<PAGE>
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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 1, 2000
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.)
Tyson Place, Suite 200
2607 Kingston Pike
Knoxville, TN 37919-4048
(Address of Principal Executive Offices)
(Zip Code)
Registrant's Telephone Number, Including Area Code: (865) 329-5300
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 [ ]
<PAGE>
Indicate the number of shares outstanding of each of the registrant's
classes of common stock, as of the latest practicable date.
<TABLE>
<CAPTION>
DATE CLASS OUTSTANDING SHARES
<S> <C> <C>
August 9, 2000 Anchor Holdings, Inc.
Common Stock, $.01 par value 1,551,218
August 9, 2000 Moll Industries, Inc.
Common Stock, $.01 par value 100
</TABLE>
Moll Industries, Inc. is a wholly-owned subsidiary of Anchor Holdings, Inc.
which is a wholly-owned subsidiary of AMM Holdings, Inc.
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ii
<PAGE>
<TABLE>
<CAPTION>
MOLL INDUSTRIES, INC. AND ANCHOR HOLDINGS, INC.
TABLE OF CONTENTS
PAGE
<S> <C>
Introduction................................................................1
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements...........................................2
Consolidated Balance Sheets at July 1, 2000
and December 31, 1999.........................................2
Consolidated Statements of Operations for
the Thirteen and Twenty-Six Weeks Ended July 1, 2000
and July 3, 1999...............................................3
Consolidated Statements of Comprehensive Income for
the Thirteen and Twenty-Six Weeks Ended July 1, 2000
and July 3, 1999...............................................4
Consolidated Statements of Cash Flows
for the Thirteen and Twenty-Six Weeks Ended July 1, 2000
and July 3, 1999...............................................5
Notes to Consolidated Financial Statements...................6-9
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations...........................10
Item 3. Quantitative and Qualitative Disclosures about Market Risks...13
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K...............................14
Signatures..................................................................15
</TABLE>
iii
<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
other than ownership of all of the capital stock of the Company.
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, SEB, 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 has 26 manufacturing facilities with approximately 700
molding machines throughout North America and Europe, including France,
the United Kingdom and Portugal. The Company is capable of providing its
customers with integrated design and prototype development, mold design and
manufacturing, advanced plastic injection molding capabilities, and value-added
finishing services, such as hot stamping, pad printing, assembly and complete
product testing, all of which enable it to provide "one-stop" shopping to
customers seeking a wide range of services. The Company's technologically
advanced manufacturing facilities and equipment enable it to provide customized
solutions to highly demanding customer specifications.
The structure of the Company is as indicated in the table below:
---------------------------
AMM Holdings, Inc.
---------------------------
|
|
---------------------------
Anchor Holdings, Inc.
---------------------------
|
|
---------------------------
Moll Industries, Inc.
---------------------------
|
|
|
<TABLE>
<CAPTION>
------------------------------------------------------------------------------|----------------------
| | | | | |
<S> <C> <C> <C> <C>
Cepillos De Moll Industries, Moll Industries UK, Moll France SARL Anchor Advanced Compression,
Matamoros Limited Limited Products Foreign Inc.
S.A. de C.V. Sales Corporation
</TABLE>
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.
