<PAGE>
<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
X QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
----- OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1998
OR
----- TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number 1-13404
THE GENERAL CHEMICAL GROUP INC.
(Exact name of Registrant as specified in its charter)
DELAWARE 02-0423437
(State of other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number
LIBERTY LANE
HAMPTON, NEW HAMPSHIRE 03842
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (603) 929-2606
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
--- ---
The number of shares of Common Stock outstanding at June 30, 1998 was
11,198,199. The number of shares of Class B Common Stock outstanding at June 30,
1998 was 9,758,421
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THE GENERAL CHEMICAL GROUP INC.
FORM 10-Q
QUARTERLY PERIOD ENDED JUNE 30, 1998
INDEX
PAGE NO.
PART I. FINANCIAL INFORMATION:
Item 1. Financial Statements
Consolidated Statements of Operations - Three Months and
Six Months Ended June 30, 1997 and 1998........................ 1
Consolidated Balance Sheets - December 31, 1997 and
June 30, 1998.................................................. 2
Consolidated Statements of Cash Flows - Six Months
Ended June 30, 1997 and 1998................................... 3
Notes to the Consolidated Financial Statements.................. 4-7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.................... 8-9
PART II. OTHER INFORMATION:
Item 1. Legal Proceedings......................................... 10
Item 6. Exhibits and Reports on Form 8-K.......................... 11
SIGNATURES......................................................... 12
EXHIBIT INDEX...................................................... 13
EXHIBITS........................................................... 14-15
<PAGE>
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
THE GENERAL CHEMICAL GROUP INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
-------------------- --------------------
1997 1998 1997 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net revenues............................................ $ 164,957 $ 188,066 $ 314,523 $ 349,535
Cost of sales........................................... 110,315 134,973 214,679 254,407
Selling, general and administrative expense............. 15,398 17,993 30,512 33,869
------------ ------------ ------------ -------------
Operating profit........................................ 39,244 35,100 69,332 61,259
Interest expense........................................ 5,093 6,807 10,350 12,397
Interest income......................................... 573 239 1,323 654
Foreign currency transaction (gains) losses............. (32) 615 514 443
Other (income) expense, net............................. 257 270 (196) 280
------------ ------------ ------------ -------------
Income before income taxes, minority
interest and extraordinary item........................ 34,499 27,647 59,987 48,793
Minority interest....................................... 6,121 3,691 12,342 8,127
------------ ------------ ------------ -------------
Income before income taxes and extraordinary
item................................................... 28,378 23,956 47,645 40,666
Income tax provision.................................... 11,120 9,270 18,673 16,119
------------ ------------ ------------ -------------
Income before extraordinary item........................ 17,258 14,686 28,972 24,547
Extraordinary item - loss from extinguishment
of debt (net of tax)................................... -- 3,661 -- 3,661
------------ ------------ ------------ -------------
Net income ................................... $ 17,258 $ 11,025 $ 28,972 $ 20,886
============ ============ ============ =============
EARNINGS PER COMMON SHARE:
Income before extraordinary item.................... $ .81 $ .69 $ 1.33 $ 1.16
Extraordinary item - loss on extinguishment
of debt (net of tax)............................... -- .17 -- .17
------------ ------------ ------------ -------------
Net income..................................... $ .81 $ .52 $ 1.33 $ .99
============ ============ ============ =============
EARNINGS PER COMMON SHARE - ASSUMING DILUTION:
Income before extraordinary item.................... $ .77 $ .67 $ 1.27 $ 1.12
Extraordinary item - loss from extinguishment
of debt (net of tax)............................... -- .17 -- .17
------------ ------------ ------------ -------------
Net income.................................... $ .77 $ .50 $ 1.27 $ .95
============ ============ ============ =============
Dividends declared per share............................ $ .05 $ .05 $ .10 $ .10
============ ============ ============ =============
Weighted average common and common
equivalent shares outstanding.......................... 22,352,545 22,001,199 22,825,853 21,948,677
============ ============ ============ =============
</TABLE>
See the accompanying notes to consolidated financial statements.
