<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 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
----------------------
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange on
Title of each class which registered
------------------- ----------------
Common stock, $1.00 par value New York Stock Exchange
Pacific Stock Exchange
----------------------
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, and (2) has been subject to the filing
requirements for the past 90 days. Yes X No
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 definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K. [ ]
----------------------
As of March 4, 1996, the aggregate market value of the voting stock held by
non-affiliates of the registrant was $4,619,556,000.
As of March 4, 1996, 64,499,617 shares of the registrant's stock were
outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the 1995 Annual Report to Stockholders are incorporated by
reference into Parts I, II and IV. Portions of the annual proxy statement dated
March 29, 1996 are incorporated by reference into Part III.
<PAGE> 2
PART I
Item 1. BUSINESS
GENERAL
Great Lakes Chemical Corporation is a Delaware corporation incorporated in
1933, having its principal executive offices in West Lafayette, Indiana. The
Company's operations consist of one dominant industry segment - chemicals and
allied products. Within this segment the Company is well diversified focusing
on performance chemicals, water treatment chemicals, petroleum additives and
specialized services and manufacturing. The corporate Profile on page 3 and
the Review of Operations on pages 14 through 19 of the 1995 Annual Report to
Stockholders are incorporated herein by reference.
The term "Great Lakes" as used herein means Great Lakes Chemical Corporation
and its Subsidiaries unless the context indicates otherwise.
Net sales by Business Unit are set forth in the following table (dollars in
millions):
<TABLE>
<CAPTION>
Year ended December 31 1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Flame Retardants $ 300 $ 265 $ 240
Intermediates and Fine Chemicals 302 262 240
Petroleum Additives 656 610 576
Polymer Stabilizers 224 162 81
Specialized Services and Manufacturing 460 383 294
Water Treatment 419 383 361
------- ------- -------
Total Net Sales $ 2,361 $ 2,065 $ 1,792
======= ======= =======
</TABLE>
PRODUCTS AND SERVICES
The following is a list of the principal products and services provided by
Great Lakes:
FLAME RETARDANTS
<TABLE>
<CAPTION>
Plants & Major Raw
Products & Services Principal Markets Facilities Materials
- ------------------- ----------------- ---------- ---------
<S> <C> <C> <C>
Brominated and Computer and ElDorado, AR Bromine
intumescent flame Business Equipment, Newport, TN Bisphenol A
retardants Consumer Electronics, Aycliffe, U.K. Diphenyl Oxide
Textiles, Urethanes and
Construction, Materials
</TABLE>
POLYMER STABILIZERS
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Antioxidants, UV Computer and Business Persan, France Alkylated
absorbers and Light Equipment, Consumer Catenoy, France Phenols,
Stabilizers Electronics, Packaging Waldkraiburg, Methyl Acrylate,
Textiles, Building and Germany Phosphorus
Construction, Transportation Pedrengo, Italy Trichloride
Ravenna, Italy
</TABLE>
1
<PAGE> 3
INTERMEDIATES AND FINE CHEMICALS
<TABLE>
<CAPTION>
Plants & Major Raw
Products & Services Principal Markets Facilities Materials
- ------------------- ------------------ ---------- ---------
<S> <C> <C> <C>
Bromine, Bromine derivatives Foundry Industry, Lube Oil ElDorado, AR Bromine,
and Bromine-based specialty Refining, Pharmaceutical Marysville, AR Agricultural
chemicals, Furfural, Furfural Industry, Agrochemical Memphis, TN By-Products
derivatives and Furfural-based Industry, Electronics, Soil Omaha, NE Chlorine
specialty chemicals, including Crop and Structural Pest Belle Glade, FL
furfuryl alcohol , Control, Production of Geel, Belgium
POLYMEG(R) Polyols and Photographic Papers and Halebank, U.K.
Methyl Bromide Films and Rubber Konstanz, Germany
Compounds Newport, TN
</TABLE>
PETROLEUM ADDITIVES
<TABLE>
<S> <C> <C>
Antiknock octane boosters for Major Oil Refineries and Fuel Ellesmere Port, U.K. Ethylene,
leaded gasoline, Cetane Blenders Worldwide Paimbouef, France Lead, Salt,
number improvers, Multi- Bussi, Italy Electricity
functional gasoline and diesel Newark, DE
fuel additives, Gasoline and
diesel detergents, Petroleum
anti-oxidants, stabilizers, and
corrosion inhibitors
</TABLE>
WATER TREATMENT CHEMICALS
<TABLE>
<S> <C> <C>
RECREATIONAL
Water sanitizers - Pool and Spa Dealers and Adrian, MI BCDMH
BioGuard(R), OMNI(R), Distributors, Mass Market Conyers, GA Chlorinated
Hydrotech(R), Guardex(R), Retailers, Builders Lake Charles, LA Isocyanurates
Pool Time(R), AquaChem(R) Munich, Germany Calcium
Algicides, oxidizers, pH 39 U.S. Distribution hypochlorite
balancers, mineral balancers locations Cyanuric acid
and specialty chemicals,
pool equipment
INDUSTRIAL
BromiCide(R) and LiquiBrom(TM) Industrial Cooling Water Adrian, MI Bromine
Specialty Biocides, Treatment, Industrial and ElDorado, AR Sodium Bromide
Biocide dispensing Municipal Wastewater Treat-
equipment ment, Pulp and Paper and
Food Processing
</TABLE>
2
<PAGE> 4
SPECIALIZED SERVICES AND MANUFACTURING
<TABLE>
<CAPTION>
Plants & Major Raw
Products & Services Principal Markets Facilities Materials
- ------------------- ------------------ ---------- ---------
<S> <C> <C> <C>
ENVIRO-ENERGY PERFORMANCE GROUP
Completion fluids, Sand Worldwide Oil and Gas Lafayette, LA Bromine,
control and filtration, Industry Aberdeen, U.K. Zinc, Sodium,
Reservoir analysis, Stravanger, Norway Calcium
Down-hole tools Anaco, Venezuela
Villahermosa, Mexico
Waste management, Petrochemical Companies, Greensboro, NC
Contamination assessment Waste Management Firms, Raleigh, NC
and remediation, Geotech- Oil Refineries, Forest Baton Rouge, LA
nical engineering, Resource Product Companies, Columbus, OH
recovery and material Government Agencies Houston, TX
handling
TOXICOLOGICAL SERVICES
All phases of nonclinical Pharmaceutical, Chemical, Ashland, OH
toxicological testing and Veterinary, Medical, Agri-
bioanalytical services, cultural, Food and Consumer
Design of specialized Products Industries
toxicological, metabolic and
analytical chemistry programs
ENGINEERED SURFACE TREATMENTS
Dry film lubricants, corrosion Aerospace, Automotive, North Hollywood, Molysulfide,
and abrasion-resistant, chip- Railroad, Machine Tool, CA Various solvents
and scuff-proof coatings, All Manufacturing Fort Worth, TX and resins
Electrically conductive Industries Lombard, IL
coatings Roseville, MI
INTERNATIONAL TRADING
Organic and inorganic Central and Eastern Budapest, Hungary
chemicals, Plastic resins, European Chemical
Finished agrochemicals and Industry
fertilizers
FLUORINE CHEMISTRY
Fire extinguishing agent Data Processing ElDorado, AR Fluorine
FM-200(R), Organofluorine Telecommunications
compounds, Fluorinated Military
intermediates
</TABLE>
1995 DEVELOPMENTS
The Corporate Profile on page 3 and the Review of Operations on pages 14
through 19 of the 1995 Annual Report to Stockholders are incorporated herein by
reference.
3
<PAGE> 5
Raw Materials
The sources of essential raw materials for bromine are the brine from
company-owned wells in Arkansas and sea water extraction plants in Europe. The
Arkansas properties are located atop the Smackover lime deposits, which
constitute a vast underground sea of bromine-rich brine. The area between
ElDorado and Magnolia, Arkansas, (located about 35 miles west of ElDorado)
provides the best known geological location for bromine production and both
major domestic bromine manufacturers are located there. Based on projected
production rates, the Company's brine reserves are conservatively estimated to
be adequate for the foreseeable future.
Furfural is extracted from agricultural by-products and waste materials such as
corncobs, sugar cane bagasse, rice hulls and oat hulls for which there are few
alternative uses. These raw material sources for furfural production are
expected to remain abundant and relatively inexpensive. Other materials used
in the chemical processes are obtained from outside suppliers through purchase
contracts. Supplies of these materials are believed to be adequate for the
Company's future operations.
International Operations
Great Lakes has a substantial presence in foreign markets. The Company's
investment in foreign countries is principally in Western Europe and represents
$1,312 million or 53 percent of total assets.
Sales to customers in foreign countries (primarily Europe and the Far East)
amount to 64, 64 and 62 percent of total sales for the years ended December 31,
1995, 1994, and 1993, respectively. Approximately 14, 15, and 15 percent of
these foreign sales, respectively for the three years shown, are products
exported from the U.S., with the balance of the Company's international sales
primarily being products manufactured and sold by the Company's European
subsidiaries and branches. The profitability on foreign sales (including U.S.
exports and foreign manufactured products, except Octel) approximates those for
domestic operations. Because of value-added pricing, Octel's alkyl lead
products have a higher profitability than do most of the Company's other
products.
The geographic segment data contained in the note "Industry Segments and
Foreign Operations" of Notes to Consolidated Financial Statements on page 37 of
the 1995 Annual Report to Stockholders is incorporated herein by reference.
Customers and Distribution
During the last three years, no single customer accounted for more than 10
percent of Great Lakes' total consolidated sales. The Company has no material
contracts or subcontracts with government agencies. A major portion of the
Company's sales are sold to industrial or commercial users for use in the
production of other products. Some products, such as recreational water
treatment chemicals and supplies, are sold to a large number of retail pool
stores, mass merchandizers and distributors. Some export sales are marketed
through distributors and brokers.
The Company's business does not normally reflect any material backlog of orders
at year-end.
Competition
Great Lakes is in competition with businesses producing the same or similar
products as well as businesses producing products intended for similar use.
There is one other major bromine producer in the United States which competes
with the Company in varying degrees, depending on the product involved, with
respect to the sale of bromine and bromine derivatives. There is also one
major overseas manufacturer of bromine and
4
<PAGE> 6
brominated products. In addition, there are several small producers in
the U.S. and overseas which are competitors in several individual products.
The Company is the major U.S. producer of furfural and furfuryl alcohol, and it
enjoys a significant market position in every major geographic and product
market in which it competes. The Company is a major producer of alkyl lead.
The Company competes with several manufacturers and distributors of swimming
pool and spa chemicals and equipment. Through its Bio-Lab subsidiary, the
Company operates 39 branch distribution outlets for chemicals and pool and spa
equipment in the U.S. Products are differentiated by brand names to the retail,
wholesale and mass merchandising markets.
Principal methods of competition are price, product quality and purity,
technical services and ability to deliver promptly. The Company is able to
move quickly in providing new products to meet identified market demands, and
believes its production costs are among the lowest in the world. These
factors, combined with high technical skills, allow the Company to compete
effectively. One negative factor in its ability to compete with the major
overseas producer of bromine is the fact that this producer receives
significant subsidies from its government, and enjoys favorable duty advantages
on its exports to certain markets.
Seasonality and Working Capital
The products, which the Company sells to the agricultural and swimming pool
markets, exhibit some seasonality; however, the effect on overall Company sales
and profits is not material. Seasonality results in the need to build
inventories for rapid delivery at certain times of the year. The pool product
season is strongest during the first six months, requiring a build-up of
inventory at the beginning of the year. Except for certain arrangements with
distributors and dealers of swimming pool and spa products, customers are not
permitted to return unsold material at the end of a season. Extended credit
terms are granted only in cases where the Company chooses to do so to meet
competition.
The alkyl lead products have somewhat larger working capital requirements than
do the Company's other major products, because of extended distribution lines
and credit terms for large volume refinery customers.
The effect of the above items on working capital requirements is not material.
Research and Development and Patents
Research and development expenditures are included in the note "Research and
Development Expense" of the Notes to Consolidated Financial Statements on page
37 of the 1995 Annual Report to Stockholders and is incorporated herein by
reference. The Company holds no patents, licenses, franchises or concessions
which are essential to its operations.
Environmental and Toxic Substances Control
The Company recognizes its responsibility for the sound environmental
management of its businesses and operations. In partial fulfillment of this
responsibility, the Company's domestic chemical manufacturing operations
subscribe to the comprehensive environmental stewardship program developed by
the Chemical Manufacturers Association known as Responsible Care.
The Company is in material compliance with all environmental laws and
regulations to which it is subject.
Employees
The Company has approximately 8,000 employees.
5
<PAGE> 7
Item 2. PROPERTIES
Great Lakes has plants at 32 locations in 13 states and 15 plants in 9 foreign
countries. Most principal plants are owned. Listed under Item 1 above in a
table captioned Products and Services are the principal locations at which
products are manufactured, distributed or marketed.
The Company leases warehouses, distribution centers and space for offices
throughout the world. All of the Company's facilities are in good repair,
suitable for the Company's businesses, and have sufficient space to meet
present marketing demands at an efficient operating level.
Item 3. LEGAL PROCEEDINGS
There are no material pending legal proceedings involving the Company, its
subsidiaries or any of its properties. Furthermore, no director, officer or
affiliate of the Company, or any associate of any director or officer is
involved, or has a material interest in, any proceeding which would have a
material adverse effect on the Company.
Item 103 of Regulation S-K requires disclosure of administrative or judicial
proceedings arising under any federal, state or local provisions dealing with
protection of the environment, if the monetary sanctions might exceed $100,000.
The following proceeding may result in sanctions exceeding $100,000.
On March 21, 1995 a Consent Agreement was entered whereby the Company and the
United States Environmental Protection Agency settled an action brought by the
EPA under Section 15(1)(c) of TOSCA for a payment of $125,000 and the
performance of $2,000,000 of environmentally beneficial capital projects at the
Company's ElDorado, Arkansas, site. The Consent Agreement states that the
Company does not admit the allegations made by the EPA.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matter was submitted to a vote of security holders during the quarter ended
December 31, 1995.
PART II
Item 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
As of March 4, 1996, there were approximately 4,400 registered holders of Great
Lakes Common Stock. Additional information is contained in the 1995 Annual
Report to Stockholders, under the captions "Stock Price Data" and "Cash
Dividends Paid" on page 26 all of which are incorporated herein by reference.
Item 6. SELECTED FINANCIAL DATA
This information is contained in the 1995 Annual Report to Stockholders, under
the caption "Financial Review" on pages 20 and 21, and is incorporated herein
by reference.
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION
"Management's Discussion and Analysis of Results of Operations and Financial
Condition" on pages 22 through 26 of the 1995 Annual Report to Stockholders, is
incorporated herein by reference.
6
<PAGE> 8
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The consolidated financial statements together with the report thereon of Ernst
& Young LLP dated January 26, 1996, appearing on pages 27 through 38 and the
"Quarterly Results of Operations" on page 39 of the 1995 Annual Report to
Stockholders, are incorporated herein by reference.
Item 9. DISAGREEMENT OF ACCOUNTING AND FINANCIAL DISCLOSURE
No change of auditors or disagreements on accounting methods have occurred
which would require disclosure hereunder.
