<PAGE>
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
September 25, 1998
[ ] 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 6, 1998:
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
<PAGE>
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 25, December 26,
1998 1997
------------- --------------
(Unaudited)
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash $ 5,325 $ 8,810
Accounts receivable, net 33,219 28,589
Inventories, net 32,775 28,451
Prepaid expenses and other 4,469 3,520
Deferred income taxes 1,701 1,708
------------- --------------
Total current assets 77,489 71,078
------------- --------------
PROPERTY, PLANT AND EQUIPMENT 199,677 176,981
LESS - ACCUMULATED DEPRECIATION (19,197) (11,868)
------------- --------------
NET PROPERTY, PLANT AND EQUIPMENT 180,480 165,113
------------- --------------
OTHER ASSETS 18,693 13,627
------------- --------------
Total assets $276,662 $249,818
============= ==============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 27,640 $ 28,565
Accrued liabilities 25,743 18,151
Current portion of long-term debt
and capitalized lease obligations 1,162 226
------------- --------------
Total current liabilities 54,545 46,942
------------- --------------
LONG-TERM DEBT, net of current portion 183,998 178,947
------------- --------------
CAPITALIZED LEASE OBLIGATIONS, net of
current portion 5,053 -
------------- --------------
DEFERRED INCOME TAXES 11,343 8,543
------------- --------------
OTHER NONCURRENT LIABILITIES 411 411
------------- --------------
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 19,387 19,387
Retained earnings (deficit) 1,204 (2,809)
Cumulative translation adjustment 720 (1,604)
------------- --------------
Total stockholders' equity 21,312 14,975
------------- --------------
Total liabilities and stockholders'
equity $276,662 $249,818
============= ==============
The accompanying notes are an integral part of these condensed consolidated financial statements.
</TABLE>
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 25, September 26, September 25, September 26,
1998 1997 1998 1997
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
Net sales $78,852 $56,090 $234,729 $170,545
Cost of goods sold 54,485 42,299 166,177 127,730
--------------- --------------- --------------- ---------------
Gross profit 24,367 13,791 68,552 42,815
Operating expenses:
Distribution 5,688 4,024 16,894 12,569
Selling, general and administrative 10,180 6,307 28,440 17,747
--------------- --------------- --------------- ---------------
Income from operations 8,499 3,460 23,218 12,499
Other (income) expense:
Interest, net 4,855 2,993 14,027 8,781
Other, net 517 44 271 (94)
--------------- --------------- --------------- ---------------
Income before income taxes 3,127 423 8,920 3,812
Provision for income taxes:
Current 314 4 749 210
Deferred 897 - 2,658 113
--------------- --------------- --------------- ---------------
1,211 4 3,407 323
--------------- --------------- --------------- ---------------
Net income $ 1,916 $ 419 $ 5,513 $ 3,489
=============== =============== =============== ===============
The accompanying notes are an integral part of these condensed consolidated financial statements.
</TABLE>
3
<PAGE>
RADNOR HOLDINGS CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
<TABLE>
<CAPTION>
For the nine months ended
------------------------------
September 25, September 26,
1998 1997
------------- -------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 5,513 $ 3,489
Adjustments to reconcile net income to cash
provided by operating activities-
Depreciation 7,496 5,008
Amortization 1,954 1,363
Deferred income taxes 2,658 113
Changes in operating assets and liabilities,
net of acquisition of business-
Accounts receivable, net (4,335) 4,493
Inventories, net (4,322) (6,308)
Prepaid expenses and other (1,306) (1,689)
Accounts payable (769) (3,203)
Accrued liabilities 7,555 902
------------- -------------
Net cash provided by operating activities 14,444 4,168
------------- -------------
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures (19,252) (10,312)
Acquisition of Epsilevy Oy, net of cash acquired (1,049) -
Additional acquisition costs for StyroChem Europe (345) -
Increase in other assets (6,866) (1,676)
------------- -------------
Net cash used in investing activities (27,512) (11,988)
------------- -------------
CASH FLOWS FROM FINANCING ACTIVITIES
Net borrowings on bank financed debt and
unsecured notes payable 5,258 11,268
Net borrowings on capital lease obligations 5,776 -
Cash dividends (1,500) (3,000)
------------- -------------
Net cash provided by financing activities 9,534 8,268
------------- -------------
EFFECTS OF EXCHANGE RATE CHANGES ON CASH 49 -
------------- -------------
NET (DECREASE) INCREASE IN CASH (3,485) 448
CASH, beginning of period 8,810 855
------------- -------------
CASH, end of period $ 5,325 $ 1,303
============= =============
SUPPLEMENTAL CASH FLOW DISCLOSURES
Interest paid $ 9,082 $ 5,619
============= =============
Income taxes paid, net of refunds of $137 in 1998 $ (108) $ 717
============ ============
The accompanying notes are an integral part of these condensed consolidated
financial statements
</TABLE>
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 and subsidiaries (collectively,
"Radnor" or 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.
