<PAGE> 1
Filed Pursuant to Rule 424(b)(3) of
the Rules and Regulations Under the
Securities Act of 1933
Registration Statement No. 33-30012
Registration Statement No. 33-31900
PROSPECTUS SUPPLEMENT
(To Prospectus dated July 8, 1994)
FORMICA CORPORATION
$100,000,000 14% Senior Subordinated Notes Due 1999
$95,910,000 15-3/4% Subordinated Discount Debentures Due 2001
This Prospectus Supplement, together with the Prospectus, is to be
used by Selling Debenture Holders (as defined in the Prospectus) in connection
with the public sale or distribution of the 15-3/4% Subordinated Discount
Debentures due 2001. This Prospectus Supplement, together with the Prospectus,
is also to be used by Dillon, Read & Co., Inc. in connection with offers and
sales of each of the above-referenced securities in market-making transactions
at negotiated prices related to prevailing market prices at the time of sale.
Dillon, Read & Co., Inc. may act as principal or agent in such transactions.
August 12, 1994
<PAGE> 2
FORMICA CORPORATION AND SUBSIDIARIES
SECURITIES AND EXCHANGE COMMISSION
Judiciary Plaza, 450 Fifth Street N.W.
Washington, D.C. 20549
-----------------------------------------------
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended June 30, 1994 Commission File No. 1-9557
--------------- -------------
FORMICA CORPORATION
- -------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 34-1046753
- ---------------------------------- ----------------------------------
(State or other jurisdiction of I.R.S. Employer Identification No.
incorporation or organization)
Oak Hill Park, 1680 Route 23 North, Wayne, New Jersey 07474-0980
- -----------------------------------------------------------------------
(Address of principal executive offices) Zip Code
Registrant's telephone number, including area code (201) 305-9400
-----------------
None
- --------------------------------------------------------------------------------
Former name, former address and former fiscal year, if changed since last report
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
------ ------
Indicate the number of shares outstanding of each of the issuer's classes of
common stock as of the latest practicable date.
Class Outstanding at August 5, 1994
- ---------------------------------- -------------------------------------
Common stock, par value $0.01 per share 100
<PAGE> 3
FORMICA CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
June 30, 1994 December 31, 1993
------------- -----------------
ASSETS (unaudited)
- ------
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 2,445 $ 2,446
Accounts receivable, net 88,533 81,350
Inventories, net 84,259 67,678
Other current assets 17,119 18,150
-------- --------
TOTAL CURRENT ASSETS 192,356 169,624
-------- --------
PROPERTY, PLANT AND EQUIPMENT, NET 210,903 212,120
GOODWILL, NET 37,690 38,231
TRADEMARKS AND PATENTS, NET 90,114 92,024
DEFERRED CHARGES AND OTHER ASSETS 32,754 29,632
-------- --------
$563,817 $541,631
======== ========
LIABILITIES AND STOCKHOLDER'S EQUITY
- ------------------------------------
CURRENT LIABILITIES:
Short-term borrowings $ 14,334 $ 11,351
Accounts payable 36,813 40,313
Accrued compensation 28,215 24,678
Other accrued liabilities 12,285 13,846
Income taxes payable 3,001 2,367
-------- --------
TOTAL CURRENT LIABILITIES 94,648 92,555
-------- --------
LONG-TERM DEBT 273,544 255,180
-------- --------
OTHER LONG-TERM LIABILITIES 15,757 15,849
-------- --------
DEFERRED INCOME TAXES 97,146 97,685
-------- --------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDER'S EQUITY:
Common stock; 100 shares
outstanding - -
Preferred stock; none outstanding - -
Capital in excess of par value 116,879 116,879
Accumulated deficit (18,147) (18,747)
Cumulative translation adjustment (16,010) (17,770)
-------- --------
TOTAL STOCKHOLDER'S EQUITY 82,722 80,362
-------- --------
$563,817 $541,631
======== ========
</TABLE>
The accompanying notes to condensed consolidated financial statements
are an integral part of these statements.
- 2 -
<PAGE> 4
FORMICA CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
For the Three Month Periods
Ended June 30,
------------------------------
1994 1993
---- ----
<S> <C> <C>
Net sales $124,143 $112,490
Cost of sales 84,964 79,670
-------- --------
Gross profit 39,179 32,820
Selling, general and
administrative expenses 26,574 24,226
-------- --------
Operating income 12,605 8,594
Other income, net 1,091 1,859
-------- --------
Income before interest expense
and income taxes 13,696 10,453
Interest expense 9,917 12,220
-------- --------
Income (loss) before income taxes 3,779 (1,767)
Income tax provision 1,235 268
-------- --------
Net income (loss) $ 2,544 $ (2,035)
======== ========
</TABLE>
The accompanying notes to condensed consolidated financial statements
are an integral part of these statements.
