<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File No. 33-66606
PM HOLDINGS CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 76-0407288
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
1401 S. HANLEY ROAD
ST. LOUIS, MISSOURI 63144
(Address of principal executive offices) (Zip Code)
(314) 768-4100
(Registrant's telephone number, including area code)
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 (or for such shorter period that the
registrant was required to file such report(s), and (2) has been subject to
such filing requirements for the past 90 days.
Yes X No
------- -------
As of November 5, 1996, 453,801 shares of the registrant's common stock,
par value $.01 per share, which is the only class of common stock of the
registrant, were outstanding.
Page 1 of 18 pages
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PM HOLDINGS CORPORATION
Table of Contents
Form 10-Q for the Quarterly Period
Ended September 30, 1996
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Page
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PART I FINANCIAL INFORMATION
- ------ ---------------------
Item 1. Financial Statements (Unaudited)
Consolidated Balance Sheets at September 30,
1996 and December 31,1995 3
Consolidated Statements of Operations for
the three and nine months ended September 30,
1996 and September 30, 1995 4
Consolidated Statements of Cash Flows for
the nine months ended September 30, 1996 and
September 30,1995 5
Notes to Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 10
PART II OTHER INFORMATION
- ------- -----------------
Item 6. Exhibits and Reports on Form 8-K 15
SIGNATURE 17
</TABLE>
2
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PM HOLDINGS CORPORATION
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
SEPTEMBER 30, 1996 AND DECEMBER 31, 1995
(DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
DECEMBER 31, 1995
(DERIVED FROM
AUDITED FINANCIAL
SEPTEMBER 30, 1996 STATEMENTS)
------------------ -----------------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 11,113 $ 21,479
Accounts receivable, net 55,325 55,499
Inventories 63,108 61,437
Prepaid expenses and other current assets 17,849 16,088
-----------------------------------------
TOTAL CURRENT ASSETS 147,395 154,503
Property, plant and equipment, net 247,216 266,769
Intangible assets, net 142,851 160,439
Other assets 61,368 55,954
-----------------------------------------
TOTAL ASSETS $598,830 $637,665
=========================================
LIABILITIES & STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 60,796 $ 75,152
Current portion of long-term debt 24,010 27,717
Bank borrowings under Revolving Credit Facility 30,730 6,000
Customer advance payments 1,665 11,136
Other current liabilities 29,159 32,342
-----------------------------------------
TOTAL CURRENT LIABILITIES 146,360 152,347
Other liabilities 62,868 60,338
Long-term debt 356,958 371,306
Common stock held by ESOP 35,742 31,000
Less unearned ESOP compensation (3,631) (1,483)
STOCKHOLDERS' EQUITY:
Preferred stock, $0.01 par value: 200,000 shares
authorized, none issued or outstanding
Common stock, $0.01 par value: 800,000 shares
authorized, 453,801 and 452,951 shares issued
and outstanding at September 30, 1996 and December 31, 1995, respectively 5 5
Additional paid-in capital 33,971 38,769
Accumulated deficit (33,443) (14,617)
-----------------------------------------
TOTAL STOCKHOLDERS' EQUITY 533 24,157
-----------------------------------------
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY $598,830 $637,665
=========================================
(SEE ACCOMPANYING NOTES)
</TABLE>
3
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PM HOLDINGS CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30,
1996 1995 1996 1995
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
NET SALES $290,802 $243,361 $892,815 $735,923
COSTS AND EXPENSES:
Cost of products sold 250,565 200,226 766,237 604,260
Marketing, distribution and advertising 19,955 20,406 62,754 60,369
General and administrative 7,661 8,386 24,015 25,240
Amortization of intangibles 4,861 4,721 14,626 13,761
Research and development 1,906 1,751 5,463 4,860
Other (income) expense, net 9,566 1,299 10,536 3,705
-------------------------------------------------------------------------------------
294,514 236,789 883,631 712,195
-------------------------------------------------------------------------------------
