<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (D) OF THE SECURITIES
- ----- EXCHANGE ACT OF 1934
For the quarterly period ended NOVEMBER 30, 1996
-----------------
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (D) OF THE SECURITIES
- ----- EXCHANGE ACT OF 1934
For the transition period from to
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Commission File Number 33-79532
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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 DECEMBER 31, 1996
----------------------------- -----------------------------------
Common Stock, $.01 par value 450,923 Shares
<PAGE> 2
LAROCHE INDUSTRIES INC.
INDEX
<TABLE>
<CAPTION>
PAGE NO.
--------
<S> <C> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Condensed Consolidated Balance Sheets at November 30, 1996 1
and February 29, 1996
Condensed Consolidated Statements of Operations for the nine 2
months and three months ended November 30, 1996 and 1995
Condensed Consolidated Statements of Cash Flows for the nine 3
months ended November 30, 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 12
Item 6. Exhibits and Reports on Form 8-K 12
</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>
NOVEMBER 30, FEBRUARY 29,
1996 1996
------------ ------------
ASSETS
<S> <C> <C>
Current assets:
Cash $ 2,904 $ 3,265
Receivables:
Trade, net of allowances of $1,244 and $849 as of November 30, 1996
and February 29, 1996, respectively 46,944 57,153
Other 2,326 4,848
Inventories (Note 2) 34,728 46,004
Other current assets 2,164 4,878
-------- --------
Total current assets 89,066 116,148
Investments 18,195 17,165
Property, plant and equipment, at cost 256,503 245,720
Less accumulated depreciation (86,271) (81,108)
-------- --------
Net property, plant and equipment 170,232 164,612
Other assets 11,366 8,007
-------- --------
Total assets $288,859 $305,932
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Revolving credit facility (Note 3) $12,195 $4,755
Accounts payable 30,482 37,770
Accrued compensation 9,286 14,408
Other accrued liabilities 11,691 16,481
Common stock with put rights (Note 4) - 7,475
Current portion of long-term debt (Note 3) 6,696 5,990
-------- --------
Total current liabilities 70,350 86,879
Long-term debt (Note 3) 104,441 112,940
Deferred income taxes 15,668 15,668
Other noncurrent liabilities 37,198 34,378
Commitments and contingencies
Redeemable common stock 7,866 4,771
Stockholders' equity:
10% cumulative, voting preferred stock, $.01 par
value, 200,000 shares authorized, no shares issued or outstanding - -
Common stock, $.01 par value, 1,200,000 shares
authorized, 425,000 non-redeemable shares issued and outstanding 4 4
Capital in excess of par value 630 630
Retained earnings 52,702 50,662
-------- --------
Total stockholders' equity 53,336 51,296
-------- --------
Total liabilities and stockholders' equity $288,859 $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 NINE MONTHS ENDED
-------------------------- --------------------------
NOVEMBER 30, NOVEMBER 30, NOVEMBER 30, NOVEMBER 30,
1996 1995 1996 1995
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Net sales $89,796 $105,078 $291,458 $348,723
Cost of sales 69,091 82,666 237,524 263,672
------- -------- -------- --------
Gross profit 20,705 22,412 53,934 85,051
Selling, general and administrative expenses 13,428 12,712 41,816 39,295
------- -------- -------- --------
Income from operations 7,277 9,700 12,118 45,756
Interest expense (3,659) (4,195) (11,244) (12,439)
Income from equity investments 1,408 964 3,636 1,491
Other income (expense), net (8) 246 19 511
------- -------- -------- --------
Income before income taxes 5,018 6,715 4,529 35,319
Provision for income taxes (2,057) (2,748) (1,799) (14,481)
------- -------- -------- --------
Net income 2,961 3,967 2,730 20,838
Adjustment to estimated fair value of common
stock with put rights - - - (1,279)
------- -------- -------- --------
Income attributable to non-redeemable
common stockholders $ 2,961 $ 3,967 $ 2,730 $ 19,559
======= ======== ======== ========
</TABLE>
See accompanying notes.
