UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_____________
FORM 10-Q
* QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1996
or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission File Number 0-19679
AMBAR, INC.
(Exact name of registrant as specified in its charter)
Delaware 72-0900435
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
The AMBAR Building
221 Rue de Jean
Lafayette, Louisiana 70508
(Address of principal (Zip Code)
executive offices)
(318) 237-5300
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes * No
NUMBER OF SHARES OF COMMON STOCK OUTSTANDING
ON APRIL 29, 1996 - 3,699,627
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
AMBAR, INC.
AND SUBSIDIARIES
<TABLE>
<CAPTION>
CONSOLIDATED BALANCE SHEETS
(unaudited)
March 31, June 30,
1996 1995
ASSETS ------------- -------------
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 647,946 $ 265,948
Cash and short-term investments--restricted 659,784 340,623
Accounts receivable 13,311,409 7,569,226
Inventory 7,107,903 6,433,783
Recoverable income taxes 859,523 672,500
Prepaid expenses and other current assets 1,180,927 1,215,801
------------ ------------
Total current assets 23,767,492 16,497,881
------------ ------------
PROPERTY AND EQUIPMENT:
Buildings and leasehold improvements 4,976,886 2,812,481
Transportation equipment (including amounts capitalized under
capital leases) 2,315,222 2,207,280
Machinery and equipment 9,367,632 6,671,214
Furniture and fixtures (including amounts capitalized under
capital leases) 593,623 540,956
Other equipment 338,912 338,912
------------ ------------
Total property and equipment 17,592,275 12,570,843
Less accumulated depreciation (including amortization of
equipment acquired under capital leases) (5,706,855) (4,685,639)
------------ ------------
Net property and equipment 11,885,420 7,885,204
------------ ------------
COST IN EXCESS OF FAIR VALUE OF NET ASSETS ACQUIRED, net 1,003,993 1,057,723
------------ ------------
OTHER ASSETS, net 2,419,669 2,305,364
------------ ------------
Total assets $ 39,076,574 $ 27,746,172
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 5,263,372 $ 3,844,101
Accrued liabilities 2,457,276 993,132
Revolving line of credit 9,115,248 3,651,344
Notes payable - 277,886
Current portion of long-term debt 613,084 -
Current portion of obligations under capital leases 151,608 158,309
------------ ------------
Total current liabilities 17,600,588 8,924,772
LONG-TERM DEBT, less current portion 5,299,514 2,707,796
OBLIGATIONS UNDER CAPITAL LEASES, less current portion 119,087 240,635
DEFERRED INCOME TAXES 1,192,153 998,837
------------ ------------
Total liabilities 24,211,342 12,872,040
------------ ------------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Common Stock, $.01 par value 36,996 36,837
Paid-in capital 12,475,184 12,355,269
Retained earnings 2,353,052 2,482,026
------------ ------------
Total stockholders' equity 14,865,232 14,874,132
------------ ------------
Total liabilities and stockholders' equity $ 39,076,574 $ 27,746,172
============ ============
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
March 31, March 31,
-------------------------- ---------------------------
1996 1995 1996 1995
----------- ----------- ------------ ------------
<S> <C> <C> <C> <C>
REVENUES:
Oilfield products and services $ 8,661,143 $ 6,099,986 $ 27,882,488 $ 24,841,450
Environmental products and services 4,607,597 1,321,242 7,725,209 4,539,101
----------- ----------- ------------ ------------
Total revenues 13,268,740 7,421,228 35,607,697 29,380,551
----------- ----------- ------------ ------------
COST OF REVENUES:
Oilfield products and services 7,999,473 5,492,126 24,629,586 21,651,638
Environmental products and services 3,556,334 1,221,847 7,086,969 3,418,219
----------- ----------- ------------ ------------
Total cost of revenues 11,555,807 6,713,973 31,716,555 25,069,857
----------- ----------- ------------ ------------
GROSS PROFIT 1,712,933 707,255 3,891,142 4,310,694
