<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 March 31, 1999
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.
<TABLE>
<CAPTION>
Delaware 36-2729497
<S> <C>
(State or other jurisdiction (I.R.S. Employee Identification No.)
of incorporation or organization)
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
(Exact name of registrant as specified in its charter)
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 May 14, 1999, 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
March 31, 1999
<TABLE>
<CAPTION>
Page
PART I Number
- ------ ------
<S> <C>
Item 1. - Financial Statements:
Consolidated Statements of Operations.......................................... 3
Consolidated Balance Sheets.................................................... 4
Consolidated Statements of Stockholder's Equity and Comprehensive Income....... 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.......................................................... 10
Item 3. - Quantitative and Qualitative Disclosures About Market Risk..................... 20
PART II
Item 1. - Legal Proceedings.............................................................. 21
Item 4. - Submission of Matters to a Vote of Security Holders............................ 21
Item 6. - Exhibits and Reports on Form 8-K............................................... 22
Signatures ............................................................................... 23
</TABLE>
2
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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
Ended March 31,
-------------------------------
1999 1998
---- ----
(000's)
<S> <C> <C>
REVENUES ..................................................................... $ 127,757 $ 104,962
COSTS AND EXPENSES:
Cost of goods sold ...................................................... 99,342 84,976
General and administrative .............................................. 15,578 11,750
--------- ---------
OPERATING INCOME ............................................................. 12,837 8,236
Interest expense ........................................................ (10,542) (8,220)
Interest and other income (expense) - net ............................... 56 23,820
--------- ---------
INCOME BEFORE INCOME TAXES,
EXTRAORDINARY ITEM AND
CHANGE IN ACCOUNTING PRINCIPLE .......................................... 2,351 23,836
--------- ---------
INCOME TAX PROVISION (BENEFIT):
Current ................................................................. 807 524
Deferred ................................................................ 705 112
--------- ---------
Total ............................................................... 1,512 636
--------- ---------
INCOME BEFORE EXTRAORDINARY
ITEM AND CHANGE IN ACCOUNTING PRINCIPLE ................................. 839 23,200
EXTRAORDINARY ITEM - Loss on repurchase of
debt (no income tax benefit) ............................................ -- (10,940)
CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE,
net of income tax benefit of $80,000 .................................... -- (1,253)
--------- ---------
NET INCOME ................................................................... $ 839 $ 11,007
========= =========
</TABLE>
See notes to unaudited consolidated financial statements.
3
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TRANS-RESOURCES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
March 31, December 31,
1999 1998
---- ----
(Unaudited)
(000's)
ASSETS
CURRENT ASSETS:
<S> <C> <C>
Cash and cash equivalents ............................................... $ 17,726 $ 12,387
Accounts receivable ..................................................... 120,397 90,998
Inventories:
Finished goods ...................................................... 81,147 74,141
Raw materials ....................................................... 20,709 21,301
Other current assets .................................................... 42,806 63,608
Prepaid expenses ........................................................ 18,062 16,477
--------- ---------
Total Current Assets ................................................ 300,847 278,912
PROPERTY, PLANT AND EQUIPMENT - NET .......................................... 281,641 260,585
OTHER ASSETS ................................................................. 70,109 59,789
--------- ---------
Total ............................................................... $ 652,597 $ 599,286
========= =========
LIABILITIES AND STOCKHOLDER'S EQUITY
CURRENT LIABILITIES:
Current maturities of long-term debt .................................... $ 12,165 $ 10,183
Short-term debt ......................................................... 53,586 39,065
Accounts payable ........................................................ 94,672 76,306
Accrued expenses and other current liabilities .......................... 34,674 43,224
--------- ---------
Total Current Liabilities ........................................... 195,097 168,778
--------- ---------
LONG-TERM DEBT - NET -
Senior indebtedness, notes payable and other obligations ................ 448,831 414,432
--------- ---------
OTHER LIABILITIES ............................................................ 56,017 54,919
--------- ---------
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 ....................................................... (36,684) (34,922)
Cumulative translation adjustment ....................................... (1,713) (1,462)
Unrealized gains (losses) on marketable securities ...................... (25,593) (19,101)
--------- ---------
Total Stockholder's Equity .......................................... (47,348) (38,843)
--------- ---------
Total ............................................................... $ 652,597 $ 599,286
========= =========
</TABLE>
See notes to unaudited consolidated financial statements.
4
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TRANS-RESOURCES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDER'S EQUITY AND COMPREHENSIVE INCOME
Three Month Period Ended March 31, 1999
(Unaudited)
<TABLE>
<CAPTION>
Additional Cumulative
Preferred Common Paid-In Retained Translation
Stock Stock Capital Earnings Adjustment
----- ----- ------- -------- ----------
(000's)
<S> <C> <C> <C> <C> <C> <C>
BALANCE,
January 1, 1999........ $ 7,960 $ -- $ 8,682 $(34,922) $ (1,462)
Net income.................. 839
Dividends paid:
Common stock.............. (2,388)
Preferred stock........... (213)
Net change during
period................. (251)
------- ------- ------- -------- --------
BALANCE,
March 31, 1999......... $ 7,960 $ -- $ 8,682 $(36,684) $ (1,713)
======= ======= ======= ======== ========
<CAPTION>
Unrealized
Gains (Losses) Comprehensive
on Securities Total Income
------------- ----- ------
(000's)
<S> <C> <C> <C>
BALANCE,
January 1, 1999........ $(19,101) $ (38,843)
Net income.................. 839 $ 839
Dividends paid:
Common stock.............. (2,388)
Preferred stock........... (213)
Net change during
period................. (6,492) (6,743) (6,743)
--------- --------- --------
BALANCE,
March 31, 1999......... $ (25,593) $ (47,348) $ (5,904)
========= ========= ========
</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>
Three Month Period
Ended March 31,
----------------------
1999 1998
---- ----
(000's)
<S> <C> <C>
OPERATING ACTIVITIES AND WORKING CAPITAL
MANAGEMENT:
Operations:
Net income .......................................................................... $ 839 $ 11,007
Items not requiring (providing) cash:
Depreciation and amortization of property, plant and equipment
and other assets ........................................................... 6,258 5,302
Amortization of deferred financing costs and accretion of
interest expense ........................................................... 2,663 601
Gain on Laser/ESC share exchange ................................................ -- (22,946)
Extraordinary item - loss on repurchase of debt ................................. -- 10,940
Cumulative effect of change in accounting principle ............................. -- 1,253
Deferred taxes and other - net .................................................. 22 366
--------- ---------
Total ...................................................................... 9,782 6,523
Working capital management:
Accounts receivable and other current assets .................................... (20,405) (22,535)
Inventories ..................................................................... (3,674) (5,750)
Prepaid expenses ................................................................ (1,585) (1,282)
Accounts payable ................................................................ 14,775 9,882
Accrued expenses and other current liabilities .................................. (7,742) (7,312)
--------- ---------
Cash provided (used) by operations and working
capital management ..................................................... (8,849) (20,474)
--------- ---------
INVESTMENT ACTIVITIES:
Additions to property, plant and equipment .......................................... (26,363) (8,229)
Purchases of marketable securities and other short-term investments ................. (1,280) (4,285)
Sales of marketable securities and other short-term investments ..................... 10,487 5,346
Other - net, including approximately $10 million and $11 million
relating to the purchase of an equity investment in Lego in 1999
and 1998, respectively ................................................... (12,575) (18,804)
--------- ---------
Cash provided (used) by investment activities .............................. (29,731) (25,972)
--------- ---------
FINANCING ACTIVITIES:
Increase in short-term debt ......................................................... 12,598 7,493
Increase in long-term debt .......................................................... 34,555 190,697
Repurchases, payments and current maturities of long-term debt ...................... (633) (135,403)
Cash dividends to stockholder ....................................................... (2,601) (10,906)
--------- ---------
Cash provided (used) by financing activities ............................... 43,919 51,881
--------- ---------
INCREASE IN CASH AND CASH EQUIVALENTS .................................................... 5,339 5,435
CASH AND CASH EQUIVALENTS:
Beginning of period ................................................................. 12,387 19,757
--------- ---------
End of period ....................................................................... $ 17,726 $ 25,192
========= =========
</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
wholly-owned subsidiary, Vicksburg Chemical Company ("Vicksburg"); Na-Churs
Plant Food Company; Haifa Chemicals Ltd. ("HCL") and HCL's wholly-owned
subsidiary, Haifa Chemicals South, Ltd. and Plant Products Co. Ltd. ("Plant
Products"). TRI is a wholly-owned subsidiary of TPR Investment Associates, Inc.
