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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q/A
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 for the quarterly period ended September 26, 1997
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the transition period from _________ to __________
Commission file number: 333-19495
RADNOR HOLDINGS CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 23-2674715
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
Three Radnor Corporate Center, Suite 300
100 Matsonford Road, Radnor, Pennsylvania 19087
(address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 610-341-9600
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 [ ]
The number of shares outstanding of the Registrant's common stock as of
November 7, 1997:
Number
Class of Shares
--------- ------------
Voting Common Stock; $.10 par value 600
Nonvoting Common Stock; $.10 par value 245
Class B Nonvoting Common Stock; $.01 par value 5,400
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PART I - FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
RADNOR HOLDINGS CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share amounts)
<TABLE>
<CAPTION>
September 26, December 27,
1997 1996
------------- ------------
(Unaudited)
ASSETS
<S> <C> <C>
CURRENT ASSETS
Cash $ 1,303 $ 855
Accounts receivable, net 20,194 24,687
Inventories, net 25,386 19,078
Prepaid expenses and other 5,438 3,971
Deferred tax asset 2,378 2,380
--------- ---------
Total current assets 54,699 50,971
--------- ---------
PROPERTY, PLANT AND EQUIPMENT 126,269 115,763
LESS - ACCUMULATED DEPRECIATION (9,380) (4,372)
--------- ---------
NET PROPERTY, PLANT AND EQUIPMENT 116,889 111,391
--------- ---------
OTHER ASSETS 10,320 10,007
--------- ---------
Total assets $ 181,908 $ 172,369
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 25,681 $ 28,884
Accrued liabilities 13,836 13,166
Current portion of long-term debt 235 237
--------- ---------
Total current liabilities 39,752 42,287
--------- ---------
LONG-TERM DEBT, net of current portion 115,632 104,362
--------- ---------
DEFERRED TAX LIABILITY 11,286 11,173
--------- ---------
OTHER NONCURRENT LIABILITIES 450 218
--------- ---------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY
Voting and nonvoting common stock, 22,700 shares authorized,
6,245 shares issued and outstanding 1 1
Additional paid-in capital 17,720 17,720
Accumulated deficit (2,931) (3,420)
Cumulative translation adjustment (2) 28
--------- ---------
Total stockholders' equity 14,788 14,329
--------- ---------
Total liabilities and stockholders' equity $ 181,908 $ 172,369
========= =========
</TABLE>
The accompanying notes are an integral part of these
condensed consolidated financial statements.
2
<PAGE>
RADNOR HOLDINGS CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(In Thousands)
<TABLE>
<CAPTION>
For the three months ended For the nine months ended
--------------------------------- ----------------------------------
September 26, September 27, September 26, September 27,
1997 1996 1997 1996
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Net sales $ 56,090 $ 43,526 $ 170,545 $ 128,052
Cost of goods sold 42,299 33,899 127,730 98,660
--------- --------- --------- ---------
Gross profit 13,791 9,627 42,815 29,392
Operating expenses:
Distribution 4,024 3,490 12,569 10,223
Selling, general and administrative 6,307 4,659 17,747 13,538
Restructuring charges -- 174 -- 855
--------- --------- --------- ---------
Income from operations 3,460 1,304 12,499 4,776
Other (income) expense:
Interest 2,993 1,214 8,781 3,346
Other, net 44 (70) (94) 153
--------- --------- --------- ---------
Income from operations before income
taxes and minority interest 423 160 3,812 1,277
Provision for income taxes
Current 4 -- 210
Deferred -- -- 113
Minority interest in income -- 70 -- 731
--------- --------- --------- ---------
Income before extraordinary item 419 90 3,489 546
Extraordinary item-gain on early
extinguishment of debt -- -- -- 710
--------- --------- --------- ---------
Net income $ 419 $ 90 $ 3,489 $ 1,256
========= ========= ========= =========
</TABLE>
The accompanying notes are an integral part of these condensed
consolidated financial statements.