2
<PAGE> 5
LAROCHE INDUSTRIES INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(Dollars in thousands)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
-----------------------------
NOVEMBER 30, NOVEMBER 30,
1996 1995
------------ ------------
<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 2,730 $ 20,838
Depreciation and amortization 13,589 10,722
Net change in operating assets and liabilities 6,901 21,320
Equity income, net of distributions 212 (231)
Other (397) (150)
-------- --------
Net cash provided by operating activities 23,035 52,499
INVESTING ACTIVITIES
Capital expenditures (20,799) (9,559)
Investments in joint ventures (1,242) -
Proceeds from sale of assets and other 4,068 2,580
-------- --------
Net cash used by investing activities (17,973) (6,979)
FINANCING ACTIVITIES
Net borrowings (repayments) under revolving credit facility 7,440 (6,105)
Sale of redeemable common stock with redemption features 3,136 1,773
Purchase of redeemable common stock (7,516) (63)
Repayments of long-term debt (7,793) (11,352)
Dividends paid (690) -
-------- --------
Net cash used by financing activities (5,423) (15,747)
-------- --------
Net (decrease) increase in cash and cash equivalents (361) 29,773
Cash and cash equivalents at beginning of period 3,265 5,900
-------- --------
Cash and cash equivalents at end of period $ 2,904 $ 35,673
======== ========
</TABLE>
See accompanying notes.
3
<PAGE> 6
LAROCHE INDUSTRIES INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOVEMBER 30, 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 nine
month period ending November 30, 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
useful information as the shares of the Company are closely held.
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>
NOVEMBER 30, 1996 FEBRUARY 29, 1996
----------------- -----------------
(in Thousands)
<S> <C> <C>
Finished goods and in-process $17,956 $28,339
Inventory purchased for resale 10,841 13,215
Raw materials 643 873
Supplies and Catalysts 7,253 7,989
------- -------
36,693 50,416
LIFO Reserve (1,965) (4,412)
------- -------
$34,728 $46,004
======= =======
</TABLE>
4
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LAROCHE INDUSTRIES INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOVEMBER 30, 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 November 30, 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 November 30, 1996 was not material to net income. Management does
not intend to replace the inventories which are liquidated prior to February
28, 1997.
NOTE 3 - BORROWING ARRANGEMENTS
The Company's borrowings include the following:
<TABLE>
<CAPTION>
NOVEMBER 30,1996 FEBRUARY 29, 1996
---------------- -----------------
(in Thousands)
<S> <C> <C>
Revolving credit facility $ 12,195 $ 4,755
======== ========
Term debt:
13% senior subordinated notes $100,000 $100,000
Notes payable to USX Corporation 5,216 11,529
Note payable to former stockholder 5,921 7,401
-------- --------
Total 111,137 118,930
Less current portion (6,696) (5,990)
-------- --------
Long term debt $104,441 $112,940
======== ========
</TABLE>
The Company's 13% senior subordinated notes (the "Notes") are due in 2004.
Semi-annual, interest only payments are due on 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 April 30,
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)
NOVEMBER 30, 1996
The Company also maintains a $40,000,000 revolving credit facility
pursuant to a Credit Agreement, dated August 17, 1994, among the Company, the
lenders listed therein, and NationsBank, N. A. (South) (the "Credit
Agreement"). 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
November 30, 1996, $12,195,000 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 occurring 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.
SEGMENT INFORMATION
Following is a tabulation of business segment information for the three and
nine month periods ended November 30, 1996 and 1995, respectively:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
----------------------------------------------------------------
NOVEMBER 30, 1996 NOVEMBER 30, 1995
----------------------------------------------------------------
Percent of Percent of
Amount Total Amount Total
--------- ----------- -------- ----------
<S> <C> <C> <C> <C>
NET SALES:
Electrochemical products $ 24,068 26.8% $ 31,602 30.1%
Nitrogen products 56,901 63.4 58,992 56.1
Alumina chemicals 8,827 9.8 14,484 13.8
-------- ------ -------- -----
Total $ 89,796 100.0% $105,078 100.0%
======== ====== ======== =====
INCOME (LOSS) FROM OPERATIONS:
Electrochemical products $ 5,063 69.6% $ 6,261 64.6%
Nitrogen products 4,403 60.5 5,685 58.6
Alumina chemicals (1,024) (14.1) (1,162) (12.0)
Corporate (1,165) (16.0) (1,084) (11.2)
-------- ------ -------- -----
Total $ 7,277 100.0% $ 9,700 100.0%
======== ====== ======== =====
</TABLE>
<TABLE>
<CAPTION>
NINE MONTHS ENDED
--------------------------------------------------------------
NOVEMBER 30, 1996 NOVEMBER 30, 1995
------------------------------ -----------------------------
<S> <C> <C> <C> <C>
NET SALES:
Electrochemical products $ 75,513 25.9% $110,207 31.6%
Nitrogen products 184,606 63.3 190,565 54.6
Alumina chemicals 31,339 10.8 47,951 13.8
-------- ------ -------- -----
Total $291,458 100.0% $348,723 100.0%
======== ====== ======== =====
INCOME (LOSS) FROM OPERATIONS:
Electrochemical products $ 8,868 73.2% $ 26,229 57.4%
Nitrogen products 7,779 64.2 20,593 45.0
Alumina chemicals (543) (4.5) 2,024 4.4
Corporate (3,986) (32.9) (3,090) (6.8)
-------- ------ -------- -----
Total $ 12,118 100.0% $ 45,756 100.0%
======== ====== ======== =====
</TABLE>
7
<PAGE> 10
RESULTS OF OPERATIONS
NET SALES. Net sales for the quarter ended November 30, 1996 decreased
$15.3 million to $89.8 million from $105.1 million for the quarter ended
November 30, 1995. Net sales for the nine months ended November 30, 1996
decreased $57.3 million to $291.5 million from $348.7 million for the nine
months ended November 30, 1995.
