<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarter ended September 30, 1998
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.)
500 East 96th Street,
Suite 500
Indianapolis, IN 46240
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code 317-715-3000
One Great Lakes Boulevard, P.O. Box 2200, West Lafayette, IN 47906
-------------------------------------------------------------------
(Former address of principal executive office)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X
-----
No
-----
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the close of the period covered by this report.
One Class - 59,105,583 Shares as of September 30, 1998
<PAGE> 2
Part 1 - Financial Statements
<TABLE>
<CAPTION>
GREAT LAKES CHEMICAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
September 30 December 31
1998 1997
------------ -----------
(thousands of dollars)
<S> <C> <C>
Assets
Current Assets
Cash and cash equivalents $ 475,046 $ 73,673
Accounts and notes receivable, less
allowance of $6,075 (1997 - $5,803) 242,998 256,892
Inventories
Finished products 217,802 217,398
Raw materials 46,527 51,984
Supplies 32,451 28,793
---------- ----------
Total inventories 296,780 298,175
Prepaid expenses 26,551 39,806
---------- ----------
Total current assets 1,041,375 668,546
Plant and Equipment 1,236,411 1,140,617
Less allowance for depreciation (552,635) (481,982)
---------- ----------
Net plant and equipment 683,776 658,635
Goodwill 118,188 114,902
Investments in and Advances to
Unconsolidated Affiliates 77,205 72,716
Other Assets 34,117 29,052
Net Assets of Discontinued Operations 104,743 726,540
---------- ----------
$2,059,404 $2,270,391
========== ==========
</TABLE>
<PAGE> 3
GREAT LAKES CHEMICAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (CONTINUED)
<TABLE>
<CAPTION>
September 30 December 31
1998 1997
------------ -----------
(thousands of dollars)
<S> <C> <C>
Liabilities and Stockholders' Equity
Current Liabilities
Accounts payable $ 101,010 $ 140,310
Accrued expenses 152,875 134,547
Income taxes payable 124,073 13,511
Dividends payable 4,728 9,431
Notes payable and current portion
of long-term debt 3,302 6,557
---------- ----------
Total current liabilities 385,988 304,356
Long-term Debt, less Current Portion 472,868 561,455
Other Noncurrent Liabilities 33,147 28,692
Deferred Income Taxes 68,025 68,445
Stockholders' Equity
Common stock, $1 par value,
authorized 200,000,000 shares,
issued 72,732,794
(1997 - 72,572,602 shares) 72,733 72,573
Additional paid-in capital 127,262 123,379
Retained earnings 1,668,779 1,912,468
Minimum pension liability adjustment (2,543) (2,543)
Cumulative translation adjustment (21,946) (52,855)
Less treasury stock, at cost,
13,627,211 shares
(1997 - 13,628,300 shares) (744,909) (745,579)
---------- ----------
Total stockholders' equity 1,099,376 1,307,443
---------- ----------
$2,059,404 $2,270,391
========== ==========
</TABLE>
<PAGE> 4
GREAT LAKES CHEMICAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30 September 30
------------------ -----------------
1998 1997 1998 1997
---- ---- ---- ----
(thousands of dollars except per share data)
<S> <C> <C> <C> <C>
Net Sales $340,450 $309,570 $1,077,130 $ 985,561
Operating Expenses
Cost of products sold 249,743 220,508 777,689 705,055
Selling, administrative
and research expenses 48,182 42,210 149,175 132,515
Restructuring and
Special Charges 48,314 -- 63,814 --
-------- -------- ---------- ---------
346,239 262,718 990,678 837,570
-------- -------- ---------- ---------
Operating (Loss) Income (5,789) 46,852 86,452 147,991
