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 30, 1996
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 Numbers 0-25586 and 33-66740
UNIROYAL CHEMICAL CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 06-1258925
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
UNIROYAL CHEMICAL COMPANY, INC.
(Exact name of registrant as specified in its charter)
NEW JERSEY 06-1148490
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
BENSON ROAD
MIDDLEBURY, CONNECTICUT 06749
(Address of principal executive offices) (Zip Code)
Registrants' telephone number, including area code - (203) 573-2000
Indicate by check mark whether the registrants (1) have 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
registrants were required to file such reports), and (2) have been subject to
such filing requirements for the past 90 days.
Yes X No
----- -----
Indicate the number of shares outstanding of each of the issuers' classes of
common stock, as of July 31, 1996:
Uniroyal Chemical Corporation: 24,308,403 shares of Common Stock;
Uniroyal Chemical Company, Inc.: 100 shares of Common Stock.
PAGE
<PAGE>
UNIROYAL CHEMICAL CORPORATION
UNIROYAL CHEMICAL COMPANY, INC.
FORM 10-Q
FOR THE QUARTER ENDED JUNE 30, 1996
PART I - FINANCIAL INFORMATION PAGE
Item 1 -- Financial Statements (unaudited):
- Consolidated Statements of Operations -
Three and Nine Months Ended June 30, 1996 and July 2, 1995 2
- Consolidated Balance Sheets -
June 30, 1996 and October 1, 1995 3
- Consolidated Statements of Cash Flows -
Nine Months Ended June 30, 1996 and July 2, 1995 5
- Notes to Unaudited Consolidated Financial Statements 6
Item 2 -- Management's Discussion and Analysis of Financial Condition
and Results of Operations 9
PART II - OTHER INFORMATION
Item 1 -- Legal Proceedings 13
Item 6 -- Exhibits and Reports on Form 8-K 14
-- Signature 15
1<PAGE>
UNIROYAL CHEMICAL CORPORATION
UNIROYAL CHEMICAL COMPANY, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited - in thousands, except per share amounts)
<TABLE><CAPTION>
Three Months Ended Nine Months Ended
---------------------- ----------------------
June 30, July 2, June 30, July 2,
1996 1995 1996 1995
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Net sales $ 302,063 $ 298,604 $ 829,171 $ 784,567
Cost of products sold 194,260 195,837 558,005 519,206
Selling, general and
administrative expenses 56,313 55,241 159,301 150,172
---------- ---------- ---------- ----------
Operating income 51,490 47,526 111,865 115,189
Interest expense 26,742 27,747 80,038 87,972
Other (income) expense 161 (640) 1,712 (1,410)
---------- ---------- ---------- ----------
Income before income taxes
and extraordinary charges 24,587 20,419 30,115 28,627
Provision (benefit) for
income taxes 9,923 8,025 12,133 (67,067)
---------- ---------- ---------- ----------
Income before
extraordinary charges 14,664 12,394 17,982 95,694
Extraordinary charges - early
retirement of debt (137) --- (441) (8,279)
---------- ---------- ---------- ----------
Net income 14,527 12,394 17,541 87,415
Preferred stock dividends earned 103 104 313 298
---------- ---------- ---------- ----------
Net income applicable
to common shares $ 14,424 $ 12,290 $ 17,228 $ 87,117
========== ========== ========== ==========
Earnings per common share:
Income before
extraordinary charges $0.59 $0.50 $0.72 $5.80
Extraordinary charges (0.01) --- (0.02) (0.50)
---------- ---------- ---------- ----------
Net income per common share $0.58 $0.50 $0.70 $5.30
========== ========== ========== ==========
Weighted average shares
outstanding 24,808 24,572 24,582 16,436
</TABLE>
See notes to unaudited consolidated financial statements
2<PAGE>
UNIROYAL CHEMICAL CORPORATION
CONSOLIDATED BALANCE SHEETS
(In thousands)
<TABLE><CAPTION>
June 30, October 1,
1996 1995
------------ ------------
(Unaudited)
<S> <C> <C>
ASSETS
Current assets
Cash and cash equivalents $ 31,243 $ 29,519
Accounts receivable 153,411 159,254
Inventories 196,468 177,647
Other current assets 44,072 39,114
------------ ------------
Total current assets 425,194 405,534
Property, plant and equipment, net 378,223 394,472
Intangible assets 228,701 241,710
Deferred income taxes 65,727 63,890
Other assets 63,202 66,101
------------ ------------
$ 1,161,047 $ 1,171,707
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable $ 90,440 $ 94,826
Short-term debt 42,245 33,305
Current portion of long-term debt 11,122 11,434
Accrued liabilities 109,168 119,077
------------ ------------
Total current liabilities 252,975 258,642
