-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, PDfpFB6S3Swf3/JhUrI/INW4OneWrIvOnNPKqGB6OghkUive5ZjLCZ+L/f1GfM49 GsF42LwLnKvUeiL3RyYRhg== 0000950146-96-001334.txt : 19960812 0000950146-96-001334.hdr.sgml : 19960812 ACCESSION NUMBER: 0000950146-96-001334 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960630 FILED AS OF DATE: 19960809 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: ASAHI AMERICA INC CENTRAL INDEX KEY: 0000906873 STANDARD INDUSTRIAL CLASSIFICATION: UNSUPPORTED PLASTICS FILM & SHEET [3081] IRS NUMBER: 042621836 STATE OF INCORPORATION: MA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 333-02314 FILM NUMBER: 96607303 BUSINESS ADDRESS: STREET 1: 19 GREEN ST CITY: MALDEN STATE: MA ZIP: 02148 BUSINESS PHONE: 3173215409 MAIL ADDRESS: STREET 1: 19 GREEN STREET CITY: MALDEN STATE: MA ZIP: 02148 10-Q 1 ASAHI/AMERICA 10-Q SECURITIES AND EXCHANGE COMMISSION Washington, DC 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 June 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: 0-28322 Asahi/America, Inc. (Exact name of registrant as specified in its charter) Massachusetts 04-2621836 (State or other Jurisdiction of (I.R.S. Employer identification No.) Incorporation or Organization) 19 Green Street, Malden, Massachusetts 02148-0005 (Address of principal executive offices) (Zip Code) (617) 321-5409 (registrant's telephone number, including area code) Indicate by check 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 twelve months (or 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 ___ No X -- The registrant had 3,340,000 shares of common stock outstanding at June 30, 1996. 1 Asahi/America, Inc. and Subsidiary Form 10-Q Index Page No. Part I Financial Information Item 1 - Condensed Consolidated Financial Statements Consolidated Balance Sheets- June 30, 1996 and December 31, 1995 3 Consolidated Statements of Operations - Three and Six Months ended June 30, 1996 and 1995 4 Consolidated Statements of Cash Flows - Six Months Ended June 30, 1996 and 1995 5 Notes to Consolidated Financial Statements 6 Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations 8 Part II Other Information (no information required to be supplied) Signatures 12 2 Asahi/America, Inc. and Subsidiary Consolidated Balance Sheets (dollars in thousands)
June 30, December 31, 1996 1995 -------------- ------------- (unaudited) ASSETS Current Assets Cash and cash equivalents $ 1,311 $ 224 Short term investments 2,006 -- Accounts receivable, less reserves of $276 at June 30, 1996 and $245 at December 31, 1995 4,161 4,446 Inventories 8,290 8,207 Prepaid expenses and other current assets 784 678 -------------- ------------- Total current assets 16,552 13,555 Property and Equipment, net 8,449 7,203 Other Assets Goodwill, net of accumulated amortization of $1,195 at June 30, 1996 and $1,106 at December 31, 1995 579 668 Other, net 817 1,026 -------------- ------------- Total other assets 1,396 1,694 -------------- ------------- $ 26,397 $ 22,452 ============== ============= LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities Demand note payable to bank $ -- $ 3,377 Current portion of MIFA obligations 135 130 Current portion of capital lease obligations 103 104 Accounts payable 4,783 5,210 Accrued expenses 1,487 885 -------------- ------------- Total current liabilities 6,508 9,706 MIFA Obligations, less current portion 3,760 3,833 Capital Lease Obligations, less current portion 250 301 Deferred Income Taxes 1,178 1,178 Commitments -- -- Stockholders' Equity Common Stock 13,524 7,358 Retained Earnings 1,510 426 -------------- ------------- 15,034 7,784 Less-Note receivable from stockholder/officer (333) (350) -------------- ------------- Total stockholders' equity 14,701 7,434 -------------- ------------- $ 26,397 $ 22,452 ============== =============
See accompanying notes to consolidated financial statements. 3 Asahi/America, Inc. and Subsidiary Consolidated Statements of Operations (unaudited) (dollars in thousands, except net income per share)
Three months ended Six months ended June 30, June 30, ---------------------------- ----------------------------- 1996 1995 1996 1995 ----------- ----------- ------------- ------------- Net sales $ 9,719 $ 8,451 $ 19,371 $ 16,258 Cost of sales 6,047 5,691 12,352 10,977 ----------- ----------- ------------- ------------- Gross Profit 3,672 2,760 7,019 5,281 Selling, general and administrative expenses 2,595 2,054 4,961 4,128 ----------- ----------- ------------- ------------- Income from operations 1,077 706 2,058 1,153 Interest expense, net (84) (201) (198) (379) ----------- ----------- ------------- ------------- Income before provision for income taxes 993 505 1,860 774 Provision for income taxes 417 195 776 299 ----------- ----------- ------------- ------------- Net Income $ 576 $ 310 $ 1,084 $ 475 ----------- ----------- ------------- ------------- Net income per common share and common equivalent share $ 0.20 $ 0.13 $ 0.42 $ 0.20 =========== =========== ============= ============= Weighted average number of common and common equivalent shares outstanding 2,881,387 2,340,000 2,610,694 2,340,000 =========== =========== ============= =============
