<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K/A
ANNUAL REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1997
Commission File No. 1-12333
JLM INDUSTRIES, INC.
(Exact name of registrant as specified in its charter.)
Delaware 86-0385884
-------- ----------
(State of Incorporation) (IRS Employer Identification No.)
8675 Hidden River Parkway, Tampa, FL 33637
------------------------------------ -------
(Address of principal executive office) (Zip Code)
(813) 632-3300
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act: None.
Securities registered pursuant to Section 12 (g) of the Act:
Common Stock, par value $.01 per share
(Title of each class)
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
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to
this form 10-K. [ ]
The aggregate market value of common stock held by non-affiliates of the
registrant at March 20, 1998 was $30,725,615, based upon the last reported
sales price of the Common Stock as reported by the NASDAQ National Market. The
number of shares of the registrant's Common Stock outstanding at March 20, 1998
was 7,105,101.
<PAGE> 2
EMPLOYEES
As of December 31, 1997, the Company and its consolidated
subsidiaries had approximately 161 full-time employees. Of these, 72 employees
were in management and administration, 39 in sales and marketing and 50 were in
production and distribution. Approximately 26 of the Company's domestic
employees at the Blue Island Plant are covered by a collective bargaining
agreement with the Oil, Chemical and Atomic Workers Union. This agreement
expires on October 31, 1998. The Company considers its relations with both its
union and non-union employees to be satisfactory.
ENVIRONMENTAL REGULATION
The Company and its operations are subject to federal, state, local
and foreign environmental laws, rules, regulations, and ordinances concerning
emissions to the air, discharges to surface and subsurface waters, and the
generation, handling, storage, transportation, treatment, disposal and import
and export of hazardous materials ("Environmental Laws"). Compliance with such
Environmental Laws may result in significant capital expenditures by the
Company. Moreover, under certain Environmental Laws, the Company may be liable
for remediation of contamination at certain of its current and former
properties. For example, under the Comprehensive Environmental Response,
Compensation and Liability Act of 1990, as amended ("CERCLA") and similar state
laws, the Company and prior owners and operators of the Company's properties may
be liable for the costs of removal or remediation of certain hazardous or toxic
materials on, under or emanating from the properties, regardless of their
knowledge of, or responsibility for, the presence of such materials. CERCLA and
similar state laws also impose liability for investigation, cleanup costs and
damage to natural resources on persons who dispose of or arrange for the
disposal of hazardous substances at third-party sites. In addition, under the
Resource Conservation and Recovery Act of 1976 ("RCRA"), the holder of a permit
to treat or store hazardous waste can be required to remediate environmental
pollution from solid waste management areas at the permitted facility regardless
of when the contamination occurred.
Although it is impossible to predict precisely what effect
Environmental Laws will have on the Company in the future, the Company
believes, based on past experience and Management's best assessment of future
events, that any environmental liabilities will be determined and incurred over
an extended period of time, allowing the Company to fund them through its
operating cash flow and mitigating their impact on the Company's results of
operations. Accordingly, the Company further believes that the effect of any
such environmental liabilities would not be material in relation to the
Company's consolidated financial position at December 31, 1996 and 1997.
Depending on future operating results, however, the environmental liabilities
to be recorded in a given annual or quarterly period may result in charges that
materially affect the Company's results of operations for that period.
Although elevated levels of certain petroleum-related substances,
organic chemicals and metals have been detected in groundwater and/or soils at
the Company's Wilmington, North Carolina terminal facilities, the Company
believes that the presence of such substances is the result of either
historical use prior to the Company's acquisition of the site from Union Oil
Company of California ("Unocal") in 1992 and/or migration from neighboring
facilities (including an adjacent Superfund site that is currently being
remediated). Unocal, the prior owner of the site, is currently implementing a
state approved Remedial Action Plan ("RAP") to address onsite petroleum
contamination. The Company is not subject to any requirements under the RAP and
believes that the prior owner or the owners of the neighboring properties bear
responsibility for any additional remediation of petroleum-related contaminants.
Except for the ongoing remediation, no significant cleanup activities have been
conducted at the JLM Terminal since it was acquired by the Company in 1992.
