<PAGE>
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 April 3, 1999
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 333-60855
AMM HOLDINGS, INC.
(Exact Name of Registrant as Specified in its Charter)
Delaware 52-2088661
(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: (423) 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 / /
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>
May 15, 1999 AMM Holdings, Inc.
Common Stock, $.01 par value 1,000
</TABLE>
<PAGE>
Moll Industries, Inc. is a wholly-owned subsidiary of Anchor Holdings, Inc.
which is a wholly-owned subsidiary of AMM Holdings, Inc.
ii
<PAGE>
AMM HOLDINGS, INC.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Introduction......................................................................................................1
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements.....................................................................................3
Consolidated Balance Sheets at April 3, 1999
and December 31, 1998...................................................................................4
Consolidated Statements of Operations for
the Thirteen Weeks Ended April 3, 1999
and March 31, 1998.......................................................................................5
Consolidated Statements of Comprehensive
Income for the Thirteen Weeks Ended
April 3, 1999 and March 31, 1998.........................................................................6
Consolidated Statements of Cash Flows
for the Thirteen Weeks Ended April 3, 1999
and March 31, 1998.......................................................................................7
Notes to Consolidated Financial Statements............................................................8-12
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.....................................................................13
Item 3. Quantitative and Qualitative Disclosures about Market Risks.............................................19
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K........................................................................20
Signatures.......................................................................................................21
</TABLE>
iii
<PAGE>
INTRODUCTION
AMM Holdings ("AMM Holdings", a wholly-owned subsidiary of AMM
Holdings, LLC) is a holding company and does not have any material operations or
assets other than ownership of all the capital stock of Anchor Holdings, Inc.
("Holdings"), which does not have any material operations or assets other than
ownership of all the capital stock of Moll Industries, Inc. (the "Company"), an
operating company.
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 has 26 manufacturing facilities with approximately 680
molding machines throughout North America and Europe, including France, Germany,
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 Company was formed through the merger in 1998 (the "Merger") of two
leading plastic injection molders, Moll PlastiCrafters Limited Partnership
("Moll") and Anchor Advanced Products, Inc. ("Anchor"), which were each
controlled by Mr. George Votis. Immediately prior to the Merger, Moll and Anchor
were independently operated entities. Anchor survived the Merger and changed its
name to "Moll Industries, Inc." 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 $223.5 million in 1998 on a
pro forma basis. Such acquisitions included the acquisition in August 1997 of a
group of companies that had previously been under common ownership ("Hanning")
which supplies injection molded plastic components for use in digital
photocopiers with manufacturing facilities located in the United States, the
United Kingdom and Germany, and the acquisition in January 1998 of Somomeca
Industries S.A.R.L. and its subsidiaries ("Somomeca"), a French injection
molder. In March 1998, Mr. Votis acquired Anchor, which began operations in 1941
as a manufacturer of cosmetic brushes for Maybelline. In June 1998, the Company
acquired Gemini Plastic Services, Inc. ("Gemini"). In addition to the Merger and
the acquisition of Gemini, in June 1998, the Company and AMM Holdings
1
<PAGE>
also consummated offerings (the "Offering") of up to $130,000,000 of its 10
1/2% Senior Subordinated Notes due 2008 (the "Notes") and of up to
$68,000,000 of its 13 1/2% Senior Discount Notes due 2009 (the "Discount
Notes") pursuant to offerings which were exempt from the registration
requirements of the Securities Act of 1933, as amended, and applicable state
securities laws. Holdings is the guarantor of the Company's 11 3/4% Series B
Senior Notes due 2004 (the "Senior Notes") issued by Anchor prior to the
Merger.
The structure of the Company is as indicated in the table below:
---------------------------
AMM Holdings, Inc.
---------------------------
|
|
---------------------------
Anchor Holdings, Inc.
---------------------------
|
|
---------------------------
Moll Industries, Inc.
---------------------------
|
|
<TABLE>
- -----------------------------------------------------------------------------------------------------
| | | | |
<S> <C> <C> <C> <C>
Cepillos De Moll Industries Moll Industries UK, Moll France SARL Anchor Advanced
Matamoros Paderborn Limited Products Foreign
S.A. de C.V. GmbH & Co. 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.
