<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 September 30, 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
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: (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>
November 10, 2000 AMM Holdings, Inc.
Common Stock, $.01 par value 1,000
</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>
AMM HOLDINGS, INC.
TABLE OF CONTENTS
PAGE
<S> <C>
Introduction................................................................1
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements...........................................2
Consolidated Balance Sheets at September 30, 2000
and December 31, 1999..........................................2
Consolidated Statements of Operations
for the Thirteen and Thirty-nine Weeks Ended
September 30, 2000 and October 2, 1999.........................3
Consolidated Statements of Comprehensive Income
for the Thirteen and Thirty-nine Weeks Ended
September 30, 2000 and October 2, 1999.........................4
Consolidated Statements of Cash Flows
for the Thirty-nine Weeks Ended September 30, 2000
and October 2, 1999............................................5
Notes to Consolidated Financial Statements...................6-8
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations............................9
Item 3. Quantitative and Qualitative Disclosures about Market Risks...15
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K..............................16
Signatures.................................................................17
</TABLE>
iii
<PAGE>
INTRODUCTION
AMM Holdings, Inc. ("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 of 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, 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> <C>
Cepillos De Moll Industries, Moll Industries UK, Moll France SARL Anchor Advanced Compression, Moll de
Matamoros Limited Limited Products Foreign Inc. Brazil LTDA
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>
AMM HOLDINGS, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT PER SHARE INFORMATION, AND UNAUDITED)
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
2000 1999
------------ --------------
ASSETS
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents.................................... $ 216 $ 1,350
Accounts receivable, net of reserves for doubtful accounts of
$1,652 and $2,194, respectively........................... 62,949 65,212
Inventories, net............................................. 29,947 35,452
Deposits on tooling.......................................... 15,493 13,043
Other current assets......................................... 2,934 2,291
------------ --------------
Total current assets................................. 111,539 117,348
------------ --------------
PROPERTY, PLANT AND EQUIPMENT:
Land......................................................... 2,878 3,142
Buildings.................................................... 41,465 40,552
Machinery and equipment...................................... 113,161 118,374
Less: accumulated depreciation............................... (45,750) (39,281)
------------ --------------
Property, plant and equipment, net........................ 111,754 122,787
------------ --------------
GOODWILL, NET.................................................. 39,892 42,562
------------ --------------
INTANGIBLE AND OTHER ASSETS, NET............................... 15,472 16,469
------------ --------------
Total assets......................................... $ 278,657 $ 299,166
============ ==============
LIABILITIES AND DEFICIT
CURRENT LIABILITIES:
Current portion of long-term obligations..................... $ 9,335 $ 4,919
Short-term borrowings........................................ 977 1,965
Accounts payable............................................. 41,603 42,191
Accrued interest............................................. 7,238 9,987
Accrued liabilities.......................................... 16,620 22,294
Deferred tooling revenue..................................... 11,719 10,586
------------ --------------
Total current liabilities............................ 87,492 91,942
------------ --------------
LONG-TERM OBLIGATIONS, NET OF CURRENT PORTION.................. 294,038 288,931
------------ --------------
DEFERRED INCOME TAXES.......................................... 1,997 4,866
------------ --------------
OTHER NON-CURRENT LIABILITIES.................................. 6,846 7,529
------------ --------------
COMMITMENTS AND CONTINGENCIES.................................. -- --
------------ --------------
DEFICIT:
Common stock ($.01 par value, 2,000 shares authorized, 1,551
shares issued and outstanding)............................ -- --
Additional paid in capital................................... 387 387
Accumulated deficit.......................................... (102,431) (90,139)
Accumulated other comprehensive income....................... (9,672) (4,350)
------------ --------------
Total deficit........................................ (111,716) (94,102)
------------ --------------
Total liabilities and deficit........................ $ 278,657 $ 299,166
============ ==============
</TABLE>
The accompanying notes are an integral part of these
consolidated balance sheets.
