FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1996
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from .......... to ..........
Commission file Number: (1-13888)
UCAR INTERNATIONAL INC.
(Exact name of registrant as specified in its charter)
Delaware 06-1385548
________ __________
(State or other jurisdiction (I.R.S. Employer Identification No.)
of incorporation or organization)
39 Old Ridgebury Road, J-4, Danbury, Connecticut 06817-0001
________________________________________________ __________
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (203) 207-7700
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. YES [ X ] NO [ ]
As of March 31, 1996, 46,155,518 shares of common stock, par value $.01 per
share, were outstanding.
<PAGE>
UCAR INTERNATIONAL INC.
TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION:
Item 1. FINANCIAL STATEMENTS:
Consolidated Balance Sheets as of March 31, 1996
and December 31, 1995........................................ Page 3
Consolidated Statements of Operations for the Three Months
Ended March 31, 1996 and 1995................................ Page 4
Consolidated Statements of Cash Flows for the Three Months
Ended March 31, 1996 and 1995................................ Page 5
Consolidated Statement of Stockholders' Equity (Deficit) for
the Three Months Ended March 31, 1996........................ Page 7
Notes to Consolidated Financial Statements..................... Page 8
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS....................... Page 12
PART II. OTHER INFORMATION:
Item 6. EXHIBITS AND REPORTS ON FORM 8-K.......................... Page 16
<PAGE>
<TABLE>
PART I. FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
UCAR INTERNATIONAL INC. AND SUBSIDIARIES
Consolidated Balance Sheets
(Dollars in millions, except per share data)
<CAPTION>
March 31, December 31,
1996 1995
_________ ___________
<S> <C> <C>
ASSETS (Unaudited)
Current assets:
Cash and cash equivalents......................... $ 48 $ 53
Notes and accounts receivable..................... 194 180
Inventories:
Raw materials and supplies..................... 32 28
Work in process................................ 94 78
Finished goods................................. 36 30
______ ______
162 136
Prepaid expenses.................................. 28 34
______ ______
Total current assets...................... 432 403
Property, plant and equipment....................... 1,017 1,013
Less: accumulated depreciation...................... 642 635
______ ______
Net fixed assets.......................... 375 378
Company carried at equity........................... 19 18
Other assets........................................ 58 65
______ ______
Total assets.............................. $ 884 $ 864
====== ======
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable.................................. $ 51 $ 56
Short-term debt................................... 29 31
Payments due within one year on long-term debt.... 3 1
Accrued income and other taxes.................... 52 50
Other accrued liabilities......................... 77 90
______ ______
Total current liabilities................. 212 228
Long-term debt...................................... 634 636
Other long-term obligations......................... 133 137
Deferred income taxes............................... 19 20
Minority stockholders' equity in consolidated
entities.......................................... 4 5
Common stock subject to "puts"...................... - 8
Less: related loans to management................... - (3)
______ ______
Stockholder's equity (deficit):
Preferred stock - par value $.01; authorized
- 10,000,000 shares; issued - none............. - -
Common stock - par value $.01; authorized
- 100,000,000 shares; issued - 46,155,518
shares....................................... - -
Additional paid-in capital........................ 491 485
Cumulative foreign currency
translation adjustment......................... (115) (116)
Retained earnings (deficit)....................... (494) (536)
______ ______
Total stockholders' equity (deficit)...... (118) (167)
______ ______
Total liabilities and stockholders'
equity (deficit)...................... $ 884 $ 864
====== ======
<FN>
See accompanying Notes to Consolidated Financial Statements.
</TABLE>
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<TABLE>
UCAR INTERNATIONAL INC. AND SUBSIDIARIES
Consolidated Statements of Operations
(Dollars in millions, except per share data)
(Unaudited)
<CAPTION>
Three months
Ended March 31,
___________________
1996 1995
______ ______
<S> <C> <C>
Net sales................................................. $ 243 $ 210
Cost of sales............................................. 150 136
______ ______
Gross profit.............................................. 93 74
Research and development.................................. 2 2
Selling, administrative and other expenses................ 22 22
Restructuring costs....................................... - 30
Other (income) expense (net).............................. 1 6
______ ______
Operating profit................................ 68 14
Interest expense.......................................... 16 23
______ ______
Income (loss) before provision for income taxes. 52 (9)
Provision for income taxes................................ 19 37
______ ______
Income (loss) of consolidated entities.......... 33 (46)
Less: minority stockholders' share of income.............. - 1
Plus: UCAR share of net income
from company carried at equity......................... 2 1
______ ______
Income (loss) before cumulative effect of
change in accounting principle.............. 35 (46)
Cumulative effect on prior years of change in accounting
for inventories....................................... 7 -
______ ______
Net income (loss).............................. $ 42 $ (46)
====== ======
Primary net income (loss) per common share
(Note 7) (Pro forma in 1995):
Income (loss) before cumulative effect of change in
accounting principle................................ $ 0.73 $(0.01)
Cumulative effect on prior years of change in
accounting for inventories.......................... 0.15 -
______ ______
Primary net income (loss) per share............ $ 0.88 $(0.01)
====== ======
Weighted average common shares outstanding
(Pro forma in 1995) (in thousands).......... 48,191 47,738
====== ======
<FN>
See accompanying Notes to Consolidated Financial Statements.