1
<PAGE>
ANCHOR HOLDINGS, INC. AND SUBSIDIARY, MOLL INDUSTRIES, INC.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT PER SHARE INFORMATION, AND UNAUDITED)
<TABLE>
<CAPTION>
JULY 1, DECEMBER 31,
2000 1999
------------ --------------
ASSETS
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents.................................... $ 224 $ 1,350
Accounts receivable, net of reserves for doubtful accounts of
$2,156 and $2,194, respectively........................... 66,619 65,212
Inventories, net............................................. 29,938 35,452
Deposits on tooling.......................................... 14,939 13,043
Other current assets......................................... 2,500 2,291
------------ --------------
Total current assets................................. 114,220 117,348
------------ --------------
PROPERTY, PLANT AND EQUIPMENT:
Land......................................................... 2,928 3,142
Buildings.................................................... 38,501 40,552
Machinery and equipment...................................... 119,461 118,374
Less: accumulated depreciation............................... (45,528) (39,281)
------------ --------------
Property, plant and equipment, net........................ 115,362 122,787
------------ --------------
GOODWILL, NET.................................................. 40,969 42,562
------------ --------------
INTANGIBLE AND OTHER ASSETS, NET............................... 15,575 16,469
------------ --------------
Total assets......................................... $ 286,126 $ 299,166
============ ==============
LIABILITIES AND DEFICIT
CURRENT LIABILITIES:
Current portion of long-term obligations..................... $ 6,600 $ 4,919
Short-term borrowings........................................ 1,986 1,965
Accounts payable............................................. 40,587 42,191
Accrued interest............................................. 10,265 9,987
Accrued liabilities.......................................... 18,648 22,294
Deferred tooling revenue..................................... 11,554 10,586
------------ --------------
Total current liabilities............................ 89,640 91,942
------------ --------------
LONG-TERM OBLIGATIONS, NET OF CURRENT PORTION.................. 247,228 245,939
------------ --------------
DEFERRED INCOME TAXES.......................................... 4,216 4,866
------------ --------------
OTHER NON-CURRENT LIABILITIES.................................. 7,401 7,529
------------ --------------
COMMITMENTS AND CONTINGENCIES.................................. -- --
------------ --------------
DEFICIT:
Common stock ($.01 par value, 2,000 shares authorized, 1,551
shares issued and outstanding)............................ 15 15
Additional paid in capital................................... 2,372 2,372
Accumulated deficit.......................................... (57,715) (49,147)
Accumulated other comprehensive income....................... (7,031) (4,350)
------------ --------------
Total deficit........................................ (62,359) (51,110)
------------ --------------
Total liabilities and deficit........................ $ 286,126 $ 299,166
============ ==============
</TABLE>
The accompanying notes are an integral part of these
consolidated balance sheets.
<PAGE>
ANCHOR HOLDINGS, INC. AND SUBSIDIARY, MOLL INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE INFORMATION, AND UNAUDITED)
<TABLE>
<CAPTION>
THIRTEEN TWENTY-SIX
WEEKS ENDED WEEKS ENDED
------------------------- -------------------------
JULY 1, JULY 3, JULY 1, JULY 3,
2000 1999 2000 1999
------------ ----------- ----------- ------------
<S> <C> <C> <C> <C>
NET SALES...................................... $ 86,500 $ 105,792 $ 179,811 $ 207,341
COST OF SALES.................................. 75,243 90,611 156,754 181,082
---------- ---------- ---------- ----------
Gross profit................................. 11,257 15,181 23,057 26,259
SELLING, GENERAL AND ADMINISTRATIVE
EXPENSES.................................. 7,886 10,087 15,746 18,428
CLOSURE OR SALE OF FACILITY.................... 1,100 -- 800 --
---------- ---------- ---------- ----------
Operating income............................. 2,271 5,094 6,511 7,831
INTEREST EXPENSE, NET.......................... 7,961 7,121 15,691 14,457
OTHER EXPENSE.................................. 176 384 156 140
---------- ---------- ---------- ----------
LOSS BEFORE INCOME TAXES....................... (5,866) (2,411) (9,336) (6,766)
PROVISION FOR INCOME TAXES (441) (370) (768) (131)
---------- ---------- ---------- ----------
NET LOSS....................................... $ (5,425) $ (2,041) $ (8,568) $ (6,635)
========== ========== ========== ==========
LOSS PER SHARE................................. $ (3.50) $ (1.32) $ (5.52) $ (4.28)
========== ========== ========== ==========
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING.. 1,551 1,551 1,551 1,551
========== ========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
<PAGE>
ANCHOR HOLDINGS, INC. AND SUBSIDIARY, MOLL INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(IN THOUSANDS AND UNAUDITED)
<TABLE>
<CAPTION>
THIRTEEN TWENTY-SIX
WEEKS ENDED WEEKS ENDED
------------------------- -------------------------
JULY 1, JULY 3, JULY 1, JULY 3,
2000 1999 2000 1999
------------ ----------- ----------- ------------
<S> <C> <C> <C> <C>
NET LOSS....................................... $ (5,425) $ (2,041) $ (8,568) $ (6,635)
OTHER COMPREHENSIVE LOSS:
