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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------
FORM 10-Q
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(Mark One)
|X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2001
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 333-64641
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Philipp Brothers Chemicals, Inc.
(Exact name of registrant as specified in its charter)
New York 13-1840497
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
One Parker Plaza, Fort Lee, New Jersey 07024
(Address of principal executive offices) (Zip Code)
(201) 944-6020
(Registrant's telephone number, including area code)
----------
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 |_|
Number of shares of each class of common stock outstanding as of September 30,
2001:
Class A Common Stock, $.10 par value: 12,600.00
Class B Common Stock, $.10 par value: 11,888.50
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PHILIPP BROTHERS CHEMICALS, INC.
TABLE OF CONTENTS
Page
----
PART I FINANCIAL INFORMATION (UNAUDITED)
Item 1. Condensed Financial Statements ............................. 3
Condensed Consolidated Balance Sheets ...................... 4
Condensed Consolidated Statements of Operations
and Comprehensive Income ................................... 5
Condensed Consolidated Statements of Changes
in Stockholders' Equity .................................... 6
Condensed Consolidated Statements of Cash Flows ............ 7
Notes to Condensed Consolidated Financial Statements ....... 8
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations ........................ 18
Item 3. Quantitative and Qualitative Disclosures About
Market Risk ................................................ 21
PART II OTHER INFORMATION
Item 5. Other Information .......................................... 22
Item 6. Exhibits and Reports on Form 8-K ........................... 22
SIGNATURES ................................................................. 23
2
This Form 10-Q contains "forward-looking statements" within the meaning of
Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. The Company's actual results could
differ materially from those set forth in the forward-looking statements.
Certain factors that might cause such a difference are discussed in the
Company's Annual Report on Form 10-K for its fiscal year ended June 30, 2001
and/or throughout this Form 10-Q and in particular in Item 2 of Part I of this
Form 10-Q under the caption "Certain Factors Affecting Future Operating
Results." Unless the context otherwise requires, references in this report to
the "Company" refers to the Company and/or one or more of its subsidiaries, as
applicable.
PART I -- FINANCIAL INFORMATION
Item 1. Condensed Financial Statements
3
PHILIPP BROTHERS CHEMICALS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)
(In Thousands)
September 30, June 30,
2001 2001
------------- --------
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 17,357 $ 14,845
Trade receivables, less allowance for
doubtful accounts of $2,486 at
September 30, 2001 and $2,369
at June 30, 2001 72,985 77,910
Other receivables 2,437 4,800
Inventories 88,245 83,796
Prepaid expenses and other current assets 16,297 17,448
--------- ---------
TOTAL CURRENT ASSETS 197,321 198,799
PROPERTY, PLANT AND EQUIPMENT, net 105,223 102,323
INTANGIBLES 5,873 5,832
OTHER ASSETS 23,492 23,065
--------- ---------
$ 331,909 $ 330,019
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Cash overdraft $ 4,430 $ 4,222
Loans payable to banks 31,540 28,463
Current portion of long-term debt 4,802 5,404
Accounts payable 51,636 51,304
Accrued expenses and other current
liabilities 36,581 35,378
--------- ---------
TOTAL CURRENT LIABILITIES 128,989 124,771
LONG-TERM DEBT 139,467 139,464
OTHER LIABILITIES 14,759 12,926
--------- ---------
TOTAL LIABILITIES 283,215 277,161
--------- ---------
COMMITMENTS AND CONTINGENCIES
REDEEMABLE SECURITIES:
Series B and C preferred stock 51,407 48,980
Common stock -- 378
Common stock of subsidiary 95 95
--------- ---------
TOTAL REDEEMABLE SECURITIES 51,502 49,453
--------- ---------
STOCKHOLDERS' EQUITY:
Series A preferred stock 521 521
Common stock 2 2
Paid-in capital 878 878
Retained earnings 4,949 9,741
Accumulated other comprehensive
income (loss) - gain on derivative
instruments 145 --
cumulative currency translation
adjustment (9,303) (7,737)
--------- ---------
TOTAL STOCKHOLDERS' EQUITY (2,808) 3,405
--------- ---------
$ 331,909 $ 330,019
========= =========
See notes to unaudited Condensed Consolidated Financial Statements.
4
PHILIPP BROTHERS CHEMICALS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
(Unaudited)
For the Three Months Ended September 30, 2001 and 2000
(In Thousands)
2001 2000
-------- --------
NET SALES $ 94,659 $ 72,795
COST OF GOODS SOLD 67,596 52,290
-------- --------
GROSS PROFIT 27,063 20,505
SELLING, GENERAL AND ADMINISTRATIVE
EXPENSES 25,654 19,095
-------- --------
OPERATING INCOME 1,409 1,410
OTHER:
Interest expense 4,643 3,939
Interest income (70) (217)
Other (income)/expense, net (195) 1,328
-------- --------
LOSS BEFORE INCOME TAXES (2,969) (3,640)
BENEFIT FOR INCOME TAXES (604) (521)
-------- --------
NET LOSS (2,365) (3,119)
OTHER COMPREHENSIVE INCOME (LOSS)-
Gain on derivative instruments 145 --
Change in currency translation
adjustment (1,566) (1,161)
-------- --------
COMPREHENSIVE LOSS $ (3,786) $ (4,280)
======== ========
See notes to unaudited Condensed Consolidated Financial Statements.
5
PHILIPP BROTHERS CHEMICALS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (Unaudited)
For the Three Months Ended September 30, 2001
(In Thousands)
Preferred Common Stock Accumulated
Stock -------------------- Other
--------- Class Class Paid-in Retained Comprehensive
Series A "A" "B" Capital Earnings (Loss) income- Total
--------- ------- ------- ------- -------- -------------- -----
BALANCE, JULY 1, 2001 $ 521 $ 1 $ 1 $ 878 $ 9,741 $(7,737) $ 3,405
Accretion of redeemable
preferred securities to fair
market value (590) (590)
Dividends on Series B and C
redeemable preferred stock (1,837) (1,837)
Gain on derivative
instruments 145 145
Foreign currency translation
adjustment (1,566) (1,566)
Net loss (2,365) (2,365)
------- ------- ------- ------- ------- ------- -------
BALANCE, SEPTEMBER 30, 2001 $ 521 $ 1 $ 1 $ 878 $ 4,949 $(9,158) $(2,808)
======= ======= ======= ======= ======= ======= =======
See notes to unaudited Condensed Consolidated Financial Statements.
