<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[X] Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the Fiscal Year Ended December 31, 1996
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
Commission file number 333-17961
ARISTECH CHEMICAL CORPORATION
(Exact name of Registrant as specified in its charter)
Delaware 25-1534498
(State of Incorporation) (I.R.S. Employer Identification Number)
600 Grant Street, Pittsburgh, Pennsylvania 15219-2704
(Address of principal executive offices)
Tel. No. (412) 433-2747
Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to Section 12(g) of the Act:
None
This report contains only financial statements for the year ended December 31,
1996 in accordance with Rule 15d-2.
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 by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [X]
Aggregate market value of the voting stock held by non-affiliates of the
Registrant as of March 21, 1997: $0.
Common stock outstanding at March 21, 1997: 14,908 shares.
Documents Incorporated By Reference:
None
<PAGE> 2
ARISTECH CHEMICAL CORPORATION
-----------------------------
CONSOLIDATED FINANCIAL STATEMENTS
as OF DECEMBER 31, 1996 AND 1995
and FOR EACH OF THE THREE YEARS IN
the PERIOD ENDED DECEMBER 31, 1996
AND INDEPENDENT AUDITORS' REPORT
<PAGE> 3
INDEPENDENT AUDITORS' REPORT
Aristech Chemical Corporation:
We have audited the accompanying consolidated balance sheets of Aristech
Chemical Corporation and its subsidiaries as of December 31, 1996 and 1995, and
the related consolidated statements of income, stockholders' equity, and cash
flows for each of the three years in the period ended December 31, 1996. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the consolidated financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the consolidated 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. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of the Company and its subsidiaries
as of December 31, 1996 and 1995 and the results of their operations and their
cash flows for each of the three years in the period ended December 31, 1996,
in conformity with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
January 30, 1997 (except for Note 17, as to
which the date is March 7, 1997)
<PAGE> 4
Aristech Chemical Corporation
Consolidated Financial Statements
Table of Contents
<TABLE>
<CAPTION>
Page
----
<S> <C>
Consolidated Statements of Income For the Years Ended
December 31, 1996, 1995 and 1994 1
Consolidated Balance Sheets, December 31, 1996 and 1995 2
Consolidated Statements of Cash Flows For the Years Ended
December 31, 1996, 1995 and 1994 3-4
Consolidated Statements of Stockholders' Equity For the Years Ended
December 31, 1996, 1995 and 1994 5
Notes to the Consolidated Financial Statements 6 - 18
</TABLE>
<PAGE> 5
ARISTECH CHEMICAL CORPORATION
Consolidated Statements of Income
For the Years Ended December 31, 1996, 1995 and 1994
(Dollars in Millions)
- ----------------------------------------------------
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Sales $ 906.6 $ 1,023.3 $ 945.5
Operating Costs:
Cost of sales 704.4 758.9 763.5
Selling, general and administrative expenses 46.9 43.6 61.3
Depreciation and amortization 47.7 48.4 50.3
------- --------- -------
Total Operating Costs 799.0 850.9 875.1
------- --------- -------
Operating Income 107.6 172.4 70.4
Loss on Disposal of Assets (7.9) (19.0) (4.3)
Other (Expense) Income, Net (1.6) (1.1) 3.4
Interest Income .7 2.1 1.2
Interest Expense (37.9) (49.8) (56.0)
------- --------- -------
Income Before Provision for Taxes on Income
and Extraordinary Loss 60.9 104.6 14.7
Provision for Taxes on Income 27.6 44.4 9.5
Income Before Extraordinary Loss 33.3 60.2 5.2
Extraordinary Loss, Net of Income Tax Benefit of $3.2 --- --- 5.1
------- --------- -------
Net Income $ 33.3 $ 60.2 $ .1
======= ========= =======
Related party transactions:
Sales $ 83.2 $ 83.4 $ 52.6
Purchases 24.0 27.2 15.7
Interest Expense 35.8 50.6 31.4
</TABLE>
The accompanying notes are an integral part of these financial statements.
1
<PAGE> 6
ARISTECH CHEMICAL CORPORATION
Consolidated Balance Sheets
December 31, 1996 and 1995
(Dollars in Millions)
- -----------------------------
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
ASSETS
Current Assets:
Cash and equivalents $ 1.9 $ .4
Short-term investments --- 17.0
Receivables (less allowance for doubtful
accounts of $.6 for 1996 and 1995) 99.0 110.7
Receivables - related parties 11.2 10.6
Inventories 113.1 101.1
Net assets held for sale --- 42.3
Deferred income taxes --- 8.7
Other current assets 2.1 5.0
-------- ---------
Total Current Assets 227.3 295.8
Property, plant and equipment, net of accumulated depreciation 598.0 602.3
Excess cost over assets acquired 172.6 174.6
Deferred income taxes 1.5 ---
Other assets 14.4 17.3
-------- ---------
Total Assets $1,013.8 $ 1,090.0
======== =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 68.5 $ 71.3
Accounts payable - related parties .5 .5
Payroll and benefits payable 12.0 11.9
Accrued taxes 13.1 8.4
Deferred income taxes .7 ---
Short-term borrowings 40.4 8.7
Long-term debt due within one year .1 ---
Other current liabilities 17.2 20.1
-------- ---------
Total Current Liabilities 152.5 120.9
Long-term debt - related parties 160.3 572.0
Long-term debt - other 149.6 .2
Deferred income taxes 164.7 177.7
Other liabilities 31.9 34.5
Other liabilities - related parties 1.2 ---
-------- ---------
Total Liabilities 660.2 905.3
-------- ---------
Redeemable preferred stock, series A, convertible (no par,
1,000,000 shares authorized, 509,983 shares issued at December 31, 1995) --- 51.0
Common stock ($.01 par value, 20,000 shares authorized,
14,908 shares issued at December 31, 1996 and 10,050
shares issued at December 31, 1995) --- ---
Additional paid-in capital 378.8 154.5
Retained deficit (25.2) (20.8)
-------- ---------
Total Stockholders' Equity 353.6 133.7
-------- ---------
Total Liabilities and Stockholders' Equity $1,013.8 $ 1,090.0
======== =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
2
<PAGE> 7
ARISTECH CHEMICAL CORPORATION
Consolidated Statements of Cash Flows
For the Years Ended December 31, 1996, 1995 and 1994
(Dollars in Millions)
- -----------------------------------------------------
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Cash Flows From Operating Activities:
