<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
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EXCHANGE ACT OF 1934
For the quarterly period ended AUGUST 31,1996
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (D) OF THE SECURITIES
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EXCHANGE ACT OF 1934
For the transition period from ________ to ________
Commission File Number 33-79532
LAROCHE INDUSTRIES INC.
(Exact name of registrant as specified in its charter)
Delaware 13-3341472
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
1100 Johnson Ferry Road, N.E., Atlanta, Ga 30342
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (404) 851-0300
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N/A
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(Former name or former address, 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
--- ---
Indicate the number of shares of each of the issuer's classes of common stock,
as of the latest practicable date:
CLASS OUTSTANDING AS OF SEPTEMBER 30, 1996
------------------------------- ------------------------------------
Common Stock, $.01 par value 449,918 Shares
<PAGE> 2
LAROCHE INDUSTRIES INC.
INDEX
<TABLE>
<CAPTION>
PAGE NO.
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<S> <C> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Condensed Consolidated Balance Sheets at August 31, 1996 1
and February 29, 1996
Condensed Consolidated Statements of Income for the six 2
months and three months ended August 31, 1996 and 1995
Condensed Consolidated Statements of Cash Flows for the six 3
months ended August 31, 1996 and 1995
Notes to Condensed Consolidated Financial Statements 4
Item 2. Management's Discussion and Analysis of Financial Condition 7
and Results of Operations
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 10
Item 6. Exhibits and Reports on Form 8-K 10
</TABLE>
<PAGE> 3
PART 1. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS (UNAUDITED) (see Note 1)
LAROCHE INDUSTRIES INC.
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(Dollars in thousands, except per share amounts)
<TABLE>
<CAPTION>
AUGUST 31, FEBRUARY 29,
1996 1996
-------- --------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $3,316 $3,265
Receivables:
Trade, net of allowances of $1,131 and $849 as of August 31, 1996
and February 29, 1996, respectively 47,403 57,153
Other 9,710 4,848
Inventories (Note 2) 27,418 46,004
Other current assets 4,674 4,878
-------- --------
Total current assets 92,521 116,148
Investments 17,440 17,165
Property, plant and equipment, at cost 249,598 245,720
Less accumulated depreciation (83,367) (81,108)
-------- --------
Net property, plant and equipment 166,231 164,612
Other assets 9,671 8,007
-------- --------
Total assets $285,863 $305,932
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Revolving credit facility (Note 3) $3,235 $4,755
Accounts payable 34,401 37,770
Accrued compensation 10,971 14,408
Other accrued liabilities 13,123 16,481
Common stock with put rights (Note 4) - 7,475
Current portion of long-term debt (Note 3) 6,528 5,990
-------- --------
Total current liabilities 68,258 86,879
Long-term debt (Note 3) 107,642 112,940
Deferred income taxes 15,668 15,668
Other noncurrent liabilities 36,026 34,378
Commitments and contingencies
Redeemable common stock 7,666 4,771
Stockholders' equity:
10% cumulative, voting preferred stock, $.01 par
value, 200,000 shares authorized, no shares outstanding - -
Common stock, $.01 par value, 1,200,000 shares
authorized, 425,000 non-redeemable shares issued 4 4
Capital in excess of par value 630 630
Retained earnings 49,969 50,662
-------- --------
Total stockholders' equity 50,603 51,296
-------- --------
Total liabilities and stockholders' equity $285,863 $305,932
======== ========
</TABLE>
See accompanying notes.