</TABLE>
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<TABLE>
UCAR INTERNATIONAL INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
Increase (Decrease) in Cash and Cash Equivalents
(Dollars in millions)
(Unaudited)
<CAPTION>
Three Months
Ended March 31,
_____________________
1996 1995
______ ______
<S> <C> <C>
Cash flow from operating activities:
Net income (loss)....................................... $ 42 $ (46)
Cumulative effect on prior years of change in
accounting for inventories........................... (7) -
Non-cash (credits) charges to net income (loss):
Depreciation.......................................... 10 10
Deferred income taxes................................. 11 (5)
Restructuring costs................................... - 30
Other non-cash charges................................ 3 8
Working capital *....................................... (45) 16
Long-term assets and liabilities........................ (6) (4)
______ ______
Net cash provided by operating activities........... 8 9
______ ______
Cash flow from investing activities:
Capital expenditures.................................... (11) (5)
Purchase of minority shares in subsidiary............... (2) -
Redemption/sale of assets............................... 1 -
______ ______
Net cash used in investing activities............... (12) (5)
Cash flow from financing activities:
Short-term debt......................................... (2) (19)
Long-term debt borrowings............................... - 960
Long-term debt reductions............................... - (223)
Financing costs......................................... (1) (63)
Sale of common stock, net of loans to management........ 2 200
Cash distribution to stockholders....................... - (756)
______ ______
Net cash (used in) provided by financing activities. (1) 99
______ ______
Net (decrease) increase in cash and cash equivalents..... (5) 103
Effect of exchange rate changes on
cash and cash equivalents.............................. - (5)
Cash and cash equivalents at beginning of period......... 53 60
______ ______
Cash and cash equivalents at end of period............... $ 48 $ 158
====== ======
(Continued)
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</TABLE>
<TABLE>
UCAR INTERNATIONAL INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows, Continued
<CAPTION>
Three Months
Ended March 31,
____________________
1996 1995
______ ______
<S> <C> <C>
Supplemental disclosures of cash flow information:
Net cash paid during the year for:
Interest expense...................................... $ 21 $ 8
Income taxes.......................................... 4 4
* Net change in working capital by component (excluding
cash and cash equivalents, deferred income taxes and
short-term debt):
(Increase) decrease in current assets
Notes and accounts receivable:
Sale of receivables............................ $ 5 $ (4)
Other changes.................................. (21) 1
Inventories........................................ (15) (1)
Prepaid expenses and other current assets.......... 6 (1)
Increase (decrease) in payables and accruals.......... (20) 21
______ ______
Working capital................................ $ (45) $ 16
====== ======
<FN>
See accompanying Notes to Consolidated Financial Statements.
</TABLE>
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<PAGE>
<TABLE>
UCAR INTERNATIONAL INC. AND SUBSIDIARIES
Consolidated Statement of Stockholders' Equity (Deficit)
Three Months Ended March 31, 1996
(Dollars in millions)
(Unaudited)
<CAPTION>
Cumulative
Foreign
Additional Currency Retained Total
Common Paid-in Translation Earnings Stockholders'
Stock Capital Adjustment (Deficit) Equity (Deficit)
-------- ------- ----------- -------- -----------------
<S> <C> <C> <C> <C> <C>
Balance at December 31, 1995........... $ - $ 485 $ (116) $ (536) $ (167)
Exercise of employee stock options..... 1 - - 1
Tax benefit arising from exercise
of employee stock options........... - 1 - - 1
Reclassification of:
Common stock subject to "puts"..... - 8 - - 8
Related loans to management........ - (3) - - (3)
Registration cost of offering.......... - (1) - - (1)
Translation adjustments................ - - 1 - 1
Net income............................. - - - 42 42
-------- -------- -------- -------- --------
Balance at March 31, 1996.............. $ - $ 491 $ (115) $ (494) $ (118)
======== ======== ======== ======== ========
<FN>
See accompanying Notes to Consolidated Financial Statements.
</TABLE>
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<PAGE>
UCAR INTERNATIONAL INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)
(1) INTERIM FINANCIAL PRESENTATION
The interim Consolidated Financial Statements are unaudited; however, in the
opinion of management, they have been prepared in accordance with Rule 10-01
of Regulation S-X adopted by the Securities and Exchange Commission
("Commission") and reflect all adjustments (all of which are of a normal,
recurring nature) which are necessary for a fair statement of the financial
condition, results of operations, cash flows and changes in stockholders'
equity (deficit) for the periods presented. Results of operations for the
three months ended March 31, 1996 are not necessarily indicative of the
results that may be expected for the entire fiscal year ending December 31,
1996.
As used in these Notes, references to "UCAR" mean UCAR International Inc., to
"Global" mean UCAR Global Enterprises Inc., a direct, wholly-owned subsidiary
of UCAR, and to the "Company" mean UCAR and its subsidiaries (including
Global), collectively. Separate financial statements of Global are not
presented because they would not be material to holders of senior subordinated
notes. The Company's investment in EMSA (Pty.) Ltd. ("EMSA"), a 50%-owned
company, is carried on the equity basis and its proportional share of the net
income of EMSA is reported under the caption "UCAR share of net income from
company carried at equity". At March 31, 1996, retained earnings (deficit)
included $37 million representing UCAR's share of the undistributed earnings
(prior to foreign currency translation adjustment) of EMSA.
(2) UCAR GLOBAL ENTERPRISES INC.
UCAR has no material assets, liabilities or operations other than those that
result from its ownership of 100% of the outstanding common stock of Global.
