<PAGE> 1
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 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 1-13574
SCHULLER INTERNATIONAL GROUP, INC.
- - --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 84-1196355
- - ------------------------------------- -------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
717 17th Street
Denver, Colorado 80202
- - --------------------------------------------------------------------------------
(Address of principal executive offices)
(Zip Code)
(303) 978-2000
--------------
(Registrant's telephone number, including area code)
- - --------------------------------------------------------------------------------
(Former name, former address and former fiscal year,
if changed since last report)
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 / /
Schuller International Group, Inc. is a wholly owned subsidiary of
Schuller Corporation and there is no market for the registrant's common stock.
As of May 9, 1996, there were 100 shares of the registrant's sole class of
common stock outstanding.
<PAGE> 2
*PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
* "Company" when used in this report refers to Schuller International
Group, Inc., incorporated in the State of Delaware in 1992, and
includes, where applicable, its consolidated subsidiaries.
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<PAGE> 3
SCHULLER INTERNATIONAL GROUP, INC.
CONDENSED CONSOLIDATED BALANCE SHEET
(Thousands of dollars)
(Unaudited)
<TABLE>
<CAPTION>
March 31, December 31,
ASSETS 1996 1995
- - -------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Current Assets
Cash and equivalents $ 122,912 $ 140,328
Marketable securities, at cost which
approximates market 1,184 21,043
Receivables, net 211,511 192,426
Inventories 107,160 77,121
Receivable from parent 7,732 10,920
Prepaid expenses 7,322 4,932
Deferred tax assets 30,834 31,957
----------------------------------------
Total Current Assets 488,655 478,727
Property, Plant and Equipment,
net of accumulated depreciation of
$582,140 and $578,120, respectively 749,777 715,903
Receivable from Parent 9,775 9,698
Other Assets 237,991 202,461
----------------------------------------
$1,486,198 $1,406,789
===================================================================================================================
LIABILITIES
- - -------------------------------------------------------------------------------------------------------------------
Current Liabilities
Accounts and notes payable $ 98,418 $ 91,206
Compensation and benefits 98,522 98,081
Income taxes 25,082 11,564
Demand note payable to parent 25,000 25,000
Other accrued liabilities 71,899 64,600
----------------------------------------
Total Current Liabilities 318,921 290,451
Long-Term Debt, less current portion 417,555 408,807
Postretirement Benefits Other Than
Pensions 206,334 203,107
Deferred Income Taxes and
Other Noncurrent Liabilities 302,219 287,990
----------------------------------------
1,245,029 1,190,355
----------------------------------------
Contingencies and Commitments (Note 2)
STOCKHOLDER'S EQUITY
- - -------------------------------------------------------------------------------------------------------------------
Common Stock, $1 par value; 100 shares
authorized, issued and outstanding
Capital in Excess of Par Value 57,082 57,082
Retained Earnings 153,807 126,668
Cumulative Currency Translation Adjustment 30,280 32,684
----------------------------------------
241,169 216,434
----------------------------------------
$1,486,198 $1,406,789
===================================================================================================================
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
I-2
<PAGE> 4
SCHULLER INTERNATIONAL GROUP, INC.
