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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
June 28, 2002
[_] 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: 333-19495
RADNOR HOLDINGS CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 23-2674715
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
Three Radnor Corporate Center, Suite 300
100 Matsonford Road, Radnor, Pennsylvania 19087
(address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 610-341-9600
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes [X] No [_]
The number of shares outstanding of the Registrant's common stock as of
August 9, 2002:
Number
Class of Shares
-------------------------------------------------------- -----------
Voting Common Stock; $.10 par value 600
Nonvoting Common Stock; $.10 par value 245
Class B Nonvoting Common Stock; $.01 par value 5,400
================================================================================
PART I - FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
RADNOR HOLDINGS CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share amounts)
(Unaudited)
June 28, December 28,
2002 2001
----------- ------------
ASSETS
------
CURRENT ASSETS:
Cash $ 2,153 $ 4,304
Accounts receivable, net 45,024 33,044
Inventories, net 35,342 30,939
Prepaid expenses and other 11,844 9,908
Deferred income tax asset 2,131 2,123
---------- ----------
Total current assets 96,494 80,318
---------- ----------
PROPERTY, PLANT AND EQUIPMENT, AT COST: 240,779 232,586
LESS - ACCUMULATED DEPRECIATION (66,126) (58,102)
---------- ----------
NET PROPERTY, PLANT AND EQUIPMENT 174,653 174,484
---------- ----------
OTHER NON CURRENT ASSETS 19,858 19,384
---------- ----------
Total assets $ 291,005 $ 274,186
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES:
Accounts payable $ 38,330 $ 34,865
Accrued liabilities and other current liabilities 16,880 18,098
Short-term borrowings 2,957 -
Current portion of long-term debt 4,202 3,987
Current portion of capitalized lease obligations 979 1,050
---------- ----------
Total current liabilities 63,348 58,000
---------- ----------
LONG-TERM DEBT, net of current portion 210,839 205,426
---------- ----------
CAPITAL LEASE OBLIGATIONS, net of current portion 2,072 2,447
---------- ----------
DEFERRED INCOME TAX LIABILITY 7,050 6,064
---------- ----------
OTHER NON CURRENT LIABILITIES 2,150 2,132
---------- ----------
COMMITMENTS AND CONTINGENCIES - -
STOCKHOLDERS' EQUITY:
Voting and nonvoting common stock, 22,700 shares authorized,
6,245 shares issued and outstanding 1 1
Additional paid-in capital 19,387 19,387
Retained deficit (7,513) (9,310)
Cumulative translation adjustment (6,329) (9,961)
---------- ----------
Total stockholders' equity 5,546 117
---------- ----------
Total liabilities and stockholders' equity $ 291,005 $ 274,186
========== ==========
The accompanying notes are an integral part of these condensed consolidated
financial statements.
2
RADNOR HOLDINGS CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(In thousands)
For the three months ended For the six months ended
---------------------------- --------------------------
June 28, June 29, June 28, June 29,
2002 2001 2002 2001
---------- ---------- ---------- ----------
NET SALES $ 87,295 $ 89,237 $ 160,633 $ 168,603
COST OF GOODS SOLD 62,775 66,653 116,678 129,451
---------- ---------- ---------- ----------
GROSS PROFIT 24,520 22,584 43,955 39,152
OPERATING EXPENSES:
Distribution 5,815 6,192 10,940 11,985
Selling, general and administrative 10,364 9,211 19,537 18,697
---------- ---------- ---------- ----------
INCOME FROM CONTINUING OPERATIONS 8,341 7,181 13,478 8,470
OTHER EXPENSE:
Interest, net 5,084 5,596 10,096 10,981
Other, net 375 319 503 645
---------- ---------- ---------- ----------
INCOME (LOSS) BEFORE INCOME TAXES, EXTRAORDINARY
ITEM AND DISCONTINUED OPERATIONS 2,882 1,266 2,879 (3,156)
PROVISION (BENEFIT) FOR INCOME TAXES:
Current 116 57 115 (120)
Deferred 979 400 979 (1,015)
---------- ---------- ---------- ----------
1,095 457 1,094 (1,135)
---------- ---------- ---------- ----------
INCOME (LOSS) BEFORE EXTRAORDINARY ITEM AND
DISCONTINUED OPERATIONS 1,787 809 1,785 (2,021)
EXTRAORDINARY GAIN, net of tax - - 60 -
LOSS FROM DISCONTINUED OPERATIONS, net of tax (48) (125) (48) (125)
---------- ---------- ---------- ----------
NET INCOME (LOSS) $ 1,739 $ 684 $ 1,797 $ (2,146)
========== ========== ========== ==========
The accompanying notes are an integral part of these condensed
consolidated financial statements.
3
RADNOR HOLDINGS CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
For the six months ended
--------------------------
June 28, June 29,
2002 2001
---------- ----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 1,797 $ (2,146)
Adjustments to reconcile net income (loss) to cash used
in operating activities-
Depreciation and amortization 8,717 9,545
Deferred income taxes 979 (1,015)
Extraordinary gain (60) -
Loss from discontinued operations 48 125
Changes in operating assets and liabilities, net of
disposition of businesses-
Accounts receivable, net (10,172) (4,338)
Inventories, net (3,681) (6,819)
Prepaid expenses and other (736) 238
Accounts payable 1,392 624
Accrued liabilities and other (1,366) (1,900)
---------- ----------
Net cash used in continuing operations (3,082) (5,686)
Net cash used in discontinued operations (130) (15)
---------- ----------
Net cash used in operating activities (3,212) (5,701)
---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (3,990) (8,382)
Increase in other assets (2,376) (1,255)
---------- ----------
Net cash used in investing activities (6,366) (9,637)
---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings on bank financed debt and
unsecured notes payable 8,135 14,345
Net payments on capital lease obligations (446) (575)
---------- ----------
Net cash provided by financing activities 7,689 13,770
---------- ----------
EFFECT OF EXCHANGE RATE CHANGES ON CASH (262) (886)
---------- ----------
NET DECREASE IN CASH (2,151) (2,454)
CASH, beginning of period 4,304 3,726
---------- ----------
CASH, end of period $ 2,153 $ 1,272
========== ==========
SUPPLEMENTAL CASH FLOW DISCLOSURES
Interest paid $ 9,433 $ 9,705
========== ==========
Income taxes paid $ 257 $ 25
========== ==========
The accompanying notes are an integral part of these condensed consolidated
financial statements.
