<PAGE> 1
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 March 31, 1995
Commission file number 1-71
BORDEN, INC.
New Jersey 13-0511250
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
180 East Broad Street, Columbus, OH 43215
(Address of principal executive offices)
(614) 225-4000
(Registrant's telephone number, including area code)
Not Applicable
(Former name, former address and former fiscal year,
if changed since last report.)
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
---- ----
Number of shares of common stock, $0.01 par value, outstanding as of the close
of business on May 10, 1995: 198,974,994.
1
<PAGE> 2
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
BORDEN, INC
<TABLE>
<CAPTION>
Three Months Ended
March 31,
--------------------
(In millions except per share data) 1995 1994
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
REVENUE Net sales $1,494.9 $1,426.0
- --------------------------------------------------------------------------------
COSTS AND Cost of goods sold 1,130.8 1,034.1
EXPENSES Marketing, general and administrative
expenses 344.0 342.7
Interest expense 46.2 30.7
Unrealized loss on interest rate swap 23.5
Loss on sale of investment 22.0
Equity in income of affiliates (3.4) (2.3)
Minority interest 11.7 9.2
Other (income) and expense, net (0.6) 16.4
Income taxes (27.9) (1.6)
-------- --------
1,546.3 1,429.2
-------- --------
- --------------------------------------------------------------------------------
EARNINGS Loss from continuing operations (51.4) (3.2)
Discontinued operations:
Income (loss) from operations 7.5 9.0
Reversal of disposal reserve 37.9
-------- --------
Net (loss) income $ (6.0) $ 5.8
======== ========
- --------------------------------------------------------------------------------
SHARE DATA Loss from continuing operations $ (.29) $ (.02)
Discontinued operations:
Income (loss) from operations .04 .06
Income (loss) on disposal .22
-------- --------
Net (loss) income per common share $ (.03) $ .04
======== ========
Cash dividends paid per common share $ .075
Average number of common shares
outstanding during the period 177.3 141.5
- --------------------------------------------------------------------------------
</TABLE>
2
<PAGE> 3
<TABLE>
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
BORDEN, INC.
<CAPTION>
Three Months Ended
March 31,
-----------------------------
(In millions) 1995 1994
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CASH FLOWS Net (loss) income $ (6.0) $ 5.8
FROM OPERATING Adjustments to reconcile net income to net
ACTIVITIES cash from operating activities:
Reversal of reserve for loss on disposal
of discontinued operations (54.6)
Depreciation and amortization 37.9 41.3
Unrealized loss on interest rate swap 23.5
Loss on sale of investment 22.0
Write-off deferred financing costs 11.1
Restructuring (9.1) (12.8)
Decrease in receivables sold (250.0) (70.0)
Net change in assets and liabilities:
Trade receivables (10.2) (20.5)
Inventories (19.0) (13.0)
Trade payables (10.0) (4.5)
Current and deferred taxes (32.2) (3.3)
Other assets (64.4) (4.2)
Other, net 57.8 47.4
Discontinued operations 18.8 (37.5)
------ ------
(284.4) (71.3)
------ ------
- ------------------------------------------------------------------------------------------------------------------------
CASH FLOWS Capital expenditures (29.9) (26.7)
FROM Divestiture of businesses 4.8
INVESTING Purchase of business (6.4)
ACTIVITIES ------- -------
(36.3) (21.9)
------- -------
- -------------------------------------------------------------------------------------------------------------------------
CASH FLOWS (Decrease) increase in short-term debt (180.2) 126.0
FROM Reduction in long-term debt (310.2) (11.4)
FINANCING Long-term debt financing 250.3 2.1
ACTIVITIES Reduction in minority interest (471.3)
Sale of investment in RJR Holdings 282.1
Equity contribution 994.7
Dividends paid (10.6)
Issuance of stock under stock options
and benefits and awards plans 3.6 .8
------- -------
569.0 106.9
------- -------
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
3
<PAGE> 4
<TABLE>
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)(continued)
BORDEN, INC.
