As filed with the Securities and Exchange Commission on June 14, 1996.
Registration No. 333-
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
____________________
FORM S-1
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
____________________
AMBAR, INC.
(Exact name of registrant as specified in its charter)
Delaware 1389 72-0900435
(State or other (Primary Standard (I.R.S. Employer
jurisdiction of incorporation Industrial Identiifcation No.)
or organization) Classification Code)
221 Rue de Jean
Lafayette, Louisiana 70508
(318) 237-5300
(Address, including zip code, and telephone number, including
area code, of Registrant's principal executive offices)
Randolph M. Moity, Sr.
Chairman, Chief Executive Officer and President
AMBAR, Inc.
221 Rue de Jean
Lafayette, Louisiana 70508
(318) 237-5300
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
Copies to:
Curtis R. Hearn, Esq. L. Steven Leshin, Esq.
Lisa M. Buchanan, Esq. Grant W. Collingsworth, Esq.
Jones, Walker, Waechter, Poitevent, Jenkens & Gilchrist,
Carrere & Denegre, L.L.P. a Professional Corporation
201 St. Charles Avenue 1445 Ross Avenue, Suite 3200
New Orleans, Louisiana 70170-5100 Dallas, Texas 75202-2799
(504) 582-8000 (214) 855-4500
____________________
Approximate date of commencement of proposed sale to the public:
As soon as practical after this Registration Statement becomes effective.
____________________
If any of the securities being registered on this Form are to be offered
on a delayed or continuous basis pursuant to Rule 415 under the Securities Act
of 1933, check the following box. ___
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. ___
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. ___
If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. ___
____________________
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
=====================================================================================================
Proposed Proposed
maximum maximum
offering aggregate Amount of
Title of each class of Amount to be price offering registration
securities to be registered registered<F1> per share<F2> price<F2> fee
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, par value $.01 per share 4,025,000 shares $12.1875 $49,054,687 $16,916
=====================================================================================================
</TABLE>
[FN]
<F1> Includes 525,000 shares that the Underwriters have the option to
purchase to cover over-allotments, if any.
<F2> Estimated solely for the purpose of calculating the registration
fee pursuant to Rule 457 under the Securities Act of 1933, based on
the average of the high and low sales prices per share of Common
Stock on the Nasdaq National Market on June 11, 1996.
____________________
The registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the Registrant shall
file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section
8(a), may determine.
AMBAR, INC.
_____________________
CROSS REFERENCE SHEET
PURSUANT TO ITEM 501(b)
<TABLE>
<CAPTION>
Form S-1 Item and Heading Location in Prospectus
- ------------------------- ----------------------
<S> <C>
1. Forepart of the Registration Statement and
Outside Front Cover Page of Prospectus............... Forepart of the Registration Statement and
Outside Front Cover Page of Prospectus
2. Inside Front and Outside Back Cover Pages of
Prospectus........................................... Inside Front and Outside Back Cover Pages of
Prospectus; Available Information
3. Summary Information, Risk Factors and Ratio
of Earnings to Fixed Charges......................... Prospectus Summary; Risk Factors
4. Use of Proceeds...................................... Use of Proceeds
5. Determination of Offering Price...................... Not Applicable
6. Dilution............................................. Not Applicable
7. Selling Security Holders............................. Principal and Selling Shareholders
8. Plan of Distribution................................. Front Cover Page of Prospectus; Underwriting
9. Description of Securities to be Registered........... Front Cover Page of Prospectus; Prospectus
Summary; Market Price of Common Stock and
Dividends; Description of Capital Stock;
Legal Matters
10. Interests of Named Experts and Counsel............... Not Applicable
11. Information with Respect to the Registrant........... Prospectus Summary; Risk Factors;
Capitalization; Selected Consolidated
Financial Data; Management's Discussion
and Analysis of Financial Condition and
Results of Operations; Business; Management;
Principal and Selling Shareholders; Certain
Transactions; Description of Capital Stock;
Market Price of Common Stock and Dividends;
Shares Eligible for Future Sale; Available
Information; Consolidated Financial Statements
12. Disclosure of Commission Position on Indemnification
for Securities Act Liabilities....................... Not Applicable
</TABLE>
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with
the Securities and Exchange Commission. These securities may not be sold
nor may offers to buy be accepted prior to the time the registration
statement becomes effective. This prospectus shall not constitute an
offer to sell or the solicitation of an offer to buy nor shall there be
any sale of these securities in any State in which such offer,
solicitation or sale would be unlawful prior to registration or
qualification under the securities laws of any such State.
SUBJECT TO COMPLETION DATED , 1996
3,500,000 Shares
[Logo] AMBAR, Inc.
Common Stock
____________________
Of the 3,500,000 shares of Common Stock offered hereby (the "Offering"),
3,000,000 shares are being issued and sold by AMBAR, Inc. ("AMBAR" or the
"Company") and 500,000 shares are being sold by certain shareholders of the
Company (the "Selling Shareholders"). The Company will not receive any
proceeds from the sale of Common Stock by the Selling Shareholders. See "Use
of Proceeds" and "Principal and Selling Shareholders."
The Common Stock is traded on the Nasdaq National Market under the
symbol "AMBR." On June 13, 1996, the last reported sales price of the Common
Stock on the Nasdaq National Market was $12.50 per share. See "Market Price
of Common Stock and Dividends."
____________________
See "Risk Factors" beginning at page 6 for a discussion of certain factors
that should be considered by prospective purchasers of the Common Stock
offered hereby.
____________________
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMIS-
SION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
Price to Underwriting Proceeds to Proceeds to
Public Discounts and Company<F2> Selling
Commissions<F1> Shareholders<F2>
Per Share.......... $ $ $ $
Total<F3>.......... $ $ $ $
[FN]
<F1> The Company and the Selling Shareholders have agreed to indemnify the
Underwriters against certain liabilities, including liabilities under the
Securities Act of 1933, as amended (the "Securities Act"). See
"Underwriting."
<F2> Before deducting estimated expenses of the Offering of $ payable
by the Company and $ payable by the Selling Shareholders.
<F3> The Company has granted the Underwriters a 30-day option to purchase up
to 525,000 additional shares of Common Stock on the same terms and
conditions as the Common Stock offered hereby solely to cover over-
allotments, if any. If the option is exercised in full, the total Price
to Public, Underwriting Discounts and Commissions and Proceeds to Company
will be $ , $ , and $ , respectively. See
"Underwriting."
____________________
The shares of Common Stock are offered by the Underwriters, subject to
prior sale, when, as and if delivered to and accepted by them, and subject to
certain other conditions including the right of the Underwriters to withdraw,
cancel, modify or reject any order in whole or in part. It is expected that
delivery of the shares will be made on or about , 1996, at the offices of
Raymond James & Associates, Inc., St. Petersburg, Florida.
______________________
Raymond James & Associates, Inc.
The date of this Prospectus is , 1996.
[Pictures to go here]
______________________
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR
EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON
STOCK AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET.
SUCH TRANSACTIONS MAY BE EFFECTED ON THE NASDAQ NATIONAL MARKET, IN THE OVER-
THE-COUNTER MARKET OR OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE
DISCONTINUED AT ANY TIME.
IN CONNECTION WITH THIS OFFERING, CERTAIN UNDERWRITERS MAY ENGAGE IN
PASSIVE MARKET MAKING TRANSACTIONS IN THE COMMON STOCK ON THE NASDAQ NATIONAL
MARKET IN ACCORDANCE WITH RULE 10b-6A UNDER THE SECURITIES EXCHANGE ACT OF
1934. SEE "UNDERWRITING."
PROSPECTUS SUMMARY
This summary is qualified in its entirety by the more detailed
information and the consolidated financial statements and notes thereto
appearing elsewhere in this Prospectus. Unless otherwise indicated, all
information in this Prospectus assumes (i) that the Underwriters' over-
allotment option will not be exercised and (ii) that a reorganization pursuant
to which the Company will reincorporate in Louisiana will have been
consummated. Immediately prior to consummation of this Offering, the Company
will also increase its authorized shares of Common Stock from 7 million to 25
million, $.01 par value per share, will authorize 10 million shares of
Preferred Stock, $.01 par value per share and will amend certain other
provisions of its Articles of Incorporation. See "Description of Capital
Stock."
The Company
General
AMBAR is principally engaged in the custom blending, distribution and
sale of clear brine fluids ("CBFs"), drilling fluids (or "muds") and other
chemicals used in the drilling, completion and workover (repair and
maintenance) of oil and gas wells. The principal consumers of AMBAR's
products are oil and gas operators, particularly those with operations
offshore in the United States Gulf of Mexico and onshore along the Gulf Coast.
Oil and gas operators use muds during the well drilling stage to control
formation pressures, lubricate and cool drill bits, and carry cuttings out of
the hole. CBFs, which generally are significantly more expensive than muds,
are used primarily in the completion and workover stages, when well operators
seek to maintain or restore well productivity.
To diversify its business and to achieve partial vertical integration of
its oilfield business, AMBAR has recently secured access to a brine stream and
acquired a plant in Manistee, Michigan (the "Manistee facility") that it is
presently retrofitting to produce liquid and dry calcium chloride, important
raw materials used in the production of the Company's CBFs and which also have
a number of other commercial and industrial applications.
AMBAR also provides certain environmental products and services relating
to oil spill response, control and remediation, environmental contingency
planning and the control and treatment of both hazardous and non-hazardous
oilfield waste.
Strategy
Diversify into Non-Oilfield Markets. The Company intends to diversify
its business through the sale of the liquid and dry calcium chloride produced
at the Manistee facility into several larger non-oilfield markets. The most
significant commercial applications of calcium chloride are to de-ice roads,
control road dust and stabilize roadbeds. The Company also intends to add a
bromine extraction process to the Manistee facility. The primary commercial
applications of bromine are in pharmaceuticals, specialty chemicals and fire
retardants. Bromine is also a raw material used in certain important
components of many of the Company's higher density, higher cost CBFs.
Increase Revenues and Profitability of Oilfield Fluids Business. AMBAR
believes that the product costs relating to its CBFs will be favorably
affected through its production of calcium chloride at the Manistee facility.
Although the Company believes that it will continue to procure calcium
chloride from third parties that are geographically convenient, it also
believes that its introduction of a substantial volume of low cost calcium
chloride into the market will allow it to moderate its product costs. In
addition, once AMBAR adds a bromine extraction process, it expects to realize
significant cost savings in the production of its higher margin CBFs. The
Company also intends to expand its share of the CBF and drilling mud markets
by increasing the sales force dedicated to these product lines.
Expand and Develop Environmental Products and Services Business. A
portion of the net proceeds of the Offering will be used by AMBAR to expand
its oil spill response capabilities in the Texas Gulf Coast region and to
continue development of new applications for its environmental products.
AMBAR is also currently in the process of using and testing AmBaSol, a
proprietary chemical designed to rapidly dissolve hazardous oilfield waste
(found in barium sulfate scale), in applications such as well stimulation,
vessel cleaning and the remediation of hazardous oilfield waste. AMBAR
intends to continue development of applications for, and increase its
marketing of, this product.
<TABLE>
<CAPTION>
The Offering
<S> <C>
Common Stock offered by the Company......................... 3,000,000 shares
Common Stock offered by the Selling Shareholders............ 500,000 shares
Common Stock to be outstanding after this Offering<F1>...... 6,811,505 shares
Use of Proceeds............................................. To repay the outstanding balance of the Company's
revolving credit facility; to retire long-term
indebtedness and to fund the completion of the
retrofitting of the Manistee facility; to fund
expansion and development of the Company's
Environmental Products and Services Division; and
for working capital and general corporate purposes.
The Company will not receive any of the proceeds
from the sale of Common Stock by the Selling
Shareholders. See "Business," "Use of Proceeds"
and "Principal and Selling Shareholders."
Nasdaq National Market Symbol.............................. AMBR
</TABLE>
____________________
[FN]
<F1> Includes 110,000 shares issuable upon the exercise of warrants held by a
Selling Shareholder, all of which will be sold in the Offering.
Summary Consolidated Financial Data
(in thousands, except per share amounts)
<TABLE>
<CAPTION>
Nine Months Ended
Fiscal Year Ended June 30, March 31,
------------------------------------- -----------------------
1993 1994 1995 1995 1996
----------- ---------- --------- --------- -----------
<S> <C> <C> <C> <C> <C>
Statement of Operations Data:
Revenues:
Oilfield products
and services . . . . . . . . . $ 20,973 $ 37,546 $ 31,661 $ 24,842 $ 27,883
Environmental products
and services . . . . . . . . . 3,946 5,762 6,416 4,539 7,725
----------- ---------- --------- ---------- ----------
Total revenues . . . . . . $ 24,919 $ 43,308 $ 38,077 $ 29,381 $ 35,608
Gross profit . . . . . . . . . . . 2,323 6,942 4,841 4,311 3,891
Operating income (loss) . . . . . . (1,816) 2,375 371 1,009 473
Net income (loss) . . . . . . . . . $ (1,200) $ 1,277 $ (236) $ 294 $ (129)
Net income (loss) per share . . . . $ (.33) $ .35 $ (.06) $ .08 $ (.03)
Weighted average common
shares outstanding . . . . . . . 3,628 3,632 3,667 3,663 3,732
Cash dividends . . . . . . . . . . -- -- -- -- --
At March 31, 1996
-----------------
As
Actual Adjusted<F1>
--------- ------------
Balance Sheet Data:
Working capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 6,167 $ 38,901
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39,077 62,443
Long-term liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,611 3,739
Stockholders' equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14,865 50,471
</TABLE>
____________________
[FN]
<F1> Adjusted to reflect the sale of 3,000,000 shares of Common Stock by the
Company, the exercise of warrants to purchase 110,000 shares of Common
Stock by a Selling Shareholder and the application of the estimated net
proceeds therefrom.
RISK FACTORS
In analyzing the Company, its business and financial condition, in
addition to the other matters disclosed in this Prospectus, investors should
carefully consider the factors described below.
Acquisition and Retrofitting of New Facility
The Company has acquired an evaporation plant in Manistee, Michigan that
it is presently retrofitting to produce liquid and dry calcium chloride. The
Company, which has no prior experience in plant conversion, has relied on the
design and engineering expertise of a number of firms in retrofitting the
facility. The retrofitting of the Manistee facility is not complete and is
subject to numerous uncertainties. Although the technology underlying the
process to be used by the Company to produce calcium chloride is well
established, and the retrofitting is nearing completion, there is no assurance
that the Company will be able to complete the retrofitting of the facility
within budget or within the Company's expected time frame. A material delay
or deviation from budget could adversely affect the Company's future results
of operations and financial condition.
Addition of Bromine Facility
The Company currently intends to engage a third-party engineering firm
to assist it in the design, engineering and construction of a bromine
extraction process at the Manistee facility. Bromine extraction is a more
complex chemical process than the production of calcium chloride and therefore
will entail higher operating complexity and risk. Bromine production will
require the Company to transport and handle chlorine and bromine, both of
which are highly corrosive chemicals. Consequently, the addition of a bromine
extraction facility may increase the Company's risk under applicable
environmental laws and regulations. Furthermore, adding a bromine facility
will require the issuance of various permits and other licenses. There can be
no assurances that such permits and licenses can be obtained timely, on
favorable terms, or at all.
Facility Operations
The Company has no prior experience in operating a chemical production
facility of the Manistee facility's size or complexity, and the facility has
not been operational since it was closed by its prior owner in the fall of
1995. The addition of the Manistee facility is expected to significantly
expand the size and geographic reach of the Company's operations, and
accordingly, the Company may experience transitional inefficiencies and costs
as it integrates its Manistee facility operations with its other operations.
The Company can not predict the duration of this transition period. Although
many of the employees who will work at the Manistee facility were previously
employed by the prior owner of the facility and have experience in evaporating
sodium chloride brine, they have no prior experience in producing calcium
chloride through the evaporation process or in producing bromine.
Feedstock Supply
The Company will produce liquid and dry calcium chloride through the
evaporation of a naturally occurring underground brine stream that will be
provided by Martin Marietta Magnesia Specialties, Inc. ("Martin Marietta"), a
subsidiary of Martin Marietta Materials, Inc., pursuant to a feedstock
agreement. The Company is prohibited under the terms of the feedstock
agreement from accepting brine from any other supplier. Based on the
historical production of the brine stream, the brine stream volume is expected
to exceed the Company's requirements; however, no assurance can be given as to
the future feedstock requirements of the Manistee facility.
Because of the competitive advantage of receiving low cost feedstock,
the continuous uninterrupted flow of the brine stream from Martin Marietta is
very important. There is no assurance that Martin Marietta will continue
operations at its facility for the entire term of the feedstock agreement,
although the Company believes that it is unlikely that Martin Marietta would
discontinue operations at its facility during the foreseeable future. It is
also possible that the brine stream flow may be temporarily reduced or
interrupted from time to time for a variety of reasons, such as pipeline
repair and maintenance or because of the temporary cessation or reduction of
production at the Martin Marietta facility. Although the feedstock agreement
contains provisions designed to assure an uninterrupted brine flow and
requires Martin Marietta to pay the Company's fixed costs if Martin Marietta
ceases operations or is otherwise unable to continue to provide an adequate
flow of brine, there can be no assurance that such provisions will be adequate
to protect the Company's interests. A prolonged interruption in the brine
stream would have a material adverse effect on the Company.
Marketing of Calcium Chloride and Bromine
Although the Company may use a portion of the calcium chloride that will
be (and the bromine that is expected to be) produced at the Manistee facility
as raw materials for its CBFs, it expects that most of the facility's
production will be marketed to third party commercial and industrial users.
The Company has no prior experience in marketing calcium chloride or bromine;
however, it has engaged Meridian Technologies, Inc. ("Meridian"), an
engineering and marketing consulting firm, the principals of which are
experienced in marketing these products, to market the products manufactured
at the Manistee facility. These individuals are experienced in marketing
liquid and dry calcium chloride to the oil and gas industry and to other
commercial and industrial users; however, they are significantly less
experienced in marketing bromine. There can be no assurance that Meridian
will be able to market successfully the products produced at the Manistee
facility to commercial and industrial users. In addition, although there are
numerous current and potential commercial and industrial applications of
liquid and dry calcium chloride, there are several very large producers of
these products, and the ability of the markets to absorb the additional
production of the Manistee facility cannot be fully assessed. In addition,
calcium chloride and bromine are commodities and are thus sensitive to
fluctuations in market conditions. See "-Competition." If AMBAR is
unsuccessful in marketing its chemical products, the Company's results of
operations will be adversely affected.
Under the terms of the Martin Marietta agreement, the Company is
required to evaporate a minimum quantity of the brine stream each year,
regardless of whether there is a market to sell products produced by such
evaporation. This contractual requirement could cause the Company to incur
the production costs of evaporation with a diminished ability to recapture
those costs through sales to commercial and industrial users, which could
result in operating losses from the Manistee facility.
Oil and Gas Industry Conditions
Demand for the Company's oilfield products and services, which accounted
for approximately 83% of fiscal 1995 revenues, is materially dependent on the
level of oil and gas well drilling, completion and workover activity in the
Gulf of Mexico, which in turn is influenced by fluctuations in oil and gas
prices. No assurance can be given as to the future levels of oil and gas
prices or the level of oil and gas drilling, completion and workover activity,
and a material decrease in the level of such activity could adversely affect
the Company's business.
Competition
Oil and gas operators generally consider CBFs and drilling muds to be
commodities, making the market for the Company's products highly competitive
and price-sensitive. In general, the Company's competitors in the CBF and
drilling muds markets are OSCA ("OSCA"), a subsidiary of Great Lakes Chemical
Corporation ("Great Lakes"); Baroid Corporation ("Baroid"), a subsidiary of
Dresser Industries, Inc.; TETRA Technology, Inc. ("TETRA"); M-I Drilling
Fluids Co. ("M-I Drilling"), which is jointly-owned by Smith International and
Halliburton Company; and INTEQ ("INTEQ"), a subsidiary of Baker-Hughes, Inc.
All of these competitors have substantially greater financial resources than
the Company and are therefore better able to price their products
aggressively.
The Company expects that it will face substantial competition in the
sale of products produced at its Manistee facility, which products are also
commodities that are highly price-sensitive. The major competitors in the
calcium chloride market are The Dow Chemical Company ("Dow"); General Chemical
Company ("General Chemical"), a Canadian company; TETRA; and OSCA. The major
competitors in the bromine market are Great Lakes; Albemarle Corporation
("Albermarle"); the Dead Sea Bromine Group, a subsidiary of Israel Chemicals,
Ltd. (the "Dead Sea Bromine Group"); and, to a lesser extent, Dow. All of
these competitors have substantially greater resources than the Company, and
there can be no assurance that the Company will be able to compete effectively
with these competitors.
Seasonality
The Company's oilfield products business lines are subject to seasonal
fluctuation because of the nature of the offshore oil and gas industry in the
Gulf of Mexico, which depends in part on weather conditions. Thus, sales of
its CBFs and drilling muds are generally stronger in the summer months when
weather conditions in the Gulf of Mexico are favorable to oil and gas
operations. The Company expects that sales of calcium chloride will also be
stronger in the summer months, as customers store such products for the
following winter season. The Company's operating results may vary from
quarter to quarter, depending upon factors outside of its control.
TETRA Litigation
In April 1995, TETRA named the Company as a co-defendant in a lawsuit
previously filed in a Texas state court against former employees of TETRA
seeking unspecified special and general damages, punitive damages of not less
than $10 million, professional fees and costs of not less than $250,000 and
injunctive relief to prevent the Company or TETRA's former employees, all of
whom are principals of Meridian, from using certain allegedly proprietary
TETRA information in operating the Manistee facility or marketing the calcium
chloride produced by the facility. Although the Company believes that it and
the Meridian principals have substantial and meritorious defenses to TETRA's
claims, there can be no assurance that the Company will not be temporarily or
permanently enjoined from the production and marketing of calcium chloride.
There also can be no assurance that the Company will not be subject to
significant monetary damages. For information on additional litigation filed
against the Company by TETRA, see "Business-Legal Proceedings."
Environmental Proceedings and Matters
A former subsidiary of the Company, which has been merged into the
Company, was named as one of approximately 190 Potentially Responsible Parties
("PRPs") in a federal administrative proceeding under the Comprehensive
Environmental Response, Compensation & Liability Act, as amended ("CERCLA"),
pertaining to the PAB Oil and Chemicals Superfund site near Abbeville,
Louisiana (the "PAB Site"). The EPA has studied the site conditions and has
proposed several alternatives to clean up the site ranging in cost from $6
million to $68 million. The cost of the method recommended by the EPA record
of decision in September 1993 was estimated at that time to be approximately
$13 million. At present, there is no agreement among the PRPs as to a
preliminary allocation of clean-up responsibility, and site remediation has
not yet commenced. Under CERCLA, PRPs are jointly and severally liable for
clean up costs. The Company filed a claim under the insurance policy covering
its former subsidiary which claim was denied by the insurance company.