2
<PAGE>
AMM HOLDINGS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE INFORMATION, AND UNAUDITED)
<TABLE>
<CAPTION>
THIRTEEN THIRTY-NINE
WEEKS ENDED WEEKS ENDED
------------------------- -------------------------
SEPTEMBER 30, OCTOBER 2, SEPTEMBER 30, OCTOBER 2,
2000 1999 2000 1999
------------ ----------- ----------- ------------
<S> <C> <C> <C> <C>
NET SALES...................................... $ 84,151 $ 93,673 $ 263,962 $ 301,014
COST OF SALES.................................. 73,758 83,029 230,512 264,483
---------- ---------- ---------- ----------
Gross profit................................. 10,393 10,644 33,450 36,531
SELLING, GENERAL AND ADMINISTRATIVE
EXPENSES.................................. 8,410 8,368 24,156 27,002
CLOSURE OR SALE OF FACILITY.................... 807 -- 1,607 --
---------- ---------- ---------- ----------
Operating income............................. 1,176 2,276 7,687 9,529
INTEREST EXPENSE, NET.......................... 9,109 8,773 27,710 25,782
OTHER EXPENSE.................................. (77) (397) 79 (835)
---------- ---------- ---------- ----------
LOSS BEFORE INCOME TAXES AND
EXTRAORDINARY ITEM........................... (7,856) (6,100) (20,102) (15,418)
INCOME TAX BENEFIT............................. (1,899) (303) (2,667) (434)
---------- ---------- ---------- ----------
NET LOSS BEFORE EXTRAORDINARY ITEM............. (5,957) (5,797) (17,435) (14,984)
EXTRAORDINARY ITEM, GAIN ON REFINANCING
OF DEBT...................................... 5,143 -- 5,143 --
---------- ---------- ---------- ----------
NET LOSS....................................... $ (814) $ (5,797) $ (12,292) $ (14,984)
========== ========== ========== ==========
NET LOSS PER SHARE BEFORE
EXTRAORDINARY ITEM........................... $ (5,957) $ (5,797) $ (17,435) $ (14,984)
========== ========== ========== ==========
NET LOSS PER SHARE $ (814) $ (5,797) $ (12,292) $ (14,984)
========== ========== ========== ==========
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING.. 1 1 1 1
========== ========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
3
<PAGE>
AMM HOLDINGS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(IN THOUSANDS AND UNAUDITED)
<TABLE>
<CAPTION>
THIRTEEN THIRTY-NINE
WEEKS ENDED WEEKS ENDED
------------------------- -------------------------
SEPTEMBER 30, OCTOBER 2, SEPTEMBER 30, OCTOBER 2,
2000 1999 2000 1999
------------ ----------- ----------- ------------
<S> <C> <C> <C> <C>
NET LOSS ...................................... $ (814) $ (5,797) $ (12,292) $ (14,984)
OTHER COMPREHENSIVE LOSS:
Deferred pension cost........................ -- -- -- --
Foreign currency translation adjustment...... (2,641) 1,625 (5,322) (4,445)
---------- ---------- ---------- ----------
COMPREHENSIVE LOSS............................. $ (3,455) $ (4,172) $ (17,614) $ (19,429)
========== ========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
4
<PAGE>
AMM HOLDINGS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS AND UNAUDITED)
<TABLE>
<CAPTION>
THIRTY-NINE
WEEKS ENDED
-------------------------
SEPTEMBER 30, OCTOBER 2,
2000 1999
------------ -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss................................................ $ (12,292) $ (14,984)
Adjustments to reconcile net loss to net cash
provided by (used in) operating activities
Extraordinary item, gain on refinancing of debt....... (5,143) --
Depreciation and amortization......................... 18,804 19,172
Loss on disposal of fixed assets...................... 1,724 168
Accretion on Senior Discount Notes.................... 4,464 3,915
Deferred income taxes................................. (2,447) (147)
Changes in assets and liabilities, net of assets
purchased and liabilities assumed:
Accounts receivable................................. (1,100) (7,710)
Inventories......................................... 4,490 2,404
Other current assets................................ (814) (925)
Deposits on tooling................................. (3,410) (8,202)
Other assets........................................ 237 (1,698)
Accounts payable.................................... 2,051 12,913
Accrued liabilities................................. (7,858) (6,469)
Deferred tooling revenue............................ 1,133 6,338
Other liabilities................................... (229) (256)
------------ -----------
Total adjustments................................ 11,902 19,503
------------ -----------
Net cash provided by (used in) operating activities. (390) 4,519
------------ -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures.................................... (6,627) (14,605)
Proceeds on disposal of fixed assets.................... 571 3,770
Short-term investments.................................. -- 3,763
Purchase of Compression, net of cash received........... -- (1,236)
Purchase of Souplex, net of cash received............... -- (6,103)
------------ -----------
Net cash used in investing activities............... (6,056) (14,411)
------------ -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from revolving loan facilities............. 853 4,396
Proceeds from issuance of long-term obligations......... 52,767 1,875
Principal payments on long-term obligations............. (45,520) (6,354)
Refinancing costs....................................... (2,694) --
------------ -----------
Net cash provided by (used in)
financing activities............................. 5,406 (83)
------------ -----------
EFFECT OF EXCHANGE RATE CHANGES IN
CASH.................................................... (94) (336)
------------ -----------
NET CHANGE IN CASH........................................ (1,134) (10,311)
BALANCE AT BEGINNING OF PERIOD............................ 1,350 14,396
------------ -----------
BALANCE AT END OF PERIOD.................................. $ 216 $ 4,085
------------ -----------
------------ -----------
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid for interest.................................. $ 24,755 $ 26,500
------------ -----------
------------ -----------
Cash paid for income taxes.............................. $ -- $ 210
------------ -----------
------------ -----------
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
5
<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 incorporated March 9, 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. 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.
