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SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q/A
QUARTERLY REPORT
Pursuant to Section 13 or 15 (d) of
the Securities Exchange Act of 1934
For the quarter ended March 31, 1994 Commission file number 1-11013
SPECIALTY CHEMICAL RESOURCES, INC.
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Exact name of registrant as specified in its charter
Delaware 34-1366838
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State of incorporation I.R.S. Employer I.D. No.
9100 Valley View Road; Macedonia, Ohio 44056
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Address of principal executive offices and zip code
(216) 468-1380
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Registrant's telephone number, including area code
Indicate by a 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 twelve (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 ninety
(90) days. Yes__X__ No_____.
The number of outstanding shares of the registrant's common stock as
of May 4, 1994 was 3,932,777. The registrant has no other class of
stock outstanding.
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Specialty Chemical Resources, Inc.
Form 10-Q/A
For the quarter ended March 31, 1994
Index
Part I Financial Information Page
Item 1. Financial Statements..........................................3
Condensed Balance Sheets....................................3-4
Condensed Statements of Operations, 3 Months..................5
Condensed Statements of Cash Flows, 3 Months..................6
Notes to Financial Statements.................................7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations................8-10
Part II Other Information
Item 1. Legal Proceedings.............................................10
Item 6. Exhibits & Reports on Form 8-K................................10
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
<TABLE>
Specialty Chemical Resources, Inc.
Condensed Balance Sheets
<CAPTION>
March 31 1994 December 31, 1993
(Unaudited) (Audited)
------------- -----------------
<S> <C> <C>
Current assets
Cash and cash equivalents $ 27,511 $ 32,691
Accounts Receivables 5,367,575 6,824,594
Receivables - Other 2,810,545 4,308,481
Inventories (Note B) 6,758,910 6,342,379
Prepaid expenses 195,660 165,731
Refundable Income Taxes 853,783 853,783
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Total current assets 16,013,984 18,527,659
Property, plant and equipment
At cost 10,238,761 10,187,905
Less accumulated depreciation
and amortization (2,153,228) (1,956,503)
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8,085,533 8,231,402
Other assets
Goodwill 21,432,530 21,586,547
Other 1,515,177 1,568,208
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22,947,707 23,154,755
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Total assets $ 47,047,224 $ 49,913,816
============ ============
See accompanying Notes to Financial Statements.
</TABLE>
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<TABLE>
Specialty Chemical Resources, Inc.
Condensed Balance Sheets
(continued)
<CAPTION>
March 31, 1994 December 31, 1993
(Unaudited) (Audited)
---------------- -----------------
<S> <C> <C>
Current liabilities
Current Maturities $ 1,500,000 $ -
Accounts payable 4,577,810 6,660,088
Deferred Income Taxes 326,345 326,345
Accrued expenses 476,861 487,436
Accrued other, including
acquisition costs 130,248 171,160
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Total current liabilities 7,011,264 7,645,029
Long-term obligations
less current maturities 8,046,000 9,948,000
Deferred Income Taxes 2,507,018 2,507,018
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Total non-current liabilities 10,553,018 12,455,018
Stockholders' equity
Preferred stock - $.01 par value;
authorized 2,000,000 shares
Common Stock - $.10 par value;
authorized 13,000,000 shares;
issued and outstanding 3,932,777
and 3,932,780 393,279 393,279
Additional paid in capital 41,878,573 41,878,573
Accumulated deficit (12,788,910) (12,458,083)
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29,482,942 29,813,769
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$47,047,224 $49,913,816
=========== ===========
See accompanying Notes to Financial Statements.
</TABLE>
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<TABLE>
Specialty Chemical Resources, Inc.
Condensed Statements of Operations
(Unaudited)
For the 3 month periods ended:
<CAPTION>
March 31, 1994 March 31, 1993
--------------- --------------
<S> <C> <C>
Net Sales $ 9,630,740 $10,274,964
Cost of Goods Sold 8,039,630 8,086,470
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Gross profit 1,591,110 2,188,494
Selling, general and administrative
expenses 1,577,949 1,488,908
Amortization of intangibles 218,448 215,768
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Operating profit (205,287) 483,818
Other (income) expense
Interest expense 128,787 88,181
Other ( 3,247) (12,426)
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125,540 75,755
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Earnings (loss) before income
taxes (330,827) 408,063
Income taxes - 149,000
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Earnings (loss) $ (330,827) $ 259,063
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Earnings (loss) per common share: $ (.08) $ .07
Weighted average shares outstanding 3,932,778 3,934,999
See accompanying Notes to Financial Statements.
