UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR QUARTERLY PERIOD ENDED MARCH 31, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM ........... TO ...............
REGISTRATION NUMBER 333-11569
----------
TEXAS PETROCHEMICAL HOLDINGS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
TEXAS 76-0504002
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
THREE RIVERWAY, SUITE 1500
HOUSTON, TEXAS 77056
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
(713) 627-7474
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
----------
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 requirement for the past 90 days. Yes [X] No [ ]
The number of shares of common stock of the registrant outstanding as of May
12, 2000 is 529,445.
<PAGE>
TEXAS PETROCHEMICAL HOLDINGS, INC.
TABLE OF CONTENTS
PAGE
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (unaudited)
Consolidated Balance Sheet as of March 31, 2000 and June 30, 1999 1
Consolidated Statement of Operations for the three and nine months
ended March 31, 2000 and 1999 2
Consolidated Statement of Cash Flows for the nine months ended
March 31, 2000 and 1999 3
Notes to Consolidated Financial Statements 4
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations 13
Item 3. Quantitative and Qualitative Disclosures about Market Risk 19
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 19
Item 6. Exhibits and Reports on Form 8-K 19
Signature 20
i
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
TEXAS PETROCHEMICAL HOLDINGS, INC.
CONSOLIDATED BALANCE SHEET
(IN THOUSANDS OF DOLLARS, EXCEPT SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
MARCH 31, JUNE 30,
2000 1999
--------- ---------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents ............................ $ 4,334 $ 103
Accounts receivable - trade .......................... 51,161 40,220
Inventories .......................................... 31,654 19,973
Other current assets ................................. 11,222 18,576
--------- ---------
Total current assets .............................. 98,371 78,872
Property, plant and equipment, net ....................... 220,454 219,706
Investments in land held for sale ........................ 2,058 2,058
Investment in and advances to limited partnership ........ 2,719 2,820
Goodwill, net ............................................ 166,123 169,560
Other assets, net of accumulated amortization ............ 8,698 9,833
--------- ---------
Total assets ...................................... $ 498,423 $ 482,849
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Bank overdraft ....................................... $ 6,903 $ 874
Accounts payable - trade ............................. 47,211 38,992
Accrued expenses ..................................... 11,379 19,215
Current portion of cash bonus plan ................... 3,989 7,811
Current portion of long-term debt .................... 6,675 7,465
--------- ---------
Total current liabilities ......................... 76,157 74,357
Revolving line of credit ................................. 13,100 2,000
Long-term debt ........................................... 327,882 328,467
Cash bonus plan .......................................... -- 1,959
Deferred income taxes .................................... 51,924 55,494
Commitments and contingencies (Note 3)
Common Stock held by the ESOP ............................ 13,100 12,600
Less: unearned compensation .............................. (3,275) (5,040)
Stockholders' equity:
Common stock, $0.01 par value, 1,000,000 voting and
100,000 non-voting shares authorized, 529,445 voting
shares issued and outstanding ...................... 5 5
Additional paid in capital ........................... 37,253 36,738
Treasury Stock ....................................... (126) --
Accumulated deficit .................................. (17,597) (23,731)
--------- ---------
Total stockholders' equity ........................ 19,535 13,012
--------- ---------
Total liabilities and stockholders' equity ...... $ 498,423 $ 482,849
========= =========
</TABLE>
See accompanying notes to consolidated financial statements.
1
<PAGE>
TEXAS PETROCHEMICAL HOLDINGS, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
(IN THOUSANDS OF DOLLARS, EXCEPT SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
MARCH 31, MARCH 31,
--------------------- ---------------------
2000 1999 2000 1999
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Revenues .................................... $ 192,580 $ 108,090 $ 532,558 $ 313,034
Cost of goods sold .......................... 170,590 92,394 464,388 261,975
Non-cash ESOP compensation .................. 155 147 415 277
Depreciation and amortization ............... 5,955 5,657 17,768 21,098
--------- --------- --------- ---------
Gross profit .............................. 15,880 9,892 49,987 29,684
Selling, general and administrative expenses 1,943 1,771 6,365 5,850
--------- --------- --------- ---------
Income from operations ................ 13,937 8,121 43,622 23,834
Interest expense ............................ 9,750 9,890 29,061 29,738
Other income (expense):
Loss on disposal of non-plant assets .. -- -- -- (44)
Other, net ............................ 78 209 1 1,198
--------- --------- --------- ---------
78 209 1 1,154
Income (loss) before income taxes ..... 4,265 (1,560) 14,562 (4,750)
Provision (benefit) for income taxes ........ 2,353 (174) 7,663 (181)
--------- --------- --------- ---------
Net income (loss) ..................... $ 1,912 $ (1,386) $ 6,899 $ (4,569)
========= ========= ========= =========
Basic income (loss) per share ............... $ 3.81 $ (2.88) $ 13.90 $ (9.61)
========= ========= ========= =========
Weighted average shares outstanding - basic . 501,445 480,945 496,195 475,612
========= ========= ========= =========
Diluted income (loss) per share ............. $ 3.75 $ (2.88) $ 13.68 $ (9.61)
========= ========= ========= =========
Weighted average shares outstanding - diluted 509,724 480,945 504,474 475,612
========= ========= ========= =========
</TABLE>
See accompanying notes to consolidated financial statements.