See accompanying notes to consolidated financial statements. 4 Asahi/America, Inc. and Subsidiary Consolidated Statements of Cash Flows (dollars in thousands)
Six months ended June 30, ------------------------------------ 1996 1995 ------------------ ---------------- Cash flows from operating activities (unaudited) (unaudited) Net Income $ 1,084 $ 475 Adjustments to reconcile net income to net cash provided by operating activities Depreciation and amortization 612 538 Deferred income taxes -- 262 Changes in assets and liabilities Accounts receivable 285 128 Inventories (83) 237 Prepaid expenses and other current assets (106) (234) Accounts payable (427) 73 Accrued expenses 602 (261) ------------------ ---------------- Net cash provided by operating activities 1,967 1,218 Cash flows from investing activities Purchase of short-term investments (2,006) -- Purchase of property and equipment (1,698) (459) Decrease (increase) in others assets 138 (11) ------------------ ---------------- Net cash used in investing activities (3,566) (470) Cash flows from financing activities Borrowings under demand note payable to bank 3,650 5,200 Payments under demand note payable to bank (7,027) (5,755) Payments on MIFA obligations (68) (64) Payments on capital lease obligations (52) (19) Payments of note receivable from stockholder/officer 17 -- Proceeds from issuance of common stock net of issuance costs of $809 6,166 -- ------------------ ---------------- Net cash provided by (used in) financing activities 2,686 (638) ------------------ ---------------- Net increase in cash and cash equivalents 1,087 110 Cash and cash equivalents, beginning of period 224 184 ------------------ ---------------- Cash and cash equivalents, end of period $ 1,311 $ 294 ================== ================ Supplemental cash flow disclosures: Cash paid during the year for: Interest $ 138 $ 300 ================== ================ Income taxes $ 475 $ 483 ================== ================ Supplemental schedule of non-cash investing and financing activities: Acquisition of equipment under capital lease obligations $ -- $ (119) ================== ================
See accompanying notes to consolidated financial statements. 5 Asahi/America, Inc. and Subsidiary Notes to Consolidated Financial Statements 1. Presentation of Interim Information The unaudited interim financial statements included herein have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission and include, in the opinion of management, all adjustments which the Company considers necessary for a fair presentation of such information. The December 31, 1995 Balance Sheet was derived from the audited Consolidated Balance Sheets contained in the Company's Form S-1 Registration Statement. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations. These statements should be read in conjunction with the Company's audited consolidated financial statements and notes thereto which are contained in the Company's Form S-1 Registration Statement. Interim results are not necessarily indicative of the results for a full year. 2. Financial Statements The condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiary. All significant intercompany balances and transactions have been eliminated. 3. Cash Equivalents and Short-term Investments Cash equivalents are short-term, highly liquid investments with original maturities of less than three months and consist of certificates of deposit. Short term investments are investments with original maturities of greater than three months but less than one year and consist of certificates of deposit. 4. Inventories Inventories are stated at the lower of cost (last in first out) or market. The components of inventory are summarized as follows: June 30, December 31, 1996 1995 -------- ------------ Raw materials $ 680 $ 743 Work in process 57 -- Finished goods 7,885 7,946 ------- ------- 8,622 8,689 LIFO reserve (332) (482) ------- ------- Total $ 8,290 $8,207 ======= ======= Had inventories been reported on the FIFO basis, net income for the six months ended June 30, 1996 and 1995 would have been approximately $1,000 and $513, respectively. Net income for the three months ended June 30, 1996 an 1995 would have been approximately $530 and $329, respectively. 6 5. Net Income Per Share Net income per common and common equivalent share is based upon the weighted average number of common and common equivalent shares outstanding during each period, computed in accordance with the treasury stock method. Fully diluted net income per common and common equivalent share has not been presented as it is not significantly different. 