<CAPTION>
Three Months Ended
March 31,
--------------------------
(In millions) 1995 1994
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Increase in cash and equivalents 248.3 13.7
Cash and equivalents at beginning
of period 125.3 100.3
------- -------
Cash and equivalents at end
of period $ 373.6 $ 114.0
======= =======
- -----------------------------------------------------------------------------------------------------------------------
SUPPLEMENTAL Interest paid $ 36.1 $ 28.0
DISCLOSURES Income taxes paid 25.8 7.2
OF CASH FLOW
INFORMATION
</TABLE>
4
<PAGE> 5
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
BORDEN, INC.
(In millions)
<TABLE>
<CAPTION>
March 31 December 31
-------- -----------
ASSETS 1995 1994
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CURRENT Cash and equivalents $ 373.6 $ 125.3
ASSETS Accounts receivable (less allowance
for doubtful accounts of $13.6) 696.9 411.8
Inventories:
Finished and in-process goods 360.2 331.0
Raw materials and supplies 183.1 183.9
Investment securities 281.1
Other current assets 237.2 249.8
Net assets of discontinued operations 40.5
-------- --------
1,851.0 1,623.4
-------- --------
- -----------------------------------------------------------------------------------------------------------------------------
INVESTMENTS Investments in and advances to
AND OTHER affiliated companies 80.0 86.9
ASSETS Deferred income taxes 283.3 284.0
Other assets 118.4 119.0
-------- --------
481.7 489.9
-------- --------
- ---------------------------------------------------------------------------------------------------------------------------
PROPERTY Land 98.0 95.2
AND Buildings 602.1 574.2
EQUIPMENT Machinery and equipment 2,033.7 1,893.1
-------- --------
2,733.8 2,562.5
Less accumulated depreciation (1,610.8) (1,455.6)
-------- --------
1,123.0 1,106.9
-------- --------
- -----------------------------------------------------------------------------------------------------------------------------
INTANGIBLES Intangibles resulting from
business acquisitions 632.2 602.1
-------- --------
- -----------------------------------------------------------------------------------------------------------------------------
$4,087.9 $3,822.3
======== ========
</TABLE>
5
<PAGE> 6
<TABLE>
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
BORDEN, INC.
(In millions except share and per share data)
<CAPTION>
March 31 December 31
-------- -----------
LIABILITIES AND SHAREHOLDERS EQUITY 1995 1994
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CURRENT Debt payable within one year $ 151.7 $ 331.9
LIABILITIES Accounts and drafts payable 505.3 498.0
Restructuring reserve 32.0 87.1
Income taxes 146.1 146.3
Other current liabilities 475.7 465.9
-------- --------
1,310.8 1,529.2
-------- --------
- -----------------------------------------------------------------------------------------------------------------------------
OTHER Long-term debt 1,322.9 1,379.0
Deferred income taxes 47.2 44.3
Non-pension postemployment
benefit obligations 344.8 348.6
Other long-term liabilities 132.1 108.7
Minority interest 34.2 504.6
-------- --------
1,881.2 2,385.2
-------- --------
- -----------------------------------------------------------------------------------------------------------------------------
SHAREHOLDERS Common stock - Issued 198,974,994
EQUITY and 194,983,374 shares, respectively 2.0 121.9
Paid in capital 927.3 120.0
Accumulated translation adjustment (121.9) (140.9)
Minimum pension liability and other (107.3) (145.4)
Retained earnings 195.8 201.8
-------- --------
895.9 157.4
Less common stock in treasury (at
cost) - 25,124,740 shares
at December 31, 1994 (249.5)
-------- --------
895.9 (92.1)
-------- --------
- -----------------------------------------------------------------------------------------------------------------------------
$4,087.9 $3,822.3
======== ========
</TABLE>
6
<PAGE> 7
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in millions except per share amounts and as otherwise indicated)
1. Interim Financial Statements
The accompanying unaudited interim consolidated financial statements
contain all adjustments, consisting only of normal adjustments, which in
the opinion of management are necessary for a fair statement of the
results for the interim periods. Results for the interim periods are not
necessarily indicative of results for the full years.