SELLING, GENERAL AND ADMINISTRATIVE 1,322,335 1,182,801 3,418,247 3,301,640
----------- ----------- ------------ ------------
OPERATING INCOME (LOSS) 390,598 (475,546) 472,895 1,009,054
OTHER INCOME (EXPENSE)
Interest expense (266,209) (185,017) (704,148) (556,495)
Interest income 12,731 4,269 29,108 13,633
----------- ----------- ------------ ------------
INCOME (LOSS) BEFORE TAXES 137,120 (656,294) (202,145) 466,192
INCOME TAX PROVISION (BENEFIT) 36,297 (242,829) (73,171) 172,491
----------- ----------- ------------ ------------
NET INCOME (LOSS) $ 100,823 $ (413,465) $ (128,974) $ 293,701
=========== =========== ============ ============
EARNINGS (LOSS) PER COMMON AND
COMMON EQUIVALENT SHARE $ .03 $ (.11) $ (.03) $ .08
=========== =========== ============ ============
WEIGHTED AVERAGE SHARES
OUTSTANDING 3,790,088 3,671,075 3,732,288 3,663,481
=========== =========== ============ ============
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
Nine Months Ended March 31,
----------------------------
1996 1995
----------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss) income $ (128,974) $ 293,701
Adjustments to reconcile net (loss) income to net cash
provided by (used in) operating activities:
Depreciation and amortization 1,393,305 1,112,389
Deferred income taxes 82,707 (127,814)
Other (11,782) (26,859)
Changes in assets and liabilities:
Cash and short-term investments--restricted 75,000 -
Accounts receivable (5,742,183) 4,812,707
Inventory (674,120) 198,656
Recoverable income taxes (187,023) 2,189
Prepaid expenses and other current assets 145,483 456,232
Other assets (355,441) (521,700)
Accounts payable 1,419,271 (1,747,772)
Accrued liabilities 1,464,144 (2,701,719)
Income taxes payable - (139,904)
----------- -----------
Net cash (used in) provided by operating activities (2,519,613) 1,610,106
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of equipment 89,428 79,706
Capital expenditures (5,098,815) (1,055,219)
Other assets (49,455) (12,530)
----------- -----------
Net cash used in investing activities (5,058,842) (988,043)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from borrowing 6,124,646 1,944,374
Principal payments (489,935) (439,545)
Net borrowing (payments) under revolving line of credit 2,756,108 (1,951,824)
Change in cash restricted to payments on revolving line of credit (394,161) (248,499)
Common Stock activity, net 92,044 91,736
Payments under capital leases (128,249) (105,129)
----------- -----------
Net cash provided by (used in) financing activities 7,960,453 (708,887)
----------- -----------
NET CHANGE IN CASH AND CASH EQUIVALENTS 381,998 (86,824)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 265,948 538,134
----------- -----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 647,946 $ 451,310
=========== ===========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest $ 702,157 $ 607,148
Income taxes $ 31,159 $ 848,160
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
1. UNAUDITED FINANCIAL INFORMATION
The financial information as of March 31, 1996, and June 30,
1995, and for the interim periods ended March 31, 1996 and 1995,
included herein is unaudited; however, such information reflects,
in the opinion of management, all adjustments (consisting solely
of normal recurring adjustments) that are necessary to present
fairly the results of operations for such periods. Results of
operations for the interim periods are not necessarily indicative
of results of operations which will be realized for the year
ending June 30, 1996.
The term "Company" used herein refers to the total business
conducted by AMBAR, Inc. and its subsidiaries.
2. 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. AMBAR will receive a
coproduct stream generated by MMMS that is rich in several
inorganic chemicals. AMBAR's interest is primarily in the
calcium chloride and sodium bromide. The Company will process
the stream into dry calcium chloride, liquid calcium chloride and
bromine. These products are raw materials for the Company's high
density brine product line.
