<PAGE>
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------------
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1994
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM _____ TO _____
Commission file number 1-6290
MINSTAR, INC.
(Exact name of Registrant as specified in its charter)
DELAWARE 41-0850712
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
100 SOUTH FIFTH STREET 55402
SUITE 2400 (Zip Code)
MINNEAPOLIS, MINNESOTA
(Address of principal executive offices)
(612) 339-7900
(Registrant's telephone number, including area code)
NOT APPLICABLE
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months, and (2) has been subject to such filing
requirements for the past 90 days.
Yes No
----- -----
On November 11, 1994, there were 500 shares of Common Stock, $.01 par value, of
Minstar, Inc. outstanding, all of which were owned by one holder of record.
<PAGE>
PART I. FINANCIAL INFORMATION
MINSTAR, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
RESULTS OF OPERATIONS
Minstar, Inc. ("Minstar") through its wholly-owned subsidiary, Genmar
Industries, Inc. ("Genmar Industries"), operates within a single industry
segment, the manufacturing of recreational powerboats. Consolidated net
revenues for the three months ended June 30, 1994 ("Second Quarter 1994") were
$93.2 million, an increase of 20.7% from Minstar's net revenues for the three
months ended June 30, 1993 ("Second Quarter 1993"). Consolidated net revenues
for the six months ended June 30, 1994 ("First Half 1994") were $166.8 million,
an increase of 17.0% from the net revenues reported for the six months
ended June 30, 1993 ("First Half 1993"). These results reflect the
continuing improvement in the domestic market as sales to dealers located in
the United States increased 24.2%, as compared to First Half 1993. Sales to
dealers located outside the United States decreased by 18.8%, as compared to
First Half 1993, reflecting the continuing weakness in the international
marketplace, especially in the European and Japanese markets. The retail
demand for Minstar's products continues to improve and has been particularly
strong in new products introduced to the market, including its aluminum
fishing boats, fiberglass runabouts, and during First Half 1994, its larger
cruisers and luxury yachts. The acceptance of the new and redesigned models
introduced during the last six months of 1993, coupled with improved retail
activities at its dealerships, and the elimination of the 10% luxury excise
tax on purchases of new boats in excess of $100,000 have resulted in an
increase in Minstar's backlog of firm orders, especially in its larger
cruisers, yachts and sportfishing convertibles. To meet increasing demand for
its products, production levels have been increased at several of Minstar's
facilities. While demand in the United States continues to recover, demand in
the European and Japanese markets is not expected to improve significantly
during 1994.
Gross profit for Second Quarter 1994 was $14.5 million (15.6% of net
revenues) and $23.4 million (14.1% of net revenues) for First Half 1994 as
compared to $8.9 million (11.5% of net revenues) for Second Quarter 1993 and
$14.9 million (10.4% of net revenues) for First Half 1993. This improvement in
gross profit is attributable primarily to increased net revenues and improved
margins from improved production efficiencies, lower manufacturing costs and
decreased spending, as a percentage of net revenues, in certain related
production areas.
Selling and administrative expenses of $9.5 million for Second Quarter
1994 and $19.6 million for First Half 1994 approximated expenses of $10.0
million and $19.5 million for Second Quarter 1993 and First Half 1993,
respectively. Increases in sales commissions and other selling and marketing
expenses directly resulting from increased revenues were offset by decreases
in certain administrative expenses.
Minstar's operating profit of $5.1 million for Second Quarter and $3.8
million for First Half 1994 compares to operating losses of $1.2 million for
Second Quarter 1994 and $4.6 million for First Half 1993 and reflects the
overall improvement of its operations resulting from the increased demand for
Minstar's products, improved margins and production efficiencies and lower
manufacturing costs and expenses.
Interest expense for Second Quarter 1994 and First Half 1994 totaled $4.6
million and $9.6 million, respectively, as compared to $5.2 million for Second
Quarter 1993 and $10.4 million for First Half 1993. The lower interest expense
during 1994 resulted primarily from the conversion in 1993 by certain holders
of an aggregate of $22.6 million principal amount of Minstar's Variable Rate
Subordinated Debentures (the "Minstar Debentures") and related accrued interest
into equity of Minstar.
1
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
(Continued)
Investment and other income for Second Quarter 1994 and First Half 1994
consisted principally of interest earned on short-term investments, notes and
other receivables.