The Electrochemical Products segment's net sales for the quarter ended
November 30, 1996 decreased $7.5 million compared to the corresponding quarter
in the preceding year. The decrease reflects reductions in fluorocarbon net
sales of $6.4 million for the quarter ended November 30, 1996 as compared to
the quarter ended November 30, 1995. This decrease is due primarily to
decreased sales volume of fluorocarbon refrigerant products of $5.7 million as
compared to the quarter ended November 30, 1995 due to the federally mandated
withdrawal from production of certain refrigerant products and the Company's
exit from the sale of refrigerant products. Caustic and chlorine net sales for
the quarter ended November 30, 1996 decreased $1.1 million compared to the
corresponding quarter in the preceding year due to a decrease in caustic sales
prices of $1.4 million.
The Nitrogen Products segment's net sales for the quarter ended November
30, 1996 decreased $2.1 million compared to the corresponding quarter in the
preceding year. The decrease in net sales during the quarter ended November 30,
1996 as compared to the corresponding quarter in the preceding year is
primarily due to decreased sales of ammonia produced by the Company's Avondale
Ammonia joint venture of $1.3 million, lower sales from the Company's
warehousing facilities of $5.6 million and reduced production at Crystal City
which resulted in decreased sales of approximately $2.1 million. Such
decreases were partially offset by increased net sales of $7.8 million by the
Company's ammonium nitrate facility in Seneca, Illinois acquired on December
13, 1995.
The Alumina Chemicals segment's net sales for the quarter ended November
30, 1996 decreased $5.7 million compared to the corresponding quarter in the
preceding year. The decline during the quarter was due to 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 reduction of approximately $4.1
million of net sales from the segment's net sales as compared to the
corresponding quarter in the prior year and production problems at the
Versal(TM) production facility of $2.4 million. Such decreases were slightly
offset by increased activated alumina net sales.
The Electrochemical Products segment's net sales for the nine months ended
November 30, 1996 decreased $34.7 million to $75.5 million from $110.2 million
for the nine months ended November 30, 1995. The decrease reflects reductions
in fluorocarbon net sales of $26.5 million for the nine months ended November
30, 1996 as compared to the prior year. This decrease is primarily the result
of decreased sales volume of fluorocarbon refrigerant products of $25.7 million
as compared to the year to date period ended November 30, 1995 due to the
federally mandated withdrawal from production of certain refrigerant products
and the Company's exit from the sale of refrigerant products. Caustic and
chlorine net sales for the nine months ended November 30, 1996 decreased $8.2
million compared to the prior year. This decrease was primarily due to lower
sales volume of $6.7 million primarily due to production problems at the
Gramercy facility and the sale of $3.0 million of caustic soda received under
exchange contracts during the nine months ended November 30, 1995 with no
comparable sales in the current year.
Net sales of Nitrogen Products for the nine months ended November 30, 1996
decreased $6.0 million to $184.6 million from $190.6 million for the nine
months ended November 30, 1995. The decrease in net sales during the nine
months ended November 30, 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 $12.2 million
(primarily resulting from an increase in internal consumption of product
produced by the facility), lower sales from the Company's warehousing
facilities as a result of poor weather and planting conditions of $12.4
million, partially offset by an increase in net sales of $21.6 million from the
ammonium nitrate facility located in Seneca, Illinois referred to above.