Unless the context otherwise requires, 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.
During 1998, the Company completed several small acquisitions.
Effective January 1, 1998, the Company acquired a Spanish company engaged in the
manufacturing and distribution of specialty plant nutrients; effective May 1,
1998, the Company acquired EMV Kft., a Hungarian business engaged in the
manufacturing and marketing of organic chemicals; effective October 30, 1998,
the Company acquired Plant Products, headquartered in Ontario, Canada, which
manufactures and markets specialty plant nutrients for commercial horticulture,
specialty high value crops and retail markets; and effective December 18, 1998,
the Company acquired Alpine Plant Foods, Inc., (including a Canadian subsidiary)
which manufactures and distributes high purity liquid fertilizers.
Each of these acquisitions have been accounted for using the purchase
method of accounting. The aggregate purchase price paid for these acquired
businesses was approximately $24.6 million and resulted in approximately $11
million in goodwill, with such goodwill generally being amortized over a 20 year
period.
In addition, effective February 4, 1998, a subsidiary of HCL purchased
a 42% equity interest in Lego Irrigation, Ltd ("Lego"), an Israeli developer,
manufacturer and marketer of drip irrigation systems, for a purchase price of
approximately $11 million. On March 9, 1999, as contemplated by the terms of the
initial purchase of the Lego shares, the subsidiary of HCL purchased, pursuant
to an option, an additional 34% equity interest in Lego for approximately $10
million.
7
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As previously disclosed in the Company's Annual Report on Form 10-K
for the year ended December 31, 1998 (the "Form 10-K"), the Company is 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
seek 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. During August, 1998 the Company
entered into conditional agreements to settle the claims in the Bogalusa
Litigation. During March, 1999, amended and restated conditional agreements to
settle the claims were executed by the parties.
If the conditions of the settlement are satisfied, the Company's
funding obligation would be an aggregate of approximately $32.4 million plus (i)
an amount (estimated to eventually be in excess of $4.5 million) equal to the
amount which one of the settling insurance companies shall have paid to the
Company for reimbursement of defense costs (the "Defense Depletion Amount") and
(ii) interest payments at 6.25% per annum beginning April 1, 1999 on the not as
yet escrowed portion of $17 million, as described below. The initial $10 million
of the funding obligation was deposited in escrow on August 31, 1998. In
addition, two settling insurance companies are to contribute an aggregate of $25
million, less the Defense Depletion Amount, and the Company will assign to the
plaintiffs its rights under another $26 million of insurance coverage. The
Company escrowed an additional $5 million on March 31, 1999, and is scheduled to
escrow an additional $6.8 million on December 31, 2000, and $5.1 million on both
June 30, 2001 and December 31, 2001.
In 1998, the Company recorded a charge of approximately $36.2 million
to cover the cost of the conditional settlement and the related legal expenses
(included in the caption "Interest and other income (expense)-net" in the
Company's December 31, 1998 Consolidated Statement of Operations in the Form
10-K).
For further information regarding the Bogalusa Litigation and the
conditional settlement relating thereto see Part I - Item 3 - "Legal
Proceedings" in the Form 10-K.
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. 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
8
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income for the cumulative effect of the change in accounting principle of
approximately $1.25 million (net of income taxes).
In the opinion of management, the unaudited consolidated financial
statements for the three month periods ended March 31, 1999 and 1998,
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 three month period ended March 31, 1999 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 Form 10-K which has been filed with
the Securities and Exchange Commission.
9
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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, certain
items appearing in the unaudited consolidated financial statements of the
Company.
<TABLE>
<CAPTION>
Percentage
of Revenues
-------------------------------
Three Month
Period Ended
March 31,
-------------------------------
1999 1998
------ ------
<S> <C> <C>
Revenues:
Specialty Plant Nutrients ................................................... 59.0% 59.4%
Industrial Chemicals ........................................................ 27.5 25.1
Organic Chemicals ........................................................... 13.5 15.5
------ ------
Total Revenues .............................................................. 100.0% 100.0%
Costs and Expenses:
Cost of goods sold .......................................................... 77.8 81.0
General and administrative .................................................. 12.2 11.2
------ ------
Operating income ................................................................. 10.0 7.8
Interest expense ............................................................ (8.3) (7.8)
Interest and other income (expense) - net ................................... 0.1 22.7
------ ------
Income before income taxes, extraordinary
item and change in accounting principle ..................................... 1.8 22.7
Income tax provision (benefit) ................................................... 1.1 0.6
------ ------
Income before extraordinary item and
change in accounting principle .............................................. 0.7 22.1
Extraordinary item ............................................................... -- (10.4)
Cumulative effect of change in accounting principle - net ........................ -- (1.2)
------ ------
Net income ....................................................................... 0.7% 10.5%
====== ======
</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 not limited to, statements concerning future
revenues (e.g., impact of the HCL Labor Dispute (as defined in the Form 10-K)
and inflation in Israel); expenses (e.g., labor savings resulting from HCL's
new Specific Collective Agreement ("SCA"), future
10
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environmental costs and capital expenditures); access to lending sources and
Israeli Government entitlements; Year 2000 matters; outcomes of legal
proceedings and statements identified or qualified by words such as "likely,"
"will," "suggests," "may," "would," "could," "should," "expects," "anticipates,"
"estimates," "plans," "projects," "believes," or similar expressions (and
variants of such words or expressions). Such forward-looking statements involve
known and unknown 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
Part I - Item 3 - "Legal Proceedings" in the Form 10-K); 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.