6
PHILIPP BROTHERS CHEMICALS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
For the Three Months Ended September 30, 2001 and 2000
(In Thousands)
2001 2000
-------- --------
OPERATING ACTIVITIES:
Net loss $ (2,365) $ (3,119)
Adjustments to reconcile net loss to
net cash provided
by operating activities:
Depreciation and amortization 4,158 3,129
Other 789 (53)
Changes in operating assets and
liabilities:
Accounts receivable 5,525 12,018
Inventories (4,383) (4,402)
Prepaid expenses and other
current assets 2,606 3,195
Other assets (815) (1,958)
Accounts payable (1,334) (761)
Accrued expenses and other
current liabilities 872 2,369
-------- --------
NET CASH PROVIDED BY OPERATING
ACTIVITIES 5,053 10,418
-------- --------
INVESTING ACTIVITIES:
Capital expenditures (3,626) (3,248)
Other investing 79 (85)
-------- --------
NET CASH USED IN INVESTING
ACTIVITIES (3,547) (3,333)
-------- --------
FINANCING ACTIVITIES:
Cash overdraft 99 1,264
Net increase (decrease) in short-term debt 1,917 (1,040)
Proceeds from long-term debt 11 732
Payments of long-term debt (1,073) (4,350)
-------- --------
NET CASH PROVIDED BY (USED IN)
FINANCING ACTIVITIES 954 (3,394)
-------- --------
EFFECT OF EXCHANGE RATE CHANGES ON CASH 52 (230)
-------- --------
NET INCREASE IN CASH AND CASH
EQUIVALENTS 2,512 3,461
CASH AND CASH EQUIVALENTS at beginning of
period 14,845 2,403
-------- --------
CASH AND CASH EQUIVALENTS at end
of period $ 17,357 $ 5,864
======== ========
See notes to unaudited Condensed Consolidated Financial Statements.
7
PHILIPP BROTHERS CHEMICALS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(In Thousands)
1. General
In the opinion of the Company, the accompanying unaudited condensed
consolidated financial statements contain all adjustments (consisting only of
normal recurring adjustments) necessary to present fairly the financial position
as of September 30, 2001 and the results of operations and cash flows for the
three months ended September 30, 2001 and 2000.
The condensed consolidated balance sheet as of June 30, 2001 was derived
from audited financial statements, but does not include all disclosures required
by generally accepted accounting principles. Additionally, it should be noted
that the accompanying condensed consolidated financial statements and notes
thereto have been prepared in accordance with accounting standards appropriate
for interim financial statements. While the Company believes that the
disclosures presented are adequate to make the information contained herein not
misleading, it is suggested that these financial statements be read in
conjunction with the Company's consolidated financial statements for the year
ended June 30, 2001.
Certain prior year amounts in the accompanying condensed consolidated
financial statements and related notes have been reclassified to conform to the
fiscal 2002 presentation. Such reclassifications include a reclassification of
freight income of $1,443 for the three months ended September 30, 2000 from
selling, general and administrative expenses to net sales on the consolidated
statements of operations and comprehensive income, as a result of the adoption
of the Emerging Issues Task Force Issue No. 00-10 "Accounting for Shipping and
Handling Revenues and Costs."
In June 2001, the Financial Accounting Standards Board issued Statements
of Financial Accounting Standards No. 141 "Business Combinations" ("SFAS No.
141") and No. 142 "Goodwill and Other Intangibles" ("SFAS No. 142"). SFAS No.
141 and No. 142 are effective for the Company on July 1, 2002. SFAS No. 141
requires that the purchase method of accounting be used for all business
combinations initiated after June 30, 2001. The statement also establishes
specific criteria for recognition of intangible assets separately from goodwill
and requires unallocated negative goodwill to be written off immediately as an
extraordinary gain. SFAS No. 142 primarily addresses the accounting for goodwill
and intangible assets subsequent to their acquisition. The statement requires
that goodwill and indefinite lived intangible assets no longer be amortized and
be tested for impairment at least annually. The amortization period of
intangible assets with finite lives will no longer be limited to forty years.
The Company is currently assessing the impact of these statements.
In June 2001, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 143 "Accounting for Asset Retirement
Obligations" ("SFAS No. 143"). SFAS No. 143 is effective for the Company on July
1, 2002. The statement establishes accounting standards for the recognition and
measurement of an asset retirement obligation and its associated asset
retirement cost. The Company is currently assessing the impact of this
statement.
In August 2001, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 144 "Accounting for Impairment or Disposal
of Long-Lived Assets" ("SFAS No. 144"). SFAS No. 144 is effective for the
Company on July 1, 2002. The statement addresses significant issues relating to
the implementation of FASB Statement No. 121 "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed Of" ("FAS No. 121"),
and the development of a single accounting model, based on the framework
established in FAS No. 121, for long-lived assets to be disposed of by sale,
whether previously held and used or newly acquired. The Company is currently
assessing the impact of this statement.
The results of operations for the three months ended September 30, 2001
and 2000 may not be indicative of results for the full year.
2. Acquisition
On November 30, 2000, the Company purchased the Medicated Feed Additives
(MFA) business of Pfizer, Inc. and certain of its subsidiaries ("Pfizer"). Under
the terms of the purchase agreement, the Company is required to pay Pfizer
contingent purchase price based on a percentage of future net revenues of a
particular product. The term of the contingent payments is five years from
November 30, 2000. The maximum contingent purchase price due under this
arrangement is limited to $55,000, with a maximum annual payment of $12,000.