Net sales of alumina chemicals for the nine months ended November 30, 1996
decreased $16.6 million to $31.3 million from $48.0 million for the nine months
ended November 30, 1995. The decline for the year to date period was due to
(1) the formation of CRILAR Alumina Company, L. L. C. ("CRILAR") effective
September 1, 1995 and the resulting exclusion of certain
8
<PAGE> 11
sales from the segment's net sales as compared to the preceding period 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 reduction of
approximately $10.2 million of net sales 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 November 30, 1996
decreased $1.7 million to $20.7 million from $22.4 million for the quarter
ended November 30, 1995. Gross profit for the nine months ended November 30,
1996 decreased $31.1 million to $53.9 million from $85.1 million for the nine
months ended November 30, 1995.
The Electrochemical Products segment's gross profit decreased by $1.0
million during the quarter as compared to the corresponding quarter in the
prior year. This decrease was primarily the result of lower sales prices in
caustic due to market conditions coupled with higher natural gas costs and
lower fluorocarbons sales tonnage resulting primarily from the federally
mandated withdrawal from production of certain refrigerant products and the
Company's exit from the sale of refrigerant products.
The Nitrogen Products segment's gross profit decreased $0.9 million during
the quarter as compared to the corresponding quarter in the prior year. This
decrease resulted primarily from increased natural gas costs for the segment
and the decreased sales at the Company's nitrogen warehouses noted above.
The Alumina Chemicals segment's gross profit increased by $0.2 million
during the quarter as compared to the corresponding quarter in the prior year.
This increase is due to increased activated alumina net sales and decreased
calcined and tabular sales as a result the sale of the calcined and tabular
alumina production facilities to C-E on April 1, 1996, partially offset by
production problems incurred at the Versal plant.
The Electrochemical Products segment's gross profit decreased by $16.8
million during the nine month period ended November 30, 1996 as compared to the
corresponding period in the prior year. This decrease was primarily the result
of lower caustic and chlorine sales tonnage caused primarily by production
problems experienced at the Gramercy plant, lower sales prices in caustic due
to market conditions coupled with higher natural gas costs and lower
fluorocarbons sales tonnage as referred to above.
The Nitrogen Products segment's gross profit decreased $11.1 million
during the nine month period ended November 30, 1996 as compared to the
corresponding period in the prior year. This decrease resulted primarily from
an extended turnaround at the Avondale Ammonia joint venture and increased
natural gas costs for the segment. In addition, low selling prices 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 $3.2 million for
the nine month period ended November 30, 1996 as compared to the corresponding
period in the prior year. The formation of CRILAR contributed to this decrease
due to lower sales volumes of Versal products as compared to the corresponding
period in the prior year. Also, production problems incurred at the Versal
plant during the nine month period ended November 30, 1996 contributed to the
decrease.
Contributing to the lower gross profit in all segments was increased
natural gas costs during the nine months ended November 30, 1996 of
approximately $10.3 million as compared to the preceding year. The Company
continues its policy of hedging its risk related to the cost of natural gas.
This policy has resulted in decreased costs of $0.4 million for the current
quarter and $1.4 million for the nine month period ended November 30, 1996.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expense for the quarter ended November 30, 1996 totaled $13.4
million compared to $12.7 million for the quarter ended November 30, 1995. As
a percentage of net sales, selling, general and administrative expenses were
15.0% for the quarter ended November 30, 1996 and 12.1% for the quarter ended
November 30, 1995. Selling, general and administrative expense for the nine
month period ended November 30, 1996 totaled $41.8 million, or 14.3% of net
sales compared to $39.3 million, or 11.3% of net sales for the nine months
ended November 30, 1995.
9
<PAGE> 12
The increase in selling, general and administrative expense as a
percentage of net sales for the quarter and nine month periods ended November
30, 1996 compared to the corresponding periods in the prior year is due
primarily to the overall reduction in net sales during the year (as discussed
previously) without a corresponding reduction in expenses.
INCOME FROM EQUITY INVESTMENTS. Income from equity investments for the
quarter and for the nine months ended November 30, 1996 was $1.4 million and
$3.6 million, respectively, primarily comprised of equity investment income
from the CRILAR investment (which was formed as of September 1, 1995) along
with earnings from Kaiser LaRoche Hydrate Partnership which were due to
increased sales volume and higher margins realized.