INVESTMENT IN LASER/ESC
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. ESC develops, manufactures, and markets medical devices utilizing both
state-of-the-art lasers and proprietary intense pulsed light source technology
for non-invasive treatment of varicose veins and other benign vascular lesions,
as well as for hair removal, skin cancer, skin rejuvenation and other clinical
applications. ESC shares are traded in the United States on the NASDAQ National
Market System. The Company's investment in ESC is accounted for pursuant to
Statement of Financial Accounting
11
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Standards ("SFAS") No. 115, "Accounting for Certain Investments in Debt and
Equity Securities" ("SFAS 115").
As of December 31, 1997, the Company carried its investment in the
Laser shares at approximately $9.1 million. 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 March 31, 1998 Consolidated Statement of Operations. Subsequent to
the exchange of shares, the Company carries its investment in the ESC shares in
"Other current assets" in the accompanying March 31, 1999 and December 31, 1998
Consolidated Balance Sheets. As of March 31, 1999, the quoted market value of
the ESC shares was approximately $6.90 per share, resulting in the Company
recording an unrealized loss of approximately $25.6 million. The unrealized loss
relating to ESC is included in the caption "Unrealized gains (losses) on
marketable securities" in the accompanying March 31, 1999 Consolidated Balance
Sheet. With respect to the Company's investment in ESC, Management of the
Company is not aware of any events that have occurred regarding ESC that would
indicate an other than temporary impairment of the Company's investment in ESC.
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 250,000 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 March 31, 1999 compared with the three month
period ended March 31, 1998:
Revenues increased by 21.7% to $127.8 million in 1999 from $105.0
million in 1998, an increase of $22.8 million. The increase resulted from (a)
increased sales of Specialty Plant Nutrients and Industrial Chemicals of
approximately $21.9 million principally attributable to (i) the businesses
acquired by the Company during 1998 as described above and (ii) more favorable
currency exchange rates in the 1999 period and (b) increased Organic Chemicals'
revenues of approximately $0.9 million.
Cost of goods sold as a percentage of revenues decreased to 77.8% in
1999 compared with 81.0% in 1998. Gross profit was $28.4 million in 1999, or
22.2% of revenues, compared with $20.0 million or 19.0% of revenues in 1998, an
increase of $8.4 million. The primary factors resulting in the increased gross
profit in 1999 were (i) increased Specialty Plant Nutrients and Industrial
Chemicals quantities sold as compared to the 1998 period, including the gross
profits relating to the businesses acquired by the Company in the latter part of
1998, (ii) more favorable currency exchange rates in 1999 and (iii) increased
production efficiencies at HCL in the 1999 period as compared to the prior year.
These increases were partially offset by decreases in the selling price of
chlorine, one
12
<PAGE> 13
of the Company's industrial chemical products. General and administrative
expense increased to $15.6 million in 1999 from $11.8 million in 1998, an
increase of $3.8 million (12.2% of revenues in 1999 compared to 11.2% of
revenues in 1998). This increase was principally due to the general and
administrative expenses recorded by the businesses acquired by the Company in
1998 as described above.
As a result of the matters described above, the Company's operating
income increased by $4.6 million to $12.8 million in 1999 as compared with $8.2
million in 1998.
Interest expense increased by $2.3 million to $10.5 million in 1999
compared with $8.2 million in 1998 primarily as a result of (i) the issuance by
the Company of its 10 3/4% Senior Notes and 12% Senior Discount Notes, partially
offset by the Company's repurchase of most of its 11 7/8% Senior Subordinated
Notes on March 16, 1998 (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 1999 by $23.8 million,
principally as the result of the 1998 gain related to the Laser/ESC combination
(see "Investment in Laser /ESC" above).
As a result of the above factors, income before income taxes,
extraordinary item and cumulative effect of change in accounting principle
decreased by $21.5 million in 1999. 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 $110.0 million principal amount
of its 11 7/8% Senior Subordinated Notes, which resulted in a loss of $10.9
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 1999 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.
CAPITAL RESOURCES AND LIQUIDITY
The Company's consolidated working capital at March 31, 1999 and
December 31, 1998 was $105.8 million and $110.1 million, respectively.
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Operations for the three month periods ended March 31, 1999 and 1998,
after adding back non-cash items, provided cash of approximately $9.8 million
and $6.5 million, respectively. During such periods other changes in working
capital used cash of approximately $18.6 million and $27.0 million,
respectively, resulting in cash being used by operating activities and working
capital management of approximately $8.8 million and $20.5 million,
respectively.
Investment activities during the three month periods ended March 31,
1999 and 1998 used cash of approximately $29.7 million and $26.0 million,
respectively. These amounts include: (i) additions to property in 1999 and 1998
of approximately $26.4 million and $8.2 million, respectively; (ii) purchases of
marketable securities and other short-term investments of approximately $1.3
million and $4.3 million, respectively; (iii) sales of marketable securities and
other short-term investments of approximately $10.5 million and $5.3 million,
respectively; and (iv) other items using cash of approximately $12.6 million and
$18.8 million, respectively (including purchases of equity interests in Lego of
approximately $10 million and $11 million in 1999 and 1998, respectively). The
property additions in both periods 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 at the Company's Vicksburg facility
in the United States to produce monoammonium phosphate ("MAP") and monopotassium
phosphate ("MKP").
Financing activities during the three month periods ended March 31,
1999 and 1998 provided cash of approximately $43.9 million and $51.9 million,
respectively. The 1998 amount relates primarily to the Refinancing described
below; the 1999 amount relates primarily to borrowings in connection with the
Company's investment and capital expenditure program.
As of March 31, 1999, the Company had outstanding long-term debt
(excluding current maturities) of $448.8 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 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 "11 7/8% Notes") (the "Refinancing"). In
addition,
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<PAGE> 15
in the four month period ended July, 1998, the Company repurchased or redeemed
the remaining $5.0 million principal amount of its 11 7/8% Notes. As a result of
the Refinancing and the subsequent repurchases or redemptions of the 11 7/8%
Notes, combined with the write-off of certain unamortized issuance costs
associated with the 11 7/8% Notes, the Company recognized an extraordinary
charge for the early extinguishment of debt of approximately $11.3 million
(including approximately $10.9 million during the three-month period ended March
31, 1998) which is classified as an extraordinary item in the December 31, 1998
Consolidated Statement of Operations included in the Company's Form 10-K.
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 TRI and senior
in right to payment to all subordinated indebtedness of TRI. 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.
See Note G of Notes to Consolidated Financial Statements included in
the 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 Form 10-K. During the years ended December 31, 1998
and 1997, the Company incurred significant capital expenditures pursuant to its
plan to increase capacity for potassium nitrate, food grade phosphates and the
construction of a plant at the Company's Vicksburg facility to manufacture MAP
and MKP (the "Plan"). The Company plans to complete the Plan during 1999. During
the three month period ended March 31, 1999 the Company incurred capital
expenditures of approximately $26.4 million, including approximately $16.0
million relating to the Plan. Ongoing maintenance capital expenditures are
expected to be approximately $16 million per year.
