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 June 30, 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.)
One Centennial Avenue, Piscataway, NJ 08855-6820
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (908) 980-6000
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
August 10, 1994 23,946,968
(shares)
<PAGE>
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PART 1. FINANCIAL INFORMATION
Item 1. Financial Statements
ASI HOLDING CORP0RATION ("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.
The following summary statement of operations of the Company and
subsidiaries for the three months and six months ended June 30, 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 three- and six-month periods of 1994 are
not necessarily indicative of results for the entire year.
<TABLE>
ASI HOLDING CORPORATION AND SUBSIDIARIES
UNAUDITED SUMMARY STATEMENT OF OPERATIONS
(Dollars in millions)
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
1994 1993 1994 1993
<S> <C> <C> <C. <C>
SALES $ 1,130.5 $ 995.5 $ 2,120.1 $1,874.9
COSTS AND EXPENSES
Cost of sales 857.3 754.5 1,603.6 1,405.0
Selling and administrative expenses 196.9 181.2 366.5 340.5
Other expense 8.2 11.5 14.4 19.6
Interest expense 64.6 76.5 128.7 147.5
1,127.0 1,023.7 2,113.2 1,912.6
INCOME (LOSS) BEFORE INCOME TAXES AND
EXTRAORDINARY ITEM 3.5 (28.2) 6.9 (37.7)
Income taxes 14.9 6.1 31.6 14.2
LOSS BEFORE EXTRAORDINARY ITEM (11.4) (34.3) (24.7) (51.9)
Extraordinary item - (91.9) - (91.9)
NET LOSS (11.4) (126.2) (24.7) (143.8)
Preferred stock dividend - (4.4) - (8.6)
NET LOSS APPLICABLE TO COMMON SHARES $ (11.4) $ (130.6) $ (24.7)$ (152.4)
========= ========= ========= ========
Loss per common share:
Loss before extraordinary item $ (.47) $ (1.63) $ (1.03)$ (2.55)
Extraordinary item - (3.87) - (3.87)
NET LOSS PER COMMON SHARE $ (.47) $ (5.50) $ (1.03)$ (6.42)
========= ========= ========= =========
Average number of outstanding
common shares and equivalents 23,990,851 23,756,057 23,956,175 23,727,443
<FN>
See following notes
</TABLE>
<PAGE>
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Item 1. Financial Statements (continued)
Note 1: Included in the three months and six months ended June 30, 1994, are
charges of $26 million related to the consolidation of production facilities
and the implementation of other cost reduction actions, and $14 million of
reserves for losses on operating assets expected to be disposed of prior to
the expiration of their originally estimated useful lives. Of such amounts
$36 million was included in cost of sales.
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 1. Financial Statements (continued)
<TABLE>
ASI HOLDING CORPORATION AND SUBSIDIARIES
UNAUDITED SUMMARY BALANCE SHEET
(Dollars in millions)
<CAPTION>
June 30, December 31,
1994 1993
<S> <C> <C>
CURRENT ASSETS
Cash and certificates of deposit $ 43.2 $ 53.2
Cash in escrow .2 .9
Accounts receivable 618.4 507.3
Inventories
Finished products 227.3 169.0
Products in process 84.7 78.0
Raw materials 98.5 78.8
410.5 325.8
Other current assets 62.7 54.5
TOTAL CURRENT ASSETS 1,135.0 941.7
FACILITIES, less accumulated depreciation:
June 1994 - $397.5; Dec. 1993 - $354.6 804.6 820.5
GOODWILL 1,027.5 1,025.8
OTHER ASSETS 248.0 199.1
$3,215.1 $2,987.1
======= =======
CURRENT LIABILITIES
Loans payable to banks $ 97.8 $ 38.0
Current maturities of long-term debt 125.4 106.0
Accounts payable 323.2 307.3
Accrued payrolls 140.5 99.8
Other accrued liabilities 331.0 263.3
Taxes on income 29.0 47.0
TOTAL CURRENT LIABILITIES 1,046.9 861.4
LONG-TERM DEBT 2,182.8 2,191.7
OTHER LIABILITIES 712.5 656.8
TOTAL LIABILITIES 3,942.2 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; 23,949,444 shares issued and
outstanding in 1994, 23,858,335 in 1993 .2 .2
Capital surplus 196.8 188.7
ESOP shares (1.8) (4.3)
Subscriptions receivable (2.6) (2.6)
Accumulated deficit (774.7) (750.0)
Foreign currency translation effects (139.4) (149.2)
Minimum pension liability adjustment (5.6) (5.6)
TOTAL STOCKHOLDERS' DEFICIT (727.1) (722.8)
$3,215.1 $2,987.1
======== ========
<FN>
See accompanying notes.
