Item 1. Business.
(A) General Development of Business The Registrant is engaged in the design and manufacture of high-energy friction materials which are used primarily in aircraft brakes and heavy equipment brakes, transmission and clutches.
Reference is made to the information set forth in the Registrant's 1993 Annual Report to Shareholders under "Management's Discussion and Analysis of Financial Condition and Results of Operations" for a discussion of the development of the business since January 1, 1993, which information is incorporated herein by reference.
In June 1993, the Company merged with and into a wholly-owned subsidiary in order to reincorporate in the State of Georgia. This transaction was approved by the Company's shareholders at the annual meeting of shareholders on June 2, 1993.
(B) Financial Information About Industry Segments Reference is made to information set forth in Note J of the Notes to Consolidated Financial Statements in the Registrant's 1993 Annual Report to Shareholders, which information is incorporated herein by reference.
(C) Narrative Description of Business Reference is made to the information set forth in "Management's Discussion and Analysis of Financial Condition and Results of Operations" under "Other Data" contained in the Registrant's 1993 Annual Report to Shareholders, which information is incorporated herein by reference. Additional information concerning the business of the Registrant follows.
General: Today, MLX owns and manages the S. K. Wellman ("Wellman") subsidiary. Wellman is one of the world's leading manufacturers of high-energy friction materials. The friction materials manufactured and sold by Wellman are used in a variety of applications which require material which will withstand and function under extreme conditions of high energy and heat. These types of conditions exist in aircraft brakes and heavy equipment brakes, transmissions and clutches. Wellman has manufacturing facilities located in Brook Park, Ohio; LaVergne, Tennessee; Concord, Ontario, Canada; and Orzinuovi, Italy. Wellman also has administrative offices and research facilities located in Solon, Ohio and sales and/or distribution offices in Madison, Wisconsin; Peoria, Illinois; Detroit, Michigan; Cleveland, Ohio; Akron, Ohio; Edmonton, Alberta, Canada; Vancouver, British Columbia, Canada; Concord, Ontario, Canada; and Orzinuovi, Italy. At December
31, 1993 Wellman had 511 employees. Approximately 213 of these employees were covered under collective bargaining agreements which expire on April 22, 1994.
MLX provides managerial and administrative support to Wellman. This support is provided in the areas of strategic management, income tax compliance, legal strategy and capital and lending resources.
Products: The friction materials manufactured by Wellman are made of a variety of materials, including metallic (either copper or iron based), graphitic, ceramic, and composite fiber (paper). These friction materials are used in commercial, military and general aviation aircraft brakes; friction disks for use in automatic and power shift transmissions; and clutch buttons, which are used as the main contact point between the engine and transmission. Wellman also manufactures other types of clutch facings and opposing disks to complement its clutch button business. Raw materials used by Wellman are available from multiple sources.
Customers: Wellman's customers for the aircraft brake friction materials are primarily aircraft wheel and brake manufacturers. Wellman's principal customers for its friction disks are heavy equipment manufacturers such as Caterpillar Inc., John Deere & Company, and the Allison Division of General Motors Corporation. The principal customers for its clutch buttons are heavy equipment component suppliers such as Dana Corporation. More than 80% of friction disk and clutch button production is sold to original equipment manufacturers with the balance sold to end users (under the "Velvetouch" tradename) through distributors and equipment rebuilders.
Competition: The Registrant believes that the domestic market for the products that it manufactures is approximately $200 million and that the total worldwide approximates $300 million. The Registrant believes that it is either the largest or the second largest manufacturer of each of the products it sells, with market share ranging between 20% and 60% of such markets. In each of its markets, the Registrant competes with a number of companies; however, there are only one or two competitors in each of its markets which are comparable in size to the Registrant. Competition is primarily based upon the ability to engineer a product which meets the customers' specifications, consistent quality, price and delivery.
Research and Development: Research, product development and engineering are an important aspect of Wellman's business. Each of Wellman's products are specifically engineered to meet a customer's applications. The Registrant believes that it has the most extensive research, development and engineering capabilities and testing equipment in the industry. Product research, development and engineering expenditures for Wellman were approximately $3,365,000 in 1993, $3,164,000 in 1992 and $3,344,000 in 1991.
