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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 the quarterly period ended
March 28, 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 [ ] No [X]
The number of shares outstanding of the Registrant's common stock as of
May 23, 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>
March 28, December 27,
1997 1996
----------- ------------
(Unaudited)
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash $ 618 $ 855
Accounts receivable, net 21,251 24,687
Inventories, net 23,089 19,078
Prepaid expenses and other 3,728 3,971
Deferred tax asset 2,378 2,380
--------- ---------
Total current assets 51,064 50,971
--------- ---------
PROPERTY, PLANT AND EQUIPMENT 118,577 115,763
LESS - ACCUMULATED DEPRECIATION (5,964) (4,372)
--------- ---------
NET PROPERTY, PLANT AND EQUIPMENT 112,613 111,391
--------- ---------
OTHER ASSETS 10,501 10,007
--------- ---------
Total assets $ 174,178 $ 172,369
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 25,779 $ 28,884
Accrued liabilities 15,232 13,166
Current portion of long-term debt 235 237
--------- ---------
Total current liabilities 41,246 42,287
--------- ---------
LONG-TERM DEBT, net of current portion 109,392 104,362
--------- ---------
DEFERRED TAX LIABILITY 11,174 11,173
--------- ---------
OTHER NONCURRENT LIABILITIES -- 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 (5,355) (3,420)
Cumulative translation adjustment -- 28
--------- ---------
Total stockholders' equity 12,366 14,329
--------- ---------
Total liabilities and stockholders' equity $ 174,178 $ 172,369
========= =========
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
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RADNOR HOLDINGS CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(In Thousands)
For the three months ended
--------------------------
March 28, March 29,
1997 1996
-------------- -----------
Net sales $ 54,028 $ 36,765
Cost of goods sold 40,654 28,815
-------- --------
Gross profit 13,374 7,950
Operating expenses:
Distribution 3,988 2,982
Selling, general and administrative 5,489 4,056
-------- --------
Income from operations 3,897 912
Other (income) expense:
Interest 2,824 985
Other, net (67) 14
-------- --------
Income (loss) from operations before
income taxes and minority interest 1,140 (87)
Provision for income taxes 75 --
Minority interest in income -- 102
-------- --------
Income (loss) before extraordinary item 1,065 (189)
Extraordinary item-gain on early
extinguishment of debt -- 710
-------- --------
Net income $ 1,065 $ 521
======== ========
The accompanying notes are an integral part of these condensed consolidated
financial statements.
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RADNOR HOLDINGS CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In Thousands)
<TABLE>
<CAPTION>
For the three months ended
--------------------------
March 28, March 29,
1997 1996
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<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 1,065 $ 521
Adjustments to reconcile net income to cash provided by
(used in) operating activities-
Depreciation 1,592 910
Amortization 428 135
Minority interest in income -- 102
Extraordinary gain on early extinguishment of debt -- (710)
Changes in operating assets and liabilities, net of
acquisition of business-
Accounts receivable, net 3,436 (11,234)
Inventories (4,011) (1,657)
Prepaid expenses and other 246 715
Accounts payable (3,105) 9,654
Accrued liabilities 1,250 778
-------- --------
Net cash provided by (used in) continuing operations 901 (786)
Net cash provided by discontinued operations -- 982
-------- --------
Net cash provided by operating activities 901 196
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures (2,842) (412)
Acquisition of JR Cup, net of cash acquired -- (21,042)
Increase in other assets (922) (1,276)
-------- --------
Net cash used in investing activities (3,764) (22,730)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
Net borrowings on bank financed debt and
unsecured notes payable 5,028 22,551
Cash dividends (2,402) --
-------- --------
Net cash provided by financing activities 2,626 22,551
-------- --------
NET INCREASE (DECREASE) IN CASH (237) 17
CASH, beginning of period 855 5
-------- --------
CASH, end of period $ 618 $ 22
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SUPPLEMENTAL CASH FLOW DISCLOSURES
Interest Paid $ 83 $ 362
======== ========
Income Taxes Paid $ 111 $ --
======== ========
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
<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 but one direct and one indirect wholly-owned subsidiary
on a full, unconditional, joint and several basis. The financial
information of the two non-guarantor subsidiaries is inconsequential.
Separate financial statements of the guarantors are not presented because
management has determined that they would not be material.
(2) STOCKHOLDERS' EQUITY
On March 21, 1997 Radnor declared a dividend of $3.0 million or
approximately $480 per share of outstanding voting and nonvoting common
stock. As of March 28, 1997 $2.4 million of the dividend had been paid to
stockholders and the remainder, to be paid on March 31, 1997, is included
in accrued liabilities on the condensed consolidated balance sheets.
(3) INTEREST EXPENSE
Included in interest expense is $140,000 and $38,000 of amortization of
deferred financing costs for the three months ended March 28, 1997 and
March 29, 1996, respectively.
