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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 September 30, 2002
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 the number of shares outstanding of each of the issuer's classes of
common stock as of the latest practical date.
As of October 31, 2002, 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
September 30, 2002 and December 31, 2001 2
Condensed Consolidated Statements of Operations
Three Months and Nine Months ended September 30, 2002 and 2001 3
Condensed Consolidated Statements of Cash Flows
Nine Months ended September 30, 2002 and 2001 4
Notes to Condensed Consolidated Financial Statements 5-15
Item 2 Management's Discussion and Analysis of Financial Condition and Results of
Operations 16-20
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
Certifications 24
Part I. Financial Information
Item 1. Financial Statements (Unaudited)
1
Continental Global Group, Inc.
Condensed Consolidated Balance Sheets
September 30 December 31
2002 2001
-------------------- --------------------
(Unaudited) (Audited)
Assets:
Current assets:
Cash and cash equivalents $ 16,586,679 $ 14,671,806
Accounts receivable, net 31,587,421 32,050,919
Inventories 27,954,655 26,572,726
Other current assets 1,316,960 1,745,684
-------------------- --------------------
Total current assets 77,445,715 75,041,135
Property, plant and equipment 27,860,975 26,142,796
Less accumulated depreciation 14,997,003 13,048,973
-------------------- --------------------
12,863,972 13,093,823
Goodwill, net 17,163,596 16,799,894
Deferred financing costs 2,339,560 2,729,487
Deferred income taxes 769,335 718,862
Other assets 303,209 388,705
-------------------- --------------------
$ 110,885,387 $ 108,771,906
==================== ====================
Liabilities and Stockholder's Equity (Deficit):
Current liabilities:
Notes payable $ 15,950,031 $ 16,306,471
Trade accounts payable 22,215,910 18,895,554
Accrued compensation and employee benefits 5,504,562 5,136,280
Accrued interest on senior notes 6,600,000 3,300,000
Deferred income taxes 957,008 1,235,922
Other accrued liabilities 9,101,559 9,185,735
Current maturities of long-term obligations 961,309 1,298,522
-------------------- --------------------
Total current liabilities 61,290,379 55,358,484
Senior notes 120,000,000 120,000,000
Other long-term obligations, less current maturities 1,926,696 2,258,082
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 (69,200,777) (65,111,800)
Accumulated other comprehensive loss (5,124,599) (5,726,548)
-------------------- --------------------
(72,331,688) (68,844,660)
-------------------- --------------------
$ 110,885,387 $ 108,771,906
==================== ====================
See notes to condensed consolidated financial statements.
2
Continental Global Group, Inc.
Condensed Consolidated Statements of Operations
Three months ended Nine months ended
September 30 September 30
2002 2001 2002 2001
----------------------------------- ------------------------------------
(Unaudited) (Unaudited)
Net sales $ 52,582,633 $ 52,627,318 $ 144,228,729 $ 143,482,857
Cost of products sold 44,671,903 45,390,027 119,950,103 120,120,850
----------------------------------- ------------------------------------
Gross profit 7,910,730 7,237,291 24,278,626 23,362,007
Operating expenses:
Selling and engineering 3,313,649 3,204,675 10,107,940 9,282,338
General and administrative 2,156,287 2,040,281 6,538,354 6,319,667
Management fee 149,080 127,519 463,502 472,110
Amortization expense 30,918 146,092 90,859 439,867
----------------------------------- ------------------------------------
Total operating expenses 5,649,934 5,518,567 17,200,655 16,513,982
----------------------------------- ------------------------------------
Operating income 2,260,796 1,718,724 7,077,971 6,848,025
Other expenses:
Interest expense 3,901,983 3,962,243 11,572,873 11,901,801
Interest income (46,941) (142,321) (151,169) (546,316)
Miscellaneous, net 44,327 161,179 85,762 991,524
----------------------------------- ------------------------------------
Total other expenses 3,899,369 3,981,101 11,507,466 12,347,009
----------------------------------- ------------------------------------
Loss before income taxes (1,638,573) (2,262,377) (4,429,495) (5,498,984)
Income tax benefit - (353,938) (340,518) (1,285,178)
----------------------------------- ------------------------------------
Net loss $ (1,638,573) $ (1,908,439) $ (4,088,977) $ (4,213,806)
=================================== ====================================
See notes to condensed consolidated financial statements.
3
Continental Global Group, Inc.