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THE GENERAL CHEMICAL GROUP INC.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
ASSETS
DECEMBER 31, JUNE 30,
1997 1998
---- ----
(UNAUDITED)
<S> <C> <C>
Current Assets:
Cash and cash equivalents................................................ $ 21,753 $ 38,209
Receivables, net......................................................... 122,720 136,202
Inventories ............................................................. 45,958 60,553
Deferred income taxes.................................................... 14,145 11,531
Other current assets..................................................... 2,370 6,256
---------- -----------
Total current assets................................................ 206,946 252,751
Property, plant and equipment, net............................................ 304,189 343,429
Other assets.................................................................. 50,502 95,122
---------- -----------
Total assets........................................................ $ 561,637 $ 691,302
========== ===========
LIABILITIES AND EQUITY (DEFICIT)
Current Liabilities:
Accounts payable......................................................... $ 61,332 $ 63,111
Accrued liabilities...................................................... 73,258 74,085
Income taxes payable..................................................... 4,576 9,265
Current portion of long-term debt........................................ 17,392 51,915
---------- -----------
Total current liabilities........................................... 156,558 198,376
Long-term debt ............................................................. 240,612 304,742
Other liabilities............................................................. 215,405 217,766
---------- ----------
Total liabilities................................................... 612,575 720,884
Minority interest............................................................. 43,301 45,511
---------- ----------
Equity (deficit):
Preferred Stock, $.01 par value; authorized:
10,000,000 shares; none issued or outstanding........................... -- --
Common Stock, $.01 par value; authorized: 100,000,000 shares;
issued: 12,558,697 shares at December 31, 1997 and
June 30, 1998 .......................................................... 126 126
Class B Convertible Common Stock, $.01 par value; authorized
40,000,000 shares; issued and outstanding: 9,758,421 shares at
December 31, 1997 and June 30, 1998..................................... 97 97
Capital deficit.......................................................... (183,814) (183,279)
Accumulated other comprehensive income................................... (2,197) (2,317)
Retained earnings ....................................................... 118,855 137,642
Treasury stock, at cost: 1,362,898 and 1,360,498 shares at
December 31, 1997 and June 30, 1998, respectively....................... (27,306) (27,362)
---------- -----------
Total equity (deficit).............................................. (94,239) (75,093)
---------- -----------
Total liabilities and equity (deficit).............................. $ 561,637 $ 691,302
========== ===========
See the accompanying notes to the consolidated financial statements.
</TABLE>
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THE GENERAL CHEMICAL GROUP INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
----------------------
1997 1998
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net income ............................................................. $ 28,972 $ 20,886
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization.......................................... 16,004 19,852
Net loss on disposition of long-term assets............................ 372 234
Loss on extinguishment of debt......................................... -- 6,056
Unrealized exchange loss............................................... 730 444
Restricted unit plan costs............................................. 684 562
(Increase) in receivables.............................................. (24,811) (2,302)
(Increase) in inventories.............................................. (272) (5,216)
(Decrease) in accounts payable......................................... (182) (9,956)
(Decrease) in accrued liabilities...................................... (243) (5,185)
Increase in income taxes payable....................................... 2,688 4,896
Increase (decrease) in other assets and liabilities, net............... 1,086 185
Increase in minority interest.......................................... 2,674 2,210
----------- ----------
Net cash provided by operating activities........................... 27,702 32,666
----------- ----------
Cash flows from investing activities:
Capital expenditures................................................... (18,407) (23,362)
Acquisition of businesses, net of cash acquired (Note 3)*.............. -- (83,165)
Proceeds from sales or disposals of long-term assets.................. 10 136
----------- ----------
Net cash (used for) investing activities........................... (18,397) (106,391)
----------- ----------
Cash flows from financing activities:
Proceeds from long-term debt........................................... -- 383,655
Repayment of long-term debt............................................ (8,696) (292,273)
Payments to acquire treasury stock..................................... (27,160) (284)
Exercise of stock options.............................................. -- 202
Dividends.............................................................. (2,225) (1,048)
----------- ----------
Net cash provided by (used for) financing activities................ (38,081) 90,252
----------- ----------
Effect of exchange rate changes on cash..................................... (41) (71)
----------- ----------
Increase (decrease) in cash and cash equivalents........................... (28,817) 16,456
Cash and cash equivalents at beginning of period............................ 51,700 21,753
----------- ----------
Cash and cash equivalents at end of period.................................. $ 22,883 $ 38,209
============ ==========
Supplemental information:
Cash paid for income taxes............................................. $ 16,739 $ 11,849
=========== ==========
Cash paid for interest................................................. $ 10,053 $ 11,250
=========== ==========
* Purchase of businesses, net of cash acquired:
Working capital, other than cash...................................... $ (6,574)
Plant, property and equipment......................................... (36,436)
Other assets.......................................................... (41,582)
Noncurrent liabilities................................................ 1,427
----------
Net cash used to acquire businesses................................ $ (83,165)
==========
</TABLE>
See the accompanying notes to the consolidated financial statements.
