UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
Quarterly Report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the Quarterly Period Ended June 30, 2003
Commission File No. 333-27665
CONTINENTAL GLOBAL GROUP, INC.
(Exact Name of Registrant as Specified in its Charter)
Delaware 31-1506889
-------- ----------
(State or other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
CO-REGISTRANTS AND SUBSIDIARY GUARANTORS
Continental Conveyor & Equipment Company Delaware 34-1603197
Goodman Conveyor Company Delaware 34-1603196
Continental Conveyor & Equipment
Continental Global Group, Inc. Company Goodman Conveyor Company
438 Industrial Drive 438 Industrial Drive Route 178 South
Winfield, Alabama 35594 Winfield, Alabama 35594 Belton, South Carolina 29627
(205) 487-6492 (205) 487-6492 (864) 338-7793
(Address, including zip code, and telephone number, including area
code, of registrant's principal executive offices)
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 twelve 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. Yes [x] No [ ]
Indicate by check mark if the registrant is an accelerated filer (as defined in
Rule 12b-2 of the Act). Yes [ ] No [x]
Indicate the number of shares outstanding of each of the issuer's classes of
common stock as of the latest practical date.
As of July 31, 2003, there were 100 shares of the registrant's common stock
outstanding.
INDEX
CONTINENTAL GLOBAL GROUP, INC.
Page
Part I Financial Information Number
Item 1 Financial Statements (Unaudited) 1
Condensed Consolidated Balance Sheets
June 30, 2003 and December 31, 2002 2
Condensed Consolidated Statements of Operations
Three Months and Six Months ended June 30, 2003 and 2002 3
Condensed Consolidated Statements of Cash Flows
Six Months ended June 30, 2003 and 2002 4
Notes to Condensed Consolidated Financial Statements 5-14
Item 2 Management's Discussion and Analysis of Financial Condition and Results of
Operations 15-20
Item 3 Quantitative and Qualitative Disclosures about Market Risk 21
Item 4 Controls and Procedures 21
Part II Other Information
Item 6 Exhibits and Reports on Form 8-K 22
Signatures 23
Part I. Financial Information
Item 1. Financial Statements (Unaudited)
1
Continental Global Group, Inc.
Condensed Consolidated Balance Sheets
June 30 December 31
2003 2002
-------------------- --------------------
(Unaudited) (Audited)
Assets:
Current assets:
Cash and cash equivalents $ 2,765,994 $ 5,635,042
Accounts receivable, net 42,050,534 25,634,100
Inventories 27,063,430 27,752,503
Deferred income taxes 24,905 25,893
Other current assets 1,817,461 1,959,369
-------------------- --------------------
Total current assets 73,722,324 61,006,907
Property, plant and equipment 30,116,653 28,681,527
Less accumulated depreciation 17,284,638 15,800,206
-------------------- --------------------
12,832,015 12,881,321
Goodwill 13,547,210 13,155,269
Deferred financing costs 1,949,633 2,209,584
Other assets 399,583 414,400
-------------------- --------------------
$ 102,450,765 $ 89,667,481
==================== ====================
Liabilities and Stockholder's Equity (Deficit):
Current liabilities:
Notes payable $ 19,673,503 $ 11,285,602
Trade accounts payable 28,763,664 20,039,041
Accrued compensation and employee benefits 5,066,560 4,974,168
Accrued interest on senior notes 3,300,000 3,300,000
Other accrued liabilities 7,216,364 6,696,110
Current maturities of long-term obligations 1,140,209 1,010,032
-------------------- --------------------
Total current liabilities 65,160,300 47,304,953
Pension obligations 2,855,636 2,645,640
Deferred income taxes 639,225 561,420
Senior notes 120,000,000 120,000,000
Other long-term obligations, less current maturities 1,910,044 1,876,928
Stockholder's equity (deficit):
Common stock, $0.01 par value, authorized 5,000,000 shares,
issued and outstanding 100 shares 1 1
Paid-in capital 1,993,687 1,993,687
Accumulated deficit (83,493,475) (77,654,146)
Accumulated other comprehensive loss (6,614,653) (7,061,002)
-------------------- --------------------
(88,114,440) (82,721,460)
-------------------- --------------------
$ 102,450,765 $ 89,667,481
==================== ====================
See notes to condensed consolidated financial statements.
2
Continental Global Group, Inc.
Condensed Consolidated Statements of Operations
Three months ended June 30 Six months ended June 30
2003 2002 2003 2002
----------------------------------- -----------------------------------
(Unaudited) (Unaudited)
Net sales $ 57,010,585 $ 46,102,465 $ 99,583,521 $ 91,646,096
Cost of products sold 48,817,808 37,678,619 85,444,448 75,278,200
----------------------------------- -----------------------------------
Gross profit 8,192,777 8,423,846 14,139,073 16,367,896
Operating expenses:
Selling and engineering 3,335,664 3,376,215 6,548,618 6,794,291
General and administrative 2,475,205 2,267,449 5,028,021 4,382,067
Management fee 144,203 166,657 180,212 314,422
Amortization expense 6,590 30,127 13,181 59,941
Restructuring charges 43,919 - 57,924 -
-------------------------------------------------------------------------
Total operating expenses 6,005,581 5,840,448 11,827,956 11,550,721
-------------------------------------------------------------------------
Operating income 2,187,196 2,583,398 2,311,117 4,817,175
Other expenses:
Interest expense 3,909,792 3,869,386 7,640,549 7,670,890
Interest income (3,636) (51,257) (12,792) (104,228)
Miscellaneous, net 332,623 9,153 522,689 41,435
----------------------------------- -----------------------------------
Total other expenses 4,238,779 3,827,282 8,150,446 7,608,097
----------------------------------- -----------------------------------
Loss before income taxes and
cumulative effect of change in
accounting principle (2,051,583) (1,243,884) (5,839,329) (2,790,922)
Income tax benefit - - - (340,518)
----------------------------------- -----------------------------------
Loss before cumulative effect of
change in accounting principle (2,051,583) (1,243,884) (5,839,329) (2,450,404)
Cumulative effect of change in
accounting principle - - - (3,850,000)
----------------------------------- -----------------------------------
Net loss $ (2,051,583) $ (1,243,884) $ (5,839,329) $ (6,300,404)
=================================== ===================================
See notes to condensed consolidated financial statements.
3
Continental Global Group, Inc.
