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SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-K
{ X } ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1993
or
{ } TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Commission file number 33-11634
TRANS-RESOURCES, INC.
(Exact name of registrant as specified in its charter)
Delaware 36-2729497
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
9 West 57th Street, New York, NY 10019
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (212) 888-3044
____________________
Securities registered pursuant to Section 12 (b) of the Act: NONE
____________________
Securities registered pursuant to Section 12 (g) of the Act: NONE
____________________
Indicate by check mark whether 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 registrant was required to file such reports), and
(2) has been subject to such filing requirements for the past 90 days.
YES X NO ___
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of registrant's knowledge, in definitive proxy
or information statements incorporated by reference in Part III of
this Form 10-K or any amendment to this Form 10-K. {X}
State the aggregate market value of the voting stock held by
non-affiliates of registrant.
None held by non-affiliates
Indicate the number of shares outstanding of each of registrant's
classes of common stock, as of the latest practicable date.
Class Outstanding at March 23, 1994
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Common Stock, par value $.01 per share 3,000 shares
(Owned by TPR Investment Associates, Inc.)
Documents incorporated by reference.
None
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TABLE OF CONTENTS
PAGE
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PART I
Item 1. Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Item 2. Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Item 3. Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Item 4. Submission of Matters to a Vote of Security Holders . . . . . . . . . . . . . 13
PART II
Item 5. Market for the Registrant's Common Equity and Related
Stockholder Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Item 6. Selected Financial Data . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations . . . . . . . . . . . . . . . . . . . . 15
Item 8. Financial Statements and Supplementary Data . . . . . . . . . . . . . . . . . 18
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure . . . . . . . . . . . . . . . . . . . . 18
PART III
Item 10. Directors and Executive Officers of the Registrant . . . . . . . . . . . . . . 19
Item 11. Executive Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Item 12. Security Ownership of Certain Beneficial Owners and Management . . . . . . . . 23
Item 13. Certain Relationships and Related Transactions . . . . . . . . . . . . . . . . 23
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K . . . . . . . 24
Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
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PART I
ITEM 1. Business
Trans-Resources, Inc., a privately owned Delaware corporation ("the
Company"), is a multinational manufacturer of specialty plant nutrients,
organic chemicals, industrial chemicals and potash and distributes its products
in over 80 countries. The Company is the world's largest producer of potassium
nitrate, which is marketed by the Company principally under the brand names
K-Power domestically and Multi-K internationally (collectively, referred to as
K-Power). The Company is also the world's largest producer of propanil, the
leading rice herbicide. In addition, the Company is the largest United States
producer of potash. During 1993, specialty plant nutrients, organic chemicals,
industrial chemicals and potash contributed approximately 45%, 12%, 26% and
17%, respectively, of the Company's total revenues. The following table sets
forth the primary markets and applications for each of the Company's principal
products:
Principal Products Primary Markets Applications
- ------------------ --------------- ------------
SPECIALTY PLANT NUTRIENTS
- -------------------------
K-Power -- Fresh fruits and vegetables, -- Fertigation and foliar sprays
flowers, cotton and tobacco (fully soluble, readily absorbed,
Polyfeed Horticulture no harmful residues)
Multi-MAP Horticulture
Multi-MKP Horticulture
Magnisal Vegetables, citrus, tropical fruits
and flowers
Multicote -- Vegetables, turf, fruit trees and -- Time release of nutrients (to
potted plants optimize plant feeding and
minimize labor requirements)
ORGANIC CHEMICALS
- -----------------
Propanil -- Rice -- Broad spectrum weed control
Dichloroaniline -- Organic chemical manufacturers -- Intermediate propanil product
Butoxone -- Peanuts -- Weed control
Custom Manufacturing -- Various industrial companies -- Various organic synthesis
INDUSTRIAL CHEMICALS
- --------------------
Technical Grade Potassium -- Glass, ceramics, food, explosives, -- Oxidation and ion exchange
Nitrate metal, petrochemical and heat
treatment industries
Phosphoric Acid -- Industrial production, food and -- Metal treatment, industrial
fertilizer industries cleaning and fermentation
Sodium Tripolyphosphate -- Soaps and detergents -- Cleansing ingredient
Monoammonium Phosphate -- Chemical manufacturers -- Fire extinguishing powders
Diammonium Phosphate Chemical manufacturers and fire retardant formulations
Monopotassium Phosphate -- Food processing companies -- Fermentation process
Sodium Acid Pyrophosphate -- Food processing companies -- Baking powders and potato
processing
Chlorine -- Chemical companies -- Water purification, production of paper pulp
and PVC pipe
Nitrogen Tetroxide -- United States Government -- Aerospace fuel additive
POTASH
- ------
Agricultural Grade -- Corn, wheat, rice, soybeans -- Fertilizer
Industrial Grade -- Various industrial companies -- Intermediate production of chemicals and lubricants
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Of the Company's total revenues for the year ended December 31, 1993,
approximately 37% and 36% were derived from sales in the United States and
Europe, respectively, with the remainder derived from sales in many other
countries.
On February 7, 1994, the smaller of the two potassium nitrate
production units of the Company's Israeli subsidiary, Haifa Chemicals Limited
("HCL"), was damaged by a fire, causing a temporary reduction of the Company's
potassium nitrate production capacity. The Company is currently reviewing
various alternatives concerning the most effective and timely replacement of
the damaged production unit and expects to replace the damaged unit within
approximately twelve months. The Company believes that the impact of the loss
of the facility, including the effect of business interruption, will be
substantially covered by insurance. While the ultimate amount of the insurance
recovery has not yet been determined, the Company expects that the insurance
proceeds relating to the property damage will be for replacement value, which
substantially exceeds the recorded carrying value of the damaged assets.
Management is not aware of any independent, authoritative source of
information about sizes, growth rates or shares for the Company's markets. The
market size, market growth rate and market share estimates contained herein
have been developed by the Company from internal sources and reflect the
Company's current estimates. However, no assurance can be given regarding the
accuracy of such estimates.
The Company's operations are conducted through its direct and indirect
wholly-owned subsidiaries which include HCL, and HCL's wholly- owned
subsidiary, Haifa Chemicals South, Ltd., an Israeli corporation; Cedar Chemical
Corporation, a Delaware corporation ("Cedar"), and Cedar's wholly-owned
subsidiaries, Vicksburg Chemical Company, a Delaware corporation ("Vicksburg"),
and New Mexico Potash Corporation, a New Mexico corporation ("NMPC"); and Eddy
Potash, Inc., a Delaware corporation ("Eddy"). The Company was incorporated in
Delaware in 1971 under the name Trans-Pacific Resources, Inc.
("Trans-Pacific").
SPECIALTY PLANT NUTRIENTS
The Company is a multinational manufacturer of a range of specialty
plant nutrients, which contributed approximately $146,000,000 to the Company's
revenues for the fiscal year ended December 31, 1993, of which K-Power
contributed a substantial portion.
Products and Markets. K-Power, Polyfeed (a fully soluble plant
nutrient containing nitrogen, phosphate and potassium), Magnisal (magnesium
nitrate), Multi-MAP (monoammonium phosphate) and Multi-MKP (monopotassium
phosphate) are suitable for intensive high value crops such as fresh fruit and
vegetables, flowers, cotton and tobacco, since they are fully soluble, easily
absorbed and leave no harmful residues such as chloride, sodium or sulfate.
Because of their solubility, these products can be used with modern drip
irrigation systems, which are increasingly being employed to conserve water.
The Company produces several grades of agricultural potassium nitrate,
including standard and prilled. The Company is the world's largest producer of
potassium nitrate.
Worldwide demand for potassium nitrate has been growing steadily since
potassium nitrate was introduced in the 1960s. The market for K-Power has
enjoyed steady volume growth because it increases plant yields, improves crop
quality and shortens growing cycles. As a result, potassium nitrate commands a
price premium over other potassic plant nutrients such as potassium sulfate and
sulfate of potash magnesia, used in combination with ammonium nitrate.
After a multi-year research and development effort, the Company
developed a technology for the coating of potassium nitrate and other specialty
plant nutrients which promotes the controlled release of
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nutrients over time. These products increase nutrient uptake by plants while
minimizing fertilizer runoff into the soil, thus satisfying growing
environmental concerns, and reducing labor requirements. The Company is
marketing these controlled release plant nutrients products under the Multicote
brand name.
Marketing and Sales. As part of the Company's market development and
sales efforts, resident agronomists are located in the United States, Italy,
France, the United Kingdom, Greece, Mexico, South Africa, Japan and the Benelux
countries. The steady growth in demand for the Company's specialty plant
nutrients has been supported by agronomic activities in many countries which
have demonstrated the benefits of using K-Power. Horticultural and
agricultural growers generally require substantial testing under their own
specific climatic, soil and growing conditions before they will adopt a new
plant nutrient. The Company has developed application expertise which has
produced a growing number of applications and users.
To market its specialty plant nutrients, the Company has established a
worldwide network of agents and distributors and uses storage facilities in
certain countries to provide prompt and responsive customer service. However,
depending on the conditions prevailing in the particular market, certain large
users are serviced directly and certain products are covered by product
managers who have worldwide responsibility for such products. In order to
further improve service to its customers in Western Europe, the Company has
established subsidiaries in the United Kingdom, Belgium, Spain and Italy. A
French subsidiary engaged in the fertilizer business and having its own sales
and distribution network also markets the Company's specialty plant nutrients.
For United States sales, the Company utilizes its own sales force and also
works in selected areas through brokers.
In general, in the United States, the Company sells K-Power to
blenders who produce mixed fertilizers containing potassium nitrate, which is
then sold to growers. Internationally, the Company's distributors usually sell
directly to growers.
Manufacturing. The Company believes it accounts for approximately 65%
of the world's production of potassium nitrate and its current annual potassium
nitrate production capacity is approximately 410,000 metric tons. This
capacity has been temporarily reduced by the February 1994 fire at HCL, but is
scheduled to be restored within approximately twelve months. To meet the
anticipated continued growing demand of the market, the Company is expanding
its production capacity by constructing a new facility (the "K3 Plant") in
Israel, with capacity to produce by 1995 approximately 100,000 metric tons of
potassium nitrate annually. Capacity of the K3 Plant may be expanded in
subsequent years. See "Facilities and Suppliers" below.
Competition. The Company's only significant competitor in the
production and sale of potassium nitrate is Sociedad Quimica Y Minera De Chile,
S.A., a Chilean company. The principal methods of competition are product
quality, customer service, agronomic expertise and price.
ORGANIC CHEMICALS
The Company's organic chemicals business has grown by building upon
its capabilities in specialized areas of complex organic synthesis. Its sales
have grown from approximately $20,000,000 in 1989 to approximately $38,000,000
in 1993, with sales of propanil representing approximately 70% of 1993 sales.
Products and Markets. The Company's organic chemicals products
include propanil (the leading rice herbicide, which Cedar markets principally
under the Cedar label and the brand name "Wham! EZ"), dichloroanaline ("DCA,"
the principal raw material for the production of propanil), Butoxone (a peanut
herbicide) and Diuron (a broad use herbicide used on food crops, alfalfa and
cotton). The Company is also the exclusive United States distributor for Tough
(a corn and peanut herbicide). The Company estimates that it currently
produces approximately 95% of the propanil sold in the United States. The
Company has also
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developed several new propanil formulations which offer various advantages in
terms of ease of application and improved environmental impact in an effort to
expand the propanil market.
Although the United States is currently the largest propanil market,
representing approximately 35% of the world market, the United States contains
only a small proportion of the world's rice acreage. Accordingly, the Company
believes there is significant potential for propanil growth internationally.
The Company has established an international market development program to
introduce propanil to additional markets around the world. As the largest
propanil producer in the world and a low cost producer, the Company believes it
is positioned to benefit from growth in the international propanil market.
The Company also produces other organic chemicals as a contract
manufacturer for various chemical companies. Through this contract
manufacturing, the Company has developed certain techniques for the synthesis
of complex organic chemicals which has been beneficial to it in both its
contract manufacturing activities as well as its own developmental efforts for
proprietary products.
Marketing and Sales. The Company produces and sells propanil under its
own brand name and supplies propanil to other agrichemical companies under
long-term supply contracts. Sales by the Company of propanil and DCA under a
long-term supply contract with the company that, prior to 1992, was the world's
largest producer of propanil, represented approximately 17% of the Company's
sales of organic chemicals in 1993.
The Company sells propanil and its other organic chemical products
through its own sales force and a network of distributors, regional dealers,
cooperatives and international brokers.
Manufacturing. The Company is a low cost producer of propanil as a
result of its 1991 acquisition, relocation and upgrading of a DCA manufacturing
plant.
The Company intends to continue to expand its organic chemicals
business by developing and/or distributing new products that draw upon its
skills in organic chemical synthesis and/or its sales organization. In
particular, the Company is pursuing new manufacturing opportunities which
capitalize on its capabilities in chloronitrobenzene technology.
Competition. In the United States market, the Company primarily
competes with one other propanil supplier while in international markets the
Company competes with several producers. Propanil competes with several other
rice herbicides, but is currently the most commonly used rice herbicide.
Diuron and Tough compete with other products supplied by several multi-national
companies. In contract manufacturing, the Company competes with various other
producers and the basis of competition is generally the quality and range of
production capabilities, service and price.
INDUSTRIAL CHEMICALS
The Company's industrial chemical products include technical grade
potassium nitrate, technical and food grade sodium tripolyphosphate ("STPP"),
technical and food grade phosphoric acid, technical grade monoammonium
phosphate and diammonium phosphate ("MAP" and "DAP"), technical and food grade
monopotassium phosphate ("MKP"), food grade sodium acid pyrophosphate ("SAPP"),
chlorine, nitrogen tetroxide and food grade salts. Industrial chemicals
contributed approximately $84,000,000 to the Company's revenues for the fiscal
year ended December 31, 1993. The Company intends to begin production of
potassium carbonate by the end of 1994 at a new plant being constructed for
this purpose by Vicksburg.
Products and Markets. Technical grade potassium nitrate is used in
the glass industry for making fine tableware glass, TV tubes and crystal glass;
in the metal industry for heat treatment; in the ceramics industry
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for the glazing process; for making explosives and for the production of heat
transfer salts in the petrochemical industry; and for solar energy systems.
Phosphoric acid is used in metal treatment, industrial cleaning
solutions, fermentation processes and for carbonated drinks in the food
industry. STPP is used primarily in the manufacturing of detergents and
specialty cleaning compounds and in the textile and ceramic clay industry; MAP
and DAP are used for fire extinguishing powders and fire retardant functions;
MKP is used for the fermentation process; and SAPP is an ingredient in baking
powders and is used for potato processing. Chlorine is used in the pulp and
paper industry and as a swimming pool disinfectant. Nitrogen tetroxide is an
aerospace fuel additive. Food grade salts are used in food processing.
Potassium carbonate produced at Vicksburg's new plant will be used primarily in
the glass industry.
Marketing and Sales. The Company sells its industrial chemicals
through its own sales force and brokers in the United States and
internationally through a worldwide network of agents and distributors.
Nitrogen tetroxide is primarily sold under a long-term contract to the United
States Government. The Company utilizes storage facilities in certain
countries.
Production. Many of these industrial products are co-products of the
Company's potassium nitrate manufacturing process. Given its production
flexibility, the Company can vary the relative proportion of the various
phosphate chemicals (STPP, MAP, MKP, DAP and SAPP) to optimize its product mix
in light of then prevailing market conditions.
Competition. Certain of the Company's industrial chemicals products,
such as STPP and phosphoric acid, compete in large industrial chemical markets
in which the Company has a small position. Others, such as technical grade
potassium nitrate, MAP, MKP and nitrogen tetroxide have relatively significant
competitive positions in their respective niche markets. The nature of
competition for the various industrial chemicals sold by the Company varies by
product. However, in general, the principal methods of competition are product
quality, customer service and price.
POTASH
The Company is the largest United States producer of potash, producing
approximately 900,000 short tons in 1993, primarily for agricultural use as
fertilizer. During 1993, the Company's share of total potash production in the
United States was approximately 47% and its share of total North American
potash production was approximately 6%. Potash provides potassium, an
essential nutrient for a wide range of crops, including wheat, soybeans and
corn. The Company, through Eddy and NMPC, mines, refines and distributes
potash from two mines and related refineries located in New Mexico. Potash
sales in 1993, excluding intercompany sales to Vicksburg, amounted to
approximately $57,000,000.
Products and Markets. During 1993, approximately 78% of the Company's
potash production was sold as fertilizer and the balance was sold for
industrial uses or used by Vicksburg as a raw material in the production of
potassium nitrate. The Company does not view these operations as a source of
growth.
Marketing and Sales. In the United States, the Company's sales force
sells potash to blenders for fertilizer material and to industrial customers.
Export sales are handled by a sales subsidiary of Potash Corporation of
Saskatchewan. During 1993, the Company sold approximately 77% of its potash
production domestically and 23% internationally.
Although average selling prices for potash in the United States have
declined over the last year, they continue to be above the 1987 price levels,
at least in part as a result of the United States Government's preliminary
findings in a Canadian potash antidumping investigation and the subsequent
Canadian potash
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antidumping agreement. If such agreement is terminated or violated by the
Canadian producers, then depending on the actions taken by the United States
Government, the production and pricing decisions of Canadian producers, and
other market factors, it is possible that the current price levels for potash
could decline substantially, which would adversely affect the Company's results
of operations. See Item 3 - "Legal Proceedings" below.
Production. The Company's potash is mined from approximately 89,000
acres which are under long-term lease, principally from the United States
Government and the State of New Mexico. Such leases cover estimated ore
reserves, as of December 31 1993, of approximately 70,000,000 short tons of
recoverable ore, at thicknesses ranging from four to eight feet. At average
recovery rates these ore reserves are estimated to be sufficient to yield
approximately 15,000,000 short tons of potash concentrate with an average grade
of 60% to 62% "K2O" (a common standard of measurement established by the
industry by defining a product's potassium content in terms of equivalent
percentages of potassium oxide). As of December 31, 1993 and based on current
rates of production (aggregating approximately 940,000 short tons annually),
these ore reserves are estimated to be sufficient to support the mining
operations of NMPC for approximately 31 years and of Eddy, depending on market
conditions, for approximately two to three years. By the time Eddy suspends
operations, which the Company currently expects will be during 1996, depending
on market conditions, the Company may expand production at NMPC from its
present level of approximately 420,000 short tons per year.
