<PAGE>
===============================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
FORM 8-K/A
CURRENT REPORT
AMENDMENT TO APPLICATION OR REPORT FILED PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934 DATE OF REPORT (DATE OF EARLIEST EVENT
REPORTED): APRIL 1, 1996
----------------
KOPPERS INDUSTRIES, INC.
(Exact name of registrant as specified in its charter)
PENNSYLVANIA 1-21716 25-1588399
(State or Other Jurisdiction (Commission File Number) (I.R.S. Employer
of Incorporation) Identification
Number)
436 SEVENTH AVENUE, PITTSBURGH, PA 15219-1800
(Zip Code)
(Address of Principal Executive
Offices)
(412) 227-2001
(Registrant's telephone number, including area code)
===============================================================================
<PAGE>
This Current Report on Form 8-K/A amends Item 7 of the Current Report on
Form 8-K filed on April 12, 1996.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
The following financial statements, pro forma financial information and
exhibits are filed as a part of this amendment to Form 8-K.
(A) FINANCIAL STATEMENTS OF THE BUSINESS ACQUIRED, PREPARED PURSUANT TO
RULE 3.05 OF REGULATION S-X AND PROVIDED TO KOPPERS INDUSTRIES, INC. BY
ARISTECH CHEMICAL CORPORATION:
<TABLE>
<CAPTION>
ITEM PAGE
---- ----
<S> <C>
Audited Financial Statements of the Coal Chemical Business of Aristech
Chemical Corporation
Independent Auditors' Report........................................ 4
Statements of Income for the Years Ended December 31, 1994 and 1995. 5
Balance Sheets at December 31, 1994 and 1995........................ 6
Statements of Net Cash Flows for the Years Ended December 31, 1994
and 1995........................................................... 7
Notes to Financial Statements....................................... 8
Unaudited Interim Financial Statements of the Coal Chemical Business
of Aristech Chemical Corporation
Statements of Income for the Three Months Ended March 31, 1995 and
1996............................................................... 14
Balance Sheet at March 31, 1996..................................... 15
Statements of Net Cash Flows for the Three Months Ended March 31,
1995 and 1996...................................................... 16
Notes to the Financial Statements................................... 17
</TABLE>
(B) PRO FORMA FINANCIAL INFORMATION REQUIRED PURSUANT TO ARTICLE 11 OF
REGULATION S-X:
<TABLE>
<CAPTION>
ITEM PAGE
---- ----
<S> <C>
Koppers Industries, Inc. and the Coal Chemical Business of Aristech
Chemical Corporation Pro Forma Condensed Consolidated Financial
Statements (Unaudited)
Pro Forma Condensed Consolidated Balance Sheet--March 31, 1996...... 18
Pro Forma Condensed Consolidated Statement of Operations--Year Ended
December 31, 1995................................................ 19
Pro Forma Condensed Consolidated Statement of Operations--Three
Months Ended March 31, 1996...................................... 20
</TABLE>
The unaudited pro forma condensed consolidated balance sheet as of March 31,
1996 gives effect to the acquisition of the Coal Chemical Business of Aristech
Chemical Corporation ("Clairton") as if the acquisition, accounted for as a
purchase, had occurred on that date. The unaudited pro forma condensed
consolidated statements of operations for the year ended December 31, 1995 and
three months ended March 31, 1996 give effect to the Clairton acquisition as
if it had occurred on January 1, 1995. The pro forma information is based on
historical financial statements of Koppers Industries, Inc. and Clairton after
giving effect to the transaction using the purchase method of accounting and
the assumptions and adjustments in the accompanying notes to the pro forma
financial statements. The pro forma adjustments described in the notes to the
pro forma condensed consolidated financial statements reflect the estimated
allocation of the purchase price to assets and liabilities. Additional
information, primarily related to the actuarial valuations for pension and
post-retirement benefits, and clarification of currently available information
may result in revisions to this estimated allocation.
The pro forma statements have been prepared by Koppers Industries, Inc.
based upon the financial statements of Clairton (filed with this report under
item 7(a)) which have been provided by Aristech Chemical Corporation. These
pro forma statements may not be indicative of the results that actually would
have occurred if the combination had been in effect on the dates indicated or
which may be obtained in the future. The pro forma financial statements should
be read in conjunction with the audited financial statements and notes of
Clairton and the audited financial statements of Koppers Industries, Inc.
1
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this amendment to be signed on its behalf by the
undersigned, thereunto duly authorized.
