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 March 31, 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
- -------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 13-3607202
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(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 X No
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 May 13, 1996
- -------------------------------- ---------------------------
Common Stock, $1.00 par 1,000
As of May 13, 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 PERIOD ENDED
-----------------------------------
MARCH 31, APRIL 2,
1996 1995
------------- --------
<S> <C> <C>
NET SALES....................................... $26,006 $26,913
Cost of sales................................... 15,052 16,049
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GROSS PROFIT.................................... 10,954 10,864
Selling, general and administrative expenses.... 2,350 2,150
------- -------
OPERATING INCOME................................ 8,604 8,714
Non operating expenses (income):
Interest expense, net........................ 3,133 3,418
Amortization of deferred charges and bank fees 277 280
Other, net................................... (81) 118
------- -------
EARNINGS BEFORE INCOME TAXES..................... 5,275 4,898
Provision for income taxes....................... 2,075 1,903
------- -------
NET EARNINGS..................................... $ 3,200 $ 2,995
======= =======
</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>
MARCH 31, DECEMBER 31,
1996 1995
----------- --------------
ASSETS
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents........................... $ 7,447 $ 8,542
Notes and trade receivables, net.................... 12,790 10,403
Inventories ........................................ 45,167 45,472
Other............................................... 3,290 3,451
------- --------
Total current assets............................. 68,694 67,868
Property, plant and equipment, net...................... 10,493 10,619
Deferred debt issuance costs............................ 4,020 4,236
Intangible assets related to business acquired, net..... 1,385 1,396
Deferred tax and other assets........................... 1,181 1,184
-------- --------
TOTAL ASSETS............................................ $ 85,773 $ 85,303
======== ========
LIABILITIES & STOCKHOLDER'S DEFICIT
CURRENT LIABILITIES:
Current portion of long-term debt.................... $ 6,200 $ 10,232
Foreign borrowings................................... 313 728
Accounts payable..................................... 5,037 5,625
Accrued interest..................................... 3,987 1,285
Accrued compensation and benefits.................... 1,868 2,376
Other accrued expenses............................... 1,992 1,177
-------- --------
Total current liabilities......................... 19,397 21,423
Long-term debt.......................................... 106,590 108,078
Other liabilities....................................... 4,220 3,144
TOTAL LIABILITIES....................................... 130,207 132,645
STOCKHOLDER'S DEFICIT:
Common stock, par value $1.00 per share, 1,000 shares
authorized, issued and outstanding................ 1 1
Accumulated deficit.................................. (46,020) (49,220)
Currency translation adjustment...................... 1,585 1,877
--------- --------
TOTAL STOCKHOLDER'S DEFICIT............................. (44,434) (47,342)
------- --------
TOTAL LIABILITIES AND STOCKHOLDER'S DEFICIT............. $ 85,773 $ 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>
THREE MONTH PERIOD ENDED
-----------------------------------
MARCH 31, APRIL 2,
1996 1995
--------- --------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings............................................................ $ 3,200 $ 2,995
Adjustments to reconcile net earnings to net cash flows from operating
activities:
Depreciation and amortization..................................... 737 695
Earnings of affiliates higher than distributions.................. (175)
Changes in assets and liabilities:
Increase in trade receivables.................................. (1,393) (4,094)
Decrease in inventories........................................ 79 2,994
Decrease in accounts payable................................... (556) (1,412)
Increase in accrued interest................................... 2,719 2,694
Other, net..................................................... 527 1,054
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2,113 1,756
Net cash flows from operating activities................................ 5,313 4,751
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CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures.................................................... (447) (479)
------- --------
Net cash flows from investing activities................................ (447) (479)
------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of borrowings................................................ (5,921) (1,263)
------- -------
Net cash flows from financing activities............................... (5,921) (1,263)
EFFECT OF EXCHANGE RATE CHANGES ON CASH................................ (40) 97
------- -------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS................... (1,095) 3,106
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD....................... 8,542 7,623
------- -------
CASH AND CASH EQUIVALENTS AT END OF PERIOD............................. $ 7,447 $10,729
======= =======
SUPPLEMENTAL SCHEDULE OF CASH FLOW INFORMATION:
Interest paid.......................................................... $ 530 $ 816
Income taxes paid, net of refunds................................... $ 1,157 $ 1,320
</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, a Delaware corporation, (the "Company"), was
formed in 1991. The Company is an indirect wholly-owned subsidiary of Mafco
Consolidated Group Inc.
("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:
MARCH 31, DECEMBER 31,
1996 1995
--------- ------------
Raw materials and supplies $31,512 $32,820
Work-in-process 565 296
Finished goods 13,090 12,356
------- -------
$45,167 $45,472
======= =======
3. INCOME TAXES
The Company is included in the consolidated federal income tax return of
Mafco. For all periods presented federal and state income taxes are provided
as if the Company filed its own income tax returns.
4. OFFER TO PURCHASE AND CONSENT SOLICITATION
On April 17, 1996, C&F Holding Corp. ("C&F"), a subsidiary of MC Group,
(i) offered to purchase for cash, upon the terms and subject to the conditions
set forth in the Offer to Purchase and Consent Solicitation Statement dated
April 17, 1996, all of the outstanding 11 7/8% Senior Subordinated Notes due
2002 of the Company at a cash price equal to 108.5% of the principal
amount of $85,000, plus accrued and unpaid interest to, but not including, the
date of payment and (ii) solicited consents to amend the indenture related
to the Notes. The offer and solicitation expire on May 15, 1996 unless extended.