- 3 -
<PAGE> 5
FORMICA CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
For the Six Month Periods
Ended June 30,
------------------------------
1994 1993
---- ----
<S> <C> <C>
Net sales $231,735 $215,673
Cost of sales 161,248 153,421
-------- --------
Gross profit 70,487 62,252
Selling, general and
administrative expenses 51,211 48,279
-------- --------
Operating income 19,276 13,973
Other income, net 1,878 2,468
-------- --------
Income before interest expense,
income taxes and accounting change 21,154 16,441
Interest expense 19,542 24,134
-------- --------
Income (loss) before income taxes
and accounting change 1,612 (7,693)
Income tax provision (benefit) 1,012 (2,925)
-------- --------
Income (loss) before accounting change 600 (4,768)
Accounting change - cumulative
effect to January 1, 1993, of
accounting for income taxes - (2,850)
-------- --------
Net income (loss) $ 600 $ (1,918)
======== ========
</TABLE>
The accompanying notes to condensed consolidated financial statements
are an integral part of these statements.
- 4 -
<PAGE> 6
FORMICA CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
For the Six Month Periods
Ended June 30,
------------------------------
1994 1993
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 600 $ (1,918)
Depreciation and amortization 11,904 12,355
Amortization of Subordinated
Discount Debentures and deferred
financing costs 7,995 7,198
Deferred income taxes (795) (8,235)
Changes in operating assets and
liabilities, net (27,101) (22,847)
-------- --------
Net cash used in operating
activities (7,397) (13,447)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net short-term borrowings (payments) 4,806 (419)
Net borrowings under bank credit
agreements 11,612 18,027
Other, net (2,314) (356)
-------- --------
Net cash provided by financing
activities 14,104 17,252
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property, plant and
equipment (6,757) (2,655)
Other, net 49 65
-------- --------
Net cash used in investing
activities (6,708) (2,590)
-------- --------
Effect of exchange rate changes on cash - (32)
-------- --------
Net change in cash and cash equivalents (1) 1,183
Cash and cash equivalents at beginning
of period 2,446 867
-------- --------
Cash and cash equivalents at end of
period $ 2,445 $ 2,050
======== ========
</TABLE>
The accompanying notes to condensed consolidated financial statements
are an integral part of these statements.
- 5 -
<PAGE> 7
FORMICA CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(1) BASIS OF PRESENTATION
The accompanying condensed consolidated financial statements include the
accounts of Formica Corporation and its subsidiaries (the "Company" or
"Formica"). All significant intercompany balances and transactions have been
eliminated. Earnings per share data are not presented because the Company's
common stock is not publicly owned and since the Company is a wholly-owned
subsidiary of FM Holdings Inc. ("Holdings"). In the opinion of the Company,
all adjustments, consisting only of normal recurring adjustments, necessary to
present fairly the financial position, results of operations and cash flows for
the interim periods presented have been included. The results of operations
for such interim periods are not necessarily indicative of the results for the
entire year. These interim financial statements should be read in conjunction
with the financial statements and the notes thereto included in the Company's
Annual Report on Form 10-K for the year ended December 31, 1993.
(2) CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLES
During the first quarter of 1993, the Company adopted Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes" ("FAS 109"). FAS
109 is an asset and liability approach that requires the recognition of
deferred tax assets and liabilities for the expected future tax consequences of
events that have been recognized in the Company's financial statements or tax
returns. In estimating future tax consequences, FAS 109 generally considers
all expected future events other than enactments of changes in the tax law or
rates. Previously, the Company used the FAS 96 asset and liability approach
that gave no recognition to future events other than the recovery of assets and
settlement of liabilities at their carrying amounts.
Under FAS 109, the Company recognizes to a greater degree the future tax
benefits of expenses which have been recognized in the financial statements.
The adjustments to the January 1, 1993 balance sheet to adopt FAS 109 netted to
$2,850,000. This amount is reflected in first quarter 1993 net income as the
cumulative effect of a change in accounting principle.
