<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 MARCH 31, 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 X No
---- ----
On May 12, 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. (the "Company"), through its wholly-owned subsidiary, Genmar
Industries, Inc. ("Genmar"), operates within a single industry segment, the
manufacturing of recreational powerboats. Consolidated net revenues for the
three months ended March 31, 1994 approximated $73.6 million, an increase of
12.8% from the revenues reported for the three months ended March 31, 1993.
These results reflect the continuing improvement in the domestic markets as
sales to dealers located in the United States increased approximately 14.5%, as
compared to first quarter 1993. Sales to dealers located outside the United
States remained unchanged, as compared to first quarter 1993, reflecting the
continuing weakness in the international marketplace, especially in the European
and Japanese markets. The retail demand for Genmar's aluminum boats continues
to be strong and demand for fiberglass models over twenty-five feet and for its
larger cruisers and luxury yachts continues to improve. The acceptance of the
new and redesigned models introduced for the 1994 model year, coupled with
improved retail activities at its dealerships, and the elimination of the 10%
luxury tax on purchases of boats in excess of $100,000 have resulted in an
increase in Genmar'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 the Company'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 first quarter 1994 of approximately $8.9 million (12.1% of net
revenues) compared to $6.0 million (9.2% of net revenues) for first quarter
1993. This improvement in gross profit is attributable primarily to increased
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 totaled $10.2 million for the three months
ended March 31, 1994, as compared to $9.4 million for the same period in 1993.
The increase in selling and administrative expenses is primarily from increased
sales commissions and other selling and marketing expenses directly resulting
from increased revenues.
The Company's operating loss for the first quarter of $1.2 million, as compared
to $3.4 million for the first quarter of 1993, reflects the overall improvement
of the Company's operations resulting from the increased demand for the
Company's products, improved margins and production efficiencies and lower
manufacturing costs and expenses.
Interest expense for the three months ended March 31, 1994 totaled approximately
$5.0 million, as compared to $5.2 million for the same period in 1993. The
lower interest expense resulted primarily from the conversion by certain holders
of an aggregate of approximately $22.6 million principal amount of the Company's
Variable Rate Subordinated Debentures due 2000 (the "Debentures") and related
accrued interest into equity of the Company.
Investment and other income for the quarter ended March 31, 1994 consisted
principally of interest earned on short-term investments and on notes and other
receivables.
1
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES -
During the period from 1989 through 1992, manufacturers in the recreational
powerboat industry experienced significant decline in retail demand. Although
the Company's revenues have increased during the past two years, revenues for
the past twelve months remained at approximately one half the level of revenues
for the Company's peak 1988 year. Management believes this decline in retail
demand has been caused by several factors, including weak international
economies especially in the European and Japanese markets, a slow growing
domestic market, the related lack of consumer confidence, more stringent retail
financing requirements, and the adverse effect of the luxury tax which had been
imposed on customers purchasing certain larger sized boats during 1992 and for
most of 1993. Retail demand for the Company's boats has improved during 1993
and 1994.
During 1991, the Company obtained equity financing of $16 million from its
parent, IJ Holdings Corp. ("Holdings") and Irwin L. Jacobs executed a
shareholder support agreement to provide up to $10 million to the Company under
certain specified conditions. During 1992, the Company received additional cash
equity financing of $20.5 million, of which $10 million was received from
Miramar Marine Corporation ("Miramar"), a corporation beneficially owned by
certain members of the Jacobs Group, and $3 million was received under the
shareholder support agreement with Mr. Jacobs.
During 1993, the Company received additional cash equity financing of
approximately $22.6 million from 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
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 the Company.
Pursuant to the Company's amended bank credit facility, the Company's ability to
make the November 1, 1993 interest payment on the Debentures was dependent on
the Company obtaining additional equity or subordinated debt financing of
approximately $4 million. In connection therewith, Mr. Jacobs agreed to provide
approximately $4 million to Holdings, in the form of subordinated debt, which
allowed the Company to make its scheduled November 1, 1993 interest payment on
the Debentures.
