<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
------------
FORM 8-K/A
AMENDMENT NO. 2
TO
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15 (D) OF
THE SECURITIES EXCHANGE ACT 0F 1934
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED), JULY 10, 1997
------------
STERLING CHEMICALS HOLDINGS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
DELAWARE 1-00059 76-0185186
(STATE OR OTHER JURISDICTION OF (COMMISSION FILE NUMBER) (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
</TABLE>
1200 SMITH STREET, SUITE 1900
HOUSTON, TEXAS 77002-4312
(713) 650-3700
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES AND ZIP CODE)
(713) 650-3700
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
-----------
STERLING CHEMICALS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
DELAWARE 333-04343-01 76-0502785
(STATE OF OTHER JURISDICTION (COMMISSION FILE NUMBER) (I.R.S. EMPLOYER
OF INCORPORATION OR IDENTIFICATION NO.)
ORGANIZATION)
</TABLE>
1200 SMITH STREET, SUITE 1900
HOUSTON, TEXAS 77002-4312
(713) 650-3700
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES AND ZIP CODE)
--------------------
(713) 650-3700
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
<PAGE> 2
EXPLANATORY NOTE TO AMENDMENT NO. 2
The undersigned registrant hereby amends its Current Report on Form 8-K
originally filed July 25, 1997 for the sole purpose of filing Item 7(a)
"Financial statements of the business acquired" and the related auditors'
consent.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(a) Financial statements of the business acquired.
The financial statements of Saskatoon Chemicals Ltd. are
presented below.
<PAGE> 3
Arthur
Andersen
- --------------------------------------------------------------------------------
Auditors' Report
- --------------------------------------------------------------------------------
To the Shareholder of
SASKATOON CHEMICALS LTD.:
We have audited the balance sheet of SASKATOON CHEMICALS LTD. as at December 29,
1996 and the statements of income, retained earnings and changes in financial
position for the year then ended. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform an audit to obtain reasonable
assurance whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation.
In our opinion, these financial statements present fairly, in all material
respects, the financial position of the Company as at December 29, 1996 and the
results of its operations and changes in its financial position for the year
then ended in accordance with generally accepted accounting principles.
Winnipeg, Manitoba
March 27, 1997
<PAGE> 4
SASKATOON CHEMICALS LTD.
BALANCE SHEET
DECEMBER 29, 1996
ASSETS
<TABLE>
<CAPTION>
1996
-----------
CURRENT ASSETS
<S> <C>
Accounts receivable $ 5,490,964
Income taxes receivable 803,297
Inventories (Note 3) 5,707,672
Prepaid expenses 13,248
-----------
12,015,181
PROPERTY, PLANT AND EQUIPMENT (Note 4) 49,517,509
OTHER ASSETS (Note 5) 820,918
-----------
$62,353,608
===========
LIABILITIES AND SHAREHOLDER'S EQUITY
CURRENT LIABILITIES
Bank indebtedness (Note 6) $ 1,252,595
Accounts payable and accrued liabilities 4,084,639
Due to affiliate (Note 8) 7,322,841
-----------
12,660,075
-----------
DEFERRED INCOME TAXES 15,865,418
-----------
COMMITMENTS (Note 10)
SHAREHOLDER'S EQUITY
Share capital (Note 7) 3,001,000
Contributed surplus 190,470
Retained earnings 30,636,645
-----------
33,828,115
-----------
$62,353,608
===========
</TABLE>
The accompanying notes are an integral part of this balance sheet.
<PAGE> 5
SASKATOON CHEMICALS LTD.
STATEMENT OF INCOME AND RETAINED EARNINGS
FOR THE YEAR ENDED DECEMBER 29, 1996
<TABLE>
<CAPTION>
1996
------------
<S> <C>
NET SALES (Note 8) $ 67,344,975
------------
COSTS AND EXPENSES
Cost of goods sold 37,213,784
Interest, net of $125,987 capitalized (Note 8) (298,889)
Corporate and administrative 14,220,947
Other 66,406
------------
51,202,248
------------
INCOME BEFORE PROVISION FOR INCOME TAXES 16,142,727
------------
PROVISION FOR INCOME TAXES
Current 5,682,758
Deferred (282,758)
------------
5,400,000
------------
NET INCOME 10,742,727
RETAINED EARNINGS, beginning of year 39,893,918
DIVIDEND PAID (20,000,000)
------------
RETAINED EARNINGS, end of year $ 30,636,645
============
</TABLE>
The accompanying notes are an integral part of this statement.
<PAGE> 6
SASKATOON CHEMICALS LTD.