(3) INVENTORIES, NET
Major classes of inventories were as follows:
<TABLE>
<CAPTION>
June 30, December 31,
1994 1993
---- ----
(in thousands)
<S> <C> <C>
Raw materials $29,157 $26,665
Work in process 11,167 9,627
Finished goods 43,935 31,386
------- -------
$84,259 $67,678
======= =======
</TABLE>
(4) PROPERTY, PLANT AND EQUIPMENT, NET
Property, plant and equipment balances were as follows:
<TABLE>
<CAPTION>
June 30, December 31,
1994 1993
---- ----
(in thousands)
<S> <C> <C>
Land and improvements $ 16,433 $ 15,355
Buildings and improvements 46,400 46,439
Machinery and equipment 235,424 228,403
-------- --------
298,257 290,197
Less - accumulated depreciation (87,354) (78,077)
-------- --------
$210,903 $212,120
======== ========
</TABLE>
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<PAGE> 8
(5) LONG-TERM DEBT
Long-term debt consisted of the following:
<TABLE>
<CAPTION>
June 30, December 31,
1994 1993
---- ----
(in thousands)
<S> <C> <C>
Bank Credit Agreements $ 77,254 $ 65,542
Senior Subordinated Notes 100,000 100,000
Subordinated Discount Debentures 92,416 85,681
Other long-term debt 3,874 3,957
-------- --------
$273,544 $255,180
======== ========
</TABLE>
(6) SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
For the six month periods ended June 30, 1994 and 1993, the Company paid
interest of $11.5 million and $17.3 million and income taxes of $0.9 million
and $0.6 million, respectively.
(7) POSTRETIREMENT BENEFITS OTHER THAN PENSIONS
In the first quarter of 1993, the Company adopted Statement of Financial
Accounting Standards No. 106, "Employers Accounting for Postretirement Benefits
Other Than Pensions" ("FAS 106"). This statement requires the accrual of the
cost of providing postretirement benefits, including medical and life insurance
coverage, during the active service of the employee. There was no effect on
the accompanying 1993 financial statements as a result of adopting FAS 106.
In accordance with the provision of this statement, postretirement benefit
information for prior years has not been restated.
- 7 -
<PAGE> 9
FORMICA CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
THE RESULTS OF OPERATIONS AND FINANCIAL CONDITION
RESULTS OF OPERATIONS
SECOND QUARTER ENDED 6-30-94 VERSUS SECOND QUARTER ENDED 6-30-93
Net sales for the second quarter of 1994 increased $11.7 million, or 10.4% as
compared with the same quarter in 1993. When adjusted for the effects of
foreign currency exchange rate fluctuations, net sales increased $15.1 million,
or 13.4% for the quarter. Domestic net sales rose $4.7 million, or 7.8% above
the comparable 1993 period primarily due to an increase in unit volumes.
Quarterly net sales in the international segment increased by $7.0 million, or
13.2%. Excluding the impact of foreign exchange, international net sales
increased $10.4 million, or 19.8%, primarily as a result of increased unit
volumes.
Cost of sales for the second quarter of 1994 increased $5.3 million, or 6.6%
over 1993. When adjusted for foreign exchange effects, cost of sales increased
$7.7 million, or 9.7%. Domestic cost of sales increased $1.0 million, or 2.2%
primarily as a result of increased unit volumes. International cost of sales
increased $4.3 million, or 11.8% for the second quarter. When adjusted for the
effects of foreign exchange, international cost of sales increased $6.7
million, or 18.4%, principally attributable to an increase in unit volumes.
Selling, general and administrative expenses for the second quarter of 1994
increased $2.3 million, or 9.7% when compared to the same period in 1993. When
adjusted for the effects of foreign exchange, selling, general and
administrative expenses increased $3.0 million, or 12.6%. Domestic selling,
general and administrative expenses increased $1.9 million, or 14.5%, primarily
as a result of higher distribution costs associated with the increase in unit
volumes. International selling, general and administrative expenses increased
$0.4 million, or 4.1%, as compared to the second quarter of 1993. When
adjusted for foreign exchange effects, international selling, general and
administrative expenses increased $1.1 million, or 10.3%, primarily as a result
of higher selling and distribution costs associated with increased unit
volumes.
Income Before Interest and Taxes ("EBIT") for the second quarter of 1994
increased $3.2 million, or 31.0%, when compared to the second quarter of 1993.
When adjusted for the effects of foreign exchange, EBIT increased $3.5 million,
or 33.4%. Domestic EBIT increased $1.0 million, or 13.8%, primarily as a
result of the increase in net sales. International EBIT increased $2.2
million, or 74.4%, for the second quarter. When adjusted for the effects of
foreign exchange, international EBIT increased $2.5 million, or 82.9%,
primarily as a result of the increase in net sales associated with higher unit
volumes in Europe and Asia.
