Securities And Exchange Commission
Washington, D.C. 20549
FORM 10-K/A #2
Amendment No. 2 to Annual Report Pursuant to Section 13 or 15(d)
of The Securities Exchange Act of 1934
For the fiscal year ended December 31, 1994
Commission file number I-4795
Transition Report Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
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 GA 30093
(Address of principal executive (Zip Code)
offices)
Registrant's telephone number, including area code: (404) 798-0677
Securities registered pursuant to Section 12(b) of the Act: none
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $.01 par value
(Title of class)
<PAGE>
ITEM 14 OF THE FORM 10-K/A OF THE
REGISTRANT AS FILED WITH THE COMMISSION
ON APRIL 28, 1995 IS DELETED IN ITS ENTIRETY AND THE
FOLLOWING IS INSERTED IN LIEU THEREOF:
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON
FORM 8-K.
(a) Documents Filed as part of the Report.
(1) The following consolidated financial statements of the
Registrant and its subsidiaries, included in its 1994
Annual Report to Shareholders, are incorporated in Item 8
of the Form 10-K by reference:
Consolidated Balance Sheets at December 31, 1994 and 1993.
Consolidated Statements of Income for the years ended
December 31, 1994, 1993 and 1992.
Consolidated Statements of Cash Flows for the years ended
December 31, 1994, 1993 and 1992.
Consolidated Statements of Shareholders' Equity for the
years ended December 31, 1994, 1993 and 1992.
Notes to Consolidated Financial Statements - December 31,
1994.
(2) The following consolidated financial statement schedules of
the Registrant and its subsidiaries are included in Item
14(D):
Schedule I - Condensed Financial Information of
Registrant
Schedule II - Valuation and Qualifying Accounts
All other schedules for which provision is made in the applicable
accounting regulations of the Securities and Exchange Commission are
not required under the related instructions or are inapplicable, and
therefore have been omitted.
(3) Exhibits required by Item 601 of Regulation S-K:
Exhibit 3.1 & 4.1 - Articles of Incorporation of the
Registrant, as amended
(incorporated herein by reference
to Exhibit 3.1 to the
Registrant's Report on Form 10-Q
for the quarter ended June 30,
1993).
Exhibit 3.2 & 4.2 - By-Laws of the Registrant
(incorporated herein by reference
to the Registrant's Report on
Form 10-Q for the quarter June
30, 1993).
Exhibit 4.3 & 9.1 - Voting Trust Agreement dated
December 11, 1984 (incorporated
herein by reference to Exhibit
4.3 to the Registrant's Report on
Form 10-K for the fiscal year
ended December 31, 1991).
<PAGE>
Exhibit 4.4 & 9.2 - Amendment No. 1 dated October 26,
1987 to the Voting Trust
Agreement dated December 11, 1984
(incorporated herein by reference
to the Registrant's Report on
Form 10-K for the fiscal year
ended December 31, 1991).
Exhibit 4.5 & 9.3 - Amendment No. 2, dated April 2,
1991, to the Voting Trust
Agreement dated December 11, 1984
(incorporated herein by reference
to Exhibit 4.3 to the
Registrant's Report on Form 10-K
for the fiscal year ended
December 31, 1991).
Exhibit 4.6 - Restricted Transfer Trust
Agreement dated October 10, 1986
(incorporated herein by reference
to Exhibit 4.3 to the
Registrant's Report on Form 10-K
for the fiscal year ended
December 31, 1991).
Exhibit 4.7 - Amendment No. 1 dated October 26,
1987 to the Restricted Transfer
Trust Agreement dated October 10,
1986 (incorporated herein by
reference to Exhibit 4.3 to the
Registrant's Report on Form 10-K
for the fiscal year ended
December 31, 1991).
Exhibit 4.8 - Amendment No. 2 dated June 4,
1990, to the Restricted Transfer
Trust Agreement dated October 10,
1986 (incorporated herein by
reference to Exhibit 4.3 to the
Registrant's Report on Form 10-K
for the fiscal year ended
December 31, 1991).
Exhibit 4.9 - MLX Exchange Agreement dated as
of April 13, 1990, as amended and
restated as of March 19, 1992, as
amended and restated as of April
21, 1993, among the Registrant,
the Lenders listed therein, and
Morgan Guaranty Trust Company of
New York, as Bond Agent.
Exhibit 4.10 - MLX Limited Guarantee, dated as
of March 19, 1992 (incorporated
herein by reference to Exhibit
2.17 to the Registrant's Current
Report on Form 8-K, dated April
10, 1992).
Exhibit 4.11 - Management Services Agreement,
dated as of March 19, 1992,
between the Registrant and Pameco
Holdings, Inc. (incorporated
herein by reference to Exhibit
2.16 of the Registrant's Current
Report on Form 8-K, dated April
10, 1992).
Exhibit 4.12 - Amendment to Management Services
Agreement, dated as of November
30, 1992, between the Registrant
and Pameco Holdings, Inc.
(incorporated herein by reference
to Exhibit 4.12 of the
Registrant's Report on Form 10-K
for the year ended December 31,
1992).
<PAGE>
Exhibit 4.13 - Nomination Agreement, dated as of
December 15, 1992, among the
Registrant and the Investors
listed therein (incorporated
herein by reference to Exhibit
4.13 of the Registrant's Report
on Form 10-K for the year ended
December 31, 1992).
Exhibit 4.14 - Exchange Agreement, dated as of
January 15, 1993, among MLX Corp.
and the Investors listed therein
(incorporated herein by reference
to Exhibit 4.14 of Registrant's
Report on Form 10-K for the year
ended December 31, 1992).
Exhibit 4.15 - Loan and Security Agreement,
dated as of January 15, 1993,
between S.K. Wellman Limited,
Inc. and Barclays Business
Credit, Inc. (incorporated herein
by reference to Exhibit 4.15 of
Registrant's Report on Form 10-K
for the year ended December 31,
1992).
Exhibit 4.16 - First Amendment to Loan and
Security Agreement, dated as of
February 19, 1993, between S.K.
Wellman Limited, Inc. and
Barclays Business Credit, Inc.
(incorporated herein by reference
to Exhibit 4.16 of Registrant's
Report on Form 10-K for the year
ended December 31, 1992).
Exhibit 4.17 - Second Amendment to Loan and
Security Agreement, dated as of
March 15, 1993, between S.K.
Wellman Limited, Inc. and
Barclays Business Credit, Inc.
(incorporated herein by reference
to Exhibit 4.17 of Registrant's
Report on Form 10-K for the year
ended December 31, 1992).
Exhibit 4.18 - Stock Pledge Agreement (S.K.
Wellman S.p.A.), dated as of
January 15, 1993 between The S.K.
Wellman Corp. and Barclays
Business Credit, Inc.
(incorporated herein by reference
to Exhibit 4.18 of the
Registrant's Report on Form 10-K
for the year ended December 31,
1992).
Exhibit 4.19 - Stock Pledge Agreement (S.K.
Wellman S.p.A.), dated as of
January 15, 1993, between S.K.
Wellman Limited, Inc. and
Barclays Business Credit. Inc.
(incorporated herein by reference
to Exhibit 4.19 of the
Registrant's Report on Form 10-K
for the year ended December 31,
1992).
Exhibit 4.20 - Stock Pledge Agreement (The S.K.
Wellman Company of Canada
Limited), dated as of January 15,
1993, between The S.K. Wellman
Corp. and Barclays Business
Credit, Inc. (incorporated herein
by reference to Exhibit 4.20 of
the Registrant's Report on Form
10-K for the year ended December
31, 1992).
<PAGE>
Exhibit 4.21 - Patent Collateral Assignment and
Security Agreement, dated as of
January 15, 1993, between The
S.K. Wellman Corp. and Barclays
Business Credit. Inc.
(incorporated herein by reference
to Exhibit 4.21 of the
Registrant's Report on Form 10-K
for the year ended December 31,
1992).
Exhibit 4.22 - Trademark Security Agreement,
dated as of January 15, 1993,
between The S.K. Wellman Corp.
and Barclays Business Credit,
Inc. (incorporated herein by
reference to Exhibit 4.22 of the
Registrant's Report on Form 10-K
for the year ended December 31,
1992).
Exhibit 4.23 - Exchange Agreement dated as of
April 2, 1993 among MLX Corp. and
the Bondholders listed therein.
Exhibit 4.24* - First Consolidated Amendment to
Loan and Security Agreement,
dated as of November 16, 1994,
between S.K. Wellman Limited,
Inc. and Barclays Business
Credit, Inc.
Exhibit 10.1# - Employment Agreement dated
February 10, 1991, between the
Registrant and Brian R. Esher
(incorporated herein by reference
to Exhibit 10.1 to the
Registrant's Report on Form 10-K
for the fiscal year ended
December 31, 1990).
Exhibit 10.2# - First Amendment to Employment
Agreement, dated as of March 19,
1992, between the Registrant and
Brian Esher.
Exhibit 10.3 - Severance/Consulting Agreement
dated January 14, 1991, between
the Registrant and William P.
Panny (incorporated herein by
reference to Exhibit 10.3 to the
Registrant's Report on Form 10-K
for the fiscal year ended
December 31, 1990).
Exhibit 10.4 - Purchase Agreement, dated as of
March 19, 1992, among the
Registrant, Pameco Holdings,
Inc., and Pameco Corporation
incorporated herein by reference
to Exhibit 21 of Registrant's
current Report on Form 8-K dated
April 10, 1992).