Condensed Consolidated Statements of Cash Flows
Nine months ended September 30
2002 2001
---------------------- ---------------------
(Unaudited)
Operating activities:
Net loss $ (4,088,977) $ (4,213,806)
Adjustments to reconcile net loss to net cash provided by
(used in) operating activities:
Provision for depreciation and amortization 1,728,819 2,122,068
Amortization of deferred financing costs 389,927 389,927
Deferred income taxes (340,518) (1,285,178)
Loss (gain) on disposal of assets 28,227 (11,348)
Changes in operating assets and liabilities 6,485,359 2,636,950
---------------------- ---------------------
Net cash provided by (used in) operating activities 4,202,837 (361,387)
---------------------- ---------------------
Investing activities:
Purchases of property, plant, and equipment (1,002,761) (799,936)
Proceeds from sale of property, plant, and equipment 43,938 95,724
Acquisition of business - (1,606,806)
---------------------- ---------------------
Net cash used in investing activities (958,823) (2,311,018)
---------------------- ---------------------
Financing activities:
Net increase (decrease) in borrowings on notes payable (569,554) 3,020,047
Principal payments on long-term obligations (768,948) (796,465)
---------------------- ---------------------
Net cash provided by (used in) financing activities (1,338,502) 2,223,582
Effect of exchange rate changes on cash 9,361 (20,198)
---------------------- ---------------------
Increase (decrease) in cash and cash equivalents 1,914,873 (469,021)
Cash and cash equivalents at beginning of period 14,671,806 16,941,949
---------------------- ---------------------
Cash and cash equivalents at end of period $ 16,586,679 $ 16,472,928
====================== =====================
See notes to condensed consolidated financial statements.
4
Continental Global Group, Inc.
Notes to Condensed Consolidated Financial Statements (Unaudited)
September 30, 2002
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 nine-month period ended September 30,
2002 are not necessarily indicative of the results that may be expected for the
year ending December 31, 2002. For further information, refer to the
consolidated financial statements and footnotes of Continental Global Group,
Inc. and subsidiaries for the year ended December 31, 2001, included in the Form
10-K filed by the Company on March 29, 2002.
Certain amounts from the prior year financial statements have been reclassified
to conform to current year presentation. These reclassifications had no impact
on operating income or net loss.
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. Derivative Instruments
At September 30, 2002, the Company is party to a foreign currency forward
contract maturing during 2002. The counterparty to the contract is a major U.S.
commercial bank. Management believes that losses related to credit risk is
remote. The Company entered into the foreign currency forward contract to hedge
certain firm sales commitments denominated in a foreign currency. The fair value
of the Company's foreign currency forward contract is estimated based on the
quoted market price of a comparable contract.
The fair value of the forward contract is included in other current assets on
the September 30, 2002 balance sheet. There was no hedge ineffectiveness
recognized in the statement of operations during the current quarter. Based on
the maturity of the contract and the nature of the hedging relationship, the
unrecognized amounts in accumulated other comprehensive loss will be
reclassified into the statement of operations during 2002 at the time the firm
commitment is recognized.
5
Continental Global Group, Inc.
Notes to Condensed Consolidated Financial Statements (Unaudited)
September 30, 2002
D. 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 62% and 67% of
inventories at September 30, 2002 and December 31, 2001, 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 $1,140,000 at
September 30, 2002 and December 31, 2001.
E. Comprehensive Loss
The components of comprehensive loss for the three months and nine months ended
September 30, 2002 and 2001 are as follows:
Three months ended September 30 Nine months ended September 30
2002 2001 2002 2001
---------------------------------- ---------------------------------
Net loss $ (1,638,573) $ (1,908,439) $ (4,088,977) $ (4,213,806)
Other comprehensive income (loss):
Foreign currency translation
adjustment (164,145) (96,699) 601,795 (1,099,157)
Change in fair value of derivative
hedge (net of tax) (20,614) - 154 -
---------------------------------- ---------------------------------
Comprehensive loss $ (1,823,332) $ (2,005,138) $ (3,487,028) $ (5,312,963)
================================== =================================
F. 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 has subsidiaries located in Australia, the United Kingdom, and South
Africa, which are subject to income taxes in their respective countries.
6
Continental Global Group, Inc.
Notes to Condensed Consolidated Financial Statements (Unaudited)
September 30, 2002
G. 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.
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. 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. 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.
7
Continental Global Group, Inc.
Notes to Condensed Consolidated Financial Statements (Unaudited)
September 30, 2002
G. Segment Information (Continued)
Three months ended September 30 Nine months ended September 30
2002 2001 2002 2001
-------------------------------------------------------------------
(in thousands) (in thousands)
Net sales:
Conveyor equipment $ 44,522 $ 46,875 $ 119,955 $ 131,407
Manufactured housing products 7,886 5,534 23,543 11,113
Other 175 218 731 963
-------------------------------------------------------------------
Total net sales $ 52,583 $ 52,627 $ 144,229 $ 143,483
===================================================================
Segment operating income:
Conveyor equipment $ 2,121 $ 2,125 $ 6,765 $ 8,414
Manufactured housing products 529 111 1,451 111
Other 21 (95) 77 (83)
-------------------------------------------------------------------
Total segment operating income 2,671 2,141 8,293 8,442
Management fee 149 128 464 472
Amortization expense 31 146 91 440
Corporate expense 230 148 660 682
-------------------------------------------------------------------
Total operating income 2,261 1,719 7,078 6,848
Interest expense 3,902 3,962 11,573 11,902
Interest income (47) (142) (151) (546)
Miscellaneous, net 44 161 85 991
-------------------------------------------------------------------
Loss before income taxes $ (1,638) $ (2,262) $ (4,429) $ (5,499)
===================================================================
8
Continental Global Group, Inc.