Deferred pension cost........................ -- -- -- --
Foreign currency translation adjustment...... (749) (2,441) (2,681) (6,070)
---------- ---------- ---------- ----------
COMPREHENSIVE LOSS............................. $ (6,174) $ (4,482) $ (11,249) $ (12,705)
========== ========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
<PAGE>
ANCHOR HOLDINGS, INC. AND SUBSIDIARY, MOLL INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS AND UNAUDITED)
<TABLE>
<CAPTION>
THIRTEEN TWENTY-SIX
WEEKS ENDED WEEKS ENDED
------------------------- -------------------------
JULY 1, JULY 3, JULY 1, JULY 3,
2000 1999 2000 1999
------------ ----------- ----------- ------------
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss................................................ $ (5,425) $ (2,041) $ (8,568) $ (6,635)
Adjustments to reconcile net loss to net cash
provided by operating activities
Depreciation and amortization......................... 6,085 6,343 12,321 12,346
Loss on disposal of fixed assets...................... 1,185 93 1,199 106
Deferred income taxes................................. (140) (252) (547) (160)
Changes in assets and liabilities, net of assets
purchased and liabilities assumed:
Accounts receivable................................. 6,003 3,729 (3,001) (11,104)
Inventories......................................... 4,326 1,663 4,979 3,904
Other current assets................................ (443) 27 (349) (852)
Deposits on tooling................................. (1,029) (5,035) (2,033) (7,167)
Other assets........................................ 164 (2,045) 128 (1,770)
Accounts payable.................................... (8,880) 2,115 (337) 13,299
Accrued liabilities................................. (1,676) 3,032 (3,027) (5,737)
Deferred tooling revenue............................ 700 2,700 968 5,650
Other liabilities................................... (71) (980) (40) (383)
------------ ----------- ----------- ------------
Total adjustments................................ 6,224 11,390 10,261 8,132
------------ ----------- ----------- ------------
Net cash provided by operating activities........... 799 9,349 1,693 1,497
------------ ----------- ----------- ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures.................................... (1,077) (3,771) (5,245) (10,298)
Proceeds on disposal of fixed assets.................... 293 1,862 293 3,074
Short-term investments.................................. -- -- -- 3,763
Purchase of Compression, net of cash received........... -- (1,236) -- (1,236)
Purchase of Souplex, net of cash received............... -- (6,103) -- (6,103)
------------ ----------- ----------- ------------
Net cash used in investing activities............... (784) (9,248) (4,952) (10,800)
------------ ----------- ----------- ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from (payments on) revolving loan
facilities............................................. 894 (11,113) 4,242 (273)
Proceeds from issuance of long-term obligations.......... -- 1,041 -- 1,278
Principal payments on long-term obligations.............. (842) (1,043) (2,071) (5,249)
------------ ----------- ----------- ------------
Net cash provided by (used in)
financing activities.............................. 52 (11,115) 2,171 (4,244)
------------ ----------- ----------- ------------
EFFECT OF EXCHANGE RATE CHANGES IN
CASH.................................................... (11) (132) (38) (287)
------------ ----------- ----------- ------------
NET CHANGE IN CASH........................................ 56 (11,146) (1,126) (13,834)
BALANCE AT BEGINNING OF PERIOD............................ 168 11,708 1,350 14,396
------------ ----------- ----------- ------------
BALANCE AT END OF PERIOD.................................. $ 224 $ 562 $ 224 $ 562
------------ ----------- ----------- ------------
------------ ----------- ----------- ------------
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid for interest.................................. $ 6,700 $ 7,310 $13,525 $20,324
------------ ----------- ----------- ------------
------------ ----------- ----------- ------------
Cash paid for income taxes.............................. $ -- $ -- $ -- $ 210
------------ ----------- ----------- ------------
------------ ----------- ----------- ------------
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
<PAGE>
ANCHOR HOLDINGS, INC. AND SUBSIDIARY, MOLL INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS AND UNAUDITED)
1. ORGANIZATION
Anchor Holdings, Inc. ( "Holdings") was incorporated March 9, 1990, under
the laws of the State of Delaware and is the wholly-owned subsidiary of AMM
Holdings, Inc. ("AMM Holdings", formerly known as Anchor Acquisition Co.),
which is not consolidated herein. Holdings owns all of the outstanding shares
of Moll Industries, Inc. (the "Company", formerly known as Anchor Advanced
Products, Inc.) through which, including the Company's subsidiaries, it
designs and manufactures custom molded products and assembled plastic
components for a broad variety of customers throughout North America and
Europe. Holdings has no operations or investments other than its investment
in the Company. The Company's products are sold to a wide range of markets,
including consumer products, telecommunications/business equipment, household
appliances, automobile and medical devices. The Company's manufacturing
facilities are located primarily in the United States, France, Mexico and the
United Kingdom.
