SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarter ended September 30, 1999
Commission File Number 333-76057
RUSSELL-STANLEY HOLDINGS, INC.
(Exact name of registrant as specified in charter)
Delaware 3412 22-3525626
(State or other jurisdiction of (Primary Standard Industrial (IRS Employer
incorporation or organization) Classification Code Number) Identification
Number)
685 Route 202/206 Bridgewater, New Jersey 08807
(Address of principal executive offices) (Zip code)
(908)203-9500
(Registrant's telephone number, including area code)
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 the number of shares outstanding of each of the issuer's classes of
common stock, as of the close of the period covered by this report:
Common Stock, $.01 par value per share: 2,200,764 shares
(See Note 16 to Financial Statements included
as part of Form S-4, File No. 333-76057)
<PAGE>
TABLE OF CONTENTS
Page
PART I: FINANCIAL INFORMATION
ITEM 1: CONSOLIDATED FINANCIAL STATEMENTS 3
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS 18
ITEM 3: QUANTITATIVE AND QUALITATIVE DISCLOSURE
ABOUT MARKET RISK 25
PART II: OTHER INFORMATION
ITEM 1: LEGAL PROCEEDINGS 26
ITEM 2: CHANGES IN SECURITIES 26
ITEM 3: DEFAULTS UPON SENIOR SECURITIES 26
ITEM 4: SUBMISSION OF MATTERS TO A VOTE
OF SECURITY HOLDERS 26
ITEM 5: OTHER INFORMATION 26
ITEM 6: EXHIBITS AND REPORTS ON FORM 8-K 26
SIGNATURES 29
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS
RUSSELL-STANLEY HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)
(In thousands)
<TABLE>
<S> <C> <C>
Three Months Ended Nine Months Ended
September 30, September 30,
------------- -------------
1999 1998 1999 1998
---- ---- ----- ----
(Unaudited) (Unaudited)
NET SALES $71,549 $67,355 $215,672 $211,511
COST OF SALES 56,046 51,909 165,036 163,535
------ ------ ------- -------
Gross Profit 15,503 15,446 50,636 47,976
OPERATING EXPENSES
Selling 6,068 5,005 17,903 14,785
General and administrative 5,688 5,732 18,181 16,177
Amortization of intangibles 447 768 2,053 2,434
Non-recurring charges - 33 - 3,500
------- ------ ------- ------
Total expenses 12,203 11,538 38,137 36,896
INCOME FROM OPERATIONS 3,300 3,908 12,499 11,080
INTEREST EXPENSE 5,576 4,390 15,554 11,841
OTHER (INCOME) EXPENSE - net 56 188 204 275
------- ------ ------- ------
LOSS BEFORE INCOME TAXES
AND EXTRAORDINARY ITEM (2,332) (670) (3,259) (1,036)
INCOME TAX (BENEFIT) PROVISION (505) 116 (615) 31
------- ------ ------- ------
LOSS BEFORE EXTRAORDINARY ITEM (1,827) (786) (2,644) (1,067)
EXTRAORDINARY ITEM, net of tax - - 763 -
-------- ------- ----- --------
NET LOSS (1,827) (786) (3,407) (1,067)
OTHER COMPREHENSIVE INCOME
(LOSS) 129 (877) 838 (1,407)
-------- ------- ----- --------
COMPREHENSIVE LOSS $ (1,698) $ (1,663) $(2,569) $(2,474)
======= ======= ======= ========
See notes to consolidated financial statements.
</TABLE>
<PAGE>
RUSSELL-STANLEY HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands)
<TABLE>
<S> <C> <C>
September 30, December 31,
1999 1998
---- ----
(Unaudited)
ASSETS
CURRENT ASSETS
Cash $1,355 $ 1,630
Accounts receivable - net 33,103 29,408
Inventories 22,800 18,761
Prepaid taxes and income taxes receivable-
net 5,558 3,460
Prepaid expenses and other current assets 1,835 2,132
Deferred tax benefit - net 740 602
------- -------
Total current assets 65,391 55,993
------- -------
PROPERTY, PLANT AND EQUIPMENT - net 94,951 92,643
------- -------
OTHER ASSETS:
Goodwill and other intangibles - net 107,039 108,195
Deferred financing costs - net 6,659 1,294
Other noncurrent assets 265 129
------- -------
Total other assets 113,963 109,618
------- -------
TOTAL ASSETS $274,305 $258,254
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable and accrued expenses $39,163 $43,079
Current maturities of long-term debt - 10
------- -------
Total current liabilities 39,163 43,089
LONG TERM DEBT 194,903 171,592
DEFERRED TAXES - net 5,021 4,662
OTHER NON CURRENT LIABILITIES 4,379 5,374
------- -------
Total liabilities 243,466 224,717
------- -------
STOCKHOLDERS' EQUITY 30,839 33,537
------- -------
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY $274,305 $258,254
======== ========
</TABLE>
See notes to consolidated financial statements.
<PAGE>
<TABLE>
RUSSELL-STANLEY HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
<S> <C>
Nine Months Ended
September 30,
------------
1999 1998
---- ----
(Unaudited)
CASH FLOWS PROVIDED BY OPERATING ACTIVITIES:
Net loss $(3,407) $(1,067)
Adjustments to reconcile net loss to
Net cash provided by operating activities:
Depreciation and amortization 22,657 19,868
Extraordinary item 1,271 -
Other noncash items - 50
Changes in operating assets and liabilities:
Decrease (increase) in accounts receivable (3,695) 250
Decrease (increase) in inventories (4,039) 1,954
Decrease (increase) in prepaid taxes and other
current assets (1,524) 1,170
Increase (decrease) in accounts payable and
accrued expenses (6,093) 5,236
Increase (decrease) in deferred income taxes 423 (774)
Increase (decrease) in other - net (157) 312
------- --------
Net cash provided by operating activities 5,436 26,999
------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition, net of cash - (16,562)
Capital expenditures (21,903) (20,479)
Other, net - 101
---------- --------
Net cash used in investing activities (21,903) (36,940)
---------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds (repayments) from long-term borrowings-
net 44,058 (286)
Proceeds (repayments) from revolving credit loan-
net (20,697) 12,419
Cash paid for financings costs (7,214) -
Other 45 (79)
--------- --------
Net cash provided by financing activities 16,192 12,054
--------- --------
NET CHANGE IN CASH (275) 2,113
CASH, BEGINNING OF PERIOD 1,630 1,051
-------- --------
CASH, END OF PERIOD $ 1,355 $ 3,164
======= =======
</TABLE>
See notes to consolidated financial statements
<PAGE>
RUSSELL-STANLEY HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - BASIS OF PRESENTATION
These consolidated financial statements and related notes thereto as of
September 30, 1999 and for each of the three and nine month periods ended
September 30, 1999 and 1998 are unaudited.
