SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
Amendment No. 1 to Form 8-K filed July 10, 1998
Current Report Pursuant
to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of amended report: August 18, 1998
333-26943
(Commission File Number)
MOLL INDUSTRIES, INC.
(Exact Name of Registrant as Specified in Its Charter)
Delaware 04-3084238
(State or Other Jurisdiction (I.R.S. Employer Identification No.)
of Incorporation)
ANCHOR HOLDINGS, INC.
(Exact Name of Registrant as Specified in Its Charter)
Delaware 62-1427775
(State or Other Jurisdiction (I.R.S. Employer Identification No.)
of Incorporation)
1111 Northshore Drive, Suite 600, Knoxville, TN 37919-4048
(Address of Principal Executive Offices) (Zip Code)
(423) 450-5300
(Registrant's Telephone Number, Including Area Code)
<PAGE>
FORM 8-K/A
AMENDMENT NO. 1 TO FORM 8-K
OF
MOLL INDUSTRIES, INC.
AND
ANCHOR HOLDINGS, INC.
Moll Industries, Inc., formerly known as Anchor Advanced Products,
Inc., and Anchor Holdings, Inc. hereby amend Items 2 and 7 of their Form 8-K
filed July 10, 1998 reporting, among other things, the merger of Anchor Advanced
Products, Inc. with Moll PlastiCrafters Limited Partnership, to include the
requisite financial statements.
Item 2. Acquisition or Disposition of Assets.
Pursuant to an Agreement and Plan of Distribution, Contribution and
Merger dated as of June 26, 1998 (the "Plan") by and among, inter alia, Moll
PlastiCrafters Limited Partnership, a Delaware limited partnership ("Moll LP"),
AMM Holdings, Inc. (f/k/a Anchor Acquisition Co.), a Delaware corporation,
Anchor Advanced Products, Inc. ("Anchor") and Anchor Holdings, Inc. (the
"Company"), Moll LP was merged with Anchor, with Anchor surviving and changing
its name to Moll Industries, Inc. (the "Merger"). Both Moll LP and Anchor, prior
to the Merger, were controlled by Mr. George Votis. One of the purposes of the
Plan was to accomplish a reorganization of the capital structures of Moll LP,
Anchor and the Company. In the Merger, the outstanding interests of Moll LP were
exchanged for shares of common stock of AMM Holdings, Inc., which owns all of
the outstanding stock of Anchor, which owns all of the outstanding stock of the
Company. Subsequent to the Merger, the former owners of Moll LP own a majority
of the outstanding common shares of AMM Holdings, Inc. The preceding description
of the Merger and the Plan does not purport to be complete and is qualified in
its entirety by reference to the provisions of the definitive agreement which is
filed as Exhibit 2.1 of this report and is incorporated herein.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
(a) Financial Statements of Moll LP and Business Acquired.
As the former owners of Moll LP own a majority of the outstanding
shares of AMM Holdings, Inc. following the Merger, Moll LP is considered the
accounting acquiror in the Merger. As Moll LP's consolidated financial
statements have not been previously filed with the Securities and Exchange
Commission (the "Commission"), Moll's consolidated balance sheets as of December
31, 1996 and 1997 and March 31, 1998 and consolidated statements of income,
partners' capital and cash flows for each of the three years in the period ended
December 31, 1997 and the three months ended March 31, 1997 and 1998 are
included as Exhibit 7.1.
2
<PAGE>
As consolidated financial statements of the Company and Anchor have
previously been filed with the Commission on Forms 10-K and 10-Q, they are
incorporated by reference.
During the past year, Moll LP has completed two other significant
acquisitions, The Hanning Companies ("Hanning") and Somomeca Industries S.A.R.L.
("Somemeca"). Hanning was acquired effective August 8, 1997. Hanning's combined
balance sheet as of December 31, 1995 and 1996 and combined statements of
operations, equity (deficit) and cash flows for each of the two years in the
period ended December 31, 1996 and the seven months and seven days ended August
7, 1996 and 1997 are included as Exhibit 7.3. Somomeca was acquired effective
January 8, 1998. Somomeca's consolidated balance sheets as of August 31, 1996
and 1997 and December 31, 1997 and consolidated statements of operations,
stockholders' equity and cash flows for each of the three years in the period
ended August 31, 1997 and the four months ended December 31, 1997 are included
as Exhibit 7.2.
(b) Pro Forma Financial Information.
Unaudited pro forma financial statements which reflect the above
transactions as well as the acquisition of Gemini Plastic Services, Inc.,
distribution of Moll LP's investment in Reliance Products, L.P. and the
refinancing of a majority of Moll LP's debt are included as Exhibit 7.4.
(c) Exhibits
Exhibit No. Exhibit
----------- -------
2.1 Agreement and Plan of Distribution, Contribution and
Merger dated June 26, 1998.
3
<PAGE>
Exhibit 7.1
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Moll PlastiCrafters Limited Partnership:
We have audited the accompanying consolidated balance sheets of MOLL
PLASTICRAFTERS LIMITED PARTNERSHIP (A DELAWARE LIMITED PARTNERSHIP) AND
SUBSIDIARIES as of December 31, 1996 and 1997, and the related consolidated
statements of income, partners' capital and cash flows for each of the three
years in the period ended December 31, 1997. These financial statements are the
responsibility of the Partnership's management. Our responsibility is to express
an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Moll PlastiCrafters Limited
Partnership and Subsidiaries as of December 31, 1996 and 1997 and the results of
their operations and their cash flows for each of the three years in the period
ended December 31, 1997, in conformity with generally accepted accounting
principles.
ARTHUR ANDERSEN LLP
Nashville, Tennessee
March 19, 1998
4
<PAGE>
MOLL PLASTICRAFTERS LIMITED PARTNERSHIP AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------- MARCH 31,
1996 1997 1998
------------ ------------ ------------
(UNAUDITED)
ASSETS
<S> <C> <C> <C>
CURRENT ASSETS:
Cash................................................ $ 877,893 $ 1,729,061 $ 7,140,808
Accounts receivable, net of reserves for doubtful
accounts of $561,000, $579,000, and $930,000
respectively..................................... 8,787,703 22,483,782 53,369,599
Inventories, net................................... 10,541,739 15,579,655 24,621,674
Deposits on tooling................................ 2,720,730 6,877,297 7,767,926
Equipment held for sale............................ -- 416,700 --
Other current assets............................... 565,363 392,357 2,877,548
------------ ------------ ------------
Total current assets....................... 23,493,428 47,478,852 95,777,555
------------ ------------ ------------
PROPERTY, PLANT AND EQUIPMENT:
Land............................................... 377,242 1,624,443 1,977,443
Buildings.......................................... 7,293,782 9,512,209 15,721,994
Machinery and equipment............................ 34,265,843 37,732,863 60,576,565
Less: accumulated depreciation..................... (12,950,756) (13,451,227) (15,548,145)
------------ ------------ ------------
Property, plant and equipment, net.............. 28,986,111 35,418,288 62,727,857
------------ ------------ ------------
RECEIVABLE FROM AFFILIATES............................ 390,000 464,451 462,646
------------ ------------ ------------
INTANGIBLE AND OTHER ASSETS, NET...................... 1,031,256 3,562,964 13,444,984
------------ ------------ ------------
Total assets............................... $ 53,900,795 $ 86,924,555 $172,413,042
============ ============ ============
LIABILITIES AND PARTNERS' CAPITAL
CURRENT LIABILITIES:
Checks drawn in excess of cash on deposit.......... $ 644,864 $ 143,272 $ 1,507,268
Customer deposits on tooling....................... 3,141,118 7,411,548 8,078,415
Short-term borrowings.............................. -- -- 23,726,000
Current portion of long-term obligations........... 6,026,626 5,059,450 10,275,742
Accounts payable................................... 4,231,673 16,587,519 32,411,988
Accrued liabilities................................ 3,976,622 5,505,943 11,304,203
Due to affiliate................................... -- -- 260,574
------------ ------------ ------------
Total current liabilities.................. 18,020,903 34,707,732 87,564,190
------------ ------------ ------------
LONG-TERM OBLIGATIONS, NET OF CURRENT PORTION......... 27,614,197 42,872,953 73,986,638
------------ ------------ ------------
DEFERRED INCOME TAXES................................. -- 10,377 3,175,593
------------ ------------ ------------
DEFERRED GAIN......................................... -- 1,157,358 1,092,459
------------ ------------ ------------
COMMITMENTS AND CONTINGENCIES......................... -- -- --
MINORITY INTEREST..................................... 1,849,755 2,212,675 2,449,561
------------ ------------ ------------
PARTNERS' CAPITAL:
General partner..................................... 1,026,260 648,632 171,373
Limited partners.................................... 5,389,680 5,314,828 3,973,228
------------ ------------ ------------
Total partners' capital.................... 6,415,940 5,963,460 4,144,601
------------ ------------ ------------
Total liabilities and partners'
capital................................... $ 53,900,795 $ 86,924,555 $172,413,042
============ ============ ============
</TABLE>
The accompanying notes are an integral part of these consolidated balance
sheets.
5
<PAGE>
MOLL PLASTICRAFTERS LIMITED PARTNERSHIP AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
---------------------------------------- -------------------------
1995 1996 1997 1997 1998
----------- ----------- ------------ ----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
NET SALES................................. $90,875,746 $89,463,883 $116,947,000 $25,632,292 $60,105,303
COST OF SALES............................. 73,909,450 72,961,380 97,086,199 20,075,328 50,738,439
----------- ----------- ------------ ----------- -----------
Gross profit........................... 16,966,296 16,502,503 19,860,801 5,556,964 9,366,864
SELLING, GENERAL AND ADMINISTRATIVE
EXPENSES................................ 8,300,503 7,189,649 10,757,773 2,461,638 4,816,651
TOOLING INCOME, NET....................... (1,716,091) (706,947) (1,911,871) (360,434) (388,119)
MANAGEMENT AND CONSULTING FEE TO RELATED
PARTIES................................. 1,363,135 1,446,143 1,652,933 401,977 770,681
LOSS INCURRED ON CLOSURE OF FACILITY...... -- -- 1,176,172 -- --
----------- ----------- ------------ ----------- -----------
Operating income....................... 9,018,749 8,573,658 8,185,794 3,053,783 4,167,651
INTEREST EXPENSE, NET..................... 2,413,607 2,518,005 3,405,386 675,840 2,336,695
OTHER (INCOME) EXPENSE.................... 119,727 50,307 (299,338) (110,553) 144,395
MINORITY INTEREST IN INCOME (LOSS) OF
SUBSIDIARY.............................. -- (31,224) 434,555 319,083 236,912
----------- ----------- ------------ ----------- -----------
INCOME BEFORE TAXES AND EXTRAORDINARY
ITEM.................................... 6,485,415 6,036,570 4,645,191 2,169,413 1,449,649
----------- ----------- ------------ ----------- -----------
PROVISION FOR INCOME TAXES
Current................................ -- -- 72,279 -- --
Deferred............................... -- -- 10,343 -- 92,411
----------- ----------- ------------ ----------- -----------
-- -- 82,622 -- 92,411
----------- ----------- ------------ ----------- -----------
INCOME BEFORE EXTRAORDINARY ITEM.......... 6,485,415 6,036,570 4,562,569 2,169,413 1,357,238
EXTRAORDINARY ITEM LOSS ON EARLY
EXTINGUISHMENT OF DEBT.................. -- -- -- -- 736,000
----------- ----------- ------------ ----------- -----------
NET INCOME................................ $ 6,485,415 $ 6,036,570 $ 4,562,569 $ 2,169,413 $ 621,238
=========== =========== ============ =========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
6
<PAGE>
MOLL PLASTICRAFTERS LIMITED PARTNERSHIP AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF PARTNERS' CAPITAL
<TABLE>
<CAPTION>
GENERAL PARTNER LIMITED PARTNERS TOTAL
--------------- ---------------- ------------
<S> <C> <C> <C>
BALANCE, DECEMBER 31, 1994....................... $2,105,043 $10,609,508 $12,714,551
Net income.................................... 1,755,001 4,730,414 6,485,415
Distributions................................. (3,773,869) (12,537,593) (16,311,462)
----------- ------------ ------------
BALANCE, DECEMBER 31, 1995....................... 86,175 2,802,329 2,888,504
----------- ------------ ------------
Net income.................................... 1,671,224 4,365,346 6,036,570
Distributions................................. (731,139) (1,777,995) (2,509,134)
----------- ------------ ------------
BALANCE, DECEMBER 31, 1996....................... 1,026,260 5,389,680 6,415,940
----------- ------------ ------------
Net income.................................... 1,263,831 3,298,738 4,562,569
Distributions................................. (1,641,975) (3,375,570) (5,017,545)
Translation adjustment........................ 516 1,980 2,496
----------- ------------ ------------
BALANCE, DECEMBER 31, 1997....................... $ 648,632 $ 5,314,828 $ 5,963,460
=========== ============ ============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
7
<PAGE>
MOLL PLASTICRAFTERS LIMITED PARTNERSHIP AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
------------------------------------------ --------------------------
1995 1996 1997 1997 1998
------------ ------------ ------------ ----------- ------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income.......................... $ 6,485,415 $ 6,036,570 $ 4,562,569 $ 2,169,413 $ 621,238
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation and amortization..... 4,417,590 4,148,148 5,399,573 1,233,979 2,138,864
Write-off of investment in
affiliate....................... 300,000 -- -- -- --
(Gain) loss on disposal of fixed
assets.......................... 119,727 50,307 (35,661) -- 5,168
Accrued loss on closure of
facility........................ -- -- 1,060,604 -- --
Deferred income taxes............. -- -- 10,343 -- 91,000
Minority interest in subsidiary
income (loss)................... -- (31,224) 434,555 319,083 236,912
Changes in assets and liabilities,
net of assets purchased:
Accounts receivable............. (1,318,658) 3,300,726 (8,347,044) (3,326,100) 2,868,909
Receivable from affiliates...... (390,000) -- (74,451) -- --
Inventories..................... (350,539) 672,096 527,008 (925,373) (1,532,483)
Other current assets............ (781,941) 938,771 181,065 (396,776) (557,434)
Deposits on tooling............. (3,245,354) 3,830,300 1,095,033 (553,375) (920,461)
Other assets.................... -- (251,035) (359,124) 61,460 (915,557)
Accounts payable................ (924,669) (2,559,947) 3,805,343 868,396 (1,965,532)
Accrued liabilities............. 1,535,307 (1,268,403) 84,746 (223,993) (3,034,484)
Customer deposits on tooling.... 3,894,672 (4,066,305) (2,337,203) 747,748 679,787
Checks drawn in excess of cash
on deposit................... (32,370) 2,261 (501,592) (2,796) 1,363,996
------------ ------------ ------------ ----------- ------------
Total adjustments............ 3,223,765 4,765,695 (943,195) (2,197,747) (1,541,315)
------------ ------------ ------------ ----------- ------------
Net cash provided by (used in)
operating activities......... 9,709,180 10,802,265 5,505,764 (28,334) (920,077)
------------ ------------ ------------ ----------- ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures................ (2,775,589) (1,387,297) (6,561,692) (334,786) (3,204,345)
Proceeds on disposal of fixed
assets............................ 222,947 57,765 267,530 100,269 416,700
Due from Lawson Mardon Packaging,
Inc. ............................. -- (110,609) 110,609 -- --
Purchase of assets of the Reliance
division of Lawson Mardon
Packaging, Inc. .................. -- (10,151,754) -- -- --
Purchase of Hanning................. -- -- (7,181,785) -- --
Purchase of Somomeca, net of cash
received.......................... -- -- (850,000) -- (11,737,470)
------------ ------------ ------------ ----------- ------------
Net cash used in investing
activities................... (2,552,642) (11,591,895) (14,215,338) (234,517) (14,525,115)
------------ ------------ ------------ ----------- ------------
</TABLE>
8
<PAGE>
MOLL PLASTICRAFTERS LIMITED PARTNERSHIP AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS--(CONTINUED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
------------------------------------------ --------------------------
1995 1996 1997 1997 1998
------------ ------------ ------------ ----------- ------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from (payments on)
revolving loan facility............ $ (1,388,269) $ 200,375 $ 10,170,694 $ 730,152 $ (9,802,543)
Proceeds from issuance of long-term
obligations........................ 14,267,877 9,597,130 12,513,382 729,567 56,308,024
Principal payments on long-term
obligations........................ (3,540,330) (7,581,902) (7,168,396) (1,297,297) (23,737,022)
Distributions........................ (16,311,462) (2,509,134) (5,017,545) (38,288) (1,859,121)
Financing costs...................... -- (251,032) (842,705) -- --
Minority partner contributions to
Reliance........................... -- 1,880,979 -- -- --
Distributions to minority partners
of Reliance........................ -- -- (60,760) -- --
------------ ------------ ------------ ----------- ------------
Net cash provided by (used in)
financing activities.......... (6,972,184) 1,336,416 9,594,670 124,134 20,909,338
------------ ------------ ------------ ----------- ------------
EFFECT OF EXCHANGE RATE CHANGES IN
CASH................................. -- -- (33,928) (11,109) (52,399)
------------ ------------ ------------ ----------- ------------
NET CHANGE IN CASH.................... 184,354 546,786 851,168 (149,826) 5,411,747
------------ ------------ ------------ ----------- ------------
BALANCE AT BEGINNING OF PERIOD........ 146,753 331,107 877,893 877,893 1,729,061
------------ ------------ ------------ ----------- ------------
BALANCE AT END OF PERIOD.............. $ 331,107 $ 877,893 $ 1,729,061 $ 728,067 $ 7,140,808
============ ============ ============ =========== ============
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid for interest............... $ 2,225,115 $ 2,822,910 $ 3,414,407 $ 644,112 $ 1,446,297
============ ============ ============ =========== ============
Cash paid for income taxes........... $ -- $ -- $ 21,590 $ -- $ --
============ ============ ============ =========== ============
</TABLE>
Non-cash transaction:
During 1997, the Partnership incurred a payable to the former owners of
Hanning of $1,500,000 for the purchase of Hanning.