OPERATING INCOME (LOSS) (3,712) 6,572 9,184 23,728
Interest expense 10,977 11,309 32,797 33,188
-------------------------------------------------------------------------------------
Loss before income taxes (14,689) (4,737) (23,613) (9,460)
Income tax benefit (2,530) (2,064) (5,313) (3,619)
-------------------------------------------------------------------------------------
NET LOSS $(12,159) $ (2,673) $(18,300) $ (5,841)
=====================================================================================
NET LOSS PER COMMON SHARE $ (27.73) $ (6.15) $ (41.43) $ (21.13)
=====================================================================================
(SEE ACCOMPANYING NOTES)
</TABLE>
4
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PM HOLDINGS CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30, 1996 SEPTEMBER 30, 1995
------------------ ------------------
<S> <C> <C>
OPERATING ACTIVITIES:
Net loss $(18,300) $ (5,841)
Adjustment to reconcile net loss to net cash
provided by operating activities:
Depreciation & amortization 38,570 35,623
Provision for loss on asset disposition 14,042 --
Compensation under ESOP 4,046 6,860
Accretion of discount on Discount Debentures 5,650 5,048
Provision for deferred taxes (12,265) (1,528)
Other (24,216) (35,298)
------------------------------------------
Net cash provided by operating activities $ 7,527 $ 4,864
INVESTING ACTIVITIES:
Purchase of Golden Sun Acquisition Company -- (57,176)
Purchase of property, plant and equipment (13,076) (13,895)
Other 728 399
------------------------------------------
Net cash used in investing activities $(12,348) $(70,672)
FINANCING ACTIVITIES:
Proceeds from revolving credit facility 24,730 29,335
Proceeds from term loans -- 45,000
Repayment of notes payable (23,401) (18,960)
Loan to ESOP (6,194) (4,000)
Other (680) 1,258
------------------------------------------
Net cash provided by (used in) financing activities $ (5,545) $ 52,633
Decrease in cash and cash equivalents (10,366) (13,175)
Cash and cash equivalents at beginning of period 21,479 22,597
------------------------------------------
Cash and cash equivalents at end of period $ 11,113 $ 9,422
==========================================
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest $ 24,248 $ 25,081
Income taxes 4,685 4,441
</TABLE>
5
<PAGE> 6
PM HOLDINGS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED
1. BASIS OF PRESENTATION
PM Holdings Corporation ("Holdings") acquired Purina Mills, Inc. ("Purina
Mills" or the "Company") in September 1993. On March 15, 1995, the Company
acquired Golden Sun Acquisition Company ("Golden Sun"), the parent company of
Golden Sun Feeds, Inc. and its wholly owned subsidiaries. As used herein,
the term "Company" refers to Purina Mills, Inc. and its subsidiaries. Unless
the context otherwise requires, the term "Holdings" refers to PM Holdings
Corporation and its subsidiaries. Holdings has no subsidiaries other than
the Company and conducts no business other than that of the Company.
The consolidated balance sheet at September 30, 1996 and the consolidated
statements of operations and cash flows for all periods presented are
unaudited and reflect all adjustments, consisting of normal recurring items,
which management considers necessary for a fair presentation. Operating
results for the fiscal 1996 interim periods are not necessarily indicative of
results to be expected for the fiscal year ending December 31, 1996. The
consolidated balance sheet at December 31, 1995 was derived from the
Holdings' December 31, 1995 audited financial statements, but does not
include all disclosures required by generally accepted accounting principles.
Although Holdings believes the disclosures are adequate, certain information
and disclosures normally included in the notes to the financial statements
have been condensed or omitted as permitted by the rules and regulations of
the Securities and Exchange Commission. The accompanying unaudited financial
statements should be read in conjunction with the financial statements
contained in the Annual Report on Form 10-K for the year ended December 31,
1995.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
The consolidated financial statements of Holdings include the accounts of all
majority-owned subsidiaries. All significant intercompany accounts and
transactions have been eliminated.
