SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-Q
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[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM ______________ TO ______________
COMMISSION FILE NUMBER 1-9988
HUNTSMAN POLYMERS CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
DELAWARE 75-2104131
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)
500 HUNTSMAN WAY
SALT LAKE CITY, UTAH 84108
(Address of principal executive offices) (Zip code)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (801) 584-5700
Indicate by a 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 | |
APPLICABLE ONLY TO REGISTRANTS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether the Registrant has filed all documents
and reports required to be filed by Section 12, 13 or 15(d) of the
Securities Exchange Act of 1934 subsequent to the distribution of
securities under a plan confirmed by a court.
Yes | | No | |
At May 15, 2000, 1,000 Shares of Common Stock, par value $0.01 per
Share, of Huntsman Polymers Corporation were outstanding.
HUNTSMAN POLYMERS CORPORATION AND SUBSIDIARIES
FORM 10-Q FOR THE QUARTERLY PERIOD
ENDED MARCH 31, 2000
TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION 3
Item 1. Financial Statements 3
Consolidated Balance Sheets as of March 31, 2000 (unaudited)
and December 31, 1999 3
Consolidated Statements of Operations for the Three Months
Ended March 31, 2000 and 1999 (unaudited) 4
Consolidated Statements of Cash Flows for the Three Months
Ended March 31, 2000 and 1999 (unaudited) 5
Notes to Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 10
Item 3. Quantitative and Qualitative Disclosures About Market
Risk 14
PART II. OTHER INFORMATION 15
Item 1. Legal Proceedings 15
Item 6. Exhibits and Reports on Form 8-K 15
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
HUNTSMAN POLYMERS CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)
March 31, 2000 December 31, 1999
-------------- -----------------
(In thousands)
ASSETS
Current assets:
Cash and cash equivalents $ - $ -
Accounts and notes receivables, net 29,745 29,171
Accounts and advances receivable -
affiliates 43,517 40,810
Inventories 76,169 73,891
Other current assets 1,364 2,296
------------ ------------
Total current assets 150,795 146,168
Properties, plant and equipment, net 934,149 947,757
Intangible assets, net 45,848 46,112
Other noncurrent assets 35,210 36,394
------------ ------------
Total assets $ 1,166,002 $ 1,176,431
============ ============
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities:
Accounts payable $ 73,974 $ 65,219
Accounts payable - affiliates 1,109 1,260
Accrued liabilities 10,492 18,925
Accrued interest 6,860 1,723
Current portion of long term debt -
affiliates - 26,610
------------ ------------
Total current liabilities 92,435 113,737
Long-term debt:
Affiliates 305,607 283,485
Other 174,882 174,882
Deferred income taxes 96,748 100,684
Other noncurrent liabilities 34,571 35,113
------------ ------------
Total liabilities 704,243 707,901
------------ ------------
Stockholder's equity:
Common Stock, $0.01 par value:
1 million shares authorized;
1,000 shares issued and outstanding - -
Additional paid-in capital 528,500 528,500
Accumulated deficit (66,741) (59,970)
------------ ------------
Total stockholder's equity 461,759 468,530
------------ ------------
Total liabilities and stockholder's
equity $ 1,166,002 $ 1,176,431
============ ============
See accompanying notes to consolidated financial statements
HUNTSMAN POLYMERS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
THREE MONTHS ENDED THREE MONTHS ENDED
MARCH 31, 2000 MARCH 31, 1999
------------------ ------------------
(In thousands)
Revenues:
Trade sales and services $ 50,745 $ 22,457
Affiliate sales 116,545 71,249
------------ ------------
Total revenues 167,290 93,706
Cost of goods sold 159,500 99,382
------------ ------------
Gross profit 7,790 (5,676)
Expenses:
Selling, general and
administrative 5,517 4,168
Research and development 1,417 1,746
------------ ------------
Operating income (loss) 856 (11,590)
Interest expense, net:
Affiliate interest (6,440) (3,159)
Other interest (5,270) (5,260)
Other income (expense) (66) 1,162
------------ ------------
Net loss before income taxes (10,920) (18,847)
Income tax benefit (4,149) (7,280)
------------ ------------
Net loss $ (6,771) $ (11,567)
============ ============
