<PAGE> 1
- 1 -
==============================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[ X ] ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended: DECEMBER 31, 1993 Commission file number: 1-9699
----------------- ------
BORDEN CHEMICALS AND PLASTICS
LIMITED PARTNERSHIP
Delaware 31-1269627
--------------------- ---------------------------------
(State of organization) (I.R.S. Employer Identification No.)
Highway 73, Geismar, Louisiana 70734 504-387-5101
-------------------------------------- -----------------------------
(Address of principal executive offices) (Registrant's telephone number)
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
Name of each exchange on
Title of each class which registered
- --------------------------------------- ------------------------------
Depositary Units Representing Common Units New York Stock Exchange
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
NONE
__________________________________
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 by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein. [X]
__________________________________
Aggregate market value in thousands of the Common Units held by non-affiliates
of the Registrant based upon the average sale price of such Units on February
18, 1994 is $454,327.
Number of Common Units outstanding as of the close of business on February 18,
1994: 36,750,000.
================================================================================
The Exhibit Index is located herein at sequential page 21.
<PAGE> 2
-2-
Part I
Item 1. Business
- ------- --------
General
-------
Borden Chemicals and Plastics Limited Partnership (the Registrant or
Partnership), a Delaware limited partnership, was formed in 1987 when the
Partnership, through Borden Chemicals and Plastics Operating Limited
Partnership, its subsidiary operating partnership (the Operating Partnership),
acquired the basic chemicals and polyvinyl chloride (PVC) resins operations of
Borden, Inc. (Borden) located at Geismar, Louisiana and Illiopolis, Illinois.
Any reference to business and transactions of the Partnership included in this
Form 10-K Annual Report includes, where applicable, business and transactions
of the Operating Partnership.
The highly integrated Geismar facility produces basic chemical products
and PVC resins. The basic chemical products manufactured at Geismar are
methanol, ammonia, formaldehyde, urea, urea-formaldehyde concentrate,
acetylene, acetylene-based vinyl chloride monomer (VCM) and ethylene-based VCM.
The Illiopolis facility produces PVC resins. The PVC resins operations at
Geismar and Illiopolis produce general purpose and specialty purpose PVC
resins.
At Geismar, the acetylene, methanol and acetylene-based VCM plants were
completed in the early 1960's; and ammonia, urea and acetic acid plants were
added during the period 1965 to 1967. In the mid-1970's an ethylene-based VCM
plant and a formaldehyde plant were added and a second formaldehyde plant was
brought on-stream in 1986, followed by a third formaldehyde plant in 1991. In
1983 Borden completed construction of a state-of-the-art PVC resins plant at
Geismar. The PVC resins facility at Illiopolis started operating in 1962.
The Partnership and Borden have entered into long-term agreements which
require Borden, subject to the terms and conditions contained in the
agreements, to purchase from the Partnership at least 85% of Borden's
requirements for PVC resins, methanol, ammonia and urea and to utilize
specified percentages of the Partnership's capacity to process formaldehyde and
urea-formaldehyde concentrate. The Partnership believes that the pricing
formula set forth in such agreements should produce aggregate prices and
processing charges for the covered products that over time will approximate the
aggregate prices and processing charges that Borden would have been able to
obtain from unaffiliated suppliers, considering the magnitude of Borden's
purchases, the long-term nature of such agreements and other factors. Sales to
Borden represented 19% of total Partnership sales in 1993.
The Partnership's products are classified into three product groups;
PVC Polymers Products, Methanol and Derivatives, and Nitrogen Products. The
following is a general description of the principal products within each group.
<PAGE> 3
-3-
PVC Polymers Products
---------------------
PVC Resins - The Partnership produces general purpose and specialty
purpose PVC resins at two plants located at Geismar and Illiopolis, with annual
capacities of 440 million and 380 million pounds, respectively. Of the
Partnership's total PVC resins sales dollars in 1993, 74% related to general
purpose PVC resins and 26% related to specialty purpose PVC resins.
The construction and home building industries are major markets for
general purpose PVC resins with uses including water distribution pipe,
residential siding and wallcoverings. Uses for specialty purpose PVC resins
include electrical cable jacketing, flooring, film and rigid packaging, tubing,
medical valves, surgical gloves, and flexible and rigid components for toys and
household goods.
PVC resins are produced by the polymerization of VCM. All of the VCM
used by the Geismar and Illiopolis PVC resins plants is obtained from the two
Geismar VCM plants discussed below.
In 1993 14% of the Partnership's total production of PVC resins was
sold to Borden for use in its downstream vinyl conversion operations and the
remainder was sold to other third parties. Approximately 10% of 1993 sales of
PVC resins were exported. Demand for PVC resins generally tends to be cyclical
and follows the upturns and downturns in the construction and automotive
industries.
VCM - The Partnership produces VCM by two processes: an acetylene
process and an ethylene process. The finished products of the two processes
are essentially identical but the production costs vary depending on the cost
of raw materials and energy. Although the cost differences are normally not
significant, the ability to produce VCM by either process provides the
Partnership the flexibility to use the process that results in the lower cost
at any particular time.
The principal market for VCM is the PVC resins industry because VCM
(either acetylene-based or ethylene-based) is the principal feedstock used to
produce PVC resins. Consequently, most major PVC resins producers either
produce VCM internally or have long-term contracts with major VCM producers.
Acetylene-based VCM is produced at a Geismar plant with a capacity of
320 million pounds per year. In 1993 98% of the acetylene-based VCM produced
at Geismar was consumed by the PVC resins plants at Geismar and Illiopolis.
The remainder was either inventoried or used to satisfy tolling arrangements.
The Geismar complex contains the only acetylene-based VCM plant in the
United States. The integration of the acetylene-based plant with the other
plants on site provides stability as well as cost and efficiency benefits to
the plants located at the Geismar complex. Although ethylene has generally
been regarded as a lower cost feedstock to produce VCM, the acetylene-based VCM
plant reduces the overall processing costs of the Geismar complex because the
acetylene plant produces acetylene off-gas as
<PAGE> 4
-4-
a by-product, which is used as a feedstock in the production of methanol. In
addition, hydrochloric acid, a feedstock used in the production of
acetylene-based VCM, is produced as a by-product by the adjacent ethylene-based
VCM plant. Furthermore, certain industrial plants adjoining the Geismar
complex have large excess supplies of hydrochloric acid, which tend to benefit
the operation of the acetylene-based VCM plant.
Ethylene-based VCM is produced at a Geismar plant with a capacity of
610 million pounds per year. In 1993 97% of the ethylene-based VCM produced at
Geismar was consumed by the PVC resins plants at Geismar and Illiopolis. The
remainder was used primarily to satisfy tolling and exchange arrangements.
Ethylene and chlorine constitute the principal feedstocks used in the
production of ethylene-based VCM. Both feedstocks are purchased by the Geismar
plant from outside sources. A by-product of the production of ethylene-based
VCM, hydrochloric acid, is diverted to the acetylene-based VCM plant, where it
is used as a feedstock and lowers the operating costs of the acetylene-based
plant.
Acetylene - The Partnership holds a 50% interest in an acetylene plant
located at the Geismar complex, with the remaining 50% interest held by BASF.
As long as a subsidiary of Borden is the General Partner of the Partnership,
the plant will be managed by employees of such General Partner pursuant to an
operating agreement with BASF. The agreement provides that, if a Borden
subsidiary ceases to be the General Partner, BASF will have the exclusive right
to become the operator of the plant and the personnel necessary to operate the
plant will be encouraged to accept employment with BASF.
The acetylene plant's total annual capacity is 200 million pounds. The
principal feedstocks used in the production of acetylene are natural gas and
oxygen. Pursuant to the contracts governing the operation of the acetylene
plant, the Partnership is required to supply the natural gas necessary to
produce its 50% share of acetylene output; BASF has an option to supply the
natural gas for its 50% share. In the event BASF does not require its share of
acetylene produced, the Partnership may supply the natural gas and is entitled
to the acetylene produced therefrom. The oxygen necessary for the production
of acetylene is obtained from certain air separation units and related air
compression systems, which are jointly owned by the Partnership, BASF and
Liquid Air Corporation pursuant to joint venture arrangements.
In 1993 67% of total production volume of the Geismar acetylene plant
was used internally as a principal feedstock of the Geismar acetylene-based VCM
plant. BASF did not require its full share of the 1993 production, but
accepted delivery of 33% of the plant's 1993 production volume. It is
anticipated that excess acetylene will be available at cost to the Partnership
through at least 1994. Because of transportation factors, the market for
acetylene is principally local.
Methanol and Derivatives
------------------------
Methanol - Methanol is produced at a plant at the Geismar complex
having an annual capacity of 270 million gallons.
<PAGE> 5
-5-
The primary raw material feedstock used in the production of methanol
is natural gas. Although the cost of natural gas represents a significant
portion of the Partnership's processing cost for methanol, the efficiency of
the Geismar methanol plant has been enhanced by using acetylene-off-gas, a
by-product of the Geismar acetylene plant, as a partial substitute feedstock
for purchased natural gas.
The principal market for methanol is as a fuel additive and as a
chemical intermediate in the manufacture of formaldehyde, acetic acid and other
basic chemicals. General industry demand for methanol varies with the level of
new housing starts and industrial production.
Methanol is a typical commodity chemical characterized by cycles of
oversupply resulting in depressed prices and idled capacity, followed by
periods of shortage with rapidly rising prices and strong demand until
increased prices justify new plant investment.
In 1993 17% of methanol produced was used internally to produce
formaldehyde. Sales to Borden for its downstream production facilities and
sales to other third parties accounted for 32% and 44%, respectively, of total
production in 1993. The remainder was used primarily to satisfy tolling and
exchange arrangements.
