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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, 1998
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)
<TABLE>
<C> <C>
Delaware 36-2729497
- ---------------------------------------- -------------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
9 West 57th Street, New York, New York 10019
- ---------------------------------------- -------------------------------------
(Address of principal executive offices) (Zip Code)
</TABLE>
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 13, 1998, there were outstanding 3,000 shares of common stock, par
value of $.01 per share, all of which were owned by TPR Investment Associates,
Inc., a privately-held Delaware corporation.
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TRANS-RESOURCES, INC.
Form 10-Q Index
September 30, 1998
Page
PART I Number
Item 1. - Financial Statements:
Consolidated Statements of Operations................. 3
Consolidated Balance Sheets........................... 4
Consolidated Statements of Stockholder's Equity and 5
Comprehensive Income..................................
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..................................... 22
Item 6. Exhibits and Reports on Form 8-K...................... 23
- -
Signatures ...................................................... 24
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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,
------------------- -------------------
1998 1997 1998 1997
---- ---- ---- ----
(000's)
<S> <C> <C> <C> <C>
REVENUES ........................................... $ 88,621 $ 92,653 $ 314,664 $ 286,936
COSTS AND EXPENSES:
Cost of goods sold ............................. 71,077 76,565 247,927 233,287
General and administrative ..................... 10,838 10,674 36,364 30,972
--------- --------- --------- ---------
OPERATING INCOME ................................... 6,706 5,414 30,373 22,677
Interest expense ............................... (9,941) (7,294) (27,982) (21,715)
Interest and other income (expense) - net ...... (34,698) 1,287 (9,284) 3,823
--------- --------- --------- ---------
INCOME (LOSS) BEFORE INCOME TAXES,
EXTRAORDINARY ITEM AND
CHANGE IN ACCOUNTING PRINCIPLE ................. (37,933) (593) (6,893) 4,785
--------- --------- --------- ---------
INCOME TAXES (BENEFIT):
Current ........................................ 100 189 1,209 782
Deferred ....................................... (760) 161 702 1,054
--------- --------- --------- ---------
(660) 350 1,911 1,836
--------- --------- --------- ---------
INCOME (LOSS) BEFORE EXTRAORDINARY
ITEM AND CHANGE IN ACCOUNTING
PRINCIPLE ...................................... (37,273) (943) (8,804) 2,949
EXTRAORDINARY ITEM - Loss on repurchase of debt (no
income tax benefit) ............................ (196) -- (11,328) --
CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE,
net of income tax benefit of $80,000 ........... -- -- (1,253) --
--------- --------- --------- ---------
NET INCOME (LOSS) .................................. $ (37,469) $ (943) $ (21,385) $ 2,949
========= ========= ========= =========
</TABLE>
See notes to unaudited consolidated financial statements.
3
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TRANS-RESOURCES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
September 30, December 31,
1998 1997
---- ----
Unaudited)
(000's)
ASSETS
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents ............................... $ 13,964 $ 19,757
Accounts receivable ..................................... 85,308 82,551
Inventories:
Finished goods ........................................ 57,805 46,764
Raw materials ......................................... 17,302 13,362
Other current assets .................................... 58,834 33,578
Prepaid expenses ........................................ 16,358 16,122
--------- ---------
Total Current Assets .................................. 249,571 212,134
PROPERTY, PLANT AND EQUIPMENT - NET ......................... 235,518 207,487
OTHER ASSETS ................................................ 51,614 42,395
--------- ---------
Total ................................................. $ 536,703 $ 462,016
========= =========
LIABILITIES AND STOCKHOLDER'S EQUITY
CURRENT LIABILITIES:
Current maturities of long-term debt .................... $ 16,138 $ 13,080
Short-term debt ......................................... 42,016 36,580
Accounts payable ........................................ 66,829 58,662
Accrued expenses and other current liabilities .......... 42,501 30,215
--------- ---------
Total Current Liabilities ............................. 167,484 138,537
--------- ---------
LONG-TERM DEBT - NET:
Senior indebtedness, notes payable and other obligations. 370,661 154,726
Senior subordinated indebtedness - net .................. -- 114,288
--------- ---------
Long-Term Debt - net .................................. 370,661 269,014
--------- ---------
OTHER LIABILITIES ........................................... 37,853 30,858
--------- ---------
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 ....................................... (27,696) 6,203
Cumulative translation adjustment ....................... (717) (67)
Unrealized gains (losses) on marketable securities ...... (27,524) 829
--------- ---------
Total Stockholder's Equity ............................ (39,295) 23,607
--------- ---------
Total ................................................. $ 536,703 $ 462,016
========= =========
</TABLE>
See notes to unaudited consolidated financial statements.
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TRANS-RESOURCES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDER'S EQUITY AND COMPREHENSIVE INCOME
Nine Month Period Ended September 30, 1998
(Unaudited)
<TABLE>
<CAPTION>
Additional Cumulative Unrealized
Preferred Common Paid-In Retained Translation Gains (Losses) Comprehensive
Stock Stock Capital Earnings Adjustment on Securities Total Income
----- ----- ------- -------- ---------- ------------- ----- ------
(000's)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE,
January 1, 1998.......... $7,960 $ -- $8,682 $6,203 $(67) $ 829 $23,607
Net loss.................... (21,385) (21,385) $(21,385)
Dividends paid:
Common stock,
including non-cash
dividend of $750,000... (11,876) (11,876)
Preferred stock........ (638) (638)
Net change during
period.................. (650) (28,353) (29,003) (29,003)
------ ---- ------ -------- ----- -------- -------- --------
BALANCE,
September 30, 1998...... $7,960 $ -- $8,682 $(27,696) $(717) $(27,524) $(39,295) $(50,388)
====== ==== ====== ======== ===== ======== ======== ========
</TABLE>
See notes to unaudited consolidated financial statements.