2. BASIS OF PRESENTATION
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 dates of the acquisition. The results of
operations sold have been included in the consolidated financial statements
through the date of the disposition. All significant intercompany balances have
been eliminated in consolidation.
The quarterly financial statements have been prepared, without audit, in
accordance with accounting principles generally accepted in the United States,
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 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
statements and notes thereto are read in conjunction with the consolidated
financial statements and notes thereto for the year ended December 31, 1999.
Results of operations in the interim periods are not necessarily indicative of
results to be expected for a full year.
Earnings (loss) per share is measured at two levels: basic earnings per
share and diluted earnings per share. Basic earnings per share is computed by
dividing net earnings by the weighted average number of common shares
outstanding during the year. Diluted earnings per share is computed by dividing
net income by the weighted average number of common shares outstanding after
considering the additional dilution related to other dilutive securities. The
Company has no other dilutive securities outstanding.
<PAGE>
3. ACQUISITIONS
COMPRESSION
Effective April 16, 1999, the Company acquired the assets of two locations
of Compression, Inc. and the stock of its subsidiary, Percept Industrial Design,
Inc. ("Compression") for net cash of $1,287, including expenses to complete the
transaction. The acquisition has been accounted for using the purchase method of
accounting with the purchase price allocated based on the estimated fair values
of the assets purchased and liabilities assumed, as follows:
Current assets......................... $ 718
Goodwill............................... 1,343
Current liabilities.................... (774)
--------------
$ 1,287
-------------
--------------
SOUPLEX
Effective May 26, 1999, the Company acquired the stock of Souplex, Limited
("Souplex") for cash of $6,545, including expenses to complete the transaction.
The acquisition has been accounted for using the purchase method of accounting
with the purchase price allocated based on the estimated fair value of the
assets purchased and liabilities assumed, as follows:
Current assets......................... $ 7,454
Property, plant and equipment.......... 6,885
Goodwill............................... 2,959
Current liabilities.................... (7,307)
Non-current liabilities................ (3,446)
--------------
$ 6,545
--------------
--------------
See Note 6 for unaudited pro forma information.
4. DISPOSITIONS
In March 1999, the Company sold its Lakewood and Betta divisions. The
reserves provided at December 31, 1998 were adequate for the loss incurred in
the sale of the Lakewood division. Betta was sold for approximately net book
value.
Effective December 31, 1999, the Company disposed of its interest in Moll
Industries Germany GmbH ("Germany"). Pursuant to the agreement to sell
Germany, the Company agreed to provide financial support to the buyer, pay
75% of the amount by which accounts payable exceeded accounts receivables
upon the date of the closing and pay the lease payments for the manufacturing
facility for two years following the sale. The Company recorded the maximum
liability under the agreement, of which $4,152 remained in liabilities as of
July 1, 2000; however, upon the occurrence of certain events, it is possible
the Company will not be required to make the maximum payments required per
the agreement. The payment of $1,731 included in the total liability is due
to an entity owned by the majority owner of AMM Holdings. In February 2000,
the new owner declared the purchased operation insolvent, which forced the
managing director to file for bankruptcy in Germany. AMM Holding's majority
owner was still legally considered the managing director. Based on guidance
from legal counsel, management believes the amounts accrued in connection
with the sale represent the Company's maximum liability related to this
matter. However, the ultimate resolution is currently unknown.
In June 2000, the Company reached an agreement to sell its Chalon France
tooling operation. The transaction is expected to close in late 2000. The
anticipated loss on the sale of $1,100 has been reserved as a reduction of
fixed assets.
See Note 6 for unaudited pro forma information.