The Company had previously disclosed its intention to build a
calcium chloride production facility adjacent to the MMMS plant.
Completion of the new plant was projected for the quarter ending
December 31, 1996. In November 1995, AMBAR signed a letter of
intent with Akzo Nobel Salt Inc. ("Akzo") for the purchase of
Akzo's plant in Manistee, Michigan. Purchase of the Akzo plant
was completed during February 1996. Rather than construct a new
facility, AMBAR is retrofitting the Akzo plant to process the
coproduct stream from MMMS. Production from the converted
facility is projected for the quarter ending June 30, 1996. The
purchase and the retrofitting of the plant are being financed
primarily by the construction/term loan discussed in Note 3.
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.
3. DEBT
The Company has a $20 million bank credit facility consisting of
the following:
$10 MILLION REVOLVING LINE OF CREDIT -- The maximum
indebtedness under the revolving line of credit cannot
exceed the lesser 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. The amount reflected
on the Consolidated Balance Sheet at March 31, 1996, as
Cash and short-term investments--restricted includes
approximately $437,000 of accounts receivable collections
which had not been applied by the bank to the balance
outstanding under the revolving line of credit.
$3 MILLION TERM LOAN -- The term loan is being amortized in
monthly installments with a balloon payment due on
April 30, 2000.
$7 MILLION CONSTRUCTION/TERM LOAN -- The construction/term
loan will be used to finance the purchase and conversion of
the Akzo plant discussed in Note 2. Through June 20, 1996,
interest payments only will be made monthly on the amount
outstanding. Monthly principal and interest payments will
commence on July 20, 1996, with a balloon payment due on
June 20, 2000. There was approximately $3.1 million
outstanding under the construction/term loan at March 31,
1996.
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%. 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. The loans are collateralized by
all of the Company's assets.
At June 30, 1995, the $3 million term loan had not been funded
pending completion of certain documentation. When the credit
facility was signed in June 1995, amounts available under the
revolving line of credit were used to liquidate both the prior
revolving line of credit and a prior term loan. At June 30,
1995, approximately $6,359,000 was outstanding under the
revolving line of credit. The $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 $3
million term loan, rather than amounts available under the
revolving line of credit, to repay the prior term loan.
Accordingly, on the consolidated balance sheet as of
June 30, 1995, 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, was classified as
"Long-term debt" and the amount shown as "Revolving line of
credit" was reduced by an equal amount.
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.
4. COMMITMENTS AND CONTINGENCIES
Kengo Services, Inc. ("Kengo"), a former subsidiary of the
Company which was merged into AMBAR, Inc. in February 1995, was
named as a Potentially Responsible Party (a "PRP") in a
federal administrative proceeding under the Comprehensive
Environmental Response, Compensation & Liability Act, as amended
by the Superfund Amendments and Reauthorization Act ("CERCLA"),
pertaining to the PAB Oil and Chemicals Superfund site (the "PAB
Site") located near Abbeville, Louisiana. This site was declared
a Superfund site by the United States Environmental Protection
Agency (the "EPA") on March 31, 1989. The Company is one of
approximately 190 PRPs involved in this proceeding, and believes
that it is a minor PRP, having disposed of a relatively small
percentage of the total wastes disposed of at the PAB Site
(approximately three percent). Further, most of such waste was
not originally generated by Kengo, but was generated by customers
of Kengo for whom Kengo provided transportation services.
The EPA has studied the site conditions and has proposed several
alternative plans of action to clean up the site. The proposed
alternatives range in cost from $8 million to $68 million; the
cost of the plan recommended by the EPA record of decision in
September 1993 would 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. 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.
It is also unknown how transporters will be treated in this
matter. 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 Technologies, Inc. ("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 plant. The Company believes that the
order is erroneous and intends to appeal once a final judgment is
rendered.