</TABLE>
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<TABLE>
Specialty Chemical Resources, Inc.
Condensed Statements of Cash Flows
(Unaudited)
For the 3 month periods ended:
<CAPTION>
March 31, 1994 March 31, 1993
-------------- --------------
<S> <C> <C>
Net cash (used) by operating
activities $ 447,676 $(1,648,398)
Cash flows from investing activities:
Expenditures for property, plant and
equipment - net (50,856) ( 32,679)
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Net cash provided (used) by
investing activities (50,856) ( 32,679)
Cash flows from financing activities:
Payments on revolver (5,210,000) (2,781,000)
Proceeds on revolver 4,808,000 4,428,000
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Net cash provided (used) by
financing activities ( 402,000) 1,647,000
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Net increase (decrease) in cash
and cash equivalents ( 5,180) (34,077)
Cash and cash equivalents at beginning
of period 32,691 78,771
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Cash and cash equivalents at end
of period $ 27,511 $ 44,694
=========== ===========
See accompanying Notes to Financial Statements.
</TABLE>
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Specialty Chemical Resources, Inc.
Notes to Financial Statements
Note A - Summary of Significant Accounting Policies
The accompanying audited and unaudited financial statements have been
prepared in conformity with generally accepted accounting principles and all
adjustments are of a normal recurring nature and are, in the opinion of
management, necessary to present fairly the financial position of Specialty
Chemical Resources, Inc. (The Company) at December 31, 1993 and March 31, 1994
and the results of operations and cash flows for the interim periods ended
March 31, 1994.
Company inadvertently used a 10 year life for depreciation on machinery
and equipment placed into service this year (assets replaced due to December,
1992 Macedonia plant fire). The Company has determined the useful life on this
machinery and equipment to be 16 years. The quarter impact (related to the
change in depreciation) to earnings before income taxes and extraordinary items
is $54,149. There was no tax affect.
Any other significant accounting policies employed in the preparation of
the financial statements are included in the Company's most recent Form 10-K.
Note B - Inventories
Inventories are stated at the lower of cost or market determined by the
last-in, first-out (LIFO) method for raw materials and the first-in, first-out
(FIFO) method for finished goods.
The Company's inventories consisted of the following at:
<TABLE>
<CAPTION>
March 31, December 31,
1994 1993
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<S> <C> <C>
Raw materials $3,975,985 $4,181,837
Finished goods 3,356,698 2,734,315
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Total FIFO cost 7,332,683 6,916,152
Less: Excess of FIFO cost over
LIFO 573,773 573,773
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Total LIFO cost $6,758,910 $6,342,379
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</TABLE>
Note C - Legal Proceedings
There have been no material changes in the status of legal proceedings
pending against the Company other than that which was reported on the Company's
most recent Form 10-K.
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Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Results of Operations
In December, 1992, the company experienced a non-chemical fire at its
Macedonia, Ohio facility. The fire adversely effected production capabilities
at such facility, which adverse effect continued through 1993. Management
believes that the damage caused by the fire and the effects on the Company's
business are adequately covered by casualty and business interruption
insurance. The Company's Macedonia facility is now fully operational.
The following table sets forth, for the periods indicated, the percentage
relationship to net sales of certain items included in the Company's Statement
of Operations.
<TABLE>
<CAPTION>
Three Months Ended
March 31,
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1994 1993
---- ----
<S> <C> <C>
Net sales........................................... 100.0% 100.0%
Cost of goods sold.................................. 83.5% 78.7%
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Gross profit...................................... 16.5% 21.3%
Selling, general and administrative expenses....... 16.4% 14.5%
Operating profit.................................. (2.1%) 4.7%
Interest expense.................................... 1.3% .01%
</TABLE>
THREE MONTHS ENDED MARCH 31, 1994 AS COMPARED TO THREE MONTHS ENDED MARCH 31,
1993:
Net sales of $9,631,000 for the three-month period ended March 31, 1994,
were $644,000, or 6.3%, below the comparable period in the prior year. This
decrease was a result of reduced demand for automotive and industrial
maintenance products, which the Company believes was induced principally by
unusually severe weather conditions.
