SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 for the quarterly period
ended March 28, 1998
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 No. 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)
Registrant's telephone number, including area code: (203)573-2000
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
Indicate the number of shares outstanding of each of the
issuer's classes of common stock, as of May 20, 1998:
Uniroyal Chemical Corporation 100 shares of Common Stock;
Uniroyal Chemical Company, Inc. 100 shares of No Class Common
Stock.
Registrants meet the conditions set forth in General Instruction
(H)(1)(a) and (b) of Form 10-Q and are therefore filing this Form
with the reduced disclosure format.
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 ONE SERIES OF OUTSTANDING PUBLIC DEBT OF UNIROYAL
CHEMICAL CORPORATION AND ONE SERIES OF OUTSTANDING PUBLIC DEBT
OF UNIROYAL CHEMICAL COMPANY, INC. UNIROYAL CHEMICAL CORPORATION
IS A WHOLLY-OWNED SUBSIDIARY OF CROMPTON & KNOWLES CORPORATION.
UNIROYAL CHEMICAL COMPANY, INC. IS A WHOLLY-OWNED SUBSIDIARY OF
UNIROYAL CHEMICAL CORPORATION.
UNIROYAL CHEMICAL CORPORATION
UNIROYAL CHEMICAL COMPANY, INC.
FORM 10-Q
FOR QUARTER ENDED MARCH 28, 1998
INDEX
PART I. FINANCIAL INFORMATION:
Item 1. Condensed Financial Statements and
Accompanying Notes
. Consolidated Statements of Operations
(unaudited) - Quarters ended
March 28, 1998 and March 29, 1997
. Consolidated Balance Sheets - March 28, 1998
(unaudited) and December 27, 1997
Uniroyal Chemical Corporation
Uniroyal Chemical Company, Inc.
. Consolidated Statements of Cash Flows
(unaudited) - Quarters ended
March 28, 1998 and March 29, 1997
. Notes to Consolidated Financial
Statements - Quarter ended March 28, 1998
(unaudited)
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
PART II. OTHER INFORMATION:
Item 6. Exhibits and Reports on Form 8-K
Signatures
*Exhibit 27 Financial Data Schedule
* A copy of this Exhibit is annexed to this report on Form 10-Q
provided to the Securities and Exchange Commission.
-1-
UNIROYAL CHEMICAL CORPORATION UNAUDITED
UNIROYAL CHEMICAL COMPANY, INC.
Consolidated Statements of Operations
Quarters ended March 28, 1998 and March 27, 1997
(In thousands of dollars)
March 28, March 27,
1998 1997
Net Sales $ 328,144 $ 307,883
Cost of products sold 197,226 187,686
Selling, general and administrative 45,846 40,788
Depreciation and amortization 16,462 15,824
Research and development 10,310 9,821
Operating profit 58,300 53,764
Interest 22,291 24,757
Other expense 150 73
Earnings before income taxes
and extraordinary loss 35,859 28,934
Provision for income taxes 13,316 10,995
Earnings before
extraordinary loss 22,543 17,939
Extraordinary loss on early
extinguishment of debt (1,951) -
Net earnings $ 20,592 $ 17,939
See accompanying notes to consolidated financial statements.
-2-
UNIROYAL CHEMICAL CORPORATION March 28, 1998 Unaudited
Consolidated Balance Sheets
March 28, 1998 and December 27, 1997
(In thousands of dollars)
March 28, December 27,
ASSETS 1998 1997
CURRENT ASSETS
Cash $ 3,998 $ 4,800
Accounts receivable 231,890 210,054
Inventories 244,019 221,249
Other current assets 45,178 65,388
Total current assets 525,085 501,491
NON-CURRENT ASSETS
Property, plant and equipment 367,586 374,421
Costs in excess of acquired net assets 126,501 127,784
Other assets 178,599 169,864
$ 1,197,771 $ 1,173,560
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES
Notes payable $ 3,324 $ 1,770
Accounts payable 98,892 105,901
Accrued expenses 104,690 99,890
Income taxes payable 29,115 27,262
Total current liabilities 236,021 234,823
NON-CURRENT LIABILITIES
Long-term debt 867,111 864,648
Postretirement healthcare liability 141,062 141,660
Other liabilities 164,327 166,571
STOCKHOLDERS' EQUITY (DEFICIT)
Additional paid-in capital 173,930 173,930
Accumulated deficit (343,519) (369,762)
Cumulative translation adjustment (38,401) (35,550)
Pension liability adjustment (2,760) (2,760)
Total stockholders' deficit (210,750) (234,142)
$ 1,197,771 $ 1,173,560
See accompanying notes to consolidated financial statements.
