Registration File No. 33-48904
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1996
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 33-48904
MAFCO WORLDWIDE CORPORATION
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(Exact name of registrant as specified in its charter)
DELAWARE 13-3607202
- --------------------------------------- -----------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
THIRD STREET AND JEFFERSON AVENUE, CAMDEN, N.J. 08104
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(Address of principal executive offices) (Zip Code)
609-964-8840
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(Registrant's telephone number, including area code)
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(Registrant's former address)
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 requirement for the past 90 days. Yes [ ] No [X]
Indicate the number of shares outstanding of each of the
issuer's classes of common stock as of
the latest practicable date.
Class Outstanding at August 9,1996
----------------------- ----------------------------
Common Stock, $1.00 par 1,000
As of August 9, 1996, all of the Registrant's outstanding common
stock was indirectly held by Mafco Consolidated Group, Inc.
<PAGE>
MAFCO WORLDWIDE CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTH PERIODS ENDED SIX MONTH PERIODS ENDED
------------------------- -----------------------
JUNE 30, JULY 2, JUNE 30, JULY 2,
1996 1995 1996 1995
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
NET SALES............................................... $26,659 $28,377 $52,665 $55,290
Cost of sales........................................... 14,319 16,510 29,371 32,559
------- ------- ------- -------
GROSS PROFIT............................................ 12,340 11,867 23,294 22,731
Selling, general and administrative expenses............ 2,533 2,315 4,883 4,465
------- -------- ------- -------
OPERATING INCOME........................................ 9,807 9,552 18,411 18,266
Non operating expenses (income):
Interest expense, net............................... 3,005 3,275 6,138 6,693
Amortization of deferred charges and bank fees 287 272 564 552
Other, net.......................................... (74) (11) (155) 107
-------- --------- ------- -------
EARNINGS BEFORE INCOME TAXES............................ 6,589 6,016 11,864 10,914
Provision for income taxes.............................. 2,557 2,333 4,632 4,236
------- ------- ------- --------
NET EARNINGS............................................ $ 4,032 $ 3,683 $ 7,232 $ 6,678
======= ======= ======= =======
</TABLE>
See Notes to Unaudited Condensed Consolidated Financial Statements.
2
<PAGE>
MAFCO WORLDWIDE CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1996 1995
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ASSETS
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents........................................................ $ 2,539 $ 8,542
Trade accounts receivable, net................................................... 13,077 10,403
Inventories ................................................................... 42,818 45,472
Deferred income taxes............................................................ 1,506 1,722
Other current assets............................................................. 1,241 1,729
---------- ------------
Total current assets........................................................ 61,181 67,868
Property, Plant and Equipment, Net................................................... 10,426 10,619
Deferred Debt Issuance Costs......................................................... 3,797 4,236
Deferred Income Taxes................................................................ 838 1,026
Goodwill and Other Assets............................................................ 1,547 1,554
---------- ------------
TOTAL ASSETS......................................................................... $ 77,789 $ 85,303
========== ============
LIABILITIES & STOCKHOLDER'S DEFICIT
CURRENT LIABILITIES:
Current portion of long-term debt................................................ $ 6,200 $ 10,232
Short term borrowings............................................................ 1,080 728
Trade accounts payable........................................................... 4,254 5,625
Accrued liabilities.............................................................. 5,889 4,838
---------- ------------
Total current liabilities................................................... 17,423 21,423
Long-Term Debt....................................................................... 104,902 108,078
Pension Plan Liabilities............................................................. 1,723 1,929
Deferred Income Taxes and Other Liabilities.......................................... 1,409 1,215
---------- ------------
TOTAL LIABILITIES.................................................................... 125,457 132,645
STOCKHOLDER'S DEFICIT:
Common stock, par value $1.00 per share, 1,000 shares authorized,
issued and outstanding...................................................... 1 1
Paid-in-capital..................................................................
Accumulated deficit.............................................................. (49,008) (49,220)
Currency translation adjustment.................................................. 1,339 1,877
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TOTAL STOCKHOLDER'S DEFICIT.......................................................... (47,668) (47,342)
---------- ------------
TOTAL LIABILITIES & STOCKHOLDER'S DEFICIT............................................ $ 77,789 $ 85,303
========== ============
</TABLE>
See Notes to Unaudited Condensed Consolidated Financial Statements.