STATEMENT OF CHANGES IN FINANCIAL POSITION
FOR THE YEAR ENDED DECEMBER 29, 1996
<TABLE>
<CAPTION>
1996
------------
CASH PROVIDED BY (USED IN)
OPERATING ACTIVITIES
<S> <C>
Net income $ 10,742,727
Add (deduct) items not affecting cash
Depreciation 4,877,395
Deferred income taxes (282,758)
Other 349,073
------------
15,686,437
Net change in non-cash operating accounts 190,012
------------
15,876,449
------------
FINANCING ACTIVITIES
Net change in affiliate accounts (Note 8) 12,455,487
Dividend paid (20,000,000)
------------
(7,544,513)
------------
INVESTING ACTIVITIES
Net additions to property, plant and equipment (7,783,041)
Net additions to other assets (946,338)
------------
(8,729,379)
------------
DECREASE IN CASH (397,443)
BANK INDEBTEDNESS, beginning of year (855,152)
------------
BANK INDEBTEDNESS, end of year $ (1,252,595)
============
</TABLE>
The accompanying notes are an integral part of this statement.
<PAGE> 7
SASKATOON CHEMICALS LTD.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 29, 1996
1. SIGNIFICANT ACCOUNTING POLICIES
(a) FISCAL YEAR
Saskatoon Chemicals Ltd.'s (the "Company") fiscal year ends on the
last Sunday of the calendar year.
(b) FOREIGN CURRENCY TRANSLATION
Sales and expenses are translated at the exchange rate in effect on
the date which they occur.
Monetary assets and liabilities are translated at the exchange rate
in effect at the period-end date.
Foreign exchange gains and losses are recorded in the statement of
income or, if relating to long-term monetary items, are deferred
and amortized over the term of the related item.
(c) INVENTORIES
Inventories are stated at the lower of average cost and net
realizable value.
(d) PROPERTY, PLANT AND EQUIPMENT
The Company capitalizes the interest cost for capital projects with
anticipated costs in excess of $500,000 expended during the
construction and pre-operating periods. In addition, the Company
capitalizes significant pre-operating and start-up costs.
Capitalized interest, pre-operating and start-up costs are
amortized against income on the same basis as the related assets.
(e) DEPRECIATION
Depreciation of property, plant and equipment is provided on the
straight-line method based on estimated service lives. The
estimated service lives have the following ranges:
Buildings 10-40 years
Machinery and equipment 3-25 years
(f) OTHER ASSETS
Costs of membranes and cell parts placed in service are deferred
and amortized over their estimated service lives of two to three
years.
<PAGE> 8
SASKATOON CHEMICALS LTD.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 29, 1996
1. SIGNIFICANT ACCOUNTING POLICES (continued)
(g) REVENUE
Revenues are disclosed net freight, discounts and allowances.
(h) INCOME TAXES
The Company follows the deferral method of tax allocation
accounting in determining the provision for income taxes
during the year. Deferred income taxes result primarily from
timing differences in the recording of depreciation for
accounting purposes and the claiming of capital cost allowance
for tax purposes.
(i) POST RETIREMENT BENEFITS
The Company provides certain retired employees with benefits
including medical coverage and life insurance. The cost of
these benefits is actuarially determined and accrued in the
accounts.
<TABLE>
<CAPTION>
2. ACCOUNTS RECEIVABLE
1996
-------------
<S> <C>
Trade $ 4,950,069
Other 540,895
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$ 5,490,964
=============
3. INVENTORIES
1996
-------------
Raw Materials $ 77,414
Finished goods 2,257,150
Materials, parts and supplies 3,373,108
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$ 5,707,672
=============
</TABLE>
<PAGE> 9
SASKATOON CHEMICALS LTD.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 29, 1996
4. PROPERTY, PLANT AND EQUIPMENT
<TABLE>
<CAPTION>
ACCUMULATED NET BOOK
COST DEPRECIATION VALUE
------------ ------------- -------------
<S> <C> <C> <C>
Land $ 503,663 $ - $ 503,663
Buildings and improvements 11,869,716 2,921,057 8,948,659
Machinery and equipment 68,053,606 28,259,710 39,793,896
Construction in progress 271,291 - 271,291
------------ ------------- -------------
$ 80,698,276 $ 31,180,767 $ 49,517,509
============ ============= =============
</TABLE>
5. OTHER ASSETS
<TABLE>
<S> <C>
Deferred membrane costs $ 520,946
Deferred cell parts costs 299,972
------------
$ 820,918
============
</TABLE>
6. BANK INDEBTEDNESS
The Company's banking facilities are maintained by the parent company,
Weyerhaeuser Canada Ltd. Bank indebtedness represents outstanding
cheques as at year end.
7. SHARE CAPITAL
Authorized
Unlimited Redeemable, retractable, non-participating,
non-voting Class A preference shares without
par value
Unlimited Voting common shares, without par value
<PAGE> 10
SASKATOON CHEMICALS LTD.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 29, 1996
7. SHARE CAPITAL (Continued)
Issued
<TABLE>
<CAPTION>
Shares Amount
------------ ------------
<S> <C> <C>
Class A common shares 10 $ 1,000
Class A preferred shares 3,000 3,000,000
------------
$ 3,001,000
============
</TABLE>
8. RELATED PARTY TRANSACTIONS
Saskatoon Chemicals Ltd., is a wholly-owned subsidiary of Weyerhaeuser
Canada Ltd., which is itself a wholly-owned subsidiary of Weyerhaeuser
Company. Weyerhaeuser Saskatchewan Ltd. is a sister company to
Saskatoon Chemicals Ltd. and is wholly-owned by Weyerhaeuser Canada
Ltd.
