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Previous: BARR ROSENBERG SERIES TRUST, 497, 2000-08-16 |
Next: SYBRON CHEMICALS INC, 10-Q/A, EX-10.24, 2000-08-16 |
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2000
( ) 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 0-19983
DELAWARE 51-0301280
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
Birmingham Rd., P.O. Box 66, Birmingham New Jersey 08011
(Address of principal executive offices) (zip code)
Registrant's telephone number, including area code (609) 893-1100
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 shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No
Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date.
Class
Outstanding at June 30, 2000
Common stock, $.01 par value 5,737,561
The Private Securities Litigation Reform Act of 1995 provides a “safe harbor” for forward-looking statements. This Form 10-Q/A Report contains information that is forward-looking, such as information relating to future capital expenditures and liquidity. Such forward-looking information involves important risks and uncertainties that could significantly affect expected results in the future from those expressed in any forward-looking statements made by, or on behalf of, the Company. These risks and uncertainties include, but are not limited to, uncertainties relating to economic conditions, fluctuations in exchange rates of various foreign currencies, and other risks associated with foreign operations, changes in governmental and regulatory policies including environmental regulations, the pricing of raw materials, the ability of the Company to make and successfully integrate corporate acquisitions, technological developments, and changes in the competitive environment in which the Company operates.
INDEX
Page No.
Part I Financial information
Item 1 - Financial Statements
Consolidated Balance Sheet -
June 30, 2000 and December 31, 1999 1
Consolidated Statement of Operations -
six months ended June 30, 2000 and 1999 2
Consolidated Statement of Operations -
Three months ended June 30, 2000 and 1999 3
Consolidated Statement of Cash Flows -
six months ended June 30, 2000 and 1999 4
Notes to Consolidated Financial Statements 5 - 9
Item 2 - Management's Discussion and Analysis
of Financial Condition and Results of
Operations 10 - 12
Part II Other information
Item 1 Legal Proceedings 13
Exhibit Index 13
Signature 14
ASSETS
Unaudited Audited
June 30, Dec. 31,
2000 1999
-------- -----
Current assets:
Cash and cash equivalents $ 14,592 $ 14,697
Accounts receivable, net 54,598 50,316
Inventories, net 38,550 37,205
Prepaid and other current assets 5,270 5,066
----- -----
Total current assets 113,010 107,284
Property, plant and equipment, net 71,618 74,459
Intangible assets, net 67,111 68,454
Other assets 6,785 6,934
-------- --------
$258,524 $257,131
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt $ 5,698 $ 8,501
Accounts payable 29,619 24,489
Accrued liabilities 14,141 15,636
------ ------
Total current liabilities 49,458 48,626
Long-term debt 125,131 127,706
Deferred income taxes 2,309 1,429
Postretirement benefits 3,523 3,584
Other liabilities 3,133 3,203
-------- --------
Total liabilities 183,554 184,548
-------- --------
Commitments and contingencies
Shareholders' equity:
Preferred stock, $.01 par value -
500,000 shares authorized; none issued
Common stock - $.01 par value -
20,000,000 shares authorized;
issued 5,942,665 (2000) and
5,941,165 (1999) shares 59 59
Additional paid-in capital 24,219 24,214
Retained earnings 67,368 63,405
Accumulated other comprehensive losses (12,574) (10,943)
Treasury stock, at cost - 205,104 (2000)
and 207,611 (1999) shares (4,102) (4,152)
--------- ---------
Total shareholders' equity 74,970 72,583
--------- --------
$258,524 $257,131
========= ========
Six months
ended
June 30,
--------------
2000 1999
------ -----
Net sales $147,127 $133,659
-------- --------
Cost of sales 101,023 87,201
Selling, general and administrative 28,195 27,892
Research and development 2,686 2,665
-------- --------
131,904 117,758
-------- --------
