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
March 31, 2000
CONSOLTEX INC.
(FORMERLY CALLED CONSOLTEX GROUP 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 or 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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CONSOLTEX INC.
(FORMERLY CALLED CONSOLTEX GROUP INC.)
[GRAPHIC OMITTED]
The quality is woven right in
RESULTS FOR THE QUARTER ENDED
MARCH 31, 2000
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For financial inquiries or information contact:
Paul J. Bamatter
VP Finance and Chief Financial Officer
Tel: 212-596-0480
Fax: 212-596-0483
Website: www.consoltex.com
[LETTERHEAD OF CONSOLTEX INC.]
May 12, 2000 - Consoltex Inc. (formerly called Consoltex Group Inc.) announces
its results for the quarter ended March 31, 2000. The Company reported a loss of
$2.2 million for the quarter ended March 31, 2000 compared to net earnings of
$2.2 million for the same quarter in 1999. Starting in this 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 which the Company operates, as well as to be more useful to the users
of these financial statements.
Consolidated sales increased from $75.9 million in the first quarter in 1999 to
$99.9 million in the current quarter. Approximately 60% of the higher 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
40% through internal growth in both the Textile and Polypropylene Operations.
Atlas and Marino are primarily engaged in the manufacturing and distribution of
polypropylene based flexible intermediate bulk container bags in the United
States and Mexico.
EBITDA for the quarter ended March 31, 2000 was $9.9 million or 1.4% 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 additional
goodwill amortization and depreciation expense on acquisitions completed during
1999. Interest expense during the quarter, at $5.6 million was 35% higher than
the comparable period in 1999 reflecting the cost of the additional debt related
to the Royalton, Marino and Atlas acquisitions, as well as higher interest rates
on the Company's floating rate debt. Earnings during the quarter include a $0.5
million foreign exchange loss versus a gain of $1.1 million in the first quarter
of 1999.
Textile Operations
Sales in the Textile Operations for the quarter ended March 31, 2000 totaling
$57.2 million represents an increase of 14.7% 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
converting/importing business which is developing new sources for fabrics
manufacturing at more favorable costs. This growth was partially offset by
weaker sales in the polyester-based fashion 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 24.8% in quarter one 1999 to 22.7% in quarter one, 2000,
primarily as a result of a shift in product mix. Our converting/importing
operations, which have lower margins as they have no manufacturing plants,
recorded a sales increase of 32.9% while our vertically integrated manufacturing
operations, with higher margins, recorded flat sales versus quarter one last
year.
EBITDA in the Textile Operations decreased by 8.3% compared to the prior year as
gross margins in the Canadian vertical operations suffered due to strong import
competition and some negative volume variances at one of its five manufacturing
facilities. This decrease was offset, in part, by improved margins at our
converting/importing business. Selling and administration costs, as a percentage
of sales, increased from 11.1% in quarter one 1999 to 11.8% in quarter one,
2000, reflecting the product mix change towards our converting/importing
operations which has a higher percentage of selling and administration costs
than that of the Canadian vertical operations.
Polypropylene Operations
Sales in the Polypropylene Operations increased by 64.4% compared to the prior
year due principally to the increased sales recorded from the Atlas and Marino
acquisitions. Excluding the effect on sales of these acquisitions, sales
increased by 9.8% from the comparable period in 1999. Sales from our Mexican
operations grew by 25% in quarter 1, 2000 compared to the same quarter in 1999
due principally to better pricing in small bags, and strong sales in FIBC
fabrics and bags. Gross profit margins slipped from 22.8% in quarter one 1999 to
20.1% in the current quarter principally due to rapidly increasing resin prices,
which increased significantly from December 31, 1999 to March 31, 2000. Selling
and administration costs increased as a percentage of sales due to the nature of
the Marino and Atlas acquisitions, which sell and market their FIBC bags direct
to end users and, as such, have higher selling and administration costs.
EBITDA for the current quarter increased by 13.4% from $4.1 million during the
March 1999 quarter to $4.6 million during the current quarter. The Atlas and
Marino acquisitions were responsible for the increase in EBITDA. This increase
was offset, in part, by the squeeze in margins from the quick rise in resin
costs.
3
Outlook
The outlook for the next few quarters is good. In our Textile Operations, we
believe that the strong growth in our home furnishings' curtaining and bedding
fabrics will offset the current weakness in fashion apparel fabrics. 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 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 include
upgrading and increasing the efficiency and capacity of the extrusion, beaming
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 Rafytek, and achieving the
many financial, selling and administrative, information systems, manufacturing
and other synergies that are expected to result of the two acquisitions
completed during 1999.
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 17 manufacturing plants, which together employ approximately 6,900
associates. The Company is a Canadian private company, however, it files its
financial statements with the U.S. 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 result 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 publicly filed disclosure documents and
securities commission reports of Consoltex Inc. and its subsidiaries.
4
Consoltex Inc.
(Formerly Consoltex Group Inc.)