The information furnished herein reflects all adjustments which are, in the
opinion of management, necessary for a fair presentation of the consolidated
balance sheets as of September 30, 1999 and December 31, 1998, the consolidated
statements of operations and comprehensive income for the three month and nine
month periods ended September 30, 1999 and 1998 and the statements of cash flows
for the nine month periods ended September 30, 1999 and 1998. The preparation of
financial statements in conformity with generally accepted accounting principles
requires management to make certain estimates and assumptions that affect the
amounts reported on the financial statements and accompanying the notes. Actual
amounts could differ from those estimates. Certain items in 1998 have been
reclassified to conform to the 1999 presentation.
These financial statements should be read in conjunction with the financial
statements and notes thereto included in Russell-Stanley Holdings, Inc.'s (the
"Company's") Registration Statement on Form S-4, File No. 333-76057.
NOTE 2 - RECENTLY ISSUED ACCOUNTING STANDARD
In June 1998, Statement of Financial Accounting Standards No. 133,
Accounting for Derivative Instruments and Hedging Activities ("SFAS 133") was
issued. SFAS 133 establishes new disclosure requirements, which provide a
comprehensive standard for recognition and measurement of derivatives and
hedging activities. SFAS 133 will take effect in 2001 and will require new
disclosures, all derivatives to be recorded on the balance sheet at fair value,
and establish special accounting for certain types of hedging activities. Based
on the Company's current derivatives, an interest rate collar and foreign
currency forward contracts, management does not believe that SFAS 133 will have
a material effect on the Company's financial condition or results of operations.
NOTE 3 - INVENTORIES
Inventories consist of the following:
September 30, December 31,
1999 1998
------------------ -----------------
(Unaudited)
(In thousands)
Raw material $12,206 $11,380
Work-in-process 1,937 1,617
Finished goods 8,657 5,764
-------- --------
Total $22,800 $18,761
====== ======
NOTE 4 - LONG-TERM DEBT
Long-term debt consists of the following:
September 30, December 31,
1999 1998
------------------ -----------------
(Unaudited)
(In thousands)
Senior subordinated notes $ 148,939 $ -
Revolving credit loan and term loans 45,964 171,591
Capital lease obligations - 11
-------- --------
194,903 171,602
-------- --------
Less current maturities - 10
-------- --------
Long-term debt $ 194,903 $ 171,592
======= =======
On February 10, 1999, the Company refinanced its revolving credit loan and
term loans by amending its senior credit facility to provide for a $75.0 million
revolving credit line (including a $15.0 million Canadian credit line in U.S.
dollars), which bears interest, at the Company election, at a combination of
domestic source and Eurodollar borrowing rates which fluctuate based on the
Company's EBITDA and debt levels, and a $25.0 million term loan, bearing
interest at 9.48% (collectively, the "Senior Credit Facility"). The revolving
credit facility matures in February 2004 and the term loan matures in two equal
installments in June 2006 and 2007. In addition, the Company issued $150
million of 10.875% Senior Subordinated Notes (the "Notes") due February 15,
2009, at 99.248%, resulting in an effective yield of 11.0%. The Senior Credit
Facility contains certain covenants and restrictions and is secured by
substantially all assets of the Company. The Notes require semiannual interest
payments commencing August 15, 1999 and mature February 2009. The Notes are
subordinate to all existing and future senior indebtedness of the Company
and are unconditionally guaranteed by the domestic subsidiaries and contain a
number of customary covenants and restrictions. Deferred financing charges of
approximately $7.2 million were incurred in connection with the refinancing.
The Notes, revolving credit loan, and term loans have the following
provisions (dollars in thousands):
<TABLE>
<C> <S> <S> <S> <S> <S> <S>
Interest Interest
Rate at Balance at Rate at Balance at
Domestic Eurodollar September 30, September 30, December 31, December 31,
Interest Rate Interest Rate 1999 1999 1998 1998
----------------- ----------------- -------------- ------------- ------------- --------------
(Unaudited) (Unaudited)
Revolving Prime plus margin LIBOR plus margin 8.25-
Credit Loan not less than 1.25% not less than 2.75% 9.50% $ 12,338 9.00% $ 22,837
Revolving Canadian prime plus
Credit loan - margin not less than - 7.50 8,626 - -
Foreign 1.25%
Term Loan A - Prime plus margin LIBOR plus margin
Domestic not less than 1.00% not less than 2.50% - - 9.00 35,000
Term Loan A - Prime plus margin LIBOR plus margin
Foreign not less than 1.00% not less than 2.50% - - 9.00 9,182
Term Loan B - Prime plus margin LIBOR plus margin
not less than 1.50% not less than 3.00% - - 9.50 79,572
Term Loan C - Fixed rate Fixed rate 9.48 25,000 9.48 25,000
Senior
Subordinated
Notes Fixed rate - 10.88 148,939 -
--------- ----------
Total $ 194,903 $ 171,591
========= =========
Maturities of long-term debt
(In thousands)
2004 $ 20,964
2005 and thereafter 173,939
-------
Total $ 194,903
=======
</TABLE>
NOTE 5 - STOCKHOLDERS' EQUITY
<TABLE>
<S> <C> <C>
September 30, December 31,
1999 1998
------------ -----------
(Unaudited)
(In thousands)
Common Stock, $.01 par value, $ 22 $ 22
At September 30, 1999 and December 31, 1998,
3,000,000 shares were authorized; 2,201,00 and
2,205,000 shares were issued and outstanding at
September 30, 1999 and December 31, 1998,
respectively
Accumulated paid in capital 70,180 70,180
Accumulated deficit (32,677) (29,270)
Accumulated other comprehensive income(loss) (1,640) (2,478)
Less: Notes receivable for shares issued to
management (13) (64)
Treasury stock (5,033) (4,853)
------- -------
TOTAL STOCKHOLDERS' EQUITY $ 30,839 $ 33,537
======= =========
</TABLE>
NOTE 6 - EXTRAORDINARY ITEM
The Company used a portion of the proceeds from the debt refinancing
to repay its existing debt. As a result of this early extinguishment of debt,
the Company incurred an extraordinary charge in February 1999 totaling
approximately $763,000, net of tax benefits, consisting of the write-off of
unamortized deferred financing costs.
NOTE 7 - COMPREHENSIVE INCOME (LOSS)
The Company has adopted Statement of Financial Accounting Standards
("SFAS") No. 130, "Reporting Comprehensive Income." Other comprehensive income
(loss) consists of foreign currency translation adjustments for each of the
three and nine month periods ended September 30, 1999 and 1998.