1
<PAGE> 4
LAROCHE INDUSTRIES INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(Dollars in thousands)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
-------------------- ------------------
AUGUST 31, AUGUST 31, AUGUST 31, AUGUST 31,
1996 1995 1996 1995
-------- ------ ----- -------
<S> <C> <C> <C> <C>
Net sales $87,441 $105,304 $201,662 $243,645
Cost of sales 77,016 79,416 168,433 181,006
------- -------- -------- --------
Gross profit 10,425 25,888 33,229 62,639
Selling, general and administrative expenses 14,761 13,976 28,388 26,583
------- -------- -------- --------
Income (loss) from operations (4,336) 11,912 4,841 36,056
Interest expense (3,566) (4,163) (7,585) (8,244)
Income from equity investments 1,160 375 2,228 527
Other income (expense), net (45) 112 27 265
------- -------- -------- --------
Income (loss) before income taxes (6,787) 8,236 (489) 28,604
(Provision) benefit for income taxes 2,782 (3,575) 258 (11,733)
------- -------- -------- --------
Net income (loss) (4,005) 4,661 (231) 16,871
Adjustment to estimated fair value of common
stock with put rights - (722) - (1,279)
------- -------- -------- --------
Income (loss) attributable to non-redeemable
common stockholders $(4,005) $ 3,939 $ (231) $ 15,592
======= ======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
THREE MONTHS ENDED
----------------------------------------
AUGUST 31, AUGUST 31,
1996 1995
------------------ -------------------
Percent Percent
Amount of Total Amount of Total
------- -------- -------- --------
<S> <C> <C> <C> <C>
SEGMENT INFORMATION:
NET SALES
Electrochemical products $25,024 28.6 % $ 40,004 38.0 %
Nitrogen products 51,865 59.3 48,555 46.1
Alumina chemicals 10,552 12.1 16,745 15.9
------- ----- -------- -----
Total $87,441 100.0 % $105,304 100.0 %
======= ===== ======== =====
INCOME (LOSS) FROM OPERATIONS:
Electrochemical products $ 862 (19.9)% $ 9,435 79.2 %
Nitrogen products (4,185) 96.5 1,754 14.7
Alumina chemicals 642 (14.8) 1,762 14.8
Corporate (1,655) 38.2 (1,039) (8.7)
------- ----- -------- -----
Total $(4,336) 100.0 % $ 11,912 100.0 %
======= ===== ======== =====
</TABLE>
See accompanying notes.
2
<PAGE> 5
LAROCHE INDUSTRIES INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
(Dollars in thousands)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
------------------------
AUGUST 31, AUGUST 31,
1996 1995
-------- ---------
<S> <C> <C>
OPERATING ACTIVITIES
Net income $ (231) $16,871
Depreciation and amortization 9,023 7,156
Net change in operating assets and liabilities 11,992 9,048
Equity income, net of distributions 64 (231)
Other (504) (250)
------- -------
Net cash provided by operating activities 20,344 32,594
INVESTING ACTIVITIES
Capital expenditures (12,686) (6,922)
Investments in joint ventures (339) -
Proceeds from sale of assets and other 4,054 1,155
------- -------
Net cash used by investing activities (8,971) (5,767)
FINANCING ACTIVITIES
Net repayments under revolving credit facility (1,520) (3,445)
Sale of common stock with redemption features 2,936 1,722
Purchase of common stock with redemption features (7,516) (63)
Repayments of long-term debt (4,760) (8,969)
Dividends paid (462) -
------- -------
Net cash (used) by financing activities (11,322) (10,755)
------- -------
Net (decrease) increase in cash and cash equivalents 51 16,072
Cash and cash equivalents at beginning of period 3,265 5,900
------- -------
Cash and cash equivalents at end of period $ 3,316 $21,972
======= =======
</TABLE>
See accompanying notes.
3
<PAGE> 6
LAROCHE INDUSTRIES INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
AUGUST 31, 1996
NOTE 1 - BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements
have been prepared in accordance with generally accepted accounting principles
for interim financial information and with the instructions to Form 10-Q and
Article 10 of Regulation S-X. Accordingly, they do not include all of the
information and notes required by generally accepted accounting principles for
complete financial statements. In the opinion of management, all adjustments
(consisting of normal recurring accruals) considered necessary for a fair
presentation have been included. All significant intercompany transactions and
balances have been eliminated in consolidation. Operating results for the six
month period ending August 31, 1996 may not be indicative of the results that
may be expected for the full fiscal year. For further information, refer to
the consolidated financial statements and notes thereto included in the
Company's Annual Report on Form 10-K for the year ended February 29, 1996.
Earnings per share have not been presented since such data provides no
significant information about the value of the Company.
Effective March 1, 1996, the Company adopted Statement of Financial
Accounting Standard No. 121, "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to be Disposed of " (SFAS 121). The Company's
adoption of SFAS 121 did not have a material impact on the Company's results of
operations.