During 1997, the Partnership terminated a capital lease which resulted in a
reduction of debt by $2,503,226 and reduction of fixed assets by $1,205,254.
The accompanying notes are an integral part of these consolidated financial
statements.
9
<PAGE>
MOLL PLASTICRAFTERS LIMITED PARTNERSHIP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. ORGANIZATION
Moll PlastiCrafters Limited Partnership ("Moll" or the "Partnership") was
formed in July 1991 for the purpose of manufacturing and selling injection
molded plastic parts. Under the partnership agreement, the partnership is
scheduled to terminate on December 31, 2012. Moll operates manufacturing
facilities in the United States, Canada, Germany and the United Kingdom.
At December 31, 1997, Moll maintained investments in three wholly-owned
subsidiaries (Moll Industries, LLC; Moll PlastiCrafters UK, Ltd.; and Moll
PlastiCrafters, LLC) as well as a 69% ownership interest in Reliance Products
Limited Partnership.
Moll Industries, LLC ("Industries") was formed on December 30, 1997. At
December 31, 1997, Industries contained no operating activities.
Moll PlastiCrafters UK, Ltd. ("Moll UK") was formed in 1997 and contains
the United Kingdom operations of Hanning purchased in 1997 (see Note 3).
Moll PlastiCrafters, LLC ("Moll Germany") was formed in 1997 and contains
the German operations of Hanning purchased in 1997 (see Note 3).
Reliance Products Limited Partnership ("Reliance") was formed in 1996. Moll
owns a 69% limited partnership interest in Reliance through its holdings of
Class B partnership units (see Note 3). The minority partners of Reliance
contributed $1,880,979 to Reliance upon its formation. Reliance operates a
production facility in Canada. The Reliance partnership agreement establishes
priorities for allocations of income, as follows: first, to the holders of Class
A partnership units until each has received a 19.5% return on its unreturned
capital; second, to Moll and the general partner until each has received a 30%
return on its unreturned capital contribution; third, to the remaining holders
of Class B partnership units until each has received a 30% return on its
unreturned capital contribution and fourth, to each of the Class B partnership
unit holders in proportion to the number of units held.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of Moll and its
majority owned subsidiaries (collectively, the "Partnership"). All significant
intercompany transactions and balances have been eliminated.
REVENUES AND ACCOUNTS RECEIVABLE
The Partnership's customers operate primarily in the home appliance,
business equipment and electronics industries. The Partnership generally grants
credit to customers on an unsecured basis. Revenues from sales are recognized at
the time products are shipped.
TOOLING
The Partnership enters into agreements with its customers to design and
produce certain customer owned plastic injection tooling (primarily molds).
Monies paid or received by the Partnership in connection with tooling that
remains undelivered at the end of an accounting period are included as Deposits
on Tooling or Customer Deposits on Tooling, respectively, in the accompanying
consolidated balance sheet. At the time of delivery of completed tooling, the
excess of revenues over costs incurred are recognized in the accompanying
consolidated statements of income as tooling revenue, net.
10
<PAGE>
MOLL PLASTICRAFTERS LIMITED PARTNERSHIP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
INVENTORIES
Inventories are valued at the lower of cost (first-in, first-out (FIFO)
method) or market.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment is valued at cost or allocated fair value at
time of acquisition. Depreciation is computed using the straight-line and
declining balance methods over the estimated useful lives of the assets, which
are as follows:
YEARS
-----
Buildings and building improvements................... 25
Machinery and equipment............................... 3-10
Furniture and fixtures................................ 10
Computer hardware and software........................ 3-10
Automobiles........................................... 3
INTANGIBLE ASSETS
Loan costs are amortized over the term of the related loan using the
straight-line method. Organizational costs are amortized over five years using
the straight-line method. Covenants not to compete are amortized over the life
of the agreements using the straight-line method.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The Partnership estimates the fair value of financial instruments using
quoted or estimated market prices based upon the current interest rate
environment and the remaining term to maturity. At December 31, 1997, there were
no material differences in the book values of the Partnership's financial
instruments and their related fair values.
INCOME TAXES
As Moll is a partnership, the earnings of Moll, including the earnings of
foreign subsidiaries attributable to Moll for United States income tax purposes,
are included in the tax returns of its partners. Accordingly, the consolidated
financial statements contain no provision for federal or state income taxes
related to these earnings.
Certain of the Partnership's subsidiaries formed in 1997 are taxable
entities. The Partnership has accounted for income taxes for these subsidiaries
using the liability method which requires recognition of deferred tax assets and
liabilities for the expected future consequences of events that have been
included in the financial statements or income tax returns.
The Partnership's taxable subsidiaries have no significant differences
between its financial reporting and tax basis except for its property, plant and
equipment, for which a deferred tax liability has been reflected in the
accompanying consolidated balance sheet. The Partnership's taxable subsidiaries
incurred current foreign income tax expense of $72,279 in 1997.
PARTNER'S CAPITAL
The income of the Partnership is allocated to the partners based on their
respective ownership percentages. Amounts classified as partners' capital are
subject to distribution at the discretion of the partners; however, the amount
of distributions is subject to limitations under certain of the Partnerships'
debt agreements (See Note 6).
11
<PAGE>
MOLL PLASTICRAFTERS LIMITED PARTNERSHIP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
FOREIGN CURRENCY TRANSLATION
Assets and liabilities of the Partnership's foreign subsidiaries are
translated to U.S. dollars at current exchange rates, while revenues and
expenses are translated at the average exchange rate prevailing during the
period. Translation adjustments are recorded as a component of partners'
capital.
MANAGEMENT ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
ACCRUED CLAIMS AND LITIGATION
The Partnership is partially self-insured for claims arising from public
liability, property damage, workers' compensation, and employee health benefits.
Excess insurance coverage is maintained for per-incident and cumulative
liability losses for these risks in amounts management considers adequate.
Amounts are accrued currently for the estimated cost of claims incurred,
including related expenses. Management considers the accrued liabilities for
unsettled claims to be adequate; however, there is no assurance that the amounts
accrued will not vary from the ultimate amounts incurred upon final disposition
of all outstanding claims. As a result, periodic adjustments to the reserves
will be made as events occur which indicate that changes are necessary.
LONG-LIVED ASSETS
When factors are present which indicate the cost of assets may not be
recovered, the Partnership evaluates the realizability of its long-lived assets,
based upon the anticipated future cash flows generated by the asset.
RECLASSIFICATIONS
Certain prior year amounts have been reclassified to conform to the 1997
presentation.
INTERIM FINANCIAL STATEMENTS
The unaudited financial statements have been prepared on a basis consistent
with the audited financial statements. In the opinion of management, the
accompanying unaudited financial statements reflect all adjustments necessary to
present fairly the financial position as of March 31, 1998 and the results of
operations and cash flows for the three months ended March 31, 1997 and 1998.
RECENT ACCOUNTING PRONOUNCEMENTS
In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 131, Disclosures About Segments of an
Enterprise and Related Information. This Statement establishes standards for the
way that public business enterprises report information about operating segments
in annual financial statements and interim financial reports issued to
shareholders. It also establishes standards for related disclosures about
products and services, geographic areas and major customers. The Statement is
effective for fiscal years beginning after December 15, 1997. The Partnership is
evaluating SFAS No. 131 to determine the impact, if any, on its reporting and
disclosure requirements.
12
<PAGE>
MOLL PLASTICRAFTERS LIMITED PARTNERSHIP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 130, Reporting Comprehensive Income. The
Statement establishes standards for reporting comprehensive income and its
components in a full set of financial statements. The Statement is effective for
fiscal years beginning after December 15, 1997. The Partnership currently
reports one-item in partners' capital that would be classified as other
comprehensive income.
3. ACQUISITIONS
RELIANCE
Effective December 12, 1996, Reliance purchased the net assets of the
Reliance Division of Lawson Mardon Packaging, Inc. for cash of $10,151,754,
whose operations are located in Canada. The transaction has been accounted for
by the purchase method with the purchase price allocated based on the fair
values of the assets purchased and liabilities assumed, as follows:
<TABLE>
<S> <C>
Accounts receivable......................................... $ 2,153,935
Inventories................................................. 2,823,970
Prepaid expenses............................................ 68,495
Equipment................................................... 7,255,970
Liabilities assumed......................................... (2,150,616)
-----------
$10,151,754
===========
</TABLE>
HANNING
Effective August 8, 1997, Moll acquired a group of companies that had
previously been under common ownership ("Hanning"). The companies acquired, the
type of acquisition and the country of operations are as follows:
<TABLE>
<CAPTION>
TYPE OF COUNTRY OF
COMPANY ACQUISITION OPERATIONS
------- -------------------- --------------
<S> <C> <C>
Hanning Corporation............................ Assets United States
Hanning-Kunststoffe Beteilingungs-GmbH......... Stock Germany
Hanning-Kunststoffe GmbH & Co. ................ Partnership Interest Germany
Hanning Plastics, Ltd. ........................ Assets United Kingdom
Hanning Property Associates.................... Assets United States
PB Hanning GmbH & Co. ......................... Stock Germany
PB Hanning GmbH & Co. Handelsgesellschaft...... Partnership Interest Germany
</TABLE>
Moll paid $7,582,000 in cash and agreed to pay the sellers $1,500,000 over
four years. Additionally, Moll incurred expenses totaling approximately
$1,400,000 in connection with this acquisition. The purchase price is subject to
adjustment based on an evaluation of the assets purchased and liabilities
assumed which is currently in process. However, the purchase price, excluding
expenses, may not exceed $10,000,000.
13
<PAGE>
MOLL PLASTICRAFTERS LIMITED PARTNERSHIP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The acquisition was accounted for using the purchase method of accounting.
The purchase price has been allocated to the assets acquired (net of $1,800,000
of assets which were distributed to partners of Moll) and liabilities assumed
based on information currently available as to their fair values as follows:
<TABLE>
<CAPTION>
<S> <C>
Accounts receivable......................................... $ 5,369,000
Inventories................................................. 5,790,000
Deposits on tooling......................................... 5,177,000
Prepaid expenses............................................ 140,000
Property, plant and equipment............................... 11,180,000
Other assets................................................ 21,000
Accounts payable............................................ (6,343,000)
Accrued liabilities and other current liabilities........... (2,270,000)
Customer deposits on tooling................................ (6,536,000)
Noncurrent liabilities...................................... (3,846,000)
-----------
$8,682,000
===========
</TABLE>
An evaluation of the acquired assets and liabilities is in progress. Upon
completion of the evaluation, net additions or reductions, if any, in the fair
values currently assigned will be credited or charged against long-term assets.
The results of operations of Reliance and Hanning have been included in the
consolidated financial statements since the effective date of each acquisition.
See Note 16 for unaudited pro forma information.