The Company's primary sources of liquidity are cash flows from
operations and borrowings under the credit facilities of the Company. As of
March 31, 1999, the Company had approximately $41 million of borrowing
availability, consisting of $18 million of borrowing availability of TRI and the
remainder at the Company's subsidiaries. In addition, during 1998 HCL entered
into an $80 million credit facility which is being used 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
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<PAGE> 16
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 would complete 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 $167 million of HCL's total sales for the year
ended December 31, 1998 were made outside of Israel in currencies other than the
U.S. dollar (principally in Western European currencies). Accordingly, to the
extent that the U.S. dollar weakens or strengthens versus the applicable
corresponding foreign 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 general policy of hedging a portion of its
foreign sales denominated in Western European currencies by entering into
forward exchange contracts. The Company determines when to enter in hedging
transactions (and the extent of its foreign currency denominated sales it wishes
to hedge) based on its ongoing review of the currency markets. A portion of
these contracts qualify as hedges pursuant to SFAS No. 52 and, accordingly,
applicable 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 three month periods ended March 31,
1999 and 1998, would have decreased by approximately $4.6 million and $1.2
million, 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.
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<PAGE> 17
On January 1, 1999, eleven of fifteen member countries of the European
Union established fixed conversion rates between their existing currencies
("legacy currencies") and one common currency - the Euro. On January 1, 1999,
the Euro began trading 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. 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 $65 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, 1998 and 1997 the inflation rate of the NIS as compared to the U.S.
Dollar was less than the devaluation rate in Israel by 9.0% and 1.8%,
respectively.
ENVIRONMENTAL MATTERS
See Part I - 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.
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
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<PAGE> 18
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 March 31, 1999, 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 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 in becoming Y2K compliant.
Through March 31, 1999 the Company estimates that it has spent
approximately $0.8 million in its efforts to achieve Y2K compliance, all of
which has been recognized as an expense in the Company's Consolidated Statements
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<PAGE> 19
of Operations. The Company estimates that the costs to be incurred subsequent to
March 31, 1999 in its efforts to achieve Y2K compliance will aggregate
approximately $0.7 million. 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 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.
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<PAGE> 20
OTHER MATTERS
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 (January 1, 2000 for the Company). The Company is evaluating
the impact, if any, of SFAS 133 on its consolidated financial statements.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The information required by this item is included in Item 7A in the
Company's Form 10-K. No material change has occurred as of March 31, 1999.
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<PAGE> 21
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
As previously disclosed (most recently in the Form 10-K), beginning in
April, 1993 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 Canadian and
United States potash producers, including Eddy Potash, Inc. ("EDP"), a direct
subsidiary of the Company (whose name was changed to EDP, Inc. upon completion
of the sale of its potash business in August, 1996), and New Mexico Potash
Corporation ("NMPC"), an indirect subsidiary of the Company (whose name was
changed to NMPC, Inc. upon completion of the sale of its potash business in
August, 1996), and "unnamed co-conspirators." On or about December 21, 1995, the
defendants filed motions for summary judgment. On September 13, 1996 Magistrate,
Judge Erickson issued a Report and Recommendation recommending that U.S.
District Court Judge Kyle grant the motions for summary judgment as to all of
the plaintiffs' claims. On January 2, 1997, Judge Kyle issued an order accepting
and adopting Magistrate Judge Erickson's Report and Recommendation and ordering
that the motions for summary judgment as to all of the plaintiffs' claims be
granted. Plaintiffs, by Notice of Appeal dated January 31, 1997, appealed Judge
Kyle's order to the U.S. Court of Appeals for the Eighth Circuit, before which
oral argument on the appeal occurred on November 17, 1997. On May 7, 1999, the
Court of Appeals affirmed the grant of summary judgment as to all of the
plaintiffs' claims against NMPC, EDP and two other defendants but reversed the
grant of summary judgment as to the claims against the remaining defendants.
Plaintiffs or the defendants against whom summary judgment was reversed may move
to reargue or for a hearing en banc before the Court of Appeals, or may seek
review by the United States Supreme Court.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
By written consent of the sole stockholder of the Company, dated
February 26, 1999, the number of directors of the Company was fixed at five, and
Avi D. Pelossof was elected a director. Arie Genger, Thomas G. Hardy, Martin A.
Coleman and Sash A. Spencer continue as the four other directors of the Company.
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ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits.
Exhibit 4.7 - Amendment No. 2, dated as of April 23, 1999, to the
Credit Agreement, dated as of November 3, 1995 and Amended and Restated
as of July 31, 1997, as previously amended, among Cedar Chemical
Corporation, the Lenders listed on the signature pages thereof and The
Chase Manhattan Bank, as Administrative Agent (exhibits omitted).
Exhibit 27 - Financial Data Schedule.
(b) Reports on Form 8-K.
No reports on Form 8-K were filed during the quarter for which this
report is filed.
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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: May 14, 1999 Lester W. Youner
--------------------------------
Vice President, Treasurer and
Chief Financial Officer
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TRANS-RESOURCES, INC.
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit Description
<S> <C>
4.7 Amendment No. 2, dated as of April 23, 1999, to the Credit
Agreement, dated as of November 3, 1995 and Amended and Restated
as of July 31, 1997, as previously amended, among Cedar Chemical
Corporation, the Lenders listed on the signature pages thereof and
The Chase Manhattan Bank, as Administrative Agent (exhibits
omitted).
27 Financial Data Schedule.
</TABLE>
24
<PAGE> 1
Exhibit 4.7
AMENDMENT NO. 2 TO CREDIT AGREEMENT
AMENDMENT NO. 2 dated as of April 23, 1999 (this "AMENDMENT NO. 2") to the
Credit Agreement dated as of November 3, 1995, as amended and restated as of
July 31, 1997 (as further amended from time to time, the "CREDIT AGREEMENT"),
among CEDAR CHEMICAL CORPORATION, a Delaware corporation (together with its
successors, the "COMPANY"), the lenders listed on the signature pages thereto
(together with their successors, the "LENDERS") and THE CHASE MANHATTAN BANK, as
administrative agent (in such capacity, together with its successors in such
capacity, the "ADMINISTRATIVE AGENT").
W I T N E S S E T H:
WHEREAS, the parties hereto have heretofore entered into the Credit
Agreement; and
WHEREAS, the Company has asked the Lenders to (i) increase the Tranche A
Term Loans and/or the Tranche B Term Loans by $9,000,000 in the aggregate, (ii)
amend the amortization schedule applicable to the Tranche A Term Loans and/or
the Tranche B Term Loans, (iii) amend the Current Ratio, Leverage Ratio,
Interest Coverage Ratio, Fixed Charge Coverage Ratio and Capital Expenditures
covenants, (iv) permit the formation of a new direct wholly-owned Subsidiary by
the Company, (v) waive the Company's default with respect to the Leverage Ratio
for the month of February 1999, and (vi) consent to the amendment of the
definition of "Secured Obligations" in each of the Company Security Agreement,
the Subsidiary Guarantor Security Agreement, the Company Pledge Agreement and
the Nine West Pledge Agreement, and, subject to the terms and conditions set
forth herein, the Lenders are willing to do so;
NOW, THEREFORE, the parties hereto agree as follows:
SECTION 1. Definitions; References. Unless otherwise specifically defined
herein, each term used herein which is defined in the Credit Agreement has the
meaning assigned to such term in the Credit Agreement. Each reference to
"hereof", "hereunder", "herein" and "hereby" and each other similar reference
and each reference to "this Agreement" and each other similar reference
contained in the Credit Agreement shall from and after the date hereof refer to
the Credit Agreement as amended hereby.