5
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TRANS-RESOURCES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Nine Month Period
Ended September 30,
-------------------
1998 1997
------ ------
(000's)
<S> <C> <C>
OPERATING ACTIVITIES AND WORKING CAPITAL
MANAGEMENT:
Operations:
Net income (loss) ......................................................... $ (21,385) $ 2,949
Items not requiring (providing) cash:
Depreciation and amortization of property, plant and equipment
and other assets ..................................................... 16,142 14,649
Amortization of deferred financing costs and accretion of
interest expense ..................................................... 5,621 697
Gain on Laser/ESC share exchange ........................................ (22,946) --
Extraordinary item - loss on repurchase of debt ......................... 11,328 --
Cumulative effect of change in accounting principle ..................... 1,253 --
Provision for loss on settlement of Bogalusa Litigation ................. 35,760 --
Deferred taxes and other - net .......................................... (2,686) (1,565)
--------- ---------
Total ................................................................ 23,087 16,730
Working capital management:
Accounts receivable and other current assets ............................ (5,538) (15,340)
Inventories ............................................................. (14,655) (305)
Prepaid expenses ........................................................ (201) (3,811)
Accounts payable ........................................................ 7,600 22,971
Accrued expenses and other current liabilities .......................... (20,674) (7,835)
--------- ---------
Cash provided (used) by operations and working
capital management ................................................ (10,381) 12,410
--------- ---------
INVESTMENT ACTIVITIES:
Additions to property, plant and equipment ................................ (42,155) (14,185)
Purchases of marketable securities and other short-term investments........ (25,946) (1,878)
Sales of marketable securities and other short-term investments ........... 7,573 8,233
Other - net, including approximately $10.0 million relating to the
purchase of an equity investment in Lego in 1998 ....................... (12,761) (6,021)
--------- ---------
Cash used by investment activities ................................... (73,289) (13,851)
--------- ---------
FINANCING ACTIVITIES:
Increase in short-term debt ............................................... 4,880 4,904
Increase in long-term debt ................................................ 230,074 6,500
Repurchases, payments and current maturities of long-term debt ............ (145,313) (10,485)
Cash dividends to stockholder ............................................. (11,764) (3,040)
--------- ---------
Cash provided (used) by financing activities ......................... 77,877 (2,121)
--------- ---------
DECREASE IN CASH AND CASH EQUIVALENTS ......................................... (5,793) (3,562)
CASH AND CASH EQUIVALENTS:
Beginning of period ....................................................... 19,757 29,112
--------- ---------
End of period ............................................................. $ 13,964 $ 25,550
========= =========
</TABLE>
See notes to unaudited consolidated financial statements.
6
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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. ("TRI"),
include TRI and its direct and indirect independently managed and financed
subsidiaries, after elimination of intercompany accounts and transactions. TRI'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 its potash operations in August,
1996; "NMPC"), and Vicksburg Chemical Company ("Vicksburg"); EDP, Inc. (name
changed from Eddy Potash, Inc. upon completion of the sale of its potash
operations in August, 1996); Na-Churs Plant Food Company; and Haifa Chemicals
Ltd. ("HCL") and HCL's wholly-owned subsidiary, Haifa Chemicals South, Ltd. TRI
is a wholly-owned subsidiary of TPR Investment Associates, Inc., a
privately-held Delaware corporation. As used herein, the term "the Company"
means TRI together with its direct and indirect subsidiaries. Certain prior
period amounts have been reclassified to conform to the manner of presentation
in the current period.
Substantially all of the Company's revenues, operating profits and
identifiable assets are related to the chemical industry. The Company is a
global developer, producer and marketer of specialty plant nutrients and
specialty industrial and agricultural chemicals and distributes its products
internationally.
See Item 2 below - "Management's Discussion and Analysis of Financial
Condition and Results of Operations" ("MD&A") for certain information regarding
(i) a labor dispute at HCL (the "HCL Labor Dispute") and (ii) the Company's
investment in ESC Medical Systems Ltd. Also see "MD&A Refinancing" for
information regarding the Company's March, 1998 refinancing of its 11 7/8%
Senior Subordinated Notes.
As previously disclosed in the Company's Annual Report on Form 10-K for
the year ended December 31, 1997 (the "Form 10-K") and in subsequent Quarterly
Reports on Form 10-Q, the Company was a party to litigation arising out of an
October 23, 1995 release of nitrogen tetroxide at a Bogalusa, Louisiana plant of
a customer of Vicksburg. The nitrogen tetroxide had been produced and sold by
Vicksburg. The plaintiffs in these suits sought unspecified damages arising out
of the alleged exposure to toxic fumes. The Louisiana class action and the
Mississippi suits (collectively referred to herein as the "Bogalusa Litigation")
named a number of other defendants, in addition to TRI and certain of its
subsidiaries. As previously disclosed in a Current Report on Form 8-K filed on
September 10,
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1998, during August, 1998 the Company entered into conditional agreements to
settle the claims in the Bogalusa Litigation.
If the conditions to the settlement are satisfied, the Company's funding
obligation would be an aggregate of $32 million, the initial $10 million of
which was deposited in escrow on August 31, 1998. In addition, two settling
insurance companies are to contribute an aggregate of $25 million and the
Company will assign to the plaintiffs its rights under another $27 million of
insurance coverage. The Company is scheduled to escrow an additional $18 million
by March 31, 1999 and $4 million by January 2, 2003.
The Company recorded a charge in the third quarter of approximately $35.8
million (included in the caption "Interest and other income (expense) net" in
the accompanying Consolidated Statements of Operations for the three month and
nine month periods ended September 30, 1998) to cover the cost of the
conditional settlement and the related legal expenses.
For further information regarding the Bogalusa Litigation and the
conditional settlement relating thereto see Item 1 - "Legal Proceedings" of Part
II of this Form 10-Q.
