<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 September 30, 1995 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 0-16277
FI LIQUIDATING COMPANY, INC.
----------------------------
(Exact name of registrant as specified in its charter)
Delaware 94-2666121
-------- ----------
(State of other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
Hughes Center
Suite 200
3753 Howard Hughes Parkway
Las Vegas, Nevada 89109
(702) 892-3772
(Address, including zip code and telephone number, including area code of
registrant's principal executive officers)
Indicate by checkmark 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 (or for such shorter periods that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No ___
---
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
At September 30, 1995, 9,281,453 shares of common stock of the registrant were
outstanding.
<PAGE>
PART I - FINANCIAL INFORMATION
------------------------------
ITEM 1 - FINANCIAL STATEMENTS
-----------------------------
FI LIQUIDATING COMPANY, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
(in thousands, except per share amounts)
(unaudited)
<TABLE>
<CAPTION>
Three Months Six Months
Ended September 30 Ended September 30
-------------------- --------------------
1995 1994 1995 1994
------ ------ ------ ------
<S> <C> <C> <C> <C>
Net sales $ - $ - $ - $ -
Costs and expenses:
Cost of sales - - - -
General and administrative 68 24 98 62
------ ------ ------ ------
Loss from operations ( 68) ( 24) ( 98) ( 62)
Realized and unrealized gain on Flex Holdings:
Net realized gain 499 36 990 36
Change in unrealized appreciation ( 292) 2, 460 1,300 1,640
Other income (loss) ( 16) 5 ( 3) ( 30)
------ ------ ------ ------
Income before provision for taxes on
income and extraordinary credit 123 2,477 2,189 1,584
Provision for taxes on income 42 539 744 539
------ ------ ------ ------
Income (loss) before extraordinary credit 81 1,938 1,445 1,045
Extraordinary credits - utilization of net
operating loss carryforward 42 539 744 539
------ ------ ------ ------
Net income $ 123 $ 2,477 $ 2,189 $ 1,584
====== ====== ====== ======
Net income per share:
Income before extraordinary credit $ .01 $ .20 $ .15 $ .11
Extraordinary credit .00 .06 .08 .06
------ ------ ------ ------
Net income (loss) $ .01 $ .26 $ .23 $ .17
====== ====== ====== ======
Shares used in computing per share amounts 9,338 9,391 9,365 9,391
====== ====== ====== ======
</TABLE>
See accompanying notes.
2
<PAGE>
FI LIQUIDATING COMPANY, INC.
CONDENSED CONSOLIDATED BALANCE SHEET
(in thousands)
(unaudited)
<TABLE>
<CAPTION>
September 30 March 31
1995 1995
------------ --------
<S> <C> <C>
Assets
Current assets:
Cash $ 22 $ 10
Marketable securities 1,976 395
Prepaid expenses and other 22 20
Assets held for sale 75 75
------ ------
Total current assets 2,095 500
Investment in Flextronics International Ltd. 4,362 3,725
------ ------
$ 6,457 $ 4,225
====== ======
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $ 14 $ 21
Other accrued liabilities 462 412
------ ------
Total current liabilities 476 433
Commitments and contingency
Stockholders' equity:
Preferred Stock, $.01 par value;
10,000 shares authorized;
Common Stock, $.01 par value;
25,000 shares authorized;
9,281 shares issued and outstanding
in both 1995 and 1994 93 93
Additional paid-in capital 29,748 29,748
Accumulated deficit (23,860) (26,049)
------ ------
Stockholders' equity 5,981 3,792
------ ------
$ 6,457 $ 4,225
====== ======
</TABLE>
See accompanying notes.
3
<PAGE>
FI LIQUIDATING COMPANY, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(in thousands)
(unaudited)
<TABLE>
<CAPTION>
Six Months
Ended September
-----------------
1995 1994
------ ------
<S> <C> <C>
Operating activities:
Net income $ 2,189 $ 1,584
Adjustment to reconcile net income
to net cash used for operating activities:
Realized and unrealized gain on
Flextronics International Ltd. (2,290) (1,676)
Changes in operating assets and liabilities:
Prepaid expenses and other assets ( 2) 4
Accounts payable and accrued liabilities 43 ( 24)
----- -----
Net cash used for operating activities ( 60) ( 112)
Investing activities:
Proceeds from sales of shares in Flextronics
International Ltd. 1,653 72
Purchase of marketable securities, net (1,581) -
----- -----
Net cash provided by investing activities 72 72
----- -----
Increase (decrease) in cash 12 ( 40)
Cash beginning of period 10 45
----- -----
Cash end of period $ 22 $ 5
===== =====
</TABLE>
See accompanying notes.
