<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 September 30, 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 - 68,265,193 Shares as of September 30, 1994
<PAGE> 2
Part 1 - Financial Statements
GREAT LAKES CHEMICAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
September 30 December 31
1994 1993
------------ -----------
(thousands of dollars)
<S> <C> <C>
Assets
Current Assets
Cash and cash equivalents $ 169,651 $ 179,734
Accounts receivable, less allowance
of $8,652 (1993 - $7,088) 459,255 383,129
Inventories
Finished products 236,799 190,867
Raw materials 61,842 54,333
Supplies 30,639 29,862
---------- ----------
Total inventories 329,280 275,062
Prepaid Expenses 26,064 18,994
---------- ----------
Total current assets 984,250 856,919
Plant and Equipment 976,911 830,784
Less allowance for depreciation (425,613) (362,774)
---------- ----------
Net plant and equipment 551,298 468,010
Excess of Investment over Net Assets of
Subsidiaries Acquired 421,422 341,079
Investments in and Advances to
Unconsolidated Affiliates 174,814 185,789
Other Assets 50,897 49,067
---------- ----------
$2,182,681 $1,900,864
========== ==========
</TABLE>
1
<PAGE> 3
GREAT LAKES CHEMICAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (CONTINUED)
<TABLE>
<CAPTION>
September 30 December 31
1994 1993
------------ -----------
(thousands of dollars)
<S> <C> <C>
Liabilities and Stockholders' Equity
Current Liabilities
Notes payable $ 5,706 $ 10,253
Accounts payable 156,793 136,957
Accrued expenses 125,281 92,612
Income taxes 101,197 109,746
Dividends payable 6,828 6,415
Current portion of long-term debt 17,358 11,757
---------- ----------
Total current liabilities 413,163 367,740
Long-Term Debt, less Current Portion 246,441 61,041
Other Non-Current Liabilities 141,639 123,618
Deferred Income Taxes 80,249 73,298
Minority Interest 22,953 18,604
Stockholders' Equity
Common stock, $1 par value, authorized
200,000,000 shares, issued
71,980,493 shares
(1993 - 71,817,996 shares) 71,980 71,818
Paid-in capital 110,233 107,268
Retained earnings 1,340,493 1,160,173
Cumulative translation adjustment (39,852) (54,563)
Treasury stock at cost 3,715,300 shares
(1993 - 543,200 shares) (204,618) (28,133)
---------- -------
Total stockholders' equity 1,278,236 1,256,563
---------- ----------
$2,182,681 $1,900,864
========== ==========
</TABLE>
2
<PAGE> 4
GREAT LAKES CHEMICAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30 September 30
------------------------- ------------------------
1994 1993 1994 1993
---- ---- ---- ----
(In Thousands except Per Share Data)
<S> <C> <C> <C> <C>
Revenues
Net sales $ 525,216 $ 469,656 $1,499,785 $1,361,671
Equity in earnings
of affiliates and
other income 13,675 6,586 34,638 21,916
-------- -------- --------- ---------
538,891 476,242 1,534,423 1,383,587
-------- -------- --------- ---------
Costs and Expenses
Cost of products
sold 346,341 302,825 987,433 864,235
Selling, adminis-
trative and
research expenses 66,562 58,175 187,329 179,941
Interest and other
expenses 12,244 9,870 35,873 31,575
-------- -------- --------- ---------
425,147 370,870 1,210,635 1,075,751
-------- -------- --------- ---------
Income Before Taxes
and Minority
Interest 113,744 105,372 323,788 307,836
Minority Interest in
Income of
Subsidiaries 9,205 8,175 24,718 24,091
-------- -------- --------- ---------
Income Before Taxes 104,539 97,197 299,070 283,745
Income Taxes 32,200 28,700 92,100 80,900
-------- -------- --------- ---------
Net Income $ 72,339 $ 68,497 $ 206,970 $ 202,845
=========== ======== ========== ==========
Net Income per Share $ 1.05 $ 0.96 $ 2.95 $ 2.84
Average Shares
Outstanding 68,914 71,266 70,264 71,354
</TABLE>
3
<PAGE> 5
GREAT LAKES CHEMICAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Nine Months Ended
September 30
---------------------------
1994 1993
---- ----
(thousands of dollars)
<S> <C> <C>
OPERATING ACTIVITIES
Net Income $206,970 $202,845
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation and amortization 72,334 69,263
Unremitted earnings of affiliates (12,529) (6,032)
Changes in deferred items and other 2,182 2,230
------- -------
Cash provided by operations
excluding changes in working capital 268,957 268,306
Changes in working capital other than
debt, net of effects from business
combinations (57,054) (37,769)
-------- --------
Net Cash Provided by Operating Activities 211,903 230,537
INVESTING ACTIVITIES
Plant and equipment additions (72,662) (56,233)
Business combinations, net of cash
acquired (172,582) (84,091)
Other 9,835 13,313
-------- --------
Net Cash Used in Investing Activities (235,409) (127,011)
FINANCING ACTIVITIES
Net borrowings and (repayment) under
short-term credit lines 1,016 (14,567)
Proceeds from long-term borrowings 1,441 3,586
Net increase (decrease) in commercial
paper and other long-term obligations 189,580 (4,609)
Payments of other non-current
liabilities 9,482 (3,301)
Minority Interest 4,349 16
Repurchase of common stock (176,485) (25,540)
Cash dividends declared (20,751) (18,548)
-------- ---------
Net Cash Provided by Financing Activities 8,632 (62,963)
Effect of Exchange Rate Changes on Cash
and Cash Equivalents 4,791 2,076
-------- --------
(Decrease) Increase in Cash
and Cash Equivalents (10,083) 42,639
Cash and Cash Equivalents at
Beginning of Year 179,734 140,801
-------- --------
Cash and Cash Equivalents at End of
Period $169,651 $183,440
======== ========
</TABLE>
4
<PAGE> 6
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 in the first
quarter.