Effective January 1, 1998, the Company changed its method of accounting
for start-up costs incurred relating to the start-up of newly constructed
manufacturing facilities to conform with AICPA Statement of Position No. 98-5
("SOP 98-5"), "Reporting on the Costs of Start-Up Activities", which requires
that such costs be currently charged to operations. SOP 98-5 encourages
companies that previously deferred such costs to write-off the unamortized
amounts thereof. As of January 1, 1998, the Company has reported the cumulative
effect of the change in the method of accounting for start-up costs in the
Consolidated Statement of Operations. The effect of adopting SOP 98-5 in 1998
was the write-off of unamortized start-up costs of approximately $1.33 million
and a reduction in net income for the cumulative effect of the change in
accounting principle of approximately $1.25 million (net of income taxes).
Effective October 30, 1998, the Company acquired the common stock of Plant
Products Co. Ltd. ("Plant Products"). Plant Products is headquartered in
Ontario, Canada and is engaged in the manufacturing and marketing of specialty
plant nutrients, serving primarily commercial horticulture, specialty high value
crops and the retail market. The acquisition is being accounted for as a
purchase. During the year ended December 31, 1997, Plant Products' consolidated
revenues were approximately $27 million.
In the opinion of management, the unaudited consolidated financial
statements for the nine month periods ended September 30, 1998 and 1997,
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, 1998 are not
necessarily indicative of results that may be expected for any other interim
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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 Form 10-K which has been filed with
the Securities and Exchange Commission.
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following table sets forth, as a percentage of revenues, certain items
appearing in the unaudited consolidated financial statements of the Company.
<TABLE>
<CAPTION>
Percentage of Revenues
---------------------------------------
Three Month Nine Month
Period Ended Period Ended
September 30, September 30,
-------------------- -----------------
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenues:
Specialty Plant Nutrients .................. 55.3% 59.4% 57.1% 58.8%
Industrial Chemicals ....................... 34.2 32.3 29.7 28.6
Organic Chemicals .......................... 10.5 8.3 13.2 12.6
----- ----- ----- -----
Total Revenues ............................. 100.0% 100.0% 100.0% 100.0%
Costs and expenses:
Cost of goods sold ......................... 80.2 82.7 78.8 81.3
General and administrative ................. 12.2 11.5 11.6 10.8
----- ----- ----- -----
Operating income ............................... 7.6 5.8 9.6 7.9
Interest expense............................ (11.2) (7.8) (8.9) (7.6)
Interest and other income (expense) - net .. (39.2) 1.4 (2.9) 1.4
----- ----- ----- -----
Income (loss) before income taxes, extraordinary
item and change in accounting principle..... (42.8) (0.6) (2.2) 1.7
Income taxes (benefit).......................... (0.7) 0.4 0.6 0.7
----- ----- ----- -----
Income (loss) before extraordinary item and
change in accounting principle ............. (42.1) (1.0) (2.8) 1.0
Extraordinary item ............................. (0.2) -- (3.6) --
Cumulative effect of change in accounting
principle - net ............................ -- -- (0.4) --
----- ----- ----- -----
Net income (loss) .............................. (42.3)% (1.0)% (6.8)% 1.0%
===== ===== ===== =====
</TABLE>
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
Certain statements herein (and in the Form 10-K) constitute
"forward-looking statements" within the meaning of the Private Securities
Litigation Reform Act of 1995. All statements other than statements of
historical facts included herein (and in the Form 10-K) are forward-looking
statements, including, but are not limited to, statements concerning future
revenues (e.g., impact of the HCL Labor Dispute and inflation in Israel);
expenses (e.g., labor
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savings resulting from HCL's new Specific Collective Agreement ("SCA"), future
environmental costs and capital expenditures; and Year 2000 costs); access to
lending sources and Israeli Government entitlements; and outcomes of legal
proceedings. Such forward-looking statements involve unknown and uncertain
risks, uncertainties and other factors which may cause the actual results,
performance or achievements of the Company to be materially different from any
future results, performance or achievements expressed or implied by such
forward-looking statements. Such factors ("Cautionary Factors") include, among
others, the following: political stability, inflation and currency rates in
those foreign countries (including, without limitation, Israel) in which the
Company generates a significant portion of its production, sales and earnings;
current or future environmental developments or government regulations which
would require the Company to make substantial expenditures, and changes in, or
the failure of the Company to comply with, such government regulations; the
potentially hazardous nature of certain of the Company's products; the ability
to achieve and sustain anticipated labor cost reductions at HCL; the Company's
ability to continue to service and refinance its debt; new plant start-up costs;
competition; changes in business strategy or expansion plans; raw material costs
and availability; the final outcome of the legal proceedings to which the
Company is a party and the conditional settlement of the Bogalusa Litigation,
including, without limitation, satisfaction by the parties of the terms and
numerous conditions of such conditional settlement (see Item 3 - "Legal
Proceedings" in the Form 10-K and Item 1 - "Legal Proceedings" of Part II of
this Form 10-Q); and other factors referenced in this Form 10-Q (or in the
Company's Form 10-K).
Given these uncertainties, investors and prospective investors are
cautioned not to place undue reliance on such forward-looking statements. All
subsequent forward-looking statements attributable to the Company or persons
acting on behalf of the Company are expressly qualified in their entirety by the
Cautionary Factors.
HCL LABOR DISPUTE
During the fourth quarter of 1996 and during 1997, primarily in the first
half of such year, the Company's operations were adversely impacted by the HCL
Labor Dispute.
Most HCL employees are members of the "Histadrut," the Israeli national
labor federation, and are represented by collective bargaining units. Terms of
employment of most HCL employees are currently governed predominantly by an SCA
negotiated by HCL with the Histadrut, the respective unions representing the
employees and representatives of the employees.
In 1994, HCL signed an agreement with the unions and representatives of
the technicians and engineers for the three year period ended December 31, 1996.
