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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, 1996
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 (I.R.S. Employer Identification No.)
incorporation or organization)
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
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At May 10, 1996, there were outstanding 3,000 shares of common stock, par value
of $.01 per share, all of 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, 1996
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,
-----------------------
1996 1995
--------- --------
(000's)
REVENUES .......................................... $ 118,242 $ 92,389
COST AND EXPENSES:
Cost of goods sold ........................... 96,262 77,710
General and administrative ................... 11,645 9,759
--------- --------
OPERATING INCOME .................................. 10,335 4,920
Interest expense ............................. (8,713) (8,034)
Interest and other income - net .............. 530 761
--------- --------
INCOME (LOSS) BEFORE INCOME TAXES
AND EXTRAORDINARY ITEM ....................... 2,152 (2,353)
--------- --------
INCOME TAX PROVISION:
Current ...................................... 682 838
Deferred ..................................... 327 278
--------- --------
1,009 1,116
--------- --------
INCOME (LOSS) BEFORE EXTRAORDINARY ITEM ........... 1,143 (3,469)
EXTRAORDINARY ITEM - Loss on repurchase of
debt (no income tax benefit) ................. (393) --
--------- --------
NET INCOME (LOSS) ................................. $ 750 $ (3,469)
========= ========
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,
1996 1995
----------- ------------
(Unaudited)
(000's)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents ................................. $ 13,927 $ 32,872
Accounts receivable ....................................... 97,340 75,630
Inventories:
Finished goods ........................................ 45,727 46,030
Raw materials ......................................... 19,216 20,444
Other current assets ...................................... 22,780 19,364
Prepaid expenses .......................................... 20,692 19,316
--------- ---------
Total Current Assets .................................. 219,682 213,656
PROPERTY, PLANT AND EQUIPMENT - NET ............................ 217,451 220,191
OTHER ASSETS ................................................... 35,903 33,255
--------- ---------
Total ................................................. $ 473,036 $ 467,102
========= =========
LIABILITIES AND STOCKHOLDER'S EQUITY
CURRENT LIABILITIES:
Current maturities of long-term debt ...................... $ 30,593 $ 40,703
Short-term debt ........................................... 13,602 6,145
Accounts payable .......................................... 54,290 51,383
Accrued expenses and other current liabilities ............ 27,295 33,414
--------- ---------
Total Current Liabilities ............................. 125,780 131,645
--------- ---------
LONG-TERM DEBT - NET:
Senior indebtedness, notes payable and other obligations .. 185,329 174,506
Senior subordinated indebtedness - net .................... 114,099 114,074
--------- ---------
Long-Term Debt - net .................................. 299,428 288,580
--------- ---------
OTHER LIABILITIES .............................................. 28,029 26,202
--------- ---------
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 ................................ 8,682 8,682
Retained earnings ......................................... 3,433 4,764
Cumulative translation adjustment ......................... (465) (594)
Unrealized gains (losses) on marketable securities ........ 189 (137)
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Total Stockholder's Equity ............................ 19,799 20,675
--------- ---------
Total ................................................. $ 473,036 $ 467,102
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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, 1996
(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, 1996................. $7,960 $ - $8,682 $4,764 $(594) $(137) $20,675
Net income.............................. 750 750
Dividends paid:
Common stock........................ (1,869) (1,869)
Preferred stock..................... (212) (212)
Net change during period................ 129 326 455
------ ---- ------ ------- ----- ----- -------
BALANCE, March 31, 1996.................. $7,960 $ - $8,682 $ 3,433 $(465) $ 189 $19,799
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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,
-----------------------
1996 1995
-------- ---------
(000's)
OPERATING ACTIVITIES AND WORKING CAPITAL
MANAGEMENT:
Operations:
Net income (loss) ................................................ $ 750 $ (3,469)
Items not requiring (providing) cash:
Depreciation and amortization ................................ 6,107 4,960
Change in other liabilities .................................. 89 (59)
Deferred taxes and other - net ............................... 1,976 974
-------- ---------
Total ................................................... 8,922 2,406
Working capital management:
Accounts receivable and other current assets ..................... (21,958) (1,724)
Inventories ...................................................... 1,531 3,652
Prepaid expenses ................................................. (1,376) 1,478
Accounts payable ................................................. 2,907 (1,350)