6
<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 receivable 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 $4,098 remained in liabilities as of
September 30, 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 future 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.
See Note 6 for unaudited pro forma information.
Effective June 27, 2000 the Company sold its Chalon, France tooling
facility. The Company realized a loss of $1,907 on the sale.
On October 4, 2000, the Company has signed an agreement to sell its
Cosmetics division for $67 million in cash, subject to a working capital
adjustment. The transaction is expected to close in mid-November and result
in a gain of approximately $28,000, which will be recorded upon closing. The
Cosmetics division had net sales of $31.5 million and $33.3 million in the
first three quarters of 1999 and 2000, respectively. It earned a net
operating profit of $3.9 million and $5.1 million in these same periods.
On October 27, 2000, the Company reached an agreement with Maybelline to
discontinue production of its point of purchase displays. In connection
therewith, the Company is discontinuing the operations of its Display
division in late 2000 or early 2001, depending on Maybelline's transition to
a new supplier. The Company is currently finalizing the plan to close the
division, including possible asset dispositions and employment terminations.
Based on current information, the Company expects to record a loss on the
closure of the division in the fourth quarter of 2000 of $4 to $5 million,
consisting primarily of fixed assets that are unique to the division and
goodwill allocated to the division. However, the Company expects the
liquidation of the assets of the division to generate approximately $4
million of cash, which will be used to reduce debt. The Display division had
net sales of $31.1 million and $14.1 million in the first three quarters of
1999 and 2000, respectively and a net operating loss of $1.1 million and $0.5
million in these same periods.
7
<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 $35,735 at November 9, 2000) and a $35 million 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. After considering payment of fees and
other expenses, the write-off of related deferred debt costs and the 15%
discount, the repurchase resulted in a net gain of $5,143, which has been
recorded as an extraordinary item in the September 30, 2000 statement of
operations.
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. Based
on the treatment of capital leases under the Credit Facility, the Company
has exceeded the capital spending limit. However, this violation has been
waived and the Credit Facility amended. 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. See Note 4.
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.
6. PRO FORMA INFORMATION
The following statement of operations data for the thirty-nine weeks
ended October 2, 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.
<TABLE>
<CAPTION>
1999
--------
<S> <C>
Net sales...................................... $293,768
Operating income............................... $ 16,147
Loss before taxes and extraordinary item....... $ (9,100)
</TABLE>
8
<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, 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) sell its Chalon Sur Saone Cedex
France tooling facility in June 2000.
9
<PAGE>
On October 4, 2000, the Company signed an agreement to sell its
Cosmetics division for $67 million in cash, subject to a working capital
adjustment. The transaction is expected to close in mid-November. Proceeds of
the sale will be used to retire debt and result in a gain of approximately
$28 million. The Cosmetics division had net sales of $31.5 million and $33.3
million in the first three quarters of 1999 and 2000, respectively. It earned
net operating profit of $3.9 million and $5.1 million in these same periods.
On October 27, 2000, the Company reached an agreement with
Maybelline to discontinue production of its point of purchase displays. In
connection therewith, the Company is discontinuing the operations of its
Display division in late 2000 or early 2001, depending on Maybelline's
transition to a new supplier. The Company is currently finalizing the plan to
close the division, including possible asset dispositions and employment
terminations. Based on current information, the Company expects to record a
loss on the closure of the division in the fourth quarter of 2000 of $4 to $5
million, consisting primarily of fixed assets that are unique to the division
and goodwill allocated to the division. However, the Company expects the
liquidation of the assets of the division to generate approximately $4
million of cash, which will be used to reduce debt. The Display division had
net sales of $31.1 million and $14.1 million in the first three quarters of
1999 and 2000, respectively and a net operating loss of $1.1 million and $0.5
in these same periods.
The Company also is exploring opportunities to dispose of its
remaining European tooling operations. However, no agreement has been
reached, nor can it be ensured any such agreement will be reached.
