<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
/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
For the transition period from ____________ to ____________
Commission File Number: 0-22098
INSILCO CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 06-0635844
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
425 Metro Place North
Fifth Floor
Dublin, Ohio 43017
(Address of principal executive offices) (Zip Code)
614-792-0468
(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 reports), and (2) has been subject to such filing
requirements for the past 90 days. /X/ Yes / / No
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Sections 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court. /X/ Yes / / No
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date. As of November 11, 1996,
9,334,700 shares of common stock, $.001 par value, were outstanding.
<PAGE> 2
INSILCO CORPORATION AND SUBSIDIARIES
INDEX TO FORM 10-Q
<TABLE>
<CAPTION>
Part I. FINANCIAL INFORMATION Page
----
<S> <C>
Item 1. Financial Statements
Condensed Consolidated Balance Sheets 3
- September 30, 1996 (unaudited)
- December 31, 1995
Condensed Consolidated Statements of Income 4
- Nine months ended September 30, 1996 (unaudited)
- Nine months ended September 30, 1995 (unaudited)
- Three months ended September 30, 1996 (unaudited)
- Three months ended September 30, 1995 (unaudited)
Condensed Consolidated Statement of Stockholders' Equity 5
- Nine months ended September 30, 1996 (unaudited)
Condensed Consolidated Statements of Cash Flows 6
- Nine months ended September 30, 1996 (unaudited)
- Nine months ended September 30, 1995 (unaudited)
Notes to Unaudited Condensed Consolidated Financial Statements 7
Independent Auditors' Review Report 10
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations 11
Part II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 16
Exhibit Index 18
</TABLE>
2
<PAGE> 3
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
INSILCO CORPORATION AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(In thousands)
<TABLE>
<CAPTION>
(unaudited)
September 30, December 31,
1996 1995
-------- --------
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 1,384 9,894
Trade receivables, net 82,384 86,086
Other receivables 7,710 8,452
Inventories, net 64,444 69,289
Deferred tax asset 7,474 7,228
Net assets of business held for sale 10,709 --
Prepaid expenses and other current assets 7,355 6,395
-------- --------
Total current assets 181,460 187,344
Property, plant and equipment, net 112,301 91,235
Deferred tax asset 19,236 29,653
Investment in Thermalex 10,900 10,028
Excess of cost over fair value of net tangible assets acquired 12,837 --
Other assets 19,791 21,869
-------- --------
Total assets $356,525 340,129
======== ========
Liabilities and Stockholders' Equity
Current liabilities:
Current portion of long-term debt $ 20,154 18,642
Current portion of other long-term obligations 7,025 7,975
Accrued interest payable 3,285 4,089
Accounts payable 32,553 45,336
Accrued expenses and other 57,675 66,382
-------- --------
Total current liabilities 120,692 142,424
Long-term debt, excluding current portion 184,320 167,847
Other long-term obligations, excluding current portion 41,094 45,637
Stockholders' equity (deficit) 10,419 (15,779)
-------- --------
Total liabilities and stockholders' equity $356,525 340,129
======== ========
</TABLE>
Note: The condensed consolidated balance sheet at December 31, 1995 has been
derived from the audited balance sheet as of that date.
See accompanying notes to unaudited condensed consolidated financial statements.
3
<PAGE> 4
INSILCO CORPORATION AND SUBSIDIARIES
Condensed Consolidated Statements of Income
(Unaudited)
(In thousands, except share and per share data)
<TABLE>
<CAPTION>
Nine Months Ended Three Months Ended
September 30, September 30,
----------------------------- -----------------------------
1996 1995 1996 1995
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Sales $ 443,390 426,216 142,893 137,620
Cost of products sold 300,535 289,103 97,783 95,727
Depreciation 12,618 11,647 4,560 3,722
Selling, general and administrative expenses 82,970 76,753 26,197 24,347
Amortization of intangible assets 179 -- 150 --
Nonrecurring charges -- 6,200 -- --
Amortization of Reorganization Goodwill -- 24,129 -- 8,043
----------- ----------- ----------- -----------
Operating income 47,088 18,384 14,203 5,781
----------- ----------- ----------- -----------
Other income (expense):
Interest expense (14,044) (14,653) (4,644) (4,913)
Interest income 673 1,431 213 54
Other income, net 5,842 9,303 2,738 927
----------- ----------- ----------- -----------
(7,529) (3,919) (1,693) (3,932)
----------- ----------- ----------- -----------
Income before income taxes 39,559 14,465 12,510 1,849
Income tax expense (13,126) (12,638) (4,028) (3,413)
----------- ----------- ----------- -----------
Net income (loss) $ 26,433 1,827 8,482 (1,564)
=========== =========== =========== ===========
Net income (loss) per common share and
share equivalent $ 2.67 0.18 0.86 (0.15)
=========== =========== =========== ===========
Weighted average number of common shares
outstanding and common share equivalents 9,882,651 10,136,386 9,830,403 10,267,665
=========== =========== =========== ===========
</TABLE>
See accompanying notes to unaudited condensed consolidated financial statements.
