<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended September 30, 1998
OR
[ ] 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)
Registrant's Telephone Number: (412) 433-2747
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 [ ]
Common Stock outstanding at September 30, 1998: 14,908 shares
<PAGE> 2
INDEX
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements:
Consolidated Statements of Income 3
Consolidated Balance Sheets 4
Consolidated Statements of Cash Flows 5
Notes to the Consolidated Financial
Statements 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 10
Item 3. Quantitative and Qualitative Disclosures
About Market Risk 13
PART II - OTHER INFORMATION
Item 1. Legal Proceedings 14
Item 2. Changes in Securities and Use of Proceeds 14
Item 3. Defaults Upon Senior Securities 14
Item 4. Submission of Matters to a Vote of Security Holders 14
Item 5. Other Information 14
Item 6. Exhibits and Reports on Form 8-K 14
2
<PAGE> 3
ARISTECH CHEMICAL CORPORATION
Consolidated Statements of Income (Unaudited)
(Dollars in Millions)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
1998 1997 1998 1997
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Sales $ 198.2 $ 224.9 $ 631.3 $ 683.3
-------- -------- -------- --------
Operating Costs:
Cost of sales 160.6 182.0 501.9 565.0
Selling, general and administrative expenses 15.1 12.5 44.7 39.1
Depreciation and amortization 13.3 12.3 39.3 36.5
-------- -------- -------- --------
Total Operating Costs 189.0 206.8 585.9 640.6
-------- -------- -------- --------
Operating Income 9.2 18.1 45.4 42.7
Gain (Loss) on Disposal of Assets -- (9.1) (1.2) (9.1)
Other Income (Expense), Net (0.8) (0.2) (1.1) (1.2)
Interest Income 0.5 0.2 1.3 0.2
Interest Expense (6.7) (6.1) (20.6) (17.8)
-------- -------- -------- --------
Income Before Taxes on Income 2.2 2.9 23.8 14.8
Provision for Taxes on Income (1.2) 2.4 8.0 7.8
-------- -------- -------- --------
Income Before Minority Interest 3.4 0.5 15.8 7.0
Minority Interest 0.6 -- 2.0 --
-------- -------- -------- --------
Net Income $ 2.8 $ 0.5 $ 13.8 $ 7.0
======== ======== ======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
3
<PAGE> 4
ARISTECH CHEMICAL CORPORATION
Consolidated Balance Sheets
(Dollars in Millions)
<TABLE>
<CAPTION>
September 30, December 31,
1998 1997
------------- ------------
(Unaudited)
<S> <C> <C>
ASSETS
Current Assets:
Cash and equivalents $ 2.5 $ 3.9
Receivables (less allowance for doubtful accounts of $.2
at September 30, 1998 and $.6 at December 31, 1997) 13.0 105.8
Receivables-related parties -- 8.4
Subordinated note receivable-related party 12.1 --
Inventories 125.9 123.5
Other current assets 1.1 1.4
---------- ----------
Total Current Assets 154.6 243.0
Property, plant and equipment, net of accumulated depreciation 799.7 662.8
Long-term receivables 8.0 7.9
Excess cost over assets acquired 163.5 167.4
Deferred income taxes 1.4 1.4
Other assets 17.3 15.0
---------- ----------
Total Assets $ 1,144.5 $ 1,097.5
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 66.8 $ 87.5
Accounts payable-related parties 2.6 1.6
Payroll and benefits payable 10.8 9.2
Accrued taxes 6.0 6.1
Deferred income taxes 3.9 3.9
Short-term borrowings 40.2 42.3
Long-term debt due within one year 0.6 0.6
Other current liabilities 17.1 16.9
---------- ----------
Total Current Liabilities 148.0 168.1
Long-term debt-related parties 96.0 187.0
Long-term debt-other 328.7 178.7
Deferred income taxes 158.6 162.9
Other liabilities 37.6 37.0
---------- ----------
Total Liabilities 768.9 733.7
---------- ----------
Minority Interest 5.0 3.0
---------- ----------
Common stock ($.01 par value, 20,000 shares authorized, 14,908
shares issued at September 30, 1998, and December 31, 1997) -- --
Additional paid-in capital 386.3 386.3
Retained deficit (15.7) (25.5)
---------- ----------
Total Stockholders' Equity 370.6 360.8
---------- ----------
Total Liabilities and Stockholders' Equity $ 1,144.5 $ 1,097.5