Formaldehyde - The Partnership produces 50%-concentration formaldehyde
(which is 50% formaldehyde and 50% water) at three plants in the Geismar
complex. The formaldehyde plants have annual capacities of 270, 180 and 190
million pounds.
The principal feedstock used in the production of formaldehyde is
methanol. The Geismar formaldehyde plants obtain all of such feedstock from
the adjacent methanol plant.
The formaldehyde market is that of a mature commodity, with demand
reflecting general economic conditions. Uses are very diverse with the highest
demand stemming from the construction and automotive industries.
In 1993 Borden purchased 40% of the total formaldehyde produced for use in
its production of urea-formaldehyde and phenol-formaldehyde resins, which are
used in the forest products and other industries, while 2% of the formaldehyde
produced at Geismar was used by the Partnership to produce urea-formaldehyde
concentrate for the fertilizer industry. The remainder was purchased by an
unaffiliated third party pursuant to a ten-year supply contract signed in 1989.
The contract requires the Partnership to supply in the future up to 78% of its
annual capacity to the third party to the extent necessary to satisfy that
party's formaldehyde requirements.
Acetic Acid - The plant has been idle since March 1989 and will remain
idle until market conditions justify restarting it. The net book value of the
plant has been written off.
Nitrogen Products
-----------------
Ammonia - The Partnership produces ammonia at a plant located at
Geismar with an annual capacity of 400,000 tons. The principal feedstock used
in the production of ammonia is natural gas. Two by-products of the
<PAGE> 6
-6-
production of ammonia are carbon dioxide and low pressure steam. The ammonia
plant supplies carbon dioxide to the urea and methanol plants and steam to the
urea plant.
The principal market for ammonia is fertilizer and other agricultural
chemicals. Approximately 85% of domestic production is consumed directly or
indirectly in fertilizer applications. Other agricultural chemicals produced
with ammonia include pesticides and herbicides. Ammonia is also used in making
certain industrial chemicals, such as amines and explosives.
In 1993 36% of total ammonia production was used by the adjacent urea
plant in the production of urea. Sales to Borden accounted for 2% of total
production, while sales to other third parties accounted for the remainder of
total production in 1993. Demand for ammonia is seasonal, with prices tending
to be higher in the spring and fall months than during the remainder of the
year.
Urea - The Partnership produces urea at a Geismar plant with an annual
capacity of 250,000 tons. The principal feedstocks used in the production of
urea are ammonia and carbon dioxide, which are obtained from the adjacent
ammonia plant.
Approximately 80% of domestic production of urea is consumed in some
form of fertilizer application. Urea's high nitrogen content makes it an
effective and popular dry nitrogen fertilizer. In addition, urea is used in
the production of animal feed and pesticides. Outside the agricultural
chemical industry, urea is used largely in the production of urea-formaldehyde
resins.
In 1993 Borden purchased 21% of the total urea produced to make
urea-formaldehyde wood adhesives and related products while 1% of urea produced
was used to produce urea-formaldehyde concentrate. The remainder of production
was sold to other third parties. Like ammonia, demand for urea is seasonal,
with prices tending to be higher in the spring and fall months than during the
remainder of the year.
Marketing
---------
The Partnership's products are marketed primarily through a
professional field sales organization, all of whom are employees of BCP
Management, Inc. (BCPM), the General Partner. The selling activity of the
Partnership is based on customer contact on a regular basis to secure and
maintain long-term supply relationships. A substantial portion of the
Partnership's sales is made under contracts with annual negotiations relating
to specific conditions of sale.
Occasional methanol export sales outside North America have been, and
will continue to be, coordinated through Borden's international sales
representatives in Columbus, Ohio.
Raw Materials
-------------
The principal purchased raw material used by the Partnership is natural
gas. Natural gas is supplied by pipeline to the Geismar complex by six major
natural gas pipelines. As is currently common in the chemical
<PAGE> 7
-7-
industry, the Partnership has long-term contracts with floating costs for the
purchase of natural gas, and also makes significant purchases on a monthly
and/or quarterly basis. The Partnership has diversified its suppliers and does
not currently anticipate any difficulty in obtaining adequate natural gas
supplies.
The Partnership purchases other raw materials for its operations,
principally ethylene and chlorine. Ethylene is currently supplied by pipeline
to the Geismar facility by several suppliers. Chlorine is supplied by railcar
to the Geismar facility by various suppliers. The major raw material for the
Illiopolis PVC plant, VCM, is supplied by railcar from the Geismar facility.
Additionally, in connection with the production of certain specialty grade PVC
resins, the Partnership purchases certain quantities of vinyl acetate monomer.
The Partnership does not believe that the loss of any present supplier would
have a materially adverse effect on the production of any particular product
because of numerous, competitive alternate suppliers.
Competition
-----------
The Partnership encounters competition from numerous manufacturers in
all of its product lines. Many of these competitors have substantially greater
financial resources and are more highly diversified than the Partnership. As
previously noted most of the Partnership products are typical commodity
chemicals for which demand and selling prices are largely related to general
economic conditions, particularly the construction and automotive sectors.
Other significant factors in the marketing of the products are delivery,
quality and, in the case of PVC resins, technical service. The Partnership
believes that the overall efficiency and integration of the facilities at
Geismar and Illiopolis make the Partnership well positioned to compete in the
markets it serves.
Research and Development
------------------------
A research and development center is located at the Geismar complex.
It contains sophisticated testing facilities for analytical work, lab scale
processing equipment to simulate customer plant operations, and pilot plant
reactors for polymerization development work.
The Partnership's annual cost for research and development was
approximately $1.8 million in 1993, 1992 and 1991.
Patents and Trademarks
----------------------
The Partnership has non-exclusive, royalty-free licenses from Borden
covering numerous licenses from third parties relating to technology used in
the Partnership's business, and unpatented operating know-how and technology in
connection with the operations of the business. The Partnership is also a
licensee or a sublicensee under license arrangements with third parties
pursuant to which it is obligated to pay royalties.
<PAGE> 8
-8-
The Partnership has entered into a Use of Name and Trademark License
Agreement with Borden pursuant to which the Partnership is permitted to use the
Borden name and logo in the name of the Partnership and in its business. The
use of Name and Trademark License Agreement and the right to use the Borden
name and logo shall terminate in the event that BCPM ceases to be the General
Partner.
Environmental and Safety Regulations
------------------------------------
Capital expenditures for environmental control facilities were
approximately $4.7 million in 1993. Such capital expenditures are expected to
be approximately $4.5 million in 1994.
The Partnership believes that it is in general compliance with
applicable existing safety, health and environmental laws and regulations. The
Partnership maintains an environmental and industrial safety program and a
health compliance program and conducts internal regulatory audits at the
plants. Risks of substantial costs and liabilities are inherent in certain
plant operations and certain products produced at the plants, as they are with
other enterprises engaged in the chemical business, and there can be no
assurance that significant costs and liabilities will not be incurred.
In 1993, 1992 and 1991 the Partnership incurred costs of $19.0 million,
$22.5 million and $17.5 million, respectively, relating to its environmental
programs. The Louisiana Department of Environmental Quality has determined
that a production unit at the Geismar facility should be subject to state
hazardous waste regulations. While the Operating Partnership has appealed the
decision, the outcome of such decision is uncertain and if upheld, the
Operating Partnership could be required to incur approximately $1.0 million in
increased operating costs during the first year and approximately $200,000 to
$500,000 each year thereafter and other significant expenditures which at this
time cannot be estimated, and which could be subject to the Environmental
Indemnity Agreement discussed at Item 3 - Legal Proceedings.
Moreover, it is possible that other developments, such as increasingly
strict environmental, safety and health laws, regulations and enforcement
policies thereunder and claims for damages to property or persons resulting
from plant emissions or products could result in substantial costs and
liabilities to the Partnership. See Item 3 - Legal Proceedings for a
discussion of environmental proceedings.
Employees
---------
The Partnership does not directly employ any of the persons responsible
for managing and operating the Partnership, but instead reimburses BCPM for
their services. On December 31, 1993 BCPM employed 740 individuals.
<PAGE> 9
-9-
<TABLE>
<CAPTION>
Item 2. Properties
- ------- ----------
The following table sets forth the approximate annual capacity with respect
to each of the principal manufacturing plants at the Geismar, Louisiana complex
and the PVC plant at Illiopolis, Illinois, all of which are owned by the
Partnership except as noted.
Annual Stated
Plants Capacity**
------------------------------ -------------
<S> <C>
Geismar:
PVC Polymers Products
PVC Resins 440,000,000 lbs.
Acetylene-based VCM 320,000,000 lbs.
Ethylene-based VCM 610,000,000 lbs.
Acetylene * 200,000,000 lbs.
Methanol and Derivatives
Methanol 270,000,000 gals.
Formaldehyde I 270,000,000 lbs.
Formaldehyde II 180,000,000 lbs.
Formaldehyde III 190,000,000 lbs.
Nitrogen Products
Ammonia 400,000 tons
Urea 250,000 tons
Illiopolis:
PVC Resins 380,000,000 lbs.
</TABLE>
The operation of the foregoing plants near full capacity or above
is an objective of the Partnership because of the significant integration
among such plants and the reduced operating costs per unit of output at full
operation.
The Partnership believes that the facilities are currently in good
condition, efficient and highly integrated and are in general compliance
with applicable existing environmental laws and regulations.
The Geismar complex is located on approximately 490 acres in
Ascension Parish, Louisiana, adjacent to the Mississippi River between Baton
Rouge and New Orleans. The complex has docking and barge loading facilities
to handle methanol, ammonia and urea. The site is also served by the
Illinois Central Gulf Railroad, which provides daily switching and
interconnecting service with the nation's major railroads through both
Baton Rouge and New Orleans. Pursuant to certain sublease agreements
entered into between Borden and the Partnership, Borden subleases to the
Partnership certain rail cars leased by Borden from third parties. The
complex is further served by numerous major trucking companies and is near an
interstate highway.