At March 31, 1994, the Company's bank credit facility consisted of a $52.6
million term loan, a $50 million revolving credit facility and a $25 million
facility for the issuance of standby letters of credit. As of March 31, 1994,
the Company had $50 million of borrowings outstanding under the revolving credit
facility and had no remaining availability thereunder. Pursuant to an agreement
dated March 31, 1994, the Company amended its bank credit facility. Under the
amended bank credit facility, the term loan and the letter of credit facility
expire on June 30, 1995 and the revolving credit facility expires on September
30, 1994. The amended bank credit facility provides, 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; an optional prepayment of
principal of $10 million on or before May 2, 1994 (the "Special Optional
Prepayment") or, in the alternative, 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, the Company will be 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) are not fully repaid by
such dates. The Company did not make the Special Optional Prepayment on or
before May 2, 1994. Although the amended bank credit facility allows the
Company to be in compliance with all covenants of its bank credit facility for
all periods prior to March 31, 1994, its amended terms require the Company to
make substantial principal payments during 1994 and the revolving credit
facility expires on September 30, 1994.
2
<PAGE>
Subsequent to March 31, 1994, a comprehensive financial restructuring of
Holdings and the Company was completed whereby:
- Holdings formed a wholly owned subsidiary, Genmar Holdings, Inc.
("Genmar Holdings") and a wholly owned subsidiary of Genmar Holdings
("Genmar Holdings Sub"). Genmar Holdings Sub merged with and into
Holdings whereby the holders of shares of common stock of Holdings
received, in the merger, shares of common stock of Genmar Holdings. In
addition, the stockholders of the Company (except Holdings) exchanged
their shares of the Company for shares of common stock of Genmar
Holdings. As a result, the Company became a wholly owned subsidiary
of Holdings and Holdings became a wholly owned subsidiary of Genmar
Holdings.
- Jacobs Management Corporation ("JMC") which is beneficially owned by
certain members of the Jacobs Group, transferred the common stock of
Miramar Marine Corporation ("Miramar") owned by it (constituting
approximately 99.6% of the outstanding shares of common stock of
Miramar) to Genmar Holdings in exchange for shares of common stock of
Genmar Holdings and the assumption by Genmar Holdings of a $25 million
principal amount demand note payable to a JMC stockholder. Miramar's
operations include Carver Boats, a manufacturer of mid-size yachts,
and Ranger Boats, a leading bass boat manufacturer.
- The State of Wisconsin Investment Board ("SWIB") transferred to Genmar
Holdings a $30 million principal amount note originally issued and
payable by Miramar to SWIB in exchange for shares of common stock of
Genmar Holdings.
- A previously unaffiliated investor and a partnership affiliated with
Carl R. Pohlad transferred certain marketable securities having an
approximate aggregate market value of $85 million and cash aggregating
$5 million to Genmar Holdings in exchange for shares of common stock
of Genmar Holdings.
In addition, the Company has commenced discussions regarding the replacement of
its existing bank credit facility. In this connection, Genmar Holdings and the
Company will attempt to arrange a longer term facility on more favorable terms
and conditions; such facility would, in all likelihood, include the consolidated
operations of Genmar Holdings. In addition, the Company is contemplating the
issuance of longer term subordinated notes, the proceeds of such would be used
to extinguish the Debentures, the demand note payable to a JMC stockholder and
certain other indebtedness and for working capital purposes. Although
management believes it will be successful in completing the replacement and/or
the restructuring of its indebtedness, there can be no assurance that the
Company will be able to consummate any or all of these initiatives.
