-----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, A5iRa3yI5CZltQXpo2TIkiLvTvHvghTgnsAt871hTPKbNuBBVzkXnsYBI2V50td5 IpbJBkPY6CxgUg0XkgkTKQ== /in/edgar/work/0000950130-00-006085/0000950130-00-006085.txt : 20001115 0000950130-00-006085.hdr.sgml : 20001115 ACCESSION NUMBER: 0000950130-00-006085 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20000930 FILED AS OF DATE: 20001114 FILER: COMPANY DATA: COMPANY CONFORMED NAME: BORDEN CHEMICALS & PLASTICS LIMITED PARTNERSHIP /DE/ CENTRAL INDEX KEY: 0000821202 STANDARD INDUSTRIAL CLASSIFICATION: [2821 ] IRS NUMBER: 311269627 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-09699 FILM NUMBER: 765136 BUSINESS ADDRESS: STREET 1: HIGHWAY 73 CITY: GEISMAR STATE: LA ZIP: 70734 BUSINESS PHONE: 6142254482 MAIL ADDRESS: STREET 1: PO BOX 427 STREET 2: 180 EAST BROAD STREET 25TH FLOOR CITY: GERSMAR STATE: LA ZIP: 70734 FORMER COMPANY: FORMER CONFORMED NAME: BORDEN CHEMICALS & PLASTICS LIMITED PARTNERSHIP DATE OF NAME CHANGE: 19920703 10-Q 1 0001.txt FORM 10-Q SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2000 - Commission File No. 1-9699 BORDEN CHEMICALS AND PLASTICS LIMITED PARTNERSHIP Delaware 31-1269627 (State of organization) (I.R.S. Employer Identification No.) Highway 73, Geismar, Louisiana 70734 614-225-4482 (Address of principal executive offices) (Registrant's telephone number) 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 . ---- ---- Number of Common Units outstanding as of the close of business on November 14, 2000: 36,750,000. =============================================================================== 1 Part I. Financial Information Item 1. Financial Statements - ---------------------------- BORDEN CHEMICALS AND PLASTICS LIMITED PARTNERSHIP CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) (In thousands, except per Unit data)
Three Months Ended ------------------------------ September 30, September 30, 2000 1999 ------------- -------------- Revenues Net trade sales $107,576 $106,016 Net sales to related parties 5,757 5,011 -------- -------- Total revenues 113,333 111,027 -------- -------- Expenses Cost of goods sold Trade 104,250 97,233 Related parties 4,837 3,612 Marketing, general & administrative expense 5,807 6,299 Interest expense 6,446 5,930 Tax on gross margin 850 565 Equity in loss of affiliate 311 157 Other (income) and expense, including minority interest (1,090) (309) -------- -------- Total expenses 121,411 113,487 -------- -------- (Loss) from continuing operations (8,078) (2,460) Discontinued operations: (Loss) from discontinued operations, net 0 (4,880) -------- -------- Net (loss) (8,078) (7,340) Less 1% General Partner interest 81 73 -------- -------- Net (loss) applicable to Limited Partners' interest $ (7,997) $ (7,267) ======== ======== Per Unit data-basic, net of 1% General Partner interest (Loss) from continuing operations per Unit $ (0.22) $ (0.07) (Loss) from discontinued operations per Unit 0.00 (0.13) ------- ------- Net (loss) per Unit $ (0.22) $ (0.20) ======= ======= Average number of Units outstanding during the period 36,750 36,750 ======= ======= Cash distributions declared per Unit $ 0.00 $ 0.00 ======= =======
See Notes to Condensed Consolidated Financial Statements 2 BORDEN CHEMICALS AND PLASTICS LIMITED PARTNERSHIP CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) (In thousands, except per Unit data)
Nine Months Ended --------------------------------- September 30, September 30, 2000 1999 -------- -------- Revenues Net trade sales $375,507 $274,451 Net sales to related parties 18,011 14,812 -------- -------- Total revenues 393,518 289,263 -------- -------- Expenses Cost of goods sold Trade 330,831 248,849 Related parties 14,760 11,801 Marketing, general & administrative expense 19,366 17,932 Interest expense 21,144 18,302 Tax on gross margin 2,310 1,298 Equity in loss of affiliate 804 540 Other expense (income), including minority interest (1,231) (382) -------- -------- Total expenses 387,984 298,340 -------- -------- Net income (loss) from continuing operations 5,534 (9,077) Discontinued operations: (Loss) from discontinued operations, net (10,192) (12,732) Gain on disposal of discontinued operations, net 5,012 0 -------- -------- Net income (loss) 354 (21,809) Less 1% General Partner interest (4) 218 -------- -------- Net income (loss) applicable to Limited Partners' interest $ 350 $(21,591) ======== ======== Per Unit data-basic, net of 1% General Partner interest Income (loss) from continuing operations per Unit $ 0.15 $ (0.24) (Loss) from discontinued operations per Unit (0.14) (0.35) -------- -------- Net income (loss) per Unit $ 0.01 $ (0.59) ======== ======== Average number of Units outstanding during the period 36,750 36,750 ======== ======== Cash distributions declared per Unit $ 0.00 $ 0.00 ======== ========
See Notes to Condensed Consolidated Financial Statements 3 BORDEN CHEMICALS AND PLASTICS LIMITED PARTNERSHIP CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (In thousands)
