<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
June 25, 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
August 4, 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>
June 25, December 25,
1999 1998
----------- ------------
(Unaudited)
<S> <C> <C>
ASSETS
------
CURRENT ASSETS
Cash $ 3,980 $ 3,975
Marketable securities 593 546
Accounts receivable, net 34,871 28,655
Inventories, net 30,099 35,267
Prepaid expenses and other 7,327 4,075
Deferred tax asset 2,263 2,255
----------- ------------
Total current assets 79,133 74,773
----------- ------------
PROPERTY, PLANT AND EQUIPMENT 217,252 203,913
LESS - ACCUMULATED DEPRECIATION (28,227) (22,536)
----------- ------------
NET PROPERTY, PLANT AND EQUIPMENT 189,025 181,377
----------- ------------
OTHER ASSETS 21,572 22,646
----------- ------------
Total assets $ 289,730 $ 278,796
=========== =============
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES
Accounts payable $ 26,143 $ 28,756
Accrued liabilities 21,317 20,618
Current portion of long-term debt and capital
lease obligations 3,217 1,490
----------- ------------
Total current liabilities 50,677 50,864
----------- ------------
LONG-TERM DEBT, net of current portion 206,800 189,653
----------- ------------
CAPITAL LEASE OBLIGATIONS, net of current portion 5,002 4,855
----------- ------------
DEFERRED TAX LIABILITY 11,454 11,839
----------- ------------
OTHER NONCURRENT LIABILITIES 330 636
----------- ------------
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 491 1,087
Cumulative translation adjustment (4,412) 474
----------- ------------
Total stockholders' equity 15,467 20,949
----------- ------------
Total liabilities and stockholders' equity $ 289,730 $ 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 six months ended
-------------------------- ------------------------
June 25, June 26, June 25, June 26,
1999 1998 1999 1998
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Net sales $ 80,995 $ 84,063 $ 148,747 $ 155,877
Cost of goods sold 57,854 58,907 107,006 111,692
--------- --------- --------- ---------
Gross profit 23,141 25,156 41,741 44,185
Operating expenses:
Distribution 6,313 6,033 11,350 11,206
Selling, general and administrative 10,477 9,734 20,668 18,260
--------- --------- --------- ---------
Income from operations 6,351 9,389 9,723 14,719
Other (income) expense:
Interest, net 5,089 4,613 10,110 9,172
Other, net 156 35 570 (246)
--------- --------- --------- ---------
Income (loss) before income taxes 1,106 4,741 (957) 5,793
Provision (benefit) for income taxes:
Current 68 357 (59) 435
Deferred 336 1,439 (302) 1,761
--------- --------- --------- ---------
404 1,796 (361) 2,196
--------- --------- --------- ---------
Net income (loss) $ 702 $ 2,945 $ (596) $ 3,597
========= ========= ========= =========
</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 six months ended
------------------------
June 25, June 26,
1999 1998
-------- --------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $ (596) $ 3,597
Adjustments to reconcile net income to cash used
in operating activities-
Depreciation and amortization 8,262 5,954
Unrealized gain on marketable securities (47) --
Deferred income taxes (302) 1,761
Changes in operating assets and liabilities, net of
acquisition of business-
Accounts receivable, net (7,006) (7,209)
Inventories, net 4,323 (5,177)
Prepaid expenses and other (3,421) (996)
Accounts payable (2,302) (1,393)
Accrued liabilities 822 2,834
-------- --------
Net cash used in operating activities (267) (629)
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures (10,293) (8,435)
Acquisition of Epsilevy Oy, net of cash acquired -- (1,049)
Additional acquisition costs for StyroChem Europe -- (345)
Increase in other assets (1,220) (1,782)
-------- --------
Net cash used in investing activities (11,513) (11,611)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
Net borrowings on bank financed debt and
unsecured notes payable 12,048 4,710
Net proceeds (payments) on capital lease obligations (220) 4,871
-------- --------