Interest and Other Income 12,255 8,368 28,534 20,784
Interest and Other Expenses 4,736 10,170 28,167 30,762
-------- -------- ---------- ---------
Income from Continuing
Operations before
Income Taxes 1,730 45,050 86,819 138,013
Income Taxes 500 16,000 30,400 49,500
-------- -------- ---------- ---------
Net Income from
Continuing Operations 1,230 29,050 56,419 88,513
Net Income from
Discontinued Operations -- 29,768 32,571 85,564
-------- -------- ---------- ---------
Net Income $ 1,230 $ 58,818 $ 88,990 $ 174,077
======== ======== ========== =========
Earnings per Share:
Basic
Continuing Operations $ 0.02 $ 0.48 $ 0.96 $ 1.47
Discontinued Operations -- 0.50 0.55 1.42
-------- -------- ---------- ---------
$ 0.02 $ 0.98 $ 1.51 $ 2.89
======== ======== ========== =========
Diluted
Continuing Operations $ 0.02 $ 0.48 $ 0.95 $ 1.46
Discontinued Operations -- 0.50 0.55 1.42
-------- -------- ---------- ---------
$ 0.02 $ 0.98 $ 1.50 $ 2.88
======== ======== ========== =========
Cash Dividends Declared
per Share $ 0.08 $ 0.16 $ 0.32 $ 0.47
</TABLE>
<PAGE> 5
GREAT LAKES CHEMICAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Nine Months Ended
September 30
----------------------
1998 1997
----------------------
(thousands of dollars)
<S> <C> <C>
OPERATING ACTIVITIES
Net income from continuing operations $ 56,419 $ 88,513
Adjustments to reconcile income from
continuing operations to net cash
provided by operating activities:
Depreciation and amortization 61,882 55,072
Changes in deferred items and other 46,697 (541)
-------- --------
Cash provided by continuing operations
excluding changes in working capital 164,998 143,044
Changes in working capital other than
debt, net of effect from business
combinations 534 32,744
Other noncurrent liabilities (2,786) 677
-------- --------
Net Cash Provided by Operating Activities
from Continuing Operations 162,746 176,465
Discontinued Operations:
Net income 32,571 85,564
Change in net assets 431,812 55,867
-------- --------
Net Cash Provided by Operating Activities 627,129 317,896
INVESTING ACTIVITIES
Plant and equipment additions (114,339) (100,415)
Business combinations, net of cash acquired 3,258 (999)
Other (8,739) (2,872)
-------- --------
Net Cash Used in Investing Activities (119,820) (104,286)
FINANCING ACTIVITIES
Net (repayments) borrowings under
short-term credit lines (3,447) 394
Net (decrease) increase in commercial
paper and other long-term obligations (88,672) 3,544
Proceeds from stock options exercised 4,043 1,941
Cash dividends (18,981) (22,927)
Repurchase of common stock (1,407) (86,405)
Other 707 ---
-------- --------
Net Cash Used in Financing Activities (107,757) (103,453)
Effect of Exchange Rate Changes on Cash
and Cash Equivalents 1,821 (4,438)
-------- --------
Increase in Cash and Cash Equivalents 401,373 105,719
Cash and Cash Equivalents at Beginning
of Year 73,673 141,439
-------- --------
Cash and Cash Equivalents at End of Period $475,046 $247,158
======== ========
</TABLE>
<PAGE> 6
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS
OF OPERATIONS AND FINANCIAL CONDITION
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998
CONTINUING OPERATIONS
Sales for the third quarter increased 10 percent to $340 million primarily on
the strength of 6 percent volume growth. Excluding the effect of restructuring
and special charges of $48 million pretax, earnings from continuing operations
were $33 million or $.56 per share compared to $29 million or $.48 per share in
the third quarter of 1997. Including restructuring and special charges net
income was $1 million or $.02 per share.