(D) Financial Information About Foreign and Domestic Operations and Export Sales Reference is made to the information set forth in Note J of the Notes to Consolidated Financial Statements in the Registrant's 1993 Annual Report to Shareholders, which information is incorporated herein by reference.
Item 2.
Item 2. Properties.
The Registrant and its consolidated subsidiaries utilize the following properties.
Management believes that none of the leased facilities is critical to its operations. The leases are generally for an initial term of five years and generally contain one or more renewal option periods. Management considers the properties to be suitable for their present use.
Item 3.
Item 3. Legal Proceedings.
An interpleader action was filed in the U.S. District Court for the Northern District of Georgia on October 9, 1992, by Mr. Alfred R. Glancy III, a director of the Company, as the custodian of the shares of Common Stock held pursuant to a Voting Trust. Mr. Glancy requested that the court determine whether or not the Voting Trust was effectively terminated as a result of the actions of one of the trustees of the Voting Trust. Upon Mr. Glancy's motion, the interpleader action was dismissed with prejudice on March 11, 1994. Mr Glancy has indicated that he will distribute the trust shares to their beneficial owners, and the Company has agreed to permit the Voting Trust to terminate. The Company agreed to the termination of the Voting Trust prior to its scheduled expiration (June 30, 1994) because the adoption of share transfer restrictions at last year's annual meeting of shareholders obviated the need for the trust. [FN] 1 These facilities and equipment at these locations are a portion of the collateral securing the Senior Lending Facility due in 1997 (S. K. Wellman) described in Note D of the Notes to the Consolidated Financial Statements contained in the Registrant's 1993 Annual Report to Shareholders.
Other than the interpleader action described above, the Registrant is unaware of any litigation which is expected to have a material effect on the results of operations or financial condition of the Registrant.
Item 4.
Item 4. Submission of Matters to a Vote of Security Holders
No response under this item is required.
PART II
Item 5.
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters.
Reference is made to the information set forth in "Management's Discussion and Analysis of Financial Condition and Results of Operations" under "Market, Share Ownership and Dividend Information" in the Registrant's 1993 Annual Report to Shareholders, which information is incorporated herein by reference.
Item 6.
Item 6. Selected Financial Data.
Reference is made to the information set forth in "Financial Review" under "Selected Financial Information" in the Registrant's 1993 Annual Report to Shareholders, which information is incorporated herein by reference.
Item 7.
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations. Reference is made to the information set forth under "Management's Discussion and Analysis of Financial Condition and Results of Operations" in the Registrant's 1993 Annual Report to Shareholders, which information is incorporated herein by reference.
Item 8.
Item 8. Financial Statements and Supplementary Data.
Reference is made to the information set forth under "Consolidated Financial Statements" in the Registrant's 1993 Annual Report to Shareholders, which information is incorporated herein by reference.
Reference is made to the information set forth under "Quarterly Data" in the Registrant's 1993 Annual Report to Shareholders, which information is incorporated herein by reference.
Item 9.
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.
No response under this item is required.
PART III
Item 10.
Item 10. Directors and Executive Officers of the Registrant. For information with respect to Directors and Executive Officers of the Registrant, the Registrant incorporates by reference herein the information appearing under the caption, "Business Experience of Directors and Executive Officers" and, with respect to compliance with Item 405 of Regulation S-K, "Security Ownership of Certain Beneficial Owners" under the table containing the "Amount and Nature of Beneficial Ownership" of executive officers and directors contained in the Registrant's definitive Proxy Statement to be filed with the Commission no later than 120 days after the close of the Registrant's fiscal year ended December 31, 1993 in connection with the Registrant's 1994 Annual Meeting of Shareholders.
Item 11.
Item 11. Executive Compensation.
Registrant incorporates by reference herein information appearing under the caption "Remuneration of Directors and Executive Officers" contained in the Registrant's definitive Proxy Statement to be filed with the Commission no later than 120 days after the close of the Registrant's fiscal year ended December 31, 1993 in connection with the Registrant's 1994 Annual Meeting of Shareholders.
Item 12.
Item 12. Security Ownership of Certain Beneficial Owners and Management.
Registrant incorporates by reference herein information appearing under the caption "Security Ownership of Certain Beneficial Owners" contained in the Registrant's definitive Proxy Statement to be filed with the Commission no later than 120 days after the close of the Registrant's fiscal year ended December 31, 1993 in connection with the Registrant's 1994 Annual Meeting of Shareholders.
