CONFORMED
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
Quarterly Report Under Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the Quarter ended June 30, 1994 Commission File Number I-4795
MLX CORP.
(Exact name of registrant as specified in its charter)
Georgia 38-0811650
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1000 Center Place, Norcross, Georgia 30093
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (404)798-0677
Indicate by check mark whether the Registrant (1) has filed all reports to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or 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 XX No
The number of shares outstanding of the Registrant's Common Stock, par value
$.01, as of the close of business on June 30, 1994 was 2,535,950.
PART I - FINANCIAL INFORMATION
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
MLX Corp. and Subsidiaries
<TABLE>
<CAPTION>
June 30 December 31
1994 1993
ASSETS
Current Assets
<S> <C> <C>
Cash and cash equivalents $ 432 $ 985
Accounts receivable, net 9,583 8,357
Inventories:
Raw materials and work-in-process 7,175 6,151
Manufactured goods 2,454 2,298
Total inventories 9,629 8,449
Prepaid expenses 720 583
Total Current Assets 20,364 18,374
Property, Plant & Equipment, net 12,667 12,064
Intangible Assets, net 2,517 2,785
Other Assets 526 538
TOTAL ASSETS $36,074 $33,761
</TABLE>
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
MLX Corp. and Subsidiaries
<TABLE>
<CAPTION>
June 30 December 31
1994 1993
LIABILITIES AND SHAREHOLDERS' EQUITY
<S> <C> <C>
Current Liabilities
Accounts payable $ 3,741 $ 3,362
Accrued compensation and benefits 2,629 2,809
Other accrued liabilities and expenses 2,068 1,969
Accrued taxes 605 553
Dividends payable on Series A Preferred Stock 211 638
Current portion of debt 1,764 53
Total Current Liabilities 11,018 9,384
Long-Term Debt 12,985 14,792
Other Long-Term Liabilities 2,356 2,261
Shareholders' Equity
Preferred stock, no par value
authorized 1,500,000 shares,
none outstanding - -
Preferred stock, Series A, $30 par value
authorized 500,000 shares,
264,000 shares outstanding 7,120 6,981
Common stock, $.01 par value
authorized 38,500,000 shares,
2,536,000 shares outstanding 25 25
Capital in excess of par value 61,249 60,551
Retained earnings deficit since December 31, 1984 (57,489) (58,836)
10,905 8,721
Less other equity adjustments (1,190) (1,397)
Total Shareholders' Equity 9,715 7,324
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $36,074 $33,761
</TABLE>
Dollars in thousands
See notes to consolidated financial statements
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
MLX Corp. and Subsidiaries
<TABLE>
<CAPTION>
For the Six Months Ended
June 30
1994 1993
<S> <C> <C>
Net Sales $ 30,400 $ 28,571
Costs and Expenses:
Costs of products sold 22,965 21,966
Selling, general and administrative expenses 3,661 3,506
Amortization of goodwill and organization costs 114 113
26,740 25,585
Operating Earnings 3,660 2,986
Other Income (Expense):
Interest expense (785) (1,198)
Other income (expense) 137 (71)
Earnings before Income Taxes 3,012 1,717
Provision for Income Taxes:
Federal income taxes due and payable (60) (20)
Charge in lieu of federal income taxes (712) (441)
Foreign, state and local income taxes (401) (287)
Earnings before Extraordinary Item 1,839 969
Extraordinary gain on early retirement of debt
(net of charge in lieu of federal
income taxes of $1,869) 0 3,627
Net Earnings 1,839 4,596
Dividends and accretion on preferred stock (495) (419)
Earnings applicable to common stock $ 1,344 $4,177
Earnings per Share:
Earnings before extraordinary item
(net of dividends and accretion on preferred stock) $0.51 $ 0.21
Extraordinary gain on early retirement of debt 0.00 1.37
Earnings applicable to common stock $ 0.51 $1.58
Average Outstanding Common Shares
and Dilutive Options 2,619 2,636
</TABLE>
Dollars in thousands (except per share data)
See notes to consolidated financial statements
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
MLX Corp. and Subsidiaries
<TABLE>
<CAPTION>
For the Quarter Ended
June 30
1994 1993
<S> <C> <C>
Net Sales $ 15,405 $ 14,143
Costs and Expenses:
Costs of products sold 11,721 10,788
Selling, general and administrative expenses 1,888 1,846