Reclassifications
Certain reclassifications have been made to the prior period consolidated
financial statements to conform to the consolidated financial statement
presentation at September 30, 1996 and for the three and nine months then
ended.
6
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Net Loss per Common Share
Net loss per common share for the three and nine months ended September 30,
1996 and 1995 is computed based on the weighted average number of common
shares outstanding during the period. Such number of shares represents the
average outstanding shares, net of the shares held by the Employee Stock
Ownership Plan (the "ESOP") and not allocated to employees (the "Unreleased
Shares").
For purposes of computing net loss per common share, net loss has been
increased by an amount equal to the fair market value of Released Shares (as
hereinafter defined) at the end of the period, minus the sum of the amount
previously recognized as compensation expense with respect to Released Shares
and the amount of appreciation in value of Released Shares in prior periods.
"Released Shares" are shares held by the ESOP but allocated to employees.
The weighted average number of outstanding shares and computation of the net
loss per common share is as follows:
(Dollars in thousands, except per share amounts)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30,
1996 1995 1996 1995
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Average outstanding shares 438,409 434,682 441,699 423,309
Net loss per consolidated
statement of operations $(12,159) $ (2,673) $(18,300) $ (5,841)
Less appreciation in value of
Released Shares during the
period in excess of amounts
recognized as compensation
expense -- -- -- (3,102)
-------------------------------------------------------------------------------------
Net loss for purposes of
computing net loss per share $(12,159) $ (2,673) $(18,300) $ (8,943)
=====================================================================================
Net loss per common share $ (27.73) $ (6.15) $ (41.43) $ (21.13)
=====================================================================================
</TABLE>
3. INVENTORIES
Inventories consist of the following (in thousands):
<TABLE>
<CAPTION>
SEPTEMBER 30, 1996 DECEMBER 31, 1995
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<S> <C> <C>
Finished goods $20,508 $19,867
Raw materials 42,600 41,570
------------------------------------------
Total inventories $63,108 $61,437
==========================================
</TABLE>
7
<PAGE> 8
4. PROPERTY, PLANT AND EQUIPMENT
During the first nine months of 1996 the Company made the decision to
discontinue all manufacturing operations at seven of its facilities.
Products for distribution to customers of these closed facilities will be
manufactured at the Company's other facilities. Under Statement of Financial
Accounting Standards No. 121 ("SFAS 121"), the Company has recorded a loss of
$9.3 million on these manufacturing assets, representing the amount by which
the book value exceeds the estimated net realizable value. The value of the
assets awaiting disposition is based on estimates of Company management.
Demolition costs of $.8 million and a write-off of $3.9 million for related
goodwill was also recorded. The total $14.0 million expense is included in
other (income) expense in the financial statement for the nine month period
ended September 30, 1996.
5. LONG-TERM DEBT
The Company is required to make annual supplemental repayments under its
$130.0 million seven-year term loan (the "Senior Term Loan") with a group of
lending banks, in amounts equal to 50% of Excess Cash Flow as defined in the
Credit Agreement. The annual supplemental repayment of $9.8 million for the
year 1995 was paid on April 30, 1996.
6. COMMON STOCK HELD BY THE ESOP
Common stock held by the ESOP (100,000 shares at December 31, 1995 and
115,296 shares at September 30, 1996) and valued at its fair market value has
been classified outside of permanent equity as, under certain conditions,
participants may require the Company to purchase for cash common stock
distributed to them by the ESOP. The unearned compensation, being the fair
market value of Unreleased Shares of approximately $3.6 million at September
30, 1996 and $1.5 million at December 31, 1995, is presented in the
consolidated balance sheet as a reduction to common stock held by the ESOP.
The increase in unearned compensation is due to the purchase of additional
shares of common stock by the ESOP in 1996. Funds for such purchase were
primarily from proceeds of $6.2 million in loans from the Company to the
ESOP.
