-----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, GqjC8hi1aj9imj/BIltozod6lRAJ+u9GQjJ8VLqnvuYDxCqrjh0L9fIlyFI1xv8q b7qXuFFxvutQE4Hyq5eYgA== 0000950130-96-001609.txt : 19960513 0000950130-96-001609.hdr.sgml : 19960513 ACCESSION NUMBER: 0000950130-96-001609 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960331 FILED AS OF DATE: 19960510 SROS: NASD SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: BORDEN CHEMICALS & PLASTICS LIMITED PARTNERSHIP /DE/ CENTRAL INDEX KEY: 0000821202 STANDARD INDUSTRIAL CLASSIFICATION: PLASTICS, MATERIALS, SYNTH RESINS & NONVULCAN ELASTOMERS [2821] IRS NUMBER: 311269627 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-09699 FILM NUMBER: 96559326 BUSINESS ADDRESS: STREET 1: HIGHWAY 73 CITY: GEISMAR STATE: LA ZIP: 70734 BUSINESS PHONE: 5046736121 MAIL ADDRESS: STREET 1: PO BOX 427 CITY: GERSMAR STATE: LA ZIP: 70734 FORMER COMPANY: FORMER CONFORMED NAME: BORDEN CHEMICALS & PLASTICS LIMITED PARTNERSHIP DATE OF NAME CHANGE: 19920703 10-Q 1 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 March 31, 1996 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 May 10, 1996: 36,750,000. ================================================================================ 1 BORDEN CHEMICALS AND PLASTICS LIMITED PARTNERSHIP CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS (UNAUDITED) (IN THOUSANDS, EXCEPT PER UNIT DATA)
THREE MONTHS ENDED ------------------ MARCH 31, MARCH 31, 1996 1995 -------- -------- REVENUES Net trade sales...................................... $144,973 $162,488 Net affiliated sales................................. 25,612 52,318 -------- -------- Total revenues............................. 170,585 214,806 -------- -------- EXPENSES Cost of goods sold Trade.......................................... 139,580 82,168 Affiliated..................................... 25,239 26,323 Marketing, general & administrative expense.......... 5,635 5,531 Interest expense..................................... 5,350 4,085 General Partner incentive............................ 0 13,075 Other expense, including minority interest......................................... 878 137 -------- -------- Total expenses........................... 176,682 131,319 -------- -------- Net (loss) income.................................... (6,097) 83,487 Less 1% General Partner interest................. 61 (835) Net (loss) income applicable to Limited Partners' -------- -------- interest......................................... $( 6,036) $ 82,652 ======== ======== PER UNIT DATA, NET OF 1% GENERAL PARTNER INTEREST: Net (loss) income per Unit........................... $ ( 0.16) $ 2.25 ======== ======== Average number of Units outstanding during the year.. 36,750 36,750 ======== ======== Cash distribution declared per Unit.................. $ 0.10 $ 1.77 ======== ========
2 BORDEN CHEMICALS AND PLASTICS LIMITED PARTNERSHIP CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED) (IN THOUSANDS)
THREE MONTHS ------------------------ MARCH 31, MARCH 31, 1996 1995 ------------ ---------- CASH FLOWS FROM OPERATIONS Net (loss) income..................................... ($6,097) $ 83,487 Adjustments to reconcile net (loss) income to net cash (used in) provided by operating activities: Depreciation....................................... 12,192 11,163 (Increase) in receivables.......................... ( 2,888) (1,649) Increase (decrease) in inventories................ 8,527 (45) (Decrease) in payables............................. (15,168) (13,024) (Decrease) increase in incentive distribution payable................................... (1,910) 1,210 Increase in accrued interest....................... 4,744 4,073 Other, net............................................ (8,425) (4,088) ----------- -------- (9,025) 81,127 ----------- -------- CASH FLOWS FROM INVESTING ACTIVITIES Capital expenditures............................... (3,115) (2,874) ----------- -------- (3,115) (2,874) CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from short-term borrowings, (net)....... 10,000 0 Cash distributions paid.......................... (21,179) (60,999) ----------- -------- (11,179) (60,999) (Decrease) increase in cash and equivalents........... (23,319) 17,254 ----------- -------- Cash and equivalents at beginning of period........... 32,421 74,126 ----------- -------- Cash and equivalents at end of period................. $ 9,102 91,380 ========== ======== SUPPLEMENT DISCLOSURES OF CASH FLOW INFORMATION Interest paid during the period....................... $ 606 $ 12 ========== ========
3 BORDEN CHEMICALS AND PLASTICS LIMITED PARTNERSHIP CONSOLIDATED CONDENSED BALANCE SHEETS (UNAUDITED) (IN THOUSANDS)
