<PAGE> 1
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 JUNE 24, 1994
--------------------------------------------
Commission file number 1-9699
----------------------------------------------------
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
------------------------------------------------------
(Address of principal executive offices)
(504) 387-5101
-----------------------------------------------------------------
(Registrant's telephone number, including area code)
Not Applicable
-----------------------------------------------------------------
(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 July 22,
1994: 36,750,000
Page 1 of 12
<PAGE> 2
<TABLE>
BORDEN CHEMICALS AND PLASTICS LIMITED PARTNERSHIP
----------------
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(In thousands except per Unit data)
<CAPTION>
Three Months Three Months
Ended Ended
June 24, 1994 June 25, 1993
------------- -------------
<S> <C> <C>
Revenues
Net trade sales $ 119,661 $ 84,381
Net affiliated sales 30,010 21,590
--------- ---------
Total revenues 149,671 105,971
--------- ---------
Expenses
Cost of goods sold
Trade 88,831 81,505
Affiliated 22,906 20,131
Marketing, general and administrative expenses 5,059 4,805
Interest expense 4,108 4,119
General Partner incentive 2,654
Other (income) and expense, including minority interes 849 266
--------- ---------
Total expenses 124,407 110,826
--------- ---------
Net income (loss) 25,264 (4,855)
Less 1% General Partner interest (253) 49
--------- ---------
Net income (loss) applicable to Limited Partners' interest $ 25,011 $ (4,806)
========= =========
Net income (loss) per Unit $ 0.68 $ (.13)
========= =========
Average number of Units outstanding during the period 36,750 36,750
========= =========
Cash distributions declared per Unit $ 0.65 $ .18
========= =========
</TABLE>
Page 2 of 12
<PAGE> 3
<TABLE>
BORDEN CHEMICALS AND PLASTICS LIMITED PARTNERSHIP
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(In thousands except per Unit data)
<CAPTION>
Six Months Six Months
Ended Ended
June 24, 1994 June 25, 1993
------------- -------------
<S> <C> <C>
Revenues
Net trade sales $ 214,482 $ 158,263
Net affiliated sales 54,170 38,312
--------- ---------
Total revenues 268,652 196,575
--------- ---------
Expenses
Cost of goods sold
Trade 175,321 148,186
Affiliated 43,321 35,439
Marketing, general and administrative expenses 9,565 9,360
Interest expense 7,902 7,956
General Partner incentive 2,654
Other (income) and expense, including minority interest 997 223
--------- ---------
Total expenses 239,760 201,164
--------- ---------
Net income (loss) 28,892 (4,589)
Less 1% General Partner interest (289) 46
--------- ---------
Net income (loss) applicable to Limited Partners' interest $ 28,603 $ (4,543)
========= =========
Net income (loss) per Unit $ .78 $ (.12)
========= =========
Average number of Units outstanding during the period 36,750 36,750
========= =========
Cash distributions declared per Unit $ .86 $ .48
========= =========
</TABLE>
Page 3 of 12
<PAGE> 4
<TABLE>
BORDEN CHEMICALS AND PLASTICS LIMITED PARTNERSHIP
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
<CAPTION>
Six Months Six Months
Ended Ended
June 24, 1994 June 25, 1993
-------------- --------------
<S> <C> <C>
Cash Flows From Operations
Net income (loss) $ 28,892 $ (4,589)
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 21,845 21,424
Increase in receivables (17,989) (1,949)
Decrease (increase) in inventories 2,122 (2,234)
Increase in payables 4,059 6,414
Increase in incentive distribution payable 2,654
Decrease in accrued interest (270) (225)
Other, net 2,804 (2,826)
--------- ---------
44,117 16,015
--------- ---------
Cash Flows From Investing Activities
Capital expenditures (9,451) (4,629)
--------- ---------
Cash Flows From Financing Activities
Cash distributions paid (14,478) (22,644)
--------- ---------
Increase (decrease) in cash and equivalents 20,188 (11,258)
Cash and equivalents at beginning of period 9,054 19,389
--------- ---------
Cash and equivalents at end of period $ 29,242 $ 8,131
========= =========
Supplemental Disclosure of Cash Flow Information
Interest paid during the period $ 8,172 $ 8,181
========= =========
</TABLE>
Page 4 of 12
<PAGE> 5
<TABLE>
BORDEN CHEMICALS AND PLASTICS LIMITED PARTNERSHIP
-----------------
CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In thousands)
ASSETS
------
<CAPTION>
June 24, 1994 December 31, 1993
-------------- -----------------
<S> <C> <C>
Cash and equivalents $ 29,242 $ 9,054
Accounts receivable (less allowance for doubtful