Contingent purchase price paid will be allocated to related production equipment
and product intangibles and the Company has recorded $9,349 under this
arrangement as of September 30, 2001, of which $2,644 has been paid as of
September 30, 2001. Under the terms of the agreement, the Company has elected to
defer $3,000 of the payment until June 30, 2006. The deferred payment bears
interest at an annual rate of 13%. In addition, the Company is required to pay
Pfizer contingent purchase price up to a maximum of $10,000 over five years on
8
PHILIPP BROTHERS CHEMICALS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(In Thousands)
other products based on certain gross profit levels of the MFA business. No
amounts have been accrued under this arrangement.
The unaudited consolidated results of operations on a pro-forma basis as
if such acquisition had occurred at the beginning of the three-month period
ended September 30, 2000 are as follows:
Net sales........................................ $97,063
Net (loss) income................................ (4,076)
The impact of purchase price adjustments to the inventory acquired from
Pfizer increased the loss before income taxes for the three months ended
September 30, 2001 by $1,973.
3. Inventories
Inventories are valued at the lower of cost or market. Cost is principally
determined using the first-in, first-out (FIFO) and average methods; however,
certain subsidiaries of the Company use the last-in, first-out (LIFO) method for
valuing inventories.
Inventories at September 30, 2001 and June 30, 2001 consist of the
following:
Sept. 30, June 30,
2001 2001
-------- -------
Raw materials .................... $28,918 $22,614
Work-in-process .................. 2,437 4,257
Finished goods ................... 56,890 56,925
------- -------
$88,245 $83,796
======= =======
4. Contingencies
a. Litigation
The Company's subsidiary, Phibro-Tech, Inc., has been named as a
potentially responsible party ("PRP") in connection with an action commenced by
the EPA, involving a third party fertilizer manufacturing site in South
Carolina. Phibro-Tech, Inc. was also named as a PRP involving a third party site
in California. Tentative settlements have been reached in both of these actions
and adequate reserves have been established.
The Company and its subsidiary, C.P. Chemicals, Inc., are involved in
litigation alleging that operations at the Sewaren, New Jersey site have
affected the adjoining owner's property. The Company is not, at this time, in a
position to assess the extent of any liability.
The Company and its subsidiaries are a party to a number of claims and
lawsuits arising in the normal course of business, including patent
infringement, product liability and governmental regulation concerning
environmental and other matters. Certain of these actions seek damages in
various amounts.
All such claims are being contested, and management believes the
resolution of these matters will not materially affect the consolidated
financial position, results of operations, or cash flows of the Company.
b. Environmental Remediation
The Company's domestic subsidiaries are subject to various federal, state
and local environmental laws and regulations which govern the management of
chemical wastes. The most significant regulation governing the Company's
recycling activities is the Resource Conservation and Recovery Act of 1976
("RCRA"). The Company has been issued final RCRA "Part B" permits to operate as
hazardous waste treatment and storage facilities at its facilities in Santa Fe
Springs, California; Garland, Texas; Joliet, Illinois; Sumter, South Carolina
and Sewaren, New Jersey. The Company has also obtained an interim status RCRA
permit for its Union City, California facility. The Company anticipates
curtailing operations at this facility in the fourth quarter of 2001.
In connection with applying for RCRA "Part B" permits, the Company has
been required to perform extensive site investigations at certain of its
operating facilities and inactive sites to identify possible contamination and
to provide the regulatory authorities with plans and schedules for remediation.
Some soil and groundwater contamination has been identified at several plant
sites and will require corrective action over the next several years.
9
PHILIPP BROTHERS CHEMICALS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(In Thousands)
Based upon information available, management estimates the cost of further
investigation and remediation of identified soil and groundwater problems at
operating sites, closed sites and third party sites to be approximately $1,984
as of September 30, 2001, which is included in current and long-term
liabilities.
5. Business Segments
The Company has four reportable segments--Animal Health and Nutrition,
Industrial Chemicals, Distribution, and All Other. The Company previously
reported two reportable segments - Agchem and Industrial Chemicals; however, due
principally to organizational changes during fiscal 2001, including those
associated with the acquisition of the animal health business from Pfizer and
the sale of the Agtrol crop protection business, segment reporting has been
revised. Prior period segment information has been revised to conform to the
fiscal 2001 segment presentation. Reportable segments have been determined
primarily on the basis of the nature of products and services and certain
similar operating units have been aggregated. The Company's Animal Health and
Nutrition segment manufactures and markets a broad range of feed additive
products including trace minerals, anticoccidials, antibiotics, vitamins,
vitamin premixes, and other animal health products. The Company's Industrial
Chemicals segment manufactures and markets pigments and other mineral products.
Certain of these products include copper oxide, which is produced by the
Company's recycling operation, mineral oxides, and alkaline etchants. The
Company's Distribution segment markets and distributes a variety of industrial,
specialty and fine organic chemicals, and intermediates produced by others. The
Company's All Other segment manufactures and markets a variety of specialty
custom chemicals and copper-based fungicides, as well as providing management
and recycling of coal combustion residues.
Segment data for the three months ended September 30, 2001 and 2000 are as
follows:
2001 2000
-------- --------
Net Sales
Animal Health and Nutrition ................ $ 59,353 $ 34,630
Industrial Chemicals ....................... 21,011 25,475
Distribution ............................... 9,989 11,399
All Other .................................. 9,947 10,448
Intersegment ............................... (5,641) (9,157)
-------- --------
Net Sales ....................................... $ 94,659 $ 72,795
======== ========
Intersegment Sales
Animal Health and Nutrition ................. $ 1,410 $ 968
Industrial Chemicals ........................ 3,666 7,708
Distribution ................................ 554 481
All Other ................................... 11 0
-------- --------
Intersegment Sales ............................... $ 5,641 $ 9,157
======== ========
Operating Income (Loss)
Animal Health and Nutrition ................ $ 7,365 $ 3,047
Industrial Chemicals ....................... (4,200) 445
Distribution ............................... 838 918
All Other .................................. 119 (1,674)
Corporate expenses and adjustments ......... (2,713) (1,326)
-------- --------
Operating Income ................................. $ 1,409 $ 1,410
======== ========
10
PHILIPP BROTHERS CHEMICALS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(In Thousands)
6. Divestitures
On May 4, 2001, the Company sold its Agtrol U.S. business, a division of
the Company's Phibro-Tech, Inc. subsidiary, to Nufarm, Inc. ("Nufarm"), the U.S.
subsidiary of Nufarm Limited, a publicly listed Australian based company. On
June 14, 2001, the Company sold its Agtrol international business to Nufarm. The
sales included inventory and intangible assets to Nufarm and did not include
plant, equipment, or other manufacturing assets. Phibro-Tech also entered into
agreements to supply copper fungicide products to Nufarm from its Sumter, South
Carolina plant for five years, and from its Bordeaux, France plant for three
years.
