<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended March 31, 1996
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from __________ to __________
MUEHLSTEIN HOLDING CORPORATION
(formerly HMC Acquisition Corporation)
(Exact name of Registrant as specified in its charter)
Commission file number: 33-99754
Delaware 06-1436941
(State or other jurisdiction (I.R.S. Employer Identification No.)
of incorporation or organization)
800 Connecticut Avenue
Norwalk, Connecticut 06856
(Address of principal executive offices) (Zip Code)
Registrant's telephone number including Area Code: (203) 855-6000
Securities registered pursuant to Section 12(b) of the Act: NONE
Securities registered pursuant to Section 12(g) of the Act: NONE
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 12 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
----- -----
The number of shares outstanding of Registrant's Common Stock at
April 1, 1996 was 1,941,409.
<PAGE>
Muehlstein Holding Corporation
Form 10-Q
Index
Part I. Financial Information
Item 1. Financial Statements (Unaudited)--Muehlstein Holding
Corporation ("Successor Company")
Consolidated balance sheet--March 31, 1996
Consolidated statement of operations--three months ended March 31, 1996
Consolidated statement of shareholders' equity and redeemable
common stock-three months ended March 31, 1996
Consolidated statement of cash flows--for the period February
9, 1996 through March 31, 1996
Notes to consolidated financial statements
Financial Statements (Unaudited)--H. Muehlstein &
Co., Inc. ("Predecessor Company")
Combined balance sheet--December 31, 1995
Combined statement of operations--three months ended March 31, 1995
Combined statement of cash flows--three months ended March 31, 1995
Notes to combined financial statements
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Part II. Other Information
Item 6. Exhibits and Reports on Form 8-K
Signatures
<PAGE>
Part I: Financial Information
Item 1: Financial Statements
Muehlstein Holding Corporation
Consolidated Balance Sheet
Successor Company
(Unaudited)
March 31, 1996
(In thousands, except per share data and number of shares)
<TABLE>
<S> <C>
Assets
Current assets:
Cash $ 7,902
Accounts receivable, net of allowance for
doubtful accounts of $2,945 126,366
Other receivables, principally value added taxes 23,838
Inventories, net 37,599
Prepaid expenses and other assets 2,500
Deferred income taxes 2,132
--------
Total current assets 200,337
Property, plant and equipment, net of accumulated depreciation 7,482
Deferred financing costs, net of accumulated amortization 3,891
Goodwill, net of accumulated amortization 3,510
--------
Total assets $215,220
--------
--------
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable $86,019
Notes payable, including current portion of long term debt 61,334
Accrued liabilities 7,365
Income taxes payable 1,139
Other taxes payable, principally value added taxes 17,985
--------
Total current liabilities 173,842
Notes payable - long term 6,953
Other long term liabilities 3,088
Common stock, par value $.01 per share - authorized shares 2,000,000;
issued and outstanding 1,941,409 shares in 1996 19
Preferred stock, par value $.01 per share - authorized shares 1,000,000;
issued and outstanding 1,000,000 shares in 1996 10
Additional paid-in capital 28,777
Retained earnings 2,416
Cumulative translation adjustment 115
--------
Total liabilities and shareholders' equity $215,220
--------
--------
</TABLE>
See notes to consolidated financial statements.
<PAGE>
Muehlstein Holding Corporation
Consolidated Statement of Operations
Successor Company
(Unaudited)
Three months ended March 31, 1996
(In thousands, except per share data and number of shares)
Revenues:
Sales and Commissions $169,791
Sales to affiliates 413
----------
Total revenues 170,204
Cost of sales 146,211
----------
23,993
Selling, general and administrative expenses 19,699
----------
Income from operations 4,294
Other expense 1,227
----------
Income before income taxes 3,067
Provision for income taxes 2,137
----------
930
Losses applicable to pre-acquisition period (1,486)
----------
Net income 2,416
Preferred stock dividend 194
----------
Net income applicable to common shareholders $ 2,222
----------
----------
Net income per share applicable to common shareholders $ 2.02
----------
----------
Weighted average number of shares outstanding 1,100,000
----------
----------
See notes to consolidated financial statements.
