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 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 33-23070
ASI HOLDING CORPORATION
(Exact name of Registrant as specified in its charter)
Delaware 13-3465896
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1114 Avenue of the Americas, New York, N.Y. 10036
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (212) 703-5100
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 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.
Common stock, $.01 par value, outstanding at
May 2, 1994 24,013,796
(shares)
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PART 1. FINANCIAL INFORMATION
Item 1. Financial Statements
ASI HOLDING CORPORATION AND SUBSIDIARIES
UNAUDITED SUMMARY STATEMENT OF OPERATIONS
ASI HOLDING CORPORATION ("Holding") is a Delaware corporation organized in
March 1988, and it has as its only investment all the outstanding common
stock of American Standard Inc. Hereinafter, "the Company" will refer to
Holding or to its subsidiary, American Standard Inc., as the context
requires.
<TABLE>
(Dollars in millions)
<CAPTION>
Three months ended
March 31,
1994 1993
<S> <C> <C>
SALES $ 989.6 $ 879.4
COSTS AND EXPENSES
Cost of sales 746.3 650.5
Selling and administrative expenses 169.6 159.3
Other expense 6.2 8.1
Interest expense 64.1 71.0
986.2 888.9
INCOME (LOSS) BEFORE INCOME TAXES 3.4 (9.5)
Income taxes 16.7 8.1
NET LOSS (13.3) (17.6)
Preferred stock dividend - (4.2)
NET LOSS APPLICABLE TO COMMON SHARES $ (13.3) $ (21.8)
======== ========
NET LOSS PER COMMON SHARE $ (.56) $ (.92)
======== ========
Average number of outstanding common shares
and equivalents 23,921,499 23,698,829
<FN>
See accompanying notes.
</TABLE>
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Item 1. Financial Statements (continued)
ASI HOLDING CORPORATION AND SUBSIDIARIES
<TABLE>
UNAUDITED SUMMARY BALANCE SHEET
(Dollars in millions)
<CAPTION>
March 31, December 31,
1994 1993
<S>
CURRENT ASSETS <C> <C>
Cash and certificates of deposit $ 57.3 $ 53.2
Cash in escrow .2 .9
Accounts receivable 560.1 507.3
Inventories
Finished products 205.0 169.0
Products in process 89.8 78.0
Raw materials 88.8 78.8
383.6 325.8
Other current assets 65.6 54.5
TOTAL CURRENT ASSETS 1,066.8 941.7
FACILITIES, less accumulated depreciation:
March 1994 - $383.4; Dec. 1993 - $354.6 832.0 820.5
GOODWILL 1,041.9 1,025.8
OTHER ASSETS 192.7 199.1
$3,133.4 $2,987.1
======= =======
CURRENT LIABILITIES
Loans payable to banks $ 113.6 $ 38.0
Current maturities of long-term debt 115.3 106.0
Accounts payable 298.3 307.3
Accrued payrolls 112.6 99.8
Other accrued liabilities 312.3 263.3
Taxes on income 50.8 47.0
TOTAL CURRENT LIABILITIES 1,002.9 861.4
LONG-TERM DEBT 2,174.7 2,191.7
OTHER LIABILITIES 684.2 656.8
TOTAL LIABILITIES 3,861.8 3,709.9
STOCKHOLDERS' DEFICIT
Preferred stock, Series A, 1,000 shares issued
and outstanding, par value $.01 - -
Common stock $.01 par value, 28,000,000 shares
authorized; 24,006,086 shares issued and
outstanding in 1994, 23,858,335 in 1993 .2 .2
Capital surplus 192.8 188.7
ESOP shares (3.0) (4.3)
Subscriptions receivable (2.5) (2.6)
Accumulated deficit (763.3) (750.0)
Foreign currency translation effects (147.0) (149.2)
Minimum pension liability adjustment (5.6) (5.6)
TOTAL STOCKHOLDERS' DEFICIT (728.4) (722.8)
$3,133.4 $2,987.1
======= =======
<FN>
See accompanying notes.
