-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, P8RClWb5t2u89DoH94qODK3IZJYKs05MhVEkNNaDDZDmzac2/6pGw2KFIFHVSsmb /oOoMvN38jvRU6W4pYOPWw== 0000907098-95-000011.txt : 19950517 0000907098-95-000011.hdr.sgml : 19950516 ACCESSION NUMBER: 0000907098-95-000011 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19950331 FILED AS OF DATE: 19950512 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: MLX CORP /MI CENTRAL INDEX KEY: 0000064247 STANDARD INDUSTRIAL CLASSIFICATION: WHOLESALE-HARDWARE & PLUMBING & HEATING EQUIPMENT & SUPPLIES [5070] IRS NUMBER: 380811650 STATE OF INCORPORATION: MI FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-13198 FILM NUMBER: 95537367 BUSINESS ADDRESS: STREET 1: 1000 CENTER PLACE CITY: NORCROSS STATE: GA ZIP: 30093 BUSINESS PHONE: 4047980677 MAIL ADDRESS: STREET 1: 1000 CENTER PLACE CITY: NORCROSS STATE: GA ZIP: 30093 FORMER COMPANY: FORMER CONFORMED NAME: MCLOUTH STEEL CORP DATE OF NAME CHANGE: 19850212 10-Q 1 CONFORMED SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q Quarterly Report Under Section 13 or 15(d) of the Securities Exchange Act of 1934 For the Quarter ended March 31, 1995 Commission File Number I-4795 MLX CORP. (Exact name of registrant as specified in its charter) Georgia 38-0811650 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 1000 Center Place, Norcross, Georgia 30093 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (404)798-0677 Indicate by check mark whether the Registrant (1) has filed all reports to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirement for the past 90 days. Yes XX No The number of shares outstanding of the Registrant's Common Stock, par value $.01, as of the close of business on March 31, 1995 was 2,539,550. PART I - FINANCIAL INFORMATION CONSOLIDATED BALANCE SHEETS (UNAUDITED) MLX Corp. and Subsidiaries March 31 December 31 1995 1994 ASSETS Current Assets Cash and cash equivalents $ 646 $ 1,087 Accounts receivable, net 10,401 9,638 Inventories: Raw materials and work-in-process 7,296 7,328 Manufactured goods 1,936 2,353 Total inventories 9,232 9,681 Prepaid expenses 979 958 Total Current Assets 21,258 21,364 Property, Plant & Equipment, net 13,401 13,362 Intangible Assets, net 2,155 2,288 Other Assets 509 510 TOTAL ASSETS $37,323 $37,524
CONSOLIDATED BALANCE SHEETS (UNAUDITED) MLX Corp. and Subsidiaries March 31 December 31 1995 1994 LIABILITIES AND SHAREHOLDERS' EQUITY Current Liabilities Accounts payable $ 4,630 $ 4,629 Accrued compensation and benefits 2,047 2,965 Other accrued liabilities and expenses 1,754 1,630 Accrued taxes 819 815 Dividends payable on Series A Preferred Stock 241 212 Current portion of debt 183 205 Total Current Liabilities 9,674 10,456 Long-Term Debt 13,432 13,960 Other Long-Term Liabilities 2,377 2,379 Shareholders' Equity Preferred stock, no par value - authorized 1,500,000 shares, none outstanding - - Preferred stock, Series A, $30 par value - authorized 500,000 shares, 264,000 shares outstanding 7,324 7,265 Common stock, $.01 par value - authorized 38,500,000 shares, 2,540,000 shares outstanding 25 25 Capital in excess of par value 62,352 61,874 Retained earnings deficit since December 31, 1984 (56,438) (57,147) 13,263 12,017 Less other equity adjustments (1,423) (1,288) Total Shareholders' Equity 11,840 10,729 TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $37,323 $37,524 Dollars in thousands See notes to consolidated financial statements
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) MLX Corp. and Subsidiaries For the Quarter Ended 1995 1994 Net Sales $18,002 $14,995 Costs and Expenses: Costs of products sold 13,902 11,244 Selling, general and administrative expenses 1,825 1,773 Amortization of goodwill and organization costs 57 57 15,784 13,074 Operating Earnings 2,218 1,921 Other Income (Expense): Interest expense (384) (382) Other income (expense) (53) 113 Earnings before Income Taxes 1,781 1,652 Provision for Income Taxes: Federal income taxes due and payable (30) (30) Charge in lieu of federal income taxes (492) (400) Foreign, state and local income taxes (265) (176) Net Earnings 994 1,046 Dividends and accretion on preferred stock (300) (246) Earnings applicable to common stock $ 694 $ 800 Earnings per Share $ 0.27 $ 0.31 Average Outstanding Common Shares and Dilutive Options 2,574 2,614 Dollars in thousands (except per share data) See notes to consolidated financial statements
CONSOLIDATED STATEMENTS OF CASH FLOW (UNAUDITED) MLX Corp. and Subsidiaries For the Quarter Ended March 31 1995 1994 Cash Flows From Operating Activities: Net Earnings $ 994 $1,046 Adjustments to reconcile earnings to net cash provided by (used in) operating activities: Charge in lieu of federal income taxes 492 400 Depreciation and amortization 589 558 Change in operating assets and liabilities: Accounts receivable (763) (724) Inventories and prepaid expenses 428 (1,206) Accounts payable and accrued expenses (782) 39 Other (39) (428) Net cash provided by (used in) operating activities 919 (315) Cash Flows From Investing Activities: Purchase of property, plant and equipment (620) (372) Net cash used in investing activities (620) (372) Cash Flows From Financing Activities: Net proceeds under revolving credit agreement (528) 1,487 Payments of dividends on Series A Preferred Stock (212) (638) Net cash provided by (used in) financing activities (740) 849 Net increase (decrease) in cash and cash equivalents (441) 162 Cash and cash equivalents at January 1 1,087 985 Cash and cash equivalents at March 31 $ 646 $ 1,147 Supplemental Cash Flow Disclosure: Federal taxes paid on income $ 0 $ 90 Interest paid on debt obligations $ 338 $ 339 Dollars in thousands See notes to consolidated financial statements