PART III
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
<TABLE>
<CAPTION>
Executive Officers
Served as
Name and Age Office Officer Since
- ------------ ------ -------------
<S> <C> <C>
Robert B. McDonald, 59 President and Chief Executive Officer 1981
Robert T. Jeffares, 60 Executive Vice President and Chief Financial Officer 1983
David A. Hall, 51 Senior Vice President 1987
David R. Bouchard, 52 Vice President, Flame Retardants 1990
Steven D. Clark, 50 Vice President, Technology 1995
L. Donald Simpson, 60 Vice President, Intermediate and Fine Chemicals 1992
Lowell C. Horwedel, 63 Vice President 1984
Robert L. Hollier, 53 Vice President 1991
J. Larry Robertson, 47 Vice President, Environment and Engineering 1994
John B. Talpas, 52 Vice President, Manufacturing 1988
Richard R. Ferguson, 44 Vice President, Treasurer and Assistant Secretary 1991
Mary P. McClanahan, 52 Corporate Secretary 1994
David C. Sanders, 52 Associate Vice President, Research and Development 1990
Robert J. Smith, 49 Corporate Controller 1993
Stephen E. Brewer, 46 Assistant Treasurer 1994
John V. Lacci, 44 Assistant Secretary 1994
</TABLE>
Information with respect to directors of the Company is contained under the
heading "Proposal One: Election of Directors" in the Great Lakes' Proxy
Statement relating to the 1996 Annual Meeting of Stockholders dated March 29,
1996, which is incorporated herein by reference.
Item 11. EXECUTIVE COMPENSATION
The information under the heading "Executive Compensation and Other
Information" in the 1996 Proxy Statement is incorporated by reference in this
report.
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information under the heading "Security Ownership of Certain Beneficial
Owners and Management" in the 1996 Proxy Statement is incorporated by reference
in this report.
7
<PAGE> 9
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information under the heading "Compensation Committee Interlocks and
Insider Participation" in the 1996 Proxy Statement is incorporated by reference
in this report.
PART IV
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) 1. Financial Statements
The following Consolidated Financial Statements of Great Lakes Chemical
Corporation and Subsidiaries and related notes thereto, together with the
report thereon of Ernst & Young LLP dated January 26, 1996, appearing on pages
27 through 38 of the 1995 Annual Report to Stockholders, are incorporated by
reference in Item 8:
Consolidated Balance Sheets - December 31, 1995 and 1994
Consolidated Statements of Income and Retained Earnings -
Years ended December 31, 1995, 1994, and 1993
Consolidated Statements of Cash Flows -
Years ended December 31, 1995, 1994, and 1993
Notes to Consolidated Financial Statements
2. Financial Statement Schedules
The following additional information is filed as part of this report and should
be read in conjunction with the 1995 financial statements.
Schedule II - Valuation and Qualifying Accounts
All other schedules for which provision is made in the applicable accounting
regulation of the Securities and Exchange Commission are not required under the
related instructions or are inapplicable, and therefore, have been omitted.
3. Exhibits
13. 1995 Annual Report to Stockholders
21. Subsidiaries - Incorporated herein by reference is the list
of subsidiaries appearing on page 40 of the 1995 Annual
Report to Stockholders
23. Consent of Independent Auditors
(b) Reports on Form 8-K
The Company filed a Form 8-K on December 7, 1995 in connection with certain
amendments to the By-Laws and Shareholder Rights Plan.
(c) Exhibits
The response to this section of Item 14 is submitted as a separate section of
this report.
(d) Financial Statement Schedules
The response to this section of Item 14 is submitted as a separate section of
this report.
8
<PAGE> 10
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
GREAT LAKES CHEMICAL CORPORATION
(Registrant)
Date March 11, 1996 /s/ Robert B. McDonald
--------------- ------------------------------------------------------
Robert B. McDonald, President and Chief Executive
Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated:
Date March 11, 1996 /s/ Robert T. Jeffares
--------------- ------------------------------------------------------
Robert T. Jeffares, Executive Vice President
and Chief Financial Officer
Date March 11, 1996 /s/ Robert J. Smith
--------------- ------------------------------------------------------
Robert J. Smith, Corporate Controller
(Principal Accounting Officer)
William H. Congleton, Director
John S. Day, Director
Thomas M. Fulton, Director
Louis E. Lataif, Director
Richard H. Leet, Director
Martin M. Hale, Director
Date March 11, 1996 /s/ John V. Lacci
--------------- ------------------------------------------------------
John V. Lacci, General Counsel
as attorney in fact for the six Directors listed above
Date March 11, 1996 /s/ Robert B. McDonald
--------------- ------------------------------------------------------
Robert B. McDonald, Director
9
<PAGE> 11
SCHEDULE II
GREAT LAKES CHEMICAL CORPORATION AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
THREE YEARS ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
Additions
----------------------------------
Balance at
Beginning Charges to Costs Charged to Balance at
Description of Period and Expenses Other Accounts Deductions End of Period
- ----------- ------------ ---------------- -------------- ---------- ---------
<S> <C> <C> <C> <C> <C>
1995:
Reserve deducted from asset:
Allowance for doubtful accounts
receivable $ 7,758,000 $ 410,000 $ -0- $ 509,000 (B) $ 7,659,000
-------------- ------------ ----------- ---------- ------------
Accumulated amortization of excess
of investment over net assets of
subsidiaries acquired $ 63,941,000 $ 22,601,000 $ (686,000) (C) $ 2,547,000 (D) $ 83,309,000
-------------- ------------ ----------- ----------- ------------
1994:
Reserve deducted from asset:
Allowance for doubtful accounts
receivable $ 7,088,000 $ 1,174,000 $ -0- $ 504,000 (B) $ 7,758,000
-------------- ------------ ----------- ----------- ------------
Accumulated amortization of excess
of investment over net assets of
subsidiaries acquired $ 43,242,000 $ 20,699,000 $ -0- $ -0- $ 63,941,000
-------------- ------------ ----------- ----------- ------------
1993:
Reserve deducted from asset:
Allowance for doubtful accounts
receivable $ 4,317,000 $ 2,833,000 $ 2,005,000 (A) $ 2,067,000 (B) $ 7,088,000
-------------- ------------ ----------- ----------- -------------
Accumulated amortization of excess
of investment over net assets of
subsidiaries acquired $ 25,272,000 $ 17,970,000 $ -0- $ -0- $ 43,242,000
-------------- ------------ ------------- ------------ -------------
</TABLE>
(A) Reserve balance of Bayrol and Lowi at date of acquisition.
(B) Uncollectible accounts receivable written off, net of recoveries and
foreign currency translation.
(C) Reclassify OSCA and Chemol intangible amortization.
(D) Foreign currency translation.
10
<PAGE> 1
CORPORATE PROFILE
FLAME RETARDANTS
Great Lakes offers the world's most comprehensive line of bromine-based
flame retardants, compounds reacted with or incorporated into combustible
materials such as engineered plastics systems, urethanes and epoxy resins
to reduce or eliminate their tendency to burn. These flame-retarded
products are then used in a wide array of applications that include
textiles, furniture, construction materials and electronic devices. Recent
initiatives in new product development have resulted in flame retardant
compounds developed from alternative base materials which impart flame
retardant qualities to an even broader range of products.
INTERMEDIATES AND FINE CHEMICALS
The Intermediates and Fine Chemicals business unit encompasses a broad
range of industrial and fine chemicals manufactured around the world.
Utilizing integrated raw material positions in bromine and furfural, Great
Lakes develops, manufactures and markets complex, value-added intermediates
used in the production of finished products. Principal applications
include foundry resins, lube oil refining, pharmaceuticals, agrochemicals,
photographic papers and films. The company also serves growing world
markets for fine chemicals from versatile custom manufacturing facilities
located in Newport and Memphis, Tennessee, the United Kingdom and Germany.
PETROLEUM ADDITIVES
Great Lakes is the world's leading producer and distributor of certain
high-performance transport fuel additives. In addition to antiknock
boosters produced by U.K.-based Octel Associates, the company manufactures
a broad line of environmentally friendly petroleum additives that include
cetane enhancers, combustion and cold fuel improvers for diesel fuel,
corrosion inhibitors, and gasoline and diesel detergents. With world-class
research and development facilities and an extensive distribution network
that serves 200 refineries in more than 65 countries, the company is
well-positioned to commercialize products that satisfy stringent
environmental standards and the demanding performance requirements of
highly advanced combustion engines.
POLYMER STABILIZERS
Building on its expertise in flame retardant technology, Great Lakes is
also one of the world's leading developers and manufacturers of polymer
stabilizers. These highly versatile products, consisting primarily of
antioxidants and ultraviolet light absorbers, are added to polymer systems
to sustain specific performance characteristics such as heat resistance and
color consistency. The company improves existing products and designs new
molecules to meet precision polymeric applications at its research and
development facilities in Italy, France and the United States.
SPECIALIZED SERVICES AND MANUFACTURING
Great Lakes owes much of its growth and success to its long-range strategy
of carefully planned, highly selective diversification. The company
continually searches for emerging business opportunities to increase its
technology base and complement its existing businesses. This
entrepreneurial approach takes Great Lakes into such high growth areas as
fluorine chemistry, environmental and oil field services, toxicological
testing, engineered surface treatments, custom manufacturing and
international trading.
WATER TREATMENT
Great Lakes also holds a leadership position in the development and
manufacture of speciality biocides used for both recreational and
industrial water sanitizing applications. Through its Bio-Lab, Inc.,
subsidiary, the company serves world markets with a complete line of
bromine, chlorine and non-oxidizing water sanitizers, as well as pumps,
filters and other operating equipment. Well-recognized brands include
BioGuard(R), OMNI(R), Guardex(R), AquaChem(R) and Pool Time(R), to
name only a few. Great Lakes also produces bromine-based biocides for
a variety of industrial applications including cooling towers, the pulp
and paper industry, and wastewater treatment.
3
<PAGE> 2
FLAME RETARDANTS
REVIEW OF OPERATIONS
With worldwide demand for flame retardants at an all-time high, Great Lakes'
Flame Retardants business unit combined technology leadership with an
aggressive growth strategy to achieve record revenues and profits in 1995. The
company also made major investments last year to increase capacity, improve
production efficiencies and expand its product portfolio.
Great Lakes offers the world's most comprehensive line of bromine-based
flame retardant compounds for use in such diverse applications as building
construction, automotive parts, electronics, and electrical wire and cable.
Strong business conditions, particularly in the United States and Europe, point
to sustained growth in these key industries. Great Lakes is well-positioned to
capitalize on growing market opportunities with production facilities in El
Dorado, Arkansas; Newport, Tennessee; Aycliffe, United Kingdom; and Ramathavov,
Israel.
Record demand for tetrabromobisphenol-A (TBBA) and TBBA derivatives, used
primarily in epoxy circuit board production and ABS applications, has tightened
supply and created longer order lead times. Through a unique manufacturing
joint venture with Bromine Compounds Limited, Great Lakes will receive 50
percent of the production from a new 25,000 metric ton TBBA plant in Israel,
which came on stream in late 1995. Great Lakes is currently designing plans to
increase capacity in late 1996.
Great Lakes likewise made additional capital investments to increase
production capacity for several other flame retardants in 1995. A dedicated
manufacturing unit for PDBS-80(TM), Great Lakes' proprietary dibromostyrene
derivative widely recognized for thermal stability and color consistency, began
production early in the year. The company also expanded capacity for the
additives DE-83R(TM) and DP-45(TM), used in wire and cable jacketing in
telecommunications, and CD-75P(TM) for expandable polystyrene foam such as
insulation board. To keep pace with the accelerating demand for its
tetrabromophthalic anhydride-based products, the company expanded manufacturing
capabilities for PHT4-Diol(TM) in Aycliffe, as well as implemented plans to
double PHT4(TM) capacity at its South Arkansas operations in late 1996.
During this period of growth, flame retardant operations maintained
consistently high levels of manufacturing efficiency. In addition, the
increased demand allowed the company to initiate price increases on select
compounds, offsetting higher raw materials costs and providing an acceptable
return on investment.
Great Lakes continued its commitment to broaden its flame retardant
portfolio in 1995 by developing second- and third-generation products for new
applications and niche markets. Building on its PHT4(TM) technology, the company
expanded its product portfolio with the development of three new compounds.
CN-1753 offers improved UV stability over other commonly used flame retardants
used in polyethylene wire and cable, polyethylene film, and high-impact
polystyrene. CN-2047 brings excellent flame retardancy to rigid polyurethane
insulation materials, as well as improved compatibility with the new blowing
agents that will replace CFCs. CN-2065 complements the company's DE-60F(TM)
Special product by providing an alternative to brominated diphenyl oxide-based
flame retardants in furniture, automobile seating and packaging applications.
All three products will be available to the market in 1996.
OUTLOOK
As the undisputed world leader in flame retardant technology with greatly
expanded production capacity, Great Lakes is well-positioned to capitalize on
the strong global demand for flame retardants anticipated in 1996 and beyond.
Flame Retardants
(in millions of dollars)
[BAR CHART]
[PHOTO OF MAN AT DESK]
[CAPTION]
Growing business and consumer demand for high-tech equipment creates favorable
market conditions for Great Lakes' flame retardants, which provide fire
protection for computers, circuit boards and other electronic devices.
14
<PAGE> 3
INTERMEDIATES
AND FINE CHEMICALS
REVIEW OF OPERATIONS
Since mid-1993, the Intermediates and Fine Chemicals business unit has made
capital investments of more than $100 million to meet sharply rising demand for
bromine and furfural, the basic building blocks for many of Great Lakes'
value-added products. Favorable market conditions -- including a strong
worldwide economy, expanded uses for polytetramethylene ether glycol (PTMEG)
based products, and the trend toward outsourcing the manufacture of fine
chemicals -- helped the business unit produce significantly improved business
results in 1995.
INTERMEDIATES
Great Lakes is the world's leading producer of bromine, a liquid,
non-metallic element extracted from brine in seawater or mineral deposits miles
below the earth's surface. Bromine and bromine derivatives are used in a wide
variety of applications such as flame retardants, water treatment products and
clear drilling fluids.
Anticipating strengthening market conditions, Great Lakes increased
production capacity at its facilities in South Arkansas and Wales, positioning
the company to pick up added business throughout the year. This expansion, the
company's largest capital investment ever in elemental bromine and its first
grass roots expansion in two decades, strengthens the company's position as the
only bromine producer serving world markets from manufacturing sites on two
continents.
Furfural, another Great Lakes core product, is derived from readily
available agricultural by-products such as corn cobs, grain hulls and sugar
cane bagasse. Furfural-based specialty chemicals find use in such diverse
applications as engineered plastics, specialty resins to make sand cores for
the foundry industry, and solvents for industrial and retail paint strippers.
Furfuryl alcohol volumes sold to the foundry industry remained strong
throughout the year, driven primarily by a strengthening machine tool industry.
In addition, the profitability of this business returned to more historic
levels in 1995 due to U.S. Department of Commerce regulations instituting
duties on furfuryl alcohol imported into the United States.
One furfural derivative, PTMEG, marketed under the trade name POLYMEG(R)
polyols, particularly benefited from renewed vigor in polyurethane applications
for the automotive, wire and cable, and coatings industries. PTMEG adds
durability and elasticity to a variety of polyurethane systems, and strong
gains in the recreational market spurred its increased use for the colorful
synthetic fibers of athletic apparel, shoe soles, and wheels for in-line
skates. To meet customers' growing PTMEG needs, Great Lakes recently completed
the first phase of a multimillion dollar expansion of its Memphis, Tennessee,
manufacturing complex. The second phase, a separate manufacturing facility
which will more than double Great Lakes' PTMEG capacity, will come on stream in
late 1996. Combined, these two phases represent one of the company's most
significant capital investments in 1995.
High-growth, broad-based specialty derivatives such as PTMEG epitomize
Great Lakes' entrepreneurial approach to creating and exploiting market
opportunities that fit its business and offer promising growth opportunities.
Great Lakes continually finds new ways to add value to its core products; for
example, the company is in the early stages of identifying a new route to
furfural production that potentially offers vastly improved economics.
FINE CHEMICALS
Taking advantage of its strong raw materials position in bromine and furfural,
Great Lakes also manufactures fine chemical intermediates used by other
companies to produce pharmaceutical, photographic and agricultural products. In
1995 global pharmaceutical and agrochemical companies continued the trend of
outsourcing the manufacture of their intermediate chemicals. With its strong
process technology base, manufacturing expertise and global presence, Great
Lakes is well-positioned to capitalize on enormous growth opportunities in the
$8 - $10 billion fine chemicals market.