4
RADNOR HOLDINGS CORPORATION AND SUBSIDIARIES
SUMMARY BY OPERATING SEGMENTS
(Unaudited)
(In thousands)
For the three months ended For the six months ended
------------------------------ --------------------------
June 28, June 29, June 28, June 29,
2002 2001 2002 2001
--------- ---------- --------- ---------
Sales to Unaffiliated Customers:
Packaging and Insulation $ 52,184 $ 65,040 $ 101,313 $ 121,385
Specialty Chemicals 37,074 29,164 63,304 59,116
Corporate and Other 482 568 944 1,169
Transfers Between Operating
Segments /(1)/ (2,445) (5,535) (4,928) (13,067)
--------- --------- --------- ---------
Consolidated $ 87,295 $ 89,237 $ 160,633 $ 168,603
--------- --------- --------- ---------
Income (Loss) from Continuing Operations:
Packaging and Insulation $ 7,933 $ 7,568 $ 16,123 $ 11,127
Specialty Chemicals 2,605 1,214 1,553 238
Corporate and Other (2,197) (1,601) (4,198) (2,895)
--------- --------- --------- ---------
Consolidated $ 8,341 $ 7,181 $ 13,478 $ 8,470
--------- --------- --------- ---------
Income (Loss) before Income Taxes, Extraordinary
Item and Discontinued Operations:
Packaging and Insulation $ 5,024 $ 3,947 $ 10,294 $ 4,478
Specialty Chemicals 918 14 (1,435) (2,549)
Corporate and Other (3,060) (2,695) (5,980) (5,085)
--------- --------- --------- ---------
Consolidated $ 2,882 $ 1,266 $ 2,879 $ (3,156)
--------- --------- --------- ---------
/(1)/ Transfers between operating segments reflect the sale of expandable
polystyrene ("EPS") bead from the specialty chemicals operating segment
to the packaging and insulation operating segment. Excluding the impact
of the European insulation operations, which were divested on December
12, 2001, transfers between operating segments would have been $2.0
million and $5.4 million for the three and six months ended June 29,
2001, respectively.
5
RADNOR HOLDINGS CORPORATION AND SUBSIDIARIES
SUMMARY BY GEOGRAPHIC REGIONS
(Unaudited)
(In thousands)
For the three months ended For the six months ended
---------------------------- --------------------------
June 28, June 29, June 28, June 29,
2002 2001 2002 2001
---------- --------- --------- ----------
Net Sales to Unaffiliated Customers:
United States $ 59,952 $ 60,807 $ 116,590 $ 116,614
Canada 8,687 6,990 15,786 14,501
Europe 21,129 23,540 33,232 43,020
Transfers Between Geographic
Regions /(1)/ (2,473) (2,100) (4,975) (5,532)
--------- --------- --------- ---------
Consolidated $ 87,295 $ 89,237 $ 160,633 $ 168,603
--------- --------- --------- ---------
Income from Continuing Operations:
United States $ 4,580 $ 4,644 $ 8,880 $ 5,609
Canada 1,541 1,098 2,925 1,716
Europe 2,220 1,439 1,673 1,145
--------- --------- --------- ---------
Consolidated $ 8,341 $ 7,181 $ 13,478 $ 8,470
--------- --------- --------- ---------
Income (Loss) before Income Taxes, Extraordinary
Item and Discontinued Operations:
United States $ 58 $ 45 $ (136) $ (2,909)
Canada 1,076 852 2,160 1,051
Europe 1,748 369 855 (1,298)
--------- --------- --------- ---------
Consolidated $ 2,882 $ 1,266 $ 2,879 $ (3,156)
--------- --------- --------- ---------
/(1)/ Transfers between geographic regions reflect the sale of EPS bead from
the Company's Canadian specialty chemical operations to its domestic
food packaging operations as well as the sale of product from the
Company's domestic food packaging operations to its European food
packaging operations.
6
RADNOR HOLDINGS CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(1) BASIS OF PRESENTATION
The condensed consolidated financial statements included herein have been
prepared by Radnor Holdings Corporation and subsidiaries (collectively,
"Radnor" or the "Company") pursuant to the rules and regulations of the
Securities and Exchange Commission. Certain information and footnote
disclosures normally included in consolidated financial statements prepared
in accordance with generally accepted accounting principles have been
condensed or omitted pursuant to such rules and regulations. In the opinion
of the Company, the statements include all adjustments (which include only
normal recurring adjustments) required for a fair statement of financial
position, results of operations and cash flows for such periods. The
results of operations for the interim periods are not necessarily
indicative of the results for a full year, due to the seasonality inherent
in some of the Company's operations and the possibility for general
economic changes.
(2) DISCONTINUED OPERATIONS
Pursuant to an asset purchase agreement among Benchmark Holdings, Inc.
("Benchmark"), WinCup Holdings, Inc. ("WinCup"), and the Fort James
Corporation, formerly James River Paper Company, Inc. ("Fort James"), dated
October 31, 1995, Benchmark and WinCup sold to Fort James all of the assets
of Benchmark's cutlery and straws business and all of the assets of
WinCup's thermoformed cup business, except for cash, accounts receivable
and prepaid assets. The operations of Benchmark's cutlery and straws
business and WinCup's thermoformed cup business were accounted for as
discontinued operations. Discontinued operations represent legal costs
incurred in conjunction with the above mentioned business.