Condensed Consolidated Statements of Cash Flows
Six months ended June 30
2003 2002
---------------------- ---------------------
(Unaudited)
Operating activities:
Net loss $ (5,839,329) $ (6,300,404)
Adjustments to reconcile net loss to net cash used in
operating activities:
Provision for depreciation and amortization 1,112,901 1,156,837
Amortization of deferred financing costs 259,951 259,952
Cumulative effect of change in accounting principle - 3,850,000
Deferred income taxes - (340,518)
Loss on disposal of assets 36,957 16,494
Changes in operating assets and liabilities (5,932,611) (912,468)
---------------------- ---------------------
Net cash used in operating activities (10,362,131) (2,270,107)
---------------------- ---------------------
Investing activities:
Purchases of property, plant, and equipment (240,848) (416,602)
Proceeds from sale of property, plant, and equipment 55,179 28,937
---------------------- ---------------------
Net cash used in investing activities (185,669) (387,665)
---------------------- ---------------------
Financing activities:
Net increase in borrowings on notes payable 7,938,839 488,419
Principal payments on long-term obligations (292,369) (517,317)
---------------------- ---------------------
Net cash provided by (used in) financing activities 7,646,470 (28,898)
Effect of exchange rate changes on cash 32,282 (14,276)
---------------------- ---------------------
Decrease in cash and cash equivalents (2,869,048) (2,700,946)
Cash and cash equivalents at beginning of period 5,635,042 14,671,806
---------------------- ---------------------
Cash and cash equivalents at end of period $ 2,765,994 $ 11,970,860
====================== =====================
See notes to condensed consolidated financial statements.
4
Continental Global Group, Inc.
Notes to Condensed Consolidated Financial Statements (Unaudited)
June 30, 2003
A. 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 Article 10 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 a fair presentation have
been included. Operating results for the six-month period ended June 30, 2003
are not necessarily indicative of the results that may be expected for the year
ending December 31, 2003. For further information, refer to the consolidated
financial statements and footnotes of Continental Global Group, Inc. and
subsidiaries for the year ended December 31, 2002, included in the Form 10-K
filed by the Company on March 31, 2003.
Certain amounts from the prior year financial statements have been reclassified
to conform to current year presentation.
In the fourth quarter of 2002, the Company recorded a non-cash impairment
write-down for goodwill of $3,850,000 in accordance with the provisions of SFAS
No. 142, "Goodwill and Other Intangible Assets". This transition adjustment has
been reported as a cumulative effect of a change in accounting principle. The
Company has restated the results of operations for the six months ended June 30,
2002 to reflect this goodwill impairment as of January 1, 2002.
B. Use of Estimates
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States requires management to make estimates
and assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
C. Inventories
Inventories, which consist of raw materials, manufactured and purchased parts,
and work in process, are stated at the lower of cost or market. Since inventory
records are maintained on a job order basis, it is not practical to segregate
inventories into their major classes. The cost for approximately 69% and 63% of
inventories at June 30, 2003 and December 31, 2002, respectively, is determined
using the last-in, first-out (LIFO) method with the remainder determined using
the first-in, first-out (FIFO) method. Had the FIFO method of inventory (which
approximates replacement cost) been used to cost all inventories, inventories
would have increased by approximately $1,457,000 at June 30, 2003 and December
31, 2002.
5
Continental Global Group, Inc.
Notes to Condensed Consolidated Financial Statements (Unaudited)
June 30, 2003
D. Warranty Costs
The Company's products are generally covered by warranties against defects in
material and workmanship for periods up to two years from the date of sale or
installation of the product. The Company records a provision for estimated
warranty cost based on actual experience and continuously assesses the adequacy
of its product warranty accrual and makes adjustments as needed. A summary of
accrued warranty costs follows:
2003
-----------------
Balance as of January 1 $ 1,678,002
Warranties issued during the period 413,818
Settlements made during the period (698,977)
Effect of exchange rate changes 51,447
-----------------
Balance as of June 30 $ 1,444,290
=================
E. Restructuring Charges
The Company incurred additional restructuring charges of approximately $58,000
for the six months ended June 30, 2003 related to changes in staffing and
production requirements in its domestic operations. These charges consist
primarily of relocation costs associated with the merger of certain domestic
facilities. Total restructuring charges incurred to date pertaining to the
actions started by the Company in 2002 are approximately $698,000. As part of
this restructuring, during 2003, the Company plans to discontinue the
manufacturing operations in certain of its domestic facilities and merge these
operations with other existing facilities. The Company expects the additional
cost of this restructuring to be approximately $450,000. These charges consist
primarily of severance and relocation costs and will be expensed as incurred. As
of June 30, 2003, the Company has paid approximately $160,000 of the charges
incurred to date.
F. Comprehensive Loss
The components of comprehensive loss for the three months and six months ended
June 30, 2003 and 2002 are as follows:
Three months ended June 30 Six months ended June 30
2003 2002 2003 2002
---------------------------------- ---------------------------------
Net loss $ (2,051,583) $ (1,243,884) $ (5,839,329) $ (6,300,404)
Other comprehensive income (loss):
Foreign currency translation
adjustment 217,732 542,066 368,919 765,940
Change in fair value of cash flow
hedges (net of tax) 34,167 20,768 77,430 20,768
---------------------------------- ---------------------------------
Comprehensive loss $ (1,799,684) $ (681,050) $ (5,392,980) $ (5,513,696)
================================== =================================
6
Continental Global Group, Inc.
Notes to Condensed Consolidated Financial Statements (Unaudited)
June 30, 2003
G. Income Taxes
Income taxes are provided using the liability method in accordance with FASB
Statement No. 109, "Accounting for Income Taxes". For tax reporting purposes,
the Company is included in the consolidated federal tax return of N.E.S.
Investment Co. However, for financial reporting purposes, the Company's tax
provision has been calculated on a stand-alone basis. The Company's effective
tax rate differs from the statutory rate in the United States due to losses
incurred without a corresponding tax benefit.
The Company has subsidiaries located in Australia, the United Kingdom, and South
Africa, which are subject to income taxes in their respective countries.
H. Segment Information
While the Company primarily manages its operations on a geographical basis, the
Company operates in two principal business segments: conveyor equipment and
manufactured housing products. The conveyor equipment business markets its
products in four main business areas. The mining equipment business area
includes the design, manufacture and testing (and, outside the United States,
installation and maintenance) of complete belt conveyor systems and components
for mining application primarily in the coal industry. The conveyor components
business area manufactures and sells components for conveyor systems primarily
for resale through distributor networks. The engineered systems business area
uses specialized project management and engineering skills to combine mining
equipment products, purchased equipment, steel fabrication and other outside
services for sale as complete conveyor equipment systems that meet specific
customer requirements. The bulk conveyor equipment business area designs and
manufactures a complete range of conveyor equipment sold to transport bulk
materials, such as cement, lime, food products and industrial waste.
