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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934
For Quarterly Period Ended July 4, 1998
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _________ to _________
Commission file number 333-26943
MOLL INDUSTRIES, INC.
(Exact Name of Registrant as Specified in its Charter)
Delaware 04-3084238
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
ANCHOR HOLDINGS, INC.
(Exact Name of Registrant as Specified in its Charter)
Delaware 62-1427775
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
1111 Northshore Drive, Suite 600
Knoxville, TN 37919-4048
(Address of Principal Executive Offices)
(Zip Code)
Registrant's Telephone Number, Including Area Code (423) 450-5300
ANCHOR ADVANCED PRODUCTS, INC.
(Former Name, Former Address and Former Fiscal Year, if Changed
Since Last Report)
Indicate by check mark whether the registrant: (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
----- -----
Indicate the number of shares outstanding of each of the registrant's
classes of common stock, as of the latest practicable date.
Date Class Outstanding Shares
---- ----- ------------------
August 19, 1998 Anchor Holdings, Inc.
Common Stock, $.01 par value 1,551,218
Moll Industries, Inc. is a wholly-owned subsidiary of Anchor Holdings, Inc.
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<PAGE>
MOLL INDUSTRIES, INC. AND ANCHOR HOLDINGS, INC.
TABLE OF CONTENTS
Page
----
Introduction 1
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements 2
Consolidated Balance Sheets at July 4, 1998 2
and December 31, 1997
Consolidated Statements of Income for
the Thirteen and Twenty-six Weeks Ended July 4, 1998
and June 30, 1997 3-4
Consolidated Statements of Cash Flows
for the Thirteen and Twenty-six Weeks Ended
July 4, 1998 and June 30 1997 5-6
Notes to Consolidated Financial Statements 7-10
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 11
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 15
Item 2. Changes in Securities 15
Item 3. Defaults Upon Senior Securities 15
Item 4. Submission of Matters to a Vote of Security Holders 15
Item 5. Other Information 15
Item 6. Exhibits and Reports on Form 8-K 15
Signatures 16
ii
<PAGE>
Introduction
Moll Industries, Inc., (the "Company"), is a leading full service
manufacturer and designer of custom molded and assembled plastic components for
a broad variety of customers and end markets throughout North America and
Europe. Anchor Holdings, Inc. ("Holdings") does not have any material operations
or assets other than ownership of all the capital stock of the Company. The
Company was formed through the merger (the "Merger") of two leading plastic
injection molders, Moll PlastiCrafters Limited Partnership ("Moll") and Anchor
Advanced Products, Inc. ("Anchor"). The Merger was structured with the owners of
Moll contributing their interests in Moll to AMM Holdings, Inc. ("AMM Holdings")
in exchange for common shares of AMM Holdings. AMM Holdings contributed these
interests in Moll to Holdings, and ultimately to Anchor. Moll was then merged
with Anchor, with Anchor surviving the Merger and changing its name to "Moll
Industries, Inc." As part of the Merger, the Company assumed all the assets of
Moll. Such assets included all the equity interests in Moll's foreign
subsidiaries, which operate in France, Germany, the United Kingdom and Portugal.
As a result of the Merger, all the U.S. operating assets of Moll and Anchor are
held by the Company. As the successor corporation in the Merger, the Company
also assumed the debt and other obligations of Anchor and Moll. See note 1 to
the Notes to Consolidated Financial Statements for a description of the Merger
and the accounting treatment thereof.
Concurrently with the Merger, the Company also issued $130,000,000
aggregate principal amount of its 10 1/2% Senior Subordinated Notes due 2008
pursuant to an offering which was exempt from the registration requirements of
the Securities Act of 1933, as amended and applicable state securities laws.
Holdings is also the guarantor of the Company's 11 3/4% Series B Senior Notes
due 2004 (the "Senior Notes") originally issued by Anchor.
The structure of the Company following the Merger is as indicated in the
table below:
---------------------------
AMM Holdings, Inc.
---------------------------
|
|
|
|
---------------------------
Anchor Holdings, Inc.
---------------------------
|
|
|
|
---------------------------
Moll Industries, Inc.