</TABLE>
<PAGE>
<PAGE>
Item 1. Financial Statements (continued)
<TABLE>
ASI HOLDING CORPORATION AND SUBSIDIARIES
UNAUDITED SUMMARY STATEMENT OF CASH FLOWS
(Dollars in millions)
<CAPTION>
Six Months Ended
June 30,
1994 1993
<S> <C> <C>
Cash provided (used) by -
Operating activities:
Net loss before extraordinary items $ (24.7) $ (51.9)
Depreciation and asset loss provision 68.7 55.1
Amortization of goodwill 15.4 15.6
Non-cash interest 26.0 40.2
Accrued interest 2.6 7.5
Amortization of debt issuance costs 7.3 4.5
Non-cash stock compensation 14.6 13.4
Changes in working capital invested in operations (95.6) (81.7)
Timing differences in funding * 26.6 (22.6)
40.9 (19.9)
Investing activities:
Purchase of property, plant and equipment (32.4) (33.4)
Investment in affiliated companies (12.6) (8.1)
Proceeds from disposals of property, plant
and equipment 11.1 1.8
Other (2.1) 4.5
(36.0) (35.2)
Financing activities:
Proceeds from issuance of senior securities - 650.0
Proceeds from term loans - 750.0
Repayment of term loans (53.9) (405.1)
Increase in cash held for redemption of
long-term debt - (961.0)
Use of revolver 53.7 108.6
Net decrease in short-term debt (6.1) (54.5)
Proceeds from other long-term debt 6.1 3.1
Repayments of other long-term debt (11.2) (10.1)
Common stock repurchases (3.4) (2.8)
ESOP stock repurchases (2.1) (2.5)
Payments of stock subscriptions receivable - .2
Other financing costs - (74.1)
(16.9) 1.8
Decrease in cash and certificates of
deposit excluding translation effects (12.0) (53.3)
Effect of exchange rate changes on cash and
certificates of deposit 2.0 (2.5)
Net decrease in cash and certificates
of deposit (10.0) (55.8)
Cash and certificates of deposit at beginning of period 53.2 111.5
Cash and certificates of deposit at end of period $ 43.2 $ 55.7
========= ========
<FN>
* Includes accruals for consolidation of production facilities and other cost
reduction actions.
</TABLE>
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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 Six Months Ended
June 30, June 30,
<S>
SALES: 1994 1993 1994 1993
<C> <C> <C> <C>
Air Conditioning Products $ 648 $ 556 $1,168 $ 992
Plumbing Products 301 299 597 597
Transportation Products 181 141 355 286
Total sales $1,130 $ 996 $2,120 $1,875
====== ======= ====== ======
OPERATING INCOME:
Air Conditioning Products $ 66 $ 37 $ 98 $ 65
Plumbing Products 21 28 59 65
Transportation Products 2 3 20 20
Total operating income 89 68 177 150
Interest expense 65 77 129 148
Corporate costs 20 19 41 40
Income (loss) before income taxes
and extraordinary item $ 4 $ (28) $ 7 $ (38)
====== ======= ====== ======
</TABLE>
Operating income for the three months and six months ended June 30, 1994,
included charges of $26 million related to the consolidation of production
facilities and the implementation of other cost reduction actions, and $14
million of reserves for losses on operating assets expected to be disposed of
prior to expiration of their originally estimated useful lives. The
comparable periods of 1993 included $8 million of charges for plant shut-downs
and other cost reduction actions. Results, with such charges shown
separately, were as follows:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
<S> 1994 1993 1994 1993
<C> <C> <C> <C>
Air Conditioning Products 73 42 105 70
Plumbing Products 40 29 78 66
Transportation Products 16 5 34 22
Subtotal 129 76 217 158
Charges for cost reduction actions (26) (8) (26) (8)
Asset loss provision (14) - (14) -
Total operating income 89 68 177 150
===== ====== ===== =====
</TABLE>
<PAGE>
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Results of Operations: Second Quarter and First Six Months of 1994
Compared with Second Quarter and First Six Months of 1993
Unless otherwise indicated the following paragraphs which discuss variances
in operating income exclude the charges in 1994 and 1993 for facilities
consolidation, cost reduction actions, and reserves for losses on early
disposal of operating assets.