2. Capitalization
As a result of the merger of the Company with an affiliate of Kohlberg
Kravis Roberts & Co. ("KKR") which occurred on March 14, 1995,
170,273,814 shares of Borden common stock were issued to two investment
partnerships affiliated with KKR (the "Shareholders"). In addition,
28,701,180 shares of Borden common stock were acquired by the
Shareholders as a result of the February 15, 1995 contribution of
68,893,232 shares of RJR Nabisco Holdings Corp. ("RJR Holdings") common
stock to the Company. On March 15, 1995, the Shareholders contributed
111,047,229 shares of RJR Holdings common stock in exchange for equity
securities of the Company to be issued in the future pursuant to an
agreement dated March 15, 1995. Under that agreement, the equity
securities to be issued can be either common stock or preferred stock.
This determination is expected to be made in the near future.
On February 16, 1995 and March 21, 1995 the Company sold all of the
231,047,290 shares of RJR Holdings stock which had been contributed to
the Company by the Shareholders. The sales resulted in a pretax loss of
$22.0.
The net proceeds of $1,276.8 were used by the Company to reduce borrowings
under its $2.0 billion credit line and to reduce the limited partner
interest in the TMI Associates, L.P. partnership (the "Partnership"). As a
result of these reductions in debt and minority interest, the Company
wrote off $11.1 of deferred costs associated with the credit line and the
Partnership. A portion of the debt repayment permanently reduced the
credit facility from $2.0 billion to $1.6 billion.
The Company has used interest rate swaps in the past to manage its
floating interest rate exposure, and at December 31, 1994 the Company had
outstanding swaps with an aggregate notional principal amount of $400.0
which hedged variable rate borrowings. Due to the debt repayments
discussed above, these interest rate swaps no longer meet the criteria for
hedge accounting. During the first quarter the Company terminated swap
agreements with an aggregate notional principal amount of $200.0 at a cost
of $6.1. The remaining outstanding interest rate swap agreement was
marked-to-market at March 31, 1995, which resulted in an unrealized loss
of $23.5 being recorded in first quarter 1995.
Common stock of the Company at March 31, 1995 consisted of 300,000,000
shares authorized and 198,974,994 shares issued at a par value of
$0.01. At December 31, 1994, common stock included 480,000,000 shares
authorized and 194,983,374 shares issued at a par value of $0.625.
7
<PAGE> 8
3. Discontinued Operations
In December 1993 the Company announced a divestiture and restructuring
program which included the divestment of several business segments. In
April 1995, management decided to retain the remaining salty snacks
business. As a result, the operating losses of the salty snacks segment
previously classified as a discontinued operation have been reclassified
into continuing operations, with an offsetting net of tax credit in loss
from discontinued operations.
Due to management's decision to retain a portion of the salty snacks
businesses which were classified as a discontinued business segment at
December 31, 1993, first quarter 1994 operating results for North American
Snacks have been reclassified into continuing operations, which increased
sales for continuing operations by $153.4 and decreased operating income
by $14.5. The offsetting $9.0 credit in loss from discontinued operations
includes a $5.5 tax expense.
The $37.9 credit in loss on disposal reflects the reversal of the unused
portion of the reserve for the loss on disposal of the North American
Snacks businesses, net of a $16.7 tax expense.
There is one remaining business under this divestiture plan which
management expects to divest by the end of 1995. The net assets of this
discontinued operation are $0 as of March 31, 1995 due to the expectation
of cash inflows from proceeds on this business being offset by cash
outflows for exit costs.
4. Sale of Accounts Receivable
During 1995 the Company renegotiated certain terms in the credit line
agreements under which it sells accounts receivable. Among the terms that
changed were those which allowed the Company to sell accounts receivable
without recourse. As a result of the change in terms, which now provide
for the sale of receivables with recourse, the amount of receivables sold
at March 31, 1995 of $250.0 is included in borrowings under the $1.6
billion credit agreement and shown as long-term debt in the consolidated
balance sheet at March 31, 1995.
