-----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, FZRwuAar7c8F3TPyarnUb6FTDkGCZv7c6SoA1sorp0Hh3poniIFPNax8y/EHpHvP r90U+yr+AeN5UmRZg6LRDQ== 0000950130-97-003628.txt : 19970814 0000950130-97-003628.hdr.sgml : 19970814 ACCESSION NUMBER: 0000950130-97-003628 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970630 FILED AS OF DATE: 19970813 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: 97658700 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 FOR THE QUARTERLY PERIOD ENDED 06/30/97 ================================================================================ 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 June 30, 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 August 8, 1997: 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 ------------------- JUNE 30, JUNE 30, 1997 1996 -------- -------- REVENUES Net trade sales ..................... $152,558 $152,675 Net sales to related parties ......... 37,218 26,552 -------- -------- Total revenues.............. 189,776 179,227 -------- -------- EXPENSES Cost of goods sold Trade............................ 125,926 140,023 Related parties.................. 29,704 25,202 Marketing, general & administrative expense .............................. 6,338 6,370 Interest expense....................... 5,243 5,556 General Partner incentive.............. 794 0 Other expense, including minority interest........................... 525 571 -------- -------- Total expenses............... 168,530 177,722 -------- -------- Net income............................. 21,246 1,505 Less 1% General Partner interest... (212) (15) -------- -------- Net income applicable to Limited Partners' interest.................... $ 21,034 $ 1,490 ======== ======== PER UNIT DATA, NET OF 1% GENERAL PARTNER INTEREST: Net income per Unit.................... $0.57 $0.04 ======== ======== Average number of Units outstanding during the period..................... 36,750 36,750 ======== ======== Cash distribution declared per Unit... $0.45 $0.00 ======== ========
2 BORDEN CHEMICALS AND PLASTICS LIMITED PARTNERSHIP CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS (UNAUDITED) (IN THOUSANDS, EXCEPT PER UNIT DATA)
SIX MONTHS ENDED --------------------- JUNE 30, JUNE 30, 1997 1996 -------- -------- REVENUES Net trade sales....................... $315,475 $297,648 Net sales to related parties.......... 68,983 52,164 -------- -------- Total revenue............... 384,458 349,812 -------- -------- EXPENSES Cost of goods sold Trade........................... 283,868 279,603 Related parties................. 59,799 50,441 Marketing, general & administrative expense.............................. 11,779 12,005 Interest expense...................... 10,493 10,906 General Partner incentive............. 794 0 Other expense, including minority interest.......................... 886 1,449 -------- -------- Total expenses 367,619 354,404 -------- -------- Net income (loss)...................... 16,839 (4,592) Less 1% General Partner interest.. (168) 46 -------- -------- Net income (loss) applicable to Limited Partners' interest........... $ 16,671 $ (4,546) ======== ======== PER UNIT DATA, NET OF 1% GENERAL PARTNER INTEREST: Net (loss) income per Unit............ $0.45 $(0.12) Average number of Units outstanding during the period...................... 36,750 36,750 ======== ======== Cash distribution declared per Unit... $0.55 $0.10 ======== ========
3 BORDEN CHEMICALS AND PLASTICS LIMITED PARTNERSHIP CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED) (IN THOUSANDS)
SIX MONTHS --------------------------------- JUNE 30, JUNE 30, 1997 1996 --------- ---------- CASH FLOWS FROM OPERATIONS Net income (loss)....................... $ 16,839 $ (4,592) Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation............................ 24,949 24,415 (Increase) in receivables.............. (10,494) (10,404) (Increase) decrease in inventories..... (7,762) 7,343 Increase in payables................... 181 4,397 Increase (decrease) in incentive distribution payable.................. 794 (1,910) (Decrease) in accrued interest......... ( 18) ( 55) Other, net............................. (3,030) (8,561) -------- --------- 21,459 10,633 -------- --------- CASH FLOWS FROM INVESTING ACTIVITIES Capital expenditures.................... (4,178) (6,852) -------- --------- CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from short-term borrowings, (net).................................. 0 (10,000) Cash distributions paid................. (7,424) (24,891) -------- --------- (7,424) (14,891) -------- --------- Increase (decrease) in cash and equivalents............................ 9,857 (11,110) Cash and equivalents at beginning of period 10,867 32,421 -------- --------- $ 20,724 $ 21,311 Cash and equivalents at end of period ======== ========= SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION Interest paid during the period......... $ 10,511 $ 10,961 ======== ========
4 BORDEN CHEMICALS AND PLASTICS LIMITED PARTNERSHIP CONSOLIDATED CONDENSED BALANCE SHEETS (UNAUDITED) (IN THOUSANDS)