The following is a summary of the consolidated assets and liabilities of
Global and its subsidiaries at March 31, 1996 and December 31, 1995 and its
consolidated results of operations for the three months ended March 31, 1996
and 1995:
<TABLE>
<CAPTION>
March 31, December 31,
1996 1995
________ ___________
(Dollars in millions)
<S> <C> <C>
Assets:
Current assets................................... $ 432 $ 403
Non-current assets............................... 452 461
______ ______
Total assets.................................. $ 884 $ 864
====== ======
Liabilities:
Current liabilities.............................. $ 212 $ 228
Non-current liabilities.......................... 786 793
______ ______
Total liabilities............................. $ 998 $1,021
====== ======
Minority stockholders' equity in
consolidated entities......................... $ 4 $ 5
====== ======
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
Three months
Ended March 31,
___________________
1996 1995
______ ______
(Dollars in millions)
<S> <C> <C>
Net Sales................................................ $ 243 $ 210
Gross profit............................................. 93 74
Income (loss) before cumulative effect of
change in accounting principles....................... 35 (46)
Net income (loss)........................................ 42 (46)
</TABLE>
(3) CHANGE IN ACCOUNTING FOR INVENTORIES
Effective January 1, 1996, the Company changed its method of determining LIFO
inventories. The new methodology provides specifically identified parameters
for defining new items within the LIFO pool which the Company believes
improves the accuracy of costing those items.
The Company recorded income of $7 million (after related taxes of $4 million)
as the cumulative effect on prior years of this change in accounting for
inventories. The Company believes this change will not materially impact the
Company's ongoing results of operation.
(4) INCOME TAXES
In connection with the leveraged recapitalization of the Company in January
1995 ("Recapitalization"), certain foreign subsidiaries borrowed and
repatriated funds to the United States. In the three months ended March 31,
1995, the Company recorded a tax liability of $37 million in connection
therewith.
(5) RESTRUCTURING COSTS
The Company recorded restructuring costs of $30 million in the three months
ended March 31, 1995 to write-off fixed assets of $22 million and accrue $8
million of related shutdown costs in connection with a project to close
certain high cost manufacturing operations and to add modern lower cost
manufacturing operations at the Company's North American graphite electrode
plants.
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<PAGE>
(6) OTHER (INCOME) EXPENSE - NET
The following is an analysis of other (income) expense (net):
<TABLE>
<CAPTION>
Three months
Ended March 31,
___________________
1996 1995
______ ______
(Dollars in millions)
<S> <C> <C>
Foreign currency adjustments............................. $ 1 $ 2
Interest income.......................................... (2) (7)
Brazilian monetary correction............................ - 2
Bank fees due to Recapitalization........................ - 7
Other.................................................... 2 2
------ ------
$ 1 $ 6
====== ======
</TABLE>
(7) EARNINGS PER SHARE
Primary Net Income Per Share
Primary net income per share is computed by dividing net income by the
weighted average number of common shares outstanding during the period. The
weighted average number of common shares outstanding reflects shares of common
stock outstanding, including common stock equivalents calculated in accordance
with the "treasury stock method," wherein the net proceeds therefrom are
assumed to repurchase shares of common stock at the average price for the
period. Fully diluted earnings per share is not significantly different than
primary net income per share, and therefore, has not been presented.
Pro Forma Net Loss Per Share
For the unaudited pro forma net loss per share data presented on the
Consolidated Statements of Operations, historical net loss for the three
months ended March 31, 1995 has been adjusted as if the Recapitalization and
the Company's initial public offering ("Initial Offering"), redemption of
senior subordinated notes ("Redemption") and refinancing of credit facilities
("Refinancing") had occurred as of January 1, 1995 and to exclude the
extraordinary charge and the non-recurring effects of the Recapitalization and
the Initial Offering. The weighted average number of common shares
outstanding reflects shares of common stock outstanding after the Initial
Offering, including common stock equivalents calculated in accordance with the
"treasury stock method," wherein the net proceeds therefrom are assumed to
repurchase shares of common stock at $23.75 (the initial public offering price
per share in the Initial Offering).
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<PAGE>
The following table is a summary of the pro forma adjustments to net loss
(dollars in millions):
<TABLE>
<CAPTION>
<S> <C>
Net loss as reported in the Consolidated Financial Statements... $ (46)
Pro forma effects of the Recapitalization (after tax):
Compensation expense related to the Company's
long term incentive compensation plan...................... 1
Senior subordinated credit facility expense.................. 4
Net adjustment to interest................................... (3)
Taxes due to Recapitalization................................ 37
Pro forma effects of the Initial Offering and
Redemption (after tax):
Net adjustment to interest................................... 4
Pro forma effects of the Refinancing (after tax):
Net adjustment to interest................................... 2
------
Pro forma net loss.............................................. $ (1)
======
</TABLE>
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<PAGE>
UCAR INTERNATIONAL INC.
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
GENERAL
As used herein, references to "UCAR" mean UCAR International Inc., to "Global"
mean UCAR Global Enterprises Inc., a direct, wholly-owned subsidiary of UCAR,
and to the "Company" mean UCAR and its subsidiaries (including Global),
collectively.
On January 26, 1995, the Company consummated a leveraged recapitalization
("Recapitalization"). On August 15, 1995, UCAR completed its initial public
offering of common stock ("Initial Offering"). On September 11, 1995, the
Company acquired substantially all of the outstanding common stock of its
Brazilian subsidiary, UCAR Carbon S.A., held by public shareholders in Brazil.
On September 15, 1995, the Company redeemed $175 million aggregate principal
amount of Senior Subordinated Notes ("Subordinated Notes") at a redemption
price equal to 110% of the aggregate principal amount thereof, plus accrued
interest thereon of approximately $4 million. On October 19, 1995, the
Company refinanced its existing credit facilities ("Recapitalization Bank
Facilities") and entered into new credit facilities ("Senior Bank Facilities")
at more favorable interest rates and with more favorable covenants.
