<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 1, 2000
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from _________ to _________
Commission file number 333-60855
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: (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>
May 12, 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.
- -------------------------------------------------------------------------------
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 April 1, 2000
and December 31, 1999.........................................2
Consolidated Statements of Operations for
the Thirteen Weeks Ended April 1, 2000
and April 3, 1999..............................................3
Consolidated Statements of Comprehensive Income for
the Thirteen Weeks Ended April 1, 2000
and April 3, 1999..............................................4
Consolidated Statements of Cash Flows
for the Thirteen Weeks Ended April 1, 2000
and April 3, 1999..............................................5
Notes to Consolidated Financial Statements...................6-9
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations...........................10
Item 3. Quantitative and Qualitative Disclosures about Market Risks...13
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K...............................14
Signatures..................................................................15
</TABLE>
iii
<PAGE>
INTRODUCTION
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. Anchor
Holdings, Inc. ("Holdings") does not have any material operations other than
ownership of all of the capital stock of the Company.
The Company serves over 450 customers, including leading
multinational companies such as Abbott Laboratories, Colgate-Palmolive,
Kimberly-Clark, L'Oreal, Maybelline, Motorola, Procter & Gamble, Renault,
Revlon, SEB, Siemens, Whirlpool and Xerox. Products using the Company's
plastic components are sold in a wide range of end markets, including end
markets for consumer products, telecommunications/business equipment,
household appliances, automobiles and medical devices. The Company believes
that the diversity of its customers, markets and geographic regions creates a
stable revenue base and reduces the Company's exposure to particular market
or regional economic cycles.
The Company has 26 manufacturing facilities with approximately 700
molding machines throughout North America and Europe, including France,
the United Kingdom and Portugal. The Company is capable of providing its
customers with integrated design and prototype development, mold design and
manufacturing, advanced plastic injection molding capabilities, and value-added
finishing services, such as hot stamping, pad printing, assembly and complete
product testing, all of which enable it to provide "one-stop" shopping to
customers seeking a wide range of services. The Company's technologically
advanced manufacturing facilities and equipment enable it to provide customized
solutions to highly demanding customer specifications.
The structure of the Company is as indicated in the table below:
---------------------------
AMM Holdings, Inc.
---------------------------
|
|
---------------------------
Anchor Holdings, Inc.
---------------------------
|
|
---------------------------
Moll Industries, Inc.
---------------------------
|
|
|
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------|----------------------
| | | | | |
<S> <C> <C> <C> <C>
Cepillos De Moll Industries, Moll Industries UK, Moll France SARL Anchor Advanced Percept
Matamoros Limited Limited Products Foreign Industrial Design,
S.A. de C.V. Sales Corporation Inc.
</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>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
AMM HOLDINGS, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT PER SHARE INFORMATION, AND UNAUDITED)
<TABLE>
<CAPTION>
APRIL 1, DECEMBER 31,
2000 1999
-------- -------------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents ................................... $ 168 $ 1,350
Accounts receivable, net of reserves for doubtful accounts of
$2,509 and $2,194, respectively .......................... 72,779 65,212
Inventories, net ............................................ 34,467 35,452
Deposits on tooling ......................................... 13,912 13,043
Other current assets ........................................ 2,075 2,291
--------- ---------
Total current assets ................................ 123,401 117,348
--------- ---------
PROPERTY, PLANT AND EQUIPMENT:
Land ........................................................ 2,992 3,142
Buildings ................................................... 39,877 40,552
Machinery and equipment ..................................... 120,498 118,374
Less: accumulated depreciation .............................. (43,263) (39,281)
--------- ---------
Property, plant and equipment, net ....................... 120,104 122,787
--------- ---------
GOODWILL, NET ................................................. 41,745 42,562
--------- ---------
INTANGIBLE AND OTHER ASSETS, NET .............................. 16,101 16,469
--------- ---------
Total assets ........................................ $ 301,351 $ 299,166
========= =========
LIABILITIES AND DEFICIT
CURRENT LIABILITIES:
Current portion of long-term obligations .................... $ 3,724 $ 4,919
Short-term borrowings ....................................... 1,577 1,965
Accounts payable ............................................ 49,628 42,191