CONDENSED CONSOLIDATED STATEMENT OF INCOME
(Thousands of dollars)
(Unaudited)
<TABLE>
<CAPTION>
Three Months
Ended March 31,
----------------------------------
1996 1995
- - -------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Net Sales $326,109 $328,401
Cost of Sales 232,550 228,666
Selling, General and Administrative 31,427 29,456
Research, Development and Engineering 7,052 6,470
Services Provided by Parent 3,384 3,029
Other Income (Expense), net 5,456 (5,060)
--------------------------------------
Income from Operations 57,152 55,720
Interest Income 2,285 2,063
Interest Expense 11,344 11,149
Interest Expense - Parent 484 552
--------------------------------------
Income before Income Taxes 47,609 46,082
Income Tax Expense 20,470 20,046
--------------------------------------
Net Income $ 27,139 $ 26,036
===================================================================================================================
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
I-3
<PAGE> 5
SCHULLER INTERNATIONAL GROUP, INC.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(Thousands of dollars)
(Unaudited)
<TABLE>
<CAPTION>
Three Months
Ended March 31,
------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES: 1996 1995
- - --------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Net income $ 27,139 $ 26,036
Noncash items included in net income:
Depreciation and amortization 16,363 14,750
Postretirement and pension benefits 3,083 5,501
Provision for furnace rebuilds 1,798 2,114
Product guarantee income 1,517 2,038
Deferred taxes 1,961 873
Other, net 15,535 3,609
Changes in current assets and liabilities:
Receivables (4,097) (6,173)
Inventories (24,254) (23,279)
Prepaid expenses (2,095) (172)
Receivable from parent 3,111 5,158
Accounts payable (5,486) (7,203)
Compensation and benefits (5,196) (17,047)
Income taxes 13,462 12,887
Other accrued liabilities 3,584 (1,694)
Changes in noncurrent liabilities:
Postretirement benefits other than pensions (426) (1,051)
Other noncurrent liabilities (5,220) (1,617)
--------------------------------------
Net cash provided by operating activities 40,779 14,730
--------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
- - -------------------------------------------------------------------------------------------------------------------
Purchases of property, plant and equipment (25,154) (20,882)
Acquisitions (49,818)
Proceeds from sales of assets 1,464 1,958
Purchases of held-to-maturity securities (5,082) (20,525)
Purchases of available-for-sale securities (4,900) (6,077)
Proceeds from maturities of held-to-maturity securities 25,946 29,356
Proceeds from sales or maturities of
available-for-sale securities 6,082
Increase in other assets (6,436) (2,917)
--------------------------------------
Net cash used in investing activities (57,898) (19,087)
--------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
- - -------------------------------------------------------------------------------------------------------------------
Issuance of debt 168
Payments on debt (10) (43)
--------------------------------------
Net cash provided by (used in)
financing activities 158 (43)
--------------------------------------
Effect of Exchange Rate Changes on Cash (455) 469
--------------------------------------
Net Decrease in Cash and Equivalents (17,416) (3,931)
Cash and Equivalents at Beginning of Period 140,328 93,428
--------------------------------------
Cash and Equivalents at End of Period $122,912 $ 89,497
===================================================================================================================
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
I-4
<PAGE> 6
SCHULLER INTERNATIONAL GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
The accompanying condensed consolidated financial statements include the
accounts of Schuller International Group, Inc., and those of its majority owned
subsidiaries (collectively, "the Company"). The Company is a wholly owned
subsidiary of Schuller Corporation.
The condensed consolidated financial statements as of March 31, 1996 and
December 31, 1995 and for the three months ended March 31, 1996 and 1995
reflect all normal, recurring adjustments which are, in the opinion of
management, necessary for a fair presentation of the financial condition and
the results of operations for the periods presented. The year-end condensed
consolidated balance sheet was derived from audited financial statements, and
as presented does not include all disclosures required by generally accepted
accounting principles.
The Company has reclassified the presentation of certain prior period
information to conform with the current presentation format.
Additional information regarding the Company's accounting policies, operations
and financial position, is contained or incorporated in the Company's Form 10-K
for the year ended December 31, 1995 filed with the Securities and Exchange
Commission.
Note 1 - Inventories
The major classes of inventories were as follows:
<TABLE>
<CAPTION>
(Thousands of dollars)
March 31, December 31,
1996 1995
------------------------
<S> <C> <C>
Finished goods $ 68,077 $46,432
Raw materials and supplies 28,751 23,344
Work-in-process 10,332 7,345
------------------------
$107,160 $77,121
========================
</TABLE>
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<PAGE> 7
Note 2 - Contingencies and Commitments
Between 1988 and 1992, the Company manufactured phenolic roofing insulation
which may, under certain circumstances, contribute to the corrosion of metal
decks on which it is installed. Subsequently, the Company began a voluntary
program to inspect such metal decks and remediate where appropriate. The
Company has also accrued for costs relating to future inspections, remediation
and anticipated claims. These accruals are based on the Company's historical
experience regarding the incidence of corrosion and the cost of remediation and
include a number of assumptions related to the types of roofs on which phenolic
insulation has been installed as well as the assumption that the Company's past
remediation experience will continue over the remaining lives of roofs
insulated with the Company's phenolic roofing insulation.