<PAGE>
Muehlstein Holding Corporation
Consolidated Statement of Shareholders' Equity and Redeemable Common Stock
Successor Company
(Unaudited)
Three months ended March 31, 1996
(In thousands)
<TABLE>
<CAPTION>
Common Stock Preferred Stock Additional Cumulative
--------------------------------------- Paid-in Retained Translation
Shares Amount Shares Amount Capital Earnings Adjustment
-------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Issuance of Common
Stock, net of offering
costs 1,941 $19 $18,787
Issuance of Preferred Stock 1,000 $10 9,990
Net income $2,416
Net change in
cumulative translation
adjustment $115
-------------------------------------------------------------------------------
Balance as of March 31,
1996 1,941 $19 1,000 $10 $28,777 $2,416 $115
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
</TABLE>
See notes to consolidated financial statements.
<PAGE>
Muehlstein Holding Corporation
Consolidated Statement of Cash Flows
Successor Company
(Unaudited)
For the period February 9, 1996 through March 31, 1996
(In thousands)
Cash flows from operating activities
Net income $ 2,416
Adjustments to reconcile net income to net cash provided by
(used in) operating activities:
Depreciation 147
Amortization of goodwill and deferred financing costs 243
Provision for deferred income taxes 1,543
Changes in operating assets and liabilities:
Accounts receivable (19,579)
Inventories (886)
Prepaid expenses and other assets (229)
Other receivables 2,090
Accounts payable 20,542
Taxes payable 1,948
---------
Net cash provided by operating activities 8,235
Cash flows from investing activities
Payments for acquired business (98,925)
Payments for purchase of fixed assets (190)
---------
Net cash (used in) investing activities (99,115)
Cash flows from financing activities
Net borrowing-revolving credit 60,287
Borrowing-term loan 8,000
Payments for financing costs (3,653)
Proceeds from issuance of common stock, net of offering costs 18,806
Proceeds from issuance of preferred stock 10,000
---------
Net cash (used in) financing activities (93,440)
Effect of exchange rate changes on cash 115
---------
Net increase in cash 2,675
Cash at beginning of year 5,227
Cash at end of year $ 7,902
---------
---------
See notes to consolidated financial statements.
<PAGE>
Muehlstein Holding Corporation
Notes to Consolidated Financial Statements
Successor Company
(Unaudited)
1. Basis of Presentation
The accompanying unaudited 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 three-month period ended March 31, 1996 are not necessarily indicative of
the results that may be expected for the year ended December 31, 1996. For
further information, refer to the combined financial statements and footnotes
thereto included in the Muehlstein Holding Corporation's (formerly HMC
Acquisition Corporation) (the "Company") Form 10-K for the year ended
December 31, 1995.
In conjunction with the acquisition, the Company has adopted the FIFO method
for inventory valuation for all of its inventory.
2. Business Combination
On September 21, 1995, the Company was incorporated for the purpose of
acquiring all of the outstanding capital stock of H. Muehlstein & Co., Inc.
("Muehlstein").
On October 30, 1995, the Company entered into an agreement (the "Stock
Purchase Agreement") with a wholly owned subsidiary of Mobil Oil Corporation
(the ultimate parent company of Muehlstein) to purchase 100% of the
outstanding capital stock of Muehlstein and certain related assets (the
"Acquisition"). The purchase price was based on capital employed, as defined,
plus $10 million.
On November 22, 1995, the Company filed a Registration Statement
("Offering"), which became effective on January 23, 1996, pursuant to which
it offered shares of its common stock to certain persons who were employees
of Muehlstein, Mobil Oil Corporation ("Mobil") or their respective
subsidiaries who would become employees of the Company or its subsidiaries
following the Acquisition, to certain benefit plans in which such persons
were or would become participants and to such other parties that the Company
in its discretion determined. The Company received total proceeds of
$19,152,130 on February 9, 1996 based upon the sale of 1,915,213 shares of
its Common Stock ("Common Stock"), par value $.01 per share at $10.00 per
share. The proceeds of this Offering, net of offering expenses of
approximately $608,000, were utilized to pay a portion of the purchase price
of the Acquisition. The Company received additional proceeds of $261,960 upon
the sale of 26,196 additional shares of its common stock through March 31,
1996.
