<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[ X ] Quarterly Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the quarterly period ended March 31, 2000
or
[ ] Transition Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the transition period from ________________________ to ___________________
Commission file number: 1-14601
Arch Chemicals, Inc.
(Exact name of registrant as specified in its charter)
Virginia 06-1526315
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
501 Merritt 7, Norwalk, CT 06851
(Address of principal executive offices) (Zip Code)
(203) 229-2900
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days:
YES X NO _____
-----
As of April 28, 2000, there were 22,153,864 outstanding shares of the
registrant's common stock.
<PAGE>
ARCH CHEMICALS, INC.
INDEX
-----
Page Numbers
------------
PART I. FINANCIAL INFORMATION:
---------------------
Item 1. Financial Statements......................................... 2
Condensed Consolidated Balance Sheets as of March 31, 2000
and December 31, 1999........................................ 2
Condensed Consolidated Statements of Income for the three
months ended March 31, 2000 and 1999......................... 3
Condensed Consolidated Statements of Cash Flows for the
three months ended March 31, 2000 and 1999................... 4
Notes to Condensed Consolidated Financial Statements......... 5 - 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.......................... 8 - 13
Item 3. Quantitative and Qualitative Disclosures About Market Risk... 13
PART II. OTHER INFORMATION:
------------------
Item 6. Exhibits and Reports on Form 8-K............................. 14
Signatures............................................................... 15
Exhibit Index............................................................ 16
1
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
ARCH CHEMICALS, INC.
Condensed Consolidated Balance Sheets
(In millions, except per share amounts)
<TABLE>
<CAPTION>
Unaudited
March 31, December 31,
2000 1999
---- ----
ASSETS
------
Current assets:
<S> <C> <C>
Cash and cash equivalents $ 7.2 $ 12.1
Accounts receivable, net 215.5 168.6
Inventories, net 149.5 147.3
Other current assets 27.2 26.7
------- -------
Total current assets 399.4 354.7
Investments and advances - affiliated companies at equity 22.9 20.8
Property, plant and equipment, net 322.2 326.7
Goodwill 36.6 37.1
Other assets 19.8 20.2
------- -------
Total assets $ 800.9 $ 759.5
======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
Current liabilities:
Short-term borrowings $ 68.3 $ 21.0
Accounts payable 105.3 108.1
Accrued liabilities 57.7 57.1
------- -------
Total current liabilities 231.3 186.2
Long-term debt 75.1 76.8
Other liabilities 43.5 44.7
Commitments and contingencies
Shareholders' equity:
Common stock, par value $1 per share, Authorized 100.0 shares:
22.2 shares issued and outstanding in 2000 (22.6 in 1999) 22.2 22.6
Additional paid-in capital 424.7 431.9
Retained earnings (from February 8, 1999) 32.2 23.8
Accumulated other comprehensive loss (28.1) (26.5)
------- -------
Total shareholders' equity 451.0 451.8
------- -------
Total liabilities and shareholders' equity $ 800.9 $ 759.5
======= =======
</TABLE>
The accompanying Notes to Condensed Consolidated Financial Statements are an
integral part of the condensed consolidated financial statements.
2
<PAGE>
ARCH CHEMICALS, INC.
Condensed Consolidated Statements of Income
(Unaudited)
(In millions, except per share amounts)
<TABLE>
<CAPTION>
Three Months
Ended March 31,
2000 1999
---- ----
<S> <C> <C>
Sales $ 220.7 $ 225.0
Operating expenses:
Cost of goods sold 157.6 157.7
Selling and administration 39.0 42.6
Research and development 4.0 4.5
------- -------
Operating income 20.1 20.2
------- -------
Equity in earnings of affiliated companies 1.9 1.3
Interest expense 2.6 1.0
Interest income 0.1 0.3
------- -------
Income before taxes 19.5 20.8
Income tax provision 6.6 7.3
------- -------
Net income $ 12.9 $ 13.5
======= =======
Basic and diluted earnings per common share $ 0.57 $ 0.59
======= =======
Weighted average common shares outstanding:
Basic 22.4 23.0
======= =======
Diluted 22.5 23.0
======= =======
Dividends declared per share $ 0.20 $ --
======= =======
</TABLE>
The accompanying Notes to Condensed Consolidated Financial Statements are an
integral part of the condensed consolidated financial statements.