8
<PAGE> 9
7. SUMMARIZED FINANCIAL INFORMATION
Summarized financial information for the Company at September 30, 1996, for
the three and nine-month periods then ended, and at December 31, 1995 and the
three and nine-month periods ended September 30, 1995 is as follows (in
thousands):
<TABLE>
<CAPTION>
SEPTEMBER 30, 1996 DECEMBER 31, 1995
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<S> <C> <C>
BALANCE SHEET DATA:
Current assets $149,464 $156,568
Noncurrent assets 442,680 475,675
Current liabilities 146,586 152,549
Noncurrent liabilities 353,497 370,966
</TABLE>
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30,
STATEMENTS OF OPERATIONS DATA: 1996 1995 1996 1995
- ----------------------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Net sales $290,802 $243,361 $892,815 $735,923
Costs and expenses 294,506 236,444 883,596 709,502
Net loss (10,867) (1,282) (14,468) (676)
</TABLE>
9
<PAGE> 10
ITEM 2 - MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Overview
The Company develops, manufactures and markets a comprehensive line of animal
nutrition products for dairy cattle, beef cattle, hogs, horses and poultry,
as well as specialty feeds for rabbits, zoo animals, birds, fish and pets.
For the year ended December 31, 1995 the product-mix by volume was
approximately 25% for dairy cattle, 29% for beef cattle, 21% for hogs, 7% for
horses, 8% for poultry and 10% for all others.
The feed industry generally prices products on the basis of aggregate
ingredient cost plus a dollar amount margin, rather than a gross margin
percentage. As ingredient prices fluctuate, the changes are generally passed
on to customers through weekly changes in the Company's price lists. Feed
tonnage and total income over ingredient cost ("IOIC"), which is net sales
minus cost of ingredients, and gross profit (IOIC less manufacturing costs),
rather than sales dollars, are the key indicators of performance because of
the distortions in sales dollars caused by changes in commodity prices and
product-mix between complete feed and concentrate products, to which
customers add their own base ingredients, such as corn and other grains.
When the price of grains has been relatively high, more of the Company's
customers have tended to purchase complete rations and the Company's sales
volume has been higher. When the price of grains has been relatively low,
more of the Company's customers have tended to use their own grains and mix
them with the Company's higher-margin concentrates, resulting in lower sales
volume but relatively higher overall unit margins.
Three Months Ended September 30, 1996 Compared to Three Months Ended
September 30, 1995
Gross profit decreased $2.9 million to $40.2 million, a decline of 6.7% from
the comparable 1995 period. Average feed IOIC per ton was $62.65, a .5%
increase over the three-month period ended September 30, 1995. Overall
volume was 1.12 million tons during the quarter ended September 30, 1996, a
4.5% decrease compared to the 1995 period, as product sale decreases in beef
cattle and specialty more than offset modest increases in product sales
related to all other species.
Beef cattle tons decreased 26.0% from the 1995 period due primarily to the
significant decrease in cattle in feedlots and favorable grazing conditions
in the southwest in 1996. Dairy cattle tons increased 2.1% but IOIC per ton
decreased 3.1% due to a product-mix shift toward complete products caused by
shortages of corn and other grains. Hog volume increased 2.0% and IOIC per
ton also increased 1.1% as prices for end-products remained strong.
10
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Laying chicken and meatbird volume increased 13.6% compared to the 1995
period and reflects the Company's lease of a plant in Wisconsin and the
corresponding supply agreement for the manufacture of duck feed. Horse
volume increased 8.3% over the 1995 period, continuing its growth and
reflecting the aggressive promotion of these products. Specialty and other
volume decreased 4.4% from the 1995 period primarily as a result of the high
commodity prices.
Cost of products sold increased $50.3 million over the 1995 period,
reflecting the large increase in ingredient costs. Manufacturing expenses
decreased $1.4 million reflecting lower volume and the continued emphasis on
cost control. The total of marketing, distribution and advertising, general
and administrative, and research and development costs also decreased $.9
million.