The following table sets forth the percentage relationship to net sales of
certain income statement items for the Company's continuing operations:
<TABLE>
<CAPTION>
Third Quarter Year to Date
---------------- ----------------
1998 1997 1998 1997
------- ------- ------- -------
<S> <C> <C> <C> <C>
Net Sales 100.0% 100.0% 100.0% 100.0%
Gross Profit 26.6 28.8 27.8 28.5
Selling, Administrative and
Research 14.1 13.6 13.8 13.5
Restructuring and
Special Charge 14.2 -- 5.9 --
------- ------- ------- -------
Operating Income (Loss) (1.7) 15.2 8.1 15.0
Interest and Other Income 3.6 2.7 2.6 2.1
Interest and Other Expense 1.4 3.3 2.6 3.1
------- ------- ------- -------
Income before Taxes .5 14.6 8.1 14.0
Income Taxes .1 5.2 2.9 5.0
------- ------- ------- -------
Net Income .4% 9.4% 5.2% 9.0%
======= ======= ======= =======
</TABLE>
Sales for the quarter were $340 million, an increase of $30 million over the
prior-year quarter. Net sales by business unit are set forth in the following
table:
<TABLE>
<CAPTION>
Third Quarter Year to Date
--------------------------------------------
1998 1997 Change 1998 1997 Change
---- ---- ------ ---- ---- ------
<S> <C> <C> <C> <C> <C> <C>
Polymer Additives $139 $126 10.3% $438 $398 10.1%
Performance Chemicals 84 68 23.5% 233 205 13.7%
Water Treatment 94 87 8.0% 319 293 8.9%
Energy Services & Products 24 26 (7.7)% 91 83 9.6%
Elimination & Other (1) 3 n/a (4) 7 n/a
---- ----- ------ ------ ---- ------
$340 $310 10.0% $1,077 $986 9.1%
==== ===== ====== ====== ==== ======
</TABLE>
On an overall basis the increases in sales reflect the following:
<TABLE>
<CAPTION>
Third Quarter Year to Date
---------------- ----------------
<S> <C> <C>
Selling Price Decreases $(3) $(10)
Volume Increases 20 76
Foreign Exchange -- (16)
Acquisitions 13 42
--- ----
$30 $ 92
=== ====
</TABLE>
<PAGE> 7
The sales of the Polymer Additives business unit, which consists of flame
retardants and polymer stabilizers, increased $13 million for the quarter and
$40 million for the nine months compared to the prior year periods. Sales
volume improved in both periods on the strength of polymer stabilizer products.
These gains were offset in the third quarter by unfavorable selling price
comparisons and for the nine month by the combined effects of unfavorable
selling prices and foreign exchange. Selling prices in the business unit
remain under pressure due to competitive activity and the weak economic
situation in Asia. The November 1997 addition of Anzon, a producer of
antimony-based product provided the overall increase in sales.
The Performance Chemicals business unit, which includes agricultural chemicals,
bromine intermediates, fine chemicals, fluorine products and WIL Labs, recorded
a sales increase of $16 million for the quarter and $28 million year to date
compared to the prior year periods. Volume gains account for the majority of
the improvement in both periods. Average selling prices were flat to slightly
positive while currency effects were negligible. Volume improvement reflects
solid customer demand for pharmaceutical and other fine chemicals
intermediates; increasing market acceptance of Hypersolve(TM), a replacement
for some chlorinated solvents; and an increase in demand for FM200, a fire
suppressant product.
Water Treatment business unit sales improved $7 million and $26 million for the
quarter and year to date periods, respectively. Volume gains in the US
recreational water treatment market account for the majority of the increase.
The higher volume reflects share gains in the mass merchandise segment of the
market, successful introduction of new products and better than normal weather
conditions during the pool season. Average selling prices were unchanged while
currency had a slightly negative impact.
Energy Services and Products business unit (OSCA) sales were down $2 million
for the third quarter. Sales for the nine months improved $8 million. Sales
in the quarter were adversely affected by reduced drilling activity caused by
low oil prices and weather conditions in the Gulf of Mexico that halted well
service activities for approximately 20 days. The year to date sales increase
reflects volume gains due to the introduction of expanded service capabilities.
Gross Profits for the quarter amounted to $91 million, and increase of $2
million from the prior year period. Gross profits as a percentage of sales for
the third quarter were 26.6%, a decrease of 2.2% points from the prior year
quarter. Gross profit margin compression results from the negative price
trends in polymer stabilizers and the reduced level of OSCA activities
including demand for clean fluids which, in addition to the loss of volume
leverage on OSCA's cost base, negatively impacts bromine costs. Raw materials
price reductions, primarily chlorine, were offset in part by lower bromine
production.
<PAGE> 8
Gross profits for the nine months were $300 million compared to $281 million in
the prior year. In absolute terms the increase in gross profits results from:
volume gains, particularly in Water Treatment and Polymer Additives; improved
manufacturing cost performance across all units; and the contribution of the
Anzon acquisition. Partially offsetting these improvements were price
decreases in polymer stabilizer and negative currency effects, primarily the
Japanese Yen and the German Mark. As a percentage of sales gross profit were
27.8% in 1998 compared to 28.5% in 1997. The decrease was primarily due to
lower prices in polymer stabilizers.
