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FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
[Mark One]
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended March 31, 1995
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For The Transition Period From _____ To _____
Commission File Number 33-11634
TRANS-RESOURCES, INC.
(Exact name of registrant as specified in its charter)
Delaware 36-2729497
(State or other jurisdiction of incorporation (I.R.S. Employer
or organization) Identification No.)
9 West 57th Street, New York, New York 10019
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (212) 888-3044
_______________
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
--- ---
At May 12, 1995, there were outstanding 3,000 shares of common stock, par value
of $.01 per share, all which were owned by TPR Investment Associates, Inc., a
privately-held Delaware corporation.
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Form 10-Q
TRANS-RESOURCES, INC.
Form 10-Q Index
March 31, 1995
Page
PART I Number
- ------ ------
Item 1. - Financial Statements (Unaudited):
Consolidated Statements of Operations . . . . . . . . . . . . . . . . . . . 3
Consolidated Balance Sheets . . . . . . . . . . . . . . . . . . . . . . . . 4
Consolidated Statement of Stockholder's Equity . . . . . . . . . . . . . . 5
Consolidated Statements of Cash Flows . . . . . . . . . . . . . . . . . . . 6
Notes to Unaudited Consolidated Financial Statements . . . . . . . . . . . 7
Item 2. - Management's Discussion and Analysis of Financial Condition and
Results of Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
PART II
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Item 6. - Exhibits and Reports on Form 8-K . . . . . . . . . . . . . . . . . . . . . 13
Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
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Form 10-Q
PART I. FINANCIAL INFORMATION
ITEM 1. - FINANCIAL STATEMENTS
TRANS-RESOURCES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Three Month Period
Ended March 31,
----------------------
1995 1994
--------- ---------
(000's)
REVENUES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $92,389 $82,032
COST AND EXPENSES:
Cost of goods sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77,710 66,083
General and administrative . . . . . . . . . . . . . . . . . . . . . . . . 9,759 9,784
------- -------
OPERATING INCOME . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,920 6,165
Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (8,034) (6,916)
Interest and other income - net . . . . . . . . . . . . . . . . . . . . . 761 19,741
------- -------
INCOME (LOSS) BEFORE INCOME TAXES . . . . . . . . . . . . . . . . . . . . . . . (2,353) 18,990
------- -------
INCOME TAX PROVISION:
Current . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 838 3,990
Deferred . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 278 5,912
------- -------
1,116 9,902
------- -------
NET INCOME (LOSS) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $(3,469) $ 9,088
======= =======
See notes to unaudited consolidated financial statements.
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Form 10-Q
TRANS-RESOURCES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
March 31, December 31,
1995 1994
----------- ------------
(Unaudited)
(000's)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents . . . . . . . . . . . . . . . . . $ 18,353 $ 15,571
Accounts receivable . . . . . . . . . . . . . . . . . . . . 76,161 66,106
Inventories:
Finished products . . . . . . . . . . . . . . . . . . . 32,327 33,747
Raw materials . . . . . . . . . . . . . . . . . . . . . 19,221 17,566
Other current assets . . . . . . . . . . . . . . . . . . . . 50,299 168,200
Prepaid expenses . . . . . . . . . . . . . . . . . . . . . . 17,395 18,852
-------- --------
Total Current Assets . . . . . . . . . . . . . . . . . . 213,756 320,042
PROPERTY, PLANT AND EQUIPMENT - NET . . . . . . . . . . . . . . . 216,102 202,085
OTHER ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . 29,244 28,827
-------- --------
Total . . . . . . . . . . . . . . . . . . . . . . . . . $459,102 $550,954
======== ========
LIABILITIES AND STOCKHOLDER'S EQUITY
CURRENT LIABILITIES:
Current maturities of long-term debt . . . . . . . . . . . . $ 24,147 $124,465
Short-term debt . . . . . . . . . . . . . . . . . . . . . . 34,672 33,521
Accounts payable . . . . . . . . . . . . . . . . . . . . . . 57,786 57,077
Accrued expenses and other current liabilities . . . . . . . 32,469 38,685
-------- --------
Total Current Liabilities . . . . . . . . . . . . . . . 149,074 253,748
-------- --------
LONG-TERM DEBT-NET:
Senior indebtedness, notes payable and other obligations . . 119,562 102,059
Senior subordinated indebtedness - net . . . . . . . . . . . 140,454 140,385
Junior subordinated debentures - net . . . . . . . . . . . . 8,044 7,981
-------- --------
Long-Term Debt - net . . . . . . . . . . . . . . . . . . 268,060 250,425
-------- --------
OTHER LIABILITIES . . . . . . . . . . . . . . . . . . . . . . . . 24,936 26,231
-------- --------
STOCKHOLDER'S EQUITY:
Preferred stock, $1.00 par value, 100,000 shares
authorized, issued and outstanding . . . . . . . . . . . 7,960 7,960
Common stock, $.01 par value, 3,000 shares authorized,
issued and outstanding . . . . . . . . . . . . . . . . . - -
Additional paid-in capital . . . . . . . . . . . . . . . . . 505 505
Retained earnings . . . . . . . . . . . . . . . . . . . . . 9,113 13,432
Cumulative translation adjustment . . . . . . . . . . . . . (615) (360)
Unrealized gains (losses) on marketable securities . . . . . 69 (987)
-------- --------
Total Stockholder's Equity . . . . . . . . . . . . . . . 17,032 20,550
-------- --------
Total . . . . . . . . . . . . . . . . . . . . . . . . . $459,102 $550,954
======== ========
See notes to unaudited consolidated financial statements.