Other (income) expense for the 1996 period includes a $10.5 million loss on
the write-down of various manufacturing facilities and related goodwill.
This is offset by $.8 million of income related to service fees and profits
from marketing arrangements and joint venture income. For the comparable
1995 period, service fees and profits from marketing arrangements and joint
ventures approximated $.4 million which was offset by a $1.5 million
reorganization charge and $.3 million of costs attributable to the aborted
Ralston international agri-business acquisition.
Interest expense decreased as a result of a lower debt level and an
approximate .4% decrease in the interest rate on the Senior Term Loan from
1995, offset partially by increased accretion on the Discount Debentures
(defined below).
The Company's 1996 income tax benefit is less than the amount at the
statutory rate due to the amortization and write-off of goodwill not being
allowed as a tax deduction and the loss of state tax benefits attributable
to the interest expense deduction for the accretion of discount on Holdings
11 1/2% Series B Subordinated Discount Debentures due 2005 (the "Discount
Debentures").
Nine Months Ended September 30, 1996 Compared to Nine Months Ended
September 30, 1995
Gross profit decreased $5.1 million to $126.6 million, a decline of 3.9% from
the comparable 1995 period. Average feed IOIC per ton was $60.24,
approximately equal to the nine-month period ended September 30, 1995.
Overall volume was 3.6 million tons during both nine-month periods ended
September 30, 1996 and 1995. Increases in 1996 product sales volume in
dairy, hog and horse offset decreases in beef cattle, poultry, meatbird,
specialty and other.
Beef cattle tons decreased 1.1% from the 1995 period as a result of the
decrease in feedlot cattle numbers and the favorable grazing conditions
during the third quarter of 1996. IOIC on cattle tons also decreased 5.1%
per ton due to the significant increase
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in commodity prices. Dairy cattle tons increased slightly with IOIC per ton
decreasing 6.7% due to a product-mix shift toward complete products and price
pressures caused by unusually high commodity prices. Hog volume increased 3.1%
due to the addition of Golden Sun with IOIC per ton also increasing 1.6% due
primarily to the higher unit margin of Golden Sun products.
Laying chicken and meatbird volume decreased 8.0% compared to the 1995 period
and reflects the termination of the lease of a plant manufacturing poultry
products in the third quarter of 1995. Horse volume increased 5.7% over the
1995 period, continuing its growth and reflecting the aggressive promotion of
these products. Specialty and other volume decreased 2.0% over the 1995
period due primarily to the high cost of ingredients.
Cost of products sold increased $162.0 million over the 1995 period,
reflecting the unusually large increase in ingredient costs. Manufacturing
expenses also increased $2.0 million, with the overall cost reductions of
$1.5 million being offset by a $1.5 million increase attributable to the
additional Golden Sun business and operating its facilities in 1996 plus a
$2.0 million increase in depreciation expense. The total of marketing,
distribution and advertising, general and administrative, and research and
development costs increased $1.8 million as the expense for the 1996 period
included the additional costs associated with the Golden Sun operations. The
expense for the 1996 period also includes additional severance expense of
$1.2 million related to the plant closings and other personnel reductions.
Other (income) expense for the 1996 period includes the $14.0 million loss on
the write-down of the various manufacturing facilities. This is offset by
$2.7 million of income related to service fees and profits from marketing
arrangements and joint venture income. For the comparable 1995 period,
service fees and profits from marketing arrangements and joint ventures
approximated break-even with the $3.7 million loss primarily representing
costs associated with the aborted Ralston international agri-business
acquisition and the 1995 reorganization.
Interest expense decreased as a result of a lower debt level and an
approximate .6% decrease in the interest rate on the Senior Term Loan over
1995, offset partially by increased accretion on the Discount Debentures.