Competition. Potash is available from several sources, both domestic
and foreign, including very large Canadian sources of supply. As a result, the
market is highly competitive. Since potash is a commodity product, the most
significant competitive factor affecting sales is price.
FACILITIES AND SUPPLIERS
Vicksburg owns the property, plant and equipment located at its
Vicksburg, Mississippi site and Cedar owns the property, plant and equipment
located at its West Helena, Arkansas site. The Vicksburg plant consists of two
adjacent manufacturing plants situated on 600 contiguous acres. Vicksburg is
constructing a third manufacturing plant on its property, to be completed
during 1994, which will be used for the production of potassium carbonate. The
West Helena plant is located on a 60 acre site. The plants are encumbered by
first mortgages and security interests securing long-term indebtedness.
Cedar's corporate offices are located in leased premises in Memphis, Tennessee.
The major raw materials required by Vicksburg for production of
potassium nitrate are potash supplied by NMPC and nitric acid which is produced
at the Vicksburg plant. Ammonia, the principal raw material required for
production of nitric acid, is supplied from two plants owned by a third party
in close proximity to the Vicksburg facility. The major raw material for the
production of propanil is DCA. The principal raw material for the production
of DCA is provided to the Company under a supply contract. Such raw material
is available from multiple sources.
NMPC owns the property, plant and equipment located at its 320 acre
site near Hobbs, New Mexico. The property, plant and equipment is encumbered
by a first mortgage and security interest securing long-term bank indebtedness.
Eddy owns the property, plant and equipment located at its 680 acre
site in Eddy County, New Mexico.
HCL owns its machinery and equipment and leases its land and buildings
from Oil Refineries Ltd. ("ORL"), a corporation which is majority-owned by the
Israeli Government. The leases expire at various dates, principally in 22
years. Substantially all of the assets of HCL are subject to security
interests in favor
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of the State of Israel or banks. HCL also has a contract with ORL for steam
and processed water which expires on December 31, 1996 and a lease from ORL of
a pipeline which transports ammonia from the port in Haifa to HCL's plant.
HCL is expanding its production capacity by constructing the K3 Plant,
with the capacity to produce annually approximately 100,000 metric tons of
potassium nitrate and 15,000 metric tons of phosphoric acid. The K3 Plant is
being built in the southern part of Israel, on land leased on a long-term basis
from the Government of Israel, and is anticipated to cost approximately
$88,000,000. HCL expects to receive from the Government of Israel an
investment grant of approximately $32,000,000 (which is non-refundable unless
the Company does not comply with the terms of the certificate of approval). In
addition, it is expected that the Government of Israel will contribute
approximately $5,000,000 for infrastructure, so that the net investment of HCL
in the K3 Plant is anticipated to be approximately $51,000,000. Construction
commenced in 1993 and production is planned to start in late 1994. Capacity of
the K3 Plant may be expanded in subsequent years. Provided it completes the K3
Plant and complies with the conditions specified in the applicable certificate
of approval, HCL will receive, with respect to taxable income derived from the
K3 Plant, certain benefits accorded under Israel's Investments Law.
On February 7, 1994, the smaller of HCL's two potassium nitrate
production units was damaged by a fire, causing a temporary reduction of the
Company's potassium nitrate production capacity. The Company is currently
reviewing various alternatives concerning the most effective and timely
replacement of the damaged production unit and expects to replace the damaged
unit within approximately twelve months. The Company believes that the impact
of the loss of the facility, including the effect of business interruption,
will be substantially covered by insurance. While the ultimate amount of the
insurance recovery has not yet been determined, the Company expects that the
insurance proceeds relating to the property damage will be for replacement
value, which substantially exceeds the recorded carrying value of the damaged
assets.
HCL obtains its major raw materials, potash and phosphate rock, in
Israel. HCL purchases potash solely from Dead Sea Works, Ltd. ("DSW") in
accordance with a supply contract expiring December 31, 1999. The contract
provides for prices to be established quarterly, based on the weighted average
of the FOB Israeli port prices paid to DSW by its overseas customers during the
preceding quarter plus certain adjustments thereto. HCL purchases phosphate
rock solely from Negev Phosphates, Ltd. ("Negev Phosphates") pursuant to a
supply agreement expiring on June 30, 1994. Based on a letter of intent
between Negev Phosphates and HCL, a long-term contract is currently being
negotiated. DSW and Negev Phosphates are companies that are majority-owned by
the Israeli Government and the sole suppliers in Israel of potash and phosphate
rock, respectively. While HCL views its current relationships with both of its
principal suppliers to be good, the loss of supply from either of these sources
would have an adverse effect on the Company.
Ammonia, which is used to produce nitric acid (which in turn is used
to produce potassium nitrate), is manufactured in Israel as well as imported.
The ammonia used by HCL is currently imported from a producer under supply
agreements expiring on December 31, 1994. HCL owns ammonia terminal facilities
located on leased property in the port of Haifa which have the capacity to
store an amount of ammonia sufficient to meet HCL's requirements.
Management believes that, except for the HCL unit damaged by the fire
in February, 1994, its facilities are in good operating condition and adequate
for its current needs. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations - Capital Expenditures" and Note P of Notes
to Consolidated Financial Statements.
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RESEARCH AND DEVELOPMENT
The Company has developed and patented certain manufacturing processes
and has submitted other applications for patents for additional processes. As
of December 31, 1993, the Company employed 81 research and development
scientists, engineers and technicians, who are involved in the development and
evaluation of process technologies, efficiencies and quality control. For the
years ended December 31, 1991, 1992, and 1993, the Company spent approximately
$2,860,000, $2,945,000 and $3,206,000, respectively, on these efforts, which
have been charged to current operations.
PERSONNEL AND LABOR RELATIONS
As of December 31, 1993 the Company employed approximately 1,500
people. Approximately 260 employees have advanced technical and academic
qualifications.
None of Cedar's, Vicksburg's or NMPC's employees are represented by
any collective bargaining unit. Eddy's hourly work force is represented by
three labor unions. Eddy's collective bargaining agreements covering the
hourly work force expire in July 1995. Eddy has enjoyed good relations with
its labor unions and has not had a significant work stoppage for many years.
Technicians and engineers of HCL are members of the Union of
Technicians and Engineers, which operates throughout Israel, and substantial
terms of their employment (e.g. salaries and promotions) are governed by a
general collective agreement which HCL does not negotiate directly with such
employees. The other employees of HCL are members of the "Histadrut", the
dominant labor union in Israel, and their terms of employment are governed by a
Specific Collective Agreement ("SCA") negotiated by HCL with the Histadrut and
the representatives of the employees. The contractual terms of the most recent
labor agreements with both employee groups expired on December 31, 1992, with
the result that they remain statutorily in effect until terminated by either
party thereto at any time upon two months prior written notice.
HCL is currently negotiating new labor agreements with the respective
employee groups with the objective being to arrive at agreements for the three
year period ending December 31, 1995. HCL's last major labor dispute took
place in July 1991 and related to negotiations of the SCA for 1990 and 1991.
As a result of this dispute, HCL's employees went on strike for approximately
four weeks during the third quarter of 1991. Prior to that, the last major
labor dispute took place in 1983, which resulted in a strike of approximately
two weeks.
ENVIRONMENTAL MATTERS
Cedar and Vicksburg
Vicksburg's plant located in Vicksburg, Mississippi and Cedar's West
Helena, Arkansas plant discharge process waste water and storm water pursuant
to permits issued in accordance with the Federal Clean Water Act and related
state statutes. Air emissions at each plant are regulated by permits issued
pursuant to the Federal Clean Air Act and related state statutes. While the
plants have generated solid waste regulated by the Federal Resource
Conservation and Recovery Act of 1976, as amended by the Hazardous and Solid
Waste Amendments of 1984 ("RCRA") and related state statutes, the Company
believes that such waste is currently handled and disposed of in a manner which
does not require the Company to have permits under RCRA or any related state
statute.
The Environmental Protection Agency's (the "EPA") Regional Office in
Atlanta notified Cedar in 1989 that unspecified corrective action will be
required to protect against the release of contaminants allegedly present at
the Vicksburg plant as a result of previous pesticide manufacturing operations.
As a result of the notice, Cedar reached agreement with the EPA and the
Department of Justice on the terms of
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a Consent Decree which was filed in the United States District Court at
Jackson, Mississippi in January 1992. Pursuant to the Consent Decree, Cedar
submitted a report of current conditions. Upon agency approval of this report
and of the facility investigation work plan to be thereafter submitted for the
Vicksburg plant, Vicksburg will undertake a site investigation and corrective
measures study, followed by implementation of appropriate corrective action.
Compliance with the Consent Decree is expected to occur over a five to six year
period.
Cedar's West Helena plant utilizes a surface impoundment for
biological treatment of non-hazardous waste streams which was the subject of an
enforcement proceeding initiated by the Arkansas Department of Pollution
Control and Ecology (the "ADPCE") in 1986. The proceeding resulted in a
Consent Administrative Order which required Cedar to carry out various studies,
ultimately leading to the implementation of a groundwater monitoring system.
Based in part on the results of groundwater monitoring and in part on the
discovery of a drum burial area on the West Helena plant site, the ADPCE
requested Cedar to initiate an expanded plant-wide investigation pursuant to a
Consent Administrative Order. The Order was entered in the third quarter of
1991. Implementation is expected to occur over a five year period.
Cedar removed the buried drums from the West Helena site in accordance
with a work plan incorporated in the Consent Administrative Order and, shortly
thereafter, filed a suit against a former operator of the plant site for
contribution for the costs incurred. In July 1992, Cedar obtained partial
summary judgment in the suit against the former operator in an amount equal to
the cost Cedar incurred in removing the buried drums. The judgment, in the
amount of $1,725,000 plus interest, has been appealed by the former operator.
The Company believes that the future costs required to complete the
site investigation and corrective measures studies at Vicksburg and the
plant-wide investigation at West Helena will be between $500,000 and $1,000,000
and will be expended over two to three years. Until these investigations are
completed, it is not possible to definitively determine the costs for any
corrective actions which will be required. Any such corrective action costs
will be expended over a period of years. There can be no assurance that such
costs will not be material.
In November 1992, Cedar entered into an agreement with the ADPCE to
resolve alleged violations of Cedar's National Pollutant Discharge Elimination
System permit (issued to its West Helena Plant in accordance with the Federal
Clean Water Act and related state statutes) by agreeing to enter into an
additional Consent Administrative Order which will require implementation of
additional corrective measures (which could cost up to $500,000 over a period
of two to three years) intended to assure future compliance with the
requirements of the permit and which required the payment of a penalty of
$80,000.
In 1987, Cedar entered into a cost sharing agreement with 55 other
companies to fund costs associated with the clean-up of an abandoned waste
disposal site located near Bayou Sorrel, Louisiana. The sharing agreement was
the basis for a consent decree to which Cedar and the other companies are
parties, settling claims brought by the EPA pursuant to the Comprehensive
Environmental Response Compensation and Liability Act of 1980, as amended. The
sharing agreement allocates approximately 4% of the clean-up costs to Cedar.
After credits and payments through December 31, 1993, Cedar's remaining share
is not expected to exceed an aggregate of $480,000 over approximately the next
25 years.
Appropriate provisions have been made in the consolidated financial
statements with respect to the above matters.
9
12
Eddy and NMPC
The Company's potash operations are subject to various Federal, state
and local environmental laws. The Company does not believe significant
expenditures will be required for the potash operations in the near future or
that its ongoing environmental operating costs will be material.
HCL
As a result of the chemicals and processes used by HCL in the course
of production, nitrous oxide ("NOX") gases, potassium nitrate and STPP dusts
are emitted into the air. In 1986, the Israeli Ministry of Interior issued an
order (the "Order") under the Law for the Prevention of Hazards of 1961
directing HCL to avoid unreasonable air pollution and to take certain remedial
actions, including the installation of measuring devices. In response to the
Order, HCL installed analyzers for the continuous measuring of the NOX content
of the tail gases in its two nitric acid plants and opacity meters for the
measurement of dust content in the air emitted from potassium nitrate dryers.
An additional absorption tower for the recovery of NOX from the tail gases of
the larger nitric acid plant was installed in 1989 as well as two ventury
scrubber units for the reduction of the dust content in the air emitted from
the dryers of both potassium nitrate plants. As a result of these actions, HCL
complied with the Order. As part of a 1990 nitric acid capacity increase, an
NOX abatement unit was installed in the smaller nitric acid plant.
As a result of the production of phosphoric acid, HCL generates acid
sludge and liquid acid effluent. HCL had previously disposed of its acid sludge
in designated approved sites. In accordance with a permit issued by the
Israeli Agency for Environmental Preservation of the Ministry of Interior
pursuant to the Law for the Prevention of Sea Pollution (Disposing of Wastes)
of 1983 and 1984, HCL is now disposing of the acid sludge in a designated site
in the Mediterranean Sea, situated 20 nautical miles from the Israeli coast.
The permit allows for the disposal of a quantity which is sufficient to satisfy
HCL's needs. The permit is valid until December 31, 1994.
HCL currently disposes of its liquid acid effluents in a local river.
Local authorities have advised HCL that it must find an alternative site for
such disposal. The present solution proposed by HCL is to dispose of the
liquid acid waste four kilometers into Haifa Bay utilizing a marine pipeline.
This proposal, accepted in principle by both the local authorities for
environmental protection and the Haifa port authorities, was submitted for
approval to the Ministry of Environmental Protection in Jerusalem. The
Ministry gave HCL permission to proceed with the design of the marine pipeline,
subject to HCL fulfilling certain requirements. Studies of sea conditions in
the area for the proposed pipeline and of the effect of the acid waste on the
sea environment were performed by the Israel Oceanographic & Lakes Research
Institute. Based on these studies, an environmental impact statement of the
proposed system is currently being prepared. The Company estimates that HCL
will be required to invest approximately $8,000,000 over the next three years
if this proposed solution is adopted and annual operating costs, after
completion of the project, will be approximately $800,000.
ITEM 2. Properties.
Reference is made to "Facilities and Suppliers" in Item 1 above,
"Business," for information concerning the Company's properties. See also
Notes D and P of Notes to Consolidated Financial Statements for additional
information.
10
13
ITEM 3. Legal Proceedings.
1. On or about December 20, 1991, Peter N. Zachary together with
fifteen other persons, claiming to be shareholders of Sylvan Learning Centers,
Inc., The Enstar Group, Inc. ("Enstar"), Kinder-Care, Inc. and Kinder-Care
Learning Centers, Inc., filed a complaint in the Circuit Court for Montgomery
County, Alabama against Richard J. Grassgreen ("Grassgreen") and Perry Mendel
("Mendel") (each a former indirect stockholder and director of the Company),
another former indirect stockholder and director of the Company, TPR Investment
Associates, Inc. ("Associates," which is a former parent corporation of the
Company), Trans-Pacific (the former name of the Company) and various other
named persons and entities and certain unnamed entities. The complaint alleges
that in January 1986, Grassgreen and Mendel became part owners of Associates
along with the other former indirect stockholder and director of the Company
and certain employees of Drexel Burnham Lambert Incorporated. The complaint
also alleges that in January 1986, Grassgreen caused Enstar, through its
subsidiary, Care Investors, Inc., to purchase a one-third interest in
Associates for $3,000,000 and to loan Associates $10,000,000 to permit it to
acquire Trans-Pacific, which would substantially increase the profits
Grassgreen and Mendel could make on their investments in Trans-Pacific. The
complaint does not explain how these allegations are actionable against
Associates or Trans-Pacific. The Company filed a motion to dismiss the
complaint. On or about May 27, 1993, the Court entered an order dismissing
substantially the entire complaint. Plaintiffs thereafter filed a second
amended complaint, against which the Company also filed a motion to dismiss.
On or about August 10, 1993 the Court entered an order dismissing four of the
five Counts of the amended complaint. The Company has interposed an answer to
the remaining Count in the complaint.
2. On or about December 3, 1993 an action was commenced in the
United States Bankruptcy Court, Middle District of Florida, Jacksonville
Division by Grassgreen (as debtor in his personal bankruptcy proceeding)
against the Company, its current parent corporation, TPR Investment Associates,
Inc. ("TPR"; which is a different corporation than Associates) and Arie Genger
(see Item 10 - "Directors and Executive Officers of the Registrant" and Item 12
- - "Security Ownership of Certain Beneficial Owners and Management"). The
complaint alleges that Grassgreen's November 1991 sale to TPR of his 250 shares
of TPR common stock (1,000 shares were then outstanding) in exchange for a non-
negotiable note constitutes a fraudulent conveyance voidable under state and
bankruptcy law, fraud, a breach by TPR of a 1988 Shareholder Agreement among
TPR and its then shareholders, and that TPR retains property owing to
Grassgreen's bankruptcy estate. The complaint seeks recision of the sale,
damages and costs, and that Mr. Genger be enjoined from issuing any new or
treasury stock of TPR or changing the ownership of TPR or the Company. On or
about February 14, 1994 the defendants filed an answer to the complaint,
denying all of the allegations of the complaint, interposing additional
defenses and asserting a counterclaim against Grassgreen pursuant to his
indemnification obligations under the agreement governing his November 1991
sale of his TPR shares. On or about December 30, 1993 Enstar moved to
intervene in the suit, contending that it, rather than Grassgreen, should
prosecute it. On or about February 16, 1994, in connection with the then
proposed settlement with Grassgreen, Enstar moved to continue indefinitely
(i.e., defer) its intervention motion until it or one of the other parties
requests otherwise.
During March 1994 the parties entered into an agreement (the
"Settlement"), which is subject to Bankruptcy Court approval and confirmation
of Mr. Grassgreen's plan of reorganization, providing for dismissal with
prejudice of the action and releases to the defendants. Pursuant to the
Settlement, TPR will make certain payments in exchange for surrender to TPR of
Grassgreen's non-negotiable note and the Company's outstanding $9,000,000, 9
1/2% junior subordinated debenture due 2005. In addition, the Settlement
provides for the release of the current holder's liability under a $4,000,000
note due 2005 payable to the Company and secured by the $9,000,000 debenture.
TPR will thereafter be the obligor on the $4,000,000 note.