8
<PAGE> 9
PART I FINANCIAL INFORMATION
Item 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
QUARTER ENDED MARCH 31, 1995 VERSUS QUARTER ENDED MARCH 31, 1994
Net sales from continuing operations for the quarter ended March 31, 1995
increased 4.8% to $1.49 billion from $1.43 billion in 1994. The Company
reported a net loss for the first quarter 1995 of $6.0 million, or $0.03 per
share, compared with net income of $5.8 million, or $0.04 per share, in 1994,
primarily as a result of net pretax charges of $85.3 million ($52.0 million
after-tax). These charges include a charge for an unrealized loss on interest
rate swaps of $23.5 million; a pretax loss on the sale of the RJR Holdings
stock of $22.0 million; $6.1 million related to terminating swap agreements;
$11.1 million relating to the writeoff of certain deferred costs associated
with the TMI Associates partnership and the $2.0 billion credit line; $9.3
million related to general insurance provisions; and charges of $13.3 million
recognized by North American Snacks primarily relating to asset write-downs and
adjustments of accrued expenses.
These charges are partially offset by an aftertax credit of $37.9 for the
reversal of the unused divestiture reserve for the remaining North American
Snacks business (see Note 3 to the Consolidated Financial Statements).
The loss from continuing operations for the first quarter of 1995 was $51.4
million compared to a loss from continuing operations of $3.2 million in 1994.
Results in both periods include the results of the North American Snacks
business segment. Credits in loss from discontinued operations of $7.5 million
in 1995 and $9.0 million in 1994 reflect the reclassification of the North
American Snacks results.
Consumer Packaged Products sales decreased 9.7% to $613.1 million from $678.9
million in 1994 primarily as a result of 1994 divestitures. The 1995 operating
income of $0.4 million decreased 98.6% from 1994 income of $24.4 million due to
the charges recorded by North American Snacks of $13.3 million and
overall decreases in most businesses.
Dairy sales decreased 3.0% to $291.6 million from $300.7 million in 1994
primarily due to volume declines in most products, particularly ice cream. 1995
operating income increased to $1.9 million income from a 1994 operating loss of
$15.0 million due to improvements in controlling distribution and
administrative costs.
Packaging and Industrial Products sales increased 32.2% to $590.2 million from
$446.4 million in 1994, due to substantial increases in all businesses,
especially worldwide resins. 1995 operating income increased 84.4% to $64.5
million from $35.0 million in 1994, primarily due to worldwide resins and income
from Borden Chemicals and Plastics Limited Partnership.
9
<PAGE> 10
LIQUIDITY AND CAPITAL RESOURCES
Cash used in operating activities during the first three months of 1995 was
$284.4 million compared to $71.3 million for the first three months of 1994. The
decrease in operating cash flows primarily reflects an outflow related to the
reclassification of the sale of accounts receivable (see Note 4 to the
Consolidated Financial Statements). This reduction in operating cash flows was
offset by a net inflow from financing activities of $569.0 million.
Cash expenditures for new facilities and improvements to existing facilities
were $29.9 million in 1995 compared to $26.7 million in 1994.
Financing flows reflect the capital contribution by the Shareholders of $994.7
million, the sale of the $282.1 million investment in RJR Holdings stock, and
the resulting reduction of short and long-term debt by $490.4 million and of
minority interest by $471.3 million.
