<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549
----------------------
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarter ended March 31, 1999
Commission file number 1-13879
OCTEL CORP.
(Exact name of registrant as specified in its charter)
DELAWARE 98-0181725
----------
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
P.O. Box 17,
Oil Sites Road,
Ellesmere Port,
South Wirral,
United Kingdom L65 4HF
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 011-44-151-355-3611
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X
----------
No
----------
Indicate the number of shares outstanding of each of the issuer's classes of
common stock as of the close of the period covered by this report.
Class Outstanding as of April 30, 1999
Common Stock, par value $0.01 13,911,534 Shares
<PAGE>
PART I - FINANCIAL INFORMATION
- ------------------------------
ITEM 1 - FINANCIAL STATEMENTS
- -----------------------------
OCTEL CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
---------------------------
<TABLE>
<CAPTION>
March 31 December 31
1999 1998
(Unaudited)
--------------------- --------------------
(millions of dollars)
<S> <C> <C>
Assets
Current Assets
Cash and cash equivalents $ 31.3 $ 26.5
Accounts receivable, less allowance
of $2.1 (1998 - $0.8) 136.8 120.6
Inventories
Finished goods 52.2 61.1
Raw materials and work in progress 30.7 27.8
--------- --------
Total inventories 82.9 88.9
Prepaid expenses 3.0 4.9
--------- --------
Total current assets 254.0 240.9
Property, plant and equipment 141.7 147.0
Less accumulated depreciation 30.9 30.9
--------- --------
Net property, plant and equipment 110.8 116.1
Goodwill 351.1 360.5
Prepaid pension cost 71.5 73.5
Deferred financing costs 13.8 15.7
--------- --------
$ 801.2 $ 806.7
========= ========
</TABLE>
The accompanying footnotes are an integral part of these unaudited condensed
financial statements.
2
<PAGE>
OCTEL CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (CONTINUED)
---------------------------------------
<TABLE>
<CAPTION>
March 31 December 31
1999 1998
(Unaudited)
------------------ --------------
(millions of dollars)
<S> <C> <C>
Liabilities and Stockholders' Equity
Current liabilities
Accounts payable $ 76.1 $ 78.6
Accrued expenses 16.1 13.0
Accrued income taxes 52.0 42.6
Current portion of long-term debt 77.0 71.0
----------- --------------
Total current liabilities 221.2 205.2
Plant closure provisions (note 4) 40.1 47.1
Deferred income taxes 22.0 21.6
Long-term debt 214.8 229.8
Other liabilities 1.8 1.9
Minority interest 0.7 -
Stockholders' equity
Common stock, $0.01 par value (note 2) 0.1 0.1
Additional paid-in capital 276.1 276.1
Treasury stock (note 2) (13.2) (13.2)
Retained earnings 50.3 39.9
Accumulated other comprehensive income (12.7) (1.8)
----------- --------------
Total stockholders' equity 300.6 301.1
----------- --------------
$ 801.2 $ 806.7
=========== ==============
</TABLE>
The accompanying footnotes are an integral part of these unaudited condensed
financial statements.
3
<PAGE>
OCTEL CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
------------------------------------
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31
-------------------------------------------
1999 1998
---------------- ----------------
(millions of dollars except per share data)
<S> <C> <C>
Net sales $ 128.0 $ 123.2
Cost of goods sold 78.6 63.7
---------------- ----------------
Gross profit 49.4 59.5
Operating expenses
Selling, general and administrative 12.2 9.1
Research and development 1.1 0.8
Amortization of intangible assets 12.0 8.6
---------------- ----------------
25.3 18.5
---------------- ----------------
Operating income 24.1 41.0
Interest expense 7.0 2.1
Other expenses 1.9 1.5
Interest income (0.4) (0.6)
Other income (4.0) (0.2)
---------------- ----------------
Income before income taxes and minority
interest 19.6 38.2
Minority interest 0.1 -
---------------- ----------------
Income before income taxes 19.5 38.2
Income taxes (note 3) 9.1 12.6
---------------- ----------------
Net income $ 10.4 $ 25.6
================ ================
Earnings per share:
Basic $ 0.74 $ 1.73
---------------- ----------------
Diluted $ 0.73 $ 1.73
---------------- ----------------
Weighted average shares outstanding (in thousands):
Basic (note 2) 13,934 14,763
---------------- ----------------
Diluted (note 2) 14,109 14,763
---------------- ----------------
</TABLE>
The accompanying footnotes are an integral part of these unaudited condensed
financial statements.
