UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
ANNUAL REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the fiscal year ended December 31, 1997 Commission File Number 33-98522
GREAT LAKES CARBON CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 13-3637043
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
110 East 59th Street, New York, New York 10022
(Address of principal executive offices) (Zip Code)
(212) 527-3002
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to Section 12(g) of the Act:
10% Senior Secured Notes due 2006
(Title of Class)
Indicate by check mark whether the registrant (i) 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 regis-
trant was required to file such reports), and (ii) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of regulation S-K is not contained herein and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K. [X]
There is no public market for registrant's common stock.
As of February 20, 1998, the registrant had outstanding 100,000 shares of
its Common Stock.
DOCUMENTS INCORPORATED BY REFERENCE
Part III of this report incorporates by reference portions of the Regis-
trant's Proxy Statement for the 1998 annual meeting of stockholders.
<PAGE>
<TABLE>
GREAT LAKES CARBON CORPORATION
Annual Report on Form 10-K for the Year Ended December 31, 1997
Table of Contents
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Page
<S> <C>
PART I
Item 1. Business. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Item 2. Properties. . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Item 3. Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . 6
Item 4. Submission of Matters to Vote of Security Holders . . . . . . . . 6
PART II
Item 5. Market for Registrant's Common Equity and Related
Stockholder Matters . . . . . . . . . . . . . . . . . . . . . . . 6
Item 6. Selected Financial Data . . . . . . . . . . . . . . . . . . . . . 7
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations . . . . . . . . . . . . . . . 8
Item 8. Financial Statements and Supplementary Data . . . . . . . . . . . 9
Item 9. Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure. . . . . . . . . . . . . .10
PART III
Item 10. Directors and Executive Officers of the Registrant. . . . . . . .10
Item 11. Executive Compensation. . . . . . . . . . . . . . . . . . . . . .10
Item 12. Security Ownership of Certain Beneficial Owners
and Management. . . . . . . . . . . . . . . . . . . . . . . . . .10
Item 13. Certain Relationships and Related Transactions. . . . . . . . . .11
PART IV
Item 14. Exhibits, Financial Statement Schedules and
Reports on Form 8-K . . . . . . . . . . . . . . . . . . . . . . .11
____________________________
Consolidated Financial Statements . . . . . . . . . . . . . . . F-1
</TABLE>
<PAGE>
PART I
Item 1. Business
Introduction
Great Lakes Carbon Corporation (the "Company" or "GLC") is the largest
producer of calcined petroleum coke ("CPC") in the world. A majority of the
Company's sales consist of anode grade CPC which is the principal raw material
used in the production of carbon anodes for use in aluminum smelting. The
Company also sells industrial grade CPC for use in the production of titanium
dioxide, as a carbon additive in the manufacture of steel and foundry products
and for use in other specialty materials and chemicals markets. The Company
produces CPC from raw petroleum coke, a by-product of petroleum refining,
utilizing a high-temperature, rotary-kiln process developed by the Company in
the 1930's.
The Company operates rotary kilns having a total capacity of 1.4
million tons at plant sites in Port Arthur, Texas; Enid, Oklahoma; and through
a wholly-owned subsidiary, Copetro S. A. ("Copetro"), at the port of La Plata,
Argentina. Copetro is in the process of constructing a 220,000 ton calcining
kiln which will double the calcining capacity of this facility. Construction
of the $21 million project is expected to be completed in the third quarter of
1998.
The Company in its present form of organization was formed in 1991 as a
subsidiary of Horsehead Industries, Inc. ("Horsehead"). In 1995 the Company
sold $65,000,000 of 10% Senior Secured Notes due 2006 ("the Secured Notes").
Upon the sale of the Secured Notes the net proceeds to the Company were
distributed by the Company as a dividend to Horsehead, all indebtedness of
Horsehead owing to the Company was canceled, and 100% of the common stock of
the Company was distributed on a pro rata basis to the holders of the common
stock of Horsehead.
Description of Principal Markets
Anode Grade CPC
Carbon anodes, which are manufactured utilizing anode grade CPC, are
used by every primary aluminum smelter in the world as a key component in
aluminum smelting pot lines. Carbon anodes act as conductors of electricity
and as a source of carbon in the electrolytic cell that reduces alumina into
aluminum metal. In this electrochemical aluminum smelting process, the carbon
anodes, and hence the CPC, are consumed. Carbon anode manufacturers,
predominantly captive operations of aluminum smelting companies, purchase anode
grade CPC, mix it with pitch binders, press the mixture into blocks and then
bake the mixture to form a finished, hardened carbon anode. The quality of
the anode grade CPC, in terms of both its physical and chemical properties, has
an effect on carbon anode life, which is an important economic factor in
aluminum production, and on the amount of impurities in the finished aluminum
metal. Anode grade CPC is approximately 97% pure carbon; however, anode grade
CPC does vary based on the content of sulfur and other trace elements in the
finished product as well as on its physical properties. GLC produces a full
range of anode grade CPC tailored to the specific needs of its aluminum company
customers.
<PAGE>
Worldwide demand for anode grade CPC is directly tied to the global
production of primary aluminum. For the third year in a row, aluminum
production increased primarily due to restarts of capacity that was idled
in 1993 and 1994 and also due to expansion of existing smelting capacity. As
a result of the strong demand for CPC, the Company operated at effective
capacity in 1997.
Industrial Grade CPC
CPC is also used in a number of other (non-aluminum) applications,
which the Company refers to as industrial grade CPC. These include sales of
CPC for use in the production of titanium dioxide, as a recarburizer in the
manufacture of steel and foundry products and for use in other specialty
materials and chemicals markets.
Titanium dioxide is a widely used brilliant white pigment, the primary
applications for which are in paints, plastics and paper. Industrial grade CPC
is used as an energy and carbon source in the production of titanium dioxide
from titanium-bearing ores using the chloride process and is also used as a
recarburizer, i.e., carbon additive, in the production of steel and foundry
products and as a carbon source in certain chemical processes.
Industrial grade CPC is generally similar to anode grade CPC in its
physical characteristics, but typically has higher chemical impurities. In
addition, industrial grade CPC is usually further processed to meet sizing
specifications and packaged for sale to end users in smaller quantities than is
anode grade CPC.
Raw Materials and Suppliers
CPC is sold in a world market. However, calcining and transportation
economics dictate that producers of CPC are most efficiently located near
petroleum refining operations, which are the source of raw petroleum coke, the
raw material used to produce CPC. Raw petroleum coke is a by-product of the
oil refining process, constituting the solid fraction remaining after the
refinery has essentially removed all of the liquid petroleum products from the
crude oil. Many, but not all, oil refineries produce raw petroleum coke.
Because a substantial portion of worldwide petroleum refining capacity is based
domestically, the United States has a majority of worldwide CPC production
capacity. Sales of raw petroleum coke do not constitute a material portion of
oil refiners' revenues.
CPC quality, which is extremely important to aluminum smelters, is
highly dependent upon the quality of the raw petroleum coke utilized in the
calcining process. The raw petroleum coke produced by different oil refineries
covers a range of physical and chemical properties depending upon both the
types of crude oils being refined and the specific process being employed by
the refinery. Only a portion of the raw petroleum coke produced by the world's
oil refineries is of suitable quality for producing anode grade or industrial
grade CPC, with anode grade requirements being generally more stringent than
industrial grade requirements. If the raw petroleum coke produced by a
refinery is not of sufficient quality for calcining, it is typically sold for
its fuel value at a substantially lower price.
The Company purchases a range of raw petroleum cokes from a number of
domestic and international oil refineries with the objective of blending these
cokes to meet the specific quality requirements of its customers at the lowest
raw material cost. Raw petroleum coke is typically
<PAGE>
purchased by the Company under contracts with a term of one or more years,
although the Company does make some spot purchases. In 1997 the Company
purchased approximately 46% of its raw petroleum coke requirements from three
petroleum refiners.
Manufacturing Process
The calcining process essentially drives off moisture, impurities and
volatile matter from the raw petroleum coke at high temperatures, to produce a
purer form of carbon in the resulting CPC. Both anode and industrial grade CPC
are manufactured by the Company to specific customer specifications. The
Company purchases raw petroleum cokes from a number of sources and has the
capability to blend these raw cokes specifically to meet a customer's required
chemical and physical properties. After blending, the raw coke is fed into the
higher end of a rotating kiln, which is up to 12 feet in diameter and up to 220
feet long. The coke in the kiln is tumbled by rotation and moves down-kiln
counter current to the heat produced by burning natural gas or oil at the
lower, firing end of the kiln. Kiln temperatures range from 2200 to 2500
degrees fahrenheit. Typically, coke is retained in the kiln for approximately
one hour, with the resident time and heating rates critical to the production
of the proper quality CPC. The moisture, impurities and volatile matter in the
coke are driven off in the kiln. As the coke is discharged from the kiln, it
drops into a cooling chamber, where it is quenched with water, treated with
dedusting agents and carried by conveyor to silos to be kept in covered storage
until shipped to customers by truck, rail, barge or ocean-going vessel. In the
case of certain industrial grade products, the CPC is also crushed and screened
to meet proper sizing requirements.
Marketing
The Company sells its CPC to end users through its direct sales staff
and exclusive sales representatives. Substantially all sales are shipped
directly to end users. GLC's domestic sales activity is handled by the
Company's direct sales staff. Internationally, GLC's direct sales staff is
supplemented by exclusive sales representatives.
The Company typically sells anode grade CPC under contracts with terms
of one or more years, although a small percentage is sold on a spot basis. CPC
is shipped by the Company in bulk quantities to its customers via truck, rail,
barge or ocean-going vessel.
Industrial grade CPC is generally sold to customers under annual contracts or
on a purchase order basis and is shipped in smaller quantities in bulk or
packaged to meet customer requirements.
In 1997 approximately one third of the Company's net sales were to
U.S.-based customers and approximately two thirds were to customers in
international markets. Approximately 62% of the Company's 1997 net sales were
made to five customers with Aluminum Company of America and Alusaf Limited
accounting for 23.7% and 15.5% of the Company's net sales, respectively.
<PAGE>
Competition
The Company is the largest producer of CPC in the world and competes
with domestic and foreign calciners in a worldwide market with respect to both
anode and industrial grade CPC sales. Marketing of CPC to both anode and
industrial grade customers is based primarily on price and quality. Worldwide
demand for anode grade CPC is tied directly to the global production of primary
aluminum. Sales of industrial grade CPC are dependent on the particular
demands of the titanium dioxide, steel and foundry, and certain chemical
markets.