The following is a summary of the outstanding balances with related
parties:
<TABLE>
<S> <C>
Payable to Weyerhaeuser Canada Ltd. $ 7,322,841
</TABLE>
The Company entered into a "Revolving Credit and Term Loan Agreement"
with Weyerhaeuser Canada Ltd. for an amount not to exceed $25,000,000
dated February 1, 1993. Under the terms of the agreement, advances bear
interest at the Royal Bank of Canada Canadian dollar prime rate. Also,
the Company is charged a standby fee equal to three-eighths of a
percent per annum on the monthly unused portion of the credit line.
This agreement terminates on the sale of substantially all of the
assets of the Company (see Note 13). Outstanding advances and interest
are payable on or before the date of closing.
<PAGE> 11
SASKATOON CHEMICALS LTD.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 29, 1996
8. RELATED PARTY TRANSACTIONS (Continued)
The following is a summary of approximate amounts of transactions with
related parties:
<TABLE>
<S> <C>
Chemical sales to Weyerhaeuser Saskatchewan Ltd. $14,315,630
Chemical sales to Weyerhaeuser Canada Ltd. 13,505,973
Corporate administrative charges paid to
Weyerhaeuser Saskatchewan Ltd. 793,857
Corporate administrative charges paid to
Weyerhaeuser Canada Ltd. 14,000
Interest revenue charged to Weyerhaeuser Canada Ltd. 294,522
Interest expense and standby fee paid to
Weyerhaeuser Canada Ltd. 121,620
Chemical sales to Weyerhaeuser Saskatchewan Ltd. and Weyerhaeuser Canada
Ltd. are priced at estimated fair market value.
</TABLE>
9. PENSION COSTS
The Company maintains a defined benefit pension plan for salaried
employees. The actuarial value of assets are based on market values. The
actuarial value of the obligation is determined using the projected unit
credit actuarial cost method pro-rated on service and the Company's best
estimates of future plan assumptions. The estimated position of the plan
at December 29, 1996 based on an actuarial valuation performed as at
January 1, 1996 are as follows:
<TABLE>
<S> <C>
Actuarial value of assets $ 3,320,514
Actuarial value of obligations 3,308,572
----------
Plan surplus $ 11,942
===========
</TABLE>
The current year deferred benefit pension plan expense amounted to
$180,227.
<PAGE> 12
SASKATOON CHEMICALS LTD.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 29, 1996
10. COMMITMENTS
As at December 29, 1996, the estimated amount to complete authorized
capital projects was approximately $1,600,000.
Management believes that the Company met the environmental compliance
standards applicable to it as at December 29, 1996, and it estimates that
capital expenditures required to meet known future environmental
compliance standards will approximate $1,550,000. These costs have been
budgeted to be incurred in fiscal 1998.
11. ENVIRONMENTAL INDEMNITY
The previous owner of the plant has indemnified the Company against any
losses resulting from environmental claims arising out of the operations
prior to the 1986 purchase by the Company.
12. ECONOMIC DEPENDENCE
During 1996, 41% of the Company's sales were made to Weyerhaeuser Canada
Ltd. and Weyerhaeuser Saskatchewan Ltd. combined. The Company does not
have a sales agreement with either of the above companies.
13. SUBSEQUENT EVENT
Subsequent to year end, the Company realized an agreement in principle
with an unrelated party to sell substantially all of its assets. The sale
is expected to take effect in June 1997. The Company expects to realize a
gain on sale.
<PAGE> 13
(b) Pro forma financial information.
Not amended
(c) Exhibits
The following exhibits are filed as part of this Form 8-K/A.
EXHIBIT NUMBER DESCRIPTION OF EXHIBIT
-------------- ----------------------
23.1 Consent of Arthur Andersen & Co.
<PAGE> 14
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrants have duly caused this report to be signed on their behalf by the
undersigned hereunto duly authorized.
STERLING CHEMICALS HOLDINGS, INC.
STERLING CHEMICALS, INC.
(Registrants)
Date: May 12, 1998
By: /s/ Gary M. Spitz
-----------------------------
Gary M. Spitz
Vice President-Finance and
Chief Financial Officer
<PAGE> 1
EXHIBIT 23.1
ARTHUR ANDERSEN
CHARTERED ACCOUNTANTS
__________________________________
500 - 330 St. Mary Avenue
Winnipeg, Manitoba R3C 3Z5
204 942 6541 Telephone
204 956 0830 Facsimile
May 11, 1998
To: The Securities and Exchange Commission
Dear Sir/Madam:
As independent public accountants, we hereby consent to the use of our report
dated March 27, 1997 and to all references to our Firm included in or made part
of Sterling Chemicals Holdings, Inc.'s Form 8-K/A Amendment No. 2 to Current
Report dated July 10, 1997.
Yours very truly,
"ARTHUR ANDERSEN & CO."