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>
Nine Months Ended
September 30
----------------------------
1994 1993
---- ----
<S> <C> <C>
Statutory U.S. Federal tax rate 35.0% 35.0%
Increase (decrease) in taxes resulting from:
FAS No. 109 --- (1.1)
Reversal of prior provisions (2.0) (2.0)
Other (2.2) (3.4)
---- ----
30.8% 28.5%
==== ====
</TABLE>
The Company adopted FAS No. 109, "Accounting for Income Taxes" January 1, 1993.
5
<PAGE> 7
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS
OF OPERATIONS AND FINANCIAL CONDITION
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1994
RESULTS OF OPERATIONS
Revenues for the 1994 third quarter amounted to $539 million, an increase of
13% over the $476 million reported in the prior-year quarter. Net income for
the period was $72 million, or $1.05 per share, an increase of 6% over the $68
million, or $0.96 per share, in the 1993 quarter.
Revenues for the nine months increased 11% amounting to $1,534 million, up from
$1,384 million in 1993. Net income for the nine months increased 2% amounting
to $207 million and $203 million for the 1994 and 1993 periods, respectively.
Comparative sales by business unit are set forth in the following table (in
millions):
<TABLE>
<CAPTION>
Third Quarter Year-To-Date
------------------- ------------------
Business Units 1994 1993 1994 1993
---- ---- ---- ----
<S> <C> <C> <C> <C>
Petroleum Additives $153 $131 $ 428 $ 420
Water Treatment 102 97 323 304
Specialty Chemicals 68 59 188 178
Flame Retardants 68 62 193 180
Polymer Stabilizers 46 26 110 58
Specialized Services 88 95 258 222
---- ---- ------ ------
$525 $470 $1,500 $1,362
==== ==== ====== ======
</TABLE>
The principal components of the increase in sales are shown in the following
table (in millions)
<TABLE>
<CAPTION>
Third Year-To
Quarter Date
------- -------
<S> <C> <C>
Selling Prices $ 6 $ 33
Volume 14 48
Acquisitions 38 90
Divestitures (8) (26)
Foreign Exchange 6 (7)
--- ----
$56 $138
=== ====
</TABLE>
Petroleum Additives sales gains in the quarter reflect a small decline in
retail volume of alkyl lead antiknock compound which was more than offset by an
11% price improvement over the prior-year quarter. The price increase is
lower than the earlier 1994 quarters as a result of the timing of the 1994 and
1993 price increases and the mix of customer sales. Wholesale volumes
increased substantially as a result of the
6
<PAGE> 8
contract to supply Ethyl Corporation's requirements. Prices in the wholesale
market declined slightly. Other fuel additives volume increased substantially
primarily as a result of the acquisition of the Du Pont business. Year-to-date
retail volumes of alkyl lead antiknock compound volumes are down about 20% from
1993 due to logistical problems and the temporary lack of hard currency for
customers in Iran and Russia. Retail prices for the year are about 14% higher
than the prior year. Wholesale volumes are almost double that of a year ago
while pricing is flat.
Water Treatment sales are up 5% for the quarter and 6% year-to-date compared to
the respective prior-year periods. The gains reflect volume improvements and
the effect of acquisitions. Pricing has suffered slightly due to competitive
activity.
Specialty Chemicals sales improved in both the quarter and year-to-date periods
as volumes for bromine derivatives, agricultural and furfural and furfural
derivatives have improved. Price pressure on furfural and furfural alcohol
continues to have negative impacts.
Flame Retardants sales remain strong in North America and the Pacific Rim
necessitating productive capacity increases for a number of key products.
Selective price increases are being implemented to offset higher raw material
cost.
Polymer Stabilizers growth during the period results primarily from
acquisitions.