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THE GENERAL CHEMICAL GROUP INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 1998
(DOLLARS IN THOUSANDS)
(UNAUDITED)
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements include the
accounts of The General Chemical Group Inc. and its subsidiaries (the
"Company"). These unaudited financial statements have been prepared by the
Company pursuant to the rules and regulations of the Securities and Exchange
Commission. The financial statements do not include certain information and
footnotes required by generally accepted accounting principles. In the opinion
of management, all adjustments (consisting of normal recurring adjustments)
considered necessary for a fair presentation have been included. Operating
results for the six months ended June 30, 1998 are not necessarily indicative of
the results that may be expected for the year ending December 31, 1998. The
Company's financial statements should be read in conjunction with the financial
statements and the notes thereto included in the Company's Annual Report on Form
10-K for the year ended December 31, 1997.
In 1997, The Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 130, "Reporting Comprehensive Income" ("FAS
130") which the Company adopted for both interim and fiscal years beginning
after December 31, 1997. FAS 130 requires the reporting and display of
comprehensive income and its components. The Company's foreign currency
translation adjustments, which were previously reported as a separate component
of equity, are now included in Accumulated other comprehensive income within the
equity section of the Consolidated Balance Sheets. Comprehensive income for the
three and six months ended June 30, 1997 was $17,279 and $28,929, respectively.
Comprehensive income for the three and six months ended June 30, 1998 was
$11,119 and $20,766, respectively.
In June 1998, The Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 133, 'Accounting for Derivative
Instruments and Hedging Activities' ('FAS 133'). FAS 133 requires that all
derivative instruments be measured at fair value and recognized in the balance
sheet as either assets or liabilities. The Company is currently evaluating the
impact FAS 133 will have on its consolidated financial statements.
Certain prior period amounts have been reclassified to conform with
current presentation.
NOTE 2 - RELATED PARTY TRANSACTIONS
Management Agreement
The Company is party to a management agreement with Latona Associates
Inc. (a management and advisory company which is controlled by a stockholder of
the Company). Pursuant to the agreement, the Company was charged $2,920 and
$2,961 for the six months ended June 30, 1997 and 1998, respectively, for
corporate supervisory and administrative services and strategic advice and
guidance. In addition, pursuant to the management agreement, during the
second quarter of 1998 the Company paid Latona Associates Inc. $500 for
additional services provided in connection with the acquisition of Reheis, Inc.
The management agreement expires on December 31, 2004.
NOTE 3 - ACQUISITIONS
On February 6, 1998, the Company's wholly owned subsidiary, Toledo
Technologies, Inc. acquired all of the outstanding stock of Sandco Automotive
Ltd. ("Sandco"), a manufacturer of engine parts for the North American
automobile industry and its aftermarket. Sandco is based in Waterdown, Ontario.
Funding for this transaction was provided with new borrowings.
On April 1, 1998, the Company's wholly owned subsidiary General Chemical
Corporation ("GCC"), acquired all of the outstanding stock of Reheis Inc.
("Reheis"). Reheis is headquartered in New Jersey and is the world's leading
producer and supplier of the active chemical ingredients in antiperspirants and
over-the-counter antacids as well as a supplier of pharmaceutical intermediates
and other products. Funding for this transaction was provided by existing cash
and borrowings under GCC's revolving credit facility.
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THE GENERAL CHEMICAL GROUP INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 1998
(DOLLARS IN THOUSANDS)
(UNAUDITED)
The acquisitions are being accounted for under the purchase method,
and accordingly, the net assets and results of operations are included in the
consolidated financial statements from the date of acquisition, based on
valuation information available to the Company, which is subject to change as
such information is finalized. The excess of purchase price over the estimated
fair values of the tangible assets acquired is being treated as goodwill.
Goodwill is being amortized on a straight line basis over a period of 25 years.
The acquisitions did not have a material pro forma impact on consolidated
earnings.