3
<PAGE>
ARCH CHEMICALS, INC.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
(In millions)
<TABLE>
<CAPTION>
Three Months
Ended March 31,
2000 1999
---- ----
<S> <C> <C>
Operating activities
- --------------------
Net income $ 12.9 $ 13.5
Adjustments to reconcile net income to net cash and
cash equivalents used by operating activities:
Equity in earnings of affiliates (1.9) (1.3)
Depreciation and amortization 12.6 13.2
Deferred taxes 0.1 0.8
Changes in assets and liabilities:
Receivables (46.8) (56.0)
Inventories (2.3) 11.2
Other current assets (0.5) (3.6)
Accounts payable and accrued liabilities (5.9) 0.3
Noncurrent liabilities 1.2 2.6
Other operating activities (2.1) 0.7
------- -------
Net operating activities (32.7) (18.6)
------- -------
Investing activities
- --------------------
Capital expenditures (11.3) (6.1)
Disposition of property, plant and equipment 6.3 -
Other investing activities (0.5) 1.9
------- -------
Net investing activities (5.5) (4.2)
------- -------
Financing activities
- --------------------
Long-term debt assumed from Olin Corporation - 75.0
Long-term debt repayments (1.7) -
Short-term borrowings 47.2 4.4
Dividends paid (4.5) -
Purchases of Arch common stock (7.7) -
Transfers to Olin Corporation - (58.1)
Other financing activities 0.1 -
------- -------
Net financing activities 33.4 21.3
------- -------
Effect of exchange rate changes on cash and cash equivalents (0.1) (0.2)
------- -------
Net decrease in cash and cash equivalents (4.9) (1.7)
Cash and cash equivalents, beginning of year 12.1 7.1
------- -------
Cash and cash equivalents, end of period $ 7.2 $ 5.4
======= =======
Supplemental cash flow information:
Taxes paid $ 1.1 $ 2.1
======= =======
Interest paid $ 1.9 $ 0.3
======= =======
</TABLE>
The accompanying Notes to Condensed Consolidated Financial Statements are an
integral part of the condensed consolidated financial statements.
4
<PAGE>
ARCH CHEMICALS, INC.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
($ in millions, except share amounts)
Basis of Presentation
These condensed financial statements have been prepared by Arch Chemicals,
Inc. (the "Company"), without audit, pursuant to the rules and regulations of
the Securities and Exchange Commission and, in the opinion of the Company,
reflect all adjustments (consisting of normal accruals) which are necessary to
present fairly the results for interim periods. Certain information and
footnote disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have been condensed or
omitted pursuant to such rules and regulations; however, the Company believes
that the disclosures are adequate to make the information presented not
misleading. It is suggested that these condensed consolidated financial
statements be read in conjunction with the financial statements, accounting
policies and the notes thereto and management's discussion and analysis of
financial condition and results of operations included in the Company's Form 10-
K for the year ended December 31, 1999. The Company's water chemicals segment
is seasonal in nature as its products are primarily used in the U.S. residential
pool market. Therefore, the results of operations for the Company and in
particular the water chemicals segment for the three months ended March 31,
2000, are not necessarily indicative of the results to be expected for the
entire fiscal year.
Reclassifications of prior-year data have been made, where appropriate, to
conform to the 2000 presentation.