<PAGE>
NOTE 8 - CONTINGENCY
In January 1999, the U.S. Environmental Protection Agency (the "EPA")
confirmed the presence of contaminants, including dioxin, in and along the
Woonasquatucket River in Rhode Island. Prior to 1970, New England Container Co.,
Inc. ("NEC") operated a facility in North Providence, Rhode Island, along the
Woonasquatucket River at a site where contaminants have been found. Recent press
reports identify NEC as a business that may have contributed to the
contamination. On September 15, 1999, NEC received a letter from the EPA
asserting that NEC is a potentially responsible party. Notwithstanding that NEC
no longer operates the facility, and did not operate the facility at the time
the Company acquired the outstanding capital stock of NEC in July 1998, NEC
could incur liability under federal and state environmental laws and/or as a
result of civil litigation. The Company believes that any resulting liability is
subject to a contractual indemnity from Vincent J. Buonanno, one of its
directors and the former owner of NEC. However, such indemnity is subject to a
$2.0 million limit. The Company is currently unable to estimate the likelihood
or extent of any liability; however, this matter may result in liability to NEC
that could have a material adverse effect on the Company's financial condition
and results of operations.
NOTE 9 - SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Nine Months Ended
September 30,
----------------
(In thousands)
1999 1998
---- ----
Cash paid during the period for:
Interest $17,181 $7,494
======= ======
Income Taxes $ 1,796 $ 478
======= ======
Non-Cash Financing Activity:
Term Loans Exchanged for
Senior Subordinated Notes
(Note 4) $150,000 $ -
======= ======
NOTE 10 - GUARANTOR SUBSIDIARIES
The Company's payment obligations under the Notes are fully,
unconditionally, jointly and severally guaranteed by its current domestic
subsidiaries, principally: Russell-Stanley Corp. ("RSC"), Container Management
Services ("CMS"), and NEC (collectively, the "Guarantor Subsidiaries"). Each of
the Guarantor Subsidiaries is a direct or indirect wholly-owned subsidiary of
the Company. The Company's payment obligations under the Notes will not be
guaranteed by the remaining subsidiary, Hunter Drums Limited ("Hunter") (the
"Non-Guarantor Subsidiary"). The obligations of each Guarantor Subsidiary under
their guarantee of the Notes are subordinated to each subsidiary's obligations
under their guarantee of the Senior Credit Facility.
Presented below is condensed combining financial information for the
Parent Company, the Guarantor Subsidiaries and the Non-Guarantor Subsidiary.
In the Company's opinion, separate financial statements and other disclosures
concerning each of the Guarantor Subsidiaries would not provide additional
information that is material to investors. Therefore, the Guarantor
Subsidiaries are combined in the presentation below.
Investments in subsidiaries are accounted for by the Company under the
equity method of accounting. Earnings of subsidiaries are, therefore, reflected
in the Company's investments in and advances to/from subsidiaries account and
earnings (losses). The elimination entries eliminate investments in
subsidiaries, related stockholders' equity and other intercompany balances and
transactions.
RUSSELL-STANLEY HOLDINGS, INC. AND SUBSIDIARIES
SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1999
(In Thousands)
(Unaudited)
<TABLE>
<S> <C> <C> <C> <C> <C>
Non
Parent Guarantor Guarantor
Company Subsidiaries Subsidiary Eliminations Consolidated
------- ------------ ---------- ------------ ------------
NET SALES $ -- $ 62,570 $ 8,979 $ -- $ 71,549
COST OF SALES -- 49,355 6,691 -- 56,046
GROSS PROFIT -- 13,215 2,288 -- 15,503
TOTAL EXPENSES -- 10,795 1,408 -- 12,203
------- ------- ------- ------ -------
INCOME FROM OPERATIONS -- 2,420 880 -- 3,300
EQUITY LOSS (1,496) -- -- 1,496 --
INTEREST EXPENSE 553 4,705 318 -- 5,576
OTHER (INCOME)
EXPENSE - net -- 49 7 -- 56
------- ------- ------- ------ -------
INCOME (LOSS) BEFORE
INCOME TAXES (2,049) (2,334) 555 1,496 (2,332)
PROVISION (BENEFIT) FOR
INCOME TAXES (222) (535) 252 -- (505)
-------- -------- ------- ------ -------
NET INCOME (LOSS) $ (1,827) $ (1,799) $ 303 $ 1,496 $ (1,827)
======== ======== ======== ======== ========
</TABLE>
<PAGE>
RUSSELL-STANLEY HOLDINGS, INC. AND SUBSIDIARIES
SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1998
(In Thousands)
(Unaudited)
<TABLE>
<S> <C> <C> <C> <C> <C>
Non-
Parent Guarantor Guarantor
Company Subsidiaries Subsidiary Eliminations Consolidated
------- ------------ ---------- ------------ ------------
NET SALES $ -- $ 59,057 $ 8,298 $ -- $ 67,355
COST OF SALES -- 45,885 6,024 -- 51,909
------ ------- ------ ----- -------
GROSS PROFIT -- 13,172 2,274 -- 15,446
TOTAL EXPENSES -- 10,112 1,426 -- 11,538
------ ------- ------ ----- -------
INCOME FROM OPERATIONS -- 3,060 848 -- 3,908
EQUITY LOSS (409) -- -- 409 --
INTEREST EXPENSE 565 3,461 364 -- 4,390
OTHER (INCOME)
EXPENSE - net -- (2) 190 -- 188
------- ------- ------ ------ -------
INCOME (LOSS) BEFORE
INCOME TAXES (974) (399) 294 409 (670)
PROVISION (BENEFIT) FOR
INCOME TAXES (188) 166) 138 -- 116
-------- -------- ------ ------ -------
NET INCOME (LOSS) $ (786) $ (565) $ 156 $ 409 $ (786)
======== ======== ====== ======== ========
</TABLE>
<PAGE>
RUSSELL-STANLEY HOLDINGS, INC. AND SUBSIDIARIES
SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999
(In Thousands)
(Unaudited)
<TABLE>
<S> <C> <C> <C> <C> <C>
Non-
Parent Guarantor Guarantor
Company Subsidiaries Subsidiary Eliminations Consolidated
------- ------------ ---------- ------------ ------------
NET SALES $ -- $ 188,289 $ 27,383 $ -- $ 215,672
COST OF SALES -- 145,069 19,967 -- 165,036
------ -------- -------- ----- ---------