7
Continental Global Group, Inc.
Notes to Condensed Consolidated Financial Statements (Unaudited)
June 30, 2003
H. Segment Information (Continued)
The Company's manufactured housing products business manufactures and/or
refurbishes axle components sold directly to the manufactured housing industry.
As part of this segment the Company also sells mounted tire and rim assemblies
to the manufactured housing industry. Included in the other category is
primarily the manufacture and sale of air filtration equipment for use in
enclosed environments, principally in the textile industry. The manufacturing
requirements for these products are generally compatible with conveyor equipment
production and thus maximize utilization of the Company's manufacturing
facilities for its primary products.
Three months ended June 30 Six months ended June 30
2003 2002 2003 2002
-------------------------------------------------------------------
(in thousands) (in thousands)
Net sales:
Conveyor equipment $ 50,071 $ 37,428 $ 86,766 $ 75,432
Manufactured housing products 6,638 8,444 12,306 15,658
Other 302 230 512 556
-------------------------------------------------------------------
Total net sales $ 57,011 $ 46,102 $ 99,584 $ 91,646
===================================================================
Segment operating income:
Conveyor equipment $ 2,199 $ 2,433 $ 2,532 $ 4,644
Manufactured housing products 467 541 651 923
Other 87 21 164 55
-------------------------------------------------------------------
Total segment operating income 2,753 2,995 3,347 5,622
Management fee 144 167 180 314
Amortization expense 7 30 13 60
Restructuring charges 44 - 58 -
Corporate expense 371 215 785 431
-------------------------------------------------------------------
Total operating income 2,187 2,583 2,311 4,817
Interest expense 3,910 3,869 7,640 7,671
Interest income (4) (51) (13) (104)
Miscellaneous, net 333 9 523 41
-------------------------------------------------------------------
Loss before income taxes $ (2,052) $ (1,244) $ (5,839) $ (2,791)
===================================================================
8
Continental Global Group, Inc.
Notes to Condensed Consolidated Financial Statements (Unaudited)
June 30, 2003
I. Guarantor and Non-Guarantor Subsidiaries
The Company's domestic subsidiaries, Continental Conveyor & Equipment Company
(CCE) and Goodman Conveyor Company (GCC), and certain of its Australian
subsidiaries, all of which are wholly owned, are the guarantors of the Senior
Notes. The guarantees are full, unconditional, and joint and several. Separate
financial statements of these guarantor subsidiaries are not presented as
management has determined that they would not be material to investors. The
Company's United Kingdom and South African subsidiaries are not guarantors of
the Senior Notes.
Summarized consolidating balance sheets as of June 30, 2003 and December 31,
2002 for the Company, the guarantor subsidiaries, and the non-guarantor
subsidiaries are as follows (in thousands):
Combined Combined
Guarantor Non-Guarantor
June 30, 2003: The Company Subsidiaries Subsidiaries Eliminations Total
-------------------------------------------------------------------------------
Current assets:
Cash and cash equivalents $ 2,057 $ 706 $ 3 $ - $ 2,766
Accounts receivable, net - 29,595 12,604 (148) 42,051
Inventories - 22,400 4,663 - 27,063
Deferred income taxes 81 - 331 (387) 25
Other current assets 168 479 1,175 (5) 1,817
-------------------------------------------------------------------------------
Total current assets 2,306 53,180 18,776 (540) 73,722
Property, plant, and
equipment, net - 8,406 4,426 - 12,832
Goodwill - 12,806 741 - 13,547
Investment in subsidiaries 60,009 20,001 - (80,010) -
Deferred financing costs 1,950 - - - 1,950
Other assets 11,231 1,824 - (12,655) 400
-------------------------------------------------------------------------------
Total assets $ 75,496 $ 96,217 $ 23,943 $ (93,205) $ 102,451
===============================================================================
Current liabilities:
Notes payable $ - $ 14,792 $ 5,530 $ (649) $ 19,673
Trade accounts payable 38 20,978 7,879 (131) 28,764
Accrued compensation and
employee benefits - 3,792 1,275 - 5,067
Accrued interest 3,300 - - - 3,300
Other accrued liabilities 638 4,138 3,236 (796) 7,216
Current maturities of
long-term obligations - 1,058 82 - 1,140
-------------------------------------------------------------------------------
Total current liabilities 3,976 44,758 18,002 (1,576) 65,160
Pension obligation - 2,856 - - 2,856
Deferred income taxes - 11,570 - (10,931) 639
Senior Notes 120,000 - - - 120,000
Other long-term obligations - 1,708 1,091 (889) 1,910
Stockholder's equity
(deficit) (48,480) 35,325 4,850 (79,809) (88,114)
-------------------------------------------------------------------------------
Total liabilities and
stockholder's equity
(deficit) $ 75,496 $ 96,217 $ 23,943 $ (93,205) $ 102,451
===============================================================================
9
Continental Global Group, Inc.
Notes to Condensed Consolidated Financial Statements (Unaudited)
June 30, 2003
I. Guarantor and Non-Guarantor Subsidiaries (Continued)
Combined Combined
Guarantor Non-Guarantor
December 31, 2002: The Company Subsidiaries Subsidiaries Eliminations Total
-------------------------------------------------------------------------------
Current assets:
Cash and cash equivalents $ 4,524 $ 1,109 $ 2 $ - $ 5,635
Accounts receivable, net - 16,469 9,165 - 25,634
Inventories - 23,479 4,274 - 27,753
Deferred income taxes 81 - 280 (335) 26
Other current assets 37 1,095 827 - 1,959
-------------------------------------------------------------------------------
Total current assets 4,642 42,152 14,548 (335) 61,007
Property, plant, and
equipment, net - 8,713 4,168 - 12,881
Goodwill - 12,528 627 - 13,155
Investment in subsidiaries 60,009 18,118 - (78,127) -
Deferred financing costs 2,210 - - - 2,210
Other assets 9,817 1,833 - (11,236) 414
-------------------------------------------------------------------------------
Total assets $ 76,678 $ 83,344 $ 19,343 $ (89,698) $ 89,667
===============================================================================
Current liabilities:
Notes payable $ - $ 9,536 $ 2,139 $ (389) $ 11,286
Trade accounts payable 16 12,404 7,619 - 20,039
Accrued compensation and
employee benefits 42 3,957 975 - 4,974
Accrued interest 3,300 - - - 3,300
Other accrued liabilities 564 4,247 2,613 (728) 6,696
Current maturities of
long-term obligations - 963 47 - 1,010
-------------------------------------------------------------------------------
Total current liabilities 3,922 31,107 13,393 (1,117) 47,305
Pension obligation - 2,645 - - 2,645
Deferred income taxes - 10,253 - (9,692) 561
Senior Notes 120,000 - - - 120,000
Other long-term obligations - 1,766 985 (874) 1,877
Stockholder's equity
(deficit) (47,244) 37,573 4,965 (78,015) (82,721)
-------------------------------------------------------------------------------
Total liabilities and
stockholder's equity
(deficit) $ 76,678 $ 83,344 $ 19,343 $ (89,698) $ 89,667
===============================================================================
10
Continental Global Group, Inc.