========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
4
<PAGE> 5
ARISTECH CHEMICAL CORPORATION
Consolidated Statements of Cash Flows (Unaudited)
(Dollars in Millions)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
1998 1997
-------- --------
<S> <C> <C>
Cash Flows From Operating Activities:
Net Income $ 13.8 $ 7.0
-------- --------
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 35.4 32.6
Amortization of excess cost over assets acquired 3.9 3.9
Deferred income taxes (4.3) (0.9)
Discount on sale of receivables 3.6 --
Loss on disposal of assets 1.2 9.1
(Increase) decrease in receivables 1.6 (18.1)
(Increase) in inventories (2.4) (8.2)
Increase (decrease) in accounts payable
and other current liabilities (19.5) 11.0
Minority interest in consolidated subsidiary 2.0 --
Other 0.4 1.5
-------- --------
Net Cash Provided by Operating Activities 35.7 37.9
Cash Flows From Investing Activities:
Capital expenditures (173.4) (58.0)
Long-term receivables 0.1 (6.5)
Other (0.2) --
-------- --------
Net Cash Used In Investing Activities (173.5) (64.5)
Cash Flows From Financing Activities:
Net increase (decrease) in short-term borrowings (2.1) 8.6
Repayment of long-term debt (91.4) (141.0)
Proceeds from issuance of long-term debt 150.0 170.0
Net proceeds from sale of receivables 83.9 --
Dividends paid (4.0) (8.3)
-------- --------
Net Cash Provided by Financing Activities 136.4 29.3
Net Increase (Decrease) in Cash and Equivalents (1.4) 2.7
Cash and Equivalents, Beginning of Year 3.9 1.9
-------- --------
Cash and Equivalents, End of Period $ 2.5 $ 4.6
======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
5
<PAGE> 6
ARISTECH CHEMICAL CORPORATION
Notes to the Consolidated Financial Statements
1. BASIS OF PRESENTATION
The consolidated financial statements include the accounts of Aristech
Chemical Corporation ("Aristech") and its majority owned subsidiaries
(collectively "the Company"). All intercompany accounts and
transactions have been eliminated. Certain amounts previously reported
in financial statement captions have been reclassified to conform with
the 1998 presentation.
The Company adopted Statement of Financial Accounting Standards
("SFAS") No. 130 "Reporting Comprehensive Income" in 1997. Adoption
had no effect on the Company's financial position or results of
operations.
In June 1997, SFAS No. 131 "Disclosures about Segments of an
Enterprise and Related Information" was issued. SFAS No. 131 is
effective for financial statements issued for periods beginning after
December 15, 1997. The Company has not yet determined the effect of
this standard on its financial reporting.
In February 1998, SFAS No. 132 "Employers' Disclosures about Pensions
and Other Postretirement Benefits" was issued. SFAS No. 132 is
effective for annual financial statements issued for periods beginning
after December 15, 1997. The Company has not yet determined the effect
of this standard on its financial reporting.
In June 1998, SFAS No. 133 "Accounting for Derivative Instruments and
Hedging Activities" was issued. SFAS No. 133 is effective for fiscal
quarters of fiscal years beginning after June 15, 1999. The Company has
not yet determined the effect of this standard on its financial
reporting.
In the opinion of management, the unaudited financial information
reflects all adjustments necessary to fairly state the results of
operations and the changes in financial position for such interim
period. Such adjustments are of a normal recurring nature.
The preparation of consolidated financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amount 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.
2. 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 plasticizers. Major polymer
products include polypropylene and acrylic sheet. Approximately 76% of
the total sales are of products that the Company considers to be
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.