OTHER INCOME (EXPENSE), NET. For the quarter ended November 30, 1996,
other income (expense), net was ($8,000) compared to other income (expense),
net of $0.2 million for the quarter ended November 30, 1995. Other income
(expense), net for the nine months ended November 30, 1996 was $19,000 compared
to other income (expense), net of $0.5 million for the nine months ended
November 30, 1995. The decrease in income is due primarily to reduced interest
income resulting from lower cash and cash equivalent balances.
INTEREST EXPENSE. For the quarter ended November 30, 1996, interest
expense was $3.7 million compared to interest expense of $4.2 million for the
quarter ended November 30, 1995. Interest expense for the nine months ended
November 30, 1996 was $11.2 million compared to interest expense of $12.4
million for the nine months ended November 30, 1995. The decreases are the
result of payments of debt obligations and interest capitalized on major
capital projects.
PROVISION FOR INCOME TAXES. Provision for income taxes for the quarter
ended November 30, 1996 was $2.1 million, a $0.7 million decrease from the
quarter ended November 30, 1995. Provision for income taxes for the nine
months ended November 30, 1996 was $1.8 million, a decrease of $12.7 million
from the nine months ended November 30, 1995. The decrease reflects the
reduction in income before income taxes as compared to the preceding periods.
The Company's effective tax rate was 41.0% for the quarter ended November 30,
1996.
NET INCOME. As a result of the factors described above, net income for
the quarter ended November 30, 1996 was $3.0 million and for the nine months
ended November 30, 1996 was $2.7 million. Net income decreased $1.0 million
from $4.0 million in the quarter ended November 30, 1995 and $18.1 million from
$20.8 million in the nine months ended November 30, 1995.
LIQUIDITY AND CAPITAL RESOURCES
Net cash provided by operating activities was $23.0 million and $52.5
million for the nine month periods ended November 30, 1996 and 1995,
respectively. The decrease is primarily the result of decreased net income and
less significant reductions in working capital from the prior year.
Cash used in investing activities was $18.0 million for the nine month
period ended November 30, 1996 compared to $7.0 million in the nine month
period ended November 30, 1995. Capital expenditures of $20.8 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 $4.6 million for the Cherokee expansion, storage and
material handling projects, $1.8 million on certain equipment at Cherokee, $1.8
million for the Gramercy powerhouse improvement projects and $1.4 million for
the Company's ongoing software implementation project. Cash used by investing
activities of $7.0 million for the nine months ended November 30, 1995 included
capital expenditures of $9.6 million partially offset by the proceeds from the
sale of assets.
Net cash used by financing activities was $5.4 million and $15.7 million
for the nine month periods ended November 30, 1996 and 1995, respectively.
Current year activity included the $7.5 million repurchase of common stock with
put rights (see Note 4 to the financial statements), partially offset by the
sale of redeemable common stock of $3.1 million, borrowings, net of $7.4
million of outstanding indebtedness under the Company's revolving credit
facility, and repayments of $7.8 million of long-term debt. Cash used by
financing activities of $15.7 million for the nine months ended November 30,
1995 was due to repayments, net, of $6.1 million of outstanding indebtedness
under the Company's revolving
10
<PAGE> 13
credit facility and $11.4 million on the USX Notes which included an
accelerated payment of $7.4 million, offset by the receipt of $1.8 million on
the sale of redeemable common stock.
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 November 26, 1996, the Company announced that Robert L. Yohe will be joining
the Board of Directors of LaRoche Industries Inc. Mr. Yohe retired as Vice
Chairman of Olin Corporation in 1994.
11
<PAGE> 14
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 surrounding 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 defendant
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. The Company is also
responding to inquiries from regulatory authorities of the State of Louisiana
related to the gasoline release. If appropriate, the Company will vigorously
defend itself against all claims. Because the investigation is in a
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/
10.2 Letter Agreement, dated December 16, 1996, to the 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.
27 Financial Data Schedule (for SEC use only).
</TABLE>
(b) REPORTS ON FORM 8-K
NONE
<TABLE>
<S> <C>
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>
12
<PAGE> 15
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: January 7, 1997
---------------
By: /s/ Grant O. Reed
--------------------------------------
Grant O. Reed, President,
Chief Executive Officer
(Principal Executive Officer)
/s/ Harold W. Ingalls
--------------------------------------
Harold W. Ingalls, Vice President,
Chief Financial Officer
(Principal Accounting Officer)
13
<PAGE> 1
EXHIBIT 10.2
December 16, 1996
LaRoche Industries Inc.