ASSETS JUNE 30, 1997 DECEMBER 31, 1996 ------ ------------- ----------------- Cash and equivalents............................... $ 20,724 $ 10,867 Accounts receivable (less allowance for doubtful accounts of $622 and $589 respectively) Trade ......................................... 80,570 72,908 Related Parties................................. 24,979 22,147 Inventories Finished and in process goods................... 42,208 36,174 Raw materials and supplies...................... 9,516 7,788 Other current assets............................... 2,560 2,579 ----------- --------- Total current assets......................... 180,557 152,463 ----------- --------- Investments in and advances to affiliated companies.............................. 4,353 4,366 Other assets....................................... 52,891 49,405 ----------- --------- 57,244 53,771 ----------- --------- Plant, property and equipment Land............................................. 15,028 14,970 Buildings........................................ 44,611 44,597 Machinery and equipment.......................... 648,395 644,619 ----------- --------- 708,034 704,186 Less accumulated depreciation...................... (409,396) (384,715) ----------- --------- Net plant, property and equipment............... 298,638 319,471 ----------- --------- Total assets...................... $ 536,439 $ 525,705 =========== ========= Accounts and drafts payable........................ $ 61,993 $ 61,812 Cash distributions payable......................... 16,713 3,712 Short-term borrowing............................... 25,000 25,000 Incentive to General Partner....................... 794 0 Accrued interest ................................. 3,167 3,185 Other accrued liabilities.......................... 16,972 16,516 ----------- --------- Total current liabilities.................... 124,639 110,225 Long-term debt..................................... 200,000 200,000 Other liabilities.................................. 5,551 5,609 Minority interest in consolidated subsidiary........................................ 1,535 1,571 ----------- ---------- Total liabilities................. 331,725 317,405 ----------- ---------- Partners' capital Limited Partners ................................ 204,138 207,680 General Partner.................................. 576 620 ----------- ---------- Total partners' capital.......................... 204,714 208,300 ----------- ---------- Total liabilities and partners' capital..... $ 536,439 $ 525,705 =========== ==========
5 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, 1995 $215,762 $ 702 $216,464 Net loss...................... (4,546) (46) (4,592) Cash distributions declared... (3,675) (37) ( 3,712) -------- ------ -------- Balances at June 30, 1996..... $207,541 $ 619 $208,160 ======== ====== ======== Balance at December 31, 1996 $207,680 $ 620 $208,300 Net income.................... 16,671 168 16,839 Cash distributions declared... (20,213) ( 212) (20,425) -------- ------ -------- Balances at June 30, 1997..... $204,138 $ 576 $204,714 ======== ====== ========
6 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 7 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 June 30, 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 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. 8 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS - ------------------------------------------------------------------------------- OF OPERATIONS - ------------- RESULTS OF OPERATIONS QUARTER ENDED JUNE 30, 1997 COMPARED TO QUARTER ENDED JUNE 30, 1996 Revenues Total revenues during the second quarter of 1997 increased $10.6 million or 6% to $189.8 million from $179.2 million in the second quarter of 1996. This increase was the result of a $5.7 million increase in PVC Polymers Products revenues and a $9.4 million increase in Methanol and Derivatives revenues, partially offset by a $4.5 million decrease in Nitrogen Products revenues. Total revenues for PVC Polymers Products increased $5.7 million as a result of an 11% increase in selling prices, partially offset by a 6% decrease in sales volumes. Pricing for PVC improved as the PVC industry realized increases caused by raw material cost increases over the past several quarters. Total revenues for Methanol and Derivatives increased $9.4 million as a result of a 33% increase in selling prices, partially offset by a 4% decrease in sales volumes. The improved methanol selling prices reflect the effect of supply disruptions due to operating disruptions at other producers. Total revenues for Nitrogen Products decreased $4.5 million as a result of a 15% decrease in sales volumes, and a 3% decrease in selling prices. Pricing for ammonia was comparable to 1996, but urea prices dropped, reflecting depressed pricing to the fertilizer industry. Cost of Goods Sold Total cost of goods sold decreased 6% to $155.6 million in the current period from $165.2 million in the year-ago period. The decrease was primarily due to the reduced volumes discussed above, combined with slightly lower raw material