Amortization of goodwill and organization costs 57 57
13,666 12,691
Operating Earnings 1,739 1,452
Other Income (Expense):
Interest expense (404) (462)
Other income (expense) 24 (22)
Earnings before Income Taxes 1,359 968
Provision for Income Taxes:
Federal income taxes due and payable (30) (20)
Charge in lieu of federal income taxes (312) (191)
Foreign, state and local income taxes (225) (163)
Earnings before Extraordinary Item 792 594
Extraordinary gain on early retirement of debt
(net of charge in lieu of federal income
taxes of $1,869) 0 3,627
Net Earnings 792 4,221
Dividends and accretion on preferred stock (249) (239)
Earnings applicable to common stock $ 543 $3,982
Earnings per Share:
Earnings before extraordinary item
(net of dividends and accretion on preferred stock) $0.21 $ 0.13
Extraordinary gain on early retirement of debt 0.00 1.37
Earnings applicable to common stock $ 0.21 $1.50
Average Outstanding Common Shares
and Dilutive Options 2,625 2,646
</TABLE>
Dollars in thousands (except per share data)
See notes to consolidated financial statements
CONSOLIDATED STATEMENTS OF CASH FLOW (UNAUDITED)
MLX Corp. and Subsidiaries
<TABLE>
<CAPTION>
For the Six Months Ended
June 30
1994 1993
Cash Flows From Operating Activities:
<S> <C> <C>
Net Earnings $ 1,839 $4,596
Adjustments to reconcile earnings to
net cash provided by operating activities:
Extraordinary gain on early retirement of debt 0 (5,495)
Charge in lieu of federal income taxes 712 2,310
Depreciation and amortization 1,151 1,368
Change in operating assets and liabilities:
Accounts receivable (1,226) (514)
Inventories and prepaid expenses (1,317) (56)
Accounts payable and accrued expenses (77) 902
Other (143) (223)
Net cash provided by operating activities 939 2,888
Cash Flows From Investing Activities:
Purchase of property, plant and equipment (1,348) (889)
Net cash provided by (used in) investing activities (1,348) (889)
Cash Flows From Financing Activities:
Net proceeds under revolving credit agreement (144) 11,204
Repayments of subordinated debt - (5,855)
Repayments of industrial revenue bonds - (6,800)
Payment of transaction expenses - (919)
Net cash provided by (used in) financing activities (144) (2,370)
Net increase (decrease) in cash and cash equivalents (553) (371)
Cash and cash equivalents at January 1 985 667
Cash and cash equivalents at June 30 $432 $296
Supplemental Cash Flow Disclosure:
Federal taxes paid on income $90 -
Interest paid on debt obligations $ 684 $788
</TABLE>
Dollars in thousands
See notes to consolidated financial statements
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
MLX Corp. and Subsidiaries
The Consolidated Financial Statements have been prepared by the Registrant
without audit, pursuant to the rules and regulations of the Securities and
Exchange Commission. Certain information and footnote disclosures normally
included in consolidated financial statements prepared in accordance with
generally accepted accounting principles have been omitted to those rules and
regulations. These financial statements should be read in conjunction with the
Consolidated Financial Statements and notes thereto included in the
Registrant's Annual Report on Form 10-K for the year ended December 31, 1993.
In the opinion of the Registrant, the accompanying Consolidated Financial
Statements contain all adjustments (consisting of only normal recurring
accruals) necessary to present fairly the financial position as of
June 30, 1994 and December 31, 1993, and the results of operations
and cash flows for the quarters and six months ended June 30, 1994 and 1993.
Note A - Income Taxes
At January 1, 1994, the Registrant had available net operating loss carry
forwards of approximately $339 million which are available to offset future
taxable income for federal income tax purposes. Accordingly, the Company has
federal tax liability only for Alternative Minimum Tax amounts and the charge
in lieu of federal income taxes included in the statement operations for the
quarters and six months ended June 30, 1993 and 1994 is not accruable or
payable. The following table illustrates the effect of this pro forma
charge on the Company's earnings applicable to common stock and earnings
per share forthe respective periods (in thousands, except per share data).