Operating income 15,223 15,901
-------- --------
Other (income) expense
Interest expense 6,197 5,520
Other - net 2,217 836
--------- --------
8,414 6,356
--------- --------
Income before income taxes 6,809 9,545
Provision for income taxes 2,846 3,913
-------- --------
Net income $ 3,963 $ 5,632
======== ========
Net income per share:
Basic $ 0.69 $ .98
======== ========
Diluted $ 0.69 $ .98
======== ========
Weighted average shares outstanding:
Basic 5,736,170 5,725,065
Diluted 5,777,361 5,754,953
Three months
ended
June 30,
-------------
2000 1999
------ -----
Net sales $ 73,852 $ 64,974
-------- --------
Cost of sales 50,825 42,074
Selling, general and administrative 13,866 15,043
Research and development 1,344 1,368
-------- --------
66,035 58,485
-------- --------
Operating income 7,817 6,489
-------- --------
Other (income) expense
Interest expense 3,217 2,699
Other - net 599 24
-------- --------
3,816 2,723
-------- --------
Income before income taxes 4,001 3,766
Provision for income taxes 1,574 1,544
-------- --------
Net income $ 2,427 $ 2,222
======== ========
Net income per share:
Basic $ 0.42 $ .39
======== ========
Diluted $ 0.42 $ .38
======== ========
Weighted average shares outstanding:
Basic 5,737,539 5,726,820
Diluted 5,806,223 5,794,905
Six months
ended
June 30,
2000 1999
------ -----
Cash flows from operating activities:
Net income $ 3,963 $ 5,632
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 6,347 6,711
Provision for losses on accounts receivable 284 292
Direct costs of financing 1,729
Changes in assets and liabilities:
Accounts receivable (5,814) (6,075)
Inventory (1,855) (2,704)
Other current assets 410 64
Accounts payable and accrued expenses 3,516 2,464
Income taxes payable 69 2,094
Other assets and liabilities - net 1,522 1,197
-------- -------
Net cash provided by operating activities 10,171 9,675
-------- -------
Cash flows from investing activities:
Capital expenditures (2,595) (2,443)
Purchase of business assets (1,611)
Other _______ (212)
-----
Net cash used by investing activities (2,595) (4,266)
-------- -------
Cash flows from financing activities:
Net repayments under revolving credit facilities (1,810)
Net repayment of debt (5,277) (3,728)
Direct costs of financing (1,729) (287)
Proceeds from exercise of stock options 19 31
-------- -------
Net cash (used) provided by financing activities (6,987) (5,794)
-------- -------
Effect of exchange rate changes on cash (694) (722)
-------- --------
Net decrease in cash and cash (105) (1,107)
Cash and cash equivalents at beginning of period 14,697 14,966
------- -------
Cash and cash equivalents at end of period $14,592 $13,859
======= =======
The accompanying consolidated financial statements are unaudited and have been prepared by management pursuant to the rules and regulations of the Securities and Exchange Commission. In the opinion of management, these consolidated financial statements contain all of the adjustments, consisting only of normal recurring adjustments, necessary to present fairly, in summarized form, the financial position of the Company at June 30, 2000 and the results of its operations and changes in its cash flows for the six months ended June 30, 2000 and 1999.
The Company presumes that users of this Quarterly Report on Form 10-Q/A have read or have access to the audited financial statements for the year ended December 31, 1999 contained in the Company’s Form 10-K which was filed with the Securities and Exchange Commission on March 30, 2000, and as amended and refiled on May 1, 2000. Accordingly, footnote disclosures which would substantially duplicate the disclosures contained therein have been omitted.
The Company has adopted the Statement of Financial Accounting Standards (“SFAS”) No. 130, “Reporting Comprehensive Income”, which establishes standards for the reporting and display of comprehensive income and its components in general-purpose financial statements.
The tables below set forth “comprehensive income” for the three and six months ended June 30. There are no related tax effects for the periods presented.
