<PAGE> 1
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
[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, 1994
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For The Transition Period From _____ To _____
Commission File Number 33-11634
TRANS-RESOURCES, INC.
(Exact name of registrant as specified in its charter)
Delaware 36-2729497
- --------------------------------- ----------------------------
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
9 West 57th Street, New York, New York 10019
- --------------------------------------- -----------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (212) 888-3044
--------------
--------------
Indicate by check mark whether 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 registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
YES X NO
--- ---
At November 10, 1994, there were outstanding 3,000 shares of common stock, par
value of $.01 per share, all which were owned by TPR Investment Associates,
Inc., a privately-held Delaware corporation.
<PAGE> 2
Form 10-Q
TRANS-RESOURCES, INC.
Form 10-Q Index
September 30, 1994
<TABLE>
<CAPTION>
Page
PART I Number
- ------ ------
<S> <C> <C>
Item 1. - Financial Statements (Unaudited):
Consolidated Statements of Operations . . . . . . . . . . . . . . . . . . . 3
Consolidated Balance Sheets . . . . . . . . . . . . . . . . . . . . . . . . 4
Consolidated Statement of Common Stockholder's Equity . . . . . . . . . . . 5
Consolidated Statements of Cash Flows . . . . . . . . . . . . . . . . . . . 6
Notes to Unaudited Consolidated Financial Statements . . . . . . . . . . . 7
Item 2. - Management's Discussion and Analysis of Financial Condition and
Results of Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
PART II
- -------
Item 1. - Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Item 6. - Exhibits and Reports on Form 8-K . . . . . . . . . . . . . . . . . . . . . 16
Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
</TABLE>
2
<PAGE> 3
Form 10-Q
PART I. FINANCIAL INFORMATION
ITEM 1. - FINANCIAL STATEMENTS
TRANS-RESOURCES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three Month Period Nine Month Period
Ended September 30, Ended September 30,
------------------- -------------------
1994 1993 1994 1993
-------- -------- -------- --------
(000's)
<S> <C> <C> <C> <C>
REVENUES . . . . . . . . . . . . . . . . . . . . . . $76,324 $65,654 $251,319 $250,260
COST AND EXPENSES:
Cost of goods sold . . . . . . . . . . . . . . . 60,153 51,810 199,092 196,042
General and administrative . . . . . . . . . . . 9,435 9,394 28,967 28,873
------- ------- -------- --------
OPERATING INCOME . . . . . . . . . . . . . . . . . . 6,736 4,450 23,260 25,345
Interest expense . . . . . . . . . . . . . . . . (7,266) (7,030) (21,634) (21,133)
Interest and other income - net . . . . . . . . (783) 1,432 14,468 4,786
------- ------- -------- --------
INCOME (LOSS) BEFORE INCOME TAXES
AND EXTRAORDINARY ITEM . . . . . . . . . . . . . (1,313) (1,148) 16,094 8,998
------- ------- -------- --------
INCOME TAX PROVISION:
Current . . . . . . . . . . . . . . . . . . . . 1,216 1,699 6,162 7,007
Deferred . . . . . . . . . . . . . . . . . . . . (212) (259) 6,583 490
------- ------- -------- --------
1,004 1,440 12,745 7,497
------- ------- -------- --------
INCOME (LOSS) BEFORE
EXTRAORDINARY ITEM . . . . . . . . . . . . . . . (2,317) (2,588) 3,349 1,501
EXTRAORDINARY ITEM - Loss on repurchase of
subordinated debt (no income tax benefit) . . . - - - (8,830)
------- ------- -------- --------
NET INCOME (LOSS) . . . . . . . . . . . . . . . . . . $(2,317) $(2,588) $ 3,349 $ (7,329)
======= ======= ======== ========
</TABLE>
See notes to unaudited consolidated financial statements.