Item 13.
Item 13. Certain Relationships and Related Transactions.
Registrant incorporates by reference herein information appearing under the caption "Employment Agreements With Executive Officers" and "Compensation Committee Interlocks and Related Transactions' contained in the Registrant's definitive Proxy Statement to be filed with the Commission no later than 120 days after the close of the Registrant's fiscal year ended December 31, 1993 in connection with the Registrant's 1994 Annual Meeting of Shareholders.
PART IV
Item 14.
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K.
(a) Documents Filed as part of the Report.
(1) The following consolidated financial statements of the Registrant and its subsidiaries, included in its 1993 Annual Report to Shareholders, are incorporated in Item 8 herein by reference:
Consolidated Balance Sheets at December 31, 1993 and 1992.
Consolidated Statements of Operations for the years ended December 31, 1993, 1992 and 1991.
Consolidated Statements of Cash Flows for the years ended December 31, 1993, 1992 and 1991.
Consolidated Statements of Shareholders' Equity for the years ended December 31, 1993, 1992 and 1991.
Notes to Consolidated Financial Statements - December 31, 1993.
(2) The following consolidated financial statement schedules of the Registrant and its subsidiaries are included in Item 14(d):
Schedule III - Condensed Financial Information of Registrant
Schedule V - Property, Plant and Equipment
Schedule VI - Accumulated Depreciation, Depletion, and Amortization of Prroperty, Plant and Equipment
Schedule VIII - Valuation and Qualifying Accounts
Schedule IX - Short Term Borrowings
Schedule X - Supplementary Income Statement Information
All other schedules for which provision is made in the applicable accounting regulation of the Securities and Exchange Commission are not required under the related instruction or are inapplicable, and therefore have been omitted.
(3) Exhibits required by Item 601 of Regulation S-K:
Exhibit 3.1 & 4.1 - Articles of Incorporation of the Registrant, as amended (incorporated herein by reference to Exhibit 3.1 to the Registrant's Report on Form 10-Q for the quarter ended June 30, 1993).
Exhibit 3.2 & 4.2 - By-Laws of the Registrant (incorporated herein by reference to Exhibit 3.2 to the Registrant's Report on Form 10-Q for the quarter ended June 30, 1993).
Exhibit 4.3 & 9.1 - Voting Trust Agreement dated Deecember 11, 1984 (incorporated herein by reference to Exhibit 4.3 to the Registrant's Report on Form 10-K for the fiscal year ended December 31, 1991).
Exhibit 4.4 & 9.2 - Amendment No. 1 dated October 26, 1987 to the Voting Trust Agreement dated December 11, 1984 (incorporated herein by reference to Exhibit 4.3 to the Registrant's Report on Form 10-K for the fiscal year ended December 31, 1991).
Exhibit 4.5 & 9.3 - Amendment No. 2, dated April 2, 1991, to the Voting Trust Agreement dated December 11, 1984 (incorporated herein by reference to Exhibit 4.3 to the Registrant's Report on Form 10-K for the fiscal year ended December 31, 1991).
Exhibit 4.6 - Restricted Transfer Trust Agreement dated October 10, 1986 (incorporated herein by reference to Exhibit 4.3 to the Registrant's Report on Form 10-K for the fiscal year ended December 31, 1991).
Exhibit 4.7 - Amendment No. 1 dated October 26, 1987 to the Restricted Transfer Trust Agreement dated October 10, 1986 (incorporated herein by reference to Exhibit 4.3 to the Registrant's Report on Form 10-K for the fiscal year ended December 31, 1991).
Exhibit 4.8 - Amendment No. 2 dated June 4, 1990 to the Restricted Transfer Trust Agreement dated October 10, 1986 (incorporated herein by reference to Exhibit 4.3 to the Registrant's Report on Form 10-K for the fiscal year ended December 31, 1991).
Exhibit 4.9* - MLX Exchange Agreement dated as of April 13, 1990, as amended and restated as of March 19, 1992, as amended and restated as of April 21, 1993, among the Registrant, the Lenders listed therein, and Morgan Guaranty Trust Company of New York, as Bond Agent.
Exhibit 4.10 - MLX Limited Guarantee, dated as of March 19, 1992 (incorporated herein by reference to Exhibit 2.17 to the Registrant's Current Report on Form 8-K, dated April 10, 1992).
