Axia Asgnd 'B-' Sr Sub Nts Rtg by S&P;Outlk Stable.

NEW YORK--(BUSINESS WIRE)--Standard & Poor's CreditWire 7/7/98-- Standard & Poor's today assigned its single-'B'-minus rating to Axia Inc.'s rule 144A $100 million senior subordinated notes due 2008. Standard & Poor's also assigned its single-'B'-plus corporate credit rating to the company. The outlook is stable.

The ratings reflect leading positions in several diverse product lines and strong operating margins, strengths which are more than offset by the modest revenue base of each of its niche businesses and very aggressive use of debt. Axia is a manufacturer of automatic taping and finishing (ATF) tools for drywall joints, dishwasher racks, and bag closing products and flexible conveyors. This product diversity imparts a degree of stability to overall sales and earnings, as each of the businesses are affected by different demand factors. ATF is the most cyclical of the three operations, given its strong dependency on housing starts, but an gradually increasing presence in the eastern and midwestern U.S. should better position this activity in the next downturn. Industry demand for dishwashers is relatively stable, as approximately 75% of all dishwashers are bought as replacements, and about 90% of company's 1997 dishwasher rack revenues were generated by contracts extending through 2002. Yet Axia's rack revenues have been adversely affected in past years by certain major dishwasher manufacturers deciding to produce racks in-house. This business risk is ongoing, as the majority of racks are internally manufactured by original equipment manufacturers. The bag closing equipment and flexible conveyor unit should continue to benefit from the global diversity of its operations (50% of sales are international) and the move to a lower-cost plant location several years ago. Overall operating income has been in an upward trend the past several years, and an extension is anticipated near term, helped by the ongoing addition of ATF distribution locations, increased sales of wire formed products to existing customers, and volume growth in North America and Latin America for bag closing product offerings. Operating margins are expected to remain quite healthy in the area of 24%. Niche acquisitions in wire forming and coating and complementary bag closing products would likely keep debt at aggressive levels. As a consequence, funds from operations to total debt, currently weak at less than 10%, is expected to experience only modest improvement during the next few years. Debt to earnings before interest, taxes, depreciaiton, and amortization (EBITDA) should remain near 4 times (x).

OUTLOOK: STABLE

The modest revenue and capital base, which makes credit quality ratios vulnerable to wide swings, and the likely continuation of aggressive debt levels dim prospects for an upgrade of ratings during the next three years.

-- CreditWire

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