<PAGE> 1
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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 June 30, 1999 Commission file number 1-11013
SPECIALTY CHEMICAL RESOURCES, INC.
----------------------------------
(Exact name of registrant as specified in its charter)
Delaware 34-1366838
-------- ----------
(State of incorporation) (I.R.S. Employer I.D. No.)
9055 S. Freeway Drive, Macedonia, Ohio 44056
--------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (330) 468-1380
--------------
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
June 30, 1999 was 4,257,101. The registrant has no other class of stock
outstanding.
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Page 1 of 18
<PAGE> 2
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Specialty Chemical Resources, Inc.
Form 10-Q
For the quarter ended June 30, 1999
<TABLE>
Index
<CAPTION>
Part I Financial Information Page
<S> <C> <C>
Item 1. Financial Statements......................................3
Condensed Balance Sheets..................................3
Condensed Statements of Operations, 3 Months..............5
Condensed Statements of Operations, 6 Months..............6
Condensed Statements of Cash Flows, 3 Months..............7
Condensed Statements of Cash Flows, 6 Months..............8
Notes to Financial Statements.............................9
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations............11
Part II Other Information
Item 1. Legal Proceedings........................................16
Item 4. Submission of Matters to a Vote of Security Holders......16
Item 5. AMEX Delisting Review....................................17
</TABLE>
Page 2 of 18
<PAGE> 3
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
<TABLE>
Specialty Chemical Resources, Inc.
Condensed Balance Sheets
<CAPTION>
June 30, 1999 December 31, 1998
(Unaudited) (Audited)
------------- -----------------
<S> <C> <C>
Current assets
Cash and cash equivalents $ 3,100 $ 3,100
Accounts Receivables 5,031,706 4,511,220
Receivable - other 215,238 359,747
Inventories - LIFO 6,765,754 6,520,852
Prepaid expenses 284,770 215,498
----------- -----------
Total current assets 12,300,568 11,610,417
Property, plant and equipment
At cost 18,382,834 18,277,245
Less accumulated depreciation
and amortization (7,183,534) (6,666,274)
----------- -----------
11,199,300 11,610,971
Other assets
Goodwill 852,199 866,239
Product Formulation 266,510 408,638
Deferred Financing Cost 601,806 461,630
Other 109,818 211,536
----------- -----------
1,830,333 1,948,044
----------- -----------
Total assets $25,330,201 $25,169,432
=========== ===========
</TABLE>
See accompanying Notes to Financial Statements.
Page 3 of 18
<PAGE> 4
<TABLE>
Specialty Chemical Resources, Inc.
Condensed Balance Sheets (continued)
<CAPTION>
June 30, 1999 December 31, 1998
(Unaudited) (Audited)
------------- -----------------
<S> <C> <C>
Current liabilities
Current maturities $ 861,985 $ 1,176,503
Accounts payable 3,907,990 3,898,411
Accrued expenses 795,003 736,291
----------- -----------
Total current liabilities 5,564,978 5,811,205
Long-term obligations
Bank revolver and term loans 8,517,596 9,067,460
Mortgage loan 1,062,655 1,085,152
Convertible subordinated notes 6,377,116 4,541,218
Subordinated notes 1,004,349 1,602,850
----------- -----------
Total long-term obligations 16,961,716 16,296,680
Stockholders' equity
Preferred stock - $.01 par value;
authorized 1,996,500 shares
Common stock - $.10 par value;
authorized 13,000,000 shares;
issued 4,257,101 and
3,947,764 shares respectively 425,710 394,777
Additional paid in capital 41,902,820 41,935,125
Less common stock in treasury,
at cost; 65,500 shares -- (118,722)
Accumulated deficit (39,525,023) (39,149,633)
----------- -----------
2,803,507 3,061,547
----------- -----------
$25,330,201 $25,169,432
=========== ===========
</TABLE>
See accompanying Notes to Financial Statements.