Koppers Industries, Inc.
-------------------------------------
(Registrant)
By /s/ Donald E. Davis
May 31, 1996
- --------------------- -----------------------------------
Donald E. Davis,
Vice President and Chief Financial
Officer
2
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors
Aristech Chemical Corporation:
We have audited the accompanying balance sheets of the Coal Chemical
Business of Aristech Chemical Corporation as of December 31, 1994 and 1995 and
the related statements of income and net cash flows for the years then ended.
These financial statements are the responsibility of 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.
The accompanying financial statements have been prepared from the separate
records maintained by the Coal Chemical Business and may not necessarily be
indicative of the conditions that would have existed or the results of
operations if the Coal Chemical Business had been operated as an unaffiliated
company. Portions of certain income and expenses represent allocations made
from corporate items applicable to Aristech Chemical Corporation as a whole.
In our opinion, such financial statements present fairly, in all material
respects, the financial position of the Coal Chemical Business of Aristech
Chemical Corporation as of December 31, 1994 and 1995, and the results of its
operations and its net cash flows for the years then ended in conformity with
generally accepted accounting principles.
/s/ Deloitte & Touche LLP
April 16, 1996
Pittsburgh, Pennsylvania
3
<PAGE>
COAL CHEMICAL BUSINESS OF ARISTECH CHEMICAL CORPORATION
STATEMENTS OF INCOME
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEARS ENDED
DECEMBER 31,
---------------
1994 1995
<S> <C> <C>
Sales.......................................................... $69,075 $75,984
Operating costs:
Cost of sales................................................ 56,531 62,291
Selling, general and administrative expenses................. 3,412 3,355
Depreciation................................................. 1,972 1,969
------- -------
Total operating costs...................................... 61,915 67,615
------- -------
Operating income............................................... 7,160 8,369
Other income................................................... 16 14
------- -------
Income before provision for taxes on income.................... 7,176 8,383
Provision for taxes on income.................................. 2,978 3,479
------- -------
Net income..................................................... $ 4,198 $ 4,904
======= =======
</TABLE>
See accompanying notes.
4
<PAGE>
COAL CHEMICAL BUSINESS OF ARISTECH CHEMICAL CORPORATION
BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 31,
---------------
1994 1995
ASSETS
<S> <C> <C>
Current assets:
Cash and equivalents......................................... $ 2 $ 1
Receivables (less allowance for doubtful accounts of $30 for
1994 and 1995)............................................. 8,884 10,249
Inventories.................................................. 4,678 4,754
Deferred income taxes........................................ 649 846
------- -------
Total current assets....................................... 14,213 15,850
Property, plant and equipment, net of accumulated depreciation. 28,820 28,181
------- -------
Total assets............................................... $43,033 $44,031
======= =======
<CAPTION>
LIABILITIES
<S> <C> <C>
Current liabilities:
Accounts payable and other current liabilities............... $ 8,226 $ 8,966
Payroll and benefits payable................................. 461 474
Accrued taxes ............................................... 14 16
------- -------
Total current liabilities.................................. 8,701 9,456
Deferred income taxes.......................................... 10,552 10,419
Other liabilities.............................................. 1,564 2,039
Intercompany liability......................................... 22,216 22,117
Commitments and contingencies (See Note 10).................... -- --
------- -------
Total liabilities.......................................... $43,033 $44,031
======= =======
</TABLE>
See accompanying notes.
5
<PAGE>
COAL CHEMICAL BUSINESS OF ARISTECH CHEMICAL CORPORATION
STATEMENTS OF NET CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEARS ENDED
DECEMBER 31,
----------------
1994 1995
<S> <C> <C>
Cash flows from operating activities:
Net income................................................ $ 4,198 $ 4,904
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation............................................ 1,972 1,969
Receivables............................................. (621) (1,365)
Inventories............................................. (1,208) (76)
Deferred income taxes................................... (112) (330)
Current liabilities..................................... 1,584 755
Other liabilities....................................... (24) 475
Other--net.............................................. (169) (117)
------- -------
Net cash flows provided by operations................. 5,620 6,215
Cash flows from investing activities:
Capital expenditures...................................... (265) (1,212)
------- -------
Net cash used in investing activities................. (265) (1,212)
------- -------
Net cash flow to Aristech Chemical Corporation.............. $ 5,355 $ 5,003
======= =======
</TABLE>
See accompanying notes.