Long-term debt 888,856 910,156
Accrued postretirement liability 180,966 180,413
Other liabilities 125,980 121,725
Stockholders' equity (deficit)
Preferred Stock 4,172 4,172
Common Stock 254 253
Additional paid-in capital 177,032 176,799
Accumulated deficit (429,919) (447,460)
Pension liability adjustment (3,617) (3,617)
Cumulative translation adjustment (25,008) (18,488)
Treasury stock (10,644) (10,888)
------------ ------------
Total stockholders' deficit (287,730) (299,229)
------------ ------------
$ 1,161,047 $ 1,171,707
============ ============
</TABLE>
See notes to unaudited consolidated financial statements
3<PAGE>
UNIROYAL CHEMICAL COMPANY, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands)
<TABLE><CAPTION>
June 30, October 1,
1996 1995
------------ ------------
(Unaudited)
<S> <C> <C>
ASSETS
Current assets
Cash and cash equivalents $ 31,243 $ 29,519
Accounts receivable 153,411 159,254
Inventories 196,468 177,647
Other current assets 44,072 39,114
------------ ------------
Total current assets 425,194 405,534
Property, plant and equipment, net 378,223 394,472
Intangible assets 228,701 241,710
Deferred income taxes 65,727 63,890
Other assets 63,202 66,101
------------ ------------
$ 1,161,047 $ 1,171,707
============ ============
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities
Accounts payable $ 90,440 $ 94,826
Short-term debt 42,245 33,305
Current portion of long-term debt 11,122 11,434
Accrued liabilities 109,168 119,077
------------ ------------
Total current liabilities 252,975 258,642
Long-term debt 888,856 910,156
Accrued postretirement liability 180,966 180,413
Other liabilities 125,980 121,725
Stockholder's equity (deficit)
Common Stock 1 1
Additional paid-in capital 172,496 172,018
Accumulated deficit (431,602) (449,143)
Pension liability adjustment (3,617) (3,617)
Cumulative translation adjustment (25,008) (18,488)
------------ ------------
Total stockholders' deficit (287,730) (299,229)
------------ ------------
$ 1,161,047 $ 1,171,707
============ ============
</TABLE>
See notes to unaudited consolidated financial statements
4<PAGE>
UNIROYAL CHEMICAL CORPORATION
UNIROYAL CHEMICAL COMPANY, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited - in thousands)
<TABLE><CAPTION>
Nine Months Ended
---------------------------
June 30, July 2,
1996 1995
------------ ------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 17,541 $ 87,415
Adjustments to reconcile net income to net cash
from operating activities:
Depreciation 34,541 32,761
Amortization 16,338 15,213
Non-cash interest 12,114 14,928
Deferred income taxes (1,662) (77,236)
Extraordinary charge 441 8,279
Other 951 702
Changes in operating assets and liabilities:
Accounts receivable 5,316 (17,946)
Inventories (19,525) (32,687)
Accounts payable (4,307) 10,962
Accrued liabilities (8,474) (13,747)
Other (4,739) 5,311
------------ ------------
Net cash flows from operating activities 48,535 33,955
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (21,582) (44,923)
Acquisitions --- (94,666)
Other (2,497) (6,879)
------------ ------------
Net cash flows used in investing activities (24,079) (146,468)
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayments of long-term debt (31,048) (189,858)
Proceeds from long-term debt 1,865 45,055
Short-term borrowings, net 8,658 29,537
Debt issuance costs (1,345) (2,877)
Proceeds from issuance of stock 478 147,049
Other --- (1,274)
------------ ------------
Net cash flows from (used in)
financing activities (21,392) 27,632
Effects of exchange rate changes on cash (1,340) (1,173)
------------ ------------
Net change in cash and cash equivalents 1,724 (86,054)
Cash and cash equivalents, beginning of period 29,519 121,344
------------ ------------
Cash and cash equivalents, end of period $ 31,243 $ 35,290
============ ============
SUPPLEMENTAL CASH FLOW DISCLOSURE:
Interest paid $75,456 $82,933
Income taxes paid 15,191 5,561
</TABLE>
See notes to unaudited consolidated financial statements
5<PAGE>
UNIROYAL CHEMICAL CORPORATION
UNIROYAL CHEMICAL COMPANY, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
1. Basis of Presentation
The accompanying consolidated financial statements include the accounts of
Uniroyal Chemical Corporation ("UCC") and its wholly-owned subsidiary Uniroyal
Chemical Company, Inc. ("Uniroyal Chemical" and together with UCC and their
subsidiaries, the "Companies"). UCC is dependent on cash flow from Uniroyal
Chemical and its subsidiaries to service its debt and meet its other cash needs.
