<PAGE>
===============================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
X
_________ QUARTERLY REPORT UNDER 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 001-14789
GENTEK INC.
(Exact name of Registrant as specified in its charter)
<TABLE>
<S> <C>
DELAWARE 02-0505547
(State of other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
LIBERTY LANE
HAMPTON, NEW HAMPSHIRE 03842
(Address of principal executive offices) (Zip Code)
</TABLE>
Registrant's telephone number, including area code: (603) 929-2264
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. YES X NO
_______ _______
The number of shares of Common Stock outstanding at April 28, 2000 was
20,233,006.
The number of shares of Class B Common Stock outstanding at April
28, 2000 was 4,750,107.
===============================================================================
<PAGE>
GENTEK INC.
FORM 10-Q
QUARTERLY PERIOD ENDED MARCH 31, 2000
INDEX
<TABLE>
<CAPTION>
PAGE NO.
-------
<S> <C>
PART I. FINANCIAL INFORMATION:
Item 1. Financial Statements
Consolidated Statements of Operations - Three Months
Ended March 31, 1999 and 2000.......................................... 1
Consolidated Balance Sheets - December 31, 1999 and
March 31, 2000......................................................... 2
Consolidated Statements of Cash Flows - Three Months
Ended March 31, 1999 and 2000.......................................... 3
Notes to the Consolidated Financial Statements.......................... 4-12
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations............................... 13-14
Item 3. Quantitative and Qualitative Disclosure about Market Risk.......... 14
PART II. OTHER INFORMATION:
Item 1. Legal Proceedings.................................................. 15
Item 2. Changes in Securities and Use of Proceeds.......................... 15
Item 3. Defaults upon Senior Securities.................................... 15
Item 4. Submission of Matters to a Vote of Security Holders................ 15
Item 5. Other Information.................................................. 15
Item 6. Exhibits and Reports on Form 8-K................................... 15
SIGNATURES.................................................................. 16
EXHIBIT INDEX............................................................... 17
EXHIBITS .................................................................. 18
</TABLE>
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
GENTEK INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
---------
1999 2000
---- ----
<S> <C> <C>
Net revenues ................................................. $127,763 $ 315,679
Cost of sales ................................................ 92,985 228,052
Selling, general and administrative expense .................. 16,604 50,896
--------- ---------
Operating profit ....................................... 18,174 36,731
Interest expense ............................................. 4,308 16,888
Interest income .............................................. 518 239
Other (income) expense, net .................................. 103 (228)
--------- ---------
Income from continuing operations before income taxes .. 14,281 20,310
Income tax provision ......................................... 6,071 9,566
--------- ---------
Income from continuing operations ............................ 8,210 10,744
Income from discontinued operations (net of tax of $470) 1,195 --
--------- ---------
Net income ........................................ $ 9,405 $ 10,744
========= =========
EARNINGS PER COMMON SHARE - BASIC:
Income from continuing operations ............................ $ .39 $ .47
Income from discontinued operations (net of tax) ............. .06 --
--------- ---------
Net income ........................................ $ .45 $ .47
========= =========
EARNINGS PER COMMON SHARE - ASSUMING DILUTION:
Income from continuing operations ............................ $ .38 $ .46
Income from discontinued operations (net of tax) ............. .06 --
--------- ---------
Net income ........................................ $ .44 $ .46
========= =========
</TABLE>
See the accompanying notes to the consolidated financial statements.