NOTE 4 - ADDITIONAL FINANCIAL INFORMATION
The components of inventories were as follows:
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
1997 1998
---- ----
(UNAUDITED)
<S> <C> <C>
Raw materials................................................ $ 10,875 $ 13,208
Work in process.............................................. 3,295 8,726
Finished products............................................ 21,209 27,412
Supplies and containers...................................... 10,579 11,207
--------- ---------
$ 45,958 $ 60,553
========= =========
</TABLE>
NOTE 5 - LONG-TERM DEBT
Long-term debt consists of the following:
<TABLE>
<CAPTION>
MATURITIES DECEMBER 31, JUNE 30,
1997 1998
---- ----
(UNAUDITED)
<S> <C> <C> <C>
Bank Term Loan A - floating rate.................. 2000-2004 $ -- $ 100,000
Bank Term Loan B - floating rate.................. 1998-2006 -- 200,000
Bank Term Loan - floating rate.................... 1998-2001 65,217 --
Senior Subordinated Notes - 9.25%................. 2003 100,000 --
Canada Senior Notes - 9.09%....................... 1999 50,787 49,915
$130,000 U.S. Revolving Credit Facility -
floating rate.................................... 42,000 --
Other Debt - floating rate........................ -- 6,742
----------- -----------
Total Debt.................................... 258,004 356,657
Less: Current Portion........................ 17,392 51,915
----------- -----------
Net Long-Term Debt............................ $ 240,612 $ 304,742
=========== ===========
</TABLE>
On June 15, 1998 the Company entered into a new credit facility
consisting of a $100,000 Term Loan ("Term Loan A") maturing on June 15, 2004,
a $200,000 Term Loan ("Term Loan B") maturing on June 15, 2006 and a $300,000
Revolving Credit Facility maturing on June 15, 2004. The term loans and
revolving credit facility bear interest at a rate equal to a spread over a
reference rate chosen by the Company from various options. Term Loan A is
payable in consecutive quarterly installments commencing March 31, 2000. Term
Loan B is payable in consecutive quarterly installments commencing September 30,
1998. The facility is secured by a first priority security interest in all of
the capital stock of the Company's domestic subsidiaries and 65 percent of the
capital stock of the Company's foreign subsidiaries.
Proceeds from the new credit facility were used to retire certain
outstanding indebtedness. In connection with the retirement the Company recorded
an extraordinary loss of $3,661 net of a tax benefit of $2,396, related to the
early retirements.
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THE GENERAL CHEMICAL GROUP INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 1998
(DOLLARS IN THOUSANDS)
(UNAUDITED)
NOTE 6 - DIVIDENDS
On June 10, 1998, the Company's Board of Directors declared a quarterly
cash dividend of $.05 per share, payable July 8, 1998, to shareholders of record
on June 24, 1998.
NOTE 7 - COMMITMENTS AND CONTINGENCIES
Richmond Works July 26, 1993 Incident. On July 26, 1993 a pressure
relief device on a railroad tank car containing oleum that was being unloaded at
the Company's Richmond, California, facility, ruptured during the unloading
process, causing the release of a significant amount of sulfur trioxide.
Approximately 150 lawsuits seeking substantial amounts of damages were filed
against the Company on behalf of in excess of 60,000 claimants in municipal and
superior courts of California (Contra Costa and San Francisco Counties) and in
federal court (United States District Court for the Northern District of
California). All state court cases were coordinated before a coordination trial
judge (In Re GCC Richmond Works Cases, JCCP No. 2906) and the federal court
cases were stayed until completion of the state court cases.
After several months of negotiation under the supervision of a
settlement master, the Company and a court-approved plaintiffs' management
committee executed a comprehensive settlement agreement which resolved the
claims of approximately 95 percent of the claimants who filed lawsuits arising
out of the July 26th incident, including the federal court cases. After a final
settlement approval hearing on October 27, 1995, the coordination trial judge
approved the settlement on November 22, 1995. Pursuant to the terms of the
settlement agreement, the Company, with funds to be provided by its insurers
pursuant to the terms of its insurance policies, has agreed to make available a
maximum of $180,000 to implement the settlement. In addition, the settlement
agreement provides, among other things, that while claimants may Aopt out@ of
the compensatory damages portion of the settlement and pursue their own cases
separate and apart from the class settlement mechanism, they have no right to
opt out of the punitive damages portion of the settlement. Consequently, under
the terms of the settlement, no party may seek punitive damages from the Company
outside of those provided by the settlement.