During 1991, 1992 and 1993, funds generated from operations, together with the
equity financing received during these years, were used to satisfy the Company's
liquidity requirements. The Company expects funds generated from its
operations, funds from the operations of its parent, Genmar Holdings (which
includes Miramar's available cash), the funds expected to be obtained in
connection with the contemplated refinancing and the proceeds expected to be
available from potential sales of the marketable securities will be sufficient
to satisfy the Company's liquidity requirements in 1994.
3
<PAGE>
<TABLE>
<CAPTION>
MINSTAR, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTH ENDED MARCH 31
(In Thousands Except Share and Per Share Amounts - Unaudited)
1994 1993
---------- ----------
<S> <C> <C>
Net revenues $ 73,608 $ 65,284
Costs of products and services 64,693 59,288
---------- ----------
Gross profit 8,915 5,996
Selling and administrative expenses 10,164 9,431
---------- ----------
Operating loss (1,249) (3,435)
Interest expense (5,023) (5,218)
Investment and other income, net 236 27
---------- ----------
Loss before income taxes (6,036) (8,626)
Provision for income taxes (62) (39)
---------- ----------
Net loss $ (6,098) $ (8,665)
---------- ----------
---------- ----------
Net loss per share $ (10,928) $ (17,330)
---------- ----------
---------- ----------
Weighted average shares outstanding 558 500
---------- ----------
---------- ----------
</TABLE>
See accompanying notes to condensed consolidated financial statements.
4
<PAGE>
<TABLE>
<CAPTION>
MINSTAR, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In Thousands)
March 31, 1994 December 31,
(Unaudited) 1993
-------------- --------------
Assets
------
<S> <C> <C>
Current Assets:
Cash and cash equivalents $ 535 $ 5,726
Accounts receivable, net 34,022 29,861
Inventories 72,302 69,914
Prepaid expenses 2,252 2,045
-------------- --------------
Total current assets 109,111 107,546
Property and Equipment, net 40,213 43,436
Goodwill 51,925 52,411
Other Assets 4,681 2,667
-------------- --------------
$ 205,930 $ 206,060
-------------- --------------
-------------- --------------
Liabilities and Shareholders' Equity
------------------------------------
Current Liabilities:
Accounts payable $ 37,515 $ 30,406
Accrued liabilities 41,206 37,463
Customer deposits 16,371 16,721
Accrued income taxes 555 508
Scheduled debt payments, excluding
debt classified as current, pending
refinancing (Note 1) 31,409 28,484
-------------- --------------
Current liabilities before
debt classified as current,
pending refinancing 127,056 113,582
Debt classified as current, pending
refinancing (Note 1) 117,692 123,169
-------------- --------------
Total current liabilities 244,748 236,751
Long-Term Debt 8,150 8,753
Other Noncurrent Liabilities (Note 3) 39,390 40,694
-------------- --------------
Shareholders' Equity (Note 1):
Common stock, -- --
Capital deficit (43,351) (43,351)
Accumulated deficit (42,711) (36,613)
Cumulative translation adjustment (296) (174)
-------------- --------------
Total shareholders' deficit (86,358) (80,138)
-------------- --------------
$ 205,930 $ 206,060
-------------- --------------
-------------- --------------
</TABLE>
See accompanying notes to condensed consolidated financial statements.
5
<PAGE>
<TABLE>
<CAPTION>
MINSTAR, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31
(In Thousands - Unaudited)
1994 1993
------------ ------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(6,098) $(8,665)
Adjustments to reconcile net loss
to net cash provided (used)
by operating activities:
Depreciation and amortization 1,921 2,367
Changes in operating assets
and liabilities, net 4,047 8,163
Other, net (312) (84)
------------ ------------
Cash provided (used) by
operating activities (442) 1,781
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Property and equipment additions (372) (437)
Proceeds from sales of property 299 --
------------ ------------
Cash used by investing activities (73) (437)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of long-term debt (3,320) (240)
Payments of noncurrent liabilities (1,356) (1,873)
------------ ------------
Cash used by financing activities (4,676) (2,113)
------------ ------------
Decrease in cash and cash equivalents (5,191) (769)
CASH AND CASH EQUIVALENTS:
Balance, beginning of period 5,726 2,568
------------ ------------
Balance, end of period $ 535 $ 1,799
------------ ------------
------------ ------------
SUPPLEMENTAL CASH FLOW INFORMATION:
Interest paid during the period $ 3,089 $ 1,485
Income taxes paid during the period 14 115
------------ ------------
------------ ------------
</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. (the "Company"), without audit, pursuant to the rules and
regulations of the Securities and Exchange Commission. The information
furnished in the condensed consolidated financial statements includes
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 the Company 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
the Company's latest Annual Report on Form 10-K and Management's
Discussion and Analysis of Results of Operations and Financial Condition
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.