-1-
<PAGE>
GENTEK INC.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
------------ ---------
1999 2000
---- ----
(UNAUDITED)
<S> <C> <C>
Current assets:
Cash and cash equivalents .................................... $ 20,562 $ 24,090
Receivables, net ............................................. 205,508 202,512
Inventories .................................................. 119,337 124,238
Deferred income taxes ........................................ 25,682 25,016
Other current assets ......................................... 15,321 19,041
----------- -----------
Total current assets ...................................... 386,410 394,897
Property, plant and equipment, net .................................. 359,359 411,084
Goodwill, net ....................................................... 386,490 335,840
Other assets ........................................................ 78,105 77,981
----------- -----------
Total assets .............................................. $1,210,364 $1,219,802
=========== ===========
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable .............................................. $ 98,035 $ 92,855
Accrued liabilities ........................................... 155,033 146,844
Current portion of long-term debt ............................. 18,758 21,826
----------- -----------
Total current liabilities ................................. 271,826 261,525
Long-term debt ...................................................... 705,357 667,522
Other liabilities ................................................... 211,612 228,729
----------- -----------
Total liabilities ......................................... 1,188,795 1,157,776
----------- -----------
Equity:
Preferred Stock, $.01 par value; authorized 10,000,000
shares; none issued or outstanding ........................... -- --
Common Stock, $.01 par value; authorized 100,000,000
shares; issued: 16,876,017 and 20,251,357 shares at
December 31, 1999 and March 31, 2000, respectively ........... 169 203
Class B Common Stock, $.01 par value; authorized
40,000,000 shares; issued and outstanding:
3,958,421 and 4,750,107 shares at December 31, 1999 and
March 31, 2000, respectively ................................. 40 48
Paid in capital ............................................... 4,856 42,882
Accumulated other comprehensive loss .......................... (3,489) (10,609)
Retained earnings ............................................. 20,270 29,765
Treasury stock, at cost: 18,058 and 18,351 shares at
December 31, 1999 and March 31, 2000, respectively ........... (277) (263)
----------- -----------
Total equity .............................................. 21,569 62,026
----------- -----------
Total liabilities and equity .............................. $1,210,364 $1,219,802
=========== ===========
</TABLE>
See the accompanying notes to the consolidated financial statements.
-2-
<PAGE>
GENTEK INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
---------
1999 2000
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net income ................................................ $ 9,405 $ 10,744
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization ........................... 7,434 15,508
Net loss on disposition of long-term assets ............. -- 69
Unrealized exchange gain ................................ (407) --
Restricted unit plan costs .............................. 217 111
Income from discontinued operations ..................... (1,195) --
(Increase) decrease in receivables ..................... (5,274) 126
Increase in inventories ................................. (202) (7,316)
Decrease in accounts payable ............................ (4,121) (3,153)
Increase (decrease) in accrued liabilities .............. 2,305 (6,821)
Increase (decrease) in other liabilities and assets, net (3,949) 2,905
-------- --------
Net cash provided by continuing operations .......... 4,213 12,173
-------- --------
Cash flows from investing activities:
Capital expenditures ...................................... (8,254) (10,282)
Proceeds from sales or disposals of long term assets ...... 8 1,537
Cash provided by discontinued operations .................. 8,567 --
Acquisition of businesses net of cash acquired* ........... (57,708) (1,523)
Other investing activities ................................ -- (2,350)
-------- --------
Net cash used for investing activities .............. (57,387) (12,618)
-------- --------
Cash flows from financing activities:
Proceeds from sale of stock ............................... -- 37,973
Proceeds from long-term debt .............................. 43,025 --
Repayment of long-term debt ............................... (15,996) (32,790)
Other financing activities ................................ (373) --
-------- --------
Net cash provided by financing activities ........... 26,656 5,183
-------- --------
Effect of exchange rate changes .................................. (248) (1,210)
-------- --------
Increase (decrease) in cash and cash equivalents ................. (26,766) 3,528
Cash and cash equivalents at beginning of period ................. 61,310 20,562
-------- --------
Cash and cash equivalents at end of period ....................... $ 34,544 $ 24,090
======== ========
Supplemental information:
Cash paid for income taxes ................................ $ 219 $ 8,453
======== ========
Cash paid for interest .................................... $ 5,726 $ 21,724
======== ========
*Purchase of businesses net of cash acquired:
Working Capital, other than cash .......................... $(12,036) $ (717)
Plant, property and equipment ............................. (34,004) (287)
Other assets .............................................. (25,142) (519)
Noncurrent liabilities .................................... 13,474 --
-------- --------
Net cash used to acquire businesses ..................... $(57,708) $ (1,523)
======== ========
</TABLE>
See the accompanying notes to the consolidated financial statements.
-3-
<PAGE>
GENTEK INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE QUARTER ENDED MARCH 31, 2000
(DOLLARS IN THOUSANDS)
(UNAUDITED)
NOTE 1 - BASIS OF PRESENTATION
GenTek Inc. ("GenTek" or the "Company") was spun off from The General
Chemical Group Inc. ("GCG") on April 30, 1999 (the "Spinoff"). The Spinoff has
been treated as a reverse spinoff for financial statement purposes because a
greater proportion of the former assets and operations of GCG are held by
GenTek. Accordingly, the financial position and results of operations of the
industrial chemicals business that remained with GCG have been reflected as
discontinued operations.