See accompanying notes to consolidated financial statements
HUNTSMAN POLYMERS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
THREE MONTHS THREE MONTHS
ENDED ENDED
MARCH 31, 2000 MARCH 31, 1999
-------------- --------------
(In thousands)
OPERATING ACTIVITIES
Net loss $ (6,771) $ (11,567)
Reconciliation to net cash used in
operations:
Depreciation and amortization 18,629 12,325
Deferred income taxes (4,149) 1,330
Amortization of debt issuance costs 217 217
Changes in operating working capital:
Receivables (3,281) (9,381)
Inventories (2,278) (901)
Other current assets 932 (9,449)
Accounts payable 8,604 (9,882)
Other current liabilities (3,088) 11,826
Deferred charges and other noncurrent
assets 509 (4,355)
Deferred credits and other noncurrent
liabilities (537) 92
--------- ----------
Net cash provided by (used in)
operations 8,787 (19,745)
INVESTING ACTIVITIES
Advances receivable - affiliates - (62,456)
Capital expenditures of continuing operations (4,299) (24,753)
--------- ----------
Net cash used in investing activities (4,299) (87,209)
FINANCING ACTIVITIES
Intercompany repayment to (borrowing from)
parent (4,488) 31,954
Proceeds of capital contribution by parent - 75,000
--------- ----------
Net cash (used in) provided by financing
activities (4,488) 106,954
INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS - -
CASH AND CASH EQUIVALENTS AT BEGINNING OF
PERIOD - -
--------- ----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ - $ -
========= ==========
SUPPLEMENTAL CASH FLOW INFORMATION
Cash paid for interest $ 41 $ -
Cash paid for income taxes $ - $ 5
See accompanying notes to consolidated financial statements
HUNTSMAN POLYMERS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Description of Business
Huntsman Polymers Corporation and its subsidiaries (collectively
"the Company") manufactures products used in a wide variety of industrial
and consumer-related applications. The Company's principal products are
polyethylene (including low density polyethylene ("LDPE") and linear low
density polyethylene ("LLDPE")), polypropylene, amorphous polyalphaolefin
("APAO"), and styrene.
Use of Estimates
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date
of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from
those estimates.
Principles of Consolidation
The consolidated financial statements of the Company include its
wholly-owned subsidiaries. Intercompany transactions and balances are
eliminated.
Cash and Cash Equivalents
Highly liquid investments with an original maturity of three months
or less when purchased are considered to be cash equivalents.
Inventories
Inventories are stated at the lower of average cost or market.
Property, Plant and Equipment
Property, plant and equipment is stated at cost. Depreciation is
provided utilizing the straight line method over the estimated useful lives
of the assets, ranging from 3 to 20 years. Periodic maintenance and repairs
applicable to major units of manufacturing facilities are accounted for on
the prepaid basis by capitalizing the costs of the turnaround and
amortizing the costs over the estimated period until the next turnaround.
Normal maintenance and repairs of all other plant and equipment are charged
to expense as incurred. Renewals, betterments and major repairs that
materially extend the useful life of the assets are capitalized, and the
assets replaced, if any, are retired. Interest costs are capitalized as
part of major construction projects. Upon disposal of assets, the cost and
related accumulated depreciation are removed from the accounts and
resulting gain or loss is included in income.
Intangible Assets
Debt issuance costs are amortized over the term of the related
debt, ranging from five to ten years. Goodwill is amortized over a period
of 20 years. Other intangible assets are stated at their fair market values
at the time the Company, formerly known as Rexene Corporation, was acquired
by Huntsman Corporation and are amortized using the straight-line method
over their estimated useful lives of five to fifteen years or over the life
of the related agreement and are included in "Intangible assets, net."
Income Taxes
Deferred income taxes are provided for temporary differences
between financial statement income and taxable income using the asset and
liability method in accordance with Statement of Financial Accounting
Standards No. 109, "Accounting for Income Taxes."