The Company's operations consist of Genmar Industries, Inc. ("Genmar"), its
wholly owned manufacturing subsidiary, and related corporate functions.
During the period from 1989 through 1992, manufacturers in the recreational
powerboat industry experienced a significant decline in retail demand.
Although the Company's revenues have increased during the past two years,
revenues for past twelve months remained at approximately one-half the
level attained during the Company's peak 1988 year. Management believes
this overall decline in retail demand was caused by several factors,
including weak international economies especially in the European and
Japanese markets, a slow growing domestic market, the related lack of
consumer confidence, more stringent retail financing requirements, and the
adverse effects of the luxury tax imposed on customers purchasing certain
larger sized boats. During 1992 and 1993, retail demand for the Company's
fiberglass models under twenty-five feet in length and aluminum fishing
boats improved. Subsequent to the elimination of the luxury tax imposed on
customers purchasing certain larger sized boats, demand for Genmar's larger
cruisers, yachts and sportfishing convertibles improved. In addition, the
dealers' acceptance of the new and redesigned models introduced during the
1994 model year, coupled with an overall improvement in the consumers'
buying attitude, have resulted in an increase in the Company's net revenues
for the three months ended March 31, 1994 and in the Company's backlog of
firm orders, especially in its larger cruisers, yachts and sportfishing
convertibles.
Subsequent to March 31, 1994, the Company completed a comprehensive
financial restructuring of its parent, IJ Holdings Corp. ("Holdings"),
whereby:
- Holdings formed a wholly owned subsidiary, Genmar Holdings, Inc.
("Genmar Holdings") and a wholly owned subsidiary of Genmar Holdings
("Genmar Holdings Sub"). Genmar Holdings Sub merged with and into
Holdings whereby the holders of shares of common stock of Holdings
received, in the merger, shares of common stock of Genmar Holdings. In
addition, the stockholders of Minstar (except Holdings) exchanged
their shares of the Company for shares of common stock of Genmar
Holdings. As a result, the Company became a wholly owned subsidiary
of Holdings and Holdings became a wholly owned subsidiary of Genmar
Holdings.
7
<PAGE>
1. INTRODUCTION (CONTINUED) -
- Jacobs Management Corporation ("JMC") which is beneficially owned by
certain members of the Jacobs Group, transferred the common stock of
Miramar Marine Corporation ("Miramar") owned by it (constituting
approximately 99.6% of the outstanding shares of common stock of
Miramar) to Genmar Holdings in exchange for shares of common stock of
Genmar Holdings and the assumption by Genmar Holdings of a $25 million
principal amount demand note payable to a JMC stockholder. Miramar's
operations include Carver Boats, a manufacturer of mid-size yachts,
and Ranger Boats, a leading bass boat manufacturer.
- The State of Wisconsin Investment Board ("SWIB") transferred to Genmar
Holdings a $30 million principal amount note originally issued and
payable by Miramar to SWIB in exchange for shares of common stock of
Genmar Holdings.
- A previously unaffiliated investor and a partnership affiliated with
Carl R. Pohlad transferred certain marketable securities having an
approximate aggregate market value of $85 million and cash aggregating
$5 million to Genmar Holdings in exchange for shares of common stock
of Genmar Holdings.