6
<PAGE> 7
ARISTECH CHEMICAL CORPORATION
Notes to the Consolidated Financial Statements
3. INVENTORIES
Inventories consist of the following at September 30, 1998, and
December 31, 1997:
<TABLE>
<CAPTION>
September 30, December 31,
1998 1997
------------- ------------
(Unaudited)
<S> <C> <C>
(In millions)
Raw materials $ 34.1 $ 35.9
Finished products 78.7 68.0
Supplies and sundry items 20.4 19.6
Lower of cost or market reserve (7.3) --
-------- --------
$ 125.9 $ 123.5
======== ========
</TABLE>
4. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consists of the following at September
30, 1998, and December 31, 1997:
<TABLE>
<CAPTION>
September 30, December 31,
1998 1997
------------- ------------
(Unaudited)
<S> <C> <C>
(In millions)
Land $ 14.1 $ 13.9
Buildings 64.0 54.8
Machinery and equipment 828.7 806.6
Construction in process 200.8 70.0
---------- --------
Total property, plant and equipment 1,107.6 945.3
Less accumulated depreciation 307.9 282.5
---------- --------
Net property, plant and equipment $ 799.7 $ 662.8
========== ========
</TABLE>
5. DEBT
Debt consists of the following at September 30, 1998, and December 31,
1997:
<TABLE>
<CAPTION>
Interest September 30, December 31,
Maturity Rate 1998 1997
-------- -------- ------------- ------------
(Unaudited)
<S> <C> <C> <C> <C>
(In millions)
Revolving Loan - BTM 2001 Variable $ 150.0 $ --
Term Loan - MIC 2002 Variable 50.0 50.0
Revolving Loan - MIC 2002 Variable 46.0 137.0
6-7/8% Notes 2006 6.875% 149.1 148.9
Note Payable to Avonite Stockholder 2006 Variable 12.4 12.4
Priority Promissory Note 2006 Variable 1.2 1.2
Industrial Revenue Bond 2008 Variable 0.5 0.6
Capital lease obligations 1998-2017 16.1 16.2
------- -------
425.3 366.3
Less amount due within one year 0.6 0.6
------- -------
Total $ 424.7 $ 365.7
======= =======
</TABLE>
7
<PAGE> 8
ARISTECH CHEMICAL CORPORATION
Notes to the Consolidated Financial Statements
6. ACCOUNTS RECEIVABLE FINANCING
The Company participates in an accounts receivable financing program
under which it initially sold an ownership interest in a defined pool
of $112.0 million of trade accounts receivable on a nonrecourse basis
to Aristech Receivables Company LLC ("ARC"), a Delaware limited
liability company in which Aristech holds a 100% ownership interest.
ARC sold an undivided interest in the trade receivables to Delaware
Funding Corporation ("DFC") on a nonrecourse basis, which provided a
revolving financing facility for a maximum of $100.0 million. Initial
proceeds from the sale amounted to $91.5 million and were used
primarily to reduce the amount outstanding on the Revolving Loan - MIC.
Generally, an undivided interest in new accounts receivable are sold
monthly as existing accounts receivable are collected, creating a
revolving credit facility. Accounts receivable sold under the program,
including related party receivables of $5.3 million, are not included
in the accompanying balance sheet at September 30, 1998.
7. COMMITMENTS AND CONTINGENCIES
Contractual commitments for capital expenditures for property, plant
and equipment totaled $194.8 million at September 30, 1998, and $291.3
million at December 31, 1997.
Aristech is obligated to indemnify USX Corporation ("USX") against
certain claims or liabilities which USX may incur relating to USX's
prior ownership and operation of the business and facilities
transferred to Aristech 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 September 30, 1998, and December 31, 1997, the Company had
outstanding irrevocable standby letters of credit in the amount of $4.8
million and $5.6 million, respectively, primarily in connection with
environmental matters.
Aristech 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. Aristech and
Phillips each filed motions for summary judgment which were referred to
a Special Master. The Special Master issued a lengthy recommendation
finding in Aristech's favor, and Phillips filed a motion with the
District Court to reject the Special Master's recommendation. A hearing
on this motion was held in October of 1996. On November 13, 1996, the
District Court granted Aristech's motion for summary judgment and
entered an order to that effect on November 19, 1996. A final judgment
was entered in Aristech's favor on December 23, 1996. Phillips appealed
the final judgment to the Court of Appeals for the Federal Circuit
("CAFC"). On September 22, 1998, the CAFC affirmed the District Court's
judgment. Phillips did not file a petition for a rehearing en banc
before the CAFC within the required ten days. Phillips has ninety days
from the CAFC ruling to file a petition for certiorari to the United
States Supreme Court. Aristech believes that the outcome of this matter
will not have a material adverse effect on the consolidated financial
position, results of operations, or cash flows of the Company.