ASSETS MARCH 31, 1996 DECEMBER 31, 1995 ------ --------------- ----------------- Cash and equivalents................................. $ 9,102 $ 32,421 Accounts receivable (less allowance for doubtful accounts of $471 and $457 respectively) Trade............................................. 76,159 75,788 Affiliated........................................ 17,719 15,202 Inventories Finished and in process goods..................... 26,657 33,418 Raw materials and supplies........................ 7,888 9,654 Other current assets................................. 2,854 3,541 --------- --------- Total current assets.............................. 140,379 170,024 --------- --------- Investments in and advances to affiliated companies.. 4,500 4,437 Other assets......................................... 47,215 39,415 --------- --------- 51,715 43,852 --------- --------- Plant, property and equipment Land.............................................. 14,586 14,106 Buildings......................................... 44,264 44,216 Machinery and equipment........................... 635,865 633,484 --------- --------- 694,715 691,806 Less accumulated depreciation........................ (349,247) (337,175) --------- --------- Net plant, property and equipment 345,468 354,631 --------- --------- Total assets $ 537,562 $ 568,507 ========= ========= LIABILITIES AND PARTNERS' CAPITAL - --------------------------------- Accounts and drafts payable.......................... $ 49,724 $ 64,892 Cash distributions payable........................... 3,712 21,179 Short-term borrowing................................. 50,000 40,000 Incentive distribution payable to General Partner.... 0 1,910 Accrued interest..................................... 8,006 3,262 Other accrued liabilities............................ 12,105 13,468 --------- --------- Total current liabilities....................... 123,547 144,711 --------- --------- Long-term debt....................................... 200,000 200,000 Other liabilities.................................... 5,805 5,677 Minority interest in consolidated subsidiary......... 1,555 1,655 --------- --------- Total liabilities 330,907 352,043 --------- --------- Partners' capital Limited Partners.................................. 206,051 215,762 General Partner................................... 604 702 --------- --------- Total Partners' capital........................ 206,655 216,464 --------- --------- $ 537,562 $ 568,507 ========= =========
4 BORDEN CHEMICALS AND PLASTICS LIMITED PARTNERSHIP CONSOLIDATED CONDENSED STATEMENTS OF CHANGES IN PARTNERS' CAPITAL (UNAUDITED) (IN THOUSANDS)
LIMITED GENERAL PARTNERS PARTNER TOTAL -------- ------- -------- Balance at December 31, 1994.. $244,443 $1,292 $245,735 Net income.................... 82,652 835 83,487 Cash distributions declared... (65,047) (789) (65,836) -------- ------ -------- Balances at March 31, 1995.... $262,048 $1,338 $263,386 ======== ====== ======== Balance at December 31, 1995.. $215,762 $ 702 $216,464 Net (loss).................... (6,036) (61) (6,097) Cash distributions declared... (3,675) (37) (3,712) -------- ------ -------- Balances at March 31, 1996.... $206,051 $ 604 $206,655 ======== ====== ========
5 BORDEN CHEMICALS AND PLASTICS LIMITED PARTNERSHIP NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (UNAUDITED) (IN THOUSANDS EXCEPT UNIT AND PER UNIT DATA) 1. INTERIM FINANCIAL STATEMENTS The accompanying unaudited interim consolidated condensed financial statements contain all adjustments, consisting only of normal 2. ACQUISITION AND FINANCING On May 2, 1995, the Partnership, through its subsidiary operating partnership ("the Operating Partnership"), completed the purchase of Occidental Chemical Corporation's ("OxyChem") Addis, Louisiana PVC manufacturing facility and related assets. The cash purchase price for the Addis assets was $100,400. On May 1, 1995 the Operating Partnership issued $200,000 aggregate principal amount of 9 1/2% senior unsecured notes (the"Senior Notes"). The proceeds from this offering, net of $9,815 of debt issuance costs, were used to prepay $150,000 aggregate principal amount of outstanding notes plus related $6,912 prepayment premium and accrued interest. The remaining proceeds were used to fund a portion of the purchase price of the Addis Facility. A $100,000 revolving credit facility was obtained during the second quarter of 1995. Borrowings under this facility was $50,000 at March 31, 1996. 3. ENVIRONMENTAL AND LEGAL PROCEEDINGS On October 27, 1994, the U.S. Department of Justice ("DOJ"), at the request of the U.S. Environmental Protection Agency (the "EPA"), filed an action against the Partnership and the General Partner in the U.S. District Court for the Middle District of Louisiana. The complaint seeks facility-wide corrective action and civil penalties for alleged violations of the federal Resource, Conservation and Recovery Act ("RCRA"), the federal Comprehensive Environmental Response, Compensation and Liability Act ("CERCLA"), and the Clean Air Act at the Geismar complex. If the Partnership is unsuccessful in this proceeding, or otherwise subject to RCRA permit requirements, it may be subject to three types of costs: (i) corrective action; (ii) penalties; and (iii) costs needed to obtain a RCRA permit, portions of each which could be subject to the Environmental Indemnity Agreement ("EIA") discussed below. As to penalties, although the maximum statutory penalties that would apply in a successful enforcement action by the United States would be in excess of $150,000, management believes that, assuming the Partnership is unsuccessful, based on information currently available, and an analysis of relevant case law and administrative decisions, the more likely amount of any liability for civil penalties would not exceed several million dollars. 