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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(Mark One)
X ANNUAL REPORT UNDER SECTION 13 OR 15(d)
----------- OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1999
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)
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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)
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Registrant's telephone number, including area code: (603) 929-2264
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
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NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
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Common stock, par value $.01 per share New York Stock Exchange
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SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: None
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
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Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in the definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [X]
The aggregate market value of the voting stock held by non-affiliates of
the registrant as of March 1, 2000, was approximately $170,250,204.
The number of outstanding shares of the Registrant's Common Stock and
Class B Common stock as of March 1, 2000 was 20,229,006 and 4,750,107,
respectively.
DOCUMENTS INCORPORATED BY REFERENCE:
The Registrant's Proxy Statement for the Annual Meeting of Stockholders to
be held on May 9, 2000 is incorporated by reference into Part III.
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PART I
ITEM 1. BUSINESS
GENERAL
GenTek Inc. (the "Company" or "GenTek") is a manufacturer of
telecommunications equipment, industrial components and performance chemicals
sold into numerous markets for a wide variety of end uses. The Company operates
through three primary business segments: telecommunications equipment,
manufacturing and performance products. The telecommunications equipment segment
serves the public network and premises (or non-public) network markets. The
manufacturing segment serves the automotive, appliance and electronic and
industrial markets. The performance products segment serves customers in many
industries including the pharmaceutical and personal care, environmental
services, technology and chemical processing markets. The Company's products are
frequently highly engineered and are important components of, or provide
critical attributes to, its customers' end products or operations. The Company
operates over 80 manufacturing and production facilities located in the U.S.,
Canada, Australia, Austria, China, Germany, Great Britain, India, Indonesia,
Ireland and Mexico.
TELECOMMUNICATIONS EQUIPMENT SEGMENT
The telecommunications equipment segment is principally operated through
Krone and its subsidiaries as wholly owned subsidiaries of the Company. Krone
was purchased from Jenoptik AG, a major German technology group, and is a
leading global supplier of connector technology for telecommunications and data
networks. Krone has positioned itself as a global supplier, with approximately
80 percent of its 1999 sales generated outside Germany. Approximately 50 percent
of Krone's sales are in Europe, 19 percent are in North and South America, and
21 percent are in Asia and Australia. Krone has subsidiaries in 25 countries,
some of which operate as integrated production and sales companies and others as
sales companies only.
The Company's fiber-optic and copper connectivity and distribution
technology is used for applications in both public telecom networks and premises
(private) voice and data networks. These markets are as follows:
Public Networks. The telecommunications equipment segment manufactures
connectors and distributors for fixed telecommunication access networks and
provides related services to customers. The connectivity and distribution
devices are mainly used to connect copper or fiber optic cables at the main
distribution frame, at the local exchange, at various connection points in the
outside-plant portion of the network and, finally, at the premises of the
subscriber.
Premises Networks. The telecommunications equipment segment also
manufactures connection and distribution components for voice, data and video
communication infrastructure within private and industrial building complexes.
These products are used in both copper and fiber optic networks and include
components needed for the connection of wires/cables in the following areas:
Structured cabling: complete solutions for wiring phones,
workstations, PCs and other voice, data, or video communication
devices throughout a building; and
Internal telephone systems: telephone cabling in building complexes,
and the increasing replacement of traditional telephone cable
through structured cabling solutions.
The telecommunications equipment segment includes a full range of
copper and fiber optic distribution systems, both for telecommunications access
networks and premises data networks. The copper systems solutions offered are
based on Krone's LSA-Plus'r' rapid connection system, which is used in all types
of communications networks. The LSA-Plus system allows easy and rapid "stapling"
of wires into connectors, without the need for soldering or time-consuming
screwing or twisting required by
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many competitors' products. In addition, this stapling action automatically
punctures the wire insulation, thereby avoiding any need for manual removal of
the wire insulation.
The telecommunications segment also includes a full line of fiber optic
connectivity devices for use in the infrastructure of both public and private
networks. In conjunction with its marketing agreement with Prestolite Wire
Corporation, Krone supplies high-quality fiber-optic cable, which it combines
with its own products to supply customers with a complete fiber-optic structured
cabling solution.
Krone's systems are offered in various product lines and modules that
meet differing customer requirements. For example, Krone offers tailored
products for interior and exterior installations, special surge protector
components for optimal protection in communication networks, products for flush
mount assembly in small rooms and special modules for heavier gauge conductor
wire.
In addition to its physical products, Krone also provides services
relating to its technology. These comprehensive services include the design,
planning and construction of fixed networks as well as the installation,
maintenance, and testing of communication systems.
The telecommunications market is in a state of change, with increasing
demand for both public and private communications networks. In addition to the
soaring demand for access to the Internet and bandwidth, growth is also being
driven by increasing networking requirements for building technology and the
need for more efficient connection and distribution devices within the network
infrastructure.
MANUFACTURING SEGMENT
The manufacturing segment provides a broad range of engineered
components and services to three principal markets: automotive, appliance and
electronic, and industrial. The Company's products for these markets are
described below:
Automotive. For the automotive market, the Company provides:
precision-engineered components for valve-train systems, including
stamped and machined rocker and roller-rocker arms, cam follower
rollers, cam follower roller axles, antifriction bearings and other
hardened/machined components;
electronic wire and cable assemblies, such as wire harnesses, ignition
cables, molded parts, electro-mechanical assemblies, engine block
heaters, battery blankets and various electrical switches, used in the
manufacture of automobiles, light and heavy duty trucks and personal
recreation vehicles such as snowmobiles and jet-skis;
computer-aided and mechanical vehicle testing services for the
automotive industry;
pre-production dies and tooling, and prototype design and production
which are used by customers for prototype and short production runs of
automotive components or systems; and
fluid transport and handling equipment for automotive service
applications.
The Company's precision-engineered stamped and machined engine
components for valve-train systems improve engine efficiency by reducing engine
friction and component mass. These components are used both in traditional
overhead valve and in the increasingly popular single and double overhead cam
(OHC) engines which power cars, light trucks and sport utility vehicles (such as
Ford Expedition and F-150, Lincoln Navigator and DaimlerChrysler Minivan). The
increased use of these OHC engines has resulted in significant volume growth
through market share gains, as vehicle manufacturers are able to obtain better
fuel economy and higher horsepower using OHC engines.
The Company's wire and cable assembly products include a variety of
automotive electronic components for use in OEM production and the aftermarket.
As a leading Tier-2 supplier of products such as wire harnesses, ignition
cables, engine block heaters, battery blankets and various electrical and
electro-mechanical switches and assemblies, the Company provides its customers
with a range of technical services, including product design using
Computer-Aided Design (CAD) systems.
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Through computer-aided and mechanical vehicle testing offerings, the
Company provides computer-aided design, engineering and simulation services for
automotive structural and mechanical systems to OEMs and Tier 1 suppliers. The
Company provides a wide range of testing services for automotive components and
systems from single sub-systems, such as chassis, suspension, seats and seating
assemblies, to entire vehicles. The Company's engineering and simulation
services provide customers with finite element modeling, kinematics, crash and
variation simulation analyses, experimental dynamics and vehicle development
programs, and allow its customers to test their automotive products for
durability, stress, noise, vibration and environmental considerations.
Automotive manufacturers generally award business to their suppliers by
individual engine line or model, often for multiple-model years. The loss of any
individual engine line or model contract would not be material to the Company.
However, an economic downturn in the automotive industry as a whole or other
events (e.g., labor disruptions) resulting in significantly reduced operations
of any of DaimlerChrysler, Ford or General Motors could have a material adverse
impact on the results of its manufacturing segment. None of these customers
accounted for 10% or more of the Company's revenues in 1999.
Appliance and Electronic. The Company produces custom-designed power
cord systems and wire and cable assemblies for a broad range of appliances and
electronic products including:
household appliances, such as refrigerators, freezers, dishwashers,
washing machines, ovens, ranges, and vacuum cleaners;
electronic office equipment, including copiers and printers; and
various electronic products, such as medical equipment, ATM machines
and gaming machines.
The Company's specialized wiring expertise and high quality wire and
cable assemblies are generally provided to larger OEM customers. A highly
competitive environment has required the Company's customers to improve their
productivity by outsourcing to lower cost producers. The Company's manufacturing
facilities are strategically located in both Canada and Mexico, permitting the
Company to share with customers efficiencies gained through its operating scale
and lower costs.
Industrial. For the industrial market, the Company manufactures:
custom-designed wire harness and power cord systems for power tools,
motors, pumps and other industrial products; and
wire and cable for industrial markets, the commercial and residential
construction industries and for a wide variety of end market uses by
OEMs.
The Company produces a broad product line of single and multi conductor
wire and cable, wire harnesses and power cord systems. The Company's wire
jacketing expertise includes the use of polyvinyl chloride (PVC), rubber,
thermoplastic elastomer (TPE) and cross-link compounds.
PERFORMANCE PRODUCTS SEGMENT
The Company's performance products segment provides a broad range of
value-added products and services to four principal markets: pharmaceutical and
personal care, environmental services, technology and chemical processing. The
Company's products and services for these markets are described below.
Pharmaceutical and Personal Care. The Company is a leading supplier of
the active chemical ingredients used in the manufacture of over-the-counter
("OTC") antiperspirants and antacids, and also supplies active ingredients used
in prescription pharmaceuticals, nutritional supplements, nutraceuticals,
veterinary health products and personal care products.
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Environmental Services. The Company's water treatment products and
services are designed to address the important environmental issues confronting
its customers. These value-added products and services provide cleaner drinking
water, restore algae-infested lakes, reduce damaging phosphorus runoff from
agricultural operations, and significantly reduce pollution from industrial
waste water. With a network of 34 plants strategically located throughout the
United States and Canada, the Company is the largest North American producer of
aluminum sulfate, or "alum," which is used as a coagulant in potable water and
waste water treatment applications, and a leading supplier of flocculents
(polymer-based materials used for settling and/or separating solids from
liquids).
In the environmental market, the Company also provides sulfuric acid
regeneration services to the refining and chemical industries, and market
pollution abatement and sulfur recovery services to selected refinery customers.
Refineries use sulfuric acid as a catalyst in the production of alkylate, a
gasoline blending component with favorable performance and environmental
properties. The alkylation process contaminates and dilutes the sulfuric acid,
thereby creating the need to dispose of or regenerate the contaminated acid. The
Company transports the contaminated acid back to the company's facilities for
recycling and redelivers the fresh, recycled acid back to customers. This
"closed loop" process offers customers significant savings versus alternative
disposal methods and also benefits the environment by significantly reducing
refineries' waste streams. Similar regeneration services are provided to
manufacturers of ion exchange resins and silicone polymers.
Technology. In the technology market, the Company provides
computer-to-plate ("CTP") technology and bi-metal lithographic printing plates
for high-quality commercial printing applications, as well as ultrahigh-purity
electronic chemicals for the semiconductor and disk drive industries. The
Company's Prisma'TM' CTP technology allows printers to transfer computer images
directly to digitally imageable printing plates, thereby eliminating
intermediate film processing and reducing labor and material costs. The
Company's proprietary bi-metal plating system provides sharper color
reproduction, greater durability and superior on-press economics relative to the
polymer plates offered by other industry participants. The Company's electronic
chemicals include ultrahigh-purity acids, caustics, solvents and etchants for
use in the manufacture of semiconductor processing chips and computer disk
drives.
Chemical Processing. The Company manufactures a broad range of products
that serve as chemical intermediates in the production of such everyday products
as newspapers, tires, paints, dyes and carpets. The Company produces:
alum and polymer-based enhanced coagulants used in paper manufacturing
to impart water resistance;
sodium and ammonia sulfites used to produce fixing and developing
solutions for conventional film and x-ray processing;
sodium nitrite, of which the Company is one of only two North American
producers, primarily used as a reactant in the manufacture of dyes,
pigments and rubber processing chemicals;
potassium fluoride and fluoborate derivatives sold into the metal
treatment, agrochemical, surfactant and analytical reagent markets; and
sulfuric acid, which is used in the manufacture of titanium pigments,
fertilizers, synthetic fibers, steel, petroleum and paper, as well as
many other products.
For further information on segment data, see "Note 15 - Geographic and
Industry Segment Information" in the Notes to the Consolidated Financial
Statements.
COMPETITION
The Company's telecommunications equipment segment operates in highly
competitive markets, with many of its competitors being large, international and
technologically sophisticated companies.
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Competition in the telecommunications equipment segment is based on a number of
factors, including technological advancements, product line breadth, price,
technical support and service, and product quality. The ability to achieve and
maintain successful performance in this segment is also dependent on the
Company's ability to develop products which meet the ever-changing requirements
of data and voice communications technology. In the public network market, the
Company's principal competitor is Lucent Technologies. Other significant
competitors include Siemens, Quante/Pouyet (which is under agreement to be
acquired by Minnesota Mining and Manufacturing ("3M")) and Raychem (Tyco
International Ltd. ("Tyco")). The Company's principal competitors in the
premises network market are Lucent Technologies, AMP (Tyco) and Quante/Pouyet
(3M). This market is highly fragmented with many regional suppliers.
Competition in the manufacturing segment's markets is based upon a
number of factors including design and engineering capabilities, quality, price
and the ability to meet customer delivery requirements. In the automotive
market, the Company competes with, among others, Eaton, Hitchiner, INA,
Ingersoll-Rand, Sumitomo, Yazaki and captive OEMs. In the appliance and
electronic and industrial markets, the Company competes with International Wire,
General Cable, Alcatel, Belden, EDS Mexico and Choctaw, among others.
Although the Company's performance products segment generally has
significant market share positions in the product areas in which it competes,
most of its end markets are extremely competitive. In the pharmaceuticals and
personal care market, the Company's major competitors include Barcroft, Giulini,
Summit and Westwood. The Company's competitors in the environmental market
include the refineries that perform their own sulfuric acid regeneration, as
well as DuPont, Marsulex, Arch Chemical, PVS and Rhodia, which also have
sulfuric acid regeneration facilities that are generally located near their
major customers. In addition, the Company competes with Geo Specialty Chemicals,
U.S. Aluminates and other regional players in the water treatment market.
Competitors in the technology market include Kodak-Polychrome and Fuji, which
also provide printing-related products. With regard to electronic chemicals, the
Company's principal competitors are Ashland and Arch Chemical. Competitors in
the chemical processing market include BASF, Calabrian, U.S. Salt, Kerley,
Rhodia and Solvay S.A.
SUPPLIERS; AVAILABILITY OF RESOURCES
The Company purchases a variety of raw materials for its businesses.
The primary raw materials used by the telecommunications equipment segment are
plastic and metal alloy. The Company's primary raw materials in its
manufacturing segment are copper and steel. The Company's performance products
segment's competitive cost position is in part attributable to its control of
certain raw materials that serve as the feedstocks for many of its products.
Consequently, major raw material purchases are limited primarily to sulfuric
acid where it is uneconomical for the Company to supply itself due to
distribution costs, soda ash (for the manufacture of sodium salts, sulfites and
nitrites), bauxite and hydrate (for the manufacture of alum), sulfur (for the
manufacture of sulfuric acid), and aluminum (for the manufacture of printing
plates).
The Company purchases raw materials from a number of suppliers and, in
addition, believes that alternative sources are available to fulfill its needs.
In the Company's opinion, the raw materials needed for its businesses will be
available in sufficient supply on a competitive basis for the foreseeable
future.
SALES AND DISTRIBUTION
The Company's telecommunications equipment segment has approximately
500 sales and marketing personnel in 25 countries around the world. The
Company's products are sold directly to key account customers, often pursuant to
long-term contracts, and via its international third-party sales and
distribution network for smaller accounts.
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The Company's manufacturing segment has approximately 70 sales,
marketing and customer service personnel. Generally, the Company markets its
products directly to its customers, but in certain industrial markets a
distribution network is used. The Company's technical and engineering staff is
an integral part of its manufacturing segment's sales and distribution effort.
Since many of the Company's products are precision-engineered and
custom-designed to customer specifications, the Company's sales force and
engineers work closely with its customers in designing, producing, testing and
improving its products.
In the Company's performance products segment, the Company employs over
100 experienced sales, marketing, distribution and customer service personnel.
The sales force is divided into a general group and several specialized groups
which focus on specific products, end-users and geographic regions. This
targeted approach provides the Company with insight into emerging industry
trends and creates opportunities for product development.
SEASONALITY; BACKLOGS
The businesses of the telecommunications equipment, manufacturing and
performance products segments are generally not seasonal. Due to the nature of
the Company's businesses, there are no significant backlogs.
ENVIRONMENTAL MATTERS
The Company's various manufacturing operations, which have been
conducted at a number of facilities for many years, are subject to numerous laws
and regulations relating to the protection of human health and the environment
in the U.S., Canada, Australia, Austria, China, Germany, Great Britain, India,
Indonesia, Ireland and Mexico. The Company believes that it is in substantial
compliance with such laws and regulations. However, as a result of its
operations, the Company is involved from time to time in administrative and
judicial proceedings and inquiries relating to environmental matters. These
include several currently pending administrative proceedings concerning alleged
environmental violations at the Company's facilities. Based on information
available at this time with respect to potential liability involving these
facilities, the Company believes that any such liability will not have a
material adverse effect on its financial condition or results of operations.
However, modifications of existing laws and regulations or the adoption of new
laws and regulations in the future, particularly with respect to environmental
and safety standards, could require capital expenditures which may be material
or otherwise adversely impact the Company's operations.
