<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, 1995
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 - 64,739,865 Shares as of September 30, 1995
<PAGE> 2
Part 1 - Financial Statements
GREAT LAKES CHEMICAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
September 30 December 31
1995 1994
------------ -----------
(thousands of dollars)
<S> <C> <C>
Assets
Current Assets
Cash and cash equivalents $ 150,777 $ 144,666
Accounts receivable, less allowance
of $9,410 (1994 - $7,758) 507,592 493,614
Inventories
Finished products 259,518 223,822
Raw materials 73,005 62,478
Supplies 32,828 30,323
---------- ----------
Total inventories 365,351 316,623
Prepaid Expenses 31,678 24,774
---------- ----------
Total current assets 1,055,398 979,677
Plant and Equipment 1,220,936 1,038,101
Less allowance for depreciation (496,736) (432,177)
---------- ----------
Net plant and equipment 724,200 605,924
Excess of Investment over Net Assets of
Subsidiaries Acquired 413,705 411,028
Investments in and Advances to
Unconsolidated Affiliates 69,065 66,479
Other Assets 57,485 48,357
---------- ----------
$2,319,853 $2,111,465
========== ==========
</TABLE>
1
<PAGE> 3
GREAT LAKES CHEMICAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (CONTINUED)
<TABLE>
<CAPTION>
September 30 December 31
1995 1994
------------ -----------
(thousands of dollars)
<S> <C> <C>
Liabilities and Stockholders' Equity
Current Liabilities
Notes payable $ 8,576 $ 7,793
Accounts payable 179,772 184,823
Accrued expenses 117,614 101,615
Income taxes 112,980 118,203
Dividends payable 7,445 6,730
Current portion of long-term debt 5,628 8,778
----- -----
Total current liabilities 432,015 427,942
Long-Term Debt, less Current Portion 298,443 143,661
Other Non-Current Liabilities 123,393 126,907
Deferred Income Taxes 81,055 75,652
Minority Interest 31,777 26,355
Stockholders' Equity
Common stock, $1 par value, authorized
200,000,000 shares, issued
72,086,265 shares
(1994 - 72,024,520 shares) 72,086 72,025
Paid-in capital 112,869 112,667
Retained earnings 1,611,652 1,411,890
Cumulative translation adjustment (29,395) (25,222)
Treasury stock at cost 7,346,400 shares
(1994 -4,727,100 shares) (414,042) (260,412)
-------- --------
Total stockholders' equity 1,353,170 1,310,948
---------- ----------
$2,319,853 $2,111,465
========== ==========
</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
-------------------- ------------------
1995 1994 1995 1994
------ ------- ------- ------
(in thousands except per share data)
<S> <C> <C> <C> <C>
Net Sales $586,224 $525,216 $1,796,110 $1,499,785
Operating Expenses
Cost of products sold 385,084 346,341 1,201,049 987,433
Selling, administrative
and research expenses 73,787 66,562 219,818 187,329
-------- -------- ---------- ----------
458,871 412,903 1,420,867 1,174,762
-------- -------- ---------- ----------
Income from Operations 127,353 112,313 375,243 325,023
Equity in Earnings of
Affiliates and Other
Income 5,613 13,675 20,114 34,638
Interest and Other Expenses 14,148 12,244 42,560 35,873
Minority Interest in Income
of Subsidiaries 8,954 9,205 25,435 24,718
-------- -------- ---------- ----------
Income Before Taxes 109,864 104,539 327,362 299,070
Income Taxes 35,700 32,200 106,400 92,100
-------- -------- ---------- ----------
Net Income $ 74,164 $ 72,339 $ 220,962 $ 206,970
======== ======== ========== ==========
Net Income per Share $ 1.15 $ 1.05 $ 3.37 $ 2.95
======== ======== ========== ==========
Dividends Declared per Share $ .115 $ .100 $ .325 $ .290
======== ======== ========== ==========
Average Shares Outstanding 64,733 68,914 65,570 70,264
</TABLE>
3
<PAGE> 5
GREAT LAKES CHEMICAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Nine Months Ended
September 30
-----------------
1995 1994
----- ------
(thousands of dollars)
<S> <C> <C>
OPERATING ACTIVITIES
Net Income $220,962 $206,970
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation and amortization 81,141 72,334
Unremitted earnings of affiliates (53) (12,529)
Changes in deferred items and other 4,894 2,182
-------- --------
Cash provided by operations
excluding changes in working capital 306,944 268,957
Changes in working capital other than
debt (54,152) (57,054)
-------- --------
Net Cash Provided by Operating Activities 252,792 211,903
INVESTING ACTIVITIES
Plant and equipment additions (184,274) (72,662)
Business combinations, net of cash