costs. Natural gas and ethylene costs moderated, but were partially offset by chlorine and VCM cost increases. Expressed as a percentage of total revenues, cost of goods sold decreased to 82% of total revenues in 1997 from 92% in 1996, resulting in improved gross margins and net income for the Partnership. Gross margins for PVC Polymers Products increased 112% as a result of the increased selling prices discussed above. Gross margins for Methanol and Derivatives increased 382% as a result of the increased selling prices combined with the decreased natural gas costs discussed above. Gross margins for Nitrogen Products decreased 11% as a result of the decreased selling prices, partially offset by the decrease in natural gas costs. Incentive Distribution to General Partner An incentive distribution to the General Partner of $0.8 million was generated in the second quarter of 1997 a result of cash distributions to Unitholders of $0.45 per unit, exceeding $0.3647 (the "Target Distribution"). There was no incentive distribution to the General Partner generated in the second quarter of 1996 as there was no cash distribution declared to the unitholders. Net Income Net income was $21.2 million compared to $1.5 million in 1996. As discussed above, the primary reasons for the improved operating performance were significant higher selling prices in PVC and methanol combined with a slight decline in raw material costs. 9 RESULTS OF OPERATIONS SIX MONTHS ENDED JUNE 30, 1997 COMPARED TO SIX MONTHS ENDED JUNE 30, 1996 Revenues Total revenues for the first six months of 1997 increased $34.7 million or 10% to $384.5 million from $349.8 million for the comparable period a year ago. Total revenues for PVC Polymers Products increased $25.3 million as a result of an 11% increase in selling prices on comparable volumes. Total revenues for Methanol and Derivatives increased $19.1 million as a result of a 33% decrease in selling prices on comparable volumes. Total revenues for Nitrogen Products decreased $9.7 million as a result of a 4% decrease in selling prices combined with a 15% decrease in sales volumes. Cost of Goods Sold Total cost of goods sold increased 4% to $343.7 million for the first six months of 1997 from $330.0 million in the year-ago period. The increase was primarily the result of increased raw material cost due to chlorine and VCM price increases, partially offset by decreased natural gas and ethylene cost. Expressed as a percentage of total revenues, cost of goods sold decreased to 89% of total revenues for the first half of 1997 from 94% in the first half of 1996, resulting in improved gross margins and net income for the Partnership. Gross margins for PVC Products increased 117% as a result of the improved selling prices discussed above. Gross margins for Methanol and Derivatives improved almost ten-fold as a result of the increased selling prices combined with the lower natural gas costs discussed above. Gross margins for Nitrogen Products decreased 63% as a result of decreased selling prices and volumes. Incentive Distribution to General Partner An incentive distribution to the General Partner of $0.8 million was generated during the second quarter of 1997 as a result of cash distributions to Unitholders exceeding the Target Distribution. There was no incentive distribution to the General Partner generated during either the first or second quarter of 1996. Interest Expense The decrease in interest expense during the first half of 1997 compared to the year-ago period was due to the reduction of short-term bank borrowings. Net Income (Loss) Net income for the first half was $16.8 million compared to a loss of $4.6 million in 1996. As discussed above, the primary reason for the improved in operating performance was significantly higher selling prices for PVC resins and methanol, combined with lower net raw material costs. LIQUIDITY AND CAPITAL RESOURCES Cash Flows from Operations. Cash flows from operations increased $10.8 million for the first two quarters of 1997 from the comparable period a year ago. The increase was primarily attributable to the increase in net income during this period compared to 1996, partially offset by increased receivable and inventory levels. 10 Cash Flows from Investing Activities. Capital expenditures for the first two quarters of 1997 totaled $4.2 million compared to $6.9 million during the year ago period. 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 $7.4 million were made during the first half of 1997 compared to $24.9 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, reduced 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 June 30, 1997. 11 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. 12 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 August 13, 1997 13 EX-27 2 FINANCIAL DATA SCHEDULE
5 1,000 3-MOS DEC-31-1997 JUN-30-1997 20,724 0 105,549 622 51,724 180,557 708,034 409,396 536,439 124,639 0 0 0 0 207,086 536,439 189,776 189,776 155,630 155,630 7,567 0 5,243 21,246 0 21,246 0 0 0 21,246 .57 .57
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