Inventories
<TABLE>
<CAPTION>
March 31, December 31,
2000 1999
------------ ------------
<S> <C> <C>
Raw materials and supplies $ 49.6 $ 54.9
Work in process 14.4 13.4
Finished goods 136.3 129.0
------------ ------------
Inventories, gross 200.3 197.3
LIFO reserve (50.8) (50.0)
------------ ------------
Inventories, net $149.5 $147.3
============ ============
</TABLE>
Inventories are valued principally by the dollar value last-in, first-out
("LIFO") method of inventory accounting. Elements of costs in inventories
include raw materials, direct labor and manufacturing overhead. Inventories
under the LIFO method are based on an annual determination of quantities and
costs as of the year-end; therefore, the condensed consolidated financial
statements at March 31, 2000, reflect certain estimates relating to inventory
quantities and costs at December 31, 2000.
Earnings Per Share
Basic earnings per share are computed by dividing net income by the
weighted average number of common shares outstanding. Diluted earnings per share
reflect the dilutive effect of stock options.
5
<PAGE>
ARCH CHEMICALS, INC.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
($ in millions, except share amounts)
A reconciliation of basic and diluted weighted average common shares
outstanding is as follows (in millions):
Three Months Ended
March 31,
2000
---------
Basic 22.4
Common equivalent shares from stock options
using the treasury stock method 0.1
---------
Diluted 22.5
=========
Comprehensive Income (Loss)
The Company's other comprehensive income currently consists solely of the
cumulative translation adjustment. The Company does not provide for U.S. income
taxes on foreign currency translation adjustments since it does not provide for
such taxes on undistributed earnings on foreign subsidiaries. Comprehensive
income for the three months ended March 31, 2000 and 1999 was $11.3 and $3.7,
respectively.
Segment Information
The Company has organized its segments around differences in products and
services, which is how the Company manages its business. Segment operating
income (loss) includes the equity in earnings of affiliated companies.
Three Months Ended
March 31,
2000 1999
---------------------
Sales:
Microelectronic Chemicals $ 54.4 $ 52.2
Water Chemicals 88.2 93.0
Performance Chemicals 78.1 79.8
---------------------
Total Sales $220.7 $225.0
=====================
Operating Income (Loss):
Microelectronic Chemicals $ 0.5 $ (0.9)
Water Chemicals 13.2 12.5
Performance Chemicals 8.3 9.9
---------------------
Total Operating Income $ 22.0 $ 21.5
=====================
Capital Spending:
Microelectronic Chemicals $ 4.0 $ 2.6
Water Chemicals 1.6 1.0
Performance Chemicals 5.7 2.5
---------------------
Total Capital Spending $ 11.3 $ 6.1
=====================
6
<PAGE>
ARCH CHEMICALS, INC.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
($ in millions, except share amounts)
Commitments and Contingencies
As a result of the spin-off from Olin Corporation and through an agreement,
the Company is only responsible for environmental liabilities at the Company's
current operating plant sites and certain offsite locations.
Environmental exposures are difficult to assess for numerous reasons,
including the identification of new sites, developments at sites resulting from
investigatory studies, advances in technology, changes in environmental laws and
regulations and their application, the scarcity of reliable data pertaining to
identified sites, the difficulty in assessing the involvement and financial
capability of other potentially responsible parties and the Company's ability to
obtain contributions from other parties and the length of time over which site
remediation occurs.
There are a variety of non-environmental legal proceedings pending or
threatened against the Company. There has been no significant change in status
of such items during the three months ended March 31, 2000.
See the Company's most recent Form 10-K for additional information on the
above items.
7
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Overview
- --------
In analyzing the results of operations for the Company and its segments, the
following matters should be considered. The Company's water chemicals segment
is seasonal in nature. Historically, approximately forty percent of the sales
in the water chemicals business occur in the second quarter of the fiscal year,
as sales in the U.S. residential pool market are concentrated between Memorial
Day and the Fourth of July. Accordingly, results of operations for the periods
presented are not necessarily indicative of the results to be expected for an
entire fiscal year. In addition, segment operating income includes the equity
in earnings of affiliated companies.