6. Commitments In June 1996, in connection with its plans to expand manufacturing and distribution capacity, the Company completed the purchase of the land and building adjoining its existing facility in Malden, Massachusetts. The Company estimates the total funds required for this project and related equipment purchases will approximate $2.5 million. 7. Concentration of credit risk Sales to the Company's major domestic customer during the second quarter of 1996 were approximately 19% of total sales as compared to 26% for the 1995 second quarter. For the six month periods ended June 30, 1996 and 1995, sales to the Company's major domestic customer were approximately 26% and 23% of total sales, respectively. Export sales as a percent of total sales during the second quarter were approximately 5% and 3% in 1996 and 1995, respectively. 7 Asahi/America, Inc. and Subsidiary Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Overview The Company is a manufacturer and master distributor of thermoplastic valves, pipe, piping systems and components for use in a wide variety of applications across numerous industries. Manufactured products include valve actuators and controls, specialized valve assemblies and double containment piping systems. Distributed products consist principally of thermoplastic valves, pipe and fittings which are purchased from two major foreign suppliers under long term supply agreements. The Company distributes its products through an extensive network of domestic and foreign distributors which are supported by Company sales, marketing and engineering personnel. Substantially all of the Company's purchases of valves are made from its Japanese supplier and are transacted in Japanese yen. As a result, the Company is exposed to fluctuations in foreign currency exchange rates. The Company may use hedging procedures including forward contracts and currency options in managing the fluctuations in foreign currency exchange rates. The Company completed its initial public offering on May 15, 1996. Results of Operations The following table sets forth, for the periods indicated, the Company's net sales as well as certain income and expense items, expressed as a percentage of sales:
Three months ended Six months ended June 30, June 30, ------------------------------- ------------------------------ 1996 1995 1996 1995 -------------- --------------- -------------- -------------- Net sales 100.0% 100.0% 100.0% 100.0% Cost of sales 62.2% 67.3% 63.8% 67.5% Gross Profit 37.8% 32.7% 36.2% 32.5% Selling, general and administrative expenses 26.7% 24.3% 25.6% 25.4% Income from operations 11.1% 8.4% 10.6% 7.1% Interest expense, net -0.9% -2.4% -1.0% -2.3% Income before provision for income taxes 10.2% 6.0% 9.6% 4.8% Provision for income taxes 4.3% 2.3% 4.0% 1.8% Net income 5.9% 3.7% 5.6% 3.0%
8 Net Sales Net sales for the quarter ended June 30, 1996 were $1.3 million higher than net sales for the second quarter of 1995. Net sales for the six months ended June 30, 1996 of $19.4 million were $3.1 million greater than sales of the comparable 1995 six month period. The quarterly and year to date increases were mainly due to improved sales volume of both distributed and manufactured products. A price increase implemented in July 1995 and higher revenues from the rental and sale of installation equipment also contributed to the increased second quarter and six month year to date sales in 1996 as compared to 1995. Export sales for the three and six month periods ended June 30, 1996 were $488,000 and $847,000 respectively compared to $247,000 and $1.0 million for the corresponding periods of 1995. Sales to the Company's largest single customer were approximately 26% and 23% of total sales for the six month periods ended June 30, 1996 and 1995, respectively. Gross Profit Gross profit as a percentage of sales (gross margin) improved 5.1 percentage points to 37.8% in the 1996 second quarter as compared to 32.7% for the corresponding quarter of 1995. Gross margin for the six months ended June 30, 1996 increased 3.7 percentage points to 36.2% from 32.5% for the comparable period of 1995. The improvement for both periods resulted mainly from increased average selling prices, following the July 1995 price increase and lower average product costs, attributed mainly to favorable movement of the Japanese yen versus the US dollar. Gross margins for the three month and six month periods of 1996 also benefited from lower freight costs on foreign purchases resulting from favorable rate negotiations and reduced use of air shipments, which have higher freight rates than items shipped by ocean vessel. Cost reductions from integrating certain contract manufacturing into the Company's in-house manufacturing also benefited the 1996 gross margins. Selling, General and Administrative Expenses Selling, general and administrative expenses for the second quarter of 1996 increased $541,000 or 26.3% over 1995 due in part to higher selling and distribution costs in support of increased sales. Selling, general and administrative expenses as a percentage of sales increased from 24.3% in the 1995 second quarter to 26.7% in the 1996 second quarter due mainly to increased sales commissions and additional expenses in connection with the launch of the industrial filtration line. The increased sales commissions were largely due to the timing of direct shipments to foreign customers. Such shipments are invoiced to the end users at end-user prices and commissions are paid to the distributors. 