Accordingly, the consolidated financial statements of Uniroyal Chemical set
forth herein are presented on a basis of accounting which reflects substantially
all of the operations (primarily interest expense), assets and liabilities of
UCC.
The statements have been prepared by the Companies without audit, pursuant
to the rules and regulations of the Securities and Exchange Commission and
according to generally accepted accounting principles, and reflect all
adjustments consisting of normal recurring accruals which, in the opinion of
management, are necessary for a fair statement of the results of the interim
periods presented. These financial statements do not include all disclosures
associated with annual financial statements and, accordingly, should be read in
conjunction with the notes contained in the Companies' audited consolidated
financial statements for the year ended October 1, 1995. Certain prior year
amounts have been reclassified to conform with the 1996 presentation.
2. Inventories
A summary of inventory components is as follows (in thousands):
<TABLE><CAPTION>
June 30, October 1,
1996 1995
------------ ------------
<S> <C> <C>
Finished goods $143,235 $129,263
Work in process 9,743 7,437
Raw materials 43,490 40,947
------------ ------------
$196,468 $177,647
============ ============
</TABLE>
3. Capital Stock
UCC has 50,000,000 shares of Series A and B Preferred Stock authorized at
$0.01 par value. As of June 30, 1996, UCC had issued and outstanding 29,721
shares of Series A Cumulative Redeemable Preferred Stock and 12,000 shares of
Series B Preferred stock. In addition, UCC has 2,050,000 shares of Series C
Junior Participating Preferred Stock authorized at $0.01 par value none of which
are issued.
UCC also has 205,000,000 shares of Common Stock authorized at $0.01 par
value. As of June 30, 1996, UCC had issued 25,422,631 shares, including
1,114,228 treasury shares. Uniroyal Chemical has 2,500 shares of common stock
authorized at no par value with 100 shares issued and outstanding.
6 <PAGE>
UNIROYAL CHEMICAL CORPORATION
UNIROYAL CHEMICAL COMPANY, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (continued)
4. Income Taxes
The provision for income taxes for the nine months ended June 30, 1996 and
July 2, 1995 includes foreign tax provisions of $14.6 million and $8.1 million,
respectively. The difference between the effective and statutory federal income
tax rate consists primarily of expenses that are not deductible for income tax
purposes, including goodwill amortization, as well as state income taxes and the
impact of foreign earnings subject to various foreign tax rates and withholding
taxes.
The benefit for income taxes for the nine months ended July 2, 1995 reflects
a benefit of $78.9 million due to the reduction in the Companies' valuation
allowance recorded against the Companies' net operating loss carryforward
position in the United States. As a result of the debt repurchase concurrent
with UCC's initial public offering in March 1995, the Companies expect future
taxable income, and therefore it was more likely than not that a significant
portion of the loss carryforwards would be realized.
5. Debt Repurchase
During April 1996, the Companies repurchased $7.2 million of their long-term
debt in the open market. As a result of this repurchase, the Companies
recognized an extraordinary charge of $0.1 million comprised of premiums and the
write-off of related unamortized fees, net of a related tax benefit of $0.1
million. The 1995 extraordinary charge relates to the debt repurchase
concurrent with UCC's initial public offering in March 1995.