Results of Operations
- ---------------------
Consolidated
<TABLE>
<CAPTION>
Three Months
Ended March 31,
2000 1999
---- ----
(In millions, except per
share amounts)
<S> <C> <C>
Sales $220.7 $225.0
Gross Margin 63.1 67.3
Selling and Administration 39.0 42.6
Research and Development 4.0 4.5
Equity in Earnings of Affiliated Companies 1.9 1.3
Interest Expense 2.6 1.0
Net Income $ 12.9 $ 13.5
Basic and Diluted Income Per Share $ 0.57 $ 0.59
Weighted Average Common Stock Outstanding:
Basic 22.4 23.0
Diluted 22.5 23.0
</TABLE>
Three Months Ended March 31, 2000 Compared to 1999
Sales decreased 2%. The decrease in sales was due to a 1% decrease in pricing
and a 1% decrease in volumes. The decrease in pricing was primarily related to
the microelectronic chemicals and performance chemicals segments. The
decrease in volumes was primarily related to the water chemicals segment,
partially offset by an increase in volumes in the microelectronic chemicals
segment.
Gross margin percentage was 28.6% and 29.9% for 2000 and 1999, respectively.
The decrease in gross margin was due to the lower sales and higher raw material
costs in the performance chemicals segment principally associated with higher
propylene costs.
Selling and administration expenses as a percentage of sales decreased to
17.7% in 2000 from 18.9% in 1999. The decrease is primarily the result of cost-
saving initiatives and lower employee benefit related costs.
Research and development expenses as a percentage of sales were approximately
2% in 2000 and 1999.
8
<PAGE>
Management's Discussion and Analysis of Financial Condition and Results of
Operations - (Continued)
Interest expense was $2.6 million in 2000 compared to $1.0 million in 1999.
The increase is due to higher interest rates and increased borrowings that were
primarily attributable to the Company's share repurchase program and higher
working capital. In addition, interest expense for 2000 includes three months
of interest costs on the $75.0 million of debt assumed from Olin Corporation as
compared to two months in 1999.
The effective tax rate for the first quarter was 34% in 2000 and 35% in 1999.
The effective tax rate for the first quarter of 2000 is consistent with the
Company's full-year 1999 effective tax of 34%.
In November 1997, the Company completed a transaction with BASF whereby the
Company received $42 million for the sale of its performance chemicals'
surfactants business and a three-year supply agreement. Of the proceeds
received, $12 million was allocated to the sale of the surfactants business
based on the fair value of such business and $30 million was allocated to the
supply agreement. No gain or loss was recorded on the sale. In the supply
agreement, the Company agreed to reserve production capacity for surfactants
products at its Brandenburg, Kentucky facility and to supply BASF with such
products in exchange for a $30 million payment made at the time of signing the
agreement, plus recovery of all fixed and variable costs during the term of the
agreement. The agreement expires on December 31, 2000 unless extended; the
Company does not believe it will be extended. The $30 million payment was
recorded as deferred income and is amortized ratably into operating income over
the three-year term. Unless the supply agreement is extended beyond 2000, which
the Company does not expect to happen, no future income will be realized with
respect to this supply agreement after December 31, 2000. Sales and operating
income for the three months ended March 31, 2000 and 1999, include $2.4 million
related to the amortization of deferred income under the supply agreement. The
Company is working to replace the loss of the income that will result upon the
expiration of the contract through a combination of acquisitions, such as the
hydroquinone di (beta-hydroxyethyl) ether ("HQEE") product line acquired from
Eastman Chemicals in September 1999, commercialization of new products and
expansion into new markets. In addition, cost reduction programs will continue
to be implemented.
For the full fiscal year, the Company's 2000 sales and operating income are
expected to be higher than 1999, and diluted income per share is expected to be
12% to 15% higher than 1999.
Microelectronic Chemicals
Three Months
Ended March 31,
2000 1999
---- ----
($ in millions)
Results of Operations
Sales $54.4 $52.2
Operating Income (Loss) 0.5 (0.9)
Three Months Ended March 31, 2000 Compared to 1999
Sales increased 4%. The increase in sales was due to an 8% increase in
volumes, partially offset by a 4% decrease in pricing. The segment reported
improved operating performance in 2000 compared to 1999. Excluding the impact
of the process chemicals product line, sales increased 10% and operating income
improved $1.7 million. The sales increase was principally driven by higher
photoresist sales, including Deep UV, and strong demand for chemical management
services and thin film systems. The increase in operating income was due to the
higher sales and favorable joint venture performance.