Net Income $ 33.3 $ 60.2 $ .1
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 42.5 43.4 44.7
Amortization of excess cost over assets acquired 5.2 5.6 5.6
Amortization of merger expenses 2.0 1.9 2.6
Amortization of deferred compensation --- .9 5.3
Amortization of compensation and anti-dilution
option liabilities --- --- 12.3
Deferred income taxes (5.1) 26.5 9.4
Loss on disposal of assets 7.9 19.0 4.3
Loss from equity investee .5 1.2 .1
Decrease (increase) in accounts receivable 11.0 2.7 (53.5)
Decrease (increase) in inventories (9.0) (17.8) 3.2
Increase (decrease) in accounts payable
and other current liabilities (1.9) (57.3) 38.5
Payment-in-kind debenture interest expense --- 5.7 20.9
Extraordinary loss, net of income tax benefit --- --- 5.1
All other (2.4) (6.5) (20.7)
-------- -------- --------
Net Cash Provided by Operating Activities 84.0 85.5 77.9
Cash Flows From Investing Activities:
Capital expenditures (41.5) (55.3) (33.4)
Purchase of short-term investment --- (17.0) ---
Maturity of short-term investment 17.0 --- ---
Cash received on disposal of assets 39.7 91.9 3.0
Cash assumed from additional purchase of Avonite .7 --- ---
-------- -------- --------
Net Cash Provided by (Used in) Investing Activities 15.9 19.6 (30.4)
Cash Flows From Financing Activities:
Short-term debt increase (decrease) 31.7 8.7 (12.8)
Repayment of long-term debt (220.1) (155.9) (531.4)
Proceeds from issuance of long-term debt 148.9 39.0 527.0
Long-term debt issuance costs (4.0) --- ---
Dividends paid (24.2) (3.8) ---
Payments for purchase of treasury stock --- (68.3) (2.0)
Redemption of preferred stock (6.2) (6.1) ---
Redemption of payment-in-kind debentures (24.5) (24.5) ---
Issuance of common stock --- 77.5 ---
-------- -------- --------
Net Cash Used in Financing Activities (98.4) (133.4) (19.2)
Net Increase (Decrease) in Cash and Equivalents 1.5 (28.3) 28.3
Cash and Equivalents, Beginning of Year .4 28.7 .4
-------- -------- --------
Cash and Equivalents, End of Year $ 1.9 $ .4 $ 28.7
======== ======== ========
</TABLE>
3
<PAGE> 8
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Supplemental disclosure of cash flow information:
Cash paid during period for:
Interest $ 39.3 $ 46.7 $ 34.6
Income taxes 27.3 13.8 .9
</TABLE>
Non-cash financing activities include the conversion of debentures of $179.5
million and Redeemable Series A Convertible PIK Preferred Stock of $44.8 million
for common stock totaling $224.3 million in 1996; debentures issued in lieu of
cash payments for interest of $5.7 million in 1995 and $20.9 million in 1994;
and the issuance of additional shares for dividends on the Redeemable Series A
Convertible PIK Preferred Stock of $1.5 million in 1995 and $5.2 million in
1994.
Non-cash investing transactions for 1996 include the acquisition of an
additional 10% interest in Avonite in exchange for the assignment of a $1.0
million promissory note from Avonite to the Avonite minority stockholders.
Non-cash investing activities also include the then pending sale of $28.2
million and $55.6 million of net property, plant and equipment at December 31,
1995 and 1994, respectively, which resulted in a decrease in net property, plant
and equipment and a corresponding increase in assets held for sale.
The accompanying notes are an integral part of these financial statements.
4
<PAGE> 9
ARISTECH CHEMICAL CORPORATION
Consolidated Statements of Stockholders' Equity
For the Years Ended December 31, 1996, 1995 and 1994
(Dollars in Millions)
- ----------------------------------------------------
<TABLE>
<CAPTION>
Common Stock
====================
Additional
Number Treasury Paid-in Treasury Retained
of Shares Shares Capital Stock Deficit
--------- -------- ---------- -------- --------
<S> <C> <C> <C> <C> <C>
Balance - December 31, 1993 7,536 (36) $ 78.0 $ (1.0) $ (70.6)
Dividend on Series A
Convertible Preferred Stock --- --- --- --- (5.2)
Transfer from temporary equity 69 --- 2.0 --- ---
Treasury stock purchased --- (69) --- (2.0) ---
Net Income - 1994 --- --- --- --- .1
------ ------- --------- -------- ---------
Balance - December 31, 1994 7,605 (105) 80.0 (3.0) (75.7)
Dividend on Series A
Convertible Preferred Stock --- --- --- --- (5.3)
Transfer from temporary equity 2,245 --- 68.3 --- ---
Treasury stock purchased --- (2,245) --- (68.3) ---
Treasury stock retired --- 2,350 --- 71.3 ---
Shares canceled (2,350) --- (71.3) --- ---
Shares issued 2,550 --- 77.5 --- ---
Net Income - 1995 --- --- --- --- 60.2
------ ------- --------- -------- ---------
Balance - December 31, 1995 10,050 --- 154.5 --- (20.8)
Dividend on Series A
Convertible Preferred Stock --- --- --- --- (4.2)
Dividend - common stock --- --- --- --- (20.0)
Conversion of payment-in-kind debentures
to common stock 3,888 --- 179.5 --- ---
Conversion of Series A Convertible
Preferred Stock to common stock 970 --- 44.8 --- ---
Assumption of minority deficit in Avonite --- --- --- --- (14.1)
Net Income - 1996 --- --- --- --- 33.3
All other --- --- --- --- .6
------ ------- --------- -------- ---------
Balance - December 31, 1996 14,908 --- $ 378.8 $ --- $ (25.2)
====== ======= ========= ======== =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
5
<PAGE> 10
ARISTECH CHEMICAL CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
1. GENERAL
On March 7, 1990, a tender offer was completed by which ACC
Acquisition Corporation ("Acquisition"), an indirect wholly owned
subsidiary of ACC Holdings Corporation ("Holdings"), acquired all the
shares of Aristech Chemical Corporation ("Aristech") common stock for
$27 per share. Subsequent to completion of the tender offer,
Acquisition was merged with and into Aristech. All of Aristech's
outstanding common stock was then owned by ACC Middle Corporation
("Middle") which was a wholly owned subsidiary of Holdings. The
acquisition of Aristech was accounted for as a purchase transaction
with the purchase price being allocated to assets and liabilities
based on their fair values as of the date of acquisition. The excess
cost over the net assets acquired totaled $235.6 million.
At the time of acquisition, 76.1% of the common stock of Holdings was
held by Mitsubishi Corporation ("MC") and Mitsubishi International
Corporation ("MIC") with the balance held by Aristech senior
management, Blackstone Capital Partner, L.P., and Blackstone Family
Investment Partnership, L.P.
