<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 24, 1999
[ ] 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 5, 1999:
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 24, December 25,
1999 1998
--------------- ---------------
(Unaudited)
<S> <C> <C>
ASSETS
------
CURRENT ASSETS
Cash ............................................. $ 3,255 $ 3,975
Marketable securities ............................ 560 546
Accounts receivable, net ......................... 34,818 28,655
Inventories, net ................................. 33,121 35,267
Prepaid expenses and other ....................... 5,904 4,075
Deferred tax asset ............................... 2,262 2,255
------------- ------------
Total current assets ........................ 79,920 74,773
------------- ------------
PROPERTY, PLANT AND EQUIPMENT ....................... 221,393 203,913
LESS - ACCUMULATED DEPRECIATION ..................... (31,712) (22,536)
------------- ------------
NET PROPERTY, PLANT AND EQUIPMENT ................... 189,681 181,377
------------- ------------
OTHER ASSETS ........................................ 22,438 22,646
------------- ------------
Total assets ................................ $ 292,039 $ 278,796
============= ============
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES
Accounts payable ................................. $ 28,367 $ 28,756
Accrued liabilities .............................. 34,901 20,618
Current portion of long-term debt and capital
lease obligations ........................... 3,609 1,490
------------- ------------
Total current liabilities ................... 66,877 50,864
------------- ------------
LONG-TERM DEBT, net of current portion .............. 202,242 189,653
------------- ------------
CAPITAL LEASE OBLIGATIONS, net of current portion ... 5,565 4,855
------------- ------------
DEFERRED TAX LIABILITY .............................. 7,881 11,839
------------- ------------
OTHER NONCURRENT LIABILITIES ........................ 393 636
------------- ------------
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) ...................... (5,948) 1,087
Cumulative translation adjustment ................ (4,359) 474
------------- ------------
Total stockholders' equity .................. 9,081 20,949
------------- ------------
Total liabilities and stockholders' equity .. $ 292,039 $ 278,796
============= ============
</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 24, September 25, September 24, September 25,
1999 1998 1999 1998
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
Net sales ...................................... $ 82,442 $ 78,852 $231,189 $234,729
Cost of goods sold ............................. 59,321 54,485 166,327 166,177
-------- -------- -------- --------
Gross profit ............................. 23,121 24,367 64,862 68,552
Operating expenses:
Distribution ................................ 6,014 5,688 17,364 16,894
Selling, general and administrative ......... 10,928 10,180 31,596 28,440
-------- -------- -------- --------
Income from operations .................... 6,179 8,499 15,902 23,218
Other expense:
Interest, net ............................... 5,230 4,855 15,340 14,027
Other, net .................................. 393 517 963 271
-------- -------- -------- --------
Income (loss) from continuing operations
before income taxes ......................... 556 3,127 (401) 8,920
Provision (benefit) for income taxes:
Current ..................................... 80 314 21 749
Deferred .................................... 149 897 (153) 2,658
-------- -------- -------- --------
229 1,211 (132) 3,407
-------- -------- -------- --------
Income (loss) from continuing operations ....... 327 1,916 (269) 5,513
Loss from discontinued operations, net of tax... (6,766) -- (6,766) --
-------- -------- -------- --------
Net income (loss) .............................. $(6,439) $ 1,916 $(7,035) $ 5,513
======== ======== ======== ========
</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 24, September 25,
1999 1998
-------------- --------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) ............................................. $ (7,035) $ 5,513
Adjustments to reconcile net income (loss) to cash provided
by operating activities-
Depreciation and amortization ........................... 12,980 9,450