4. INTANGIBLE AND OTHER ASSETS
Intangible and other assets of the Partnership at December 31, 1996 and
1997 consist of the following:
<TABLE>
<CAPTION>
1996 1997
----------- ----------
<S> <C> <C>
Covenants not to compete.................................... $ 1,740,678 $1,344,199
Acquisition costs on pending transactions................... -- 1,065,778
Deposit on purchase of Somomeca............................. -- 850,000
Loan costs.................................................. 455,060 842,705
Organization costs.......................................... 327,108 --
Other...................................................... 226,055 456,513
----------- ----------
2,748,901 4,559,195
Less: accumulated amortization........................... (1,717,645) (996,231)
----------- ----------
$ 1,031,256 $3,562,964
=========== ==========
</TABLE>
5. INVENTORIES
Inventories of the Partnership at December 31, 1996 and 1997 consist of the
following:
<TABLE>
<CAPTION>
1996 1997
----------- -----------
<S> <C> <C>
Raw materials............................................. $ 4,696,804 $ 7,718,780
Work-in-progress.......................................... 999,307 1,413,502
Finished goods............................................ 5,656,377 7,614,110
Less: reserve for excess and obsolete inventory........... (810,749) (1,166,737)
----------- -----------
$10,541,739 $15,579,655
=========== ===========
</TABLE>
14
<PAGE>
MOLL PLASTICRAFTERS LIMITED PARTNERSHIP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
6. LONG-TERM OBLIGATIONS
Long-term obligations of the Partnership at December 31, 1996 and 1997
consist of the following:
<TABLE>
<CAPTION>
1996 1997
----------- -----------
<S> <C> <C>
Revolving loan facility with a bank that provided for borrowings up to the
lesser of $10,950,000 or the sum of 85% of eligible accounts receivable and
50% of eligible inventories. Interest was payable monthly at the bank's
reference rate plus 0.5% (9.25% at December 31, 1997). This revolving loan
facility was refinanced on January 8, 1998.................................... $ 200,375 $10,720,543
Revolving credit agreement under which the Partnership can obtain up to
$12,300,000 (Canadian dollars, approximately $8,600,000 U.S. dollars at
December 31, 1997) in loans. Loans bear interest at either the lender's
floating rate plus 0.5% or at a IBOR based rate at the option of the
Partnership (5.98% at December 31, 1997). The available loan amount decreases
by approximately $73,000 monthly and expires on December 11, 1999............. 6,448,021 5,809,071
Term note payable to a bank. Interest payable monthly at a
range of LIBOR plus 2% (7.94% at December 31, 1997) to
8.75%. This note was refinanced on January 8, 1998. .......................... 20,941,652 24,598,000
Industrial Development Revenue Bonds, payable in annual principal installments
of $190,000 to $220,000 through December 1, 1999. Interest is payable
bi-annually at 8.25% to 8.625%. .............................................. 635,000 440,000
Note payable to former owner of Quality Plastics Company,
Inc. in annual installments of $448,569 beginning October
7, 1996 with the remaining balance due October 7, 1999.
Interest is payable semi-annually at 9%. This note was
refinanced on January 8, 1998. ............................................... 1,794,228 1,345,708
Payable to former owners of Hanning. The payable is denominated in Deutsche
Marks. Principle is payable in three equal annual payments beginning August
1999. Interest is due annually at 8%. ........................................ -- 1,500,000
Mortgage payable in monthly installments of $28,486. The
mortgage expires on December 1, 2012. Interest is payable
at 8.40%. .................................................................... -- 2,901,884
----------- -----------
Total long-term debt................................................. 30,019,276 47,315,206
----------- -----------
Capitalized equipment sublease obligation, interest on the
sublease is 9.5%. The debt was extinguished in June
1997.......................................................................... 2,806,133 --
Other capitalized equipment leases.............................................. 815,414 617,197
----------- -----------
Total capitalized lease obligations (see Note 7)..................... 3,621,547 617,197
----------- -----------
Total long-term obligations.................................................. 33,640,823 47,932,403
Less current portion......................................................... (6,026,626) (5,059,450)
----------- -----------
$27,614,197 $42,872,953
=========== ===========
</TABLE>
15
<PAGE>
MOLL PLASTICRAFTERS LIMITED PARTNERSHIP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The amounts of all long-term obligations, excluding capital leases, to be
repaid for the years following December 31, 1997 are as follows:
1998............................................ $ 4,745,504
1999............................................ 10,239,904
2000............................................ 5,920,511
2001............................................ 5,931,032
2002............................................ 7,442,473
Thereafter...................................... 13,035,782
-----------
$47,315,206
===========
DEBT REFINANCING
On January 8, 1997, the Partnership entered into a credit agreement
("Credit Agreement") with a group of lenders ("Lenders"), in which the Lenders
agreed to loan the Partnership $60,000,000 in term debt (under two equal
tranches) and make available a revolving credit facility of up to $10,000,000,
based on the level of eligible accounts receivable and inventory. The debt under
the Credit Agreement earns interest at a variable rate depending upon the market
rate and certain financial ratios of the Partnership. The effective interest
rate would have been approximately 8.25% if the debt had been outstanding at
December 31, 1997. Substantially all assets of the Partnership are pledged as
collateral on the Credit Agreement.
Tranche A and the revolving credit facility expire on December 31, 2003.
Tranche B expires on December 31, 2005. The term loans require varying,
quarterly principal payments beginning in 1998. These requirements have been
reflected in the debt maturities included above. Additionally, the Credit
Agreement requires prepayment of a portion of the term loans should the
Partnership generate a specified level of cash flows as defined in the Credit
Agreement. Any outstanding balance under the revolving credit facility is due at
expiration.
The Credit Agreement contains restrictions on the payment of dividends and
distributions, transactions with affiliated parties, purchase and sale of fixed
assets and limitations on the level of advances that can be made to certain
subsidiaries, among others. Additionally, it contains various financial
covenants, all of which the Partnership was in compliance with as of December
31, 1997.
The Partnership had deferred costs of $671,000 at December 31, 1997 related
to the previous credit agreement which will be expensed in 1998 in connection
with the refinancing.
LEASE RENEGOTIATION
On June 15, 1997, the Partnership renegotiated an agreement for the lease
of equipment. The terms of the original agreement required the lease to be
accounted for as a capital lease. However, the terms of the new agreement result
in the lease being accounted for as an operating lease. At the date of the
renegotiation, the difference between the net book value of the assets and the
related debt under the capital lease, $1,297,972, was reflected as a deferred
gain in the accompanying consolidated balance sheets at December 31, 1997.
16
<PAGE>
MOLL PLASTICRAFTERS LIMITED PARTNERSHIP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
7. LEASE COMMITMENTS
The aggregate future minimum fixed lease obligations for the Partnership as
of December 31, 1997, are as follows:
<TABLE>
<CAPTION>
CAPITAL LEASES - OPERATING
EQUIPMENT LEASES
---------------- ----------
<S> <C> <C>
1998..................................................... $362,732 $3,243,318
1999..................................................... 269,916 2,043,698
2000..................................................... 34,498 1,680,386
2001..................................................... 14,476 1,450,466
2002..................................................... 4,557 552,571
Thereafter............................................... -- 66,201
-------- ----------
Total minimum lease payments............................. 686,179 $9,036,640
==========
Less amounts representing interest....................... 68,982
--------
Present value of minimum capital lease payments.......... $617,197
========
</TABLE>
Total rent expense for the Partnership's operating leases was approximately
$1,375,000, $1,780,000 and $2,835,000 for 1995, 1996 and 1997, respectively.
8. RETIREMENT PLANS
The Partnership maintains profit-sharing plans covering substantially all
employees in the United States and Canada meeting the service requirements
defined in the plan. Under the provisions of the plans, employees may contribute
from 2% to 15% of their wages. The Partnership may make matching contributions
equal to a discretionary percentage, to be determined by the Partnership.
Matching contributions are subject to certain vesting requirements. The
Partnership contributed approximately $143,000, $165,000 and $233,000 to the
plans in 1995, 1996 and 1997, respectively.
9. RELATED PARTIES
At December 31, 1997, the Partnership has a note receivable of $390,000
from an individual with ownership interest in certain partners of Moll. The note
is payable in three equal annual installments beginning February 1, 1998 and
bears interest at 9%.
The Partnership pays management fees to certain related companies which are
limited in amount under the Partnership's debt agreements. Management fee
expense was approximately $1,363,000, $1,346,000 and $1,553,000 for 1995, 1996
and 1997, respectively. Of this amount, approximately $150,000 was recorded as
an accrued liability at December 31, 1997.
Under the terms of Moll's Partnership Agreement, effective September 1995,
Moll committed to pay consultant fees to a partner as defined in the Partnership
Agreement not to exceed $100,000 per year. The arrangement was for two years and
terminated in September 1997. Payments made in 1996 and 1997 were $100,000 per
year.
The Partnership leases land and buildings in Germany from an entity owned
by certain partners of the Partnership. The lease expires on August 7, 1998,
contains three automatic one year extensions and accrues rent at a rate of
790,000 Deutsche Marks ($439,000 per year based on the December 31, 1997
exchange rate). Payment of the accrued rent is subject to restrictions as
defined in the Credit Agreement (see Note 6). The Partnership recognized rent
expense of $176,000 in 1997, which is included in accounts payable at December
31, 1997.
17
<PAGE>
MOLL PLASTICRAFTERS LIMITED PARTNERSHIP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
10. FACILITY CLOSURE
In September 1997, the Partnership closed its El Paso facility. The
expenses incurred in closing the facility are reflected as "Loss Incurred on
Closure of Facility" in the accompanying consolidated statements of income.
Liabilities and reserves of $1,061,000 are included in the accompanying December
31, 1997 consolidated balance sheet for anticipated future expenditures and
losses related to the closure. Equipment from the El Paso facility that was
disposed of in February 1998 is included in the accompanying consolidated
balance sheets as "Equipment Held for Sale" at its net realized value.
11. MAJOR CUSTOMERS
Two customers accounted for approximately 46%, 50% and 45% of the
Partnership's net sales in 1995, 1996 and 1997, respectively. In addition,
approximately 49% and 61% of the Partnership's total accounts receivable at
December 31, 1996 and 1997 were from these customers. Management believes the
credit risk associated with these customers is minimal.
12. CONTINGENCIES
The Partnership is a party to various lawsuits and claims in the normal
course of business. While the outcome of the lawsuits and claims against the
Partnership cannot be predicted with certainty, management believes that the
ultimate resolution of the matters will not have a material effect on the
financial position or results of operations of the Partnership.
13. SEGMENT INFORMATION
The Partnership operates in one industry segment. The following table
presents sales and other financial information by geographic region for the
years ended December 31, 1995, 1996 and 1997.
<TABLE>
<CAPTION>
1995 1996 1997
----------- ----------- ------------
<S> <C> <C> <C>
Net sales:
United States............................ $90,875,746 $89,035,929 $ 87,584,479
Canada................................... -- 427,954 17,383,250
Europe................................... -- -- 11,979,271
----------- ----------- ------------
Total net sales.................. $90,875,746 $89,463,883 $116,947,000
=========== =========== ============
Operating income:
United States............................ $ 9,018,749 $ 8,626,800 $ 8,306,464
Canada................................... -- (53,142) 1,551,115
Europe................................... -- -- (1,671,785)
----------- ----------- ------------
Total operating income........... $ 9,018,749 $ 8,573,658 $ 8,185,794
=========== =========== ============
Identifiable assets:
United States............................ $51,287,835 $41,502,714 $ 60,529,356
Canada................................... -- 12,590,288 12,353,975
Europe................................... -- -- 15,146,654
Eliminations............................. -- (192,207) (1,105,430)
----------- ----------- ------------
Total assets..................... $51,287,835 $53,900,795 $ 86,924,555
=========== =========== ============
</TABLE>
18
<PAGE>
MOLL PLASTICRAFTERS LIMITED PARTNERSHIP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
<TABLE>
<CAPTION>
1995 1996 1997
----------- ----------- ------------
<S> <C> <C> <C>
Depreciation and amortization:
United States............................ $ 4,417,590 $ 4,087,803 $ 3,819,324
Canada................................... -- 60,345 1,158,082
Europe................................... -- -- 422,167
----------- ----------- ------------
Total............................ $ 4,417,590 $ 4,148,148 $ 5,399,573
=========== =========== ============
Capital expenditures:
United States............................ $ 2,775,589 $ 1,387,297 $ 5,965,381
Canada................................... -- -- 531,633
Europe................................... -- -- 64,678
----------- ----------- ------------
Total............................ $ 2,775,589 $ 1,387,297 $ 6,561,692
=========== =========== ============
</TABLE>
14. SOMOMECA ACQUISITION
Effective January 8, 1998, Industries, through its subsidiaries, purchased
100% of the outstanding shares of Somomeca Industries S.A.R.L. ("Somomeca").
Somomeca's operations are located primarily in France. Somomeca incurred a net
loss before taxes of $363,000 on revenues of $84,926,000 in their fiscal year
ended August 31, 1997. The Partnership paid $12,587,000 net of cash received and
assumed $68,377,000 of liabilities in the acquisition. The stock purchase
agreement allows for a reduction of the purchase price if the stockholders'
equity of Somomeca at the closing date is less than the similar amount on
February 28, 1997. An evaluation of the stockholders' equity at the closing date
is currently in process. Additionally, the stock purchase agreement requires the
payment of additional consideration of up to 13,000,000 French Franc ($2,135,000
at December 31, 1997 exchange rates) should Somomeca achieve specified operating
results for the twelve months ending August 31, 1998. See Note 15 for unaudited
pro forma information.
As discussed in Note 1, during 1997 and at December 31, 1997, Industries
did not contain any assets, liabilities, or operations. In the future, the
members of Industries, excluding Moll, are entitled to all distributions made by
Industries which are attributable to a) any distribution received by Industries
from any direct or indirect subsidiary organized under the laws of France (the
"French Companies") and b) proceeds from the sale or other disposition of the
equity interests in any of the French Companies.
Secondly, a member of Industries is entitled to a distribution equal to 5%
of the debt service paid to Industries by the French Companies on the initial
acquisition loan (agreed to be $13,000,000). However, no amount shall be paid
unless the manager of Industries concludes that the liquidation of Industries
would result in aggregate distributions to Moll that are in excess of the
acquisition debt amount.
Thirdly, a member of Industries is entitled to a distribution if
indebtedness of the French Companies to Industries exceeds $40 million. The
amount of the distribution equals 5% of the debt service on the indebtedness in
excess of $40 million.
Moll is entitled to all other distributions of Industries.
15. SUMMARIZED FINANCIAL INFORMATION OF SUBSIDIARIES
The following reflects the summarized combined financial data of Moll
PlastiCrafters GmbH and Moll Industries UK, Limited (formerly companies in the
Hanning Companies) and Moll Plastics SARL (formerly Somomeca Industries) since
the date of their acquisition by the Company (See Notes 3 and 16). These
companies and all of their subsidiaries have guaranteed the $100,000,000 of
11-3/4% Senior Notes due 2004, issued by Anchor (See Note 16) and represent all
of the subsidiaries of the Company for the periods presented.
19
<PAGE>
MOLL PLASTICRAFTERS LIMITED PARTNERSHIP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Statement of Income Data:
<TABLE>
<CAPTION>
YEAR ENDED THREE MONTHS
DECEMBER 31, ENDED
1997 MARCH 31, 1998
------------ --------------
(UNAUDITED)
<S> <C> <C>
Net sales.............................................. $11,979,000 $29,814,000
Gross margin........................................... (740,000) 3,048,000
Income (loss) from operations.......................... (1,671,000) 980,000
Net loss............................................... (1,607,000) (628,000)
</TABLE>
Balance Sheet Data:
<TABLE>
<CAPTION>
DECEMBER 31,
1997 MARCH 31, 1998
------------ --------------
(UNAUDITED)
<S> <C> <C>
Current assets......................................... $ 9,528,000 $ 50,921,000
Total assets........................................... 17,591,000 115,574,000
Current liabilities.................................... 19,054,000 109,158,000
Total liabilities...................................... 19,089,000 118,210,000
Partners deficit....................................... (1,498,000) (2,636,000)
</TABLE>
16. SUBSEQUENT EVENT AND PRO FORMA INFORMATION (UNAUDITED)
Effective June 26, 1998, the Partnership completed a series of transactions
as follows:
(i) the distribution by the Partnership of its 69% Class B limited
partnership interest in Reliance to certain of Moll's limited partners,
(ii) the merger of Moll into Anchor Advanced Products, Inc. ("Anchor")
in exchange for common shares of AMM Holdings, Inc. ("Holdings"--Anchor's
parent), to form Moll Industries, Inc.,
(iii) the issuance by Moll Industries, Inc. of $130,000,000 Senior
Subordinated Notes,
(iv) the acquisition of Gemini Plastic Services, Inc. by Moll
Industries, Inc., and
(v) a capital contribution by AMM Holdings Inc. into Moll Industries,
Inc. of $2,000,000.