The Comprehensive Environmental Response Compensation and Liability Act
of 1980 ("CERCLA") and similar state statutes have been construed as imposing
joint and several liability, under certain circumstances, on present and former
owners and operators of contaminated sites and transporters and generators of
hazardous substances regardless of fault. The Company's facilities have operated
for many years by the Company or its prior owners and operators, and adverse
environmental conditions may exist of which the Company is not aware. The
discovery of additional or unknown environmental contamination at any of the
Company's current or former facilities could have a material adverse effect on
the Company's financial condition or results of operation. In addition, the
Company has received written notice from the Environmental Protection
Administration that it has been identified as a "potentially responsible party"
under CERCLA at three third-party sites. The Company does not believe that its
liability, if any, for these sites will be material to its results of operations
or financial condition. In addition, Congress continues to consider the
reauthorization of and modifications to CERCLA. Because Congress has not yet
acted with respect to CERCLA, the Company does not have sufficient information
to ascertain the impact that any change might have on the Company's potential
liabilities, if any.
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At any time, the Company may be involved in proceedings with various
regulatory authorities which could require the Company to pay various fines and
penalties due to violations of environmental laws and regulations at its sites,
remediate contamination at some of these sites, comply with applicable standards
or other requirements, or incur capital expenditures to modify certain pollution
control equipment or processes at its sites. Again, although the amount of any
liability that could arise with respect to these matters cannot be accurately
predicted, the Company believes that the ultimate resolution of these matters
will have no material adverse effect on its results of operations or financial
condition.
Avtex Site at Front Royal, Virginia. On March 22, 1990, the
Environmental Protection Agency (the "EPA") issued to the Company a Notice of
Potential Liability pursuant to Section 107(a) of CERCLA with respect to a site
located in Front Royal, Virginia, owned at the time by Avtex Fibers Front Royal,
Inc., which has filed for bankruptcy. A sulfuric acid plant adjacent to the main
Avtex site was previously owned and operated by the Company. On September 30,
1998, the EPA issued an administrative order under Section 106 of CERCLA, which
requires General Chemical Group (whose obligations the Company assumed in
connection with the Spinoff), AlliedSignal, Inc. (now Honeywell) and Avtex to
undertake certain removal actions at the acid plant. On October 19, 1998, the
Company delivered to the EPA written notice of its intention to comply with that
order, subject to numerous defenses. The requirements of the order include
preparation of a study to determine the extent of any contamination at the acid
plant site. The Company has provided for the estimated costs of $1.6 million for
these activities in its accrual for environmental liabilities relating to the
order. The Company is working cooperatively with the EPA with respect to
compliance with the order and believes that such compliance will not have a
material effect on its results of operations or financial condition.
EMPLOYEES/LABOR RELATIONS
At December 31, 1999, the Company had approximately 10,300 employees,
of whom approximately 3,100 were full-time salaried employees, approximately
1,200 were full-time hourly employees (represented by ten different unions) and
approximately 6,000 were hourly employees working in nonunion facilities.
Approximately 1,200 of the Company's employees are based in Germany.
German-based employees are members of unions and are subject to industry-wide
and other collective bargaining agreements.
The Company's union contracts have durations which vary from two to
four years.
EXECUTIVE OFFICERS AND KEY EMPLOYEES
Set forth below is information with respect to each of the Company's
executive officers and/or key employees.
Richard R. Russell, 57, President and Chief Executive Officer and a
Director. From 1994 until the spinoff date, he served as the President and Chief
Executive Officer and a Director of General Chemical Group. Mr. Russell has also
been the President and Chief Executive Officer of General Chemical Corporation
since 1986.
Stewart A. Fisher, 39, Vice President and Chief Financial Officer. From
the Spinoff date until March 2000, Mr. Fisher served as Vice President and Chief
Financial Officer of General Chemical Group. Mr. Fisher served from 1998 until
the Spinoff as the Treasurer of General Chemical Group and since 1994 as
Treasurer of General Chemical Corporation. He served as Assistant Treasurer of
General Chemical Group from 1996 to 1998.
Michael R. Herman, 37, Vice President and General Counsel. From 1997
until the spinoff date, he served as the Vice President and General Counsel of
General Chemical Corporation. Mr. Herman had served as Deputy General Counsel of
General Chemical Corporation from 1995 until 1997, and as Associate General
Counsel of General Chemical Corporation from 1992 to 1995.
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Bodo B. Klink, 62, Vice President, Business Development and Services of
General Chemical Corporation since 1996. Mr. Klink was Vice President of
Marketing from 1993 to 1996. Mr. Klink had been General Manager - Water
Treatment Chemicals from 1991 to 1993.
Kevin J. O'Connor, 49, Controller. From March 1996 until the spinoff
date, he served as the Controller of General Chemical Group. Mr. O'Connor has
also served as Controller of General Chemical Corporation since 1986.
Ralph M. Passino, 48, Vice President and General Manager -
Manufacturing Group of General Chemical Corporation. Mr. Passino served as Vice
President and Chief Financial Officer of General Chemical Group from 1994 to
March 1999. From 1986 until the Spinoff date, he served as Chief Financial
Officer and Vice President of Administration of General Chemical Corporation,
and has been a Director of General Chemical Corporation since 1994.
Manfred Schneider, 63, Managing Director and Chief Executive Officer
of Krone GmbH. Mr. Schneider has been a member of the Board of Krone since 1986,
and the Chairman of the Board of Krone since 1998.
James N. Tanis, 55, Vice President and General Manager - Performance
Products Group of General Chemical Corporation. Mr. Tanis has held this position
since 1987.
Matthew M. Walsh, 33, Vice President and Treasurer. Mr. Walsh served
as a Group Controller-Performance Products of General Chemical Corporation from
October, 1997 to December, 1999 and was Director, Corporate Development of
General Chemical Corporation from September, 1996 to October, 1997. Mr. Walsh
served as Corporate Development Analyst at International Specialty Products,
Inc. from October, 1995 to September, 1996.
James A. Wilkinson, 58, Vice President of Manufacturing of General
Chemical Corporation. Mr. Wilkinson has held this position since 1986.
ITEM 2. PROPERTIES
The Company operates over 80 manufacturing and production facilities
located in the United States, Canada, Australia, Austria, China, Germany, Great
Britain, India, Indonesia, Ireland and Mexico. The Company's headquarters are
located in Hampton, New Hampshire.
Set forth below are the locations and uses of the Company's major
properties:
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LOCATION USE
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Telecommunications Equipment Segment
Englewood, Colorado.............................. Production Facility and Offices
Sydney, Australia................................ Production Facility and Offices
Trumau, Austria.................................. Production Facility
Cheltenham, England.............................. Production Facility and Offices
Berlin, Germany(1)............................... Production Facility and Offices
Mexico City, Mexico.............................. Production Facility
Shanghai, People's Republic of China............. Production Facility
Bangalore, India................................. Production Facility
Jakarta, Indonesia............................... Production Facility
Manufacturing Segment
Livonia, Michigan(1)............................. Production Facility
Troy, Michigan(1)................................ Production Facility and Offices
Westland, Michigan(1)............................ Production Facility
Upper Sandusky, Ohio(1).......................... Production Facility
Toledo, Ohio..................................... Production Facility
Defiance, Ohio................................... Production Facility
Perrysburg, Ohio(1).............................. Production Facility and Offices
Mineral Wells, Texas............................. Production Facility
Imuris, Mexico................................... Production Facility
Juarez, Mexico(1)................................ Production Facility
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Nogales, Mexico(1)............................... Production Facility
Concord, Ontario................................. Production Facility
Guelph, Ontario(1)............................... Production Facility
Stouffville, Ontario............................. Production Facility
Tillsonburg, Ontario(1).......................... Production Facility
Toronto, Ontario................................. Production Facility
Waterdown, Ontario............................... Production Facility
Performance Products Segment
Hollister, California............................ Production Facility and Offices
Pittsburg, California............................ Production Facility
Richmond, California............................. Production Facility
North Claymont, Delaware......................... Production Facility, Offices and Warehouse
Augusta, Georgia................................. Production Facility
East St. Louis, Illinois......................... Production Facility
Berkeley Heights, New Jersey..................... Production Facility, Offices and Warehouse
Newark, New Jersey............................... Production Facility
Solvay, New York................................. Production Facility
Marcus Hook, Pennsylvania........................ Production Facility, Offices and Warehouse
Midlothian, Texas................................ Production Facility
Anacortes, Washington............................ Production Facility
Racine, Wisconsin................................ Production Facility and Offices
Dublin, Ireland.................................. Production Facility, Offices and Warehouse
Thorold, Ontario................................. Production Facility
Valleyfield, Quebec.............................. Production Facility
Offices
Hampton, New Hampshire(1)........................ Headquarters
Parsippany, New Jersey(1)........................ Offices
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(1) Leased.
ITEM 3. LEGAL PROCEEDINGS
The Company is involved in claims, litigation administrative
proceedings and investigations of various types, including the Delaware Valley
litigation discussed below, and certain environmental proceedings previously
discussed. Although the amount of any liability that could arise with respect to
these actions cannot be accurately predicted, the opinion of management based
upon currently-available information is that any such liability not covered by
insurance will have no material adverse effect on the Company's results of
operations or financial condition. See Item 1. "Business - Environmental
Matters" above.
Delaware Valley Litigation. In April 1998, approximately 40 employees
(and their respective spouses) of the Sunoco refinery in Marcus Hook,
Pennsylvania, filed lawsuits in the Court of Common Pleas, Delaware County,
Pennsylvania, against General Chemical Group (whose obligations have been
assumed by the Company pursuant to the terms of the Spinoff), alleging that
sulfur dioxide and sulfur trioxide releases from the Company's Delaware Valley
facility caused various respiratory and pulmonary injuries. Unspecified damages
in excess of $50,000 for each plaintiff are sought. The litigation has entered
the discovery phase. The Company has denied all material allegations of the
complaints and will continue to defend itself vigorously in this matter.
Management further believes that current accruals and available insurance should
provide adequate coverage in the event of an adverse result in this matter and
that, based on currently available information, this matter will not have a
material adverse effect on the Company's results of operations or financial
condition.
-9-
<PAGE>
In addition, on September 24, 1999, the same attorneys that filed the
April, 1998 actions against the Company also filed a purported class action
complaint against the Company, titled Whisnant vs. General Chemical Corporation,
(in the court of Common Pleas, Delaware County, Pennsylvania), on behalf of 550
current and former employees of the Sunoco Marcus Hook, Pennsylvania refinery
located immediately adjacent to the Company's Delaware Valley facility. The
complaint alleges that unspecified releases of sulfur dioxide and sulfur
trioxide over unspecified timeframes caused injuries to the plaintiffs, and
seeks, among other things, to establish a "trust fund" for medical monitoring
for the plaintiffs. The Company believes this claim is without merit and will
vigorously defend itself in this matter. Management further believes that the
Company's current accruals and available insurance should provide adequate
coverage in the event of an adverse result in this matter, and that, based on
currently available information, this matter will not have a material adverse
effect on the Company's results of operations or financial condition.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No items were submitted to a vote of security holders of the Company,
through the solicitation of proxies or otherwise, during the fourth quarter of
fiscal 1999.
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
MARKET INFORMATION
The Company's Common Stock is traded on the New York Stock Exchange
(the "NYSE") under the symbol "GK." The following table shows the high and low
recorded sales prices of the Company's Common Stock, as reported on the NYSE
composite tape for each of the quarterly periods since May 3, 1999, the first
trading day of the Company's Common Stock on the NYSE following its spinoff from
its predecessor company, The General Chemical Group Inc. (the "Spinoff").
YEAR ENDED DECEMBER 31, 1999
<TABLE>
<CAPTION>
HIGH LOW
---- ---
<S> <C> <C>
Second Quarter, since May 3, 1999............................. $ 15.88 $ 11.56
Third Quarter ............................................ 14.81 10.50
Fourth Quarter ............................................ 12.63 7.81
</TABLE>
As of March 1, 2000, there were 148 stockholders of record of the
Company's Common Stock and 6 stockholders of record of the Company's Class B
Common Stock.
DIVIDENDS
During the last three quarters of 1999, the Company paid a regular
quarterly cash dividend of $.05 per share of Common Stock.
-10-
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA
The following selected consolidated financial data of the Company has
been derived from and should be read in conjunction with the Company's
Consolidated Financial Statements.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------------------------------------------------------
1995 1996 1997 1998 1999
---- ---- ---- ---- ----
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
STATEMENT OF OPERATIONS DATA:
<S> <C> <C> <C> <C> <C>
Net revenues............................. $ 290,185 $ 330,120 $ 368,516 $ 443,919 $ 931,999
Gross profit............................. 84,822 100,883 116,604 117,293(1) 244,411
Operating profit......................... 43,564 48,723(2) 67,526 51,721(3) 112,406(4)
Interest expense......................... 12,927 10,747 8,855 14,624 41,503
Income from continuing operations
before income taxes and
extraordinary item...................... 32,835 39,200 59,535 37,313 70,991
Income (loss) from continuing
operations before extraordinary item.... (551)(5) 20,775(2) 33,274 41,069(6) 36,828(4)
Income from discontinued operations...... 21,644 25,833 23,041 10,299 1,006
Income before extraordinary item......... 21,093 46,608 56,315 51,368 37,834
Net income (7)........................... $ 21,093 $ 46,608 $ 56,315 $ 47,707 $ 32,895
PER SHARE:
Income (loss) from continuing
operations before extraordinary
item - basic........................... $ (.03)(5) $ .97(2) $ 1.55 $ 1.95(6) $ 1.76(4)
Income (loss) from continuing
operations before extraordinary
item - diluted......................... (.03)(5) .95(2) 1.48 1.88(6) 1.72(4)
Net income - basic....................... 1.07 (5) 2.19(2) 2.63 2.27(6) 1.57(4)
Net income - diluted..................... 1.07 (5) 2.13(2) 2.50 2.18(6) 1.54(4)
Dividends................................ 1.00 .13 .20 .20 .20
Weighted average number of
shares outstanding - basic.............. 19,736,842 21,317,657 21,424,401 21,048,240 20,952,915
Weighted average number of
shares outstanding - diluted............ 19,736,842 21,898,548 22,502,642 21,855,644 21,407,017
OTHER DATA:
Capital expenditures..................... $ 24,842 $ 19,231 $ 26,203 $ 33,737 $ 38,508
Depreciation and amortization............ 13,125 14,099 16,296 23,065 51,104
BALANCE SHEET DATA (AT END OF PERIOD):
$ 18,097 $ 50,091 $ 20,401 $ 61,310 $ 20,562
Cash and cash equivalents................
Total assets............................. 259,773 274,298 389,818 536,818 1,210,364
Long-term debt (including current
portion)................................ 291,495 234,609 258,004 357,531 724,115
Total equity (deficit)................... (215,336) (119,753) (94,239) (54,696) 21,569
</TABLE>
- -----------------------
(1) Includes a one-time charge of $12.1 million ($7.3 million after tax, or
$.33 per share) primarily due to an asset-impairment writedown for two of
the Company's manufacturing facilities.
(2) Includes a one-time charge of $6.8 million ($4.1 million after tax, or
$.19 per share) primarily related to awards made under a restricted unit
plan, which replaced certain prior equity programs.
(3) Includes incremental accruals of $9.8 million ($5.9 million after tax, or
$.27 per share) principally related to litigation and environmental
spending and the impact of the adjustment in footnote one.
(4) Includes a one-time charge of $6.2 million ($3.7 million after tax, or
$.17 per share) primarily related to the Spinoff.
(5) Includes a nonrecurring charge to income tax expense of $17.1 million
($.87 per share).
(6) Includes a nonrecurring gain of $19.5 million ($.89 per share) related to
an income tax settlement and the impact of the adjustments in footnotes
one and three.
(7) For 1998 and 1999 includes extraordinary losses of $3.7 million and $4.9
million, respectively, related to the early retirement of certain
indebtedness.
-11-
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
OVERVIEW
The Company is a manufacturer of telecommunications equipment,
industrial components and performance chemicals sold into numerous markets for a
wide variety of end uses. The Company operates through three primary business
segments; telecommunications equipment, manufacturing and performance products.
The telecommunications equipment segment serves public network and premises (or
nonpublic) network markets. The manufacturing segment serves the automotive,
appliance and electronic and industrial markets. The performance products
segment serves customers in many industries, including the pharmaceutical and
personal care, environmental services, technology and chemical processing
markets.
GenTek 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 portion 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 percentage of the Company's revenues generated by its three
segments has changed significantly this year. The Company's telecommunications
equipment segment consists of Krone, which the Company acquired on August 20,
1999. The Company's manufacturing segment has expanded, primarily due to the
acquisitions of Noma in April 1999 and Defiance in February 1999.
RECENT ACQUISITIONS
The Company has grown through acquisitions, and will continue to pursue
acquisition and investment opportunities that will create long-term value and
enhance cash flow and earnings. Generally, the businesses the Company has
acquired have had lower margins than its existing operations. One of the
Company's goals for the acquired businesses is to increase earnings by
implementing cost-reduction programs and achieving operating efficiencies.
In 1999, the Company made the following significant strategic
acquisitions:
In August 1999, the Company acquired Krone AG, a leading global
supplier of connector technology for telecommunications and data
networks, from Jenoptik AG for total consideration of approximately
$222 million (including $63 million of assumed debt). Krone had pro
forma sales of DM 581 million (approximately $330 million) in the year
ended December 31, 1998.
In April 1999, the Company acquired Noma Industries Limited for total
consideration of approximately $240 million. Noma is a leading North
American producer of insulated wire and wire-related products for the
automotive, appliance and electronic and industrial markets. Noma had
sales of approximately $269 million for the year ended December 31,
1998.
In February 1999, the Company acquired Defiance, Inc. for total
consideration of approximately $70 million. Defiance is a leading North
American manufacturer of specialty antifriction bearings for the
transportation industry and a provider of vehicle testing services,
tooling design and preproduction dies and components, primarily for the
automotive industry. Defiance had sales of approximately $93 million
for the year ended December 31,1998.