Environmental Expenditures
Environmental related restoration and remediation costs are
recorded as liabilities and expensed when site restoration and
environmental remediation and clean-up obligations are either known or
considered probable and the related costs can be reasonably estimated.
Other environmental expenditures, which are principally maintenance or
preventative in nature, are recorded when expended and are expensed or
capitalized as appropriate.
Reclassifications
Certain amounts in the consolidated financial statements for prior
periods have been reclassified to conform with the current presentation.
New Accounting Standards
In June 1998, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards ("SFAS") No. 133, "Accounting
for Derivative Instruments and Hedging Activities," which establishes
accounting and reporting standards for derivatives and for hedging
activities. It requires an entity to recognize all derivatives as either
assets or liabilities in the statement of financial position and measure
those instruments at fair value. In June 1999, the FASB issued SFAS No.
137, "Accounting for Derivative Instruments and Hedging Activities -
Deferral of the Effective Date of FASB Statement No. 133," which delays the
effective date for implementation of SFAS No. 133 for one year, making it
effective for all fiscal quarters of fiscal years beginning after June 15,
2000. The Company is currently in the process of evaluating the impact of
this statement on its financial statements.
Income (Loss) per Share
Income (loss) per share is not presented because it is not
considered meaningful information due to the Company's ownership by a
single non-public shareholder.
2. INVENTORIES
Inventories consist of the following (in thousands):
March 31, 2000 December 31, 1999
--------------- -----------------
Raw materials $ 15,771 $ 12,022
Work in progress 10,627 10,548
Finished goods 49,771 51,321
--------------- -----------------
Total inventories $ 76,169 $ 73,891
=============== =================
3. PROPERTY, PLANT AND EQUIPMENT
The cost and accumulated depreciation of property, plant and
equipment are as follows (in thousands):
March 31, 2000 December 31, 1999
-------------- -----------------
Property, plant and equipment $ 1,059,355 $ 1,055,056
Less accumulated depreciation (125,206) (107,299)
-------------- -----------------
Total property, plant and
equipment $ 934,149 $ 947,757
============== =================
4. LONG-TERM DEBT
Long-term debt consists of the following (in thousands):
March 31, 2000 December 31, 1999
--------------- -----------------
Affiliates:
Intercompany borrowings $ 244,847 $ 250,360
Capital lease - Affiliate 60,760 59,735
--------------- -----------------
Total affiliate debt 305,607 310,095
Less: Current portion of
capital lease - Affiliate - 26,610
--------------- -----------------
Total long-term debt -
Affiliate 305,607 283,485
Other - 11 3/4% Senior Notes due 2004 174,882 174,882
--------------- -----------------
Total long-term portion $ 480,489 $ 458,367
=============== =================
During the first quarter of 2000, the Company amended the terms of the
Capital Lease Agreement with HGHFC. As a result of the amendment, the
Company is obligated to repay the entire amount of the lease on September
30, 2002, the maturity date of the Capital Lease Agreement. All other terms
of the Capital Lease remain unchanged.
5. INTANGIBLE ASSETS
Intangible assets, net of accumulated amortization are (in
thousands):
March 31, 2000 December 31, 1999
-------------- -----------------
Debt issuance costs $ 7,173 $ 7,173
Less accumulated amortization (3,775) (3,558)
-------------- -----------------
Total debt issuance costs 3,398 3,615
-------------- -----------------
Goodwill 42,406 42,406
Less accumulated amortization (5,452) (4,924)
-------------- -----------------
Total goodwill 36,954 37,482
-------------- -----------------
Other intangible assets 6,071 5,396
Less accumulated amortization (575) (381)
-------------- -----------------
Total other intangible assets 5,496 5,015
-------------- -----------------
Total intangible assets $ 45,848 $ 46,112
============== =================
6. CONTINGENCIES
Environmental Regulation
The Company and the industry in which it competes are subject to
extensive environmental laws and regulations concerning, for example,
emissions to the air, discharges to surface and subsurface waters and the
generation, handling, storage, transportation, treatment and disposal of
waste and other materials. The Company believes that, in light of its
historical expenditures and expected future results of operations, it will
have adequate resources to conduct its operations in compliance with
currently applicable environmental and health and safety laws and
regulations. However, in order to comply with changing facility permitting
and regulatory requirements, the Company may be required to make additional
significant site or operational modifications that are not currently
contemplated. Further, the Company has incurred, and may in the future
incur, liability to investigate and clean up waste or contamination at its
current or former facilities, or which it may have disposed of at
facilities operated by third parties.