4
<PAGE>
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
----------------------------------------------------
1. BASIS OF PRESENTATION
The accompanying financial statements as of September 30, 1995 and March
31, 1995 and for the three months and six months ended September 30, 1995
and September 30, 1994 have been prepared on a liquidating basis of
accounting with assets and liabilities stated at fair value. The Company
has wound down its operations and is continuing to implement a formal plan
of liquidation approved by the Shareholders in June 1992.
The condensed consolidated financial statements at September 30, 1995 and
March 31, 1995 and for the three months and six months ended September 30,
1995 and September 30, 1994, respectively, are unaudited but include all
adjustments (consisting only of normal recurring adjustments) which are, in
the opinion of management, necessary to present a fair statement of the
results of interim periods.
The condensed consolidated financial statements and notes thereto should be
read in conjunction with the consolidated financial statements for the year
ended March 31, 1995, as presented in the Registrant's Annual Report on
Form 10-K.
2. INVESTMENT IN FLEXTRONICS INTERNATIONAL LTD.
At March 31, 1994, the Company held 171,000 shares of Flextronics
International Ltd. capital stock. In addition, the Company held an option
from Flextronics International Ltd. to purchase 155,843 of its ordinary
shares at an exercise price of $3.21 per share ("Flex Option"), as well as
an option from certain shareholders of Flextronics International Ltd. to
acquire 110,379 additional ordinary shares of Flextronics International
Ltd. at an exercise price of $3.16 per share (the "Shareholder Option").
During fiscal 1995, the Company sold 55,500 shares of Flextronics
International Ltd. for $772,375. The Company exercised its options from
Flextronics International Ltd. and purchased 155,843 shares for $500,000.
The Company also negotiated a cashless exchange with the shareholders of
Flextronics International Ltd. whereby the Company acquired 88,233 shares
of Flextronics International Ltd. for the surrender of that option.
During the three months ended June 30, 1995, the Company sold 60,000 shares
of Flextronics International Ltd. for $933,125 and during the three months
ended September 30, 1995, the Company sold 30,000 shares for $720,000.
5
<PAGE>
The 155,843 shares acquired from Flextronics International Ltd. are
"restricted securities" as that term is defined in Rule 144 under the
Securities Act of 1933 (the "Act") and may not be resold to the public
until November 18, 1996 unless the shares are registered under the Act or
an exemption from registration is available. The 88,233 shares acquired by
the Company for the option from shareholders of Flextronics International
Ltd. are also "restricted securities" as that term is defined in Rule 144
under the Act and may not be resold to the public until February 17, 1997
unless the shares are registered under the Act or an exemption from
registration is available. In prior periods the Company expected that these
88,233 shares could be resold under Rule 144 after June 30, 1995; however,
the Company was not able to obtain the rulings necessary to permit such
sales. At September 30, 1995 the closing price for Flextronics
International Ltd. as reported on NASDAQ was $25.75 per share. At September
30, 1995 the reported fair value of the 155,843 shares which the Company
may not resell to the public under Rule 144 until November 18, 1996 and the
88,233 shares which the Company may not resell to the public under Rule 144
until February 17, 1997 reflect discounts of 40% from the closing price
reported on the NASDAQ National Market System due to aforementioned
restrictions on resale. The reported fair value of the 25,500 shares of
Flextronics International Ltd. which are not restricted under the Act
reflects a 10% discount due to the limited trading activity of the shares.
3. NET INCOME PER SHARE
Net income per share is computed based on the weighted average number of
common shares and dilutive common stock equivalents.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
---------------------------------------------
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
------------------------------------------------
OVERVIEW
- --------
The Company has substantially completed a major restructuring and wind down of
its worldwide business and in June 1992 adopted a plan of liquidation. As a
result of these activities, the Company's financial position at September 30,
1995, and its operating results for the three months and six months then ended,
are not indicative of the Company's expected operating performance and liquidity
and capital resource needs. The restructuring and wind down results in
eliminating revenues and expenses other than general and administrative expenses
needed to manage its assets and creditor
6
<PAGE>
relations. The liquidation activities of the Company will be the orderly
disposal of its remaining assets to fund its remaining obligations. Its
principal assets are 269,576 shares of Flextronics International Ltd. as well as
cash and marketable securities of $1,998,000.
RESULTS OF OPERATIONS
- ---------------------
THREE MONTHS ENDED SEPTEMBER 30, 1995 COMPARED TO THREE MONTHS ENDED SEPTEMBER
- ------------------------------------------------------------------------------
30, 1994
- --------
Because of the restructuring and wind down described in the preceding Overview,
any comparison of net revenues and operating expenses for the three months ended
September 30, 1995 to those for the three months ended September 30, 1994 is, in
the opinion of management, not meaningful.