GROSS PROFIT -- 43,220 7,416 -- 50,636
TOTAL EXPENSES -- 33,718 4,419 -- 38,137
------ -------- -------- ----- ---------
INCOME FROM OPERATIONS -- 9,502 2,997 -- 12,499
EQUITY LOSS (1,663) -- -- 1,663 --
INTEREST EXPENSE 1,587 12,989 978 -- 15,554
OTHER (INCOME)
EXPENSE - net -- 309 (105) -- 204
------ -------- -------- ----- ---------
INCOME (LOSS) BEFORE
INCOME TAXES (3,250) (3,796) 2,124 1,663 (3,259)
PROVISION (BENEFIT) FOR
INCOME TAXES (606) (964) 955 -- (615)
------ -------- -------- ----- ---------
INCOME (LOSS) BEFORE
EXTRAORDINARY ITEM (2,644) (2,832) 1,169 1,663 (2,644)
EXTRAORDINARY ITEM,
Net of tax 763 -- -- -- 763
------ -------- -------- ----- ---------
NET INCOME (LOSS) $ (3,407) $ (2,832) $ 1,169 $ 1,663 $ (3,407)
========= ========= ========== ======== =========
</TABLE>
<PAGE>
RUSSELL-STANLEY HOLDINGS, INC. AND SUBSIDIARIES
SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998
(In Thousands)
(Unaudited)
<TABLE>
<S> <C> <C> <C> <C> <C>
Non-
Parent Guarantor Guarantor
Company Subsidiaries Subsidiary Eliminations Consolidated
------- ------------ ---------- ------------ ------------
NET SALES $ -- $ 184,018 $ 27,493 $ -- $ 211,511
COST OF SALES -- 143,404 20,131 -- 163,535
--------- --------- --------- ------- ---------
GROSS PROFIT -- 40,614 7,362 -- 47,976
TOTAL EXPENSES -- 32,563 4,333 -- 36,896
--------- --------- --------- ------- ---------
INCOME FROM OPERATIONS -- 8,051 3,029 -- 11,080
EQUITY INCOME 20 -- -- (20) --
INTEREST EXPENSE 1,628 9,180 1,033 -- 11,841
OTHER (INCOME)
EXPENSE - net -- (33) 308 -- 275
--------- --------- --------- ------- ---------
INCOME (LOSS) BEFORE
INCOME TAXES (1,608) (1,096) 1,688 (20) (1,036)
PROVISION (BENEFIT) FOR
INCOME TAXES (541) (81) 653 -- 31
--------- --------- --------- ------- ---------
NET INCOME (LOSS) $ (1,067) $ (1,015) $ 1,035 $ (20) $ (1,067)
========= ========= ========= ========= =========
</TABLE>
<PAGE>
<TABLE>
RUSSELL-STANLEY HOLDINGS, INC. AND SUBSIDIARIES
SUPPLEMENTAL CONDENSED CONSOLIDATING BALANCE SHEET
SEPTEMBER 30, 1999
(In Thousands)
(Unaudited)
<C> <S> <S> <S> <S> <S>
Non-
Parent Guarantor Guarantor
Company Subsidiaries Subsidiary Eliminations Consolidated
------- ------------ ---------- ------------ ------------
ASSETS
CURRENT ASSETS:
Cash $ - $ 1,355 $ - $ - $ 1,355
Accounts receivable - net - 28,653 4,450 - 33,103
Inventories - 19,930 2,870 - 22,800
Prepaid and other current
assets - net - 8,013 120 - 8,133
-------- ---------- --------- ---------
Total current assets - 57,951 7,440 - 65,391
-------- ---------- --------- --------- --------
PROPERTY, PLANT AND
EQUIPMENT - net - 89,057 5,894 - 94,951
-------- ---------- --------- --------- --------
OTHER ASSETS:
Goodwill and other
Intangibles - net - 88,780 18,259 - 107,039
Deferred financing costs -
net - 6,659 - - 6,659
Other noncurrent assets - 265 - - 265
Intercompany advances 19,869 20,632 43 (40,544) -
Investment in subsidiaries 38,259 - - (38,259) -
-------- ---------- --------- --------- -----------
TOTAL ASSETS $ 58,128 $ 263,344 $ 31,636 $ (78,803) $ 274,305
========= =========== ========== ============ ===========
LIABILITIES AND
STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable and
accrued expenses $ (2,511) $ 37,300 $ 4,374 $ - $ 39,163
-------- ---------- --------- --------- -----------
Current maturities of long-
term debt - - -
-------- ---------- --------- ---------
Total current liabilities (2,511) 37,300 4,374 - 39,163
LONG-TERM DEBT 19,997 166,280 8,626 - 194,903
-------- ---------- --------- --------- --------
DEFERRED TAXES - net (749) 4,715 1,055 - 5,021
OTHER NON CURRENT
LIABILITIES - 3,244 1,135 - 4,379
-------- ---------- --------- --------- --------
Total liabilities 16,737 211,539 15,190 - 243,466
-------- ---------- --------- --------- --------
INTERCOMPANY ADVANCES - 32,577 7,214 (39,791) -
TOTAL STOCKHOLDERS' EQUITY 41,391 19,228 9,232 (39,012) 30,839
---------- ---------- ---------- ----------- ---------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 58,128 $ 263,344 $ 31,636 $ (78,803) $ 274,305
========== ========== ========== ========== =========
</TABLE>
<PAGE>
<TABLE>
RUSSELL-STANLEY HOLDINGS, INC. AND SUBSIDIARIES
SUPPLEMENTAL CONDENSED CONSOLIDATING BALANCE SHEET
DECEMBER 31, 1998
(In Thousands)
(Unaudited)
<C> <S> <S> <S> <S> <S>
Non-
Parent Guarantor Guarantor
Company Subsidiaries Subsidiary Eliminations Consolidated
------- ------------ ---------- ------------ ------------
ASSETS
CURRENT ASSETS:
Cash $ - $ 1,246 $ 384 $ - $ 1,630
Accounts receivable - net - 26,263 3,226 (81) 29,408
Inventories - 16,354 2,407 - 18,761
Prepaid and other current
assets - net - 2,412 398 3,384 6,194
-------- ---------- -------- -------- ---------
Total current assets - 46,275 6,415 3,303 55,993
-------- ---------- -------- -------- ---------
PROPERTY, PLANT AND
EQUIPMENT - net - 86,720 5,923 - 92,643
-------- ---------- -------- -------- ---------
OTHER ASSETS:
Goodwill and other
Intangibles - net - 91,869 17,570 (1,244) 108,195
Deferred financing costs -
net 1,294 - - - 1,294
Other noncurrent assets - 129 - - 129
Intercompany advances 21,434 76,033 390 (97,857) -
Investment in subsidiaries 37,788 - - (37,788) -
-------- ---------- -------- -------- ---------
TOTAL ASSETS $ 60,516 $ 301,026 $ 30,298 $(133,586) $ 258,254
========= ========== ========= ========= =========
LIABILITIES AND
STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable and
accrued expenses $ (2,149) $ 37,767 $ 4,336 $ 3,125 $ 43,079
Current maturities of long-
term debt - 10 - - 10
-------- ---------- -------- -------- ---------
Total current liabilities (2,149) 37,777 4,336 3,125 43,089
-------- ---------- -------- -------- ---------
LONG-TERM DEBT 19,997 142,413 9,182 - 171,592
-------- ---------- -------- -------- ---------
DEFERRED TAXES - net - 2,331 2,331 - 4,662