4
<PAGE> 5
INSILCO CORPORATION AND SUBSIDIARIES
Condensed Consolidated Statement of Stockholders' Equity
For the Nine Months Ended September 30, 1996
(unaudited)
(In thousands)
<TABLE>
<CAPTION>
Common
Stock Total
Par Additional Cumulative Stockholders'
Value Paid-in Accumulated Treasury Translation Equity
$0.001 Capital Deficit Stock Adjustment (Deficit)
------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1995 $ 10 67,192 (76,168) (6,813) -- (15,779)
Net income -- -- 26,433 -- -- 26,433
Purchase of treasury stock -- -- -- (3,932) -- (3,932)
Restricted stock -- 3,300 -- -- -- 3,300
Reserved shares -- (706) -- -- -- (706)
Shares issued upon exercise
of stock options -- 811 -- -- -- 811
Tax benefit from exercise of
stock options -- 294 -- -- -- 294
Foreign translation adjustment -- -- -- -- (2) (2)
------- ------- ------- ------- ------- -------
Balance at September 30, 1996 $ 10 70,891 (49,735) (10,745) (2) 10,419
======= ======= ======= ======= ======= =======
</TABLE>
See accompanying notes to unaudited condensed consolidated financial statements.
5
<PAGE> 6
INSILCO CORPORATION AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(Unaudited)
(In thousands)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
-----------------------
1996 1995
-------- --------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 26,433 1,827
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 12,797 35,776
Deferred tax expense 10,370 10,150
Other noncash charges and credits (739) (985)
Changes in operating assets and liabilities:
Receivables 4,492 (5,633)
Inventories (1,191) (4,292)
Payables and other (26,036) (26,718)
Other long-term liabilities (1,786) (3,165)
-------- --------
Net cash provided by operating activities 24,340 6,960
-------- --------
Cash flows from investing activities:
Acquisitions of businesses (39,123) --
Divestitures 6,392 --
Capital expenditures (14,662) (15,755)
Other investing activities 2,074 4,777
-------- --------
Net cash used in investing activities (45,319) (10,978)
-------- --------
Cash flows from financing activities:
Proceeds from debt borrowings 29,653 10,750
Retirement of long-term debt (11,224) (8,670)
Purchase of treasury stock (3,932) (547)
Payment of prepetition liabilities (2,839) (2,949)
Proceeds from sale of stock 811 203
-------- --------
Net cash provided by (used in) financing activities 12,469 (1,213)
-------- --------
Net decrease in cash and cash equivalents (8,510) (5,231)
Cash and cash equivalents at beginning of period 9,894 8,690
-------- --------
Cash and cash equivalents at end of period $ 1,384 3,459
======== ========
Interest paid $ 12,946 14,087
======== ========
Income taxes paid $ 1,865 1,618
======== ========
</TABLE>
See accompanying notes to unaudited condensed consolidated financial statements.
6
<PAGE> 7
INSILCO CORPORATION AND SUBSIDIARIES
Notes to Unaudited Condensed Consolidated Financial Statements
September 30, 1996
(1) Basis of Presentation
The accompanying unaudited condensed consolidated financial statements
have been prepared in accordance with generally accepted accounting
principles for interim financial information in accordance with the
instructions to Form 10-Q and Rule 10-01 of Regulation S-X.
Accordingly, they do not include all the information and footnotes
required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all determinable
adjustments have been made which are considered necessary to present
fairly the financial position and the results of operations and cash
flows at the dates and for the periods presented. Certain
reclassifications have been made to the 1995 financial statements to
conform to the 1996 presentation.
