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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D. C. 20549
FORM 10-Q
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
- - ----- EXCHANGE ACT OF 1934
For the quarterly period ended MARCH 25, 1994
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Commission file number 1-9699
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BORDEN CHEMICALS AND PLASTICS
LIMITED PARTNERSHIP
(Exact name of registrant as specified in its charter)
Delaware 31-1269627
- - -------------------------------- ---------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
Highway 73, Geismar, Louisiana 70734
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(Address of principal executive offices)
(504) 387-5101
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(Registrant's telephone number, including area code)
Not Applicable
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(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
--- --- ----------------------------
Number of Common Units outstanding as of the close of business on April 26,
1994: 36,750,000
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<TABLE>
BORDEN CHEMICALS AND PLASTICS LIMITED PARTNERSHIP
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CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(In thousands except per Unit data)
<CAPTION>
Three Months Three Months
Ended Ended
March 25, 1994 March 26, 1993
-------------- --------------
<S> <C> <C>
Revenues
Net trade sales $ 94,821 $ 73,882
Net affiliated sales 24,160 16,722
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Total revenues 118,981 90,604
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Expenses
Cost of goods sold
Trade 86,490 66,681
Affiliated 20,415 15,308
Marketing, general and administrative expenses 4,506 4,555
Interest expense 3,794 3,837
Other (income) and expense, including minority interest 148 (43)
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Total expenses 115,353 90,338
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Net income 3,628 266
Less 1% General Partner interest (36) (3)
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Net income applicable to Limited Partners' interest $ 3,592 $ 263
========= =========
Net income per Unit $ .10 $ .01
========= =========
Average number of Units outstanding during the period 36,750 36,750
========= =========
Cash distributions declared per Unit $ .21 $ .30
========= =========
</TABLE>
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<TABLE>
BORDEN CHEMICALS AND PLASTICS LIMITED PARTNERSHIP
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CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
<CAPTION>
Three Months Three Months
Ended Ended
March 25, 1994 March 26, 1993
-------------- --------------
<S> <C> <C>
Cash Flows From Operations
Net income $ 3,628 $ 266
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 10,887 10,677
(Increase) decrease in receivables (10,022) 3,747
Decrease (increase) in inventories 3,007 (4,888)
Increase in payables 3,675 1,052
Increase in accrued interest 3,780 3,825
Other, net 237 (5,735)
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15,192 8,944
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Cash Flows From Investing Activities
Capital expenditures (6,458) (1,354)
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Cash Flows From Financing Activities
Cash distributions paid (6,682) (11,508)
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Increase (decrease) in cash and equivalents 2,052 (3,918)
Cash and equivalents at beginning of period 9,054 19,389
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Cash and equivalents at end of period $ 11,106 $ 15,471
========= =========
Supplemental Disclosure of Cash Flow Information
Interest paid during the period $ 14 $ 12
========= =========
</TABLE>
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<TABLE>
BORDEN CHEMICALS AND PLASTICS LIMITED PARTNERSHIP
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CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In thousands)
ASSETS
------
<CAPTION>
March 25, 1994 December 31, 1993
-------------- -----------------
<S> <C> <C>
Cash and equivalents $ 11,106 $ 9,054
Accounts receivable (less allowance for doubtful
accounts of $388 and $768, respectively)
Trade 57,517 48,990
Affiliated 19,762 18,267
Inventories
Finished goods 18,933 21,499
Raw materials 7,317 7,758
Other current assets 1,749 2,182
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Total current assets 116,384 107,750
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Investments in and advances to affiliated companies 3,651 3,623
Other assets 26,708 26,956
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30,359 30,579
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Land 12,051 12,051
Buildings 35,955 35,955
Machinery and equipment 511,694 505,236
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559,700 553,242
Less accumulated depreciation (258,154) (247,267)
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301,546 305,975
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$ 448,289 $ 444,304
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LIABILITIES AND
PARTNERS' CAPITAL
-----------------
Accounts and drafts payable $ 48,083 $ 44,408
Cash distributions payable 7,796 6,682
Accrued interest 5,625 1,845
Other accrued liabilities 8,005 8,515
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Total current liabilities 69,509 61,450
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Long-term debt 150,000 150,000
Minority interest in consolidated subsidiary 1,752 1,795