Pursuant to the Stock Purchase Agreement, Mobil purchased from the Company on
February 9, 1996, 1,000,000 shares of Series "A" Preferred Stock, $.01 par
value per share, at a purchase price of $10.00 per share. The Series "A"
Preferred Stock pays an annual dividend of $1.20 per share (equal to 12
percent per annum of the stated value of $10.00 per share). Except for
certain matters connected with the Series "A" Preferred Stock and other
matters required by applicable law, holders of Series "A" Preferred Stock
will have no voting rights. Series "A" Preferred Stock will have no
preemptive rights and may be redeemed, in whole or in part, at the option of
the Company, at any time. If the Company redeems the Series "A" Preferred
Stock, the redemption price for the shares will equal the stated value per
share ($10.00) plus all accrued and unpaid dividends. In the event of any
voluntary or involuntary dissolution, liquidation or winding up of the
Company, the holders of Series "A" Preferred Stock will have preferential
rights, superior to other shareholders, to distributions out of the assets of
the Company.
<PAGE>
Muehlstein Holding Corporation
Notes to Consolidated Financial Statements (continued)
Successor Company
(Unaudited)
2. Business Combination (continued)
Effective February 9, 1996, Muehlstein entered into a credit agreement with
Citicorp USA, Inc. and Citicorp Canada ("Credit agreement"), which was
guaranteed by the Company. Pursuant to this Credit agreement a $125,000,000
revolving credit facility was provided, the expiration date of which is
February 9, 2000. The revolving credit facility will bear interest at either
(1) 100 basis points per annum over the U.S. or certain other foreign
currency Base Rates or (2) 250 basis points per annum over the U.S. or
certain other foreign currency LIBOR rates. On the same date, the Company
borrowed approximately $73,191,000 under this facility. As of March 31,
1996, approximately $40,000,000 of the Credit agreement was based on LIBOR
and bore interest at 7.875%, the balance of the indebtedness was based on
Base Rates and bore interest at 9.25%
Effective February 9, 1996, Muehlstein entered into a loan agreement with
Finova Capital Corporation ("Loan agreement"), which was guaranteed by the
Company. Pursuant to this Loan agreement total proceeds of $8,000,000 from
two term loans, Note A and Note B, both maturing March 1, 2000, were
received. The principal amount of the two term loans are $2,560,000 (Note A)
and $5,440,000 (Note B), respectively. These notes bear interest at a fixed
annual rate of interest of 8.20% per annum (Note A) and 9.70% per annum
(Note B).
The indebtedness under the Credit and Loan agreements is secured by liens on
substantially all the assets of Muehlstein. The Credit and Loan agreements
contain various covenants which include, among other things: (a) the
maintenance of certain financial ratios and compliance with certain financial
tests and limitations; (b) limitations on investments and capital
expenditures; and (c) limitations on leases and the sale of assets.
The proceeds from the sale of the Company's common and preferred stock
aggregating approximately $30,000,000 and borrowings of $81,191,000 under the
aforementioned facilities were used to finalize the Acquisition and provide
working capital.
The Acquisition was finalized on February 9, 1996 for a total purchase price
of approximately $98,925,000 ("Purchase Price"), with fees of approximately
$957,000 being included. Upon effectiveness of the Acquisition, Muehlstein
became a wholly-owned subsidiary of the Company, and the Company thereupon
changed its name to "Muehlstein Holding Company".
The Company's financial statements reflect the application of purchase
accounting to the acquired operations of Muehlstein. The application of
purchase accounting resulted in the allocation of the purchase price and
related acquisition costs based on the fair value of the assets acquired and
liabilities assumed. As a result, the enclosed predecessor combined financial
statements are not comparable to the successor company consolidated financial
statements.