Notes to Condensed Consolidated Financial Statements (Unaudited)
June 30, 2003
I. Guarantor and Non-Guarantor Subsidiaries (Continued)
Summarized consolidating statements of operations for the three months and six
months ended June 30, 2003 and 2002, respectively, for the Company, the
guarantor subsidiaries, and the non-guarantor subsidiaries are as follows (in
thousands):
Combined Combined
Guarantor Non-Guarantor
The Company Subsidiaries Subsidiaries Eliminations Total
------------- ------------- --------------- ------------- -------------
Three months ended June 30, 2003:
Net sales $ - $ 47,349 $ 9,847 $ (185) $ 57,011
Cost of products sold - 39,950 9,053 (185) 48,818
------------- ------------- --------------- ------------- -------------
Gross profit - 7,399 794 - 8,193
Total operating expenses 448 4,320 1,238 - 6,006
------------- ------------- --------------- ------------- -------------
Operating income (loss) (448) 3,079 (444) - 2,187
Interest expense 3,433 395 82 - 3,910
Interest income (4) - - - (4)
Miscellaneous, net 153 195 (15) - 333
------------- ------------- --------------- ------------- -------------
Income (loss) before income taxes (4,030) 2,489 (511) - (2,052)
Income tax expense (benefit) (842) 842 - - -
------------- ------------- --------------- ------------- -------------
Net income (loss) $ (3,188) $ 1,647 $ (511) $ - $ (2,052)
============= ============= =============== ============= =============
Combined Combined
Guarantor Non-Guarantor
The Company Subsidiaries Subsidiaries Eliminations Total
------------- ------------- --------------- ------------- -------------
Three months ended June 30, 2002:
Net sales $ - $ 36,426 $ 9,676 $ - $ 46,102
Cost of products sold - 29,503 8,175 - 37,678
------------- ------------- --------------- ------------- -------------
Gross profit - 6,923 1,501 - 8,424
Total operating expenses 225 4,595 1,021 - 5,841
------------- ------------- --------------- ------------- -------------
Operating income (loss) (225) 2,328 480 - 2,583
Interest expense 3,439 421 9 - 3,869
Interest income (51) - - - (51)
Miscellaneous, net (5) 19 (5) - 9
------------- ------------- --------------- ------------- -------------
Income (loss) before income taxes (3,608) 1,888 476 - (1,244)
Income tax expense (benefit) (710) 710 - - -
------------- ------------- --------------- ------------- -------------
Net income (loss) $ (2,898) $ 1,178 $ 476 $ - $ (1,244)
============= ============= =============== ============= =============
11
Continental Global Group, Inc.
Notes to Condensed Consolidated Financial Statements (Unaudited)
June 30, 2003
I. Guarantor and Non-Guarantor Subsidiaries (Continued)
Combined Combined
Guarantor Non-Guarantor
The Company Subsidiaries Subsidiaries Eliminations Total
------------- ------------- --------------- ------------- -------------
Six months ended June 30, 2003:
Net sales $ - $ 80,902 $ 18,893 $ (211) $ 99,584
Cost of products sold - 68,148 17,508 (211) 85,445
------------- ------------- --------------- ------------- -------------
Gross profit - 12,754 1,385 - 14,139
Total operating expenses 897 8,551 2,380 - 11,828
------------- ------------- --------------- ------------- -------------
Operating income (loss) (897) 4,203 (995) - 2,311
Interest expense 6,868 633 139 - 7,640
Interest income (13) - - - (13)
Miscellaneous, net 323 219 (19) - 523
------------- ------------- --------------- ------------- -------------
Income (loss) before income taxes (8,075) 3,351 (1,115) - (5,839)
Income tax expense (benefit) (1,240) 1,240 - - -
------------- ------------- --------------- ------------- -------------
Net income (loss) $ (6,835) $ 2,111 $ (1,115) $ - $ (5,839)
============= ============= =============== ============= =============
Combined Combined
Guarantor Non-Guarantor
The Company Subsidiaries Subsidiaries Eliminations Total
------------- ------------- --------------- ------------- -------------
Six months ended June 30, 2002:
Net sales $ - $ 73,957 $ 17,689 $ - $ 91,646
Cost of products sold - 60,106 15,172 - 75,278
------------- ------------- --------------- ------------- -------------
Gross profit - 13,851 2,517 - 16,368
Total operating expenses 451 9,055 2,045 - 11,551
------------- ------------- --------------- ------------- -------------
Operating income (loss) (451) 4,796 472 - 4,817
Interest expense 6,880 762 29 - 7,671
Interest income (104) - - - (104)
Miscellaneous, net - 29 12 - 41
------------- ------------- --------------- ------------- -------------
Income (loss) before income taxes and
cumulative effect of change in
accounting principle (7,227) 4,005 431 - (2,791)
Income tax expense (benefit) (1,837) 1,496 - - (341)
------------- ------------- --------------- ------------- -------------
Income (loss) before cumulative effect
of change in accounting principle (5,390) 2,509 431 - (2,450)
Cumulative effect of change in
accounting principle - (3,850) - - (3,850)
------------- ------------- --------------- ------------- -------------
Net income (loss) $ (5,390) $ (1,341) $ 431 $ - $ (6,300)
============= ============= =============== ============= =============
12
Continental Global Group, Inc.