4
<PAGE>
OCTEL CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
-------------------------------------
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
--------------------------------
March 31
--------------------------------
1999 1998
------------ -------------
(millions of dollars)
<S> <C> <C>
Cash Flows from Operating Activities
Net income $ 10.4 $ 25.6
Adjustments to reconcile net income to cash provided
by operating activities:
Depreciation and amortization 16.8 13.6
Deferred income taxes 0.4 -
Other - (0.1)
Changes in operating assets and liabilities:
Accounts receivable and prepaid expenses (18.0) 16.1
Inventories 3.7 2.4
Accounts payable and accrued expenses 3.8 (16.0)
Income taxes and other current liabilities 9.0 12.9
Other non-current assets and liabilities (3.4) (6.6)
------------- --------------
Net cash provided by operating activities 22.7 47.9
Cash flows from Investing activities
Capital expenditures (3.3) (2.9)
Business combinations, net of cash acquired (2.4) (4.5)
Other - (0.6)
------------- --------------
Net cash used in investing activities (5.7) (8.0)
Cash flows from Financing Activities
Net cash paid to GLCC - (34.2)
Receipt of long-term borrowings 6.0 -
Repayment of long-term borrowings (15.0) -
Minority interest 0.7 -
------------- --------------
Net cash used in financing activities (8.3) (34.2)
Effect of exchange rate changes on cash (3.9) (2.1)
------------- --------------
Net change in cash and cash equivalents 4.8 3.6
Cash and cash equivalents at beginning of period 26.5 29.7
------------- --------------
Cash and cash equivalents at end of period $ 31.3 $ 33.3
============= ==============
</TABLE>
The accompanying footnotes are an integral part of these unaudited condensed
financial statements
5
<PAGE>
OCTEL CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
----------------------------------------------
(Unaudited)
<TABLE>
<CAPTION>
(millions of dollars) Additional Total
--------- Treasury ----------- Retained CTA* ----------------
Common ---------- Paid-in --------- ---------- Comprehensive
--------- Stock ----------- Earnings ----------------
Stock ---------- Capital --------- Income
--------- ----------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Balance at January $0.1 $(13.2) $276.1 $39.9 $ (1.8) $ 38.1
1, 1999
Net Income - - - 10.4 - 10.4
Net CTA* change - - - - (10.9) (10.9)
----------- ----------- ------------- ----------- ----------- -----------------
Balance at March 31,
1999 $0.1 $(13.2) $276.1 $50.3 $(12.7) $ 37.6
=========== =========== ============= =========== =========== =================
</TABLE>
*Cumulative translation adjustment
The accompanying footnotes are an integral part of these unaudited condensed
financial statements.
OCTEL CORP. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------
NOTE 1 - BACKGROUND AND BASIS OF PRESENTATION
Octel Corp., a Delaware corporation (the Company), is a major manufacturer and
distributor of fuel additives and other specialty chemicals. Its primary
manufacturing operation is located at Ellesmere Port, Cheshire, United Kingdom.
The Company's products are sold globally, primarily to oil refineries.
Principal product lines are lead alkyl antiknock compounds (TEL), and specialty
chemicals.
Until May 22, 1998, the Company was a wholly owned subsidiary of Great Lakes
Chemical Corporation, a Delaware corporation (GLCC). On May 22, 1998, GLCC
consummated the spin off of its petroleum additives business by distributing
shares in the Company to the stockholders of GLCC in a ratio of one Company
share for every four GLCC shares held (the spin off). In connection with the
spin off, the Company issued 14,762,417 shares of common stock on May 26, 1998.
A further 969 shares were subsequently issued in respect of late notified
changes in GLCC stockholders at the record date of the spin off issue.
On April 27, 1998 the Company entered into a $300 million secured credit
facility consisting of a $280 million senior secured term loan and a $20 million
revolving credit facility. The credit facility will mature on December 31, 2001
and the term loan is amortized in quarterly instalments to December 31, 2001
subject to early repayment conditions. The term loan is secured on the
Company's UK assets. Loans under the credit facility bear interest at LIBOR
plus 1.75 per cent, reducing to LIBOR plus 1.25 per cent when the outstanding
balance under the credit facility is below $140 million or 12 months from first
drawdown (whichever is the later).
Also on April 27, 1998 the Company issued $150 million of Senior Notes due 2006.
The Company is required to redeem $37.5 million principal amount of Notes in
each of the years 2003, 2004 and 2005. The notes bear interest at a fixed rate
of 10%.