(2) Inventories
Inventories consisted of the following at September 30, 1996 (in
thousands):
<TABLE>
<S> <C>
Raw materials and supplies $28,819
Work-in-process 21,624
Finished goods 14,001
-------
Total inventories $64,444
=======
</TABLE>
(3) Net Assets of Business Held For Sale and Subsequent Event
On October 4, 1996, the Company sold its Rolodex electronics product
line to Franklin Electronic Publishers, Inc. ("Franklin") for
approximately $15,800,000, less transaction costs, resulting in a
pretax gain of approximately $3,000,000. Under the terms of the sale
agreement, Franklin assumed certain assets and liabilities related to
the electronics product line and the Company has granted to Franklin an
exclusive license to use the Rolodex(R) brand name for certain
electronics products. The net assets of the Rolodex electronic product
line are presented as "Net Assets of Business Held for Sale" on the
Unaudited Condensed Consolidated Balance Sheet as of September 30,
1996.
(4) Other Income
Other income for the third quarter of 1996 includes a $2,200,000
favorable adjustment to the Company's environmental liabilities
following a review of its environmental exposures.
(5) Earnings Per Share
Earnings per share for the three and nine months ended September 30,
1996 and 1995 were determined using the weighted average of the shares
issued and reserved for issuance as of the Plan Effective Date and
additional shares issued since that date. When dilutive, stock options
were included as share equivalents using the treasury stock method. The
weighted average number of common shares and common share equivalents
used for calculation of the primary earnings per
7
<PAGE> 8
INSILCO CORPORATION AND SUBSIDIARIES
Notes to Unaudited Condensed Consolidated Financial Statements
September 30, 1996
share for the quarter and nine months ended September 30, 1996 were
9,830,403 and 9,882,651, respectively. The weighted average number of
common shares and common share equivalents used for calculation of
earnings per share for the three and nine months ended September 30,
1995 were 10,267,665 and 10,136,386, respectively.
(6) Contingencies
The Company's operations are subject to extensive federal, state and
local laws and regulations relating to the generation, storage,
handling, emission, transportation and discharge of materials into the
environment. The Company has a program for monitoring its compliance
with applicable environmental regulations, the interpretation of which
often is subjective. This program includes regular reviews of the
Company's operations' obligations to comply with the environmental laws
and regulations in order to determine the adequacy of the recorded
liability for remediation activities.
The Company is also implicated in various claims and legal actions
arising in the ordinary course of business. These claims will be
addressed in the ordinary course of business and will be paid in cash
as expenses are incurred. Certain claims filed in the bankruptcy court
are also still in dispute. Any liability resulting from these
bankruptcy claims will be paid in accordance with the Plan of
Reorganization. The Company has recorded these disputed claims at the
estimated settlement amounts ultimately expected to be allowed
following the bankruptcy court litigation.
In the opinion of management, the ultimate disposition of these matters
will not have a material adverse effect on the Company's consolidated
financial position, results of operations or liquidity.
(7) Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual results could differ
from those estimates.
(8) Acquisitions
On July 10, 1996, the Company acquired the automotive aluminum tube
business of Helmut Lingemann GmbH & Co. ("Lingemann") for approximately
$33,994,000 including transaction fees and expenses, and subject to
certain adjustments. The transactions include the purchase of stock of
Lingemann's German subsidiary, ARUP Alu-Rohr und-Profil GmbH, and the
automotive aluminum tube business assets of its Duncan, South Carolina
based Helima-Helvetion International, Inc. This cash transaction was
financed principally from borrowings under the Company's Bank Credit
Agreement.
8
<PAGE> 9
INSILCO CORPORATION AND SUBSIDIARIES
Notes to Unaudited Condensed Consolidated Financial Statements
September 30, 1996
The acquisition has been accounted for as a purchase and, accordingly,
the purchase price has been allocated to the assets and liabilities
acquired based on their preliminary (pending finalization of certain
appraisals) estimated fair values at July 10, 1996. The operating
results of the enterprises acquired have been included for the period
subsequent to July 10, 1996. (See Form 8-K/A dated July 10, 1996 for
further information.) (See Note 10 for pro forma results.)
(9) Divestiture
On September 3, 1996, the Company through its wholly owned subsidiary,
Rolodex Corporation, sold Curtis Manufacturing, Inc. ("Curtis"), its
computer accessories business for estimated proceeds of approximately
$6,392,000 subject to adjustment for certain post closing items, which
was used to reduce the outstanding principal on the Company's bank term
loan. The Company filed a Form 8-K dated September 6, 1996 reporting
the divestiture of Curtis. (See Note 10 for pro forma results.)
