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, 1995
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, 1995 was
2,578,950.
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PART I - FINANCIAL INFORMATION
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
MLX Corp. and Subsidiaries
June 30 December 31
1995 1994
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ASSETS
Current Assets
Cash and cash equivalents $ 523 $ 640
Short-term investments 33,719 -
Prepaid expenses 5 -
Total Current Assets 34,247 640
Equipment, net 6 1
Escrow Funds 5,250 -
Net Assets Held for Disposal - 13,232
Other Assets - 1
TOTAL ASSETS $39,503 $13,874
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CONSOLIDATED BALANCE SHEETS (UNAUDITED)
MLX Corp. and Subsidiaries
June 30 December 31
1995 1994
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LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Accounts payable $ 300 $ 14
Accrued compensation and benefits 159 201
Other accrued liabilities and expenses 132 207
Accrued taxes 1,654 47
Dividends payable on Series A Preferred Stock - 212
Total Current Liabilities 2,245 681
Long-Term Debt - 2,464
Other Long-Term Liabilities 1,945 -
Shareholders' Equity
Preferred stock, Series A, $30 par value - authorized 500,000 shares,
none outstanding in 1995 and 264,000 shares outstanding in 1994 - 7,265
Common stock, $.01 par value - authorized 38,500,000 shares,
2,579,000 shares outstanding in 1995 and 2,540,000 shares outstanding in 1994 25 25
Capital in excess of par value 72,590 61,874
Retained earnings deficit since December 31, 1984 (37,302) (57,147)
35,313 12,017
Less other equity adjustments - (1,288)
Total Shareholders' Equity 35,313 10,729
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $39,503 $13,874
Dollars in thousands
See notes to consolidated financial statements
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CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
MLX Corp. and Subsidiaries
For the Six Months Ended
June 30
1995 1994
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Net Sale $ - $ -
Costs and Expenses:
Costs of products sold - -
General and administrative expenses 463 522
Other expense 97 87
Loss Before Income Taxes, Discontinued Operations and Extraordinary Item (560) (609)
Federal Income Tax Benefit 190 207
Loss before Discontinued Operations and Extraordinary Item (370) (402)
Discontinued Operations:
Earnings from operations (net of tax of $1,928 in 1995 and $1,380 in 199 2,507 2,241
Gain on disposal of business (net of tax of $13,311) 18,086 -
Earnings from Discontinued Operations 20,593 2,241
Extraordinary Gain on Early Retirement of Debt (net of tax of $140) 272 -
Net Earnings 20,495 1,839
Dividends and accretion on preferred stock (652) (495)
Earnings Applicable to Common Stock $19,843 $1,344
Earnings per Share:
Loss from continuing operations (net of dividends and
accretion on preferred stock) $ (0.39) $(0.34)
Discontinued operations:
Earnings from operations 0.96 0.85
Gain on disposal of business 6.88 -
Extraordinary gain on early retirement of debt 0.10 -
Earnings applicable to common stock $ 7.55 $ 0.51
Average Outstanding Common Shares and Dilutive Options 2,629 2,619
Dollars in thousands (except per share data)
See notes to consolidated financial statements
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CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
MLX Corp. and Subsidiaries
For the Quarter Ended
June 30
1995 1994
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Net Sales $ - $ -
Costs and Expenses:
Costs of products sold - -
General and administrative expenses 263 283
Other expense 49 44
Loss Before Income Taxes, Discontinued Operations and Extraordinary Item (312) (327)
Federal Income Tax Benefit 106 111
Loss before Discontinued Operations and Extraordinary Item (206) (216)
Discontinued Operations:
Earnings from operations (net of tax of $1,057 in 1995 and $678 in 1994) 1,349 1,008
Gain on disposal of business (net of tax of $13,311) 18,086 -
Earnings from Discontinued Operations 19,435 1,008
Extraordinary Gain on Early Retirement of Debt (net of tax of $140) 272 -
Net Earnings 19,501 792
Dividends and accretion on preferred stock (352) (249)
Earnings Applicable to Common Stock $19,149 $ 543
Earnings per Share:
Loss from continuing operations (net of dividends and
accretion on preferred stock) $ (0.21) $(0.18)
Discontinued operations:
Earnings from operations 0.50 0.39
Gain on disposal of business 6.74 -
Extraordinary gain on early retirement of debt 0.10 -
Earnings applicable to common stock $ 7.13 $ 0.21
Average Outstanding Common Shares and Dilutive Options 2,685 2,625
Dollars in thousands (except per share data)
See notes to consolidated financial statements
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CONSOLIDATED STATEMENTS OF CASH FLOW (UNAUDITED)
MLX Corp. and Subsidiaries
For the Six Months Ended
June 30
1995 1994
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Cash Flows From Operating Activities:
Loss from continuing operations (net of extraordinary gain on early retirement of debt) $ (98) $ (402)
Adjustments to reconcile loss to net cash provided by operating activities:
Extraordinary gain on early retirement of debt (412) -
Federal income tax benefit (50) (207)
Depreciation 1 10
Change in operating assets and liabilities of continuing operations:
Accounts payable and accrued expenses (307) (112)
Other (202) -
