0000907098-95-000022.txt : 19950815 0000907098-95-000022.hdr.sgml : 19950815 ACCESSION NUMBER: 0000907098-95-000022 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19950630 FILED AS OF DATE: 19950814 SROS: NASD 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: 95563113 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 June 30, 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 June 30, 1995 was 2,578,950. PART I - FINANCIAL INFORMATION CONSOLIDATED BALANCE SHEETS (UNAUDITED) MLX Corp. and Subsidiaries June 30 December 31 1995 1994 ASSETS Current Assets Cash and cash equivalents $ 523 $ 640 Short-term investments 33,719 - Prepaid expenses 5 - Total Current Assets 34,247 640 Equipment, net 6 1 Escrow Funds 5,250 - Net Assets Held for Disposal - 13,232 Other Assets - 1 TOTAL ASSETS $39,503 $13,874
CONSOLIDATED BALANCE SHEETS (UNAUDITED) MLX Corp. and Subsidiaries June 30 December 31 1995 1994 LIABILITIES AND SHAREHOLDERS' EQUITY Current Liabilities Accounts payable $ 300 $ 14 Accrued compensation and benefits 159 201 Other accrued liabilities and expenses 132 207 Accrued taxes 1,654 47 Dividends payable on Series A Preferred Stock - 212 Total Current Liabilities 2,245 681 Long-Term Debt - 2,464 Other Long-Term Liabilities 1,945 - Shareholders' Equity Preferred stock, Series A, $30 par value - authorized 500,000 shares, none outstanding in 1995 and 264,000 shares outstanding in 1994 - 7,265 Common stock, $.01 par value - authorized 38,500,000 shares, 2,579,000 shares outstanding in 1995 and 2,540,000 shares outstanding in 1994 25 25 Capital in excess of par value 72,590 61,874 Retained earnings deficit since December 31, 1984 (37,302) (57,147) 35,313 12,017 Less other equity adjustments - (1,288) Total Shareholders' Equity 35,313 10,729 TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $39,503 $13,874 Dollars in thousands See notes to consolidated financial statements
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) MLX Corp. and Subsidiaries For the Six Months Ended June 30 1995 1994 Net Sale $ - $ - Costs and Expenses: Costs of products sold - - General and administrative expenses 463 522 Other expense 97 87 Loss Before Income Taxes, Discontinued Operations and Extraordinary Item (560) (609) Federal Income Tax Benefit 190 207 Loss before Discontinued Operations and Extraordinary Item (370) (402) Discontinued Operations: Earnings from operations (net of tax of $1,928 in 1995 and $1,380 in 199 2,507 2,241 Gain on disposal of business (net of tax of $13,311) 18,086 - Earnings from Discontinued Operations 20,593 2,241 Extraordinary Gain on Early Retirement of Debt (net of tax of $140) 272 - Net Earnings 20,495 1,839 Dividends and accretion on preferred stock (652) (495) Earnings Applicable to Common Stock $19,843 $1,344 Earnings per Share: Loss from continuing operations (net of dividends and accretion on preferred stock) $ (0.39) $(0.34) Discontinued operations: Earnings from operations 0.96 0.85 Gain on disposal of business 6.88 - Extraordinary gain on early retirement of debt 0.10 - Earnings applicable to common stock $ 7.55 $ 0.51 Average Outstanding Common Shares and Dilutive Options 2,629 2,619 Dollars in thousands (except per share data) See notes to consolidated financial statements
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) MLX Corp. and Subsidiaries For the Quarter Ended June 30 1995 1994 Net Sales $ - $ - Costs and Expenses: Costs of products sold - - General and administrative expenses 263 283 Other expense 49 44 Loss Before Income Taxes, Discontinued Operations and Extraordinary Item (312) (327) Federal Income Tax Benefit 106 111 Loss before Discontinued Operations and Extraordinary Item (206) (216) Discontinued Operations: Earnings from operations (net of tax of $1,057 in 1995 and $678 in 1994) 1,349 1,008 Gain on disposal of business (net of tax of $13,311) 18,086 - Earnings from Discontinued Operations 19,435 1,008 Extraordinary Gain on Early Retirement of Debt (net of tax of $140) 272 - Net Earnings 19,501 792 Dividends and accretion on preferred stock (352) (249) Earnings Applicable to Common Stock $19,149 $ 543 Earnings per Share: Loss from continuing operations (net of dividends and accretion on preferred stock) $ (0.21) $(0.18) Discontinued operations: Earnings from operations 0.50 0.39 Gain on disposal of business 6.74 - Extraordinary gain on early retirement of debt 0.10 - Earnings applicable to common stock $ 7.13 $ 0.21 Average Outstanding Common Shares and Dilutive Options 2,685 2,625 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 Six Months Ended June 30 1995 1994 Cash Flows From Operating Activities: Loss from continuing operations (net of extraordinary gain on early retirement of debt) $ (98) $ (402) Adjustments to reconcile loss to net cash provided by operating activities: Extraordinary gain on early retirement of debt (412) - Federal income tax benefit (50) (207) Depreciation 1 10 Change in operating assets and liabilities of continuing operations: Accounts payable and accrued expenses (307) (112) Other (202) - Net cash used in operating activities from continuing