RECENT DEVELOPMENTS
GenTek identified the opportunity to acquire Krone through Prestolite
Wire Corporation ("Prestolite"), Krone's marketing partner. Prestolite is a
leading North American manufacturer of copper and fiber-optic wire and cable
products for telecommunications, automotive and industrial markets, with annual
sales of approximately $250 million.
-12-
<PAGE>
The Company is currently discussing the combination of Prestolite's
telecommunications business with Krone. This combination may be through an
acquisition of Prestolite's telecommunications business, a joint venture with
Prestolite, or other appropriate structure. The Company believes that the
integration of Krone's and Prestolite's telecommunications and data businesses
could create additional value for the Company. The integration of Krone's and
Prestolite's telecommunications and data businesses would allow the Company to
provide customers around the globe with total connectivity and wiring solutions
that optimize network transmission throughput capabilities.
There can be no assurance, however, that agreement on any strategic
combination will be reached, or if such an agreement is reached, that it will
yield the benefits the Company currently believes are possible. As with
acquisitions in general, negotiating and consummating a transaction can be a
lengthy and costly process. Successfully implementing an operating strategy is
likely to require substantial attention from the Company's management team,
which could divert it from its existing business. Further, because Prestolite is
controlled by Paul Montrone, the Company's controlling shareholder and Chairman
of the Company's Board of Directors, any such strategic combination would have
to be approved by a special committee, comprised of disinterested directors of
GenTek. Such procedural and substantive safeguards are likely to add additional
time and expense to the consummation of any such transaction.
-13-
<PAGE>
RESULTS OF OPERATIONS
The following table sets forth the Company's statement of operations
data for each of the three years in the period ended December 31, 1999.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------------------------------------
1997 1998 1999
----------------- --------------------- ----------------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C>
Net revenues........................................ $ 368.5 100% $ 443.9 100% $ 932.0 100%
Cost of sales....................................... 251.9 68 326.6(1) 74 687.6 74
--------- ----- --------- ----- --------- ----
Gross profit........................................ 116.6 32 117.3 26 244.4 26
Selling, general and administrative expense......... 49.1 13 65.6(2) 14 132.0(3) 14
--------- ----- --------- ----- --------- ----
Operating profit.................................... 67.5 19 51.7 12 112.4 12
Interest expense.................................... 8.9 2 14.6 3 41.5 4
Interest income..................................... 1.5 -- 1.2 -- 1.0 --
Other expense, net.................................. 0.6 -- 0.9 -- 0.9 --
--------- ----- --------- ----- --------- ----
Income from continuing operations before
income taxes and extraordinary item............... 59.5 16 37.3 9 71.0 8
Income tax provision................................ 26.3 7 (3.8)(4) -- 34.2 4
--------- ----- --------- ----- --------- ----
Income from continuing operations
before extraordinary item......................... 33.3 9 41.1 9 36.8 4
Income from discontinued operations................. 23.0 6 10.3 2 1.0 --
--------- ----- --------- ----- --------- ----
Income before extraordinary item.................... 56.3 15 51.4 11 37.8 4
Extraordinary item-loss from
extinguishment of debt (net of tax)............... -- -- 3.7 -- 4.9 --
--------- ----- --------- ----- --------- ----
Net income.......................................... $ 56.3 15% $ 47.7 11% $ 32.9 4%
========= ====== ========= ====== ========= ======
</TABLE>
- ---------------
Note: Amounts may not total due to rounding.
(1) Includes a one-time charge of $12.1 million ($7.3 million after tax)
primarily due to an asset-impairment writedown for two of the Company's
manufacturing facilities.
(2) Includes incremental accruals of $9.8 million ($5.9 million after tax)
principally related to litigation and environmental spending.
(3) Includes a one-time charge of $6.2 million ($3.7 million after tax),
primarily related to the Spinoff.
(4) Includes a nonrecurring gain of $19.5 million related to an income tax
settlement.
1999 COMPARED WITH 1998
Net revenues were $932.0 million for 1999 compared with $443.9 million
for 1998. This increase was due principally to the acquisitions of Noma and
Defiance in the manufacturing segment and the acquisition of Krone, which
represents the telecommunications equipment segment.
Gross profit of $244.4 million was $127.1 million above the prior
year's level. This increase is principally due to the above-mentioned
acquisitions, higher volumes in the existing manufacturing segment businesses
and a one-time charge of $12.1 million recorded in 1998 related to an
asset-impairment writedown. Gross profit as a percentage of sales for 1998,
excluding the impact of the one-time charge was 29 percent. Gross profit as a
percentage of sales for 1999 was 26 percent, which primarily reflects the impact
of lower margins in the acquired businesses.
Selling, general and administrative expense was $132.0 million as
compared with $65.6 million for 1998. This increase is principally due to the
above-mentioned acquisitions and a one-time charge of $6.2 million, primarily
related to the Spinoff.
Interest expense was $41.5 million versus $14.6 million for the prior
year. The increase reflects higher outstanding debt balances related to the
Company's acquisitions.
-14-
<PAGE>
1998 COMPARED WITH 1997
Net revenues were $443.9 million for 1998 compared with $368.5 million
for 1997. This increase was due to higher sales in both the manufacturing and
the performance products segments. The increase in sales of the manufacturing
segment reflects higher unit volumes. The increase in sales of the performance
products segment was due to the acquisitions of Reheis and Peridot.
Gross profit of $117.3 million was $0.7 million above the prior year's
level. This increase was principally due to increases in sales resulting from
acquired businesses in the performance products segment and higher volumes in
the manufacturing segment, partially offset by a one-time charge of $12.1
million recorded in 1998, principally related to an asset-impairment writedown
for two of the Company's manufacturing facilities. Excluding the effect of the
one-time charge, gross profit as a percentage of sales was 29 percent for 1998
versus 32 percent for 1997, primarily due to the lower margins of the acquired
businesses.
Selling, general and administrative expense as a percentage of net
revenues was 14 percent in 1998 versus 13 percent for 1997. This increase was
principally due to incremental accruals of $9.8 million in 1998 principally
related to litigation and environmental spending.
Interest expense increased by $5.7 million in 1998 from 1997 due to
higher outstanding debt balances as a result of acquisitions.
Income from the Industrial Chemicals Business, recorded as discontinued
operations, was $10.3 million for 1998 versus $23.0 million for 1997. This
decrease was due to weaker pricing and lower volumes of export soda ash to Asia.
Net income was $47.7 million for 1998 versus $56.3 million for 1997.
This decrease was due to the foregoing reasons and a $3.7 million extraordinary
item related to the early extinguishment of debt, substantially offset by a
nonrecurring gain of $19.5 million related to an income tax settlement.
LIQUIDITY AND CAPITAL RESOURCES
Cash and cash equivalents were $20.6 million at December 31, 1999
compared with $61.3 million at year-end 1998. During 1999, the Company generated
cash flow from continuing operations of $71.5 million, had net proceeds from
debt of $851.8 million and cash flow from discontinued operations of $127.6
million. The Company's cash flow was used to fund acquisitions of $444.8
million, to repay debt of $604.7 million and to make capital expenditures of
$38.5 million.
The Company had working capital of $114.6 million at December 31, 1999
as compared with $17.3 million at December 31, 1998. This increase in working
capital principally reflects the working capital of the newly acquired
companies, partially offset by lower cash balances.
The increases in property, plant and equipment, goodwill and long-term
debt reflect the assets and debt related to the various acquisitions completed
during 1999.
In connection with the Spinoff, the Company entered into a $550 million
credit facility with a syndicate of banks and other financial institutions,
consisting of a $300 million revolving credit facility and $250 million
aggregate term loan facilities. The Company's initial borrowing incurred at the
time of the spinoff was $500 million (consisting of $250 million of term loans
and $250 million of loans under the revolving credit facility), of which the
Company used approximately $487 million to repay a portion of General Chemical
Group's third-party indebtedness, including borrowings to finance the
acquisitions of Noma and Defiance. The agreement for the Company's credit
facility contains restrictive covenants which impose operating and financial
restrictions on the Company, including the requirement that it maintain maximum
leverage and minimum interest coverage ratios.
-15-
<PAGE>
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 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.
On August 9, 1999, the Company issued $200 million aggregate principal
amount of 11% Senior Subordinated Notes due 2009 and received proceeds of $193
million from such issuance. The Company used these proceeds to repay a portion
of the Company's outstanding indebtedness under its credit facility. The Company
paid the cash portion of the purchase price for its acquisition of Krone by
reborrowing under the revolving credit facility.
As of December 31, 1999, the Company had $220 million in borrowings
outstanding under its revolving credit facility and the ability to borrow an
additional $80 million under its credit facility (excluding approximately $10
million for letters of credit issued under the credit facility). At December 31,
1999, the total outstanding indebtedness was $724.1 million.
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.
ENVIRONMENTAL MATTERS
The Company's various manufacturing operations, which have been
conducted at a number of facilities for many years, are subject to numerous laws
and regulations relating to the protection of human health and the environment
in the U.S., Canada, Australia, Austria, China, Germany, Great Britain, India,
Indonesia, Ireland and Mexico. The Company believes that it is in substantial
compliance with such laws and regulations. However, as a result of its
operations, the Company is involved from time to time in administrative and
judicial proceedings and inquiries relating to environmental matters. Based on
information available at this time with respect to potential liability involving
these proceedings and inquiries, the Company believes that any such liability
would not have a material adverse effect on its financial position or results of
operations. However, modifications or changes in enforcement of existing laws
and regulations or the adoption of new laws and regulations in the future,
particularly with respect to environmental and safety standards could require
expenditures which might be material to the Company's financial position or
results of operations. See also "Business -- Environmental Matters."
The Company's accruals for environmental liabilities are recorded based
on current interpretation of environmental laws and regulations when it is
probable that a liability has been incurred and the amount of such liability can
be reasonably estimated. At December 31, 1999, accruals for environmental
matters were $29.3 million. The Company maintains a comprehensive insurance
program, including customary comprehensive general liability insurance for
bodily injury and property damage caused by various activities and occurrences
and significant excess coverage to insure against catastrophic occurrences.
However, the Company does not maintain any insurance other than as described
above for potential liabilities related specifically to remediation of existing
environmental contamination or future environmental contamination, if any.
-16-
<PAGE>
The Company has an established program to ensure that its facilities
comply with environmental laws and regulations. Expenditures for 1999
approximated $8.9 million (of which approximately $1.0 million represented
capital expenditures and approximately $7.9 million related to ongoing
operations and the management and remediation of potential environmental
contamination from prior operations). Expenditures for 1998 approximated $11.7
million (of which approximately $1.0 million represented capital expenditures
and approximately $10.7 million related to ongoing operations and the management
and remediation of potential environmental contamination from prior operations).
Management expects similar expenditures in 2000. In addition, if environmental
laws and regulations affecting the Company's operations become more stringent,
costs for environmental compliance may increase above historical levels.
OTHER MATTERS
In June 1998, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 133 "Accounting for Derivative Instruments
and Hedging Activities" ("FAS 133"). FAS 133 requires that all derivative
instruments be measured at fair value and recognized in the balance sheet as
either assets or liabilities. The Company is required to adopt FAS 133 for its
fiscal year beginning January 1, 2001. The Company does not expect that the
adoption of FAS 133 will have a material effect on its consolidated financial
position, results of operations or cash flows.
YEAR 2000 ISSUE
Year 2000 issues exist when dates in computer systems are recorded
using two digits (rather than four) and are then used for arithmetic operations,
comparisons or sorting. A two-digit date recording may recognize a date using
"00" as 1900 rather than 2000, which could cause the Company's computer systems
to perform inaccurate computations.
During 1998 and 1999, the Company completed a detailed assessment of
its information systems and other hardware and software at each of the Company's
business units. Based upon these assessments, non-compliant software or hardware
were either upgraded to Year 2000 compliant versions, remediated to become Year
2000 compliant or replaced by other hardware or software which provided Year
2000 compliance and other benefits. As a result of the Company's Year 2000
readiness efforts, the Company's mission critical systems successfully
distinguished between the year 1900 and 2000 without any critical system
failures. In addition, the Company has not experienced an adverse impact due to
Year 2000 issues at any of its significant suppliers. The Company will continue
to monitor its mission critical applications and equipment through the normal
course of business operations to ensure that any Year 2000 matters that do arise
are addressed promptly.
With regard to financial cost, the Company estimates it has incurred
$1.8 million on Year 2000 activities through December 31, 1999.
FORWARD-LOOKING STATEMENTS
This Annual Report on Form 10-K includes forward-looking statements.
All statements other than statements of historical facts included in this Annual
Report on Form 10-K may constitute forward-looking statements. The Company has
based these forward-looking statements on its current expectations and
projections about future events. Although it believes that its assumptions made
in connection with the forward-looking statements are reasonable, there can be
no assurances that its assumptions and expectations will prove to have been
correct. These forward-looking statements are subject to various risks,
uncertainties and assumptions including, among other things:
the Company's outstanding indebtedness and its leverage, and the
restrictions imposed by its indebtedness;
-17-
<PAGE>
the cyclical nature of certain of the Company's businesses, and
domestic and international economic conditions;
the high degree of competition in certain of the Company's businesses,
and the potential for new competitors to enter into those businesses;
the integration of recent and future acquired businesses with the
Company's existing operations in a timely and efficient manner;
the extent to which the Company undertakes new acquisitions or enters
into strategic joint ventures of partnerships;
future modifications to existing laws and regulations affecting the
environment, health and safety;
discovery of unknown contingent liabilities, including environmental
contamination at the Company's facilities;
fluctuations in interest rates and in foreign currency exchange rates;
increases in the cost of raw materials and other inputs used to make
the Company's products and;
certain potential adverse tax consequences of a change of control.
The Company undertakes no obligation to publicly update or revise any
forward-looking statements, whether as a result of new information, future
events or otherwise. In light of these risks, uncertainties and assumptions, the
forward-looking events discussed in this report might not occur.
ITEM 7A. 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 it selectively uses financial instruments to manage these
risks. The Company's objective in managing 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. Additional information regarding financial instruments is contained in
Note 14 to the Consolidated Financial Statements.
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 debt and derivative portfolios 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 its fair values, cash flows or earnings.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
See "Item 14. Exhibits, Financial Statement Schedules and Reports on
Form 8-K."
-18-
<PAGE>
INDEPENDENT AUDITORS' REPORT
TO THE BOARD OF DIRECTORS AND STOCKHOLDERS OF
GENTEK INC.:
We have audited the accompanying consolidated balance sheets of GenTek
Inc. and subsidiaries as of December 31, 1998 and 1999, and the related
consolidated statements of operations, changes in equity (deficit) and cash
flows for each of the three years in the period ended December 31, 1999. Our
audits also included the financial statement schedule in the Index at Item 14.
These financial statements and financial statement schedule are the
responsibility of the Company's management. Our responsibility is to express an
opinion on the financial statements and the financial statement schedule based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly,
in all material respects, the financial position of GenTek Inc. and subsidiaries
at December 31, 1998 and 1999, and the results of their operations and their
cash flows for each of the three years in the period ended December 31, 1999 in
conformity with generally accepted accounting principles. Also, in our opinion,
such financial statement schedule, when considered in relation to the basic
consolidated financial statements taken as a whole, presents fairly in all
material respects the information set forth therein.
Deloitte & Touche LLP
Parsippany, New Jersey
February 8, 2000
(February 22, 2000 as to the last paragraph of Note 4)
-19-
<PAGE>
GENTEK INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------------------
1997 1998 1999
----------- ----------- -----------
<S> <C> <C> <C>
Net revenues........................................................... $ 368,516 $ 443,919 $ 931,999
Cost of sales.......................................................... 251,912 326,626 687,588
Selling, general and administrative expense............................ 49,078 65,572 132,005
---------- ----------- -----------
Operating profit.................................................... 67,526 51,721 112,406
Interest expense ..................................................... 8,855 14,624 41,503
Interest income ..................................................... 1,475 1,165 1,022
Other expense, net..................................................... 611 949 934
---------- ----------- -----------
Income from continuing operations before income taxes
and extraordinary item............................................ 59,535 37,313 70,991
Income tax provision................................................... 26,261 (3,756) 34,163
---------- ----------- -----------
Income from continuing operations before extraordinary item......... 33,274 41,069 36,828
Income from discontinued operations (net of tax)....................... 23,041 10,299 1,006
---------- ----------- -----------
Income before extraordinary item.................................... 56,315 51,368 37,834
Extraordinary item - loss from extinguishment of debt
(net of tax of $2,395 and $3,231, respectively)..................... -- 3,661 4,939
---------- ----------- -----------
Net income......................................................... $ 56,315 $ 47,707 $ 32,895
========== =========== ===========
Earnings per common share - basic:
Income from continuing operations...................................... $ 1.55 $ 1.95 $ 1.76
Income from discontinued operations (net of tax)....................... 1.08 .49 .05
Extraordinary item - loss from extinguishment of debt
(net of tax)........................................................ -- .17 .24
---------- ----------- -----------
Net income......................................................... $ 2.63 $ 2.27 $ 1.57
========== =========== ===========
Earnings per common share - assuming dilution:
Income from continuing operations...................................... $ 1.48 $ 1.88 $ 1.72
Income from discontinued operations (net of tax)....................... 1.02 .47 .05
Extraordinary item - loss from extinguishment of debt
(net of tax)........................................................ -- .17 .23
---------- ----------- -----------
Net income......................................................... $ 2.50 $ 2.18 $ 1.54
========== =========== ===========
</TABLE>
See the accompanying notes to the consolidated financial statements.