11
14
3. On or about April 1, 1993 an action was commenced in the
United State District Court for the District of Minnesota, Minneapolis
Division, by Blomkest Fertilizer, Inc., Meadowland Farmers Corp., and Cobden
Grain & Feed against the major Canadian and United States potash producers,
including Eddy and NMPC. The action is purportedly a class action on behalf of
all purchasers of potash from any of the defendants or their respective
affiliates, at any time during the period April 1987 to the present, and
alleges that the defendants conspired to fix, raise, maintain and stabilize the
prices of potash in the United States purchased by the plaintiffs and the other
member of the class in violation of the United States anti-trust laws. The
complaint seeks unspecified damages together with injunctive relief against the
defendants. A total of fourteen related actions (in ten of which Eddy and NMPC
were named defendants) were subsequently filed in the United State District
Courts for the District of Minnesota, the Northern District of Illinois and the
Western District of Virginia, all containing allegations similar to those made
by the plaintiffs in the Blomkest action. The actions pending in Federal court
in Minnesota were consolidated and an amended and consolidated complaint was
served; several of the plaintiffs named in the original complaints are no
longer parties to the amended and consolidated complaint. On or about May 27,
1993 a purported class action was filed against the major potash producers,
including Eddy and NMPC, in the Superior Court of the State of California for
the County of Los Angeles on behalf of Angela Coleman and a class consisting of
all California indirect purchasers of potash. The complaint in the Coleman
action alleges a price fixing conspiracy in the potash industry between April
1987 and the present in violation of specified California statutes. On July 6,
1993 the defendants removed the Coleman case to the United States District
Court for the Central District of California. Pursuant to an order of the
Judicial Panel for Multidistrict Litigation, all of the pending Federal actions
have been consolidated for pretrial purposes in the United States District
Court for Minnesota.
The defendants filed a joint motion to disqualify plaintiffs' counsel
and dismiss their complaints ("Motion to Disqualify"). Additionally, certain
of the defendants, including Eddy and NMPC, filed a Joint Motion, pursuant to
stipulated Federal statutes, to dismiss ("Motion to Dismiss"). On December 8,
1993 the Court granted the Motion to Disqualify with respect to certain of the
plaintiffs' counsel, including all of the plaintiffs' lead counsel, and ordered
that the plaintiffs, using non-disqualified counsel who submit an affidavit
attesting to facts establishing that they should not be disqualified, could
file amended complaints within 30 days (subsequently extended to January 28,
1994), failing which the complaints would be dismissed without prejudice. The
Court denied the Motion to Dismiss as moot. The Court also ruled that the
Motion to Disqualify and the Motion to Dismiss and its rulings with respect
thereto did not apply to the case transferred from the California Court.
The plaintiffs filed a motion for reconsideration of the Court's
December 8, 1993 decision on the Motion to Disqualify or, in the alternative,
for certification ("Motion for Certification") allowing plaintiffs to appeal
the Court's interlocutory decision to the Eighth Circuit Court of Appeals. On
January 4, 1994 the Court ruled that two of the twelve disqualified law firms
should not have been disqualified and granted plaintiffs' Motion for
Certification. The Court also ruled that upon plaintiffs filing an application
for appeal, all proceedings would be stayed pending further order of the Court
or the Eighth Circuit. On February 4, 1994 the Eight Circuit Court of Appeals
denied the plaintiffs' petitions for permission to appeal the District Court's
interlocutory order. Accordingly, on February 14, 1994, the District Court
vacated the stay and ordered that plaintiffs (using non-disqualified counsel)
could file amended complaints on or before March 1, 1994. Certain of the
plaintiffs filed amended complaints on or about March 1, 1994 and other
plaintiffs obtained an extension from the District Court to file amended
complaints until April 21, 1994. On March 14, 1994, the Court scheduled the
trial to begin on or about January 1, 1996. On or about February 18, 1994
certain of the plaintiffs filed with the Eighth Circuit a petition for
rehearing and suggestion for rehearing en banc of the Eighth Circuit's denial
of plaintiffs' petition for permission to appeal the District Court's
interlocutory decision. This petition has not yet been decided.
Management has no knowledge of any conspiracy of the type alleged in
these complaints.
12
15
There are several other legal proceedings pending against the Company
and certain of its subsidiaries arising in the ordinary course of its business
which management does not consider material.
Management of the Company believes, based upon its assessment of the
actions and claims outstanding against the Company and certain of its
subsidiaries, and after discussion with counsel, that the eventual disposition
of the matters described or referred to above should not have a material
adverse effect on the financial position or future operations of the Company.
On or about November 26, 1993 Eddy and NMPC (and other major United
States potash producers) were served with subpoenas issued by the United States
District Court for the Northern District of Ohio to produce documents to a
grand jury authorized by the U.S. Department of Justice Antitrust Division
("DOJ") to investigate possible violations of the antitrust laws in connection
with the allegations made in the civil actions describe above. Eddy and NMPC
are cooperating with DOJ in connection with providing documents sought by the
subpoena.
For information relating to certain environmental proceedings
affecting the Company, see "Environmental Matters" in Item 1 above, "Business."
ITEM 4. Submission of Matters to a Vote of Security Holders.
No matters were submitted to a vote of security holders during the
quarter ended December 31, 1993.
PART II
ITEM 5. Market for the Registrant's Common Equity and Related Stockholder
Matters.
All of the Company's equity securities are owned by TPR. See Item 12
- - "Security Ownership of Certain Beneficial Owners and Management." In
addition, see Note H of Notes to Consolidated Financial Statements for
information regarding certain restrictions on the Company's payment of
dividends. During 1991, 1992 and 1993 the Company paid or declared dividends
on its Common Stock in the amounts of $2,850,000, $13,136,000 and $7,508,000,
respectively.
13
16
ITEM 6. Selected Financial Data.
The following table presents selected consolidated financial data of
the Company for the five year period ended December 31, 1993. This data has
been derived from the consolidated financial statements of the Company and
should be read in conjunction with the notes thereto.
Year Ended December 31,
-----------------------
1989 1990 1991 1992 1993
---- ---- ---- ---- ----
(in thousands)
Results of Operations:
Revenues . . . . . . . . . . . . . . . . . . $ 269,311 $ 292,235 $ 309,068 $ 345,356 $326,315
Operating costs and expenses:
Cost of goods sold . . . . . . . . . . . . 197,495 219,878 238,489 266,770 255,563
General and administrative . . . . . . . . 24,809 29,488 33,262 36,270 38,375
--------- --------- --------- --------- --------
Operating income . . . . . . . . . . . . . . 47,007 42,869 37,317 42,316 32,377
Interest expense . . . . . . . . . . . . . . (29,393) (32,153) (31,210) (27,542) (27,405)
Interest and other income
(expense) - net (1) . . . . . . . . . . . . 4,095 (4,647) 14,159 8,476 6,014
--------- --------- --------- --------- --------
Income before income taxes,
extraordinary item and change
in accounting principle . . . . . . . . . . 21,709 6,069 20,266 23,250 10,986
Income tax provision . . . . . . . . . . . . 12,283 11,037 2,582 11,231 7,920
--------- --------- --------- --------- --------
Income (loss) before extraordinary item
and change in accounting principle . . . . 9,426 (4,968) 17,684 12,019 3,066
Extraordinary item - net . . . . . . . . . . -- 263 1,186 -- (8,830)
Cumulative effect on prior years of
change in accounting for income taxes . . . -- -- -- 1,130 --
--------- --------- --------- --------- --------
Net income (loss) . . . . . . . . . . . . . . $ 9,426 $ (4,705) $ 18,870 $ 13,149 $ (5,764)
========= ========= ========= ========= ========
Dividends:
Preferred stock . . . . . . . . . . . . . . . $ 855 $ 855 $ 214 $ -- $ --
Common stock . . . . . . . . . . . . . . . . 2,000 2,175 2,850 13,136 7,508
_______________________
(1) Includes (a) security losses of $6,381,000 and $15,490,000 (which
$15,490,000 relates principally to the Company's investment in Enstar)
in the years ended December 31, 1989 and 1990, respectively, (b) a
gain of $10,000,000 in the year ended December 31, 1991, representing
the excess of insurance proceeds over the carrying value of certain
HCL property destroyed in a fire, and (c) security gains of $2,865,000
and $2,261,000 in the years ended December 31, 1992 and 1993,
respectively. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and Note L of Notes to
Consolidated Financial Statements.
14
17
December 31,
------------
1989 1990 1991 1992 1993
---- ---- ---- ---- ----
(in thousands)
Financial Position:
Cash and cash equivalents . . . . . . . . . . $61,347 $ 54,999 $ 39,276 $ 54,745 $ 25,742
Working capital . . . . . . . . . . . . . . . 102,670 111,951 120,150 99,297 103,694
Total assets . . . . . . . . . . . . . . . . 318,343 373,083 381,841 341,055 365,865
Short-term debt, including current
maturities of long-term debt . . . . . . . 25,394 29,383 50,105 42,666 47,282
Long-term debt, excluding current
maturities and subordinated debt . . . . . 79,259 125,745 84,132 71,318 61,328
Senior subordinated debt - net . . . . . . . 120,747 120,309 110,716 103,689 140,133
Junior subordinated debt - net . . . . . . . 7,078 7,213 14,735 15,089 15,495
Redeemable preferred stock - net . . . . . . 7,078 7,213 -- -- --
Common stockholder's equity - net . . . . . . 23,236 15,824 28,772 28,882 15,794
ITEM 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
RESULTS OF OPERATIONS
The following table sets forth as a percentage of revenues and the
percentage change of those items as compared to the prior period, certain items
appearing in the Consolidated Financial Statements.
PERCENTAGE OF REVENUES YEAR-TO-YEAR CHANGES
---------------------- --------------------
YEAR ENDED DECEMBER 31, 1992 1993
----------------------- VS. VS.
1991 1992 1993 1991 1992
---- ---- ---- ---- ----
Revenues . . . . . . . . . . . . . . . . . . . . . 100.0% 100.0% 100.0% 11.7% (5.5)%
----- ----- -----
Cost and expenses:
Cost of goods sold . . . . . . . . . . . . . . . 77.2 77.2 78.3 11.9 (4.2)
General and administrative . . . . . . . . . . . 10.7 10.5 11.8 9.0 5.8
----- ----- -----
Operating income . . . . . . . . . . . . . . . . . 12.1 12.3 9.9 13.4 (23.5)
Interest expense . . . . . . . . . . . . . . . . (10.1) (8.0) (8.4) (11.8) (.5)
Interest and other income - net . . . . . . . . 4.6 2.4 1.9 (40.1) (29.1)
----- ----- -----
Income before income taxes, extraordinary
item and change in accounting principle . . . . 6.6 6.7 3.4 14.7 (52.8)
Income tax provision . . . . . . . . . . . . . . . .9 3.2 2.5 335.0 (29.4)
----- ----- -----
Income before extraordinary item and
change in accounting principle . . . . . . . . . 5.7 3.5 .9 (32.0) (74.5)
Extraordinary item - net . . . . . . . . . . . . . .4 -- (2.7) (100.0) (100.0)
Cumulative effect on prior years of
change in accounting for income taxes . . . . . -- .3 -- 100.0 (100.0)
----- ----- -----
Net income (loss) . . . . . . . . . . . . . . . . . 6.1% 3.8% (1.8)% (30.3)% (143.8)%
===== ===== =====
1993 Compared with 1992
Revenues decreased by 5.5% to $326,315,000 in 1993 from $345,356,000
in 1992, a decrease of $19,041,000, resulting from decreased sales of potash
and chlorine ($9,600,000), specialty plant nutrients and industrial chemicals
($2,600,000) and organic chemicals (primarily contract manufacturing
activities) ($6,800,000).
15
18
Cost of goods sold as a percentage of revenues increased to 78.3% in
1993 compared with 77.2% in 1992 primarily due to higher costs associated with
contract manufacturing activities in the Company's organic chemicals business
and lower potash prices. During the 1993 period margins on specialty plant
nutrients, industrial chemicals and the organic chemicals' pesticide business
increased, but were offset by reduced margins in contract manufacturing
activities and in the potash business. Gross profit was $70,752,000 in 1993
compared with $78,586,000 in 1992, a decrease of $7,834,000, principally the
result of a decrease in potash gross profit. General and administrative
expense increased to $38,375,000 in 1993 from $36,270,000 in 1992 (11.8% of
revenues in 1993 compared with 10.5% in 1992), with the increase of $2,105,000
principally due to increased selling and marketing expenses for specialty plant
nutrients and organic chemicals.
As a result of the matters described above, the Company's operating
income decreased by $9,939,000 to $32,377,000 in 1993 as compared with
$42,316,000 in 1992.
Interest expense decreased by $137,000 ($27,405,000 in 1993 compared
with $27,542,000 in 1992). While the Company's outstanding debt at December
31, 1993 exceeded the outstanding debt at December 31, 1992 primarily as a
result of the Company's issuance of its 11 7/8% Senior Subordinated Notes due
2002 (see Note H of Notes to Consolidated Financial Statements), interest
expense declined as a result of scheduled debt repayments and lower interest
rates in the 1993 period. Interest and other income - net decreased in 1993 by
$2,462,000, principally as the result of reduced interest and dividend income
and security gains in 1993 and other non-recurring income earned in 1992.
As a result of the above factors, income before income taxes,
extraordinary item and change in accounting principle decreased by $12,264,000
in 1993. The provision for income taxes increased to 72.1% of pre-tax income
in 1993 from 48.3% of pre-tax income in 1992. The Company's provisions for
income taxes are impacted by the mix between domestic and foreign earnings and
vary from the U.S. Federal statutory rate principally due to the impact of
foreign operations and certain losses for which there is no current tax
benefit. See Note K of Notes to Consolidated Financial Statements for
information regarding effective tax rates.
In the 1993 period the Company acquired $65,497,000 principal amount
of its 13 1/2% Senior Subordinated Debentures due 1997 (the "13 1/2%
Debentures") and $21,500,000 principal amount of its Senior Subordinated Reset
Notes due 1996 (the "Reset Notes"), which resulted in a loss of $8,830,000.
Such loss (which has no current tax benefit) is classified as an extraordinary
item in the accompanying Consolidated Statement of Operations. No debt was
acquired in the 1992 period. See the Note H of Notes to Consolidated Financial
Statements.
1992 Compared with 1991
Revenues increased by 11.7% to $345,356,000 in 1992 from $309,068,000
in 1991, an increase of $36,288,000, mainly the result of increased sales of
specialty plant nutrients, organic chemicals and potash.
Cost of goods sold as a percentage of revenues was 77.2% in both 1991
and 1992. During 1992 margins on specialty plant nutrients and industrial
chemicals improved slightly, partially offset by higher volumes of propanil
sold at lower margins pursuant to a supply agreement commencing in 1992. See
"Business - Organic Chemicals - Marketing and Sales." Gross profit was
$78,586,000 in 1992 compared with $70,579,000 in 1991, an increase of
$8,007,000, with increases occurring in each of the Company's product lines.
General and administrative expense increased to $36,270,000 in 1992 from
$33,262,000 in 1991 (10.5% of revenues in 1992 compared with 10.7% in 1991)
principally due to increased labor costs, selling and marketing expenses.
As a result of the matters described above, the Company's operating
income increased by $4,999,000 to $42,316,000 in 1992 as compared with
$37,317,000 in 1991.
16
19
Interest expense decreased from $31,210,000 in 1991 to $27,542,000 in
1992, mainly resulting from scheduled debt repayments, lower interest rates and
senior subordinated debt repurchased by the Company in 1991, partially offset
by exchange rate differences on certain HCL long-term loans denominated in
European currencies. Interest and other income - net decreased by $5,683,000
in 1992 principally as the result of the prior year including a gain of
$10,000,000 relating to the excess of insurance proceeds over the carrying
value of certain HCL property damaged in a fire, partially offset by increased
security gains in 1992 (see Notes D and L of Notes to Consolidated Financial
Statements).
As a result of the above factors, income before income taxes,
extraordinary item and change in accounting principle increased by $2,984,000
in 1992. The provision for income taxes increased to 48.3% of pre-tax income
in 1992 from 12.7% of pre-tax income in 1991 since during 1991 HCL received an
income tax refund relating to prior years of $7,100,000. These effective tax
rates are impacted by the mix between domestic and foreign earnings and vary
from the U.S. Federal statutory rate principally due to the impact of foreign
operations and certain losses for which there is no current tax benefit. See
Note K of Notes to Consolidated Financial Statements for information regarding
effective tax rates.
In 1991 the Company repurchased $10,153,000 principal amount of 13
1/2% Debentures and Reset Notes. Such repurchases resulted in a gain to the
Company, net of income taxes, of $1,186,000, with this gain being classified as
an extraordinary item. There were no repurchases of public indebtedness in
1992. Effective January 1, 1992, the Company changed its method of accounting
for income taxes to conform with Statement of Financial Accounting Standards
No. 109 "Accounting For Income Taxes". In connection with such change in
accounting, net income in 1992 was impacted by a net charge of $1,170,000. See
Note A of Notes to Consolidated Financial Statements.
CAPITAL RESOURCES AND LIQUIDITY
The Company's consolidated working capital at December 31, 1993 and
1992 was $103,694,000 and $99,297,000, respectively. See "Other Matters" and
Notes H and P of Notes to Consolidated Financial Statements.
CAPITAL EXPENDITURES
During 1993 (excluding the K3 Plant) the Company invested
approximately $13,000,000 in capital expenditures. The Company currently
anticipates that capital expenditures for the year ending December 31, 1994
(excluding the K3 Plant and the reconstruction of the production unit damaged
by a fire in February 1994) will aggregate approximately $35,000,000, which
will be used for increasing production capacity and product diversification.
During 1993 the Company commenced construction of the K3 Plant, which is
estimated to cost approximately $88,000,000, with $37,000,000 of such cost
being provided by grants and other entitlements from the Israeli Government.
Capital expenditures in connection with the K3 Plant (net of Israeli Government
grants) amounted to approximately $16,000,000 in 1993. The Company anticipates
completing the construction of the K3 Plant in late 1994. See "Business -
Facilities and Suppliers" and Notes D and P of Notes to Consolidated Financial
Statements. The Company expects to be able to finance its capital expenditures
from internally generated funds, borrowings from traditional lending sources
and, where applicable, Israeli Government grants and entitlements.
EXCHANGE RATE INSURANCE
In 1981, HCL joined a program of exchange rate insurance of the
Israeli Government designed to protect participating Israeli exporters from
losses resulting from the widening of the gap between the inflation rate in
Israel and the rate of devaluation of the New Israeli Shekel ("NIS") against a
weighted basket of currencies of Israel's major trading partners. The net
benefits received by HCL for the years ended December 31, 1991, 1992 and 1993
were $4,599,000, $4,056,000 and $1,616,000, respectively, which benefits
17
20
have been included in revenues. As part of various economic measures adopted
in Israel subsequent to December 31, 1988, the Israeli Government has gradually
reduced the insurance proceeds granted under its program of exchange rate
insurance, with the program having been fully eliminated on August 31, 1993.