6. Contingencies
The Companies' are involved in claims, litigation, administrative
proceedings and investigations of various types in several jurisdictions. A
number of such matters involve claims for a material amount of damages and
relate to or allege environmental liabilities, including clean-up costs
associated with hazardous waste disposal sites, natural resource damages,
property damage and personal injury. Uniroyal Chemical has been identified by
federal, state or local governmental agencies, and other potentially responsible
parties (each a "PRP"), as a PRP for costs associated with waste disposal sites
at various locations in the United States. In many cases, Uniroyal Chemical is
one of many PRP's so identified. In addition, the Companies are involved with
environmental remediation and compliance activities at some of their current and
former sites.
Each quarter, the Companies evaluate and review estimates for future
remediation and other costs to determine appropriate environmental reserve
amounts. For each site a determination is made of the specific measures that are
believed to be required to remediate the site, the estimated total cost to carry
out the remediation plan, the portion of the total remediation costs to be borne
by the Companies' and the anticipated time frame over which payments toward the
remediation plan will occur. As of June 30, 1996, the Companies' reserves for
environmental liabilities totaled $64.3 million. These estimates may
subsequently change should additional sites be identified, further remediation
measures be required or undertaken, the interpretation of current laws and
regulations be modified or additional environmental laws and regulations be
enacted.
7<PAGE>
UNIROYAL CHEMICAL CORPORATION
UNIROYAL CHEMICAL COMPANY, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (continued)
6. Contingencies (continued)
The Companies intend to assert all meritorious legal defenses and all other
equitable factors which are available to them with respect to the above matters.
The Companies believe that the resolution of these environmental matters, which
may be over the next decade, will not have a material adverse effect on the
consolidated financial position of the Companies, but could have a material
adverse effect on the Companies' consolidated results of operations in any given
year if a significant number of these matters are resolved unfavorably which the
Companies believe to be unlikely.
7. Merger Agreement
UCC entered into an Agreement and Plan of Merger, dated as of April 30, 1996
(the "Merger Agreement"), with Crompton & Knowles Corporation ("Crompton") and
Tiger Merger Corp. ("Tiger"). The merger agreement provides, among other
things, pursuant to the terms and subject to the conditions therein, that Tiger,
a wholly-owned subsidiary of Crompton, will merge with and into UCC (the
"Merger"). Under the terms of the Merger Agreement, each share of UCC's common
stock issued and outstanding immediately prior to the consummation of the Merger
will be converted into .9577 shares of Crompton common stock (the "Exchange
Ratio"). The Exchange Ratio is based on the average closing price of Crompton's
common stock on the New York Stock Exchange Composite Tape for the twenty
trading days ending July 18, 1996. Each share of UCC's Series A Cumulative
Redeemable Preferred Stock and Series B Preferred Stock issued and outstanding
immediately prior to the consummation of the Merger will be converted into and
represent a number of shares of Crompton common stock equal to the Exchange
Ratio multiplied by 6.667.
The Merger, which is intended to be tax free to UCC shareholders and
accounted for as a pooling of interests, is subject to approval by the
shareholders of both companies at special meetings of stockholders to be held on
August 21, 1996. Common stockholders of record on July 9, 1996 will be eligible
to vote at the special meeting.
8<PAGE>
ITEM 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Third Quarter 1996 versus 1995
Net Sales
Consolidated net sales for the third quarter ended June 30, 1996 increased
$3.5 million, or 1.2% to $302.1 million from $298.6 million for the third
quarter of fiscal 1995, as higher sales for the Chemicals and Polymers and
Specialities Divisions more than offset lower sales for the Crop Protection
Division.
Sales for the Chemicals and Polymers Division rose 2.6% in the third quarter
to $125.3 million compared to $122.2 million in the third quarter of fiscal 1995
as this division continues to benefit from higher rubber chemical selling
prices. Increased nitrile rubber volume also contributed to higher sales.
These increases were partially offset by lower volume and pricing in EPDM due to
lower demand and domestic price competition.
Crop Protection Division sales in the third quarter of fiscal 1996 were
$104.3 million, or 2.9% lower than prior year sales of $107.4 million. The
primary factors contributing to this decrease were lower infestation levels and
adverse weather conditions in the United States as well as a reduction in the
number of cotton acres planted. This decrease was somewhat offset by the
continuing success of the new Gaucho (TM) seed treatment insecticide and higher
sales of farmer applied seed treatment chemicals.