2
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
3
<PAGE>
AMM HOLDINGS, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT PER SHARE INFORMATION, AND UNAUDITED)
<TABLE>
<CAPTION>
APRIL 3, DECEMBER 31,
1999 1998
-------- ------------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents.................................... $ 11,708 $ 14,396
Short-term investments....................................... -- 3,763
Accounts receivable, net of reserves for doubtful accounts of
$1,667 and $1,214, respectively........................... 82,863 70,872
Inventories, net............................................. 35,868 38,926
Deposits on tooling.......................................... 13,163 11,051
Property, plant and equipment held for sale.................. -- 1,429
Other current assets......................................... 1,830 1,812
------- -------
Total current assets................................. 145,432 142,249
------- -------
PROPERTY, PLANT AND EQUIPMENT:
Land......................................................... 3,509 3,876
Buildings.................................................... 40,937 39,100
Machinery and equipment...................................... 111,197 114,737
Less: accumulated depreciation............................... (24,450) (26,814)
------- -------
Property, plant and equipment, net........................ 131,193 130,899
------- -------
GOODWILL, NET.................................................. 39,954 40,874
------- -------
INTANGIBLE AND OTHER ASSETS, NET............................... 17,623 18,178
------- -------
Total assets......................................... $ 334,202 $ 332,200
------- -------
------- -------
LIABILITIES AND DEFICIT
CURRENT LIABILITIES:
Current portion of long-term obligations..................... $ 16,501 $ 8,228
Short-term borrowings........................................ 455 1,710
Accounts payable............................................. 46,663 37,037
Accrued liabilities.......................................... 18,891 27,270
Deferred income taxes........................................ -- 450
Deferred tooling revenue..................................... 11,944 9,083
------- -------
Total current liabilities............................ 94,454 83,778
------- -------
LONG-TERM OBLIGATIONS, NET OF CURRENT PORTION.................. 284,348 284,229
------- -------
DEFERRED INCOME TAXES.......................................... 5,056 5,295
------- -------
OTHER NON-CURRENT LIABILITIES.................................. 8,843 7,898
------- -------
COMMITMENTS AND CONTINGENCIES.................................. -- --
------- -------
DEFICIT:
Common stock ($.01 par value, 3 shares authorized, 1
shares issued and outstanding)............................ -- --
Additional paid in capital................................... 387 387
Accumulated deficit.......................................... (58,279) (52,409)
Accumulated other comprehensive income....................... (607) 3,022
------- -------
Total deficit........................................ (58,499) (49,000)
------- -------
Total liabilities and deficit........................ $ 334,202 $ 332,200
------- -------
------- -------
</TABLE>
The accompanying notes are an integral part of these consolidated balance
sheets.
4
<PAGE>
AMM HOLDINGS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE INFORMATION, AND UNAUDITED)
<TABLE>
<CAPTION>
THIRTEEN WEEKS ENDED
------------------------
APRIL 3, MARCH 31,
1999 1998
------- ---------
<S> <C> <C>
NET SALES............................................................. $ 101,549 $ 61,453
COST OF SALES......................................................... 90,752 51,698
------- ------
Gross profit........................................................ 10,797 9,755
SELLING, GENERAL AND ADMINISTRATIVE
EXPENSES......................................................... 8,547 4,817
MANAGEMENT AND CONSULTING FEE TO RELATED
PARTIES.......................................................... 50 770
------- ------
Operating income.................................................... 2,200 4,168
INTEREST EXPENSE, NET................................................. 8,193 2,337
OTHER (INCOME) EXPENSE................................................ (362) 144
MINORITY INTEREST IN INCOME OF
SUBSIDIARY....................................................... -- 237
------- ------
INCOME (LOSS) BEFORE TAXES AND
EXTRAORDINARY ITEM............................................... (5,631) 1,450
------- ------
PROVISION FOR INCOME TAXES
Current.......................................................... 147 --
Deferred......................................................... 92 93
------- ------
239 93
------- ------
INCOME (LOSS) BEFORE EXTRAORDINARY ITEM (5,870) 1,357
Extraordinary Item - Loss on extinguishment of debt -- 736
------- ------
NET INCOME (LOSS)..................................................... $ (5,870) $ 621
------- ------
------- ------
PRO FORMA INFORMATION
Provision for income taxes.......................................... $ 239 $ 560
------- ------
------- ------
Net income (loss) before extraordinary item......................... $ (5,870) $ 890
------- ------
------- ------
Earnings (loss) per share........................................... $ (5,870) $ 890
------- ------
------- ------
Weighted average number of shares outstanding....................... 1 1
------- ------
------- ------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
5
<PAGE>
AMM HOLDINGS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(IN THOUSANDS AND UNAUDITED)