Great Lakes also custom manufactures compounds and intermediates for
individual customers, including the recent development of customized compounds
for antibiotics and over-the-counter pain relievers for several major
pharmaceutical producers. Custom manufacturing helps the company further
leverage its core competencies by extending its process and product expertise
in new areas as well as uncovering and developing new niche applications with
high growth potential.
Great Lakes operates fine chemical and custom manufacturing facilities in
Newport and Memphis, Tennessee; Konstanz, Germany; and Halebank, United
Kingdom. These ISO 9000 certified facilities maintain the highest quality
standards, producing intermediates and custom compounds that meet our
customers' demanding performance, environmental and quality requirements.
OUTLOOK
The Intermediates and Fine Chemicals business unit will experience sustained
growth in each of its segments throughout 1996 and beyond. By increasing
capacity and broadening manufacturing capabilities and expertise, Great Lakes
will be able to meet rising demand for bromine, furfural and other fine
chemicals, ensuring its place as a world leader in these technologies.
INTERMEDIATES AND FINE CHEMICALS
(in millions of dollars)
[BAR CHART]
[PICTURE OF WOMAN]
[CAPTION]
Great Lakes has leveraged its strong raw materials positions to capitalize on
two trends in the pharmaceutical industry--the outsourcing of the manufacture
of intermediate chemicals and the increasing need for customized compounds.
15
<PAGE> 4
PETROLEUM ADDITIVES
REVIEW OF OPERATIONS
Great Lakes is the world's leading supplier of a wide range of fuel additives
for more than 200 refineries in 65 countries. By broadening its product line
and strengthening its geographic market penetration, the company's Petroleum
Additives business unit once again registered a strong performance in 1995.
Great Lakes' diversification strategy reflects its ongoing commitment to
respond to changing market and consumer needs. The company offers the most
comprehensive array of performance-enhancing petroleum additives, including
cetane number improvers, fuel stabilizers, combustion improvers, petroleum
dyes, and detergents for gasoline and diesel fuel, all of which help engines
run more efficiently. This wide range of complementary products enables the
company to market pre-blended, customized fuel stabilizer packages that make
handling and storage more convenient. The Petroleum Additives business unit
also extends its technology into other fuel types with proprietary products
such as Stadis(R) 450, the only anti-static agent approved throughout the world
for aviation fuel.
With a strong manufacturing base and ongoing product development
initiatives, Great Lakes is well-positioned to respond quickly to changing fuel
requirements around the globe. In addition to its European operations, the
company has plans for its wholly owned subsidiary Octel America to establish a
manufacturing presence in North America -- the world's largest market for
efficient, environmentally friendly petroleum additives. Octel America has
already developed a series of new products targeted specifically for this
market. Its DMA 496, an intake valve detergent, provides a superior performance
- - cost package. The company's DDA 2500 series of premium diesel detergents
received superior ratings on both Filter Plugging and L10 Cummins tests, two
major approvals needed for use in the United States.
To assure quality and develop other new product applications, Great Lakes
operates fuel testing laboratories on two continents, providing numerous
testing scenarios for different fuel types. The company's U.K.-based subsidiary
Octel Associates (Octel) operates an engine laboratory near London which is the
only test laboratory outside the United States to be included in an official
U.S. program to develop a new inlet valve detergency procedure. This new
procedure will standardize on a Ford engine, differing from other tests which
utilize a BMW engine. In addition, the greater stringency of current test
standards will result in improved product prices and margins for this growing
area of the business.
On another front, Octel initiated steps to ensure its position as the
world's major supplier of antiknock compound. While lead antiknock compound
remains the most cost-effective and energy-efficient additive for producing
incremental octane quality in refineries, all indicators point to steady
declines in world lead antiknock markets. To moderate this trend and maintain
profitability, the company completed a comprehensive assessment of the
antiknock compound business and then adapted its pricing strategy to reflect
antiknock's value to individual refineries. This action promises to prolong the
life of antiknock compound over a longer period of time.
Another key element in Octel's diversification efforts entails broadening
its manufacturing expertise into other industrial chemical products, most
notably bromine and sodium derivatives, chlor-alkali products and other
specialty chemicals. The company's new, multi-product bromine manufacturing
plant in North Wales will produce bromine-based intermediates for use in the
manufacture of pharmaceuticals, pesticides and other agricultural chemical
products. Octel also recently started production on a chemical intermediate for
a European consumer product, with potential revenues from this single-customer
project approaching $15 million by the end of 1996.
OUTLOOK
Supported by significant R&D, capital investment and cost reduction programs,
the aggressive diversification campaign for the Petroleum Additives business
unit will accelerate in 1996 to meet the expanding need for efficient,
environmentally friendly fuel additives.
PETROLEUM ADDITIVES
(in millions of dollars)
[BAR CHART]
[PHOTO OF TRUCK]
[CAPTION]
Great Lakes' cetane enhancers, detergents and other environmentally friendly
diesel fuel additives improve engine performance while significantly reducing
exhaust emissions.
16
<PAGE> 5
POLYMER STABILIZERS
REVIEW OF OPERATIONS
By leveraging its specialty chemical expertise to capitalize on synergies with
its existing additives business, Great Lakes has become in just three years a
world-class developer, manufacturer and marketer of cost-effective,
performance-enhancing polymer stabilizers. This fast-growing business unit,
which achieved double-digit gains in both sales and profits in 1995, is
expanding its stake in this dynamic global industry by extending its
manufacturing and market presence in North America, Europe and the Pacific Rim.
Great Lakes' product portfolio includes antioxidants, light stabilizers
and other performance-enhancing polymer additives. By improving polymer
processing, color stability, heat and long-term ultraviolet (UV) light
resistance in a wide range of polymer systems, Great Lakes enables its
customers to bring this cost-effective technology to new markets and to an
expanding range of applications. In the automotive industry, for example, where
manufacturers strive for lighter vehicles and flexible materials, and with the
use of polypropylene and other less costly plastics on the rise, demand for
polymer stabilizers is at an all-time high.
Through its continual investment of resources in research and development,
coupled with a sound business strategy, Great Lakes has greatly broadened its
polymer stabilizer capabilities and is well-positioned to take advantage of
emerging market opportunities. Great Lakes is the only company to offer a
comprehensive line of flame retardants and polymer stabilizers and is, thus,
best qualified to ensure compatibility between these additives. The Polymer
Stabilizers business unit will establish a manufacturing presence in the $600
- -$700 million North American market with its new production center in Newport,
Tennessee, expected to begin operations in the third quarter of 1996. This
facility will produce a wide range of products, as well as standard and
tailor-made blends and multiple packaging options.
While Great Lakes already offers the widest range of hindered phenolic
antioxidants in the industry, it introduced and commercialized three new
specialty antioxidants in 1995: Anox(R) 70 for polyethylene cable jacketing;
Lowinox(R) GP-45, used mainly in styrene applications such as computer housing;
and Lowinox(R) HD-98 for nylon applications in carpeting and automobile parts.
Another product category offering tremendous opportunities is hindered
amine light stabilizers (HALS), used to protect plastic from ultraviolet light
degradation. To better serve this market segment, Great Lakes' new HALS
manufacturing facility in Persan, France, came on stream in 1995, providing
greater capacity for its new, patented family of Uvasil 299 stabilizers.
Uvasil's unique molecular structure offers powerful UV protection through
superior compatibility with leading polymers. The company will soon broaden
production capabilities at this new plant to include additional HALS based on
the same technology.
Finding new applications for polymer stabilizers begins by combining an
in-depth understanding of product characteristics with a dedicated commitment
to meeting customers' unique needs. To accomplish this, Great Lakes operates
Technical Service Centers in Milan, Italy, and West Lafayette, Indiana, the
latter of which opened in mid-1995. Plans are well under way to establish an
additional Technical Service Center in the Far East. With its sophisticated
processing, aging and analytical equipment, Great Lakes offers a full range of
services, including testing new products for performance characteristics,
making formulation recommendations, and developing new applications and uses
for existing products. These centers provide major polymer producers and
compounders with customized products and customer-specific technical support.
Great Lakes will establish additional Technical Service Centers as needed,
resulting in greater service to its worldwide customer base.
OUTLOOK
Opportunities are abundant in this dynamic growth industry. Great Lakes has
built a solid foundation -- established technology, a global presence,
integrated manufacturing, and market-driven research and development -- to grow
its share of this $1.5 billion market.
POLYMER STABILIZERS
(in millions of dollars)
[BAR CHART]
[PHOTO OF MAN]
To meet customers' specific needs, Great Lakes' market-driven research and
development has identified several new molecules and alternate physical forms
for cleaner, safer processing.
17
<PAGE> 6
SPECIALIZED SERVICES
AND MANUFACTURING
REVIEW OF OPERATIONS
The Specialized Services and Manufacturing business unit embodies Great Lakes'
opportunistic, entrepreneurial approach, and its continuing success reaffirms
the company's commitment to developing and acquiring technologies that serve
fast-growing new markets. The unit consists of five technology-based,
stand-alone businesses, the majority of which grew by more than 25 percent in
1995.
FLUORINE CHEMICALS
Innovative research and development efforts, the fuel for Great Lakes' growth,
led to the extension of the company's specialty chemical expertise into
fluorine, a chemical with properties similar to bromine. Fluorine chemistry
opens the door for new product development in refrigerants, pharmaceutical,
fire suppression and specialty polymer markets.
One fluorinated derivative that continues to post strong gains is the
FM-200(R) fire extinguishant. Introduced just three years ago and manufactured
at the company's South Arkansas operations, FM-200(R) is now the leading choice
for fire protection with more than 10,000 installed systems worldwide. Used to
protect such high-value assets as computer and telecommunications facilities,
museums and high-tech medical diagnostic equipment, FM-200(R) is finding
increasing applications in the military sector. Great Lakes also applies
fluorine technology to other markets by developing new products such as
specialty refrigerants to replace CFCs.
ENVIRO-ENERGY PERFORMANCE GROUP
This group consists of two key subsidiaries -- OSCA, Inc., and Four Seasons
Industrial Services, Inc. Each holds a prominent position in growing world
markets.
OSCA continued to benefit from a greater international presence and
increased demand for its bromine-based clear workover and completion fluids and
ancillary services used in the production of oil and natural gas. In late 1995,
OSCA and Norwegian-based Norsk Hydro, a.s., jointly formed a new company,
Forbrico, Ltd., to market potassium, cesium and sodium formates as completion
and drilling fluids, and to provide formulation, blending and reclamation
services for these products. Forbrico is the first company to offer this
comprehensive array of formate products and services. The joint venture also
accelerates OSCA's ongoing efforts to develop and commercialize new brine-based
completion fluids.
Four Seasons and its affiliate Aquaterra make an ongoing contribution to
the company's environmental business by providing services such as site
assessment and evaluation, groundwater treatment systems, soil reclamation,
waste minimization and pollution prevention. In 1995, Aquaterra completed
projects in Europe, India and the Far East. In the U.S., it conducted large
multiphased projects for governmental agencies, including the United States
Department of Defense and Army Corps of Engineers, as well as for commercial
clients ranging from small independents to large, multinational companies.
TOXICOLOGICAL TESTING
Great Lakes' wholly owned WIL Research Laboratories, Inc., subsidiary is one of
a select few, fully integrated, interdisciplinary research service firms
performing private and government- mandated toxicological assessments. The
company conducts critical product research and development for pharmaceutical,
chemical, veterinary medical, agricultural, food and consumer product
industries -- services in increasing demand as countries around the globe adopt
more stringent requirements for these products. To accommodate its expanding
study load as well as centralize its testing facilities, WIL completed a
multimillion dollar, 100,000 square-foot expansion in early 1995, its fourth
significant capital construction in the last five years.
ENGINEERED SURFACE TREATMENTS
Through its E/M Corporation subsidiary, Great Lakes is a leading developer and
applicator of engineered surface treatments that impart such properties as
corrosion control, lubricity and electromagnetic interference shielding. E/M
continues to adapt its products to new applications by tapping into markets
outside the traditional aerospace and transportation industries.
INTERNATIONAL TRADING
Great Lakes' 78 percent owned affiliate, Chemol RT, a leading distributor of
chemicals, plastics, pesticides and fertilizers, gives the company and other
chemical manufacturers convenient access to emerging Central and Eastern
European markets. Headquartered in Budapest, Chemol has an extensive presence
and keen understanding of the chemical industry in a part of the world
important to Great Lakes' international growth strategy. Once concerned solely
with marketing Hungarian-produced chemicals, Chemol's five specialized product
departments today offer a well-established infrastructure to chemical
manufacturers around the world.
OUTLOOK
Strategically positioned to capitalize on anticipated high-growth rates in
diverse specialty markets, the Specialized Services and Manufacturing business
unit appears likely to continue its record of outstanding performance.
[PHOTO OF MAN]
[CAPTION]
Serum chemistry analysis is one of the many customized toxicological services
available from Great Lakes' wholly owned WIL Research Laboratories, a fully
integrated, interdisciplinary research service firm providing both private and
government-mandated assessments.
SPECIALIZED SERVICES AND MANUFACTURING
(in millions of dollars)
[BAR CHART]
18
<PAGE> 7
WATER TREATMENT
REVIEW OF OPERATIONS
By expanding into new markets, increasing production capacity and extending its
product offering, Great Lakes strengthened its position as the world's premier
supplier of water-sanitizing products and accessories in 1995. With its
efficient, cost-effective and environmentally safe solutions, the company's
Water Treatment business unit achieved all-time record sales levels in
recreational, industrial and consumer markets.
RECREATIONAL
Buoyed by favorable weather conditions throughout the United States and Canada,
the Water Treatment business unit posted strong sales of its recreational water
treatment chemicals. In addition, the company enhanced its ability to access
and serve key market segments through a geographically strategic acquisition,
the streamlining of its European production and packaging operations, and
improved research and development capabilities.
Great Lakes' wholly owned BioLab subsidiary purchased the assets of
PoolBrite of Johannesburg, South Africa, that country's leading manufacturer of
recreational water treatment chemicals and accessories. The move complements
Great Lakes' ongoing expansion efforts in the major water treatment markets of
North America, Europe and Australia by providing the means for introducing
these products to the growing African marketplace.
Also during the year, the company's Bayrol subsidiary reduced its
manufacturing and maintenance costs -- while improving logistics and safety --
by reorganizing its European-based manufacturing operations. Great Lakes also
improved customer service and process capabilities by establishing a Technology
and Development Center with research and development, quality assurance, and
technical service functions all under one roof. By conducting R&D and technical
service for both industrial and recreational water treatment in one central
location, the company is better equipped to capitalize on synergies between the
two areas.
Following its successful introduction in 1994, BioLab's Vantage(TM)
Commercial Water System continues to gain market acceptance for use in
municipal pools, water parks, resort or specialty pools and other large
commercial pools. With its patented bromine-based technology, the Vantage(TM)
System is the first sanitation system utilizing corona discharge ozone
generators to be listed by National Sanitation Foundation (NSF) International
as conforming to the requirements of NSF Standard 50-Ozone Process Equipment.
The company will gain additional exposure for this product through its use on
the Georgia Tech Aquatics Center pools, site of the 1996 Centennial Olympic
Games swimming and diving venues.
INDUSTRIAL
Great Lakes' proprietary biocides are environmentally suitable alternatives to
traditional biocides and offer significant safety and handling benefits. Their
various industrial applications include cooling towers, the pulp and paper
industry and wastewater treatment facilities.
To meet the increasing demand for these bromine-based products, Great
Lakes is constructing a new, dedicated bromochlorodimethylhydantoin (BCDMH)
manufacturing facility at its Lake Charles, Louisiana, site, which will expand
its annual production capacity of this key raw material by up to 20 million
pounds. This expansion underscores the company's commitment to the global water
treatment industry, as well as ensures its capability to supply current and
future requirements.