Notes to Condensed Consolidated Financial Statements (Unaudited)
June 30, 2003
I. Guarantor and Non-Guarantor Subsidiaries (Continued)
Summarized consolidating cash flow statements for the six months ended June 30,
2003 and 2002, respectively, for the Company, the guarantor subsidiaries, and
the non-guarantor subsidiaries are as follows (in thousands):
Combined Combined
Guarantor Non-Guarantor
The Company Subsidiaries Subsidiaries Eliminations Total
------------- ------------- --------------- ------------- -------------
Six months ended June 30, 2003:
Net cash provided by (used in)
operating activities $ (7,892) $ 132 $ (2,633) $ 31 $ (10,362)
Investing activities:
Purchases of property, plant, and
equipment - (127) (114) - (241)
Proceeds from sale of property,
plant, and equipment - 52 3 - 55
------------- ------------- --------------- ------------- -------------
Net cash used in investing activities - (75) (111) - (186)
------------- ------------- --------------- ------------- -------------
Financing activities:
Net increase in borrowings on notes
payable - 4,995 2,944 - 7,939
Principal payments on long-term
obligations - (256) (36) - (292)
Distributions for interest on
senior notes 5,600 (5,600) - - -
Intercompany loan activity (175) 355 (180) - -
------------- ------------- --------------- ------------- -------------
Net cash provided by (used in)
financing activities 5,425 (506) 2,728 - 7,647
Exchange rate changes on cash - 46 17 (31) 32
------------- ------------- --------------- ------------- -------------
Increase (decrease) in cash and cash
equivalents (2,467) (403) 1 - (2,869)
Cash and cash equivalents at beginning
of period 4,524 1,109 2 - 5,635
------------- ------------- --------------- ------------- -------------
Cash and cash equivalents at end of
period $ 2,057 $ 706 $ 3 $ - $ 2,766
============= ============= =============== ============= =============
13
Continental Global Group, Inc.
Notes to Condensed Consolidated Financial Statements (Unaudited)
June 30, 2003
I. Guarantor and Non-Guarantor Subsidiaries (Continued)
Combined Combined
Guarantor Non-Guarantor
The Company Subsidiaries Subsidiaries Eliminations Total
------------- ------------- --------------- ------------- -------------
Six months ended June 30, 2002:
Net cash provided by (used in)
operating activities $ (7,381) $ 4,574 $ 529 $ 8 $ (2,270)
Investing activities:
Purchases of property, plant, and
equipment - (222) (195) - (417)
Proceeds from sale of property,
plant, and equipment - 17 12 - 29
------------- ------------- --------------- ------------- -------------
Net cash used in investing activities - (205) (183) - (388)
------------- ------------- --------------- ------------- -------------
Financing activities:
Net increase in borrowings on notes
payable - 130 358 - 488
Principal payments on long-term
obligations - (503) (14) - (517)
Distributions for interest on
senior notes 5,900 (5,900) - - -
Intercompany loan activity - 1,252 (1,252) - -
------------- ------------- --------------- ------------- -------------
Net cash provided by (used in)
financing activities 5,900 (5,021) (908) - (29)
Exchange rate changes on cash - 36 (42) (8) (14)
------------- ------------- --------------- ------------- -------------
Decrease in cash and cash equivalents (1,481) (616) (604) - (2,701)
Cash and cash equivalents at beginning
of period 12,548 1,518 606 - 14,672
------------- ------------- --------------- ------------- -------------
Cash and cash equivalents at end of
period $ 11,067 $ 902 $ 2 $ - $ 11,971
============= ============= =============== ============= =============
J. Subsequent Events
At June 30, 2003, the Company was in violation of certain of its financial
covenants under its domestic revolving credit facility. The Company received a
waiver of these violations. Prior to June 30, 2003, the Company's domestic
credit facility had been extended until August 31, 2003. On August 12, 2003,
the Company successfully completed negotiations of an amended $26 million
revolving credit facility. The amended revolving credit facility has a maturity
date of July 31, 2004. The availability under this revolving credit facility is
equal to the sum of (i) 85% of eligible accounts receivable and (ii) 55% of
eligible inventory. The amended revolving credit facility continues to be
guaranteed by the Company and secured by a lien on substantially all of the
assets of CCE and GCC. In addition, the amended revolving credit facility
contains certain financial covenants that are more favorable to the Company
than the financial covenants under its previous agreement.
14
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
The following discussion should be read in conjunction with the Consolidated
Financial Statements and related notes included in the Company's Form 10-K dated
March 31, 2003.
General
The Company, through its subsidiaries, is primarily engaged in the manufacture
and distribution of bulk material handling and replacement equipment, primarily
for use in the mining industry. The Company is a holding company organized under
the Delaware General Corporation law and conducts all of its business through
its direct and indirect operating subsidiaries. The Company's direct operating
subsidiaries are Continental Conveyor and Equipment Company and Goodman Conveyor
Company. The Company also owns indirectly all of the capital stock of
Continental Conveyor & Equipment Pty. Ltd., an Australian holding company that
owns all of the capital stock of four Australian operating companies. The
Company also owns indirectly all of the capital stock of Continental Conveyor
Ltd., a U.K. operating company, and Continental MECO (Pty.) Ltd., a South
African operating company. During 2001, the Company acquired certain assets in
Alabama from Lippert Tire & Axle, Inc. The Company's existing Alabama operations
of its manufactured housing products segment have been combined with the Lippert
operations.
Results of Operations
The following table sets forth, on a comparative basis, selected income
statement data as a percentage of net sales for the three months and six months
ended June 30, 2003 and 2002.
Three months ended Six months ended
June 30 June 30
-------------------------- -------------------------
2003 2002 2003 2002
Net sales 100.0% 100.0% 100.0% 100.0%
Cost of products sold 85.6 81.7 85.8 82.1
Gross profit 14.4 18.3 14.2 17.9
SG&A expenses 10.2 12.2 11.6 12.2
Management fee 0.3 0.4 0.2 0.3
Amortization expense - 0.1 - 0.1
Restructuring charges 0.1 - 0.1 -
Operating income 3.8 5.6 2.3 5.3
Three months ended June 30, 2003, compared to three months ended June 30, 2002:
Net Sales
- ---------
Net sales for the quarter increased $10.9 million, or 24%, from $46.1 million in
2002 to $57.0 million in 2003. Of this increase, $3.4 million is due to changes
in the foreign currency translation rates. Net sales in the domestic operations
of the Company's conveyor equipment segment increased $3.6 million due to
increased sales in the mining equipment business of $1.8 million and increased
sales in the engineered systems business of $1.8 million as a result of shipping
a significant project in the second quarter of 2003. Net sales in the foreign
operations of the Company's conveyor equipment segment increased $9.0 million.