<TABLE>
<CAPTION>
THIRTEEN WEEKS ENDED
------------------------
APRIL 3, MARCH 31,
1999 1998
-------- ---------
<S> <C> <C>
NET INCOME (LOSS)...................................................... $ (5,870) $ 621
OTHER COMPREHENSIVE INCOME (LOSS):
Deferred pension cost................................................ -- --
Foreign currency translation adjustment.............................. (3,629) 589
------- ------
COMPREHENSIVE INCOME (LOSS)............................................ $ (9,499) $ 1,210
------- ------
------- ------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
6
<PAGE>
AMM HOLDINGS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS AND UNAUDITED)
<TABLE>
<CAPTION>
THIRTEEN WEEKS ENDED
-------------------------
APRIL 3, MARCH 31,
1999 1998
--------- ----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)................................................... $ (5,870) $ 621
Adjustments to reconcile net income (loss) to net cash
used in operating activities
Extraordinary loss................................................ -- 736
Depreciation and amortization..................................... 6,003 2,139
Loss on disposal of fixed assets.................................. 13 5
Accretion on Senior Discount Notes................................ 1,276 --
Deferred income taxes............................................. 92 93
Minority interest in subsidiary income (loss)..................... -- 237
Changes in assets and liabilities, net of assets
purchased and liabilities assumed:
Accounts receivable............................................. (14,833) 2,869
Inventories..................................................... 2,241 (1,532)
Other current assets............................................ (879) (559)
Deposits on tooling............................................. (2,132) (920)
Other assets.................................................... 275 (1,652)
Accounts payable................................................ 11,184 (602)
Accrued liabilities............................................. (8,769) (3,035)
Deferred tooling revenue........................................ 2,950 680
Other liabilities............................................... 597 --
------ -------
Total adjustments............................................ (1,982) (1,541)
------ -------
Net cash used in operating activities........................... (7,852) (920)
------ -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures................................................ (6,527) (3,204)
Proceeds on disposal of fixed assets................................ 1,212 416
Short-term investments.............................................. 3,763 --
Purchase of Somomeca, net of cash received.......................... -- (11,737)
------ -------
Net cash used in investing activities........................... (1,552) (14,525)
------ -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from (payments on) revolving loan
facilities........................................................ 10,840 (9,803)
Proceeds from issuance of long-term obligations..................... 237 56,308
Principal payments on long-term obligations......................... (4,206) (23,737)
Distributions to partners........................................... -- (1,859)
------ -------
Net cash provided by financing activities....................... 6,871 20,909
------ -------
EFFECT OF EXCHANGE RATE CHANGES IN
CASH................................................................ (155) (52)
------ -----
NET CHANGE IN CASH.................................................... (2,688) 5,412
BALANCE AT BEGINNING OF PERIOD........................................ 14,396 1,729
------ -----
BALANCE AT END OF PERIOD.............................................. $ 11,708 $ 7,141
------ -----
------ -----
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid for interest.............................................. $ 13,014 $ 1,446
------ -----
------ -----
Cash paid for income taxes.......................................... $ 210 $ --
------ -----
------ -----
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
7
<PAGE>
AMM HOLDINGS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS AND UNAUDITED)
1. ORGANIZATION
AMM Holdings, Inc. ("AMM Holdings", a wholly owned subsidiary of AMM
Holdings, LLC) was formed March 3, 1998 under the laws of the state of
Delaware. AMM Holdings owns all of the outstanding Shares of Anchor Holdings,
Inc. ("Holdings"). 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. Neither AMM
Holdings nor Holdings has any operations or investments other than their
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,
Germany, Mexico and the United Kingdom.
2. 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 owned 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. As a result of the
Merger, Moll's corporate structure was changed from a partnership to a
corporation.
3. BASIS OF PRESENTATION
The historical consolidated financial statements, through the date of the
Merger, include the accounts of Moll, as it is the accounting acquiror in the
Merger discussed in Note 2, 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
dates of the respective acquisition, (Somomeca Industries, Inc.--January 8,
1998, Anchor--June 26, 1998 and Gemini Plastic Services, Inc.--June 26, 1998).
The results of Reliance Products L.P. have been excluded from these consolidated
financial statements since June 26, 1998 (see Note 5). All significant
intercompany balances have been eliminated in consolidation.