During 1990, MC sold a portion of its shares to Mitsubishi Kasei
Corporation, Mitsubishi Gas Chemical Company, Inc. ("MGCC"),
Mitsubishi Rayon Co., Ltd. ("MRC"), and Mitsubishi Petrochemical Co.,
Ltd. (collectively the "Minority Owners") thereby reducing its share
of ownership in the Company to 55.7%. Mitsubishi Kasei Corporation and
Mitsubishi Petrochemical Co., Ltd. subsequently merged to form
Mitsubishi Chemical Corporation ("MCC").
Middle was merged with and into Holdings on August 1, 1994. Holdings
was merged with and into Aristech under the name of Aristech Chemical
Corporation (the "Company") on December 30, 1994.
Combined and separate results of Aristech and Holdings during the
periods preceding the merger were as follows:
<TABLE>
<CAPTION>
(In millions)
<S> <C> <C> <C>
For the period ended
December 30, 1994 Aristech Holdings Combined
----------------- -------- -------- --------
Sales $ 945.5 $ --- $ 945.5
Extraordinary loss (5.1) --- (5.1)
Net income (loss) 12.6 (12.5) .1
</TABLE>
In March 1995, the Company purchased all outstanding shares held by
the Blackstone partnerships, and all the outstanding shares and
options held by Aristech senior management. At the same time, 2,550
shares were issued to MC and MIC. The purchased shares, as well as
shares previously held as treasury stock, were retired. In April 1995,
MC acquired all the shares held by MGCC.
Effective September 30, 1996, the Company called for the redemption of
all of the outstanding 10% Series A Convertible Subordinated
Payment-in-Kind Debentures ("PIK Debentures") and 10% Series A
Convertible Payment-in-Kind Preferred Stock ("PIK Preferred Stock").
All such securities were held by MC, MIC, MCC and MRC. MC, MIC, and
MCC elected to exercise their right to convert the principal amount of
$179.5 million of PIK Debentures into 3,888 shares of common stock and
$44.8 million of PIK Preferred Stock into 970 shares of common stock.
The remaining principal amount of $24.5 million of PIK Debentures and
$6.2 million of PIK Preferred Stock held by MRC were redeemed for
cash. The holders of the 14,908 shares of common stock outstanding at
December 31, 1996 are as follows:
<TABLE>
<S> <C>
Mitsubishi Corporation 77.7%
Mitsubishi International Corporation 4.5
Mitsubishi Chemical Corporation 14.8
Mitsubishi Rayon Company, Ltd. 3.0
</TABLE>
6
<PAGE> 11
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The consolidated financial statements include the accounts of the
Company and its wholly and majority owned subsidiaries. Investments in
other entities over which the Company exercises significant influence
are carried on the equity basis. All intercompany accounts and
transactions have been eliminated. Certain amounts previously reported
in financial statement captions have been reclassified to conform with
the 1996 presentation.
The Company has adopted Statement of Financial Accounting Standards
("SFAS") No. 121, "Accounting for the Impairment of Long-Lived Assets
and for Long-Lived Assets to be Disposed of." Adoption did not have a
material effect on the Company's financial position or results of
operations.
The Company has not completed the process of evaluating the impact
that will result from adopting Statement of Position ("SOP") 96-1,
"Environmental Remediation Liabilities." The Company does not expect
adoption of this statement to have a material effect on the
consolidated financial statements.
The preparation of consolidated financial statements in conformity
with generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of
assets and liabilities and contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual results could differ
from those estimates.
Inventories
Inventories are stated at the lower of aggregate cost or market. Cost
is determined primarily by the last-in, first-out ("LIFO") method.
Inventory costs include direct and indirect manufacturing costs
associated with the production of product.
Property, Plant and Equipment
Property, plant and equipment are carried at cost. Major replacements
and improvements which extend the life of the property are
capitalized, while maintenance and repairs are expensed as incurred.
The Company capitalizes the interest cost associated with major
property additions while in progress and amortizes the amount over the
useful lives of the related assets. Depreciation of plant and
equipment is computed on the straight-line method.
When a plant or major facility within a plant is sold or otherwise
disposed of, any gain or loss is reflected in the consolidated
statement of income. Proceeds from the sale of other facilities
depreciated on a group basis are credited to the depreciation reserve.
The Company capitalizes the cost of catalyst replacement and amortizes
the cost over the life of the catalyst. The Company expenses any other
planned maintenance activity during the period the work was performed.
Excess Cost Over Assets Acquired
The excess cost over the fair value of assets acquired is generally
amortized on a straight-line basis over a 40 year period. Such amount
associated with the 1990 acquisition has been allocated to each of the
Company's businesses based on historical operating results prior to
the acquisition. Accumulated amortization of the excess cost over
assets acquired was $49.2 million and $44.0 million at December 31,
1996 and 1995, respectively.
7
<PAGE> 12
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Pensions
The Company maintains defined benefit pension plans with benefits
based on compensation and years of service for substantially all of
its employees. The Company's funding practice is to contribute
annually not less than the actuarially determined minimum funding
requirements of the Employee Retirement Income Security Act of 1974
nor more than the maximum funding limitation under the Internal
Revenue Code. Contributions are intended to provide benefits for
service to date and for benefits expected to be earned in the future.
The Company also maintains defined contribution plans which cover
certain eligible salaried and hourly employees. The Company's cost is
determined based on a percentage of compensation as defined by the
plans (see Note 4).
Income Taxes
Income taxes are accounted for in accordance with SFAS No. 109,
"Accounting for Income Taxes." Under SFAS No. 109, deferred income
taxes are recognized for the estimated taxes ultimately payable or
recoverable based on enacted tax law. The deferred income taxes are
computed annually for differences between book and tax bases of assets
and liabilities that will result in taxable or deductible amounts in
the future (see Note 5).
Income Recognition
Sales and related costs of sales are included in income when goods are
shipped or services are rendered to the customer.
Cash Equivalents
The Company considers all highly liquid instruments with a maturity of
three months or less at the date of purchase to be cash equivalents.
Such investments are carried at cost which approximates fair value.
Short-Term Investments
Instruments with a maturity greater than three months but less than
one year at the time of purchase are considered short-term
investments. At December 31, 1995, the Company held a $17.0 million
investment in a time deposit maturing in February 1996 for purposes of
securing various letters of credit. Because the Company intended to
hold such investment to maturity, the investment was reported at
amortized cost which approximated fair value at December 31, 1995. The
Company is no longer required to secure the letters of credit.
Interest Rate Swap Agreements
The differential to be paid or received is accrued as interest rates
change over the life of the agreements (see Note 10).
Environmental Compliance and Remediation
Environmental compliance costs include ongoing maintenance, monitoring
and similar costs. Such costs are expensed as incurred. Except to the
extent costs can be capitalized, environmental remediation costs are
fully accrued when environmental assessments and/or remedial efforts
are probable and the cost can be reasonably estimated.