__________________
*50% owned by the Partnership.
**Assumes normal operating conditions, including down-time and
maintenance.
<PAGE> 10
-10-
The Illiopolis PVC resin facility is located on approximately 45 acres
in central Illinois between Springfield and Decatur. It contains a large
reactor plant, in which polymerization occurs producing general purpose PVC
resins, a small reactor plant producing copolymer and blending specialty
resins, and a paste or dispersion specialty resins unit. Appropriate raw
material and finished goods storage facilities, utilities, and waste treatment
facilities are maintained at the site.
The Illiopolis facility is serviced by the Norfolk and Southern
Railroad which provides daily direct and connecting service to the nation's
major railroads through East St. Louis. Illiopolis is also located near
an interstate highway and is serviced by several major trucking firms.
Utilities
---------
The Geismar complex operates three high thermal efficiency
co-generation units providing the site with low cost electricity, steam and
high temperature reformer combustion air. Each unit is composed of a
natural gas burning turbine/generator unit combined with a steam producing
heat recovery system (i.e., the "co-generation" of electricity and steam).
The co-generation units are designed to provide 100% of the
electricity, a significant portion of the steam, and a portion of the
reformer combustion air requirements of the Geismar complex at full
production levels. These units have electrical outputs of 20, 35 and 35
megawatts. The electricity supplied by the units through a substation
owned by Monochem, Inc. (Monochem), a corporation of which the Partnership
owns 50% of the capital stock, usually exceeds the requirement of the Geismar
complex with the excess production being sold to Gulf States Utilities at its
"avoided cost" rate. The Partnership's interest in Monochem is subject to
certain rights of first refusal and limitations to transfer.
Water requirements at the Geismar complex are obtained through
Monochem from the Mississippi River. At Illiopolis, a municipal water
company supplies the facility with its water requirements. Because the
Illiopolis facility represents a significant portion of the demand for water
supply from the municipal water company, the Partnership manages the operations
of the water company on a cost-reimbursed basis.
Item 3. Legal Proceedings
- ------- -----------------
Environmental Proceedings
-------------------------
Private actions filed in Federal District Court in Louisiana against
the 50% owned subsidiary of the Operating Partnership, and several other
defendants alleging personal injuries and property damage in connection with a
former hazardous waste disposal site, have been settled by payment by the
Operating Partnership's subsidiary of approximately $44,000.
The Louisiana Department of Environmental Quality has determined that a
production unit at the Geismar facility should be subject to the Resource
Conservation and Recovery Act ("RCRA"). The Partnership believes that
similar allegations and allegations relating to other RCRA issues are being
contemplated by the U.S. Environmental Protection Agency. The Operating
Partnership maintains that the production unit is not subject to
<PAGE> 11
-11-
RCRA regulation. A petition for a rehearing was denied and appeals have been
filed in Louisiana State Courts.
In February, 1993 an Environmental Protection Agency
Administrative Law Judge held that the Illiopolis facility had violated
Comprehensive Environmental Response, Compensation, and Liability Act
("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.
Item 4. Submission of Matters to a Vote of Security Holders
- ------- ---------------------------------------------------
No matter was submitted during the fourth quarter of 1993 to a vote
of security holders, through the solicitation of proxies or otherwise.
<PAGE> 12
-12-
Part II
Item 5. Market for the Registrant's Common Equity and Related
- ------- -----------------------------------------------------
Stockholder Matters
-------------------
On February 12, 1993, which was the payment date for the 1992 fourth
quarter distribution, Borden's obligations under the Guarantee Agreement to
ensure minimum quarterly distributions under the Preference Unit Distribution
Support Agreement and the Common Unit Direct Payment Agreement were
extinguished and all differences between the Preference Units and Enhanced
Common Units ceased and all Units are now Common Units.
The high and low sales prices for the Common Units on February 18, 1994
were $12 5/8 and $12 1/8, respectively. The approximate number of Common
Unitholders as of February 18, 1994 was 65,000.
<TABLE>
The following table sets forth the 1993 quarterly Common Unit data:
<CAPTION>
1993 Quarters
---------------------------------------
First Second Third Fourth
------- -------- ------- --------
<S> <C> <C> <C> <C>
Cash distribution declared $ .30 $ .18 $ .12 $ .18
Market price range:
Low 13 5/8 10 3/4 8 7/8 8 1/4
High 17 1/8 16 1/8 12 1/8 11 1/4
</TABLE>
The high and low prices for the Preference Units during the
first quarter of 1993 (through February 12) were $16 1/4 and $13 3/4,
respectively.
<TABLE>
Prior to February 12, 1993 the Enhanced Common Units and
Preference Units traded separately on the New York Stock Exchange.
The following table sets forth the 1992 quarterly unit data:
<CAPTION>
1992 Quarters
-------------------------------------------
First Second Third Fourth
------- -------- ------- --------
<S> <C> <C> <C> <C>
Cash distribution declared $ .45 $ .51 $ .32 $ .31
Market price range:
Enhanced Common Units
Low 13 3/4 16 1/2 15 7/8 12 3/8
High 22 7/8 21 3/8 19 3/8 17
Preference Units
Low 14 1/8 17 16 12 5/8
High 24 1/8 22 5/8 19 5/8 17 1/8
</TABLE>
<PAGE> 13
-13-
Item 6. Selected Financial Data
- ------- -----------------------
<TABLE>
The following table sets forth selected historical financial information
for the Partnership for each of the five years ended December 31, 1993.
<CAPTION>
1993 1992 1991 1990 1989
-------- -------- -------- -------- --------
(in thousands except per Unit data)
<S> <C> <C> <C> <C> <C>
Net revenues $433,297 $401,803 $410,005 $420,631 $465,923
Net (loss) income (1,435) 27,085 51,553 45,296 69,495
Net (loss) income
per Unit (.04) .73 1.39 1.22 1.87
Cash distribution
declared per Unit .78 1.59 1.98 1.95 2.45
Total assets 444,304 466,729 507,042 544,204 549,628
Long-term debt 150,000 150,000 150,000 150,000 150,000
</TABLE>
Item 7. Management's Discussion and Analysis of Financial Condition
- ------- -----------------------------------------------------------
and Results of Operations
-------------------------
<TABLE>
Results of Operations
---------------------
The following table sets forth the dollar amount of revenues and the
percentage of total revenues for each of the principal product groups
of the Partnership (in thousands):
<CAPTION>
1993 1992 1991
------------ ------------ ------------
<S> <C> <C> <C>
PVC Polymers Products $261,342 60% $247,209 61% $232,963 57%
Methanol and Derivatives 119,779 28 100,002 25 119,278 29
Nitrogen Products 52,176 12 54,592 14 57,764 14
-------- --- -------- --- -------- ---
Total Revenues $433,297 100% $401,803 100% $410,005 100%
======== === ======== === ======== ===
</TABLE>
<TABLE>
Following are indices of average selling prices per unit of product sold
for the principal product groups and relative average raw material costs per
unit for the principal raw materials (using 1985 as base year with index values
of 100). The price indices in the table reflect changes in the mix and volume
of individual products sold as well as changes in selling prices.
<CAPTION>
1993 1992 1991
---- ---- ----
<S> <C> <C> <C>
Average Price Received per
Unit Sold:
PVC Polymers Products 106 99 103
Methanol and Derivatives 94 88 110
Nitrogen Products 85 82 87
Raw Material Costs per Unit:
Natural Gas 88 74 63
Ethylene 115 116 128
Chlorine 83 7 N/M
<FN>
N/M - Not meaningful due to the extreme oversupply of chlorine and the
resulting negative value in the marketplace.
</TABLE>
<PAGE> 14
-14-
1993 Compared to 1992
---------------------
Total revenues for 1993 were $433.3 million compared to $401.8 million for
1992. A net loss of $1.4 million was recorded in 1993 compared to net income
of $27.1 million in 1992. The increase in sales is primarily related to
increased sales for Methanol and Derivatives and PVC Polymers Products,
partially offset by slightly lower sales for Nitrogen Products. The decline in
net income reflects gross margin declines in all groups, especially PVC
Polymers Products.
PVC Polymers Products sales increased 5.7% to $261.3 million compared to
1992 as a result of higher selling prices partially offset by a slight decrease
in volume. Gross margin decreased 53.6%, as a result of a significant
increase in chlorine costs which could not be fully recovered in product
pricing due to strong industrywide competition.
Methanol and Derivatives sales increased 19.8% to $119.8 million compared
to 1992 as a result of increases in selling prices and volume. The higher
volume was the result of increased winter season demand for methanol-based,
octane-boosting gasoline additives used to reduce automobile emissions, as well
as increased general industry demand. Gross margins decreased 7.7% as a result
of substantially higher natural gas costs.
Nitrogen Products sales decreased 4.4% to $52.2 million compared to 1992 as
a result of decreased volume, partially offset by higher selling prices for
ammonia. Gross margin decreased from near break-even in 1992 to a moderate
loss in 1993 as a result of the decreased sales and higher natural gas costs.
Raw material costs are expected to remain high during the first quarter of
1994. However, these increased costs should be offset by strong demand and
favorable selling price trends. As a result, the Partnership expects to record
a moderate profit in the first quarter of 1994.
1992 Compared to 1991
---------------------
Total revenues for 1992 were $401.8 million compared to $410.0 million for
1991, while net income for 1992 was $27.1 million compared to $51.6 million in
1991. The decrease in sales is due primarily to lower Methanol and Derivatives
sales, as well as lower Nitrogen Products sales, partially offset by higher PVC
Polymers Products sales. The decrease in net income reflects gross margin
declines for both Methanol and Derivatives and Nitrogen Products.