On the basis of reasonable investigation and analysis, management
believes that the approximately $6.5 million accrued in the March 31, 2000
balance sheet is adequate for the total potential environmental liability
of the Company with respect to contaminated sites. Extensive environmental
investigation of the groundwater, soils and solid waste management units
has been conducted at the Odessa Facility. Risk assessments have been
completed for a number of these units and corrective measures have been
defined and conducted. As of March 31, 2000, the Texas Natural Resource
Conservation Commission ("TNRCC") has approved closure for 30 of the
plant's solid waste management units.
TNRCC Flare Investigation
By letter dated January 28, 1999, the TNRCC notified the Company of
allegations that the Company's olefins plant may have violated its air
permit by emitting visible smoke from its process/emergency flare in late
December 1998 or early January 1999. During that period, the olefins plant
was in the midst of start up after extensive construction. As required by
Texas law, the Company had given prior notice to the TNRCC of the start up
and that excess emissions might result. The TNRCC investigated this matter
after receiving numerous complaints from residents of a subdivision near
the Odessa facility. A draft Agreed Order with a proposed $15,000 penalty
was sent by the TNRCC to the Company. Following discussions with the
Company, the TNRCC re-drafted the Agreed Order with a proposed $7,500
penalty. The Company agreed to an Order stipulating that $1,500 of the
$7,500 be deferred, a $3,000 fine paid and $3,000 offset with a
supplemental environmental project for a neighborhood monitoring program
near the facility. When the Agreed Order was presented to the Commission,
Odessa residents attending the hearing opposed its entry. The Commission
remanded the matter back to the Commission staff for further consideration.
The Company will meet with the TNRCC staff to determine whether a
settlement can be reached.
As a result of the start-up flaring during late December 1998 and
January 1999, complaining citizens have hired counsel to consider bringing
legal action to recover damages alleged to have been caused by that
flaring. One such action has been filed, and two other actions have been
threatened. Company lawyers believe that the Company has strong defenses to
these suits, but because the number of plaintiffs could be as high as 5,000
to 6,000, substantial damages might be sought.
Other Matters
The Company has received information from the United States
Environmental Protection Agency ("EPA") that an enforcement action is
likely to be brought under the Federal Clean Air Act for alleged violations
discovered by the EPA during an inspection of the Odessa facility in April
1997, during the time when the facility was owned and operated by Rexene
Corporation. Although the Company cannot estimate with reasonable certainty
the level of civil penalties the government may seek, the Company believes
that the ultimate outcome is not likely to have a material effect on the
Company's financial position.
The Company continually reviews its estimates of potential
environmental liabilities. However, no assurance can be given that all
potential liabilities arising out of the Company's present or past
operations have been identified or fully assessed or that the amounts that
might be required to remediate such conditions will not be significant to
the Company.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
GENERAL
The markets in which the Company competes are generally cyclical
markets that are sensitive to relative changes in supply and demand as well
as general economic conditions. Historically, these products have
experienced alternating periods of tight supply, rising prices and
increased profits followed by periods of large capacity additions resulting
in oversupply, lower selling prices and lower profits. Certain of the
Company's products, such as APAO, are generally less sensitive to economic
cycles. In addition, the Company's polyethylene and polypropylene
businesses are geared toward higher value-added, specialty grades, which
generally are sold at a premium over prices for commodity grades. The
Company's results for the period ended March 31, 1999 were significantly
impacted by the protracted start-up of its newly expanded and modernized
facilities. Management believes that with the start-up complete, the
Company's results are more representative of market factors as opposed to
operational factors.