10
<PAGE> 11
PART II
Item 1: LEGAL PROCEEDINGS
Environmental Proceedings
The Company has been notified that it is or may be a potentially responsible
party with respect to the cleanup of certain waste sites (currently
approximately 51 in number) in proceedings brought under the Comprehensive
Environmental Response, Compensation and Liability Act ("CERCLA") or similar
state environmental laws. While the Company cannot predict with certainty the
total cost of such cleanup, the Company's ultimate liability will depend on many
factors including its volumetric share of waste, the financial viability of
other responsible parties, the remediation methods and technology used, the
amount of time necessary to accomplish remediation, and the availability of
insurance coverage. The Company has established reserves for environmental
remediation costs for these and other sites in amounts which it believes are
probable and reasonably estimable. Based on currently available information and
analysis, the Company believes that it is reasonably possible that costs
associated with such sites may exceed current reserves by amounts that may prove
insignificant or by amounts, in the aggregate, up to approximately $40 million.
This estimate of the range of reasonably possible additional costs is less
certain than the estimates upon which reserves are based, and in order to
establish the upper limit of such range, assumptions least favorable to the
Company among the range of reasonably possible outcomes were used. In estimating
both its current reserves for environmental remediation and the possible range
of additional costs, the Company has not assumed that it will bear the entire
cost of remediation of every site to the exclusion of other known potentially
responsible parties who may be jointly and severally liable. The ability of
other potentially responsible parties to participate has been taken into
account, based generally on the parties' probable contribution on a per site
basis. No attempt has been made to discount the estimated amounts to net present
value, and no amounts have been recorded for potential recoveries from insurance
carriers. Based upon previous experience and the information presently
available, however, management believes that, as of the date hereof, future
costs incurred will not have a material adverse effect on the financial
condition of the Company.
Private actions against the Company and numerous other defendants are currently
pending in U.S. District Court in Baton Rouge, Louisiana alleging personal
injuries and property damage in connection with a waste disposal site in
Louisiana. Similar actions are pending in state court in Camden, New Jersey in
connection with a waste disposal site in New Jersey and in state court in Los
Angeles, California in connection with a landfill site in Monterey Park,
California (September 1994).
The U.S. Environmental Protection Agency ("EPA") has issued a notice of
violation alleging the violation of air pollution regulations by a plant in
Massachusetts (September 1988).
A notice of violation has been issued by the Maine Department of Environmental
Protection (April 1991) alleging the violation of certain solid waste and
wetlands regulations at a Scarborough, Maine facility.
A notice of violation has been issued by the Puerto Rican sewer and water
authority (July 1994) alleging violations of wastewater regulations by an ice
11
<PAGE> 12
cream plant in Mantecados Nevada, Puerto Rico.
Borden Chemicals and Plastics Limited Partnership
In 1987, the Company's basic chemical and PVC resin businesses located at
Geismar, Louisiana and Illiopolis, Illinois were acquired by the Borden
Chemicals and Plastics Limited Partnership ("BCP"). Under an Environmental
Indemnity Agreement ("EIA"), the Company has agreed, subject to certain
conditions and limitations, to indemnify BCP from certain environmental
liabilities arising from facts or circumstances that existed and requirements in
effect prior to November 30, 1987, and share on an equitable basis those arising
from facts or circumstances existing and requirements in effect both prior to
and after such date. No claim can be made by BCP under the EIA after November
30, 2002 and no claim can, with certain exceptions, be made with respect to the
first $500,000 of liabilities which Borden would otherwise be responsible for
thereunder in any year, but such excluded amounts may not exceed $3.5 million in
the aggregate. Excluded amounts under the EIA have aggregated approximately $2.7
million through March 31, 1995. Accordingly, certain BCP legal proceedings are
discussed below.
In 1985 the Louisiana Department of Environmental Quality ("LDEQ") and the
Company entered into a Settlement Agreement that called for the implementation
of a long-term groundwater and soil remediation program at the Geismar complex
to address contaminants. Borden and BCP have implemented the Settlement
Agreement, and have worked in cooperation with the LDEQ to remediate the
groundwater and soil contamination. BCP believes that it already has
sufficiently identified the extent of the groundwater plume. Nevertheless, BCP
intends to drill and test some additional groundwater wells for the purpose of
addressing issues raised by the LDEQ concerning whether the extent of the
groundwater contamination has been identified. The Company has paid
substantially all of the costs to date of the Settlement Agreement with LDEQ. It
is unknown how long the remediation program will continue or whether the LDEQ
will require BCP to incur costs to take further remedial measures in response to
data generated by the planned additional groundwater wells. If the LDEQ requires
BCP to take further remedial measures, a portion of such costs may be covered
under the EIA.