9 Although these shipments normally provide the same level of operating profit dollars, the commission payments cause higher selling expenses as a percentage of net sales as well as higher gross margins. Despite the second quarter increase, selling, general and administrative expenses for the six months ended June 30, 1996 were 25.6% of net sales; substantially unchanged from the same period of 1995. Interest Expense and Income Taxes Interest expense was $103,000 and $157,000 lower in the respective three and six month periods ended June 30, 1996 as compared to the corresponding periods of 1995. The decreases were caused by reduced average borrowings and lower average interest rates on the Company's bank line of credit. The entire outstanding balance of the line was paid down immediately following the initial public offering in May 1996 and there have been no additional borrowings under the line since that time. Income taxes increased $222,000 in the second quarter of 1996 and increased $477,000 for the six months ended June 30, 1996 as compared to 1995. The increases were mainly due to higher income before income taxes. Liquidity and Capital Resources The Company has financed its operations through the sale of equity securities, bank borrowings under a line of credit, an Industrial Revenue Bond financing in March 1994 and cash from operations. In addition, the Company enjoys favorable payment terms under a $6 million open account line of credit for the purchase of Japanese valve products, which the majority of its purchases are at 180 day payment terms. At June 30, 1996 cash and cash equivalents were $1.3 million while short term investments were $2.0 million. The Company generated $2.0 million of cash flow from operations during the six months ended June 30, 1996 as compared to $1.2 million for the comparable 1995 period. Receivables at June 30, 1996 decreased $285,000 from December 31, 1995 mainly due to improved collection results while inventories remained relatively unchanged. The Company completed its initial public offering on May 15, 1996 through the sale of one million shares of common stock at $7.50 per share. After underwriting discounts, commissions and expenses related to the offering, the Company received $6.2 million from the sale of its shares. Immediately following the offering, the Company used $2.3 million to pay down the entire balance of its bank line of credit, which remained unused through June 30, 1996. Also following the offering, the Company negotiated an interim 10 extension of its line of credit to August 31, 1996 with a reduced availability of $3 million. During the third quarter, the Company expects to finalize arrangements for an increased, unsecured line of credit to meet future working capital needs. In June 1996, in connection with its plans to expand manufacturing and distribution capacity, the Company completed the purchase of the land and building adjoining its existing facility in Malden, Massachusetts at an aggregate purchase price of $1.25 million. The Company estimates the total funds required for this project and the related equipment purchases will approximate $2.5 million. Of this amount, approximately $1.4 million had been expended at June 30, 1996. The Company's industrial revenue bonds funded through the Massachusetts Industrial Finance Agency (MIFA) are secured by a letter of credit issued by a bank which is secured by substantially all the assets of the Company. The bonds consist of six separate series each with differing interest rates and maturities. Interest rates range from 4.2% to 5.1% and are subject to adjustment in 1999, 2004 and 2009. The maximum principal payable in any one year is $320,000 payable in 2014. The Company believes that its current funds, together with cash generated by operations will be sufficient to fund the Company's operations, debt service and capital requirements at least through the next 12 months. 11 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. ASAHI/AMERICA, INC. Dated: August 9, 1996 By: /s/ Leslie B. Lewis ------------------------------------- Leslie B. Lewis, President and Chief Executive Officer By: /s/ Kozo Terada ------------------------------------- Kozo Terada, Vice President, Principal Financial Officer and Treasurer 12 EX-27 2 FDS
5 0000906873 ASAHI/AMERICA, INC. 1,000 U.S. DOLLARS 6-MOS Dec-31-1996 Jan-1-1996 Jun-30-1996 1 1,311 0 4,437 276 8,290 16,552 11,577 3,128 26,397 6,508 3,760 0 0 13,524 1,177 26,397 19,371 19,371 12,352 12,352 4,911 50 198 1,860 776 0 0 0 0 1,084 0.42 0.42
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