-20-
<PAGE>
GENTEK INC.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
ASSETS
DECEMBER 31,
-------------------------------
1998 1999
----------- -----------
<S> <C> <C>
Current assets:
Cash and cash equivalents................................................ $ 61,310 $ 20,562
Receivables, net......................................................... 60,620 205,508
Inventories.............................................................. 37,619 119,337
Deferred income taxes.................................................... 11,494 25,682
Other current assets..................................................... 826 15,321
----------- -------------
Total current assets.................................................. 171,869 386,410
Property, plant and equipment, net.......................................... 196,526 359,359
Goodwill, net of amortization............................................... 71,444 386,490
Other assets................................................................ 21,687 78,105
Net assets of discontinued operations....................................... 75,292 --
----------- -------------
Total assets $ 536,818 $ 1,210,364
=========== =============
LIABILITIES AND EQUITY (DEFICIT)
Current liabilities:
Accounts payable........................................................ $ 42,813 $ 98,035
Accrued liabilities..................................................... 60,925 155,033
Current portion of long-term debt....................................... 50,802 18,758
----------- -------------
Total current liabilities............................................. 154,540 271,826
Long-term debt.............................................................. 306,729 705,357
Other liabilities........................................................... 130,245 211,612
----------- -------------
Total liabilities..................................................... 591,514 1,188,795
----------- -------------
Equity (deficit):
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: 12,654,489 and 16,876,017 shares at
December 31, 1998 and 1999, respectively............................... 127 169
Class B Common Stock, $.01 par value, authorized 40,000,000
shares; issued and outstanding: 9,758,421 and 3,958,421 shares
at December 31, 1998 and 1999, respectively............................ 97 40
Paid in capital (Capital deficit)....................................... (182,056) 4,856
Accumulated other comprehensive loss.................................... (2,446) (3,489)
Retained earnings....................................................... 162,378 20,270
Treasury stock, at cost: 1,641,166 and 18,058 shares at
December 31, 1998 and 1999, respectively............................... (32,796) (277)
----------- -----------
Total equity (deficit)............................................... (54,696) 21,569
----------- -----------
Total liabilities and equity (deficit)............................... $ 536,818 $ 1,210,364
=========== =============
</TABLE>
See the accompanying notes to the consolidated financial statements.
-21-
<PAGE>
GENTEK INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------------------
1997 1998 1999
---------- ----------- -----------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income........................................................... $ 56,315 $ 47,707 $ 32,895
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization..................................... 16,296 23,065 51,104
Net loss on disposition/impairment of long-term assets............ 431 11,910 2,077
Unrealized exchange loss.......................................... 1,405 1,313 --
Restricted unit plan costs........................................ 1,302 1,309 790
Loss on extinguishment of debt.................................... -- 6,056 8,170
Income from discontinued operations............................... (23,041) (10,299) (1,006)
(Increase) decrease in receivables................................ (4,835) 1,216 (20,925)
Increase in inventories........................................... (1,597) (2,596) (8,845)
Increase in accounts payable...................................... 1,944 6,241 8,452
Increase (decrease) in accrued liabilities........................ (216) 4,427 (4,676)
Increase (decrease) in other liabilities and assets, net.......... 8,175 (33,081) 3,480
---------- ----------- -----------
Net cash provided by continuing operations........................ 56,179 57,268 71,516
---------- ----------- -----------
Cash flows from investing activities:
Capital expenditures................................................. (26,203) (33,737) (38,508)
Proceeds from sales or disposals of long-term assets................. 63 767 1,481
Cash provided by discontinued operations............................. 331 20,512 127,571
Acquisition of businesses net of cash acquired*...................... (30,130) (90,935) (444,782)
---------- ----------- -----------
Net cash (used for) investing activities.......................... (55,939) (103,393) (354,238)
---------- ----------- -----------
Cash flows from financing activities:
Proceeds from long-term debt......................................... 49,000 389,858 851,827
Repayment of long-term debt.......................................... (45,536) (293,778) (604,720)
Payments to acquire treasury stock................................... (27,183) (5,490) (650)
Exercise of stock options............................................ -- 445 --
Dividends............................................................ (5,368) (4,184) (4,160)
---------- ----------- -----------
Net cash provided by (used for) financing activities.............. (29,087) 86,851 242,297
---------- ----------- -----------
Effect of exchange rate changes on cash.................................. (843) 183 (323)
---------- ----------- -----------
Increase (decrease) in cash and cash equivalents......................... (29,690) 40,909 (40,748)
Cash and cash equivalents at beginning of period......................... 50,091 20,401 61,310
---------- ----------- -----------
Cash and cash equivalents at end of period............................... $ 20,401 $ 61,310 $ 20,562
========== =========== ===========
Supplemental information:
Cash paid for income taxes........................................... $ 35,179 $ 19,754 $ 41,551
========== =========== ===========
Cash paid for interest............................................... $ 20,923 $ 29,353 $ 31,060
========== =========== ===========
* Purchase of businesses net of cash acquired:
Working capital, other than cash.................................. $ 3,110 $ (14,303) $ (38,407)
Plant, property and equipment..................................... (43,007) (36,436) (170,490)
Other assets...................................................... (19,593) (41,622) (388,025)
Noncurrent liabilities............................................ 29,360 1,426 152,140
---------- ----------- -----------
Net cash used to acquire businesses............................... $ (30,130) $ (90,935) $ (444,782)
========== =========== ===========
</TABLE>
See the accompanying notes to the consolidated financial statements.
-22-
<PAGE>
GENTEK INC.
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (DEFICIT)
FOR THE THREE YEARS ENDED DECEMBER 31, 1999
<TABLE>
<CAPTION>
ACCUMULATED
PAID IN OTHER
CLASS B CAPITAL COMPREHENSIVE
COMMON COMMON TREASURY (CAPITAL INCOME RETAINED
STOCK STOCK STOCK DEFICIT) (LOSS) EARNINGS TOTAL
------ ------ ----- --------- -------------- --------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1996.............. $80 $ 143 $ (123) $(185,215) $(1,435) $ 66,797 $(119,753)
Components of comprehensive income:
Net income....................... -- -- -- -- -- 56,315 56,315
Foreign currency translation..... -- -- -- -- (762) -- (762)
---------
Comprehensive income................... -- -- -- -- -- -- 55,553
Dividends (per share $.125)............ -- -- -- -- -- (4,257) (4,257)
Conversion of Class B Common
stock to common stock................. 46 (46) -- -- -- -- --
Restricted unit plan grants, cancel- -- -- -- 1,401 -- -- 1,401
lations, tax benefits and other......
Purchase of treasury stock............. -- -- (27,183) -- -- -- (27,183)
------ ------ -------- --------- ------- --------- ---------
Balance at December 31, 1997.............. 126 97 (27,306) (183,814) (2,197) 118,855 (94,239)
Components of comprehensive income:
Net income....................... -- -- -- -- -- 47,707 47,707
Foreign currency translation..... -- -- -- -- (249) -- (249)
---------
Comprehensive income................... -- -- -- -- -- -- 47,458
Dividends (per share $.20)............. -- -- -- -- -- (4,184) (4,184)
Exercise of stock options.............. -- -- -- 445 -- -- 445
Restricted unit plan grants, cancel- 1 -- -- 1,313 -- -- 1,314
lations, tax benefits and other........
Purchase of treasury stock............. -- -- (5,490) -- -- -- (5,490)
------ ------ -------- ---------- ------- --------- ----------
Balance at December 31, 1998.............. 127 97 (32,796) (182,056) (2,446) 162,378 (54,696)
Components of comprehensive income:
Net income....................... -- -- -- -- -- 32,895 32,895
Foreign currency translation..... -- -- -- -- (3,883) -- (3,883)
---------
Comprehensive income................... -- -- -- -- -- -- 29,012
Dividends (per share $.20)............. -- -- -- -- -- (4,160) (4,160)
Conversion of Class B Common
stock to common stock................. 57 (57) -- -- -- -- --
Restricted unit plan grants, cancel- -- -- -- 790 -- -- 790
lations, tax benefits and other.......
Purchase of treasury stock............. -- -- (650) -- -- -- (650)
Spinoff adjustments.................... (15) -- 33,169 186,122 2,840 (170,843) 51,273
------ ------ -------- --------- ------- --------- ---------
Balance at December 31, 1999.............. $ 169 $ 40 $ (277) $ 4,856 $(3,489) $ 20,270 $ 21,569
====== ====== ======== ========= ======= ========= =========
</TABLE>
See the accompanying notes to the consolidated financial statements.
-23-
<PAGE>
GENTEK INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
NOTE 1 - BASIS OF PRESENTATION
GenTek Inc.'s ("GenTek'" or the "Company") manufacturing and
performance products businesses (the "GenTek Business") were formerly part of
the businesses of The General Chemical Group Inc. ("GCG"). GCG separated the
GenTek Business from GCG's soda ash and calcium chloride business (the
"Industrial Chemicals Business") through a spinoff (the "Spinoff"). On March 9,
1999, the Board of Directors of GCG approved the Spinoff, subject to, among
other things, GCG obtaining a private letter ruling from the United States
Internal Revenue Service (the "IRS") that the Spinoff would be tax-free to GCG's
shareholders. On March 18, 1999, GCG received a favorable tax ruling from the
IRS. GCG accomplished the Spinoff by transferring the GenTek Business to GenTek,
and distributing the common stock of GenTek to GCG's shareholders on April 30,
1999 (the "Spinoff Date").
Since the Spinoff Date, GCG and GenTek have been separate, stand-alone
companies with GenTek operating the manufacturing, performance products, and
telecommunications equipment segments and GCG operating the Industrial Chemicals
Business. GenTek's common stock is listed on the New York Stock Exchange (under
the symbol "GK").
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. Therefore, the Spinoff has been reflected,
for financial statement presentation, as if GenTek formed a new company
consisting of the Industrial Chemicals Segment and distributed the stock of the
company as a dividend to GenTek's stockholders, with the assets and operations
of the performance products and manufacturing segments remaining with GenTek.
Accordingly, the GenTek financial statements reflect the financial position and
results of operations of the performance products and manufacturing segments as
continuing operations and the financial position and results of operations of
the Industrial Chemicals Business as discontinued operations.
For the purpose of governing certain ongoing relationships between GCG
and GenTek after the Spinoff and to provide mechanisms for an orderly
transition, GCG and GenTek have entered into various agreements. Management
believes that the agreements are comparable to those which would have been
reached in arm's-length negotiations with unaffiliated parties.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities at the
date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates.
The consolidated financial statements include the accounts of the
Company and of all wholly owned subsidiaries. Intercompany balances and
transactions are eliminated in consolidation.
All highly liquid instruments purchased with a maturity of three months
or less are considered to be cash equivalents.
Inventories are valued at the lower of cost or market, using the
last-in, first-out ("LIFO") method for certain domestic production inventories
and the first-in, first-out ("FIFO") or average-cost method for all other
inventories. Production inventory costs include material, labor and factory
overhead.
Property, plant and equipment are carried at cost and are depreciated
principally using the straight-line method. Estimated lives range from five to
35 years for buildings and leasehold improvements and one to 20 years for
machinery and equipment.
-24-
<PAGE>
GENTEK INC.
NOTES TO THE CONSOLIDATED STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS)
The Company evaluates the recovery of long-lived assets not held for
sale by measuring the carrying value of these assets against the estimated
undiscounted future cash flows associated with them. At the time such
evaluations indicate that the future cash flows are not sufficient to recover
the carrying value of such assets, the carrying values are adjusted to their
fair values, which have been determined on a discounted cash flow basis. During
1998, based on these evaluations, the Company recorded an $11,600 impairment
charge, which is included in cost of sales, primarily related to two of its
manufacturing facilities in its Performance products Segment.
Goodwill, which represents the excess of purchase price over fair value
of net assets acquired, is amortized on a straight line basis over a period
which ranges from 25 to 35 years. The Company assesses the recoverability of
this intangible asset by determining whether the amortization of the goodwill
balance over its remaining life can be recovered through undiscounted future
operating cash flows of the acquired operation. As of December 31, 1998 and
1999, goodwill is reflected net of accumulated amortization of $2,671 and
$12,001, respectively.
Accruals for environmental liabilities are recorded based on current
interpretations of environmental laws and regulations when it is probable that a
liability has been incurred and the amount of such a liability can be reasonably
estimated.
The Company does not hold or issue financial instruments for trading
purposes. Amounts to be paid or received under interest swap agreements are
recognized as increases or reductions in interest expense in the periods to
which they relate.
Accumulated other comprehensive income (loss) is comprised solely of
foreign currency translation adjustments.
In June 1998, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 133 "Accounting for Derivative Instruments
and Hedging Activities" ("FAS 133"). FAS 133 requires that all derivative
instruments be measured at fair value and recognized in the balance sheet as
either assets or liabilities. The Company is required to adopt FAS 133 for its
fiscal year beginning January 1, 2001. The Company does not expect that the
adoption of FAS 133 will have a material effect on the Company's consolidated
financial position, results of operations or cash flows.
Certain prior-period amounts have been reclassified to conform with the
current presentation.
NOTE 3 - DISCONTINUED OPERATIONS
Discontinued operations represent the Industrial Chemicals Business of
GCG (see Note 1). An allocation of certain assets, liabilities and expenses has
been made related to discontinued operations. In the opinion of management,
expenses have been allocated to the discontinued operations in a reasonable and
consistent basis using management's estimate of services provided to the
discontinued business by GCG. General corporate overhead expenses have not been
allocated to discontinued operations. However, such allocations are not
necessarily indicative of the level of expenses which might have been incurred
had the Industrial Chemicals Business been operating as a stand-alone entity
during the periods presented or expected to be incurred after the spinoff.
-25-
<PAGE>
GENTEK INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS)
The assets and liabilities of the Industrial Chemicals Business are
classified on the balance sheet as "Net assets of discontinued operations" and
consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31, 1998
-----------------
<S> <C>
ASSETS
Current assets:
Cash and cash equivalents............................................ $ 1,127
Receivables, net..................................................... 58,601
Inventories ........................................................ 25,508
Deferred income taxes................................................ 4,392
Other current assets................................................. 1,659
-------------
Total current assets............................................ 91,287
Property, plant and equipment........................................... 141,808
Other assets............................................................ 15,619
-------------
Total assets from discontinued operations....................... $ 248,714
-----------
LIABILITIES
Current liabilities:
Accounts payable.................................................... $ 24,298
Accrued liabilities................................................. 27,134
-------------
Total current liabilities...................................... 51,432
Other liabilities...................................................... 78,561
Minority interest...................................................... 43,429
-------------
Total liabilities from discontinued operations................. 173,422
-------------
Net assets from discontinued operations................................ $ 75,292
===========
</TABLE>
The results from operations of the Industrial Chemicals Business are
reflected in the Statements of Operations as "Income from discontinued
operations" and are summarized as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------------------------
1997 1998 1999
----------- ----------- -----------
<S> <C> <C> <C>
Net revenues.................................................. $ 289,700 $ 261,469 $ 81,197
Cost of sales................................................. 204,769 202,338 68,846
Selling, general and administrative expense................... 15,365 16,634 5,071
------------ ------------ -----------
Operating profit ............................................ 69,566 42,497 7,280
Interest expense ............................................ 12,747 11,747 3,521
Interest income ............................................ 1,029 930 384
Other (income) expense, net................................... 470 971 (313)
------------ ------------ -----------
Income before minority interest and income taxes.............. 57,378 30,709 4,456
Minority interest 24,253 16,666 2,932
------------ ------------ -----------
Income before income taxes.................................... 33,125 14,043 1,524
Income tax provision.......................................... 10,084 3,744 518
------------ ------------ -----------
Net income ............................................ $ 23,041 $ 10,299 $ 1,006
=========== ========== ==========
</TABLE>
NOTE 4 - CAPITAL STOCK
The Company's authorized capital stock consists of 100,000,000 shares
of Common Stock, par value $.01 per share, of which 11,013,323 and 16,857,959
were outstanding at December 31, 1998 and 1999, respectively, and 40,000,000
shares of Class B Common Stock, par value $.01 per share, which has ten votes
per share, is subject to significant restrictions on transfer and is convertible
at any time into
-26-
<PAGE>
GENTEK INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS)
Common Stock on a share-for-share basis, of which 9,758,421 and 3,958,421 shares
were outstanding at December 31, 1998 and 1999, respectively. The Common Stock
and Class B Common Stock are substantially identical, except for the disparity
in voting power, restriction on transfer and conversion provisions.
Prior to the Spinoff, a stockholder converted 5.8 million shares of GCG
Class B Common Stock into an identical number of shares of GCG Common Stock. On
the Spinoff Date, GCG issued shares of Common Stock and Class B Stock of GenTek
and distributed them to the holders of GCG's stock on a one-for-one basis.
Accordingly, as of the Spinoff Date, the equity accounts have been reclassified
to reflect the formation of GenTek and the issuance of its stock by recording
the par value of the stock issued and reclassifying all other equity to paid in
capital. The distribution of net liabilities of the Industrial Chemicals
Business has been recorded as a capital contribution of $51,273 to the Company.
The Company's Preferred Stock, par value $.01 per share, consists of
10,000,000 authorized shares, none of which were outstanding at December 31,
1998 and 1999.
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.
NOTE 5 - EARNINGS PER SHARE
The computation of basic earnings per share is based on the weighted
average number of common shares and contingently issuable shares outstanding
during the period. The computation of diluted earnings per share assumes the
foregoing and, in addition, the exercise of all stock options and restricted
units, using the treasury stock method.