Employees
As of December 31, 1997 the Company employed 254 persons. The Company
is a party to collective bargaining agreements at two of its three facilities,
covering approximately one-third of its employees. A collective bargaining
agreement with the international Association of Machinists and Aerospace
Workers covers hourly employees at the Enid, Oklahoma facility. Certain
employees at the La Plata, Argentina facility of Copetro are covered by an
annual labor contract with an Argentine government union. The Port Arthur
plant is operated with a non-union workforce.
Patents, Trademarks
None of the Company's business is dependent upon any patents or other
intellectual property.
Environmental Matters
The Company's facilities and operations are subject to various federal,
state and local and foreign governmental laws and regulations with respect to
the protection of the environment, including regulations relating to air and
water quality. The Company believes that it possesses all of the permits
required for the conduct of its operations and that it is currently in material
compliance with all relevant environmental regulations. The Company spent
approximately $3.5 million on capital expenditures related to pollution control
facilities in 1997 and anticipates spending approximately $3.5 million and
$1.9 million in 1998 and 1999, respectively. Approximately half of the
environmental expenditures in 1997 and 1998 will be in conjunction with the
facility expansion at Copetro.
The Clean Air Act was amended in 1990. While the Company believes that
its facilities meet current regulatory standards applicable to air emissions,
some of its facilities may be required to comply with new standards for air
emissions to be adopted by the United States Environmental Protection Agency
and state environmental agencies over the next several years. At this time,
the Company cannot estimate when new standards will be imposed or what control
technologies or changes in processes the Company may be required to install or
undertake. Based on information currently available to it, the Company
believes that attaining compliance with such regulations will not have a
material adverse effect on the financial position or results of operations of
the Company.
<PAGE>
Executive Officers of the Company
The following table sets forth certain information concerning the
executive officers of the Company:
- ------------------------------------------------------------------------------
Name and Age as Period of Service as an Executive Officer and
of February 20, 1998 Business Experience During Past Five or More Years
- ------------------------------------------------------------------------------
William E. Flaherty Chairman of the Board of the Company and its
64 predecessor company since 1985. Chairman of the Board
and Chief Executive Officer of Horsehead since 1989.
James D. McKenzie President and Chief Executive Officer of the Company
53 since 1995. Executive Vice President of the Company
and President of the Calcined Petroleum Coke business
of the Company and its predecessor company from 1989
to 1995.
A. Frank Baca Senior Vice President, Operations and Administration of
54 the Company since 1995. Vice President, Operations of
the Company from 1991 to 1995.
Robert C. Dickie Vice President, Sales of the Company since 1995 and
49 Director of Sales from 1992 to 1995. Plant Manager of
Enid Oklahoma facility from 1989 to 1992.
James W. Betts Vice President, Raw Materials of the Company and its
60 predecessor company since 1986.
Patrick E. Valentine Vice President, Commercial Development of the Company
43 since 1997.
Ronald J. Statile Vice President and Treasurer of the Company and its
50 predecessor company since 1986. Vice President of
Horsehead since 1988.
Item 2. Properties
The Port Arthur facility has four kilns which have the capacity to
produce 680,000 tons per year of CPC. Port Arthur is also the site of the
Company's primary laboratory and testing facility. Port Arthur has substantial
CPC storage capacity and the capability to receive and ship product by truck,
rail, barge or ocean-going vessel. The 115-acre Port Arthur property is leased
by the Company under a long-term lease, which was originally executed in the
1930's and the most recent renewal of which expires at the end of 2004. A
waste heat recovery facility, owned by a third party, is located
<PAGE>
at the plant site under a sublease arrangement with the Company under which
terms the Company receives revenue from the delivery of flue gas from its kilns
to the facility.
The Enid facility has three kilns which have the capacity to produce
490,000 tons per year of CPC. The Enid plant has the capability to receive and
ship material by truck or rail and is located on 160 acres of property that is
owned by the Company.
The La Plata, Argentina facility operated by Copetro has a single kiln
with the capacity to produce 220,000 tons per year of anode grade CPC. The
Copetro capacity will be doubled when the second kiln expansion is completed
in 1998. The plant is located on 30 acres of land at the port of La Plata.
The plant has the capability to receive raw petroleum coke by rail or truck and
to ship CPC by truck or ocean-going vessel.
The Company's principal business office is located at 4 Greenspoint
Plaza, Suite 2200, 16945 Northchase Drive, Houston, TX 77060 under a lease
expiring in January, 2001.
The Company's executive office is located in leased space at 110 East
59th Street, New York, NY 10022.
Item 3. Legal Proceedings
The Company is a party to legal proceedings which are in various stages
of resolution. Management, after discussion with legal counsel, is of the
opinion that the ultimate resolution of these matters will not have a material
adverse effect on the results of operations or financial position of the
Company.
Item 4. Submission of Matters to Vote of Security Holders
No matters were submitted for vote of security holders of the Company
during the three months ended December 31, 1997.
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters
(a) There is no established market in which the Company's Common
Stock, par value $.01 per share (the "Common Stock"), is publicly traded,
because all of such Common Stock is privately held.
(b) As of the date of this annual report, there were fourteen
holders of record of the Company's Common Stock.
(c) During 1997 the Board of Directors declared cash dividends of
$3.75 per share which were paid to shareholders of record on each of March 31,
1997, June 30, 1997, September 30, 1997, and December 31, 1997. Any future
determination as to the payment of dividends will depend upon the Company's
financial condition, results of operations, capital requirements and such other
factors as the Board of Directors deems relevant. The Company's debt
instruments limit the conditions under which the Company may pay a cash
dividend on its outstanding Common Stock.
<PAGE>
Item 6. Selected Financial Data
The following table sets forth selected financial data of the Company
at and for the five years ended December 31, 1997. The financial data set
forth below should be read in conjunction with "Management's Discussion and
Analysis of Financial Condition and Results of Operations" in Item 7 and the
consolidated financial statements of the Company and the related notes thereto
included elsewhere herein.
Year Ended December 31,
1997 1996 1995 1994 1993
--------- --------- --------- --------- --------
Results of Operations
- ----------------------------
Net sales $231,911 $242,744 $178,628 $130,797 $149,225
Gross Profit 59,521 66,373 36,440 20,914 24,465
Operating income 41,011 51,052 26,753 12,688 14,564
Total other income (expense) (6,336) (8,345) (5,302) (12,633) (9,686)
Income before income taxes 34,675 42,707 21,451 55 4,878
Net income (loss) 21,984 27,559 13,818 (134) 2,870
Balance sheet data (at end
of period):
Total assets $174,911 $148,905 $113,930 $105,390 $106,483
Total long-term debt 84,014 72,885 74,291 11,907 17,986
- ----------------------------
<PAGE>
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Year Ended December 31, 1997 Versus Year Ended December 31, 1996
The Company's net sales for the year ended December 31, 1997 decreased
to $231.9 million from $242.7 million in the corresponding period of 1996.
Anode grade CPC net sales decreased to $189.9 million from $199.4 million,
primarily as a result of decreased selling prices, which were partially offset
by higher sales volume. Industrial grade CPC net sales increased to $40.2
million from $38.6 million, due to increased selling prices, which were
partially offset by lower sales volume.
Gross profit for the year decreased to $59.5 million from $66.4 million
in the prior year. The decrease in gross profit margin was the result of the
decrease in net sales which was partially offset by the decrease in cost of
sales. The lower cost of sales was mainly the result of lower raw material
costs.
Operating income for 1997 decreased to $41.0 million from $51.1 million
in 1996. The decrease in operating income was the result of the reduced gross
profit and an increase in selling, general and administrative expenses to $18.5
million from $15.3 million, primarily related to higher compensation and
professional fees expenses.
Income before income taxes decreased to $34.7 million from $42.7
million in the prior year as a result of the reduced operating income that was
partially offset by a $2.0 million positive change in other income (expense).
The change in other income (expense) was primarily the result of greater
interest income from larger cash reserves in 1997.
Net income for 1997 decreased to $22.0 million from $27.6 million in
1996 primarily due to the lower income before income taxes described above.
Year Ended December 31, 1996 Versus Year Ended December 31, 1995
The Company's net sales for the year ended December 31, 1996 increased
to $242.7 million from $178.6 million in the corresponding period of 1995.
Anode grade CPC net sales increased to $199.4 million from $147.9 million,
primarily as a result of increased selling prices, which were partially offset
by lower sales volume. The lower sales volume was primarilly attributable to
the unavailability of third party production, which the Company had been able
to purchase for resale in 1995. Industrial grade CPC net sales increased to
$38.6 million from $27.6 million, due to both higher sales volume and increased
selling prices.
Gross profit for the year increased to $66.4 million from $36.4 million
in the prior year. The increase in gross profit margin was the result of the
increase in net sales which more than offset the increase in cost of sales.
The higher cost of sales was mainly the result of higher raw material costs.
Operating income for 1996 increased to $51.1 million from $26.8 million
in 1995. The increase in operating income was the result of the improved gross
profit that was partially offset by an increase in selling, general and
administrative expenses to $15.3 million from $9.7 million, primarily related
to higher compensation, benefits, professional fees and office overhead
expenses.
Income before income taxes increased to $42.7 million from $21.5
million in the prior year as a result of the improvement in operating income
that was partially offset by a $3.0 million negative change in other income
(expense),primarily resulting from a non recurring income item in 1995. The
<PAGE>
increase in net interest expense, arising principally from $65 million in
outstanding 10% Senior Secured Notes issued in December 1995, was offset by
the reduction in asset utilization fee to parent, which was terminated in
December 1995.
Net income for 1996 increased to $27.6 million from $13.8 million in
1995 primarily due to the higher income before income taxes described above.
Liquidity and Capital Resources
In 1997 net cash provided by operating activities of $31.3 million and
$12.5 million of loan proceeds were used to fund $21.4 million of capital
expenditures (including a major expansion of the Company's La Plata, Argentina
facility), $1.4 million in repayment of long-term debt and $1.5 million of
dividends. The 1996 net cash provided by operating activities of $27.7
million was used to fund $6.4 million of capital expenditures, $1.4 million in
repayment of long-term debt and $1.5 million of dividends. In 1995 net cash
provided by operating activities of $17.2 million was used to fund $5.8 million
of capital expenditures, $2.6 million in repayment of long-term debt and $8.1
million of cash transfers to parent. Also, the net proceeds from the sale of
Secured Notes were used to fund a cash distribution to Horsehead.
The Secured Notes are secured by first priority liens on all material
property and equipment of the Company and certain other assets. Interest on
the Secured Notes is payable semi-annually each year on January 1 and July 1.
The Secured Notes will mature on January 1, 2006 and are subject to early
redemption as set forth under the terms of the Secured Notes.