Unrealized gain on marketable securities ................ (14) --
Deferred income taxes ................................... (153) 2,658
Discontinued operations ................................. 6,766 --
Changes in operating assets and liabilities, net of
acquisition of business-
Accounts receivable, net .......................... (7,031) (4,335)
Inventories, net .................................. 1,341 (4,322)
Prepaid expenses and other ........................ (2,003) (1,306)
Accounts payable .................................. (101) (769)
Accrued liabilities ............................... 4,516 7,555
------- -------
Net cash provided by continuing operations .... 9,266 14,444
Net cash used in discontinued operations ...... (530) --
------- -------
Net cash provided by operating activities ..... 8,736 14,444
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures .......................................... (13,490) (19,252)
Acquisition of Epsilevy Oy, net of cash acquired .............. -- (1,049)
Additional acquisition costs for StyroChem Europe ............. -- (345)
Increase in other assets ...................................... (3,391) (6,866)
------- -------
Net cash used in investing activities ......... (16,881) (27,512)
------- -------
CASH FLOWS FROM FINANCING ACTIVITIES
Net borrowings on bank financed debt and
unsecured notes payable ................................... 7,748 5,258
Net proceeds (payments) on capital lease obligations .......... (420) 5,776
Cash dividends ................................................ -- (1,500)
------- -------
Net cash provided by financing activities...... 7,328 9,534
------- -------
EFFECTS OF EXCHANGE RATE CHANGES ON CASH ........................ 97 49
------- -------
NET DECREASE IN CASH ............................................ (720) (3,485)
CASH, beginning of period ....................................... 3,975 8,810
------- -------
CASH, end of period ............................................. $ 3,255 $ 5,325
======= =======
SUPPLEMENTAL CASH FLOW DISCLOSURES
Interest paid ................................................. $ 9,961 $ 9,082
======= =======
Income taxes paid, net of refunds of $137 in 1998 ............. $ 162 $ (108)
======= =======
</TABLE>
The accompanying notes are an integral part of these
condensed consolidated financial statements.
4
<PAGE>
RADNOR HOLDINGS CORPORATION AND SUBSIDIARIES
SUMMARY BY OPERATING SEGMENTS
(Unaudited)
(In thousands)
<TABLE>
<CAPTION>
For the three months ended For the three months ended
----------------------------- -----------------------------
September 24, September 25, September 24, September 25,
1999(1) 1998(1) 1999(1) 1998(1)
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Sales to Unaffiliated Customers:
Packaging and Insulation ..... $ 58,787 $ 55,962 $ 168,064 $ 162,953
Specialty Chemicals .......... 29,606 28,622 79,380 87,499
Corporate and Other .......... 586 402 1,486 402
Transfers Between Operating
Segments(2) ................ (6,537) (6,134) (17,741) (16,125)
--------- --------- --------- ---------
Consolidated ....... $ 82,442 $ 78,852 $ 231,189 $ 234,729
--------- --------- --------- ---------
Operating Income (Loss):
Packaging and Insulation ..... $ 7,169 $ 6,232 $ 20,934 $ 18,251
Specialty Chemicals .......... 601 3,726 (963) 8,912
Corporate and Other .......... (1,591) (1,459) (4,069) (3,945)
--------- --------- --------- ---------
Consolidated ....... $ 6,179 $ 8,499 $ 15,902 $ 23,218
--------- --------- --------- ---------
Income (Loss) from Continuing
Operations before Income Taxes:
Packaging and Insulation ..... $ 2,071 $ 3,257 $ 9,659 $ 9,596
Specialty Chemicals .......... 1,644 2,687 (1,571) 6,743
Corporate and Other .......... (3,159) (2,817) (8,489) (7,419)
--------- --------- --------- ---------
Consolidated ....... $ 556 $ 3,127 $ (401) $ 8,920
--------- --------- --------- ---------
</TABLE>
(1) Amounts reflect the transfer of the expandable polystyrene ("EPS")
production operations in Minton, Texas from one of the Company's Specialty
Chemical subsidiaries to one of its Packaging and Insulation subsidiaries.
(2) Transfers between operating segments reflect the sale of EPS bead from the
Specialty Chemicals operating segment to the Packaging and Insulation
operating segment.