During the first quarter of 1995, the Company and its liability insurance
carriers reached a settlement with respect to the extent of coverage to be
provided by such carriers. In addition, during the third quarter of 1995, the
Company and the former owner of the phenolic roofing insulation business
reached an agreement with respect to the costs to be reimbursed by the former
owner. Pursuant to these agreements, the Company has been reimbursed for a
portion of historical costs incurred and is entitled to receive reimbursement
for a substantial portion of future costs to be incurred by the Company for
inspection and remediation.
In 1996, the Company, Schuller Corporation and a third party were named as
defendants in two class action cases filed in U.S. District Court in Boston,
Massachusetts. The plaintiffs purport to represent all building owners in the
United States with phenolic insulation installed on their roof decks and seek
damages and injunctive relief, including an order requiring the removal and
replacement of the phenolic insulation and remediation of any deck corrosion.
The Company intends to defend these allegations vigorously.
The Company has reviewed its historical inspection and remediation experience
and the terms and collectibility of amounts payable under the reimbursement
agreements in light of the commitments and contingencies described above.
Based on the information available to date and subject to the assumptions
described above, if additional costs are incurred in excess of the accrued
amounts, such costs are not expected to have a material adverse effect on the
Company's financial condition, liquidity or results of operations.
I-6
<PAGE> 8
Note 3 - Other Income (Expense), net
Other income, net, was $5.5 million for the first quarter of 1996 compared with
other expense, net, of $5.1 million for the same period of 1995. Other income
for 1996 includes a $7.2 million gain relating to the receipt of surplus
pension assets in connection with the settlement of defined benefit pension
plans in which the Company's Canadian employees previously participated. Other
expense for 1995 included a $2.9 million charge for legal costs in connection
with litigation brought by the Company against the former owner of the phenolic
roofing business.
Note 4 - Acquisitions
On January 31, 1996, the Company acquired the commercial and industrial roofing
businesses of Nord Bitumi SpA, headquartered in Italy, and Nord Bitumi U.S.,
Inc. (collectively "Nord") to expand the Company's existing commercial and
industrial roofing product lines. On March 25, 1996, the Company acquired Web
Dynamics, a U.S. manufacturer of synthetic filtration products. Also during
the first quarter of 1996, a joint venture, in which the Company has a 60
percent interest, to operate and expand an existing fiber glass mat facility in
China became effective.
The combined purchase price for the acquisitions and the Company's contribution
to the joint venture totaled $56.5 million during the first quarter of 1996.
The acquisitions were accounted for under the purchase method, and accordingly,
the purchase prices were allocated on the basis of the estimated fair value of
assets acquired and liabilities assumed. Total purchase price in excess of net
assets acquired of $41 million is being amortized on a straight-line basis over
20 years. The pro forma effect of the acquisitions is not material to the
results of operations for the quarters ended March 31, 1996 and 1995.
I-7
<PAGE> 9
Note 5 - Business Segment Information
The Company reports separately the results of the Building Products and
Engineered Products segments. The Building Products segment consists of the
Company's building insulation, commercial and industrial roofing systems and
mechanical insulations businesses. The Engineered Products segment consists of
the Company's specialty insulations, filtration and mats and fibers businesses.
<TABLE>
<CAPTION>
(Thousands of dollars)
Three Months
Ended March 31,
- - -----------------------------------------------------------------------------------------------------------
Building Products 1996 1995
- - -----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Net Sales $180,500 $179,132
Costs and Expenses 156,006 146,582
Other Income (Expense), net (161) (2,702)
- - -----------------------------------------------------------------------------------------------------------
Income from Operations $ 24,333 $ 29,848
===========================================================================================================
Engineered Products
- - -----------------------------------------------------------------------------------------------------------
Net Sales $153,495 $156,199
Costs and Expenses 121,668 124,451
Other Income (Expense), net 270 453
- - -----------------------------------------------------------------------------------------------------------
Income from Operations $ 32,097 $ 32,201
===========================================================================================================
Corporate and Eliminations
- - -----------------------------------------------------------------------------------------------------------
Net Sales $ (7,886) $ (6,930)
Costs and Expenses (3,261) (3,412)
Other Income (Expense), net 5,347 (2,811)
- - -----------------------------------------------------------------------------------------------------------
Income (Loss) from Operations $ 722 $ (6,329)
===========================================================================================================
Consolidated Total Company
- - -----------------------------------------------------------------------------------------------------------
Net Sales $326,109 $328,401
Costs and Expenses 274,413 267,621
Other Income (Expense), net 5,456 (5,060)
- - -----------------------------------------------------------------------------------------------------------
Income from Operations $ 57,152 $ 55,720
===========================================================================================================
</TABLE>
Net sales included in Corporate and Eliminations relate principally to the
elimination of intersegment sales from the Engineered Products segment to the
Building Products segment (at prices approximating market).