Exhibit 10.5# - MLX Corp. Stock Option Plan,
dated as of December 29, 1989
(incorporated herein by reference
to Exhibit 10.5 of Registrant's
Report on Form 10-K for the year
ended December 31, 1992).
Exhibit 10.6# - Senior Management Discretionary
Bonus Plan, dated as of January
21, 1992 (incorporated herein by
reference to Exhibit 10.6 of the
Registrant's Report on Form 10-K
for the year ended December 31,
1992).
<PAGE>
Exhibit 10.7# - Second Amendment to Employment
Agreement, dated as of January 1,
1994, between the Registrant and
Brian Esher.
Exhibit 13* - 1994 Annual Report to
Shareholders of the Registrant.
With the exception of information
expressly incorporated herein by
reference, the 1994Annual Report
is not deemed to be filed with
the Commission.
Exhibit 21 - Subsidiaries of the Registrant
(incorporated herein by reference
to Exhibit 22 of Registrant's
Report on Form 10-K for the year
ended December 31, 1992).
Exhibit 23* - Consent of Independent
Accountants.
Exhibit 27* - Financial Data Schedule.
Exhibit 99.1* - Opinion of Independent Accountants
* Filed with this Report on Form 10-K/A
# Management compensatory plan or arrangement
(b) Reports on Form 8-K
No reports on Form 8-K were filed by the Registrant during the
quarter ended December 31, 1994.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 12(g) of the
Securities Exchange Act of 1934 and Rule 12b-15 promulgated by the
Securities and Exchange Commission under 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.
MLX CORP.
Date: June 1, 1995. By: /s/ Thomas C. Waggoner
Thomas C. Waggoner
Vice President & Chief
Financial Officer
<PAGE>
Exhibit Index
Exhibit No. Description of Exhibit Page
13 1994 Annual Report to
Shareholders of the
Registrant
23 Consent of Independent Accountants
99.1 Opinion of Independent Accountants
MLX CORP. 1994 ANNUAL REPORT
<PAGE>
PROFILE Formed as a result of a reorganization in 1984, MLX Corp is
today a publicly held company owned by an estimated 10,000
beneficial shareholders. MLX owns and manages the S. K. Wellman
group of specialty friction materials businesses. MLX has a federal
net operating loss carryforward exceeding $300 million to offset
federal taxable income from its investments.
The S. K. Wellman subsidiaries are engaged in the global design
and manufacture of specialty friction and related products intended
for use in extremely demanding environments. Wellman produces
friction components under very precise tolerances for use in brake,
clutch and transmission applications in heavy equipment, farm
machinery, military equipment, recreational vehicles, trains and
over the road trucks as well as brake applications for commercial and
military aircraft. Wellman participates in both the original
equipment and replacement markets and relies on an extensive research
and development and engineering staff to continually provide improved
products and performance to its Fortune 500 and international
customers.
CONTENTS
1........Financial Highlights
2........Letter to Shareholders
4........Five-Year Financial Review
5........Management's Discussion and Analysis
9........Consolidated Financial Statements and Notes
23.......Report of Independent Auditors
24.......Corporate Data
<PAGE>
MLX Corp. & Subsidiaries
<TABLE>
FINANCIAL HIGHLIGHTS
(In thousands, except per share data)
1994 1993 1992
<S> <C> <C> <C>
Net sales $60,858 $57,036 $53,862
Operating earnings 6,668 6,218 5,373
Interest expense, net (1,553) (2,100) (2,612)
Earnings before extraordinary item 2,747 2,039 1,385
Net earnings 2,747 5,666 5,509
Earnings per share before extraordinary item
(Net of dividends and accretion on preferred stock) $ 0.65 $ 0.45 $ 0.55
Long-term debt 14,165 14,845 25,711
Shareholders' equity (deficit) 10,729 7,324 (1,844)
</TABLE>
Earnings per share data have been restated to reflect the 1993
one-for-ten reverse stock split.
[GRAPHIC--PIE CHART]
REVENUES
1990 $55,228
1991 50,714
1992 53,862
1993 57,036
1994 60,858
OPERATING EARNINGS
1990 $3,858
1991 3,738
1992 5,373
1993 6,218
1994 6,668
TANGIBLE SHAREHOLDERS' EQUITY*
1990 $(99,323)
1991 (17,165)
1992 (4,576)
1993 4,539
1994 8,441
*includes intangible assets of $2.7 million and $2.9 million in 1992
and 1991, respectively, and $108.2 million in 1990 including
intangible assets of the RAC Group (discontinued as of December 31,
1991).
<PAGE>
MLX Corp. & Subsidiaries
LETTER TO SHAREHOLDERS
We are pleased to report another successful year
of operations. Our S.K. Wellman subsidiary produced record revenues,
and operating earnings reached a five year high. These profits
enabled us to further reduce debt while maintaining our research and
development spending and investments in new products, markets and
technologies.
Despite strong results since our restructuring in
1992, S.K. Wellman operates in a mature, consolidating industry. In
this situation, long-term success depends in part on creating
alliances or in merging with synergistic businesses. While we have
attempted since late 1993 to identify synergistic acquisition
opportunities for Wellman, to date we have been unsuccessful in
negotiating an attractive price for such businesses.
In response to this situation, we have solicited
offers for our Wellman operating subsidiary and have executed a Stock
Purchase Agreement to sell all our interests in Wellman for $60
million, which includes certain amounts related to the repayment or
assumption of debt and capital leases by the purchaser. This sale is
contingent on the majority approval by you, the common shareholders,
at our upcoming annual meeting.
Your board recommends the approval of this
proposed sale and has received from Donaldson, Lufkin & Jenrette
Securities Corporation a favorable fairness opinion regarding the
consideration to be received by the Company.
"We entered into an agreement providing for the
sale of Wellman."
The sale of Wellman as proposed and described
fully in our proxy statement would yield approximately $36 million in
cash to MLX after payment of existing debts, the preferred stock
interests, and payment of the federal and state tax obligations
arising from the sale. Furthermore, with a substantial cash balance
and no debt, MLX will be in a position to capitalize on the value of
its large net operating loss carryforward.
In this transaction, our "fully diluted" shares
(outstanding shares plus exercisable stock options) would remain
constant at 2,822,000 equivalent shares. Our financial statements
include a table at Note B showing the effects the proposed sale would
have had on our balance sheet at December 31, 1994 on a pro forma
basis.
"Your board recommends approval of the proposed
sale."
Your board of directors has considered the
direction MLX should take to enhance shareholder value if the sale of
S.K. Wellman is approved at the upcoming Annual Meeting of
Shareholders. As a result of such considerations, your board has
identified certain strategies as being potentially attractive courses
of action, although there can be no assurances
[GRAPHIC--PIE CHART]
REPORTED PRIMARY EARNINGS PER SHARE
1990 $0.06
1991 0.02
1992 0.55
1993 0.45
1994 0.65
TOTAL EARNINGS PER SHARE (Defined)*
1990 $0.06
1991 0.02
1992 0.98
1993 0.92
1994 1.15
*Total Earnings defined as earnings (a) excluding pro-forma federal
tax provision, (b) after dividends and accretion on preferred stock,
and (c) before extraordinary item.
The Company is able to offset substantially all of its federal
taxable income with its pre-reorganization tax loss carry-forwards
and therefore has a federal tax liability only for Alternative
Minimum Tax amounts. Accordingly, the pro forma charge in lieu of
federal income taxes included in the statements of income is not
accruable or payable.
<PAGE>
MLX Corp. & Subsidiaries
that any of them will be pursued. I urge you to consult the Proxy
Statement for the 1995 Annual Meeting for a more complete description
of the proposed transaction and the potential courses of action that
are being considered by the board.
One such strategy involves utilizing a portion
of the cash balance resulting from the sale of S.K. Wellman to
support the issuance by MLX of a series of structured preferred
securities (known as Market Auction Preferred Stock). Proceeds from
the sale of the preferred securities would be invested in U.S.
Government obligations or similar investments which represent low
credit risks. The federal taxable income from this investment
portfolio would be substantially sheltered by our existing net
operating losses, and dividends would be paid on the preferred
securities at market rates. The tax savings resulting from the
utilization of the net operating loss carryforwards would enhance the
returns to the shareholders.
Further, if valuations for businesses become more
attractive, we will consider possible acquisitions. An additional
strategy being considered is the use of the proceeds to support a
common share buy-back program.
We should not overlook the many achievements of
the employees of MLX and Wellman during 1994. I am especially proud
of the achievements made by our Wellman operations team this year --
including the introduction of several new products and reaching an
all-time revenue record. In fact, at year end our backlog of
unshipped orders had reached $16.4 million which is the highest level
for this measure since we have maintained this record. The 1994
operations are discussed in greater detail in the "Management's
Discussion and Analysis" section elsewhere in this report. We
regained our listing on the NASDAQ National Market System in April,
and in November we restructured our senior lending facility to lower
our borrowing costs and extend the maturity date of the facility.
"We accept the challenge of refocusing the
mission of MLX."
In closing, you should know that we have
approached the proposed sale of Wellman very carefully and
analytically and ask for your approval at the upcoming annual meeting
- -- either in person or by proxy. We accept the challenge of
refocusing
the mission of MLX after the Wellman transaction. With your support,
we will attempt to continue to add to the long-term value for our
shareholders.