Cost of goods sold for the three-month period ended March 31, 1994,
decreased by $47,000 as compared to the same period in the prior year. Cost of
goods sold increased as a percentage of net sales from 78.7% to 83.5% for the
three-month periods ended March 31, 1993 and 1994, respectively. The increase
is due to decreased sales, increased charges for chemical waste disposal, and
higher than normal utility expense.
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Selling, general and administrative expenses were $1,578,000 for the
three-month period March 31, 1994, or 16.4% of net sales. Selling, general
and administrative expenses were $1,489,000 or 14.5% of net sales for the same
period in 1993. The increase of $89,000 was due principally to an increase in
commission expense incurred by the sales of branded products. The increase in
percent of sales is due primarily to reduced sales during the 1994 period.
Interest expense for the three months ended March 31, 1994, was 1.3% of
net sales versus .01% for the comparable period in the prior year. Interest
expense was $128,787 for the three months ended March 31, 1994, an increase of
$40,606 from the three months ended March 31, 1993. This increase is due to
increased borrowing as well as higher interest rates. See "Liquidity".
The Company experienced a net loss for the three months ended March 31,
1994, of $385,000, or $.10 per share on weighted average shares outstanding of
3,932,778. This compared to a net earnings of $259,000, or $.07 per share on
weighted average shares outstanding of 3,934,999 for the same period in the
prior year.
Liquidity and Capital Resources
As of March 31, 1994, the Company's ratio of current assets to current
liabilities was 2.28 to 1 and the quick ratio (cash, cash equivalents, and
accounts receivable, divided by current liabilities) was 1.29 to 1.
During the three months ended March 31, 1994, the Company incurred
$128,787 in interest expense and made interest payments totaling $133,120.
Accrued interest at March 31, 1994 was $54,395. Substantially all of the
Company's interest expense is related to the "Credit Agreement" and the 90 day
note discussed below.
The Company, as borrower, is a party to a credit agreement (the "Credit
Agreement") that provides for a $10,000,000 revolving line of credit at an
interest rate equal to the prime rate or the London Inter-Bank Offered Rate
(LIBOR), at the Company's election. The Credit Agreement, entered into on
March 30, 1992 and expiring on May 31, 1995, is a facility that allows for
borrowings based upon a formula comprised of inventory, accounts receivable and
fixed assets, less environmental compliance reserve, if any.
Under the terms of the Credit Agreement, the Company is required to comply
with various covenants, the most restrictive of which relate to restrictions on
distributions from the Company to its stockholders, maintenance of certain
financial ratios and levels of tangible net worth and limits on capital
expenditures. As a result of the fire, the Company
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has used funds for the replacement of damaged equipment in advance of insurance
proceeds. As a result of the foregoing, as of March 31, 1994, approximately
$2 million was unused an available under the Credit Agreement. The Company
anticipates that these advanced funds will be reimbursed by its insurance
carrier. On January 4, 1994, the Company entered into a 90 day $1,500,000 note
at an interest rate equal to the prime rate with its senior lender to fund
operations until insurance proceeds become available.
The Company is continuing negotiations with its insurance carrier for
reimbursement of capital improvements and expenditures made during the year
ended December 31, 1993 that were related to the December, 1992 fire. To date
$9,123,000 of the $17,312,000 has been recovered. The Company anticipates
further proceeds will be forth coming from the insurance carrier and expects
final settlement of this claim in 1994.
The Company spent $50,856 on capital improvements during the period ended
March 31, 1994. The Company expects to spend approximately $500,000 on capital
improvements during the current fiscal year. Such expenditures are expected to
be funded from cash generated by operations and borrowings under the Credit
Agreement.
Part II - Other Information
Item 1. Legal Proceedings
There have been no material changes in the status of legal proceedings
pending against the Company.
Item 6. Exhibits and Reports on Form 8-K
(a) No exhibits are included with this report.
(b) The Company filed no reports on Form 8-K during the quarter ended March
31, 1994.
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Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Specialty Chemical Resources, Inc.
By:/s/ COREY ROTH
----------------------------------- March 22, 1995
Corey Roth
Vice President, and Treasurer
(Principal Financial Officer)
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