NOTE 2 - INVENTORIES
The components of inventory are as follows:
<TABLE>
<CAPTION>
AUGUST 31, FEBRUARY 29,
---------- ------------
1996 1996
---------- ------------
<S> <C> <C>
(in Thousands)
Finished goods and in-process $15,260 $28,339
Inventory purchased for resale 6,078 13,215
Raw materials 804 873
Supplies and Catalysts 7,688 7,989
------- -------
29,830 50,416
LIFO Reserve (2,412) (4,412)
------- -------
$27,418 $46,004
======= =======
</TABLE>
4
<PAGE> 7
LAROCHE INDUSTRIES INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
AUGUST 31, 1996
An actual valuation of inventory under the LIFO method can be made only at
the end of each year based on the inventory levels and costs at that time.
Accordingly, interim LIFO calculations must necessarily be based on
management's estimates of expected year-end inventory levels and costs and are
subject to change based on the final year-end LIFO inventory valuation. During
the year to date period ended August 31, 1996 inventory quantities were reduced
resulting in the liquidation of certain inventory quantities valued under the
LIFO method. The effect of the liquidation during the year to date period ended
August 31, 1996 was not material to net income. Management does not intend
to replace the inventories which were liquidated prior to February 28, 1997.
NOTE 3 - BORROWING ARRANGEMENTS
The Company's borrowings include the following:
<TABLE>
<CAPTION>
AUGUST 31, FEBRUARY 29,
---------- -----------
1996 1996
---- ----
<C> <C> <C>
(in Thousands)
Revolving credit facility $ 3,235 $ 4,755
======== ========
Term debt:
13% senior subordinated notes $100,000 $100,000
Notes payable to USX Corporation 8,249 11,529
Note payable to former stockholder 5,921 7,401
-------- --------
Total 114,170 118,930
Less current portion 6,528 5,990
-------- --------
Long term debt $107,642 $112,940
======== ========
</TABLE>
The Company's 13% senior subordinated notes are due 2004 (the "Notes").
Semi-annual, interest only payments are due February 15 and August 15 of each
year. The Notes are redeemable at the option of the Company, in whole or in
part, at any time on or after August 15, 1999 at redemption prices set out in
the Indenture, dated as of August 17, 1994 between The Bank of New York (as
successor to NationsBank of Georgia, National Association), as Trustee, and the
Company pursuant to which the Notes were issued (the "Indenture"). The Notes
are unsecured obligations of the Company, and the Indenture contains, among
other things, limitations on stock redemptions, dividends, borrowings, and
investments, and upon the ability of the Company to enter into certain
transactions.
The LaRoche Industries Inc. Amended and Restated 10% Secured Note due May
1, 2000, dated as of April 30, 1990 in the original principal amount of
$16,472,108 and the LaRoche Industries Inc. Amended and Restated 12% Secured
Note due May 1, 2000, dated as of April 30, 1990, in the original principal
amount of $17,308,173 (collectively, the "USX Notes") bear fixed interest rates
of 10% and 12%, respectively, and are due in aggregate semi-annual installments
of principal and interest of $2,831,000 with a final payment due May 1, 1998.
The USX Notes are senior to the Notes and are secured by the Company's Crystal
City, Missouri plant. The USX Notes contain restrictions relating to, among
other things, changes in control, the ability of the Company to enter into
certain transactions, the payment of dividends, and are cross-defaulted with
other debt of the Company.
5
<PAGE> 8
LAROCHE INDUSTRIES INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
AUGUST 31, 1996
The Company also maintains a $40,000,000 revolving credit facility
pursuant to a Credit Agreement (the "Credit Agreement"), dated August 17, 1994,
among the Company, the lenders listed therein, and NationsBank, N.A. (South).
The revolving credit facility is senior to the Notes and secured by the
Company's accounts receivable and inventory. Borrowings are based on eligible
accounts receivable and inventory, as defined in the Credit Agreement.
Interest is based on either the prime rate or LIBOR, plus up to 1.25%. At
August 31, 1996, $3,325,000 was outstanding under the credit facility and the
weighted average borrowing rate was 8.25%. At February 29, 1996, $4,755,000
was outstanding under the credit facility and the weighted average borrowing
rate was 6.73%. Under the terms of the Credit Agreement, the Company pays
commitment fees, on a quarterly basis, ranging from 0.125% to 0.25% per
annum of average unused balances. The Company is required, among other
things, to maintain certain working capital, debt to equity, and net worth
levels under the Credit Agreement. The Credit Agreement also contains negative
covenants similar to those contained in the Indenture and USX Notes. The
obligations of the lenders to make revolving loans and issue letters of
credit under the Credit Agreement expire on August 1, 1999.