The components of the denominator for basic earnings per common share
and diluted earnings per common share are reconciled as follows:
<TABLE>
<CAPTION>
YEARS ENDED
DECEMBER 31,
--------------------------------------------
1997 1998 1999
------------ ------------ -------------
<S> <C> <C> <C>
Basic earnings per common share:
Weighted average common shares outstanding........... 21,424,401 21,048,240 20,952,915
------------ ------------ ------------
Diluted earnings per common share:
Weighted average common shares outstanding........... 21,424,401 21,048,240 20,952,915
Options and Restricted Units......................... 1,078,241 807,404 454,102
------------ ------------ ------------
Total........................................... 22,502,642 21,855,644 21,407,017
============ ============ ============
</TABLE>
Options to purchase 398,500 and 1,653,800 shares of common stock were
outstanding during 1998 and 1999, respectively, but 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 December 31, 1999.
-27-
<PAGE>
GENTEK INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS)
NOTE 6 - ACQUISITIONS
On July 1, 1997, the Company acquired for $30,130 all of the
outstanding stock of Peridot Holdings, Inc., a manufacturer and supplier of
sulfuric acid and water treatment chemicals. On February 6, 1998, the Company
acquired for $6,999 all of the outstanding stock of Sandco Automotive Ltd.
("Sandco"), a manufacturer of engine parts for the North American automobile
industry and its aftermarket. On April 1, 1998, the Company acquired for $83,936
all of the outstanding stock of Reheis Inc. ("Reheis"), a leading producer and
supplier of the active chemical ingredients in antiperspirants and
over-the-counter antacids, as well as a supplier of pharmaceutical intermediates
and other products. On February 23, 1999, the Company acquired for $58,020
through a cash tender offer, Defiance Inc. ("Defiance"), a manufacturer of
specialty antifriction bearings for the transportation industry and a provider
of vehicle testing services, tooling design and preproduction dies and
components primarily for the automotive industry. On April 6, 1999, the Company
acquired for approximately $220,000 Noma Industries Limited ("Noma"), a leading
North American producer of insulated wire and wire-related products for the
automotive, appliance and electronic industries. On August 20, 1999, the Company
acquired for approximately $222,000, including approximately $63,000 in assumed
debt, Berlin-based Krone AG ("Krone") from Jenoptik AG. Krone is a leading
global supplier of connector and distribution technology for telecommunications
and data networks. In addition, during the third quarter the Company made two
small acquisitions (Structural Kinematics, a leading provider of testing and
engineering services to the automotive, truck and agricultural equipment
industries, and the business of Pacific Pac International Inc. ("Pacific Pac"),
a supplier of ultrahigh-purity solvents to the electronics industry). Funding
for these transactions was provided by existing cash and borrowings under the
Company's existing debt and credit facilities. The acquisitions are accounted
for under the purchase method, and accordingly, the net assets and results of
operations are included in the financial statements from the date of their
respective acquisitions. The allocation of purchase price is based on valuation
information available to the Company which is subject to change as such
information is finalized. Goodwill is being amortized on a straight-line basis
over a period which ranges from 25 to 35 years.
The following pro forma information has been prepared for comparative
purposes and is not necessarily indicative of what would have occurred had the
acquisitions occurred on such date or of results which may occur in the future.
Had the acquisitions occurred as of January 1, 1998 and 1999, net sales would
have been $1,135,000 and $1,236,000, income before extraordinary items would
have been $36,851 ($1.69 per share) and $35,896 ($1.68 per share) and net income
would have been $33,190 ($1.52 per share) and $30,957 ($1.45 per share) for the
years ended December 31, 1998 and 1999, respectively.
NOTE 7 - INCOME TAXES
Income from continuing operations before income taxes is as follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------------------
1997 1998 1999
---------- ---------- ----------
<S> <C> <C> <C>
United States.................................. $ 58,314 $ 34,150 $ 43,944
Foreign ...................................... 1,221 3,163 27,047
---------- ---------- ----------
Total..................................... $ 59,535 $ 37,313 $ 70,991
========== ========== ==========
</TABLE>
-28-
<PAGE>
GENTEK INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS)
The components of the income tax provision are as follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------------------
1997 1998 1999
---------- ---------- ------------
<S> <C> <C> <C>
United States:
Current............................... $ 24,669 $ (3,532) $ 23,128
Deferred.............................. (3,120) (3,776) (5,223)
Foreign:
Current............................... 589 911 11,911
Deferred.............................. (97) (18) 960
State:
Current............................... 4,890 3,470 4,133
Deferred.............................. (670) (811) (746)
---------- ---------- ----------
Total.............................. $ 26,261 $ (3,756) $ 34,163
========== ========== ==========
</TABLE>
A summary of the components of deferred tax assets and liabilities is
as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------
1998 1999
-------------- -----------
<S> <C> <C>
Net operating loss carry forwards........................ $ -- $ 44,117
Postretirement benefits.................................. 19,507 20,563
Nondeductible accruals................................... 43,830 60,139
Other.................................................... 3,372 7,103
---------- ----------
Deferred tax assets............................... 66,709 131,922
---------- ----------
Property, plant and equipment............................ 32,977 56,536
Pensions................................................. 2,007 449
Inventory................................................ 3,437 2,822
Other.................................................... 2,965 889
---------- ----------
Deferred tax liabilities.......................... 41,386 60,696
---------- ----------
Net deferred tax assets.................................. $ 25,323 $ 71,226
========== ==========
</TABLE>
The difference between the Company's effective income tax rate and the
United States statutory rate is reconciled below:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------------------
1997 1998 1999
-------- ---------- ---------
<S> <C> <C> <C>
U.S. federal statutory rate...................... 35.0% 35.0% 35.0%
State income taxes, net of federal benefit....... 4.5 4.5 3.1
Tax effect of foreign operations................. 4.1 (5.8) 7.9
Reversal of provision for disputed items......... -- (44.1) --
Other............................................ .5 .3 2.1
----- ----- ----
Total................................... 44.1% (10.1)% 48.1%
===== ===== ====
</TABLE>
In connection with the Spinoff, GenTek entered into a tax sharing
agreement with GCG which requires GenTek to indemnify and hold harmless GCG for
consolidated tax liabilities attributable to periods before the Spinoff Date.
The IRS examinations of the Company's federal income tax returns for
1990 and 1991 resulted in the issuance of a deficiency notice during 1995. The
Company filed an administrative appeal with the IRS in 1995 contesting the items
denoted in the deficiency notice. During 1998 the Company entered
-29-
<PAGE>
GENTEK INC.
NOTES TO THE CONSOLIDATED STATEMENTS--(CONTINUED)
(DOLLARS IN THOUSANDS)
into a settlement agreement with the IRS settling all items denoted in the
original deficiency notice. The settlement agreement binds the IRS for all years
subsequent to 1989 on the items denoted in the original deficiency notice. In
1998, the Company recorded an income tax benefit of $19,527 in connection with
the reversal of amounts previously accrued in connection with the deficiency
notice settlement agreement.
NOTE 8 - PENSION PLANS AND OTHER POSTRETIREMENT BENEFITS
The Company maintains several defined benefit pension plans covering
certain employees. A participating employee's annual postretirement pension
benefit is determined by the employee's credited service and, in most plans,
final average annual earnings with the Company. Vesting requirements are from
two to five years. The Company's funding policy is to annually contribute the
statutorily required minimum amount as actuarially determined. The Company also
maintains several plans providing postretirement benefits other than pensions
covering certain hourly and salaried employees. The Company funds these benefits
on a pay-as-you-go basis. The long-term portion of accrued postretirement
benefit cost related to continuing operations of $48,766 and $52,913 at December
31, 1998 and 1999, respectively, is included in other liabilities on the balance
sheet.
Following the Spinoff, the Industrial Chemicals Business and the GenTek
Business assumed responsibility for pension and other postretirement benefits
for retirees whose last work assignment was with their respective business and
the active employees of each of their respective businesses. Separate defined
benefit plans have been established for both companies, with assets included in
trusts under qualified pension plans being divided between the trusts. Each
domestic plan received the legally required funding as specified under the
Employee Retirement Income Security Act of 1974 and foreign plans received
funding as specified under the applicable statutory requirements.
GenTek's net periodic benefit cost for pension and other postretirement
benefits disclosed below includes amounts related to the Industrial Chemicals
Business. Periodic benefit cost of $5,380, $5,400 and $1,948 for 1997, 1998 and
1999, respectively, has been allocated to the Industrial Chemicals Business and
is included in "Discontinued Operations" in the Statement of Operations.
<TABLE>
<CAPTION>
OTHER POSTRETIREMENT
PENSION BENEFITS BENEFITS
YEARS ENDED DECEMBER 31, YEARS ENDED DECEMBER 31,
-------------------------------------- --------------------------------------
1997 1998 1999 1997 1998 1999
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
UNITED STATES:
Components of Net Periodic
Benefit Cost
Service Cost .................... $ 5,217 $ 5,645 $ 4,942 $ 1,575 $ 1,568 $ 1,237
Interest Cost ................... 13,873 14,935 12,489 3,896 4,046 3,251
Expected Return on Plan Assets... (13,466) (15,156) (14,013) -- -- --
Amortization of Net
Prior Service Cost .......... 843 910 379 (1,604) (1,604) (1,046)
(Gain)/Loss ................. 46 10 16 (587) (628) (384)
-------- -------- -------- -------- -------- --------
Net Periodic Benefit Cost ....... $ 6,513 $ 6,344 $ 3,813 $ 3,280 $ 3,382 $ 3,058
======== ======== ======== ======== ======== ========
</TABLE>
-30-
<PAGE>
GENTEK INC.
NOTES TO THE CONSOLIDATED STATEMENTS--(CONTINUED)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
OTHER POSTRETIREMENT
PENSION BENEFITS BENEFITS
DECEMBER 31, DECEMBER 31,
-------------------------- -------------------------
1998 1999 1998 1999
----------- ----------- ---------- ---------
<S> <C> <C> <C> <C>
Change in Benefit Obligation
Benefit Obligation at Prior Measurement Date $ 203,495 $ 236,901 $ 57,522 $ 59,199
Service Cost ............................... 5,533 4,942 1,568 1,237
Interest Cost .............................. 14,856 12,489 4,046 3,251
Actuarial (Gain)/Loss ...................... 22,332 (19,882) (948) (4,363)
Benefits Paid .............................. (10,648) (10,242) (2,989) (2,593)
Spinoff .................................... -- (73,075) -- (15,278)
Business Combinations ...................... 1,333 5,053 -- --
--------- --------- --------- ---------
Benefit Obligation at Measurement Date ..... $ 236,901 $ 156,186 $ 59,199 $ 41,453
========= ========= ========= =========
</TABLE>
<TABLE>
<CAPTION>
OTHER POSTRETIREMENT
PENSION BENEFITS BENEFITS
DECEMBER 31, DECEMBER 31,
--------------------------- -------------------------
1998 1999 1998 1999
------------ ----------- ---------- ---------
<S> <C> <C> <C> <C>
Change in Plan Assets
Fair Value of Assets at Prior Measurement Date ......... $ 193,301 $ 203,988 $ -- $ --
Actual Return on Plan Assets ........................... 17,124 29,472 -- --
Employer Contributions ................................. 3,065 2,115 2,989 2,593
Benefits Paid .......................................... (10,649) (10,242) (2,989) (2,593)
Spinoff ................................................ -- (68,733) -- --
Business Combinations .................................. 1,147 5,403 -- --
--------- --------- --------- ---------
Fair Value of Assets at Measurement Date ............... $ 203,988 $ 162,003 $ -- $ --
========= ========= ========= =========
</TABLE>
<TABLE>
<CAPTION>
OTHER POSTRETIREMENT
PENSION BENEFITS BENEFITS
DECEMBER 31, DECEMBER 31,
------------------------ -----------------------
1998 1999 1998 1999
--------- -------- --------- ---------
<S> <C> <C> <C> <C>
Reconciliation of Funded Status
Funded Status ................... $ (32,913) $ 5,819 $(59,199) $(41,453)
Unrecognized Net:
Transition Obligation....... 13 -- -- --
Prior Service Cost ......... 6,178 820 (9,500) (3,604)
(Gain)/Loss ................ (3,540) (26,887) (8,629) (9,140)
---------- -------- -------- --------
Net Amount Recognized ........... $ (30,262) $(20,248) $(77,328) $(54,197)
========== ======== ======== ========
</TABLE>
The assumptions used in accounting for the plans were:
<TABLE>
<CAPTION>
1997 1998 1999
------ ------- ------
<S> <C> <C> <C>
Discount rate ........................................................ 7 1/2% 6 3/4% 7 1/2%
Long-term rate of return on assets.................................... 9% 9% 9%
Average rate of increase in employee compensation..................... 5% 5% 5%
</TABLE>
The assumption used in accounting for the medical plans in 1999 and
beyond was a 7 1/2 percent health care cost trend rate. A one percent increase
in the health care trend rate would increase the accumulated postretirement
benefit obligation by $3,042 at year-end 1999 and the net periodic cost by $224
for the year. A one percent decrease in the health care trend rate would
decrease the accumulated postretirement benefit obligation by $3,282 at year-end
1999 and the net periodic cost by $241 for the year.
-31-
<PAGE>
GENTEK INC.
NOTES TO THE CONSOLIDATED STATEMENTS--(CONTINUED)
(DOLLARS IN THOUSANDS)
The assumption used in accounting for the plans in 1998 was an 8
percent health care cost trend rate (decreasing to 6 percent in the year 2001
and beyond).
The dates used to measure plan assets and liabilities were October 31,
1998 and 1999 for all plans. Pension plan assets are invested primarily in
stocks, bonds, short-term securities and cash equivalents.
<TABLE>
<CAPTION>
OTHER POSTRETIREMENT
PENSION BENEFITS BENEFITS
YEARS ENDED DECEMBER 31, YEARS ENDED DECEMBER 31,
-------------------------------- --------------------------------
1997 1998 1999 1997 1998 1999
-------- ---------- --------- -------- --------- ----------
<S> <C> <C> <C> <C> <C> <C>
FOREIGN:
Components of Net Periodic Benefit Cost
Service Cost ....................... $ 1,352 $ 1,463 $ 903 $ 302 $ 332 $ 118
Interest Cost ....................... 3,868 3,789 2,410 1,032 1,014 345
Expected Return on Plan Assets....... (4,877) (4,881) (2,064) -- -- --
Amortization of Net:
Prior Service Cost................. 90 84 32 -- -- --
(Gain)/Loss ....................... 432 458 157 -- -- --
-------- --------- --------- -------- --------- ---------
Net Periodic Benefit Cost............ $ 865 $ 913 $ 1,438 $ 1,334 $ 1,346 $ 463
======== ========= ========= ======== ========= =========
</TABLE>
<TABLE>
<CAPTION>
OTHER POSTRETIREMENT
PENSION BENEFITS BENEFITS
DECEMBER 31, DECEMBER 31,
------------------------ ------------------------
1998 1999 1998 1999
----------- ---------- ----------- --------
<S> <C> <C> <C> <C>
Change in Benefit Obligation
Benefit Obligation at Prior Measurement Date........... $ 55,493 $ 59,605 $ 14,631 $ 13,690
Service Cost ....................................... 1,457 903 330 118
Employee Contributions................................. -- 23 -- --
Interest Cost ....................................... 3,773 2,410 1,010 345
Actuarial (Gain)/Loss.................................. 5,823 (1,525) (934) 256
Foreign Currency Translation........................... (3,701) (701) (977) 238
Benefits Paid ....................................... (3,240) (2,504) (370) (143)
Spinoff................................................ -- (55,305) -- (13,641)
Business Combinations.................................. -- 44,392 -- --
--------- ----------- --------- -----------
Benefit Obligation at Measurement Date................. $ 59,605 $ 47,298 $ 13,690 $ 863
========= =========== ========= ===========
</TABLE>
<TABLE>
<CAPTION>
OTHER POSTRETIREMENT
PENSION BENEFITS BENEFITS
DECEMBER 31, DECEMBER 31,
------------------------ --------------------------
1998 1999 1998 1999
----------- ---------- ----------- -----------
<S> <C> <C> <C> <C>
Change in Plan Assets
Fair Value of Assets at Prior Measurement Date.......... $ 66,181 $ 62,805 $ -- $ --
Actual Return on Plan Assets............................ 2,633 4,811 -- --
Employer Contributions.................................. 1,643 1,044 370 143
Employee Contributions.................................. -- 23 -- --
Foreign Currency Translation............................ (4,412) 1,449 -- --
Benefits Paid ........................................ (3,240) (2,504) (370) (143)
Spinoff................................................ -- (62,568) -- --
Business Combinations.................................. -- 2,132 -- --
--------- ----------- ----------- ----------
Fair Value of Assets at Measurement Date................ $ 62,805 $ 7,192 $ -- $ --
========= =========== ========== ==========
</TABLE>
-32-
<PAGE>
GENTEK INC.
NOTES TO THE CONSOLIDATED STATEMENTS--(CONTINUED)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
OTHER POSTRETIREMENT
PENSION BENEFITS BENEFITS
DECEMBER 31, DECEMBER 31,
------------------------ ---------------------------
1998 1999 1998 1999
----------- ---------- ----------- ------------
<S> <C> <C> <C> <C>
Reconciliation of Funded Status
Funded Status ........................................ $ 3,201 $ (40,106) $ (13,691) $ (843)
Unrecognized Net:
Prior Service Cost.................................... 695 44 -- --
(Gain)/Loss ........................................ 13,560 1,104 316 (27)
--------- ---------- ----------- ----------
Net Amount Recognized................................... $ 17,456 $ (38,958) $ (13,375) $ (870)
========= ========== ========== ==========
</TABLE>
The assumptions used in accounting for the plans were:
<TABLE>
<CAPTION>
PENSION PLANS
1997 1998 1999
------ ------ -----
<S> <C> <C> <C>
Estimated discount rate......................................... 7 1/2% 6 3/4% 7 1/2%
Estimated long-term rate of return on assets.................... 9% 9% 9%
Average rate of increase in employee compensation............... 5 1/4% 5 1/4% 5 1/4%
</TABLE>
The assumption used in accounting for the medical plans in 1999 was an
8.4 percent health care cost trend rate (decreasing to 6 percent in the year
2004 and beyond). A one percent increase in the health care trend rate would
increase the accumulated postretirement benefit obligation by $116 at year-end
1999 and the net periodic cost by $15 for the year. A one percent decrease in
the health care trend rate would decrease the accumulated postretirement benefit
obligation by $142 at year-end 1999 and the net periodic cost by $11 for the
year.