Net cash provided by financing activities 11,828 9,581
-------- --------
EFFECTS OF EXCHANGE RATE CHANGES ON CASH (43) (1,181)
-------- --------
NET INCREASE (DECREASE) IN CASH 5 (3,840)
CASH, beginning of period 3,975 8,810
-------- --------
CASH, end of period $ 3,980 $ 4,970
======== ========
SUPPLEMENTAL CASH FLOW DISCLOSURES
Interest paid $ 9,240 $ 8,649
======== ========
Income taxes paid $ 161 $ --
======== ========
</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 six months ended
-------------------------- ------------------------
June 25, June 26, June 25, June 26,
1999 /(1)/ 1998 /(1)/ 1999 /(1)/ 1998 /(1)/
--------- --------- -------- ---------
<S> <C> <C> <C> <C>
Sales to Unaffiliated Customers:
Packaging and Insulation $ 59,255 $ 58,922 $ 109,277 $ 106,991
Specialty Chemicals 28,709 32,195 49,774 58,877
Corporate and Other 507 -- 900 --
Transfers Between Operating
Segments /(2)/ (7,476) (7,054) (11,204) (9,991)
-------- -------- -------- --------
Consolidated $ 80,995 $ 84,063 $ 148,747 $ 155,877
-------- -------- -------- --------
Operating Income (Loss):
Packaging and Insulation $ 7,520 $ 7,410 $ 13,765 $ 12,019
Specialty Chemicals 45 3,047 (1,564) 5,186
Corporate and Other (1,214) (1,068) (2,478) (2,486)
-------- -------- -------- --------
Consolidated $ 6,351 $ 9,389 $ 9,723 $ 14,719
-------- -------- -------- --------
Income (Loss) Before Income Taxes:
Packaging and Insulation $ 4,451 $ 4,530 $ 7,588 $ 6,339
Specialty Chemicals (872) 2,422 (3,215) 4,056
Corporate and Other (2,473) (2,211) (5,330) (4,602)
-------- -------- -------- --------
Consolidated $ 1,106 $ 4,741 $ (957) $ 5,793
-------- -------- -------- --------
</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>
<TABLE>
<CAPTION>
RADNOR HOLDINGS CORPORATION AND SUBSIDIARIES
SUMMARY BY GEOGRAPHIC REGION
(Unaudited)
(In thousands)
For the three months ended For the six months ended
-------------------------- ------------------------
June 25, June 26, June 25, June 26,
1999 1998 1999 1998
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Sales to Unaffiliated Customers:
United States $ 54,879 $ 56,028 $ 104,909 $ 105,460
Canada 6,128 5,810 10,922 10,983
Europe 22,270 25,598 36,720 43,479
Transfers Between Geographic
Regions /(1)/ (2,282) (3,373) (3,804) (4,045)
-------- -------- -------- --------
Consolidated $ 80,995 $ 84,063 $ 148,747 $ 155,877
-------- -------- -------- --------
Operating Income:
United States $ 3,545 $ 5,102 $ 7,082 $ 8,321
Canada 472 1,087 863 1,979
Europe 2,334 3,200 1,778 4,419
-------- -------- -------- --------
Consolidated $ 6,351 $ 9,389 $ 9,723 $ 14,719
-------- -------- -------- --------
Income (Loss) Before Income Taxes:
United States $ 179 $ 2,164 $ 6 $ 2,623
Canada 60 729 171 1,340
Europe 867 1,848 (1,134) 1,830
-------- -------- -------- --------
Consolidated $ 1,106 $ 4,741 $ (957) $ 5,793
-------- -------- -------- --------
/(1)/ Transfers between geographic regions reflect the sale of EPS bead from
the Company's Canadian specialty chemical operations to its domestic
food packaging operations.
</TABLE>
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) INVENTORIES
The components of inventories were as follows (in thousands):
<TABLE>
<CAPTION>
June 25, December 25,
1999 1998
-------- ------------
<S> <C> <C>
Raw Materials $ 8,998 $12,576
Work in Process 1,328 1,251
Finished Goods 19,773 21,440
------- -------
$30,099 $35,267
======= =======
</TABLE>
(3) INTEREST EXPENSE
Included in interest expense is $369,000 and $266,000 of amortization of
deferred financing costs for the three months ended June 25, 1999 and June
26, 1998, respectively, and $760,000 and $543,000 of amortization of
deferred financing costs for the six months ended June 25, 1999 and June
26, 1998, respectively. Premium amortization related to the issuance of the
Company's 10% Series B Senior Notes due 2003 of $80,000 and $76,000 for the
three months ended June 25, 1999 and June 26, 1998, respectively, and
$158,000 and $146,000 for the six months ended June 25, 1999 and June 26,
1998, respectively, is included in interest expense.