I-8
<PAGE> 10
Report of Independent Accountants
To the Securityholders and Directors
of Schuller International Group, Inc.:
We have reviewed the accompanying condensed consolidated balance sheet of
Schuller International Group, Inc., as of March 31, 1996, and the related
condensed consolidated statements of income and cash flows for the three month
periods ended March 31, 1996 and 1995. These 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 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 as of December 31, 1995 and the
related consolidated statements of income, cash flows and stockholder's equity
for the year then ended (not presented herein); and in our report dated
February 2, 1996, except for Note 21, as to which the date is March 23, 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.
/s/ COOPERS & LYBRAND L.L.P.
- - ----------------------------
COOPERS & LYBRAND L.L.P.
Denver, Colorado
May 13, 1996
I-9
<PAGE> 11
ITEM 2.
SCHULLER INTERNATIONAL GROUP, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Schuller International Group, Inc. (the "Company"), a wholly owned subsidiary
of Schuller Corporation ("Schuller"), manufactures and markets insulation for
buildings and equipment, commercial roofing systems, high-efficiency air
filtration media and fibers and nonwoven mats used as reinforcements in
building and industrial applications. The Company operates 43 manufacturing
facilities in North America, Europe and China, and is comprised of two
principal business segments: Building Products and Engineered Products.
The Building Products segment consists of the Company's building insulation
business, which manufactures fiber glass wool insulation for walls and attics
in residential and commercial buildings; the commercial and industrial roofing
systems business, which supplies roofing membranes, insulations, accessories
and related guarantees; and mechanical insulations business, which manufactures
pipe and duct insulation for use in commercial buildings, factories, refineries
and other industrial applications.
The Engineered Products segment consists of the Company's specialty insulations
and filtration business which manufactures thermal and acoustic insulation for
aircraft, automobiles and heating, ventilating and air conditioning ("HVAC")
and other equipment; air filtration media for commercial and industrial
buildings; and ultra-fine fibers for clean room air filters and battery
separators. The Engineered Products segment also includes the Company's mats
and fibers business, which manufactures continuous filament fiber glass-based
products used for reinforcing roofing, flooring, wall covering and plastic
products. The mats and fibers business includes the Company's German
subsidiary, Schuller GmbH.
I-10
<PAGE> 12
RESULTS OF OPERATIONS
The following table sets forth, for the three months ended March 31, 1996 and
1995, certain income and expense items and the percentage that such items
increased (decreased):
<TABLE>
<CAPTION>
Three Months Percentage
Ended March 31, Increase
1996 1995 (Decrease)
------------- ------------ ----------
(thousands of dollars)
<S> <C> <C> <C>
Net Sales:
Building Products $ 180,500 $ 179,132 0.8
Engineered Products 153,495 156,199 (1.7)
Corporate and Eliminations (7,886) (6,930)
------------- ------------
326,109 328,401 (0.7)
Cost of Sales 232,550 228,666 1.7
------------- ------------
Gross Profit 93,559 99,735 (6.2)
Other Operating Expenses 41,863 38,955 7.5
Other Income (Expense), net 5,456 (5,060)
------------- ------------
Income from Operations:
Building Products 24,333 29,848 (18.5)
Engineered Products 32,097 32,201 (0.3)
Corporate and Eliminations 722 (6,329)
------------- ------------
$ 57,152 $ 55,720 2.6
============= ============
</TABLE>
The Company's net sales in the first quarter of 1996 decreased slightly
compared with the same period of 1995. Gross profit decreased $6.2 million, or
6.2 percent, with gross profit margins declining to 28.7 percent for the first
quarter of 1996 from 30.4 percent for the first quarter of 1995, primarily due
to decreased selling prices in building insulation. Income from operations for
the first quarter of 1996 increased $1.5 million to $57.2 million from $55.7
million as the gross profit decline was more than offset by the recognition of
a gain on the settlement of pension plans (see discussion of other income
(expense), net, below) during the first quarter of 1996.