8
<PAGE> 13
3. NATURE OF OPERATIONS
The Company's operations are conducted in one business segment, the
production and marketing of chemical and polymer products. The major
chemical products include phenol, acetone, bisphenol-A, aniline,
phthalic anhydride, 2-ethylhexanol and plasticizer. Major polymer
products include polypropylene and acrylic sheet. Approximately 80% of
the total sales are of products which are considered commodity
chemicals. The Company's products are generally sold for further
processing by manufacturers of automotive components, construction
materials and consumer products.
The Company's product line provides it with a diverse revenue base.
The Company does not derive significant revenue from any single
customer. International sales are made primarily to Japan, Canada and
Taiwan.
The Company exported chemical products with a total sales revenue of
$172.4 million in 1996, $186.8 million in 1995 and $134.5 million in
1994.
4. PENSIONS AND OTHER POSTRETIREMENT BENEFITS
Substantially all employees of the Company are covered by various
defined benefit or defined contribution plans. The cost of such plans
was $5.7 million in 1996, $4.9 million in 1995 and $4.4 million in
1994.
Defined benefit pension cost for 1996, 1995 and 1994 includes the
following components:
<TABLE>
<CAPTION>
(In millions) 1996 1995 1994
------ ------ -----
<S> <C> <C> <C>
Cost of benefits earned during the period $ 3.8 $ 3.2 $ 3.9
Interest cost on projected benefit obligation 3.8 3.8 3.8
Actual return on plan assets (6.5) (7.6) (.7)
Net amortization and deferral 3.7 4.7 (3.0)
----- ----- -----
Total $ 4.8 $ 4.1 $ 4.0
===== ===== =====
</TABLE>
<TABLE>
<CAPTION>
Assumptions 1996 1995 1994
----------- ------ ------ -----
<S> <C> <C> <C>
Discount rate, net periodic pension cost 7.25% 8.50% 7.5%
Rate of increase in compensation levels, net
periodic pension cost 4.00 4.00 3.5
Expected long-term rate of return on assets 9.00 9.00 10.0
Discount rate, projected benefit obligation 7.75 7.25 8.5
Rate of increase in compensation levels, projected
benefit obligation 4.50 4.00 3.0
</TABLE>
9
<PAGE> 14
4. PENSIONS AND OTHER POSTRETIREMENT BENEFITS (CONTINUED)
The following table sets forth the defined benefit plans' funded
status and amounts recognized in the Company's consolidated balance
sheets at December 31, 1996 and 1995:
<TABLE>
<CAPTION>
Assets Exceed Accumulated
Accumulated Benefits
Benefits Exceed Assets
------------- -------------
(In millions) 1996 1995 1996 1995
------ ------ ------ -----
<S> <C> <C> <C> <C>
Actuarial present value of benefit
obligations:
Vested benefit obligation $ (31.4) $ (25.1) $ (4.2) $ (9.4)
======== ======== ======= ========
Accumulated benefit obligation $ (36.0) $ (28.1) $ (4.5) $ (10.4)
======== ======== ======= ========
Projected benefit obligation $ (52.5) $ (41.2) $ (7.5) $ (17.1)
Plan assets at fair value 39.5 28.9 1.2 8.8
-------- -------- ------- --------
Plan assets less than projected benefit
obligation (13.0) (12.3) (6.3) (8.3)
Unrecognized net loss 7.1 8.0 .9 3.4
Unrecognized prior service cost .7 (.3) 3.9 1.9
-------- -------- ------- -------
Accrued pension cost recognized in
the consolidated balance sheets $ (5.2) $ (4.6) $ (1.5) $ (3.0)
======== ======== ======= ========
</TABLE>
Amounts recognized in the 1996, 1995 and 1994 consolidated income
statements due to the settlement or curtailment of pension plans as a
result of the sales of the coal chemical business and the Polyester
Group (see Note 16) were not significant.
Plan assets are invested primarily in listed stocks and bonds.
In addition to providing pension benefits, the Company provides
certain medical and life insurance benefits to eligible retired
employees. Under the terms of the benefit plans, which are unfunded,
the Company reserves the right to modify or discontinue the plans.
A transition obligation of $5.9 million existed at the date of
adoption of SFAS No. 106, "Employers' Accounting for Postretirement
Benefits Other Than Pensions." The Company, as permitted by SFAS No.
106, has chosen to amortize this transition obligation on a
straight-line basis over 20 years.
The expense for other postretirement benefits was $1.4 million in
1996, $2.1 million in 1995 and $1.4 million in 1994. The cash payments
for such benefits were $.6 million in 1996, $.7 million in 1995 and
$.6 million in 1994.
Postretirement benefit cost for 1996, 1995 and 1994 included the
following components:
<TABLE>
<CAPTION>
(In millions) 1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Cost of benefits earned during the period $ .4 $ .4 $ .5
Interest cost on accumulated postretirement
obligation 1.2 1.4 .6
Amortization of transition obligation .2 .3 .3
Charge due to transfer of employees to Ashland (.4) --- ---
----- ----- -----
Total $ 1.4 $ 2.1 $ 1.4
===== ===== =====
</TABLE>
For measurement purposes, the discount rates used for calculating the
present value of postretirement benefit liabilities were 7.75% for
1996, 7.25% for 1995 and 8.75% for 1994.
10
<PAGE> 15
4. PENSIONS AND OTHER POSTRETIREMENT BENEFITS (CONTINUED)
The following table sets forth the plans' postretirement benefit
liability as of December 31, 1996 and 1995:
<TABLE>
<CAPTION>
(In millions) 1996 1995
------ -----
<S> <C> <C>
Accumulated postretirement benefit obligation:
Retirees $ (7.5) $ (7.3)
Fully eligible active plan participants (2.9) (3.6)
Other active plan participants (5.7) (7.0)
------- --------
Total (16.1) (17.9)
Unrecognized (gain) loss (.8) 1.0
Unrecognized prior service cost .2 ---
Unrecognized transition obligation 3.7 4.6
------- --------
Accrued postretirement benefit liability recognized in
the consolidated balance sheets $ (13.0) $ (12.3)
======= ========
</TABLE>
The assumed health care cost trend rate was 8% for 1996 and 1995 and
9% for 1994. These rates were assumed to decline to 4% for 1996 and
1995 over six year periods and to 5% for 1994 over a ten year period.
A 1% increase in the health care cost trend rate would increase the
accumulated postretirement benefit obligation as of December 31, 1996
by 5% and the sum of the service and interest costs in 1996 by 7.2%.