<PAGE>
Muehlstein Holding Corporation
Notes to Consolidated Financial Statements (continued)
Successor Company
(Unaudited)
2. Business Combination (continued)
The condensed consolidated balance sheet on a fair value basis as of February
9, 1996 was as follows:
(IN
THOUSANDS)
Assets
Current assets:
Cash $ 5,227
Accounts receivable, net 106,787
Other receivables 25,928
Inventories 36,713
Prepaid expenses and other current assets 5,893
--------
Total current assets 180,548
Property, plant and equipment 7,439
Other assets 6,903
--------
$194,890
--------
--------
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable $ 65,477
Notes payable to bank 66,315
Accrued and other current liabilities 24,541
--------
156,333
Long-term debt 6,953
Other long-term liabilities 3,035
Common and preferred stock 28,569
--------
$194,890
--------
--------
3. Common Stock
The Company's common stock is held by certain of the Company's employees, the
Company's Employee Share Ownership Plan (ESOP) and Citicorp North America,
Inc. ("Citicorp"). Shareholders', excluding Citicorp, have a right to put
these shares to the Company, following termination of their employment,
subject to the limitations imposed under the terms of the Credit, Loan and
preferred stock agreements. Such provision exists to create a market for the
employees' shares. Citicorp has the right to put their shares to the Company
at any time after the earliest to occur of: (a) three years after the
Acquisition closing date or (b) certain mergers, consolidations, sale of
assets or change of control with respect to the Company or its material
subsidiaries. Except for certain matters connected with its shares, the
shares held by Citicorp will be nonvoting shares. The redemption price for
any shares will be equal to the most recent appraised fair market value of
the common stock. If a put is exercised, the Company will have the option to
pay for the repurchased shares either in cash or pursuant to a promissory
note. Under the terms of the Credit, Loan and preferred stock agreements and
given management's view of its present employee base, significant activity
under the put provisions is not anticipated presently. However, in accordance
with the requirements for accounting for common stock with a put provision,
the common stock has been classified between liabilities and preferred
stock.
<PAGE>
Muehlstein Holding Corporation
Notes to Consolidated Financial Statements (continued)
Successor Company
(Unaudited)
4. Pro Forma Financial Data
The following pro forma unaudited consolidated statements of operations for
the three month periods ended March 31, 1996 and 1995 have been prepared to
reflect the consummation of the offerings of the Company's debt and equity
securities, the Acquisition and related transactions. The pro forma unaudited
effects of such transactions have been presented assuming that they occurred
as of the beginning of the periods presented in the pro forma unaudited
consolidated statements of operations.
Three months ended
March 31
1996 1995
---------------------
Pro forma
---------------------
(IN THOUSANDS, EXCEPT
PER SHARE DATA)
Revenues $170,204 $229,595
Total operational costs 166,122 221,218
----------------------
Income from operations 4,082 8,377
Other expense (295) (1,900)
Interest expense (1,735) (1,630)
Provision for income taxes (914) (2,142)
----------------------
Net income 1,138 2,705
Preferred dividend (300) (300)
----------------------
Net income applicable to common shareholders $ 838 $ 2,405
----------------------
----------------------
Net income per share applicable to common
shareholders $ .43 $ 1.24
----------------------
----------------------
Assumed number of common shares outstanding 1,941 1,941
----------------------
----------------------
5. Income Taxes
The tax provision for the three month period ended March 31, 1996 was
determined based upon an estimate of the effective tax rates for the year
ending December 31, 1996. The effective tax rate of 70% for the three month
period ending March 31, 1996 reflects higher foreign taxes for dividend
distributions and changes in the valuation of certain foreign deferred tax
assets for the period prior to the Acquisition and foreign losses for which
the Company did not have offsetting tax credits.
<PAGE>
H. Muehlstein & Co., Inc.
Predecessor Combined Balance Sheet
(Note)
December 31, 1995
(In thousands)
Assets
Current assets:
Cash $ 6,326
Accounts receivable, net of allowance for
doubtful accounts of $4,614 134,132
Other receivables, principally value added taxes 21,341
Inventories, net 29,516
Due from affiliates 139
Prepaid expenses and other assets 2,120
Deferred income taxes 4,151
--------
Total current assets 197,725
Property, plant and equipment, net of accumulated depreciation 7,307
Deferred income taxes 549
--------
Total assets $205,581
--------
--------
Liabilities and Parent Company Investment
Current liabilities:
Accounts payable $ 57,412
Accrued liabilities 10,672
Other taxes payable, principally value added taxes 15,345
Due to affiliates 11,681
--------
Total current liabilities 95,110
Other long term liabilities 1,832
Parent company investment 108,639
--------
Total liabilities and parent company investment $205,581
--------
--------
Note: The balance sheet at December 31, 1995 has been derived from the
audited predecessor combined financial statements at that date but
does not include all of the information and footnotes required by
generally accepted accounting principles for complete financial
statements.