---------------------------
|
|
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------------------------------------------------------------------
| | | | |
| | | | |
| | | | |
| | | | Anchor
Cepillos De Hanning- Moll Moll Advanced
Matamoros Kunststoffe Industries UK, Plastics Products Foreign
S.A. de C.V. GmbH & Co. Limited SARL Sales
Corporation
- --------------------------------------------------------------------------------
Note: Certain subsidiaries of the Company are held through one or more
intermediate holding companies for certain corporate and tax considerations.
However, such holding companies have not been reflected on this chart.
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Anchor Holdings, Inc. and Subsidiary, Moll Industries, Inc.
Consolidated Balance Sheets
(in thousands and unaudited)
<TABLE>
<CAPTION>
July 4, December 31,
1998 1997
---- ----
<S> <C> <C>
ASSETS
Current Assets:
Cash $ 29,668 $ 1,729
Accounts receivable, net of reserves for doubtful accounts
of $2,037 and $579, respectively 75,117 22,484
Inventories, net 53,922 15,580
Deposits on tooling 4,551 6,877
Equipment held for sale -- 417
Other current assets 4,257 392
-------- -------
Total current assets 167,515 47,479
Property, Plant and Equipment, net 118,933 35,418
Receivable from Affiliates 390 465
Goodwill, net 36,411 --
Other Intangible and Non-current Assets, net 16,206 3,563
-------- -------
Total assets $339,455 $86,925
======== =======
LIABILITIES AND EQUITY
Current Liabilities:
Checks drawn in excess of cash on deposit $ 1,005 $ 143
Customer deposits on tooling 4,669 7,412
Current portion of other long-term obligations 7,575 5,059
Accounts payable 36,762 16,588
Accrued liabilities 27,774 5,506
-------- -------
Total current liabilities 77,785 34,708
-------- -------
Notes Payable 230,000 --
Other Long-term Obligations, net of current portion 15,025 42,873
-------- -------
Deferred Income Taxes 6,972 10
-------- -------
Other Non-current Liabilities 7,741 1,157
-------- -------
Commitments and Contingencies -- --
-------- -------
Minority Interest -- 2,213
-------- -------
Equity:
Partners' Capital -- 5,962
Common stock ($.01 par value, 2,000 shares authorized,
1,551 shares issued and outstanding) 15 --
Additional contributed capital 2,000 --
Treasury stock at cost (10) --
Retained earnings 372 --
Accumulated other comprehensive income (445) 2
-------- -------
Total equity 1,932 5,964
-------- -------
Total liabilities and equity $339,455 $86,925
======== =======
</TABLE>
See accompanying notes to consolidated financial statements (unaudited)
2
<PAGE>
Anchor Holdings, Inc. and Subsidiary, Moll Industries, Inc.
Consolidated Statements of Income
(in thousands and unaudited)
<TABLE>
<CAPTION>
Thirteen Weeks Ended Twenty-six Weeks Ended
-------------------------- --------------------------
July 4, June 30, July 4, June 30,
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net sales $63,063 $28,122 $123,169 $53,755
Cost of goods sold 51,358 21,791 102,096 41,867
------- ------- -------- -------
Gross profit 11,705 6,331 21,073 11,888
Selling, general and administrative
expense 5,159 2,076 9,587 4,177
Management and consulting fee to related
parties 427 439 1,198 842
------- ------- -------- -------
Operating income 6,119 3,816 10,288 6,869
Other expense:
Interest expense, net 2,643 748 4,979 1,423
Minority interest in subsidiary
income 2 79 239 399
Other, net 392 202 538 91
------- ------- -------- -------
3,037 1,029 5,756 1,913
Income before income taxes and
extraordinary item 3,082 2,787 4,532 4,956
Provision for income taxes 651 -- 744 --
------- ------- -------- -------
Income before extraordinary item 2,431 2,787 3,788 4,956
Extraordinary item - loss on early
extinguishment of debt 1,235 -- 1,971 --
------- ------- -------- -------
Net income $ 1,196 $ 2,787 $ 1,817 $ 4,956
======= ======= ======== =======
Earnings per share $ 1.57 $ 1.80 $ 2.44 $ 3.20
======= ======= ======== =======
Weighted average common shares
outstanding 1,551 1,551 1,551 1,551
======= ======= ======== =======
</TABLE>
See accompanying notes to consolidated financial statements (unaudited)
3
<PAGE>
Anchor Holdings, Inc. and Subsidiary, Moll Industries, Inc.