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Form 10-Q
TRANS-RESOURCES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDER'S EQUITY
Three Month Period Ended March 31, 1995
(Unaudited)
ADDITIONAL CUMULATIVE UNREALIZED
PREFERRED COMMON PAID-IN RETAINED TRANSLATION GAINS(LOSSES)
STOCK STOCK CAPITAL EARNINGS ADJUSTMENT ON SECURITIES TOTAL
---------- ------- --------- --------- ----------- ------------- -------
(000'S)
BALANCE, January 1, 1995 . . . $7,960 $ - $505 $13,432 $(360) $ (987) $20,550
Activity for the three month
period ended March 31, 1995:
Net loss . . . . . . . . . . . (3,469) (3,469)
Dividends paid . . . . . . . . (850) (850)
Net change during period . . . (255) 1,056 801
------ ------ ---- ------- ----- ------ -------
BALANCE, March 31, 1995 . . . . $7,960 $ - $505 $ 9,113 $(615) $ 69 $17,032
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See notes to unaudited consolidated financial statements.
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Form 10-Q
TRANS-RESOURCES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Three Month Period
Ended March 31,
---------------------
1995 1994
---- ----
(000's)
OPERATING ACTIVITIES AND WORKING CAPITAL
MANAGEMENT:
Operations:
Net income (loss) . . . . . . . . . . . . . . . . . . . . . . . . $ (3,469) $ 9,088
Items not requiring (providing) cash:
Depreciation and amortization . . . . . . . . . . . . . . . . 4,960 5,528
Change in other liabilities . . . . . . . . . . . . . . . . . (59) 164
Deferred taxes and other - net . . . . . . . . . . . . . . . . 974 6,047
-------- -------
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,406 20,827
Working capital management:
Accounts receivable and other current assets . . . . . . . . . . . (1,724) (41,681)
Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,652 4,438
Prepaid expenses . . . . . . . . . . . . . . . . . . . . . . . . . 1,478 1,452
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . (1,350) 2,989
Accrued expenses and other current liabilities . . . . . . . . . . (9,926) (1,039)
-------- -------
Cash used by operations and working
capital management . . . . . . . . . . . . . . . . . . . . . (5,464) (13,014)
-------- -------
INVESTMENT ACTIVITIES:
Additions to property, plant and equipment . . . . . . . . . . . . . . (15,946) (18,517)
Purchases of marketable securities and other short-term investments . (4,339) (4,376)
Sales of marketable securities and other short-term investments . . . 118,071 17,795
Other - net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (4,012) 1,585
-------- -------
Cash provided (used) by investment activities . . . . . . . . 93,774 (3,513)
-------- --------
FINANCING ACTIVITIES:
Increase in short-term debt . . . . . . . . . . . . . . . . . . . . . 751 3,187
Increase in long-term debt . . . . . . . . . . . . . . . . . . . . . . 19,000 7,613
Repurchases, payments and current maturities of long-term debt . . . . (104,429) (9,016)
Distributions to stockholder . . . . . . . . . . . . . . . . . . . . . (850) -
-------- -------
Cash provided (used) by financing activities . . . . . . . . . (85,528) 1,784
-------- -------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS . . . . . . . . . . . . . 2,782 (14,743)
CASH AND CASH EQUIVALENTS:
Beginning of period . . . . . . . . . . . . . . . . . . . . . . . . . 15,571 25,742
-------- -------
End of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 18,353 $10,999
======== =======
See notes to unaudited consolidated financial statements.
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Form 10-Q
TRANS-RESOURCES, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
Basis of Presentation and Other Matters
The consolidated financial statements of Trans-Resources, Inc. (the
"Company") include the Company and its direct and indirect 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; Eddy Potash, Inc. ("Eddy"); and Haifa Chemicals Ltd., an
Israeli corporation ("HCL"), and HCL's wholly-owned subsidiary, Haifa Chemicals
South Ltd. ("HCSL"). The Company is a wholly-owned subsidiary of TPR
Investment Associates, Inc., a privately-held corporation. Certain prior
period amounts have been reclassified to conform to the manner of presentation
in the current period.