5. TAX PROVISION
Provision for taxes on income is as follows:
<TABLE>
<CAPTION>
(In millions) 1996 1995 1994
------ ------ -----
<S> <C> <C> <C>
Current federal income taxes $ 28.6 $ 16.3 $ 1.1
Current state and local income taxes 3.4 3.3 1.5
Deferred income taxes (3.6) 24.8 6.9
------ ------ ------
Total provision before change in valuation allowance 28.4 44.4 9.5
Change in valuation allowance (.8) --- ---
------ ------ ------
Total Provision $ 27.6 $ 44.4 $ 9.5
====== ====== ======
</TABLE>
A reconciliation of the differences between income taxes computed at
the federal statutory rate to the total provision for income taxes is
as follows:
<TABLE>
<CAPTION>
(In millions) 1996 1995 1994
------ ------ -----
<S> <C> <C> <C>
Statutory rate applied to income before tax $ 21.0 $ 36.6 $ 5.1
Foreign Sales Corporation benefits & other
tax credits (.5) (.7) (.5)
Goodwill amortization 2.0 2.1 2.0
Losses from equity investee 4.3 --- ---
Goodwill write-off --- 5.9 2.3
State income taxes after federal income tax benefit 2.0 1.4 .1
Other (.4) (.9) .5
------ ------ ------
Total provision for income taxes before change in
valuation allowance 28.4 44.4 9.5
Change in valuation allowance (.8) --- ---
------ ------ ------
Total provision for income taxes $ 27.6 $ 44.4 $ 9.5
====== ====== ======
</TABLE>
11
<PAGE> 16
5. TAX PROVISION (CONTINUED)
The tax effect of the significant temporary differences which comprise
the deferred tax assets and liabilities is as follows:
<TABLE>
<CAPTION>
(In millions) 1996 1995
------ -----
<S> <C> <C>
Deferred tax assets:
Accruals different than payments $ 15.3 $ 16.5
Net operating loss carryforwards 8.8 ---
Other tax credit carryforwards --- 10.6
Other .1 .1
------ ------
Gross deferred tax assets before valuation allowance 24.2 27.2
Less valuation allowance (8.7) ---
------ ------
Gross deferred tax assets 15.5 27.2
------ ------
Deferred tax liabilities:
Property and inventory 178.6 197.0
Losses from equity investee --- (4.3)
Accruals different than payments --- 2.3
Other .8 1.2
------ ------
Gross deferred tax liabilities 179.4 196.2
------ ------
Net deferred tax liabilities $163.9 $169.0
====== ======
</TABLE>
Avonite (see Note 8) has net operating loss carryforwards of $25.2
million which expire in years 1999 through 2011. Since Avonite is not
consolidated for tax purposes, utilization of these carryforwards is
limited to the taxable income of Avonite. Should a tax benefit be
subsequently recognized relating to the valuation allowance at
December 31, 1996, $4.4 million of such benefit will be allocated to
reduce excess cost over assets acquired and the assumed Avonite
minority deficit.
During 1996 and 1994, the Company settled IRS examinations related to
audit years through December 31, 1990. These settlements resulted in
increases in the excess cost over assets acquired account of $1.7
million in 1995 and $2.8 million in 1994. The Company also completed
an IRS survey relating to years through December 31, 1993. Management
believes that reserves established for open years are adequate.
6. INVENTORIES
Inventories consist of the following at December 31, 1996 and 1995:
<TABLE>
<CAPTION>
(In millions) 1996 1995
------ -----
<S> <C> <C>
Raw materials $ 24.8 $ 28.8
Finished products 70.8 61.5
Supplies and sundry items 17.5 15.7
------ ------
Total Inventory 113.1 106.0
Less inventory held for sale --- 4.9
------ ------
Net Inventory $113.1 $101.1
====== ======
</TABLE>
The current cost of inventories at December 31, 1996 and 1995 was
$110.2 million and $98.5 million, respectively.
The Company had LIFO liquidations resulting in a decrease in cost of
sales of $.1 million in 1996, an increase in cost of sales of $.1
million in 1995 and a decrease in cost of sales of $2.6 million in
1994.
12
<PAGE> 17
7. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consists of the following at December
31, 1996 and 1995:
<TABLE>
<CAPTION>
(In millions) 1996 1995
------ -----
<S> <C> <C>
Land $ 13.8 $ 13.5
Buildings 36.8 37.1
Machinery and equipment 793.0 794.2
------ ------
Total property, plant and equipment 843.6 844.8
Less accumulated depreciation 245.6 214.3
Less net property, plant and equipment held for sale --- 28.2
------ ------
Net property, plant and equipment $598.0 $602.3
====== ======
</TABLE>
8. AVONITE, INC.
On December 15, 1987, the Company acquired for $5.0 million a 50%
interest in Avonite, Inc. ("Avonite") of Belen, New Mexico, a producer
and marketer of premium unsaturated polyester sheet. The investment
was accounted for under the equity method. As of December 31, 1995,
the Company had made loans to Avonite totaling $8.8 million for
working capital and construction of a new production facility
completed in 1989. Interest receivable relating to the loans at
December 31, 1995 was $5.9 million. In the ordinary course of
business, the Company sells products to Avonite and the outstanding
receivable balance relating to these sales at December 31, 1995 was
$2.6 million.
On July 1, 1996, the Company acquired an additional 10% of the
outstanding common stock of Avonite in exchange for the assignment to
the Avonite minority owners of a $1.0 million note owed by Avonite to
the Company. As a result, Avonite became a consolidated subsidiary of
the Company. Excess cost over assets acquired of $3.5 million was
recorded and the minority deficit at the date of the additional
acquisition of $14.1 million was assumed by the Company.
9. LEASE COMMITMENTS
The Company has operating leases primarily for buildings, railway
equipment, data processing and automotive equipment. Capital leases
are immaterial.
Minimum annual rentals for operating leases with initial or remaining
lease terms in excess of one year were as follows at December 31,
1996:
<TABLE>
<CAPTION>
(In millions)
<S> <C>
1997 $ 14.6
1998 11.3
1999 9.4
2000 6.7
2001 3.1
Thereafter .4
------
Total minimum lease payments $ 45.5
======
</TABLE>
Operating lease rental expense was $12.0 million for 1996, $11.0
million for 1995 and $12.0 million for 1994.