Also 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,
an officer of the Company and a company allegedly organized by
such persons (collectively, the "Original Defendants"), claiming,
among other things, that the Original Defendants 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 employed by
Meridian Technologies, Inc., an engineering consulting firm with
whom the Company has entered an exclusive agreement to market the
products produced at the Manistee plant. 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 its former employees 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 ex-employees. 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.
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 it business.
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
RESULTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1995 COMPARED
TO THREE MONTHS ENDED MARCH 31, 1996
Revenues from oilfield products and services increased 42% from
approximately $6.1 million in the 1995 quarter to $8.7 million in
the current year quarter. Activity levels in the Gulf of Mexico
have been strong and sales volumes of high density brines and
drilling muds have increased. The Company has also increased the
sales staff related to these products.
Revenues from environmental products and services more than
doubled from $1.3 million in the prior year quarter to $4.6
million in the current year quarter. Sales of Oil Mop equipment
increased from approximately $340,000 in the 1995 quarter to
approximately $1.1 million in the 1996 quarter. This was due to
increased sales effort related to these products. Revenues from
Oil Mop's spill response operations increased from approximately
$500,000 to $2.6 million. This was primarily due to response
efforts related to a major oil spill near Galveston, Texas. In
1996, sales of rigid hull inflatable boats by AMBAR Marine
generated revenues of approximately $100,000; there were no sales
of these boats in the 1995 quarter. The 1995 quarter did not
include any revenues related to the remediation operations since
they did not commence commercial operation until the fourth
quarter of fiscal 1995. In the 1996 quarter, revenues from the
remediation operations were approximately $130,000.
Cost of revenues from oilfield products and services increased
from $5.5 million in the prior year to $8.0 million in the
current year. The increase is primarily due to increased product
costs related to the increased sales volumes noted above.
Average margins on products sales were approximately 4% higher
in the prior year quarter than in the current year quarter.
Cost of revenues for environmental products and services
increased from $1.2 million in the prior year to $3.6 million in
the current year. This is primarily due to costs related to the
Oil Mop equipment sales and Oil Mop response activities noted
above. Costs related to the AMBAR Marine operations were
approximately $179,000. Sales of these boats did not commence
until November 1995, so there were no related costs in the prior
year quarter. The prior year quarter did not include any
expenses related to the remediation operations since they did not
commence commercial operation until the fourth quarter of fiscal
1995. In the 1996 quarter, costs related to the remediation
operations were approximately $490,000. These operations
represent a new product line for the Company and introduction of
the product line is taking longer than originally projected.
Selling, general and administrative expenses increased from
approximately $1.2 million in the prior year to approximately
$1.3 million in the current year quarter, with such expenses
consisting principally of salaries and other compensation
expense. The increase relates primarily to additional salesmen
for the company's high density brine and drilling mud product
lines.
Interest expense increased from approximately $185,000 to
$266,000. This increase relates primarily to additional amounts
outstanding under the revolving line of credit.
NINE MONTHS ENDED MARCH 31, 1995 COMPARED
TO NINE MONTHS ENDED MARCH 31, 1996
Revenues from oilfield products and services increased 12% from
approximately $24.8 million in the 1995 period to $27.9 million
in the current year period. Activity levels in the Gulf of
Mexico have been strong and sales volumes of high density brines
and drilling muds have increased. The Company has also increased
the sales staff related to these products.
Revenues from environmental products and services increased 70%
from $4.5 million in the prior year period to $7.7 million in the
current year period. Sales of Oil Mop equipment more than
doubled from approximately $900,000 in the 1995 period to
approximately $2.0 million in the 1996 period. This was due to
increased sales effort related to these products. Revenues from
Oil Mop's spill response operations increased from $2.2 million
to $3.3 million. This was due to response efforts related to a
major oil spill near Galveston, Texas. In 1996, sales of rigid
hull inflatable boats by AMBAR Marine generated revenues of
approximately $200,000; there were no sales of these boats in the
prior year period. The prior year period did not include any
revenues related to the remediation operations since they did not
commence commercial operation until the fourth quarter of fiscal
1995. In the fiscal 1996 period, revenues from the remediation
operations were approximately $375,000.