Brian R. Esher
Chairman, President and Chief Executive Officer
April 10, 1995
[GRAPHIC -- PIE CHART]
LATEST TWELVE MONTHS ENDED
(In 000S)
Operating Earnings Income Before Extraordinary Items
12/31/92 5,373 1,385
3/31/93 5,949 1,796
6/30/93 5,844 2,041
9/30/93 6,151 2,229
12/31/93 6,218 2,039
3/31/94 6,605 2,710
6/30/94 6,892 2,908
9/30/94 6,331 2,729
12/31/94 6,668 2,747
<PAGE>
MLX Corp. & Subsidiaries
<TABLE>
FINANCIAL REVIEW
SELECTED FINANCIAL INFORMATION
Years ended December 31 1994 1993 1992 1991 1990
Dollars in thousands (except earnings per share data)
Operating Data
<S> <C> <C> <C> <C> <C>
Net sales $60,858 $57,036 $ 53,862 $ 50,714 $ 55,228
Gross margin 14,493 13,862 12,586 10,711 13,329
Operating expenses (excluding
restructuring and other
nonrecurring costs in 1990) 7,825 7,644 7,213 6,973 8,811
Operating earnings 6,668 6,218 5,373 3,738 3,858
Interest expense, net (1,553) (2,100) (2,612) (3,399) (3,333)
Other income (expense) 20 (162) 367 (75) 331
Income taxes (2,388) (1,917) (1,428) (7) (413)
Minority interests - - (315) (200) (310)
Earnings from continuing operations 2,747 2,039 1,385 57 133
Discontinued operations - - - (23,291) (26,505)
Extraordinary gain on
early retirement of debt (net of taxes) - 3,627 4,124 - -
Net earnings (loss) $ 2,747 $5,666 $ 5,509 $(23,234) $ (26,372)
Earnings (loss) applicable to common stock $ 1,689 $4,793 $ 5,509 $(23,234) $ (26,372)
Discontinued Operations
Net sales - - - $333,279 $ 394,849
Gross margin - - - 83,820 97,101
Operating expenses - - - (81,090) (105,488)
Other expenses - - - (17,086) (18,118)
Loss on disposal - - - (8,935) -
Net loss from discontinued operations - - - $(23,291) $ (26,505)
Financial Position
Working capital $10,908 $8,990 $ 9,752 $ 10,331 $ 14,589
Depreciation and amortization 2,277 2,671 3,421 3,622 3,396
Total assets 37,524 33,761 33,128 41,718 47,945
Long-term liabilities 16,339 17,053 26,631 40,980 46,253
Minority interests - - - 2,045 1,845
Shareholders' equity (deficit) 10,729 7,324 (1,844) (14,252) 8,852
Per Share Data
Average common shares outstanding
and dilutive options 2,613 2,620 2,541 2,540 2,268
Earnings (loss) per share:
Continuing operations $ 0.65 $ 0.45 $ 0.55 $ 0.02 $ 0.06
Discontinued operations - - - (9.17) (11.69)
Extraordinary gain on early
retirement of debt - 1.38 1.62 - -
Total $ 0.65 $ 1.83 $ 2.17 $ (9.15) $ (11.63)
</TABLE>
Earnings per share data have been restated to reflect the 1993
one-for-ten reverse stock split.
<PAGE>
MLX Corp. & Subsidiaries
MANAGEMENT'S DISCUSSION AND ANALYSIS
Results of Operations
Basis of Presentation -- On April 10, 1995 the Company entered into
a stock purchase agreement for the sale of all the common shares of
S.K. Wellman. The transaction, if approved by the Company's
shareholders and subsequently consummated, will eliminate all the
Company's assets and liabilities pertaining to Wellman. The
accompanying financial statements reflect the financial condition and
results of operations for the consolidated group (including S.K.
Wellman) as it is now comprised. Note B to the consolidated financial
statements presents the pro forma effect of the proposed transaction
on the historical consolidated balance sheet at December 31, 1994.
Effective June 25, 1993, MLX implemented a one-for-ten
reverse stock split as approved by shareholders at the 1993 annual
meeting of shareholders. Historical per share data in the
consolidated financial statements and in the discussion below have
been retroactively adjusted to reflect this reverse split.
1994 vs 1993 -- Revenues for S. K. Wellman in 1994 were $60.9 million
versus a 1993 level of $57.0 million, an increase of 6.7%. This
increase resulted from increased sales of clutch, brake and
transmission components for applications including on-highway hauling
vehicles, construction equipment and commercial aircraft. In
addition, sales volume from the Italian facility increased by 20%
over the prior year due to overall increased demand in its markets.
Sales of after-market components decreased by 12% in 1994 versus 1993
due to declining demand for military items and the military component
of export sales. The effect of foreign currency exchange fluctuations
was insignificant in 1994.
The gross margin achieved in 1994 was 23.8% compared to
24.3% in 1993. This decrease resulted from increases in raw material
commodity prices (principally steel), strategic price concessions,
unfavorable product mix shifts and outsourcing due to capacity
constraints.
Consolidated selling, general and administrative
expenses for 1994 amounted to $7.8 million compared to $7.6 million
in 1993, an increase of 2.4%. The increase occurred principally at S.
K. Wellman as a result of higher compensation charges and the
marketing costs of supporting new product initiatives. These were
offset in part by reduced compensation and administrative charges at
MLX Corp.
Consolidated interest expense dropped from $2.1 million
in 1993 to a level of $1.6 million in 1994 (a reduction of 26%). The
MLX Corp. component dropped by $164,000 from the prior year due to
the repayment of the minority interest purchase note in December
1993. The Wellman interest component dropped by $383,000 due to lower
overall borrowings under the senior credit facility.
Included in the results for 1993 is an extraordinary
gain from early retirement of debt resulting from an exchange of
Series A Preferred Stock for certain debt obligations described in
Note C to the financial statements. No such exchange or gain occurred
in 1994.
Dividends and accretion applicable to Series A
Preferred Stock increased to $1.1 million in 1994 versus $900,000 in
1993 due to increases in the prime rate component in the dividend
rate structure.
In 1994, the Company had net earnings of $2.7 million
(or $0.65 per share net of obligations on the Series A Preferred
Stock) compared to earnings before extraordinary item in 1993 of $2.0
million (or $0.45 per share). The extraordinary gain in 1993 amounted
to $1.38 per common share.
1993 vs 1992 -- Revenues for S. K. Wellman in 1993 were $57.0 million
compared to a 1992 level of $53.9 million, an increase of 5.9%. This
increase resulted principally from higher sales of transmission and
clutch components for use in construction equipment, farm machinery
and on-highway hauling vehicles. In addition, after-market sales
increased by 15.4% compared to 1992 due to higher demand for sales
for U.S. military applications and to export customers.
Sales of aircraft brake components in 1993 decreased by
approximately 10.5% compared to 1992 due to lower mid-year demand
from commercial airline customers.
In addition, reported 1993 sales from the Italian
plant, as expressed in U.S. dollars, decreased by $700,000, or 7.3%,
compared to 1992. However, if the weighted average currency exchange
rate for 1992 had remained constant in 1993, reported 1993 sales from
this plant would have increased by $1.7 million, or 18%.
<PAGE>
MLX Corp. & Subsidiaries
The gross margin achieved in 1993 increased to
24.3% compared to 23.4% in 1992. This favorable result was due
principally to improved efficiencies in production operations which
offset the unfavorable shift in product mix away from higher margin
commercial aircraft products.
Consolidated selling, general and administrative
expenses for 1993 rose by 6% to $7.6 million compared to $7.2 million
in 1992. At S. K. Wellman, such expenses rose by a nominal amount to
$6.3 million. At MLX Corp. charges in this area increased to $1.3
million (from $1.1 million in 1992) since 1992 had a nonrecurring
credit of $675,000 resulting from a change in estimate in medical
claim reserves which was partially offset by a charge of $450,000 for
potential litigation and professional obligations.
Consolidated interest expense dropped from $2.6 million
in 1992 to $2.1 million in 1993. The interest incurred at S. K.
Wellman rose to $1.7 million in 1993 (compared to $1.3 million in
1992) as a result of amounts borrowed to pay off the MLX senior term
loan and the minority interest obligations. At MLX the interest
charge dropped to $400,000 in 1993 (compared to $1.3 million in 1992)
due to the payoff of the senior term loan and the exchange of certain
of the Zero Coupon Bonds for Series A Preferred Stock.
Included in the results for 1993 is an extraordinary
gain from early retirement of debt of $3.6 million resulting from the
exchange in the second quarter of Series A Preferred Stock and 1993
Variable Rate Notes for certain of the remaining Zero Coupon Bonds.
The gain is reported net of a charge in lieu of federal income taxes
of $1.9 million and is discussed in Note C to Consolidated Financial
Statements.
Earnings applicable to common stock for 1993 have been
reduced for dividend and accretion obligations amounting to $873,000
on the Series A Preferred Stock issued as of December 31, 1992 and
April 22, 1993.
In 1993, the Company had earnings before extraordinary
items of $2.0 million, $0.45 per share (net of obligations on the
Series A Preferred Stock), and net income of $5.7 million, or $1.83
per share. In 1992, the Company had earnings before extraordinary
item of $1.4 million, or $0.55 per share, and net income of $5.5
million, or $2.17 per share.
The Company is able to offset substantially all of its
federal taxable income with its pre-reorganization tax loss
carryforwards and therefore has a federal tax liability only for
Alternative Minimum Tax amounts. Accordingly, the charge in lieu of
federal income taxes included in the statements of income is not
accruable or payable. These pro forma charges for 1994, 1993 and 1992
(excluding the pro forma charge provided for extraordinary gains)
were $1.3 million, $1.2 million and $1.1 million, respectively. The
following table illustrates the effect of this pro forma charge on
the Company's earnings and earnings per share.
