<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2000
---------------------------------------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
---------------------- --------------------
33-88007
(Commission File Number)
LLS Corp.
(Exact name of Registrant as specified in its charter)
Illinois
(State or other jurisdiction of incorporation or organization)
36-2741439
(I.R.S. Employer Identification No.)
101 South Hanley Road
St. Louis, MO 63105
(314) 727-1701
(Address, including zip code, and telephone number, including
area code, of Registrant's principal executive offices)
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 issuer's classes of
common stock, as of the latest practicable date:
Outstanding at
Class April 30, 2000
- ---------------------------- -----------------
Common Stock 55,333,333
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LLS CORP.
INDEX
<TABLE>
<CAPTION>
PART I - FINANCIAL INFORMATION Page
----
<S> <C>
LLS Corp.
Condensed Consolidated Balance Sheets as of March 31, 2000 and
September 30, 1999 ............................................................................ 1
Condensed Consolidated Statements of Operations for the three and six month
periods ended March 31, 2000 and 1999.......................................................... 2
Condensed Consolidated Statements of Cash Flows for the six month
periods ended March 31, 2000 and 1999.......................................................... 3
Notes to Condensed Consolidated Financial Statements................................................ 4
Management's Discussion and Analysis of Financial Condition and Results of Operations............... 5
Quantitative and Qualitative Disclosure About Market Risk .......................................... 7
PART II - OTHER INFORMATION........................................................................... 8
SIGNATURES............................................................................................ 9
</TABLE>
<PAGE> 3
LLS CORP.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
<TABLE>
<CAPTION>
March 31, September 30,
2000 1999
------------ ------------
ASSETS (Unaudited)
<S> <C> <C>
Current assets:
Cash ................................................ $ -- $ 4,140
Accounts receivable, less allowance of $494 ......... 21,126 20,424
Inventories ......................................... 28,358 28,705
Other current assets ................................ 750 768
------------ ------------
Total current assets .............................. 50,234 54,037
Property, plant and equipment, net .................... 87,889 86,072
Intangibles and other assets .......................... 26,829 29,091
------------ ------------
Total assets ...................................... $ 164,952 $ 169,200
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable .................................... $ 15,535 $ 19,712
Accrued and other liabilities ....................... 13,037 15,873
Accrued interest .................................... 3,712 4,120
------------ ------------
Total current liabilities ......................... 32,284 39,705
Long-term obligations ................................. 251,400 245,000
Other long-term liabilities ........................... 7,543 8,166
------------ ------------
Total liabilities ................................. 291,227 292,871
Stockholders' equity (deficit):
Series A convertible preferred stock, $.01 par
value, 100,000,000 shares authorized,
78,000,000 shares issued and outstanding .......... 780 780
Common stock, $.01 par value, 500,000,000
shares authorized, 55,333,333 shares issued
and outstanding ................................... 553 553
Warrants for common stock ........................... 900 900
Additional paid-in capital .......................... 75,167 75,167
Accumulated deficit ................................. (203,675) (201,071)
------------ ------------
Total stockholders' equity (deficit) .............. (126,275) (123,671)
------------ ------------
Total liabilities and stockholders'
equity (deficit) .................................. $ 164,952 $ 169,200
============ ============
</TABLE>
See accompanying notes to the condensed consolidated financial statements.
1
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LLS CORP.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Six Months
Ended March 31, Ended March 31,
------------------------------ ------------------------------
2000 1999 2000 1999
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Net sales ............................................. $ 40,559 $ 41,061 $ 76,512 $ 77,919
Operating expenses:
Cost of sales ....................................... 26,352 27,101 51,470 53,054
Selling, general and administrative ................. 4,244 3,721 8,303 7,476
Depreciation and amortization ....................... 3,556 3,158 6,954 6,113
------------ ------------ ------------ ------------
Operating income ...................................... 6,407 7,081 9,785 11,276
Other expense:
Interest expense .................................... 6,238 720 12,388 1,252
Amortization of deferred financing costs ............ 672 -- 1,365 --
Other, net .......................................... 90 -- 98 --
------------ ------------ ------------ ------------
Income (loss) before income tax provision (benefit) ... (593) 6,361 (4,066) 10,024
Income tax provision (benefit) ........................ (213) 90 (1,463) 180
------------ ------------ ------------ ------------
Net income (loss) before minority interest ............ (380) 6,271 (2,603) 9,844
Minority interest ..................................... -- -- -- 171
------------ ------------ ------------ ------------
Net income (loss) ..................................... $ (380) $ 6,271 $ (2,603) $ 9,673
============ ============ ============ ============
</TABLE>
See accompanying notes to the condensed consolidated financial statements.