Accrued interest ............................................ 9,658 9,987
Accrued liabilities ......................................... 20,880 22,294
Deferred tooling revenue .................................... 10,854 10,586
--------- ---------
Total current liabilities ........................... 96,321 91,942
--------- ---------
LONG-TERM OBLIGATIONS, NET OF CURRENT PORTION ................. 293,581 288,931
--------- ---------
DEFERRED INCOME TAXES ......................................... 4,685 4,866
--------- ---------
OTHER NON-CURRENT LIABILITIES ................................. 7,396 7,529
--------- ---------
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 ......................................... (94,737) (90,139)
Accumulated other comprehensive income ...................... (6,282) (4,350)
--------- ---------
Total deficit ....................................... (100,632) (94,102)
--------- ---------
Total liabilities and deficit ....................... $ 301,351 $ 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 WEEKS ENDED
--------------------
APRIL 1, APRIL 3,
2000 1999
-------- ---------
<S> <C> <C>
NET SALES ................................... $ 93,311 $ 101,549
COST OF SALES ............................... 81,511 90,471
-------- ---------
Gross profit .............................. 11,800 11,078
SELLING, GENERAL AND ADMINISTRATIVE
EXPENSES ............................... 7,860 8,341
CLOSURE OR SALE OF FACILITY.................. (300) --
-------- ---------
Operating income .......................... 4,240 2,737
INTEREST EXPENSE, NET ....................... 9,185 8,612
OTHER (INCOME) EXPENSE ...................... (20) (244)
-------- ---------
INCOME (LOSS) BEFORE TAXES .................. (4,925) (5,631)
PROVISION (BENEFIT) FOR INCOME TAXES ........ (327) 239
-------- ---------
NET INCOME (LOSS) ........................... $ (4,598) $ (5,870)
======== =========
LOSS PER SHARE .............................. $ (4,598) $ (5,870)
======== =========
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING 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 WEEKS ENDED
--------------------
APRIL 1, APRIL 3,
2000 1999
--------- --------
<S> <C> <C>
NET INCOME (LOSS) ....................... $(4,598) $(5,870)
OTHER COMPREHENSIVE INCOME (LOSS):
Foreign currency translation adjustment (1,932) (3,629)
------- -------
COMPREHENSIVE INCOME (LOSS) ............. $(6,530) $(9,499)
======= =======
</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>
THIRTEEN WEEKS ENDED
--------------------
APRIL 1, APRIL 3,
2000 1999
------- --------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) ..................................... $(4,598) $ (5,870)
Adjustments to reconcile net income (loss) to net cash
from operating activities:
Depreciation and amortization ....................... 6,236 6,003
Loss on disposal of fixed assets .................... 14 13
Accretion on Senior Discount Notes................... 1,455 1,276
Deferred income taxes ............................... (407) 92
Changes in assets and liabilities, net of assets
purchased and liabilities assumed:
Accounts receivable ............................... (9,004) (14,833)
Inventories ....................................... 653 2,241
Other current assets .............................. 94 (879)
Deposits on tooling ............................... (1,004) (2,132)
Other assets ...................................... (36) 275
Accounts payable .................................. 8,543 11,184
Accrued liabilities ............................... (1,351) (8,769)
Deferred tooling revenue .......................... 268 2,950
Other liabilities ................................. 31 597
------- --------
Total adjustments .............................. 5,492 (1,982)
------- --------
Net cash provided by (used in) operating activities 894 (7,852)
------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures .................................. (4,168) (6,527)
Proceeds on disposal of fixed assets .................. -- 1,212
Short-term investments ................................ -- 3,763
------- --------
Net cash used in investing activities ............. (4,168) (1,552)
------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from (payments on) revolving loan
Facilities........................................... 3,303 10,840
Proceeds from issuance of long-term obligations ....... 45 237
Principal payments on long-term obligations ........... (1,229) (4,206)
------- --------
Net cash provided by financing activities ......... 2,119 6,871
------- --------
EFFECT OF EXCHANGE RATE CHANGES IN
CASH .................................................. (27) (155)
------- --------
NET CHANGE IN CASH ...................................... (1,182) (2,688)
------- --------
BALANCE AT BEGINNING OF PERIOD .......................... 1,350 14,396
------- --------
BALANCE AT END OF PERIOD ................................ $ 168 $ 11,708
======= ========
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid for interest ................................ $ 6,825 $ 13,014
======= ========
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 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,
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 tentatively 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 tentatively 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
=======
An evaluation of the assets acquired and liabilities assumed is in process.