The Building Products segment reported a decrease in income from operations of
$5.5 million, or 18.5 percent, compared with the first quarter of 1995. Income
from operations declined principally as a result of the lower building
insulation selling prices and an unfavorable product mix in roofing systems.
During the first quarter of 1996, the Company acquired the commercial and
industrial roofing businesses of Nord Bitumi SpA and Nord Bitumi U.S., Inc.
(collectively "Nord") to complement and expand existing product lines - see
Liquidity and Capital Resources. Although the Nord acquisition resulted in
higher sales volumes during the first quarter of 1996, the additional sales
were offset by the impacts of
I-11
<PAGE> 13
lower selling prices for building insulation, reflecting excess capacity in the
industry. Net sales were essentially flat for mechanical insulations for the
first quarter of 1996, compared with the same period of 1995.
The Engineered Products segment's first quarter 1996 income from operations was
flat as net sales decreased slightly when compared with the first quarter of
1995. Selling prices for mats and fibers in the U.S. increased compared with
1995, while sales volumes were essentially flat as the Company's U.S. production
remained capacity constrained. However, in total, operating results of the
Company's mats and fibers business declined as net sales decreased slightly
during the first quarter of 1996 due primarily to softness in European
construction markets. Operating results of the filtration and specialty
insulations businesses were slightly improved for the first quarter of 1996 as
the Company benefited from continuing strong demand for its ultra-fine fibers
used for filtration, realizing higher sales volumes and selling prices,
partially offset by lower sales of automotive products.
Other operating expenses include selling, general, administrative, services
provided by parent and research, development and engineering expenses. These
expenses increased $2.9 million, or 7.5 percent, for the first quarter of 1996
compared with the same period of 1995. The increase is principally due to
additional selling, general, administrative expenses as a result of recent
acquisitions and acquisition activities.
Other income, net, was $5.5 million for the first quarter of 1996 compared with
other expense, net, of $5.1 million for the same period of 1995. Other income
for 1996 includes a $7.2 million gain relating to the receipt of surplus
pension assets in connection with the settlement of defined benefit pension
plans in which the Company's Canadian employees previously participated. Other
expense for 1995 included a $2.9 million charge for legal costs in connection
with litigation brought by the Company against the former owner of the phenolic
roofing business.
LIQUIDITY AND CAPITAL RESOURCES
The Company broadly defines liquidity as the ability to generate sufficient
cash flow to satisfy operating requirements, fund capital expenditures and meet
existing obligations and commitments. In addition, liquidity also includes the
ability to obtain appropriate financing and convert into cash those assets that
are no longer required to meet the Company's strategic objectives. Therefore,
liquidity should not be considered separately from capital resources, which
consist of currently or potentially available funds for use in achieving
long-range business objectives and meeting debt service commitments. In
addition, the Company's relationship with Schuller Corporation should be
considered in evaluating liquidity.
I-12
<PAGE> 14
At March 31, 1996, the Company had cash and marketable securities of $124.1
million, of which $93 million was available for domestic operating purposes.
In addition, at March 31, 1996, the Company had $87 million available under a
receivables sale facility (the "Receivables Facility") for its domestic
short-term working capital requirements. Amounts available for borrowing under
the Receivables Facility, up to a maximum of $100 million, are based on the
daily balance of certain outstanding trade accounts receivable adjusted for
various factors as defined under the terms of the Receivables Facility. There
have been no borrowings under the Receivables Facility through March 31, 1996.
The Company's foreign subsidiaries also had working capital facilities totaling
$68 million available for borrowing at March 31, 1996.
The Company's cash flows from operating activities are primarily influenced by
sales volume and selling prices. During the first quarter of 1996, sales
volumes were adversely affected by softness in European construction markets
and capacity constraints in U.S. markets served by its mats and fibers and
ultra-fine fibers businesses. The Company's building insulation business
continued to experience price declines which began in the second half of 1995
due to new capacity added by competitors.
The recent acquisition discussed in results of operations is expected to
provide additional sales volumes for commercial and industrial roofing systems
as it becomes fully integrated into existing product lines. While stronger
housing starts reported during the first quarter of 1996, compared with the
same period of 1995, should benefit the building insulation business in terms
of volumes and pricing this year, selling price pressures from new industry
capacity are expected to negatively impact mechanical insulations during 1996.