Accrued expenses and other current liabilities ................... (9,219) (9,926)
-------- ---------
Cash used by operations and working
capital management ...................................... (19,193) (5,464)
-------- ---------
INVESTMENT ACTIVITIES:
Additions to property, plant and equipment ........................... (3,026) (15,946)
Purchases of marketable securities and other short-term investments .. (3,261) (4,339)
Sales of marketable securities and other short-term investments,
including in 1995 liquidation of CD's securing a bank loan ....... 93 118,071
Other - net .......................................................... 1,749 (4,012)
-------- ---------
Cash provided (used) by investment activities ................ (4,445) 93,774
-------- ---------
FINANCING ACTIVITIES:
Increase in short-term debt .......................................... 7,457 751
Increase in long-term debt ........................................... 41,708 19,000
Repurchases, payments and current maturities of long-term debt ....... (42,391) (104,429)
Distributions to stockholder ......................................... (2,081) (850)
-------- ---------
Cash provided (used) by financing activities ................. 4,693 (85,528)
-------- ---------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS ...................... (18,945) 2,782
CASH AND CASH EQUIVALENTS:
Beginning of period .................................................. 32,872 15,571
-------- ---------
End of period ........................................................ $ 13,927 $ 18,353
======== =========
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 and Vicksburg Chemical
Company; Na-Churs Plant Food Company ("Na-Churs"); Eddy Potash, Inc.; and Haifa
Chemicals Ltd., an Israeli corporation ("HCL"), and HCL's wholly-owned
subsidiary, Haifa Chemicals South Ltd. The Company is a wholly-owned subsidiary
of TPR Investment Associates, Inc., a privately-held corporation. Effective
March 31, 1995, the Company acquired the assets of Na-Churs, a company
headquartered in Ohio and engaged in the specialty plant nutrient business.
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, 1996 and 1995,
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, 1996 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, 1995 (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
of Revenues Period
----------------- to
Three Month Period
Period Ended Changes
March 31, ----------
----------------- Increase
1996 1995 (Decrease)
----- ----- ----------
Revenues .................................................. 100.0% 100.0% 28.0%
Costs and expenses:
Cost of goods sold ................................... 81.4 84.1 23.9
General and administrative ........................... 9.9 10.6 19.3
----- -----
Operating income .......................................... 8.7 5.3 110.1
Interest expense ..................................... (7.4) (8.7) 8.5
Interest and other income - net ...................... .5 .8 (30.4)
----- -----
Income (loss) before income taxes and extraordinary item .. 1.8 (2.6) 191.5
Income tax provision ...................................... .8 1.2 (9.6)
----- -----
Income (loss) before extraordinary item ................... 1.0 (3.8) 133.0
Extraordinary item ........................................ (.4) -- (100.0)
----- -----
Net income (loss) ......................................... .6% (3.8)% 121.6%
===== ===== =====
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Form 10-Q
RESULTS OF OPERATIONS
Three month period ended March 31, 1996 compared with the three month period
ended March 31, 1995:
Revenues increased by 28.0% to $118,242,000 in 1996 from $92,389,000 in
1995, an increase of $25,853,000, resulting from increased sales of specialty
plant nutrients and industrial chemicals ($25,000,000) (including $4,400,000
relating to the acquisition of Na-Churs) and organic chemicals ($1,100,000),
which were partially offset by slightly lower sales of potash ($200,000).
Cost of goods sold as a percentage of revenues decreased by 2.7% during
the period (81.4% in 1996 compared with 84.1% in 1995). Gross profit was
$21,980,000 in 1996 compared with $14,679,000 in 1995 (18.6% of revenues in 1996
compared with 15.9% of revenues in 1995), an increase of $7,301,000. The primary
factors resulting in the increased gross profit were (i) more favorable currency
rates in the 1996 period, (ii) higher quantities of potassium nitrate sold in
1996 and (iii) the inclusion of the results of Na-Churs in the 1996 period.
General and administrative expense increased to $11,645,000 in 1996 from
$9,759,000 in 1995, but declined as a percentage of revenues (9.9% of revenues
in 1996 compared with 10.6% of revenues in 1995).
As a result of the matters described above, the Company's operating
income increased by $5,415,000 to $10,335,000 in 1996 as compared with
$4,920,000 in 1995.
Interest expense increased by $679,000 ($8,713,000 in 1996 compared
with $8,034,000 in 1995) primarily as a result of interest on the long-term debt
that financed the construction of the Company's K3 Plant in Israel. Interest and
other income - net decreased in 1996 by $231,000, principally as the result of
the net adjustments relating to the marking-to-market of forward exchange
contracts which do not qualify as hedges, partially offset by certain realized
losses on marketable securities in the 1995 period, with no such losses in the
1996 period. As a result of the above factors, income before income taxes and
extraordinary item increased by $4,505,000 in 1996. 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.