The following unaudited statement of income data gives effect to these
transactions as well as the acquisitions of Reliance, Hanning, and Somomeca as
if they had occurred at the beginning of the respective periods.
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31,
--------------------------------
1996 1997
-------------- --------------
<S> <C> <C>
Net sales............................................... $421,683,000 $414,630,000
------------ ------------
Operating income........................................ $ 30,538,000 $ 30,458,000
------------ ------------
Income before taxes and extraordinary item.............. $ 3,668,000 $ 4,321,000
------------ ------------
</TABLE>
20
<PAGE>
MOLL PLASTICRAFTERS LIMITED PARTNERSHIP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The following unaudited balance sheet information gives effect to the
transactions as if they had occurred on March 31, 1998.
Current assets.............................................. $156,174,000
------------
Total assets................................................ $329,817,000
------------
Current liabilities......................................... $ 69,655,000
------------
Total liabilities........................................... $329,623,000
------------
Stockholders' equity........................................ $ 194,000
------------
21
<PAGE>
Exhibit 7.2
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Somomeca Industries:
We have audited the accompanying consolidated balance sheets of SOMOMECA
INDUSTRIES (a French corporation) and subsidiaries as of December 31, 1997 and
as of August 31, 1997 and 1996, and the related consolidated statements of
operations, stockholders' equity and cash flows for the four month period ended
December 31, 1997 and for each of the three years in the period ended August 31,
1997. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these statements
based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
SOMOMECA INDUSTRIES and subsidiaries as of December 31, 1997 and as of August
31, 1997 and 1996, and the results of their operations and their cash flows for
the four month period ended December 31, 1997 and for each of the three years in
the period ended August 31, 1997, in conformity with generally accepted
accounting principles in the United States.
BARBIER, FRINAULT & ASSOCIES
Member Firm of Andersen Worldwide
February 17, 1998
Paris, France
22
<PAGE>
SOMOMECA INDUSTRIES AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS OF US DOLLARS -- NOTE 2)
<TABLE>
<CAPTION>
AUGUST 31, AUGUST 31, DECEMBER 31,
1996 1997 1997
---------- ---------- ------------
ASSETS
<S> <C> <C> <C>
CURRENT ASSETS
Cash and cash equivalents............................... $ 851 $ 804 $ 428
Trade receivables, net of allowance of $91, $213 and
$104 respectively.................................... 21,223 25,752 26,623
Other receivables....................................... 1,235 1,667 1,193
Inventories............................................. 8,976 7,862 7,806
Prepaid expenses........................................ 1,030 502 730
Deferred tax assets..................................... 684 828 617
------- ------- -------
Total current assets........................... 33,999 37,415 37,397
------- ------- -------
PROPERTY, PLANT AND EQUIPMENT, NET........................ 23,676 21,304 22,438
------- ------- -------
OTHER ASSETS.............................................. 7,204 5,928 6,029
------- ------- -------
Total assets................................... $64,879 $64,647 $65,864
======= ======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Revolving lines of credit............................... $ 9,111 $17,841 $16,005
Current portion of long-term obligations................ 5,110 4,328 4,026
Accounts payable........................................ 17,764 16,459 18,221
Accrued liabilities..................................... 9,922 7,121 7,778
------- ------- -------
Total current liabilities...................... 41,907 45,749 46,030
------- ------- -------
DEFERRED INCOME TAXES..................................... 1,192 1,046 1,399
------- ------- -------
LONG-TERM OBLIGATIONS, NET OF CURRENT PORTION............. 13,286 11,349 10,523
------- ------- -------
MINORITY INTEREST......................................... 2,065 1,430 1,513
------- ------- -------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY
Common stock (par value of $9.89; 500,000 shares
authorized and outstanding).......................... 4,943 4,943 4,943
Additional paid-in capital.............................. 1,848 1,848 1,848
Retained earnings (deficit)............................. (614) (775) 352
Accumulated foreign currency translation adjustment..... 252 (943) (744)
------- ------- -------
Total stockholders' equity................. 6,429 5,073 6,399
------- ------- -------
Total liabilities and stockholders' equity...... $64,879 $64,647 $65,864
======= ======= =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
23
<PAGE>
SOMOMECA INDUSTRIES AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS OF US DOLLARS--NOTE 2)
<TABLE>
<CAPTION>
FOR THE FOUR
FOR THE YEAR ENDED AUGUST 31, MONTHS ENDED
----------------------------- DECEMBER 31,
1995 1996 1997 1997
------- ------- ------- ------------
<S> <C> <C> <C> <C>
NET SALES........................................ $64,533 $81,983 $84,926 $32,414
COST OF SALES.................................... 54,747 70,353 75,807 27,506
------- ------- ------- -------
Gross profit.............................. 9,786 11,630 9,119 4,908
OPERATING EXPENSES
Selling and marketing.......................... 1,494 1,403 1,690 394
General and administrative..................... 3,317 4,322 4,853 1,337
Other income (expense) net..................... (366) (121) (341) 244
------- ------- ------- -------
Total operating expenses.............. 5,177 5,846 6,884 1,975
------- ------- ------- -------
Operating income...................... 4,609 5,784 2,235 2,933
INTEREST INCOME (EXPENSE)
Interest income................................ 445 37 50 1
Interest expense............................... (3,042) (3,189) (2,648) (806)
------- ------- ------- -------
Total interest income (expense)....... (2,597) (3,152) (2,598) (805)
------- ------- ------- -------
Income (loss) before income taxes..... 2,012 2,632 (363) 2,128
INCOME TAX (EXPENSE) BENEFIT
Current income tax............................. (679) (995) (74) (373)
Deferred income tax............................ (301) (178) 218 (563)
------- ------- ------- -------
Total income tax (expense) benefit.... (980) (1,173) 144 (936)
------- ------- ------- -------
Income (loss) before minority interest......... 1,032 1,459 (219) 1,192
MINORITY INTEREST................................ (108) (265) 272 (65)
------- ------- ------- -------
NET INCOME....................................... $ 924 $ 1,194 $ 53 $ 1,127
======= ======= ======= =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
24
<PAGE>
SOMOMECA INDUSTRIES AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(IN THOUSANDS OF US DOLLARS, EXCEPT SHARE DATA--NOTE 2)
<TABLE>
<CAPTION>
ACCUMULATED
FOREIGN
COMMON STOCK ADDITIONAL RETAINED CURRENCY TOTAL
----------------- PAID-IN EARNINGS TRANSLATION STOCKHOLDERS'
SHARES AMOUNT CAPITAL (DEFICIT) ADJUSTMENT EQUITY
------- ------ ---------- --------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
BALANCE
AUGUST 31, 1994.......... 500,000 $4,943 $1,848 $(2,693) $ -- $ 4,098
Net income................. -- -- -- 924 -- 924
Foreign currency
translation
adjustment............... -- -- -- -- 348 348
------- ------ ------ ------- ------- -------
BALANCE
AUGUST 31, 1995.......... 500,000 4,943 1,848 (1,769) 348 5,370
Dividends.................. -- -- -- (39) -- (39)
Net income................. -- -- -- 1,194 -- 1,194
Foreign currency
translation
adjustment............... -- -- -- -- (96) (96)
------- ------ ------ ------- ------- -------
BALANCE
AUGUST 31, 1996.......... 500,000 4,943 1,848 (614) 252 6,429
Dividends.................. -- -- -- (214) -- (214)
Net income................. -- -- -- 53 -- 53
Foreign currency
translation
adjustment................ -- -- -- -- (1,195) (1,195)
------- ------ ------ ------- ------- -------
BALANCE
AUGUST 31, 1997.......... 500,000 4,943 1,848 (775) (943) 5,073
Net income................. -- -- -- 1,127 -- 1,127
Foreign currency
translation
adjustment............... -- -- -- -- 199 199
------- ------ ------ ------- ------- -------
BALANCE
DECEMBER 31, 1997........ 500,000 $4,943 $1,848 $ 352 $ (744) $ 6,399
======= ====== ====== ======= ======= =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
25
<PAGE>
SOMOMECA INDUSTRIES AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS OF US DOLLARS--NOTE 2)
<TABLE>
<CAPTION>
FOR THE FOUR
FOR THE YEAR ENDED AUGUST 31, MONTHS ENDED
------------------------------ DECEMBER 31,
1995 1996 1997 1997
------- ------- -------- -------------
<S> <C> <C> <C> <C>
OPERATING ACTIVITIES
Net income....................................... $ 924 $ 1,194 $ 53 $ 1,127
Adjustments to reconcile net income to net cash
provided by operating activities...............
Depreciation and amortization.................... 3,324 5,693 6,386 1,971
Loss (gain) on sale of assets.................... (76) (244) (47) 24
Changes in operating assets and liabilities:
(Increase) decrease in inventories............. (80) (3,248) (603) 346
(Increase) decrease in trade and other
receivables................................. (5,164) (7,348) (11,235) 262
(Increase) decrease in other assets............ 2,451 (1,944) 9 248
Increase (decrease) in accounts payable........ (984) 8,252 2,192 1,180
Increase (decrease) in other liabilities....... 5,177 (1,550) (814) 115
Minority interest.............................. (28) (135) (282) 31
------- ------- -------- -------
Net cash provided by (used in) operating
activities............................. 5,544 670 (4,341) 5,304
------- ------- -------- -------
INVESTING ACTIVITIES
Purchase of additional ownership in
subsidiaries................................... -- (297) -- --
Purchase of property, plant and equipment........ (4,115) (6,956) (6,117) (1,771)
Proceeds from sales of property, plant and
equipment...................................... 547 1,728 495 --
------- ------- -------- -------
Net cash used in investing activities..... (3,568) (5,525) (5,622) (1,771)
------- ------- -------- -------
FINANCING ACTIVITIES
Proceeds from (repayment of) short-term
borrowings..................................... 1,260 6,972 11,566 (2,512)
Repayment of capital lease obligations........... (4,446) (3,005) (3,085) (824)
Proceeds from issuance of long-term debt......... 2,333 1,656 3,750 --
Repayment of principal of long-term debt......... (773) (806) (1,903) (637)
Dividends........................................ -- (39) (214) --
------- ------- -------- -------
Net cash provided by (used in) financing
activities............................. (1,626) 4,778 10,114 (3,973)
------- ------- -------- -------
EFFECT OF FOREIGN EXCHANGE RATE CHANGES ON
CASH........................................... 51 17 (198) 64
------- ------- -------- -------
NET INCREASE (DECREASE) IN CASH.................. 401 (60) (47) (376)
CASH AND CASH EQUIVALENTS, BEGINNING OF
PERIOD......................................... 510 911 851 804
------- ------- -------- -------
CASH AND CASH EQUIVALENTS, END OF PERIOD......... $ 911 $ 851 $ 804 $ 428
======= ======= ======== =======
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION
Cash paid during the period for:
Interest....................................... $ 2,995 $ 3,044 $ 2,577 $ 769
------- ------- -------- -------
Income taxes................................... $ 374 $ 1,304 $ 777 $ --
======= ======= ======== =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
26
<PAGE>
SOMOMECA INDUSTRIES AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS OF US DOLLARS, EXCEPT SHARE DATA--NOTE 2)
1. BASIS OF PRESENTATION
The SOMOMECA INDUSTRIES and subsidiaries (the Company) consolidated
financial statements include the following entities:
<TABLE>
<CAPTION>
CONSOLIDATED ENTITIES % OWNED BUSINESS
<S> <C> <C>
SOMOMECA INDUSTRIES................. Holdings
SOMOMECA INDUSTRIES owned
subsidiaries:
SAPI (SARL)....................... 100 Manufacturing and selling of
injection molded plastic parts
SOMOPLAST Lorraine................ 100 Manufacturing and selling of
injection molded plastic parts
BBI............................... 100 Manufacturing and selling of
injection molded plastic parts
SCI Bonnevalaise.................. 100 Building ownership
FINANCIERE SOMOMECA............... 73.7 Holdings
FINANCIERE SOMOMECA owned subsidiaries:
STAPHANE.......................... 100 Manufacturing and selling of molds
for plastic injection
SERIM............................. 100 Manufacturing and selling of molds
for plastic injection and of
injection molded plastic parts
SOMOPLAST......................... 100 Manufacturing and selling of
injection molded plastic parts
SEMIP............................. 100 Manufacturing and selling of molds
for plastic injection
PROMOLDE.......................... 100 Manufacturing and selling of molds
for plastic injection
SCI TERREAU BRENOT................ 95 Building ownership
</TABLE>
The entities listed above were acquired on January 8, 1998 by Moll
PlastiCrafters Limited Partnership.
27
<PAGE>
SOMOMECA INDUSTRIES AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Before September 1995, the legal organization of the various companies
forming SOMOMECA INDUSTRIES was as follows:
% OWNED
SAPI
SAPI owned subsidiaries:
SCI Bonnevalaise............................................ 100
BBI......................................................... 100
FINANCIERE SOMOMECA......................................... 16
SCP Staphane
FINANCIERE SOMOMECA......................................... 52
FINANCIERE SOMOMECA owned subsidiaries:
STAPHANE.................................................... 100
SOMOPLAST................................................... 100
SERIM....................................................... 100
SEMIP....................................................... 100
PROMOLDE.................................................... 100
SCI Terreau Brenot.......................................... 95
In September 1995, SAPI and SCP Staphane completed a restructuring which
led to the SOMOMECA INDUSTRIES current structure, as follows:
- SAPI and SCP STAPHANE were merged, to form SOMOMECA INDUSTRIES, holding
company owned by two individuals (the Staphane family).
- The molding activity of SAPI was contributed to a new company, SAPI
(SARL).
- The number of authorized common shares was set at 500,000, with a par
value of $9.89.
As the previous separate entities and newly formed entity were all under
common control, the restructuring has been reflected as if it occurred at
September 1, 1994, similar to a pooling of interest.
As of August 31, 1994, FINANCIERE SOMOMECA was partly directly held by the
two individuals. During the year ended August 31, 1995, the shares of FINANCIERE
SOMOMECA held by the Staphane family were contributed to the Company.