The accompanying unaudited consolidated financial statements have been
prepared by the Company pursuant to the rules and regulations of the Securities
and Exchange Commission (the "SEC"). In the opinion of management, all
adjustments (consisting of normal recurring adjustments) considered necessary
for a fair presentation have been included. In addition, the Company recorded
adjustments to increase property, plant and equipment and decrease goodwill to
reflect refinements in purchase price allocations for acquisitions made during
1999. Operating results for the three months ended March 31, 2000 are not
necessarily indicative of the results that may be expected for the year ended
December 31, 2000. These statements should be read in conjunction with the
financial statements and the notes thereto included in the Company's Annual
Report on Form 10-K for the year ended December 31, 1999.
NOTE 2 - COMPREHENSIVE INCOME
Total comprehensive income is comprised of net income, unrealized gains
and losses on marketable securities and foreign currency translation gains and
losses. Total comprehensive income for the three months ended March 31, 1999 and
2000 was $9,214 and $3,624, respectively.
NOTE 3 - CAPITAL STOCK
On February 22, 2000, the Company issued 3,371,340 shares of Common
Stock and 791,685 shares of Class B Common Stock in connection with the
Company's rights offering. Pursuant to the rights offering, the holders of
record of the Company's Common Stock and Class B Common Stock as of January 24,
2000 received, at no cost, 0.20 rights to purchase one share of Common Stock or
Class B Common stock of the Company, as appropriate, for each share of such
stock they held as of the record date. Each whole right entitled the holder to
purchase one share of Common Stock or Class B Stock, as the case may be, at the
price of $9.43 per share. The net proceeds to the Company from this issuance of
Common Stock and Class B Common Stock were approximately $38 million and were
used to repay existing indebtedness and for general corporate purposes.
NOTE 4 - EARNINGS PER SHARE
The computation of basic earnings per share is based on the weighted
average number of common shares and issuable shares outstanding during the
period. The computation of diluted earnings per share also includes the exercise
of all stock options and restricted units, using the treasury stock method.
-4-
<PAGE>
GENTEK INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE QUARTER ENDED MARCH 31, 2000
(DOLLARS IN THOUSANDS)
(UNAUDITED)
The shares outstanding used for basic and diluted earnings per common
share are reconciled as follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
---------
1999 2000
---- ----
<S> <C> <C>
Basic earnings per common share:
Weighted average common shares outstanding.................... 20,847,073 22,756,886
=============== ===============
Diluted earnings per common share:
Weighted average common shares outstanding.................... 20,847,073 22,756,886
Options and restricted units.................................. 611,425 481,569
--------------- ---------------
Total................................................... 21,458,498 23,238,455
=============== ===============
</TABLE>
At March 31, 1999 and 2000 options to purchase 1,704,500 shares and
1,653,800 shares of common stock, respectively, were not included in the
computation of diluted earnings per common share because the exercise price was
greater than the average market price of the common shares. The options, which
expire during 2007 through 2009, were still outstanding at March 31, 2000.
NOTE 5 - ADDITIONAL FINANCIAL INFORMATION
The components of inventories were as follows:
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
----------- --------
1999 2000
---- ----
<S> <C> <C>
Raw materials.................................. $ 51,652 $ 50,818
Work in process................................ 18,472 20,264
Finished products.............................. 45,004 48,904
Supplies and containers........................ 4,209 4,252
----------- -----------
$119,337 $124,238
=========== ===========
</TABLE>
NOTE 6 - LONG-TERM DEBT
Long-term debt consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
------------ ---------
MATURITIES 1999 2000
---------- ---- ----
<S> <C> <C> <C>
Bank Term Loans - floating rates................... 2000-2007 $249,250 $248,875
Revolving Credit Facility - floating rate.......... 2005 220,000 195,000
Senior Subordinated Notes - 11%.................... 2009 200,000 200,000
Other Debt - floating rate......................... 54,865 45,473
----------- -----------
Total Debt................................... 724,115 689,348
Less: Current Portion....................... 18,758 21,826
----------- -----------
Net Long-Term Debt........................... $705,357 $667,522
=========== ===========
</TABLE>
-5-
<PAGE>
GENTEK INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE QUARTER ENDED MARCH 31, 2000
(DOLLARS IN THOUSANDS)
(UNAUDITED)
NOTE 7 - DIVIDENDS
On March 8, 2000, the Board of Directors declared a quarterly cash
dividend of $.05 per share, payable April 3, 2000, to shareholders of record on
March 22, 2000.
