UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549
FORM 10-Q
x QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.
For the quarterly period ended March 31, 2005
Commission file number 1-71
| New Jersey | 13-0511250 | |
| (State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) |
180 East Broad Street, Columbus, Ohio 43215
(Address of principal executive offices)
(614) 225-4000
(Registrant’s telephone number, including area code)
Not Applicable
(Former name, former address and former fiscal year, if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes ¨ No x
Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x
Number of shares of common stock, $0.01 par value, outstanding as of the close of business on May 10, 2005: 96,905,936
INDEX
2
Item 1. Borden Chemical, Inc. Condensed Consolidated Financial Statements
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE (LOSS) INCOME (Unaudited)
BORDEN CHEMICAL, INC.
| (In thousands, except per share data) |
Three Months ended March 31, | ||||||
| 2005 |
2004 | ||||||
| Net sales |
$ | 485,166 | $ | 385,434 | |||
| Cost of goods sold |
395,309 | 310,249 | |||||
| Gross margin |
89,857 | 75,185 | |||||
| Distribution expense |
21,345 | 17,328 | |||||
| Marketing expense |
11,959 | 11,403 | |||||
| General & administrative expense |
23,745 | 22,874 | |||||
| Transaction related costs (see Note 1) |
1,500 | — | |||||
| Business realignment and impairments (income) expense |
(382 | ) | 1,494 | ||||
| Other operating (income) expense |
(279 | ) | 1,284 | ||||
| Operating income |
31,969 | 20,802 | |||||
| Interest expense |
21,785 | 11,890 | |||||
| Other non-operating expense |
9,113 | 61 | |||||
| Income before income tax |
1,071 | 8,851 | |||||
| Income tax expense |
5,333 | 3,937 | |||||
| Net (loss) income |
$ | (4,262 | ) | $ | 4,914 | ||
| Comprehensive (loss) income |
$ | (6,327 | ) | $ | 5,638 | ||
| Basic and Diluted Per Share Data |
|||||||
| Net (loss) income - basic and diluted |
$ | (0.04 | ) | $ | 0.02 | ||
| Average number of common shares outstanding during the period – basic |
96,906 | 199,308 | |||||
| Average number of common shares outstanding during the period – diluted |
96,906 | 200,449 | |||||
See Notes to Condensed Consolidated Financial Statements
3
CONDENSED CONSOLIDATED BALANCE SHEETS
BORDEN CHEMICAL, INC. (Unaudited)
(In thousands)
| ASSETS |
March 31, 2005 |
December 31, 2004 |
||||||
| Current Assets |
||||||||
| Cash and equivalents |
$ | 124,308 | $ | 122,111 | ||||
| Accounts receivable (less allowance for doubtful accounts of $9,754 in 2005 and $10,197 in 2004) |
217,618 | 226,235 | ||||||
| Inventories: |
||||||||
| Finished and in-process goods |
54,008 | 55,656 | ||||||
| Raw materials and supplies |
51,241 | 54,768 | ||||||
| Other current assets |
16,288 | 22,991 | ||||||
| 463,463 | 481,761 | |||||||
| Other Assets |
62,327 | 53,314 | ||||||
| Property and Equipment |
||||||||
| Land |
33,174 | 32,945 | ||||||
| Buildings |
103,493 | 103,504 | ||||||
| Machinery and equipment |
734,833 | 733,285 | ||||||
| 871,500 | 869,734 | |||||||
| Less accumulated depreciation |
(430,736 | ) | (421,728 | ) | ||||
| 440,764 | 448,006 | |||||||
| Goodwill |
50,455 | 50,682 | ||||||
| Other Intangible Assets |
9,897 | 10,351 | ||||||
| Total Assets |
$ | 1,026,906 | $ | 1,044,114 | ||||
See Notes to Condensed Consolidated Financial Statements
4
CONDENSED CONSOLIDATED BALANCE SHEETS
BORDEN CHEMICAL, INC. (Unaudited)
(In thousands, except share data)
| LIABILITIES AND SHAREHOLDER’S DEFICIT |
March 31, 2005 |
December 31, 2004 |
||||||
| Current Liabilities |
||||||||
| Accounts and drafts payable |
$ | 208,316 | $ | 222,173 | ||||
| Debt payable within one year |
8,181 | 11,588 | ||||||
| Income taxes payable |
33,616 | 31,556 | ||||||
| Interest payable |
15,956 | 26,022 | ||||||
| Other current liabilities |
92,426 | 74,417 | ||||||
| 358,495 | 365,756 | |||||||
| Other Liabilities |
||||||||
| Long-term debt |
955,157 | 955,816 | ||||||
| Non-pension post-employment benefit obligations |
110,824 | 114,502 | ||||||
| Other long-term liabilities |
157,341 | 156,865 | ||||||
| 1,223,322 | 1,227,183 | |||||||
| Commitments and Contingencies (See Note 8) |
||||||||
| Shareholder’s Deficit |
||||||||
| Common stock - $0.01 par value: authorized 300,000,000 shares, Issued 200,167,297, treasury 103,261,361, outstanding 96,905,936 shares in 2005 and 2004 |
969 | 969 | ||||||
| Paid-in capital |
1,286,743 | 1,274,358 | ||||||
| Treasury stock |
(295,881 | ) | (295,881 | ) | ||||
| Receivable from parent |
(572,816 | ) | (560,672 | ) | ||||
| Accumulated other comprehensive loss |
(109,558 | ) | (107,493 | ) | ||||
| Accumulated deficit |
(864,368 | ) | (860,106 | ) | ||||
| (554,911 | ) | (548,825 | ) | |||||
| Total Liabilities and Shareholder’s Deficit |
$ | 1,026,906 | $ | 1,044,114 | ||||
See Notes to Condensed Consolidated Financial Statements
5
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
BORDEN CHEMICAL, INC.
