-----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, DKe0x5GJMKL0x0GEIpzFEGpt7Ln1lp1bTvsDhutbHu15zVN0TeGjr+A2rwILnQgw 8VPeWSu+Xo29+D0GGhN/TA== 0000950146-96-002054.txt : 19961118 0000950146-96-002054.hdr.sgml : 19961118 ACCESSION NUMBER: 0000950146-96-002054 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960930 FILED AS OF DATE: 19961114 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: 96664454 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 QUARTERLY REPORT 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 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: 0-28322 Asahi/America, Inc. (Exact name of registrant as specified in its charter) Massachusetts 04-2621836 (State or other Jurisdiction of (I.R.S. Employer Incorporation or Organization) identification No.) 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 [X] No [ ] The registrant had 3,340,000 shares of common stock outstanding at September 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- September 30, 1996 and December 31, 1995 3 Consolidated Statements of Operations - Three and Nine Months ended September 30, 1996 and 1995 4 Consolidated Statements of Cash Flows - Nine Months Ended September 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 Asahi/America, Inc. and Subsidiary Consolidated Balance Sheets (dollars in thousands)
September 30, December 31, 1996 1995 ------------- ------------ ASSETS (unaudited) Current Assets Cash and cash equivalents $ 2,481 $ 224 Short term investments 1,016 -- Accounts Receivable, less reserves of $279 at September 30, 1996 and $245 at December 31, 1995 4,915 4,446 Inventories 8,302 8,207 Prepaid expenses and other current assets 271 678 -------- -------- Total current assets 16,985 13,555 Property and Equipment, net 9,109 7,203 Other Assets Goodwill, net of accumulated amortization of $1,240 at September 30, 1996 and $1,106 at December 31, 1995 535 668 Other, net 776 1,026 -------- -------- Total other assets 1,311 1,694 -------- -------- $ 27,405 $ 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 5,357 5,210 Accrued expenses 1,261 885 -------- -------- Total current liabilities 6,856 9,706 MIFA Obligations, less current portion 3,760 3,833 Capital Lease Obligations, less current portion 223 301 Deferred Income Taxes 1,178 1,178 Commitments -- -- Stockholders' Equity Common Stock 13,524 7,358 Retained Earnings 2,179 426 -------- -------- 15,703 7,784 Less-Note receivable from stockholder/officer (315) (350) -------- -------- Total stockholders' equity 15,388 7,434 -------- -------- $ 27,405 $ 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 Nine months ended September 30, September 30, ------------------ ----------------- 1996 1995 1996 1995 ---- ---- ---- ---- Net sales $ 9,066 $ 9,093 $ 28,437 $ 25,351 Cost of sales 5,613 5,819 17,965 16,796 ----------- ----------- ----------- ----------- Gross Profit 3,453 3,274 10,472 8,555 Selling, general and administrative expenses 2,275 2,164 7,236 6,292 ----------- ----------- ----------- ----------- Income from Operations 1,178 1,110 3,236 2,263 Interest expense, net (24) (178) (222) (557) ----------- ----------- ----------- ----------- Income before provision for income taxes 1,154 932 3,014 1,706 Provision for income taxes 485 361 1,261 660 ----------- ----------- ----------- ----------- Net Income $ 669 $ 571 $ 1,753 $ 1,046 ----------- ----------- ----------- ----------- Net income per common share and common equivalent share $ 0.20 $ 0.24 $ 0.61 $ 0.45 ----------- ----------- ----------- ----------- Weighted average number of common and common equivalent shares outstanding 3,342,314 2,340,000 2,860,940 2,340,000 ----------- ----------- ----------- -----------
See accompanying notes to consolidated financial statements. 4 Asahi/America, Inc. and Subsidiary Consolidated Statements of Cash Flows (dollars in thousands) (unaudited)