See Note A of Notes to Consolidated Financial Statements.
INFLATION
Inasmuch as only approximately $36,000,000 of HCL's annual operating
costs are denominated in NIS, HCL is exposed to inflation in Israel to a
limited extent. The combination of price increases coupled with devaluation of
the NIS have in the past generally enabled HCL to avoid a material adverse
impact from inflation in Israel. However, HCL's earnings could increase or
decrease to the extent that the rate of future NIS devaluation differs from the
rate of Israeli inflation. In December 1991, the Central Bank of Israel
announced a program whereby the lag between the inflation rate in Israel and
devaluation of the NIS, compared to the weighted average exchange rate of a
"basket of currencies" (the currencies most commonly traded with Israel,
including the U.S. Dollar), will not exceed the average inflation rate (about 3
to 4%) of the countries represented in the "basket of currencies". For the
years ended December 31, 1992 and 1993, the devaluation rate of the NIS as
compared to the U.S. Dollar exceeded (or was less than) the inflation rate in
Israel by 11.7% and (3.2)%, respectively.
OTHER MATTERS
On January 27, 1994, HCL filed a registration statement with the
Israeli Securities Authority (the "ISA") pursuant to which HCL would publicly
offer in Israel, in an underwritten offering, units consisting of (i) shares of
HCL common stock (the "HCL Shares") and (ii) options exercisable for HCL
Shares. The terms of the proposed offering have not been finalized, and there
can be no assurance that the ISA will declare the offering effective or that
the offering will be consummated (considering, among other things, prevailing
stock market conditions in Israel). If the proposed offering is consummated,
the Company has determined that it would maintain beneficial ownership of not
less than 90% of the HCL Shares upon issuance of the units and not less than
80% on a fully diluted basis. The Company anticipates that the net proceeds to
be realized for the HCL Shares in the proposed offering, if consummated, would
be substantially in excess of the Company's corresponding carrying value for
the equity interest represented by such shares.
The net proceeds of the proposed offering may be used for any purpose
authorized by the Board of Directors of HCL, including, without limitation,
internal growth or the acquisition of new businesses. HCL does not currently
have any agreements, commitments or understandings for acquiring any particular
businesses and does not anticipate using any of the net proceeds to finance the
construction of the K3 Plant.
ITEM 8. Financial Statements and Supplementary Data.
See Index to Consolidated Financial Statements and Schedules on page
F-1.
ITEM 9. Changes In and Disagreements with Accountants on Accounting and
Financial Disclosure.
None.
18
21
PART III
ITEM 10. Directors and Executive Officers of the Registrant.
The directors and executive officers of the Company are as follows:
NAME AGE POSITION
- ---- --- --------
Arie Genger . . . . . . . . . 48 Chairman of the Board and Chief Executive Officer
Thomas G. Hardy . . . . . . . 48 President and Chief Operating Officer; Director
Martin A. Coleman . . . . . . 63 Director
Sash A. Spencer . . . . . . . 62 Director
Lester W. Youner . . . . . . 48 Vice President, Treasurer and Chief Financial Officer
Martin A. Eichen . . . . . . 49 Vice President
Bernard J. Blaney . . . . . . 69 Vice President
Kenneth H. Traub . . . . . . 32 Vice President
FINANCIAL ADVISORY COMMITTEE
- ----------------------------
Lawrence M. Small
Thomas G. Hardy
Sash A. Spencer
The By-laws of the Company provide for at least one director.
Directors hold office until the next annual meeting of stockholders or until
their successors are elected and qualified. There are no arrangements or
understandings between any director or executive officer of the Company and any
other person pursuant to which such person was elected as a director or
executive officer. The executive officers serve at the discretion of the Board
of Directors.
There are no family relationships among any directors or executive
officers of the Company.
The following are descriptions of the directors and executive officers
of the Company and the members of the Financial Advisory Committee. The
Financial Advisory Committee advises the Board of Directors regarding financial
matters and, when the Committee deems appropriate, make recommendations to the
Board of Directors.
Arie Genger has been a director and Chairman of the Board of Directors
and Chief Executive Officer of the Company since 1986, the sole member of the
Executive Committee since June 1988, and was President of the Company from 1986
to December 1993.
Thomas G. Hardy has been President and Chief Operating Officer of the
Company since December 1993, was Executive Vice President of the Company from
June 1987 to December 1993 and has been a director and member of the Financial
Advisory Committee since October 1992. He has been a director of Laser
Industries Limited (a manufacturer and distributor of surgical lasers and other
medical technology in which the Company has an ownership interest) since
January 1990.
19
22
Martin A. Coleman has been a director since March 1993. Since January
1991 he has been a private investor and of counsel to the law firm of Rubin
Baum Levin Constant & Friedman, general counsel to the Company. Prior to that,
he was a member of such law firm for more than five years.
Sash A. Spencer has been a director since October 1992 and a member of
the Financial Advisory Committee since March 1993. He has been a private
investor and Chairman of Holding Capital Management Corp., a private investment
firm, for more than five years. He has been a director of Empire Gas Corp., a
corporation engaged in the propane gas business, since 1983.
Lester W. Youner has been Vice President, Treasurer and Chief
Financial Officer of the Company since October 1987. From June 1979 until
October 1987 he was a Partner of Deloitte & Touche, a public accounting firm.
Martin A. Eichen has been a Vice President of the Company since June
1988. From June 1978 to June 1988 he was a Manager at Deloitte & Touche.
Bernard J. Blaney has been a Vice President of the Company since
January 1987.
Kenneth H. Traub has been a Vice President of the Company since
December 1993. Prior thereto, from July 1989, he was Assistant to the Chairman
of the Board of the Company.
Lawrence M. Small, 52, has been Chairman of the Financial Advisory
Committee of the Board of Directors since October 1992. Mr. Small is President
and Chief Operating Officer of Fannie Mae (Federal National Mortgage
Association) headquartered in Washington, DC, which he joined in September
1991. Prior to that, he was Vice Chairman and Chairman of the Executive
Committee of the Boards of Directors of Citicorp and Citibank, N.A., where he
was employed for 27 years. He serves as a director of Fannie Mae and of the
Chubb Corporation (an insurance company).
20
23
ITEM 11. Executive Compensation
The following table sets forth the aggregate compensation paid or
accrued by the Company for the past three fiscal years to its Chief Executive
Officer and to other executive officers whose annual compensation exceeded
$100,000 for the fiscal year ended December 31, 1993:
SUMMARY COMPENSATION TABLE
Annual Compensation (1) All Other
----------------------- Compen-
Name and Principal Position Year Salary (2) Bonus sation(2)(3)
- --------------------------- ---- ---------- ----- ------------
Arie Genger . . . . . . . . . . . . . . . . . . 1993 $750,000 $ 92,000 $519,000
Chairman of the Board 1992 750,000 143,000 437,000
and Chief Executive Officer 1991 759,000 -- 14,000
Thomas G. Hardy . . . . . . . . . . . . . . . . 1993 350,000 50,000 8,000
President and Chief Operating Officer 1992 350,000 100,000 11,000
and Director 1991 278,000 125,000 10,000
Lester W. Youner . . . . . . . . . . . . . . . 1993 226,000 70,000 8,000
Vice President, Treasurer and 1992 206,000 70,000 11,000
Chief Financial Officer 1991 199,000 60,000 10,000
Martin A. Eichen . . . . . . . . . . . . . . . 1993 149,000 15,000 7,000
Vice President 1992 149,000 15,000 9,000
1991 142,000 13,000 8,000
Kenneth H. Traub . . . . . . . . . . . . . . . 1993 105,000 25,000 4,000
Vice President 1992 95,000 30,000 6,000
1991 80,000 20,000 5,000
____________________
(1) During the period covered by the table, the Company did not make any
restricted stock awards, did not have in effect any stock option or
stock appreciation rights plans, and did not make any payments under
any long-term incentive plan. See "Compensation Agreement" for Mr.
Hardy's bonus arrangement.
(2) Does not include in the case of Messrs. Genger, Hardy and Youner
$500,000, $275,000 and $20,000, respectively, of 1994 salary which was
prepaid in 1993.
(3) For 1993, consists of: (i) in the case of Mr. Genger, $250,000 for an
annual premium on ordinary life insurance, $258,000 for related income
tax gross-up, $6,000 for the Company's matching contribution to a
profit sharing thrift plan, and $5,000 for the premium on term life
insurance; (ii) in the case of Messrs. Hardy, Youner, Eichen and Traub
$6,000, $6,000, $5,000 and $4,000, respectively, for the Company's
matching contribution to a profit sharing thrift plan; and (iii)
$2,000 each for Messrs. Hardy, Youner and Eichen for the premium on
term life insurance.
For 1992, consists of: (i) in the case of Mr. Genger, $241,000 for an
annual premium on ordinary life insurance, $183,000 for related income
tax gross-up, $9,000 for the Company's matching contribution to a
profit sharing thrift plan, and $4,000 for the premium on term life
insurance; (ii) in the case of Messrs. Hardy, Youner, Eichen and Traub
$9,000, $9,000, $7,000 and $6,000, respectively, for the Company's
matching contribution to a profit sharing thrift plan; and (iii)
$2,000 each for Messrs. Hardy, Youner and Eichen for the premium on
term life insurance.
21
24
COMPENSATION AGREEMENT
Pursuant to an Agreement entered into in March 1994 (the "New
Agreement"), the Company and Thomas G. Hardy modified and superseded a bonus
arrangement entered into on January 15, 1988, as amended (the "Old Agreement"),
under which no payments had been made. The Old Agreement provided for a
payment upon termination of Mr. Hardy's employment in an amount equal to 2% of
the Company's average annual after-tax consolidated net income (as defined)
available to the common stockholders for the three years ending on December
31st of the year immediately prior to the termination of Mr. Hardy's
employment, multiplied by either the multiple of the market price to such net
income of the Company's common stock if it is publicly traded or, if the
Company's common stock continues to be privately held at the time of such
termination, by a multiple of eleven. Pursuant to the New Agreement, the
Company is required to irrevocably deposit in trust for the benefit of Mr.
Hardy an aggregate of $2,800,000, of which $1,400,000 was deposited upon
execution of the New Agreement, with the remaining $1,400,000 to be deposited
in 1996 (or under certain circumstances, including a change in control of the
Company, earlier). The deposited funds are held by the trustees under a Trust
Agreement (the "Trust Agreement"), which provides that the assets held
thereunder are subject to the claims of the Company's general creditors in the
event of insolvency of the Company. The Trust Agreement provides that the
assets are payable in a lump sum to Mr. Hardy or his beneficiaries upon the
earlier of December 1, 2001 or the termination of his employment with Company.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Board of Directors does not have a Compensation Committee.
Executive officer compensation matters were determined by the Board of
Directors, whose four members currently include Mr. Genger, Chairman of the
Board and Chief Executive Officer of the Company, and Mr. Hardy, President and
Chief Operating Officer of the Company.
COMPENSATION OF DIRECTORS
Officers of the Company who serve as directors do not receive any
compensation for serving as directors. Martin A. Coleman and Sash A. Spencer
each receive $15,000 annually for serving as directors.
22
25
ITEM 12. Security Ownership of Certain Beneficial Owners and
Management.
The following table sets forth certain information as of March 23,
1994, as to the beneficial ownership of the Common Stock of the Company, which
is the only outstanding class of voting security of the Company:
SHARES PERCENT
BENEFICIALLY OF
NAME AND ADDRESS OWNED CLASS
---------------- ----- -----
Common Stock, $.01 par value (1):
TPR (2)
9 West 57th Street
New York, NY 10019 . . . . . . . . . . . . 3,000 100%
All executive officers and directors as a group
(eight persons)(2) . . . . . . . . . . . . 3,000 100%
___________________
(1) All of the shares of the Common Stock of the Company are pledged to
secure an outstanding TPR note of $7,000,000 issued to a former
indirect stockholder and director of the Company.
(2) Mr. Genger and members of his family own all of the capital stock of
TPR.
ITEM 13. Certain Relationships and Related Transactions.
The Company is, for Federal income tax purposes, a member of a
consolidated tax group of which TPR is the common parent. The Company, TPR,
Eddy, Cedar and certain other subsidiaries are parties to a tax sharing
agreement, dated as of December 30, 1991, under which, among other things, the
Company and such other parties have each agreed to pay TPR amounts equal to the
amounts of Federal income taxes that each such party would be required to pay
if it filed a Federal income tax return on a separate return basis (or in the
case of Cedar, a consolidated Federal income tax return for itself and its
eligible subsidiaries), computed without regard to net operating loss
carrybacks and carryforwards. However, TPR may, at its discretion, allow tax
benefits for such losses. See Note A of Notes to Consolidated Financial
Statements.
See Item 3 - "Legal Proceedings" for a description of the proposed
settlement of an action brought by Grassgreen as debtor in his personal
bankruptcy proceeding, which will result in, among other things, TPR acquiring
the Company's outstanding $9,000,000, 9 1/2% junior subordinated debenture due
2005 and becoming the obligor on an outstanding 8 3/4%, $4,000,000 note due
2005 (which is secured by the $9,000,000 debenture) payable to the Company.
23
26
PART IV
ITEM 14. Exhibits, Financial Statement Schedules and Reports on Form
8-K.
(a) (1)-(2) See Index to Consolidated Financial Statements and
Schedules on Page F-1.
(3) See Index to Exhibits on Page E-1.
Management contracts or compensatory plans and
arrangements required to be filed as exhibits are as
follows:
(i) Agreement between the Company and Thomas G. Hardy,
dated March 22, 1994, concerning incentive bonus
compensation, including, as Exhibit A thereto, the
related Trust Agreement.
(ii) Split Dollar Insurance Agreement, entered into as
of August 26, 1988, between the Company and Arie
Genger.
(b) No reports on Form 8-K were filed during the last quarter of the
year ended December 31, 1993.
24
27
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF SECTION 13 OR 15 (D) OF THE SECURITIES
EXCHANGE ACT OF 1934, THE REGISTRANT HAS DULY CAUSED THIS REPORT TO BE SIGNED
ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED.
Trans-Resources, Inc. (Registrant)
By LESTER W. YOUNER
Lester W. Youner
Vice President, Treasurer
and Chief Financial Officer
Dated: March 23, 1994
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934,
THIS REPORT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS ON BEHALF OF THE
REGISTRANT AND IN THE CAPACITIES AND ON THE DATE INDICATED:
PRINCIPAL EXECUTIVE OFFICER:
ARIE GENGER
Chairman of the Board and Chief Executive Officer
PRINCIPAL FINANCIAL AND ACCOUNTING OFFICER:
LESTER W. YOUNER
Vice President, Treasurer and Chief Financial Officer
By LESTER W. YOUNER
Lester W. Youner
For Himself and As Attorney-In-Fact
Directors:
Arie Genger
Thomas G. Hardy Dated: March 23, 1994
Martin A. Coleman
Sash A. Spencer
ORIGINAL POWERS OF ATTORNEY AUTHORIZING LESTER W. YOUNER TO SIGN THIS
REPORT AND ANY AMENDMENTS HERETO ON BEHALF OF THE PRINCIPAL EXECUTIVE OFFICER
AND THE DIRECTORS ARE BEING FILED WITH THE SECURITIES AND EXCHANGE COMMISSION
WITH THIS REPORT.
SUPPLEMENTAL INFORMATION TO BE FURNISHED WITH REPORTS FILED PURSUANT
TO SECTION 15(D) OF THE ACT BY REGISTRANTS WHICH HAVE NOT REGISTERED SECURITIES
PURSUANT TO SECTION 12 OF THE ACT:
No annual report or proxy materials have been sent to the Company's
security holders. This Annual Report on Form 10-K will be furnished to the
holders of the Company's 11 7/8% Notes and Reset Notes.
25
28
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULES
FINANCIAL STATEMENTS Page
- -------------------- ----
Independent Auditors' Report . . . . . . . . . . . . . . . . . . . . . F-2
Report of Independent Accountants . . . . . . . . . . . . . . . . . . F-3
Consolidated Balance Sheets, December 31, 1992 and 1993 . . . . . . . F-4
Consolidated Statements of Operations,
for the Years Ended December 31, 1991, 1992 and 1993 . . . . . . . . F-5
Consolidated Statements of Common Stockholder's Equity,
for the Years Ended December 31, 1991, 1992 and 1993 . . . . . . . . F-6
Consolidated Statements of Cash Flows,
for the Years Ended December 31, 1991, 1992 and 1993 . . . . . . . . F-7
Notes to Consolidated Financial Statements . . . . . . . . . . . . . . F-8
SCHEDULES
- ---------
Schedule III - Condensed Financial Information of Registrant,
for the Years Ended December 31, 1991, 1992 and 1993 . . . . . . . . S-1
Schedule V - Property, Plant and Equipment,
for the Years Ended December 31, 1991, 1992 and 1993 . . . . . . . . S-4
Schedule VI - Accumulated Depreciation, Depletion and Amortization of
Property, Plant and Equipment,
for the Years Ended December 31, 1991, 1992 and 1993 . . . . . . . . S-5
Schedule X - Supplementary Income Statement Information,
for the Years Ended December 31, 1991, 1992 and 1993 . . . . . . . . S-6
Certain schedules, other than as listed above, are omitted because of the
absence of the conditions under which they are required or because the
information required therein is set forth in the financial statements or the
notes thereto.
F-1
29
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholder of Trans-Resources, Inc.
New York, New York
We have audited the accompanying consolidated financial statements and
financial statement schedules of Trans-Resources, Inc. (a wholly-owned
subsidiary of TPR Investment Associates, Inc.) and Subsidiaries listed in the
foregoing Index. These financial statements and financial statement schedules
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements and financial statement
schedules based on our audits. We did not audit the consolidated financial
statements of Cedar Chemical Corporation, a wholly-owned subsidiary, which
statements reflect total assets constituting 26 percent and 27 percent of
consolidated total assets as of December 31, 1993 and 1992, respectively, and
total revenues constituting 35 percent, 35 percent and 32 percent of
consolidated total revenues for the years ended December 31, 1993, 1992 and
1991, respectively. Such financial statements were audited by other auditors
whose report has been furnished to us, and our opinion, insofar as it relates
to the amounts included for Cedar Chemical Corporation, is based solely on the
report of such other auditors.