LIQUIDITY AND CAPITAL RESOURCES -
During the period from 1989 through 1992, manufacturers in the
recreational powerboat industry experienced a significant decline in retail
demand. Although Minstar's revenues have increased during the past two years,
revenues for the past twelve months remained at approximately 50% of the
revenues for Minstar's peak 1988 year. Management believes this decline in
retail demand has been caused by several factors, including a recessionary
economy, weak international economies, especially in Europe and Japan, the
related lack of consumer confidence which depressed discretionary spending and
more stringent retail financing requirements. An additional contributor to
the industry-wide decline was the imposition in January 1991 of a 10% federal
luxury excise tax on the retail purchase price of new boats in excess of
$100,000 which was applicable to Minstar's luxury yachts and larger cruisers.
The industry decline was further exacerbated by the Persian Gulf crisis
commencing in August 1990, which deepened recessionary fears and caused the
market to anticipate higher fuel prices. Retail demand for Minstar's boats
has improved during 1993 and 1994.
During 1991, Minstar obtained equity financing of $16 million from its
parent, IJ Holdings Corp. ("IJ Holdings") and Irwin L. Jacobs executed a
shareholder support agreement to provide up to $10 million to Minstar under
certain specified conditions. During 1992, Minstar received additional cash
equity financing of $20.5 million, of which $10 million was received from
Miramar Marine Corporation ("Miramar"), a corporation owned by Jacobs
Management Corporation, and $3 million was received under the shareholder
support agreement with Mr. Jacobs.
During 1993, Minstar received additional cash equity financing of
approximately $22.6 million from IJ Holdings, of which $7.7 million of such
financing was received from Mr. Jacobs, fulfilling all remaining obligations
under the shareholder support agreement. Effective September 30, 1993, the
Minstar Debentures (in the principal amount of $22.6 million) owned by Mr.
Jacobs and Carl R. Pohlad and certain other related parties, plus related
accrued interest, were exchanged at net book value into 58 shares of common
stock of Minstar. Pursuant to conditions of Minstar's amended bank credit
facility, Mr. Jacobs provided approximately $4 million to IJ Holdings, in the
form of subordinated debt, which allowed Minstar to make its scheduled November
1, 1993 interest payment on the Minstar Debentures.
Pursuant to an agreement dated March 31, 1994, Minstar amended its bank
credit facility. Under the amended bank credit facility, the term loan and the
letter of credit facility expired on June 30, 1995 and the revolving credit
facility expired on September 30, 1994. The amended bank credit facility
provided, among other things, for the following principal payments on the term
loan: a $5 million payment on the effective date of the bank amendment (which
payment was made in April 1994); monthly principal payments of $1 million
during 1994; and additional principal payments of $1 million on June 30, 1994,
$4 million on July 15, 1994, $4 million on July 31, 1994 and $2 million on
August 31, 1994. In addition, Minstar was required to pay facility fees of $2
million on each of July 15, 1994 and August 31, 1994 if the outstanding
borrowings (including letters of credit) were not fully repaid by such dates.
In April 1994, a comprehensive financial restructuring of IJ Holdings
was completed. In connection therewith, Genmar Holdings, Inc. (the "Company"),
the parent company of IJ Holdings, received, among other things, 1,860,000
shares of common stock of Amway Japan Limited (the "Shares") having an
approximate aggregate market value, on the effective date of the
restructuring, of $80 million. Based on contractual restrictions, the Company
is permitted to sell 50,000 Shares each month
2
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
(Continued)
until the aggregate shares held by the Company are 700,000 or less. In July
1994, the Company issued $100 million aggregate principal amount of 13 1/2%
Senior Subordinated Notes due 2001 (the "New Notes") and concurrently arranged
an $85 million bank credit facility (the "New Credit Agreement"). The net
proceeds of the New Notes and borrowings under the New Credit Agreement
aggregating approximately $147.5 million were used to repay borrowings
outstanding under Minstar's existing bank credit facility and to redeem the
Minstar Debentures. In connection therewith, Minstar realized an extraordinary
loss of approximately $6.6 million; such loss will be reflected in Minstar's
consolidated financial statements subsequent to June 30, 1994. The New Credit
Agreement and the indenture governing the New Notes contain a number of
restrictive covenants, which, among other things, limits the ability of the
Company and its subsidiaries (including Minstar) to incur other indebtedness,
engage in transactions with affiliates, incur liens, make certain restricted
payments, and enter into certain business combination and asset sale
transactions. The New Credit Agreement also requires the Company to maintain
certain specified financial ratios. A failure by the Company to maintain such
financial ratios or to comply with the restrictions contained in the New
Credit Agreement, the indenture or other agreements relating to the Company's
debt could cause such indebtedness (and by reason of cross-acceleration
provisions, other indebtedness) to become immediately due and payable.