Selling, administrative and research costs were $48 million for the quarter and
$149 year to date representing an increase of $6 million and $17 million for
the quarter and year to date periods, respectively. As a percentage of sales
selling, administrative and research costs were up about 0.5 percentage points
for both periods compared to a year ago. Increased costs resulted from
expanded infrastructure to support revenue growth and the implementation of a
new information systems.
Interest and other income increased $4 million for the quarter and $8 million
for the nine months compared to the prior year periods primarily due to
interest earned in the cash distribution from Octel.
Interest and other expense decreased $5 million for the quarter and $3 million
year to date compare to prior years periods due to the elimination of
provisions no longer required.
RESTRUCTURING AND SPECIAL CHARGES
On October 21, 1998, the company announced actions intended to improve the
operating income of its businesses, primarily polymer additives, by
approximately $40 million per year before taxes. The major components of the
charge include:
- Consolidating manufacturing operations
- Elimination of approximately 600 jobs
- Writing down or disposing of underperforming assets and product
lines.
- Consolidating sales offices and research and development
facilities
To implement these actions, the company will take a pre-tax charge of $100 to
$120 million. For actions finalized in the third quarter the company
recognized a pre-tax charge of $48 million. The company is in the process of
finalizing the remaining actions which will be
<PAGE> 9
reflected as a charge in the 1998 fourth quarter. In addition to the above the
company incurred a charge in the first quarter of 1998 of approximately $16
million in connection with a change in the chief executive officer; which is
reflected as part of the restructuring and special charges in the nine months
ended September 30, 1998.
FINANCIAL CONDITION
Net cash provided by the operating activities of the continuing operations
amounted to $163 million for the nine months ended September 30, 1998 compared
to $176 million for the same period in 1997. The decline reflects an
increased use of working capital in the operations of approximately $33
million. Excluding the change in working capital, net cash provided increased
$22 million as lower net income resulting from the restructuring and special
charges was more than offset by the fact that very little of the charge
consumed cash in the period and depreciation and amortization increased by
approximately $7 million.
The change in working capital reflects a reduction in accounts payable and
accrued liabilities primarily due to timing compared to the prior year.
Accounts receivable of $243 million at September 30, 1998 increased about $14
million from September last year in line with increased sales. Days sales
outstanding at 63 days represents an improvement of 3 days compared to
September 1997. Inventories of $297 million at September 30, 1998 increased
about $15 million from the prior September. Inventory turnover remains
essentially unchanged at 3.4 times.
Capital sending amounted to $114 million for the period and is expected to
total approximately $160 million for the full year.
Discontinued Operations generated $464 million in the current year, all but $4
million of which is the cash received from the company's petroleum additives
business (Octel) prior to the May 22, 1998 spin-off of Octel to Great Lakes
shareholders. Approximately $50 million of the $462 million in cash received
from Octel was used to reduce debt. The balance was added to cash and cash
equivalents. As part of the transaction, approximately $108 million in tax
liabilities were assumed by Great Lakes. Approximately $54 million in taxes
related to Octel's 1997 earnings will be paid in October 1998. An additional
$38 million will become payable when the dividend from Octel is repatriated.
Shareholders equity (retained earnings and cumulative translation adjustment)
was reduced by approximately $282 million representing the remaining net book
value of the Octel Corp asset distribution to the Great Lakes shareholders.
Approximately 37,000 shares of common stock have been repurchased during 1998
at an average cost of $38.16.
YEAR 2000 READINESS
<PAGE> 10
The Year 2000 Issue (Y2K) is the result of computer programs being written
using two digits rather than four to define the applicable year. Any computer
programs or any hardware that have date sensitive software or embedded chips
may recognize a date using "00" as the year 1900 rather than the year 2000.
This could result in a temporary inability to process transactions or engage in
normal manufacturing or other business activities. Failure by the Company or
any of its significant suppliers or customers to complete year 2000 readiness
activities in manner could have a material adverse effect on the Company's
business and results of operations.
Great Lakes is actively engaged in a company-wide effort to achieve year 2000
readiness for both information technology (IT) and non-information technology
(Non-IT) systems and to determine the readiness of significant suppliers and
customers.
The Company's approach to addressing its Y2K issues consists of the following:
- Inventory - identification of items to be assessed for Y2K
readiness.
- Assessment - prioritizing the inventoried items, assessing
their Y2K readiness, defining corrective actions and developing
contingency plans.
- Deployment - implementing corrective actions, verifying
implementation and finalizing contingency plans.