Notes to Condensed Consolidated Financial Statements (Unaudited)
September 30, 2002
H. 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 September 30, 2002 and December
31, 2001 for the Company, the guarantor subsidiaries, and the non-guarantor
subsidiaries are as follows (in thousands):
Combined Combined
Guarantor Non-Guarantor
September 30, 2002: The Company Subsidiaries Subsidiaries Eliminations Total
-------------------------------------------------------------------------------
Current assets:
Cash and cash equivalents $ 10,424 $ 6,161 $ 2 $ - $ 16,587
Accounts receivable, net - 19,377 12,217 (7) 31,587
Inventories - 23,439 4,516 - 27,955
Other current assets 165 441 1,054 (343) 1,317
-------------------------------------------------------------------------------
Total current assets 10,589 49,418 17,789 (350) 77,446
Property, plant, and
equipment, net - 8,944 3,920 - 12,864
Goodwill, net - 16,560 603 - 17,163
Investment in subsidiaries 60,009 17,722 - (77,731) -
Deferred financing costs 2,340 - - - 2,340
Deferred income taxes 9,977 - - (9,208) 769
Other assets 13 1,681 17 (1,408) 303
-------------------------------------------------------------------------------
Total assets $ 82,928 $ 94,325 $ 22,329 $ (88,697) $ 110,885
===============================================================================
Current liabilities:
Notes payable $ - $ 14,020 $ 2,145 $ (215) $ 15,950
Trade accounts payable - 14,546 7,672 (2) 22,216
Accrued compensation and
employee benefits - 4,667 837 - 5,504
Accrued interest 6,600 - - - 6,600
Deferred income taxes - 1,300 - (343) 957
Other accrued liabilities 522 12,466 5,672 (9,558) 9,102
Current maturities of
long-term obligations - 952 9 - 961
-------------------------------------------------------------------------------
Total current liabilities 7,122 47,951 16,335 (10,118) 61,290
Senior Notes 120,000 - - - 120,000
Other long-term obligations - 1,881 990 (944) 1,927
Stockholder's equity
(deficit) (44,194) 44,493 5,004 (77,635) (72,332)
-------------------------------------------------------------------------------
Total liabilities and
stockholder's equity
(deficit) $ 82,928 $ 94,325 $ 22,329 $ (88,697) $ 110,885
===============================================================================
9
Continental Global Group, Inc.
Notes to Condensed Consolidated Financial Statements (Unaudited)
September 30, 2002
H. Guarantor and Non-Guarantor Subsidiaries (Continued)
Combined Combined
Guarantor Non-Guarantor
December 31, 2001: The Company Subsidiaries Subsidiaries Eliminations Total
-------------------------------------------------------------------------------
Current assets:
Cash and cash equivalents $ 12,548 $ 1,518 $ 606 $ - $ 14,672
Accounts receivable, net - 23,107 8,949 (5) 32,051
Inventories - 23,816 2,756 - 26,572
Other current assets 107 1,991 318 (670) 1,746
-------------------------------------------------------------------------------
Total current assets 12,655 50,432 12,629 (675) 75,041
Property, plant, and
equipment, net - 9,433 3,661 - 13,094
Goodwill, net - 16,232 568 - 16,800
Investment in subsidiaries 60,009 17,132 - (77,141) -
Deferred financing costs 2,729 - - - 2,729
Deferred income taxes 7,262 - - (6,543) 719
Other assets 35 2,466 55 (2,167) 389
-------------------------------------------------------------------------------
Total assets $ 82,690 $ 95,695 $ 16,913 $ (86,526) $ 108,772
===============================================================================
Current liabilities:
Notes payable $ - $ 15,948 $ 898 $ (540) $ 16,306
Trade accounts payable 227 14,081 4,630 (42) 18,896
Accrued compensation and
employee benefits - 4,201 935 - 5,136
Accrued interest 3,300 - - - 3,300
Deferred income taxes - 1,564 - (328) 1,236
Other accrued liabilities 658 10,057 5,802 (7,331) 9,186
Current maturities of
long-term obligations - 1,284 15 - 1,299
-------------------------------------------------------------------------------
Total current liabilities 4,185 47,135 12,280 (8,241) 55,359
Senior Notes 120,000 - - - 120,000
Other long-term obligations - 2,240 1,107 (1,089) 2,258
Stockholder's equity
(deficit) (41,495) 46,320 3,526 (77,196) (68,845)
-------------------------------------------------------------------------------
Total liabilities and
stockholder's equity
(deficit) $ 82,690 $ 95,695 $ 16,913 $ (86,526) $ 108,772
===============================================================================
10
Continental Global Group, Inc.