The decrease of approximately $2.3 million in interest expense for the second
quarter of 1994 as compared to the same period in 1993 was primarily
attributable to the effects of lower bank debt outstanding in the second
quarter of 1994. The income tax provision for the second quarter of 1994
increased by approximately $1.0 million as compared to the second quarter of
1993, primarily as a result of higher income before income taxes.
- 8 -
<PAGE> 10
SIX MONTH PERIOD ENDED 6-30-94 VERSUS SIX MONTH PERIOD ENDED 6-30-93
Net sales for the first half of 1994 increased $16.1 million, or 7.4% as
compared with the same period in 1993. When adjusted for the effects of
foreign currency exchange rate fluctuations, net sales increased $22.9 million,
or 10.6% for the six month period. Domestic net sales rose $8.2 million, or
7.0%, above the comparable 1993 period, primarily due to higher unit volumes.
Net sales in the international segment increased by $7.9 million, or 7.9%, when
compared to the same period in 1993. Excluding the impact of foreign exchange,
international net sales increased $14.7 million, or 14.9%, primarily due to
increased unit volumes.
Cost of sales for the first half of 1994 increased $7.8 million, or 5.1% above
1993. When adjusted for foreign exchange effects, cost of sales increased
$12.7 million, or 8.3%. Domestic cost of sales increased $4.2 million, or
5.0%, primarily as a result of increased unit volumes. International cost of
sales increased $3.6 million, or 5.2%, for the period. When adjusted for the
impact of foreign exchange, international cost of sales increased by $8.5
million, or 12.0%, primarily due to increased unit volumes.
Selling, general and administrative expenses for the first half of 1994
increased $2.9 million, or 6.1%, when compared to the same period in 1993.
When adjusted for the effects of foreign exchange, selling, general and
administrative expenses increased $4.4 million, or 9.1% The increase in
domestic selling, general and administrative expenses of $2.7 million, or
10.1%, was primarily attributable to increased distribution expenses due to
higher unit volumes. International selling, general and administrative
expenses increased $0.2 million, or 1.2%, compared to the first half of 1993.
When adjusted for foreign exchange effects, international selling, general and
administrative expenses rose $1.7 million, or 7.9%, due to increased selling
and distribution costs associated with higher unit volumes.
EBIT for the first half of 1994 increased $4.7 million, or 28.7%, above the
first half of 1993. EBIT increased $5.1 million, or 31.1%, when adjusted for
the effects of foreign exchange. Domestic EBIT increased $0.9 million, or
6.9%, as compared with the same period in 1993, primarily as a result of the
aforementioned increase in net sales. International EBIT for the period was
$3.8 million higher than last year. When adjusted for the impact of foreign
exchange, international EBIT increased $4.2 million primarily as a result of
the increase in net sales associated with higher unit volumes in Europe and
Asia.
The decrease of approximately $4.6 million in interest expense for the first
half of 1994 as compared to the same period in 1993 was principally
attributable to lower bank debt outstanding in 1994. The income tax provision
for the first half of 1994 changed by approximately $3.9 million as compared to
the income tax benefit for the first half of 1993, primarily due to higher
income before income taxes.
- 9 -
<PAGE> 11
LIQUIDITY AND CAPITAL RESOURCES
At June 30, 1994 the Company's working capital was $97.7 million, representing
an increase of $20.6 million, or 26.8%, from the amount at December 31, 1993.
Exclusive of the impact of foreign currency exchange effects, the Company's
working capital increased $20.4 million, or 26.4%, from the amount at December
31, 1993. The increase in working capital was primarily due to higher accounts
receivable and inventory balances and lower levels of accounts payable,
partially offset by an increase in short-term borrowings. The increase in
accounts receivable is primarily attributable to the increase in sales. The
increase in inventory resulted from management's efforts to increase quantities
on hand in order to meet current and anticipated future volume demands. The
additional short-term borrowings were primarily used to reduce accounts
payable.
In September 1989, Formica executed revolving credit agreements with Canadian
Imperial Bank of Commerce, as agent, and other banks for borrowings in the
United States and by the Company's Canadian, French, Spanish and United Kingdom
subsidiaries (the "CIBC Credit Agreements"). Also, Formica's Taiwan subsidiary
entered into a new revolving credit facility with a local bank to repay
existing debt and provide for working capital requirements. Additionally, in
October 1989, Formica issued Senior Subordinated Notes ($100 million) due 1999
and Subordinated Discount Debentures ($45 million), at a discount, due 2001.