<PAGE> 2
SECTION 2. Amendment of Section 1.01 of the Credit Agreement. (a) Section
1.01 of the Credit Agreement is amended by inserting, in their appropriate
alphabetical position, the following definitions:
"ADDITIONAL TRANCHE A TERM LOAN" has the meaning set forth in
Section 2.01(i).
"ADDITIONAL TRANCHE B TERM LOAN" has the meaning set forth in
Section 2.01(i).
"ADDITIONAL TRANCHE B TERM LOAN COMMITMENT" shall mean, as to any
Lender, the obligation (if any) of such Lender to make an Additional
Tranche B Term Loan to the Company in a principal amount up to but not
exceeding the amount set forth opposite such Lender's name on the
Commitment Schedule under the caption "Additional Tranche B Term Loan
Commitment" (as the same may be adjusted from time to time pursuant to
Section 2.03).
"AMENDED AND RESTATED TRANCHE A TERM NOTES" shall mean the
promissory notes of the Company evidencing the Tranche A Term Loans,
substantially in the form of Exhibit A to Amendment No. 2.
"AMENDED AND RESTATED TRANCHE B TERM NOTES" shall mean the
promissory notes of the Company evidencing the Tranche B Term Loans,
substantially in the form of Exhibit B to Amendment No. 2.
"AMENDMENT NO. 2" shall mean Amendment No. 2 to this
Agreement dated as of the Amendment No. 2 Effective Date among the
parties to this Agreement.
"AMENDMENT NO. 2 EFFECTIVE DATE" shall mean April 23, 1999.
"COMMITMENT SCHEDULE" shall mean the Commitment Schedule
attached as Schedule I to Amendment No. 2.
"EXISTING TRANCHE A TERM LOAN" has the meaning set forth in
Section 2.01(i).
"EXISTING TRANCHE B TERM LOAN" has the meaning set forth in
Section 2.01(i).
"NEW CAPITAL PROJECTS"shall mean, collectively, (i) the expansion of
the Company's dichloroanaline ("DCA") capacity to eliminate the need for
purchases of DCA as a raw material in the production of propanil, (ii)
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<PAGE> 3
the expansion of in-house formulation in the Company's organics division,
(iii) the construction of a slow-release plant at the potassium nitrate
plant of Vicksburg Chemical, and (iv) the purchase of a new boiler to
expand the potassium nitrate capacity at Vicksburg Chemical.
"PARENT CAPITAL CONTRIBUTION AGREEMENT" shall mean the Parent
Capital Contribution Agreement dated as of April 23, 1999 among the
Parent, the Company and the Administrative Agent, substantially in the
form of Exhibit F attached to Amendment No. 2, pursuant to which the
Parent has agreed to contribute or cause to be contributed capital to the
Company in the amount of each payment by the Company or Vicksburg Chemical
under the Settlement Agreements within five days of such payment, as such
agreement shall, subject to Section 9.20 hereof, be modified and
supplemented and in effect from time to time.
"SETTLEMENT AGREEMENTS" shall mean, collectively, (i) the
Conditional Agreement to Settle dated as of August 20, 1998 by and among
the Plaintiffs' Liaison Committee, on behalf of the Class, the
Compromising Parties and the Settling Insurers, in each case as named
therein, and (ii) the Conditional Agreement to Settle dated as of August
20, 1998 by and among the Mississippi Plaintiff's Counsel, on behalf of
the Mississippi Plaintiffs, the Compromising Parties, and the Settling
Insurers, in each case as named therein, as said agreements shall be
modified and supplemented and in effect from time to time, with respect to
the settlement of all claims against the Company pursuant to In re:
Chemical Release at Bogalusa (all cases), Case No. 73,341, Division C,
22nd Judicial District, Parish of Washington, State of Louisiana and In
re: Bogalusa Chemical Release (all cases), Case No.: 251-96-493 Civ.,
Circuit Court of Hinds County, Mississippi First Judicial District.
"SPECIAL DIVIDEND" has the meaning set forth in Section 9.16 of
the Original Agreement.
"SUBSIDIARY GUARANTOR ADDENDUM" shall mean the Subsidiary Guarantor
Addendum dated as of the Amendment No. 2 Effective Date executed by TRI
Pro, Inc., substantially in the form of Exhibit E to Amendment No. 2, as
modified and supplemented and in effect from time to time.
"TRANCHE A TERM LOAN COMMITMENT" shall mean, as to any Lender, the
obligation (if any) of such Lender to make an Additional Tranche A Term
Loan to the Company in a principal amount up to but not exceeding the
amount set forth opposite such Lender's name on the Commitment Schedule
under the caption "Tranche A Term Loan
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<PAGE> 4
Commitment" (as the same may be adjusted from time to time pursuant to
Section 2.03).
"VICKSBURG CHEMICAL" shall mean Vicksburg Chemical Company, a
Delaware corporation, and its successors.
(b) Section 1.01 of the Credit Agreement is amended by restating in their
entirety the following definitions:
"COMMITMENTS" shall mean, as to any Lender, the aggregate of such
Lender's Tranche A Term Loan Commitment, Additional Tranche B Term Loan
Commitment and Working Capital Commitment.
"FINANCING DOCUMENTS" shall mean this Agreement, the Nine West
Guaranty, the Subsidiary Guaranty, the Nine West Guarantor
Acknowledgments, the Subsidiary Guarantor Acknowledgments, the Subsidiary
Guarantor Addendum, the Parent Capital Contribution Agreement, the Notes
and the Security Documents.
"NINE WEST GUARANTOR ACKNOWLEDGMENTS" shall mean the Nine West
Guarantor Acknowledgment and Consent dated the Effective Date executed by
Nine West, substantially in the form of Exhibit H hereto, and the Nine
West Guarantor Acknowledgment and Consent dated the Amendment No. 2
Effective Date executed by Nine West, substantially in
the form of Exhibit D to Amendment No. 2.
"REQUIRED CLASS LENDERS" shall mean, with respect to any Class of
Lenders, (x) at any time while no Loans or Letter of Credit Liabilities of
such Class of Lenders are outstanding, (i) for the Class of Lenders
holding Tranche A Term Loan Commitments or Working Capital Commitments,
Lenders having at least 66 2/3% of the aggregate amount of the Tranche A
Term Loan Commitments and the Working Capital Commitments and (ii) for the
Class of Lenders holding Additional Tranche B Term Loan Commitments,
Lenders having at least 66 2/3% of the aggregate amount of the Additional
Tranche B Term Loan Commitments, and (y) at any time while any Loans or
Letter of Credit Liabilities (if any) of such Class of Lenders are
outstanding, (i) for the Class of Lenders holding Tranche A Term Loans or
Working Capital Loans or Letter of Credit Liabilities, Lenders holding at
least 66 2/3% of the outstanding aggregate principal amount of the Tranche
A Term Loans, the Working Capital Loans and Letter of Credit Liabilities
(including, without limitation, participations in the Participation
Letters of Credit) and (ii) for the Class of Lenders holding Tranche B
Term Loans, Lenders holding at least 66 2/3% of the outstanding aggregate
principal amount of the Tranche B Term Loans.
