SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
_________
FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 27, 1997
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 06-114-8490
(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
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: None
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 by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K is not contained herein,
and will not be contained, to the best of registrant's knowledge,
in definitive proxy or information statements incorporated by
reference in Part III of this Form 10-K or any amendment to this
Form 10-K [ ].
None of the voting stock of Uniroyal Chemical Corporation or
Uniroyal Chemical Company, Inc. is held by non-affiliates.
Indicate the number of shares outstanding of each of the issuers'
classes of common stock, as of March 30, 1998
Uniroyal Chemical Corporation: 100 shares of Common Stock;
Uniroyal Chemical Company, Inc.: 100 Shares of No Class
Common Stock.
Documents incorporated by reference
None
Registrants meet the conditions set forth in General Instruction
(I)(1)(a) and (b) of Form 10-K and are therefore filing this Form
with the reduced disclosure format.
INDEX
PART 1
Item 1. Business
(a) Businesses of Uniroyal Chemical
Company, Inc. and Uniroyal Chemical
Corporation
(b) Merger with Crompton & Knowles
Corporation
Item 2. Properties
Item 3. Legal Proceedings
Item 4. Submission of Matters to a Vote of
Security Holders
PART II
Item 5. Market for Registrants' Common Equity
and Related Stockholder Matters
Item 6. Selected Financial Data
Item 7. Management's Discussion and Analysis
of Financial Condition and Results
of Operations
Item 8. Financial Statements and Supplementary
Data
Item 9. Changes in and Disagreements with
Accountants on Accounting and Financial
Disclosure
PART III
Item 10. Directors and Executive Officers of
the Registrants
Item 11. Executive Compensation
Item 12. Security Ownership of Certain Beneficial
Owners and Management
Item 13. Certain Relationships and Related
Transactions
PART IV
Item 14. Exhibits, Financial Statement Schedules,
and Reports on Form 8-K
The Registrants are not required by Section 13 or 15(d) of
the Securities Exchange Act of 1934 to file this Report, which is
being filed to comply with certain provisions of the indentures
applicable to three series of outstanding public debt of Uniroyal
Chemical Corporation and one series of such debt of Uniroyal
Chemical Company, Inc.
* * * * * * * * * * * * *
PART I
ITEM 1. BUSINESS
Businesses of Uniroyal Chemical Company, Inc. and Uniroyal
Chemical Corporation
Uniroyal Chemical Company, Inc. ("Uniroyal Chemical") is a
major multinational manufacturer of a wide variety of specialty
chemical products, including specialty elastomers, rubber
chemicals, crop protection chemicals and additives for the
plastics and lubricants industries. Uniroyal Chemical produces
high value added products which are currently marketed in
approximately 120 countries. Uniroyal Chemical's products serve
a wide variety of end use markets including tires, agriculture,
automobiles, plastics, lubricants, petrochemicals, hoses,
construction, recreation, mining and appliances. Uniroyal
Chemical's business has its origins in the chemical operations of
the U.S. Rubber Company, which date back over 90 years.
Uniroyal Chemical Corporation ("UCC") has no operations and
its sole material asset is the capital stock of Uniroyal
Chemical.
Merger with Crompton & Knowles Corporation
There is incorporated by reference herein Item 1 of the
Registrants' Current Report on Form 8-K dated August 21, 1996,
for information pertaining to an Agreement and Plan of Merger
dated as of April 30, 1996, as amended, by and among UCC,
Crompton & Knowles Corporation ("Crompton & Knowles") and Tiger
Merger Corp. ("Subcorp"), a wholly owned subsidiary of Crompton &
Knowles, whereby Subcorp was merged with and into UCC (the
"Merger") effective on August 21, 1996. As a result of the
Merger, UCC became a wholly owned subsidiary of Crompton &
Knowles. Uniroyal Chemical remained a wholly owned subsidiary of
UCC.
ITEM 2. PROPERTIES
Uniroyal Chemical and its subsidiaries (including Gustafson,
Inc.) ("Gustafson") operate 16 production facilities worldwide.
While most manufacturing plants produce a variety of products,
three are dedicated to individual products. The four most
significant production facilities are in Elmira, Ontario, Canada;
Geismar, Louisiana; Naugatuck, Connecticut and Latina, Italy.
Gustafson operates four facilities: an equipment manufacturing
plant in Eden Prairie, Minnesota and chemical formulation
facilities in Marsing, Idaho; Des Moines, Iowa and Pekin,
Illinois.
Uniroyal Chemical holds a 50% voting interest in Rubicon
Inc. which operates a chemical production facility located in
Geismar, Louisiana that in part is dedicated to producing certain
intermediates for Uniroyal Chemical.
Uniroyal Chemical conducts research and development in
facilities in Bethany, Middlebury and Naugatuck, Connecticut;
Guelph, Ontario, Canada and Evesham, England. In addition,
Gustafson conducts research and development at a facility in
Frisco, Texas. Uniroyal Chemical and Gustafson each also operate
field stations for crop protection research and development
activities.
Uniroyal Chemical and UCC maintain headquarters facilities
at Middlebury, Connecticut.
ITEM 3. LEGAL PROCEEDINGS
Uniroyal Chemical and its subsidiaries 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 injuries.
Environmental Liabilities. Each quarter, Uniroyal Chemical
evaluates and reviews 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 Uniroyal
Chemical and the anticipated time frame over which payments
toward the remediation plan will occur. As a result of current
information and analysis, Uniroyal Chemical recorded a special
provision of $13.5 million during the third quarter of 1997
for environmental remediation activities. The total amount accrued
for such environmental liabilities at December 27, 1997, was
$100.6 million. Uniroyal Chemical estimates the potential
liabilities to range from $74 million to $133 million at December
27, 1997. It is reasonably possible that Uniroyal Chemical's
estimates for environmental remediation liabilities may change in
the future 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.
Uniroyal Chemical generally assesses the possibility for
toxic tort claims. Such liabilities are dependent upon complex
factors. Five facilities have been identified where the
possibility for toxic tort claims may be significant, i.e. as
situations where chemicals are believed to have migrated
off-site, thus posing risk of exposure. There are no lawsuits
pending involving any of these five facilities. Virtually all,
if not all, of the off-site disposal sites to which Uniroyal
Chemical may have sent toxic materials pose a possibility for
toxic tort claims. There are currently pending five toxic tort
claims against Uniroyal Chemical and others arising from these
off-site disposal sites.
Uniroyal Chemical has been identified by federal, state or
local governmental agencies, and by other potentially responsible
parties (a "PRP") under the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended, or comparable
state statutes, as a PRP with respect to costs associated with
waste disposal sites at various locations in the United States.
Because these regulations have been construed to authorize joint
and several liability, the Environmental Protection Agency could
seek to recover all costs involving a waste disposal site from
any one of the PRPs for such site, including Uniroyal Chemical,
despite the involvement of other PRPs. In many cases, Uniroyal
Chemical is one of several hundred PRPs so identified. In a few
instances, Uniroyal Chemical is one of only a handful of PRPs.
In certain instances, a number of other financially responsible
PRPs are also involved, and Uniroyal Chemical expects that any
ultimate liability resulting from such matters will be
apportioned between Uniroyal Chemical and such other parties. In
addition, Uniroyal Chemical is involved with environmental
remediation and compliance activities at some of its current and
former sites in the United States and abroad. The more
significant of these matters are described below.
. Beacon Heights and Laurel Park - Uniroyal Chemical is a
member of the Beacon Heights Coalition, a group of entities
engaged in remedial work at the Beacon Heights site in the State
of Connecticut pursuant to a Consent Decree entered in 1987. The
actions required by this Consent Decree have been essentially
completed. There is a continuing requirement for operation and
maintenance at the site.
Over many years, Uniroyal Chemical has entered into and
performed activities pursuant to a series of Administrative
Orders with respect to the Laurel Park site located in the State
of Connecticut. The EPA, the State of Connecticut, and the
Laurel Park Coalition (consisting of Uniroyal Chemical and a
number of other parties) have entered into a Consent Decree
governing the design and implementation of the selected remedy.
Remedial construction began at the Laurel Park site in July 1996,
and is anticipated to be completed in 1998.
Consolidated litigation brought by the Beacon Heights and
Laurel Park Coalitions seeking contribution to the costs from the
owner/operators of the site and later from other identified
generator parties has resulted in substantial recoveries from a
number of parties. In November 1996, the United States Court of
Appeals for the Second Circuit reversed judgments granted to
other defendants in that litigation and the litigation has been
remanded and the remaining claims are currently the subject of
further proceedings before a Special Master appointed by the
Court.
. Cleve Reber - Uniroyal Chemical and three other
corporations named in an Administrative Order issued by the EPA
have complied with such Order which governs remediation of the
site located in the State of Louisiana. The cooperating parties
are negotiating a consent agreement with the EPA for operation
and maintenance of the site and to resolve all of the EPA's past
cost claims.
. Petro Processors - This matter relating to a site in the
State of Louisiana was initiated in 1981. Litigation was
instituted by the EPA against a number of parties, including
Uniroyal, Inc. (which Uniroyal Chemical has agreed to indemnify),
seeking cleanup of the Petro Processors site. A Consent Decree
was entered to settle the case in February 1984, which required
the defendants to clean up the site to the satisfaction of the
EPA under supervision of the court. A settlement among the ten
defendants, dated December 16, 1983, defines the percentage to be
borne by each defendant of the currently estimated future cost of
$100 million to complete remediation of the site. Although the
allocations are subject to a confidentiality order, Uniroyal
Chemical believes that the amount it will pay will not be
material to its financial condition or results of operations.
