<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 June 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 - 64,727,473 Shares as of June 30, 1995
<PAGE> 2
Part 1 - Financial Statements
GREAT LAKES CHEMICAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
June 30 December 31
1995 1994
------- -----------
(thousands of dollars)
Assets
<S> <C> <C>
Current Assets
Cash and cash equivalents $ 130,613 $ 144,666
Accounts receivable, less allowance
of $8,624 (1994 - $7,758) 576,379 493,614
Inventories
Finished products 264,158 223,822
Raw materials 72,722 62,478
Supplies 33,199 30,323
---------- ----------
Total inventories 370,079 316,623
Prepaid Expenses 25,210 24,774
---------- ----------
Total current assets 1,102,281 979,677
Plant and Equipment 1,187,678 1,038,101
Less allowance for depreciation (495,966) (432,177)
---------- ----------
Net plant and equipment 691,712 605,924
Excess of Investment over Net Assets of
Subsidiaries Acquired 419,340 411,028
Investments in and Advances to
Unconsolidated Affiliates 68,802 66,479
Other Assets 55,212 48,357
---------- ----------
$2,337,347 $2,111,465
========== ==========
</TABLE>
1
<PAGE> 3
GREAT LAKES CHEMICAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (CONTINUED)
<TABLE>
<CAPTION>
June 30 December 31
1995 1994
-------- -----------
(thousands of dollars)
<S> <C> <C>
Liabilities and Stockholders' Equity
Current Liabilities
Notes payable $ 10,351 $ 7,793
Accounts payable 202,045 184,823
Accrued expenses 111,313 101,615
Income taxes 155,211 118,203
Dividends payable 6,796 6,730
Current portion of long-term debt 9,327 8,778
---------- ----------
Total current liabilities 495,043 427,942
Long-Term Debt, less Current Portion 305,929 143,661
Other Non-Current Liabilities 134,681 126,907
Deferred Income Taxes 78,583 75,652
Minority Interest 29,806 26,355
Stockholders' Equity
Common stock, $1 par value, authorized
200,000,000 shares, issued
72,073,873 shares
(1994 - 72,024,520 shares) 72,074 72,025
Paid-in capital 112,753 112,667
Retained earnings 1,544,933 1,411,890
Cumulative translation adjustment (22,413) (25,222)
Treasury stock at cost 7,346,400 shares
(1994 -4,727,100 shares) (414,042) (260,412)
---------- ----------
Total stockholders' equity 1,293,305 1,310,948
---------- ----------
$2,337,347 $2,111,465
========== ==========
</TABLE>
2
<PAGE> 4
GREAT LAKES CHEMICAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30 June 30
------------------ ------------------
1995 1994 1995 1994
------- ------- ------- ------
(in thousands except per share data)
<S> <C> <C> <C> <C>
Net Sales $ 640,851 $ 525,893 $ 1,209,886 $ 974,569
Operating Expenses
Cost of products sold 430,576 352,487 815,965 641,092
Selling, administrative
and research expenses 74,715 64,716 146,031 120,767
--------- --------- ----------- ---------
505,291 417,203 961,996 761,859
--------- --------- ----------- ---------
Income from Operations 135,560 108,690 247,890 212,710
Equity in Earnings of
Affiliates and Other
Income 7,936 9,901 14,501 20,963
Interest and Other Expenses 18,710 13,212 28,412 23,629
Minority Interest in Income
of Subsidiaries 8,515 7,532 16,481 15,514
--------- --------- ----------- ---------
Income Before Taxes 116,271 97,847 217,498 194,530
Income Taxes 37,800 30,100 70,700 59,900
--------- --------- ----------- ---------
Net Income $ 78,471 $ 67,747 $ 146,798 $ 134,630
========= ========= =========== =========
Net Income per Share $ 1.20 $ 0.96 $ 2.22 $ 1.90
========= ========= =========== =========
Dividends Declared per Share $ .105 $ .095 $ .21 $ .19
========= ========= =========== =========
Average Shares Outstanding 65,240 70,594 65,995 70,949
</TABLE>
3
<PAGE> 5
GREAT LAKES CHEMICAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Six Months Ended
June 30
-----------------
1995 1994
------ ------
(thousands of dollars)
<S> <C> <C>
OPERATING ACTIVITIES
Net Income $ 146,798 $ 134,630
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation and amortization 55,132 47,251
Unremitted earnings of affiliates (775) (6,829)
Changes in deferred items and other 4,170 3,282
--------- ---------
Cash provided by operations