Notes to Condensed Consolidated Financial Statements (Unaudited)
September 30, 2002
H. Guarantor and Non-Guarantor Subsidiaries (Continued)
Summarized consolidating statements of operations for the three months and nine
months ended September 30, 2002 and 2001, 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 September 30, 2002:
Net sales $ - $ 42,445 $ 10,138 $ - $ 52,583
Cost of products sold - 35,688 8,984 - 44,672
------------- ------------- --------------- ------------- -------------
Gross profit - 6,757 1,154 - 7,911
Total operating expenses 241 4,346 1,063 - 5,650
------------- ------------- --------------- ------------- -------------
Operating income (loss) (241) 2,411 91 - 2,261
Interest expense 3,440 437 25 - 3,902
Interest income (47) - - - (47)
Miscellaneous, net 3 44 (3) - 44
------------- ------------- --------------- ------------- -------------
Income (loss) before income taxes (3,637) 1,930 69 - (1,638)
Income tax expense (benefit) (879) 879 - - -
------------- ------------- --------------- ------------- -------------
Net income (loss) $ (2,758) $ 1,051 $ 69 $ - $ (1,638)
============= ============= =============== ============= =============
Combined Combined
Guarantor Non-Guarantor
The Company Subsidiaries Subsidiaries Eliminations Total
------------- ------------- --------------- ------------- -------------
Three months ended September 30, 2001:
Net sales $ - $ 44,743 $ 7,902 $ (18) $ 52,627
Cost of products sold - 38,481 6,927 (18) 45,390
------------- ------------- --------------- ------------- -------------
Gross profit - 6,262 975 - 7,237
Total operating expenses 160 4,430 928 - 5,518
------------- ------------- --------------- ------------- -------------
Operating income (loss) (160) 1,832 47 - 1,719
Interest expense 3,442 460 60 - 3,962
Interest income (142) - - - (142)
Miscellaneous, net (2) 179 (16) - 161
------------- ------------- --------------- ------------- -------------
Income (loss) before income taxes (3,458) 1,193 3 - (2,262)
Income tax expense (benefit) (1,383) 1,029 - - (354)
------------- ------------- --------------- ------------- -------------
Net income (loss) $ (2,075) $ 164 $ 3 $ - $ (1,908)
============= ============= =============== ============= =============
Combined Combined
Guarantor Non-Guarantor
The Company Subsidiaries Subsidiaries Eliminations Total
------------- ------------- --------------- ------------- -------------
Nine months ended September 30, 2002:
Net sales $ - $ 116,402 $ 27,827 $ - $ 144,229
Cost of products sold - 95,794 24,156 - 119,950
------------- ------------- --------------- ------------- -------------
Gross profit - 20,608 3,671 - 24,279
Total operating expenses 692 13,401 3,108 - 17,201
------------- ------------- --------------- ------------- -------------
Operating income (loss) (692) 7,207 563 - 7,078
Interest expense 10,320 1,199 54 - 11,573
Interest income (151) - - - (151)
Miscellaneous, net 3 73 9 - 85
------------- ------------- --------------- ------------- -------------
Income (loss) before income taxes (10,864) 5,935 500 - (4,429)
Income tax expense (benefit) (2,715) 2,375 - - (340)
------------- ------------- --------------- ------------- -------------
Net income (loss) $ (8,149) $ 3,560 $ 500 $ - $ (4,089)
============= ============= =============== ============= =============
11
Continental Global Group, Inc.