6
<PAGE>
COAL CHEMICAL BUSINESS OF
ARISTECH CHEMICAL CORPORATION
NOTES TO THE FINANCIAL STATEMENTS--(CONTINUED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying financial statements have been prepared for the purpose of
presenting the balance sheets of the Coal Chemical Business (the "Business")
of Aristech Chemical Corporation (the "Company") at December 31, 1994 and 1995
and its income and net cash flows to the Company for each of the two years in
the period ended December 31, 1995, in accordance with generally accepted
accounting principles.
During the periods covered by the statement of income, the Business was
operated as an integral part of the Company's overall operations. The
financial statements also include various allocated costs and expenses (see
Note 5) which are not necessarily indicative of the costs and expenses which
would have resulted had the Business been operated as a separate company. All
of the allocations and estimates reflected in the financial statements are
based on assumptions that management believes are reasonable.
The Company has not completed the process of evaluating the impact that will
result from adopting Statement of Financial Accounting Standards ("SFAS") No.
121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed Of." The Company is therefore unable to disclose the
impact that adopting SFAS No. 121 will have on net assets and results of
operations of the Business when such statement is adopted.
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
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reported period.
Actual results could differ from those estimates.
Cash
The Business participates in the Company's cash management system and,
accordingly, does not maintain cash balances other than minimal imprest
amounts.
Inventories
Inventories are stated at the lower of aggregate cost or market. Cost is
determined primarily by the last-in, first-out ("LIFO") method. Inventory
costs include direct and indirect manufacturing costs associated with the
production of product.
Property, Plant and Equipment
Property, plant and equipment are carried at cost. Major replacements and
improvements which extend the life of the property are capitalized, while
maintenance and repairs are expensed as incurred. Depreciation of plant and
equipment is computed on the straight-line method.
When a plant or major facility within a plant is sold or otherwise disposed
of, any gain or loss is reflected in the statement of income. Proceeds from
the sale of other facilities depreciated on a group basis are credited to the
depreciation reserve.
Pensions
Employees of the Business are covered by Company defined benefit and defined
contribution pension plans. Benefits are based on compensation and/or years of
service for substantially all of its employees. The Company's
7
<PAGE>
COAL CHEMICAL BUSINESS OF
ARISTECH CHEMICAL CORPORATION
NOTES TO THE FINANCIAL STATEMENTS--(CONTINUED)
funding practice is to contribute annually not less than the actuarially
determined minimum funding requirements of the Employee Retirement Income
Security Act of 1974 nor more than the maximum funding limitation under the
Internal Revenue Code. Contributions are intended to provide benefits for
service to date and for benefits expected to be earned in the future (see Note
4).
Income Taxes
Income taxes are accounted for in accordance with SFAS No. 109, "Accounting
for Income Taxes." Under SFAS No. 109, deferred income taxes are recognized
for the estimated taxes ultimately payable or recoverable based on enacted tax
law. The deferred income taxes are computed annually for differences between
book and tax bases of assets and liabilities that will result in taxable or
deductible amounts in the future. Significant basis differences are due to
depreciation and other liabilities (see Note 6).
Debt
The Business participates in the Company's treasury system and, accordingly,
does not record debt other than the intercompany liability.
Income Recognition
Sales and related costs of sales are included in income when goods are
shipped or services are rendered to the customer.
Intercompany Liability
The Coal Chemical Business is an unincorporated division of Aristech
Chemical Corporation. The equity of the Company in the net assets of the
Business is reflected as an intercompany liability to the Company. The Company
allocates certain income and expenses to the Business via the intercompany
liability (see Note 5).
2. LINES OF BUSINESS
The Business operates one tar distillation production facility and a light
oil storage terminal at Clairton, PA. This facility is located adjacent to the
USX Corporation's (USX) Clairton coking facility which supplies approximately
75% of its tar feedstock and light oil requirement under a seven-year
agreement.
The primary product derived from the tar distillation process is liquid and
solid pitch which is sold to aluminum manufacturers under contract basis.
Other products obtained in the tar distillation process include creosote used
in wood treating of railroad ties and utility poles and carbon black sold to
the rubber goods industry.
The light oil terminal, which stores light oil for shipment under contract
to one customer, will be transferred to USX at the end of 1996. Light oil
sales for 1994 and 1995 were $14,233,000 and $13,337,000, respectively. The
net book value of the light oil terminal was $2,261,000 and $2,144,000 at
December 31, 1994 and 1995, respectively.