. Vertac - Uniroyal Chemical and its Canadian subsidiary,
Uniroyal Chemical Co./Cie. (formerly known as Uniroyal Chemical
Ltd./Ltee), were joined with others as defendants in consolidated
civil actions brought in the United States District Court,
Eastern District of Arkansas, Western Division by the United
States of America, the State of Arkansas and Hercules
Incorporated ("Hercules") relating to a Vertac Chemical
Corporation site in Jacksonville, Arkansas allegedly contaminated
by dioxins. Uniroyal Chemical has been dismissed from the
litigation. On May 21, 1997, the Court entered an order finding
that Uniroyal Chemical Co./Cie. is jointly and severally liable
to the United States, and finding that Hercules and Uniroyal
Chemical Co./Cie. are liable to each other in contribution. The
allocation phase of the proceedings has begun with discovery
ongoing and trial scheduled to begin in 1998. No ultimate
determination of the amount of Uniroyal Chemical Co./Cie.'s
liability, if any, is expected prior to the middle of 1999. In
addition, the natural resource damage case filed by several
individuals in state court which named Uniroyal Chemical Co./Cie.
has been withdrawn without prejudice. These individuals have
refiled their case in Federal court against some of the parties
but have not as yet named Uniroyal Chemical Co./Cie. as a
defendant. Uniroyal Chemical Co./Cie. received a notice from the
United States Department of the Interior of its intent to perform
a Natural Resource Damage Assessment at the site. In addition,
the State of Arkansas has commenced an action for natural
resource damages which is currently pending in the State court,
but Uniroyal Chemical Co./Cie. has not been named a party in that
action.
Other Environmental Matters
. Sundor Canada Inc. - On July 13, 1990, Sundor Canada Inc.
("Sundor") instituted suit against Uniroyal Chemical Co./Cie. and
others including the Ontario Ministry of the Environment and the
Regional Municipality of Waterloo in the Ontario Court of Justice
(General Division) at Toronto claiming that Uniroyal Chemical
Co./Cie. and others are responsible for losses resulting from
Sundor's recall of packaged juices and fruit due to Sundor's use
of the public water derived from Elmira groundwater which was
allegedly contaminated by Uniroyal Chemical Co./Cie. A tentative
settlement has been reached with Sundor by which the defendants,
including Uniroyal Chemical Co./Cie. and its insurer, will pay
CD$3,500,000 in the aggregate to Sundor.
. Painesville - Reference is made to Item 1(i) of Part II of
the Registrants' Quarterly Report on Form 10-Q for the quarterly
period ended June 28, 1997, for information relating to (a)
Uniroyal Chemical's Painesville, Lake County, Ohio facility which
manufactures nitrile rubber and the discharge of Painesville's
wastewater to the Lake County sanitary sewer system for treatment
at Lake County's Greater Mentor Wastewater Treatment Plant
("GMWTP"); and (b) a proposed Local Limit aimed at regulating the
amount of substances which absorb at 230 nanometers that are
discharged in wastewater to the GMWTP. From July 1996 through
December 31, 1997, Lake County has assessed against the
Painesville facility a total of $487,000 in administrative fines
and has ordered Uniroyal Chemical to reimburse it for $106,295 in
fines Lake County has paid to the State of Ohio for the GMWTP's
violations of its NPDES permit. The Painesville facility
appealed Lake County's Reimbursement Order and its initial
assessment of administrative fines to the Lake County Court of
Common Pleas. Since the parties commenced settlement
negotiations in December 1996, all legal proceedings concerning
the above-described matters have been stayed voluntarily by
agreement of the parties. Uniroyal Chemical anticipates that any
fines and/or reimbursements paid to Lake County in connection
with the resolution of this matter will not substantially exceed
$100,000 in the aggregate.
Uniroyal Chemical intends to assert all meritorious legal
defenses and all other equitable factors which are available to
it with respect to the above matters. Uniroyal Chemical believes
that the resolution of these environmental matters will not have
a material adverse effect on its consolidated financial position.
While Uniroyal Chemical believes it is unlikely, the resolution
of these environmental matters could have a material adverse
effect on its consolidated results of operations in any given
year if a significant number of these matters are resolved
unfavorably.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No response to this item is required as Registrants meet the
conditions set forth in General Instruction (I)(1)(a) and (b) of
Form 10-K ("No Response Required").
PART II
ITEM 5. MARKET FOR REGISTRANTS' COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
There is no established market for the Common Stock of
Uniroyal Chemical, all of which is owned by UCC, or for the
Common Stock of UCC, all of which is owned by Crompton & Knowles.
See "BUSINESS - Merger with Crompton & Knowles Corporation" for
information about the Merger.
The operations of UCC are conducted through Uniroyal
Chemical and its subsidiaries and, therefore, UCC relies on
Uniroyal Chemical's cash flow to satisfy its debt obligations and
other cash needs. The debt agreements of Uniroyal Chemical
restrict its ability to provide funds to UCC. Likewise, the
provisions of the debt agreements of UCC restrict its ability to
pay dividends, and UCC has never paid cash dividends on shares of
its Common Stock. See Note entitled "Long-term Debt" in
accompanying notes to Consolidated Financial Statements of
Uniroyal Chemical.
ITEM 6. SELECTED FINANCIAL DATA
No Response Required.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The response to this item has been limited to an analysis
of the results of operations for 1997 as compared with fiscal
1996 as Registrants meet the conditions set forth in General
Instruction (I)(1)(a) and (b) of Form 10-K.
Operating Results
Noncomparability
In 1996, Uniroyal Chemical and UCC (collectively, the
"Company") changed their fiscal year ends from September 28 to
December 27. Accordingly, the results of operations discussed
herein compare the year ended December 27, 1997, to the fiscal
year ended September 28, 1996. Such results are not necessarily
indicative of the Company's future results of operations. The
following discussion should be read in conjunction with the
Consolidated Financial Statements and the notes thereto contained
elsewhere in this Report.
Year ended December 27, 1997 compared to fiscal year ended
September 28, 1996
Net Sales
Net sales for 1997 increased by 4% to $1,183.3 million from
$1,132.7 for fiscal 1996. The increase was due to a 6% increase
in unit volume offset by a 1% decrease in both price and foreign
currency translation.
Chemicals and Polymers sales of $496.4 million were up 1% in
1997 compared to fiscal 1996. Unit volume increased 6%, but was
offset by lower pricing of 4% and lower foreign currency
translation of 1%. Sales of rubber chemicals were lower than
1996 primarily due to lower pricing. Sales increased in both the
nitrile rubber and EPDM businesses primarily due to increased
unit volume.
Crop Protection sales of $370.1 million were up 5% in 1997
compared to fiscal 1996 primarily due to higher unit volume in
the herbicides, insecticide, and fungicide businesses.
Specialties sales of $315.2 million increased 9% in 1997
compared to fiscal 1996 attributable primarily to higher unit
volume for urethane prepolymers and specialty additives.
Colors sales of $1.6 million were all incremental to 1997.
Operating Profit
Gross margin as a percentage of net sales of 38.6% increased
from 38.1% in the 1996 fiscal year. Operating profit, before
special charges of $23.5 million in 1997 and $82.6 million in
1996, increased 18% to $185.9 million from $158.0 million in
fiscal 1996. The improvement in operating profit resulted
primarily from an increase in unit volume, improved gross margin
and lower depreciation and amortization.
Other
Selling, general and administrative expenses of $165.9
million decreased modestly as a percentage of sales.
Depreciation and amortization of $63.8 million decreased 6% as a
result of certain assets becoming fully depreciated and
amortized. Research and development costs of $40.7 million
increased 4% from fiscal 1996, but remained constant as a
percentage of sales.
Special environmental provisions of $13.5 million in 1997
and $30.0 million in 1996 reflect the Company's current
evaluation of its obligation for environmental remediation
activities. Severance and other costs of $10.0 million represent
planned workforce reductions and other costs relating primarily
to certain product liability claims and costs associated with the
implementation of SAP software.
Interest expense for 1997 of $96.0 million decreased 10%
from fiscal 1996 primarily due to lower levels of indebtedness.
Other income of $26.5 million increased $26.2 million versus
fiscal 1996 primarily due to a gain of $28.0 million relating to
a settlement with the U.S. Department of the Army (refer to
footnote on postretirement health care liability). The effective
tax rate of 38.0% compares to 40.1% in the prior year after
adjusting for the impact of special charges.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
There is incorporated by reference herein the information
set forth on the Index to Financial Statements and Financial
Statement Schedules on Page F-1.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
There is incorporated by reference herein Items 4 and 7 of
the Registrants' Current Report on Form 8-K dated September 27,
1996, for information pertaining to the replacement of the
accounting firm of Deloitte & Touche LLP with KPMG Peat Marwick
LLP to serve as independent certified public accountants for UCC
and its subsidiaries. KPMG Peat Marwick LLP is the independent
certified public accountant for Crompton & Knowles and its
subsidiaries.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANTS
No Response Required.
ITEM 11. EXECUTIVE COMPENSATION
No Response Required.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
No Response Required.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
No Response Required.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON
FORM 8-K
(a) 1. Financial Statements
The financial statements, and the notes thereto, listed on
Page F-1 are filed herewith as part of this Report.
2. Financial Statement Schedules
The financial statement schedules listed on page F-1 are
filed herewith as part of this Report.
3. Exhibits
The exhibits listed in the accompanying Exhibit Index are
filed herewith as part of this Report.
(b) Reports on Form 8-K filed in fourth quarter 1997
No Current Report on Form 8-K was filed on behalf of UCC or
Uniroyal Chemical during the fiscal fourth quarter of 1997.
(c) Exhibits
See Exhibit Index.
(d) Financial Statement Schedules
See Index to Financial Statements and Financial Statement
Schedules on page F-1.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the Registrant has duly caused
this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
UNIROYAL CHEMICAL CORPORATION
Date: April 13, 1998 By: /s/ Vincent A. Calarco
Vincent A. Calarco
President and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons
on behalf of the Registrant and in the capacities indicated this
13th day of April, 1998.
Signature Title
/s/ Vincent A. Calarco Chairman of the Board,
Vincent A. Calarco President, Chief Executive
Officer and Director
/s/ Charles J. Marsden Vice President and Chief
Charles J. Marsden Financial Officer and
Director
(principal financial officer)
/s/ John T. Ferguson II Vice President, General
John T. Ferguson II Counsel, Secretary and
Director
/s/ Michael F. Vagnini Controller (principal
Michael F. Vagnini accounting officer)
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the Registrant has duly caused
this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
UNIROYAL CHEMICAL COMPANY, INC.