In October, 2000 the Company was informed that Colgate will move
production of its toothbrushes to its internal facilities at the beginning of
2001. While this event had been expected, the timing was unknown until the
notification in October. As management is currently not aware of any
significant new opportunities in this business they are currently evaluating
the future of this division. Sales to Colgate in 2000 are expected to be
approximately $10 million.
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. 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.
Management continues to evaluate its other divisions 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 these evaluations. Concurrently, expansion could occur
in other divisions as the Company continues its growth with strategic
customers.
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<PAGE>
Certain of the Company's operating data for the thirteen and
thirty-nine weeks ended September 30, 2000 and October 2, 1999 are set forth
below as percentages of net sales.
<TABLE>
<CAPTION>
Thirteen Weeks Ended Thirty-nine Weeks Ended
----------------------- -------------------------
September 30, October 2, September 30, October 2,
2000 1999 2000 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net sales 100.0% 100.0% 100.0% 100.0%
Gross profit 12.4% 11.4% 12.7% 12.1%
Selling, general and administrative 10.0% 8.9% 9.2% 9.0%
Closure or sale of facilities 1.0% 0.0% 0.6% 0.0%
Operating income 1.4% 2.4% 2.9% 3.2%
Interest expense, net 10.8% 9.4% 10.5% 8.6%
Provision (benefit) for income taxes (2.3) (0.3)% (1.0)% (0.1)%
Extraordinary item 6.1% 0.0% 2.0% 0.0%
Net loss (0.1)% (6.2)% (4.7)% (5.0)%
</TABLE>
THIRTEEN WEEKS ENDED SEPTEMBER 30, 2000 VERSUS OCTOBER 2, 1999
NET SALES. Net sales decreased by $9.5 million, or 10.1%, to $84.2
million for 2000 from $93.7 million for 1999, due in part to the disposition
of the Germany division. After considering this change, sales decreased $4.1
million, or 4.7%. Sales declined by $1.3 million in the Brush division due to
the anticipated reduction in the program with Proctor and Gamble. Sales
declined by $1.0 million in the Medical division due to declines in sales to
Abbott Laboratories. Sales declined by $2.9 million in the European divisions
due to strengthening of the US dollar.
GROSS PROFIT. Gross profit decreased by $0.3 million, or 2.4%, to
$10.4 million for 2000 from $10.7 million for 1999. Excluding the Germany
disposition, gross profit decreased $1.7 million or 13.9%. The decrease was
primarily the result of the decreased volume in the Brush division and a
decline in the profitability of the Cosmetics division compared to a strong
third quarter of 1999.
SELLING, GENERAL AND ADMINISTRATIVE. SG&A expenses remained stable
at $8.4 million.
CLOSURE OR SALE OF FACILITIES. Upon further analysis and closing of
the transaction, the Company recognized an additional loss of $0.8 million on
the sale of its Chalon France tooling facility. This loss is in addition to
the estimated loss of $1.1 million recorded in the second quarter.
OPERATING INCOME. Operating income decreased by $1.1 million, or
48.3%, to $1.2 million for 2000 from $2.3 million for 1999 for the reasons
listed above.
NET INTEREST EXPENSE. Net interest expense increased by $0.3
million, or 3.8%, to $9.1 million for 2000 from $8.8 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 $1.9
million for 2000 compared to a benefit of $0.3 million for 1999. The benefits
were the result of losses in the French division.
EXTRAORDINARY ITEM. The Company recognized a gain of $5.1 million in
connection with the retirement of $50 million of its Senior Notes. The gain
consists of a 15% discount paid on retirement of the debt less fees incurred
in the refinancing and the write-off of deferred debt costs.
NET LOSS. Net loss decreased by $5.0 million, or 86.0% to $0.8
million for 2000 from $5.8 million for 1999 as a result of the above factors.
11
<PAGE>
THIRTY-NINE WEEKS ENDED SEPTEMBER 30, 2000 VERSUS OCTOBER 2, 1999
NET SALES. Net sales decreased by $37.0 million, or 12.3%, to $264.0
million for 2000 from $301.0 million for 1999, due to the disposition of the
Germany division, which was offset by the acquisitions of the Souplex and
Compression divisions. After considering these changes, sales decreased $29.8
million, or 10.1%. Sales decreased in the Display division by $17.0 million
from 1999 due to the Maybelline `99 Wall Program. Sales decreased in the
Brush division by $8.9 million due to declines in the program with Proctor
and Gamble. Sales decreased in the Medical division by $4.4 million due to
declines in sales to Abbott Laboratories.