Cost of revenues from oilfield products and services increased
from $21.7 million in the prior year to $24.6 million in the
current year. The increase is primarily due to increased product
costs related to the increased sales volumes noted above.
Average margins on products sales were approximately 3% higher in
the prior year period than in the current year period.
Cost of revenues for environmental products and services
increased from $3.4 million in the prior year to $7.1 million in
the current year. Costs related to Oil Mop equipment and Oil Mop
response activities increased by approximately $885,000 and
$940,000, respectively. These increases relate to the revenue
increases discussed above. Costs related to the AMBAR Marine
operations were approximately $300,000. Sales of these boats did
not commence until November 1995, so there were no related costs
in the prior year period. The prior year period did not include
any expenses related to the remediation operations since they did
not commence commercial operation until the fourth quarter of
fiscal 1995. In the fiscal 1996 period, cost of revenues for the
remediation operations were approximately $1.3 million. These
operations represent a new product line for the Company and
introduction of the product line is taking longer than originally
projected.
Selling, general and administrative expenses increased from
approximately $3.3 million in the prior year to approximately
$3.4 million in the current year period, with such expenses
consisting principally of salaries and other compensation
expense. The increase relates primarily to additional salesmen
for the company's high density brine and drilling mud product
lines.
Interest expense increased from approximately $556,000 to
$704,000. This increase relates primarily to additional amounts
outstanding under the revolving line of credit.
LIQUIDITY AND CAPITAL RESOURCES
Operating Activities--Net cash used in operating activities was
$2.5 million.
Accounts receivable increased $5.7 million from June 30, 1995.
This is primarily due to higher revenues. Total revenues for the
quarter ended March 31, 1996, were approximately $4.6 million or
53% higher than revenues for the quarter ended June 30, 1995.
Also, approximately 45% of the revenues for the March 1996
quarter were generated during March, so most of the revenues for
the quarter had not been collected by the balance sheet date.
Associated with the higher level of sales mentioned above,
inventory increased by $674,000 or approximately 10% from June
30, 1995.
The increase in recoverable income taxes relates to the estimated
tax benefit for the first nine months of fiscal 1996.
The increase in other assets relates primarily to costs
associated with closing the $20 million credit facility discussed
below under Financing Activities. It also includes approximately
$81,000 related to the start-up of the AMBAR Marine operations.
The initial sale of the boats produced by AMBAR Marine occurred
during November 1995 and amortization of the start-up costs
commenced at that time.
Accounts payable and accrued liabilities together increased by
approximately $2.9 million. This is primarily due to the
increased level of revenues and the timing of revenues discussed
above.
Investing activities--Net cash used in investing activities was
$5.1 million. Capital expenditures related to the purchase and
conversion of the Akzo plant in Manistee, Michigan totaled
approximately $3.7 million. The remainder of the capital
expenditures were primarily for improvements at the Company's
existing stockpoints.
Financing Activities--Net cash provided by financing activities
was approximately $8.0 million. The Company has a $20 million
bank credit facility consisting of a $10 million revolving line
of credit, a $3 million term loan and a $7 million
construction/term loan. At March 31, 1996, approximately $9.1
million was outstanding under the line of credit. The $3 million
term loan was funded on July 31, 1995, and the proceeds were
applied to the revolving line of credit. During fiscal 1996,
approximately $3.1 million was borrowed under the
construction/term loan. These funds were used for the purchase
and conversion of the Akzo plant.
The Company believes that internally generated funds and funds
available under the line of credit and the construction/term loan
will be sufficient to meet the Company's liquidity and capital
needs for the next twelve months.
OTHER
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 ending 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.