NOTE 4 - COMMON STOCK WITH PUT RIGHTS
On May 31, 1996, pursuant to his shareholder's agreement with the Company,
the holder of 25,000 shares of the Company's common stock exercised his right
to require the Company to repurchase those shares. The Company repurchased
such shares for $7,475,000 in cash on May 31, 1996. Such shares constituted
the only remaining shares of capital stock of the Company that were subject to
put rights by the holder.
NOTE 5 - SEASONALITY
A portion of the Company's nitrogen business serves the agricultural
fertilizer market. The business is seasonal with greater sales of such
products occuring in the spring and, to a lesser extent, the fall planting
seasons.
6
<PAGE> 9
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction with
the unaudited consolidated financial statements and notes thereto included in
this Quarterly Report on Form 10-Q and with the Company's audited financial
statements and notes thereto for the fiscal year ended February 29, 1996.
Demand for the Company's fertilizer products is seasonal. The Company
typically realizes higher prices and margins for fertilizer during the spring
and, to a lesser extent, the fall planting seasons. Demand for the Company's
fertilizer is primarily dependent on U.S. agricultural conditions, which can be
volatile as a result of a number of factors, the most important of which are
weather patterns and conditions, current and projected grain stocks and prices,
and the U.S government's agricultural policy. Due to fertilizer seasonality,
interim results of operations may not be indicative of the results expected for
the full fiscal year. In addition, the Company periodically performs extended
major maintenance on its manufacturing facilities that results in periods of
reduced production at such facilities. Due to the timing of these activities
and other factors, interim results of operations may not be indicative of the
results expected for the full fiscal year.
RESULTS OF OPERATIONS
NET SALES. Net sales for the quarter ended August 31, 1996 decreased
$17.9 million, or 16.9%, to $87.4 million from $105.3 million for the quarter
ended August 31, 1995. Net sales for the six months ended August 31, 1996
decreased $41.9 million, or 17.2% from $243.6 million for the six months ended
August 31, 1995.
The Electrochemical Products segment's net sales for the quarter ended
August 31, 1996 decreased $14.9 million, or 37.4%, compared to the same period
in the preceding year. Net sales of Electrochemical Products for the six
months ended August 31, 1996 decreased $27.2 million, or 34.5% from $80.9
million for the six months ended August 31, 1995. The decreases reflect
reductions in fluorocarbon net sales of $12.4 million, or 55.4% for the quarter
ended August 31, 1996 as compared to the quarter ended August 31, 1995 and
$20.0 million for the six months ended August 31, 1996 as compared to the prior
year. The decreases are due primarily to decreased sales volume of
fluorocarbon refrigerant products of $11.9 million and $18.4 million as
compared to the quarter and year to date periods ended August 31, 1995,
respectively. Caustic and chlorine net sales for the quarter ended August
31, 1996 decreased $2.5 million or 14.5% compared to the same quarter in the
preceding year and for the six months ended August 31, 1996 decreased $7.1
million, or 18.9% compared to the prior year. The year to date decrease was
primarily due to lower sales volume of $4.3 million caused by production
problems at the Gramercy facility and the sale of $2.0 million of caustic soda
received under exchange contracts in the quarter ended May 31, 1995 with no
comparable sales in the quarter ended May 31, 1996.
The Nitrogen Products segment's net sales for the quarter ended August 31,
1996 increased $3.3 million, or 6.8%, compared to the same period in the
preceding year. Net sales of Nitrogen Products for the six months ended August
31, 1996 decreased $3.9 million, or 2.9% from $131.6 million for the six months
ended August 31, 1995. The increase in net sales during the quarter ended
August 31, 1996 as compared to the same period in the preceding year is due to
increased net sales of $7.3 million by the Company's newly acquired ammonium
nitrate facility in Seneca, Illinois offset by decreased sales of ammonia
produced by the Company's Avondale Ammonia joint venture of $2.6 million. This
decrease resulted from lower sales prices of ammonia recognized during the
period as compared to prior periods. In addition, the decrease resulted from
lower sales from the Company's warehousing facilities as a result of poor
weather and planting conditions. The decrease in net sales during the six
months ended August 31, 1996 as compared to the preceding year reflects a
decrease in the sales price of ammonia as well as a decrease in sales volume of
ammonia produced by the Avondale Ammonia joint venture of $10.9 million
(primarily resulting from an increase in internal consumption of product
produced by the facility), lower sales from the Company's warehousing
facilities partially offset by a increase in net sales of $13.7 million from
the ammonium nitrate facility located in Seneca, Illinois.