(10) Pro Forma Results of Operations
The following pro forma financial information presents consolidated
sales and results of operations as if the sales of Curtis (see Note 9)
and Rolodex electronics product line (see Note 3) had occurred as of
the beginning of the periods presented. The pro forma effect of the
acquisition of the automotive aluminum tube business of Lingemann (see
Note 8) is included as if the acquisition occurred at the beginning of
the nine-month period ended September 30, 1996. The effect of the
acquisition for the nine-month period ended September 30, 1995, is not
included because operating information is not available for that
period. The pro forma results of operations are as follows (in
thousands, except per share data):
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
-----------------
1996 1995
---- ----
<S> <C> <C>
Sales $435,800 393,759
Net income 26,414 7,641
Net income per common share
and share equivalent 2.67 0.75
</TABLE>
9
<PAGE> 10
INDEPENDENT AUDITORS' REVIEW REPORT
THE BOARD OF DIRECTORS
INSILCO CORPORATION:
We have reviewed the condensed consolidated balance sheet of Insilco Corporation
and subsidiaries as of September 30, 1996, the related condensed consolidated
statements of income for the three-month periods and nine-month periods ended
September 30, 1996 and 1995, the related condensed consolidated statement of
stockholders' equity for the nine-month period ended September 30, 1996, and the
related condensed consolidated statements of cash flows for the nine-month
periods ended September 30, 1996 and 1995. These condensed consolidated
financial statements are the responsibility of the Company's management.
We conducted our review in accordance with standards established by the American
Institute of Certified Public Accountants. A review of interim financial
information consists principally of applying analytical procedures to financial
data and making inquiries of persons responsible for financial and accounting
matters. It is substantially less in scope than an audit conducted in accordance
with generally accepted auditing standards, the objective of which is the
expression of an opinion regarding the financial statements taken as a whole.
Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to the condensed consolidated financial statements referred to above for
them to be in conformity with generally accepted accounting principles.
We have previously audited, in accordance with generally accepted auditing
standards, the consolidated balance sheet of Insilco Corporation and
subsidiaries as of December 31, 1995, and the related consolidated statements of
operations, stockholders' equity (deficit) and cash flows for the year then
ended (not presented herein); and in our report dated February 12, 1996, we
expressed an unqualified opinion on those consolidated financial statements. In
our opinion, the information set forth in the accompanying condensed
consolidated balance sheet as of December 31, 1995, is fairly stated, in all
material respects, in relation to the consolidated balance sheet, from which it
has been derived.
Columbus, Ohio
October 24, 1996 KPMG Peat Marwick LLP
10
<PAGE> 11
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
INTRODUCTION
On April 1, 1993, Insilco Corporation (the "Company") and certain of its
subsidiaries emerged from Chapter 11 bankruptcy proceedings pursuant to an
Amended and Restated Plan of Reorganization dated November 23, 1992 (the "Plan
of Reorganization"). The Plan of Reorganization resulted in a change of control
of the Company and a substantial reduction in the Company's liabilities.
March 31, 1993 was the effective date (the "Plan Effective Date ") of the Plan
of Reorganization for financial reporting purposes, and as of that date the
Company adopted the "fresh start" reporting principles prescribed by Statement
90-7, "Financial Reporting by Entities in Reorganization Under the Bankruptcy
Code", issued by the American Institute of Certified Public Accountants. The
"fresh start" accounting principles required the Company to value its assets and
liabilities at fair values and eliminate its accumulated deficit. The total
reorganization value of assets at the Plan Effective Date was approximately
$562,011,000, or approximately $218,026,000 in excess of the aggregate fair
value of the tangible and identified intangible assets (classified as
"Reorganization Goodwill"). The most notable impact of "fresh start" accounting
on the financial statements is the negative impact on the reported operating
income of each business segment and the consolidated net income resulting from
the noncash amortization of the Reorganization Goodwill. Such amortization
expense totaled $8,043,000 and $24,129,000 in the three and nine months ended
September 30, 1995, respectively. At December 31, 1995, the Reorganization
Goodwill was fully amortized.
RESULTS OF OPERATIONS
The Company is a diversified manufacturer of automotive component products,
telecommunications and electronics components and a variety of specialty
consumer products. The Company's Automotive Components Group serves primarily
the automotive markets through its Thermal Components and Steel Parts
Corporation operating units. The Technologies Group serves primarily the
telecommunications and electronics components markets through its Stewart
Connector Systems, Stewart Stamping, Signal Transformer and Escod Industries
operating units. The Office Products and Specialty Publishing Group includes
Rolodex and Taylor Publishing (a school yearbook publisher) and Curtis
Manufacturing through the date of sale in early September, 1996 (see Note 9 to
the Unaudited Condensed Consolidated Financial Statements.)