3
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Form 10-Q
TRANS-RESOURCES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
September 30, December 31,
1994 1993
---------- -------------
(Unaudited)
(000's)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents . . . . . . . . . . . . . . . . . $ 30,677 $ 25,742
Accounts receivable . . . . . . . . . . . . . . . . . . . . 50,785 55,681
Inventories:
Finished products . . . . . . . . . . . . . . . . . . . 35,222 50,327
Raw materials . . . . . . . . . . . . . . . . . . . . . 14,074 10,602
Other current assets . . . . . . . . . . . . . . . . . . . . 66,559 56,090
Prepaid expenses . . . . . . . . . . . . . . . . . . . . . . 17,591 17,485
-------- --------
Total Current Assets . . . . . . . . . . . . . . . . . . 214,908 215,927
PROPERTY, PLANT AND EQUIPMENT - NET . . . . . . . . . . . . . . . 180,906 131,001
OTHER ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . 120,857 18,937
-------- --------
Total . . . . . . . . . . . . . . . . . . . . . . . . . $516,671 $365,865
======== ========
LIABILITIES AND STOCKHOLDER'S EQUITY
CURRENT LIABILITIES:
Current maturities of long-term debt . . . . . . . . . . . . $ 23,249 $ 24,801
Short-term debt . . . . . . . . . . . . . . . . . . . . . . 21,467 22,481
Accounts payable . . . . . . . . . . . . . . . . . . . . . . 46,794 34,924
Accrued expenses and other current liabilities . . . . . . . 34,876 30,027
-------- --------
Total Current Liabilities . . . . . . . . . . . . . . . 126,386 112,233
-------- --------
LONG-TERM DEBT:
Senior indebtedness, notes payable and other obligations . . 193,648 61,328
Senior subordinated indebtedness - net . . . . . . . . . . . 140,319 140,133
Junior subordinated debentures - net . . . . . . . . . . . . 15,839 15,495
-------- --------
Long-Term Debt - net . . . . . . . . . . . . . . . . . . 349,806 216,956
-------- --------
OTHER LIABILITIES . . . . . . . . . . . . . . . . . . . . . . . . 26,346 20,882
-------- --------
COMMON STOCKHOLDER'S EQUITY:
Common stock, $.01 par value, 3,000 shares authorized,
issued and outstanding . . . . . . . . . . . . . . . . . - -
Additional paid-in capital . . . . . . . . . . . . . . . . . 505 500
Retained earnings . . . . . . . . . . . . . . . . . . . . . 14,231 15,348
Cumulative translation adjustment . . . . . . . . . . . . . (385) (54)
Unrealized gains (losses) on securities . . . . . . . . . . (218) -
-------- --------
Total Common Stockholder's Equity . . . . . . . . . . . 14,133 15,794
-------- --------
Total . . . . . . . . . . . . . . . . . . . . . . . . . $516,671 $365,865
======== ========
</TABLE>
See notes to unaudited consolidated financial statements.
4
<PAGE> 5
Form 10-Q
TRANS-RESOURCES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF COMMON STOCKHOLDER'S EQUITY
Nine Month Period Ended September 30, 1994
(Unaudited)
<TABLE>
<CAPTION>
ADDITIONAL CUMULATIVE UNREALIZED
COMMON PAID-IN RETAINED TRANSLATION GAINS(LOSSES)
STOCK CAPITAL EARNINGS ADJUSTMENT ON SECURITIES TOTAL
----------- --------- -------- ----------- -------------- -------
(000'S)
<S> <C> <C> <C> <C> <C> <C>
BALANCE, January 1, 1994 . . . . . . . . $ - $500 $15,348 $ (54) $ - $15,794
Activity for the nine month
period ended September 30, 1994:
Net income . . . . . . . . . . . . . . . 3,349 3,349
Dividends paid . . . . . . . . . . . . . (4,466) (4,466)
Net change during period . . . . . . . . 5 (331) (218) (544)
------- ---- ------- ----- ------- -------
BALANCE, September 30, 1994 . . . . . . . $ - $505 $14,231 $(385) $ (218) $14,133
======= ==== ======= ===== ======= =======
</TABLE>
See notes to unaudited consolidated financial statements.