Upon completion of the evaluation, net additions or reductions, if any, in the
fair values currently assigned will result in a corresponding change in
goodwill.
See Note 6 for unaudited pro forma information.
4. DISPOSITIONS
In March 1999, the Company sold its Lakewood and Betta divisions. The
reserves provided at December 31, 1998 were adequate for the loss incurred in
the sale of the Lakewood division. Betta was sold for approximately net book
value.
Effective December 31, 1999, the Company disposed of its interest in Moll
Industries Germany GmbH ("Germany"). Pursuant to the agreement to sell Germany,
the Company agreed to provide financial support to the buyer, pay 75% of the
amount by which accounts payable exceeded accounts receivables upon the date of
the closing and pay the lease payments for the manufacturing facility for two
years following the sale. The Company recorded the maximum liability under the
agreement, of which $4,864 remained in liabilities as of April 1, 2000; however,
upon the occurrence of certain events, the Company will not be required to make
the maximum payments required per the agreement. The payment of $1,731 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.
7
<PAGE>
5. 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 1, 2000 is as follows:
<TABLE>
<CAPTION>
AMM GUARANTOR NON-GUARANTOR CONSOLIDATED
HOLDINGS SUBSIDIARIES SUBSIDIARIES ELIMINATIONS BALANCE
---------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash .............................. $ 135 $ 168 $ 135 $ $ 168
Accounts Receivable ............... 39,698 33,078 3 72,779
Inventories ....................... 27,149 7,318 -- 34,467
Other Current Assets .............. 11,499 4,307 181 15,987
-------- --------- --------- --------- --------
Total Current Assets .... 78,211 44,871 319 123,401
Fixed Assets ...................... 79,891 37,375 2,838 120,104
Goodwill .......................... 34,418 7,327 -- 41,745
Intercompany Receivables .......... 65,559 4,213 2,745 (72,517) --
Other Assets ...................... 11,936 4,165 -- 16,101
-------- --------- --------- --------- --------
$270,015 $ 97,951 $ 5,902 $ (72,517) $301,351
======== ========= ========= ========= ========
Accounts Payable $ 23,726 $ 25,509 $ 393 $ $ 49,628
Accrued Liabilities ............... 15,775 4,965 303 21,043
Other Current Liabilities ......... 21,582 4,068 -- 25,650
-------- --------- --------- --------- --------
Total Current
Liabilities ........... 61,083 34,542 696 96,321
Long Term Debt .................... 284,363 9,218 -- 293,581
Other Non-current Liabilities ..... 2,899 9,182 -- 12,081
Intercompany Payables ............. 25,880 46,637 -- (72,517) --
-------- --------- --------- --------- --------
Total Liabilities ....... 374,225 99,579 696 (72,517) 401,983
Equity ............................ (104,210) (1,628) 5,206 (100,632)
-------- --------- --------- --------- --------
$270,015 $ 97,951 $ 5,902 $ (72,517) $301,351
======== ========= ========= ========= ========
</TABLE>
8
<PAGE>
<TABLE>
<CAPTION>
AMM GUARANTOR NON-GUARANTOR CONSOLIDATED
HOLDINGS SUBSIDIARIES SUBSIDIARIES ELIMINATION BALANCES
---------- ------------ ------------- ----------- ------------
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net Sales...................... $ 64,287 $ 29,024 $ 2,445 $ (2,445) $ 93,311
Cost of Sales.................. 56,053 25,718 2,185 (2,445) 81,511
-------- --------- -------- -------- ---------
Gross Profit......... 8,234 3,306 260 11,800
Selling, General &
Administrative Expense......... 4,354 3,180 26 7,560
-------- --------- -------- -------- ---------
Operating Income..... 3,880 126 234 4,240
Interest Expense, net.......... 7,763 1,422 -- 9,185