Nine Months Ended ------------------------------- September 30, September 30, 2000 1999 ------------- ------------- Cash Flows From Operations Net income (loss) $ 354 $(21,809) Adjustments to reconcile net loss income to net cash provided by operating activities: Gain on disposal of discontinued operations, net (5,012) 0 Depreciation 27,655 27,214 Increase (decrease) in cash from changes in certain assets and liabilities: Receivables (39) (16,724) Inventories (9,128) (3,835) Payables (12,225) 13,879 Accrued interest 4,943 4,742 Other, net (11,997) (708) -------- -------- (5,449) 2,759 -------- -------- Cash Flows Used In Investing Activities Capital expenditures (6,885) (11,154) Plant acquisition (15,880) 0 -------- -------- (22,765) (11,154) -------- -------- Cash Flows Used In Financing Activities (Repayments of)/proceeds from borrowings, net (13,017) 6,600 Proceeds from sale of business segment 38,800 0 Payment of debt issuance costs (1,132) 0 -------- -------- 24,651 6,600 -------- -------- (Decrease) in cash and equivalents (3,563) ( 1,795) Cash and equivalents at beginning of period 5,759 8,703 -------- -------- Cash and equivalents at end of period $ 2,196 $ 6,908 ======== ======== Supplemental Disclosures of Cash Flow Information Interest paid during the period, net of capitalization $ 14,488 $ 12,489 ======== ========
See Notes to Condensed Consolidated Financial Statements 4 BORDEN CHEMICALS AND PLASTICS LIMITED PARTNERSHIP CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) (In thousands)
September 30, 2000 December 31, 1999 ------------------- ------------------ ASSETS - ------ Cash and equivalents $ 2,196 $ 5,759 Accounts receivable (less allowance for doubtful accounts of $491 and $456, respectively) Trade 70,439 75,794 Related parties 20,256 14,862 Inventories Finished and in process goods 48,384 36,041 Raw materials and supplies 12,277 15,492 Other current assets 20,577 4,443 --------- --------- Total current assets 174,129 152,391 --------- --------- Investments in and advances to affiliated companies 8,675 8,521 Other assets 44,140 50,679 --------- --------- 52,815 59,200 --------- --------- Land 16,385 16,308 Buildings 45,881 45,625 Machinery and equipment 516,969 704,252 --------- --------- 579,235 766,185 Less accumulated depreciation (344,845) (496,925) --------- --------- 234,390 269,260 --------- --------- Total assets $ 461,334 $ 480,851 ========= ========= LIABILITIES AND PARTNERS' CAPITAL - --------------------------------- Accounts payable $ 54,292 $ 66,517 Accrued interest 8,352 3,409 Other accrued liabilities 18,703 17,084 --------- --------- Total current liabilities 81,347 87,010 Long-term debt 250,183 263,200 Deferred tax on gross margin 5,410 6,640 Other liabilities 4,902 4,866 Minority interest in consolidated subsidiary 658 655 --------- --------- Total liabilities 342,500 362,371 --------- --------- Partners' capital Limited Partners 119,116 118,766 General Partner (282) (286) --------- --------- Total partners' capital 118,834 118,480 --------- --------- Total liabilities and partners' capital $ 461,334 $ 480,851 ========= =========
See Notes to Condensed Consolidated Financial Statements 5 BORDEN CHEMICALS AND PLASTICS LIMITED PARTNERSHIP CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN PARTNERS' CAPITAL (Unaudited) (In thousands) Limited General Partners Partner Total -------- -------- ----- Balance at December 31, 1998 $ 142,517 $ (46) $ 142,471 Net loss (21,591) (218) ( 21,809) Cash distributions declared 0 0 0 --------- ----- --------- Balance at September 30, 1999 $ 120,926 $(264) $ 120,662 ========= ===== ========= Balance at December 31, 1999 $ 118,766 $(286) $ 118,480 Net income 350 4 354 Cash distributions declared 0 0 0 --------- ----- --------- Balance at September 30, 2000 $ 119,116 $(282) $ 118,834 ========= ===== ========= Notes to Condensed Consolidated Financial Statements 6 BORDEN CHEMICALS AND PLASTICS LIMITED PARTNERSHIP NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (In thousands except Unit and per Unit data) 1. Interim Financial Statements The accompanying unaudited interim condensed consolidated financial statements of Borden Chemicals and Plastics Limited Partnership (the "Partnership"), and its subsidiary operating partnership Borden Chemicals and Plastics Operating Limited Partnership (the "Operating Partnership") contain all normal recurring adjustments, which in the opinion of BCP Management, Inc. (the "General Partner") are necessary for a fair statement of the results for the interim periods. Results for the interim periods are not necessarily indicative of the results for the full year. The interim financial statements and notes are presented as specified by Regulation S-X of the Securities and Exchange Commission, and should be read in conjunction with the Partnership's Annual Report on Form 10-K. Basic income per unit is computed by dividing net income, after subtracting the General Partner's 1% interest, by the weighted average number of units outstanding. Currently, there are no potentially dilutive