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 March 31, 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 March 31, 1995 was
2,539,550.
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PART I - FINANCIAL INFORMATION
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
MLX Corp. and Subsidiaries
March 31 December 31
1995 1994
ASSETS
<S> <C> <C>
Current Assets
Cash and cash equivalents $ 646 $ 1,087
Accounts receivable, net 10,401 9,638
Inventories:
Raw materials and work-in-process 7,296 7,328
Manufactured goods 1,936 2,353
Total inventories 9,232 9,681
Prepaid expenses 979 958
Total Current Assets 21,258 21,364
Property, Plant & Equipment, net 13,401 13,362
Intangible Assets, net 2,155 2,288
Other Assets 509 510
TOTAL ASSETS $37,323 $37,524
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CONSOLIDATED BALANCE SHEETS (UNAUDITED)
MLX Corp. and Subsidiaries
March 31 December 31
1995 1994
LIABILITIES AND SHAREHOLDERS' EQUITY
<S> <C> <C>
Current Liabilities
Accounts payable $ 4,630 $ 4,629
Accrued compensation and benefits 2,047 2,965
Other accrued liabilities and expenses 1,754 1,630
Accrued taxes 819 815
Dividends payable on Series A Preferred Stock 241 212
Current portion of debt 183 205
Total Current Liabilities 9,674 10,456
Long-Term Debt 13,432 13,960
Other Long-Term Liabilities 2,377 2,379
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 7,324 7,265
Common stock, $.01 par value -
authorized 38,500,000 shares,
2,540,000 shares outstanding 25 25
Capital in excess of par value 62,352 61,874
Retained earnings deficit since
December 31, 1984 (56,438) (57,147)
13,263 12,017
Less other equity adjustments (1,423) (1,288)
Total Shareholders' Equity 11,840 10,729
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $37,323 $37,524
Dollars in thousands
See notes to consolidated financial statements
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CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
MLX Corp. and Subsidiaries
For the Quarter Ended
1995 1994
<S> <C> <C>
Net Sales $18,002 $14,995
Costs and Expenses:
Costs of products sold 13,902 11,244
Selling, general and administrative expenses 1,825 1,773
Amortization of goodwill and organization costs 57 57
15,784 13,074
Operating Earnings 2,218 1,921
Other Income (Expense):
Interest expense (384) (382)
Other income (expense) (53) 113
Earnings before Income Taxes 1,781 1,652
Provision for Income Taxes:
Federal income taxes due and payable (30) (30)
Charge in lieu of federal income taxes (492) (400)
Foreign, state and local income taxes (265) (176)
Net Earnings 994 1,046
Dividends and accretion on preferred stock (300) (246)
Earnings applicable to common stock $ 694 $ 800
Earnings per Share $ 0.27 $ 0.31
Average Outstanding Common Shares and Dilutive Options 2,574 2,614
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 Quarter Ended
March 31
1995 1994
<S> <C> <C>
Cash Flows From Operating Activities:
Net Earnings $ 994 $1,046
Adjustments to reconcile earnings to net cash provided by (used in) operating activities:
Charge in lieu of federal income taxes 492 400
Depreciation and amortization 589 558
Change in operating assets and liabilities:
Accounts receivable (763) (724)
Inventories and prepaid expenses 428 (1,206)
Accounts payable and accrued expenses (782) 39
Other (39) (428)
Net cash provided by (used in) operating activities 919 (315)
Cash Flows From Investing Activities:
Purchase of property, plant and equipment (620) (372)
Net cash used in investing activities (620) (372)
Cash Flows From Financing Activities:
Net proceeds under revolving credit agreement (528) 1,487
Payments of dividends on Series A Preferred Stock (212) (638)
Net cash provided by (used in) financing activities (740) 849
Net increase (decrease) in cash and cash equivalents (441) 162
Cash and cash equivalents at January 1 1,087 985
Cash and cash equivalents at March 31 $ 646 $ 1,147
Supplemental Cash Flow Disclosure:
Federal taxes paid on income $ 0 $ 90
Interest paid on debt obligations $ 338 $ 339
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 March 31, 1995 and December 31, 1994, and the results
of operations and cash flows for the quarters ended March 31, 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 ended March 31, 1994 and 1995 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 quarter (in thousands, except per share
data).
March 31
1995 1994
Earnings applicable to common shareholders $ 694 $ 800
Charge in lieu of federal income taxes
which are not accruable or payable 492 400
Total $1,186 $1,200
Total Earnings per share $ .46 $ .46
NOTE B - PROPOSED SALE OF S.K. WELLMAN
On April 10, 1995 the Company entered into a stock purchase agreement
(the Agreement) with The Hawk Group of Companies, Inc. 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. The sale is subject to the
majority vote of the common shareholders of MLX Corp. and will be
voted on at the annual meeting of such shareholders expected to be
held in late June, 1995. The Company's Board of Directors has
recommended approval of the proposed sale and has received a fairness
opinion from Donaldson, Lufkin & Jenrette Securities Corporation to
the effect that the consideration to be received by the Company in
the transaction is fair to the Company from a financial point of
view.
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 balance sheet of the Company at March
31, 1995 as if such a transaction, including expenses and income
taxes associated with the sale, had occurred on that date (in
thousands):
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Historical Pro Forma
Balance Sheet Disposition of Other Balance Sheet
March 31, 1995 S.K. Wellman Adjustments March 31, 1995
<S> <C> <C> <C> <C>
Cash $ 646 $ 44,756 $(10,267) $ 35,135
Other current assets 20,612 (20,612)
Property, plant and
equipment 13,401 (13,397) 4
Intangible assets 2,155 (2,155)
Other assets - escrow fund 4,000 4,000
Other assets 509 (509)
$37,323 $12,083 $(10,267) $ 39,139
Current liabilities $9,674 $(6,611) $ (285) $ 2,778
Long-term debt 13,432 (10,957) (2,475)
Other long-term liabilities 2,377 (2,377)
Shareholders' equity 11,840 32,028 (7,507) 36,361
$37,323 $12,083 $(10,267) $39,139
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All of the Company's revenues are attributable to the Wellman
business. In addition, Wellman had earnings before income taxes of
$2.1 million for the quarter ended March 31, 1995.