6
<PAGE>
The accompanying unaudited consolidated financial statements have been prepared
in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all the information and
footnotes necessary for a comprehensive presentation of financial position and
results of operations.
It is management's opinion, however, that all material adjustments (consisting
of normal recurring accruals) have been made which are necessary for a fair
financial statement presentation. These financial statements should be read in
conjunction with the consolidated financial statements and notes thereto
included in the Company's Form 10-K filed on March 26, 1999.
The unaudited combined financial statements for the three months ended March 31,
1998, give effect to the spin off as a transfer of ownership interests between
two entities under common control. Accordingly, the financial statements
reflect the assets, liabilities, revenues and expenses of GLCC's petroleum
additives business, adjusted only for those parts of that business which
remained part of GLCC after the spin off. The financial statements have been
prepared as if the Company had existed as an independent entity and include
certain GLCC expenses prior to the spin off. Management believes that these
allocations are reasonable.
On March 1, 1999, the Company formed a joint venture between its subsidiary,
Octel America Inc., and Starreon Corporation. The joint venture, Octel Starreon
L.L.C., has been accounted for as a consolidated, partly-owned subsidiary to
reflect the nature of the joint venture agreement.
The results for the interim period are not necessarily indicative of the results
to be expected for the full year.
NOTE 2 - STOCKHOLDERS' EQUITY AND EARNINGS PER SHARE
At March 31, 1999, the Company had authorized common stock of 40 million shares
(December 31, 1998 -- 40 million). Issued shares at March 31, 1999, were
14,766,386 (December 31, 1998 -- 14,766,386) and treasury stock amounted to
832,052 (December 31, 1998 -- 832,052).
In February 1999 the Company granted zero cost share options to senior
management under the terms of the Octel Corp. Performance Related Stock Option
Plan (PRSOP) and the Octel Corp. Time Restricted Stock Option Plan (TRSOP). The
107,079 options granted under the PRSOP are exercisable from January 1, 2001
through January 1, 2008. The 181,521 options granted under the TRSOP are
exercisable from December 31, 1999 through December 31, 2007. No stock options
were exercised under any Company scheme in the quarter.
Basic earnings per share is based on the weighted average number of common
shares outstanding during the period, while diluted earnings per share includes
the effect of options and restricted stock that are dilutive and outstanding
during the period.
Prior to the spin off the Company was not a separate operating company with a
capital structure of its own. Weighted average shares for the first quarter
1998 have therefore been based on shares issued on the spin off (see note 1).
7
<PAGE>
NOTE 3 - INCOME TAXES
A reconciliation of the U.S. statutory income tax rate to the effective income
tax rate is as follows:
<TABLE>
<CAPTION>
Three Months Ended
March 31,
1999 1998
---------- ---------
<S> <C> <C>
Statutory US Federal tax rate 35.0% 35.0%
Increase (decrease) resulting from:
Foreign tax rate differential (4.7) (4.1)
Amortization of goodwill 15.8 3.0
Other 0.7 (0.9)
--------- ---------
46.8% 33.0%
========= =========
</TABLE>
NOTE 4 - PLANT CLOSURE PROVISIONS
<TABLE>
<CAPTION>
(millions of dollars) 1999 1998
---------- ---------
<S> <C> <C>
Balance at January 1 $47.1 $ 57.2
Exchange effect (2.6) -
Charge for the period 3.7 5.0
Expenditure (8.1) (10.3)
---------- ---------
Balance at March 31 $40.1 $ 51.9
---------- ---------
</TABLE>
Expenditure of $6.3 million in the first quarter 1999 related to personnel
severance costs incurred as part of the Company's ongoing program of downsizing
and restructuring of operations to respond to declining demand for TEL. The
balance of $1.8 million related to environmental remediation activities.
NOTE 5 - RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board (FASB) issued Statement
of Financial Accounting Standard (SFAS) No. 133, "Accounting for Derivative
Instruments and Hedging Activities", which establishes accounting and reporting
standards for derivative instruments, including certain derivative instruments
embedded in other contracts (collectively referred to as derivatives), and for
hedging activities. This Statement is effective for all fiscal quarters of
fiscal years beginning after June 15, 1999. The Company is at present
evaluating the impact of SFAS 133 on its operations.
NOTE 6 - RELATED PARTY TRANSACTIONS
Prior to the spin off on May 22, 1998, sales of product between the Company and
GLCC were reported in the financial statements at estimated market value. In
the first three months of 1998 the value of sales from the Company to GLCC
amounted to $2.0 million and the value of purchases by the Company from GLCC
amounted to $4.1 million.