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.
8
<PAGE> 9
ARISTECH CHEMICAL CORPORATION
Notes to the Consolidated Financial Statements
7. COMMITMENTS AND CONTINGENCIES (CONTINUED)
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.
9
<PAGE> 10
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The discussions in this quarterly report contain both historical information and
forward-looking statements. The forward-looking statements involve risks and
uncertainties that affect the Company's operations, markets, products, services,
prices and factors discussed in the Company's filings with the Securities and
Exchange Commission. These risks and uncertainties include, but are not limited
to, economic, competitive, governmental and technological factors. Accordingly,
there is no assurance that the Company's expectations will be realized.
RESULTS OF OPERATIONS
Three Months Ended September 30, 1998 Compared to Three Months Ended September
30, 1997.
Net sales decreased by $26.7 million or 11.9% from $224.9 million for the three
months ended September 30, 1997 to $198.2 million for the three months ended
September 30, 1998. This reduction in sales, when compared to the same period
for 1997 was caused primarily by decreases in the average selling prices for the
Company's chemical and polymer products of 12.7% and 24.7%, respectively.
However, chemical shipment volumes remained consistent with the same period in
1997 and polymer shipment volumes increased by 4.7% when compared with the same
period in 1997.
Cost of sales decreased by $21.4 million or 11.8% for the three months ended
September 30, 1998 as compared with the same period in 1997 due primarily to
lower average feedstock costs for all of the Company's chemical and polymer
products.
Selling, general and administrative expenses as a percent of sales increased to
7.6% for the three months ended September 30, 1998 as compared with 5.6% for the
same period in 1997, and primarily reflects increased sales and marketing
efforts and costs associated with the Company's year 2000 readiness plan.
Operating income decreased by $8.9 million or 49.2% for the three months ended
September 30, 1998 when compared with the same period in 1997. From the total
decrease of $8.9 million, $2.7 million is attributable to a more rapid reduction
in the Company's average selling prices over the corresponding decrease in
average feedstock costs for both chemical and polymer products. Further, $2.5
million is due to an additional lower of cost or market adjustment recognized
during the three month period ended September 30, 1998, that occurred primarily
as a result of the rapid price decline in the majority of the Company's average
feedstock costs. Other factors that contributed to the overall decrease in
operating income for the three months ended September 30, 1998 were increased
research and development expenses, selling, general and administrative expenses
and depreciation expense.
Loss on disposal of assets decreased by $9.1 million for the three month period
ended September 30, 1998, primarily due to the 1997 write-off of deferred
engineering costs associated with the company's consideration of a cumene/phenol
complex at Garyville, Louisiana.
The Company's interest expense increased by $.6 million or 9.8% from $6.1
million at September 30, 1997 to $6.7 million at September 30, 1998 and is due
to increased borrowings necessary to finance the Company's production capacity
expansions.
10
<PAGE> 11
Provision for income taxes decreased by $3.6 million from $2.4 million for the
three months ended September 30, 1997 to a benefit of $1.2 million for the three
months ended September 30, 1998. The decrease is due to the third quarter 1998
recognition of income tax benefits resulting from the anticipated utilization of
tax credits originating from the Company's ongoing production capacity
expansions and income tax refunds on foreign sales applied for during the
quarter.
Nine Months Ended September 30, 1998 Compared to Nine Months Ended September 30,
1997.
Net sales decreased by $52.0 million or 7.6% from $683.3 million for the nine
months ended September 30, 1997 to $631.3 million for the nine months ended
September 30, 1998. This reduction in sales, when compared to the same period
for 1997 was caused by decreases in the average selling prices for the Company's
chemical and polymer products of 9.8% and 22.9%, respectively. However, despite
the reduction in selling prices, the Company's shipment volumes for chemicals
and polymers increased by 4.7% and 2.1%, respectively for the nine months ended
September 30, 1998 when compared with the same period for 1997.