(3) EXTRAORDINARY GAIN
In February 2002, the Company retired $500,000 principal amount of its 10%
Senior Notes due December 1, 2003. An extraordinary gain of $60,000 was
realized as a result of the early retirement, net of a $36,000 provision
for income taxes.
(4) INVENTORIES
The components of inventories were as follows (in thousands):
June 28, December 28,
2002 2001
----------- ------------
Raw Materials $ 8,164 $ 6,813
Work in Process 2,015 1,290
Finished Goods 25,163 22,836
--------- ---------
$ 35,342 $ 30,939
========= =========
7
(5) INTEREST EXPENSE
Included in interest expense was $375,000 and $374,000 of amortization of
deferred financing costs for the three months ended June 28, 2002 and June
29, 2001, respectively, and $749,000 and $748,000 of amortization of
deferred financing costs for the six months ended June 28, 2002 and June
29, 2001, respectively. Premium amortization related to the issuance of the
Company's 10% Series B Senior Notes due 2003 of $105,000 and $93,000 for
the three months ended June 28, 2002 and June 29, 2001, respectively, and
$210,000 and $180,000 for the six months ended June 28, 2002 and June 29,
2001, respectively, was also included in interest expense.
(6) COMPREHENSIVE INCOME
Comprehensive income is the total of net income (loss) and non-owner
changes in equity. The Company had comprehensive income (loss) as follows
(in thousands):
Three Months Ended Six Months Ended
------------------ ------------------
June 28, June 29, June 28, June 29,
2002 2001 2002 2001
-------- -------- -------- --------
Net Income (Loss) $ 1,739 $ 684 $ 1,797 $(2,146)
Foreign Currency Translation Adjustment 4,022 (1,554) 3,632 (4,681)
------- ------- ------- -------
Comprehensive Income (Loss) $ 5,761 $ (870) $ 5,429 $(6,827)
======= ======= ======= =======
(7) NEW ACCOUNTING STANDARDS
In April 2002, the FASB issued SFAS No. 145, "Rescission of FASB Statements
No. 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical
Corrections." This Statement rescinds SFAS No. 4, "Reporting Gains and
Losses from Extinguishment of Debt," and SFAS No. 64, "Extinguishments of
Debt Made to Satisfy Sinking-Fund Requirements." The Statement requires
gains and losses from debt extinguishments that are used as part of the
company's risk management strategy to be classified as income from
operations rather than as extraordinary items, net of tax. Upon adoption,
the Company will reclassify debt extinguishments previously recorded as
extraordinary items into operating income. Statement 145 is effective for
fiscal years beginning after May 15, 2002, with early adoption permitted.
(8) SUPPLEMENTAL FINANCIAL INFORMATION
Radnor Holdings Corporation is a holding company that has no operations
separate from its investment in subsidiaries. The Company's $100 million
Series A Senior Notes and the $60 million Series B Senior Notes are
guaranteed by substantially all of the Company's domestic subsidiaries. The
following consolidating financial statements of Radnor Holdings Corporation
and subsidiaries have been prepared pursuant to Rule 3-10 of Regulation
S-X:
8
RADNOR HOLDINGS CORPORATION AND SUBSIDIARIES
CONSOLIDATING BALANCE SHEETS
As of June 28, 2002
(In thousands, except share amounts)
Holding Guarantor Non-Guarantor
Company Subsidiaries Subsidiaries Eliminations Consolidated
----------- -------------- --------------- -------------- --------------
ASSETS
------
CURRENT ASSETS:
Cash $ - $ 423 $ 1,730 $ - $ 2,153
Accounts receivable, net - 24,247 25,836 (5,059) 45,024
Inventories, net - 26,509 8,833 - 35,342
Intercompany receivable - - 20,336 (20,336) -
Prepaid expenses and other 148 10,955 799 (58) 11,844
Deferred income tax asset - 1,991 140 - 2,131
--------- --------- --------- --------- ---------
Total current assets 148 64,125 57,674 (25,453) 96,494
--------- --------- --------- --------- ---------
PROPERTY, PLANT AND EQUIPMENT, AT COST: - 193,873 46,906 - 240,779
LESS - ACCUMULATED DEPRECIATION - (54,478) (11,648) - (66,126)
--------- --------- --------- --------- ---------
NET PROPERTY, PLANT AND EQUIPMENT - 139,395 35,258 - 174,653
--------- --------- --------- --------- ---------
INTERCOMPANY RECEIVABLE 27,028 - - (27,028) -
INVESTMENT IN SUBSIDIARIES 106,153 25,078 - (131,231) -
OTHER NON CURRENT ASSETS 2,518 10,396 6,944 - 19,858
--------- --------- --------- --------- ---------
Total assets $ 135,847 $ 238,994 $ 99,876 $(183,712) $ 291,005
========= ========= ========= ========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES
Accounts payable $ - $ 25,678 $ 12,867 $ (215) $ 38,330
Accrued liabilities 1,201 13,182 2,554 (57) 16,880
Short-term borrowings - - 2,957 - 2,957
Intercompany payable - 20,062 - (20,062) -
Current portion of long-term debt and capitalized
lease obligations - 4,313 868 - 5,181
--------- --------- --------- --------- ---------
Total current liabilities 1,201 63,235 19,246 (20,334) 63,348
--------- --------- --------- --------- ---------
LONG-TERM DEBT, net of current portion 160,095 60,851 6,453 (16,560) 210,839
--------- --------- --------- --------- ---------
CAPITAL LEASE OBLIGATIONS, net of current portion - 2,072 - - 2,072
--------- --------- --------- --------- ---------
INTERCOMPANY PAYABLE 18,080 329 18,088 (36,497) -
--------- --------- --------- --------- ---------
DEFERRED INCOME TAX LIABILITY (3,979) 11,053 (24) - 7,050
--------- --------- --------- --------- ---------
OTHER NON CURRENT LIABILITIES - 2,150 - - 2,150
--------- --------- --------- --------- ---------
COMMITMENTS AND CONTINGENCIES - - - - -