2
<PAGE>
TEXAS PETROCHEMICAL HOLDINGS, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(IN THOUSANDS OF DOLLARS)
(UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
MARCH 31,
--------------------
2000 1999
-------- --------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) ...................................... $ 6,899 $ (4,569)
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation of fixed assets ........................... 14,160 17,413
Amortization of goodwill and other assets .............. 3,608 3,685
Amortization of debt issue costs and deferred premium .. 5,537 4,941
Loss on disposal of non-plant assets ................... -- 44
Earnings from limited partnership ...................... (249) (616)
Deferred income taxes .................................. (2,844) (3,235)
Non-cash ESOP compensation ............................. 415 277
Change in:
Accounts receivable .................................. (10,941) 5,769
Inventories .......................................... (11,681) 1,230
Other assets ......................................... 6,534 (955)
Accounts payable ..................................... 8,219 2,354
Accrued expenses ..................................... (7,834) (10,960)
-------- --------
Net cash provided by operating activities ......... 11,823 15,378
Cash flows from investing activities:
Capital expenditures ................................... (14,908) (12,863)
Proceeds from the sale of non-plant assets ............. -- 477
Distribution from limited partnership .................. 350 780
-------- --------
Net cash used in investing activities ............. (14,558) (11,606)
Cash flows from financing activities:
Change in bank overdraft ............................... 6,029 2,331
Net borrowings (repayments) under revolver ............. 11,100 2,800
Payments on long-term debt ............................. (5,730) (5,233)
Payment of cash bonus plan ............................. (5,781) (5,886)
Debt issuance costs .................................... (152) (163)
Reduction in note receivable from ESOP ................. 1,500 1,500
-------- --------
Net cash provided by (used in) financing activities 6,966 (4,651)
-------- --------
Net increase (decrease) in cash and cash equivalents ....... 4,231 (879)
Cash and cash equivalents, at beginning of period .......... 103 956
-------- --------
Cash and cash equivalents, at end of period ................ $ 4,334 $ 77
======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
3
<PAGE>
TEXAS PETROCHEMICAL HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
1. BASIS OF PRESENTATION
NATURE OF OPERATIONS
The consolidated financial statements include the accounts of Texas
Petrochemical Holdings, Inc. and its wholly owned subsidiary, TPC Holding Corp.,
collectively referred to as (the "Company"). The Company through its facility in
Houston, Texas is the third largest producer of butadiene, the largest producer
of butene-1, and the third largest producer of methyl tertiary-butyl ether
("MTBE"), in North America, in terms of production capacity. In addition, the
Company is the sole producer of diisobutylene and isobutylene concentrate in the
United States and is the largest domestic merchant supplier of high purity
isobutylene to the chemical market. The Company's products include: (i)
butadiene, primarily used to produce synthetic rubber; (ii) MTBE, used as an
oxygenate and octane enhancer in gasoline; (iii) n-butylenes (butene-1 and
butene-2), used in the manufacture of plastic resins, fuel additives and
synthetic alcohols; and (iv) specialty isobutylenes, primarily used in the
production of specialty rubbers, lubricant additives, detergents and coatings.
The Company's principal feedstocks are crude butadiene, isobutane and
methanol. The Company purchases a significant portion of its crude butadiene
requirements at prices that are adjusted based on the Company's selling price of
butadiene as well as the cost of natural gas used to produce butadiene, thereby
providing the Company with a fixed profit on such sales. Methanol and isobutane
are purchased at prices linked to prevailing market prices.
GENERAL
The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10Q and Rule 10-01 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments, consisting
only of normal recurring adjustments, have been made which are necessary to
fairly present the financial position of the Company as of March 31, 2000 and
the results of its operations and cash flows for the interim period ended March
31, 2000. The results of the interim period should not be regarded as
necessarily indicative of results that may be expected for the entire year. The
financial information presented herein should be read in conjunction with the
audited financial statements and notes included in the Company's Form 10-K
thereto, for the year ended June 30, 1999. The June 30, 1999 balance sheet was
derived from audited financial statements but does not include all disclosures
required by generally accepted accounting principles. Certain amounts from prior
periods have been reclassified to conform to current period presentation.
4
<PAGE>
TEXAS PETROCHEMICAL HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED), CONTINUED
EARNINGS PER SHARE
The basic and diluted weighted average shares outstanding used in the
computation of earnings (loss) per share are net of 25,000 and 45,000 shares
held by the Employee Stock Ownership Plan that are not allocated to employees as
of March 31, 2000 and 1999, respectively. The diluted weighted average shares
outstanding for the three and nine months ended March 31, 2000 includes the
dilutive effect of stock options outstanding of 8,279 shares. The effect of
options was antidilutive for the three and nine months ended March 31, 1999 and
therefore was excluded from the earning/loss per share calculation.
2. DETAIL OF CERTAIN BALANCE SHEET ACCOUNTS (IN THOUSANDS OF DOLLARS)
INVENTORIES:
MARCH 31, JUNE 30,
2000 1999
--------- ---------
Finished goods ............................. $ 14,503 $ 10,594
Raw materials .............................. 15,753 8,053
Chemicals and supplies ..................... 1,398 1,326
--------- ---------
$ 31,654 $ 19,973
========= =========
PROPERTY, PLANT AND EQUIPMENT:
MARCH 31, JUNE 30,
2000 1999
-------- --------
Chemical plants .......................... $283,659 $277,117
Construction in progress ................. 17,200 8,834
Other .................................... 5,202 5,202
-------- --------
306,061 291,153
Less accumulated depreciation, depletion
and amortization ..................... 85,607 71,447
-------- --------
$220,454 $219,706
======== ========
OTHER CURRENT ASSETS:
MARCH 31, JUNE 30,
2000 1999
--------- ---------
Catalyst Inventory .......................... $ 6,128 $ 7,463
Deferred turnaround costs ................... 747 2,585
Prepaid and other ........................... 4,347 8,528
--------- ---------
$ 11,222 $ 18,576
========= =========
5
<PAGE>
TEXAS PETROCHEMICAL HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED), CONTINUED
ACCRUED EXPENSES:
MARCH 31, JUNE 30,
2000 1999
-------- --------
Accrued interest .................................. $ 6,415 $ 13,893
Property and sales taxes .......................... 1,004 1,995
Federal and state taxes ........................... 2,782 2,731
Other ............................................. 1,178 596
-------- --------
$ 11,379 $ 19,215
======== ========
LONG TERM DEBT:
MARCH 31, JUNE 30,
2000 1999
-------- --------
Bank Credit Agreement:
Term A Loan ................................ $ 15,302 $ 18,002
Term B Loan ................................ 40,668 41,407
ESOP Loan .................................. 2,500 4,000
Revolving Credit Loans ..................... 13,100 2,000
Senior Subordinated Notes ..................... 225,000 225,000
Discount Notes ................................ 48,990 44,394
Deferred premium on Senior Subordinated Notes . 2,009 2,250
Long-term financing ........................... 88 879
-------- --------
347,657 337,932
Less current maturities ....................... 6,675 7,465
-------- --------
Long-term debt ................................ $340,982 $330,467
======== ========
The Bank Credit Agreement provides for term loans in the amount of $130
million, an ESOP loan of $10 million, and a revolving credit facility of up to
$40 million. Quarterly principal and interest payments are made under the Bank
Credit Agreement. The final payments under the ESOP Loan, Term A Loan and Term B
Loan are due on June 30, 2001, December 31, 2002 and June 30, 2004,
respectively. The Revolving Credit Loan facility is currently scheduled to
expire on December 31, 2002. The debt under the Bank Credit Agreement bears
interest, at the option of the borrower, based on the LIBOR rate plus a margin
(1.75% and 3% for Term A and Term B, respectively at March 31, 2000) or the
greater of the prime rate and the federal funds rate plus 1/2% plus a margin
(0.75% at March 31, 2000). Substantially all assets of the Company are pledged
as collateral under the Bank Credit Agreement. The Senior Subordinated Notes are
due 2006 and bear interest at 11 1/8% payable semiannually on January 1 and July
1. The Discount Notes are due 2007 and bear interest at 13 1/2% payable
semiannually on January 1 and July 1 beginninG in 2002. The Bank Credit
Agreement, the Senior Subordinated Notes and the Discount Notes include certain
restrictive covenants which include, but are not limited to, limitations on
capital expenditures, indebtedness, investments and sales of assets and
subsidiary stock. Additionally, the Bank Credit Agreement requires the Company
to maintain certain financial ratios. As of June 30, 1999 the Company obtained
an amendment to the Bank Credit Agreement to update the financial ratios
relating to fixed charge coverage and debt to EBITDA for fiscal 2000.