5
<PAGE> 6
Form 10-Q
TRANS-RESOURCES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Nine Month Period
Ended September 30,
------------------------
1994 1993
---- ----
(000's)
<S> <C> <C>
OPERATING ACTIVITIES AND WORKING CAPITAL
MANAGEMENT:
Operations:
Net income (loss) . . . . . . . . . . . . . . . . . . . . . . $ 3,349 $(7,329)
Items not requiring (providing) cash:
Depreciation and amortization . . . . . . . . . . . . . . 16,391 18,825
Increase in other liabilities . . . . . . . . . . . . . . 374 813
Deferred taxes and other - net . . . . . . . . . . . . . . 5,074 (888)
------- -------
Total . . . . . . . . . . . . . . . . . . . . . . . . . . 25,188 11,421
Working capital management:
Accounts receivable and other current assets . . . . . . . . . (19,125) 559
Inventories . . . . . . . . . . . . . . . . . . . . . . . . . 11,633 (8,295)
Prepaid expenses . . . . . . . . . . . . . . . . . . . . . . . (106) 265
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . 11,870 7,600
Accrued expenses and other current liabilities . . . . . . . . 4,849 (5,698)
------- -------
Cash provided by operations and working
capital management . . . . . . . . . . . . . . . . . . . . 34,309 5,852
------- -------
INVESTMENT ACTIVITIES:
Additions to property, plant and equipment . . . . . . . . . . . . (68,675) (17,608)
Purchases of marketable securities and other short-term investments
(120,935) (34,057)
Sales of marketable securities and other short-term investments . 29,625 13,993
Other - net . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,572 (757)
------- -------
Cash used by investment activities . . . . . . . . . . . . (157,413) (38,429)
------- -------
FINANCING ACTIVITIES:
Decrease in short-term debt . . . . . . . . . . . . . . . . . . . (1,014) (755)
Increase in long-term debt . . . . . . . . . . . . . . . . . . . . 165,716 111,949
Repurchases, payments and current maturities of long-term debt . . (36,438) (101,456)
Distributions to stockholder . . . . . . . . . . . . . . . . . . . (225) (7,158)
------- -------
Cash provided by financing activities . . . . . . . . . . 128,039 2,580
------- -------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS . . . . . . . . . . . 4,935 (29,997)
CASH AND CASH EQUIVALENTS:
Beginning of period . . . . . . . . . . . . . . . . . . . . . . . 25,742 54,745
------- -------
End of period . . . . . . . . . . . . . . . . . . . . . . . . . . $30,677 $24,748
======= =======
</TABLE>
See notes to unaudited consolidated financial statements.
6
<PAGE> 7
Form 10-Q
TRANS-RESOURCES, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
Basis of Presentation and Other Matters
The consolidated financial statements of Trans-Resources, Inc. (the
"Company") include the Company and its direct and indirect subsidiaries, after
elimination of intercompany accounts and transactions. The Company's principal
subsidiaries are Cedar Chemical Corporation ("Cedar"), and Cedar's two
wholly-owned subsidiaries, New Mexico Potash Corporation ("NMPC") and Vicksburg
Chemical Company; Eddy Potash, Inc. ("Eddy"); and Haifa Chemicals Ltd., an
Israeli corporation ("HCL"), and HCL's wholly-owned subsidiary, Haifa Chemicals
South Ltd. ("HCSL"). The Company is a wholly-owned subsidiary of TPR
Investment Associates, Inc., a privately-held corporation. Certain prior
period amounts have been reclassified to conform to the manner of presentation
in the current period.
On February 7, 1994, the smaller of HCL's two potassium nitrate
production units was damaged by a fire, causing a temporary reduction of the
Company's potassium nitrate production capacity. The Company currently expects
to complete the replacement of the damaged unit by early 1995. The impact of
the loss of the facility, including the effect of business interruption, will
be substantially covered by insurance. The insurance proceeds relating to the
property damage will be for replacement value, which at a minimum will be $20
million greater than the recorded carrying value of the damaged assets.