<TABLE>
1994 1993 1992
(Dollars in thousands, except per share data)
<S> <C> <C> <C>
Earnings before extraordinary item $ 2,747 $2,039 $1,385
Less dividends and accretion on preferred stock (1,058) (873) -
Plus pro forma federal tax charge not due or payable 1,314 1,243 1,110
Total earnings $ 3,003 $2,409 $2,495
Total earnings per common share $ 1.15 $ 0.92 $ 0.98
</TABLE>
Financial Position and Liquidity
Consolidated working capital at December 31, 1994 was
$10.9 million compared to $9.0 million at December 31, 1993.
This increase resulted from higher trade receivables and inventories
stemming from increased sales volume and additional inventory
investments to support new product initiatives.
S. K. Wellman finances its operations with cash from
operations and the use of a senior credit facility. In 1993 the
Company successfully executed a new senior credit agreement with a
new lender which extends through January 1998. During 1993, the
proceeds from this facility were used to pay down certain obligations
of MLX Corp. and to replace the previous senior facility and the two
Industrial Revenue Bonds. In 1994 funds from the senior credit
facility were used to repay the Seller Note otherwise due in 1995 and
to pay certain obligations of MLX Corp.
<PAGE>
MLX Corp. & Subsidiaries
MANAGEMENT'S DISCUSSION AND ANALYSIS (Continued)
In 1994 the senior credit facility was amended to lower
the interest rate structure, extend the maturity date and to
consolidate certain components of the facility. At December 31, 1994
the facility included a consolidated term component, a mezzanine
component and an equipment line with varying amortization obligations
and maturities ranging from July 1995 to January 1998. In addition,
there is a revolving loan component with a limit of $7.2 million,
subject to certain availability formulas, and an expiration date of
January 1998. In February 1995 the remaining balance under the
mezzanine facility was repaid with proceeds from the revolving loan
component.
The amount available under the revolving loan facility
at December 31, 1994 was $4.8 million which exceeded the amount
outstanding on that date by $2.8 million. Management believes that
the existing lending facilities provide adequate working capital
resources for its anticipated needs in 1995.
The senior credit facility limits cash dividends and
loans which S. K.Wellman may make to MLX Corp. Under the most
restrictive covenants, retained earnings in the amount of
approximatel $1.3 million were free from limitations on the payment
of dividends to MLX Corp. at December 31, 1994.
The Zero Coupon Bonds were originally issued in 1990
and were subsequently amended in 1992. As of the end of 1993,
approximately 94.2% of these bonds had been exchanged for 1993
Variable Rate Notes and shares of Series A Preferred Stock. The
remaining outstanding Zero Coupon Bonds mature in 2002 and require no
payments of principal or interest until maturity except in very
limited circumstances. Early redemption of the Bonds is at the
Company's option.
The Series A Preferred Stock was issued as of December
31, 1992 and April 22, 1993 and provides for dividend rates which
commence at prime plus 2.5% (but not less than 9%) and escalate
gradually to a peak of prime plus 7% (but not less than 14%) for all
periods after January 1, 1999. The dividend rate at December 31, 1994
was 11%. Dividends accumulate in arrears unless paid, and the
redemption of the Preferred Stock is solely at the option of the
Company.
The 1993 Variable Rate Notes were issued in April 1993
in exchange for certain of the Zero Coupon Bonds. The Notes have an
escalating interest rate feature (currently at 11%) and mature in
2002. The agreement governing the Notes requires that interest due on
the Notes be paid (on a pro rata basis) whenever dividends on the
Series A Preferred Stock are paid.
In connection with the proposed sale of the common
stock of Wellman, certain provisions of the documents governing the
Zero Coupon Bonds, 1993 Variable Rate Notes and Series A Preferred
Stock require that funds from such sale be used to repay certain
minimum portions of those obligations aggregating $4.5 million. If
the transaction is approved and consummated, the Company expects to
repay all of such obligations.
Effective December 31, 1992 the Company purchased the
13.7% minority interest in its S. K. Wellman subsidiary under the
terms of the relevant agreement. Notes were issued to the holders of
such minority interests, and these notes were paid off in February
and December 1993.
Other Data
Capital Expenditures -- Capital expenditures in 1994 amounted to $3.0
million, all of which pertains to S. K. Wellman. These expenditures
were made to expand the Italian facility, add laser cutting equipment
and further automate the clutch component production lines. In 1993,
capital expenditures amounted to $1.8 million for capital projects to
improve quality control procedures, expand existing clutch component
production capabilities, install new production capabilities in other
areas and to automate certain engineering design steps. There were no
material commitments for capital expenditures outstanding at December
31, 1994. The expected level of capital expenditures for S.K. Wellman
in 1995 is approximately $3.2 million.
Seasonality -- Sales of S. K. Wellman generally do not follow a
strong seasonal pattern. However, extended holiday shutdowns of major
customer production sites can result in minor reductions in sales
volume in the third and fourth quarters for the European operation
and in the fourth quarter for the North American operation. The
quarterly results are further affected by interim accounting
estimates for matters such as income tax provisions, plant operating
efficiencies, operating expense accruals and preferred stock
dividends.
Backlog -- The backlog of unshipped orders for the ensuing three
months (the period which generally represents a firm customer
commitment) at December 31, 1994 was $16.4 million. At December 31,
1993 the backlog for such period was $13.0 million.
<PAGE>
MLX Corp. & Subsidiaries
Employees -- At December 31, 1994 the Company had 559 employees
compared to 511 at December 31, 1993. Approximately 247 are covered
by collective bargaining agreements as of December 31, 1994.
Environmental Status -- In connection with the loan application
procedures for the new senior lender, S. K. Wellman performed certain
tests for environmental contamination for each of the three owned
U.S. operating sites. These tests revealed minor surface
contamination at one site and no other condition requiring
remediation. In 1993 the Company removed this contaminated soil
following specific disposal guidelines. Costs incurred in connection
with the removal were not significant.
Market, Share Ownership and Dividend Information -- As of December
31, 1994 (and commencing on April 28, 1994) the Company's
common shares were traded on the NASDAQ National Market under the
trading symbol "MLXR." From August 30, 1993 until April 28, 1994, the
Company's shares were traded in the NASDAQ Small Cap Market. From
January 26, 1993 until August 30, 1993, the Company's shares were
traded in the Domestic OTC Electronic Bulletin Board regulated by
NASD. Prior to that time and commencing on March 27, 1992, the
Company's shares were traded on the NASDAQ Small Cap Market. Prior to
that date the Company's shares were traded on the NASDAQ National
Market.
As of December 31, 1994 the Company estimated there
were approximately 6,900 shareholders of record of its common stock.
In addition, the Company believes that there are approximately 2,700
shareholders whose shares are registered in names of nominees.
In connection with the reverse stock split implemented
in June 1993, approximately 3,200 shareholders who held fewer than 10
pre-split shares were eliminated as shareholders and given the right
to redeem their shares at $1 each.
MLX's current policy is to retain earnings to finance
future growth and for debt repayment and, accordingly, does not
currently expect to pay any cash dividends on its common stock in the
foreseeable future. In addition, certain covenants relating to
indebtedness of MLX and S. K. Wellman prohibit the payment of common
stock cash dividends.
<TABLE>
Quarterly Data (Unaudited)
(In thousands, except per share data)
1994 1st 2nd 3rd 4th
<S> <C> <C> <C> <C>
Net sales $ 14,995 $ 15,405 $ 14,940 $ 15,518
Operating earnings 1,921 1,739 1,156 1,852
Net earnings 1,046 792 493 416
Earnings applicable to common stockholders 800 543 243 103
Net earnings per common share $ 0.31 $ 0.21 $ 0.09 $ 0.04
Stock price range per common share $6.13-5.25 $7.50-5.25 $7.38-5.38 $6.00-3.75
Trading volume as reported by NASDAQ 69 174 164 129
1993 1st 2nd 3rd 4th
Net sales $ 14,428 $ 14,143 $ 13,892 $ 14,573
Operating earnings 1,534 1,452 1,717 1,515
Extraordinary gain on early retirement of debt - 3,627 - -
Net earnings 375 4,221 672 398
Earnings applicable to common stockholders 195 3,982 430 186
Net earnings per common share:
Earnings before extraordinary item $ 0.08 $ 0.13 $ 0.16 $ 0.07
Extraordinary gain on early retirement of debt - 1.37 - -
Total $ 0.08 $ 1.50 $ 0.16 $ 0.07
Stock price range per common share $9.38-3.13 $9.38-5.00 $9.00-4.25 $5.75-4.13
Trading volume as reported by NASDAQ 73 45 64 55
</TABLE>
<PAGE>
MLX Corp. & Subsidiaries
<TABLE>
CONSOLIDATED BALANCE SHEETS
<S> <C> <C>
December 31 1994 1993
(Dollars in thousands, except share data)
Assets
Current assets
Cash and cash equivalents $ 1,087 $ 985
Accounts receivable 9,638 8,357
Inventories 9,681 8,449
Prepaid expenses and other current assets 958 583
Total current assets 21,364 18,374
Property, plant and equipment, net 13,362 12,064
Intangible assets, net 2,288 2,785
Other assets 510 538
Total assets $37,524 $ 33,761
Liabilities
Current liabilities
Accounts payable $ 4,629 $ 3,362
Accrued compensation and benefits 2,965 2,809
Other accrued liabilities and expenses 1,630 1,969
Accrued taxes 815 553
Dividends payable on Series A preferred stock 212 638
Current portion of long-term debt 205 53
Total current liabilities 10,456 9,384
Long-term debt 13,960 14,792
Other long-term liabilities 2,379 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 7,265 6,981
Common stock, $.01 par value -- authorized
38,500,000 shares; 2,540,000 shares
outstanding (2,536,000 shares in 1993) 25 25
Capital in excess of par value 61,874 60,551
Retained earnings deficit since December 11, 1984 (57,147) (58,836)
12,017 8,721
Other equity adjustments (1,288) (1,397)
Total shareholders' equity 10,729 7,324
Total liabilities and shareholders' equity $37,524 $ 33,761
</TABLE>
See notes to consolidated financial statements.