6
<PAGE>
TEXAS PETROCHEMICAL HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED), CONTINUED
3. COMMITMENTS AND CONTINGENCIES
PURCHASE COMMITMENTS
The Company has purchase commitments incident to the ordinary conduct of
business. The prices of such purchase commitments are based on formulas, which
are determined from the prevailing market rate for such products. These
commitments generally have cancellation provisions given proper notification.
LITIGATION
The Company is involved in various routine legal proceedings which are
incidental to the business. Management of the Company is vigorously defending
such matters and is of the opinion that their ultimate resolution will not have
a material impact on the Company.
ENVIRONMENTAL REGULATION
The Company's operations are subject to federal, state and local laws and
regulations administered by the U.S. Environmental Protection Agency, the U.S.
Coast Guard, the Army Corps of engineers, the Texas Natural Resource
Conservation Commission, the Texas General Land Office, the Texas Department of
Health and various local regulatory agencies. The Company holds all required
permits and registrations necessary to comply substantially with all applicable
environmental laws and regulations, including permits and registrations for
wastewater discharges, solid and hazardous waste disposal and air emissions, and
management believes that the Company is in substantial compliance with all such
laws and regulations. While management does not expect the cost of compliance
with existing environmental laws will have a material adverse effect on the
Company's financial condition, results of operations or cash flows, there can be
no assurance that future legislation, regulation or judicial or administrative
decisions will not have such an effect.
4. SUPPLEMENTAL GUARANTOR INFORMATION
TPC Holding Corp. a wholly owned subsidiary of Texas Petrochemical Holdings,
Inc. has fully and unconditionally guaranteed, on a joint and several basis,
Texas Petrochemical Holdings, Inc's. obligations relative to the Discount Notes
due 2007 in an Event of Default. TPC Holding Corp. conducts its operations
through its subsidiaries and is dependent upon distribution from these
subsidiaries as its source of cash flow. Management has determined that
separate, full financial statements of TPC Holding Corp. ("Guarantor") would not
be material to investors and such financial statements are not provided.
Supplemental combining financial information of Texas Petrochemical Holdings,
Inc. is presented below:
7
<PAGE>
TEXAS PETROCHEMICAL HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED), CONTINUED
Texas Petrochemical Holdings, Inc.
Supplemental Combining Balance Sheet
March 31, 2000
(in thousands)
<TABLE>
<CAPTION>
PARENT GUARANTOR NON-GUARANTORS ELIMINATIONS TOTAL
--------- --------- -------------- ------------ ---------
<S> <C> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents ........................... $ -- $ -- $ 4,334 $ -- $ 4,334
Accounts receivable - trade ......................... 51,161 51,161
Inventories ......................................... 31,654 31,654
Other current assets ................................ (79) 11,301 11,222
--------- --------- -------------- ------------ ---------
Total current assets ........................... (79) 98,450 98,371
Property, plant and equipment, net ......................... 220,454 220,454
Investments in land held for sale .......................... 2,058 2,058
Investment in and advances to limited partnership .......... 2,719 2,719
Goodwill, net .............................................. 166,123 166,123
Other assets, net of accumulated amortization .............. 418 8,280 8,698
Consolidated subsidiaries .................................. 71,365 71,365 (142,730) --
--------- --------- -------------- ------------ ---------
Total assets ................................... $ 71,704 $ 71,365 $ 498,084 $ (142,730) $ 498,423
========= ========= ============== ============ =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Bank overdraft ...................................... $ -- $ -- $ 6,903 $ -- $ 6,903
Accounts payable - trade ............................ 47,211 47,211
Payable to Parent ................................... 838 (838) --
Accrued expenses .................................... 10,541 838 11,379
Current portion of cash bonus plan .................. 3,989 3,989
Current portion of long-term debt ................... 6,675 6,675
--------- --------- -------------- ------------ ---------
Total current liabilities ...................... 76,157 76,157
Revolving line of credit ................................... 13,100 13,100
Long-term debt ............................................. 48,990 278,892 327,882
Deferred income taxes ...................................... (6,646) 58,570 51,924
Common stock held by the ESOP .............................. 13,100 13,100
Less: unearned compensation ................................ (3,275) (3,275)
Stockholders' equity:
Common Stock ........................................ 5 4,162 (4,162) 5
Additional paid in capital .......................... 37,253 74,127 72,465 (146,592) 37,253
Treasury stock ...................................... (126) (126)
Accumulated deficit ................................. (17,597) (2,762) (2,762) 5,524 (17,597)
Note receivable from ESOP ........................... (2,500) 2,500 --
--------- --------- -------------- ------------ ---------
Total stockholders' equity ..................... 19,535 71,365 71,365 (142,730) 19,535
--------- --------- -------------- ------------ ---------
Total liabilities and stockholders' equity . $ 71,704 $ 71,365 $ 498,084 $ (142,730) $ 498,423
========= ========= ============== ============ =========
</TABLE>
8
<PAGE>
TEXAS PETROCHEMICAL HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED), CONTINUED
Texas Petrochemical Holdings, Inc.