On March 6, 1996, certain stockholders of UCAR sold 16,675,000 shares of
UCAR's common stock, par value $.01 per share ("Common Stock") in a secondary
public offering ("Secondary Offering"). In the Secondary Offering, Blackstone
Capital Partners II Merchant Banking Fund L.P. and its affiliates
(collectively, "Blackstone"), Chemical Equity Associates and certain members
of management sold approximately 15,449,000 shares, 826,000 and 400,000
shares, respectively. After the Secondary Offering, Blackstone owned
approximately 20% of the outstanding shares of Common Stock. UCAR did not
sell any shares in the Secondary Offering and did not receive any proceeds
from the shares sold by the selling stockholders. Approximately 193,000 of
the shares sold by management consisted of shares issued upon the exercise of
vested stock options concurrently with the Secondary Offering and the Company
received proceeds of $1.5 million from the exercise of such options.
RESULTS OF OPERATIONS
Three Months Ended March 31, 1996 as Compared to Three Months Ended March 31,
1995
Net sales of $243 million in the first quarter of 1996 ("1996 First Quarter")
represent a 16% increase over net sales of $210 million in the first quarter
of 1995 ("1995 First Quarter"). Of this increase, $4 million was due to an
increase of 1,300 metric tons in the volume of graphite electrodes sold and
$18 million was due to an increase of 12% in the average selling price per
metric ton (in dollars and net of changes in currency exchange rates) of
graphite electrodes sold. Net sales of graphite specialty products in the
1996 First Quarter increased 15% to $30 million from $26 million in the 1995
First Quarter. This $4 million increase was due to higher prices on certain
products and a favorable shift in product mix. Net sales of carbon specialty
products in the 1996 First Quarter rose 29% to $22 million from $17 million in
the 1995 First Quarter. Increased demand for carbon electrodes as a result of
increased silicon metal production and a 6% price increase effective January
1, 1996 were the main contributors to the strong growth in carbon specialty
products net sales.
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<PAGE>
Cost of sales increased 10% to $150 million in the 1996 First Quarter from
$136 million in the 1995 First Quarter. This increase was primarily due to
increased volume of graphite electrodes, carbon specialty and graphite
specialty products sold.
As a result of the changes described above, the Company's gross profit margin
increased to 38.3% in the 1996 First Quarter from 35.2% in the 1995 First
Quarter.
Selling, administrative and other expenses were stable at $22 million in each
of the 1996 First Quarter and the 1995 First Quarter.
Restructuring costs of $30 million were incurred in the 1995 First Quarter in
connection with a project, approved by UCAR's Board of Directors in January
1995, which involves the closure of certain high cost manufacturing operations
and the addition of modern lower cost manufacturing operations at the
Company's North American graphite electrode plants ("Rationalization
Project"). The Rationalization Project is expected to yield approximately $23
million in annual cost savings, with approximately $20 million expected to be
realized in 1996 and the full $23 million expected to be realized in 1997 (in
each case, as compared to 1994). These restructuring costs include fixed
asset write-offs of $22 million and $8 million of facility closing expenses
and environmental clean-up costs. No restructuring costs were incurred in the
1996 First Quarter.
Other (income) expense (net) was expense of $1 million in the 1996 First
Quarter as compared to expense of $6 million in the 1995 First Quarter. The
major difference was a $6 million expense associated with a back-up senior
subordinated credit facility provided by Chemical Bank in connection with the
Recapitalization. This facility was not used and the fees were expensed in
the 1995 First Quarter.
Operating profit in the 1996 First Quarter was $68 million (28% of net sales)
as compared to $14 million (7% of net sales) in the 1995 First Quarter.
Excluding the restructuring costs of $30 million, the non-recurring expenses
of $6 million for a senior subordinated credit facility which was available
but not used in connection with the Recapitalization and $2 million under the
Company's long term incentive compensation plan which were incurred as a
result of the Recapitalization, operating profit in the 1995 First Quarter
would have been $52 million (25% of net sales).
Interest expense decreased to $16 million in the 1996 First Quarter from $23
million in the 1995 First Quarter. Excluding the effect on interest expense
as a result of the Recapitalization, the Initial Offering, the Redemption and
the Refinancing, interest expense would have been $19 million in the 1995
First Quarter. The average outstanding total debt balance in the 1996 First
Quarter was $669 million as compared to $770 million in the 1995 First
Quarter, and the average annual interest rate in the 1996 First Quarter was
9.63% as compared to 9.75% in the 1995 First Quarter.
The provision for income taxes was $19 million in the 1996 First Quarter as
compared to $37 million in the 1995 First Quarter. The decrease in income tax
expense was primarily due to non-recurring taxes of approximately $37 million
in the 1995 First Quarter associated with the Recapitalization as a result of
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<PAGE>
the repatriation to the United States of funds borrowed by foreign
subsidiaries, partially offset by the effect of the improvement in income
before provision for income taxes.
LIQUIDITY AND CAPITAL RESOURCES
Debt
At March 31, 1996, the Company had total debt of $666 million as compared to
$668 million at December 31, 1995, and a stockholders' deficit of $118 million
at March 31, 1996 as compared to $167 million at December 31, 1995. The
Company believes that cash flow from operations combined with its $100 million
revolving credit facility and existing cash balances will be adequate to meet
the Company's debt service requirements, fund continued capital requirements,
allow for growth opportunities and meet working capital and general corporate
needs.
Inventory Levels and Working Capital
Inventory levels at any specified date are affected by increases in
inventories of raw materials to meet anticipated increases in sales of
finished products, customer buy-ins and other factors affecting net sales from
quarter to quarter. Inventory levels increased in the 1996 First Quarter to
$162 million at March 31, 1996 from $136 million at December 31, 1996. This
increase was primarily due to an $11 million LIFO accounting method change, a
$9 million temporary build-up of inventory in North America due to the
Rationalization Project and a $6 million increase of inventory in Europe to
meet anticipated export orders.