PVC Polymers Products sales increased 6.1% to $247.2 million as a result of
increased volume partially offset by lower selling prices. Domestic demand for
PVC resin in building and construction applications achieved record levels in
1992, but additional capacity industrywide exceeded demand resulting in
increased price competition. Gross margin increased 2.1% from 1991 as a result
of the higher sales.
<PAGE> 15
-15-
Methanol and Derivatives sales decreased 16.2% to $100.0 million as a
result of lower selling prices compared to 1991, when unscheduled production
outages by several major domestic methanol producers resulted in tight supplies
and higher prices. These decreases were partially offset by higher volume from
increased demand for methanol, especially as an ingredient in cleaner-burning
octane-boosting gasoline additives and formaldehyde. Gross margin decreased
51.2% as a result of the lower sales and increased natural gas costs.
Nitrogen Products sales decreased 5.5% to $54.6 million as a result of
lower selling prices. Volume was essentially unchanged as demand in key
fertilizer end uses remained stable. Gross margin decreased from a moderate
profit in 1991 to near break-even in 1992 as a result of lower selling prices
and higher natural gas costs.
Liquidity and Capital Resources
-------------------------------
Cash flows from operations for 1993 were $38.5 million compared to $63.9
million for 1992 and $91.5 million for 1991. The reduction in operating cash
flows in 1993 and 1992 is primarily due to 1ower net income.
Capital expenditures totaled approximately $15.0 million, $10.5 million and
$18.0 million for 1993, 1992 and 1991, respectively. In addition to capital
expenditures, maintenance expenses incurred in 1993, 1992 and 1991 were $29.9
million, $29.3 million and $30.8 million, respectively.
Capital expenditures, including environmental expenditures, for 1994 are
estimated to be approximately $20.0 million. While capital expenditures are
generally incurred throughout the year, the timing of certain projects can be
influenced by factors such as the level of business activity. It is expected
that annual capital expenditures beyond 1994 will be approximately $20.0
million but may increase as opportunities for economically viable capital
projects arise.
Capital expenditures in 1993 primarily related to the completion of the
urea granulation conversion project, VCM-E environmental cost reduction and
waste treatment upgrades. Capital expenditures in 1992 primarily related to a
methanol purge gas separator, the urea granulation conversion project and
numerous small projects. Capital expenditures in 1991 primarily related to an
environmental compliance project at Geismar and the completion of the expansion
of formaldehyde capacity.
The Partnership expects to satisfy its future cash requirements through
internally generated cash and borrowings.
The Partnership has a short-term unsecured working capital facility of up
to $20.0 million under a revolving credit agreement to support working capital
requirements. Borrowings under the working capital facility bear interest at
rates fixed at the time of each borrowing. There were no significant
borrowings under the working capital facility at any time during 1993, 1992 or
1991.
<PAGE> 16
-16-
The Partnership makes quarterly distributions to Unitholders and the
General Partner of 100% of its Available Cash (as defined in the Partnership
Agreement). Available Cash each quarter generally consists of cash receipts
less cash disbursements (excluding cash distributions to Unitholders) and
reserves.
On February 12, 1993, which was the payment date for the 1992 fourth
quarter distribution, Borden's obligations under the Guarantee Agreement to
ensure minimum quarterly distributions under the Preference Unit Distribution
Support Agreement and the Common Unit Direct Payment Agreement were
extinguished and all differences between the Preference Units and Enhanced
Common Units ceased and all Units are now Common Units.
As discussed under Item 1 "Business" herein, cyclical demand for Partnership
products and, to a lesser extent, seasonality factors, affect results of
operations. These same factors affect the amount of cash flows from operations
and consequently the amount of cash available for distribution to Unitholders.
The amount of cash flows from operations and the Available Cash generated for
distribution for any period does not necessarily correlate directly with net
income for such period because various items and transactions affect net income
and cash flows from operations differently. For example, depreciation reduces
net income but does not affect cash flows from operations, while changes in
working capital items (including receivables, inventories, accounts payable and
other items) generally do not affect net income but do affect cash flows from
operations. Moreover, as provided for in the Partnership Agreement, certain
reserves may be established which do not affect net income or cash flows but do
affect Available Cash to be distributed to Unitholders.
<PAGE> 17
-17-
<TABLE>
Item 8. Financial Statements and Supplementary Data
- ------- -------------------------------------------
<CAPTION>
Sequential
Index to Financial Statements Page
- ----------------------------- ----------
<S> <C>
Report of Independent Accountants 29
Consolidated Statements of Income for the years
ended December 31, 1993, 1992 and 1991 30
Consolidated Statements of Cash Flows for the years
ended December 31, 1993, 1992 and 1991 31
Consolidated Balance Sheets as of December 31, 1993
and 1992 32
Consolidated Statements of Changes in Partners'
Capital for the years ended December 31, 1993,
1992 and 1991 33
Notes to Consolidated Financial Statements 34-38
</TABLE>
<TABLE>
<CAPTION>
Selected Quarterly Financial Data (Unaudited)
- ---------------------------------------------
(in thousands except per Unit data)
1993 Quarters
---------------------------------------------------------
First Second Third Fourth
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Revenue $ 90,604 $105,971 $111,001 $125,721
Gross Profit 8,615 4,335 7,739 14,837
Net Income (loss) 266 (4,855) (1,471) 4,625
Net Income (loss)
per Unit 0.01 (0.13) (0.04) 0.12
1992 Quarters
---------------------------------------------------------
First Second Third Fourth
-------- -------- -------- --------
Revenue $ 99,278 $103,060 $ 92,860 $106,605
Gross Profit 21,034 23,989 9,434 9,364
Net Income 12,176 13,335 787 787
Net Income per Unit 0.33 0.36 0.02 0.02
</TABLE>
Item 9. Changes in and Disagreements with Accountants on Accounting
- ------- -----------------------------------------------------------
and Financial Disclosure
------------------------
No Form 8-K was issued by the Company for the two most recent years ended
December 31, 1993 reporting a change in or disagreement with accountants.
<PAGE> 18
-18-
PART III
Item 10. Directors and Executive Officers of the Registrant
- -------- --------------------------------------------------
The Partnership is a limited partnership (of which BCPM is the General
Partner) and has no directors or officers. The directors, officers and
employees of the General Partner perform management and nonsupervisory
functions for the Partnership.
Management Organization - Joseph M. Saggese is Chairman, President and
Chief Executive Officer of BCPM. He is also an Executive Vice President of
Borden and President of the Borden Packaging and Industrial Products Division
Domestic and International. John L. Russ III and Wayne P. Leonard, who report
directly to Mr. Saggese, are responsible for Partnership marketing and
manufacturing operations, respectively.
Independent Committee - BCPM is required to maintain an Independent
Committee of its Board of Directors, which shall be composed of at least three
directors, each of whom is neither an officer, employee or director of Borden
nor an officer or employee of BCPM. Certain actions require special approval
from the Independent Committee. Such actions include an expansion of the scope
of business of the Partnership, the making of material capital expenditures,
the material curtailment of operations of any plant, the material expansion of
capacity of any plant, and the amendment of or entry into by the Partnership of
any agreement with Borden. The members of the Independent Committee are Edward
H. Jennings, George W. Koch and Daniel M. Galbreath.
<TABLE>
As sole stockholder of BCPM, Borden elects directors of BCPM on an
annual basis. Set forth below is certain information concerning the directors
and officers of BCPM.
<CAPTION>
Served in
Age on Present
Position and Office Dec. 31, Position
Name with General Partner 1993 Since
----------------- ----------------------------- -------- ---------
<S> <C> <C>
Joseph M. Saggese Director, Chairman, President
and Chief Executive Officer 62 1990
*Lawrence O. Doza Director 55 1987
Daniel M. Galbreath Director 65 1987
Edward H. Jennings Director 56 1989
George W. Koch Director 67 1987
John P. Stapleton Director and Vice President 48 1987
Ronald B. Wiles Director 55 1990
**David A. Kelly Director, Treasurer and Principal
Financial Officer 55 1987
John L. Russ III Vice President 53 1987
Wayne P. Leonard Vice President 52 1987
James O. Stevning Controller and Principal
Accounting Officer 34 1994
Lawrence L. Dieker Secretary 55 1987
<FN>
*Mr. Doza retired effective March 1, 1994.
**Mr. Kelly was elected a director effective March 1, 1994.
</TABLE>
<PAGE> 19
-19-
Joseph M. Saggese was elected Chairman, President and Chief Executive
Officer of BCPM effective July 1, 1990. He was also elected Executive Vice
President of Borden and President of the Borden Packaging and Industrial
Products Division Domestic and International (the Division) effective July 1,
1990. Prior to that he served as a Senior Group Vice President of the Division
since January 1, 1989. Prior to that he served as a Senior Vice President of
the Division since October 1, 1985.
Daniel M. Galbreath is a director of BCPM. He is Chairman of the Board
of The Galbreath Company, a position he has held since 1979, and President and
Chief Executive Officer of John W. Galbreath & Co., a position he has held
since 1950. The Galbreath Company is engaged in the real estate development
business. Mr. Galbreath is also a director of Churchill Downs, Incorporated.
Edward H. Jennings is a director of BCPM. He is also a professor and
President Emeritus of The Ohio State University. He served as President of The
Ohio State University from 1981 to 1990. Mr. Jennings is also a director of
Super Foods, Inc. and Lancaster Colony, Inc.