The Company has in place a Revolving Credit Facility pursuant to
agreements with certain financial institutions. The facility, which expires in
December, 1998, provides borrowings of up to $15 million, including a $10
million sub-limit for letter of credit, which are subject to borrowing base
limitations. At February 20, 1998 the Company had no borrowings under the
facility and had outstanding letters of credit of $1.7 million.
Historically, the Company's liquidity requirements have been primarily
for debt service, capital expenditures and general working capital needs. The
timing of inventory receipts and product shipments, all of which transactions
are entirely U.S. dollar denominated, can have a substantial impact on the
Company's working capital requirements. Capital investments generally relate
to facility maintenance and projects to improve plant throughput and product
quality. In 1998 the Company's capital investments, which will continue to
include amounts for a major facility expansion at Copetro, are anticipated to
total approximately $15 million. The Company expects to fund its liquidity
needs through cash from operations, its revolving credit line and a credit
facility arranged to finance the Copetro facility expansion.
Item 8. Financial Statements and Supplementary Data
The following consolidated financial statements of the Company and its
subsidiaries, together with the report of independent auditors thereon, are
filed as part of this report:
<PAGE>
Consolidated Financial Statements:
Report of Independent Auditors
Consolidated Balance Sheets as of December 31, 1997 and 1996
Consolidated Statements of Operations for the years ended
December 31, 1997, 1996 and 1995
Consolidated Statements of Stockholders' Equity for the years
ended December 31, 1995, 1996 and 1997
Consolidated Statements of Cash Flows for the years ended
December 31, 1997, 1996 and 1995
Notes to Consolidated Financial Statements
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
None.
PART III
Item 10. Directors and Executive Officers of the Registrant
The information required in response to Item 10 is incorporated in this
report by reference from the Proxy Statement to be prepared in connection with
the 1998 Annual Meeting of Stockholders.
Item 11. Executive Compensation
The information required in response to Item 11 is incorporated in this
report by reference from the Proxy Statement to be prepared in connection with
the 1998 Annual Meeting of Stockholders.
Item 12. Security Ownership of Certain Beneficial Owners and Management
The information required in response to Item 12 is incorporated in this
report by reference from the Proxy Statement to be prepared in connection with
the 1998 Annual Meeting of Stockholders.
<PAGE>
Item 13. Certain Relationships and Related Transactions
The information required in response to Item 13 is incorporated in this
report by reference from the Proxy Statement to be prepared in connection with
the 1998 Annual Meeting of Stockholders.
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
(a)(1) List of Financial Statements:
Report of Independent Auditors..................................... F-1
Consolidated Balance Sheets as of December 31, 1997 and 1996....... F-2
Consolidated Statements of Operations for the years ended
December 31, 1997, 1996 and 1995.................................. F-4
Consolidated Statements of Stockholders' Equity
for the years ended December 31, 1995, 1996 and 1997............. F-5
Consolidated Statements of Cash Flows for the years
ended December 31, 1997, 1996 and 1995............................F-6
Notes to the Consolidated Financial Statements......................F-7
(a)(2) List of Financial Statement Schedules:
None
All schedules for which provision is made in the applicable accounting
regulations of the Commission are not required under the related instructions
or are not applicable and, therefore, have been omitted.
(a)(3) List of Exhibits:
Exhibit
Number Description
3.1 Restated Certificate of Incorporation [1]
3.2 By-Laws [1]
<PAGE>
4.1 Form of Indenture governing the 10% Senior Secured Notes due
2005 of the Company, including the form of 10% Senior Secured
Note due 2005 [1]
4.2 Form of Mortgage from the Company to The Bank of New York [1]
4.3 Form of Security Agreement between the Company and The Bank of
New York [1]
4.4 Form of Pledge Agreement between the Company and The Bank of
New York [1]
4.5 Form of Patent Security Agreement between the Company and The
Bank of New York [1]
4.6 Form of Trademark Security Agreement between the Company and
The Bank of New York [1]
10.1 Distribution Agreement between the Company and Horsehead
Industries, Inc. [1]
10.2 Tax Separation Agreement between the Company and Horsehead
Industries, Inc. [1]
10.3 Lease Agreement between the Company and Rice-Carden Corpora-
tion (as successor to Kansas City Southern Industries, Inc.),
as amended [1]
10.4 Calcined Coke Supply Agreement between the Company and Aluminum
Company of America [1]
10.5 Green Anode Coke Sales Agreement between the Company and Conoco
Inc. [*]
10.7 Petroleum Coke Sales Agreement between Copetro S.A. and YPF
S.A. [1]
10.7A Petroleum Coke Sales Agreement between Copetro S.A. and YPF
S.A. [2]
10.8 Form of Revolving Credit Facility among the Company, Chemical
Bank, as agent and lender, and the several lenders party there-
to [1]
10.9 Coke Supply Agreement between the Company and Exxon Company,
U.S.A. [2]
21 Subsidiaries of the Registrant [1]
[1] Incorporated by reference to the Company's Registration Statement on Form
S-1 (33-98522)
[2] Incorporated by reference to the Company's Form 10-K/A for the year ended
December 31, 1996
[*] The Company has amended its request for confidential treatment to include
this Exhibit.
(b) Reports on Form 8-K
None
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this annual report to be
signed on its behalf by the undersigned thereunto duly authorized.
GREAT LAKES CARBON CORPORATION
By: /s/JAMES D. MCKENZIE
---------------------
James D. McKenzie, President and
Chief Executive Officer
(Principal Executive Officer)
February 27, 1998
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following person on behalf of the
registrant and in the capacities and as of the date indicated.
Signature Title Date
- --------- ----- ----
/s/JAMES D. MCKENZIE President and
- --------------------- Chief Executive Officer February 27, 1998
James D. McKenzie (Principal Executive Officer)
/s/WILLIAM E. FLAHERTY Chairman of the Board February 27, 1998
- ---------------------
William E. Flaherty
/s/RONALD J. STATILE Vice President and Treasurer February 27, 1998
- --------------------- (Principal Financial Officer)
Ronald J. Statile
/s/ADELA I. ROBLES Controller February 27, 1998
- --------------------- (Principal Accounting Officer)
Adela I. Robles
/s/DAVID O. CARPENTER Director February 27, 1998
- ---------------------
David O. Carpenter
/s/DAVID N. JUDELSON Director February 27, 1998
- ---------------------
David N. Judelson
/s/TINKHAM VEALE II Director February 27, 1998
- ---------------------
Tinkham Veale II
<PAGE>
Report of Independent Auditors
The Board of Directors
Great Lakes Carbon Corporation
We have audited the accompanying consolidated balance sheets of Great Lakes
Carbon Corporation and subsidiaries as of December 31, 1997 and 1996, and the
related consolidated statements of operations, stockholders' equity, and cash
flows for each of the three years in the period ended December 31, 1997.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements
based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the oveall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Great Lakes
Carbon Corporation and subsidiaries at December 31, 1997 and 1996, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended December 31, 1997, in conformity with generally
accepted accounting principles.
ERNST & YOUNG LLP
New York, NY
February 13, 1998
<PAGE>
<TABLE>
Great Lakes Carbon Corporation
and Subsidiaries
Consolidated Balance Sheets
<CAPTION>
December 31
1997 1996
---------------------------------
(In thousands, except share data)
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 43,596 $ 24,097
Accounts receivable -- net of
allowance for doubtful accounts
of $600 in 1997 and 1996 29,908 28,934
Inventories 32,455 39,872
Other current assets 4,349 2,958
---------------------------------
Total current assets 110,308 95,861
Property, plant and equipment, net 59,165 47,530
Other assets 5,438 5,514
---------------------------------
Total assets $174,911 $148,905
=================================
<FN>
See accompanying notes.
</TABLE>
<PAGE>
<TABLE>
Great Lakes Carbon Corporation
and Subsidiaries
Consolidated Balance Sheets
<CAPTION>
December 31
1997 1996
---------------------------------
(In thousands, except share data)
<S> <C> <C>
Liabilities and stockholders' equity
Current liabilities:
Accounts payable $ 13,601 $ 22,222
Accrued expenses 14,057 11,592
Income taxes payable 1,796 3,840
Current portion of long-term debt 1,419 1,389
---------------------------------
Total current liabilities 30,873 39,043
Long-term debt, less current portion 82,595 71,496
Other long-term liabilities 4,190 3,857
Deferred taxes 4,814 2,554
Stockholders' equity:
Common Stock, par value $0.01 per
share, 100,000 shares authorized
and outstanding 1 1
Additional paid-in capital 5,509 5,509
Retained earnings 46,929 26,445
---------------------------------
Total stockholders' equity 52,439 31,955
---------------------------------
Total liabilities and stockholders'
equity $174,911 $148,905
=================================
<FN>
See accompanying notes.
</TABLE>
<PAGE>
<TABLE>
Great Lakes Carbon Corporation
and Subsidiaries
Consolidated Statement of Operations
<CAPTION>
Year ended December 31
1997 1996 1995
-------------------------------
(In thousands)
<S> <C> <C> <C>
Net Sales $231,911 $242,744 $178,628
Cost of goods sold 172,390 176,371 142,188
-------------------------------
Gross profit 59,521 66,373 36,440
Selling, general and administrative expenses 18,510 15,321 9,687
-------------------------------
Operating income 41,011 51,052 26,753
Other income (expense):
Interest expense, net (6,287) (7,573) (1,127)
Asset utilization fee to parent -- -- (6,286)
Other, net (49) (772) 2,111
-------------------------------
(6,336) (8,345) (5,302)
-------------------------------
Income before income taxes 34,675 42,707 21,451
Income tax expense 12,691 15,148 7,633
-------------------------------
Net income $ 21,984 $ 27,559 $ 13,818
===============================
<FN>
See accompanying notes.
</TABLE>
<PAGE>
<TABLE>
Great Lakes Carbon Corporation
and Subsidiaries
Consolidated Statements of Stockholders' Equity
<CAPTION>
Additional Total
Common Paid-in Retained Stockholders'
Stock Capital Earnings Equity
-------------------------------------------
(In thousands)
<S> <C> <C> <C> <C>
Balance at January 1, 1995 $ 1 $ 53,637 $ 15,019 $ 68,657
Net income 13,818 13,818
Distributions (48,128) (28,451) (76,579)
-------------------------------------------
Balance at December 31, 1995 1 5,509 386 5,896
Net income 27,559 27,559
Dividends (1,500) (1,500)
-------------------------------------------
Balance at December 31, 1996 1 5,509 26,445 31,955
Net income 21,984 21,984
Dividends (1,500) (1,500)
-------------------------------------------
Balance at December 31, 1997 $ 1 $ 5,509 $ 46,929 $ 52,439
===========================================
<FN>
See accompanying notes.
