-----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, Dk0rYxH+fzNP8OlViqJfTigc92iSQ6/ALEfd1SP1jKzOpXB5Gp/w6nGM7XqA747f EzrJaAWUwleuD7pRdA4HeQ== 0000950130-97-002279.txt : 19970513 0000950130-97-002279.hdr.sgml : 19970513 ACCESSION NUMBER: 0000950130-97-002279 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970331 FILED AS OF DATE: 19970512 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: 97600559 BUSINESS ADDRESS: STREET 1: HIGHWAY 73 CITY: GEISMAR STATE: LA ZIP: 70734 BUSINESS PHONE: 5046736121 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 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, 1997 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 9, 1997: 36,750,000. ================================================================================ 1 BORDEN CHEMICALS AND PLASTICS LIMITED PARTNERSHIP CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) (IN THOUSANDS, EXCEPT PER UNIT DATA)
THREE MONTHS ENDED --------------------- MARCH 31, MARCH 31, 1997 1996 -------- -------- REVENUES Net trade sales ........................ $162,917 $144,973 Net sales to related parties ........... 31,765 25,612 -------- -------- Total revenues ......................... 194,682 170,585 -------- -------- EXPENSES Cost of goods sold Trade ................................ 157,942 139,580 Related Parties ...................... 30,095 25,239 Marketing, general & administrative expense ............................... 5,441 5,635 Interest expense ....................... 5,250 5,350 Other expense, including minority interest................................ 361 878 -------- -------- Total expenses .................... 199,089 176,682 -------- -------- Net (loss) ............................. (4,407) (6,097) Less 1% General Partner interest............................. 44 61 -------- -------- Net (loss) applicable to Limited Partners' interest ..................... $( 4,363) $ (6,036) ======== ======== PER UNIT DATA, NET OF 1% GENERAL PARTNER INTEREST: Net (loss) per Unit .................... $( 0.12) $(0.16) ======== ======== Average number of Units outstanding during the year ........................ 36,750 36,750 ======== ======== Cash distribution declared per Unit .... $0.10 $0.10 ======== ========
2 BORDEN CHEMICALS AND PLASTICS LIMITED PARTNERSHIP CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (IN THOUSANDS)
THREE MONTHS ------------------------- MARCH 31, MARCH 31, 1997 1996 ------------- ---------- CASH FLOWS FROM OPERATIONS Net (loss) .............................. ($4,407) ($6,097) Adjustments to reconcile net (loss) to net cash provided by operating activities: Depreciation ............................ 12,410 12,192 Increase (decrease) in cash from changes in certain assets and liabilities: Receivables ........................... (14,449) (2,888) Inventories ........................... 6,160 8,527 Payables .............................. 1,103 (15,168) Incentive distribution payable ............................. 0 (1,910) Accrued interest ...................... 4,750 4,744 Other, net .............................. (5,806) (8,425) -------- -------- ( 239) (9,025) -------- -------- CASH FLOWS FROM INVESTING ACTIVITIES Capital expenditures ................... (1,567) (3,115) -------- -------- CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from short-term borrowings, (net)................................. 0 10,000 Cash distributions paid................. (3,712) (21,179) -------- -------- (3,712) (11,179) -------- -------- (Decrease) increase in cash and equivalents............................. (5,518) (23,319) Cash and equivalents at beginning of period.................................. 10,867 32,421 -------- -------- Cash and equivalents at end of period..... $ 5,349 $ 9,102 ======== ======== SUPPLEMENT DISCLOSURES OF CASH FLOW INFORMATION Interest paid during the period.................................. $ 500 $ 606 ======== ========
3 BORDEN CHEMICALS AND PLASTICS LIMITED PARTNERSHIP CONSOLIDATED BALANCE SHEETS (UNAUDITED) (IN THOUSANDS)