13
<PAGE> 18
10. DEBT
<TABLE>
<CAPTION>
Interest
(In millions) Maturity Rates 1996 1995
-------- --------- ------ -----
<S> <C> <C> <C> <C>
Term Loan - MC 2002 Variable $100.0 $203.0
Term Loan - MIC 1997 Variable --- 100.0
Revolving Loan - MIC 2002 Variable 48.0 65.0
Subordinated PIK Debentures 2005-2007 10% --- 204.0
6 7/8% Notes 2006 6.875% 148.9 ---
Note payable to Avonite stockholder 2006 Variable 11.2 ---
Priority Promissory Note 2006 Variable 1.1 ---
Industrial Revenue Bond 2008 Variable .6 ---
Capital lease obligations 1997-1999 .2 .2
------ ------
310.0 572.2
Less amount due within one year .1 ---
------ ------
Total $309.9 $572.2
====== ======
</TABLE>
On August 1, 1994, the Company refinanced the prior $825.0 million
Credit Agreement dated April 18, 1990 as well as a $42.0 million
subordinated loan entered into on March 1, 1994 through a combination
of permanent and temporary financing provided by MC, MIC and certain
commercial banks. The permanent financing was provided by MC in the
form of a $203.0 million Term Loan due July 31, 2002. The agreement
governing this financing provides for interest on outstanding
borrowings at a variable rate based on the London Interbank Offered
Rate (LIBOR), plus a margin of 1.375% for loans extending to June 3,
1996, a margin of .55% for loans extending to November 1, 1996, and a
margin of .4875% for loans from November 1, 1996 and thereafter. The
temporary financing, which was guaranteed by MC, was arranged through
MIC and three commercial banks. The MIC financing was provided in the
form of a $100.0 million Term Loan and a Revolving Loan with a maximum
commitment of $100.0 million, with both facilities maturing March 31,
1995. The commercial bank financing was provided in the form of three
Term Loans totaling $156.0 million and a Revolving Loan with a maximum
commitment of $20.0 million, all maturing on March 31, 1995.
Due to this refinancing, the unamortized portion of deferred finance
charges related to the Credit Agreement of $8.3 million was recognized
as a loss. This amount, net of the related income tax benefit of $3.2
million, is presented as an extraordinary loss in the 1994
consolidated statement of income.
On January 4, 1995, the commercial bank financing was repaid in its
entirety by increasing the commitment amount of the MIC Revolving Loan
to $250.0 million and by replacing the previous $20.0 million
committed Revolving Loan with a $20.0 million discretionary line of
credit at a variable rate of interest available through two commercial
banks. The amount outstanding under the discretionary line of credit
at December 31, 1995 was $8.7 million at a rate of 6.1%.
The original maturity of the MIC financing scheduled for March 31,
1995 was extended annually to March 31, 1997. The maturity on the MIC
Revolving Loan was further extended to April 18, 2002 in September
1996.
On June 3, 1996, the Company prepaid $103.0 million of the MC Term
Loan from proceeds available through the $250.0 million MIC Revolving
Loan.
On November 25, 1996, the Company issued $150.0 million of 6.875%
notes due November 15, 2006 ("Notes") at a discount of $1.1 million.
The proceeds were used to prepay in entirety the $100.0 million MIC
Term Loan and the balance was used for general corporate purposes.
Also effective November 25, 1996, the MIC Revolving Loan commitment
was reduced to $150.0 million and the interest rate was increased from
LIBOR plus a margin of .15% to LIBOR plus a margin of .1875%.
Prior to the issuance of the Notes, the Company entered into an
interest rate hedging contract with a commercial bank that effectively
fixed at 6.404% the treasury rate component of the all-in cost
(treasury rate component plus credit margin) of the Notes. The Company
settled the interest rate hedging contract at a cost of approximately
$2.5 million on November 22, 1996, which is being amortized along with
other costs associated with the Notes over the life of the Notes.
14
<PAGE> 19
10. DEBT (CONTINUED)
Effective December 17, 1996, the previous $20.0 million discretionary
line of credit with two commercial banks was replaced with a new $50.0
million discretionary facility at a variable rate of interest provided
by one commercial bank. The amount outstanding at December 31, 1996
was $40.4 million at a rate of 7.4%.
During 1992, the Company hedged some of its exposure to upward
movements in interest rates by entering into interest rate swap
arrangements on $250.0 million of debt by fixing the effective rate of
interest at approximately 7.4%. These swaps consisted of varying
maturity dates ranging from January 1994 to July 1995. As of December
31, 1995 and 1996, there were no swap arrangements outstanding.
On March 7, 1990, the Company issued $80.0 million of PIK Debentures
to MC and MIC. An additional $64.0 million of PIK Debentures were
issued to the Minority Owners on November 27, 1990. Interest on these
debentures from issue date to March 1, 1995, was paid in the form of
additional debentures bearing the same terms as the original issue.
Additional issues of debentures in lieu of cash payments for interest
were $5.7 million in 1995 and $20.9 million in 1994. Commencing with
the June 1, 1995 payment date, interest was payable at the Company's
option, either in cash or Series B (non-convertible) PIK Debentures.
From June 1, 1995 to September 30, 1996, the Company elected to pay
interest in cash. Total cash interest payments were $17.0 million for
1996 and $15.3 million for 1995. On March 23, 1995, the Company
redeemed all of the debentures held by MGCC for $24.5 million. On
September 30, 1996, the Company called for the redemption of all of
its outstanding PIK Debentures. MC, MIC and MCC elected to exercise
their right to convert $179.5 million of the PIK Debentures into 3,888
shares of common stock of the Company. The remaining $24.5 million of
PIK Debentures held by MRC were redeemed for cash.
As of December 31, 1995, it was not practical to estimate the fair
value of the PIK Debentures. The instrument was carried at its face
amount plus accrued interest. The debt was not traded and the cost was
prohibitive to have a valuation of the company performed in order to
establish the fair value of the conversion feature.
Based on the borrowing rates currently available to the Company for
bank loans with similar terms and average maturities, the fair value
of long-term debt other than the PIK Debentures at December 31, 1996
and 1995 approximates carrying value at those dates.
The Company has agreed to pay MC a guarantee fee on the outstanding
principal balance of the 1990 Guaranteed Subordinated Loan, all
financing obtained from MIC, the 1994 commercial bank financing, and
the commercial bank discretionary line of credit. The guarantee fee is
calculated on a daily basis in an amount equal to 1.125% per annum for
guaranteed loans extending to January 4, 1995, .60% per annum for
guaranteed loans extending to June 3, 1996 and .30% per annum for
guaranteed loans effective June 3, 1996 and thereafter. The guarantee
fee expense for 1996, 1995 and 1994 was $.9 million, $2.2 million and
$4.3 million, respectively.
The note payable to an Avonite stockholder in the amount of $11.2
million as of December 31, 1996, is secured by a stock pledge by and
between the Avonite stockholder and the other Avonite minority
stockholders. The unsecured Priority Promissory Note, which has been
assigned by the Company to the Avonite minority stockholders, has a
balance of $1.1 million at December 31, 1996. Interest on these two
notes is calculated at the prime interest rate plus 2%, of which any
unpaid amounts are added to the unpaid principal balance at the end of
each year. Repayment of both principal and interest is dependent on
the cash position of Avonite at each quarter end with all outstanding
amounts ultimately due on July 1, 2006. The Industrial Revenue Bond,
secured by property and land, requires monthly payments of principal
and interest based on the prime interest rate. This Bond, which had a
balance of $.6 million at December 31, 1996, is due May 1, 2008 and is
guaranteed by the Company.