Prior to the spin off, interest charges from GLCC, in respect of funding
provided primarily for acquisitions, amounted to $2.1 million in the first three
months of 1998.
8
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION FOR THE THREE MONTHS ENDED MARCH 31, 1999
-------------------------------------------------------------
Some of the information presented in the following discussion constitutes
forward-looking comments within the meaning of the Private Litigation Reform Act
of 1995. Although the Company believes its expectations are based on reasonable
assumptions within the bounds of its knowledge of its business and operations,
there can be no assurance that actual results will not differ materially from
its expectations. Factors which could cause actual results to differ from
expectations include, without limitation, the timing of orders received from
customers, the gain or loss of significant customers, competition from other
manufacturers and changes in the demand for the Company's products, including
the rate of decline in demand for TEL. In addition, increases in the cost of
product, changes in the market in general and significant changes in new product
introduction could result in actual results varying from expectations.
RECENT DEVELOPMENTS
- -------------------
In December 1998, the Company concluded an agreement with Veba Oel AG for the
acquisition of its petroleum specialties subsidiary, Chemische Betriebe Pluto
GmbH, now renamed Octel Deutschland GmbH (Deutschland). Based in Herne,
Germany, Deutschland manufactures and sells fuel additives mainly based on
ferrocene, an iron-based metal organic product used as a combustion improver and
octane enhancer.
On March 1, 1999, the Company formed a joint venture between its subsidiary,
Octel America Inc., and Starreon Corporation. The joint venture, Octel Starreon
L.L.C., combines the finished fuel additives businesses of both companies in the
USA and Canada but will exclude TEL.
The Company continues to reduce TEL costs in line with the market decline and
the Company announced another voluntary severance program in September 1998
which was implemented in early 1999. The Company closed one TEL building at the
end of 1998 and has announced a formal review into the economics of
manufacturing raw materials currently produced to support the manufacture of
TEL.
The number of group employees at March 31, 1999 was 1,207 compared to 1,305 at
December 31, 1998. The net decrease of 98 includes an additional 14 employees
included in group headcount as a result of the Octel Starreon L.L.C. joint
venture.
RESULTS OF OPERATIONS
- ---------------------
Operating income for the first quarter 1999 and 1998 may be analysed as
follows:-
<TABLE>
<CAPTION>
(in millions)
1999 1998
TEL Specialty Total TEL Specialty Total
Chemicals Chemicals
<S> <C> <C> <C> <C> <C> <C>
Net Sales $98.4 $29.6 $128.0 $102.5 $20.7 $123.2
------------ --------------- -------------- -------------- --------------- ------------
Gross Profit 40.9 8.5 49.4 54.7 4.8 59.5
------------ --------------- -------------- -------------- --------------- ------------
Operating Income $22.9 $ 1.2 $ 24.1 $ 41.3 $(0.3) $ 41.0
------------ --------------- -------------- -------------- --------------- ------------
</TABLE>
All figures have been restated to reflect the aggregation of Petroleum
Specialties and Performance Chemicals into a combined Specialty Chemicals
Business Unit which represents the markets where Octel Corp. is focusing on
building its position. Within these categories the sodium and chlorine products
(Intermediates), which are manufactured as raw materials for the TEL business
but are also sold on the
9
<PAGE>
open market, have been reclassified. They were part of Performance Chemicals
Business Unit but have now been included as TEL to reflect their close
relationship with TEL markets and manufacturing cycle.
Overall TEL sales have decreased by $4.1 million (4%). Intermediate sales
decreased by $0.3 million to $2.9 million, the remaining $3.8 million of the
decline relating to TEL sales. Volumes for the quarter fell by 14.1% to 14,256
metric tons, the anticipated ongoing annual decline in markets being offset
slightly by the effect of the marketing agreements with Ethyl Corporation
(Ethyl). The adverse volume variance of $14.0 million was offset by a
favourable price variance of $10.2 million largely due to sales mix, where lower
priced wholesale market sales were 606 tons compared to 3,076 tons in the first
quarter 1998. TEL gross profit was reduced by $13.8 million, reflecting the
declining net sales level and also the compensation payable to Ethyl on all
sales made under the marketing agreements.
Specialty Chemicals net sales increased by $8.9 million over the first quarter,
with volume declines in Octaquest/R/ more than offset by new product sales from
Deutschland, acquired in December 1998, and the newly formed Octel Starreon
L.L.C. joint venture.