NOTE 8 - RELATED PARTY TRANSACTIONS
MANAGEMENT AGREEMENT
The Company is party to a management agreement with Latona Associates
("Latona") which is controlled by a stockholder of the Company under which the
Company receives corporate supervisory and administrative services and strategic
guidance. Prior to the Spinoff, Latona provided these services to the GenTek
Business pursuant to its agreement with GCG. The Company was charged $1,368 and
$1,136 for the three months ended March 31, 1999 and 2000, respectively.
TRANSITION SUPPORT AGREEMENT
After the Spinoff, GenTek provides GCG with certain administrative
services pursuant to the Transition Support Agreement. For the three months
ended March 31, 2000, GenTek charged GCG $477, related to this agreement.
OTHER TRANSACTIONS
GCG supplies soda ash and calcium chloride to GenTek. For the three
months ended March 31, 1999 and 2000, purchases from GCG amounted to $1,109 and
$1,183, respectively.
-6-
<PAGE>
GENTEK INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE QUARTER ENDED MARCH 31, 2000
(DOLLARS IN THOUSANDS)
(UNAUDITED)
NOTE 9 - SEGMENT INFORMATION
Industry segment information for continuing operations is summarized as
follows:
<TABLE>
<CAPTION>
TOTAL REVENUES OPERATING PROFIT
THREE MONTHS ENDED THREE MONTHS ENDED
----------------- ------------------
MARCH 31, MARCH 31,
-------- ---------
1999 2000 1999 2000
---- ---- ---- ----
<S> <C> <C> <C> <C>
Performance Products...................................... $ 78,331 $ 83,562 $ 9,126 $ 11,016
Manufacturing............................................. 49,432 149,339 10,120 19,739
Telecommunications Equipment.............................. -- 82,778 -- 7,836
------------ ------------ ----------- -----------
Total Segment.................................... 127,763 315,679 19,246 38,591
Eliminations and other corporate expenses................. -- -- (1,072) (1,860)
------------ ------------ ----------- ----------
Consolidated.............................................. $ 127,763 $ 315,679 18,174 36,731
============ ============
Interest expense.......................................... 4,308 16,888
Other income, net......................................... 415 467
----------- -----------
Income from continuing operations before
income taxes............................................. $ 14,281 $ 20,310
========= ===========
</TABLE>
<TABLE>
<CAPTION>
IDENTIFIABLE ASSETS
DECEMBER 31, MARCH 31,
----------- ---------
1999 2000
---- ----
<S> <C> <C>
Performance Products...................................... $ 360,597 $ 362,996
Manufacturing............................................. 467,886 465,150
Telecommunications Equipment.............................. 368,495 379,129
Corporate................................................. 13,386 12,527
------------ -------------
Consolidated.............................................. $1,210,364 $1,219,802
============ =============
</TABLE>
-7-
<PAGE>
GENTEK INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE QUARTER ENDED MARCH 31, 2000
(DOLLARS IN THOUSANDS)
(UNAUDITED)
NOTE 10- SUMMARIZED FINANCIAL INFORMATION
The Company's Senior Subordinated Notes due 2009 are fully and
unconditionally guaranteed, on a joint and several basis, by all of the
Company's wholly owned, domestic subsidiaries ("Subsidiary Guarantors"). The
non-guarantor subsidiaries are foreign or are part of the Industrial Chemicals
Business, which are no longer part of GenTek as a result of the Spinoff.
The following condensed consolidating financial information illustrates
the composition of the combined Subsidiary Guarantors. The Company believes that
the separate complete financial statements of the respective guarantors would
not provide additional material information which would be useful in assessing
the financial composition of the Subsidiary Guarantors.