Of the $310.0 million of debt outstanding at December 31, 1996, no
significant amounts are due to be repaid within the next five years.
15
<PAGE> 20
11. OTHER ITEMS
<TABLE>
<CAPTION>
(In millions) 1996 1995 1994
------ ------ -----
<S> <C> <C> <C>
Operating costs include:
Maintenance and repairs of plant and equipment $36.0 $31.8 $28.3
Research and development 13.0 11.9 13.1
</TABLE>
12. EQUITY
The Subscription and Stockholders Agreement ("Stockholders
Agreement"), dated January 31, 1990, and as amended June 4, 1993,
among MC, MIC, Blackstone Capital Partners L.P., Blackstone Family
Investment Partnership L.P., Holdings, Middle, Acquisition and certain
management investors provided for the initial capitalization of
Holdings. Under the Stockholders Agreement, management investors
acquired from Holdings 1,250 shares of common stock ("Acquired
Shares") in return for shares of Aristech common stock and cash with a
combined total value of $12.5 million. MC and MIC together acquired
from Holdings 7,500 shares of common stock for $84.7 million and the
Blackstone partnerships together acquired from Holdings 250 shares of
common stock for $2.8 million. In addition, management investors
received, at no cost, 850 shares of Holding's common stock
("Restricted Shares").
On March 23, 1995, the Company exercised its call option with respect
to 2,245 shares of common stock held by the management investors and
the Blackstone partnerships at the established price of $30,431 per
share, in addition to options on 200 shares granted to the management
investors by the Performance Option Plan ("POP")(see Note 14). The
shares and options were purchased using proceeds obtained from issuing
2,550 shares of common stock to MC and MIC at the established price.
Deferred compensation had been recognized for the established price of
the Restricted Shares and for the difference between the established
price of the Acquired Shares and the amount paid by management
investors for such shares. The deferred compensation was amortized
over the restriction period beginning on March 1990 and ending on
March 1995.
On February 22, 1996, a cash dividend of $1,990 per share was declared
to holders of record of the Company's common stock as of that date and
was paid in June 1996.
An additional 4,858 shares of common stock were issued on September
30, 1996 when MC, MIC and MCC exercised an option to convert their PIK
Debentures and PIK Preferred Stock (see Notes 1, 10 and 13).
13. REDEEMABLE PREFERRED STOCK
The PIK Preferred Stock, of which 1,000,000 shares were authorized,
had a liquidation value of $100 per share plus all accumulated and
unpaid dividends to the date of final distribution. Dividends were
payable quarterly at the rate of 10% per annum. Prior to June 1, 1995,
dividends were paid in additional shares of this PIK Preferred Stock
rather than in cash. Additional shares issued in lieu of cash
dividends were $1.5 million in 1995 and $5.2 million in 1994. All
dividends payable on or after June 1, 1995 were paid in cash. Total
cash dividends for 1996 and 1995 were $4.2 million and $3.8 million,
respectively. This PIK Preferred Stock was convertible at the option
of the holder(s) into 7% of the Fully-Diluted Common Stock of the
Company as defined in the Certificate of Designation for this
issuance. The shares were also subject to redemption at the Company's
option after March 1, 1995. Such redemptions would be at the
liquidation value plus accrued and unpaid dividends.
16
<PAGE> 21
13. REDEEMABLE PREFERRED STOCK (CONTINUED)
On March 23, 1995, the Company redeemed all of the shares held by MGCC
for $6.1 million. On September 30, 1996 MC, MIC and MCC elected to
convert $44.8 million of the PIK Preferred Stock into 970 shares of
common stock. The shares held by MRC were redeemed for $6.2 million in
cash.
As of December 31, 1995 it was not practical to estimate the fair
value of the PIK Preferred Stock. The instrument was carried at its
face amount plus accrued dividends. The preferred stock was not traded
and the cost was prohibitive to have a valuation of the Company
performed in order to establish the fair value of the conversion
feature.
14. PERFORMANCE STOCK OPTION PLAN ("PSOP"), PERFORMANCE OPTION PLAN
("POP") AND EMPLOYMENT COMPENSATION AGREEMENTS
The PSOP was replaced by the POP in 1992 and, on January 4, 1993, the
Stockholders Agreement was amended to terminate the POP and the
Company entered into an Employment Compensation Agreement with each
participant. This agreement provided for the payment of a fixed cash
settlement amount to each participant, which was paid on January 3,
1995 to participants who had satisfied the requirement to remain
employed through January 1, 1995. The payment was $27.0 million. The
amount recorded to expense for this liability was $10.1 million in
1994.
15. COMMITMENTS AND CONTINGENCIES
Contract commitments for capital expenditures for property, plant and
equipment totaled $16.8 million and $12.7 million at December 31, 1996
and 1995, respectively.
The Company has agreed to indemnify USX Corporation ("USX") against
certain claims or liabilities which USX may incur relating to USX's
prior ownership and operation of the facilities transferred to the
Company in 1986, including liabilities under laws relating to the
protection of the environment and the workplace. Such liabilities have
been provided for in the consolidated financial statements.
As of December 31, 1996 and 1995, the Company had outstanding
irrevocable standby letters of credit in the amount of $15.2 million
and $16.0 million, respectively, primarily in connection with
environmental matters.
The Company is a defendant in a patent infringement suit filed by
Phillips Petroleum Company ("Phillips") in 1987, in the United States
District Court for the Southern District of Texas, captioned Phillips
Petroleum Company v. Aristech Chemical Corporation, Civil Action No.
H87-3445. The complaint alleges infringement of two patents related to
the production of polypropylene, which have since expired. The Company
and Phillips each filed motions for summary judgment which were
referred to a Special Master. The Special Master issued a lengthy
recommendation to find in the Company's favor, and Phillips filed a
motion to reject the Special Master's recommendation. A hearing on
this motion was held on October 21, 1996. On November 19, 1996, the
District Court granted the Company's motion for summary judgment and
entered an order to that effect on November 19, 1996. A final judgment
was entered on December 23, 1996. Phillips has filed a notice of
appeal.
The Company is subject to pervasive environmental laws and regulations
concerning the production, handling, storage, transportation, emission
and disposal of waste materials and is also subject to other federal
and state laws and regulations regarding health and safety matters.
These laws and regulations are constantly evolving, and it is
impossible to predict accurately the effect these laws and regulations
will have on the Company in the future.
The Company is also the subject of, or party to, a number of other
pending or threatened legal actions involving a variety of matters. In
the opinion of management, any ultimate liability arising from these
contingencies, to the extent not otherwise provided for, should not
have a material adverse effect on the consolidated financial position,
results of operations, or cash flows of the Company.