securities; accordingly, basic income per unit and diluted income per unit are equivalent. In June 1998, the Financial Accounting Standards Board issued SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities", which is effective in 2001 for the Partnership. The statement requires that all derivatives be recorded in the balance sheet as either assets or liabilities and be measured at fair value. The accounting for changes in fair value of a derivative depends on the intended use of the derivative and the resulting designation. The Partnership is in the process of assessing the impact that SFAS No. 133 will have on the consolidated financial statements. The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the condensed consolidated financial statements and accompanying disclosures. Although these estimates are based on management's best knowledge of events and actions the Partnership may undertake in the future, actual results may differ from the estimates. Certain reclassifications have been made in prior periods' financial statements to conform to current year classifications. 2. Environmental and Legal Proceedings Under an Environmental Indemnity Agreement (the "EIA") with Borden, Inc. ("Borden"), Borden has agreed, subject to certain specified limitations, to indemnify the Partnership in respect of environmental liabilities arising from facts or circumstances that existed and requirements in effect prior to November 30, 1987, the date of the initial sale of the Geismar and Illiopolis plants to the Partnership. The Partnership is responsible for environmental liabilities arising from facts or circumstances that existed and requirements that become effective on or after such date. With respect to certain environmental liabilities that may arise from facts or circumstances that existed and requirements in effect both prior to and after such date, Borden and the Partnership will share liabilities on an equitable basis considering all of the facts and circumstances including, but not limited to, the relative contribution of each to the matter and the amount of time each has operated the assets in question (to the extent relevant). No claims can be made under the EIA after November 30, 2002. The Partnership is subject to extensive federal, state and local environmental laws and regulations which impose limitations on the discharge of pollutants into the air and water, establish standards for the treatment, storage, transportation and disposal of solid and hazardous wastes, and impose obligations to investigate and remediate contamination in certain circumstances. The Partnership has expended substantial resources, both financial and managerial, and it anticipates that it will continue to do so in the future. Failure to comply with the extensive federal, state and local environmental laws and regulations could result in significant civil or criminal penalties and remediation costs. The Partnership is subject to legal proceedings and claims which may arise in the ordinary course of business. In the opinion of the management of the Partnership, the amount of the ultimate liability, taking into account its insurance coverage, including its risk retention program and Environmental Indemnity Agreement with Borden, is unlikely to have a material adverse effect on the financial position or results of operations of the Partnership. 7 3. Discontinued Operations On June 27, 2000, the Partnership announced its decision to exit the methanol and derivatives and nitrogen products business segments, as part of a process that included the sale of its formaldehyde and certain other assets for $48.5 million. The sale of those assets was completed on July 28, 2000. The Operating Partnership will operate the methanol assets through early January 2001, with the intent of exiting the business and closing the facility at that time. The nitrogen products facilities were closed in July 2000. In connection with the discontinuance of the methanol and derivatives and nitrogen products business segments, a gain of $5.0 million (net of taxes) was recognized in the second quarter of 2000. The gain was based on the sales proceeds less associated transaction costs, book value of assets sold, charges for the write-down of methanol and nitrogen products assets to estimated net realizable value, and an accrual for estimated losses from these operations during the phase-out period. Results of these operations, previously reported as separate business segments, have been classified as discontinued and prior periods have been restated. Continuing operations are now comprised of the PVC Polymers Products business segment. Net revenues and losses from the discontinued operations are as follows:
Three Months Ended Sept. 30, Nine Months Ended Sept. 30, In Thousands 2000 1999 2000 1999 - ------------ ---------------------------- --------------------------- Net sales $40,330 $41,808 $129,024 $106,212 ------- ------- -------- -------- (Loss) from discontinued operations $ - $(4,880) $(10,192) $(12,732) Gain on disposal of discontinued operations - - 5,012 - ------- ------- -------- -------- Net (loss) from discontinued operations $ - $(4,880) (5,180) $(12,732) ======= ======= ======== ========