</TABLE>
<PAGE>
<TABLE>
Great Lakes Carbon Corporation
and Subsidiaries
Consolidated Statements of Cash Flows
<CAPTION>
Year ended December 31
1997 1996 1995
-------------------------------
(In thousands)
<S> <C> <C> <C>
Operating activities
Net income $21,984 $27,559 $13,818
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 10,220 9,551 8,420
Deferred taxes 2,260 462 4,181
Changes in operating assets and
liabilities:
Accounts receivables (974) (6,851) (8,418)
Inventories 7,417 (13,701) (7,167)
Other current assets (1,391) 306 621
Income taxes payable (2,044) 743 3,523
Accounts payable and accrued expenses (6,156) 8,158 4,103
Other, net (55) 1,495 (1,846)
-------------------------------
Net cash provided by operating activities 31,261 27,722 17,235
Investing activities
Capital expenditures (21,391) (6,371) (5,774)
-------------------------------
Net cash used in investing activities (21,391) (6,371) (5,774)
Financing activities
Repayment of long-term debt (1,389) (1,406) (2,616)
Additions to long-term debt 12,518 -- 65,000
Transfers to parent -- -- (68,503)
Dividends (1,500) (1,500) --
-------------------------------
Net cash provided (used) by financing
activities 9,629 (2,906) (6,119)
Increase in cash 19,499 18,445 5,342
Cash at beginning of year 24,097 5,652 310
-------------------------------
Cash at end of year $43,596 $24,097 $ 5,652
===============================
<FN>
See accompanying notes.
</TABLE>
<PAGE>
Great Lakes Carbon Corporation and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 1997
1. Significant Accounting Policies
Basis of Presentation
Great Lakes Carbon Corporation (the Company) is a producer of calcined coke
principally for customers in the aluminum industry. The consolidated financial
statements include the accounts of the Company and its subsidiaries.
Significant intercompany accounts have been eliminated in consolidation.
On December 20, 1995, the Company, formerly a wholly-owned subsidiary of
Horsehead Industries, Inc. ("Horsehead"), sold $65,000,000 of 10% Senior
Secured Notes due 2006. Immediately upon the completion of the sale, the net
proceeds therefrom were distributed by the Company as a cash dividend to
Horsehead, all indebtedness of Horsehead owing to the Company was canceled and
100% of the common stock of the Company was distributed by Horsehead on a pro
rata basis to the holders of the common stock of Horsehead.
Through December 20, 1995 a monthly asset utilization fee was charged by
Horsehead equal to 1% of the Company's net assets, adjusted for intercompany
balances and tax assets and liabilities. A portion of this fee ($1,400,000 in
1995) is included in selling, general and administrative expenses, as it
represents estimates of various ongoing management services provided to the
Company by Horsehead. The balance is included in other income (expense).
Management believes that the allocation method is reasonable and that, after
giving affect to such allocation, selling, general and administrative expenses
in 1995 approximate what the costs would have been for the Company if
it had operated as an unaffiliated entity.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the amounts and disclosures reported in the financial statements
and accompanying notes. Actual results could differ from those estimates.
<PAGE>
Great Lakes Carbon Corporation and Subsidiaries
Notes to Consolidated Financial Statements (continued)
1. Significant Accounting Policies (continued)
Cash Equivalents
Investments with maturities of less than 90 days when purchased are considered
the equivalent of cash.
Inventories
Inventories are stated at the lower of cost (principally average cost method)
or market.
Property, Plant and Equipment
Property, plant and equipment are stated on the basis of cost. Enhancements
are capitalized and depreciated over the period benefited. The provision for
depreciation is determined by the straight-line method over the estimated
useful lives of the related assets.
Impairment of Long-Lived Assets
The Company adopted Statement of Financial Accounting Standards ("SFAS") No.
121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to Be Disposed Of" effective January 1, 1996, which requires impairment
losses to be recorded on long-lived assets used in operations when indicators
of impairment are present and the undiscounted cash flows estimated to be
generated by those assets are less than the assets' carrying amount. The
adoption did not have an effect on the financial condition of the Company.
Significant Customers
The Company had two customers which represented 23.7% and 15.5% of net sales
in 1997 and 22% and 15.3% of net sales in 1996, and one customer which
represented 15.1% of net sales in 1995.
2. Inventories
Inventories consist of the following:
December 31
1997 1996
--------------------
(In thousands)
Raw materials $18,483 $26,377
Finished goods 7,821 8,534
Supplies and spare parts 6,151 4,961
--------------------
$32,455 $39,872
====================
<PAGE>
Great Lakes Carbon Corporation and Subsidiaries
Notes to Consolidated Financial Statements (continued)
3. Property, Plant and Equipment
Property, plant and equipment consists of the following:
December 31
1997 1996
--------------------
(In thousands)
Land and improvements $ 2,718 $ 2,449
Buildings 9,193 8,835
Machinery, equipment and other 116,786 110,955
Construction in progress 16,866 2,175
--------------------
145,563 124,414
Accumulated depreciation (86,398) (76,884)
--------------------
$ 59,165 $ 47,530
====================
4. Accrued Expenses
Accrued expenses included interest payable of $3,467,000 and $3,370,000 at
December 31, 1997 and 1996, respectively.
5. Long-Term Debt
Long-term debt and capital lease obligations consist of the following:
December 31
1997 1996
--------------------
(In thousands)
10% Senior Secured Notes due January 1, 2006 $ 65,000 $ 65,000
Various pollution control and industrial revenue bonds
bearing interest at rates from 6.75% to 7.125% due
in varying amounts at various dates through 2002 4,834 5,919
Facility expansion credit line bearing interest at
LIBOR plus 4% (9.90% at December 31, 1997) due in
varying amounts semi-annually from June, 1999
through June, 2002 11,850 --
Capital lease obligation, bearing interest of 9.3% 1,662 1,966
Other 668 --
--------------------
84,014 72,885
Current portion (1,419) (1,389)
--------------------
$ 82,595 $ 71,496
====================
<PAGE>
Great Lakes Carbon Corporation and Subsidiaries
Notes to Consolidated Financial Statements (continued)
5. Long-Term Debt (continued)
The Senior Secured Notes are secured by essentially all property, plant and
equipment not otherwise pledged and certain other assets of the Company. At
the option of the Company, the Senior Secured Notes may be redeemed, in whole
or in part, commencing January 1, 2001 at various redemption prices ranging
from 105% in 2001 to par in 2004 and beyond. The Senior Secured Notes
indenture imposes limitations on restricted payments, including dividends.
The pollution control and industrial development revenue bonds were issued by
various state and local governmental authorities. Under agreements with these
authorities, the Company has either leased (with nominal value purchase
options) or purchased on an installment basis the facilities constructed with
the funds financed. The Company has the option of redeeming the bonds in whole
or in part at par.
The facility expansion credit line provides for credit of up to $20,000,000
for use in connection with a major facility expansion at the Company's La
Plata, Argentina plant operated by its wholly-owned subsidiary, Copetro S.A.
(Copetro). The loan is secured by the property, plant and equipment of
Copetro, including, upon completion, the assets constructed with the funds
financed. The agreement requires that Copetro satisfy certain financial
ratios and imposes limitations on the payment of dividends.
The Company's revolving credit agreement, which is in effect until December
1998, provides for borrowings, subject to borrowing base limitations, of up
to $15,000,000 (with a $10,000,000 sublimit for letters of credit). The
agreement is secured by substantially all domestic accounts receivable and
inventory of the Company and requires that the Company satisfy certain
financial ratios. At December 31, 1997 and 1996, there were no borrowings
under this credit agreement and outstanding letters of credit were $3,420,000
and $6,153,000, respectively.
The fair market value of the Company's long-term debt obligations approximated
$89,000,000 and $77,400,000 at December 31, 1997 and 1996, respectively.
<PAGE>
Great Lakes Carbon Corporation and Subsidiaries
Notes to Consolidated Financial Statements (continued)
5. Long-Term Debt (continued)
Maturities of long-term debt, for the succeeding five years and thereafter are
as follows:
Long-Term Capital
Debt Leases Total
-------------------------------
(In thousands)
1998 $ 1,085 $ 334 $ 1,419
1999 3,568 367 3,935
2000 4,768 403 5,171
2001 4,906 442 5,348
2002 2,869 116 2,985
Thereafter 65,156 0 65,156
-------------------------------
$ 82,352 $ 1,662 $84,014
===============================
Interest paid amounted to $7,773,000, $4,989,000, and $1,223,000 for the years
ended December 31, 1997, 1996 and 1995, respectively.
The Company capitalized interest in construction in progress of $808,000 for
the year ended December 31, 1997.
6. Leases
The Company leases various production equipment under capital leases, some of
which contain renewal options and/or options to purchase. Amortization under
capital leases is included in depreciation expense.
<PAGE>
Great Lakes Carbon Corporation and Subsidiaries
Notes to Consolidated Financial Statements (continued)
6. Leases (continued)
Future minimum payments as of December 31, 1997, by year and in the aggregate,
under capital leases and noncancelable operating leases with initial or
remaining terms of one year or more consist of the following:
Capital Operating
Leases Leases
--------------------
(In thousands)
1998 $ 615 $1,622
1999 615 892
2000 615 857
2001 615 648
2002 154 633
Thereafter 0 2,085
--------------------
Total minimum lease payments 2,614 $6,737
Amounts representing interest (952) ======
------
Present value of net minimum lease payments $1,662
======
Rental expense for all operating leases was $2,770,000, $2,685,000, and
$2,691,000 for the years ended December 31, 1997, 1996 and 1995, respectively.
7. Pension Plans
The Company has various defined benefit retirement plans which cover
substantially all employees. Benefits are based upon the number of years of
service and the employee's compensation under varying formulas. The funding
policy is generally to contribute at least the minimum amount that is
acceptable under federal law for tax purposes. Contributions are intended to
provide not only for benefits attributed to service to date, but also for those
expected to be earned in the future. As of December 31, 1997 the assets of the
plan were invested principally in listed stocks, bonds, money market
certificates and cash.