Revenues and operating losses relating to the Agtrol business amounted to
$6,367 and $2,003, respectively, for the three months ended September 30, 2000.
7. Condensed Consolidating Financial Statements
In June 1998, the Company issued $100 million of its 97/8% Senior
Subordinated Notes due 2008 (the "Notes"). In connection with the issuance of
these Notes, the Company's U.S. Subsidiaries fully and unconditionally
guaranteed such Notes on a joint and several basis. Foreign subsidiaries do not
presently guarantee the Notes.
The following condensed consolidating financial data summarizes the
assets, liabilities and results of operations and cash flows of the Parent,
Guarantor Subsidiaries and Non-Guarantor Subsidiaries. The Parent is Philipp
Brothers Chemicals, Inc. ("PBC"). The U.S. Guarantor Subsidiaries include all
domestic subsidiaries of PBC including the following: C.P. Chemicals, Inc.,
Phibro-Tech, Inc., MRT Management Corp., Mineral Resource Technologies, L.L.C.,
Prince Agriproducts, Inc., The Prince Manufacturing Company (PA), The Prince
Manufacturing Company (IL), PhibroChem, Inc., Phibro Chemicals, Inc., Western
Magnesium Corp., Phibro Animal Health Holdings, Inc. and Phibro Animal Health
U.S., Inc. The U.S. and foreign Guarantor and Non-Guarantor Subsidiaries are
directly or indirectly wholly owned as to voting stock by PBC.
Investments in subsidiaries are accounted for by the Parent using the
equity method. Income tax expense (benefit) is allocated among the consolidating
entities based upon taxable income (loss) by jurisdiction within each group.
The principal consolidation adjustments are to eliminate investments in
subsidiaries and intercompany balances and transactions. Separate financial
statements of the U.S. Guarantor Subsidiaries and the Non-Guarantor Subsidiaries
are not presented because management has determined that such financial
statements would not be material to investors.
11
PHILIPP BROTHERS CHEMICALS, INC.
CONDENSED CONSOLIDATING BALANCE SHEET (Unaudited)
As of September 30, 2001
(In Thousands)
------------------------------------------------------------------------------------------------------------------------------------
Foreign
U.S. Guarantor Subsidiaries Consolidation Consolidated
Parent Subsidiaries Non-Guarantors Adjustments Balance
------------------------------------------------------------------------------------------------------------------------------------
Assets
Current Assets:
Cash and cash equivalents $ 1,416 $ 769 $ 15,172 $ 17,357
Trade receivables 4,399 29,262 39,324 72,985
Other receivables 1,131 120 1,186 2,437
Inventory 3,033 43,670 41,542 88,245
Prepaid expenses and other 4,544 2,905 8,848 16,297
-----------------------------------------------------------------------------
Total current assets 14,523 76,726 106,072 -- 197,321
-----------------------------------------------------------------------------
Property, plant & equipment, net 606 30,212 74,405 105,223
Intangibles 32 1,948 3,893 5,873
Investment in subsidiaries 62,069 1,542 (6,138) (57,473) --
Intercompany 58,420 (25,497) 969 (33,892) --
Other assets 92,912 (71,163) 1,743 23,492
-----------------------------------------------------------------------------
Total assets $ 228,562 $ 13,768 $ 180,944 $ (91,365) $ 331,909
=============================================================================
Liabilities and Stockholders' Equity
Current Liabilities:
Cash overdraft $ 13 $ 4,417 $ -- $ 4,430
Loan payable to banks 28,665 -- 2,875 31,540
Current portion of long term debt 2,540 491 1,771 4,802
Accounts payable 1,240 22,068 28,328 51,636
Accrued expenses and other 8,736 11,680 16,165 36,581
-----------------------------------------------------------------------------
Total current liabilities 41,194 38,656 49,139 -- 128,989
-----------------------------------------------------------------------------
Long term debt 127,255 (66,672) 112,776 (33,892) 139,467
Other liabilities 2,021 5,119 7,619 14,759
Redeemable securities:
Series B and C preferred stock 51,407 -- -- 51,407
Common stock 479 -- (479) --
Common stock of subsidiary -- 95 -- 95
-----------------------------------------------------------------------------
51,886 95 (479) -- 51,502
-----------------------------------------------------------------------------
Stockholders' Equity
Series A preferred stock 521 -- -- 521
Common stock 2 32 -- (32) 2
Paid in capital 878 34,041 -- (34,041) 878
Retained earnings 4,949 2,322 21,078 (23,400) 4,949
Accumulated other comprehensive
(loss) income-
gain on derivative instruments -- 145 -- 145
cumulative currency translation
adjustment (144) 30 (9,189) (9,303)
-----------------------------------------------------------------------------
Total stockholders' equity 6,206 36,570 11,889 (57,473) (2,808)
-----------------------------------------------------------------------------
Total liabilities and equity $ 228,562 $ 13,768 $ 180,944 $ (91,365) $ 331,909
=============================================================================
12
PHILIPP BROTHERS CHEMICALS, INC.