The Agreement contains certain representations and warranties made by
the Company with respect to matters such as environmental status,
income tax compliance, etc. In this connection, an escrow fund
totaling $4 million of the proceeds will be deposited with a trustee
bank for a period of 15 months following the transaction to fund any
claim against such representations and warranties. The Company's
total liability under such representation and warranties is limited
to $5 million. MLX will also be required to deposit with the trustee
bank 85% of MLX's estimate of certain tax liabilities that may arise
from the sale. Such amount has not been determined and accordingly,
has not been reflected above in the escrow fund balance.
In connection with the sale, the Company plans to repay its Zero
Coupon Bonds and Variable Rate Subordinated Notes and redeem its
Series A Preferred Stock including accrued interest and dividends.
These repayments, redemptions and adjustments relating thereto are
reflected in the above pro forma balance sheet.
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
Seasonality: Sales of the Registrant's subsidiary, S.K. Wellman, are
generally not seasonal in nature, however, due to the extended
holiday shutdowns of its major customers, Wellman does experience a
modest reduction in sales volume during the third quarter for its
European operations, and during the fourth quarter for both its North
American and European operations.
Operations: For the quarter ended March 31, 1995, net sales of the
Registrant were $18.0 million and operating earnings were $2.2
million. Comparatively, the Registrant recorded net sales of $15.0
million and operating earnings of $1.9 million in the first three
months of 1994. The increase in sales is due to higher demand by
domestic original equipment manufacturers and overseas customers of
the Registrant's Italian facility and higher domestic sales of
aircraft components.
Gross margins for the first quarter of 1995 were 22.8% compared to
25.0% in 1994. The decrease in margin percentage resulted from
increases in raw material commodity prices (principally steel),
strategic price concessions and outsourcing due to capacity
restraints.
Selling, general and administrative expenses were $1.83 millionin the
first quarter of 1995 compared to $1.77 million for the first quarter
of 1994. This increase of $52 thousand is due generally to higher
occupancy and selling expenses.
Interest expense for the quarter ended March 31, 1995 was $384,000
compared to $382,000 for the comparable quarter in 1994. This
resulted from lower overall borrowing levels, which were offset by
the impact of higher interest rates linked to the prime rate.
Liquidity and Capital Resources: At March 31, 1995, the Registrant's
consolidated working capital amounted to $11.7 million compared to
$11.4 million at December 31, 1994. The 1995 working capital balance
included higher trade receivables due to increasing sales and higher
trade accounts payable resulting from higher production requirements.
The Registrant had available unused revolving lines of credit of an
additional $3.4 million at March 31, 1995. In addition, the Company
has a capital expenditure line with a maximum borrowing limit of $2.0
million during the two year period ending January 14, 1997. At March
31, 1995, the Company had borrowed an aggregate of $450 thousand
under this line.
The Registrant believes that its current financial resources and
anticipated cash flows from operations are adequate to meet its
projected operating needs in 1995, as the Company presently exists.
Proposed Sale of S.K. Wellman:
On April 10, 1995, the Company entered into an agreement for the
purchase and sale of all of the capital stock of S.K. Wellman
Limited, Inc. for an aggregate purchase price of $60 million, which
includes certain amounts related to the repayment or assumption of
debt and capital leases by the purchaser. Net cash proceeds to the
Company are estimated to be approximately $48.8 million after such
adjustments and estimated transaction expenses. The Company further
plans, in connection with the proposed sale, to repay its outstanding
Zero Coupon Bonds and Variable Rate Subordinated Notes and redeem its
Series A Preferred Stock including any accrued interest and
dividends. After these repayments, the transaction is expected to net
approximately $36 million in cash to the Company. The Company's plans
and intentions following the consummation of the sale are set forth
in the Proxy Statement pertaining to the 1995 annual meeting of
shareholders.
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 2.18 - Agreement for purchase
and sale of the
capital stock of
S.K. Wellman Ltd, Inc.
dated April 10, 1995
(incorporated herein
by reference to the
Registrant's Proxy
Statement filed with
the commission for the
1995 annual meeting of
the Registrant's
shareholders).
Exhibit 27* - Financial Data
Schedule
(b) Reports: 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: May 5, 1995 MLX Corp.
(Registrant)
By: /s/ BRIAN R. ESHER By: /s/THOMAS C. WAGGONER
Brian R. Esher Thomas C. Waggoner
Chief Executive Officer Chief Financial Officer
(Duly Authorized Officer) (Principal Financial
Officer)
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<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> MAR-31-1995
<CASH> 646
<SECURITIES> 0
<RECEIVABLES> 10,401
<ALLOWANCES> 0
<INVENTORY> 9,232
<CURRENT-ASSETS> 21,258
<PP&E> 28,011
<DEPRECIATION> 14,610
<TOTAL-ASSETS> 37,323
<CURRENT-LIABILITIES> 9,674
<BONDS> 0
<COMMON> 4,516
0
7,324
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<TOTAL-LIABILITY-AND-EQUITY> 37,323
<SALES> 18,002
<TOTAL-REVENUES> 18,002
<CGS> 13,902
<TOTAL-COSTS> 15,784
<OTHER-EXPENSES> 53
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 384
<INCOME-PRETAX> 1,781
<INCOME-TAX> 787
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