Specialties Division sales of $70.5 million increased 4.8% versus third
quarter sales in fiscal 1995 of $67.3 million. The increase was primarily due
to higher urethane prepolymers selling prices in response to higher raw material
costs and increased demand and market share of lubricant additives.
Operating Income
Operating income in the third quarter of 1996 increased by 8.3% to $51.5
million as gross margin increased to 35.7% of net sales versus 34.4% in last
year's third quarter. The increase in gross margin is primarily a result of the
improved margin percentage in the Chemical and Polymers division primarily due
to higher rubber chemical selling prices and increased contribution from the
Crop Protection Division due primarily to lower raw material and production
costs.
Selling, general and administrative expenses versus the prior year were
essentially flat as a percentage of sales. Real dollar expenses rose less than
2% despite increased spending in new product development and promotion. This
increased spending was somewhat offset by benefits related to the cost reduction
program implemented in the fourth quarter of fiscal 1995.
Interest Expense
Interest expense for the three months ended June 30, 1996 was $1.0 million
lower than the prior year quarter primarily as a result of the Company's debt
repurchase program.
9
Income Taxes
The provision for taxes for the three months ended June 30, 1996 includes a
$5.0 million federal and state tax provision, in addition to a foreign provision
of $4.9 million.
First nine months 1996 versus 1995
Net Sales
Consolidated net sales for the nine months ended June 30, 1996 were $829.2
million, a 5.7% increase over sales of $784.6 million for the nine months ended
July 2, 1995. The sales increase includes incremental sales of $29.4 million in
fiscal 1996 resulting from acquisitions made during fiscal 1995.
Sales for the Chemicals and Polymers Division increased 3.0% to $365.9
million in the first nine months of fiscal 1996 versus $355.1 million for the
same period of the prior year as this division continues to benefit from higher
selling prices in all product lines, particularly in rubber chemicals. These
increases were somewhat offset by lower EPDM volumes as a result of softening
demand and domestic price competition.
Crop Protection Division sales of $250.7 million in the first nine months of
fiscal 1996 increased 12.8% versus sales of $222.3 million in the same period
last year. Acquisitions, including the worldwide crop protection business of
Solvay Duphar B.V. (the "Duphar Acquisition"), accounted for $25.4 million or
11.4% of the sales increase. The remaining sales increase was primarily due to
increased sales of new seed treatment products, primarily Gaucho (TM), partially
offset by the factors previously discussed in the third quarter analysis.
Specialties Division sales in the first nine months of fiscal 1996 increased
to $206.9 million, or 2.7%, versus $201.4 million in the prior year primarily
due to higher urethane prepolymer sales somewhat offset by lower sales of
chemical intermediates and other specialty chemicals. Urethane prepolymer sales
increased in all regions of the world due to higher selling prices and increased
demand from an expanding international market while demand in the United States
is beginning to soften. Other specialty chemical sales were lower primarily
from decreased demand of lubricant additives and plastic additives in Europe.
These decreases were partially offset by higher sales of Synton (TM) PAO's in
the United States due to new applications and enhanced production facilities.
Operating Income
Operating income was $111.9 million for the first nine months of fiscal 1996.
After adjusting fiscal 1995 operating income for non-recurring insurance
recoveries of $9.9 million, 1996 operating income was $6.6 million or 6.3%
higher than fiscal 1995. Gross profit increased as a result of the higher sales
as the gross margin percentage remained constant at approximately 33% after
adjusting for the 1995 insurance recoveries.
10
Selling, general and administrative expenses during the first nine months of
fiscal 1996 of $159.3 million were essentially flat as a percentage of sales at
approximately 19%. The real dollar increase in expenses was primarily due to
incremental expenses related to acquisitions completed during fiscal 1995
including the Duphar Acquisition, increased spending for research and
development and promotional spending on new products such as Gaucho. These
increases were partially offset by benefits related to the cost reduction
program implemented in the fourth quarter of fiscal 1995.
