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 Commission File Number
MARCH 31, 1996 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, (770) 798-0677
including area code
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,
1996 was 2,607,384.
PART I - FINANCIAL INFORMATION
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
MLX Corp.
March 31 December 31
1996 1995
ASSETS
Current Assets
Cash and cash equivalents $33,104 $32,903
Prepaid expenses 56 103
Escrow funds 4,163 4,113
Total Current Assets 37,323 37,119
Equipment and Other Assets 5 5
Tax Escrow Funds 1,401 1,385
TOTAL ASSETS $38,729 $38,509
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CONSOLIDATED BALANCE SHEETS (UNAUDITED)
MLX Corp.
March 31 December 31
1996 1995
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LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Accrued compensation and benefits $ 41 $ 75
Other accrued liabilities and expenses 366 310
Accrued taxes 300 289
Total Current Liabilities 707 674
Other Long-Term Liabilities 1,967 1,957
Shareholders' Equity
Common stock, $.01 par value - authorized 38,500,000
shares; 2,607,000 shares outstanding in 1996 and 1995 26 26
Capital in excess of par value 72,902 72,841
Retained earnings deficit (36,873) (36,989)
Total Shareholders' Equity 36,055 35,878
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $38,729 $38,509
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Dollars in thousands
See notes to consolidated financial statements
<TABLE>
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
MLX Corp.
For the Quarter Ended
March 31
1996 1995
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Net Sales $ -- $ --
General and administrative expenses 280 200
Operating Loss from Continuing Operations (280) (200)
Interest income 460 9
Interest expense -- (57)
Earnings (Loss) before Income Taxes
and Discontinued Operations 180 (248)
Provision for Income Taxes:
Federal income taxes due and payable (3) --
(Charge in lieu of federal income taxes)
Federal income tax benefit (61) 84
Earnings (Loss) from Continuing Operations 116 (164)
Earnings from Discontinued Operations
(net of income tax of $871) -- 1,158
Net Earnings 116 994
Dividends and accretion on preferred stock -- 300
Earnings Applicable to Common Stock $ 116 $ 694
Earnings per Share:
Earnings (loss) from continuing operations (net of
dividends and accretion on preferred stock) $0.04 $(0.18)
Earnings from discontinued operations -- 0.45
Earnings applicable to common stock $0.04 $ 0.27
Average Outstanding Common Shares and Dilutive Options 2,737 2,574
</TABLE>
Dollars in thousands, except per share data
See notes to consolidated financial statements
<TABLE>
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
MLX Corp.
For the Quarter Ended
March 31
1996 1995
<S> <C> <C>
Cash Flows from Operating Activities:
Earnings (loss) from continuing operations $ 116 $ (164)
Adjustments to reconcile earnings (loss) from continuing operations
to net cash used in operating activities from continuing operations:
Charge in lieu of federal income taxes
(federal income tax benefit) 61 (84)
Change in operating assets and liabilities of continuing operations:
Prepaid expenses 47 (4)
Accounts payable, accrued expenses and other 43 (26)
Net cash provided by (used in) operating activities from continuing operations 267 (278)
Net cash provided by operating activities from discontinued operations -- 1,197
Net cash provided by operating activities 267 919
Cash Flows from Investing Activities:
Increase in escrow fund for warranties and taxes (66) --
Investing cash flows from discontinued operations -- (620)
Net cash used in investing activities (66) (620)
Cash Flows from Financing Activities:
Net proceeds under revolving credit agreement -- 12
Payments of dividends on Series A Preferred Stock -- (212)
Financing cash flows from discontinued operations -- (540)
Net cash used in financing activities -- (740)
Net Increase (Decrease) in Cash and Cash Equivalents 201 (441)
Cash and cash equivalents on January 1 32,903 1,087
Cash and cash equivalents on March 31
(including cash of discontinued operations of ($12) in 1995) $33,104 $ 646
Supplemental Cash Flow Disclosure
Taxes paid on income $ -- $ --
Interest paid on debt obligations $ -- $ 39
</TABLE>
Dollars in thousands, except per share data
See notes to consolidated financial statements
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
MLX Corp.
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, 1995.
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, 1996 and December 31, 1995 and
the results of operations and cash flows for the quarters ended
March 31, 1996 and 1995.
Note A - Income Taxes
At January 1, 1996, the Registrant had available net operating
loss carry forwards of approximately $299 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, 1996 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 periods
(in thousands, except per share data).