Exhibit 4.11 - Management Services Agreement, dated as of March 19, 1992, between the Registrant and Pameco Holdings, Inc. (incorporated herein by reference to Exhibit 2.16 of Registrant's Current Report on Form 8-K dated April 10, 1992).
Exhibit 4.12 - Amendment to Management Services Agreement, dated as of November 30, 1992, between the Registrant and Pameco Holdings, Inc. (incorporated herein by reference to Exhibit 4.12 of Registrant's Report on Form 10-K for the year ended December 31, 1992).
Exhibit 4.13 - Nomination Agreement, dated as of December 15, 1992, among the Registrant and the Investors listed therein (incorporated herein by reference to Exhibit 4.13 of Registrant's Report on Form 10-K for the year ended December 31, 1992).
Exhibit 4.14 - Exchange Agreement, dated as of January 15, 1993, among MLX Corp. and the Investors listed therein (incorporated herein by reference to Exhibit 4.14 of Registrant's Report on Form 10-K for the year ended December 31, 1992).
Exhibit 4.15 - Loan and Security Agreement, dated as of January 15, 1993, between S.K. Wellman Limited, Inc. and Barclays Business Credit, Inc. (incorporated herein by reference to Exhibit 4.15 of Registrant's Report on Form 10-K for the year ended December 31, 1992).
Exhibit 4.16 - First Amendment to Loan and Security Agreement, dated as of February 19, 1993, between S.K. Wellman Limited, Inc. and Barclays Business Credit, Inc. (incorporated herein by reference to Exhibit 4.16 of Registrant's Report on Form 10-K for the year ended December 31, 1992).
Exhibit 4.17 - Second Amendment to Loan and Security Agreement, dated as of March 15, 1993, between S.K. Wellman Limited, Inc. and Barclays Business Credit, Inc. (incorporated herein by reference to Exhibit 4.17 of Registrant's Report on Form 10-K for the year ended December 31, 1992).
Exhibit 4.18 - Stock Pledge Agreement (S.K. Wellman S.p.A.), dated as of January 15, 1993 between The S.K. Wellman Corp. and Barclays Business Credit, Inc. (incorporated herein by reference to Exhibit 4.18 of Registrant's Report on Form 10-K for the year ended December 31, 1992).
Exhibit 4.19 - Stock Pledge Agreement (S.K. Wellman S.p.A.), dated as of January 15, 1993, between S.K. Wellman Limited, Inc. and Barclays Business Credit, Inc. (incorporated herein by reference to Exhibit 4.19 of Registrant's Report on Form 10-K for the year ended December 31, 1992).
Exhibit 4.20 - Stock Pledge Agreeme (The S.K. Wellman Company of Canada Limited), dated as of January 15, 1993, between The S.K. Wellman Corp. and Barclays Business Credit, Inc. (incorporated herein by reference to Exhibit 4.20 of Registrant's Report on Form 10-K for the year ended December 31, 1992).
Exhibit 4.21 - Patent Collateral Assignment and Security Agreement, dated as of January 15, 1993, between The S.K. Wellman Corp. and Barclays Business Credit, Inc. (incorporated herein by reference to Exhibit 4.21 of Registrant's Report on Form 10-K for the year ended December 31, 1992).
Exhibit 4.22 - Trademark Security Agreement, dated as of January 15, 1993, between The S.K. Wellman Corp. and Barclays Business Credit, Inc. (incorporated herein by reference to Exhibit 4.22 of Registrant's Report on Form 10-K for the year ended December 31, 1992).
Exhibit 4.23* - Exchange Agreement dated as of April 2, 1993 among MLX Corp. and the Bondholders Listed Herein.
Exhibit 10.1# - Employment Agreement dated February 10, 1991, between the Registrant and Brian R. Esher (incorporated herein by reference to Exhibit 10.1 to the Registrant's Report on Form 10-K for the fiscal year ended December 31, 1990).
Exhibit 10.2# - First Amendment to Employment Agreement, dated as of March 19, 1992, between the Registrant and Brian Esher.
Exhibit 10.3 - Severance/Consulting Agreement dated January 14, 1991, between the Registrant and William P. Panny (incorporated herein by reference to Exhibit 10.3 to the Registrant's Report on Form 10-K for the fiscal year ended December 31, 1990).