ASSETS MARCH 31, 1997 DECEMBER 31, 1996 - ---------------------------------------- ---------------- ------------------ Cash and equivalents.................... $ 5,349 $ 10,867 Accounts receivable (less allowance for doubtful accounts of $642 an $589 respectively) Trade.................................. 88,206 72,908 Related Parties ........................ 21,298 22,147 Inventories Finished and in process goods.......... 30,020 36,174 Raw materials and supplies............. 7,782 7,788 Other current assets.................... 2,152 2,579 --------- --------- Total current assets................... 154,807 152,463 --------- --------- Investments in and advances to affiliated companies.................... 4,410 4,366 Other assets............................ 53,395 49,405 --------- --------- 57,805 53,771 --------- --------- Plant, property and equipment Land.................................... 14,970 14,970 Buildings............................... 44,597 44,597 Machinery and equipment................. 646,186 644,619 --------- --------- 705,753 704,186 Less accumulated depreciation............ (397,125) (384,715) --------- --------- Net plant, property and equipment 308,628 319,471 --------- --------- Total assets $ 521,240 $ 525,705 ========= ========= LIABILITIES AND PARTNERS' CAPITAL - --------------------------------- Accounts and drafts payable ............. $ 62,915 $ 61,812 Cash distributions payable .............. 3,712 3,712 Short-term borrowings ................... 25,000 25,000 Accrued interest ........................ 7,935 3,185 Other accrued liabilities ............... 14,526 16,516 --------- --------- Total current liabilities ............. 114,088 110,225 Long-term debt .......................... 200,000 200,000 Other liabilities ....................... 5,483 5,609 Minority interest in consolidated subsidiary ............................. 1,488 1,571 --------- --------- Total liabilities 321,059 317,405 --------- --------- Commitments and contingencies Partners' capital Limited Partners ....................... 199,642 207,680 General Partner ........................ 539 620 --------- --------- Total Partners' capital .............. 200,181 208,300 --------- --------- Total liabilities and Partners' capital ....................... $ 521,240 $ 525,705 ========= =========
4 BORDEN CHEMICALS AND PLASTICS LIMITED PARTNERSHIP CONSOLIDATED STATEMENTS OF CHANGES IN PARTNERS' CAPITAL (UNAUDITED) (IN THOUSANDS)
GENERAL PARTNERS PARTNER TOTAL ----------------- ------------ -------------- 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 ========== ========== ========== Balance at December 31, 1996 $ 207,680 $ 620 $ 208,300 Net (loss) ............................ (4,363) (44) (4,407) Cash distributions declared ........... (3,675) (37) (3,712) ---------- ---------- ---------- Balances at March 31, 1997 ............. $ 199,642 $ 539 $ 200,181 ========== ========== ==========
5 BORDEN CHEMICALS AND PLASTICS LIMITED PARTNERSHIP NOTES TO CONSOLIDATED 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 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. Per Unit data in the accompanying financial statements is derived by subtracting the General Partner 1% interest from the income captions and dividing the results by the Average Units Outstanding. In February 1997, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards (SFAS) No. 128, "Earnings per Share." SFAS No. 128 establishes new standards for computing and presenting earnings per share. The Partnership is required to adopt the provisions of SFAS No. 128 for its consolidated financial statements for the year ended December 31, 1997 and subsequent interim periods. Upon adoption, the standard also requires the restatement of all prior period earnings per Unit information presented. The adoption of SFAS No. 128 is not expected to have a material effect on the Partnership's earnings per Unit computations or disclosures. 2. 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 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, 1997. 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 6 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, 1997 COMPARED TO QUARTER ENDED MARCH 31, 1996 Revenues Total revenues during the first quarter of 1997 increased $24.1 million or 14% to $194.7 million from $170.6 million in the first quarter of 1996. This increase was the result of a $19.6 million increase in PVC Polymers Products revenues and a $9.7 million increase in Methanol and Derivatives revenues, partially offset by a $5.2 million decrease in Nitrogen Products revenues. Total revenues for PVC Polymers Products increased $19.6 million as a result of a 5% increase in sales volumes and a 12% increase in selling prices. The selling price increase was due to