Minstar's operations used cash of $16.1 million in First Half 1994
resulting primarily from the net loss incurred offset by depreciation and
amortization, the payment of noncurrent liabilities (including payments
relating to environmental matters with respect to divested operations), and
changes in working capital items (principally receivables and inventories).
Minstar received cash equity financing of approximately $19.5 million,
$22.6 million and $13.9 million in 1992, 1993, and First Half 1994,
respectively, to fund its operations and to meet its debt service
requirements. Although the marine industry is recognized for its cyclicality,
Minstar's management has developed a plan to improve Minstar's operating
performance and to grow its businesses. To accomplish these objectives,
management has focused on the strength and the recognition of its individual
tradenames and in broadening its product lines, where appropriate. In this
connection, management has continued to emphasize improving operating
efficiencies, building customer loyalty to Minstar's existing tradenames and
product lines and expanding its dealer network. Of course, there can be no
assurance that Minstar or its management will be able to successfully
implement its plan or objectives.
During 1991, 1992 and 1993, funds generated from operations, together
with the equity financing received during these years, were used to satisfy
Minstar's liquidity requirements. Minstar expects funds generated from its
operations, funds generated from operations of the Company (including
Miramar), funds available under the Company's New Credit Agreement and the
proceeds expected to be available from potential sales of the Shares are
expected to be sufficient to satisfy Minstar liquidity requirements in 1994.
3
<PAGE>
MINSTAR, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In Thousands - Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
------------------- -------------------
1994 1993 1994 1993
------- ------- -------- --------
<S> <C> <C> <C> <C>
Net revenues $93,228 $77,261 $166,836 $142,545
Cost of products and services (Note 7) 78,696 68,403 143,389 127,691
------- ------- -------- --------
Gross profit 14,532 8,858 23,447 14,854
Selling and administrative expenses 9,465 10,021 19,629 19,452
------- ------- -------- --------
Operating profit (loss) 5,067 (1,163) 3,818 (4,598)
Interest expense (4,550) (5,155) (9,573) (10,373)
Investment and other income, net 375 134 611 161
------- ------- -------- --------
Income (loss) before income taxes 892 (6,184) (5,144) (14,810)
Provision for income taxes (137) (176) (199) (215)
------- ------- -------- --------
Net income (loss) $755 $(6,360) $ (5,343) $(15,025)
------- ------- -------- --------
------- ------- -------- --------
</TABLE>
See accompanying notes to condensed consolidated financial statements
4
<PAGE>
MINSTAR, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In Thousands - Unaudited)
<TABLE>
<CAPTION>
June 30, December 31,
1994 1993
-------- -----------
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $ 2,362 $ 5,726
Accounts receivable, net 33,518 29,861
Inventories 76,668 69,914
Prepaid expenses and other 2,361 2,045
-------- --------
Total current assets 114,909 107,546
Property and Equipment, net 38,973 43,436
Goodwill 51,438 52,411
Other Assets 4,504 2,667
-------- --------
$209,824 $206,060
-------- --------
-------- --------
LIABILITIES AND STOCKHOLDER'S EQUITY
Current Liabilities:
Accounts payable $ 33,235 $ 30,406
Accrued liabilities 37,381 37,463
Customer deposits 12,860 16,721
Accrued income taxes 674 508
Current maturities of long-term debt (Note 1) 2,619 17,040
-------- --------
Total current liabilities 86,769 102,138
Long-Term Debt (Note 1) 157,220 143,366
Other Noncurrent Liabilities 37,490 40,694
-------- --------
Stockholder's Equity:
Common stock -- --
Capital deficit (29,404) (43,351)
Accumulated deficit (41,956) (36,613)
Cumulative translation adjustment (295) (174)
-------- --------
Total stockholder's deficit (71,655) (80,138)
-------- --------
$209,824 $206,060
-------- --------
-------- --------
</TABLE>
See accompanying notes to condensed consolidated financial statements
5
<PAGE>
MINSTAR, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30
(In Thousands - Unaudited)
<TABLE>
<CAPTION>
1994 1993
-------- --------
<S> <C> <C>
OPERATING ACTIVITIES:
Net loss $ (5,343) $(15,025)
Adjustments to reconcile net loss to net cash used
by operating activities:
Depreciation and amortization 3,815 4,600
Changes in operating assets and liabilities, net (11,361) 3,193
Other, net 129 (137)
Payments of noncurrent liabilities (3,317) (4,107)
-------- --------
Cash used by operating activities (16,077) (11,476)
-------- --------
INVESTING ACTIVITIES:
Property and equipment additions (1,024) (800)