Notes to Condensed Consolidated Financial Statements (Unaudited)
September 30, 2002
H. Guarantor and Non-Guarantor Subsidiaries (Continued)
Combined Combined
Guarantor Non-Guarantor
The Company Subsidiaries Subsidiaries Eliminations Total
------------- ------------- --------------- ------------- -------------
Nine months ended September 30, 2001:
Net sales $ - $ 119,490 $ 24,011 $ (18) $ 143,483
Cost of products sold - 99,508 20,631 (18) 120,121
------------- ------------- --------------- ------------- -------------
Gross profit - 19,982 3,380 - 23,362
Total operating expenses 719 13,105 2,690 - 16,514
------------- ------------- --------------- ------------- -------------
Operating income (loss) (719) 6,877 690 - 6,848
Interest expense 10,325 1,415 162 - 11,902
Interest income (546) - - - (546)
Miscellaneous, net 698 318 (25) - 991
------------- ------------- --------------- ------------- -------------
Income (loss) before income taxes (11,196) 5,144 553 - (5,499)
Income tax expense (benefit) (4,476) 3,191 - - (1,285)
------------- ------------- --------------- ------------- -------------
Net income (loss) $ (6,720) $ 1,953 $ 553 $ - $ (4,214)
============= ============= =============== ============= =============
Summarized consolidating cash flow statements for the nine months ended
September 30, 2002 and 2001, 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
------------- ------------- --------------- ------------- -------------
Nine months ended September 30, 2002:
Net cash provided by (used in)
operating activities $ (7,574) $ 12,062 $ (301) $ 16 $ 4,203
Investing activities:
Purchases of property, plant, and
equipment - (637) (366) - (1,003)
Proceeds from sale of property,
plant, and equipment - 29 15 - 44
------------- ------------- --------------- ------------- -------------
Net cash used in investing activities - (608) (351) - (959)
------------- ------------- --------------- ------------- -------------
Financing activities:
Net increase (decrease) in
borrowings on notes payable - (2,018) 1,449 - (569)
Principal payments on long-term
obligations - (748) (21) - (769)
Distributions for interest on
senior notes 5,450 (5,450) - - -
Intercompany loan activity - 1,462 (1,462) - -
------------- ------------- --------------- ------------- -------------
Net cash provided by (used in)
financing activities 5,450 (6,754) (34) - (1,338)
Exchange rate changes on cash - (57) 82 (16) 9
------------- ------------- --------------- ------------- -------------
Increase (decrease) in cash and cash
equivalents (2,124) 4,643 (604) - 1,915
Cash and cash equivalents at beginning
of period 12,548 1,518 606 - 14,672
------------- ------------- --------------- ------------- -------------
Cash and cash equivalents at end of
period $ 10,424 $ 6,161 $ 2 $ - $ 16,587
============= ============= =============== ============= =============
12
Continental Global Group, Inc.
Notes to Condensed Consolidated Financial Statements (Unaudited)
September 30, 2002
H. Guarantor and Non-Guarantor Subsidiaries (Continued)
Combined Combined
Guarantor Non-Guarantor
The Company Subsidiaries Subsidiaries Eliminations Total
------------- ------------- --------------- ------------- -------------
Nine months ended September 30, 2001:
Net cash provided by (used in)
operating activities $ (7,200) $ 7,549 $ (727) $ 17 $ (361)
Investing activities:
Purchases of property, plant, and
equipment - (638) (162) - (800)
Proceeds from sale of property,
plant, and equipment - 54 42 - 96
Acquisition of business - (1,607) - - (1,607)
------------- ------------- --------------- ------------- -------------
Net cash used in investing activities - (2,191) (120) - (2,311)
------------- ------------- --------------- ------------- -------------
Financing activities:
Net increase in borrowings on notes
payable - 2,238 782 - 3,020
Principal payments on long-term
obligations - (761) (36) - (797)
Distributions for interest on
senior notes 6,373 (6,373) - - -
Intercompany loan activity - (117) 117 - -
------------- ------------- --------------- ------------- -------------
Net cash provided by (used in)
financing activities 6,373 (5,013) 863 - 2,223
Exchange rate changes on cash - 12 (15) (17) (20)
------------- ------------- --------------- ------------- -------------
Increase (decrease) in cash and cash
equivalents (827) 357 1 - (469)
Cash and cash equivalents at beginning
of period 16,257 565 120 - 16,942
------------- ------------- --------------- ------------- -------------
Cash and cash equivalents at end of
period $ 15,430 $ 922 $ 121 $ - $ 16,473
============= ============= =============== ============= =============
I. Goodwill and Other Intangibles
In July 2001, the Financial Accounting Standards Board (FASB) issued Statement
of Financial Accounting Standards (SFAS) No. 142, "Goodwill and Other Intangible
Assets". SFAS No. 142 was effective January 1, 2002 and applies to all goodwill
and other intangible assets recognized in the Company's statement of financial
position, regardless of when those assets were initially recognized. Under SFAS
No. 142, goodwill and intangible assets deemed to have indefinite lives are no
longer amortized but are subject to annual impairment tests. Other intangible
assets will continue to be amortized over their useful lives.
13
Continental Global Group, Inc.
Notes to Condensed Consolidated Financial Statements (Unaudited)
September 30, 2002
I. Goodwill and Other Intangibles (Continued)
On January 1, 2002, the Company adopted SFAS No. 142. This Statement requires
goodwill and other intangibles that have indefinite lives to be tested for
impairment at least annually, using a two step process. The first step
identifies if there is impairment using a fair-value-based test and the second
step determines the amount of the impairment. Step one, which was completed in
the second quarter of 2002, indicated potential impairment and, therefore, step
two is in process to determine the amount of the impairment. Based on findings
from step one, the Company expects to record a non-cash impairment write-down
related to the goodwill from the acquisition of the Company's Australian
subsidiary, which is part of the Company's conveyor equipment segment. This
transition adjustment, which will be recorded in the fourth quarter of 2002 upon
completion of the step two analysis, will be reported as a cumulative effect of
a change in accounting principle.