<PAGE>
MLX Corp. & Subsidiaries
<TABLE>
CONSOLIDATED STATEMENTS OF INCOME
Years ended December 31 1994 1993 1992
(Dollars in thousands, except per share data)
<S> <C> <C> <C>
Net sales $60,858 $57,036 $53,862
Costs and expenses
Cost of products sold 46,365 43,174 41,276
Selling, general and administrative expenses 7,825 7,644 7,213
54,190 50,818 48,489
Operating earnings 6,668 6,218 5,373
Interest expense, net (1,553) (2,100) (2,612)
Other income (expense) 20 (162) 367
Earnings before income taxes, minority interests, and
extraordinary item 5,135 3,956 3,128
Provision for income taxes:
Federal taxes due and payable 80 150 -
Charge in lieu of federal income taxes 1,314 1,243 1,110
Foreign, state and local income taxes 994 524 318
Minority interests in net earnings of consolidated subsidiaries - - 315
Earnings before extraordinary item 2,747 2,039 1,385
Extraordinary gain on early retirement of debt (net of charge in
lieu of federal income taxes of $1,869 in 1993 and $1,661 in 1992) - 3,627 4,124
Net earnings 2,747 5,666 5,509
Dividends and accretion on preferred stock (1,058) (873) -
Earnings applicable to common stock $ 1,689 $ 4,793 $ 5,509
Earnings per share:
Earnings before extraordinary item (net of dividends and
accretion on preferred stock) $ 0.65 $ 0.45 $ 0.55
Extraordinary gain on early retirement of debt - 1.38 1.62
Net earnings $ 0.65 $ 1.83 $ 2.17
Average outstanding common shares and dilutive options 2,613 2,620 2,541
</TABLE>
See notes to consolidated financial statements.
<PAGE>
<TABLE>
MLX Corp. & Subsidiaries
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
Series A Capital In Retained Other
Preferred Common Excess of Earnings Equity
(Dollars in thousands) Stock Stock Par Value (Deficit) Adjustments Total
<S> <C> <C> <C> <C> <C> <C>
Balances at January 1, 1992 $ - $254 $54,548 $(69,138) $ 84 $(14,252)
Issuance of 200,000 shares of preferred
stock in connection with the
retirement of debt 5,100 - - - - 5,100
Foreign currency translation adjustment - - - - (972) (972)
Benefit of pre-reorganization
tax loss carryforwards - - 2,771 - - 2,771
Net earnings - - - 5,509 - 5,509
Balances at December 31, 1992 5,100 254 57,319 (63,629) (888) (1,844)
Issuance of 64,000 shares of
preferred stock in connection with
the retirement of debt 1,646 - - - - 1,646
Dividends and accretion
on preferred stock 235 - - (873) - (638)
Foreign currency translation adjustment - - - - (509) (509)
Benefit of pre-reorganization
tax loss carryforwards - - 3,112 - - 3,112
One-for-ten reverse stock split - (229) 118 - - (111)
Stock options exercised - - 2 - - 2
Net earnings - - - 5,666 - 5,666
Balances at December 31, 1993 6,981 25 60,551 (58,836) (1,397) 7,324
Dividends and accretion
on preferred stock 284 - - (1,058) - (774)
Foreign currency translation adjustment - - - - 109 109
Benefit of pre-reorganization
tax loss carryforwards - - 1,314 - - 1,314
Stock options exercised - - 9 - - 9
Net earnings - - - 2,747 - 2,747
Balances at December 31, 1994 $7,265 $ 25 $61,874 $(57,147) $ (1,288) $10,729
</TABLE>
See notes to consolidated financial statements.
<PAGE>
MLX Corp. & Subsidiaries
<TABLE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years ended December 31 1994 1993 1992
(Dollars in thousands)
<S> <C> <C> <C>
Cash Flows From Operating Activities:
Net earnings $ 2,747 $ 5,666 $ 5,509
Adjustments to reconcile net earnings to net cash provided
by operating activities:
Extraordinary gain on early retirement of debt - (5,496) (5,785)
Charge in lieu of federal income taxes 1,314 3,112 2,771
Depreciation and amortization 2,277 2,671 3,421
Minority interests in net earnings of consolidated subsidiaries - - 315
Changes in operating assets and liabilities:
Accounts receivable (1,281) (84) (2)
Inventories and prepaid expenses (1,607) (390) 1,264
Accounts payable and accrued expenses 920 1,630 (1,094)
Other 693 (1,053) (919)
Net cash provided by operating activities 5,063 6,056 5,480
Cash Flows From Investing Activities:
Purchase of property, plant and equipment (2,985) (1,820) (1,129)
Net cash used in investing activities (2,985) (1,820) (1,129)
Cash Flows From Financing Activities:
Borrowings on long-term debt 976 10,740 -
Repayment of debt (1,761) (14,611) (6,460)
Payment of dividends on Series A preferred stock (1,200) - -
Other 9 (47) -
Net cash used in financing activities (1,976) (3,918) (6,460)
Net increase (decrease) in cash and cash equivalents 102 318 (2,109)
Cash and cash equivalents at January 1 985 667 2,776
Cash and cash equivalents at December 31 $ 1,087 $ 985 $ 667
</TABLE>
See notes to consolidated financial statements.
<PAGE>
MLX Corp. & Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE A Summary of Significant Accounting Policies
Principles of Consolidation: The financial statements include
the accounts of MLX Corp. (MLX or the Company) and its wholly owned
subsidiaries. The wholly owned subsidiaries include S. K. Wellman
Limited, Inc. (S. K. Wellman -- the principal entity of the Company's
specialty friction materials manufacturing group) and each of its
wholly owned subsidiaries. Upon consolidation, all significant
intercompany accounts and transactions have been eliminated.
Cash Equivalents: Cash equivalents consist of investments in
short-term asset management accounts. Such investments are stated at
cost plus accrued interest which approximates market value. For
purposes of the accompanying Consolidated Statements of Cash Flows,
the Company considers all highly liquid investments purchased with a
maturity of three months or less to be cash equivalents.
Inventories: Inventories are stated at the lower of cost or
market. Cost is determined by the first-in, first-out (FIFO) method.
The components of inventories are as follows (in thousands):
1994 1993
Manufactured goods $2,353 $2,298
Raw materials and work in progress 7,328 6,151
Property, Plant and Equipment: Properties are recorded at cost
and include expenditures for additions and major improvements.
Expenditures for repairs and maintenance are charged to operations as
incurred. Depreciation and amortization are computed using the
straight-line method over the estimated useful lives of the
respective assets. The components of property, plant and equipment
are as follows (in thousands):
1994 1993
Land and improvements $ 1,239 $ 1,179
Buildings and leasehold improvements 7,376 6,933
Machinery and equipment 17,581 16,007
Construction in progress 1,178 533
27,374 24,652
Accumulated depreciation and amortization (14,012) (12,588)
$ 13,362 $ 12,064
Accrued Insurance: The Company sponsors funded health and
workers' compensation plans for the majority of its employees.
Premiums are based on experience and accrued insurance is based on a
pre-calculated contractual obligation to the insurance company.
During a portion of 1992 the Company was self-insured for both health
and workers' compensation claims.
Health accruals under the previous plan were based on current
claims plus estimates of incurred but not reported claims. In 1992
the Company recorded income of $675,000 related to a change in its
estimate of necessary claims accrual due to better than expected
claims experience.
<PAGE>
MLX Corp. & Subsidiaries
NOTE A Summary of Significant Accounting Policies (continued)
Intangible Assets: Intangible assets are amortized using the
straight-line method over the average lives indicated in the
following table. The components of intangible assets are as follows
(in thousands):
<TABLE>
1994 1993 Life
<S> <C> <C> <C>
Excess of cost of acquired businesses over the fair value
of the net assets acquired $ 2,445 $ 2,445 10 years
Deferred financing costs 953 907 11 years
Proprietary formulations and patents 1,806 1,806 10 years
Pension costs 1,025 1,018 15 years
6,229 6,176
Accumulated amortization (3,941) (3,391)
$ 2,288 $ 2,785
</TABLE>
Accounting Changes: Effective January 1, 1993, the Company
adopted Statement of Financial Accounting Standards No. 109,
"Accounting for Income Taxes." The adoption of Statement 109 did not
have an impact on the Company's financial position or results of
operations.
Effective January 1, 1993, the Company adopted Statement of
Financial Accounting Standards No. 106, "Employers Accounting for
Post-retirement Benefits Other Than Pensions" which requires the
projected future costs of providing post-retirement health care
benefits be recognized as an expense as employees render service
instead of when benefits are paid. The Company elected to recognize
the transition obligation on a prospective basis. The transition
obligation (approximately $540,000 at January 1, 1993) for prior
service costs at the time of adoption of the Standard is being
amortized into general and administrative expense over 20 years.