</TABLE>
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Item 1. Financial Statements (continued)
ASI HOLDING CORPORATION AND SUBSIDIARIES
<TABLE>
UNAUDITED SUMMARY STATEMENT OF CASH FLOWS
(Dollars in millions)
<CAPTION>
Three months ended
March 31,
<S> 1994 1993
Cash provided (used) by operating activities <C> <C>
Income-related:
Net loss $ (13.3) $ (17.6)
Depreciation 27.1 26.9
Amortization of goodwill 7.6 7.8
Non-cash interest 12.7 18.2
Accrued interest 32.3 36.8
Amortization of debt issuance costs 3.7 1.8
Non-cash stock compensation 6.0 5.5
Changes in working capital invested in operations (88.9) (118.9)
Timing differences in funding 16.7 (1.2)
Net cash flow provided (used) by operating activities 3.9 (40.7)
Investing activities:
Purchase of property, plant and equipment (10.5) (9.3)
Investment in affiliated companies (7.6) (1.0)
Proceeds from disposals of property, plant
and equipment .9 1.0
Cash of subsidiary consolidated 1.6 4.5
(15.6) (4.8)
Financing activities:
Repayment of term loans (45.9) -
Use of revolver 62.4 4.0
Net increase (decrease) in short-term debt 3.7 (11.0)
Proceeds from other long-term debt 2.8 1.1
Repayments of other long-term debt (4.9) (3.7)
Common stock repurchases (2.6) (2.7)
ESOP stock repurchases (.1) (.2)
Payments of stock subscriptions receivable - .1
15.4 (12.4)
Increase (decrease) in cash and certificates of
deposit excluding translation effects 3.7 (57.9)
Effect of exchange rate changes on cash and
certificates of deposit .4 (.3)
Net increase (decrease) in cash and certificates
of deposit 4.1 (58.2)
Cash and certificates of deposit at beginning
of period 53.2 111.5
Cash and certificates of deposit at end of period $ 57.3 $ 53.3
========= ========
</TABLE>
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AMERICAN STANDARD INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
Note 1.
The accompanying summary statement of operations of the Company and
subsidiaries for the three months ended March 31, 1994 and 1993 has not
been audited, but management believes that all adjustments, consisting of
normal recurring items, necessary to a fair statement for those periods
have been included. Results for the first three months of 1994 are not
necessarily indicative of results for the entire year.
Note 2.
As described in Note 5 of Notes to Consolidated Financial Statements
in the Company's Annual Report on Form 10-K for the year ended December
31, 1993, there are pending German tax issues for the years 1984 through
1990. There has been no significant change in the status of these issues
since December 31, 1993.
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Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Introduction
American Standard Inc. was acquired by ASI Holding Corporation, a Delaware
corporation, on April 27, 1988. As a result of this acquisition, results of
operations since that date include purchase price accounting adjustments and
reflect a highly leveraged capital structure.
<TABLE>
SUMMARY SEGMENT DATA
(Dollars in millions)
(Unaudited)
<CAPTION>
Three months ended
March 31,
<S> 1994 1993
SALES: <C> <C>
Air Conditioning Products $ 520 $ 436
Plumbing Products 296 298
Transportation Products 174 145
Total sales $ 990 $ 879
======= =======
OPERATING INCOME:
Air Conditioning Products $ 32 $ 28
Plumbing Products 38 37
Transportation Products 18 17
Total operating income 88 82
Interest expense 64 71
Corporate costs 21 21
Income (loss) before income taxes $ 3 $ (10)
======= =======
</TABLE>
Results of Operations: First Quarter of 1994 Compared with First Quarter of
1993
Consolidated sales rose from $879 million in the first quarter of 1993 to
$990 million in the first quarter of 1994, a gain of 13% (16% excluding the
unfavorable effects of foreign exchange). Sales increases of 19% for Air
Conditioning Products and 20% for Transportation Products were partly offset
by a sales decrease of 1% for Plumbing Products.