Proceeds from sales of property 688 --
-------- --------
Cash used by investing activities (336) (800)
-------- --------
FINANCING ACTIVITIES:
Repayment of long-term debt (898) (10,876)
Capital contributions by parent 13,947 22,618
-------- --------
Cash provided by financing activities 13,049 11,742
-------- --------
Decrease in cash and cash equivalents (3,364) (534)
CASH AND CASH EQUIVALENTS:
Balance, beginning of period 5,726 2,568
-------- --------
Balance, end of period $ 2,362 $ 2,034
-------- --------
-------- --------
SUPPLEMENTAL CASH FLOW INFORMATION:
Interest paid during the period $ 9,110 $ 7,962
Income taxes paid during the period 33 167
-------- --------
-------- --------
</TABLE>
See accompanying notes to condensed consolidated financial statements
6
<PAGE>
MINSTAR, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. INTRODUCTION -
The condensed consolidated financial statements have been prepared by
Minstar, Inc. ("Minstar") without audit, pursuant to the rules and
regulations of the Securities and Exchange Commission. The information
furnished in the condensed consolidated financial statements includes
solely normal recurring adjustments and reflects all adjustments which
are, in the opinion of management, necessary for a fair presentation
of such financial statements. Certain information and footnote
disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have been
condensed or omitted pursuant to such rules and regulations. Although
Minstar believes that the disclosures are adequate to make the
information presented not misleading, it is suggested that these
condensed consolidated financial statements be read in conjunction
with the financial statements and the notes thereto included in
Minstar's latest Annual Report on Form 10-K and Management's Discussion
and Analysis of Financial Condition and Results of Operations
included in this Form 10-Q. The interim operating results for 1994 are
not necessarily indicative of the results expected for the remainder of
the year.
Minstar's operations consist of Genmar Industries, Inc. ("Genmar
Industries"), its wholly owned manufacturing subsidiary, and related
corporate functions. At June 30, 1994, Minstar is a wholly owned
subsidiary of IJ Holdings Corp. ("IJ Holdings"). IJ Holdings serves
principally as a holding company for Minstar and its sole asset is its
investment in Minstar. IJ Holdings has no independent operations. As a
result, the financial position and historical results of operation of IJ
Holdings on a consolidated basis is substantially equivalent to the
financial position and historical results of operations of Minstar on a
consolidated basis.
During April 1994, a comprehensive financial restructuring of
IJ Holdings was completed. In July 1994, Genmar Holdings, Inc.
(the "Company"), the parent company of IJ Holdings, issued $100 million
aggregate principal amount of 13 1/2% Senior Subordinated Notes due 2001
("New Notes") and concurrently arranged an $85 million bank credit
facility (the "New Credit Agreement"). The net proceeds of the New
Notes and borrowings under the New Credit Agreement aggregating
approximately $147.5 million were used to repay borrowings outstanding
under Minstar's existing bank credit facility and to redeem its
Variable Rate Subordinated Debentures due 2000 (the "Minstar Debentures").
In connection therewith, Minstar realized an extraordinary loss of
approximately $6.6 million; such loss will be reflected in Minstar's
consolidated financial statements subsequent to June 30, 1994. The
balance sheet classifications of Minstar's debt as of June 30, 1994
reflect the effects of the July 1994 refinancing.
Following are unaudited pro forma results of operations for the Company
for the six months ended June 30, 1994 and 1993 as if this comprehensive
financial restructuring and previously discussed refinancing had been
completed as of January 1, 1993. The unaudited pro forma financial
information does not purport to represent what the combined companies'
results of operations would actually have been if such transactions in
fact had occurred at such date or to project the results of future
operations of the combined companies (in thousands):
<TABLE>
<CAPTION>
1994 1993
-------- --------
<S> <C> <C>
Net revenues $239,193 $195,150
Operating profit (loss) 9,996 (541)
Net loss (782) (11,841)
-------- --------
-------- --------
</TABLE>
7
<PAGE>
2. COMMITMENTS AND CONTINGENCIES -
Outstanding Letters of Credit:
At June 30, 1994, Minstar had outstanding letters of credit aggregating
approximately $21.6 million. Approximately $20.2 million of such
letters of credit secure the insurance programs of Minstar and its
subsidiaries; the remainder principally relates to liabilities retained
from divested businesses.