In 1995, an SCA was signed with the unions and representatives of the other
employees for the two year period ended December 31, 1996. In September, 1996,
the Company announced
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the cancellation of such agreements effective upon their expiration dates and
its intention to negotiate a new SCA with basic changes aimed at reducing labor
costs and enhancing operating flexibility for the period following December 31,
1996.
As a result of the announced cancellation of the labor agreements, HCL
suffered several work stoppages and other job actions which adversely affected
productivity during October and November 1996, including a period of temporary
plant shut-down. On December 3, 1996 the plant was shut-down until March 10,
1997 when a new SCA providing for certain wage freezes and reductions in
benefits was signed for the three year period ending December 31, 1999.
Subsequent to March 10, 1997, the HCL plant re-opened and gradually began
production. By the end of May, 1997 and subsequent thereto through the early
part of 1998, the HCL plant was generally operating at approximately full
capacity; however, due to the need for increased maintenance for certain
equipment resulting from the lengthy period of shut-down, there have been
several periods of operations at less than full capacity and production
efficiencies were also adversely impacted.
Management believes that the new SCA will result in cost savings for the
Company compared to the costs it would otherwise have incurred during the next
few years had HCL renewed the terms of the prior SCAs and continued the pattern
of increased costs included in recent SCAs. Further, management believes that
the aggregate amount of such cost savings over the years subsequent to the
settlement of the HCL Labor Dispute will substantially exceed the incremental
costs experienced during the HCL Labor Dispute.
Following the settlement of the HCL Labor Dispute, HCL achieved the
following objectives: (i) a reduction in absenteeism; (ii) greater ability to
freely transfer employees between departments and production units; (iii)
increased flexibility regarding the ability to promote employees and incentivize
them based on performance measures and evaluations developed and implemented by
management; (iv) greater ability to dismiss employees on the basis of poor
performance; (v) on-going and more effective communication between management
and employees; and (vi) increased freedom to use sub-contractors. In addition,
following the settlement of the HCL Labor Dispute, HCL restructured its
workforce with the result being an approximate 18% reduction in the number of
its employees, and a reduction in the average cost per employee. See "Special
Note Regarding Forward-Looking Statements" above.
INVESTMENT IN LASER INDUSTRIES LIMITED
On November 9, 1997, Laser Industries Limited ("Laser"), a publicly traded
manufacturer of lasers for medical use in which the Company had an ownership
interest accounted for by the equity method, and ESC Medical Systems Ltd.
("ESC"), signed a definitive agreement (the "Agreement") to combine the two
companies through an exchange of shares. The transaction closed on February 23,
1998. The Company's ability to sell the ESC shares it
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received pursuant to the combination is governed by securities law volume
restrictions. As of December 31, 1997, the Company carried its investment in the
Laser shares at approximately $9.1 million, which amount is included in the
caption "Other assets" in the accompanying December 31, 1997 Consolidated
Balance Sheet. Based on the quoted market value of the ESC shares ($35.00 per
share), as of February 20, 1998, the last day of trading before the combination,
the Company recognized a pre-tax gain of approximately $22.9 million during the
first quarter of 1998, which gain is included in the caption "Interest and other
income (expense) - net" in the accompanying Consolidated Statement of Operations
for the nine month period ended September 30, 1998. Subsequent to the exchange
of shares, the Company carries its investment in the ESC shares in "Other
current assets" in the accompanying September 30, 1998 Consolidated Balance
Sheet. As of September 30, 1998, the quoted market value of the ESC shares
declined to approximately $7.00 per share, resulting in the Company recording an
unrealized loss of approximately $25.5 million. Most of this decline occurred in
the latter part of September, 1998 and resulted from ESC's pre-announcement of
third quarter 1998 operating results, which ESC indicated would show a decline
when compared to operating results for its second quarter of 1998. The
unrealized loss relating to ESC is included in the caption "Unrealized gains
(losses) on marketable securities" in the accompanying September 30, 1998
Consolidated Balance Sheet.
In addition to the ownership of the Laser shares described above, the
Company also owned a warrant (the "Laser Warrant") which enabled the Company to
purchase additional Laser shares. The Laser Warrant, which had a carrying value
of $0.75 million, was distributed as a dividend in February, 1998.
RESULTS OF OPERATIONS
Three month period ended September 30, 1998 compared with the three month
period ended September 30, 1997:
Revenues decreased by 4.4% to $88.6 million in 1998 from $92.7 million in
1997, a decrease of $4.1 million. The decrease resulted primarily from decreased
sales of Specialty Plant Nutrients and Industrial Chemicals of approximately
$5.6 million principally attributable to (i) lower volumes sold in certain
countries as a result of the economic downturn and (ii) less favorable currency
exchange rates in the 1998 period. These items were partially offset by
increased revenues of Organic Chemicals of approximately $1.5 million.
Cost of goods sold as a percentage of revenues decreased to 80.2% in 1998
compared with 82.7% in 1997. Gross profit was $17.5 million in 1998, or 19.8% of
revenues, compared with $16.1 million or 17.3% of revenues in 1997, an increase
of $1.4 million. The primary factor resulting in the increased gross profit in
1998 was improved margins of Organic Chemicals. General and administrative
expense increased to $10.8 million in 1998 from $10.7 million in 1997, an
increase of $0.1 million (12.2% of revenues in 1998, compared with 11.5% of
revenues in 1997).
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As a result of the matters described above, the Company's operating income
increased by $1.3 million to $6.7 million in 1998 as compared with $5.4 million
in 1997.
Interest expense increased by $2.6 million to $9.9 million in 1998
compared with $7.3 million in 1997 primarily as a result of (i) the March, 1998
issuance by the Company of the 10 3/4% Senior Notes and 12% Senior Discount
Notes, partially offset by the Company's repurchase of substantially all of its
11 7/8% Senior Subordinated Notes (see "Refinancing" below) and (ii) certain
increased borrowings relating to the Company's investment and capital
expenditure program. Interest and other income (expense) - net decreased in 1998
by $36.0 million, principally as a result of the provision for loss relating to
the conditional settlement of the Bogalusa Litigation (see Notes to Unaudited
Consolidated Financial Statements).