Nine months ended September 30, 1996 1995 ------- ------- Cash flows from operating activities Net Income $ 1,753 $ 1,046 Adjustments to reconcile net income to net cash provided by operating activities Depreciation and amortization 925 804 Deferred income taxes -- 393 Changes in assets and liabilities Accounts receivable (469) 23 Inventories (95) 707 Prepaid expenses and other current assets 407 (232) Accounts payable 147 (1,263) Accrued expenses 376 (262) ------- ------- Net cash provided by operating activities 3,044 1,216 Cash flows from investing activities Purchase of short-term investments (1,016) -- Purchase of property and equipment (2,591) (838) Decrease (increase) in others assets 143 (117) ------- ------- Net cash used in investing activities (3,464) (955) Cash flows from financing activities Borrowings under demand note payable to bank 3,650 7,780 Payments under demand note payable to bank (7,027) (7,785) Payments on MIFA obligations (68) (64) Payments on capital lease obligations (79) (26) Payments of note receivable from stockholder/officer 35 -- Proceeds from issuance of common stock net of issuance costs of $809 6,166 ------- ------- Net cash provided by (used in) financing activities 2,677 (95) ------- ------- Net increase in cash and cash equivalents 2,257 166 Cash and cash equivalents, beginning of period 224 185 ------- ------- Cash and cash equivalents, end of period $ 2,481 $ 351 ------- ------- Supplemental cash flow disclosures: Cash paid during the year for: Interest $ 285 $ 484 ------- ------- Income taxes $ 690 $ 769 ------- ------- Supplemental schedule of non-cash investing and financing activities: Acquisition of equipment under capital lease obligations $ -- $ 234 ------- -------
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: September 30, December 31, 1996 1995 ------------- ------------ Raw materials $ 659 $ 743 Work in process 40 -- Finished goods 7,715 7,946 ------- ------- 8,414 8,689 LIFO reserve (112) (482) ------- ------- Total $ 8,302 $8,207 ======= ======= Had inventories been reported on the FIFO basis, net income for the nine months ended September 30, 1996 and 1995 would have been approximately $1,533 and $1,103, respectively. Net income for the three months ended September 30, 1996 an 1995 would have been approximately $542 and $590, respectively. 6 5. Borrowing Arrangement The Company and its Bank are negotiating the terms of a loan arrangement which will provide for up to $10 million of unsecured borrowing. The new loan arrangement, anticipated to be closed in the fourth quarter, will consist of two facilities including a two year $5 million unsecured, Committed Revolving Line of Credit (the Committed Line) and a one year $5 million unsecured, Discretionary Demand Line of Credit (the Demand Line). The Committed Line requires that the Company meet certain financial ratios and maintain specified minimum levels of working capital and tangible net worth. 6. 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. 7. 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 of which $1.9 million was expended through September 30, 1996. 8. Concentration of credit risk Sales to the Company's major domestic customer during the third quarter of 1996 were approximately 21% of total sales as compared to 24% for the 1995 third quarter. For the nine month periods ended September 30, 1996 and 1995, sales to the Company's major domestic customer were approximately 24% and 23% of total sales, respectively. Export sales as a percent of total sales during the third quarter were approximately 4% and 5% 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 Nine months ended September 30, September 30, ------------------------------- ----------------------------- 1996 1995 1996 1995 -------------- -------------- -------------- -------------- Net sales 100.0% 100.0% 100.0% 100.0% Cost of sales 61.9% 64.0% 63.2% 66.3% Gross Profit 38.1% 36.0% 36.8% 33.7% Selling, general and administrative expenses 25.1% 23.8% 25.4% 24.8% Income from operations 13.0% 12.2% 11.4% 8.9% Interest expense, net -0.3% -1.9% -0.8% -2.2% Income before provision for income taxes 12.7% 10.3% 10.6% 6.7% Provision for income taxes 5.3% 4.0% 4.4% 2.6% Net income 7.4% 6.3% 6.2% 4.1%