In the opinion of management, the unaudited consolidated financial
statements for the three month periods ended March 31, 1995 and 1994,
respectively, include all adjustments, which comprise only normal recurring
accruals, necessary for a fair presentation of the results for such periods.
The results of operations for the three month period ended March 31, 1995 are
not necessarily indicative of results that may be expected for any other
interim period or the full fiscal year. It is suggested that these unaudited
consolidated financial statements be read in conjunction with the financial
statements and notes thereto included in the Company's Annual Report on Form
10-K for the fiscal year ended December 31, 1994 (the "Form 10-K"), which has
been filed with the Securities and Exchange Commission.
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ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following table sets forth, as a percentage of revenues and the
percentage dollar change of those items as compared to the prior period,
certain items appearing in the unaudited consolidated financial statements of
the Company.
Percentage Period
of Revenues to
----------------
Three Month Period
Period Ended Changes
---------
March 31, Increase
----------------
1995 1994 (Decrease)
---- ---- ----------
Revenues . . . . . . . . . . . . . . . . . . . . . . . . . 100.0% 100.0% 12.6%
Costs and expenses:
Cost of goods sold . . . . . . . . . . . . . . . . . . 84.1 80.6 17.6
General and administrative . . . . . . . . . . . . . . 10.6 11.9 (.3)
----- -----
Operating income . . . . . . . . . . . . . . . . . . . . . 5.3 7.5 (20.2)
Interest expense . . . . . . . . . . . . . . . . . . . (8.7) (8.4) 16.2
Interest and other income - net . . . . . . . . . . . .8 24.1 (96.2)
----- -----
Income (loss) before income taxes . . . . . . . . . . . . . (2.6) 23.2 (112.4)
Income tax provision . . . . . . . . . . . . . . . . . . . 1.2 12.1 (88.7)
----- -----
Net income (loss) . . . . . . . . . . . . . . . . . . . . . (3.8)% 11.1% (138.2)%
===== ===== ======
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Form 10-Q
RESULTS OF OPERATIONS
Three month period ended March 31, 1995 compared with the three month
period ended March 31, 1994:
Revenues increased by 12.6% to $92,389,000 in 1995 from $82,032,000 in
1994, an increase of $10,357,000, resulting from increased sales of (i)
specialty plant nutrients and industrial chemicals ($8,800,000), (ii) organic
chemicals ($900,000) and (iii) potash ($700,000).
Cost of goods sold as a percentage of revenues increased during the periods
(84.1% in 1995 compared with 80.6% in 1994), primarily due to certain raw
material cost increases, which were only partially offset by increases in the
selling prices of the Company's products. Gross profit was $14,679,000 in 1995
compared with $15,949,000 in 1994, a decrease of $1,270,000, with such decrease
primarily being the net result of the increased raw materials costs. General
and administrative expense decreased to $9,759,000 in 1995 from $9,784,000 in
1994 (10.6% of revenues in 1995 compared with 11.9% of revenues in 1994).
As a result of the matters described above, the Company's operating income
decreased by $1,245,000 to $4,920,000 in 1995 as compared with $6,165,000 in
1994.
Interest expense increased by $1,118,000 ($8,034,000 in 1995 compared with
$6,916,000 in 1994) primarily as a result of interest expense related to (i)
the long-term debt that financed the construction of the K3 Plant and (ii) the
June 30, 1994 loan agreement (the "Loan Agreement") described under "Capital
Resources and Liquidity" below. Interest and other income - net decreased in
1995 by $18,980,000, principally as the result of the 1994 period including a
$20,000,000 gain relating to the February 1994 fire at HCL as compared to a
$1,700,000 gain in the 1995 period relating to such fire, which 1995 gain is
substantially offset by losses relating to certain forward exchange contracts
which do not qualify as hedges.
As a result of the above factors, income before income taxes decreased by
$21,343,000 in 1995. 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.
CAPITAL RESOURCES AND LIQUIDITY
The Company's consolidated working capital at March 31, 1995 and December
31, 1994 was $64,682,000 and $66,294,000, respectively.
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Operations for the three month periods March 31, 1995 and 1994, after
adding back non-cash items, provided cash of $2,406,000 and $20,827,000,
respectively. During such periods other changes in working capital used cash
of $7,870,000 and $33,841,000, respectively, resulting in net cash being used
from operating activities and working capital management of $5,464,000 and
$13,014,000, respectively.