3
<PAGE>
MAFCO WORLDWIDE CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTH PERIODS ENDED
-------------------------
JUNE 30, JULY 2,
1996 1995
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<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings................................................................ $ 7,232 $ 6,678
------------ -----------
Adjustments to reconcile net earnings to net cash flows from operating
activities:
Depreciation and amortization........................................... 1,480 1,403
Earnings of affiliates lower than distributions......................... 694
Changes in assets and liabilities:
Increase in notes and trade receivables.............................. (2,787) (4,150)
Decrease in inventories.............................................. 2,266 2,984
Decrease in accounts payable......................................... (1,315) (1,177)
Increase in accrued liabilities...................................... 1,089 300
Other, net........................................................... 899 198
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1,632 252
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Net cash flows from operating activities.................................... 8,864 6,930
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CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures....................................................... (937) (960)
Proceeds from sale of joint venture........................................ 20
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Net cash flows from investing activities................................... (937) (940)
------------ -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from borrowings.................................................... 1,000 843
Repayment of borrowings..................................................... (7,840) (2,726)
Dividend paid............................................................... (7,020) (9,000)
------------ -----------
Net cash flows from financing activities.................................... (13,860) (10,883)
EFFECT OF EXCHANGE RATE CHANGES ON CASH..................................... (70) 57
------------ -----------
NET DECREASE IN CASH AND CASH EQUIVALENTS................................... (6,003) (4,836)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD............................ 8,542 7,623
------------ -----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD.................................. $ 2,539 $ 2,787
============ ===========
SUPPLEMENTAL SCHEDULE OF CASH FLOW INFORMATION:
Interest paid............................................................... $ 6,339 $ 7,573
Income taxes paid, net of refunds........................................... 3,588 4,213
</TABLE>
See Notes to Unaudited Condensed Consolidated Financial Statements.
4
<PAGE>
MAFCO WORLDWIDE CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS)
(UNAUDITED)
1. BACKGROUND AND BASIS OF PRESENTATION
Mafco Worldwide Corporation (the "Company"), a Delaware corporation
was formed in 1991. Prior to June 15, 1995 the Company was an indirect wholly
owned subsidiary of Mafco Holdings Inc. ("Holdings"). On June 15, 1995,
Holdings and Mafco Consolidated Group Inc. ("Mafco") formerly known as Abex
Inc., consummated an agreement and plan of merger (the "Mafco Merger
Agreement") which was entered into on January 6, 1995. The Mafco Merger
Agreement provided for, among other things, the merger of Mafco and C & F
Merger Inc., a subsidiary of Holdings and the indirect parent of the Company
and Consolidated Cigar Corporation. As a result of the merger, the Company
became an indirect wholly-owned subsidiary of Mafco.
The accompanying unaudited consolidated financial statements have
been prepared in accordance with generally accepted accounting principles for
interim financial information. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements. In the opinion of management, all
adjustments (consisting of normal recurring accruals) considered necessary for
a fair presentation have been included. Operating results for the interim
periods are not necessarily indicative of the results that may be expected for
a full year.
2. INVENTORIES
Inventories are valued at the lower of cost or market and consist of
the following:
JUNE 30, DECEMBER 31,
1996 1995
-------- ----------
Raw materials $ 29,424 $ 32,820
Work-in-progress 751 296
Finished goods 12,643 12,356
-------- ----------
$ 42,818 $ 45,472
======== ==========
3. TENDER OFFER
On April 17, 1996, C&F Holdings Corp., a subsidiary of Mafco, offered
to purchase for cash, all of the outstanding 11 7/8% Senior Subordinated Notes
of the Company (the "11 7/8% Notes"). The offer expired on May 15, 1996 and
none of the 11 7/8% Notes were purchased.
5
<PAGE>
MAFCO WORLDWIDE CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS:
The Company's revenues are principally derived from sales of licorice
extract to the tobacco and confectionery industries for use as a flavoring
ingredient. Sales are recorded when shipment is made to customers.
Three month period ended June 30, 1996 compared with the three month period
ended July 2, 1995
Net sales in 1996 and 1995 were $26.7 million and $28.4 million,
respectively, a decrease of $1.7 million or 6.1%. The decrease was due to
lower shipment volume to the Company's domestic and foreign customers
primarily in the tobacco industry due to competition from other licorice
producers, decreased demand for licorice and the timing of shipments to
customers.
Cost of sales was $14.3 million and $16.5 million in 1996 and 1995,
respectively, a decrease of $2.2 million or 13.3%. The decrease in cost of
sales was primarily due to the decrease in sales volume and lower material
costs. As a percentage of net sales, cost of sales decreased to 53.7% in 1996
from 58.2% in 1995 primarily due to lower raw material costs and an insurance
recovery related to damaged inventory.
Selling, general and administrative ("SG&A") expenses were $2.5
million and $2.3 million in 1996 and 1995, respectively. As a percentage of
net sales, SG&A expenses were 9.5% in 1996 and 8.2% in 1995. This percentage
increase was primarily due to the lower sales in 1996.
Interest expense, net was $3.0 million in 1996 and $3.3 million in
1995, a decrease of $0.3 million or 8.2%. The decrease was due to lower
average debt outstanding in 1996 as compared to 1995.
The provision for income taxes as a percentage of earnings before
income taxes was 38.8% in 1996 and in 1995.