The Alumina Chemicals segment's net sales for the quarter ended August 31,
1996 decreased $6.2 million, or 36.9%, compared to the same period in the
preceding year. Net sales of alumina chemicals for the six months ended August
31, 1996 decreased $10.9 million or 32.7% from $33.5 million
7
<PAGE> 10
for the six months ended August 31, 1995. The decline for the quarterly and
year to date periods, respectively was due to (1) the formation of CRILAR
Alumina Company, L.L.C. ("CRILAR") effective September 1, 1995 and the
resulting exclusion of approximately $3.5 million of net sales during the
quarter and $6.9 million of net sales during the year from the segment's net
sales as compared to the preceding periods and (2) the sale of the calcined and
tabular alumina production facilities to C-E Baton Rouge, Inc. ("C-E") on April
1, 1996 which resulted in the exclusion of approximately $3.3 million of net
sales during the quarter and $6.8 million of net sales during the year from the
segment's net sales as compared to the prior year. Such decreases were offset
somewhat by increased activated alumina net sales.
GROSS PROFIT. Gross profit for the quarter ended August 31, 1996
decreased $15.5 million, or 59.7%, to $10.4 million from $25.9 million for the
quarter ended August 31, 1995. Gross profit for the six months ended August 31,
1996 decreased $29.4 million, or 46.9% to $33.2 million from $62.6 million for
the six months ended August 31, 1996.
The Electrochemical Products segment's gross profit decreased by $8.8
million, or 68.9% during the quarter and $15.8 million, or 61.9% during the
year as compared to the preceding periods. This decrease was primarily the
result of lower caustic and chlorine sales tonnage caused primarily by
production problems experienced at the Gramercy plant coupled with higher
natural gas costs and lower fluorocarbons sales tonnage resulting primarily
from the Company's federally mandated withdrawal from production and
corresponding reduction in sales of refrigerant products.
The Nitrogen Products segment's gross profit decreased $4.9 million, or
54.0% during the quarter and $10.3 million, or 34.1% during the year as
compared to the preceding periods. This decrease resulted primarily from the
reduction in margins obtained on sales of ammonia produced by the Avondale
Ammonia joint venture which were caused by the decreased sales price of ammonia
during the year as compared to preceding periods and production problems
experienced at the facility during the second quarter. In addition, increased
natural gas costs and operating losses incurred at the ammonium nitrate
facility located in Seneca, Illinois contributed to the reduction in the gross
profits recognized by the segment.
The Alumina Chemicals segment's gross profit decreased by $1.7 million, or
43.3% during the quarter and $3.4 million, or 47.8% during the year as compared
to the preceding periods. The formation of CRILAR contributed to this decline
because a portion of these profits, approximately $0.7 million for the six
months ended August 31, 1996, is now recorded as income from equity
investments. Also contributing to the decrease was the decrease in sales
volumes of Versal products as compared to the preceding periods as a result of
the formation of CRILAR.
Contributing to the lower gross profit in all segments was increased
natural gas costs during the six months ended August 31, 1996 of approximately
$8.8 million as compared to the preceding year.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expense for the quarter ended August 31, 1996 totaled $14.8
million compared to $14.0 million for the quarter ended August 31, 1995. As a
percentage of net sales, selling, general and administrative expenses were
16.9% for the quarter ended August 31, 1996 and 13.3% for the quarter ended
August 31, 1995. Selling, general and administrative expense for the six month
period ended August 31, 1996 totaled $28.4 million, or 14.1% of net sales
compared to $26.6 million, or 10.9% of net sales for the six months ended
August 31, 1995.
The increase in selling, general and administrative expense as a
percentage of net sales for the quarter and six month periods ended August 31,
1996 compared to the preceding periods is due primarily to the overall
reduction in net sales during the year as well as increased expenses incurred
by the ammonuim nitrate facility in Seneca, Illinois which were not incurred in
the prior periods.