Date: April 13, 1998 By: /s/ Vincent A. Calarco
Vincent A. Calarco
President and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons
on behalf of the Registrant and in the capacities indicated this
13th day of April, 1998.
Signature Title
/s/ Vincent A. Calarco President, Chief Executive
Vincent A. Calarco Officer and Director
/s/ Charles J. Marsden Vice President and Chief
Charles J. Marsden Financial Officer and
Director
(principal financial officer)
/s/ John T. Ferguson II Vice President, General
John T. Ferguson II Counsel and Director
/s/ Michael F. Vagnini Controller (principal
Michael F. Vagnini accounting officer)
EXHIBIT INDEX
The exhibit numbers set forth below correspond to the
numbers assigned to such exhibits in the Exhibit Table to Item
601 of Regulation S-K.
Exhibit
Number Description
2 Agreement and Plan of Merger dated April 30, 1996, by and
among Crompton & Knowles Corporation, Tiger Merger Corp.
and UCC (incorporated by reference to Exhibit 2 to the
Quarterly Report on Form 10-Q for the period ended March
31, 1996).
3.1 Certificate of Incorporation of UCC, effective as of August
21, 1996 (incorporated by reference to Exhibit 3.1 to the
Registrants' Annual Report on Form 10-K for the fiscal year
ended September 28, 1996 ["1996 Form 10-K"]).
3.2 By-laws of UCC, effective as of August 21, 1996
(incorporated by reference to Exhibit 3.2 to the 1996 Form
10-K).
3.3 Certificate of Incorporation of Uniroyal Chemical
(incorporated by reference to Exhibit 3.3 to the
Registration Statement on Form S-1 of Uniroyal Chemical,
Registration No. 33-66740 ["Form S-1, Registration No.
33-66740"]).
3.4 By-Laws of Uniroyal Chemical (incorporated by reference to
Exhibit 3.4 to Form S-1, Registration No. 33-66740).
4.1 Form of Indenture, dated as of February 8, 1993, among UCC
and State Street Bank and Trust Company, as Trustee,
relating to the 10 1/2% Notes, including form of securities
(incorporated by reference to Exhibit 4.1 to the
Registration Statement on Form S-1 of UCC, Registration No.
33-45296 and 33-45295 ["Form S-1, Registration No.
33-45296/45295"]).
4.2 Form of Indenture, dated as of February 8, 1993, among UCC
and United States Trust Company of New York, as Trustee,
relating to the 11% Notes, including form of securities
(incorporated by reference to Exhibit 4.1(a) to Form S-1,
Registration No. 33-45296/45295).
4.3 Form of Indenture, dated as of February 8, 1993, among UCC
and The Shawmut Bank Connecticut, N.A. as Trustee, relating
to the 12% Notes, including form of securities
(incorporated by reference to Exhibit 4.1(b) to Form S-1,
Registration No. 33-45296/45295).
4.4 Form of Indenture, dated as of September 1, 1993, among
Uniroyal Chemical and State Street Bank and Trust Company,
as Trustee, relating to $270 million of 9% Notes, including
the form of securities (incorporated by reference to
Exhibit 4.2 to Form S-1, Registration No. 33-66740).
4.5 Form of $530 Million Dollar Amended and Restated Credit
Agreement dated as of December 19, 1996, by and among
Uniroyal Chemical, et al., as Borrowers and various banks
as Lenders, and Citicorp USA, Inc., as Agent and The Chase
Manhattan Bank as Managing Agent (incorporated by reference
to Exhibit 10 to the Registrants' Transition Report on Form
10-QT for the transition period from September 29, 1996, to
December 28, 1996).
4.6 Form of $600 Million Dollar Second Amended and Restated
Credit Agreement dated as of July 25, 1997, by and among
Uniroyal Chemical, et al., as Borrowers and various banks
as Lenders, and Citicorp USA, Inc., as Agent and The Chase
Manhattan Bank as Managing Agent (incorporated by reference
to Exhibit 4 to the Registrants' Quarterly Report on Form
10-Q for the quarterly period ended June 28, 1997).
10.1 Form of Assignment and Assumption of Raw Materials
Agreement, dated as of October 30, 1989, between UCC and
Avery (incorporated by reference to Exhibit 10.1 to Form
S-1, Registration No. 33-32770).
10.2 Form of Employment Agreement, dated as of October 30, 1989,
among Uniroyal Chemical and the Executive Officers of
Uniroyal Chemical (incorporated by reference to Exhibit
10.3 to Form S-1, Registration No. 33-32770).
10.3 Form of Supplemental Executive Retirement Agreement, dated
as of October 30, 1989, among Uniroyal Chemical and the
Executive Officers of Uniroyal Chemical (incorporated by
reference to Exhibit 10.4 to Form S-1, Registration No.
33-32770).
10.4 Amended and Restated Tax Indemnification Agreement, dated
as of October 26, 1989, among Avery, Inc., Uniroyal
Chemical Holding Company, UCAC, UCC and certain
subsidiaries of UCAC ("Tax Indemnification Agreement")
(incorporated by reference to Exhibit 10.13 to Form S-1,
Registration No. 33-32770).
10.5 Form of Amendment, dated as of December 14, 1990, to the
Tax Indemnification Agreement (incorporated by reference to
Exhibit 10.26 to Post Effective Amendment No. 3 to the
Registration Statement on Form S-1, of UCC and UCAC
Registration No. 33-32770, filed on January 15, 1991 ["1991
Form S-1, Registration No. 33-32770"]).
10.6 Uniroyal Chemical Company Long-Term Management Incentive
Plan (incorporated by reference to Exhibit 10.5 to the
Registration Statement on Form S-1 of UCC, Registration No.
33-45295, filed on January 27, 1992).
10.7 UCC Purchase Right Plan, as amended and restated as of
March 16, 1995 (incorporated by reference to Exhibit 10.1
to the Quarterly Report on Form 10-Q for the period ended
April 2, 1995 ["April 1995 Form 10-Q"]).
10.8 Form of Amendment, dated as of December 8, 1992, to the Tax
Indemnification Agreement (incorporated by reference to
Exhibit 10.30 to 1992 Form S-1, Registration Nos.
33-45296/33-45295).
10.9 UCC 1993 Stock Option Plan (incorporated by reference to
Exhibit 28.1 to UCC's Registration Statement on Form S-8,
Registration No. 33-62030, filed on May 4, 1993).
10.10 Form of Amendment No. 2 to the UCC 1993 Stock Option Plan
(incorporated by reference to Exhibit 10.2 to the April
1995 Form 10-Q).
10.11 Form of Executive Stock Option Agreement, dated as of
November 15, 1993 (incorporated by reference to Exhibit
10.22 to the 1994 Form 10-K).
10.12 Form of Management Investor and Other Key Personnel Option
Agreement, dated as of December 15, 1993 (incorporated by
reference to Exhibit 10.23 to the 1994 Form 10-K).
10.13 Form of Non-Employee Director Stock Option Agreement, dated
as of September 13, 1994 (incorporated by reference to
Exhibit 10.24 to the 1994 Form 10-K).
10.14 Form of Non-Employee Director Stock Option Agreement, dated
as of March 5, 1996 (incorporated by reference to Exhibit
10.27 to the 1996 Form 10-K).
10.15 Form of Employment Agreement, dated as of August 21, 1996,
between Uniroyal Chemical and four executive officers of
Uniroyal Chemical (incorporated by reference to Exhibit
10.28 to the 1996 Form 10-K).
10.16 Form of Supplemental Retirement Agreement, dated as of
August 21, 1996, between Uniroyal Chemical and two
executive officers of Uniroyal Chemical (incorporated by
reference to Exhibit 10.29 the 1996 Form 10-K).
10.17 Form of Supplemental Retirement Agreement, dated as of
August 21, 1996, between Uniroyal Chemical and two
executive officers of Uniroyal Chemical (incorporated by
reference to Exhibit 10.30 to the 1996 Form 10-K).
10.18 Form of Second Amended and Restated Lease Agreement between
Middlebury Partnership, as Lessor, and Uniroyal Chemical,
as Lessee, dated as of August 28, 1997 (incorporated by
reference to Exhibit 10 to the Registrants' Quarterly
Report on Form 10-Q for the quarterly period ended
September 27, 1997).
12 Computation of earnings to fixed charges ratio for the
fiscal years 1993, 1994, 1995, 1996 and 1997 and three
months ended December 28, 1996 (filed herewith).
21 Subsidiaries of the Registrants (No Response Required).
27 Financial data schedules for Uniroyal Chemical and UCC
(filed herewith).
INDEX TO FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES
UNIROYAL CHEMICAL CORPORATION
UNIROYAL CHEMICAL COMPANY, INC.
FINANCIAL STATEMENTS
Independent Auditors' Report
KPMG Peat Marwick LLP
Deloitte & Touche LLP
Consolidated Statements of Operations
Consolidated Balance Sheets
Uniroyal Chemical Corporation
Uniroyal Chemical Company, Inc.
Consolidated Statements of Stockholders' Equity
(Deficit)
Uniroyal Chemical Corporation
Uniroyal Chemical Company, Inc.
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements
FINANCIAL STATEMENT SCHEDULES
Schedule I - Condensed Financial Information of
Registrant
Schedule II - Valuation and Qualifying Accounts
Certain schedules are omitted because they are not applicable
or the required information is provided in the Financial
Statements or related notes thereto.
F-1
INDEPENDENT AUDITORS' REPORT
Board of Directors
Uniroyal Chemical Corporation
Uniroyal Chemical Company, Inc.
We have audited the following consolidated financial
statements:
Uniroyal Chemical Corporation
Consolidated Balance Sheets as of December 27, 1997 and
December 28, 1996
Consolidated Statements of Operations, Stockholders' Equity
(Deficit) and Cash Flows for the fiscal years ended
December 27, 1997 and September 28, 1996, and the three-
month period ended December 28, 1996
Uniroyal Chemical Company, Inc. (a wholly-owned subsidiary)
and subsidiaries
Consolidated Balance Sheets as of December 27, 1997 and
December 28, 1996
Consolidated Statements of Operations, Stockholders' Equity
(Deficit) and Cash Flows for the fiscal years ended
December 27, 1997 and September 28, 1996, and the three-
month period ended December 28, 1996
In connection with our audits of the consolidated financial
statements referred to above, we have also audited the
financial statement schedules for the periods then ended as
listed in the accompanying index on page F-1. These
consolidated financial statements and financial statement
schedules are the responsibility of the Companies'
management. Our responsibility is to express an opinion on
these consolidated financial statements and financial
statement schedules based on our audits.