George W. Koch is a director of BCPM. He is Of Counsel in the law firm
of Kirkpatrick & Lockhart since January 1992. Prior to that he was a partner
of Kirkpatrick & Lockhart since April 1990. From 1966 to April 1990 he was
President and Chief Executive Officer of the Grocery Manufacturers of America,
Inc., a non-profit organization of the leading grocery manufacturers in the
United States. Mr. Koch is also a director of McCormick & Co.
Ronald B. Wiles is a director of BCPM. He is also Controller of the
Borden Packaging and Industrial Products Division Domestic and International, a
position he has held since July 1, 1990. Prior to that he held various Group
Controller positions for the Division.
James O. Stevning was elected Controller and Principal Accounting of
BCPM effective March 2, 1994. He is also Group Controller of the Partnership,
a position he has held since April 1992. Prior to that he was Assistant
Controller of the Borden Packaging and Industrial Products Division Domestic
and International.
As previously indicated, officers and employees who, prior to the
transfer of the operations in 1987, were responsible for managing and operating
the basic chemicals and PVC resins business of Borden, continue to manage and
operate the business of the Partnership as officers and/or employees of BCPM.
Officers of BCPM, other than Messrs. Russ, Leonard and Stevning, who perform
services solely for BCPM, allocate their time between Borden and BCPM.
Item 11. Executive Compensation
- -------- ----------------------
The Partnership has no directors or officers. The directors and officers of
BCPM receive no direct compensation from the Partnership for services to the
Partnership. The Partnership reimburses BCPM for all direct and indirect costs
incurred in managing the Partnership.
<PAGE> 20
-20-
During 1993 the three independent directors of BCPM received a retainer
of $15,000 per year plus a fee of $1,000 for each BCPM Board meeting attended.
The Board functions in part through its Independent and Audit Committees. The
three non-employee members of each of these committees are paid a meeting fee
of $700 for each committee meeting attended. The committee chairman is also
paid an additional $100 for each committee meeting attended in that capacity.
During 1993, the Board met four times, and the Independent and Audit Committees
met jointly four times.
Item 12. Security Ownership of Certain Beneficial Owners and Management
- -------- --------------------------------------------------------------
To the knowledge of BCPM, no person is the beneficial owner of more than
five percent of the Partnership's Units. As of February 18, 1994 the
beneficial ownership of Common Units by all directors and officers of BCPM as a
group was 36,675 Units, which represents less than one percent of the total
Units outstanding.
Item 13. Certain Relationships and Related Transactions
- -------- ----------------------------------------------
The Partnership is managed by BCPM pursuant to the Amended and Restated
Agreement of Limited Partnership (the Agreement) dated December 15, 1988.
Under the Agreement BCPM is entitled to reimbursement of certain costs of
managing the Partnership. These costs include compensation and benefits
payable to officers and employees of BCPM, payroll taxes, general and
administrative costs and legal and professional fees. Note 3 of Notes to
Consolidated Financial Statements of the Partnership contained on page 35 of
this Form 10-K Annual Report contains information regarding relationships and
related transactions.
Mr. Daniel M. Galbreath, a director of BCPM, is President of The
Galbreath Company, which is the Management and Leasing Agent for the owners of
an office building in Columbus, Ohio which is used by Borden and BCPM as
executive and administrative offices. The Partnership believes that the terms
of the current lease are, and that any extension or renewal thereof will be, on
terms no less favorable to Borden and BCPM than if such premises were leased
from any other independent third party.
<PAGE> 21
-21-
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on
- -------- -------------------------------------------------------
Form 8-K
--------
(a) 1. Financial Statements
--------------------
a. The Consolidated Financial Statements, together with the
report thereon of Price Waterhouse dated January 18, 1994, are
contained on pages 29 through 38 of this Form 10-K Annual
Report.
2. Financial Statement Schedules
-----------------------------
<TABLE>
a. The following additional financial data should be read in
conjunction with the Consolidated Financial Statements of the
Partnership contained on pages 29 through 38 of this Form
10-K Annual Report. Schedules not included with this
additional financial data have been omitted because they are
not applicable or the required information is shown in the
Consolidated Financial Statements or Notes thereto.
<CAPTION>
Sequential
Additional Financial Data Page
------------------------- ----------
<S> <C>
Report of Independent Accountants on
Financial Statement Schedules 39
Property and Equipment (Schedule V) 40
Accumulated Depreciation of Property
and Equipment (Schedule VI) 41
</TABLE>
3. Exhibits
--------
<TABLE>
<S> <C>
3.1(2) Certificate of Incorporation of BCP Management, Inc., the general partner
of the Partnership ("BCPM")
3.1.1(2) Certificate of Amendment to Certificate of Incorporation of BCPM
3.2(2) By-Laws of BCPM
3.3(1) Amended and Restated Certificate of Limited Partnership of the Partnership
<FN>
___________________
See page 27 for footnote explanations.
</TABLE>
<PAGE> 22
-22-
<TABLE>
<S> <C>
3.4(1) Amended and Restated Certificate of Limited Partnership of Borden Chemicals and Plastics Operating Limited
Partnership (the "Operating Partnership")
3.5(1) Amended and Restated Agreement of Limited Partnership of the Partnership dated as of December 15, 1988
3.6(3) Amended and Restated Agreement of Limited Partnership of the Operating Partnership, dated as of November 30, 1987
4.1(6) Form of Depositary Receipt for Common Units
10.1(6) Second Amended and Restated Deposit Agreement, dated February 16, 1993 among Borden Chemicals and Plastics Limited
Partnership, Society National Bank, Borden, Inc. and BCP Management, Inc.
10.2(3) Conveyance and Transfer Agreement, dated as of November 30, 1987, among Borden, BCPM, Borden Delaware,
the Operating Partnership and the Partnership
10.3(3) Note Agreement, dated as of November 20, 1987, among the Operating Partnership and Metropolitan Life Insurance
Company, Metropolitan Insurance and Annuity Company and the Prudential Insurance Company of America
10.4(3) Revolving Credit Agreement, dated as of November 20, 1987, between the Operating Partnership and Wachovia Bank and
Trust Company, N.A.
10.5(3) Service Agreement, dated as of November 30, 1987, between Borden and the Operating Partners
10.6(3) Intercompany Agreement, dated as of November 30, 1987, among Borden, BCPM, the Partnership and the Operating
Partnership
10.7(1) Borden and BCPM Covenant Agreement, dated as of December 15, 1988, among Borden and the Partnership
<FN>
- -------------------
See page 27 for footnote explanations.
</TABLE>
<PAGE> 23
-23-
<TABLE>
<S> <C>
10.8(1)(5) Ethylene Dichloride/Vinyl Chloride Monomer Tolling Agreement, dated as of July 19, 1988, between the
Operating Partnership and Vulcan Chemicals, a division of Vulcan Materials Company
10.9(3) PVC Purchase Agreement, dated as of November 30, 1987, between Borden and the Operating Partnership
10.9.1(1) Amendment Agreement No. 1 to PVC Purchase Agreement, dated as of December 15, 1988, between Borden and
the Operating Partnership
10.10(3) Ammonia Purchase Agreement, dated as of November 30, 1987, between Borden and the Operating Partnership
10.10.1(1) Amendment Agreement No. 1 to Ammonia Purchase Agreement, dated as of December 15, 1988, between Borden
and the Operating Partnership
10.11(3) Urea Purchase Agreement, dated as of November 30, 1987, between Borden and the Operating Partnership
10.11.1(1) Amendment Agreement No. 1 to Urea Purchase Agreement, dated as of December 15, 1988, between Borden and
the Operating Partnership
10.12(3) Methanol Purchase Agreement, dated as of November 30, 1987, between Borden and the Operating Partnership
10.12.1(1) Amendment Agreement No. 1 to Methanol Purchase Agreement, dated as of December 15, 1988, between Borden
and the Operating Partnership
10.13(3) Formaldehyde Processing Agreement, dated as of November 30, 1987, between Borden and the Operating
Partnership
10.13.1(1) Amendment Agreement No. 1 to Formaldehyde Processing Agreement, dated as of December 15, 1988 between
Borden and the Operating Partnership
10.14(3) Urea-Formaldehyde Concentrate Processing Agreement, dated as of November 30, 1987, between Borden and
the Operating Partnership
<FN>
_________________
See page 27 for footnote explanations.
</TABLE>
<PAGE> 24
-24-
<TABLE>
<S> <C>
10.14.1(1) Amendment Agreement No. 1 to Urea-Formaldehyde Concentrate Processing Agreement, dated as of December
15, 1988, between Borden and the Operating Partnership
10.15(3) Use of Name and Trademark License Agreement, dated as of November 30, 1987, among Borden, the
Partnership and the Operating Partnership
10.16(3) Patent and Know-How Agreement, dated November 30, 1987, among Borden, the Partnership and the Operating
Partnership
10.17(3) Environmental Indemnity Agreement, dated as of November 30, 1987, among the Partnership, the Operating
Partnership and Borden
10.18(3) Lease Agreement, dated as of November 30, 1987, between the Operating Partnership and Borden
10.19(2) Indenture, dated as of June 1, 1962, among Monochem, Inc., Borden and Uniroyal Chemical Company, Inc.
(as successor to Uniroyal Inc., which was a successor to United States Rubber Company)
10.20(2) Amendment to Indenture, dated as of December 30, 1981, among Monochem, Inc., Borden and Uniroyal
Chemical Company, Inc. (as successor to Uniroyal, Inc.)
10.21(2) Restructuring Agreement, dated as of December 9, 1980, among Borden, Uniroyal Chemical Company, Inc. (as
successor to Uniroyal, Inc.) and Monochem, Inc.
10.22(2) Amendment to Restructuring Agreement, dated as of December 31, 1981, among Borden, Uniroyal Chemical
Company, Inc. (as successor to Uniroyal, Inc.) and Monochem, Inc.