The Company's IT systems are comprised of business computer systems, end user
systems and technical infrastructure. In 1996, the company determined that
the IT systems supporting its Polymer Additives and Performance Chemical
business units were inadequate to meet the business requirements and embarked
on a project to replace all critical systems for these businesses. In the
Water Treatment and Energy Services and Products business units IT systems
inventories and assessments were completed in the first part of 1998 and
replacement of non-conforming systems will begin during the 1998 fourth
quarter. Deployment of all critical systems is expected to be
completed by the end of the third quarter of 1999. The company has
begun to develop contingency plans and expects them to be completed by the end
of the first quarter of 1999.
Non-IT systems are comprised of manufacturing and warehousing systems and
facility support systems. The Company has made a preliminary inventory and
assessment of these systems and anticipates finalizing these activities by the
end of the first quarter of 1999.
In 1998 Great Lakes began contacting its suppliers regarding their Y2K
readiness. The suppliers readiness program focuses on those suppliers
considered essential for the prevention of material disruption of Great Lakes
business operation. The program is expected
<PAGE> 11
to be completed by the end of the second quarter of 1999. It is anticipated
contingency plans will be in place by September 30, 1999.
The Company is using both internal and external resources to complete it's Y2K
readiness plan. The Company currently estimates that the cost of resolving the
year 2000 issues at approximately $15 to $20 million, of this amount, the
Company estimates an expenditure of approximately $4 million in 1998.
Approximately 50 percent of the total year 2000 costs will be for equipment or
software replacement and the remainder on assessment and remediation. The
Company expects all costs will be funded out of operating cash flow. Year 2000
costs are expensed except for new systems and equipment. Such costs are
capitalized and charged to expense over the estimated useful life of the asset
in accordance with existing company policy. The estimated costs are base on
currently available information and may be subject to change.
While the Company believes its efforts to address Y2K issues will be completed
in a timely manner, the Company recognizes that failing to resolve Y2K issues
on a timely basis would, in a reasonably likely worst case scenario,
significantly limit the Company's ability to manufacture and distribute its
products and process business transactions. Also, the Company could be
adversely affected by the failure of suppliers or customers to conduct their
operations due to Y2K-related issues. Adverse effects on the Company could
include among other things disruption of manufacturing operations, increased
costs and loss of business which can not be reasonably quantified.
ACCOUNTING STANDARDS
In March 1998, the American Institute of Certified Public Accountants (AICPA)
issued Statement of Positive (SOP) 98-1, Accounting for the Costs of Computer
Software Developed or Obtained for Internal Use. This accounting standard,
which is effective for fiscal years beginning after December 15, 1998, defines
the criteria for capitalizing or expensing costs incurred in connection with
internal-use computer software projects and establishes when amortization of
capitalized costs is to begin. The adoption of SOP 98-1 will result in a small
increase in operating expense in 1999.
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards (SFAS) No. 133, Accounting for Derivative
Instruments and Hedging Activities. This accounting standard, which is
effective for all fiscal quarters of fiscal years beginning after June 15,
1999, requires that all derivatives be recognized as either assets or
liabilities at fair value. The Company is evaluating the new statements
provisions and has not yet determined the date on which it will adopt SFAS
No. 133.
<PAGE> 12
FORWARD LOOKING STATEMENT
This report contains forward looking statements involving risks and
uncertainties that affect the Company's operations as discussed in the 1997
Annual Report on Form 10-K filed with the Securities and Exchange Commission.
Accordingly, there is no assurance that the Company's expectations will be
realized.
<PAGE> 13
GREAT LAKES CHEMICAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE A - BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements have been prepared
in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all the information and
footnotes necessary for a comprehensive presentation of financial position and
results of operations.
It is management's opinion, however, that all material adjustments (consisting
of normal recurring accruals) have been made which are necessary for a fair
financial statement presentation. The results for the interim period are not
necessarily indicative of the results to be expected for the year.
For further information, refer to the consolidated financial statements and
footnotes included in the Company's Annual Report on form 10-K for the year
ended December 31, 1997.