See notes to combined financial statements.
<PAGE>
H. Muehlstein & Co., Inc.
Predecessor Combined Statement of Operations
(Unaudited)
Three months ended March 31, 1995
(In thousands)
Revenues:
Sales and Commissions $225,272
Sales to affiliates 4,323
--------
Total revenues 229,595
Cost of sales 200,846
--------
28,749
Selling, general and administrative expenses 20,826
--------
Income from operations 7,923
Other expense 1,925
--------
Income before income taxes 5,998
Provision for income taxes 2,588
--------
Net income $ 3,410
--------
--------
See notes to combined financial statements.
<PAGE>
H. Muehlstein & Co., Inc.
Predecessor Combined Statement of Cash Flows
(Unaudited)
Three months ended March 31, 1995
(In thousands)
Cash flows from operating activities
Net income $ 3,410
Adjustments to reconcile net income to net cash provided by
(used in) operating activities:
Depreciation 214
Provision for deferred income taxes 149
Loss on retirement of fixed assets 13
Changes in operating assets and liabilities:
Accounts receivable (35,884)
Inventories (13,644)
Due from affiliates (36)
Prepaid expenses and other assets (147)
Other receivables (7,204)
Accounts payable 8,716
Accrued liabilities (5,776)
Taxes payable 6,367
Due to affiliates (4,946)
---------
Net cash (used in) operating activities (48,768)
Cash flows from investing activities
Payments for purchase of fixed assets (62)
---------
Net cash (used in) investing activities (62)
Cash flows from financing activities
Net change in parent company advances 47,775
---------
Net cash provided by financing activities 47,775
Net (decrease) in cash (1,055)
Cash at beginning of year 4,763
---------
Cash at end of year $ 3,708
---------
---------
See notes to combined financial statements.
<PAGE>
H. Muehlstein & Co., Inc.
Notes to Predecessor Combined Financial Statements
(Unaudited)
1. Basis of Presentation
The accompanying unaudited combined financial statements present the combined
assets, liabilities, revenues and expenses related to the marketing
operations of H. Muehlstein & Co., Inc. ("Muehlstein") and affiliated
entities, exclusive of certain assets and liabilities retained by Mobil Oil
Corporation ("Mobil"), the ultimate parent company in conjunction with the
Acquisition (See Note 2 of the Notes to Consolidated Financial Statements -
Successor Company). These statements are presented on a historical cost
basis. All transactions between subsidiaries of Muehlstein and other units
of Mobil which are included in Muehlstein's operations have been eliminated.
Parent company investment reflects Mobil's investment in Muehlstein, the
accumulated earnings of such entity, as well as intercompany balances with
Mobil and other entities therewith which are not settled on a current basis.
In addition, the parent company investment includes intercompany accounts
resulting from the exclusion of various assets or liabilities that were not
acquired under the Acquisition.
The unaudited combined 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. For further information, refer to the
combined financial statements and footnotes thereto included in Muehlstein
Holding Corporation's Form 10-K for the year ended December 31, 1995.
<PAGE>
Item 2: Management's Discussion and Analysis of
Financial Condition and Results of Operations
General
As discussed in the notes to the financial statements, Muehlstein Holding
Corporation (formerly HMC Acquisition Corporation) (the "Company") was
incorporated for the purpose of acquiring all of the outstanding capital
stock of H. Muehlstein & Co., Inc. ("Muehlstein") and certain related assets.
The acquisition was finalized on February 9, 1996 for a total purchase price
with approximately $98,925,000. Accordingly, the quarter ended March 31, 1996
is the only period of successor company operations and is compared to pro
forma results of operations for the quarter ended March 31, 1995 for purposes
of the comparative discussion presented below. The financial information of
the successor company reflects the application of purchase accounting to the
operations of Muehlstein subsequent to the Offering by the Company. The
application of purchase accounting results in the allocation of the purchase
price and related acquisition costs based on the fair value of the underlying
assets and liabilities of the predecessor company's operations. As a result
of the application of purchase accounting, the predecessor combined financial
information is not comparable to the financial information of the successor
company. The unaudited proforma results of operations have been prepared for
comparative purposes only and are not necessarily indicative of the results
of operations that would have resulted had the Offering and Acquisition been
effective January 1, 1995, or that may result in the future.