The quarterly 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 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, 1998. Results of operations in the
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 first quarter end from March 31 to April 3.
Earnings per share for all periods presented have been computed on a basis
assuming the number of
8
<PAGE>
common shares outstanding subsequent to the Merger were outstanding for all
periods presented. There are no potentially dilutive securities currently
outstanding.
9
<PAGE>
RECENT ACCOUNTING PRONOUNCEMENTS
During June 1998, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 133, "Accounting for Derivative
Instruments and Hedging Activities" ("SFAS 133"). SFAS 133 requires that
derivatives and hedges be valued at their fair value and establishes standards
for the recognition of changes in fair value. SFAS 133 is effective for periods
beginning after June 15, 1999. AMM Holdings is evaluating SFAS No. 133 to
determine the impact, if any, on its reporting and disclosure requirements.
In April 1998, the Accounting Standards Executive Committee of the American
Institute of Certified Public Accountants issued Statement of Position 98-5,
"Reporting on the Costs of Start-up Activities" ("SOP 98-5"). SOP 98-5 requires
the costs of start-up activities and organization costs, as defined, to be
charged to operations as incurred. Adoption of SOP 98-5 did not have a material
impact on AMM Holdings' results of operations, financial condition or cash
flows.
4. ACQUISITIONS
SOMOMECA
Effective January 8, 1998, Moll acquired the stock of Somomeca Industries,
Inc. ("Somomeca"). Moll paid $13,144 in cash, agreed to pay the sellers $1,488
over two years and assumed its liabilities. Additionally, Moll incurred
approximately $2,321 in expenses to complete the acquisition. The acquisition
has been accounted for using the purchase method.
GEMINI
Effective June 26, 1998, the Company acquired the stock of Gemini Plastic
Services, Inc. ("Gemini") for cash of $10,186 and the assumption of its
liabilities. The acquisition has been accounted for using the purchase method.
The results of operations of Somomeca and Gemini have been included in the
consolidated financial statements since the effective date of each acquisition.
See Note 8 for unaudited pro forma information.
5. DISPOSITIONS
Effective immediately prior to the Merger discussed in Note 2, Moll
distributed its interest in Reliance Products, L.P. ("Reliance") to its owners.
The total amount of such distribution was $3,135.
Reliance is a limited partnership based in Canada in which Moll had
purchased a 69% limited partnership interest effective December 12, 1996.
Holdings included the operating results of Reliance in its consolidated
financial statements through June 26, 1998. The earnings attributable to the
minority partners are included in the consolidated statements of operations of
AMM Holdings as minority interest in income (loss) of subsidairy.
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.
10
<PAGE>
6. INCOME TAXES
Effective June 26, 1998, Moll became a taxable entity. Prior to June 26,
1998, Moll was a partnership; accordingly, the earnings of Moll, including the
earnings of foreign subsidiaries attributable to Moll for United States tax
purposes, were included in the tax returns of the partners. Certain of Moll's
foreign subsidiaries have been taxable entities for foreign tax purposes since
their inception. The Company did not recognize a tax benefit for the losses
incurred in the current period due to the uncertainty of realization.
Included in the accompanying consolidated statements of operations is a pro
forma tax provision that was calculated as if Holdings, including all of its
subsidiaries, was taxable for the entire period presented.
7. SUMMARIZED FINANCIAL INFORMATION OF SUBSIDIARIES
All material subsidiaries of the Company, each of which are wholly-owned,
have fully, unconditionally, jointly and severally guaranteed the otherwise
unsecured $100,000 of 11 3/4% Senior Notes due 2004 issued by Anchor and assumed
by the Company in the Merger. The subsidiaries that have not guaranteed the debt
only participate in intercompany transactions with the Company, which are
eliminated in the consolidated financial statements of the Company. The
guarantor subsidiaries are subject to the reporting requirements under Section
13 or 15(d) of the Securities Exchange Act of 1934. Management has determined
that separate financial statements for the guarantor subsidiaries are not
material to holders of the Notes. 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.