STOCKHOLDERS' EQUITY:
Voting and nonvoting common stock 1 4 23 (27) 1
Additional paid-in capital 9,164 97,634 22,590 (110,001) 19,387
Retained earnings (deficit) (48,715) 8,318 33,177 (293) (7,513)
Cumulative translation adjustment - (6,652) 323 - (6,329)
--------- --------- --------- --------- ---------
Total stockholders' equity (39,550) 99,304 56,113 (110,321) 5,546
--------- --------- --------- --------- ---------
Total liabilities and stockholders' equity $ 135,847 $ 238,994 $ 99,876 $(183,712) $ 291,005
========= ========= ========= ========= =========
9
RADNOR HOLDINGS CORPORATION AND SUBSIDIARIES
CONSOLIDATING STATEMENTS OF INCOME
For the three months ended June 28, 2002
(In thousands)
Holding Guarantor Non-Guarantor
Company Subsidiaries Subsidiaries Eliminations Consolidated
--------- -------------- --------------- -------------- --------------
NET SALES $ - $ 60,405 $ 29,363 $ (2,473) $ 87,295
COST OF GOODS SOLD - 42,768 22,480 (2,473) 62,775
-------- -------- -------- -------- --------
GROSS PROFIT - 17,637 6,883 - 24,520
OPERATING EXPENSES:
Distribution - 4,302 1,513 - 5,815
Selling, general and administrative - 9,200 1,164 - 10,364
-------- -------- -------- -------- --------
INCOME FROM CONTINUING OPERATIONS - 4,135 4,206 - 8,341
OTHER EXPENSE:
Interest, net 2,440 2,208 436 - 5,084
Other, net - (127) 502 - 375
-------- -------- -------- -------- --------
Income (loss) before income taxes and discontinued
operations (2,440) 2,054 3,268 - 2,882
PROVISION FOR INCOME TAXES:
Current - 116 - - 116
Deferred - 979 - - 979
-------- -------- -------- -------- --------
- 1,095 - - 1,095
-------- -------- -------- -------- --------
Net income (loss) before discontinued operations (2,440) 959 3,268 - 1,787
LOSS FROM DISCONTINUED OPERATIONS, net of tax (48) - - - (48)
-------- -------- -------- -------- --------
NET INCOME (LOSS) $ (2,488) $ 959 $ 3,268 $ - $ 1,739
======== ======== ======== ======== ========
10
RADNOR HOLDINGS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
For the six months ended June 28, 2002
(In thousands)
Holding Guarantor Non-Guarantor
Company Subsidiaries Subsidiaries Eliminations Consolidated
--------- ------------ ------------- ------------ ------------
NET SALES $ - $ 117,482 $ 48,126 $ (4,975) $ 160,633
COST OF GOODS SOLD - 83,892 37,761 (4,975) 116,678
--------- --------- --------- --------- ---------
GROSS PROFIT - 33,590 10,365 - 43,955
OPERATING EXPENSES:
Distribution - 8,335 2,605 - 10,940
Selling, general and administrative - 17,351 2,186 - 19,537
--------- --------- --------- --------- ---------
INCOME FROM CONTINUING OPERATIONS - 7,904 5,574 - 13,478
OTHER EXPENSE:
Interest, net 2,440 6,887 769 - 10,096
Other, net - (288) 791 - 503
--------- --------- --------- --------- ---------
Income (loss) before income taxes, extraordinary item
and discontinued operations (2,440) 1,305 4,014 - 2,879
PROVISION FOR INCOME TAXES:
Current - 115 - - 115
Deferred - 979 - - 979
--------- --------- --------- --------- ---------
- 1,094 - - 1,094
--------- --------- --------- --------- ---------
Net income (loss) before extraordinary item
and discontinued operations (2,440) 211 4,014 - 1,785
--------- --------- --------- --------- ---------
EXTRAORDINARY GAIN, net of tax 60 - - - 60
LOSS FROM DISCONTINUED OPERATIONS, net of tax (48) - - - (48)
--------- --------- --------- --------- ---------
NET INCOME (LOSS) $ (2,428) $ 211 $ 4,014 $ - $ 1,797
========= ========= ========= ========= =========
RADNOR HOLDINGS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the six months ended June 28, 2002
(In thousands)
Holding Guarantor Non-Guarantor
Company Subsidiaries Subsidiaries Eliminations Consolidated
--------- ------------ ------------- ------------ ------------
Net cash used in operating activities $ (2,654) $ 2,558 $ (3,317) $ 201 $ (3,212)
Cash flows from investing activities:
Capital expenditures - (3,820) (170) - (3,990)
Change in other assets 525 (2,384) (517) - (2,376)
--------- --------- --------- --------- ---------
Net cash provided by (used in) investing activities 525 (6,204) (687) - (6,366)
--------- --------- --------- --------- ---------
Cash flows from financing activities:
Net borrowings on bank financed debt and
unsecured notes payable (404) 4,974 3,565 - 8,135
Net payments on capital lease obligations - (446) - - (446)
Change in intercompany, net 2,533 (3,908) 797 578 -
--------- --------- --------- --------- ---------
Net cash provided by financing activities 2,129 620 4,362 578 7,689
--------- --------- --------- --------- ---------
Effect of exchange rate changes on cash - 429 88 (779) (262)
--------- --------- --------- --------- ---------
Net increase (decrease) in cash - (2,597) 446 - (2,151)
Cash, beginning of period - 3,020 1,284 - 4,304
--------- --------- --------- --------- ---------
Cash, end of period $ - $ 423 $ 1,730 $ - $ 2,153
========= ========= ========= ========= =========
11
RADNOR HOLDINGS CORPORATION AND SUBSIDIARIES
CONSOLIDATING BALANCE SHEETS
As of December 28, 2001
(In thousands, except share amounts)
Holding Guarantor Non-Guarantor
Company Subsidiaries Subsidiaries Eliminations Consolidated
--------- ------------ ------------- ------------ ------------
ASSETS
------
CURRENT ASSETS:
Cash $ - $ 3,020 $ 1,284 $ - $ 4,304
Accounts receivable, net - 22,524 10,520 - 33,044
Inventories, net - 24,568 6,371 - 30,939
Intercompany receivable - - 24,906 (24,906) -
Prepaid expenses and other 148 8,520 1,240 - 9,908
Deferred income tax asset - 1,994 132 (3) 2,123