Cost of sales decreased by $63.1 million or 11.2 % from $565.0 million for the
nine months ended September 30, 1997 to $501.9 million for the same period in
1998. The decrease was caused by reductions in the average feedstock costs of
20.2% and 27.2% for the Company's chemical and polymer products, respectively.
Selling, general and administrative expenses as a percent of sales increased to
7.1% for the nine months ended September 30, 1998 as compared with 5.7% for the
same period in 1997, and primarily reflects increased sales and marketing
efforts and other costs associated with the Company's year 2000 readiness plan.
Operating income for the nine months ended September 30, 1998 increased by $2.7
million when compared with the same period for 1997. This overall increase
occurred primarily due to certain increased product margins that occurred during
the first quarter of 1998 partially offset by the increased depreciation and
selling, general and administrative expenses. Also offsetting an overall
increase in the Company's operating income for the nine months ended September
30, 1998 was an aggregate lower of cost or market adjustment of $7.3 million
recognized in cost of sales during the second and third quarters of 1998, due
primarily as a result of the rapid price decline in the majority of the
Company's average feedstock costs.
Interest expense increased by $2.8 million or 15.7% to $20.6 million for the
nine months ended September 30, 1998 as compared to $17.8 million for the nine
months ended September 30, 1997 and was due primarily to increased borrowings
necessary to finance the Company's production capacity expansions.
The effective tax rates on income were 33.6% and 52.7% for the nine months ended
September 30, 1998 and 1997, respectively. The 19.1% decrease in the effective
rate was caused primarily by the recognition of income tax benefits resulting
from the anticipated utilization of tax credits originating from the Company's
ongoing production capacity expansions, income tax refunds on foreign sales
applied for during the third quarter of 1998 and lower pretax income during
1997.
11
<PAGE> 12
FINANCIAL CONDITION
Liquidity and Capital Resources
During the nine month period ended September 30, 1998, the Company's working
capital balance decreased by $68.3 million from its December 31, 1997 balance of
$74.9 million. The decrease in working capital is due primarily to the $89.1
million reduction in trade receivables from the second quarter 1998 sale of
trade receivables used to finance a portion of the Company's capacity expansion
program, offset by a $20.1 million reduction in current liabilities. Despite a
$6.8 million increase in the Company's net income for the nine months ended
September 30, 1998, net cash provided by operations decreased by $2.2 million
when compared with the same period in 1997. This decrease occurred primarily as
a result of the change in the composition of items comprising the Company's
working capital balance.
The Company funds its working capital requirements on a short-term basis
primarily through borrowings on a $50.0 million discretionary line of credit
with a commercial bank. At September 30, 1998, borrowings of $40.2 million were
drawn under this line of credit.
During the third quarter of 1998, the Company entered into a Revolving Credit
Agreement with the Bank of Tokyo-Mitsubishi Trust Company ("BTM") to provide a
revolving credit facility in the maximum amount of $150.0 million. The entire
amount was drawn with the proceeds used to reduce the amount outstanding under
the revolving loan from Mitsubishi International Corporation. The Revolving
Credit Agreement with BTM expires on March 31, 2001 and is guaranteed by
Mitsubishi Corporation.
The Company anticipates that the outstanding capital commitments and future
working capital requirements will be funded by cash flows from operations and
additional borrowings on the Company's revolving loan from Mitsubishi
International Corporation.
Capital Expenditures
The Company continues to invest in plant capacity expansion as evidenced by the
increase in capital expenditures of $115.4 million for the nine months ended
September 30, 1998 when compared with the same period for 1997. For the nine
months ended September 30, 1998, the capital expenditures of $173.4 million have
been funded by cash flows from operations, net additional borrowings of $58.6
million on its two revolving credit agreements and $83.9 million obtained from
the second quarter 1998 sale of trade receivables.
As part of its ongoing capacity expansion plan, the Company has outstanding
commitments for capital expenditures through the fourth quarter of 1999 totaling
$194.8 million at September 30, 1998.