Consolidated sales rose from $996 million in the second quarter of 1993 to
$1,130 million in the second quarter of 1994, a gain of 13% (16% excluding
the unfavorable effects of foreign exchange). Operating income (excluding
the unusual charges described previously) in the second quarter of 1994 was
$129 million compared with $76 million in the second quarter of 1993, an
increase of $53 million, or 70% (with little effect from foreign exchange).
Consolidated sales for the first half of 1994 of $2,120 million were up by
$245 million, or 13% (16% excluding the unfavorable effects of foreign
exchange). Operating income for the first half of 1994 was $217 million,
up $59 million, or 37% (40% excluding the effects of foreign exchange),
from $158 million in the comparable period of 1993.
Sales of Air Conditioning Products increased 17% (with little effect from
foreign exchange) to $648 million in the second quarter of 1994 from $556
million in the 1993 quarter. The Unitary Products Group achieved a gain of
18% because of higher volume (as a result of 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 13% primarily because of improved markets, gains
in market share, and the acquisition of sales offices in the latter half of
1993. For the International Group sales increased 20%, with gains in the
Far East, Latin America, and European operations, principally from higher
volumes. Sales for Air Conditioning Products in the first half of 1994
increased by 18% to $1,168 million from $992 million in the first half of
1993, for the reasons cited for the second quarter.
Operating income of Air Conditioning Products increased 74% (excluding the
unusual charges described previously), from $42 million in the second
quarter of 1993 to $73 million in the second quarter of 1994. This gain
was primarily the result of increased operating income for the Unitary
Products Group and the Commercial Systems Group because of higher sales and
cost reductions. The International Group experienced an overall decrease
in income as declines for the European Group and for Latin America were
partly offset by a gain for the Far East operations. First-half operating
income for Air Conditioning Products was up 50% from the first half of 1993
principally for the reasons mentioned for the second quarter.
<PAGE>
<PAGE>
Results of Operations: Second Quarter and First Six Months of 1994 Compared
with Second Quarter and First Six Months of 1993 (Continued)
Partially offsetting those gains in the second quarter and first half of 1994
were $7 million of charges in the second quarter related to the
implementation of cost reduction actions. The second quarter of 1993
included $5 million of charges for plant closings and other cost reduction
actions. Including such charges, operating income increased by 78% in the
quarter and 51% in the half.
Sales of Plumbing Products increased 1% (5% excluding the unfavorable effects
of foreign exchange) to $301 million for the second quarter of 1994 from $299
million for the second quarter of 1993. The exchange-adjusted improvement
resulted from sales increases of 5% for the European Plumbing Products Group,
3% for the U.S. Plumbing Products Group, and 7% for the Far East and Americas
International Groups on a combined basis. Sales of the European group
increased primarily because of volume gains as economic conditions continued
to show modest improvement. For the International Group exchange-adjusted
sales increased for the Far East group and for the Americas International
group primarily because of higher volumes. Sales increased for the Far East
group despite the deconsolidation of operations in China which in April 1994
were contributed to a new joint venture. Sales of the U.S. Plumbing Products
Group for the second quarter of 1994 increased 3% over the comparable 1993
quarter as a result of an expanded retail customer base. For the first half
of 1994 sales of the Plumbing Products Group were $597 million, the same
level as in the first half of 1993, but increased by 4% excluding the adverse
effects of foreign exchange principally for the reasons cited for the second
quarter.
Operating income of Plumbing Products was $40 million (excluding the unusual
charges described previously) in the 1994 quarter compared with $29 million
in the second quarter of 1993, an increase of 38% (42% excluding the
unfavorable effects of foreign exchange). Results for the U.S. Plumbing
Products Group improved because of the increased sales and cost reductions at
manufacturing facilities. Operating income for the European Plumbing
Products Group also increased, primarily because of price and volume gains in
the U.K. and Germany. Operating income of the Far East and Americas
International Groups on a combined basis increased because of the higher
sales. For the first half of 1994 operating income for Plumbing Products
increased by 18% (24% excluding the effects of foreign exchange), primarily
for the reasons explained for the second quarter.