Another growth factor for this business unit will be the continuing
development and extension of new applications for its core products. The
company successfully introduced last year a powdered form of BromiCide(R), a
biocide that provides a more effective shock disinfecting treatment for the
pulp and paper industry. Sweden's governing regulatory body, the National
Chemicals Inspectorate, named Great Lakes' BromiCide(R) one of only two
recipients of its Nordic White Swan Award given to environmentally friendly
products. This designation will lead to greater acceptance in Europe, which has
a $150 - $200 million market for biocides in the paper industry.
Great Lakes also further extended its bromine technology into home care
products in 1995 with the development of additional proprietary formulations of
consumer water sanitizing products. Great Lakes has completed the launch phase
for a concentrated, bromine-based automatic toilet bowl cleaner, marketed as
Ty-D-Bol Bleach and Ty-D-Bol Dura-Bleach(TM) by Kiwi Brands. The company also
increased production of dimethylhydantoin (DMH), used in health care and
consumer markets as a preservative, at its Adrian, Michigan, facility.
OUTLOOK
With a growing presence on four continents, this business unit will parlay
efficient manufacturing with aggressive new product development to achieve
greater penetration in a variety of promising markets around the world.
[PHOTO OF PRODUCTS]
[CAPTION]
As a world leader in recreational water treatment, Great Lakes markets its
extensive line of swimming pool and spa products in North America, Europe,
Australia, Africa and several Mediterranean countries.
WATER TREATMENT
(in millions of dollars)
[BAR CHART]
19
<PAGE> 8
FINANCIAL REVIEW
(in thousands of dollars, except per share data)
<TABLE>
<CAPTION>
1995 1994 1993 1992
<S> <C> <C> <C> <C>
SUMMARY OF EARNINGS
Net sales $2,361,069 2,065,008 1,792,042 1,496,478
Percent increase over previous year 14.3 15.2 19.8 14.4
Income from operations $ 497,343 438,689 424,781 363,010
Percent of net sales 21.1 21.2 23.7 24.3
Income before taxes $ 437,873 402,675 383,384 332,735
Percent of net sales 18.5 19.5 21.4 22.2
Income taxes $ 142,300 124,000 110,600 100,000
Percent of income before taxes 32.5 30.8 28.8 30.1
Net income $ 295,573 278,675 272,784 232,735
Per share $4.52 4.00 3.82 3.27
Percent of net sales 12.5 13.5 15.2 15.6
Percent of stockholders' average equity 21.7 21.7 23.6 23.8
FINANCIAL POSITION AT YEAR-END
Working capital $ 659,586 551,735 489,179 342,171
Current ratio 2.4 2.3 2.3 1.8
Capital expenditures $ 246,639 123,109 79,270 69,368
Total assets $2,468,869 2,111,465 1,900,864 1,731,989
Long-term debt $ 340,145 143,661 61,041 45,642
Percent of total capitalization 18.8 9.7 5.1 7.3
SHARE DATA
Stockholders' equity $1,416,183 1,310,948 1,256,563 1,052,851
Per share $ 21.92 19.48 17.63 14.75
Cash dividends per share
Declared during year $ .44 .39 .35 .31
Paid during year $ .43 .38 .34 .30
Payout as percent of net income 9.7 9.8 9.2 9.5
Shares outstanding
Average during year 65,364,066 69,658,653 71,329,145 71,164,010
At year-end 64,604,377 67,297,420 71,274,796 71,410,458
Stock price
High $ 74 5/8 82 84 71 3/8
Low $ 55 3/4 48 3/4 64 1/2 50 1/4
At year-end $ 72 57 74 5/8 69 1/4
</TABLE>
Share data has been restated to reflect the 100 percent stock dividends on
January 30, 1992, and October 31, 1989.
Long-term debt in 1991 excludes debt of $125 million incurred to fund an
acquisition.
20
<PAGE> 9
GREAT LAKES CHEMICAL CORPORATION
AND SUBSIDIARIES
<TABLE>
<CAPTION>
Ten-Year
Growth
1991 1990 1989 1988 1987 1986 1985 Percentage
<S> <C> <C> <C> <C> <C> <C> <C>
1,307,607 1,066,298 792,327 557,770 478,386 300,329 276,932 23.9
22.6 34.6 42.1 16.6 59.3 8.4 (0.5)
309,867 270,452 163,918 92,600 76,120 42,895 44,911 27.2
23.7 25.4 20.7 16.6 15.9 14.3 16.2
225,473 209,449 167,918 143,488 85,036 42,717 45,368 25.4
17.2 19.6 21.2 25.7 17.8 14.2 16.4
68,000 68,600 45,000 40,200 29,500 15,900 16,550
30.2 32.8 26.8 28.0 34.7 37.2 36.5
157,473 140,849 122,918 103,288 55,536 26,817 28,818 26.2
2.23 2.00 1.76 1.48 .83 .44 .48 25.1
12.0 13.2 15.5 18.5 11.6 8.9 10.4
19.2 21.1 22.9 23.6 18.2 13.0 15.7
338,009 301,092 236,648 100,238 101,083 113,370 78,009 23.8
2.1 2.0 2.1 1.8 1.9 2.4 2.3
71,243 48,565 40,466 47,017 35,186 18,327 25,601
1,649,132 1,406,296 1,097,400 663,838 577,087 491,567 323,121 22.5
139,788 76,657 113,700 19,266 42,149 163,319 36,862
4.4 12.8 17.5 3.7 9.4 40.1 15.5
900,344 744,158 590,861 482,225 392,602 216,265 195,416 21.9
12.69 10.56 8.42 6.91 5.64 3.60 3.26 21.0
.27 .23 .20 .18 .16 .14 .12 13.9
.26 .22 .19 .17 .15 .13 .11 14.6
12.1 11.5 11.4 12.2 19.3 31.8 25.0
70,700,332 70,287,088 69,885,212 69,658,840 66,469,556 59,992,472 59,841,260
70,923,990 70,443,150 70,098,826 69,653,184 69,580,948 60,044,516 59,908,468
58 34 24 16 1/2 19 1/4 11 1/8 11 1/8
30 1/8 20 5/8 14 1/8 12 1/8 9 7 1/2 7 7/8
57 1/4 31 7/8 23 1/8 14 1/8 13 1/2 9 9 3/4 22.1
</TABLE>
21
<PAGE> 10
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
OPERATING RESULTS 1995 COMPARED WITH 1994
Sales for the year were a record $2.4 billion, an increase of 14 percent
over the $2.1 billion reported in 1994. Sales have grown at an annual compound
rate of 24 percent over the last ten-year period. Sales by business unit are set
forth in the following table (in millions):
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------
Percent
Increase
Over Prior
1995 1994 1993 Year
------------ -------- -------- ----------
$ % $ % $ % 1995 1994
- ----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Flame Retardants 300 13 265 13 240 13 13 10
Intermediates
and Fine
Chemicals 302 13 262 13 240 13 15 9
Petroleum
Additives 656 28 610 30 576 32 8 6
Polymer
Stabilizers 224 9 162 8 81 5 38 100
Specialized
Services and
Manufacturing 460 19 383 18 294 16 20 30
Water Treatment 419 18 383 18 361 21 9 6
- ----------------------------------------------------------------------------
2,361 100 2,065 100 1,792 100 14 15
- ----------------------------------------------------------------------------
</TABLE>
Sales in 1995 increased $296 million over the prior year due to
the following (in millions):
<TABLE>
- ----------------------------------------------------------------------------
<S> <C>
Selling Prices $ 87
Volume 81
Acquisitions 102
Foreign Exchange 26
- ----------------------------------------------------------------------------
$296
- ----------------------------------------------------------------------------
</TABLE>
Flame Retardants sales reached a record $300 million, an increase of $35
million over 1994. Selling price increases effected in late 1994 and early 1995
were maintained throughout the year. Incremental capacity expansions allowed
the unit to satisfy strong market requirements in the United States and the
Pacific Rim. Sales volumes in Europe were comparable to the prior year.
Intermediates and Fine Chemicals sales increased $40 million, totaling $302
million for the year. Demand was strong across all product lines with furfural
and derivatives, bromine and derivatives, and fine chemicals posting
double-digit volume gains. All product lines achieved price improvements.
Furfural and derivatives led the price improvements with the combined effect of
tight raw material supply and strong market demand for high value-added
derivative products.
Petroleum Additives sales improved $46 million in 1995 reflecting sales added
by the September 1994 acquisition of E. I. du Pont de Nemours (DuPont) fuel
additives business. In the alkyl lead compound product line, retail (direct
sales to refineries) volumes declined approximately 8 percent for the year
which is on the low side of the expected 7 percent to 10 percent annual market
decline. Price improvements for the year averaged about 9 percent, which is a
lower rate of increase than achieved in prior years. Product pricing reflects
the Company's strategy to extend the life of the product, refinery economics
related to achieving octane ratings and the changing mix of geographic regions
where lead fuels are used. Future price increases are expected to be in the high
single-digit range.
In the second quarter of 1994, the Company entered into an agreement to supply
Ethyl Corporation's requirements for alkyl lead compound (wholesale compound).
During 1995 wholesale volumes declined 19 percent while prices, which are a
function of both changes in production costs and retail prices for compound,
improved about 5 percent for the year. The relationship of retail to wholesale
compound sales was 72/28 in 1995 compared to 70/30 in 1994.
Polymer Stabilizers sales increased 38 percent, or $62 million, during 1995.
Approximately half of the improvement is attributable to the April 1994
acquisition of EniChem Synthesis S.p.A.'s (GLCI) polymer additives and
associated chemicals business. The business unit successfully expanded
its market presence through new product introductions and incremental capacity
increases to meet customer requirements. Volume gains made during the first
half of the year were offset in part by customer year-end inventory
corrections. Product pricing increased over 1994 and was strong all year.
Specialized Services and Manufacturing posted a $77 million sales improvement
over 1994 primarily due to Chemol's trading activities in Central Europe. The
oil field service business registered solid improvements through an expanded
presence in international markets and a broader offering of oil and gas well
completion services. The fluorine chemicals business, led by expanded market
acceptance of the FM-200(R) fire extinguishing product, gained over 40 percent
for the year.
Water Treatment sales gained $36 million in 1995. The extended summer season
and higher than normal temperatures contributed to strong volume gains in
recreational water chemical sales. Volume contributed more than 40 percent of
the sales improvement with acquisitions adding another 35 percent. Favorable
currency effects account for the balance of the improvement as competitive
pressures did not allow for price improvement.
22
<PAGE> 11
<TABLE>
- -------------------------------------------------------------------------------
Gross Profits as a
Year Percentage of Net Sales
- -------------------------------------------------------------------------------
<S> <C>
1995 33.4
1994 33.7
1993 36.8
- -------------------------------------------------------------------------------
</TABLE>
Gross profits of $788 million increased $93 million over the prior year.
Increases in selling prices were more than double manufacturing and raw material
cost increases. Core specialty chemical businesses registered volume gains that
more than offset declines in the Petroleum Additives business unit. The
contribution from acquisitions accounted for about 30 percent of the overall
improvement while foreign exchange had a minimal impact on the increase in gross
profits. As a percentage of sales, gross profits declined slightly as a one
percentage point improvement in our core businesses was offset by a decline in
Petroleum Additives.
Although the Company continues to have approximately 50 percent of its business
transacted in foreign currencies, principally the pound sterling, deutsche mark
and yen, currency changes did not have a significant impact on profit margins.
To minimize the effect of currency fluctuations, the Company uses foreign
exchange contracts, average rate options, and other financial instruments. A
dollar billing program is in place at Octel and approximately 50 percent of this
foreign subsidiary's sales are in dollars; the balance of Octel's billing is in
pound sterling which approximates its pound sterling costs. This program
effectively insulates Octel's profits, measured in dollars, from fluctuations in
the pound sterling.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------
SAR expense as a Percentage of Net Sales
Selling &
Year Administration R&D Total
- ----------------------------------------------------------------------
<S> <C> <C> <C>
1995 9.6 2.7 12.3
1994 9.5 2.9 12.4
1993 10.0 3.1 13.1
- ----------------------------------------------------------------------
</TABLE>
Selling, administration and research (SAR) expenses in 1995 were $291 million,
an increase of $34 million from the $257 million in 1994. As a percentage of
sales, SAR expense declined slightly. In absolute terms, about half of the
increase is attributable to increased spending associated with the growth of
the business, 30 percent is related to acquisitions, and the balance due to
negative foreign exchange impacts.
Research and development continues to be an area of emphasis for the Company.
Spending in 1995 amounted to $63 million, an increase of 6 percent over the
prior year. During 1995, efforts continued to focus on new and improved flame
retardants, furfural derivatives, pharmaceutical intermediates, new fuel
additives, and water treatment products.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------
Income from Operations as
Year a Percentage of Net Sales
- ----------------------------------------------------------------------
<S> <C>
1995 21.1
1994 21.2
1993 23.7
- ----------------------------------------------------------------------
</TABLE>
Operating income increased 13 percent to $497 million on the strength of the
strong performance by the core business units. Operating income of these
businesses increased 31 percent over the prior year.
Equity in earnings of affiliates and other income was $29 million in 1995, a
decrease of $16 million from the prior year. Nonrecurring 1994 gains from
insurance settlements, the disposition of a product line, and the settlement of
a natural gas contract-related matter account for half of the decrease with the
balance related to converting an equity position in Huntsman Chemical
Corporation (HCC) to cumulative preferred shares in March 1995.
Interest and other expenses amounted to $55 million in 1995, an increase of $7
million from the prior year. Interest expense, net of capitalized interest on
construction projects, increased $5 million due to higher borrowing in support
of the Company's share repurchase program and capital investment projects. Other
expenses increased due to the settlement of various legal matters. Amortization
of intangibles declined slightly as goodwill amortization associated with the
investment in HCC was eliminated with the conversion of the equity position in
HCC to preferred stock. Foreign exchange gains and losses, which are included in
other expenses, were not significant.
Minority interest in the income of subsidiaries includes an approximate 12
percent minority interest in Octel and a 22 percent minority interest in Chemol.
The minority interest in Octel is before income taxes as earnings are
predominantly from a partnership and, therefore, taxes are paid by each partner
individually.
<TABLE>
<CAPTION>
- ------------------------------------------------
Effective Tax Rate
Year Percentage
- ------------------------------------------------
<S> <C>
1995 32.5
1994 30.8
1993 28.8
- ------------------------------------------------
</TABLE>
Income taxes of $142 million increased $18 million over the prior year. The
higher effective tax rate is due to a reduction
in reversals of prior year tax reserves and from a change in the mix of
earnings from lower to higher tax rate jurisdictions. These items account for
approximately $7 million of the increase with the balance related to increased
earnings.
Net income for 1995 was $296 million, or $4.52 per share, compared to net
income of $279 million, or $4.00 per share in 1994. The increase in net income
and earnings per share was 6 percent and 13 percent, respectively. The share
repurchase program since inception added about $0.18 to 1995 earnings per
share.
23
<PAGE> 12
MANAGEMENT DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
OPERATING RESULTS 1994 COMPARED WITH 1993
Net sales in 1994 were $2.1 billion, an increase of $273 million, or 15 percent,
over 1993 net sales of $1.8 billion.
Key factors contributing to the increase in sales include:
selling price increases of $48 million, volume improvements of $114 million, and
acquisitions of $140 million offset by divestitures of $33 million.
Flame Retardants sales gained $25 million from the prior year, reflecting
strong demand in North America and the Pacific Rim. Capacity increases for
several key products brought on stream during the latter part of the year and
price increases that became effective in the fourth quarter contributed to the
strong performance.
Intermediates and Fine Chemicals posted a $22 million improvement over 1993.
Volumes were strong and pricing flat to down across all product lines except for
agricultural chemicals, whose volume was constrained by legislated limitations
on methyl bromide. Pricing for agricultural chemicals showed improvement.