OTHER NON CURRENT
LIABILITIES - 4,714 1,410 (750) 5,374
-------- ---------- -------- -------- ---------
Total liabilities 17,848 187,235 17,259 2,375 224,717
-------- ---------- -------- -------- ---------
INTERCOMPANY ADVANCES - 90,252 6,790 (97,042) -
TOTAL STOCKHOLDERS'
EQUITY 42,668 23,539 6,249 (38,919) 33,537
-------- ---------- -------- -------- ---------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 60,516 $ 301,026 $ 30,298 $ (133,586) $ 258,254
========== =========== ========= ========== ===========
</TABLE>
<PAGE>
<TABLE>
RUSSELL-STANLEY HOLDINGS, INC. AND SUBSIDIARIES
SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999
(In Thousands)
(Unaudited)
<S> <C> <C> <C> <C> <C>
Non-
Parent Guarantor Guarantor
Company Subsidiaries Subsidiary Eliminations Consolidated
CASH FLOWS PROVIDED BY
OPERATING ACTIVITIES:
Net (loss) income $ (3,407) $ (2,832) $ 1,169 $ 1,663 $ (3,407)
Adjustments to reconcile net income
(loss) to net cash provided by (used
in) operating activities:
Equity loss 1,663 - - (1,663) -
Depreciation and amortization 23 21,571 1,063 - 22,657
Extraordinary item 1,271 - - - 1,271
Changes in operating assets
and liabilities (1,114) (13,614) (357) - (15,085)
------- ------- ------ ------- --------
Net cash provided by (used in)
operating activities (1,564) 5,125 1,875 - 5,436
------- ------- ------ ------- --------
CASH FLOWS USED IN
INVESTING ACTIVITIES - (21,221) (682) - 21,903
------- ------- ------ ------- --------
CASH FLOWS PROVIDED
BY (USED IN) FINANCING
ACTIVITIES 1,564 16,205 (1,577) - 16,192
------- ------- ------ ------- --------
NET CHANGE IN CASH - 109 (384) - (275)
CASH, BEGINNING OF PERIOD - 1,246 384 - 1,630
------- ------- ------ ------- --------
CASH, END OF PERIOD $ - $ 1,355 $ - $ - $ 1,355
======== ======= ========= ========= ===========
</TABLE>
<PAGE>
<TABLE>
RUSSELL-STANLEY HOLDINGS, INC. AND SUBSIDIARIES
SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998
(In Thousands)
(Unaudited)
<S> <C> <C> <C> <C> <C>
Non-
Parent Guarantor Guarantor
Company Subsidiaries Subsidiary Eliminations Consolidated
------- ------------ ---------- ------------ ------------
CASH FLOWS PROVIDED BY
OPERATING ACTIVITIES:
Net (loss) income $ (1,067) $ (1,015) $ 1,035 $ (20) $ (1,067)
Adjustments to reconcile net
(loss) income to net cash
provided by (used in)
operating activities:
Equity loss (20) - - 20 -
Depreciation and amortization 207 18,561 1,100 - 19,868
Changes in operating assets
and liabilities (541) 10,298 (1,559) - 8,198
-------- ------- -------- -------- --------
Net cash provided by
(used in) operating activities (1,421) 27,844 576 - 26,999
-------- ------- -------- -------- --------
CASH FLOWS USED IN
INVESTING ACTIVITIES - (36,148) (792) - (36,940)
-------- ------- -------- -------- --------
CASH FLOWS PROVIDED BY
(USED IN) FINANCING
ACTIVITIES 1,421 10,639 (6) - 12,054
-------- ------- -------- -------- --------
NET CHANGE IN CASH - 2,335 (222) - 2,113
CASH, BEGINNING OF PERIOD - 829 222 - 1,051
-------- ------- -------- -------- --------
CASH, END OF PERIOD $ - $ 3,164 $ - $ - $ 3,164
========= ========== =========== ========== =========
</TABLE>
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Three Month Period Ended September 30, 1999 Compared to Three Month Period
Ended September 30, 1998
Net Sales
Net sales increased 6.1 % to $71.5 million in 1999 from $67.4 million
in 1998. Our container manufacturing division's net sales increased 3.5% to
$56.1 million in 1999, from $54.2 million in 1998, due primarily to unit volume
sales growth and higher average selling prices for plastic drums which helped
offset selling price declines in steel drums due to competitive pressures. Net
sales in our services division increased 16.7% to $15.4 million in 1999 from
$13.2 million in 1998 due to the net sales of New England Container which was
acquired in late July 1998 and growth in intermediate bulk container ("IBC")
leasing. Excluding the impact of the New England Container acquisition, our
services division's net sales increased approximately 9.5%, despite lower
selling prices in response to competitive pressures.
Gross Profit
Gross profit remained flat in 1999 versus 1998. In our container
manufacturing division, stronger unit volumes, lower raw material costs and
improved efficiencies helped offset the effects of lower selling prices to
generate higher gross profit in 1999. Offsetting the increased containers gross
profit was a reduction in the services division's gross profit. Higher volumes
in IBC leasing and steel reconditioning were more than offset by across the
board lower selling prices due to competitive pressures, increased return
freight costs, and additional labor costs incurred in the destruction of a
backlog of unusable containers. Gross profit as a percentage of net sales
decreased to 21.7% in 1999 from 22.8% in 1998 as a result of these factors.
Operating Expenses
Operating expenses as a percentage of net sales remained constant at
17.1 % in both periods.
Income from Operations
Income from operations decreased by $0.6 million to $3.3 million in
1999 from $3.9 million in 1998 as a result of the factors described above.
Other (Income) Expense, Net
Other (income) expense, net, which includes changes in the fair value
of foreign exchange contracts, decreased by $0.1 million in 1999 compared to
1998.
Interest Expense
Interest expense was $5.6 million in 1999 compared with $4.4 million in
1998. The increase in interest expense is the result of increased debt levels
associated with the refinancing of our revolving credit loan and term loans and
the senior subordinated notes offering in February 1999 as well as a higher
weighted average interest rate on this indebtedness versus the rate on our
former senior credit agreement.