Consolidated Statements of Comprehensive Income
(in thousands and unaudited)
<TABLE>
<CAPTION>
Thirteen Weeks Ended Twenty-six Weeks Ended
-------------------------- --------------------------
July 4, June 30, July 4, June 30,
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net Income $1,196 $2,787 $1,817 $4,956
Other Comprehensive Income:
Foreign currency translation
adjustment 460 11 (120) (68)
------ ------ ------ ------
Comprehensive Income $1,656 $2,798 $1,697 $4,888
====== ====== ====== ======
</TABLE>
See accompanying notes to consolidated financial statements (unaudited)
4
<PAGE>
Anchor Holdings, Inc. and Subsidiary, Moll Industries, Inc.
Consolidated Statements of Cash Flows
(in thousands and unaudited)
<TABLE>
<CAPTION>
Thirteen Weeks Ended Twenty-six Weeks Ended
---------------------------- ----------------------------
July 4, June 30, July 4, June 30,
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Cash Flows from Operating Activities:
Net income $ 1,196 $ 2,787 $ 1,817 $ 4,956
Adjustments to reconcile net
income to net cash provided by
operating activities:
Depreciation and amortization 2,947 1,123 5,086 2,357
Loss on early extinguishment of debt 1,235 -- 1,971 --
Gain on disposal of fixed assets (139) (69) (134) (69)
Deferred income taxes 108 -- 199 --
Minority interest in subsidiary income 2 79 239 399
Changes in assets and liabilities, net
of assets purchased and liabilities
assumed:
Accounts receivable (7,942) (5,149) (5,073) (8,475)
Receivable from affiliates 74 -- 74 --
Inventories 941 346 (591) (579)
Other current assets (405) 98 (964) (299)
Deposits on tooling 3,694 921 2,773 367
Other assets (1,353) 186 (1,300) 249
Accounts payable 458 687 (1,507) 1,552
Accrued liabilities 4,876 1,202 1,842 978
Customer deposits on tooling (3,536) (832) (2,856) (83)
Checks drawn in excess of cash on
deposit (215) 122 1,149 119
-------- ------- -------- -------
Total adjustments 745 (1,286) 908 (3,484)
-------- ------- -------- -------
Net cash provided by operating
activities 1,941 1,501 2,725 1,472
-------- ------- -------- -------
Cash Flows from Investing Activities:
Capital expenditures (3,778) (1,112) (6,983) (1,447)
Proceeds on disposal of fixed assets 136 -- 553 100
Purchase of Somomeca -- -- (11,737) --
Purchase of Anchor (6,453) -- (6,453) --
Purchase of Gemini (9,954) -- (9,954) --
-------- ------- -------- -------
Net cash used in investing activities (20,049) (1,112) (34,574) (1,347)
-------- ------- -------- -------
</TABLE>
(continued)
5
<PAGE>
Anchor Holdings, Inc. and Subsidiary, Moll Industries, Inc.
Consolidated Statements of Cash Flows
(in thousands and unaudited)
<TABLE>
<CAPTION>
Thirteen Weeks Ended Twenty-six Weeks Ended
------------------------------ --------------------------
July 4, June 30, July 4, June 30,
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Cash Flows from Financing Activities:
Net proceeds from (payments on)
revolving loan facility $ (792) $ 3,224 $ (10,594) $ 3,954
Proceeds from issuance of long-term
obligations 130,910 502 187,218 1,232
Principal payments on long-term
obligations (82,419) (1,281) (106,157) (2,579)
Financing costs (5,813) -- (7,517) --
Capital contribution from parent 2,000 -- 2,000 --
Distributions (2,936) (1,793) (4,795) (1,831)
Distributions to minority partners of
Reliance (643) (4) (643) (4)
--------- ------- --------- -------
Net cash provided by financing
activities 40,307 648 59,512 772
--------- ------- --------- -------
Effect of Exchange Rate Changes in Cash 328 (3) 276 (13)
--------- ------- --------- -------
Net Change in Cash 22,527 1,034 27,939 884
Balance at Beginning of Period 7,141 728 1,729 878
--------- ------- --------- -------
Balance at End of Period $ 29,668 $ 1,762 $ 29,668 $ 1,762
========= ======= ========= =======
Supplemental Cash Flow Information:
Cash paid for interest $ 2,104 $ 834 $ 4,574 $ 1,595
========= ======= ========= =======
Cash paid for taxes $ 167 $ -- $ 167 $ --
========= ======= ========= =======
</TABLE>
Non-cash Transactions:
In June 1997, the Company terminated a capital lease that resulted in a
reduction of debt by $2,503 and a reduction in fixed assets by $1,205.