We conducted our audits in accordance with generally
accepted auditing standards. Those standards require that
we plan and perform the audit to obtain reasonable assurance
about whether the consolidated financial statements are free
of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures
in the financial statements. An audit also includes
assessing the accounting principles used and significant
estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements
referred to above present fairly, in all material respects,
the financial position of Uniroyal Chemical Corporation and
Uniroyal Chemical Company, Inc. and its subsidiaries as of
December 27, 1997 and December 28, 1996, and the results of
their operations and their cash flows for the fiscal years
ended December 27, 1997 and September 28, 1996 and the
three-month period ended December 28, 1996, in conformity
with generally accepted accounting principles. Also, in our
opinion, the related financial statement schedules, when
considered in relation to the basic consolidated financial
statements taken as a whole, presents fairly, in all
material respects, the information set forth therein.
/s/KPMG Peat Marwick LLP
KPMG Peat Marwick LLP
Stamford, Connecticut
January 29, 1998, except as to Note "Long-term Debt", which is
as of April 9, 1998
INDEPENDENT AUDITORS' REPORT
Board of Directors
Uniroyal Chemical Corporation
Uniroyal Chemical Company, Inc.
We have audited the following consolidated financial statements:
Uniroyal Chemical Corporation
Consolidated Statements of Operations, Stockholders'
Equity (Deficit) and Cash Flows for the year ended
October 1, 1995
Uniroyal Chemical Company, Inc. (a wholly-owned subsidiary)
and subsidiaries:
Consolidated Statements of Operations, Stockholders'
Equity (Deficit) and Cash Flows for the year ended
October 1, 1995
Our audits also included the financial statement schedules for
the year ended October 1, 1995 listed in the index on page F-1.
These consolidated financial statements and financial statement
schedules are the responsibility of the aforementioned Companies'
management. Our responsibility is to express an opinion on these
consolidated financial statements and financial statement
schedules based on our audit.
We conducted our audit in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether
the consolidated financial statements are free of material
misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our
opinion.
In our opinion, such consolidated financial statements present
fairly, in all material respects, the results of the Companies'
operations and their cash flows for the year ended October 1,
1995 in conformity with generally accepted accounting principles.
Also, in our opinion, such financial statement schedules, when
considered in relation to the basic consolidated financial
statements taken as a whole, present fairly, in all material
respects, the information set forth therein.
/s/Deloitte & Touche LLP
Deloitte & Touche LLP
Stamford, Connecticut
November 17, 1995
UNIROYAL CHEMICAL CORPORATION
UNIROYAL CHEMICAL COMPANY, INC.
Consolidated Statements of Operations
(In thousands of dollars)
Three
months
Year ended ended Year ended Year ended
Dec.27, Dec.28, Sept.28, Oct.1,
1997 1996 1996 1995
Net Sales $1,183,289 $242,338 $1,132,746 $1,079,321
Cost of products sold 727,102 154,031 701,104 665,980
Selling, general
and administrative 165,852 40,214 166,716 165,803
Depreciation and
amortization 63,780 15,485 67,946 65,083
Research and development 40,699 9,160 39,014 36,622
Severance and other costs 10,000 - - -
Special environmental charge 13,500 - 30,000 -
Merger and related costs - - 52,579 -
Operating profit 162,356 23,448 75,387 145,833
Interest expense 96,011 24,814 106,456 114,034
Other income (26,541) (41) (308) (2,570)
Earnings (loss) before
income taxes
and extraordinary charge 92,886 (1,325) (30,761) 34,369
Provision (benefit) for
income taxes 35,323 (531) 951 (65,060)
Earnings (loss) before
extraordinary charge 57,563 (794) (31,712) 99,429
Extraordinary loss on early
extinguishment of debt (4,958) - (441) (8,279)
Net earnings (loss) $52,605 ($794) ($32,153) $91,150
See accompanying notes to consolidated financial statements.
UNIROYAL CHEMICAL CORPORATION
Consolidated Balance Sheets
(In thousands of dollars)
December 27, December 28,
ASSETS 1997 1996
Current Assets
Cash $4,800 $21,015
Accounts receivable 210,054 137,238
Inventories 221,249 202,762
Other current assets 65,388 60,848
Total current assets 501,491 421,863
Non-current Assets
Property, plant and equipment 374,421 367,962
Costs in excess of acquired net assets 127,784 128,155
Other assets 169,864 215,327
$1,173,560 $1,133,307
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current Liabilities
Current installments of long-term debt $- $731
Notes payable 1,770 8,595
Accounts payable 105,901 97,909
Accrued expenses 99,890 87,313
Income taxes payable 27,262 24,969
Total current liabilities 234,823 219,517
Non-Current Liabilities
Long-term debt 864,648 925,982
Postretirement health care liability 141,660 174,025
Other liabilities 166,571 150,615
Stockholders' Equity (Deficit):
Additional paid-in capital 173,930 172,822
Accumulated deficit (369,762) (480,407)
Cumulative translation adjustment (35,550) (25,534)
Pension liability adjustment (2,760) (3,713)
Total stockholders' deficit (234,142) (336,832)
$1,173,560 $1,133,307
See accompanying notes to consolidated financial statements.
UNIROYAL CHEMICAL COMPANY, INC.
Consolidated Balance Sheets
For the year ended 1997 and 1996
(In thousands of dollars)
December 27, December 28,
ASSETS 1997 1996
Current Assets
Cash $4,800 $21,015
Accounts receivable 210,054 137,238
Inventories 221,249 202,762
Other current assets 65,388 60,848
Total current assets 501,491 421,863
Non-current Assets
Property, plant and equipment 374,421 367,962
Costs in excess of acquired net assets 127,784 128,155
Other assets 169,864 215,327
$1,173,560 $1,133,307
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current Liabilities
Current installments of long-term debt $- $731
Notes payable 1,770 8,595
Accounts payable 105,901 97,909
Accrued expenses 99,890 87,313
Income taxes payable 27,262 24,969
Total current liabilities 234,823 219,517
Non-current Liabilities
Long-term debt 864,648 925,982
Postretirement health care liability 141,660 174,025
Other liabilities 166,571 150,615
Stockholders' Equity (Deficit)
Common stock 1 1
Additional paid-in capital 175,612 174,504
Accumulated deficit (371,445) (482,090)
Cumulative translation adjustment (35,550) (25,534)
Pension liability adjustment (2,760) (3,713)
Total stockholders' deficit (234,142) (336,832)
$1,173,560 $1,133,307
See accompanying notes to consolidated financial statements.
UNIROYAL CHEMICAL CORPORATION
Consolidated Statements of Stockholders' Equity (Deficit)
(In thousands of dollars)
Three
months
Year ended ended Year ended Year ended
Dec.27, Dec.28, Sept.28, Oct.1,
1997 1996 1996 1995
PREFERRED STOCK
Balance at beginning of year $ - $ - $4,172 $4,172
Reclassification due to Merger - - (4,172) -
Balance at end of year - - - 4,172
COMMON STOCK
Balance at beginning of year - - 253 91
Stock options and
other issuances - - 1 3
IPO proceeds, net - - - 134
Reclassification of
redeemable capital - - - 25
Reclassification due to Merger - - (254) -
Balance at end of year - - - 253
ADDITIONAL PAID IN CAPITAL
Balance at beginning of year 172,822 172,822 176,799 -
Stock options and
other issuances - - 557 294
IPO proceeds, net - - - 146,492
Reclassification of
redeemable capital - - - 30,013
Reclassification due to Merger - - (4,534) -
Related party transfer 1,108 - - -
Balance at end of year 173,930 172,822 172,822 176,799
ACCUMULATED DEFICIT
Balance at beginning of year (480,407) (479,613)(447,460) (538,610)
Net earnings (loss) 52,605 (794) (32,153) 91,150
Related party transfer 58,040 - - -
Balance at end of year (369,762) (480,407)(479,613) (447,460)
ACCUMULATED TRANSLATION ADJUSTMENT
Balance at beginning of year (25,534) (24,506) (18,488) (9,964)
Equity adjustment for translation
of foreign currencies (6,511) (1,028) (6,018) (8,524)
Related party transfer (3,505) - - -
Balance at end of year (35,550) (25,534) (24,506) (18,488)
PENSION LIABILITY ADJUSTMENT
Balance at beginning of year (3,713) (3,713) (3,617) (1,903)
Equity adjustment for
pension liability 953 - (96) (1,714)
Balance at end of year (2,760) (3,713) (3,713) (3,617)
TREASURY STOCK
Balance at beginning of year - - (10,888) (5,945)
Stock options and
other issuances - - 1,928 99
Reclassification of
redeemable capital - - - (5,042)
Reclassification due to Merger - - 8,960 -
Balance at end of year - - - (10,888)
Total stockholders' deficit ($234,142) ($336,832)($335,010) ($299,229)
See accompanying notes to consolidated financial statements.
UNIROYAL CHEMICAL COMPANY, INC.