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<PAGE> 5
"SUBSIDIARY GUARANTOR" shall mean each of the following Subsidiaries
of the Company: Vicksburg Chemical, Cedar International, TRI Pro, Inc., a
Delaware corporation, and each other Subsidiary of the Company that from
time to time becomes a party to the Subsidiary Guaranty.
"SUBSIDIARY GUARANTOR ACKNOWLEDGMENTS" shall mean the Subsidiary
Guarantor Acknowledgment and Consent dated the Effective Date executed by
each of Vicksburg Chemical and Cedar International, substantially in the
form of Exhibit I hereto, and the Subsidiary Guarantor Acknowledgment and
Consent dated the Amendment No. 2 Effective Date executed by each of
Vicksburg Chemical and Cedar International, substantially in the form of
Exhibit C to Amendment No. 2.
"TRANCHE A TERM LOAN" shall mean, as to any Lender, the Existing
Tranche A Term Loan and/or any Additional Tranche A Term Loan of such
Lender, as the context may require.
"TRANCHE A TERM NOTES" shall mean (i) as to Lenders who have not
made a Tranche A Term Loan Commitment, the promissory notes of the Company
evidencing the Tranche A Term Loans, substantially in the form of Exhibit
A hereto, and (ii) as to Lenders who have made a Tranche A Term Loan
Commitment, (x) for the period from the Effective Date through the
Amendment No. 2 Effective Date, the promissory notes of the Company
evidencing the Tranche A Term Loans, substantially in the form of Exhibit
A hereto, and (y) for the period beginning on the Amendment No. 2
Effective Date and thereafter, the Amended and Restated Tranche A Term
Notes.
"TRANCHE B TERM LOAN" shall mean, as to any Lender, the Existing
Tranche B Term Loan and/or any Additional Tranche B Term Loan of such
Lender, as the context may require.
"TRANCHE B TERM NOTES" shall mean (i) as to Lenders who have not
made an Additional Tranche B Term Loan Commitment, the promissory notes of
the Company evidencing the Tranche B Term Loans, substantially in the form
of Exhibit B hereto, and (ii) as to Lenders who have made an Additional
Tranche B Term Loan Commitment, (x) for the period from the Effective Date
through the Amendment No. 2 Effective Date, the promissory notes of the
Company evidencing the Tranche B Term Loans, substantially in the form of
Exhibit B hereto, and (y) for the period beginning on the Amendment No. 2
Effective Date and thereafter, the Amended and Restated Tranche B Term
Notes.
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<PAGE> 6
SECTION 3. Amendment of Section 1.03 of the Credit Agreement. Section 1.03
of the Credit Agreement is amended by replacing the parenthetical "(or Tranche B
Term Loan Commitments)" in the second sentence thereof with "(or Commitments to
make any such Class of Loans)".
SECTION 4. Amendment of Section 2.01(i) of the Credit Agreement. Section
2.01(i) of the Credit Agreement is amended and restated in its entirety as
follows:
(i) Term Loans. Prior to the Amendment No. 2 Effective Date, each
Lender made a Tranche A Term Loan (an "EXISTING TRANCHE A TERM LOAN")
and/or a Tranche B Term Loan (an "EXISTING TRANCHE B TERM LOAN") pursuant
to the terms of the Original Agreement or this Agreement, as the case may
be. As of the Amendment No. 2 Effective Date, $5,832,161.68 in principal
amount of the Existing Tranche A Term Loans and $43,678,381.53 in
principal amount of the Existing Tranche B Term Loans remain outstanding.
On the Amendment No. 2 Effective Date, each Lender shall make an
additional Loan to the Company in an amount equal to its Tranche A Term
Loan Commitment, if any (such loan, an "ADDITIONAL TRANCHE A TERM LOAN"),
and an additional Loan to the Company in an amount equal to its Additional
Tranche B Term Loan Commitment, if any (such loan, an "ADDITIONAL TRANCHE
B TERM LOAN").
SECTION 5. Amendment of Section 2.03(a)(ii) of the Credit Agreement.
Section 2.03(a)(ii) of the Credit Agreement is amended and restated in its
entirety as follows:
(ii) The Tranche A Term Loan Commitments and the Additional
Tranche B Term Loan Commitments shall all terminate on the
Amendment No. 2 Effective Date.
SECTION 6. Amendment of Section 2.07 of the Credit Agreement. The first
sentence of Section 2.07 of the Credit Agreement is amended and restated as
follows:
The Loans of each Class made by each Lender shall be evidenced by a single
Tranche A Term Note, Tranche B Term Note or Working Capital Note of the
Company (each a "NOTE"), as the case may be, payable to the order of such
Lender in a principal amount equal to such Lender's Commitment of such
Class as originally in effect (or, in the case of the Amended and Restated
Tranche A Term Notes and the Amended and Restated Tranche B Term Notes, in
a principal amount equal to the initial
- 6 -
<PAGE> 7
principal amount of the related Loans by such Lender as in effect as of
the Amendment No. 2 Effective Date) and otherwise duly completed.
SECTION 7. Amendment of Section 2.08 of the Credit Agreement. The first
sentence of Section 2.08 of the Credit Agreement is amended and restated in its
entirety as follows:
The proceeds of the Existing Tranche B Term Loans made pursuant to Section
2.01(i) hereof have been used to repay existing outstanding Working
Capital Loans and to finance Capital Expenditures in connection with the
Potassium Nitrate Project and the MAP/MKP Project, and the proceeds of the
Additional Tranche A Term Loans and the Additional Tranche B Term Loans
made pursuant to Section 2.01(i) hereof shall be used to finance Capital
Expenditures in connection with the New Capital Projects.
SECTION 8. Amendment of Section 5.02(b) of the Credit Agreement. The first
sentence of Section 5.02(b) of the Credit Agreement is amended by inserting the
following parenthetical at the end thereof:
(except that the payment by the Company of principal of the Tranche B
Term Loans on the Quarterly Date falling in April 1999 shall be for the
account of the Lenders pro rata in accordance with the respective unpaid
principal amount of their Existing Tranche B Term Loans, and no amount of
such payment shall be for the account of the Lenders in respect of their
Additional Tranche B Term Loans)
SECTION 9. Amendment of Section 8.02 of the Credit Agreement. Section 8.02
of the Credit Agreement is amended by amending subsections (a)(i) and (c)
thereof in their entirety as follows:
(a)(i)The audited consolidated balance sheets of the Company and its
Subsidiaries as of December 31, 1998 and the related consolidated
statements of income and retained earnings and cash flows for the year
then ended (the "COMPANY AUDITED STATEMENTS"), have been prepared in
accordance with generally accepted accounting principles consistently
applied. The Company Audited Statements fairly present the financial
position of the Company and its Subsidiaries at December 31, 1998 and the
results of their operations and cash flows for the year then ended in
conformity with generally accepted accounting principles.
(c) Since December 31, 1998 no event has occurred and no condition
has come into existence which has had, or is reasonably likely to have, a
Material Adverse Effect.