For the three months ended September 30, 1995 realized and unrealized gain on
Flextronics International Ltd. of $207,000 was recognized. (See Note 2 to the
financial statements.) The market close on June 30, 1995 was $21.875 and the
market close on September 30, 1995 was $25.75. For the three months ended
September 30, 1994 realized and unrealized gain on Flextronics International
Ltd. of $2,496,000 was recognized. The market close on June 30, 1994 was $9.375
and the market close on September 30, 1994 was $14.625.
Other income (loss) of $(16,000) for the three months ended September 30, 1995
primarily consisted of expenses related to the building held for sale. Other
income of $5,000 for the three months ended September 30, 1994 primarily
consisted of net rent on the building held for sale.
A provision for taxes of $42,000 is provided for the three months ended
September 30, 1995 based on income before extraordinary credits. A provision
for taxes of $539,000 is provided for the three months ended September 30, 1994
based on year to date income before extraordinary credits.
SIX MONTHS ENDED SEPTEMBER 30, 1995 COMPARED TO SIX MONTHS ENDED SEPTEMBER 30,
- ------------------------------------------------------------------------------
1994
- ----
Because of the restructuring and wind down described in the preceding Overview,
any comparison of net revenues and operating expenses for the six months ended
September 30, 1995 to those for the six months ended September 30, 1994 is, in
the opinion of management, not meaningful.
For the six months ended September 30, 1995 realized and unrealized gain on
Flextronics International Ltd. of $2,290,000 was
7
<PAGE>
recognized. (See note 2 to the financial statements.) The market close on
March 31, 1995 was $13.75 and the market close on September 30, 1995 was $25.75.
For the six months ended September 30, 1994 realized and unrealized gain on Flex
Holdings of $1,676,000 was recognized. The market close on March 31, 1994 was
$12.50 and the market close on September 30, 1994 was $14.625.
Other income (loss) of $(3,000) for the six months ended September 30, 1995
primarily consisted of expenses on the building held for sale and reversal of
provisions for claims which can no longer be assessed. Other income (loss) of
$(30,000) for the six months ended September 30, 1994 primarily consisted of a
charge-back on a prior year's insurance policy.
A provision for taxes of $744,000 is provided for the six months ended September
30, 1995 based on income before extraordinary credits. A provision for taxes of
$539,000 is provided for the six months ended September 30, 1994 based on income
before extraordinary credits.
CAPITAL RESOURCES AND LIQUIDITY
- -------------------------------
For the six months ended September 30, 1995 cash increased by $12,000 as
compared to a decrease of $40,000 for the six months ended September 30, 1994.
Cash outflows from operating activities consisted primarily of winding down
operations and liquidating the assets in both years. The cash inflow from
investing activities reflects the sales of Flextronics International Ltd. shares
net of purchases of marketable securities in both years.
The Company's balance sheet at September 30, 1995 shows a shareholders' equity
of $5,981,000. The Flextronics International Ltd. shares owned by the Company
are carried on the financial statements at $4,362,000 which is the aggregate
fair value of such shares based on the closing market price on NASDAQ on
September 30, 1995 of $25.75 per share reduced for the significant restrictions
on transfer. (See Note 2 to financial statements.)
The Company has cash and marketable securities at September 30, 1995 of
$1,998,000 as well as 25,500 shares in Flextronics International Ltd. which may
be sold in the public market. Such amounts should be sufficient to complete an
orderly liquidation.
The timing for the Company to complete the liquidation is dependent upon its
ability to obtain the necessary regulatory clearances and eliminate the
remaining restrictions on the disposition of assets. The amount of the
liquidating distributions is primarily dependent on the performance of
Flextronics International Ltd. and the Company's ability to dispose of its
remaining assets and obligations.
8
<PAGE>
SIGNATURES
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 thereunder duly authorized.
FI LIQUIDATING COMPANY, INC.
(Registrant)
Date: 11/14/95 By: /s/John C. Roberts
------------------
John C. Roberts
President, Chief Executive
Officer (Principal
Executive Officer)
Date: 11/14/95
By: /s/Michael R. Ramelot
---------------------
Michael R. Ramelot
Chief Financial Officer
(Principal Financial
Officer)
9
<PAGE>
PART II - OTHER INFORMATION
---------------------------
ITEM 1. LEGAL PROCEEDINGS
-------------------------
During the six months ended September 30, 1995 there were no material
developments in legal proceedings since the report filed on Form 10-K for the
fiscal year ended March 31, 1995.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
-----------------------------------------
(a) Exhibits
--------
10. Bonus Agreement by and between the Company and Management
Resource Partners, a California general partnership, dated as of
July 20, 1995.