2
<PAGE> 5
LLS CORP.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
Six Months
Ended March 31,
------------------------------
2000 1999
------------ ------------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) .................................. $ (2,603) $ 9,673
Adjustments to reconcile net income (loss) to
net cash from operating activities:
Depreciation and amortization ..................... 6,954 6,113
Amortization of deferred financing costs .......... 1,365 --
Minority interest ................................. -- 171
Change in assets and liabilities:
Accounts receivable ............................. (702) 1,182
Inventories ..................................... 347 (619)
Other assets .................................... 747 206
Accounts payable ................................ (4,177) 1,988
Accrued and other liabilities ................... (3,460) (2,009)
Accrued interest ................................ (408) 28
------------ ------------
Net cash from operating activities .................... (1,937) 16,733
------------ ------------
Cash flows from investing activities:
Capital expenditures ................................ (8,603) (8,942)
------------ ------------
Net cash from investing activities .................... (8,603) (8,942)
------------ ------------
Cash flows from financing activities:
Proceeds from borrowings of long term obligations... 18,000 14,500
Principal payments of long term obligations......... (11,600) (3,412)
Redemption of minority interest..................... -- (8,524)
Distributions to stockholders ...................... -- (11,335)
------------ ------------
Net cash from financing activities .................... 6,400 (8,771)
------------ ------------
Net change in cash .................................... (4,140) (980)
Cash, beginning of period ............................. 4,140 1,177
------------ ------------
Cash, end of period ................................... $ -- $ 197
============ ============
</TABLE>
See accompanying notes to the condensed consolidated financial statements.
3
<PAGE> 6
LLS CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share data)
(Unaudited)
1. The Company
LLS Corp., an Illinois corporation ("LLS" or the "Company"), is engaged
in the design, manufacture and distribution of various types of
injection molded plastic parts and custom molds used in plastic
injection molding. The Company operates in one industry segment,
serving customers located primarily in the United States.
2. Basis of Presentation
Unaudited Interim Condensed Consolidated Financial Statements
The unaudited interim condensed consolidated financial statements
reflect all adjustments consisting only of normal recurring adjustments
which are, in the opinion of management, necessary for a fair
presentation of the financial position and results of operations of the
Company. The results for the three and six months ended March 31, 2000
are not necessarily indicative of the results that may be expected for
a full fiscal year. These financial statements should be read in
conjunction with the audited consolidated financial statements and
notes thereto included in the Company's Form S-4 previously filed with
the Securities and Exchange Commission.
Statement of Cash Flows
Interest paid for the six months ended March 31, 2000 and 1999, was
approximately $12,795 and $1,224, respectively. Total income taxes paid
for the six months ended March 31, 2000 and 1999 was approximately
$1,068 and $ 221, respectively.
3. Inventories
The composition of inventories at March 31, 2000 is as follows:
<TABLE>
<S> <C>
Raw materials . . . . . . . . . . . . . . . . $ 7,511
Work-in-process . . . . . . . . . . . . . . . 8,635
Finished goods . . . . . . . . . . . . . . . 12,212
----------
Total . . . . . . . . . . . . . . . . . . . $ 28,358
==========
</TABLE>
4
<PAGE> 7
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
The following discussion and analysis includes the results of operations for the
three and six months ended March 31, 2000 and 1999 for LLS Corp.