Results of Operations
Total revenues decreased 25.9% in the first quarter of 1996 to $170,204,000
compared to $229,595,000 for the first quarter of 1995. Income from
operations decreased 51.3% to $4,082,000 for the first quarter of 1996 from
$8,377,000 for the first quarter of 1995 while net income after tax decreased
57.9% to $1,138,000 for the first quarter of 1996 from $2,705,000 for the
first quarter of 1995.
The decrease in revenues was due to lower sales prices worldwide caused by
increases in the availability of product. The average sales price for plastic
resin and rubber, combined, decreased 25.4% in the first quarter of 1996
versus the same period in 1995. Sales volume decreased 0.7% in the first
quarter of 1996 versus the first quarter of 1995.
Income from operations was unfavorably impacted by lower sales prices during
the first quarter of 1996 versus the comparative period in 1995. Due to
changes in market conditions, the average margin on product sales decreased
to $0.0504 per pound in the first quarter of 1996 from $0.0600 per pound in
the first quarter of 1995. Partially offsetting the lower margins was a 6.6%
decrease in selling and administrative expenses to $19,911,000 for the first
quarter of 1996 from $21,322,000 for the same period in 1995. The change was
due to lower bad debt expenses in the U.S. and Latin America.
Non-operating expenses decreased $1,500,000 in the first quarter of 1996
versus the first quarter of 1995. The decrease was predominantly due to the
fact that 1995 included $2,300,000 of expense for an incentive compensation
plan related to the predecessor company. This decrease was partially offset
by interest expense and amortization of deferred financing costs and goodwill
being incurred as a result of the financing of the business combination. For
further discussion of the financing, see "Note 2 of the Notes to Consolidated
Financial Statements - Successor Company".
<PAGE>
Net income decreased 57.9% to $1,138,000 in the first quarter of 1996 from
$2,705,000 in the comparative period last year after tax charges of $914,000
and $2,142,000, respectively. The effective tax rate was 45% in the first
quarter of 1996 and 43% in the same period in 1995.
Liquidity and Sources of Capital
Historically, Muehlstein had been an indirect, wholly owned subsidiary of
Mobil. As such, cash generated by Muehlstein and its financing requirements
had been subject to Mobil's cash management procedures and policies.
In connection with the Acquisition, Muehlstein entered into a $125,000,000
revolving credit facility with Citibank N.A. ("Citibank"). The revolving
credit facility expires February 9, 2000. The revolving credit facility will
bear interest at either (i) 100 basis points per annum over the U.S. or
certain other foreign currency Base Rates or (2) 250 basis points per annum
over the U.S. or certain other foreign currency LIBOR rates. On the day of
the Acquisition, the Company borrowed approximately $73,191,000 under this
facility. As of that date, Muehlstein has been subject to Citibank cash
management procedures and policies.
At the date of the Acquisition, Muehlstein entered into a loan agreement with
Finova Capital Corporation ("Finova"). Pursuant to this agreement total
proceeds of $8,000,000 from two term loans, Note A and Note B, both maturing
March 1, 2000, were received. The principal amount of the two term loans is
$2,560,000 (Note A) and $5,440,000 (Note B), respectively. These notes bear
interest at a fixed annual rate of interest of 8.20% per annum (Note A) and
9.70% per annum (Note B).
Pursuant to the Stock Purchase Agreement, Mobil purchased from the Company on
February 9, 1996, 1,000,000 shares of Series "A" Preferred Stock, $.01 par
value per share, at a purchase price of $10.00 per share. The Series "A"
Preferred Stock pays an annual dividend of $1.20 per share (equal to 12
percent per annum of the stated value of $10.00 per share).