10.23(2) Restated Basic Agreement, dated as of January 1, 1982, between Borden and Uniroyal Chemical Company,
Inc. (as successor to Uniroyal, Inc.)
10.24(2) Restated Operating Agreement, dated as of January 1, 1982, among Borden, Uniroyal Chemical Company, Inc.
(as successor to Uniroyal, Inc.) and Monochem, Inc.
<FN>
____________________
See page 27 for footnote explanations.
</TABLE>
<PAGE> 25
-25-
<TABLE>
<S> <C>
10.25(2) Restated Agreement to Amend Operating Agreement, dated as of January 1, 1983, among Borden, Uniroyal
Chemical Company, Inc. (as successor to Uniroyal, Inc.) and Monochem, Inc.
10.26(2) Operating Agreement for Oxygen and Acetylene Plants, dated April 1, 1982, between Borden and BASF
Wyandotte Corporation (subsequently named BASF Corporation) ("BASF")
10.27(2) Amendment to Operating Agreement for Oxygen and Acetylene Plants, dated August 22, 1984, between Borden
and BASF
10.28(2) Second Amendment to Operating Agreement for Oxygen and Acetylene Plants, dated December 14, 1984,
between Borden and BASF
10.29(2) Third Amendment to Operating Agreement for Oxygen and Acetylene Plants, dated as of October 2, 1985,
between Borden and BASF
10.30(2) Fourth Amendment to Operating Agreement, dated August 25, 1987, between Borden and BASF
10.31(2) Fifth Amendment to Operating Agreement, dated November 10, 1987, between Borden and BASF
10.32(1)(5) Sixth Amendment to Operating Agreement, dated February 11, 1988, between the Operating Partnership and
BASF
10.33(2) Third Purchase Agreement, dated August 25, 1987, between Borden and BASF
10.34(2) Operating Agreement, dated December 14, 1984 among Borden, BASF, Liquid Air Corporation ("LAC") and LAI
Properties, Inc. ("LAI")
10.35(2) Amendment No. 1 to Operating Agreement, dated October 2, 1985, among Borden, BASF, LAC and LAI
10.36(1)(5) Amendment No. 2 to the Operating Agreement, dated February 11, 1988, among Borden, the Operating
Partnership, BASF, LAC and LAI
10.37(2)(5) Second Operating Agreement, dated October 2, 1985, among Borden, BASF, LAC and LAI
<FN>
____________________
See page 27 for footnote explanations.
</TABLE>
<PAGE> 26
-26-
<TABLE>
<S> <C>
10.38(1)(5) Restated Second Operating Agreement, dated February 11, 1988 among Borden, the Operating
Partnership, BASF, LAC and LAI
10.39(1) Acetylene Sales Agreement No. 1, dated February 11, 1988, between the Operating Partnership and
BASF
10.40(1) Acetylene Sales Agreement No. 2, dated February 11, 1988, between the Operating Partnership and
BASF
10.41(3) Railroad Car Master Sublease Agreement, dated as of November 30, 1987, between Borden and the
Operating Partnership, relating to ACF Industries, Incorporated Master Service Contract
10.42(3) Railroad Car Master Sublease Agreement, dated as of November 30, 1987, between Borden and the
Operating Partnership, relating to Pullman Leasing Company Lease of Railroad Equipment
10.43(3) Railroad Car Master Sublease Agreement, dated as of November 30, 1987, between Borden and the
Operating Partnership, relating to Union Tank Car Company Service Agreement
10.44(3) Railroad Car Master Sublease Agreement, dated as of November 30, 1987, between Borden and the
Operating Partnership, relating to General Electric Railroad Service Corporation Car Leasing
Agreement
10.45(3) Railroad Car Master Sublease Agreement, dated as of November 30, 1987, between Borden and the
Operating Partnership, relating to General American Transportation Corporation Tank Car Service
Contract
10.46(3) Railroad Car Sublease Agreement, dated as of November 30, 1987, between Borden and the Operating
Partnership, relating to EHF Leasing Corporation Railroad Equipment Lease
10.47(3) Railroad Car Sublease Agreement, dated as of November 30, 1987, between Borden and the Operating
Partnership, relating to Bank of New York Lease of Railroad Equipment (as amended)
10.48(2) Form of Rail Service Agreement between Borden and the Operating Partnership
<FN>
____________________
See page 27 for footnote explanations.
</TABLE>
<PAGE> 27
-27-
<TABLE>
<S> <C>
10.49(4) Form of Letter Agreement with Directors
10.50(3) Illiopolis Indemnity Agreement
12.1 Ratio of Earnings to Fixed Charges
22.1(2) Subsidiary of the Partnership
</TABLE>
(b) Reports on Form 8-K
-------------------
No reports on Form 8-K were filed by the Registrant during the fourth
quarter 1993.
__________________
(1) Filed as an exhibit to the joint Registration Statement on Form S-1 and
Form S-3 of the Partnership, Borden, Inc. and Borden Delaware Holdings,
Inc. (File No. 33-25371) and is incorporated herein by reference in this
Form 10-K Annual Report.
(2) Filed as an exhibit to the Partnership's Registration Statement on Form
S-1 (File No. 33-17057) and is incorporated herein by reference in this
Form 10-K Annual Report.
(3) Filed as an exhibit to the Partnership's Registration Statement on Form
S-1 (File No. 33-18938) and is incorporated herein by reference in this
Form 10-K Annual Report.
(4) Filed as an exhibit to the Registrant's 1989 Form 10-K Annual Report
and is incorporated herein by reference in this Form 10-K Annual Report.
(5) Exhibits 10.8, 10.32, 10.36, 10.37 and 10.38, which were previously
filed, contain information which has been deleted pursuant to an
application for confidential treatment pursuant to Rule 406 of the
Securities Act of 1933, with respect to which an order has been granted by
the Commission.
(6) Filed as an exhibit to the Registrants 1992 Form 10-K Annual Report and
is incorporated herein by reference in this Form 10-K Annual Report.
<PAGE> 28
-28-
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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
By /s/ David A. Kelly
----------------------------
David A. Kelly,
Director, Treasurer and
Principal Financial Officer
By /s/ James O. Stevning
----------------------------
James O. Stevning
Controller and Principal
Accounting Officer
Date: March 23, 1994
Pursuant to the requirements of the Securities Exchange
Act of 1934, this report has been signed below by the following persons on
behalf of the Registrant and in the capacities (with BCP Management, Inc.,
General Partner) indicated, on the date set forth above.
<TABLE>
<CAPTION>
Signature Title
--------- -----
<S> <C>
/s/ Joseph M. Saggese Director, Chairman, President
- -------------------------- and Chief Executive Officer
Joseph M. Saggese
/s/ Daniel M. Galbreath Director
- --------------------------
Daniel M. Galbreath
/s/ Edward H. Jennings Director
- --------------------------
Edward H. Jennings
/s/ George W. Koch Director
- --------------------------
George W. Koch
/s/ John P. Stapleton Director and Vice President
- --------------------------
John P. Stapleton
/s/ Ronald B. Wiles Director
- --------------------------
Ronald B. Wiles
</TABLE>
<PAGE> 29
-29-
REPORT OF INDEPENDENT ACCOUNTANTS
TO THE PARTNERS OF BORDEN CHEMICALS
AND PLASTICS LIMITED PARTNERSHIP
In our opinion, the accompanying consolidated balance sheets and the
related consolidated statements of income, of changes in partners' capital and
of cash flows present fairly, in all material respects, the financial position
of Borden Chemicals and Plastics Limited Partnership at December 31, 1993 and
1992, and the results of its operations and its cash flows for each of the
three years in the period ended December 31, 1993, in conformity with generally
accepted accounting principles. These financial statements are the
responsibility of the Partnership's management; our responsibility is to
express an opinion on these financial statements based on our audits. We
conducted our audits of these statements in accordance with generally accepted
auditing standards which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management,
and evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for the opinion expressed above.