<PAGE>
Great Lakes Carbon Corporation and Subsidiaries
Notes to Consolidated Financial Statements (continued)
7. Pension Plans (continued)
Pension expense for the plans included the following:
1997 1996 1995
-------------------------------
(In thousands)
Service cost $ 501 $ 545 $ 481
Interest cost 571 483 411
Actual return on assets (1,595) (889) (905)
Net amortization and deferral 1,010 498 541
-------------------------------
$ 487 $ 637 $ 528
===============================
The following table sets forth the plans' funded status and amounts recognized
in the Company's balance sheets:
1997 1996
--------------------
(In thousands)
Actuarial present value of benefit obligations:
Vested benefit obligation $(6,781) $(5,310)
====================
Accumulated benefit obligation $(7,146) $(5,673)
====================
Projected benefit obligation $(8,538) $(7,041)
Plan assets, at fair value 9,003 6,763
--------------------
Projected benefit obligation less than
(in excess of) plan assets 465 (278)
Unrecognized net gain (542) (45)
Prior service cost 80 (9)
--------------------
Pension asset (liability) recognized
in the balance sheet $ 3 $ (332)
====================
The expected long-term rate of return on plan assets was 9% for 1997, 1996 and
1995. The weighted average discount rate and weighted average rate of increase
in future compensation levels used were 7.5% and 5% for 1997, 8% and 5% for
1996, and 7.25% and 4.25% for 1995.
8. Postretirement Obligations
The Company provides certain health care and life insurance benefits to all
full time employees who satisfy certain eligibility requirements and reach
retirement age while employed by the Company. The Company does not fund these
benefits and accrues for the related cost generally over the employees' service
period.
<PAGE>
Great Lakes Carbon Corporation and Subsidiaries
Notes to Consolidated Financial Statements (continued)
8. Postretirement Obligations (continued)
Net periodic postretirement benefit cost includes the following components:
1997 1996 1995
------------------------------
(In thousands)
Service cost $204 $198 $196
Interest cost 223 184 175
Amortization of transition obligation 68 68 68
------------------------------
$495 $450 $439
==============================
Postretirement benefit obligations at December 31, 1997 and 1996 were as
follows:
1997 1996
--------------------
(In thousands)
Accumulated Postretirement Benefit Obligation ("APBO"):
Retirees $ (653) $ (544)
Active fully-eligible (1,459) (1,106)
Other active (1,265) (1,145)
--------------------
Total APBO (3,377) (2,795)
Unrecognized net loss 267 50
Unamortized transition obligation 1,020 1,088
-------------------
Accrued postretirement benefit liability $(2,090) $(1,657)
====================
The health care cost trend used in determining the APBO was 6.31% grading down
to 5.0% in three years. That assumption may have a significant effect on the
amounts reported. To illustrate, increasing the assumed trend by 1% for all
years would increase the APBO as of December 31, 1997 by $478,000 and the
service and interest cost components of net periodic postretirement benefit
cost for the year then ended by $71,000.
Assumptions used to develop net periodic postretirement benefit cost and the
actuarial present value of accumulated benefit obligations include the weighted
average rate of increase in future compensation levels and the weighted average
discount rate of 5% and 7.5% for 1997, 5% and 8% for 1996, and 5% and 7.25% for
1995.
<PAGE>
Great Lakes Carbon Corporation and Subsidiaries
Notes to Consolidated Financial Statements (continued)
9. Other Income (Expense)
Other income (expense) consists of the following:
1997 1996 1995
-------------------------------
(In thousands)
Department of Energy refund $ -- $ -- $2,390
Other (49) (772) (279)
-------------------------------
$(49) $(772) $2,111
===============================
10. Income Taxes
The Company was included in the consolidated federal income tax return of
Horsehead through December 20, 1995. Income taxes have been provided in the
Company's 1995 statement of operations as if the Company was a separate taxable
entity.
Components of the Company's deferred tax liabilities and assets are as follows:
1997 1996
--------------------
(In thousands)
Deferred tax liabilities:
Book over tax depreciable basis $4,460 $ 3,601
Other - net 2,315 605
--------------------
Total deferred tax liabilities 6,775 4,206
Deferred tax assets:
Accrued liabilities 1,571 1,333
Other - net 390 319
--------------------
Total deferred tax assets 1,961 1,652
--------------------
Net deferred tax liability $4,814 $ 2,554
====================
<PAGE>
Great Lakes Carbon Corporation and Subsidiaries
Notes to Consolidated Financial Statements (continued)
10. Income Taxes (continued)
The differences between tax expense computed at the statutory federal income
tax rate and actual tax expense are as follows:
1997 1996 1995
-------------------------------
(In thousands)
Tax expense at statutory rates applied
to pretax earnings $12,143 $14,947 $7,508
State income tax, net of federal tax effects 1,020 1,029 428
Tax exempt earnings (938) (480) (371)
Effects of foreign operations (91) (657) 45
Other 557 309 23
-------------------------------
$12,691 $15,148 $7,633
===============================
Income taxes consist of the following:
1997 1996 1995
------------------------------
(In thousands)
Current:
Federal $ 7,229 $ 9,252 $ 1,934
State 1,481 1,465 240
Foreign 2,852 3,969 1,278
------------------------------
11,562 14,686 3,452
Deferred:
Federal 1,001 564 3,763
State 88 118 418
Foreign 40 (220) --
------------------------------
1,129 462 4,181
------------------------------
Total $12,691 $15,148 $7,633
==============================
Income taxes paid were approximately $12,485,000, $13,723,000 and $161,000
in 1997, 1996 and 1995, respectively.
U.S. income taxes have not been provided on the undistributed earnings of
Copetro ($23,415,000 as of December 31, 1997) because such earnings are
expected to be reinvested. Upon distribution of those earnings, the Company
would be subject to U.S. income taxes (subject to an adjustment for foreign
tax credits and withholding taxes, if any).
<PAGE>
Great Lakes Carbon Corporation and Subsidiaries
Notes to Consolidated Financial Statements (continued)
10. Income Taxes (continued)
Income before income taxes attributable to domestic operations (which included
results from export sales) was $25,723,000, $30,601,000 and $16,356,000 for
the years ended December 31, 1997, 1996 and 1995, respectively, while income
before income taxes attributable to foreign operations was $8,952,000,
$12,106,000 and $5,095,000 for the years ended December 31, 1997, 1996 and
1995, respectively.
11. Operations by Geographic Area
The following is a summary of the Company's operations by geographic area:
1997 1996 1995
-------------------------------
(In thousands)
Net Sales
United States $189,730 $197,296 $146,819
Foreign 42,181 45,448 31,809
-------------------------------
$231,911 $242,744 $178,628
===============================
Operating income
United States $ 32,358 $ 38,266 $ 21,841
Foreign 8,653 12,786 4,912
-------------------------------
$ 41,011 $ 51,052 $ 26,753
===============================
Assets
United States $125,448 $114,864 $ 90,153
Foreign 49,463 34,041 23,777
-------------------------------
$174,911 $148,905 $113,930
===============================
Exports of U.S. produced products were approximately $104,826,000, $111,482,000
and $87,287,000 for the years ended December 31, 1997, 1996 and 1995,
respectively. Export sales as a percentage of United States net sales
represented 22.9%, 23.0% and 25.6% to Western Europe in 1997, 1996 and 1995,
respectively, and 18.9%, 18.8% and 11.1% to Africa in 1997, 1996 and 1995,
respectively. The Company's foreign operations are conducted principally in
South America.
12. Litigation and Contingencies
The Company is a party to several proceedings which are in various stages of
resolution. Management of the Company, after discussion with legal counsel, is
of the opinion that the ultimate resolution of these matters will not have a
material effect upon the financial condition of the Company.
GREEN ANODE COKE SALES AGREEMENT
BETWEEN
CONOCO INC.
AND
GREAT LAKES CARBON CORPORATION
CONOCO INC., a corporation organized under the laws of the State of
Delaware ("Seller"), and GREAT LAKES CARBON CORPORATION, a corporation also
organized under the laws of the state of Delaware ("Buyer"), enter into this
Agreement for the sale and purchase of green anode coke ("Coke"), pursuant to
the following terms and conditions.
1.0. Term
----
Subject to the provisions of Sections 4.3. and 8.2. hereof, the initial
term of this Agreement shall be from January 1, 1998 through CONFIDENTIAL
TREATMENT. Upon the expiration of the initial term, this Agreement shall be
automatically renewed on a year-to-year basis, from anniversary date to
anniversary date, unless terminated pursuant to the provisions of Sections
4.4., 8.2. or 18.0. hereof.
2.0. QUANTITY
--------
2.1. Subject to the provisions of Sections 3.0., 4.4., 8.2 and
12.5. hereof, Seller shall sell and Buyer shall purchase a base quantity of
CONFIDENTIAL TREATMENT short dry tons of Coke during each calendar year during
the term of this Agreement. These sales/purchases shall be at a rate of
CONFIDENTIAL TREATMENT short dry tons per calendar quarter.
2.2. As specified below, for each six-calendar month period of
January 1 - June 30 and July 1 - December 31 ("six-month period") which occurs
during the term of this Agreement, Buyer may give Seller written notice that
Buyer wishes to purchase from Seller an additional quantity of up to
CONFIDENTIAL TREATMENT short dry tons of Coke. Seller will use commercially
reasonable efforts to supply the additional quantity of Coke requested by
Buyer but will not be obligated to sell or deliver any additional quantity of
Coke to Buyer.
(a) Except for the first six-month period, Buyer shall submit its
notice to Seller not less than thirty (30) days prior to the first day of the
relevant six-month period.
(b) Upon receipt of Buyer's notice, Seller will promptly evaluate
Buyer's request in light of Seller's Coke production schedule and Seller's
other Coke marketing obligations/opportunities. Seller will then notify Buyer
<PAGE>
of the additional quantity of Coke, if any, which Seller could make available
to Buyer during each calendar quarter of the relevant six-month period. If
Buyer wishes to purchase any or all of Seller's available additional Coke,
Seller and Buyer will enter good faith negotiations to establish (i) the exact
additional quantity of Coke which Seller will sell and Buyer will purchase
during each calendar quarter of the relevant six-month period, and (ii) the
pricing terms for the Coke to be sold/purchased during the relevant six-month
period. Seller and Buyer shall complete these negotiations during the thirty
(30) days immediately prior to the first day of the relevant six-month period.
(c) If the Seller and Buyer reach agreement on the quantity and
pricing terms for an additional quantity of Coke, such additional quantity
will be sold and purchased during the relevant six-month period pursuant to
those negotiated terms and the other applicable terms and conditions of this
Agreement. If the Seller and Buyer do not reach agreement on the quantity or
pricing terms for an additional quantity of Coke, then only the base quantity
specified in Subsection 2.1. will b sold and purchased pursuant to this
Agreement during the relevant six-month period.
2.3. Buyer acknowledges that the Coke sold hereunder is a by-
product of the manufacturing operations at Seller's Ponca City, Oklahoma
Refinery ("Refinery"), Buyer further acknowledges that Seller may change the
feedstocks or raw materials which are used at the Refinery or alter Seller's
method of manufacture of Coke without liability even though such changes may
alter the quality and/or quantity of Coke produced there.
Seller will give buyer 30 days notice if seller anticipates
changes in feedstocks, raw materials or method of manufacture, that will
adversely affect the quality of coke produced such that it does not meet the
specifications as provided in attachment A.