Accordingly, during the nine month period ended September 30, 1994, HCL has
recorded a gain of $20 million less a provision for certain estimated costs
related to the fire of approximately $1.8 million. Such pre-tax gain of
approximately $18.2 million is included in the caption "interest and other
income-net" in the accompanying Consolidated Statements of Operations.
Additional insurance proceeds relating to the property damage, if any, will be
reflected in income as the amounts are determined.
7
<PAGE> 8
HCL purchases an important raw material, phosphate rock, solely from
Negev Phosphates, Ltd. pursuant to a supply agreement. During 1994 HCL
extended the expiration date of such supply agreement to June 30, 1995.
See "Management's Discussion and Analysis of Financial Condition and
Results of Operations - Capital Resources and Liquidity" for certain
information regarding a loan agreement with a bank entered into by the Company
on June 30, 1994.
Effective January 1, 1994, the Company adopted Statement of Financial
Accounting Standards No. 115, "Accounting for Certain Investments in Debt and
Equity Securities" ("SFAS 115"). This statement requires the Company to
classify its equity and fixed maturity securities as available-for-sale and
reported at fair value, with unrealized gains and losses included as a separate
component of stockholder's equity. The adoption of SFAS 115 did not have a
significant effect on the Company's consolidated financial position or results
of operations.
Effective July 1, 1994, HCL revised the estimate of depreciable lives
of its property, plant and equipment to more closely approximate the economic
lives of those assets. The effect of this change in estimate was to decrease
depreciation expense in 1994 by approximately $600,000.
In the opinion of management, the unaudited consolidated financial
statements for the nine month periods ended September 30, 1994 and 1993,
respectively, include all adjustments, which comprise only normal recurring
accruals, necessary for a fair presentation of the results for such periods.
The results of operations for the nine month period ended September 30, 1994
are not necessarily indicative of results that may be expected for any other
interim period or the full fiscal year. It is suggested that these unaudited
consolidated financial statements be read in conjunction with the financial
statements and notes thereto included in the Company's Annual Report on Form
10-K for the fiscal year ended December 31, 1993 (the "Form 10-K") which has
been filed with the Securities and Exchange Commission.
8
<PAGE> 9
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following table sets forth, as a percentage of revenues and the
percentage dollar change of those items as compared to the prior period,
certain items appearing in the unaudited consolidated financial statements of
the Company.
<TABLE>
<CAPTION>
Percentage Percentage
of Revenues Period of Revenues Period
----------- to ----------- to
Three Month Period Nine Month Period
Period Ended Changes Period Ended Changes
September 30, ------- September 30, -------
------------- Increase ------------- Increase
1994 1993 (Decrease) 1994 1993 (Decrease)
---- ---- ---------- ---- ---- ----------
<S> <C> <C> <C> <C> <C> <C>
Revenues . . . . . . . . . . . . . . . . 100.0% 100.0% 16.3% 100.0% 100.0% .4%
Costs and expenses:
Cost of goods sold . . . . . . . . . 78.8 78.9 16.1 79.2 78.4 1.6
General and administrative expense . 12.4 14.3 .4 11.5 11.5 .3
---- ---- ---- ----
Operating income . . . . . . . . . . . . 8.8 6.8 51.4 9.3 10.1 (8.2)
Interest expense . . . . . . . . . . (9.5) (10.7) 3.4 (8.6) (8.4) 2.4
Interest and other income - net . . (1.0) 2.2 (154.7) 5.7 1.9 202.3
---- ---- ---- ----
Income (loss) before income taxes and
extraordinary item . . . . . . . . . (1.7) (1.7) 14.4 6.4 3.6 78.9
Income tax provision . . . . . . . . . . 1.3 2.2 (30.3) 5.1 3.0 70.0
---- ---- ---- ----
Income (loss) before
extraordinary item . . . . . . . . . (3.0) (3.9) (10.5) 1.3 .6 123.1
Extraordinary item - net . . . . . . . . - - - - (3.5) 100.0
---- ---- ---- ----
Net income (loss) . . . . . . . . . . . . (3.0)% (3.9)% (10.5)% 1.3% (2.9)% 145.7%
===== ===== ====== ==== ===== =====
</TABLE>
9
<PAGE> 10
Form 10-Q
RESULTS OF OPERATIONS
Three month period ended September 30, 1994 compared with the three month
period ended September 30, 1993:
Revenues increased by 16.3% to $76,324,000 in 1994 from $65,654,000 in
1993, an increase of $10,670,000, resulting from (i) increased sales of
specialty plant nutrients and industrial chemicals ($11,000,000), primarily
relating to potassium nitrate, which was partially offset by the unfavorable
effect ($800,000) of certain weakened European currencies in relation to the
U.S. dollar (including those covered by forward exchange contracts) in the 1994
period as compared to the corresponding prior period, and (ii) lower potash
sales ($300,000).