3
<PAGE>
RADNOR HOLDINGS CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In Thousands)
<TABLE>
<CAPTION>
For the nine months ended
--------------------------------
September 26, September 27,
1997 1996
------------- -------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 3,489 $ 1,256
Adjustments to reconcile net income to cash provided by
(used in) operating activities-
Depreciation 5,008 3,170
Amortization 1,363 446
Deferred income taxes 113 --
Minority interest in income -- 731
Extraordinary gain on early extinguishment of debt -- (710)
Changes in operating assets and liabilities, net of
acquisition of business-
Accounts receivable, net 4,493 (6,459)
Inventories (6,308) (47)
Prepaid expenses and other (1,689) (772)
Accounts payable (3,203) 4,087
Accrued liabilities 902 1,157
-------- --------
Net cash provided by continuing operations 4,168 2,859
Net cash provided by discontinued operations -- 982
-------- --------
Net cash provided by operating activities 4,168 3,841
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures (10,312) (2,629)
Acquisition of JR Cup, net of cash acquired -- (21,042)
Increase in other assets (1,676) (1,254)
-------- --------
Net cash used in investing activities (11,988) (24,925)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
Net borrowings on bank financed debt and
unsecured notes payable 11,268 21,100
Cash dividends (3,000) --
-------- --------
Net cash provided by financing activities 8,268 21,100
-------- --------
NET INCREASE IN CASH 448 16
CASH, beginning of period 855 5
-------- --------
CASH, end of period $ 1,303 $ 21
======== ========
SUPPLEMENTAL CASH FLOW DISCLOSURES
Interest Paid $ 5,619 $ 1,488
======== ========
Income Taxes Paid $ 717 $ 7
======== ========
</TABLE>
The accompanying notes are an integral part of these
condensed consolidated financial statements.
4
<PAGE>
RADNOR HOLDINGS CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(1) BASIS OF PRESENTATION
The condensed consolidated financial statements included herein have been
prepared by Radnor Holdings Corporation ("Radnor") and subsidiaries
(collectively, the "Company") pursuant to the rules and regulations of the
Securities and Exchange Commission. Certain information and footnote
disclosures normally included in consolidated financial statements prepared
in accordance with generally accepted accounting principles have been
condensed or omitted pursuant to such rules and regulations. In the opinion
of the Company, the statements include all adjustments (which include only
normal recurring adjustments) required for a fair statement of financial
position, results of operations and cash flows for such periods. The
results of operations for the interim periods are not necessarily
indicative of the results for a full year.
Radnor is a holding company which has no operations or assets separate from
its investment in its subsidiaries. Radnor's $100 million senior notes are
guaranteed by all of its direct and indirect wholly-owned subsidiaries on a
full, unconditional, joint and several basis other than certain
non-guarantor subsidiaries that individually and in the aggregate are
inconsequential. Separate financial statements of the guarantors are not
presented because management has determined that they would not be
material.
(2) INVENTORIES
The components of inventories were as follows (in thousands):
September 26, December 27,
1997 1996
------------- ------------
Raw Materials $ 6,869 $ 4,503
Work in Process 1,260 2,242
Finished Goods 17,257 12,333
------- -------
$25,386 $19,078
======= =======
(3) INTEREST EXPENSE
Included in interest expense is $188,000 and $114,000 of amortization of
deferred financing costs for the three months ended September 26, 1997 and
September 27, 1996, respectively. In addition, included in interest expense
is $464,000 and $266,000 of amortization of deferred financing costs for
the nine months ended September 26, 1997 and September 27, 1996,
respectively.
(4) PENDING ACCOUNTING CHANGES
In July 1997, the FASB issued Statement #130, "Reporting Comprehensive
Income," and Statement #131, "Disclosures About Segments of an Enterprise
and Related Information." Statement #130 establishes standards for
reporting comprehensive income in financial statements. Statement #131
expands certain reporting and disclosure requirements for segments from
current requirements. The Company is not required to adopt these Statements
until 1998 and does not expect the adoption of these new standards to
result in material changes to previously reported amounts or disclosures.