Supplemental Combining Balance Sheet
June 30, 1999
(in thousands)
<TABLE>
<CAPTION>
PARENT GUARANTOR NON-GUARANTORS ELIMINATIONS TOTAL
--------- --------- -------------- ------------ ---------
<S> <C> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents .......................... $ -- $ -- $ 103 $ -- $ 103
Accounts receivable - trade ........................ 40,220 40,220
Inventories ........................................ 19,973 19,973
Other current assets ............................... (48) 18,624 18,576
--------- --------- -------------- ------------ ---------
Total current assets .......................... (48) 78,920 78,872
Property, plant and equipment, net ........................ 219,706 219,706
Investments in land held for sale ......................... 2,058 2,058
Investment in and advances to limited partnership ......... 2,820 2,820
Goodwill, net ............................................. 169,560 169,560
Other assets, net of accumulated amortization ............. 459 9,374 9,833
Consolidated subsidiaries ................................. 59,518 59,518 (119,036) --
--------- --------- -------------- ------------ ---------
Total assets .................................. $ 59,929 $ 59,518 $ 482,438 $ (119,036) $ 482,849
========= ========= ============== ============ =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Bank overdraft ..................................... $ -- $ -- $ 874 $ -- $ 874
Accounts payable - trade ........................... 38,992 38,992
Payable to Parent .................................. 1,987 (1,987) --
Accrued expenses ................................... 17,228 1,987 19,215
Current portion of cash bonus plan ................. 7,811 7,811
Current portion of long-term debt .................. 7,465 7,465
--------- --------- -------------- ------------ ---------
Total current liabilities ..................... 74,357 74,357
Revolving line of credit .................................. 2,000 2,000
Long-term debt ............................................ 44,394 284,073 328,467
Cash bonus plan ........................................... 1,959 1,959
Deferred income taxes ..................................... (5,037) 60,531 55,494
Common stock held by the ESOP ............................. 12,600 12,600
Less: unearned compensation ............................... (5,040) (5,040)
Stockholders' equity:
Common Stock ....................................... 5 4,162 (4,162) 5
Additional paid in capital ......................... 36,738 72,212 72,050 (144,262) 36,738
Accumulated deficit ................................ (23,731) (12,694) (12,694) 25,388 (23,731)
Note receivable from ESOP .......................... (4,000) 4,000 --
--------- --------- -------------- ------------ ---------
Total stockholders' equity .................... 13,012 59,518 59,518 (119,036) 13,012
--------- --------- -------------- ------------ ---------
Total liabilities and stockholders' equity. $ 59,929 $ 59,518 $ 482,438 $ (119,036) $ 482,849
========= ========= ============== ============ =========
</TABLE>
9
<PAGE>
TEXAS PETROCHEMICAL HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED), CONTINUED
Texas Petrochemical Holdings, Inc.
Supplemental Consolidating Statement of Income
Nine Months Ended March 31, 2000
(in thousands)
<TABLE>
<CAPTION>
PARENT GUARANTOR NON-GUARANTORS ELIMINATIONS TOTAL
--------- --------- -------------- ------------ ---------
<S> <C> <C> <C> <C> <C>
Revenues .................................................. $ -- $ -- $ 532,558 $ -- $ 532,558
Cost of goods sold ........................................ 464,388 464,388
Non-cash ESOP compensation ................................ 415 415
Depreciation and amortization ............................. 17,768 17,768
--------- --------- -------------- ------------ ---------
Gross profit ....................................... 49,987 49,987
Selling, general and administrative expenses .............. 2 6,363 6,365
--------- --------- -------------- ------------ ---------
Income (loss) from operations ................ (2) 43,624 43,622
Interest expense .......................................... 4,636 24,425 29,061
Other income (expense) .................................... 1 1
--------- --------- -------------- ------------ ---------
Income (loss) before income taxes ............ (4,638) 19,200 14,562
Provision (benefit) for income taxes ...................... (1,605) 9,268 7,663
Equity in net income of subsidiaries ...................... 9,932 9,932 (19,864)
--------- --------- -------------- ------------ ---------
Net income ................................... $ 6,899 $ 9,932 $ 9,932 $ (19,864) $ 6,899
========= ========= ============== ============ =========
</TABLE>
Texas Petrochemical Holdings, Inc.
Supplemental Consolidating Statement of Income
Nine Months Ended March 31, 1999
(in thousands)
<TABLE>
<CAPTION>
PARENT GUARANTOR NON-GUARANTORS ELIMINATIONS TOTAL
--------- --------- -------------- ------------ ---------
<S> <C> <C> <C> <C> <C>
Revenues .................................................. $ -- $ -- $ 313,034 $ -- $ 313,034
Cost of goods sold ........................................ 261,975 261,975
Non-cash ESOP compensation ................................ 277 277
Depreciation and amortization ............................. 21,098 21,098
--------- --------- -------------- ------------ ---------
Gross profit ....................................... 29,684 29,684
Selling, general and administrative expenses .............. 8 5,842 5,850
--------- --------- -------------- ------------ ---------
Income (loss) from operations ................ (8) 23,842 23,834
Interest expense .......................................... 4,074 25,664 29,738
Other income (expense):
Loss on disposal of non-plant assets ............... (44) (44)
Other, net ......................................... 1,198 1,198
--------- --------- -------------- ------------ ---------
1,154 1,154
--------- --------- -------------- ------------ ---------
Income (loss) before income taxes ............ (4,082) (668) (4,750)
Provision (benefit) for income taxes ............... (1,408) 1,227 (181)
Equity in net income of subsidiaries ...................... (1,895) (1,895) 3,790
--------- --------- -------------- ------------ ---------
Net income (loss) ............................ $ (4,569) $ (1,895) $ (1,895) $ 3,790 $ (4,569)
========= ========= ============== ============ =========
</TABLE>
10
<PAGE>
TEXAS PETROCHEMICAL HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED), CONTINUED
Texas Petrochemical Holdings, Inc.