In February 1993, an EPA Administrative Law Judge held that the Illiopolis,
Illinois facility violated CERCLA and the Emergency Planning and Community
Right to Know Act ("EPCRA") by failing to report certain relief valve releases
which occurred between February 1987 and July 1989, that BCP and the Company
believe are exempt from CERCLA and EPCRA reporting. BCP's petition for
reconsideration was denied, a penalty hearing will be scheduled and further
appeals are possible. Management does not believe that any ultimate
penalty arising from this proceeding would have a material adverse effect on
the Company.
On October 27, 1994, the U.S. Department of Justice ("DOJ") acting on behalf of
the EPA, filed an action against BCP and its General Partner, BCP Management,
Inc., a wholly owned subsidiary of the Company, in U.S. District Court for the
Middle District of Louisiana. The complaint seeks civil penalties for alleged
violations of the Resource Conservation and Recovery Act ("RCRA"), CERCLA and
the Clean Air Act as well as corrective action, at the Geismar facility. BCP
plans to vigorously defend against all the allegations. Prior to the filing of
the complaint, BCP and the DOJ had engaged in settlement discussions and are
currently engaged in such discussions. If BCP is unsuccessful in defending
itself against the allegations, it could be subject to penalties, costs for
corrective action and costs needed to obtain a RCRA permit.
12
<PAGE> 13
As to penalties, although the maximum statutory penalties that would apply in a
successful enforcement action by the government would be in excess of $150.0
million, BCP believes, assuming it is unsuccessful and based on information
currently available to it, that the more likely amount of any liability for
civil penalties would not exceed several million dollars.
If unsuccessful, BCP could also be subject to costs for facility-wide corrective
action to address the contamination at the Geismar complex. The cost of any
corrective action could be material to BCP, depending on the scope of such
corrective action which cannot be determined at this time.
The extent to which any costs that may be incurred by BCP as the result of the
above described legal proceedings will be subject to the EIA will depend, in
large part, on whether such costs or penalties are attributable to facts or
circumstances that existed and requirements in effect prior to November 30,
1987. The costs that may be subject to the EIA have not yet been determined.
Other Legal Proceedings
The States of West Virginia, Ohio and Louisiana have filed suits (12/93, 8/93
and 10/94) alleging antitrust violations in connection with the sale of milk to
schools in certain of their school districts. A private antitrust suit filed in
Federal Court in Oklahoma (4/93) on behalf of four school districts sought, but
was denied class action certification. Although Federal Grand Jury
investigations are pending in Oklahoma (8/92), Ohio (2/93) and the Plains States
(9/93), only the Plains States investigation is continuing. Private antitrust
suits alleging price fixing of wholesale/retail accounts have been filed in
Florida (7/93) and Virginia (9/93).
The Company is a defendant in litigation in Montreal, Canada involving
allegations of personal injury or property damage arising from the
misapplication of, or defects in, a urea-formaldehyde foam insulation product
which the Company manufactured from 1973 through 1980. The litigation, which was
tried from September 1983 through December 1989, was dismissed by the trial
court in December 1991. An Appeal filed by plaintiffs will be heard in late
1995.
