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 September 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 (770) 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 September 30, 1995 was 2,607,384.
PART I - FINANCIAL INFORMATION
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
MLX Corp. and Subsidiaries
September 30 December 31
1995 1994
ASSETS
Current Assets
Cash and cash equivalents...... $ 162 $ 640
Short-term investments......... 32,769 -
Prepaid expenses............... 156 -
Total Current Assets. 33,087 640
Equipment, net.......................... 6 1
Escrow Funds............................ 5,424 -
Net Assets Held for Disposal............ - 13,232
Other Assets............................ - 1
TOTAL ASSETS............................ $38,517 $13,874
<TABLE>
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
MLX Corp. and Subsidiaries
September 30 December 31
1995 1994
LIABILITIES AND SHAREHOLDERS' EQUITY
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Current Liabilities
Accounts payable....................................................................... $ 166 $ 14
Accrued compensation and benefits...................................................... 38 201
Other accrued liabilities and expenses................................................. 127 207
Accrued taxes.......................................................................... 590 47
Dividends payable on Series A Preferred Stock.......................................... - 212
Total Current Liabilities ......................................................... 921 681
Long-Term Debt............................................................................ - 2,464
Other Long-Term Liabilities............................................................... 1,947 -
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,
2,607,000 shares outstanding in 1995 and 2,540,000 shares
outstanding in 1994.............................................................. 26 25
Capital in excess of par value........................................................ 72,758 61,874
Retained earnings deficit since December 31, 1984..................................... (37,135) (57,147)
35,649 12,017
Less other equity adjustments ........................................................ - (1,288)
Total Shareholders' Equity....................................................... 35,649 10,729
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY................................................ $38,517 $13,874
</TABLE>
Dollars in thousands
See notes to consolidated financial statements
<TABLE>
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
MLX Corp. and Subsidiaries
For the Quarter Ended
September 30
1995 1994
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Net Sales .................................................................................... $ - $ -
Costs and Expenses:
Costs of products sold ........................................................... - -
General and administrative expenses .............................................. 277 127
Operating Loss................................................................................ (277) (127)
Other expense .................................................................... - (25)
Interest income .................................................................. 543 3
Earnings (Loss) Before Income Taxes and Discontinued Operations............................... 266 (149)
Provision for Income Taxes:
Federal income taxes due and payable ............................................. (9) -
Federal income tax benefit (Charge in lieu of federal income taxes)............... (90) 51
Earnings (Loss) Before Discontinued Operations and Extraordinary Item......................... 167 (98)
Earnings from Discontinued Operations (net of tax of $508).................................... - 591
Net Earnings ................................................................................. 167 493
Dividends and accretion on preferred stock........................................ - (250)
Earnings Applicable to Common Stock........................................................... $ 167 $ 243
Earnings per Share:
Earnings (Loss) from continuing operations (net of dividends and
accretion on preferred stock).................................................. $ 0.06 $(0.13)
Earnings from discontinued operations............................................... - 0.22
Earnings applicable to common stock................................................. $ 0.06 $ 0.09
Average Outstanding Common Shares and Dilutive Options ....................................... 2,717 2,632
</TABLE>
Dollars in thousands (except per share data)
See notes to consolidated financial statements
<TABLE>
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
MLX Corp. and Subsidiaries
For the Nine Months Ended
September 30
1995 1994
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Net Sales .................................................................................... $ - $ -
Costs and Expenses:
Costs of products sold............................................................ - -
General and administrative expenses............................................... 740 649
Operating Loss................................................................................ (740) (649)
Other expense..................................................................... (115) (119)
Interest income................................................................... 561 10
Earnings (Loss) Before Income Taxes, Discontinued Operations and Extraordinary Item........... (294) (758)
Provision for Income Taxes:
Federal income taxes due and payable.............................................. (9) -
Federal income tax benefit (Charge in lieu of federal income taxes)............... 100 258
Earnings (Loss) Before Discontinued Operations and Extraordinary Item......................... (203) (500)
Discontinued Operations:
Earnings from operations (net of tax of $1,928 in 1995 and $1,889 in 1994)........ 2,507 2,832
Gain on disposal of business (net of tax of $13,311).............................. 18,086 -
Earnings from Discontinued Operations......................................................... 20,593 2,832
Extraordinary Gain on Early Retirement of Debt (net of tax of $140)........................... 272 -
Net Earnings ................................................................................. 20,662 2,332
Dividends and accretion on preferred stock........................................ (652) (745)
Earnings Applicable to Common Stock........................................................... $20,010 $1,587
Earnings per Share:
Earnings (Loss) from continuing operations (net of dividends and
accretion on preferred stock)................................................. $ (0.32) $(0.48)
Discontinued operations:
Earnings from operations...................................................... 0.94 1.08
Gain on disposal of business.................................................. 6.80 -
Extraordinary gain on early retirement of debt.................................... 0.10 -
Earnings applicable to common stock............................................... $ 7.52 $ 0.60
Average Outstanding Common Shares and Dilutive Options ....................................... 2,659 2,624
</TABLE>
Dollars in thousands (except per share data)
See notes to consolidated financial statements