Notices of appeal of all or portions of the settlement approved by the
court were filed by five law firms representing approximately 2,750 claimants,
with approximately 2,700 of these claimants represented by the same law firm.
Virtually all of these claimants have not specified the amount of their claims
in court documents, although the Company believes that their alleged injuries
are no different in nature or extent than those alleged by the settling
claimants. On May 8, 1996, the California Court of Appeals dismissed each of the
appeals that had been filed challenging the trial court's approval of the class
action settlement. The Court of Appeals dismissed the appeal relating to the
trial court's rulings on plaintiffs' attorney's fees on the ground that the
appealing attorneys lacked standing to appeal. The Court of Appeals also
dismissed each of the other pending appeals, ruling that the trial court's
orders and rulings approving the settlement were not presently appealable, if at
all, by the appealing claimants since they had all elected to opt out of the
settlement. The appealing attorneys and some of the appealing claimants then
filed a petition for review with the California Supreme Court which, on August
15, 1996, elected not to review the Court of Appeals' decision.
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THE GENERAL CHEMICAL GROUP INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (CONCLUDED)
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 1998
(DOLLARS IN THOUSANDS)
(UNAUDITED)
On March 11, 1997, the coordination judge dismissed the material claims
of 1,269 of the approximately 2,750 opt-out claimants, primarily on the grounds
that they had failed to comply with previous pre-trial orders. On April 8, 1997,
the California Court of Appeals denied a petition for review of the dismissals
filed by attorneys for the dismissed opt-out claimants, and on June 8, 1997, the
California Supreme Court denied the same attorneys' petition for review of the
California Court of Appeals' denial of their prior petition. On March 20, 1998,
the coordination judge dismissed the material claims of an additional 167 of the
opt-out claimants. As of June 30, 1998, as a result of these dismissals and
various settlements, there are approximately 1,000 opt-out claimants remaining.
It is possible that one or more of the appealing claimants, once their
opt-out cases are finally litigated through trial, may attempt to refile all or
a portion of the appeals that were dismissed by the Court of Appeals. While
there can be no assurances regarding how an appellate court might rule in the
event of such a refiling, the Company believes that the settlement will be
upheld on appeal. If the settlement is upheld on appeal, the Company believes
that any further liability in excess of the amounts made available under the
settlement agreement will not exceed the available insurance coverage, if at
all, by an amount that could be material to its financial condition or results
of operations. In the event of a reversal or modification of the settlement on
appeal, with respect to lawsuits by any then remaining claimants (opt-outs and
settling claimants who have not signed releases) the Company believes that,
whether or not it elects to terminate the settlement in the event it is reversed
or modified on appeal, it will have adequate resources from its available
insurance coverage to vigorously defend these lawsuits through their ultimate
conclusion, whether by trial or settlement. However, in the event the settlement
is overturned or modified on appeal, there can be no assurance that the
Company's ultimate liability resulting from the July 26, 1993 incident would not
exceed the available insurance coverage by an amount which could be material to
its financial condition or results of operations, nor is the Company able to
estimate or predict a range of what such ultimate liability might be, if any.
The Company has insurance coverage relating to this incident which
totals $200,000. The first two layers of coverage total $25,000 with a sublimit
of $12,000 applicable to the July 26, 1993 incident, and the Company also has
excess insurance policies of $175,000 over the first two layers. The Company
reached an agreement with the carrier for the first two layers whereby the
carrier paid the Company $16,000 in settlement of all claims the Company had
against that carrier. In the third quarter of 1994, the Company recorded a
$9,000 charge to earnings for costs which the Company incurred related to this
matter. The Company's excess insurance policies, which are written by two
Bermuda-based insurers, provide coverage for compensatory as well as punitive
damages. Both insurers have executed agreements with the Company confirming
their respective commitments to fund the settlement as required by their
insurance policies with the Company and as described in the settlement
agreement. In addition, these same insurers currently continue to provide
substantially the same insurance coverage to the Company.
-7-
<PAGE>
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
June 30, 1998 Compared with December 31, 1997
Financial Condition
Cash and cash equivalents were $38.2 million at June 30, 1998 as
compared with $21.8 million at December 31, 1997. During the first six months of
1998 the Company generated cash flow from operating activities of $32.7 million,
and received net proceeds from debt of $91.4 million, which was used to finance
acquisitions and capital expenditures of $83.2 million and $23.4 million,
respectively.