Specialized Services sales during the quarter declined due to a fall off in
Chemol trading volumes and reduced fire suppressant sales due to the cessation
of halon production as of December 31, 1993. The other operations in this
unit, OSCA - oil field services; Four Seasons - environmental services; E/M -
engineered surface treatment; and WIL - toxicological services all posted gains
over the prior-year periods.
Equity in earnings of affiliates and other income improved $7 million in the
quarter and $13 million year-to-date compared to the prior-year periods. The
increases result from the continuing turnaround at Huntsman Chemical
Corporation, higher interest income and several one-time gains including
insurance recoveries and the gain recognized on the sale of the Purex swimming
pool equipment business.
Gross profits as a percentage of sales for the quarter and nine months are down
from the respective prior-year periods. Price improvements in the Petroleum
Additives business unit have been more than offset by higher costs,
particularly for chlorine, caustic soda and energy; reduced volumes for retail
alkyl lead antiknock compound; and the phase out of halons.
Selling, administrative and research expenses (SAR) as a percentage of sales
increased slightly in the quarter as a result of acquisitions, the negative
impact of exchange rates, and the timing of expenditures.
7
<PAGE> 9
Year-to-date SAR costs as a percentage of sales are lower than the prior year
due to effective cost control measures and the reorganization of certain
European operations.
Other expenses increased in the quarter due to higher interest expense as
borrowings have increased to fund acquisitions and repurchase shares.
FINANCIAL CONDITION
Cash provided by operating activities for the nine months amounted to $212
million, about $19 million less than the prior-year period, reflecting the
increased working capital requirements of recent acquisitions.
Plant and equipment additions were $73 million and remain in line with
projected capital spending in the $100 million range for the year.
Borrowings amounted to $190 million and were used to finance acquisitions,
repurchase Company shares and for interest rate arbitrage investments.
During 1994, the Company purchased nearly 3.2 million shares of its stock at a
total cost of just over $176 million. Management's intention is to acquire up
to an additional 1.5 million shares as market conditions warrant.
A dividend of $0.10 per share was declared in the quarter and paid on November
1, 1994 for a total of $7 million.
OTHER MATTERS
On September 7, 1994, the Company completed the acquisition of E. I. du Pont de
Nemours and Company's petroleum additives business including Du Pont's North
and South American tetraethyl lead business for approximately $50 million.
Octel America, Inc., a wholly-owned subsidiary of Great Lakes, acquired the
non-tetraethyl lead portion of the business whose products consist of corrosion
inhibitors, petroleum dyes, conductivity improvers, antioxidants, metal
sequestering agents, diesel fuel stabilizers and valve seat recession
protectors. A wholly-owned affiliate of The Associated Octel Company, Ltd.,
(AOC), purchased the tetraethyl lead portion of the business. AOC is a
majority-owned subsidiary of Great Lakes.
The Company's acquisition of EniChem Synthesis SPA (renamed GLCI) was completed
on April 21, 1994, for approximately $90 million in cash. Headquartered in
Milan, Italy, GLCI is a leading manufacturer of antioxidants and UV absorbers
with annual revenues approaching $90 million. GLCI 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.
8
<PAGE> 10
Other acquisitions completed this year include a U.K.-based distributor of pool
and spa chemicals and equipment, a southeastern U.S. distributor of pool
chemicals and spa equipment, and the balance of a European joint venture
involved in providing oil field services. The acquisitions cost approximately
$11 million.
9
<PAGE> 11
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 November 11, 1994 By /s/ Robert T. Jeffares
- - - --------------------- ---------------------------
Robert T. Jeffares
Executive Vice President and
Chief Financial Officer
Date November 11, 1994 By /s/ Robert J. Smith
- - - --------------------- ------------------------------
Robert J. Smith, Controller
10
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from
consolidated balance sheet, statements of income, and statement of cash flow and
is qualified in its entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> QTR-3
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> SEP-30-1994
<CASH> $ 169,651
<SECURITIES> 0
<RECEIVABLES> 467,907
<ALLOWANCES> (8,652)
<INVENTORY> 329,280
<CURRENT-ASSETS> 984,250
<PP&E> 976,911
<DEPRECIATION> (425,613)
<TOTAL-ASSETS> 2,182,681
<CURRENT-LIABILITIES> 413,163
<BONDS> 246,441
<COMMON> 71,980
0
0
<OTHER-SE> 1,206,256
<TOTAL-LIABILITY-AND-EQUITY> 2,182,681
<SALES> 1,499,785
<TOTAL-REVENUES> 1,534,423
<CGS> 987,433
<TOTAL-COSTS> 1,173,751
<OTHER-EXPENSES> 28,400
<LOSS-PROVISION> 1,011
<INTEREST-EXPENSE> 7,473
<INCOME-PRETAX> 299,070
<INCOME-TAX> 92,100
<INCOME-CONTINUING> 206,970
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> $ 206,970
<EPS-PRIMARY> $ 2.95
<EPS-DILUTED> $ 2.95
</TABLE>