Consolidated Statements of Stockholders' Equity (Deficit)
(In thousands of dollars)
Three
months
Year ended ended Year ended Year ended
Dec.27, Dec.28, Sept.28, Oct.1,
1997 1996 1996 1995
COMMON STOCK
Balance at beginning
and end of year $1 $1 $1 $1
ADDITIONAL PAID IN CAPITAL
Balance at beginning of year 174,504 174,504 172,018 -
Capital contribution - - 2,486 147,022
Adjustment of amount due to
to Uniroyal Chemical
Corporation - - - 24,996
Related party transfer 1,108 - - -
Balance at end of year 175,612 174,504 174,504 172,018
ACCUMULATED DEFICIT
Balance at beginning of year (482,090) (481,296) (449,143) (540,293)
Net earnings (loss) 52,605 (794) (32,153) 91,150
Related party transfer 58,040 - - -
Balance at end of year (371,445) (482,090) (481,296) (449,143)
ACCUMULATED TRANSLATION ADJUSTMENT
Balance at beginning of year (25,534) (24,506) (18,488) (9,964)
Equity adjustment for translation
of foreign currencies (6,511) (1,028) (6,018) (8,524)
Related party transfer (3,505) - - -
Balance at end of year (35,550) (25,534) (24,506) (18,488)
PENSION LIABILITY ADJUSTMENT
Balance at beginning of year (3,713) (3,713) (3,617) (1,903)
Equity adjustment for
pension liability 953 - (96) (1,714)
Balance at end of year (2,760) (3,713) (3,713) (3,617)
Total stockholders' deficit ($234,142) ($336,832) ($335,010) ($299,229)
See accompanying notes to consolidated financial statements.
UNIROYAL CHEMICAL CORPORATION
UNIROYAL CHEMICAL COMPANY, INC.
Consolidated Statements of Cash Flows
(In thousands of dollars)
Three
months Year
Year ended ended Year ended ended
Dec.27, Dec.28, Sept.28, Oct.1,
1997 1996 1996 1995
CASH FLOWS FROM OPERATING ACTIVITIES
Net earnings (loss) $52,605 ($794) ($32,153) $91,150
Adjustments to reconcile net earnings
(loss) to net cash provided
(used) by operations:
Depreciation and amortization 63,780 15,485 67,946 65,083
Noncash interest 14,355 3,567 16,267 18,781
Deferred income taxes 18,414 506 (18,021) (79,340)
Changes in assets and liabilities:
Accounts receivable (5,772) 19,413 (1,696) (26,565)
Inventories 621 (22,671) (3,627) (8,425)
Other current assets 12,833 (2,044) (2,277) 5,787
Other assets (2,961) 2,150 1,826 6,552
Accounts payable
and accrued expenses 6,771 (13,228) 11,609 21,440
Income taxes payable 6,233 (1,108) 2,881 (1,136)
Postretirement health care
liabilities (32,189) (530) (2,095) (150)
Other 16,134 (8,850) 29,341 (13,165)
Net cash provided(used)by operations 150,824 (8,104) 70,001 80,012
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisitions - - - (98,497)
Capital expenditures (36,271) (7,437) (28,574) (69,495)
Purchase of receivables (50,000) - - -
Other investing activities 2,503 11 (2,228) (6,838)
Net cash (used) by
investing activities (83,768) (7,426) (30,802) (174,830)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds (payments) on
short-term borrowings (5,903) (403) (24,464) 9,301
Proceeds (payments) on
long-term borrowings (78,239) 22,237 (30,256) (146,807)
Proceeds from sale of
common stock, net - - - 146,626
Other financing activities - 141 864 (4,886)
Net cash provided (used) by
financing activities (84,142) 21,975 (53,856) 4,234
CASH
Effect of exchange rates on cash 871 (1,045) 753 (1,241)
Change in cash (16,215) 5,400 (13,904) (91,825)
Cash at beginning of period 21,015 15,615 29,519 121,344
Cash at end of period $4,800 $21,015 $15,615 $29,519
UNIROYAL CHEMICAL CORPORATION
UNIROYAL CHEMICAL COMPANY, INC.
Notes to Consolidated Financial Statements
Accounting Policies
Basis of Presentation
Uniroyal Chemical Corporation ("UCC") was incorporated in
Delaware in December 1988 for the sole purpose of acquiring
Uniroyal Chemical Company, Inc. ("Uniroyal Chemical") in October
1989. Uniroyal Chemical, a New Jersey corporation, is a direct
wholly-owned subsidiary of UCC. Herein, UCC and Uniroyal
Chemical, collectively, are referred to as the "Company".
On August 21, 1996, Crompton & Knowles Corporation ("Parent")
acquired all of the issued and outstanding capital stock of UCC,
the "Merger", at which time UCC became a wholly-owned subsidiary
of the Parent. Uniroyal Chemical remained a direct wholly-owned
subsidiary of UCC.
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 all of the adjustments to account for the
acquisition of Uniroyal Chemical by UCC and substantially all of
the operations (primarily interest expense), assets and
liabilities of UCC.
Certain amounts in the accompanying consolidated financial
statements have been reclassified to conform with the current
year presentation.
Change of Year End
On September 27, 1996 the Board of Directors approved a change in
the Company's fiscal year end from the last Saturday in September
to the last Saturday in December.
Principles of Consolidation
The accompanying consolidated financial statements include the
accounts of all majority-owned subsidiaries. Other affiliates in
which the Company has a 20% to 50% ownership are accounted for in
accordance with the equity method. All significant intercompany
balances and transactions within the Company have been eliminated
in consolidation.
Translation of Foreign Currencies
Balance sheet accounts denominated in foreign currencies are
translated generally at the current rate of exchange as of the
balance sheet date, while revenues and expenses are translated at
average rates of exchange during the periods presented. The
cumulative foreign currency adjustments resulting from such
translation are reported as a component of stockholders' equity
(deficit). For foreign subsidiaries operating in highly
inflationary economies, monetary balance sheet accounts and
related revenue and expenses are translated at the current rates
of exchange while non-monetary balance sheet accounts and related
revenues and expenses are translated at historical exchange
rates. The resulting translation gains and losses related to
those countries are reflected in operations and are not
significant in any of the years presented.
Property, Plant and Equipment
Property, plant and equipment are carried at cost, less
accumulated depreciation. Depreciation expense ($44.7 million in
1997, $10.6 million for the three months ended December 28, 1996,
$46.2 million in 1996 and $44.2 million in 1995) is computed
generally on the straight-line method using the following ranges
of asset lives: buildings and improvements: 10 to 40 years,
machinery and equipment: 3 to 25 years, and furniture and
fixtures: 3 to 10 years.
Renewals and improvements which extend the useful lives of the
assets are capitalized. Capitalized leased assets and leasehold
improvements are depreciated over their useful lives or the
remaining lease term, whichever is shorter. Expenditures for
maintenance and repairs are charged to expense as incurred.
Inventory Valuation
Inventories are valued at the lower of cost or market. Cost is
determined principally using the first-in, first out (FIFO)
basis.
Intangible Assets
The excess cost over the fair value of net assets of businesses
acquired is being amortized on a straight-line basis over 20 to
40 years. Accumulated amortization was $31.4 million and $26.5
million in 1997 and 1996, respectively.
Patents, unpatented technology, trademarks and other intangibles
of $76.5 million in 1997 and $91.8 million in 1996, included in
other assets, are being amortized principally on a straight-line
basis over their estimated useful lives ranging from 6 to 20
years. Accumulated amortization was $121.4 million and $106.7
million in 1997 and 1996, respectively.
Long-Lived Assets
In March, 1995, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 121, "Accounting
for the Impairment of Long-Lived Assets and for Long-Lived Assets
to be Disposed Of." This statement requires that long-lived
assets be reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount of such assets
may not be recoverable. The Company adopted the new standard in
the first quarter of 1996. The effect of the adoption did not
materially impact the Company's financial position or results of
operations.
The Company evaluates the recoverability of the carrying value of
the intangible assets of each of its businesses by assessing
whether the projected earnings and cash flows of each of its
businesses is sufficient to recover the existing unamortized cost
of these assets. On this basis, if the Company determines that
any assets have been permanently impaired, the amount of the
impaired assets is written off against earnings in the quarter in
which the impairment is determined.
Research and Development
Research and development costs are expensed as incurred.
Income Taxes
A provision has not been made for U.S. income taxes which would
be payable if undistributed earnings of foreign subsidiaries of
approximately $137.5 million at December 27, 1997, were
distributed to the Company in the form of dividends, since
certain foreign countries limit the extent of repatriation of
earnings, while for others, the Company's intention is to
permanently reinvest such foreign earnings.
Statement of Cash Flows
Cash includes bank term deposits of three months or less. Cash
payments during the fiscal year ended 1997, the three months
ended December 28, 1996, and fiscal years ended 1996 and 1995
included interest payments of $82.8 million, $28.7 million, $90.8
million and $99.4 million and income tax payments of $11.8
million, $7.7 million, $16.9 million and $8.7 million,
respectively.
Financial Instruments
Financial instruments are presented in the accompanying
consolidated financial statements at either cost or fair value as
required by generally accepted accounting principles.
Other Disclosures
Included in accounts receivable are allowances for doubtful
accounts in the amount of $6.1 million in 1997 and $3.7 million
in 1996.
Related Party Transactions
On December 27, 1997, the Parent transferred its European and
Asian specialty chemical businesses to the Company at cost for
the business purpose of consolidating operations. The transfer
included assets in the amount of $76.4 million and liabilities of
$20.8 million. Sales and net earnings related to these
operations in 1997 of $83.7 million and $2.6 million
respectively, have not been included in the Consolidated
Statement of Operations. Financial statements have not been
restated for prior years as the impact was not considered
material.
In June 1997, the Company entered into an accounts receivable
purchase agreement with the Parent in which the Company may
purchase an undivided interest of up to $150 million in domestic
accounts receivable from the Parent with recourse. Interest is
paid to the Company by the Parent equal to the interest rate
charged on the Company's credit agreement. The amount
outstanding under the accounts receivable purchase agreement was
$50 million and is included in accounts receivable in the
Consolidated Balance Sheet at December 27, 1997.
Acquisitions
During fiscal 1995, Uniroyal Chemical acquired the worldwide crop
protection business of Solvay Duphar, B.V. (the "Duphar
Acquisition") , along with three smaller acquisitions, at an
aggregate cost of $98.5 million. The acquisitions have been
accounted for using the purchase method of accounting and,
accordingly, the acquired assets and liabilities have been
recorded at their fair values at the dates of acquisition. The
excess cost of purchase price over fair value of net assets
acquired in the amount of $16.1 million is being amortized over
20 years. The operating results of each acquisition are included
in the consolidated statement of operations from the dates of
acquisition.