<PAGE>
5. LONG-TERM DEBT
Effective August 11, 2000, the Company entered into an Amended and
Restated Credit Agreement with Bank of America (the "Credit Facility"). The
Credit Facility contains a $50 million line of credit (subject to a borrowing
base limitation of $32,734 at August 11, 2000) and a $35 term loan. The
proceeds of the term loan, along with borrowings of $7.5 million under the
line of credit were used to retire $50 million of the 11.75% Senior Notes
(the "Senior Notes") at a 15% discount. Following the transaction another $50
million of the Senior Notes remain outstanding. The Credit Facility contains
financial covenants requiring the Company to maintain a minimum availability
under the line of credit and a minimum fixed charge ratio, along with
limiting capital expenditures. Additionally, in the event of the sale of the
Cosmetics division, $10 million of the term loan must be repaid.
In conjunction with the refinancing, the bondholders consented to
amending the Indenture for the Senior Notes to allow for 1) the borrowing of
up to $50 million under the line of credit and 2) a tender for the remaining
$50 million of Senior Notes at a 15% discount upon the sale of the Cosmetics
division, subject to reaching an agreement to sell the division by December
31, 2000 and the sale occurring before March 31, 2001. Negotiations are
currently in process regarding the sale of the Cosmetics division; however,
no assurance can be given that the transaction will be completed. Following
payment of fees and other applicable expenses, the Company expects the gain
associated with the refinancing to approximate $4.9 million. The gain will be
recognized in the third quarter based on the closing date of the Amendment.
The Credit Facility requires repayment of the term loan in monthly
installments of $449 beginning in February 2001, with a balloon payment of
$8,526 due on February 1, 2006. The payment terms have been reflected in the
accompanying Consolidated Balance Sheet. The Credit Facility is guaranteed by
Holdings and all of the subsidiaries of the Company. As a result, the Senior
and Senior Subordinated Notes are also guaranteed by Holdings and all
subsidiaries of the Company.
6. PRO FORMA INFORMATION
The following statement of income data for the twenty-six weeks ended July
3, 1999 gives effect to the acquisition of Souplex and the sale of the Lakewood,
Betta and Germany divisions as if they had occurred at the beginning of the
period.
Net sales...................................... $ 205,471
Operating income............................... $ 12,240
Loss before taxes and extraordinary item....... $ (2,764)
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
This Report may contain certain 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.
OVERVIEW
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 multi-national companies such as
Abbott Laboratories, Colgate-Palmolive, Kimberly-Clark, L'Oreal, Maybelline,
Motorola, Procter & Gamble, Renault, Revlon, SEB, Siemens, Whirlpool and
Xerox. Products using the Company's 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 has been formed by a number of acquisitions that have been
integrated through consolidation of manufacturing facilities, logistical
optimization and reduction of overhead. In July 1991, certain entities
controlled by Mr. Votis and his partners were merged to form Moll PlastiCrafters
Limited Partnership ("Moll"). Since 1991, Moll has grown significantly through
several strategic acquisitions in North America and Europe. In December 1992,
Moll acquired Textek Plastics, Inc., based in San Antonio and Round Rock, Texas.
In July 1993, Moll acquired Advanced Custom Molders, based in Georgetown and El
Paso, Texas. In October 1994, Moll acquired Quality Plastics Company, based in
Newberg, Oregon.
In August 1997, Moll acquired the Hanning group of companies, a
supplier of injection molded plastic components for use in digital
photocopiers, with manufacturing facilities located in the United States, the
United Kingdom and Germany. In January 1998, Moll acquired Somomeca
Industries; a major French supplier of injection molded plastic components
and plastic injection molds. In March 1998, Mr. Votis acquired Anchor from
affiliates of the Thomas H. Lee Company.
In June 1998, the Company was formed through the merger (the "Merger")
of two leading plastic injection molders, Moll and Anchor Advanced Products,
Inc. ("Anchor"), which were each controlled by Mr. Votis. Prior to the Merger,
Moll and Anchor were independently operated entities.
Immediately after the Merger, the Company acquired Gemini Plastic, a
specialty medical and telecommunications product plastic molding company with
one plant in Florida. In April 1999, the Company acquired three locations of
Compression, Inc., which designs products for the industrial and consumer
products markets. In May 1999, the Company acquired Souplex, Limited, a
telecommunications and consumer products plastic molding and tool building
company with three locations in the United Kingdom.