Operating income in the first quarter of 1994 was $88 million compared with
$82 million in the first quarter of 1993, an increase of $6 million, or 7%
(11% excluding the effects of foreign exchange). Operating income improved
for all three segments, with increases of 14% for Air Conditioning Products,
3% for Plumbing Products, and 6% for Transportation Products.
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Results of Operations: First Quarter of 1994 Compared with First Quarter of
1993 (Continued)
Sales of Air Conditioning Products increased 19% (20% excluding the effects
of foreign exchange) to $520 million in the first quarter of 1994 from $436
million in the 1993 quarter as U.S. commercial and residential new-
construction and replacement markets improved. The Unitary Products Group
achieved a gain of 26% because of higher volume (as a result of the improved
residential and commercial markets) and a shift to newer, larger-capacity,
higher-efficiency products, offset partly by the effect of lower prices for
certain products due to competitive pressures. Sales of the Commercial
Systems Group increased by 24% primarily because of improved markets, gains
in market share, and the acquisition of several sales and service offices in
the latter half of 1993. For the International Group a 12% sales increase
in the Far East (primarily because of increased exports from the U.S.) was
offset by a 9% sales decline for the European and Middle East operations
(principally because of lower volume as a result of poor economic conditions
and the unfavorable effects of foreign exchange). Excluding foreign
exchange effects the decline for the European group was 6%.
Operating income of Air Conditioning Products increased 14%, from $28
million in the first quarter of 1993 to $32 million in the first quarter of
1994. This was the result of increased operating income for the Unitary
Products Group because of higher sales, offset partly by declines in
operating income for the other groups. Despite higher volumes, operating
income for the Commercial Systems Group was slightly lower because
competitive price pressures prevented recovery of increased material, labor,
and other costs. The International Group also experienced an overall
decrease in income as declines in operating results for the Latin American
(primarily as a result of business expansion costs) and the European
operations (a slightly larger loss in the 1994 quarter than in the 1993
quarter because of poor economic conditions) more than offset a gain for the
Far East operations (because of higher export volumes).
Sales of Plumbing Products declined from $298 million for the first quarter
of 1993 to $296 million for the first quarter of 1994, a decrease of 1% (but
an increase of 4% excluding the unfavorable effects of foreign exchange).
The exchange-adjusted improvement resulted from sales increases of 6% for
the European Plumbing Products Group and 3% for the Far East and Americas
International Groups on a combined basis. Sales of the U.S. Plumbing
Products Group were flat year to year. The exchange-adjusted sales of the
European group increased primarily because of volume and product-mix gains
in the U.K., price and volume gains in Germany and Greece, and sales of the
new Czech Republic operation; otherwise European sales changed little from
the 1993 quarter, with small declines in France and Italy (primarily volume
and mix), offset partly by small gains in Egypt (volume) and Bulgaria
(price). In general, European sales were adversely affected by the poor
economy there, but several countries showed signs of recovery. Sales
increased for the Far East Group primarily because of higher prices and
volumes in Thailand, China, the Philippines, and Korea. Those increases
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Results of Operations: First Quarter of 1994 Compared with First Quarter
of 1993 (continued)
were offset by an overall sales decline for the Americas International
Group primarily because of lower volumes and prices in Canada and lower
prices on fixtures in Mexico. The Brazilian business showed a gain
because of higher volumes and prices, and sales of the Incesa companies in
Central America were flat. Sales of the U.S. Plumbing Products Group were
at the same level as in the comparable 1993 quarter because gains (volume,
price, and mix) in the improving U.S. domestic market were offset by a
decrease in export sales to the Far East. Sales gains in the U.S. market
were achieved for chinaware and acrylic products as a result of an
expanded retail customer base and increased volumes of small Americast
products.