In December 1994, the Company agreed to a proposed settlement in twelve putative
class actions that were filed by purported Company shareholders in the New
Jersey and Ohio state courts against the Company, members of the Board and, in
two of the cases, Kohlberg Kravis Roberts & Co.("KKR"). These actions alleged
among other things, that the Company was being sold at too low a price, and that
the Company's directors breached their fiduciary duties by failing to "auction"
the Company and by "locking up" a transaction that was not in the best interests
of shareholders. KKR was alleged to have aided and abetted these breaches of
fiduciary duty. The complaints sought preliminary and permanent relief,
including a preliminary injunction, damages in an unspecified amount and
attorneys' fees. In connection with the proposed settlement, the defendants
agreed to take certain actions under the Agreement and Plan of Merger and
Conditional Purchase/Stock Option Agreement both between the Company and KKR,
and both dated as of September 23, 1994 as amended; agreed to publish certain
information in an Offering Circular supplement; agreed to cause the Company's
Board of Directors to include up to two independent directors until such time as
the Merger is completed; and agreed to arrange a meeting between plaintiffs'
counsel and the Company's investment bankers. The proposed settlement is subject
to court approval.
The Company was also named as a defendant in a shareholder derivative
action filed against RJR Nabisco Holdings Corp.("RJR") in the Court of Chancery
of the State of Delaware. That action alleged that the proposed
13
<PAGE> 14
acquisition by RJR of a stake in the Company constituted a breach of the
fiduciary duty of loyalty of RJR's Board of Directors because the transaction
was unfair to the public shareholders of RJR. The complaint sought to enjoin
RJR's purchase of Company shares and damages in an unspecified amount. The
complaint was voluntarily discontinued as moot except for an issue relating to
attorney fees which is not expected to be material to the Company
The Company is involved in other litigation throughout the United States which
is considered to be in the ordinary course of the Company's business.
The Company believes, based upon the information it presently possesses, and
taking into account its established reserves for estimated liability and its
insurance coverage, that the ultimate outcome of the foregoing proceedings and
actions is unlikely to have a materially adverse effect on the Company's
financial position or operating results.
Item 4: SUBMISSION OF MATTERS TO A VOTE OF SECURITY - HOLDERS
At the Special Meeting of Shareholders held on March 14, 1995, the
Shareholders voted on the proposal to approve the Agreement and Plan of
Merger dated as of September 23, 1994, as amended, among Borden, Inc.
and affiliates of Kohlberg Kravis Roberts & Co., L.P.
The proposal was approved by the following vote:
<TABLE>
<S> <C>
For 136,609,582
Against 13,162,895
Abstain 1,461,316
</TABLE>
14
<PAGE> 15
Item 5: EXHIBITS AND REPORTS ON FORM 8-K
a. Exhibits
27. Financial Data Schedule
b. Reports on Form 8-K
On January 10, 1995 the Registrant filed a Form 8-K
announcing the resignation of Ervin R. Shames,
Director, President, and Chief Executive Officer of
Borden, Inc., and the appointment of C. Robert Kidder
as Chairman of the Board and Chief Executive Officer.
On January 30, 1995 the Registrant filed a Form 8-K
announcing results for the fourth quarter and for the
year ended December 31, 1994.
On February 16, 1995 the Registrant filed a Form 8-K
announcing the Company's dismissal of Price
Waterhouse LLP as its independent accountants. The
Company engaged Deloitte & Touche LLP as its new
independent accountants as of February 16, 1995.
SIGNATURE
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 thereunto duly authorized.
BORDEN, INC.
Date: May 15, 1995 By /s/ William H. Carter
---------------------------
William H. Carter
Executive Vice President and
Chief Financial Officer
(Principal Financial Officer and
duly authorized signing officer)
15
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> MAR-31-1995
<CASH> 374
<SECURITIES> 0
<RECEIVABLES> 697
<ALLOWANCES> 14
<INVENTORY> 543
<CURRENT-ASSETS> 1,851
<PP&E> 2,734
<DEPRECIATION> 1,611
<TOTAL-ASSETS> 4,088
<CURRENT-LIABILITIES> 1,311
<BONDS> 1,323
<COMMON> 2
0
0
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<INCOME-PRETAX> (79)
<INCOME-TAX> (28)
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<DISCONTINUED> 45
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (6)
<EPS-PRIMARY> (.03)
<EPS-DILUTED> (.03)
</TABLE>