Accordingly, the Company is unable to reasonably estimate its liability, if
any, for costs imposed with regard to the PAB Site.
The Company's handling, transportation and disposal of hazardous and
non-hazardous oilfield wastes currently exposes, and once AMBAR adds a bromine
extraction facility its production of bromine will expose, it to certain risks
under applicable environmental laws and regulations. Although the Company
believes its operations are conducted in substantial compliance with such laws
and regulations, there can be no assurance that liability will not attach in
the future due to stricter laws and regulations, stricter enforcement thereof
or other currently unforeseen or unknown events. In addition, there can be no
assurance that substantial costs of compliance with such laws and regulations
will not be incurred in the future. Generally, the Company's general
liability insurance does not include coverage for losses or liabilities
relating to environmental damage or pollution.
The demand for some of the products and services provided by the
Company's Environmental Products and Services Division has increased due to
the promulgation of stricter environmental laws and regulations and stricter
enforcement of existing laws and regulations. Decreased regulation and
enforcement could adversely affect the demand for the types of products and
services offered by the Company and, therefore, adversely affect the Company's
business. However, as noted above, increased environmental regulation may
also increase the Company's costs of doing business and risk of liability.
Trade Secret Protection
The Company possesses numerous unpatented trade secrets and proprietary
technologies. Although the Company requires each of its employees to sign a
confidentiality agreement, there can be no assurance that this and other
protective measures taken by the Company will be adequate to deter
misappropriation of its proprietary rights. In addition, independent third
parties may develop competitive technology. While some of the Company's trade
secrets and proprietary technologies may be deemed materially important to the
Company's operations, no one trade secret is considered essential to the
success of the Company.
History of Losses
The Company has incurred losses in two of its last three fiscal years
and for the nine-month period ended March 31, 1996. Although the losses for
the nine-month period reflect significant losses incurred in the start-up of
the Company's remediation and marine businesses and are not the result of the
Company's other businesses, the losses for the fiscal year periods did relate
to such other businesses. There can be no assurance with respect to the
Company's future profitability. Future profitability may largely depend on
the successful retrofitting and profitable operation of the Manistee facility.
See "Management's Discussion and Analysis of Financial Condition and Results
of Operations."
Anti-Takeover Matters
The Company's charter documents contain provisions that may have the
effect of discouraging a proposal for a takeover of the Company in which the
Company's shareholders could receive a substantial premium for some or all of
their shares. The provisions, among other things, authorize the issuance of
"blank check" preferred stock and divide the Board of Directors into three
classes. The Company has also adopted a Shareholder Protection Rights
Agreement (the "Rights Agreement"). In addition, the Company is subject to
certain provisions of Louisiana law that limit, in some cases, the ability of
the Company to engage in certain business combinations with significant
stockholders. Such provisions, either alone, or in combination with each
other and the Company's Rights Agreement, may give the Company's current
directors and executive officers, who will beneficially own approximately
27.3% of the Company's outstanding shares of Common Stock following the
Offering, a substantial ability to influence the outcome of a proposed
takeover. See "Description of Capital Stock-Certain Provisions of the
Articles of Incorporation and By-laws."
USE OF PROCEEDS
The net proceeds to the Company from the sale of the 3,000,000 shares of
Common Stock offered by the Company and the exercise of warrants to purchase
110,000 shares of Common Stock by a Selling Shareholder (assuming an offering
price of $12.50 per share and after deducting estimated underwriting discounts
and commissions and estimated expenses of the Offering) are estimated to be
approximately $35.6 million ($41.9 million if the Underwriters' over-allotment
option is exercised in full). The Company will not receive any of the
proceeds from the sale of Common Stock by the Selling Shareholders.
The Company intends to use approximately $9 million of the net proceeds
to repay the outstanding balance of its $10 million revolving credit facility,
which indebtedness was previously incurred to fund the Company's working
capital and to liquidate balances under previously existing credit facilities.
The Company intends to use approximately $7 million of the net proceeds (i) to
repay approximately $4 million which has been borrowed under a term loan that
was established to fund the purchase and retrofitting of the Manistee facility
and (ii) to fund the completion of the retrofitting. Both the revolving
credit facility and the term loan bear interest at the bank's base rate (8.75%
at March 31, 1996) or at the 30-day, 60-day or 90-day LIBOR rate plus 2.5%.
The revolving credit facility expires on October 31, 1996, and the term loan
matures on June 20, 2000. Following the Offering, the Company intends to use
bank borrowings to finance the estimated $7 million expenditure necessary to
construct a bromine extraction facility at its Manistee facility. See
"Business - The Chemical Division."
The Company also intends to use approximately $4 million of the net
proceeds of the Offering for the expansion and development of the Company's
Environmental Products and Services Division. See "Business - Environmental
Products and Services Division."
The balance of the net proceeds will be used by the Company for working
capital, of which approximately $6 million is expected to support the working
capital requirements of operating the Manistee facility, and general corporate
purposes, including possible purchases of capital equipment to facilitate
further growth in the Company's operations and other capital expenditures.
Pending application of the net proceeds, the Company intends to invest such
proceeds in short-term, investment grade, interest-bearing investments.
MARKET PRICE OF COMMON STOCK AND DIVIDENDS
The Common Stock is traded on the Nasdaq National Market under the
symbol "AMBR." The following table sets forth, for the periods indicated, the
high and low sales prices per share of the Common Stock as reported by the
Nasdaq National Market.
Fiscal Year Ended June 30,
1994 High Low
---- ---- ----
September 30, 1993 $4-3/4 $3-1/4
December 31, 1993 6-1/4 3-1/2
March 31, 1994 6 3-3/4
June 30, 1994 5-1/4 4-1/8
1995
----
September 30, 1994 4-3/4 4
December 31, 1994 6-3/4 3-7/8
March 31, 1995 5-1/2 4-1/2
June 30, 1995 5-1/4 4-1/4
1996
----
September 30, 1995 5-3/4 4-1/4
December 31, 1995 8-5/8 5-1/4
March 31, 1996 11-3/4 7-7/8
June 30, 1996 (through
June 13, 1996) 12-1/2 9-3/4
On June 13, 1996, the closing sale price for the Common Stock was
$12.50. As of June 13, 1996, there were approximately 50 holders of record of
the Common Stock.
AMBAR has never paid cash dividends on its Common Stock and its credit
facility prohibits the payment of dividends. The Company currently intends to
retain earnings to finance the growth and development of its business and does
not anticipate paying cash dividends in the foreseeable future. Any payment
of cash dividends in the future will depend upon the financial condition,
capital requirements, credit arrangements and earnings of the Company as well
as other factors the Board of Directors may deem relevant.
CAPITALIZATION
The following table sets forth the capitalization of the Company at May
31, 1996, and as adjusted to give effect to the sale of the 3,000,000 shares
of Common Stock offered by the Company hereby (at an assumed offering price of
$12.50), the exercise of warrants to purchase 110,000 shares of Common Stock
by a Selling Shareholder and the application of the estimated net proceeds
therefrom. This table should be read in conjunction with the Company's
consolidated financial statements, including the notes thereto, appearing
elsewhere in this Prospectus.
May 31, 1996
----------------------
Actual As Adjusted
------ -----------
(In thousands)
Revolving line of credit . . . . . . . . . . . . $ 8,526 $ --
======== ==========
Long-term debt, including current portion. . . . $ 6,122 $ 2,730
Capital lease obligations. . . . . . . . . . . . 234 234
Stockholders' equity:
Preferred Stock, $.01 par value; 10 million
shares authorized, no shares outstanding . . -- --
Common Stock, $.01 par value; 25 million
shares authorized, 3,701,505 shares
outstanding; 6,811,505 shares as
adjusted . . . . . . . . . . . . . . . . . 37 68
Paid-in capital . . . . . . . . . . . . . . . 12,526 48,101
Retained earnings . . . . . . . . . . . . . . 2,415 2,415
-------- ----------
Total stockholders' equity . . . . . . . . 14,978 50,584
Total capitalization . . . . . . . . . . . . $ 21,334 $ 53,548
======== ==========
SELECTED CONSOLIDATED FINANCIAL DATA
The following table contains selected consolidated financial data for
the Company for each of the years in the five-year period ended June 30, 1995
and as of and for the nine months ended March 31, 1995 and 1996. The
financial information as of and for each of the years in the five-year period
ended June 30, 1995 is derived from the Company's audited consolidated
financial statements and notes thereto. The financial information as of and
for the nine months ended March 31, 1995 and 1996 is unaudited but, in the
opinion of the Company's management, includes all adjustments, which include
only normal recurring adjustments, necessary for a fair presentation of the
results of operations and financial position for these periods. Operating
results for the nine months ended March 31, 1996 are not necessarily
indicative of the results that may be expected for the entire fiscal year.
This information should be read in conjunction with the consolidated financial
statements and notes thereto and "Management's Discusson and Analysis of
Financial Condition and Results of Operations" appearing elsewhere herein.
<TABLE>
<CAPTION>
Nine Months Ended
Years Ended June 30, March 31,
----------------------------------------------------- ---------------------
1991 1992 1993 1994 1995 1995 1996
-------- -------- -------- -------- -------- -------- --------
(in thousands, except per share amounts)
<S> <C> <C> <C> <C> <C> <C> <C>
Statement of Operations Data:
Revenues:
Oilfield products and services . . . . $ 21,425 $ 17,340 $ 20,973 $ 37,546 $ 31,661 $ 24,842 $ 27,883
Environmental products and
services<F1>. . . . . . . . . . . . . -- 1,677 3,946 5,762 6,416 4,539 7,725
-------- -------- -------- -------- -------- -------- --------
Total revenues. . . . . . . . . . . 21,425 19,017 24,919 43,308 38,077 29,381 35,608
-------- -------- -------- -------- -------- -------- --------
Cost of revenues:
Oilfield products and services . . . . . 16,717 13,598 18,400 31,146 28,197 21,652 24,630
Environmental products and
services<F1>. . . . . . . . . . . . . -- 1,296 4,196 5,220 5,039 3,418 7,087
-------- -------- -------- -------- -------- -------- --------
Total cost of revenues. . . . . . . 16,717 14,894 22,596 36,366 33,236 25,070 31,717
-------- -------- -------- -------- -------- -------- --------
Gross profit . . . . . . . . . . . . . . 4,708 4,123 2,323 6,942 4,841 4,311 3,891
Selling, general and administrative . . . 2,216 3,063 4,139 4,567 4,470 3,302 3,418
-------- -------- -------- -------- -------- -------- --------
Operating income (loss) . . . . . . . . . 2,492 1,060 (1,816) 2,375 371 1,009 473
Interest expense . . . . . . . . . . . . (351) (170) (133) (390) (748) (556) (704)
Interest income . . . . . . . . . . . . . 4 75 56 34 51 13 29
-------- -------- -------- -------- -------- -------- --------
Income (loss) before income taxes . . . . 2,145 965 (1,893) 2,019 (326) 466 (202)
Income tax provision (benefit). . . . . . 814 353 (693) 742 (90) 172 (73)
-------- -------- -------- -------- -------- -------- --------
Net income (loss) . . . . . . . . . . . . $ 1,331 $ 612 $ (1,200) $ 1,277 $ (236) $ 294 $ (129)
======== ======== ======== ======== ======== ======== ========
Net income (loss) per common share . . . $ .72 $ .22 $ (.33) $ .35 $ (.06) $ .08 $ (.03)
Weighted average common shares
outstanding . . . . . . . . . . . . . . 1,855 2,817 3,628 3,632 3,667 3,663 3,732
Cash dividends per common share . . . . . -- -- -- -- -- -- --
Balance Sheet Data:
Working capital . . . . . . . . . . . . . $ 688 $ 7,156 $ 6,660 $ 7,428 $ 7,573 $ 8,541 $ 6,167
Total assets . . . . . . . . . . . . . . 9,153 18,429 21,791 32,572 27,746 27,938 39,077
Long-term liabilities . . . . . . . . . . 1,579 1,244 2,337 2,440 3,947 3,764 6,611
Stockholders' equity . . . . . . . . . . 2,047 14,778 13,586 14,948 14,874 15,938 14,865
</TABLE>
____________________
[FN]
<F1> The Company acquired its environmental operations in December 1991.
The Company expanded its environmental operations in July 1992 with
the purchase of the Oil Mop assets (see Note 2 of Notes to
Consolidated Financial Statements).
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following should be read in conjunction with the "Selected
Consolidated Financial Data" and the notes thereto and the consolidated
financial statements and the notes thereto of the Company appearing elsewhere
herein.
Overview
Historically, the Company's revenues and operating income have been
principally derived from the sale of CBFs and drilling muds to oil and gas
operators primarily in the Gulf of Mexico and onshore along the Gulf Coast.
Therefore, the levels of the Company's revenues and operating income have been
subject to the financial and operating factors associated with the energy
business. The Company's principal competitors in its oilfield fluids business
are believed to have certain cost advantages due to their partial vertical
integration. Importantly, the Company has historically depended on certain of
its competitors for a substantial volume of the raw materials used in the
Company's CBF product line which management believes has significantly
impacted the Company's profitability.
AMBAR recently acquired access to a brine stream, and in February 1996
purchased a chemical production facility in Manistee, Michigan which is
currently being retrofitted to produce liquid and dry calcium chloride,
important raw materials in the production of CBFs that also have a number of
other commercial and industrial applications. The Company believes that its
production of low cost calcium chloride at the facility will enable it to
diversify its business through the sale of these products to non-oilfield
customers. The Company also believes that the product costs related to its
CBFs will be favorably affected through its production of calcium chloride at
the Manistee facility. The addition of a bromine extraction process at the
Manistee facility is expected to generate significant cost savings in the
production of the Company's higher margin CBFs.
A portion of the Company's revenues is derived from its Environmental
Products and Services Division. The activity in the environmental services
market is highly dependent upon compliance and enforcement of existing
regulations. The Company's operating results from its oil spill response
business varies greatly from period to period depending on the timing and
occurrence of major oil spills; however, the Company believes that there is
increasing demand for its environmental services and the Company intends to
use a portion of the proceeds of the Offering to expand its oil spill response
capabilities in the Texas Gulf Coast region. The Company has also incurred
significant expenses in the start-up of its remediation and marine operations
that have exceeded the revenues generated thus far by such businesses. There
can be no assurance as to the future profitability of such businesses.
Results of Operations
General.
The following table sets forth, for the periods indicated, the relative
percentages that certain income and expense items bear to revenues:
<TABLE>
<CAPTION> Nine Months Ended
Years Ended June 30, March 31,
------------------------------- -----------------------
1993 1994 1995 1995 1996
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
REVENUES:
Oilfield products and services . . . . 84.2% 86.7% 83.2% 84.6% 78.3%
Environmental products and services . . 15.8 13.3 16.8 15.4 21.7
---- ---- ---- ---- ----
Total revenues . . . . . . . . . . 100.0 100.0 100.0 100.0 100.0
COST OF REVENUES: ----- ----- ----- ----- -----
Oilfield products and services . . . . 73.9 71.9 74.1 73.7 69.2
Environmental products and services . . 16.8 12.1 13.2 11.6 19.9
---- ---- ---- ---- ----
Total cost of revenues . . . . . . 90.6 84.0 87.3 85.3 89.1
GROSS PROFIT . . . . . . . . . . . . . . 9.4 16.0 12.7 14.7 10.9
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES . . . . . . . . 16.6 10.5 11.7 11.2 9.6
---- ---- ---- ---- ---
OPERATING INCOME (LOSS) . . . . . . . . . (7.2) 5.5 1.0 3.5 1.3
OTHER INCOME (EXPENSE):
Interest expense . . . . . . . . . (0.5) (0.9) (2.0) (1.9) (2.0)
Interest income . . . . . . . . . 0.2 0.1 0.1 0.0 0.1
--- --- --- --- ---
INCOME (LOSS) BEFORE TAXES . . . . . . . (7.5) 4.7 (0.9) 1.6 (0.6)
INCOME TAX PROVISION (BENEFIT) . . . . . (2.8) 1.7 (0.2) 0.6 (0.2)
----- --- ----- --- -----
NET INCOME (LOSS) . . . . . . . . . . . . (4.7) 3.0 (0.7) 1.0 (0.4)
===== === ===== === =====
</TABLE>
Nine Months Ended March 31, 1996 Compared to Nine Months Ended March 31,
1995. Revenues from oilfield products and services increased 12.2% from
approximately $24.8 million in the 1995 period to $27.9 million in the 1996
period. Sales volumes of CBFs and drilling muds have increased, partially
reflecting higher activity levels in the Gulf of Mexico and the Company's
addition of sales staff to market these products.
Revenues from environmental products and services increased 70.2% from
$4.5 million in the 1995 period to $7.7 million in the 1996 period. Sales of
Oil Mop equipment more than doubled from approximately $916,000 in the 1995
period to approximately $2.0 million in the 1996 period due to increased sales
efforts related to these products. Revenues from Oil Mop's spill response
operations increased from $2.2 million to $3.3 million largely due to response
efforts related to a major oil spill near Galveston, Texas. In the 1996
period, sales of rigid hull inflatable boats by AMBAR's marine operations
generated revenues of approximately $204,000, and revenues from the
remediation operations were approximately $375,000. As the marine and
remediation operations were new operations for the Company in 1996, they did
not generate revenues in the 1995 period.
Cost of revenues from oilfield products and services increased 13.8%
from $21.7 million in the 1995 period to $24.6 million in the 1996 period.
This increase is primarily due to increased product costs reflecting the
increased sales volumes during the same period. Average margins on oilfield
products sales were approximately 40.0% in the 1995 period compared to
approximately 37.2% in the 1996 period.
Cost of revenues for environmental products and services increased
107.3% from $3.4 million in the 1995 period to $7.1 million in the 1996
period. Costs related to Oil Mop equipment and Oil Mop response activities
increased by approximately $885,000 and $940,000, respectively, in line with
the revenue increases discussed above. In the 1996 period, costs related to
AMBAR's marine operations were approximately $296,000 and cost of revenues for
the remediation operations were approximately $1.3 million. As the marine and
remediation operations were new operations for the Company in 1996, there were
no related costs in the 1995 period.
Selling, general and administrative expenses increased 3.5% from
approximately $3.3 million in the 1995 period to approximately $3.4 million in
the 1996 period, with such expenses consisting principally of salaries and
other compensation expense. The increase relates primarily to additional
personnel costs reflecting the increase in the Company's sales force for the
Company's CBFs, drilling mud and Oil Mop product lines.
Interest expense increased from approximately $556,000 in the 1995
period to $704,000 in the 1996 period. This increase relates primarily to
additional amounts outstanding under the revolving line of credit.
The income tax provision for the 1996 period is based on the expected
annual rate for the fiscal year ending June 30, 1996.
Fiscal 1995 Compared to Fiscal 1994. Revenues from oilfield products
and services decreased 15.7% from approximately $37.5 million in fiscal 1994
to $31.7 million in fiscal 1995. Sales volumes and revenues were adversely
affected by reduced activity levels in the Gulf of Mexico. As a result,
pricing in the market was very competitive, and the Company was not willing to
reduce prices to maintain sales revenues.
Revenues from environmental products and services increased 11.3% from
$5.8 million in fiscal 1994 to $6.4 million in fiscal 1995. Revenues from Oil
Mop's spill response operations increased from $2.1 million in fiscal 1994 to
$3.0 million in fiscal 1995, offsetting a slight decline in revenues from the
Company's other environmental operations.
Cost of revenues from oilfield products and services decreased 9.5% from
$31.1 million in fiscal 1994 to $28.2 million in fiscal 1995. Gross profit
from oilfield products and services decreased from approximately 17% of
revenues in fiscal 1994 to approximately 11% of revenues in fiscal 1995.
Product costs decreased with lower sales volumes; however, other costs were
more fixed in nature and did not decrease in direct proportion to revenues.
Cost of revenues for environmental products and services decreased 3.5%
from $5.2 million in fiscal 1994 to $5.0 million in fiscal 1995. Costs
related to the Oil Mop operations increased due to the revenue increases
during the same period. This was offset by cost reductions in other areas.
Selling, general and administrative expenses for fiscal 1995 were $4.5
million compared to $4.6 million in fiscal 1994 and increased to 11.7% of
revenues in fiscal 1995 from 10.5% of revenues in fiscal 1994.
Interest expense increased from approximately $390,000 in fiscal 1994 to
$748,000 in fiscal 1995. The increase was primarily due to higher average
borrowings under the revolving line of credit at higher interest rates.
During fiscal 1994, revolving debt averaged $2.9 million at an average
interest rate of 7.9%. During fiscal 1995, revolving debt averaged $5.0
million at an average interest rate of 9.6%. The increased debt levels under
the revolving line of credit reflected the higher use of such borrowing to
fund working capital. The amount of term debt outstanding was also higher
during fiscal 1995, and because the term debt bore interest at a floating rate
based on prime, the interest rate was also higher.
The Company's effective income tax rate was 28% in fiscal 1995 compared
to 37% in fiscal 1994. This change was due to expenses which are not
deductible for income tax purposes and, accordingly, generate no tax benefit.
In fiscal 1994, these expenses were not as significant in relation to income
before taxes of $2.0 million and, accordingly, did not significantly affect
the tax rate.
Fiscal 1994 Compared to Fiscal 1993. Revenues from oilfield products
and services increased 79.0% from $21.0 million in fiscal 1993 to $37.5
million in fiscal 1994. Sales volumes of CBFs and drilling mud increased due
to improved activity levels in the Gulf of Mexico. Approximately $3.2 million
of the increase resulted from the entry by the Company into the wholesale
drilling mud business (with the Company selling certain of its drilling mud
products on a wholesale basis to other distributors).
Revenues from environmental products and services increased 46.0% from
$3.9 million in fiscal 1993 to $5.8 million in fiscal 1994. Sales of Oil Mop
equipment in fiscal 1994 of $1.9 million represented a 59% increase from the
prior year. The Oil Mop assets were acquired in July 1992, and that operation
was in a start-up phase for a portion of fiscal 1993. Oil Mop's spill
response operations, which commenced during fiscal 1994, generated revenues of
approximately $2.1 million. The majority of these revenues were from response
efforts related to two major oil spills, one in Tampa, Florida and one in
Puerto Rico. Fiscal 1993 included revenues of approximately $1.5 million from
the construction and export of a closed-loop mud system to a customer in
Western Siberia; there were no similar revenues in fiscal 1994.
Cost of revenues from oilfield products and services increased 69.3%
from $18.4 million in fiscal 1993 to $31.1 million in fiscal 1994. The
increase is primarily due to increased product costs related to the increased
sales volumes during the same period. Average margins on products sales
decreased by approximately 2.7% in fiscal 1994 from fiscal 1993.
Cost of revenues for environmental products and services increased 24.4%
from $4.2 million in fiscal 1993 to $5.2 million in fiscal 1994. This
increase is primarily due to costs related to the Oil Mop equipment sales and
Oil Mop response activities noted above. Fiscal 1993 included costs of
approximately $1.2 million related to the construction and export of a closed-
loop mud system to a customer in Western Siberia.