Summarized sales and operating income (loss) by business segment and the
significant other components of net income for the three and nine months ended
September 30, 1996 compared to the corresponding periods in 1995 are set forth
in the following table (in thousands) and discussed below:
11
<PAGE> 12
<TABLE>
<CAPTION>
Nine Months Three Months
Ended September 30, Ended September 30,
------------------- -------------------
1996 1995 1996 1995
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
SALES
Automotive Components Group $ 154,057 136,625 52,577 43,408
Technologies Group 137,647 127,157 45,466 40,687
Office Products/Specialty Publishing Group 151,686 162,434 44,850 53,525
--------- --------- --------- ---------
443,390 426,216 142,893 137,620
--------- --------- --------- ---------
OPERATING INCOME (LOSS)
Automotive Components Group 17,758 14,962 5,480 4,324
Technologies Group 19,056 14,284 5,653 3,808
Office Products/Specialty Publishing Group 10,337 (10,817) 3,091 (2,336)
Unallocated Corporate (63) (45) (21) (15)
--------- --------- --------- ---------
47,088 18,384 14,203 5,781
--------- --------- --------- ---------
- -----------------------------------------------------------------------------------------------------------------
SUPPLEMENTAL INFORMATION: EFFECTS OF "FRESH START
ACCOUNTING" ON OPERATING INCOME (LOSS)
COMPARABILITY
AMORTIZATION OF REORGANIZATION GOODWILL
Automotive Components Group -- 2,553 -- 851
Technologies Group -- 5,382 -- 1,794
Office Products/Specialty Publishing Group -- 16,194 -- 5,398
--------- --------- --------- ---------
-- 24,129 -- 8,043
--------- --------- --------- ---------
- -----------------------------------------------------------------------------------------------------------------
OTHER INCOME (EXPENSE)
Interest expense (14,044) (14,653) (4,644) (4,913)
Interest income 673 1,431 213 54
Other income, net 5,842 9,303 2,738 927
--------- --------- --------- ---------
(7,529) (3,919) (1,693) (3,932)
--------- --------- --------- ---------
INCOME BEFORE INCOME TAXES 39,559 14,465 12,510 1,849
INCOME TAX EXPENSE (13,126) (12,638) (4,028) (3,413)
--------- --------- --------- ---------
NET INCOME (LOSS) $ 26,433 1,827 8,482 (1,564)
========= ========= ========= =========
</TABLE>
12
<PAGE> 13
SALES AND OPERATING INCOME. Total net sales in the third quarter of 1996
increased by approximately 4% ($5,273,000) over the corresponding period in
1995. In the third quarter of 1996, the Automotive Components Group and
Technologies Group had increases over the corresponding period in 1995 of
approximately 21% ($9,169,000) and 12% ($4,779,000), respectively, while sales
in the Office Products/Specialty Publishing Group were down 16% ($8,675,000)
from the prior year period. In the first nine months of 1996, sales increased 4%
($17,174,000) over the same period in 1995 due to increased sales in the
Automotive Components Group and Technologies Group of 13% ($17,432,000) and 8%
($10,490,000), respectively, partially offset by a decline in sales in the
Office Products/Specialty Publishing Group of 7% ($10,748,000).
In the Automotive Components Group, sales of automotive heat exchanger related
products manufactured by the Company's Thermal Components unit increased over
the third quarter and first nine months of 1995. Sales for the third quarter and
first nine months of 1996 included $6,641,000 and $10,034,000, respectively, in
sales from acquisitions completed throughout this year (see Note 8 to the
Unaudited Condensed Consolidated Financial Statements.) For the third quarter
and first nine months of 1996, Steel Parts reported gains in sales of
transmissions and other stamped steel parts due to higher content per car of
Steel Parts' transmission components and diversification of its steel parts
product line. Partially offsetting these gains was a drop in sales of stainless
steel tubing for non-automotive applications for both the third quarter and
first nine months of 1996.
Sales in the Technologies Group for the quarter ended September 30, 1996
increased 12% ($4,779,000) due to 34% and 11% growth in sales of the segment's
wire and cable assemblies by Escod Industries and Stewart Connector's modular
data interconnect product, respectively, and to a lesser degree, growth in the
sales of precision stampings by Stewart Stamping. Partially offsetting these
improvements was a decline in the sales of power transformers by Signal
Transformer due to a slowdown in orders from a few higher volume customers.
