<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, 1996
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 of (I.R.S. Employer Identification No.)
incorporation or organization)
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 12, 1996, 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.
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Form 10-Q
TRANS-RESOURCES, INC.
Form 10-Q Index
September 30, 1996
Page
Number
------
PART I
- -----
Item 1. - Financial Statements (Unaudited):
Consolidated Statements of Operations ......................... 3
Consolidated Balance Sheets ................................... 4
Consolidated Statement of 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 5. - Other Information ............................................. 17
Item 6. - Exhibits and Reports on Form 8-K .............................. 17
Signatures .............................................................. 18
2
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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,
--------------------- -----------------------
(000's)
1996 1995 1996 1995
-------- -------- --------- ---------
<S> <C> <C> <C> <C>
REVENUES ........................... $ 90,910 $ 87,871 $ 331,574 $ 287,602
COSTS AND EXPENSES:
Cost of goods sold .............. 75,914 74,466 272,206 241,439
General and administrative ...... 11,464 10,749 34,549 30,962
-------- -------- --------- ---------
OPERATING INCOME ................... 3,532 2,656 24,819 15,201
Interest expense ................ (7,799) (8,853) (24,847) (25,599)
Interest and other income - net . 24,547 2,188 25,475 6,211
-------- -------- --------- ---------
INCOME (LOSS) BEFORE INCOME TAXES .. 20,280 (4,009) 25,447 (4,187)
-------- -------- --------- ---------
INCOME TAX PROVISION (BENEFIT):
Current ......................... 488 (935) 1,914 1,200
Deferred ........................ 652 (63) 1,786 (125)
-------- -------- --------- ---------
1,140 (998) 3,700 1,075
-------- -------- --------- ---------
INCOME (LOSS) BEFORE EXTRAORDINARY
ITEM ............................ 19,140 (3,011) 21,747 (5,262)
EXTRAORDINARY ITEM ................. -- -- (553) --
-------- -------- --------- ---------
NET INCOME (LOSS) .................. $ 19,140 $ (3,011) $ 21,194 $ (5,262)
======== ======== ========= =========
</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,
1996 1995
------------- ------------
(Unaudited)
(000's)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents .............................. $ 36,410 $ 32,872
Accounts receivable .................................... 78,841 75,630
Inventories:
Finished goods ....................................... 46,531 46,030
Raw materials ........................................ 16,712 20,444
Other current assets ................................... 26,003 19,364
Prepaid expenses ....................................... 17,599 19,316
--------- ---------
Total Current Assets ................................. 222,096 213,656
PROPERTY, PLANT AND EQUIPMENT - NET ........................ 200,102 220,191
OTHER ASSETS ............................................... 26,007 33,255
--------- ---------
Total ................................................ $ 448,205 $ 467,102
========= =========
LIABILITIES AND STOCKHOLDER'S EQUITY
CURRENT LIABILITIES:
Current maturities of long-term debt ................... $ 17,762 $ 40,703
Short-term debt ........................................ 14,790 6,145
Accounts payable ....................................... 51,548 51,383
Accrued expenses and other current liabilities ......... 22,352 33,414
--------- ---------
Total Current Liabilities ............................ 106,452 131,645
--------- ---------
LONG-TERM DEBT - NET:
Senior indebtedness, notes payable and other obligations 158,048 174,506
Senior subordinated indebtedness - net ................. 114,149 114,074
--------- ---------
Long-Term Debt - net ................................. 272,197 288,580
--------- ---------
OTHER LIABILITIES .......................................... 29,614 26,202
--------- ---------
STOCKHOLDER'S EQUITY:
Preferred stock, $1.00 par value, 100,000 shares
authorized, issued and outstanding ................... 7,960 7,960
Common stock, $.01 par value, 3,000 shares authorized,
issued and outstanding ............................... -- --
Additional paid-in capital ............................. 8,682 8,682
Retained earnings ...................................... 23,232 4,764
Cumulative translation adjustment ...................... (427) (594)
Unrealized gains (losses) on marketable securities ..... 495 (137)
--------- ---------
Total Stockholder's Equity ........................... 39,942 20,675
--------- ---------
Total ................................................ $ 448,205 $ 467,102
========= =========
</TABLE>
See notes to unaudited consolidated financial statements.