The merger and capital restructuring involving the Company and Miramar will
result in the combination of these entities at historical carrying values.
The issuance of additional shares of Genmar Holdings to the other investors
will be recorded based on independently determined fair value for the
consideration exchanged.
Following are unaudited pro forma results of operations for Genmar Holdings
for the three months ended March 31, 1993 and 1994 as if the above
comprehensive financial restructuring 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, except per share amounts):
<TABLE>
<CAPTION>
1994 1993
---------- ----------
<S> <C> <C>
Net revenue $ 108,500 $ 92,120
Operating income (loss) 1,216 (1,964)
Net loss (3,428) (7,648)
---------- ----------
---------- ----------
Loss per share (based on
1,738,070 pro forma shares
outstanding) $ (1.97) $ (4.40)
---------- ----------
---------- ----------
</TABLE>
Pursuant to an agreement dated March 31, 1994, the Company amended its bank
credit facility. Under the amended bank credit facility, the term loan and
the letter of credit facility expire on June 30, 1995 and the revolving
credit facility expires on September 30, 1994. At March 31, 1994, the
Company's bank credit facility consisted of a $52.6 million term loan, a
$50 million revolving credit facility and a $25 million facility for the
issuance of standby letters of credit. As of March 31, 1994, the Company
had $50 million of borrowings outstanding under the revolving credit
facility and had no remaining availability thereunder.
8
<PAGE>
1. INTRODUCTION (CONTINUED) -
The amended bank credit facility provides, 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; an optional
prepayment of principal of $10 million on or before May 2, 1994 (the
"Special Optional Prepayment") or, in the alternative, 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,
the Company will be 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) are not fully repaid by such dates. The Company did not
make the Special Optional Prepayment on or before May 2, 1994. Although
the amended bank credit facility allows the Company to be in compliance
with all covenants of its bank credit facility for all periods prior to
March 31, 1994, its amended terms require the Company to make substantial
principal payments during 1994 and the revolving credit facility expires on
September 30, 1994.
The Company has commenced discussions regarding the replacement of its bank
credit facility. In this connection, Genmar Holdings and the Company will
attempt to arrange a longer term facility on more favorable terms and
conditions; such facility would, in all likelihood, include the
consolidated operations of Genmar Holdings. In addition, the Company is
contemplating the issuance of longer term subordinated notes, the proceeds
of which would be used to extinguish the Company's Variable Rate
Subordinated Debentures due 2000, the demand note payable to a JMC
stockholder and certain other indebtedness and for working capital
purposes. Although management believes it will be successful in completing
the replacement and/or the restructuring of its indebtedness, there can be
no assurance that the Company will be able to consummate any or all of
these initiatives.
2. SIGNIFICANT ACCOUNTING POLICIES -
PRINCIPLES OF CONSOLIDATION:
The consolidated financial statements include the accounts of the Company
and its subsidiaries, all of which are wholly owned. Significant
intercompany accounts and transactions have been eliminated.
REVENUE RECOGNITION:
Revenue for products and services, reported net of dealer and other
discounts, is recognized at the time of shipment or when services have been
performed. Through its dealers, the Company warrants its products under
normal use and maintains warranty reserves pursuant to this policy.
CASH:
Cash includes cash equivalents consisting principally of short-term
investments with original maturities of three months or less and are
recorded at cost, which approximates market value.
9
<PAGE>
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) -
INVENTORIES:
Inventories are stated at the lower of cost or market and include
materials, labor and overhead costs. The Company uses the first-in,
first-out cost method in determining cost for substantially all its
domestic inventories.
ACCRUED LIABILITIES:
Included in accrued liabilities and noncurrent liabilities are certain
liabilities retained by the Company when certain of the Company's
non-marine operations were divested and reserves for claims estimated to be
payable in connection with self-insurance programs covering loss or damage
related to property, workers' compensation and certain other liability
claims. The portion of the reserves estimated to be payable within one
year is classified as accrued liabilities in the accompanying condensed
consolidated balance sheets.