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS (Unaudited)
For The Three Months Ended September 30, 2001
(In Thousands)
------------------------------------------------------------------------------------------------------------------------------------
Foreign
U.S. Guarantor Subsidiaries Consolidation Consolidated
Parent Subsidiaries Non-Guarantors Adjustments Balance
------------------------------------------------------------------------------------------------------------------------------------
Net sales $ 7,108 $ 51,594 $ 42,404 $ (6,447) $ 94,659
Cost of goods sold 5,632 36,172 32,239 (6,447) 67,596
----------------------------------------------------------------------------
Gross profit 1,476 15,422 10,165 -- 27,063
Selling, general, and administrative
expenses 3,737 13,531 8,386 25,654
----------------------------------------------------------------------------
Operating (loss) income (2,261) 1,891 1,779 -- 1,409
Interest expense 674 933 3,036 4,643
Interest income 3 -- (73) (70)
Other expense (income) 117 19 (331) (195)
Intercompany allocation (993) 993 -- --
Loss (profit) relating to subsidiaries 1,098 -- -- (1,098) --
----------------------------------------------------------------------------
(Loss) income before income taxes (3,160) (54) (853) 1,098 (2,969)
(Benefit) provision for income taxes (795) 320 (129) (604)
----------------------------------------------------------------------------
Net (loss) income $ (2,365) $ (374) $ (724) $ 1,098 $ (2,365)
============================================================================
13
PHILIPP BROTHERS CHEMICALS INC.
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS (Unaudited)
For the Three Months Ended September 30, 2001
(In Thousands)
------------------------------------------------------------------------------------------------------------------------------------
Foreign
U.S. Guarantor Subsidiaries Consolidation Consolidated
Parent Subsidiaries Non-Guarantors Adjustments Balance
------------------------------------------------------------------------------------------------------------------------------------
Operating activities:
Net (loss) income $ (2,365) $ (374) $ (724) $ 1,098 $ (2,365)
Adjustments to reconcile net (loss)
income to cash (used in) provided by
operating activities:
Depreciation and amortization 264 1,344 2,550 4,158
Other (211) 65 935 789
Changes in operating assets and
liabilities:
Accounts receivable 210 2,369 2,946 5,525
Inventory 220 (1,401) (3,202) (4,383)
Prepaid expenses and other 362 1,843 401 2,606
Other assets 264 (996) (83) (815)
Intercompany (3,000) (718) 4,816 (1,098) --
Accounts payable (502) (1,861) 1,029 (1,334)
Accrued expenses and other 1,462 1,093 (1,683) 872
----------------------------------------------------------------------------
Net cash (used in) provided by
operating activities (3,296) 1,364 6,985 -- 5,053
----------------------------------------------------------------------------
Investing activities:
Capital expenditures (70) (1,426) (2,130) (3,626)
Other investing -- -- 79 79
----------------------------------------------------------------------------
Net cash used in
investing activities (70) (1,426) (2,051) -- (3,547)
----------------------------------------------------------------------------
Financing activities:
Cash overdraft -- 246 (147) 99
Net increase (decrease)
in short term debt 3,498 -- (1,581) 1,917
Proceeds from long term debt -- 11 -- 11
Payments of long term debt (8) (126) (939) (1,073)
----------------------------------------------------------------------------
Net cash provided by (used in)
financing activities 3,490 131 (2,667) -- 954
----------------------------------------------------------------------------
Effect of exchange rate changes
on cash -- -- 52 52
----------------------------------------------------------------------------
Net increase in cash and
cash equivalents 124 69 2,319 -- 2,512
Cash and cash equivalents
at beginning of year 1,292 700 12,853 14,845
----------------------------------------------------------------------------
Cash and cash equivalents
at end of year $ 1,416 $ 769 $ 15,172 $ -- $ 17,357
============================================================================
14
PHILIPP BROTHERS CHEMICALS, INC.
CONDENSED CONSOLIDATING BALANCE SHEET (Unaudited)
As of June 30, 2001
(In Thousands)
------------------------------------------------------------------------------------------------------------------------------------
Foreign
U.S. Guarantor Subsidiaries Consolidation Consolidated
Parent Subsidiaries Non-Guarantors Adjustments Balance
------------------------------------------------------------------------------------------------------------------------------------
Assets
Current Assets:
Cash and cash equivalents $ 1,292 $ 1,210 $ 12,343 $ 14,845
Trade receivables 4,624 32,291 40,995 77,910
Other receivables 791 1,913 2,096 4,800
Inventory 2,715 44,050 37,031 83,796
Prepaid expenses and other 5,461 2,745 9,242 17,448
----------------------------------------------------------------------------
Total current assets 14,883 82,209 101,707 -- 198,799
----------------------------------------------------------------------------
Property, plant & equipment, net 626 30,143 71,554 102,323
Intangibles 87 1,915 3,830 5,832
Investment in subsidiaries 63,490 1,542 (6,138) (58,894) --
Intercompany 54,322 (22,808) 3,852 (35,366) --
Other assets 93,466 (71,571) 1,170 23,065
----------------------------------------------------------------------------
Total assets $226,874 $ 21,430 $175,975 $(94,260) $330,019
============================================================================
Liabilities and Stockholders' Equity
Current Liabilities:
Cash overdraft $ 13 $ 4,209 $ -- $ 4,222
Loan payable to banks 24,471 -- 3,992 28,463
Current portion of long term debt 2,541 493 2,370 5,404
Accounts payable 1,743 23,359 26,202 51,304
Accrued expenses and other 7,859 11,780 15,739 35,378
----------------------------------------------------------------------------
Total current liabilities 36,627 39,841 48,303 -- 124,771
----------------------------------------------------------------------------
Long term debt 127,263 (60,654) 108,221 (35,366) 139,464
Other liabilities 2,129 5,731 5,066 12,926
Redeemable securities:
Series B and C preferred stock 48,980 -- -- 48,980
Common stock 877 -- (499) 378
Common stock of subsidiary -- 95 -- 95
----------------------------------------------------------------------------
49,857 95 (499) -- 49,453
----------------------------------------------------------------------------
Stockholders' Equity
Series A preferred stock 521 -- -- 521
Common stock 2 32 -- (32) 2
Paid in capital 878 34,041 -- (34,041) 878
Retained earnings 9,741 2,325 22,496 (24,821) 9,741
Accumulated other comprehensive
(loss) income-
cumulative currency translation
adjustment (144) 19 (7,612) (7,737)
----------------------------------------------------------------------------
Total stockholders' equity 10,998 36,417 14,884 (58,894) 3,405
----------------------------------------------------------------------------
Total liabilities and equity $226,874 $ 21,430 $175,975 $(94,260) $330,019
============================================================================
15
PHILIPP BROTHERS CHEMICALS, INC.