5
<PAGE>
RADNOR HOLDINGS CORPORATION AND SUBSIDIARIES
SUMMARY BY GEOGRAPHIC REGION
(Unaudited)
(In thousands)
<TABLE>
<CAPTION>
For the three months ended For the three months ended
----------------------------- -----------------------------
September 24, September 25, September 24, September 25,
1999(1) 1998(2) 1999(1) 1998(2)
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Sales to Unaffiliated Customers:
United States ................ $ 53,622 $ 52,195 $ 158,531 $ 157,655
Canada ....................... 5,755 5,205 16,677 16,188
Europe ....................... 25,271 23,247 61,991 66,726
Transfers Between Geographic
Regions ................... (2,206) (1,795) (6,010) (5,840)
--------- --------- --------- ---------
Consolidated ..... $ 82,442 $ 78,852 $ 231,189 $ 234,729
--------- --------- --------- ---------
Operating Income:
United States ................ $ 2,650 $ 2,528 $ 9,732 $ 10,849
Canada ....................... 402 1,184 1,265 3,163
Europe ....................... 3,127 4,787 4,905 9,206
--------- --------- --------- ---------
Consolidated ..... $ 6,179 $ 8,499 $ 15,902 $ 23,218
--------- --------- --------- ---------
Income (Loss) from Continuing
Operations before Income Taxes:
United States ................ $ (1,281) $ 2,284 $ (1,275) $ 4,907
Canada ....................... 45 896 216 2,236
Europe ....................... 1,792 (53) 658 1,777
--------- --------- --------- ---------
Consolidated ..... $ 556 $ 3,127 $ (401) $ 8,920
--------- --------- --------- ---------
</TABLE>
(1) Transfers between geographic regions reflect the sale of EPS bead from the
Company's Canadian specialty operations to its domestic food packaging
operations as well as the sale of product from the Company's domestic food
packaging operations to its European food packaging operations.
(2) Transfers between geographic regions reflect the sale of EPS bead from the
Company's Canadian specialty chemical operations to its domestic food
packaging operations.
6
<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) DISCONTINUED OPERATIONS
Pursuant to an asset purchase agreement among Benchmark Holdings, Inc.
("Benchmark"), WinCup Holdings, Inc. ("WinCup"), and the Fort James
Corporation, formerly James River Paper Company, Inc. ("Fort James"), dated
October 31, 1995, Benchmark and WinCup sold to Fort James all of the assets of
Benchmark's cutlery and straws business and all of the assets of WinCup's
thermoformed cup business, except for cash, accounts receivable and prepaid
assets. The operations of Benchmark's cutlery and straws business and
WinCup's thermoformed cup business were accounted for as discontinued
operations. The current period loss, net of a tax benefit of $3.7 million,
represents the settlement of a contingent liability related to the
discontinued operations.
(3) INVENTORIES
The components of inventories were as follows (in thousands):
September 24, December 25,
1999 1998
------------- ------------
Raw Materials $10,386 $12,576
Work in Process 1,312 1,251
Finished Goods 21,423 21,440
------- -------
$33,121 $35,267
======= =======
(4) INTEREST EXPENSE
Included in interest expense is $387,000 and $315,000 of amortization of
deferred financing costs for the three months ended September 24, 1999 and
September 25, 1998, respectively, and $1,147,000 and $858,000 of amortization
of deferred financing costs for the nine months ended September 24, 1999 and
September 25, 1998, respectively. Premium amortization related to the
issuance of the Company's 10% Series B Senior Notes due 2003 of $81,000 and
$85,000 for three months ended September 24, 1999 and September 25, 1998,
respectively, and $239,000 and $231,000 for nine months ended September 24,
1999 and September 25, 1998, respectively, is included in interest expense.