4
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Form 10-Q
TRANS-RESOURCES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDER'S EQUITY
Nine Month Period Ended September 30, 1996
(Unaudited)
<TABLE>
<CAPTION>
Additional Cumulative Unrealized
Preferred Common Paid-In Retained Translation Gains(Losses)
Stock Stock Capital Earnings Adjustment on Securities Total
--------- ------ ---------- -------- ----------- ------------- -------
(000's)
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE, January 1, 1996.... $7,960 $ -- $8,682 $ 4,764 $(594) $(137) $20,675
Net income................ 21,194 21,194
Dividends paid:
Common stock.......... (2,088) (2,088)
Preferred stock....... (638) (638)
Net change during period.. 167 632 799
------ ---- ------ ------- ----- ----- -------
BALANCE September 30, 1996.. $7,960 $ -- $8,682 $23,232 $(427) $ 495 $39,942
====== ==== ====== ======= ===== ===== =======
</TABLE>
See notes to unaudited consolidated financial statements.
5
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Form 10-Q
TRANS-RESOURCES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Nine Month Period
Ended September 30,
----------------------
1996 1995
-------- ---------
(000's)
<S> <C> <C>
OPERATING ACTIVITIES AND WORKING CAPITAL
MANAGEMENT:
Operations:
Net income (loss) ................................................. $ 21,194 $ (5,262)
Items not requiring (providing) cash:
Depreciation and amortization ................................... 17,426 16,224
Deferred taxes and other - net, including gain on sale of
potash business in 1996 ...................................... (22,806) 1,009
-------- ---------
Total ........................................................ 15,814 11,971
Working capital management:
Accounts receivable and other current assets ...................... (10,041) 19,809
Inventories ....................................................... (4,546) (2,440)
Prepaid expenses .................................................. (2,495) (3,075)
Accounts payable .................................................. 2,276 (18,646)
Accrued expenses and other current liabilities .................... (9,609) (13,925)
-------- ---------
Cash used by operations and working
capital management ........................................... (8,601) (6,306)
-------- ---------
INVESTMENT ACTIVITIES:
Additions to property, plant and equipment ........................... (10,828) (31,661)
Purchases of marketable securities and other short-term investments .. (5,294) (4,371)
Sales of marketable securities and other short-term investments ...... 889 132,406
Other - net, including proceeds from sale of potash business in 1996.. 61,272 (3,916)
-------- ---------
Cash provided by investment activities .......................... 46,039 92,458
-------- ---------
FINANCING ACTIVITIES:
Increase (decrease) in short-term debt ............................... 8,645 (3,823)
Increase in long-term debt ........................................... 49,264 42,892
Repurchases, payments and current maturities of long-term debt ....... (89,083) (117,267)
Distributions to stockholder ......................................... (2,726) (1,495)
-------- ---------
Cash used by financing activities ............................... (33,900) (79,693)
-------- ---------
INCREASE IN CASH AND CASH EQUIVALENTS ................................. 3,538 6,459
CASH AND CASH EQUIVALENTS:
Beginning of period .................................................. 32,872 15,571
-------- ---------
End of period ........................................................ $ 36,410 $ 22,030
======== =========
</TABLE>
See notes to unaudited consolidated financial statements.
6
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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, NMPC, Inc. (name changed from New Mexico Potash
Corporation upon completion of the sale of the Company's potash business in
August, 1996; "NMPC"); and Vicksburg Chemical Company ("Vicksburg"); Na-Churs
Plant Food Company ("Na-Churs"); EDP, Inc. (name changed from Eddy Potash, Inc.
upon completion of the sale of the Company's potash business in August, 1996;
"EDP"); 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. Effective March 31, 1995, the Company acquired the assets of
Na-Churs, a company headquartered in Ohio and engaged in the specialty plant
nutrient business.