4. Debt The Operating Partnership entered into a new four-year Credit Agreement (the "Year 2000 Revolving Credit Facility") with Fleet Capital Corporation ("Fleet"), effective March 31, 2000, which provides for a revolving credit facility of up to $100 million subject to borrowing base limitations. The amount available was not affected by borrowing base limitations at September 30, 2000. The Operating Partnership's obligations under the facility are collateralized by its accounts receivable, inventory and a lien against certain fixed assets. The Year 2000 Revolving Credit Facility replaced the existing facility and all amounts outstanding under that facility were repaid with borrowings under the Year 2000 Revolving Credit Facility. As of September 30, 2000, the Operating Partnership had $50.2 million outstanding under the Year 2000 Revolving Credit Facility. Under the Year 2000 Revolving Credit Facility, the Operating Partnership, at its option, may make either LIBOR based or Base Rate borrowings. The applicable margin for such borrowings is reset quarterly, beginning fourth quarter 2000, based on the ratio of EBITDA to interest expense for the previous twelve months. For LIBOR based borrowings the applicable margin can range from LIBOR plus 1.25% to 2.50%, and for Base Rate borrowings, the margin can range from Base Rate flat to Base Rate plus 0.5%. In addition, the Operating Partnership pays a commitment fee between 0.375% and 0.50% on the unused portion of the facility based on the same EBITDA to interest expense ratio. The applicable margin, through the quarter ended September 30, 2000, is 2.25% for LIBOR loans and 0.25% for Base Rate loans and the commitment fee is 0.50% for the same period. The Year 2000 Revolving Credit Facility contains covenants that place significant restrictions on, among other things, the ability to incur additional indebtedness, make distributions, engage in certain transactions with affiliates, create liens or other encumbrances, merge or consolidate with other entities, make acquisitions, make capital expenditures, and sell or otherwise dispose of assets. In addition, a change in control of the General Partner, the Partnership or the Operating Partnership are events of default under the Year 2000 Revolving Credit Facility. On May 1, 1995, the Operating Partnership issued $200 million aggregate principal amount of 9.5% Notes due 2005 (the "Notes") pursuant to an Indenture dated as of May 1, 1995 (the "Indenture"). The Notes are senior unsecured obligations of the Operating Partnership. The Notes include restrictions on the Operating Partnership's ability to make cash distributions, incur additional indebtedness, sell assets, engage in sale/leasebacks and to take certain other actions. Upon a Change in Control, the holders of the Notes may require the Operating Partnership to repurchase their Notes at a price equal to 101% of the aggregate principal amount plus accrued and unpaid interest to the date of repurchase. 8 Item 2. Management's Discussion and Analysis of Financial Condition and Results - -------------------------------------------------------------------------------- of Operations - ------------- Results of Operations Quarter Ended September 30, 2000 Compared to Quarter Ended September 30, 1999 Revenues Total revenues during the third quarter of 2000 increased $2.3 million or 2% to $113.3 million from $111.0 million in the third quarter of 1999. The increase in revenues is attributable to a 22% increase in selling prices in PVC resins, offset by a 12% decrease sales volumes for this business line. The increase in selling prices over third quarter 1999 is attributable to increased raw material costs and also reflects the significant increases in industry pricing that occurred in the first half of 2000 due to strong market conditions. The decrease in sales volume reflects a sharp reduction in demand for PVC resin during third quarter 2000 due to industry destocking by converters and processors of PVC resin, as well as reduced resin demand from the PVC pipe market, the major end use of PVC resins. Cost of Goods Sold Total cost of goods sold increased $8.3 million to $109.1 million in the current period from $100.8 million in the same period last year. The increase was due to significant increases in the costs of all major raw materials partially offset by the decrease in sales volumes. Expressed as a percent of revenue, cost of goods sold was 96% in the current period versus 91% in the prior period. The unit costs of all major raw materials - natural gas, chlorine, ethylene, and vinyl chloride monomer (VCM) - increased significantly when compared to the third quarter of 1999. The unit cost of natural gas averaged 70% higher in third quarter 2000 over the 1999 quarter. Natural gas cost impacts the Partnership's basic energy costs