7
<PAGE>
(5) COMPREHENSIVE INCOME
Comprehensive income is the total of net income (loss) and non-owner changes
in equity. The Company had comprehensive income as follows (in thousands):
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
----------------------------- -----------------------------
September 24, September 25, September 24, September 25,
1999 1998 1999 1998
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Net Income (Loss) $(6,439) $1,916 $ (7,035) $5,513
Foreign Currency Translation Adjustment 53 3,699 (4,833) 2,324
------- ------ -------- ------
Comprehensive Income (Loss) $(6,386) $5,615 $(11,868) $7,837
======= ====== ======== ======
</TABLE>
(6) 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
24, 1999 and September 25, 1998 (in thousands):
<TABLE>
<CAPTION>
HOLDING GUARANTOR NON-GUARANTOR
COMPANY SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
------- ------------ ------------ ------------ ------------
THREE MONTHS ENDED SEPTEMBER 24, 1999
-------------------------------------
<S> <C> <C> <C> <C> <C>
Net Sales $- $53,699 $30,949 $(2,206) $82,442
Gross Profit - 14,351 8,770 - 23,121
Income from Operations - 2,577 3,602 - 6,179
Income (Loss) from
Continuing Operations - (1,637) 1,964 - 327
THREE MONTHS ENDED SEPTEMBER 25, 1998
-------------------------------------
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
Income (Loss) from
Continuing Operations - 2,941 503 (1,528) 1,916
NINE MONTHS ENDED SEPTEMBER 24, 1999
------------------------------------
Net Sales $- $158,608 $78,591 $(6,010) $231,189
Gross Profit - 43,564 21,298 - 64,862
Income from Operations - 9,567 6,335 - 15,902
Income (Loss) from
Continuing Operations - (1,418) 1,149 - (269)
</TABLE>
8
<PAGE>
(6) SUPPLEMENTAL FINANCIAL INFORMATION (Continued)
<TABLE>
<CAPTION>
HOLDING GUARANTOR NON-GUARANTOR
COMPANY SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
------- ------------ ------------ ------------ ------------
NINE MONTHS ENDED SEPTEMBER 25, 1998
------------------------------------
<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
Income (Loss) from
Continuing Operations - 5,617 3,855 (3,959) 5,513
AS OF SEPTEMBER 24, 1999
------------------------
Current Assets $ 652 $ 51,069 $30,876 $ (2,677) $ 79,920
Non-Current Assets 141,499 204,991 51,550 (185,921) 212,119
Current Liabilities 15,011 37,001 19,470 (4,605) 66,877
Non-Current Liabilities 157,900 97,637 52,606 (92,062) 216,081
AS OF SEPTEMBER 25, 1998
------------------------
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>
9
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
GENERAL
- -------
Radnor Holdings Corporation, through acquisition and internal development, has
established itself as a leading worldwide manufacturer and distributor of
specialty chemicals and foam packaging and insulation products for the
foodservice, insulation and packaging industries.
The packaging and insulation business segment manufactures and distributes
foam cup and container products for the foodservice industry as well as a
variety of standard and specialized insulation products. Through its WinCup
Holdings, Inc. ("WinCup") subsidiary, the Company is the second largest producer
in the United States of foam cups and containers for the foodservice industry.
The specialty chemicals business segment primarily manufactures and distributes
expandable polystyrene ("EPS") bead for internal consumption and distribution to
the insulation and packaging industries. Through its Radnor Chemical Corporation
("Radnor Chemical") subsidiary, the Company is the fifth largest worldwide
producer of EPS.
RESULTS OF OPERATIONS
- ---------------------
In January 1999, the EPS production operations located in Minton, Texas were
transferred from the Company's Radnor Chemical subsidiary to its WinCup
subsidiary. This facility manufactures a substantial portion of the EPS
utilized by the Company's domestic food packaging operations with the remainder
purchased from Radnor Chemical's Canadian EPS manufacturing facility. The
Company's results of operations for the three months and nine months ended
September 25, 1998 have been restated to reflect the impact of this transaction
for purposes of Management's Discussion and Analysis of Financial Condition and
Results of Operations.