The Company's operating results have been lower than expected since
the Merger. The disappointing results are primarily attributable to the
Display, Germany, Medical, Compression, Tooling and European divisions, along
with charges to sell or close unnecessary facilities. Management has and
continues to evaluate all of its operations. These evaluations have to date
resulted in the decisions to 1) sell its metal fabrication business in March
1999 to a supplier, 2) sell a non-essential tool building division in March
1999, 3) close its Round Rock, Texas molding facility, moving production from
this facility to existing capacity in other Company facilities, 4) sell its
Paderborn, Germany division, which had incurred significant losses due to
declines in volume, in December 1999 and 5) enter into an agreement to sell
its Chalon Sur Saone Cedex France tooling facility in June 2000.
The Company is currently negotiating for the sale of its Cosmetics
division. A potential acquirer is currently performing its due diligence
procedures. While no assurance can be given that the transaction will be
completed, management is optimistic that the transaction will close by the
end of 2000. The net proceeds, which are yet uncertain in amount due to the
due diligence procedures, would be used to retire debt.
Management continues to dedicate extensive resources to improve the
performance of the Medical, Tooling and European divisions. The Medical
division was impacted by the cost structures within its facilities along with
financial difficulties of certain of its non-core customers. The Company has
dedicated one facility to medical customers, moving production from two other
facilities that had been in part serving these customers. The Company
continues to address the cost structure within the remaining medical
facility. Additionally, relocation of the medical business allowed the
Company to focus another facility on the telecom business. The tooling
divisions in both the United States and Europe have been impacted by
declining margins and excess capacity. The UK division has been impacted by
declining revenues from a significant customer. This revenue decline is
expected to reverse later in 2000 as sales begin to new customers. The France
division has been impacted by start-up costs associated with the Villefranche
facility, declining prices and increases in raw material costs. It is
expected that France will continue to be impacted by these issues for the
remainder of 2000. However, actions have been taken to raise prices with low
margin customers. Additionally, the relocation of jobs within the division,
which will occur as a result of the Villefranche facility, is expected to
have a positive impact beginning in 2001.
The Display division was significantly impacted by the delayed
introduction of its primary customer's significant new program in early 1999
due to product design and tooling changes. The Compression division's cost
structure was not in line with its volume, nor was it focused on its core
competencies. Additionally, since the merger, management has spent
significant effort consolidating the Cosmetics division's production. As a
result of the consolidation efforts, the 2000 operating profit of the
Cosmetics division has improved by $3.8 million over the same period in 1999.
Management continues to evaluate its other divisions, including its
tool building operations in Europe and the United States, along with certain
molding operations as to their future strategic fit within the organization
and their projected results of operations. Additional locations/divisions
could be sold or closed as management continues the evaluation. Concurrently,
expansion could occur in other divisions as the Company continues its growth
with strategic customers.
10
<PAGE>
Certain of the Company's operating data for the thirteen and twenty-six
weeks ended July 1, 2000 and July 3, 1999 are set forth below as percentages of
net sales.
<TABLE>
<CAPTION>
Thirteen Weeks Ended Twenty-six Weeks Ended
----------------------- -------------------------
July 1, July 3, July 1, July 3,
2000 1999 2000 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net sales 100.0% 100.0% 100.0% 100.0%
Gross profit 13.0% 14.3% 12.8% 12.7%
Selling, general and administrative 9.1% 9.5% 8.8% 8.9%
Closure or sale of facilities 1.3% 0.0% 0.4% 0.0%
Operating income 2.6% 4.4% 3.6% 3.8%
Interest expense, net 9.2% 6.7% 8.7% 7.0%
Provision for income taxes (0.5)% (0.3)% (0.4)% (0.1)%
Net income (loss) (6.3)% (1.9)% (4.8)% (3.2)%
</TABLE>
THIRTEEN WEEKS ENDED JULY 1, 2000 VERSUS JULY 3, 1999
NET SALES. Net sales decreased by $19.3 million, or 18.2%, to $86.5
million for 2000 from $105.8 million for 1999, due in part to the disposition of
the Germany division, which was offset by the acquisitions of the Souplex and
Compression divisions. On a pro forma basis, sales decreased $18.3 million, or
17.5%. Sales decreased in the Display division by $13.1 million as the
introduction of the Maybelline '99 Wall Program had a significant impact on 1999
sales. Sales declined by $4.6 million in the Brush division due to the
anticipated reduction in the program with Proctor and Gamble. Sales declined by
$2.1 million in the Medical division due to weaknesses in demand for the
products of the Company's customers.