On September 27, 1993, Holdings consummated a private placement of $50 million
of 13-1/8% Accrual Debentures due September 15, 2005. Interest on the Accrual
Debentures will accrue and compound on a semi-annual basis and will be payable
in cash on September 15, 1998 in an aggregate amount of approximately $44
million. Thereafter, interest will be payable on March 15 and September 15 of
each year. Using funds received from the closing of the private placement,
Holdings made a capital contribution of $47.5 million to Formica in 1993. The
$47.5 million capital contribution was then used by Formica to pay down debt
outstanding under the CIBC Credit Agreements. After the private placement was
completed, Holdings filed a registration statement with the SEC, and upon the
registration statement being declared effective, Holdings exchanged the
privately placed Accrual Debentures for identical publicly registered
Debentures.
As of June 30, 1994, utilizing foreign currency exchange rates in effect at
that time, the Company had approximately $61.7 million of available and unused
principal borrowing commitments for both revolving credit and working capital
purposes over and above the $84.5 million of outstanding borrowings under the
CIBC Credit Agreements and other local bank borrowing arrangements.
Payments of principal and interest under the various debt instruments will be
the Company's largest use of funds for the foreseeable future. Funds generated
from operations and borrowings are expected to be adequate to fund the
Company's debt service obligations, capital expenditures and working capital
requirements. Borrowings under the CIBC Credit Agreements bear interest at
floating rates which averaged approximately 8.7% for the six month period ended
June 30, 1994. Formica has interest rate swap agreements outstanding at June
30, 1994 on approximately $18.6 million of borrowings at an average interest
rate of approximately 11.9%. The average interest rate of borrowings under the
CIBC Credit Agreements for the six month period ended June 30, 1994, after
taking into consideration the adverse impact of the interest rate swap
agreements, approximated 10.0%.
The Company's percentage of long-term debt to total capital (long-term debt and
stockholder's equity) changed from 76.1% at December 31, 1993 to 76.8% at June
30, 1994. The Company believes that it has adequate resources from operations
and unused credit facilities to fund its operations and expected future capital
expenditures through the expiration of the CIBC Credit Agreements.
- 10 -
<PAGE> 12
LIQUIDITY AND CAPITAL RESOURCES - (CON'T)
Indebtedness of the Company's subsidiaries under the CIBC Credit Agreements is
due in full in September 1997, while the working capital facility of $15.0
million matures in September 1994. The 14% Senior Subordinated Notes are due
in 1999 and require a sinking fund payment on October 1, 1998 to redeem $40.0
million of the aggregate principal amount of such notes and the 15 3/4%
Subordinated Discount Debentures are due in 2001 and require a sinking fund
payment on October 1, 2000 to redeem $38.4 million of the aggregate principal
amount of such debentures. Interest on the Accrual Debentures is payable in
cash on September 15, 1998 in an aggregate amount of approximately $44.0
million. See Note 4 to the Company's Consolidated Financial Statements for
additional information with respect to bank revolving credit facilities and
other long-term debt.
- 11 -
<PAGE> 13
FORMICA CORPORATION AND SUBSIDIARIES
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Reference is made to the Company's Annual Report on Form 10-K for the year
ended December 31, 1993.
ITEM 2. CHANGES IN SECURITIES
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
The exhibits filed with this report are listed on the Index to Exhibits.
No reports were required to be filed on Form 8-K during the quarter for which
this report is filed.
- 12 -
<PAGE> 14
FORMICA CORPORATION AND SUBSIDIARIES
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.
FORMICA CORPORATION
Dated: August 11, 1994 By: /s/ David Schneider
--------------------
David Schneider
Vice President and
Chief Financial Officer
and Chief Accounting
Officer
- 13 -
<PAGE> 15
<TABLE>
<CAPTION>
EXHIBIT NO. INDEX TO EXHIBITS
- ----------- -----------------
<S> <C>
4.29 (a) Amendment, dated as of April 14, 1994, to the Loan Agreement dated November 30, 1990 by and among Credit Lyonnais, Taipei
Branch and Formica Taiwan Corporation.
4.30 (a) Short Term Line of Credit Facility Letter Agreement dated April 14, 1994 between Credit Lyonnais, Taipei Branch and
Formica Taiwan Corporation.
</TABLE>
- --------------------------------------------------------
(a) Previously filed as an Exhibit to FM Holdings
Inc.'s Form 10-Q for the quarter ended June 30,
1994 as the Exhibit No. indicated and hereby
incorporated by reference.
- 14 -