but is also a raw material feedstock for a portion of its PVC resin production. The average cost of chlorine and ethylene increased 145% and 27%, respectively, compared with the third quarter of 1999. The cost of purchased VCM increased 36%. These increases were primarily a result of increased demand for these products and resulted in significantly higher pricing to PVC producers for these raw materials. As a result of the changes in revenues and cost of goods sold, the contributing margin from continuing operations declined to $4.2 million in the third quarter of 2000 from $10.2 million for the same quarter of 1999. This was a result of the reduction in resin volumes as well as the significant increases in raw material costs that are only partially offset by increased selling prices. Interest Expense Interest expense for the quarter increased $0.5 million over the 1999 quarter, which is directly attributable to higher average borrowing levels compared to third quarter 1999. Total long-term debt was $250 million at September 30, 2000. Discontinued Operations In the second quarter of 2000, the decision was made to exit the methanol and derivatives and nitrogen products business segments to become a focused PVC producer; therefore, prior period results for these former business segments are now classified as discontinued operations. The net loss from discontinued operations was $4.9 million in the third quarter of 1999, which was attributable to depressed selling prices for these business segments due to industry overcapacity compared to demand. Net Income The net loss for the third quarter of 2000 was $8.1 million compared to $7.3 million loss for the third quarter of 1999. As discussed above, the primary reasons for the decline were depressed sales volumes for PVC resins and elevated raw material costs. 9 Results of Operations Nine Months Ended September 30, 2000 Compared to Nine Months Ended September 30, 1999 Revenues Total revenues during the first nine months of 2000 increased $104.2 million or 36% to $393.5 million from $289.3 million in 1999. The increase in revenues is attributable to a 40% increase in selling prices of PVC resins, and a 1% increase in sales volumes for this business line. While market conditions softened in the third quarter of 2000, the increase in selling prices reflect the improvement in market conditions for the PVC industry for the first nine months of 2000 over 1999. This improvement was a result of strong demand for the PVC resins during the first half of the year fueled by the construction industry and the generally strong domestic economic environment. Cost of Goods Sold Total cost of goods sold increased $84.9 million to $345.6 million from $260.7 million when comparing year-to-date 2000 to 1999. Expressed as a percent of revenue, cost of goods sold was 88% in the current period versus 90% in the prior year. The increase in cost of goods sold was partially due to the slight increase in volume but was largely driven by increased unit costs of major raw materials. When compared to 1999, the average cost of natural gas increased 52%, chlorine increased 300%, ethylene increased 46%, and purchased VCM increased 53%. As a result of the changes in revenues and cost of goods sold, the contributing margin from continuing operations improved to $47.9 million in the first nine months of 2000 from $28.6 million for 1999. This improvement was primarily a result of increases in unit selling prices of PVC resins in excess of the increased unit costs of raw materials. Interest Expense Interest expense increased $2.8 million over 1999, a direct result of an increase in average borrowing levels over the prior period. Discontinued Operations The net loss from discontinued operations was $10.2 million in 2000 compared to a loss of $12.7 million in 1999. During the second quarter of 2000, the Partnership recognized a net gain on disposal of discontinued operations of $5.0 million. On June 27, 2000, a definitive agreement was signed to sell the formaldehyde unit and certain other assets for $48.5 million. The sale closed on July 28, 2000. The net gain of $5.0 million is based on the sales price less transaction costs and the net book value of assets sold, as well as all estimated costs associated with exiting the methanol and derivatives and nitrogen products business segments. These costs include charges to write-down the methanol and nitrogen assets to net realizable value, closure costs, and an accrual for estimated losses from these operations during the phase-out period. Net Income Net income for the first nine months of 2000 was $0.4 million compared to a loss of $21.8 million for the first nine months of 1999. As discussed above, the primary reasons for the improvement was the return to profitability in continuing operations and the gain from the disposal of discontinued operations. 