acquired (24,426) (172,582)
Other (5,086) 9,835
-------- --------
Net Cash Used in Investing Activities (213,786) (235,409)
FINANCING ACTIVITIES
Net (repayment) and borrowings under
short-term credit lines (3,638) 1,016
Proceeds from and (payment of)
long-term borrowings (533) 1,441
Net increase in commercial paper
and other long-term obligations 143,445 189,580
Net increase (decrease) in other
non-current liabilities (24) 9,482
Minority interest 2,392 4,349
Repurchases of common stock (153,630) (176,485)
Cash dividends declared (21,200) (20,751)
-------- --------
Net Cash (Used) Provided by
Financing Activities (33,188) 8,632
Effect of Exchange Rate Changes on Cash
and Cash Equivalents 293 4,791
-------- --------
Increase (Decrease)in Cash and
Cash Equivalents 6,111 (10,083)
Cash and Cash Equivalents at
Beginning of Year 144,666 179,734
-------- --------
Cash and Cash Equivalents at End of
Period $150,777 $169,651
======== ========
</TABLE>
4
<PAGE> 6
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS
OF OPERATIONS AND FINANCIAL CONDITION
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1995
RESULTS OF OPERATIONS
Third quarter sales were $586 million, an improvement of 12% over the $525
million reported in the 1994 quarter. Net income amounted to $74 million, or
$1.15 per share, an increase of 2.5% over the $72 million, or $1.05 per share
in 1994.
Year-to-date sales of $1,796 million increased 20% over the year-ago period.
Net income for the period increased 6.8% to $221 million, or $3.37 per share.
Comparative sales by business unit are set forth in the following table
($-millions):
<TABLE>
<CAPTION>
Third Quarter Year-to-Date
----------------------------- --------------------------
1995 1994 Inc. 1995 1994 Inc.
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Flame Retardants $ 73 $ 68 7% $ 222 $ 193 15%
Intermediates and
Fine Chemicals 80 68 18% 228 187 22%
Petroleum Additives 166 153 8% 480 429 12%
Polymer Stabilizers 52 46 13% 170 110 55%
Specialized Services
and Manufacturing 105 88 19% 344 258 33%
Water Treatment 110 102 8% 352 323 9%
--- ----- --- ---- ----- ---
$586 $525 12% $1,796 $1,500 20%
==== ==== === ====== ====== ===
</TABLE>
The increase in sales is attributable to the following
($-millions):
<TABLE>
<CAPTION>
Third Year to
Quarter Date
------- -------
<S> <C> <C>
Selling Price $25 $ 60
Volume 14 102
Acquisitions 16 102
Foreign Exchange 6 32
--- ----
$61 $296
=== ====
</TABLE>
The Flame Retardant business unit sales continued to exhibit sustained strength
in all product lines as worldwide demand from the electrical, electronic and
construction industries continues unabated. Price increases implemented
earlier in the year were more fully realized in the quarter.
Intermediates and Fine Chemicals sales improved 18% in the quarter. Volume and
pricing were positive in all key product areas. A strengthened machine tool
industry pulled foundry demand for furfuryl alcohol; and requirements for
urethane application in the
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automotive, wire and cable and coatings industry spurred requirements for PTMEG
polyols, another furfural derivative. Bromine and derivative sales were at
record levels reflecting strong market demand. Fine chemicals, custom
manufactured for customers, enjoyed significant growth.
Petroleum Additives sales increased about 8% over the prior-year quarter. The
improvement resulted from the acquisition of DuPont's petroleum additives
business in September of 1994, while TEL price increases were sufficient to
offset volume declines. Retail compound volumes were up slightly from the 1995
second quarter but experienced the expected trend-line decline from the
prior-year quarter. Pricing for retail compound improved about 8% from the
prior year. For the year, retail volumes should decline between 7% and 10%,
and price increases should average between 8% and 10%. Wholesale compound
sales were about 20% lower than the prior year due to inventory building in the
year-earlier period.
Polymer Stabilizer sales, while up 13% for the quarter, saw its rate of
growth decline as the comparison no longer benefits from the mid-1994
acquisition of EniChem's polymer additives business. Demand in the market
remains buoyant and pricing trends on key products are positive.
Specialized Services and Manufacturing registered a 19% increase in sales.