accounts of $428 and $768, respectively)
Trade 63,620 48,990
Affiliated 21,626 18,267
Inventories
Finished goods 18,931 21,499
Raw materials 8,204 7,758
Other current assets 1,959 2,182
--------- ---------
Total current assets 143,582 107,750
--------- ---------
Investments in and advances to affiliated companies 3,642 3,623
Other assets 26,867 26,956
--------- ---------
30,509 30,579
--------- ---------
Land 12,051 12,051
Buildings 36,332 35,955
Machinery and equipment 513,462 505,236
--------- ---------
561,845 553,242
Less accumulated depreciation (268,606) (247,267)
--------- ---------
293,239 305,975
--------- ---------
$ 467,330 $ 444,304
========= =========
LIABILITIES AND
PARTNERS' CAPITAL
-----------------
Accounts and drafts payable $ 48,467 $ 44,408
Cash distributions payable 24,155 6,682
Incentive distribution payable to General Partner 2,654
Accrued interest 1,575 1,845
Other accrued liabilities 10,439 8,515
--------- ---------
Total current liabilities 87,290 61,450
--------- ---------
Long-term debt 150,000 150,000
Minority interest in consolidated subsidiary 1,764 1,795
Postretirement benefit obligation 1,130 854
--------- ---------
152,894 152,649
--------- ---------
Partners' capital
Common Unitholders 225,860 228,862
General Partner 1,286 1,343
--------- ---------
Total partners' capital 227,146 230,205
--------- ---------
$ 467,330 $ 444,304
========= =========
</TABLE>
Page 5 of 12
<PAGE> 6
<TABLE>
BORDEN CHEMICALS AND PLASTICS LIMITED PARTNERSHIP
------------------------
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 loss (4,543) (46) (4,589)
Cash distributions declared (17,640) (178) (17,818)
------------ ------------ ------------ ------------
Balances at June 25, 1993 $ -0- $ 236,765 $ 1,423 $ 238,188
============ ============ ============ ============
Balances at December 31, 1993 $ 228,862 $ 1,343 $ 230,205
Net income 28,603 289 28,892
Cash distributions declared (31,605) (346) (31,951)
------------ ------------ ------------
Balances at June 24, 1994 $ 225,860 $ 1,286 $ 227,146
============ ============ ============
</TABLE>
Page 6 of 12
<PAGE> 7
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
(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
------------------------------------------
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
-------------
State and federal environmental agencies have notified the Partnership
of their determinations that certain materials and facilities 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.
Page 7 of 12
<PAGE> 8
PART I. FINANCIAL INFORMATION
------------------------------
Item 2. Management's Discussion and Analysis of Financial
- - ------- -------------------------------------------------
Condition and Results of Operations
-----------------------------------
Liquidity and Capital Resources
- - -------------------------------
Cash flows from operations for the first six months of 1994 were $44.1
million compared to $16.0 million for 1993. The increase is the result of
higher net income partially offset by increased working capital requirements.
Capital expenditures for the first six months of 1994 and 1993 were $9.5
million and $4.6 million, respectively. Total capital expenditures for 1994
are expected to be approximately $20 million.
Cash distributions paid during the first six months of 1994 for fourth
quarter 1993 and first quarter 1994 were $14.5 million while cash distributions
paid during the first six months of 1993 for fourth quarter 1992 and first
quarter 1993 were $22.6 million.
On July 19, 1994, a cash distribution of $.65 per Common Unit was
declared for the second quarter, payable August 8, 1994 to Unitholders of
record July 29, 1994. A cash distribution of $.18 per Unit was paid for second
quarter 1993. Cash available for distribution was $27.1 million and $6.8
million for second quarter 1994 and 1993, respectively. Of the available cash
for second quarter 1994, $23.9 million will be paid to the Unitholders and the
remainder will be distributed to the General Partner for its ownership interest
and incentive payment. Of the available cash for second quarter 1993, $6.6
million was distributed to the Unitholders and the remainder was distributed to
the General Partner for its ownership interest.
The Partnership has signed a letter of intent with Dallas-based
Occidental Chemical Corporation to purchase Occidental's Addis, Louisiana, PVC
manufacturing facility. A conclusion of this acquisition is contingent on
negotiation of a definitive agreement, FTC approval and other conditions.