Pursuant to an Asset Purchase Agreement, dated as of May 21, 1996, by and
among Mississippi Chemical Corporation ("MCC"), Mississippi Acquisition I, Inc.
("MI"), Mississippi Acquisition II, Inc. ("MII"), both of which are indirect
wholly-owned subsidiaries of MCC (MI and MII being collectively called the
"Designated Buyers"), and NMPC and EDP (NMPC and EDP being collectively called
the "Sellers"), on August 16, 1996 (the "Closing Date") NMPC and EDP sold
substantially all of their assets to MI and MII, respectively, for an aggregate
consideration of $45,000,000 plus a working capital adjustment (described below)
and the assumption of specified liabilities (but excluding, among other things,
liabilities, if any, which may arise in connection with certain antitrust
litigation described in the Form 10-K (defined below) and in Part II - Item 1
"Legal Proceedings" below). The sale of the Company's potash business resulted
in a pre-tax gain, after considering certain costs relating thereto, of
approximately $22,900,000. Such gain is included in "Interest and other income -
net" in the accompanying Consolidated Statements of Operations.
7
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NMPC and EDP had conducted the Company's potash mining and production
operations. During the year ended December 31, 1995 and the nine month periods
ended September 30, 1995 and September 30, 1996, the potash operations
contributed approximately $54,000,000 (14%), $39,000,000 (13%) and $35,000,000
(11%), respectively, to the Company's consolidated revenues, after eliminating
intercompany sales.
On the Closing Date, the Designated Buyers paid $10,638,000 pursuant to
the above-mentioned working capital adjustment. The final amount of the
adjustment will be determined pursuant to a combined Closing Date Balance Sheet
for Sellers.
Approximately 50% of the aggregate proceeds received on the Closing Date
were applied to prepay debt secured by the assets of NMPC or EDP. In connection
with the sale, Vicksburg entered into a five year potash supply agreement, at
prevailing market rates during the period (subject to certain adjustments), with
MI.
In the opinion of management, the unaudited consolidated financial
statements for the nine month periods ended September 30, 1996 and 1995,
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, 1996 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 year ended December 31, 1995 (the "Form 10-K") which has been filed
with the Securities and Exchange Commission.
8
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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
1996 1995 (Decrease) 1996 1995 (Decrease)
----- ----- ---------- ----- ----- ----------
<S> <C> <C> <C> <C> <C> <C>
Revenues ................................ 100.0% 100.0% 3.5% 100.0% 100.0% 15.3%
Costs and expenses:
Cost of goods sold ................... 83.5 84.7 1.9 82.1 84.0 12.7
General and administrative ........... 12.6 12.3 6.7 10.4 10.7 11.6
----- ----- ----- -----
Operating income ........................ 3.9 3.0 33.0 7.5 5.3 63.3
Interest expense ..................... (8.6) (10.1) (11.9) (7.5) (8.9) (2.9)
Interest and other income - net ...... 27.0 2.5 1,021.9 7.7 2.1 310.2
----- ----- ----- -----
Income (loss) before income taxes ....... 22.3 (4.6) 605.9 7.7 (1.5) 707.7
Income tax provision (benefit) .......... 1.3 (1.2) 214.2 1.1 .3 244.2
----- ----- ----- -----
Income (loss) before extraordinary item.. 21.0 (3.4) 735.7 6.6 (1.8) 513.3
Extraordinary item ...................... -- -- -- (0.2) -- 100.0
----- ----- ------- ----- ----- -----
Net income (loss) ....................... 21.0% (3.4)% 735.7% 6.4% (1.8)% 502.8%
===== ===== ======= ===== ===== =====
</TABLE>
9
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Form 10-Q
RESULTS OF OPERATIONS
Three month period ended September 30, 1996 compared with the three month
period ended September 30, 1995:
Revenues increased by 3.5% to $90,910,000 in 1996 from $87,871,000 in
1995, an increase of $3,039,000, resulting from increased sales of specialty
plant nutrients and industrial chemicals ($6,500,000) and organic chemicals
($300,000), which were partially offset by slightly lower sales of potash
($3,800,000), with such lower sales primarily the result of the sale of the
Company's potash business in August, 1996.