excluding changes in working capital 205,325 178,334
Changes in working capital other than
debt, net of effects from business
combinations (66,674) (45,229)
--------- ---------
Net Cash Provided by Operating Activities 138,651 133,105
INVESTING ACTIVITIES
Plant and equipment additions (126,244) (48,162)
Business combinations, net of cash
acquired (27,806) (110,544)
Other 2,875 9,471
--------- ---------
Net Cash Used in Investing Activities (151,175) (149,235)
FINANCING ACTIVITIES
Net repayment and borrowings under
short-term credit lines 1,745 70
Proceeds from long-term borrowings 261 42,663
Net increase in commercial paper
and other long-term obligations 161,811 105,557
Net increase (decrease) in other
non-current liabilities 99 (254)
Minority interest 432 2,372
Repurchases of common stock (153,630) (90,743)
Cash dividends declared (13,749) (13,399)
--------- ---------
Net Cash (Used) Provided by
Financing Activities (3,031) 46,266
Effect of Exchange Rate Changes on Cash
and Cash Equivalents 1,502 4,215
--------- ---------
Increase (Decrease) in Cash and
Cash Equivalents (14,053) 34,351
Cash and Cash Equivalents at
Beginning of Year 144,666 179,734
--------- ---------
Cash and Cash Equivalents at End of
Period $ 130,613 $ 214,085
========= =========
</TABLE>
4
<PAGE> 6
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS
OF OPERATIONS AND FINANCIAL CONDITION
FOR THE SIX MONTHS ENDED JUNE 30, 1995
RESULTS OF OPERATIONS
Second quarter sales amounted to $641 million, an improvement of 22% over the
$526 million reported in the 1994 quarter. Net income amounted to $78 million,
or $1.20 per share, an increase of 16% over the $68 million, or $.96 per share
in 1994.
Six month sales of $1,210 million increased 24% over the year-ago period. Net
income for the period increased 9% to $147 million, or $2.22 per share.
Comparative sales by business unit are set forth in the following table
($ - millions):
<TABLE>
<CAPTION>
Second Quarter Year-to-Date
---------------------------- ---------------------------
1995 1994 Inc. 1995 1994 Inc.
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Flame Retardants $ 75 $ 63 19% $ 149 $ 125 19%
Intermediates and
Fine Chemicals 78 56 39% 148 119 24%
Petroleum Additives 161 142 13% 314 276 14%
Polymer Stabilizers 59 38 55% 118 64 84%
Specialized Services
and Manufacturing 121 98 23% 239 170 41%
Water Treatment 147 129 14% 242 221 10%
---- ---- --- ------ ---- ---
$641 $526 22% $1,210 $975 24%
==== ==== === ====== ==== ===
</TABLE>
The increase in sales is attributable to the following ($-millions):
<TABLE>
<CAPTION>
Second Year to
Quarter Date
------- -------
<S> <C> <C>
Selling Price $ 13 $ 35
Volume 51 88
Acquisitions 37 86
Foreign Exchange 14 26
---- ----
$115 $235
==== ====
</TABLE>
Flame Retardants demand remains high, mirroring the sustained strength of the
electrical, electronic and construction industries. Demand in European markets
has recently begun to accelerate, and the Pacific Rim remains strong. While
volume gains account for the majority of the quarter's improvement over the
year-ago period, pricing improvements are being realized; and the business unit
benefited from the relative strength of the Yen and German Mark vis-a-vis the
dollar.
5
<PAGE> 7
Intermediates and Fine Chemicals sales growth is primarily attributable to
strong demand for furfuryl alcohol due to a resurgent foundry industry and the
expanding use of value-added furfural derivatives. Price increases are being
achieved but will not be fully realized until later in the year, as contract
terms permit.
Petroleum Additives sales increased about $18 million over the prior-year
quarter primarily due to acquisition of the DuPont business in the latter part
of 1994. Retail compound price increases averaged about 5% for the quarter
compared to the prior year. Customer mix accounts for the relatively small
price improvement. For the six months, the average retail price increase is
about 10% and is expected to be in that range for the year. Second quarter
retail volumes increased 14% as some of the first quarter shortfall was
recovered. For the year, retail volumes are expected to decline about 7%-10%.