GROSS PROFIT. Gross profit decreased by $3.9 million, or 25.8%, to
$11.3 million for 2000 from $15.2 million for 1999. On a pro forma basis,
gross profit decreased $5.4 million or 32.3%. The decrease was the result of
the decreased volume in the Display, Brush and Medical divisions ($4.9
million), increased raw material costs in France and inefficiencies in the
tooling operations in France. Additionally, the Brush division benefited from
a retroactive price increase in 1999 that positively impacted gross profit by
approximately $1.0 million. These decreases were offset in part by
efficiencies gained in the consolidation of the Cosmetic facilities.
SELLING, GENERAL AND ADMINISTRATIVE. SG&A expenses decreased $2.2
million, or 21.8%, to $7.9 million for 2000 from $10.1 million for 1999 due
primarily to the disposition of the Germany division. On a pro forma basis,
SG&A expenses decreased $1.3 million or 14.4% due to reductions in personnel
and administrative expenses in the Souplex division since its acquisition and
a focus on reduction of SG&A expenses across all divisions of the Company,
especially in the areas of travel and professional services.
CLOSURE OR SALE OF FACILITIES. The Company recognized a loss of $1.1
million for the anticipated loss on the sale of its Chalon Sur Saone Cedex
France tooling facility. The transaction is expected to be finalized in the
third quarter of 2000.
OPERATING INCOME. Operating income decreased by $2.8 million, or
55.4%, to $2.3 million for 2000 from $5.1 million for 1999 for the reasons
listed above.
NET INTEREST EXPENSE. Net interest expense increased by $0.9 million,
or 11.8%, to $8.0 million for 2000 from $7.1 million for 1999 due to increased
borrowings and higher interest rates under the Company's credit facility.
INCOME TAXES. The Company recognized an income tax benefit of $441 for
2000 compared to a benefit of $370 for 1999. The benefits were the result of
losses in the French division.
NET LOSS. Net loss increased $3.4 million, to $5.9 million for 2000
from $2.0 million 1999 as a result of the above factors.
<PAGE>
TWENTY-SIX WEEKS ENDED JULY 1, 2000 VERSUS JULY 3, 1999
NET SALES. Net sales decreased by $27.5 million, or 13.3%, to $179.8
million for 2000 from $207.3 million for 1999, due to the disposition of the
Germany division, which was offset by the acquisitions of the Souplex and
Compression divisions. On a pro forma basis, sales decreased $25.7 million, or
12.5%. Sales decreased in the Display division by $17.8 million from 1999 due to
the Maybelline `99 Wall Program. Sales decreased in the Brush division by $7.2
million due to declines in the program with Proctor and Gamble.
GROSS PROFIT. Gross profit decreased by $3.2 million, or 12.2%, to
$23.1 million for 2000 from $26.2 million for 1999. On a pro forma basis,
gross profit decreased $7.0 million or 23.2%. The decrease was the result of
the decreased sales in the Display and Brush divisions ($5.4 million), a
decline in efficiencies in Telecom and Medical divisions ($2.4 million),
increased raw material costs in France, inefficiencies in the tooling
operations in France and start-up costs associated with a new facility in
France. These declines were offset in part by improvements made in the
Cosmetics division.
SELLING, GENERAL AND ADMINISTRATIVE. SG&A expenses decreased $2.7
million, or 14.6%, to $15.7 million for 2000 from $18.4 million for 1999 due
to the disposition of the Germany division. On a pro forma basis, SG&A
expenses decreased $2.2 million or 12.3% due to reductions in expenses in the
Souplex division since its acquisition and a focus on reduction of SG&A
expenses across all divisions of the Company.
CLOSURE OR SALE OF FACILITIES. The Company recognized a loss of $1.1
million for the anticipated loss on the sale of its Chalon Sur Saone Cedex
France tooling facility. Additionally, the Company reversed $0.3 million of the
charge taken in 1999 to restructure the Compression division due to the better
than anticipated settlement of the division's previous facility lease.
OPERATING INCOME. Operating income decreased by $1.3 million, or
16.9%, to $6.5 million for 2000 from $7.8 million for 1999 for the reasons
listed above.