Investment activities during the three month periods ended March 31, 1995
and 1994 provided (used) cash of $93,774,000 (principally relating to the
liquidation of the pledged certificates of deposits ("CD's") described below)
and ($3,513,000), respectively, including additions to property in 1995 and
1994 of $15,946,000 and $18,517,000, respectively, and purchases of marketable
securities and short-term investments of $4,339,000 and $4,376,000,
respectively. The 1994 and 1995 property additions principally relate to (i)
the construction of the K3 plant, (ii) the replacement of the production unit
damaged in the fire in February, 1994 and (iii) the construction of a new
potassium carbonate manufacturing facility (see "Capital Expenditures" below).
Financing activities during the three month periods ended March 31, 1995
and 1994 provided (used) cash of ($85,528,000) (principally relating to the
prepayment described in the paragraph below) and $1,784,000, respectively.
On June 30, 1994, the Company entered into the Loan Agreement with a bank
and borrowed $40,000,000 (repayable quarterly over a four year period) and
utilized a portion of the proceeds to prepay approximately $19,000,000 then owed
to such bank. Pursuant to the Loan Agreement, the Company also borrowed an
additional $100,000,000, repayable in January, 1996. Under certain specified
circumstances prior to such date, the Company could have converted such loan
into a term loan maturing five years from the date of conversion. The Company
pledged CD's with a principal amount of $100,000,000 as collateral for such loan
(such CD's are included in "other current assets" in the accompanying December
31, 1994 Consolidated Balance Sheet). On January 5, 1995, the Company
liquidated the pledged CD's and prepaid the $100,000,000 loan.
As of March 31, 1995, the Company had outstanding long-term debt
(excluding current maturities) of $268,060,000. The Company's primary source
of liquidity is cash flow generated from operations and certain revolving loan
commitments.
Approximately 90% of HCL's sales are made outside of Israel in various
currencies, of which approximately 34% are in U.S. dollars, with the remainder
principally in Western European currencies. In order to mitigate the impact of
currency fluctuations against the U.S. dollar, the Company has a policy of
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hedging a significant portion of its foreign sales denominated in Western
European currencies by entering into forward exchange contracts. A portion of
these contracts qualify as hedges pursuant to Statement of Financial Accounting
Standards No. 52 and accordingly, unrealized gains and losses arising therefrom
are deferred and accounted for in the subsequent year as part of sales.
Unrealized gains and losses for the remainder of the forward exchange contracts
are recognized in income currently.
The principal purpose of the Company's hedging program (which is for other
than trading purposes) is to mitigate the impact of fluctuations against the
U.S. dollar, as well as to protect against significant adverse changes in
exchange rates. Accordingly, the gains and losses recognized relating to the
hedging program in any particular period and the impact on revenues had the
Company not had such a program are not necessarily indicative of its
effectiveness.
CAPITAL EXPENDITURES
During 1995 (excluding the K3 Plant described below and the reconstruction
of the production unit damaged by fire in February 1994) the Company invested
approximately $6,000,000 in capital expenditures. During 1993 the Company
commenced construction of the K3 Plant, a new facility in Israel, with initial
capacity to produce approximately 100,000 metric tons of potassium nitrate
annually. The Company has recently completed the construction of the K3 Plant
and the reconstruction of the damaged production unit.
The Company currently anticipates that capital expenditures for the year
ending December 31, 1995 (excluding the K3 Plant and the reconstruction of the
damaged production unit) will aggregate approximately $19,000,000. The
Company's capital expenditures will be used primarily for increasing certain
production capacity and efficiency, product diversification, safety and for
ecological matters. 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 and, with respect to the damaged production unit, insurance
proceeds.
INFLATION
Inasmuch as only approximately $40,000,000 of HCL's annual operating costs
are denominated in New Israeli Shekels ("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. For the years ended
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December 31, 1993 and 1994, the inflation rate of the NIS as compared to the
U.S. Dollar exceeded the devaluation rate in Israel by 3.2% and 13.4%,
respectively.
ENVIRONMENTAL MATTERS
See Item 1 - "Business - Environmental Matters" and Note N of Notes to
Consolidated Financial Statements included in the Company's Form 10-K for
information regarding environmental matters relating to the Company's various
facilities.
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PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits.
Exhibit 27 - Financial Data Schedule.
(b) Reports on Form 8-K.
No reports on Form 8-K were filed during the quarter for which this report
is filed.
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Form 10-Q
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
TRANS-RESOURCES, INC.
-------------------------------
(Registrant)
Date: May 12, 1995 Lester W. Youner
-----------------------------
Vice President, Treasurer and
Chief Financial Officer
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TRANS-RESOURCES, INC.
INDEX TO EXHIBITS
Exhibit Description Page No.
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27 Financial Data Schedule. 16
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