During the third quarter of 1998, the Company executed two operating lease
agreements, each extending for a period of twenty years that will provide for a
total of 932 new railcars to be placed in service at various intervals through
December 1999. The new railcars will be used to replace existing cars and
support future increased production capacities.
12
<PAGE> 13
Year 2000 Readiness Disclosure
The Company's Year 2000 ("Y2K") project team is working on making the Company's
systems ready for the next millennium. The team is assessing all systems for Y2K
impacts and costs of upgrading or replacing systems that are not Y2K ready, and
testing and monitoring systems for Y2K readiness. The assessment phase is near
completion. Current efforts are focused on upgrading or replacing systems. The
Company believes the project will be completed by October 1999.
Y2K project costs are expected to range from $8.0 million to $10.0 million. The
Company does not expect the Y2K project costs to have a material effect on its
financial position or results of operations.
The Company is contacting major suppliers to seek assurance of their intent to
be Y2K ready, and is responding to customer requests for information on the
Company's Y2K project. The Company cannot control whether third parties,
including governments, upon which the Company relies will be fully Y2K compliant
by 2000.
The failure to correct a material Y2K problem could result in an interruption
in, or a failure of, certain normal business activities or operations. The
Company is unable to determine at this time whether a Y2K failure will have a
material impact on the Company's results of operations, liquidity or financial
conditions.
The costs of the Y2K project and the time by which the Company expects to
complete it are based on management's best estimates, which were derived using
numerous assumptions of future events including the availability of certain
resources, third party modifications, and other factors. There is no guarantee
that these estimates will be achieved and actual results could differ from these
plans.
There is general uncertainty inherent in the Y2K problem. The Y2K project is
intended to reduce, to the maximum extent feasible, that uncertainty for the
Company.
Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
At September 30, 1998, the Company was not a party to any material derivative
financial instruments or any other market risk sensitive instruments, other than
the trade accounts receivable and trade accounts payable that by their nature
mature within one year, inventory that is not subject to commodity price risk,
and the long-term debt which is discussed in Note 5 to the financial statements.
The Company's exposure to market risk is minimal with regards to its trade
accounts receivable, trade accounts payable, inventory and long-term debt.
13
<PAGE> 14
PART II - OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS
See Note 7 to the Financial Statements.
Item 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
None.
Item 3. DEFAULTS UPON SENIOR SECURITIES
None.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
Item 5. OTHER INFORMATION
On September 28, 1998, H. Patrick Jack succeeded Charles W. Hamilton as
President and Chief Operating Officer of Aristech Chemical Corporation. Mr.
Jack possesses over 25 years of chemical industry experience in sales,
marketing, research and development, manufacturing and general management.
He was previously the Senior Vice President - Chemical Division for Fina
Oil & Chemical Company, a $4.5 billion producer of petrochemicals and
plastics headquartered in Dallas, Texas. Mr. Hamilton, who has elected
retirement after his 37 years with USS Chemicals and subsequently,
Aristech, will remain with Aristech as a consultant through the end of the
year.
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
No reports on Form 8-K were filed during the quarter ended September 30,
1998.
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.
Aristech Chemical Corporation
By /s/ MICHAEL J. PRENDERGAST
---------------------------
Michael J. Prendergast
Senior Vice President and
Chief Financial Officer
October 30, 1998
14
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> SEP-30-1998
<CASH> 2,471
<SECURITIES> 0
<RECEIVABLES> 25,305
<ALLOWANCES> 239
<INVENTORY> 125,880
<CURRENT-ASSETS> 154,554
<PP&E> 1,107,583
<DEPRECIATION> 307,845
<TOTAL-ASSETS> 1,144,521
<CURRENT-LIABILITIES> 148,133
<BONDS> 424,643
0
0
<COMMON> 0
<OTHER-SE> 370,620
<TOTAL-LIABILITY-AND-EQUITY> 1,144,521
<SALES> 631,320
<TOTAL-REVENUES> 631,320
<CGS> 501,949
<TOTAL-COSTS> 585,970
<OTHER-EXPENSES> 2,983
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 20,578
<INCOME-PRETAX> 21,789
<INCOME-TAX> 7,972
<INCOME-CONTINUING> 13,817
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 13,817
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