Supplemental Combining Statement of Cash Flows
Nine Months Ended March 31, 2000
(in thousands)
<TABLE>
<CAPTION>
PARENT GUARANTOR NON-GUARANTORS ELIMINATIONS TOTAL
-------- --------- -------------- ------------ --------
Cash flows from operating activities:
<S> <C> <C> <C> <C> <C>
Net income (loss) ...................................... $ 6,899 $ 9,932 $ 9,932 $ (19,864) $ 6,899
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation of fixed assets ........................... 14,160 14,160
Amortization of goodwill and other assets .............. 3,608 3,608
Amortization of debt issue costs ....................... 4,636 901 5,537
Earnings from limited partnership ...................... (249) (249)
Deferred income taxes .................................. (1,605) (1,239) (2,844)
Non-cash ESOP compensation ............................. 415 415
Change in:
Accounts receivable ................................ (10,941) (10,941)
Inventories ........................................ (11,681) (11,681)
Other assets ....................................... 6,534 6,534
Accounts payable, accrueds and other ............... 2 383 385
-------------- --------
Net cash provided by operating activities ...... 9,932 9,932 11,823 (19,864) 11,823
Cash flows from investing activities:
Capital expenditures ................................... (14,908) (14,908)
-------- -------- -------------- ------------ --------
Distribution from limited partnership .................. 350 350
-------- -------- -------------- ------------ --------
Net cash used in investing activities .......... (14,558) (14,558)
Cash flows from financing activities:
Change in bank overdraft ............................... 6,029 6,029
Net repayments under revolver .......................... 11,100 11,100
Payments on long-term debt ............................. (5,730) (5,730)
Payment of cash bonus plan ............................. (5,781) (5,781)
Debt issuance costs .................................... (152) (152)
Reduction in note receivable from ESOP ................. 1,500 1,500
-------------- --------
Net cash used in financing activities .......... 6,966 6,966
-------- -------- -------------- ------------ --------
Net increase (decrease) in cash and cash equivalents .......... 9,932 9,932 4,231 (19,864) 4,231
Cash and cash equivalents, at beginning of period ............. 103 103
-------- -------- -------------- ------------ --------
Cash and cash equivalents, at end of period ................... $ 9,932 $ 9,932 $ 4,334 $ (19,864) $ 4,334
======== ======== ============== ============ ========
</TABLE>
11
<PAGE>
TEXAS PETROCHEMICAL HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED), CONTINUED
Texas Petrochemical Holdings, Inc.
Supplemental Combining Statement of Cash Flows
Nine Months Ended March 31, 1999
(in thousands)
<TABLE>
<CAPTION>
PARENT GUARANTOR NON-GUARANTORS ELIMINATIONS TOTAL
-------- --------- -------------- ------------ --------
<S> <C> <C> <C> <C> <C>
Cash flows from operating activities:
Net income (loss) ..................................... $ (4,569) $ (1,895) $ (1,895) $ 3,790 $ (4,569)
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation of fixed assets .......................... 17,413 17,413
Amortization of goodwill and other assets ............. 3,685 3,685
Amortization of debt issue costs ...................... 4,074 867 4,941
Loss on disposal of non-plant assets .................. 44 44
Earnings from limited partnership ..................... (616) (616)
Deferred income taxes ................................. (1,408) (1,827) (3,235)
Non-cash ESOP compensation ............................ 277 277
Change in:
Accounts receivable ............................... 5,769 5,769
Inventories ....................................... 1,230 1,230
Other assets ...................................... (955) (955)
Accounts payable, accrueds and other .............. 8 (8,614) (8,606)
-------- -------- -------------- ------------ --------
Net cash provided by operating activities ..... (1,895) (1,895) 15,378 3,790 15,378
Cash flows from investing activities:
Capital expenditures .................................. (12,863) (12,863)
Proceeds from the sale of non-plant assets ............ 477 477
Distribution from limited partnership ................. 780 780
-------- -------- -------------- ------------ --------
Net cash used in investing activities ......... (11,606) (11,606)
Cash flows from financing activities:
Change in bank overdraft .............................. 2,331 2,331
Net repayments under revolver ......................... 2,800 2,800
Proceeds from issuance of long-term debt
Payments on long-term debt ............................ (5,233) (5,233)
Payment of cash bonus plan ............................ (5,886) (5,886)
Debt issuance costs ................................... (163) (163)
Reduction in note receivable from ESOP ................ 1,500 1,500
-------- -------- -------------- ------------ --------
Net cash used in financing activities ......... (4,651) (4,651)
-------- -------- -------------- ------------ --------
Net increase (decrease) in cash and cash equivalents ......... (1,895) (1,895) (879) 3,790 (879)
Cash and cash equivalents, at beginning of period ............ 956 956
-------- -------- -------------- ------------ --------
Cash and cash equivalents, at end of period .................. $ (1,895) $ (1,895) $ 77 $ 3,790 $ 77
======== ======== ============== ============ ========
</TABLE>
12
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
The following discussion should be read in conjunction with the condensed
consolidated financial statements and notes thereto of the Company included
elsewhere in this report.
OVERVIEW
The Company's revenues are derived primarily from merchant market sales of
butadiene, MTBE, n-butylenes (butene-1 and butene-2) and specialty isobutylenes
(isobutylene concentrate, high purity isobutylene, and diisobutylene). The
Company's results of operations are affected by a number of factors, including
variations in market demand, production volumes, and the pricing of its products
and primary raw materials. The Company believes that the pricing for its
principal products is primarily dependent on the balance between the global
supply and North American demand for each product, the cost structure of the
various global producers (including their cost of raw materials) and from time
to time, other external factors, such as the implementation of the Clean Air Act
Amendments of 1990, which significantly increased the demand for MTBE.