--------- --------- --------- --------- ---------
Total current assets 148 60,626 44,453 (24,909) 80,318
--------- --------- --------- --------- ---------
PROPERTY, PLANT AND EQUIPMENT, AT COST: - 190,065 42,521 - 232,586
LESS - ACCUMULATED DEPRECIATION - (48,914) (9,188) - (58,102)
--------- --------- --------- --------- ---------
NET PROPERTY, PLANT AND EQUIPMENT - 141,151 33,333 - 174,484
--------- --------- --------- --------- ---------
INTERCOMPANY RECEIVABLE 11,481 2,093 - (13,574) -
INVESTMENT IN SUBSIDIARIES 106,153 25,078 1 (131,232) -
DEFERRED INCOME TAX ASSET 3,985 - - (3,985) -
OTHER NON CURRENTASSETS 3,226 9,756 6,402 - 19,384
--------- --------- --------- --------- ---------
Total assets $ 124,993 $ 238,704 $ 84,189 $(173,700) $ 274,186
========= ========= ========= ========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES:
Accounts payable $ - $ 25,366 $ 9,499 $ - $ 34,865
Accrued liabilities 1,310 15,070 1,718 - 18,098
Intercompany payable - 24,516 - (24,516) -
Current deferred income tax liability - - 3 (3) -
Current portion of long-term debt and capitalized -
lease obligations - 4,245 792 - 5,037
--------- --------- --------- --------- ---------
Total current liabilities 1,310 69,197 12,012 (24,519) 58,000
--------- --------- --------- --------- ---------
LONG-TERM DEBT, net of current portion 160,805 39,456 5,165 - 205,426
--------- --------- --------- --------- ---------
CAPITAL LEASE OBLIGATIONS, net of current portion - 2,447 - - 2,447
--------- --------- --------- --------- ---------
INTERCOMPANY PAYABLE - - 35,155 (35,155) -
--------- --------- --------- --------- ---------
DEFERRED INCOME TAX LIABILITY - 10,072 (23) (3,985) 6,064
--------- --------- --------- --------- ---------
OTHER NON CURRENT LIABILITIES - 2,132 - 2,132
--------- --------- --------- --------- ---------
COMMITMENTS AND CONTINGENCIES - - - - -
STOCKHOLDERS' EQUITY:
Voting and nonvoting common stock 1 4 23 (27) 1
Additional paid-in capital 9,164 97,634 22,590 (110,001) 19,387
Retained earnings (deficit) (46,287) 25,745 11,225 7 (9,310)
Cumulative translation adjustment - (7,983) (1,958) (20) (9,961)
--------- --------- --------- --------- ---------
Total stockholders' equity (37,122) 115,400 31,880 (110,041) 117
--------- --------- --------- --------- ---------
Total liabilities and stockholders' equity $ 124,993 $ 238,704 $ 84,189 $(173,700) $ 274,186
========= ========= ========= ========= =========
12
RADNOR HOLDINGS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
For the three months ended June 29, 2001
(In thousands)
Holding Guarantor Non-Guarantor
Company Subsidiaries Subsidiaries Eliminations Consolidated
--------- ------------ ------------- ------------ ------------
NET SALES $ - $ 61,157 $ 30,180 $ (2,100) $ 89,237
COST OF GOODS SOLD - 46,134 22,619 (2,100) 66,653
--------- --------- --------- --------- ---------
GROSS PROFIT - 15,023 7,561 - 22,584
OPERATING EXPENSES:
Distribution - 4,253 1,939 - 6,192
Selling, general and administrative 2 6,676 2,533 - 9,211
--------- --------- --------- --------- ---------
INCOME FROM CONTINUING OPERATIONS (2) 4,094 3,089 - 7,181
OTHER EXPENSE:
Interest, net 1,237 3,316 1,043 - 5,596
Other, net 9 5 305 - 319
--------- --------- --------- --------- ---------
INCOME (LOSS) BEFORE INCOME TAXES
AND DISCONTINUED OPERATIONS (1,248) 773 1,741 - 1,266
PROVISION FOR INCOME TAXES:
Current - 48 9 - 57
Deferred - 400 - - 400
--------- --------- --------- --------- ---------
- 448 9 - 457
--------- --------- --------- --------- ---------
INCOME (LOSS) BEFORE DISCONTINUED OPERATIONS (1,248) 325 1,732 - 809
LOSS FROM DISCONTINUED OPERATIONS, net of tax 125 - - - 125
--------- --------- --------- --------- ---------
NET INCOME (LOSS) $ (1,373) $ 325 $ 1,732 $ - $ 684
========= ========= ========= ========= =========
13
RADNOR HOLDINGS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
For the six months ended June 29, 2001
(In thousands)
Holding Guarantor Non-Guarantor
Company Subsidiaries Subsidiaries Eliminations Consolidated
--------- ------------ ------------- ------------ ------------
NET SALES $ - $ 117,197 $ 56,938 $ (5,532) $ 168,603
COST OF GOODS SOLD - 90,776 44,207 (5,532) 129,451
--------- --------- -------- --------- ---------
GROSS PROFIT - 26,421 12,731 - 39,152
OPERATING EXPENSES:
Distribution - 8,352 3,633 - 11,985
Selling, general and administrative 2 13,543 5,152 - 18,697
--------- --------- -------- --------- ---------
INCOME FROM CONTINUING OPERATIONS (2) 4,526 3,946 - 8,470
OTHER EXPENSE:
Interest, net 1,237 7,480 2,264 - 10,981
Other, net 9 (224) 860 - 645
--------- --------- -------- --------- ---------
INCOME (LOSS) BEFORE INCOME TAXES
AND DISCONTINUED OPERATIONS (1,248) (2,730) 822 - (3,156)
PROVISION (BENEFIT) FOR INCOME TAXES:
Current - (138) 18 - (120)
Deferred - (1,015) - - (1,015)
--------- --------- -------- --------- ---------
- (1,153) 18 - (1,135)
--------- --------- -------- --------- ---------
INCOME (LOSS) BEFORE DISCONTINUED OPERATIONS, net of tax (1,248) (1,577) 804 - (2,021)
--------- --------- -------- --------- ---------
LOSS FROM DISCONTINUED OPERATIONS 125 - - - 125
NET INCOME (LOSS) $ (1,373) $ (1,577) $ 804 $ - $ (2,146)
========= ========= ======== ========= =========
RADNOR HOLDINGS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the six months ended June 29, 2001
(In thousands)
Holding Guarantor Non-Guarantor
Company Subsidiaries Subsidiaries Eliminations Consolidated
--------- ------------ ------------- ------------ ------------