INCOME FROM EQUITY INVESTMENTS. Income from equity investments for the
quarter and for the six months ended August 31, 1996 was $1.2 million and $2.2
million, respectively. Income from equity investments includes an increase of
$0.8 million and $1.7 million for the quarter and sixth month periods ended
August 31, 1996, respectively compared to the corresponding periods in the
preceding year. Equity investment income from the CRILAR investment (which was
formed as of September 1, 1995) of $0.7 million along with increased earnings
from Kaiser LaRoche Hydrate Partnership of $0.7 million which were due to
higher margins realized for the six month period ended August 31, 1996, 2
accounted for the increase.
8
<PAGE> 11
OTHER INCOME/EXPENSE (NET). For the quarter ended August 31, 1996, other
income (expense), net was ($0.05 million) compared to other income (expense),
net of $0.1 million for the quarter ended August 31, 1995. Other income
(expense), net for the six months ended August 31, 1996 was $.03 million
compared to other income (expense), net of $0.3 million for the six months
ended August 31, 1995. The decrease in income is due primarily to reduced
interest income resulting from lower cash and cash equivalent balances.
PROVISION (BENEFIT) FOR INCOME TAXES. Provision (benefit) for income
taxes for the quarter ended August 31, 1996 was ($2.8 million), an $6.4
million decrease from the quarter ended August 31, 1995. Provision for income
taxes for the six months ended August 31, 1996 was ($0.3 million), a decrease
of $11.7 million from the six months ended August 31, 1995. The decrease
reflects the reduction in income before income taxes as compared to the
preceding periods. The Company's effective tax rate was 40.9% for the quarter
ended August 31, 1996, the same rate as the effective tax rate for the year
ended February 29, 1996.
NET INCOME/(LOSS). As a result of the factors described above, net loss
for the quarter ended August 31, 1996 was ($4.0 million) and for the six months
ended August 31, 1996 was ($0.2 million). Net loss includes an $8.7 million
decrease from the $4.7 million net income recorded in the quarter ended August
31, 1995 and a $15.8 million decrease from the $15.6 million recorded in the
six months ended August 31, 1995.
LIQUIDITY AND CAPITAL RESOURCES
Net cash provided by operating activities was $20.3 million and $32.6
million for the six month periods ended August 31, 1996 and 1995, respectively.
The decrease is primarily the result of decreased net income.
Cash used in investing activities was $9.0 million for the six month
period ended August 31, 1996 compared to $5.8 million in the prior year.
Capital expenditures of $12.7 million, partially offset by proceeds of $4.1
million from the sale of certain calcined and tabular alumina production
equipment and assets along with other assets accounted for the net cash used by
investing activities. Major capital expenditures included $3.9 million for the
Cherokee expansion, storage and material handling projects and $0.8 million for
the Gramercy powerhouse improvement projects. Cash used by investing activities
of $5.8 million for the six months ended August 31, 1995 included capital
expenditures of $6.9 million partially offset by the proceeds from the sale of
assets.
Net cash used by financing activities was $11.3 million and $10.8 million
for the six month periods ended August 31, 1996 and 1995, respectively. Current
period activity included the $7.5 million repurchase of common stock with put
rights (see Note 4 in the financial statements), partially offset by the sale
of redeemable common stock of $2.9 million, repayments of $1.5 million, net, of
outstanding indebtedness under the Company's revolving credit facility, and
repayments of $4.8 million on long-term debt. Cash used by financing activities
of $10.8 million for the six months ended August 31, 1995 was due to the
repayment of $3.4 million, net, on the revolving credit facility and $8.9
million on the USX Notes which included an accelerated payment of $7.4 million
offset by the receipt of $1.7 million on the sale of common stock with
redemption features.
The Company has available a $40.0 million long-term revolving credit facility
and anticipates that its existing capital resources and cash flow generated
from future operations will enable it to maintain its planned operations,
capital expenditures and debt service for the foreseeable future.
RECENT DEVELOPMENTS
On July 15, 1996 Harold W. (Bud) Ingalls joined the Company as Vice President
and Chief Financial Officer. Mr. Ingalls most recently served as Vice
President and Chief Financial Officer of OHM Corp. Atlanta, an affiliate of WMX
Technologies, Inc.
On August 22, 1996 Vincent R. Gurzo joined the Company as Vice President of
Specialty Chemicals. Mr. Gurzo is responsible for the Company's Alumina and
Specialty Chemicals business lines.