Historically, the Company has successfully mitigated the cyclicality of the
markets for certain of its end products by entering into contracts with pricing
which allows for a fixed profit by linking prices directly or indirectly to raw
material costs. In addition, the Company has attempted to optimize the use of
isobutylene, an intermediate feedstock produced by the Company, to produce MTBE
or higher margin specialty products depending on prevailing market conditions.
MTBE ENVIRONMENTAL AND MARKET ISSUES
The possibly adverse effects of MTBE on health and the environment has become
a statewide concern in California and in several other states because MTBE has
appeared in certain drinking water wells. It is believed that this is the result
of leaks from older underground gasoline storage tanks and pipelines.
In addition, certain bodies of water have shown the presence of MTBE. A
typical source of MTBE in these bodies is the operation of two-cycle outboard
motors, which do not fully combust gasoline. Certain regulatory bodies are
considering imposing limitations on the use of two-cycle outboard motors in
bodies of water that are also used as sources of drinking water.
In California, the legislature required the state Department of Health
Services (DHS) to assess MTBE and to set the maximum permissible levels of MTBE
in drinking water in 1999. The levels are referred to as the primary and
secondary maximum contaminant levels (MCLs). Secondary MCLs or secondary
drinking water standards apply to chemicals in public drinking water that may
adversely affect the taste, odor, or appearance of the water, and may cause
people served by the public water system to discontinue its use. In January
1999, the DHS adopted 5 parts per billion (ppb) as the California secondary MCL
for MTBE based upon the aesthetic factors alone. On December 13, 1999, the
Western States Petroleum Association and California Chamber of Commerce filed a
petition with Department of Health Services, asking that the secondary MCL for
MTBE be repealed or amended, based on DHS' misapplication of statutory criteria,
failure to consider all relevant and available scientific evidence, and failure
to conduct a public hearing or submit its preliminary findings to scientific
peer review. That petition was denied by DHS in January, 2000.
13
<PAGE>
The primary MCL for MTBE in California has also been set. The DHS established
13 ppb as the primary MCL for MTBE. It accepted public comments on the proposal
through November 1, 1999. The primary MCL for MTBE is based upon the public
health goal (PHG) for MTBE, and the technical feasibility and costs associated
with compliance. Notably, however, a public health goal of 13 ppb for MTBE was
set by the California Office of Environmental Health Hazard Assessment (OEHHA)
in March 1999 based exclusively on public health considerations. PHGs represent
the level of chemicals in drinking water that would pose no significant health
risks to individuals, and are non-mandatory goals. If MTBE is found in a
drinking water supply at levels exceeding 13 ppb, it is expected that the DHS
will require treatment for the removal of MTBE from the water system to attain
compliance.
On March 25, 1999, California Governor Gray Davis declared that, "on balance,
there is a significant risk to the environment from using (MTBE) in gasoline in
California," and issued an executive order calling for the removal of MTBE from
gasoline at the earliest possible date and no later than December 31, 2002.
Governor Davis also mandated state agencies to conduct an environmental analysis
and evaluation of ethanol as a possible substitute for MTBE and to seek relief
from the requirement of the CAA to use oxygenates in gasoline in certain areas
of the state. Several bills codifying the Executive Order have been introduced
in the California legislature. Senate Bill 192 would require the State Energy
Resources Conservation and Development Commission to report to the legislature
the amount of MTBE used in gasoline in California by refineries on a quarterly
basis. As of May 2000, SB 192 was still pending in the legislature. Senate Bill
989 was passed into law and became effective January 1, 2000. The new law will
require various state agencies to develop guidelines for the investigation,
remediation, and clean up of MTBE in ground water. The bill also authorizes the
California Environmental Protection Agency to prohibit the use of MTBE in motor
vehicle fuel before December 31, 2002, on a sub-regional basis in the Bay Area
Air Basin, or in any other air basin in the state. On December 9, 1999, the
California Air Resources Board (ARB) approved a new set of rules that, it says,
will ban the additive MTBE while preserving all the air-quality benefits
obtained from the state's cleaner-burning gasoline program. The new rules, known
officially as the Phase 3 gasoline regulation (CaRFG3), prohibit the formulation
of gasoline with MTBE after December 31, 2002. In addition, bills to limit or
ban the use of MTBE have been introduced in several states.
Although the EPA continues to require oxygenates to be added to gasoline in
certain regions of the country either year-round or during the winter months,
and MTBE continues to be the predominate oxygenate used, a panel appointed by
the EPA has issued a report calling for the reduction in the use of MTBE in
gasoline.
No assurance can be given that actions will not be taken to restrict or
prohibit the use of MTBE in certain areas of the country or to remove the
oxygenate requirement from the CAA. Any restriction on or prohibition of the use
of MTBE could have a material adverse effect on the Company's financial
condition or results of operations.
14
<PAGE>
REVENUES
The Company's revenues are a function of the volume of products sold by the
Company and the prices for such products. The following tables set forth the
Company's historical revenues and the percentages of historical revenues by
product and volume of products sold, for the three and nine months ended March
31, 2000 and 1999.
REVENUES
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
MARCH 31, MARCH 31,
------------------------------ ------------------------------
2000 1999 2000 1999
------------- ------------- ------------- -------------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Butadiene ............ $ 33.0 17% $ 22.8 21% $ 91.0 17% $ 75.9 24%
MTBE ................. 106.8 55 55.3 51 312.3 59 150.0 48
n-Butylenes .......... 20.4 11 10.1 9 54.3 10 33.9 11
Specialty Isobutylenes 29.1 15 16.9 16 64.7 12 43.5 14
Other(1) ............. 3.3 2 3.0 3 10.3 2 9.7 3
------ ---- ------ ---- ------ ---- ------ ----
Total ................ $192.6 100% $108.1 100% $532.6 100% $313.0 100%
====== ==== ====== ==== ====== ==== ====== ====
</TABLE>
- ----------
(1) Includes utility revenues and revenues realized from the Company's
terminalling facilities.