| (In thousands) |
Three months ended March 31, |
|||||||
| 2005 |
2004 |
|||||||
| Cash Flows from (used in) Operating Activities |
||||||||
| Net (loss) income |
$ | (4,262 | ) | $ | 4,914 | |||
| Adjustments to reconcile net (loss) income to net cash from (used in) operating activities: |
||||||||
| Depreciation and amortization |
12,360 | 11,943 | ||||||
| Unrealized loss (gain) on derivative instruments |
9,809 | (145 | ) | |||||
| Business realignment and impairments (income) expense |
(382 | ) | 1,494 | |||||
| Gain on sale of venture interest |
(1,614 | ) | — | |||||
| Deferred tax expense (benefit) |
908 | (1,362 | ) | |||||
| Other non-cash adjustments |
(10 | ) | 981 | |||||
| Net change in assets and liabilities: |
||||||||
| Accounts receivable |
8,323 | (3,613 | ) | |||||
| Inventories |
4,930 | 2,238 | ||||||
| Accounts and drafts payable |
(13,526 | ) | 15,986 | |||||
| Income taxes |
2,126 | (1,025 | ) | |||||
| Other assets |
6,609 | (8,034 | ) | |||||
| Other liabilities |
(13,099 | ) | (17,546 | ) | ||||
| 12,172 | 5,831 | |||||||
| Cash Flows (used in) from Investing Activities |
||||||||
| Capital expenditures |
(6,481 | ) | (7,471 | ) | ||||
| Deferred acquisition costs (see Note 1) |
(9,128 | ) | — | |||||
| Proceeds from the sale of venture interest |
2,507 | — | ||||||
| Proceeds from the sale of assets |
— | 8,105 | ||||||
| (13,102 | ) | 634 | ||||||
| Cash Flows (used in) from Financing Activities |
||||||||
| Net short-term debt repayments |
(3,407 | ) | (3,026 | ) | ||||
| Borrowings of long-term debt |
— | 3,028 | ||||||
| Repayments of long-term debt |
(663 | ) | — | |||||
| Purchase price adjustment payable to parent (see Note 5) |
7,500 | |||||||
| Affiliated loan repayments |
— | (4,960 | ) | |||||
| 3,430 | (4,958 | ) | ||||||
| Effect of exchange rates on cash |
(303 | ) | (37 | ) | ||||
| Increase in cash and equivalents |
2,197 | 1,470 | ||||||
| Cash and equivalents at beginning of period |
122,111 | 28,162 | ||||||
| Cash and equivalents at end of period |
$ | 124,308 | $ | 29,632 | ||||
| Supplemental Disclosures of Cash Flow Information |
||||||||
| Cash paid: |
||||||||
| Interest, net |
$ | 31,497 | $ | 16,125 | ||||
| Income taxes, net |
2,299 | 6,324 | ||||||
| Non-cash activity: |
||||||||
| Capital contribution by parent |
— | 4,250 | ||||||
See Notes to Condensed Consolidated Financial Statements
6
CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDER’S DEFICIT (Unaudited)
BORDEN CHEMICAL, INC.
(In thousands)
| Common Stock |
Paid-in Capital |
Treasury Stock |
Receivable from Parent |
Accumulated Other Comprehensive Loss |
Accumulated Deficit |
Total |
||||||||||||||||||||
| Balance, December 31, 2004 |
$ | 969 | $ | 1,274,358 | $ | (295,881 | ) | $ | (560,672 | ) | $ | (107,493 | ) | $ | (860,106 | ) | $ | (548,825 | ) | |||||||
| Net loss |
(4,262 | ) | (4,262 | ) | ||||||||||||||||||||||
| Translation adjustments |
(2,065 | ) | (2,065 | ) | ||||||||||||||||||||||