Cost of goods sold as a percentage of revenues decreased by 1.2% during
the period (83.5% in 1996 compared with 84.7% in 1995). Gross profit was
$14,996,000 in 1996 compared with $13,405,000 in 1995 (16.5% of revenues in 1996
compared with 15.3% of revenues in 1995), an increase of $1,591,000. The primary
factor resulting in the increased 1996 gross profit was more favorable currency
rates in the 1996 period. This was partially offset by lower quantities of
potassium nitrate sold and by lower organic chemical margins in the 1996 period.
General and administrative expense increased to $11,464,000 in 1996 from
$10,749,000 in 1995, and increased slightly as a percentage of revenues (12.6%
of revenues in 1996 compared with 12.3% of revenues in 1995).
As a result of the matters described above, the Company's operating income
increased by $876,000 to $3,532,000 in 1996 as compared with $2,656,000 in 1995.
Interest expense decreased by $1,054,000 ($7,799,000 in 1996 compared with
$8,853,000 in 1995) primarily as the result of the repurchase and maturity of
the Company's outstanding Senior Subordinated Reset Notes and the 1996
prepayment of certain senior indebtedness from a portion of the proceeds from
the sale of the potash business. Interest and other income - net increased in
1996 by $22,359,000, principally as the result of (i) the 1996 period including
a gain relating to the sale of the Company's potash business ($22,900,000),
partially offset by (ii) the net change in adjustments relating to the
marking-to-market of forward exchange contracts which do not qualify as hedges
($2,000,000).
As a result of the above factors, income before income taxes and
extraordinary item increased by $24,289,000 in 1996. The Company's provisions
for income taxes are impacted by the mix between domestic and foreign earnings
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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, 1996 compared with the nine month
period ended September 30, 1995:
Revenues increased by 15.3% to $331,574,000 in 1996 from $287,602,000 in
1995, an increase of $43,972,000, resulting from increased sales of specialty
plant nutrients and industrial chemicals ($46,200,000) and organic chemicals
($1,300,000), which were partially offset by lower sales of potash ($3,500,000),
with such lower sales primarily the result of the sale of the Company's potash
business in August, 1996.
Cost of goods sold as a percentage of revenues decreased by 1.9% during
the period (82.1% in 1996 compared with 84.0% in 1995). Gross profit was
$59,368,000 in 1996 compared with $46,163,000 in 1995 (17.9% of revenues in 1996
compared with 16.0% of revenues in 1995), an increase of $13,205,000. The
primary factors resulting in the increased 1996 gross profit were (i) more
favorable currency rates, (ii) higher quantities of potassium nitrate sold and
(iii) the inclusion of the results of Na-Churs for the full 1996 period as
compared with only six months in 1995. These increases were partially offset by
lower potash and organic chemicals margins in the 1996 period. General and
administrative expense increased to $34,549,000 in 1996 from $30,962,000 in
1995, but declined as a percentage of revenues (10.4% of revenues in 1996
compared with 10.7% of revenues in 1995). During the 1995 period the Company
recorded a $750,000 reimbursement of certain general and administrative expenses
incurred in prior years on behalf of an entity in which the Company has an
investment.
As a result of the matters described above, the Company's operating income
increased by $9,618,000 to $24,819,000 in 1996 as compared with $15,201,000 in
1995.
Interest expense decreased by $752,000 ($24,847,000 in 1996 compared with
$25,599,000 in 1995) primarily as the result of reduced interest expense
resulting from the repurchase of certain of the Company's outstanding Senior
Subordinated Reset Notes partially offset by interest on the long-term debt that
financed the construction of the Company's K3 Plant in Israel. Interest and
other income - net increased in 1996 by $19,264,000, principally as the result
of (i) the 1996 period including a gain relating to the sale of the Company's
potash business ($22,900,000) partially offset by (ii) the net change in
adjustments relating to the marking-to-market of forward exchange contracts
which do not qualify as hedges ($3,500,000).