Furfural and related derivative products, which have been negatively impacted
over the past few years by recessionary economies in Europe and Japan and by
competitive price pressures from foreign competition attempting to gain market
share, saw price erosion abate during the year and turn slightly positive in the
fourth quarter.
Petroleum Additives sales gain for the year of $34 million includes about $20
million in sales attributable to the September acquisition of DuPont's fuel
additives business. The balance of the improvement came primarily from price
increases that more than offset lower volumes. During 1994, retail compound
volumes declined a total of 17 percent. First half declines due to logistical
problems and the temporary lack of hard currency by customers in Iran and
Russia were, in part, offset by normal selling patterns in the second half of
the year. Pricing for retail compound improved about 15 percent for the year,
which is consistent with prior trends. Wholesale volumes almost doubled during
1994 due to the supply agreement with Ethyl Corporation; prices declined
slightly. The relationship of retail to wholesale compound sales was about
70/30 in 1994, compared to about 85/15 in 1993.
Polymer Stabilizers sales doubled during the period reflecting the acquisition
of GLCI in April 1994 and the full-year effect of the acquisition of LOWI in
June of 1993.
Specialized Services and Manufacturing posted an $89 million sales improvement
over 1993. While all operations in this business unit registered year-over-year
sales gains, the preponderance of the increase was derived from Chemol's
chemical trading activities in Central Europe and Four Seasons' environmental
remediation business.
Water Treatment, benefiting from both excellent weather conditions during the
pool season and market expansion, improved sales by $22 million, or 6 percent,
over 1993.
Gross profits of $695 million were up $36 million over 1993; however, as a
percentage of sales, gross profits declined approximately 3 percentage points.
The margin compression is attributable to price increases in business units
other than Petroleum Additives not keeping pace with production cost increases
primarily related to raw materials such as chlorine and caustic soda; volume
gains coming predominately in lower margin areas such as chemical trading and
certain environmental services; the cessation of the highly profitable halon
business at the end of 1993; increased alkyl lead compound sales to the
wholesale market; and recently acquired businesses that have yet to achieve
margins comparable with corporate norms.
SAR expenses in 1994 were $257 million, an increase of $23 million over the
prior year's $234 million. As a percentage of sales, SAR expense increased at a
rate less than sales. In absolute terms, acquisitions accounted for about half
of the increase. The balance of the increase was commensurate with the growth of
the business.
Equity in earnings of affiliates and other income amounted to $46 million, an
increase of $10 million over the $36 million recorded in 1993. The significant
earnings improvements at HCC, coupled with the increased earnings from the
KAO-Quaker joint venture, resulted in the Company's share of affiliate earnings
increasing $9 million to $20 million for the year. Interest income for the year
declined about $2 million to $9 million as a result of lower average
investments. Other income amounted to $17 million for 1994, an increase of $3
million over the prior year due to a number of one-time items.
Interest and other expenses amounted to $48 million in 1994 compared to $46
million in 1993. Interest expense, net of amounts capitalized, was $10 million,
up from $7 million in 1993, reflecting increased borrowings in support of the
share repurchase program, capital projects, and acquisitions combined with
higher average interest rates. Amortization of intangible assets, primarily
goodwill, increased $2 million to $30 million due to acquisitions and profit
participation payments related to the Octel acquisition. Foreign currency
exchange gains and losses which are netted in other expenses were insignificant.
Other expenses declined $3 million to $8 million.
Income taxes of $124 million increased $13 million over the prior year's $111
million. The effective tax rate for the year was 30.8 percent compared to 28.8
percent in 1993. The 2.0 point increase in the rate results from 1993 benefiting
from adoption of Statement of Financial Accounting Standard No. 109 "Accounting
for Income Taxes" and a shift in earnings to higher tax jurisdictions.
Net income for 1994 was $279 million, or $4.00 per share, compared to 1993 net
income of $273 million, or $3.82 per share. The year-over-year increase in net
income and earnings per share was 2 percent and 5 percent, respectively. Share
repurchases during 1994 increased earnings per share by approximately $0.05.
24
<PAGE> 13
FINANCIAL CONDITION AND LIQUIDITY
The Company's objective is to return 20% or more on stockholders' average
equity. Again in 1995, this goal was achieved. Management continues to emphasize
allocating resources to capital projects and strategic acquisitions that meet or
exceed the Company's return on investment target.
<TABLE>
<CAPTION>
- ---------------------------------------------------
Year Return on Equity
- ---------------------------------------------------
<S> <C>
1995 21.7
1994 21.7
1993 23.6
- ---------------------------------------------------
</TABLE>
Cash provided by operating activities amounted to $344 million, an increase of
$48 million over the $296 million in cash provided in 1994, exclusive of the
special cash dividend received from HCC. This strong cash flow supplemented by
commercial paper borrowings was utilized by the Company to expand and improve
production capacity, to increase dividends to shareholders, and to repurchase
approximately 2.8 million shares of stock. Cash and cash equivalents of $181
million include $123 million of short-term investments, an increase of $36
million from the prior year.
The Company's investment in working capital, excluding cash and cash
equivalents, increased $72 million during the year to $479 million as of
December 31, 1995. Accounts receivable increased $33 million from the prior
year. On average, 1995 days sales outstanding in trade accounts receivable were
77 days, essentially unchanged from the 78 days outstanding in 1994. The
increase in the accounts receivable balance reflects a strong early buy program
in the recreational water treatment business, coupled with an increase in
non-trade receivables related to European value-added taxes and insurance
recoveries, both of which are expected to be collected in the first quarter of
1996.
Inventories were $376 million as of December 31, 1995, an increase of $59
million over the prior year. The increase is attributable to the acquisition of
a trichloroisocyanuric dry sanitizer plant at the end of 1994; a build-up of
recreational water treatment chemical inventories in connection with an
early-buy program; and a return to more normal inventory levels in the Petroleum
Additives business unit from the relatively low levels of the prior year due to
very high fourth quarter 1994 sales. On average, inventory turned 4.4 times in
1995 compared to 4.3 times in 1994.
Spending on plant and equipment in 1995 amounted to $247 million, essentially
double the prior year. Additional capacity for both new and existing products
accounted for approximately 60 percent of the spending. Another 15 percent was
for capital replacement and cost savings projects; and the remainder of the
spending was directed towards safety and regulatory compliance, environmental
matters and support activities. The Company's capital spending activities are
well diversified by product area and geographic location. The largest group of
projects is for bromine capacity and includes land acquisition for future brine
production, brine well additions, bromine extraction towers and sour gas
recovery facilities. Other key projects include debottlenecking of the existing
PTMEG capacity and a related THF expansion which came on stream late in 1995;
capacity expansions for key flame retardant products such as tetrabrom, PHT4,
and PDBS; and a facility for production of an intermediate for a major European
customer. Capital spending in 1996 is projected to be about $210 million and
the character of the projects will be similar to 1995.
Spending on environmental related capital projects was approximately $10
million in both 1994 and 1995. Capital requirements for environmental related
projects in 1996 should be consistent with 1995 levels.
Investments in and advances to unconsolidated affiliates increased
approximately $6 million as a result of the Company's investment in Tetrabrom
Technologies, Ltd., a new joint venture in Israel that will manufacture
tetrabromobisphenol-A. Also in 1995, the Company exchanged its remaining 17
percent common stock holdings in HCC for 58,700 shares of series A cumulative
preferred stock with a current annual dividend rate of 14 percent. The face
value of the shares is $58.7 million.
The Company utilizes commercial paper borrowing as its primary source of
external financing due to interest rate considerations. Commercial paper
borrowings at December 31, 1995, amounted to $262 million compared to $87
million at December 31, 1994. At December 31, 1995, the level of debt to total
capitalization was 18.8 percent, up from 9.7 percent at December 31, 1994.
The Company recently negotiated a $400 million, five-year credit facility with
various banks that replaces a three-year, $250 million facility. The credit
facility provides back-up to the Company's $400 million commercial paper
program. During 1995, Standard & Poor's upgraded the Company's corporate credit
rating to AA- and its commercial paper rating to A-1+. Additionally, the
Company has a shelf registration on file with the Securities and Exchange
Commission for $200 million of debt securities which could be issued to finance
acquisitions or fund other corporate requirements. Management has no immediate
plans to issue debt securities under the registration statement.
Other noncurrent liabilities of $127 million include a $46 million reserve for
expected future personnel reductions, plant closures and decontamination costs
at Octel's alkyl lead plants in the United Kingdom, France and Italy as demand
for this product diminishes. Approximately $6 million was spent in 1995,
compared to $7 million in 1994. The Company anticipates that operations in
Italy will cease in the first quarter of 1996 and that operations in France
will cease in 1997. Spending on plant closures noted above and a previously
closed German facility should be in the $10 million range in 1996 and the $15
million range in 1997. Production at the U.K. plants should continue into the
next century based on the current rate of market decline.
25
<PAGE> 14
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
Deferred revenues of $65 million included in other noncurrent liabilities
represent partial payments for future delivery of an intermediate product under
a long-term supply agreement with a major customer. Production has been
suspended since 1993 pending the customer receiving FDA approval for their
final product. Under the terms of the contract, the Company is entitled to
retain the advanced payment regardless of production volumes. In the event that
production is not resumed, the deferred revenue would be used to offset the
remaining book value of dedicated facilities. The Company is currently in
discussions with the customer regarding the future of the facility. As an
interim step, a portion of the plant is being converted to polymer stabilizer
production.
Stockholders' equity was $1.4 billion, or $21.92 per share, at December 1995,
compared to $1.3 billion, or $19.48 per share, at the end of 1994. Over the
past ten years, stockholders' equity has grown at a compound rate of 22
percent.
Dividends declared increased for the twenty-third consecutive year totaling $29
million, or $.44 per share, compared with $27 million, or $.39 per share, in
the prior year.
In 1995, the Company purchased 2.8 million shares of its stock for a total cost
of $165 million under share repurchase programs authorized by the Board of
Directors. The average price per share of the stock purchased was $59.33.
During the three-year period ended December 31, 1995, the Company has
repurchased 7.3 million shares at a cost of approximately $423 million, or
$57.59 per share. As of December 31, 1995, management is authorized to
repurchase an additional 1.7 million shares. Management intends to repurchase
additional shares as market conditions warrant.
The cumulative translation adjustment component of stockholders' equity
represents the remeasurement of foreign currency denominated assets and
liabilities into U.S. dollars. The change in the cumulative translation
adjustment increased stockholders' equity by $2 million in 1995. Approximately
50 percent of the Company's net assets are in Europe, predominantly the United
Kingdom.
OTHER MATTERS
The Company's operations, like those of most companies which use or make
chemicals, are subject to stringent laws and regulations relating to
maintaining or improving the quality of the environment. Such laws and
regulations, along with the Company's own internal compliance efforts, have
required and will continue to require capital expenditures and associated
operating costs. Normal spending for environmental compliance, including that
associated with waste minimization and pollution prevention programs, amounted
to approximately $44 million in 1995 and about $34 million in 1994. These
amounts include approximately $10 million for capital equipment in both 1995
and 1994, respectively. The increase in 1995 reflects higher operating rates
and the effect of recent acquisitions. Spending for environmental compliance is
anticipated to be about $45 million in 1996.
The Company is a party to various governmental and private environmental
actions associated with current and former manufacturing sites and waste
disposal sites, including some sites that are on the Environmental Protection
Agency's Superfund National Priority List. In most instances, the Company has
been viewed as a de minimis contributor and has not expended any significant
amounts for remediation. Future environmental compliance and remediation costs
are, at best, difficult to quantify with reasonable assurance. This is due to
many factors including the speculative nature of remediation methods and costs,
conflicting and imprecise data regarding the nature and extent of waste, the
number of other parties involved, and changing governmental regulations. Based
upon current regulation and the information available, management believes that
adequate provisions have been made in the financial statements and future costs
will not have a material adverse impact on the Company's consolidated financial
position.
Inflation has not been a significant factor for the Company over the last
several years. Management believes that inflation will continue to be moderate
over the next several years and can be offset through a combination of price
increases and productivity improvements.
With the Company's strong balance sheet, substantial free cash flow, and access
to low-cost external financing, the Company is well-positioned to capitalize on
opportunities that may arise in 1996.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------
1995--Stock Price Data High Low
- ----------------------------------------------------------------
<S> <C> <C>
1st Quarter 62 7/8 56
2nd Quarter 64 1/8 55 3/4
3rd Quarter 69 7/8 59 7/8
4th Quarter 74 3/4 65 3/4
Year-End Close 72
- ----------------------------------------------------------------
- ----------------------------------------------------------------
1994--Stock Price Data High Low
- ----------------------------------------------------------------
1st Quarter 82 67 1/2
2nd Quarter 71 48 3/4
3rd Quarter 61 1/2 53 5/8
4th Quarter 59 5/8 51 3/4
Year-End Close 57
- ----------------------------------------------------------------
- ----------------------------------------------------------------
Cash Dividends Paid 1995 1994
- ----------------------------------------------------------------
1st Quarter .10 .09
2nd Quarter .105 .095
3rd Quarter .105 .095
4th Quarter .115 .10
- ----------------------------------------------------------------
</TABLE>
26
<PAGE> 15
MANAGEMENT'S STATEMENT OF RESPONSIBILITY FOR FINANCIAL STATEMENTS
GREAT LAKES CHEMICAL CORPORATION
AND SUBSIDIARIES
The management of Great Lakes Chemical Corporation is responsible for the
preparation and presentation of the accompanying consolidated financial
statements and all other information in this Annual Report. The financial
statements are prepared in accordance with generally accepted accounting
principles and include amounts that are based on management's informed
judgements and estimates.
The company maintains accounting systems and internal accounting controls which
management believes provide reasonable assurance that the company's financial
reporting is reliable, that assets are safeguarded, and that transactions are
executed in accordance with proper authorization. This internal control
structure is supported by the selection and training of qualified personnel,
and an organizational structure which permits the delegation of authority and
responsibility. The systems are monitored worldwide by an internal audit
function that reports its findings to management.
The company's financial statements have been audited by Ernst & Young LLP,
independent accountants, in accordance with generally accepted auditing
standards. These standards provide for the review of internal accounting
control systems to plan the audit and determine auditing procedures, and tests
of transactions to the extent they deem appropriate.
The Audit Committee of the Board of Directors, which
consists solely of non-employee directors, is responsible for overseeing the
functioning of the accounting systems and related internal controls and the
preparation of annual financial statements. The Audit Committee periodically
meets with management and the independent accountants to review and evaluate
their accounting, auditing and financial reporting activities and
responsibilities. The independent accountants and internal auditors have full
and free access to the Audit Committee without management's presence to discuss
internal accounting controls, results of their audits, and financial reporting
matters.
/s/ ROBERT T. JEFFARES
- ---------------------------
Robert T. Jeffares
Executive Vice President and Chief Financial Officer
- -----------------------------------------------------------------------------
REPORT OF ERNST & YOUNG LLP,
INDEPENDENT AUDITORS
We have audited the accompanying consolidated balance sheets of the Great Lakes
Chemical Corporation and subsidiaries as of December 31, 1995 and 1994, and the
related consolidated statements of income and retained earnings and cash flows
for each of the three years in the period ended December 31, 1995. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements 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, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Great Lakes
Chemical Corporation and subsidiaries at December 31, 1995 and 1994, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended December 31, 1995, in conformity with generally
accepted accounting principles.