Net cash used in operating activities $ (2,549) $ (2,820) $ (332) $ - $ (5,701)
Cash flows from investing activities:
Capital expenditures - (3,998) (4,384) - (8,382)
Change in other assets 507 (773) (989) - (1,255)
--------- --------- -------- --------- ---------
Net cash provided by (used in) investing activities 507 (4,771) (5,373) - (9,637)
--------- --------- -------- --------- ---------
Cash flows from financing activities:
Net borrowings on bank financed debt and
unsecured notes payable - 8,548 5,797 - 14,345
Net payments on capital lease obligations - (455) (120) - (575)
Change in intercompany, net 2,042 (1,117) (925) - -
--------- --------- -------- --------- ---------
Net cash provided by financing activities 2,042 6,976 4,752 - 13,770
--------- --------- -------- --------- ---------
Effect of exchange rate changes on cash - (197) (689) - (886)
--------- --------- -------- --------- ---------
Net decrease in cash - (812) (1,642) - (2,454)
Cash, beginning of period - 894 2,832 - 3,726
--------- --------- -------- --------- ---------
Cash, end of period $ - $ 82 $ 1,190 $ - $ 1,272
========= ========= ======== ========= =========
14
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
General
Radnor Holdings Corporation, through acquisition and internal development,
has established itself as a leading worldwide manufacturer and distributor of
specialty chemical and foam packaging products for the foodservice, insulation
and packaging industries.
The packaging and insulation business segment manufactures and distributes
foam cup and container products for the foodservice industry, through its WinCup
Holdings, Inc. ("WinCup") subsidiary. WinCup is the second largest producer in
the United States of foam cups and containers for the foodservice industry. The
specialty chemicals business segment primarily manufactures and distributes
expandable polystyrene ("EPS") bead for internal consumption and distribution to
the insulation and packaging industries. Through its Radnor Chemical Corporation
("Radnor Chemical") subsidiary, the Company is the third largest worldwide
producer of EPS.
On December 12, 2001, the Company sold its European insulation operations.
Prior to that date, the Company's results of operations include the results of
the divested European insulation operations. See Note 1 to the financial
statements included under Item 8 in the Company's Report on Form 10-K for the
year ended December 28, 2001.
Results of Operations
CONSOLIDATED
Three Months Ended Six Months Ended
--------------------------- ---------------------------
June 28, June 29, June 28, June 29,
(Millions of dollars) 2002 2001 2002 2001
- ----------------------------------------------------------------------------------------
Net sales $ 87.3 $ 89.2 $ 160.6 $ 168.6
- ----------------------------------------------------------------------------------------
Gross profit 24.5 22.6 44.0 39.2
- ----------------------------------------------------------------------------------------
Operating expenses 16.2 15.4 30.5 30.7
- ----------------------------------------------------------------------------------------
Income from operations 8.3 7.2 13.5 8.5
- ----------------------------------------------------------------------------------------
Net sales for the three months ended June 28, 2002 were $87.3 million, a
decrease of $1.9 million from the three months ended June 29, 2001. Excluding
the impact of the divested European insulation operations, which were sold in
December 2001, net sales increased by $6.0 million. This increase was primarily
caused by higher sales volumes throughout the specialty chemicals operations.
Gross profit for the three months ended June 28, 2002 increased by $1.9
million to $24.5 million or 28.1% of net sales from $22.6 million or 25.3% of
net sales for the comparable period in 2001. Excluding the impact of the
European insulation operations, gross profit for the three months ended June 28,
2002 increased by $5.6 million or 29.6%. This increase was primarily caused by
higher selling prices in the food packaging operations and increased sales
volumes throughout the specialty chemicals segment, combined with reductions in
energy-related costs, increased manufacturing efficiencies and implemented cost
containment initiatives throughout the Company.
Operating expenses for the three months ended June 28, 2002 increased to
$16.2 million from $15.4 million for the comparable period in 2001. This
15
increase was primarily due to higher selling costs at the Company's domestic
food packaging operations and higher insurance and personnel costs at the
Company's corporate offices.
For the reasons described above, income from operations increased by $1.1
million to $8.3 million for the three months ended June 28, 2002. Excluding the
results of the divested European insulation operations, income from operations
increased by $2.6 million or 45.6% to $8.3 million for the three months ended
June 28, 2002 from $5.7 million for the similar period in the prior year.
Net sales for the six months ended June 28, 2002 were $160.6 million, a
decrease of $8.0 million from the comparable period in the prior year. Excluding
the impact of the divested European insulation operations, net sales increased
$4.4 million. This increase was primarily due to higher sales volumes throughout
the specialty chemicals segment, as mentioned above, partially offset by lower
EPS selling prices, resulting from reduced raw material costs during the first
quarter of 2002.