<TABLE>
CONSOLIDATED STATEMENTS OF CASH FLOW (UNAUDITED)
MLX Corp. and Subsidiaries
For the Nine Months Ended
September 30
1995 1994
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Cash Flows From Operating Activities:
Earnings (loss) from continuing operations (net of extraordinary gain on
early retirement of debt) ..........................................................$ 69 $ (500)
Adjustments to reconcile earnings (loss) to net cash provided by operating activities:
Extraordinary gain on early retirement of debt.................................... (412) -
Charge in lieu of federal income taxes (Federal income tax benefit)............... 40 (258)
Depreciation...................................................................... 1 10
Change in operating assets and liabilities of continuing operations:
Accounts payable and accrued expenses............................................. (1,629) (163)
Other............................................................................. (351) 4
Net cash used in operating activities from continuing operations........................ (2,282) (870)
Net cash provided by operating activities from discontinued operations.................. 3,102 4,353
Net cash provided by operating activities .............................................. 820 3,483
Cash Flows From Investing Activities:
Proceeds from sale of business.......................................................... 49,177 -
Redemption of Series A Preferred Stock.................................................. (7,920) -
Increase in escrow fund for warranties and taxes........................................ (5,424) -
Investing cash flows from discontinued operations....................................... (1,437) (1,639)
Net cash provided by (used in) investing activities ............................................ 34,396 (1,639)
Cash Flows From Financing Activities:
Payments of dividends on Series A Preferred Stock....................................... (506) (1,000)
Repayment of debt....................................................................... (2,076) -
Receipts from stock option purchases.................................................... 177 -
Financing cash flows from discontinued operations....................................... (967) (875)
Net cash used in financing activities .......................................................... (3,372) (1,875)
Net increase (decrease) in cash and cash equivalents ........................................... 31,844 (31)
Cash and cash equivalents at January 1 ......................................................... 1,087 985
Cash and Cash Equivalents at September 30.......................................................$32,931 $ 954
Supplemental Cash Flow Disclosure:
Taxes paid on income ....................................................................$ 1,216 $ 353
Interest paid on debt obligations .......................................................$ 817 $1,022
</TABLE>
Dollars in thousands
See notes to consolidated financial statements
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
MLX Corp. and Subsidiaries
The Consolidated Financial Statements have been prepared by the Registrant
without audit, pursuant to the rules and regulations of the Securities and
Exchange Commission. Certain information and footnote disclosures normally
included in consolidated financial statements prepared in accordance with
generally accepted accounting principles have been omitted 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 September
30, 1995 and December 31, 1994, and the results of operations for the
quarters and nine months ended September 30, 1995 and 1994 and cash flows for
the nine months ended September 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 nine months ended September 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).
Quarter Ended Nine Months Ended
September 30 September 30
1995 1994 1995 1994
Earnings applicable to common
shareholders $ 167 $243 $20,010 $1,587
Charge in lieu of federal income
taxes which is not accruable or payable 90 229 11,243 941
Total $ 257 $ 472 $31,253 $2,528
Total Earnings per share $0.09 $0.18 $ 11.75 $ 0.96
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 (and
adjusted to $1,347,000 in August 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 nine months ended
September 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 nine months ended September 30, 1995 and 1994 were as follows (in
000's)
<TABLE>
Quarter Ended Nine Months Ended
Sept. 30, 1995 Sept. 30, 1994 Sept. 30, 1995 Sept. 30, 1994
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Net Sales $ - $14,940 $34,916 $45,340
Income from operations before income taxes $ - $ 1,099 $ 4,435 $ 4,721
Income taxes - 508 1,928 1,889
Income from discontinued operation $ - $ 591 $ 2,507 $ 2,832
</TABLE>
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 earnings/(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 as of June 30, 1995.
The net gain resulting from this early retirement of debt is reported in the
nine months ended September 30, 1995 as an extraordinary item. No such
repayment occurred in 1994.
Dividends and accretion on Series A Preferred Stock (redeemed on June 30,
1995) for the nine months ended September 30, 1995 and nine months ended
September 30, 1994 were effected by the increasing rate formula of the
preferred stock and the rise in prime rate on which such formula was based as
well as the length of the periods outstanding.
Liquidity and Capital Resources: At September 30, 1995 the Registrant had
working capital of $32.2 million, consisting principally of cash and
short-term investments of $32.9 million and estimated short-term obligations
for income taxes, transaction expenses and compensation of $0.9 million. The
Company's short-term investments at September 30, 1995 consisted principally
of overnight repurchase arrangements collateralized by U.S. Treasury and
federal agency obligations.
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 (adjusted to $1,347,000 in August 1995) relating to certain
estimated income tax obligations arising from the sale.
The Registrant believes that its current financial resources are adequate to
meet its projected operating needs in 1995.
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
None
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibit 27* - Financial Data Schedule
(b) Reports on Form 8-K:
None
* 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: November 3, 1995 MLX Corp.
(Registrant)
By: /s/ BRIAN R. ESHER By: /s/ THOMAS C. WAGGONER
Brian R. Esher Thomas C. Waggoner
Chairman and Chief Executive Officer President & Chief Financial
(Duly Authorized Officer) Officer
(Principal Financial Officer)
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
ART 5 FDS FOR 3RD QUARTER 10-Q
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> SEP-30-1995
<CASH> 32,931
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 33,087
<PP&E> 6
<DEPRECIATION> 0
<TOTAL-ASSETS> 38,517
<CURRENT-LIABILITIES> 921
<BONDS> 0
<COMMON> 25
0
0
<OTHER-SE> 35,624
<TOTAL-LIABILITY-AND-EQUITY> 38,517
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 740
<OTHER-EXPENSES> 115
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (294)
<INCOME-TAX> 91
<INCOME-CONTINUING> (203)
<DISCONTINUED> 20,593
<EXTRAORDINARY> 272
<CHANGES> 0
<NET-INCOME> 20,662
<EPS-PRIMARY> 7.52
<EPS-DILUTED> 7.52
</TABLE>
