Insilco Corporation Reports Third Quarter 1997 Results
22 October 1997
Insilco Corporation Reports Third Quarter 1997 Results
COLUMBUS, Ohio, Oct. 22 -- Insilco Corporation
today reported net income of $3.6 million, or $.62 per share, for its third
quarter ended September 30, 1997, on sales of $131.4 million. The 1997 third
quarter included an extraordinary charge of $0.7 million, or $.12 per share,
related to the early extinguishment of debt as a result of the Company's
refinancing and share repurchase which was completed in August.
For the nine months ended September 30, 1997 the Company recorded net
income of $78.1 million, or $9.19 per share, which included an after tax gain
of $57.8 million, or $6.80 per share, on the first quarter sale of the Rolodex
business unit. For the nine months ended September 30, 1997 sales were
$418.4 million.
The Company said that reported results were not comparable to the prior
year results due to acquisitions and divestitures completed after July 1, 1996
and its recent refinancing and share repurchase. For the three and nine
months ended September 30, 1996, without adjustments for acquisitions,
divestitures and the Company's refinancing and share repurchase, respectively,
the Company earned $8.5 million, or $.86 per share and $26.4 million, or
$2.67 per share, respectively. Sales for the three and nine month periods
ended September 30, 1996 were $142.9 million and $443.4 million, respectively.
PRO FORMA RESULTS
On an unaudited pro forma basis, adjusting results for the 1996
acquisition of the Lingemann aluminum tubing business, the 1996 and 1997
divestitures of the Company's office products businesses, and the third
quarter 1997 share repurchase and debt issuance, as if all had occurred at the
beginning of the respective periods, the Company reported higher sales and
operating income for the third quarter and nine months. Pro forma results
were as follows: Sales of $131.4 million for the third quarter 1997 were up
8% from $122.2 million recorded in the 1996 third quarter. Operating income
increased 6% in the current year third quarter to $11.0 million, from
$10.4 million recorded in the year earlier third quarter. Net income for the
third quarter of 1997 was $3.1 million, or $.73 per share, compared to
$4.0 million, or $.96 per share, recorded in the 1996 third quarter. The
Company noted that other non-operating income declined from $2.5 million in
last year's third quarter to $0.1 million this year. Last year's other income
for the third quarter included a favorable non-recurring adjustment of
$2.2 million, or $.33 per share, to the Company's environmental liabilities.
Pro forma sales of $407.6 million for the first nine months of 1997 were
up 4% from $391.6 million recorded in the first nine months of 1996.
Operating income was $39.8 million for the first nine months of 1997, up 7%
from $37.2 million recorded in the nine months ended September 30, 1996. Year
to date 1997 net income was $12.9 million, or $3.10 per share, compared to
$12.9 million, or $3.09 per share, recorded in the first nine months of 1996.
BUSINESS DISCUSSION
The Company's Automotive Components Group reported 6% sales growth in the
1997 third quarter to $55.7 million, compared to $52.6 million reported in the
year earlier third quarter. Sales growth was moderated by continued softness
in aftermarket demand for heat exchangers and related components and flat OEM
shipments of transmission components. Operating income for the Automotive
Components Group was $5.5 million in the quarter, compared to $6.2 million in
the year ago third quarter. The Group's operating performance was primarily
impacted by lower operating income from the businesses acquired in 1996 and
increased research and development expenses associated with the Group's new
technical center.
The Company's Technologies Group reported 10% sales growth in the third
quarter to $50.1 million from $45.5 million in the 1996 third quarter. Strong
telecommunications market demand for contract manufacturing continued in the
quarter with sales of wire and cable assemblies up 21%, despite a comparison
against 34% sales growth in last year's third quarter. Power transformer
sales grew 23% in the quarter, while precision stampings and connector sales
were essentially flat. Operating income for the Technologies Group was
$6.9 million in the 1997 third quarter, compared to $6.4 million recorded in
the 1996 third quarter. Operating results for the wire and cable assembly and
power transformer businesses improved sharply during the quarter, but were
partially offset by operating income declines from the precision stamping and
connector businesses. The Group's El Paso, Texas precision stamping facility,
which began production early in 1997, continued to report an operating loss in
the third quarter, as it builds a new customer base in the southwestern United
States.
Sales at the Company's Taylor Publishing business unit were up 6% in the
third quarter to $25.6 million, compared to 1996 third quarter sales of
$24.1 million. Taylor's operating income was $0.9 million, compared to
$0.2 million recorded in the third quarter last year. The Company said the
increase in sales and operating income was largely due to the timing of
deliveries of fall season yearbooks versus a year ago.