CONSOLIDATED
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
--------------------------------------- --------------------------------------
SEPTEMBER 24, SEPTEMBER 25, SEPTEMBER 24, SEPTEMBER 25,
(Millions of dollars) 1999 1998 1999 1998
<S> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------
Net sales $82.4 $78.9 $231.2 $234.7
- ------------------------------------------------------------------------------------------------------------------
Gross profit 23.1 24.4 64.9 68.5
- ------------------------------------------------------------------------------------------------------------------
Operating expenses 16.9 15.9 49.0 45.3
- ------------------------------------------------------------------------------------------------------------------
Income from operations 6.2 8.5 15.9 23.2
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
Net sales for the three months ended September 24, 1999 were $82.4 million, an
increase of $3.5 million from the three months ended September 25, 1998. This
increase was primarily caused by growth in the packaging and insulation segment.
Gross profits decreased to 28.0% of net sales for the third quarter of fiscal
1999 from 30.9% of net sales in the third quarter of fiscal 1998. This decrease
was caused by increased depreciation expense of $0.7 million, higher raw
material costs and the impact of reduced specialty chemical selling prices,
partially offset by improved manufacturing efficiencies. Operating expenses for
the three months ended September 24, 1999 increased to $16.9 million from $15.9
million for the same period in 1998 primarily as a result of increased
distribution costs and depreciation expense.
Net sales for the nine months ended September 24, 1999 were $231.2 million.
This $3.5 million or 1.5% decrease from the same period in the prior year was
caused by reduced specialty chemical selling prices, partially offset by growth
in the packaging and insulation segment. Gross profit as a percentage of net
sales
10
<PAGE>
decreased to 28.1% for the nine months ended September 24, 1999 from 29.2% for
the nine months ended September 25, 1998. This decrease was caused by increased
depreciation expense of $1.8 million and the impact of reduced specialty
chemicals prices, partially offset by improved manufacturing efficiencies.
Operating expenses for the nine months ended September 24, 1999 increased $3.7
million over the same period in 1998 primarily as a result of a $1.4 million
increase in depreciation and amortization combined with increased distribution
and administrative costs.
SEGMENT ANALYSIS
Packaging & Insulation
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
-------------------------------------- --------------------------------------
SEPTEMBER 24, SEPTEMBER 25, SEPTEMBER 24, SEPTEMBER 25,
(Millions of dollars) 1999 1998 1999 1998
<S> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------
Net sales $58.8 $56.0 $168.1 $163.0
- ---------------------------------------------------------------------------------------------------------------
Gross profit 17.8 16.5 51.7 48.3
- ---------------------------------------------------------------------------------------------------------------
Operating expenses 10.6 10.3 30.8 30.0
- ---------------------------------------------------------------------------------------------------------------
Income from operations 7.2 6.2 20.9 18.3
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
Net sales in the packaging and insulation business segment increased
by $2.8 million to $58.8 million for the three months ended September 24, 1999
primarily due to volume growth. Gross profit increased to 30.3% of net sales
for the three months ended September 24, 1999 from 29.5% of net sales for the
same period in 1998 as a result of improved manufacturing efficiencies and
higher production levels. Operating expenses increased to $10.6 million for the
three months ended September 24, 1999 from $10.3 million for the same period in
1998 primarily due to higher distribution costs in the domestic packaging
business. Income from operations for the three months ended September 24, 1999
increased by $1.0 million or 16.1% over the same period in 1998 as a result of
the reasons described above.
Net sales for the nine months ended September 24, 1999 were $168.1 million.
This $5.1 million or 3.0% increase over the nine months ended September 25, 1998
was primarily due to volume growth. Gross profit as a percentage of net sales
increased to 30.8% for the nine months ended September 24, 1999 from 29.6% for
the same period in 1998. This increase was primarily caused by improved
manufacturing efficiencies and higher production levels. Operating expenses
increased by $0.8 million to $30.8 million for the nine months ended September
24, 1999 due to higher selling and distribution costs. Income from operations
for the nine months ended September 24, 1999 increased by $2.6 million or 14.2%
over the same period in 1998 as a result of the reasons described above.