Federal Income Taxes: Any tax benefits resulting from the
utilization of the Company's federal net operating loss or other
carryforwards existing at December 11, 1984, the date of confirmation
of the Plan of Reorganization (Confirmation Date), are excluded from
operations and credited to capital in excess of par value in the year
such tax benefits are realized.
Earnings Per Common Share: Primary earnings per common share
is based on the weighted average number of shares outstanding during
each year and dilutive common stock equivalents. Earnings applicable
to common stock is determined by adjusting net earnings for dividends
and accretion on preferred stock.
Relationship With Pameco Corporation: On March 19, 1992 the
Company reached an agreement with its Refrigeration & Air
Conditioning (RAC) Group senior lenders (the Lenders) and a third
party investment group, (the Buyers) which included a director, to
sell its equity interest in its RAC Group. The loss on disposal
resulting from the divestiture of the RAC Group was reported in the
1991 consolidated financial statements.
MLX entered into an agreement with the Buyers pursuant to
which MLX shares management, operational and administrative functions
with the RAC Group (renamed Pameco Corporation). The costs for such
services are also shared. In 1994 MLX paid $60,000 to Pameco
Corporation under this agreement. MLX received $81,500 (net of
amounts paid) in 1993 and $470,000 in 1992 from Pameco Corporation.
Such amounts are included as a component of selling, general and
administrative expenses in the accompanying Consolidated Statements
of Income.
<PAGE>
MLX Corp. & Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTE B PROPOSED SALE OF S.K. WELLMAN
On April 10, 1995 the Company entered into a stock purchase
agreement (the Agreement) with a third party for the sale of all the
common stock of S.K. Wellman for $60 million, which includes certain
amounts related to the repayment or assumption of debt and capital
leases by the purchaser. Such sale is subject to the approval of the
common shareholders of MLX Corp. at the 1995 annual meeting of
shareholders. The Company's Board of Directors has recommended
approval of the proposed sale and has obtained a fairness opinion
from an investment banker regarding the consideration to be received
by the Company in the transaction.
If the transaction is approved by the MLX shareholders and
consummated thereafter, the Company's investment in Wellman will be
exchanged for cash, and the assets and liabilities of S.K. Wellman
will cease to be a part of the consolidated financial statements of
MLX. The following table shows the unaudited pro forma effect of this
transaction on the historical consolidated balance sheet of the
Company at December 31, 1994 as if such transaction had occurred on
that date (in thousands):
<TABLE>
Historical Required and Pro Forma
Balance Sheet at Sale of Discretionary Balance Sheet at
December 31, 1994 S.K. Wellman Repayments December 31, 1994
<S> <C> <C> <C> <C>
Cash $ 1,087 $ 44,235 $(10,220) $35,102
Other current assets 20,277 (20,277) - -
Property, plant and equipment 13,362 (13,361) - 1
Intangible assets 2,288 (2,288) - -
Other assets -- escrow fund - 4,000 - 4,000
Other assets 510 (510) - -
$37,524 $ 11,799 $(10,220) $39,103
Current liabilities $10,456 $ (7,308) $ (251) $ 2,897
Long-term debt 13,960 (11,496) (2,464) -
Other long-term liabilities 2,379 (2,379) - -
Shareholders' equity 10,729 32,982 (7,505) 36,206
$37,524 $ 11,799 $(10,220) $39,103
</TABLE>
Reference is made to Note J for information regarding sales
and earnings of S.K. Wellman and its Italian and Canadian operations.
The Agreement includes provisions for certain representations
and warranties made by the Company for such matters as environmental
status, income tax status, etc. In this connection, it is anticipated
that $4 million of the proceeds will be deposited with a trustee bank
for a period of 15 months to fund any claim against such
representations and warranties. MLX's maximum liability for such
claims under the Agreement is limited to $5 million. The Company will
also be required to deposit with the trustee bank 85% of MLX's
estimate of certain tax liabilities of S.K. Wellman that may arise
from the sale. Such amount has not been determined and has not been
included in the above table.
NOTE C GAIN ON EARLY RETIREMENT OF DEBT
Effective December 31, 1992, the Company exchanged shares of
its Series A Preferred Stock (see Note F) 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,
a senior term loan with a carrying value of $2.6 million was replaced
with a note for $2.5 million (since repaid). The resulting net gain
on early retirement of debt of $4.1 million was reported as of
December 31, 1992 as an extraordinary item.
<PAGE>
MLX Corp. & Subsidiaries
NOTE C GAIN ON EARLY RETIREMENT OF DEBT (CONTINUED)
During the quarter ended June 30, 1993, the Company exchanged
shares of its Series A Preferred Stock (see Note F) with an
approximate fair value of $1.6 million (face value of $1.9 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 net gain on early retirement of debt of $3.6 million
was reported in the quarter ended June 30, 1993 as an extraordinary
item.
NOTE D LONG-TERM DEBT
The components of long-term debt are as follows (in
thousands):
1994 1993
S. K. Wellman:
Senior credit facility:
Revolving credit facility $ 1,981 $ 2,345
Real estate term facility - 6,450
Consolidated term facility 8,399 -
Mezzanine component 550 1,350
Equipment term note - 420
Seller note, due 1995 with interest at 8% - 1,703
Note payable to bank 128 175
Capital leases 64 -
MLX:
Zero coupon bonds net of unamortized
discount of $130 in 1994 and $147 in 1993 1,022 1,005
Variable rate subordinated notes 1,441 1,397
14,165 14,845
Less current portion of debt (205) (53)
$13,960 $14,792
S. K. Wellman: S. K. Wellman's primary credit facility at
December 31, 1994 was the senior credit facility which provides for
four borrowing components with varying rates and repayment
obligations. It is secured by a lien of substantially all the North
American assets of S. K. Wellman and a pledge of the common stock of
the Italian and Canadian subsidiaries. The loan and security
agreement for the senior credit facility requires S. K. Wellman to,
among other things, maintain certain levels of working capital, net
worth and profitability. This agreement also limits cash dividends
and loans to MLX Corp. Under the most restrictive covenants, retained
earnings in the amount of approximately $1.3 million were free from
limitations on the payment of dividends to MLX Corp. at December 31,
1994. In November 1994 the loan and security agreement was amended to
extend the expiration of the facility through January 1998 and to
consolidate the real estate term facility, the original equipment
term note and the proceeds used to repay the seller note into the
consolidated term loan.
The senior credit facility has a revolving credit component
with a maximum borrowing limit of $7.2 million which expires in
January 1998. This revolving loan bears interest at prime rate plus
1.25% (9.75%) at December 31, 1994 compared to prime rate plus 2.0%
(8%) at December 31, 1993. The amount which may be borrowed is
subject to certain availability formulas regarding accounts
receivable and inventory.
<PAGE>
MLX Corp. & Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTE D LONG-TERM DEBT (continued)
The senior credit facility also includes a consolidated term
loan component with an initial balance of $8.5 million. This loan
requires monthly amortization of $101,000 with any remaining unpaid
balance payable in January 1998. The loan bears an initial interest
rate of prime plus 2.0% which drops to prime plus 1.75% after certain
conditions are met. The senior credit facility also includes a $2
million 30-month mezzanine term facility (expiring in July 1995) with
monthly amortization requirements of $67,000 and an interest rate of
prime plus 3.5%. This facility was repaid, with no penalty, in
February 1995.
The senior credit facility has an additional line of credit
intended to fund capital expenditures up to a maximum of $2.0
million. At December 31, 1994 no amounts were outstanding under the
arrangement. This line will bear interest at prime plus
1.75%.Advances may be made at any time until January 1997.
The proceeds of the note payable to a bank were used to fund
certain capital expenditures in Italy. The note bears interest at 9%,
is unsecured and is due in varying quarterly installments through
December 1996.
MLX: The Company has outstanding Zero Coupon Bonds with a
maturity date of March 2002. As of December 1992 and April 1993
certain of the Bonds were exchanged for MLX Series A Preferred Stock
(See Note C) and Variable Rate Notes. Subsequent to these exchanges,
Zero Coupon Bonds with a net carrying value at December 31, 1994 of
$1.0 million remain outstanding. Such Bonds have a maturity value of
$1.2 million and have an accretion rate of 1.7% for financial
reporting purposes. The redemption value of the Bonds remaining after
the exchange was $605,000 at December 31, 1994.
In April 1993 MLX issued variable rate subordinated notes to
certain holders of its Zero Coupon Bonds. These notes, which are
unsecured, bear interest at an initial rate of the prime rate plus
2.5% (11% at December 31, 1994) but not less than 9%, increasing to
a maximum rate of the prime rate plus 7%, but not less than 14% on
January 1, 1999. The notes were initially recorded at their estimated
fair value and are being increased to the redemption value of
$1,444,000 during the period from date of issuance until March 19,
2002 (date of maturity). The notes are due in 2002 or, on a pro rata
basis, whenever shares of the Series A preferred stock are
repurchased.
Aggregate maturities and other required reductions of debt for
the next five years are: 1995 -$205,000, 1996 - $1.4 million, 1997 -
$1.3 million, 1998 - $8.6 million and 1999 - $32,000. The Company
intends to pay installments due in 1995 under the consolidated term
facility and mezzanine component with borrowings under the revolving
credit facility. Accordingly, such amounts have been classified as
long term.
Interest paid was $1.4 million in 1994, $1.5 million in 1993,
and $1.2 million in 1992.
NOTE E REVERSE STOCK SPLIT
On June 2, 1993, the stockholders 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.
All references in the financial statements with regard to
average number of shares of common stock and related prices and per
share amounts have been restated to reflect the one-for-ten reverse
stock split.