Accordingly, the investment of this family in FINANCIERE SOMOMECA has been
reflected in the position of stockholders' equity at August 31, 1994, as the
Companies were under common control.
SOMOPLAST LORRAINE (100% owned by SOMOMECA INDUSTRIES) was incorporated
during the year ended August 31, 1996. During the same year, SOMOMECA INDUSTRIES
acquired 5.7% of FINANCIERE SOMOMECA shares from CENTREST (a French company).
SOMOMECA INDUSTRIES and its subsidiaries manufacture and sell molds or
injection molded plastic parts to the automotive industry (car manufacturers and
equipment suppliers) and to other industries.
All companies, except PROMOLDE (Portugal), are located in France.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
CONSOLIDATION
The consolidated financial statements include the accounts of the Company
and its majority-owned subsidiaries, after elimination of intercompany balances
and transactions.
28
<PAGE>
SOMOMECA INDUSTRIES AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
GOODWILL
Goodwill, arising from the difference between the investment cost in
certain subsidiaries and their net assets value at the date of the acquisition,
are being amortized, from the acquisition date, over 20 years. The Company
evaluates on a continual basis, the realizability of goodwill using measurements
of earnings before amortization, as well as operating cash flows for the
respective acquired operations.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment is stated at cost. Depreciation and
amortization are provided over the following estimated useful lives, using the
straight-line method:
Buildings........................................ 20 years
Leasehold improvements........................... 5-10 years
Production equipment............................. 3-7 years
Other equipment.................................. 3-10 years
REVENUE RECOGNITION
Revenue from sales is recognized at the time products are shipped or at the
time of the first use for molds sold to certain customers and used for
outsourced plastic parts production.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ form those estimates.
INVENTORIES
Inventories are valued at the lower of cost (using the weighted average
cost method) or market.
RETIREMENT INDEMNITIES OBLIGATIONS
Company personnel are granted payments, defined by law, at the time they
retire. The related retirement indemnities obligation has been accrued under the
criteria set forth by Statement of Financial Accounting Standards No. 87.
CONCENTRATION OF CREDIT RISK
Financial instruments which potentially subject the company to
concentrations of credit risk consist principally of cash investments and trade
receivables. The Company has cash investment policies that limit investments to
short-term low risk instruments.
With respect to trade receivables, one customer accounted for approximately
17% of SOMOMECA Industries and subsidiaries sales in the four month period ended
December 31, 1997 (24% in 1997, 26% in 1996 and 30% in 1995). In addition,
approximately 18% of total trade receivables as of December 31, 1997 (28% as of
August 31, 1997, and 36% as of August 31, 1996) were from that customer.
Management believes the credit risk associated with this customer is minimal.
29
<PAGE>
SOMOMECA INDUSTRIES AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
FOREIGN CURRENCY TRANSLATION
The Company's functional currency is the French Franc. In the accompanying
financial statements, assets and liabilities are translated into US Dollars at
the current exchange rate as of the applicable balance sheet dates. Revenues and
expenses are translated at the average exchange rate prevailing during the
period. Gains and losses resulting from the translation into US Dollars are
reported in a separate component of stockholders' equity.
The functional currency for the Company's only foreign subsidiary (in
Portugal) is its local currency. Accordingly, all the assets and liabilities of
the subsidiary are translated into French Francs at the current exchange rate as
of the applicable balance sheet date. Revenues and expenses are translated at
the average exchange rate prevailing during the period. Gains and losses
resulting from the translation of the subsidiary financial statements were
insignificant as of December 31, 1997.
INCOME TAXES
Deferred taxes are provided utilizing the liability method whereby deferred
tax assets are recognized for deductible temporary differences and operating
loss carryforwards, and deferred tax liabilities are recognized for taxable
temporary differences. Temporary differences are the differences between the
reported amounts of assets and liabilities and their tax bases. Deferred tax
assets and liabilities are adjusted for the effects of changes in tax laws and
rates on the date of enactment. Deferred tax assets are reduced by a valuation
allowance when, in the opinion of management, it is more likely than not that
some portion or all of the deferred tax assets will not be realized.
3. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consist of the following:
<TABLE>
<CAPTION>
AUGUST 31,
-------------------- DECEMBER 31,
1996 1997 1997
-------- -------- ------------
<S> <C> <C> <C>
Land............................................. $ 845 $ 666 $ 690
Buildings and leasehold improvements............. 14,968 11,973 12,403
Production equipment............................. 30,077 30,910 34,122
Other equipment.................................. 4,412 3,946 3,863
-------- -------- --------
Total cost....................................... 50,302 47,495 51,078
Less--accumulated depreciation................... (26,626) (26,191) (28,640)
-------- -------- --------
$ 23,676 $ 21,304 $ 22,438
======== ======== ========
</TABLE>
4. INVENTORIES
Inventories include the following:
<TABLE>
<CAPTION>
AUGUST 31,
------------------ DECEMBER 31,
1996 1997 1997
------- ------- ------------
<S> <C> <C> <C>
Raw materials...................................... $ 3,350 $ 2,868 $ 3,294
Work in progress................................... 2,571 2,987 2,841
Finished products.................................. 3,055 2,007 1,671
------- ------- -------
$ 8,976 $ 7,862 $ 7,806
======= ======= =======
</TABLE>
30
<PAGE>
SOMOMECA INDUSTRIES AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
5. OTHER ASSETS
Other assets include the following:
<TABLE>
<CAPTION>
AUGUST 31,
------------------ DECEMBER 31,
1996 1997 1997
------- ------- ------------
<S> <C> <C> <C>
Acquisition goodwill............................... $ 8,281 $ 6,753 $ 6,998
Less--amortization................................ (2,325) (2,232) (2,430)
------- ------- -------
5,956 4,521 4,568
Other assets....................................... 1,248 1,407 1,461
------- ------- -------
$ 7,204 $ 5,928 $ 6,029
======= ======= =======
</TABLE>
6. REVOLVING LINES OF CREDIT
Short term financing facilities include the following:
<TABLE>
<CAPTION>
AUGUST 31,
------------------ DECEMBER 31,
1996 1997 1997
------- ------- ------------
<S> <C> <C> <C>
Authorized lines of credit......................... $31,620 $28,274 $29,314
======= ======= =======
Outstanding amounts under lines of credit.......... $ 9,111 $17,841 $16,005
======= ======= =======
Maximum balances outstanding....................... $20,751 $20,483 $24,247
======= ======= =======
Average balances outstanding....................... $18,355 $18,710 $20,903
======= ======= =======
</TABLE>
Interest rates on these lines of credit are generally based on reference
market rates (such as PIBOR 3 month) plus 1.5% (5% at December 31, 1997).
Lines of credit are secured by substantially all of the Company's assets.
7. LONG-TERM OBLIGATIONS
Long-term obligations consist of the following:
<TABLE>
<CAPTION>
AUGUST 31,
------------------ DECEMBER 31,
1996 1997 1997
------- ------- ------------
<S> <C> <C> <C>
Long-term borrowings............................... $ 6,869 $ 7,033 $ 6,093
Capital leases..................................... 11,005 8,126 7,887
Retirement indemnities obligations................. 522 518 569
------- ------- -------
18,396 15,677 14,549
Less--current portion.............................. (5,110) (4,328) (4,026)
------- ------- -------
$13,286 $11,349 $10,523
======= ======= =======
</TABLE>
Long-term borrowings are secured by substantially all of the Company's
assets. These long-term borrowings did not include any individual loan of
significant amount for each of the periods.
31
<PAGE>
SOMOMECA INDUSTRIES AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Interest rates on long-term borrowings and capital leases can be summarized
as follows:
<TABLE>
<CAPTION>
AUGUST 31,
------------------ DECEMBER 31,
RANGE OF INTEREST RATES 1996 1997 1997
------------------------- ------- ------- ------------
<S> <C> <C> <C> <C>
Fixed rate loans:
Loans.................. 6.31% to 12.75% $ 6,869 $ 7,033 $ 6,093
Capital leases........... 4.68% to 15.35% 8,472 6,441 6,736
Variable rate loans:
Capital leases......... TAM to TAM + 1.5% 2,533 1,685 1,151
------- ------- -------
$17,874 $15,159 $13,980
======= ======= =======
</TABLE>
Future payments on long-term loans are due as follows:
1998................................................ $2,021
1999................................................ 1,767
2000................................................ 1,168
2001................................................ 767
2002................................................ 200
Thereafter.......................................... 170
------
$6,093
======
The Company leases certain equipment under capital leases which expire on
various dates through 2004. Future payments on capital leases are due as
follows:
1998............................................... $ 2,517
1999............................................... 1,999
2000............................................... 1,381
2001............................................... 834
2002............................................... 663
Thereafter......................................... 2,007
Less amount representing interest.................. (1,514)
-------
$ 7,887
=======
8. RETIREMENT INDEMNITIES OBLIGATIONS
The Company maintains defined unfunded retirement indemnity plans which
cover substantially all of their employees.
In order to comply with US GAAP, the Company has applied SFAS No. 87
"Employers' Accounting for Pensions" and SFAS No. 88 "Employers' Accounting for
Settlements and Curtailments of Defined Benefit Pension Plans and for
Termination Benefits" as follows:
- the transition obligation or fund excess has been determined as of
September 1, 1994 as being the difference between the liabilities accounted for
under prior years' accounting policies and the funded status of the plans
resulting from actuarial calculations; the transition obligation or fund excess,
as determined at September 1, 1994 has been deducted from retained earnings as
if the Company had always applied SFAS No. 87. Amortization of a transition
obligation would have led to expenses not significantly different from what has
been accounted for;
32
<PAGE>
SOMOMECA INDUSTRIES AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
- the actuarial method used is the projected unit credit method. However,
when the benefit formulas attribute more benefits to senior employees or when
the plans are integrated with social security systems or multi employer plans,
the Company has elected to apply the projected unit credit service pro-rata
method to avoid delayed recognition of pension costs.
The status of pension plans determined in accordance with U.S. GAAP is as
follows:
<TABLE>
<CAPTION>
AUGUST 31,
------------ DECEMBER 31,
1996 1997 1997
---- ---- ------------
<S> <C> <C> <C>
Actuarial present value of benefit obligations:
Vested benefit obligation............................. $ -- $ -- $ --
Non-vested benefit obligation......................... 393 390 428
---- ---- ----
Accumulated benefit obligation.......................... 393 390 428
Effect of projected future salary increases............. 129 128 141
---- ---- ----
Projected benefit obligation............................ $522 $518 $569
==== ==== ====
</TABLE>
The pension liability is included in the accompanying balance sheets as a
component of long-term obligations.
The net periodic pension cost of the Company's retirement indemnity plans,
determined in accordance with US GAAP, includes the following components:
<TABLE>
<CAPTION>
FOR THE FOUR
FOR THE YEAR ENDED AUGUST 31, MONTHS ENDED
------------------------------ DECEMBER 31,
1995 1996 1997 1997
------ ------ ------ ------------
<S> <C> <C> <C> <C>
Service cost............................... $ 40 $ 46 $ 42 $14
Interest cost on projected benefit
obligation............................... 38 33 31 10
Net amortization and deferrals............. 23 30 28 9
---- ---- ---- ---
Net pension cost........................... $101 $109 $101 $33
==== ==== ==== ===
</TABLE>
Average assumptions used in accounting for the Company's retirement
indemnities obligations under US GAAP are as follows:
<TABLE>
<CAPTION>
AUGUST 31,
------------ DECEMBER 31,
1996 1997 1997
---- ---- ------------
<S> <C> <C> <C>
Discount rate............................................. 6.0% 6.0% 6.0%
Rate of increase in compensation levels................... 2.5% 2.0% 2.0%
</TABLE>
9. OPERATING LEASES
The Company leases certain equipment under operating leases. Rent expense
was $261, $290, $155, and $37 for each of the years ended August 31, 1995, 1996
and 1997 and for the four month period ended December 31, 1997 respectively.
Future payments on operating leases were due as follows:
1998.................................................... $64
1999.................................................... 20
2000.................................................... 2
---
$86
===
33
<PAGE>
SOMOMECA INDUSTRIES AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
10. COMMITMENTS AND CONTINGENCIES
From time to time the Company is involved in certain legal actions arising
in the ordinary course of business. In the opinion of management, the outcome of
such actions will not have a material adverse effect on the Company's financial
position or results of operations.
11. INCOME TAXES
For income tax purposes, SOMOMECA INDUSTRIES and its subsidiaries formed
two distinct tax consolidation groups. The (provision) benefit for income taxes
consists of the following:
<TABLE>
<CAPTION>
FOR THE FOUR
FOR THE YEAR ENDED AUGUST 31, MONTHS ENDED
------------------------------ DECEMBER 31,
1995 1996 1997 1997
------- --------- ------ ------------
<S> <C> <C> <C> <C>
Current income tax.......................... $(679) $ (995) $(74) $(373)
Deferred income tax......................... (301) (178) 218 (563)
----- ------- ---- -----
Total (provision) benefit................... $(980) $(1,173) $144 $(936)
===== ======= ==== =====
</TABLE>
The reconciliation of the statutory income tax rate to the Company's
effective income tax rate is as follows:
<TABLE>
<CAPTION>
FOR THE YEAR ENDED FOR THE FOUR
AUGUST 31, MONTHS ENDED
-------------------- DECEMBER 31,
1995 1996 1997 1997
---- ---- ---- ------------
<S> <C> <C> <C> <C>
Statutory income tax rate........................ 33.3% 36.6% 36.6% 41.6%
Non-deductible expenses.......................... 15.4% 7.5% 3.1% 1.3%
Effect of the variation of statutory income tax
rate........................................... -- 0.4% -- 2.0%
---- ---- ---- -----
48.7% 44.5% 39.7% 44.9%
==== ==== ==== =====
</TABLE>
34
<PAGE>
SOMOMECA INDUSTRIES AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The components of the deferred tax asset (liability) consisted of the
following:
<TABLE>
<CAPTION>
AUGUST 31,
------------------ DECEMBER 31,
1996 1997 1997
------- ------- ------------
<S> <C> <C> <C>
Current deferred tax asset
Temporary timing differences........................ $ 279 $ 221 $ 310
Other temporary differences between tax reporting
and US GAAP financial reporting:
--inventory pricing.............................. 171 337 139
--reserve for doubtful accounts.................. 33 78 43
--subsidies income recognition................... 59 89 --
--other, net..................................... 142 103 125
------- ------- -------
684 828 617
------- ------- -------
Non-current deferred tax asset (liability)
Net operating loss carry forward.................... 119 178 --
Other temporary differences between tax reporting
and US GAAP financial reporting:
--retirement indemnities......................... 191 189 183
--capital leases................................. (1,092) (896) (861)
--accumulated engineering costs expensed in tax
reporting...................................... (410) (517) (721)
------- ------- -------
(1,192) (1,046) (1,399)
------- ------- -------
Net deferred tax liability.......................... $ (508) $ (218) $ (782)
======= ======= =======
</TABLE>
12. FAIR VALUE OF FINANCIAL INSTRUMENTS
The following estimated fair values of financial instruments is made in
accordance with the requirements of SFAS No. 107, Disclosures about Fair Value
of Financial Instruments. The estimated fair value amounts have been determined
by the Company using available market information and appropriate valuation
methodologies.