Net cash used in operating activities from continuing operations (1,068) (711)
Net cash provided by operating activities from discontinued operations 2,645 2,464
Net cash provided by operating activities 1,577 1,753
Cash Flows From Investing Activities:
Proceeds from sale of S.K. Wellman 49,177 -
Redemption of Series A Preferred Stock (7,920) -
Increase in escrow fund for warranties and taxes (5,250) -
Investing cash flows from discontinued operations (1,437) (1,348)
Net cash provided by (used in) investing activities 34,570 (1,348)
Cash Flows From Financing Activities:
Payments of dividends on Series A Preferred Stock (506) (814)
Repayment of debt (2,076) -
Other 100 -
Financing cash flows from discontinued operations (967) (144)
Net cash used in financing activities (3,449) (948)
Net increase (decrease) in cash and cash equivalents 32,698 (553)
Cash and cash equivalents at January 1 1,087 985
Cash and cash equivalents at June 30 (including cash of
discontinued operations of $(457) in 1995) $33,785 $ 432
Supplemental Cash Flow Disclosure:
Federal taxes paid on income $ - $ 90
Interest paid on debt obligations $ 817 $ 684
Dollars in thousands
See notes to consolidated financial statements
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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 pursuant 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, 1994.
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, 1995 and December 31, 1994, and the results
of operations for the quarters and six months ended June 30, 1995 and
1994 and cash flows for the six months ended June 30, 1995 and 1994.
Note A - Income Taxes
At January 1, 1995, the Registrant had available net operating loss
carry forwards of approximately $337 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 statements of operations for the
quarters and six months ended June 30, 1995 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 for the respective periods (in thousands, except
per share data).
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Quarter Ended June 30 Six Months Ended June 30
1995 1994 1995 1994
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Earnings applicable to common stock $19,149 $ 543 $19,843 $1,344
Charge in lieu of federal income
taxes which is not accruable or payable 10,661 312 11,153 712
Total Earnings $29,810 $ 855 $30,996 $2,056
Total Earnings per share $ 11.10 $ 0.33 $ 11.79 $ 0.79
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Note B - Sale of S.K. Wellman Subsidiary
On June 30, 1995 the Company completed the sale of its S.K. Wellman
subsidiary for a purchase price of $60 million, which included
certain amounts related to the repayment or assumption of debt and
capital leases by the purchaser. The cash proceeds received by the
Company pursuant to the transaction, less purchase price adjustments
and estimated expenses, amounted to $48.9 million.
In connection with the sale of the S.K. Wellman subsidiary, the
Company repaid its principal and interest obligations under the
Subordinated Variable Rate Notes and Zero Coupon Bonds and redeemed
its Series A Preferred Stock along with unpaid dividends. The net
proceeds to the Company from the transaction after such repayments
were $38.5 million.
A portion of these proceeds was used by the Company to fund an escrow
account of $4 million to partially collateralize its indemnification
obligations in the purchase and sale agreement. This escrow fund is
expected to exist for a period of 15 months. The Company's maximum
liability under the indemnification provisions in the agreement is $5
million. An additional escrow fund amounting to $1,250,000 was
established at June 30, 1995 relating to certain estimated income tax
obligations arising from the sale. Other Long-Term Liabilities
include taxes related to this escrow fund which are estimated to be
due after one year.
The transaction resulted in a gain of $31.4 million. Income taxes
were provided for this gain as follows (in 000's)
Federal and State Income Taxes Due and Payable $ 3,291
Pro-Forma Charge in Lieu of Federal Income Taxes 10,020
$13,311
The consolidated financial statements for the quarter and six months
ended June 30, 1994 and the balance sheet at December 31, 1994 have
been restated to report the results of operations, balance sheet and
statement of cash flow for S.K. Wellman as a discontinued operation
in accordance with APB Opinion 30.
The operating results of the discontinued S.K. Wellman operations for
the quarter and six months ended June 30, 1995 and 1994 were as
follows (in 000's)
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Quarter Ended Six Months Ended
June 30, 1995 June 30, 1994 June 30, 1995 June 30, 1994
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Net Sales $16,194 $15,405 $34,916 $30,400
Income from operations before income taxes $ 2,406 $ 1,686 $ 4,435 $ 3,621
Income taxes 1,057 678 1,928 1,380
Income from discontinued operation $ 1,349 $ 1,008 $ 2,507 $ 2,241
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Note C - Gain on Early Retirement of Debt
In connection with the sale of the S.K. Wellman subsidiary (see Note
B), the Company retired Zero Coupon Bonds and Variable Rate
Subordinated Notes with a carrying value of $2.5 million for cash
payments totaling $2.1 million. The resulting net gain on early
retirement of debt (net of a pro-forma charge in lieu of federal
income taxes of $140,000) has been reported as an extraordinary item.