In the event Refinery does not produce ample quantities of
Coke to meet the needs of Seller's customers, Seller shall have the right to
proportionately allocate Coke.
Buyer shall not be obligated to purchase any Coke which does
not have physical properties that conform to those listed in the
"Specifications" column of Exhibit A hereto.
<PAGE>
3.0. QUALITY
-------
3.1. Subject to Section 2.3, Seller shall deliver Coke which has
been produced at Seller's Refinery and which has physical properties that
conform to those listed in the "Specifications" column of Exhibit A hereto.
3.2. The quality of each quantity of delivered Coke will be
determined as follows.
(a) Immediately after the Coke is unloaded at Buyer's facility,
Buyer will obtain a representative sample of the Coke which it will divide
into two equal portions. Seller will have the right to witness the sampling.
Sampling of trucked material will be by a mutually agreeable method.
(b) Buyer will promptly test one portion of the sample and, based
upon the test results, notify Seller of the Coke's physical properties.
Buyer will retain the second portion of the sample as a referee sample.
(c) If Buyer's test results show that the Coke's physical
properties do not conform to those listed in the "Specifications" column of
Exhibit A hereto, and Seller so requests, the second portion of the sample
will be tested by a mutually acceptable independent testing laboratory which
will use mutually acceptable testing procedures. The parties will equally
share the costs of the independent testing laboratory and its quality
determination will be binding on the parties.
(d) If the independent testing laboratory's test results show that
the Coke's physical or chemical properties exceed the average monthly maximum
as set forth in Exhibit A hereto, the parties will use good faith efforts to
devise a mutually satisfactory remedy, subject to the provisions of Section
10.0 hereof.
(e) If the coke's physical or chemical properties exceed the reject
maximum as set forth in Exhibit A hereto, buyer will make best efforts to
utilize such coke but reserves the right to reject any coke deemed unsuitable
for calcining.
<PAGE>
4.0. PRICE
-----
4.1. The price for Coke delivered by Seller to Buyer pursuant to
this Agreement will be FOB freight prepaid buyers facility at Enid, OK and
will be established by the parties in accordance with the following
provisions.
4.2. Each Coke price will be based upon the assumption that the
moisture content of the delivered Coke will be 9.5 wt% and Seller's initial
invoice for each Coke delivery will be based upon that assumption. However,
if the actual moisture of the delivered Coke is not 9.5 wt%, then the price
of the delivered Coke shall be adjusted according to Section 4.4. hereof.
4.3. The price for Coke delivered to Buyer during each six-month
period during the term of this Agreement will be negotiated in good faith
during the thirty (30) days immediately prior to the first day of the
relevant six-month period. If a price agreement cannot be reached by the
end of the thirty (30) day price negotiation period, then this Agreement
will automatically terminate at the end of the calendar quarter immediately
following the thirty (30) day price negotiation period. The price for Coke
delivered during that final calendar quarter will be the last price
established pursuant to this Agreement or if no agreement on price is
reached for the first six-month period under this Agreement then the price
to be paid will be the last prevailing price under the prior Green Coke
Sales Agreement between Conoco and Great Lakes Carbon Corporation.
4.4. In the calendar month following the calendar quarter of
delivery, the actual moisture content of the delivered Coke, as determined
by Buyer, shall be averaged to determine a quarterly average moisture content
("Average Moisture Content"). The Average Moisture Content shall be deemed
to be the actual moisture content for each delivery of Coke during the
specified calendar quarter. The price of the delivered Coke shall be
adjusted to compensate for the difference between the Average Moisture
Content and 9.5 wt%.
5.0. DELIVERY
--------
5.1. Seller shall deliver and Buyer shall receive CONFIDENTIAL
TREATMENT short dry tons of Coke per calendar quarter. By the 28th day of
each month, the parties will agree upon the quantity of Coke that will be
delivered during the following month.
<PAGE>
5.2. Except as otherwise agreed by the parties in writing, all
Coke will be delivered FOB Buyer's facility at Enid, OK, freight prepaid.
Seller will choose method of transport, arrange for trucks or railcars and
will be responsible for loading material into such vehicles.
6.0. TITLE AND RISK OF LOSS
----------------------
Title to and risk of loss of the Coke delivered during this Agreement
shall pass to Buyer at the time the coke is delivered into buyer's facility
at Enid, OK.
7.0. MEASUREMENT
-----------
The quantity of Coke delivered shall be determined (i) by the use of
mutually acceptable railroad weigh station scales, or (ii) by Buyer's
certified railroad scales in Kremlin, Oklahoma, or (iii) by Seller's
certified belt scales in Ponca City, Oklahoma. Any measurement made by the
above methods will be final for both parties.
8.0. PAYMENT
-------
8.1. Seller shall promptly invoice Buyer for each delivery of Coke.
Subject to the adjustment specified in Section 4.5 hereof, Buyer shall pay
Seller's invoices in full, not later than the fifteenth (15) day of the month
following the month of the bill of lading date, without any adjustments,
discounts or set-offs by telegraphic transfer to:
Morgan Guaranty Trust Company
Conoco Inc., Account Number: 73900006
Buyer shall include, in the telegraphic transfer details, the invoice number
and a statement that payment is for the purchase of coke. If the payment
date falls on a day when Seller's bank is closed (Saturday, Sunday, New York
bank holiday, or other nonworking day), payment shall be due on the succeeding
New York banking day.
8.2. Seller reserves the right to withhold delivery of Coke to
Buyer at any time Buyer's payments become past due. If buyer fails to pay
in full all amounts owed to Seller within five (5) days after receipt of
Seller's notice that such amounts are past due, Seller shall have the right
to immediately cancel or terminate this Agreement, without prejudice to any
rights, claims or causes of action arising from the Agreement.
<PAGE>
8.3. Buyer shall pay interest on all past due invoices at the
prime rate as quoted by Citibank N.A. from its New York offices on the date
the invoice is due, plus two percentage points above the announced rate.
In addition, Buyer shall pay all costs and expenses, including reasonable
attorneys's fees, incurred by Seller in collecting past due payments.
9.0. WARRANTIES
----------
Seller warrants that it has title to the Coke delivered under this
Agreement, that the Coke will be free from all liens, encumbrances and
security interests and that the Coke will have physical properties that
conform to those listed in the "Specifications" column of Exhibit A hereto.
THERE ARE NO OTHER WARRANTIES, EXPRESS OR IMPLIED, INCLUDING THE WARRANTIES
OF MERCHANTABILITY OR FITNESS OF THE COKE FOR A PARTICULAR PURPOSE, EVEN IF
SUCH PURPOSE IS KNOWN TO SELLER. SELLER EXPRESSLY DISCLAIMS ANY
REPRESENTATION OR WARRANTY THAT THE COKE DELIVERED HEREUNDER SHALL HAVE THE
PHYSICAL PROPERTIES LISTED IN THE "TYPICAL" COLUMN OF EXHIBIT A TO THIS
AGREEMENT.
10.0. LIMITATION OF LIABILITY
-----------------------
10.1. Seller's liability to the Buyer for a breach of warranty
under this Agreement shall be limited to (i) replacing, at the point of
delivery, the particular quantity of Coke affected by the breach or
(ii) crediting to Buyer's account an amount not to exceed the purchase price
of the particular quantity of Coke affected by the breach, at Seller's option.
10.2. Neither party shall be liable on any claim under or arising
out of or for breach of this Agreement unless such action is brought no later
than one year from the date the cause of action arose.
10.3. IN NO EVENT SHALL EITHER PARTY BE LIABLE FOR ANY INCIDENTAL
OR CONSEQUENTIAL DAMAGES.
<PAGE>
11.0. TAXES
-----
11.1 Seller agrees to pay any and all property taxes, fees, or
other charges imposed or assessed by governmental or regulatory bodies, the
taxable incident of which occurs prior to the transfer of title to Buyer.
11.2 Buyer agrees to pay any and all property taxes, fees, or
other charges imposed or assessed by governmental or regulatory bodies, the
taxable incident of which occurs after transfer of title to Buyer.
11.3. Any applicable sales, use, gross receipt, superfund,
hazardous waste, gross income or any other excise tax or inspection fee
imposed by any taxing jurisdiction on any transaction covered by this
Agreement shall be paid by the party who is liable for the tax according
to the laws of the jurisdiction involved. However, if the tax is imposed
by law on Seller, such tax shall be reimbursed to Seller by Buyer. This
section shall not apply to any federal, state, or local income, franchise,
or excess profits taxes imposed as a result of the transactions contemplated
by this Agreement.
11.4. Buyer shall furnish Seller with an exemption or resale
certificate or other documents necessary to comply with any applicable sales
and use tax laws.
11.5. When applicable, Buyer shall furnish Seller in duplicate with
a notice of exportation or articles with benefit of drawback and other forms
required by governmental authorities covering each batch of Coke sold to and
exported by Buyer or any of Buyer's subsidiaries or licensees. Each notice
of exportation of articles with benefit of drawback shall be fully completed
and properly executed by all necessary parties and endorsed to Seller.
12.0. FORCE MAJEURE
-------------
12.1 No failure or omission by either party to carry out or observe
any of the terms or conditions of this Agreement, including, but not limited
to, either party's delay or failure to perform as a result of such party's
failure to manufacture, deliver, receive, transport, use, or consume Coke
due to occurrences set forth below, shall, except in relation to obligations
to make payments under this Agreement, give rise to any claim against the
party in question or be deemed a breach of the Agreement if such failure or
<PAGE>
omission arises from any cause reasonably beyond the control of that party,
to the extent that such failure of delay may be due to:
(a) Compliance (voluntary or involuntary) with laws, decrees,
guidelines, requests, or the like of any government or person purporting to
act therefor, or of international organizations of which the United States
is a member including without limitation the International Energy Agency.
(b) Restriction or cessation of production of Coke by reason of
the imposition of any government or person purporting to act under the color
or claim of any governmental authority of conditions or requirements which
make it necessary to cease or to reduce the production of the Coke.
(c) Hostilities of war (declared or undeclared), embargoes,
blockades, civil unrest, riots or disorders, terrorism, or sabotage.
(d) Fires, explosions, lightning, maritime peril, collisions,
storms, landslides, earthquakes, floods, and other acts of nature.
(e) Strikes, lockouts, or other labor difficulties (whether or
not involving employees of Seller or Buyer).
(f) Disruption or breakdown of production or transportation
facilities, equipment, labor, or materials.
(g) Closing or restrictions on the use of harbors, railroads or
pipelines.
(h) Any reduction in availability of crude petroleum or crude
petroleum products and/or other materials necessary to make Coke.