Page 4 of 18
<PAGE> 5
<TABLE>
Specialty Chemical Resources, Inc.
Condensed Statements of Operations
(Unaudited)
For the 3 month periods ended:
<CAPTION>
June 30, 1999 June 30, 1998
------------- -------------
<S> <C> <C>
Net Sales $7,984,831 $9,314,165
Cost of Goods Sold 6,204,046 7,295,931
---------- ----------
Gross profit 1,780,785 2,018,931
Selling, general and administrative
Expenses 1,400,586 1,599,701
Amortization of intangibles 153,287 106,584
---------- ----------
Operating profit 226,912 312,646
Other income (expense)
Interest expense (368,205) (407,056)
Other - 0- -0-
---------- ----------
(368,205) (407,056)
---------- ----------
Earnings (loss) before income
Taxes (141,293) (94,410)
Income taxes -0- -0-
Net (loss) $ (141,293) $ (94,410)
========== ==========
Net (loss) per common share: $ (.03) $ (.02)
Weighted average shares outstanding 4,257,259 3,882,261
</TABLE>
See accompanying Notes to Financial Statements.
Page 5 of 18
<PAGE> 6
<TABLE>
Specialty Chemical Resources, Inc.
Condensed Statements of Operations
(Unaudited)
For the 6 month periods ended:
<CAPTION>
June 30, 1999 June 30, 1998
------------- -------------
<S> <C> <C>
Net Sales $15,736,922 $19,386,151
Cost of Goods Sold 12,346,879 15,640,265
----------- -----------
Gross profit 3,390,043 3,745,886
Selling, general and administrative
Expenses 2,785,401 3,298,443
Amortization of intangibles 259,420 213,134
----------- -----------
Operating profit 345,222 234,309
Other income (expense)
Interest expense 720,612 801,504
Other - 0- -0-
----------- -----------
720,612 801,504
----------- -----------
Earnings (loss) before income
Taxes (375,390) (567,195)
Income taxes -0- -0-
Net (loss) $ (375,390) $ (567,195)
=========== ===========
Net (loss) per common share: $ (.09) $ (.15)
Weighted average shares outstanding 4,135,022 3,882,261
</TABLE>
See accompanying Notes to Financial Statements.
Page 6 of 18
<PAGE> 7
<TABLE>
Specialty Chemical Resources, Inc.
Condensed Statements of Cash Flows
(Unaudited)
For the 3 month periods ended:
<CAPTION>
June 30, 1999 June 30, 1998
------------- -------------
<S> <C> <C>
Net cash provided (used) by operating
activities $ (41,183) $ (606,366)
Cash flows from investing activities:
Capital expenditures, other (432,587) (159,545)
----------- -----------
Net cash (used) by investing
activities (432,587) (159,545)
Cash flows from financing activities:
Proceeds from notes -0- 1,500,000
Payments on revolver (9,553,661) (8,264,884)
Proceeds on revolver 9,027,431 7,530,795
Proceeds from Harris Trust Note 1,000,000 -0-
----------- -----------
Net cash provided (used) by
financing activities 473,770 765,911
----------- -----------
Net increase (decrease) in cash
and cash equivalents -0- -0-
Cash and cash equivalents at beginning
of period 3,100 3,100
----------- -----------
Cash and cash equivalents at end
of period $ 3,100 $ 3,100
=========== ===========
</TABLE>
See accompanying Notes to Financial Statements.
Page 7 of 18
<PAGE> 8
<TABLE>
Specialty Chemical Resources, Inc.