(4) 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 Six Months Ended
-------------------- -------------------
June 25, June 26, June 25, June 26,
1999 1998 1999 1998
-------- ------- -------- --------
<S> <C> <C> <C> <C>
Net Income (Loss) $ 702 $2,945 $ (596) $ 3,597
Foreign Currency Translation Adjustment (1,243) 98 (4,886) (1,375)
------- ------ ------- -------
Comprehensive Income (Loss) $ (541) $3,043 $(5,482) $ 2,222
======= ====== ======= =======
</TABLE>
7
<PAGE>
(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 six
months ended June 25, 1999 and June 26, 1998 (in thousands):
<TABLE>
<CAPTION>
Holding Guarantor Non-Guarantor
Company Subsidiaries Subsidiaries Eliminations Consolidated
------- ------------ ------------ ------------ ------------
Three Months Ended June 25, 1999
--------------------------------
<S> <C> <C> <C> <C> <C>
Net Sales $ - $ 54,879 $ 28,398 $ (2,282) $ 80,995
Gross Profit - 14,932 8,209 - 23,141
Income from Operations - 3,453 2,898 - 6,351
Net Income (Loss) - (376) 1,078 - 702
<CAPTION>
Three Months Ended June 26, 1998
--------------------------------
<S> <C> <C> <C> <C> <C>
Net Sales $ - $ 56,373 $ 31,408 $ (3,718) $ 84,063
Gross Profit - 15,789 9,367 - 25,156
Income from Operations - 5,220 4,169 - 9,389
Net Income - 1,595 2,575 (1,225) 2,945
<CAPTION>
Six Months Ended June 25, 1999
--------------------------------
<S> <C> <C> <C> <C> <C>
Net Sales $ - $ 104,909 $ 47,642 $ (3,804) $ 148,747
Gross Profit - 29,213 12,528 - 41,741
Income from Operations - 6,990 2,733 - 9,723
Net Income (Loss) - 219 (815) - (596)
<CAPTION>
Six Months Ended June 26, 1998
--------------------------------
<S> <C> <C> <C> <C> <C>
Net Sales $ - $ 105,805 $ 54,462 $ (4,390) $ 155,877
Gross Profit - 28,593 15,592 - 44,185
Income from Operations - 8,740 5,979 - 14,719
Net Income - 2,676 3,352 (2,431) 3,597
<CAPTION>
As of June 25, 1999
-------------------
<S> <C> <C> <C> <C> <C>
Current Assets $ 1,437 $ 50,828 $ 29,271 $ (2,403) $ 79,133
Non-Current Assets 138,604 204,011 50,721 (182,739) 210,597
Current Liabilities 1,051 36,504 16,915 (3,793) 50,677
Non-Current Liabilities 161,704 96,595 55,189 (89,902) 223,586
<CAPTION>
As of June 26, 1998
-------------------
<S> <C> <C> <C> <C> <C>
Current Assets $ 389 $ 51,451 $ 35,228 $ (7,423) $ 79,645
Non-Current Assets 146,738 180,838 49,175 (193,053) 183,698
Current Liabilities 1,132 31,047 16,363 (874) 47,668
Non-Current Liabilities 162,014 84,671 60,315 (108,522) 198,478
</TABLE>
8
<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 six months ended June 26, 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 Six Months Ended
----------------------------- -----------------------------
(Millions of dollars) June 25, 1999 June 26, 1998 June 25, 1999 June 26, 1998
<S> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------
Net sales $ 81.0 $ 84.1 $ 148.7 $ 155.9
- --------------------------------------------------------------------------------------------
Gross profit 23.2 25.2 41.7 44.2
- --------------------------------------------------------------------------------------------
Operating expenses 16.8 15.8 32.0 29.5
- --------------------------------------------------------------------------------------------
Income from operations 6.4 9.4 9.7 14.7
- --------------------------------------------------------------------------------------------
</TABLE>
Net sales for the three months ended June 25, 1999 were $81.0 million, a
decline of $3.1 million from the three months ended June 26, 1998. This decline
was caused by reductions in selling prices in the specialty chemicals segment,
partially offset by growth in the packaging and insulation segment. Gross
profits decreased to 28.6% of net sales for the second quarter of fiscal 1999
from 30.0% of net sales in the second quarter of fiscal 1998. This decrease was
caused by increased depreciation expense of $0.6 million and the impact of the
reduced specialty chemical selling prices, partially offset by improved
manufacturing efficiencies and lower raw material costs. Operating expenses
for the three months ended June 25, 1999 increased to $16.8 million from $15.8
million for the same period in 1998 primarily as a result of increased
depreciation and amortization.