PRICE WATERHOUSE
Columbus, Ohio
January 18, 1994
<PAGE> 30
-30-
<TABLE>
BORDEN CHEMICALS AND PLASTICS LIMITED PARTNERSHIP
CONSOLIDATED STATEMENTS OF INCOME
(In thousands except per Unit data)
<CAPTION>
Year Ended December 31,
--------------------------------------
1993 1992 1991
-------- -------- --------
<S> <C> <C> <C>
Revenues
Net trade sales $349,200 $328,343 $328,069
Net affiliated sales 84,097 73,460 81,936
-------- -------- --------
Total revenues 433,297 401,803 410,005
-------- -------- --------
Expenses
Cost of goods sold
Trade 321,966 274,505 253,319
Affiliated 75,805 63,477 64,185
Marketing, general and administrative
expenses 18,993 18,118 18,578
Interest expense 16,356 16,340 16,340
General Partner incentive 2,146 5,497
Other (income) and expense,
including minority interest 1,612 132 533
-------- -------- --------
Total expenses 434,732 374,718 358,452
-------- -------- --------
Net (loss) income (1,435) 27,085 51,553
Less 1% General Partner interest 14 (271) (515)
-------- -------- --------
Net (loss) income applicable to Limited
Partners' interest $ (1,421) $ 26,814 $ 51,038
======== ======== ========
Net (loss) income per Unit $ (.04) $ .73 $ 1.39
======== ======== ========
Average number of Units outstanding
during the year 36,750 36,750 36,750
======== ======== ========
Cash distributions declared per Unit $ .78 $ 1.59 $ 1.98
======== ======== ========
<FN>
See notes to consolidated financial statements
</TABLE>
<PAGE> 31
-31-
<TABLE>
BORDEN CHEMICALS AND PLASTICS LIMITED PARTNERSHIP
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
<CAPTION>
Year Ended December 31,
--------------------------------------
1993 1992 1991
-------- -------- --------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATIONS
Net (loss) income $ (1,435) $ 27,085 $ 51,553
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation 42,946 43,584 42,505
(Increase) decrease in receivables (11,821) (3,398) 5,173
(Increase) decrease in inventories (5,418) (996) 7,604
Increase (decrease) in payables 13,698 5,887 (14,486)
Decrease in incentive
distribution payable (1,607) (154)
Other, net 517 (6,618) (693)
-------- -------- --------
38,487 63,937 91,502
-------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures (15,041) (10,534) (17,975)
-------- -------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
Cash distributions paid (33,781) (66,856) (73,558)
-------- -------- --------
Decrease in cash and equivalents (10,335) (13,453) (31)
Cash and equivalents at beginning of year 19,389 32,842 32,873
-------- -------- --------
Cash and equivalents at end of year $ 9,054 $ 19,389 $ 32,842
======== ======== ========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION
Interest paid during the year $ 16,356 $ 16,340 $ 16,340
======== ======== ========
<FN>
See notes to consolidated financial statements
</TABLE>
<PAGE> 32
-32-
<TABLE>
BORDEN CHEMICALS AND PLASTICS LIMITED PARTNERSHIP
CONSOLIDATED BALANCE SHEETS
(In thousands)
<CAPTION>
December 31, December 31,
1993 1992
----------- ------------
<S> <C> <C>
ASSETS
Cash and equivalents $ 9,054 $ 19,389
Accounts receivable (less allowance for
doubtful accounts of $768 and $477,
respectively)
Trade 48,990 41,711
Affiliated 18,267 13,725
Inventories
Finished goods 21,499 19,209
Raw materials 7,758 4,630
Other current assets 2,182 1,912
-------- --------
Total current assets 107,750 100,576
-------- --------
Investments in and advances to affiliated companies 3,623 2,787
Other assets 26,956 28,230
-------- --------
30,579 31,017
-------- --------
Land 12,051 11,960
Buildings 35,955 36,012
Machinery and equipment 505,236 492,593
-------- --------
553,242 540,565
Less accumulated depreciation (247,267) (205,429)
-------- --------
305,975 335,136
-------- --------
$444,304 $466,729
======== ========
LIABILITIES AND
PARTNERS' CAPITAL
Accounts and drafts payable $ 44,408 $ 30,710
Cash distributions payable 6,682 11,508
Accrued interest 1,845 1,845
Other accrued liabilities 8,515 9,966
-------- --------
Total current liabilities 61,450 54,029
-------- --------
Long-term debt 150,000 150,000
Minority interest in consolidated subsidiary 1,795 2,105
Postretirement benefit obligation 854
-------- --------
152,649 152,105
-------- --------
Partners' capital
Preference Unitholders 210,923
Common Unitholders 228,862 48,025
General Partner 1,343 1,647
-------- --------
Total partners' capital 230,205 260,595
-------- --------
$444,304 $466,729
======== ========
<FN>
See notes to consolidated financial statements
</TABLE>
<PAGE> 33
-33-
<TABLE>
<CAPTION>
BORDEN CHEMICALS AND PLASTICS LIMITED PARTNERSHIP
CONSOLIDATED STATEMENTS OF CHANGES IN PARTNERS' CAPITAL
(In thousands)
Preference Common General
Unitholders Unitholders Partner Total
----------- ----------- ------- --------
<S> <C> <C> <C> <C>
Balances at December 31, 1990 $251,749 $60,545 $ 2,264 $314,558
Net income 39,059 11,979 515 51,553
Cash distributions declared (55,688) (17,078) (790) (73,556)
-------- -------- ------- --------
Balances at December 31, 1991 235,120 55,446 1,989 292,555
Net income 20,521 6,293 271 27,085
Cash distributions declared (44,718) (13,714) (613) (59,045)
-------- -------- ------- --------
Balances at December 31, 1992 210,923 48,025 1,647 260,595
Combination of Preference and (210,923) 210,923
Common units
Net loss (1,421) (14) (1,435)
Cash distributions declared (28,665) (290) (28,955)
-------- -------- ------- --------
Balances at December 31, 1993 $ -0- $228,862 $ 1,343 $230,205
======== ======== ======= ========
<FN>
See notes to consolidated financial statements
</TABLE>
<PAGE> 34
-34-
BORDEN CHEMICALS AND PLASTICS LIMITED PARTNERSHIP
-------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
(In thousands except Unit and per Unit data)
1. ORGANIZATION
Borden Chemicals and Plastics Limited Partnership (the Partnership), a
Delaware limited partnership, was formed in 1987 when the Partnership, through
its subsidiary operating partnership, acquired the basic chemicals and
polyvinyl chloride (PVC) resins operations of Borden, Inc. (Borden). The
operations are comprised of highly integrated plants in Geismar, Louisiana,
which produce basic petrochemical products, PVC resins and industrial gases and
a PVC resins plant located in Illiopolis, Illinois. The Partnership conducts
its activities through Borden Chemicals and Plastics Operating Limited
Partnership (the Operating Partnership). The Partnership, as the sole limited
partner, owns a 98.9899% interest and BCP Management, Inc. (BCPM), a Delaware
corporation and wholly-owned subsidiary of Borden, owns a 1.0101% interest as
the sole general partner (General Partner) in the Operating Partnership. The
General Partner's interest in the Operating Partnership is reflected in the
accompanying consolidated financial statements as minority interest.
Borden and its affiliates contributed the basic chemicals and PVC resins
operations to the Partnership in exchange for 28,125,000 Preference Units,
8,625,000 Enhanced Common Units, the general partner interest in each of the
partnerships, the net proceeds of $150,000 aggregate principal amount of Notes
issued by the Operating Partnership and the assumption by the Operating
Partnership of substantially all liabilities of Borden related to the basic
chemicals and PVC resins operations.
In 1987 Borden and its affiliates sold the Preference Units representing a
75% interest in the partnerships and in 1988 sold the Enhanced Common Units
representing a 23% interest in the partnerships. Borden retains, through
BCPM's general partner interest, the remaining 2% interest in the partnerships.
With the payments of the fourth quarter distribution on February 12, 1993, all
differences between the Preference Units and Enhanced Common Units ceased and
all units are now Common Units.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The significant accounting policies summarized below are in conformity with
generally accepted accounting principles; however, this will not be the basis
for reporting taxable income to Unitholders.
Principles of Consolidation - The consolidated financial statements include
the accounts of the Partnership and the Operating Partnership after elimination
of interpartnership accounts and transactions. The Partnership's proportionate
ownership of a joint venture that provides utilities to the Geismar complex is
accounted for by the equity method. Utilities provided by the joint venture
are allocated to the joint venture partners at cost. The cost of the
Partnership's proportionate share of utilities is included in cost of goods
sold.
<PAGE> 35
-35-
Cash Equivalents - The Partnership considers all highly liquid investments
purchased with an original maturity of three months or less to be cash
equivalents.
Inventories - Inventories are stated at the lower of cost or market. Cost
is determined using the average cost and first-in, first-out methods.
Property and Equipment - The amount of the purchase price originally
allocated by the Partnership to land, buildings, and machinery and equipment
was based upon their relative fair values.
Depreciation is recorded on the straight-line basis by charges to costs and
expenses at rates based on the estimated useful lives of the properties
(average rates for buildings - 4%; machinery and equipment - 8%).
Major renewals and betterments are capitalized. Maintenance, repairs and
minor renewals totaling $29,905 in 1993, $29,302 in 1992 and $30,763 in 1991
were expensed as incurred. When properties are retired or otherwise disposed
of, the related cost and accumulated depreciation are removed from the
accounts.
Income Taxes - The Partnership is not a separate taxable entity for Federal
and state and local income tax purposes. Accordingly, any taxable income or
loss, which may vary substantially from income or loss reported under generally
accepted accounting principles, should be reported in the tax returns of the
individual partners. Under current tax law the Partnership will be treated as
a partnership until December 31, 1997; thereafter, it will be taxed as a
corporation. Effective January 1, 1993 the Partnership adopted statement of
Financial Accounting Standard (SFAS) No. 109 "Accounting for Income Taxes."
The adoption of this statement did not have a material effect on 1993 results.
3. RELATED PARTY TRANSACTIONS
The Partnership is managed by the General Partner. Under certain
agreements, the General Partner and Borden are entitled to reimbursement of
costs incurred relating to the business activities of the Partnership. The
Partnership is engaged in various transactions with Borden and its affiliates
in the ordinary course of business. Such transactions include, among other
things, the sharing of certain general and administrative costs, sales of
products to and purchases of raw materials from Borden or its affiliates, and
usage of railcars owned or leased by Borden.
The employees of BCPM operate the Partnership and participate in various
Borden benefit plans including pension, retirement savings, and health and life
insurance. Employee benefit plan expenses are determined by Borden's actuary
based on annual employee census data. The Partnership is charged for general
insurance expense, which includes liability and property damage insurance,
based on calculations made by Borden's Risk Management Department. Under its
risk retention program, Borden maintains deductibles of $2,500 and $500 per
occurrence for property and related damages at the Geismar and Illiopolis
facilities, respectively, and deductibles ranging from $1,000 to $3,000 per
event for liability insurance. The Partnership has first dollar liability
insurance coverage from Borden. The cost of Borden's corporate information
services and
<PAGE> 36
-36-
corporate staff department services is allocated to the Partnership based on
usage of resources such as personnel and data processing equipment.