Six month period ended June 30, 1996 compared with the six month period ended
July 2, 1995
Net sales in 1996 and 1995 were $52.7 million and $55.3 million,
respectively, a decrease of $2.6 million or 4.7%. The decrease was due to
lower shipment volume to the Company's customers primarily in the tobacco
industry as a result of competition from other licorice producers, decreased
demand and the timing of shipments to customers.
Cost of sales was $29.4 million and $32.6 million in 1996 and 1995,
respectively, a decrease of $3.2 million or 9.8%. The decrease in cost of
sales was due to the decrease in sales volume and lower raw material costs. As
a percentage of net sales, cost of sales decreased to 55.8% in 1996 from 58.9%
in 1995 primarily due to lower raw material costs and an insurance recovery
related to damaged inventory.
6
<PAGE>
MAFCO WORLDWIDE CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
SG&A expenses were $4.9 million and $4.5 million in 1996 and 1995,
respectively. As a percentage of net sales, SG&A expenses were 9.3% in 1996
and 8.1% in 1995. This percentage decrease was primarily due to lower sales in
1996.
Interest expense, net was $6.1 million in 1996, and $6.7 million in
1995, a decrease of $0.6 million or 8.3%. The decrease was due to lower
average debt outstanding in 1996 as compared to 1995.
The provision for income taxes as a percentage of earnings before
income taxes was 39.0% in 1996 and 38.8% in 1995.
LIQUIDITY AND CAPITAL RESOURCES
The Company's net cash flows from operating activities were $8.9
million and $6.9 million for the six month periods ended June 30, 1996 and
July 2, 1995, respectively. The increase of $2.0 million in 1996 was due to
higher net earnings in 1996, a lower increase in accounts receivable in 1996,
and a larger increase in accrued liabilities and other, net due to the timing
of payments which were offset in part by a smaller inventory reduction in
1996. The Company's working capital requirements, especially for accounts
receivables and inventory are affected by customer demand, by current and
prospective supplies of raw materials and raw material prices. The current
inventory of $42.8 million is slightly lower than the Company's optimal level
set to meet customer requirements. Raw material purchases have slowed in the
past several months due to transportation delays, but are expected to increase
in the second half of 1996. Management expects that inventory levels may
continue to fluctuate in the future as the Company takes advantage of
opportunities to purchase quality raw materials at favorable prices while
maintaining its policy of purchasing licorice root from all available sources
to maintain relationships with its suppliers.
Capital expenditures for the six month periods ended June 30, 1996
and July 2, 1995 were $0.9 million and $1.0 million, respectively. While the
Company has not made any material commitments for capital expenditures, they
are expected to be approximately $1.5 million for the remainder of 1996.
Under the Senior Credit agreement, the Company may borrow up to $25.0
million under a revolving credit facility. At June 30, 1996 approximately $1.0
million was borrowed under the facility and $3.3 million of this facility had
been reserved to support lender guarantees for outstanding letters of credit.
Management believes the remaining availability of approximately $20.7 million
under the Company's revolving credit facility will be sufficient to meet the
Company's working capital, capital expenditure and debt service needs through
the end of 1996.
7
<PAGE>
MAFCO WORLDWIDE CORPORATION
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
None
(b) Reports on Form 8-K
There were no reports filed on Form 8-K during the period covered
by this report.
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, thereunto duly authorized.
MAFCO WORLDWIDE CORPORATION
(Registrant)
Date: August 9, 1996 By: /s/ Stephen G. Taub
-------------------------------------
Stephen G. Taub
President and Chief Operating Officer
Date: August 9, 1996 By: /s/ Peter W. Grace
-------------------------------------
Peter W. Grace
Chief Financial Officer
8
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from Mafco
Worldwide Corporation's Condensed Consolidated Balance Sheet and Statement of
Earnings and is qualified in its entirety by reference to such financial
statements.
</LEGEND>
<CIK> 0000061113
<NAME> MAFCO WORLDWIDE CORPORATION
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-28-1996
<CASH> 2,539
<SECURITIES> 0
<RECEIVABLES> 14,112
<ALLOWANCES> 1,035
<INVENTORY> 42,818
<CURRENT-ASSETS> 61,181
<PP&E> 28,117
<DEPRECIATION> 17,691
<TOTAL-ASSETS> 77,789
<CURRENT-LIABILITIES> 17,423
<BONDS> 0
0
0
<COMMON> 1
<OTHER-SE> (47,669)
<TOTAL-LIABILITY-AND-EQUITY> 77,789
<SALES> 52,665
<TOTAL-REVENUES> 52,665
<CGS> 29,371
<TOTAL-COSTS> 29,371
<OTHER-EXPENSES> 5,066
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 6,364
<INCOME-PRETAX> 11,864
<INCOME-TAX> 4,632
<INCOME-CONTINUING> 7,232
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 7,232
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