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1999
<TABLE>
<CAPTION>
NON-
SUBSIDIARY GUARANTOR
PARENT GUARANTORS SUBSIDIARIES ELIMINATIONS CONSOLIDATED
------ ---------- ------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Net revenues......................................... $ -- $118,615 $ 9,148 $ -- $127,763
Cost of sales........................................ -- 85,874 7,111 -- 92,985
Selling, general and administrative expenses......... 352 15,325 927 -- 16,604
---------- ----------- ----------- ----------- -----------
Operating profit................................. (352) 17,416 1,110 -- 18,174
Interest expense ................................... 206 3,989 113 -- 4,308
Other (income) expense, net.......................... 3 (433) 15 -- (415)
---------- ----------- ----------- ----------- -----------
Income from continuing operations before
income taxes.................................... (561) 13,860 982 -- 14,281
Income tax provision................................. (254) 6,004 321 -- 6,071
Equity in income from subsidiaries................... 9,712 1,856 -- (11,568) --
---------- ----------- ----------- ---------- ----------
Income from continuing operations ............... 9,405 9,712 661 (11,568) 8,210
Income from discontinued operations
(net of tax)....................................... -- -- 1,195 -- 1,195
---------- ----------- ----------- ---------- -----------
Net income....................................... $ 9,405 $ 9,712 $ 1,856 $(11,568) $ 9,405
========== =========== =========== =========== ===========
</TABLE>
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 2000
<TABLE>
<CAPTION>
NON-
SUBSIDIARY GUARANTOR
PARENT GUARANTORS SUBSIDIARIES ELIMINATIONS CONSOLIDATED
------ ---------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Net revenues......................................... $ -- $174,861 $149,071 $(8,253) $315,679
Cost of sales........................................ -- 132,557 103,748 (8,253) 228,052
Selling, general and administrative expense.......... 888 21,733 28,275 -- 50,896
---------- ----------- ----------- ---------- -----------
Operating profit................................. (888) 20,571 17,048 -- 36,731
Interest expense ................................... 11,677 12,321 7,579 (14,689) 16,888
Other (income) expense, net.......................... (11,824) (3,372) 40 (14,689) (467)
---------- ----------- ----------- ---------- -----------
Income before income taxes....................... (741) 11,622 9,429 -- 20,310
Income tax provision................................. (1,264) 5,888 4,942 -- 9,566
Equity in income from subsidiaries................... 10,221 4,487 -- (14,708) --
---------- ----------- ----------- ---------- -----------
Net income....................................... $10,744 $ 10,221 $ 4,487 $(14,708) $ 10,744
========== =========== =========== ========== ===========
</TABLE>
-8-
<PAGE>
GENTEK INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE QUARTER ENDED MARCH 31, 2000
(DOLLARS IN THOUSANDS)
(UNAUDITED)
CONDENSED CONSOLIDATING BALANCE SHEET
DECEMBER 31, 1999
<TABLE>
<CAPTION>
NON-
SUBSIDIARY GUARANTOR
PARENT GUARANTORS SUBSIDIARIES ELIMINATIONS CONSOLIDATED
------ ---------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Current assets:
Cash and cash equivalents.................... $ 51 $ 6,050 $ 14,461 $ -- $ 20,562
Receivables, net............................. -- 99,723 105,785 -- 205,508
Inventories.................................. -- 56,234 63,103 -- 119,337
Other current assets......................... 523 29,418 11,062 -- 41,003
---------- ----------- ----------- ----------- -----------
Total current assets......................... 574 191,425 194,411 -- 386,410
Property, plant and equipment, net............... -- 255,412 103,947 -- 359,359
Goodwill, net of amortization.................... -- 121,027 265,463 -- 386,490
Intercompany receivable (payable)................ 514,067 (400,878) (113,189) -- --
Investment in subsidiaries....................... 33,473 79,736 -- (113,209) --
Other assets..................................... 245 37,549 40,311 -- 78,105
---------- ----------- ----------- ----------- -----------
Total assets ............................... $548,359 $284,271 $ 490,943 $(113,209) $1,210,364
========== =========== =========== =========== ===========
Current liabilities:
Accounts payable............................. $ 16 $ 42,555 $ 55,464 $ -- $ 98,035
Accrued liabilities.......................... 6,202 69,274 79,557 -- 155,033
Current portion of long-term debt............ 1,250 1,255 16,253 -- 18,758
---------- ----------- ----------- ----------- ----------
Total current liabilities.................... 7,468 113,084 151,274 -- 271,826
Long-term debt ............................... 518,750 8,019 178,588 -- 705,357
Other liabilities ............................... 572 129,695 81,345 -- 211,612
---------- ----------- ----------- ----------- -----------
Total liabilities............................ 526,790 250,798 411,207 -- 1,188,795
Equity........................................... 21,569 33,473 79,736 (113,209) 21,569
---------- ----------- ----------- ----------- -----------