Results of Operations
- - ---------------------
Quarter Ended June 24, 1994 versus
Quarter Ended June 25, 1993
Net sales for second quarter 1994 were $149.7 million, an increase of
41.2% from $106.0 million a year earlier. Net income for second quarter 1994
was $25.3 million compared to a net loss of $4.9 million for second quarter
1993. The increase in net income reflects both higher selling prices and
increased volume.
Net sales for PVC Polymers Products increased 33.0% to $83.8 million in
1994 from $63.1 million in 1993. The increase in sales was the result of
substantial increases in both selling price and volume for PVC resins. Gross
margin for this product group increased versus the prior year as a result of
the increased sales partially offset by substantially higher chlorine costs.
Page 8 of 12
<PAGE> 9
Net sales for Methanol and Derivatives increased 72.5% to $47.2 million
in 1994 from $27.3 million in 1993 as a result of higher selling prices and
increased volume for methanol. Gross margin for this group increased
significantly from second quarter 1993 reflecting both the higher sales and
lower natural gas costs.
Net sales for Nitrogen Products were $18.7 million for second quarter
1994 compared to $15.6 million for second quarter 1993, a 19.9% increase. The
increase was primarily the result of a significant increase in selling prices
for ammonia and slightly higher selling prices for urea, partially offset by
decreased volume for both products. Gross margin increased to a moderately
profitable position from a slightly negative position in 1993.
The Partnership expects the favorable price and volume trends from the
second quarter to continue in the third quarter.
Six Months Ended June 24, 1994 Versus
Six Months Ended June 25, 1993
Net sales for the first six months of 1994 increased 36.7% to $268.7
million compared to $196.6 million in 1993. Net income for the first six
months of 1994 was $28.9 million compared to a net loss for 1993 of $4.6
million.
Net sales for PVC Polymer Products increased 30.9% to $153.0 million in
1994 from $116.8 million in 1993 as a result of substantial increases in both
volume and selling prices for PVC resins. Gross margin for the group doubled
as a result of the increased sales partially offset by substantially higher
chlorine costs.
Net sales for Methanol and Derivatives increased 60.2% to $83.8 million
in 1994 from $52.3 million in 1993 primarily as a result of higher selling
prices and volume for methanol. Gross margin for the group increased
substantially as a result of the increased sales partially offset by slightly
higher natural gas costs.
Net sales for Nitrogen Products increased 16.3% to $31.9 million in 1994
from $27.5 million in 1993 as a result of significantly higher selling prices
for ammonia, slightly higher selling prices and volume for urea, partially
offset by decreased volume for ammonia. Gross margin for the group increased
from a slightly negative position in 1993 to a moderately profitable position
in 1994.
Page 9 of 12
<PAGE> 10
PART II. OTHER INFORMATION
---------------------------
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 EPA's
allegations include claims that a partially-depleted mecuric chloride catalyst
used in the manufacture of vinyl chloride is a hazardous waste, even though it
is recycled for reuse; and that materials from a vinyl chloride manufacturing
process are hazardous wastes even though they are continually processed and
never become waste. The Partnership believes that it has meritorious defenses
to these allegations and in May 1994, 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. If
the Partnership is unsuccessful, management believes, based upon information
currently available to it, that the realistic range of liability for penalties
would not be material to the financial position of the Partnership but could
have an adverse effect on any quarter's results of operations.
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. The Partnership's petition for reconsideration was denied, a
penalty hearing has been scheduled, and further appeals are possible if the
parties cannot reach an agreement. The Government is seeking penalties in an
amount which would not have a material adverse effect on the financial position
or operating results of the Partnership.
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.
Page 10 of 12
<PAGE> 11
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 effect on the financial position and results of operations of the
Partnership.
Page 11 of 12
<PAGE> 12
Item 6. Exhibits and Reports on Form 8-K
- - ------- --------------------------------
(a) Exhibits
None
(b) Reports on Form 8-K
On May 12, 1994 the Registrant filed a Form 8-K announcing
the filing of a lawsuit against the U.S. Environmental
Protection Agency seeking a ruling that certain materials
and facilities are not subject to regulation under the
Resource Conservation and Recovery Act.
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: July 29, 1994 By /s/ D. A. Kelly
-------------------------
D. A. Kelly
Director and Treasurer
(Principal Financial
Officer and duly
authorized signing
officer)
Page 12 of 12