The Partnership has no direct liability for postretirement benefits since
the Partnership does not directly employ any of the persons responsible for
managing and operating the Partnership, but instead reimburses Borden for their
services. As a result of Borden's adoption of SFAS No. 106 "Employers'
Accounting for Postretirement Benefits Other Than Pensions", 1993 charges to
the Partnership for such services were actuarially determined. The Partnership
expensed the full amount of such charges but only reimbursed Borden for actual
postretirement benefits paid. The difference between cash payments to Borden
and postretirement expense is accrued on the Partnership's books. In 1992 the
Partnership was charged and reimbursed Borden for other postretirement benefits
on a cash basis.
Benefit plan and general insurance expenses, and allocation for usage of
resources such as personnel and data processing equipment were $9,506 in 1993,
$10,319 in 1992 and $10,610 in 1991. Management believes the allocation
methods used are reasonable.
The Partnership sells methanol, ammonia, urea and PVC resins to, and
processes formaldehyde and urea-formaldehyde concentrate for, Borden and its
affiliates at prices which approximate market.
The Partnership entered into long-term agreements with Borden which require
Borden to purchase from the Partnership at least 85% of Borden's requirements
for PVC resins, ammonia, urea and methanol and to utilize specified percentages
of the Partnership's capacity to process formaldehyde and urea-formaldehyde
concentrate.
4. DEBT
<TABLE>
<CAPTION>
At December 31, 1993 and 1992 long-term debt consists of the following:
<S> <C>
10.7% Note due 1997.......................... $ 90,000
11.1% Note due 1999.......................... 60,000
--------
$150,000
========
</TABLE>
On November 30, 1987, the Operating Partnership issued $150,000 aggregate
principal amount of Notes in a private placement. The gross proceeds were
reduced by $1,600 of expenses associated with the borrowing. These expenses
have been deferred and are being amortized over the term of the debt.
The Operating Partnership is obligated to redeem $30,000 of the 10.7% Note
due 1997 in each of 1995 and 1996 and to redeem $30,000 of the 11.1% Note due
1999 in 1998. The Notes provide that no recourse is available against the
General Partner.
The aggregate fair value of the Partnership's outstanding debt was $183,586
at December 31, 1993 and $180,362 at December 31, 1992, which was calculated
based on current yields for debt with similar characteristics.
<PAGE> 37
-37-
The Partnership has a short-term unsecured working capital facility of up
to $20,000 under a revolving credit agreement. There were no significant
borrowings under the revolving credit agreement at December 31, 1993 and 1992,
or during the 1993 and 1992 period. There were also no amounts outstanding at
any month end during 1993 and 1992. A commitment fee of 1/4% per annum is
payable on the unused portion. Borrowings under the revolving credit agreement
bear interest at rates fixed at the time of each borrowing. It provides that
no recourse is available against the General Partner.
5. ALLOCATION OF INCOME AND LOSS
Income and loss of the Partnership is allocated in proportion to the
partners' percentage interests in the Partnership, provided that at least 1% of
the income or loss of the Partnership and Operating Partnership is allocated to
the General Partner. For income tax purposes, certain items are specially
allocated to account for differences between the tax basis and fair market
value of property contributed to the Partnership by Borden and to facilitate
uniformity of Units. In addition, the Partnership Agreement generally provides
for an allocation of gross income to the Unitholders and the General Partner to
reflect disproportionate cash distributions, on a per Unit basis.
6. CASH DISTRIBUTIONS
The Partnership makes quarterly distributions to Unitholders and the
General Partner of 100% of its Available Cash. Available Cash each quarter
generally consists of cash receipts less cash disbursements (excluding cash
distributions to Unitholders and the General Partner) and reserves.
On February 12, 1993, which was the payment date for the 1992 fourth
quarter distribution, Borden's obligations under the Guarantee Agreement to
ensure minimum quarterly distributions under the Preference Unit Distribution
Support Agreement and Common Unit Direct Payment Agreement were extinguished,
and all differences between the Preference Units and Enhanced Common Units
ceased. All Units are now Common Units.
7. CONTINGENCIES
The Louisiana Department of Environmental Quality has determined that a
production unit at the Geismar facility should be subject to state hazardous
waste regulations. While the Partnership has appealed the decision, the
outcome of such decision is uncertain and if upheld, the Partnership could be
required to incur significant expenditures which at this time cannot be
estimated, and could be subject to the Environmental Indemnity Agreement (EIA)
discussed below.
In addition, the Partnership is subject to various other legal proceedings
and claims which arise in the ordinary course of business. In the opinion of
management, based upon the information it presently possesses, the amount of
the ultimate liability of these other matters, taking into account insurance
coverage, including its risk retention program and EIA with Borden, would not
have a material adverse effect on the financial position and results of
operations of the Partnership.
<PAGE> 38
-38-
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.
<PAGE> 39
-39-
REPORT OF INDEPENDENT ACCOUNTANTS ON
FINANCIAL STATEMENT SCHEDULES
To the Board of Directors of
BCP Management, Inc.
Our audits of the consolidated financial statements of Borden Chemicals and
Plastics Limited Partnership referred to in our report dated January 18, 1994,
appearing on page 29 of this Annual Report on Form 10-K also included an audit
of the Financial Statement Schedules listed in Item 14 (a)(2)(a) of this Annual
Report on Form 10-K. In our opinion, these Financial Statement Schedules
present fairly, in all material respects, the information set forth therein
when read in conjunction with the related consolidated financial statements.
Columbus, Ohio
January 18, 1994
<PAGE> 40
-40-
<TABLE>
Schedule V
BORDEN CHEMICALS AND PLASTICS LIMITED PARTNERSHIP
PROPERTY AND EQUIPMENT
----------------------
(In thousands)
<CAPTION>
Retire-
Balance at ments Balance
Beginning Additions or at End
of Period at Cost Sales of Period
--------- --------- ------- ---------
<S> <C> <C> <C> <C>
Classification
- --------------
Year Ended
December 31, 1993
- -----------------
Land $ 11,960 $ 91 $ 12,051
Buildings 36,012 $ 57 35,955
Machinery and Equipment 492,593 14,950 2,307 505,236
-------- ------- ------ --------
$540,565 $15,041 $2,364 $553,242
======== ======= ====== ========
Year Ended
December 31, 1992
- -----------------
Land $ 11,507 $ 499 $ 46 $ 11,960
Buildings 35,701 340 29 36,012
Machinery and Equipment 484,653 9,695 1,755 492,593
-------- ------- ------ --------
$531,861 $10,534 $1,830 $540,565
======== ======= ====== ========
Year Ended
December 31, 1991
- -----------------
Land $ 10,917 $ 675 $ 85 $ 11,507
Buildings 35,249 508 56 35,701
Machinery and Equipment 470,900 16,792 3,039 484,653
-------- ------- ------ --------
$517,066 $17,975 $3,180 $531,861
======== ======= ====== ========
</TABLE>
<PAGE> 41
-41-
Schedule VI
<TABLE>
<CAPTION>
BORDEN CHEMICALS AND PLASTICS LIMITED PARTNERSHIP
ACCUMULATED DEPRECIATION OF
PROPERTY AND EQUIPMENT
----------------------
(In thousands)
Balance at Retire-
Beginning Charged to ments Balance
of Costs and or at End
Period Expenses Sales of Period
---------- ---------- ------- ---------
<S> <C> <C> <C> <C>
Classification
- --------------
Year Ended
December 31, 1993
- -----------------
Land (1) $ 1,988 $ 456 $ 2,444
Buildings 7,016 1,430 $ 14 8,432
Machinery and Equipment 196,425 41,060 1,094 236,391
-------- -------- ------- --------
$205,429 $ 42,946 $ 1,108 $247,267
======== ======== ======= ========
Year Ended
December 31, 1992
- -----------------
Land (1) $ 1,558 $ 441 $ 11 $ 1,988
Buildings 5,594 1,428 6 7,016
Machinery and Equipment 155,520 41,715 810 196,425
-------- -------- ------- --------
$162,672 $ 43,584 $ 827 $205,429
======== ======== ======= ========
Year Ended
December 31, 1991
- -----------------
Land (1) $ 1,160 $ 412 $ 14 $ 1,558
Buildings 4,191 1,412 9 5,594
Machinery and Equipment 115,953 40,681 1,114 155,520
-------- -------- ------- --------
$121,304 $ 42,505 $ 1,137 $162,672
======== ======== ======= ========
<FN>
(1) Relates to depreciable improvements to land.
</TABLE>
<PAGE> 42
Exhibit 12.1
<TABLE>
<CAPTION>
BORDEN CHEMICALS AND PLASTICS LIMITED PARTNERSHIP
Ratio of Earnings to Fixed Charges
(In thousands except ratio data)
Year Ended December 31,
----------------------------------------------------------------------------
1993 1992 1991 1990 1989
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net (loss) income $ (1,435) $ 27,085 $ 51,553 $ 45,296 $ 69,495
Interest expense 16,356 16,340 16,340 16,340 16,340
Interest portion
of rents 3,847 3,087 2,887 2,790 2,015
-------- -------- -------- -------- --------
$ 18,768 $ 46,512 $ 70,780 $ 64,426 $ 87,850
======== ======== ======== ======== ========
Interest expense $ 16,356 $ 16,340 $ 16,340 $ 16,340 $ 16,340
Interest portion
of rents 3,847 3,087 2,887 2,790 2,015
-------- -------- -------- -------- --------
$ 20,203 $ 19,427 $ 19,227 $ 19,130 $ 18,355
======== ======== ======== ======== ========
Ratio of earnings
to fixed charges * 2.4:1 3.7:1 3.4:1 4.8:1
======== ======== ======== ======== ========
<FN>
* For the year ended December 31, 1993, fixed charges exceeded earnings by $1,435.
</TABLE>