10 Liquidity and Capital Resources Cash Flows from Operations. Cash provided by operations for the first nine months of 2000 totaled ($6.6) million, a reduction of $9.3 million from September 30, 1999, primarily due to unfavorable changes in inventories and payables, and other asset and liabilities. Cash Flows from Investing Activities. Capital expenditures totaled $6.9 million and $11.2 million for the first nine months of 2000 and 1999, respectively. During 2000, the Partnership also purchased BASF's 50% interest in the jointly owned acetylene plant at the Geismar complex for $15.9 million. Cash Flows from Financing Activities. Net repayments of long-term borrowings were $13.0 million in the first nine months of 2000 compared to proceeds from borrowings of $6.6 million in the first nine months of 1999. The repayments were primarily the result of $38.8 million in proceeds on the sale of assets discussed below that was received in July 2000. Liquidity Adverse business conditions for the Partnership's methanol and derivatives and nitrogen products business segments over an extended period resulted in the Partnership evaluating various alternatives for the businesses, resulting in the sale of the formaldehyde assets and certain other assets for $48.5 million, and the decision to exit the methanol and nitrogen product businesses. The sale transaction closed on July 28, 2000, with the Partnership receiving gross proceeds of $38.8 million on that date and an interest bearing six-month note for $9.7 million. The proceeds were used to reduce borrowings under its $100 million revolving credit facility, which was collateralized by the assets sold, as well as other assets. As of September 30, 2000, the $9.7 million note was included in other current assets on the balance sheet of the Partnership. The Partnership closed the nitrogen products facilities in July 2000 and intends to operate its methanol facility through early 2001, with the intent of exiting the methanol business and closing the facility at that time. By reducing its debt level with the proceeds from the sale and by exiting the non-vinyl based basic chemical business segments, the Partnership has improved its liquidity and is better positioned to focus on its core PVC Polymers Products operations. The Partnership's PVC operations experienced a sudden downturn during the third quarter 2000 as reduced sales volumes and selling prices compared to the first half of the year combined with historically high natural gas cost resulted in a loss for the quarter. Difficult market conditions are likely to continue over the next two quarters and possibly beyond. The Partnership believes that it should have sufficient liquidity over this period, based on availability under its revolving credit facility, receipt in January 2001 of the remaining $9.7 million due from the sale of the formaldehyde assets, and other actions underway to improve cash flows through reducing working capital levels and controlling capital spending and other controllable cash spending. The Operating Partnership entered into a new four-year Credit Agreement (the "Year 2000 Revolving Credit Facility") with Fleet Capital Corporation ("Fleet"), effective March 31, 2000, which provides for a revolving credit facility of up to $100 million subject to borrowing base limitations. The amount available was not affected by borrowing base limitations at September 30, 2000. The Operating Partnership's obligations under the facility are collateralized by its accounts receivable, inventory and a lien against certain fixed assets. The Year 2000 Revolving Credit Facility replaced the existing facility and all amounts outstanding under that facility were repaid with borrowings under the Year 2000 Revolving Credit Facility. As of September 30, 2000, the Operating Partnership had $50.2 million outstanding under the Year 2000 Revolving Credit Facility. Under the Year 2000 Revolving Credit Facility, the Operating Partnership, at its option, may make either LIBOR based or Base Rate borrowings. The applicable margin for such borrowings is reset quarterly, beginning fourth quarter 2000, based on the ratio of EBITDA to interest expense for the previous twelve months. For LIBOR based borrowings the applicable margin can range from LIBOR plus 1.25% to 2.50%, and for Base Rate borrowings, the margin can range from Base Rate flat to Base Rate plus 0.5%. In addition, the Operating Partnership pays a commitment fee between 0.375% and 0.50% on the unused portion of the facility based on the same EBITDA to interest expense ratio. The applicable margin, through the quarter ended September 30, 2000, is 2.25% for LIBOR loans and 0.25% for Base Rate loans and the commitment fee is 0.50% for the same period. The Year 2000 Revolving Credit Facility contains covenants that 11 place significant restrictions on, among other things, the ability to incur additional indebtedness, make distributions, engage in certain transactions with affiliates, create liens or other encumbrances, merge or consolidate with other entities, make acquisitions, make capital expenditures, and sell or otherwise dispose of assets. In addition, a change in control of