11
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As a result of the above factors, income before income taxes and
extraordinary item increased by $29,634,000 in 1996. 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 1996 period the Company acquired $19,122,000 principal amount of
its Senior Subordinated Reset Notes due September 1, 1996 prior to its maturity,
which resulted in a loss of $553,000. Such loss (which has no current tax
benefit) is classified as an extraordinary item in the accompanying Consolidated
Statement of Operations. No such debt was acquired in the 1995 period.
CAPITAL RESOURCES AND LIQUIDITY
The Company's consolidated working capital at September 30, 1996 and
December 31, 1995 was $115,644,000 and $82,011,000, respectively.
Operations for the nine month periods ended September 30, 1996 and 1995,
after adding back non-cash items, provided cash of approximately $15,800,000 and
$12,000,000, respectively. During such periods other changes in working capital
used cash of approximately $24,400,000 and $18,300,000, respectively, resulting
in net cash being used by operating activities and working capital management of
approximately $8,600,000 and $6,300,000, respectively.
Investment activities during the nine month periods ended September 30,
1996 and 1995 provided cash of approximately $46,000,000 and $92,500,000,
respectively, including additions to property in 1996 and 1995 of approximately
$10,800,000 and $31,700,000, respectively, net purchases of marketable
securities and other short-term investments of approximately $5,300,000 and
$4,400,000, respectively, and sales of marketable securities and other
short-term investments of approximately $900,000 and $132,400,000, respectively.
No major property additions occurred in 1996. The 1995 property additions
principally relate to (i) the construction of the K3 Plant, (ii) the replacement
of the HCL production unit damaged in a fire in February, 1994 and (iii) the
construction of a new potassium carbonate manufacturing facility. The 1995 sales
of marketable securities and short-term investments relate principally to the
purchase in 1994, and the liquidation in 1995, of the pledged certificates of
deposit ("CD's") relating to the Loan Agreement described below. During the 1996
period the Company sold its potash business and realized
12
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gross proceeds of approximately $55,600,000. Approximately 50% of such gross
proceeds were applied to prepay certain senior indebtedness related to the
Company's potash business.
Financing activities during the nine month periods ended September 30,
1996 and 1995, used cash of approximately $33,900,000 and $79,700,000,
respectively (principally relating to the increase of certain long-term debt in
1994 and the prepayment of such debt in 1995, which is described below).
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 a portion of 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 could have converted 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 for such loan
(such CD's were included in "other current assets" in the December 31, 1994
Consolidated Balance Sheet). In addition, the Company pledged 79% of the capital
stock of HCL to secure its obligations under the Loan Agreement. On January 5,
1995, the Company liquidated the pledged CD's and prepaid the $100,000,000 loan.
As of September 30, 1996, the Company had outstanding long-term debt
(excluding current maturities) of $272,197,000. The Company's primary source of
liquidity is cash flow generated from operations and its unused credit lines.
Approximately 90% of HCL's sales are made outside of Israel in various
currencies, of which approximately 40% 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 and accounted for in the subsequent year as part of sales.
Unrealized gains and losses for the remainder of the forward exchange contracts
are recognized in income currently. If the Company had not followed such a
policy of entering into forward exchange contracts in order to hedge its foreign
sales, and instead recognized income based on the then prevailing foreign
currency rates, the Company's income
13
<PAGE> 14
before income taxes for the nine month periods ended September 30, 1996 and
1995, would have increased (decreased) by approximately ($4,100,000) and
$10,300,000, respectively.
The principal purpose of the Company's hedging program (which is for other
than trading purposes) 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 nine month period ended September 30, 1996 the Company invested
approximately $10,800,000 in capital expenditures. The Company currently
anticipates that capital expenditures for the year ending December 31, 1996 will
aggregate approximately $16,000,000. The Company's capital expenditures will be
used primarily for increasing certain production capacity and efficiency,
product diversification and for ecological matters.