Loss Before Income Taxes
In 1999, the loss before income taxes was $2.3 million versus $0.7
million in 1998, as a result of the factors described above.
Income Tax Provision(Benefit)
The effective tax rate provision(benefit) on income was (21.7)% in 1999
and 17.3% in 1998, both lower than the statutory federal income tax rate due to
the non-deductible portion of goodwill associated with our acquisitions and
higher foreign income taxes.
Net Loss
In 1999, the net loss was $1.8 million versus $0.8 million in 1998, as
a result of the factors described above.
Nine Month Period Ended September 30, 1999 compared to Nine Month Period Ended
September 30, 1998
Net Sales
Net sales increased 2.0% to $215.7 million in 1999 from $211.5 million
in 1998. Our container manufacturing division's net sales declined approximately
6.0% to $168.3 million in 1999, from $178.7 million in 1998, due primarily to
selling price declines in response to lower raw material prices coupled with
competitive pressures and unit volume decreases due to some share shifts in
steel containers and a lack of demand from specialty export segments. Net sales
in our services division increased approximately 44.0% to $47.4 million in 1999
from $32.9 million in 1998 due to the net sales of New England Container, which
was acquired in July 1998, and growth in IBC leasing. Excluding the impact of
the New England Container acquisition, our services division's net sales
increased approximately 10% despite lower selling prices in response to
competitive pressures.
Gross Profit
Gross profit increased $2.6 million to $50.6 million in 1999 from $48.0
million in 1998, primarily from the benefit of higher services division sales
volume, lower raw material prices, and improved containers efficiencies which
more than offset the impact of lower selling prices, higher return freight costs
and labor inefficiencies in services. Gross profit as a percentage of net sales
improved to 23.5% in 1999 from 22.7% in 1998 as a result of these factors.
Operating Expenses
Operating expenses, excluding non-recurring charges, increased as a
percentage of net sales to 17.7% in 1999 from 15.8% in 1998 primarily due to the
impact of the New England Container acquisition, higher logistics infrastructure
costs in our services segment, increased inter-region delivery costs to satisfy
specialty market peak demands in containers, and the recording of a legal
settlement provision and related professional fees.
Non-Recurring Charges
In conjunction with the integration of acquired entities and expansion
of our operations, a plan was developed in 1998 to rationalize our operations
and sales force and consolidate and relocate our corporate headquarters in order
to improve operating efficiencies and reduce costs. This plan began in March
1998 and was substantially completed during the first quarter of 1999. As part
of this plan, we recorded restructuring, integration, and other charges of
approximately $3.5 million for the nine months ended September 30, 1998. These
charges primarily include costs related to the closure of a container
manufacturing facility, severance costs and other personnel related costs, the
relocation of corporate headquarters and other miscellaneous costs. We did not
record any non-recurring charges for the nine months ended September 30, 1999.
Income from Operations
Income from operations increased by $1.4 million to $12.5 million in
1999 from $11.1 million in 1998 as a result of the factors described above.
Other (Income) Expense, Net
Other (income) expense, net decreased slightly in 1999 from 1998 due to
changes in the fair value of foreign exchange contracts.
Interest Expense
Interest expense was $15.6 million in 1999 compared with $11.8 million
in 1998. The increase in interest expense is the result of increased debt levels
associated with the acquisition of New England Container in late July 1998 and
the refinancing of our revolving credit loan and term loans and the senior
subordinated notes offering in February 1999. In addition, our weighted average
interest rate on this indebtedness is higher than the rate on our former senior
credit agreement.
Loss Before Income Taxes and Extraordinary Item
In 1999, the loss before income taxes and extraordinary item was $3.3
million versus $1.0 million in 1998, as the result of the factors described
above.
Income Tax Provision(Benefit)
The effective tax rate provision (benefit) on income was (18.9)% in
1999 and 3.0% in 1998, both lower than the statutory federal income tax rate due
to the non-deductible portion of goodwill associated with our acquisitions and
higher foreign income taxes.
Loss Before Extraordinary Item
In 1999, the loss before extraordinary item was $2.6 million versus
$1.1 million in 1998 due to the factors described above.
Extraordinary Item
As a result of the February 1999 refinancing of our revolving credit
loan and term loans and the senior subordinated notes offering, we incurred an
extraordinary charge of $0.8 million, which is net of tax benefits of $0.4
million, relating to the write-off of unamortized deferred financing costs.
Net Loss
In 1999, the net loss was $3.4 million versus $1.1 million in 1998, as
a result of the factors described above.
Liquidity and Capital Resources
Our principal uses of cash are for capital expenditures, interest
expense, working capital, and acquisitions. We utilize funds generated from
operations and borrowings to meet these requirements. For the nine months ended
September 30, 1999, cash generated from operations was $5.4 million compared to
cash generated from operations of $27.0 million for the nine months ended
September 30, 1998. The decrease was driven primarily by the timing of interest
and foreign tax payments, as well as reduced accounts payable and accrued
expense levels associated with the payment of professional fees incurred in late
1998 for proposed acquisitions which were not consummated. In addition,
increased working capital investments in accounts receivable and inventory were
made in the first nine months of 1999 as compared to the first nine months of
1998 to support our services division's sales growth as well as to purchase raw
materials in advance of announced price increases.
For the nine months ended September 30, 1999 and 1998 we made capital
expenditures of $21.9 million and $20.7 million, respectively. We currently have
no capital commitments outside the ordinary course of business. Our principal
working capital requirements are to finance accounts receivable and inventories.
As of September 30, 1999 we had net working capital of $26.5 million, including
$1.4 million of cash, $33.1 million of accounts receivable, $22.8 million of
inventories, $8.4 million of other current assets, and approximately $39.2
million of accounts payable and accrued expenses.
On February 10, 1999, we refinanced our revolving credit loan and term
loans by amending our senior credit facility to provide for a $75.0 million
revolving credit line (including a $15.0 million Canadian credit line in U.S.
dollars), which bears interest, at our election, at a combination of domestic
source and Eurodollar borrowing rates which fluctuate based on our EBITDA and
debt levels, and a $25.0 million term loan, bearing interest at 9.48%
(collectively, the "Senior Credit Facility"). The revolving credit facility
matures in February 2004 and the term loan matures in two equal installments in
June 2006 and 2007. In addition, we issued $150 million of 10 7/8% Senior
Subordinated Notes (the "Notes") due February 15, 2009, at 99.248% resulting in
an effective yield of 11.0%. The Senior Credit Facility contains certain
covenants and restrictions and is secured by substantially all our assets. The
Notes require semiannual interest payments commencing August 15, 1999 and mature
February 2009. The Notes are subordinate to all existing and future senior
indebtedness and are unconditionally guaranteed by the domestic subsidiaries and
contain a number of customary covenants and restrictions. Deferred financing
charges of approximately $7.2 million were incurred in connection with the
refinancing
Effect of Inflation
Inflation generally affects our business by increasing the interest
expense of floating rate indebtedness and by increasing the cost of labor,
equipment and raw materials. We do not believe that inflation has had any
material effect on our business during the periods discussed herein.