As a result of the above factors, income before income taxes,
extraordinary item and cumulative effect of change in accounting principle
decreased by $37.3 million in 1998. 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 items which are not taxable.
In the 1998 period the Company acquired $2.7 million principal amount of
its 11 7/8% Senior Subordinated Notes, which resulted in a loss of $0.2 million
(see "Refinancing" below). Such loss (which has no tax benefit) is classified as
an extraordinary item in the accompanying Consolidated Statement of Operations.
No such debt was acquired in the 1997 period.
Nine month period ended September 30, 1998 compared with the nine month
period ended September 30, 1997:
Revenues increased by 9.7% to $314.7 million in 1998 from $286.9 million
in 1997, an increase of $27.8 million. The increase resulted from (i) increased
sales of Specialty Plant Nutrients and Industrial Chemicals of approximately
$22.3 million principally due to an increase of quantities sold in 1998 versus
the prior year period, which period was adversely affected as a result of the
HCL labor dispute, with such increased sales partially offset by less favorable
currency exchange rates in 1998 and (ii) an increase in revenues of Organic
Chemicals of approximately $5.5 million. See "HCL Labor Dispute" above.
Cost of goods sold as a percentage of revenues decreased to 78.8% in 1998
compared with 81.3% in 1997. Gross profit was $66.7 million in 1998, or 21.2% of
revenues, compared with $53.6 million or 18.7% of revenues in 1997, an increase
of $13.1 million. The primary factors resulting in the increased gross profit in
1998 were (i) increased Specialty Plant Nutrient and Industrial Chemicals
quantities sold as compared to the 1997 period primarily resulting from the
adverse effect of the HCL Labor Dispute, (ii) lower raw material and energy
costs and certain selling price
13
<PAGE> 14
increases and (iii) improved margins of Organic Chemicals. These increases were
partially offset by less favorable currency exchange rates in the 1998 period
and by certain increased costs relating to production interruptions and
inefficiencies at HCL in the 1998 period resulting from (i) certain unscheduled
maintenance to equipment required due to the lengthy period of shut-down during
the HCL Labor Dispute and (ii) the impact of power interruptions associated with
the installation of a new electrical co-generation facility at HCL's plant.
General and administrative expense increased to $36.4 million in 1998 from $31.0
million in 1997, an increase of $5.4 million (11.6% of revenues in 1998 compared
to 10.8% of revenues in 1997). This increase was due to (i) increased sales
volume in 1998 and (ii) the general and administrative expenses relating to an
Organic Chemicals business in Hungary purchased by the Company in May, 1998.
As a result of the matters described above, the Company's operating income
increased by $7.7 million to $30.4 million in 1998 as compared with $22.7
million in 1997.
Interest expense increased by $6.3 million to $28.0 million in 1998
compared with $21.7 million in 1997 primarily as a result of (i) the March, 1998
issuance by the Company of the 10 3/4% Senior Notes and 12% Senior Discount
Notes, partially offset by the Company's repurchase of all of its 11 7/8% Senior
Subordinated Notes (see "Refinancing" below) and (ii) certain increased
borrowings relating to the Company's investment and capital expenditure program.
Interest and other income (expense) - net decreased in 1998 by $13.1 million,
principally as the result of the provision for loss relating to the conditional
settlement of the Bogalusa Litigation, partially offset by the gain related to
the Laser/ESC combination described above (see Notes to Unaudited Consolidated
Financial Statements and "Investment in Laser Industries Limited" above).
As a result of the above factors, income before income taxes,
extraordinary item and cumulative effect of change in accounting principle
decreased by $11.7 million in 1998. 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 items which are not taxable.
In the 1998 period the Company acquired the total amount outstanding
($115.0 million principal amount) of its 11 7/8% Senior Subordinated Notes,
which resulted in a loss of $11.3 million (see "Refinancing" below). Such loss
(which has no tax benefit) is classified as an extraordinary item in the
accompanying Consolidated Statement of Operations. No such debt was acquired in
the 1997 period.
In the 1998 period the Company changed its method of accounting for
start-up costs incurred relating to the start-up of newly constructed
manufacturing facilities to conform with SOP 98-5. This change in accounting
method resulted in a net charge of approximately $1.3 million.
14
<PAGE> 15
CAPITAL RESOURCES AND LIQUIDITY
The Company's consolidated working capital at September 30, 1998 and
December 31, 1997 was approximately $82.1 million and $73.6 million,
respectively.
Operations for the nine month periods ended September 30, 1998 and 1997,
after adding back non-cash items, provided cash of approximately $23.1 million
and $16.7 million, respectively. During such periods other changes in working
capital used cash of approximately $33.5 million and $4.3 million, respectively,
resulting in cash being provided (used) by operating activities and working
capital management of approximately ($10.4) million and $12.4 million,
respectively.
Investment activities during the nine month periods ended September 30,
1998 and 1997 used cash of approximately $73.3 million and $13.9 million,
respectively. These amounts include: (i) additions to property in 1998 and 1997
of approximately $42.2 million and $14.2 million, respectively; (ii) purchases
of marketable securities and other short-term investments of approximately $25.9
million and $1.9 million, respectively; (iii) sales of marketable securities and
other short-term investments of approximately $7.6 million and $8.2 million,
respectively; and (iv) other items using cash of approximately $12.8 million
(including approximately $10.0 million relating to the purchase of approximately
42% of the equity of Lego Irrigation, Ltd., an Israeli developer, manufacturer
and marketer of drip irrigation systems) and $6.0 million, respectively. The
property additions in the 1998 period relate primarily to the Company's
expansion of its potassium nitrate and food grade phosphates capacity in the
United States and Israel and the construction of a plant in the United States to
produce monoammonium phosphate ("MAP") and monopotassium phosphate ("MKP").