See Part II, Item 1 for a discussion of legal proceedings.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
Kengo Services, Inc. ("Kengo"), a former subsidiary of the
Company which was merged into AMBAR, Inc. in February 1995, was
named as a Potentially Responsible Party (a "PRP") in a
federal administrative proceeding under the Comprehensive
Environmental Response, Compensation & Liability Act, as amended
by the Superfund Amendments and Reauthorization Act ("CERCLA"),
pertaining to the PAB Oil and Chemicals Superfund site (the "PAB
Site") located near Abbeville, Louisiana. This site was declared
a Superfund site by the United States Environmental Protection
Agency (the "EPA") on March 31, 1989. The Company is one of
approximately 190 PRPs involved in this proceeding, and believes
that it is a minor PRP, having disposed of a relatively small
percentage of the total wastes disposed of at the PAB Site
(approximately three percent). Further, most of such waste was
not originally generated by Kengo, but was generated by customers
of Kengo for whom Kengo provided transportation services.
The EPA has studied the site conditions and has proposed several
alternative plans of action to clean up the site. The proposed
alternatives range in cost from $8 million to $68 million; the
cost of the plan recommended by the EPA record of decision in
September 1993 would 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. 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.
It is also unknown how transporters will be treated in this
matter. 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 Technologies, Inc. ("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 plant. The Company believes that the
order is erroneous and intends to appeal once a final judgment is
rendered.
Also 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,
an officer of the Company and a company allegedly organized by
such persons (collectively, the "Original Defendants"), claiming,
among other things, that the Original Defendants 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 employed by
Meridian Technologies, Inc., an engineering consulting firm with
whom the Company has entered an exclusive agreement to market the
products produced at the Manistee plant. 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 its former employees 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 ex-employees. 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.
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 it business.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
3.1 Certificate of Amendment and Amended and
Restated Certificate of Incorporation of the
Company (incorporated by reference to Exhibit
3.1 to the Annual Report on Form 10-K for the
year ended June 30, 1992)
3.2 By-Laws of the Company, as amended
(incorporated by reference to Exhibit 3.2 to
the Annual Report on Form 10-K for the year
ended June 30, 1992)
27 Financial Data Schedule
(b) Reports on Form 8-K:
There were no reports on Form 8-K filed during the
three months ended March 31, 1996.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
AMBAR, Inc.
By /s/ Randolph M. Moity By /s/ Barry N. Huntsman
___________________________ ___________________________
Randolph M. Moity Barry N. Huntsman
Chairman and Chief Executive Treasurer and Chief
Officer Financial Officer
Date: May 13, 1996
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS FINANCIAL INFORMATION FROM CONDENSED FINANCIAL
STATEMENTS FOR THE PERIOD ENDING MARCH 31, 1996 AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-END> MAR-31-1996
<CASH> 1,370,730
<SECURITIES> 0
<RECEIVABLES> 13,627,064
<ALLOWANCES> 315,655
<INVENTORY> 7,107,903
<CURRENT-ASSETS> 23,767,492
<PP&E> 17,592,275
<DEPRECIATION> 5,706,855
<TOTAL-ASSETS> 39,076,574
<CURRENT-LIABILITIES> 17,600,588
<BONDS> 5,299,514
0
0
<COMMON> 36,996
<OTHER-SE> 14,828,236
<TOTAL-LIABILITY-AND-EQUITY> 39,076,574
<SALES> 35,607,697
<TOTAL-REVENUES> 35,607,697
<CGS> 31,716,555
<TOTAL-COSTS> 31,716,555
<OTHER-EXPENSES> 3,418,247
<LOSS-PROVISION> 281,865
<INTEREST-EXPENSE> 704,148
<INCOME-PRETAX> (202,145)
<INCOME-TAX> (73,171)
<INCOME-CONTINUING> (128,974)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (128,974)
<EPS-PRIMARY> (0.3)
<EPS-DILUTED> (0.3)
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