The Company's income tax benefit is less than the amount at the statutory
rate in 1996 due to the amortization and write-off of goodwill not being
allowed as a tax deduction and the loss of state tax benefits attributable to
the interest expense deduction for the accretion of discount on Holdings
Discount Debentures.
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LIQUIDITY AND CAPITAL RESOURCES
For the nine months ended September 30, 1996, net cash provided by operations
before the effects of changes in operating assets and liabilities was $31.7
million, compared to $40.2 million in the 1995 period. The 1996 decrease was
primarily due to reduced operating income.
The Credit Agreement between the Company and a group of lending banks (The
"Credit Agreement") contains covenants that require the Company to limit
capital expenditures to $20.0 million per year. These expenditures are
permitted subject to compliance with certain financial covenants and may be
increased under certain conditions. As a result of the annual supplemental
repayment based on Excess Cash Flow, the Company's capital expenditure
allowance is increased by approximately $9.8 million for the period May 1,
1996 to April 30, 1997. The Company currently anticipates that its total
1996 capital expenditures will approximate $22.0 million, inclusive of
approximately $12.1 million allocated for construction of new plants in
Statesville, NC and Hagerstown, MD. The Company plans to fund capital
expenditures by using internally generated funds, borrowings from the sale of
industrial revenue bonds ("IRBs") and, if necessary, borrowings under the
Revolving Credit Facility created pursuant to the Credit Agreement. The
Credit Agreement was amended on June 28, 1996 to increase the borrowing
capacity under the Revolving Credit Facility from $50.0 million to $65.0
million. At September 30, 1996 the Company had approximately $11.1 million
in cash and cash equivalents on hand, and approximately $13.9 million (after
giving effect to borrowing base limitations) was available for borrowings
under the Revolving Credit Facility.
Net cash used in investing activities for purchases of property, plant and
equipment was $13.1 million for the nine-months ended September 30, 1996
compared to $13.9 million for the nine-month period ended September 30, 1995.
In March 1995 the Company purchased all of the outstanding stock of Golden
Sun. Proceeds for the purchase were obtained from a borrowing of $45.0
million under its Senior Term Loan and a borrowing of $15.0 million under the
Revolving Credit Facility.
Net cash used in financing activities in the nine months ended September 30,
1996 includes debt repayments of $23.4 million as compared to $19.0 million
for the comparable 1995 period. Additionally, the Company loaned $6.2
million to the ESOP for the purchase of shares of common stock from existing
shareholders in 1996 versus a loan of $4.0 million for a similar transaction
in 1995.
The Company's cash and cash equivalents decreased from the amount at year-end
as a result of the repayment of $23.4 million in debt, the loan to the ESOP,
and the normal decrease in prepaid feed purchases from such amount at
year-end. The Company operates with a relatively low working capital level
because a majority of its sales are made on terms whereby customers receive a
3% discount if payment is received
13
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immediately upon shipment of feed products, and raw ingredients are normally
purchased shortly prior to manufacturing and shipment.
Holdings' liquidity needs have been and will continue to be met through
internally generated funds, IRBs, and, to the extent necessary, borrowings
under the Revolving Credit Facility. Holdings and the Company's ability to
obtain additional financing in the future for working capital, capital
expenditures, acquisitions and general corporate purposes, should they need
to do so, may be affected by cash requirements for debt service. The Credit
Agreement and the Indenture relating to the Company's 10 1/2% Senior
Subordinated Notes due 2003 (the "Notes Indenture") contain numerous
financial and operating covenants, including, but not limited to,
restrictions on the Company's ability to incur indebtedness, pay dividends,
create liens, sell assets, engage in mergers and acquisitions, and refinance
existing indebtedness. The Indenture relating to the Discount Debentures
(the "Debenture Indenture") and Holdings' guaranty of the Credit Agreement
have covenants binding Holdings that restrict similar types of matters.
Holdings and the Company's ability to meet their debt service obligations and
to comply with the terms of these covenants depends on the future performance
of the Company.