NET INTEREST EXPENSE. Net interest expense increased by $1.2
million, or 8.5%, to $15.7 million for 2000 from $14.5 million for 1999 due
to increased borrowing and higher interest rates under the credit facility.
INCOME TAXES. The Company recognized an income tax benefit of $768 for
2000 compared to $131 for 1999. The benefit was the result of losses incurred
in the French division.
NET LOSS. Net loss increased $1.9 million, to $8.5 million for 2000
from $6.6 million 1999 as a result of the above factors.
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
The Company's liquidity requirements consist primarily of working
capital needs, capital expenditures required payments of principal and
interest on various debt instruments.
Effective August 11, 2000, the Company entered into an Amended and
Restated Credit Agreement with Bank of America (the "Credit Facility"). The
Credit Facility contains a $50 million line of credit (subject to borrowing
base limitations) and a $35 term loan. At August 11, 2000, approximately $10
million was available under the Credit Facility. The proceeds of the term
loan, along with borrowings of $7.5 million under the line of credit were
used to retire $50 million of the 11.75% Senior Note (the "Senior Notes") at
a 15% discount. The Credit Facility contains financial covenants requiring
the Company to maintain a minimum availability under the line of credit and a
minimum fixed charge ratio, along with limiting capital expenditures.
Additionally, in the event of the sale of the Cosmetics division, $10 million
of the term loan must be repaid.
In connection with the refinancing, the bondholders consented to
amending the Indenture (the "Amendment") for the Senior Notes to allow for 1)
the borrowing of up to $50 million under the line of credit and 2) a tender
for the remaining $50 million of Senior Notes at a 15% discount upon the sale
of the Cosmetics division, subject to reaching an agreement to sell the
division by December 31, 2000 and the sale occurring before March 31, 2001.
The Company has no significant principal payments due in 2000.
Interest payments are expected to total approximately $14.0 million for the
remainder of the year. The Company expects capital expenditures, including
equipment obtained under lease agreements, to approximate $3.5 million for
the remainder of the year. The capital expenditures are associated with
expansion of capacity to meet the needs of certain key customers along with
normal replacement of existing equipment. The capital expenditures are
expected to be financed with cash from operations, supplemented with leasing
arrangements and the Credit Facility.
In 2000, the Company's cash generated from operations increased by
$0.2 million to $1.7 million from $1.5 million in 1999. The Company spent
$5.2 million in the first half of 2000 to make purchases of property, plant
and equipment. The Company has borrowed $4.8 million under the Credit
Facility during 2000. The Company has borrowed an additional $2.7 million
under the Credit Facility in the third quarter, resulting in an outstanding
balance of $7.5 million as of August 10, 2000.
Cash flows from operating activities have historically been and
management believes will continue to be sufficient to meet the Company's debt
service obligations. Additionally, management believes the Credit Facility
gives the Company an improved capital structure which will be sufficient to
fund a moderate growth rate.
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, the
Company's principal raw material, is generally passed through to customers, such
changes historically have not, and in the future are not expected to have, a
material effect on Moll's gross profit.
12
<PAGE>
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS.
Market risk represents the risk of loss that may impact the
consolidated financial statements of the Company due to adverse changes in
financial market prices and rates. The Company's market risk exposure is
primarily a result of fluctuations in interest rates and foreign exchange rates.
The Company has not entered into derivative-hedging transactions to manage risk
connected with such fluctuations.
The Company derived approximately 31% of its 2000 net sales to date
from its operations in Europe. The Company prices its products and incurs
operating expenses in Europe in the currency of the country in which the product
is manufactured and sold and, in the United States, in United States dollars. To
the extent that costs and prices are in the currency of the country in which the
products are manufactured and sold, the costs and prices of such products in
dollars will vary as the value of the dollar fluctuates against such currencies.
There can be no assurance that there will not be increases in the value of the
dollar against such currencies that will reduce the dollar return to the Company
on the sale of its products in such countries.
13
<PAGE>
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits.
Exhibit 27. Financial Data Schedule
(b) Reports on Form 8-K.
None.
14
<PAGE>
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 15, 2000 MOLL INDUSTRIES, INC.
By: /s/ James T. Sprouse
-----------------------------
James T. Sprouse
Controller
ANCHOR HOLDINGS, INC.
By: /s/ James T. Sprouse
-----------------------------
James T. Sprouse
Controller
15