- 7 -
<PAGE> 8
SECTION 10. Amendment of Section 8.10 of the Credit Agreement. Section
8.10 of the Credit Agreement is amended by changing the references to "the
Effective Date" therein to "the Amendment No. 2 Effective Date".
SECTION 11. Amendment of Section 9.09 of the Credit Agreement. Section
9.09 of the Credit Agreement is amended by inserting, immediately after the text
"to Current Liabilities", the following parenthetical:
(other than Current Liabilities owing by the Company pursuant to the
Settlement Agreements; provided that the Parent Capital Contribution
Agreement shall be in effect, and TRI shall be in compliance with all
applicable provisions thereof, in each case at such time)
SECTION 12. Amendment of Section 9.10 of the Credit Agreement. Section
9.10 of the Credit Agreement is amended by changing the table contained therein
to read in its entirety as follows:
<TABLE>
<CAPTION>
Periods Ratio
------- -----
<S> <C>
From the Effective Date
through July 30, 1997 3.80:1.00
From July 31, 1997 through
December 30, 1997 3.50:1.00
From December 31, 1997
through December 30, 1998 3.00:1.00
From December 31, 1998
through June 30, 1999 3.50:1.00
From July 1, 1999 through
September 30, 1999 3.25:1.00
From October 1, 1999 through
December 31, 1999 3.00:1.00
From January 1, 2000 through
December 31, 2000 2.75:1.00
From January 1, 2001 through
December 31, 2001 2.25:1.00
From January 1, 2002 and at
all times thereafter 2.00:1.00
</TABLE>
- 8 -
<PAGE> 9
SECTION 13. Amendment of Section 9.11 of the Credit Agreement. Section
9.11 of the Credit Agreement is amended by changing the table contained therein
to read in its entirety as follows:
<TABLE>
<CAPTION>
Periods Ratio
------- -----
<S> <C>
From the Effective Date
through December 30, 1997 2.25:1.00
From December 31, 1997
through December 31, 1999 3.00:1.00
From January 1, 2000 and at
all times thereafter 3.50:1.00
</TABLE>
SECTION 14. Amendment of Section 9.12(i) of the Credit Agreement. The
parenthetical immediately after the text "minus Capital Expenditures" in clause
(i) of Section 9.12 of the Credit Agreement is amended and restated in its
entirety as follows:
(other than (x) Capital Expenditures incurred during fiscal year 1998 in
respect of the MAP/MKP Project in an aggregate amount not to exceed the
sum of $6,500,000 plus the amount of related capitalized interest expense
and (y) Capital Expenditures incurred during fiscal year 1999 in respect
of the New Capital Projects in an aggregate amount not to exceed the sum
of $6,000,000 plus the amount of related capitalized interest expense)
SECTION 15. Amendment of Section 9.19 of the Credit Agreement. Section
9.19 of the Credit Agreement is amended by inserting a new clause (iii),
restating the existing clause (iii) as clause (iv) and restating the proviso
thereof as follows:
(iii) for fiscal year 1999, $6,000,000; provided that such Capital
Expenditures shall be applied solely to the New Capital Projects; plus
(iv) Capital Expenditures consisting of capitalized Interest Expense
incurred in connection with Capital Expenditures permitted pursuant to
clauses (ii) and (iii) above;
provided that to the extent that Capital Expenditures in any period are
less than the permitted amount for such period set forth in clause (i),
(ii) or (iii) above, the amount of such shortfall may be carried forward
to any succeeding fiscal year.
- 9 -
<PAGE> 10
SECTION 16. Amendment of Section 9.15 of the Credit Agreement. Section
9.15 of the Credit Agreement is amended by changing the reference to "the
Effective Date" in clause (v) thereof to "the Amendment No. 2 Effective Date".
SECTION 17. Amendment of Section 9.20 of the Credit Agreement. Section
9.20 of the Credit Agreement is amended by inserting "the Parent Capital
Contribution Agreement," immediately before the reference to "the Tax Sharing
Agreement" in the second sentence thereof.
SECTION 18. Amendment of Section 10.01(d) of the Credit Agreement. Section
10.01(d) of the Credit Agreement is amended by restating clause (iii) thereof as
follows:
(iii) the Parent shall default in the performance of any of its
obligations under the Parent Capital Contribution Agreement.
SECTION 19. Amendment of Section 11.10 of the Credit Agreement. Section
11.10 of the Credit Agreement is amended by replacing the words "record the
Tranche B Term Loan Commitments and the Working Capital Commitments from time to
time of each of the Lenders" contained in the first sentence thereof with
"record the Commitments from time to time of each of the Lenders".
SECTION 20. Amendment of Schedule III of the Credit Agreement. Schedule
III of the Credit Agreement is amended and restated in its entirety as set forth
in Schedule II hereto.
SECTION 21. Amendment of Schedule IV of the Credit Agreement. Schedule IV
to the Credit Agreement is amended by (i) inserting the new Subsidiary "TRI Pro,
Inc." under the caption "Subsidiaries of Cedar Chemical Corporation" and (ii)
deleting all items other than US Treasury Notes under the caption "Other
Investments".
SECTION 22. Amendment of Schedule V of the Credit Agreement. Schedule V to
the Credit Agreement is amended by deleting the reference to the Joint Venture
Agreement between Cedar and Girindus Chemie GMBH & Co. under the caption
"Agreements".
SECTION 23. Waiver of Compliance with Section 9.10 of the Credit
Agreement. The Lenders hereby waive any Default or Event of Default that has
occurred during the period of February 1, 1999 through February 28, 1999 with
respect to the failure of the Company to comply with the Leverage Ratio set
forth in Section 9.10 of the Credit Agreement at any time during such period.
- 10 -
<PAGE> 11
SECTION 24. Consent to Amendments to Security Documents. Each of the
Lenders hereby consents to amendments to the Company Security Agreement, the
Subsidiary Guarantor Security Agreement, the Company Pledge Agreement and the
Nine West Pledge Agreement, substantially in the form of Exhibits G, H, I and J,
respectively, hereto, and hereby authorizes the Administrative Agent to execute
such amendments in substantially the form of such Exhibits hereto.
SECTION 25. Representations of the Company. The Company represents and
warrants that as of the Amendment No. 2 Effective Date and after giving effect
to Amendment No. 2, (i) the representations and warranties of the Company set
forth in Article 8 of the Credit Agreement will be true and correct as though
made on and as of such date and (ii) no Default will have occurred and be
continuing.
SECTION 26. Governing Law. This Amendment No. 2 shall be governed
by and construed in accordance with the laws of the State of New York.
SECTION 27. Counterparts; Effectiveness. This Amendment No. 2 may be
signed in any number of counterparts, each of which shall be an original, with
the same effect as if the signatures thereto and hereto were upon the same
instrument. This Amendment No. 2 shall become effective on the date (the
"AMENDMENT NO. 2 EFFECTIVE DATE") on which all of the following conditions
precedent shall have been fulfilled to the satisfaction of the Administrative
Agent:
(a) Counterparts. The Administrative Agent shall have received
counterparts of this Amendment No. 2, executed and delivered by or on behalf of
each of the parties hereto (or, in the case of any party as to which the
Administrative Agent shall not have received such a counterpart, the
Administrative Agent shall have received evidence satisfactory to it of the
execution and delivery by such Lender of a counterpart hereof).