operations (1,068) (711) Net cash provided by operating activities from discontinued operations 2,645 2,464 Net cash provided by operating activities 1,577 1,753 Cash Flows From Investing Activities: Proceeds from sale of S.K. Wellman 49,177 - Redemption of Series A Preferred Stock (7,920) - Increase in escrow fund for warranties and taxes (5,250) - Investing cash flows from discontinued operations (1,437) (1,348) Net cash provided by (used in) investing activities 34,570 (1,348) Cash Flows From Financing Activities: Payments of dividends on Series A Preferred Stock (506) (814) Repayment of debt (2,076) - Other 100 - Financing cash flows from discontinued operations (967) (144) Net cash used in financing activities (3,449) (948) Net increase (decrease) in cash and cash equivalents 32,698 (553) Cash and cash equivalents at January 1 1,087 985 Cash and cash equivalents at June 30 (including cash of discontinued operations of $(457) in 1995) $33,785 $ 432 Supplemental Cash Flow Disclosure: Federal taxes paid on income $ - $ 90 Interest paid on debt obligations $ 817 $ 684 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 June 30, 1995 and December 31, 1994, and the results of operations for the quarters and six months ended June 30, 1995 and 1994 and cash flows for the six months ended June 30, 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 and six months ended June 30, 1995 and 1994 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 periods (in thousands, except per share data). Quarter Ended June 30 Six Months Ended June 30 1995 1994 1995 1994 Earnings applicable to common stock $19,149 $ 543 $19,843 $1,344 Charge in lieu of federal income taxes which is not accruable or payable 10,661 312 11,153 712 Total Earnings $29,810 $ 855 $30,996 $2,056 Total Earnings per share $ 11.10 $ 0.33 $ 11.79 $ 0.79
Note B - Sale of S.K. Wellman Subsidiary On June 30, 1995 the Company completed the sale of its S.K. Wellman subsidiary for a purchase price of $60 million, which included certain amounts related to the repayment or assumption of debt and capital leases by the purchaser. The cash proceeds received by the Company pursuant to the transaction, less purchase price adjustments and estimated expenses, amounted to $48.9 million. In connection with the sale of the S.K. Wellman subsidiary, the Company repaid its principal and interest obligations under the Subordinated Variable Rate Notes and Zero Coupon Bonds and redeemed its Series A Preferred Stock along with unpaid dividends. The net proceeds to the Company from the transaction after such repayments were $38.5 million. A portion of these proceeds was used by the Company to fund an escrow account of $4 million to partially collateralize its indemnification obligations in the purchase and sale agreement. This escrow fund is expected to exist for a period of 15 months. The Company's maximum liability under the indemnification provisions in the agreement is $5 million. An additional escrow fund amounting to $1,250,000 was established at June 30, 1995 relating to certain estimated income tax obligations arising from the sale. Other Long-Term Liabilities include taxes related to this escrow fund which are estimated to be due after one year. The transaction resulted in a gain of $31.4 million. Income taxes were provided for this gain as follows (in 000's) Federal and State Income Taxes Due and Payable $ 3,291 Pro-Forma Charge in Lieu of Federal Income Taxes 10,020 $13,311 The consolidated financial statements for the quarter and six months ended June 30, 1994 and the balance sheet at December 31, 1994 have been restated to report the results of operations, balance sheet and statement of cash flow for S.K. Wellman as a discontinued operation in accordance with APB Opinion 30. The operating results of the discontinued S.K. Wellman operations for the quarter and six months ended June 30, 1995 and 1994 were as follows (in 000's) Quarter Ended Six Months Ended June 30, 1995 June 30, 1994 June 30, 1995 June 30, 1994 Net Sales $16,194 $15,405 $34,916 $30,400 Income from operations before income taxes $ 2,406 $ 1,686 $ 4,435 $ 3,621 Income taxes 1,057 678 1,928 1,380 Income from discontinued operation $ 1,349 $ 1,008 $ 2,507 $ 2,241
Note C - Gain on Early Retirement of Debt In connection with the sale of the S.K. Wellman subsidiary (see Note B), the Company retired Zero Coupon Bonds and Variable Rate Subordinated Notes with a carrying value of $2.5 million for cash payments totaling $2.1 million. The resulting net gain on early retirement of debt (net of a pro-forma charge in lieu of federal income taxes of $140,000) has been reported as an extraordinary item. Also on June 30, 1995 the Company redeemed all its outstanding shares of Series A Preferred Stock for cash payments totaling $7.9 million, the contractual redemption value. The difference between this redemption amount and the carrying value of $7.4 million was charged to Capital in Excess of Par Value. Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Basis of Discussion: The accompanying financial statements report the financial condition and results of operations of the S.K. Wellman subsidiary as a discontinued operation. Accordingly the results of operations of Wellman for the periods presented are excluded from income/(loss) from operations. The gain on the disposal of the Wellman subsidiary is reported as a gain from the disposal of a discontinued business. The discussion below addresses the operations and financial condition of the Registrant only. After the disposal of Wellman, the Registrant has no recurring revenues or operating subsidiaries. In the short-term, the Company intends to invest the proceeds of the Wellman transaction in investment grade short-term marketable debt securities. Courses of action being considered for the future by the Company include (a) utilizing a portion of the proceeds to support the issuance of a series of structured preferred securities and (b) pursuing the acquisition of new businesses. No agreements have been entered into with respect to either of these courses of action. Operations: The general and administrative expenses of the Registrant are incurred for compensation, occupancy, shareholder costs (such as printing, distribution and stock transfer fees) and legal and professional matters. The sale of the Wellman subsidiary is not expected to materially alter the level of these expenses incurred by the Registrant. In connection with the disposal of Wellman, the Company's Zero Coupon Bonds and Variable Rate Subordinated Notes with a carrying value of $2.5 million were repaid with cash payments amounting to $2.1 million. The net gain resulting from this early retirement of debt is reported in the quarter and six months ended June 30, 1995 as an extraordinary item. No such repayment occurred in the comparable earlier periods. Dividends and accretion on Series A Preferred Stock (redeemed on June 30, 1995) for the quarter and six months ended June 30, 1995 exceeded such charges for the quarter and six months ended June 30, 1994 due to the increasing rate formula of the preferred stock and the rise in prime rate on which such formula was based. Liquidity and Capital Resources: At June 30, 1995 the Registrant had working capital of $32.0 million, consisting principally of cash and short-term investments of $34.2 million and estimated short-term obligations for income taxes, transaction expenses and compensation of $2.1 million. The net proceeds of the Wellman transaction were invested in short-term investments at major commercial banks at June 30, 1995. In connection with the sale of Wellman, the Company funded an escrow fund with a cash payment of $4 million to partially collateralize the indemnification obligations of the Registrant in the purchase and sale agreement. The Company's maximum liability under such indemnity provisions is $5 million. An additional escrow fund amounting to $1,250,000 was established at June 30, 1995 relating to certain estimated income tax obligations arising from the sale. 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 The Annual Meeting of Shareholders was held on June 27, 1995 for the purpose of electing a Board of Directors and acting on any other proposals properly introduced. Proxies for the meeting were solicited pursuant to Section 14(a) of the Securities Exchange Act of 1934. All of Management's nominees for Directors as listed in the Proxy Statement were elected. A total of 2,565,450 shares were eligible to vote. The vote totals for the director nominees were as follows: Brian R. Esher 2,115,555; Willem F.P. de Vogel, 2,115,578; Alfred R. Glancey III, 2,115,627; S. Sterling McMillan III, 2,115,616; W. John Roberts, 2,115,086; J. William Uhrig, 2,115,488; and H. Whitney Wagner, 2,115,488. The proposal to approve the sale of the capital stock of the S.K. Wellman Limited, Inc. subsidiary was approved by the following vote: Shares Shares Shares Voted "For" Voted "Against" "Abstaining" 1,682,738 10,359 31,711 The proposal to adopt the MLX Corp. Stock Option and Incentive Award Plan was approved by the following vote: Shares Shares Shares Voted "For" Voted "Against" "Abstaining" 1,855,216 48,207 216,401 Item 5. Other Information The sale of the capital stock of the Registrant's S.K. Wellman Limited, Inc. subsidiary, which was approved at the Registrant's June 27, 1995 Annual Meeting of Shareholders, was consummated on June 30, 1995. Item 6. Exhibits and Reports on Form 8-K (a) Exhibit 27* -Financial Data Schedule (b) Reports: On Form 8-K: On April 12, 1995, the Registrant filed a report on Form 8-K to report the execution and delivery of an agreement to sell all of the capital stock of its S.K. Wellman Limited, Inc. subsidiary. * 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: August 11, 1995 MLX Corp. (Registrant) By: /s/ BRIAN R. ESHER By: /s/THOMAS C. WAGGONER Brian R. Esher Thomas C. Waggoner Chief Executive Officer President & Chief Financial Officer (Duly Authorized Officer) (Principal Financial Officer) EX-27 2
5 1,000 6-MOS DEC-31-1995 JUN-30-1995 34,242 0 0 0 0 34,247 6 0 39,503 2,245 0 25 0 0 35,288 39,503 0 0 0 560 0 0 0 (560) 190 (370) 20,593 272 0 20,495 7.55 7.55