5
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(5) SUBSEQUENT EVENTS:
StyroChem Europe Acquisition
On October 15, 1997, the Company acquired substantially all of the tangible and
intangible assets and long term investments relating to the polystyrene
production and conversion operations of Neste Oy (the "StyroChem Europe
Acquisition"). The cash consideration for the acquired assets was 213.0 million
Finnish markkas ($40.8 million as of the date of closing) plus 60.0 million
Finnish markkas ($11.5 million as of the date of closing) for the net working
capital, which included accounts receivable, inventory, trade accounts payable
and accrued liabilities. Pursuant to the Sale of Assets Agreement, the purchase
price will be adjusted on a markka for markka basis following an audit of the
net working capital to the extent that net working capital is greater or less
than 60.0 million Finnish markkas.
Senior Note Offering
On October 15, 1997, the Company issued $60.0 million of 10% Series B Senior
Notes due 2003. The net proceeds to the Company from the offering in the amount
of $60.6 million were used to repay existing indebtedness under the Company's
revolving credit agreements and to finance the StyroChem Europe Acquisition.
Amended Credit Agreement
On October 15, 1997, the Company amended its current credit facility which
increased the aggregate commitment to $40.0 million and included a $10.0
sublimit for the StyroChem Europe subsidiaries.
6
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Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
General
The Company has two main lines of business. The Company manufactures foam
packaging and sells its products to national, institutional and retail
customers located throughout the U.S., in Mexico and in other countries.
The Company, through its predecessors, has been manufacturing foam
packaging since 1961. The Company also manufactures a broad line of crystal
polystyrene and expandable polystyrene ("EPS") for sale to manufacturers of
foam packaging and insulation products worldwide.
The Company was organized in 1991 to facilitate the acquisition of Scott
Container Products Group, Inc. from Kimberly Clark Tissue Company, which
occurred in February 1992. In January 1996, the Company executed an
agreement with James River Paper Company, Inc., which resulted in the
acquisition of its Handi Kup business ("J.R. Cup"). In December 1996, the
Company purchased the outstanding capital stock of and other equity
interests in SP Acquisition Co. ("StyroChem"). StyroChem supplies the
Company's packaging operations with substantially all of the EPS beads used
in its manufacture of foam packaging. On October 15, 1997, the Company
acquired substantially all of the tangible and intangible assets and long
term investments relating to the polystyrene production and conversion
operations of Neste Oy.
Comparability of Periods
Financial results for the three months ended September 26, 1997 are not
fully comparable with the three months ended September 27, 1996 because of
the December 1996 acquisition of StyroChem. In addition, financial results
for the nine months ended September 26, 1997 are not fully comparable with
the nine months ended September 27, 1996 because of the January 1996 J.R.
Cup transaction and the December 1996 acquisition of StyroChem.
Three Months Ended September 26, 1997 Compared to Three Months Ended September
27, 1996
Net sales increased to $56.1 million for the three months ended September
26, 1997 from $43.5 million for the same period in 1996, an increase of
$12.6 million or 29.0%. The increase was due primarily to the StyroChem
acquisition on December 5, 1996.
Cost of goods sold as a percentage of net sales decreased to 75.4% for the
three months ended September 26, 1997, from 77.9% for the same period in
1996. This decrease was due to a decline in raw material prices resulting
from improved market conditions and reductions in manufacturing overhead as
a percentage of net sales resulting from the J.R. Cup and StyroChem
acquisitions.
Gross profit increased to $13.8 million or 24.6% of net sales for the three
months ended September 26, 1997, from $9.6 million or 22.1% of net sales
for the same period in 1996.
Distribution expense as a percentage of net sales decreased to 7.2% for the
three months ended September 26, 1997, from 8.0% of net sales for the same
period in 1996. This decline in distribution expense as a percentage of net
sales was due primarily to the acquisition of StyroChem, whose distribution
expense was 3.6% of net sales for the three month period.
7
<PAGE>
Selling, general and administrative expenses as a percentage of net sales
increased to 11.2% for the three months ended September 26, 1997, from
10.7% of net sales for the same period in 1996. This was due to higher
selling costs resulting from an increase in sales and manufacturing rebates
as a percentage of net sales partially offset by a decrease in
administrative cost as a percentage of net sales resulting from the J.R.