The Company anticipates continuing softness in European markets for its mats
and fibers business, along with capacity constraints in the U.S., until the
completion of expansion projects. Meanwhile, the filtration business expects
to benefit from growing worldwide markets through capacity expansions this
year, along with the March 25, 1996 acquisition of Web Dynamics, a U.S.
manufacturer of synthetic filtration products.
Demand for the Company's products has historically been cyclical due to
macroeconomic factors affecting residential and commercial construction
markets. The Company estimates that approximately half of its annual sales are
made to commercial and industrial markets, while approximately one-third are
made to residential markets and the remainder are made to original equipment
manufacturers.
The Company's investing activities for the quarter ended March 31, 1996 include
the combined purchase prices for acquisitions of $49.8 million. The Company's
investing activities also include capital expenditures for the three months
ended March 31, 1996 totaling
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<PAGE> 15
$25.2 million, of which approximately $12.7 million were attributable to
capacity expansion projects.
The Company's capacity expansion programs are periodically revised to reflect
changes in demand, industry capacity and the results of productivity and
technology innovations. In order to meet strong worldwide demand for its mats
and fibers products, the Company announced plans during 1995 to increase its
U.S. production capacity of continuous filament fiber glass by mid 1997. In
addition, the Company entered into a joint venture in China and began expansion
of an existing fiber glass mat facility, with completion expected in 1997. The
Company also plans to continue the expansion of its filtration business'
ultra-fine fiber production capacity during 1996 through capital spending
programs. The Company currently estimates capital spending in 1996 of
approximately $100 million to $110 million, excluding acquisitions, of which
approximately $40 million to $50 million will be used in the capacity expansion
programs described above. As of March 31, 1996, outstanding purchase
commitments relating to these and other projects totaled $20.6 million. The
Company plans to fund future capital spending from existing cash balances and
cash flows generated by operations.
The Company's Senior Notes are governed by an indenture that contains a number
of financial and operating covenants including, among other things,
restrictions on borrowings, investments, stock issuances and repurchases,
dividends and other distributions by the Company and certain of its
subsidiaries, transactions with Schuller Corporation and other affiliates,
disposal of assets and prepayments on indebtedness subordinate to the Senior
Notes. As of March 31, 1996, the maximum amount available for dividends under
the terms of the indenture was approximately $181 million. Noncompliance with
the covenants in the indenture could result in the termination of existing
credit agreements and the acceleration of debt owed by the Company and its
subsidiaries. At March 31, 1996, the Company was in compliance with these
covenants.
The Company believes that its current cash position, funds available under the
Receivables Facility and foreign working capital facilities, and cash generated
from operations will enable it to satisfy its debt service requirements, its
ongoing capital expansion program and its other ongoing operating costs.
However, the Company may need to access capital markets to pay the principal of
its $400 million Senior Notes due in 2004, or in connection with possible
future acquisitions.
Additional information regarding the Company's relationship with Schuller
Corporation, accounting policies, operations, financial position and factors
that may effect future operating results and operations is contained or
incorporated in the Company's Form 10-K for the year ended December 31, 1995
filed with the Securities and Exchange Commission.
I-14
<PAGE> 16
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
Not applicable.
ITEM 2. CHANGES IN SECURITIES.
Not applicable.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
Not applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Not applicable.
ITEM 5. OTHER INFORMATION.
Not applicable.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits:
Exhibit 27.1 Financial Statement Schedule
(b) Form 8-K
None
II-1
<PAGE> 17
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
SCHULLER INTERNATIONAL GROUP, INC.
----------------------------------
(Registrant)
Date: May 15, 1996 By: /s/ R. B. Von Wald
---------------------------------------
R. B. Von Wald
Executive Vice President,
General Counsel and Secretary
Date: May 15, 1996 By: /s/ K. L. Jensen
---------------------------------------
K. L. Jensen
Senior Vice President, Finance
II-2
<PAGE> 18
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
Number Exhibit Description Page
- - ------ ------------------- ----
<S> <C> <C>
27.1 Financial Data Schedule
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE MARCH
31, 1996 FORM 10Q OF SCHULLER INTERNATIONAL GROUP, INC. AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<CASH> 122,912
<SECURITIES> 1,184
<RECEIVABLES> 209,095
<ALLOWANCES> 6,894
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0
0
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</TABLE>