Dealer Inventory Floor Plan Financing:
Genmar Industries is party to dealer inventory floor plan financing
arrangements with certain financial institutions pursuant to which it may
be required, in the event of default by a financed dealer, to repurchase
products previously sold to such dealer. Genmar Industries repurchased
$.7 million and $1.9 million of such dealer inventory during the six
months ended June 30, 1994 and 1993, respectively. As of June 30, 1994,
Genmar Industries was contingently liable under such arrangements to
repurchase inventory in the aggregate maximum amount of $17.4 million.
Minstar generally has not provided reserves, other than immaterial
reserves at certain subsidiaries, for losses and costs which may result
should Genmar Industries be required to repurchase product from a
defaulting dealer. Genmar Industries' losses resulting from such
repurchases are minimized because: i) it is only obligated to repurchase
products that are new and unused, ii) it is generally not liable to the
respective lender for product which is sold by the dealer for which the
related proceeds are not remitted by the dealer to the floor plan
provider (product sold out of trust), iii) its repurchase obligation
is triggered only when a dealer incurs a payment or other default and
iv) no agreements exist which allows the dealer or the floor plan lender
to "put" product back to Genmar Industries until or unless there has been
a dealer default. In addition, certain management initiatives such as
monthly review and analysis of dealer field inventory and related retail
sales activity, Genmar Industries' proactive efforts to relocate noncurrent
or slow moving inventory to other dealers, where appropriate, and related
initiatives are believed to substantially mitigate Genmar Industries'
exposure to losses and other costs resulting from its contractual
repurchase obligations. Although the ultimate loss which might be
incurred as a result of such contractual obligation is uncertain, Minstar
believes that any such losses that may be incurred would not have a
material effect on its consolidated operating results or the consolidated
financial position of Minstar. Genmar Industries has made available
limited floor plan financing to certain dealers at prevailing rates and
conditions consistent with this type of financing. Interest income on
such financing is recorded as earned and appropriate reserves for estimated
losses are recorded. Amounts outstanding at June 30, 1994 and December
31, 1993, net of applicable reserves for estimated losses, of approximately
$16.5 million and $11.5 million, respectively, under this secured
arrangement are included as accounts receivable in the accompanying
condensed consolidated balance sheets.
Environmental Matters:
A hazardous waste inspection was conducted at Minstar's Wellcraft facility
in Avon Park, Florida in 1993 by the Florida Department of Environmental
Protection ("DEP") and the Environmental Protection Agency ("EPA"). As a
result, DEP issued a warning notice alleging that Wellcraft had violated
certain hazardous waste rules related to the release of washing machine
wastewater. In June 1994, Wellcraft reached an agreement in principle
with the DEP to settle all outstanding issues with respect to the alleged
violations pursuant to which Wellcraft agreed to pay approximately
$225,000 in fines. Of this amount, $135,000 may be offset by DEP approved
pollution prevention/waste minimization projects. As part of such
resolution, Wellcraft's Avon Park facility will undergo Resource
Conservation and Recovery Act closure permitting.
8
<PAGE>
2. COMMITMENTS AND CONTINGENCIES (CONTINUED) -
Environmental Matters (Continued):
In September 1993, Wellcraft confirmed a leak in an abandoned acetone
pipe underneath a plant in Sarasota, Florida. Wellcraft reached an
agreement in principle with the DEP to settle all outstanding issues with
respect to the acetone leak pursuant to which Wellcraft agreed to pay a
$309,000 civil penalty with $200,000 of the penalty offset for DEP
approved pollution prevention/waste minimization projects. The final
consent order will require Wellcraft to carry out DEP approved remediation
activities at this site. Although the ultimate cost of remediation is
uncertain, Minstar believes that, based on information known at this time,
it presently had adequate reserves recorded to cover such costs.