Condensed Statements of Cash Flows
(Unaudited)
For the 6 month periods ended:
<CAPTION>
June 30, 1999 June 30, 1998
------------- -------------
<S> <C> <C>
Net cash provided (used) by operating
activities $ 130,668 $ (1,330,473)
Cash flows from investing activities:
Capital expenditures, other (405,043) (486,448)
------------ ------------
Net cash (used) by investing
activities (405,043) (486,448)
Cash flows from financing activities:
Proceeds from notes -0- 1,500,000
Payments on revolver (17,702,229) (21,771,929)
Proceeds on revolver 16,976,604 22,088,850
Proceeds from Harris Trust Note 1,000,000 -0-
------------ ------------
Net cash provided (used) by
financing activities 274,375 1,816,921
------------ ------------
Net increase (decrease) in cash
and cash equivalents -0- -0-
Cash and cash equivalents at beginning
of period 3,100 3,100
------------ ------------
Cash and cash equivalents at end
of period $ 3,100 $ 3,100
============ ============
</TABLE>
See accompanying Notes to Financial Statements.
Page 8 of 18
<PAGE> 9
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, 1998 and June 30, 1999
and the results of operations and cash flows for the interim periods ended June
30, 1999 and 1998.
Any 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>
June 30, 1999 December 3l, 1998
------------- -----------------
<S> <C> <C>
Raw materials $3,583,534 $3,737,239
Finished goods 3,871,824 3,473,217
---------- ----------
Total FIFO cost 7,455,358 7,210,456
Less: Excess of FIFO cost over
LIFO 689,604 689,604
---------- ----------
Total LIFO cost $6,765,754 $6,520,852
---------- ----------
</TABLE>
Page 9 of 18
<PAGE> 10
Note C - Treasury Shares
The Company's Treasury Shares consisted of the following at:
<TABLE>
<CAPTION>
June 30, 1999 December 31, 1998
------------- -----------------
<S> <C> <C>
Treasury Shares (at cost) -- $118,722
(65,500 shares)
</TABLE>
On February 11, 1999, the Company used common stock to pay $112,500 of
interest accrued through January 31, 1999 on three $500,000 subordinated
promissory notes for indebtedness, one each to Edwin Roth, Martin Trust and CEW
Partners. A total of 375,000 shares consisting of 309,500 newly issued shares
and 65,500 of Treasury shares at the fair market value of $.30 per share, which
was the average closing price of the common stock for the five consecutive
trading days prior to the day immediately before the payment date, were issued
equally among Edwin Roth, Martin Trust and CEW Partners. (See Liquidity and
Capital Resources).
Note D - 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.
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Results of Operations
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>
Six Months Ended Three Months Ended
June 30, June 30,
-------- --------
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net sales ............................................ 100.0% 100.0% 100.0% 100.0%
Cost of goods sold ................................... 78.5% 80.7% 77.7% 78.3%
Gross profit ....................................... 21.5% 19.3% 22.3% 21.7%
Selling, general and administrative expenses ......... 17.7% 17.0% 17.5% 17.2%
Operating profit (loss) ............................ 2.2% 1.2% 2.8% 3.4%
Interest expense ..................................... 4.6% 4.1% 4.6% 4.4%
</TABLE>
Page 10 of 18
<PAGE> 11
SIX AND THREE MONTHS ENDED JUNE 30, 1999 AS COMPARED TO SIX AND THREE MONTHS
ENDED JUNE 30, 1998:
Net sales of $15,737,000 for the six months ended June 30, 1999, were
$3,649,000, or 19%, below the comparable period in the prior year. The decrease
was entirely due to reduced volume that resulted primarily from production
shortfalls in the last six months of 1997 that caused a loss of customers and a
loss of business from several continuing customers throughout 1998. No
additional significant customers were lost during the first six months of 1999.
Net sales of $7,985,000 for the three-month period ended June 30, 1999
were $1,329,000, or 14% below the comparable period in the prior year. The
decrease was entirely due to reduced volume that resulted primarily from
production shortfalls in the last six months of 1997 that caused a loss of
customers and a loss of business from several continuing customers throughout
1998. No additional significant customers were lost during the second quarter of
1999.