Total liabilities and equity................. $548,359 $284,271 $ 490,943 $(113,209) $ 1,210,364
========== =========== =========== =========== ===========
</TABLE>
-9-
<PAGE>
GENTEK INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE QUARTER ENDED MARCH 31, 2000
(DOLLARS IN THOUSANDS)
(UNAUDITED)
CONDENSED CONSOLIDATING BALANCE SHEET
MARCH 31, 2000
<TABLE>
<CAPTION>
NON-
SUBSIDIARY GUARANTOR
PARENT GUARANTORS SUBSIDIARIES ELIMINATIONS CONSOLIDATED
------ ---------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Current assets:
Cash and cash equivalents.................... $ 10 $ 4,878 $ 19,202 $ -- $ 24,090
Receivables, net............................. -- 102,179 100,333 -- 202,512
Inventories.................................. -- 56,750 67,488 -- 124,238
Other current assets......................... 428 32,102 11,527 -- 44,057
---------- ----------- ----------- ----------- -------------
Total current assets......................... 438 195,909 198,550 -- 394,897
Property, plant and equipment, net............... -- 257,246 153,838 -- 411,084
Goodwill, net of amortization.................... -- 108,046 227,794 -- 335,840
Intercompany receivable (payable)................ 501,641 (392,001) (109,640) -- --
Investment in subsidiaries....................... 75,907 85,069 -- (160,976) --
Other assets..................................... 245 38,349 39,387 -- 77,981
---------- ----------- ----------- ----------- -------------
Total assets ............................... $578,231 $292,618 $509,929 $(160,976) $1,219,802
========== =========== =========== =========== =============
Current liabilities:
Accounts payable............................. $ 12 $ 26,009 $ 66,834 $ -- $ 92,855
Accrued liabilities.......................... 20,557 54,482 71,805 -- 146,844
Current portion of long-term debt............ 1,875 359 19,592 -- 21,826
---------- ----------- ----------- ----------- -------------
Total current liabilities.................... 22,444 80,850 158,231 -- 261,525
Long-term debt ............................... 493,125 875 173,522 -- 667,522
Other liabilities ............................... 636 134,986 93,107 -- 228,729
---------- ----------- ----------- ----------- -------------
Total liabilities............................ 516,205 216,711 424,860 -- 1,157,776
Equity (deficit)................................. 62,026 75,907 85,069 (160,976) 62,026
---------- ----------- ----------- ----------- -------------
Total liabilities and equity (deficit) ...... $578,231 $292,618 $509,929 $(160,976) $1,219,802
========== =========== =========== =========== =============
</TABLE>
-10-
<PAGE>
GENTEK INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE QUARTER ENDED MARCH 31, 2000
(DOLLARS IN THOUSANDS)
(UNAUDITED)
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
THREE MONTHS ENDED MARCH 31, 1999
<TABLE>
<CAPTION>
NON-
SUBSIDIARY GUARANTOR
PARENT GUARANTORS SUBSIDIARIES ELIMINATIONS CONSOLIDATED
------ ---------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Net cash provided by (used in) operating
activities........................................ $(2,275) $ 6,391 $ 97 $ -- $ 4,213
---------- ----------- ----------- ----------- -----------
Cash flows from investing activities:
Cash provided by discontinued operations....... -- -- 8,567 -- 8,567
Acquisition of businesses net of cash
acquired...................................... -- (57,708) -- -- (57,708)
Other.......................................... -- (7,834) (412) -- (8,246)
----------- ----------- ----------- ----------- -----------
Net cash provided by (used in) investing
activities........................................ -- (65,542) 8,155 -- (57,387)
----------- ----------- ----------- ----------- -----------
Cash flows from financing activities:
Intercompany cash transfers.................... (38,680) 46,852 (8,172) -- --
Other.......................................... 39,127 (12,418) (53) -- 26,656
---------- ----------- ----------- ----------- -----------
Net cash provided by (used in) financing
activities........................................ 447 34,434 (8,225) -- 26,656
---------- ----------- ----------- ----------- -----------
Effect of exchange rates on cash................... -- -- (248) -- (248)
---------- ----------- ----------- ----------- -----------
Increase (decrease) in cash and cash
equivalents....................................... (1,828) (24,717) (221) -- (26,766)
Cash and cash equivalents at beginning
of year........................................... 3,147 57,159 1,004 -- 61,310
---------- ----------- ----------- ----------- -----------
Cash and cash equivalents at end of year........... $ 1,319 $ 32,442 $ 783 $ -- $ 34,544
========== =========== =========== =========== ===========
</TABLE>
-11-
<PAGE>
GENTEK INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONCLUDED)
FOR THE QUARTER ENDED MARCH 31, 2000
(DOLLARS IN THOUSANDS)
(UNAUDITED)
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
THREE MONTHS ENDED MARCH 31, 2000
<TABLE>
<CAPTION>
NON-
SUBSIDIARY GUARANTOR
PARENT GUARANTORS SUBSIDIARIES ELIMINATIONS CONSOLIDATED