(2) INVENTORIES
The components of inventories were as follows (in thousands):
September 25, December 26,
1998 1997
------------- ------------
Raw Materials $10,481 $ 9,612
Work in Process 1,270 1,303
Finished Goods 21,024 17,536
------- -------
$32,775 $28,451
======= =======
(3) INTEREST EXPENSE
Included in interest expense is $315,000 and $188,000 of amortization of
deferred financing costs for the three months ended September 25, 1998 and
September 26, 1997, respectively, and $858,000 and $464,000 of amortization of
deferred financing costs for the nine months ended September 25, 1998 and
September 26, 1997, respectively. Premium amortization of $85,000 and
$231,000 related to the issuance of the Company's 10% Series B Senior Notes
due 2003 is included in interest expense for the three months ended September
25, 1998 and nine months ended September 25, 1998, respectively.
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(4) COMPREHENSIVE INCOME
In 1998, the Company adopted Statement of Financial Accounting Standard No.
130, Reporting Comprehensive Income, which establishes standards for the
reporting and display of comprehensive income and its components.
Comprehensive income is the total of net income and non-owner changes in
equity. The Company had comprehensive income as follows (in thousands):
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
---------------------------- ----------------------------
September 25, September 26, September 25, September 26,
1998 1997 1998 1997
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Net Income $1,916 $ 419 $5,513 $3,489
Foreign Currency Translation Adjustment 3,699 (9) 2,324 (30)
------ ----- ------ ------
Comprehensive Income $5,615 $ 410 $7,837 $3,459
====== ===== ====== ======
</TABLE>
(5) SUPPLEMENTAL FINANCIAL INFORMATION
Radnor Holdings Corporation is a holding company that has no operations
separate from its investment in subsidiaries. The Company's $100 million 10%
Senior Notes due 2003 and $60 million 10% Series B Senior Notes due 2003 are
guaranteed by substantially all of the Company's domestic subsidiaries. The
following represents summarized combining financial information of the holding
company, combined guarantor subsidiaries and the combined non-guarantor
subsidiaries as of and for the three months and nine months ended September
25, 1998 (in thousands):
<TABLE>
<CAPTION>
Holding Guarantor Non-Guarantor
Company Subsidiaries Subsidiaries Eliminations Consolidated
------- ------------ ------------ ------------ ------------
Three Months Ended September 25, 1998
-------------------------------------
<S> <C> <C> <C> <C> <C>
Net Sales $ - $52,195 $28,452 $(1,795) $78,852
Gross Profit - 13,717 10,650 - 24,367
Income from Operations - 2,531 5,968 - 8,499
Net Income - 2,941 503 (1,528) 1,916
</TABLE>
Nine Months Ended September 25, 1998
------------------------------------
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Net Sales $ - $158,000 $82,914 $(6,185) $234,729
Gross Profit - 42,310 26,242 - 68,552
Income from Operations - 11,271 11,947 - 23,218
Net Income - 5,617 3,855 (3,959) 5,513
</TABLE>
September 25, 1998
------------------
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Current Assets $ 340 $ 49,091 $32,412 $(4,354) $ 77,489
Non-Current Assets 147,887 194,122 52,977 (195,813) 199,173
Current Liabilities 5,346 35,592 16,465 (2,858) 54,545
Non-Current Liabilities 161,929 84,787 60,279 (106,190) 200,805
</TABLE>
6
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
GENERAL
Radnor manufactures and distributes worldwide a variety of specialty chemical
and foam products for the foodservice, insulation and protective packaging
industries. In the foodservice industry, the Company is the second largest
manufacturer of foam cup and container products. The Company is also the
fifth largest producer worldwide of expandable polystyrene. The Company
manufactures, markets and sells its products through five operating units
comprised of twenty-three manufacturing locations in the U.S., Canada and
Europe.
COMPARABILITY OF PERIODS
Financial results for the periods presented are not fully comparable because
of the October 1997 acquisition of the polystyrene production and conversion
operations of Neste Oy ("StyroChem Europe").