Gross profit for the six months ended June 28, 2002 increased by $4.8
million to $44.0 million or 27.4% of net sales from $39.2 million or 23.3% of
net sales for the same period in 2001. Excluding the impact of the divested
European insulation operations, gross profit increased by $10.9 million to $44.0
million for the six months ended June 28, 2002 from $33.1 million for the
comparable period in the prior year. This increase was primarily caused by
higher sales volumes in the Company's specialty chemicals operations, as
described above, as well as higher selling prices, lower energy-related costs
and improved manufacturing efficiencies in the domestic food packaging
operations.
Operating expenses decreased by $0.2 million to $30.5 million for the six
months ended June 28, 2002 from the same period in 2001. Excluding the impact of
the European insulation operations, operating expenses increased $3.9 million
over the six-month period ended June 29, 2001. This increase was primarily due
to higher selling costs at the Company's domestic food packaging operations and
higher insurance and personnel costs at the Company's corporate offices.
For the reasons described above, income from operations increased by $5.0
million to $13.5 million for the six months ended June 28, 2002. Excluding the
results of the divested European insulation operations, income from operations
for the six months ended June 28, 2002 increased by $6.9 million or 104.5% to
$13.5 million from $6.6 million for the similar period in the prior year.
SEGMENT ANALYSIS
Packaging & Insulation
Three Months Ended Six Months Ended
------------------------------ -----------------------------
June 28, June 29, June 28, June 29,
(Millions of dollars) 2002 2001 2002 2001
- --------------------------------------------------------------------------------------------
Net sales $ 52.2 $ 65.0 $ 101.3 $ 121.4
- --------------------------------------------------------------------------------------------
Gross profit 17.5 18.2 34.0 31.4
- --------------------------------------------------------------------------------------------
Operating expenses 9.6 10.6 17.9 20.3
- --------------------------------------------------------------------------------------------
Income from operations 7.9 7.6 16.1 11.1
- --------------------------------------------------------------------------------------------
Net sales in the packaging and insulation business segment decreased by
$12.8 million to $52.2 million for the three months ended June 28, 2002.
Excluding the impact of the European insulation operations, net sales decreased
by $1.4 million. This decrease was caused by lower sales volumes at the
Company's domestic packaging operations, partially offset by increased selling
prices.
16
Excluding the impact of the European insulation operations, gross profit
for the three months ended June 28, 2002 increased by $3.0 million to $17.5
million or 33.5% of net sales from $14.5 million or 27.1% of net sales for
the similar period in the prior year. This increase was caused by higher selling
prices, a reduction in energy-related costs, increased manufacturing
efficiencies and cost containment initiatives implemented during the first
quarter of 2002.
Operating expenses decreased to $9.6 million for the three months ended
June 28, 2002 from $10.6 million for the comparable period in 2001. Excluding
the impact of the European insulation operations, operating expenses increased
by $1.2 million, primarily as a result of increased selling costs in the
domestic operations.
For the reasons described above, income from operations increased by $0.3
million to $7.9 million for the three months ended June 28, 2002. Excluding the
results of the European insulation operations, income from operations increased
by $1.8 million or 29.5% to $7.9 million for the three months ended June 28,
2002 from $6.1 million for the same period in 2001.
Net sales for the six months ended June 28, 2002 were $101.3 million.
Excluding the impact of the European insulation operations, net sales decreased
$0.1 million. This decrease over the six-month period ended June 29, 2001 was
primarily due to lower sales volumes at the Company's domestic packaging
operations, almost entirely offset by higher selling prices.
Gross profit increased by $2.6 million to $34.0 million for the six months
ended June 28, 2002 from $31.4 million for the same six-month period in 2001.
Excluding the impact of the European insulation operations, gross profit
increased by $8.6 million to $34.0 million or 33.6% of net sales for the six
months ended June 28, 2002 from $25.4 million or 25.0% of net sales for the
comparable period in the prior year. This increase was primarily caused by
higher selling prices and lower energy and raw material costs, as well as from
improved manufacturing efficiencies resulting from engineering projects and
technology upgrades.
Operating expenses decreased to $17.9 million for the six months ended June
28, 2002 from $20.3 million for the same period in the prior year. Excluding the
impact of the European insulation operations, operating expenses increased by
$1.8 million, primarily as a result of increased selling costs.
For the reasons described above, income from operations increased by $5.0
million to $16.1 million for the six months ended June 28, 2002 versus the same
period in 2001. Excluding the results of the European insulation operations,
income from operations for the six months ended June 28, 2002 increased by $6.9
million or 75.0% to $16.1 million from $9.2 million for the comparable period in
the prior year.
Specialty Chemicals
Three Months Ended Six Months Ended
---------------------------- -------------------------------
June 28, June 29, June 28, June 29,
(Millions of dollars) 2002 2001 2002 2001
- -------------------------------------------------------------------------------------------
Net sales $ 37.1 $ 29.2 $ 63.3 $ 59.1
- -------------------------------------------------------------------------------------------
Gross profit 6.6 4.4 9.0 7.3
- -------------------------------------------------------------------------------------------
Operating expenses 4.0 3.2 7.4 7.1
- -------------------------------------------------------------------------------------------
Income from operations 2.6 1.2 1.6 0.2
- -------------------------------------------------------------------------------------------
Net sales for the second quarter of fiscal 2002 increased to $37.1 million
from $29.2 million for the same period in 2001. This $7.9 million increase was
primarily caused by increased sales volumes experienced throughout the entire
segment, partially offset by lower EPS selling prices. Net sales for the three
months ended June 28, 2002 and June 29, 2001 included sales to the packaging and
insulation segment of $2.4 million and
17
$5.5 million, respectively. Excluding the impact of the divested European
insulation operations, net sales to the packaging and insulation segment were
$2.0 million for the three-month period ended June 29, 2001.
Gross profit increased from $4.4 million or 15.1% of net sales to $6.6
million or 17.8% of net sales for the three months ended June 28, 2002. This
increase was primarily caused by higher sales volumes and manufacturing
efficiencies, partially offset by increased raw material costs and decreased EPS
selling prices, as described above.