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS (Unaudited)
For The Three Months Ended September 30, 2000
(In Thousands)
------------------------------------------------------------------------------------------------------------------------------------
Foreign
U.S. Guarantor Subsidiaries Consolidation Consolidated
Parent Subsidiaries Non-Guarantors Adjustments Balance
------------------------------------------------------------------------------------------------------------------------------------
Net sales $ 8,521 $ 42,814 $ 28,097 $ (6,637) $ 72,795
Cost of goods sold 6,791 29,917 22,219 (6,637) 52,290
----------------------------------------------------------------------------
Gross profit 1,730 12,897 5,878 -- 20,505
Selling, general, and
administrative expenses 3,472 11,468 4,155 19,095
----------------------------------------------------------------------------
Operating (loss) income (1,742) 1,429 1,723 -- 1,410
Interest expense 2,470 66 1,403 3,939
Interest income (36) -- (181) (217)
Other expense 89 -- 1,239 1,328
Intercompany allocation (3,324) 3,067 257 --
Loss (profit) relating to subsidiaries 1,505 -- -- (1,505) --
----------------------------------------------------------------------------
(Loss) income before income taxes (2,446) (1,704) (995) 1,505 (3,640)
Provision (benefit) for income taxes 673 (712) (482) (521)
----------------------------------------------------------------------------
Net (loss) income $ (3,119) $ (992) $ (513) $ 1,505 $ (3,119)
============================================================================
16
PHILIPP BROTHERS CHEMICALS INC.
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS (Unaudited)
For the Three Months Ended September 30, 2000
(In Thousands)
------------------------------------------------------------------------------------------------------------------------------------
Foreign
U.S. Guarantor Subsidiaries Consolidation Consolidated
Parent Subsidiaries Non-Guarantors Adjustments Balance
------------------------------------------------------------------------------------------------------------------------------------
Operating activities:
Net (loss) income $ (3,119) $ (992) $ (513) $ 1,505 $ (3,119)
Adjustments to reconcile net (loss)
income to cash provided by
operating activities:
Depreciation and amortization 116 1,213 1,800 3,129
Other 186 (60) (179) (53)
Changes in operating assets and
liabilities:
Accounts receivable 459 8,367 3,192 12,018
Inventory 93 (4,987) 492 (4,402)
Prepaid expenses and other 3,441 (135) (111) 3,195
Other assets (788) (1,216) 46 (1,958)
Intercompany 84 (900) 2,321 (1,505) --
Accounts payable (450) 403 (714) (761)
Accrued expenses and other 3,991 (25) (1,597) 2,369
----------------------------------------------------------------------------
Net cash provided by
operating activities 4,013 1,668 4,737 -- 10,418
----------------------------------------------------------------------------
Investing activities:
Capital expenditures (23) (2,617) (608) (3,248)
Other investing -- -- (85) (85)
----------------------------------------------------------------------------
Net cash used in
investing activities (23) (2,617) (693) -- (3,333)
----------------------------------------------------------------------------
Financing activities:
Cash overdraft 114 1,810 (660) 1,264
Net decrease in short term debt (104) -- (936) (1,040)
Proceeds from long term debt -- -- 732 732
Payments of long term debt (4,008) (195) (147) (4,350)
----------------------------------------------------------------------------
Net cash (used in) provided by
financing activities (3,998) 1,615 (1,011) -- (3,394)
----------------------------------------------------------------------------
Effect of exchange rate changes
on cash -- -- (230) (230)
----------------------------------------------------------------------------
Net (decrease) increase in cash and
cash equivalents (8) 666 2,803 -- 3,461
Cash and cash equivalents
at beginning of year 11 99 2,293 2,403
----------------------------------------------------------------------------
Cash and cash equivalents
at end of year $ 3 $ 765 $ 5,096 $ -- $ 5,864
============================================================================
17
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
General
The Company is a leading diversified global manufacturer and marketer of a
broad range of specialty agricultural and industrial chemicals, which are sold
world-wide for use in numerous markets, including animal health and nutrition,
agriculture, pharmaceutical, electronics, wood treatment, glass, construction
and concrete. The Company also provides recycling and hazardous waste services
primarily to the electronics and metal treatment industries.
The Company has four operating segments--Animal Health and Nutrition,
Industrial Chemicals, Distribution and All Other. The Company previously
reported two operating segments-- Agchem and Industrial Chemicals. Due to
organizational changes during fiscal 2001, including those associated with the
acquisition of the animal health business from Pfizer and the sale of the Agtrol
crop protection business, segment reporting has been revised. Prior period
segment information has been revised to conform to the fiscal 2002 segment
presentation.
On November 30, 2000, the Company purchased the medicated feed additives
business of Pfizer, Inc. ("Pfizer"). The operating results of this business, now
called Phibro Animal Health, ("PAH"), are included in the Company's consolidated
statements of operations from the date of acquisition and are included in the
Animal Health and Nutrition segment.
On May 4, 2001, the Company sold its Agtrol U.S. business, a division of
the Company's Phibro-Tech, Inc. subsidiary, to Nufarm, Inc. ("Nufarm"), a U.S.
subsidiary of Nufarm Limited, a publicly listed Australian based company. On
June 14, 2001, the Company sold its Agtrol international business to Nufarm.
Agtrol developed, manufactured and marketed crop protection products, including
copper fungicides. The sale included inventory and intangible assets to Nufarm
but did not include plant, equipment, or other manufacturing assets. Phibro-Tech
also entered into agreements to supply copper fungicide products to Nufarm from
its Sumter, South Carolina plant for five years, and from its Bordeaux, France
plant for three years. The operating results of Agtrol are included in the
Company's consolidated statements of operations up to the date of disposition
and are included in the All Other segment.