Condensed consolidating financial information for AMM Holdings for the
quarter ended April 3, 1999 is as follows:
<TABLE>
<CAPTION>
MOLL GUARANTOR NON-GUARANTOR CONSOLIDATED
INDUSTRIES SUBSIDIARIES SUBSIDIARIES ELIMINATIONS BALANCE
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash........................... $ 9,506 $ 2,187 $ 15 $ -- $ 11,708
Accounts Receivable............ 46,330 36,418 115 -- 82,863
Inventories.................... 26,459 9,409 -- -- 35,868
Other Current Assets........... 11,339 3,603 51 -- 14,993
------- ------- ----- ------ -------
Total Current Assets. 93,634 51,617 181 -- 145,432
Fixed Assets................... 87,075 41,143 2,975 -- 131,193
Goodwill....................... 34,721 5,233 -- -- 39,954
Intercompany Receivables....... 50,336 1,197 2,556 (54,089) --
Other Assets................... 16,001 1,468 154 -- 17,623
------- ------- ----- ------ -------
$ 281,767 $ 100,658 $ 5,866 $(54,089) $334,202
------- ------- ----- ------ -------
------- ------- ----- ------ -------
Accounts Payable............... $ 21,116 $ 25,524 $ 23 $ -- $ 46,663
Accrued Liabilities............ 11,004 7,084 803 -- 19,004
Other Current Liabilities...... 24,418 4,482 -- -- 28,787
------- ------- ----- ------ -------
Total Current
Liabilities........ 56,538 37,090 826 -- 94,454
Long Term Debt................. 276,143 8,205 -- -- 284,348
Other Non-current Liabilities.. 8,110 5,789 -- -- 13,899
Intercompany Payables.......... -- 53,975 -- (53,975) --
------- ------- ----- ------ -------
Total Liabilities.... 340,791 105,059 826 (53,975) 392,701
Equity......................... (59,024) (4,401) 5,040 (114) (58,499)
------- ------- ----- ------ -------
$ 281,767 $ 100,658 $ 5,866 $(54,089) $334,202
------- ------- ----- ------ -------
------- ------- ----- ------ -------
</TABLE>
11
<PAGE>
<TABLE>
<CAPTION>
MOLL GUARANTOR NON-GUARANTOR CONSOLIDATED
INDUSTRIES SUBSIDIARIES SUBSIDIARIES ELIMINATIONS BALANCE
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net Sales...................... $ 70,796 $ 30,753 $ 2,674 $ (2,674) $101,549
Cost of Sales.................. 62,818 28,909 1,699 (2,674) 90,752
------- ------- ----- ----- -------
Gross Profit......... 7,978 1,844 975 -- 10,797
Selling, General &
Administrative Expense........ 5,105 2,814 678 -- 8,597
------- ------- ----- ----- -------
Operating Income..... 2,873 (970) 297 -- 2,200
Interest Expense, net.......... 6,828 1,365 -- -- 8,193
Other (Income) Expense......... (622) 85 175 -- (362)
------- ------- ----- ----- -------
Income Before Taxes.. (3,333) (2,420) 122 -- (5,631)
Income Tax Expense ............ 97 93 49 -- 239
------- ------- ----- ----- -------
Net Income (Loss).... $ (3,430) $ (2,513) $ 73 $ -- $ (5,870)
------- ------- ----- ----- -------
------- ------- ----- ----- -------
STATEMENT OF CASH FLOWS DATA:
Net Income (Loss)................. $ (3,430) $ (2,513) 73 $ -- $ (5,870)
Depreciation and Amortization..... 3,992 1,960 51 -- 6,003
Change in Assets and Liabilities.. (11,992) 3,071 (445) -- (9,366)
Other............................. 1,065 316 -- -- 1,381
------- ------- ----- ----- -------
Cash Flows from Operating
Activities............ (10,365) 2,834 (321) -- (7,852)
------- ------- ----- ----- -------
Capital Expenditures.............. (3,811) (2,716) -- -- (6,527)
Proceeds from Disposal of Fixed
Assets............................ 1,191 21 -- -- 1,212
Short-term Investments............ 3,763 -- -- -- 3,763
------- ------- ----- ----- -------
Cash Flows from Investing
Activities............ 1,143 (2,695) -- -- (1,552)
------- ------- ----- ----- -------
Payments on Revolving Loan
Facility........................ 12,000 (1,160) -- -- 10,840
Proceeds from Issuance of Long-
Term Obligations................ -- 237 -- -- 237
Principle Payments on Long-Term
Obligations..................... (3,279) (927) -- -- (4,206)
Intercompany transfers............ (3,246) 2,967 279 -- --
------- ------- ----- ----- -------
Cash Flows from Financing
Activities............ 5,475 1,117 279 -- 6,871
------- ------- ----- ----- -------
Effect of Exchange Rate Changes
in Cash......................... -- (155) -- -- (155)
------- ------- ----- ----- -------
Net Change in Cash................ (3,747) 1,101 (42) -- (2,688)
Balance at Beginning of Period.... 13,253 1,086 57 -- 14,396
------- ------- ----- ----- -------
Balance at End of Period.......... $ 9,506 $ 2,187 $ 15 $ -- $ 11,708
------- ------- ----- ----- -------
------- ------- ----- ----- -------
</TABLE>
The financial information of Holdings is identical to that of the Company.