In June 1998, the Company distributed its investment in Reliance L.P. of $3,135
to its partners. Reliance had a cash balance of $543 at the time of the
distribution.
See accompanying notes to consolidated financial statements (unaudited)
6
<PAGE>
Anchor Holdings, Inc. and Subsidiary, Moll Industries, Inc.
Notes to Consolidated Financial Statements
(in thousands and unaudited)
Anchor Holdings, Inc. ("Holdings") was incorporated March 9, 1990, under the
laws of the State of Delaware. Holdings is the wholly-owned subsidiary of AMM
Holdings, Inc. ("AMM Holdings", formerly known as Anchor Acquisition Co.), which
is not consolidated herein. Holdings owns Moll Industries, Inc. (the "Company",
formerly known as Anchor Advanced Products, Inc.) through which, including its
subsidiaries, it designs and manufactures custom molded products and assembled
plastic components for a broad variety of customers and end markets throughout
North America and Europe. The Company's products are sold to a wide range of
end-markets, including end markets for consumer products,
telecommunication/business equipment, household appliances, automobile and
medical devices. The Company's manufacturing facilities are located primarily in
the United States, France, Germany, Mexico and the United Kingdom.
1. Merger with Moll PlastiCrafters Limited Partnership
Effective June 26, 1998, the owners of Moll PlastiCrafters Limited Partnership
("Moll") contributed their interest in Moll to AMM Holdings in exchange for
common shares of AMM Holdings. AMM Holdings contributed these interests in Moll
to Holdings and ultimately to Anchor Advanced Products, Inc. ("Anchor"). Moll
was merged into Anchor (the "Merger") at which time the name of Anchor was
changed to Moll Industries, Inc. As the owners 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; therefore, the consolidated financial
statements presented for all periods herein are those of Moll, and exclude those
of Anchor prior to June 26, 1998. Moll utilized purchase accounting to account
for the merger; accordingly, the assets and liabilities acquired in the Merger,
which primarily relate to Anchor, were adjusted to their estimated fair values
which are as follows:
Current assets $ 42,966
Property, plant and equipment 56,122
Goodwill 19,566
Other assets 9,563
Current liabilities (12,914)
Notes payable (100,000)
Other non-current liabilities (15,303)
An evaluation of the assets acquired and liabilities assumed is in process. Upon
completion of the evaluation, net additions or reductions, if any, in the fair
values currently assigned will result in a corresponding change in goodwill.
2. Basis of Presentation
The quarterly consolidated financial statements include the accounts of Moll, as
it is the accounting acquiror in the Merger discussed in Note 1, and its
subsidiaries. All significant results of operations of companies acquired
utilizing the purchase method of accounting have been included in the
consolidated financial statements since the effective date of the acquisition
(the Hanning Companies - August 8, 1997, Somomeca Industries, Inc. - January 8,
1998, Anchor - June 26, 1998 and Gemini Plastic Services, Inc. - June 26, 1998).
The results of Reliance Products have been excluded from these consolidated
financial statements since June 26, 1998 (see Note 4). All significant
intercompany balances have been eliminated in consolidation. The quarterly
consolidated financial statements have been prepared, without audit, in
accordance with generally accepted accounting principles, pursuant to the rules
and regulations of the Securities and Exchange Commission. In the opinion of
management, the quarterly consolidated financial statements include all
adjustments which are necessary for a fair presentation of the financial
position and results of operations for the interim periods presented, such
adjustments being of a normal, recurring nature. Certain information and
footnote disclosures have been condensed or omitted pursuant to such rules and
regulations. It is suggested that these quarterly consolidated financial
7
<PAGE>
statements and notes thereto are read in conjunction with the consolidated
financial statements and notes thereto for the year ended December 31, 1997.
Results of operations in interim periods are not necessarily indicative of
results to be expected for a full year.
In connection with the Merger, Moll changed its financial reporting period from
one based on calendar month ends to four thirteen week periods. As a result,
Moll changed its second quarter period end from June 30 to July 4.