Postretirement benefit obligation 991 854
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152,743 152,649
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Partners' capital
Common Unitholders 224,736 228,862
General Partner 1,301 1,343
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Total partners' capital 226,037 230,205
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$ 448,289 $ 444,304
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</TABLE>
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<TABLE>
BORDEN CHEMICALS AND PLASTICS LIMITED PARTNERSHIP
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CONSOLIDATED STATEMENTS OF CHANGES IN PARTNERS' CAPITAL
(Unaudited)
(In thousands)
<CAPTION>
PREFERENCE COMMON GENERAL
UNITHOLDERS UNITHOLDERS PARTNER TOTAL
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Balances at December 31, 1992 $ 210,923 $ 48,025 $ 1,647 $ 260,595
Combination of preference and
common Units (210,923) 210,923
Net income 263 3 266
Cash distributions declared (11,025) (111) (11,136)
------------ ------------ ------------ ------------
Balances at March 26, 1993 $ -0- $ 248,186 $ 1,539 $ 249,725
============ ============ ============ ============
Balances at December 31, 1993 $ 228,862 $ 1,343 $ 230,205
Net income 3,592 36 3,628
Cash distributions declared (7,718) (78) (7,796)
------------ ------------ ------------
Balances at March 25, 1994 $ 224,736 $ 1,301 $ 226,037
============ ============ ============
</TABLE>
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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(unaudited)
1. Interim Financial Statements
----------------------------
The accompanying unaudited interim consolidated financial statements
contain all adjustments, consisting only of normal recurring
adjustments, which in the opinion of the General Partner are necessary
for a fair statement of the results for the interim periods. Results
for the interim periods are not necessarily indicative of the results
for the full years.
2. Combination of Preference and Common Units
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With the payment of the 1992 fourth quarter distribution on February 12,
1993, all differences between the Preference and Common Units ceased and
all units are now Common Units.
3. Contingencies
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State and federal environmental agencies have notified the Partnership
of their determinations that a production unit at the Geismar facility
should be subject to certain state and federal environmental regulations
(see "Legal Proceedings"). While the outcome is uncertain, if these
determinations are upheld, the Partnership could be required to incur
significant expenditures which at this time cannot be estimated, and
portions of which could be subject to the Environmental Indemnity
Agreement (EIA) discussed below.
Under the EIA, Borden has agreed, subject to certain specified
limitations, to indemnify the Partnership in respect of environmental
liabilities arising from facts or circumstances that existed and
requirements in effect prior to the date of the initial public offering
of Preference Units. The Partnership is responsible for environmental
liabilities arising from facts or circumstances that existed and
requirements that become effective on or after such date. With respect
to certain environmental liabilities that may arise from facts or
circumstances that existed and requirements in effect both prior to and
after such date, Borden and the Partnership will share liabilities on an
equitable basis.
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PART I. FINANCIAL INFORMATION
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Item 2. Management's Discussion and Analysis of Financial
- - ------- -------------------------------------------------
Condition and Results of Operations
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Liquidity and Capital Resources
- - -------------------------------
Cash flows from operations for the first three months of 1994 were $15.2
million compared to $8.9 million for 1993. The increase is the result of
higher net income and reduced working capital requirements.
Capital expenditures for the first three months of 1994 and 1993 were
$6.5 million and $1.4 million, respectively. Total capital expenditures for
1994 are expected to be approximately $20 million.
Cash distributions paid during the first three months of 1994 for fourth
quarter 1993 were $6.7 million while cash distributions paid during the first
three months of 1993 for fourth quarter 1992 were $11.5 million.
On April 19, 1994, a cash distribution of $.21 per Common Unit was
declared for the first quarter, payable May 9, 1994 to Unitholders of record
April 29, 1994. A cash distribution of $.30 per Unit was paid for first
quarter 1993. Cash available for distribution was $7.9 million and $11.3
million for first quarter 1994 and 1993, respectively. Of the available cash
for first quarter 1994, $7.7 million will be paid to the Unitholders and the
remainder will be distributed to the General Partner for its ownership
interest. Of the available cash for first quarter 1993, $11.0 million was
distributed to the Unitholders and the remainder was distributed to the General
Partner for its ownership interest.
Results of Operations
- - ---------------------
Quarter Ended March 25, 1994 versus
Quarter Ended March 26, 1993
Net sales for first quarter 1994 were $119.0 million, an increase of
31.3% from $90.6 million a year earlier. Net income for first quarter 1994 was
$3.6 million compared to net income of $0.3 million for first quarter 1993.