The Company's working capital increased to $220 million at March 31, 1996 from
$175 million at December 31, 1995. Cash and cash equivalents were $5 million
lower at March 31, 1996 than at December 31, 1995. Cash and cash equivalents
at March 31, 1996 included $4 million set aside for the Rationalization
Project and $28 million held by the Company's Brazilian subsidiary.
Capital Expenditures
Capital expenditures aggregated $11 million (including $3 million for the
Rationalization Project) in the 1996 First Quarter as compared to $5 million
in the 1995 First Quarter. Capital expenditures have been and will be made
during 1996 to maintain existing facilities and equipment, to achieve cost
savings, to improve operating efficiency (including the Rationalization
Project and other restructuring and reengineering projects). The Company
expects capital expenditures in 1996 to total approximately $60 million
(including expenditures relating to the Rationalization Project which were
pre-funded as part of the Recapitalization). Capital expenditures for
environmental protection have not been and are not expected to be a
significant factor with respect to the Company's capital expenditures as a
whole.
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<PAGE>
OTHER MATTERS
Restrictions on Dividends or Distributions
Under the Senior Bank Facilities, UCAR and Global are generally permitted to
pay dividends to their respective stockholders only in an annual amount up to
the greater of $15 million or a specified percentage of adjusted consolidated
net income.
The indenture relating to the Subordinated Notes restricts the payment of
dividends by Global to UCAR if (a) at the time of such proposed dividend,
Global is unable to meet certain indebtedness incurrence and income tests or
(b) the total amount of the dividend paid exceeds specified aggregate limits
based on consolidated net income, net proceeds from asset and stock sales and
certain other transactions. Such restrictions are not applicable to dividends
(i) in respect of UCAR's administrative fees and expenses and (ii) for the
specific purpose of the purchase or redemption by UCAR of capital stock held
by present or former officers of the Company up to $5 million per year or $25
million in the aggregate.
Changes in Accounting Principles
Effective January 1, 1996, the Company changed its method of determining LIFO
inventories. The new methodology provides specifically identified parameters
for defining new items within the LIFO pool which the Company believes
improves the accuracy of costing those items.
The Company recorded income of $7 million (after related taxes of $4 million)
as the cumulative effect on prior years of this change in accounting for
inventories. The Company believes this change will not materially impact the
Company's ongoing results of operation.
In October 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards ("SFAS") 123, "Accounting for Stock-Based
Compensation" which is effective for years beginning after December 15, 1995.
SFAS 123 permits a fair value based method of accounting for employee stock
compensation plans. It also allows a company to continue to use the intrinsic
value method of accounting prescribed by Accounting Principles Board Opinion
No. 25, "Accounting for Stock Issued to Employees" ("APB 25"). Companies
electing to continue to use the accounting prescribed by APB 25 must make pro
forma disclosures of net income and net income per share as if the fair value
based method of accounting defined in SFAS 123 had been applied. The Company
intends to continue the method of accounting for stock-based compensation
prescribed by APB 25; accordingly, the adoption of SFAS 123 will have no
effect with the exception of expanded disclosures required under SFAS 123.
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<PAGE>
UCAR INTERNATIONAL INC.
PART II - OTHER INFORMATION
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS
The exhibits listed in the following table have been filed as part of this
Quarterly Report on Form 10-Q.
Exhibit
Number Description of Exhibit
- - ------- ----------------------
2.28 Trade Name and Trademark License Agreement dated March 1,1996
between Union Carbide Corporation and UCAR Carbon
Technology Corporation
10.34 (b) Amendment to Annual Incentive Compensation Plan effective July
28, 1995
11 Statement re: computation of per share earnings
18 Letter re: change in accounting principle
27 Financial Data Schedule
(b) REPORTS ON FORM 8-K
No Report on Form 8-K has been filed during the quarter for which this
Quarterly Report on Form 10-Q is filed.
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<PAGE>
UCAR INTERNATIONAL INC.
SIGNATURE
Pursuant to the requirement of the Securities Exchange Act of 1934, the
registrant has duly cause this report to be signed on its behalf by the
undersigned thereunto duly authorized.
UCAR INTERNATIONAL INC.
Date: May 1, 1996 By: /s/ William P. Wiemels
______________________
William P. Wiemels
Vice President, Chief
Financial Officer and Treasurer
(Principal Financial Officer)
- 17 -
EXHIBIT 2.28
TRADE NAME AND TRADEMARK LICENSE AGREEMENT
Agreement, dated March 1, 1996, by and between UNION CARBIDE
CORPORATION (hereinafter "Licensor"), a New York corporation, and UCAR
CARBON TECHNOLOGY CORPORATION (hereinafter "Licensee"), a Delaware
corporation.
WHEREAS, Licensor and its affiliates, subsidiaries and predecessors have
for many years been engaged in the manufacture and sale of carbon and graphite
products, and related systems and services (hereinafter "Products"), under the
trade or company name UCAR (hereinafter "Name") and the trademark UCAR
(hereinafter "Trademark"); and
WHEREAS, Licensor is the owner of the Name and Trademark for a wide
variety of goods and services and such Name and Trademark are derivatives of
Licensor's corporate name Union Carbide Corporation, and the reputation of
Licensor is associated with high quality in the production and sales of its
goods and services; and
WHEREAS, Licensee desires to use the Name and Trademark throughout the
world in accordance with the terms of this Agreement in connection with its
corporate name and Products manufactured and/or sold by Licensee or its
sublicensees; and
WHEREAS, Licensor is willing to grant Licensee the right to use the
Name and Trademark and to grant sublicenses, subject to the provisions of this
Agreement;
NOW, THEREFORE, in consideration of the mutual covenants and
obligations herein contained, the parties agree as follows:
1. Licensee acknowledges that Licensor is the owner of all right,
title and interest in the Name and Trademark in connection with the Products.