------ ---------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Net cash provided by (used in) operating
activities........................................ $ 15,054 $(20,254) $17,373 $ -- $ 12,173
---------- ----------- ----------- ----------- -----------
Cash flows from investing activities:
Acquisition of businesses net of cash
acquired...................................... -- (1,523) -- -- (1,523)
Other.......................................... -- (6,477) (4,618) -- (11,095)
------------------------- ----------- ----------- -----------
Net cash provided by (used in) investing
activities........................................ -- (8,000) (4,618) -- (12,618)
------------------------- ----------- ----------- -----------
Cash flows from financing activities:
Proceeds from sale of stock.................... 37,973 -- -- -- 37,973
Intercompany cash transfers.................... (28,068) 32,578 (4,510) -- --
Other.......................................... (25,000) (5,496) (2,294) -- (32,790)
---------- ----------- ----------- ----------- -----------
Net cash provided by (used in) financing
activities........................................ (15,095) 27,082 (6,804) -- 5,183
---------- ----------- ----------- ----------- -----------
Effect of exchange rates on cash................... -- -- (1,210) -- (1,210)
---------- ----------- ----------- ----------- -----------
Increase (decrease) in cash and cash
equivalents....................................... (41) (1,172) 4,741 -- 3,528
Cash and cash equivalents at beginning
of year........................................... 51 6,050 14,461 -- 20,562
---------- ----------- ----------- ----------- -----------
Cash and cash equivalents at end of year........... $ 10 $ 4,878 $19,202 $ -- $ 24,090
========== =========== =========== =========== ===========
</TABLE>
-12-
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
This Form 10-Q contains forward-looking statements within the meaning
of Section 27A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934. The Company's actual results could differ materially from
those set forth in the forward-looking statements. Certain factors that might
cause such a difference include those discussed in the section entitled
"Management's Discussion and Analysis of Financial Condition and Results of
Operations - Forward-Looking Statements" contained in the Company's Form 10-K
for the year ended December 31, 1999.
Results of Operations
Net revenues for the three month period ended March 31, 2000 increased
147 percent to $315.7 million, from $127.8 million for the comparable period in
1999. This increase is due principally the acquisitions of the Noma and Defiance
in the manufacturing segment and the acquisition of Krone, which represents the
telecommunications equipment segment.
Gross profit for the three month period ended March 31, 2000 increased
152 percent to $87.6 million from $34.8 million for the comparable prior year
period. This increase is principally due to the above-mentioned acquisitions and
higher volumes in the existing manufacturing segment businesses. Gross profit as
a percentage of net revenues was comparable to the prior year period.
Selling, general and administrative expense was $50.9 million for the
three months ended March 31, 2000 as compared to $16.6 million for the first
three months of 1999 principally due to the above-mentioned acquisitions.
Interest expense for the three month period ended March 31, 2000 was
$16.9 million, which was $12.6 million higher than the comparable prior year
level as a result of higher outstanding debt balances related to the Company's
acquisitions.
Financial Condition, Liquidity and Capital Resources
Cash and cash equivalents were $24.1 million at March 31, 2000 compared
with $20.6 million at year-end 1999. During the first three months of 2000, the
Company generated cash flow from continuing operations of $12.2 million, had net
proceeds from sale of stock of $38.0 million which was used for the repayment of
existing debt of $32.8 million and capital expenditures of $10.3 million.
The Company had working capital of $133.5 million at March 31, 2000 as
compared with $114.6 million at December 31, 1999. This increase in working
capital principally reflects lower accounts payable and accrued liabilities and
higher inventories.
On February 22, 2000, the Company issued 3,371,340 shares of Common
Stock and 791,685 shares of Class B Common Stock in connection with the
Company's rights offering. Pursuant to the rights offerings, the holders of
record of the Company's Common Stock and Class B Common Stock as of January 24,
2000 received, at no cost, 0.20 rights to purchase one share of Common Stock or
Class B Common Stock of the Company, as appropriate, for each share of such
stock they held as of the record date. Each whole right entitled the holder to
purchase one share of Common Stock or Class B Common Stock, as the case may be,
at the price of $9.43 per share. The net proceeds to the Company from this
issuance of Common Stock and Class B Common Stock were approximately $38 million
and were used to repay existing indebtedness and for general corporate purposes.