The Company's common stock is held by certain of the Company's employees, the
Company's Employee Share Ownership Plan (ESOP) and Citicorp North America,
Inc. ("Citicorp"). Shareholders', excluding Citicorp, have a right to put
these shares to the Company, following termination of their employment,
subject to the limitations imposed under the terms of the Credit, Loan and
preferred stock agreements. Such provision exists to create a market for the
employees' shares. Citicorp has the right to put their shares to the Company
at any time after the earliest to occur of: (a) three years after the
Acquisition closing date or (b) certain mergers, consolidations, sale of
assets or change of control with respect to the Company or its material
subsidiaries. The redemption price for any shares will be equal to the most
recent appraised fair market value of the common stock. If a put is
exercised, the Company will have the option to pay for the repurchased shares
either in cash or pursuant to a promissory note. Under the terms of the
Credit, Loan and preferred stock agreements and given management's view of
its present employee base, significant activity under the put provisions is
not anticipated presently. However, in accordance with the requirements for
accounting for common stock with a put provision, the common stock has been
classified between liabilities and preferred stock.
Operating activities have historically been a major source or use of cash for
working capital needs and capital expenditures. Net cash provided by
operations were $21,051,000 for the three months ended March 31, 1996 as
compared to a ($48,768,000) use of cash in the first three months of 1995.
Working capital on a comparative basis decreased $78,909,000 from December
31, 1995 to March 31, 1996. Current assets increased by 1.3% to $200,337,000
at March 31, 1996 from $197,725,000 at December 31, 1995. Current liabilities
increased $81,521,000 mainly due to the addition of $61,334,000 in short term
borrowing from Citibank and the current portion of the Finova loan. In
addition, accounts payable increased $28,607,000 mainly due to the addition
of Mobil as a non-affiliated supplier. The Company expects that available
<PAGE>
cash and existing credit facilities will be sufficient to meet its normal
operating requirements, including capital expenditures, over the near term.
Foreign Exchange
The Company's foreign exchange exposure is limited to its operations in
Europe, Far East and Canada. All sales and purchases in the United States and
Latin America, representing approximately 80 percent of the volume, are
denominated in U.S. dollars. Exposure to foreign exchange fluctuations in
Europe are managed through a netting of the local assets (primarily accounts
receivable) and liabilities (accounts payable). Fluctuations in foreign
currency exchange rates have not had a material financial impact on the
results of the Predecessor Company or Successor Company.
Impact of Inflation and Changing Prices
Market conditions which are influenced by economic and political
considerations, as well as production capacities and utilization dictate
pricing and costs. The Company has entered into certain supply agreements
with Mobil for an initial term of three years. Such agreements provide for
minimum and maximum limits on the amounts of product supplied. The Company
does not have any other long-term purchase or sales commitments with its
suppliers or customers. The Company views this as a marketing advantage that
enables it to respond quickly to market changes, matching supply with demand.
The Company capitalizes on opportunities and imbalances in the market place.
<PAGE>
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
(b) No reports on Form 8-K were filed during the quarter for which this
report is filed.
<PAGE>
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.
MUEHLSTEIN HOLDING CORPORATION
Date: May 15, 1996 By: /S/ J. Kevin Donohue
----------------------
J. Kevin Donohue
Chairman of the Board and
Chief Executive Officer
Date: May 15, 1996 By: /S/ Ronald J. Restivo
----------------------
Ronald J. Restivo
Treasurer and Chief Financial
Officer (Principal Financial and
Accounting Officer)
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
CONSOLIDATED BALANCE SHEET (MAR. 31, 1996) CONSOLIDATED STATEMENT OF
OPERATIONS (MAR. 31, 1996) CONSOLIDATED STATEMENT OF CASH FLOWS
(FEB. 9 - MAR. 31, 1996) AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<CASH> 7902
<SECURITIES> 0
<RECEIVABLES> 126366
<ALLOWANCES> 2945
<INVENTORY> 37599
<CURRENT-ASSETS> 200337
<PP&E> 7482
<DEPRECIATION> 147
<TOTAL-ASSETS> 215220
<CURRENT-LIABILITIES> 173842
<BONDS> 0
0
10
<COMMON> 19
<OTHER-SE> 31308
<TOTAL-LIABILITY-AND-EQUITY> 215220
<SALES> 170204
<TOTAL-REVENUES> 170204
<CGS> 146211
<TOTAL-COSTS> 165910
<OTHER-EXPENSES> 1227
<LOSS-PROVISION> 181
<INTEREST-EXPENSE> 923
<INCOME-PRETAX> 3067
<INCOME-TAX> 2137
<INCOME-CONTINUING> 930
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 930
<EPS-PRIMARY> 2.02
<EPS-DILUTED> 2.02
</TABLE>