Cup and StyroChem acquisitions.
Income from operations increased to $3.5 million or 6.2% of net sales for
the three months ended September 26, 1997, from $1.3 million or 3.0% of net
sales for the same period in 1996.
Interest increased to $3.0 million for the three months ended September 26,
1997, from $1.2 million for the same period in 1996. This increase was due
primarily to an increase in borrowings related to the J.R. Cup and
StyroChem acquisitions, including the issuance of Radnor's $100 million 10%
Senior Notes due 2003.
Net income increased to $0.4 million or 0.7% of net sales for the three
months ended September 26, 1997, from $0.1 million or 0.2% of net sales for
the same period in 1996 due to the reasons described above.
Nine Months Ended September 26, 1997 Compared to Nine Months Ended September 27,
1996
Net sales increased to $170.5 million for the nine months ended September
26, 1997 from $128.1 million for the same period in 1996, an increase of
$42.4 million or 33.1%. The increase was due primarily to the J.R. Cup
transaction on January 20, 1996 and the StyroChem acquisition on December
5, 1996 as well as overall growth in the foam packaging market.
Cost of goods sold as a percentage of net sales decreased to 74.9% for the
nine months ended September 26, 1997, from 77.0% for the same period in
1996. This decrease was due to a decline in raw material prices resulting
from improved market conditions and reductions in manufacturing overhead as
a percentage of net sales resulting from the J.R. Cup and StyroChem
acquisitions.
Gross profit increased to $42.8 million or 25.1% of net sales for the nine
months ended September 26, 1997, from $29.4 million or 23.0% of net sales
for the same period in 1996.
Distribution expense as a percentage of net sales decreased to 7.4% for the
nine months ended September 27, 1997, from 8.0% of net sales for the same
period in 1996. This decline in distribution expense as a percentage of net
sales was due primarily to the acquisition of StyroChem, whose distribution
expense was 3.4% of net sales for the nine month period.
Selling, general and administrative expenses as a percentage of net sales
decreased marginally to 10.4% for the nine months ended September 26, 1997,
from 10.6% of net sales for the same period in 1996.
Income from operations increased to $12.5 million or 7.3% of net sales for
the nine months ended September 26, 1997, from $4.8 million or 3.7% of net
sales for the same period in 1996.
Interest increased to $8.8 million for the nine months ended September 26,
1997, from $3.3 million for the same period in 1996. This increase was due
primarily to an increase in borrowings related to the J.R. Cup and
StyroChem acquisitions, including the issuance of Radnor's $100 million 10%
Senior Notes due 2003.
8
<PAGE>
Net income increased to $3.5 million or 2.0% of net sales for the nine
months ended September 26, 1997, from $1.3 million or 1.0% of net sales for
the same period in 1996 due to the reasons described above.
Liquidity and Capital Resources
During the nine months ended September 26, 1997 and September 27, 1996, the
Company's principal sources of funds consisted of cash from continuing
operations and financing sources. During the 1997 period, after tax cash
flow increased to $10.0 million offset by cash used for working capital of
$5.8 million. Additional borrowings under the credit facilities of $11.3
million, offset by an increase in cash of $0.4 million, were used to fund
capital expenditures of $10.3 million and a dividend payment of $3.0
million.
As of September 26, 1997 the Company had $15.1 million outstanding and
$12.4 million available under its revolving credit agreements. The
Company's principal uses of cash for the next several years will be working
capital requirements and capital expenditures. Management expects that
annual capital expenditures will increase from historical levels during the
next few years as the Company pursues new development and cost-reduction
opportunities.
On October 15, 1997, the Company issued $60.0 million of 10% Series B
Senior Notes due 2003. The net proceeds to the Company from the offering in
the amount of $60.6 million were used to repay existing indebtedness under
the Company's revolving credit agreements and to finance the StyroChem
Europe Acquisition. The Company also amended its current credit facility,
which increased the aggregate commitment to $40.0 million and included a
$10.0 sublimit for the StyroChem Europe subsidiaries.