CASH, ACCOUNTS RECEIVABLE AND ACCOUNTS PAYABLE
The carrying amounts of these items are a reasonable estimate of their fair
value due to their short-term nature.
LONG-TERM DEBT
The carrying amount of the revolving lines of credit approximates fair
value as the interest rate fluctuates with changes in market conditions. It is
estimated that the fair value of the long-term debt is $15,516.
35
<PAGE>
SOMOMECA INDUSTRIES AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
13. SALES GEOGRAPHICAL DATA
Sales to foreign countries represented 8%, 10%, 12% and 10% of Company
sales for the years ended August 31, 1995, 1996 and 1997 and for the four-month
period ended December 31, 1997 respectively, as follows:
<TABLE>
<CAPTION>
FOR THE FOUR
MONTHS ENDED
FOR THE YEAR ENDED AUGUST 31, DECEMBER 31,
-------------------------------------------------- --------------
1995 % 1996 % 1997 % 1997 %
------- --- ------- --- ------- --- ------- ---
<S> <C> <C> <C> <C> <C> <C> <C> <C>
France................ $59,370 92 $73,784 90 $74,734 88 $29,173 90
Other EEC
countries........... 5,163 8 8,199 10 10,192 12 3,241 10
------- --- ------- --- ------- --- ------- ---
Total...... $64,533 100 $81,983 100 $84,926 100 $32,414 100
======= === ======= === ======= === ======= ===
</TABLE>
36
<PAGE>
Exhibit 7.3
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Hanning Companies:
We have audited the accompanying combined balance sheets of the HANNING
COMPANIES (see Note 1) as of December 31, 1995 and 1996, and the related
combined statements of operations, equity (deficit) and cash flows for the years
then ended. These combined financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
combined financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the combined financial statements referred to above
present fairly, in all material respects, the combined financial position of the
Hanning Companies as of December 31, 1995 and 1996, and the results of their
operations and their cash flows for the years then ended in conformity with
generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Nashville, Tennessee
May 19, 1998
37
<PAGE>
THE HANNING COMPANIES
COMBINED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------
1995 1996
----------- -----------
ASSETS
<S> <C> <C>
CURRENT ASSETS:
Cash......................................................... $ 112,408 $ 371,518
Accounts receivable, net of reserves for doubtful accounts
of $34,000 and $29,000, respectively................... 6,971,529 4,795,473
Inventories, net............................................. 7,343,295 5,748,393
Deposits on tooling.......................................... 3,183,587 3,227,968
Other receivables............................................ 159,274 45,225
Other assets................................................. 460,350 262,871
----------- -----------
Total current assets.............................. 18,230,443 14,451,448
----------- -----------
PROPERTY, PLANT AND EQUIPMENT:
Land....................................................... 626,337 520,653
Buildings.................................................. 5,166,315 3,665,318
Machinery and equipment...................................... 6,172,294 6,968,976
Less: accumulated depreciation............................... (5,186,735) (6,116,331)
----------- -----------
Property, plant and equipment, net................ 6,778,211 5,038,616
DUE FROM AFFILIATES, NET..................................... 3,353,088 2,314,405
OTHER ASSETS................................................. 65,294 24,478
----------- -----------
Total assets...................................... $28,427,036 $21,828,947
=========== ===========
LIABILITIES AND EQUITY (DEFICIT)
CURRENT LIABILITIES:
Checks drawn in excess of cash on deposit.................. $ 170,858 $ 321,070
Accounts payable........................................... 10,419,740 8,986,502
Customer deposits on tooling............................... 4,049,770 3,016,117
Short-term borrowings...................................... 953,343 1,597,777
Current portion of stockholder debt........................ 2,097,103 1,250,766
Current portion of long-term obligations................... 1,065,374 1,907,866
Accrued liabilities........................................ 3,048,800 3,195,179
----------- -----------
Total current liabilities......................... 21,804,988 20,275,277
----------- -----------
STOCKHOLDER DEBT, NET OF CURRENT PORTION..................... 906,683 259,615
----------- -----------
LONG-TERM OBLIGATIONS, NET OF CURRENT PORTION................ 3,650,201 1,573,441
----------- -----------
COMMITMENTS AND CONTINGENCIES
EQUITY (DEFICIT):
Capital.................................................... 1,405,280 1,420,640
Additional paid-in capital................................. 6,269,319 7,599,372
Receivable from partners................................... -- (1,000,000)
Translation adjustment..................................... 109,762 38,393
Retained deficit........................................... (5,719,197) (8,337,791)
----------- -----------
Total equity (deficit)............................ 2,065,164 (279,386)
----------- -----------
Total liabilities and equity (deficit)............ $28,427,036 $21,828,947
=========== ===========
</TABLE>
The accompanying notes are an integral part of these combined balance sheets.
38
<PAGE>
THE HANNING COMPANIES
COMBINED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
SEVEN MONTHS AND SEVEN DAYS
FOR THE YEAR ENDED DECEMBER 31, ENDED AUGUST 7,
-------------------------------- ----------------------------
1995 1996 1996 1997
-------------- -------------- ------------ ------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
NET SALES.............................. $57,298,730 $54,062,809 $33,075,375 $29,640,348
COST OF SALES.......................... 55,447,691 51,456,915 31,526,552 28,342,440
----------- ----------- ----------- -----------
Gross profit........................ 1,851,039 2,605,894 1,548,823 1,297,908
SELLING, GENERAL AND ADMINISTRATIVE
EXPENSES............................. 4,804,885 5,775,080 3,270,550 2,723,412
TOOLING REVENUE, NET................... 348,795 957,467 540,610 1,113,673
----------- ----------- ----------- -----------
Operating loss...................... (2,605,051) (2,211,719) (1,181,117) (311,831)
INTEREST INCOME........................ 290,421 209,728 123,800 61,490
INTEREST EXPENSE....................... 727,899 570,847 409,604 290,623
OTHER (INCOME) EXPENSE................. 194,271 (171,104) (141,500) (293,432)
----------- ----------- ----------- -----------
Loss before income tax expense...... (3,236,800) (2,401,734) (1,325,421) (247,532)
----------- ----------- ----------- -----------
INCOME TAX EXPENSE..................... 18,578 216,860 126,545 382,192
----------- ----------- ----------- -----------
Net Loss............................ $(3,255,378) $(2,618,594) $(1,451,966) $ (629,724)
=========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these combined financial
statements.
39
<PAGE>
THE HANNING COMPANIES
COMBINED STATEMENTS OF EQUITY (DEFICIT)
<TABLE>
<CAPTION>
ADDITIONAL RECEIVABLE
PAID-IN FROM TRANSLATION RETAINED
CAPITAL CAPITAL PARTNER ADJUSTMENT DEFICIT TOTAL
---------- ---------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
BALANCE, DECEMBER 31,
1994................... $1,405,280 $3,130,806 $ -- $ -- $(2,463,819) $ 2,072,267
Translation adjustments.. -- -- -- 109,762 -- 109,762
Capital contribution..... -- 3,138,513 -- -- -- 3,138,513
Net loss................. -- -- -- -- (3,255,378) (3,255,378)
---------- ---------- ----------- -------- ----------- -----------
BALANCE, DECEMBER 31,
1995................... 1,405,280 6,269,319 -- 109,762 (5,719,197) 2,065,164
Translation adjustment... -- -- -- (71,369) -- (71,369)
Receivable from Partner.. -- -- (1,000,000) -- -- (1,000,000)
Capital contribution..... 15,360 1,330,053 -- -- -- 1,345,413
Net loss................. -- -- -- -- (2,618,594) (2,618,594)
---------- ---------- ----------- -------- ----------- -----------
BALANCE, DECEMBER 31,
1996................... $1,420,640 $7,599,372 $(1,000,000) $ 38,393 $(8,337,791) $ (279,386)
========== ========== =========== ======== =========== ===========
</TABLE>
The accompanying notes are an integral part of these combined financial
statements.
40
<PAGE>
THE HANNING COMPANIES
COMBINED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE YEAR ENDED SEVEN MONTHS AND SEVEN DAYS
DECEMBER 31, ENDED AUGUST 7,
-------------------------- ----------------------------
1995 1996 1996 1997
----------- ----------- ------------ ------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss................................... $(3,255,378) $(2,618,594) $(1,451,966) $ (629,724)
Adjustments to reconcile net loss to net
cash provided by (used in) operating
activities:
Depreciation and amortization............ 1,653,439 1,347,843 883,205 640,714
Gain on disposal of fixed assets........... (174,711) (62,397) -- (23,999)
Changes in assets and liabilities:
Accounts receivable.................... (1,112,144) 1,837,848 933,877 (1,235,372)
Due from affiliates, net............... (3,119) 25,714 (97,703) 2,782,953
Inventories............................ 1,082,034 1,285,704 546,713 (739,036)
Deposits on tooling.................... (3,140,865) (146,677) 1,131,761 (4,299,084)
Other assets........................... (203,848) 218,472 (218,012) (148,967)
Other receivables...................... (11,720) 114,049 154,472 3,474
Accounts payable....................... 1,884,153 (938,846) (3,825,510) (1,992,673)
Accrued liabilities.................... (424,178) 339,433 1,301,398 (155,610)
Checks drawn in excess of cash on
deposit............................. (184,328) 150,212 610,906 (321,070)
Customer deposits on tooling.......... 3,836,908 (926,547) 302,495 5,822,111
----------- ----------- ----------- -----------
Total adjustments................ 3,201,621 3,244,808 1,723,602 333,441
----------- ----------- ----------- -----------
Net cash provided by (used in)
operating activities............ (53,757) 626,214 271,636 (296,283)
----------- ----------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property, plant and
equipment.............................. (945,461) (1,029,359) (438,201) (544,845)
Proceeds on disposal of fixed assets..... 174,711 1,248,344 1,163,812 23,999
----------- ----------- ----------- -----------
Net cash (used in) provided by
investing activities............ (770,750) 218,985 725,611 (520,846)
----------- ----------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net change in short-term borrowings...... 800,133 731,628 300,451 (1,387,662)
Partner contributions.................... 3,138,513 1,345,413 15,308 --
Receivable from partner.................. -- (1,000,000) (1,000,000) --
Net change in stockholder debt........... (2,533,096) (1,466,937) (9,495) 2,790,838
Principal payments on long-term
obligations............................ (569,951) (199,102) -- (705,343)
----------- ----------- ----------- -----------
Net cash provided by (used in)
financing activities............ 835,599 (588,998) (693,736) 697,833
----------- ----------- ----------- -----------
EFFECT OF EXCHANGE RATE.................... 575 2,909 2,744 (3,839)
----------- ----------- ----------- -----------
NET CHANGE IN CASH......................... 11,667 259,110 306,255 (123,135)
BALANCE AT BEGINNING OF PERIOD............. 100,741 112,408 112,408 371,518
----------- ----------- ----------- -----------
BALANCE AT END OF PERIOD................... $ 112,408 $ 371,518 $ 418,663 $ 248,383
=========== =========== =========== ===========
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid for interest................... $ 539,854 $ 465,585 $ 172,497 $ 241,773
=========== =========== =========== ===========
Cash paid for income taxes............... $ 19,078 $ 23,661 $ 14,000 $ 258,518
=========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these combined financial
statements.
41
<PAGE>
THE HANNING COMPANIES
NOTES TO FINANCIAL STATEMENTS
1. ORGANIZATION
The Hanning Companies (the "Company") consists of the following entities
which are under common ownership.
<TABLE>
<CAPTION>
TYPE OF COUNTRY OF
COMPANY ENTITY OPERATIONS
<S> <C> <C>
Hanning Corporation......................................... Corporation United States
Hanning--Kunststoffe Beteilingungs-GmbH..................... Corporation Germany
Hanning--Kumststoffe GmbH & Co. ............................ Partnership Germany
Hanning Plastics, Ltd. ..................................... Corporation United Kingdom
Hanning Property Associates................................. Corporation United States
PB Hanning GmbH & Co. ...................................... Corporation Germany
PB Hanning GmbH & Co. Handelsgesellschaft................... Partnership Germany
</TABLE>
The entities listed above were acquired through either asset or stock
purchases on August 8, 1997, by Moll PlastiCrafters Limited Partnership. The
Company manufactures custom injection molded parts which it sells primarily to
customers in the office equipment, home appliance and automotive industries.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF COMBINATION
The combined financial statements include the accounts of the combined
companies. All significant inter-company balances and transactions have been
eliminated in combination.
MANAGEMENT ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
REVENUE RECOGNITION
Revenue from sales of injection molded plastic parts is recognized at the
time products are shipped.
TOOLING
The Company enters into agreements with its major customers to design and
produce certain customer owned plastic injection tooling (primarily molds).
Amounts paid or received by the Company in connection with this activity related
to tooling that remains undelivered at the end of an accounting period are
included as Deposits on Tooling or Customer Deposits on Tooling, respectively,
in the accompanying combined balance sheet. At the time of delivery of completed
tooling, the excess of revenues over costs are recognized in the accompanying
combined statements of operations as tooling revenue, net.
INVENTORIES
Inventories are valued at the lower of cost (first-in, first-out (FIFO)
method) or market.
42
<PAGE>
THE HANNING COMPANIES
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment is valued at cost. Depreciation is computed
using straight-line and accelerated methods over the estimated useful lives of
the assets, as follows:
Buildings..................................... 40 to 50 years
Machinery and equipment....................... 3 to 10 years
INCOME TAXES
Certain of the entities included in the Company are partnerships. The
earnings of the partnerships are included in the tax returns of its partners.
Accordingly, the combined financial statements contained no provision for
federal or state income taxes related to these earnings.
Certain of the entities included in the Company are taxable entities. As
such the Company has accounted for income taxes using the liability method which
requires recognition of deferred tax assets and liabilities for the expected
future consequences of events that have been included in the combined financial
statements or income tax returns.
Certain of the Company's incurred costs were not deductible for income tax
purposes. As a result, the Company incurred current income tax expense. At
December 31, 1996, the Company had net operating loss carryforwards available to
offset future taxable income. However, due to the Company's historical operating
results, it has not recognized a deferred tax asset in the accompanying combined
financial statements.
LONG-LIVED ASSETS
When factors are present which indicate the cost of long-lived assets may
not be recovered, the Company evaluates the realizability of its long-lived
assets, based upon the anticipated future cash flows generated by the asset.
FOREIGN CURRENCY TRANSLATION
Assets and liabilities of the Company are translated to United States
dollars at current exchange rates, while revenues and expenses are translated at
the average rate prevailing during the period. Gains and losses resulting from
translation since January 1, 1995 are accumulated in a separate component of
equity (deficit).