Interest Expense
Interest expense of $80.0 million for the nine months ended June 30, 1996 was
$7.9 million lower than the nine months ended July 2, 1995, primarily due to the
debt repurchase concurrent with UCC's initial public offering ("IPO") in March
1995 and the Company's continuing debt repurchase program. These savings were
partially offset by additional interest expense related to the Duphar
Acquisition financing.
Other Income (Expense)
Other income in the first nine months of fiscal 1995 included certain non-
recurring licensing income and interest income resulting from the build up of
cash in the first six months of fiscal 1995 in anticipation of the debt
repurchase concurrent with the IPO and the Duphar Acquisition in March 1995.
Excluding these items, other expense for the first nine months of 1996 would
have been lower than 1995 due to the foreign exchange losses related to the
devaluation of the Mexican Peso in the first nine months of fiscal 1995.
Income Taxes
The provision for taxes for the nine months ended June 30, 1996 is comprised
of a benefit of $2.5 million for federal and state tax and a foreign provision
of $14.6 million. The benefit for taxes in the first nine months of fiscal 1995
includes a reduction of the Companies' deferred tax valuation allowance of $78.9
million.
Liquidity and Capital Resources
At June 30, 1996, the Companies had $31.2 million of cash and cash
equivalents of which $26.0 million was outside the United States. Due to the
seasonal nature of Uniroyal Chemical's crop protection business, cash flows
typically are lower in the first half of the fiscal year than in the second half
of the year. Therefore, cash flow during the first nine months of fiscal 1996
and cash availability in the United States at June 30,1996, are not indicative
of cash flows and cash availabilities anticipated for the entire fiscal year.
Net cash from operating activities for the first nine months of fiscal 1996
was $48.5 million, or a $14.6 million increase versus the first nine months of
fiscal 1995. The primary reasons for this improvement were lower seasonal net
working capital usage and lower interest payments. Partially offsetting these
improvements were higher tax payments and slightly lower operating results as
the nine months ended July 2, 1995 included non-recurring insurance proceeds.
11
The Companies used $21.6 million for capital expenditures during the nine
months ended June 30,1996 as compared with $44.9 million in the first nine
months of fiscal 1995. This decrease was do to major capacity expansion
projects in the prior year that did not recur in this year. Other investing
activities in fiscal 1996 includes the payment of $2.0 million in January 1996
for inventory and certain other assets related to the long-term manufacturing
agreement with Negromex.
Net cash flows used in financing activities for the nine months ended June
30, 1996 of $21.4 million, primarily consisted of $31.0 million in long-term
debt repayments, including scheduled maturities of $11.7 million and $17.2
million of debt repurchases Uniroyal Chemical made in the open market. In
addition, Uniroyal Chemical used $8.7 million in net short-term borrowings,
including $13.8 million under its credit facility. These additional borrowings
were mainly due to the seasonal cash nature of the Companies' crop protection
business.
Future Liquidity
Management believes that projected cash flows from operations and the
Companies' current capital position will provide sufficient liquidity to meet
the Companies' anticipated short and long-term operating and capital
requirements. Factors supporting this belief include the Companies' operating
income growth and the reduction in interest expense to be realized as a result
of the current and anticipated repayments of long-term debt.
Recent Events
UCC entered into an Agreement and Plan of Merger, dated as of April 30,
1996 (the "Merger Agreement"), with Crompton & Knowles Corporation ("Crompton")
and Tiger Merger Corp. ("Tiger"). The merger agreement provides, among other
things, pursuant to the terms and subject to the conditions therein, that Tiger,
a wholly-owned subsidiary of Crompton, will merge with and into UCC (the
"Merger"). Under the terms of the Merger Agreement, each share of UCC's common
stock issued and outstanding immediately prior to the consummation of the Merger
will be converted into .9577 shares of Crompton common stock (the "Exchange
Ratio"). The Exchange Ratio is based on the average closing price of Crompton's
common stock on the New York Stock Exchange Composite Tape for the twenty
trading days ending July 18, 1996. Each share of UCC's Series A Cumulative
Redeemable Preferred Stock and Series B Preferred Stock issued and outstanding
immediately prior to the consummation of the Merger will be converted into and
represent a number of shares of Crompton common stock equal to the Exchange
Ratio multiplied by 6.667.