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
March 31, March 31,
------------------------- -------------------------
<S> <C> <C> <C> <C>
2000 1999 2000 1999
---------- ---------- ---------- ----------
(In thousands) (In thousands)
Net sales ................................... $ 40,559 $ 41,061 $ 76,512 $ 77,919
Cost of sales ............................... 26,352 27,101 51,470 53,054
Selling, general and administrative ......... 4,244 3,721 8,303 7,476
Depreciation and amortization ............... 3,556 3,158 6,954 6,113
---------- ---------- ---------- ----------
Operating income ............................ $ 6,407 $ 7,081 $ 9,785 $ 11,276
========== ========== ========== ==========
</TABLE>
Three Months Ended March 31, 2000 Compared to Three Months Ended March 31,
1999
Net sales for the three months ended March 31, 2000 were $40.6 million,
representing a $0.5 million or 1.2% decrease compared to the same period in the
prior year. This net decrease was primarily due to weakened demand from
international customers partially offset by increased business from existing
customers.
Cost of sales decreased $0.7 million or 2.8%, to $26.4 million during the three
months ended March 31, 2000 compared to the same period in the prior year. Cost
of sales expressed as a percentage of net sales decreased to 64.9% for the three
months ended March 31, 2000 from 66.0% for the comparable period in the prior
year. The decrease in cost of sales as a percentage of net sales during the
second quarter of fiscal 2000, was due to improved manufacturing efficiencies,
offset by higher labor costs and higher average resin prices compared to the
same period in fiscal 1999. Because we pass substantially all resin price
fluctuations onto our customers, a higher average resin price leads to a lower
gross margin percentage but generally has no impact on gross margin dollars.
Selling, general and administrative expenses increased $.5 million or 14.1% to
$4.2 million for the three months ended March 31, 2000 compared to the same
period in the prior year. Selling, general and administrative expenses expressed
as a percentage of sales increased to 10.5% for the three months ended March 31,
2000 from 9.1% for the comparable period in the prior year. Contributing to
these increases were higher fixed general and administrative costs resulting
from annual wage increases, the addition of management personnel and incremental
costs associated with the addition of two new manufacturing facilities during
fiscal 1999. These incremental facility costs primarily represent increased wage
and benefit amounts reflecting a higher number of employees during the three
months ended March 31, 2000 compared to the same period in the prior year.
Six Months Ended March 31, 2000 Compared to Six Months Ended March 31, 2000.
Net sales for the six months ended March 31, 2000 were $76.5 million,
representing a $1.4 million or 1.8% decrease compared to the same period in he
prior year. This net decrease was primarily due to delays in a major project
and weakened demand from international customers partially offset by increased
business from existing customers.
Cost of sales decreased $1.6 million or 3.0%, to $51.5 million during the six
months ended March 31, 2000 compared to the same period in the prior year. Cost
of sales expressed as a percentage of net sales decreased to 67.3% for the six
months ended March 31, 2000 from 68.1% for the comparable period in the prior
year. The decrease in cost of sales as a percentage of net sales during the
first six months of fiscal 2000, was due to improved manufacturing efficiencies,
offset by higher labor costs and higher average resin prices compared to the
same period in fiscal 1999. Because we pass substantially all resin price
fluctuations onto our customers, a higher average resin price leads to a lower
gross margin percentage but generally has no impact on gross margin dollars.
Selling, general and administrative expenses increased $0.8 million or 11.1% to
$8.3 million for the six months ended March 31, 2000 compared to the same period
in the prior year. Selling, general and administrative expenses expressed as a
percentage of sales increased to 10.9% for the six months ended March 31, 2000
from 9.6% for the comparable period in the prior year. Contributing to these
increases were higher fixed general and administrative costs resulting from
annual wage increases, the addition of management personnel and incremental
costs associated with the addition of two new manufacturing facilities during
fiscal 1999. These incremental facility costs primarily represent increased wage
and benefit amounts reflecting a higher number of employees during the six
months ended March 31, 2000 compared to the same period in the prior year.
5
<PAGE> 8
Depreciation and amortization increased $.8 million to $6.9 million for the six
months ended March 31, 2000 compared to the same period in the prior year. This
increase primarily reflects net increases in depreciable assets from new
equipment purchases and mold construction costs.