INTERIM FINANCIAL STATEMENTS
In the opinion of management, the accompanying unaudited, interim financial
statements have been prepared on a basis consistent with the audited financial
statements and contain all adjustments necessary to present fairly the Company's
results of operations and cash flows for the seven months and seven days ended
August 7, 1996 and 1997.
43
<PAGE>
THE HANNING COMPANIES
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
3. INVENTORIES
Inventories consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------
1995 1996
---------- ----------
<S> <C> <C>
Raw materials................................................ $4,341,883 $3,325,107
Work-in-process.............................................. 1,137,132 694,188
Finished goods............................................... 2,368,651 2,327,113
Reserve...................................................... (504,371) (598,015)
---------- ----------
$7,343,295 $5,748,393
========== ==========
</TABLE>
4. RELATED PARTIES
The Company has certain transactions with companies that are affiliated
through common ownership. At December 31, 1996, the Company has a net receivable
from these affiliated parties totaling $2,314,405 related to these transactions.
The Company pays management fees to a related company. Management fee
expense was approximately $262,000 and $264,000 for 1995 and 1996, respectively.
5. STOCKHOLDER DEBT
Stockholder debt consists of the following:
A note bearing interest at 7.5% per annum, payable semiannually (interest
expense totaled $155,868 and $83,428 in 1995 and 1996, respectively.) The note
matures on June 30, 1998 and requires repayment in Deutsche Marks. The
outstanding balance was DM 2,200,507 and DM 1,400,507 at December 31, 1995 and
1996, respectively ($1,534,079 and $908,123, respectively). Principle payments,
in U.S. dollars and stated at current exchange rates, are due as follows:
1997--$648,508 and 1998--$259,615. The note is unsecured and may be repaid at
any time without penalty.
A note bearing interest at a prime rate plus 1%, payable quarterly
(interest expense totaled $18,738 in 1996). The outstanding balance was $312,728
at December 31, 1996.
Additionally, the Company has payables to the stockholders totaling DM
2,108,295 and DM 337,174 at December 31, 1995 and 1996, respectively ($1,469,707
and $289,530, respectively). These payables do not bear interest and are due on
demand.
6. SHORT-TERM BORROWINGS
The Company has the following revolving loan facilities:
Facility with a bank which provides for borrowings up to DM 2,000,000
($1,300,000 at December 31, 1996). The Company had a balance outstanding of DM
1,080,672 and DM 2,458,499 at December 31, 1995 and 1996, respectively ($753,343
and $1,597,777, respectively). Interest is payable quarterly at a variable rate
(6.55% at December 31, 1996). The facility is secured by land and an office
building in Germany.
Facility with a bank which provides for borrowings up to $250,000. The
Company had a balance outstanding of $200,000 and $0 at December 31, 1995 and
1996, respectively. Interest is payable monthly at prime (8.25% at December 31,
1996). The facility is secured by all assets of the Company located in the
United States.
44
<PAGE>
THE HANNING COMPANIES
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
7. LONG-TERM OBLIGATIONS
The Company has the following long-term debt obligations:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------
1995 1996
----------- -----------
<S> <C> <C>
Term loan payable to a bank, denominated in Deutsche
Marks, payable in annual installments of DM 1,200,000
($779,879 at December 31, 1996 exchange rates),
matures May 10, 1999. Interest payable quarterly
at 6.92%. Secured by land and office building in
Germany. ................................................ $ 3,346,113 $ 2,339,463
Term loan payable to a bank, payable in annual
installments of $181,173 in addition to a balloon
payment of $920,000 due on December 15, 1997. Interest
is payable at the banks base rate plus 1% (9.25% at
December 31, 1996). ..................................... 1,300,275 1,101,173
Capital lease obligations (see Note 8).................... 69,187 40,671
----------- -----------
4,715,575 3,481,307
Less current portion...................................... (1,065,374) (1,907,866)
----------- -----------
$ 3,650,201 $ 1,573,441
=========== ===========
</TABLE>
The amounts of all long-term obligations, excluding capital leases, to be
repaid for the years following December 31, 1996 are as follows:
1997...................................................... $ 1,881,052
1998...................................................... 779,879
1999...................................................... 779,705
-----------
$ 3,440,636
===========
8. LEASE COMMITMENTS
The aggregate future minimum fixed lease obligations for the Company as of
December 31, 1996 are as follows:
<TABLE>
<CAPTION>
OPERATING
CAPITAL LEASES LEASES
-------------- ---------
<S> <C> <C>
1997........................................................ $28,181 $212,541
1998........................................................ 10,509 285,670
1999........................................................ 4,618 35,287
2000........................................................ 385 --
------- --------
Total minimum lease payments................................ 43,693 $533,498
========
Less amounts representing interest.......................... 3,022
-------
Present value of minimum capital lease payments............. $40,671
=======
</TABLE>
Total rent expense for the Company's operating leases for the years ended
December 31, 1995 and 1996 was approximately $180,839 and $654,354.
45
<PAGE>
THE HANNING COMPANIES
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
9. RETIREMENT PLAN
The Company has a 401(k) deferred compensation plan covering substantially
all U.S. employees meeting the service requirements defined in the plan. Under
the provisions of the plan, employees may elect to contribute up to 15% of their
wages. The Company may make matching contributions equal to a discretionary
percentage, to be determined by the Company. The Company made no contributions
to the plan for the years ended December 31, 1995 and 1996.
10. FAIR VALUE OF FINANCIAL INSTRUMENTS
The following estimated fair values of financial instruments is disclosed
in accordance with the requirements of SFAS No. 107, Disclosures about Fair
Value of Financial Instruments. The estimated fair value amounts have been
determined by the Company using available market information and appropriate
valuation methodologies.
Cash, accounts receivable, and accounts payable
The carrying amounts of these items are a reasonable estimate of their fair
value due to their short-term nature.
Short-term borrowings
The carrying amounts of the short-term borrowings approximates fair value
as the interest rates reflect market rates.
Long-term obligations
The fair value of the variable rate obligation approximates its fair value
since the interest rate reflects market rates. The fair value of the fixed rate
obligation is estimated to be $1,987,550 as compared to its carrying amount of
$2,339,463. The Company estimated the fair value based on estimated borrowing
rates for similar obligations with similar terms.
Note payable to stockholder
The carrying amount of the note payable approximates fair value based upon
current market rates and the remaining term to maturity.
11. CONTINGENCIES
The Company is a party to various lawsuits and claims in the normal course
of business. While the outcome of the lawsuits and claims against the Company
cannot be predicted with certainty, management believes that the ultimate
resolution of these matters will not have a material effect on the Company. The
Company is undergoing a tax audit covering the years 1993 to 1996. Management is
currently not able to determine the effects on the financial statements, if any.
12. MAJOR CUSTOMERS
Two customers accounted for approximately 86% and 91% of the Company's net
sales in 1995 and 1996, respectively. In addition, approximately 86% and 81% of
the Company's total accounts receivable at December 31, 1995 and 1996,
respectively, were from these customers. Management believes the credit risk
associated with these customers to be minimal.
46
<PAGE>
THE HANNING COMPANIES
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
13. SEGMENT INFORMATION
The Company operates in one industry segment. The following table presents
sales and other financial information by geographic region for the years ended
December 31, 1995 and 1996.
<TABLE>
<CAPTION>
1995 1996
----------- -----------
<S> <C> <C>
Net sales:
United States............................................ $ 8,599,770 $11,641,318
Europe................................................... 48,698,960 42,421,491
----------- -----------
Total net sales................................. $57,298,730 $54,062,809
=========== ===========
Operating loss:
United States............................................ $ (322,310) $ 475,000
Europe................................................... (2,616,741) (2,686,719)
Eliminations............................................. 334,000 --
----------- -----------
Total operating loss............................ $(2,605,051) $(2,211,719)
=========== ===========
Identifiable assets:
United States............................................ $ 8,882,549 $ 7,222,715
Europe................................................... 20,018,870 16,236,720
Eliminations............................................. (474,383) (1,630,488)
----------- -----------
Total assets.................................... $28,427,036 $21,828,947
=========== ===========
Depreciation and amortization:
United States............................................ $ 618,297 $ 494,497
Europe................................................... 1,035,142 853,346
----------- -----------
Total........................................... $ 1,653,439 $ 1,347,843
=========== ===========
Capital Expenditures:
United States............................................ $ 516,959 $ 474,874
Europe................................................... 428,502 554,485
----------- -----------
Total........................................... $ 945,461 $ 1,029,359
=========== ===========
</TABLE>
47
<PAGE>
Exhibit 7.4
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
BASIS OF PRESENTATION
The following unaudited pro forma consolidated financial statements of the
Company give effect to the contribution of the interests in Moll PlastiCrafters
Limited Partnership ("Moll") to AMM Holdings, Inc. ("AMM Holdings") in exchange
for common shares of AMM Holdings, and the subsequent merger of Moll into Anchor
Advanced Products, Inc. ("Anchor") (the "Merger"). AMM Holdings is the indirect
parent and Anchor Holdings, Inc. ("Anchor Holdings") is the direct parent of
Anchor. Anchor Advanced Products, Inc. was renamed Moll Industries, Inc. upon
completion of the Merger. The Merger occurred immediately prior to the
consummation of the offering of Moll Industries, Inc. senior subordinated notes
(the "Offering"). As the partners of Moll own a majority of the outstanding
shares of AMM Holdings subsequent to the Merger, Moll is considered the
accounting acquiror in the Merger and will utilize purchase accounting to
account for the Merger.
In addition, the unaudited pro forma consolidated financial statements of
the Company also give effect to the following:
- the August 1997 purchase acquisition of the Hanning companies ("Hanning")
by Moll,
- the January 1998 purchase acquisition of Somomeca Industries ("Somomeca")
by Moll,
- the distribution of Moll's investment in Reliance Products, L.P.
("Reliance"), to certain of Moll's limited partners, and
- the purchase acquisition of Gemini Plastic Services, Inc. ("Gemini") by
the Company.
Collectively, these acquisitions are referred to as the "Acquisitions" and
the combined companies are referred to as the "Company".
Concurrently with the Offering, AMM Holdings offered approximately $35.3
million aggregate gross proceeds of its 13 1/2% Senior Discount Notes due 2009.
The unaudited pro forma consolidated financial statements of the Company do not
reflect the offering of these notes by AMM Holdings. A portion of the proceeds
from the AMM Holdings offering was used by AMM Holdings to make a capital
contribution to the Company (the "Capital Contribution"). The Capital
Contribution has been reflected in the unaudited pro forma consolidated
financial statements of the Company.
The unaudited pro forma consolidated balance sheet of the Company gives
effect to the Merger, the Acquisitions, the Capital Contribution and the
Offering and the application of the proceeds therefrom as if they had occurred
on March 31, 1998. The unaudited pro forma consolidated statement of income of
the Company for the year ended December 31, 1997 gives effect to these
transactions as if they had occurred on January 1, 1997. The unaudited pro forma
consolidated statement of income of the Company for the three months ended March
31, 1998 gives effect to these transactions as if they had occurred on January
1, 1998.
The Company has identified certain savings which are expected to occur as a
result of the Merger. These savings have been reflected in the unaudited pro
forma consolidated financial statements of the Company. The Company has
preliminarily analyzed certain additional savings that it expects to be realized
by consolidating other operational and general and administrative functions as a
result of the Merger. The Company has not and cannot quantify these savings
until completion of the Merger. Accordingly, these additional anticipated
savings have not been included in the unaudited pro forma consolidated financial
statements of the Company.
The pro forma adjustments are based on preliminary estimates, available
information and certain assumptions and may be revised as additional information
becomes available. The pro forma financial data does not purport to represent
what the Company's financial position or results of operations would actually
have been if such transactions in fact had occurred on those dates or to project
the Company's financial position or results of operations for any future period.
Since the combined companies were not under common control or management,
historical combined results may not be comparable to, or indicative of, future
performance. The unaudited pro forma consolidated financial statements should be
read in conjunction with the other financial statements and notes thereto
included elsewhere herein.
48
<PAGE>
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
MARCH 31,1998
<TABLE>
<CAPTION>
PRO FORMA ADJUSTMENTS
--------------------------------------------------------
MOLL ANCHOR(a) GEMINI(b) RELIANCE(c)
------------ ------------ ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Cash....................... $ 7,140,808 $ 144,000 $ 692,922 $ (1,052,805) $ 16,674,000 (l)
2,000,000 (m)
Accounts receivable, net... 53,369,599 15,559,000 2,030,140 (3,233,816)
Inventories................ 24,621,674 26,379,000 1,686,550 (3,630,734)
Deposits on tooling........ 7,767,926 -- -- --
Other current assets....... 2,877,548 3,123,000 59,557 (34,812)
------------ ------------ ----------- ------------
Total current assets....... 95,777,555 45,205,000 4,469,169 (7,952,167)
------------ ------------ ----------- ------------
Property, plant
and equipment............ 78,276,002 94,392,000 5,720,830 (7,641,390) 7,806,428 (h)
(45,728,258) (h)
Accumulated depreciation... (15,548,145) (42,695,000) (3,033,258) 1,471,221 45,728,258 (h)
------------ ------------ ----------- ------------
62,727,857 51,697,000 2,687,572 (6,170,169)
------------ ------------ ----------- ------------
Goodwill, net.............. 8,722,000 9,363,000 -- -- 17,981,659 (i)
Intangible and other
assets, net............... 4,722,984 8,414,000 54,213 -- 7,550,000 (l)
(2,149,420) (i)
(2,375,022) (k)
Receivable from affiliates. 462,646 2,149,000 -- --
------------ ------------ ----------- ------------
Total other assets....... 13,907,630 19,926,000 54,213 --
------------ ------------ ----------- ------------
$172,413,042 $116,828,000 $ 7,210,954 $(14,122,336)
============ ============ =========== ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Checks drawn in excess of cash on
deposit.................... $ 1,507,268 $ 929,000 $ -- $ -- $
Short-term borrowings........ 23,726,000 -- -- -- (23,726,000) (l)
Current portion of long-term
obligations................ 10,275,742 1,075,000 379,262 -- (5,400,000) (l)
Customer deposits on tooling. 8,078,415 -- -- --
Accounts payable............. 32,411,988 4,950,000 1,413,021 (1,690,525) 118,306 (g)
Accrued liabilities.......... 11,304,203 4,328,000 360,760 (646,236)
Due to affiliates............ 260,574 -- -- --
------------ ------------ ----------- ------------
Total current liabilities.... 87,564,190 11,282,000 2,153,043 (2,336,761)
------------ ------------ ----------- ------------
Long-term obligations:
Term loans................. 53,850,000 -- -- -- (53,850,000) (l)
11 3/4% Senior Notes....... -- 100,000,000 -- --
Senior Subordinated Notes.. -- -- -- -- 130,000,000 (l)
Other...................... 20,136,638 -- 1,964,078 (6,399,887) 22,438,000 (j)
(22,800,000) (l)
------------ ------------ ----------- ------------ ------------
73,986,638 100,000,000 1,964,078 (6,399,887)
Deferred income taxes........ 3,175,593 1,595,000 420,500 -- 1,637,000 (h)
Deferred gain................ 1,092,459 -- -- --
Minority interest............ 2,449,561 -- -- -- (2,449,561) (g)
Other........................ -- 6,709,000 -- --
----------- ------------ ----------- ------------
80,704,251 108,304,000 2,384,578 (6,399,887)
----------- ------------ ----------- ------------
Stock........................ -- 15,000 1,781 -- 15,000 (n)
(16,781) (f)
Additional paid-in capital... -- -- 1,915,962 (4,408,199) (1,915,962) (f)
4,408,199 (g)
2,000,000 (m)
Undistributed profits........ 4,723,076 (2,242,000) 755,590 (1,182,379) (3,054,433) (g)
1,182,379 (g)
(2,375,022) (k)
1,486,410 (f)
(15,000) (n)
Treasury stock............... -- (10,000) -- -- 10,000 (f)
Accumulated other comprehensive
49
<PAGE>
income..................... -- (521,000) -- --
Exchange rate translation
adjustment................. (578,475) -- -- 204,890 (204,890) (g)
------------ ------------ ----------- ------------
4,144,601 (2,758,000) 2,673,333 (5,385,688)
------------ ------------ ----------- ------------
$172,413,042 $116,828,000 $ 7,210,954 $(14,122,336)
============ ============ =========== ============
</TABLE>
<TABLE>
<CAPTION>
PRO FORMA
MOLL INDUSTRIES, INC.