Earnings per share for all periods presented have been computed on a basis
assuming the number of common shares outstanding subsequent to the Merger were
outstanding for all periods presented. There are no potentially dilutive
securities currently outstanding.
3. Acquisitions
Effective June 26, 1998, the Company acquired the stock of Gemini Plastic
Services, Inc. ("Gemini") for cash of $10,186. The acquisition has been
accounted for using the purchase method with the purchase price allocated based
on the estimated fair values of the assets purchased and liabilities assumed, as
follows:
Current assets $ 4,534
Property, plant and equipment 4,571
Goodwill 6,527
Other assets 23
Current liabilities (2,818)
Non-current liabilities (2,651)
--------
$10,186
========
Effective January 8, 1998, the Company acquired Somomeca Industries, Inc.
("Somomeca"). In April 1998, the Company entered into an agreement with the
former owners of Somomeca under which the former owners will receive additional
consideration of 9,000 French Francs ($1,488 at July 4, 1998 exchange rates) in
lieu of consideration for the operating results of Somomeca for the twelve
months ended August 31, 1998 as required per the purchase agreement. The
additional consideration will be paid in three equal installments on August 31,
1998 and January 31, 1999 and 2000. The additional consideration has been
reflected as goodwill in the accompanying July 4, 1998 consolidated balance
sheet. Total cash consideration, including the additional consideration and
expenses was $15,988.
Effective August 8, 1997, the Company acquired the Hanning Companies, a group of
companies which had previously been under common control for total cash
consideration, including expenses, of $10,482.
An evaluation of the assets acquired and liabilities assumed is in process. Upon
completion of the evaluation, net additions or reductions, if any, in the fair
values currently assigned will result in a corresponding change in goodwill.
4. Distribution of Interest in Reliance Products, L.P.
Effective immediately prior to the Merger discussed in Note 1, Moll distributed
its interest in Reliance Products, L.P. to its owners. The total amount of such
distribution was $3,135.
8
<PAGE>
5. Notes Payable
On June 26, 1998, the Company issued $130,000 of 10 1/2% Senior Subordinated
Notes due in 2008. These notes are unsecured and subordinate to substantially
all of the Company's indebtedness. The proceeds of these notes were used
primarily to repay existing indebtedness, acquire Gemini and other corporate
purposes.
In conjunction with the Merger, the Company assumed $100,000 of 11 3/4% Senior
Notes due 2004 originally issued by Anchor. These notes are unsecured but are
guaranteed by Holdings and the foreign subsidiaries of the Company.
6. Taxes
Effective June 26, 1998, the Company became a taxable entity. Prior to June 26,
1998, the Company was a partnership; accordingly, the earnings of the Company,
including the earnings of foreign subsidiaries attributable to the Company for
United States tax purposes, were included in the tax returns of the partners.
Therefore, the consolidated financial statements contain no provision for
federal or state income taxes related to these earnings.
Certain of the Company's foreign subsidiaries and, subsequent to June 26, 1998,
the Company are taxable entities. The Company has accounted for income taxes for
taxable entities 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.
7. Summarized Financial Information of Subsidiaries
The Company's foreign subsidiaries, Moll PlastiCrafters GmbH, Moll Industries
UK, Limited and Moll Plastics SARL, are each wholly-owned subsidiaries of the
Company. Each of these entities has guaranteed the $100,000 of 11 3/4% Senior
Notes due 2004 issued by Anchor and assumed by the Company in the Merger. As
such, these entities are subject to the reporting requirements under Section 13
or 15 (d) of the Securities Exchange Act of 1934. Combined financial information
relating to these entities since the date of their acquisition is presented
herein in accordance with Staff Accounting Bulletin No. 53 as an addition to the
notes of the consolidated financial statements of the Company. Summarized
combined financial information for the Company's foreign subsidiaries is as
follows:
Thirteen Twenty-six
Weeks Ended Weeks Ended
July 4, 1998 July 4, 1998
------------ ------------
Statement of Income Data:
Net sales $32,673 $62,486
Gross margin 5,322 8,370
Income from operations 2,983 4,279
Net income (loss) 210 (418)
July 4, December 31,
1998 1997
---- ----
Balance Sheet Data:
Current Assets $ 63,531 $ 9,528
Total assets 103,961 17,591
Current liabilities 42,886 19,054
Total liabilities 104,762 19,089
Deficit (801) (1,498)
The financial information of Anchor Holdings is identical to that of the
Company. Therefore, summarized financial information of the Company is not
required.