The Merger, which is intended to be tax free to UCC shareholders and
accounted for as a pooling of interests, is subject to approval by the
shareholders of both companies at special meetings of stockholders to be held on
August 21, 1996. Common stockholders of record on July 9, 1996 will be eligible
to vote at the special meeting.
12<PAGE>
PART II - OTHER INFORMATION
ITEM 1 - LEGAL PROCEEDINGS
Counsel for UCC, Crompton, Tiger and the counsel for plaintiff entered into a
memorandum of understanding (the "Memorandum of Understanding") dated August 5,
1996 in connection with the settlement of a purported class action lawsuit filed
in the Delaware Court of Chancery, County of New Castle entitled Fassbender v.
Mazaika, et al., which had sought, among other things, to enjoin consummation of
the Merger. Among other things, the Memorandum of Understanding provides that,
in full settlement of the claims asserted, (i) the Agreement and Plan of Merger,
dated as of April 30, 1996 (the "Merger Agreement"), between UCC, Crompton and
Tiger will be amended so as to reduce the fee payable to Crompton upon
termination of the Merger Agreement under certain circumstances from $50 million
to $35 million, (ii) UCC will promptly disseminate to UCC stockholders the Third
Quarter Report, (iii) the defendants will publicly disclose this proposed
settlement by a filing with the Securities and Exchange Commission and (iv) the
plaintiff will withdraw his request for a preliminary injunction enjoining
consummation of the Merger. The Merger Agreement was amended as of
August 7, 1996 to reduce the termination fee as contemplated in the Memorandum
of Understanding.
The consummation of the proposed settlement is subject to (i) completion by the
plaintiff of discovery, (ii) execution of definitive settlement documents, (iii)
notice to members of the plaintiff class and (iv) approval by the Delaware Court
of Chancery. In connection with the proposed settlement, the defendants have
agreed that they will not oppose plaintiff's counsel's application for an award
of fees and expenses not to exceed $350,000 in the aggregate, to be paid by
Crompton and/or UCC.
UCC and its directors have denied, and continue to deny, that any of them have
committed any violations of law or breaches of duty to plaintiff or any member
of the plaintiff class, UCC or its stockholders, or anyone else. The defendants
entered into the Memorandum of Understanding in order to eliminate the
distraction and expense of further litigation.
13<PAGE>
PART II - OTHER INFORMATION
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
11 Statement re computation of per share earnings.
27 Financial data schedule.
(b) Reports on Form 8-K
During the quarterly period ended June 30, 1996, the registrants did
not file any reports on Form 8-K.
14<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, each
Registrant has duly caused this Report to be signed on its behalf by the
undersigned, thereunto duly authorized.
UNIROYAL CHEMICAL CORPORATION
UNIROYAL CHEMICAL COMPANY, INC.
(Registrants)
Date: August 12, 1996 By /s/ Alexander R. Castaldi
----------------- -----------------------------
Vice President and
Chief Financial Officer
(Principal Financial Officer)
15<PAGE>
UNIROYAL CHEMICAL CORPORATION
EXHIBIT 11 - COMPUTATION OF EARNINGS PER COMMON SHARE
For the three and nine months ended June 30, 1996 and July 2, 1995
(In thousands, except per share amounts)
<TABLE><CAPTION>
Three Months Ended Nine Months Ended
-------------------- --------------------
1996 1995 1996 1995
--------- --------- --------- ---------
NET INCOME APPLICABLE TO COMMON SHARES (primary and fully diluted)
<S> <C> <C> <C> <C>
Income before extraordinary charges $14,664 $12,394 $17,982 $95,694