(b) Notes. The Administrative Agent shall have received the Amended and
Restated Tranche A Term Note and the Amended and Restated Tranche B Term Note
for each Lender extending a Tranche A Term Loan Commitment or an Additional
Tranche B Term Loan Commitment under this Amendment No. 2, duly completed and
executed.
(c) Ancillary Documents. The Administrative Agent shall have received
counterparts of (i) the applicable Subsidiary Guarantor Acknowledgment and Nine
West Guarantor Acknowledgment, (ii) the Subsidiary Guarantor Addendum and (iii)
the Parent Capital Contribution Agreement, in each case executed and delivered
by or on behalf of each of the parties thereto.
- 11 -
<PAGE> 12
(d) Fees and Expenses. The Company shall have paid to the Administrative
Agent, for the account of each Lender, a fee equal to 0.125% of the sum of the
aggregate principal amount of such Lender's Tranche A Term Loans, Tranche B Term
Loans and Working Capital Commitments, in each case outstanding under the Credit
Agreement immediately prior to the Amendment No. 2 Effective Date; and shall
have in addition paid to the Administrative Agent all amounts payable under
Section 12.03 of the Credit Agreement on or before the Amendment No. 2 Effective
Date.
(e) Opinions of Counsel to the Company. The Administrative Agent shall
have received an opinion of Apperson, Crump & Maxwell, PLC, counsel to the
Company, substantially in the form of Exhibit E to the Credit Agreement, and an
opinion of Rubin, Baum, Levin, Constant & Friedman, counsel to the Parent and
Nine West, substantially in the form of Exhibit F to the Credit Agreement, in
each case with reference to this Amendment No. 2 and the Credit Agreement as
amended hereby.
(f) Other Documents. The Administrative Agent shall have received such
other documents relating to the transactions contemplated hereby as the
Administrative Agent may reasonably request.
- 12 -
<PAGE> 13
IN WITNESS WHEREOF, the parties hereto have caused this Amendment No. 2 to
be duly executed by their respective authorized officers as of the day and year
first above written.
CEDAR CHEMICAL CORPORATION
By /s/ J. Randal Tomblin
-------------------------------------
Title: President
LENDERS:
THE CHASE MANHATTAN BANK
By /s/ Robert T. Sacks
-------------------------------------
Title: Managing Director
BANK LEUMI TRUST COMPANY OF
NEW YORK
By /s/ Gloria Bucher
-------------------------------------
Title: First Vice President and
Managing Director
THE BANK OF NOVA SCOTIA
By /s/ Brian Allen
-------------------------------------
Title: Senior Relationship Manager
FIRST AMERICAN NATIONAL BANK
By /s/ S. Floyd Harvey, III
-------------------------------------
Title: Senior Vice President
- 13 -
<PAGE> 14
U.S. BANK NATIONAL ASSOCIATION
By /s/ Alan V. Schuler
-------------------------------------
Title: Vice President
ERSTE BANK NEW YORK
By /s/ Arcinee Hovanessian
-------------------------------------
Title: Vice President
By /s/ John S. Runnion
-------------------------------------
Title: First Vice President
MERRILL LYNCH SENIOR FLOATING
RATE FUND, INC.
By /s/ Colleen M. Cunniffe
-------------------------------------
Title: Authorized Signatory
PILGRIM PRIME RATE TRUST
By: Pilgrim Investments, Inc.,
as its investment manager
By /s/ Robert L. Wilson
-------------------------------------
Title: Vice President
VAN KAMPEN PRIME RATE INCOME
TRUST
By /s/ Lisa M. Mincheski
-------------------------------------
Title: Assistant Portfolio Manager
- 14 -
<PAGE> 15
INDOSUEZ CAPITAL FUNDING IIA,
LIMITED
By: INDOSUEZ CAPITAL as portfolio
advisor
By /s/ Melissa Marano
-------------------------------------
Title: Vice President
- 15 -
<PAGE> 16
SCHEDULE I
COMMITMENT SCHEDULE
<TABLE>
<CAPTION>
Additional
Tranche A Tranche B Working
Term Loan Term Loan Capital
Lender Commitment Commitment Commitment
- ------ ---------- ---------- ----------
<S> <C> <C> <C>
The Chase Manhattan Bank $ 0.00 $ 2,000,000.00 $ 6,066,691.43
Bank Leumi Trust Company of New York 1,000,000.00 0.00 3,250,000.00
The Bank of Nova Scotia 0.00 5,000,000.00 3,250,000.00
First American National Bank 0.00 0.00 6,500,000.00
U.S. Bank National Association 500,000.00 500,000.00 3,683,308.57
Erste Bank New York 0.00 0.00 3,250,000.00
Merrill Lynch Senior Floating Rate Fund, Inc. 0.00 0.00 0.00
Pilgrim Prime Rate Trust 0.00 0.00 0.00
Van Kampen Prime Rate Income Trust 0.00 0.00 0.00
Indosuez Capital Funding IIA, Limited 0.00 0.00 0.00
Total: $ 1,500,000.00 $ 7,500,000.00 $26,000,000.00
============== ============== ==============
</TABLE>
- 16 -
<PAGE> 17
SCHEDULE II
Scheduled Term Loan Installments
<TABLE>
<CAPTION>
Tranche A Tranche B
Quarterly Date Term Loan Term Loan
Falling In Installment Installment
---------- ----------- -----------
<S> <C> <C>
April 1999 $ 0.00 $ 110,000.00
July 1999 0.00 128,935.75
October 1999 0.00 128,935.75
January 2000 0.00 128,935.75
April 2000 0.00 128,935.75
July 2000 0.00 128,935.75
October 2000 0.00 128,935.75
January 2001 0.00 128,935.75
April 2001 0.00 128,935.75
July 2001 0.00 128,935.75
October 2001 7,332,161.75 128,935.75
January 2002 5,860,715.93
April 2002 5,860,715.93
July 2002 5,860,715.93
October 2002 5,860,715.93
January 2003 6,584,040.06
April 2003 6,584,040.06
July 2003 6,584,040.06
October 2003 6,584,040.06
Total: $7,332.161.75 $51,178,381.46
============== ==============
</TABLE>
- 17 -
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> MAR-31-1999
<CASH> 17,726
<SECURITIES> 0
<RECEIVABLES> 120,397
<ALLOWANCES> 0
<INVENTORY> 101,856
<CURRENT-ASSETS> 300,847
<PP&E> 428,168
<DEPRECIATION> 146,527
<TOTAL-ASSETS> 652,597
<CURRENT-LIABILITIES> 195,097
<BONDS> 448,831
0
7,960
<COMMON> 0
<OTHER-SE> (55,308)
<TOTAL-LIABILITY-AND-EQUITY> 652,597
<SALES> 127,757
<TOTAL-REVENUES> 127,757
<CGS> 99,342
<TOTAL-COSTS> 99,342
<OTHER-EXPENSES> 15,578
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (10,542)
<INCOME-PRETAX> 2,351
<INCOME-TAX> 1,512
<INCOME-CONTINUING> 839
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 839
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