Financing activities during the nine month periods ended September 30,
1998 and 1997 provided (used) cash of approximately $77.9 million and ($2.1)
million, respectively. The 1998 amount relates primarily to the refinancing
described below and certain borrowings relating to the Company's investment and
capital expenditure program.
As of September 30, 1998, the Company had outstanding long-term debt
(excluding current maturities) of approximately $370.7 million. The Company's
primary sources of liquidity are cash flows generated from operations and its
unused credit lines.
REFINANCING
On March 11, 1998, the Company commenced a private placement of $100.0
million principal amount of 10 3/4% Senior Notes due 2008 (the "Senior Notes")
and $135.0 million principal amount at maturity of 12% Senior Discount Notes due
2008 (the "Senior Discount Notes"). The Senior Discount Notes provided gross
proceeds to the Company of approximately $75.4 million. The sale of the Senior
Notes and the Senior Discount Notes closed on
15
<PAGE> 16
March 16, 1998. A substantial portion (approximately $118.0 million) of the net
proceeds from the sale was used in March, 1998 to purchase (pursuant to a tender
offer and consent solicitation) approximately $110.0 million principal amount of
the Company's 11 7/8% Senior Subordinated Notes (the "Refinancing"), and,
combined with the write-off of certain unamortized issuance costs associated
with the 11 7/8% Senior Subordinated Notes, resulted in an extraordinary charge
for the early extinguishment of debt of approximately $10.9 million which is
classified as an extraordinary item in the accompanying Consolidated Statement
of Operations.
The Senior Notes and the Senior Discount Notes are unsecured obligations
of the Company and are pari passu in right of payment with all existing and
future unsecured and unsubordinated indebtedness of the Company and senior in
right to payment of all subordinated indebtedness of the Company. Interest on
the Senior Notes is payable semi-annually. Interest on the Senior Discount Notes
accretes and compounds semi-annually but is not payable until 2003, after which
interest will be payable semi-annually.
The Company intends to use the balance of the proceeds from the sale of
the Senior Notes and Senior Discount Notes for working capital and general
corporate purposes, including the repayment of debt and possible future
acquisitions and capital expenditures. During March, 1998 the Company repaid
$13.9 million of borrowings under a Loan Agreement with a bank and reduced the
amounts outstanding under certain short-term loans. In addition, in the three
month period ended June, 1998 the Company repurchased an additional $2.3 million
principal amount of its 11 7/8% Senior Subordinated Notes, and, in July, 1998,
repurchased the remaining $2.7 million outstanding principal amount of the
11 7/8% Senior Subordinated Notes pursuant to the call provisions under such
notes. See Note G of Notes to Consolidated Financial Statements included in the
Company's Form 10-K.
FORWARD-LOOKING LIQUIDITY AND CAPITAL RESOURCES
Interest payments on the Senior Notes and interest and principal
repayments under other indebtedness represent significant obligations of the
Company and its subsidiaries. For a description of the amortization required on
the Company's other indebtedness see Note G of Notes to Consolidated Financial
Statements included in the Company's Form 10-K. During the year ended 1997, the
Company spent approximately $10.8 million relating to the Company's initial
capital expenditures pursuant to its plan to increase capacity for potassium
nitrate, food grade phosphates and the construction of a plant to manufacture
MAP and MKP. In addition, the Company plans to complete such projects by
spending an aggregate of approximately $63.0 million during 1998 and 1999.
During the nine month period ended September 30, 1998 the Company incurred
capital expenditures of approximately $42.2 million, including approximately
$27.2 million relating to these projects. Ongoing maintenance capital
expenditures are expected to be approximately $14.0 million per year.
16
<PAGE> 17
The Company's primary sources of liquidity are cash flows from operations
and borrowings under the credit facilities of the Company. As of September 30,
1998, the Company had approximately $62.5 million of borrowing availability,
consisting of $29.0 million of borrowing availability at TRI and the remainder
at the Company's subsidiaries. In addition, during 1998 HCL entered into an
$80.0 million credit facility which will be used primarily to finance its
planned capacity expansion at its Mishor Rotem, Israel facility. Dividends and
other distributions from the Company's subsidiaries are, in part, a source of
cash flow available to the Company. The Company believes that, based on current
and anticipated financial performance, cash flow from operations, borrowings
under the Company's credit facilities and dividends and other distributions
available from the Company's subsidiaries will be adequate to meet anticipated
requirements for capital expenditures, working capital and scheduled interest
payments. However, the Company's capital requirements may change, particularly
if the Company completes any material acquisitions. The ability of the Company
to satisfy its capital requirements and to repay or refinance its indebtedness
will be dependent upon the future financial performance of the Company, which in
turn will be subject to general economic conditions and to financial, business
and other factors, including factors beyond the Company's control. See "Special
Note Regarding Forward-Looking Statements" above.
FOREIGN CURRENCIES
The Company has no significant foreign currency denominated revenues
except at HCL. Approximately $135.0 million of HCL's total sales for the year
ended December 31, 1998 are estimated to be made outside of Israel in currencies
other than the U.S. dollar (principally in Western European currencies).
Accordingly, to the extent the U.S. dollar weakens or strengthens versus the
applicable corresponding currency, HCL's results are favorably or unfavorably
affected. 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 before
income taxes for the nine month periods ended September 30, 1998 and 1997, would
have increased (decreased) by approximately $1.4 million and ($5.6) million,
respectively.
17
<PAGE> 18
The Company determines when to enter into hedging transactions based on
its ongoing review of the currency markets. 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.
On January 1 1999, eleven of fifteen member countries of the European
Union are scheduled to establish fixed conversion rates between their existing
currencies ("legacy currencies") and one common currency - the Euro. The Euro
will then trade on currency exchanges and may be used in business transactions.
The conversion to the Euro will eliminate currency exchange rate risk between
the member countries. Beginning in January, 2002, new Euro-denominated bills and
coins will be issued, and legacy currencies will be withdrawn from circulation.