Licensee
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acknowledges that it has not acquired any ownership rights in the Name or
Trademark and will not acquire any ownership rights in the Name or Trademark by
reason of this Agreement or otherwise. Licensee will not at any time willfully
do or knowingly permit to be done any act or thing which would in any way
impair the rights of Licensor in and to the Name and Trademark or which would
affect the validity of the Name or Trademark or which would depreciate the
value or reputation of the Name or Trademark. Licensee explicitly agrees that
all use of the Name and Trademark by Licensee shall inure to the benefit of
Licensor.
2. Licensor hereby grants Licensee a non-exclusive, non-
assignable, non-transferable and royalty-free right and license to use the
Name in its corporate and business names. Licensor further grants Licensee an
exclusive, non-assignable, non-transferable and royalty-free right and license
to use the Trademark throughout the world only on or in connection with
Products manufactured by or for it or any Affiliated Company (as hereinafter
defined), provided that such Products are manufactured in accordance with the
formulations, specifications and standards of quality heretofore observed by
Licensor, Licensee and their licensees, or set forth from time to time in
writing by Licensor, or approved in writing by Licensor prior to the first
commercial manufacture thereof, which approval shall not be unreasonably
withheld.
3. Unless sooner terminated pursuant to any provision contained in
this Agreement, the license grant shall have a term from the date hereof and
ending January 26, 2015. Thereafter, it will be automatically renewed for
successive terms of ten years, but with Licensor retaining the right to
terminate this Agreement by giving written notice to Licensee at least five
years before the end of the then current term. Licensee may terminate this
Agreement at any time by giving written notice to Licensor.
4. Licensor acknowledges and agrees to Licensee's grant of a
sublicense of the Name and Trademark to UCAR INTERNATIONAL INC. (hereinafter
UCAR INTERNATIONAL). Licensee may grant additional sublicenses of the Name and
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Trademark to any company of which UCAR INTERNATIONAL owns or controls,
directly or indirectly, fifty percent (50%) or more of the issued and
outstanding voting stock (hereinafter "Affiliated Company"), provided that, as
to all sublicenses, unless Licensor otherwise gives its prior written consent,
(i) each such sublicense shall be subject to all the terms and conditions of
this Agreement with the exception that no sublicensee may itself grant any
sublicense or any right, title or interest in the sublicense granted to it;
(ii) except for provisions respecting royalties, Licensor shall be a third
party beneficiary to each such sublicense and shall have the right under each
such sublicense directly to exercise any rights as if it were the licensor
thereunder; (iii) Licensee may not grant any such sublicense in any country
or territory which does not recognize the validity of such a sublicense;
provided, however, in such event, Licensor agrees to issue a direct license to
Licensee or to any Affiliated Company of Licensee as Licensee may designate to
permit use of the Trademark in such country or territory under terms and
conditions consistent with this Agreement; (iv) each sublicense will provide
that in the event that the sublicensee ceases to be an Affiliated Company, all
rights to the use of the Name and Mark shall immediately terminate and each
such sublicensee shall immediately cease to use the Name and Trademark; and
(v) Licensee agrees, at its expense, to record all sublicenses or registered
user agreements in those countries and territories where such recording is
deemed necessary by the Licensor and provided that no use of the Name or
Trademark shall commence under any such sublicense in any country or territory
in which approval of the sublicense by any entity is required prior to the use
of the Name or Trademark thereunder until such approval is obtained.
5. No consent or approval required by this Agreement will be
unreasonably withheld. All consents or approvals required by this Agreement
shall be deemed granted unless denied within sixty (60) days following
Licensor's receipt thereof.
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<PAGE>
6. Licensee undertakes and agrees to use the Name and Trademark
only on or in connection with Products which are of a quality which is
acceptable to Licensor. Licensee agrees to comply with reasonable rules set
forth from time to time by Licensor with respect to the appearance and manner
of use of the Name and Trademark. Any form of use of the Name and Trademark
not specifically covered by such rules shall be adopted by Licensee only upon
prior approval in writing by Licensor. Representative specimens showing the
use of the Name and Trademark by Licensee shall be sent to Licensor from time
to time upon request by Licensor.
7. Licensee agrees to furnish Licensor, from time to time as
requested, representative samples of Products to which it affixes the
Trademark. Licensor or its authorized representative shall also have the
right to conduct during regular business hours and under conditions of
confidentiality an examination of Products and of the plants and processes for
making Products. If, at any time, any Products manufactured by or for
Licensee (and not acquired from Licensor) and bearing the Trademark shall fail
to conform to one of the provisos set forth in Paragraph 1, Licensee shall
promptly remove the Trademark from such non-conforming Products in its
inventory and shall use best efforts to replace, at its own cost, any such
non-conforming Products held by the trade with conforming Products.
8. Licensee agrees to defend, indemnify and hold Licensor harmless
from, against and in respect of all claims, demands, losses, lawsuits,
proceedings, obligations, assessments, fines, penalties, administrative
orders, costs, expenses, liabilities and damages, including interest,
penalties and reasonable attorneys' fees, which Licensor may incur for any
damage to property and/or injury to persons (including death), resulting from
the manufacture, storage, packaging, handling, transportation, sale or use of
Products bearing the Trademark which are manufactured by or for Licensee and
not acquired from Licensor.
9. Licensee agrees to hold comprehensive general liability insurance
(including contractual liability) properly safeguarding Licensor against
liability
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indemnified against under Paragraph 8 hereof.