LIQUIDITY AND CAPITAL RESOURCES
Net cash from operating activities was $(1.9) million for the six months ended
March 31, 2000, compared to $16.7 million for the six months ended March 31,
1999. The fluctuation was primarily due to an increase in interest costs related
to the Company's long-term obligations and accounts payable decreases related to
the timing of payment transactions.
Net cash from investing activities, representing capital expenditures, was $8.6
million for the six month period ended March 31, 2000, compared to $8.9 million
during the comparable period for the prior year.
Net cash flows from financing activities were $6.4 for the six months ended
March 31, 2000, compared to $(8.8) million for the same period in the prior
year. Cash from financing activities during the six months ended March 31, 2000
represented net borrowings under the Company's long-term obligations. During the
same period in 1999, cash from financing activities represented net proceeds of
$11.1 million from long-term obligations offset by distributions to stockholders
of $19.9 million.
6
<PAGE> 9
QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
The Company does not ordinarily hold market risk sensitive instruments for
trading purposes. The Company does, however, recognize market risk from interest
rates and raw material price exposure.
INTEREST RATE RISK
At March 31, 2000, approximately $151.4 million of the Company's long-term
obligations, specifically, borrowings outstanding under the Senior Credit
Facility, bore interest at variable rates. Accordingly, the Company's net income
and after tax cash flow are affected by changes in interest rates. Assuming the
current level of borrowings at variable rates and assuming a two percentage
point change in the average interest rate under these borrowings, it is
estimated that the Company's interest expense for the six months ended March 31,
2000 would have increased by approximately $1.4 million, resulting in a decrease
to the Company's net income and after tax cash flow of approximately $.9
million. In the event of an adverse change in interest rates, management would
likely take actions that would mitigate the Company's exposure; however, due to
the uncertainty of the actions that would be taken and their possible effects,
this analysis assumes no such actions. Further, this analysis does not consider
the effects of the change in the level of overall economic activity that could
exist in such an environment. Additionally, there can be no assurances that
increases in interest rates will not exceed the interest rates projected above.
RAW MATERIAL PRICE RISK
The principal raw material used by the Company is plastic resin, particularly
polyethylene and polypropylene. The cost of plastic resin fluctuates based upon
supply and demand. These fluctuations can be and have been significant in the
past. We cannot guarantee that plastic resin prices will not rise significantly
in the future or that the supply will remain stable. In the event of an adverse
change in the plastic resin market, we also cannot guarantee that we will be
able to pass on increased costs of resin to all of our customers or that we will
be able to obtain sufficient quantities of plastic resin for production.
7
<PAGE> 10
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
Exhibit 27.1 - Financial Data Schedule
(b) Reports on Form 8-K
No reports on Form 8-K have been filed during the three months ended
March 31, 2000.
8
<PAGE> 11
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
LLS CORP.
Dated: May 15, 2000 By: /s/ JAMES N. MILLS
-----------------------------
Name: James N. Mills
Title: Chairman of the Board and
Chief Executive Officer
By: /s/ DAVID M. SINDELAR
--------------------------------
Name: David M. Sindelar
Title: Senior Vice President and
Chief Financial Officer
(Principal Financial Officer)
9
<PAGE> 12
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<S> <C>
27.1 Financial Data Schedule
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> SEP-30-2000
<PERIOD-END> MAR-31-2000
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 21,620
<ALLOWANCES> 494
<INVENTORY> 28,358
<CURRENT-ASSETS> 50,234
<PP&E> 87,889
<DEPRECIATION> 61,774
<TOTAL-ASSETS> 164,952
<CURRENT-LIABILITIES> 32,284
<BONDS> 251,400
0
780
<COMMON> 553
<OTHER-SE> (127,608)
<TOTAL-LIABILITY-AND-EQUITY> 164,952
<SALES> 76,512
<TOTAL-REVENUES> 76,512
<CGS> 51,470
<TOTAL-COSTS> 51,470
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 12,388
<INCOME-PRETAX> (4,066)
<INCOME-TAX> (1,463)
<INCOME-CONTINUING> (2,603)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,603)
<EPS-BASIC> 0
<EPS-DILUTED> 0
</TABLE>