(i) Any other cause whether or not of the same class or kind,
beyond the control of either party which prevents or interferes with the
performance of this Agreement.
<PAGE>
12.2. Notwithstanding the provisions of Section 12.1. hereof,
nothing contained in this Agreement shall relieve Buyer of the obligation to
pay in full the purchase price or any other amounts due for the Coke actually
delivered hereunder.
12.3. Upon the occurrence of any of the Force Majeure events
described in Section 12.1. hereof, the party claiming Force Majeure shall
notify the other party promptly in writing of such event and, to the extent
possible, inform the other party of the expected duration of the Force Majeure
event and the volumes of Coke to be affected by the suspension or curtailment
of performance under this Agreement.
12.4. No curtailment or suspension of deliveries or acceptance of
deliveries pursuant to this Section shall operate to extend the period of this
Agreement or to terminate this Agreement.
12.5. Buyer acknowledges that the Coke delivered hereunder is to
be produced by Seller at its Refinery. Seller shall have no obligation to
acquire Coke from any other source to meet its obligations under this
Agreement. If Seller's production of Coke at this Refinery is stopped or
disrupted by an event of Force Majeure, (i) Seller shall have the right to
allocate its available supplies of Coke, if any, among any or all of its
existing customers in a fair and equitable manner, whether or not such
customers are under contract, and (ii) Seller may, with mutual consent,
make up deliveries of Coke to Buyer which have been prevented by a Force
Majeure event, and/or (iii) to the extent that Seller does not make up such
deliveries, then Buyer's annual quantity obligation shall be reduced
accordingly.
13.0. WARNING
-------
13.1. The Material Safety Data Sheet attached hereto as Exhibit B,
which is made a part of this Agreement, contains information regarding health
risks and recommendations for the safe use and handling of Coke.
13.2. THE COKE SOLD BY SELLER MAY BEAR OR CONTAIN HAZARDOUS
CHEMICALS, RESIDUES OR OTHER HAZARDOUS MATERIALS WHICH MAY BE, OR MAY BECOME
BY CHEMICAL REACTION OR OTHERWISE, DIRECTLY OR INDIRECTLY HAZARDOUS TO LIFE,
<PAGE>
TO HEALTH, OR TO PROPERTY BY REASON OF TOXICITY, FLAMMABILITY, EXPLOSIVENESS,
OR FOR OTHER SIMILAR OR DIFFERENT REASONS DURING TRANSPORTATION, USE HANDLING,
REMOVAL, REFINING, CLEANING, RECONDITIONING, DISPOSAL OR OTHER SIMILAR EVENTS.
13.3 Buyer acknowledges and represents that it has read and
understands the Material Safety Data Sheet and the above warning and
will read and undertake to understand any subsequent Material Safety Data
Sheets or written warnings provided by Seller from time to time an undertakes
to exercise the degree of care required to protect persons and properties from
all hazards of the Coke disclosed in the Material Safety Data Sheets or
warnings including but no limited to (i) warning the employees of Buyer and
its affiliates who may become exposed to the Coke of the said hazards of the
Coke, providing such employees with necessary and appropriate safety
equipment and taking appropriate measures to assure that such safety
equipment is adequately maintained and properly used, and (ii) warning third
parties who may purchase or come into contact with the Coke or who handle or
transport the Coke on the behalf of Buyer of the aforesaid hazards of the
Coke.
14.0. INDEMNITY
---------
The Buyer shall indemnify and hold harmless the Seller, its parent,
subsidiaries, successors and assigns, and other officers, directors,
employees, subcontractors, and agents against any and all liabilities, claims,
demands and/or suits (including attorneys' fees and all costs), which arise
out of or are related in any way to the possession, handling, use, or resale
of the Coke after title to the Coke passes to the Buyer. The Buyer shall, at
the option of the Seller, defend the Seller at the Buyer's sole expense
against any claims, demands and/or suits which are covered by this Indemnity/
Hold Harmless clause.
15.0. WAIVER
------
No waiver, either express, or by course of dealing or course of
performance, of any of the terms and conditions contained in this Agreement,
or waiver of any breach of any of the terms and conditions contained in this
Agreement, shall be construed as a subsequent waiver of any of the terms and
conditions of this Agreement or as a waiver of any subsequent breach of the
same or any other term or condition of this Agreement.
<PAGE>
16.0. ASSIGNMENT
----------
Neither party may assign this Agreement without the prior written
consent of the other party; except that, either party may assign this
Agreement to any of its affiliates, in which event the assignor shall remain
responsible for the assignee's complete performance.
17.0. NOTICES
-------
All notices required or permitted by the terms of this Agreement shall
be deemed sufficient if given by personal delivery, telegram, telex, or
telecopier, or by prepaid, certified mail and addressed to the Seller and to
the Buyer as follows:
TO SELLER: CONOCO INC.
600 North Dairy Ashford
P.O. Box 2197
Houston, Texas 77252
Telex No: 775347
Attention: Manager
North American Petroleum Coke
Moran Building, Room 3030
TO BUYER: Great Lakes Carbon Corporation
4 Greenspoint Plaza, Suite 2200
16945 Northchase Drive
Houston, Texas 77060
Fax No: (281) 775-4744
Attention: V.P., Raw Materials
18.0. TERMINATION
-----------
Unless terminated earlier pursuant to Sections 4.3. or 8.2., either
party may terminate this Agreement upon completion of the initial term,
by giving written notice to the other party on or before CONFIDENTIAL
TREATMENT. In addition, either party may terminate this Agreement as of
December 31 of any subsequent year by giving written notice to the other
party on or before July 1 of that year.
19.0. GOVERNING LAW
-------------
This Agreement shall be governed by and construed in accordance with
the laws of the State of Texas, U.S.A.
<PAGE>
20.0. MISCELLANEOUS PROVISIONS
------------------------
20.1. The section headings contained in this Agreement are for the
convenience of the parties only and shall not be interpreted as part of this
Agreement.
20.2. To the extent it can legally do so, the Buyer hereby waives
all causes of action and remedies to which the Buyer is or may be entitled
under the Texas Deceptive Trade Practices Act.
21.0. MODIFICATION
------------
This agreement shall not be modified except by written instrument
executed by duly authorized representatives of the respective parties.
22.0. ENTIRE AGREEMENT
----------------
This Agreement, including all Exhibits, contains the full and complete
understanding of the parties with respect to the purchase and sale of Coke.
This Agreement shall not be affected by the acknowledgment or acceptance by
the Seller of purchase orders, acknowledgments, sales orders, releases or any
other form submitted by the Buyer, which contain other or different terms and
conditions from those included in this Agreement.
<PAGE>
IN WITNESS WHEREOF, Seller and Buyer have caused this Agreement to be
executed in duplicate originals by their duly authorized representatives this
____ day of ____________, 19__.
WITNESS: CONOCO INC.
By: /s/FD Bell 10/28/97
- ------------------------ -------------------------------
Title: Manager, Global Carbon
-------------------------------
WITNESS: GREAT LAKES CARBON CORPORATION
By: /s/Jim Betts
- ------------------------ -------------------------------
Title: Vice President, Raw Materials
-------------------------------
<PAGE>
<TABLE>
EXHIBIT A
CONFIDENTIAL TREATMENT GREEN ANODE COKE SALES AGREEMENT
BETWEEN
CONOCO INC.
AND
GREAT LAKES CARBON CORPORATION
EFFECTIVE CONFIDENTIAL TREATMENT
<CAPTION>
PRODUCT SPECIFICATIONS
PROPERTY TYPICAL AVERAGE REJECT TEST METHOD
MONTHLY MAXIMUM
MEAN
<S> <C> <C>
Moisture, wt% CONFIDENTIAL TREATMENT Conoco Method
TSL-19-80
and/or GLC
Method C-1B
Volatile
Matter, wt% CONFIDENTIAL TREATMENT ASTM D-4421
Sulfur, wt% CONFIDENTIAL TREATMENT ASTM D-1552
Ash, wt% CONFIDENTIAL TREATMENT ASTM D-4422
Metals, ppm: ASTM D-5600-94
Iron CONFIDENTIAL TREATMENT
Vanadium CONFIDENTIAL TREATMENT
Nickel CONFIDENTIAL TREATMENT
Silicon CONFIDENTIAL TREATMENT
Sodium CONFIDENTIAL TREATMENT
Calcium CONFIDENTIAL TREATMENT
Nickel +
Vanadium CONFIDENTIAL TREATMENT
<FN>
Individually NI and VA may exceed monthly average as long as the combined
NI and VA do not exceed CONFIDENTIAL TREATMENT on a monthly average.
</TABLE>
<PAGE>
EXHIBIT B
CONOCO
MATERIAL SAFETY DATA SHEET
- --------------------------------------------------------------------------
COKC0020 Revised 7-APR-1997 Printed 1-MAY-1997
Green Petroleum Coke
- --------------------------------------------------------------------------
CHEMICAL PRODUCT/COMPANY IDENTIFICATION
Material Identification
CAS Number 64741-79-3
----------------------------------------------------------
Tradenames and Synonyms
Green Anode Coke, Green Anode Code PC
Green Fuel Coke
Green Premium Coke
Needle Coke
Graphite Petroleum Coke
8950, 8942, 8940, 8971, 8977, 8982
----------------------------------------------------------
Company Identification
MANUFACTURER/DISTRIBUTOR
Conoco, Inc.
P.O. Box 2197
Houston, TX 77252
----------------------------------------------------------
PHONE NUMBERS
Product Information 1-281-293-5550
Transport Emergency CHEMTREC 1-800-424-9300
Medical Emergency 1-800-441-3637
----------------------------------------------------------
- --------------------------------------------------------------------------
COMPOSITION/INFORMATION ON INGREDIENTS
Components
Material CAS Number %
----------------------------------------------------------
Thermocracked Coke, Green 64741-79-3 100
----------------------------------------------------------
Components (Remarks)
If workplace exposure monitoring indicates detectable levels
of polynuclear aromatic hydrocarbons, refer to the Exposure
Controls/Personal Protection Section.
----------------------------------------------------------
(Continued)
<PAGE>
- --------------------------------------------------------------------------
HAZARDS IDENTIFICATION
Potential Health Effects
Primary Routes of Exposure/Entry: Skin Inhalation
Signs and Symptoms of Exposure/Medical Conditions Aggravated
by Exposure:
The product is a relatively nontoxic material. The "nuisance
dust" exposure values are listed but they apply to any inert
substance capable of producing airborne particulates.
Excessive concentrations of nuisance dusts may reduce
visibility, cause unpleasant deposits in the eyes, ears, and
nasal passages, or irritate the skin or mucous membranes by
mechanical means. However, the workplace exposure is not
known or expected to cause a significant health effect.