Operating income of Plumbing Products was $38 million in the 1994 quarter
compared with $37 million in the first quarter of 1993, an increase of 3%
(10% excluding the unfavorable effects of foreign exchange). Operating
income of the U.S. group rose because of the domestic sales increase and
cost reductions, offset partly by a decline in operating income on export
sales because of lower volume. The European group also increased its
operating income on an exchange-adjusted basis, despite the lingering
recession, primarily because of price and volume gains in the U.K. and
Germany and income from the new Czech Republic operations. Operating
income of the Far East and Americas International Groups on a combined
basis decreased slightly; operations in Canada, Thailand, China, and the
Incesa countries experienced declines, which were partly offset by gains
for the Brazilian and Philippine companies.
Sales of Transportation Products in the 1994 quarter were $174 million,
compared with $145 million in the first quarter of 1993, an increase of
20% (25% excluding the unfavorable effects of foreign exchange).
Approximately half of this gain was from the sales of Perrot, a German
brake manufacturer, 70% of which was acquired in January 1994, and the
sales of a new wholly owned Spanish subsidiary consolidated beginning
January 1994. The remainder of the gain was driven by an 18% increase in
the unit volume of original-equipment sales and a 5% increase in
aftermarket sales. Sales volumes were significantly higher in the U.K.
(as a result of the growing automobile business in that country), in
Sweden (where truck manufacturing increased 53%,) and in Brazil (where
truck production increased by 15%). Sales gains were also achieved in
most other countries in which this group operates.
Operating income for Transportation Products increased 6% (10% excluding
foreign exchange effects) to $18 million in the first quarter of 1994 from
$17 million in the first quarter of 1993 primarily because of the
increased sales volume and the effect of cost reductions in
manufacturing. Those favorable factors were partly offset by the effects
of lower prices for original equipment (especially in Germany) and flat
prices in the aftermarket, in both cases because of competitive pressures
in weak markets. As a result, material and labor cost increases for the
most part were not recovered. In addition, the new Perrot and Spanish
operations experienced small losses.
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Results of Operations: First Quarter of 1994 Compared with First Quarter
of 1993 (continued)
Financial Review
The Company's financing and corporate costs for the first quarter of 1994
were $85 million, down from $92 million in the 1993 quarter. Interest
expense decreased as a result of lower overall interest rates on debt
issued as part of the major refinancing in 1993, while other corporate
costs were essentially at the same level as in the 1993 quarter.
For the three months ended March 31, 1994, the income tax provision was
$17 million despite pre-tax income of $3 million, whereas the tax
provision for the first quarter of 1993 was $8 million despite a pre-tax
loss of $10 million. These provisions reflected the annualized estimate
of taxes payable on those foreign operations that are expected to be
profitable, offset partly in the 1993 quarter by tax benefits from certain
foreign net operating losses. The provision for the first quarter of 1994
was adversely affected by less favorable tax treatment with respect to
certain foreign income. The unusual relationship between the pre-tax
results and the tax provision for both quarters is explained by the
nondeductibility for tax purposes of the amortization of goodwill and
other purchase accounting adjustments and the share allocations made by
the Company's ESOP as well as by tax rate differences and withholding
taxes on foreign earnings.
Liquidity and Capital Resources
The Company has a highly leveraged capital structure. Net cash provided
by operating activities, after cash interest paid of $15 million, was $4
million for the three months ended March 31, 1994. Utilizing this cash
flow, cash on hand at December 31, 1993, and the $250 million Revolving
Credit Facility (the "Revolver") available under the Company's 1993 credit
agreement, the Company devoted $18 million to capital expenditures,
including $8 million of investments in affiliated companies, and repaid
$46 million of bank term loans. Working capital invested in operations
increased by $89 million principally as a result of increased inventories
and receivables following a pattern typical of first quarters in the past
and expected to recur in the future.