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) MLX Corp. and Subsidiaries The Consolidated Financial Statements have been prepared by the Registrant without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in consolidated financial statements prepared in accordance with generally accepted accounting principles have been omitted pursuant to those rules and regulations. These financial statements should be read in conjunction with the Consolidated Financial Statements and notes thereto included in the Registrant's Annual Report on Form 10-K for the year ended December 31, 1994. In the opinion of the Registrant, the accompanying Consolidated Financial Statements contain all adjustments (consisting of only normal recurring accruals) necessary to present fairly the financial position as of March 31, 1995 and December 31, 1994, and the results of operations and cash flows for the quarters ended March 31, 1995 and 1994. Note A - Income Taxes At January 1, 1995, the Registrant had available net operating loss carry forwards of approximately $337 million which are available to offset future taxable income for federal income tax purposes. Accordingly, the Company has federal tax liability only for Alternative Minimum Tax amounts and the charge in lieu of federal income taxes included in the statements of operations for the quarters ended March 31, 1994 and 1995 is not accruable or payable. The following table illustrates the effect of this pro forma charge on the Company's earnings applicable to common stock and earnings per share for the respective quarter (in thousands, except per share data). March 31 1995 1994 Earnings applicable to common shareholders $ 694 $ 800 Charge in lieu of federal income taxes which are not accruable or payable 492 400 Total $1,186 $1,200 Total Earnings per share $ .46 $ .46 NOTE B - PROPOSED SALE OF S.K. WELLMAN On April 10, 1995 the Company entered into a stock purchase agreement (the Agreement) with The Hawk Group of Companies, Inc. for the sale of all the common stock of S.K. Wellman for $60 million, which includes certain amounts related to the repayment or assumption of debt and capital leases by the purchaser. The sale is subject to the majority vote of the common shareholders of MLX Corp. and will be voted on at the annual meeting of such shareholders expected to be held in late June, 1995. The Company's Board of Directors has recommended approval of the proposed sale and has received a fairness opinion from Donaldson, Lufkin & Jenrette Securities Corporation to the effect that the consideration to be received by the Company in the transaction is fair to the Company from a financial point of view. If the transaction is approved by the MLX shareholders and consummated thereafter, the Company's investment in Wellman will be exchanged for cash, and the assets and liabilities of S.K. Wellman will cease to be a part of the consolidated financial statements of MLX. The following table shows the unaudited pro forma effect of this transaction on the historical balance sheet of the Company at March 31, 1995 as if such a transaction, including expenses and income taxes associated with the sale, had occurred on that date (in thousands): Historical Pro Forma Balance Sheet Disposition of Other Balance Sheet March 31, 1995 S.K. Wellman Adjustments March 31, 1995 Cash $ 646 $ 44,756 $(10,267) $ 35,135 Other current assets 20,612 (20,612) Property, plant and equipment 13,401 (13,397) 4 Intangible assets 2,155 (2,155) Other assets - escrow fund 4,000 4,000 Other assets 509 (509) $37,323 $12,083 $(10,267) $ 39,139 Current liabilities $9,674 $(6,611) $ (285) $ 2,778 Long-term debt 13,432 (10,957) (2,475) Other long-term liabilities 2,377 (2,377) Shareholders' equity 11,840 32,028 (7,507) 36,361 $37,323 $12,083 $(10,267) $39,139
All of the Company's revenues are attributable to the Wellman business. In addition, Wellman had earnings before income taxes of $2.1 million for the quarter ended March 31, 1995. The Agreement contains certain representations and warranties made by the Company with respect to matters such as environmental status, income tax compliance, etc. In this connection, an escrow fund totaling $4 million of the proceeds will be deposited with a trustee bank for a period of 15 months following the transaction to fund any claim against such representations and warranties. The Company's total liability under such representation and warranties is limited to $5 million. MLX will also be required to deposit with the trustee bank 85% of MLX's estimate of certain tax liabilities that may arise from the sale. Such amount has not been determined and accordingly, has not been reflected above in the escrow fund balance. In connection with the sale, the Company plans to repay its Zero Coupon Bonds and Variable Rate Subordinated Notes and redeem its Series A Preferred Stock including accrued interest and dividends. These repayments, redemptions and adjustments relating thereto are reflected in the above pro forma balance sheet. Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Seasonality: Sales of the Registrant's subsidiary, S.K. Wellman, are generally not seasonal in nature, however, due to the extended holiday shutdowns of its major customers, Wellman does experience a modest reduction in sales volume during the third quarter for its European operations, and during the fourth quarter for both its North American and European operations. Operations: For the quarter ended March 31, 1995, net sales of the Registrant were $18.0 million and operating earnings were $2.2 million. Comparatively, the Registrant recorded net sales of $15.0 million and operating earnings of $1.9 million in the first three months of 1994. The increase in sales is due to higher demand by domestic original equipment manufacturers and overseas customers of the Registrant's Italian facility and higher domestic sales of aircraft components. Gross margins for the first quarter of 1995 were 22.8% compared to 25.0% in 1994. The decrease in margin percentage resulted from increases in raw material commodity prices (principally steel), strategic price concessions and outsourcing due to capacity restraints. Selling, general and administrative expenses were $1.83 millionin the first quarter of 1995 compared to $1.77 million for the first quarter of 1994. This increase of $52 thousand is due generally to higher occupancy and selling expenses. Interest expense for the quarter ended March 31, 1995 was $384,000 compared to $382,000 for the comparable quarter in 1994. This resulted from lower overall borrowing levels, which were offset by the impact of higher interest rates linked to the prime rate. Liquidity and Capital Resources: At March 31, 1995, the Registrant's consolidated working capital amounted to $11.7 million compared to $11.4 million at December 31, 1994. The 1995 working capital balance included higher trade receivables due to increasing sales and higher trade accounts payable resulting from higher production requirements. The Registrant had available unused revolving lines of credit of an additional $3.4 million at March 31, 1995. In addition, the Company has a capital expenditure line with a maximum borrowing limit of $2.0 million during the two year period ending January 14, 1997. At March 31, 1995, the Company had borrowed an aggregate of $450 thousand under this line. The Registrant believes that its current financial resources and anticipated cash flows from operations are adequate to meet its projected operating needs in 1995, as the Company presently exists. Proposed Sale of S.K. Wellman: On April 10, 1995, the Company entered into an agreement for the purchase and sale of all of the capital stock of S.K. Wellman Limited, Inc. for an aggregate purchase price of $60 million, which includes certain amounts related to the repayment or assumption of debt and capital leases by the purchaser. Net cash proceeds to the Company are estimated to be approximately $48.8 million after such adjustments and estimated transaction expenses. The Company further plans, in connection with the proposed sale, to repay its outstanding Zero Coupon Bonds and Variable Rate Subordinated Notes and redeem its Series A Preferred Stock including any accrued interest and dividends. After these repayments, the transaction is expected to net approximately $36 million in cash to the Company. The Company's plans and intentions following the consummation of the sale are set forth in the Proxy Statement pertaining to the 1995 annual meeting of shareholders. PART II - OTHER INFORMATION Item 1. Legal Proceedings None. Item 2. Changes in Securities None. Item 3. Defaults Upon Senior Securities None. Item 4. Submission of Matters to a Vote of Security Holders None. Item 5. Other Information None. Item 6. Exhibits and Reports on Form 8-K (a) Exhibit 2.18 - Agreement for purchase and sale of the capital stock of S.K. Wellman Ltd, Inc. dated April 10, 1995 (incorporated herein by reference to the Registrant's Proxy Statement filed with the commission for the 1995 annual meeting of the Registrant's shareholders). Exhibit 27* - Financial Data Schedule (b) Reports: NONE * Filed with this report. SIGNATURES Pursuant to the requirements of Securities Exchange Act of 1934, the Registrant has duly caused the Report to be signed on its behalf by the undersigned hereunto duly authorized. Date: May 5, 1995 MLX Corp. (Registrant) By: /s/ BRIAN R. ESHER By: /s/THOMAS C. WAGGONER Brian R. Esher Thomas C. Waggoner Chief Executive Officer Chief Financial Officer (Duly Authorized Officer) (Principal Financial Officer) EX-27 2
5 1,000 3-MOS DEC-31-1995 MAR-31-1995 646 0 10,401 0 9,232 21,258 28,011 14,610 37,323 9,674 0 4,516 0 7,324 0 37,323 18,002 18,002 13,902 15,784 53 0 384 1,781 787 994 0 0 0 994 0.27 0.27
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