If the offer is consummated, the Company will incur an extraordinary charge
related to the redemption premium, discount and the amortized debt issuance
costs related to the retired debt. The offer is conditioned upon, among other
things, C&F securing the financing to fund the purchase of notes pursuant to
the offer.
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 shipments are made to customers.
Three month period ended March 31, 1996 compared with the three month period
ended April 2, 1995
Net sales in 1996 and 1995 were $26.0 million and $26.9 million,
respectively, a decrease of $0.9 million or 3.4%. U.S. sales decreased by $1.1
million and foreign sales (including export sales) increased by $0.2 million.
The decrease in U.S. sales was due to lower shipment volume. The increase in
foreign sales was due to higher average selling prices of $0.4 million
partially offset by lower volume of $0.2 million.
Cost of sales was $15.1 million and $16.0 million in 1996 and 1995,
respectively, a decrease of $0.9 million or 6.2%. The decrease in cost of
sales was primarily due to the decrease in sales volume. As a percentage of
net sales, cost of sales decreased to 57.9% in 1996 from 59.6% in 1995
primarily due to lower material costs.
Selling, general and administrative ("SG&A") expenses were $2.4 million and
$2.2 million in 1996 and 1995, respectively. The increase of $0.2 million was
a result of higher compensation and health and welfare costs. As a percentage
of net sales, SG&A expenses increased to 9.0% in 1996 from 8.0% in 1995 due to
the higher costs on lower sales for the 1996 quarter.
Interest expense, net, was $3.1 million in 1996 and $3.4 million in 1995.
The decrease of $0.3 million 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 39.3% in 1996 and 38.9% in 1995.
LIQUIDITY AND CAPITAL RESOURCES
The Company's net cash flows from operating activities were $5.3 million
and $4.8 million for the three month periods ended March 31, 1996 and April 2,
1995, respectively. The increase of $0.5 million from 1995 to 1996 was
primarily due to the timing of shipments to customers, payment of sales
invoices by customers and inventory purchases and deliveries. 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. Although the Company's inventories
have fluctuated in the past several years, the current inventory of $45.2
million is at the level where the Company feels comfortable to meet ongoing
customer requirements. 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 the lowest possible cost while maintaining
its policy of purchasing licorice root from all available sources to maintain
relationships with its suppliers and insure a continuous supply of raw
materials.
6
<PAGE>
MAFCO WORLDWIDE CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Capital expenditures for the three month periods ended March 31, 1996 and
April 2, 1995 were $0.4 million and $0.5 million, respectively. While the
Company has not made any material commitments for capital expenditures, they
are expected to be approximately $1.8 million for the remaining nine months of
1996.
Under the Senior Credit, the Company may borrow up to $25.0 million under a
revolving credit facility. At March 31, 1996 approximately $2.9 million of
this facility had been reserved to support lender guarantees for outstanding
letters of credit. Management believes the remaining availability of
approximately $22.1 million under the Company's revolving credit facility will
be sufficient to meet the Company's working capital, capital expenditure and
debt service needs for the foreseeable future.
On April 17, 1996, C&F (i) offered to purchase for cash, upon the terms
and subject to the conditions set forth in the Offer to Purchase and Consent
Solicitation Statement dated April 17, 1996, all of the outstanding 11 7/8%
Senior Subordinated Notes due 2002 of the Company at a cash price equal to
108.5% of the principal amount of $85.0 million plus accrued and unpaid interest
to, but not including, the date of payment and (ii) solicited consents to amend
the indenture related to the notes. The offer and solicitation expire on May
15, 1996 unless extended. If the offer is consummated, the Company will incur
an extraordinary charge related to the redemption premium, discount and the
amortized debt issuance costs related to the retired debt. The offer is
conditioned upon, among other things, C&F securing the financing to fund the
purchase of notes pursuant to the offer.
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
10.1 The Tobacco Products Group Performance Plan (incorporated by
reference to Exhibit 10.5 of the Mafco Consolidated Group Inc.
Form 10-Q for the quarter ended March 31, 1996)
27* Financial Data Schedule
- ---------------
*Filed herein
(b) Reports on Form 8-K
There were no reports filed on Form 8-K during the period covered by
this report.
7
<PAGE>
MAFCO WORLDWIDE CORPORATION
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: May 13, 1996 By: /s/ Stephen G. Taub
-----------------------------
Stephen G. Taub
President and Chief Operating
Officer
Date: May 13, 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 Stateement of
Earnings and is qualified in its entirety by reference to such financial
statements.
</LEGEND>
<S> <C>
<NAME> Mafco Worldwide Corporation
<CIK> 0000061113
<MULTIPLIER> 1,000
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<PERIOD-TYPE> 3-MOS
<CASH> 7,447
<SECURITIES> 0
<RECEIVABLES> 13,822
<ALLOWANCES> 1,032
<INVENTORY> 45,167
<CURRENT-ASSETS> 68,694
<PP&E> 27,781
<DEPRECIATION> 17,288
<TOTAL-ASSETS> 85,773
<CURRENT-LIABILITIES> 19,397
<BONDS> 84,522
0
<COMMON> 1
0
<OTHER-SE> (44,435)
<TOTAL-LIABILITY-AND-EQUITY> 85,773
<SALES> 26,006
<TOTAL-REVENUES> 26,006
<CGS> 15,052
<TOTAL-COSTS> 15,052
<OTHER-EXPENSES> 2,435
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,244
<INCOME-PRETAX> 5,275
<INCOME-TAX> 2,075
<INCOME-CONTINUING> 3,200
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,200
<EPS-PRIMARY> 0.00
<EPS-DILUTED> 0.00
</TABLE>