Principal raw materials purchased by the Company consist of ethane
and propane extracted from natural gas liquids ("NGLs"), propylene and
benzene (all four of which are referred to as "feedstocks") for the
polyethylene, polypropylene and styrene businesses. Management believes the
feedstock supplies available in Odessa, Texas are currently adequate for
the Company's requirements.
RESULTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 2000 COMPARED TO THREE MONTHS ENDED MARCH 31,
1999
Revenues
The Company's revenue increased $73.6 million to $167.3 million for
the three months ended March 31, 2000 from $93.7 million for the same
period in 1999. The major factors contributing to the increase in revenue
were higher sales volumes in all product lines except FPO as well as higher
sales prices in all product lines. The higher sales volumes were primarily
attributable to the Company's ability to meet increased demand from its
customers following the successful completion and start up of the olefins
and LLDPE modernization and expansion projects in the second quarter of
1999. Olefins revenue increased $19.8 million to $29.0 million spurred by
volume increases attributed to the new and expanded Olefins unit and a
101.2 % increase in selling price resulting from a tight ethylene supply
and the pull through effect of higher feedstock prices. Polyethylene
revenue increased $35.3 million to $77.9 million resulting from higher
volumes primarily associated with the newly expanded facilities; pricing
increased 3.6% resulting from improved product and customer mix. Styrene
revenue increased $15.0 million to $28.3 million due primarily to higher
sales volumes due to improved plant performance and a 53.8% increase in the
average sales price resulting from the market's reaction to higher raw
material costs. Polypropylene revenue increased $4.7 million to $23.3
million due to increased volume and a 12.6% price improvement.
Gross Profit
The Company's gross profit increased $13.5 million to $7.8 million
for the three months ended March 31, 2000 from a loss of $5.7 million for
the same period in 1999. The increase in gross profit is due mainly to
improved operations resulting from the modernization and expansion projects
as well as higher sales prices and sales volumes described above. Olefins
gross profit increased $12.2 million to $4.5 million due mainly to improved
operations and favorable pricing. Polyethylene gross profit improved $1.8
million to $3.7 million due primarily to the successful start up of the new
LLDPE plant. Styrene and polypropylene gross profit were virtually
unchanged as the significant rise in feedstock prices effectively negated
all improvements in pricing and volumes.
Selling, General and Administrative
The Company's selling, general and administrative expenses
increased $1.3 million to $5.5 million for the three months ended March 31,
2000 from $4.2 million for the same period in 1999. This increase is
primarily due to higher overhead allocations from an affiliate of the
Company in 2000, resulting from increased information technology, safety,
environmental and international support services.
Affiliate Interest
The Company's affiliate interest increased $3.2 million to $6.4
million for the three months ended March 31, 2000 from $3.2 million for the
same period in 1999, primarily due to a decrease in capitalized interest
related to lower levels of construction-in-progress in 2000.
Other Income (Expense)
The Company's other income (expense) decreased $1.3 million to
expense of $0.1 million for the three months ended March 31, 2000 from
income of $1.2 million in the same period in 1999. The change is primarily
due to the receipt of a $1.5 million insurance claim receipt in the 1999
period relating to the January 1998 transformer fire.
Net Income
The Company's net income increased $4.8 million to a loss of $6.8
million for the three months ended March 31, 2000 from a loss of $11.6
million for the same period in 1999. The decrease is a result of the
reasons stated above.
LIQUIDITY AND CAPITAL RESOURCES
Net cash provided by operating activities for the three months
ended March 31, 2000 was $8.8 million, as compared to a net use of cash of
$19.7 million in the same period in 1999. This increase is attributable to
a smaller net loss, higher depreciation and amortization expenses, and a
net reduction in working capital during the 2000 period.
Net cash used in investing activities for the three months ended
March 31, 2000 was $4.3 million, as compared to $87.2 million for the same
period in 1999. This decrease is attributable to a decrease in capital
expenditures in the 2000 period and an increase in the advances receivable
from an affiliate of the Company which occurred during the 1999 period.
Net cash used in financing activities for the three months ended
March 31, 2000 was $4.5 million, as compared to net cash provided of $107.0
million for the same period in 1999. The increase was primarily
attributable to a net repayment of intercompany borrowings during the 2000
period as compared to a net increase in intercompany borrowings and capital
contributions from the Company's parent during the 1999 period.