Therefore, summarized financial information of the Company is not required.
8. PRO FORMA INFORMATION
The following statement of income data gives effect to the merger with
Anchor, the acquisition of Gemini and the distribution of Reliance and the sale
of the Lakewood and Betta divisions as if they had occurred at the beginning of
the respective periods.
<TABLE>
<CAPTION>
THIRTEEN-WEEKS ENDED
--------------------
APRIL 3, MARCH 31,
1999 1998
---------- ----------
<S> <C> <C>
Net sales................................................. $ 100,131 $ 96,727
Operating income.......................................... $ 2,565 $ 6,895
Loss before taxes and extraordinary item.................. $ (5,019) $ (989)
</TABLE>
12
<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
AMM Holdings is a holding company and does not have any material operations or
assets other than its ownership of all of the capital stock of Anchor Holdings,
Inc., which does not have any material operations or assets other than the
ownership of all of the capital stock of the Company. Unless otherwise noted,
references herein to the Company also apply to AMM Holdings.
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,
Proctor & Gamble, Renault, Revlon, 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 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. 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 the Merger, the owners of 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. Moll
was merged into Anchor at which time the name of Anchor was changed to Moll
Industries, Inc. As the owners of Moll owned 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.
The Company continues to integrate the businesses that were merged.
This includes the pursuit of
13
<PAGE>
global opportunities with customers previously served by each individual
company, identification of core competencies the Company should focus on to
meet its strategies, modification of the cost structure within certain
businesses and implementation of an integrated management information system.
This effort has included the sale in March 1999 of its Lakewood and Betta
divisions, neither of which were critical to the Company's long-term success
and the decision to close in May 1999 its Round Rock, TX facility due to over
capacity within the merged company. Further closures or dispositions could
result as the integration continues. This effort has also resulted in the
Company acquiring in April 1999, three locations of Compression, Inc. This
acquisition will enable the Company to provide product design and engineering
services to its customers.
Certain of the Company's operating data for the thirteen weeks ended April 3,
1999 and March 31, 1998 are set forth below as percentages of net sales. The
Company's results for the first quarter were negatively impacted by unexpected
inefficiencies associated with the start-up of the Maybelline 99 Wall display
project. Management believes most of the start-up inefficiencies were realized
in the first quarter and will conclude by the end of April. The results were
also negatively impacted by declining sales in the German division.
<TABLE>
<CAPTION>
Thirteen Weeks Ended,
-----------------------
April 3, March 31,
1999 1998
---- ----
<S> <C> <C>
Net sales 100.0% 100.0%
Gross profit 10.6% 15.9%
Selling, general and administrative 8.4% 7.8%
Management and consulting fee to related parties 0.0% 1.3%
Operating income 1.9% 6.8%
Interest expense, net 8.1% 3.8%
Provision for income taxes 0.2% 0.2%
Extraordinary item 0.0% 1.2%
Net income (loss) (5.8)% 1.0%
</TABLE>
THIRTEEN WEEKS ENDED APRIL 3, 1999 VERSUS MARCH 31, 1998
NET SALES. Net sales increased by $40.1 million, or 65.2%, to $101.5
million for 1999 from $61.5 million for 1998, due to the acquisition of Anchor
and Gemini, offset by the distribution of the Company's limited partnership
interest in Reliance Products. On a pro forma basis, sales increased $3.4
million, or 3.5%. Sales increased to Maybelline due to the 99 Display Wall
project and to Whirlpool due to increased demand for existing products. However,
these increases were partially offset by declines in sales to Colgate and
Maybelline packaging and in the German division.