HCL, the principal subsidiary of TRI that will be affected by the Euro
conversion, has established plans to address the issues raised by the Euro
currency conversion. These issues include, among others, the need to adapt
computer and financial systems, the competitive impact of cross-border price
transparency which may make it more difficult for businesses to charge different
prices for the same products on a country-by-country basis, recalculating
currency risk and recalibrating derivatives and other financial instruments. The
Company does not expect any required system conversion costs to be material. Due
to numerous uncertainties, the Company cannot reasonably estimate the effects
one common currency will have on pricing and the resulting impact, if any, on
the Company's financial condition or its results of operations.
INFLATION
Inasmuch as only approximately $59.0 million 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 could 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, 1997 and 1996 the inflation rate of the NIS as compared to the U.S.
Dollar was greater (less) than the devaluation rate in Israel by (1.8%) and
6.9%, 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 for
information regarding environmental matters relating to the Company's various
facilities.
18
<PAGE> 19
YEAR 2000 ISSUE
The term "Year 2000 ("Y2K") Issue" is a general term used to describe the
various problems that may result from the improper processing of dates and
date-sensitive calculations by computers and other machinery as the year 2000 is
approached and reached. These problems generally arise from the fact that most
of the world's computer hardware and software have historically used only two
digits to identify the year in a date, often meaning that the computer will fail
to distinguish dates in the "2000's" from dates in the "1900's." These problems
may also arise from other sources as well, such as the use of special codes and
conventions in software that make use of the date field. The Y2K computer
software compliance issues affect the Company and most companies in the world.
In 1997, the Company created project teams to coordinate its activities
relating to becoming Y2K compliant (the "Y2K Project"). The Y2K Project for the
Company's internal systems and equipment covers both traditional computer
systems and infrastructure ("IT Systems") and computer-based manufacturing,
logistical and related systems ("Non-IT Systems"). The Y2K Project generally has
four phases - (i) an identification and inventory of all systems and devices
with potential Y2K problems; (ii) assessment (including prioritization); (iii)
remediation (including modification, upgrading and replacement) and testing; and
(iv) contingency planning.
The Company operates on a decentralized independent operating company
basis; consequently, the Y2K Project status may vary across TRI's various
direct and indirect subsidiaries. As of September 30, 1998, for both IT Systems
and Non-IT Systems, phases (i) and (ii) are generally complete and phase (iii)
is in process. Based on its assessment of its major IT systems, the Company
expects that all necessary modifications and/or replacements required in phase
(iii) will be completed in a timely manner to ensure that all of TRI's various
direct and indirect subsidiaries are Y2K compliant.
The Y2K Project also considers the readiness of significant customers,
suppliers and other third party providers. Each of TRI's various direct and
indirect subsidiaries are currently assessing the status of its significant
customers, suppliers and other third party providers with respect to their
becoming Y2K compliant.
The Company is revising its existing business interruption contingency
plans to address internal and external issues specific to the Y2K problem, to
the extent practicable. Such revisions are expected to be completed by mid 1999.
These plans, which are intended to enable the Company to continue to operate on
January 1, 2000 and beyond, include performing certain processes manually;
repairing or obtaining replacement systems; changing suppliers; and reducing or
suspending operations. These plans are intended to mitigate both internal risks
as well as potential risks in the supply
19
<PAGE> 20
chain of the Company's suppliers and customers. The Company believes, however,
that due to the widespread nature of potential Y2K issues, the contingency
planning process is an ongoing one which will require further modifications as
the Company obtains additional information regarding the Company's internal
systems and equipment during the completion of the Y2K Project and regarding the
status of its suppliers, customers, and other third party providers regarding
their becoming Y2K compliant.
Through September 30, 1998 the Company estimates that it has spent
approximately $500,000 in its efforts of achieving Y2K compliance, all of which
has been recognized as an expense in the Company's Consolidated Statements of
Operations. The Company expects to be able to provide an estimate of remaining
costs to be incurred in its efforts of achieving Y2K compliance in its December
31, 1998 Form 10-K, but does not anticipate that such costs will have a material
effect on its liquidity or financial condition. The Company intends to fund from
operations the costs of becoming Y2K compliant.
The failure to correct a material Y2K problem could result in an
interruption in, or failure of, certain normal business activities or
operations. Such failures could materially and adversely affect the Company's
results of operations, liquidity and financial condition. Due to the general
uncertainty inherent in the Y2K problem, resulting in part from the uncertainty
of the Y2K readiness of the Company's customers, suppliers, and other
third-party providers, the Company is unable to determine at this time whether
the consequences of any Y2K failures will have a material impact on the
Company's results of operations, liquidity or financial condition. The Y2K
Project is expected to significantly reduce the Company's level of uncertainty
about the Y2K problem. The Company believes that, with the implementation of
new business systems and completion of the Company's Y2K Project, the
possibility of significant interruptions of normal operations should be
reduced.
The preceding "Y2K problem" discussion contains various forward-looking
statements which represent the Company's beliefs or expectations regarding
future events. When used in the "Y2K problem" discussion, the words "believes,"
"expects," "estimates" and similar expressions are intended to identify
forward-looking statements. Forward-looking statements include, without
limitation, the Company's expectations as to when it will complete the
remediation and testing phases of its Y2K Project as well as its Y2K contingency
plans; its estimated cost of becoming Y2K compliant; and the Company's belief
that its internal systems and equipment will be Y2K compliant in a timely
manner. All forward-looking statements involve a number of risks and
uncertainties that could cause the actual results to differ materially from the
projected results, including problems that may arise on the part of third
parties. Factors that may cause these differences include, but are not limited
to, the availability of qualified personnel and other
20
<PAGE> 21
information technology resources; the ability to identify and remediate all
date sensitive lines of computer code or to replace embedded computer chips in
affected systems or equipment; and the actions of governmental agencies or
other third parties with respect to Y2K problems. If the modifications and
conversions required to make the Company Y2K compliant are not made or are not
completed on a timely basis, the resulting problems could have a material
impact on the operations of the Company. This impact could, in turn, have a
material adverse effect on the Company's results of operations and
financial condition.