(b) Reports on Form 8-K
-------------------
No reports on Form 8-K were filed during the quarter ended September
30, 1995.
10
<PAGE>
EXHIBIT 10
BONUS AGREEMENT
This Bonus Agreement ("Agreement") is made as of July 20, 1995, by and
between FI Liquidating Company, Inc., a Delaware corporation, with offices at
Hughes Center, Suite 200, 3753 Howard Hughes Parkway, Las Vegas, Nevada 89109
(facsimile no. (702)892-3906) ("FILI"), and Management Resource Partners, a
California general partnership, with offices at Three Lagoon Drive, Suit 100,
Redwood Shores, California 94065 (facsimile no. (415)637-9279) ("MRP").
RECITALS
A. FILI requires the continuing services of a qualified professional
management firm with individuals who possess specialized skills and expertise to
assist FILI in its wind-up, complete liquidation and dissolution pursuant to
FILI's Plan of Complete Liquidation and Dissolution (the "Wind-up").
B. MRP is in the business of rendering such specialized services to
clients such as FILI and has been providing said services to FILI since
November, 1990, with the terms pursuant to which MRP would provide such services
memorialized under that certain agreement dated March 2, 1993 (as the same has
been modified from time to time by oral agreement among the parties, the
"Consulting Agreement").
C. In recognition of the quality of the services provided by MRP to FILI,
FILI and MRP entered into that certain Warrant Purchase Agreement dated as of
February 28, 1991 (the "Warrant Purchase Agreement"), pursuant to which MRP
acquired detachable warrants to subscribe for and purchase an aggregate of
80,000 shares of the voting common stock of FILI (the "Common Stock") at an
exercise price per share of $0.3750 (the "Warrants").
D. In further recognition of MRP's favorable performance under the
Consulting Agreement, FILI wishes to provide for payment of bonuses to MRP under
the terms and conditions set forth in this Bonus Agreement, and both Parties
have agreed to the termination of the Warrant Purchase Agreement and the
assignment of MRP's rights thereunder to FILI as provided herein.
NOW, THEREFORE, in consideration of the mutual promises, covenants and
conditions hereinafter set forth, the parties hereto mutually agree as follows:
1. Assignment and Subsequent Cancellation of Warrant. In consideration
-------------------------------------------------
for FILI's promise to pay the "Bonuses," as such term is defined in Section 2
below and pursuant to the provisions of said Section 2, MRP hereby assigns and
delivers the Warrants
<PAGE>
to FILI for cancellation, and FILI and MRP hereby agree that the Warrants and
the Warrant Purchase Agreement are hereby terminated and henceforth shall be
null and void and of no effect whatsoever.
2. Bonuses. Immediately prior to any distribution of cash, other assets
-------
or any combination of cash and other assets by FILI to all of its shareholders
(the "Shareholders") in the course of the Wind-up (a "Distribution"), FILI shall
pay a bonus to MRP in cash in immediately available funds. Each such payment
shall hereinafter be referred to as a "Bonus", and all such payments shall be
collectively hereinafter referred to as the "Bonuses"). The amount of each
Bonus shall be determined as follows:
(a) First Bonus. The first Bonus payable hereunder (the "First
-----------
Bonus") shall be paid by FILI to MRP at the time of the first Distribution. The
First Bonus shall be determined in accordance with the following formula:
B = V x (80,000 / (S + 80,000)) - D
Where
B = The dollar amount of the First Bonus.
V = The aggregate dollar value of all cash and other assets then to
be distributed to the Shareholders (with marketable securities to
be distributed deemed to have a value equal to the average of the
bid and ask prices for said securities on the date of that
Distribution as reported by the National Association of
Securities Automated Quotation System, Inc.).
S = The number of shares of Common Stock outstanding on the record
date for that Distribution.
D = $30,000.00 (provided that if, in the first application of the
formula, the amount for B shall be negative, D shall be reduced
from $30,000.00 by any amount as may be necessary to result in a
value for B that is zero.
(b) Interim Bonuses. All Bonuses after the First Bonus but before
---------------
the "Final Bonus," as such term is defined below (the "Interim Bonuses"), shall
be determined using the same formula for the determination of the First Bonus,
provided, however, that on each occasion "D" shall equal $30,000 minus the
aggregate values of "D" in the determination of the First Bonus and all Interim
Bonuses, if any.
