<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (D) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarter ended March 31, 1994
Commission file number 1-6450
GREAT LAKES CHEMICAL CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 95-1765035
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
ONE GREAT LAKES BOULEVARD
P. O. BOX 2200
WEST LAFAYETTE, INDIANA 47906
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code 317-497-6100
Not Applicable
Former name, former address and former fiscal year, if changed since last
report.
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X
No
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the close of the period covered by this report.
One Class - 71,344,518 Shares as of March 31, 1994
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Part 1 - Financial Statements
GREAT LAKES CHEMICAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
March 31 December 31
1994 1993
-------- -----------
(thousands of dollars)
Assets
<S> <C> <C>
Current Assets
Cash and cash equivalents $ 244,449 $ 179,734
Accounts receivable, less allowance
of $7,223 (1993 - $7,088) 427,507 383,129
Inventories
Finished products 210,621 190,867
Raw materials 49,762 54,333
Supplies 30,151 29,862
---------- ----------
Total inventories 290,534 275,062
Prepaid Expenses 13,908 18,994
---------- ----------
Total current assets 976,398 856,919
Plant and Equipment 846,444 830,784
Less allowance for depreciation (371,467) (362,774)
---------- ----------
Net plant and equipment 474,977 468,010
Excess of Investment over Net Assets of
Subsidiaries Acquired 350,021 341,079
Investments in and Advances to
Unconsolidated Affiliates 189,627 185,789
Other Assets 50,517 49,067
---------- ----------
$2,041,540 $1,900,864
---------- ----------
---------- ----------
</TABLE>
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GREAT LAKES CHEMICAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (CONTINUED)
<TABLE>
<CAPTION>
March 31 December 31
1994 1993
-------- -----------
(thousands of dollars)
Liabilities and Stockholders' Equity
<S> <C> <C>
Current Liabilities
Notes payable $ 15,902 $ 10,253
Accounts payable 148,061 136,957
Accrued expenses 87,746 92,612
Income taxes 129,619 109,746
Dividends payable 6,777 6,415
Current portion of long-term debt 12,010 11,757
---------- ----------
Total current liabilities 400,115 367,740
Long-Term Debt, less Current Portion 95,716 61,041
Other Non-Current Liabilities 125,702 123,618
Deferred Income Taxes 76,044 73,298
Minority Interest 20,647 18,604
Stockholders' Equity
Common stock, $1 par value, authorized
200,000,000 shares, issued
71,887,718 shares
(1993 - 71,817,996 shares) 71,888 71,818
Paid-in capital 108,237 107,268
Retained earnings 1,220,279 1,160,173
Cumulative translation adjustment (48,955) (54,563)
Treasury stock at cost 543,200 shares (28,133) (28,133)
--------- ---------
Total stockholders' equity 1,323,316 1,256,563
---------- ----------
$2,041,540 $1,900,864
---------- ----------
---------- ----------
</TABLE>
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GREAT LAKES CHEMICAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
Three Months Ended
March 31
-----------------
1994 1993
------- ------
(thousands of dollars
except per share data)
<S> <C> <C>
Revenues
Net sales $448,676 $430,176
Equity in earnings of
affiliates and other income 11,062 6,406
-------- --------
Total revenues 459,738 436,582
Costs and Expenses:
Cost of products sold 288,605 272,995
Selling, administrative and
research expenses 56,051 59,570
Interest and other expenses 10,417 7,295
-------- --------
Total costs and expenses 355,073 339,860
-------- --------
Income Before Taxes
and Minority Interest 104,665 96,722
Minority Interest in
Income of Subsidiaries 7,981 7,780
-------- --------
Income Before Taxes 96,684 88,942
Income Taxes (Note B) 29,800 24,700
-------- --------
Net Income $ 66,884 $ 64,242
-------- --------
-------- --------
Net Income per Share $0.940 $0.900
------ ------
------ ------
Dividends Declared per Share $0.095 $0.085
------ ------
------ ------
Average Shares Outstanding 71,308,272 71,427,379
</TABLE>
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GREAT LAKES CHEMICAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Three Months Ended
March 31
----------------------
1994 1993
--------- ----------
(thousands of dollars)
<S> <C> <C>
Operating Activities
Net Income $ 66,884 $ 64,242
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation and amortization 22,968 20,470
Unremitted earnings of affiliates (2,265) (513)
Changes in deferred items and other 2,271 (2,628)