<TABLE>
<CAPTION>
Quarter Six Months
Ended June 30 Ended June 30
1994 1993 1994 1993
<S> <C> <C> <C> <C>
Earnings applicable to common shareholders $ 543 $3,982 $1,344 $ 4,177
Charge in lieu of federal income taxes
which is not accruable or payable 312 2,060 712 2,310
Total Earnings $ 855 $6,042 $ 2,056 $6,487
Total Earnings per share $0.33 $2.28 $0.70 $ 2.46
</TABLE>
The Company adopted Statement of Financial Standards No. 109, "Accounting
for Income Taxes," during the quarter ended March 31, 1993. The adoption of
Statement 109 did not have a material impact on the Company's financial
position or results of operations.
Note B - Reverse Stock Split
On June 2, 1993, the stockholders of the Company authorized a reverse stock
split whereby each 10 common shares owned prior to the reverse stock split
became one common share. The reverse stock split was implemented on
June 25, 1993 and fractional common shares (approximately 62,000 common
shares) were or will be repurchased for $1.00 per share. Weighted average
shares outstanding and earnings per share have been restated to reflect the
reverse stock split.
Note C - Exchanged Shares
Effective December 31, 1992, the Company exchanged shares of its Series A
Preferred Stock with an approximate fair value of $5.1 million (face value
of $6.0 million) for Zero Coupon Bonds with a carrying value of $7.7 million
and a portion of the MLX Senior Term Loan with a carrying value of
$3.1 million. In addition, senior term loan with a carrying value of $2.6
million was replaced with a note for $2.5 million (since repaid).
The resulting gain on early retirement of debt of $4.1 million was recorded
as of December 31, 1992.
During the quarter ended June 30, 1993, the Company exchanged shares of its
Series A Preferred Stock with an approximate fair value of $1.6 million and
1993 Variable Rate Notes with an approximate fair value of $1.4 million for
Zero Coupon Bonds with a carrying value of $8.5 million. The resulting gain
on early retirement of debt of $3.6 million was recorded in the quarter
ended June 30, 1993.
The Series A Preferred Stock issued in these exchanges was initially
recorded at its estimated fair value and is being increased to the
redemption price of $30 per share during the period from date of issuance
until January 1, 1999 (commencement of maximum annual dividend rate). The
annual accretion, based on the interest method, is charged to
additional paid in capital.
Note D - Postretirement Benefit Obligations
The Company provides a fixed non-contributory benefit toward postretirement
health care for certain of its U.S. subsidiary's union employees. In 1993
the Company adopted FASB Statement No. 106, "Employer's Accounting for
Postretirement Benefits Other than Pensions," to account for this obligation.
The Company has elected to recognize the obligation on a prospective
basis and will amortize the transition obligation (approximately $540
thousand at January 1, 1993) for prior service costs at the time of adoption
of the standard into general and adminstrative expense over a 20 year period.
The weighted average discount rate used in determining the accumulated
postretirement benefit obligation was 7%.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Seasonality: Sales of the Registrant's subsidiary, S.K. Wellman, are
generally not seasonal in nature, however, due to the extended holiday
shutdowns of its major customers, Wellman does experience a modest reduction
in sales volume during the third quarter for its European operations, and
during the fourth quarter for both its North American and European operations.
Operations: For the six months ended June 30, 1994, net sales and operating
earnings were $30.4 million and $3.7 million, respectively. Comparatively,
the Registrant recorded net sales of $28.6 million and operating earnings of
$3.0 million for the six months ended June 30, 1993. The increase in sales
over the prior year was due to higher demand by domestic original equipment
manufacturers and overseas customers of the Registrant's Italian facility.
These increases were offset partially by lower sales of U.S. military items
and the military component of export sales.
Sales for the second quarter of 1994 were $15.4 million, up $1.3 million or
8.9% from the second quarter of 1993. Operating earnings amounted to
$1.7 million for the quarter ended June 30, 1994 compared to $1.5 million
(an increase of 19.8%) for the comparable prior year quarter.