GROSS PROFIT. Gross profit increased by $1.0 million, or 10.7%, to
$10.8 million for 1999 from $9.8 million for 1998, resulting from the
inclusion of results for Anchor and Gemini, offset by the distribution of the
Company's limited partnership interest in Reliance Products. Additionally,
certain of the acquired companies earn lower margins than the Company had
historically realized, thereby, diluting the average margin. On a pro forma
basis, gross profit decreased $3.7 million or 24.8%. The decrease was the
result of operating inefficiencies encountered in the start-up of the 99
Display Wall project and decreased sales in the German and Packaging
divisions.
SELLING, GENERAL AND ADMINISTRATIVE. SG&A expenses increased $3.7
million, or 77.4%, to $8.5 million for 1999 from $4.8 million for 1998 due to
the inclusion of Anchor and Gemini, offset by the distribution of the Company's
limited partnership interest in Reliance Products. On a pro forma basis, SG&A
expenses increased $0.8 million or 10.6% due to increased professional services,
travel and computer costs incurred in connection with the integration of the
merged companies.
MANAGEMENT AND CONSULTING FEE TO RELATED PARTIES. Management and
Consulting Fee to
14
<PAGE>
Related Parties decreased by $0.7 million, or 93.5%, to $0.1 million for 1999
from $0.8 million for 1998, due to restrictions contained in the Notes and
Senior Notes.
OPERATING INCOME. Operating income decreased by $2.2 million, or 53.1%,
to $2.0 million for 1999 from $4.2 million for 1998 for the reasons listed
above.
NET INTEREST EXPENSE. Net interest expense increased by $5.9
million, or 250.6%, to $8.2 million for 1999 from $2.3 million for 1998 due
to the issuance of $130 million Notes and $68 million Discount Notes in the
second quarter to finance the acquisitions of Somomeca and Gemini and to
refinance existing debt. Additionally, the Company assumed $100 million of
debt in the Merger.
INCOME TAXES. Income Taxes increased by $0.1 million, or 157.0%, to $.2
million for 1999 from $0.1 million for 1998. Prior to the Merger, the Company's
US operations were organized as a partnership for U.S. tax purposes and,
accordingly, did not reflect income tax expense in its financial statements.
Certain of the Company's foreign subsidiaries are profitable, resulting in the
1999 and 1998 tax provision.
EXTRAORDINARY ITEM. Extraordinary Item of $0.7 million for 1998
represents a loss on early retirement of bank debt due to the write-off of the
remaining deferred debt issue costs.
NET INCOME. Net income decreased $6.5 million, to a $5.9 million loss
for 1999 from $0.6 million income for 1998 as a result of the above factors.
LIQUIDITY AND CAPITAL RESOURCES
The Company's liquidity requirements consist primarily of working
capital needs, capital expenditures, required payments of principal and interest
on any borrowings under the NationsBank Credit Facility, required payments of
principal and interest on the European debt, required payments of interest on
the Notes and Senior Notes and principal at maturity.
The Company has no significant principal payments due in 1999 while
interest payments are expected to total approximately $28.0 million.
Additionally, the Company expects capital expenditures to be limited to normal
periodic replacement of equipment (approximately $15 million) with no
significant projects currently planned.
In 1999, the Company's cash used in operations increased by $7.0
million to $7.9 million from $0.9 million for 1998. The increased cash
utilization was primarily the result of the loss for the quarter, an increase in
accounts receivable and interest payments on both the Notes and Senior Notes.
These uses were partially offset by an increase in accounts payable. The Company
spent $6.5 million in the first quarter to make purchases of property, plant and
equipment. The Company borrowed $12.0 million under the Credit Facility during
the quarter. These borrowings were repaid at the beginning of the second
quarter.
The Company believes that cash flows from operating activities will be
adequate to meet debt service obligations and working capital needs in 1999. The
Company plans to pursue financing alternatives to supplement cash from operating
activities to fund planned capital expenditures for 1999.
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.
IMPACT OF NEW ACCOUNTING STANDARDS
During June 1998, the Financial Accounting Standards Board issued Statement
of Financial Accounting
15
<PAGE>
Standard No. 133, Accounting for Derivative Instruments and Hedging
Activities. The Statement requires that derivatives and hedges be valued at
their fair value and establishes standards for the recognition of changes in
fair value. The Statement is effective for periods beginning after June 15,
1999. The Company is evaluating SFAS No. 133 to determine the impact, if any,
on its reporting and disclosure requirements.