Historically, Minstar's facilities have used underground storage tanks
("USTs") for storage of a number of materials associated with Minstar's
operations, including petroleum, acetone and resins. Minstar is currently
in the process of removing the remaining USTs on its properties. As in the
past, in the course of removing such USTs, contamination of soils and
groundwater may be discovered, in which case environmental laws generally
would require a contamination assessment and the implementation of a
cleanup plan. The costs associated with any such necessary remedial action
could be significant, but are not expected to be significant because the
tanks were drained and filled with concrete at the time of closing.
However, until the tanks are removed in compliance with environmental
laws, Minstar cannot predict with any certainty the nature or extent of
such contamination or potential remedial costs associated therewith.
Although the ultimate cost of remediation is uncertain, Minstar believes
that, based on information known at this time, it presently has adequate
reserves recorded to cover such expenses.
Minstar also incurs costs from time to time for environmental claims
relating to its previously discontinued operations. Minstar made payments
relating to environmental matters (including environmental related costs
incurred with respect to divested operations) of approximately $.8 million
during the six months ended June 30, 1994. Minstar anticipates total
environmental related costs from previously divested operations to range
from approximately $8.0 million to $16.0 million (which include CERCLA -
type liabilities), which costs are likely to be incurred over the next 8
to 12 years. With respect to these potential liabilities, Minstar or
its subsidiaries have been identified as a potential responsible party at
approximately 10 sites. Minstar has reserves of $11.5 million to cover
such potential liabilities as of June 30, 1994 and, based on currently
available information, believes such reserves are adequate to cover such
potential costs.
Other Commitments and Contingencies:
In connection with certain previously divested businesses, Minstar
retained certain obligations and remains contingently liable under limited
indemnities related to such matters as taxes, insurance, environmental
claims, litigation and postretirement medical benefits. Such cash
expenditures are expected to be payable over the next 8 to 12 years. Where
appropriate, Minstar established reserves in response to these matters,
including reserves required under Statement of Financial Accounting
Standards No. 106, "Employers' Accounting for Postretirement Benefits Other
Than Pensions". Employee benefits covered by this Statement are not
available to the Company's active employees.
9
<PAGE>
2. COMMITMENTS AND CONTINGENCIES (CONTINUED) -
Other Commitments and Contingencies (Continued):
Minstar and its subsidiaries have insurance for worker's compensation,
health, general and auto liability losses in excess of predetermined
loss limits. Provision has been made in the consolidated financial
statements for estimated losses resulting from claims incurred prior
to the balance sheet date which were below the amounts of the
predetermined loss limits.
Minstar and its subsidiaries are defendants in legal proceedings arising
in the ordinary course of business. Although the outcome of these matters
cannot be determined, in the opinion of management and outside counsel,
disposition of these proceedings will not have a material effect on
Minstar's consolidated financial position or results of operations.
3. NEW NOTES AND NEW CREDIT AGREEMENT -
As previously discussed in Note 1, the Company issued $100 million
aggregate principal amount of New Notes and arranged the New Credit
Agreement to refinance substantially all of Minstar's outstanding
indebtedness. Borrowings under the New Credit Agreement are
collateralized by substantially all assets of the Company and its direct
and indirect subsidiaries, including pledges of the capital stock of the
Company's direct and indirect subsidiaries. The New Credit Agreement is
guaranteed by substantially all of the Company's existing operating
subsidiaries, including IJ Holdings, Minstar, Genmar Industries and
certain of its subsidiaries. The New Credit Agreement also includes
covenants which, among other matters, requires the Company to satisfy
certain financial tests and ratios. These covenants also restrict
capital expenditures, the incurrence of additional indebtedness, lease
obligations and the redemption, prepayment or modification of
subordinated indebtedness (other than the Minstar Debentures.) Borrowings
under the revolving credit facility are limited to eligible receivables
and eligible inventories, as defined. The New Credit Agreement currently
expires in July 1997.
10
<PAGE>
PART II. OTHER INFORMATION
MINSTAR, INC. AND SUBSIDIARIES
Item 6. Exhibits and Reports on Form 8-K
(a) No Form 8-K's were filed during the quarter ended June 30, 1994.
(b) Exhibits - No exhibits have been filed with this Form 10-Q.
11
<PAGE>
SIGNATURE
Pursuant to the requirements of 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.
MINSTAR, INC.
Date: November 11, 1994 /s/ ARLYN J. LOMEN
----------------------------
Arlyn J. Lomen
Senior Vice President
and Treasurer
(Chief Financial and
Accounting Officer)
12