Gross margins for the first six months of 1994 were 24.5% compared to 23.1%
in 1993. This increase in margin percentage is due to a shift in product
mix to higher margin items such as on-road clutch components,
higher unit volume and increased efficiency and utilization in the
Company's plants.
Selling, general and administrative expenses were $1.9 million in the
second quarter of 1994 compared to $1.8 million for the second
quarter of 1993. This increase is due generally to higher selling expenses
stemming from new product initiatives. For the six months ended
June 30, 1994, such expenses totaled $3.7 million as compared to
$3.5 million in the prior year.
Interest expense for the quarter and six months ended June 30, 1994
was $404 thousand and $785 thousand, respectively, compared to
$462 thousand and $1.2 million for the comparable periods in
1993. This reduction was the result of lower borrowing levels and the
revised capital structure resulting from the exchanges referred to in
Note C of the Notes to the Consolidated Financial Statements.
Liquidity and Capital Resources: At June 30, 1994, the Registrant's
consolidated working capital amounted to $9.3 million compared
to $9.0 million at December 31, 1993. The 1994 working capital balance
includes the effect of higher planned inventory levels, higher trade
receivables due to increasing sales and the current classification
of the Italian Seller Note ($1.7 million) due in April 1995.
The Registrant had available unused revolving lines of credit of an
additional $3.4 million at June 30, 1994. During the quarter
ended June 30, 1994, the Registrant borrowed the remaining available balance
of $1.05 million under its capital expenditures line. This borrowing has an
amortization period of 60 months. The proceeds of the borrowing were used
to reduce the amount outstanding under the working capital revolver.
The Registrant believes that its current financial resources and anticipated
cash flows from operations are adequate to meet its projected
operating needs in 1994.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
An interpleader action was filed in the U.S. District Court for the Northern
District of Georgia on October 9, 1992 by Mr. Alfred R. Glancy III,
a director of the Company, as the custodian of the shares of Common Stock
held pursuant to the MLX Corp. Voting Trust. Mr. Glancy requested
that the court determine whether or not the Voting Trust was effectively
terminated as a result of the actions of one of the trustees of the
Voting Trust. Upon Mr. Glancy's motion, the interpleader action was
dismissed with prejudice on March 11, 1994. The Company agreed to the
termination of the Voting Trust prior to its scheduled expiration
(June 30, 1994) because the adoption of the share transfer restrictions
at the June 1993 annual meeting of shareholders obviated the need for
the Voting Trust.
On May 5, 1994, Mr. Glancy, on behalf of the trustees of the Voting Trust,
commenced the distribution of the 288,808 shares held by the
Voting Trust to their respective beneficial owners, effectively terminating
the Voting Trust. Termination of the Voting Trust also triggered the
termination of the Restricted Transfer Trust which held 403,160 shares of
Common Stock, all of which were distributed to their beneficial owners
on or about May 5, 1994.
Item 2. Changes in Securities
NONE
Item 3. Defaults Upon Senior Securities
NONE
Item 4. Submission of Matters to a Vote of Security Holders
The Annual Meeting of Shareholders was held on May 4, 1994 for the purpose
of electing a Board of Directors and acting on any other proposals properly
introduced. Proxies for the meeting were solicited pursuant to
Section 14(a) of the Securities Exchange Act of 1934. All of Management's
nominees for Directors as listed in the Proxy Statement were elected.
A total of 2,535,950 shares were eligible to vote. The vote totals for the
director nominees were as follows: Brian R. Esher, 1,756,620;
Willem F.P. de Vogel, 1,837,543; Alfred R. Glancy III,
1,837,618; S. Sterling McMillan, III, 1,837,602; W. John Roberts, 1,837,606;
J. William Uhrig, 1,834,227; and H. Whitney Wagner, 1,834,230.
Item 5. Other Information
NONE
Item 6. Exhibits and Reports on Form 8-K
(a)Exhibits: NONE
(b)Reports: NONE
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.
Date: August 5, 1994 MLX Corp.
(Registrant)
By: /s/ BRIAN R. ESHER By: /s/ THOMAS C. WAGGONER
Brian R. Esher Thomas C. Waggoner
Chief Executive Officer Chief Financial Officer
(Duly Authorized Officer) (Principal Financial Officer)