Cost of goods sold as a percentage of revenues did not change
significantly during the periods (78.8% in 1994 compared with 78.9% in 1993),
primarily due to certain cost reductions, which offset the adverse effects of
(i) the above-mentioned weakened European currencies, (ii) the cancellation of
the program of exchange rate insurance by the Israeli Government in August 1993
(which contributed $300,000 in revenues during the 1993 period) and (iii) lower
margins realized in the potash business. Gross profit was $16,171,000 in 1994
compared with $13,844,000 in 1993, an increase of $2,327,000, with such increase
primarily being the net result of the increase in revenues as well as the net
effect of the items described in the previous sentence. General and
administrative expense increased slightly to $9,435,000 in 1994 from $9,394,000
in 1993 (12.4% of revenues in 1994 compared with 14.3% of revenues in 1993).
As a result of the matters described above, the Company's operating
income increased by $2,286,000 to $6,736,000 in 1994 as compared with $4,450,000
in 1993.
Interest expense increased by $236,000 ($7,266,000 in 1994 compared with
$7,030,000 in 1993) primarily as a result of the June 30, 1994 loan agreement
(the "Loan Agreement") described under "Capital Resources and Liquidity" below.
Interest and other income - net decreased in 1994 by $2,215,000, principally as
the result of the 1994 period including a provision for loss on certain foreign
currency transactions and the settlement of an outstanding claim.
10
<PAGE> 11
As a result of the above factors, loss before income taxes and
extraordinary item increased by $165,000 in 1994. The Company's provisions for
income taxes are impacted by the mix between domestic and foreign earnings and
vary from the U.S. Federal statutory rate principally due to the impact of
foreign operations and certain losses for which there is no current tax
benefit.
Nine month period ended September 30, 1994 compared with the nine month
period ended September 30, 1993:
Revenues increased by .4% to $251,319,000 in 1994 from $250,260,000 in
1993, an increase of $1,059,000, resulting from (i) increased sales of specialty
plant nutrients and industrial chemicals ($3,500,000), primarily relating to
potassium nitrate, which was partially offset by the unfavorable effect
($7,000,000) of certain weakened European currencies in relation to the U.S.
dollar (including those covered by forward exchange contracts) in the 1994
period as compared to the corresponding prior period, and (ii) decreased sales
of organic chemicals ($1,800,000) and potash ($600,000).
Cost of goods sold as a percentage of revenues increased to 79.2% in 1994
compared with 78.4% in 1993, primarily due to the adverse effects of (i) the
above-mentioned weakened European currencies, (ii) cancellation of the program
of exchange rate insurance by the Israeli Government in August 1993 (which
contributed $1,600,000 in revenues in the 1993 period) and (iii) lower margins
realized in the organic chemicals and potash business, with these items being
partially offset by certain cost reductions. Gross profit was $52,227,000 in
1994 compared with $54,218,000 in 1993, a decrease of $1,991,000, with such
decrease primarily being the net result of the increase in revenues as well as
the net effect of the items described in the previous sentence. General and
administrative expense increased slightly to $28,967,000 in 1994 from
$28,873,000 in 1993 (11.5% of revenues in both 1994 and 1993).