Statement of Comprehensive Income
Three Months Ended June 30,
2000 1999
-------- ------
Net income $ 2,427 $ 2,222
Other comprehensive income, net of tax:
Foreign currency translation adjustments (249) (1,076)
------- -------
Comprehensive income $ 2,178 $ 1,146
======= ======
Statement of Comprehensive Income
Six Months Ended June 30,
2000 1999
-------- ------
Net income $ 3,963 $ 5,632
Other comprehensive income, net of tax:
Foreign currency translation adjustments (1,631) (3,262)
------- -------
Comprehensive income $ 2,332 $ 2,370
======= ======
The following table illustrates the components of accumulated other comprehensive income and their associated changes for the six month period ending June 30, 2000:
Accumulated Other Comprehensive Income (Loss) Balances Six Months Ending June 30, 2000
Current
Beginning Period Ending
Balance Change Balance
--------- ------- -------
Foreign currency translation adjustments $(10,943) $(1,631) $(12,574)
In June 1998, the Financial Accounting Standards Board issued SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities” which establishes accounting and reporting standards for derivative instruments and hedging activities. SFAS No. 133 requires that an entity recognize all derivatives as either assets or liabilities in the statement of financial position and measure those instruments at fair value. SFAS No. 133 is effective for all fiscal quarters of fiscal years beginning after June 15, 2000. The Company does not believe that the adoption of SFAS No. 133 will have a material effect on its consolidated financial statements.
Inventories are stated at the lower of cost or market. For U.S. operations, except for Ruco, cost is determined using the last-in, first-out (LIFO) method. For all other operations, cost is determined using the first-in, first-out (FIFO) method.
The components of inventories are:
June 30, Dec. 31,
2000 1999
------- ------
Finished goods $31,398 $29,373
Raw materials 8,800 9,502
------- -------
40,198 38,875
Less reserves 1,648 1,670
------- -------
$38,550 $37,205
======= =======
The following schedule presents certain financial information about the Company’s three business segments for the six and three months ended June 30.
For 2000 the results of the Organics Strategic Business Unit, which was formerly a part of the Textile Chemical Specialties segment, is now included in the new Environmental Products and Services segment.
Six months ended June 30, 2000 compared with six months ended June 30, 1999.
Six Months Ended June 30,
----------------------------
2000 1999(1)
--------------- -------------
% of % of
Amount Sales Amount Sales
------ ----- ------ -----
(in thousands except percentages)
Sales
Textile Chemical Specialties $ 61,183 41.6% $ 62,365 46.7%
Polymer Intermediates 50,645 34.4 42,899 32.1
Environmental Products and Services 35,299 24.0 28,395 21.2
--------- ------ -------- -----
Total 147,127 100.0 133,659 100.0
Cost of Sales
Textile Chemical Specialties 35,506 58.0 34,954 56.1
Polymer Intermediates 40,771 80.5 33,925 79.1
Environmental Products and Services 24,746 70.1 18,322 64.5
-------- --------
Total 101,023 68.7 87,201 65.2
Gross Margin
Textile Chemical Specialties 25,677 42.0 27,411 43.9
Polymer Intermediates 9,874 19.5 8,974 20.9
Environmental Products and Services 10,553 29.9 10,073 35.5
-------- --------
Total 46,104 31.3 46,458 34.8
Operating Expenses
Textile Chemical Specialties 19,683 32.2 21,038 33.7
Polymer Intermediates 4,754 9.4 4,559 10.6
Environmental Products and Services 6,444 18.3 4,960 17.5
-------- --------
Total 30,881 21.0 30,557 22.9
Operating Income
Textile Chemical Specialties 5,994 9.8 6,373 10.2
Polymer Intermediates 5,120 10.1 4,415 10.3
Environmental Products and Services 4,109 11.6 5,113 18.0
-------- --------
Total 15,223 10.3 15,901 11.9
Other Expense, Net (8,414) (5.7) (6,356) (4.8)
-------- ----- -------- -----
Income before income taxes 6,809 4.6 9,545 7.1
Provision for income taxes 2,846 1.9 3,913 2.9
-------- ----- -------- ----
Net Income $ 3,963 2.7% $ 5,632 4.2%
======== ===== ======== =====
(1) 1999 segments have been reclassified to conform to 2000 presentation.
Three months ended June 30, 2000 compared with three months ended June 30, 1999.