Other (Income) Expense......... (390) 370 -- (20)
-------- --------- -------- -------- ---------
Income Before Taxes.. (3,493) (1,666) 234 (4,925)
Income Tax Expense (Benefit)... -- (407) 80 (327)
-------- --------- -------- -------- ---------
Net Income (Loss).... $ (3,493) $ (1,259) $ 154 $ $ (4,598)
======== ========= ======== ======== =========
STATEMENT OF CASH FLOWS DATA:
Net Income (Loss)................. $ (3,493) $ (1,259) $ 154 $ -- $ (4,598)
Depreciation and Amortization..... 4,038 2,146 52 -- 6,236
Change in Assets and Liabilities.. (1,985) 286 (107) -- (1,806)
Other............................. 1,469 (407) -- -- 1,062
-------- --------- -------- -------- ---------
Cash Flows from Operating
Activities............ 29 766 99 894
-------- --------- -------- -------- ---------
Capital Expenditures.............. (3,166) (1,002) -- -- (4,168)
-------- --------- -------- -------- ---------
Cash Flows from Investing
Activities............ (3,166) (1,002) -- (4,168)
-------- --------- -------- -------- ---------
Payments on Revolving Loan
Facility........................ 3,750 (447) -- -- 3,303
Proceeds from Issuance of Long-
Term Obligations................ 45 -- -- -- 45
Principle Payments on Long-Term
Obligations..................... (596) (633) -- -- (1,229)
Intercompany transfers............ (242) 242 -- --
-------- --------- -------- -------- ---------
Cash Flows from Financing
Activities............ 2,957 (838) -- -- 2,119
-------- --------- -------- -------- ---------
Effect of Exchange Rate Changes
in Cash........................... -- (27) -- -- (27)
-------- --------- -------- -------- ---------
Net Change in Cash................ (180) (1,101) 99 -- (1,182)
Balance at Beginning of Period.... 45 1,269 36 -- 1,350
-------- --------- -------- -------- ---------
Balance at End of Period.......... $ (135) $ 168 $ 135 $ -- $ 168
======== ========= ======== ======== =========
</TABLE>
The financial information of Holdings is identical to that of the Company.
Therefore, summarized financial information of the Company is not required.
6. PRO FORMA INFORMATION
The following statement of income data for the thirteen weeks ended April
3, 1999 gives effect to the acquisition of Souplex and the sale of the
Lakewood, Betta and Germany divisions as if they had occurred at the
beginning of the period.
<TABLE>
<CAPTION>
APRIL 3,
1999
---------
<S> <C>
Net sales......................................... $ 100,686
Operating income.................................. $ 5,024
Loss before taxes and extraordinary item.......... $ (2,374)
</TABLE>
9
<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 worse
than expected performance in the Display, Germany, Medical and Compression
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 and 4) sell its Paderborn, Germany division, which had
incurred significant losses due to declines in volume, in December 1999.
Management continues to dedicate extensive resources to improve the
performance of the Display, Medical and Compression divisions. The Display
division was significantly impacted by the delayed introduction of its
primary customer's significant new program in early 1999 due to product
design and tooling changes. The division continues to be impacted by the
design changes that occurred. 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 Compression division was purchased out of bankruptcy in April
1999. The cost structure of Compression was not in line with its volume, nor
was it focused on its core competencies. The Company implemented a
restructuring plan of the Compression division in late 1999 that resulted in
a significant reduction in its employment level and the focusing of its
activities in design and engineering services.