Should remedial activities be conducted to address contaminants that are not
petroleum-related, the Company has insufficient information regarding the types,
concentrations, and possible cleanup levels of onsite contaminants to reasonably
estimate costs that may be associated with such remediation. In addition, the
Company may be entitled to be indemnified for such costs under the 1992 Asset
Purchase Agreement between the Company and Unocal. Pursuant to indemnification
provisions set forth in the agreement, Unocal agreed to indemnify the Company up
to $7.5 million for environmental liabilities at the JLM Terminal. The Company
believes that the low levels of various organic compounds detected in soils and
groundwater at the Blue Island plant are the result of historical use of the
site prior to its acquisition by the Company in 1995 and/or migration from
neighboring facilities. The concentrations of some of these compounds exceed
established state groundwater standards and/or cleanup objectives. However, the
Company also believes that the likelihood of either state or federal
environmental regulatory agencies seeking remediation in the near term is low,
based on the location of the facility, the character of the area (each of which
are factors in assessing risk), and the fact that the site is pending removal
from the federal list of contaminated sites. To date, the Company has not been
required to plan, undertake, or fund any remedial activities.
12
<PAGE> 3
$0.5 million as additional consideration for its ownership interest in SK
Chemical Trading Pte. Ltd. The Company expects to fund this payment through the
Company's current credit facilities.
In February 1998, the Company signed a non-binding letter of intent to
purchase all of the assets of Browning Chemical Company ("Browning") for $9.5
million of which $7.5 million will be paid in cash and the remaining $2.0
million will be evidenced by a promissory note payable in equal installments
over four years. Browning is a leading distributor of inorganic chemicals
throughout the United States. It is expected that the purchase will be
consummated March 31, 1998 provided, however, the consummation of the purchase
is subject to, among other things, negotiation and execution of a definitive
agreement.
On February 20, 1998, the Company entered into a non-binding agreement
to purchase 50.1% of the outstanding stock of Inquinosa S.A. ("Inquinosa"). The
purchase price will be determined based upon earnings over a five-year period as
defined in the agreement. The consummation of the purchase is subject to, among
other things, negotiation and execution of a definitive agreement. Inquinosa is
a leading marketer of lindane throughout the world.
On March 2, 1998, the Company signed a non-binding letter of intent to
acquire 100% of the outstanding stock of Tolson Holding B.V. ("Tolson"), for
approximately $5.7 million. The purchase will require the Company to make a
$2.9 million cash down payment and execute a $2.8 million note payable due in
five equal installments with interest accruing at the six month LIBOR rate and a
$750,000 balloon payment. However, pursuant to the terms of the letter of
intent, the purchase price may be subject to certain adjustments, which
adjustments could partially or completely offset the cash purchase price. The
consummation of the purchase is subject to, among other things, negotiation and
execution of a definitive agreement. Tolson is a Dutch global distributor and
trader of methanol, solvents, aromatics and olefins.
On March 10, 1998, the Company executed a long-term purchase agreement
with Solutia, Inc. ("Solutia") to purchase on a take-or-pay basis phenol
produced at Solutia's proposed phenol plant to be built on the Gulf Coast
of the United States. Under terms of the agreement, the Company will advance
over three years $35 million to Solutia as a partial prepayment for future
inventory purchases. The prepayment will be paid as follows: $5 million on
or about December 31, 1998, $6.5 million in equal quarterly payments in 1999 and
the remaining balance in equal quarterly payments in 2000. Under the agreement
Solutia is required to sell 125 million pounds of phenol per year (75 million
pounds in the first year of production) to JLM for 15 years at a specified price
outlined in the agreement with a credit on a per pound basis for the advance
payments mentioned above. Construction of the plant is anticipated to commence
in the beginning of 1999 and phenol production is anticipated to begin at the
plant in the fourth quarter of 2000. The agreement also provides that if the
Company's available borrowing capacity under its aggregate credit facilities is
less than the total amount of the advance payments owed to Solutia, Solutia may
require the Company to deliver to Solutia an executed, irrevocable bank guaranty
equal to the total amount of the advance payments owed to Solutia.
The Company expects capital expenditures for its manufacturing and
terminaling facilities to be approximately $1.2 million for each of the years
1998, 1999 and 2000.