The product, as with many petroleum products, may cause
minor skin, eye, or lung irritation, but good hygienic
practices can minimize these effects.
------------------------------------------------------------------
Carcinogenicity Information
None of the components present in this material at
concentrations equal to or greater than 0.1% are listed by
IARC, NTP, OSHA or ACGIM as a carcinogen.
------------------------------------------------------------------
- --------------------------------------------------------------------------
FIRST AID MEASURES
First Aid
INHALATION
If inhaled, remove to fresh air. If not breathing, give
artificial respiration. If breathing is difficult, give
oxygen. Call a physician.
SKIN CONTACT
Wash thoroughly with soap and water after contact. If
irritation develops, consult a physician.
EYE CONTACT
In case of contact, immediately flush eyes with plenty of
water for at least 15 minutes. Call a physician
INGESTION
No specific intervention is indicated as compoind is not
likely to be hazardous by ingestion. Consult a physician
if necessary.
----------------------------------------------------------
- --------------------------------------------------------------------------
(Continued)
<PAGE>
FIRE FIGHTING MEASURES
Flammable Properties
Flash Point: No Applicable Test.
----------------------------------------------------------
Fire and Explosion Hazards:
May burn if exposed to temperatures above 700 deg F (370
deg C.)
----------------------------------------------------------
Extinguishing Media
Water Spray, Water Fog.
The most effective method of extinguishment is drenching
with water or water fog. Though other forms of
extinguishing agent may be used, they are considered less
effective for deep seated smoldering fires.
Burning green coke has similar characteristics to burning
coal -- may be readily extinguished using water fog after
spreading the burning material.
----------------------------------------------------------
Fire Fighting Instructions
Most reported coke fires have occurred when freshly
produced coke is inadequately cooled and stored in a manner
that allows the movement of air through the coke bed. Coke
should be well quenched or cooled before it is stored in a
pile out of doors or placed in silos or bins. Storage
should be arranged to prevent movement of air through the
coke.
Should a fire occur, its location and extent should be
determined as quickly as possible. The best procedure is to
dig out and remove the coke in the heated zone. The hot
coke should be drenched with water as it is exposed.
Because of the possibility of a steam explosion, great care
should be used in introducing water into confined storage
such as a silo. Whenever possible, bulk material in silos
should be removed and the material drenched in an open area.
Products of combustion may contain carbon monoxide, carbon
dioxide, and other toxic materials. Do not enter enclosed
or confined space without proper protective equipment
including respiratory protection.
----------------------------------------------------------
- --------------------------------------------------------------------------
ACCIDENTAL RELEASE MEASURES
Safeguards (Personnel)
NOTE: Review FIRE FIGHTING MEASURES and HANDLING (PERSONNEL)
sections before proceeding with clean-up. Use appropriate
PERSONAL PROTECTIVE EQUIPMENT during clean-up.
----------------------------------------------------------
Spill Clean Up
Recover undamaged and minimally contaminated material for
reuse and reclamation. Shovel or sweep up.
----------------------------------------------------------
(Continued)
<PAGE>
- --------------------------------------------------------------------------
HANDLING AND STORAGE
Handling (Personnel)
Wash thoroughly after handling. Wash clothing after use.
----------------------------------------------------------
Storage
Store in accordance with National Fire Protection
Association recommendations.
----------------------------------------------------------
- --------------------------------------------------------------------------
EXPOSURE CONTROLS/PERSONAL PROTECTION
Engineering Controls
Ventilation: Keep area well ventilated and avoid inhalation
of dust.
----------------------------------------------------------
Personal Protective Equipment
Respiratory Protection: Select appropraite NIOSH-approved
respiratory protection where necessary to maintain
exposure below the acceptable limits. Proper respiratory
selection should be determined by adequately trained
personnel and based on the containment(s), the degree of
potential exposure and published respirator protection
factors.
Protective Gloves: Wear impervious gloves.
Eye Protection: Use close fitting goggles.
Other Protective Equipment: Sufficient protective clothing
to minimize skin exposure. Launder contaminated clothing
before reuse.
Other Precautions: Coke can contain very low ppm levels of
polynuclear aromatic hydrocarbons. OSHA has a coal-tar
pitch volatile exposure standard (permissible exposure
limit) of 0.2 mg/m3 (benzene-soluble fraction of total
particulates) that applies if the workplace has DETECTABLE
levels of any of six polynuclear aromatic hydrocarbons
(anthracene, benz-a-pyrene, phenanthrene, acridine,
chrysene, and pyrene).
----------------------------------------------------------
Exposure Guidelines
Exposure Limits
Green Petroleum Coke
PEL (OSHA) Particulates (Not Otherwise Regulated)
15 mg/m3, 8Hr. TWA, total dust
5 mg/m3, 8 Hr. TWA, respirable dust
----------------------------------------------------------
- --------------------------------------------------------------------------
PHYSICAL AND CHEMICAL PROPERTIES
Physical Data
Boiling Point Solid
Melting Point Nonmelting solid
% Volatiles (volume %) Approximately 5-15%
Solubility in Water Insoluble
Odor Slight hydrocarbon
Form Solid
Color Black
Bulk Density (Loose) Approximately 52 lb/cu ft.
----------------------------------------------------------
- --------------------------------------------------------------------------
(Continued)
<PAGE>
STABILITY AND REACTIVITY
Chemical Stability
Stable.
Not reactive under normal conditions.
----------------------------------------------------------
Incompatibility with Other Materials
Incompatible with strong oxidizers.
----------------------------------------------------------
Decomposition
Combustion may produce oxides of sulfur and carbon.
Incomplete combustion can produce carbon monoxide.
----------------------------------------------------------
Polymerization
Polymerization will not occur.
----------------------------------------------------------
- --------------------------------------------------------------------------
TOXICOLOGICAL INFORMATION
Animal Data
Monkeys and rats were exposed six (6) hours a day for 24
months to green petroleum coke dust (10 or 31 mg/mg3). No
tissue effects occurred in monkeys, but the rats showed lung
inflammation.
PNAs (polynuclear aromatic hydrocarbons) have caused cancer
involving skin and internal organs of laboratory animals.
This animal data should be interpreted cautiously since
these studies involved repeated exposure of shaved skin
which was never washed free of test material; the resulting
skin effects (irritation, cell damage, etc.) may play a role
in the tumorigenic response. Also, limited studies of
carcinogenic oils have shown that washing the animals' skin
with soap and water between applications greatly reduces
tumor formation. These studies demonstrate the
effectiveness of cleansing the skin after contact.
----------------------------------------------------------
- --------------------------------------------------------------------------
DISPOSAL CONSIDERATIONS
Waste Disposal
Treatment, storage, transportation, and disposal must be in
accordance with applicable Federal, State/Provincial, and
Local regulations. Remove nonusable solid material and/or
contaminated soil, for disposal in an approved and permitted
landfill.
----------------------------------------------------------
- --------------------------------------------------------------------------
TRANSPORTATION INFORMATION
Shipping Information
DOMESTIC HM-181
Not regulated in packaged or containerized shipments.
Regulated only in bulk water shipments by U.S. Coast
Guard in 46 CFR.
- --------------------------------------------------------------------------
(Continued)
<PAGE>
TRANSPORTATION INFORMATION (Continued)
Must not be loaded in cargo vessels when temperatures
exceed 225 deg F. See Coast Guard Special Permit 3.86
(which supercedes 46 CFR 148.04-15) and 46 CFR 148.04-17.
INTERNATIONAL/HM-181:
Regulated by IMO as "material hazardous only in bulk".
See IMO Bulk Code Nos. 40/45 for loading requirements.
ICAO:
Not regulated under ICAO.
------------------------------------------------------------------
- --------------------------------------------------------------------------
REGULATORY INFORMATION
U.S. Federal Regulations
OSHA HAZARD DETERMINATION
This material is not known to be hazardous as defined by
OSHA's Hazard Communication Standard, 29 CFR 1910.1200.
CERCLA/SUPERFUND
Not applicable; this material is covered by the CERCLA
petroleum exclusion. Releases are not reportable.
SARA, TITLE III 302/304
This material is not known to contain extremely hazardous
substances.
TITLE III HAZARD CLASSIFICATIONS SECTIONS 311, 312
Acute : No
Chronic : No
Fire : No
Reactivity : No
Pressure : No
SARA, TITLE III, 313
This material is not known to contain any chemical(s) at
a level of 1.0% or greater (0.1% for carcinogens) on the
list of Toxic Chemicals and subject to release reporting
requirements.
TSCA
This material is in the TSCA Inventory of Chemical
Substances (40 CFR 710) and/or is otherwise in compliance
with TSCA.
RCRA
This material, when discarded or disposed of, is not
specifically listed as a hazardous waste in Federal
regulations; however, it could be considered hazardous
if it meets criteria for being toxic, corrosive,
ignitable, or reactive according to U.S. definitions
(40 CFR 261). This material could also become a
hazardous waste if it is mixed with or comes in contact
with a listed hazardous waste. If it is a hazardous
waste, regulations 40 CFR 262-266 and 268 may apply.
----------------------------------------------------------
(Continued)
<PAGE>
REGULATORY INFORMATION (Continued)
CLEAN WATER ACT
This material is not known to contain any ingredient(s)
subject to the Act.
State Regulations (U.S.)
CALIFORNIA "PROP 65"
The material contains ingredient(s) known to the State of
California to cause cancer, birth defects, or other
reproductive harm. Read and follow all label directions.
Ingredient Nickel (<0.1%)
PENNSYLVANIA WORKER & COMMUNITY RIGHT TO KNOW ACT
This material may contain the following ingredient(s)
subject to the Pennsylvania Worker and Community Right
to Know Hazardous Substances List.
Ingredient Nickel
CAS Number 7442-02-0
Category Environmental Hazard, Special
Hazardous Substance
Ingredient Sulfur
CAS Number 7704-34-9
Category Hazardous Substance
----------------------------------------------------------
Canadian Regulations
This is not a WHMIS Controlled Product.
----------------------------------------------------------
- --------------------------------------------------------------------------
OTHER INFORMATION
NFPA, NPCA-HMIS
NPCA-HMIS Rating
Health 1
Flammability 1
Reactivity 0
Personal Protection rating to be supplied by user depending
on use conditions.
----------------------------------------------------------
- --------------------------------------------------------------------------
The data in this Material Safety Data Sheet relates only to
the specific material designated herein and does not relate
to use in combination with any other material or in any
process.
Responsibility for MSDS : MSDS Coordinator
Address : Conoco Inc.
> : P.O. Box 2197
> : Houston, TX 77252
Telephone : 1-281-293-5550
----------------------------------------------------------
End of MSDS
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