THREE MONTHS ENDED SEPTEMBER 25, 1998 COMPARED TO THREE MONTHS ENDED
SEPTEMBER 26, 1997
Net sales increased to $78.9 million for the three months ended September 25,
1998 from $56.1 million for the same period in 1997, an increase of $22.8
million or 40.6%. The increase was primarily due to the acquisition of
StyroChem Europe on October 15, 1997.
Cost of goods sold as a percentage of net sales decreased to 69.1% for the
three months ended September 25, 1998, from 75.4% for the same period in 1997.
This decrease was primarily attributable to a decline in raw material prices,
higher levels of production and improved manufacturing efficiencies.
Gross profit increased to $24.4 million or 30.9% of net sales for the three
months ended September 25, 1998, from $13.8 million or 24.6% of net sales for
the same period in 1997.
Distribution expense as a percentage of net sales remained constant at 7.2%
for the three month periods ended September 25, 1998 and September 26, 1997.
Selling, general and administrative expenses as a percentage of net sales
increased to 12.9% for the three months ended September 25, 1998, from 11.2%
of net sales for the same period in 1997. This increase was primarily due to
additional selling and administrative costs associated with StyroChem Europe.
Income from operations increased to $8.5 million or 10.8% of net sales for the
three months ended September 25, 1998, from $3.5 million or 6.2% of net sales
for the same period in 1997.
Interest increased to $4.9 million for the three months ended September 25,
1998, from $3.0 million for the same period in 1997. This increase was
primarily due to an increase in borrowings related to the acquisition of
StyroChem Europe in October 1997.
Other expenses for the three months ended September 25, 1998 included $0.8
million in costs related to an attempted acquisition that was terminated by
the Company as well as a one-time charge related to the write-off of an
investment in an affiliate.
Income taxes were $1.2 million for the three months ended September 25, 1998,
an increase of $1.2 million over the same period in 1997. This increase
related to the elimination, in the prior year, of an income tax valuation
allowance that was recorded against the Company's loss carryforward tax
benefits.
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Net income increased to $1.9 million or 2.4% of net sales for the three months
ended September 25, 1998, from $0.4 million or 0.7% of net sales for the same
period in 1997 due to the reasons described above.
NINE MONTHS ENDED SEPTEMBER 25, 1998 COMPARED TO NINE MONTHS ENDED
SEPTEMBER 26, 1997
Net sales increased to $234.7 million for the nine months ended September 25,
1998 from $170.5 million for the same period in 1997, an increase of $64.2
million or 37.7%. The increase was primarily attributable to the acquisition
of StyroChem Europe on October 15, 1997.
Cost of goods sold as a percentage of net sales decreased to 70.8% for the
nine months ended September 25, 1998, from 74.9% for the same period in 1997.
This decrease was primarily due to a decline in raw material prices, higher
levels of production and improved manufacturing efficiencies.
Gross profit increased to $68.6 million or 29.2% of net sales for the nine
months ended September 25, 1998, from $42.8 million or 25.1% of net sales for
the same period in 1997.
Distribution expense as a percentage of net sales decreased to 7.2% for the
nine months ended September 25, 1998, from 7.4% of net sales for the same
period in 1997. This decrease was primarily due to increased efficiencies in
the North American operations resulting from the realignment of shipping
points and an increase in the percentage of full truckload shipments.
Selling, general and administrative expenses as a percentage of net sales
increased to 12.1% for nine months ended September 25, 1998, from 10.4% of net
sales for the same period in 1997. This increase was due to higher selling
and marketing expenses as well as additional administrative costs associated
with StyroChem Europe.
Income from operations increased to $23.2 million or 9.9% of net sales for the
nine months ended September 25, 1998, from $12.5 million or 7.3% of net sales
for the same period in 1997.
Interest increased to $14.0 million for the nine months ended September 25,
1998, from $8.8 million for the same period in 1997. This increase was
primarily due to an increase in borrowings related to the acquisition of
StyroChem Europe in October 1997.
Other expenses for the nine months ended September 25, 1998 included $0.8
million in costs related to an attempted acquisition that was terminated by
the Company as well as a one-time charge related to the write-off of an
investment in an affiliate.
Income taxes were $3.4 million for the nine months ended September 25, 1998,
compared to $0.3 million for the same period in 1997. This increase related
to the elimination, in the prior year, of an income tax valuation allowance
that was recorded against the Company's loss carryforward tax benefits.
Net income increased to $5.5 million or 2.3% of net sales for the nine months
ended September 25, 1998, from $3.5 million or 2.0% of net sales for the same
period in 1997 due to the reasons described above.