Adjusting for the effect of the changes in foreign currency translation rates,
net sales in the Company's Australian subsidiary increased $6.9 million. This
was offset by a decrease in net sales in the Company's United Kingdom subsidiary
of $1.3 million. The sales increase in Australia was the result of new mining
projects. The decrease in sales in the United Kingdom was the result of volume
decreases in the standard manufactured products business and sales to the
tunneling industry. Net sales in the Company's manufactured housing segment
decreased $1.8 million due to the decrease by the Company's customers in the
production and shipment of manufactured homes. Based upon the Manufactured
Housing Institute's economic report for May 2003, quarter over quarter
production and shipment of manufactured homes is down 27%. Net sales in the
Company's other segment increased $0.1 million.
15
Gross Profit
- ------------
Gross profit for the quarter decreased $0.2 million, or 2%, from $8.4 million in
2002, to $8.2 million in 2003. Gross profit in the domestic operations of the
Company's conveyor equipment segment decreased $0.1 million due to reduced
profit margins in the mining equipment business which primarily resulted from
the Company's inability to pass through raw material price increases,
predominantly in steel and steel-related products, occurring in the second half
of 2002. Gross profit in the foreign operations of the Company's conveyor
equipment segment decreased $0.1 million due to a decrease at the United Kingdom
subsidiary of $0.8 million, offset by an increase in the Australian subsidiary
of $0.7 million. The decrease in gross profit in the United Kingdom resulted
from lower gross margins in complete conveyor systems and reduced sales volume
of the higher margin standard manufactured products business. The increase in
gross profit in Australia resulted from the increase in sales.
Gross profit as a percentage of net sales decreased from 18.3% in 2002 to 14.4%
in 2003. This decline was primarily attributable to the lower margins on mining
equipment business in the Company's domestic operations of the conveyor
equipment segment and the decreased profit margins in the United Kingdom.
SG&A Expenses
- -------------
SG&A expenses for the quarter increased $0.2 million, or 3%, from $5.6 million
in 2002 to $5.8 million in 2003. SG&A expenses in the domestic operations of the
Company's conveyor equipment segment decreased $0.4 million due to a reduction
in sales personnel and administrative expenses. SG&A expenses in the foreign
operations of the Company's conveyor equipment segment increased $0.4 million;
$0.3 million of this increase can be attributed to changes in the foreign
currency translation rates. Corporate expenses increased $0.2 million due to
higher insurance costs and increased personnel expenses.
Operating Income
- ----------------
Operating income for the quarter decreased $0.4 million, or 15%, from $2.6
million in 2002 to $2.2 million in 2003. This decrease resulted from the $0.2
million decrease in gross profit combined with the $0.2 million increase in SG&A
expenses.
Six months ended June 30, 2003, compared to six months ended June 30, 2002:
Net Sales
- ---------
Net sales for the six-month period increased $8.0 million, or 9%, from $91.6
million in 2002 to $99.6 million in 2003. Of this increase, $5.5 million is due
to changes in the foreign currency translation rates. Net sales in the domestic
operations of the Company's conveyor equipment segment increased $1.3 million
due primarily to increased sales in the engineered systems business as a result
of shipping a significant project in the second quarter of 2003. Net sales in
the foreign operations of the Company's conveyor equipment increased $10.0
million. Adjusting for the effect of the changes in foreign currency translation
rates, net sales in Australia and South Africa increased $5.9 million and $0.2
million, respectively. This was offset by a decrease in net sales in the United
Kingdom of $1.6 million. The sales increase in Australia was due to sales of
conveyor equipment for new mining projects. The increase in sales in South
Africa resulted from increased sales of conveyor components in the coal
industry. The decrease in sales in the United Kingdom resulted from sales
decreases in the standard manufactured products business and sales to the
tunneling industry. Net sales in the Company's manufactured housing segment
decreased $3.3 million due to the decrease by the Company's customers in the
production and shipment of manufactured homes. Based upon the Manufactured
Housing Institute's economic report for May 2003, year over year production and
shipment of manufactured homes is down 27%.
16
Gross Profit
- ------------
Gross profit for the six-month period decreased $2.2 million, or 13%, from $16.3
million in 2002 to $14.1 million in 2003. Gross profit in the domestic
operations of the Company's conveyor equipment segment decreased $1.5 million
due to a decline in profit margins in the mining equipment business which
primarily resulted from the Company's inability to pass through raw material
price increases, predominantly in steel and steel-related products, occurring in
the second half of 2002. Gross profit in the foreign operations of the Company's
conveyor equipment segment decreased $0.5 million due to a decrease in the
United Kingdom of $1.3 million, offset by increases in Australia and South
Africa of $0.6 million and $0.2 million, respectively. The decrease in gross
profit in the United Kingdom resulted from lower profit margins in complete
conveyor systems and reduced sales volume of the higher margin standard
manufactured products business. The increases in Australia and South Africa
resulted from increased sales and favorable changes in the foreign currency
translation rates. Gross profit in the Company's manufactured housing segment
decreased $0.2 million due to the decrease in net sales.
Gross profit as a percentage of net sales decreased from 17.9% in 2002 to 14.2%
in 2003. This decline primarily resulted from the lower margins on mining
equipment business in the Company's domestic operations of the conveyor
equipment segment and the decreased profit margins in the United Kingdom.
SG&A Expenses
- -------------
SG&A expenses for the six-month period increased $0.4 million, or 4%, from $11.2
million in 2002 to $11.6 million in 2003. SG&A expenses in the domestic
operations of the conveyor equipment segment decreased $0.8 million, primarily
due to a $0.5 million decline in selling expenses as a result of reduced sales
personnel and related expenses and a $0.3 million decline in administrative
expenses. SG&A expenses in the foreign operations increased $0.8 million. Of
this increase in the foreign operations, $0.6 million resulted from changes in
foreign currency translation rates. Corporate expenses increased $0.4 million,
primarily due to increased insurance and personnel expenses.
Operating Income
- ----------------
Operating income for the six-month period decreased $2.5 million, or 52%, from
$4.8 million in 2002 to $2.3 million in 2003. This decrease resulted from the
$2.2 million decrease in gross profit combined with the $0.4 million increase in
SG&A expenses, partially offset by a $0.1 million decrease in management fees.
Restructuring Charges
- ---------------------
The Company incurred additional restructuring charges of approximately $0.1
million for the six months ended June 30, 2003 related to changes in staffing
and production requirements in its domestic operations. These charges consist
primarily of relocation costs associated with the merger of certain domestic
facilities. Total restructuring charges incurred to date pertaining to the
actions started by the Company in 2002 are approximately $0.7 million. As part
of this restructuring, during 2003, the Company plans to discontinue the
manufacturing operations in certain of its domestic facilities and merge these
operations with other existing facilities. The Company expects the additional
cost of this restructuring to be approximately $0.5 million. These charges
consist primarily of severance and relocation costs and will be expensed as
incurred. As of June 30, 2003, the Company has paid approximately $0.2 million
of the charges incurred to date.