Improvements in Enviro-Energy Performance Group resulted from its broadened
international presence and expanded service capabilities for offshore natural
gas well completions and workovers. Also, sales of FM 200, our fluorine based
fire extinguishant, expanded due to new regulatory approvals and greater market
acceptance.
Water Treatment sales grew 8% in the quarter due to ideal weather
conditions extending the normal selling season in both the U.S. and southern
Europe.
Gross profits increased $22 million from the prior-year quarter amounting
to $201 million. Selling price increases offset cost increases by better than
50%; volume gains and positive impacts from both acquisitions and foreign
exchange also contributed to the improvement. The Company's raw materials
price index was up about eight percentage points from the year-ago quarter but
showed a slight decline from the first half of the year. As a percentage of
sales, gross profit for the quarter improved 0.2 percentage points from the
prior year. The improved performance of our non-petroleum additives business
units offset a small decline in the Petroleum Additives business unit due to
higher materials and production costs coupled with increasing sales of lower
margin products.
Selling, Administration and Research expense increased $7 million from the
year-ago quarter; however, as a percentage of sales, it was essentially equal
to 1994 at 12.6%. The increase in absolute
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<PAGE> 8
terms is attributable to higher expenses, $4 million; unfavorable currency
effects, $2 million; and acquisitions, $1 million.
Operating Income improved 13%, or $15 million, from the prior-year quarter
reflecting the price and volume improvements in business units other than
Petroleum Additives which was comparable to 1994.
Equity in Earnings of Affiliates and Other Income declined about $8
million for the quarter. The Company no longer has an equity position in
Huntsman Chemical Corporation and the 1994 quarter benefited from some one-time
items.
Interest and Other Expense increased $2 million from higher interest
expense associated with higher debt levels.
The higher effective tax rate for 1995, 32.5% versus 30.8%, is due to a
reduction in reversals of prior year tax reserves and a change in the mix of
income from lower to higher tax rate jurisdictions.
FINANCIAL CONDITION
Cash provided from operations amounts to $253 million for the nine-month
period ended September 30, 1995; $41 million more than the corresponding 1994
period. The increase reflects higher earnings and lower working capital
requirements.
Spending on plant and equipment amounted to $184 million. Spending for
the year is expected to be in the $230 million range.
Share repurchases through September 30, 1995 amounted to approximately 2.6
million shares at a cost of $154 million. The Company has authorization to
repurchase up to 1.8 million additional shares; and it remains management's
intention to do so as market conditions warrant.
Net borrowings under short-term and long-term borrowing arrangements
amounted to $140 million and were used to fund share repurchase and other
investments.
7
<PAGE> 9
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.
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, 1994.
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
-----------------
1995 1994
---- ----
<S> <C> <C>
Statutory U.S. Federal tax rate 35.0% 35.0%
Decrease in taxes relating to
various minor items (2.5) (4.2)
---- ----
32.5% 30.8%
==== ====
</TABLE>
8
<PAGE> 10
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 10, 1995 By /s/ Robert T. Jeffares
----------------- ----------------------
Robert T. Jeffares
Executive Vice President and
Chief Financial Officer
Date November 10, 1995 By /s/ Robert J. Smith
----------------- ----------------------
Robert J. Smith, Controller
9
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEET, STATEMENT OF INCOME, and STATEMENT OF CASHFLOW AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> SEP-30-1995
<CASH> 150,777
<SECURITIES> 0
<RECEIVABLES> 517,002
<ALLOWANCES> 9,410
<INVENTORY> 365,351
<CURRENT-ASSETS> 1,055,398
<PP&E> 1,238,762
<DEPRECIATION> 514,562
<TOTAL-ASSETS> 2,319,853
<CURRENT-LIABILITIES> 432,015
<BONDS> 298,443
<COMMON> 72,086
0
0
<OTHER-SE> 1,281,084
<TOTAL-LIABILITY-AND-EQUITY> 2,319,853
<SALES> 1,796,110
<TOTAL-REVENUES> 1,816,224
<CGS> 1,201,049
<TOTAL-COSTS> 1,419,128
<OTHER-EXPENSES> 29,866
<LOSS-PROVISION> 1,739
<INTEREST-EXPENSE> 12,694
<INCOME-PRETAX> 327,362
<INCOME-TAX> 106,400
<INCOME-CONTINUING> 220,962
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 220,962
<EPS-PRIMARY> 3.37
<EPS-DILUTED> 3.37
</TABLE>