The Company had working capital of $54.4 million at June 30, 1998 as
compared with $50.4 million at December 31, 1997. This increase in working
capital primarily reflects higher cash, accounts receivable and inventory offset
by higher current portion of long-term debt.
During the second quarter of 1998, the Company completed a $600 million
refinancing plan to improve financial flexibility, simplify the capital
structure, support future growth efforts, refinance certain existing debt and
provide substantial funds for new acquisitions.
On April 1, 1998, the previously-announced acquisition of Reheis, Inc.
("Reheis") by a subsidiary of the Company was closed. Funding for this
transaction was provided with existing cash and borrowings from the Company's
revolving credit facility.
Results of Operations
Net revenues for the three and six month periods ended June 30, 1998
increased 14 percent and 11 percent to $188.1 million and $349.5 million,
respectively, from $165.0 million and $314.5 million for the comparable periods
in 1997. This increase is due to higher sales in the Chemical and Manufacturing
Segments. The increase in the Manufacturing Segment primarily reflects higher
volumes. The increase in the Chemical Segment is due primarily to sales of
Peridot Holdings, Inc. ("Peridot") and Reheis, Inc. which were acquired on July
1, 1997 and April 1, 1998, respectively, offset by weaker pricing for Industrial
Chemicals and lower export soda ash volumes to Asia.
Gross profit for the three month periods ended June 30, 1998 decreased 3
percent to $53.1 million from $54.6 million for the same period in 1997. Gross
profit for the six month period ended June 30, 1998 decreased 5 percent to $95.1
million from $99.8 million for the same period in 1997. These decreases were
primarily related to the lower pricing for Industrial Chemicals partially offset
by acquisition related sales increases and higher Manufacturing Segment sales.
Gross profit as a percentage of sales for the three months ended June
30, 1998 decreased to 28 percent from 33 percent for the same period in 1997.
Gross profit as a percentage of sales for the six months ended June 30, 1998
decreased to 27 percent from 32 percent for the same period in 1997. These
decreases are primarily due to the lower pricing for Industrial Chemicals.
Selling, general and administrative expense compared with the prior year
increased $2.6 million and $3.4 million, respectively, for the three and six
month periods ended June 30, 1998. This increase is due primarily to the
abovementioned acquisitions of Peridot and Reheis.
Interest expense for the three and six month periods ended June 30, 1998
was $6.8 million and $12.4 million, which was $1.7 million and $2.0 million
higher, respectively, than the comparable prior year levels as a result of
higher outstanding debt balances.
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<PAGE>
<PAGE>
Interest income for the three and six month periods ended June 30, 1998
was $.2 million and $.7 million, respectively, versus $.6 million and $1.3
million for the same periods in 1997 as a result of lower average cash balances.
The foreign currency transaction loss for the three and six month
periods ended June 30, 1998 was $.6 million and $.4 million, respectively. There
was no foreign currency transaction (gain) loss for the three months ended June
30, 1997. The foreign currency loss for the six months ended June 30, 1997 was
$.4 million. These amounts are principally due to the impact of exchange rate
fluctuations on the Company's Canadian subsidiary.
Minority interest for the three and six month periods ended June 30,
1998 was $3.7 million and $8.1 million, respectively, versus $6.1 million and
$12.3 million for the comparable periods in 1997. The decrease in both periods
reflect lower earnings due to lower soda ash pricing of General Chemical (Soda
Ash) Partners.
Net income was $11.0 million and $20.9 million for the three and six
month periods ended June 30, 1998, respectively, versus $17.3 million and $29.0
million for the comparable periods in 1997, for the foregoing reasons and a $3.7
million extraordinary item related to the early extinguishment of debt recorded
during the second quarter of 1998.
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<PAGE>
<PAGE>
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The following developments have occurred with respect to this matter
since the filing of the Company's Quarterly Report on Form 10-Q for the period
ended March 31, 1998:
In April of 1998, approximately 40 employees (and their respective
spouses) of the Sun Company, Inc. refinery in Marcus Hook, Pennsylvania, filed
lawsuits in the Court of Common Pleas, Delaware County, Pennsylvania, against
the Company, alleging that sulfur dioxide (SO2) and sulfur trioxide (SO3)
releases from the Company's Delaware Valley facility caused various respiratory
and pulmonary injuries. Unspecified damages in excess of $50,000 for each
plaintiff are sought. The Company has answered the complaints and will
vigorously defend itself in this matter. The Company believes that its available
insurance provides adequate coverage in the event of an adverse result in this
matter and that, based on currently-available information, this matter will not
have a material adverse effect on the Company's financial condition or results
of operations.