Cost of goods sold dollars decreased by $3,293,000 for the six months
ended June 30, 1999, as compared to the same period in the prior year. However,
1998 manufacturing overhead benefited from a $300,000 refund of Worker's
Compensation Insurance premiums from prior years. Without the refund, cost of
goods sold decreased by $3,593,000. Approximately 60% of this dollar decrease in
the 1999 period is due to lower volume, with 18% due to lower manufacturing
labor costs, 13% due to improved material efficiencies and 9% related to lower
manufacturing overhead costs. Cost of goods sold decreased as a percentage of
net sales from 80.7% to 78.5% for the six-month period ended June 30, 1999, as
compared to the same period of the prior year. The decreased percentage was due
entirely to improved material efficiencies.
Cost of goods sold dollars decreased by $1,092,000 for the three months
ended June 30, 1999 compared to the same period of 1998. Without the $300,000
1998 Worker's Compensation refund mentioned above, the 1999 decreased cost would
have been $1,392,000. Approximately 56% of this dollar decrease was due to lower
volume with 18% due to improved material efficiencies, 13% due to lower
manufacturing labor costs in 1999 and 13% due to lower manufacturing overhead
costs. Cost of goods sold decreased as a percentage of net sales from 78.3% to
77.7% for the three-month period ended June 30, 1999 compared to the same period
for the prior year. The decreased percentage was due entirely to improved
material efficiencies.
Selling, general and administrative expenses were $2,786,000 for the
six-month period ended June 30, 1999, a reduction of $512,000 as compared to the
same period in 1998. Approximately 50% of the decrease in selling, general and
administrative expense dollars is due to staffing reductions implemented
throughout 1998 and with a downsizing at the beginning of 1999, with 43% due to
overhead reduction programs implemented throughout 1998 and 7% due to reduced
freight and commission costs.
Selling, general and administrative expenses were $1,401,000 for the
three-month period ended June 30, 1999, a reduction of $199,000 as compared to
the same period of 1998. Approximately 53% of the decrease in selling, general
and administrative expense dollars is due to staffing reductions, with the
remainder due to overhead reduction programs both mentioned above.
Page 11 of 18
<PAGE> 12
Interest expense was $721,000 for the six months ended June 30, 1999, a
decrease of $81,000 from the six months ended June 30, 1998. The decrease in
interest expense is due to decreased borrowings under the senior credit
facility. See "Liquidity and Capital Resources". Interest expense for the six
months ended June 30, 1999, was 4.6% of net sales versus 4.1% for the comparable
period in the prior year.
Interest expense was $368,000 for the three months ended June 30, 1999,
a decrease of $39,000 from the three months ended June 30, 1998. The decrease in
interest expense is due to decreased borrowings under the senior credit
facility. Interest expense for the three months ended June 30, 1999 was 4.6% of
net sales versus 4.4% for the comparable period in the prior year.
The Company experienced a net loss for the six months ended June 30, 1999, of
$375,000, or $.09 loss per share on weighted average shares outstanding of
4,135,022. This compared to a net loss of $867,000, or $.22 loss per share on
weighted average shares outstanding of 3,882,261 for the same period in the
prior year before the inclusion in 1998 of the Worker's Compensation insurance
premium rebate of $300,000. The reported loss in 1998 after the rebate was
$567,000, or $.15 loss per share. The reduced loss is due to the cost
improvements mentioned above more than offsetting the effects of the volume
decrease.
The Company experienced a net loss for the three months ended June 30, 1999, of
$141,000, or $.03 loss per share on weighted average shares outstanding of
4,257,259. This compared to a net loss of $394,000, or $.10 loss per share on
weighted average shares outstanding of 3,882,261 for the same period in 1998
before the inclusion in 1998 of the Worker's Compensation insurance premium
rebate of $300,000. The reported loss in 1998 after the rebate was $94,000, or
$.02 loss per share. The reduced loss is due to the cost improvement mentioned
above more than offsetting the volume decrease.
Liquidity and Capital Resources
As of June 30, 1999, the Company's ratio of current assets to current
liabilities was 2.21 to 1 and the quick ratio (cash, cash equivalents, and
accounts receivable, divided by current liabilities) was .94 to 1.