Inventories
(in thousands)
1997 1996
Finished Goods $151,229 $148,552
Work in process 14,786 9,296
Raw materials and supplies 55,234 44,914
$221,249 $202,762
Property, Plant and Equipment
(In thousands) )
1997 1996
Land and improvements $ 21,799 $ 20,545
Buildings and improvements 105,664 88,431
Machinery and equipment 507,289 477,541
Furniture and fixtures 24,854 21,857
Construction in progress 30,728 22,015
690,334 630,389
Less accumulated depreciation 315,913 262,427
$374,421 $367,962
Leases
The future minimum rental payments under operating leases having
initial or remaining non-cancelable lease terms in excess of one
year (as of December 27, 1997) total $88.3 million as follows:
$8.1 million in 1998, $7.2 million in 1999, $5.6 million in 2000,
$4.9 million in 2001, $4.5 million in 2002, and $58.0 million in
later years. Total rental expense for all operating leases was
$8.4 million in 1997, $2.0 million for the three months ended
December 28, 1996, $8.1 million in 1996 and $6.6 million in 1995.
Real estate taxes, insurance and maintenance expenses generally
are obligations of the Company and, accordingly, are not included
as part of rental payments. It is expected that, in the normal
course of business, leases that will expire will be renewed or
replaced by leases on other properties.
Accrued Expenses
(In thousands) ) 1997 1996
Accrued interest $ 16,725 $ 17,875
Current portion of environmental
liability 15,376 18,903
Other accruals 67,789 50,535
$ 99,890 $ 87,313
Long-term Debt
(In thousands) ) 1997 1996
9% Senior Notes Due 2000 $226,623 $250,583
10.5% Senior Notes Due 2002 235,998 283,078
11% Senior Subordinated Notes
Due 2003 232,175 232,175
12% Subordinated Discount
Notes Due 2005 115,971 103,215
Credit Agreement 50,800 54,466
Other 3,081 3,196
$864,648 $926,713
Less amounts due within one year - (731)
$864,648 $925,982
9% Senior Notes
The 9% Senior Notes Due 2000 are an obligation of Uniroyal
Chemical and are unsecured. Interest is payable semi-annually.
The 9% Senior Notes are not redeemable prior to maturity, except
upon a change in control (as defined in the related indenture)
whereupon an offer shall be made to purchase the 9% Senior Notes
then outstanding at a purchase price equal to 101% of the
principal amount thereof, plus accrued and unpaid interest. In
connection with the Merger, such an offer was made, resulting in
$2.2 million of principal being redeemed. The 9% Senior Notes
rank pari passu in right of payment with all existing and future
senior indebtedness of Uniroyal Chemical.
10.5% Senior Notes
The 10.5% Senior Notes Due 2002 are an obligation of UCC and are
unsecured. Interest is payable semi-annually.
11% Senior Subordinated Notes
The 11% Senior Subordinated Notes Due 2003 are an obligation of
UCC and are unsecured. Interest is payable semi-annually. The
11% Senior Subordinated Notes are redeemable in whole or in part,
at the option of UCC at any time after May 1, 1998, at prices
commencing at 105.5% of par of the then outstanding principal
amount, plus accrued and unpaid interest, declining ratably to
par by May 1, 2000. On April 8, 1998, UCC called all of the outstanding
11% Senior Subordinated Notes for redemption on May 8, 1998,
at a price of 105.5% of the principal amount thereof plus accrued
and unpaid interest pursuant to the terms of the notes and related
indentures.
12% Subordinated Discount Notes
The 12% Subordinated Discount Notes Due 2005 are an unsecured
obligation of UCC and have a final accreted value of $126.6
million at May 1, 1998. Beginning on such date, cash interest
will accrue on these securities and will be payable semi-
annually. The Notes are redeemable in whole or in part, at the
option of UCC at any time after May 1, 1998, at 100% of their
principal amount, plus accrued and unpaid interest. On April 8, 1998,
UCC called all of the outstanding 12% Subordinated Discount Notes
for redemption on May 8, 1998, at a price of 100% of the
principal amount plus accrued and unpaid interest pursuant to
the terms of the notes and related indentures.
Merger Waivers
The note indentures require that upon a change in control (as
defined in the related indentures), an offer shall be made to
purchase all of the notes at a purchase price equal to 101% of
the principal amounts (or accreted value), thereof, plus accrued
and unpaid interest. In connection with the Merger, waivers of
the requirement were obtained, except the 9% Senior Notes for
which an offer to purchase was made.
Debt Repurchases
During 1997, the Company repurchased in the open market $24.0
million of 9% Senior Notes and $47.1 million of 10.5% Senior
Notes. As a result of the repurchases, the Company recognized an
extraordinary charge of $5.0 million, net of tax benefit of $3.3
million.
During 1996, the Company repurchased $17.2 million of 9% Senior
Notes in the open market. As a result of this repurchase, the
Company recognized an extraordinary charge of $441 thousand, net
of tax benefit of $293 thousand.
Credit Agreement
In July 1997, the Parent increased its revolving credit agreement
with a syndicate of banks to $600 million (from $530 million)
which extends through August 2001. Borrowings under the credit
agreement are divided into three tranches. Tranche I provides a
maximum of up to $300 million available to the Parent for working
capital and general corporate purposes. Tranche II provides a
maximum of up to $150 million available to the Company for
working capital and general corporate purposes. Tranche III
allows up to $150 million of borrowings by the European and
Canadian subsidiaries of the Company and the Parent. Borrowings
may be denominated in U.S. dollars or the subsidiary's local
currency.
The credit agreement calls for interest based upon various
options including a spread over LIBOR that varies according to
certain debt ratios for the trailing four fiscal quarters. In
addition, the Company must pay a commitment fee (currently .175%)
on the total unused portion of the credit agreement based upon
certain debt ratios for the trailing four fiscal quarters. At
December 27, 1997, borrowings under the credit agreement for the
Company of $50.8 million bore a weighted average interest rate of
7.7%.
Debt Covenants
The Company's various debt agreements contain covenants which
limit the ability to incur additional debt, transfer funds
between affiliated companies, pay cash dividends or make certain
other payments. In addition, the credit agreement requires the
Company to maintain certain financial ratios.
Maturities
In 1997, the scheduled maturities of long-term debt during the
next five fiscal years and years thereafter were 1998 none;
1999 - $0.9 million; 2000 - $227.1 million; 2001 - $51.3 million;
2002 - $236.4 million and years thereafter $349.0 million.
Financial Instruments
At December 27, 1997, the Company had an interest rate swap
contract ("the Swap") outstanding for $270 million with a major
financial institution. Net receipts or payments on the Swap are
accrued and recognized as adjustments to interest expense. The
Swap requires the Company to make semi-annual payments to its
counterparty of an amount ranging from 5.89%-6.25% in 1998 and
5.68% in 1999 with the last payment due on December 31, 1999.
The Swap requires the counterparty to make semi-annual payments
at a fixed rate of 5.24%. The Company paid $1.9 million under
the Swap in 1997. A settlement of the fair market value of the
Swap as of December 27, 1997 would require a payment of
approximately $4.2 million.
At December 27, 1997, the Company had an interest rate lock
contract ("Interest Hedge") outstanding with a major financial
institution for $230 million at a rate of 6.04%. The interest
hedge expires on September 1, 2000, which corresponds to the date
of maturity of the 9% Senior Notes payable. Upon expiration an
amount of settlement is computed based upon the difference
between the rate of 6.04% and the 10 year Treasury rate. A
settlement of the fair market value of the interest hedge as of
December 27, 1997 would require payment of approximately $1.6
million.
The carrying amounts for cash, accounts receivable, notes
payable, accounts payable and other current liabilities
approximate fair value because of the short maturities of these
instruments. The fair market values of long term debt (including
current installments) were $938.5 million and $995.8 million in
1997 and 1996, respectively, and with respect to the notes have
been determined based on quoted market prices.
Income Taxes
The components of earnings (loss) before income taxes and
extraordinary loss and the provision (benefit) for income taxes
are as follows:
Three
months
Year ended ended Year ended Year ended
Dec.27, Dec.28, Sept.28, Oct.1,
(In thousands) 1997 1996 1996 1995
Pretax Earnings (Loss):
Domestic $57,391 $5,649 ($66,250) $17,269
Foreign 35,495 (6,974) 35,489 17,100
$92,886 ($1,325) ($30,761) $34,369
Taxes
Domestic
Current $1,860 $92 $2,261 $3,753
Deferred 18,125 2,104 (13,612) (73,983)
19,985 2,196 (11,351) (70,230)
Foreign
Current 15,049 (1,129) 16,416 9,234
Deferred 289 (1,598) (4,114) (4,064)
15,338 (2,727) 12,302 5,170
Total
Current 16,909 (1,037) 18,677 12,987
Deferred 18,414 506 (17,726) (78,047)
$35,323 ($531) $951 ($65,060)
The provision (benefit) for income taxes differs from the Federal
statutory rate for the following reasons:
Three
months
Year ended ended Year ended Year ended
Dec.27, Dec.28, Sept.28, Oct.1,
(In thousands) 1997 1996 1996 1995
Provision (benefit) at
statutory rate $32,510 ($463) ($10,766) $12,029
Nondeductible merger
and related costs - - 11,132 -
Impact of valuation
allowance (3,616) - (2,905) (78,880)
Foreign dividends impact 524 119 3,077 2,367
Goodwill amortization 1,142 378 1,092 1,092
Foreign income tax
rate differential 1,759 (553) (362) (2,127)
State income taxes, net
of federal benefit 2,248 18 (1,877) 555
Other, net 756 (30) 1,560 (96)
Actual provision (benefit)
for income taxes $35,323 ($531) $951 ($65,060)
Provisions have been made for deferred taxes based on differences
between financial statement and tax bases of assets and liabilities
using currently enacted tax rates and regulations. The components
of the net deferred tax assets and liabilities are as follows:
(In thousands) 1997 1996
Deferred tax assets:
Pension and other postretirement
benefits $72,564 $84,713
Accruals for environmental
remediation 31,974 30,427
Other accruals 30,859 29,959
AMT credit and NOL
carryforwards 22,363 33,399
Inventories and other 8,776 10,181
Deferred tax liabilities:
Property, plant and equipment (60,517) (54,824)
Intangibles (10,055) (14,015)
Other (2,389) (4,235)
Net deferred tax asset before
valuation allowance 93,575 115,605
Valuation allowance (12,466) (16,082)
Net deferred tax asset after
valuation allowance $81,109 $99,523
Net deferred taxes (in thousands) include $35,491 and $32,507 in
current assets, $45,843 and $67,308 in long-term assets, $2 and
$114 in current liabilities and $223 and $178 in long-term
liabilities in 1997 and 1996, respectively.