GROSS PROFIT. Gross profit decreased by $3.1 million, or 8.4%, to
$33.4 million for 2000 from $36.5 million for 1999. After considering the
Germany, Souplex and Compression changes, gross profit decreased $9.1 million
or 21.3%. The decrease was the result of the decreased sales in the Display,
Brush and Medical divisions ($7.2 million) and decreased profitability in
France ($2.1 million) due to increased raw material costs, inefficiencies in
the tooling operations and start-up costs associated with a new facility in
Villefranche.
SELLING, GENERAL AND ADMINISTRATIVE. SG&A expenses decreased $2.8
million, or 10.3%, to $24.2 million for 2000 from $27.0 million for 1999 due
to the disposition of the Germany division. After considering the disposition
of Germany, SG&A expenses decreased $2.2 million or 8.3% 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 $1.9
million for the loss on the sale of its Chalon 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 $1.8 million, or
19.3%, to $7.7 million for 2000 from $9.5 million for 1999 for the reasons
listed above.
NET INTEREST EXPENSE. Net interest expense increased by $1.9
million, or 7.5%, to $27.7 million for 2000 from $25.8 million for 1999 due
to increased borrowings and higher interest rates under the credit facility.
INCOME TAXES. The Company recognized an income tax benefit of $2.7
million for 2000 compared to $0.4 million for 1999. The benefit was the
result of losses incurred in the French division.
NET LOSS. Net loss decreased $2.7 million, to $12.3 million for 2000
from $15.0 million for 1999 as a result of the above factors.
12
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
The Company's liquidity requirements consist primarily of working
capital needs, capital expenditures and the 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 million term loan. At November 9, 2000,
approximately $3.5 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. After considering payment of fees and
other expenses, the write-off of related deferred debt costs and the 15%
discount, the repurchase resulted in a net gain of $5.1 million.
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. Based
on the treatment of capital leases under the Credit Facility, the Company has
exceeded the capital spending limit. However, this violation has been waived
and the Credit Facility amended. 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 is required under the Credit Facility to enter into certain
interest rate protection agreements designed to fix interest rates on
variable rate debt and reduce exposure to fluctuations in interest rates. On
August 7, 2000, the Company entered into a $50 million interest rate swap
for a term of six years, cancelable after four years at the option of the
counterparty, under which the Company will pay to the counterparty a fixed
rate of 7.08%, and the counterparty will pay to the Company a variable rate
equal to LIBOR. The transaction involved an exchange of fixed rate payments
for variable rate payments and does not involve the exchange of the
underlying nominal value.
The Company has no significant debt principal payments due in 2000.
Interest payments are expected to total approximately $1.2 million for the
remainder of the year. The Company expects capital expenditures, including
equipment obtained under lease agreements, to approximate $1.0 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 decreased by $4.8
million to a use of $0.3 million from proceeds of $4.5 million in 1999. The
Company has spent $6.6 million in 2000 to make purchases of property, plant
and equipment. The Company borrowed $21.5 million under the Credit Facility
through September 30, 2000. The Company has borrowed an additional $0.1
million under the Credit Facility, resulting in an outstanding balance of
$21.6 million as of November 9, 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.
13
<PAGE>
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.
RECENT ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board issued SFAS No.
133 "Accounting for Derivative Instruments and Hedging Activities." SFAS No.
133 established reporting standards for derivative instruments, including
certain derivative instruments embedded in other contracts. Under SFAS No.
133, the Company would recognize all derivatives as either assets or
liabilities, measured at fair value, in the statement of financial position.
In July 1999, SFAS No. 137 "Accounting for Derivative Instruments and Hedging
Activities - Deferral of Effective Date of FASB No. 133, An Amendment of FASB
Statement No. 133" was issued deferring the effective date of SFAS 133 to
fiscal years beginning after June 15, 2000. In June 2000, SFAS No. 138
"Accounting for Certain Derivative Instruments and Certain Hedging
Activities, an Amendment of FASB Statement No. 133" was issued classifying
the accounting for derivatives under the new standard. The Company is in the
process of evaluating the impact these pronouncements will have on its
consolidated financial statements.
14
<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.
15
<PAGE>
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits.
Exhibit 10.1 Amended and Restated Credit Agreement
Exhibit 27. Financial Data Schedule
(b) Reports on Form 8-K.
Form 8K filed on August 22, 2000, reporting under Item 5;
financial statements were not filed.
Form 8K filed on July 19, 2000, reporting under Item 5;
financial statements were not filed.
16
<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: November 21, 2000 AMM HOLDINGS, INC.
By: /s/ James T. Sprouse
-----------------------------
James T. Sprouse
Corporate Controller
17