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 remedation costs. Under the EIA, Borden, Inc. ("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 6 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, and no claim can, with certain exceptions, be made with respect to the first $500 of liabilities which Borden would otherwise be responsible for thereunder in any year, but such excluded amounts shall not exceed $3,500 in the aggregate. Excluded amounts under the EIA have aggregated approximately $3,500 through March 31, 1996. In connection with potential environmental matters, a $4,000 provision was included in the Partnership's third quarter 1994 operating results. Because of various factors (including the nature of any settlement with appropriate regulatory authorities or the outcome of any proceeding, actual environmental conditions, the scope of the application of the EIA and the timing of actions, if any, required to be taken by the Partnership), the Partnership cannot reasonably estimate the full range of costs it might incur with respect to the environmental matters discussed herein. The costs incurred in any quarter or year could be material to the Partnership's results of operations for such quarter or year, although, on the basis of the relevant facts and circumstances, management believes this to be unlikely. However, management believes that such costs should not have a material adverse effect on the Partnership's financial position. The Partnership is subject to legal proceedings and claims which 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 risk retention program and EIA with Borden, would not materially affect the financial position or results of operations of the Partnership. 7 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS - ------------------------------------------------------------------------------- OF OPERATIONS - ------------- RESULTS OF OPERATIONS QUARTER ENDED MARCH 31, 1996 COMPARED TO QUARTER ENDED MARCH 31, 1995 Revenues Total revenues during the first quarter of 1996 decreased $44.2 million or 21% to $170.6 million from $214.8 million in the first quarter of 1995. This decrease was the result of a $48.0 million decrease in Methanol and Derivatives revenues and a $2.0 million decrease in Nitrogen Products revenues, partially offset by a $5.7 million increase in PVC Polymers Products revenues. Total revenues for PVC Polymers Products increased $5.7 million as a result of a 49% increase in sales volumes partially offset by a 29% decrease in selling prices. The increase in sales volumes was attributable to the additional production from the Addis acquisition. Pricing for PVC continues to be well below the year-ago period and on average, declined from the fourth quarter of 1995. Total revenues for Methanol and Derivatives decreased $48.0 million as a result of a 61% decrease in selling prices, partially offset by an 8% increase in sales volumes. Methanol sales prices began to decline during early 1995, and the outlook for Methanol continues to be uncertain, but the Partnership believes that its Methanol sales prices during 1996 are likely to remain at current levels. Total revenues for Nitrogen Products decreased $2.0 million as a result of a 6% decrease in selling prices along with a 1% decrease in sales volumes. Demand and pricing for ammonia and urea were steady during the quarter and comparable to the first quarter of 1995, despite drought in the western wheat belt and continued cold in the Midwest, which slowed plantings. Cost of Goods Sold Total cost of goods sold increased 52% to $164.8 million in the current period from $108.5 million in the year-ago period. The increase was primarily a result of increased raw material costs due to natural gas price increases, partially offset by decreased ethylene and chlorine costs. Expressed as a percentage of total revenues, cost of goods sold increased to 97% of total revenues in 1996 from 51% in 1995, resulting in greatly reduced gross margins and net income for the Partnership. Gross margins for PVC Polymers Products decreased to a slight negative position as a result of the reduced selling prices discussed above. Gross margins for Methanol and Derivatives also decreased to a slight negative position as a result of the decreased selling prices combined with the increased natural gas costs discussed above. Gross margins for Nitrogen Products decreased nearly 50% as a result of the increase in natural gas costs. Incentive Distribution to General Partner There was no incentive distribution to the General Partner generated in the first quarter of 1996 as cash generated was less than $0.3647 (the "Target Distribution"). An incentive distribution to the General Partner of $13.1 million was generated in the first quarter of 1995 as a result of cash distributions to Unitholders of $1.77 per unit, exceeding the Target Distribution. 