The Company had domestic NOL carryforwards of $35 million,
expiring in the year 2007, which can be used to reduce future
Federal taxable income, while certain of the Companies' foreign
subsidiaries had aggregate NOL carryforwards of $30 million which
can be used to reduce future taxable income in those countries.
As a result of the Company's stock offering in 1995 and the
Merger, the Company has undergone an "ownership change" within
the meaning of Section 382 of the Internal Revenue Code of 1986,
as amended. Consequently, the Federal NOL carryforward is
subject to an annual limitation as prescribed thereunder.
Postretirement Health Care Liability
The Company provides health and life insurance benefits for
certain retired and active employees and their beneficiaries and
covered dependents in the U.S. and Canada. Postretirement
benefits for retired employees in other countries are generally
covered by government-sponsored plans. The Company's cost
information for December, 1996 has not been updated from
September, 1996 as the change was not considered material.
Net postretirement health care cost included the following
components:
December 28, September 28, October 1,
(In thousands) 1997 1996 1995
Service cost-benefits earned
during the period $ 1,144 $ 1,250 $ 1,315
Interest cost on
accumulated postretirement
benefit obligation 9,839 9,738 9,899
Actual return on plan assets (910) 10 (677)
Net amortization and deferral (6,628) (7,959) (5,751)
Net postretirement
health care cost $ 3,445 $ 3,039 $ 4,786
Postretirement health care costs are generally not pre-funded
(except for certain government-related plans) and are paid by the
Company as incurred. The accumulated postretirement health care
liability is as follows:
December 27, September 28,
(In thousands) 1997 1996
Fully eligible and other active
plan participants $ 37,893 $ 40,658
Retirees 110,706 96,851
Accumulated post retirement
benefit obligation 148,599 137,509
Plan assets at fair value 40,002 5,601
Unfunded status 108,597 131,908
Unrecognized reduction in prior
service cost 34,200 43,158
Unrecognized net loss (1,137) (511)
Postretirement health care
liability $ 141,660 $174,555
The weighted-average discount rate used to calculate the
accumulated health care liability in 1997 and 1996 ranged from 7%
- - 7.5% and 7%-8%, respectively. The expected long-term rate of
return on plan assets was 8% in 1997 and 3.5% in 1996. The
assumed health care cost trend rate ranged from 12.7% - 8.8%
and is assumed to decrease gradually to a range of 6.07% - 5.5%
in 2020 and remain level thereafter.
An increase in the assumed health care cost rate of 1% in each
year would increase the postretirement health care liability by
approximately $9 million.
The U.S. Department of the Army funded certain costs during 1997
related to postretirement medical and life insurance benefits of
retirees of Uniroyal Chemical who worked at the Joliet Army
Ammunition Plant in Joliet, Illinois. Uniroyal Chemical operated
the plant for the Army on a cost reimbursement basis from the
1940's until 1993. The funds are held in trust in satisfaction
of the government's liability to reimburse Uniroyal Chemical for
these costs. At the same time, the government waived its claim
to certain funds held in pension trusts for the benefit of these
Joliet retirees. The resulting pretax gain to the Company
amounted to $28 million and is included in other income.
Pensions
The Company has several defined benefit and defined contribution
plans which cover substantially all employees in the United
States and Canada. Pension benefits for retired employees of the
Company in other countries are generally covered by government-
sponsored plans. The defined benefit plans provide retirement
benefits based on the employees' years of service and
compensation during employment. The Company will make
contributions to the defined benefit plans at least equal to the
minimum amounts required by law, while contributions to the
defined contribution plans are determined as a percentage of
each covered employees' salary. The Company's cost information
for December, 1996 has not been updated from September, 1996 as
the change was not considered material.
The Company's net pension cost for the defined benefit plans
included the following components:
December 27, September 28, October 1,
(In thousands) 1997 1996 1995
Service cost-benefits earned
during the period $ 5,981 $ 5,765 $ 4,851
Interest cost on projected
benefit obligation 14,189 12,676 11,449
Actual return on plan assets (13,777) (8,327) (13,442)
Net amortization and deferral 293 (1,020) 6,143
Net pension cost $ 6,686 $ 9,094 $ 9,001
The funded status and the (accrued) prepaid pension cost of the
defined benefit pension plans are as follows:
December 27, September 28,
1997 1996
Accumulated Assets Exceed Accumulated Assets Exceed
Benefits Accumulated Benefits Accumulated
Exceed Benefits Exceed Benefits
(In thousands) Assets Assets
Vested benefit
obligation $ 177,514 $18,478 $131,830 $15,968
Non-vested
benefit
obligation 9,617 84 11,790 99
Accumulated
benefit
obligation 187,131 18,562 143,620 16,067
Excess of
projected
benefit obligation
over accumulated
benefit
obligation 22,759 1,675 22,219 1,601
Projected
benefit
obligation 209,890 20,237 165,839 17,668
Plan assets at
fair value 167,199 22,589 113,469 19,824
Funded status (42,691) 2,352 (52,370) 2,156
Unrecognized
prior service
cost 1,062 (362) 12,040 (406)
Unrecognized net
(gain) loss 3,804 (203) 3,675 45
Unrecognized net
transition asset - (306) (741) (430)
Equity adjustment
to recognize
minimum
liability (2,760) - (3,713) -
(Accrued)
prepaid
pension cost $ (40,585) $ 1,481 $(41,109) $ 1,365
The weighted-average discount rate used to calculate the
projected benefit obligation ranged from 6% - 8% in 1997 and
6.25% - 8% in 1996. The expected long-term rate of return on
plan assets ranged from 7% - 9% in 1997 and from 6.25% - 9% in
1996. The assumed rate of compensation increase ranged from 2% -
5.5% in 1997 and 2% - 6% in 1996.
The Company's net cost for all pension plans, including defined
benefit plans, was $10.4 million, $12.6 million and $12.3 million
in 1997, 1996 and 1995, respectively.
Contingencies
The Company is 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. The Company and some of its subsidiaries
have been identified by Federal, state or local governmental
agencies, and by other potentially responsible parties (a "PRP")
under the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended, or comparable state statutes,
as a PRP with respect to costs associated with waste disposal
sites at various locations in the United States. In addition,
the Company is involved with environmental remediation and
compliance activities at some of its current and former sites in
the United States and abroad.
Each quarter, the Company evaluates and reviews 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 Company and the anticipated time frame over which
payments toward the remediation plan will occur. As a result of
current information and analysis, the Company recorded a special
provision of $13.5 million during the third quarter of 1997 for
environmental remediation activities. The total amount accrued
for such environmental liabilities at December 27, 1997 was
$100.6 million. The Company estimates its potential
environmental liability to range from $74 million to $133 million
at December 27, 1997. It is reasonably possible that the
Company's estimates for environmental remediation liabilities may
change in the future 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.
The Company intends to assert all meritorious legal defenses and
all other equitable factors which are available to it with
respect to the above matters. The Company believes that the
resolution of these environmental matters will not have a
material adverse effect on its consolidated financial position.
While the Company believes it is unlikely, the resolution of
these environmental matters could have a material adverse effect
on its consolidated results of operations in any given year if a
significant number of these matters are resolved unfavorably.
Business Segment Data
The Company and its subsidiaries operate in one industry segment,
the manufacture and sale of specialty chemicals and elastomers.