The Company believes that the amounts available from operating cash flows,
funds available under the Revolver, or potential long-term debt or equity
financing sources will be sufficient to meet its expected cash needs
including planned capital expenditures for the foreseeable future.
As of March 31, 1994, there was $114 million available under the Revolver
after reduction for $66 million of letters of credit outstanding
thereunder. In addition, the Company's foreign subsidiaries had $38
million available under overdraft facilities. These foreign facilities
can be withdrawn by the banks at any time.
In April 1994 the Company took another significant step in its expansion
of plumbing product operations in the People's Republic of China (the
<PAGE>
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Results of Operations: First Quarter of 1994 Compared with First Quarter
of 1993 (Continued)
"PRC"). Through a newly established holding company affiliate, A-S China
Plumbing Products Limited ("ASPPL"), $83 million was raised in a private
placement of capital shares. In conjunction therewith the Company acquired
an initial ownership interest in ASPPL of approximately 27% for an
investment of $30 million consisting of a contribution of the Company's
67.6% ownership interest in its plumbing fixture manufacturing company
located in Guangdong Province and cash payments. With the proceeds from
this offering ASPPL will expand its operations to Beijing, Tianjin, and
Shanghai, providing for the PRC market a full product line of fixtures,
fittings, and bathtubs (eventually through as many as ten joint venture
companies). The Company's ownership interest in ASPPL is expected to
increase over time through additional investments.
In May 1994 a subsidiary of the Company, Standard Compressors Inc.,
concluded the final arrangements for a partnership formed in December 1993
with Heatcraft Technologies Inc., a subsidiary of Heatcraft Inc., for the
manufacture of compressors for use in air conditioning and refrigeration
equipment. Each partner has a 50% interest in the joint venture, called
Alliance Compressors, which initially will manufacture reciprocating
compressors in a section of the Company's existing facility in Tyler,
Texas. Construction of a new facility in Natchitoches, Louisiana, for the
manufacture of scroll compressors for use in residential air conditioners
is expected to begin later in 1994, with startup scheduled for late 1995.
In connection with this arrangement, American Standard Inc. received $22.5
million of which $8 million was for assets transferred and $10.5 million
for technologies transferred. It is contemplated that American Standard
Inc. will receive two additional payments of $10 million each upon
achieving technological and manufacturing milestones.
The Company's credit agreement contains various covenants that limit, among
other things, indebtedness, dividends on and redemptions of capital stock
of the Company, purchases and redemptions of other indebtedness of the
Company (including its outstanding debentures and notes), rental expense,
liens, capital expenditures, investments or acquisitions, disposal of
assets, the use of proceeds from asset sales, and certain other business
activities and require the Company to meet certain financial tests. In
February 1994 the Company obtained an amendment to the credit agreement
that among other things relaxed certain financial tests and covenants and
facilitated the investment in the air conditioning joint venture and the
formation of the plumbing affiliate in China. The Company currently
believes it will comply with the amended financial tests and covenants but
may have to obtain similar amendments or waivers in the future.
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PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits.
The exhibit listed on the accompanying Index to Exhibit is filed as
part of this quarterly report on Form 10-Q.
(b) Reports on Form 8-K for the quarter ended March 31, 1994.
None
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Company has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
ASI HOLDING CORPORATION
By: G. Ronald Simon
(Vice President and Controller)
(also signing as Principal
Accounting Officer)
May 16 , 1994
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ASI HOLDING CORPORATION
INDEX TO EXHIBIT
(The File Number of the Registrant, ASI Holding Corporation
("Holding") is 33-23070)
(10) (i) Summary of TNE Incentive Plan of American Standard
Inc. and Subsidiaries; a copy of the Summary is being
filed as Exhibit (10)(i) by American Standard Inc.
(File No. 1-470). in its Form 10-Q for the quarter
ended March 31, 1994, concurrently with the filing of
Holding's Form 10-Q for the same period and said
Summary is herein incorporated by reference.
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