<PAGE>
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
cups for hot and cold drinks, foam bowls and containers and thermoformed
lids 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 cups and containers
since 1961. The Company also manufactures a broad line of crystal
polystyrene and expandable polystyrene ("EPS") for sale to manufacturers of
foam cups and containers and insulation and packaging 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, 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 cup operations with
approximately 50% of the EPS beads used in its manufacture of foam cups and
containers.
Comparability of Periods
Financial results for the quarter ended March 28, 1997 are not fully
comparable with the quarter ended March 29, 1996 because of the January
1996 transaction with J.R. Cup and the December 1996 acquisition of
StyroChem.
Three Months Ended March 28, 1997 Compared to Three Months Ended March 29, 1996
Net sales increased to $54.0 million for the three months ended March 28,
1997 from $36.8 million for the same period in 1996, an increase of $17.3
million or 47.0%. The increase was due primarily to the transaction with
J.R. Cup on January 20, 1996 and the StyroChem acquisition on December 5,
1996 as well as overall growth in the foam cup market.
Cost of goods sold as a percentage of net sales decreased to 75.2% for the
three months ended March 28, 1997, from 78.4% 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
result of the J.R. Cup and StyroChem acquisitions.
Gross profit increased to $13.4 million or 24.8% of net sales for the three
months ended March 28, 1997, from $8.0 million or 21.6% of net sales for
the same period in 1996.
Distribution expense as a percentage of net sales decreased to 7.4% for the
three months ended March 28, 1997, from 8.1% 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 2.8% of net sales. The distribution expense for the company's
foam cup and container operations remained fairly constant with an increase
of 0.2% of net sales due to rate increases by carriers.
Selling, general and administrative expenses as a percentage of net sales
decreased to 10.2% for the three months ended March 28, 1997, from 11.0% of
net sales for the same period in 1996. This was due to administrative
synergies resulting from the J.R. Cup and StyroChem acquisitions.
<PAGE>
Income from operations increased to $3.9 million or 7.2% of net sales for
the three months ended March 28, 1997, from $0.9 million or 2.5% of net
sales for the same period in 1996.
Interest increased to $2.8 million for the three months ended March 28,
1997, from $1.0 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 $1.1 million or 2.0% of net sales for the three
months ended March 28, 1997, from $0.5 million or 1.4% of net sales for the
same period in 1996 due to the reasons described above.
Liquidity and Capital Resources
During the quarters ended March 28, 1997 and March 29, 1996, the Company's
principal sources of funds consisted of cash from continuing operations and
financing sources. During the 1997 quarter, after tax cash flow increased
to $3.1 million offset by cash used for working capital of $2.2 million.
Additional borrowings under the credit facilities of $5.0 million and cash
of $0.2 million were used to fund capital expenditures of $2.8 million and
a dividend of $2.4 million.
As of March 28, 1997 the Company had $9.4 million outstanding and $17.0
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.
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. The
carryforwards expire through 2010. Management believes that the Company's
future taxable income will be sufficient to use the $14.0 million of net
operating loss carryforwards prior to their expiration; however, 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.
The future benefit of the net operating loss carryforwards has not been
reflected in the Company's financial statements.
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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.
<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 March 28, 1997.
<PAGE>
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)
/s/ Michael V. Valenza
---------------------------
Date: May 23, 1997 By:
Michael V. Valenza
Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 3-MOS
<FISCAL-YEAR-END> DEC-26-1997 DEC-27-1996
<PERIOD-START> DEC-28-1996 DEC-30-1995
<PERIOD-END> MAR-28-1997 MAR-29-1996
<CASH> 618 0
<SECURITIES> 0 0
<RECEIVABLES> 21,251 0
<ALLOWANCES> 0 0
<INVENTORY> 23,089 0
<CURRENT-ASSETS> 51,064 0
<PP&E> 118,577 0
<DEPRECIATION> 5,964 0
<TOTAL-ASSETS> 174,178 0
<CURRENT-LIABILITIES> 41,246 0
<BONDS> 109,392 0
0 0
0 0
<COMMON> 1 0
<OTHER-SE> 12,365 0
<TOTAL-LIABILITY-AND-EQUITY> 174,178 0
<SALES> 54,028 36,765
<TOTAL-REVENUES> 54,028 36,765
<CGS> 40,654 28,815
<TOTAL-COSTS> 50,131 35,853
<OTHER-EXPENSES> (67) 14
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 2,824 985
<INCOME-PRETAX> 1,140 (87)
<INCOME-TAX> 75 0
<INCOME-CONTINUING> 1,065 (189)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 710
<CHANGES> 0 0
<NET-INCOME> 1,065 521
<EPS-PRIMARY> 0 0
<EPS-DILUTED> 0 0
</TABLE>