The Company maintains an intercompany loan agreement (the
"Intercompany Loan Agreement") with Huntsman Group Holdings Finance
Corporation, a wholly-owned subsidiary of Huntsman Corporation. As of March
31, 2000, the Company owed $244.8 million under the Intercompany Loan
Agreement. Subject to certain terms and conditions, the Company may borrow
additional amounts under the Intercompany Loan Agreement. The Company has
guaranteed on a secured basis, subject to the limitations imposed by the
indenture (the "Indenture") governing the Company's 11 3/4% Senior Notes
(the "Senior Notes"), Huntsman Corporation's senior secured borrowings on a
pari passu basis with substantially all of Huntsman Corporation's domestic
subsidiaries.
Capital expenditures for the three months ended March 31, 2000 were
$4.3 million. The $20.5 million decrease in capital expenditures for the
three months ended March 31, 2000 compared to the same period in 1999 was
due primarily to a reduction in spending in connection with the Company's
modernization and expansion program, which was substantially completed in
the first quarter of 1999. The Company expects to spend approximately $14
million during the balance of 2000 on capital projects.
The Company believes that, based on current levels of operation and
anticipated growth, its cash flow from operations, together with other
available sources of liquidity, will be adequate to make scheduled payments
of interest on the Senior Notes, to permit anticipated capital expenditures
and to fund working capital requirements. However, the ability of the
Company to satisfy these obligations depends on a number of significant
assumptions, including but not limited to, the demand for the Company's
products and raw material costs.
A number of potential environmental liabilities exist which relate
to certain contaminated property. In addi tion, a number of potential
environmental costs relate to pending or proposed environmental
regulations. No assurance can be given that all of the potential
liabilities arising out of the Company's present or past operations have
been identified or that the amounts that might be required to investigate
and remediate such sites or comply with pending or proposed environmental
regulations can be accurately estimated. The Company has approximately $6.5
million accrued in the March 31, 2000 balance sheet as an estimate of its
total potential environmental liability with respect to investigating and
remediating known and assessed site contamination. Extensive environmental
investigation of the groundwater, soil and solid waste management units has
been conducted at the Odessa facility. Risk assessments have been completed
for a number of these units and corrective measures have been defined and
conducted. If, however, additional liabilities with respect to
environmental contamination are identified, there is no assurance that
additional amounts that might be required to investigate and remediate such
potential sites would not have a material adverse effect on the financial
position, results of operations or cash flows of the Company. In addition,
future regulatory developments could restrict or possibly prohibit existing
methods of environmental compliance. At this time, the Company is unable to
determine the potential consequences such possible future regulatory
developments would have on its financial condition. Management continually
reviews its estimates of potential environmental liabilities. The Company
carries Pollution Legal Liability insurance to address many of the
potential environmental liabilities, subject to its terms, limits,
exclusions and deductibles, on both a sudden and accidental basis and on a
gradual basis for occurrences commencing after July 1, 1997 on its
operations. The Company also carries Pollution Legal Liability and Closure
and Post Closure insurance on certain facilities at the Odessa
manufacturing location which are regulated by the TNRCC. This insurance
satisfies requirements of the TNRCC governing operations at this location.
CAUTIONARY STATEMENT FOR FORWARD LOOKING INFORMATION
Certain information set forth in this report contains "forward-looking
statements" within the meaning of federal securities laws. Forward-looking
statements include statements concerning the Company's plans, objectives,
goals, strategies, future events, future revenues or performance, capital
expenditures, financing needs, plans or intentions relating to acquisitions
and other information that is not historical information. In some cases,
forward-looking statements can be identified by terminology such as
"believes," "expects," "may," "should," or "anticipates", or the negative
of such terms or other comparable terminology, or by discussions of
strategy. The Company may also make additional forward-looking statements
from time to time. All such subsequent forward-looking statements, whether
written or oral, by the Company or on its behalf, are also expressly
qualified by these cautionary statements.