The following table reflects the consolidated results adjusted as though the
adoption of SFAS No. 142 had occurred in the first quarter of 2001:
Three months ending Nine months ending
September 30 September 30
2002 2001 2002 2001
-------------------------------------------------------------------
Reported net loss $ (1,638,573) $ (1,908,439) $ (4,088,977) $ (4,213,806)
Goodwill amortization, net of tax - 97,289 - 293,098
-------------------------------------------------------------------
Adjusted net loss $ (1,638,573) $ (1,811,150) $ (4,088,977) $ (3,920,708)
===================================================================
The carrying amounts and related accumulated amortization balances of the
Company's other intangible assets as of September 30, 2002 and December 31, 2001
are listed below:
September 30, 2002 December 31, 2001
Carrying Accumulated Carrying Accumulated
Amount Amortization Amount Amortization
---------------- ----------------- ---------------- -----------------
Amortized intangible assets $ 493,442 $ (360,559) $ 486,848 $ (264,976)
Unamortized intangible assets 139,026 - 138,386 -
The change in goodwill reflected on the balance sheet from December 31, 2001 to
September 30, 2002 resulted entirely from foreign currency translation.
Unamortized intangible assets consist primarily of intangible assets related to
a minimum pension liability for the Company's pension plan. Estimated
amortization expense related to other intangible assets for each of the next
five fiscal years is:
2002 $ 113,146
2003 27,810
2004 26,360
2005 26,360
2006 17,117
----------------
Total $ 210,793
================
14
Continental Global Group, Inc.
Notes to Condensed Consolidated Financial Statements (Unaudited)
September 30, 2002
J. New Accounting Pronouncements
In June 2002, the FASB issued SFAS No. 146, "Accounting for Costs Associated
with Exit or Disposal Activities," which addresses financial accounting and
reporting for costs associated with exit or disposal activities. The provisions
of this Statement, which is effective for exit or disposal activities that are
initiated after December 31, 2002, is not expected to have a material impact on
the Company's financial position, results of operations, or cash flows.
15
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 28, 2002.
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 (i)
Continental Conveyor & Equipment Pty. Ltd., an Australian holding company that
owns all of the capital stock of four Australian operating companies; (ii)
Continental Conveyor Ltd., a U.K. operating company; and (iii) Continental MECO
(Pty.) Ltd., a South African operating company. In July 2001, the Company
acquired certain assets in Alabama from Lippert Tire & Axle, Inc ("Lippert
acquisition"). The Company's existing Alabama operations of its manufactured
housing products segment have been combined with the Lippert operations.
Mr. C. E. Bryant, Jr. has announced his retirement as of December 31, 2002.
Effective November 4, 2002, the Company's Board of Directors appointed Mr.
Robert W. Hale as President and CEO to succeed Mr. Bryant. Mr. Bryant will
continue as a consultant to the Company.
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 nine months
ended September 30, 2002 and 2001.
Three months ended Nine months ended
September 30 September 30
-------------------------- -------------------------
2002 2001 2002 2001
Net sales 100.0% 100.0% 100.0% 100.0%
Cost of products sold 85.0 86.2 83.2 83.7
Gross profit 15.0 13.8 16.8 16.3
SG&A expenses 10.4 10.0 11.5 10.9
Management fee 0.2 0.2 0.3 0.3
Amortization expense 0.1 0.3 0.1 0.3
Operating income 4.3 3.3 4.9 4.8
16
Three months ended September 30, 2002, compared to three months ended September
30, 2001:
Net Sales
- ---------
Net sales were approximately $52.6 million for both the three months ended
September 30, 2002 and 2001. In the domestic operations of the Company's
conveyor equipment segment, net sales for the quarter decreased $5.6 million due
to continued lower capital spending by the Company's major customers in the coal
industry. In the foreign operations of the Company's conveyor equipment segment,
net sales for the quarter increased $3.2 million. This increase was primarily
attributable to increased sales at the Company's Australian and United Kingdom
subsidiaries resulting from the shipment of new mining projects in the backlog
at June 30, 2002. Net sales for the quarter in the Company's manufactured
housing segment increased $2.4 million due to the Lippert acquisition and
shipments to new customers.