The assumption used in accounting for the plans in 1998 was an 8.4
percent health care cost trend rate (decreasing to 6 percent in the year 2003
and beyond).
The dates used to measure plan assets and liabilities were October 31,
1998 and 1999 for all plans. Plan assets are invested primarily in stocks,
bonds, short-term securities and cash equivalents.
NOTE 9 - COMMITMENTS AND CONTINGENCIES
Future minimum rental payments for operating leases (primarily for
transportation equipment, offices and warehouses) having initial or remaining
noncancellable lease terms in excess of one year as of December 31, 1999 are as
follows:
<TABLE>
<CAPTION>
YEARS ENDING
DECEMBER 31,
------------
<S> <C>
2000 ...................................................... $ 13,013
2001 ...................................................... 10,638
2002 ...................................................... 9,642
2003 ...................................................... 8,910
2004 ...................................................... 8,076
thereafter................................................... 2,738
---------
$ 53,017
=========
</TABLE>
Rental expense for the years ended December 31, 1997, 1998 and 1999 was
$4,621, $5,632, and $19,229, respectively.
-33-
<PAGE>
GENTEK INC.
NOTES TO THE CONSOLIDATED STATEMENTS--(CONTINUED)
(DOLLARS IN THOUSANDS)
ENVIRONMENTAL MATTERS
Accruals for environmental liabilities are recorded based on current
interpretations of applicable environmental laws and regulations when it is
probable that a liability has been incurred and the amount of such liability can
be reasonably estimated. Estimates are established based upon information
available to management to date, the nature and extent of the environmental
liability, the Company's experience with similar activities undertaken,
estimates obtained from outside consultants and the legal and regulatory
framework in the jurisdiction in which the liability arose. The potential costs
related to environmental matters and their estimated impact on future operations
are difficult to predict due to the uncertainties regarding the extent of any
required remediation, the complexity and interpretation of applicable laws and
regulations, possible modification of existing laws and regulations or the
adoption of new laws or regulations in the future, and the numerous alternative
remediation methods and their related varying costs. The material components of
the Company's environmental accruals include potential costs, as applicable, for
investigation, monitoring, remediation and ongoing maintenance activities at any
affected site. Accrued liabilities for environmental matters were $25,016 and
$29,296 at December 31, 1998 and 1999, respectively. These amounts do not
include estimated third-party recoveries nor have they been discounted.
The Company is involved in claims, litigation, administrative
proceedings and investigations and remediation relative to environmental
matters. Although the amount of any ultimate liability which could arise with
respect to these matters cannot be accurately predicted, it is the opinion of
management, based upon currently available information and the accruals
established, that any such liability will have no material adverse effect on the
Company's financial condition, results of operations or cash flows.
NOTE 10 - 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 a quarterly
fee of $1,099 and $1,195 in 1997 and 1998, respectively. In connection with the
Spinoff, Latona agreed to provide its services separately to GenTek and GCG.
GenTek pays Latona, for periods subsequent to the Spinoff, a quarterly fee of
$1,125, to be adjusted after 1999 for increases in U.S. CPI. In addition, if
Latona provides advisory services to GenTek in connection with any acquisition,
business combination or other strategic transaction, GenTek pays Latona
Associates additional fees comparable to fees received by investment banking
firms for such services. During 1998, the Company paid Latona $500 in connection
with acquisitions. During 1999, GenTek was charged fees of $3,600 in the
aggregate in connection with the acquisitions of Defiance, Noma and Krone.
GenTek's agreement with Latona expires on December 31, 2004.
TRANSITION SUPPORT AGREEMENT
After the Spinoff, GenTek provides GCG with certain administrative
services pursuant to the Transition Support Agreement. For the twelve months
ended December 31, 1999, GenTek charged GCG $2,474 with respect to this
agreement.
-34-
<PAGE>
GENTEK INC.
NOTES TO THE CONSOLIDATED STATEMENTS--(CONTINUED)
(DOLLARS IN THOUSANDS)
OTHER TRANSACTIONS
GCG supplies soda ash and calcium chloride to GenTek. For the twelve
months ended December 31, 1997, 1998 and 1999, purchases from GCG amounted to
$5,240, $5,336, and $14,696, respectively.
NOTE 11 - ADDITIONAL FINANCIAL INFORMATION
The following are summaries of selected balance sheet items:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------
1998 1999
----------- ---------
<S> <C> <C>
Receivables
Trade................................................... $ 62,810 $ 211,717
Other................................................... 1,536 1,079
Allowance for doubtful accounts......................... (3,726) (7,288)
----------- -----------
$ 60,620 $ 205,508
=========== ===========
Inventories
Raw materials $ 11,395 $ 51,652
Work in process......................................... 6,049 18,472
Finished products....................................... 15,706 45,004
Supplies and containers................................. 4,469 4,209
----------- -----------
$ 37,619 $ 119,337
=========== ===========
</TABLE>
Inventories valued at LIFO amounted to $17,450 and $25,905 at December
31, 1998 and 1999, respectively, which were below estimated replacement cost by
$730 and $116, respectively. The impact of LIFO liquidations in 1997, 1998 and
1999 was not significant.
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------
1998 1999
----------- ---------
<S> <C> <C>
Property ,Plant and Equipment
Land and improvements................................... $ 24,954 $ 33,273
Machinery and equipment................................. 210,503 354,494
Buildings and leasehold improvements.................... 33,473 70,934
Construction in progress................................ 19,178 28,121
---------- -----------
288,108 486,822
---------- -----------
Less accumulated depreciation and amortization.......... (91,582) (127,463)
----------- -----------
$ 196,526 $ 359,359
========== ===========
Accrued Liabilities
Wages, salaries and benefits............................ $ 17,616 $ 32,763
Interest................................................ -- 12,564
Income taxes 8,960 10,364
Taxes, other than income taxes.......................... 3,256 7,569
Other................................................... 31,093 91,773
---------- -----------
$ 60,925 $ 155,033
========== ===========
</TABLE>
-35-
<PAGE>
GENTEK INC.
NOTES TO THE CONSOLIDATED STATEMENTS--(CONTINUED)
(DOLLARS IN THOUSANDS)
NOTE 12 - LONG-TERM DEBT
Long-term debt consists of the following:
<TABLE>
<CAPTION>
DECEMBER DECEMBER
MATURITIES 1998 1999
--------------------------- -----------
<S> <C> <C> <C>
Bank Term Loans - floating rates....................... 1999-2007 $ 299,000 $ 249,250
Revolving Credit Facility - floating rate.............. 2005 -- 220,000
Senior Subordinated Notes - 11%........................ 2009 -- 200,000
Canada Senior Notes - 9.09%............................ 1999 48,269 --
Other debt - floating rate............................. 10,262 54,865
----------- -----------
Total Debt.................................... 357,531 724,115
Less: Current Portion........................ 50,802 18,758
----------- -----------
Net Long-Term Debt............................ $ 306,729 $ 705,357
=========== ===========
</TABLE>
Aggregate maturities of long-term debt for each of the years in the
five-year period ending December 31, 2004 are $18,758, $22,476, $11,215, $32,804
and $41,500, respectively.
On April 30, 1999, the Company entered into a new credit facility with
a syndicate of banks and other financial institutions consisting of $100,000
Term Loan ("Tranche A") maturing on April 30, 2005, a $150,000 Term Loan
("Tranche B") maturing on April 30, 2007 and a $300,000 Revolving Credit
Facility maturing on April 30, 2005. The $300,000 Revolving Credit Facility
includes letters of credit up to $50,000. The unused letter of credit balance
was $39,835 at December 31, 1999. The rate in effect at December 31, 1999 was
7.8 percent. The term loans and revolving credit facility bear interest at a
rate equal to a spread over a reference rate. The rate in effect at December 31,
1999 for Tranche Loan A and Tranche Loan B was 7.7 percent and 8.7 percent,
respectively. Tranche A is payable in consecutive quarterly installments
commencing September 30, 2000. Tranche B is payable in consecutive quarterly
installments which commenced on July 31, 1999. The facility is secured by a
first priority security interest in all of the capital stock of the Company's
domestic subsidiaries and 65 percent of the capital stock of the Company's
foreign subsidiaries. The proceeds were used to repay outstanding borrowings of
GCG under its existing credit facilities prior to the Spinoff, resulting in an
extraordinary loss from the extinguishment of debt of $4,939, net of a tax
benefit of $3,231.
On August 9, 1999, the Company issued $200,000 of 11% Senior
Subordinated Notes due 2009. Net proceeds of the offering of $193,000 were used
to repay a portion of the borrowings outstanding under the Company's Revolving
Credit Facility. On November 17, 1999, the Company filed a Registration
Statement on Form S-4 with the Securities and Exchange Commission to exchange
$200,000 11% Unregistered Senior Subordinated Notes due 2009 for $200,000 11%
Registered Senior Subordinated Notes due 2009. The terms of the new notes issued
were identical to the terms of the old notes except that the new notes are
registered under the Securities Act of 1933 and therefore will not contain
restrictions on transfer and will not contain provisions relating to additional
interest. The exchange was completed on January 19, 2000.
Commitment fees paid for the Company's credit facilities were $274,
$446, and $231 for 1997, 1998 and 1999, respectively.
-36-
<PAGE>
GENTEK INC.
NOTES TO THE CONSOLIDATED STATEMENTS--(CONTINUED)
(DOLLARS IN THOUSANDS)
NOTE 13 - STOCK OPTION PLAN AND RESTRICTED UNIT PLAN
GCG's 1996 Stock Option and Incentive Plan (the "Plan") provides for
the issuance of up to 2,200,000 shares of Common Stock. The Plan authorizes the
granting of incentive and nonqualified stock options, stock appreciation rights,
restricted and unrestricted stock and performance share awards to executives,
directors and other key persons. Any incentive stock options granted under the
Plan must have an exercise price at least equal to the market value of the
shares on the day the option is granted and a maximum term of 10 years.
GCG's Restricted Unit Plan provides for the issuance of 850,000 units,
with each unit representing one share of Common Stock to be issued to the
participant upon the occurrence of certain conditions ("vesting") unless the
participant elects to defer receipt thereof. All awards are subject to a
five-year vesting schedule under which a portion of each participant's award
vests annually over a five-year period. Dividend equivalents on outstanding
units accrue to the benefit of the participants and are paid at the time
dividends are paid to Common Stockholders. These units were awarded during the
second quarter of 1996 in replacement of the rights earned by participants
beginning in 1989 under the Phantom Equity Plan and certain other prior equity
programs of the Company which were then terminated. Compensation expense
recorded was $1,302, $1,309 and $760 for 1997, 1998 and 1999, respectively.
Effective as of the Spinoff Date, holders of outstanding GCG
equity-related awards received similar awards with respect to GenTek stock. The
awards were adjusted to preserve the total economic value of the awards that
existed prior to the Spinoff Date. In connection with the Spinoff, GenTek
established the GenTek Inc. Long-Term Incentive Plan pursuant to which stock
options, stock appreciation rights and other equity-related incentive awards may
be granted covering the issuance of up to 1,600,000 shares of Common Stock.
Information with respect to all stock options is summarized below:
<TABLE>
<CAPTION>
1997 1998 1999
--------------------------- ------------------------------ ---------------------------
WEIGHTED WEIGHTED WEIGHTED
AVERAGE AVERAGE AVERAGE
SHARES EXERCISE PRICE SHARES EXERCISE PRICE SHARES EXERCISE PRICE
--------------------------- ------------------------------ ---------------------------
<S> <C> <C> <C> <C> <C> <C>
Outstanding at
beginning of year........ 1,271,000 $ 13.22 1,341,200 $ 13.50 1,679,500 $ 14.51
Options granted........... 100,000 17.00 398,500 17.77 310,000 9.96
Options exercised......... -- -- 25,200 13.23 -- --
Options cancelled......... 29,800 13.53 35,000 13.66 55,700 18.84
--------- --------- ---------
Outstanding at end
of year ................. 1,341,200 $ 13.50 1,679,500 $ 14.51 1,933,800 $ 13.66
========= ========= =========
Exercisable at end
of year ................. 110,100 $ 13.48 218,300 $ 14.04 430,650 $ 14.74
</TABLE>
-37-
<PAGE>
GENTEK INC.
NOTES TO THE CONSOLIDATED STATEMENTS--(CONTINUED)
(DOLLARS IN THOUSANDS)
The following table summarizes information about stock options
outstanding at December 31, 1999:
<TABLE>
<CAPTION>
OUTSTANDING
---------------------------------------------
WEIGHTED AVERAGE EXERCISABLE
REMAINING ------------------------------
RANGE OF NUMBER OF CONTRACTUAL WEIGHTED AVERAGE NUMBER OF WEIGHTED AVERAGE
EXERCISE PRICES OPTIONS LIFE EXERCISE PRICE OPTIONS EXERCISE PRICE
- --------------- ----------------------------------------------- ------------------------------
<S> <C> <C> <C> <C> <C>
$ 7.81 - $13.06 340,000 9.3 $ 10.10 15,000 $ 12.53
$13.07 - $15.64 1,214,000 6.7 $ 13.25 294,000 $ 13.52
$15.65 - $18.73 379,800 8.1 $ 18.14 121,650 $ 17.98
--------- -------
1,933,800 430,650
========= =======
</TABLE>
The Company applies APB 25 in accounting for its stock plans. The
following table reflects pro forma net income and earnings per share had the
Company elected to adopt the fair value approach of SFAS 123:
<TABLE>
<CAPTION>
1997 1998 1999
--------- ---------- -------
<S> <C> <C> <C>
Net income.................................. $ 55,140 $ 45,857 $ 31,764
Earnings per share - basic.................. 2.57 2.18 1.52
Earnings per share - diluted................ 2.45 2.10 1.48
</TABLE>
For purposes of this calculation, the fair value of each option grant
was estimated on the grant date using the Black-Sholes option-pricing model with
the following assumptions:
<TABLE>
<CAPTION>
1997 1998 1999
--------- ---------- -------
<S> <C> <C> <C>
Dividend yield.............................. 0.7% 1.5% 1.5%
Expected volatility......................... 41% 42% 46%
Risk-free interest rate..................... 5.5% 4.6% 6.6%
Expected holding period (in years).......... 6 6 6
Weighted average fair value................. $8.41 $8.20 $6.42
</TABLE>
NOTE 14 - FINANCIAL INSTRUMENTS
SWAP AGREEMENTS
The Company does not enter into financial instruments for trading
purposes. The Company periodically enters into interest rate swap agreements to
effectively convert a portion of its floating-rate to fixed-rate debt in order
to reduce the Company's exposure to movements in interest rates. Such agreements
involve the exchange of fixed and floating interest rate payments over the life
of the agreement without the exchange of the underlying principal amounts.
Accordingly, the impact of fluctuations in interest rates on these interest rate
swap agreements is fully offset by the opposite impact on the related debt. Swap
agreements are only entered into with strong creditworthy counterparties. The
swap agreements in effect were as follows:
<TABLE>
<CAPTION>
INTEREST RATE
NOTIONAL -------------------------
DECEMBER 31, AMOUNT MATURITIES RECEIVE (1) PAY (2)
------------ ------ ---------- ----------- -------
<S> <C> <C> <C> <C>
1998.............. $ 100,000 1999-2006 5.6% 6.6%
1999.............. $ 80,000 2002-2006 6.2% 6.1%
</TABLE>
- ---------------------
(1) Three-month LIBOR.
(2) Represents the weighted average rate.
-38-
<PAGE>
GENTEK INC.
NOTES TO THE CONSOLIDATED STATEMENTS--(CONTINUED)
(DOLLARS IN THOUSANDS)
At December 31, 1998, the Company was also party to a currency and
interest rate swap, which partially hedged the Company's Canadian subsidiary's
9.09 percent Senior Notes. The agreement, that matured in 1999, provides for the
payment of C$48,400 at a fixed rate of 7.54 percent in exchange for the receipt
of US$35,000 at a fixed rate of 9.09 percent. Unrealized gains and losses on the
currency portion of the swap are recognized and offset the foreign exchange gain
or loss on the related debt in the consolidated statements of operations. Net
amounts paid or received on the interest portion of the swap are accrued as
adjustments to interest expense.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The estimated fair values of the Company's financial instruments are as
follows:
<TABLE>
<CAPTION>
DECEMBER 31, 1998 DECEMBER 31, 1999
------------------------ ---------------------
CARRYING FAIR CARRYING FAIR
AMOUNT VALUE AMOUNT VALUE
------ ----- ------ -----
<S> <C> <C> <C> <C>
Long-term debt............................... $ 357,531 $ 357,737 $ 724,115 $ 730,115
Unrealized gain on swap agreements........... $ -- $ 309 $ -- $ 2,857
</TABLE>
The fair values of cash and cash equivalents, receivables and payables
approximate their carrying values due to the short-term nature of the
instruments. The fair value of the Company's long-term debt was based on quoted
market prices for publicly traded notes and discounted cash flow analyses on its
nontraded debt. The fair value of the Company's interest rate swap agreements is
the estimated amount the Company would have to pay or receive to terminate the
swap agreements based upon quoted market prices as provided by financial
institutions which are counterparties to the swap agreements.
NOTE 15 - GEOGRAPHIC AND INDUSTRY SEGMENT INFORMATION
GenTek operates through three primary business segments;
telecommunications equipment, manufacturing and performance products. The
business segments were determined based on several factors including products
and services provided and markets served. Each segment is managed separately.