The Credit Agreement requires that half of Excess Cash Flow (as defined) be
used to repay the Senior Term Loan, with the remaining Excess Cash Flow
available for use for additional capital expenditures, for acquisitions or
for other purposes. The first mandatory supplemental repayment of Excess
Cash Flow was for the period from September 1, 1993 to December 31, 1994 and
totaled $17.9 million. In 1994 the Company made a $12.0 million prepayment
with the remaining annual supplemental repayment of $5.9 million being paid
on May 1, 1995. The next supplemental repayment for the year 1995 totaled
$9.8 million and was paid on April 30, 1996.
The Credit Agreement, the Notes Indenture and the Debenture Indenture contain
provisions that restrict the payment of advances and loans from the Company
to Holdings. Holdings conducts no business other than its ownership of the
Company's common stock. Holdings has no direct funded debt obligation other
than the Discount Debentures. As those Discount Debentures do not require
any cash payments of debt service prior to 2001, the restrictive covenants
described above should not limit Holdings' ability to meet its obligations.
14
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PART II - OTHER INFORMATION
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
<TABLE>
<CAPTION>
EXHIBIT PAGE NUMBER OR
NUMBER DESCRIPTION INCORPORATION BY REFERENCE TO
- --------------------------------------------------------------------------------------------------------
<C> <S> <C>
3.1 Restated Certificate of Incorporation of Filed as Exhibit 3.1 to the
Holdings Registration Statement on
Form S-1 of Holdings and PMI,
Registration No. 33-66606 and
incorporated herein by
reference
3.2 Bylaws of Holdings Filed as Exhibit 3.3 to the
Registration Statement on
Form S-1 of Holdings and PMI,
Registration No. 33-66606 and
incorporated herein by
reference
4.1 Indenture by and between Holdings and Filed as Exhibit 4.1 to the
NationsBank of Texas, National Association, as Registration Statement on
Trustee, with respect to the 11 1/2% Series A Form S-1 of Holdings,
and Series B Discount Debentures Registration No. 33-70920 and
incorporated herein by
reference
4.2 Indenture dated as of September 27, 1993 by Filed as Exhibit 4.1 to the
and between the Company and IBJ Schroder Bank Current Report on Form 8-K of
& Trust Company, as Trustee, with respect to Holdings dated September 27,
the 10 1/4% Senior Subordinated Notes due 1993 and incorporated herein
2003, including the form of Note and guaranty by reference
of Holdings
4.3 Stockholders Agreement among Holdings and Filed as Exhibit 4.4 to the
certain holders of Holdings Common Stock Current Report on Form 8-K of
effective as of September 27, 1993 Holdings dated September 27,
1993 and incorporated herein
by reference
4.4 Employee Stockholders' Agreement among Filed as Exhibit 4.5 to the
Holdings and certain holders of Holdings Current Report on Form 8-K of
Common Stock effective as of September 27, Holdings dated September 27,
1993 1993 and incorporated herein
by reference
4.5 Registration Rights Agreement among Holdings Filed as Exhibit 4.6 to the
and certain holders of Holdings Common Stock Current Report on Form 8-K of
effective as of September 27, 1993 Holdings dated September 27,
1993 and incorporated herein
by reference
4.6 Registration Rights Agreement among Holdings Filed as Exhibit 4.8 to the
and the holders of Holdings Common Stock Current Report on Form 8-K of
issued as a part of the Units effective as of Holdings dated September 27,
September 27, 1993 1993 and incorporated herein
by reference
15
<PAGE> 16
<CAPTION>
EXHIBIT PAGE NUMBER OR
NUMBER DESCRIPTION INCORPORATION BY REFERENCE TO
- --------------------------------------------------------------------------------------------------------
<C> <S> <C>
27.1<F*> Financial Data Schedule
<FN>
- --------------------
<F*> Filed herewith
</TABLE>
(b) Reports on Form 8-K:
No reports on Form 8-K were filed during the quarter ended September
30, 1996.