Selling and administrative costs have increased by $3.1 million overall,
reflecting the costs of the new group companies in 1999, redundancy costs at
Octel America resulting from the Octel Starreon L.L.C. joint venture and the
Company's public corporation costs which did not exist in 1998 prior to the May
spin off. Amortization costs have increased by $3.4 million. This reflects the
effect of the growth in the cost of goodwill since March 31, 1998. Also
included in the 1999 charge is amortization on the deferred finance costs
arising from the spin off in May 1998.
Interest expense increased by $4.9 million. The 1999 charge relates to the
Senior Debt and Senior Notes which arose as a result of the spin off.
The principal change in other income and expenses relates to foreign exchange
movements. In 1998 there was a net loss of $1.2 million included in other
expenses while in 1999 the gain of $4.0 million has been included in other
income.
LIQUIDITY AND FINANCIAL CONDITION
- ---------------------------------
Net cash provided by operating activities in the three months to March 31, 1999
was $22.7 million, a decrease of $25.2 million compared to the first quarter
1998. This was largely due to the lower level of net income, $15.2 million
below 1998 levels, but there was an overall increase in working capital (current
operating assets and liabilities) of $1.5 million in 1999 compared to a decrease
of $15.4 million in 1998. The major difference in the working capital movement
in both periods was the movement in receivables.
Receivables at December 31, 1997 were relatively high at $169.8 million and by
March 31, 1998 had been reduced to $156.7 million, representing 118 days sales.
The decrease for that quarter (excluding $3.0 million exchange effect) was $16.1
million. Further reductions during fiscal 1998 resulted in a year end balance
of $120.6 million, representing 98 days sales. At March 31, 1999 receivables
had increased to $136.8 million, an increase (excluding $1.8 million exchange
effect) of $18.0 million but still reflecting 98 days sales in debtors. The
apparent weakening in the receivables position from the first quarter 1998 to
1999 is therefore largely due to the high December 1997 starting point. March
31, 1999 debtor days are consistent with December 1998 and 17% below March 1998
levels.
The inventory decrease of $3.7 million in the first quarter 1999 is net of
exchange gains of $2.3 million, the reduction in the balance sheet amounts being
$6.0 million. This includes a decrease of $8.9 million in finished goods due to
recent cuts in production levels, and the Company believes that it is on program
to reverse the increase of $25.4 million which arose in 1998 by the end of
fiscal 1999.
10
<PAGE>
Senior debt of $15 million was repaid during the first quarter 1999, offset by
the drawdown of a further $6 million under the Revolving Credit Facility.
YEAR 2000
- ---------
Octel is implementing a program of work, the objective of which is to ensure
that the Company is not adversely affected by "Date Discontinuity" problems in
computers, software and embedded processors during the transition from 1999 to
2000 and as a result of 2000 being a leap year.
Date discontinuity occurs when time as expressed by a system or its software
does not move forward successfully in line with true time. The most commonly
known manifestation of this occurs in systems that recognize years as two digits
and, when moving from '99' to '00', recognise '00' as 1900 or fail altogether.
Additionally, some systems fail to recognise 2000 as a leap year, omitting Feb
29th from their calendars.
Project Scope
- -------------
The project scope covers Information Technology (IT) systems, embedded
processors, supply chain and business continuity.
IT systems include central and network hardware, business systems and desktop
hardware and software. Octel has very little bespoke software, the majority
being industry standard packages, customized only where necessary.
Embedded processors include, for example, plant instruments, laboratory
equipment, control systems, data acquisition systems, vehicles and
telecommunications.
Supply chain considerations include liaison with suppliers and customers about
our respective states of readiness for the Year 2000.
Business continuity will consider all areas of the business and put in place
contingency plans to mitigate the consequences arising from key risks
identified.
The project covers all Octel Corp. sites.
Program
- -------
Work is divided into the following key stages:-
1. Inventory of hardware, software and embedded systems
2. Analysis of compliance
3. Defining and planning of solutions
4. Implementation and testing of solutions
5. Confirmation of major suppliers' and customers' state of readiness
6. Business continuity and contingency planning
Steps 1 and 2 are substantially complete. However, constant monitoring of
compliance statements is taking place to capture those suppliers that modify or
revoke information.
Step 3 is well advanced and progressing to program. This is being produced by
business process reviews and impact assessments.
11
<PAGE>
In the UK there are two key IT legacy system replacement programs (step 4), both
of which are substantially complete:
. Replacement of the existing purchasing and sales order processing
system.
. Introduction of Windows NT environment, which will result in
substantial replacement of desktop hardware and software.