Selling, general and administrative expenses for fiscal 1994 were $4.6
million compared to $4.1 million in fiscal 1993, but declined to 10.5% of
revenues in fiscal 1994 from 16.6% of revenues in fiscal 1993.
Interest expense increased from approximately $133,000 in fiscal 1993 to
$390,000 in fiscal 1994. The increase was primarily due to borrowings under
the line of credit. In fiscal 1993, there were no borrowings under the line
of credit until the third quarter. In fiscal 1994, there were amounts
outstanding under the line of credit throughout the year.
The Company's effective income tax rate for fiscal 1994 of 37% was the
same as the effective rate for fiscal 1993.
Liquidity and Capital Resources
Funding for the Company's activities has historically been provided by
operating cash flows and bank financing. There have been no funds raised
through equity issuances since the Company's initial public offering in 1991.
The Company's current primary cash needs include (i) the retirement of
approximately $13 million in borrowings used to date for working capital
purposes and to acquire and retrofit the Manistee facility for production of
calcium chloride as well as approximately $3 million in cash necessary to
complete the retrofitting, (ii) the expansion and development of the Company's
Environmental Products and Services Division, including funding for its Oil
Mop, remediation and AMBAR Marine businesses, and (iii) funding for working
capital requirements expected to result from the expansion of AMBAR's business
in fiscal 1997 and fiscal 1998. The Company expects to repay bank
indebtedness with the proceeds of the Offering and subsequently to utilize
approximately $7 million of bank borrowings to finance the addition of a
bromine extraction process at the Manistee facility. The Company believes
that the net proceeds of this Offering together with internally generated
funds and amounts available under its line of credit and term loans will be
sufficient to meet the Company's liquidity and capital needs for the
foreseeable future.
In June 1995, the Company entered into a $20.0 million bank credit
facility consisting of a $10.0 million revolving line of credit, a $3.0
million term loan and a $7.0 million construction/term loan. The three loans
bear interest at the bank's base rate (8.25% at March 31, 1996) or at the 30-
day, 60-day or 90-day LIBOR rate plus 2.5%. The $10.0 million revolving line
of credit expires on October 31, 1996. The $3.0 million term loan will be
amortized in monthly installments with a balloon payment due on April 30,
2000. Through June 30, 1996, monthly interest payments only have been made on
the amount outstanding under the $7.0 million construction/term loan. Monthly
principal payments will commence on July 20, 1996, with a balloon payment due
on June 20, 2000. At March 31, 1996 approximately $9.1 million was
outstanding under the line of credit, $2.8 million was outstanding under the
term loan, and $3.1 million was outstanding under the construction/term loan.
As of March 31, 1996, the Company was not in compliance with certain
provisions of the loan agreements. The bank has agreed to waive compliance
with these provisions.
Operating Activities. In the nine months ended March 31, 1996, net cash
used by operating activities was $2.5 million compared to net cash provided by
operating activities of $1.6 million in the nine months ended March 31, 1995.
The cash used in the 1996 period was primarily due to an increase in accounts
receivable and a reduction in net income. In fiscal 1995, net cash provided
by operating activities was $2.0 million compared to net cash used in
operating activities of $3.4 million in fiscal 1994 and $1.6 million in fiscal
1993. In fiscal 1995, accounts receivable, inventory, accounts payable and
accrued liabilities all decreased primarily due to lower revenues, and
correspondingly, the larger working capital needs in fiscal 1994 were the
result of the relatively sizeable increase in revenues that year.
Investing Activities. Net cash used in investing activities was $5.1
million in the nine months ended March 31, 1996. Net cash used in investing
activities was $1.5 million in fiscal 1995, $1.6 million in fiscal 1994 and
$1.5 million in fiscal 1993. For all periods the principal use of cash was
for capital expenditures in the Company's oilfield and environmental
businesses.
Capital expenditures in fiscal 1995 of $1.6 million included amounts for
the replacement of equipment and improvements to the Company's oilfield fluids
business, for equipment to expand the Company's oil and hazardous materials
spill response capabilities, and for the equipment necessary for the start-up
of the remediation operations. In July 1992, the Company purchased
substantially all the operating assets of Oil Mop, Inc. The assets were
purchased for approximately $1.0 million in cash.
Financing Activities. Net cash provided by financing activities was
$8.0 million for the nine-month period ending March 31, 1996. Net cash used
in financing activities was $715,000 in fiscal 1995 compared to net cash
provided by financing activities of $5.1 million in fiscal 1994 and $2.2
million in fiscal 1993. The increase in cash provided for the nine-month
period ended March 31, 1996 reflects additional borrowing under the Company's
term loan and revolving line of credit, principally to finance the purchase
and retrofitting of the Manistee facility.
Impact of Accounting Standards
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 ("SFAS 121")
which is required to be adopted by the Company no later than the fiscal year
ended June 30, 1997. The Company has not determined what effect, if any,
adoption of SFAS 121 will have on the Company's financial position or results
of operations.
BUSINESS
General
AMBAR is principally engaged in the custom blending, distribution and
sale of CBFs, drilling muds and other chemicals used in the drilling,
completion and workover of oil and gas wells. The principal consumers of
AMBAR's products are oil and gas operators, particularly those with operations
offshore in the Gulf of Mexico and onshore along the Gulf Coast. Oil and gas
operators use muds during the well drilling stage to control formation
pressures, lubricate and cool drill bits, and carry cuttings out of the hole.
CBFs, which generally are significantly more expensive than muds, are used
primarily in the completion and workover stages, when well operators seek to
maintain or restore well productivity.
To diversify its business and to achieve partial vertical integration of
its oilfield business, AMBAR has recently secured access to a brine stream and
acquired the Manistee facility that it is presently retrofitting to produce
liquid and dry calcium chloride, important raw materials used in the
production of the Company's CBFs and which also have a number of other
commercial and industrial applications.
AMBAR also provides certain environmental products and services relating
to oil spill response, control and remediation, environmental contingency
planning and the control and treatment of both hazardous and non-hazardous
oilfield waste.
The Company was incorporated in Delaware in 1980 and will be
reincorporated in Louisiana prior to consummation of the Offering. The
principal executive offices of AMBAR are located at The AMBAR Building, 221
Rue de Jean, Lafayette, Louisiana 70508 (telephone no. (318) 237-5300).
Strategy
In order to reduce its exposure to fluctations in the level of drilling
and exploration activities in the oil and gas industry and to reduce its
dependence on its competitors for certain raw materials, AMBAR recently
secured access to a brine stream through a feedstock agreement with Martin
Marietta and purchased an evaporation facility in Manistee, Michigan. The
Company believes that the Manistee facility will allow AMBAR to diversify its
business by enabling it to penetrate new non-oilfield commercial and
industrial markets and to moderate the product costs for its CBFs.
Diversify into Non-Oilfield Markets. The Company intends to capitalize
on its ability to produce significant volumes of calcium chloride, and
eventually bromine, at a low cost by actively marketing such products for non-
oilfield commercial and industrial uses.
Calcium Chloride. The Company intends to diversify its business
through the sale of the liquid and dry calcium chloride produced at the
Manistee facility into several larger non-oilfield markets. The most
significant commercial applications of calcium chloride are to de-ice roads,
control road dust and stabilize roadbeds.
Bromine. The Company also intends to add a bromine extraction
process to the Manistee facility. The primary commercial applications of
bromine are in pharmaceuticals, specialty chemicals and fire retardants.
Bromine is also a raw material used in certain important components of many of
the Company's higher density, higher cost CBFs.
Increase Revenues and Profitability of Oilfield Fluids Business. AMBAR
believes that the product costs relating to its CBFs will be favorably
affected through its production of calcium chloride at the Manistee facility.
Although the Company believes that it will continue to procure calcium
chloride from third parties that are geographically convenient, it also
believes that its introduction of a substantial volume of low cost calcium
chloride into the market will allow it to moderate its product costs. In
addition, once AMBAR adds a bromine extraction process, it expects to realize
significant cost savings in the production of its higher margin CBFs. The
Company also intends to expand its share of the CBF and drilling mud markets
by increasing the sales force dedicated to these product lines.
Expand and Develop Environmental Products and Services Business. A
portion of the net proceeds of the Offering will be used by AMBAR to expand
its oil spill response capabilities in the Texas Gulf Coast region and to
continue development of new applications for its environmental products. The
Company is also currently using and testing AmBaSol, a proprietary chemical
designed to rapidly dissolve hazardous oilfield waste (found in barium sulfate
scale), in applications such as well stimulation, vessel cleaning onshore and
offshore and the remediation of hazardous oilfield waste. AMBAR intends to
continue development of applications for, and increase its marketing of, this
product.
The Chemical Division
Facility Acquisition. In February 1996, the Company purchased an
evaporation facility in Manistee, Michigan, and is currently in the process of
retrofitting the facility, which was previously used to produce dry technical-
, industrial- and food-grade sodium chloride, to produce liquid and dry
calcium chloride. The Company expects the facility to begin producing liquid
calcium chloride by July 1, 1996 and to begin producing dry calcium chloride
by the end of September 1996. The Company also currently intends to add a
bromine extraction process to the facility. The facility will obtain all of
its raw material feedstock via pipeline from a nearby chemical manufacturing
facility owned and operated by Martin Marietta pursuant to a feedstock supply
agreement entered into between the Company and Martin Marietta in May 1995.
Management believes that its cost of producing and marketing calcium
chloride and bromine at its Manistee facility could be significantly below
that of other producers because, as discussed below, (i) AMBAR will extract
such raw materials from the brine stream supplied by Martin Marietta and thus
will not incur the costs of exploiting, managing and maintaining brine wells,
(ii) the facility will produce liquid and dry calcium chloride by using
efficient, relatively inexpensive evaporation processes to concentrate calcium
chloride in the brine stream and (iii) the facility is strategically located
in close proximity to the larger markets for these products.
The Company believes that its production of low cost liquid and dry
calcium chloride at the facility will enable it to diversify its business
through the sale of these products to non-oilfield customers. AMBAR also
believes that the product costs related to its CBFs will be favorably affected
through its production of calcium chloride at the Manistee facility. Although
the Company believes that it will continue to procure calcium chloride from
third parties that are geographically convenient, it also believes that its
introduction of a substantial volume of low cost calcium chloride into the
market will allow it to moderate its product costs.
In addition, once AMBAR adds a bromine extraction process to the
Manistee facility, it expects to realize significant cost savings in the
production of its higher margin CBFs because bromine is a raw material used in
certain important components of many of the Company's higher density, higher
cost CBFs. There are few suppliers of bromine, and the Company believes there
is a high demand for this product in a number of non-oilfield markets.
Marketing. Management believes that the brine stream volume to be
provided by Martin Marietta and the production capacity of the Manistee
facility will enable the Company to become one of the largest producers of
calcium chloride in North America. Substantially all of the facility's
production of liquid and dry calcium chloride will be marketed to third
parties. Currently, the most significant commercial applications of calcium
chloride outside of the oil and gas industry are to de-ice roads, control road
dust and stabilize roadbeds. Other applications include concrete additives,
tire ballasting, brine refrigeration, food processing, livestock feed
additives and micronutrient fertilizers. The Company believes that its
ability to produce high volumes of low cost calcium chloride will enable it to
successfully enter and compete effectively in the markets for these products,
particularly against those producers located outside the United States and
others with higher production and transportation costs.
In addition, once the Company adds a bromine extraction process to the
Manistee facility, management believes it will be one of only three major
producers of elemental bromine in North America, although the two largest
suppliers are significantly larger than the Company. The primary commercial
applications of bromine are in pharmaceuticals, specialty chemicals and fire
retardants. Arkansas and Michigan are the only states in North America where
elemental bromine is found, and the primary barrier to new entrants to the
market is the high cost of drilling the necessary extraction wells. The
Company believes that its access to the low cost feedstock provided by Martin
Marietta will enable the Company to compete effectively against much larger
suppliers of bromine who must bear the cost of exploiting, managing and
maintaining their own brine wells.
Although the Company has no prior experience in marketing calcium
chloride or bromine to third parties, in order to market the products produced
by its facility, the Company has engaged Meridian, the principals of which the
Company believes possess the technical and marketing capabilities required to
market and sell such products effectively. Meridian's principals also have
extensive experience in locating sources of, and acting as distributors for,
these products, for both oil and gas and commercial and industrial
applications. The Company believes that this experience will benefit the
Company in its sale of products produced by its facility.
Distribution. The Company will transport liquid calcium chloride by
rail, truck and barge. Because of its greater volume and weight, and thus
higher transportation costs, the Company anticipates that most of the liquid
calcium chloride will be transported to Midwest destinations. The Company
will also lease storage tanks for liquid calcium chloride at strategic
locations, such as Chicago, and will be able to use its own storage facilities
at its stockpoints for its storage needs along the Gulf Coast. The Company's
principal customers for liquid calcium chloride will be distributors who will
re-sell the product to end-users such as state and local municipalities,
primarily for use in dust control, road stabilization and de-icing.
Dry calcium chloride will be shipped by the Company in sacks or in bulk,
by truck or rail, primarily to customers in the Midwest, the East Coast and
Canada. The Company anticipates that approximately 80-90% of its dry calcium
chloride production will be sold to distributors who will re-sell the product
to municipalities and other end-users, to be used primarily for snow and ice
melt applications. The Company expects that 10-20% of its production will be
sold directly to end-users such as oil refineries and users in the food and
canning industries.
Once the facility is equipped to produce bromine, bromine liquid will be
shipped by special trucks and rail and sold directly to end-users throughout
the United States for use in pharmaceuticals, lubricants, fire retardants and
other similar industrial applications.
The Feedstock Agreement. The Martin Marietta facility exploits
naturally occurring, underground brine streams at or near its facility site to
extract magnesium that it uses to produce magnesium oxide and magnesia-based
products. Historically, Martin Marietta has injected the unused remainder of
the liquid brine stream into underground wells that it maintains at its
facility site. Under the feedstock agreement, which has an initial term due
to expire December 31, 2003, Martin Marietta will feed the brine stream by
pipeline to the Company's facility. The brine stream contains, along with
other salts, significant concentrations of calcium chloride, which the Company
will concentrate through the evaporation process described below, and sodium
bromide, from which bromine will be extracted once the Company adds the
bromine extraction process. Management believes that it has secured a long-
term, reliable, low cost source of brine for the extraction of calcium
chloride and bromine.
Although AMBAR will return a substantial portion of the brine stream to
Martin Marietta, the volume remaining for disposal by Martin Marietta will be
measurably reduced through the evaporation process employed at AMBAR's
facility. The Company believes that because Martin Marietta will obtain
significant benefits through the Company's evaporation of the brine stream, it
is unlikely that Martin Marietta would voluntarily interrupt the feedstock
supply. Martin Marietta will provide the brine stream to the Company without
charge until January 1, 1998, and thereafter will charge the Company a formula
price based on the quantity of each product sold by the Company. After
January 1, 2000, Martin Marietta will also charge a fixed base price in
addition to the formula price. Although the feedstock agreement contains
provisions designed to ensure an uninterrupted brine flow and to pay the
Company's fixed costs if Martin Marietta ceases operations or is otherwise
unable to continue to provide an adequate flow of brine, there can be no
assurance that such provisions will be adequate to protect the Company's
interests or that the Company will achieve its expected revenues from the
Manistee facility if the brine stream is interrupted.
Production Process. When the brine stream initially enters the
facility, it will be partially evaporated in an evaporator with the result
that the calcium chloride concentration in the remaining brine solution will
be increased to between 42% and 47%. A portion of the brine solution will
then be sold by the Company as liquid calcium chloride. The remainder of the
brine stream will be further evaporated by flowing over a fluidized heated
bed, resulting in dry calcium chloride with a concentration in excess of 95%.
Once the bromine extraction process is added, the bromine will be extracted
prior to the brine stream entering the evaporator by mixing chlorine with the
brine stream in a process similar to that currently used by certain of the
Company's competitors.
The Company believes that its evaporation processes will be superior to
and more cost-effective than the manufacturing processes used by certain of
its competitors to produce liquid calcium chloride. These competitors produce
liquid calcium chloride by neutralizing limestone with hydrochloric acid or as
a by-product of the Solvay process (treating sodium chloride with ammonia and
carbon dioxide) to produce soda ash. Management believes that the use of a
naturally occurring brine steam, the low cost of the feedstock and the
evaporation process will result in a process that is significantly less
expensive than either the hydrochloric acid or Solvay process and presents
significantly fewer environmental concerns than the hydrochloric acid process.
In addition, those of the Company's competitors that use an evaporation
process similar to the Company's to produce liquid calcium chloride must bear
the cost of exploiting, maintaining and operating their own brine wells, which
the Company will not.
In addition, the Company believes that the use of the fluidized beds to
produce dry calcium chloride is more efficient and cost effective than the
rotary kiln method used by most of its competitors because the fluidized beds
do not employ the high temperatures required to operate the kilns, resulting
in significantly lower energy costs.
Conversion and Operation of the Facility. The Company has collaborated
with Meridian, an engineering and marketing consulting firm, in designing and
engineering the retrofitted facility. In addition, the Company engaged
Buffalo Technologies Corporation to assess the feasibility of utilizing the
facility's existing evaporation process to produce calcium chloride, as well
as to confirm the Company's estimates of the productive capacity of the
facility following completion of the retrofitting. The Company has also
engaged Sulzer USA, Inc., an engineering firm, to design, manufacture and
install the fluidized beds to be used in the production of dry calcium
chloride. The Company also intends to engage a third-party engineering firm
to assist it in the design, engineering and construction of a bromine
extraction process at the facility.
Once the retrofitting of the facility is completed, it will be operated
by former employees of the prior owner of the facility as well as other
Company employees and the Meridian principals. The Company has hired one
electrical and four chemical engineers to manage the plant operations and has
hired the former assistant plant manager of the prior owner of the facility as
the Company's facility operations manager. Once all processes, including
those required to produce dry calcium chloride and bromine, are fully
operational, the Company expects to operate the facility with 30-35 operations
employees. The Company is currently installing a computer system at the
facility and upgrading its computer systems generally to assist in the
integration of operations and the implementation of management controls.
Oilfield Products and Services Division
General. AMBAR blends and sells CBFs and drilling muds used in the
drilling, completion and workover (repair and maintenance) of oil and gas
wells, primarily to offshore oil and gas operators in the Gulf of Mexico and
to onshore operators along the Gulf Coast. Oil and gas well operators use
CBFs and drilling muds principally to control pressure within the oil and gas
geological formation being exploited. This is achieved by the circulation of
such fluids, with varying densities, within the well bore to control pressure
within producing formations.
Generally, contributions to the Company's revenues from the sale of CBFs
and drilling muds are comparable, with approximately 42% and 40%,
respectively, of the Company's revenues being attributable to the sale of CBFs
and drilling muds for the fiscal year ended June 30, 1995. Both product lines
are usually available at all of the Company's stockpoints.
To support its products, the Company provides its customers with access
to specialized engineering services and specially trained, experienced
personnel. The Company believes that its broad range of products and services
and its strategically located stockpoints along the Louisiana and Texas
coastline enable it to compete effectively with other suppliers.
Demand for the Company's oilfield products and services is materially
dependent on the level of oil and gas well drilling, completion and workover
activity in the Gulf of Mexico, which in turn is influenced by fluctuations in
oil and gas prices. A well typically undergoes several workover procedures
during its productive life, since workovers are generally less costly and thus
more economically justifiable to an operator than drilling a new well.
Consequently, the Company believes that workover operations are not as
sensitive to fluctuations in the price of oil and gas as are drilling
operations.
Clear Brine Fluids. CBFs are aqueous solutions that are produced by
mixing water with various quantities of salts or brines such as calcium
chloride, calcium bromide and zinc bromide having different molecular weights.
Calcium chloride is generally used to produce lower density, lighter CBFs,
while calcium and zinc bromides are used to produce higher density, heavier
CBFs. Generally, higher density CBFs are more expensive to produce because
calcium and zinc bromide are more expensive materials than calcium chloride.
Although CBFs and drilling muds have similar capabilities in controlling
formation pressures, CBFs control formation pressure without damaging the
formation or inhibiting production. Oil and gas is generally recovered from
porous geologic formations, and it is not unusual for the pores of the
producing formation to become fully or partially occluded by minerals and
other solids, including solids from drilling muds. CBFs usually do not reduce
the permeability of an oil or gas geologic formation and thus do not impede
production; therefore, CBFs are generally used for well completion and
workover operations, when their ability to assist in the restoration of
production from an existing well (workover) makes their use cost effective.
CBFs are also used almost exclusively in offshore exploration and production
operations, which typically require a higher overall level of capital and
operating expenditures, making the relatively higher cost of CBFs less of a
factor.
Drilling Muds. The Company sells, in both liquid and dry form, drilling
muds as part of its strategy to be a full-service provider of fluids products
to the oil and gas industry. Drilling muds are solutions containing barite,
bentonite and other clays and chemicals. In contrast to CBFs, which are
solids-free, drilling muds contain solids that can plug pore spaces in
producing formations and impede oil and gas production. However, drilling
muds usually are significantly less expensive than CBFs, particularly at
higher densities, and are primarily employed during the drilling phase, where
they not only control formation pressure, but also lubricate and cool drill
bits and carry cuttings out of the hole. The Company sells a complete
drilling mud product line, as well as numerous additives to modify various
physical properties of the mud, including viscosity and gel strength (static
suspension). The Company also purchases and recycles used drilling mud.
Distribution. The Company operates 12 stockpoints where it stores
liquid and dry materials used in its CBF and drilling muds business. These
stockpoints are strategically located at various locations along the Louisiana
and Texas Gulf Coast to allow for prompt customer response and service.
Certain of the stockpoints also serve as bases for the Company's oil spill
response teams and house oil spill response equipment. The following table
provides certain information concerning the Company's stockpoints as of May
31, 1996.
Liquid Dry Bulk
Description Location Capacity<F1> Capacity<F2>
----------- -------- --------- ---------
Servicing offshore Berwick, LA <F3> . . . 4,000 8,350
Cameron, LA <F3> . . . 22,500 28,000
Fourchon, LA <F3>. . . 18,500 30,000
Houma, LA <F3> . . . . 2,400 9,000
Intracoastal City,
LA <F3>. . . . . . . 23,500 26,250
Venice, LA <F3>. . . . 13,000 20,550
Freeport, TX <F4>. . . 7,300 12,000
Galveston, TX . . . . 5,700 12,750
Servicing onshore Abbeville, LA <F5> . . -- --
New Iberia, LA <F3>. . 2,000 --
Hebbronville, TX . . . 5,000 24,000
Victoria, TX . . . . . -- 10,000
Portable storage . . . . . . . . . . . . 15,000 54,400
-------- --------
Total . . . . . . . . . . . . . . . . . 118,970 235,300
======== ========
____________________
<<FN>
<F1> Stated in barrels (42 gallons). Liquids stored at such facilities
are primarily CBFs and, to a lesser extent, recycled mud.