ERNST & YOUNG LLP SIGNATURE
Indianapolis, Indiana
January 26, 1996
27
<PAGE> 16
CONSOLIDATED STATEMENTS OF INCOME AND RETAINED EARNINGS
GREAT LAKES CHEMICAL CORPORATION
AND SUBSIDIARIES
<TABLE>
<CAPTION>
(in thousands of dollars, except per share data)
YEAR ENDED DECEMBER 31 1995 1994 1993
<S> <C> <C> <C>
NET SALES $2,361,069 $2,065,008 $1,792,042
OPERATING EXPENSES
Cost of products sold 1,572,653 1,369,618 1,133,352
Selling, administrative and research expenses 291,073 256,701 233,909
---------- ---------- ----------
1,863,726 1,626,319 1,367,261
---------- ---------- ----------
INCOME FROM OPERATIONS 497,343 438,689 424,781
EQUITY IN EARNINGS OF AFFILIATES AND OTHER INCOME 29,353 45,645 35,754
INTEREST AND OTHER EXPENSES 55,149 48,432 45,512
MINORITY INTEREST IN INCOME OF SUBSIDIARIES 33,674 33,227 31,639
---------- ---------- ----------
INCOME BEFORE TAXES 437,873 402,675 383,384
INCOME TAXES 142,300 124,000 110,600
---------- ---------- ----------
NET INCOME 295,573 278,675 272,784
---------- ---------- ----------
RETAINED EARNINGS AT BEGINNING OF YEAR 1,411,890 1,160,173 912,352
CASH DIVIDENDS DECLARED 28,629 26,958 24,963
---------- ---------- ----------
RETAINED EARNINGS AT END OF YEAR $1,678,834 $1,411,890 $1,160,173
========== ========== ==========
NET INCOME PER SHARE $ 4.52 $ 4.00 $ 3.82
CASH DIVIDENDS DECLARED PER SHARE $ .44 $ .39 $ .35
AVERAGE SHARES OUTSTANDING 65,364,066 69,658,653 71,329,145
</TABLE>
See notes to consolidated financial statements.
28
<PAGE> 17
CONSOLIDATED BALANCE SHEETS
GREAT LAKES CHEMICAL CORPORATION
AND SUBSIDIARIES
<TABLE>
<CAPTION>
(in thousands of dollars)
DECEMBER 31 1995 1994
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 180,970 $ 144,666
Accounts and notes receivable, less allowance of
$7,659 and $7,758, respectively 527,014 493,614
Inventories 375,967 316,623
Prepaid expenses 41,060 24,774
---------- -----------
TOTAL CURRENT ASSETS 1,125,011 979,677
---------- -----------
PLANT AND EQUIPMENT 765,311 605,924
EXCESS OF INVESTMENT OVER NET ASSETS OF SUBSIDIARIES ACQUIRED 416,632 411,028
INVESTMENTS IN AND ADVANCES TO UNCONSOLIDATED AFFILIATES 72,587 66,479
OTHER ASSETS 89,328 48,357
---------- -----------
$2,468,869 $2,111,465
========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Notes payable $ 6,309 $ 7,793
Accounts payable 198,490 184,823
Accrued expenses 108,414 101,615
Income taxes payable 128,891 118,203
Dividends payable 7,430 6,730
Current portion of long-term debt 15,891 8,778
---------- -----------
TOTAL CURRENT LIABILITIES 465,425 427,942
---------- -----------
LONG-TERM DEBT, LESS CURRENT PORTION 340,145 143,661
OTHER NONCURRENT LIABILITIES 126,820 126,907
DEFERRED INCOME TAXES 88,540 75,652
MINORITY INTEREST 31,756 26,355
STOCKHOLDERS' EQUITY
Common stock, $1 par value, authorized 200,000,000 shares,
issued 72,109,477 and 72,024,520 shares, respectively 72,109 72,025
Paid-in capital 113,647 112,667
Retained earnings 1,678,834 1,411,890
Cumulative translation adjustment (23,179) (25,222)
Less treasury stock, at cost, 7,505,100 and 4,727,100 shares, respectively (425,228) (260,412)
---------- -----------
TOTAL STOCKHOLDERS' EQUITY 1,416,183 1,310,948
---------- -----------
$2,468,869 $ 2,111,465
========== ===========
</TABLE>
See notes to consolidated financial statements.
29
<PAGE> 18
CONSOLIDATED STATEMENTS OF CASH FLOWS
GREAT LAKES CHEMICAL CORPORATION
AND SUBSIDIARIES
<TABLE>
<CAPTION>
(in thousands of dollars)
YEAR ENDED DECEMBER 31 1995 1994 1993
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income $295,573 $278,675 $ 272,784
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and depletion 83,461 72,663 62,475
Amortization of intangible assets 27,184 29,634 27,541
Deferred income taxes 12,600 700 (3,000)
Net (unremitted) remitted earnings of affiliates (518) 112,312 (4,348)
Gain on sale of assets (185) (65) (4,418)
Other (843) (1,365) 2,792
Change in operating assets and liabilities,
net of effects from business combinations:
Accounts receivable (34,432) (95,097) (33,281)
Inventories (57,565) (9,969) 6,670
Other current assets (13,948) (6,602) 2,042
Accounts payable and accrued expenses 22,137 35,010 (51,048)
Income taxes and other current liabilities 10,504 10,131 21,765
--------- --------- ---------
NET CASH PROVIDED BY OPERATING ACTIVITIES 343,968 426,027 299,974
INVESTING ACTIVITIES
Plant and equipment additions (246,639) (123,109) (79,270)
Business combinations, net of cash acquired (24,399) (198,494) (89,827)
Proceeds from sale of assets 3,144 11,700 14,024
Other (47,986) 21,484 (8,449)
--------- --------- ---------
NET CASH USED IN INVESTING ACTIVITIES (315,880) (288,419) (163,522)
FINANCING ACTIVITIES
Net (repayment) and borrowings under
short-term credit lines (5,878) 1,243 (11,941)
Net (payments of) proceeds from
long-term borrowings (2,399) (8,026) 15,234
Net increase (decrease) in commercial paper and
other long-term obligations 208,081 85,042 (49,995)
Net increase (decrease) in other
noncurrent liabilities 639 (8,098) (4,015)
Minority interest 1,065 9,751 (822)
Proceeds from stock options exercised 2,345 3,336 3,203
Cash dividends declared (28,629) (26,958) (24,963)
Repurchase of common stock (164,816) (232,279) (25,540)
--------- --------- ---------
NET CASH PROVIDED (USED) BY FINANCING ACTIVITIES 10,408 (175,989) (98,839)
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND
CASH EQUIVALENTS (2,192) 3,313 1,320
--------- --------- ---------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 36,304 (35,068) 38,933
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 144,666 179,734 140,801
--------- --------- ---------
CASH AND CASH EQUIVALENTS AT END OF YEAR $180,970 $144,666 $179,734
========= ========= =========
</TABLE>
See notes to consolidated financial statements.
Parentheses indicate decrease in cash and cash equivalents.
30
<PAGE> 19
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
GREAT LAKES CHEMICAL CORPORATION
AND SUBSIDIARIES
ACCOUNTING POLICIES
NATURE OF OPERATIONS
The Company is a well-diversified specialty chemical company. Primary
manufacturing operations are located in the United States and Europe. Principal
product lines ranked in order of sales are: Petroleum Additives, Specialized
Services and Manufacturing, Water Treatment, Intermediates and Fine Chemicals,
Flame Retardants and Polymer Stabilizers. The Company's products are sold
globally. The principal markets include: Oil Refineries, Computer and Business
Equipment, Consumer Electronics, Data Processing, Construction Materials,
Telecommunications, Pharmaceuticals and Pool
and Spa Dealers and Distributors.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include all subsidiaries of the Company
after elimination of significant intercompany accounts and transactions.
Investments in less than majority-owned companies in which the Company has the
ability to exercise significant influence over operating and financial policies
of the investees are recorded at cost, plus equity in their undistributed
earnings since acquisition.
USE OF ESTIMATES
The preparation of the consolidated financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the amounts reported in the financial statements
and accompanying notes. Actual results could differ from those estimates.
CASH EQUIVALENTS
Investment securities with maturities of three months or
less when purchased are considered to be cash equivalents.
INVENTORIES
Approximately 95 percent of inventories are stated at the lower of cost
(first-in, first-out method) or market.
PLANT AND EQUIPMENT
Plant and equipment are stated at cost. Depreciation is provided over the
estimated useful lives of the assets using the straight-line, declining-balance
and unit-of-production methods. The costs of gas wells, leases, and royalty
interests are amortized by the unit-of-production method based upon estimated
recoverable reserves and annual volumes of production.
EXCESS OF INVESTMENT OVER NET ASSETS OF SUBSIDIARIES ACQUIRED
Excess of investment over net assets of subsidiaries acquired (goodwill) is
amortized over periods of eight to 40 years. The Company regularly evaluates
the realizability of goodwill based on projected undiscounted cash flows and
operating income for each business having material goodwill balances. Based on
its most recent analysis, the Company believes that no impairment of goodwill
exists at December 31, 1995. As of December 31, 1995 and 1994, accumulated
amortization was $83,309,000 and $63,941,000, respectively.
INCOME TAXES
Income taxes are provided on the portion of the income
of unconsolidated affiliates that is expected to be remitted
and taxable.
STOCK OPTIONS
The Company is following Accounting Principles Board Opinion No. 25 "Accounting
for Stock Issued to Employees" (APB 25) and related Interpretations in
accounting for its employee stock options. Under APB 25, because the exercise
price of the stock option equals the market price of the underlying stock on
the issuance date, no compensation expense is recognized.
RETIREMENT PLANS
Noncontributory defined benefit pension plans cover substantially all employees
located in the United States, and contributory defined benefit pension plans
cover substantially all employees in the United Kingdom. Accrued pension costs
of qualified plans are funded. Pension contributions are computed actuarially
using the projected unit credit cost method and include normal costs and
amortization of prior service costs over approximately 30 years.
SHARE DATA
Net income per share is computed on the weighted average number of shares
outstanding for all periods presented. The effect on net income per share
resulting from the assumed issuance of shares reserved for stock options is not
material.
ACQUISITIONS
In 1995, the Company completed acquisitions in the Water Treatment and
Intermediates and Fine Chemicals business units at a cost of $11,000,000,
including $6,000,000 of excess purchase price over the value of net assets
acquired.
On September 7, 1994, the Company completed the acquisition of E. I. du Pont de
Nemours & Company's (DuPont) petroleum additives business including DuPont's
North and South American tetraethyl lead business for approximately
$50,000,000. 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 subsidiary of The Associated Octel Company, Ltd.
(AOC) purchased the tetraethyl lead portion of the business. AOC is a
majority-owned subsidiary of the Company. The excess of purchase price over the
value of net assets acquired totaled approximately $35,000,000.
The Company's acquisition of EniChem Synthesis S.p.A. (renamed GLCI) was
completed on April 21, 1994, for approximately $90,000,000 in cash. The excess
of purchase price over the net assets acquired amounted to $25,000,000.
Headquartered in Milan, Italy, GLCI is a leading manufacturer of antioxidants
and UV absorbers. GLCI operates
31
<PAGE> 20
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
manufacturing facilities in Pedrengo and Ravenna, Italy, and a research
and development center in Bolgiano. The acquisition complemented the Company's
existing polymer additives business by bringing an extensive line of new
products and technology. The acquisition created synergies and cost reduction
opportunities in supplying a worldwide customer base.
Other acquisitions completed in 1994 included a U.K.-based distributor of pool
and spa chemicals and equipment, a Southeastern U.S. distributor of pool
chemicals and spa equipment, a trichloroisocyanuric acid (trichlor) dry
sanitizer plant that provides a key raw material used in the production of
swimming pool products, and the 50 percent balance of a European joint venture
involved in providing oil field services. The acquisitions cost approximately
$43,000,000. The excess of purchase price over the net assets acquired amounted
to approximately $6,000,000.
In 1993, the Company completed four acquisitions described below at a total
cost of $72,000,000, including $10,000,000 in future payments to be made over
four years. The excess of purchase price over the net assets acquired amounted
to approximately $30,000,000.
Two of the acquisitions strengthened the Company's position in the recreational
water treatment market. On January 4, 1993, the Company completed the purchase
of Bayrol Chemische Fabrik GmbH (Bayrol). Bayrol's headquarters and
manufacturing plants are in Munich, Germany, and it maintains sales and
distribution centers in France and Spain. On May 3, 1993, the Company acquired
Aqua Chem, a supplier of swimming pool and spa chemicals to mass merchants in
the United States.
In January 1993, the Company completed the purchase of Four Seasons Industrial
Services, Inc. and two associated companies. Located at Greensboro, North
Carolina, Four Seasons provides environmental remediation, consulting, and
on-site treatment services.
In June 1993, the Company acquired LOWI, a Germany based manufacturer of
antioxidants and ultraviolet absorbers, to complement the Company's worldwide
polymer stabilizers business.
The Company's 87.82 percent ownership interest in Octel Associates and The
Associated Octel Company, Limited, was acquired in two transactions. In 1989
the Company acquired 51.15 percent interest from three major oil companies; and
in 1992, the Company acquired a 36.67 percent interest from Shell U.K. Limited.
The 1989 acquisition agreement provides for profit participation payments for
specified periods of time after the date of acquisition. Such profit
participation is treated as an adjustment to the purchase price. These payments
amounted to approximately $20,000,000 in 1995 and to approximately $169,000,000
since acquisition.
All acquisitions have been accounted for as purchases and the results of
operations of the acquired businesses are included in the consolidated
financial statements from the dates of acquisition. The following represents
the unaudited pro forma results of operations as if the above-noted business
combinations had occurred at the beginning of the respective year in which the
companies were acquired as well as at the beginning of the immediately
preceding year:
<TABLE>
<CAPTION>
(in thousands, except earnings per share)
Year Ended December 31 1995 1994 1993
- -----------------------------------------------------------------------
<S> <C> <C> <C>
Net sales $2,366,000 $ 2,129,000 $ 1,926,500
Net income $ 296,000 $ 287,000 $ 283,000
Earnings per share $ 4.52 $ 4.12 $ 3.96
</TABLE>
The pro forma results do not represent the Company's actual operating results
had the acquisitions been made at the beginning of 1995, 1994, and 1993, or the
results which may be expected in the future.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents consist of the following:
<TABLE>
<CAPTION>
(in thousands)
December 31 1995 1994
- -----------------------------------------------------------------
<S> <C> <C>
Cash $ 57,607 $ 47,171
Time deposits 123,363 97,495
-------- --------
$180,970 $144,666
======== ========
</TABLE>
INVENTORIES
The major components of inventories are as follows:
<TABLE>
<CAPTION>
(in thousands)
December 31 1995 1994
- -----------------------------------------------------------------
<S> <C> <C>
Finished products $260,293 $223,822
Raw materials 82,297 62,478
Supplies 33,377 30,323
-------- --------
$375,967 $316,623
======== ========
</TABLE>
Cost of applicable inventories using the last-in, first-out valuation method
approximates current cost at December 31, 1995 and 1994.
32
<PAGE> 21
PLANT AND EQUIPMENT GREAT LAKES CHEMICAL CORPORATION
Plant and equipment consist of the following: AND SUBSIDIARIES
<TABLE>
<CAPTION>
(in thousands)
December 31 1995 1994
- -----------------------------------------------------------------
<S> <C> <C>
Land $ 25,750 $ 24,229
Buildings and land improvements 115,897 116,833
Equipment and
leasehold improvements 931,386 789,951
Gas wells, leases and royalty interests 4,997 4,791
Construction in progress (estimated
additional cost to complete at
December 31, 1995, $131,000) 200,302 102,297
----------- -----------
1,278,332 1,038,101
Less allowances for depreciation,
depletion and amortization 513,021 432,177
----------- -----------
$ 765,311 $ 605,924
=========== ===========
</TABLE>
The estimated useful lives for purposes of computing depreciation are:
buildings and land improvements, 7-40 years; equipment and leasehold
improvements, 2-17 years.
Maintenance and repairs charged to costs and expenses were $97,759,000,
$89,164,000, and $81,420,000 for 1995, 1994, and 1993, respectively.