In 1994 and 1995, the Business exported coal chemical products with a total
sales value of $1,884,000 and $1,722,000, respectively. Sales to the
Business's top four customers represented 19%, 13%, 13% and 10% of total 1994
sales and 17%, 16%, 12% and 11% of total 1995 sales.
8
<PAGE>
COAL CHEMICAL BUSINESS OF
ARISTECH CHEMICAL CORPORATION
NOTES TO THE FINANCIAL STATEMENTS--(CONTINUED)
3. INTERCOMPANY LIABILITY
Change in the intercompany liability reflect the results of operations and
cash generated by the Business. The changes in the intercompany liability were
as follows:
<TABLE>
<CAPTION>
YEARS ENDED
DECEMBER 31,
----------------
1994 1995
(IN THOUSANDS)
<S> <C> <C>
Beginning balance....................................... $23,373 $22,216
Add: Net income......................................... 4,198 4,904
Less: Net cash flows.................................... (5,355) (5,003)
------- -------
Ending Balance.......................................... $22,216 $22,117
======= =======
</TABLE>
4. PENSIONS AND OTHER POSTRETIREMENT BENEFITS
Substantially, all of the Business employees participate in various defined
benefit or defined contribution plans sponsored by the Company. The Business
recognized pension expense of $293,000 in 1994 and $345,000 in 1995. These
amounts represent an allocation of the Company's total pension expense based
on the ratio of compensation and the number of eligible employees of the
Business to the total compensation and number of eligible employees of the
Company.
Reconciliation of the funded status of the hourly pension plan allocated to
the Business as follows:
<TABLE>
<CAPTION>
YEARS ENDED
DECEMBER 31,
----------------
1994 1995
(IN THOUSANDS)
<S> <C> <C>
Actuarial present value of benefit obligations:
Vested benefit obligation.................................. $ (798) $(1,331)
======= =======
Accumulated benefit obligation............................. $ (942) $(1,525)
======= =======
Projected benefit obligation............................... $(2,036) $(3,109)
Plan assets at fair value.................................... 1,124 1,334
------- -------
Plan assets less than projected benefit obligation........... (912) (1,775)
Unrecognized net loss........................................ 217 773
Unrecognized prior service cost.............................. 127 264
------- -------
Accrued pension cost recognized in the balance sheets........ $ (568) $ (738)
======= =======
Assumptions
Discount rate, projected benefit obligation.................. 8.5% 7.25%
Rate of increase in compensation levels, projected benefit
obligation.................................................. 3.0 4.0
</TABLE>
Plan assets are invested primarily in stocks and bonds.
In addition to providing pension benefits, the Company provides certain
medical and life insurance benefits to eligible retired employees. Under the
terms of the benefit plans, which are unfunded, the Company reserves the right
to modify or discontinue the plans.
9
<PAGE>
COAL CHEMICAL BUSINESS OF
ARISTECH CHEMICAL CORPORATION
NOTES TO THE FINANCIAL STATEMENTS--(CONTINUED)
The following table sets forth the postretirement benefit liability of the
hourly employees as allocated to the Business:
<TABLE>
<CAPTION>
YEARS ENDED
DECEMBER 31,
----------------
1994 1995
(IN THOUSANDS)
<S> <C> <C>
Accumulated postretirement benefit obligation:
Retirees................................................... $ (400) $ (450)
Fully eligible active plan participants.................... (64) (117)
Other active plan participants............................. (591) (850)
------- -------
Total.................................................... (1,055) (1,417)
Unrecognized loss............................................ 341 360
Unrecognized transition obligation........................... 46 81
------- -------
Accrued postretirement benefit liability recognized in the
balance sheet............................................... $ (668) $ (976)
======= =======
</TABLE>
The discount rates used for calculating the present value of postretirement
benefit liabilities for the hourly employees were 8.75% and 7.25% as of
December 31, 1994 and 1995, respectively.
A health care cost trend rate starting at 8.0% and declining to 4% over a
six-year period to the year 2002 was assumed for 1995. A 1% increase in the
health care cost trend rate would increase the accumulated postretirement
benefit obligation as of December 31, 1995 by 6.1% and the sum of the service
and interest costs in 1995 by 7.4%.
The expense recognized by the Business for other postretirement benefits was
$124,000 and $204,000 in 1994 and 1995, respectively. The expense represents
an allocation of the Company's total other postretirement expense based on the
number of eligible employees of the Business to the Company's total number of
employees.