In Step 5, all current suppliers of goods and services have been approached and
replies have been received from most suppliers. Key suppliers are the subject
of more detailed scrutiny to monitor the progress of their program. Liaison
with customers is ongoing.
Business continuity and contingency planning (Step 6) is progressing well.
Octel Corp. will adopt a normal end of year operating regime, while maintaining
the ability to respond promptly to external circumstances as they arise. The
comprehensive planning supporting this operating regime uses a risk based
approach, taking account of internal, external and resource issues.
Octel Corp. is on program to be in full Year 2000 readiness for critical systems
by the end of the third quarter 1999 and will then continue to monitor all areas
through January 2000 and beyond.
Costs
- -----
It is estimated that the total cost of achieving Year 2000 compliance will be
approximately $8.0 million of which $6.5 million will be on IT systems and $1.5
million on embedded processors. This figure is subject to ongoing review and
throughout the project life cycle the business benefit of systems is constantly
challenged and redundant systems will be decommissioned prior to the Year 2000.
Approximately $4.3 million has been spent to date.
Risks
- -----
The most reasonably likely worst case scenario is an event which would shut down
the Sodium manufacturing process. It has been estimated that this would reduce
TEL production for up to six months. During this time the Company would be able
to maintain supplies to its customers but the cost to the business would be
approximately $11 million.
Through its internal and supplier Year 2000 projects, the Company is working to
minimize the probability of such an event occurring and, through its contingency
planning, to mitigate the consequences.
12
<PAGE>
ITEM 3 - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
- -------- ----------------------------------------------------------
There has been no material change in the Company's exposure to market
risk as described in the Form 10-K filed on March 26, 1999.
PART II - OTHER INFORMATION
- ----------------------------
ITEM 1 - LEGAL PROCEEDINGS
- -------- -----------------
The Company's UK subsidiary, The Associated Octel Company Limited, has
recently been charged by the Health and Safety Executive with two
offences under the Health and Safety at Work etc Act 1974 and by the
Environment Agency with three offences under the Environment Act 1990 in
respect of a bromine gas emission on July 19, 1997, from a plant situated
in Amlwch, North Wales, which was operated by that company at that time.
A preliminary hearing will take place at Caernarvon Crown Court in the UK
on May 7, 1999 and the cases will be finally determined later in 1999.
No remedies are being sought under civil law. External legal counsel has
advised that the aggregate of fines and prosecution costs in respect of
all such offences is unlikely to exceed US$650,000. Provision has been
made for this amount in the accounts of the Company.
The plant concerned was retained by GLCC when the company was spun off in
May 1998.
ITEM 6 - EXHIBITS AND REPORTS ON 8K
- -------- --------------------------
(a) Exhibits
27 Combined Financial Data Schedule
(b) Reports of Form 8-K
None
13
<PAGE>
SIGNATURES
-----------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorised.
Date: May 4, 1999 By /s/ Dennis J Kerrison
----------- -----------------
Dennis J Kerrison
President and
Chief Executive Officer
Date: May 4, 1999 By /s/ Alan G Jarvis
----------- -------------
Alan G Jarvis
Vice President and
Chief Financial Officer
EXHIBIT INDEX
Exhibit Description Page No.
- ------- ----------- --------
27 Combined Financial Data Schedule 15
14
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE COMBINED
BALANCE SHEETS, STATEMENTS OF INCOME, AND STATEMENTS OF CASH FLOWS AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<CASH> 31,300
<SECURITIES> 0
<RECEIVABLES> 138,900
<ALLOWANCES> 2,100
<INVENTORY> 82,900
<CURRENT-ASSETS> 254,000
<PP&E> 141,700
<DEPRECIATION> 30,900
<TOTAL-ASSETS> 801,200
<CURRENT-LIABILITIES> 221,200
<BONDS> 214,800
0
0
<COMMON> 100
<OTHER-SE> 300,500
<TOTAL-LIABILITY-AND-EQUITY> 801,200
<SALES> 128,000
<TOTAL-REVENUES> 132,400
<CGS> 78,600
<TOTAL-COSTS> 103,900
<OTHER-EXPENSES> 8,900
<LOSS-PROVISION> 1,300
<INTEREST-EXPENSE> 7,000
<INCOME-PRETAX> 19,500
<INCOME-TAX> 9,100
<INCOME-CONTINUING> 10,400
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 10,400
<EPS-PRIMARY> 0.74
<EPS-DILUTED> 0.73
</TABLE>