Net sales for the six months ended June 25, 1999 were $148.7 million. This
$7.2 million or 4.6% 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
9
<PAGE>
decreased to 28.0% for the six months ended June 25, 1999 from 28.4% for the six
months ended June 26, 1998. This decrease was caused by increased depreciation
expense of $1.2 million and the impact of reduced specialty chemicals prices,
partially offset by improved manufacturing efficiencies and lower raw material
costs. Operating expenses for the six months ended June 25, 1999 increased $2.5
million over the same period in 1998 primarily as a result of a $1.0 million
increase in depreciation and amortization combined with increased costs in the
administrative operations.
SEGMENT ANALYSIS
Packaging & Insulation
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
----------------------------- -----------------------------
(Millions of dollars) June 25, 1999 June 26, 1998 June 25, 1999 June 26, 1998
<S> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------
Net sales $ 59.3 $ 58.9 $ 109.3 $ 107.0
- --------------------------------------------------------------------------------------------
Gross profit 18.3 18.0 33.9 31.7
- --------------------------------------------------------------------------------------------
Operating expenses 10.8 10.6 20.1 19.7
- --------------------------------------------------------------------------------------------
Income from operations 7.5 7.4 13.8 12.0
- --------------------------------------------------------------------------------------------
</TABLE>
Net sales in the packaging and insulation business segment increased by
$0.4 million to $59.3 million for the three months ended June 25, 1999 primarily
due to volume growth. Gross profit increased to 30.9% of net sales for the three
months ended June 25, 1999 from 30.6% of net sales for the same period in 1998
as a result of improved manufacturing efficiencies and higher production levels.
Operating expenses increased marginally to $10.8 million for the three months
ended June 25, 1999 from $10.6 million for the same period in 1998 primarily due
to higher distribution costs. Income from operations for the three months ended
June 25, 1999 increased by $0.1 million or 1.4% over the same period in 1998 as
a result of the reasons described above.
Net sales for the six months ended June 25, 1999 were $109.3 million. This
$2.3 million or 2.1% increase over the six months ended June 26, 1998 was
primarily due to volume growth. Gross profit as a percentage of net sales
increased to 31.0% for the six months ended June 25, 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 $0.4 million to $20.1 million for the six months ended June 25,
1999 due to higher selling and administrative costs. Income from operations for
the six months ended June 25, 1999 increased by $1.8 million or 15.0% over the
same period in 1998 as a result of the reasons described above.
Specialty Chemicals
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
----------------------------- -----------------------------
(Millions of dollars) June 25, 1999 June 26, 1998 June 25, 1999 June 26, 1998
<S> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------
Net sales $ 28.7 $ 32.2 $ 49.8 $ 58.9
- --------------------------------------------------------------------------------------------
Gross profit 4.3 7.1 6.5 12.9
- --------------------------------------------------------------------------------------------
Operating expenses 4.3 4.1 8.1 7.7
- --------------------------------------------------------------------------------------------
Income (loss) from operations - 3.0 (1.6) 5.2
- --------------------------------------------------------------------------------------------
</TABLE>
Net sales for the three months ended June 25, 1999 and June 26, 1998
included sales to the packaging and insulation segment of $7.5 million and $7.1
million, respectively. Net sales for the six months ended
10
<PAGE>
June 25, 1999 and June 26, 1998 included sales to the packaging and insulation
segment of $11.2 million and $10.0 million, respectively.
Net sales for the second quarter of fiscal 1999 decreased to $28.7 million
from $32.2 million for the same period in 1998. This $3.5 million decrease was
primarily due to reduced selling prices in both the North American and European
specialty chemicals businesses. These price reductions were the combined result
of lower underlying raw material prices and excess supply in the EPS market
caused by increased competition from Asian producers. Gross profit decreased to
15.0% of net sales for the second quarter of fiscal 1999 from 22.0% of net sales
for the same period in 1998. This decrease was caused by the reduction in
selling prices described above, partially offset by lower raw material costs
and increased manufacturing efficiencies. Operating expenses increased $0.2
million to $4.3 million for the three months ended June 25, 1999 as a result of
higher distribution and administrative costs in the European specialty chemicals
business.