NOTE F SHAREHOLDERS' EQUITY AND STOCK OPTIONS
The assets and liabilities of foreign operations are
translated into U.S. dollars at current exchange rates with the
resulting cumulative translation adjustment, $(1,018,000) at December
31, 1994 and $(1,127,000) at December 31, 1993, recorded as a
separate component of shareholders' equity. Exchange adjustments
resulting from foreign currency translations included in other income
(expense) in the accompanying Consolidated Statements of Income were
$95,000 in 1994, $(255,000) in 1993 and $(461,000) in 1992.
<PAGE>
MLX Corp. & Subsidiaries
NOTE F SHAREHOLDERS' EQUITY AND STOCK OPTIONS (CONTINUED)
The Company has a stock option plan which provides that
options may be granted to key employees, including officers and
directors, to purchase common stock at a price not less than market
value on the date the option is granted. The stock options are
exercisable over periods not exceeding five years. A summary of
transactions under the plan is as follows:
<TABLE>
1994 1993 1992
Number Price Per Number Price Per Number Price Per
of Shares Share of Shares Share of Shares Share
<S> <C> <C> <C> <C> <C> <C>
Outstanding at beginning of year 94,733 $2.50-8.44 87,000 $2.50-33.70 75,490 $5.00-33.70
Granted 14,300 4.00 11,800 4.25-8.44 86,000 2.50
Exercised (3,600) 2.50 (867) 2.50-8.44 - -
Canceled for reissuance(1) - - - - (24,450) 5.00-31.30
Canceled (966) 2.50-8.44 (3,200) 2.50-33.70 (50,040) 5.00-33.70
Outstanding at end of year 104,467 $2.50-8.44 94,733 $ 2.50-8.44 87,000 $2.50-33.70
At December 31:
Exercisable 91,100 58,854 29,665
Reserved for future grant 3,817 17,151 25,750
</TABLE>
(1) As a result of the sale of the RAC Group in March of 1992,
certain options held by employees of that group were canceled.
Options were also canceled for MLX employees and reissued at the
market price as of the new date of issuance. Certain other key
employees of MLX were also issued options during 1992.
On February 11, 1991, MLX issued options to its Chief
Executive Officer (CEO) to acquire 190,400 shares of the Company's
common stock at $5.00 per share (the market value at date of grant),
which are not reflected in the table above. At December 31, 1994, all
such options are exercisable and will expire in February 1998. The
options contain a clause that in the event that any new or existing
shareholders increase their percentage ownership interest of the
Company's common stock by 5% or more, the options are immediately
converted to a Stock Appreciation Rights (SAR).
The Company is authorized to issue up to 500,000 shares
designated as Series A Preferred Stock with a par value and
liquidation preference of $30 per share. The Series A Preferred Stock
is non-voting. Cumulative dividends on the Series A Preferred Stock
are payable when, and if declared, at an initial rate of the prime
rate plus 2.5% (11% at December 31, 1994), but not less than 9%,
increasing to a maximum rate of the prime rate plus 7%, but not less
than 14% on January 1, 1999. The dividend rate will be 1% greater
than the rate reflected above for any period after March 31, 1994
during which dividends for more than one quarter remain unpaid. The
Series A Preferred Stock is redeemable at the option of the Company
at any time at a cash redemption price equal to $30 per share plus
any and all cumulative dividends accrued and unpaid on the date of
redemption.
An aggregate of 264,000 shares of Series A Preferred Stock was
issued (see Note C) to certain holders of Zero Coupon Bonds as of
December 1992 and April 1993. The Series A Preferred Stock 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 retained earnings and amounted to $284,000 in
1994 and $235,000 in 1993.
<PAGE>
MLX Corp. & Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTE G INCOME TAXES
Effective January 1, 1993, the Company adopted the
liability method of accounting for income taxes as required by FASB
Statement 109, "Accounting for Income Taxes."
At December 31, 1994, MLX has net operating loss
carryforwards, existing as of the Confirmation Date, of approximately
$277.4 million which are available to offset future taxable income
for federal income tax purposes. Such carryforwards expire as
follows: $16.8 million in 1995, $41.3 million in 1996, $144.3 million
in 1997, $1.2 million in 1998 and $73.8 million in 1999. Any tax
benefit derived from the utilization of these net operating loss
carryforwards is excluded from operations and credited to capital in
excess of par value in the year such tax benefits are utilized.
Subsequent to the Confirmation Date, the Company has available
(for federal income tax purposes), net operating loss carryforwards
of approximately $59.2 million, which expire as follows: $2.7 million
in 2000, $45,000 in 2001, $2.2 million in 2002, $8,000 in 2004, $5.0
million in 2005, $2.0 million in 2006 and $47.3 million in 2007.
The cumulative net operating loss for financial reporting
purposes approximates the tax amount as shown above. The components
of the income tax provision are as follows (in thousands):
1994 1993 1992
Charge in lieu of federal income taxes:
Operating earnings $1,314 $1,243 $1,110
Extraordinary gain - 1,869 1,661
Total $1,314 $3,112 $2,771
Federal alternative minimum taxes $ 80 $ 150 $ -
Foreign, state and local income taxes:
Foreign $ 699 $ 168 $ (82)
State and local 295 356 400
Total $ 994 $ 524 $ 318
The charge in lieu of federal income taxes is computed by
applying the statutory rate to earnings before income taxes adjusted
for items which are not deductible (includable) for income tax
purposes of $(954,000) in 1994, $(2,000) in 1993 and $617,000 in 1992
(principally results from foreign operations and goodwill
amortization) and further adjusted for foreign, state and local
taxes.
Deferred income taxes reflect the net tax effects of temporary
differences between the carrying amounts of assets and liabilities
for financial reporting purposes and the amounts used for income tax
purposes. Significant components of the Company's deferred tax assets
as of December 31, 1994 and 1993 are as follows (in thousands):
1994 1993
Federal net operating loss carryforward $ 114,000 $ 115,000
State net operating loss carryforward 3,000 3,000
Reserves and other 2,000 3,000
Total 119,000 121,000
Valuation allowance for deferred tax assets (119,000) (121,000)
Net deferred tax assets $ - $ -
The valuation allowance for deferred tax assets decreased $3
million during 1993.
<PAGE>
MLX Corp. & Subsidiaries
NOTE G INCOME TAXES (CONTINUED)
Undistributed earnings of the Company's foreign subsidiaries
were not significant at December 31, 1994. These earnings are
considered to be indefinitely reinvested and, accordingly, no
provision for U.S. federal and state income taxes has been provided
thereon. Upon distribution of those earnings in the form of dividends
or otherwise, the Company would be subject to both U.S. income taxes
and withholding taxes payable to various foreign countries.
Cash paid for foreign, state and local taxes and federal
alternative minimum taxes amounted to $810,000, $504,000 and $500,000
in 1994, 1993 and 1992, respectively.
NOTE H EMPLOYEE BENEFITS
The Company and its subsidiaries sponsor a defined
contribution plan which covers a majority of their employees. This
plan provides for voluntary employee contributions, a matching
Company contribution and a discretionary Company contribution.
Expenses related to this plan were $516,000, $470,000 and $128,000 in
1994, 1993 and 1992, espectively.
The Company and certain of its subsidiaries sponsor
two non-contributory defined benefit pension plans covering certain
of their U.S. and Canadian employees. Benefits under one plan are
based on compensation during the years immediately preceding
retirement. Under the other plan, the benefits are based on a fixed
annual benefit for each year of credited service. It is the Company's
policy to make contributions to these plans sufficient to meet
minimum funding requirements of the applicable laws and regulations,
plus such additional amounts, if any, as the Company's actuarial
consultants advise to be appropriate. Plan assets consist principally
of equity securities and fixed income instruments. In 1992 the
Company terminated one of its defined benefit plans and recognized a
curtailment gain of $200,000. The Company settled the obligation
under the plan in 1993, which resulted in a loss of $230,000. A
summary of the components of net periodic pension costs for the plans
is as follows (in thousands):
<TABLE>
1994 1993 1992
<S> <C> <C> <C>
Service cost $ 125 $ 105 $ 344
Interest cost 160 259 439
Actual return on plan assets 71 (281) (197)
Net amortization and deferral (227) 88 (90)
$ 129 $ 171 $ 496
Assumptions used were:
Weighted average discount rate 8.38% 7.44% 8.03%
Rate of increase in compensation levels 5.00% 6.00% 6.00%
Weighted average expected long-term rate of return on assets 8.63% 8.63% 8.66%
</TABLE>
<PAGE>
MLX Corp. & Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTE H EMPLOYEE BENEFITS (continued)
The following table presents the funded status and amounts
recognized in the consolidated balance sheets at December 31,
1994 and 1993 related to the defined benefit plans (in thousands):
<TABLE>
Assets Exceed Accumulated Assets Exceed Accumulated
Accumulated Benefits Accumulated Benefits
Benefits Exceed Assets Benefits Exceed Assets
<S> <C> <C> <C> <C>
Actuarial present value of benefit obligations:
Vested benefit obligations $(372) $(1,558) $ (423) $(1,407)
Accumulated benefit obligations $(381) $(1,772) $ (434) $(1,613)
Projected benefit obligations $(495) $(1,772) $ (537) $(1,613)
Plan assets at fair value 891 1,038 1,012 984
Projected benefit obligations less than
(in excess of) plan assets 396 (734) 475 (629)
Unrecognized net loss 170 149 93 86
Prior service cost not yet recognized in
net periodic pension cost - 349 - 200
Unrecognized net obligation (asset) at January 1 (246) 76 (284) 214
Adjustment required to recognize minimum liability - (574) - (500)
Prepaid (accrued) pension cost at December 31 $320 $ (734) $ 284 $ (629)
</TABLE>
The Company provides a fixed non-contributory benefit towards
post-retirement health care for certain of its U.S. subsidiary's
retired union employees. The weighted average discount rate used
in determining the accumulated post-retirement benefit obligation was
7%. Post-retirement benefit costs, which are not considered
significant, amounted to $50,000 in 1994 and $62,000 in 1993.