INFLATION
Inasmuch as only approximately $45,000,000 of HCL's annual operating costs
are denominated in New Israeli Shekels ("NIS"), HCL is exposed to inflation in
Israel to a limited extent. The combination of price increases coupled with
devaluation of the NIS have in the past generally enabled HCL to avoid a
material adverse impact from inflation in Israel. However, HCL's earnings
increase or decrease to the extent that the rate of future NIS devaluation
differs from the rate of Israeli inflation. For the years ended December 31,
1995 and 1994, the inflation rate of the NIS as compared to the U.S. Dollar
exceeded the devaluation rate in Israel by 4.2% and 13.4%, respectively.
ENVIRONMENTAL MATTERS
See Item 1 - "Business - Environmental Matters" and Note O of Notes to
Consolidated Financial Statements included in the Company's Form 10-K, and
"Legal Proceedings" below for information regarding environmental matters
relating to the Company's various facilities.
OTHER MATTERS
HCL's current labor agreements with its union employees expire on December
31, 1996. HCL has indicated that it wants to negotiate a fundamentally new
agreement and not continue within the framework of the existing agreement. The
unions have objected and are currently on strike. With the exception of HCSL's
plant, HCL's
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manufacturing facilities have not been operating since October 29, 1996. HCL's
management will continue to seek to resolve the labor dispute and to negotiate
new labor agreements with it's union employees. HCL is unable to predict the
duration of the work stoppage or the impact thereof.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
1. As previously disclosed (most recently in the Form 10-K and in the Form
10-Q for the period ended June 30, 1996), a number of antitrust class action
lawsuits were filed in several United States District Courts, and consolidated
for pretrial purposes in the United States District Court for Minnesota, against
the major United States potash producers, including NMPC and EDP. On or about
December 21, 1995 the defendants filed motions for summary judgment before a
specially appointed Magistrate Judge. On September 13, 1996 the Magistrate Judge
issued a Report and Recommendation recommending that U.S. District Court Judge
Kyle grant the motions filed by NMPC, EDP and the other defendants for summary
judgement as to all of the plaintiffs' claims. Plaintiffs have filed objections
to the Report and Recommendation and Judge Kyle has established a briefing
schedule and set a hearing date for oral argument on December 19, 1996. If Judge
Kyle does not accept the Report and Recommendation, the trial is scheduled to
commence on May 12, 1997.
2. On October 24, 1995, several suits were filed in both the State Court
in Bogalusa, Louisiana and in the United States District Court for the Eastern
District of Louisiana, each purporting to be class actions arising out of an
October 23, 1995 explosion of a tank car at a plant of a Vicksburg customer
located in Bogalusa, Louisiana. The tank car contained nitrogen tetroxide which
had been produced and sold by Vicksburg. Subsequently, at least 146 suits were
filed in the State Court for the 22nd Judicial District, Washington Parish,
Louisiana. All of the cases have been consolidated in this State Court and the
consolidated suit certified as a class action. Vicksburg and Cedar are included
among the defendants in the class action. In addition, two recent suits, one on
behalf of the City of Bogalusa, have been filed in the same court naming, among
the defendants, Vicksburg, Cedar and the Company. Also, 10 separate suits naming
an aggregate of more than 8,000 plaintiffs have been filed in the Circuit Court
of Hinds County, Mississippi naming, among the defendants, Vicksburg, Cedar and
the Company. The plaintiffs in all of these suits
15
<PAGE> 16
seek unspecified damages arising out of the alleged exposure to toxic fumes
which were allegedly released as a result of the explosion and the City of
Bogalusa also seeks reimbursement of expenses allegedly resulting from the
explosion. The suits have been tendered to the Company's liability insurance
carriers for defense and indemnification. Vicksburg and Cedar have commenced an
action in the 22nd Judicial District Court, Washington Parish, Louisiana against
their principal insurance carriers (whose insurance policies also include the
Company as an additional named insured) seeking a declaratory judgement that
Cedar and Vicksburg are entitled to defense costs and indemnification with
respect to these claims.