OTHER MATTERS
In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards ("SFAS") No. 131, "Disclosures about Segments of
an Enterprise and Related Information" ("SFAS 131"). SFAS 131 establishes
standards for reporting financial and descriptive information for reportable
segments on the same basis that is used internally for evaluating segment
performance and the allocation of resources to segments. The Company is
evaluating the effect, if any, of SFAS 131 on its reporting disclosures. This
statement is effective for fiscal years beginning after December 15, 1997.
In June 1998, the Financial Accounting Standards Board issued SFAS No.
133, "Accounting for Derivative Instruments and Hedging Activities" ("SFAS
133"). SFAS 133 requires that an entity recognize all derivatives as either
assets or liabilities and measure those instruments at fair value. Depending on
the intended use of the derivative, changes in derivative fair values may be
charged to operations unless the derivative qualifies as a hedge under certain
requirements. SFAS 133 is effective for all quarters of fiscal years beginning
after June 15, 1999. The Company will be evaluating the impact, if any, of SFAS
133 on its consolidated financial statements over the coming months.
21
<PAGE> 22
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
As previously disclosed, 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 chemical release from a tank car at
a Bogalusa, Louisiana plant of a Vicksburg customer. The tank car contained
nitrogen tetroxide which had been produced and sold by Vicksburg. Subsequently,
approximately 146 suits were filed in the State Court for the 22nd Judicial
District, Washington Parish, Louisiana (the "Louisiana Court"). The cases have
been consolidated in the Louisiana Court and certified as a class action (the
"Louisiana Class Action"). The class is estimated to contain more than 8,000
claimants. Vicksburg, the Company and Cedar are included among the defendants
in the Class Action. In addition, two later suits, one on behalf of the City of
Bogalusa, have been filed in the Louisiana Court naming, among the defendants,
Vicksburg, Cedar and the Company. Also, 10 separate suits naming an aggregate
of approximately 4,000 plaintiffs are pending in the Circuit Court of Hinds
County, Mississippi naming, among the defendants, Vicksburg, Cedar and the
Company. Among other defendants included in the Louisiana Class Action and in
the Mississippi suits are Gaylord Chemical Company and its parent corporation,
Gaylord Container Corporation; Union Tank Car Company; Illinois Central
Railroad Company; and Kansas City Southern Railway Company. The plaintiffs in
these suits seek unspecified damages arising out of the alleged exposure to
toxic fumes and the City of Bogalusa seeks reimbursement of expenses allegedly
resulting from the chemical release. The suits were tendered to the Company's
liability insurance carriers for defense and indemnification. Certain of the
carriers denied coverage. Vicksburg and Cedar have commenced an action in the
Louisiana Court against their insurance carriers (whose insurance policies also
included 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.
As previously disclosed in the Company's Current Report on Form 8-K for
August 31, 1998 (the "Form 8-K"), during August, 1998, conditional agreements
to settle the claims in the Louisiana Class Action and in the Mississippi suits
were entered into on behalf of TRI, Vicksburg, Cedar and other affiliates of
the Company named as defendants (collectively the "Entities") and on behalf of
the plaintiffs.
If the numerous conditions to the settlement are satisfied, the Entities'
funding obligation under the settlement would be an aggregate of $32 million,
the initial $10 million of which was deposited in an escrow account on August
31, 1998 governed by a Temporary Escrow Agreement. In addition, two settling
22
<PAGE> 23
insurance carriers (the "Settling Insurers") are to contribute an aggregate of
$25 million and the Entities will assign to the plaintiffs its rights under
another $27 million of insurance coverage. The Entities are also to contribute a
sum equal to the amount by which the policy of one of the Settling Insurers is
depleted by payments of TRI's defense costs.
The Company has recorded a charge in the third quarter of $35.8 million in
connection with the conditional settlement and the related legal expenses. See
Notes to Unaudited Consolidated Financial Statements.
For a detailed description of the conditional settlement see the Form
8-K.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits.
Exhibit 27 - Financial Data Schedule.
(b) Reports on Form 8-K.
On September 10, 1998 the Company filed a Current Report on Form 8-K (for
August 31, 1998) disclosing under Item 5 of Form 8-K the conditional settlement
of the Bogalusa Litigation. See Item 1 - "Legal Proceedings" above.
23
<PAGE> 24
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 13, 1998 Lester W. Youner
-----------------------------
Vice President, Treasurer and
Chief Financial Officer
24
<PAGE> 25
TRANS-RESOURCES, INC.
INDEX TO EXHIBITS
Exhibit Description Page No.
27 Financial Data Schedule. 26
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> SEP-30-1998
<CASH> 13,964
<SECURITIES> 0
<RECEIVABLES> 85,308
<ALLOWANCES> 0
<INVENTORY> 75,107
<CURRENT-ASSETS> 249,571
<PP&E> 370,230
<DEPRECIATION> 134,712
<TOTAL-ASSETS> 536,703
<CURRENT-LIABILITIES> 167,484
<BONDS> 370,661
0
7,960
<COMMON> 0
<OTHER-SE> (47,255)
<TOTAL-LIABILITY-AND-EQUITY> 536,703
<SALES> 314,664
<TOTAL-REVENUES> 314,664
<CGS> 247,927
<TOTAL-COSTS> 247,927
<OTHER-EXPENSES> 36,364
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 27,982
<INCOME-PRETAX> (6,893)
<INCOME-TAX> 1,911
<INCOME-CONTINUING> (8,804)
<DISCONTINUED> 0
<EXTRAORDINARY> (11,328)
<CHANGES> (1,253)
<NET-INCOME> (21,385)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