-3-
UNIROYAL CHEMICAL COMPANY, INC. March 28, 1998 Unaudited
Consolidated Balance Sheets
March 28, 1998 and December 27, 1997
(In thousands of dollars)
March 28, December 27,
ASSETS 1998 1997
CURRENT ASSETS
Cash $ $3,998 $ $4,800
Accounts receivable 231,890 210,054
Inventories 244,019 221,249
Other current assets 45,178 65,388
Total current assets 525,085 501,491
NON-CURRENT ASSETS
Property, plant and equipment 367,586 374,421
Costs in excess of acquired net assets 126,501 127,784
Other assets 178,599 169,864
$ $1,197,771 $ $1,173,560
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES
Notes payable $ 3,324 $ 1,770
Accounts payable 98,892 105,901
Accrued expenses 104,690 99,890
Income taxes payable 29,115 27,262
Total current liabilities 236,021 234,823
NON-CURRENT LIABILITIES
Long-term debt 867,111 864,648
Postretirement health care liability 141,062 141,660
Other liabilities 164,327 166,571
STOCKHOLDERS' EQUITY (DEFICIT)
Common stock 1 1
Additional paid-in capital 175,612 175,612
Accumulated deficit (345,202) (371,445)
Cumulative translation adjustment (38,401) (35,550)
Pension liability adjustment (2,760) (2,760)
Total stockholders' deficit (210,750) (234,142)
$ $1,197,771 $ $1,173,560
See accompanying notes to consolidated financial statements.
-4-
UNIROYAL CHEMICAL CORPORATION UNAUDITED
UNIROYAL CHEMICAL COMPANY, INC.
Consolidated Statements of Cash Flows
Quarters ended March 28, 1998 and March 29, 1997
(In thousands of dollars)
March 28, March 29,
Increase (decrease to cash) 1998 1997
CASH FLOWS FROM OPERATING ACTIVITIES
Net earnings $ 20,592 $ 17,939
Adjustments to reconcile net earnings
to net cash provided by operations:
Depreciation and amortization 16,462 15,824
Noncash interest 3,834 3,424
Deferred income taxes 5,053 3,836
Changes in assets and liabilities, net (35,657) (20,333)
Net cash provided by operations 10,284 20,690
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures (6,070) (4,621)
Other investing activities - (327)
Net cash used by investing activities (6,070) (4,948)
CASH FLOWS FROM FINANCING ACTIVITIES
Payments on
long-term borrowings (3,850) (22,164)
Proceeds (payments) from
short-term borrowings 1,639 (1,860)
Other financing activities (2,662) -
Net cash used by
financing activities (4,873) (24,024)
CASH
Effect of exchange rates on cash (143) 795
Change in cash (802) (7,487)
Cash at beginning of period 4,800 21,015
Cash at end of period $ 3,998 $ 13,528
See accompanying notes to consolidated financial statements.
-5-
UNIROYAL CHEMICAL CORPORATION
UNIROYAL CHEMICAL COMPANY, INC.
Notes to Consolidated Financial Statements
Quarter Ended March 28, 1998
PRESENTATION ON CONSOLIDATED FINANCIAL STATEMENTS
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,
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.
The information included in the foregoing consolidated financial
statements is unaudited but reflects all adjustments which are,
in the opinion of management, necessary for a fair statement of
the results for the interim periods presented. It is suggested
that the interim consolidated financial statements be read in
conjunction with the consolidated financial statements and notes
thereto included in the Company's 1997 Form 10-K.
Included in accounts receivable are allowances for doubtful
accounts of $6.9 million in 1998 and $6.1 million at December 27,
1997. Accounts receivable include $50 million of pledged
receivables purchased from the Parent at March 28, 1998 and
December 27, 1997.
Accumulated depreciation amounted to $327.0 million in 1998 and
$315.9 million at December 27, 1997.
Accumulated amortization of cost in excess of acquired net assets
amounted to $32.5 million in 1998 and $31.4 million at December
27, 1997.
Accumulated amortization of patents, unpatented technology,
trademarks and other intangibles included in other assets
amounted to $125.0 million in 1998 and $121.4 million at December
27, 1997.
Cash payments during the quarters ended March 28, 1998 and March
29, 1997 included interest of $12.3 million and $13.4 million and
income taxes of $5.2 million and $3.1 million, respectively.
INVENTORIES
Components of inventories are as follows:
(in thousands) Mar 28, Dec 27,
1998 1997
Finished Goods $184,459 $151,229
Work in process 11,384 14,786
Raw materials and supplies 48,176 55,234
$244,019 $221,249
COMPREHENSIVE INCOME
Effective in the first quarter of 1998, the Company adopted
Financial Accounting Standards Board Statement No. 130 "Reporting
Comprehensive Income". The statement establishes standards for
reporting "comprehensive income" and its components in financial
statements and notes thereto. The Company's comprehensive income
consists of net earnings, minimum pension liability adjustment
and foreign currency translation adjustment. Comprehensive
income for the quarters ended March 28, 1998 and March 29, 1997
was $17.7 million and $17.7 million, respectively. The tax
effect for the minimum pension liability was $0.6 million in the
first quarter of 1997. The Company does not provide for U.S.
income taxes on foreign currency translation adjustments since a
tax provision has not been made for undistributed earnings of
foreign subsidiaries.