Specialty Chemicals
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
-------------------------------------- ---------------------------------------
SEPTEMBER 24, SEPTEMBER 25, SEPTEMBER 24, 1999 SEPTEMBER 25,
(Millions of dollars) 1999 1998 1998
<S> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------------
Net sales $29.6 $28.6 $79.4 $87.5
- ----------------------------------------------------------------------------------------------------------------
Gross profit 4.7 7.4 11.2 20.3
- ----------------------------------------------------------------------------------------------------------------
Operating expenses 4.1 3.7 12.2 11.4
- ----------------------------------------------------------------------------------------------------------------
Income (loss) from operations 0.6 3.7 (1.0) 8.9
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
11
<PAGE>
Net sales for the three months ended September 24, 1999 and September 25, 1998
included sales to the packaging and insulation segment of $6.5 million and $6.1
million, respectively. Net sales for the nine months ended September 24, 1999
and September 25, 1998 included sales to the packaging and insulation segment of
$17.7 million and $16.1 million, respectively.
Net sales for the third quarter of fiscal 1999 increased to $29.6 million from
$28.6 million for the same period in 1998. This $1.0 million increase was due
to increased sales volume, partially offset by reduced selling prices in the
European specialty chemicals business. These price reductions were the result
of excess supply in the European EPS market caused by increased competition
from Asian producers. Gross profit decreased to 15.9% of net sales for the
third quarter of fiscal 1999 from 25.9% of net sales for the same period in
1998. This decrease was caused by higher raw material costs and the reduction
in selling prices described above, partially offset by increased manufacturing
efficiencies. Operating expenses increased $0.4 million to $4.1 million for the
three months ended September 24, 1999 as a result of increased depreciation
expense and higher distribution costs in the European specialty chemicals
business.
Net sales in the specialty chemicals business segment decreased by $8.1
million to $79.4 million for the nine months ended September 24, 1999. This
decrease was primarily due to reduced selling prices in the North American and
European specialty chemicals businesses resulting from excess supply in the EPS
market. Gross profit decreased to 14.1% of net sales for the nine months ended
September 24, 1999 as compared to 23.2% of net sales for the same period in
1998. This decrease was caused by the reduction in selling prices described
above, partially offset by increased manufacturing efficiencies. Operating
expenses increased $0.8 million to $12.2 million for the nine months ended
September 24, 1999 primarily due to increased distribution costs and
depreciation expense in the European specialty chemicals business.
Corporate & Other
For the three month and nine month periods ended September 24, 1999, corporate
operating expenses increased by $0.3 million and $2.1 million to $2.2 million
and $6.0 million, respectively, from the same periods in 1998. These increases
were due to increased amortization and administrative expenses.
INTEREST EXPENSE
- ----------------
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
-------------------------------------- ---------------------------------------
SEPTEMBER 24, SEPTEMBER 25, SEPTEMBER 24, SEPTEMBER 25,
(Millions of dollars) 1999 1998 1999 1998
<S> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------
Interest expense $5.2 $4.9 $15.3 $14.0
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
Interest expense for the three months and nine months ended September 24, 1999
increased by $0.3 million and $1.3 million, respectively, over the same periods
in 1998. These increases were primarily due to increased borrowings related to
the purchase of the Company's Atlanta, Georgia and Tolleson, Arizona food
packaging plants in June 1998 and March 1999, respectively. In addition,
amortization of deferred financing fees and debt issuance premium increased by
$0.1 million for the three months ended September 24, 1999 and by $0.3 million
for the nine months ended September 24, 1999.
12
<PAGE>
INCOME TAXES
- ------------
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
-------------------------------------- ---------------------------------------
SEPTEMBER 24, SEPTEMBER 25, SEPTEMBER 24, SEPTEMBER 25,
(Millions of dollars) 1999 1998 1999 1998
<S> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------------
Income tax expense (benefit) $0.2 $1.2 $(0.1) $3.4
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
The effective tax rate for the three months ended September 24, 1999 increased
to 41.2% of pre-tax income from 38.7% of pre-tax income for the same period in
1998. The effective tax rates for the nine months ended September 24, 1999 and
September 25, 1998 were 32.9% and 38.2% of pre-tax income, respectively. As of
September 24, 1999 the Company had approximately $42.8 million of net operating
loss carryforwards for federal income tax purposes, which expire through 2019.