Three Months Ended June 30,
-----------------------------
2000 1999(1)
--------------- -------------
% of % of
Amount Sales Amount Sales
------ ----- ------ -----
(in thousands except percentages)
Sales
Textile Chemical Specialties $ 30,246 40.9% $ 30,941 47.6%
Polymer Intermediates 26,044 35.3 20,487 31.5
Environmental Products and Services 17,562 23.8 13,546 20.9
--------- ------ -------- -----
Total 73,852 100.0 64,974 100.0
Cost of Sales
Textile Chemical Specialties 17,510 57.9 17,330 56.0
Polymer Intermediates 21,262 81.6 16,147 78.8
Environmental Products and Services 12,053 68.6 8,597 63.5
-------- --------
Total 50,825 68.8 42,074 64.8
Gross Margin
Textile Chemical Specialties 12,736 42.1 13,611 44.0
Polymer Intermediates 4,782 18.4 4,340 21.2
Environmental Products and Services 5,509 31.4 4,949 36.5
-------- --------
Total 23,027 31.2 22,900 35.2
Operating Expenses
Textile Chemical Specialties 9,662 31.9 10,646 34.4
Polymer Intermediates 2,393 9.2 2,305 11.3
Environmental Products and Services 3,155 18.0 3,460 25.5
-------- --------
Total 15,210 20.6 16,411 25.3
Operating Income
Textile Chemical Specialties 3,074 10.2 2,965 9.6
Polymer Intermediates 2,389 9.2 2,035 9.9
Environmental Products and Services 2,354 13.4 1,489 11.0
-------- --------
Total 7,817 10.5 6,489 9.9
Other Expense, Net (3,816) (5.2) (2,723) (4.2)
-------- ----- -------- -----
Income before income taxes 4,001 5.4 3,766 5.8
Provision for income taxes 1,574 2.1 1,544 2.4
-------- ----- -------- ----
Net Income $ 2,427 3.3% $ 2,222 3.4%
======== ===== ======== =====
(1) 1999 segments have been reclassified to conform to 2000 presentation.
On April 26, 2000 the Company announced that it engaged JP Morgan to study strategic alternatives to maximize shareholder value. This decision has been arrived at by the unanimous agreement of the Company's Board of Directors. At this time, it is not possible to predict the outcome of this study.
Revenues, operating profits, and net income increased for the second quarter of 2000 versus the prior year's quarter. Earnings were $.42 per share compared to the $.38 per fully diluted share in 1999, a 10.5% increase.
For the six months ended June 30, 2000, earnings per share (fully diluted) was $.69 compared to $.98 per share for the first six months of 1999. Excluding one time items which increased 1999 first quarter by $.22 for an insurance settlement, and decreased 1st quarter 2000 by $.18 for refinancing costs, the first six months earnings per share in 2000 would have been $.87 vs. 1999's $.76, an increase of 14.5%.
Sales for the quarter were $73,852,000, a 13.7% increase over the same period last year. The increase in sales was primarily the result of strong demand for many of the company's products, particularly Polymer Intermediates (powder coating resins, toner polymers and high-solids polyester polyols) and Environmental Products and Services (mainly, ion exchange resins, aziridine based products and toll manufactured organic products). The gross margin for the second quarter of 2000 was 31.2%, a 4.0 percentage point decrease from the prior year's quarter. The decline resulted from a combination of lower selling prices primarily for textile and garment processing products and polymer intermediates in North America, increases in several petrochemical based raw materials and higher sales of relatively lower margin toner, aziridine and curative products. Operating income increased 20.5% to $7,817,000 from the previous year level of $6,489,000 due to the increased sales volume and reduced operating expenses. Net income increased to $2,427,000 versus the $2,222,000 in the same quarter in 1999.
For the six-month period ended June 30, 2000, sales were $147,127,000 a 10.1% increase over the same period last year. The gross margin for the six-month period was 31.3% versus 34.8% in 1999. The decline resulted from a combination of higher sales of relatively lower margin toner, aziridine and curative products, lower selling prices primarily for textile and garment processing and polymer intermediates products in North America, and increases in several petrochemical based raw materials. Operating income declined by 4.3% to $15,223,000. The 1999 period included the receipt of a one-time insurance settlement of $2,065,000. Exclusive of this one-time item, operating income increased by 10.0%. Net income declined by $1,669,000 primarily as a result of the inclusion in 1999 of the one-time insurance settlement and a non-recurring financing cost incurred in the first quarter of this year. Excluding these unusual items, net income increased by 15.0%.