SUBSEQUENT EVENTS
On March 31, 1998, the Parent amended its $600 million revolving
credit agreement with a syndicate of banks. The termination date
was extended to September 2003 from August 2001. Borrowings
under the credit agreement were amended as follows: Tranche I
provides a maximum of $375 million (up from $300 million)
available to the Parent for working capital and general corporate
purposes. Tranche II provides a maximum of $75 million (down
from $150 million) available to Uniroyal Chemical for working
capital and general corporate purposes. Tranche III continues to
provide up to $150 million available to the European and Canadian
subsidiaries of the Parent and Company.
On May 8, 1998, UCC redeemed the outstanding 11% Senior
Subordinated Notes at a price of 105.5% of the principal amount
thereof plus accrued and unpaid interest and the 12% Senior
Subordinated Discount Notes at a price of 100% of the principal
amount thereof plus accrued and unpaid interest. The payment for
the redemption including interest and premium totaled $372.3
million and was funded through the issuance of two intercompany
notes with the Parent. The intercompany notes bear the same
terms as the notes redeemed and are in accordance with terms of
the Company's remaining public indebtedness.
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 the quarter ended March 28, 1998 as
compared with the quarter ended March 29, 1997 as Registrants
meet the conditions set forth in the General Instruction
(H)(1)(a) and (b) of Form 10-Q.
FIRST QUARTER RESULTS
Overview
The Company's results for the quarter ended March 28, 1998
includes the operations of the European and Asian specialty
chemical businesses transferred from the Parent on December 27,
1997. Net sales of these operations amounted to $19.8 million
and $20.7 million, and net earnings amounted to $0.9 million and
$0.9 million for the first quarter of 1998 and 1997, respectively.
The financial statements have not been restated for the first
quarter of 1997 as the impact was not considered material.
Net sales of $328.1 million for the quarter ended March 28, 1998
increased by 7% from $307.9 million for the comparable period in
1997. All of the increase was attributable to the sales of 19.8
million from transferred operations. Net earnings of $20.6
million (including $0.9 million from transferred operations)
increased by 26% versus the comparable period of 1997. Gross
margin as a percentage of net sales increased to 39.9% from 39.0%
in the comparable 1997 period. Operating profit increased 8% to
$58.3 million primarily as a result of lower manufacturing cost
and improved product mix.
Sales by Major Product Line
Chemicals and polymers sales of $120.8 million decreased 5% from
the first quarter of 1997 primarily attributable to the impact of
lower foreign currency translation of 2% and lower pricing of 3%.
Sales of rubber chemicals were lower than 1997 primarily due to
lower pricing and the impact of lower foreign currency
translation. EPDM sales increased primarily due to higher unit
volume and improved pricing. Nitrile rubber sales decreased
primarily as a result of lower unit volume.
Crop protection sales of $107.9 were 3% higher than the first
quarter of 1997. The increase was primarily attributable to
higher unit volume in fungicides and herbicides.
Specialties sales of $79.0 million increased 5% from the first
quarter of 1997. The increase resulted primarily from higher
unit volume in lubricant additives and specialty intermediates.
Colors sales of $20.4 were $20.3 million higher than the first
quarter of 1997 primarily due to the transfer of the European and
Asian specialty chemical businesses from the Parent.
Selling, general and administrative expenses of $45.8 million
increased 12%, depreciation and amortization of $16.5 million
increased 4%, and research and development costs of $10.3 million
increased 5% from the quarter ended March 29, 1997. These
increases were primarily due to the transfer of the European and
Asian specialty chemical businesses from the Parent.
Interest expense for the quarter ended March 28, 1998 of $22.3
million decreased 10% from the first quarter of 1997 primarily
due to lower levels of indebtedness. The effective tax rate of
37.1% decreased from 38.0% in the comparable 1997 period.
ENVIRONMENTAL MATTERS
Uniroyal Chemical 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. Uniroyal Chemical and some
of its subsidiaries have been identified by federal, state or
local governmental agencies, and by other potentially responsible
parties (each 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, Uniroyal Chemical is involved with environmental
remediation and compliance activities at some of its current and
former sites in the United States and abroad.
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. The total
amount accrued for such environmental liabilities at March 28,
1998 was $100.6 million. 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 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.
FORWARD-LOOKING STATEMENTS
The information in this report contains forward-looking
statements and estimates which are based on currently available
information. The Company's actual results may differ
significantly from the results discussed. Investors are
cautioned that there can be no assurance that the actual results
will not differ materially from those suggested in such forward-
looking statements and estimates.
PART II. OTHER INFORMATION:
Item 6. Exhibits and reports on Form 8-K
(a) Exhibits
(27)* Financial data schedules
(b) No reports on Form 8-K were filed during the quarter for
which this report is filed.
* A copy of this Exhibit is annexed to this report on Form
10-Q provided to the Securities and Exchange Commission.
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: May 27, 1998 By:/s/Charles J. Marsden
Charles J. Marsden
Vice President and
Chief Financial Officer and
Director
(Principal Financial Officer)
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This schedule contains summary financial information extracted from
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