Net sales in the specialty chemicals business segment decreased by $9.1
million to $49.8 million for the six months ended June 25, 1999. This decrease
was primarily due to reduced selling prices in the North American and European
specialty chemicals businesses resulting from lower underlying raw material
prices and excess supply in the EPS market. Gross profit decreased to 13.1% of
net sales for the six months ended June 25, 1999 as compared to 21.9% of net
sales for the same period in 1998. This decrease was caused by the
reduction in selling prices described above, partially offset by lower raw
material costs and increased manufacturing efficiencies. Operating expenses
increased $0.4 million to $8.1 million for the six months ended June 25, 1999
due to increased distribution and administrative costs in the European specialty
chemicals business, partially offset by lower administrative costs in the North
American specialty chemicals business.
Corporate & Other
For the three month and six month periods ended June 25, 1999, corporate
operating expenses increased by $0.7 million and $1.7 million to $1.7 million
and $3.8 million, respectively, from the same periods in 1998. These increases
were primarily due to increased depreciation, amortization and administrative
expenses.
Interest Expense
- ----------------
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
----------------------------- -----------------------------
(Millions of dollars) June 25, 1999 June 26, 1998 June 25, 1999 June 26, 1998
<S> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------
Interest expense $ 5.1 $ 4.6 $ 10.1 $ 9.2
- --------------------------------------------------------------------------------------------
</TABLE>
Interest expense for the three months and six months ended June 25, 1999
increased by $0.5 million and $0.9 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 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 June 25, 1999 and by $0.2 million for the six months
ended June 25, 1999.
11
<PAGE>
Income Taxes
- ------------
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
----------------------------- -----------------------------
(Millions of dollars) June 25, 1999 June 26, 1998 June 25, 1999 June 26, 1998
<S> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------
Income tax expense (benefit) $ 0.4 $ 1.8 $ (0.4) $ 2.2
- --------------------------------------------------------------------------------------------
</TABLE>
The effective tax rate for the three months ended June 25, 1999 decreased
to 36.5% of pre-tax income from 37.9% of pre-tax income for the same period in
1998. The effective tax rates for the six months ended June 25, 1999 and June
26, 1998 were 37.7% and 37.9% of pre-tax income, respectively. As of June 25,
1999 the Company had approximately $28.5 million of net operating loss
carryforwards for federal income tax purposes, which expire through 2019.
Liquidity and Capital Resources
- -------------------------------
During the six months ended June 25, 1999 and June 26, 1998, the Company's
principal source of funds consisted of cash from financing activities. During
the 1999 period, after tax cash flow of $7.3 million and borrowings on bank
financed debt of $12.0 million were primarily used to fund capital expenditures
of $10.3 million and a $7.6 million increase in working capital.
As of June 25, 1999, the Company had $28.0 million outstanding and $7.2
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.
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'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. As of June 25, 1999, the Company had incurred approximately
$150,000 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 with respect to these systems will have a
material adverse effect on the Company's business, financial condition, cash
flows or results of operations.
12
<PAGE>
In the event that any of the Company's operations remain Year 2000
noncompliant 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 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 its confirmation process and is currently evaluating
responses from suppliers and customers. Contingency plans will be developed, as
necessary, based upon the results of the evaluation of these 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 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.
13
<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
27.1 Financial Data Schedule
(b) Reports on Form 8-K
There were no reports filed on Form 8-K during the three month period
ended June 25, 1999.
14
<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: August 4, 1999 By:
Michael V. Valenza
Senior Vice President-Finance and
Chief Financial Officer
15
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<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM RADNOR
HOLDINGS CORPORATION AND SUBSIDIARIES AND IS QUALIFIED IN ITS ENITRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> DEC-26-1998
<PERIOD-END> JUN-25-1999
<CASH> 3,980
<SECURITIES> 593
<RECEIVABLES> 34,871
<ALLOWANCES> 0
<INVENTORY> 30,099
<CURRENT-ASSETS> 79,133
<PP&E> 217,252
<DEPRECIATION> 28,227
<TOTAL-ASSETS> 289,730
<CURRENT-LIABILITIES> 50,677
<BONDS> 211,802
0
0
<COMMON> 1
<OTHER-SE> 15,466
<TOTAL-LIABILITY-AND-EQUITY> 289,730
<SALES> 148,747
<TOTAL-REVENUES> 148,747
<CGS> 107,006
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<OTHER-EXPENSES> 0
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<INTEREST-EXPENSE> 10,110
<INCOME-PRETAX> (957)
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