Extraordinary charges (137) -- (441) (8,279)
Preferred stock dividends earned (103) (104) (313) (298)
--------- --------- --------- ---------
Net income applicable
to common shares $14,424 $12,290 $17,228 $87,117
========= ========= ========= =========
PRIMARY EARNINGS PER SHARE
Weighted average shares
outstanding 24,293 24,127 24,277 15,832
Effect of warrants 104 219 104 376
Effect of stock options 252 87 127 88
Other dilutive securities 159 139 74 140
--------- --------- --------- ---------
Weighted average shares and
share equivalents outstanding 24,808 24,572 24,582 16,436
========= ========= ========= =========
Earnings per common share:
Income before extraordinary charges $ 0.59 $ 0.50 $ 0.73 $ 5.82
Extraordinary charges (0.01) -- (0.02) (0.50)
Preferred stock dividends earned -- -- (0.01) (0.02)
--------- --------- --------- ---------
Net income per common share $ 0.58 $ 0.50 $ 0.70 $ 5.30
========= ========= ========= =========
FULLY DILUTED EARNINGS PER SHARE
Weighted average shares
outstanding 24,293 24,127 24,277 15,832
Effect of warrants 104 219 107 376
Effect of stock options 327 106 332 100
Other dilutive securities 183 140 184 142
--------- --------- --------- ---------
Weighted average shares and
share equivalents outstanding 24,907 24,592 24,900 16,450
========= ========= ========= =========
Earnings per common share
Income before extraordinary charges $ 0.59 $ 0.50 $ 0.72 $ 5.82
Extraordinary charges (0.01) -- (0.02) (0.50)
Preferred stock dividends earned -- -- (0.01) (0.02)
--------- --------- --------- ---------
Net income per common share $ 0.58 $ 0.50 $ 0.69 $ 5.30
========= ========= ========= =========
</TABLE>
Note: These calculations are submitted in accordance with Regulation S-K item
601(b)(11).
(1) Effect of dilutive securities was determined using the treasury stock
method.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FORM 10-Q
FOR THE PERIOD ENDED JUNE 30, 1996 AND IS QUALIFIED IN ITS ENTIREY BY REFERENCE
TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000858905
<NAME> UNIROYAL CHEMICAL CORP
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> OCT-1-1995
<PERIOD-END> JUN-30-1996
<CASH> 31,243
<SECURITIES> 0
<RECEIVABLES> 156,903
<ALLOWANCES> 3,492
<INVENTORY> 196,468
<CURRENT-ASSETS> 425,194
<PP&E> 623,539
<DEPRECIATION> 245,316
<TOTAL-ASSETS> 1,161,047
<CURRENT-LIABILITIES> 252,975
<BONDS> 888,856
0
4,172
<COMMON> 254
<OTHER-SE> (292,156)
<TOTAL-LIABILITY-AND-EQUITY> 1,161,047
<SALES> 829,171
<TOTAL-REVENUES> 829,171
<CGS> 558,005
<TOTAL-COSTS> 717,306
<OTHER-EXPENSES> 1,712
<LOSS-PROVISION> 952
<INTEREST-EXPENSE> 80,038
<INCOME-PRETAX> 30,115
<INCOME-TAX> 12,133
<INCOME-CONTINUING> 17,982
<DISCONTINUED> 0
<EXTRAORDINARY> 441
<CHANGES> 0
<NET-INCOME> 17,541
<EPS-PRIMARY> 0.70
<EPS-DILUTED> 0.69
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FORM 10-Q
FOR THE PERIOD ENDED JUNE 30, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000862612
<NAME> UNIROYAL CHEMICAL CO INC
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> OCT-1-1995
<PERIOD-END> JUN-30-1996
<CASH> 31,243
<SECURITIES> 0
<RECEIVABLES> 156,903
<ALLOWANCES> 3,492
<INVENTORY> 196,468
<CURRENT-ASSETS> 425,194
<PP&E> 623,539
<DEPRECIATION> 245,316
<TOTAL-ASSETS> 1,161,047
<CURRENT-LIABILITIES> 252,975
<BONDS> 888,856
0
0
<COMMON> 1
<OTHER-SE> (287,731)
<TOTAL-LIABILITY-AND-EQUITY> 1,161,047
<SALES> 829,171
<TOTAL-REVENUES> 829,171
<CGS> 558,005
<TOTAL-COSTS> 717,306
<OTHER-EXPENSES> 1,712
<LOSS-PROVISION> 952
<INTEREST-EXPENSE> 80,038
<INCOME-PRETAX> 30,115
<INCOME-TAX> 12,133
<INCOME-CONTINUING> 17,982
<DISCONTINUED> 0
<EXTRAORDINARY> 441
<CHANGES> 0
<NET-INCOME> 17,541
<EPS-PRIMARY> 0.70
<EPS-DILUTED> 0.69
</TABLE>