<F2> Stated in 100 pound sacks. The principal dry bulk product stored
at such facilities is barite, the principal raw material used in
drilling muds.
<F3> Also serves as an oil spill response location.
<F4> Use of this facility is pursuant to a service agreement under
which the owner of the property provides certain receiving,
storing, warehousing, handling and loading services for the
Company's products in return for payments based on sales.
<F5> Serves as the base for the Company's transportation fleet.
_______________________________________
The Company delivers CBFs and drilling mud to customers, and transports
used drilling mud and other non-hazardous oilfield wastes to approved disposal
sites designated by its customers, through the operation of a fleet of 40
heavy vehicles (of which 14 are owned and 26 are leased by the Company),
including 26 vacuum trucks. The Company also owns several flatbed trucks and
other specialized vehicles that it uses to serve its customers and for intra-
company distribution of its products and raw materials. The Company believes
that its transportation fleet provides it with a competitive advantage because
it allows the Company to shorten delivery times and reduce its inventory costs
because of its ability to transport fluids from stockpoint to stockpoint as
needed.
Rentals and Other Operations. The Company is also engaged in the rental
of equipment related to its product and service lines and provides dock
services at its stockpoints servicing offshore operations. Rental products
offered by the Company include portable liquid storage tanks used by offshore
or onshore operators, cuttings boxes used to transport well cuttings, pumps
and heavy equipment.
Raw Materials. The principal raw materials used by the Company in
producing CBFs are calcium chloride (liquid and dry), calcium bromide (liquid
and dry) and zinc bromide (liquid). Historically, one foreign and three
domestic suppliers have been the Company's principal sources of these raw
materials. Two of the domestic suppliers are also competitors of the Company
in the retail CBF market; however, the Company's Manistee facility will
produce liquid and dry calcium chloride once the retrofitting is complete,
lessening the Company's dependence on these suppliers. On a more limited
basis, the Company also recycles "used" calcium and zinc bromide-based CBFs
that it purchases from oil and gas operators, most of whom are its customers.
CBF recycling offers operators the companion benefits of (i) reducing the cost
of CBF use and (ii) reducing material handling costs of the operator by
providing an inexpensive alternative to transporting and disposing of used
CBFs.
The principal raw materials used in drilling mud are barite (barium
sulfate), which is used as a weighting material, and bentonite, an aluminum
silicate clay that contributes suspension, viscosity and filtration properties
to drilling mud. The Company has historically been able to obtain barite and
bentonite from a variety of sources in sufficient quantities at competitive
prices.
Environmental Products and Services Division
In addition to its CBF and drilling muds business, the Company provides
certain environmental products and services designed to respond to
environmental conditions and hazards generally related to the oil and gas
industry. Approximately 17% of the Company's fiscal 1995 revenues were
contributed by its environmental operations.
Environmental Products. Through its Oil Mop subsidiary, the Company
manufactures and sells a rope mop made of interwoven polypropylene fibers (the
"Rope Mop") that has a wide variety of oil spill response, industrial and
commercial applications. The Rope Mop has proven to be highly effective in
absorbing oil floating on the surface of water under a variety of climatic and
water surface conditions. The Rope Mop is usually incorporated into a machine
that both guides the mop across the water's surface and removes the oil
absorbed by the mop for collection. The Company has successfully manufactured
and sold Rope Mop machines that have the capacity to handle a wide range of
oil viscosities and to recover up to 200 barrels of oil per hour. In addition
to oil spill clean-up, there is a growing market for Rope Mops in other
commercial settings, including the food processing industry where it is used
to skim grease and fats from large food material vats.
Environmental Services. Oil Mop also provides rapid oil spill response
services throughout the United States and has the highest level of
classification granted by the United States Coast Guard as an Oil Spill
Response Organization (an "OSRO") for near shore and inland areas and rivers
and canals. The Company maintains oil spill response equipment and trained
personnel at 10 locations along the Louisiana coast, seven of which also serve
as its oilfield fluids stockpoints (see, "-Oilfield Products and Services
Division-Distribution"). The Company's three additional oil spill response
locations are in Belle Chasse and Port Allen, Louisiana, and Panama City,
Florida. The Company also maintains a small fleet of vehicles equipped at all
times to transport vessels, booms, absorbent materials and other equipment and
supplies to the appropriate location immediately upon notification of an oil
spill ("Immediate Response Equipment"). The Company plans to use a portion of
the proceeds of the Offering to purchase equipment necessary to expand its oil
spill response capabilities in the Texas Gulf Coast region.
The Company also provides environmental consulting on the proper
handling and supervision of hazardous waste materials, response training and
contingency planning, compliance support and drill management for customers
that operate along the Gulf Coast. Other services include real estate site
assessment, site sampling for hazardous contaminants, remedial investigation
and development of hazardous site closure plans.
Stimulation and Remediation Services - AmBaSol. The Company has
developed a non-hazardous chemical solvent that it markets under the trade
name AmBaSol and has developed a process that uses AmBaSol to dissolve barium
sulfate scale. Scale, which often forms within wells, can significantly
impede oil and gas flow and is considered non-hazardous oilfield waste ("NOW")
once removed from the well, the disposal of which is regulated by the state.
Hazardous levels of Naturally Occurring Radioactive Materials ("NORM"), which
is naturally present in the water and fluids of the oil emulsion, often
becomes embedded in the scale thus subjecting the scale to classification as
NORM, the disposal of which is currently more strictly regulated at the state
level than NOW. The Company plans to use a portion of the proceeds of the
Offering to continue to develop the applications for, and increase its
marketing of, AmBaSol.
Because it dissolves most forms of scale, the Company is using AmBaSol
for stimulating oil and gas production from within producing geologic
formations. The Company completed a test program that used AmBaSol to
dissolve barium sulfate scale in approximately 30 producing wells, resulting
in increased production. The Company believes that, under certain
circumstances, the use of AmBaSol to restore well productivity can be a viable
alternative to a workover procedure. The Company intends to license the use
of AmBaSol in the stimulation process to one or more oilfield service
companies which would then market and distribute this process.
AmBaSol can be injected in the tubing in pressure vessels, heater-
treaters, HP separators and other similar equipment, where it dissolves the
scale in a more efficient and cost-effective manner than conventional labor
intensive methods, and is the only non-destructive method of cleaning this
equipment. Traditional methods of removing scale are expensive, disruptive
and time-consuming, and operators often elect to dispose of the equipment as
the less expensive alternative. AmBaSol is a less expensive option because it
can be circulated within the vessel without removing it from the platform.
Following treatment, the vessel can be re-used or transferred or sold to other
operators.
The Company is also testing a process through which NORM-embedded barium
sulfate scale is removed from a well by the well operator and transported to
the Company's Cameron, Louisiana facility for treatment in a processing system
containing AmBaSol solution where the scale is dissolved and any remaining
solids can be disposed of as NOW.
Other Operations and Services
Laboratory Services. The Company has a 12,000 square foot laboratory
located in Lafayette, Louisiana that is equipped to provide environmental and
quality control testing as well as marine toxicity, corrosion analysis,
drilling and completion fluids evaluation, and other chemical analyses. The
laboratory was acquired in 1992 to provide testing and evaluation support for
AMBAR's product lines; however, more than 90% of the work performed by the
laboratory in fiscal 1995 was for customers. The laboratory is registered by
the EPA, which allows the Company to provide customers with EPA mandated
testing services. AMBAR believes that its ability to offer laboratory
services has strengthened the Company's ability to compete with its major
competitors in its core businesses.
Marine Operations. In 1993, the Company acquired the exclusive, world-
wide (outside of Scandinavia) right to manufacture and sell a light-weight,
aluminum RIB ("rigid inflatable boat") designed for use primarily as a rescue
craft. These boats, which meet all standards prescribed by the Safety of Life
at Sea international protocol ("SOLAS"), an international accord, are between
4.2 and 9 meters in length, can carry four to ten passengers, and are sold for
approximately $14,000 to $22,000 (for the smaller boats) or $90,000 to
$150,000 (for the larger boats). These boats are used as rescue vessels that
are maintained on board cruise ships and other passenger vessels. Under the
terms of the agreement, the Company is required to pay the designer a
commission equal to three percent of net sales on the first 10 boats sold and
a commission equal to two percent of all sales thereafter. The Company
completed construction of a prototype and obtained the necessary approvals and
certifications from the United States Coast Guard during fiscal 1995. It has
contracted with a local shipyard to construct the vessels and as of May 31,
1996 had sold seven of these boats and had an additional eleven boats under
construction pursuant to customer orders.
Properties
In addition to its stockpoints and oil response locations discussed
above, the Company has sales offices in Lafayette, New Orleans and Belle
Chasse, Louisiana and Houston and Dallas, Texas. Its laboratory and corporate
headquarters are located in Lafayette, Louisiana.
The Company's Manistee facility is an approximately 270,000 square foot
facility located on an approximately 32 acre parcel of land in Manistee,
Michigan. The Company also owns an 11 acre parcel of land in Manistee,
Michigan, which it purchased from Martin Marietta in October 1994 and intended
to use for the construction of an evaporation plant. The Company currently is
completing the sale of this parcel back to Martin Marietta for the same price
paid.
The Company leases all of the land for its stockpoints and other
facilities except for the Victoria, Texas and Belle Chasse, Louisiana
locations, which are owned by the Company. In addition, the Company owns
several of the buildings located at its leased stockpoints. All of the
Company's leased facilities are leased under long term lease agreements at
prevailing market rates.
Competition
Oil and gas operators generally consider CBFs and drilling muds to be
commodities, making the market for the Company's products highly competitive
and price-sensitive. Thus, the Company competes primarily on the basis of the
location of its stockpoints, the depth of its product and service lines, and
the quality of its service. The Company believes that it is an effective
competitor in each of these areas. The Company's depth of products and
services and its strategically-located stockpoints allow it to provide
products and services throughout virtually all stages of the life cycle of oil
and gas wells. Although many of the Company's competitors compete with it in
specific product and service lines and have substantially greater financial
resources than the Company, the Company does not believe that any of its
existing competitors currently provide as broad a range of product lines and
services as those it provides in the Gulf Coast area. The Company's
transportation fleet also allows it to respond promptly and efficiently to the
needs of its customers. The Company emphasizes a consistent, quality product
at a competitive price. The Company believes that these factors, together
with its experience and reputation in the industry and relationships with its
customers, enable it to effectively compete in its markets.
The Company's principal competitors in the CBF market along the Gulf
Coast are OSCA, Baroid and TETRA. Its principal competitors in the drilling
muds market are M-I Drilling, Baroid and INTEQ. In general, its competitors
in the CBF and drilling muds markets have substantially greater financial
resources than the Company.
The Company expects that it will face substantial competition in the
sale of products produced at its Manistee facility, which products are also
viewed as commodities and are extremely price-sensitive. The major
competitors in the calcium chloride market are Dow, General Chemical, TETRA
and OSCA. The major competitors in the bromine market are expected to be
Great Lakes, Albemarle Corporation, the Dead Sea Bromine Group, and to a
lesser extent, Dow, all of which have substantially greater resources than the
Company. The Company believes that the low cost brine stream provided by
Martin Marietta combined with the Company's cost-efficient production
processes and the strategic location of its facility will enable the Company
to compete effectively against these competitors.
Customers
The Company sells its CBF and drilling mud products and services
primarily to oil and gas operators along the Gulf Coast. In fiscal 1995 and
1993, no single customer accounted for more than 10% of the Company's total
revenues, while in fiscal 1994, Pennzoil Exploration & Production Co. was the
sole customer accounting for more than 10% of the Company's total revenues.
It has been the Company's experience that the mix of its largest customers
changes annually and the Company believes that the loss of any single customer
would not have a material adverse effect upon the Company.
The primary customers for the Company's liquid and dry calcium chloride
will be distributors who sell such products to municipalities and other end-
users. The principal customers of bromine will be industrial end-users. The
Company does not expect any customer of its chemical products to account for
more than 10% of the Company's total revenues.
Proprietary Technology
The Company relies on trade secrets, in-house expertise and continuing
technological advancement to maintain its competitive position. It is the
Company's practice to enter into confidentiality agreements with key employees
and consultants. There can be no assurance, however, that these measures will
prevent the unauthorized disclosure or use of the Company's trade secrets and
expertise or that others may not independently develop similar trade secrets
or expertise or obtain access to the Company's trade secrets, expertise or
other proprietary technology. The Company does not believe that trademark,
patent or copyright protection is of material importance to either the Company
or the industry. The Company believes, however, that it would require a
substantial period of time and substantial resources to independently develop
similar expertise or technology.
Regulatory Matters
Environmental Regulations. The operations of the Company are governed
by both federal and state environmental laws and regulations, principally
CERCLA, the Clean Air Act, the Clean Water Act, the Oil Pollution Act and the
Resource Conservation and Recovery Act, as well as similar state counterparts
of these statutes (collectively, "Environmental Laws"). The operations of the
Company and its customers are subject to these laws and the regulations which
implement these laws, which are enforced by the EPA and various other federal,
state and local environmental safety and health agencies and authorities.
Compliance with the requirements of these laws contributes to the demand for
the Company's products and services and also increases the Company's risk of
liability for environmental matters.
The Company has been named as a Potentially Responsible Party in an
administrative proceeding pertaining to the PAB Site. See "-Legal
Proceedings." As of the date hereof, other than in connection with the PAB
Site, the Company has not received notice of, nor been subjected to,
significant fines or other costs associated with compliance with applicable
Environmental Laws.
Other Regulations. The Company is subject to health and safety
standards promulgated by OSHA, including regulations related to the handling
of hazardous materials and wastes. The Company believes that its facilities
are in general compliance with all applicable safety and health laws. The
Company has never incurred a material fine in connection with safety or health
matters. However, risks of substantial costs and liabilities are inherent in
certain operations and certain products produced at the Company's stockpoints,
as they are with other companies engaged in the chemical industry, and there
can be no assurance that significant costs and liabilities will not be
incurred.
In its transportation operations, the Company is regulated by the
Department of Transportation, the Interstate Commerce Commission, the
Louisiana Public Service Commission, and the regulatory commission of each
other state through which its vehicles pass.
Seasonality
The Company's oilfield products operations in the Gulf of Mexico have
historically been seasonal due primarily to budgeting cycles of oil and gas
operators along the Gulf Coast. Generally, a peak in activity is reached in
the summer months (the Company's fourth and first fiscal quarters), as oil and
gas operators endeavor to complete planned programs by year end as well as due
to favorable weather conditions in the Gulf of Mexico.
AMBAR expects that sales of the calcium chloride produced at its
Manistee plant will also be stronger in the summer months (the Company's
fourth and first fiscal quarters), as customers store such products in
anticipation of the following winter season.
Employees
As of May 31, 1996, the Company had approximately 275 employees. Of
these, approximately 45 were employed in administration, 25 were employed in
sales, 35 were technical personnel, 10 were employed in the Company's
laboratory and the others were employed as warehousemen, servicemen and
drivers at the Company's stockpoints and facilities. Included in the
foregoing are approximately 15 employees working in the Company's Chemical
Division. The Company expects to hire an additional seven employees for the
Chemical Division in the near future. The Chemical Division also utilizes the
assistance of six consultants employed by Meridian. None of the employees are
covered by collective bargaining agreements.
Legal Proceedings
A former subsidiary of the Company which has now been merged into the
Company, was named as a PRP in a federal administrative proceeding under
CERCLA, pertaining to the PAB Site located near Abbeville, Louisiana. This
site was declared a Superfund site by the EPA on March 31, 1989. The Company
is one of approximately 190 PRPs involved in this proceeding.
The EPA has studied the site conditions and has proposed several
alternatives to clean up the site ranging in cost from $6 million to $68
million. The cost of the method recommended by the EPA record of decision in
September 1993 was estimated at that time to be approximately $13 million. A
group of PRPs, many of which are large, well capitalized companies, is also
investigating site conditions and clean up alternatives and has called for
participation by the other PRPs. The Company is participating in this PRP
group. Except for the remediation of certain above-ground storage tanks,
clean up has not been initiated. Under CERCLA, PRPs are jointly and severally
liable for clean up costs. Insurance and contributions by other PRPs may
reduce the Company's ultimate overall exposure, but insurance coverage may be
contested. The Company filed a claim under the insurance policy maintained by
the former subsidiary and such claim was denied. No assurance can be given
that any insurance company would ultimately recognize coverage for any
environmental claim under any policy purchased by the Company. The degree, at
present, of contribution by other PRPs is unknown. Accordingly, the Company
is unable to reasonably estimate its liability, if any, for costs imposed with
regard to the PAB Site, but does not believe that any liability would be
material.
In April 1995, TETRA named the Company as a co-defendant in a lawsuit
previously filed in the 359th Judicial District Court, Montgomery County,
Texas, against several ex-employees of TETRA claiming, among other things,
that the ex-employees and the Company engaged in a scheme to misappropriate
TETRA's trade secrets and confidential information regarding the production
and sale of specialty chemicals, including calcium chloride. The former TETRA
employees named in this lawsuit are currently principals of Meridian. TETRA
also claims that the Company engaged in unfair competition by undertaking to
hire TETRA employees who had knowledge of TETRA's confidential information
regarding the research, development, manufacture and sale of specialty
chemicals, including calcium chloride. TETRA seeks unspecified special and
general damages, as well as punitive damages of not less than $10 million, and
not less than $250,000 for professional fees and costs, as well as an
injunction to prevent the Company and the Meridian principals from, among
other things, using any of the allegedly proprietary information or diverting
the business, customers or suppliers of TETRA for the benefit of the Company
or the Meridian principals. Based on discussions with legal counsel in this
matter, management believes that TETRA's claims are without merit, and the
Company intends to vigorously contest this claim.
Also in April 1995, TETRA filed suit against the Company in the 359th
Judicial District Court, Montgomery County, Texas, contesting the Company's
right to satisfy its own liquid calcium chloride needs under the terms of a
1993 supply contract pursuant to which the Company agreed, subject to certain
conditions, to purchase 70% of its liquid calcium chloride requirements from
TETRA for a five-year period. In January 1996, TETRA was granted a partial
summary judgment which prohibits the Company from reducing its obligation to
purchase calcium chloride from TETRA by obtaining liquid calcium chloride from
the Manistee facility. The Company believes that the order is erroneous and
intends to appeal once a final judgment is rendered. There can be no
assurance that such appeal would be resolved prior to the expiration of the
supply contract.
The Company is involved in routine legal proceedings that arise in the
ordinary course of its business from time to time. The Company believes that
the outcome of any of such proceedings will not have a material adverse affect
on its business.
MANAGEMENT
Executive Officers, Directors and Key Employees
The following table sets forth certain information as of the date of
this Prospectus with respect to the executive officers, directors and key
employees of the Company.
Name Age Position
---- --- --------
Randolph M. Moity, Sr. 49 Chairman of the Board, Chief Executive Officer
and President
David L. Bush 42 Vice President-Marketing
Jerome J. Gaspard 39 Vice President-Support Services
Barry N. Huntsman 39 Treasurer and Chief Financial Officer
J. Travis Kieffer 49 Vice President-Operations
Peter F. Reeves 39 Vice President-Environmental
Kenneth J. Boutte 56 Director
Harry E. Barsh, Jr. 65 Director
Richard M. Currence 57 Director
James C. Roddy 58 Director
Robert D. van Roijen 56 Director
Richard S. Lovas 39 Facility Operations Manager - Chemical
Division
____________________
Randolph M. Moity, Sr. is the founder of the Company and has served as
Chief Executive Officer and Chairman of the Board of Directors of the Company
since its inception in 1980. He also served as President of the Company from
1980 to 1991 and resumed the position of President in December 1994. Mr.
Moity holds a master of business administration degree from Southern Methodist
University. Mr. Moity is a member of the Executive Committee of the Board of
Directors.
David L. Bush is the Vice President-Marketing of the Company. He served
in this capacity from July 1989 to July 1992 and from January 1993 until the
present. From July 1992 until January 1993, he served as Vice President-
Business Development of the Company.
Jerome J. Gaspard is the Vice President-Support Services of the Company.
Mr. Gaspard joined the Company in 1981 as a warehouse manager and has held
various managerial positions related to purchasing, distribution and sales.
He was appointed Vice President-Distribution in July 1992, Vice President-
Cooperative Distribution in June 1993, and to his present position in May
1994.
Barry N. Huntsman is the Treasurer and Chief Financial Officer of the
Company. Prior to joining the Company in November 1991, Mr. Huntsman was
employed for approximately 10 years by Reading & Bates Corporation, an
international offshore drilling contractor, where he held various accounting
and financial reporting managerial positions. Mr. Huntsman is a certified
public accountant.
J. Travis Kieffer is the Vice President-Operations of the Company. He
joined the Company in December 1991 as Vice President-Environmental and was
appointed to his present position in July 1992. From 1983 until he joined the
Company, Mr. Kieffer was general manager of operations of Chevco
Environmental, Inc. ("Chevco") and Kengo Services, Inc. ("Kengo"), two
companies that were acquired by the Company in 1991.
Peter F. Reeves is the Vice President-Environmental of the Company. He
has served in this capacity since January 1995. Mr. Reeves joined the Company
in March 1993 and has also held the positions of Manager of Compliance and
Response and General Manager for the Company's Oil Mop subsidiary. Prior to
joining the Company, Mr. Reeves was a principal engineer for Techmatics, Inc.,
an engineering services firm based in Arlington, Virginia. Mr. Reeves holds a
bachelor's degree in ocean engineering from the United States Naval Academy.
Kenneth J. Boutte has been self-employed since December 1994. He served
as President and Chief Operating Officer of the Company from November 1991 to
December 1994. Prior to November 1991, Mr. Boutte served as President of
Chevco and Kengo. Mr. Boutte has been a Director since 1991 and is a member
of the Executive Committee of the Board of Directors.
Harry E. Barsh, Jr. has served as a Senior Vice President of Cassidy &
Associates, a government and public relations firm based in Washington, D.C.
since May 1995. From March 1994 to 1995, Mr. Barsh practiced law with the
Washington, D.C. law firm of Patton Boggs, L.L.P. Prior to joining Patton
Boggs, L.L.P., Mr. Barsh practiced law with the Washington, D.C. law firm of
Camp & Barsh for more than five years, primarily in the areas of federal and
state energy legislation and regulation. Mr. Barsh has been a Director since
1991 and is a member of the Audit and Compensation Committees of the Board of
Directors.
Richard M. Currence is Executive Vice President of Tidewater Inc., a
company that serves the international offshore energy industry with its fleet
of vessels and its rental fleet of natural gas compressors. Mr. Currence has
been a Director since 1992 and is a member of the Executive, Compensation and
Audit Committees of the Board of Directors.