9
<PAGE>
Management's Discussion and Analysis of Financial Condition and Results of
Operations - (Continued)
The results for the quarter were negatively impacted by the depressed results
of the process chemicals product line. Process chemicals reported sales of
$15.9 million and incurred an operating loss of $2.6 million compared to sales
of $17.1 million and an operating loss of $2.3 million in 1999. The Company has
initiated actions to improve process chemicals' performance in the near-term,
and is pursuing other various strategic options. By mid-year 2000, the Company
expects an approximate 50% reduction in process chemicals' operating losses.
Water Chemicals
Three Months
Ended March 31,
2000 1999
----- -----
($ in millions)
Results of Operations
Sales $88.2 $93.0
Operating Income 13.2 12.5
Three Months Ended March 31, 2000 Compared to 1999
Sales decreased 5% primarily due to early buy-in for the 2000 season that
occurred during the fourth quarter of 1999. The segment reported improved
operating performance in 2000 compared to 1999. The sales decrease was
principally driven by lower export and bulk volumes, partially offset by higher
volumes of branded calcium hypochlorite (HTH)(R) and higher sales from the
distribution businesses. The improvement in operating results was attributable
to lower operating expenses.
The Company is pursuing the sale of one of its two distribution businesses,
Superior Pool Products, Inc., and expects a transaction to be completed by the
end of the second quarter 2000. In addition, the Company completed its
evaluation of Hydrochim, the Company's other distribution business, and
determined it will remain in the portfolio, as opportunities to improve its
operating performance are pursued.
Performance Chemicals
Three Months
Ended March 31,
2000 1999
---- ----
($ in millions)
Results of Operations
Sales $78.1 $79.8
Operating Income 8.3 9.9
Three Months Ended March 31, 2000 Compared to 1999
Sales and operating income decreased 2% and 16%, respectively.
Performance urethanes and organics sales were slightly lower as lower volumes
of glycol products due to weak demand were offset by higher sales from the HQEE
acquisition and recovery in the Latin American market. Operating income was
lower as a result of higher propylene raw material prices and natural gas costs.
10
<PAGE>
Management's Discussion and Analysis of Financial Condition and Results of
Operations - (Continued)
Biocides sales were 9% higher due to increased volumes in all markets,
principally driven by higher anti-dandruff market sales. Operating income
increased significantly as a result of the higher sales and lower operating
expenses primarily due to cost reduction initiatives.
Hydrazine sales were 19% lower due to lower hydrazine hydrate pricing
(approximately 13% lower than 1999), and lower propellant and UltraPureTM
volumes due to timing of government orders and satellite launches. Operating
income decreased due to the lower sales, partially offset by lower manufacturing
costs.
Sulfuric acid sales decreased 7% due to lower volumes as a result of customer
manufacturing plant outages. Operating income was lower primarily as a result
of the lower sales.
In November 1997, the Company completed a transaction with BASF whereby the
Company received $42 million for the sale of its performance chemicals'
surfactants business and a three-year supply agreement. Of the proceeds
received, $12 million was allocated to the sale of the surfactants business
based on the fair value of such business and $30 million was allocated to the
supply agreement. No gain or loss was recorded on the sale. In the supply
agreement, the Company agreed to reserve production capacity for surfactants
products at its Brandenburg, Kentucky facility and to supply BASF with such
products in exchange for a $30 million payment made at the time of signing the
agreement, plus recovery of all fixed and variable costs during the term of the
agreement. The agreement expires on December 31, 2000 unless extended; the
Company does not believe it will be extended. The $30 million payment was
recorded as deferred income and is amortized ratably into operating income over
the three-year term. Unless the supply agreement is extended beyond 2000, which
the Company does not expect to happen, no future income will be realized with
respect to this supply agreement after December 31, 2000. Sales and operating
income for the three months ended March 31, 2000 and 1999, include $2.4 million
related to the amortization of deferred income under the supply agreement. The
Company is working to replace the loss of the income that will result upon the
expiration of the contract through a combination of acquisitions, such as the
HQEE product line acquired from Eastman Chemicals in September 1999,
commercialization of new products and expansion into new markets. In addition,
cost reduction programs will continue to be implemented.