10. Notwithstanding any provisions to the contrary contained in
this Agreement, the indemnification obligations under Paragraph 8 shall
survive the termination or expiration of this Agreement.
11. Licensee shall comply with all laws, rules, regulations,
ordinances, decrees, edicts and orders pertaining to the proper use and
designation of the Trademark and shall at all times designate the Trademark as
a registered trademark. Licensee shall, upon reasonable request in writing
Trademark, and on each item of advertising and promotion containing the
Trademark, such designations as ownership and/or licensing relationship.
12. Licensee shall give Licensor notice of any known or presumed
infringement of the Name or Trademark, and Licensee shall render to Licensor
full cooperation, at Licensor's and Licensee's shared expense, for the
protection of the Name and Trademark.
13. Licensor will renew and maintain registrations of the Trademark
and obtain new registrations for the Trademark, covering the Products made by
or for Licensee or any Affiliated Company. Licensee shall pay or reimburse
Licensor for all costs and expenses relating to or arising from registration
and renewal or maintenance of the registration of the Trademark, registered,
renewed or maintained for the Products in any jurisdiction.
14. In the event Licensee materially breaches any provision of this
Agreement, Licensor may elect to give Licensee written notice of such breach.
If Licensee does not commence remedy of such breach within sixty (60) days
after such notice is given and thereafter diligently pursue such remedy,
Licensor shall have the right to terminate this Agreement at any time
thereafter, but prior to the completion of the remedy of such breach, by
giving Licensee written notice of such termination.
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15. In the event termination of this Agreement occurs, Licensee
shall have a period of six (6) months from the date of such termination to use
up its inventories of Products, literature, packaging and other materials to
which the Name and/or Trademark have already been applied on the date of
termination. Any such use of the Name and/or Trademark under this Paragraph
shall otherwise be in accordance with the provisions of this Agreement.
16. This Agreement and all rights and obligations hereunder shall
inure to the benefit of and be binding upon the successors and permitted
assigns of Licensor. Except as otherwise provided herein, neither this
Agreement nor any rights granted herein shall be assigned by Licensee without
the written consent of Licensor, and any attempted assignment or transfer
without such consent shall be null and void.
17. Any notices or requests with reference to this Agreement shall
be by letter, telegram, telex, or electronic facsimile confirmed promptly by
letter and shall be directed by one party to the other at its respective
address as follows:
Licensor: Union Carbide Corporation
Attention: Trademark Counsel
39 Old Ridgebury Road
Danbury, Connecticut 06817, U.S.A.
Fax: (203) 794-6269
Licensee: UCAR Carbon Technology Corporation
Attention: President
39 Old Ridgebury Road
Danbury, Connecticut 06817, U.S.A.
Fax: (203) 207-7785
Either party may change its address to which notices or requests shall be
directed by notice to the other party. Any notices or requests sent to the
current notice address of record (either an address listed above or one
subsequently established by notice) shall be effective and considered as
having been received upon transmittal.
20. This instrument contains the entire agreement between the parties
hereto regarding the Name and Trademark, and this Agreement supersedes and
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cancels all previous negotiations, agreements, commitments and writings in
respect to the subject matter hereof. This Agreement may not be released,
discharged, abandoned, changed or modified in any manner, orally or otherwise,
except by an instrument in writing signed by duly authorized officers or
representatives of the parties hereto.
21. This Agreement shall be construed and the legal relations
between the parties hereto with respect to the subject matter hereof shall be
governed by the laws of the State of New York, United States of America,
without recourse to its conflict of law principles.
IN WITNESS WHEREOF, Licensor and Licensee have caused this instrument
to be executed in duplicate by their duly authorized representatives as of the
date first above written.
UNION CARBIDE CORPORATION
By: /s/ John K. Wulff
---------------------------------
Name: John K. Wulff
Title: Vice President
UCAR CARBON TECHNOLOGY CORPORATION
By: /s/ F. J. McCarthy
---------------------------------
Name: F. J. McCarthy
Title: President
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EXHIBIT 10.34(b)
AMENDMENT TO THE
UCAR INTERNATIONAL INC. ANNUAL INCENTIVE COMPENSATION PLAN
__________________________________________________________
The UCAR International Inc. Annual Incentive Compensation Plan (the "Plan")
is hereby amended as follows:
1. Section 2 is amended by replacing the date December 31, 1995 with the date
December 31, 2000.
2. The provisions of this Amendment are effective as of January 26, 1995.
3. This amendment supercedes the amendment to the UCAR International Inc.
Annual Incentive Compensation Plan effective July 28, 1995.
UCAR INTERNATIONAL INC.
By: /s/ Peter B. Mancino
____________________
EXHIBIT 11
<TABLE>
UCAR INTERNATIONAL INC.