5. ALLOCATED EXPENSES
General administrative and other expenses are allocated to the Business
using methods deemed appropriate for the nature of the expenses involved. The
methods include various allocation bases such as relative investment, number
of employees and related payroll costs, and direct effort expended. Management
of the Company believes the allocations are reasonable, but they are not
necessarily indicative of the costs that would have been incurred had the
Business been a stand-alone entity. Such amounts totaled $2,192,000 in 1994
and $2,036,000 in 1995.
6. TAX PROVISION
Provision for taxes on income are as follows:
<TABLE>
<CAPTION>
YEARS ENDED
DECEMBER 31,
----------------
1994 1995
(IN THOUSANDS)
<S> <C> <C>
Current federal income taxes.................................. $ 2,628 $ 3,264
Current state and local income taxes.......................... 466 545
Deferred income taxes......................................... (116) (330)
------- -------
Total provision............................................. $ 2,978 $ 3,479
======= =======
</TABLE>
10
<PAGE>
COAL CHEMICAL BUSINESS OF
ARISTECH CHEMICAL CORPORATION
NOTES TO THE FINANCIAL STATEMENTS--(CONTINUED)
A reconciliation of the differences between income taxes computed at the
federal statutory rate of 35% to the total provision for income taxes is as
follows:
<TABLE>
<CAPTION>
YEARS ENDED
DECEMBER 31,
---------------
1994 1995
(IN THOUSANDS)
<S> <C> <C>
Statutory rate applied to income before tax.................... $ 2,512 $ 2,934
State income taxes after federal income tax benefit.......... 466 545
------- -------
Total provision for income taxes........................... $ 2,978 $ 3,479
======= =======
</TABLE>
The tax effects of the significant temporary differences which comprise the
deferred tax assets and liabilities are as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
---------------
1994 1995
(IN THOUSANDS)
<S> <C> <C>
Deferred tax asset:
Accruals different than payments........................... $ 649 $ 846
------- -------
Gross deferred tax assets.................................. 649 846
------- -------
Deferred tax liabilities:
Property................................................... 10,458 10,168
Accrual different than payments............................ -- 119
Other...................................................... 94 132
------- -------
Gross deferred tax liabilities............................. 10,552 10,419
------- -------
Net deferred tax liabilities............................... $ 9,903 $ 9,573
======= =======
</TABLE>
7. INVENTORIES
<TABLE>
<CAPTION>
DECEMBER 31,
---------------
1994 1995
(IN THOUSANDS)
<S> <C> <C>
Raw materials................................................. $ 2,338 $ 2,375
Finished products............................................. 2,340 2,379
------- -------
Net Inventory............................................... $ 4,678 $ 4,754
======= =======
</TABLE>
The current cost of inventories at December 31, 1994 and 1995 was $4,812,000
and $5,100,000, respectively.
8. PROPERTY, PLANT AND EQUIPMENT
<TABLE>
<CAPTION>
DECEMBER 31,
---------------
1994 1995
(IN THOUSANDS)
<S> <C> <C>
Land......................................................... $ 625 $ 625
Buildings.................................................... 4,385 4,367
Machinery and equipment...................................... 31,650 32,823
------- -------
Total property, plant and equipment........................ 36,660 37,815
Less accumulated depreciation.............................. 7,840 9,634
------- -------
Net property, plant and equipment.......................... $28,820 $28,181
======= =======
</TABLE>
11
<PAGE>
COAL CHEMICAL BUSINESS OF
ARISTECH CHEMICAL CORPORATION
NOTES TO THE FINANCIAL STATEMENTS--(CONTINUED)
Depreciation expense for 1994 and 1995 was $1,972,000 and $1,969,000,
respectively.
9. LEASE COMMITMENTS
The Business has operating leases, primarily for railway equipment.
Minimum annual rentals for operating leases with initial or remaining lease
terms in excess of one year were as follows at December 31, 1995:
<TABLE>
<CAPTION>
YEARS ENDED
DECEMBER 31, (IN THOUSANDS)
<S> <C>
1996.................................... $1,993
1997.................................... 1,369
1998.................................... 1,156
1999.................................... 894
2000.................................... 572
Later years............................. 570
------
Total minimum lease payments............ $6,554
======
</TABLE>
Operating lease rental expense for 1994 and 1995 was $1,282,000 and
$1,270,000, respectively.
10. COMMITMENTS AND CONTINGENCIES
Contract commitments for capital expenditures for property, plant and
equipment totaled $104,000 and $333,000 at December 31, 1994 and 1995,
respectively.