(c) Final Bonus. The final Bonus shall be determined in accordance
-----------
with the following formula and shall be paid by FILI to MRP at the time of the
final Distribution.
<PAGE>
B = A x (80,000 /(S + 80,000)) - D
Where
B = The dollar amount of the Bonus.
A = The aggregate dollar value of all cash and other assets
(determined at the time of payment of the Final Bonus) of FILI
(with marketable securities to be distributed deemed to have a
value equal to the average of the bid and ask prices for said
securities on the date of that Distribution as reported by the
National Association of Securities Automated Quotation System,
Inc.).
S = The number of shares of Common Stock outstanding on the record
date for that Distribution.
D = $30,000.00 minus the aggregate values of "D" applied to the
determination of the First Bonus and all Interim Bonuses.
3. Alternative Dispute Resolution. The parties agree that they will meet
------------------------------
and negotiate in good faith to resolve any controversy or claim between them
arising under this Agreement before a mutually agreed-upon neutral mediator. If
negotiations do not resolve the dispute within sixty (60) days of a written
request by either party for mediation, then the dispute shall be submitted to
binding arbitration before a single arbitrator in accordance with applicable
rules of the American Arbitration Association. The parties agree that
appropriate venue for such arbitration shall be the County of San Mateo or the
County of San Francisco. This Section 3 does not apply to any action or
proceeding which may be commenced by any third party against either MRP or FILI
in connection with this Agreement.
4. Miscellaneous.
-------------
(a) Governing Law. This Agreement shall be governed by and construed
-------------
in accordance with the laws of the State of California without regard to
conflict of law rules. The parties shall submit to the jurisdiction of the
state and federal courts located within the counties of San Mateo or San
Francisco within the State of California.
(b) Notice. All notices required or permitted hereunder shall be
------
given in writing and shall be deemed to have been given either: (i) upon
personal delivery or confirmed facsimile transmission; (ii) one (1) day after
deposit with a courier service for next day delivery; or (iii) five (5) days
after deposit in the U.S. mail, registered mail-postage prepaid. In all cases,
notices shall be directed to the signatories below at the addresses or facsimile
transmission numbers set forth at the beginning of this Agreement. Either party
may change its
<PAGE>
address or facsimile number upon written notice to the other party in accordance
with the terms of this subsection.
(c) Assignment. Neither party hereto may assign any of its
----------
respective rights (except that MRP may assign its right to receive payment) or
obligations hereunder by operation of law or otherwise without the prior written
consent of the other party hereto. Any assignment or attempted assignment in
violation of this Section shall be void and of no force or effect.
(d) Severability. In the event that any of the terms or provisions
------------
herein shall violate any statutory provision or may be otherwise unlawful or
inoperative, it is the intent and desire of the parties that this Agreement
operate and be in full force and effect insofar as it is otherwise lawful, and
that the Agreement be carried out as far as possible consistent with its tenor
and effect.
(e) Attorneys' Fees. In the event of any claim, suit or other legal
---------------
proceeding arising under or related to this Agreement, the prevailing party
shall be entitled to recover from the other party its reasonable costs incurred
in such proceeding, including without limitation attorneys fees. The prevailing
party shall mean the party who obtains substantially the relief sought by such
party in such claim, suit or proceeding, whether by settlement, summary
judgment, judgment or otherwise. Notwithstanding this provision, the parties
shall equally share the costs of any mediation described in Section 5; provided,
however, that each party shall bear the expense of its own attorneys' fees.
(f) Entire Agreement; Modification. This Agreement represents the
------------------------------
entire agreement of the parties and cancels and supersedes any prior or
contemporaneous agreements or understandings between them with respect to the
subject matter hereof. This Agreement may only be modified or amended by mutual
written agreement of the parties.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the day
and year first written above.
Management Resource Partners
By:_________________________
Its:________________________
FI Liquidating Company, Inc.
By:_________________________
Its:________________________
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FORM 10Q
SEPTEMBER 30, 1995 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-31-1996
<PERIOD-START> APR-01-1995
<PERIOD-END> SEP-30-1995
<CASH> 22
<SECURITIES> 1,976
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 2,095
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 6,457
<CURRENT-LIABILITIES> 476
<BONDS> 0
<COMMON> 5,981
0
0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 6,457
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 2,189
<INCOME-TAX> 744
<INCOME-CONTINUING> 1,445
<DISCONTINUED> 0
<EXTRAORDINARY> 744
<CHANGES> 0
<NET-INCOME> 2,189
<EPS-PRIMARY> .23
<EPS-DILUTED> .23
</TABLE>