16
<PAGE> 17
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.
PM HOLDINGS CORPORATION
Date: November 5, 1996 /s/Ian R. Alexander
----------------------------
Ian R. Alexander
Executive Vice President and
Chief Financial Officer
17
<PAGE> 18
<TABLE>
EXHIBIT INDEX
<CAPTION>
EXHIBIT PAGE NUMBER OR
NUMBER DESCRIPTION INCORPORATION BY REFERENCE TO
- --------------------------------------------------------------------------------------------------------
<C> <S> <C>
3.1 Restated Certificate of Incorporation of Filed as Exhibit 3.1 to the
Holdings Registration Statement on
Form S-1 of Holdings and PMI,
Registration No. 33-66606 and
incorporated herein by
reference
3.2 Bylaws of Holdings Filed as Exhibit 3.3 to the
Registration Statement on
Form S-1 of Holdings and PMI,
Registration No. 33-66606 and
incorporated herein by
reference
4.1 Indenture by and between Holdings and Filed as Exhibit 4.1 to the
NationsBank of Texas, National Association, as Registration Statement on
Trustee, with respect to the 11 1/2% Series A Form S-1 of Holdings,
and Series B Discount Debentures Registration No. 33-70920 and
incorporated herein by
reference
4.2 Indenture dated as of September 27, 1993 by Filed as Exhibit 4.1 to the
and between the Company and IBJ Schroder Bank Current Report on Form 8-K of
& Trust Company, as Trustee, with respect to Holdings dated September 27,
the 10 1/4% Senior Subordinated Notes due 1993 and incorporated herein
2003, including the form of Note and guaranty by reference
of Holdings
4.3 Stockholders Agreement among Holdings and Filed as Exhibit 4.4 to the
certain holders of Holdings Common Stock Current Report on Form 8-K of
effective as of September 27, 1993 Holdings dated September 27,
1993 and incorporated herein
by reference
4.4 Employee Stockholders' Agreement among Filed as Exhibit 4.5 to the
Holdings and certain holders of Holdings Current Report on Form 8-K of
Common Stock effective as of September 27, Holdings dated September 27,
1993 1993 and incorporated herein
by reference
4.5 Registration Rights Agreement among Holdings Filed as Exhibit 4.6 to the
and certain holders of Holdings Common Stock Current Report on Form 8-K of
effective as of September 27, 1993 Holdings dated September 27,
1993 and incorporated herein
by reference
4.6 Registration Rights Agreement among Holdings Filed as Exhibit 4.8 to the
and the holders of Holdings Common Stock Current Report on Form 8-K of
issued as a part of the Units effective as of Holdings dated September 27,
September 27, 1993 1993 and incorporated herein
by reference
27.1<F*> Financial Data Schedule
<FN>
- --------------------
<F*> Filed herewith
</TABLE>
18
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 11,113
<SECURITIES> 0
<RECEIVABLES> 62,614
<ALLOWANCES> 7,289
<INVENTORY> 63,108
<CURRENT-ASSETS> 147,395
<PP&E> 321,236
<DEPRECIATION> 74,020
<TOTAL-ASSETS> 598,830
<CURRENT-LIABILITIES> 146,360
<BONDS> 356,958
<COMMON> 5
0
0
<OTHER-SE> 528
<TOTAL-LIABILITY-AND-EQUITY> 598,830
<SALES> 892,815
<TOTAL-REVENUES> 892,815
<CGS> 766,237
<TOTAL-COSTS> 766,237
<OTHER-EXPENSES> 115,961
<LOSS-PROVISION> 1,433
<INTEREST-EXPENSE> 32,797
<INCOME-PRETAX> (23,613)
<INCOME-TAX> (5,313)
<INCOME-CONTINUING> (18,300)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (18,300)
<EPS-PRIMARY> (41.43)
<EPS-DILUTED> (41.43)
</TABLE>