COMPUTATION OF EARNINGS PER SHARE
(Dollars in millions, except per share data)
<CAPTION>
Three Months Ended March 31,
____________________________________________________
1996 1995
_______________________ _______________________
Fully Fully
Primary Diluted Primary Diluted
__________ __________ __________ __________
<S> <C> <C> <C> <C>
Income (loss) before cumulative effect of change in accounting principle..... $ 35.1 $ 35.1 $ (45.5) $ (45.5)
Pro forma effects of the Recapitalization (after tax):
Compensation expense related to the Company's long
term incentive compensation plan....................................... - - 1.0 1.0
Senior subordinated credit facility expense............................... - - 4.0 4.0
Net adjustment to interest................................................ - - (3.0) (3.0)
Taxes due to Recapitalization............................................. - - 37.0 37.0
Pro forma effects of the Initial Offering and Redemption (after tax):
Net adjustment to interest................................................ - - 4.0 4.0
Pro forma effects of the Refinancing (after tax):
Net adjustment to interest................................................ - - 2.0 2.0
__________ __________ __________ __________
Income (loss) from continuing operations for
income calculation (Pro forma in 1995).................................... $ 35.1 $ 35.1 $ (0.5) $ (0.5)
Cumulative effect on prior years of change in accounting for inventories..... 7.0 7.0 - -
__________ __________ __________ __________
Net income (loss) - common stockholders (Pro forma in 1995).......... $ 42.1 $ 42.1 $ (0.5) $ (0.5)
========== ========== ========== ==========
Weighted average number of common and common equivalent shares
applicable to each earnings per share calculation (Pro forma in 1995):
Weighted average number of shares outstanding............................. 46,015,215 46,015,215 45,039,718 45,039,718
Dilutive effect of stock options.......................................... 2,175,323 2,236,368 2,697,994 2,697,994
__________ __________ __________ __________
48,190,538 48,251,583 47,737,712 47,737,712
========== ========== ========== ==========
Net income (loss) per common share (Pro forma in 1995) (A):
Income (loss) before cumulative effect of change in accounting principle.. $ 0.73 $ 0.73 $ (0.01) $ (0.01)
Cumulative effect on prior years of change in accounting for inventories.. 0.15 0.15 - -
__________ __________ __________ __________
Net income (loss) per share.......................................... $ 0.88 $ 0.88 $ (0.01) $ (0.01)
========== ========== ========== ==========
<FN>
(A) Fully diluted earnings per share is not significantly different than primary net income per share, and therefore, has not
been presented on the face of the Consolidated Statements of Operations.
</FN>
</TABLE>
EXHIBIT 18
[LOGO]
KPMG Peat Marwick LLP Stamford Square, 3001 Summer Street, Stamford, CT 06905
Telephone 203 356 9800 Telefax 203 967 3503
April 15, 1996
UCAR International Inc.
Danbury, CT
Gentlemen:
We have been furnished with a copy of Form 10-Q of UCAR International Inc.
(the "Company") for the three months ended March 31, 1996, and have read the
Company's statements contained in Note 3 to the condensed financial statements
included therein. As stated in Note 3, the Company changed its method of
accounting for the calculation of LIFO inventories and states that the newly
adopted accounting principle is preferable in the circumstances because the
new methodology provides specifically identified parameters for defining new
items within the LIFO pool and improves the accuracy of costing these items.
In accordance with your request, we have reviewed and discussed with Company
officials the circumstances and business judgment and planning upon which the
decision to make this change in the method of accounting was based.
We have not audited any financial statements of UCAR International Inc. as of
any date or for any period subsequent to December 31, 1995, nor have we
audited the information set forth in the aforementioned Note 3 to the
condensed financial statements; accordingly, we do not express an opinion
concerning the factual information contained therein.
With regard to the aforementioned accounting change, authoritative criteria
have not been established for evaluating the preferability of one acceptable
method of accounting over another acceptable method. However, for purposes of
the Company's compliance with the requirements of the Securities and Exchange
Commission, we are furnishing this letter.
Based on our review and discussion, with reliance on management's business
judgment and planning, we concur that the newly adopted method of accounting
is preferable in the Company's circumstances.
Very truly yours,
KPMG Peat Marwick LLP
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF UCAR INTERNATIONAL INC.'S FORM 10-Q FOR THE QUARTER ENDED
MARCH 31, 1996, FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 1995, AND FORM 10-Q
FOR THE QUARTER ENDED MARCH 31, 1995, AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000931148
<NAME> UCAR INTERNATIONAL INC.
<MULTIPLIER> 1,000,000
<S> <C> <C> <C>
<PERIOD-TYPE> 3-MOS YEAR 3-MOS
<FISCAL-YEAR-END> DEC-31-1996 DEC-31-1995 DEC-31-1995
<PERIOD-START> JAN-01-1996 JAN-01-1995 JAN-01-1995
<PERIOD-END> MAR-31-1996 DEC-31-1995 MAR-31-1995
<CASH> 48 53 158
<SECURITIES> 0 0 0
<RECEIVABLES> 205 191 165
<ALLOWANCES> 11 11 9
<INVENTORY> 162 136 129
<CURRENT-ASSETS> 432 403 488
<PP&E> 1017 1013 895
<DEPRECIATION> 642 635 544
<TOTAL-ASSETS> 884 864 919
<CURRENT-LIABILITIES> 212 228 208
<BONDS> 634 636 942
0 0 0
0 0 0
<COMMON> 0 0 0
<OTHER-SE> (118) (167) (439)
<TOTAL-LIABILITY-AND-EQUITY> 884 864 919
<SALES> 243 901 210
<TOTAL-REVENUES> 243 901 210
<CGS> 150 556 136
<TOTAL-COSTS> 150 556 136
<OTHER-EXPENSES> 2 38 32
<LOSS-PROVISION> 0 2 0
<INTEREST-EXPENSE> 16 93 23
<INCOME-PRETAX> 52 96 (9)
<INCOME-TAX> 19 74 37
<INCOME-CONTINUING> 35 25 (46)
<DISCONTINUED> 0 0 0
<EXTRAORDINARY> 0 37 0
<CHANGES> 7 0 0
<NET-INCOME> 42 (12) (46)
<EPS-PRIMARY> .88 1.87<F1> (.01)<F1>
<EPS-DILUTED> .88 1.87<F1> (.01)<F1>
<FN>
<F1>Pro forma for 1995. See Note 7 of the Notes to Consolidated Financial Statements.
</FN>
</TABLE>