For the second quarter of 2000, sales in the Textile Chemical Specialties segment of $30,246,000 were $695,000 (2.2%) lower than the similar period in 1999, while operating income of $3,074,000 was $109,000 above 1999, an increase of 3.7%. Continued softness in the garment processing markets in North America was responsible for an 8.9% reduction in sales in that region, as those businesses continue to migrate to Latin America and Asia. Also, sales were negatively impacted by an 11.9% change in the Euro exchange rate resulting in a 5.4% reduction in sales for the segment. Eliminating the conversion impact, sales in Europe actually increased by 10.4% over the prior year's second quarter, mainly driven by physical volume increases. Textile Chemical sales in Latin America were 42.6% higher in 2000, reflecting the continued growth of the textile and garment processing business in that region and the increased company focus being placed on these markets. Gross profit margin of the segment decreased by 1.9 percentage points, mainly as a result of lower selling prices and increased raw material costs in Europe and North America. The increase in operating profit for this segment was primarily due to the increase in volume in Europe and Latin America, while a 10.7% reduction in operating expenses in North America offset the lower volume there.
For the six month period ending June 30, 2000, Textile Chemical sales were $1,182,000 (1.9%) lower than the same period last year reflecting the softness in the North American Textile and Garment markets and the decline in the Euro offset by increased sales in Latin America. Operating profit was $379,000 (5.9%) lower than the same period reflecting increased operating costs in Asia as this operation has expanded consistent with the Company’s regional growth plans and the recording in 1999 of income from a one-time insurance settlement. Partially offsetting these items were reduced operating costs in North America and the conversion impact for Europe and the stronger sales volumes in Latin America.
Sales for the second quarter in the Polymer Intermediates Segment were $26,044,000, a 27.1% increase over the second quarter of 1999. Physical volume of solid resins, which includes powder coating resins, curatives and toner polymers increased by 34.7% on very strong demand for most products and a major new customer for toner polymers. Unit volume for liquid resins increased 23.6% primarily as a result of new customers. Gross profit margins for the segment decreased by 2.8 percentage points reflecting the sales increases of lower margin toner and curative products and lowered selling prices partially offset by lower year to year raw material costs and plant efficiencies. The segment contributed operating profit of $2,389,000 versus $2,035,000 in the same period last year, a 17.4% increase.
For the six-month period ending June 30, 2000, Polymer Intermediates sales were $50,645,000 versus $42,899,000 in the same period last year, an increase of 18.1%. Operating profits of $5,120,000 were $705,000 (16.0%) higher than the same period last year. Both the solid and liquid resin product groups had increased sales and operating profits.
Second quarter sales in the Environmental Products and Services segment were $17,562,000 a 29.7% increase from the same period last year. The increase was primarily related to increased sales of specialty chemical products (aziridine-based products and toll manufactured organic products) and ion exchange resins. Gross profit margins for the segment declined by 5.1 percentage points from the same quarter last year, mainly a result of higher raw material costs for ion exchange resins, partially offset by price increases during the quarter, and the impact of the large increase in relatively lower margin aziridine products. Operating income was $2,354,000 for the quarter, an increase of 58.1% from the second quarter of 1999. The increase is primarily attributed to the specialty products volume growth.
For the six month period ended June 30, 2000, sales in the Environmental Segment were $35,299,000 (24.3%) above the same period last year reflecting the increased aziridine and toll manufactured product sales. Operating income was $1,004,000 below the same period last year. The 1999 results reflect a $1,500,000 insurance settlement recorded in the first quarter of 1999. Excluding this one-time item, operating profits increased by 13.7%.