1100 Johnson Ferry Road, N.E.
Atlanta, Georgia 30342
Attn: Chief Financial Officer
Re: Credit Agreement dated as of August 17, 1994 (the "Credit
Agreement") among LaRoche Industries Inc. ("Borrower"), the
lenders signatory thereto (the "Lenders") and NationsBank, N.A.
(South), as agent for the Lenders (the "Agent"), as amended.
Gentlemen:
Reference is hereby made to the above-referenced Credit Agreement.
All capitalized terms used herein and not otherwise defined herein shall have
the meanings given such terms in the Credit Agreement.
The Borrower has requested that the minimum current ratio covenant set
forth in Section 7.09(a) of the Credit Agreement be decreased from (x) 1.4 to
1.0 to (y) 1.20 to 1.0 and that the Agent and the Lenders waive the covenant
violation of Section 7.09(a) of the Credit Agreement for the month ended
October 31, 1996.
Subject to the terms and conditions set forth below, the Agent and the
Lenders hereby waive any Default or Event of Default caused by the violation by
Borrower of Section 7.09(a) of the Credit Agreement for the month ended October
31, 1996 and hereby agree that the Credit Agreement shall be amended by
deleting Section 7.09(a) thereof in its entirety and by substituting in lieu
thereof the following new Section 7.09(a):
"(a) The ratio of Borrower's Current Assets to
Current Liabilities shall not be less than 1.20 to 1.00 as of
the end of each fiscal month or fiscal year of Borrower ending
on or after December 31, 1996."
<PAGE> 2
LaRoche Industries Inc.
December 16, 1996
Page 2
Except as set forth herein, the Credit Agreement shall remain
unchanged and in full force and effect.
This letter agreement may be executed in a number of several
counterparts, each of which shall be identical and all of which when taken
together shall constitute one and the same letter agreement and any of the
parties hereto may execute this letter agreement by signing one or more of such
counterparts.
This letter agreement shall be governed by, and construed in
accordance with, the internal laws of the State of Georgia (without giving
effect to its conflict of law rules).
If you are in agreement with the foregoing, please so signify by
signing the enclosed counterparts of this letter agreement in the space
provided below. This letter agreement shall become effective upon receipt by
the Agent of this letter agreement duly executed by the Agent, the Required
Lenders and the Borrower.
Very truly yours,
NATIONSBANK, N.A. (SOUTH), as Agent and
as a Lender
By: /s/ Cathy Rhodes
-------------------------------------
Name: CATHERINE S. RHODES
--------------------------------
Title: VICE PRESIDENT
-------------------------------
<PAGE> 3
LaRoche Industries Inc.
December 16, 1996
Page 3
DEPOSIT GUARANTY NATIONAL BANK,
as a Lender
By: /s/ Gregory A. Moore
-------------------------------------
Name: Gregory A. Moore
--------------------------------
Title: Vice President
-------------------------------
HIBERNIA NATIONAL BANK, as a Lender
By: /s/ Trudy W. Nelson
-------------------------------------
Name: Trudy W. Nelson
--------------------------------
Title: Vice President
-------------------------------
Agreed to as of the date set forth above:
LAROCHE INDUSTRIES INC.
By: /s/ Harold W. Ingalls
-------------------------------------
Name: HAROLD W. INGALLS
--------------------------------
Title: CFO & VP
-------------------------------
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM CONDENSED
CONSOLIDATED BALANCE SHEETS, STATEMENTS OF OPERATIONS AND CASH FLOWS NOVEMBER
30, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FORM 10-Q 3RD
QUARTER 1996 LAROCHE INDUSTRIES INC.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> FEB-28-1997
<PERIOD-START> MAR-01-1996
<PERIOD-END> NOV-30-1996
<CASH> 2,904
<SECURITIES> 0
<RECEIVABLES> 48,188
<ALLOWANCES> 1,244
<INVENTORY> 34,728
<CURRENT-ASSETS> 89,066
<PP&E> 256,503
<DEPRECIATION> 86,271
<TOTAL-ASSETS> 288,859
<CURRENT-LIABILITIES> 70,350
<BONDS> 104,441
7,866
0
<COMMON> 4
<OTHER-SE> 53,332
<TOTAL-LIABILITY-AND-EQUITY> 288,859
<SALES> 291,458
<TOTAL-REVENUES> 291,458
<CGS> 237,524
<TOTAL-COSTS> 237,524
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 11,244
<INCOME-PRETAX> 4,529
<INCOME-TAX> 1,799
<INCOME-CONTINUING> 2,730
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,730
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