Liquidity, Investment Activity and Other Financial Data
- -------------------------------------------------------
Cash Flow Data
Three Months
Ended March 31,
2000 1999
---- ----
($ in millions)
Provided By (Used For)
Net Operating Activities $(32.7) $(18.6)
Capital Expenditures (11.3) (6.1)
Net Investing Activities (5.5) (4.2)
Net Financing Activities 33.4 21.3
Three Months Ended March 31, 2000 Compared to 1999
For the three months ended March 31, 2000, the increase in cash flow used by
net operating activities was primarily attributable to higher working capital,
principally higher inventories associated with the microelectronic chemicals and
water chemicals segments.
11
<PAGE>
Management's Discussion and Analysis of Financial Condition and Results of
Operations - (Continued)
Capital expenditures for the first three months of 2000 increased
significantly as compared to 1999 due to the timing of certain capital projects
in the microelectronic chemicals and performance chemicals segments. Capital
expenditures for 2000 are expected to be in the $65 million range.
In March 2000, the Company completed the sale of its building in Cheshire,
Connecticut. Proceeds from the sale were $6.3 million. No gain or loss was
recorded on the transaction. The Company subsequently leased approximately 40%
of the facility from the new owner. This transaction is expected to generate
approximately $1 million in cost savings per year.
On March 10, 2000, the Company paid a quarterly dividend of $0.20 on each
share of common stock. Total dividends paid to shareholders were $4.5 million
during the first three months of 2000.
The Company has an unsecured $125 million revolving five-year credit facility
which expires in January 2004 and an unsecured $125 million, 364-day facility
which expires in January 2001 (collectively, the "Credit Facility"). The Credit
Facility contains leverage and interest coverage ratio covenants, and restricts
the payment of dividends in excess of $65 million plus 50% of cumulative net
income under certain circumstances. Facility fees are payable on the unused
credit and range from 0.125% to 0.30%. The Company may select various borrowing
rate options, including but not limited to, LIBOR plus 0.325% to 1.00%. At
March 31, 2000, the Company had $110 million of available borrowings under this
Credit Facility. The Company believes that the Credit Facility is adequate to
satisfy its liquidity needs for the near future.
During the first quarter of 2000, Arch repurchased 413,000 shares of its
common stock, bringing the cumulative total shares repurchased through March 31,
2000 to approximately 804,000, at a total cost of approximately $15 million. In
October 1999, Arch's Board of Directors authorized a program to repurchase up to
a total of 1.2 million shares of the Company's common stock.
On April 27, 2000, the Company declared a quarterly dividend of $0.20 on each
share of the Company's common stock. The dividend is payable on June 9, 2000,
to shareholders of record at the close of business on May 10, 2000.
Recent Developments
- -------------------
In April 2000, Arch announced the formation of a joint venture with Wacker
Silicones Corporation to produce and market Chemical Mechanical Planarization
("CMP") slurry products used in the advanced computer chip manufacturing
process. The joint venture, called Planar Solutions LLC, is expected to provide
opportunities in this high growth area of the semiconductor industry. The
Company contributed cash of approximately $3.5 million and intellectual property
to the venture. No future cash contributions are anticipated at this time. The
venture is not expected to have a material effect on the Company's results of
operations in 2000.
New Accounting Standard
- -----------------------
In 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133 ("SFAS 133"), "Accounting for Derivative
Instruments and Hedging Activities." It requires an entity to recognize all
derivatives as either assets or liabilities in the statement of financial
position and measure those instruments at fair value. This statement, as
amended, is effective for all fiscal quarters of fiscal years beginning after
June 15, 2000. The Company is currently evaluating the effect this statement
will have on its financial position and results of operations in the period of
adoption.