9
<PAGE>
8. Other Comprehensive Income
The Company has adopted Statement of Financial Accounting Standards No. 130,
Reporting Comprehensive Income, which requires the reporting of comprehensive
income in addition to net income. Comprehensive income is a more inclusive
financial reporting methodology that includes disclosure of certain financial
information that historically has not been recognized in the calculation of net
income.
Information with respect to the accumulated other comprehensive income balance
is as follows:
<TABLE>
<CAPTION>
Thirteen Weeks Ended Twenty-six Weeks Ended
-------------------------- --------------------------
July 4, June 30, July 4, June 30,
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Beginning balance $(578) $(79) $ 2 $ --
Current period change in foreign
currency translation 460 11 (120) (68)
Accumulated foreign currency
translation associated with
distributed interest 194 -- 194 --
Deferred compensation assumed in Merger (521) -- (521) --
----- ---- ----- ----
$(445) $(68) $(445) $(68)
===== ==== ===== ====
</TABLE>
9. Pro Forma Financial Information
The historical statement of operations data for Anchor for the periods prior to
the Merger is as follows:
<TABLE>
<CAPTION>
Thirteen Thirteen Twenty-six Twenty-six
Weeks Ended Weeks Ended Weeks Ended Weeks Ended
July 4, 1998 June 28, 1997 July 4, 1998 June 28, 1997
------------ ------------- ------------ -------------
<S> <C> <C> <C> <C>
Net sales $36,507 $43,199 $75,810 $84,745
Gross margin 4,533 6,531 11,141 13,424
Income from operations 1,298 3,334 4,466 7,269
Net income (loss) (1,269) (868) (1,188) 190
</TABLE>
The following unaudited pro forma statement of operations data gives effect to
the Merger and the acquisition of Gemini as if they had occurred at the
beginning of the respective periods.
<TABLE>
<CAPTION>
Thirteen Twenty-six
Weeks Ended Weeks Ended
July 4, 1998 July 4, 1998
------------ ------------
<S> <C> <C>
Net sales $98,446 $199,185
Operating income 7,604 16,248
Income (loss) before taxes and extraordinary item (77) 1,494
</TABLE>
10
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
This Report may contain forward-looking statements concerning the
Company's operations, economic performance and financial condition. All such
statements are based upon a number of assumptions and estimates that are
inherently subject to significant uncertainties and contingencies, many of which
are beyond the control of the Company, and reflect future business decisions
that are subject to change. Some of these assumptions inevitably will not
materialize, and unanticipated events will occur that will affect the Company's
results.
The Company is a leading full service manufacturer and designer of
custom molded and assembled plastic components for a broad variety of customers
and end markets throughout North America and Europe. The Company serves over 450
customers, including leading multinational companies such as Abbott
Laboratories, Colgate-Palmolive, Kimberly-Clark, L'Oreal, Maybelline, Motorola,
Procter & Gamble, Renault, Revlon, Siemens, Whirlpool and Xerox. Products using
the Company's plastic components are sold in a wide range of end markets,
including end markets for consumer products, telecommunications/ business
equipment, household appliances, automobiles and medical devices. The Company
believes that the diversity of its customers, markets and geographic regions
creates a stable revenue base and reduces the Company's exposure to particular
market or regional economic cycles.
The Company was formed through the merger of two leading plastic injection
molders, Moll and Anchor, which were each controlled by Mr. George Votis.
Immediately prior to the Merger, Moll and Anchor were independently operated
entities. Mr. Votis acquired Moll's predecessor in 1989 and has since completed
seven acquisitions, increasing Moll's revenues from approximately $8 million in
1989 to approximately $232.4 million in 1997 on a pro forma basis, excluding the
acquisition of Anchor. Such acquisitions included the acquisition in August 1997
of the Hanning Companies ("Hanning"), a leading supplier of injection molded
plastic components for use in digital photocopiers with manufacturing facilities
located in the United States, the United Kingdom and Germany, which had 1997
revenues of $49.6 million, and the acquisition in January 1998 of Somomeca
Industries S.A.R.L. and its subsidiaries ("Somomeca"), a French injection molder
which had 1997 revenues of $88.5 million. In March 1998, Mr. Votis acquired
Anchor, which had 1997 revenues of $161.2 million. See Note 1 to the interim
consolidated Financial Statements included in Item 1 as to the accounting
treatment of the Merger.