--------- ----------
Cash provided by operations
excluding changes in working capital 89,858 81,571
Changes in working capital other than
debt, net of effects from business
combinations (32,503) (47,051)
--------- ----------
Net Cash Provided by Operating Activities 57,355 34,520
Investing Activities
Plant and equipment additions (24,169) (18,184)
Business combinations, net of cash
acquired (16,667) (50,547)
Other 12,907 4,344
--------- ----------
Net Cash Used in Investing Activities (27,929) (64,387)
Financing Activities
Net repayment and borrowings under
short-term credit lines 5,775 3,117
Proceeds from long-term borrowings 443 27,207
Net increase in commercial paper and
other long-term obligations 35,119 26,778
Cash dividends declared (6,777) (6,073)
Other liabilities 1,687 (3,416)
--------- ----------
Net Cash Provided by Financing Activities 36,247 47,613
Effect of Exchange Rate Changes on Cash
and Cash Equivalents (958) (1,011)
--------- ----------
Increase in Cash and Cash Equivalents 64,715 16,735
Cash and Cash Equivalents at
Beginning of Year 179,734 140,801
-------- --------
Cash and Cash Equivalents at End of
Period $244,449 $157,536
--------- ----------
--------- ----------
</TABLE>
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MANAGEMENT DISCUSSION AND ANALYSIS OF RESULTS
OF OPERATIONS AND FINANCIAL CONDITION
FOR THE THREE MONTHS ENDED MARCH 31, 1994
RESULTS OF OPERATIONS
Revenues for the 1994 first quarter amounted to $460 million, an increase of 5%
over the $437 million reported in 1993. Net income amounted to $67 million, or
$0.94 per share, a 4% increase over the $64 million, or $0.90 per share, in the
prior year quarter. Both revenues and earnings represent record results for
the reporting period.
First quarter sales of $449 million increased $19 million over the $430 million
in the 1993 period. Comparative sales by product group are as follows:
<TABLE>
<CAPTION>
First Quarter
---------------
1994 1993
------ ------
($-millions)
<S> <C> <C>
Performance Chemicals $165 $143
Water Treatment 91 84
Petroleum Additives 121 135
Specialized Services & Manufacturing 72 68
---- ----
$449 $430
---- ----
---- ----
</TABLE>
On an overall basis, the sales improvement resulted from net increases in
selling prices amounting to $15 million, and acquisitions concluded in the
middle of 1993 adding $20 million. Offsetting these positives were volume
declines of $4 million; lost sales on business dispositions, $8 million; and
currency impacts, $4 million.
Price improvement achieved in Octel's alkyl lead antiknock compound business
were partially offset by continuing price pressure on QO's furfural-based
products and some competitive activity in recreational water treatment
chemicals. The acquisition of AquaChem, a supplier of swimming pool and spa
chemicals to mass merchants, completed in May 1993 and Chemische Werke Lowi, a
German-based manufacturer of antioxidants and UV absorbers acquired in June
1993, added to the sales improvement. Volume improvements were achieved in all
of the Company's operating units except Octel.
Advancements of particular note were made by the Company's flame retardant
products where demand remained strong in the United States and the Pacific Rim.
The swimming pool and spa chemicals season is off to a fast start in the U.S.
while gains in Europe were held back by a lingering recession.
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Alkyl lead additive tonnage declined about 25% from the prior year quarter,
substantially more than the anticipated rate of attrition, due to container
shortages and shipping delays to customers in Russia and the Far East and the
temporary lack of hard currency for customers in Iran and Russia. Most of the
volume shortfall is expected to be made up over the balance of the year.
The negative currency effects are related principally to Chemol, the Company's
Hungarian trading company; relative to the dollar, the Forint decreased about
20% in value from a year ago.
Equity in earnings of affiliates and other income increased $4.7 million over
the prior year as a result of a turnaround at Huntsman Chemical Corporation and
some one-time gains, including that recognized on the sale of the Purex
swimming pool equipment business.
Gross profit margins at 35.7% were off 0.8 points from the 1993 first quarter.
The mix of sales shifted slightly away from the higher margin fuel additives,
and price and production gains were not sufficient to offset the overall
decrease in volume and higher costs, particularly for chlorine and energy used
in bromine production.