In the wholesale market, prices were comparable to 1994 while volumes declined
to about half of 1994 levels. The 1994 second quarter was the first time all
of Ethyl Corporation's requirements were supplied, and they were adjusting
inventory levels.
Polymer Stabilizer growth reflects continuing strong demand from the plastics
industry and the April 1994 acquisition of EniChem's polymer additives and
associated specialty chemicals business.
Specialized Services and Manufacturing sales increased 23% over the prior-year
quarter primarily due to the strong performance of Chemol, our Eastern European
chemical trading company.
Water Treatment sales are up 14% over the prior-year quarter. The growth
reflects an improvement in weather-related purchasing, some customer
purchasing in advance of announced price increases and acquisitions.
Gross profits increased $37 million from the prior-year quarter, amounting to
$210 million. Overall, the increase in gross profits results from volume, 57%;
acquisitions, 32%; and favorable foreign exchange impacts. Price increases
were sufficient to offset cost increases. The Company's raw material price
index increased about 10 percentage points from the year-ago quarter but
remained essentially unchanged from the 1995 first quarter. As a percent of
sales, gross profits were 32.8%, a decline of 0.2 percentage points from the
prior year. While generally each business unit, including Petroleum Additives,
posted an improvement, the gross profits of Petroleum Additives was a smaller
percentage of total gross profits than in the prior quarter.
Selling, Administrative and Research Expense increased $10 million from the
prior-year quarter; however, as a percentage of sales, it declined 0.6
percentage points to 11.7% of sales.
6
<PAGE> 8
Increases resulting from acquisitions and unfavorable foreign exchange were $3
million each with the balance attributable to cost increases.
Operating Income improved 25%, or $27 million, from the prior-year quarter
primarily reflecting expanded volumes.
Equity in Earnings of Affiliates and Other Income declined about $2 million for
the quarter as the Company no longer maintains an equity position in Huntsman
Chemical Corporation.
Interest and Other Expense increased about $6 million due to higher interest
expense associated with increased borrowings and a higher level of other
expenses.
The increase in the effective tax rate for 1995 results from a reduction in the
reversal of prior-year tax provisions and a shift in the mix of income from
lower to higher tax rate jurisdictions.
FINANCIAL CONDITION
Cash provided from operations amounts to $139 million for the six months, $6
million more than the year-ago period. Increased earnings and non-cash charges
exceeded the additional working capital required to support the growth of the
business.
Plant and equipment expenditures amounted to $126 million. Spending is
primarily for capacity expansion, including the production of elemental
bromine. Spending for the year is projected to be in the $230 million range.
The spending projections have been increased to take advantage of further
capacity expansion opportunities in key product areas.
Share repurchases through June 30, 1995, amounted to approximately 2.6 million
shares at a cost of $154 million. As of June 30, 1995, the Company is
authorized to repurchase an additional 1.8 million shares and it remains
management's intention to do so as market conditions warrant.
Borrowings amounted to $162 million and were used to fund share repurchases 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>
Six Months Ended
June 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 August 11,1994 By /s/ Robert T. Jeffares
-------------- ----------------------------
Robert T. Jeffares
Executive Vice President and
Chief Financial Officer
Date August 11, 1994 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> 6-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> JUN-30-1995
<CASH> 130,613
<SECURITIES> 0
<RECEIVABLES> 585,003
<ALLOWANCES> 8,624
<INVENTORY> 370,079
<CURRENT-ASSETS> 1,102,281
<PP&E> 1,187,678
<DEPRECIATION> 495,966
<TOTAL-ASSETS> 2,337,347
<CURRENT-LIABILITIES> 495,043
<BONDS> 305,929
<COMMON> 72,074
0
0
<OTHER-SE> 1,221,231
<TOTAL-LIABILITY-AND-EQUITY> 2,337,347
<SALES> 1,209,886
<TOTAL-REVENUES> 1,224,387
<CGS> 815,965
<TOTAL-COSTS> 961,847
<OTHER-EXPENSES> 20,911
<LOSS-PROVISION> 149
<INTEREST-EXPENSE> 7,501
<INCOME-PRETAX> 217,498
<INCOME-TAX> 70,700
<INCOME-CONTINUING> 146,798
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 146,798
<EPS-PRIMARY> 2.22
<EPS-DILUTED> 2.22
</TABLE>