As a result of the matters described above, the Company's operating income
decreased by $2,085,000 to $23,260,000 in 1994 as compared with $25,345,000 in
1993.
Interest expense increased by $501,000 ($21,634,000 in 1994 compared with
$21,133,000 in 1993), primarily as a result of the June 30, 1994 Loan Agreement
described below. Interest and other income - net increased in 1994 by
$9,682,000, principally as the result of a gain relating to the February, 1994
fire at HCL
11
<PAGE> 12
(see Notes to Unaudited Consolidated Financial Statements), partially offset by
the 1994 period including (i) lower investment income and security gains, (ii)
a provision for loss on certain foreign currency transactions and (iii) the
settlement of an outstanding claim.
As a result of the above factors, income before income taxes and
extraordinary item increased by $7,096,000 in 1994. The Company's provisions
for income taxes are impacted by the mix between domestic and foreign earnings
and vary from the U.S. Federal statutory rate principally due to the impact of
foreign operations and certain losses for which there is no current tax
benefit.
In the 1993 period the Company acquired approximately $65,500,000 principal
amount of its 13 1/2% Senior Subordinated Debentures and $21,500,000 principal
amount of its Senior Subordinated Reset Notes, which resulted in a loss of
$8,830,000. Such loss (which has no current tax benefit) is classified as an
extraordinary item in the accompanying Consolidated Statements of Operations.
No such debt was acquired in the 1994 period.
CAPITAL RESOURCES AND LIQUIDITY
The Company's consolidated working capital at September 30, 1994 and
December 31, 1993 was $88,522,000 and $103,694,000, respectively.
Operations for the nine month periods ended September 30, 1994 and 1993,
after adding back non-cash items, provided cash of approximately $25,200,000
and $11,400,000, respectively. During such periods other changes in working
capital provided (used) cash of approximately $9,100,000 and ($5,500,000),
respectively, resulting in net cash being provided from operating activities
and working capital management of approximately $34,300,000 and $5,900,000,
respectively.
Investment activities during the nine month periods ended September 30,
1994 and 1993 used cash of approximately $157,400,000 and $38,400,000,
respectively, including additions to property in the 1994 and 1993 periods of
approximately $68,700,000 and $17,600,000, respectively, and purchases of
marketable securities and short-term investments of approximately $120,900,000
and $34,100,000, respectively. The 1994 property additions principally relate
to (i) the construction of the K-3 plant, (ii) the replacement of the
production unit damaged in the fire in February, 1994 and (iii) the
construction of a new potassium carbonate manufacturing
12
<PAGE> 13
facility (see "Capital Expenditures" below). Purchases of marketable
securities and short-term investments in 1994 include $100,000,000 of
certificates of deposit ("CD's") relating to the Loan Agreement described
below, which CD's are pledged to a bank.
Financing activities during the nine month periods ended September 30, 1994
and 1993 provided cash of approximately $128,000,000 and $2,600,000,
respectively. During the 1994 period the Company entered into the Loan
Agreement described below which resulted in new bank loans aggregating
$140,000,000 and the repayment of bank loans of approximately $19,000,000.
During the 1993 period the Company issued $115,000,000 principal amount of 11
7/8% Senior Subordinated Notes, due 2002, and acquired approximately
$65,500,000 principal amount of its 13 1/2% Senior Subordinated Debentures and
$21,500,000 principal amount of its Senior Subordinated Reset Notes.
On June 30, 1994, the Company entered into the Loan Agreement with a bank
and borrowed $40,000,000 (repayable quarterly over a four year period) and
utilized the proceeds to prepay approximately $19,000,000 then owed to such
bank. Pursuant to the Loan Agreement, the Company also borrowed an additional
$100,000,000, repayable in January, 1996. Under certain specified
circumstances prior to such date, the Company can convert such loan into a term
loan maturing five years from the date of conversion. The Company pledged CD's
with a principal amount of $100,000,000 as collateral to such loan (such CD's
are included in "other assets" in the accompanying Consolidated Balance
Sheets). In addition, the Company has pledged 79% of the capital stock of HCL
to secure its obligations under the Loan Agreement.