All forward-looking statements, including without limitation,
management's examination of historical operating trends, are based upon
their current expectations and various assumptions. The Company's
expectations, beliefs and projections are expressed in good faith and the
Company believes there is a reasonable basis for them, but, there can be no
assurance that the Company's expectations, beliefs and projections will
result or be achieved. All forward-looking statements apply only as of the
date made. The Company undertakes no obligation to publicly update or
revise forward- looking statements that may be made to reflect events or
circumstances after the date made or to reflect the occurrence of
unanticipated events.
There are a number of risks and uncertainties that could cause the
Company's actual results to differ materially from the forward-looking
statements contained in or contemplated by this report. The following are
among the factors that could cause actual results to differ materially from
the forward-looking statements. There may be other factors, including those
discussed elsewhere in this report, that may cause the Company's actual to
differ materially from the forward-looking statements. Any forward-looking
statements should be considered in light of these factors.
1. The cyclical nature of the Company's business
2. Changes in the availability and/or price of feedstocks
3. Environmental and safety requirements, including permitting,
enforcement activities and the possibility of related litigation
4. Changes in product mix and utilization of production facilities
5. Unavailability of, and substantial delays in, transportation of
raw materials and products
6. Inability to obtain new customers or retain existing ones
7. Significant changes in competitive factors affecting the Company
8. Significant changes from expectations in actual capital
expenditures and operating expenses and unanticipated project
delays
9. Occurrences affecting the Company's ability to obtain funds from
operations, debt or equity to finance needed capital expenditures
and other investments
10. Significant changes in the Company's relationship with its
employees and the potential adverse effects if labor disputes or
grievances were to occur
11. Significant changes in tax rates or policies or in rates of
inflation or interest
12. Changes in economic conditions
13. Changes in management or control of the Company
14. Changes in accounting principles and/or the application of such
principles to the Company
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company has interest and market risk with respect to $175 million
of its 11 3/4% Senior Notes due 2004. The market value of this debt was
$181 million and $187 million on March 31, 2000 and 1999, respectively. The
senior notes are redeemable at prices up to 105.875% of par value through
2004. All other debt is at floating rates.
The Company's exposure to foreign currency market risk is minimal
since sales prices are typically denominated in U.S. dollars. The Company's
exposure to changing commodity prices is also minimal since substantially
all raw material is acquired at posted or market related prices, and sales
prices for finished products are generally at market related prices.
PART II -- OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company is a party to various lawsuits arising in the ordinary
course of business and does not believe that the outcome of any of these
lawsuits will have a material adverse effect on the Company's financial
position, results of operations or cash flows.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Number Exhibits
------ --------
27 Financial Data Schedule
(b) Reports Submitted on Form 8-K:
There were no reports submitted on Form 8-K during the first
quarter of 2000.
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.
HUNTSMAN POLYMERS CORPORATION
Registrant
Date: May 15, 2000 By: /s/ J. Kimo Esplin
------------------------------
J. Kimo Esplin
Senior Vice President and
Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information
extracted from the third quarter 10-Q and is qualified in
its entirety by reference to such 10-Q.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> Dec-31-2000
<PERIOD-START> Jan-01-2000
<PERIOD-END> Mar-31-2000
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 74,246
<ALLOWANCES> (984)
<INVENTORY> 76,169
<CURRENT-ASSETS> 150,795
<PP&E> 1,059,355
<DEPRECIATION> (125,206)
<TOTAL-ASSETS> 1,166,002
<CURRENT-LIABILITIES> 92,435
<BONDS> 174,882
<COMMON> 0
0
0
<OTHER-SE> 461,759
<TOTAL-LIABILITY-AND-EQUITY> 1,166,002
<SALES> 167,290
<TOTAL-REVENUES> 167,290
<CGS> 159,500
<TOTAL-COSTS> 159,500
<OTHER-EXPENSES> 7,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 11,710
<INCOME-PRETAX> (10,920)
<INCOME-TAX> (4,149)
<INCOME-CONTINUING> (6,771)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (6,771)
<EPS-BASIC> 0
<EPS-DILUTED> 0
</TABLE>