-10-
<PAGE>
<PAGE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a) Exhibits:
(11) Statement regarding computation of per share earnings.
(27) Financial Data Schedule
b) No report on Form 8-K has been filed by the Company during the
period covered by this report.
-11-
<PAGE>
<PAGE>
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.
THE GENERAL CHEMICAL GROUP INC.
-------------------------------
(Registrant)
<TABLE>
<S> <C>
Date July 31, 1998 /s/ Richard R. Russell
-------------------------- -------------------------------
RICHARD R. RUSSELL
President and Chief Executive
Officer (Principal Executive Officer) and Director
Date July 31, 1998 /s/ Ralph M. Passino
--------------------------- ---------------------------
RALPH M. PASSINO
Vice President and Chief Financial Officer
(Principal Financial and Accounting Officer)
</TABLE>
-12-
<PAGE>
<PAGE>
EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION PAGE
- ----------- ----------- ----
11 Computation of per share earnings for the three 14
and six months ended June 30, 1997 and 1998
27 Financial Date Schedule (EDGAR filings only) 15
-13-
STATEMENT OF DIFFERENCES
------------------------
Characters normally expressed as subscript shall be expressed as
baseline characters.
<PAGE>
<PAGE>
EXHIBIT 11
THE GENERAL CHEMICAL GROUP INC.
COMPUTATION OF PER SHARE EARNINGS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNT)
(UNAUDITED)
Earnings per share were calculated as follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
----------------- -----------------
1997 1998 1997 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Basic
Income before extraordinary item used for
basic earnings per share............................ $ 17,258 $ 14,686 $ 28,972 $ 24,547
Extraordinary item................................... -- (3,661) -- (3,661)
---------- --------- --------- ---------
Total income used for basic
earnings per share.................................. $ 17,258 $ 11,025 $ 28,972 $ 20,886
========== ========= ========= =========
Weighted average common shares
outstanding......................................... 21,327 21,103 21,817 21,076
Basic earnings per common share...................... $ .81 $ .52 $ 1.33 $ .99
========== ========= ========= =========
Diluted
Income before extraordinary item used for
basic earnings per share............................ $ 17,258 $ 14,686 $ 28,972 $ 24,547
Extraordinary item................................... -- (3,661) -- (3,661)
---------- --------- --------- ---------
Total income used for diluted
earnings per share.................................. $ 17,258 $ 11,025 $ 28,972 $ 20,886
========== ========= ========= =========
Weighted average common shares
outstanding......................................... 21,327 21,103 21,817 21,076
Weighted average common
equivalents shares.................................. 1,026 898 1,009 873
---------- --------- --------- ---------
Weighted average common and
common equivalent shares............................ 22,353 22,001 22,826 21,949
========== ========= ========= =========
Diluted earnings per common share
and common equivalent shares ....................... $ .77 $ .50 $ 1.27 $ .95
========== ========= ========= =========
</TABLE>
- --------------------
All prior period per share figures have been restated in accordance with
FAS 128.
-14-
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND> This schedule contains summary financial
information extracted from Form 10-Q for the period
ended June 30, 1998 and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> JUN-30-1998
<PERIOD-TYPE> 6-MOS
<CASH> 38,209
<SECURITIES> 0
<RECEIVABLES> 141,692
<ALLOWANCES> 5,490
<INVENTORY> 60,553
<CURRENT-ASSETS> 252,751
<PP&E> 562,416
<DEPRECIATION> 218,987
<TOTAL-ASSETS> 691,302
<CURRENT-LIABILITIES> 198,376
<BONDS> 304,742
0
0
<COMMON> 223
<OTHER-SE> (75,316)
<TOTAL-LIABILITY-AND-EQUITY> 691,302
<SALES> 349,535
<TOTAL-REVENUES> 349,535
<CGS> 254,407
<TOTAL-COSTS> 254,407
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 12,397
<INCOME-PRETAX> 40,666
<INCOME-TAX> 16,119
<INCOME-CONTINUING> 24,547
<DISCONTINUED> 0
<EXTRAORDINARY> 3,661
<CHANGES> 0
<NET-INCOME> 20,886
<EPS-PRIMARY> .99
<EPS-DILUTED> .95
</TABLE>