Operating expense as a percent of sales was 20.6% in the second quarter of 2000 versus 25.3% in the second quarter of 1999. The reduction was attributable to sales growth, a change from direct to distributor sales in one business and to continued cost control efforts particularly in the North American Textile Chemical segment.
For the six month period ended June 30, 2000, operating expenses as a percentage of sales were 21.0% versus 22.9% in the same period in 1999. The reduction was attributable to sales growth and the continued cost control in the North America Textile Chemical segment more then compensating for the one time insurance settlement recorded in the first quarter of 1999, which reduced operating expenses in that period.
Other Expense of $3,816,000 for the quarter was $1,093,000 higher than the same period in 1999 primarily due to the increased interest costs on the long-term debt outstanding and to the unfavorable currency conversion related to the decline in the Euro and the Mexican peso as they relate to the U.S. dollar, resulting in foreign currency exchange losses.
For the six month period ended June 30, 2000, Other Expense was $2,058,000 higher than the same period last year, primarily related to additional interest expense and to the long-term debt financing costs incurred in the first quarter of this year.
Cash and cash equivalents of $14,592,000 as of June 30, 2000 were $1,772,000 above the balance as of March 31, 2000.
Operating activities generated cash flow of $4,254,000 for the second quarter of 2000 versus cash flow of $2,156,000 for the same period in 1999. Net working capital increased by $3,100,000 in the quarter mostly as a result of the increased sales and resulting receivables.
Net cash used by investing activities totaled $1,205,000 for the second quarter of 2000 compared to the $1,807,000 in the same period in 1999. Capital expenditures were $1,205,000 in 2000 and $1,381,000 in 1999. In 1999, the Company also acquired certain business assets for approximately $426,000. The company expects to spend approximately $10,000,000 on capital expenditures for the year 2000.
Financing activities used $1,088,000 in cash in the second quarter of 2000 versus $1,738,000 in the second quarter of 1999. The cash utilization in both periods was for the scheduled repayment of long-term debt.
For the six-month period ended June 30, 2000, operating activities generated $10,171,000 verses $9,675,000 generated in the same period in 1999. Cash utilized for investing activities was $2,595,000 in 2000 versus $4,266,000 utilized in 1999. In 1999, the company acquired the assets of Green Releaf and certain other business assets for $1,823,000.
Cash utilized for financing activities for the six-month period was $6,987,000 versus $5,794,000 in 1999. In 2000, $1,729,000 was utilized for the financing of long-term debt. The company amended the credit facility to reduce current maturates in the next six years. The interest rate, restrictive covenants and certain other provisions were also amended.
Management believes that its capital expenditures for existing operations can be funded from operating cash flow. Management also believes that cash flow from operations and available credit will be sufficient to finance its operations and debt service requirements for the foreseeable future.
There have been no material developments in connection with any pending legal proceedings as reported in the Registrant's Form 10-K Annual Report which was filed with the Securities and Exchange Commission on March 30, 2000 and as amended and refiled on May 1, 2000.
Exhibit No. Description Method of Filing
----------- ----------- ----------------
10.24 Supplement to Employment Agreement, dated
April 28, 2000, with Stephen R. Adler *
10.25 Supplement to Employment Agreement, dated
April 28, 2000, with Douglas Brown *
10.26 Supplement to Employment Agreement, dated
April 28, 2000, with Steven F. Ladin *
10.27 Supplement to Employment Agreement, dated
June 28, 2000, with John McPeak *
10.28 Supplement to Employment Agreement, dated
April 28, 2000, with Robert Parlman *
10.29 Supplement to Employment Agreement, dated
April 28, 2000, with John H. Schroeder *
10.30 Amendment No. 1 to Employment Agreement,
dated April 25, 2000, with Richard M. Klein *
10.31 Amendment No. 2 to Sybron Chemicals Inc. Share
Participation Plan, dated April 27, 2000 *
10.32 Amendment to the Company's Executive Bonus Plan *
27 Financial Data Schedule *
SYBRON CHEMICALS INC.
/s/ Steven F. Ladin
-------------------
Steven F. Ladin
Vice President, Finance and
Chief Financial Officer
Date: August 16, 2000
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