The telecommunications equipment segment manufactures connector technology for
telecommunications and data networks for two principal markets; public
telecommunications networks and premises (non-public) voice and data networks.
The segment is comprised of the businesses of Krone which were acquired by the
Company on August 20, 1999. The manufacturing segment provides a broad range of
engineered components and services to the automotive, appliance and electronic
and industrial markets. The performance products segment manufactures a broad
range of products and services to four principal markets: pharmaceutical and
personal care, environmental services, technology and chemical processing. The
accounting policies of the segments are the same as those described in the
summary of significant accounting policies.
-39-
<PAGE>
GENTEK INC.
NOTES TO THE CONSOLIDATED STATEMENTS--(CONTINUED)
(DOLLARS IN THOUSANDS)
Industry segment information for continuing operations is summarized as
follows:
<TABLE>
<CAPTION>
TOTAL REVENUES OPERATING PROFIT
-------------------------------------- ------------------------------------
1997 1998 1999 1997 1998 1999
----------- ----------- ----------- ----------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
Performance Products......................... $ 260,351 $ 315,787 $ 343,275 $ 48,292 $ 25,711 $ 40,250
Manufacturing ........................... 108,165 128,132 450,125 23,531 30,649 67,831
Telecommunications Equipment................. -- -- 138,599 -- -- 16,632
----------- ----------- ---------- ---------- -----------------------
Total Segment......................... 368,516 443,919 931,999 71,823 56,360 124,713
Eliminations and other corporate
expenses................................... -- -- -- (4,297) (4,639 (12,307)
----------- ----------- ---------- ---------- ----------------------
Consolidated................................. $ 368,516 $ 443,919 $ 931,999 $ 67,526 $ 51,721 $ 112,406
=========== =========== ========== ---------- ---------- ----------
Interest expense ........................... 8,855 14,624 41,503
Other income, net ........................... (864) (216) (88)
---------- --------------- ------
Consolidated income from continuing
operations before income taxes and
extraordinary item......................... $ 59,535 $ 37,313 $ 70,991
========== ========== ==========
</TABLE>
<TABLE>
<CAPTION>
CAPITAL EXPENDITURES DEPRECIATION AND AMORTIZATION
-------------------------------------- ------------------------------------
1997 1998 1999 1997 1998 1999
----------- ----------- ----------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Performance Products......................... $ 23,563 $ 24,260 $ 21,475 $ 13,688 $ 19,763 $ 22,485
Manufacturing................................ 2,640 9,477 12,458 2,608 3,302 19,088
Telecommunications Equipment................. -- -- 4,575 -- -- 9,531
----------- ----------- ----------- ---------- ----------- ----------
Consolidated................................. $ 26,203 $ 33,737 $ 38,508 $ 16,296 $ 23,065 $ 51,104
=========== =========== =========== ========== ========== ==========
</TABLE>
<TABLE>
<CAPTION>
IDENTIFIABLE ASSETS
----------------------------
DECEMBER 31,
----------------------------
1998 1999
----------- ------------
<S> <C> <C>
Performance Products..................................................................... $ 381,202 $ 360,597
Manufacturing ....................................................................... 78,267 467,886
Telecommunications Equipment............................................................. -- 368,495
Corporate................................................................................ 2,057 13,386
----------- ------------
Consolidated............................................................................. $ 461,526 $ 1,210,364
=========== ============
</TABLE>
Geographic area information for continuing operations is summarized as
follows:
<TABLE>
<CAPTION>
EXTERNAL REVENUES (1) LONG-LIVED ASSETS (2)
------------------------------------- -------------------------
1997 1998 1999 1998 1999
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
United States.......... $ 337,659 $ 394,307 $ 682,189 $ 262,291 $ 380,782
Foreign................ 30,857 49,612 249,810 12,575 393,273
----------- ----------- ----------- ----------- -----------
Consolidated........... $ 368,516 $ 443,919 $ 931,999 $ 274,866 $ 774,055
=========== =========== =========== =========== ===========
</TABLE>
- ----------------
(1) Revenues are attributed to geographic areas based on the locations of
customers.
(2) Represents all non-current assets except deferred tax assets and financial
instruments.
-40-
<PAGE>
GENTEK INC.
NOTES TO THE CONSOLIDATED STATEMENTS--(CONTINUED)
(DOLLARS IN THOUSANDS)
NOTE 16 - 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
YEAR ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
NON-
SUBSIDIARY GUARANTOR
PARENT GUARANTORS SUBSIDIARIES ELIMINATIONS CONSOLIDATED
------ ---------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Net revenues......................................... $ -- $ 352,806 $ 15,710 $ -- $ 368,516
Cost of sales........................................ -- 240,210 11,702 -- 251,912
Selling, general and administrative expense.......... 2,562 45,335 1,181 -- 49,078
---------- ----------- ----------- ----------- -----------
Operating profit................................. (2,562) 67,261 2,827 -- 67,526
Interest expense ................................... -- 8,855 -- -- 8,855
Other (income) expense, net.......................... 33 (901) 4 -- (864)
---------- ----------- ----------- ----------- -----------
Income from continuing operations
before income taxes ............................ (2,595) 59,307 2,823 -- 59,535
Income tax provision................................. (1,111) 26,329 1,043 -- 26,261
Equity in income from subsidiaries................... 57,799 24,821 -- (82,620) --
---------- ----------- ----------- ---------- -----------
Income from continuing operations ............... 56,315 57,799 1,780 (82,620) 33,274
Income from discontinued operations
(net of tax)....................................... -- -- 23,041 -- 23,041
---------- ----------- ----------- ---------- -----------
Net income ................................... $ 56,315 $ 57,799 $ 24,821 $ (82,620) $ 56,315
========== =========== =========== =========== ===========
</TABLE>
-41-
<PAGE>
GENTEK INC.
NOTES TO THE CONSOLIDATED STATEMENTS--(CONTINUED)
(DOLLARS IN THOUSANDS)
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
NON-
SUBSIDIARY GUARANTOR
PARENT GUARANTORS SUBSIDIARIES ELIMINATIONS CONSOLIDATED
------ ---------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Net revenues......................................... $ -- $ 410,778 $ 33,141 $ -- $ 443,919
Cost of sales........................................ 301,347 25,279 -- 326,626
Selling, general and administrative expense.......... 2,758 59,621 3,193 -- 65,572
---------- ----------- ----------- ----------- -----------
Operating profit................................. (2,758) 49,810 4,669 -- 51,721
Interest expense ................................... 455 13,790 379 -- 14,624
Other (income) expense, net.......................... 30 (208) (38) -- (216)
---------- ----------- ---------- ----------- -----------
Income from continuing operations
before income taxes and extraordinary item...... (3,243) 36,228 4,328 -- 37,313
Income tax provision................................. (1,469) (3,599) 1,312 -- (3,756)
Equity in income from subsidiaries................... 49,481 13,315 -- (62,796) --
---------- ----------- ----------- ---------- ----------
Income from continuing operations
before extraordinary item...................... 47,707 53,142 3,016 (62,796) 41,069
Income from discontinued operations
(net of tax)........................................ -- -- 10,299 -- 10,299
---------- ----------- ----------- ---------- -----------
Income before extraordinary item................. 47,707 53,142 13,315 (62,796) 51,368
Extraordinary item (net of tax)...................... -- 3,661 -- -- 3,661
---------- ----------- ----------- ---------- -----------
Net income....................................... $ 47,707 $ 49,481 $ 13,315 $ (62,796) $ 47,707
========== =========== =========== =========== ===========
</TABLE>
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1999
<TABLE>
<CAPTION>
NON-
SUBSIDIARY GUARANTOR
PARENT GUARANTORS SUBSIDIARIES ELIMINATIONS CONSOLIDATED
------ ---------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Net revenues......................................... $ -- $ 624,455 $ 329,565 $ 22,021 $ 931,999
Cost of sales........................................ -- 473,728 235,881 (22,021) 687,588
Selling, general and administrative expense.......... 8,139 75,720 48,146 -- 132,005
---------- ----------- ----------- ----------- -----------
Operating profit................................. (8,139) 75,007 45,538 -- 112,406
Interest expense ................................... 32,276 18,745 14,412 (23,930) 41,503
Other (income) expense, net.......................... (31,744) 5,030 2,696 23,930 (88)
---------- ----------- ----------- ---------- -----------
Income from continuing operations
before income taxes and extraordinary item...... (8,671) 51,232 28,430 -- 70,991
Income tax provision................................. (3,463) 24,092 13,534 -- 34,163
Equity in income from subsidiaries................... 43,042 15,902 -- (58,944) --
---------- ----------- ----------- ---------- -----------
Income from continuing operations before
extraordinary item............................. 37,834 43,042 14,896 (58,944) 36,828
Income from discontinued operations
(net of tax)........................................ -- -- 1,006 -- 1,006
---------- ----------- ----------- ---------- -----------
Income before extraordinary item................. 37,834 43,042 15,902 (58,944) 37,834
Extraordinary item (net of tax)...................... 4,939 -- -- -- 4,939
---------- ----------- ----------- ---------- -----------
Net income....................................... $ 32,895 $ 43,042 $ 15,902 $ (58,944) $ 32,895
========== =========== =========== ========== ===========
</TABLE>
-42-
<PAGE>
GENTEK INC.
NOTES TO THE CONSOLIDATED STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS)
CONDENSED CONSOLIDATING BALANCE SHEET
DECEMBER 31, 1998
<TABLE>
<CAPTION>
NON-
SUBSIDIARY GUARANTOR
PARENT GUARANTORS SUBSIDIARIES ELIMINATIONS CONSOLIDATED
------ ---------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Current assets:
Cash and cash equivalents.................... $ 3,147 $ 57,159 $ 1,004 $ -- $ 61,310
Receivables, net............................. 1,900 53,009 5,711 -- 60,620
Inventories.................................. -- 33,731 3,888 -- 37,619
Other current assets......................... -- 11,864 456 -- 12,320
---------- ----------- ----------- ---------- -----------
Total current assets......................... 5,047 155,763 11,059 -- 171,869
Property, plant and equipment, net............... -- 185,784 10,742 -- 196,526
Goodwill, net of amortization.................... -- 69,533 1,911 -- 71,444
Intercompany receivable (payable)................ 231,395 (231,282) (113) -- --
Investment in subsidiaries....................... 9,410 84,830 -- (94,240) --
Other assets..................................... 2,172 19,480 35 -- 21,687
Net assets of discontinued businesses............ -- -- 75,292 -- 75,292
---------- ----------- ----------- ---------- -----------
Total assets ............................... $ 248,024 $ 284,108 $ 98,926 $ (94,240) $ 536,818
========== =========== =========== ========== ===========
Current liabilities:
Accounts payable............................. $ 2,550 $ 35,816 $ 4,447 $ -- $ 42,813
Accrued liabilities.......................... 677 59,075 1,173 -- 60,925
Current portion of long-term debt............ 2,000 48,270 532 -- 50,802
---------- ----------- ----------- ---------- -----------
Total current liabilities.................... 5,227 143,161 6,152 -- 154,540
Long-term debt ............................... 297,000 3,876 5,853 -- 306,729
Other liabilities ............................... 493 127,661 2,091 -- 130,245
---------- ----------- ----------- ---------- -----------
Total liabilities............................ 302,720 274,698 14,096 -- 591,514
Equity (deficit)................................. (54,696) 9,410 84,830 (94,240) (54,696)
---------- ----------- ----------- ---------- -----------
Total liabilities and equity (deficit) ...... $ 248,024 $ 284,108 $ 98,926 $ (94,240) $ 536,818
========== =========== =========== ========== ===========
</TABLE>
-43-
<PAGE>
GENTEK INC.
NOTES TO THE CONSOLIDATED STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS)
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) 211,612
-------- -------- -------- --------- ----------
Total liabilities and equity................. $548,359 $284,271 $490,943 $(113,209) $1,210,364
======== ======== ======== ========= ==========
</TABLE>
-44-
<PAGE>
GENTEK INC.
NOTES TO THE CONSOLIDATED STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS)
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
YEAR ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
NON-
SUBSIDIARY GUARANTOR
PARENT GUARANTORS SUBSIDIARIES ELIMINATIONS CONSOLIDATED
------ ---------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Net cash provided by (used in) operating
activities........................................ $ (4,048) $ 57,579 $ 2,648 $ -- $ 56,179
--------- ---------- -------- ------- ---------
Cash flows from investing activities:
Acquisition of businesses net of cash
acquired...................................... -- (30,130) -- -- (30,130)
Cash provided by discontinued operations....... -- -- 331 -- 331
Other.......................................... -- (26,105) (35) -- (26,140)
--------- ---------- -------- ------- ---------
Net cash provided by (used in) investing
activities........................................ -- (56,235) 296 -- (55,939)
--------- ---------- -------- ------- ---------
Cash flows from financing activities:
Intercompany cash transfers.................... 36,648 (34,547) (2,101) -- --
Other.......................................... (32,551) 3,464 -- -- (29,087)
--------- ---------- -------- ------- ---------
Net cash provided by (used in) financing
activities........................................ 4,097 (31,083) (2,101) -- (29,087)
--------- ---------- -------- ------- ---------
Effect of exchange rates on cash................... -- -- (843) -- (843)
--------- ---------- -------- ------- ---------
Increase (decrease) in cash and cash
equivalents....................................... 49 (29,739) -- -- (29,690)
Cash and cash equivalents at beginning
of year........................................... 2 50,089 -- -- 50,091
--------- ---------- -------- ------- ---------
Cash and cash equivalents at end of year........... $ 51 $ 20,350 $ -- $ -- $ 20,401
========= ========== ======== ======= =========
</TABLE>
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
YEAR ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
NON-
SUBSIDIARY GUARANTOR
PARENT GUARANTORS SUBSIDIARIES ELIMINATIONS CONSOLIDATED
------ ---------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Net cash provided by (used in) operating
activities........................................ $ (4,166) $ 56,803 $ 4,631 $ -- $ 57,268
--------- ---------- -------- ------- ---------
Cash flows from investing activities:
Acquisition of businesses net of cash
acquired...................................... -- (90,935) -- -- (90,935)
Cash provided by discontinued operations....... -- -- 20,512 -- 20,512
Other.......................................... -- (32,170) (800) -- (32,970)
--------- ---------- -------- ------- ---------
Net cash provided by (used in) investing
activities........................................ -- (123,105) 19,712 -- (103,393)
--------- ---------- -------- ------- ---------
Cash flows from financing activities:
Intercompany cash transfers.................... (280,040) 309,942 (29,902) -- --
Other.......................................... 287,302 (206,831) 6,380 -- 86,851
--------- ---------- -------- ------- ---------
Net cash provided by (used in) financing
activities........................................ 7,262 103,111 (23,522) -- 86,851
--------- ---------- -------- ------- ---------
Effect of exchange rates on cash................... -- -- 183 -- 183
--------- ---------- -------- ------- ---------
Increase (decrease) in cash and cash
equivalents....................................... 3,096 36,809 1,004 -- 40,909
Cash and cash equivalents at beginning
of year........................................... 51 20,350 -- -- 20,401
--------- ---------- -------- ------- ---------
Cash and cash equivalents at end of year........... $ 3,147 $ 57,159 $ 1,004 $ -- $ 61,310
========= ========== ======== ======= =========
</TABLE>
-45-
<PAGE>
GENTEK INC.
NOTES TO THE CONSOLIDATED STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS)
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
YEAR ENDED DECEMBER 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...................................... $ (3,773) $ 36,109 $ 39,180 $ -- $ 71,516
--------- ---------- -------- ------- ---------
Cash flows from investing activities:
Acquisition of businesses net of cash
acquired.................................... -- (444,782) -- -- (444,782)
Cash provided by discontinued operations..... -- -- 127,571 -- 127,571
Other........................................ -- (29,054) (7,973) -- (37,027)
--------- ---------- -------- ------- ---------
Net cash provided by (used in) investing
activities...................................... -- (473,836) 119,598 -- (354,238)
--------- ---------- -------- ------- ---------
Cash flows from financing activities:
Intercompany cash transfers.................. (215,513) 327,153 (111,640) -- --
Other........................................ 216,190 59,465 (33,358) -- 242,297
--------- ---------- -------- ------- ---------
Net cash provided by (used in) financing
activities...................................... 677 386,618 (144,998) -- 242,297
--------- ---------- -------- ------- ---------
Effect of exchange rates on cash................. -- -- (323) -- (323)
--------- ---------- -------- ------- ---------
Increase (decrease) in cash and cash
equivalents..................................... (3,096) (51,109) 13,457 -- (40,748)
Cash and cash equivalents at beginning
of year......................................... 3,147 57,159 1,004 -- 61,310
--------- ---------- -------- ------- ---------
Cash and cash equivalents at end of year......... $ 51 $ 6,050 $ 14,461 $ -- $ 20,562
========= ========== ======== ======= =========
</TABLE>
NOTE 17- UNAUDITED QUARTERLY INFORMATION
<TABLE>
<CAPTION>
1998
---------------------------------------------------------------
FIRST SECOND THIRD FOURTH YEAR
----- ------ ----- ------ -----
<S> <C> <C> <C> <C> <C>
Net revenues.................................... $ 100,536 $ 118,355 $112,562 $112,466 $443,919
Income from continuing operations
before extraordinary item...................... 7,751 10,497 8,725 14,096 41,069
Income (loss) from discontinued operations...... 2,110 4,189 3,041 959 10,299
Income before extraordinary item................ 9,861 14,686 11,766 15,055 51,368
Net income............................... 9,861 11,025(1) 11,766 15,055(2) 47,707
========= ========== ======== ======== ========
Earnings per common share - basic:
Income from continuing operations........... .37 .49 .42 .67 1.95
Income from discontinued operations......... .10 .20 .14 .05 .49
Extraordinary item - loss on
extinguishment of debt (net of tax)............ -- .17 -- -- .17
--------- ---------- -------- -------- --------
Net income .............................. .47 .52 .56 .72 2.27
========= ========== ======== ======== ========
Earnings per common share - assuming dilution:
Income from continuing operations........... .35 .48 .40 .65 1.88
Income from discontinued operations......... .10 .19 .14 .04 .47
Extraordinary item - loss from
extinguishment of debt (net of tax)............ -- .17 -- -- .17
--------- ---------- -------- -------- --------
Net income .............................. $ .45 $ .50 $ .54 $ .69 $ 2.18
========= ========== ======== ======== ========
</TABLE>
-46-
<PAGE>
GENTEK INC.