the General Partner, the Partnership or the Operating Partnership are events of default under the Year 2000 Revolving Credit Facility. On May 1, 1995, the Operating Partnership issued $200 million aggregate principal amount of 9.5% Notes due 2005 (the "Notes") pursuant to an Indenture dated as of May 1, 1995 (the "Indenture"). The Notes are senior unsecured obligations of the Operating Partnership. The Notes include restrictions on the Operating Partnership's ability to make cash distributions, incur additional indebtedness, sell assets, and to take certain other actions. Upon a change in control, the holders of the Notes may require the Operating Partnership to repurchase their Notes at a price equal to 101% of the aggregate principal amount plus accrued and unpaid interest to the date of repurchase. The covenants of the Indenture and the Year 2000 Revolving Credit Facility require certain financial ratios to be met before the Partnership can declare and make quarterly cash distributions to its unitholders. The Partnership does not currently meet these requirements. These restrictions, along with current operating conditions, planned capital spending and debt service requirements make it unlikely that the Partnership will make cash distributions through 2001. Capital Expenditures The Partnership currently believes that the level of annual base capital expenditures over the next two years will be in the range of $15 to $20 million per year. Total capital expenditures for 2000 are anticipated to be approximately $25-$30 million, including the acquisition of BASF's 50% share of the acetylene plant at the Geismar complex. Item 2-A Market Risk - -------------------- Interest Rate Risk - The Year 2000 Credit Facility provides up to $100 million under a revolving credit agreement with Fleet Capital Corporation. The credit facility expires on March 30, 2004, at which time all amounts outstanding must be repaid. Interest on borrowings under the revolving credit facility are determined, at the Operating Partnership's option, based on the applicable LIBOR rate (one, two, three or six month periods) plus a margin or the Base Rate. The Base Rate borrowing rate is the greater of (a) the prime rate as announced or quoted by Fleet Bank or (b) Federal Funds Effective rate plus .50%. At September 30, 2000, borrowings under the facility were $50.2 million and bore interest at a blended rate of 9.58%. The Partnership is exposed to fluctuations in the LIBOR rate or the Base Rate. A change of 1% in the applicable rate would change the Partnership's annual interest cost by approximately $0.5 million based on the borrowings at September 30, 2000. Commodity Risk - The Partnership generally does not use derivatives or other financial instruments such as futures contracts to manage commodity market risk. However, at certain times of the year the Operating Partnership will enter into contracts whereby it agrees to purchase a specified quantity of natural gas, a principal raw material, at a fixed price. Such contracts are generally not in excess of three months forward, and the Operating Partnership generally limits such forward purchases to 60% of a month's requirements. No such contracts are in place at September 30, 2000. In addition, the Partnership has entered into a fifteen-year supply agreement (commencing in 1997) to provide a long-term supply of ethylene, a raw material, and minimize price volatility. The purchase price for the product varies with the supplier's raw material and variable costs, which are market-driven, as well as its fixed costs. The Partnership evaluates all such contracts on the basis of whether committed costs are expected to be realized in light of current and expected selling prices when the commodities are consumed in manufactured products. Foreign Exchange and Equity Risk - The Partnership is not exposed to significant foreign exchange or equity market risk. 12 Forward-Looking Statements Certain statements in this section are forward-looking. These can be identified by the use of forward-looking words or phrases such as "believe", "expect", "may" and "potential", among others and include statements regarding the business outlook for the Operating Partnership and its ability to fund its cash needs. The Private Securities Litigation Reform Act of 1995 provides a "safe harbor" for such forward-looking statements. While these forward-looking statements are based on the Partnership's reasonable current expectations, a variety of risks uncertainties and other factors, including many which are outside the control of the Partnership, could cause the Partnership's actual results to differ materially from the anticipated results or expectations expressed in such forward-looking statements. The risks, uncertainties and other factors that may affect the operations, performance, development and results of the Partnership include changes in the demand for and pricing of its commodity products, changes in industry production capacity, changes in the supply of and costs