Results of Operations
Sales
($000's)
Three Months Ended September 30,
--------------------------------
Operating Segments: 2001 2000
-------- --------
Animal Health and Nutrition ................. $ 59,353 $ 34,630
Industrial Chemicals ........................ 21,011 25,475
Distribution ................................ 9,989 11,399
All Other ................................... 9,947 10,448
Elimination of intersegment sales ........... (5,641) (9,157)
-------- --------
$ 94,659 $ 72,795
======== ========
Operating Income (Loss)
($000's)
Three Months Ended September 30,
--------------------------------
Operating Segments: 2001 2000
-------- --------
Animal Health and Nutrition ................. $ 7,365 $ 3,047
Industrial Chemicals ........................ (4,200) 445
Distribution ................................ 838 918
All Other ................................... 119 (1,674)
Corporate expenses and intercompany
profit elimination ........................ (2,713) (1,326)
-------- --------
$ 1,409 $ 1,410
======== ========
18
Comparison of Three Months Ended September 30, 2001 and 2000
Net Sales. Net sales increased by $21.9 million, or 30%, to $94.7 million
in the three months ended September 30, 2001, as compared to same period of the
prior year. The increase was primarily due to the purchase of the PAH business
offset in part by the sale of the Company's Agtrol operations.
The Animal Health and Nutrition segment's net sales increased by $24.7
million, or 71%, to $59.4 million in the three months ended September 30, 2001,
as compared to the prior period. The net sales increase was due to increased
unit volume primarily as a result of the PAH purchase. Excluding PAH, sales for
the segment in 2001 were $1.1 million below the prior year primarily due to
lower average selling prices.
The Industrial Chemicals segment's net sales decreased by $4.5 million, or
18%, to $21.0 million in the three months ended September 30, 2001, as compared
to the prior period. Due to the sale of Agtrol to Nufarm, the Company no longer
has intersegment sales in the Industrial segment which accounted for $4.0
million of the decline in revenues. Sales by the Company's Phibro-Tech
subsidiary, excluding recycling fees, were down by $1.4 million due to volume
declines related to the printed circuit board industry. Lower recycling fees of
$.4 million were due to decreased demand. Higher unit volume sales at the
Company's Odda subsidiary increased revenues by $1.7 million and partially
offset the decrease. Lower unit sales of iron oxide and manganese dioxide
primarily accounted for the balance of the change.
Net sales for the Distribution segment decreased by $1.4 million, or 12%,
to $10.0 million in 2001, as compared to the prior period. The net sales
decrease was due to lower unit volumes. Significant declines in the segment's
trace minerals, cyanide and dicyandiamide products occurred during the current
quarter.
Net sales for the All Other segment decreased by $.5 million, or 5%, to
$9.9 million in 2001, as compared to the prior period. Approximately $2.4
million of this decrease related to lower sales of crop protection chemicals.
The Company's Agtrol crop protection business was sold during the fourth quarter
of 2001 and sales are currently being made under supply agreements to Nufarm.
Excluding Agtrol, sales for the segment in 2001 were $1.9 million above the
prior year. The Company's fly ash business increased by $1.3 million primarily
due to increased volume as a result of additional contracts with utilities in
Missouri and Michigan and improved average selling prices. Revenues at the
Company's Wychem, U.K. facility improved by $.6 million due to an increase in
specialized lab projects and formulations.
Gross Profit. Gross profit increased by $6.6 million, or 32.0%, to $27.1
million in the three months ended September 30, 2001, as compared to the prior
period. The increase was primarily due to the purchase of the PAH business
offset in part by the sale of the Company's Agtrol operations. Purchase
accounting adjustments relating to inventory acquired in the PAH acquisition
resulted in an increase to cost of goods sold of $2.0 million during fiscal
2002. The remainder of the inventory purchase adjustment, approximately $1.3
million, will be charged to cost of goods sold during the balance of the fiscal
year. Lower production volumes at the Company's Phibro-Tech facilities and
higher utility and raw material costs at Odda adversely affected margins in the
Industrial Chemical segment. Margin declines in the All Other segment were due
to sales of crop protection products sold to Nufarm under a supply agreement in
the current period as opposed to higher margin sales to third parties in the
prior period. In addition, the declines in average selling prices in the Animal
Health and Nutrition segment described above further reduced the Company's
margin.
Selling, General and Administrative Expenses. Costs increased by $6.6
million to $25.7 million in 2001, as compared to the prior period. Excluding PAH
and Agtrol, costs were up approximately $2.4 million principally due to
management advisory fees to Palladium Equity Partners, LLC ($.6 million), higher
warehousing and distribution primarily relating to sales growth in the Company's
fly ash business ($.8 million), environmental remediation ($.3 million) and
other general spending increases ($.7 million).
Operating Income. Operating income was $1.4 million for the three months
ended September 30, 2001, approximately the same as the prior period. The Animal
Health and Nutrition segment increased due to the inclusion of PAH for the
period. Operating income would have been $2.0 million higher than reported if
not for purchase accounting adjustments to the sale of inventory acquired from
Pfizer as part of the PAH acquisition. Operating income declined in the
Industrial Chemicals segment primarily due to lower sales and production
volumes. The Company is implementing cost reduction programs and other
initiatives in this segment in reaction to current market conditions. The
improvement in operating income of the All Other segment is primarily the result
of the sale of Agtrol as the Company is no longer materially impacted by the
seasonal nature of the crop protection business. The Distribution segment was
slightly below the prior year due to sales volume declines.
19
Interest Expense, Net. Costs increased by $.9 million or 23% to $4.6
million for the three months ended September 30, 2001 as compared to the prior
period primarily due to debt incurred in connection with the PAH acquisition and
higher levels of average bank borrowings.
Other Expense, Net. Other expense, net principally reflects foreign
currency transaction losses of the Company's foreign subsidiaries and the
quarter over quarter change reflects the strengthening of currencies against the
U.S. dollar in 2001 (principally Norwegian Kroner) versus weakening of these
currencies in the September 2000 quarter.
Income Taxes. The Company provides a benefit on interim period losses as
it is anticipated that future earnings can be utilized to offset the tax benefit
recorded in the current year. The effective tax rate is lower than the U.S.
statutory rate due to the relationship of each domestic and international
subsidiaries' individual income or loss position to the statutory tax rates in
each country.