LIQUIDITY AND CAPITAL RESOURCES
During the nine months ended September 25, 1998 and September 26, 1997, the
Company's principal sources of funds consisted of cash from operations and
financing sources. During the 1998 period, after
8
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tax cash flow of $17.6 million, borrowings on bank financed debt of $5.3
million, capital lease financing of $5.8 million and a decrease in cash of
$3.5 million were primarily used to fund capital expenditures of $19.3
million, dividends of $1.5 million and a $3.2 million increase in working
capital.
As of September 25, 1998, the Company had $17.1 million outstanding and $17.9
million of availability 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.
As a holding company, Radnor Holdings Corporation 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 Holdings Corporation 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 under the revolving credit
facilities, will be sufficient to meet the Company's expected operating needs,
planned capital expenditures and debt service requirements.
YEAR 2000 COMPLIANCE
Many existing computer hardware and software systems use only the last two
digits to identify a year. As a result, many systems do not yet recognize the
difference between years beginning with "20" instead of "19". This, as well
as other date related processing issues, may cause systems to fail or
malfunction unless corrected.
The Company's current Year 2000 assessment is that some of its data
processing systems are generally not compliant. Some of these systems can
easily be updated or modified to be compliant, but several of the Company's
systems cannot be updated because of software or hardware limitations. The
Company has begun the process of replacing these systems with Year 2000
compliant data processing systems. The cost to upgrade or replace the
Company's non-compliant systems is not expected to exceed $400,000, which
includes internal costs for personnel, training, supplies, travel and
equipment. These costs are expected to be funded through operations.
In the event that any of the Company's operations remain Year 2000 non-
compliant near the end of 1999, the Company plans to transfer the accounting
and information processing of those operations to the Company's systems that
are Year 2000 compliant. The Company estimates that the overall risk to its
operations as a result of non-compliance with Year 2000 for its existing
systems in a most likely worst case scenario is less than $250,000. There can
be no assurance, however, that this estimate represents the Company's maximum
Year 2000 exposure.
The ability of third parties with which the Company transacts business to
adequately address their Year 2000 issues is outside of the Company's control.
The Company is taking steps to obtain written confirmations that the systems
of its suppliers and customers are Year 2000 compliant and to determine
whether the nature of any noncompliance would have a material adverse effect
on the Company's business, financial condition, cash flows or results of
operations. The Company anticipates this process will be completed no later
than June 25, 1999, and will develop contingency plans, as necessary, based
upon the results of the confirmations.
Even assuming that all material third parties confirm that they are or
expect to be Year 2000 compliant by December 31, 1999, it is not possible to
state with certainty that such parties will be so compliant, or that the
operations of such third parties will not be materially impacted by other
parties with whom they themselves have a material relationship, and who fail
to timely become Year 2000 compliant. Consequently, it is not possible to
predict whether or to what extent the Year 2000 issues may have an
9
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adverse material impact on the Company as a result of their impact on the
operations of third parties with whom the Company has a material relationship.
There can be no assurance that the failure of the Company or such third
parties to adequately address their respective Year 2000 issues will not have
a material adverse effect on the Company's business, financial condition, cash
flows and results of operations.
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 Report on Form 10-K for the year ended
December 26, 1997, Commission File No. 333-19495, to which reference is hereby
made.
10
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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
27.1 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 25, 1998.
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)
/s/ Michael V. Valenza
----------------------------------
Date: November 6, 1998 By:
Michael V. Valenza
Senior Vice President-Finance and
Chief Financial Officer
12
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM RADNOR
HOLDINGS CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-25-1998
<PERIOD-START> DEC-27-1997
<PERIOD-END> SEP-25-1998
<CASH> 5,325
<SECURITIES> 0
<RECEIVABLES> 33,219
<ALLOWANCES> 0
<INVENTORY> 32,775
<CURRENT-ASSETS> 77,489
<PP&E> 199,677
<DEPRECIATION> 19,197
<TOTAL-ASSETS> 276,662
<CURRENT-LIABILITIES> 54,545
<BONDS> 189,051
0
0
<COMMON> 1
<OTHER-SE> 21,311
<TOTAL-LIABILITY-AND-EQUITY> 276,662
<SALES> 234,729
<TOTAL-REVENUES> 234,729
<CGS> 166,177
<TOTAL-COSTS> 166,177
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 14,027
<INCOME-PRETAX> 8,920
<INCOME-TAX> 3,407
<INCOME-CONTINUING> 5,513
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,513
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