REFINANCING AND SHARE REPURCHASE
As previously reported, during the third quarter the Company completed the
repurchase of 5.7 million shares of its common stock for $220 million,
reducing outstanding shares to approximately 4.1 million at the end of the
quarter. In connection with this share repurchase, the Company issued
$150 million of 10.25% senior subordinated notes, due in 2007 and replaced its
previous bank credit facility with a new six year $200 million secured bank
credit facility (at LIBOR plus 1.25%).
CEO COMMENTS
Robert L. Smialek, Insilco Chairman and CEO, said, "We are pleased to
report improved operating performance at several of our business units. Our
wire and cable assembly business benefited from both strong telecommunications
market demand and from an expansion of its customer base. Our power
transformer business has rebounded nicely from a year ago, reporting double
digit sales growth in each of the past two quarters and markedly improved
operating income. Taylor Publishing, coming off its peak yearbook season,
posted improved results, although the benefit of the technology and automation
investments we continue to make today to capture additional market share will
not be recognized until future years. However, the performance of our
connector and precision stamping business units and certain businesses in our
Automotive Components Group tempered the favorable results overall.
"While most of our business units are participating in markets with strong
long-term growth profiles or trends that will provide strong future growth
prospects, we are mindful of the difficult near-term factors in certain of our
markets and businesses. In addition, our 1997 fourth quarter results will be
taxed at a normalized corporate tax rate, which will make a difficult
comparison versus the prior year when we recorded non-recurring deferred tax
assets that reduced the pro forma effective tax rate to 1% in the quarter.
"From an operating perspective, current year results at our connector
business have been impacted by the lack of new product introductions. As we
have previously stated, it will be 1998 before meaningful revenues are
generated from new products scheduled for release in late 1997 and the first
half of 1998. Nonetheless, the long-term outlook for inter-connectivity
products remains strong and we are positioning our business to continue a
leadership position in the data grade segment of the connector market.
"The Automotive Components Group experienced continued soft aftermarket
demand for heat exchangers as well as a substantial decline in the order
backlog of our heat exchanger equipment manufacturing business as of the end
of the quarter. Third quarter results were also affected by additional
expenses related to the integration of our German acquisition into our
operations. In addition, our ability to improve results at our new Duncan,
S.C. manufacturing facility have been hampered all year by the ongoing FTC
inquiry. However, we are evaluating a number of alternatives to enhance the
profitability of our tubing operations and will be able to take appropriate
actions once the FTC matter has been resolved. In addition, we are
strengthening our distribution network and broadening our aftermarket radiator
product line to capitalize on the anticipated increase in replacement market
demand. Our optimism about the long-term growth prospects in the world-wide
heat exchanger market remains strong," Smialek concluded.
The statements made in this press release which are not historical facts
may be deemed forward looking statements, and, as such, are subject to certain
risks and uncertainties, including statements concerning Taylor Publishing and
the future benefits and market share gains resulting from current capital
investments, sales growth as a result of market acceptance for the Company's
new connector products, the ability of the Company's connector business to
maintain its leadership position, the Company's ability to improve automotive
aftermarket sales, the Company's ability to improve its tubing operations'
performance and statements concerning the growth prospects present in the
automotive markets served by the Company's automotive businesses. It is
important to note that results could differ materially from those projected in
such forward looking statements. Factors which could cause results to differ
materially include, but are not limited to the following: delays in new
product introductions, lack of market acceptance for new products, changes in
demand for the Company's products, changes in market trends, general
competitive pressures from existing and new competitors, changes in interest
rates, and adverse economic conditions which could affect the amount of cash
available for debt servicing and capital investments. Further information
concerning factors that could cause actual results to differ materially from
those in the forward-looking statements are contained from time to time in the
Company's SEC filings, including but not limited to the Company's report on
Form 10-K for the year ended December 31, 1996, and the Company's report on
Form 10-Q for the quarters ended March 31, 1997, June 30, 1997 and September
30, 1997. Copies of these filings may be obtained by contacting the Company
or the SEC.
Insilco Corporation, based in suburban Columbus Ohio, is a diversified
manufacturer of industrial components and a supplier of specialty
publications. The Company's industrial business units serve the automotive,
electronics, telecommunications and other industrial markets, and its
publishing business serves the school yearbook market. It had revenues in
1996 of $572 million.