During the six months ended June 30, 1999, the Company incurred $721,000
in interest expense of which $186,000 was accrued to the carrying value of the
subordinated debentures. Total accrued interest reflected in the carrying value
of the subordinated debentures was $712,000 at June 30, 1999. Cash interest
payments totaled $538,000. Accrued interest payable to banks at June 30, 1999,
was $73,000.
On May 22, 1997 the Company executed an amendment to its current
agreement dated September 18, 1996 (the "Credit Agreement") with its senior
lender Star Bank, N.A. (now Firstar) The amended Credit Agreement provided for a
$15,000,000 facility which expires on December 31, 2000, comprised of a
revolving line of credit and three term loans. Borrowings on the revolving line
of credit and two of the term loans bear interest at the prime rate plus 1.5%,
subject to decrease if certain ratios and financial tests are met. The first of
these two term loans for $2,680,000 amortizes in forty-seven consecutive monthly
installments of $55,833 commencing June 1, 1998 with a forty-eighth and final
principal payment of $55,849. The second of these term loans was paid off in
1997. The third term loan was paid off by the end of the second quarter of 1999.
Page 12 of 18
<PAGE> 13
Under the terms of the Credit Agreement, the Company is required to
comply with various covenants, the most restrictive of which relates to the
maintenance of certain financial ratios, levels of tangible net worth, limits on
capital expenditures and restrictions on distributions from the Company to its
stockholders. On April 14, 1998, the Company and the senior lender executed a
Second Amendment to the Credit Agreement whereby the senior lender revised the
various financial covenants and required that the Company provide an acceptable
plan to the bank to provide additional capital for the Company. On May 20, 1998
the Company and its senior lender executed a Third Amendment to the Credit
Agreement related to the implementation of the Company's recapitalization plan.
On November 12, 1998, the Company and its senior lender executed a Fourth
Amendment to the Credit Agreement, to allow the Company to issue $1,800,000 of
new Subordinated Convertible Notes pursuant to a rights offering to its
stockholders, to reduce the total credit facility from $15 million to $14
million, to revise repayment schedules for the two continuing term loans and to
revise certain financial covenants. The revised term loan repayment schedule
does not alter the monthly amount of the payments, but restructures the
application of the payments to pay off the higher interest bearing (prime +4.5%)
term loan first and then commence repayment of the lower interest (prime +1.5%)
term loan. On February 15, 1999, Specialty Chemical and its senior lender
executed a Fifth Amendment to the Credit Agreement reducing the amount of the
new Subordinated Convertible Notes from $1,800,000 to $1,360,000 and permitting
the issuance of three unsecured subordinated promissory notes to Edwin Roth,
Martin Trust and CEW Partners in the aggregate amount of $304,800.
Based on 1998 financial performance, the senior lender has revised the
various covenants in a Sixth Amendment to the Credit Agreement. The Company is
currently in compliance with all covenants set by the Sixth Amendment to the
Credit Agreement. Such amendment reduces the total loan facility from $14
million to $12 million and requires Specialty Chemical to obtain an additional
$1 million of cash contributions through either equity or unsecured subordinated
debt by June 30, 1999. As of June 30, 1999, approximately $620,000 was unused
and available under the Credit Agreement. On April 28, 1999, in satisfaction of
its obligation to obtain additional cash, Specialty Chemical executed an
unsecured subordinated note with Harris Trust and Savings Bank permitting the
Company to borrow up to $1 million. Interest on the balance of this note is
payable monthly at the prime rate of Harris Trust and Savings Bank. The note is
due March 31, 2000 and is guaranteed and collateralized by Edwin Roth, Martin
Trust and CEW Partners. As of June 30, 1999, Specialty Chemical has borrowed
$1,000,000 under this note.