Post-retirement benefit cost for 1992, which was recorded on a cash
basis, has not been restated. Such amounts for 1992 are not
considered significant.
NOTE I LEASES
The Company leases certain office and warehouse facilities and
equipment under noncancelable operating leases. Rental expense for
1994, 1993 and 1992 approximated $367,000, $312,000, and $351,000,
respectively. Future minimum lease commitments under these agreements
which have an original or existing term in excess of one year as of
December 31, 1994 are: 1995-$259,000, 1996 - $128,000, 1997 -$76,000,
1998 - $11,000 and 1999 - $9,000.
<PAGE>
MLX Corp. & Subsidiaries
NOTE J SEGMENT INFORMATION
The Company is engaged in the design, manufacture and sale of
high-energy friction materials which are used primarily in jet
aircraft brakes and heavy equipment brakes, transmissions and
clutches. The following table presents geographic segment information
for the years ended December 31, 1994, 1993 and 1992 (in thousands):
<TABLE>
Corporate United States Italy Canada Consolidated
<S> <C> <C> <C> <C> <C>
1994:
Net sales $ - $49,010 $10,195 $1,653 $60,858
Inter-area sales to affiliates - 1,093 21 288 1,402
Earnings (loss) (212) 2,445 402 112 2,747
Identifiable assets 1,005 25,699 9,086 1,734 37,524
1993:
Net sales $ - $46,923 $ 8,487 $1,626 $57,036
Inter-area sales to affiliates - 853 3 292 1,148
Earnings (loss) (888) 2,943 (66) 50 2,039
Identifiable assets 1,119 23,253 7,521 1,868 33,761
1992:
Net sales $ - $42,987 $ 9,157 $1,718 $53,862
Inter-area sales to affiliates - 731 82 139 952
Earnings (loss) (601) 2,291 (428) 123 1,385
Identifiable assets 921 22,824 7,494 1,889 33,128
</TABLE>
Inter-area sales to affiliates represent products which are
transferred between geographic areas on a basis intended to
approximate the market value of the products. Inter-area sales to
affiliates are not included in the net sales of each geographic
segment. Earnings (loss) by geographic area is defined as sales less
all expenses (excluding extraordinary gain on early retirement of
debt). Identifiable assets are those assets used exclusively in the
operations of each geographic area. Corporate assets consist
principally of cash and cash equivalents, prepaid expenses and
intangible assets.
Product research, development and engineering expenses were
$3.4 million, $3.4 million and $3.2 million in 1994, 1993 and 1992,
respectively. As a percent of sales, these expenditures were 5.5%,
5.9% and 5.9% respectively.
<PAGE>
MLX Corp. & Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTE J SEGMENT INFORMATION (CONTINUED)
The percentage of net sales to major customers was
as follows:
1994 1993 1992
Customer A 15% 16% 15%
Customer B 9% 9% 12%
Customer C 16% 14% 14%
Customer D 9% 9% 9%
The Company manufacturers and sells sintered friction
materials to original equipment manufacturers, aircraft
component and aftermarket customers. The Company's customers are not
concentrated in any specific geographic region. The Company
performs ongoing evaluations of its customers' financial condition
and generally does not require collateral. Receivables generally are
due within 60 days. Credit losses consistently have been within the
range of management's expectations.
REPORT OF INDEPENDENT AUDITORS
Board of Directors
MLX Corp.:
We have audited the accompanying consolidated balance sheets of
MLX Corp. and subsidiaries as of December 31, 1994 and 1993, and the
related consolidated statements of income, shareholders' equity and
cash flows for each of the three years in the period ended December
31, 1994. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on
these financial statements based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above
present fairly, in all material respects, the consolidated financial
position of MLX Corp. and subsidiaries at December 31, 1994 and
1993, and the consolidated results of their operations and their cash
flows for each of the three years in the period ended December
31,1994 in conformity with generally accepted accounting principles.
March 10, 1995, except for Note B,
as to which the date is April 10, 1995
Atlanta, Georgia
<PAGE>
CORPORATE DATA
Board of Directors
Brian R. Esher
Chairman of the Board, President & Chief Executive Officer of the
Company
W. John Roberts (1) (2)
Retired Senior Vice President-Finance and Treasurer, Amerisure
Companies
Willem F. P. de Vogel (2)
President, Three Cities Research, Inc.
H. Whitney Wagner
Managing Director, Three Cities Research, Inc.
Alfred R. Glancy III (1) (2)
Chairman President & Chief Executive Officer, MCN Corporation
S. Sterling McMillan, III (1)
Vice Chairman, Greenlead Capital Management, Inc.
J. William Uhrig (1)
Managing Director, Three Cities Research, Inc.
(1) Member of Audit Committee
(2) Member of Compensation Committee
MLX Corporate Management
Brian R. Esher
Chairman of the Board, President & Chief Executive Officer
Theodore R. Kallgren
Vice President, Fianance & Treasurer
Thomas C. Waggoner
Vice President, Chief Financial Officer & Secretary
S.K. Wellman Operating Management
Ronald E. Grambo
President
James W. Feldhouse
Vice President, Operations
Giovanni Cipolla
General Manager, European Operations
Frederich A. Kowalcyk
Vice President, Velvetouch Division
Anthony M. Gambatese
Vice President, Sales
Douglas O. Firman
Corporate Controller
Gail D. Terry
Operations Manager, Canada
Corporate Data
Executive Office
1000 Center Place
Norcross, Georgia 30093
Independent Auditors
Ernst & Young LLP
Atlanta, Georgia
Legal Counsel
Kilpatrick & Cody
Atlanta, Georgia
Stock Transfer Agent & Registrar
American Stock Transfer & Trust Company
New York, New York
MLX Corp. common stock is traded in the NASDAQ National Market under
the symbol "MLXR".
For more information about the Company or to obtain a copy of the
Company's annual report on Form 10-K, contact the Investor Relations
Department at (404) 798-0677 or write to MLX Corp., 1000 Center
Place, Norcross, Georgia 30093.
The annual meeting of shareholders of MLX Corp. will be held on June
27, 1995 at 11:00 a.m. at the offices of Kilpatrick &Cody, 1100
Peachtree Street, Suite 2700, Atlanta, Georgia.
Designed and produced by Phoenix Communications, Inc. / Atlanta,
Georgia
Printed on Recycled paper
MLX Corp. World Headquarters
1000 Center Place
Norcross, Georgia 30093
(404) 798-0677
FAX (404) 798-0633
S. K. Wellman World Headquarters
6180 Cochran Road
Solon, Ohio 44139
(216) 498-2275
FAX (216) 498-2290
MLX Corp. & Subsidiaries
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration
Statements (Form S-8 No. 33-32841 and No. 33-13130) pertaining to the
MLX Corp. Stock Option Plan and in the related Prospectuses of our
report dated March 10, 1995, except for Note B, as to which the date
is April 10, 1995, with respect to the consolidated financial
statements and schedules of MLX Corp. included in the Annual Report
of Form 10-K/A#2 for the year ended December 31, 1994.
Ernst & Young LLP
May 30, 1995
Atlanta, Georgia
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> DEC-31-1994
<CASH> 1,087
<SECURITIES> 0
<RECEIVABLES> 9,638
<ALLOWANCES> 0
<INVENTORY> 9,681
<CURRENT-ASSETS> 21,364
<PP&E> 27,374
<DEPRECIATION> 14,012
<TOTAL-ASSETS> 37,524
<CURRENT-LIABILITIES> 10,456
<BONDS> 0
<COMMON> 3,464
0
7,265
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 37,524
<SALES> 60,858
<TOTAL-REVENUES> 60,858
<CGS> 46,385
<TOTAL-COSTS> 54,190
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,553
<INCOME-PRETAX> 5,135
<INCOME-TAX> 2,388
<INCOME-CONTINUING> 2,747
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,747
<EPS-PRIMARY> 0.65
<EPS-DILUTED> 0.65
</TABLE>
Report of Independent Auditors
BOARD OF DIRECTORS
MLX CORP.
We have audited the consolidated balance sheets of MLX Corp. and
subsidiaries as of December 31, 1994 and 1993, and the related
consolidated statements of income, shareholders' equity, and cash
flows for each of the three years in the period ended December 31,
1994. Our audits also included the financial statement schedules
listed in the Index at Item 14(a). These financial statements and
schedules are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial
statements and schedules based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to
above present fairly, in all material respects, the consolidated
financial position of MLX Corp. and subsidiaries at December 31, 1994
and 1993, and the consolidated results of their operations and their
cash flows for each of the three years in the period ended December
31, 1994 in conformity with generally accepted accounting principles.
Also, in our opinion, the related financial statement schedules, when
considered in relation to the basic financial statements taken as a
whole, present fairly in all material respects the information set
forth therein.
ERNST & YOUNG LLP
March 10, 1995, except for Note B,
as to which the date id April 10, 1995
Atlanta, Georgia
<PAGE>