3. As previously disclosed in Item 1 - "Business-Environmental Matters" of
the Form 10-K, as a result of the production of phosphoric acid, HCL generates
acid sludge and liquid acid effluents. HCL currently disposes of its liquid acid
effluents in a local river (the "River"). On December 21, 1994, a private
criminal complaint was filed in the Magistrate's Court of Haifa against HCL and
its directors alleging violation of specified Israeli environmental laws through
HCL's dumping of chemical waste into the River without adequate permits.
On July 8, 1996 HCL submitted to the Israel Ministry of Environment
(the "Ministry") a proposed comprehensive land solution plan for the handling
and disposal of the sludge and effluents produced by HCL's plant (the "Plan").
The Plan was based on the joint work of HCL and representatives of the Ministry.
The Plan generally consists of two objectives: (i) decreasing the quantities and
concentrations of the effluents disposed of into the River, in several phases,
each dealing with a different category of effluents, and (ii) a permanent land
solution for the sludge currently being disposed of in the Mediterranean Sea, by
filterizing and purifying the sludge in a special purifying plant to be built by
HCL, and the disposal thereof at a land site to be approved by the Ministry.
Implementation of the Plan is anticipated to require between 4.5 years and six
years, and is estimated to cost up to $15 million. HCL is seeking Israeli
Governmental financial support for the implementation of the Plan.
The Ministry approved the Plan on July 11, 1996 and withdrew its
objection to granting HCL a temporary permit for disposal of liquid acid
effluents into the Haifa Bay. Such permit was accordingly granted on July 24,
1996, effective to July 31, 1997, permitting disposal of liquid acid effluents
through the River and out to the Haifa Bay, subject to certain restrictions on
quantities and concentrations, inspection and reporting duties and certain other
conditions. Although HCL has applied to the Israeli Attorney General for a
suspension of the proceedings in the criminal complaint, the Attorney General
has denied HCL's applications.
16
<PAGE> 17
ITEM 5. OTHER INFORMATION
For a description of the work stoppage at HCL, see "Management's Discussion and
Analysis of Financial Condition and Results of Operations - Other Matters".
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits.
Exhibit 27 - Financial Data Schedule.
(b) Reports on Form 8-K.
On August 30, 1996 the Company filed a Current Report on Form 8-K
disclosing, under Item 2 of Form 8-K, the August 16, 1996 sale by NMPC and EDP
of substantially all of their assets to two subsidiaries of Mississippi Chemical
Corporation. The Form 8-K included a Pro Forma Condensed Consolidated Balance
Sheet of the Company as of June 30, 1996 and Pro Forma Condensed Consolidated
Statements of Operations of the Company for the six month period ended June 30,
1996 and the year ended December 31, 1995.
17
<PAGE> 18
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 12, 1996 Lester W. Youner
-----------------------------
Vice President, Treasurer and
Chief Financial Officer
18
<PAGE> 19
TRANS-RESOURCES, INC.
INDEX TO EXHIBITS
Exhibit Description Page No.
- ------- ----------- --------
27 Financial Data Schedule. 20
19
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
TRANS-RESOURCES, INC. Financial Data Schedule Article 5 of Regulation S-X
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-30-1996
<CASH> 36,410
<SECURITIES> 0
<RECEIVABLES> 78,841
<ALLOWANCES> 0
<INVENTORY> 63,243
<CURRENT-ASSETS> 222,096
<PP&E> 303,346
<DEPRECIATION> 103,244
<TOTAL-ASSETS> 448,205
<CURRENT-LIABILITIES> 106,452
<BONDS> 272,197
0
7,960
<COMMON> 0
<OTHER-SE> 31,982
<TOTAL-LIABILITY-AND-EQUITY> 448,205
<SALES> 331,574
<TOTAL-REVENUES> 331,574
<CGS> 272,206
<TOTAL-COSTS> 272,206
<OTHER-EXPENSES> 34,549
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 24,847
<INCOME-PRETAX> 25,447
<INCOME-TAX> 3,700
<INCOME-CONTINUING> 21,747
<DISCONTINUED> 0
<EXTRAORDINARY> (553)
<CHANGES> 0
<NET-INCOME> 21,194
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