12
<PAGE>
Management's Discussion and Analysis of Financial Condition and Results of
Operations - (Continued)
Cautionary Statement under Federal Securities Laws
- --------------------------------------------------
The information in this Form 10-Q contains forward-looking statements that are
based on management's beliefs, certain assumptions made by management and
management's current expectations, estimates and projections about the markets
and economy in which the Company and its businesses operate. Words such as
"anticipates," "believes," "estimates," "expects," "forecasts," "opines,"
"plans," "predicts," "projects," "should," "targets," "will," and variations of
such words and similar expressions are intended to identify such forward-looking
statements. These statements are not guarantees of future performance and
involve certain risks, uncertainties and assumptions ("Future Factors") which
are difficult to predict. Therefore, actual outcomes and results may differ
materially from what is expected or forecasted in such forward-looking
statements. The Company undertakes no obligation to update publicly any forward-
looking statements, whether as a result of future events, new information or
otherwise. Future factors which could cause actual results to differ materially
from those discussed include but are not limited to: general economic and
business and market conditions; lack of moderate growth in the U.S. economy or
even a slight recession in 2000; the continued recovery of economic conditions
in Asia; customer acceptance of new products; efficacy of new technology;
changes in U.S. laws and regulations; increased competitive and/or customer
pressure; the Company's ability to maintain chemical price increases; higher-
than-expected raw material costs for certain chemical product lines; increased
foreign competition in the calcium hypochlorite markets; continued improvement
in the semiconductor industry; unfavorable court, arbitration or jury decisions;
the supply/demand balance for the Company's products, including the impact of
excess industry capacity; failure to achieve targeted cost reduction programs;
unsuccessful entry into new markets for electronic chemicals; capital
expenditures in excess of those scheduled; environmental costs in excess of
those projected; and the occurrence of unexpected manufacturing
interruptions/outages at the customer's or Company plants.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
No material changes from that reported in the Company's Form 10-K for the year
ended December 31, 1999.
13
<PAGE>
ARCH CHEMICALS, INC.
PART II. OTHER INFORMATION
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
--------------------------------
(a) Exhibits required by Item 601 of Regulation S-K.
27. Financial Data Schedule.
(b) No reports on Form 8-K were filed during the quarter ended March 31,
2000.
14
<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 authorized.
ARCH CHEMICALS, INC.
--------------------
(Registrant)
May 12, 2000 By: Louis S. Massimo
---------------------------------
Louis S. Massimo
Vice President and Chief
Financial Officer
15
<PAGE>
EXHIBIT INDEX
Exhibit
No. Description Page
--------- ----------- ----
27. Financial Data Schedule 17
16
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS CONTAINED IN ITEM 1 OF FORM 10-Q FOR THE PERIOD ENDED MARCH
31, 2000 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS. FIGURES ARE ROUNDED TO THE NEAREST 100,000 (EXCEPT EPS).
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 7,200
<SECURITIES> 0
<RECEIVABLES> 215,500
<ALLOWANCES> 0
<INVENTORY> 149,500
<CURRENT-ASSETS> 399,400
<PP&E> 856,600
<DEPRECIATION> 534,400
<TOTAL-ASSETS> 800,900
<CURRENT-LIABILITIES> 231,300
<BONDS> 75,100
0
0
<COMMON> 22,200
<OTHER-SE> 428,800
<TOTAL-LIABILITY-AND-EQUITY> 800,900
<SALES> 220,700
<TOTAL-REVENUES> 220,700
<CGS> 157,600
<TOTAL-COSTS> 157,600
<OTHER-EXPENSES> 43,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,600
<INCOME-PRETAX> 19,500
<INCOME-TAX> 6,600
<INCOME-CONTINUING> 12,900
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 12,900
<EPS-BASIC> 0.57
<EPS-DILUTED> 0.57
</TABLE>