17
Cumulative Effect of Change in Accounting Principle
- ---------------------------------------------------
In the fourth quarter of 2002, the Company recorded a non-cash impairment
write-down for goodwill of approximately $3.9 million in accordance with the
provisions of SFAS No. 142, "Goodwill and Other Intangible Assets". This
transition adjustment has been reported as a cumulative effect of a change in
accounting principle. The Company has restated the results of operations for the
six months ended June 30, 2002 to reflect this goodwill impairment as of January
1, 2002.
Backlog
- -------
Backlog at June 30, 2003 was $47.5 million, an increase of $5.4 million, or 13%,
from $42.1 million at December 31, 2002 and a decrease of $5.2 million, or 10%,
from $52.7 million at March 31, 2003. At June 30, 2003, backlog in the domestic
operations of the Company's conveyor equipment segment was $15.2 million, a
decrease of $5.7 million from March 31, 2003, and backlog in the foreign
operations of the Company's conveyor equipment segment was $32.3 million, an
increase of $0.5 million from March 31, 2003. Management believes that
approximately 75% of the backlog will be shipped in 2003.
Liquidity and Capital Resources
Net cash used in operating activities was $10.4 million and $2.3 million for the
six months ending June 30, 2003 and 2002, respectively. Net cash used in
operating activities in 2003 resulted primarily from a net loss of $5.8 million
and a net increase in operating assets and liabilities of $5.9 million,
partially offset by non-cash expenses of $1.3 million. The net increase in
operating assets and liabilities is primarily due to the significant increase in
trade accounts receivables which resulted from higher sales in the second
quarter of 2003 compared to the fourth quarter of 2002. Net cash used in
operating activities in 2002 resulted from a net loss of $6.3 million and a net
increase in operating assets and liabilities of $0.9 million partially offset
by non-cash expenses of $4.9 million.
Net cash used in investing activities was $0.2 million and $0.4 million for the
six months ending June 30, 2003 and 2002, respectively, and represents net
purchases of property, plant, and equipment for both years.
Net cash provided by (used in) financing activities was $7.6 million and $(0.03)
million for the six months ending June 30, 2003 and 2002, respectively. Net cash
provided by financing activities in 2003 resulted from a net increase in
borrowings on notes payable of $7.9 million offset by principal payments on
long-term obligations of $0.3 million. Net borrowings on notes payable under the
Company's domestic credit facility increased $5.0 million while net borrowings
on notes payable under the Company's various credit facilities at the foreign
subsidiaries increased $2.9 million. Net cash used in financing activities in
2002 represented principal payments on long-term obligations of $0.52 million
offset by a net increase in borrowings on notes payable of $0.49 million.
The Company's primary capital requirements consist of capital expenditures and
debt service. The Company utilizes cash on hand and its available credit
facilities to satisfy these requirements. The Company anticipates that capital
expenditures in 2003 will be less than those made in 2002. The Company
anticipates that its debt service requirements in 2003 (not including principal
obligations under the Company's credit facilities) will be approximately $16.0
million. In addition, as of June 30, 2003, the Company's domestic and foreign
credit facilities had outstanding principle balances of approximately $13.1
million and $6.6 million, respectively.
18
The Company's United Kingdom subsidiary completed negotiations during the second
quarter of 2003 on an amended credit facility. The amended facility increases
the credit limit to (pound) 3.3 million and has a maturity date of April 30,
2004. The credit facility of the Company's Australian facility matures on August
31, 2003 and the Company expects to successfully complete negotiations for a new
agreement in the third quarter of 2003.
At June 30, 2003, the Company was in violation of certain of its financial
covenants under its domestic credit facility. The Company received a waiver of
these violations. Prior to June 30, 2003, the Company's domestic credit facility
had been extended until August 31, 2003. Since June 30, 2003, the Company has
successfully completed negotiations of an amended credit facility. The amended
credit facility has a maturity date of July 31, 2004 and contains financial
covenants that are more favorable to the Company. However, notwithstanding the
amended credit facility, the Company will need to materially improve its results
of operations in order to both meet its future debt service requirements and
remain in compliance with its financial covenants under the amended credit
facility. Failure to materially improve operations will impact the Company's
ability to borrow under the amended credit facility and to meet its future
working capital and debt service requirements.
At June 30, 2003, the Company had cash and cash equivalents of approximately
$2.8 million and approximately $9.8 million available for use under its domestic
credit facility, representing approximately $12.6 million of liquidity. On
October 1, 2003, the Company will be required to make a semi-annual interest
payment of $6.6 million on its $120 million of outstanding Senior Notes due
2007. The Company intends to utilize its current financial resources (cash and
cash equivalents and available bank borrowings) and anticipated funds from
operations to fund the October 2003 interest payment. The Company's Board of
Directors is presently exploring alternative methods of enhancing the Company's
short and long-term liquidity position, including refinancing its outstanding
Senior Notes, in order to meet its working capital and debt service obligations
in the future. Failure to refinance the Senior Notes or to otherwise take steps
to improve the Company's liquidity position could materially impact the
Company's ability to meet its short and long-term working capital and debt
service requirements.
International Operations
The Company transacts business in a number of countries throughout the world and
has facilities in the United States, Australia, the United Kingdom, and South
Africa. As a result, the Company is subject to business risks inherent in
non-U.S. operations, including political and economic uncertainty, import and
export limitations, exchange controls and currency fluctuations. The Company
believes that the risks related to its foreign operations are mitigated by the
relative political and economic stability of the countries in which its largest
foreign operations are located. As the U.S. dollar strengthens and weakens
against foreign currencies in which the Company transacts business, its
financial results will be affected. The principal foreign currencies in which
the Company transacts business are the Australian dollar, the British pound
sterling, and the South African rand. The fluctuation of the U.S. dollar versus
other currencies resulted in increases to stockholder's equity (deficit) of
approximately $0.4 million and $0.8 million for the six months ended June 30,
2003 and 2002.
19
Cautionary Statement for Safe Harbor Purposes
This Management's Discussion and Analysis of Financial Condition and Results of
Operations (MD&A) contains forward-looking statements within the meaning of the
federal securities laws. As a general matter, forward-looking statements are
those focused upon future plans, objectives or performance as opposed to
historical items and include statements of anticipated events or trends and
expectations and beliefs relating to matters that are not historical in nature.