Consolidated Balance Sheet (1)
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(in thousands of US dollars) March 31, December 31,
(unaudited) 2000 1999
- -----------------------------------------------------------------------------------------------------------
ASSETS
Current assets:
Cash $ 233 $ 2,969
Accounts receivable and prepaid expenses 60,189 50,638
Inventories 93,536 90,202
Current portion of deferred income tax assets 402 448
- -----------------------------------------------------------------------------------------------------------
154,360 144,257
Fixed assets, net 109,991 111,044
Goodwill 79,674 80,333
Other assets 4,095 4,684
Deferred income tax assets 1,733 1,510
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Total assets $ 349,853 $ 341,828
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LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Bank loans $ 44,316 $ 38,888
Accounts payable and accrued liabilities 44,240 36,646
Income taxes payable 3,542 2,761
Current portion of long-term debt 53,250 55,000
Current portion of other long-term liabilities 4,145 5,646
Current portion of deferred income tax liabilities 5,655 6,357
- -----------------------------------------------------------------------------------------------------------
155,148 145,298
Long-term debt 120,000 120,000
Other long-term liabilities 10,874 11,196
Deferred income tax liabilities 16,036 15,920
Shareholders' equity:
Share capital (18,027,551 shares) 75,645 75,645
Contributed Surplus 2,071 2,071
Retained earnings (deficit) (2,187) 51
Accumulated other comprehensive income (loss) (27,734) (28,353)
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47,795 49,414
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Total liabilities and shareholders' equity $ 349,853 $ 341,828
===============================
(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
financial 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.
Consoltex Inc.
(Formerly Consoltex Group Inc.)
Consolidated Statement of Earnings (1)
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(in thousands of US dollars) Quarter ended March 31
(unaudited) 2000 1999
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Sales:
Textile Operations $ 57,215 $ 49,900
Polypropylene Operations 42,720 25,981
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99,935 75,881
Cost of sales 78,357 57,598
Selling and administrative expenses 11,987 8,489
Foreign exchange (gain) loss 471 (1,066)
Depreciation and amortization 4,593 3,501
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Earnings from operations 4,527 7,359
Financing costs:
Interest expense 5,620 4,154
Factor expenses 369 362
Amortization of deferred financing expenses 563 284
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6,552 4,800
Earnings (loss) before income taxes (2,025) 2,559
Income tax expense 212 359
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Net earnings (loss) $ (2,237) $ 2,200
=========================
EBITDA (2) $ 9,933 $ 9,794
=========================
(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
financial 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 and American Industrial Partners management fee
($342 for quarter ended March 31, 2000; nil in 1999).
Consoltex Inc.
(Formerly Consoltex Group Inc.)
Consolidated Statement of Cash Flows (1)
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(in thousands of U.S. dollars) Quarter ended March 31
(unaudited) 2000 1999
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Cash flows from operating activities:
Net earnings (loss) $ (2,237) $ 2,200
Depreciation 3,615 3,113
Amortization of goodwill and other assets 978 388
Amortization of deferred financing expenses 563 284
Deferred income taxes (835) (979)
- -----------------------------------------------------------------------------------------------------
2,084 5,006
Changes in:
Accounts receivable and prepaid expenses (9,644) (8,315)
Inventories (3,595) (8,295)
Accounts payable and accrued liabilities 7,685 13,108
Income taxes payable 804 24
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Cash flows from (used in) operating activities (2,666) 1,528
Cash flows used in investing activities:
Purchase of fixed assets, net of disposals (2,446) (2,589)
Acquisition of Royalton -- (3,539)
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Cash used before financing activities (5,112) (4,600)
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Cash flows from financing activities:
Increase in bank loans 5,428 4,965
Repayment of long-term debt (1,750) (1,750)
Decrease in other long-term liabilities (2,000) (18)
Other 698 (690)
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2,376 2,507
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Decrease in cash (2,736) (2,093)
Cash at the beginning of the period 2,969 2,537
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Cash at the end of the period $ 233 $ 444
========================
(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
financial 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.
Consoltex Inc.
(Formerly Consoltex Group Inc.)
Consolidated Segment Disclosures (1)
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(in thousands of U.S. dollars) Quarter ended March 31
(unaudited) 2000 1999
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SALES
Textile Operations: $ 57,215 $ 49,900
Polypropylene Operations: 42,720 25,981
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Consolidated sales $ 99,935 $ 75,881
========================
EBITDA
Textile Operations $ 6,244 $ 6,812
Polypropylene Operations 4,641 4,091
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Total for reportable segments 10,885 10,903
Corporate (952) (1,109)
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Consolidated EBITDA 9,933 9,794
American Industrial Partners management fee 342 --
Foreign exchange (gain) loss 471 (1,066)
Depreciation and amortization 4,593 3,501
Financing costs 6,552 4,800
Income tax expense 212 359
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Net earnings (loss) $ (2,237) $ 2,200
========================
March 31, Dec. 31,
2000 1999
------------------------
Segment assets:
Textile Operations $ 147,972 $ 145,176
Polypropylene Operations 196,006 192,466
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Total for reportable segments 343,978 337,642
Corporate 5,875 4,186
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Consolidated total assets $ 349,853 $ 341,828
========================
(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
financial 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.
Consoltex Inc.
(Formerly Consoltex Group Inc.)
Consolidated Statement of Comprehensive Income
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(in thousands of U.S. dollars) Quarter ended March 31
(unaudited) 2000 1999
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Net earnings (loss) $ (2,237) $ 2,200
Foreign currency translation adjustments 619 1,280
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Consolidated comprehensive income (loss) $ (1,618) $ 3,480
==========================