The increase in net income reflects volume increases and higher selling prices,
partially offset by higher raw material costs.
Net sales for PVC Polymers Products increased 28.6% to $69.1 million in
1994 from $53.8 million in 1993. The increase in sales was the result of
increased volume and higher selling prices. Notwithstanding the increase in
sales, gross margin for this product group decreased 39.8% versus the prior
year due to substantially higher chlorine costs.
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Net sales for Methanol and Derivatives increased 46.7% to $36.6 million
in 1994 from $24.9 million in 1993 due to higher selling prices and increased
volume. Gross margin for this group increased significantly from first quarter
1993 reflecting the higher sales, partially offset by higher natural gas costs.
Net sales for Nitrogen Products were $13.3 million for first quarter 1994
compared to $11.9 million for first quarter 1993, an 11.5% increase. The
increase was the result of higher selling prices for ammonia and urea as well
as increased volume for urea, partially offset by decreased volume for ammonia.
Gross margin was slightly negative versus a slightly positive position in 1993.
The Partnership expects the favorable price and volume trends from the
first quarter to continue in the second quarter.
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PART II. OTHER INFORMATION
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Item 1. Legal Proceedings
- - ------- -----------------
Environmental Proceedings
- - -------------------------
In January 1994, the Louisiana Department of Environmental Quality
determined that a production unit at the Geismar facility should be subject to
regulation under Louisiana's hazardous waste statutes and regulations. The
Operating Partnership maintains that the production unit is not subject to such
regulation and has filed appeals in Louisiana State Courts. In April 1994, the
U.S. Department of Justice, at the request of the U.S. Environmental Protection
Agency ("EPA"), notified the Partnership that it intends to bring an action in
federal court against the Partnership, seeking corrective action and penalties
for alleged violations of the Resource Conservation and Recovery Act ("RCRA"),
the Comprehensive Environmental Response, Compensation and Liability Act,
("CERCLA") and the Clean Air Act at the Geismar facility. The Operating
Partnership has filed a Complaint for Declaratory Judgment in U.S. District
Court in Baton Rouge seeking a determination that certain materials and
facilities are not subject to regulation under RCRA.
In February 1993, an EPA Administrative Law Judge held that the
Illiopolis facility had violated CERCLA and the Emergency Planning and
Community Right to Know Act ("EPCRA") by failing to report certain relief valve
releases that the Partnership believes are exempt from CERCLA and EPCRA
reporting. A petition for reconsideration has been filed.
Under an Environmental Indemnity Agreement, Borden has agreed, subject to
certain conditions, to indemnify the Partnership and the Operating Partnership
(the Partnerships) in respect of environmental liabilities arising from facts
or circumstances that existed and requirements in effect prior to November 30,
1987. The Partnerships are responsible for environmental liabilities arising
from facts or circumstances that existed and requirements in effect on or after
such date. With respect to certain environmental liabilities that may arise
from facts or circumstances that existed and requirements in effect both prior
to and after such date, Borden and the Partnerships will share liabilities on
an equitable basis. No claim can be made under the Environmental Indemnity
Agreement after 15 years from November 30, 1987 and in any year no claim can,
with certain exceptions, be made with respect to the first $500,000 of
liabilities which Borden would otherwise be responsible for thereunder in such
year, but such excluded amounts may not exceed $3.5 million in the aggregate.
Other Legal Proceedings
- - -----------------------
In addition, the Partnership is subject to various other legal
proceedings and claims which arise in the ordinary course of business. The
management of the Partnership believes, based upon the information it presently
possesses, the realistic range of liability of these other matters, taking into
account its insurance coverage, including its risk retention program and the
Environmental Indemnity Agreement with Borden, would not have a material
adverse affect on the financial position and results of operations of the
Partnership.
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Item 6. Exhibits and Reports on Form 8-K
- - ------- --------------------------------
(a) Exhibits
None
(b) Reports on Form 8-K
None
SIGNATURE
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.
BORDEN CHEMICALS AND PLASTICS
LIMITED PARTNERSHIP
By BCP Management, Inc.,
General Partner
Date: May 6, 1994 By /s/ D. A. Kelly
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D. A. Kelly
Director and Treasurer
(Principal Financial Officer and
duly authorized signing officer)
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