SALES VOLUMES
THREE MONTHS ENDED NINE MONTHS ENDED
MARCH 31, MARCH 31,
------------------- -------------------
2000 1999 2000 1999
-------- -------- -------- --------
(MILLIONS OF POUNDS, EXCEPT WHERE NOTED)
Butadiene .......................... 191.1 200.4 619.8 613.6
MTBE(1) ............................ 111.1 110.0 361.5 261.4
n-Butylenes ........................ 116.6 73.0 334.8 242.7
Specialty Isobutylenes ............. 118.8 97.6 276.6 233.8
- ----------
(1) Volumes in millions of gallons. Includes 28.0 million, 37.9 million, 107.3
million and 49.8 million gallons of finished MTBE purchased for resale for the
three months ended March 31, 2000 and 1999 and the nine months ended March 31,
2000 and 1999 respectively.
RESULTS OF OPERATIONS
The following table sets forth an overview of the Company's results of
operations.
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
MARCH 31, MARCH 31,
---------------------------------- ----------------------------------
2000 1999 2000 1999
--------------- --------------- --------------- ---------------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues .......................... $192.6 100% $108.1 100% $532.6 100% $313.0 100%
Cost of goods sold ................ 170.6 89 92.4 86 464.4 88 262.0 84
Non-cash ESOP compensation ........ 0.1 -- 0.1 -- 0.4 -- 0.3 --
Depreciation and amortization ..... 6.0 3 5.7 5 17.8 3 21.1 6
------ ------ ------ ------ ------ ------ ------ ------
Gross profit .................. 15.9 8 9.9 9 50.0 9 29.6 10
Selling, general and administrative 1.9 1 1.8 1 6.4 1 5.8 2
------ ------ ------ ------ ------ ------ ------ ------
Income from operations ........ $ 14.0 7% $ 8.1 8% $ 43.6 8% $ 23.8 8%
====== ====== ====== ====== ====== ====== ====== ======
</TABLE>
15
<PAGE>
THREE MONTHS ENDED MARCH 31, 2000 COMPARED TO THE THREE MONTHS ENDED MARCH 31,
1999
REVENUES
The Company's revenues increased by approximately 78%, or $84.5 million, to
$192.6 million for the three months ended March 31, 2000 from $108.1 million for
the three months ended March 31, 1999. Butadiene sales revenues increased
approximately 45% due to higher sales prices during the current quarter. MTBE
sales revenues increased approximately 93% as a result of higher sales prices as
compared to the prior year quarter. MTBE prices are significantly higher as a
result of increases in gasoline and crude oil prices. N-butylene sales revenues
increased 102% due to higher sales volumes and sales prices. Specialty
isobutylene sales revenues increased 72% due to higher sales volumes and sales
prices. Sales volumes were higher due to increased customer demand and new
export business.
GROSS PROFIT
Gross profit increased by approximately 61%, or $6.0 million, to $15.9
million for the three months ended March 31, 2000 from $9.9 million for the
three months ended March 31, 1999. Gross margin during this period decreased to
8.3% from 9.2%. Gross profit increased during the period due to higher margins
on MTBE sales and higher sales volumes of specialty isobutylenes. Butadiene
margins were down slightly compared to the prior year quarter due to lower sales
volumes. Sales volumes were lower due to a planned expansion outage at one of
the Company's major suppliers. MTBE margins improved over the prior year period
due to higher production rates and a larger spread of sales prices over raw
material costs. Specialty isobutylene margins were higher due to higher sales
volumes, which offset an increase of raw material costs during the current
quarter.
INCOME FROM OPERATIONS
Income from operations increased by approximately 73%, or $5.9 million, to
$14.0 million for the three months ended March 31, 2000 from $8.1 million for
the three months ended March 31, 1999. Operating margin during this period
decreased to 7.3% from 7.5%. This increase in income from operations was
primarily due to the same factors contributing to the increase in gross profit
described above. The increase in depreciation and amortization is due to new
depreciable capital placed in service during the period.
16
<PAGE>
NINE MONTHS ENDED MARCH 31, 2000 COMPARED TO THE NINE MONTHS ENDED MARCH 31,
1999
REVENUES
The Company's revenues increased by approximately 70%, or $219.6 million, to
$532.6 million for the nine months ended March 31, 2000 from $313.0 million for
the nine months ended March 31, 1999. Butadiene sales revenues increased 20% due
to higher sales prices and slightly higher sales volumes. MTBE sales revenues
increased approximately 108% as a result of higher sales volumes and sales
prices as compared to the prior year period. MTBE prices are significantly
higher as a result of increases in gasoline and crude oil prices. MTBE sales
volumes were higher due to increase resale of purchased product and higher
production rates. N-butylene sales revenues increased 60% due to higher sales
volumes and sales prices. Specialty isobutylene sales revenues increased 49% due
to higher sales volumes and sales prices. Sales volumes were higher due to
increased customer demand and new export business.
GROSS PROFIT
Gross profit increased by approximately 69%, or $20.4 million, to $50.0
million for the nine months ended March 31, 2000 from $29.6 million for the nine
months ended March 31, 1999. Gross margin during this period decreased to 9.4%
from 9.5%. Gross profit increased during the period due to higher sales volumes
of all product groups and higher margins on butadiene and MTBE sales. Butadiene
margins improved over the prior year period due to improved spot business,
processing efficiencies from new control room instrumentation and positive
inventory impacts from higher butadiene sales prices. MTBE margins improved over
the prior year period due to higher production rates and a larger spread of
sales prices over raw material costs. Gross profit from specialty isobutylenes
increased as a result of higher sales volumes of n-butylenes and specialty
isobutylenes. Gross profit also increased due to lower depreciation and
amortization charges during the current period. Depreciation and amortization
was lower by $3.3 million due to the change in depreciable lives of certain
plant assets from 10 years to 15 years beginning in January 1999.
INCOME FROM OPERATIONS
Income from operations increased by approximately 83%, or $19.8 million, to
$43.6 million for the nine months ended March 31, 2000 from $23.8 million for
the nine months ended March 31, 1999. Operating margin during this period
increased to 8.2% from 7.6%. This increase in income from operations was
primarily due to the same factors contributing to the increase in gross profit
described above. The increase in selling, general and administrative costs was
primarily due to higher MTBE advocacy costs.