James C. Roddy has been self-employed as a business consultant since May
1995. Mr. Roddy served as Vice President of Hancock Holding Corp., a bank
holding company, from October 1993 to May 1995. From December 1990 to October
1993, Mr. Roddy served as a Managing Director in the New Orleans office of
Morgan Keegan & Company, Inc. ("Morgan Keegan"). See "Principal and Selling
Shareholders." Prior to joining Morgan Keegan, Mr. Roddy served as President
and Chief Executive Officer of Scharff & Jones, Inc., a full service regional
securities dealer. Mr. Roddy has been a Director since 1991 and is a member
of the Audit and Compensation Committees of the Board of Directors.
Robert D. van Roijen has been the President of TOX Financial Company, an
investment advisory and venture capital firm based in Winter Park, Florida,
since 1988. He currently serves on the Board of Directors of Sonex Research,
Inc. and Quixote Corp. Mr. van Roijen received a B.A. degree in economics and
philosophy from Harvard University. Mr. van Roijen has been a Director of the
Company since 1994.
Richard S. Lovas is the Facility Operations Manager of the Chemical
Division. Prior to joining the Company in March 1996, Mr. Lovas held various
positions related to plant operations and engineering management in production
facilities, including fourteen years chemical evaporating plant experience
with North American Chemicals and Akzo Nobel Salt, Inc. Mr. Lovas graduated
from Michigan State University in 1979.
The Board of Directors has an Executive Committee, an Audit Committee
and a Compensation Committee, the members of which are identified above. The
Executive Committee has the authority to exercise all but certain specified
powers of the Board of Directors when the Board is not in session. The Audit
Committee recommends to the Board of Directors the appointment of the
independent auditors of the Company, reviews the scope of audits, reviews and
recommends to the Board of Directors financial reporting and accounting
practices, reviews the adequacy of the system of internal accounting controls
of the Company, and has responsibility with respect to audit matters
generally. The Compensation Committee approves, or in some cases recommends
to the Board of Directors, remuneration arrangements and compensation plans
involving the Company's directors, officers, and employees and administers the
Employees Savings and Retirement Plan (the "401(k) Plan") and the Employees'
1991 Incentive Compensation Program (the "Employee Program"). No Director
attended fewer than 75% of the aggregate of (i) the total number of meetings
of the Board of Directors and (ii) the total number of meetings held by all
committees on which he served during fiscal 1995.
Compensation of Directors
Directors receive an annual retainer of $5,000 plus a stipend for each
Board or committee meeting attended, with the aggregate of such stipend not
exceeding $2,500 per year per director. All directors are reimbursed for
travel and other related expenses incurred in attending Board and committee
meetings.
Under the terms of the Company's 1994 Non-Employee Directors' Incentive
Compensation Program (the "Non-Employee Directors Program"), directors who, as
of the date of award, are not employees of the Company or any of its
subsidiaries may elect to receive their annual retainer fee either in cash or
an equivalent amount of Company securities, or partly in cash and partly in
Company securities. At present, all of the directors except Mr. Moity are
eligible non-employee directors. Mr. Boutte became eligible upon his
resignation as President and Chief Operating Officer in December 1994. Mr.
Moity, the Chairman of the Board, administers the Non-Employee Directors
Program. In November 1995, the Company issued options to purchase 5,000
shares of the Company's Common Stock under the Non-Employee Directors Program
to each of Messrs. Barsh, Boutte, Currence, Roddy and van Roijen. These
options have an exercise price of $5.75 per share, are exercisable in 20%
increments beginning on November 6, 1996 and annually thereafter on the
anniversary of such date and expire in 2005.
Compensation of Executive Officers
Summary of Executive Compensation. The following table sets forth
information with respect to the compensation paid by the Company to its Chief
Executive Officer for services rendered in fiscal 1995, 1994 and 1993. No
other person who was serving as an executive officer of the Company at the end
of its last fiscal year received in excess of $100,000 in annual compensation
from the Company for services rendered during those three fiscal years.
SUMMARY COMPENSATION TABLE
Annual Compensation
------------------------------
Name and Principal Other Annual
Position Fiscal Year Salary Bonus Compensation <F1>
------------------------ ----------- ------ ----- ------------
Randolph M. Moity, Sr. 1995 $293,751 - $ 11,344
Chairman of the Board, 1994 275,000 - 12,223
President and Chief 1993 275,000 - 1,136
Executive Officer
____________________
[FN]
<F1> Consists of contributions made by the Company to its 401(k) Plan on
behalf of the named executive, car allowance and director's fees.
____________________
Employment Agreement of Chief Executive Officer. The Company has an
employment agreement dated October 1, 1994 with Mr. Moity pursuant to which he
serves as Chairman, Chief Executive Officer and President of the Company for a
three-year term expiring in October 1997. Under such agreement, Mr. Moity
receives a salary of $300,000 per year plus a quarterly bonus of up to 5.0% of
the Company's profit before taxes, with a maximum annual bonus of $250,000 per
year. The employment agreement with Mr. Moity provides that, upon the
expiration or termination of the agreement, Mr. Moity will not compete with
the Company for a period of two years from the date of such expiration or
termination. The employment agreement superseded a three-year employment
contract executed in 1991 between Mr. Moity and the Company. Mr. Moity's
salary under such previous contract was $275,000 per year and his bonus was
2.5% of the Company's profit before taxes, with a maximum bonus of $250,000
per year. Mr. Moity waived his right to receive the bonus to which he was
entitled for fiscal 1995, 1994 and 1993.
Compensation Committee Interlocks and Insider Participation
The members of the Company's Compensation Committee are Harry E. Barsh,
Jr., Richard M. Currence and James C. Roddy. No member of the Compensation
Committee has been an officer or employee of the Company. No executive
officer of the Company has served during the last three fiscal years as a
director or member of the compensation committee (or other board committee
performing equivalent functions) of another entity, one of whose executive
officers served as a director or on the Compensation Committee of the Company.
CERTAIN TRANSACTIONS
From July 1992 until March 1995, the Company leased office space for its
corporate headquarters in Lafayette, Louisiana from a corporation in which Mr.
Moity, the Company's Chairman and Chief Executive Officer, had a substantial
interest. The term of such lease was 10 years commencing July 1, 1992. The
base rental during the first five years of this lease was $11,781 per month.
On July 1, 1993, the Company began leasing additional office space from the
same corporation. The term of such lease was three years and the rental was
$2,445 per month. In March 1995, the office building was sold to an
unaffiliated third party. The Company continues to lease space in the office
building.
In March 1995, Mr. Moity purchased the building that houses the
Company's laboratory. The Company leases 12,000 square feet in such building
at a monthly rate of $7,000, although it is permitted the use of all 16,000
square feet of space in the building.
The Company leases from Mr. Moity 8.1 acres of real property and three
buildings located thereon totalling approximately 14,000 square feet in New
Iberia, Louisiana. The lease expires on June 30, 2005, with a ten-year
renewal option in favor of the Company. The annual rent is $48,000, but may
be increased as a result of ongoing negotiations between the Company and Mr.
Moity related to certain improvements that may be made to the property. In
addition, the Company currently leases under a lease scheduled to expire on
July 7, 2005 (with a ten-year renewal option) certain real property located in
New Iberia, Louisiana from Mr. Moity's mother at an annual rent of $12,000.
For a 60-day period beginning on November 23, 1994, Mr. Moity pledged to
a bank 425,000 shares of his stock in the Company (the "Pledged Shares") to
provide additional collateral under the Company's line of credit. After the
60-day period, the pledge expired, the Pledged Shares were returned to Mr.
Moity, and the maximum indebtedness under the line of credit reverted to the
lesser of $7 million or 80% of eligible accounts receivable.
During fiscal 1995, the Company borrowed $100,000 from Mr. Moity. The
interest rate on this loan floated at New York Prime plus one percent (10.0%
at June 30, 1995), which was equal to the interest rate the Company was being
charged on its revolving line of credit at the time. Interest expense in
fiscal 1995 related to this loan was approximately $6,400. The Company repaid
this loan in full on September 15, 1995.
The Company is a party to an exclusive marketing agreement with Meridian
which grants to Meridian the exclusive right to market products produced by
the Manistee facility. Meridian will be entitled to 18% of all pre-tax profit
derived from the sale of products produced by the facility, including products
produced from the facility used by the Company provided that, for purposes of
calculating pre-tax profit under this agreement, those products will be deemed
to be sold to the Company at a 10% discount. The agreement also requires the
Company to pay certain expenses and a minimum or base compensation of $210,000
annually, subject to certain minimum performance requirements. The Company is
also a party to a credit agreement with Meridian pursuant to which the Company
agreed to lend to Meridian up to $290,320. As of May 31, 1996, Meridian owed
the Company a total of $224,681 in principal and interest pursuant to the
terms of the credit agreement. Advances made by the Company under the credit
agreement bear interest from the date of each advance until paid at the rate
of New York Prime plus two percent per annum. David L. Bush, Vice President-
Marketing of the Company is the owner of 20% of the outstanding common stock
of Meridian. The Company has call options from each of the stockholders of
Meridian pursuant to which it can purchase 82% of their respective interests
in Meridian for a total purchase price of $25,420.
The Company believes that the terms of the foregoing transactions are
reasonable and no less favorable to the Company than terms available from
unaffiliated third parties.
PRINCIPAL AND SELLING SHAREHOLDERS
The following table sets forth as of May 31, 1996 and as adjusted to
give effect to the Offering, the beneficial ownership of the Company's Common
Stock, of (i) each shareholder known by the Company to beneficially own 5% or
more of the outstanding Common Stock, (ii) each Selling Shareholder, (iii)
each of the Company's directors and its executive officers named in the
Summary Compensation Table, and (iv) all of the Company's directors and
executive officers as a group. Beneficial ownership has been determined in
accordance with Rule 13d-3 under the Securities Exchange Act of 1934 (the
"Exchange Act"), based upon information furnished by the persons listed.
Unless otherwise indicated, all shares shown are beneficially owned with sole
investment and voting power.
<TABLE>
<CAPTION>
Shares beneficially Shares beneficially
owned prior to owned after
Offering Offering
-------------------- ----------------------
Number
of
Shares
Name and Address to be
of Beneficial Owner Number Percentage Sold Number Percentage
------------------- -------- ------------ ------ -------- ------------
<S> <C> <C> <C> <C> <C>
The Kaufman Fund, Inc.
140 E. 45th Street, 43rd Floor
New York, New York 10017........ 291,800 7.9% 0 291,800 4.3%
Kenneth J. Boutte <F1>
P. O. Box 147
Erath, Louisiana 70533......... 227,424 6.1 87,500 139,924 2.0
Beverly D. Boutte <F1>
P. O. Box 147
Erath, Louisiana 70533......... 227,424 6.1 87,500 139,924 2.0
Morgan Keegan & Company, Inc...... 110,000 2.9 110,000 0 0
Randolph M. Moity, Sr............. 1,866,411<F2> 50.4 215,000 1,651,411 24.2
James C. Roddy ................... 17,000 * 0 17,000 *
Richard M. Currence............... 1,000 * 0 1,000 *
Robert D. van Roijen.............. 102,000<F3> 2.8 0 102,000 1.5
Harry E. Barsh, Jr................ 0 0 0 0 0
All directors and executive
officers as a group (11)
persons......................... 2,246,734 60.7 390,000 1,856,734 27.3
</TABLE>
____________________
* Less than 1%.
[FN]
<F1> Kenneth J. Boutte and Beverly D. Boutte are husband and wife, and each
exercises sole voting and investment power over the shares shown
opposite their respective names.
<F2> Includes 3,380 shares owned by Mr. Moity's wife as to which he disclaims
beneficial ownership.
<F3> Includes 2,000 shares owned by Mr. van Roijen's wife as to which he
disclaims beneficial ownership.
____________________
DESCRIPTION OF CAPITAL STOCK
Immediately prior to consummation of the Offering, the Company will
reincorporate in Louisiana and will effect certain changes to its Articles of
Incorporation and By-laws. The following summary description of the Company's
capital stock assumes completion of the reincorporation and other changes and
is qualified in its entirety by reference to the Company's Articles of
Incorporation and By-laws, which are filed as exhibits to the Registration
Statement of which this Prospectus forms a part.
General
The Company is authorized to issue 25,000,000 shares of Common Stock,
$.01 par value, and 10,000,000 shares of Preferred Stock, $.01 par value. As
of May 31, 1996, the Company had 3,701,505 shares of Common Stock issued and
outstanding. No shares of Preferred Stock are outstanding, but 200,000 shares
of Preferred Stock have been designated Participating Preferred Stock under
the Rights Agreement, which is described further below.
Generally, all holders of Common Stock are entitled to one vote for each
share of Common Stock held of record on all matters on which shareholders are
entitled to vote. Subject to any dividend or liquidation preferences that may
be accorded to the holders of any shares of Preferred Stock that may be issued
in the future, holders of Common Stock are entitled to dividends at such times
and in such amounts as the Board of Directors shall determine. Holders of
shares of Common Stock have no preemptive, subscription, cumulative voting,
conversion or redemption rights, and the Common Stock is not subject to
mandatory redemption by the Company.
The Board of Directors is authorized to amend the Articles, without
further action by the Company's shareholders, to issue Preferred Stock from
time to time in one or more series and to fix, as to any such series, the
voting rights, if any, applicable to such series and such other preferences,
limitations and relative rights as the Board of Directors may determine,
including dividend, conversion, redemption and liquidation rights and
preferences.
Certain Provisions of the Articles of Incorporation and By-laws
Certain provisions of the Articles and By-laws and certain Louisiana
statutes, which are described below, may have the effect, either alone, in
combination with each other and the Rights Agreement, or with the existence of
authorized but unissued capital stock, of making more difficult or
discouraging an acquisition of the Company deemed undesirable by the Board of
Directors.
Classified Board of Directors. The Articles and By-laws divide the
members of the Board of Directors who are elected by the holders of the Common
Stock into three classes serving three-year staggered terms.
Advance Notice of Intention to Nominate a Director. The Articles and
By-laws permit a shareholder to nominate a person for election as a director
only if written notice of such shareholder's intent to make the nomination,
including such information regarding the nominee as would be required to be
included in the Company's proxy statement, has been given to the Secretary of
the Company, generally no less than 45 days or more than 90 days prior to the
meeting. Any shareholder nomination that fails to comply with these
requirements may be disqualified.
Shareholders' Right to Call Special Meeting. The Articles and By-laws
provide that a special shareholders' meeting may be called by a shareholder or
group of shareholders holding in the aggregate at least two-thirds of the
Company's total voting power.
Removal of Directors; Filling Vacancies on Board of Directors. The
Articles and By-laws provide that any director elected by holders of the
Common Stock may be removed only for cause (as defined by the Articles and
Bylaws) by a vote of not less than two-thirds of the total voting power at any
meeting of shareholders called for such purpose. Subject to certain
limitations, the Articles and By-laws also provide that any vacancies on the
Board of Directors (including any resulting from an increase in the authorized
number of directors) may be filled by the affirmative vote of at least two-
thirds of the entire Board, provided that the shareholders have the right, at
any special meeting called for that purpose prior to such action by the Board,
to fill the vacancy.
Adoption and Amendment of By-laws. The Articles and By-laws provide,
subject to certain limitations, that By-laws may be adopted only by a majority
of the entire Board of Directors. Generally, By-laws may be amended or
repealed only by (i) a majority of the entire Board of Directors (except any
amendment to or repeal of a by-law concerning the removal of a director, which
requires an affirmative vote of at least three-fourths of the entire Board of
Directors) or (ii) the affirmative vote of the holders of at least two-thirds
of the total voting power at any shareholders' meeting the notice of which
states that the amendment or repeal is to be considered at the meeting.
Special Shareholder Voting Requirements. Under certain conditions
relating to the presence of a "related person," an amendment to the Articles
must be approved by the affirmative vote of at least two-thirds of the total
voting power. When there is no related person, an amendment generally must be
approved by the affirmative vote of a majority of the voting power present at
a shareholders' meeting, unless otherwise specifically provided in the
Articles.
Consideration of Tender Offers and Other Extraordinary Transactions. As
permitted by Louisiana law, the Articles expressly authorize the Board of
Directors, when considering a tender offer, exchange offer, merger or
consolidation, to consider, among other factors, the social and economic
effects of the proposal on the Company and its employees, customers, creditors
and the communities in which it does business.
Limitation of Liability and Indemnification. The Articles provide that
to the fullest extent permitted by Louisiana law, no director or officer of
the Company will be liable to the Company or to its shareholders for monetary
damages for breach of his or her fiduciary duty as a director or officer.
These provisions of the Articles may only be amended by the affirmative vote
of at least 80% of the total voting power and any amendment or repeal may not
adversely affect any limitation of liability of a director or officer with
respect to action or inaction occurring prior to the amendment or repeal. The
Company's By-laws provide that the Company will indemnify to the full extent
permitted by law any person made or threatened to be made a party to any
action, suit or proceeding by reason of the fact that such person is or was a
director, officer or employee of the Company or served at the request of the
Company as a director, officer or employee of any other enterprise.
Louisiana Control Share Acquisition Statute. The Company's Articles and
By-laws provide that the Company will not claim the benefits of the Louisiana
Control Share Acquisition Statute, which provides that any shares acquired by
a person or group (an "Acquiror") in an acquisition that causes such person or
group to have the power to direct the exercise of voting power in the election
of directors in excess of 20%, 33-1/3% or 50% thresholds will have only such
voting power as shall be accorded by (i) the holders of a majority of all
shares other than "interested shares," as defined below, and (ii) a majority
of the total voting power. "Interested shares" include all shares as to which
the Acquiror, any officer of the Company and any director of the Company who
is also an employee of the Company may exercise or direct the exercise of
voting power.
Louisiana Fair Price Protection Statute. The Articles provide that the
Company claims the benefits of the Louisiana Fair Price Protection Statute,
provided that the statute will not apply to any business combination, as
defined in such statute, involving Mr. Moity.
The Louisiana Fair Price Protection Statute requires that any "business
combination" (defined to include a merger, consolidation, share exchange,
certain asset distributions and certain issuances of securities) with a
shareholder who is the beneficial owner of 10% or more of the voting power of
the outstanding voting stock of the Company (an "interested shareholder"), or
an affiliate of an interested shareholder, be recommended by the Board of
Directors. Additionally, the business combination must be approved by the
affirmative vote of at least (i) 80% of the votes entitled to be cast by
outstanding shares of voting stock of the Company voting together as a single
voting group, and (ii) two-thirds of the votes entitled to be cast by holders
of voting stock other than voting stock held by the interested shareholder who
is, or whose affiliate is, a party to the business combination or an affiliate
or associate of the interested shareholder, voting together as a single group.
These votes are not required if certain minimum price, form of consideration
and procedural requirements are satisfied by the interested shareholder, or if
the Board approves the business combination before the interested shareholder
becomes such.
Shareholder Rights Plan
In June 1996, the Board of Directors of AMBAR declared a distribution of
one preferred stock purchase right (a "Right") for each outstanding share of
Common Stock held of record at the close of business on ____________, 1996
(the "Record Time"), or issued thereafter, subject to the terms of the Rights
Agreement. Each Right currently entitles the registered holder to purchase
from the Company one one-hundredth of a share of Participating Preferred
Stock, $.01 par value ("Participating Preferred Stock"), for $________ (the
"Exercise Price"), subject to adjustment. The Rights are represented by the
Common Stock certificates and are exercisable only after an entity acquires
20% or more of the outstanding Common Stock or commences a tender offer that
will result in the entity owning 20% or more of the Common Stock. After an
entity acquires 20% or more of the outstanding Common Stock, each right would
then entitle the holder (other than the acquiring entity) to purchase, at the
exercise price, the number of shares of Common Stock or other securities of
the Company (or, in certain situations, the acquiring entity) having a market
value of twice the right's exercise price (the "Flip-in Date"). The Rights
will expire on ____________, 2006 (the "Expiration Time") unless earlier
redeemed by the Company, as described below. Until a Right is exercised, the
holder, as such, will have no rights as a shareholder of the Company,
including without limitation, the right to vote or to receive dividends.
The Board of Directors of the Company may, at its option, at any time
prior to the close of business on the Flip-in Date, redeem all (but not less
than all) the then outstanding Rights at a price of $____ per Right (the
"Redemption Price"), as provided in the Rights Agreement. Immediately upon
the action of the Board of Directors of the Company electing to redeem the
Rights, without any further action and without any notice, the right to
exercise the Rights will terminate and each Right will thereafter represent
only the right to receive the Redemption Price in cash for each Right so held.
The Rights will not prevent a takeover of the Company. However, the
Rights may cause substantial dilution to a person or group that acquires 20%
or more of the Common Stock unless the Rights are first redeemed by the Board
of Directors of the Company. The Rights are intended to encourage any person
desiring to acquire a controlling interest in the Company to do so through a
transaction negotiated with the Company's Board of Directors rather than
through a hostile takeover attempt. The Rights are intended to assure that
any acquisition of control of the Company will be subject to review by the
Board to take into account, among other things, the interests of all the
Company's shareholders.
Transfer Agent
The transfer agent and registrar for the Common Stock is American Stock
Transfer & Trust Company.
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of the Offering, the Company will have outstanding
6,811,505 shares of Common Stock. Of these shares, the 3,000,000 shares of
Common Stock to be sold in the Offering will be, and the 1,276,500 shares sold
in the Company's initial public offering in December 1991 are, freely
transferable without restriction or registration under the Securities Act
except by persons deemed to be "affiliates" of the Company or acting as
"underwriters" as those terms are defined in the Securities Act. For purposes
of the federal securities laws, all of the 2,354,848 shares of Common Stock
that were outstanding prior to the Company's initial public offering in
December 1991, which were issued in private transactions in reliance upon
exemptions from the registration requirements of the Securities Act, are not
eligible for public sale unless they are registered under the Securities Act
or sold pursuant to an exemption from registration under the Securities Act,
including Rule 144 thereunder.
With respect to such previously issued shares of Common Stock, a
shareholder who has beneficially owned his shares of Common Stock for at least
two years is generally entitled under Rule 144 to sell a number of shares
within any three-month period that does not exceed the greater of (i) one
percent of the then outstanding shares of Common Stock (approximately 68,115
shares immediately after the Offering) or (ii) the average weekly trading
volume of the Common Stock in the over-the-counter market during the four
calendar weeks preceding such sale, and may only sell such shares in
unsolicited brokers' transactions. A shareholder who has not been an
affiliate of the Company for at least three months and who has beneficially
owned his shares of Common Stock for at least three years would be entitled to
sell such shares under Rule 144 without regard to such volume limitations or
the requirements that the sale be made in an unsolicited brokers' transaction.
The Company and each of its directors and executive officers have agreed
with the Underwriters not to sell any shares of Common Stock for a period of
180 days after the date of this Prospectus without the prior written consent
of the Representative of the Underwriters.