---------------------
<S> <C>
ASSETS
Cash.................................. $ 25,598,925
Accounts receivable, net.............. 67,724,923
Inventories........................... 49,056,490
Deposits on tooling................... 7,767,926
Other current assets.................. 6,025,293
------------
Total current assets.......... 156,173,557
------------
Property, plant and equipment......... 132,825,612
Accumulated depreciation.............. (14,076,924)
------------
118,748,688
------------
Goodwill, net......................... 36,066,659
Intangible and other assets, net...... 16,216,755
Receivable from affiliates............ 2,611,646
------------
Total other assets............ 54,895,060
------------
$329,817,305
============
LIABILITIES AND STOCKHOLDERS' EQUITY
Checks drawn in excess of cash on
deposit............................. $ 2,436,268
Short-term borrowings................. --
Current portion of long-term
obligations......................... 6,330,004
Customer deposits on tooling.......... 8,078,415
Accounts payable...................... 37,202,790
Accrued liabilities................... 15,346,727
Due to affiliates..................... 260,574
------------
Total current liabilities..... 69,654,778
------------
Long-term obligations:
Term loans.......................... --
11 3/4% Senior Notes................ 100,000,000
Senior Subordinated Notes........... 130,000,000
Other............................... 15,338,829
------------
245,338,829
Deferred income taxes................. 6,828,093
Deferred gain......................... 1,092,459
Minority interest..................... --
Other................................. 6,709,000
------------
259,968,381
------------
Stock................................. 15,000
Additional paid-in capital............ 2,000,000
Undistributed profits................. (721,379)
Treasury stock........................ --
Accumulated other comprehensive
income.............................. (521,000)
Exchange rate translation
adjustment.......................... (578,475)
------------
194,146
------------
$329,817,305
============
</TABLE>
50
<PAGE>
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
PRO FORMA ADJUSTMENTS
-------------------------------------------------------------------------
MOLL ANCHOR(a) GEMINI(b) SOMOMECA(d) HANNING(e)
------------ ------------ ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Net sales...................... $116,947,000 $161,161,000 $20,980,374 $88,502,000 $29,640,348
Cost of sales.................. 97,086,199 135,974,000 16,237,263 77,943,000 28,342,440
------------ ------------ ----------- ----------- -----------
Gross profit................. 19,860,801 25,187,000 4,743,111 10,559,000 1,297,908
Selling, general and administrative
expenses...................... 10,757,773 12,497,000 3,580,361 5,469,000 2,596,750
Management fee to related parties. 1,652,933 180,000 -- -- 126,662
Tooling income, net.............. (1,911,871) -- -- -- (1,113,673)
Loss on closure of facility...... 1,176,172 -- -- -- --
------------ ------------ ----------- ----------- -----------
Operating income................. 8,185,794 12,510,000 1,162,750 5,090,000 (311,831)
Interest expense................. 3,430,505 11,165,000 221,579 2,654,000 290,623
Interest income.................. (25,119) -- (11,237) (263,000) (61,490)
Other (income) expense........... (299,338) (287,000) 11,374 320,000 (293,432)
Minority interest in income (loss) of
subsidiary...................... 434,555 -- -- (95,000) --
------------ ------------ ----------- ----------- -----------
Income before taxes and extraordinary
item............................ 4,645,191 1,632,000 941,034 2,474,000 (247,532)
Income tax expense............... 82,622 794,000 371,400 1,036,000 382,192
------------ ------------ ----------- ----------- -----------
Income before extraordinary item $ 4,562,569 $ 838,000 $ 569,634 $ 1,438,000 $ (629,724)
============ ============ =========== =========== ===========
EBITDA(1)........................
</TABLE>
<TABLE>
<CAPTION>
PRO FORMA ADJUSTMENTS
---------------------------------- PRO FORMA
RELIANCE(c) MOLL INDUSTRIES, INC.
-------------- ---------------------
<S> <C> <C> <C>
Net sales............................... $(17,383,250) $ (4,116,000) (o) $414,630,111
18,898,639 (u)
Cost of sales........................... (13,293,572) 15,976,085 (u) 354,582,415
808,000 (v)
(547,000) (s)
(4,193,000) (o)
249,000 (w)
------------ ----------------- ---------------------
Gross profit............................ (4,089,678) 60,047,696
Selling, general and administrative
expenses............................... (2,277,814) 655,000 (x) 29,390,070
(2,429,000) (q)
(1,103,000) (r)
(356,000) (o)
Management fee to related parties....... (260,749) (1,498,846) (t) 200,000
Tooling income, net..................... -- 2,922,544 (u) --
103,000 (o)
Loss on closure of facility............. -- (1,176,172) (p) --
------------ ----------- --- ------------
Operating income........................ (1,551,115) 30,457,626
Interest expense........................ (509,511) 5,254,000 (z) 27,367,196
4,861,000 (aa)
Interest income......................... -- (360,846)
Other (income) expense.................. (149,762) (172,000) (o) (870,158)
Minority interest in income (loss) of
subsidiary............................. -- (339,555) (y) --
------------ ------------
Income before taxes and extraordinary
item................................... (891,842) 4,321,434
Income tax expense...................... -- 928,000 (bb) 3,594,214
------------ ------------
Income before extraordinary item........ $ (891,842) $ 727,220
============ ============
EBITDA(1)............................... $ 54,807,000
============
</TABLE>
51
<PAGE>
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF INCOME
FOR THE THREE MONTHS ENDED MARCH 31, 1998
<TABLE>
<CAPTION>
PRO FORMA ADJUSTMENTS
----------------------------------------------------- PRO FORMA
MOLL ANCHOR(a) GEMINI(b) RELIANCE(c) MOLL INDUSTRIES, INC.
----------- ----------- ----------- ----------- ---------------------
<S> <C> <C> <C> <C> <C> <C>
Net sales.............. $60,105,303 $39,303,000 $5,270,616 $(5,288,277) $1,348,276 (u) $100,738,918
Cost of sales.......... 50,738,439 32,695,000 4,042,166 (4,074,899) 105,000 (v) 84,328,863
(137,000) (s)
960,157 (u)
----------- ----------- ---------- ----------- ------------
Gross profit....... 9,366,864 6,608,000 1,228,450 (1,213,378) 16,410,055
Selling, general and
administrative
expenses............. 4,816,651 3,440,000 815,873 (610,939) 138,000 (x) 7,715,585
(608,000) (q)
(276,000) (r)
Management fee to
related parties...... 770,681 -- -- (79,324) (641,357) (t) 50,000
Tooling income, net... (388,119) -- -- -- 388,119 (u) --
----------- ----------- ---------- ----------- ------------
Operating income...... 4,167,651 3,168,000 412,577 (523,115) 8,644,470
Interest expense....... 2,348,996 2,967,000 65,337 (97,876) 559,000 (z) 6,900,457
1,058,000 (aa)
Interest income........ (12,301) -- (5,014) 12,301 (5,014)
Other (income)
expense.............. 144,395 42,000 5,013 (13,128) 178,280
Minority interest in
income (loss) of
subsidiary........... 236,912 -- -- -- (236,912) (y) --
----------- ----------- ---------- ----------- ------------
Income before taxes and
extraordinary item... 1,449,649 159,000 347,241 (424,412) 1,570,747
Income tax expense..... 92,411 78,000 -- -- 876,000 (bb) 1,046,411
----------- ----------- ---------- ----------- ------------
Income before
extraordinary item... $ 1,357,238 $ 81,000 $ 347,241 $ (424,412) $ 524,336
=========== =========== ========== =========== ============
EBITDA(1).............. $ 13,315,000
============
</TABLE>
52
<PAGE>
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
- ------------------------------
(1) EBITDA represents income before taxes plus interest expense, net,
depreciation and amortization. While EBITDA should not be construed as a
substitute for operating income, net income or cash flows from operating
activities in analyzing the Company's operating performance, financial position
or cash flows, the Company has included EBITDA because it is commonly used by
certain investors and analysts to analyze and compare companies on the basis of
operating performance, leverage and liquidity and to determine a company's
ability to service debt.
Pro Forma Adjustments
(a) Adjustment to include the Anchor Holdings historical cost balances and
operating activity for the respective periods in the unaudited pro forma
financial statements.
(b) Adjustment to include the Gemini historical cost balances and operating
activity for the respective periods in the unaudited pro forma financial
statements.
(c) Adjustment to eliminate the Reliance balances and operating activity for the
respective periods from the unaudited pro forma financial statements.
(d) Adjustment to include the Somomeca historical operating activity for the
period of January 1 through December 31, 1997 in the unaudited pro forma
financial statements.
(e) Adjustment to include the Hanning historical operating activity for the
period of January 1 through August 7, 1997 in the unaudited pro forma financial
statements.
(f) Adjustment to eliminate the historical equity of Anchor Holdings and Gemini
which was accumulated prior to their acquisition by the Company.
(g) Adjustment to eliminate Reliance's equity and associated minority interest
and to record the distribution of the investment in Reliance to the owners of
Moll.
(h) Adjustment to record the property, plant and equipment of AMM Holdings and
Gemini at their fair value and to record the associated deferred tax liability.
(i) Adjustment to record goodwill of $9,254,000 and $8,728,000 for Moll's
purchase of AMM Holdings and Gemini, respectively.
(j) Adjustment to record debt of $6,600,000 and $15,838,000 incurred in
connection with the acquisition of AMM Holdings and Gemini, respectively.
(k) Adjustment to write-off unamortized cost of $2,375,000 related to debt
repaid with the proceeds of the Offering.
53
<PAGE>
(l) Adjustment to record the proceeds and uses of the Offering, as follows:
<TABLE>
<S> <C> <C>
Proceeds............................................. $130,000,000
Uses:
Revolving credit facility....................... (7,100,000)
Somomeca revolving credit facility................... (16,626,000)
-----------
(23,726,000)
Current portion of term debt......................... (5,400,000)
Long-term portion of term debt....................... (53,850,000)
Anchor acquisition debt.............................. (6,600,000)
Gemini acquisition................................... (13,038,000)
Gemini property debt................................. (2,800,000)
Other Gemini debt.................................... (362,000)
-----------
(76,650,000)
------------
Total debt repayment................................. (105,776,000)
Expenses of the Offering............................. (7,550,000)
------------
Total uses........................................... (113,326,000)
------------
Net cash proceeds from the Offering.................. $ 16,674,000
============
</TABLE>
(m) Adjustment to record the capital contribution from AMM Holdings.
(n) Adjustment to reclassify Moll's equity to match the legal equity structure
of AMM Holdings.
(o) Adjustment to eliminate the operating results of the El Paso facility, as it
was closed in September 1997.
(p) Adjustment to eliminate non-recurring costs, consisting primarily of future
rental payments and losses on equipment and inventory, incurred by Moll in the
September 1997 closure of its El Paso facility.
(q) Adjustment to record the reduction of personnel at AMM Holdings and Gemini.
The reductions were made in executive management and certain overhead functions
at AMM Holdings and management of Gemini.
(r) Adjustment to reflect the freezing by the Company of certain AMM Holdings
retirement plans which occurred on June 3, 1998. The estimated savings were
based on historical costs as compared to anticipated future costs which were
actuarially determined.
(s) Adjustment to eliminate the rent expense associated with the building which
houses the Gemini operation as the Company purchased the building.
(t) Adjustment to reflect the future management fee of $200,000 per year.
(u) Adjustment to conform accounting policies regarding the classification
of revenues and expenses for tooling built for and sold to consumers.
(v) Adjustment to record depreciation expense (i) for the adjustment of
property, plant and equipment to fair market value in the acquisitions of
Hanning, Somomeca, AMM Holdings and Gemini, and (ii) the purchase of the Gemini
building.
(w) Adjustment to reflect rent expense for the period of January 1 through
August 7, 1997 to be paid on land and buildings in Germany distributed to the
owners of Moll in August 1997.
(x) Adjustment to record amortization of additional goodwill generated in the
acquisitions of Somomeca, AMM Holdings and Gemini. The goodwill is being
amortized over 20 years.
(y) Adjustment to eliminate the minority interest's portion of the earnings of
Somomeca and Reliance as the minority interest of Somomeca was purchased in
connection with Moll's purchase of Somomeca and Reliance is no longer reflected
as a consolidated subsidiary of the Company.
54
<PAGE>
(z) Adjustment to record interest expense incurred on the increase in debt
resulting from the acquisitions of Hanning, Somomeca, AMM Holdings and Gemini.
(aa) Adjustment to reflect interest on the net additional debt incurred in
connection with the Offering and to reflect the difference in interest rates
between the current debt instruments and the Notes to be sold pursuant to the
Offering.
(bb) Adjustment to reflect the tax impact of the pro forma adjustments and to
reflect Moll as a taxable entity using an estimated effective tax rate of 40%.
55
<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 hereunto duly authorized.
MOLL INDUSTRIES, INC.
(f/k/a Anchor Advanced Products, Inc.)
Date: August 18, 1998 By: /s/ Phyllis Best
------------------
Phyllis Best
Chief Financial Officer
56
<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 hereunto duly authorized.
ANCHOR HOLDINGS, INC.
Date: August 18, 1998 By: /s/ Phyllis Best
------------------
Phyllis Best
Chief Financial Officer
57
<PAGE>
EXHIBIT INDEX
Exhibit No. Exhibit
----------- -------
2.1 Agreement and Plan of Distribution, Contribution and
Merger dated June 26, 1998 (incorporated by reference
to Exhibit 2.1 of the Form 8-K filed on July 10,
1998).