17
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
CASH FLOWS
NINE MONTHS ENDED MARCH 31, 2000 COMPARED TO THE NINE MONTHS ENDED MARCH 31,
1999
Net cash provided by operating activities was $11.8 million for the nine
months ended March 31, 2000 compared to $15.4 million for the nine months ended
March 31, 1999. The decrease of $3.6 million was attributable to increased cash
flow used in working capital. Working capital has been impacted during the
period by rising market prices for both finished goods and raw materials. Net
cash used in investing activities was $14.6 million for the nine months ended
March 31, 2000 compared to $11.6 million for the nine months ended March 31,
1999. The increase of $3.0 million was attributable to higher capital
expenditures. Net cash provided by (used in) financing activities was $7.0
million for the nine months ended March 31, 2000 compared to $(4.7) million for
the nine months ended March 31, 1999. The change of $11.7 million was
attributable to borrowings under the revolver and higher bank overdraft.
LIQUIDITY
The Company's liquidity needs arise primarily from principal and interest
payments under the Bank Credit Agreement and the Subordinated Notes. The
Company's primary source of funds to meet debt service requirements is net cash
flow provided by operating activities. Operating cash flow is significantly
impacted by raw materials cost as well as the selling price and volume variances
of finished goods. The Company enters into supply contracts for certain of its
products in order to mitigate the impact of changing prices. Additionally, the
Company has a $40 million Revolving Credit Facility, of which $13.1 million was
in use at March 31, 2000, to provide adequate funds for ongoing operations,
working capital and planned capital expenditures. The Company believes that the
availability of funds under the Revolving Credit Facility are sufficient to
cover any current liquidity needs which could arise as a result of negative
working capital. The Company's ability to borrow is limited by the terms of the
Bank Credit Agreement, the Subordinated Notes and the Discount Notes. The Bank
Credit Agreement, the Subordinated Notes and the Discount Notes include certain
restrictive covenants, which include but are not limited to, the maintenance of
certain financial ratios and limitations on capital expenditures, indebtedness,
investments and sales of assets and subsidiary stock. As of June 30, 1999 the
Company obtained an amendment to the Bank Credit Agreement to update the
financial ratios relating to fixed charge coverage and debt to EBITDA for fiscal
2000.
CASH BONUS PLAN
In connection with the Acquisition, the Predecessor established a $35
million Cash Bonus Plan covering substantially all employees of the Predecessor
(or certain affiliates of the Predecessor) and covering certain third-party
contractors who have contributed to the past success of the Predecessor. During
the nine months ended March 31, 2000, $5.8 million of this amount was paid to
eligible participants and the remaining $4.0 million will be made in future
quarterly installments ending in July 2000.
CAPITAL EXPENDITURES
The Company's capital expenditures relate principally to improving operating
efficiencies and maintaining environmental compliance. Capital expenditures for
the nine months ended March 31,
18
<PAGE>
2000 were $14.9 million. The Company expenses approximately $20 million annually
for plant maintenance. These maintenance costs are not treated as capital
expenditures.
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
During 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities." The Company has entered into interest rate
swap and cap agreements, and may have entered into other types of contracts,
which are included in the scope of SFAS No. 133. The Company will analyze SFAS
No. 133 to determine what effect it will have on the Company's future financial
statements and disclosures. In June 1999, SFAS No. 137 was issued to delay the
required effective date of SFAS No. 133 from fiscal years beginning after June
15, 1999 to fiscal years beginning after June 15, 2000.
DISCLOSURE REGARDING FORWARD LOOKING STATEMENTS
This document may include forward-looking statements within the meaning of
Section 21E of the Securities Exchange Act of 1934, as amended. Although the
Company believes that the expectations reflected in such forward looking
statements are based upon reasonable assumptions, it can give no assurance that
its expectations will be achieved. Important factors that could cause actual
results to differ materially from the Company's expectations are disclosed in
conjunction with the forward looking statements included herein ("Cautionary
Disclosures"). Subsequent written oral forward looking statements attributable
to the Company or persons acting on its behalf are expressly qualified in their
entirety by the Cautionary Disclosures.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
There have been no significant quantitative or qualitative changes during
the third fiscal quarter of 2000 in the Company's risk sensitive instruments.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
There have been no material developments with respect to the Company's legal
proceedings previously reported in the Company's Form 10-K for the year ended
June 30, 1999.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
27 Financial Data Schedule
(b) Reports on Form 8-K
There were no reports on Form 8-K filed during the three months ended
March 31, 2000.
19
<PAGE>
SIGNATURE
Pursuant to the requirements 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.
TEXAS PETROCHEMICAL HOLDINGS, INC.
(Registrant)
Dated: May 12, 2000 By: /s/ CARL S. STUTTS
------------------------------
(Signature)
Carl S. Stutts
Executive Vice President,
Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE FINANCIAL DATA SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM TEXAS PETROCHEMICAL HOLDINGS, INC. AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL MATTERS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-30-2000
<PERIOD-END> MAR-31-2000
<CASH> 4,334
<SECURITIES> 0
<RECEIVABLES> 51,161
<ALLOWANCES> 0
<INVENTORY> 31,654
<CURRENT-ASSETS> 98,371
<PP&E> 220,454
<DEPRECIATION> 85,607
<TOTAL-ASSETS> 498,423
<CURRENT-LIABILITIES> 76,157
<BONDS> 273,990
0
0
<COMMON> 5
<OTHER-SE> 19,530
<TOTAL-LIABILITY-AND-EQUITY> 498,423
<SALES> 532,558
<TOTAL-REVENUES> 532,558
<CGS> 464,388
<TOTAL-COSTS> 488,936
<OTHER-EXPENSES> (1)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 29,061
<INCOME-PRETAX> 14,562
<INCOME-TAX> 7,663
<INCOME-CONTINUING> 6,899
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 6,899
<EPS-BASIC> 13.90
<EPS-DILUTED> 13.68
</TABLE>