Gross Profit
- ------------
Gross profit for the quarter increased $0.7 million, or 10%, from $7.2 million
in 2001 to $7.9 million in 2002. Gross profit in the domestic operations of the
Company's conveyor equipment segment decreased $1.4 million due to lower sales
volume. Gross profit in the foreign operations of the Company's conveyor
equipment segment increased $1.5 million due to higher sales volume and improved
margins at the Company's Australian subsidiary. Gross profit in the Company's
manufactured housing segment increased $0.5 million due to increased sales and
improved margins resulting from the Lippert acquisition and the subsequent
consolidation in the fourth quarter of 2001 of the existing operations into the
acquired facility. Gross profit in the other segment increased $0.1 million.
Gross profit as a percentage of sales increased from 13.8% in 2001 to 15.0% in
2002. This increase resulted from improved margins in the Australian subsidiary
and the manufactured housing segment. In addition to improved margins on
contracts, the gross profit percentage in the Australian subsidiary increased
from 2001 to 2002 due to physical inventory adjustments made in 2001 that did
not recur in 2002.
SG&A Expenses
- -------------
SG&A expenses for the quarter increased $0.2 million, or 4%, from $5.2 million
in 2001 to $5.4 million in 2002. The increase occurred in the foreign operations
of the Company's conveyor equipment segment and was primarily due to increased
marketing and insurance costs.
Operating Income
- ----------------
Operating income for the quarter increased $0.5 million, or 29%, from $1.7
million in 2001 to $2.2 million in 2002. This increase resulted from the $0.7
million increase in gross profit offset by the $0.2 million increase in SG&A
expenses.
Nine months ended September 30, 2002, compared to nine months ended September
30, 2001:
Net Sales
- ---------
Net sales for the nine-month period increased $0.7 million, or less than 1%,
from $143.5 million in 2001 to $144.2 in 2002. Net sales in the domestic
operations of the Company's conveyor equipment segment decreased $18.6 million
due to lower capital spending by the Company's major customers in the coal
industry. Net sales in the foreign operations of the Company's conveyor
equipment segment increased $7.1 million. This increase in sales occurred in
Australia and the United Kingdom and was the result of new mining projects for
conveyor equipment. Net sales in the Company's manufactured housing segment
increased $12.4 million due to the Lippert acquisition and shipments to new
customers. Net sales in the other segment decreased $0.2 million.
17
Gross Profit
- ------------
Gross profit for the nine-month period increased $0.9 million, or 4%, from $23.4
million in 2001 to $24.3 million in 2002. Gross profit in the domestic
operations of the Company's conveyor equipment segment decreased $3.8 million
due to lower sales volume. Gross profit in the foreign operations of the
Company's conveyor equipment segment increased $3.2 million due to increased
sales and improved margins at the Company's Australian subsidiary. Gross profit
in the Company's manufactured housing segment increased $1.5 million due to
increased sales and improved profit margins resulting from the Lippert
acquisition and the subsequent consolidation of the existing operations into the
acquired facility.
SG&A Expenses
- -------------
SG&A expenses for the nine-month period increased $1.0 million, or 6%, from
$15.6 million in 2001 to $16.6 million in 2002. SG&A expenses in the domestic
and foreign operations of the Company's conveyor equipment segment increased
$0.4 million and $0.6 million, respectively. The increase in the domestic
operations resulted from higher advertising and travel expenses and increased
general liability insurance costs. The increase in the foreign operations
resulted from increased marketing and insurance costs.
Operating Income
- ----------------
Operating income for the nine-month period increased $0.3 million, or 4%, from
$6.8 million in 2001 to $7.1 million in 2002. This increase resulted from the
$0.9 million increase in gross profit and a $0.4 million decrease in
amortization expense, offset by the $1.0 million increase in SG&A expenses.
Backlog
- -------
Backlog at September 30, 2002 was $37.2 million, a decrease of $4.1 million, or
10%, from $41.3 million at December 31, 2001 and a decrease of $17.8 million or
32%, from $55.0 million at June 30, 2002. The decrease from June was
attributable to decreases of $11.1 million and $6.7 million in the domestic and
foreign operations of the Company's conveyor equipment segment, respectively.
Management believes that approximately 55% of the backlog will be shipped in
2002.
Liquidity and Capital Resources
Net cash provided by (used in) operating activities was $4.2 million and $(0.4)
million for the nine months ending September 30, 2002 and 2001, respectively.
The net cash provided by operating activities in 2002 resulted from a net loss
of $4.1 million offset by a net decrease in operating assets and liabilities of
$6.5 million and non-cash expenses such as depreciation, amortization, and
deferred income taxes of $1.8 million. The net cash used in operating activities
in 2001 resulted from a net loss of $4.2 million offset by a net decrease in
operating assets and liabilities of $2.6 million and non-cash expenses of $1.2
million.
Net cash used in investing activities was $1.0 million and $2.3 million for the
nine months ending September 30, 2002 and 2001, respectively. The net cash used
in investing activities in 2002 represents net purchases of property, plant, and
equipment. The net cash used in investing activities in 2001 resulted from net
purchases of property, plant, and equipment of $0.7 and the acquisition of a
business for $1.6 million.