Sales of office and computer accessory products, within the Office
Products/Specialty Publishing Group, decreased 27% ($7,723,000) in the third
quarter of 1996 from the same period in 1995, primarily due to decreased sales
of the subsequently divested electronic organizer product line from $6,934,000
in the third quarter in 1995 to $1,807,000 in the third quarter of 1996 (see
Note 3 to the Unaudited Condensed Consolidated Financial Statements.) Sales for
the third quarter of 1996 also included sales from the recently divested
computer product accessories business totaling $3,831,000 in the third quarter
of 1996 as compared to $4,624,000 in the corresponding period of 1995 (see Note
9 to the Unaudited Condensed Consolidated Financial Statements.) Excluding the
divested businesses, sales of Rolodex traditional products and paper-based
organizers in the third quarter of 1996 decreased 11% from the prior year
period. For the first nine months of 1996, sales of office and computer
accessory products decreased 13% ($10,199,000) from the same period in 1995 due
to decreased sales of electronic organizers at Rolodex and computer accessories
products at Curtis. Excluding the divested businesses, sales of Rolodex
traditional products and paper-based organizers for the first nine months of
1996 were approximately flat as compared to the corresponding period of 1996.
Taylor Publishing sales for the third quarter and first nine months of 1996 were
approximately flat compared to the same periods of the prior year. (See
Seasonality for additional information regarding Taylor Publishing sales.)
Operating income increased from $5,781,000 in the third quarter of 1995 to
$14,203,000 in the third quarter of 1996 primarily due to the effect of the 1995
noncash amortization of Reorganization Goodwill. In the third quarter of 1996,
there was no Reorganization Goodwill amortization expense compared to $8,043,000
in the third quarter of 1995. Excluding the third quarter 1995 Reorganization
Goodwill amortization expense, operating income for the third quarter of 1996
increased $379,000 or 3% over the corresponding period in 1995.
On a year-to-date basis, operating income increased from $18,384,000 in the
first nine months of 1995 to $47,088,000 in the first nine months of 1996
primarily due to the effect of the noncash amortization of Reorganization
Goodwill and certain nonrecurring charges recorded at Rolodex/Curtis in 1995. In
the second quarter of 1995, Rolodex/Curtis recorded $6,200,000 of nonrecurring
charges related to uncollectible accounts receivable, sales returns and obsolete
inventory. In 1996 there was no Reorganization Goodwill amortization expense
compared to $24,129,000 in 1995. Excluding the 1995 Reorganization Goodwill
amortization expense
13
<PAGE> 14
and nonrecurring charges, operating income for the first nine months of 1996
decreased $1,625,000 or 3% from the corresponding period in 1995.
The Automotive Components Group's operating income in the third quarter of 1996
compared to the corresponding period of 1995 increased from $4,324,000 to
$5,480,000. Excluding the third quarter 1995 Reorganization Goodwill
amortization expense of $851,000, the segment's operating income increased
$305,000 due to increased sales in the Company's heat exchanger related business
units partially offset by decreased operating margins at the Company's
non-automotive stainless steel tubing business and the product mix of heat
exchanger sales. For the first nine months of 1996, the Automotive Components
Group's operating income was $17,758,000 compared to $14,962,000 in the
corresponding period of 1995. Excluding the 1995 Reorganization Goodwill
amortization expense of $2,553,000, the segment's operating income increased
$243,000 over the prior year period as a result of increased sales in the
Company's heat exchanger related business units partially offset by lower
margins reported in the stainless steel tubing business and the product mix of
heat exchanger sales.
The Technologies Group's operating income increased from $3,808,000 in the third
quarter of 1995 to $5,653,000 in the third quarter of 1996. Excluding the
Reorganization Goodwill amortization expense of $1,794,000 in the third quarter
of 1995, the segment's operating income increased $51,000 over the third quarter
of 1995 due to higher volume and efficiency gains at the Company's precision
stamping and cable assembly businesses partially offset by the sales mix shift
to lower margin products at the Company's connector business, competitive
pricing pressures and lower power transformer sales. For the first nine months
of 1996, the Technologies Group's operating income was $19,056,000 compared to
$14,284,000 in the corresponding period of 1995. Excluding the Reorganization
Goodwill amortization expense of $5,382,000 in the first nine months of 1995,
the segment's operating income decreased $610,000 from the first nine months of
1995 due to the sales mix shift to lower margin products at the Company's
connector business and competitive pricing pressures.
The Office Products/Specialty Publishing Group's operating income in the third
quarter of 1996 was $3,091,000 compared to an operating loss of $2,336,000 in
the corresponding period of 1995. Excluding the Reorganization Goodwill
amortization expense of $5,398,000 in the third quarter of 1995, the Group's
operating income increased $29,000 due to improved operating results at the
computer accessories business partially offset by the increased costs associated
with restructuring Rolodex' administrative support structure. In the first nine
months of 1996, the Office Products/Specialty Publishing Group's operating
income was $10,337,000 compared to an operating loss of $10,817,000 in the
corresponding period of 1995. Excluding the Reorganization Goodwill amortization
expense of $16,194,000 in the first nine months of 1995, the Group's operating
income increased $4,960,000 due to the $6,200,000 of nonrecurring charges
incurred in 1995 and the increased income in the computer accessories business
partially offset by the increased costs associated with restructuring Rolodex'
administrative support structure.