Certain of the Company's operating data for the Thirteen and Twenty-six
weeks ended July 4, 1998 and June 30, 1997 are set forth below as percentages of
net sales:
<TABLE>
<CAPTION>
13 Weeks Ended 26 Weeks Ended
July 4, June 30, July 4, June 30,
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net Sales 100.0% 100.0% 100.0% 100.0%
Gross Profit 18.6% 22.5% 17.1% 22.1%
Selling, G&A 8.9% 8.9% 8.8% 9.3%
Operating Income 9.7% 13.6% 8.4% 12.8%
Other (Income)/Expense 0.6% 1.0% 0.6% 0.9%
Net Interest (Income)/Expense 4.2% 2.7% 4.0% 9.2%
Income Taxes 1.0% 0.0% 0.6% 0.0%
Extraordinary Item 2.0% 0.0% 1.6% 0.0%
Net Income 1.9% 9.9% 1.5% 2.6%
</TABLE>
11
<PAGE>
Results of Operations
Twenty-six weeks ended July 4, 1998 compared to
Twenty-six weeks ended June 30, 1997
Net Sales. Net sales for the twenty-six weeks ended July 4, 1998 increased $69.4
million, or 129.1%, to $123.2 million from $53.8 million for the twenty-six week
period ended June 30, 1997, due primarily to the Somomeca acquisition ($43.4
million) and the Hanning acquisition ($23.8 million). The closure of the El
Paso, Texas facility in September 1997 decreased sales in the first half of 1998
by $3.2 million.
Gross Profit. Gross profit increased $9.2 million, or 77.3%, in the first half
of 1998 to $21.1 million from $11.9 million in the first half of 1997, due
primarily to the Somomeca ($6.5 million) and Hanning ($1.9 million) acquisitions
in January 1998 and August 1997, respectively. Increased utilization of plant
capacity caused a combined increase from remaining facilities of $0.8 million.
Gross profit as percentage of net sales decreased 5.0% from 22.1% for the
twenty-six week period ended June 30, 1997 to 17.1% for the twenty-six weeks
ended July 4, 1998, primarily as a result of lower margins realized at the
acquired companies than the Company had historically realized.
S G & A Expenses. S G & A expenses increased $5.4 million, or 128.6%, in the
first half of 1998 to $9.6 million from $4.2 million for the first half of 1997,
primarily due to the Somomeca ($2.4 million) and Hanning ($2.2 million)
acquisitions mentioned previously. Increases totaling $0.2 million were incurred
for personnel, travel and computer system support in the period ended July 4,
1998 over the period ended June 30, 1997.
Management Fees. Management fees increased $0.4 million, or 42.3%, to $1.2
million in the first half of 1998 from $0.8 million in the first half of 1997,
primarily due to the increase in net sales.
Operating Income. Operating income increased $3.4 million, or 49.8%, in the
first half of 1998 to $10.3 million from $6.9 million in corresponding period of
1997, due primarily to the acquisitions mentioned above.
Interest Expense. Interest expense increased $3.6 million, or 249.9%, in the
first half of 1998 to $5.0 million from $1.4 million in the same period for
1997, primarily due to the increase in debt acquired in connection with the
Hanning and Somomeca acquisitions mentioned above.
Provision for Income Taxes. Provision for income taxes in 1998 represents
foreign income taxes recorded in connection with the new corporate subsidiaries
in France, Portugal, Germany and the United Kingdom. Prior to the acquisition of
foreign subsidiaries no provision for income taxes was made on the Consolidated
Financial Statements as the Company's partnership tax status allowed for the
earnings of the Company to be taxed on the tax returns of the partners.
Extraordinary Loss. The extraordinary loss represents the write-off of
unamortized fees incurred in connection with debt which was repaid during the
period.
Net Income. Net income decreased $3.1 million, or 66.6%, to $1.8 million for the
first half of 1998 from $4.9 million for the first half of 1997 as a result of
the items listed above.