Such forward looking statements are subject to uncertainties and factors
relating to the Company's operations and business environment which are outside
the Company's control, such as the continued availability of funds under the
Company's credit facilities. All such uncertainties and factors are difficult to
predict and could cause actual results to differ materially from those matters
expressed in or implied by such forward-looking statements.
In addition, the Company's future results of operations, financial condition,
liquidity and capital resources could be materially adversely affected by, among
other things, the economic and political uncertainties or prolonged economic
recession.
20
Item 3. Quantitative and Qualitative Disclosures about Market Risk
The following table provides information about the Company's Senior Notes. The
table presents principal cash flows and interest rate by expected maturity date.
Interest Rate Sensitivity
Principal Amount by Expected Maturity
Average Interest Rate
Fair
Value,
(dollars in thousands) 2003 2004 2005 2006 2007 Total 6/30/03
- ------------------------------------------------------------------------------------------------
Long-Term Obligations,
including current
portion
Fixed Rate $ - $ - $ - $ - $ 120,000 $ 120,000 $ 54,000
Average interest rate 11% 11% 11% 11% 11%
The Company's interest income and expense are most sensitive to changes in the
general level of U.S. interest rates. In this regard, changes in U.S. interest
rates affect the interest earned on the Company's cash equivalents as well as
interest paid on its debt. To mitigate the impact of fluctuations in U.S.
interest rates, the Company generally borrows on a long-term basis to maintain a
debt structure that is fixed rate in nature.
A portion of the Company's operations consists of manufacturing and sales
activities in foreign jurisdictions. The Company manufactures and sells its
products in the United States, Australia, the United Kingdom, and South Africa.
As a result, the Company's financial results could be significantly affected by
factors such as changes in foreign currency exchange rates or weak economic
conditions in the foreign markets in which the Company distributes its products.
The Company's operating results are exposed to changes in exchange rates between
the U.S. dollar and the Australian dollar, the British pound sterling, and the
South African rand.
Item 4. Controls and Procedures
As of June 30, 2003, the Company carried out an evaluation, under the
supervision and with the participation of the Company's management, including
the Company's Chief Executive Officer and Chief Financial Officer, of the
effectiveness of the design and operation of the Company's disclosure controls
and procedures. Based upon that evaluation, the Chief Executive Officer and
Chief Financial Officer concluded that the Company's disclosure controls and
procedures are effective in timely alerting them to material information
relating to the Company (including its consolidated subsidiaries) required to be
included in the Company's periodic filings with the Securities and Exchange
Commission. There were no significant changes in the Company's internal controls
over financial reporting that occurred during the Company's most recent fiscal
quarter that have materially affected, or are reasonably likely to materially
affect, the Company's internal control over financial reporting.
21
Part II. Other Information
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits: Refer to the index of exhibits.
(b) No reports on Form 8-K were filed during the quarter ended June
30, 2003.
22
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.
CONTINENTAL GLOBAL GROUP, INC.
By: /s/ Jimmy L. Dickinson
----------------------
Jimmy L. Dickinson
Vice President and Chief Financial Officer
(As duly authorized representative and as
Principal Financial and Accounting Officer)
CONTINENTAL CONVEYOR & EQUIPMENT COMPANY
By: /s/ Jimmy L. Dickinson
----------------------
Jimmy L. Dickinson
Vice President - Finance (As duly authorized
representative and as Principal Financial and
Accounting Officer)
GOODMAN CONVEYOR COMPANY
By: /s/ J. Mark Etchberger
----------------------
J. Mark Etchberger
Controller (As duly authorized representative
and as Principal Financial and Accounting
Officer)
Date: August 13, 2003
23
Continental Global Group, Inc.
Form 10-Q
Index of Exhibits
Exhibit
Number Description of Exhibit
3.1
(a) Certificate of Incorporation of Continental Global Group, *
Inc., as currently in effect.
(b) Certificate of Amendment of Certificate of Incorporation of
Continental Global Group, Inc. (Filed as Exhibit 3.1(b) to
the Company's Form 10-Q for the quarter ended September 30,
2000, and is incorporated herein by reference.)
3.2 By-Laws of Continental Global Group, Inc., as currently *
in effect.
3.3 Certificate of Incorporation of Continental Conveyor & *
Equipment Company, as currently in effect.
3.4 By-Laws of Continental Conveyor & Equipment Company, as *
currently in effect.
3.5 Certificate of Incorporation of Goodman Conveyor Company, *
as currently in effect.
3.6 By-Laws of Goodman Conveyor Company, as currently in effect. *
4.1 Indenture, dated as of April 1, 1997, among Continental *
Global Group, Inc., Continental Conveyor & Equipment
Company, Goodman Conveyor Company, and the Trustee
(containing, as exhibits, specimens of the Series A Notes
and the Series B Notes).
10.1 Amended and Restated Credit Facility and Security Agreement,
dated as of July 25, 2002, among Bank One, NA, Continental
Conveyor & Equipment Company, and Goodman Conveyor Company.
(Filed as Exhibit 10.1 to the Company's Form 10-Q for the
quarter ended September 30, 2002, and is incorporated herein
by reference.)
10.2 Management Agreement, dated as of April 1, 1997, between *
Continental Global Group, Inc. and Nesco, Inc.
10.3 Employment Agreement, effective November 4, 2002, between
Continental Global Group, Inc. and Robert Hale. (Filed as
Exhibit 10.3 to the Company's Form 10-K for the year ended
December 31, 2002, and is incorporated herein by reference.)
10.4 Continental Global Group, Inc. Phantom Stock Plan dated as
of November 4, 2002. (Filed as Exhibit 10.4 to the Company's
Form 10-K for the year ended December 31, 2002, and is
incorporated herein by reference.)
10.5 Second Amendment to Amended and Restated Credit Facility and
Security Agreement, effective as of August 12, 2003, by and
among Bank One, NA, Continental Conveyor & Equipment Company,
and Goodman Conveyor Company.
31.1 Certification of the Chief Executive Officer pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002.
31.2 Certification of the Chief Financial Officer pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002.
32 Certifications of the Chief Executive Officer and Chief
Financial Officer pursuant to 18, U.S.C. 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
Certain instruments with respect to long-term debt have not been filed as
exhibits as the total amount of securities authorized under any one of such
instruments does not exceed 10 percent of the total assets of the registrant and
its subsidiaries on a consolidated basis. The registrant agrees to furnish to
the Commission a copy of each such instrument upon request.
* Incorporated by reference from Form S-4 Registration Number 333-27665 filed
under the Securities Act of 1933.