During January, 1998, the Company refinanced the mortgage on its
distribution center and corporate offices with a $1,125,000 note with a new
bank. The note, which bears interest at 8.75%, requires twelve monthly interest
only payments until February 1, 1999. Commencing on February 1, 1999, the note
requires 167 monthly principal and interest payments of $11,790, the final
payment being due on November 1, 2012. The borrowing is collateralized by a
facility which serves as the Company's distribution center and corporate
offices.
Page 13 of 18
<PAGE> 14
On May 20, 1998, the Company issued three $150,000 principal amount
subordinated promissory notes to Martin Trust, CEW Partners and Edwin M. Roth,
respectively (the "Investors"). Such notes were due June 22, 1998. On June 15,
1998, the Company issued three $500,000 principal amount 12% promissory notes
subordinated to the bank (the "Subordinated Notes") to such Investors in part to
refinance the original notes issued on May 20, 1998. Such Subordinated Notes
were originally due December 15, 1998, but were extended to March 15, 1999.
Interest accrued on the Subordinated Notes through January 31, 1999 was paid in
common stock of the Company on February 11, 1999. The Investors and the Company
agreed at the time these loans were made that the Subordinated Notes would be
refinanced with the net proceeds of a pro rata rights offering of Company debt
to its stockholders and its holders of Original Notes (as defined below). On
March 15, 1999, the Company completed an offering of subscription rights to
purchase an aggregate principal amount of $1,360,000 of 6% Convertible
Subordinated Notes due in ten years (the "New Notes") to stockholders and
holders of the 6% Convertible Subordinated Notes due 2006 (the "Original
Notes"). The net proceeds available to the Company from the rights offering were
approximately $1,160,000. The net proceeds of the rights offering were used to
repay a portion of the loans made to the Company by the Investors. As agreed to
by the Investors and the Company, the Company canceled the Subordinated Notes as
payment of each Investor's subscription price for the New Notes. After the
rights offering, Specialty Chemical issued an aggregate of $304,800 in new 12%
subordinated notes on March 15, 1999, due January 15, 2001. These new
subordinated notes were issued to the Investors in an amount equal to the
principal amount of the subordinated notes that exceeded each Investor's
subscription price for the New Notes purchased by each Investor. The principal
and accrued interest on the new subordinated notes will be payable at maturity
in cash, or at the holder's option, in shares of Common Stock based upon the
fair market value of the Common Stock. However, the noteholders may demand full
payment of principal and accrued interest on the new subordinated notes at any
time after the Company has authorized, unissued and unreserved shares of Common
Stock sufficient to pay, in full, the outstanding principal and interest under
all the new subordinated notes. The fair market value will be the average
closing price of the Common Stock on five consecutive trading days prior to the
day immediately before the date that the stockholders authorize the issuance of
Common Stock sufficient to pay all the outstanding principal and interest due
under the new subordinated notes. Such stock was authorized on June 3, 1999 and
a fair market value was established at $.4875 per share.
Net capital expenditures were $106,000 for the six months ended June 30,
1999. In addition, the Company expects to spend approximately $100,000 in
capital expenditures for the balance of the current fiscal year to be funded
from operating cash flows and borrowings under the senior credit facility. Under
current business conditions, the Company expects no significant change in its
liquidity position during the current fiscal year, and the Company believes that
cash from operations and the senior credit facility will be adequate to satisfy
the Company's liquidity needs during the balance of fiscal 1999.
Page 14 of 18
<PAGE> 15
YEAR 2000
Many computer systems and software products will have trouble processing
data related to the Year 2000. Specialty Chemical has reviewed all of its
information technology and non-information technology computer systems, computer
chips and software products for Year 2000 problems and has determined that its
operations systems and products relating to production and shipments should not
have Year 2000 problems, but that certain financial systems and products and
outsourced payroll systems should be upgraded or replaced. Specialty Chemical
recently replaced its vendor for outsourced payroll systems. Specialty Chemical
began replacing financial computer systems and software products in the second
quarter of 1999 and believes that new systems and products will be tested and in
place by September 30, 1999.