-13-
<PAGE>
Management believes that cash flows will be sufficient to cover future
interest expense, capital expenditures and working capital requirements. The
Company will use proceeds of borrowings under the revolving portion of its
credit facility to finance future acquisitions and investments. In the event the
Company identifies additional acquisition candidates, however, current sources
of liquidity may not be adequate. Accordingly, the Company may issue equity
securities or incur additional debt, subject to market conditions. The Company
may also use stock as acquisition currency.
ITEM 3. QUALITATIVE AND QUANTITATIVE DISCLOSURES ABOUT MARKET RISK
The Company's cash flows and earnings are subject to fluctuations
resulting from changes in interest rates and changes in foreign currency
exchange rates and the Company selectively uses financial instruments to manage
these risks. The Company's objective in managing its exposure to changes in
foreign currency exchange rates and interest rates is to reduce volatility on
earnings and cash flow associated with such changes. The Company has not
entered, and does not intend to enter, into financial instruments for
speculation or trading purposes.
The Company measures the market risk related to its holding of
financial instruments based on changes in interest rates and foreign currency
rates using a sensitivity analysis. The sensitivity analysis measures the
potential loss in fair values, cash flows and earnings based on a hypothetical
10 percent change in interest and currency exchange rates. The Company used
current market rates on its debt and derivative portfolio to perform the
sensitivity analysis. Such analysis indicates that a hypothetical 10 percent
change in interest rates or foreign currency exchange rates would not have a
material impact on the fair values, cash flows or earnings of the Company.
-14-
<PAGE>
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
On March 30, 2000, the Company received a Notice of Violation issued by
the U.S. Environmental Protection Agency ("EPA"), pursuant to which EPA alleged
that the routine replacement of certain catalyst at the Company's Anacortes,
Washington facility in 1990 constituted a violation of EPA's Prevention of
Significant Deterioration ("PSD") regulations promulgated under Sections 165-169
of the Clean Air Act. The Company denies such allegations and will defend itself
vigorously in this matter. In the event that the Company is unsuccessful in its
defense or cannot otherwise resolve this matter with EPA, potential penalties
could exceed $100,000. Management does not expect that this matter will have a
material effect on the financial condition or result of operations of the
Company.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
NONE
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
NONE
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
NONE
ITEM 5. OTHER INFORMATION
NONE
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
27 Financial Data Schedule.
Form 8-K filed with the Securities and Exchange Commission on February
15, 2000 with respect to the Company's rights offering of newly issued shares of
its Common Stock and Class B Common Stock to its shareholders of record as of
January 24, 2000.
-15-
<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.
GENTEK INC.
----------------------------------------
Registrant
Date May 12, 2000 /s/ Richard R. Russell
--------------- ----------------------------------------
RICHARD R. RUSSELL
President and Chief Executive Officer
(Principal Executive Officer) and Director
Date May 12, 2000 /s/ Stewart A. Fisher
--------------- ---------------------------------------
STEWART A. FISHER
Vice President and Chief Financial Officer
(Principal Financial and Accounting Officer)
-16-
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION PAGE
----------- ----------- -----
<S> <C> <C>
27 Financial Data Schedule.................................. 18
</TABLE>
-17-
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from Form 10-Q
for the period ended March 31, 2000 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-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 24,090
<SECURITIES> 0
<RECEIVABLES> 206,496
<ALLOWANCES> 3,984
<INVENTORY> 124,238
<CURRENT-ASSETS> 394,897
<PP&E> 531,209
<DEPRECIATION> 120,125
<TOTAL-ASSETS> 1,219,802
<CURRENT-LIABILITIES> 261,525
<BONDS> 667,522
<COMMON> 203
0
0
<OTHER-SE> 61,823
<TOTAL-LIABILITY-AND-EQUITY> 1,219,802
<SALES> 315,679
<TOTAL-REVENUES> 315,679
<CGS> 228,052
<TOTAL-COSTS> 228,052
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 112
<INTEREST-EXPENSE> 16,888
<INCOME-PRETAX> 20,310
<INCOME-TAX> 9,566
<INCOME-CONTINUING> 10,744
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 10,744
<EPS-BASIC> .47
<EPS-DILUTED> .46
</TABLE>