In April 1998, the Accounting Standards Executive Committee of the American
Institute of Certified Public Accountants issued Statement of Position 98-5,
"Reporting on the Costs of Start-up Activities" ("SOP 98-5"). SOP 98-5 requires
the costs of start-up activities and organization costs, as defined, to be
charged to operations as incurred. Adoption of this SOP did not have a
significant impact on the Company's financial position or results of operations.
16
<PAGE>
YEAR 2000
Historically, certain computerized systems have had two digits rather
than four digits to define the applicable year, which could result in
recognizing a date using "00" as the year 1900 rather than the year 2000. This
could result in major failures or miscalculations, and is generally referred to
as the "Year 2000 issue." The Company recognizes that the impact of the Year
2000 issue extends beyond traditional computer hardware and software to
automated plant systems and instrumentation, as well as to third parties. The
Year 2000 issue is being addressed within the Company by its individual business
units, and progress is reported periodically to management.
The Company has committed resources to conduct risk assessments and to
take corrective action, where required, within each of the following areas:
information technology, plan systems and external parties. Information
technology includes telecommunications, as well as traditional computer software
and hardware in the mainframe, midrange and desktop environments. Plant systems
include all automation and embedded chips used in plant operations. External
parties include any third party with which the Company does business.
In the information technology area, inventory and assessment audits in
the mainframe and midrange environments were completed in third quarter 1998 and
corrective action was completed in the fourth quarter 1998, except for business
application software which is expected to be completed by the second quarter
1999. Inventory and assessment audits for telecommunications were completed in
third quarter 1998 with corrective action expected to be completed by the second
quarter 1999. Finally, inventory and assessment audits in the desktop
environment were completed in third quarter 1998, with corrective action
expected to be completed by the third quarter 1999. The companies located in
Europe began installing systems in the first quarter 1999 that will be Year 2000
ready.
In the plant systems area, 100% of the Company's business units have
completed their inventory and assessment audits. The Company is relying on
vendor testing and certification with validation through limited internal
testing and/or industry test results. Downtime for normally scheduled plant
maintenance will be used to conduct testing, with corrective action expected to
be completed by the second quarter 1999.
With respect to external parties, 70% of the Company's business units
have completed their inventory audit of critical external parties. The remaining
business units are expected to complete this work by the second quarter
1999.Risk assessment is expected to be completed by the second quarter 1999 and
monitoring of risk in this area will continue during 1999, as many external
parties will not have completed their work.
The total cost of Year 2000 activities is not expected to be material
to the Company's operations, liquidity or capital resources. Costs are being
managed within each business unit. The total cost for the Company's Year 2000
work is estimated to be $2 million.
17
<PAGE>
Costs exclude expenditures for replacement systems, which were previously
scheduled.
There is still uncertainty around the scope of the Year 2000 issue. At
this time the Company cannot quantify the potential impact of these failures.
There can be no assurance that there will not be a delay in, or increased costs
associated with, the Company's efforts to address the Year 2000 issue, and the
Company's inability to implement the necessary changes could have an adverse
effect on the Company. The Company's Year 2000 program and contingency plans are
being developed to address issues within the Company's control. The program
reduces but may not eliminate the issues of external parties.
18
<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 30% of its 1999 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.
19
<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.
20
<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: May 18, 1999 AMM HOLDINGS, INC.
By: /s/ Phyllis C. Best
-------------------------------
Phyllis C. Best
Chief Financial Officer
21
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<CIK> 0001067531
<NAME> AMM HOLDINGS
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> APR-03-1999
<EXCHANGE-RATE> 1
<CASH> 11,708
<SECURITIES> 0
<RECEIVABLES> 84,530
<ALLOWANCES> (1,667)
<INVENTORY> 35,868
<CURRENT-ASSETS> 145,432
<PP&E> 155,643
<DEPRECIATION> (24,450)
<TOTAL-ASSETS> 334,202
<CURRENT-LIABILITIES> 94,454
<BONDS> 268,989
0
0
<COMMON> 0
<OTHER-SE> (58,499)
<TOTAL-LIABILITY-AND-EQUITY> 324,202
<SALES> 101,549
<TOTAL-REVENUES> 101,549
<CGS> 90,752
<TOTAL-COSTS> 8,597
<OTHER-EXPENSES> (362)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 8,193
<INCOME-PRETAX> (5,631)
<INCOME-TAX> 239
<INCOME-CONTINUING> (5,870)
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<NET-INCOME> (5,870)
<EPS-PRIMARY> (5,870)
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</TABLE>