Operating expenses as a percentage of net sales decreased to 10.8% for the
three-month period ended June 28, 2002 from 11.0% for the same period in the
prior year, due primarily to decreases in distribution resulting from lower
transportation costs. For the reasons described above, income from operations
increased $1.4 million or 116.7% to $2.6 million for the three months ended June
28, 2002.
For the six months ended June 28, 2002 net sales increased by $4.2 million
to $63.3 million. This increase was primarily due to higher sales volumes,
partially offset by lower EPS selling prices, resulting from reduced raw
material costs versus the comparable period in the prior year. Net sales for the
six months ended June 28, 2002 and June 29, 2001 included sales to the packaging
and insulation segment of $4.9 million and $13.1 million, respectively.
Excluding the impact of the divested European insulation operations, net sales
to the packaging and insulation segment would have been $5.4 million for the six
month period ended June 29, 2001.
Gross profit increased by $1.7 million to $9.0 million for the six months
ended June 28, 2002 from $7.3 million for the same period in 2001. As a
percentage of net sales, gross profit increased to 14.2% for the six months
ended June 28, 2002 from 12.4% for the similar period for 2001. As described
above, higher sales volumes, reduced raw material costs and improved
manufacturing efficiencies were partially offset by lower EPS selling prices.
Operating expenses as a percentage of net sales decreased to 11.7% for the
six months ended June 28, 2002 from 12.0% for the same period in 2001. This
decrease was primarily caused by reduced distribution costs resulting from lower
transportation costs. For the reasons described above, income from operations
increased $1.4 million to $1.6 million for the six months ended June 28, 2002
compared to the same period in 2001.
Corporate & Other
For the three months and six months ended June 28, 2002, corporate
operating expenses increased by $1.5 million and $2.2 million, respectively,
over the same period in 2001. This increase was primarily due to higher
insurance and personnel costs.
Interest Expense
Three Months Ended Six Months Ended
--------------------------- -------------------------
June 28, June 29, June 28, June 29,
(Millions of dollars) 2002 2001 2002 2001
- --------------------------------------------------------------------------------
Interest expense $ 5.1 $ 5.6 $ 10.1 $ 11.0
- --------------------------------------------------------------------------------
Interest expense for the three months and six months ended June 28, 2002
decreased by $0.5 million and $0.9 million, respectively, from the same periods
in the prior year. This decrease was caused by a reduction in long-term debt
resulting from the sale of the European insulation operations in December 2001
combined with lower interest rates on the Company's revolving credit facilities.
18
Income Taxes
Three Months Ended Six Months Ended
--------------------------- -------------------------
June 28, June 29, June 28, June 29,
(Millions of dollars) 2002 2001 2002 2001
- -------------------------------------------------------------------------------------
Income tax expense (benefit) $ 1.1 $ 0.5 $ 1.1 $ (1.1)
- -------------------------------------------------------------------------------------
The effective tax rate for the three months and six months ended June 28,
2002 increased to 38.0% of pre-tax income from 36.1% of pre-tax income for the
comparable periods in 2001. The higher effective tax rate in 2002 was primarily
due to a higher proportion of total taxable income in the United States and
Canada. As of June 28, 2002, the Company had approximately $66.5 million of net
operating loss carryforwards for federal income tax purposes, which expire
through 2021.
Liquidity and Capital Resources
During the six months ended June 28, 2002, the Company generated after-tax
cash flow of $11.5 million. Combined with a $2.2 million reduction in cash and
$7.7 million of net borrowings on bank financed debt and capital lease
obligations, after-tax cash flow was used to fund capital expenditures of $4.0
million and a $14.6 million investment in working capital.
As of June 28, 2002, the Company had $32.7 million outstanding under its
credit facilities. Including cash on hand, the Company had $7.3 million of
availability under these facilities as of June 28, 2002. The principal uses of
cash for the near term will be working capital requirements, capital
expenditures and debt service.
As a holding company, Radnor Holdings Corporation is dependent upon
dividends and other payments from its subsidiaries to generate the funds
necessary to meet its obligations. Subject to certain limitations under
applicable state law and the Company's credit agreements, Radnor Holdings
Corporation is, and will continue to be, able to control its receipt of
dividends and other payments from its subsidiaries. Management believes that
cash generated from operations, together with available borrowings under the
revolving credit facilities, will be sufficient to meet the Company's expected
operating needs and planned capital expenditures, as well as debt service
requirements through December 1, 2003. In addition, the Company is evaluating
various refinancing options with respect to its Series A and Series B notes due
December 1, 2003.
Other Financial Data
Financial Instruments
There has been no material change in the net financial instrument position
or sensitivity to market risk since the disclosure in the annual report.
Forward Looking Statements
All statements contained herein that are not historical facts are based on
current expectations. These statements are forward looking in nature and involve
a number of risks and uncertainties. Such risks and uncertainties are described
in detail in the Company's Report on Form 10-K for the year ended December 28,
2001, Commission File No. 333-19495, to which reference is hereby made.
19
PART II - OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS
The Company is involved in various legal actions arising in the normal
course of business. After taking into consideration legal counsel's evaluation
of such actions, management believes that these actions will not have a material
effect on the Company's financial position or results of operations.
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
99.1 Statement of Chief Executive Officer Pursuant to Section
1350 of Title 18 of the United States Code
99.2 Statement of Chief Financial Officer Pursuant to Section
1350 of Title 18 of the United States Code
(b) Reports on Form 8-K
The Company filed a Current Report on Form 8-K under Item 4 on June
27, 2002 relating to the change in Radnor's certifying accountant to
KPMG LLP from Arthur Andersen LLP.
20
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.
RADNOR HOLDINGS CORPORATION
By: /s/ Michael V. Valenza
--------------------------
Date: August 9, 2002 Michael V. Valenza
Senior Vice President-Finance and
Chief Financial Officer
21