In the 1996 period the Company acquired $11,237,000 principal amount of
its Senior Subordinated Reset Notes, which resulted in a loss of $393,000. Such
loss (which has no current tax benefit) is classified as an
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extraordinary item in the accompanying Consolidated Statements of Operations. No
such debt was acquired in the 1995 period.
CAPITAL RESOURCES AND LIQUIDITY
The Company's consolidated working capital at March 31, 1996 and
December 31, 1995 was $93,902,000 and $82,011,000, respectively.
Operations for the three month periods ended March 31, 1996 and 1995,
after adding back non-cash items, provided cash of approximately $8,900,000 and
$2,400,000, respectively. During such periods other changes in working capital
used cash of approximately $28,100,000 and $7,900,000, respectively, resulting
in net cash being used by operating activities and working capital management of
approximately $19,200,000 and $5,500,000, respectively.
Investment activities during the three month periods ended March 31,
1996 and 1995 provided (used) cash of approximately ($4,400,000) and
$93,800,000, respectively, including additions to property in 1996 and 1995 of
approximately $3,000,000 and $15,900,000, respectively, net purchases of
marketable securities and other short-term investments of approximately
$3,300,000 and $4,300,000, respectively, and sales of marketable securities and
other short-term investments of approximately $100,000 and $118,100,000,
respectively. No major property additions occurred in 1996. The 1995 property
additions principally relate to (i) the construction of the K3 Plant, (ii) the
replacement of the HCL production unit damaged in a fire in February, 1994 and
(iii) the construction of a new potassium carbonate manufacturing facility. The
1995 sales of marketable securities and short-term investments relate
principally to the purchase in 1994, and the liquidation in 1995, of the pledged
certificates of deposit ("CD's") relating to the Loan Agreement described below.
Financing activities during the three month periods ended March 31,
1996 and 1995, provided (used) cash of approximately $4,700,000 and
($85,500,000), respectively (principally relating to the increase of certain
long-term debt in 1994 and the prepayment of such debt in 1995, which is
described below). During 1994 the Company entered into the Loan Agreement which
resulted in new bank loans aggregating $140,000,000 and the repayment of bank
loans of approximately $19,000,000; during 1995 a significant portion of such
debt was prepaid.
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
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$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 were
included in "other current assets" in the December 31, 1994 Consolidated Balance
Sheet). In addition, the Company pledged 79% of the capital stock of HCL to
secure its obligations under the Loan Agreement. On January 5, 1995, the Company
liquidated the pledged CD's and prepaid the $100,000,000 loan.
As of March 31, 1996, the Company had outstanding long-term debt
(excluding current maturities) of $299,428,000. The Company's primary source of
liquidity is cash flow generated from operations and its unused credit lines.
Approximately 90% of HCL's sales are made outside of Israel in various
currencies, of which approximately 38% 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
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. If the Company had not followed such a
policy of entering into forward exchange contracts in order to hedge its foreign
sales, and instead recognized income based on the then prevailing foreign
currency rates, the Company's income before income taxes for the three month
periods ended March 31, 1996 and 1995, would have increased (decreased) by
approximately ($1,600,000) and $3,500,000, respectively.
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.
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CAPITAL EXPENDITURES
During the three month period ended March 31, 1996 the Company invested
approximately $3,000,000 in capital expenditures. The Company currently
anticipates that capital expenditures for the year ending December 31, 1996 will
aggregate approximately $20,000,000. The Company's capital expenditures will be
used primarily for increasing certain production capacity and efficiency,
product diversification and for ecological matters.
INFLATION
Inasmuch as only approximately $45,000,000 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 increase or decrease to the extent that the rate of future NIS
devaluation differs from the rate of Israeli inflation. For the years ended
December 31, 1995 and 1994, the inflation rate of the NIS as compared to the
U.S. Dollar exceeded the devaluation rate in Israel by 4.2% and 13.4%,
respectively.
ENVIRONMENTAL MATTERS
See Item 1 - "Business - Environmental Matters" and Note O 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 10, 1996 Lester W. Youner
-----------------------------
Vice President, Treasurer and
Chief Financial Officer
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TRANS-RESOURCES, INC.
INDEX TO EXHIBITS
Exhibit Description Page No.
- ------- ----------- --------
27 Financial Data Schedule. 16
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