Management continues to evaluate its other divisions, including its
tool building operations in Europe and the United States, along with certain
molding operations as to their future strategic fit within the organization
and their projected results of operations. Additional locations/divisions
could be sold or closed as management continues the evaluation. Concurrently,
expansion could occur in other divisions as the Company continues its growth
with strategic customers.
10
<PAGE>
Certain of the Company's operating data for the thirteen weeks ended April 1,
2000 and April 3, 1999 are set forth below as percentages of net sales.
<TABLE>
<CAPTION>
Thirteen Weeks Ended,
April 1, April 3,
2000 1999
--------- ----------
<S> <C> <C>
Net sales 100.0% 100.0%
Gross profit 12.6% 10.9%
Selling, general and administrative 8.4% 8.2%
Operating income 4.5% 3.0%
Interest expense, net 9.8% 8.5%
Provision for income taxes (0.3)% 0.2%
Net income (loss) (4.9)% (5.8)%
</TABLE>
THIRTEEN WEEKS ENDED APRIL 1, 2000 VERSUS APRIL 3, 1999
NET SALES. Net sales decreased by $8.2 million, or 8.1%, to $93.3
million for 2000 from $101.5 million for 1999, due in part to the disposition
of the Lakewood, Betta and German divisions that was offset by the
acquisition of Souplex. On a pro forma basis, sales decreased $7.4 million,
or 7.3%. Sales decreased by $4.7 million in the Display division due to the
expected decline in the Maybelline program and $2.6 million in the Brush
division due to the expected decline in the Procter and Gamble program. Less
significant declines were also experienced in the Medical, Telecom and
Souplex divisions; however, these declines were offset by increases in the
Custom and Packaging divisions.
GROSS PROFIT. Gross profit increased by $0.7 million, or 6.5%, to
$11.8 million for 2000 from $11.1 million for 1999, resulting in part from
the acquisition and disposition activity noted above. On a pro forma basis,
gross profit decreased $1.6 million or 12.0%. Decreases in gross margin
occurred in the Brush division ($1.1 million) due to the decline in sales
discussed above; in the Souplex division ($1.0 million) due to a decline in
highly profitable tooling sales; in the Telecom division ($0.8 million) due
to inefficiencies that developed in late 1999 in connection with the movement
of medical production from the telecom facility to the medical facility and
in the France division ($0.6 million) due to inefficiencies associated with
the start-up of the Villefranche facility and lower tooling margins. The
Company experienced higher margins in the Packaging division ($1.5 million)
due to the consolidation of three facilities into one and in the Display
division ($0.5 million) due to inefficiencies experienced in 1999 related to
the start-up of the Maybelline program.
SELLING, GENERAL AND ADMINISTRATIVE. SG&A expenses decreased $0.5
million, or 5.8%, to $7.9 million for 2000 from $8.4 million for 1999 due to
the disposition of the German division, offset in part by the acquisition of
Souplex. On a pro forma basis, SG&A expenses decreased $0.7 million or 8.5%,
due to reductions made in the Souplex division following its acquisition.
OPERATING INCOME. Operating income increased by $1.5 million, or
54.9%, to $4.2 million for 2000 from $2.7 million for 1999 for the reasons
listed above. On a pro forma basis, operating income decreased $0.8 million,
or 15.6%.
NET INTEREST EXPENSE. Net interest expense increased by $0.6
million, or 6.7% to $9.2 million for 2000 from $8.6 million for 1999 due to
debt assumed in the acquisition of Souplex.
INCOME TAXES. Income taxes decreased by $0.5 million to a benefit of
$0.3 million for 2000 from an expense of $0.2 million for 1999 due to losses
in the France division in 2000.
NET LOSS. Net loss decreased $1.3 million, to $4.6 million for 2000
from $5.9 million for 1999 as a result of the above factors.
11
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
The Company's liquidity requirements consist primarily of working
capital needs, capital expenditures, required payments of principal and
interest on any borrowings under the Bank of America Credit Facility,
required payments of principal and interest on the European debt, required
payments of interest on the Senior, Senior Subordinated and Senior Discount
Bonds and principal at maturity.