strong PVC resin demand and partially successful efforts to pass through raw material cost increases. Total revenues for Methanol and Derivatives increased $9.7 million as a result of a 32% increase in selling prices, partially offset by a 3% decrease in sales volumes. The high raw material natural gas costs of 1996 that continued into 1997 have caused industry pricing to increase significantly, as have several recent production disruptions other producers have experienced. Total revenues for Nitrogen Products decreased $5.2 million as a result of a 6% decrease in selling prices along with a 15% decrease in sales volumes. Prices and volumes in 1997 have been negatively affected by reduced demand, in part caused by the flooding of the midwestern United States river systems. Cost of Goods Sold Total cost of goods sold increased 14% to $188.0 million in the current period from $164.8 million in the year-ago period. Raw material costs are a significant component of cost of goods sold. Natural gas, the Partnership's largest raw material, increased slightly from last year's very high costs, further depressing margins. The Partnership's other major raw materials - ethylene, chlorine and VCM - all posted significant increases from the 1996 period. The increase was also the result of the increased PVC volume discussed above, partially offset by decreased volumes in Methanol and Derivatives and Nitrogen Products. Expressed as a percentage of total revenues, cost of goods sold remained constant at 97% of total revenues in 1997, a depressed gross margin level, and was the primary factor in the Partnership's net loss for the quarter. Gross margins for PVC Polymers Products remained in a slight negative position as raw material ethylene, chlorine and VCM cost increases offset improved selling prices and volumes. Gross margins for Methanol and Deriv atives improved to moderate profitability from a slight negative position as a result of the improved selling prices discussed above. Margins continued to be depressed due to very high raw material natural gas costs. Gross margins for Nitrogen Products declined significantly to near breakeven due to the selling price and volume declines discussed above. As with Methanol and Derivatives, the raw material natural gas costs depressed margins for the first quarter of 1997 and the year-ago period. Net (Loss) Net (loss) was $4.4 million compared to $6.1 million in 1996. As discussed above, the primary reasons for the depressed operating performance were high raw material costs and declines in Nitrogen Products selling prices and volumes, offset by improved Methanol and Derivatives and PVC selling prices. 8 LIQUIDITY AND CAPITAL RESOURCES Cash Flows from Operations. Cash flows from operations remained slightly - -------------------------- negative in 1997, primarily due to the net (loss) and the increase in receivables, partially offset by non-cash depreciation expense and reduced inventory levels. Cash Flows from Investing Activities. First quarter 1997 capital expenditures - ------------------------------------ totaled $1.6 million. Capital expenditures for the first quarter 1996 were $3.1 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 $3.7 million were made during the first quarter 1997 compared to $21.2 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, and 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 $25 million at March 31, 1997. 9 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 1996 Annual Report on Form 10-K and Note 2 to the consolidated condensed financial statements in Part I hereof. Item 6. Exhibits and Reports on Form 8-K - -------------------------------------------- On April 8, 1997, the Partnership filed a Form 8-K under Item 5 to disclose its Agreement and Plan of Conversion to corporate status and the Partnership's newly adopted Rights Agreement. 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/ James O. Stevning --------------------------------------- James O. Stevning Vice President, Chief Financial Officer and Treasurer Principal Accounting Officer May 12, 1997 11 EX-27 2 FINANCIAL DATA SCHEDULE
5 1000 3-MOS DEC-31-1997 MAR-31-1997 5,349 0 109,504 642 37,802 154,807 705,753 397,125 521,240 114,088 200,000 0 0 0 200,181 521,240 194,682 194,682 188,037 188,037 5,802 0 5,250 (4,407) 0 (4,407) 0 0 0 (4,407) (.12) (.12)
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