3. COMMITMENTS AND CONTINGENCIES -
A hazardous waste inspection was conducted at the 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. DEP has proposed a settlement involving $3.4 million in civil
penalties and administrative costs, and to undertake site assessment and,
if necessary, remediation activities. Additionally, EPA issued a report on
the same issues and proposed $954,000 in additional penalties. Wellcraft
is vigorously defending these proposed penalties. In June 1993, Wellcraft
discovered a break in an abandoned acetone pipe underneath a plant in
Sarasota, Florida. As a result, DEP issued a proposed administrative
consent order that would require Wellcraft to pay a civil penalty in the
amount of $296,000 and to carry out remediation activities. Wellcraft
believes that the civil penalty is erroneous based on the facts and intends
to dispute it. The ultimate amount of penalties or the cost of remediation
is uncertain, however, the Company believes that, based on information
known at this time, it presently has adequate reserves recorded to cover
such expenses.
In connection with certain previously divested businesses, the Company
retained certain obligations and remains contingently liable under limited
indemnities related to such matters as taxes, insurance, environmental
claims, litigation and post retirement medical benefits. Where appropriate,
the Company has established reserves in response to these matters.
At March 31, 1994, the Company had outstanding letters of credit
aggregating approximately $21.6 million. Approximately $20.2 million of
such letters of credit secure the Company's insurance programs; the
remainder principally relate to liabilities retained from divested
businesses.
10
<PAGE>
3. COMMITMENTS AND CONTINGENCIES (CONTINUED) -
Genmar is a party to dealer inventory floor plan financing arrangements
with certain financial institutions pursuant to which Genmar may be
required, in the event of default by a financed dealer, to repurchase
products previously sold to such dealer. As of March 31, 1994, Genmar was
contingently liable under such arrangements to repurchase inventory in the
maximum amount of $16.0 million. Genmar has made available limited floor
plan financing to certain dealers. Amounts outstanding at March 31, 1994
and December 31, 1993 under this secured arrangement are included as
accounts receivable in the accompanying condensed consolidated balance
sheets.
4. RELATED PARTY TRANSACTION -
During the three months ended March 31, 1994, Genmar entered into
agreements with Miramar whereby Miramar purchased certain Hatteras yachts
for aggregate cash payments of $12.5 million. The agreements with Miramar
provide that Genmar will assist Miramar in the sale of these yachts to
unrelated third parties and, in the event Miramar sells the yachts at an
amount in excess of its purchase price, Genmar will receive such excess
proceeds less specified sales commission due Miramar. Under the accounting
policy adopted by Genmar, revenues are not recorded by the Company until
such time as these yachts are delivered to third party purchasers. During
the three months ended March 31, 1994, yachts having an aggregate sales
price of $2.5 million were sold to unrelated third parties; Genmar received
excess proceeds, as defined, of approximately $.2 million from Miramar.
11
<PAGE>
PART II. OTHER INFORMATION
MINSTAR, INC. AND SUBSIDIARIES
Item 5. OTHER
Pro Forma Condensed Consolidated Financial Information of
Genmar Holdings, Inc. as of March 31, 1994 and the
three months then ended. (Unaudited) 0-1
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) No Form 8-K's were filed during the quarter ended March 31, 1994.
(b) Exhibits - No exhibits have been filed with this Form 10-Q.
12
<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: May 12, 1994 /s/ ARLYN J. LOMEN
----------------------------
Arlyn J. Lomen
Senior Vice President
and Treasurer
(Chief Financial and
Accounting Officer)
13
<PAGE>
GENMAR HOLDINGS, INC.
PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION
The following unaudited pro forma condensed consolidated financial information
presents the estimated effects of the agreements for the financial restructuring
of Minstar, Inc. ("Minstar") whereby Minstar became an indirect wholly owned
subsidiary of Genmar Holdings, Inc. ("Genmar Holdings"), a newly formed holding
company; Miramar Marine Corporation ("Miramar") became a subsidiary of Genmar
Holdings; and certain investors contributed assets to Genmar Holdings for common
stock, as if such transaction had occurred as of the beginning of the respective
periods presented in the Pro Forma Condensed Consolidated Statements of
Operations. In the case of the Pro Forma Condensed Consolidated Balance Sheet,
these transactions are reflected on a pro forma basis as if they had occurred on
March 31, 1994.
The pro forma condensed consolidated financial information reflects the terms
pursuant to the financial restructuring agreements.
- - IJ Holdings, Inc. ("Holdings") formed a wholly owned subsidiary, Genmar
Holdings and a wholly owned subsidiary of Genmar Holdings ("Genmar Holdings
Sub"). Genmar Holdings Sub merged with and into Holdings whereby the
holders of shares of common stock of Holdings received, in the merger,
shares of common stock of Genmar Holdings. In addition, the stockholders
of Minstar (except Holdings) exchanged their shares of Minstar for shares
of common stock of Genmar Holdings. As a result, Minstar became a wholly
owned subsidiary of Holdings and Holdings became a wholly owned subsidiary
of Genmar Holdings.
- - Jacobs Management Corporation ("JMC") transferred the common stock of
Miramar owned by it (constituting approximately 99.6% of the outstanding
shares of common stock of Miramar) to Genmar Holdings in exchange for
shares of common stock of Genmar Holdings and the assumption by Genmar
Holdings of a $25 million principal amount demand note payable to a JMC
stockholder. Miramar's operations include Carver Boats, a manufacturer of
mid-size yachts, and Ranger Boats, a leading bass boat manufacturer.
- - The State of Wisconsin Investment Board ("SWIB") transferred to Genmar
Holdings a $30 million principal amount note originally issued and payable
by Miramar to SWIB in exchange for shares of common stock of Genmar
Holdings.
- - A previously unaffiliated investor and a partnership affiliated with Carl
R. Pohlad transferred certain marketable securities having an approximate
aggregate market value of $85 million and cash aggregating $5 million to
Genmar Holdings in exchange for shares of common stock of Genmar Holdings.
The pro forma condensed consolidated financial information is based on
assumptions deemed appropriate by Minstar's management based on its best current
judgment, and such assumptions are set forth in the accompanying notes. The pro
forma condensed consolidated financial information is not necessarily indicative
of the results that actually would have occurred had these transactions been
consummated on the dates indicated or of results of operations which may be
obtained in the future.
The pro forma condensed consolidated financial information should be read in
conjunction with Minstar's consolidated financial statements and notes thereto
included in Minstar's latest Annual Report on Form 10-K and Minstar's Form 10-Q
for the quarterly period ended March 31, 1994.
0-1
<PAGE>
<TABLE>
<CAPTION>
GENMAR HOLDINGS, INC.
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1994
(UNAUDITED - IN MILLIONS, EXCEPT SHARE AND PER SHARE AMOUNTS)
Minstar, Inc. Miramar Marine Pro Forma
and its Corporation and Pro Forma Genmar
Subsidiaries its Subsidiaries Adjustments Holdings, Inc.