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
During the nine months ended September 24, 1999 and September 25, 1998, the
Company's principal source of funds consisted of cash from operating and
financing activities. During the 1999 period, after tax cash flow of $12.5
million and net borrowings on bank financed debt and capital lease obligations
of $7.3 million were primarily used to fund capital expenditures of $13.5
million and a $3.3 million increase in working capital.
As of September 24, 1999, the Company had $22.6 million outstanding and $13.4
million of availability under its revolving credit agreements. The Company's
principal uses of cash for the remainder of 1999 will be working capital
requirements, capital expenditures and the settlement of the contingent
liability related to the discontinued operations. The 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.
OTHER FINANCIAL DATA
- --------------------
Year 2000 Readiness Disclosure
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 is near to completing the process of replacing its noncompliant
systems with Year 2000 compliant data processing systems. As of September 24,
1999, the Company had incurred approximately $275,000 in costs to upgrade or
replace its noncompliant systems, including internal costs for personnel,
training, supplies, travel and equipment. The total cost to upgrade or replace
the Company's noncompliant systems is not expected to exceed $400,000 and is
expected to be funded through operations. The Company has assessed its non-
information technology systems and does not believe that any Year 2000
noncompliance
13
<PAGE>
with respect to these systems will have a material adverse effect on the
Company's business, financial condition, cash flows or results of operations.
In the event that any of the Company's operations experience Year 2000 issues,
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 noncompliance
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 has taken 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 has completed the confirmation process and has evaluated responses
from its suppliers and customers. All major suppliers and customers have
responded indicating their Year 2000 preparedness.
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 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 or results of operations.
Financial Instruments
There has been no material change in the net financial instrument position or
sensitivity to market risk since the disclosure in the annual report.
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 25, 1998, Commission File No. 333-19495, to which reference is hereby
made.
14
<PAGE>
PART II - OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS
In October 1999, the Company settled the litigation filed by Jackson
National Life Insurance Company and Benchmark Holdings, Inc. in the Court
of Chancery for the State of Delaware in and for New Castle County. See
Item 3 of the Company's Report on Form 10-K for the year ended December 25,
1998. Although the Company believed it had meritorious defenses and was
prepared to assert such defenses vigorously, the Company determined it was
in its best interests to settle the litigation due to the expense of such
litigation and the attendant diversion and disruption of management
resources, as well as the inherent uncertainties of litigation.
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 nine month period
ended September 24, 1999.
15
<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: November 5, 1999 By:
Michael V. Valenza
Senior Vice President-Finance and
Chief Financial Officer
16
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM *ILLEGIBLE
INFORMATION* AND IS QULAIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> DEC-26-1998
<PERIOD-END> SEP-24-1999
<CASH> 3,255
<SECURITIES> 560
<RECEIVABLES> 34,818
<ALLOWANCES> 0
<INVENTORY> 33,121
<CURRENT-ASSETS> 79,920
<PP&E> 221,393
<DEPRECIATION> 31,712
<TOTAL-ASSETS> 292,039
<CURRENT-LIABILITIES> 66,877
<BONDS> 207,808
0
0
<COMMON> 1
<OTHER-SE> 9,080
<TOTAL-LIABILITY-AND-EQUITY> 292,089
<SALES> 231,189
<TOTAL-REVENUES> 231,189
<CGS> 166,327
<TOTAL-COSTS> 166,327
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 15,340
<INCOME-PRETAX> (401)
<INCOME-TAX> (132)
<INCOME-CONTINUING> (269)
<DISCONTINUED> (6,766)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (7,035)
<EPS-BASIC> 0
<EPS-DILUTED> 0
</TABLE>