USX has retained responsibility for environmental liabilities relating to
occurrences at the operating facility located in Clairton, Pennsylvania during
USX's ownership prior to December, 1986. The Company has agreed to share in
certain costs relating to this site providing the Company's share does not
exceed $500,000. Such liability has been provided for in the financial
statements.
The Business is subject to pervasive environmental laws and regulations
concerning the production, handling, storage, transportation, emission, and
disposal of waste materials and is also subject to other federal and state
laws and regulations regarding health and safety matters. These laws and
regulations are constantly evolving, and it is impossible to predict
accurately the effect these laws and regulations will have on the Business in
the future.
The Business is also the subject of, or party to, a number of other pending
or threatened legal actions involving a variety of matters. In the opinion of
management, any ultimate liability arising from these contingencies, to the
extent not otherwise provided for, should not have a material adverse effect
on the financial position or results of operations of the Business.
11. SUBSEQUENT EVENTS
Effective April 1, 1996, the Company sold the Business to Koppers
Industries, Inc. for $39 million, plus assumption of certain liabilities and
adjustments for working capital changes.
12
<PAGE>
COAL CHEMICAL BUSINESS OF
ARISTECH CHEMICAL CORPORATION
STATEMENTS OF INCOME (UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
MARCH 31,
----------------
1995 1996
<S> <C> <C>
Sales......................................................... $19,236 $19,132
Operating costs:
Cost of sales............................................... 15,852 16,093
Selling, general and administrative expenses................ 783 926
Depreciation................................................ 494 460
------- -------
Total operating costs..................................... 17,129 17,479
------- -------
Operating income.............................................. 2,107 1,653
Other income.................................................. (4) 6
------- -------
Income before provision for taxes on income................... 2,103 1,659
Provision for taxes on income................................. 872 678
------- -------
Net income.................................................... $ 1,231 $ 981
======= =======
</TABLE>
See accompanying notes.
13
<PAGE>
COAL CHEMICAL BUSINESS OF
ARISTECH CHEMICAL CORPORATION
BALANCE SHEET (UNAUDITED)
MARCH 31, 1996
(IN THOUSANDS)
<TABLE>
<S> <C>
ASSETS
Current assets:
Cash and equivalents................................................. $ --
Receivables (less allowance for doubtful accounts of $30)............ 10,062
Inventories.......................................................... 4,682
Deferred income taxes................................................ 846
-------
Total current assets............................................... 15,590
Property, plant and equipment, net of accumulated depreciation......... 28,200
-------
Total assets....................................................... $43,790
=======
LIABILITIES
Current liabilities:
Accounts payable and other current liabilities....................... $ 8,287
Payroll and benefits payable......................................... 400
Accrued taxes........................................................ 701
-------
Total current liabilities.......................................... 9,388
Deferred income taxes.................................................. 10,419
Other liabilities...................................................... 2,148
Intercompany liability................................................. 21,835
Commitments and contingencies.......................................... --
-------
Total liabilities.................................................. $43,790
=======
</TABLE>
See accompanying notes.
14
<PAGE>
COAL CHEMICAL BUSINESS OF
ARISTECH CHEMICAL CORPORATION
STATEMENTS OF NET CASH FLOWS (UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
MARCH 31,
--------------
1995 1996
<S> <C> <C>
Cash flows from operating activities:
Net income................................................... $1,231 $ 981
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation............................................... 494 460
Receivables................................................ (176) 187
Inventories................................................ 71 72
Current liabilities........................................ 1,443 (68)
Other liabilities.......................................... 57 109
------ ------
Net cash flows provided by operations.................... 3,120 1,741
Cash flows from investing activities:
Capital expenditures......................................... (221) (478)
------ ------
Net cash used in investing activities.................... (221) (478)
------ ------
Net cash flow to Aristech Chemical Corporation................. $2,899 $1,263
====== ======
</TABLE>
See accompanying notes.
15
<PAGE>
COAL CHEMICAL BUSINESS OF ARISTECH CHEMICAL CORPORATION
NOTES TO THE FINANCIAL STATEMENTS
(UNAUDITED)
(1) The interim financial statements include all adjustments which, in the
opinion of management, are necessary to present fairly the financial
position and the results of operations and net cash flows for the quarter
ended March 31, 1995 and 1996. All such adjustments are of a normal,
recurring nature.