Recently Issued Accounting Standard
In June 1998, the Financial Accounting Standards Board issued SFAS No.
133, "Accounting for Derivative Instruments and Hedging Activities". SFAS 133
establishes new disclosure requirements which provide a comprehensive standard
for recognition and measurement of derivatives and hedging activities. This will
require new disclosures, all derivatives to be recorded on the balance sheet at
fair value, and special accounting for particular types of hedges. SFAS 133 is
currently scheduled to take effect for us on January 1, 2001. Based on our
current derivatives, an interest rate collar and foreign currency forward
contracts, we do not believe that SFAS 133 will have a material effect on our
financial condition or results of operations.
Year 2000 Compliance
General
As has been widely reported, many computer systems process dates based
on two digits for the year of transaction and may be unable to process dates in
the year 2000 and beyond. We believe that we have identified all significant
internal systems and hardware with embedded applications that require
modification to ensure year 2000 compliance. In addition, we have sent
questionnaires to our critical vendors in an attempt to confirm that they are
year 2000 compliant. We are conducting our year 2000 compliance efforts with the
assistance of independent consultants.
Internal Systems
Our significant internal systems consist of our accounting systems and
our system that manages the inventory for our plastic container leasing and
fleet management businesses. Two of our four accounting systems have been
certified by the licensor and successfully tested by us for year 2000
compliance. The third accounting system has been updated and successfully tested
for year 2000 compliance. We are in the process of replacing the fourth
accounting system with a system that is certified by the licensor as being year
2000 compliant, and we expect the replacement and testing to be completed by the
end of November 1999. We are also in the process of updating our system that
manages the inventory for our plastic container leasing and fleet management
businesses for year 2000 compliance, and we expect the updating and testing to
be completed by the end of November 1999.
Hardware
Our hardware with embedded applications principally consists of
manufacturing machinery for the manufacture of plastic and steel drums.
Substantially, all of this machinery has been certified by the manufacturer and
tested by us for year 2000 compliance. Our tests have shown that our hardware
is year 2000 compliant.
Vendors
We have sent questionnaires to 31 of our vendors that we consider
critical. Twenty-four vendors have responded, nineteen by supplying readiness
disclosures letters and five by completing our questionnaire. None of the
responding vendors reported any significant year 2000 compliance issues. We have
sent a follow-up letter to the seven vendors that have not responded to our
questionnaire. All of the vendors which have not responded are large,
sophisticated corporations, and we expect that they are aware of their year 2000
compliance issues.
Year 2000 Risks
Despite our year 2000 compliance efforts, there are many risks
associated with the year 2000 compliance issue, including but not limited to the
possible failure of our systems and hardware with embedded applications. These
failures could result in:
o our inability to order raw materials,
o the malfunctioning of our manufacturing or services processes,
o our inability to properly bill and collect payments from our
customers and/or errors or omissions in accounting and
financial data, any of which could have a material adverse
effect on our results of operations and financial condition.
In addition, there can be no guarantee that the systems of other
companies, including our vendors, utilities and customers, will be converted in
a timely manner, or that a failure to convert by another company, or a
conversion that is incompatible with our systems, would not have a material
adverse effect on us.
Costs
Through September 30, 1999, we have incurred and capitalized costs of
approximately $5.1 million primarily related to the upgrade and replacement of
our internal systems. We currently expect that we will incur and capitalize
future incremental costs of approximately $0.3 million. We are funding these
costs with a combination of cash from operations and borrowings under our senior
credit facility. We have developed our cost estimates with the assistance of
independent consultants.
Contingency Plans
We have not yet developed any contingency plans and, based on the state
of our year 2000 readiness, do not expect that we will have to do so. If,
however, the testing of our internal systems that we expect to finish completely
by the end of November 1999 or any further correspondence with our vendors
indicates that it is necessary, we will develop contingency plans to be in place
by December 31, 1999.
FORWARD LOOKING STATEMENTS
This report includes forward-looking statements. All statements other
than statements of historical facts included in this report may constitute
forward-looking statements. We have based these forward-looking statements on
our current expectations and projections about future events. Although we
believe that our assumptions made in connection with the forward-looking
statements are reasonable, we cannot assure you that our assumptions and
expectations will prove to have been correct. We undertake no obligation to
publicly update or revise any forward-looking statements, whether as a result of
new information, future events or otherwise. Important factors that could cause
our actual results to differ from our expectations include the following: our
ability to satisfy our obligations under our substantial indebtedness and the
restrictions which our indebtedness impose on our operations; our ability to
compete with competitors, including competitors that are larger than us and have
greater financial resources than we do; our ability to finance the significant
level of capital expenditures that our operations will require; the availability
of raw materials and our ability to pass along to our customers any increases in
our prices for raw materials; our ability to identify suitable businesses for
acquisition and our ability to consummate such acquisitions and integrate the
operations of such businesses; unfavorable shifts in demand from higher margin
products and services to lower margin products and services; declines in the
level of economic activity in the industries served by our customers; the
termination of a license under which we obtain important intellectual property;
adverse developments arising out of the ongoing grand jury investigation into
possible price-fixing in the plastic drum industry between 1991 and 1995; loss
of key personnel; employee slowdowns, strikes or similar actions; our compliance
with laws and regulations governing our business, including federal, state and
local environmental, transportation and shipping laws and regulations; our
exposure to litigation, including to claims for product liability and
contamination of the environment; and our ability and the ability of our
suppliers and customers to achieve year 2000 compliance.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
Interest Rate Risk and Foreign Currency Exchange Rate Risk
General
Our results of operations and financial condition are affected by
changes in interest rates and foreign currency exchange rates as measured
against the U.S. dollar. We manage this exposure through internal policies and
procedures and the use of derivative financial instruments. In accordance with
our internal policies, we only use derivative financial instruments for risk
management and not for speculative or trading purposes.