17
<PAGE> 22
15. COMMITMENTS AND CONTINGENCIES (CONTINUED)
The Company has entered into an agreement with the Pittsburgh Economic
Industrial Development Corporation ("PEIDC") for the construction of a
new polypropylene technical center. The Company has entered into a 20
year lease agreement for the facility which will begin upon completion
of construction and is obligated to assist in financing the
construction in the amount of $8.2 million which will be repaid over
the term of the lease.
16. ASSETS HELD FOR SALE
In November 1994, the Company announced that a letter of intent had
been signed with Ashland, Inc. for the purchase of the Company's
unsaturated polyester resin, polyester distribution and maleic
anhydride businesses (the "Polyester Group"). The sale was completed
in April 1995 for $91.9 million. Losses of $3.5 million in 1995 and
$6.2 million in 1994 were recorded primarily due to the write-off of
excess cost over assets acquired, anticipated severance costs and less
than projected operating income of the Polyester Group through April
1995. The net sales and operating income of the Polyester Group,
excluding certain corporate charges, for 1994 was $135.3 million and
$3.9 million, respectively.
In November 1995, the Company announced that a letter of intent had
been signed with Koppers Industries, Inc. for the purchase of the
Company's coal chemicals business. The sale was completed in April
1996. Losses of $3.9 million in 1996 and $7.9 million in 1995 were
recorded primarily due to the write-off of excess cost over assets
acquired.
The net sales and operating income of coal chemicals, excluding
certain corporate charges, for 1996, 1995 and 1994 were as follows:
<TABLE>
<CAPTION>
(In millions) 1996 1995 1994
------ ------ -----
<S> <C> <C> <C>
Net sales $ 19.1 $ 76.0 $ 69.1
Operating income 2.6 10.3 9.1
</TABLE>
The net assets to be purchased by Koppers Industries, Inc. totaling
$42.3 million at December 31, 1995 are reflected on the consolidated
balance sheet as net assets held for sale and include accounts
receivable of $10.3 million, inventory of $4.9 million, net property,
plant and equipment of $28.2 million and accounts payable of $9.0
million.
17. SUBSEQUENT EVENTS
On February 26, 1997, a cash dividend of $558 per share was declared
to holders of record of the Company's common stock as of that date, to
be paid on April 24, 1997.
Effective March 3, 1997, the $100.0 million MC Term Loan was prepaid
in its entirety using proceeds from the MIC Revolving Loan by
increasing the commitment amount of the facility to $250.0 million.
Concurrently, the guarantee fee payable to MC was reduced to .1875%
per annum for guaranteed loans effective March 3, 1997, and
thereafter.
18
<PAGE> 23
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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 on March 19, 1997.
ARISTECH CHEMICAL CORPORATION
By /s/ MICHAEL J. EGAN
-----------------------------
Michael J. Egan
Senior Vice President and
Chief Financial Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons in the capacities
indicated and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
<S> <C> <C>
/s/ JIRO KAMIMURA Chairman of the Board, March 19, 1997
- ---------------------------------------- Chief Executive Officer and Director
Jiro Kamimura (Principal Executive Officer)
/s/ CHARLES W. HAMILTON President, Chief Operating Officer and March 19, 1997
- ---------------------------------------- Director
Charles W. Hamilton
/s/ MICHAEL J. EGAN Senior Vice President, March 19, 1997
- ---------------------------------------- Chief Financial Officer and Director
Michael J. Egan (Principal Financial Officer)
/s/ MICHAEL J. PRENDERGAST Corporate Comptroller April 1, 1997
- ---------------------------------------- (Principal Accounting Officer)
Michael J. Prendergast
/s/ MASATAKE BANDO Director March 27, 1997
- ----------------------------------------
Masatake Bando
/s/ HAJIME KOGA Director March 25, 1997
- ----------------------------------------
Hajime Koga
/s/ YOSHIZO SHIMIZU Director March 26, 1997
- ----------------------------------------
Yoshizo Shimizu
/s/ YASUO SONE Director March 25, 1997
- ----------------------------------------
Yasuo Sone
/s/ MUNEO SUZUKI Director March 26, 1997
- ----------------------------------------
Muneo Suzuki
/s/ TAKAYORI TSUBOI Director March 20, 1997
- ----------------------------------------
Takayori Tsuboi
</TABLE>
<PAGE> 24
Supplemental Information to be Furnished with Reports Filed Pursuant to Section
15(d) of the Act by Registrants Which Have Not Registered Securities Pursuant
to Section 12 of the Act.
The registrant has not sent to its security holders any annual report covering
the registrant's last fiscal year, nor sent any proxy statement, form of proxy
or other proxy soliciting material to more than ten of the registrant's
security holders with respect to any annual or other meeting of security
holders.
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C> <C> <C>
<PERIOD-TYPE> YEAR YEAR YEAR
<FISCAL-YEAR-END> DEC-31-1994 DEC-31-1995 DEC-31-1996
<PERIOD-START> JAN-01-1994 JAN-01-1995 JAN-01-1996
<PERIOD-END> DEC-31-1994 DEC-31-1995 DEC-31-1996
<CASH> 28,700 400 1,900
<SECURITIES> 0 17,000 0
<RECEIVABLES> 134,900 121,900 110,800
<ALLOWANCES> (800) (600) (600)
<INVENTORY> 85,700 101,100 113,100
<CURRENT-ASSETS> 346,500 295,800 227,300
<PP&E> 820,300 816,600 843,600
<DEPRECIATION> 196,700 214,300 245,600
<TOTAL-ASSETS> 1,183,400 1,090,000 1,013,800
<CURRENT-LIABILITIES> 180,100 120,900 152,500
<BONDS> 707,900 572,200 309,900
123,100 51,000 0
0 0 0
<COMMON> 0 0 0
<OTHER-SE> 1,300 133,700 353,600
<TOTAL-LIABILITY-AND-EQUITY> 1,183,400 1,090,000 1,013,800
<SALES> 945,500 1,023,300 906,600
<TOTAL-REVENUES> 945,500 1,023,300 906,600
<CGS> 763,500 758,900 704,400
<TOTAL-COSTS> 813,800 807,300 752,100
<OTHER-EXPENSES> 0 0 0
<LOSS-PROVISION> 0 0 0
<INTEREST-EXPENSE> 56,000 49,800 37,900
<INCOME-PRETAX> 14,700 104,600 60,900
<INCOME-TAX> 9,500 44,400 27,600
<INCOME-CONTINUING> 5,200 60,200 33,300
<DISCONTINUED> 0 0 0
<EXTRAORDINARY> (5,100) 0 0
<CHANGES> 0 0 0
<NET-INCOME> 100 60,200 33,300
<EPS-PRIMARY> 0 0 0
<EPS-DILUTED> 0 0 0
</TABLE>