------------- ---------------- ------------- -------------
<S> <C> <C> <C> <C>
Net revenues $73.6 $34.9 $ -- $108.5
Cost of products and services 64.7 27.4 -- 92.1
Selling and administrative expenses 10.1 4.9 .2 (1) 15.2
------------- ------------- ------------- -------------
Operating income (loss) (1.2) 2.6 (.2) 1.2
Interest expense (5.0) (.7) .6 (2) (5.5)
(.4)(3)
Investment and other income .2 1.0 -- 1.2
------------- ------------- ------------- -------------
Income (loss) before income taxes (6.0) 2.9 0.0 (3.1)
Provision for income taxes (.1) (1.1) 0.9 (4) (.3)
------------- ------------- ------------- -------------
Net income (loss) $(6.1) $1.8 $0.9 $(3.4)
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------
Loss per share $(1.97)
-------------
-------------
Pro forma common shares outstanding 1,738,070
-------------
-------------
</TABLE>
NOTES TO PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(1) Reflects the administrative expenses of Minstar's parent, Holdings, for the
three months ended March 31, 1994, not included in Minstar's consolidated
operations.
(2) Reflects the reduction in interest expense resulting from the transfer of a
$30 million principal amount note, originally issued and payable by Miramar
to SWIB, in exchange for shares of common stock of Genmar Holdings.
(3) Reflects the increase in interest expense resulting from the assumption by
Genmar Holdings of a $25 million principal amount demand note payable to a
JMC stockholder.
(4) Reflects the utilization of a portion of Minstar's available losses to
offset Miramar taxable income following its acquisition by Genmar Holdings.
0-2
<PAGE>
<TABLE>
<CAPTION>
GENMAR HOLDINGS, INC.
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
MARCH 31, 1994
(UNAUDITED - IN MILLIONS)
Miramar Marine
Minstar, Inc. Corporation Pro Forma
and its and its Pro Forma Genmar
Subsidiaries Subsidiaries Adjustments Holdings, Inc.
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $ .6 $15.0 $5.0 (1) $20.6
Accounts receivable, net 34.0 8.6 -- 42.6
Inventories 72.3 24.5 -- 96.8
Prepaid expenses 2.2 1.0 -- 3.2
------------- ------------- ------------- -------------
Total current assets 109.1 49.1 5.0 163.2
Property and equipment, net 40.2 10.7 -- 50.9
Goodwill 51.9 -- -- 51.9
Investments -- 10.0 85.0 (1) 85.0
(10.0)(2)
Other assets 4.7 3.4 (1.5)(3) 6.6
------------- ------------- ------------- -------------
Total Assets $205.9 $73.2 $78.5 $357.6
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable $37.5 $4.6 -- $42.1
Accrued liabilities 58.1 10.6 .1 (3) 68.8
Current maturities of long-term debt 149.1 .3 -- 149.4
------------- ------------- ------------- -------------
Total current liabilities 244.7 15.5 .1 260.3
Long-term debt 8.2 30.8 25.0 (4) 34.0
(30.0)(5)
Other Noncurrent Liabilities 39.4 -- -- 39.4
Total Shareholders' Equity (Deficit) (86.4) 26.9 90.0 (1) 23.9
(10.0)(2)
(1.6)(3)
(25.0)(4)
30.0 (5)
------------- ------------- ------------- -------------
Total Liabilities and Shareholders' Equity $205.9 $73.2 $78.5 $357.6
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------
</TABLE>
NOTES TO PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
(1) Reflects the transfer by a previously unaffiliated investor and a
partnership affiliated with Carl R. Pohlad of certain marketable securities
having an approximate aggregate market value of $85 million and cash
aggregating $5 million in exchange for shares of common stock of Genmar
Holdings.
(2) Reflects the elimination in consolidation of Miramar's $10 million
investment in Holdings common stock.
(3) Reflects the balance sheet accounts of Minstar's parent, Holdings, not
included in Minstar's consolidated balance sheet, including the elimination
in consolidation of intercompany accounts between Minstar and Holdings.
(4) Reflects the assumption by Genmar Holdings of a $25 million principal
amount demand note payable to a JMC stockholder in connection with Genmar
Holdings' acquisition of Miramar and the elimination of Genmar Holdings'
related investment in Miramar.
(5) Reflects the transfer of a $30 million principal amount note, originally
issued and payable by Miramar to SWIB, in exchange for shares of common
stock of Genmar Holdings.
0-3