All of such previously issued shares of Common Stock have been held in
excess of three years. Thus, the 12,100 shares of Common Stock held by
persons who are not affiliates of the Company are freely tradeable without
regard to the volume, timing and other limitations of Rule 144. In addition,
upon expiration of the lock-up period, an additional 2,345,548 shares of
Common Stock held by affiliates of the Company will become eligible for sale
under Rule 144, subject to the volume, timing and other limitations contained
therein. In addition, the Company issued 1,877 shares without registration to
an employee in January 1994, which shares are eligible for sale under Rule
144, subject to the volume, timing and other limitations contained therein.
Pursuant to the Company's Employee Program, the Company may issue stock
options or restricted stock for up to 200,000 shares of Common Stock, and
pursuant to its Non-Employee Directors program, may issue stock options for up
to 200,000 shares of Common Stock. The Company has filed registration
statements under the Securities Act to register the Common Stock that may be
issued through the Employee Program and the Directors Program. Shares issued
to non-affiliates generally will be available for sale in the open market.
Affiliates may sell such shares in accordance with the requirements of Rule
144. As of May 31, 1996, 20,000 shares of restricted stock and non-qualified
stock options for 160,000 shares of Common Stock, none of which have been
exercised, have been issued under the Employee Program, and non-qualified
stock options for 25,000 shares of Common Stock, none of which have been
exercised, have been issued under the Non-Employee Directors Program. The
Company has also registered 300,000 shares of Common Stock that may be issued
pursuant to its 401(k) Plan. As of May 31, 1996, 96,280 shares of Common
Stock have been issued pursuant to such plan.
UNDERWRITING
Subject to the terms and conditions set forth in the Underwriting
Agreement, the Underwriters named below, through their representative, Raymond
James & Associates, Inc. (the "Representative"), have severally agreed to
purchase from the Company and the Selling Shareholders the following
respective number of shares of Common Stock at the public offering price less
the underwriting discounts and commissions set forth on the cover page of this
Prospectus:
Number of
Underwriter Shares
----------- ---------
Raymond James & Associates, Inc.............
---------
Total.................................. 3,500,000
=========
The Underwriting Agreement provides that the obligations of the
Underwriters are subject to certain conditions precedent, and that the
Underwriters will purchase the total number of shares of Common Stock shown
above if any of such shares are purchased.
The Company has granted to the Underwriters an option, exercisable not
later than 30 days after the date of this Prospectus, to purchase up to an
aggregate of 525,000 additional shares of Common Stock at the public offering
price, less the underwriting discounts and commissions set forth on the cover
page of this Prospectus. To the extent that the Underwriters exercise such
option, each of the Underwriters will have a firm commitment to purchase
approximately the same percentage thereof which the number of shares of Common
Stock to be purchased by it shown in the above table bears to the total shown,
and the Company will be obligated, pursuant to the option, to sell such shares
to the Underwriters. The Underwriters may exercise this option only to cover
over-allotments made in connection with the sale of the shares of Common Stock
offered hereby. If purchased, the Underwriters will sell such additional
shares on the same terms as those on which the shares are being offered.
The Representative of the Underwriters has informed the Company that the
Underwriters do not intend to confirm sales to any accounts over which they
exercise discretionary authority.
The Company and the Selling Shareholders have severally agreed to
indemnify the Underwriters against, and to contribute to losses arising out
of, certain civil liabilities under the Securities Act.
The Company, and its executive officers and directors have agreed that
they will not, without the prior written consent of the Representative of the
Underwriters, offer, sell or otherwise dispose of any shares of Common Stock
for a period of 180 days from the date of this Prospectus. This Agreement
does not apply to certain issuances of Common Stock by the Company in
connection with employee benefit plans. See "Shares Eligible for Future
Sale."
Certain of the Underwriters may make a market in the Common Stock.
During the two days immediately prior to the offer and sale of the Common
Stock, regulations under the Exchange Act impose restrictions on the market
making activities of such Underwriters, including price and volume
limitations. Certain of the Underwriters may engage in such passive market
making activities during the two business days immediately prior to the offer
and sale of the Common Stock.
The foregoing includes a summary of the principal terms of the
Underwriting Agreement and does not purport to be complete. Reference is made
to the copy of the Underwriting Agreement which is on file as an exhibit to
the Registration Statement of which this Prospectus is a part.
LEGAL MATTERS
The validity of the Common Stock offered hereby will be passed upon for
the Company by Jones, Walker, Waechter, Poitevent, Carrere & Denegre, L.L.P.,
New Orleans, Louisiana. Jenkens & Gilchrist, a Professional Corporation,
Dallas, Texas, will pass upon certain legal matters for the Underwriters.
Jenkens & Gilchrist, a Professional Corporation, may rely upon the opinion of
Jones, Walker, Waechter, Poitevent, Carrere & Denegre, L.L.P. as to matters of
Louisiana law.
EXPERTS
The audited consolidated financial statements of the Company as of June
30, 1995 and 1994 and for each of the three years in the period ended June 30,
1995 included in this Prospectus and elsewhere in the Registration Statement
of which this Prospectus forms a part, have been audited by Arthur Andersen
LLP, independent public accountants, as indicated in their report with respect
thereto, and are included herein in reliance upon the authority of said firm
as experts in accounting and auditing.
With respect to the unaudited consolidated interim financial information
of AMBAR, Inc. and subsidiaries as of March 31, 1996 and for the nine months
ended March 31, 1995 and 1996 included in this Prospectus, Arthur Andersen LLP
has applied limited procedures in accordance with professional standards for a
review of that information. However, their separate report thereon states
that they did not audit and they do not express an opinion on that interim
financial information. Accordingly, the degree of reliance on their report on
that information should be restricted in light of the limited nature of the
review procedures applied. In addition, Arthur Andersen LLP is not subject to
the liability provisions of Section 11 of the Securities Act for their report
on the unaudited interim financial information because that report is not a
"report" or a "part" of the Registration Statement prepared or certified by
them within the meaning of Sections 7 and 11 of the Securities Act.
AVAILABLE INFORMATION
The Company is subject to the information and reporting requirements of
the Exchange Act, and in accordance therewith files reports, proxy statements
and other information with the Securities and Exchange Commission (the
"Commission"). Such reports, proxy statements and other information filed by
the Company with the Commission may be inspected and copied at the public
reference facilities maintained by the Commission at Room 1024, 450 Fifth
Street, N.W., Washington, D.C. 20549, and at the regional offices of the
Commission located at 7 World Trade Center, Suite 1300, New York, New York
10048 and Citicorp Center, 500 W. Madison St., Suite 1400, Chicago, Illinois
60661. Copies of such materials can also be obtained from the Public
Reference Section of the Commission at 450 Fifth Street, N.W., Washington,
D.C. 20549 at prescribed rates.
The Company has filed with the Commission a Registration Statement on
Form S-1 under the Securities Act with respect to the Common Stock being
offered pursuant to this Prospectus. This Prospectus does not contain all
information set forth in the Registration Statement, certain parts of which
are omitted in accordance with the rules and regulations of the Commission.
For further information pertaining to the Company and to the shares offered
hereby reference is made to the Registration Statement including the exhibits
and schedules thereto. Statements contained herein concerning the provisions
of any documents are not necessarily complete and, where such document is an
exhibit to the Registration Statement, each such statement is qualified in all
respects by the provisions of such exhibit, to which reference is hereby made
for a full statement of the provisions thereof.
AMBAR, INC.
AND SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Page
______
AMBAR, Inc. - Consolidated Financial Statements:
Report of Independent Public Accountants..................... F-2
Review Report of Independent Public Accountants.............. F-3
Consolidated Balance Sheets as of June 30, 1994 and 1995,
and March 31, 1996 (Unaudited)............................. F-4
Consolidated Statements of Operations for the years ended
June 30, 1993, 1994 and 1995 and the nine months ended
March 31, 1995 (Unaudited) and 1996 (Unaudited)............ F-5
Consolidated Statements of Changes in Stockholders' Equity
for the years ended June 30, 1993, 1994 and 1995 and
the nine months ended March 31, 1995 (Unaudited) and
1996 (Unaudited)........................................... F-6
Consolidated Statements of Cash Flows for the years ended
June 30, 1993, 1994 and 1995 and the nine months ended
March 31, 1995 (Unaudited) and 1996 (Unaudited)............ F-7
Notes to Consolidated Financial Statements................... F-8
F-1
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Stockholders of AMBAR, Inc.:
We have audited the accompanying consolidated
balance sheets of AMBAR, Inc. (a Delaware corporation) as of
June 30, 1995 and 1994, and the related consolidated
statements of operations, changes in stockholders' equity and
cash flows for each of the three years in the period ended
June 30, 1995. These financial statements are the
responsibility of the Company's management. Our
responsibility is to express an opinion on these financial
statements 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 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 financial statements referred
to above present fairly, in all material respects, the
financial position of AMBAR, Inc. as of June 30, 1995 and
1994, and the results of its operations and its cash flows for
each of the three years in the period ended June 30, 1995, in
conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
New Orleans, Louisiana,
August 25, 1995
F-2
REVIEW REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Stockholders of AMBAR, Inc.:
We have reviewed the consolidated balance sheet of
AMBAR, Inc. (a Delaware corporation) as of March 31, 1996, and
the related consolidated statements of operations, changes in
stockholders' equity and cash flows for the nine months ended
March 31, 1996. These financial statements are the
responsibility of the Company's management.
We conducted our review in accordance with
standards established by the American Institute of Certified
Public Accountants. A review of interim financial information
consists principally of applying analytical review procedures
to financial data and making inquiries of persons responsible
for financial and accounting matters. It is substantially
less in scope than an audit conducted in accordance with
generally accepted auditing standards, the objective of which
is the expression of an opinion regarding the financial
statements taken as a whole. Accordingly, we do not express
such an opinion.
Based on our review, we are not aware of any
material modifications that should be made to the financial
statements referred to above for them to be in conformity with
generally accepted accounting principles.
ARTHUR ANDERSEN LLP
New Orleans, Louisiana,
May 3, 1996
F-3
AMBAR, INC.
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
June 30, March 31, 1996
------------------------------------ ----------------
1994 1995 (Unaudited)
--------------- ---------------- ----------------
ASSETS
<S> <C> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 538,134 $ 265,948 $ 647,946
Cash and short-term investments--
restricted (Note 4) 319,601 340,623 659,784
Accounts receivable (net of allowance
for doubtful accounts of $332,000,
$329,000 and $316,000) 11,783,029 7,569,226 13,311,409
Inventory 7,985,726 6,433,783 7,107,903
Recoverable income taxes (Note 5) 396,375 672,500 859,523
Prepaid expenses and other current
assets 1,590,223 1,215,801 1,180,927
--------------- --------------- ----------------
Total current assets 22,613,088 16,497,881 23,767,492
--------------- --------------- ----------------
PROPERTY AND EQUIPMENT:
Buildings and leasehold improvements 2,444,217 2,812,481 4,976,886
Transportation equipment (including
amounts capitalized under capital
leases)(Note 7) 1,831,099 2,207,280 2,315,222
Machinery and equipment 6,019,964 6,671,214 9,367,632
Furniture and fixtures (including
amounts capitalized under capital
leases)(Note 7) 409,985 540,956 593,623
Other equipment 338,912 338,912 338,912
--------------- --------------- ----------------
Total property and equipment 11,044,177 12,570,843 17,592,275
Less--accumulated depreciation
(including amortization of
equipment acquired under capital
leases)(Note 7) (3,508,036) (4,685,639) (5,706,855)
--------------- --------------- ----------------
Net property and equpment 7,536,141 7,885,204 11,885,420
--------------- --------------- ----------------
COST IN EXCESS OF FAIR VALUE OF NET
ASSETS ACQUIRED, net (Note 2) 1,119,112 1,057,723 1,003,993
--------------- --------------- ----------------
OTHER ASSETS, net (including $230,000,
$347,000 and $352,000 due from a
related party)(Note 6) 1,303,761 2,305,364 2,419,669
--------------- --------------- ----------------
Total assets $ 32,572,102 $ 27,746,172 $ 39,076,574
=============== =============== ================
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 5,472,011 $ 3,844,101 $ 5,263,372
Accrued liabilities 3,172,640 993,132 2,457,276
Revolving line of credit (Note 4) 5,809,705 3,651,344 9,115,248
Notes payable (including $100,000 at
June 30, 1995 payable to a related
party)(Notes 4 and 6) 137,542 277,886 --
Current portion of long-term debt
(Note 4) 351,850 -- 613,084
Current portion of obligations under
capital leases (Note 7) 100,959 158,309 151,608
Income taxes payable 139,904 -- --
--------------- --------------- ----------------
Total current liabilities 15,184,611 8,924,772 17,600,588
LONG-TERM DEBT, less current
portion (Note 4) 1,011,917 2,707,796 5,299,514
OBLIGATIONS UNDER CAPITAL LEASES,
less current portion (Note 7) 200,901 240,635 119,087
DEFERRED INCOME TAXES (Note 5) 1,226,791 998,837 1,192,153
--------------- --------------- ----------------
Total liabilities 17,624,220 12,872,040 24,211,342
--------------- --------------- ----------------
COMMITMENTS AND CONTINGENCIES (Note 10)
STOCKHOLDERS' EQUITY (Note 9):
Common Stock, $.01 par value, authorized
7,000,000 shares, issued and outstanding
3,649,965 shares, 3,683,711 shares and
3,699,627 shares 36,500 36,837 36,996
Paid-in capital 12,193,530 12,355,269 12,475,184
Retained earnings 2,717,852 2,482,026 2,353,052
--------------- --------------- ----------------
Total stockholders' equity 14,947,882 14,874,132 14,865,232
--------------- --------------- ----------------
Total liabilities and stockholders'
equity $ 32,572,102 $ 27,746,172 $ 39,076,574
=============== =============== ================
</TABLE>
The accompanying notes are an integral part of the consolidated
financial statements.
F-4
AMBAR, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Nine Months Ended
Year Ended June 30, March 31,
----------------------------------------------- ------------------------------
1993 1994 1995 1995 1996
------------- ------------- ------------- ------------- -------------
(Unaudited)
<S> <C> <C> <C> <C> <C>
REVENUES:
Oilfield products and services $ 20,973,401 $ 37,546,256 $ 31,661,146 $ 24,841,450 $ 27,882,488
Environmental products and
services 3,945,720 5,761,979 6,415,501 4,539,101 7,725,209
------------- ------------- ------------- ------------- -------------
Total revenues 24,919,121 43,308,235 38,076,647 29,380,551 35,607,697
------------- ------------- ------------- ------------- -------------
COSTS OF REVENUES:
Oilfield products and
services (including lease
expense of $70,000, $36,000,
$140,000, $116,000 and $91,000
to related parties)(Note 6) 18,399,859 31,146,685 28,196,971 21,651,638 24,629,586
Environmental products and
services (including lease
expense of $27,000, $63,000,
$41,000, $7,000 and $53,000
paid to related parties)
(Note 6) 4,196,527 5,219,976 5,038,726 3,418,219 7,068,969
------------- ------------- ------------- ------------- -------------
Total cost of revenues 22,596,386 36,366,661 33,235,697 25,069,857 31,716,555
------------- ------------- ------------- ------------- -------------
GROSS PROFIT 2,322,735 6,941,574 4,840,950 4,310,694 3,891,142
SELLING, GENERAL AND
ADMINISTRATIVE (including lease
expense of $144,000, $162,000,
$93,000, $103,000 and $1,000 paid
to related parties)(Note 6) 4,138,759 4,566,846 4,469,787 3,301,640 3,418,247
------------- ------------- ------------- ------------- ------------
OPERATING INCOME (LOSS) (1,816,024) 2,374,728 371,163 1,009,054 472,895
OTHER INCOME (EXPENSE):
Interest expense (including
$6,000 in 1995 paid to a
related party)(Note 6) (133,016) (389,959) (748,202) (556,495) (704,148)
Interest income (including
$27,000 in 1995 from a
related party)(Note 6) 56,339 34,622 51,542 13,633 29,108
------------- ------------- ------------- ------------- ------------
INCOME (LOSS) BEFORE TAXES (1,892,701) 2,019,391 (325,497) 466,192 (202,145)
INCOME TAX PROVISION
(BENEFIT)(Note 5) (692,650) 742,572 (89,671) 172,491 (73,171)
------------- ------------- ------------- ------------- ------------
NET INCOME (LOSS) $ (1,200,051) 1,276,819 (235,826) $ 293,701 $ (128,974)
============= ============= ============= ============= ============
NET INCOME (LOSS) PER SHARE $ (.33) $ .35 $ (.06) $ .08 $ (.03)
============= ============= ============= ============= ============
</TABLE>
The accompanying notes are an integral part of the consolidated
financial statements.
F-5
AMBAR, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Common Total
Shares Common Treasury Paid-In Retained Stockholders'
Outstanding Stock Stock Capital Earnings Equity
------------- ----------- ----------- ------------- ------------ --------------
<S> <C> <C> <C> <C> <C> <C>
Balance at June 30, 1992 3,631,348 $ 36,313 -- $ 12,100,567 $ 2,641,084 $ 14,777,964
Common Stock purchased
for treasury (13,000) -- (43,750) -- -- (43,750)
Common Stock issued to
employee benefit plan 14,125 12 43,750 8,071 -- 51,833
Net loss -- -- -- -- (1,200,051) (1,200,051)
------------- ----------- ----------- ------------- ------------ --------------
Balance at June 30, 1993 3,632,473 36,325 -- 12,108,638 1,441,033 13,585,996
Common Stock purchased
for treasury (15,000) -- (54,375) -- -- (54,375)
Common Stock issued to
employee benefit plan 30,615 156 54,375 78,065 -- 132,596
Common Stock issued to
employee 1,877 19 -- 6,827 -- 6,846
Net income -- -- -- -- 1,276,819 1,276,819
------------- ----------- ----------- ------------- ------------ --------------
Balance at June 30, 1994 3,649,965 36,500 -- 12,193,530 2,717,852 14,947,882
Common Stock issued to
employee benefit plan 33,746 337 -- 161,739 -- 162,076
Net loss -- -- -- -- (235,826) (235,826)
------------- ----------- ----------- ------------- ------------ --------------
Balance at June 30, 1995 3,683,711 36,837 -- 12,355,269 2,482,026 14,874,132
Unaudited Period:
Common Stock issued to
employee benefit plan 15,916 159 -- 119,915 -- 120,074
Net loss -- -- -- -- (128,974) (128,974)
--------------- ----------- ----------- ------------- ------------ --------------
Balance at March 31, 1996 3,699,627 $ 36,996 $ -- $ 12,475,184 $ 2,353,052 $ 14,865,232
(Unaudited) =============== =========== =========== ============= ============
</TABLE>
The accompanying notes are an integral part of the consolidated
financial statements.
F-6
AMBAR, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Nine Months Ended
Year Ended June 30, March 31,
-------------------------------------------- ---------------------------
1993 1994 1995 1995 1996
-------------- ------------- ------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net income (loss) $ (1,200,051) $ 1,276,819 $ (235,826) $ 293,701 $ (128,974)
Adjustments to reconcile net
income (loss) to net cash
provided by (used in) operating
activities:
Depreciation and amortization 1,237,915 1,377,432 1,577,051 1,112,389 1,393,305
Deferred income taxes (305,390) (423,804) (62,466) (127,814) 82,707
Other 27,677 115,412 (75,490) (26,859) (11,782)
Changes in assets and liabilities,
net of acquisitions:
Cash and short-term investments
--restricted -- (298,200) -- -- 75,000
Accounts receivable (2,490,116) (4,941,092) 4,213,803 4,812,707 (5,742,183)
Inventory 91,184 (4,623,835) 1,551,943 198,656 (674,120)
Recoverable income taxes (486,324) 89,949 (276,125) 2,189 (187,023)
Prepaid expenses and other current
assets (167,368) 150,728 208,934 456,232 145,483
Other assets (443,306) (387,439) (1,001,515) (521,700) (355,441)
Accounts payable 1,160,860 2,631,651 (1,627,910) (1,747,772) 1,419,271
Accrued liabilities 1,145,439 1,471,329 (2,179,508) (2,701,719) 1,464,144
Income taxes payable (165,033) 133,552 (139,904) (139,904) --
------------- ------------- ------------- ------------ ------------
Net cash provided by (used in)
operating activities (1,594,513) (3,427,498) 1,952,987 1,610,106 (2,519,613)
------------- ------------- ------------- ------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of equipment 40,275 598,572 220,233 79,706 89,428
Capital expenditures (589,115) (1,692,245) (1,559,796) (1,055,219) (5,098,815)
Other assets -- (464,264) (171,070) (12,530) (49,455)
Purchase of Oil Mop assets (906,685) -- -- -- --
------------- ------------- ------------- ------------ ------------
Net cash used in investing
activities (1,455,525) (1,557,937) (1,510,633) (988,043) (5,058,842)
------------- ------------- ------------- ------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowing under revolving
line of credit 700,162 5,109,543 549,435 1,944,374 6,124,646
Proceeds from borrowings 1,844,662 588,768 2,082,746 (439,545) (489,935)
Principal payments (272,808) (659,313) (3,306,169) (1,951,824) 2,756,108
Payments under capital leases (4,079) (80,029) (145,559) (248,499) (394,161)
Change in cash restricted to payments
on revolving line of credit (69,131) 47,730 (21,022) 91,736 92,044
Common Stock activity, net (3,545) 47,639 126,029 (105,129) (128,249)
------------- ------------- ------------- ------------ ------------
Net cash provided by (used in)
financing activities 2,195,261 5,054,338 (714,540) (708,887) 7,960,453
------------- ------------- ------------- ------------ ------------
NET CHANGE IN CASH AND CASH EQUIVALENTS (854,777) 68,903 (272,186) (86,824) 381,998
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD 1,324,008 469,231 538,134 538,134 265,948
------------- ------------- ------------- ------------ ------------
CASH AND CASH EQUIVALENTS AT END
OF PERIOD $ 469,231 $ 538,134 $ 265,948 $ 451,310 $ 647,946
============= ============= ============= ============ ============
SUPPLEMENTAL DISCLOSURES OF CASH
FLOW INFORMATION:
Cash paid during the period for:
Interest $ 131,782 $ 344,392 $ 757,859 $ 607,148 $ 702,157
Income taxes $ 264,097 $ 1,000,745 $ 848,160 $ 848,160 $ 31,159
</TABLE>
The accompanying notes are an integral part of the consolidated
financial statements.
F-7
AMBAR, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Information subsequent to August 25, 1995 is unaudited)
1. SIGNIFICANT ACCOUNTING POLICIES
Consolidation--The consolidated financial statements include the
accounts of AMBAR, Inc. and its subsidiaries. All significant intercompany
accounts and transactions have been eliminated. The terms "Company" and
"AMBAR" are used interchangeably herein to refer to the total business
conducted by AMBAR, Inc. and its subsidiaries.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual amounts could differ from those estimates.
Cash and Cash Equivalents--For purposes of the consolidated statements
of cash flows, the Company considers all cash and temporary investments with
an original maturity of three months or less to be cash and cash equivalents.