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 and the report of other
auditors provide a reasonable basis for our opinion.
In our opinion, based upon our audits and the report of other auditors, such
consolidated financial statements present fairly, in all material respects, the
financial position of Trans-Resources, Inc. and Subsidiaries as of December 31,
1993 and 1992, and the results of their operations and their cash flows for
each of the three years in the period ended December 31, 1993, in conformity
with generally accepted accounting principles. Also, in our opinion, based on
our audits and the report of other auditors, such financial statement
schedules, when considered in relation to the basic consolidated financial
statements taken as a whole, present fairly in all material respects the
information set forth therein.
As discussed in Note A to the Consolidated Financial Statements, the Company
changed its method of accounting for income taxes during the year ended
December 31, 1992.
Deloitte & Touche
New York, New York
March 16, 1994
F-2
30
Report of Independent Accountants
To the Board of Directors and Shareholder
of Cedar Chemical Corporation:
In our opinion, the consolidated balance sheets and the related consolidated
statements of income and retained earnings and of cash flows (not presented
separately herein) present fairly, in all material respects, the financial
position of Cedar Chemical Corporation (a wholly-owned subsidiary of
Trans-Resources, Inc.) and its subsidiaries ("Cedar") at December 31, 1992 and
1993, and the results of their operations and their cash flows for the years
ended December 31, 1991, 1992 and 1993, in conformity with generally accepted
accounting principles. These financial statements are the responsibility of
Cedar's management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
statements in accordance with generally accepted auditing standards which
require that we plan and perform the audits 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, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for the opinion expressed above.
Price Waterhouse
Memphis, Tennessee
February 11, 1994
F-3
31
TRANS-RESOURCES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31,
------------
1992 1993
---- ----
(IN THOUSANDS)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . $ 54,745 $ 25,742
Accounts receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . 47,373 55,681
Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51,057 60,929
Other current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . 28,061 56,090
Prepaid expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15,298 17,485
---------- ----------
Total Current Assets . . . . . . . . . . . . . . . . . . . . . . . . 196,534 215,927
PROPERTY, PLANT AND EQUIPMENT - net . . . . . . . . . . . . . . . . . . . . . 121,754 131,001
INVESTMENTS IN SECURITIES - net . . . . . . . . . . . . . . . . . . . . . . . 10,827 2,356
OTHER ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11,940 16,581
---------- ----------
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 341,055 $ 365,865
========== ==========
LIABILITIES AND STOCKHOLDER'S EQUITY
CURRENT LIABILITIES:
Current maturities of long-term debt . . . . . . . . . . . . . . . . . . . $ 29,911 $ 24,801
Short-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12,755 22,481
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25,082 34,924
Accrued expenses and other current liabilities . . . . . . . . . . . . . . 29,489 30,027
---------- ----------
Total Current Liabilities . . . . . . . . . . . . . . . . . . . . . 97,237 112,233
---------- ----------
LONG-TERM DEBT - net:
Senior indebtedness, notes payable and other obligations . . . . . . . . . 71,318 61,328
Senior subordinated debt - net . . . . . . . . . . . . . . . . . . . . . . 103,689 140,133
Junior subordinated debt - net . . . . . . . . . . . . . . . . . . . . . . 15,089 15,495
---------- ----------
Long-Term Debt - net . . . . . . . . . . . . . . . . . . . . . . . . 190,096 216,956
---------- ----------
OTHER LIABILITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24,840 20,882
---------- ----------
COMMON STOCKHOLDER'S EQUITY:
Common stock, $.01 par value, 3,000 shares authorized,
issued and outstanding . . . . . . . . . . . . . . . . . . . . . . . . . -- --
Additional paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . 500 500
Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28,620 15,348
Cumulative translation adjustment . . . . . . . . . . . . . . . . . . . . (238) (54)
---------- ----------
Total Common Stockholder's Equity . . . . . . . . . . . . . . . . . 28,882 15,794
---------- ----------
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 341,055 $ 365,865
========== ==========
See notes to consolidated financial statements.
F-4
32
TRANS-RESOURCES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
For the Years Ended December 31, 1991, 1992 and 1993
1991 1992 1993
---- ---- ----
(IN THOUSANDS)
REVENUES . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 309,068 $ 345,356 $ 326,315
OPERATING COSTS AND EXPENSES:
Cost of goods sold . . . . . . . . . . . . . . . . . . . . . 238,489 266,770 255,563
General and administrative . . . . . . . . . . . . . . . . . 33,262 36,270 38,375
--------- --------- ---------
OPERATING INCOME . . . . . . . . . . . . . . . . . . . . . . . 37,317 42,316 32,377
Interest expense . . . . . . . . . . . . . . . . . . . . . . (31,210) (27,542) (27,405)
Interest and other income - net . . . . . . . . . . . . . . . 14,159 8,476 6,014
--------- --------- ---------
INCOME BEFORE INCOME TAXES,
EXTRAORDINARY ITEM AND CHANGE IN
ACCOUNTING PRINCIPLE . . . . . . . . . . . . . . . . . . . . 20,266 23,250 10,986
INCOME TAX PROVISION . . . . . . . . . . . . . . . . . . . . . 2,582 11,231 7,920
--------- --------- ---------
INCOME BEFORE EXTRAORDINARY ITEM
AND CHANGE IN ACCOUNTING PRINCIPLE . . . . . . . . . . . . . 17,684 12,019 3,066
EXTRAORDINARY ITEM - Gain (loss) on repurchase
of debt, net of income tax of $296,000 in 1991 . . . . . . . . 1,186 -- (8,830)
CUMULATIVE EFFECT ON PRIOR YEARS OF
CHANGE IN ACCOUNTING FOR INCOME TAXES . . . . . . . . . . . . -- 1,130 --
--------- --------- ---------
NET INCOME (LOSS) . . . . . . . . . . . . . . . . . . . . . . . $ 18,870 $ 13,149 $ (5,764)
========= ========= =========
See notes to consolidated financial statements.
F-5
33
TRANS-RESOURCES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMMON STOCKHOLDER'S EQUITY
For the Years Ended December 31, 1991, 1992 and 1993
ADDITIONAL CUMULATIVE
COMMON PAID-IN RETAINED TRANSLATION
STOCK CAPITAL EARNINGS ADJUSTMENT TOTAL
------ ---------- -------- ----------- -----
(IN THOUSANDS)
BALANCE, JANUARY 1, 1991 . . . . . . . . . . $ -- $ 500 $ 15,601 $ (277) $ 15,824
Net income . . . . . . . . . . . . . . . . 18,870 18,870
Payable to Parent under tax allocation
agreement . . . . . . . . . . . . . . . . (2,800) (2,800)
Dividends:
Preferred stock . . . . . . . . . . . . . (214) (214)
Common stock . . . . . . . . . . . . . . (2,850) (2,850)
Exchange rate changes during year . . . . . (58) (58)
-------- ------- -------- -------- ---------
BALANCE, DECEMBER 31, 1991 . . . . . . . . . -- 500 28,607 (335) 28,772
Net income . . . . . . . . . . . . . . . . 13,149 13,149
Dividends - common stock . . . . . . . . . (13,136) (13,136)
Exchange rate changes during year . . . . . 97 97
-------- ------- -------- -------- ---------
BALANCE, DECEMBER 31, 1992 . . . . . . . . . -- 500 28,620 (238) 28,882
Net loss . . . . . . . . . . . . . . . . . (5,764) (5,764)
Dividends - common stock . . . . . . . . . (7,508) (7,508)
Exchange rate changes during year . . . . . 184 184
-------- ------- -------- -------- ---------
BALANCE, DECEMBER 31, 1993 . . . . . . . . . $ -- $ 500 $ 15,348 $ (54) $ 15,794
======== ======= ======== ======== =========
See notes to consolidated financial statements.
F-6
34
TRANS-RESOURCES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Years Ended December 31, 1991, 1992 and 1993
1991 1992 1993
---- ---- ----
(IN THOUSANDS)
OPERATING ACTIVITIES AND WORKING CAPITAL
MANAGEMENT:
Operations:
Net income (loss) . . . . . . . . . . . . . . . . . . . $ 18,870 $ 13,149 $ (5,764)
Items not requiring cash:
Depreciation and amortization . . . . . . . . . . . 19,757 20,979 24,490
Increase in other liabilities . . . . . . . . . . . 1,730 265 725
Deferred taxes and other - net . . . . . . . . . . . 7,906 (1,694) (2,494)
-------- --------- ---------
Total . . . . . . . . . . . . . . . . . . . . . . 48,263 32,699 16,957
Working capital management:
Accounts receivable and other current assets . . . . . (32,741) 45,416 (9,222)
Inventories . . . . . . . . . . . . . . . . . . . . . . (9,483) (3,538) (9,872)
Prepaid expenses . . . . . . . . . . . . . . . . . . . (2,012) 155 (2,187)
Accounts payable . . . . . . . . . . . . . . . . . . . 9,460 (14,175) 9,842
Accrued expenses and other current liabilities . . . . 4,532 (1,297) 1,323
-------- --------- ---------
Cash provided by operations and
working capital management . . . . . . . . . . . . . 18,019 59,260 6,841
-------- --------- ---------
INVESTMENT ACTIVITIES:
Additions to property, plant and equipment . . . . . . . . (18,821) (26,143) (29,056)
Sales of marketable securities and
short-term investments . . . . . . . . . . . . . . . . 2,622 15,391 15,825
Purchases of marketable securities and
short-term investments . . . . . . . . . . . . . . . . (2,108) (12,819) (34,118)
Other - net . . . . . . . . . . . . . . . . . . . . . . . (2,127) 2,405 (6,087)
-------- --------- ---------
Cash used in investment activities . . . . . . . . . . (20,434) (21,166) (53,436)
-------- --------- ---------
FINANCING ACTIVITIES:
Increase in long-term debt . . . . . . . . . . . . . . . . 9,188 10,850 124,660
Repurchases, payments and current maturities of
long-term debt . . . . . . . . . . . . . . . . . . . . (23,444) (18,314) (109,286)
Increase (decrease) in short-term debt . . . . . . . . . . 4,012 (2,025) 9,726
Dividends to stockholders . . . . . . . . . . . . . . . . (3,064) (13,136) (7,508)
-------- --------- ---------
Cash provided by (used in) financing activities . . . . (13,308) (22,625) 17,592
-------- --------- ---------
INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS . . . . . . . . . . . . . . . . . . . . . (15,723) 15,469 (29,003)
CASH AND CASH EQUIVALENTS:
Beginning of year . . . . . . . . . . . . . . . . . . . . 54,999 39,276 54,745
-------- --------- ---------
End of year . . . . . . . . . . . . . . . . . . . . . . . $ 39,276 $ 54,745 $ 25,742
======== ========= =========
See notes to consolidated financial statements.
F-7
35
TRANS-RESOURCES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
A. SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The consolidated financial statements of Trans-Resources, Inc. ("TRI"
or the "Company"), include the Company and its subsidiaries, after elimination
of intercompany accounts and transactions. The Company's principal
subsidiaries are Cedar Chemical Corporation ("Cedar"), and Cedar's two
wholly-owned subsidiaries -New Mexico Potash Corporation ("NMPC") and Vicksburg
Chemical Company ("Vicksburg"); Eddy Potash, Inc. ("Eddy"); and Haifa Chemicals
Ltd. ("HCL") and HCL's wholly-owned subsidiary, Haifa Chemicals South, Ltd.
("HCSL"). The Company is a wholly-owned subsidiary of TPR Investment
Associates, Inc. ("TPR").
Substantially all of the companies' revenues, operating profits and
identifiable assets are related to the chemical industry. The Company is a
multinational manufacturer of specialty plant nutrients, organic chemicals,
industrial chemicals and potash and distributes its products internationally.
The Company is the world's largest producer of potassium nitrate, and the
world's largest producer of propanil, the leading rice herbicide, and is the
largest United States producer of potash.
Operating Data
The Company's revenues by region for the years ended December 31,
1991, 1992 and 1993 are set forth below:
1991 1992 1993
---- ---- ----
(IN MILLIONS)
Western Hemisphere:
United States . . . . . . . . . . . . . . . . . $ 114 $ 133 $ 121
Other . . . . . . . . . . . . . . . . . . . . . 31 30 30
Europe . . . . . . . . . . . . . . . . . . . . . . 112 124 119
Asia and Australia . . . . . . . . . . . . . . . . 25 29 30
Israel . . . . . . . . . . . . . . . . . . . . . . 16 18 17
Africa and other . . . . . . . . . . . . . . . . . 11 11 9
----- ------ -----
Total . . . . . . . . . . . . . . . . . . . . . $ 309 $ 345 $ 326
===== ====== =====
As of December 31, 1992 and 1993, the Company's assets were located in
the United States (44% and 49%, respectively) and abroad (principally Israel)
(56% and 51%, respectively). The Company has no single customer accounting for
more than 10% of its revenues.
Contracts and Revenue Recognition
Under the terms of a long-term U.S. Government contract for the
manufacture of an industrial chemical, revenues are recognized ratably for the
duration of the contract and billings are rendered as product is shipped.
Current deferred revenue of $2,772,000 at December 31, 1992 and 1993 and
non-current deferred revenue of $5,416,000 and $2,645,000 at December 31, 1992
and 1993, respectively, represent billings in excess of revenues recognized
under the contract. Such current and non-current amounts are classified within
"accrued expenses and other current liabilities" and "other liabilities",
respectively, in the accompanying Consolidated Balance Sheets.
F-8
36
Functional Currency and Transaction Gains and Losses
Approximately 90% of HCL's sales are made outside of Israel in various
currencies, of which approximately 35% are in U.S. dollars, with the remainder
principally in Western European currencies. The Company has a policy of
hedging contracted foreign sales denominated in Western European currencies
against fluctuations in the U.S. dollar rates of exchange. Accordingly, the
Company has entered into forward exchange contracts. At December 31, 1992 and
1993, there were outstanding contracts to purchase $166 million and $167
million, respectively, in various European currencies, principally Deutsche
Marks. In addition, at December 31, 1993 there were outstanding contracts to
sell $56 million in various Western European currencies, principally Deutsche
Marks. Unrealized gains and losses arising from forward exchange contracts
which qualify as hedges pursuant to Statement of Financial Accounting Standards
No. 52 have been deferred and are accounted for in the subsequent year as part
of sales. Gains of approximately $3,900,000 and $2,400,000 were deferred at
December 31, 1992 and 1993, respectively, for forward exchange contracts which
qualify as hedges.
During the years ended December 31, 1991, 1992 and 1993, the Company
recorded a gain of approximately $3,100,000, a loss of approximately $7,000,000
and a gain of approximately $6,100,000, respectively, relating to foreign
currency transactions.
Raw materials purchased in Israel are mainly quoted at prices linked
to the U.S. dollar. The U.S. dollar is the functional currency and accordingly
the financial statements of HCL are prepared, and the books and records of HCL
(except for a subsidiary described below) are maintained, in U.S. dollars.
The assets, liabilities and operations of one of HCL's foreign
subsidiaries are measured using the currency of the primary economic
environment in which the subsidiary operates. Assets and liabilities are
translated at the exchange rate as of the balance sheet date. Revenues,
expenses, gains and losses are translated at the weighted average exchange rate
for the period. Translation adjustments, resulting from the process of
translating such subsidiary's financial statements from its currency into U.S.
dollars, are recorded directly as a separate component of stockholder's equity.
Exchange Rate Insurance
In 1981, HCL joined a program of exchange rate insurance of the
Israeli Government designed to protect participating Israeli exporters from
losses resulting from the widening of the gap between the inflation rate in
Israel and the rate of devaluation of the New Israeli Shekel against a weighted
basket of currencies of Israel's major trading partners. The net benefits
received by HCL for the years ended December 31, 1991, 1992 and 1993 were
$4,599,000, $4,056,000 and $1,616,000, respectively, which benefits have been
included in revenues. As part of various economic measures adopted in Israel
subsequent to December 31, 1988, the Israeli Government has gradually reduced
the insurance proceeds granted under its program of exchange rate insurance,
with the program having been fully eliminated on August 31, 1993.
Inventories
Inventories are carried at the lower of cost or market. Cost is
determined on the first-in, first-out method.
F-9
37
Property, Plant and Equipment
Property, plant and equipment are carried at cost. Depreciation is
recorded under the straight-line method at generally the following annual
rates:
Buildings . . . . . . . . . . . . . . . . . . . . . . . . . . . 5-8 %
Machinery, plant and equipment . . . . . . . . . . . . . . . . 10-25 %
Office furniture and equipment . . . . . . . . . . . . . . . . 6-20 %
Expenditures for maintenance and repairs are charged to expense as
incurred. Investment grants from the Israeli Government are initially recorded
as a reduction of the capitalized asset and are recognized in income over the
estimated useful life of the respective asset. HCL recorded investment grants
for the years ended December 31, 1991, 1992 and 1993 amounting to $4,029,000,
$846,000 and $10,952,000, respectively.
Effective January 1, 1992 and 1993, Eddy revised the estimate of
depreciable lives of its property, plant and equipment to more closely
approximate the economic lives of those assets. The effect of these changes in
estimate was to decrease depreciation expense in 1992 and 1993 by approximately
$960,000 and $630,000, respectively.
Non-Current Investments In Marketable Securities
The Company carries its investments in marketable equity securities at
the lower of cost or market. To the extent that the quoted market value is
less than cost, an unrealized loss on marketable equity securities would be
recorded and classified as a reduction of common stockholder's equity. At
December 31, 1992 and 1993 the aggregate quoted market value of the marketable
equity securities owned by the Company exceeded the aggregate cost.
The Company's other investments (principally short-term investments)
are carried at cost. Should declines in the carrying value of any of these
securities (as well as the marketable equity securities described above) be
considered to be other than temporary, such declines are recognized by an
appropriate charge in the Consolidated Statements of Operations.
In May 1993, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 115, "Accounting for Certain Investments
in Debt and Equity Securities" ("SFAS 115"). The adoption of this Statement,
which is not required until 1994, will require the Company to classify its
equity and fixed maturity securities as available-for-sale and reported at fair
value, with unrealized gains and losses included as a separate component of
stockholder's equity. The adoption of SFAS No. 115 is not expected to have a
material effect on the Company's consolidated financial position or results of
operations.