8 Net Sales Net sales for the quarter ended September 30, 1996 of $9.1 million were unchanged from the third quarter of 1995 as higher sales volume of distributed products offset a decline in manufactured product sales. Manufactured product sales were adversely affected by the timing of construction project orders. Year to date sales through September 30, 1996 were $3.1 million higher than the corresponding period of 1995 principally due to increased volume of distributed products and the impact of a price increase implemented in July 1995. Export sales for the three and nine month periods ended September 30, 1996 were $345,000 and $1.2 million respectively compared to $491,000 and $1.5 million for the corresponding periods of 1995. Sales to the Company's largest single customer were approximately 24% and 23% of total sales for the nine month periods ended September 30, 1996 and 1995, respectively. Gross Profit Gross profit as a percentage of sales (gross margin) for the third quarter of 1996 improved 2.1 percentage points from third quarter 1995 to 38.1%. Gross margin for the nine months ended September 30, 1996 increased 3.1 percentage points over the corresponding prior year period to 36.8%. Gross margins for both periods improved, despite a less favorable sales mix associated with lower sales of manufactured product, due mainly to lower product costs attributed to favorable movement of the US dollar against the Japanese yen, reduced freight costs on foreign purchases, and the integration of certain contract manufacturing into in-house manufacturing. Gross profit for the 1996 third quarter included foreign currency gain of $45,000 as compared to a $416,000 foreign currency gain for the 1995 third quarter. Gross margin for the nine month period ended September 30, 1996 also benefited from a July 1995 price increase. Selling, General and Administrative Expenses Selling, general and administrative expenses for the three and nine month periods ended September 30, 1996 increased $111,000 and $944,000, respectively, over the corresponding periods of 1995 due to increased personnel and infrastructure to support plans for long-term growth. Higher direct selling and warehousing costs associated with improved sales also contributed significantly to the nine month increase in 1996 as compared to 1995. 9 Interest Expense and Income Taxes Interest expense was approximately $109,000 and $260,000 lower in the respective three and nine month periods of 1996 as compared to 1995. The Company paid down the entire balance of its bank line of credit following the initial public offering in May 1996 and there have been no additional bank borrowings since that time. Lower average borrowing and lower interest rates prior to the initial public offering also contributed to lower year to date expense in 1996 as compared to 1995. Income taxes increased $124,000 in the third quarter of 1996 and $601,000 for the nine months ended September 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 September 30, 1996 cash and cash equivalents were $2.5 million while short term investments were $1.0 million. The Company generated $3.0 million of cash flow from operations during the nine month period ended September 30, 1996 as compared to $1.2 million for the same period of 1995. Receivables at September 30, 1996 increased $469,000 from December 31, 1995 mainly due to slower collections associated with construction project shipments. 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 September 30, 1996. The Company and its Bank are negotiating the terms of a loan arrangement which will provide for up to $10 million of unsecured borrowing. The new loan arrangement, anticipated to be closed in the fourth quarter, will consist of two facilities including a two year $5 million unsecured, Committed Revolving Line of Credit (the Committed Line) and a one year $5 million unsecured, Discretionary Demand Line of Credit (the Demand Line). 10 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 $1.9 million had been expended at September 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: November 14, 1996 By: /s/ Leslie B. Lewis ---------------------------- Leslie B. Lewis, President and Chief Executive Officer By: /s/ Kozo Terada ----------------------------- Kozo Terada, Vice President, Chief Financial Officer and Treasurer (Principal Financial and Accounting Officer) 12 EX-27 2 FINANCIAL DATA SCHEDULE
5 0000906873 ASAHI/AMERICA, INC. 1,000 U.S. DOLLAR 9-MOS DEC-31-1996 JAN-01-1996 SEP-30-1996 1.0 $2,481 $0 $8,302 $5,194 $279 $16,985 $12,470 $3,361 $27,405 $6,856 $3,760 $0 $0 $13,524 $1,864 $27,405 $28,437 $28,437 $17,965 $17,965 $7,186 $50 $222 $3,014 $1,261 $0 $0 $0 $0 $1,753 $0.61 $0.61
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