Interest Rate Risk
The revolving indebtedness under our senior credit facility bears
interest at a floating rate. Our primary exposure to interest rate risk is as a
result of changes in interest expense related to this indebtedness due to
changes in market interest rates. We maintain an interest rate collar in an
aggregate notional principal amount of $45.0 million to limit our exposure to
interest rate risk. Under this collar, if the actual Eurodollar rate at the
specified measurement date is greater than a ceiling rate stated in the collar
agreement, the other party to the collar pays us the differential interest
expense. If the actual Eurodollar rate is lower than the floor stated in the
collar agreement, we pay the other party to the collar the differential interest
expense. The collar terminates on November 30, 2000. A 10% increase in interest
rates at September 30, 1999 would not have had a material adverse affect on our
results of operations, financial condition or cash flows.
Foreign Currency Exchange Rate Risk
We have operations in Canada and sales denominated in Canadian dollars.
Our primary exposure to foreign currency exchange rate risk is a result of
changes in the exchange rate between the U.S. dollar and the Canadian dollar. We
currently do not maintain any derivative financial instruments to limit our
exposure to this risk. Our Canadian subsidiary, Hunter Drums Limited, maintains
U.S. dollar denominated foreign currency exchange contracts which were in place
prior to our acquisition of Hunter Drums. At September 30, 1999, Hunter Drums
held $0.9 million of forward currency exchange contracts which have a settlement
rate of $1.41 Canadian dollars to U.S. dollars and settlement dates through
December 1999. While these contracts increase our exposure to foreign currency
exchange rate risk, due primarily to the relatively short maturities of these
contracts, a 10% change in the exchange rate on September 30, 1999 between the
U.S. dollar and the Canadian dollar would not have had a material adverse affect
on our results of operations, financial condition or cash flows.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Not Applicable
ITEM 2. CHANGES IN SECURITIES
Not Applicable
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not Applicable
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
All of the Company's incumbent directors were re-elected to one-year
terms at the annual meeting of stockholders on July 22, 1999.
ITEM 5. OTHER INFORMATION
Not Applicable
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
*3.1 Certificate of Incorporation of Russell-Stanley Holdings, Inc.
*3.2 By-Laws of Russell-Stanley Holdings, Inc.
*4.1 Indenture, dated as of February 10, 1999, by and
among Russell-Stanley Holdings, Inc., the guarantors
named therein and The Bank of New York, as the
Trustee
*4.2 Form of 10 7/8% Senior Subordinated Notes due 2009 (included
as part of the Indenture filed as Exhibit 4.1 hereto.)
*10.1 Fifth Amended and Restated Revolving Credit Agreement and Term
Loan Agreement, dated as of February 10, 1999, among Russell-
Stanley Holdings, Inc. and its subsidiaries, as borrowers, the
lenders listed therein and BankBoston, N.A. as administrative
agent, and Goldman Sachs Credit Partners, L.P., as syndication
agent.
*10.2 Stock Purchase Agreement dated as of July 21, 1998, among
Vincent J. Buonanno, New England Container Co., Inc. and
Russell-Stanley Holdings, Inc.
*10.3 Stock Purchase Agreement dated as of July 1, 1997, among
Mark E. Daniels, Robert E. Daniels, Mark E. Daniels Irrevocable
Family Trust, R.E. Daniels Irrevocable Family Trust, Container
Management Services, Inc. and Russell-Stanley Corp.
*10.4 Share Purchase Agreement dated as of October 24, 1997, among
Michael W. Hunter, John D. Hunter, Michael W. Hunter Holdings,
Inc. John D. Hunter Holdings, Inc., Hunter Holdings, Inc
373062 Ontario Limited, Hunter Drums Limited, Russell-Stanley
Holdings, Inc. and HDL Acquisition, Inc.
*10.5 Purchase and Sale Agreement dated as of October 23, 1997, among
Smurfit Packaging Corporation, Russell-Stanley Holdings, Inc.
and Russell-Stanley Corp.
*10.6 Vestar Management Agreement dated as of July 23, 1997, among
Russell-Stanley Holdings, Inc., Russell-Stanley Corp., Container
Management Services, Inc. and Vestar Capital Partners.
*10.7 Know How and Patent Licensing Agreement between Mauser-Werke
GmbH and Russell-Stanley Corp., dated June 26, 1995.
*10.8 Licensing Agreement between Mauser-Werke GmbH and Russell-
Stanley Corp., dated June 26, 1995.
*10.9 Know How and Patent Licensing Agreement between Mauser-Werke
GmbH and Russell-Stanley Corp. dated June 26, 1995.
*10.10 Know How and Patent Licensing Agreement between
Mauser-Werke GmbH and Hunter Drums Limited, dated July 31, 1996.
*10.11 Know How and Patent Licensing Agreement between Mauser-Werke
GmbH and Hunter Drums Limited, dated July 31, 1996.
*10.12 Consent and Agreement between Hunter Drums Limited and
Mauser-Werke GmbH, dated September 29, 1997.
*10.13 1998 Stock Option Plan.
*10.14 Russell-Stanley Holdings, Inc. Management Annual Incentive
Compensation Plan 1998.
*10.15 Employment Agreement, dated October 30, 1997, among Russell-
Stanley Holdings, Inc., Hunter Drums Limited and Michael W.
Hunter.
*10.16 Stay Pay Agreement, dated October 30, 1997, among Russell-
Stanley Holdings, Inc. and Michael W. Hunter.
*10.17 Employment Agreement, dated as of July 23, 1997, between
Russell-Stanley Holdings, Inc. and Mark E. Daniels.
*10.18 Stay Pay Agreement, dated as of July 23, 1997, between Russell-
Stanley Holdings, Inc. and Mark E. Daniels.
*10.19 Employment Agreement, dated as of July 23, 1998, between
Russell-Stanley Holdings, Inc. and Gerard C. DiSchino.
*10.20 Employment Agreement, dated September 20, 1996, between
Russell-Stanley Corp. and Robert Singleton.
*10.21 Services Agreement, dated as of February 10, 1999, between
Russell-Stanley Holdings, Inc. and Vincent J. Buonanno.
*10.22 License Agreement between Gallay SA and Hunter Drums Limited,
dated February 7, 1997.
*10.23 License Agreement between Gallay SA and Hunter Drums Limited,
dated April 16, 1987.
27 Financial Data Schedule
* This Exhibit is incorporated by reference to the Exhibit of the same number
filed as part of the Company's. Registration Statement on Form S-4 (File No.
333-76057).
(b) Reports on Form 8-K
None
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Company has duly caused this report to be signed on its behalf by the
undersigned thereto duly authorized.
RUSSELL-STANLEY HOLDINGS, INC.
Date: November 12,1999
By: /s/Ronald M. Litchkowski
---------------------------------
Ronald M. Litchkowski,
Chief Financial Officer
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<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JUL-01-1999
<PERIOD-END> SEP-30-1999
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<RECEIVABLES> 33,103,000
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