During 1998 Specialty Chemical made no expenditures relating to Year
2000 issues and used internal personnel to complete all work on such issues. In
the first half of 1999, Specialty Chemical spent approximately $80,000 to
complete its Year 2000 compliance efforts. No additional expenditures are
anticipated.
Specialty Chemical has received verbal and written responses from its
material suppliers and vendors regarding their Year 2000 compliance efforts. All
have responded that they either are compliant or have plans to be compliant
prior to the Year 2000. Specialty Chemical's contingency plan for uninterrupted
material supply sources includes maintaining multiple suppliers for most of its
raw materials and identifying back up suppliers for all key materials. However,
if Specialty Chemical's upgrade and replacement plan is not successful, or its
material suppliers or vendors develop Year 2000 problems, then Specialty
Chemical may suffer significant losses which would have a material adverse
effect on its business.
FORWARD-LOOKING STATEMENTS
Certain statements contained herein that are not statements of
historical facts are "forward-looking statements" within the meaning of the
Private Securities Litigation Reform Act of 1995 and are thus prospective. Such
forward-looking statements include, without limitation, statements regarding
expected financial performance, ongoing business strategies and possible future
action that the Company intends to pursue in order to achieve strategic
objectives. Such forward-looking statements are subject to risks, uncertainties
and other factors that could cause actual results to differ materially from
future results expressed or implied by such forward-looking statements.
Important factors that could cause actual results to differ materially from the
results expressed or implied by any forward-looking statements ("Cautionary
Statements") include general economic conditions, conditions in the Company's
industry, the uncertainty of availability of net operating loss carryovers, the
outcomes of certain environmental and legal proceedings and the adequacy of Year
2000 compliance measures. All subsequent written and oral forward-looking
statements relating to the matters described herein and attributable to the
Company or to persons acting on behalf of the Company are expressly qualified in
their entirety by the Cautionary Statements.
Page 15 of 18
<PAGE> 16
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 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
At the annual Meeting of Stockholders of the Company held on June 3,
1999, the stockholders considered and voted to adopt, by a vote of 2,850,847
For, 289,871 Against and 6,015 Withheld, an amendment to the Company's Restated
Certificate of Incorporation increasing the Company's authorized shares of
common stock, par value $.10 per share, to 30,000,000 shares, the election of
seven directors for one-year terms expiring in 2000, or until their successors
have been duly elected and qualified, and a resolution by the Board of Directors
ratifying the appointment of Grant Thornton LLP as independent auditors for the
Company for the year ended December 31, 1999.
All of management's nominees for directors, as listed in the proxy
statement, were elected by the following votes:
Edwin M. Roth For 2,972,642
Against 174,091
Withheld -0-
Corey B. Roth For 2,974,685
Against 172,048
Withheld -0-
George N. Aronoff For 2,976,191
Against 170,542
Withheld -0-
Victor Gelb For 2,975,320
Against 171,413
Withheld -0-
Geoffrey J. Colvin For 2,976,670
Against 170,063
Withheld -0-
Terence J. Conklin For 2,976,670
Against 170,063
Withheld -0-
Lionel N. Sterling For 2,976,670
Against 170,063
Withheld -0-
Page 16 of 18
<PAGE> 17
ITEM 5. AMEX DELISTING REVIEW
Specialty Chemical has been notified by AMEX that it is
reviewing the Company's financial position and that the common stock may be
delisted from trading on the Exchange. The review process will commence in the
third quarter of 1999.
Page 17 of 18
<PAGE> 18
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/ David F. Spink August 16, 1999
-----------------------------------------
David F. Spink
Vice President , Chief Financial Officer,
Treasurer, and Asst. Secretary
Page 18 of 18
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<CIK> 0000703645
<NAME> SPECIALTY CHEMICAL RESOURCES, INC.
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-1-1999
<PERIOD-END> JUN-30-1999
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