Income Taxes
The Company is included in the consolidated Federal income tax return
of TPR. Under the tax allocation agreement entered into with TPR in 1991, the
annual current Federal income tax liability for the Company and each of its
domestic subsidiaries reporting profits is determined as if such entity had
filed a separate Federal income tax return; no tax benefits are given for
companies reporting losses. However, TPR may, at its discretion, allow tax
benefits for such losses.
For purposes of the consolidated financial statements, taxes on income
have been computed as if the Company and its domestic subsidiaries filed its
own consolidated Federal income tax return without regard to the tax allocation
agreement. Payments to TPR, if any, representing the excess of amounts
determined under the tax allocation agreement over amounts determined for the
purposes of consolidated financial statements have been charged to retained
earnings.
F-10
38
Effective January 1, 1992, the Company changed its method of
accounting for income taxes to conform with Statement of Financial Accounting
Standards No. 109, "Accounting for Income Taxes" ("SFAS 109"), which requires a
change from the deferred method to the asset and liability method of accounting
for income taxes. Under the asset and liability method, deferred income taxes
are recognized for the tax consequences of "temporary differences" by applying
enacted statutory tax rates applicable to future years to differences between
the financial statement carrying amounts and the tax bases of existing assets
and liabilities. Under SFAS 109, the effect on deferred taxes of a change in
tax rates is recognized in income in the period that includes the enactment
date. The Company has reported the cumulative effect on prior years of the
change in the method of accounting for income taxes as of the beginning 1992 in
the Consolidated Statement of Operations.
The effect of adopting SFAS 109 in 1992 was to decrease net income by
approximately $1,170,000, representing an increased income tax provision of
$2,300,000 and an increase in income for the cumulative effect of the change in
accounting principle of $1,130,000.
Research and Development Costs
Research and development costs are charged to expense as incurred and
amounted to $2,860,000, $2,945,000 and $3,206,000 for the years ended December
31, 1991, 1992 and 1993, respectively.
Statements of Cash Flows
Investments with original maturities of three months or less are
classified as cash equivalents by the Company.
Reclassifications
Certain prior year amounts have been reclassified to conform to the
manner of presentation in the current year.
B. OTHER CURRENT ASSETS
Other current assets consist of the following at December 31, 1992 and
1993:
1992 1993
---- ----
(IN THOUSANDS)
Short-term investments, government securities, etc.
(at cost, approximates market value) . . . . . . . . . . . . . . $ 7,504 $34,529
Miscellaneous receivables (value added tax, grants,
insurance, etc.), deferred income taxes and other . . . . . . . . 20,557 21,561
------- -------
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $28,061 $56,090
======= =======
C. INVENTORIES
Inventories consist of the following at December 31, 1992 and 1993:
1992 1993
---- ----
(IN THOUSANDS)
Raw materials . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 8,923 $10,602
Finished goods . . . . . . . . . . . . . . . . . . . . . . . . . . . 42,134 50,327
------- -------
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $51,057 $60,929
======= =======
F-11
39
D. PROPERTY, PLANT AND EQUIPMENT - NET
Property, plant and equipment at December 31, 1992 and 1993 consists
of the following:
1992 1993
---- ----
(IN THOUSANDS)
Land . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,116 $ 2,116
Buildings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18,760 19,994
Machinery, plant and equipment . . . . . . . . . . . . . . . . . . . 177,891 187,566
Office furniture, equipment and water rights . . . . . . . . . . . . 9,144 9,892
Construction-in-progress . . . . . . . . . . . . . . . . . . . . . . 6,932 24,197
--------- ---------
Total, at cost . . . . . . . . . . . . . . . . . . . . . . . . . 214,843 243,765
Less accumulated depreciation and amortization . . . . . . . . . . . 93,089 112,764
--------- ---------
Property, plant and equipment - net . . . . . . . . . . . . . . . $ 121,754 $ 131,001
========= =========
The Company, through HCSL, is in the process of expanding its
production capacity by constructing a new facility in Israel to produce
annually approximately 100,000 metric tons of potassium nitrate and 15,000
metric tons of phosphoric acid. The new plant is anticipated to cost
approximately $88,000,000 and construction commenced in the second quarter of
1993. The Company expects to receive from the Government of Israel an
aggregate investment grant of approximately $32,000,000 and contributions for
infrastructure of approximately $5,000,000, so that the Company's net
investment in the new plant is anticipated to be approximately $51,000,000.
The Company incurred capital expenditures for the new plant during 1993 (net of
investment grants) of approximately $16,000,000. Plant production is planned
to start in late 1994. The capacity of the new plant may be expanded in
subsequent years.
The Company capitalized interest costs aggregating $144,000, $200,000
and $352,000 during the years ended December 31, 1991, 1992 and 1993,
respectively, with respect to the financing of several construction projects.
Certain property, plant and equipment has been pledged as collateral for
long-term debt - see Note H.
In September 1991, a unit within one of two production lines located
in the Company's Israeli manufacturing facility was damaged by a fire. Such
damage resulted in a temporary reduction of the Company's phosphoric acid
production capacity. Costs of replacement of the damaged assets have been
reimbursed by insurers. Insurance proceeds exceeded the recorded carrying
value of the damaged assets by approximately $10 million. Accordingly, a gain
has been recorded in that amount - see Note L. The effect of business
interruption was likewise covered by insurers and the related compensation
received has been reflected in the accompanying Consolidated Statements of
Operations.
See Note P to Consolidated Financial Statements.
F-12
40
E. INVESTMENTS IN SECURITIES
Investments in securities consist of the following at December 31,
1992 and 1993:
1992 1993
---- ----
Carrying Market Carrying Market
Value Value Value Value
-------- ------ -------- ------
(in thousands)
Marketable equity securities . . . . . . . . . . . . . . . . $ 4,383 $ 8,424 $ 2,274 $ 8,529
Corporate bonds, notes and other securities
(carrying value net of allowance for unrealized
loss of $2,351,000 in 1992 and $2,000,000 in 1993) . . . . 6,444 6,921 82 77
--------- -------- --------- --------
Investments in securities - net . . . . . . . . . . . $ 10,827 $ 15,345 $ 2,356 $ 8,606
========= ======== ========= ========
During the years ended December 31, 1991, 1992 and 1993 the Company
recorded net gains (losses) relating to investments in securities in the
caption "interest and other income - net" in the Consolidated Statements of
Operations (see Note L) in the amounts of $(30,000), $2,865,000 and $2,261,000,
respectively.
In March 1992, the Company purchased from a former indirect
stockholder and director of the Company a 30% limited partnership interest in
American Recreation Group, a New York limited partnership ("ARG"). The
purchase price for the 30% limited partnership interest was $7,500,000. In
March 1992, in open market purchases, the Company acquired approximately
$11,000,000 principal amount of Riviera, Inc. ("Riviera") Floating Rate First
Mortgage Notes (the "Riviera Notes"). The Riviera Notes were purchased at a
cost of approximately $5,100,000. The above-mentioned former indirect
stockholder and director of the Company was the sole owner of the capital stock
of Riviera. In September 1992, the Company sold its investments in both ARG
and the Riviera Notes for an aggregate of $14,500,000 (of which $10,000,000 was
received in October, 1992, and the balance was received during January, 1993)
and recognized a gain of approximately $1,900,000. Shortly after the receipt
of the respective sale proceeds, the Company dividended these amounts to TPR.
F. SHORT-TERM DEBT
The weighted average interest rates and weighted average amounts of
short-term debt outstanding during the years ended December 31, 1991, 1992 and
1993 were 10.6% and $7,921,000; 7.7% and $10,235,000; and 6.7% and $14,066,000,
respectively. The highest amount owed during such years were $14,786,000,
$15,163,000 and $22,481,000, respectively.
The average amount outstanding was determined by the average of
month-end balances. The weighted average interest rate was determined by
dividing interest expense on short-term debt by the average amount outstanding
during the year.
Cedar has a revolving loan commitment from two banks aggregating
$25,000,000 for 1993 (approximately $3,000,000 unused at December 31, 1993) and
$28,000,000 and $33,000,000 for 1994 and 1995, respectively. HCSL has a
$10,000,000 revolving loan commitment from two banks through December 31, 1997,
which permits borrowings commencing January 1, 1995.
F-13
41
G. ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES
Accrued expenses and other current liabilities consist of the
following at December 31, 1992 and 1993:
1992 1993
---- ----
(in thousands)
Compensation and payroll taxes . . . . . . . . . . . . . . . . . $ 9,210 $ 8,827
Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,598 8,795
Income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . 4,915 1,004
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,766 11,401
----------- ---------
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 29,489 $ 30,027
=========== =========
H. LONG-TERM DEBT - NET
Long-term debt consists of the following at December 31, 1992 and 1993:
Payable
Description Interest Rate * Through 1992 1993
----------- --------------- ------- ---- ----
(in thousands)
TRI:
Bank loan (1) . . . . . . . . . . . . . . . . . . . . . LIBOR 1995 $ 12,700 $ 12,700
Bank loans . . . . . . . . . . . . . . . . . . . . . . LIBOR + 2.25% 1997 17,300 13,840
13.5% Senior subordinated debentures, net of
unamortized debt discount of $1,375,000 in 1992
(effective interest rate of 14.2%) (2) . . . . . . . 13.5% 1993 64,123 --
Senior subordinated reset notes, net of
unamortized debt discount of $1,209,000
and $522,000 (effective interest rate of 15.4%) . . . 14.5% 1996 47,04 126,228
11.875% Senior subordinated notes, net of
unamortized debt discount of $1,095,000 in 1993
(effective interest rate of 12.1%)(4) . . . . . . . . 11.875% 2002 -- 113,905
9.5% Junior subordinated debentures, net of
unamortized debt discount of $2,911,000 and
$2,505,000 (effective interest rate of 14.1%)(5). . . 9.5% 2005 15,089 15,495
Subsidiaries:
Bank loans and Industrial Revenue Bond
financing (6) . . . . . . . . . . . . . . . . . . . . Various 2005 62,389 59,589
Other . . . . . . . . . . . . . . . . . . . . . . . . . Various 1993 1,365 --
-------- ----------
Total . . . . . . . . . . . . . . . . . . . . . . 220,007 241,757
Less current portion . . . . . . . . . . . . . . . 29,911 24,801
-------- ----------
Long-term debt - net . . . . . . . . . . . . . . . $190,096 $ 216,956
======== ==========
____________________
* As prevailing on respective balance sheet dates. Such rates (other
than the subordinated debt) generally "float" according to changes in the Prime
or LIBOR rates. At December 31, 1993 such rates were approximately 6.0% and
3.5%, respectively.
1. On February 26, 1988, the Company entered into a loan agreement with a
bank, pursuant to which the Company borrowed $12,000,000. Subsequently, such
agreement was amended and the Company borrowed an additional $700,000.
One-half of the outstanding principal amount of the loans is due on February
28, 1994 and the balance is due on February 28, 1995.
F-14
42
2. The senior subordinated debentures (the "Debentures") were redeemable
at the option of the Company at any time after May 1, 1992 at stipulated
redemption prices. As described below, on March 30, 1993, the Company
privately placed $115,000,000 principal amount of 11 7/8% Senior Subordinated
Notes due 2002, Series A (the "11 7/8% Notes"). The Company used a portion of
the net proceeds from the issuance of the 11 7/8% Notes to acquire all of the
Company's $60,997,000 then outstanding principal amount of the Debentures.
3. The Senior Subordinated Reset Notes (the "Reset Notes") bear interest
at 14.5% and mature on September 30, 1996. The Reset Notes are not subject to
any mandatory sinking fund requirement.
4. On March 30, 1993, the Company privately placed $115,000,000 principal
amount of the 11 7/8% Notes at 99% of principal amount (the "Offering"). The
net proceeds to the Company from the Offering were approximately $109,700,000.
Approximately $24,200,000 of such proceeds were used to acquire $21,500,000
principal amount of the Company's Reset Notes. In addition, approximately
$63,900,000 of the proceeds were used in May, 1993 to acquire all of the
Company's $60,997,000 then outstanding principal amount of the Debentures
through utilization of the applicable sinking fund and optional redemption
provisions of the Debentures. As a result of the redemptions and purchases
described above, as well as the Company's acquisition of $4,500,000 principal
amount of the Debentures in January 1993, the Company has recorded an
extraordinary loss of $8,830,000 during 1993, including the write-off of
applicable deferred debt issuance costs. Such loss has no current tax benefit.
On May 6, 1993, to satisfy its obligations with respect to the registration of
the 11 7/8% Notes, the Company commenced an offer (the "Exchange Offer") to
exchange up to $115,000,000 principal amount of its registered 11 7/8% Senior
Subordinated Notes due 2002, Series B (the "New 11 7/8% Notes") for a like
principal amount of the 11 7/8% Notes. The terms of the 11 7/8% Notes and the
New 11 7/8% Notes were identical in all material respects. Pursuant to the
Exchange Offer, which expired on June 9, 1993, all outstanding 11 7/8% Notes
were tendered and exchanged for New 11 7/8% Notes.
The New 11 7/8% Notes mature on July 1, 2002 and are redeemable at the option
of the Company at any time after July 1, 1998 at stipulated redemption prices.
There are no mandatory sinking fund requirements.
5. On November 28, 1986, the Company issued the junior subordinated
debentures (the "9.5% Debentures") in the aggregate principal amount of
$9,000,000, with interest payable from October 1, 1987 and quarterly
thereafter. Such 9.5% Debentures were initially recorded at $6,700,000, the
estimated value on the date of issue, and mature in 1998. During 1991, as
described in Note M, the Company's redeemable preferred stock was converted
into $9,000,000 principal amount of the Company's 9.5% Debentures.
Subsequently, during 1991, the then holder of this $9,000,000 principal amount
of 9.5% Debentures agreed to extend the maturity date of such principal amount
by seven years to the year 2005. The carrying value of the 9.5% Debentures
issued upon conversion of the redeemable preferred stock was equivalent to the
previous carrying value of the preferred stock.
6. Industrial Revenue Bond financing permits an $11,250,000 term loan
commitment in connection with the construction of a new plant in Vicksburg. As
of December 31, 1993, $495,000 was outstanding relating to such facility. In
addition, as of December 31, 1993 certain subsidiaries of the Company have
unused bank credit lines of approximately $37,000,000. Such credit lines
permit borrowings through December 31, 1995. Any amounts borrowed must be
repaid over a ten year period ending in the year 2005.
The Reset Notes are pari passu with the New 11 7/8% Notes and
are subordinated in right of payment to all Senior Indebtedness (as defined) of
the Company and senior to the 9.5% Debentures.
Certain of the Company's and its subsidiaries' loan agreements
and Indentures require the Company and/or the respective subsidiary to, among
other things, maintain various financial ratios including minimum net worth,
ratios of debt to net worth, interest and fixed charge coverage tests and
current ratios. In addition, there are certain limitations on the Company's
ability make certain Restricted Payments and Restricted
F-15
43
Investments (each as defined), etc. The Company is also required to offer to
purchase a portion of the New 11 7/8% Notes and the Reset Notes if it fails to
maintain minimum amounts of Junior Subordinated Capital (as defined). In the
event of a Change in Control (as defined), the Company is required to offer to
purchase all the New 11 7/8% Notes and Reset Notes as well as to repay certain
bank loans. Certain of the respective instruments also limit the payment of
dividends, capital expenditures and the incurring of additional debt and liens.
As of December 31, 1993, the Company and its subsidiaries are
in compliance with the covenants of each of the respective loan agreements and
Indentures.
The aggregate maturities of long-term debt are set forth below.
Years Ending
December 31, (in thousands)
------------ --------------
1994 . . . . . . . . . . . . . . . . . . $ 24,801
1995 . . . . . . . . . . . . . . . . . . 23,355
1996 . . . . . . . . . . . . . . . . . . 36,296
1997 . . . . . . . . . . . . . . . . . . 9,546
1998 . . . . . . . . . . . . . . . . . . 15,086
Thereafter . . . . . . . . . . . . . . . 136,795
Unamortized debt discount . . . . . . . (4,122)
--------
Total . . . . . . . . . . . . . $241,757
=========
Substantially all of the assets of HCL are subject to security
interests in favor of the State of Israel and/or banks. In addition,
substantially all of Cedar's, Vicksburg's and NMPC's assets are subject to
security interests in favor of banks pursuant to loan agreements. The capital
stock of HCL, Cedar, Vicksburg and NMPC has also been pledged to the banks
pursuant to these agreements. The Company's common stock is pledged to secure
the repayment obligations of TPR under a note issued by it to a former indirect
shareholder of the Company.
During 1991, the Company acquired $10,153,000 principal amount
of Debentures and Reset Notes, at a cost of $8,127,000, resulting in a net gain
(pre-tax) to the Company, after the elimination of certain deferred costs, of
$1,482,000. Such gain is reported as an extraordinary item in the accompanying
Consolidated Statement of Operations.
Interest paid on the long-term debt obligations, net of
capitalized interest, totaled $30,136,000, $26,386,000 and $21,852,000 for the
years ended December 31, 1991, 1992 and 1993, respectively.
I. OTHER LIABILITIES
Under Israeli law and labor agreements, HCL is required to
make severance and pension payments to dismissed employees and to employees
leaving employment in certain other circumstances. These liabilities are
covered by regular deposits to various severance pay funds and by payment of
premiums to an insurance company for officers and non-factory personnel under
approved plans. "Other liabilities" in the Consolidated Balance Sheets as of
December 31, 1992 and 1993 include accruals of $2,097,000 and $2,116,000,
respectively, for the estimated unfunded liability of complete severance of all
HCL employees. Cost incurred was approximately $2,531,000, $1,673,000 and
$1,857,000 for the years ended December 31, 1991, 1992 and 1993, respectively.
No information is available regarding actuarial present value
of HCL's pension plans and the plans' net assets available for benefits, as
these plans are multi-employer, external and independent of HCL.
F-16
44
Cedar has a defined benefit pension plan which covers all of
the full-time employees of Cedar and Vicksburg. Funding of the plan is made
through payment to various funds managed by a third party and is in accordance
with the funding requirements of the Employee Retirement Income Security Act of
1974 ("ERISA").