8 Interest Expense The increase in interest expense during the first quarter of 1996 compared to the year-ago period was predominantly due to debt incurred associated with the Addis acquisition. Net (Loss) Income Net (loss) income was a loss of $6.1 million compared to $83.5 million in 1995. As discussed above, the primary reasons for the decrease in operating performance were significant selling price decreases in PVC and methanol along with a significant natural gas cost increase. LIQUIDITY AND CAPITAL RESOURCES Cash Flows from Operations. Cash flows from operations decreased $90.2 million for the first quarter 1996 from the comparable period a year ago. The decrease was primarily attributable to the decrease in net income from the first quarter of 1995. Cash flows (used in) provided by operations were also negatively affected by an approximate $9.2 million prepayment for a long-term raw material supply contract made during the first quarter of 1996. Cash Flows from Investing Activities. First quarter 1996 capital expenditures totalled $3.1 million. Capital expenditures for the first quarter 1995 were $2.9 million. Cash Flows from Financing Activities. The Partnership makes quarterly distributions to Unitholders and the General Partner of 100% of its Available Cash. Available Cash means generally, with respect to any quarter, the sum of all cash receipts of the Partnership plus net reductions to reserves established in prior quarters, less all of its cash disbursements and net additions to reserves in such quarter. The General Partner may establish reserves to provide for the proper conduct of the Partnership's business, to stabilize distributions of cash to Unitholders and the General Partner and as necessary to comply with the terms of any agreement or obligation of the Partnership. Cash distributions of $21.2 million were made during the first quarter 1996 compared to $61.0 million in the year-ago period. These amounts reflect the payment of cash distributions declared for the immediately proceeding quarters. Cash distributions with respect to interim periods are not necessarily indicative of cash distributions with respect to a full year. Moreover, due to the cyclical nature of the Partnership's business, past cash distributions are not necessarily indicative of future cash distributions. There are various seasonality factors affecting results of operations and, therefore, cash distributions. In addition, the amount of Available Cash constituting Cash from Operations for any period does not necessarily correlate directly with net income for such period because various items and transactions affect net income and Available Cash constituting Cash from Operations differently. For example, depreciation reduces net income but does not affect Available Cash constituting Cash from Operations, while changes in working capital items (including receivables, inventories, accounts payable and other items) generally do not affect net income but do affect such Available Cash. Moreover, as provided for in the Partnership Agreements with respect to the Partnership and the Operating Partnership, certain reserves may be established which affect Available Cash constituting Cash from Operations but do not affect cash balances in financial statements. Such reserves have generally been used to set cash aside for debt service, capital expenditures and other accrued items. Liquidity The Partnership expects to satisfy its cash requirements through internally generated cash and borrowings. During 1995, the Partnership entered into a Revolving Credit Facility which provided a $100.0 million line of credit for capital expenditures, working capital and general partnership purposes. The amount available under the facility reduced to $75.0 million on January 1, 1996, reduces to $50.0 million on January 1, 1997 and terminates December 31, 1997. The facility may be extended for one year with the consent of the lenders. Borrowing under this facility was $50 million at March 31, 1996. The $10.0 million increase in the amount outstanding under the Revolving Credit Facility during the first 9 quarter of 1996 was principally for the $9.2 million raw material contract prepayment discussed above. PART II. OTHER INFORMATION Item 1. Legal Proceedings - ------------------------- There is incorporated by reference herein the information regarding legal proceedings in Item 3 of Part I of the Partnership's 1995 Annual Report on Form 10-K and Note 3 to the consolidated condensed financial statements in Part I hereof. 10 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., General Partner By /s/ JOHN R. BEAVER ----------------------------- JOHN R. BEAVER Controller and Principal Accounting Officer May 10, 1996 11 EX-27 2 FINANCIAL DATA SCHEDULE
5 1,000 3-MOS DEC-31-1996 MAR-31-1996 9102 0 76630 471 34545 140379 694715 349247 537562 123547 200000 0 0 0 206655 537562 170585 170585 164819 164819 6513 0 5350 (6097) 0 (6097) 0 0 0 (6097) (0.16) 0
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