Exhibit 10.4 - Purchase Agreement, dated as of March 19, 1992, among the Registrant, Pameco Holdings, Inc., and Pameco Corporation (incorporated herein by reference to Exhibit 2.1 of Registrant's Current Report on Form 8-K dated April 10, 1992).
Exhibit 10.5# - MLX Corp. Stock Option Plan, dated as of December 29, 1989 (incorporated herein by reference to Exhibit 10.5 of Registrant's Report on Form 10-K for the year ended December 31, 1992).
Exhibit 10.6# - Senior Management Discretionary Bonus Plan, dated as of January 21, 1992 (incorporated herein by reeference to Exhibit 10.6 of Registrant's Report on Form 10-K for the year ended December 31, 1992).
Exhibit 13* - 1993 Annual Report to Shareholders of the Registrant. With the exception of information expressly incorporated herein by reference, the 1993 Annual Report is not deemed to be filed with the Commission.
Exhibit 21 - Subsidiaries of the Registrant (incorporated herein by reference to Exhibit 22 of Registrant's Report on Form 10-K for the year ended December 31, 1992).
Exhibit 24* - Consent of Independent Accountants. _____________ [FN] *Filed with this Report on Form 10-K #Management compensatory plan or arrangement
(b) Reports on Form 8-K
No reports on Form 8-K were filed by the Registrant during the quarter ended December 31, 1993.
SIGNATURES
Pursuant to the requirement's of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, hereunto duly authorized.
MLX Corp.
Dated: March 11, 1994 By: /s/ Thomas C. Waggoner
Thomas C. Waggoner Vice President & Chief Financial Officer
Pursuant to the requirement of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant, and in the capacities indicated, on March 11, 1994.
Signature Title
/s/ BRIAN R. ESHER Chairman of the Board, President & Chief Executive Officer (Principal Executive Officer) and Director
/s/ THOMAS C. WAGGONER Vice President & Chief Financial Officer (Principal Financial & Accounting Officer)
/s/ WILLEM F.P. de VOGEL Director
/s/ ALFRED R. GLANCY III Director
/s/ S. STERLING McMILLAN III Director
/s/ J. WILLIAM UHRIG Director
/s/ W. JOHN ROBERTS Director
/s/ H. WHITNEY WAGNER Director
Report of Independent Auditors Board of Directors MLX Corp.
We have audited the consolidated balance sheets of MLX Corp. and subsidiaries as of December 31, 1993 and 1992, and the related consolidated statements of operations, shareholders' equity, and cash flows for each of the three years in the period ended December 31, 1993. Our audits also included the financial statement schedules listed in the Index at Item 14(a). These financial statements and schedules are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements and schedules based on our audits.
We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of MLX Corp. and subsidiaries at December 31, 1993 and 1992, and the consolidated results of their operations and their cash flows for each of the three years in the period ended December 31, 1993 in conformity with generally accepted accounting principles. Also, in our opinion, the related financial statement schedules, when considered in relation to the basic financial statements taken as a whole, present fairly in all material respects the information set forth therein.
As discussed in Note A to the consolidated financial statements, in 1993 the Company changed its method of accounting for income taxes and postretirement benefits.
ERNST & YOUNG March 11, 1994 Atlanta, Georgia
SCHEDULE III - CONDENSED FINANCIAL INFORMATION OF REGISTRANT MLX Corp. December 31, 1993 and 1992 (in thousands)
SCHEDULE III - CONDENSED FINANCIAL INFORMATION OF REGISTRANT - (cont.) MLX Corp. YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991 (in thousands)
SCHEDULE V - PROPERTY, PLANT AND EQUIPMENT
MLX CORP. AND SUBSIDIARIES
SCHEDULE VI - ACCUMULATED DEPRECIATION, DEPLETION AND AMORTIZATION OF PROPERTY, PLANT AND EQUIPMENT
MLX CORP. AND SUBSIDIARIES
SCHEDULE VIII - VALUATION AND QUALIFYING ACCOUNTS
MLX CORP. AND SUBSIDIARIES
SCHEDULE IX - SHORT-TERM BORROWINGS
MLX CORP. AND SUBSIDIARIES
SCHEDULE X - SUPPLEMENTARY INCOME STATEMENT INFORMATION
MLX CORP. AND SUBSIDIARIES