Cedar's net pension cost for the years ended December 31,
1991, 1992 and 1993 included the following benefit and cost components:
1991 1992 1993
---- ---- ----
(in thousands)
Service cost . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 481 $ 540 $ 552
Interest cost . . . . . . . . . . . . . . . . . . . . . . . . . . . 445 523 658
Amortization of unrecognized prior service cost . . . . . . . . . . 72 72 120
Actual return on plan assets . . . . . . . . . . . . . . . . . . . (403) (526) (592)
Amortization of unrecognized net transition obligation . . . . . . 59 59 59
-------- ---------- ---------
Net pension cost . . . . . . . . . . . . . . . . . . . . . . . . $ 654 $ 668 $ 797
======== ========== =========
The funded status and the amounts recognized in the Company's
December 31, 1992 and 1993 Consolidated Balance Sheets for Cedar's benefit plan
is as follows:
1992 1993
---- ----
(in thousands)
Plan assets at market value . . . . . . . . . . . . . . . $ 6,332 $ 8,066
Actuarial present value of projected benefit obligation . 7,362 10,222
------- -------
Funding status . . . . . . . . . . . . . . . . . . . . . (1,030) (2,156)
Unrecognized net transition obligation . . . . . . . . . 527 468
Unrecognized prior service cost . . . . . . . . . . . . . 724 1,265
Unrecognized net (gain) loss . . . . . . . . . . . . . . (552) 762
------- -------
Prepaid (accrued) pension cost . . . . . . . . . . . . . $ (331) $ 339
======= =======
At December 31, 1992 and 1993 the actuarial present value of
Cedar's vested benefit obligation was $6,036,000 and $7,115,000 and the
accumulated benefit obligation was $6,329,000 and $7,533,000, respectively.
Actuarial assumptions used at December 31, 1992 and 1993 were
as follows:
1992 1993
---- ----
Discount rate . . . . . . . . . . . . . . . . . . . . . . 8.25% 7.50%
Rate of increase in compensation levels . . . . . . . . . 5.0% 5.0%
Expected long-term rate of return on assets . . . . . . . 9.0% 9.0%
The unrecognized net transition obligation is being amortized
on a straight-line basis over fifteen years beginning January 1, 1987.
Cedar and its subsidiaries and Eddy have profit sharing thrift
plans designed to conform to Internal Revenue Code Section 401(k) and to the
requirements of ERISA. The plans, which cover all full-time employees (and one
of which includes Company headquarters employees), allow participants to
contribute as much as 15% of their annual compensation, up to a maximum
permitted by law, through salary reductions. The companies' contributions to
the plans are based on a percentage of the participant's contributions, and the
companies may make additional contributions to the plans at the discretion of
their respective Boards of Directors. The contribution expense relating to the
profit sharing thrift plans totaled $631,000, $653,000 and $595,000 for the
years ended December 31, 1991, 1992 and 1993, respectively.
F-17
45
J. COMMITMENTS AND CONTINGENCIES
Operating Leases
The Company and its subsidiaries are obligated under
non-cancelable operating leases covering principally land and office
facilities. At December 31, 1993, minimum annual rental commitments under
these leases are:
Years Ending
December 31, (in thousands)
------------ --------------
1994 . . . . . . . . . . . . . . . . . . $ 1,451
1995 . . . . . . . . . . . . . . . . . . 1,307
1996 . . . . . . . . . . . . . . . . . . 1,152
1997 . . . . . . . . . . . . . . . . . . 1,143
1998 . . . . . . . . . . . . . . . . . . 1,143
Thereafter . . . . . . . . . . . . . . . 7,394
-------
Total . . . . . . . . . . . $13,590
=======
Rent expense for 1991, 1992 and 1993 was $3,154,000,
$3,637,000 and $3,835,000, respectively, covering land, office facilities and
equipment.
Purchase Commitment
HCL has an agreement for the purchase of potash which
expires in 1999. The terms of the agreement require HCL to purchase a minimum
quantity at the weighted average of the FOB Israeli port prices received by the
seller for the immediately preceding quarter plus certain adjustments thereto.
Based upon current prices and at current capacity, the annual commitment is
approximately $15,000,000. There are currently no purchase commitments in
excess of market prices.
K. INCOME TAXES
The Company's income tax provision for the years ended
December 31, 1991, 1992 and 1993 consist of the following:
1991 1992 1993
---- ---- ----
(in thousands)
Currently payable (refundable):
Federal . . . . . . . . . . . . . . . . . . . . . . . . $ (530) $ -- $ --
Foreign . . . . . . . . . . . . . . . . . . . . . . . . (5,451) 11,276 7,939
State . . . . . . . . . . . . . . . . . . . . . . . . . 678 1,232 301
-------- --------- --------
Total . . . . . . . . . . . . . . . . . . . . . . . (5,303) 12,508 8,240
-------- --------- --------
Deferred (benefit):
Federal . . . . . . . . . . . . . . . . . . . . . . . . 71 -- --
Foreign . . . . . . . . . . . . . . . . . . . . . . . . 7,840 (785) (472)
State . . . . . . . . . . . . . . . . . . . . . . . . . (26) (492) 152
-------- ---------- --------
7,885 (1,277 ) (320)
-------- --------- ---------
Total . . . . . . . . . . . . . . . . . . . . . . . $ 2,582 $ 11,231 $ 7,920
======== ========= ========
F-18
46
Deferred income taxes (benefits) included in the Company's
income tax provision consisted of the following:
1991 1992 1993
---- ---- ----
(in thousands)
Depreciation and property and equipment basis
differences . . . . . . . . . . . . . . . . . . . . $ 8,181 $ 1,435 $ (1,110)
Contract revenue recognition method . . . . . . . . . . (367) (1,843) 1,185
Net operating and capital loss carryforwards . . . . . . -- (1,239) (6,945)
Valuation allowance . . . . . . . . . . . . . . . . . . -- 1,204 9,275
Other - net . . . . . . . . . . . . . . . . . . . . . . 71 (834) (2,725)
-------- ---------- --------
Total . . . . . . . . . . . . . . . . . . . . . . . $ 7,885 $ (1,277) $ (320)
======== ========= =========
The provision for income taxes for the years ended December
31, 1991, 1992 and 1993 amounted to $2,582,000, $11,231,000 and $7,920,000,
respectively, representing effective income tax rates of 12.7%, 48.3% and
72.1%, respectively. These amounts differ from the amounts of $6,890,000,
$7,905,000 and $3,845,000, respectively, computed by applying the statutory
Federal income tax rates to income before income taxes. The reasons for such
variances from statutory rates were as follows:
1991 1992 1993
---- ---- ----
Statutory Federal rates . . . . . . . . . . . . . . . . 34.0% 34.0% 35.0%
Increase (decrease) in income tax rate resulting from:
Israeli operations - net impact of Israeli statutory
rate, effects of "inflation allowances",
withholding taxes etc. . . . . . . . . . . . . . 13.1 3.3 (10.1)
Refund of prior year Israeli taxes . . . . . . . . (35.0) -- --
Net losses for which
there is no current tax benefit . . . . . . . . 4.7 15.5 47.4
Additional depletion expense . . . . . . . . . . . (6.2) (6.6) (2.9)
State and local income taxes - net . . . . . . . . 2.1 2.1 2.7
---- ---- ----
Effective income tax rates . . . . . . . . . . . . . . . 12.7% 48.3% 72.1%
==== ==== ====
F-19
47
At December 31, 1992 and 1993, deferred taxes (liabilities)
consisted of the following:
1992 1993
---- ----
(in thousands)
Depreciation and property and equipment basis differences . . . . . . $ (16,173) $ (15,063)
Contract revenue recognition method . . . . . . . . . . . . . . . . . 3,292 2,107
Nondeductible reserves . . . . . . . . . . . . . . . . . . . . . . . . 2,971 3,683
Net operating loss carryforwards . . . . . . . . . . . . . . . . . . . 10,860 18,973
Capital loss and capital loss carryforwards . . . . . . . . . . . . . 6,742 5,574
Foreign tax credit carryovers . . . . . . . . . . . . . . . . . . . . 792 3,000
AMT credit carryovers . . . . . . . . . . . . . . . . . . . . . . . . 1,693 1,693
Investment tax credit carryovers . . . . . . . . . . . . . . . . . . . 200 200
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,355 1,160
------------ ------------
Deferred taxes - net, exclusive of valuation allowance . . . . . . . . 11,732 21,327
Valuation allowance . . . . . . . . . . . . . . . . . . . . . . . . . (23,228) (32,503)
------------ ------------
Deferred taxes - net . . . . . . . . . . . . . . . . . . . . . . . . . $ (11,496) $ (11,176)
============= ============
At December 31, 1992, deferred tax assets of $2,382,000 are
classified as "other current assets" and deferred tax liabilities of
$13,878,000 are classified as "other liabilities". At December 31, 1993,
deferred tax assets of $2,100,000 are classified as "other current assets" and
deferred tax liabilities of $13,276,000 are classified as "other liabilities".
At December 31, 1993, the Company had various tax loss and
credit carryovers which expire as follows:
Federal Net State Net Foreign Investment
Operating Operating Capital Tax Tax
Expiration Loss Loss Loss Credit Credit
- ---------- ----------- --------- ------- ------- ----------
(in thousands)
1994 . . . . . . $ 800
1995 . . . . . . $ 1,000
1997 . . . . . . 13,000
1998 . . . . . . 2,200
2001 . . . . . . $ 200
2002 - 2005 . . . $ 19,000
2006 - 2008 . . . $41,000 33,000
------- ---------- ---------- --------- ---------
Total . . . . $41,000 $ 52,000 $ 14,000 $ 3,000 $ 200
======= ========== ========== ========= =========
Income tax has not been provided on unrepatriated earnings of
HCL as it is the intention of the Company to reinvest such foreign earnings for
indefinite periods in HCL's operations. The cumulative amount of such
unrepatriated earnings at December 31, 1993 approximates $38 million.
Income taxes paid totalled approximately $3,300,000,
$7,800,000 and $11,600,000, respectively, during the years ended December 31,
1991, 1992 and 1993. The amount paid for 1991 excludes an Israeli tax refund
received by HCL relating to prior years amounting to $7,100,000.
F-20
48
L. INTEREST AND OTHER INCOME - NET
Interest and other income - net for the years ended December
31, 1991, 1992 and 1993 consists of the following:
1991 1992 1993
---- ---- ----
(in thousands)
Interest and dividend income . . . . . . . . . . . . . . $ 6,959 $ 3,735 $ 3,258
Security gains (losses) - net . . . . . . . . . . . . . (30 ) 2,865 2,261
Gain on involuntary conversion (see Note D) . . . . . . 10,000 -- --
Other . . . . . . . . . . . . . . . . . . . . . . . . . (2,770 ) 1,876 495
--------- --------- --------
Total . . . . . . . . . . . . . . . . . . . . . . . $ 14,159 $ 8,476 $ 6,014
========= ========= ========
M. REDEEMABLE PREFERRED STOCK
Redeemable preferred stock was issued to a then related party,
Care Investors, Inc., on November 28, 1986. The dividend on the preferred
stock was cumulative at the rate of $9.50 per share per annum and the preferred
stock was convertible into 9.5% junior subordinated debentures due 1998, at the
option of the Company or the holder. The preferred shares were initially
recorded at $6,700,000, the estimated value on the date of issue. During
January 1991 the preferred stock was converted into $9,000,000 principal amount
of the Company's 9.5% junior subordinated debentures (see Note H).
N. FAIR VALUE OF FINANCIAL INSTRUMENTS
The following disclosure of the estimated fair value of
financial instruments is made in accordance with the requirements of Statement
of Financial Accounting Standards No. 107, "Disclosures About Fair Value of
Financial Instruments." The estimated fair value amounts have been determined
by the Company, using available market information and appropriate valuation
methodologies. However, considerable judgment is necessarily required in
interpreting market data to develop the estimates of fair value. Accordingly,
the estimates presented herein are not necessarily indicative of the amounts
that the Company could realize in a current market exchange. The use of
different market assumptions and/or estimation methodologies may have a
material effect on the estimated fair value amounts.
December 31, 1992 December 31, 1993
----------------- -----------------
Carrying Estimated Carrying Estimated
Amount Fair Value Amount Fair Value
------ ---------- ------ ----------
(in thousands)
Assets:
Short-term investments (included within
"other current assets") . . . . . . . . . $ 7,504 $ 8,655 $ 34,529 $ 34,895
Investments in securities - net . . . . . . . 10,827 15,345 2,356 8,606
Liabilities:
Long-term debt . . . . . . . . . . . . . . . 220,007 227,000 241,757 246,330
Off-balance sheet financial instruments:
Foreign currency contracts . . . . . . . . . -- 3,900 -- 2,400
Cash and Cash Equivalents, Accounts Receivable, Short-Term
Debt, and Accounts Payable - The carrying amounts of these items are a
reasonable estimate of their fair value.
F-21
49
Investments in Securities - The fair value of these securities
(including short-term investments classified within "other current assets" in
the accompanying Consolidated Balance Sheets) are estimated based on quoted
market prices or recent sales for those or similar investments.
Long-Term Debt - Interest rates that are currently available
to the Company for issuance of debt with similar terms and remaining maturities
are used on a discounted cash flow basis to estimate fair value for debt issues
for which no market quotes are available.
Foreign Currency Contracts - The fair value of foreign
currency contracts (used for hedging purposes) is estimated by obtaining quotes
from brokers. The contractual amount of these contracts totals approximately
$67,000,000 and $35,000,000 as of December 31, 1992 and 1993, respectively.
The fair value estimates presented herein are based on
pertinent information available to management as of December 31, 1992 and 1993.
Although management is not aware of any factors that would significantly affect
the estimated fair value amounts, such amounts have not been comprehensively
revalued for purposes of these financial statements since that date, and
current estimates of fair value may differ significantly from the amounts
presented herein.
O. CONTINGENT LIABILITIES
For a description of certain legal proceedings pending against
the Company, see Item 3 - "Legal Proceedings", which is an integral part of
these financial statements. The Company is vigorously defending against the
allegations described therein.
Management of the Company believes, based upon its assessment
of the actions and claims outstanding against the Company and certain of its
subsidiaries, and after discussion with counsel, that the eventual disposition
of the matters referred to above should not have a material adverse effect on
the financial position or future operations of the Company.
Also see "Environmental Matters" in Item 1 - "Business".
P. SUBSEQUENT EVENTS
On January 27, 1994, HCL filed a registration statement with
the Israeli Securities Authority (the "ISA") pursuant to which HCL would
publicly offer in Israel, in an underwritten offering, units consisting of (i)
shares of HCL common stock (the "HCL Shares") and (ii) options exercisable for
HCL Shares. The terms of the proposed offering have not been finalized, and
there can be no assurance that the ISA will declare the offering effective or
that the offering will be consummated (considering, among other things,
prevailing stock market conditions in Israel). If the proposed offering is
consummated, the Company has determined that it would maintain beneficial
ownership of not less than 90% of the HCL Shares upon issuance of the units and
not less than 80% on a fully diluted basis. The Company anticipates that the
net proceeds to be realized for the HCL Shares in the proposed offering, if
consummated, would be substantially in excess of the Company's corresponding
carrying value for the equity interest represented by such shares.
The net proceeds of the proposed offering may be used for any
purpose authorized by the Board of Directors of HCL, including, without
limitation, internal growth or the acquisition of new businesses. HCL does not
currently have any agreements, commitments or understandings for acquiring any
particular businesses and does not anticipate using any of the net proceeds to
finance the construction of the K3 Plant.
On February 7, 1994, the smaller of the two potassium nitrate
production units located in the Company's Haifa, Israel manufacturing facility
was damaged by a fire, causing a temporary reduction of the Company's potassium
nitrate production capacity. The Company is currently reviewing various
alternatives concerning the most effective and timely replacement of the
damaged production unit and expects to replace the damaged unit within
approximately twelve months. The Company believes that the impact of the loss
F-22
50
of the facility, including the effect of business interruption, will be
substantially covered by insurance. While the ultimate amount of the insurance
recovery has not yet been determined, the Company expects that the insurance
proceeds relating to the property damage will be for replacement value, which
substantially exceeds the recorded carrying value of the damaged assets.
F-23
51
CONDENSED FINANCIAL INFORMATION OF REGISTRANT SCHEDULE III
TRANS-RESOURCES, INC.
BALANCE SHEETS
December 31,
------------
1992 1993
---- ----
(in thousands)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . $ 5,918 $ 9,800
Receivables and other current assets . . . . . . . . . . . . . . . . . . . 13,285 35,474
Prepaid expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 736 891
----------- ----------
Total Current Assets . . . . . . . . . . . . . . . . . . . . . . . 19,939 46,165
INVESTMENTS IN SECURITIES - net . . . . . . . . . . . . . . . . . . . . . . . 5,081 --
INVESTMENTS IN SUBSIDIARIES . . . . . . . . . . . . . . . . . . . . . . . . . 144,151 131,861
DUE FROM SUBSIDIARIES - net . . . . . . . . . . . . . . . . . . . . . . . . . 15,453 19,402
OTHER ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,484 11,282
----------- ----------
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 192,108 $ 208,710
=========== ==========
LIABILITIES AND STOCKHOLDER'S EQUITY
CURRENT LIABILITIES:
Current maturities of long-term debt . . . . . . . . . . . . . . . . . . . $ 10,935 $ 9,810
Accrued expenses and other current liabilities . . . . . . . . . . . . . . 4,774 7,805
----------- ----------
Total Current Liabilities . . . . . . . . . . . . . . . . . . . . . 15,709 17,615
----------- ----------
LONG-TERM DEBT - net:
Senior indebtedness, notes payable and other obligations . . . . . . . . . 26,540 16,730
Senior subordinated debt - net . . . . . . . . . . . . . . . . . . . . . . 103,689 140,133
Junior subordinated debt - net . . . . . . . . . . . . . . . . . . . . . . 15,089 15,495
----------- ----------
Long-Term Debt - net (Note) . . . . . . . . . . . . . . . . . . . . 145,318 172,358
----------- ----------
OTHER LIABILITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,199 2,943
----------- ----------
COMMON STOCKHOLDER'S EQUITY:
Common stock, $.01 par value, 3,000 shares authorized,
issued and outstanding . . . . . . . . . . . . . . . . . . . . . . -- --
Additional paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . 500 500
Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28,620 15,348
Cumulative translation adjustment . . . . . . . . . . . . . . . . . . . . (238) (54)
----------- ----------
Total Common Stockholder's Equity . . . . . . . . . . . . . . . . . 28,882 15,794
----------- ----------
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 192,108 $ 208,710
=========== ==========
____________________
Note - The aggregate maturities of long-term debt during the next five years
is approximately as follows: 1994 - $9,810,000; 1995 - $9,810,000;
1996 - $30,210,000; 1997 - $3,460,000 and 1998 - $9,000,000. Also,
see Note H of Notes to Consolidated Financial Statements.