Also on June 30, 1995 the Company redeemed all its outstanding shares
of Series A Preferred Stock for cash payments totaling $7.9 million,
the contractual redemption value. The difference between this
redemption amount and the carrying value of $7.4 million was charged
to Capital in Excess of Par Value.
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
Basis of Discussion: The accompanying financial statements report
the financial condition and results of operations of the S.K. Wellman
subsidiary as a discontinued operation. Accordingly the results of
operations of Wellman for the periods presented are excluded from
income/(loss) from operations. The gain on the disposal of the
Wellman subsidiary is reported as a gain from the disposal of a
discontinued business.
The discussion below addresses the operations and financial condition
of the Registrant only. After the disposal of Wellman, the Registrant
has no recurring revenues or operating subsidiaries. In the
short-term, the Company intends to invest the proceeds of the Wellman
transaction in investment grade short-term marketable debt
securities. Courses of action being considered for the future by the
Company include (a) utilizing a portion of the proceeds to support
the issuance of a series of structured preferred securities and (b)
pursuing the acquisition of new businesses. No agreements have been
entered into with respect to either of these courses of action.
Operations: The general and administrative expenses of the
Registrant are incurred for compensation, occupancy, shareholder
costs (such as printing, distribution and stock transfer fees) and
legal and professional matters. The sale of the Wellman subsidiary
is not expected to materially alter the level of these expenses
incurred by the Registrant.
In connection with the disposal of Wellman, the Company's Zero Coupon
Bonds and Variable Rate Subordinated Notes with a carrying value of
$2.5 million were repaid with cash payments amounting to $2.1
million. The net gain resulting from this early retirement of debt
is reported in the quarter and six months ended June 30, 1995 as an
extraordinary item. No such repayment occurred in the comparable
earlier periods.
Dividends and accretion on Series A Preferred Stock (redeemed on June
30, 1995) for the quarter and six months ended June 30, 1995 exceeded
such charges for the quarter and six months ended June 30, 1994 due
to the increasing rate formula of the preferred stock and the rise in
prime rate on which such formula was based.
Liquidity and Capital Resources: At June 30, 1995 the Registrant had
working capital of $32.0 million, consisting principally of cash and
short-term investments of $34.2 million and estimated short-term
obligations for income taxes, transaction expenses and compensation
of $2.1 million. The net proceeds of the Wellman transaction were
invested in short-term investments at major commercial banks at June
30, 1995.
In connection with the sale of Wellman, the Company funded an escrow
fund with a cash payment of $4 million to partially collateralize the
indemnification obligations of the Registrant in the purchase and
sale agreement. The Company's maximum liability under such indemnity
provisions is $5 million. An additional escrow fund amounting to
$1,250,000 was established at June 30, 1995 relating to certain
estimated income tax obligations arising from the sale.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
None.
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 June 27,
1995 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 2,565,450 shares were eligible to vote. The
vote totals for the director nominees were as follows:
Brian R. Esher 2,115,555; Willem F.P. de Vogel, 2,115,578;
Alfred R. Glancey III, 2,115,627; S. Sterling McMillan III,
2,115,616; W. John Roberts, 2,115,086; J. William Uhrig,
2,115,488; and H. Whitney Wagner, 2,115,488.
The proposal to approve the sale of the capital stock of
the S.K. Wellman Limited, Inc. subsidiary was approved by
the following vote:
Shares Shares Shares
Voted "For" Voted "Against" "Abstaining"
1,682,738 10,359 31,711
The proposal to adopt the MLX Corp. Stock Option and
Incentive Award Plan was approved by the following vote:
Shares Shares Shares
Voted "For" Voted "Against" "Abstaining"
1,855,216 48,207 216,401
Item 5. Other Information
The sale of the capital stock of the Registrant's S.K.
Wellman Limited, Inc. subsidiary, which was approved at the
Registrant's June 27, 1995 Annual Meeting of Shareholders,
was consummated on June 30, 1995.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibit 27* -Financial Data Schedule
(b) Reports: On Form 8-K:
On April 12, 1995, the Registrant filed a report on
Form 8-K to report the execution and delivery of an
agreement to sell all of the capital stock of its S.K.
Wellman Limited, Inc. subsidiary.
* Filed with this report.
SIGNATURES
Pursuant to the requirements of Securities Exchange Act of 1934, the
Registrant has duly caused the Report to be signed on its behalf by
the undersigned hereunto duly authorized.
Date: August 11, 1995 MLX Corp.
(Registrant)
By: /s/ BRIAN R. ESHER By: /s/THOMAS C. WAGGONER
Brian R. Esher Thomas C. Waggoner
Chief Executive Officer President & Chief Financial Officer
(Duly Authorized Officer) (Principal Financial Officer)
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<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> JUN-30-1995
<CASH> 34,242
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<ALLOWANCES> 0
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