Approximately 90% of HCL's sales are made outside of Israel in various
currencies, of which approximately 35% are in U.S. dollars, with the remainder
principally in Western European currencies. In order to mitigate the impact of
currency fluctuations against the U.S. dollar, the Company has a policy of
hedging a significant portion of its foreign sales denominated in Western
European currencies by entering into forward exchange contracts. A portion of
these contracts qualify as hedges pursuant to Statement of Financial Accounting
Standards No. 52 and accordingly, unrealized gains and losses arising therefrom
are deferred. Unrealized gains and losses for the remainder of the forward
exchange contracts are recognized in income currently.
13
<PAGE> 14
The principal purpose of the Company's hedging program is to mitigate the
impact of fluctuations against the U.S. dollar, as well as to protect against
significant adverse changes in exchange rates. Accordingly, the gains and
losses recognized relating to the hedging program in any particular period and
the impact on revenues had the Company not had such a program are not
necessarily indicative of its effectiveness.
CAPITAL EXPENDITURES
During the first nine months of 1994 (excluding the HCSL facility (the "K-3
Plant") described below and the reconstruction of the production unit damaged
by fire in February 1994) the Company invested approximately $23,000,000 in
capital expenditures. The Company currently anticipates that capital
expenditures for the remainder of the fiscal year (excluding the K-3 Plant and
the reconstruction of the damaged production unit) will aggregate approximately
$14,000,000. The Company's capital expenditures will be used primarily for
increasing certain production capacity and efficiency and for product
diversification, including the construction of a new potassium carbonate
manufacturing facility scheduled for completion in the fourth quarter of 1994.
During 1993 the Company commenced construction of the K-3 Plant, a new facility
in Israel, with initial capacity to produce approximately 100,000 metric tons
of potassium nitrate annually. The Company will complete the construction of
the K-3 Plant in the fourth quarter of 1994. The K-3 plant and related
expenditures is estimated to cost approximately $92,000,000, with approximately
$34,000,000 of such cost being provided by grants and other entitlements from
the Israeli Government. Capital expenditures in connection with the K-3 Plant
(net of Israeli Government grants) amounted to approximately $16,000,000 in
1993. During the nine month period ended September 30, 1994, the Company
invested approximately $34,000,000 in connection with the K-3 plant (net of
Israeli Government grants) and approximately $11,000,000 in connection with the
replacement of the damaged production unit. The Company expects to be able to
finance its capital expenditures from internally generated funds, borrowings
from traditional lending sources and, where applicable, Israeli Government
grants and entitlements and, with respect to the damaged production unit,
insurance proceeds.
14
<PAGE> 15
Form 10-Q
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
As previously disclosed (most recently in the Form 10-K and in the
Company's June 30, 1994 Form 10-Q), beginning in April 1993 a number of class
of action lawsuits were filed in several United States District Courts against
the major Canadian and United States potash producers, including Eddy and NMPC.
The purported class actions were on behalf of all purchasers of potash from any
of the defendants or their respective affiliates, at any time during the period
of April 1987 to the present, and alleged that the defendants conspired to fix,
raise, maintain and stabilize the prices of potash in the United States
purchased by the plaintiffs and the other members of the class in violation of
the United States antitrust laws. The complaints sought unspecified treble
damages, attorneys fees and injunctive relief against the defendants. In
addition, on or about May 27, 1993 a purported class action seeking similar
relief was filed against the major potash producers, including Eddy and NMPC,
in the Superior Court of the State of California for the County of Los Angeles
on behalf of Angela Coleman and a class consisting of all California indirect
purchasers of potash, alleging violation of specified California statutes.