Rent expense for all operating leases amounted to $24,156,000, $20,747,000, and
$16,138,000 for 1995, 1994, and 1993, respectively.
NOTES PAYABLE
Data concerning borrowings are as follows:
<TABLE>
1995 1994 1993
- -----------------------------------------------------------------
<S> <C> <C> <C>
Amounts borrowed (in thousands):
Maximum during
the year $44,969 $34,758 $31,082
Average for the year $10,992 $11,916 $17,734
Weighted average interest rates:
At December 31 12.9% 6.6% 8.5%
On borrowings during the year 11.0% 6.7% 7.6%
</TABLE>
The Company has no confirmed short-term credit lines, but has available for its
use substantial non-confirmed credit lines. The weighted average interest rates
increased in 1995 due to proportionately higher borrowings in locations such as
South America and Central Europe.
LONG-TERM DEBT
Long-term debt is summarized as follows:
<TABLE>
<CAPTION>
(in thousands)
December 31 1995 1994
- -----------------------------------------------------------------
<S> <C> <C>
Commercial paper, 1995 year-end
average interest rate of 5.8% $262,382 $ 86,954
Industrial development bonds, at fixed
and variable interest rates from 5.2%
to 7.0% at December 31, 1995
(weighted average 5.6%) with
maturities to May 2025 21,685 21,685
Other 71,969 43,800
-------- --------
356,036 152,439
Less current portion 15,891 8,778
-------- --------
$340,145 $143,661
======== ========
</TABLE>
In early 1996, the Company entered into a five year $400,000,000
revolving credit agreement with nine banks which serves as a backup for the
Company's commercial paper program. The facility replaced a $250,000,000 credit
agreement. The agreement provides various interest rate options, including the
banks' prime interest rate, and contains restrictive financial covenants,
including an interest coverage ratio. The Company's commercial paper is rated
A-1+ by Standard and Poor's and P-1 by Moody's.
The Company has on file a shelf registration with the Securities and Exchange
Commission for $200,000,000 of debt securities. Once issued, the security
proceeds will be utilized by the Company as required from time to time for
acquisitions and other corporate purposes.
Long-term debt matures as follows: 1996, $15,891,000; 1997, $10,190,000; 1998,
$4,872,000; 1999, $2,681,000; and 2000, $11,683,000.
During 1995, 1994, and 1993, interest costs were $21,262,000,
$11,856,000, and $8,174,000, respectively, of which $6,187,000, $1,737,000, and
$928,000, respectively, were capitalized as additional costs of equipment and
leasehold improvements in connection with the expansion of physical facilities.
In these years, interest payments were $21,086,000, $12,075,000, and
$8,167,000, respectively.
33
<PAGE> 22
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
OTHER NONCURRENT LIABILITIES
Other noncurrent liabilities consist of the following:
<TABLE>
<CAPTION>
(in thousands)
December 31 1995 1994
- -------------------------------------------------------------
<S> <C> <C>
Future estimated closing costs of Octel's
TEL manufacturing facilities $ 46,328 $ 48,271
Deferred revenue 64,932 63,932
Other 15,560 14,704
-------- --------
$126,820 $126,907
======== ========
</TABLE>
Deferred revenue represents funds provided as an advance partial payment for
product to be delivered under the terms of a long-term supply contract with a
major customer. The plant is idle as the customer's product has not received
FDA approval.
INCOME TAXES
The following is a summary of domestic and foreign income before income taxes,
the components of the provisions for income taxes and deferred income taxes, a
reconciliation of the U.S. statutory income tax rate to the effective income
tax rate, and the components of deferred tax assets and liabilities. The data
are presented on the liability method which was adopted in 1993. The cumulative
effect of adopting the liability method in 1993 was an increase in net income
of $3,000,000.
Income Before Taxes:
<TABLE>
<CAPTION>
(in thousands)
Year Ended December 31 1995 1994 1993
- --------------------------------------------------------------------------
<S> <C> <C> <C>
Domestic $142,271 $145,351 $148,078
Foreign 295,602 257,324 235,306
-------- -------- --------
$437,873 $402,675 $383,384
======== ======== ========
</TABLE>
Provisions for Income Taxes:
<TABLE>
<CAPTION>
(in thousands)
Year Ended December 31 1995 1994 1993
- --------------------------------------------------------------------------
<S> <C> <C> <C>
Current:
Federal $ 34,900 $ 39,500 $ 39,600
State 5,300 6,000 5,600
Foreign 89,500 77,800 68,400
-------- -------- --------
129,700 123,300 113,600
======== ======== ========
Deferred:
Domestic 5,800 (6,100) 1,300
Foreign 6,800 6,800 (4,300)
-------- -------- --------
12,600 700 (3,000)
-------- -------- --------
$142,300 $124,000 $110,600
======== ======== ========
</TABLE>
Provisions for Deferred Income Taxes:
<TABLE>
<CAPTION>
(in thousands)
Year Ended December 31 1995 1994 1993
- --------------------------------------------------------------------------
<S> <C> <C> <C>
Equity in affiliates $ -- $ (8,313) $ 559
Depreciation 7,003 4,297 1,735
Other 5,597 4,716 (5,294)
-------- -------- --------
$12,600 $ 700 $ (3,000)
======== ======== ========
</TABLE>
Effective Income Tax Rate Reconciliation:
<TABLE>
Year Ended December 31 1995 1994 1993
- --------------------------------------------------------------------------
<S> <C> <C> <C>
U.S. statutory income tax rate 35.0% 35.0% 35.0%
Decrease resulting from:
SFAS 109 -- -- (0.8)
Reversal of prior provisions -- (2.0) (2.3)
Other (2.5) (2.2) (3.1)
-------- -------- --------
Effective income tax rate 32.5% 30.8% 28.8%
======== ======== ========
</TABLE>
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes.
Components of Deferred Tax Assets and Liabilities:
<TABLE>
<CAPTION>
(in thousands)
December 31 1995 1994
- ----------------------------------------------------
<S> <C> <C>
Deferred tax assets $ 26,231 $17,215
======== =======
Deferred tax liabilities
Depreciation $ 62,000 $54,997
Foreign liabilities
pending settlements 20,000 20,000
Undistributed affiliate earnings 1,352 1,352
Other 23,399 11,224
-------- -------
$106,751 $87,573
======== =======
</TABLE>
Cash payments for income taxes were $125,574,000, $109,337,000, and
$105,169,000 in 1995, 1994, and 1993, respectively.
34
<PAGE> 23
GREAT LAKES CHEMICAL CORPORATION
AND SUBSIDIARIES
STOCKHOLDERS' EQUITY
Changes in common stock and paid-in capital accounts are summarized as follows:
<TABLE>
<CAPTION>
Common Stock Paid-In
(dollar amounts in thousands) Shares Amount Capital
- -----------------------------------------------------------------------
<S> <C> <C> <C>
Balance at
December 31, 1992 71,576,558 $ 71,576 $ 100,957
Exercise of stock
options, net of
shares exchanged 241,438 242 2,961
Tax benefit from
early disposition
of stock by optionees -- -- 3,350
---------- -------- ---------
Balance at
December 31, 1993 71,817,996 71,818 107,268
Exercise of stock
options, net of
shares exchanged 206,524 207 3,129
Tax benefit from
early disposition
of stock by optionees -- -- 2,270
---------- -------- ---------
Balance at
December 31, 1994 72,024,520 72,025 112,667
Exercise of stock
options, net of
shares exchanged 84,957 84 400
Tax benefit from
early disposition
of stock by optionees -- -- 580
---------- -------- ---------
Balance at
December 31, 1995 72,109,477 $72,109 $113,647
========== ======== =========
</TABLE>
The Company has a Stockholder Rights Plan. Under the Plan, the stockholders
have received a right (the "Right") for each outstanding share of common stock
of the Company. Each Right entitles the holder under certain circumstances to
purchase from the Company at an exercise price of $92.50 per Right (after
adjustment pursuant to the Plan) one unit consisting initially of one-tenth of
a share of the Company's common stock and a note in a principal amount equal to
nine-tenths of the market price of a share of the Company's common stock on the
date of exercise.
The Rights become exercisable and transferable apart from the common stock if a
person acquires 15 percent or more of the Company's outstanding common stock or
the Company declares a 10 percent-or-more stockholder an "adverse person"
because such stockholder meets certain criteria set forth in the Plan. In such
event, each right entitles the holder, except the acquiring person or adverse
person, to purchase, at the Right's then-current exercise price, the number of
Great Lakes common shares having a market value equal to twice the Right's
exercise price.
If after one of the triggering events described above, the Company is acquired
in a merger or other business combination, and the Rights have not been
redeemed, the holder of each Right is entitled to purchase, at the Right's
then-current exercise price, that number of the acquiring company's common
shares having a market value equal to twice the Right's exercise price.
Under certain conditions, the Rights may be redeemed by the Company at
a price of $.0025 per Right (after adjustment pursuant to the Plan) prior to
their expiration on September 22, 1999.
The Company has repurchased shares of its common stock as follows:
<TABLE>
<CAPTION>
Number of
(dollar amount in thousands) Shares Cost
- -------------------------------------------------------------------------------
<S> <C> <C>
1995 2,778,000 $ 164,816
1994 4,183,900 $ 232,279
1993 377,100 $ 25,540
</TABLE>
Changes in the cumulative translation adjustment account are as follows:
<TABLE>
<CAPTION>
(in thousands)
Year Ended December 31 1995 1994 1993
- ---------------------------------------------------------------------------------
<S> <C> <C> <C>
Balance at beginning of year $(25,222) $(54,563) $(29,441)
Translation adjustments and
gains and losses from
hedging transactions 2,043 29,341 (25,122)
-------- -------- --------
Balance at end of year $(23,179) $(25,222) $(54,563)
======== ======== ========
</TABLE>
The 1995 and 1994 increase in the cumulative translation adjustment account was
principally due to the effect of the weakening U.S. dollar in relation to the
currencies of the various foreign countries in which the Company operates.
Conversely, the U.S. dollar strengthened in 1993 decreasing the cumulative
translation adjustment account.
STOCK OPTIONS
In May 1993, the stockholders adopted the 1993 Employee Stock Compensation Plan
for officers and other key employees, authorizing the issuance of 2,000,000
shares of the Company's common stock upon exercise of incentive stock options,
non-qualified stock options or other stock-based awards. The Plan replaced the
1984 Plan which expired in May 1994. Under the Plan, options are granted at the
market value at date of grant, become exercisable over periods of one to five
years after grant and expire ten years from the date of grant.
35
<PAGE> 24
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
The following summarizes the changes in options under the Plans for the years
1995 and 1994:
<TABLE>
<CAPTION>
Shares Option
Under Option Prices
- ----------------------------------------------------
<S> <C> <C>
Outstanding at
December 31, 1993 1,883,563 $6.89 to $78.25
Granted 240,600 54.00 to 77.50
Exercised (233,315) 6.89 to 66.13
Terminated (40,211) 9.25 to 78.25
--------- ---------------
Outstanding at
December 31, 1994 1,850,637 9.25 to 78.25
Granted 309,030 58.50 to 72.13
Exercised (98,280) 9.25 to 51.38
Terminated (14,319) 9.25 to 78.25
--------- ---------------
Outstanding at
December 31, 1995 2,047,068 $9.88 to $78.25
========= ===============
Currently Exercisable 1,591,071 $9.88 to $78.25
========= ===============
</TABLE>
Options outstanding at December 31, 1995, have an average option price of
$43.53 per share and expire from March 18, 1996, to December 6, 2005. A total
of 1,538,332 shares are reserved for future grants as of December 31, 1995.
RETIREMENT PLANS
The Company maintains several noncontributory defined benefit pension plans
covering substantially all U.S. employees. Benefits are based on total
compensation, as defined, and years of credited service reduced by social
security benefits according to a plan formula. Normal retirement age is 65, but
provisions are made for early retirement. The Company's funding policy is to
contribute amounts to the plans to meet the funding requirements of federal
laws and regulations, as determined by the Company's actuary. The plans' assets
are invested by an insurance company, one bank, and six investment management
companies in various commingled and segregated funds holding equities, bonds,
and cash or cash equivalents.
The Company maintains three contributory defined benefit pension plans covering
substantially all United Kingdom employees. Benefits are based on final salary
and years of credited service, reduced by social security benefits according to
a plan formula. Normal retirement age is 65, but provisions are made for early
retirement. The Company's funding policy is to contribute amounts to the plans
to cover service costs to date as recommended by the Company's actuary. The
plans' assets are invested by three investment management companies in funds
holding U.K. and overseas equities, U.K. and overseas fixed interest securities,
index linked securities, property unit trusts and cash or cash equivalents.
A summary of the components of net periodic pension cost for U.S. and U.K.
pension plans is as follows:
<TABLE>
<CAPTION>
(in thousands)
Year Ended December 31 1995 1994 1993
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Service cost $ 15,290 $ 16,218 $ 14,160
Interest cost on projected
benefit obligation 40,614 37,855 34,590
Actual return on plan assets (80,636) (16,280) (119,219)
Net amortization and deferral 31,461 (28,317) 79,522
--------- --------- ----------
Net pension cost $ 6,729 $ 9,476 $ 9,053
========= ========= ==========
</TABLE>
The funded status and accrued pension cost for the U.S. pension plans are as
follows:
<TABLE>
<CAPTION>
(in thousands)
December 31 1995 1994 1993
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Actuarial present value
of accumulated
plan benefits:
Vested $48,041 $40,219 $37,447
Non-vested 1,540 1,241 2,345
------- ------- -------
Total accumulated benefit
obligation 49,581 41,460 39,792
Additional amounts related
to projected
salary increases 18,868 12,074 18,549
------- ------- -------
Total projected
benefit obligation 68,449 53,534 58,341
Plan assets at fair value 62,352 50,975 43,982
------- ------- -------
Projected benefit obligation
in excess of plan assets 6,097 2,559 14,359
Unrecognized net (loss) gain (2,110) 3,418 (5,605)
Unrecognized prior
service cost 217 (175) (13)
Unrecognized obligation
at January 1, 1987,
net of amortization (1,452) (1,643) (1,834)
------- ------- -------
Accrued pension cost $ 2,752 $ 4,159 $ 6,907
======= ======= =======
</TABLE>
36
<PAGE> 25
GREAT LAKES CHEMICAL CORPORATION
AND SUBSIDIARIES
The funded status and prepaid pension cost for the U.K. pension plans are as
follows:
<TABLE>
<CAPTION>
(in thousands)
December 31 1995 1994 1993
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Actuarial present value of
accumulated plan
benefits, all vested $392,925 $384,140 $353,963
Additional amounts
related to projected
salary increases 41,540 13,310 34,997
-------- -------- --------
Total projected
benefit obligation 434,465 397,450 388,960
Plan assets at fair value 551,645 486,242 448,028
-------- -------- --------
Plan assets in excess
of projected benefit
obligation 117,180 88,792 59,068
Unrecognized net gain (75,640) (56,532) (32,487)
Unrecognized prior
service cost 9,145 10,649 10,928
-------- -------- --------
Prepaid pension cost $ 50,685 $ 42,909 $ 37,509
======== ======== ========
</TABLE>
Assumptions used in determining the actuarial present value of the projected
benefit obligations are set forth below. In 1995 the weighted average discount
rate for U.S. plans was decreased from 8.7 percent to 7.7 percent, thus
increasing the 1995 year-end projected benefit obligation by approximately
$9,500,000. In 1994, the weighted average discount rate for the U.S. plans was
increased from 7.5 percent to 8.7 percent, thus reducing the 1994 year-end
projected benefit obligation by approximately $11,000,000. In 1993, the
weighted average discount rate and the rates of increase in compensation level
assumptions were revised downward for all plans to be consistent with
prevailing market conditions. The changes resulted in increasing the projected
benefit obligation of the U.S. plans by approximately $5,000,000.