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Thirteen Weeks ended July 4, 1998 compared to the
Thirteen Weeks ended June 30, 1997
Net Sales. Net sales increased $34.9 million, or 124.2%, to $63.1 million in the
1998 second quarter from $28.2 million in the 1997 second quarter, due to the
Somomeca ($22.2 million) and Hanning ($12.7 million) acquisitions.
Gross Profit. Gross profit increased $5.4 million, or 84.9%, to $11.7 million in
the 1998 period from $6.3 million in the corresponding period in 1997, primarily
due to the Somomeca ($4.0 million) and Hanning ($1.2 million) acquisitions
mentioned above. Productivity increases at the Company's other facilities
contributed an additional increase of $0.2 million. Gross profit as a percentage
of net sales decreased 4.0% from 22.5% to 18.5% primarily as a result of margins
realized at the acquired companies being lower than the margins the Company has
historically realized.
S G & A Expenses. S G & A expenses increased $3.1 million, or 148.5%, to $5.2
million in the 1998 period from $2.1 million in the 1997 period, primarily due
to the Somomeca ($1.4 million) and Hanning ($1.2 million) acquisitions.
Management Fees. Management fees remained stable at $0.4 million for the
second quarter of 1998 and 1997.
Operating Income. Operating income increased $2.3 million, or 60.3%, to $6.1
million in the 1998 period from $3.8 million in the 1997 period, due primarily
to the acquisitions mentioned above.
Interest Expense. Interest expense increased $1.9 million, or 253.3%, to $2.6
million in the second quarter of 1998 from $0.8 million in the 1997 second
quarter primarily due to the increase in debt acquired in connection with the
Hanning and Somomeca acquisitions mentioned above.
Provision for Income Taxes. Provision for income taxes in 1998 represents
foreign income taxes recorded in connection with the new corporate subsidiaries
in France, Portugal, Germany and the United Kingdom. Prior to the acquisition of
foreign subsidiaries no provision for income taxes was made on the Consolidated
Financial Statements as the Company's partnership tax status allowed for the
earnings of the company to be taxed on the tax returns of the Partners.
Extraordinary Loss. The extraordinary loss represents the write-off of
unamortized fees incurred in connection with debt which was repaid with the
proceeds of the Senior Subordinated Debt.
Net Income. Net income decreased $1.6 million, or 57.1%, to $1.2 million in the
1998 second quarter from $2.8 million in the second quarter of 1997, as a result
of the items listed above.
Liquidity and Capital Resources
The Company's liquidity requirements consist primarily of working
capital needs and capital expenditures, required payments of principal and
interest on any borrowings under its credit facility and required payments of
interest on its 11 3/4 Senior Notes due 2004 and its 10 1/2 Senior Subordinated
Notes due 2008.
Proceeds from the issuance of long term debt of $188.7 million were
used to extinguish existing bank debt of $106.2 million, purchase Somomeca
($11.8 million), purchase Anchor ($6.5 million) and to purchase Gemini Plastic
Services, Inc. ($10.0 million). Capital expenditures for the period ended July
4, 1998 increased $5.5 million from the same period in 1997, primarily due to
the funding of construction of the Company's facility in Rochester, New York.
Cash provided form operating activities increased by $1.3 million in 1998
primarily as a result of the Hanning and Somomeca acquisitions.
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Inflation and Changing Prices
The Company's sales and costs are subject to inflation and price
fluctuations. However, because changes in the cost of plastic resins and nylon,
the Company's principal raw materials, are generally passed through to
customers, such changes historically have not, and in the future are not
expected to have a material effect on the Company's gross profit.
14
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PART II. OTHER INFORMATION
Item 1. Legal Proceedings
None.
Item 2. Change in Securities
None.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Submission of Matters to a Vote of Securities Holders
None.
Item 5. Other Information
None.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits.
None.
(b) Reports on Form 8-K.
Form 8-K filed on April 2, 1998, reporting under Item 1; no
financial statements were filed.
Form 8-K filed on June 12, 1998, reporting under Item 5; no
financial statements were filed.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
each registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Date: August 21, 1998 MOLL INDUSTRIES, INC.
By: /s/ Phyllis C. Best
----------------------------
Phyllis C. Best
Chief Financial Officer
ANCHOR HOLDINGS, INC.
By: /s/ Phyllis C. Best
----------------------------
Phyllis C. Best
Chief Financial Officer
16
