1994, Polymer Group incurred approximately $56.0 million of long-term debt which was allocated to the subsidiary in the form of United States dollar intercompany indebtedness. Since the functional currency of this entity is the nuevo peso, United States dollar indebtedness is re-measured into the functional currency. The re-measurement process created foreign currency transaction losses of approximately $24.4 million for the year ended December 30, 1995. Concurrently with the Offerings, the Company restructured this indebtedness by converting such debt into equity thus reducing foreign currency gains and losses in accordance with SFAS No. 52. Additionally, the New Credit Facility allows for the Company's Canadian and Dutch subsidiaries to borrow a portion of their working capital requirements in local currencies rather than borrowing such funds in United States dollars. The functional currency for these subsidiaries is their local currency; thus these entities are also required to re-measure United States dollar indebtedness into the functional currency. For the year ended December 30, 1995, the Company incurred foreign currency transaction gains of $1.2 million related to United States dollar indebtedness at its Canadian subsidiary and foreign currency transaction losses of $1.2 million at its Dutch subsidiary. Since the New Credit Facility allows for foreign subsidiaries to borrow a portion of their working capital funding requirements in local (functional) currencies, a portion of the Company's net foreign currency transaction gains and losses related to this indebtedness is reduced in accordance with SFAS 52; therefore, the following pro forma adjustments give effect to the restructuring of the Mexican intercompany indebtedness and to the provisions under the New Credit Facility which allows foreign subsidiaries to borrow working capital funding requirements in their respective local currency: Reduction of foreign currency transaction losses as a result of the restructuring of United States dollar indebtedness at the Company's Mexican subsidiary ............................ $(23,544) Reduction of foreign currency transaction gains giving effect to the provisions under the New Credit Facility which allows for Canadian and Dutch subsidiaries to borrow a portion of their working funding requirements in the local (functional) currencies ................................................... $ 607 ------ Net decrease in foreign currency transaction losses ...... $(22,937) ======== (e) Estimated tax effect of pro forma adjustments relating to (a), (b), (c) and (d) ............................................. $ 2,740 ====== (f) Represents elimination of mandatory redeemable preferred stock of subsidiary and discount accretion - as a result of the Offerings .................................................... $ 4,839 ====== PRO FORMA ADJUSTMENTS RELATED TO THE FNA ACQUISITION (g) Represents estimated net increase (decrease) in depreciation and amortization resulting from the application of purchase accounting and amortization of loan acquisition costs related to the FNA Acquisition: Estimated decrease in depreciation expense on assignment of purchase price to property, plant and equipment .............. $ (491) ======= Estimated increase in amortization expense on assignment of purchase price to intangible assets and loan acquisition cost ......................................................... $ 581 ====== (h) Represents net increase in interest expense as a result of indebtedness incurred pursuant to the FNA Acquisition ...... $ 22 ====== (i) Prior to the FNA Acquisition, FNA had royalty and guarantee agreements with its former parent. These contractual obligations were not part of the FNA Acquisition; therefore, the following pro forma adjustments give effect to the elimination of royalty and guarantee expense: Reduction of royalty expense as a result of the FNA Acquisition .................................................. $ (958) ======= Reduction of guarantee expense as a result of the FNA Acquisition .................................................. $ (255) ======= (j) Estimated tax effect of pro forma adjustments relating to (g), (h) and (i) ............................................. $ (513) ======= 31 EX-23 4 CONSENT OF COOPERS & LYBRAND Exhibit 23 Consent of Coopers & Lybrand L.L.P. 32 CONSENT OF INDEPENDENT ACCOUNTANTS We consent to the incorporation by reference in the registration statement of Polymer Group, Inc. on Form S-8 (File No. 333-04969) of our report dated January 12, 1996, except as to information presented in Note 10, for which the date is February 5, 1996, and information presented in Note 11, for which the date is April 17, 1996, on our audit of the consolidated financial statements of Petropar N.A., Corp. and Subsidiary as of December 31, 1995, and for the year then ended, which report is included in this Form 8-K/A (Amendment No. 1). /s/ Coopers & Lybrand L.L.P. Charlotte, N.C. October 24, 1996 33 -----END PRIVACY-ENHANCED MESSAGE-----