INSILCO CORPORATION
Condensed Consolidated Income Statements
(Unaudited)
(Amounts in millions, except per share data)
THIRD QUARTER
Actual Pro forma
Three Months Three Months
Ended Ended
September 30, September 30,
1997 1996 1997 1996
Sales $ 131.4 142.9 131.4 122.2
Gross profit 34.3 41.0 34.3 31.1
% of sales 26.1% 28.7% 26.1% 25.5%
SG&A 23.1 26.7 23.1 20.5
Goodwill amortization 0.2 0.1 0.2 0.2
Operating income 11.0 14.2 11.0 10.4
Interest expense, net (4.9) (4.4) (7.0) (7.6)
Equity in net income
of Thermalex 0.6 0.9 0.6 0.9
Other income and expense, net 0.1 1.8 0.1 2.5
Income before income taxes and
extraordinary item 6.8 12.5 4.7 6.2
Income tax expense (2.5) (4.0) (1.6) (2.2)
Income tax rate 36.2% 32.2% 35.2% 36.3%
Income before extraordinary item 4.3 8.5 3.1 4.0
Extraordinary item, net of tax (0.7) -- -- --
Net income $ 3.6 8.5 3.1 4.0
Earnings (loss) per share:
Income before
extraordinary item $ 0.74 0.86 0.73 0.96
Extraordinary item (0.12) -- -- --
Net income per share $ 0.62 0.86 0.73 0.96
Weighted average
shares outstanding 5.8 9.9 4.2 4.1
Memo: Depreciation expense
included in earnings $ 4.6 4.6 4.6 4.1
INSILCO CORPORATION
Condensed Consolidated Income Statements
(Unaudited)
(Amounts in millions, except per share data)
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996
Actual Pro forma
Nine Months Nine Months
Ended Ended
September 30, September 30,
1997 1996 1997 1996
Sales $ 418.4 443.4 407.6 391.6
Gross profit 117.7 131.6 112.5 105.3
% of sales 28.1% 29.7% 27.6% 26.9%
SG&A 75.4 84.3 72.3 67.7
Goodwill amortization 0.4 0.2 0.4 0.4
Operating income 41.9 47.1 39.8 37.2
Interest expense, net (10.6) (13.4) (21.6) (24.0)
Gain on sale of Rolodex 95.0 -- -- --
Equity in net income
of Thermalex 2.2 2.3 2.2 2.3
Other income and expense, net 0.1 3.5 0.1 4.2
Income before income taxes and
extraordinary item 128.6 39.5 20.5 19.7
Income tax expense (49.8) (13.1) (7.6) (6.8)
Income tax rate 38.7% 33.2% 36.8% 34.7%
Income before
extraordinary item 78.8 26.4 12.9 12.9
Extraordinary item, net of tax (0.7) -- -- --
Net income $ 78.1 26.4 12.9 12.9
Earnings (loss) per share:
Income before
extraordinary item $ 9.27 2.67 3.10 3.09
Extraordinary item (0.08) -- -- --
Net income per share $ 9.19 2.67 3.10 3.09
Weighted average
shares outstanding 8.5 9.9 4.2 4.2
Memo: Depreciation expense
included in earnings $ 14.2 12.6 14.0 12.7
Capital Spending $ (15.0) (14.7) (15.0) N/A
Trailing Four Quarter EBITDA $ 72.5 77.3 67.6 N/A
INSILCO CORPORATION
Condensed Consolidated Balance Sheets
(Unaudited)
(In Millions)
Sept. 30, Dec. 31, Sept. 30,
1997 1996 1996
Assets
Current assets:
Cash and cash equivalents $ 4.6 3.5 1.4
Receivables, net 90.3 82.4 90.1
Inventories, net 54.5 66.4 64.4
Current portion of deferred taxes 1.6 29.9 7.5
Assets held for sale -- -- 10.7
Prepaid expenses 7.1 7.0 7.4
Total current assets 158.1 189.2 181.5
Property, plant and equipment, net 110.3 114.4 112.3
Goodwill, net 13.6 13.7 12.8
Deferred taxes 3.8 7.5 19.2
Other assets and deferred charges 28.2 27.2 30.7
Total assets $ 314.0 352.0 356.5
Liabilities and Stockholders' Equity (Deficit)
Current liabilities:
Current portion of
long-term debt $ 0.6 24.3 20.2
Current portion of
long-term obligations 5.6 6.7 7.0
Accrued interest payable 3.6 3.1 3.3
Accounts payable 34.0 38.0 32.6
Accrued expenses and other 58.7 69.1 57.6
Total current liabilities 102.5 141.2 120.7
Long-term debt 279.7 136.7 184.3
Other long-term obligations 37.5 40.7 41.1
Stockholders' equity (deficit) (105.7) 33.4 10.4
Total liabilities and
stockholders' equity
(deficit) $ 314.0 352.0 356.5
SOURCE Insilco Corporation