NOTES TO THE CONSOLIDATED STATEMENTS - (CONCLUDED)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
1999
---------------------------------------------------------------
FIRST SECOND THIRD FOURTH YEAR
----- ------ ----- ------ -----
<S> <C> <C> <C> <C> <C>
Net revenues.................................... $127,763 $217,726 $263,834 $322,676 $931,999
Income from continuing operations
before extraordinary item...................... 8,210 8,837 10,720 9,061 36,828
Income (loss) from discontinued operations...... 1,195 (189) -- -- 1,006
Income before extraordinary item................ 9,405 8,648 10,720 9,061 37,834
Net income...................................... 9,405 3,709(3) 10,720 9,061 32,895
======== ======== ======== ======== ========
Earnings per common share - basic:
Income from continuing operations........... .39 .42 .51 .43 1.76
Income (loss) from discontinued
operations .............................. .06 (.01) -- -- .05
Extraordinary item - loss on
extinguishment of debt (net of tax)............ -- .24 -- -- .24
-------- -------- -------- -------- --------
Net income.................................. $ .45 $ .17 $ .51 $ .43 $ 1.57
======== ======== ======== ======== ========
Earnings per common share - assuming dilution:
Income from continuing operations........... .38 .41 .50 .42 1.72
Income (loss) from discontinued
operations................................. .06 (.01) -- -- .05
Extraordinary item - loss from
extinguishment of debt (net of tax)............ -- .23 -- -- .23
-------- -------- -------- -------- --------
Net income.................................. $ .44 $ .17 $ .50 $ .42 $ 1.54
======== ======== ======== ======== ========
</TABLE>
Note: Basic earnings per common share calculations are based on the weighted
average number of shares outstanding during each of the quarters.
Diluted earnings per common share assume the foregoing and, in
addition, the exercise of all stock options and restricted units. The
sum of the four quarters may not equal the full year computation due to
rounding.
(1) In the second quarter of 1998, the Company recorded an extraordinary
loss of $3,661 ($.17 per share) related to the early retirement of
certain outstanding indebtedness.
(2) During the fourth quarter of 1998, the Company recorded a one-time
charge of $12,885 ($7,789 after tax, or $.36 per share) primarily due
to an asset impairment writedown for two of the Company's manufacturing
facilities and incremental accruals of $11,300 ($6,831 after tax, or
$.31 per share) principally related to litigation and environmental
spending. The Company also recorded a non-recurring gain of $19,500
($.89 per share) related to an income tax settlement.
(3) During the second quarter of 1999, the Company recorded an
extraordinary loss of $4,939 ($0.23 per share) related to the early
retirement of certain outstanding indebtedness and a one-time charge of
$6,200 ($3,748 after tax, or $.17 per share).
-47-
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
-48-
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Directors. For information relating to the Company's Directors, see the
information under the caption "Nomination and Election of Directors" in the
Company's definitive 1999 Proxy Statement (the "Proxy Statement"), which is
hereby incorporated by reference.
Executive Officers. For information relating to the Company's executive
officers, see the information contained under the caption "Executive Officers
and Key Employees" in Part I of this report.
Compliance with Section 16(a) of the Exchange Act. For information
relating to the compliance of the directors and officers of the Company, as well
as any holder of ten percent or more of any registered class of the equity
securities of the Company with Section 16(a) of the Exchange Act, see the
information under the caption "Section 16(a) Beneficial Ownership Reporting
Compliance" in the Company's Proxy Statement, which is hereby incorporated by
reference.
ITEM 11. EXECUTIVE COMPENSATION
Executive Compensation. For information relating to the compensation of
the Company's executives, see the information under the caption "Compensation of
Directors and Executive Officers" in the Company's Proxy Statement, which hereby
incorporated by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Security Ownership of Certain Beneficial Owners. For information
relating to the beneficial ownership of more than five percent of the Company's
Common Stock and Class B Common Stock, see the information under the caption
"Security Ownership of Certain Beneficial Owners and Management" in the
Company's Proxy Statement, which is hereby incorporated by reference.
Security Ownership of Management. For information relating to the
beneficial ownership of the Company's Common Stock and Class B Common Stock by
Management, see the information under the caption "Management Stockholders" in
the Company's Proxy Statement, which is hereby incorporated by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Certain Relationships and Related Transactions. For information
relating to certain relationships and related transactions of the Company, see
the information under the caption "Certain Relationships and Transactions" in
the Company's Proxy Statement, which is hereby incorporated by reference.
-49-
<PAGE>
PART IV
ITEM 14. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.
LIST OF EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- -----------
<S> <C>
3.1 -- Amended and Restated Certificate of Incorporation of GenTek Inc. Incorporated by reference to the relevant
exhibit to the Amendment No. 2 to Registration Statement on Form 10 of GenTek Inc. (File No. 001-14789),
filed with the Securities and Exchange Commission on April 8, 1999 (the "1999 GenTek Form 10")
3.2 -- Amended and Restated By-Laws of GenTek Inc. Incorporated by reference to the relevant exhibit to the 1999
GenTek Form 10.
10.01 -- GenTek Inc. Restricted Unit Plan for Non-Employee Directors. Incorporated by reference to the relevant
exhibit to the 1999 GenTek Form 10.
10.02 -- GenTek Inc. Retirement Plan for Non-Employee Directors. Incorporated by reference to the relevant
exhibit to the 1999 GenTek Form 10.
10.03 -- GenTek Inc. Performance Plan. Incorporated by reference to the relevant exhibit to the 1999 GenTek
Form 10.
10.04 -- GenTek Inc. Long-Term Incentive Plan. Incorporated by reference to the relevant exhibit to the 1999
GenTek Form 10.
10.05 -- Employee Benefits Agreement among GenTek Inc., The General Chemical Group Inc., General Chemical
Industrial Products Inc. and General Chemical Corporation. Incorporated by reference to the
relevant exhibit to the 1999 GenTek Form 10.
10.06 -- Tax Sharing Agreement between GenTek Inc. and The General Chemical Group Inc. Incorporated
by reference to the relevant exhibit to the 1999 GenTek Form 10.
10.07 -- Intellectual Property Agreement among GenTek Inc., General Chemical Corporation, The General
Chemical Group Inc. and General Chemical Industrial Products Inc. Incorporated by reference
to the relevant exhibit to the 1999 GenTek Form 10.
10.08 -- Management Agreement between GenTek Inc. and Latona Associates Inc. Incorporated by reference
to the relevant exhibit to the 1999 GenTek Form 10.
10.09 -- Registration Rights Agreement between Paul M. Montrone and the General Chemical Group Inc., as
assumed by GenTek Inc. with respect to Common Stock of GenTek Inc. Incorporated by reference
to the relevant exhibit to the 1999 GenTek Form 10.
10.10 -- Credit Agreement, dated as of April 30, 1999, among GenTek Inc., Noma Acquisition Corp., the
several Lenders from time to time parties thereto, The Chase Manhattan Bank, as Administrative
Agent, The Bank of Nova Scotia, as Syndication Agent, and Bankers Trust Company as Documentation
Agent. Incorporated by reference to the relevant exhibit to GenTek Inc.'s 10-Q for the three months
ended March 31, 1999 filed with the Securities and Exchange Commission on May 17, 1999 (the "GenTek
First Quarter 1999 10-Q").
10.11 -- Guarantee and Pledge Agreement, dated as of April 30, 1999, made by GenTek Inc. and certain of its
subsidiaries in favor of the Chase Manhattan Bank, as Administrative Agent. Incorporated by reference to
the relevant exhibit to the GenTek First Quarter 1999 10-Q.
10.12 -- Indenture, dated as of August 9, 1999, between the Company and U.S. National Trust Association, as Trustee.
Incorporated by reference to the relevant exhibit to GenTek Inc.'s 10-Q for the nine months ended September
30, 1999 filed with the Securities and Exchange Commission on November 15, 1999.
21.1 -- Subsidiaries of GenTek Inc. Incorporated by reference to the relevant exhibit to GenTek Inc.'s Amendment
No. 1 to Registration Statement on Form S-4 (File No. 333-91171) filed with the Securities and Exchange
Commission on December 2, 1999.
24.1 -- Powers of Attorney.
27 -- Financial Data Schedule
</TABLE>
-50-
<PAGE>
FINANCIAL STATEMENTS
See Item 8, beginning on page 18.
FINANCIAL STATEMENT SCHEDULES
See Index to Financial Statement Schedule on page 53.
REPORTS ON FORM 8-K
Form 8-K/A filed with the Securities and Exchange Commission on
November 3, 1999 with respect to the acquisition of Krone AG, which included the
financial statements for Krone AG for the two years ended December 31, 1998.
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.
-51-
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1934, the
Registrant had duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized, on the 7th day of March, 2000.
GENTEK INC.
By: /s/ Richard R. Russell
__________________________________________
NAME: RICHARD R. RUSSELL
TITLE: PRESIDENT AND CHIEF EXECUTIVE OFFICER
Pursuant to the requirements of this Securities Act of 1934, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- -----
<S> <C> <C>
PRINCIPAL EXECUTIVE OFFICER:
/s/ Richard R. Russell President and Chief Executive Officer March 7, 2000
_______________________________________
RICHARD R. RUSSELL
PRINCIPAL FINANCIAL AND ACCOUNTING
OFFICER:
/s/ Stewart A. Fisher Vice President and Chief Financial Officer March 7, 2000
_______________________________________
STEWART A. FISHER
DIRECTORS:
/s/ Paul M. Montrone Chairman and Director March 7, 2000
_______________________________________
PAUL M. MONTRONE
/s/ Paul M. Meister Vice Chairman and Director March 7, 2000
_______________________________________
PAUL M. MEISTER
/s/ Richard R. Russell Director March 7, 2000
_______________________________________
RICHARD R. RUSSELL
/s/ John W. Gildea Director March 7, 2000
_______________________________________
JOHN W. GILDEA
/s/ Scott M. Sperling Director March 7, 2000
_______________________________________
SCOTT M. SPERLING
/s/ Ira Stepanian Director March 7, 2000
_______________________________________
IRA STEPANIAN
/s/ Bruce Koepfgen Director March 7, 2000
_______________________________________
BRUCE KOEPFGEN
</TABLE>
-52-
<PAGE>
GENTEK INC.
INDEX TO FINANCIAL STATEMENT SCHEDULE
<TABLE>
<S> <C>
Schedule II -- Valuation and Qualifying Accounts .......................54
</TABLE>
Schedules required by Article 12 of Regulation S-X, other than those
listed above, are omitted because of the absence of the conditions under which
they are required or because the required information is included in the
consolidated financial statements or notes thereto.
-53-
<PAGE>
GENTEK INC.
VALUATION AND QUALIFYING ACCOUNTS
<TABLE>
<CAPTION>
BALANCE AT ADDITIONS
BEGINNING OF CHARGED DEDUCTIONS BALANCE AT
PERIOD TO INCOME FROM RESERVES OTHER* END OF PERIOD
------------ --------- ------------- -------- -------------
<S> <C> <C> <C> <C> <C>
Year ended December 31, 1997
Allowance for doubtful accounts.......... $ 3,419 $ 134 $ -- $ -- $ 3,553
Year ended December 31, 1998
Allowance for doubtful accounts.......... $ 3,553 $ 584 $ (411) $ -- $ 3,726
Year ended December 31, 1999
Allowance for doubtful accounts.......... $ 3,726 $ 2,974 $ (1,812) $ 2,400 $ 7,288
</TABLE>
* Primarily acquisitions
-54-
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT PAGE
NO. NUMBER
--- ------
<S> <C> <C>
3.1 -- Amended and Restated Certificate of Incorporation of
GenTek Inc. Incorporated by reference to the relevant exhibit
to Amendment No. 2 to the Registration Statement on Form 10
of GenTek Inc. (File No. 001-14789), filed with the
Securities and Exchange Commission on April 8, 1999 (the
"1999 GenTek Form 10").......................................
3.2 -- Amended and Restated By-Laws of GenTek Inc. Incorporated
by reference to the relevant exhibit to the 1999 GenTek
Form 10......................................................
10.01 -- GenTek Inc. Restricted Unit Plan for Non-Employee
Directors. Incorporated by reference to the relevant exhibit
to the 1999 GenTek Form 10...................................
10.02 -- GenTek Inc. Retirement Plan for Non-Employee Directors.
Incorporated by reference to the relevant exhibit to the 1999
GenTek Form 10...............................................
10.03 -- GenTek Inc. Performance Plan. Incorporated by reference to
the relevant exhibit to the 1999 GenTek Form 10..............
10.04 -- GenTek Inc. Long-Term Incentive Plan. Incorporated by
reference to the relevant exhibit to the 1999 GenTek Form 10.
10.05 -- Employee Benefits Agreement among GenTek Inc., The General
Chemical Group Inc., General Chemical Industrial Products
Inc. and General Chemical Corporation. Incorporated by
reference to the relevant exhibit to the 1999 GenTek Form
10...........................................................
10.06 -- Tax Sharing Agreement between GenTek Inc. and The General
Chemical Group Inc. Incorporated by reference to the relevant
exhibit to the 1999 GenTek Form 10...........................
10.07 -- Intellectual Property Agreement among General Chemical
Corporation, The General Chemical Group Inc., GenTek Inc. and
General Chemical Industrial Products Inc. Incorporated by
reference to the relevant exhibit to the 1999 GenTek Form
10...........................................................
10.08 -- Management Agreement between GenTek Inc. and Latona
Associates Inc. Incorporated by reference to the relevant
exhibit to the 1999 GenTek Form 10...........................
10.09 -- Registration Rights Agreement between Paul M. Montrone and
The General Chemical Group Inc., as assumed by GenTek Inc.
with respect to Common Stock of GenTek Inc. Incorporated by
reference to the relevant exhibit to the 1999 GenTek Form
10...........................................................
10.10 -- Credit Agreement, dated as of April 30, 1999, among GenTek
Inc., Noma Acquisition Corp., the several Lenders from time
to time parties thereto, The Chase Manhattan Bank, as
Administrative Agent, The Bank of Nova Scotia, as Syndication
Agent, and Bankers Trust Company as Documentation Agent.
Incorporated by reference to the relevant exhibit to GenTek
Inc.'s 10-Q for the three months ended March 31, 1999 filed
with the Securities and Exchange Commission on May 17, 1999
(the "GenTek First Quarter 1999 10-Q").......................
10.11 -- Guarantee and Pledge Agreement, dated as of April 30, 1999,
made by GenTek Inc. and certain of its subsidiaries in favor
of the Chase Manhattan Bank, as Administrative Agent.
Incorporated by reference to the relevant exhibit to the
GenTek First Quarter 1999 10-Q...............................
10.12 -- Indenture, dated as of August 9, 1999, between the Company
and U.S. National Trust Association, as Trustee. Incorporated
by reference to the relevant exhibit to GenTek Inc.'s 10-Q
for the nine months ended September 30, 1999 filed with the
Securities and Exchange Commission on November 15, 1999......
</TABLE>
-55-
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT PAGE
NO. NUMBER
--- ------
<S> <C> <C>
21.1 -- Subsidiaries of GenTek Inc. Incorporated by reference to
the relevant exhibit to GenTek Inc.'s Amendment No. 1 to its
Registration Statement on Form S-4 (File No. 333-91171) filed
with the Securities and Exchange Commission on December 2,
1999.........................................................
24.1 -- Powers of Attorney...........................................
27 -- Financial Data Schedule......................................
</TABLE>
-56-
STATEMENT OF DIFFERENCES
------------------------
The trademark symbol shall be expressed as ........................... 'TM'
The registered trademark symbol shall be expressed as ................ 'r'
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from Form
10-K for the period ended December 31, 1999 and is qualified in is
entirety by reference to such financial statements.
</LEGEND>
<CIK> 0001077552
<NAME> GENTEK INC.
<MULTIPLIER> 1,000
<S> <C>
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<PERIOD-TYPE> 12-MOS
<CASH> 20,562
<SECURITIES> 0
<RECEIVABLES> 212,796
<ALLOWANCES> 7,288
<INVENTORY> 119,337
<CURRENT-ASSETS> 386,410
<PP&E> 486,822
<DEPRECIATION> 127,463
<TOTAL-ASSETS> 1,210,364
<CURRENT-LIABILITIES> 271,826
<BONDS> 705,357
0
0
<COMMON> 209
<OTHER-SE> 21,360
<TOTAL-LIABILITY-AND-EQUITY> 1,210,364
<SALES> 931,999
<TOTAL-REVENUES> 931,999
<CGS> 687,588
<TOTAL-COSTS> 687,588
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 2,974
<INTEREST-EXPENSE> 41,503
<INCOME-PRETAX> 70,991
<INCOME-TAX> 34,163
<INCOME-CONTINUING> 36,828
<DISCONTINUED> 1,006
<EXTRAORDINARY> 4,939
<CHANGES> 0
<NET-INCOME> 32,895
<EPS-BASIC> 1.57
<EPS-DILUTED> 1.54
</TABLE>