As a holding company, Radnor is dependent upon dividends and other payments
from its subsidiaries to generate the funds necessary to meet its
obligations. Subject to certain limitations under applicable state law and
the Company's credit agreements, Radnor is, and will continue to be, able
to control its receipt of dividends and other payments from its
subsidiaries. Management believes that cash generated from operations,
together with available borrowings from the revolving credit facilities
under the credit agreements, will be sufficient to meet the Company's
expected operating needs, planned capital expenditures and debt service
requirements.
Net Operating Loss Carryforwards
As of December 27, 1996, the Company had approximately $14.0 million of net
operating loss carryforwards for federal income tax purposes, which expire
through 2010. Since there can be no assurance that the Company's net
operating loss carryforwards will become available or that the Company will
generate future taxable income, a valuation allowance was provided for
substantially all of the loss carryforward tax benefit at December 27,
1996. In 1997 a portion of the valuation allowance has been eliminated and
a tax benefit reflected in the 1997 financial statements.
Pending Accounting Changes
In July 1997, the FASB issued Statement #130, "Reporting Comprehensive
Income," and Statement #131, "Disclosures About Segments of an Enterprise
and Related Information." Statement #130 establishes standards for
reporting comprehensive income in financial statements. Statement #131
expands certain reporting and disclosure requirements for segments from
current requirements. The Company is not required to adopt these Statements
until 1998 and does not expect the adoption of these new standards to
result in material changes to previously reported amounts or disclosures.
9
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Forward Looking Statements
All statements contained herein that are not historical facts are based on
current expectations. These statements are forward looking in nature and
involve a number of risks and uncertainties. Such risks and uncertainties
are described in detail in the Company's Prospectus dated April 10, 1997
included in the Company's Registration Statement on Form S-4, Commission
File No. 333-19495, to which reference is hereby made.
10
<PAGE>
PART II - OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS
The Company is involved in various legal actions arising in the
normal course of business. After taking into consideration legal
counsel's evaluation of such actions, management believes that
these actions will not have a material effect on the Company's
financial position or results of operations.
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
27.0 Financial Data Schedule
(b) Reports on Form 8-K
There were no reports filed on form 8-K during the three month
period ended September 26, 1997.
11
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SIGNATURES
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, its duly authorized officer and chief financial officer.
RADNOR HOLDINGS CORPORATION
(registrant)
_________________________________________________
Date: December 11, 1997 By:
Michael V. Valenza
Senior Vice President-Finance and Chief Financial
Officer
12
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 9-MOS 9-MOS
<FISCAL-YEAR-END> DEC-26-1997 DEC-27-1996
<PERIOD-START> DEC-28-1996 DEC-30-1995
<PERIOD-END> SEP-26-1997 SEP-27-1996
<CASH> 1,303 0
<SECURITIES> 0 0
<RECEIVABLES> 20,194 0
<ALLOWANCES> 0 0
<INVENTORY> 25,386 0
<CURRENT-ASSETS> 54,699 0
<PP&E> 126,269 0
<DEPRECIATION> 9,380 0
<TOTAL-ASSETS> 181,908 0
<CURRENT-LIABILITIES> 39,752 0
<BONDS> 115,632 0
0 0
0 0
<COMMON> 1 0
<OTHER-SE> 14,787 0
<TOTAL-LIABILITY-AND-EQUITY> 181,908 0
<SALES> 170,545 128,052
<TOTAL-REVENUES> 170,545 128,052
<CGS> 127,730 98,660
<TOTAL-COSTS> 158,046 123,276
<OTHER-EXPENSES> (94) 153
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 8,781 3,346
<INCOME-PRETAX> 3,812 1,277
<INCOME-TAX> 323 0
<INCOME-CONTINUING> 3,489 546
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 710
<CHANGES> 0 0
<NET-INCOME> 3,489 1,256
<EPS-PRIMARY> 0 0
<EPS-DILUTED> 0 0
</TABLE>