18
Net cash provided by (used in) financing activities was $(1.3) million and $2.2
million for the nine months ending September 30, 2002 and 2001, respectively.
Net cash used in financing activities in 2002 represents a net decrease in
borrowings on notes payable of $0.6 million and principal payments on long-term
obligations of $0.7 million. Net cash provided by financing activities in 2001
resulted from a net increase in borrowings on notes payable of $3.0 million
offset by principal payments on long-term obligations of $0.8 million.
The Company's primary capital requirements consist of capital expenditures and
debt service. The Company expects current financial resources, existing lines of
credit, and funds from operations to be adequate to meet anticipated cash
requirements. At September 30, 2002, the Company had cash and cash equivalents
of approximately $16.6 million and approximately $9.1 million available for use
under its domestic credit facility, representing approximately $25.7 million of
liquidity.
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 (decreases) to stockholder's equity
(deficit) of approximately $0.6 million and $(1.1) million for the nine months
ended September 30, 2002 and 2001, respectively.
New Accounting Pronouncements
In July 2001, the Financial Accounting Standards Board (FASB) issued Statement
of Financial Accounting Standards (SFAS) No. 142, "Goodwill and Other Intangible
Assets". SFAS No. 142 was effective January 1, 2002 and applies to all goodwill
and other intangible assets recognized in the Company's statement of financial
position, regardless of when those assets were initially recognized. Under SFAS
No. 142, goodwill and intangible assets deemed to have indefinite lives are no
longer amortized but are subject to annual impairment tests. Other intangible
assets will continue to be amortized over their useful lives.
On January 1, 2002, the Company adopted SFAS No. 142. This Statement requires
goodwill and other intangibles that have indefinite lives to be tested for
impairment at least annually, using a two step process. The first step
identifies if there is impairment using a fair-value-based test and the second
step determines the amount of the impairment. Step one, which was completed in
the second quarter of 2002, indicated potential impairment and, therefore, step
two is in process to determine the amount of the impairment. Based on findings
from step one, the Company expects to record a non-cash impairment write-down
related to the goodwill from the acquisition of the Company's Australian
subsidiary, which is part of the Company's conveyor equipment segment. This
transition adjustment, which will be recorded in the fourth quarter of 2002 upon
completion of the step two analysis, will be reported as a cumulative effect of
a change in accounting principle.
19
In June 2002, the FASB issued SFAS No. 146, "Accounting for Costs Associated
with Exit or Disposal Activities," which addresses financial accounting and
reporting for costs associated with exit or disposal activities. The provisions
of this Statement, which is effective for exit or disposal activities that are
initiated after December 31, 2002, is not expected to have a material impact on
the Company's financial position, results of operations, or cash flows.
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, all of which are
difficult to predict and many of which are beyond the control of the Company,
that could cause actual results of the Company to differ materially from those
matters expressed in or implied by such forward-looking statements.
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) 2002 2003 2004 2005 2006 Thereafter Total 9/30/02
- ---------------------------------------------------------------------------------------------------------
Long-Term Obligations,
including current
portion
Fixed Rate $ - $ - $ - $ - $ - $ 120,000 $ 120,000 $ 66,000
Average interest rate 11% 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
Within the 90-day period prior to the date of this report, the Company carried
out an evaluation, under the supervision 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 have been no significant changes in the Company's internal
controls or in other factors that could significantly affect internal controls
subsequent to the time of such evaluation.
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
September 30, 2002.
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: November 13, 2002
23
CERTIFICATIONS
I, Robert W. Hale, and I, Jimmy L. Dickinson, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Continental
Global Group, Inc.;
2. Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect to
the period covered by this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and
cash flows of the registrant as of, and for, the periods presented in
this quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and
have:
a) designed such disclosure controls and procedures to ensure
that material information relating to the registrant,
including its consolidated subsidiaries, is made known to us
by others within those entities, particularly during the
period in which this quarterly report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to
the filing date of this quarterly report (the "Evaluation
Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based
on our evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the
audit committee of registrant's board of directors (or persons
performing the equivalent functions):
a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the
registrant's ability to record, process, summarize and report
financial data and have identified for the registrant's
auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management
or other employees who have a significant role in the
registrant's internal controls; and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation,
including any corrective actions with regard to significant
deficiencies and material weaknesses.
24
Signature Title Date
/s/ Robert W. Hale President and Chief Executive Officer November 13, 2002
- -----------------------------------------
Robert W. Hale
/s/ Jimmy L. Dickinson Vice President and Chief Financial Officer November 13, 2002
- -----------------------------------------
Jimmy L. Dickinson
25
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.
10.2 Management Agreement, dated as of April 1, 1997, between *
Continental Global Group, Inc. and Nesco, Inc.
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.