Cash and Short-Term Investments--Restricted--Cash and short-term
investments--restricted at June 30, 1994 and 1995, include approximately
$21,000 and $43,000, respectively, of accounts receivable collections which
had not been applied by the bank to the balance outstanding under the line of
credit (see Note 4). At both June 30, 1994 and 1995, it also includes
approximately $298,000 collateralizing two letters of credit related to
certain insurance coverage.
Accounts Receivable--The Company grants credit to its customers,
primarily oil and gas companies operating in the Gulf of Mexico region, on a
short-term basis. Accounts receivable are stated at net realizable value.
Bad debt expense was approximately $246,000, $278,000 and $369,000 during
1993, 1994 and 1995, respectively.
Inventory--Inventory consists primarily of high density brines,
drilling fluids and specialty chemicals. Inventory is valued at the lower of
average cost or market. Only product costs are included in the cost of
inventory.
Property and Equipment--Property and equipment is recorded at cost.
When assets are retired or sold, the cost and related accumulated depreciation
are removed from the accounts and any resulting gain or loss is reflected in
income. Depreciation is provided on a straight-line basis for financial
reporting purposes over the estimated useful lives of the related assets as
follows:
Classification Estimated Useful Lives
-------------- ----------------------
Buildings and leasehold improvements 5 to 31.5 years
All others 5 to 10 years
The Company incurred maintenance and repairs expense of approximately
$660,000, $724,000 and $767,000 during 1993, 1994 and 1995, respectively.
Cost in Excess of Fair Value of Net Assets Acquired--Cost in excess of
fair value of net assets acquired is amortized over periods up to twenty-five
years using the straight-line method. Such amortization was $44,804 in 1993,
$49,266 in 1994 and $61,389 in 1995. At both June 30, 1994 and 1995, total
cost in excess of fair value of net assets acquired was $1,228,714. At June
30, 1994 and 1995, accumulated amortization of cost in excess of fair value of
net assets acquired was $109,602 and $170,991, respectively. Recoverability
of goodwill is assessed by evaluating the anticipated long-term profitability
of the acquired businesses to which it relates. Projected future results are
evaluated on an undiscounted basis.
Other Assets--Other assets include capitalized costs related to the
start-up of new product lines. Start-up costs are amortized over periods up
to five years using the straight-line method. At June 30, 1994 and 1995,
unamortized start-up costs were $456,000 and $1,206,000, respectively.
Amortization of start-up costs was $13,000 in 1993, $60,000 in 1994 and
$112,000 in 1995. Recoverability of start-up costs is assessed by evaluating
the anticipated long-term profitability of the product line to which it
relates. Projected future results are evaluated on an undiscounted basis.
The increase in start-up costs during fiscal 1995 includes $536,000
related to the NORM remediation operations. The NORM remediation operations
relate to the Company's process of dissolving barium sulfate scale. During
1995, the Company developed and refined this process and obtained the
necessary licenses and approvals to conduct these operations. Commercial
operation of the NORM process began during the fourth quarter of fiscal 1995.
At June 30, 1995, total start-up costs related to the NORM remediation
operations were $767,000. The increase in start-up costs during fiscal 1995
also includes $285,000 related to the AMBAR Marine operations. The AMBAR
Marine operations relate to a rigid hull inflatable boat which will be used
primarily as an open ocean rescue craft. During fiscal 1994, the Company
acquired the rights to manufacture and market this boat in all areas outside
Scandinavia. During fiscal 1995, the Company completed construction of a
prototype of this boat, began obtaining the necessary approvals and
certifications and began establishing relationships with distributors. The
initial sales of these boats occurred during the second quarter of fiscal
1996. At June 30, 1995, total start-up costs related to the AMBAR Marine
operations were $338,000.
Revenues--Revenues from products and services are recorded when
accepted by the customer. It is the Company's policy to repurchase certain
fluids upon completion of their intended use by the customer if the Company is
able to reuse these fluids. The Company repurchases only those fluids which
it can recycle and return to inventory in a salable condition. The fluids are
repurchased at a discount from the original sales price. The Company records
the repurchased fluids as a reduction of revenues and, when material,
provisions are made to give recognition to current period sales expected to be
returned in the subsequent period. Amounts repurchased during the years 1993,
1994 and 1995 were as follows:
1993 1994 1995
----------- ----------- -----------
Revenues before repurchases $28,932,607 $50,582,079 $46,721,163
Repurchases (4,013,486) (7,273,844) (8,644,516)
----------- ----------- -----------
Revenues $24,919,121 $43,308,235 $38,076,647
=========== =========== ===========
Certain revenues are billed at the conclusion of the job. Revenues
from these jobs are recognized over the period during which the products
and/or services are provided to the customer and are included in the financial
statements as unbilled accounts receivable. Unbilled accounts receivable were
approximately $1,233,000 and $205,000 at June 30, 1994 and 1995, respectively.
In 1993, no single customer accounted for as much as 10% of the
Company's total revenues. In 1994, one customer accounted for approximately
12% of the Company's total revenues. In 1995, no single customer accounted
for as much as 10% of the Company's total revenues.
Income Taxes--Deferred income taxes are provided for temporary
differences between financial and tax accounting, principally for temporary
differences between the financial statement and tax bases of property and
equipment and inventory.
Accounting Pronouncement--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 ("SFAS 121") which is required to be adopted by the Company
no later than the fiscal year ended June 30, 1997. The Company has not
determined what effect, if any, adoption of SFAS 121 will have on the
Company's financial position or results of operations.
F-9
2. OIL MOP ACQUISITION
On July 31, 1992, the Company purchased, through a new wholly owned
subsidiary, Oil Mop, Inc., a Delaware corporation ("OMI-Delaware"),
substantially all the operating assets of Oil Mop, Inc., a Louisiana
corporation ("OMI-Louisiana"). The purchase was approved by the United States
Bankruptcy Court for the Eastern District of Louisiana, as OMI-Louisiana is a
debtor-in-possession and is under the jurisdiction of the bankruptcy court.
The assets are located near New Orleans, Louisiana and consist principally of
manufacturing equipment, inventory, patents, trademarks and trade names
including the name "Oil Mop, Inc." The assets were used primarily in the
manufacture and distribution of oil spill clean-up equipment and supplies;
AMBAR is continuing in this business through OMI-Delaware. The assets were
purchased for approximately $1,020,000 in cash, funded by a $1.5 million term
loan from a bank. This loan was refinanced during 1995 (see Note 4). The
purchase price was allocated to the underlying assets based on their
respective fair values at the date of acquisition. The excess of cost over
the estimated fair value of the assets acquired of approximately $511,000 is
being amortized over twenty-five years using the straight-line method. The
estimated fair values of assets acquired are as follows:
Inventory $ 428,000
Property and equipment 81,000
Goodwill 511,000
----------
$1,020,000
==========
3. CALCIUM CHLORIDE FACILITY
In May 1995, the Company signed a long-term supply agreement with
Martin Marietta Magnesia Specialties Inc., ("MMMS") a subsidiary of Martin
Marietta Materials, Inc. MMMS produces magnesia-based products at a plant in
Manistee, Michigan. The Company initially intended to build a calcium
chloride production facility adjacent to the MMMS plant.
In February 1996, the Company purchased an existing plant in Manistee
and is currently in the process of retrofitting the facility, which was
previously used to produce sodium chloride to produce liquid and dry calcium
chloride. The Company intends to add a bromine extraction process to the
plant.
The plant will receive a coproduct stream generated by MMMS. The
coproduct stream is rich in several inorganic chemicals, primarily calcium
chloride and bromides. The Company will process the stream into dry calcium
chloride and liquid calcium chloride. These products are raw materials for
the Company's high density brine product line. The plant's production
capacity will be significantly more than is currently required to meet the
Company's internal needs. Production in excess of internal needs will be
marketed to third parties.
The plant is expected to begin producing liquid calcium chloride in
July 1996. Construction will be financed primarily by the construction/term
loan discussed in Note 4. During fiscal 1995, capital expenditures related to
this facility were approximately $365,000.
F-10
4. DEBT
Notes Payable--Notes payable at June 30, 1994 and 1995, were as
follows:
1994 1995
---------- ----------
Unsecured note payable to the
Chairman of the Company. This
note bears interest at the
prime rate plus one percent
(10.00% at June 30, 1995) and
is payable on demand. $ -- $ 100,000
Unsecured note payable to a
finance company. Principal
and interest at 7.90% are
payable monthly through
February 1996. -- 171,035
Unsecured note payable to a
finance company. Principal
and interest at 10.02% are
payable monthly through
September 1995. -- 6,851
Unsecured note payable to a
finance company. Principal
and interest at 7.97% were
payable monthly through
February 1995. 137,542 --
---------- ----------
$ 137,542 $ 277,886
========== ==========
Revolving Line of Credit--At June 30, 1994, the Company had a line of
credit with a bank. The maximum indebtedness under this line could not exceed
the lesser of 80% of eligible accounts receivable or $7 million and bore
interest at the bank's base rate which was generally equal to New York prime
plus one and one-half percent. The line of credit was collateralized by
accounts receivable, and the Company was required to maintain a $225,000
compensating balance. At June 30, 1994, approximately $5,810,000 was
outstanding under the line of credit, and, based on eligible accounts
receivable, the amount of unused credit was $1,082,000. The line expired on
December 31, 1994. It was renewed until December 31, 1995, the maximum
indebtedness was increased to $10 million and the interest rate was reduced to
New York prime plus one percent. In June 1995, this revolving line of credit
was replaced with another line of credit as discussed below.
Long-Term Debt--During the first six months of fiscal 1995, the Company
entered into two additional term loans totalling $532,000. In December 1994,
these new term loans and the term loans outstanding at June 30, 1994 were
combined into one note and the total note was increased to $3 million. This
note was collateralized by certain inventory, machinery and transportation
equipment. The term loan bore interest at New York prime plus one and one-
half percent with principal and interest payable monthly through December
1999. In June 1995, amounts borrowed under this term note were paid as
discussed below.
Credit Facility--In June 1995, the Company entered into a $20
million bank credit facility consisting of the following:
$10 million revolving line of credit--The maximum indebtedness under the
new revolving line of credit cannot exceed the lessor of 80% of eligible
accounts receivable plus 50% of eligible inventory or $10 million. The
revolving line of credit expires on October 31, 1996. Repayment on the
line of credit operates under a lock box arrangement as required by the
bank (see Note 1--Cash and short-term investments--restricted).
$3 million term loan--The purpose of the $3 million term loan is to
replace the prior term loan discussed above. The new term loan will be
amortized in monthly installments with a balloon payment due on April 30,
2000. At March 31, 1996, the balance outstanding was $2.8 million.
F-11
$7 million construction/term loan--The construction/term loan will be used
to finance the construction of the calcium chloride production facility in
Manistee, Michigan. Through June 20, 1996, monthly interest payments will
be made on the amount outstanding. Monthly principal payments will
commence on July 20, 1996, with a balloon payment due on June 20, 2000.
There were no amounts outstanding under the construction/term loan at
June 30, 1995. At March 31, 1996, the balance outstanding was $3.1
million.
The three loans bear interest at the bank's base rate (9.00%
at June 30, 1995) or at the 30-day, 60-day or 90-day LIBOR rate plus 2.5%. In
addition, there is a fee of one-quarter of one percent on the unused portions
of the revolving line of credit and the construction/term loan. There are no
compensating balance requirements. The loans are collateralized by all of the
Company's assets.
At June 30, 1995, the new $3 million term loan had not been
funded pending completion of certain documentation. When the new credit
facility was closed in June 1995, amounts available under the new revolving
line of credit were used to liquidate both the prior revolving line of credit
and the prior term loan. At June 30, 1995, approximately $6,359,000 was
outstanding under the line of credit, and, based on eligible accounts
receivable and inventory, the amount of unused credit was $1,344,000. The new
$3 million term loan was funded on July 31, 1995, and the proceeds were used
to pay down the revolving line of credit. If the $3 million term loan had
been funded at June 30, 1995, $2,707,796 would have been classified as "Long-
term debt" and $292,204 would have been classified as the "Current portion of
long-term debt". The original intent of both the Company and the bank was to
use the proceeds from the new term loan, rather than amounts available under
the revolving line of credit, to repay the prior term loan. Accordingly, on
the consolidated balance sheet, the portion of the revolving line of credit
that was paid down on July 31, 1995 with debt that would have been classified
as long-term at June 30, 1995, has been classified as "Long-term debt" and the
amount shown as "Revolving line of credit" has been reduced by an equal
amount.
Long-term debt at June 30, 1994 and 1995, was as follows:
1994 1995
----------- -----------
Portion of revolving line of credit
replaced by long-term debt
subsequent to June 30, 1997 $ -- $ 2,707,796
Term loan payable to a bank due
July 1997 991,131 --
Term loan payable to a bank due
January 1999 372,636 --
----------- -----------
1,363,767 2,707,796
Less--current portion 351,850 --
----------- -----------
Long-term debt $ 1,011,917 $ 2,707,796
=========== ===========
Annual maturities of long-term debt are as follows:
Years ending June 30,
1996 $ --
1997 353,480
1998 386,146
1999 421,831
2000 1,546,339
------------
$ 2,707,796
============
The terms of the credit facility require, among other terms,
minimum amounts, as defined, of working capital and tangible net worth, and
minimum ratios of indebtedness to net worth. As of March 31, 1996, the
Company was not in compliance with certain provisions of the loan agreements.
The bank has agreed to waive compliance with these provisions.
F-12
5. INCOME TAXES
The Company's income tax provision (benefit) for each of the
three years in the period ended June 30, 1995, is as follows:
1993 1994 1995
----------- ----------- -----------
Current -- Federal $ (396,255) $ 1,043,176 $ 47,572
-- State 8,995 123,200 (74,777)
Deferred (305,390) (423,804) (62,466)
----------- ----------- -----------
$ (692,650) $ 742,572 $ (89,671)
=========== =========== ===========
At June 30, 1994, the consolidated balance sheet included
total deferred tax assets of $983,000 and total deferred tax liabilities of
$1,427,000. The tax effect of significant temporary differences that give
rise to these deferred tax assets and liabilities include future taxable
differences in the basis of property and equipment of approximately
$1,203,000, future deductions of inventory differences of approximately
$771,000 and future deductions for bad debts of approximately $126,000.
At June 30, 1995, the consolidated balance sheet included
total deferred tax assets of $709,000 and total deferred tax liabilities of
$1,090,000. The tax effect of significant temporary differences that give
rise to these deferred tax assets and liabilities include future taxable
differences in the basis of property and equipment of approximately $970,000,
future deductions of inventory differences of approximately $399,000 and
future deductions for bad debts of approximately $125,000.
The Company's effective tax rate was 37% for each of the years
ended June 30, 1993 and 1994. This was greater than the federal statutory
rate of 34% due primarily to state income taxes. The Company's federal income
tax returns through June 30, 1992 have been examined by the Internal Revenue
Service and were settled. The settlement of these returns did not result in a
material impact on the Company's financial position or results of operations
for the years examined.
The Company's effective tax rate for the year ended June 30,
1995 was approximately 28%. This was less than the federal statutory rate of
34% due to expenses which are not deductible for income tax purposes and,
therefore, generate no tax benefit. The current federal tax provision results
from both temporary and permanent differences between financial and tax
accounting.
6. RELATED PARTY TRANSACTIONS
The Company leases a yard facility under a non-cancelable
operating lease from the Chairman of the Company at a rate of $4,000 per
month. The Company leases a warehouse facility under a non-cancelable
operating lease from a relative of the Chairman of the Company at a rate of
$1,000 per month. The Company leased an airplane on a month-to-month basis
from the Chairman of the Company at an annual rate of $37,000; this lease was
terminated in July 1992. Since December 18, 1991, the Company has leased one
of its locations from a relative of a director and former President of the
Company. At June 30, 1995, the rate was approximately $4,000 per month.
Effective July 1, 1992, the Company entered into an operating
lease for office space for its corporate offices. The lessor was a
corporation in which the Chairman of the Company is a major stockholder. At
June 30, 1994, the lease covered approximately 19,000 square feet at a monthly
rate of approximately $15,000. During fiscal 1995, the office building was
sold to an unrelated third party. The Company continues to lease space in the
office building at prevailing market rates.
In March 1995, the Chairman of the Company purchased the
building which houses the Company's laboratory. The Company leases
approximately 12,000 square feet in the laboratory building at a monthly rate
of $7,000. As discussed in Note 4, during fiscal 1995 the Company borrowed
$100,000 from the Chairman of the Company. The note bears interest at the
F-13
prime rate plus one percent (10.0% at June 30, 1995). Interest expense in
fiscal 1995 related to this note was approximately $6,400.
Included in Other Assets are receivables from an entity
(Meridian Technologies, Inc. ("Meridian")) in which an officer of the Company
has a 20% interest. Meridian has an exclusive marketing agreement with the
Company to market products manufactured at its new facility in Manistee (See
Note 3) in return for a percentage of the pre-tax profit generated by the
facility. The Company has agreed to pay certain expenses and a minimum
compensation of $210,000 annually and to lend Meridian up to $290,320. The
Company has an option to purchase up to 82% of Meridian for a total purchase
price of $25,420.
7. LEASES
Capital Leases--The Company is committed under non-cancelable
leases which expire on various dates through July 1999. The following is an
analysis of the leased property under capital leases by major classes:
1994 1995
---------- ----------
Transportation equipment $ 265,437 $ 512,436
Furniture and fixtures 119,447 119,447
---------- ----------
384,884 631,883
Less--accumulated amortization (49,756) (129,165)
---------- ----------
$ 335,128 $ 502,718
========== ==========
Interest expense on the outstanding lease obligations was
approximately $3,000 in 1993, $16,000 in 1994 and $39,000 in 1995.
Amortization expense for this equipment was included in depreciation expense.
The following is a schedule by years of future minimum lease
payments under capital leases together with the present value of the net
minimum lease payments as of June 30, 1995:
1996 $ 192,021
1997 162,180
1998 96,004
1999 1,837
---------
Total minimum lease payments 452,042
Less--amounts representing
interest 53,098
---------
Total capital lease obligations 398,944
Less--current portion 158,309
---------
Long-term obligations under
capital leases $ 240,635
=========
F-14
Operating Leases--The Company has non-cancelable operating
leases in connection with the lease of certain equipment, land and facilities.
During fiscal 1994, the Company disposed of certain of its heavy duty vehicles
and forklifts and replaced them with units acquired under operating leases.
These new operating leases are primarily responsible for the increase in rent
expense for 1994 and 1995. Rental expense incurred under these leases, and
the leases with related parties disclosed previously, was approximately
$603,000, $764,000 and $1,090,000 in 1993, 1994 and 1995, respectively. As of
June 30, 1995, aggregate future payments under non-cancelable operating leases
are as follows:
1996 $ 1,176,755
1997 1,149,299
1998 907,024
1999 645,473
2000 444,937
Thereafter 1,691,124
8. BENEFIT PLANS
Incentive Plan--In 1991, the Company adopted the Employees
1991 Incentive Compensation Program (the "Employee Plan") which provides for
the granting of incentive awards in the form of stock options, restricted
stock awards, stock appreciation rights, performance shares, and cash awards
and loans. Eligible participants include officers and employees of the
Company and other individuals providing services to the Company on a
substantially full time basis. The Company reserved 200,000 shares of Common
Stock for issuance under the Employee Plan. At July 1, 1992, there were
180,000 shares available in the Employee Plan. There was no activity in the
Employee Plan during fiscal 1993 or fiscal 1994. During fiscal 1995, options
were granted to purchase a total of 14,500 shares at $4.125, which was the
market value of AMBAR's Common Stock at the date of grant. These options are
exercisable for ten years from the date of grant, subject to a seven year
vesting schedule. No options were exercisable at June 30, 1995. At June 30,
1995, there were 165,500 shares available in the Employee Plan.
Savings and Retirement Plan--Effective January 1, 1993, the
Company established the AMBAR Employees Savings and Retirement Plan pursuant
to Section 401 of the Internal Revenue Code (the "401(k) Plan"). Under the
401(k) Plan, participants may contribute a percentage of their compensation,
but not in excess of the maximum allowed under the Internal Revenue Code. The
401(k) Plan provides for a matching contribution by the Company, in AMBAR
Common Stock, which amounted to approximately $12,000 for the six months that
the 401(k) Plan was in effect during fiscal 1993, $31,000 for fiscal 1994 and
$36,000 for fiscal 1995. Employees direct the investment of their
contributions.
Directors Plan--In fiscal 1995, the Company adopted the 1994
Non-Employee Directors' Incentive Compensation Program (the "Directors Plan")
which provides for the granting of stock options, restricted stock awards,
stock appreciation rights, performance shares, and cash awards and loans. All
non-employee directors of the Company are eligible to participate. The
Company reserved 200,000 shares of Common Stock for issuance under the
Directors Plan. Through June 30, 1995, there was no activity in the Directors
Plan.
9. COMMON STOCK AND EARNINGS PER SHARE
The Company completed the initial public offering (the "IPO")
of its Common Stock in December 1991. The Company issued 1,276,500 shares at
$8.25 per share. In connection with the IPO, the Company issued to
Morgan Keegan & Company, Inc., the managing underwriter for the IPO, warrants
to purchase 110,000 shares of Common Stock at an exercise price per share
equal to 115% of the IPO price. The warrants are exercisable during the four-
year period commencing on December 12, 1992.
F-15
In December 1992, the Company filed a registration statement
on Form S-8 covering 300,000 shares of its Common Stock to be issued to the
401(k) Plan. During 1993, the Company purchased 13,000 shares of its Common
Stock on the open market at a cost of approximately $44,000. All of these
shares were used during 1993 to make the Company's matching contributions to
the 401(k) Plan and for employee purchases of AMBAR Common Stock through the
401(k) Plan. During 1994, the Company purchased 15,000 shares of its Common
Stock on the open market at a cost of approximately $54,000. All of these
shares were used during 1994 to make the Company's matching contributions to
the 401(k) Plan and for employee purchases of AMBAR Common Stock through the
401(k) Plan.
Earnings per share is computed by dividing net income or loss
by the weighted average number of common shares outstanding plus the effect,
using the treasury stock method, of common shares contingently issuable from
stock options and warrants. The weighted average number of common shares used
for the earnings per share calculation is 3,628,691 for 1993, 3,632,765 for
1994 and 3,667,344 for 1995. Based on market prices for the Company's Common
Stock, the warrants issued to Morgan Keegan & Company, Inc. are antidilutive
and, therefore, are not included in the earnings per share calculation.
10. COMMITMENTS AND CONTINGENCIES
A former subsidiary of the Company which has now been merged
into the Company, was named as a PRP in a federal administrative proceeding
under CERCLA, pertaining to the PAB Site located near Abbeville, Louisiana.
This site was declared a Superfund site by the EPA on March 31, 1989. The
Company is one of approximately 190 PRPs involved in this proceeding.
The EPA has studied the site conditions and has proposed
several alternatives to clean up the site ranging in cost from $6 million to
$68 million. The cost of the method recommended by the EPA record of decision
in September 1993 was estimated at that time to be approximately $13 million.