(2) The Coal Chemical Business is an unincorporated division of Aristech
Chemical Corporation. The equity of the Aristech Chemical Corporation in
the net assets of the Business is reflected as an intercompany liability
to Aristech Coal Chemical Corporation. The financial statements also
include various allocated costs and expenses (see Note 6) which are not
necessarily indicative of the costs and expenses which would have resulted
had the Business been operated as a separate company. All of the
allocations and estimates reflected in the financial statements are based
on assumptions that management believes are reasonable.
(3) Effective January 1, 1996, the Business adopted Statement of Financial
Accounting Standards ("SFAS") No. 121, "Accounting for the Impairment of
Long-Lived Assets and Assets to be Disposed Of." Adoption of SFAS 121 had
no effect on the Business' financial position or results of operations.
(4) At March 31, 1996, inventory consisted of $2.1 million of raw materials
and $2.6 million of finished products. The current cost of these
inventories was approximately $5 million.
(5) Effective April 1, 1996, the Company sold the Business to Koppers
Industries, Inc. for $39 million, plus the assumption of certain
liabilities and adjustments for working capital changes.
(6) General administrative and other expenses are allocated to the Business
using methods deemed appropriate for the nature of the expenses involved.
The methods include various allocation bases such as relative investment,
number of employees and related payroll costs, and direct effort expended.
Management of the Company believes the allocations are reasonable, but
they are not necessarily indicative of the costs that would have been
incurred had the Business been a stand-alone entity. Such amounts totaled
$482,000 and $483,000 for the quarters ended March 31, 1995 and 1996,
respectively.
16
<PAGE>
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
MARCH 31, 1996
------------------------------------------
HISTORICAL
----------------- PRO FORMA COMPANY
COMPANY CLAIRTON ADJUSTMENTS PRO FORMA
(IN THOUSANDS)
<S> <C> <C> <C> <C>
ASSETS
Current Assets
Cash and equivalents............... $ 4,816 $ -- $ -- $ 4,816
Accounts receivable (net of
allowance)....................... 59,969 10,062 -- 70,031
Inventories........................ 78,279 4,682 347 (1) 83,308
Other.............................. 8,345 846 (846)(2) 8,345
-------- ------- -------- --------
Total current assets............. 151,409 15,590 (499) 166,500
Investments.......................... 51,783 -- -- 51,783
Fixed assets (net)................... 148,947 28,200 1,513 (1) 178,660
Other assets......................... 9,293 -- 12,994 (1) 22,287
-------- ------- -------- --------
Total assets....................... $361,432 $43,790 $ 14,008 $419,230
======== ======= ======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable................... $ 27,420 $ 8,287 $ 1,912 (1) $ 37,619
Accrued liabilities................ 28,150 1,101 (831)(2)
260 (1) 28,680
Current portion of long-term debt.. 4,000 -- -- 4,000
-------- ------- -------- --------
Total current liabilities........ 59,570 9,388 1,341 70,299
Long-term debt....................... 199,000 -- 39,000 (1) 238,000
Deferred income taxes................ 14,085 10,419 (10,419)(2) 14,085
Intercompany liability............... -- 21,835 (32,239)(1)
10,404 (2) --
Other liabilities.................... 29,292 2,148 5,921 (1) 37,361
-------- ------- -------- --------
Total liabilities.................. 301,947 43,790 14,008 359,745
Common stock subject to redemption... 15,735 -- -- 15,735
Common stock, voting and non-voting.. 102 -- -- 102
Retained earnings.................... 34,782 -- -- 34,782
Other stockholders' equity........... 8,866 -- -- 8,866
-------- ------- -------- --------
Total liabilities and stockholders'
equity........................... $361,432 $43,790 $ 14,008 $419,230
======== ======= ======== ========
</TABLE>
- ---------------------
(1) Adjusted to reflect the preliminary allocation of the approximately $40
million purchase price and related transaction costs to the fair value of
assets acquired and the assumption of certain liabilities. Liabilities
assumed by the Company include certain pension and post-retirement benefit
costs, and estimated costs for the demolition of unused facilities and
tank cleaning. The acquisition, primarily financed by additional
borrowings of $39 million, resulted in goodwill of approximately $13.0
million.
(2) Adjusted to reflect the elimination of deferred tax assets, accrued taxes
payable and deferred tax liabilities not assumed by the Company.