Selling, administrative and research expenses of $56 million declined $4
million from a year ago, reflecting the continued effectiveness of cost control
programs and the reorganization of certain European operations.
The Company's effective income tax rate was 30.8% for the quarter, 3.0 points
higher than a year ago, primarily due to the 1993 quarter benefiting from the
adoption of FAS No. 109, "Accounting for Income Taxes."
FINANCIAL CONDITION
Cash provided by operating activities amounted to $57 million, an increase of
$22 million over the year-ago period. Working capital, exclusive of cash and
debt, increased $33 million from year end, reflecting the seasonal effects of
the recreational water treatment business on inventories and accounts
receivable.
Plant and equipment additions were $24 million and in line with anticipated
capital spending in the $100 million range for the year.
Long-term debt and notes payable increased $41 million from year end due to
increased commercial paper borrowings. Commercial paper borrowings are used to
supplement seasonal working capital requirements and for interest rate
arbitrage opportunities.
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<PAGE> 8
A dividend of $0.095 per share was declared in the quarter and paid on May 3,
1994, for a total of $6.8 million.
OTHER MATTERS
The Company completed the acquisition of EniChem Synthesis S.P.A. (renamed
GLCI) on April 21, 1994, for approximately $90 million in cash. Headquartered
in Milan, Italy, the company is a leading manufacturer of antioxidants and UV
absorbers. Annual revenues should approach $90 million. The company operates
manufacturing facilities in Pedrengo and Ravenna, Italy, and a research and
development center in Bolgiano. The acquisition complements the Company's
existing polymer additives business by bringing an extensive line of new
products and technology. Also, the acquisition creates synergies and cost
reduction opportunities in supplying a worldwide customer base.
On May 10, 1994, the Company completed the acquisition of CPC Hydrachem, a
U.K.-based packager and distributor of pool and spa chemicals and equipment,
for approximately $3 million. CPC, with annual sales of approximately $7
million, provides a significant addition to the Company's share of the European
recreational water treatment market.
On May 5, 1994, the Board of Directors authorized management to purchase up to
an additional one million shares of the Company's outstanding stock. Combined
with a prior authorization, a total of approximately 1.5 million shares can be
repurchased.
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GREAT LAKES CHEMICAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE A - Basis of Presentation
The accompanying unaudited consolidated financial statements have been prepared
in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all the information and
footnotes necessary for a comprehensive presentation of financial position and
results of operations.
It is management's opinion, however, that all material adjustments (consisting
of normal recurring accruals) have been made which are necessary for a fair
financial statement presentation. The results for the interim period are not
necessarily indicative of the results to be expected for the year.
Effective January 1, 1994, the company adopted FAS No. 112 "Employers'
Accounting for Postemployment Benefits." Implementation of the standard
resulted in an after-tax charge of approximately $1 million.
For further information, refer to the consolidated financial statements and
footnotes included in the Company's annual report on Form 10-K for the year
ended December 31, 1993.
NOTE B - Income Taxes
The provision for income taxes at the effective tax rates reconciles with the
statutory U.S. Federal tax rate as follows:
<TABLE>
<CAPTION>
Three Months Ended
March 31
-------------------------
1994 1993
---- ----
<S> <C> <C>
Statutory U.S. Federal tax rate 35.0% 34.0%
Increase (decrease) in taxes resulting from:
FAS No. 109 --- (3.4)
Other (4.2) (2.8)
---- ----
30.8% 27.8%
---- ----
---- ----
</TABLE>
The company adopted FAS No. 109, "Accounting for Income Taxes" January 1, 1993.
The cumulative effect of the change was to decrease income taxes by $3 million
for the three months ended March 31, 1993.
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Part II. Other Financial Information
Item 6. Exhibits and Reports on Form 8-K
The company did not file, nor was it required to file, a Form 8-K because of a
change in independent auditors or because of any material unusual charges or
credits to income occurring during the quarter for which this report was filed.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Date May 11, 1994 By /s/ Robert T. Jeffares
--------------- -------------------------------------
Robert T. Jeffares, Senior Vice
President and Chief Financial Officer
Date May 11, 1994 By /s/ Robert J. Smith
--------------- -------------------------------------
Robert J. Smith, Controller
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