<TABLE>
<S> <C>
Weighted average discount rates 7.7% to 8.75%
Rates of increase in compensation levels 4.8% to 6.5%
Expected long-term return on assets 9.0% to 9.5%
</TABLE>
Supplemental defined benefit pension plans covering certain officers and
directors are also maintained. These plans are non-qualified and unfunded. The
pension liability associated with these plans is accrued using the same
actuarial methods and assumptions as those used in the qualified U.S. plans.
The cost for these plans which is included in the net pension cost shown above
amounted to $1,200,000, $800,000, and $900,000 in 1995, 1994, and 1993,
respectively. The unfunded projected benefit obligation, which is included in
the accrued pension cost above, amounted to $5,073,000, $4,519,000, and
$4,930,000 in 1995, 1994, and 1993. Benefits under these plans will be paid
from general Company funds.
The Company provides no significant postretirement benefits other than
pensions.
RESEARCH AND DEVELOPMENT EXPENSES
Research and development expenses were approximately $62,701,000, $59,090,000,
and $55,152,000 in 1995, 1994, and 1993, respectively.
INDUSTRY SEGMENTS AND FOREIGN OPERATIONS
The Company's operations consist of one dominant industry segment, chemicals
and allied products.
Net sales, income before taxes and minority interest, and
identifiable assets by geographic areas follow:
<TABLE>
(in thousands) 1995 1994 1993
- -----------------------------------------------------------------------------
<S> <C> <C> <C>
Net sales to
unaffiliated customers:
United States $ 1,062,495 $ 938,214 $ 846,876
Foreign 1,298,574 1,126,794 945,166
----------- ---------- -----------
Total $ 2,361,069 $2,065,008 $ 1,792,042
=========== ========== ===========
Intercompany sales
between geographic
areas:
United States $ 103,265 $ 96,668 $ 103,151
Foreign 31,924 26,418 4,581
----------- ---------- -----------
Total $ 135,189 $ 123,086 $ 107,732
=========== ========== ===========
Income before taxes:
United States $ 172,511 $ 138,123 $ 144,722
Foreign 273,905 258,279 238,698
Earnings of affiliates 4,023 14,765 5,535
Corporate interest
expense (12,566) (8,492) (5,571)
----------- ---------- -----------
Total $ 437,873 $ 402,675 $ 383,384
=========== ========== ===========
Identifiable assets
at year-end:
United States $ 1,084,117 $ 972,002 $ 922,091
Foreign 1,312,165 1,072,984 792,984
Affiliates 72,587 66,479 185,789
----------- ---------- -----------
Total $ 2,468,869 $2,111,465 $1,900,864
=========== ========== ===========
</TABLE>
Most of the Company's foreign operations are conducted by European subsidiaries
or U.S. branch offices. Sales between the United States and its foreign
operations are generally priced to recover cost plus an appropriate markup for
profit and are eliminated in the consolidated financial statements.
Identifiable assets include assets directly identified with operations,
principally: accounts receivable, inventories, and plant and equipment, plus an
allocation of cost in excess of net assets acquired.
Export sales for 1995, 1994, and 1993 amounted to approximately $216,000,000,
$199,000,000, and $167,000,000, respectively, of which 86 percent, 88 percent,
and 87 percent, respectively, were outside the Western Hemisphere.
37
<PAGE> 26
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
INVESTMENT IN UNCONSOLIDATED AFFILIATES
As of December 31, 1995, the Company's investment in unconsolidated affiliates
consists mainly of a 50 percent interest in KAO-Quaker, Co. Ltd., a Japanese
marketer of furfural derivatives, and a preferred stock interest in Huntsman
Chemical Corporation (HCC).
Effective December 29, 1994, the Company's ownership interest in HCC, a
producer of polystyrene and compounded specialty plastics, was reduced from 40
percent to 17 percent when the Company elected to receive a $130,000,000 cash
dividend while HCC's other shareholder elected to receive additional shares. On
March 17, 1995, the Company exchanged its remaining common stock holdings for
58,700 shares of series A cumulative preferred stock with an annual dividend
rate of 14 percent. Beginning in the year 2000, the annual dividend rate will
increase 1 percent per year to a maximum rate of 25 percent. The preferred
shares have a face value of $58,700,000.
The Company's equity in earnings of unconsolidated affiliates was $4,023,000,
$20,165,000, and $10,935,000 for 1995, 1994, and 1993, respectively. Preferred
dividends from HCC amounted to $8,200,000 in 1995.
FINANCIAL INSTRUMENTS AND CONCENTRATION OF CREDIT RISK
The carrying amounts reported in the balance sheet of cash and cash
equivalents, notes payable, and long-term debt do not materially differ from
their fair value at December 31, 1995. The fair value of the Company's debt
was estimated using a discounted cash flow analysis based upon the Company's
current incremental borrowing rates for similar borrowing arrangements.
The Company hedges certain portions of its exposure to foreign currency
fluctuations in revenues and net foreign investments through the use of options
and forward exchange contracts. Gains and losses arising from the use of such
instruments are recorded in the income statement concurrently with gains and
losses arising from the underlying hedged transactions.
The Company enters into currency options contracts to hedge anticipated export
sales that are exposed to foreign currency fluctuations over the next year. At
December 31, 1995, the Company had no outstanding option contracts. At December
31, 1994, the Company had outstanding option contracts with a notional value of
$67,000,000, of which 64 percent were for German marks and the balance Japanese
yen.
The Company uses currency swap contracts to hedge long-term intercompany loans
and the related interest. The terms of the swap contracts match the loan
payment terms. Swap contracts in existence at December 31, 1995 were for French
francs, German marks and Italian lira against the British pound sterling. The
U.S. dollar equivalent of the notional amount of the contracts outstanding as
of December 31, 1995 was $178,645,000. Liquidating the position at December 31,
1995 would cost the Company approximately $16,700,000. It is the Company's
intention to hold the swap contracts to maturity.
Counterparties to the currency swap agreements are major financial
institutions. Credit losses from counterparty non-performance are not
anticipated.
The Company sells a broad range of products to a diverse group of customers
operating throughout the world. These industries generally are not
significantly affected by changes in economic or other factors. Credit
limits, ongoing credit evaluation and account monitoring procedures are
utilized to minimize the risk of loss. Collateral is generally not required.
38
<PAGE> 27
QUARTERLY RESULTS OF OPERATIONS
GREAT LAKES CHEMICAL CORPORATION
AND SUBSIDIARIES
(in thousands of dollars, except per share data)
<TABLE>
<CAPTION>
1995
THREE MONTHS ENDED Mar. 31 Jun. 30 Sept. 30 Dec. 31
<S> <C> <C> <C> <C>
Net Sales $ 569,035 $ 640,851 $ 586,224 $ 564,959
Operating Expenses
Cost of products sold 385,389 430,576 385,084 371,604
Selling, administrative and research expenses 71,316 74,715 73,787 71,255
--------- --------- --------- ---------
456,705 505,291 458,871 442,859
--------- --------- --------- ---------
Income from Operations 112,330 135,560 127,353 122,100
Equity in Earnings of Affiliates and Other Income 6,565 7,936 5,613 9,239
Interest and Other Expenses 9,702 18,710 14,148 12,589
Minority Interest in Income of Subsidiaries 7,966 8,515 8,954 8,239
--------- --------- --------- ---------
Income Before Taxes 101,227 116,271 109,864 110,511
Income Taxes 32,900 37,800 35,700 35,900
--------- --------- --------- ---------
Net Income $ 68,327 $ 78,471 $ 74,164 $ 74,611
--------- --------- --------- ---------
Net Income per Share $ 1.02 $ 1.20 $ 1.15 $ 1.15
========= ========= ========= =========
<CAPTION>
1994
THREE MONTHS ENDED Mar. 31 Jun. 30 Sept. 30 Dec. 31
<S> <C> <C> <C> <C>
Net Sales $ 448,676 $ 525,893 $ 525,216 $ 565,223
Operating Expenses
Cost of products sold 288,605 352,487 346,342 382,184
Selling, administrative and research expenses 56,051 64,716 66,562 69,372
--------- --------- --------- ---------
344,656 417,203 412,904 451,556
--------- --------- --------- ---------
Income from Operations 104,020 108,690 112,312 113,667
Equity in Earnings of Affiliates and Other Income 11,062 9,901 13,675 11,007
Interest and Other Expenses 10,417 13,212 12,244 12,559
Minority Interest in Income of Subsidiaries 7,981 7,532 9,204 8,510
--------- --------- --------- ---------
Income Before Taxes 96,684 97,847 104,539 103,605
Income Taxes 29,800 30,100 32,200 31,900
--------- --------- --------- ---------
Net Income $ 66,884 $ 67,747 $ 72,339 $ 71,705
--------- --------- --------- ---------
Net Income per Share $ .94 $ .96 $ 1.05 $ 1.05
========= ========= ========= =========
</TABLE>
39
<PAGE> 1
SUBSIDIARIES AND AFFILIATES
BAYROL CHEMISHE
FABRIK GMBH
Swimming Pool and
Spa Products
100% Owned
BIO-LAB, INC.
Swimming Pool and
Spa Products
100% Owned
CHEMISCHE WORKE
LOWI BETEILIGUNGS
GMBH & CO.
Specialty Chemicals
100% Owned
CHEMOL RT
Chemical Trading
Company
78% Owned
E/M CORPORATION
Engineered Finishes and Coatings
100% Owned
FOUR SEASONS
INDUSTRIAL
SERVICES, INC.
Environmental
Remediation
100% Owned
GREAT LAKES
CHEMICAL (EUROPE),
LTD.
Specialty Chemicals
100% Owned
GREAT LAKES
CHEMICAL FRANCE
S.A.
Specialty Chemicals
100% Owned
GREAT LAKES
CHEMICAL
INTERNATIONAL, INC.
Export Sales-FSC
100% Owned
GREAT LAKES
CHEMICAL ITALIA
S.R.L.
Specialty Chemicals
100% Owned
GREAT LAKES FINE
CHEMICALS, LTD.
Manufacturer of Fine
and Specialty Chemicals
and Intermediates
100% Owned
KAO-QUAKER CO., LTD.
Furfural Derivatives
50% Owned
OCTEL ASSOCIATES
and
THE ASSOCIATED
OCTEL COMPANY,
LIMITED
Fuel Additives and
Specialty Chemicals
87.8% Owned
OSCA, INC.
High-Density, Clear
Fluids
100% Owned
WIL RESEARCH
LABORATORIES, INC.
Toxicological Testing
100% Owned
SHAREHOLDER INFORMATION
TRANSFER AGENT AND REGISTRAR
The stock transfer
agent and registrar for
Great Lakes' stock is
Harris Trust Company
of New York.
Stockholders who wish
to transfer their stock,
or change the name in
which the shares are
registered, should
contact:
Harris Trust
and Savings Bank
Attn:
Shareholder Services
P.O. Box 755
Chicago, Illinois
60690-0755
(312) 461-2421
AUDITORS
Ernst & Young LLP
Indianapolis, Indiana
LISTINGS
New York Stock
Exchange
New York, New York
Pacific Stock Exchange
Los Angeles and San
Francisco, California
Ticker Symbol: GLK
ANNUAL MEETING
The Annual Meeting of
the Stockholders will be
held at 11:00 a.m.,
Thursday, May 2, 1996,
at the Radisson Plaza &
Suite Hotel,
Indianapolis, Indiana.
FORM 10-K AND OTHER
INFORMATION
A complimentary copy of the
company's 1995 Annual Report to
the Securities and Exchange
Commission on Form 10-K is
available upon request. for this, or
for other information concerning
the company, please contact:
William P. Blake
Director, Investor Relations
or
Gregory J. Griffith
Director, Public Affairs and
Administration
Great Lakes Chemical Corporation
One Great Lakes Boulevard
West Lafayette, Indiana 47906-0200
Phone: (317) 497-6100
The following trademarks of Kiwi Brands appear in this report: Ty-D-Bol,
Dura-Bleach.
DIRECTORS
WILLIAM H. CONGLETON 1,4,6
General Partner
Palmer Partners
Private investment partnership
Director since 1973
JOHN S. DAY 1,2,3,6
Vice President Emeritus
of Purdue University
Director since 1975
THOMAS M. FULTON 4,5
Chief Executive Officer
and President
of Landauer, Inc.
Director since 1995
MARTIN M. HALE 1,3,4,6
Chairman of the Board;
Executive Vice President
Hellman Jordan
Management Company
Investment management
Boston, Massachusetts
Director since 1978
LEO H. JOHNSTONE 1,2,5
Retired Vice Chairman
Phillips Petroleum Company
Director since 1982
LOUIS E. LATAIF 1,2
Dean of the School
of Management
Boston University
Director since 1995
RICHARD H. LEET 2,3,5
Retired Vice Chairman
and Director
Amoco Corporation
Director since 1994
ROBERT B. MCDONALD 3,4,5,6
Chief Executive Officer
and President
Director since 1994
1 Member of the Audit Committee
2 Member of the Compensation and Incentive Committee
3 Member of the Executive Committee
4 Member of the Finance Committee
5 Member of the Environmental, Safety and Health Committee
6 Member of the Succession Planning Committee
40
<PAGE> 1
Exhibit 23
Great Lakes Chemical Corporation and Subsidiaries
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the incorporation by reference in this Annual Report (Form 10-K)
of Great Lakes Chemical Corporation of our report dated January 26, 1996,
included in the 1995 Annual Report to Stockholders of Great Lakes Chemical
Corporation.
Our audits also included the financial statement schedule of Great Lakes
Chemical Corporation listed in Item 14(a). This schedule is the responsibility
of the Company's management. Our responsibility is to express an opinion based
on our audits. In our opinion, the financial statement schedule referred to
above, when considered in relation to the basic financial statements taken as a
whole, presents fairly in all material respects the information set forth
therein.
We also consent to the incorporation by reference in Post-Effective Amendment
Number 5 to the Registration Statement Number 2-53909 on Form S-8, dated May 1,
1980, in Registration Statement Number 33-02069 on Form S-3, dated December 11,
1985, in Post-Effective Amendment Number 1 to the Registration Statement Number
33-02074 on Form S-8, dated February 3, 1995, in Registration Statement Number
33-02075 on Form S-8, dated December 11, 1985, in Registration Statement Number
33-42477 on Form S-3, dated August 28, 1991, and in Registration Statement
Number 33-57589 on Form S-8, dated February 3, 1995, of our report dated
January 26, 1996, with respect to the consolidated financial statements
incorporated herein by reference, and our report included in the preceding
paragraph with respect to the financial statement schedule included in this
Annual Report (Form 10-K) of Great Lakes Chemical Corporation for the year
ended December 31, 1995.
ERNST & YOUNG LLP
Indianapolis, Indiana
March 22, 1996
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEET, STATEMENT OF INCOME, AND STATEMENT OF CASH FLOW AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<CASH> $ 180,970
<SECURITIES> 0
<RECEIVABLES> 534,673
<ALLOWANCES> 7,659
<INVENTORY> 375,967
<CURRENT-ASSETS> 1,125,011
<PP&E> 1,278,332
<DEPRECIATION> 513,021
<TOTAL-ASSETS> 2,468,869
<CURRENT-LIABILITIES> 465,425
<BONDS> 340,145
0
0
<COMMON> 72,109
<OTHER-SE> 1,344,074
<TOTAL-LIABILITY-AND-EQUITY> 2,468,869
<SALES> 2,361,069
<TOTAL-REVENUES> 2,390,422
<CGS> 1,572,653
<TOTAL-COSTS> 1,863,316
<OTHER-EXPENSES> 40,074
<LOSS-PROVISION> 410
<INTEREST-EXPENSE> 15,075
<INCOME-PRETAX> 437,873
<INCOME-TAX> 142,300
<INCOME-CONTINUING> 295,573
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> $ 295,573
<EPS-PRIMARY> $ 4.52
<EPS-DILUTED> $ 4.52
</TABLE>