JLM believes its liquidity and capital resources, including its ability
to borrow additional amounts under its credit agreements, are sufficient to meet
its currently anticipated needs through the foreseeable future and to permit it
to continue to implement its business strategy. In addition, requirements of
bringing the Company's information systems to compliance with Year 2000
standards will not have a material impact on its liquidity or capital resources.
ITEM 8. CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA:
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<S> <C>
Independent Auditors' Report 26
Consolidated Balance Sheets - December 31, 1996 and 1997 27
Consolidated Statements of Income - Years Ended December 31, 1995,
1996 and 1997 28
Consolidated Statements of Changes in Stockholders' Equity - Years
Ended December 31, 1995, 1996 and 1997 29
Consolidated Statements of Cash Flows - Years Ended December 31,
1995, 1996 and 1997 30
Notes to Consolidated Financial Statements 31
CONSOLIDATED SUPPLEMENTAL SCHEDULE
Independent Auditors' Report 47
Supplemental Schedule 48
</TABLE>
25
<PAGE> 4
22. SUBSEQUENT EVENTS
In February 1998, the Company signed a letter of intent to purchase
all of the assets of Browning Chemical Company ("Browning") for $9.5
million of which $7.5 million will be paid in cash and the remaining $2.0
million will be evidenced by a promissory note payable in equal
installments over four years. Browning is a leading distributor of
inorganic chemicals throughout the United States. It is expected that the
purchase will be effective March 31, 1998. The acquisition of Browning's
assets will be accounted for as a purchase.
On February 20, 1998, the Company entered into an agreement to purchase
50.1% of the outstanding stock of Inquinosa S.A. ("Inquinosa"). The
purchase price will be determined based upon earnings over a five-year
period as defined in the agreement. Inquinosa is a leading marketer of
lindane throughout the world. The purchase of Inquinosa's common stock
will be accounted for as a purchase.
On March 2, 1998, the Company signed a letter of intent to acquire
100% of the outstanding stock of Tolson Holding B.V. ("Tolson"), for
approximately $5.7 million. The purchase will require the Company to make
a $2.9 million cash down payment and execute a $2.8 million note payable
due in five equal installments with interest accruing at the six month
LIBOR rate and a $750,000 balloon payment. However, pursuant to the terms
of the letter of intent, the purchase price may be subject to certain
adjustments, which adjustments could partially or completely offset the
cash purchase price. Tolson is a Dutch global distributor and trader of
methanol, solvents, aromatics and olefins. The purchase of Tolson's common
stock will be accounted for as a purchase.
On March 10, 1998, the Company executed a long-term purchase agreement
with Solutia, Inc. ("Solutia") to purchase on a take-or-pay basis phenol
produced at Solutia's proposed phenol plant to be built on the Gulf Coast
of the United States. Under terms of the agreement, the Company will
advance over three years $35 million to Solutia as a partial prepayment for
future inventory purchases. The prepayment will be paid as follows: $5
million on or about December 31, 1998, $6.5 million in equal quarterly
payments in 1999 and the remaining balance in equal quarterly payments in
2000. Under the agreement Solutia is required to sell 125 million pounds of
phenol per year (75 million pounds in the first year of production) to JLM
for 15 years at a specified price outlined in the agreement with a credit
on a per pound basis for the advancement mentioned above. Construction of
the plant is anticipated to commence in the beginning of 1999 and phenol
production is anticipated to begin at the plant in the fourth quarter of
2000.
46
<PAGE> 5
SIGNATURES
Pursuant to the requirements of section 13 or 15 (d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
JLM INDUSTRIES, INC.
April 13, 1998 By: /s/ John L. Macdonald
-------------------------------
John L. Macdonald
President and Chief Executive Officer
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, this report has been signed below by the following
persons on behalf of the registrant and in the capacities and on the dates
indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ John L. Macdonald President, Chief Executive Officer and April 13, 1998
- ----------------------------- Director (Principal Executive Officer)
John L. Macdonald
/s/ Frank A. Musto Chief Financial Officer, Vice President April 13, 1998
- ----------------------------- and Director (Principal Financial Officer
Frank A. Musto and Principal Accounting Officer)
/s/ Thaddeus J. Lelek Vice President and Director April 13, 1998
- -----------------------------
Thaddeus J. Lelek
/s/ Wilfred J. Kimball Vice President and Director April 13, 1998
- -----------------------------
Wilfred J. Kimball
</TABLE>
58