The Company has a $50 million Credit Facility with the Bank of
America. Restrictions in the Senior Note Agreement limit the current
availability under the Credit Facility to $15 million. The Credit Facility
contains certain financial covenants which were amended on March 31, 2000.
The Company is dependent upon availability under the line of credit to meet
certain working capital needs during 2000. Management's projections and
related operating plans indicate the Company can remain in compliance with
the new financial covenants and meet its expected obligations throughout
2000. However, as with all projections, it is not certain management's
projections will be achieved. The balance outstanding under the Credit
Facility as of April 1, 2000 was $3.8 million. Additionally, there is a $2.0
million letter of credit outstanding against the Credit Facility.
The Company has no significant principal payments due in 2000. Interest
payments are expected to total approximately $28.5 million. The Company expects
capital expenditures to approximate $12 million in 2000. 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 Bank of America Credit Facility.
In 2000, the Company's cash generated from operations increased by
$8.8 million to $0.9 million in 2000 from ($7.9 million) in 1999. The
improvement is the result of the timing of the interest payment on the Senior
Subordinated Bonds, which occurred in the first quarter of 1999 but in the
second quarter of 2000. The Company spent $4.2 million in the first quarter
of 2000 to make purchases of property, plant and equipment. The Company
borrowed $3.8 million under the Credit Facility during the first quarter. As
of May 15, 2000, the Company has borrowed an additional $5.2 million under
the Credit Facility in the second quarter, resulting in an outstanding
balance of $9.0 million.
Cash flows from operating activities have historically been and
management believes will continue to be sufficient to meet the Company's debt
service obligations. However, management does not believe they will be
sufficient to fund the expected future growth of the Company. Therefore,
management is presently exploring various alternatives to improve the
Company's liquidity and provide a more favorable capital structure for its
future growth.
INFLATION AND CHANGING PRICES
The Company's sales and costs are subject to inflation and price
fluctuations. However, because changes in the cost of plastic resins, the
Company's principal raw material, is generally passed through to customers, such
changes historically have not, and in the future are not expected to have, a
material effect on Moll's gross profit.
12
<PAGE>
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS.
Market risk represents the risk of loss that may impact the
consolidated financial statements of the Company due to adverse changes in
financial market prices and rates. The Company's market risk exposure is
primarily a result of fluctuations in interest rates and foreign exchange rates.
The Company has not entered into derivative-hedging transactions to manage risk
connected with such fluctuations.
The Company derived approximately 31% of its 2000 net sales to date
from its operations in Europe. The Company prices its products and incurs
operating expenses in Europe in the currency of the country in which the product
is manufactured and sold and, in the United States, in United States dollars. To
the extent that costs and prices are in the currency of the country in which the
products are manufactured and sold, the costs and prices of such products in
dollars will vary as the value of the dollar fluctuates against such currencies.
There can be no assurance that there will not be increases in the value of the
dollar against such currencies that will reduce the dollar return to the Company
on the sale of its products in such countries.
13
<PAGE>
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits.
Exhibit 27. Financial Data Schedule
(b) Reports on Form 8-K.
None.
14
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
each registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Date: May 16, 2000 AMM HOLDINGS, INC.
By: /s/ James T. Sprouse
-----------------------------
James T. Sprouse
Controller
15
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<PAGE>
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<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> APR-01-2000
<CASH> 168
<SECURITIES> 0
<RECEIVABLES> 75,288
<ALLOWANCES> (2,509)
<INVENTORY> 34,467
<CURRENT-ASSETS> 123,401
<PP&E> 163,367
<DEPRECIATION> (43,263)
<TOTAL-ASSETS> 301,351
<CURRENT-LIABILITIES> 96,321
<BONDS> 274,447
0
0
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<CGS> 81,511
<TOTAL-COSTS> 89,071
<OTHER-EXPENSES> (20)
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<INCOME-PRETAX> (4,925)
<INCOME-TAX> (327)
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