Information by Major Geographic Segment
Three
months
Year ended ended Year ended Year ended
Dec.27, Dec.28, Sept.28, Oct.1,
(In thousands) 1997 1996 1996 1995
Net sales and transfer between geographic areas:
United States $1,042,850 $213,717 $978,081 $942,635
Americas 219,418 47,040 201,913 181,926
Europe/Africa 158,150 23,374 181,268 135,805
Asia/Pacific 56,217 13,501 58,800 58,124
$1,476,635 $297,632 $1,420,062 $1,318,490
Less transfers between geographic areas:
United States $173,476 $36,659 $150,863 $141,063
Americas 62,975 16,658 61,253 51,821
Europe/Africa 55,813 1,751 74,386 45,285
Asia/Pacific 1,082 226 814 1,000
$293,346 $55,294 $287,316 $239,169
Net sales from geographic areas to unaffiliated customers:
United States $869,374 $177,058 $827,218 $801,572
Americas 156,443 30,382 140,660 130,105
Europe/Africa 102,337 21,623 106,882 90,520
Asia/Pacific 55,135 13,275 57,986 57,124
$1,183,289 $242,338 $1,132,746 $1,079,321
Export sales included in United States sales:
Americas $30,066 $4,860 $31,633 $30,300
Europe/Africa 107,157 18,967 90,074 80,136
Asia/Pacific 62,523 13,071 60,911 51,380
$199,746 $36,898 $182,618 $161,816
Operating Profit
United States $116,318 $26,584 $35,001 $116,887
Americas 34,129 7,463 17,420 19,036
Europe/Africa 9,926 (10,732) 25,453 12,522
Asia/Pacific 1,983 133 (2,487) (2,612)
$162,356 $23,448 $75,387 $145,833
Identifiable assets
United States $890,454 $897,328 $893,912 $922,151
Americas 84,023 94,867 88,972 88,800
Europe/Africa 166,634 107,379 117,209 125,430
Asia/Pacific 32,449 33,733 32,525 35,326
$1,173,560 $1,133,307 $1,132,618 $1,171,707
UNIROYAL CHEMICAL CORPORATION SCHEDULE I
Condensed Financial Information of Registrant
Condensed Statements of Operations and Accumulated Deficit
(In thousands of dollars)
Three
months
Year ended ended Year ended Year ended
Dec.27, Dec.28, Sept.28, Oct.1,
1997 1996 1996 1995
Equity in income of
consolidated subsidiaries $101,639 $10,594 $15,429 $107,455
Selling, general
and administrative 354 106 551 523
Interest expense 68,899 17,414 68,677 76,943
Earnings (loss) before
income taxes and
extraordinary loss 32,386 (6,926) (53,799) 29,989
Provision (benefit) for
income taxes (24,210) (6,132) (21,646) (69,440)
Earnings (loss) before
extraordinary loss 56,596 (794) (32,153) 99,429
Extraordinary loss on early (3,991) - - (8,279)
extinguishment of debt
Net earnings (loss) 52,605 (794) (32,153) 91,150
Accumulated deficit,
beginning of year (480,407) (479,613) (447,460) (538,610)
Related party transfer 58,040 - - -
Accumulated deficit,
end of year ($369,762) ($480,407) ($479,613) ($447,460)
UNIROYAL CHEMICAL CORPORATION SCHEDULE I
Condensed Financial Information of Registrant
Condensed Balance Sheets
For the year end December 27, 1997 and December 28, 1996
(In thousands of dollars)
1997 1996
ASSETS
Current Assets
Cash $48 $48
Total current assets 48 48
Non-Current Assets
Investment in consolidated subsidiaries 365,406 294,960
Deferred income taxes 474 9,334
Other assets 15,581 19,038
$381,509 $323,380
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current Liabilities
Accrued expenses $25,773 $36,584
Non-Current Liabilities
Long-term debt 584,144 618,468
Other liabilities 5,734 5,160
Stockholders' Equity (Deficit)
Additional paid-in capital 173,930 172,822
Accumulated deficit (369,762) (480,407)
Accumulated translation adjustment (35,550) (25,534)
Pension liability adjustment (2,760) (3,713)
Total stockholders' deficit (234,142) (336,832)
$381,509 $323,380
UNIROYAL CHEMICAL CORPORATION SCHEDULE I
Condensed Financial Information of Registrant
Condensed Statements of Cash Flows
(In thousands of dollars)
Three
Year months Year Year
ended ended ended ended
Dec.27, Dec.28, Sept.28, Oct.1,
1997 1996 1996 1995
CASH FLOWS FROM OPERATING ACTIVITIES
Net earnings (loss) $52,605 ($794) ($32,153) $91,150
Adjustments to reconcile net earnings
(loss) to net cash provided (used)
by operations:
Equity in income of
consolidated subsidiaries (101,639) (10,594) (15,429) (107,455)
Amortization 315 47 315 323
Noncash interest 16,780 3,599 13,417 15,927
Allocation of current tax provision (36,570) (8,329) (31,307) (34,787)
Deferred income taxes 8,860 2,489 9,625 (36,665)
Change in assets
and liabilities, net (10,707) 13,582 101 (2,983)
Dividends from
consolidated subsidiaries 117,436 - 52,887 63,527
Other - - 313 (180)
Net cash provided
(used) by operations 47,080 - (2,231) (11,143)
CASH FLOWS FROM INVESTING ACTIVITIES
Return of capital - - - 45,666
CASH FLOWS FROM FINANCING ACTIVITIES
Payments on long-term borrowings (47,080) - - (187,595)
Proceeds from sale of
common stock, net - - - 146,626
Purchase of treasury stock - - - (1,161)
Other financing activities - - 2,209 7,499
Net cash provided (used) by
financing activities (47,080) - 2,209 (34,631)
Change in cash - - (22) (108)
Cash at beginning of year 48 48 70 178
Cash at end of year $48 $48 $48 $70
Schedule II
UNIROYAL CHEMICAL CORPORATION
UNIROYAL CHEMICAL COMPANY, INC.
Valuation and Qualifying Accounts
(In thousands of dollars)
Additions
Balance at charged to Adjustments Balance
beginning costs and at end
of year expenses Recurring Other of year
Fiscal Year ended December 27, 1997:
Allowance for doubtful accounts
$ 3,741 $ 1,338 $ 1,019 (1) $ - $ 6,098
Accumulated amortization of cost in
excess of acquired net assets
26,534 4,639 269 (2) - 31,442
Accumulated amortization of other
intangible assets
106,655 15,151 (439)(2) - 121,367
Three months ended December 28, 1996:
Allowance for doubtful accounts
$ 3,333 $ 421 $ (13)(1) $ - $ 3,741
Accumulated amortization of cost in
excess of acquired net assets
25,491 1,415 (372)(2) - 26,534
Accumulated amortization of other
intangible assets
102,938 3,438 279 (2) - 106,655
Fiscal Year ended September 28, 1996:
Allowance for doubtful accounts
$ 2,873 $ 1,568 $ (1,108)(1) $ - $ 3,333
Accumulated amortization of cost in
excess of acquired net assets
21,281 3,887 323 (2) - 25,491
Accumulated amortization of other
intangible assets
87,813 15,622 (497)(2) - 102,938
Fiscal Year ended October 1, 1995:
Allowance for doubtful accounts
$ 2,452 $ 708 $ (287)(1) $ - $ 2,873
Accumulated amortization of cost in
excess of acquired net assets
17,194 3,953 134 (2) - 21,281
Accumulated amortization of other
intangible assets
73,981 14,647 (815)(2) - 87,813
(1) Represents accounts written off as uncollectible (net of recoveries),
and the translation effect of accounts
denominated in foreign currencies.
(2) Represents the translation effect of intangible assets denominated
in foreign currencies.
EXHIBIT 12
UNIROYAL CHEMICAL CORPORATION
UNIROYAL CHEMICAL COMPANY, INC.
Computation of Earnings to Fixed Charges Ratio
(In thousands of dollars)
Three
Year months Year Year Year Year
Ended ended Ended Ended Ended Ended
Dec.27, Dec.28, Sept.28, Oct.1, Oct.2, Sept.30,
1997 1996 1996 1995 1994 1993
Earnings (loss) before
fixed charges:
Earnings (loss) from
continuing operations
before income
taxes (1) $ 92,886 $ (1,325)$ (30,761)$ 34,369 $ (204,925)$ (18,259)
Interest and
debt expense 96,011 24,814 106,456 114,034 128,567 120,567
Undistributed (earnings)
loss of less
than 50% owned
affiliates 2,135 149 362 149 (32) 884
Interest portion of
rent expense 3,138 663 2,705 2,193 2,051 2,012
Earnings (loss
before fixed
charges: $ 194,170 $ 24,301 $ 78,762 $ 150,745 $ (74,339)$ 105,204
Fixed charges:
Interest and
debt expense $ 96,011 $ 24,814 $ 106,456 $ 114,034 $ 128,567 $ 120,567
Interest portion of
rent expense 3,138 663 2,705 2,193 2,051 2,012
Capitalized
interest 364 68 1,677 2,518 378 964
Fixed charges: $ 99,513 $ 25,545 $ 110,838 $ 118,745 $ 130,996 $ 123,543
Deficiency in earnings
available to cover
fixed charges $1,244 $32,076 $205,335 $18,339
Ratio of earnings to
fixed charges 1.95 1.27
(1) Includes $10.0 million of severance and other costs and a $13.5 million
special environmental charge in 1997, $52.6 million of merger and related
costs and a $30 million special environmental charge in the year ended
September 28, 1996, and a $191 million write-off of intangible assets in the
year ended October 2, 1994.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Form 10-K for the year ended December 27, 1997 and is qualified in it's
entirety by reference to such financial statements.
</LEGEND>
<CIK> 0000858905
<NAME> UNIROYAL CHEMICAL CORPORATION
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-27-1997
<PERIOD-END> DEC-27-1997
<CASH> 4,800
<SECURITIES> 0
<RECEIVABLES> 216,152
<ALLOWANCES> 6,098
<INVENTORY> 221,249
<CURRENT-ASSETS> 501,491
<PP&E> 690,334
<DEPRECIATION> 315,913
<TOTAL-ASSETS> 1,173,560
<CURRENT-LIABILITIES> 234,823
<BONDS> 864,648
0
0
<COMMON> 0
<OTHER-SE> (234,142)
<TOTAL-LIABILITY-AND-EQUITY> 1,173,560
<SALES> 1,183,289
<TOTAL-REVENUES> 1,183,289
<CGS> 727,102
<TOTAL-COSTS> 1,020,933
<OTHER-EXPENSES> (26,541)
<LOSS-PROVISION> 1,337
<INTEREST-EXPENSE> 96,011
<INCOME-PRETAX> 92,886
<INCOME-TAX> 35,323
<INCOME-CONTINUING> 57,563
<DISCONTINUED> 0
<EXTRAORDINARY> (4,958)
<CHANGES> 0
<NET-INCOME> 52,605
<EPS-PRIMARY> 0.00
<EPS-DILUTED> 0.00
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Form 10-K for the year ended December 27, 1997 and is qualified in it's
entirety by reference to such financial statements.
</LEGEND>
<CIK> 0000862612
<NAME> UNIROYAL CHEMICAL COMPANY, INC.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-27-1997
<PERIOD-END> DEC-27-1997
<CASH> 4,800
<SECURITIES> 0
<RECEIVABLES> 216,152
<ALLOWANCES> 6,098
<INVENTORY> 221,249
<CURRENT-ASSETS> 501,491
<PP&E> 690,334
<DEPRECIATION> 315,913
<TOTAL-ASSETS> 1,173,560
<CURRENT-LIABILITIES> 234,823
<BONDS> 864,648
0
0
<COMMON> 0
<OTHER-SE> (234,142)
<TOTAL-LIABILITY-AND-EQUITY> 1,173,560
<SALES> 1,183,289
<TOTAL-REVENUES> 1,183,289
<CGS> 727,102
<TOTAL-COSTS> 1,020,933
<OTHER-EXPENSES> (26,541)
<LOSS-PROVISION> 1,337
<INTEREST-EXPENSE> 96,011
<INCOME-PRETAX> 92,886
<INCOME-TAX> 35,323
<INCOME-CONTINUING> 57,563
<DISCONTINUED> 0
<EXTRAORDINARY> (4,958)
<CHANGES> 0
<NET-INCOME> 52,605
<EPS-PRIMARY> 0.00
<EPS-DILUTED> 0.00
</TABLE>