OTHER INCOME (EXPENSE). Other income for the third quarter of 1996 increased
$2,239,000 over third quarter 1995 primarily due to other income of $2,200,000
from a favorable adjustment to the Company's environmental liabilities following
a review of its environmental exposures. Other income for the first nine months
of 1996 decreased $3,610,000 from the corresponding period in 1995. In the first
nine months of 1995, other income included a net favorable adjustment of
$1,494,000 related to the resolution of several legal disputes dating to prior
years, a favorable adjustment to its environmental liabilities of $3,600,000
following a review of the Company's liability related to previously divested
operations and a $1,599,000 gain on the sale of idle corporate assets. For the
third quarter and first nine months of 1996, other income included equity in
income from the Company's unconsolidated joint venture, which manufactures
extruded aluminum tubing primarily for automotive air conditioning condensers,
of $910,000 and $2,273,000, respectively, compared to $592,000 and $1,667,000 in
the corresponding periods in 1995, respectively. Interest expense decreased 5%
($269,000) and 4% ($609,000) in the third quarter and first nine months of 1996,
respectively, from the corresponding periods in the prior year.
INCOME TAX EXPENSE. During the third quarter of 1996, the Company's estimated
annual effective income tax rate improved to 32.2% based primarily on the
estimated change in mix of U.S. versus Puerto Rico source income.
14
<PAGE> 15
The Company's actual income tax payments were, and are expected to be,
substantially less than the total financial statement tax expense as the
benefits of net deferred tax assets are realized.
CASH FLOWS FROM OPERATING ACTIVITIES. Operations provided $24,340,000 cash in
the first nine months of 1996 as compared to providing $6,960,000 in the first
nine months of 1995. Cash flows from operations improved due to improved working
capital management, primarily accounts receivable and inventory.
CASH FLOWS USED IN INVESTING ACTIVITIES. In the first nine months of 1996, the
Company's investing activities used $45,319,000 compared to $10,978,000 in the
first nine months of 1995. In July of 1996, the Company announced that it had
acquired the automotive aluminum tube business of Helmut Lingemann GmbH & Co. Of
Dortmund, Germany for approximately $33,994,000, including transaction fees and
expenses, subject to adjustment. In early 1996, the Company acquired businesses
serving the automotive, heavy truck and industrial manufacturing radiator
replacement market for a net purchase price of $5,129,000. In the third quarter
of 1996, the Company sold its computer accessories business, Curtis
Manufacturing Co., Inc. for proceeds of approximately $6,392,000. The Company's
other current investments consist principally of capital expenditures which
totaled $14,662,000 during the first nine months of 1996. In the first nine
months of 1996, the Company received $1,000,000 from Thermalex relating to the
partial repayment of a 1994 loan and a $400,000 dividend distribution from
Thermalex. In 1995, the Company received $1,918,000 on the sale of idle assets,
$1,750,000 from Thermalex relating to the partial repayment of a 1994 loan, net
proceeds of $726,000 from an escrow deposit following settlement of certain
environmental claims that had been pending against the Company in the Chapter 11
cases and a $400,000 dividend distribution from Thermalex.
CASH FLOWS FROM (USED IN) FINANCING ACTIVITIES. Financing activities provided
$12,469,000 in the first nine months in 1996 compared to using $1,213,000 in the
corresponding period of 1995. In the first nine months of 1996, the Company made
payments totaling $10,846,000 on its term loan and borrowed a net amount of
$29,400,000 on its revolving credit facility. The Company also repurchased an
additional 97,500 shares of its common stock for $3,117,000 bringing the total
purchases under the Company's $15.0 million buyback program to 295,000 shares or
$9,756,000. In addition, the Company paid $2,839,000 of prepetition liabilities
in the first nine months of 1996. In the first nine months of 1995, the Company
made payments totaling $8,625,000 on its term loan and borrowed a net amount of
$10,100,000 on its revolving credit facility. The Company paid $2,949,000 of
prepetition liabilities in the first nine months of 1995.
SEASONALITY. The Company's yearbook publishing business, Taylor Publishing, is
highly seasonal, with a majority of sales occurring in the second and third
quarters of the year. Taylor receives significant customer advance deposits in
the second half of the year. The Company's other businesses are not highly
seasonal.