NOTE B - INCOME TAXES
The provision for income taxes at the effective tax rates reconciles with the
statutory U.S. Federal tax rate as follows:
<TABLE>
<CAPTION>
Nine Months Ended
September 30
--------------------
1998 1997
--------------------
<S> <C> <C>
Statutory U.S. Federal tax rate 35.0% 35.0%
State income taxes 2.1 2.4
Restructuring and special charges
rate differential 1.5 --
Change in taxes relating to
various minor items (3.6) (1.5)
--------- ---------
35.0% 35.9%
========= =========
</TABLE>
NOTE C - COMPREHENSIVE INCOME
As of January 1, 1998, the Company adopted the Financial Accounting Standards
Board's Statement 130, Reporting Comprehensive Income. Statement 130
establishes new rules for reporting and display of comprehensive income and its
components. However, the adoption of
<PAGE> 14
this Statement had no impact on the Company's net income or stockholders'
equity. Statement 130 requires foreign currency translation adjustments and
minimum pension liability adjustments, which are reported separately in
stockholders' equity, to be included in other comprehensive income. Prior year
financial statements have been reclassified to conform to the requirements of
Statement 130.
Comprehensive income was as follows:
<TABLE>
<CAPTION>
(in thousands) 1998 1997
------- --------
<S> <C> <C>
Third Quarter $14,594 $ 46,633
Year to Date $90,904 $104,714
</TABLE>
NOTE D - EARNINGS PER SHARE
The computation of basic and diluted earnings per share is determined by
dividing net income as reported as the numerator, by the number of shares
included in the denominator as follows:
<TABLE>
<CAPTION>
(in thousands) Three Months Ended Nine Months Ended
September 30 September 30
------------------ -------------------
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Weighted average shares
used for calculating
basic earnings per share 59,093 59,849 59,050 60,181
Effect of potentially
dilutive stock options
and restricted stock
used for calculating
diluted earnings per
share 137 265 202 258
------ ------ ------ ------
Denominator for diluted
earnings per share 59,230 60,114 59,252 60,439
====== ====== ====== ======
</TABLE>
NOTE E - RESTRUCTURING AND SPECIAL CHARGES
On October 21, 1998, the Company announced actions intended to reduce costs and
improve operating efficiencies. The Company estimates the cost of implementing
the plan will be between $100 and $120 million. For those actions finalized in
the third quarter a charge of $48 million was recorded, the remaining costs
will be recognized in the 1998 fourth quarter when the action plans are
finalized.
The components of the charge are as follows (in millions):
<PAGE> 15
Restructuring Charge:
<TABLE>
<CAPTION>
<S> <C>
Write down of property
plant and equipment (Non-Cash) $19
Severance and related cost 7
Other 12
---
38
---
Special Charge:
Write down of property
plant and equipment (non-cash) 10
---
Restructuring and Special Charges
$48
===
</TABLE>
The restructuring is expected to be completed by the first quarter of 2000.
Part II. Other Financial Information
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits filed as part of the report are listed below:
Exhibit Number
--------------
27 Financial Data Schedule
(b) The Company filed a form 8K on October 27, 1998 in connection with
Restructuring and Special Charges.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Date: November 13, 1998 By /s/ Robert J. Smith
----------------------- --------------------------------
Robert J. Smith
Vice President, Controller
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
consolidated balance sheet, statement of income, and statment of cash flow and
is qualified in its entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> SEP-30-1998
<CASH> 475,046
<SECURITIES> 0
<RECEIVABLES> 249,073
<ALLOWANCES> 6,075
<INVENTORY> 296,780
<CURRENT-ASSETS> 1,041,375
<PP&E> 1,236,411
<DEPRECIATION> 552,635
<TOTAL-ASSETS> 2,059,404
<CURRENT-LIABILITIES> 385,988
<BONDS> 472,868
0
0
<COMMON> 72,733
<OTHER-SE> 1,026,643
<TOTAL-LIABILITY-AND-EQUITY> 2,059,404
<SALES> 1,077,130
<TOTAL-REVENUES> 1,105,664
<CGS> 777,689
<TOTAL-COSTS> 990,067
<OTHER-EXPENSES> 9,125
<LOSS-PROVISION> 611
<INTEREST-EXPENSE> 19,042
<INCOME-PRETAX> 86,819
<INCOME-TAX> 30,400
<INCOME-CONTINUING> 56,419
<DISCONTINUED> 32,571
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 88,990
<EPS-PRIMARY> 1.51
<EPS-DILUTED> 1.50
</TABLE>