Liquidity and Capital Resources
Net Cash Provided by Operating Activities. Cash provided by operations for
the three months ended September 30, 2001 was $5.1 million. The increase in cash
from the collection of receivables from our crop protection business was
partially offset by higher inventories at the Phibro Animal Health business
unit. This build up of inventories is necessary to ensure an adequate
availability of product as the Company continues to refine its supply chain and
expand into new markets.
Net Cash Used by Investing Activities. Net cash used in investing
activities for the three months ended September 30, 2001 was $3.5 million.
Capital expenditures of $3.6 million were primarily for maintaining the
Company's existing asset base and for environmental, health and safety projects.
Net Cash Provided by Financing Activities. Net cash provided by financing
activities totaled $1.0 million. Borrowings under the domestic revolving credit
agreement were partially offset by paydowns of debt at several of the Company's
international subsidiaries.
Liquidity. At September 30, 2001, working capital totaled $68.3 million
compared to $74.0 million at the fiscal year end. Due to the nature and terms of
the revolving credit agreement, which includes both a subjective acceleration
clause and a requirement to maintain a lockbox arrangement, all borrowings
against this facility are classified as a current liability. At September 30,
2001, the amount of credit extended under this agreement totaled $28.7 million
and the Company had $17.3 million available under the borrowing base formula in
this agreement. In addition, certain of the Company's foreign subsidiaries also
had availability under their respective credit facilities totaling $10.0
million.
The Company anticipates spending approximately $13 million for capital
expenditures in fiscal 2002, primarily to cover the Company's asset replacement
needs, improve processes, and for environmental and regulatory compliance. The
Company believes that cash flows from operations and available borrowing
arrangements should provide sufficient working capital to operate the Company's
existing business, to make budgeted capital expenditures, and to service
interest and current principal coming due on outstanding debt.
New Accounting Pronouncements
In June 2001, the Financial Accounting Standards Board issued Statements
of Financial Accounting Standards No. 141 "Business Combinations" ("SFAS No.
141") and No. 142 "Goodwill and Other Intangibles" ("SFAS No. 142"). SFAS No.
141 and No. 142 are effective for the Company on July 1, 2002. SFAS No. 141
requires that the purchase method of accounting be used for all business
combinations initiated after June 30, 2001. The statement also establishes
specific criteria for recognition of intangible assets separately from goodwill
and requires unallocated negative goodwill to be written off immediately as an
extraordinary gain. SFAS No. 142 primarily addresses the accounting for goodwill
and intangible assets subsequent to their acquisition. The statement requires
that goodwill and indefinite lived intangible assets no longer be amortized and
be tested for impairment at least annually. The amortization period of
intangible assets with finite lives will no longer be limited to forty years.
The Company is currently assessing the impact of these statements.
In June 2001, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 143 "Accounting for Asset Retirement
Obligations" ("SFAS No. 143"). SFAS No. 143 is effective for the Company on July
1, 2002. The statement establishes accounting standards for the recognition and
measurement of an asset retirement obligation and its associated asset
retirement cost. The Company is currently assessing the impact of this
statement.
In August 2001, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 144 "Accounting for Impairment or Disposal
of Long-Lived Assets" ("SFAS No. 144"). SFAS No. 144 is effective for the
Company on July 1, 2002. The statement addresses significant issues relating to
the implementation of FASB Statement No.
20
121 "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to Be Disposed Of" ("FAS No. 121"), and the development of a single
accounting model, based on the framework established in FAS No. 121, for
long-lived assets to be disposed of by sale, whether previously held and used or
newly acquired. The Company is currently assessing the impact of this statement.
Seasonality of Business
Prior to the divestiture of the crop protection business, the Company's
sales were typically highest in the fourth fiscal quarter due to the seasonal
nature of the agricultural industry. With the sale of this business, as well as
the acquisition of the non-seasonal PAH business, the Company's sales are
expected to be less seasonal. However, some seasonality in the Company's results
will remain as sales of certain industrial chemicals to the wood treatment
industry as well as sales of coal fly ash are typically highest during the peak
construction periods of the first and fourth fiscal quarters.
Quantitative and Qualitative Disclosure About Market Risk
For financial market risks related to changes in interest rates, foreign
currency exchange rates and commodity prices, reference is made to Part II, Item
7, Quantitative and Qualitative Disclosure About Market Risk, in the Company's
Annual Report on Form 10-K for the year ended June 30, 2001 and to Note 13 to
the Consolidated Financial Statements of the Company included therein.
Certain Factors Affecting Future Operating Results
This Form 10-Q contains "forward-looking statements" within the meaning of
Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. The Company's actual results could
differ materially from those set forth in the forward-looking statements.
Certain factors that might cause such a difference include, among other factors
noted herein, the following: the Company's substantial leverage and potential
inability to service its debt; the Company's dependence on distributions from
its subsidiaries; risks associated with the Company's international operations;
the Company's ability to absorb and integrate into its existing operations the
PAH acquisition referred to above; the Company's dependence on its Israeli
operations; competition in each of the Company's markets; potential
environmental liability; extensive regulation by numerous government authorities
in the United States and other countries; significant cyclical price fluctuation
for the principal raw materials used by the Company in the manufacture of its
products; the Company's reliance on the continued operation and sufficiency of
its manufacturing facilities; the Company's dependence upon unpatented trade
secrets; the risks of legal proceedings and general litigation expenses;
potential operating hazards and uninsured risks; the risk of work stoppages; the
Company's dependence on key personnel; the uncertain impact of the Company's
acquisition plans; and the seasonality of the Company's business.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
See Part I -- Item 2 -- "Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Quantitative and Qualitative Disclosure
About Market Risk."
21
PART II -- OTHER INFORMATION
Item 5. Other Information.
None.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
Exhibit No. Description
----------- -----------
None.
(b) Reports on Form 8-K.
None.
22
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.
PHILIPP BROTHERS CHEMICALS, INC.
Date: November 13, 2001 By: /s/ DAVID C. STORBECK
--------------------------------
David C. Storbeck
Chief Financial Officer
Date: November 13, 2001 By: /s/ JOSEPH KATZENSTEIN
--------------------------------
Joseph Katzenstein, Treasurer
and Secretary
23