IMPACT OF INFLATION AND CHANGING PRICES. Inflation and changing prices have not
significantly affected the Company's operating results or markets.
LIQUIDITY. At September 30, 1996, the Company's cash and cash equivalents and
net working capital amounted to $1,384,000 and $60,768,000, respectively,
representing decreases in cash and cash equivalents of approximately 86%
($8,510,000) and an increase in net working capital of 35% ($15,848,000) from
the December 31, 1995 levels. The borrowing ability under the Company's
revolving credit facility at September 30, 1996 was $45,050,000 including
$39,050,000 available for letters of credit.
SUBSEQUENT EVENT. Effective on October 4, 1996, the Company reported on Form 8-K
that it sold the Rolodex electronics product line to Franklin Electronic
Publishers, Inc. for gross proceeds of approximately $15,800,000, less
transaction costs and subject to adjustment for certain post closing items. The
net proceeds will be utilized to reduce the outstanding principal on the
Company's bank term loan.
On October 7, 1996, the Company announced that it retained the investment
banking firm of Goldman, Sachs & Co. to assist in the review of its strategic
alternatives, including identifying potential buyers of its Rolodex business
unit.
15
<PAGE> 16
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Exhibit 21 Subsidiaries of the Registrant.
(b) Reports on Form 8-K
A report, dated July 10, 1996, on Form 8-K was filed during the
quarter ending September 30, 1996, pursuant to Item 2 of that
form. No financial statements were filed as part of that report.
An amended report, dated July 10, 1996, on Form 8-K/A was filed
during the quarter ending September 30, 1996, pursuant to Item 2
of that form. The following financial statements were filed as
part of that report:
(1) Financial Statements of Business Acquired.
Unaudited Statement of Combined Revenues and Direct
Operating Expenses for the Ten Months Ended June
30, 1996
Unaudited Statement of Assets Acquired and Liabilities
Assumed as of July 10, 1996
(2) Pro Forma Financial Information.
Unaudited Pro Forma Condensed Balance Sheet as of June
30, 1996
Unaudited Pro Forma Condensed Consolidated Statements
of Operations
Six Months Ended June 30, 1996
Four Months Ended December 31, 1995
A report, dated September 6, 1996, on Form 8-K was filed during
the quarter ending September 30, 1996, pursuant to Item 2 of
that form. The following financial statements were filed as part
of that report:
(1) Pro Forma Financial Information.
Pro Forma Condensed Balance Sheet as of June 30, 1996
Pro Forma Condensed Consolidated Statements of
Operations
Six Months Ended June 30, 1996
Year Ended December 31, 1995
16
<PAGE> 17
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
INSILCO CORPORATION
------------------------------
Registrant
Date: November 12, 1996 By: /s/ James D. Miller
----------------------
James D. Miller
Executive Vice President and
Chief Financial Officer
17
<PAGE> 18
INSILCO CORPORATION
FORM 10-Q
EXHIBIT INDEX
Exhibit No. Exhibit Page No.
- ----------- ------- --------
21 Subsidiaries of the Registrant.
18
<PAGE> 1
EXHIBIT 21
INSILCO CORPORATION AND SUBSIDIARIES
SUBSIDIARIES
The following table sets forth certain information with respect to subsidiaries
of the Company, all of which are directly or indirectly owned by the Company or
applicable subsidiary unless otherwise indicated. Subsidiaries are indicated by
indentation.
Company Place of Incorporation
------- ----------------------
ARUP Alu-Rohr und Profil GmbH Germany
Great Lake Inc. Delaware
GUVAB Gesellschaft fur Unternehmensbeteililgungen
und Vermogensverwaltung im
aluminiumverarbeitenden Bereich mbH Germany
Rolodex Corporation Delaware
Rolodex de Puerto Rico, Inc. Delaware
Signal Dominicana, S.A. Dominican Republic
Signal Transformer Co., Inc. Delaware
Signal Caribe, Inc. Delaware
Steel Parts Corporation Delaware
Stewart Connector Systems, Inc. Pennsylvania
Stewart Connector Systems GmbH Germany
Stewart Connector Systems de Mexico,
S.A. de C.V. Mexico
Stewart Connector Systems (Japan), Inc. Japan
Stewart Stamping Corporation Delaware
Taylor Publishing Company Delaware
Thermal Components Division, Inc. Delaware
Thermal Components, Inc. Delaware
Thermalex, Inc. (50% owned) Alabama
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