Pursuant to an order of the Judicial Panel for Multidistrict Litigation, all of
the Federal District Court actions have been consolidated for pretrial purposes
in the United States District Court for Minnesota, where the initial such
action and several others had been commenced. On March 14, 1994, this Court
scheduled the trial to begin on or about January 1, 1996. Several additional
and/or amended complaints were filed in the Minnesota Federal District Courts
making substantially the same allegations as the earlier complaints. These
complaints have been superseded by or deemed included in the Third Amended and
Consolidated Class Action Complaint, to which NMPC and Eddy served and filed
answers denying all the material allegations thereof on or about July 22, 1994.
On or about March 29, 1994, an action captioned Neve Bros. et al. v. Potash
Corporation of Saskatchewan, et al., was commenced in the Superior Court of the
State of California for the City and County of San Francisco. Eddy, NMPC,
Cedar, Nine West Corporation (a subsidiary of the Company which is the direct
15
<PAGE> 16
parent corporation of Cedar) and the Company are among the named defendants.
This action, brought under California statutes on behalf of a class of indirect
purchasers of potash, makes substantially the same allegations as made in the
Coleman action and seeks substantially the same legal and equitable remedies
and relief. Motions have been filed for Eddy to be dismissed from both the
Coleman and Neve Bros. actions, and for Nine West Corporation and the Company
to be dismissed from the Neve Bros. action, in each case for lack of personal
jurisdiction. Cedar and NMPC have served and filed answers in the Neve Bros.
action, and NMPC has served and filed an answer in the Coleman action, in each
case denying all material allegations of the respective complaint. It is
expected that the Coleman action will be consolidated with the Neve Bros.
action in the Superior Court of the State of California for the City and County
of San Francisco.
The Company has been advised that another purported class action on behalf
of indirect purchasers of potash, David B. Gaebler v. New Mexico Potash
Corporation, et al., has been commenced against Eddy and NMPC in the Circuit
Court of Cook County, Illinois. Eddy and NMPC have not, however, been served
with summonses.
Management has no knowledge of any conspiracy of the type alleged in these
complaints.
On or about November 26, 1993 Eddy and NMPC (and other major potash
producers) were served with subpoenas issued by the United States District Court
for the Northern District of Ohio to produce documents to a grand jury
authorized by the U.S. Department of Justice Antitrust Division ("DOJ") to
investigate possible violations of the antitrust laws in connection with the
allegations made in the civil actions described above. A salesman employed by
the sales group for Eddy and NMPC testified before the grand jury pursuant to a
subpoena. Eddy and NMPC are cooperating with DOJ in connection with the
subpoenas.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits.
Exhibit 27 - Financial Data Schedule.
(b) Reports on Form 8-K.
No reports on Form 8-K were filed during the quarter for which this report
is filed.
16
<PAGE> 17
Form 10-Q
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.
TRANS-RESOURCES, INC.
-----------------------------
(Registrant)
Date: November 10, 1994
Lester W. Youner
-----------------------------
Vice President, Treasurer and
Chief Financial Officer
17
<PAGE> 18
TRANS-RESOURCES, INC.
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit Description Page No.
- ------- ----------- --------
<S> <C> <C>
27 Financial Data Schedule. 19
</TABLE>
18
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF TRANS-RESOURCES, INC. FOR THE PERIOD ENDED SEPTEMBER 30,
1994, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> SEP-30-1994
<CASH> 30,677
<SECURITIES> 0
<RECEIVABLES> 50,785
<ALLOWANCES> 0
<INVENTORY> 49,296
<CURRENT-ASSETS> 214,908
<PP&E> 286,244
<DEPRECIATION> 105,338
<TOTAL-ASSETS> 516,671
<CURRENT-LIABILITIES> 126,386
<BONDS> 349,806
<COMMON> 0
0
0
<OTHER-SE> 14,133
<TOTAL-LIABILITY-AND-EQUITY> 516,671
<SALES> 251,319
<TOTAL-REVENUES> 251,319
<CGS> 199,092
<TOTAL-COSTS> 199,092
<OTHER-EXPENSES> 28,967
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 21,634
<INCOME-PRETAX> 16,094
<INCOME-TAX> 12,745
<INCOME-CONTINUING> 3,349
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,349
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