9
<PAGE> 12
Effective October 1, 1996 John R. Hall joined the Board of Directors of LaRoche
Industries Inc. Mr. Hall is the Chairman of the Board and former Chief
Executive Officer of Ashland, Inc. Mr. Hall will resign as Chairman of
Ashland upon his retirement on February 1, 1997.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
As previously reported, on June 27, 1996, Marathon Pipe Line Company and
Marathon Oil Company (collectively, "Marathon") filed a complaint against the
Company and one other company in the United States District Court for the
Eastern District of Louisiana alleging that the Company or its agents damaged a
gasoline pipeline causing it to rupture and release gasoline into the Blind
River and surronding area near Gramercy, Louisiana. In connection with the
Gasoline release, a class action petition was filed on May 28, 1996 by Pernell
Ramagos and certain other named petitioners ("Petitioners") on behalf of
persons and entities allegedly sustaining direct and/or consequential damage as
a result of the gasoline release in the 23rd Judicial District Court for the
Parish of St. James Louisiana against Marathon. On September 19, 1996 , the
Petitioners amended their original petition to add the Company as a defendent
to the class action lawsuit. The Company is continuing a diligent
investigation of the situation in order to evaluate the allegations and the
relative responsibility of the parties involved. If appropriate, the Company
will vigorously defend itself against all claims. Because the investigation is
in a very preliminary stage, it is not yet possible to predict whether the
Company will incur any liability for the rupture and release or to reasonably
estimate the cost of any possible liability.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(A) EXHIBITS
<TABLE>
<S> <C>
3.1 Certificate of Incorporation of the Company, together with all
amendments thereto. 1/
3.2 Bylaws of the Company. 1/
4.1 Indenture, dated as of August 17, 1994 between The Bank of New York, as
successor to NationsBank of Georgia, National Association, as Trustee,
and the Company. 2/
4.2 Form of Note (included in Exhibit 4.1). 2/
4.3 10% Secured Note from the Company to USX, dated as of April 30, 1990
and due May 1, 2000. 3/
4.4 12% Secured Note from the Company to USX, dated as of April 30, 1990
and due May 1, 2000. 3/
10.1 Credit Agreement, dated as of August 17, 1994, among the Company,
NationsBank, N.A. (South), successor to Bank South, as Agent, and the
Lenders listed therein. 2/
27 Financial Data Schedule (for SEC use only).
(B) REPORTS ON FORM 8-K
NONE
1/ Previously filed as an exhibit to Registration Statement No. 33-79532 filed May 31, 1994
2/ Previously filed as an exhibit to the Quarterly Report on Form 10-Q for the second quarter
ended August 31, 1994, filed with the Securities and Exchange Commission
3/ Previously filed as an exhibit to Amendment No. 4 to Registration Statement No. 33-79532
filed August 9, 1994
</TABLE>
10
<PAGE> 13
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.
LAROCHE INDUSTRIES INC.
(Registrant)
Date: October 15, 1996 By: /s/ Grant O. Reed
----------------------
Grant O. Reed, President,
Chief Executive Officer
(Principal Executive Officer)
/s/ Harold W. Ingalls
------------------------
Harold W. Ingalls,
Chief Financial Officer
(Principal Accounting Officer)
11
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF LAROCHE INDUSTRIES FOR THE SIX MONTH PERIOD ENDED
AUGUST 31, 1996, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> FEB-28-1997
<PERIOD-START> MAR-01-1996
<PERIOD-END> AUG-31-1996
<CASH> 3,316
<SECURITIES> 0
<RECEIVABLES> 48,534
<ALLOWANCES> 1,131
<INVENTORY> 27,418
<CURRENT-ASSETS> 92,521
<PP&E> 249,598
<DEPRECIATION> 83,367
<TOTAL-ASSETS> 285,863
<CURRENT-LIABILITIES> 68,258
<BONDS> 107,642
7,666
0
<COMMON> 4
<OTHER-SE> 50,599
<TOTAL-LIABILITY-AND-EQUITY> 285,863
<SALES> 201,662
<TOTAL-REVENUES> 201,662
<CGS> 168,433
<TOTAL-COSTS> 168,433
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 7,585
<INCOME-PRETAX> (489)
<INCOME-TAX> (258)
<INCOME-CONTINUING> (231)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (231)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