S-1
52
CONDENSED FINANCIAL INFORMATION OF REGISTRANT SCHEDULE III
(continued)
TRANS-RESOURCES, INC.
STATEMENTS OF OPERATIONS
For the Years Ended December 31, 1991, 1992 and 1993
1991 1992 1993
---- ---- ----
(in thousands)
REVENUE - Equity in earnings of subsidiaries
(including $167,000 credit representing the
cumulative effect on prior years of the change
in accounting for income taxes in 1992) . . . . . . . . . . $ 38,940 $ 30,345 $ 22,458
COSTS AND EXPENSES . . . . . . . . . . . . . . . . . . . . . . (2,993) (4,527) (4,111)
INTEREST EXPENSE . . . . . . . . . . . . . . . . . . . . . . . (21,849) (20,682) (22,121)
INTEREST AND OTHER INCOME - net . . . . . . . . . . . . . . . . 2,068 4,970 5,797
--------- --------- ---------
INCOME BEFORE INCOME TAXES,
EXTRAORDINARY ITEM AND CHANGE IN
ACCOUNTING PRINCIPLE . . . . . . . . . . . . . . . . . . . . 16,166 10,106 2,023
INCOME TAX BENEFIT . . . . . . . . . . . . . . . . . . . . . . 1,518 2,080 1,043
--------- --------- ---------
INCOME BEFORE EXTRAORDINARY ITEM
AND CHANGE IN ACCOUNTING PRINCIPLE . . . . . . . . . . . . . 17,684 12,186 3,066
EXTRAORDINARY ITEM - Gain (loss) on repurchase
of debt, net of income tax of $296,000 in 1991 . . . . . . . 1,186 -- (8,830)
CUMULATIVE EFFECT ON PRIOR YEARS OF
CHANGE IN ACCOUNTING FOR INCOME TAXES . . . . . . . . . . . -- 963 --
--------- --------- ---------
NET INCOME (LOSS) . . . . . . . . . . . . . . . . . . . . . . . $ 18,870 $ 13,149 $ (5,764)
========= ========= =========
S-2
53
CONDENSED FINANCIAL INFORMATION OF REGISTRANT SCHEDULE III
(concluded)
TRANS-RESOURCES, INC.
STATEMENTS OF CASH FLOWS
For the Years Ended December 31, 1991, 1992 and 1993
1991 1992 1993
---- ---- ----
(in thousands)
OPERATING ACTIVITIES AND WORKING CAPITAL
MANAGEMENT:
Operations:
Net income (loss) . . . . . . . . . . . . . . . . . . . . $ 18,870 $ 13,149 $ (5,764)
Non-cash items:
Unremitted earnings of subsidiaries . . . . . . . . . (12,797) (25,213) 12,474
Depreciation and amortization . . . . . . . . . . . . 1,691 1,307 3,985
Increase in other liabilities . . . . . . . . . . . . 775 594 744
Deferred taxes and other - net . . . . . . . . . . . 43 1,125 (1,048)
--------- --------- ---------
Total . . . . . . . . . . . . . . . . . . . . . . . . . . 8,582 (9,038) 10,391
Working capital management:
Receivables and other current assets . . . . . . . . . . (19,077) 23,171 4,926
Prepaid expenses . . . . . . . . . . . . . . . . . . . . (86) (642) (155)
Accrued expenses and other current liabilities . . . . . 5,909 (7,764) 3,816
--------- --------- ---------
Cash provided by (used in) operations and
working capital management . . . . . . . . . . . . . . . (4,672) 5,727 18,978
--------- --------- ---------
INVESTMENT ACTIVITIES:
Additions to property, plant and equipment . . . . . . . . . (945) (28) (75)
Sales of marketable securities and
short-term investments . . . . . . . . . . . . . . . . . 2,622 12,578 12,435
Purchases of marketable securities and
short-term investments . . . . . . . . . . . . . . . . . (2,108) (12,819) (34,118)
Other - net . . . . . . . . . . . . . . . . . . . . . . . . (10,278) (645) (4,539)
--------- --------- ---------
Cash used in investment activities . . . . . . . . . . . . . (10,709) (914) (26,297)
--------- --------- ---------
FINANCING ACTIVITIES:
Increase in long-term debt . . . . . . . . . . . . . . . . . -- -- 109,166
Payments and current maturities of long-term debt . . . . . (3,803) (475) (90,457)
Distribution to stockholders . . . . . . . . . . . . . . . . (3,064) (13,136) (7,508)
--------- --------- ---------
Cash provided by (used in) financing activities . . . . . . (6,867) (13,611) 11,201
--------- --------- ---------
INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS . . . . . . . . . . . . . . . . . . . . . . (22,248) (8,798) 3,882
CASH AND CASH EQUIVALENTS:
Beginning of year . . . . . . . . . . . . . . . . . . . . . 36,964 14,716 5,918
--------- --------- ---------
End of year . . . . . . . . . . . . . . . . . . . . . . . . $ 14,716 $ 5,918 $ 9,800
========= ========= =========
- ------------------
Interest paid . . . . . . . . . . . . . . . . . . . . . . . . . $ 20,992 $ 19,497 $ 16,557
========= ========= =========
Income taxes paid . . . . . . . . . . . . . . . . . . . . . . . $ 2,614 $ 506 $ 2,100
========= ========= =========
S-3
54
TRANS-RESOURCES, INC. SCHEDULE V
PROPERTY, PLANT AND EQUIPMENT
YEARS ENDED DECEMBER 31, 1991, 1992 AND 1993
(in thousands)
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E COLUMN F
-------- -------- -------- -------- -------- --------
BALANCE AT BALANCE AT
BEGINNING ADDITIONS OTHER CHANGES END OF
CLASSIFICATIONS OF PERIOD AT COST RETIREMENTS ADD (DEDUCT) PERIOD
--------------- ---------- --------- ----------- ------------- ----------
Year Ended December 31, 1991:
- -----------------------------
Land . . . . . . . . . . . . . . . $ 1,891 $ 225 $ 2,116
Buildings . . . . . . . . . . . . 15,222 3,908 $ (1,346) 17,784
Machinery, plant and equipment . . 131,047 39,784 (18,076) 152,755
Office furniture, equipment
and water rights . . . . . . . . 7,113 2,246 (105) 9,254
Construction-in-progress . . . . . 34,400 (27,342) 7,058
--------- --------- --------- -------- ---------
Total . . . . . . . . . . . . . $ 189,673 $ 18,821 $ (19,527) $ -- $ 188,967
========= ========= ========= ======== =========
Year Ended December 31, 1992:
- -----------------------------
Land . . . . . . . . . . . . . . . $ 2,116 $ 2,116
Buildings . . . . . . . . . . . . 17,784 $ 1,015 $ (39) 18,760
Machinery, plant and equipment . . 152,755 24,693 $ (231) 674 177,891
Office furniture, equipment
and water rights . . . . . . . . 9,254 561 (236) (435) 9,144
Construction-in-progress . . . . . 7,058 (126) 6,932
--------- --------- --------- -------- ---------
Total . . . . . . . . . . . . . $ 188,967 $ 26,143 $ (467) $ 200 $ 214,843
========= ========= ========= ======== =========
Year Ended December 31, 1993:
- -----------------------------
Land . . . . . . . . . . . . . . . $ 2,116 $ 2,116
Buildings . . . . . . . . . . . . 18,760 $ 1,234 19,994
Machinery, plant and equipment . . 177,891 9,685 $ (10) 187,566
Office furniture, equipment
and water rights . . . . . . . . 9,144 872 (124) 9,892
Construction-in-progress . . . . . 6,932 17,265 24,197
--------- --------- --------- --------
Total . . . . . . . . . . . . . $ 214,843 $ 29,056 $ (134) $ -- $ 243,765
========= ========= ========= ======== =========
S-4
55
TRANS-RESOURCES, INC. SCHEDULE VI
ACCUMULATED DEPRECIATION, DEPLETION AND AMORTIZATION
OF PROPERTY, PLANT AND EQUIPMENT
YEARS ENDED DECEMBER 31, 1991, 1992 AND 1993
(in thousands)
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E COLUMN F
-------- -------- -------- -------- -------- --------
ADDITIONS
BALANCE AT CHARGED TO BALANCE AT
BEGINNING COSTS AND OTHER CHANGES END OF
DESCRIPTION OF PERIOD EXPENSES RETIREMENTS ADD (DEDUCT) PERIOD
----------- ---------- ---------- ----------- ------------- ----------
Year Ended December 31, 1991:
- -----------------------------
Buildings . . . . . . . . . . . . $ 6,003 $ 1,615 $ (1,275) $ 6,343
Machinery, plant and equipment . . 55,419 15,851 (13,432) 57,838
Office furniture, equipment
and water rights . . . . . . . . 2,582 1,035 (82) 3,535
Excess of net assets acquired
over related costs . . . . . . . 8,528 (1,344) 7,184
--------- --------- --------- -------- ---------
Total . . . . . . . . . . . . . $ 72,532 $ 17,157 $ (14,789) $ -- $ 74,900
========= ========= ========= ======== =========
Year Ended December 31, 1992:
- -----------------------------
Buildings . . . . . . . . . . . . $ 6,343 $ 1,325 $ 7,668
Machinery, plant and equipment . . 57,838 17,498 $ (84) 75,252
Office furniture, equipment
and water rights . . . . . . . . 3,535 1,044 (172) $ (78) 4,329
Excess of net assets acquired
over related costs . . . . . . . 7,184 (1,344) 5,840
--------- ------ --------- -------- ---------
Total . . . . . . . . . . . . . $ 74,900 $ 18,523 $ (256) $ (78) $ 93,089
========= ========= ========= ======== =========
Year Ended December 31, 1993:
- -----------------------------
Buildings . . . . . . . . . . . . $ 7,668 $ 1,646 $ 9,314
Machinery, plant and equipment . . 75,252 18,405 $ (10) 93,647
Office furniture, equipment
and water rights . . . . . . . . 4,329 1,074 (96) 5,307
Excess of net assets acquired
over related costs . . . . . . . 5,840 (1,344) 4,496
--------- --------- --------- -------- ---------
Total . . . . . . . . . . . . . $ 93,089 $ 19,781 $ (106) $ -- $ 112,764
========= ========= ========= ======== =========
S-5
56
TRANS-RESOURCES, INC. SCHEDULE X
SUPPLEMENTARY INCOME STATEMENT INFORMATION
YEARS ENDED DECEMBER 31, 1991, 1992 AND 1993
(in thousands)
COLUMN A COLUMN B
-------- --------
ITEM CHARGED TO COSTS AND EXPENSES
---- -----------------------------
1991 1992 1993
---- ---- ----
Maintenance and repairs . . . . . . . . . . . . . . . . . . . . $ 27,648 $ 28,381 $ 25,582
========= ========= =========
Royalties . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,361 $ 5,732 $ 4,360
========= ========= =========
S-6
57
TRANS-RESOURCES, INC.
INDEX TO EXHIBITS
Exhibit Description Page No.
- ------- ----------- --------
3.1 Certificate of Incorporation of the Company, as amended, filed as Exhibit
3.1 to the Company's Annual Report on Form 10-K for the year ended December
31, 1987 (the "1987 Form 10-K"), which is incorporated herein by reference.
*
3.2 By-laws of the Company, filed as Exhibit 3.2 to the Company's Annual Report
on Form 10-K for the year ended December 31, 1991 (the "1991 Form 10-K"),
which is incorporated herein by reference. *
4.1 Indenture, dated as of March 1, 1989, between the Company and First Alabama
Bank, as Trustee, relating to the Senior Subordinated Reset Notes due 1996,
filed as Exhibit 4.3 to the Company's Annual Report on Form 10-K for the
year ended December 31, 1988 (the "1988 Form 10-K"), which is incorporated
herein by reference. *
4.2 Indenture, dated as of March 30, 1993 between the Company and First Alabama
Bank, as Trustee, relating to the 11 7/8% Senior Subordinated Notes due
2002, filed as Exhibit 4.1 to the Registration Statement of the Company on
Form S-1, filed on April 16, 1993, as amended, Registration No. 33-61158
(the "1993 Form S-1"), which is incorporated herein by reference.
*
10.1 Potash Sales Agreement between Haifa Chemicals Ltd. and Dead Sea Works
Limited, dated January 1, 1980 (termination date extended to December 31,
1999), concerning the supply of potash, filed as Exhibit 10.2 to the
Registration Statement of the Company on Form S-1, filed on January 30,
1987, as amended, Registration No. 33-11634 (the "1987 Form S-1"), which is
incorporated herein by reference. *
10.2 Manufacturing Processes Agreement between Haifa Chemicals Ltd. and Oil
Refineries Ltd., dated December 28, 1981, concerning the supply of steam and
water, filed as Exhibit 10.6 to the 1987 Form S-1, which is incorporated
herein by reference. *
10.3 Agreement of Use of Ammonia Pipeline between Haifa Chemicals Ltd. and Oil
Refineries Ltd., dated August 7, 1977, as amended, concerning the use of an
ammonia pipeline, filed as Exhibit 10.8 to the 1987 Form S-1, which is
incorporated herein by reference. *
10.4 Lease between Haifa Chemicals Ltd. and Oil Refineries Ltd., dated December
20, 1968, concerning real property, filed as Exhibit 10.9 to the 1987 Form
S-1, which is incorporated herein by reference. *
10.5 Lease between Haifa Chemicals Ltd. and Oil Refineries Ltd., dated March
31, 1974, concerning real property, filed as Exhibit 10.10 to the 1987 Form
S-1, which is incorporated herein by reference. *
E-1
58
Exhibit Description Page No.
- ------- ----------- --------
10.6 Lease between Haifa Chemicals Ltd. and Oil Refineries Ltd., dated April
5, 1978, concerning real property, filed as Exhibit 10.11 to the 1987 Form
S-1, which is incorporated herein by reference. *
10.7 Lease between Haifa Chemical Ltd. and Oil Refineries Ltd., dated June 25,
1978, concerning real property, filed as Exhibit 10.12 to the 1987 Form S-1,
which is incorporated herein by reference. *
10.8 Lease between Haifa Chemicals Ltd. and Oil Refineries Ltd., dated September
25, 1986, concerning real property, filed as Exhibit 10.13 to the 1987 Form
S-1, which is incorporated herein by reference. *
10.9 Agreement between Haifa Chemicals Ltd. and The Port Authorities, dated
January 31, 1980 (termination date extended to June 1996), concerning real
property, filed as Exhibit 10.15 to the 1987 Form S-1, which is incorporated
herein by reference. *
10.10 Agreement between the Company and Thomas G. Hardy, dated March 22, 1994,
concerning incentive bonus compensation, including, as Exhibit A thereto,
the related Trust Agreement. E-4
10.11 Loan Agreement, dated as of February 26, 1988, and Amendment No. 1 to Loan
Agreement, dated June 13, 1988, between the Company and Bank Hapoalim B.M.
(certain exhibits omitted) (the "1988 Bank Hapoalim Agreement"), filed as
Exhibit 28.1 to the Company's Quarterly Report on Form 10-Q for the quarter
ended June 30, 1988, which is incorporated herein by reference.
*
10.12 Amendment No. 2, dated March 17, 1989, to the 1988 Bank Hapoalim Agreement,
and Pledge Agreement, dated March 20, 1989, between the Company, Bank
Hapoalim B.M. and Trust Company of Bank Hapoalim Ltd., filed as Exhibit
10.26 to the 1988 Form 10-K, which is incorporated herein by reference.
*
10.13 Letter agreement, dated April 13, 1989, amending the 1988 Bank Hapoalim
Agreement, between the Company and Bank Hapoalim B.M., filed as Exhibit
10.25 to the Company's Annual Report on Form 10-K for the year ended
December 31, 1989 (the "1989 Form 10-K") which is incorporated herein by
reference. *
10.14 Sixth Amendment to Loan Agreement, dated as of April 25, 1991, amending the
1988 Bank Hapoalim Agreement, between the Company and Bank Hapoalim B.M.,
filed as Exhibit 10.14 to the 1991 Form 10-K, which is incorporated herein
by reference. *
E-2
59
Exhibit Description Page No.
- ------- ----------- --------
10.15 Amended and Restated Credit Agreement, dated as of June 2, 1993 (The
"Cedar/NMPC/Vicksburg Credit Agreement"), among Cedar Chemical Corporation,
New Mexico Potash Corporation, the Banks parties thereto and The First
National Bank of Boston, as Agent (exhibits and schedules omitted). E-5
10.16 Restated Amendment No. 1, dated as of November 10, 1993, to the
Cedar/NMPC/Vicksburg Credit Agreement (exhibits and schedules omitted). E-6
10.17 Loan Agreement, dated as of December 24, 1990, between the Company and Bank
Hapoalim (certain exhibits omitted) (the "1990 Bank Hapoalim Agreement"),
filed as Exhibit 10.20 to the Company's Annual Report on Form 10-K for the
year ended December 31, 1990, which is incorporated herein by reference.
*
10.18 Amendment No. 2, dated as of September 25, 1992, to the 1990 Bank Hapoalim
Agreement, filed as Exhibit 10.23 to the Registration Statement of the
Company on Form S-1, filed on October 20, 1992, as amended, Registration No.
33-53486 (the "1992 Form S-1"), which is incorporated herein by reference.
*
10.19 Tax Sharing Agreement, dated as of December 30, 1991, among TPR Investment
Associates, Inc., the Company, Eddy Potash, Inc., Nine West Corporation, TR
Media Corporation and Cedar Chemical Corporation, filed as Exhibit 10.23 to
the 1991 Form 10-K, which is incorporated herein by reference.
*
10.20 Purchase Agreement, dated September 30, 1992, between the Company and Mardi
Gras Food Court, Inc., filed as Exhibit 10.26 to the 1992 Form S-1, which is
incorporated herein by reference. *
10.21 Split Dollar Insurance Agreement, entered into as of August 26, 1988,
between the Company and Arie Genger, filed as Exhibit 10.27 to the 1992 Form
S-1, which is incorporated herein by reference. *
10.22 Bond Purchase Agreement, dated November 10, 1993, among Mississippi Business
Finance Corporation, Vicksburg Chemical Company and the banks named as
Purchasers therein. E-7
21 Subsidiaries of the Company. E-8
24 Power of Attorney authorizing Lester W. Youner to sign this report and any
amendments hereto on behalf of the principal executive officer and the
directors. E-9
____________________
* Incorporated by reference
E-3