of its significant raw materials, and changes in applicable environmental, health and safety laws and regulations. PART II. OTHER INFORMATION Item 1. Legal Proceedings - -------------------------- There have been no material developments in the ongoing legal proceedings that are discussed in the Partnership's 1999 Annual Report on Form 10-K. The Partnership is subject to legal proceedings and claims that may arise in the ordinary course of business. In the opinion of the management of the Partnership, the amount of ultimate liability, taking into account its insurance coverage, including its risk retention program and Environmental Indemnity Agreement with Borden, is unlikely to have a material adverse effect on the financial position or results of operations of the Partnership. Item 5. Other Events - --------------------- On November 9, 2000, the Partnership announced that it will close its methanol operations in early January 2001, thereby completing its previously announced plan to exit its non-vinyl based basic chemical business segments. Incorporated by reference is the Registrant's press release issued November 9, 2000, attached hereto as Exhibit 99. Item 6. Exhibits - ----------------- (a) Exhibits: --------- 99 Press Release dated November 9, 2000 13 SIGNATURE Pursuant to the requirements of Section 13 or 15(d) 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. BORDEN CHEMICALS AND PLASTICS LIMITED PARTNERSHIP By BCP Management, Inc., its General Partner By: ------------------------------------- James O. Stevning Chief Financial Officer and Treasurer Principal Accounting Officer November 14, 2000 14 EX-27 2 0002.txt FINANCIAL DATA SCHEDULE
5 1,000 3-MOS 9-MOS DEC-31-2000 DEC-31-2000 JUL-01-2000 JAN-01-2000 SEP-30-2000 SEP-30-2000 2,196 2,196 0 0 90,695 90,695 0 0 60,661 60,661 73,392 73,392 579,235 579,235 (344,845) (344,845) 461,334 461,334 81,347 81,347 200,000 200,000 0 0 0 0 0 0 179,987 179,987 461,334 461,334 113,333 393,518 113,333 393,518 109,087 345,591 109,087 345,591 5,878 21,249 0 0 6,446 21,144 (8,078) 5,534 0 0 (8,078) 5,534 0 (5,180) 0 0 0 0 (8,078) 354 0 0 0 0
EX-99 3 0003.txt BORDEN CHEMICALS PRESS RELEASE Exhibit 99 FOR IMMEDIATE RELEASE CONTACT: John Kompa (614) 224-4600 Borden Chemicals and Plastics to Close Methanol Plant Columbus, Ohio (November 9, 2000) - Borden Chemicals and Plastics Limited Partnership (NYSE: BCU) today announced that it will close its methanol operations in Geismar, Louisiana, effective in early January 2001. This will complete the process of exiting all of the Partnership's non-vinyl based basic chemical businesses, following the sale of its formaldehyde assets and the closure of the nitrogen product facilities in July 2000. The process for the Partnership to exit these businesses and focus on its polyvinyl chloride resin operations was announced in June 2000. In July 2000, the Partnership completed the sale of its formaldehyde assets and certain other assets to Borden Chemical, Inc. (BCI), a separate entity which is a subsidiary of Borden, Inc., for $48.5 million. As part of the agreement, BCI obtained an option to acquire the methanol assets by year-end. BCI has informed the Partnership that it has elected not to exercise its option to acquire the assets. The Partnership expects it will continue to operate the methanol facility until early January 2001 to meet customer and operating requirements and will shut down the facility at that time. The Partnership said it expected to absorb most of the employees involved with its methanol operations into its ongoing PVC operations. Borden Chemicals and Plastics Limited Partnership produces polyvinyl chloride resins and intermediate raw materials at facilities located in Geismar and Addis, La., and Illiopolis, Ill. BCP Management, Inc., a wholly owned subsidiary of Borden, Inc., has a 2 percent interest and serves as general partner. Publicly traded units account for the remaining 98 percent ownership. Forward-Looking Statements This news release contains forward-looking statements subject to the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995. These include statements with words such as "expect," "anticipate" and "appear," statements regarding the Partnership's financial status, future business prospects and continued access to credit to meet future business needs, and statements referring to overall industry trends. These forward-looking statements are based on a number of assumptions and forecasts, and actual results may be materially different from those expressed or implied by such statements. Factors affecting future results include, but are not limited to, changes in the demand for and pricing of products, changes in industry production capacities, and changes in the supply of and costs of significant raw materials. Discussion of these and other factors and risks are discussed in detail in the Partnership's Form 10-K annual report and other documents filed with the Securities and Exchange Commission. # # # -----END PRIVACY-ENHANCED MESSAGE-----