17
<PAGE>
PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1995
------------------------------------------
HISTORICAL
----------------- PRO FORMA COMPANY
COMPANY CLAIRTON ADJUSTMENTS PRO FORMA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
Net sales............................ $525,730 $75,984 $(11,638)(1) $590,076
Cost of sales...................... 440,746 62,291 (11,638)(1) 491,399
Depreciation and amortization...... 17,532 1,969 415 (2) 19,916
Selling, general and
administrative................... 27,604 3,355 (2,036)(3) 28,923
-------- ------- -------- --------
Operating profit..................... 39,848 8,369 1,621 49,838
Equity in earnings of affiliates..... 9,239 -- -- 9,239
Other income......................... 376 14 -- 390
Interest expense..................... 15,060 -- 2,925 (4) 17,985
-------- ------- -------- --------
Income before taxes.................. 34,403 8,383 (1,304) 41,482
Income taxes......................... 9,963 3,479 (873)(5) 12,569
-------- ------- -------- --------
Net income........................... $ 24,440 $ 4,904 $ (431) $ 28,913
======== ======= ======== ========
Earnings per share (6)............... $ 2.36 N/A N/A $ 2.80
======== ======= ======== ========
</TABLE>
- ---------------------
(1) Adjusted to reflect the elimination of purchases by the Company from
Clairton.
(2) Adjusted to reflect increased depreciation and amortization expense
resulting from recording the assets acquired at estimated fair value. The
Company records depreciation and amortization using the straight-line
method, over estimated useful lives of 15 years for buildings and
machinery and 25 years for goodwill.
(3) Adjusted to reflect the reversal of corporate overhead costs allocated to
Clairton by its former parent.
(4) Adjusted to reflect increased interest expense to the Company related to
$39 million of borrowings under the Bank Credit Facilities (as hereinafter
defined) in connection with the acquisition of Clairton. Interest is
calculated at an assumed rate of 7.5% (LIBOR plus 1.0%).
(5) Adjusted to reflect the Company's estimated pro forma effective tax rate
of 30.3%, which differs from the statutory rate primarily as a result of
non-cash equity in earnings of affiliates for which no tax expense is
provided.
(6) Average shares outstanding for the year ended December 31, 1995 amounted
to 10,376,658 shares after giving effect to a three-for-one stock split
effective May 23, 1996.
18
<PAGE>
PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (CONTINUED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31, 1996
------------------------------------------
HISTORICAL
------------------ PRO FORMA COMPANY
COMPANY CLAIRTON ADJUSTMENTS PRO FORMA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
Net sales........................... $126,701 $19,132 $(2,932)(1) $142,901
Cost of sales..................... 111,255 16,093 (2,932)(1) 124,416
Depreciation and amortization..... 4,943 460 136 (2) 5,539
Selling, general and
administrative................... 6,256 926 (483)(3) 6,699
-------- ------- ------- --------
Operating profit.................... 4,247 1,653 347 6,247
Equity in earnings of affiliates.... 1,791 -- -- 1,791
Other income........................ 8 6 -- 14
Interest expense.................... 3,734 -- 643 (4) 4,377
Litigation judgment................. (10,946) -- -- (10,946)
-------- ------- ------- --------
Income (loss) before taxes.......... (8,634) 1,659 (296) (7,271)
Income taxes (benefit).............. (894) 678 (533)(5) (749)
-------- ------- ------- --------
Net income (loss)................... $ (7,740) $ 981 $ 237 $ (6,522)
======== ======= ======= ========
Earnings (loss) per share (6)....... $ (0.78) N/A N/A $ (0.66)
======== ======= ======= ========
</TABLE>
- ---------------------
(1) Adjusted to reflect the elimination of purchases by the Company from
Clairton and purchases by Clairton from the Company.
(2) Adjusted to reflect increased depreciation and amortization expense
resulting from recording the assets acquired at estimated fair value. The
Company records depreciation and amortization using the straight-line
method, over estimated useful lives of 15 years for buildings and
machinery and 25 years for goodwill.
(3) Adjusted to reflect the reversal of corporate overhead costs allocated to
Clairton by its former parent.
(4) Adjusted to reflect increased interest expense to the Company related to
$39 million of borrowings in connection with the acquisition of Clairton.
Interest is calculated at an assumed rate of 6.6% (LIBOR plus 1.0%).
(5) Adjusted to reflect the Company's estimated pro forma effective tax rate
of 10.3%, which differs from the statutory rate primarily as a result of
projected non-cash equity earnings of affiliates and tax credits earned
beginning in 1996 at the Company's Monessen Facility.
(6) Average shares outstanding for the three months ended March 31, 1996
amounted to 9,911,202 shares after giving effect to a three-for-one stock
split effective May 23, 1996.
19