A group of PRPs, many of which are large, well capitalized companies, is also
investigating site conditions and clean up alternatives and has called for
participation by the other PRPs. The Company is participating in this PRP
group. Except for the remediation of certain above-ground storage tanks,
clean up has not been initiated. Under CERCLA, PRPs are jointly and severally
liable for clean up costs. Insurance and contributions by other PRPs may
reduce the Company's ultimate overall exposure, but insurance coverage may
be contested. The Company filed a claim under the insurance policy maintained
by the former subsidiary and such claim was denied. No assurance can be
given that any insurance company would ultimately recognize coverage for any
environmental claim under any policy purchased by the Company. The degree, at
present, of contribution by other PRPs is unknown. Accordingly, the Company is
unable to reasonably estimate its liability, if any, for costs imposed with
regard to the PAB Site, but does not believe that any liability would be
material.
In April 1995, TETRA named the Company as a co-defendant in a
lawsuit previously filed in the 359th Judicial District Court, Montgomery
County, Texas, against several ex-employees of TETRA claiming, among other
things, that the ex-employees and the Company engaged in a scheme to
misappropriate TETRA's trade secrets and confidential information regarding
the production and sale of specialty chemicals, including calcium chloride.
The former TETRA employees named in this lawsuit are currently principals of
Meridian. TETRA also claims that the Company engaged in unfair competition by
undertaking to hire TETRA employees who had knowledge of TETRA's confidential
information regarding the research, development, manufacture and sale of
specialty chemicals, including calcium chloride. TETRA seeks unspecified
special and general damages, as well as punitive damages of not less than $10
million, and not less than $250,000 for professional fees and costs, as well
as an injunction to prevent the Company and the Meridian principals from,
among other things, using any of the allegedly proprietary information or
diverting the business, customers or suppliers of TETRA for the benefit of
the Company or the Meridian principals. Based on discussions with legal
counsel in this matter, management believes that TETRA's claims are without
merit, and the Company intends to vigorously contest this claim.
Also in April 1995, TETRA filed suit against the Company in
the 359th Judicial District Court, Montgomery County, Texas, contesting the
Company's right to satisfy its own liquid calcium chloride needs under the
terms of a 1993 supply contract pursuant to which the Company agreed, subject
to certain conditions, to purchase 70% of its liquid calcium chloride
F-16
requirements from TETRA for a five-year period. In January 1996, TETRA was
granted a partial summary judgment which prohibits the Company from reducing
its obligation to purchase calcium chloride from TETRA by obtaining liquid
calcium chloride from the Manistee facility. The Company believes that the
order is erroneous and intends to appeal once a final judgment is rendered.
There can be no assurance that such appeal would be resolved prior to the
expiration of the supply contract.
The Company is involved in routine legal proceedings that
arise in the ordinary course of its business from time to time. The Company
believes that the outcome of any of such proceedings will not have a material
adverse affect on its business.
F-17
11. INDUSTRY SEGMENTS
Information concerning the Company's operations in different
businesses for each of the three years in the period ended June 30, 1995, is
as follows:
<TABLE>
<CAPTION>
Oilfield Environmental Corporate Eliminations Consolidated
----------- ------------- ----------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Year ended June 30, 1993
Sales to customers $20,973,401 $ 3,945,720 $ -- $ -- $24,919,121
Intersegment sales <F1> 243,846 313,752 -- (557,598) --
----------- ----------- ----------- ----------- -----------
Total revenues 21,217,247 4,259,472 -- (557,598) 24,919,121
=========== =========== =========== =========== ===========
Operating profit 1,947,159 (1,028,846) (2,734,337) -- (1,816,024)
=========== =========== =========== =========== ===========
Identifiable assets <F1> 14,321,495 6,201,699 1,267,722 -- 21,790,916
=========== =========== =========== =========== ===========
Capital expenditures 226,182 210,262 152,671 -- 589,115
=========== =========== =========== =========== ===========
Depreciation and
amortization <F1> 698,705 439,859 99,351 -- 1,237,915
=========== =========== =========== =========== ===========
Year ended June 30, 1994
Sales to customers $37,546,256 $ 5,761,979 $ -- $ -- $43,308,235
Intersegment sales <F1> 300,217 478,051 -- (778,268) --
----------- ----------- ----------- ----------- -----------
Total revenues 37,846,473 6,240,030 -- (778,268) 43,308,235
=========== =========== =========== =========== ===========
Operating profit 4,541,005 344,744 (2,511,021) -- 2,374,728
=========== =========== =========== =========== ===========
Identifiable assets <F1> 24,753,276 5,733,505 2,085,321 -- 32,572,102
=========== =========== =========== =========== ===========
Capital expenditures 977,744 590,029 124,472 -- 1,692,245
=========== =========== =========== =========== ===========
Depreciation and
amortization <F1> 682,334 571,292 123,806 -- 1,377,432
=========== =========== =========== =========== ===========
Year ended June 30, 1995
Sales to customers $31,661,146 $ 6,415,501 $ -- $ -- $38,076,647
Intersegment sales <F1> 224,674 18,324 -- (242,998) --
----------- ----------- ----------- ----------- -----------
Total revenues 31,885,820 6,433,825 -- (242,998) 38,076,647
=========== =========== =========== =========== ===========
Operating profit 2,395,940 349,387 (2,374,164) -- 371,163
=========== =========== =========== =========== ===========
Identifiable assets <F1> 19,012,549 5,399,359 3,334,264 -- 27,746,172
=========== =========== =========== =========== ===========
Capital expenditures 1,097,890 314,735 147,171 -- 1,559,796
=========== =========== =========== =========== ===========
Depreciation and
amortization <F1> 1,052,658 292,291 232,102 -- 1,577,051
=========== =========== =========== =========== ===========
</TABLE>
[FN]
<F1> During 1993 and 1994, certain property and equipment held by the
environmental operations was rented to the oilfield operations. At the
beginning of 1995, these assets were transferred to the oilfield
operations resulting in a decrease in intersegment sales, identifiable
assets and depreciation and amortization expense for the environmental
operations. Prior to 1995, the environmental operations included the
following amounts related to these assets: intersegment sales (rental
income) of $238,890 in 1993 and $367,152 in 1994; identifiable assets of
$2,579,318 in 1993 and $2,266,561 in 1994; and depreciation and
amortization expense of $394,769 in 1993 and $402,195 in 1994.
F-18
==================================== =========================
------------------------------------ -------------------------
3,500,000 Shares
No dealer, salesperson or any
other person has been authorized to
give any information or to make any
representation other than those
contained in this Prospectus in
connection with the offering and, if [LOGO]
given or made, such information or
representation must not be relied
upon as having been authorized by
the Company, the Selling
Shareholders or the Underwriters.
This Prospectus does not constitute
an offer to sell, or a solicitation AMBAR, INC.
of an offer to buy, to any person in
any jurisdiction in which such offer
to sell or solicitation is not
authorized, or in which the person Common Stock
making such offer or solicitation is
not qualified to do so, or to any
person to whom it is unlawful to
make such offer or solicitation. ______________
PROSPECTUS
______________
____________________
Raymond, James &
Associates, Inc.
TABLE OF CONTENTS
Page
________
Prospectus Summary............
Risk Factors..................
Use of Proceeds............... , 1996
Market Price of Common
Stock and Dividends.........
Selected Consolidated
Financial Data..............
Management's Discussion and
Analysis of Financial
Condition and Results of
Operations..................
Business......................
Management....................
Certain Transactions..........
Principal and Selling
Shareholders................
Description of Capital Stock..
Shares Eligible for Future
Sale........................
Underwriting..................
Legal Matters.................
Experts.......................
Available Information.........
Index to Consolidated
Financial Statements........ F-1
----------------------------------- ------------------------
=================================== ========================
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 13. Other Expenses of Issuance and Distribution.
Estimated expenses payable in connection with the proposed
sale of Common Stock covered hereby are as follows:
SEC registration fee............................ $ 16,916
NASD filing fee................................. 5,405
Nasdaq National Market application fee.......... *
Accounting fees and expenses.................... *
Printing expenses............................... *
Legal fees and expenses......................... *
Transfer agent fees............................. *
Miscellaneous expenses.......................... *
____________
Total...................................... $ *
============
__________________
* To be provided by amendment
Item 14. Indemnification of Directors and Officers.
Section 83 of the Louisiana Business Corporation Law (the "LBCL")
provides in part that a corporation may indemnify any director, officer,
employee or agent of the corporation against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and
reasonably incurred by him in connection with any action, suit or proceeding
to which he is or was a party or is threatened to be made a party (including
any action by or in the right of the corporation) if such action arises out
of the fact that he is or was a director, officer, employee or agent of the
corporation and he acted in good faith and in a manner he reasonably
believed to be in, or not opposed to, the best interests of the corporation,
and, with respect to any criminal action or proceeding, had no reasonable
cause to believe his conduct was unlawful.
The indemnification provisions of the LBCL are not exclusive; however,
no corporation may indemnify any person for willful or intentional
misconduct. A corporation has the power to obtain and maintain insurance,
or to create a form of self-insurance on behalf of any person who is or was
acting for the corporation, regardless of whether the corporation has the
legal authority to indemnify the insured person against the liability.
The Registrant's by-laws provides for mandatory indemnification for
directors and officers or former directors and officers of the Registrant to
the fullest extent permitted by Louisiana law. The Registrant maintains an
insurance policy covering the liability of its directors and officers for
actions taken in their official capacity.
The Underwriters have also agreed to indemnify the directors and
certain of the Company's officers against certain liabilities, including
liabilities under the Securities Act of 1933, as amended, or to contribute
to payments that such directors and officers may be required to make in
respect thereof.
Item 15. Recent Sales of Unregistered Securities.
On January 14, 1994, the Company issued 1,877 shares of common
stock to an employee in exchange for services rendered to the Company. These
securities were issued without registration under the Securities Act of
1933, as amended, (the "Securities Act"), in reliance on Section 4(2) of the
Securities Act and the rules and regulations promulgated thereunder as a
transaction not involving any public offering.
Item 16. Exhibits and Financial Statement Schedules.
(a) Exhibits:
1 Form of Underwriting Agreement*
2 Agreement and Plan of Merger of AMBAR, Inc. (Delaware) into
AMBAR, Inc. (Louisiana)*
3.1 Articles of Incorporation of the Company*
3.2 By-laws of the Company*
4.1 Specimen Certificate for Common Stock of the Company*
4.2 AMBAR, Inc. Shareholder Protection Rights Agreement dated
June ___, 1996 *
5 Opinion of Jones, Walker, Waechter, Poitevent, Carrere &
Denegre, L.L.P.*
10.1 Employment Agreement dated October 1, 1994, between AMBAR, Inc.
and Randolph M. Moity <F1>
10.2 AMBAR, Inc. Employees 1991 Incentive Compensation Plan <F2>
10.3 Warrant Agreement between AMBAR, Inc. and Morgan Keegan &
Company, Inc. <F3>
10.4 AMBAR, Inc. 1994 Non-Employee Directors' Incentive Compensation
Program <F4>
10.5 Materials Purchase Agreement dated May 4, 1995, between AMBAR,
Inc. and Martin Marietta Magnesia Specialties Inc. <F1>, as
amended on ________, 1996*
10.6 Asset Purchase Agreement between AMBAR Chemical, Inc. and AKZO
Nobel Salt, Inc. dated February 14, 1996*
10.7 Exclusive Marketing Agreement and Credit Agreement dated October
12, 1994 between AMBAR, Inc. and Meridian Technologies, Inc.*
10.8 Agreement between AMBAR, Inc., Meridian Technologies, Inc. and
Sulzer USA, Inc. dated November 22, 1995*
10.9 Revolving, Term and Construction/Term Loan Agreement dated June
20, 1995 among AMBAR, Inc., each of AMBAR, Inc.'s subsidiaries
and SouthTrust Bank of Alabama, National Association, as amended
on June 30, 1995, February 13, 1996 and May 29, 1996*
15 Letter of Arthur Andersen, LLP regarding review report on
interim financial information
21 Subsidiaries of the Company
23.1 Consent of Arthur Andersen, L.L.P.
23.2 Consent of Jones, Walker, Waechter, Poitevent, Carrere &
Denegre, L.L.P. (included in Exhibit 5)
24 Power of Attorney (included in the signature page to this
Registration Statement)
____________________
* To be filed by amendment.
[FN]
<F1> Incorporated by reference from the Company's Annual Report on Form 10-
K for the fiscal year ended June 30, 1995.
<F2> Incorporated by reference from the Company's Registration Statement on
Form S-1 (Registration No. 33-43503) filed with the Commission on
December 13, 1991.
<F3> Incorporated by reference from the Company's Annual Report on Form 10-
K for the fiscal year ended June 30, 1992.
<F4> Incorporated by reference from the Company's Registration Statement on
Form S-8 (Registration No. 33-91204) filed with the Commission on
April 17, 1995.
____________________
(b) Financial Statement Schedules
Report of Independent Public Accountant
Schedule II - Valuation and Qualifying Accounts
Item 17. Undertakings.
The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act,
the information omitted from the form of prospectus filed as part of this
Registration Statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the Registrant under Rule 424(b)(1) or (4) or 497(h)
under the Securities Act shall be deemed to be part of this Registration
Statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities Act,
each post-effective amendment that contains a form of prospectus shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of said securities at that time shall be deemed to
be the initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling
persons pursuant to the provisions described in Item 14 above, or otherwise,
the Registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as
expressed in the Securities Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities (other than
the payment by the Registrant of expenses incurred or paid by a director,
officer or controlling person of the Registrant in the successful defense of
any action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the
Registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against
public policy as expressed in the Securities Act and will be governed by the
final adjudication of such issue.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant certifies that it has duly caused this Registration Statement to
be signed on its behalf by the undersigned, thereunto duly authorized, in
the City of Lafayette, State of Louisiana, on June 12, 1996.
AMBAR, INC.
By: /s/ RANDOLPH M. MOITY, SR.
----------------------------
Randolph M. Moity, Sr.
Chairman of the Board,
Chief Executive Officer and
President
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that each person whose signature
appears below constitutes and appoints Randolph M. Moity, Sr. and Barry N.
Huntsman, or either of them acting individually, his true and lawful
attorney-in-fact and agent, with full power of substitution, for him and in
his name, place and stead, in any and all capacities, to sign any and all
amendments (including post-effective amendments) to this Registration
Statement and any registration statement for the same offering that is to be
effective upon filing pursuant to Rule 462(b) under the Securities Act, and
to file the same with all exhibits thereto, and other documents in
connection therewith, with the Securities and Exchange Commission, granting
unto said attorney-in-fact full power and authority to do and perform each
and every act and thing requisite and necessary to be done, as fully to all
intents and purposes as he might or could do in person, hereby ratifying and
confirming all that said attorney-in-fact or agent or his substitute or
substitutes may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated
Signature Title Date
Chairman of the Board, June 12, 1996
/s/ RANDOLPH M. MOITY, SR. President and Chief
- ----------------------------- Executive Officer
Randolph M. Moity, Sr.
/s/ HARRY E. BARSH, JR. Director June 12, 1996
- -----------------------------
Harry E. Barsh, Jr.
/s/ KENNETH J. BOUTTE Director June 12, 1996
- -----------------------------
Kenneth J. Boutte
/s/ JAMES C. RODDY Director June 12, 1996
- -----------------------------
James C. Roddy
/s/ RICHARD M. CURRENCE Director June 12, 1996
- -----------------------------
Richard M. Currence
/s/ ROBERT D. VAN ROIJEN Director June 12, 1996
- -----------------------------
Robert D. van Roijen
/s/ BARRY N. HUNTSMAN Treasurer and Chief June 12, 1996
- ----------------------------- Financial Officer
Barry N. Huntsman (Principal Financial
and Accounting Officer)
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
ON FINANCIAL STATEMENT SCHEDULE
To the Stockholders of AMBAR, Inc.:
We have audited in accordance with generally accepted auditing
standards, the consolidated financial statements of AMBAR, Inc. and its
subsidiaries and have issued our report thereon dated August 25, 1995. Our
audit was made for the purpose of forming an opinion on the basic financial
statements taken as a whole. The schedule of valuation and qualifying
accounts is the responsibility of the Company's management and is presented
for the purpose of complying with the Securities and Exchange Commission's
rules and is not part of the basic financial statements. This schedule has
been subjected to the auditing procedures applied in the audit of the basic
financial statements and, in our opinion, fairly states in all material
respects the financial data required to be set forth therein in relation to
the basic financial statements taken as a whole.
Arthur Andersen LLP
New Orleans, Louisiana,
August 25, 1995
AMBAR, INC.
AND SUBSIDIARIES
Schedule II - Valuation and Qualifying Accounts
<TABLE>
<CAPTION>
Additions
-----------------------
Balance at Charged to Charged to Balance
beginning costs and other at end
of year expenses accounts Deductions of year
--------- -------- -------- ---------- --------
<S> <C> <C> <C> <C> <C>
Year ended June 30, 1995:
Allowance for doubtful
accounts ........... $ 332,000 $369,000 $ -- $372,000 $329,000
Year ended June 30, 1994:
Allowance for doubtful
accounts ........... $ 258,000 $278,000 $ -- $204,000 $332,000
Year ended June 30, 1993:
Allowance for doubtful
accounts ........... $ 45,000 $246,000 $ -- $ 33,000 $258,000
</TABLE>
____________________
Amounts in the Deductions column are written off against the allowance for
doubtful accounts.
EXHIBIT INDEX
_________________
1 Form of Underwriting Agreement*
2 Agreement and Plan of Merger of AMBAR, Inc. (Delaware) into
AMBAR, Inc. (Louisiana)*
3.1 Articles of Incorporation of the Company*
3.2 By-laws of the Company*
4.1 Specimen Certificate for Common Stock of the Company*
4.2 AMBAR, Inc. Shareholder Protection Rights Agreement dated
June ___, 1996*
5 Opinion of Jones, Walker, Waechter, Poitevent, Carrere &
Denegre, L.L.P.*
10.1 Employment Agreement dated October 1, 1994, between AMBAR, Inc.
and Randolph M. Moity <F1>
10.2 AMBAR, Inc. Employees 1991 Incentive Compensation Plan <F2>
10.3 Warrant Agreement between AMBAR, Inc. and Morgan Keegan &
Company, Inc. <F3>
10.4 AMBAR, Inc. 1994 Non-Employee Directors' Incentive Compensation
Program <F4>
10.5 Materials Purchase Agreement dated May 4, 1995, between AMBAR,
Inc. and Martin Marietta Magnesia Specialties Inc. <F1>, as
amended on ________, 1996*
10.6 Asset Purchase Agreement between AMBAR Chemical, Inc. and AKZO
Nobel Salt, Inc. dated February 14, 1996*
10.7 Exclusive Marketing Agreement and Credit Agreement dated October
12, 1994 between AMBAR, Inc. and Meridian Technologies, Inc.*
10.8 Agreement between AMBAR, Inc., Meridian Technologies, Inc. and
Sulzer USA, Inc. dated November 22, 1995*
10.9 Revolving, Term and Construction/Term Loan Agreement dated June
20, 1995 among AMBAR, Inc., each of AMBAR, Inc.'s subsidiaries
and SouthTrust Bank of Alabama, National Association, as amended
on June 30, 1995, February 13, 1996 and May 29, 1996*
15 Letter of Arthur Andersen, LLP regarding review report on
interim financial information
21 Subsidiaries of the Company
23.1 Consent of Arthur Andersen, L.L.P.
23.2 Consent of Jones, Walker, Waechter, Poitevent, Carrere &
Denegre, L.L.P. (included in Exhibit 5)
24 Power of Attorney (included in the signature page to this
Registration Statement)
____________________
* To be filed by amendment.
[FN]
<F1> Incorporated by reference from the Company's Annual Report on Form 10-
K for the fiscal year ended June 30, 1995.
<F2> Incorporated by reference from the Company's Registration Statement on
Form S-1 (Registration No. 33-43503) filed with the Commission on
December 13, 1991.
<F3> Incorporated by reference from the Company's Annual Report on Form 10-
K for the fiscal year ended June 30, 1992.
<F4> Incorporated by reference from the Company's Registration Statement on
Form S-8 (Registration No. 33-91204) filed with the Commission on
April 17, 1995.
____________________
EXHIBIT 5
June 14, 1996
AMBAR, Inc.
221 Rue de Jean
Lafayette, Louisiana 70508
Dear Sirs:
We have acted as your counsel in connection with the
preparation of the registration statement on Form S-1 (the
"Registration Statement") filed by you with the Securities and
Exchange Commission on the date hereof, with respect to the offer
by the Company and Selling Shareholders of up to 4,025,000 shares
of Common Stock, $.01 par value per share (the "Shares"). In so
acting, we have examined original, or photostatic or certified
copies, of such records of the Company, certificates of officers
of the Company and of public officials, and such other documents
as we have deemed relevant. In such examination, we have assumed
the genuineness of all signatures, the authenticity of all
documents submitted to us as originals, the conformity to
original documents of all documents submitted to us as certified
or photostatic copies and the authenticity of the originals of
such documents.
Based upon the foregoing, we are of the opinion that the
Shares have been duly authorized and validly issued and are fully
paid and non-assessable.
We hereby consent to the filing of this opinion as an
exhibit to the Registration Statement and the reference to us
under the caption "Legal Matters" as counsel for the Company. In
giving this consent, we do not admit that we are within the
category of persons whose consent is required under Section 7 of
the Securities Act of 1933, as amended, or the general rules and
regulations of the Commission.
Very truly yours,
/s/ Jones, Walker Waechter, Poitevent
Carrere & Denegre, L.L.P.
JONES, WALKER, WAECHTER,
POITEVENT, CARRERE & DENEGRE, L.L.P.
EXHIBIT 15
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
Re: AMBAR, Inc. Registration on Form S-1
We are aware that our report dated May 3, 1996, on our
review of the interim financial information of AMBAR, Inc., (the
"Company") as of March 31, 1996 and for the nine months ended
March 31, 1996 is included in the Company's Registration
Statement. Pursuant to Rule 436(c) under the Securities Act of
1933 (the "Act"), this report should not be considered a part of
the Registration Statement prepared or certified by us within the
meaning of Sections 7 and 11 of the Act.
/s/ Arthur Andersn LLP
ARTHUR ANDERSEN LLP
New Orleans, Louisiana,
June 14, 1996
EXHIBIT 21
List of Subsidiaries
______________________
Jurisdiction of
Name Incorporation
---- -------------
AMBAR Chemical, Inc. Delaware
AMBAR Marine, Inc. Delaware
Oil Mop, Inc. Delaware
AMBAR Europe B.V. The Netherlands
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use
in this registration statement of our reports dated August 25,
1995 included herein and to all references to our Firm included
in this registration statement.
/s/ Arthur Andersen LLP
ARTHUR ANDERSEN LLP
New Orleans, Louisiana,
June 14, 1996