Quarter Ended March 31
1996 1995
Earnings applicable to common
shareholders $ 116 $ 694
Charge in lieu of federal income
taxes which is not accruable
or payable 61 492
Total Earnings Applicable to Common Stock $ 177 $1,186
Total Earnings per Share $0.06 $ 0.46
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
from the date of sale and accordingly has been classified
as a current asset. 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 and has been classified as a long-term asset. 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 which was
reported in the second quarter of 1995. 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 ended March
31, 1995 have been restated to report the results of operations
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 ended March 31, 1996 and 1995 were as follows (in
000's)
Quarter Ended March 31
1996 1995
Net Sales -- $18,002
Incomes from operations before taxes -- $ 2,029
Income taxes -- 871
Income from Discontinued Operations -- $ 1,158
Note C - Early Retirement of Debt and Preferred Stock Redemption
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.
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 quarter ended March 31,
1995 are excluded from earnings/(loss) from operations.
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 short-term repurchase
instruments managed by selected commercial banks. Since the
divestiture of Wellman, the Company has been actively engaged in
pursuing the acquisition of new businesses where purchase
valuations are attractive. No agreements have been entered into
with respect to any acquisition opportunity.
Operations: The general and administrative expenses of the
Registrant are incurred for acquisition search, 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 sale of S.K. Wellman on June 30, 1995, the
Company repaid its principal and interest obligations under the
Variable Rate Subordinated Notes and Zero Coupon Bonds and
redeemed its Series A Preferred Stock along with unpaid dividends
resulting in no interest expense or preferred dividends in the
quarter ended March 31, 1996.
The Company considers its business to be that of seeking to
acquire an operating business that meets its financial
acquisition criteria. Accordingly, the Company believes that it
is not an investment company as defined by the Investment Company
Act of 1940. Until June 30, 1996, this belief is supported by the
Company's compliance with the safe harbor provisions of Rule 3a-2
under the Investment Company Act, compliance with which
effectively excepts the Company from the definition of investment
company. However, given the Company's inability to control the
timing of any acquisition, and the uncertainty of the Company's
status under the Investment Company Act past June 30, 1996, the
Company is in the process of preparing an application to the
Securities and Exchange Commission requesting an order
declaring that the Company is not an investment company or,
alternately, requesting an exemption from all or most substantive
provisions of the Investment Company Act. If such application is
denied and/or the Company is otherwise deemed to be an investment
company, the Company would be required to register under that
Investment Company Act and would thereafter be subject to
regulation thereunder, which would add complexity to the
Company's pursuit of its acquisition strategy, add to the
expenses of the Company and fundamentally alter the presentation
of the Company's financial statements.
Liquidity and Capital Resources: At March 31, 1996, the
Registrant had working capital of $36.6 million, consisting
principally of cash and short-term investments of $33.1 million,
escrow funds totaling $4.2 million and estimated short-term
obligations for income taxes, transaction expenses and
compensation of $0.7 million. The Company's short-term
investments at March 31, 1996 consisted principally of
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. Any
amount remaining in the escrow fund after September 30, 1996,
net of any allowed or asserted claims, will be disbursed to MLX.
An additional escrow fund amount 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 Company was advised by NASDAQ on February 5, 1996 that it
failed to comply with Section 3(a)3 of Schedule D of the NASD
By-Laws by not having an operating business activity. A
temporary exception was granted on that date permitting the
Registrant's common shares to remain listed on the NASDAQ
National Market until June 30, 1996. At that time, if an
additional exception is not granted or if compliance is not
achieved, the Registrant's shares will be delisted and traded on
the Domestic OTC Electronic Bulletin Board.
The Registrant believes that its current financial resources are
adequate to meet its projected operating needs in 1996.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
None.
Item 2. Changes in Securities
None.
Item 3. Default 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: May 6, 1996 MLX Corp
(Registrant)
BY: /s/ THOMAS C. WAGGONER
Thomas C. Waggoner
Chief Executive Officer and President
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
ART 5 FDS FOR 1ST QUARTER 10-Q
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> MAR-31-1996
<CASH> 33,104
<SECURITIES> 0
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<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 37,323
<PP&E> 5
<DEPRECIATION> 0
<TOTAL-ASSETS> 38,729
<CURRENT-LIABILITIES> 707
<BONDS> 0
0
0
<COMMON> 26
<OTHER-SE> 36,029
<TOTAL-LIABILITY-AND-EQUITY> 38,729
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 280
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 180
<INCOME-TAX> 64
<INCOME-CONTINUING> 116
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<NET-INCOME> 116
<EPS-PRIMARY> 0.04
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</TABLE>