More than offsetting these improvements were certain charges which caused
operating income to decrease by 25% in the quarter and 9% in the half as
compared to the corresponding periods of the prior year. In connection with
an evaluation of its North American plumbing products operations, the Company
determined that certain assets (principally machinery and equipment used in
the production of chinaware) will be disposed of prior to the expiration of
their originally estimated useful lives. In recognition of the anticipated
loss on disposal, the Company provided a reserve of $14 million in the second
quarter of 1994. In addition the Company provided $5 million of charges
related to implementation of cost reduction actions. Similar charges in the
second quarter of 1993 were $1 million.
<PAGE>
<PAGE>
Results of Operations: Second Quarter and First Six Months of 1994 Compared
with Second Quarter and First Six Months of 1993 (Continued)
Sales of Transportation Products in the second quarter of 1994 were $181
million, compared with $141 million in the second quarter of 1993, an
increase of 28% (31% excluding the unfavorable effects of foreign exchange).
More than half of the gain was driven by a 24% increase in the unit volume of
truck production in Western Europe 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 by approximately 50%,) and in Brazil, France and
Spain where demand increased significantly. Sales gains were also achieved
in most other countries in which this group operates. In addition
approximately 40% of this gain was from the sales of Perrot, a German brake
manufacturer which was acquired in January 1994. First-half 1994 sales were
up 24% (28% excluding the effects of foreign exchange) to $355 million from
$286 million in the first half of 1993, for the same reasons.
Operating income for Transportation Products was $16 million (excluding the
unusual charges described previously) in the second quarter of 1994 compared
with $5 million in the second quarter of 1993, an increase of $11 million
(with little effect from foreign exchange). The increase was primarily
because of the increased sales volume and the effect of cost reductions.
Those favorable factors were partly offset by the effects of lower prices in
Europe. In addition, the new Perrot operation experienced a small loss. For
the six-month period operating income increased 55%, from $22 million in the
1993 period to $34 million in 1994. Factors affecting the six-month period
comparisons were essentially the same as those affecting the second quarter
comparison.
Offsetting the improvements in the second quarter of 1994 were charges of $14
million related to the consolidation of production facilities and
implementation of other cost reduction actions. Charges of a similar nature
in the second quarter of 1993 totalled $2 million. Including these charges,
operating income in the quarter and the half were essentially flat at $2
million and $20 million, respectively.
Financial Review
The Company's financing and corporate costs for the second quarter of 1994
were $85 million, down from $96 million in the 1993 quarter. Such items in
the first half of 1994 were $170 million, down from the $188 million in the
1993 period. For both the quarter and the six months interest expense
decreased as a result of lower overall interest rates on debt issued as part
of the major refinancing in 1993.
For the three months and six months ended June 30, 1994, the income tax
provisions were $15 million and $32 million, respectively, on pre-tax income
of $4 million for the quarter and $7 million for the six months. The tax
provisions for the three months and six months ended June 30, 1993, were $6
million and $14 million, respectively, despite losses (before taxes and
extraordinary item) of $28 million and $38 million, respectively. These
<PAGE>
<PAGE>
Results of Operations: Second Quarter and First Six Months of 1994 Compared
with Second Quarter and First Six Months of 1993 (Continued)
provisions reflected the annualized estimate of taxes payable on those
foreign operations that are expected to be profitable, offset partly in the
1993 periods by tax benefits from certain foreign net operating losses. The
provision for the first six months 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 all
periods 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 $93 million, was $41
million for the six months ended June 30, 1994. The Company borrowed $54
million under the $250 million Revolving Credit Facility (the "Revolver")
available under the Company's 1993 credit agreement. Working capital
invested in operations increased by $96 million compared with an increase
of $82 million in the comparable period of 1993. These increases are
principally a result of increased inventories and receivables, following a
seasonal pattern typical of the first half in past years and expected to
recur in the future. The Company also devoted $45 million to capital
expenditures, including $13 million of investments in affiliated companies,
and repaid $54 million of bank term loans.
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 June 30, 1994, there was $133 million available under the Revolver
after reduction for borrowings and for $55 million of letters of credit
outstanding thereunder. In addition, the Company's foreign subsidiaries
had $45 million available under overdraft facilities. These foreign
facilities can be withdrawn by the banks at any time.
In February 1994 the Company obtained an amendment to the credit agreement
that among other things relaxed certain financial tests and covenants. 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.
<PAGE>
<PAGE>
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits.
None.
(b) Reports on Form 8-K for the quarter ended June 30, 1994.
None
<PAGE>
<PAGE>
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 INC.
By: G. Ronald Simon
(Vice President and Controller)
(also signing as Principal
Accounting Officer)
August 15, 1994
